The Wolf Of All Streets - Why Big Money Is Yet To Come To Crypto | Alex Tapscott

Episode Date: January 11, 2022

Alex Tapscott, the son of previous guest Don Tapscott, is carrying on the family’s legacy of investment success across capital markets. Alex is the author of Blockchain Revolution, a 2016 book that remains a crypto-best seller, with over 500,000 copies sold worldwide. It’s Alex’s belief that the best is yet to come for the crypto space and that massive capital formation and investment into crypto are still on their way. Listeners of this episode should keep an eye out for Alex’s top 2022 predictions. -- Amber Group: WhaleFin is a digital investing experience offering easy portfolio management tools, attractive investment yields, and access to the emerging digital lifestyle. With over $1T in volume traded, WhaleFin offers personalized, compliant, and secure service across dozens of digital assets in 150+ countries. Find out more at https://thewolfofallstreets.link/whalefin -- HBAR Foundation: Fund your project quickly and easily with the HBAR Foundation. Apply for a grant and be put on the fast track to success at https://thewolfofallstreets.link/hbar -- Horizen: Horizen is the zero-knowledge enabled network of blockchains powered by the largest node system with scalability and flexibility unmatched by others. Blockchains built on Horizen are enhanced by zk-SNARK privacy tech and provide massive throughput without compromising decentralization. Horizen can support up to 10,000 independent blockchains running in parallel and issue an unlimited amount of tokens. More at https://thewolfofallstreets.link/horizen ーーー Join the Wolf Den newsletter: ►►https://www.getrevue.co/profile/TheWolfDen/members If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by Blockworks. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworks.co

This episode of the Wolf of All Streets podcast is sponsored by Horizon, the HBAR Foundation, and Whalefin. Please stay tuned for more information on all three of them later in the episode. What's up, everybody? I'm Scott Melker, and this is the Wolf of All Streets podcast, where twice every week I talk to your favorite personalities from the worlds of Bitcoin, finance, music, art, sports, politics, basically anyone with a good story to tell. Now, today's guest, Alex Tapscott, is well known in the crypto industry. He wrote one of the most popular books in the history of our space, Blockchain Revolution, which has sold over, I believe, 500,000 copies and is translated to 15 languages worldwide. He also had one of the most impressive and popular TED Talks of all time in the crypto space, which was Blockchain is Eating Wall Street. I think a title that all of

us absolutely love and would love to see. But now he's also released a major research report entitled Digital Asset Revolution, talking about how DeFi and crypto basically are influencing everything and will continue to do so moving forward. I think it's fair to say that we have quite a bit to talk about. Alex Tapscott, thank you so much for coming on the show. Thanks for having me. So listen, your dad was actually one of my most popular and favorite guests that I've ever had on the show. I'm curious, which one of you found crypto first and how did that happen? Well, it's a really interesting story, actually, and it goes back to the year 2013. My dad and I used to, before COVID and all this nonsense, used to go on ski trips every single year.

And we were actually in Mont-Tremblant in Quebec sharing a 30-ounce tomahawk ribeye steak when he sort of asked me, what are you looking at? What are you thinking about these days? And at the time, I was working for the investment bank Canaccord Genuity, I was mostly focused on the sales side where I was covering institutional investors that deployed money on behalf of other people into equities and other asset classes. And I told him actually that one of the things that had come across our desk was some Bitcoin deals. This is a very early stage, right? I think the value of Bitcoin was maybe $7 or $8 billion. So if it was a publicly traded company, it would have barely cracked the S&P 500. But even still, we were in the business of financing small and medium-sized companies. And there were some miners who had actually come in

to present to our desk and to our investment banking group and that's when i basically first started learning about uh bitcoin was back in 2013. i'd heard about it in the news about you know um you know silk road and empty dot or this sorry silk road and some other things that were happening at the time but it was actually it coming into my office when i first learned about it and i think like a lot of people i was curious and intrigued but the more i looked into it the more convinced i became that this was actually a really important innovation so fast forward to the steak dinner in quebec my dad i told him this and he said well it's interesting you know we're actually looking at the subject as well at the time he was running a big research project through the

university of toronto and he said would you be interested basically in helping us to understand this a bit better by writing a report about Bitcoin? So that I think was January, 2014. And that's what sort of launched me on this journey. That work that we did together culminated in a report called the Bitcoin Governance Network, which was about how you basically allow something that is decentralized and multi-stakeholder

to reach its full potential, what's the governance system. And that research became the basis for other stuff that we did together, which eventually became the basis for that book. And in the fall of 2014, he came to me with an offer I couldn't refuse, basically, would you be interested in partnering up to write a book about the subject? This is before Ethereum had launched. This is before crypto and DeFi and all

of these things that we understand today are having a profound impact. We're really clear. It was a big gamble, but to me, it was a no-brainer. If someone offers you a seat on a rocket ship, you don't ask what seat, you just get on the rocket ship. And, you know, I had no idea what I was going to do after this book came out, or even if we get a book done, you know, was there enough to talk about in a whole book? At the time, we had to, you know, make a lot of predictions and extrapolate. But we decided, let's go, let's go for it. And that book ended up, you know, coming out in, I think it was May of 2016. better better lucky than smart people say you know it's um it's always good to get your

timing correct and this was right around the time that a lot of people were trying to understand this stuff a lot better and not just people in the crypto community but a more general uh business and generalist audience and And our timing was also very convenient because the week the book came out was also the week that the first DAO launched, which I'm happy to talk about that as well. But basically, all eyes were all of a sudden on what WTF is all this stuff, what's going on. And we were the only book at the time that I think explained it, you know, holistically to a mainstream audience. Anyway, so that's what launched me on this path. And I'm still, you know, on the journey today mainstream audience. Anyway, so that's what launched me on this path.

And I'm still, you know, on the journey today. It's interesting. A lot of people probably think that the Dow model is extremely new. I think that that word has sort of gone mainstream in the last year. But you just said you were already talking about governance in 2013 and 2014. Talk about that first Dow sort of as you were just touching on that story. Yeah, absolutely. Well, I think a lot of the work that we wrote, the stuff that I have in the book was informed a lot by the Bitcoin community, but it was definitely informed a lot by the Ethereum community as well. Don and I, my dad and I were actually in New York City, sitting in the Brooklyn offices of Consensus Systems, when the Ethereum network launched for the first time.

And it was an amazing moment because we were all sitting there, we had received storm warnings on our phone because there was some easterly gale that was coming across New York that was about to drop a huge amount of rain. And it felt very sort of prophetic in a way, that this was some sort of biblical moment biblical moment and not to overdo it but it really was this beginning of something

really big and um that uh launch went off without a hitch and you know nobody knew what the value of this network was going to be i remember the pre-market you know for ether at the time was anywhere between 30 cents and uh three dollars um $3. Everyone's like, $3? It's like 10x what people paid in the pre-sale. That seems a little crazy, which of course today sounds ridiculous. But putting the price aside, we did talk about distributed autonomous systems and distributed autonomous organizations with the people who are trying to do this stuff in that community. And we actually wrote about it in the book. We called them distributed autonomous organizations with the people who are trying to do this stuff in that community. And we actually wrote about it in the book. We call them distributed autonomous enterprises, mostly because we maybe have a bias, had a bias towards corporate structure and,

you know, understood that there was a business audience. And the idea was, well, how do we understand the future of, you know know how we organize capability in the economy and the idea was pretty simple and it was informed by the work of a very prominent 20th century economist named ronald coz who basically asked this very you know deceptively simple question um and for answering it he won the nobel prize basically and question was, why do we have companies? Why do corporations exist? And the logic basically was, if the open market is the best way to connect buyers and sellers and organize capability, you know, in an environment where there's scarcity, which is what most economists would agree is true, then why do we do things inside of this company? Why isn't everybody

an independent contractor? And the reason, and this is the big insight, was transaction costs. So long as it's cheaper to do something inside this organization than outside of it in a marketplace, then that thing would continue to grow. So in the early days of corporations, the Model T and the Ford Motor Company, transaction costs were very high. So it made sense that Ford didn't just make cars, but they had their own timber mill, they had rubber plantation, they had their own steelworks, etc. And today, transaction costs have gotten lower. So we have outsourcing and offshoring. What I think DAOs and what crypto does is basically drops a lot of those transaction costs close to zero.

And these are the costs that really matter to companies, the cost of organizing people, the cost of contracting and record keeping, and the cost of establishing trust. So if all of those costs decline, then we can reimagine how we organize capability. We can rethink the company and we can rethink how we do things. And so the distributed autonomous enterprise was our answer to that and we got it pretty much correct um the wording today is dow not dae so what um the concept is basically the same thing and to be sure there are lots of implementation challenges to getting to the point where these things are actually changing the nature of

business and work but we're already seeing how this technology can organize a community, raise a lot of money to go and do something, which is effectively what a lot of the purpose of a company is in the first place. So it's early stage, but I think it's clear that we were definitely onto something in the book. Yeah, I very much believe in the concept of the DAO, of course. And I think anyone who's been in crypto for any amount of time, at least conceptually, you believe that that's the way that things should operate. But there's a sticking point, which is obviously that DAOs are still humans, right? And then anytime you organize a group of humans and the larger that gets, you end up inevitably,

I think, having a leader or some sort of structure in place because people can't just make collective decisions like that. So I find that to be a huge challenge and one that I don't quite see how we move forward. Listen, you wrote this entire report, Digital Asset Revolution. I know part of it sort of focuses on that. How do you see DAOs moving forward and actually operating harmoniously? So I think it's interesting that the crypto community today is rediscovering a lot of financial concepts and a lot of governance issues that have been around for a very long time um in the traditional world of you know democracy

or corporate governance however you want to describe it most people feel them that feel like they're sort of um inert that they can't really make a difference because they're, you know, one vote in a democracy or they're small shareholders in a corporate structure. And so in the end, you know, participation rates are really low and large holders that are maybe more sophisticated in the case of corporate governance are able to, you know, control the outcome of events at the corporate level because they can work together and i think what we're seeing in the dow space is that you know there are still a lot of whales or whatever you want to call them large holders of tokens that have a greater i mean we all have they all have

the same um pro-rated uh level of interest right i mean you a $500 position in a Dow might mean a lot to an individual, but the bigger guys have just got that much more vested interest dollar wise. And so they're the ones who are more likely to, you know, try and control the outcome of events, which is frankly, very similar to how it works in the world of corporate governance, with proxy battles, activist investors, and so on and so forth, or even in the world of democracies where maybe every person has one vote, but you can't deny the fact that a wealthy individual or corporation can use money to influence the outcome of events, right? So I think that there's a lot that needs to be figured out at the governance level. What really interests me about

DAOs is how they've sort of organically become these very powerful entities. So with large capital bases. And that to me is really interesting. Uniswap is the one that people point to a lot. The treasury of Uniswap is in the billions of dollars. It's a bit misleading because most of that treasury value is actually the UNI token. And to say that the company's got money on its balance sheet in its own native token is very misleading right um that's more like treasury stock for a company so a company might be authorized to issue shares to raise capital but that doesn't make it cash that they have the authorization to do that um what's more interesting

to me are the treasuries that include other kinds of liquid crypto assets like stable coins bitcoin ether etc and even if you strip out the uni token from uniswap its treasury is still very large and a lot of new d5 protocols have as part of their design a transaction fee right that accrues to a treasury which if you can extrapolate these dOs, these DeFi protocols becoming larger and larger, and you're gaining more users and more total value, which I think is clear is going to occur, then these treasuries are going to become enormously important. So what does it mean for a distributed autonomous organization to have control over, you know, billions of dollars of highly liquid assets, which effectively are like cash. Well, if you look at the world of public companies, we point to Apple and some of these other ones with these huge cash piles of $200 billion or more.

But it starts to drop off pretty quickly. In fact, a company that has $10 billion of net liquid assets would be in the top 15 corporations in the United States. So I think it's possible, in fact, very likely that sometime in the next year or two, there's going to be a Dow that's going to have as much capital resources as one of the largest corporations in the country, which would mean in the world, basically. And that's going to raise all sorts of new challenges and opportunities. I don't know how exactly it's going to play out, but that's going to, I think, certainly raise some eyebrows for a lot of people who have not been paying as much attention to what's been going on here. Right. So it's less about the governance to some degree, because that'll sort itself out. But it's more about the amount of assets they would control

and the power of what they could do with those assets. I mean, you know, listen, Constitution, Dow as a drop in the pan was $40 million, but it happened overnight, right? So if you imagine the same sort of structure over a year or two years with a real defined motive beyond buy a copy of the Constitution, you can easily see how that gets into the billions. Yeah, to me, it's a classic way in which technology always plays itself out, which is that at the beginning, it's used for sort of fun and silly things. And that's where it finds like a product market fit. And that was true of the internet. And it was true of electric cars, you know, the first electric cars. And this is Elon Musk's well-worn roadmap, which was build a roadster that is sort of only the rich will use as a silly play thing, basically. But that will prove product market fit and allow you to scale the technology, right? And now we've got Model 3s that cost as much as Fords. So that works. And in crypto, we've seen this play out a couple of times, like NFTs. It started with crypto kitties and other sort of fun and playful things, which are really important. I'm not

discounting them, but that's where they found the first sort of product market fit. And now NFTs, I saw that the value of transactions in 2021 was astronomically high and is now being used as a way to monetize culture that I think is benefiting a lot of artists and musicians. And I think that's very important. I think NFTs could do a lot more than that as well. And so I think DAOs similarly are in the same position where I've seen some funny DAOs, right? There's the Constitution DAO, which is not funny, but definitely playful.

There's Lynx DAO, which is trying to buy a golf course, which I think is sort of funny. And there are tons of others like this, but I just find these things to be kind of interesting. And yeah, look, like there's a strong community of people that believe in the constitution being in public hands, whatever that means. There's a strong community of people that love to golf.

So that's great. But I think eventually that kind of structure can be used to do a lot more. I mean, ultimately it should replace the way in which we fund a human enterprise, however you want to describe it. Like today, the way that we do this is we've got angel investors and VCs, then you do a Series A and a Series B and a Series C and a Series D, blah, blah, blah, blah. And then if you're not bankrupt by then, you know, we work, then you go public in an IPO.

And that's a that's a form of capital formation that has been around for 100 years and has worked extremely well. I'm not saying it's not worked well, but we have a way to do that, I think, better now by tapping into these communities that care about this common cause or want to make money or whatever it is and want to risk capital to do so. And I think that that's going to completely flatten the investment landscape, provided that the regulators allow for it. That being the point I was just about to make, providing that the regulators allow for it, because we know that venture capital, venture capitalist has become somewhat of a four letter word in the crypto community, really over the past few months, largely led by sort of Jack's criticism of Web3. But what's missed there is what you just touched on, is that that's the only structure that exists because it's the only one that's allowed, right? I mean, unless you're an accredited investor, unless you can go through KYC, AML, your average person literally can't invest in most of these projects.

Maybe Dow solved for that, but maybe they fall under that same sort of regulatory criticism and your average person isn't allowed to participate in a Dow that's allowed to invest in these companies. So it will be really interesting to see how that plays out. Yeah, well, I mean, who knows? The regulatory timeline is always different from the technology timeline. It's always slower, right? Technology moves quicker and regulation catches up. That's not necessarily a bad thing. You know, sometimes you need time for technology to gesticulate before you can create new rules for it.

That was true of the Internet and other areas where rules, regulations actually helped to grow the pie. In the case of the Internet, internet was the Telecommunications Act. But I think this time the biggest hindrance is that the investing rules that exist in the US and have been copied in other marketplaces like in Canada, basically were designed a hundred years ago when the nature of the economy and the access to information and everything else

was completely different. It's crazy that someone can spend their money gambling on an online casino or buy lottery tickets, but can't make venture capital investments into small private companies unless they're super rich. And, you know, people in the crypto world and VC world are like, well, it's not that rich. It's like actually for regular person, for you to meet them accredited investor requirements is to be in the top 1% of people, right? So we need to, in my view, you know, is venture capital, some sort of like magic box where you can unlock massive outsized gains? Well, some of the times, but a lot of the times, no. And so it's not like, I think unlocking VC is going to all of a sudden create some massive

wealth creation event. But it's just fair and reasonable that people should be able to invest their money wherever they want in a way so long as it's not harmful or illegal in some form. So to me, those rules need to go away. And I think to do that, in so doing, we'll basically level the playing field even more by making it much easier to create capital formation at the at the crypto level without worrying about you know regulatory um backlash now people like to malign the ico period and to be sure there were a lot of projects that you know were that began then that didn't work out and others that were outright frauds but actually if you were to buy a basket of ICOs in 2017, you probably would have outperformed any normal kind of benchmark.

A lot of the most exciting projects today that you probably talk about on your show, like Solana and Terra and others, began as SAFT notes, pre-ICO or ICO stage projects during that period of time, and today are capturing huge amounts of value. So yeah, to me, you're right. There's always a regulatory hurdle there. And I think that's why it's important that the industry interface constructively with lawmakers and policymakers.

And I think frankly, they've done a very good job and should continue that fight. They talk about the ICO boom and one of the famous corollaries people love to make is it's like the tech boom of the late 90s, the internet boom and bust, right? The dot-com bubble. And they always view it in this sort of negative light, sort of as you hinted to with ICOs. But the reality to me is that those situations are what give us the ideas and the technology of the future, right? There's no Google, there's no Amazon, there's no Facebook without the dot-com bubble popping because all of the entrepreneurs and smart people come to that one place and try to innovate. And by nature, most of them are going to fail. And that's how I see the ICO boom. That's how I see the boom of all these projects being built, Web3, NFT, all of this now, right? You accept that most will fail, but the ones that do succeed will

probably be the most important companies in the world. I don't see why that's a bad thing. Yeah, I completely agree. And there's a couple other dimensions to that. Number one, people talk about the dot-com as if it was some like boom and bust and it went away. Like internet stocks are the entire economy, practically. I know I'm exaggerating, but if you look at the largest corporations in the United States, like they're all internet companies or technology companies um if you bought the nasdaq at the very top of the dot-com you'd be still up massively since then you would have had to endure a decade of pain um but like in the end the value that was created then um has as you pointed out

set the stage for today and then the final point is that a lot of the business models from the dot-com period that people like to roll their eyes at, like pets.com, I mean, look at Chewy. Like every business model, this is something Mark Andreessen pointed out, it's not an original thought, I wish it were. But basically, every single business model or almost every business model from the 90s and dot-com era that ended up tanking probably would work today. And the reason it didn't work at the time was that there wasn't as much access to computing um personal devices were not particularly intuitive to use compared to like the iphone um there wasn't as much connectivity and other issues like gps and and um you know broad then 5g and everything didn't exist but if they had they existed then

as they do as they do now most of those business models would have worked out. And I think we may end up saying the same thing about a lot of models from the ICO boom. And I do think that, you know, if you just look at the value that's been created from the ICO period today, it's actually a lot greater than I think a lot of people realize. And I think that's a testament to the innovators that were doing stuff. The final thing I'll say is that the ICO boom was not the dot-com. Give me a break. The dot-com bubble was $4 trillion of value. It was wiped out from major indices, not to mention what occurred in the private markets between March of 2000 and the bottom of that cycle. The ICO boom was a flash in the pan. It was a tenth of the size. And it happened like 20 years later. So it was probably a twentieth the size in sort of real terms.

Like we have not yet seen the actual period of massive capital formation and investment into crypto yet. The ICO boom will look like a tiny like blip on the radar screen compared to what we're going to see. I'm not like hoping that there's a bubble or hoping there's a boom and bust any more than the next person. But I just think it's important to keep the sizing of those different market periods into context. Yeah, I guess the ICO boom would be like the early 90s as opposed to what actually happened in 2000, right?

And what we have yet to come. And I love the idea that you shared it. You could just be too early with the right idea. Ride sharing Uber was not a new idea. It just didn't work without a phone, right? And so it's a matter of technology catching up. But obviously, you believe that the best is yet to come for crypto based on what you're saying and that you wrote this report, Digital Asset Revolution. So how is crypto currently changing the landscape of companies, countries, investing, DeFi, and how early is that versus what it can do in the coming

years? Well, I wrote the report for a few different reasons, but one of the reasons was that in my day job, I'm the managing director of the digital asset group at Nine Point Partners, which is an $8 billion asset management firm based in Toronto, which is where I live. I'm Canadian. And we have a number of initiatives, including one of the world's first Bitcoin ETFs and one of the time about this asset class. And I'm not talking about the crypto native people who listen to your podcast or the others that spend their time on crypto Twitter. I'm talking about regular investors, because ultimately, like if you want to grow the pie and get more people interested in this, you need to speak at their level. And what I heard a lot was I don't I get Bitcoin. I get the value proposition for Bitcoin. I don't understand why we need a million other currencies. We've got a couple hundred countries in the world, and they've all got their own currency. And that seems to not work very well.

So why do we need millions of cryptocurrencies? And what I say to them is, you're right. Most of the time, we don't need lots of different kinds of currencies. We need maybe one or two. And that's why we're bullish on bitcoin and on stable coins because i think the us dollar if anything could ironically benefit from crypto absolutely more than more than it could suffer um but what's what my point is that all the other coins many of the other coins some of them may be trying to be bitcoin-like but a lot of them are trying to do something very different. And so in Digital Asset Revolution, the paper you're referring to, I took another look at the token taxonomy that we created for the second edition

of the original book, Blockchain Revolution, and tried to make sure that we were capturing all the different kinds of assets. And so one of the main thrusts of the report is to say, OK, there is more to this. This may seem obvious to people who are in crypto, but to the average person, it's important to understand that there are actually many different kinds of crypto assets and they all do many different kinds of things. There are currencies like Bitcoin that are designed to be a medium of exchange, a store of value. Bitcoin is highly decentralized, pretty simple in its design, and that makes it very useful for that use case.

But other kinds of crypto assets are trying to do something else. What does Bitcoin have in common with Beeple's 5,000 days? Absolutely nothing. They're totally different things. What does that have in common with AXI? What does that have in common with, you know, UNI, the native token for Uniswap or Ethereum or another L1 token like Terra? Like they're all different. And so in the taxonomy, we broke it down. Currencies, protocol tokens like Ethereum, what we would call governance tokens, what used to be called utility tokens, which would be like the tokens of native applications like Uniswap and others.

There are NFTs, of course, stable coins, which can be broken down into various categories, centralized or decentralized, and then within decentralized, algorithmic or non-algorithmic. We looked at natural asset tokens, which try to track the value of traditional carbon. One ofalgorithmic um we looked at natural asset tokens which try to track the value of you know traditional carbon one of the really interesting projects we looked at is the

regen network which is doing this for carbon credits that's based on the cosmos network um we looked at you know central bank digital currencies which as much as they're hyped up are still mostly theoretical except for a few different examples and you know if you break down all these different kinds of tokens you realize actually this isn't just about money or even about financial services. These are, this nascent group of assets is changing every single industry. And so the report, as much as I'd love to go

into every industry in the world, did still focus on finance, but tried to explain how these things can apply to just about everything. And when you look at it from that perspective, isn't the term cryptocurrency a complete misnomer at this point? Yeah, absolutely. Though I do think the word crypto asset, which I think Chris Berniski popularized in that book, has proven to be quite enduring and quite useful. And I think that, you know, there's a lot of people struggle a lot with

language in this industry. And we did at the beginning when we, you know, said blockchain revolution. Originally, the book title was going to be called The Trust Protocol, which described how we can eliminate the need for centralized intermediaries and creating trust online in transactions and because you know blockchain was one component of this bigger sort of system and our publisher said nobody even knows what blockchain is so the trust protocol nobody will know what that is especially so don't bury the lead just use the word that some people are familiar with fair enough um and other people were like you know why isn't it called the bitcoin uh revolution why are you talking about blockchain that's all bs and you know we hear that from maxis a lot um and you know even the word blockchain itself is not exactly

sonorous it's kind of clunky like a block um doesn't really roll off the tongue so i think that figuring out how to how to describe this has been a challenge um certainly for people who are in the industry talking to people who are in the industry, talking to people who are outside of it. And I think that the creation of the term crypto asset has been really useful. And I also think the creation of the term Web3 to describe kind of everything that's going on here has also been really useful because it's, you know, anchors people to a concept that they're already familiar with, which is the internet, right? The future of cryptocurrency is a multi-chain world, and you can't have a multi-chain world without Horizon, who allows these chains to be interoperable.

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information and the perfect platform for trading and investing, then please go to www.thewolfofallstreets.link slash whalefin. That's slash W-H-A-L-E-F-I-N. Check them out now. Yeah, I love the term Web3 as well. But yet again, that's another one that's sort of taken this four letter word. Well, it is four letters, if you think about the zero, but Web3 has sort of become a bad word as well, largely, again, because of sort of the venture capital side. But why do you think that there's that negative stigma around the idea of Web3? Because when you describe it and describe all of the potential for all of these projects and everything being developed, it seems extremely positive. Well, let's not forget that most people don't know what Web3 is. So it doesn't yet have like a mass market um like stigma or positive um perspective i think within

people who pay attention to this there are people who you know believe in in bitcoin or or ethereum alone or usually bitcoin in this case um who would just say like anything other than bitcoin is bs okay fine if that's your view that's your view but that's not really going to be the view of the majority of people long term um then there's this other more nuanced view, I think, which is, well, Web3 is a buzzword that's being touted by venture capitalists to, you know, increase the value of their crypto holdings, which I think really undersells what we're talking about here. I think it's true that VCs have been large backers of crypto projects. But as we pointed out earlier in the podcast, that's mostly because it's one of the main ways that anything can get funded in the first place. So I really don't view that as a legitimate criticism.

I think probably, you know, if anything, it's is Web3 just a clever rebrand for crypto that we're using and not being totally honest about it? And I think the answer to that is no. I think Web3 is a legitimate way of describing everything that's happening in the space. And we had Ryan Selkis from Masari, the CEO of Masari on our podcast, DeFi Decoded. Check it out on YouTube or wherever you get your podcasts. Who basically, because I asked him the same question, I said, you know, is Web3 a real thing or is it just a clever rebrand of crypto? And he said, it's a bit of both. And I tend to agree, right? Which is that it's true that at this stage describing, you know, LinksDAO, which is a thing that's trying to grow

to raise money to buy a golf course and using that in the same breath as a play or a video game as Bitcoin, as these other, as, you know, DeFi, you know, a lending pool, they are totally different things. So how are we going to describe how this technology is impacting gaming, capital formation, financial services, art, culture, and so forth? Well, we need a term to describe it. And I think Web3 does that pretty well. But also, as I read in the New York Times article the other day, whoever came up with this concept, and you know, who knows, there are lots of people who raised their hand, is the best possible rebrand that's ever happened in the history of crypto. Because for whatever reason, and maybe it's just people don't bother to look deep into

it. People see crypto, they think cryptic, they think, you know, something creepy. I don't know what it is, but it's a word that some people in the mainstream struggle with. As much as you'd like to just roll your eyes and say, you know, you're not going to make it. The fact is, you know, if you want something to change the world, you got to get everybody on board. You need to pitch a big tent. And I think Web3 does that. Yeah, it's a familiar term that everybody can at least have their own basic understanding of what they believe, obviously, that it means. But we have this huge umbrella for all of these assets now that maybe beyond the underlying technology really have very little to do with each other. So what are the most exciting use cases that we could

actually start to see come to fruition and have a meaningful impact in 2022, 2023, not talking about 10, 15 years from now? Yeah, absolutely. Well, I think it's important to think in sort of one or two year time horizons, because the growth that we see in this space, as we've seen in other technologies, follows like an exponential curve, right? So it's sort of like the parable of the invention of chess. I don't know if this is something you're familiar with, but basically the king of the land is so pleased with this invention that he offers the inventor whatever he wants as a reward. And the inventor, who's a very clever guy, says,

oh, all I need is some rice to feed my family, but I want you to give it to me in the following way. One grain on the first piece of the chessboard, two grains on the second, four grains on the third, eight, and so on and so forth. So the king, who's like not a math guy, says, sure, whatever. But eight becomes 16 and so on and so forth. So by halfway through the chessboard, it's more rice than the entire kingdom can produce in a year. By the end of the chessboard, it's enough rice to cover the whole planet in six feet of rice. So in other words, what I'm saying

is to make a prediction 15 years down the road is to say like, who knows, like, you know, we could be dealing with, you know, six feet of crypto surrounding the earth at some point, so to speak. So some things that I think could happen. Well, number one is I think that DeFi is going to continue on its own exponential growth curve. If you look at the values, you know values for TVL or user growth in DeFi across various different layer ones, it has growing at one of the fastest rates of any industry in human history. TVL has increased, I think it's around $250 billion today. Yeah, it was to 1200% in 2021 to reach 240 billion. Yeah. Yeah. Which is probably an underestimate, to be quite frank, because it doesn't count everything. Definitely.

And so I think we're going to continue to see that grow. What really excites me about DeFi is where DeFi can apply to people who don't have access to financial services. In the same way that like Axie Infinity became very popular with people in the Philippines who, you know, were usually young and unemployed and stuck at home. They had a way to make money to put, you know, food on the table. Now that I'm not trying to romanticize it. Obviously, these people are sitting in front of a computer playing, you know, played our video games all day long. But the fact of the matter is that they lacked a way to make money. They found a way to make money, and that was a way to grow crypto. To me, what's exciting about DeFi is where all the places in the world where people are either underbanked or unbanked or where young people don't yet have a relationship

with a financial institution. And if you look at, you know, like MetaMask, for example, the most popular countries in the world for MetaMask are in Southeast Asia, which may surprise a lot of people. Now, part of the reason is play-to-earn games, but also the ability to interact with DeFi. If you don't have access to financial services, DeFi can be hugely attractive to you. And if you're a young digital native and people are disproportionately younger than older in a lot of emerging markets, then I'd see that as a really exciting opportunity. So, you know, we could throw out numbers. I think, you know, for DeFi to hit a trillion in TVL in 2022 is probably conservative. Like it went up 12x last year. It went up, I don't know how much the year before, a million x because it started basically so infinity x no it was it

was there was a number in january of 2019 but you know it was small um so to get to a trillion to me would be frankly conservative what's what's far more interesting is is user growth you know unlocking the next billion uh people um who could get access to this stuff so that's something i'm going to be paying really close attention to. I also would love to see the NFT space evolve from collectibles and art to being the sort of the primitives for a native digital identity online.

I think that that's pretty exciting. You know, the most non-fungible thing is you. You are non-fungible. No, you're a one of one. And so there are all sorts of attributes of who we are online that we should be able to um put together into a digital identity using nfts as the basis we saw the very very very early early stages of this in 2021 with you know pfp craze like uh crypto punks and and board apes and whatever and i think that's all cool and

whatnot it's not i don't own one of them it's it's not for me but um i can see that you know being like CryptoPunks and Bored Apes and whatever. And I think that's all cool and whatnot. It's not, I don't own one of them. It's not for me, but I can see that, you know, being the marker of your virtual self online, but it's all the other stuff that would allow you to, you know, get access to financial services, get access to government services, get access to, you know, other things that companies and DAOs and whomever provide

using that digital native identity, that to me is far more exciting. So I'd love to see a lot more innovation happening in that space. And then, I haven't played video games in a long time, but I think it's an inevitability that both play to earn and NFTs become huge parts of the video gaming industry.

And so as fun as it is to join a guild and do, you know, yield farm on Axie Infinity, it would be way more fun to do that in like Red Dead Redemption or Call of Duty or something. So I just see like the potential for, you know, games that are actually fun and in engrossing uh integrating some of these concepts like um like well for one nfts would be huge but also just the concept of play to earn or some sort of reward reward system uh into games that are like on their own really

great that i think could be hugely um like be hugely disruptive in unlocking hundreds of millions of people into the crypto landscape. So lots to be excited about in 2022. I would have given almost the exact same list, to be honest. I sort of make the same comparisons about Axie. I mean, Axie, difficult to gain access to, right? You have to understand how to get a MetaMask wallet and then buy ETH and send it to your Ronin wallet and start participating in this game. It's a 90s level game as far as entertainment. So it's just mind blowing when you think about if this was happening in Fortnite, right? That everybody's playing it and that they love. And so it's very exciting that we're that early. Something you touched on DeFi that I find really interesting. We've always sort of talked about DeFi being this system that gives access to the unbanked

or underbanked, right? And I think the crypto community then jumps to saying that would be Bitcoin or Ethereum or these other digital assets and totally eliminate the fact that most people in the world really just want access to dollars and don't have it, which means that stable coins maybe are the biggest story of DeFi. Yeah, well, there's a couple of great points you made. Number one is that there's more to financial services than what Bitcoin can provide. Financial services is not just moving and storing value. It is getting access to credit. It's getting access to growth capital, it's insurance, it's accounting, it is exchanging and trading assets, it is organizing financial information. There's so much more to the industry. In fact, that's a taxonomy that I also talk about in digital asset revolution.

We call it the golden nine. And I think Bitcoin does a couple of those things really well. And that's why Bitcoin is going to be hugely important and valuable. And I think probably is going to be a great performing asset this year. And, you know, I have a Bitcoin, launched a Bitcoin ETF. I talk about Bitcoin all day long. So I'm bullish on Bitcoin, just to be clear. But there's a lot of else that I just described that Bitcoin can't do. And that's OK.

That's why we have all these other open protocols, these platforms to build those kinds of use cases. One of those really exciting use cases is in the stable coin space. So to me, most people want access to, I mean, first of all, if you live in parts of the world where the local currency is hyperinflationary, Bitcoin is great because Bitcoin is a store value asset that's probably going to appreciate over time. Dollars are also great because they're fungible. They're the most fungible thing in the world. You can trade dollars for anything,

anywhere, anywhere in the world. And that's something that makes the US dollar enormously powerful. So I think most people want a US dollar bank account and they can get that basically by being in the stable coin space. And then you can even stake stable coins in some places to earn a yield. So it's almost like legitimately having a bank account where you own a thing that's stable in value,

attracts the US dollar, so everyone accepts it. And you can earn a modest return by staking these assets in a pool and earn 5%. I know sometimes it's larger, but basically earn the equivalent of what you would get in an account. And that basically replaces the need for a local bank account. So I think that's really interesting. I think that if everybody wants a US dollar bank account, then probably a big subset of that group wants a US dollar investment account. And I think this is something that's not totally well understood, which is that even as a Canadian, there are obstacles to investing in the US stocks. And we're the most closely integrated countries, you know, financially,

some of two of the most integrated. Obviously in the EU, they're a bit more integrated. But so imagine how hard it is for someone in Europe or South Korea or Japan or China or Russia, let alone in Africa or Latin America to get access to the same thing. So to me, the idea of using this technology to create synthetic ways to gain exposure to assets you couldn't otherwise invest in is massively

exciting and there's some really interesting project. There's one on Terra called Mirror, which basically is a way to gain access to whatever most popular single stocks there are out there. So Tesla, Google, Microsoft, Amazon, Apple, the Fangs and more. And to be clear, at least in that instance, you don't own the asset in the sense that you don't have the voting rights or any of the other rights that exist. But as we pointed out earlier in the podcast, most individual shareholders are just looking for price exposure because they know that their three shares of Amazon worth 10K aren't going to move the needle in any event anyway. And in some of these cases, they have a dual class of shares. So you have no vote. Your

vote doesn't matter even if you have a lot of shares. So really it's all about price exposure. And so to me, like if stable coins, if we prove that there's a clear product market fit globally for people to have access to a bank account in US dollars using stable coins, then we're going to show this year that there is huge demand for an investment account in crypto that gives you exposure to those same kinds of assets. And I think Mirror is a good example of where you can start to see this happening in real time. So we tokenize everything, basically. We take all assets in the real world that people don't have access to. And it sounds like a meme, but that really is the truth. And you're exactly what I was saying is that in crypto, we talk about DeFi as a way to get more exposure to crypto.

But for someone who doesn't have exposure to all the assets that we take for granted, crypto solves that as well, which is what you basically just put very eloquently. Like Americans have no idea how good they have it when it comes to like, I mean, there are lots of things that could be improved. The credit investor rules and, you know, blah, blah, blah. Bank secrecy. But but ultimately, like you transact in dollars, which everyone accepts, you can invest in the US stock market, which is really the only market anybody wants to own right now.

You know, you have access to the biggest common market in the world if you're a business owner or someone who's starting a company and that's why the US is such a great place, right? You know, as a Canadian, I can see the advantages of that. But for most people outside of the States, those things don't exist. So giving them greater access to that

is gonna unlock huge value. And I think that these crypto rails are actually the way to deliver that kind of value. I agree. And you talked about earlier, the fact that you have your own podcast, actually, DeFi Decoded. You touched on your episode with Ryan Selkis from Asari, who's one of our favorites here. We've had him on the show. Actually, I've had him on three times. He's one of the few people that we've had three times. What are you discussing on that podcast? Do you find that to be a way for you actually to do your own research and find out

more about what's going on in the space? That's my favorite thing about having a podcast myself. I feel like I can invite any professor to give me a personal lesson for an hour, right? Which you can't get in the real world. It's the greatest job there is. I'll be honest with you. That has been the biggest benefit to me, which is that, you know, you're having fun having Sonny Agarwal, who's the creator of Osmosis, which is that, you know, if you're having, if I'm having Sonny Agarwal, who's the creator of Osmosis, which is the fastest growing AMM in the world on the Cosmos ecosystem, they've gone from zero to a billion TVL in like three months. I better know what this thing is and how it works and, you know, what its origins are somewhat.

Otherwise I'm going to, you know, it's not going to be a good interview and um so it's it's great to to talk to these people and unlock that value but also to do your own work do your own homework do your own due diligence to maintain you know to stay up on everything that's going on but so that's for me that's the selfish reason but for people who are listening i think it's an incredible podcast because in our first 10 episodes we basically broke down all the different functions of finance it's like okay moving money well here's what's going on in stable coins and algorithmic stable coins and whatever. Okay. Insurance. Well, here's what's going on with, you know, the futures market with of investment funds that are based on the principles of DAOs that allow people to get access or yield farming or whatever it is. So every single one of those episodes, I think, is a great starting point to learn about what

the industry does and how DeFi is affecting it. And then since then, so that was the first 10 episodes. The last 15, because we're on 26 coming up next week, have all been interviewing just kick-ass people in the space. And that's been the most fun part, honestly. So we have had, you know, Ethan Buckman, the co-founder of Cosmos, Sonny Agarwal, who is the inventor of Osmosis, you know, mentioned Ryan Selkis. We had Vali Benartzi, the inventor of Bancor, and the AMM is a fundamental building block of DeFi. So we've just had some incredible guests and we've got an incredible lineup lined up for this year. Folks from Ethereum ecosystem, Avalanche, Solana, Terra, Cosmos, like you name it.

If you're interested in what's going on in DeFi, it's a really terrific podcast. When I talked to your dad, he was extremely, extremely bullish on Ethereum, right? He totally got it. But you just touched on there's now sort of since then, they always existed, but we've seen this explosion of layer ones, right? Obviously.

I find the notion of an Ethereum killer silly, somewhat nonsense. I think we'll live in a multi-chain world and each will sort of find its niche and power. But I'm really interested in hearing how you think they all fit together, or if they will, or if there is an Ethereum killer, if Ethereum will dominate. What do you think of the layer one wars, so to speak? Yeah, I think I'm like you, I'm a multi-chain maximalist. So I don't really think the idea of ETH killer is the right way to think about it. If the success, if the early success of Ethereum is any indication, then a lot of these protocols are going to become really successful because they offer block space that's cheap and fast right now but like ethereum may become victims of their own success in that you know uh transaction speeds will slow down gas fees will go up and maybe it'll look different

there's lots of different you know designs and everything i'm not trying to piss off any community here but i think that the key thing is that Chris Dixon of Andreessen said this as well, which is that, you know, basically the idea of these L1s fighting against each other is the wrong way to think about it. The co-host of my podcast, Andrew Young, who himself is a DeFi entrepreneur, had launched the SX Network, which is one of the largest prediction markets in crypto, basically said the most scarce resource for the next decade is going to be block space. And so what we're going to see is that as there's a proliferation at the application level for

whether it's DeFi or gaming or art and culture, or whether it's payments or whatever it is, there's going to be a demand for block space. So that means there's going to be demand for L1. So I'm bullish generally on L1s. But i do think that unless we need ways to to inter integrate these different things together so that they can operate seamlessly bridging is one example of that for um but what we're seeing also is the success of of cosmos the cosmos ecosystem specifically now full disclosure i've been in that for since the beginning and remain a large holder of Atom. So maybe I'm biased. I'm an Atom bull, so I'm biased. Okay, let's assume for a second that Ethereum is not going anywhere. ETH bulls believe ETH is money. And even today, a lot of the most exciting and innovative and avant-garde innovations in DeFi and other applications happens on Ethereum.

I'm not saying Ethereum is dead. Far from it. And I think there's scaling potential in all the different solutions. But we also know that these L1s are going to gain tons of success. So how are all these different chains going to interact and operate together? And I think that there's going to be the need for that integration layer. And that's where Cosmos really shines. And Cosmos, being an atom holder is like being, you know, having a seat at the table for a lot of the other really exciting projects that come along. You're sort of a passive recipient of all these airdrops, which themselves can become super valuable. So, you know, to me, for technical and financial reasons, I'm very bullish on Cosmos. Yeah, I agree. So obviously, and if you don't even want to be specific to Cosmos, we can just sort of say conceptually, in the next year, coming years,

we're going to need to see massive improvements in any protocol that offers interoperability the way that these chains bridge. And that could be one of the stories of the next year. And I think that, so you have interoperability obviously between all of these, and then because block space is at such a premium, that's when you start getting into layer twos and roll-ups and ZK snarks and all of these other things, right? Basically anything that makes the layer ones more efficient and work together is probably the next big story. Yeah, absolutely. And look, like one of the things

that I've probably missed on the most was Polygon. I was, you know, in it and then got out of it. Sorry, this is all not financial advice. I'm just trying to work through it a little bit. We say that generally for the entire show. Yeah, but the the potential of you know we we want to be on ethereum but we're looking for ways to do it cheaper and faster and like that that's a simple pitch and uh it worked and um you know so you see tons of

innovation and value capture happening at this layer two level and uh i think we're going to continue to see that new l1's new new everything, because as I pointed out, if blocked space is the most scarce resource, then we're going to need every solution under the sun in order to scale this whole space. I absolutely agree. So where can everybody keep up with you after this and where can they check out the podcast, of course? Yeah, absolutely. So I'm on Twitter at Alex Tapscott. You can check out DeFi Decoded on YouTube on the Nine Point Partners YouTube channel, but also anywhere you get your podcasts,

you know, Apple Music, Spotify, et cetera. And yeah, just, you know, keep an eye out for everything that we're doing in the space. We try to be public about it and to, you know, stay on top of what's going on. So looking forward to having new followers and, you know, having more conversations like this. So thank you very much.

Well, thank you. And everybody should definitely also check out the new report, Digital Asset Revolution. It gives you a very good idea of what's likely to come. Obviously, nobody here is a profit or has a crystal ball, but I think it's a very solid assessment of the different areas where we'll see crypto continue to grow in the next couple of years. Thank you for summing that up for us and for taking the time to be on the show. Yeah, my pleasure. Thanks, Scott.