The Wolf Of All Streets - Crypto VC Funding Dead? AI Killed Crypto? | Crypto Town Hall With Kay Phillips, Vinny Lingham, Dovey Wan, Eleanor Terrett, Gaurav Dubey & Others

Episode Date: July 21, 2023

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Yo. How you doing, man? Good, man. Good. Where's, uh... Where's our boy Rand? Port of Israel. Co-host me. Co-host me.

Nah, I'm done. Man, you need to stop sending the most boring news and make a big deal out of it. Like, like, like the world is changing. It's just another, another one of those bills that will not get passed and end up being forgotten about. And suddenly it's like the biggest thing that happens in sliced bread i'm not so sure this time you guys now you're getting a glimpse of what happens in the background is that uh i like serious things and my co-hosts are jackass i'll ask i'll actually ask the audience in a bit to compare my topic to yours and we'll see what everyone thinks and if if they vote your topic man i'm out of here you guys can run

this shitty ass downhole okay all i all i will say is that if so so everybody knows obviously we had the congressional bill yesterday and eleanor and i are going to talk about that um and it looks like next week we will have the actual congressman who proposed the bill and warren davidson and such if we add all of them on today immediately you would admit that it was huge you're just mad that i didn't get them yes um to be honest no man i'd still be bored and i'll just let you run it like you did last time with congressman we had one when i called million people listen when we had warren davidson 1.5 million people man i'm part of the minority that doesn't care

um well i will see how many people listen today. How are the markets? Flat. Boring. Equities as well? Same. Yeah. Actually, I was on.

Equities are trading a bit sideways. Actually, it looks like a bit up on the day from yesterday, but boring. I think equities are, we can talk about markets later, but I think equities are topping here for topping here for a bit all right man do you want to kick off the discussion about the bill then sure yeah we can go ahead and do that uh eleanor and i already kind of talked about it a bit on youtube so she gave me some context of course eleanor who's up here everybody should be following her because she's the absolute queen of breaking news uh somehow gets the scoop on literally everything that happens in crypto and beyond all the time. But you broke the news yesterday, of course, that we had the

Financial Innovation and Technology for the 21st Century Act, which was presented by three congressmen, Congressman Glenn Thompson, French Hill, and Dusty Johnson, Republicans in Congress. Mario laughed at me when I said that this was a big deal, said he's a skeptic, said he'll never pass. It doesn't matter. But there's a lot of language in here, in my opinion, that is brand new and things that we need to see change that are in the right direction. But Eleanor, maybe you can give us the very, very broad strokes.

Yeah, sure. Just first, I'm curious, Mario, why are you such a skeptic? Because I don't understand this. No, look, I was going to say I don't understand this stuff. They can't read. Look, there's only one part of this. I took my notes. I actually did a bit of homework.

It's two things. One of them is there's a bit of a disclaimer that kind of made it less exciting. It's on page 10. I'll just read out one of the tweets. The revised bill excludes from the definition of digital assets a range of traditional securities, blah, blah, blah, which includes participation in any profit sharing agreement. So they kind of kicked DeFi out on the curb. Is that one? Nah.

Bad take. It's a bad take, but we'll talk about it. Eleanor, go ahead. We should have Gabe up here, Scott. Maybe he can explain the tweet, because I know that's kind of the tweet that went viral, right, about how this bill sort of excludes De things, but mostly that, you know, it pays away for companies to be able to legally register with a regulatory body. And hopefully this gives them the confidence to come forward and not feel like they're getting, you know, targeted unfairly anymore. You know, it gives them the option to register either with the SEC or the CFTC, depending on what they're offering, right? So I think a lot of the stuff in this bill was not a surprise. A lot of stuff was new. We can get into that in a minute as well. But basically, it gives both the SEC and the CFTC a good seat at the table, jurisdiction over digital assets and digital commodities. And

they get into the difference here. The SEC has jurisdiction over restricted digital assets. So what that means is assets that don't meet the decentralization test, they do get into kind of what they expect to that in the bill too. And the CFTC will get jurisdiction over digital commodities and those intermediaries that offer the digital commodities. So kind of a, you know, a clear distinction there, although we don't know exactly which tokens will go into which bucket yet. I think the biggest sort of positive new take on here was the safe harbor of sorts for existing

digital assets and companies. They're allowed to file a notice of intent to register with the CFTC and the SEC right away. So that would mean that if they did that, they would be not subject to enforcement action as long as they agree to comply with keeping customer assets safe and bumping up their disclosure requirements. So this is sort of what Hester Peirce was talking about a couple of years ago, right? A safe harbor where companies and tokens can exist while final rules are being written until the FTC and the CFTC decides kind of what you are.

Are you a digital commodity? Are you a digital asset? It's restricted. And I've just got one part that I wanted to ask about. And by the way, just for the audience, we're going to have a two-part discussion today. The first part, which will be relatively short, is about this bill. And the second part will be about the VC funding is completely drying up. We've got an incredible panel with great VCs on stage to dig into the numbers.

But my question to you, Eleanor, is the part of the bill where it says the following, it exempts digital asset projects from typical registrations for securities offerings up to a limit of $75 million in tokens over 12 months, but with restrictions on sales to unaccredited investors. Again, this is not my area of expertise. Can you explain what that means for projects? Yeah, I can actually. So I actually was in contact with the policy people on this very topic today because I feel like it's one of the hottest topics in the bill that people kind of think, well, what's that exactly referring to? So I'll read you the. No, no, no. This is Scott. Did you hear what she just said?

I commented on the most important part of the bill that everyone doesn't understand. Just for the clarity, the person that doesn't read pretty well. But please, Eleanor, continue. just want to point it out um yeah so let me just read you the email I got because I literally got it five minutes ago so um in relation to that with the you know the the five or ten percent of the uh the unaccredited investors income the 75 million dollar offering so this I asked basically I said you, I said, is this for unaccredited investors? Does this apply to all digital asset purchases or just private coin offerings? Because it wasn't really clear in there. And they said, this only involves purchases of digital assets

through the exemption provided in Section 201. So this is a new exemption. It's a new exempt offering. It's similar to Reg D, Reg A, or Reg CF. That offering is an initial offering of a digital asset from an issuer to a non-accredited investor. Initial offers in digital assets which are not made through that offering are subject to different rules. There are no limitations on the purchasing of digital commodities so i think they answer my question in so much that you know what does it apply to all digital assets are they saying you know everybody can has to cut off their purchase point at five to ten percent of their annual income not for digital commodities but for specific uh digital assets that are you know i

guess regulated under the sec there's a new exemption that they're offering. They're bringing in, it's similar to Reg D, Reg A. Scott, I'm curious to know your thoughts on that, because I know we talked about that. Yeah, I kicked off there for a second, but I think that this is absolutely massive. At no point in history can I remember even a proposal that unaccredited investors be allowed to invest, first of all, certainly in private token sales, but in almost anything that they want to invest in the United States. I would love for this to be a slippery slope for people to be able to invest in VC and private equity and other things in the United States. But A, it's going to be hard to vet, obviously, their income. I'm assuming

it'll be on the years past IRS tax reporting, probably when you apply for a mortgage or something. But the fact that they're saying that unaccredited retail investors in the United States will be able to participate in private token sales, when by the way, 99% of the time, accredited investors in the United States right now still can't participate in private token sales because they generally happen offshore, to me is absolutely just massive. It's huge. Even that they're allowing unaccredited investors to participate in any way, shape, or form, a lot of people are getting fixated on the 5% number. They're, I think, having bad takes about believing that they're only allowed to have 5% of their money in digital

assets. That's not the case. These are private offerings. And like you said before, up to $75 million a year effectively without registering. This does allow for small projects to innovate and be entrepreneurs in the United States to allow retail to participate. I mean, what more could we ask for? But do you genuinely, Scott, do you genuinely have any hope that the bill will pass? I do. What makes you say that? I do. Well, because I think that they're giving a lot of red meat to the SEC still here. I think a reasonable increase in powers to the CFTC. And I think that right now there's really a lot of political heat on the SEC and there could be some major pushback.

And I think that right now after Ripple and after seeing Gary's aggressive campaign, I think that there's a very clear need for some sort of legislation. And listen, it's the same time we're seeing Lummis-Gillibrand reproposed in the Senate, which I think is huge. And there's a lot of aspects that are shared between these bills. And that's a Wyoming Republican and a New York Democrat, of all things, proposing that together. I think this will get past Congress, most likely, and then it'll be up to just chopping it up and making it work for the Senate. But I do think, listen, if this can't pass, which is definitely possible, it's just a systemic issue that nothing can pass in this country because there's political gridlock from both sides on everything. But

there's no reason, if a bill in the United States can still be made into law, there's no reason that this one can't be a part of that. This is less bipartisan than most issues that are being discussed. And everything being proposed here is rational and relatively pragmatic, won't be that popular, to be quite honest, and should not harm the Democratic, unless you're Elizabeth Warren and you're part of the anti-crypto army specifically. I think it's a really good step in the right direction. I think you're right about the red meat with the SEC. There's a lot of stuff in here that the SEC does get to control and a lot of stuff that CFTC gets to weigh in on. So I think

it's not by any means perfect, the bill. I think everybody would agree on that. But it's definitely, like you said, a step in the right direction. That safe harbor part of it, I think, is really big. And also the part where it says it provides a pathway for digital assets that start as securities to eventually be regulated as commodities. That was also something that stood out big to me. And the key test of that will be the decentralization test. They define what a functional network is and the decentralized network and digital asset issuers can certify to the SEC that the network their token is on if they can certify it

decentralized. I don't know how they would do that paperwork, you know, meetings, but then that could be, you know, considered decentralized. So it'll be interesting to see how it all rolls out. You know, they're doing a markup next week. Wednesday, the House Financial Services will look at it and mark it up. And Thursday, the Agriculture Committee will mark it up. So there's obviously going to be some changes. I think the Democrats will be encouraged by the fact that there is such a big part of the SEC still in here. And I think the rebel decision will also hopefully weigh in as positive development for them to see

the need that there really is a need for legislation here, even though Gary Kanzler has kind of flip-flopped on that notion. Dave, do you want to go ahead before we get into VC funding? Yeah. Yeah. i think scott well actually dovetails with that uh i think scott's point is is really really critical which is that this bill effectively opens a pathway to understand the life cycle of crypto and what people in crypto keep doing is they keep focusing on everything at one point in time. But the truth of the matter is projects go from initial funding, incentivizing miners and developers and users in order to fund. And then it moves to secondary trading and or the secondary trading, which is still relevant for those people on an ongoing basis. And basically what this is saying is when you're funding a project from the beginning, you're going to have a set of rules. And over time, as the project is continuing to use crypto as an incentive, there will be

different rules and those rules morph over time. And all of that makes sense because everyone who's been involved in a rug pull basically understands that having no token economics specified is important. Some of that red meat that is in this rule, which is really important, is actually defining what token economic disclosures need to be and to actually have it such that you have to say those things and it has to be clear. And I don't think it's hard to argue that that makes sense. Now, yes, there's going to be details, but at some point, if you want institution, if you want broad-based adoption, you need that. And the other thing to keep in mind on the political side is, you know, with Richie Torres, who's another New York-based Democrat, and no one's going to confuse him with a Mongo Republican. You know, you have people on both parties who understand that we kind of need to get out of this mess and we can't afford to cede it to the rest of the world. And the thing

that Scott talked about this morning, which I want to highlight is really important, was the myths section. I've never seen anything like this before. And I encourage everyone to read Scott, you have it fingertippy if you want to pin it. But their myths that they went through where they said all digital, you know, they one of them was a myth. All digital assets other than Bitcoin are securities. And they go, fact, no, it's not. And they say, you know, it keeps going. Myth, existing legal frameworks can accommodate it. No, it can't.

Myth, Congress is working to create light touch regulation to prevent the SEC from being able to police. No, that's not what we're trying to do. And so on. They basically went out and preempted the PR campaign from Gensler and other people at the time of release. That kind of is par for the course these days, but I think it's really important. It kind of tells you what these people are looking at and that they don't want this just to be a show. They want to actually do something. I mean, Dave, you can actually come in and register now. I love that. That was one of the myths is that obviously you can't come in and register, but just so people are clear, yes, you can do 75 million in offering. And the only thing you need to do to register is to basically, I mean, seemingly you have to KYC, you know, they have

to know who you are, which by the way, will prevent a rug pull because nobody will go in and register with the SEC, even if it's basic, and then rug pull on people. And you have to have a business plan. I mean, could it be any more basic than that? And there's that five-year safe harbor. It's very explicit. Eleanor said it, but it's huge. It basically says it's codifying Hester Peirce's original thing for a safe harbor so that people can, you don't regulate by enforcement. Basically, it's telling the SEC, here's your red meat, but you got to do it by rulemaking. You can't be vague and arbitrary. And that is really, really important. That's a slap on the wrist.

Look, this SEC is no problem with rulemaking. I mean, they filed more rules than any previous SEC in history. But for digital assets, because of the anti-crypto army, they've actually refused, except to try to expand jurisdiction. So it does really matter. Mario, did we sway you at all? Yeah, I'm actually, you know, it's just fascinating. I want to know how it's going. Yeah, okay. Of course not. it's just fascinating to see that power struggle

that we've seen over the last few weeks. The SEC is not that almighty, powerful decision maker that makes up all the rules. So it's just fascinating to see the power struggle. But the question that I have, and I'm just thinking now, is that what's the process? How long will this take for it to potentially pass?

Anyone? Long time. That's for Eleanor Eleanor I was gonna excuse me sorry I was gonna say yeah it could be a long time I think it's out there now you know you kind of got this basis of a framework and when they mark it up they're gonna vote on things they like things they don't like things will be taken. Things will be nitpicked. And that could take a while in the House, right? And then it's going to go to the Senate. And then it's going to go to the president. Like, you guys all know the bill process, Bill on Capitol Hill.

I think we all remember that from elementary school. But yeah, I mean, I don't, and I've talked to people, you know, kind of who, you know, who are on the Hill, who have experience with legislation and writing legislation legislation how long the process takes this definitely won't pass this year i mean it could be next year it could be a year like after that but there's no time frames per se but i don't think it's going to be quick that's for sure look i i i think that the best thing about this thing is that every move that we see now is a move that excludes the sec limits the sec's powers um move stuff towards the cftc which is much more pragmatic in their approach it just feels like it feels like the the the walls are tightening on gary ginsler and the sec if they can't be having

like this that's actually not true ran i mean actually empowers him, but he has to do something he doesn't like to do. Because what's really happening here is this is legitimizing digital assets. And the SEC has treated, in fact, even two days ago when he spoke, you know, asking for $72 million, he basically says, oh, it's all crypto fraud scams. And they basically are saying, no, you're wrong. So here, use your power and regulate it and legitimize it. And that is an extraordinarily important difference here. So it's not about getting rid of what they're doing. It's forcing them to take it.

It's more asking. Yeah, it's asking. I feel like it's more focused on providing clarity rather than fighting the SEC. And there's one part here. Token issues must be established in the U.S., have a business plan, and not be under any enforcement order from the SEC in the five years preceding a token offering.

That's all it takes to get a token offering going. All right, that's pretty cool. All right, Scott, can we get into the VC funding drying up? I don't know. Can I just make a report? Okay, go ahead. Yeah, I think we should beat this to death a little more. Come on, go ahead.

Sorry. Yeah, no, I just wanted to make the point that this is something that could pass quicker. So on July 19th, where are we now? So Tuesday? I don't even know my dates, but on July 19th, Gillibrand, Lemus, Warren, and Roger Marshall, they introduced an amendment to the fiscal year 24 NDAA, which is the National Defense

Authorization Act. And they actually slipped in some crypto updates in there, which basically help prevent the use of crypto assets for money laundering and encourage financial institutions to come up with sort of rules of their own, but then confer with FinCEN and the Treasury to make sure there's no nefarious activity. So that because it's attached to a bill that must pass, which is a National Defense Authorization Act, it happens every year. You know, crypto rules, crypto, you know, these little things can be attached to bigger bills. So you'd look at something like the crypto market bill that just came out. It's like a bill in of itself in crypto. But there's a chance for, you know, little bits of legislation to be attached

to bigger ones. So also keep an eye out for things like that, because I think that's kind of interesting as well. Yeah, I just want to say really quick to what Rand said and Dave as well. I think this does not necessarily eliminate all of the power of Gensler. He's going to hate it, of course, but I do think that there's a general error across the board and not just with regard to crypto that Gary has pushed too far. If you see any of his hearings in Congress, I mean, they're attacking him on ESG. They're attacking him on not giving answers on rulemaking. They're attacking him on crypto. And I feel like, you know, maybe Coinbase was the breach too far. I've said this quite a few times because they're very transparent and out there. And I think he's been kneecapped on Coinbase now with the Ripple judgment. And I just think that maybe this is the point if we want to take a silver lining that whether this is going to take a long time to pass or not, I think Gary is going to have to slow his roll right now. I really do. Cool, man.

Scott, can I please get into the VC funding? Do I have your permission? No, I'd like to talk about every other thing. Well, you've been wanting to get into this all week, every day. You guys have been delaying it nonstop. Like, I don't know how this is fucking serious.

Today, the VC funding discussion, isn't it? Mario, today is the VP. But guys, have you looked at the numbers, though? I don't know. Am I the only one that's worried? Like, I understand we're in a bear market, but there's a few sources. DeFi Llama is one, obviously. Another one is Galaxy Digital has a report.

According to DeFi Llama, the numbers are worse than they were in 2018. The other reports don't show the same thing. But let me just give you, let me get into the Galaxy Digital report. We've got Vinny, we've got Goran, Kayla, Dovi's here, Michael. So it's going to be a good discussion. And I'll give you some numbers.

Galaxy Digital did send out, put out that report many days ago, but the guys kept delaying it. Quarter one 2022, I think it was the peak. No, it wasn't the peak. It's 2022. Quarter one, $13 billion. Quarter two 2022, $8 billion.

Quarter two this year, so last quarter, $2.3 billion. That's the decline for the fifth straight quarter now they're blaming the interest rates of course and what we've seen with ftx three hours capital luna etc and now with the sec as well now it's prior to xrp's ruling so just many people thought to to remind everyone of that um and what's interesting as well is that we're all trying to on the us and how startups got you keep saying startups are leaving the US. 45% of the funding was from US-based VCs or into US companies. Actually, I'm not sure which one.

I'm going to have to check that. While I check that, I'm going to give you some numbers from DeFi Llama that I was looking at earlier. June saw $109 million worth of funding. And that's, according to them, it's lower than any month during million worth of funding. And according to them, it's lower than any month during the bottom of 2018.

That's the worst period. Funding is down 98% from peak in February 2021. Valuations are lower, obviously, and VCs are raising smaller funds. Okay, so it is correct. U.S.-based companies. So Scott, yeah,

everyone's leaving the U.S. U.S.-based companies raised 45% of that VC money. so it is correct u.s based companies so scott yeah you everyone's leaving the u.s u.s based companies raised 45 of that vc money so whatever your thoughts are it seems that vcs are disagreeing goes back to the narrative that people trust companies that are based in the u.s that was a a point that was made about a year ago on my show and kind of stuck with me but look we've got the a panel that can that they're still in the space, still at the ecosystem, big believers in crypto. And I want to, before we go through and go to the panel,

I do want to mention that we have, I think it's like Paradigm, let me read it. Yeah, Paradigm, FedOcean. They removed crypto from their website until the block caught them on it. And then they said, hey, it's a mistake. They started focusing more on AI in their website. We have Sequoia's capital investor, Michelle Fredin, who was the reason they invested

in FTX. She's tweeting more about AI than crypto. So the first question is for Vinny, I want to go to you. Is AI sucking the fuel out of crypto? Can we still be bullish? How long will this bear market last? What are your thoughts? How does this compare to 2018? Yeah, this is very... This market I think was colder in some ways in 2018, 2019. That was I think a lot worse. In 2018,

2019, we got on to like a $50 Ethereum, for example. And yeah, there was just like... If you're understanding, it's nearly two thousand bucks as an example and uh bitcoin is nearly 30 000 but it still feels like it's been colder uh in this in this run um and i think it's probably because of the the you know the decompression in ulsts has been pretty pretty rough and i think also the speed at which it happened um you know with the fed taking action i'm i'm i'm like personally i've i've moved out of uh crypto as an operator about two years ago so i've been focusing

on ai but you know um with my new company waitroom and um you know i'm still investing in crypto i'm still involved in a bunch of funds i still channel civic. So I was still in crypto one foot in. But as an operator day to day, crypto has been hard. And it's just not as much fun as it was maybe a decade ago when Bitcoin was getting started. And I've been in for a while. So I kind of moved out a bit. And I do think a lot of people are feeling that way as well. It's just maybe you get tired. You know, it's hard.

It's really hard building as an operator in crypto. It's really, really hard. So Vinny, maybe tell me a little bit like why you feel the way you feel and maybe like

what's different in the world of AI? Maybe give us some, you're saying you prefer as a builder to be in the world of AI. What's making you feel so not negative, but not demotivated, but maybe unenthusiastic about crypto and so much more enthusiastic about AI?

So personally, I like building products that people can use, and I've been doing that for my whole career. And in crypto, there's just a lot of stuff that goes mainstream, unfortunately. It's very narrow to the crypto community and then when there's a hype cycle everyone sort of plows in but you know no one really you know like it doesn't have longevity and

like giving one consumer product in crypto that's got more than 10 million users or 5 million users except I mean exchanges are not really a product it's just a place to buy and sell but like we're struggling in crypto to find product markets it um and the other problem is that it's just like overload right there's like 10 000 crypto projects out there and let's be honest 90 90 plus is gangs uh and they just waste to enrich the founders

uh other people's photos so 95 probably it's it's it's it's you know it's pretty depressing and i've watched this from the inside i've been involved in crypto companies where i've invested in them uh in theft you know we've seen lawsuits we've seen you know pretty heated discussions with investors uh everyone's just motivated to sort of cash out when they can no one doesn't really has the the sort of um wherewithal to stay in it for a long enough period of time. And then they just jump on retail as well. And that's a problem. So I think I've gotten negative on crypto.

I think there's still some, there's a few really good projects out there. People actually do care about some of the things I care about. But from a values perspective, just less than this. And you've watched me in crypto for a long time. I mean, with what I've you know you're right you've you're right you've watched me in crypto for a long time I mean what I've done and most you know most of the time it's just been um like cherry picking the best stuff for me you know one of the reasons why I'm so interested in this discussion really is that I've known you for many many years and I've always thought that you always you're always ahead of the curve in terms of trends I mean you were the person that, I think one of the first people that tried to get me into Bitcoin. And I think

it was because of you that I actually really got into Bitcoin. And I've been following every move that you make. And the truth is every move that you make, you're always ahead of the curve. Now, when you tell me that you're pivoting to AI, then I've got to ask some really tough questions. Yeah. I mean, it is what it is. I just, I think the big blue sky ahead of AI. I mean, here's some examples of like AI numbers, right? We're building a product in Waitroom right now, which it's video conferencing.

It analyzes your conversation. It uses AI to process it. We work with OpenAI, et cetera. The products I can build there, the big guys have got no way of building this because the GPU power is so constrained. Zoom does 3 trillion minutes a year. If they were trying to analyze every conversation on Zoom, that's one quadrillion tokens in the AI world,

tokens basically processing words. One quadrillion tokens and in the ai world tokens basically processing words um one one quadrillion there isn't enough gpu power for them to build this product for their customers uh because they have too much scale so now we have to think about it in a different way we can go build the product in a you know from the grounds up targeting different markets different uh smaller groups etc and and i think that there's just a big wide open space in AI and I've seen a lot of people leaving crypto because of AI. Isn't it just money? The use cases

are still there. The same use cases we talked about last year, the year before, the year before still apply today. If anything, they apply even more. We're closer to those use cases. Is it just because there's more money, there's more interest, just easier in AI and looking at the numbers? No, think this way if you want to make money like it's probably better than being crypto in the short term because ai you're not going to make money uh ai is a very

ai will be it is a very well regulated space okay so in other words uh founders go in you you go raise money from vcs they sit on your board, you go build it, you're not enriching yourself from day one, you don't have liquidity from day one. The problem with crypto is there's too much liquidity from day one for founders. And they basically... But that's an easy...

I wouldn't agree, right? That's an easy thing to fix, just put mock-up periods and that's already happening. It's like this is a... No, no, not... Because the community doesn't listen to this. We've been doing this for years. If you go find a company in a different country,

you don't have to have a lock-up period and people will still buy your token. It's just a weird scenario where there's a lot more formality in the VC world, in Silicon Valley and VCs investing and founders who are looking to do four-year base, one-year cliffs, etc. You still get this in crypto. I actually want to

ask the panel, like is there, and then I'm going to go to you, Ryan, because I want to get your thoughts, you're the bull. But I want to go to the panel. Goran, Michael, actually I've been boiling to speak since when he started because I've also been around since Civic was launched and invested in liquid markets.

So first comment first, if I can start, Mario. Yeah, go ahead. Yeah. So Vinny, it's always colder when you're living the winters, right? The one you're living is always the coldest. That's on the funny part, but a simple statement. We can blame it all on the VCs and people not holding onto it, but can't we blame it also to the founders in crypto?

They also don't tend to stick. Let's say, okay, you raised a cap round, not you, but a project comes out, raises, let's say, whatever million dollars for a five-year roadmap or a three-year roadmap. Obviously, you know in tokens, you won't have a fundraise very soon. So you raise accordingly. And a lot of projects literally raised hundreds of millions in 2016, 17. So it should definitely assure or ensure a three-year, five-year roadmap product delivery, marketing, and everything. And so no matter what happens to the retail,

I mean, with the retail, that dumps the token to the market and the token falls, they should at least stick to the product delivery. But instead, what has happened is, you know, 98% founders and 95% founders are proudly launching new products without even caring about the delivery of the first ones. What do you think about that?

That's also to be blamed equally as much as the crypto ecosystem to be dumping on people. What do you think about that? Shouldn't founders stick to the projects that they've raised upon? Yeah, absolutely. I mean, with Civic, we did ours in 2017. I was there for five years. I'm still there as chairman, right? I'm not day-to-day operating it, but we're still sticking it out.

We're still building KYC. I mean, actually, if this bill goes through and your KYC is required, Civic's going to do really well because we've been building all this infrastructure for years, and we're still there and still it so but like we're one of the very few i mean how many how many projects do you remember from 2017 where like the founders are still involved and the team's still building and whatever else most these guys have run out of money and so no i'm not even i'm not even pointing it at you i'm just pointing it at your statement in general. I mean, yes, there are a zillion things I can obviously talk about other projects, including yours. But I'm nobody to speak on that as an outsider.

I'm just talking about your statement where you said the market dumps the token and everybody leaves. Like crypto as a market, you said, is unreliable and the investors are unreliable. And they depend on retail liquidity. For the majority, it's true. I mean, out of 10,000 projects out there, plus 10,000 plus, how many... 9,900. Yeah, out there it's garbage, greed, garbage, greed, no consulting.

I mean, come on, how many projects have we invested in where the founders have disappeared with the money that have never ever launched a token that had internal scuffles and the money has disappeared and the product's never launched? I mean, I'm actually speaking on the founders part here. I'm actually representing that part. I'm saying founders are equally responsible for investors to dump their goods and move forward. Karad, this is the problem. Let me try and shine some light on this, okay? Because I think this is actually an important, I think I'll make it a

pretty important point. When I moved to Silicon Valley in 2008, it was a very closed network of people, right? You had reputation at stake stake you go and raise money investors i mean you know you know there was like you couldn't turn over quickly and just go start something new if you were doing dodgy stuff right and so there was a lot of handshake deals uh they were you know the diligence was very light and it's you know and we've seen what happened with fdx but like people there's a trust network in silicon valley and that's how found you know if you move there you could raise funding etc etc the problem with crypto right now is it's a global economy with people with different value sets across the board from different countries um and and there's

no gating factor to get into silicon valley and raise money and and immigrate to the u.s there's a whole bunch of like steps that you have to go to get there before you get the funding from the VCs and building things out. Right now, a founder can just churn over multiple times, and we have this whole notion that anonymity is okay in crypto, and undocs founders are fine if they're brilliant and good coders. We don't look at the values of the founders. We don't look at their ethics, and this is the problem. And so it's on the founders, but it's also on us

because we keep buying from people we don't know and without people i find it to be i find this to be less applicable than use cases i think ai has a lot more short-term use cases a lot more adoption than crypto and i think that it just boils down to this and more capital flowing into it i think we talk about you know we're talking about now how VCs are investing in projects and exiting quickly and having that herd mentality and projects just,

Randy said 9,900 projects are garbage out of 10,000. George, the cool thing to say, but that applies to most industries, maybe crypto more because of lack of regulation. But I just don't think that's enough of a reason. Like in the bull market, we didn't complain much about it yet. And the bear

market suddenly is the reason we're leaving the industry. But I do agree with Vinny, the application of crypto does not compare to AI. And Dov, I wanted to go to you, get your thoughts, Scott. One quick state going, that'll be like a very quick one. Ran, I've been operating a tech incubator in India for like 13 years now and only three years incubator in crypto. I can tell you the numbers in the crypto incubators are like almost eight times better than the early stage investment company in the normal equity stage.

So I'm telling you, just because we are living in the bubble, we don't have to blame the bubble to be the worst. The startup failure rate and the garbage rate is equally the same across the whole landscape. Yeah, Davi, you had your hand up. I just want to say really quickly, Mario, just because it's a bear market, all prices will go up and everybody will FOMO back in and we'll see 10 times as much VC funding in the next round. And we'll all be like, why did we even talk about this? Okay, go ahead, Jerry. Yeah, so what I want to just, so I just want to add on to this point because I've been in now you're working on AI.

And so, so when I, so before I full time crypto investment and I briefly invested in AI startup like before the transformer era. And so some of them have like decent access like Loon.ai got acquired by Roblox and like Syntheum that they're working on some pretty cutting edge on just the edge compute. And I think like their recent valuation is also like a 500 million something in Path AI, etc.

But doing just like pathology, just like computer imaging on like pathology. And so I have seen how all these AI startups are trying to find a very niche and like very, very niche market and like try to grind in. So try to grind in between this book. So like this big platforms and channels. And because the LRM model is going to be commoditized, so who can own the end user and client relationship will be the killer. And most AI startups, it seems to me nowadays, their best asset is going to be acquisition

or just have some sugar daddy out there in the market. And I think in order to just have any edge to be an AI application-side innovation. And because when it comes to crypto innovation, everything is permissionless. You can do community fundraising. And so you can hire from your own like Discord, right? And then so, and I have been batching a lot of really good anonymous founders out there. So like they don't even have to use their social, so like they don't even have to use

their like social currency or like social capital. Like GMX, Luxor, Pika, and like these are all like really, so like these are all really good anonymous founding examples. Like when it comes to AI application, and so if you want to grow big and these are all really good anonymous founding examples. When it comes to AI application, and so if you want to grow big,

and so you have to have some of, so you will need to have some unfair advantages when it comes to accessing domain data. And so if you ever become big, and so you will have to self-censor. And then also you will have to pay very high infrastructure tax to framework, like OpenAI, or just a training model eventually. So they will have very high capex on all the hash power. And then at the end of the day, consumer-facing application, when it comes to

traditional web, like Web 2.0, just a typical consumer application. So it's very tax-sensitive, right? So AI is not going to fix your distribution channel. And so if you're building for B2B, let's say, for instance, I invested in something very similar to

what you're working on right now, like Fulon.ai. So it's also like a typical B2B sales company. And the sales cycle is such a bitch. And so they were just essentially acquired by Salesforce at the end of the day. So, Dovi, sorry, let me finish off, sorry.

I wanted to ask you, I'll actually ask you a question as you finish off. You can answer that question. I want to go to Kayla and Danish. The question I have to you you, I'll actually ask you a question as you finish off. You can answer that question. I want to go to Kayla and Danish. The question I have to you, Dovi, is it just seems that we're talking about crypto VC funding and the whole discussion is about AI. Is it as simple as AI is the reason that crypto funding dried up? Because again, VC funding across various industries dried up as well.

It's not just crypto, but we're focusing on crypto. AI is the only one that seems to be doing well. It's not just crypto, but we're focusing on crypto. AI is the only one that seems to be doing well. So, okay. So AI, I think like the crypto, just like the crypto founding dries up. So it's more about the, so it's a much more about the risk appetite other than just a competition from the other sector. And then I also let every boat market, we have all this at True Risk Investors and just I I have like friends who are working in traditional industry. And then so like wants to get allocation in like all these like Leo 2 projects. And so like all these are just like tourist investors. And so I think if we count them in, and I think it's actually a good thing that now we just have to say watch them now. And so both the tourist investors and also the opportunistic founders,

and then so they're basically gone. And I personally, as an investor in this space for almost 10 years now, so I actually prefer bear market much, much better. And so if we think back through like the few cycles right like color coin in like 2013 like ico in like 2017 like nft and like games like in like 2021 and then from like bitshirt to like maker down from eos to like app so so from eos to like currently aptos and then from like name coin to handshake ens and also to like civic like the very old gdid and then it's a current version did and i think like timing is everything and then

so it's like so if i have to power has like like how so how a so it so if i have to power so if i have to prioritize the so like all the factors how a crypto the factors, how a crypto founder can essentially pull off, timing is everything. So first it's timing and then execution and then it's idea. So I have some very cool ideas just with prime timing and better execution. And so that's why they make it. Go ahead, Scott. I just want to see why Danish gave me so many 100s when I was saying that people will...

Good to see you. Good to see you. Good to see you bullish, Danish. Good to see you bullish. So this is my rule. And this is my rule. Always do the opposite of what Web3 investors are doing. That is my actual rule now. I will always do the opposite of what Web3 investors are doing. That is my actual rule now.

I will always do the opposite of what crypto investors do. Well, they're selling now. So you'd be selling, you'd be buying? I actually will never buy a meme coin. I think that's stupidity. But really, anything with utility, I'm starting to think to myself, this is valuable. And seeing all of these Web3 experts become AI experts overnight is a fascinating journey to watch from the outside.

I will tell you, I have never been more bearish on LLMs than I am right now hearing people talk about this. This is insanity. First of all, in the Bay Area, we are seeing significant investors start to pull back on AI. It is happening. There is tons of conversation around it. We are hearing about it daily. That's number one,

especially when it's only an LLM-based AI. And especially if it's at the application layer, we are seeing all of that go away. Number two, the thing that's interesting that just came out that I think a lot of people are watching to see is how are we going to take this multimedia data and build new models, not just based on text, but based on text and image and audio and video and train new AIs based on that.

That's what XAI is about, but I'm actually not. I don't think that's the only answer, but there's a lot of new work happening in multimedia AI. So when I'm hearing people say, LLMs are going to change the world, LLMs are going to change enterprise. By the way, has anybody done an enterprise sales cycle to W's point? It takes 18 months for that to come through. And you have to meet with chief innovation officers and chief transformation officers who, by the way, have never built anything in-house ever. So to see AI actually be valuable enough that somebody will acquire it will take five to ten years easy. So I think seeing all the Web3 VCs pivot to AI has been the fascinating, most hilarious experience being somebody that's been in this industry for a long time.

And I do have to say it makes me bearish on the short-term prospects on ai because now the pumpers are here good to see you good to see you good to see you done it's good to i'm gonna go quickly though if you don't mind to kayla uh because i know she's been trying to jump in but danish at first like my conclusion out of what you said is that you're bullish on crypto so i i'm glad we we agree on that point. Kayla, what do you think? He bought so much Pepe while he was giving that monologue. And I'm curious to see, and I actually want to do a bit of a survey

to see who on stage is not an investor or involved in AI in any way. And I'm talking non-Web3 AI. Kayla, go ahead. I'm not invested in AI in any way. I mean, I own some nvidia that i bought a long time ago but that's it and i think that ai is a massive heaping bubble waiting to happen but uh go to kayla yeah um personally the only ai um applications that i'm looking at are at the intersection of web3 and ai um but i do agree with what Donis and Dovi were saying previously,

just talking about kind of the comparisons between AI funding and crypto funding and the opportunities in both. I mean, AI is certainly having its moment right now. It's at the peak of the hype cycle. So much venture funding is being thrown that way i mean in just q2 of this year more than nine times the amount of venture funding went towards ai um that then uh crypto projects and so it's interesting to see that contrast um but i will say that with any hype cycle, even the past crypto bull market that we saw rise and fall, so many projects will get funding that don't necessarily deserve it, and they won't be sustainable over the longer term. And so, so many AI projects are coming to market right now that are getting funding that I don't really see

making it in the future and that haven't really built up any sort of like defensible competitive moat. But in contrast, in the crypto space and really in the blockchain and Web3 space more broadly, I think that in the current bear market, we're really seeing some really strong applications for the technology that are being built right now, especially in the infrastructure space that off and gaining a ton of momentum. I mean, one of those, just going back to the AI topic, is some of the unique functions and features of Web3 that can really meet emerging needs from AI. Can you get it on that point? Yeah, I actually want you to touch on that point. I want to read out a quote here by Ali Yahya from Andreessen Horowitz.

She says, AI and crypto can be complementary. So they're both natural counterweights for one another. And then she continues by saying crypto will enhance AI by providing some of the decentralization that AI maybe needs. I want you to touch on, and then I'm going to go back to V's, Crypto's numbers, because again, we're starting to move to AI completely now. But I want to get your thoughts on where is that intersection between crypto and AI?

Yeah, so I think that there are a number of ways that Web3 and crypto can play a unique value in the AI space. I mean, one is that there is tons of synthetic data that's coming to market with AI. And crypto and Web3 through digital signatures, as well as through ZK, zero knowledge technology, that type of technology can verify and authenticate real data directly from its source versus synthetic data or even like deep faith, which we're also seeing in

AI. ZK technology can also be used to preserve privacy of user data, which can be really important, especially as we're seeing AI used for things like, you know, drug discovery, where they're using tons of sensitive patient health records and health data that patients don't want out there for the world to be able to see. Let me, I actually want to do something else. I want to ask a separate question now, and maybe Michael, Scott, unless you want to take it. But Michael. No, no, please go ahead. I just wanted to share one quote that Pascal Gauthier from

Ledger said to me on a podcast, which I thought was brilliant, gives sort of the broad strokes. He said he couldn't credit it to himself either but he said ai is digital abundance and crypto is digital scarcity and that was the ways that we would if you viewed it through that lens that's the way that you would find the intersection between the two but but go ahead um can you elaborate can you explain more how that that what intersection comes out of that quote well i think it's basically saying that there's these endless opportunities in AI and the place where it's going to meet is where you need to actually like verify identity or where you need the currency who's AI, and then obviously to be able to transact between one another. I mean, those are the two things. If you're empowering agents to transact back and general, last week inflows were $137 million, according to CoinShares, in total digital assets investment products, making the past month at $742 million of inflows, representing the largest run of inflows since the final quarter of 2021. See, I was changed completely. VC investing drying up, but general inflows into the industry doing pretty damn well.

And US was by far again, by far the biggest source. So the question that I have, and Michael, maybe you could take that one or anyone else could jump in, is VC investment, is it lagging to crypto in general? Is it lagging to Bitcoin? Or the

correlation is not even there? Yeah, I think in all market cycles the risk assets are the most impacted. So anything venture is

the liquidity dries up more. And people flee to the dollar or to Bitcoin and then when they come back into the market, they similarly start with Bitcoin. And then as people get more... But now, but Bitcoin has been doing well.

The market has been improving. It's been a few months. We saw Apple with XRP. Are you seeing any movements? Anyone seeing any positive movement when it comes to VC funding? Is that that correlation already there it takes a lot longer or it's a myth yeah it sounds like there's it feels like there's been quite a big shift also with um with uh with with venture as of the as of BlackRock and Fidelity

and the biggest institutions in the world coming on board, it feels like the bottom of this bear market cycle is definitely behind us. And I speak for ourselves, but I think it's pretty representative of the market that we have a big shift in our portfolio companies wanting to start to come to market and seeing this as uh as a good time to launch uh projects that are launching are also we're seeing projects that launched in in the beginning of the year i

think there was another shift um in uh in in january after q4 was was really cold with with ftx um but a lot of those did i think was was a little bit early um but products that are launching uh recently i think at least from from what i'm seeing are doing pretty well so um with projects launching, it creates more liquidity and then investors are redeploying. So yeah, I think it's starting to trickle down into venture as well. I want to go back to the AI and crypto intersection, Scott, with Eugene and Gaurav.

What do you think? Yeah, about it. On digging to... Yeah, so Eugene... Yeah, so... Eugene On digging to it. Yeah, so Eugene, I want you to kind of move back to the intersection between crypto and AI, but also answer the first question that I asked Michael, is whether we're going to see that correlation between VC funding and crypto. It's the market improves.

Should we start seeing VCs flock back in? Or it's not that simple and AI is just a lot shinier? Yeah, I think it's a very complicated question. What's interesting is I think the kind of character of the AI investor versus the Web3 investor generally look pretty different for a variety of reasons. I mean, there's some crossovers for sure. A16Z is a great example of somebody who's been very active in crypto, Web3, very active in AI. But outside of them and a few others, they are very different. I posted up in the nest this sort of thought, right? So right now, all the VCs are trying to look for what is the

competitive mode in the AI tech stack, right? And it's really interesting to take a look at this because right now it's kind of like a rich getting richer with a few exceptions. Right. We see these big raises, you know, inflection, AI, you know, you know, Databricks acquiring, you know, companies for one point three billion dollars, et cetera, and companies raising one point three billion dollars. But when you look at it, there's apps, models and infrastructure. Right. And the infrastructure layer is actually making the most amount of money. Infrastructure being compute hardware, so GPUs, NVIDIA, TPUs, Google, and cloud platforms, AWS, Amazon Web Services, Google Cloud Platform, Microsoft's Azure. And then you got this whole layer of apps and models above. And there's a lot of battles happening there. And there's a lot of companies that have raised tons of money. And there's a big question about who's going to

win. Are there going to be new players? Undoubtedly, new players will win, but who will those be, right, is an open debate. The question about the intersection is really interesting. Definitely agree. I think I heard some other comments. I joined a little late, but clearly there's going to be this idea of data, right? There's going to be lawsuits over data

and you're already seeing that with Sarah Silverman suing OpenAI and Meta. So I think that there's clearly going to be a place for blockchain to be a solution right there, meaning you can use blockchain as a consumer to basically lend your data out to companies. I don't think that's going to be happening in the near term, but that's clearly a solution that could just benefit so many people that I see that being sort of the intersection between the two. And I think at the end of the day, all this is going to converge.

Blockchain, crypto, AI, and even with Apple Vision Pro, basically what we call the metaverse or spatial computing, all of those are coming into, they're all converging into basically frontier technologies. So anyway, I'll leave it at that, but a lot to dive into for sure. Yeah, Gaurav, I want to get your thoughts on that intersection as well. And actually both questions, Gaurav, the VC funding, is it lagging the rest of the crypto market? Could we see a resurgence of VC funding now that crypto is improving? Or is that a myth?

And then the intersection between both industries, Gaurav? So the way VCs operate, and I'm talking about true VCs, who have a five-year to seven-year horizon, I'm not talking about often referred to as crypto VCs, you know, people who bought Bitcoin early and then, you know, had nothing exciting to do with that money. So started calling themselves VCs that are my friends and that I know in this space still have an average of about you know at least one ticket a month but the numbers but the number the numbers are like 2022 is 21.6 billion this year so far 500 million according to pitch book absolutely because first of all for the when the market starts to

fall then of course uh vcs are not idiots they can see that there's a downtrend and they have to wait till the time they can you know they can have at least some visibility on on when the markets would improve and uh obviously they also take it as a like we i personally take it as a as an opportunity to wait for a bit and then place my bets because uh you know especially people who are investing in crypto the funds that have the capability or the flexibility to inform to invest in crypto you have to like assume uh that they're largely hybrid funds so they all and and and not with fixed mandates because crypto itself is is a pretty risky and a volatile asset so without

getting into the details of how they how they, just by the nature of being a flexible fund, they obviously have two options. They can invest in liquid assets, which are more reliable and often offer almost the same kind of return. So for example, we and Mario, we have had chats about this. Instead of writing saps that God knows when they will realize and when they will launch tokens. And obviously, we have seen the trend of offering tokens first and then equity first and then whatnot. Obviously, it's way better for people like us to invest in already settled tokens. So let's say buy whatever. And I'm not shilling anything. I'm just saying buy any of the top 10 or any of the top 20 tokens that are 90 down and you still have a clear

roadmap right so yes we see funding has dried down but that's that's because of a lot of other reasons and i'm not including the funds that are raising money now right i'm talking about the funds that are already sitting on capital and still not deploying. So I've mentioned just to cap it up quickly, one, visibility of the launch and then visibility into the project. Of course, crypto is a bit tricky with founders jumping up the boat very quickly and starting something new with the new trend to uh did graph drop off on my phone i lost him he's not in dubai anymore he's not in dubai like i'm actually looking look at the chart that i've sent you i don't know if i should pin it it shows 2018 3.3 billion 19 3.3 billion. 19, 3.3. That's another source. That's PitchBook. 2019, 3.3 billion.

2020, 5.5. 2021, 14.4. 2022, 21.6. And then 2023 so far, I don't know when this is dated, but I'm guessing it's relevant. That's as of May 16th. So already halfway through this year, it's at 500 million, half a billion. So if you compare it, remember how we talked during FTX when it collapsed? We talk about it in our space,

like, will we see a 2018 like Ice Age? And everyone was saying, no, no, we're too mature for that. No, it won't happen. We're not going to see what happened in 2018. Yet the numbers show that we're doing worse in 2018. It's according to PitchBook's numbers and the one from DeFi Llama. And the bulk, the 90% of those projects that launched over those years that people maybe never heard of or were like the darlings of the pre-sale community are literally down 99.99%. So it's definitely been brutal for a lot of the ones that raised. But I will say maybe there's an argument here

and I would love to hear from the actual VCs. Because we saw so much money raised in the last year or two, I mean, those numbers are astounding that you just shared. Could it rationally make sense that because we're in a bit of an ice age, whatever you want to call it,

there's less development, there's nobody launching in the United States, they still have to deploy all that money that they raised? Why would they be raising it again? Well, actually, that's actually a little misnomer, I think. VCs, when they raise money for their funds, they get capital commitments from LPs.

And the problem they've got is the money isn't actually in the bank. Yeah, that's right. They can't get the next capital. When they need to call for capital, it's not there. Exactly. So I've invested in a number of crypto funds and some big ones as well. And what's happened is if you invested into the funds anytime in 2021, they probably made a bunch of really bad investments towards mid-2021, towards the end of the year. And those investments tanked very

quickly. And there's some big ones that I won't name, but they tanked. And so those VCs are literally underwater on that portion of the capital. So it's very hard for them to go back to the LPs and say, we want more capital. So they do it. They do do it. But they do it very sparingly. So, you know, back in 2021 or even late 2020, early 2021, I was seeing, you know, 10, 15, 20 percent capital calls from from the funds. Now I'm seeing 5% every six months. Right. So to be clear for people listening, that means if we saw a huge headline that somebody, an A16Z or something, but maybe a smaller one, raised $3 billion, $4 billion into a fund, they may have only ever gotten liquid less than a billion of that. And the rest of it was dependent

on future capital calls that just haven't happened. and then some of the big lps for these funds they're underwater themselves and like yeah they could have been individuals they could have been small funds whatever uh you know could be the fdx for example and now they so they actually don't have the full capital and they can't draw it down because you know if you raise money per pursue with everyone else and you know one of your one or two of your big LPs don't have the money, what do you do? That massively compounds this problem, right, Mario? And Vinny, that massively compounds this problem because you're not even fulfilling the obligations of the previous funds.

There's nobody that's going to go out and raise a new one when they can't even fulfill the capital calls from previous ones, which just kills activity completely. So what I'm seeing is we're getting really good deals on new projects that need funding. We can get into SAFs at really low valuations, and there's just not a lot of money at the table. So there are deals happening, but it's a lot more sensible in terms of valuation-wise. The problem really is with the existing funds, where they're very underwater or partially underwater. It's just not a lot of money at the table. So there are deals happening, but it's a lot more sensible in terms of valuation-wise. The problem really is with the existing funds where they're very underwater or partially underwater is how do they pull back from that?

So they have to be very careful in terms of the bets that they place. And there aren't a lot of them. I've seen anecdotally that a ton of quote-unquote VCs have basically become liquid funds. You say liquid, what do you mean? Instead of investing early stage, they're buying something that's liquid

OTC at a discount or something like that. I think not a lot. It's top with a lot of the private deals raised X percent of their private rounds in 2021

and whatever valuation that seems to be accepted in 2021 is um and has stayed private and you're still looking or haven't been still looking to raise that their valuations from 2021 which hadn't stayed the same whereas the public market valuations have gone down 60 to 90 plus percent so it's really tough for uh for private deals to justify unless they've found a way to either uh justify their valuation from from their revenue numbers which very few have um they're not collapsing their valuations as quickly in the private market as they are in the public market. So really tough for private companies to justify 20, 30 plus million dollar valuations when public opportunities have gone down, which are much more de-risked

and gone down 60, 90 plus percent. So yeah, I'm seeing that a lot with previous funds that had more of a focus on, a higher percentage of their portfolio focused on venture to focus on listing strategies. Who would make the argument that things are, actually, who would not make the argument that things aren't discounted now is a great time to get involved?

Because everyone loves to make that argument every time we're in a bear market, every time prices are shit. Is there anyone on stage that says, no, even current valuations are too high and I'm still not bullish on all these different startups considering how much VC fund is already dried up?

Crypto, crypto, not AI. So Amar, I mean, I've seen a couple of deals recently where the valuations are still too high, like $50 million, FTV, $100 million FTV, where you can pick up a lot of other projects, a lot cheaper, and they're already live and listed.

And they may even have like Coinbase listings, for example, in the US. The problem with Guardia is like, now is a great time to invest in theory, but the, you know, I'll caveat that by saying,

we have to solve the regulatory issue because a lot of the liquidity accounts are being able to list these tokens and have them traded on exchanges and take that, which is a whole different discussion. Okay, but if VCs aren't seeing a path to liquidity and a hostile regulatory environment, what do they do about investing in projects where like what's the clear path to liquidity

for the investors? Especially funds that are maybe two or three years in to maybe a five year or seven year fund, you have a shorter path to liquidity. So it's a lot harder to make those investments at that point. And then the next point to tack onto that is, the tokenomics model, there's Birdman's Equilibrium, there's Stock2Flow, there's a um you know we haven't really figured out the killer one yet there isn't like the industry hasn't figured it out and we haven't figured out how to um you know other than like you know musical chairs and and and um you know like um you know basically dumping on retail like

how do you actually create value in these crypto economics and tokens? And no one's got a good answer for it. I mean, BME is probably the closest one, I guess. But it's like, tell me, like if you have a project that's going well, why would people buy the token at a higher price later on? I think the economic model that I'm seeing work the best.

And I know that Mario, we've spoken about this before and have some similar portfolio companies leveraging this strategy. I think FTX was actually the first one to do this but either buyback and bird or just buyback. So as revenue increases from a food protocol

or application, if revenue is being put on the charts then that's in my opinion the easiest way to It's not even... But Michael... Basically making your asset a security. That's exactly it.

Exactly, yeah. Michael, let's not even talk about it on a crypto forum. That's not tokenomic. Yeah. That's basically turning yourself into a security, like out loud. Exactly. Trevor, I want to get your thoughts as well on this sorry

i'm eating um especially you know touching on ordinals and nfts and all the the innovation we've seen in the last year yeah absolutely i mean i think i agree with most of the speakers today i do think that valuations are at a more reasonable level i mean with our portfolio in 2021 during the bull cycle valuations and the amount of capital flow to ground was just at a crazy level that I'd never seen in my career before. And I think that companies had a much easier time. And then over the 2021 timeframe, a lot of founders had to come to terms with the idea that what they had been seeing from the cohort of companies that raised before them was just good timing in terms of, um, raising then. I mean, we are seeing companies take down rounds. Um, we have seen them take down rounds over the past, you know, uh, year plus. And I think that that, um, you know, it just, uh, shows the importance of, of really like timing when you're,

when you're raising and also raising enough so that you can weather the market reaction to that. I think that the companies who are well-capitalized right now are going to be some of the best companies in the future. I think most of the best companies are created in the downturn or the companies that raise right before the downturn because they can scoop up some of the best talent. I think it's become shifted from a seller's market with talent to a buyer's market with talent now where there's so much talent in the crypto space that is much better priced. I mean, some of the salaries for core blockchain engineers are ridiculous. I mean, we're seeing maybe not too different from AI now or what AI was even in the

2018, 2019 cycle. People are getting seven-figure salaries for certain technical skills or they were if they were like Rust-based blockchain engineers with strong experience, L1 experience in the last cycle. Now I think it's becoming much more reasonable and i think it's a it's a healthy adjustment and i think that the valuations that companies that in my portfolio are raising it now are pretty healthy and i think that if you are early stage you know it's there's always capital if you have a good product and a good company and you're a good team and i don't think that um that it's necessarily a negative effect on the overall space. But man, doesn't it shock you that the numbers are worse than 2018?

Isn't that mental that we're doing worse than 2018 when regulations evolving? I know the SEC is not too friendly, but regulations evolving, we're getting what we want. We're getting that clarity that we want. You've got innovation is incomparable to what we saw in 2018 and what do

you make of this man like we when we're doing worse in terms of the very significant 2018 god mario where's the where's the innovation again please tell me and we got with the ordinals but you got true but we got trevor i'm comparing crypto innovation you don't think we have more innovation now than we did back in 2018 in crypto? We haven't evolved more than we did in 2018. We were talking about gaming me and you not long ago, talking about all these Telegram NFTs, talking about the adoption,

where Polygon is today versus before, the adoption they're getting, all the partnerships they're getting. And now the innovation on Bitcoin as well, and the startups being built on the Bitcoin ecosystem. Ethereum, where it is, isn't Polygon doing way better than what it was at the time you were quoting? So anything, even despite of it being a weird trend, Polygon is still back.

But startups, startups building. Startups, yeah, startups building on Polygon though. Yeah, exactly my point. And I want to connect this to your question, your building on Polygon though. tokenomics i think the best use case was bitcoin which was still implemented in ethereum and the reason why there's a whole ton of investments still flowing uh into layer ones and layer twos and infrastructure projects is just because the fact people can depend on those tokens and tokenomics so the best form of tokenomics is when the token is implemented in every single transaction not even transaction i should use the word interaction.

So when you open token at interaction level with the infrastructure, with the protocol, with the product, that's when the token becomes dependable and that's the killer use case of tokenomics because anything else is just a speculation of the fact that our dependency on the finding team, that they will not reel out the revenue into their own pockets and leave the token hanging high and dry.

So that's one. Sorry, go ahead, finish. Yeah, so finishing it, as long as we are producing use cases and being true to this tokenomics, people can always read the white paper. People can always validate the white paper on the implication of the same on the smart contract and hence depend on the token and their investments. But not a lot of that is happening now. And hence, people are speculative of investing in them. And we have seen that with one of our projects, Mario. Right. Yeah, I was going to say to Eugene and then to Trevor, but I want to make a point because And you have seen that in one of our projects, Mario. Go ahead.

Yeah, I was going to say to Eugene and then to Trevor, but I want to make a point because all I hear, listen, when I zoom out, listen to this conversation, is the same market cycles that happen in every single market. They're happening in crypto over and over again. This is just not even a washout. Everybody getting buried at the same time, everybody being emotional about it. And then that's always the bottom. And then we cycle back

up. And I really think that once price is at a certain level, we're going to see everybody fumbling back in. And this is the natural VC cycle as well. The reason that you saw so much investment in those years is because prices rise. When people were fumbling in, it's literally that simple. Nobody wants to invest when prices are low because it's dead and going to zero. And everybody wants in when prices are high because they don't want to miss out on their lottery ticket. And that's exactly what's happening here. You want to get in when it's dead. And none of these people should have been raising $5 billion funds when Bitcoin was $65,000. Go ahead, Eugene. Yeah. So I want to kind of compare some differences between Web3 and AI development,

right? And using two case studies, right? Mistral AI recently raised 105 million Euro round, 240 million post, Euro post. And what was special about that is basically three guys from France, France-based company. And of course, Inflection AI, right, which raised like 1.3 billion at a $4 billion post. Why are these companies raising this much money? And it's because to your point, Scott, there are a lot of VC funds, just like startups that raise too much money. And they're now chasing smaller and smaller opportunities because you only need one to

five people to make a good MVP when before you needed 50 because of AI, right? There are people who believe the BCS weather, right? They were wrong. They believe that the people like the founders of Mistral are one of 75 people in the world that can build these kinds of foundational models, right? Whether that's true or not will yet to be seen. But that's partly why you're seeing this kind of herding into these opportunities. And the development of these two technologies is so different, right? Solidity, for anyone who's programmed in Solidity, ain't a great language to program in, but it isn't too hard, right? Even today, ChatGPT4 can write a pretty decent smart contract using OpenZeppelin, right? You

just kind of load it in. Doesn't mean there's not innovation there, but there's a difference in the amount of talent that can develop some of the foundational AI tools versus some Web3 consumer stuff. At the flip side, though, I think there's incredible, incredible innovation in Web3 right now. I'm sure Trevor will talk about Bitcoin Ordinals. I've had some great conversations with him on it. I'm super enthused that somebody who's been Bitcoin for a decade, I'm super enthused by Ordinals Theory and some of the digital artifacts that are being created. And actually, some of the things that around DEXs, Unisoft, SushiSwap, DYDX, etc., they're just useful, right? I've talked a lot about how useful I find them. So I think a lot of this next wave is going to be innovation that's useful to consumers and useful to eventually enterprises.

Quiet, Jared. Yeah, I mean, I agree with Gaurav. I mean, I'm pretty bearish on just tokenomics in general being any kind of panacea. I think that tokenomics is like icing on the cake. I don't think it's necessarily a core part of like solving a user's problem. I do think that it's more about novel asset creation and novel portfolio construction

and the creation of digital assets that is necessarily about incentive tokens for liquidity. We're seeing with Blur, for example, I think that that's a whole big risk in the space right now with their incentive token because they're trying to apply a Uniswap-like model to non-fungible assets like NFTs, which are primarily Veblen goods, which don't function like commodities or like stocks, where if you have market making that, let's say, lowers the price, then people will step up and demand will increase. They tend to have a different price elasticity curve than stocks or commodities. And I think we'll see the repercussions of that coming in the coming months.

I think the real innovation is happening from the tech and the infrastructure. And that leads into the application layer with Bitcoin Ordinal specifically. It's a completely different architecture. It's based on the use of arbitrary data construction instead of smart contracts. Bitcoin Ordinals is more like assets without smart contracts that can

build on top of arbitrary data through recursion and also can function with all different types of media. So one of the interesting angles to see with Bitcoin Ordinals is the idea of decentralized front-end applications. We look at Tornado Cash and we know that the government can not stop the smart contract, but they can stop the website. They can go and issue takedown requests to different service providers. But with Bitcoin Ordinals, you can upload any type of HTML, CSS, et cetera. We could see interaction between the Bitcoin Ordinals arbitrary data layer and then other chains like Ethereum. You could imagine that if people were to upload a front-ended client to Tornado Cash on Bitcoin, sure, the government could issue takedown requests to various explorers, but it would be much easier

to access for the general public. And so this idea of uncensorable front-ended applications on Bitcoin Ordinals is an interesting one. And it's a deep rabbit hole to go down. And I think that when we look at innovation, you can look at that independent of the funding cycles. I mean, I was in China from VC investment in China passed North America for a quarter, which was crazy. It's since corrected and we saw some crazy implications of that, like the bike sharing wars. I don't know if you saw the bike sharing companies that were funded in China, but it was like an arms race. VCs were saying that the most important thing for a startup is just to raise as much capital as possible, which is kind of true, but that's like a bubble. That's kind of like what people say in a bubble where it's like whoever just raised the most capital can steamroll everybody else rather than focusing on human economics and building a sustainable model

that solves customer pain points. And I think that the innovation for Web3 really didn't come until the 2020, 2021. I mean, with MetaMask, OpenSea, Uniswap, these were the first consumer level production applications that opened the space. And now we're at the top of the current S curve and it's going to take a while for experimentation and more failure to figure out the next on-ramp for Web3 specifically. Bitcoin has an easier time of just kind of following in the path of what Ethereum has paved and just catching up to where they are. And then I think a lot of the innovation will come in a year or so as these use cases break through. So Dave, I want to get your

thoughts as we wrap it up. Look, there's two arguments here. One of them is that AI will keep sucking funds out of crypto. And we saw Vinny started it off, but we're seeing everyone start talking about AI. We're talking about why VC funding is drying up. And everyone's talking about AI and a lot of names we respect, not only on this panel, but in the space. It's starting to shift more and more towards AI. Is this more of a long-term thing where the recovery will be again slow? We will never see the VC recovery we saw in the last two bull markets or is it going to be on scott is saying it'll be bigger than ever we'll just chase the money and have it one other

possible ever nfts will be bigger than ever right will be bigger than ever oh hey they have something to do like sorry um something the other guys again scott i mean i fully agree with you bigger than ever. Oh, thank you. Yeah, something to... Yeah, like... Sorry. Something to other guys. Scott, I mean, I fully agree with you regarding that. I mean, if you go to DeFi Lama

and you look at DeFi Lama's last raises and you look at the money poured into crypto, it's very obvious that this is a market cycle. If you look in 2018 and zoom out, funding has only been increasing.

At this point, currently, obviously, it's down, but in the long run, it's going to come back stronger than ever. And, you know, I mean, wrapping it up, I have so much to say, especially to me, regarding companies that do not go mainstream in crypto. It's so early, guys. We are so early.

Some of us here, you know, it feels it's been forever, but for the everyday jobs, it's so, so, so early, guys. We are so early. Some of us here, you know, it feels it's been forever. But for the everyday jobs, it's so, so, so early. And I'll bring you an example. Fortnite. Anybody plays Fortnite here? I assume everybody plays Fortnite. If V-Bucks was a token, would it be successful and would it be a massive use case for the world or no? Nope.

You said no? I know. So if V-Bucks was on the blockchain, nobody would use it? No, because you have to have a game to play in. You have to have an ecosystem that's used. That's what I'm saying. V-Bucks are valuable. Yeah. I'm saying Fortnite uses V-Bucks as their digital token, right?

That's what they're selling assets with, correct? And you're assuming they can trade their avatars and stuff, right, Nick? Is that what you're saying? No, you can't trade them. You can't do that now, yeah. Say that again? You're saying if you could.

All I'm saying... You could. If V-Bucks was on the blockchain, you could go think if you could, it's one thing. All I'm saying, all I'm saying, all I'm saying. You could. If V-Bucks was on the blockchain, you could go on Binance and buy it. And that's the token for Qlik available. Nick, you could buy the V-Bucks, but then when you buy your skin, it's still locked to your account. Exactly. Exactly. And that's why blockchain solved this.

Because if V-Bucks was on the blockchain, you'd have a three times bigger market than Fortnite has right now. If you look at my Fortnite account, I have thousands of skins that I purchased with V-Bucks, and I can't do anything with them but use them. There is no secondary marketplace. But that's the value extraction that Epic Games has. The fact that you've got thousands, you don't need thousands. They don't want you to be able to trade this. Exactly. That's why we're all here. And that's why there's other founders who are building it. They want to free that. They want to make this available to the world.

And that's the purpose of blockchain. But they have to build a better game than Fortnite for that. Of course. They will be games like Fortnite. That's why I'm telling you it's early. Because me as the founder... One second. Me as the founder, you know how many roadblocks I have?

We raised recently $20 million to build a game. You can find a lot online. Multiple VCs, Eric Smith, Michael Rubin, individuals. You know how many roadblocks you have as a founder to build something successful here at Fortnite? Apple, they don't accept crypto. You want to do an app, you want to create an app and have crypto integrated? They don't accept it.

PlayStation, you want to build a game? They don't accept crypto. Xbox, I can bring you a million roadblocks. Regulation, when all that stuff are solved and they will be solved with regulation and those companies, you can read articles, they're all rethinking the strategy towards crypto. When all those doors are opened up,

crypto would be so much bigger that some of us here understand, but I don't know, some of us do not want to understand and do not want to see. I feel crypto will open the gates to everyday's jobs for investing and for actually using mainstream products like Fortnite. There's a lot of smart founders out there, guys.

They'll build fun products like Fortnite. You just need the doors open by those companies that are keeping the doors closed right now. I want to go to Dave and then Dovi. Dave? Dovi, I'll give you the final word.

Can you hear me, Dovi? Yeah, so I'm here. Yeah, we'd love to get your thoughts in about 30, 60 seconds. What should investors expect over the next few months? And where do you see the industry, especially when it comes to startups and VC funding? And where do you see that head over the next 12 months? Okay, so I think think so first of all and i think the last truth to drop is the criminal charges against finance and so

um so i'm not sure like there's that pricing um or not and i think like there can be something very interesting like a resonance like when it comes to the u.s so when it comes to the U.S. So when it comes to the U.S. election cycle and like the Bitcoin helping cycle, and like that's our industry's like reason. And because like when it comes to like 2014, so when it comes to like 2024, and so when it comes to re-election year and political resources,

and I think we'll be largely allocated on campaign. And so the financial sector and the tax sector will probably like, so I think we'll likely get less heat on. So 2016, 2020, and both are the year when bear ended

and the bull market kicked off. And I think this time, like probably going to be the same as well. And so this is a very interesting macro geopolitical and like micro-specific resonance. And so I think if DOJ is going to publicly indict Binance, it has to happen by the end of this year or early next year, probably the latest.

So that's my general thinking when it comes to um like timing um etc uh and then also if we are talking about so because so i'm crypto native and and like because of uh so for us and we're like a principal investment fund and we don't rely on any external money and so when it comes to bear market and we just like double down And so I think like many of the panelists has mentioned, like have mentioned that like now is actually the best time to invest in because like tourist founders are gone, like optimistic players are gone. And so like whoever, so whoever are still committed in the space, and so are the best. And then, like, the other thing is I have seen a lot of repeating founders nowadays working on new ideas and so go out racing and, like, brainstorming. So I have at least, like, a lot of inbound, like, started, I think, like, started, like, past two months.

And so I think it's definitely picking up. And then, like, Siphon, literally just yesterday, and like there's one like algorithmic token founder. And so very good algorithm, just like very good algo stable token founder like in the last DeFi summer. So he just launched another new one and with a lot of like good improvement.

And then so it's all fair launch. And so I think, so like that's why as a crypto native so as a crypto native investor so I'm extremely bullish and yeah so I like that final I'll let you finish off

but it's good to end it on a bullish note I'm glad yeah Mario I tried to tell you but you might not know but Javi is like the biggest OG here and he's an absolute killer. I told... Thank you, God. I don't know if I'm allowed to say this, but we're going to get in trouble anyways. I pulled the story here probably 50 times about how I was in Dubai at a conference and I heard there was a meeting with three arrows capital and I crashed it.

And at no point have I said who I went with when I was with Joe. She's also let me crash her meeting with Kyle for three hours. Yeah. So like they completed under like two hours story. Every single word that came out of your mouth, you were like very calmly, but Kyle, and then just an opoculated whatever. Yeah, anyway, yeah, so I think my mental model when it comes to the whole industry growth is, like, currently at the top of funnel, and we have

200 million registered accounts on Binance and Coinbase combined, and Manhattan Mask, there's like 20 million addresses, right? And then so that's only 10%, and then so like further down the funnel is that there's probably um like 200 000 active on-chain addresses and so there's a one like 0.1 percent of like the top of funnel so i think for the next cycle and basically

my mission as a crypto need investor is i want to just up this ratio to like probably 1% because at the top of funnel gonna probably grow to like 500 million or like probably a billion. And then, so if we can grow 1% of the bottom funnel, like compared to the top of funnel, and I think we're definitely killing it. And so, yeah, that's my final.

Well, I like this good final note. Dave, I'm not sure if your mic is back. If it is, I'll let you unmute. If not, because I know you couldn't unmute earlier. Cool. I'm glad I got this off my chest, Scott. I'm glad I went through the discussion. I told you there's a lot to discuss.

I told you it's an important discussion. I'm so bullish on this conversation. Really? Edward, by the way, remember you were in shop a couple weeks ago, but I casually at the end of one of the uh streams was like yeah i'm investing i'm buying all coins remember that yeah yeah yeah yeah you were in shop well they're all a lot uh and did you actually end up buying hold on did you end up buying out of course you're just talking to impress the audience so i did and what level what do you what do you think just like so, is the level of depression, the level of, like,

depression, and crypto's dead, and no use cases, and listen, I get all that, but that's fair market shit, man. This is, this is fair market shit, and if you're getting your money in right now, and you actually have a couple years of patience, what W just pointed out is so accurate, like, the

political cycle of the market, the four-year halving cycle of Bitcoin, this is depressed exactly when it's literally supposed to be depressed. This is bad exactly when it's supposed to be bad. You could have fallen on your head last year, gone into a coma, woken up into a zombie apocalypse, and looked at a Bitcoin chart and said, oh shit, it's the four-year cycle. You could have ignored every single time Jerome Powell opened his mouth, Joe Biden opened his mouth, any stock market, whatever happened, you could have literally ignored it all. We're exactly where it's supposed to be in a predictable four-year cycle that if it broke, you don't try to fix it.

Maybe it'll be different this time, but those are the four most dangerous words in investing. I think that one year from now, maybe 18 months, we are all going to be following assholes here talking about how every single thing being built in crypto is the greatest thing that's ever happened in the history of mankind. Now we're going to take over the world. We're getting 17 Bitcoin presidents. We're all going to be having an SDM or D in the Bahamas with a bunch of Web3 VCs, and we're all going to be fucking rich. And we're going to look back on this and laugh. That's what I really think. Because the more I hear people depressed, and the more I hear this bear market bullshit, the more I know that it's

just another cycle. Let's go.