The Pomp Podcast - #1056: John Wu On Bridging Bitcoin To Other Ecosystems

Starting point is 00:00:00 What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. John Wu is the president of Ava Labs. In this conversation, we talk about Bitcoin, bridging it to Avalanche, what the Avalanche ecosystem is, who's building there, what are they building, and why you should go ahead and take a look at these bridges and that ecosystem. I really enjoyed this conversation with John. Hope you guys enjoy it as well. Before we get into this episode, though, I first want to talk about our sponsors. This episode is brought to you by BCB Group. With a dedicated focus on institutional payment

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Starting point is 00:02:42 within the United States, Canada, and the UK. I told you, it changed my life. It helps me sleep deeper helps me sleep longer. I feel much more refreshed and I have better energy. You want to know how I have relentless energy every single day? Because I sleep on an 8sleep. Seriously, go check it out. 8sleep.com slash Pomp today. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

Starting point is 00:03:23 John, how are you? Hop, how are you? It's good to see you. I think it's about three or four years since we've done this. Absolutely. I'm doing very well. I'm glad to have you. I'd love to start the conversation. We're going to kind of take a little windy road here because I got a bunch of questions. I keep hearing about Bitcoin bridges to Avalanche. What is that? What are people talking about

Starting point is 00:03:44 when they say that they are bringing their Bitcoin to one of these ecosystems? So there's a basically, when you're talking about bridge, you're talking about different types of bridges, but basically you enable people to bring assets over from a different chain onto, you know, one chain to chain number two

Starting point is 00:04:02 and allow the functionality that you have on chain two that perhaps you may have different experience from chain one. So there's a Ethereum to Avalanche bridge. That thing has generated over $60 billion worth of assets moving back and forth over time. And now there is a Bitcoin bridge. So people who want to huddle Bitcoin, but use DeFi, they have the ability to do that through this bridge. And when that happens, like what is the, at a high level, the technical kind of mechanics of this. Is it Bitcoin and being wrapped in some other kind of token? Is it literally bridging over and there's like support for Bitcoin or whatever? How does that work? Right. So there's

Starting point is 00:04:44 two different or three different methods. Okay. One way you're describing is the wrapped concept where you have it on one end and then you have another one called a wrapped version on the other end. There is another way to do it is really you can have, you know, stuff on one side being locked, But then you have a native version of that on the other end that acts as the same thing. So it's not necessarily any different. You're just minting a new asset, whether it's BTC or whatever it is. There's two general ways of bridging across. One is the RAP, like you talked about.

Starting point is 00:05:16 And the other is actually just locking the asset value on one end and creating the same asset or a native version of that asset on the other end. And when that happens, how much functionality is gained or lost? it's interesting to think about, let's take Bitcoin as one example, and then maybe we use ETH as another example. So Bitcoin may not be as expressive or kind of have as much of the smart contract functionality as maybe an ETH has. When you see that, do you lose or gain functionality in either one of those situations when you do these bridges? That's a great question. And generally speaking, from the user's perspective, you're gaining more functionality, regardless of whether it's the RAP version or the native version to another chain,

Starting point is 00:06:00 because you're doing that either because one side is too cheap or too, sorry, sorry, too expensive. You needed to transact cheaper or there are different applications on a different chain. And so the user's perspective is you're not losing functionality. You do it because you're actually gain functionality where you can't do it on the previous chain. From the chain's perspective, obviously you increase activity and liquidity. So it's a,

Starting point is 00:06:24 it's kind of like a win-win the, you know, know, the ones that are secure and are able to do this well, and have, you know, assets that are secure to the user will ultimately win in these cases. Got it. And so when you think of kind of Avalanche, why are people bridging these assets over there? What's like the value proposition to doing that versus like keeping Bitcoin on the Bitcoin network or something? Yeah, I mean, for Bitcoin specifically, there is less functionality. But in general, especially Avalanche's case. There's over a thousand applications on the chain. It's instant finality. It's super fast. There's lots of dApps and DeFi as well as gaming applications. So just

Starting point is 00:07:04 a lot of utility and functionality for Bitcoin users who may want to keep their Bitcoin because they think the price is too low, but also get to use the functionality associated with a chain like Avalanche. So let's kind of keep going down this rabbit hole because it's actually pretty interesting to me um on bitcoin there would be two i would say scaling solutions uh and this can be super generalized right but there's like layer two solutions like the lightning network and then there's kind of side chain things liquid and a bunch of others um this is sounds like it's almost like a third uh value proposition that people would make is like hey you could take the asset you could bridge it either natively uh or kind of in a true bridge in a wrapped way uh and then

Starting point is 00:07:45 you could gain speed efficiency innovation whatever do you see those as competitive to like the layer twos and side chains or is it just something that's different and kind of two different questions there's like side chains and layer two specific to like you know lightning specific to bitcoin and then there are layer twos that exist in the call it you know evm compatible type ecosystem um reality is in the long run i think there's going to be a lot of interoperability among many, many different chains. And that's really where we all really, deep down, if you are honest with yourselves,

Starting point is 00:08:21 that's where we want the space to go to. Layer 2s, they provide certain functionality, but they also are not able to provide necessarily a lot of decentralization and the security that a Layer 1 can. But they're more centralized, so they can probably be cheaper and faster in some respect. So there are different trade-offs,

Starting point is 00:08:42 But over time, I think it's about where the community, where the applications are, and there will be multiple winners. And then the interoperability is what really the power of the permissionless world of blockchain that we all want, where people can actually own their data and profit from their data and have low switching costs. So over time, there will be a few or maybe more than a few winners, but there will be interoperability. And when you look at that, the interoperability argument, there's people, and I think in every

Starting point is 00:09:15 ecosystem that would say like, no, we don't want interoperability. There's some sort of maximalist view or whatever. What's your kind of vision of that interoperable world? Why do you say that that is what we want? Well, let's reduce this argument to the most basic level. Web2, in my opinion, scale, we've all benefited from certain efficiencies, but the infrastructure on a certain level operates very poorly from interoperability. It's basically siloed databases, monolithic databases. Everyone has to constantly update it themselves. You have to create APIs and permission who gets into where and what. And then you have to, over time, you have to reconcile that. So you have a gazillion intermediaries and a lot of middleware that's built and you allow a lot of

Starting point is 00:09:58 centralization and people who get bigger have a lot of power over the new entrance to anything. So over time, what happens is like, look at Swift Network. It's supposed to be a nonprofit, but it takes five days for you to send money from the U.S. to an international friend. It's those intermediaries and the painful middleware and other things related to that that causes that delay. So if you have a permissionless world, whether it's seamless and chains out there like Avalanche that are instant settlement, instant finality, payment and settlement happens very close to each other or at the same time. And when you have this decentralized public and mutable type situation, suddenly you're unlocking trap value. basically, you know, look at the SWIFT network or look at credit cards, what you're doing is you have one counterparty to another waiting basically for the validation that those

Starting point is 00:10:52 transactions are real. And while it's waiting for 30 days at the bank to pay the merchant at the restaurant, you are literally taking money out of the system. By having it in a permissionless world where things can move smoothly and fast, suddenly you are literally making money more productive. So increasing the velocity of money and effective actually even growing the economy. I mean, GDP is money supply times velocity of money. So when you start to look at other use cases, what else are you excited about? Where else is this technology going? So obviously, DeFi is something that Avalanche is very excited about. And if we look at DeFi 2.0, when we come out of this, call it winter, and we have spring, really excited about a couple of

Starting point is 00:11:37 things, because for DeFi to really explode and to grow, you need new participants to come into the ecosystem. And that means tokenizing real world assets and ultimately having some sort of identity mechanism, on-chain identity mechanism, so that you can really enable that representation of a person or a thing properly. Because if you look at DeFi 1.0, I think everyone in the crypto world will agree that it actually, the DeFi apps function pretty well, given all the stuff we hear from the CeFi type players. No one got their withdrawals halted. Transactions continue. Code was the law and it all happened. Sure, it was painful. These Aave, Maker, Compound lost a lot of TVL, but they functioned and everyone got their money. In fact, it did pretty well in my opinion.

Starting point is 00:12:30 However, the basic mechanisms to allow that were the smart contract code, rules embedded into the code, and the over-collateralization. So in DeFi 1.0, to get to DeFi 2.0, which we all want, which is to bring new users in, you can't use a system where you're over-collateralizing with existing crypto assets. That means just people who are already in the system who have assets are able to use the system. No new collateral comes in. means no new people coming in. So in order to get new people to come in, you need less volatility

Starting point is 00:13:04 in that asset. We try to do it with stable coins in the crypto native. But if you tokenize real world assets, that inherently is less stable. You also invite new players in. But to do that, especially with financial services firms, you need some sort of proper KYC, AML, and identity associated with it. So we are really excited for real world assets that will be tokenized to grow hold DeFi pie for everyone. It seems like every kind of blockchain, every ecosystem is trying to do this. So obviously the Ether and Ethereum ecosystem

Starting point is 00:13:36 has been talking about this a long time. I've seen Solana pitches, Bitcoin with the Tero protocol built on top of Lightning, Avalanche, et cetera. Does it matter where stuff gets built? Like, you know, if I use Google, I couldn't tell you what the technical architecture is. I just know I type a question in a box

Starting point is 00:13:50 and I get an answer and Google, you know, it's cool to me, this answers my question. Like, is it ultimately going to matter? Isn't that the world we all want to go to where the underlying, anything under the hood is completely abstracted away? I think actually the fun part right now is trying to build and create and be one of those players in order to do that. But yes, the end result will be like, your stuff is served in AWS.

Starting point is 00:14:12 You have no idea whether it's AWS, Azure, or Google Cloud. And one day you just Google it and you can do it and you abstract away the entire, everything under the hood. When I drive my car, I could not fix the engine, but I know how to drive a car. That's literally where we want to get to. But right now, it's a lot of fun. And it does matter a little bit right now because there are differences in technology, differences in speed and scale, and differences in value proposition.

Starting point is 00:14:38 So I think in the long run or medium term, the ones that have better value propositions will ultimately win out. But to the user in the long run, it doesn't really matter. Abstract it away. And then what about like institutions? As they come into this, like, are they looking at this all just from a speculation standpoint? Are they trying to build assets? When you say institutions, let's define that institutions.

Starting point is 00:14:59 I mean, there are two types of institutions. There are like financial services institutions, kind of what we've been talking about because of the DeFi, Ben. But there's also, you know, just enterprises, Adidas, Nike, whatever. So on the financial institutions, they're very aware that the power of the blockchain or the crypto system is that when you need information and money to move at the same time, blockchain is a very powerful tool for that. So when you settle a stock, there are so many intermediaries. When we talked about Swift earlier, there's so many intermediaries, credit cards, there's so many intermediaries, and they're all working off of their own respective databases and lots of reconciliation has to happen. A lot of the financial services players are actually experimenting with blockchain. The amount of experimentation on blockchain and development, not just experimentation, innovation, but the amount of development, whether it's the JPM coin, Monetary Authority Singapore, DBS with JPM trying to tokenize wholesale lending.

Starting point is 00:16:03 Citi doing the custody recently, SockGen, you know, working with MakerDAO, they're looking at it as a way, the technology as a way to create efficiency and create more productivity and squeeze costs out. So that's one part of the equation for institutions. The other part of institutions is really new business models, new business models that will enhance user experience. Brave Browser, for instance, I think, you know, it's been around for a long time. So I'm sure you know of and your audience knows it too. But I think it's kind of cool that they protect you and your privacy. They don't allow your digital fingerprint or your digital traversing of the internet to just be sold. You have to actually opt into that. So once you opt into that,

Starting point is 00:16:48 then you can get paid in basic attention tokens. So you actually decide on your privacy, then you own your data. And in other words, tokenization and this whole new world for institutions will change because the users will now be, at some point, will be able to basically turn their searching into an asset via tokenization and get the choice of privacy or monetization. What are the risks with some of this stuff? We talked about bridging, both wrapping and natively. What are risks there? And then what are the risks of some of these newer ecosystems? Right. So from the technology side, obviously, there is bad coding and things can happen with hackers. But most of the risk we've seen have been more in human nature. And this is part of the reason why the CeFi protocols or CeFi applications have seen more of these problems than you have in DeFi. I'm not saying that DeFi, there's no rug pulls or anything, but if you look at the blue chip ones that are functioning, they function pretty well.

Starting point is 00:17:55 The risks are really on the human nature side, all of it. I mean, any CISO will tell you, you know, human hygiene is just as important to security as any technology. I mean, look at all the CeFi stuff. You know, this is stuff that you saw in traditional financial services in OA. We're talking about re-hypothecation, layering of debt, unsecure lending, and basically things that just happen to be happening in crypto as opposed to another asset class. And then when you start to look into the marketplace, you mentioned the interoperability component of that. How would the market change if we got to true interoperability? Like institutions come in and they're agnostic to the underlying kind of infrastructure, or how does that work?

Starting point is 00:18:39 Great question. I think right now, they definitely clearly are working more in a permissioned fashion. So they're creating consortiums or they're, you know, leveraging the blockchain for, you know, their nodes are actually all part of that bank just in different geographies. So they're really leveraging more of the underlying technology in a permissioned manner. However, they are slowly experimenting like SogGen with the traditional DeFi type applications. They want to test it out. Ultimately, they too want to reach more people. And so that is like on the come. But again, initially, it's all about productivity, efficiencies, and probably doing more in a permission manner. But for institutions, they need compliance.

Starting point is 00:19:21 They need all these rules and regulations. So they need proof of authority for the short term. Hopefully, in the long run, we get to a point where they will be more comfortable in the technology is there and the rules are there so that they can go into a permissionless environment where everyone can actually participate. So on the regulation side, what are you seeing there? What do you think has to change? What do you think is going to change? Well, I think what's happened recently, for better or for worse, has actually created a little bit more urgency to have more attention to the regulation of space. I think the Loomis

Starting point is 00:19:55 Gillibrand bill has certain common sense things that make sense, like in terms of taxing small transactions so people can actually use crypto in order to make transactions happen without capital gains worries. But in general, I think what you have to do is somehow align standards around the world, because you have different rules in different geographies, different regions and it's really hard to put people on the same plane if if you have to have a different you know think of it as a passport entry to every single place it's not going to be truly global until you can do that the benefit and that's part of the reason why avalanche has the subnets you know the subnets allow people to create their own restrictions and then you can toggle you know the

Starting point is 00:20:43 lowest common denominator or the highest in order to like figure out who can transact with him so it's some of a solution to the lack of common set of rules. Ultimately, I think some global standards will have to come about. What is the thing you're most excited about in the next 12 months? We obviously are in kind of this bear market or downtrend now. What are you excited about for people to kind of look forward to? I wish I could give you specific names, but I am really excited about certain big brand traditional enterprises who are going to be doing some cool stuff on avalanche it's still that same theme of like real world assets um you know coming into this ecosystem and growing the ecosystem for everyone so um both in the financial services side

Starting point is 00:21:33 as well as in the gaming side i mean obviously we have a lot of visibility to gaming as well because the subnets have been really adopted by a lot of gamers to to basically create their own execution environment in a very quick manner so those are two areas that we're super excited i wish i can give you specific names right now but the audience just stay tuned and just follow me on twitter or whatever and they'll hear about it very shortly and then lastly i guess is like talk to me about uh the hiring uh environment what are you all seeing there both i guess in your own ecosystem uh and then also in um kind of other companies that you interface with yeah so for us we're continuing to hire or continue to grow. I will say it's probably gotten slightly easier

Starting point is 00:22:17 in the sense that we've come to the point where it's not just hiring crypto native people. It literally is hiring BD people from JP Morgan or Goldman Sachs. It's also hiring tech engineers from the Silicon Valley titans that you know of and product guys from those places. It was a lot harder just about four or five months ago. But now that there's a little more slack in the employment market for tech workers, that's become easier. From our perspective, we're still very selective, but we are growing. We've gone from literally 10 people in the room about 2.5 years ago to over 180. We'll probably be over 200 in the very near future. I lied. I actually have a ecosystem. We think about Bitcoin. We think about the entire space. Self-custody is a huge piece of

Starting point is 00:23:12 it. We do a bunch of work with Ledger. How do you think about self-custody, especially when there's bridging, when there's wrapping, when there's all this other things? How does self-custody still fit into the ecosystem? Listen, that is the holy grail. I think people who truly understand the power of permissionless, they want to own their assets, own their data and have switching costs to the most minimum level as possible this is part of the reason why avalabs is creating the core wallet the core wallet goes back to what you said earlier it will abstract away a lot of the stuff under the hood the bridging you talked about um keeping one place where you can keep your nfts as well as your other assets having uh like just a like normal

Starting point is 00:23:59 like fidelity type of experience where you can actually do analysis on the stuff that you own it's almost like an operating system more than a wallet and it has fiat or as well as uh you know crypto on ramp so it makes it as if you can be a coinbase type situation wallet but yet actually own your own stuff have your own access to it and that's what we're also you know thank you for bringing it up very excited about our own core wallet you know originally it came out because our community wanted an experience that was more appropriate for the speed of Avalanche. MetaMask is great, but it was built for a different chain and that chain has different inherent differences. So the speed will be somewhat different, but recognizing that the goal for all of us is to

Starting point is 00:24:44 grow the user base for the ecosystem and to abstract away some of the native crypto stuff so we can grow that ecosystem. That's what the core wallet's all about, the bridging and all the other stuff that we just talked about yeah all embedded and you won't even know about it makes uh makes complete sense where can we send people to uh to find you on the internet absolutely so me personally uh twitter john the number one wu um and then avalabs you know avalabs.org awesome are you getting sleep everyone always knows i don't know not enough i mean i get I see you every once in a while. Last time I was on the show, we did this in person. Now I know the zoom could be deceiving, but you look pretty much the same. And by the way, I just see the

Starting point is 00:25:32 advertising for eight sleep. That's a wonderful product. It's awesome. Do you have one speaking of sleep? And you know, coincidentally just pops up. I don't have one, but I had a friend who had it and I stayed over at their place. It's a changer. It makes a far more comfortable. It'll give you more deep and run sleep that you need a lot of for people who work they're gonna hire you they need to hire you it can replace my it can replace my whoop or aurora yeah you know that is that is exactly what uh what it is that's even better whooping or just tell you what you're doing this actually changes so that you actually don't need them to tell you you're not getting enough sleep it just gives you more sleep you you're a sleep expert you're asleep we're sleeping

Starting point is 00:26:13 on you because you're uh you're expert at all this stuff do you have a whoop or uh uh the aura ring i do i do have a whoop i could and the next step may be uh eight sleep because i had such a good experience on it yeah i am i use the uh apple watch uh for most of it um and uh i love the data i don't necessarily i don't think i actually like change too much somebody asked me recently like what is what do i do differently in my life because of all the like quantitative self stuff uh i sleep on the eight sleep right so i i definitely know that i get better sleep i feel better higher energy all this stuff and then on the apple watch uh it's got all this data but you know what the thing is that i do uh i just close the rings like that like it's the most basic thing

Starting point is 00:26:54 right as i just try to close the activity rings to close the rings like i'm good uh and how i did it whatever like sure you know i might work out i might go for a walk whatever but as long as i close the rings then i feel like i uh was active for the day and it's such a basic user experience uh thing of like there's these stupid you're on one end of the spectrum i know a lot of other people who become neurotic because they check every single second you know i have an apple watch too yeah i'm wearing um but i don't use that for the sleep i use the whoop because i thought the whoop app was actually a little bit better for other functions so anyway point is some people get neurotic about it i can't do that actually is detrimental yeah i can't i can't uh

Starting point is 00:27:30 i'd go crazy like i'd be sitting there like oh i didn't close it yet like like man just chill life um awesome john listen thank you so much uh for uh for coming on um i uh i think that uh yeah absolutely thanks so much and uh we'll definitely do together in the future cool all right later buddy

The Pomp Podcast - #1056: John Wu On Bridging Bitcoin To Other Ecosystems

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