The Breakdown - Travis Kling on Why a Decentralized Web 3 Is Worth Fighting For

Episode Date: May 21, 2022

This episode is sponsored by Nexo.io, NEAR and FTX US.    On today's episode, NLW is joined by Travis Kling, co-founder and chief investment officer at Ikigai Asset Management. They discuss Ikigai's just-announced $30 million Web 3 fund, and what got Travis and his team excited to start investing in the Web 3 space. They also discuss the current state of traditional and crypto markets and catalysts that might bring new energy and excitement to the space.   Find our guest on Twitter: @Travis_Kling - Nexo is a secure crypto exchange and crypto lending platform. Buy 40+ hot coins with your bank card in seconds and swap between exclusive pairs for cashback. Earn up to 17% interest on your idle crypto assets and borrow against them for instant liquidity. Simple and secure. Head over to nexo.io and get started now.  - NEAR is a blockchain for a world reimagined. Through simple, secure, and scalable technology, NEAR empowers millions to invent and explore new experiences. Business, creativity, and community are being reimagined for a more sustainable and inclusive future. Find out more at NEAR.org. - FTX US is the safe, regulated way to buy Bitcoin, ETH, SOL and other digital assets. Trade crypto with up to 85% lower fees than top competitors and trade ETH and SOL NFTs with no gas fees and subsidized gas on withdrawals. Sign up at FTX.US today. - Consensus 2022, the industry’s most influential event, is happening June 9–12 in Austin, Texas. If you’re looking to immerse yourself in the fast-moving world of crypto, Web 3 and NFTs, this is the festival experience for you. Use code BREAKDOWN to get 15% off your pass at www.coindesk.com/consensus2022.

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 nexus.io, near NFTX, and produced and distributed by CoinDesk. What's going on, guys, is Friday, May 20th, and man, oh man, am I excited for today's conversation with Travis Kling? 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, If you want to dig deeper into the conversation and come talk about these think-boy ideas that we are about to get into, join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod.

Also, a disclosure as always, in addition to them being a sponsor of the show, I also work with FTX. So yes, Travis Kling is back on the breakdown, one of my favorite people and my favorite guests. And this is a conversation that's been in the works for a little while because Travis and his Aikai Asset Management have just announced a $30 million Web3 venture fund. This is a departure from their systematic Bitcoin-only hedge fund that they've run for the last few years. And in Travis's thinking, there's a lot of discovery and exploration that I think is very different than people who have been coming into Web 3, all guns blazing right away.

What started as something that I planned to be a pretty standard interview ended up getting really deep and kind of existential about the nature of these Web 3 explorations, of play to earn, of these new concepts, and what they might mean to the world. And what I think Travis offers that's so different is he's someone who is sitting there, watching Defy Summer in 2020 and NFTs, and he just couldn't quite get himself there. There were these lingering questions that made him keep his focus. because his conviction around Bitcoin as a non-sovereign money system has been so clear for so long. But as you'll discover, the emergence of Axy and play to earn and people earning a living wage

in emerging markets around the world triggered a different sort of exploration and a journey that Travis is clearly still on. So I think if you are as well on your journey trying to understand whether you think any of these things that are talked about in Web3 are valuable, interesting, worth your time, If you're skeptical, I think you're going to like this conversation. And I will warn you that it is much more of a conversation than your standard interview. There's a lot more of me talking, which hopefully if you listen to me regularly, you're used to. Either way, I couldn't help myself.

And I love this conversation. I think you're going to like it too. All right, Travis, welcome back to the breakdown. How you doing, sir? Glad to be here. Been too long, sir. Well, we've been waiting because you have exciting news. Fun times at Iki guy. Yeah, big next step for us.

Okay, great. So we're going to get into that. We're going to talk about some macro stuff. Obviously, you can't not. But the way that I wanted to start this, actually right around the time that we met that you had left and we're building this sort of at the hedge fund version for the first time, right, as the ICO movement was kind of doing its thing. So I guess let's go back to 2017 when you start getting really deep in this space. You decide you want to dive in. what at the time were you focused on? How did you structure it? Why did you make that choice? Obviously, this is all sort of contextual for, you know, what you've done and how your views have evolved since then. But let's go back to the beginning. Yeah. So I left traditional December 17, you know, fell down the rabbit hole, summer 17, convinced myself all this was going to be a big deal. Left traditional December 17. Decided to start my own fund, focused on crypto. Spent 2018.

you know, putting the fund together and watching prices go down every day. And fun fact, we sent out our offering documents for the hedge fund the week of the Bitcoin cash like November 2018, that whole debacle. Like we literally like, he'd been talking to investors for months, had some money raised or sort of soft-circled, took us a long time to get those. the legal documents done and the bank account done this 2018, and then sent them out the week of the price crash. You know, everything went down 50% after already going down, you know, 50%.

And, you know, so we launched it in December 2018 in the depths of the bear market. And the mandate of the hedge fund's broad. We can do kind of whatever we want to with very little sort of limitations. in the crypto space. I had always wanted to take a quantum mental approach, which is this term that was being thrown around a lot at point 72 when I was there, and just sort of like merging together qualitative and fundamental type of research with quantitative research.

And that was always sort of the goal that we were heading towards. And exactly how you go skin that cat, you know, that's a totally, unwritten playbook because it was the Wild Wild West of crypto, especially in late 2018. And, you know, so we spent, we spent the first six months trying a bunch of different things. And then over the summer 2019, kind of honed in on a systematic models driven Bitcoin focused strategy that was basically using proprietary models to outperform holding Bitcoin by trading Bitcoin without using much leverage. And we kind of figured out a way to do that or thought we had a way that we could do that well. In September 2019, we started deploying

essentially all of our capital, you know, pretty quite a small capital base in 2019 into that systematic BTC focus strategy. And it was working really well. And we started outperforming the market buy a lot and, you know, was able to scale up the hedge fund well into nine figure AUM and put up a bunch of performance. We've outperformed Bitcoin by a ton over the last few years. And the reason we picked that was like there's there was a number of different reasons. Part of it was that BTC was big and it was liquid. I went and looked this up the other day. I was talking to an investor this will be a fun trivia question. In September 2019, when we started our systematic BTC focused strategy, and we're focusing on that, what was the aggregate market cap of ALS?

So the whole market cap minus BTC, what was that number in September 2019? I have no idea. $77 billion. And that was across everything. So it was just this really, you know, I couldn't figure out how to make money in the alt space in that period of time. And we found some edge in BTC. And we needed to get the fund scaled up. And, you know, we did that. And we were always paying a good amount of attention to what was going on outside of Bitcoin.

I use the analogy kind of front row, you know, court side tickets to the basketball game. So you're paying attention to ETH. You're paying attention to these other various different use cases. is we saw a Deepi summer happen in 2020. We, you know, started doing a bunch of work on defy. It was, you know, one of our qualitative analysts sort of like full-time job looking at defy dug real deep into it. I was not compelled by Defi in terms of, I thought the innovation was clear and interesting.

And I thought it was here to stay. But I was really didn't understand the value of cruel, like how these tokens, if you invest, invested in them, we're going to produce attractive risk-adjusted returns, you know, over a medium, longer-term basis. And I just struggled with that after a lot of work that we did. And that was in the spring of 2021. And because we had investors in in late 2020 telling us, you should raise a venture fund to go do defy. And like that was part of the impetus because like our investor base was very interested in this. So we're doing all this work and didn't find it compelling enough. And then the market topped in May and then all that, you know,

defy I got smoked bad and, you know, really hasn't ever recovered. And then Axi Infinity happened in summer of 2021. And we were not involved and we just watched it from the sidelines. And I didn't know what was going on there. We were not paying attention to blockchain gaming at the time. And, you know, started to understand what play to earn was, what the scholarship mechanism was, what these guilds were doing. And I started thinking more deeply about that and came to the conclusion that that looked

like something that was probably going to be transformational. And it had my alarm bells going off the same way that I felt the first 100 hours of research that I did in the crypto in the summer 2017, which was kind of fun. Funny enough, the only other time in my life I had ever felt like that before crypto was the first time I took an Uber and I was living in Chicago. And Uber, Chicago was the second city that Uber went to after San Francisco. So I took an Uber, I can't remember. It was like early 2012. And like nobody had ever heard of it.

Somebody told me about it. Download the app. There's black car only. Pick me up from my apartment. Took me to some store, dropped me off, drove away. And I remember standing on the sidewalk. the car was driving away and I was like, that's going to change everything. And I was positive of it.

And I wasn't a technology investor by background. So I wasn't used to like having that feel. I wasn't really into technology. So there wasn't a feeling that I like had had ever really. I was doing oil and gas and you just don't feel that way about oil and gas. And so in the summer 2017, when I started feeling that way again, it really was like this pattern match for me that was a significant influence in convincing me to like, you know, make a big bet on this. And I felt the same way when I started digging into all this. And it looked like it was just the top of the first inning of something

that was going to be transformational potentially. Metaverse broadly is going to be transformational. And I'm like pretty highly convicted that we're heading in that way. You know, and it has the potential to make the world a much better place. And whether or not it, delivers on all over some of or none of its potential to make the better place, that's entirely unwritten. And that is going to be entirely dependent on the individuals that are working on those various outcomes. And that struck me as something like really,

really worth working on. Like that's like a fight worth fighting. Going back to Defi, and I don't want to kind of put words in your mouth, but if you look at why maybe Defi didn't grab you, at least it not in the same way, you had these sort of like these reservations. versus something like Axi sending you down that, that same sort of rabbit hole.

They're kind of like this weird opposite of each other in the sense that the summer of DeFi was a lot of crypto kids in some ways returning to the roots of crypto as a financial mechanism after a kind of two-year departure in 2017 around, you know, tokenization of everything, tokenization of, you know, networks, tokenization of, some of the stuff that's coming back now. but, you know, the money aspect of crypto wasn't really forefront in late 2017, right? When the ICO boom was happening, it was sort of much more proto Web3 in some ways. And when the Defi kids came in, it was sort of like this moment of putting together money Legos and getting to play in that sandbox and seeing how you could post, you know, put these things

together with composability. But like, it was, it was almost the experimentation was the end of itself. Whereas with Axi, it went straight to. emerging markets and people actually started playing it and figuring it out. It's almost like the opposite with like, you know, it's kind of a subpar gaming experience in a lot of ways. I don't know. Does that resonate at all? Or am I totally off the mark? No, no, it definitely resonates. And I think it was part of the reason that we were hesitant on defy was it was like all of these tools to like help crypto traders lever long crypto in like a decentralized way.

And that composability word, that's, that's, that is the key innovation. Yeah. And. But, but then when I thought about like, okay, how does this go to the next level? And you start thinking about that, like, taking real market share away from traditional financial services. I like started struggling with that and struggling to think through like traditional Wall Street, adopting, you know, decentralized borrow lending. like certainly maybe someday. You know, I've got these four questions I've been talking about for years.

How ready is the tech for the world? How ready is the world for the tech? What do you need decentralization for? And how decentralized is to decentralize enough? And a lot of times there's like the, is the world ready for this tech? And I struggled with that. Then when we got to like Metaverse and play to earn stuff, the immediacy of providing a living wage to developing nations,

you like put that in one hand and then you put like helping crypto traders lever long in the other hand and you go like what's more worthwhile to work on and then we decided to raise the venture fund we really kind of hit the green light on it initially two weeks before Facebook changed their name to meta and told our investors that we're like we think we're going to do this and then two weeks later and we think like metaverse and play to earn is the reason why we're going to raise this venture fund and in two weeks later Facebook Facebook changed their name to meta. And then that just so much more clearly helped me understand why this is a fight worth fighting.

Because, like, decentralization is really going to matter in this. And the problems that big tech are causing in society in general right now are set to unequivocally become exacerbated, you know, as innovation leads to technology being further intertwined into humanity. And like, that's just such a fight worth fighting. And then, like, the play to earn into developing nations, what I realized was that that's only possible because of QE, because of incredibly loose monetary policy that has driven speculation and asset prices so high that has created a wealth inequality gap that is so broad that you can have. of the speculators, because like play to earn is or even X, let's call it X to earn, because now we're talking about stepping and like, you know, a bunch of other, this kind of X to earn thing, you know, let's, let's broaden that. But like what that is is speculators that are

carving off a piece of their profit and using that as like a steroid shot injection of network effect into a project because they know that the total addressable market for like a metaverse or something like that, that's in the trillions, not the billions, basically. And it is that wealth and equality gap that even makes all of that possible. And that's going to be exacerbated too. Like, that's going to keep going too. And so all of that kind of started coming together for me in a way that was very compelling to me.

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That's N-E-X-O.I-O. This episode is brought to you by NIR, a climate-neutral, high-speed, and low transaction fee, layer-one blockchain platform. near is a blockchain for a world reimagined through simple secure and scalable technology neir empowers millions to invent and explore new experiences business creativity and community are being reimagined for a more sustainable and inclusive future reimagined your world today at neer dot org the breakdown is sponsored by ftx us ftx us is the safe regulated way to buy and sell

Bitcoin and other digital assets with up to 85% lower fees than competitors. There are no fixed minimum fees, no ACH transaction fees, and no withdrawal fees. One of the largest exchanges in the U.S. FDXUS is also the only leading exchange that supports both Ethereum and Solana NFTs. When you trade NFTs on FTCS, you pay no gas fees. Download the FTCX app today and use Referral Code Breakdown to support the show. Let's talk a little bit about this sort of, this path that you're walking down around Web3 Metaverse. Because I think your take on it is slightly different than a lot of folks. Just your genesis into it. Honestly, it reminds me a lot of, I'm sure I've told you this story, but, you know, I was in San Francisco around Bitcoin,

you know, a fair bid in 2012, 2013, but it was the payments narrative. It was just a competitor to square at that time, right? It was the thing that you used to look like you got it when you were buying coffee at Cupa Cafe in Palo Alto pitching an investor, right? And it just, none of that version of it like captivated me, you know, and I didn't, it's not Bitcoin's fault. It's my fault. I didn't go deep on it then, but it's because it didn't kind of even hit that threshold. Whereas I left San Francisco, you know, a number of years later and sort of reconnected with Bitcoin through the lens of some of the social impact stuff that I had done earlier in my career, thinking about refugees transporting life savings, you know, across borders and imagining what it

would have been like to have a highly portable, much harder to confiscate store of wealth in that context. And that's, that's kind of what hooked me. But anyways, coming back to the defype point, I want to, I want to hone in on this point of Facebook demonstrating why decentralization was so important. Or maybe even a better way to put it is Facebook showing the far end of the non-decentralized, you know, the centralized kind of spectrum. I guess the question and one of the things that people struggle with with the X to earn is, is how much, where the lines need to be in terms of the native experiences versus the economic incentive and what that balance looks like. I mean, how do you think about that? It seems to be like you're still kind of like building out these thesis versus like you feel like you have it all kind of completely figured out.

But talk to me a little bit about that. Yeah, definitely don't have it figured. out. Yeah, definitely a work in progress. I mean, we ask ourselves a lot, like, how fun does the game need to be? And I'm not sure I know an answer to that because I don't think Farmville was like all that fun, but it got mass adoption. I think in the X to earn type of framework, like, that can be applied to like, like helium is. X to earn, right? That, you know, you can, you can broaden that out.

It's, it's, it's a different way to approach human coordination. And I think when you couple that with Dow's, which are also like in the top of the first inning, and you run that out a decade and then into the next decade, that strikes me as a powerful competitor to big tech companies right now and just the way the human organization works right now. And it has the potential to make the world a much better place. But it totally remains to be seen whether or not that potential comes to fruition. One of the things that is interesting about this, so let's take it from this angle of human coordination and human organization, which I think about a lot too.

One of the fascinating things is how vacant the space between a Facebook group and an LLC is in terms of the tools that we have right now. It seems ludicrous, right? The idea that the two bounds of organization, if you're trying to do something, are, again, like, you know, sort of call it any digital social group, you know, kind of platform forum. board, whatever, on the one hand, and an actual, you know, company, legally organized, designed for perpetuity, you know, with reporting requirements and all these sort of things on the other. The idea that there wouldn't find something internet native into that space just seems insane, right? There's always going to be something that filled in that gap of organization that had, that gave people the ability to do more things than they could with a Facebook group, but without the sort of overhead and burden of,

you know, traditional legal structures, right? To me, that's why DAOs have never been particularly surprising and they've always been interesting is because something has to fit in that slot. But one of the things that I think that we've seen is it's almost easy to think reductively that all these DAOs are just organizing people around their money and making group decisions around money. But it turns out that a huge amount of lived human experience is organized people around money decisions. And like it's actually, that's not a small use case. It's a small use case in the context of the old world where all you could do with money was like, you know, split the dinner bill on the one end of the spectrum or like actually be a, you know, an LP and a fund

on the other hand. It makes a lot more sense when when money is so much easier to move around and there's so many more interesting things you can do with it. It was a very, very long, very long rant, but you know, the human coordination piece of this, I find really fascinating. And it's honestly, it's not something that people talk as much about when it comes to, when it comes to DAOs. Yeah. And I mean, like the Constitution Dow is like an immaculate conception in a way. And there's, I think there's, there's almost beauty to the manner in which it was unsuccessful.

Like, it was almost like, like what movie are we living in right now that like this Dow forms out of nowhere to buy this physical copy of the Constitution in this like like in my opinion you know decentralization and democracy the way that the founding fathers talked about it like go hand in hand then like to have Ken Griffin come in and buy it like you're like what movie are you couldn't you couldn't I know 100. I know. Yeah. And it very clearly, I think, I think laid out why this is worth doing, why this innovation matters and just gave you a little glimpse into the possibilities. And like I said, it's like it's the top of the first inning. But it's, I mean, I think Dals will probably end up as the layer two of human civilization. And that you fast forward. a couple hundred years and the idea of a corporation from like a misalignment perspective, like I think about this a lot.

Decentralization has potential to solve misalignments in the way that humans have organized thus far. and decentralization is an innovation that wasn't available before Bitcoin and then before layer one smart contract platforms. So we did the best we could. And then you started having issues with misalignment of incentives. And the way I frame this is like if an alien, you know, an advanced civilization alien came down to Earth. and let's just take Bitcoin and money as a use case as an example. Alien civilization, advanced civilization comes down to Earth, looks at everything they have going on.

They have the benefit of having thousands of years or hundreds of thousands of years more technology than we have. And they look at the way money works today with a bunch of old white people sitting in a closed room and that's who decides how money is going to work. And then you look at the way Bitcoin works, and it just strikes me as like objectively a better way to go about money and figuring it out. It's just a way that very clearly eliminates the types of misalignment of incentives that the founding fathers warned about when they wrote the Constitution. They talked about special interest groups and how that can intertwine into this enrol. this democracy and in turn the free capitalism for you know we don't really have that anymore

and now we find ourselves a couple hundred years later and that's and that's where we're at that all seems like pretty clear to me and it is going to take a while you know i'm going to do the i'm 37 i'm going to do this for like another you know 20 years or something like that and like i'm just trying to like push this thing you know you're clogging a wheel and just like turn the the wheel a couple clicks in the right direction And this period of time while I'm on here, and then, you know, you got to pass it off the next generation, the next generation after that. But like it's, I don't know, why it matters is pretty clear to me. So I want to actually build off this because there's another piece of this, which is

really interesting, too, going back almost to the wealth inequality piece. One of the things that seems kind of clear to me is that historically investing as a concept was framed as for rich people, right? Like, there wasn't a sensibility. It wasn't a thing that, you know, we talked about in school in Maine in the late 80s and early 90s that you could, I mean, savings was for kind of middle class and lower class folks. You could save in a savings account, you know, that maybe had had a little bit of interest. But no one taught you about investing. And in fact, it was it was too risky and yada, yada, yada, and all these sort of things, right? And the language of, mainstream financial media, I think to this day continues to be exclusionary. It continues to be

a set of kind of puffed up talking heads who use acronyms to make themselves feel cool, which is like if you just happen to wander into that channel and you see someone talking about the Fed, like who's going to understand that unless they've spent all their time kind of learning that lingo, right? Over the last couple of years, I think crypto has been the biggest factor in this, but I also think, you know, we're recording this on the day that Melvin Capital finally gave up the ghost. The whole meme stock thing, too. There's plenty of nihilistic kind of cynical ways to look at that. One of the non-cynical ways is that people stopped saying, basically people stopped pretending like they weren't supposed to have a seat at the investing table too. And a lot of them are a lot more of them are going to lose money before they make money.

but that process of onboarding, you know, so many people to conceptualize themselves as investors, I think is hugely powerful. Okay, so now you have these stocks are accessible and people are thinking about equities. And maybe they're bringing heretical ideas about how to think about equities or what you can do with equities or whatever, but they're thinking about it. You've got crypto, which is, in a lot of cases, they got there first before the people who are supposed to be smart about this stuff. So they feel empowered with that. And then all of a sudden, there's this whole set of things. things that come around in the form of DAOs, which are all over the place. Some are for NFTs, some are for culture, some are for random constitution things. But people are coming into that

primed to say, what is my investor identity? How do I think about myself? What do I want to contribute to? But I think that if you start to look at DAWs and how people are organizing themselves around things that they're really passionate about investing in, it's the sort of, you see the germs of a very different type of world where, again, you don't have to contribute big amounts to be a part of a collective that's using coordinated capital to do things that you find meaningful. And I think that there's something potentially really powerful there. I didn't know we're going to go so, so big picture on this. You got me post-putting the kids down. So I'm not even drinking yet, but.

The financial nihilism is like a symptom and it's a backlash. And when I run that out to, I guess we're just going to do La La Land for this podcast. So the robots are going to take all of our jobs. Like over a long enough horizon, it's going to happen. And like this decade, they're going to take driver's jobs and they're taking, you know, hamburger flipper jobs because you're going to have the robot arm that flips the hamburgers instead. And then, you know, they're coming for accountants. Like I'm almost surprised at like being an – my undergrad was in accounting. I'm surprised like being an accountant is like even still a job almost.

That's very clearly a job for the robots. Like the machines are going to take more and more of our jobs over the coming day. decades. And it's why I think universal basic income is an inevitability. But then you get into like this weird stuff about like, because when you get far enough down that path, the basic fundamental building blocks of economics start to break down. Like the relationship between time and labor and capital and production, like all of that starts to get like, they, that just breaks down, basically. And, you know, especially, you know, if we figure out renewable energy, which, you know, I think we're making pretty decent progress on, you know, it's like if a robot's

running off solar power that's taking everybody's jobs, right? Like, you just think of that as an edge case, but it's instructive to help imagine, I think, the direction that we're going in over the coming decades. And then it's like, well, what's going to make anything valuable? And I think human attention is going to end up being, and it's already very valuable. It's already incredibly valuable. You look at the way that technology companies are valued. If you have humans' attention, you get a lot of value in most cases. Not in every case.

Twitter's had a hard time monetizing that, but in most cases, that's true. And that's set to, I think, get much, much more true. And it's actually the reason why I think Dogecoin, if I was going to try and wrap a fundamental value around like a fundamental thesis around why Dogecoin is popular, it's that in the future, attention is the only thing that matters. It's the only thing that's going to have value. And so if you have anything that gets attention, that thing is valuable. and it sounds a little wacky, but honestly, I think the world's moving in that direction. And so kind of, that was a bunch of crazy things to say, but the point I was trying to make, and that is the backdrop is that in that world, community is heavily empowered.

And community people, groups of individuals will start to realize that their collective attention is very valuable and very powerful. And that Dow's and decentralization and X to earn, you know, it's innovation for humanity to do things in this world where, you know, increasingly the basic building blocks of economics are just getting weirder and weirder. I mean, I think that the attention point is dead on. and just even in the context of the fundamental building blocks and scarcity, right? Attention is, in the way that you just described, that attention is a proxy for the ultimate scarce asset, which is time, right?

Each individual human on earth can only spend 24 hours a day doing a set of stuff. Of that, a huge part is carved up by things that aren't really choices, roughly speaking, at least not in a day-to-day kind of way. And what's left is that that's what's left that they have to distribute, right? And what we've seen clearly with Web 2 is the, I mean, it started with Web 1, the way that we chose to monetize attention was advertising. I mean, that was the, you know, Ethan Zuckerman called it the original sin, the Internet's original sin. And they didn't know. It just seemed smart and it seemed great.

And it, you know, I think we rag on advertising, but it did do some valuable things as well. well, like making these technologies accessible to everyone versus sort of, you know, capped by cost. But we're now clearly in a situation where the balance is so off and we're dealing with these sort of forces, you know, corporations or big tech has fundamentally a different type of power than any type of corporation that's existed before, you know, and we're all just kind of trying to figure out what to do about it. Yeah. And that world you're described. none of that matters unless you're moving towards technological innovation-driven abundance. Like this like attention economy, like, you know, the only thing humans have been doing for

99.9% of their existence that were just been killing each other. Like, that's basically what we've been doing. It's like a deeply scarce mindset, right? You're just trying to make it through another day when you look at the history of humanity. And like none of that matters back then. What we're moving increasingly towards an age of technological innovation driven abundance. That's a massive shift. It's one of the things that seems small, but I imagine is really nice, is when you're sort of actively trading, you know, you're talking about how 1920 you couldn't find, you know, there's just not enough market cap to do anything.

versus now you get to have this sort of 10-year horizon, 20-year horizon, right, with venture. What are, you know, as you're trying to look for things to go back, you know, obviously you've talked about some of the themes, but how would you describe or what does it mean to be in the top of the first inning for these things? What are the types of projects that you're seeing that you're excited about actually investing in, you know, right now? when I say top of the first inning, you know, I think I think what I mean is that a whole bunch of the metaverse project decentralized metaverse projects currently in existence look like ass and Jeeves. So this ebb and flow of speculation versus application utility, that's been in place since the beginning of Bitcoin. And that's going to continue in the metaverse.

So like the relationship between speculation and application usage. It's been a critical factor since the very beginning. The creation of the token itself was a step change in that relationship. And relative to, you know, traditional equity, it's, you know, been around for hundreds of years. And then play to earn, I think, is like this additional step change in that relationship between speculation and application usage. And it's probably worth trillions. but then at the same time, the concept of value accrual

is still a completely wide open question. It's like certainly possible that all current token economic models that existence today for, you know, play to earn in Metaverse and stuff like that are like rendered obsolete. Like it's just, it's a wide open question.

And that's exciting to me. Because when you have conviction on like the potential and especially the potential to make the world a better place, like making a bunch of money is cool having nice stuff is cool taking care of your family's cool that's all cool like what are we really doing here though like what are we like what are we really trying to do here

for the blink of an eye that we have here on earth and when you see thousands of Filipinos that are earning a living wage in Axi Infinity and I realize that's made possible by quantitative easing like my alarm bells go off dude you know and I'm excited about um so token structure was actually like one of my very first in some ways it was like my first love in crypto you know because I had been that you know it's like starting my junior year in college I just valued for the next like I don't know 12 years it's

like all I did was value a bunch of different things different asset classes different parts of the cabal structure different industries just value stuff So when I first jumped into crypto, I wanted to understand how people were thinking about valuing things. So by the time I got to spring of 2018, I'd probably read 85% of everything that had ever been written on crypto valuation. All the research papers, all the medium articles, all the MV equals PQ junk, like all this stuff. I'd read all of it. And I was fascinated by token structure. and I could dig up a deck for a project that will remain nameless where I was pitching them a dual token structure in the summer of 2018, a utility token and a value accrual token.

And then it was the depth of the bare market. And I had to figure out a way to make sure that Ikega was going to make it. Then I like turned into a quant, basically. And that's great. And that's all fine. and we're still going to do the systematic stuff. And I actually think there's a lot of, like, we definitely need that side of the business. We're completely committed to it.

But I'm very excited about getting back to thinking about token structure and value accrual and excited that it's a wide open space right now, that you saw Axi Infinity. You saw the potential for it. You know, I think right now it remains to be seen whether or not that was a flash of the pan. And, you know, if you took a snapshot today, it looks like it was probably a flash in the pan. But the cool thing is that that entire ecosystem knows that we got a problem on our hands. Now what do we go do? I'm super pumped about that.

And I look forward to earning my way into that ecosystem by providing value. I'm really, you know, and not to be, that's like a VC, whatever, but like I'm like pumped about that. Super cool, man. I love it. I'm excited. I think that, you know, I think that you have a different perspective just from where you're starting, wandering into the sort of Web 3 space writ large. And I think it's going to be really interesting to see what you guys do there. I want to maybe as we kind of segue out a little bit to bring it back to, you know, a little bit closer and talk some of the macro stuff right now. What's your sense of where we are? I know before the show, we were talking about what we think Bitcoin's going to do and just crypto in general is going to do this summer.

But give us your sense of kind of how you characterize where we are in cycle, not so much in crypto or it can be in crypto, but more in terms of sort of general economics. I mean, it's ridiculously all one trade right now. I mean, I've been saying that for, there's no way I admitted that term. I think I said it for the first time in May of 2020. and it's never been more true than it is right now. And we just happen to be on the, you know, more painful side of that. The Fed got super spooked by inflation, completely politically unpalpable.

You could have made this argument that they would have been willing to let real yields run deeply negative for an extended period of time to work. That's like the Lynn Alden argument, right? Where like, we jacked up the debt to GDP fighting World War II, Great Depression and fighting World War II. And then you ran real yield super negative for over a decade to like dig your, dig your way out of that hole, basically. And you could have argued that maybe they're going to try and run that playbook again. But very quickly it became apparent that inflation was so politically unpalpable that that just wasn't going to happen. And the Fed is completely beholden to, you know, politics and, you know, specifically to the Democratic Party. And, you know, they decided that, you know,

now we got to tighten the lot. And, you know, if the Ukraine conflict hadn't happened, you know, we can pontificate about what this pace would have looked like. If Shanghai locked down, hadn't have happened. We can pontificate, but like now we're sitting at the state that the Ukraine conflict, you know, not to make light of the situation going on over there at all to talk about inflation when a bunch of people are dying because it's a very serious situation. But in the context of this conversation, now they've got a big inflation problem on their hands.

They're very scared of it, you know, and Powell is going to, you know, the guy's been invoking Volker. I always laugh so much like the way that these guys talk about like Volker. But, you know, he's going to do the Volker right move and, you know, hammer this thing into recession. And, you know, they look at financial conditions and basically you smoke people's net worth enough that they stop spending money and that allows inflation to roll over. That's the playbook that they're running. how well that works, how far they have to go, whether or not something in traditional markets are going to break sooner rather than later because the global financial system is a big rickety

piece of shit. Those are all, you know, questions that remain to be answered. What's your base case for the timeline that it takes for this to play out before something's got to give? I am not seeing anything in the very near term in terms of skeletons falling out of the closet. The skeletons in the closet that freak out the Fed are credit markets, treasury volatility, and especially like treasury volatility in the context of what other asset classes are doing. This is all my opinion, by the way, but yeah, I pay a lot of attention to stuff. Credit spreads or a functional credit market. credit spreads, treasury volatility in the context of other asset classes, and the overnight,

the short-term funding market. Like that's where they're, when I talk, what I mean like a big rickety piece of shit, it's like those are the places that the ricketyness like generally tends to start to show up. And it doesn't seem like any of those spots are in a, like a particularly bad spot right now. Treasury volatility is certainly elevated. And so I think it doesn't look to me like we're going to have like a repo market blowout like we had in September 2019.

It doesn't look to me like we're going to have one of those like in June. And it's hard to predict out any further than that because these things change very rapidly. But like I don't think that's going to happen June, July. So I probably go 50 in June, 50 July. There's no meeting in August. You got Jackson Hole at the end of August. There's been big announcements, big changes that have happened in Jackson Hole historically. And it's my base case assumption that inflation and economic growth indicators are going to roll over pretty hard, you know, month over month in between now and then.

You're already starting to see a number of glimpses of those things. and then do they cool off to 25 bibs in September? It would be my base case that they will. And if the numbers roll over hard enough, and if the stock market and the bond market have gotten smoke bad enough, then they may go to, they may go from 50 biffs to zero instead of from 50 biffs to 25. And, you know, the bogies there,

the biggest risks to that are definitely the Ukraine conflict in China lockdowns. There was some headlines that came out overnight that maybe Shanghai is loosening some of that. Kind of hard to get a sense of that off one headline, but paying a lot of attention to that. So it's completely possible that we, and it's almost like my base case that we're going to either dip into a mild recession in Q1 of 23, maybe Q4 of 22, or we're going to like kiss zero GDP growth. And I don't know which one of those it's going to be. but asset prices can bottom before the recession starts and go up a lot into the start, like the official start of a recession, because asset prices are so closely tied to monetary policy

that if the Fed goes from, you know, 50 bips June, 50 bips July, all these economic growth and inflation indicators roll over, roll over, roll over, Jackson Hole, they whisper about it. And then September they go on pause. Risk risks rifts hard, hard. Crypto is going to rip. Heath will go up 100% in a straight line because the merge is going to happen exactly like right around that period of time.

If all those line up together, crypto will rip in that situation. But there's risks to that view. And if they don't blow up financial markets, you know, in those skeletons in the closet that I just talked about and inflation stays high, I think they're going to keep tightening. So I want to bring the crypto dimension in. I mean, I share your view that it's all one trade. I think that even in that context, we will naturally look for the narrative justification, even if it's mostly just sort of market structure things. What are your candidates for things

that restore excitement, right? Because if this goes kind of sideways down for three months, I mean, you can see, you can feel it like Twitter's angrier than it's been since, you know, since pre-March 2020, you know, like people are, the critics are having their field day and doing their victory lap with their, with their posts, you know, it's that part of the cycle. And I think that the important thing about that is sort of on the flip side is that people do need reasons to come back, like when their friends are talking to their friends and why, why, now, you know, there's going to be some narrative that's driving it. Yeah.

ETH merge is the most likely candidate for me. And we can have a conversation about whether narrative drives price or price causes people to create narratives. That's a very chicken egg type of thing to talk about. But the ETH merge is the largest, most significant, most telegraphed catalyst in the history of crypto. That's not hyperbole. You go back because it's not the same as the having.

It's a different type of setup. And the digestability of that catalyst, the willingness and the ability for large pools of institutional capital to buy Eath, which was not true two years ago, that strikes me as the kind of thing. But it wouldn't be my base case that crypto is going to decouple from its all one trade if the Fed is still going hammer time. like that catalyst isn't going to work very well if the NASDAQ is just down only like it has been you know like if the repo market blows up in the same month that uh the merge happens like i don't think eats is going to do that much and i know people hate that but like you like

you like you got to let that go because it's it's like only going to get more like that i think you know in terms of other stuff you know we've had like a fill in the blank summer for the last You know, you had defy summer and then you had NFT summer. It is not apparent to me that there's anything particularly on the horizon. You know, hilariously, if we had had this conversation three weeks ago, I would have told you the likelihood of an Algo stablecoin summer. Like that would have been pretty high on my list, actually, you know, but things change pretty rapidly.

Metaverse stuff, I don't know, not when the markets. I don't think any of that's going to work when the broader market is in a downtrend. And maybe if macro bottoms, because the Fed slows down on tightening, ETH is ripping, and then, you know, some of these games start producing, you know, their initial product or whatever. Like, you could see some of those needles getting threaded. We'll definitely be paying attention to those. But I don't see any narrative catalyst for crypto specifically on the, you know, the horizon that would be strong enough to like cause a decoupling. I would say the one exception to that is a spot Bitcoin ETF, you know, coming in the coming months, which is definitely

not my base case. That's going to happen. You know, you never know, though, because people are so off sides on Bitcoin right now. I know it's like funny to say, dude, nobody owns Bitcoin. Nobody's, we don't own, we don't own Bitcoin. We have like cash and Eath, like basically. That's, That's our portfolio. So if you had a spot Bitcoin ETF coming down the pipe, that would be at least a temporary, like, rip your face off rally. I tend to agree. I don't think that there's anything that has a strong enough narrative pull to pull us out as sort of just the, you know, the overarching macro trade. I think that obviously sort of like where institutions fall is going to be a key driver in the early stages of whatever comes next.

They'll come before retail because they're sort of, you know, still around the edges. The one other thing, I think you're right about the ethmerge being sort of like the most obvious candidate for that. The other one that I think is pretty clear to me, and I just have no sense of the timeline, is a U.S. like a calm U.S. regulatory regime actually getting done, right? Congress passing legislation that organizes the way that this industry is regulated in the U.S. in some coherent way that's that's that sort of not bad. No version of that is going to have things that we don't like. But the ability to clear out the U.S. is going to ban it or it's going

to be really restrictive or just we don't know who regulates it and our compliance department doesn't know who to go to around this stuff, I think is the other one that has a lot of attention. And I think is in the sort of like, I don't know, call it six to 12 month time frame. the issue is that is that politics had become so intertwined in this the different regulatory agencies are are fighting over each other tripping over one another to find to see who gets to regulate this thing and all of that is like driven by by politics and like the democrats are going to get smoked in November and so it's going to change it's going to change the it's one of the main reasons why I don't think we're going to get a spot bitcoin ETF before the

midterms but it's like after the midterms when the Republicans have control of both houses, you know, the way the SEC gets to operate, like that all matters. And that's all, it's all super swampy stuff. Like, it's, I'm like, when I spend much time talking to people about this, trying to figure out, it's like so gross, dude. And it's like, it's so obvious that the way all this works is like deeply rotten. And to tie all that back to the first part of this conversation or earlier part of this

conversation, this sort of like, you know, technological innovation driven changes in human coordination. Look, they ain't going to be this year. It's not going to be next year, but like making progress over that over the course of the next few decades, got to do it. I think that's a pretty good place to wrap, actually. The optimism by necessity, you know, way of looking at things. But no, this is awesome. This is a, this is a very, um, obology esk conversation. I feel like we let it rip. So for those who stuck around the whole time,

thank you and, you know, hope you were drinking. And Travis, as always, pleasure to have you here. Yeah, enjoyed it. Thanks, Nate. What I loved about that conversation, just reflecting on it a little bit, is the energy that Travis is bringing to this new fun, this new pursuit. It's really about

not coming in with conviction around any of the specifics, but conviction that the possibilities are worth investing in. That making a real go of X to earn and seeing if it can disrupt work in a changing world in a way that is to the net benefit of humanity is a possibility worth investing in. I think there's something both fundamentally clear-eyed and also optimistic about that that I love to see. Anyways, guys, I hope you enjoyed that conversation. I appreciate you hanging out this whole time. I want to say thanks one more time to my sponsors, nexus.com, near and FTX for supporting the show. And thanks to you guys for listening. Until tomorrow, be safe and take care of each other. Peace. Hey, breakdown listeners, come join CoinDesk's

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