Unchained - Does Venture Capital Investment Violate the Ethos of Crypto? Sequoia Says No - Ep. 367

Episode Date: June 28, 2022

Shaun Maguire and Michelle Bailhe, partners at Sequoia, discuss their long term view and thesis about crypto, what do they look for to invest in a crypto project, the takeaways from the blowup of Terra, the insolvency of crypto companies, and much more. Show highlights: what is Sequoia’s long term view and thesis about the crypto industry how different our lives will look in 20 years from now due to blockchain technology how Sequoia had to adapt to invest in this new asset class and what are the similarities and differences with investing in traditional startups when a product or service on the internet should be offered in a decentralized or centralized way how Sequoia decides whether to invest in the entity behind a project or in the tokens whether having venture capitalists involved at all goes against the ethos of decentralization why Shaun believes that Ethereum proved that decentralization can be achieved even when you start being centralized whether people underestimate the value that VCs can add to a project why Shaun believes that Solana is moving towards decentralization Sequoia’s thesis about privacy in crypto and the potential of zero-knowledge proofs  how Michelle sees the macroeconomic environment impacting crypto and whether this cycle is different from the previous ones the importance of product market fit in crypto projects what crypto projects should be focusing on and the business model they should be pursuing the main takeaways of the Terra collapse and how it was a major setback for algo stablecoins how crypto founders should always do the right thing even though there is no clear regulation whether SBF is the Berkshire Hathaway of crypto today the lessons to be learned from the potential insolvency of some crypto lenders and investment firms how demand for blockspace will keep increasing and whether a single blockchain could supply all that space the future of the metaverse and how it can be defined Michelle’s mental model for crypto and the phases for achieving worldwide adoption   Thank you to our sponsors!   Crypto.com: https://crypto.onelink.me/J9Lg/unconfirmedcardearnfeb2021 Beefy Finance: https://beefy.finance/ Ava Labs: https://www.avax.network/ EPISODE LINKS   Shaun Maguire:  Twitter: https://www.twitter.com/shaunmmaguire Sequoia Profile: https://www.sequoiacap.com/people/shaun-maguire/   Michelle:  Twitter: https://twitter.com/michellebailhe Sequoia Profile: https://www.sequoiacap.com/people/michelle-bailhe/ Michelle’s investment thesis: https://www.sequoiacap.com/article/ask-not-wen-moon-ask-why-moon/ Bear Market: Michelle’s Twitter thread: https://twitter.com/michellebailhe/status/1526373378516365312?s=20&t=c7vdmdg2mnQ34rsAGIm0lg Insolvency of crypto lenders: Voyager: https://www.coindesk.com/business/2022/06/22/voyager-digital-requests-loan-repayment-from-3ac-considers-issuing-default-notice/ BlockFi: https://decrypt.co/103422/blockfi-secures-250-million-line-of-credit-from-ftx Celsius: https://www.theblock.co/linked/151522/crypto-lending-firm-celsius-pauses-withdrawals-and-transfers-citing-market-conditions Celsius possible bankruptcy: https://www.theblock.co/linked/154100/crypto-lender-celsius-hires-more-advisors-ahead-of-possible-bankruptcy-wsj Previous Unchained Coverage:  Why Possible Insolvencies by Celsius and 3AC Could Spell Disaster for Crypto: https://unchainedpodcast.com/why-possible-insolvencies-by-celsius-and-3ac-could-spell-disaster-for-crypto/ Cobie and Chris Burniske on How to Navigate a Crypto Bear Market: https://unchainedpodcast.com/cobie-and-chris-burniske-on-how-to-navigate-a-crypto-bear-market-ep-354/ ** For more episode links and details visit the Unchained website ** Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to Unchained. You're a no-hype resource for all things crypto. I'm your host, Laura Shin, author of The Cryptopians. I started covering crypto seven years ago, and as a senior editor of Forbes, was the first Mainstream meter reporter to cover cryptocurrency full-time. This is the June 28th, 2022 episode of Unchained. Later today at 6 p.m. Eastern Time, make sure to tune in for the live stream on YouTube of the Chauvinbhawing block with Paseeb Qureshi, Robert Leshner, Tarun Chitra, and Tom Schmidt. They'll be joined by special guest Taylor Monaghan to discuss Metamask. Hey, builders, looking for one of the best scaling solutions in crypto? That's easy. Avalanche's breakthrough subnet design lets you minimize transaction costs and maximize your speed, consistency, and user experience. To experience Web3 like never before, head to avox.com network to learn more. With the crypto.com app, you can buy, earn, and spend crypto in one place. Download and get $25 with the code Laura. Link in the description. This episode of Unchained

is brought to you by Beefy Finance, the multi-chain yield optimizer. Beefy is the easiest way to earn more from your crypto. Deposit funds into Beefy's secure vaults to auto-compound yield across 12 blockchains. Got crypto? Choose Beefy. Today's guests are Sean McGuire and Michelle Bailey, partners at Sequoia Capital. Welcome, Sean and Michelle. Thanks for having us. Thank you so much. It's great to be here, Laura. In February, Sequoia announced that it had launched a crypto-focused fund of $500 million or $600 million. I guess you can update me on what the final amount was. At the time of its launch, you talked about the fund being for your 20-year view on crypto. So it's curious to hear you elaborate on what that view is, what you think the world will look like when crypto,

in terms of both the technology and adoption reaches maturity. It's a very interesting time in crypto, obviously, as you know, Laura. And so, you know, separate from the fun, the question we keep getting asked most recently is has our conviction change. And the answer, of course, is no. We, crypto has been through many cycles and we never expected the next 20 years to be a straight up into the right ride. So nothing about our conviction has changed. and the thesis is still the same, which is that we think that crypto created both a fundamentally new asset class and a new computing platform. And there will be businesses that emerge to both

serve those assets. You know, a lot of the financial businesses, centralized and decentralized, as well as new applications that are, you know, best built on a decentralized platform. And so we've been continuing to invest in all layers of that stack from core layer one's, layer two's, infrastructure and applications, and expect over the next 20 years to see a lot of things mature and a lot more that we couldn't even fathom, you know, to predict today. What do you think our lives will look like 20 years from now? How will they look different once we're using this technology and it's fully scaled, et cetera? First of all, I think it's hard to say. And I don't feel ashamed to say that. I think it's really

hard to predict what crypto will be used for, you know, over the next 20, 30 years, similar to how it was very difficult to predict how the internet would be used in the 90s. That said, I personally believe that all money is going to be digital in 20 years, like, including, I think, governments. Like, I think the dollar will probably become digital. I think that the yuan will become digital, you know, and then I also, so I think there will be centralized digital currencies, think and hope It'll be decentralized digital currencies. I think the decentralized currencies are going to rise in adoption by massive levels, especially in developing parts of the world.

I think there's going to be fully autonomous businesses. Uniswap is something that who knows what the end state of uniswap as any one example will be. But the idea that you can launch some code and it just runs forever as a very high trading volume business that in theory, like the first version or second version or V3, like don't need people to maintain it. You just ship the code and it's out there. Like I just, there's so many examples like that that I think give a glimmer to what the feature might look like, but it's hard to be overly prescriptive.

I totally agree with everything Sean said. And I think for something like the internet, it's fundamentally an information revolution. And so it's so hard to predict, and I'm certain that I couldn't in the time have predicted what that would look like, whether it was Google or, you know, and then giving birth to mobile later and that I could order cabs on my phone and, you know, book a hotel anywhere, right? Like, I can't possibly fathom that at the time. But the broader trend that billions more people will have access to billions more information than they would have before. and the cost of transacting information of sharing it will dramatically lower, I think is consistent in all those businesses. And so it's very hard to say exactly what form factor will take,

but I think crypto being both a financial and a computing revolution, I think our sense is that over the next 20 years, billions more people may have access to dramatically better financial products and dramatically lower costs of transactions. And, you know, Internet sort of, today that look different in terms of their censorship and freedom on them and who runs them. And it doesn't mean the old ones will go away, but we'll have more choice. I think that's the broad stroke that we believe in.

One thing that strikes me about Sequoia is that it's certainly one of the most important and powerful venture capital firms, but much of its success has come by investing in the old model of, you know, kind of the startup in the garage or whatever. And it's very much like the centralized company. You had to do some restructuring to be able to invest in a large amount of tokens. Probably becoming a registered investment advisor is one. But in general, what is kind of like the mental shift or what are some of the maybe traditional ways that you had done business that you had to shed in order to adapt to this new model of investing in this new world that's quote unquote decentralized? Whether or not it's actually decentralized, I guess we could discuss later,

but supposedly. I hope we do discuss that later. I'll jump in. You know, Laura, on the one hand, I totally agree with you, and there's a lot that's different about crypto. Well, on the other hand, I actually think that crypto sometimes thinks it's more different than it actually is. Like, there are so many similarities to crypto and traditional businesses.

Like, at the end of the day, you need to hire engineers and product people to help, like, build the best product, and you need to help motivate them and manage them. And, like, it's just, there's a lot of similarities to building a traditional software business and and building a crypto company. And it's just, it's genuinely not as different as people think. You know, Sequoia has been around for 50 years, transitioned from in the early days, like, the biggest wins were Apple and Atari and some other hardware companies. And then, you know, in the late 80s, early 90s, the biggest wins were internet infrastructure companies. You know, Cisco as an example, Oracle, not as much core infrastructure, but closer to that than to consumer, you know, application.

Then, like, it can only missed the first wave of Web 1 companies, missed Netscape and kind of the first browser companies. but in the late 90s, you know, led the series in Google, Yahoo, eBay, on and on. In Web 2, you know, invest, led the early rounds in YouTube, Instagram, et cetera. So Square already has a history of kind of like moving from Silicon to Internet infrastructure to Web 1 to Web 2 and, you know, backing some of those fintech companies along the way, Stripe, Square, you know, etc. backing some best open source companies when that was a new trend like MongoDB, backing some really blue sky businesses like Unity, which a completely new business model. Okay. I just was surprised when you said that investing in these decentralized projects

actually isn't that different. To me, the whole way that you go about getting business, the business model, like there's just so many ways in which I think it is different. So can you elaborate on that part? Yeah. And so I was right what I was getting to, which is like, Sequoia has this history of transitioning through all these chapters, but there's a lot more continuity than you would think in there. At the end of the day, it's about human nature and understanding how to find the best people, how to incentivize them to work as a team, how to find customers across many different definitions of a customer, whether it's open source, whether it's, whether it's consumers, whether it's enterprises. In crypto, it's basically

the same thing. And so anyways, yes, there are some fundamental differences, such as like investing in tokens where Sequoia was not legally structured in the right way, you know, where most venture capital funds have been, you know, subject to this thing called the venture capital exemption rule, where you can have up to 20% of your fund in things other than primary preferred shares. And so that was one the things that motivated us to become a registered investment advisor, as you, as you said, so that we can hold more tokens. But other than that, I really, I would challenge that building crypto companies, I don't think is as different as a lot of people in crypto think it is. Well, so then I have to ask this follow up because obviously, so, you know, Sequoia has invested in a certain startup such as like

DoorDash or Airbnb. And you may have heard that there are some crypto entrepreneurs out there who've said things like, oh, there could be a decentralized Airbnb or decentralized Uber slash DoorDash or whatever. And they would be decentralized. They'd have the token, which are incentivizing all the different workers. So just when you're thinking about how about some kind of product or service that could be offered on the internet, how do you determine whether it makes more sense for it to be offered by a centralized entity or in a decentralized way? Or, you know, when you're looking to invest, how do you think founders should be thinking about that? This idea, the idea of like giving away equity in the early days of a company to help

incentivize users and adoption, that idea has been around a long time. Using tokens to do it has primarily been a regulatory arbitrage because giving, you know, like equity to unqualified investors has been legal no-no for the last 20 years. And so it's a little bit uncertain, but the primary difference is just returning to an old idea of, like, let's give away the ownership of the early network to the users to help incentivize bootchopping the early days of the network. So there is kind of a difference in the very early days. But at the end state, it doesn't matter. Like, you know, Airbnb, hypothetically, you got to decentralized Airbnb and you gave away 50% of the equity as tokens to incentivize early users. and early hosts and all of that, after you get to some level of scale, you don't have,

you can't keep giving away another 50% of the network. And so at that point, people are going to use whichever is the best product, like whichever has the most host, whichever has the most liquidity, whichever has the best customer service, et cetera. And so I would just say to me, the only difference is in the very early days of giving away ownership to help incentivize usage. But at the end of the day, you have to have a better product because people are going to leave and go to the next thing if your product is not better than the alternative. And so, and I think that's something that a lot of Web3 companies

have missed, actually. I agree. I think we've seen this kind of like unfettered lust for decentralization. And I think when you really dig into it, running something decentralized, is actually way less efficient. It takes a lot more resources with compute and people, a lot more coordination to ensure that's done well. And so over time, we kind of expect that to be almost a luxury, something that you want to use for the most important things, for something as important as potentially a stateless free store of value

or a public information network that you don't want a certain government or a certain, you know, company to be the only people that control. And so it's sort of like in a way the same questions humans have been asking about how to best organize even governments or people, right? It's like, yeah, you can do democracy. You can have it be more decentralized. If that comes with a lot of cost, a lot of cost of participation, of constantly voting, of all these things.

So you would only want to do that for the things that are probably the most important, whereas something else where you just are optimizing for convenience or access or speed, you might want a centralized business model. And to give another example less about the access of decentralization, but sort of along these lines, or instance, someone said, oh, is there going to be some of the Web3 startups like a threat to Google? Well, if you think about what Google's doing or an ad business model, right,

if what you're solving for is getting billions of people access to information, making that free and funding it with ads is a pretty wonderful way to do that. It's very hard to do that by charging those people for access. You won't get billions of people access this information. They can't afford it. If what you want is something where you are not taking private information and you're not selling ads and you have more security and control, you might have to pay for that, but it might be a smaller group that can access that. And so really, it's just different choices. And so we think it allows this spectrum. And so it's not so much either or this blunt instrument of decentralization, always at all costs. It's what do we want to

be decentralized? What does that unlock for users? When is that a important, or when is it really not important? And I'm happy to just, you know, use something centralized. It's much cheaper and more convenient potentially. Yeah, that's really interesting. So I, you know, your example of having a store of value that's decentralized was a strong one. Are there any other ones where it's obvious to you that that should be something that's just decentralized as opposed to centralized? Yeah, I mean, for me, like identity. So I think that Sean McGuire at gmail.com, like I wish I owned that. It was. fully decentralized, crypto has already done that with, I mean, Ethereum name service as an example

where I have SMC.Eath. And every time I log into a new DAP, like, that's my handle. And people can, they can send me money directly to it. Like, I have a whole history associated to it. I have credibility and trust associated with it that moves across any new application. You know, if I'm living in a place where my government says, hey, turn off Twitter to all users. Like, I still have, you know, I still have access to my identity and the credibility comes with it. So anyways, I think to me, it's like money and identity are the two that I think absolutely I want to be as decentralized as possible.

But to the spectrum comment, you know, if I'm spending $5 to buy coffee, I'm okay if that transaction is centralized. If it's my whole bank account balance, I want that to be as decentralized as possible. And so I just think there's a pretty similar with my identity. Like if I'm doing some action that is very low value, it's fine if there's some centralization in there. If it's an NFT that McDonald's, I get from McDonald's, like I don't, and it's $5, I don't care if it's very centralized. But for a crypto punk, like, I want it to be as decentralized as possible. Let's now talk. about when you are looking to invest in some kind of crypto project, a lot of times there is a

centralized entity behind that protocol. So there's the option of investing in the project's tokens or in equity of the centralized entity that's launching this decentralized project. So for instance, I know you invested in Filecoin. And so I'm sure you had the option of investing in Filecoin tokens or in Protocol Labs, which is the company behind FileCoin. How do you decide, you know, what to do, or maybe you do both, but in general, like, how do you think about this decision? Most of the time, what we're solving for is maximal alignment with the founders. And so most of the time, we ask to be as aligned as possible. If they have equity in both the company as well as the token, we would ask to match that. We think that's usually really

important. Cryptos littered with examples of those incentives not being aligned and it leading to rough outcomes. And of course, non-crypto, just broader tech, similar story. And so we always try to push to both shareholders in the equity and whatever share of tokens, often at equal proportions. And sometimes one can get diluted more depending on emissions for the community or users or whatever, but that's usually our ingoing path. And then in other times, you know, it really depends. Like tokens right now in crypto are painted with such a broad brush when in reality there's so many different things. In my mind, there are things that look a lot more like commodities that are the native tokens used to actually stabilize or secure a network like Bitcoin or Ethereum or whatever.

Then you might have application tokens that relate a lot more. Some people are hoping to the success of an application on top of that. Then you have stuff that just looks like rewards points. Like it's basically airline miles. It has no relation to the business, right? But it just gets you like trading discounts or something else, supermarket points or airline points. And you've got other things. You've got dog money. You've got whatever other stuff you want. So what we're talking about, it really depends on the business and what they're building. Like if it's something like rewards points, you know, we may not care because those have no value to us because we're not a user who's going to be trading on it necessarily. So we may just care about being equity shareholders.

In other situations, we may really care especially for applications to be And then for layer ones, it's just the layer one, right? That is where the value will accrue. So it really ranges depending on what's being built. And how do you deal generally with the attitude that parts of the crypto community have toward VCs? I'm sure you're aware that there are certain people. They have this kind of disparaging attitude toward what they call VC coins. I'm sure you're even more well aware that there's, I think, even like a separate contingent that, you know, we'll call them Web3VCs and say that they're kind of taking the lion's share of the gains and leaving retail with the drugs. When you try to

approach different projects, like, do you find that any of this can affect your interactions with them? And then I guess it's like a two-part question because then the second part would be, if you are going to invest in one of these via the tokens, then how much do you think is kind of the right percentage for a decentralized project? because obviously, you know, there is this sense that venture capital in a way almost goes against the general ethos of crypto. Two-part question. Those are great questions. First of all, I love the skepticism in crypto.

Like, it's amazing. We love how skeptical the community is. And a lot of the skepticism is very well placed. You know, that said, it oscillates very heavily based on the market. market conditions. And so, like, three months ago, a lot of founders thought that they were gods and like just absolutely hated VCs and like hated all VCs equally. Today, like, I think VCs are showing their true colors. And so like, you know, some VCs are pulling term sheets or trying to renegotiate them. Some VCs are like very strongly standing behind their founders and projects that

they work with. And I'm actually living in the last month, I've noticed a pretty big change in the way that founders react to VCs because they're already starting to, there's a look like, we're out of a bull market. And so they're starting to see the true colors. And I think that instead of using broad strokes to say that all VCs are bad, basically find the VCs that are true believers in the long-term potential and like are going to try to support the community even when it's down rather than just be there when it's up as a cash grab. And so anyway, it's just I think more nuances needed and I've been seeing it heavily. In terms of the second part of the question, you know, and like Jack Dorsey, who's made a lot of those comments,

who's a legendary Sequoia founder who, you know, like we love and our partner Rulhoff works with him and thinks the world of him. Again, like I think there's, a huge amount of truth to what he said. And I think it's really important to call out a lot of people in Web3 think that everything's perfectly decentralized. And before Moxie's post and Jack's comments, they weren't thinking enough about the centralized points of failure. And so I think all of that is very legitimate. But on the other hand, as we were talking about earlier, like there's a spectrum here. And, you know, Jack obviously knows Bitcoin. Part of why he loves it is Bitcoin is as decentralized as anything you can find. A few of the other things. A few people,

Ethereum, something that's interesting about it to me is like, it started off not very decentralized in that it really relied on Vitalik and the Ethereum Foundation. And then there's the Dow hack, which had a hard fork. And like, it's taken six years where Ethereum's become much more decentralized over time. And to me is now like basically fully decentralized. And so I think it's, it can, these things can happen over time. And even if you. start in a somewhat centralized way over time, you can become much, much more decentralized. And so I just, I think you need to apply the spectrum here of like, Bitcoin's the most decentralized Ethereum's, the next most decentralized. Then there's a bunch of stuff. And then there's

extremely centralized things on the other than under the spectrum. And you should be very aware, if your goal is maximum decentralization, don't use any of the really centralized platforms in the middle. So, but if you're going to invest in something, then what, do you think is an appropriate allocation for VCs? Because obviously, especially if these are used in governance, you know, then that can create issues down the road. So how do you guys think about that? Again, I think that this changes over time. Use Ethereum as an analogy. Like with the ICO, it was very centralized, like of who was holding ETH in the early days. And I think that that was fine in the early days, but it shouldn't be the long-term goal. And, and,

And, you know, I think that something that people oftentimes underestimate is VCs have a lot of experience building companies and have a lot of resources and have big Rolodexes. And like in the early days, if the VCs are as involved as the team behind the protocol, like just take paradigm as an example with UNISW. Like, I think everyone knows that with V2 and V3, they were incredibly involved in the mechanism design in hiring the team, in branding, and bringing credit. credibility to it. And so I think in the early days, like, it was good that they own so much of uniswap and that it, that they were like incentivized to really help build this thing. But over time, as it gets to more trading volume and, like, you want it to become as decentralized as possible. And so it's just there is this big spectrum. I think people just oftentimes miss the nuance in this. Okay. So you don't have like a certain percentage where it's like we will not go beyond that.

I mean, we've never even gotten close to that percentage with a protocol. Sorry. Well, rather, it should be the whole VC allocation, not just yours. It's challenging because it changed over time. It changes over time. And so like, I think in a pre-launch, just hypothetically, in a pre-launch project, I think it's fine for, I mean, by definition, the team and VC's own 100% of it, you know, but I think that like when something's at maturity, it should be like less than 2% should be owned by the VCs and founding team. And so it's just there's a spectrum of getting there. Okay, that's a very big spectrum and a very long time frame.

You know what's funny though, thinking about the time frame, that actually is the same time frame for other companies that are pure equity-based companies that start as startups, right? I mean, if you look at the cap table, things have gone public in the last year, a lot of firms have probably sold their positions. And so it actually has gone through. the 100 to 2% ownership spectrum. So I think that spectrum can take place.

And I think there are a lot more tools to get at the core question of how do you ensure if the goal is to make something decentralized, that the power is actually decentralized. I think there are tools that crypto hasn't yet utilized around transparency around. You could have sale agreements, right? Like you could imagine someone signing up just to own something at some point and say, you have to sell certain percent every year after that or something like that. There are a lot of tools that were just scratching the surface in thinking about how to use to get at the real goal, just making sure that it's not just decentralized in name only. And let me, Laura, like,

let me use another controversial example here. I'll use Solana. I was initially, I come from a school of thought, and it may not seem this way, but I come from a school of like maximum decentralization. I was an early Bitcoin person. I love Bitcoin. And I was very skeptical of Solana for a while because of how centralized it was. But something that I had an insight on maybe six months ago is that even though Solana a year ago was insanely decentralized, it was becoming much, much less centralized pretty rapidly. And you look at it like, say the number of validators in early 2021, it was like,

10. You know, by the end of 2021, it was, I think, I can't remember now, but it was at least one or two orders of magnitude more than that. But something even more important is that the hardware requirements today to run a Solana validator, like, are pretty high. But in three or four years, like, it's going to be easy. And the biggest bottleneck today is bandwidth, where you need, really you need like about a gigabit per second internet connection that's symmetrics, both upload and download to really be a legitimate valetator. It's very hard to get that type of internet. Like, that's actually going to be commodity very easy to come by, though, in four or five

years. And the benefit of the Salana team being so involved is that they've been able to, like, push lots of updates. And, you know, just this week, they push like their, I think it's 1.10 update, which was a huge performance update. And so I've kind of come around to the goal. to me is that you need to be moving towards extreme decentralization. And I think Salon is going that direction, just as one example. And I think that four or five years from now, if they survive

that long, which I think they will, but if they survive that long, like, I think it will be extremely decentralized at that point. And I think there's benefits of like by being so close to the metal today, they've been able to really push huge technical improvements that push the limits of Crypto for it. And if nothing else, like future layer ones will learn from their ideas. And so anyways, I just, I really view this as a spectrum. And I'm trying to use a few examples to get that point across. Okay. It's like really interesting points that you're making. Obviously, Solana sometimes can be quite controversial. But in a moment, we are going to talk a bit more about your portfolio and your investment thesis, as well as some of the recent.

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Back to my conversation with Sean and Michelle. Your investments range from a few portfolio companies that are, for instance, focused on privacy. You're also working on some cross-chain interoperability, scaling solutions, ways for users to manage their own data, even decentralized social applications. overall, what would you say is your crypto investing thesis? Okay, in four sentences, let me see if I can do it. We think digital assets and blockchains are fundamentally useful. They are going to create a market for financial services for those assets that incumbents are most likely slow to serve. A couple may get in there, but many of them seem to be slow to serve. That with it, the rise of crypto will bring a new

crypto stack. So everything from the core compute and storage all the way up through a lot of infrastructure will yield new opportunities for new companies. And there'll be a host of applications that are best suited for decentralized environments or some hybrid that we have yet to to see flourish. But we are seeing some really interesting tidbits that are coming. So one thing that I wanted to ask about was the investments in privacy because I'm one of those people where on Venmo, I do not publicize a single one of my transactions. And I cannot understand how I can log in and see these random people that I barely know, like paying their friends. Like I find it very weird. So to my mind, and granted, I am clearly maybe not the target audience here.

So maybe it's just that I'm the weird one. But when I look at all this activity on these public blockchains, I'm a little bit like, I think in the future, a lot of this will be private. I could be wrong. But since I noticed that that was an area that you have focused on, I was curious if you could talk a little bit about what your thesis is for privacy and crypto. Totally. I'm also not a public Venmo transaction person.

It makes me super nervous when like the one time I accidentally did that. This idea has been around. in crypto since the beginning, but there have been two kind of primary bottlenecks. One is we didn't have the technology and zero knowledge proofs are kind of this emerging technological why now that is just creating all sorts of new opportunities that weren't possible in the past. And the second is regulatory where, you know, no matter what school thought you come from. Like if you're a crypto anarchist libertarian, like maybe you don't want governments to have a huge say over money and and blockchains, but they're going to. You know,

like there's always going to be on and off ramps and, you know, governments are always going to have a huge say over them. And it's one of the things I think is a little bit of a narrative a violation about Bitcoin for non-crypto enthusiasts is that in some ways it's the most traceable form of money ever. You know, there's very, like, it's hard to think of many times where people say stole large amount of Bitcoin or got large amounts of crypto, including Bitcoin as a ransom. So like, say, colonial pipeline hack, you know, I think they got like $100 million worth and they weren't actually able to use it.

the Bitfinex hack. There's 20, 30 of these examples of people getting 100 million plus of crypto and then never being able to use it. And so in some ways, actually, like, from a regulatory perspective, governments have been fine with the use of Bitcoin and Ethereum and all that because it hasn't weakened their powers too much. but if you get into like a true privacy coin, like in theory, that would be a regulator's worst nightmare from a fall to money perspective. And I'm personally like, that scares me.

Like I actually think this is a very like a lot of people who are going to not like me for this, but I think it's important to try to stop terrorist financing from happening or, you know, other large scale activities. I actually think it's valuable to have some of this transparency and money on the large scale. On the individual human level, I have the opposite view.

And anyways, we're getting to this new era where there's a bunch of people working on privacy coins where it's like privacy for normal users, but still with some tools for regulators to still, like for large dollar amounts, be able to see under the hood. And I personally think that's a reasonable steady state and zero knowledge proofs for the enabling technology that lets that happen. So we're going to switch gears a little bit and talk about some of the recent news because

there's been so much of it. Let's just in general start talking about the bear market, which, Michelle, you had this great thread about it. And you wrote, crypto has survived plenty of winters. but it's never been through a global macro storm yet. Bitcoin was launched in the last global financial crisis of 2008. Crypto has mostly existed in a roughly 0% U.S. interest rate environment. So what do you expect to see going forward over the next year or so or whatever time frame you project will be in this macro environment in the crypto industry? I think the point of that was that just to ready people as they see things in crypto happen.

in, the tree of crypto has grown taller, and so it's going to fall harder, right? It doesn't mean that it's going away or that it's in the world, but like the dollar amounts that things drop are going to be bigger because they got higher. The changes and the volatility in this period will feel larger than it has before, and that's because we have more users, more dollars, more liquidity, more regulator attention than crypto has ever had. So it was just really trying to ready people for that, that yes, crypto has always been through cycles, but this one may have some unique elements that make it feel different and to be ready for that. And I think that really depends on the business that you are running as to how you should react to that. You know, for some of them

that are maybe have been especially very new in the last several years of a lot of retail trading activity and, you know, extremely low cost of capital, they may need to plan for a different environment going forward with less retail interests potentially, not zero, but less than they had before. And you're seeing that already, right? A lot of the big public companies that are more brokerage trainings have had, you know, down 20% volumes since last year, obviously, because last year was historic highs. That doesn't mean it's going away and that it's broken or anything like that, but it just, you just need to plan for that difference. And so that's what we've been trying to talk about with our founders,

is just recognize that this is a different environment. If you keep running what you're doing the same way that you did for the last two years, you're probably going to find yourself in quicksand soon. So recognize that the environment has changed and plan accordingly. For some people that will be, you know, trims, for some people that might be hiring more and stepping on the gas because you can access even more talent and you're really well positioned. For some people that might be focusing on certain product areas or hard pivoting, it really depends on who you are.

But the message we just wanted to get across is this is different. Plan for that and make it a priority. So Michelle, I did also want to ask in that thread, you talked about how crypto entrepreneurs will really need product market fit. And I was wondering what that looks like for a decentralized product or service or aspiring to be decentralized. are there particular metrics that you're looking at? And then how do you also measure that, given how much speculation we often see in crypto, I'm sure you know about how much speculation kind of made things look like Axi Infinity was sort of a success story for maybe about a year or so. And then now it's really struggling. So how do you kind of determine that?

Yeah, it's a great question. Again, this ranges. But for the sake of discussion, I think what we roughly look at is either developer or user uptake without incentives. And so this doesn't mean you need to turn off all incentives or you can't use it. But if you have only seen rising developer or user uptake depending on your product, when you have been pushing incentives in some way, whether they're tokens or tokens related to some type of activity or something else, try pulling back on that and seeing whether you see a decrease and whether that really changes. And if that's the case, then you can tell there is at least some proportion of your usage that's not being driven by genuine value the person's finding in what you've built,

but by kind of mercenary interest in the incentives that you've set up. And if that's the case, it doesn't mean you're over and there's something else to do. It just means you need to work on, you know, iterating in terms of the product and getting something to the point where it doesn't need constant incentivization to have people keep using it. I feel like this would have been good advice for the Tara people before everything fell apart. But anyway, and then the last bit I wanted to ask you about in your thread was that you said that to build a sustainable business, token go up is not a business model. So talk a little bit about what you mean by that. What do you think these crypto projects should be focusing on and what kinds of business models do you think will work

when it comes to decentralized projects in crypto? Yeah, this is something Sean and I talk a lot about. So I can take a fathom and let Sean go into. I think the thing is that, you know, tokens are really cool. Like there's something very cool in terms of the regulatory dynamics about having found this way to really, really get incentive, you know, rewarding users, rewarding early developers. You know, there's a lot that's really interesting about them. And there are a lot of people using them for truly genuine

reasons, again, like for Ethereum or Bitcoin or Solana, a lot of these other ones, like it literally stabilizes and secures the network. There is a purpose to it. And there are others where it has a purpose, you know, but there are a lot of others where it doesn't really have a purpose. And when you really push on it, like, it's kind of this application that exists and they just like slapped on this token as this weird like tumor on the side that is not really related to what they're doing. And so, you know, in the craze of the last couple years, people are excited, maybe something's going up, everything's getting trading volume. You know, you might see a lot of growth in that. And then you think, oh, my God, we're doing something amazing. It's working. But as soon as the

interest rate environment changes and the air comes out of the market and that type of energy isn't there, you'll see it fall away. And that's where a lot of people are now. And so the point we're trying to make is just like, you can't just look at the token going up and seeing if you have that is the business model. The same way for a startup without a token. Like if you just keep getting valuation increases from investors, but a lot of the other metrics of health aren't there. That doesn't mean that you are on stable ground. And so really looking at what is the actual business model? What is the product or service you make that people actually pay you for?

and how does that work? And then how does that relate to the assets that may or may not be related to the business is an important question that certainly many crypto founders are incredibly sophisticated and have thought a lot about. But there are some others that probably think a little bit more about that. But Sean, we talk about this all the time. So please. You said it perfectly.

All right. So why don't we run through some of these recent big events in crypto? I want to get your opinion on each of these. Let's just start with Tara. Obviously, that was kind of the big one that sort of kicked off this era of these dominoes falling. What do you think are the main takeaways from Tara's collapse? There's so many takeaways. First of all, I just want to say that we feel awful for everyone involved.

Like, I feel horrible for anyone that lost money. There feel horrible for people that were on the Tara team. like anyways it's just even though it's such a catastrophic kind of implosion just want to register the empathy there's a lot of things to say one takeaway is that no one could explain where the yield comes from like if you ask someone to explain where the yield comes from like no one could actually do it and in general if something anywhere including and especially in crypto can't past like the explain it to a sixth grader test. Like, you know, it's usually a bad sign.

It's not always a bad sign. There are some things that are so novel, but like it's usually a bad sign. Number two is that the level of arrogance around some of the people around the project, I think was too high. And then number three. I love how you say that without naming names. And yet I think we all know that you are mainly talking about Doquan. but anyway.

Not naming any names. And then I think number three is that, and this is very controversial and contrarian, but like even though no algorithmic stable coin has worked, I don't necessarily think that no algorithmic stable coin will ever work. I think there are some interesting, interesting ideas there, and the execution was poor, and like there was too much hubris and all that,

but there could be some really interesting future innovators. in the space. And there's probably a five-year setback for like algorithmic stable coins. But I do think there's some really interesting kernels of ideas. I think the other lesson, which is tough, it's just a reality, which is that we've seen, you know, in the United States, at least SEC's hired 50 new crypto enforcement attorneys. And as our friend at Stanford, Joe Grenfors likes to say they are not there on vacation. And it's a bummer. And it's a bummer. or because I think, of course, there are some things that should be prosecuted, but what I struggle with just on a personal level, not, you know, any religious acquire

or anything else, is just that it's hard for crypto founders, many of whom who want to do the right thing and are trying to find a way to do it, to live in this world where they're most likely going to be only sued later when something goes wrong rather than told initially, like this is the framework that you should fit in. You should register with this group or you should register. just serve with this and here are the rules that apply to you. And so I feel like without that context and then people, you know, choosing to clearly not follow those rules, then it's one thing. But we do live in a world of a lot of gray area for these founders where they don't really know.

And it's not that they're ignoring it. Like, am I a commodity? Am I a security? Do I register with CFTC? Do I not? Do you want me to register as an exchange? What am I exchanging? That, you know, like, these are legitimate questions that people don't know how to answer. But the reality, that's a really big bummer is that it doesn't matter. No one will feel bad for you. If you do something and later it hurts people, you will get sued for it and it will not end well. And so that's why, you know, we did a podcast with Sam at the end of last year and Sam's resolution for the, for crypto, if we could do a New Year's resolution for the year was like just follow the rules ahead of the rules. Like even though there's no clarity, do the best you can, do the right thing so you don't

end up in these situations. And you're talking about Sam Pinkman-free, the CEO of the FTX, yeah. Yes, apologies, yes, yeah, Sam or SBF, people call him, you know. And so that's something for crypto founders is like, don't expect that because there is not clarity today that anyone will feel bad for you. Unfortunately, you have to do the right thing and think about how what you're building could have negative impacts on people if it's not properly supported. And I think that was unfortunately the case with Tara.

Yeah, well, while you bring up Sam, which by the way, I noticed a bunch of funny tweets pulling apart all the bits of his last name to be like, Sam, bank man, freed. Which I was like, oh, right. Of course, this was after the Blockfi and the Voyager news. Clearly, Sam comes from an ancient banking family. Justin, Justin for greatness. But I did want to ask because FTCS, now is sort of turning out to be this savior to a number of these companies, such as BlockFi and Voyager, when do you think, I mean, I know that you are an investor in FTX. So when do you think it makes sense for FTCS to do these kinds of deals? Because obviously, for certain of these companies,

you know, I'm sure we could all probably say at this point, Celsius is probably not going to survive. So how would you kind of think about when kind of shoring up the finances of such a company would be just throwing good money off your bad or when it's sort of worth it to do that deal. I'll take the first stab here, Michelle, and then you go, even though Michelle is the one that works with Sam and FTX with our partner Alfred. So I just, I saw a really good tweet about this today where someone basically said that the best analogy is the Berkshire Hathaway, like Sam and FTCS have been the Berkshire Hathaway of the space because Berkshire in 2008 bailed out Goldman and at least one other bank where like I think it was like a can't remember the exact details but

major injection of capital into Goldman and at least one other bank and so I would say there's a few things a few things here one is that like Berkshire those were amazing moves in that one like if the entire US financial system collapsed like if the whole banking industry collapsed if there's a domino you know and Lehman led to a ton of like if Goldman would have have fallen, then Berkshire would have lost everything, like, and not necessarily everything, but like, we all would have been doomed. And Berkshire happened to be in this situation where they were able to help protect the entire global economy. And they actually also made money by doing it, because they're able to get good terms and invest in super high quality assets

that were facing kind of the perfect storm of dominoes falling. And they were able to basically stop further dominance from falling. And I feel like it's very similar here with FTX, where a lot of these lending protocols, if they have a bad book of assets, then you should not step in to bail them out. But if they have a great book of assets, but they might have a little bit of a short-term liquidity crunch, then it's super smart to step in. Like if something's over collateralized with really high quality assets, which is maybe that 40, 50% of them are in like three month duration or 12 month duration, you know, locked up bonds or some other like high quality asset, then it makes a ton of sense to step in and give your stamp of approval, your brand trust, and also make a great

financial deal for you. And this has been happening like since the beginning of banks. You know, like, you know, it's just that it's been other banks and or governments that will step in to kind of stop bank runs. And crypto doesn't have the same tools. And so I'm very grateful to Sam and I was thinking it's very strategic because it helps preserve their whole book of crypto assets where they're indexed the entire space. And I think they're getting some great deals. So, and everyone's winning. I'm going to keep just plowing through these because I do have a number of questions before. We're going to to finally close up here.

So let's just move on a three arrows capital. We kind of talked about Celsius, but, you know, just in the interest of time, I'll just move on. So what was your takeaway from this firm's likely insolvency? It was surprising, and we, again, feel badly for the people involved. Yeah, but in terms of like going forward for builders or or and for investors, yeah, like, how would you kind of counsel your portfolio companies or like how would you think about your investments based on what happened here. I was going to say 3AC shocked me. I was not expecting this happened to them. Like I've always thought of them as very smart. And they come from

like Wall Street. And so, you know, I would have assumed better risk management practices. So I was shocked candidly. Like there's all sorts of things in crypto that I expect to fail. 3AC was not one of them. And so I think the advice to startups is like there's so many people in crypto, they're given a large fraction of their, like, had a large fraction of their balance sheet exposed to 3AC because they trusted it. And I think it's just the lesson is like always diversify and you can't really trust anyone in the space, you know, with a large, like, with existential risk for your company or protocol. And in crypto, we don't yet have like FDIC insurance. So it's different than if you have a bunch of your, you know, fiat in a bank where it's, you know, you

insured and the government's going to step in and protect you. And so I just, I think people were too cavalier with their balance sheets is the biggest takeaway to me. I also think from the VC side, you know, there were a lot of people posting 3A as a crypto VC and there were other people saying they're not a VC, they're a prop trading firm and just understanding that. I think there are a lot of solo capitalists, you know, what you could call a prop firm, right?

It's all sort of the same who have been great partners. And so it's not like the model itself is broken. But I think a lot of founders didn't seem to fully understand the differences between a firm that has been around for a really long time versus one that's not. And there were some things that Sean and I were hearing, you know, oh, well, they've never lost any money. And it's like, well, that actually is not necessarily a good sign because in this business, you're destined to lose money. And so if you've never lost any money, you probably are very new to the world. And we actually don't know what you're like when you lose money or when you're in a crisis. And those are the moments where you really do want to know that you're having a good partner

because those are when it's hard and you see people's true colors. So there's a lot more besides just even investors, right, where people are saying, oh, they've never lost money. And it's like, well, they're a quote unquote bank that's been around two years. So that's not a good track record necessarily, right? And so I think in general, I think this crisis or, you know, period for crypto will probably give everyone a healthier and higher bar for trust in counterparties and insurgies. institutions they work with. Yeah, I actually feel like there's also something to be said about the

social media behavior being sort of similar to the Doquan situation, which is kind of interesting, just in terms of it giving a lens into what that founder is like and maybe their ability to, you know, think about potential bad things that could happen or manage for risk. In this case, I just find it interesting that it happened to be those people because they definitely seem to have a lot of swagger on social media. And let me just say, Sequoia is one of the places that's had some of the least swagger on social media. Right, right, right, right.

Excluding this moment in particular, though. Exactly. So we'll circle back to some of your other investments again, kind of looking forward to the future. Obviously, there's a lot of movement and activity around interoperability and trying to have transactions across chains. And you have written about the problem of fragmentation across chains. Can you elaborate on that kind of, you know, how do you see this problem manifesting for users?

And then what do you think are the best ways to handle it? We're very fortunate to have great friends at the Ethereum Foundation, Solana, you know, know people with Cosmos and Avalanche, Pocod and others. And the more and more we just kept talking to core teams working on layer ones and also layer two's, you know, Polygon Starkware, often, etc. We just felt like there's so much demand for block space that we think

will keep increasing, and the smartest people we can find in the world roughly don't think that there will be one single blockchain that will actually be able to supply all of that demand. And so if that's the case, if you have at least two that succeed, and it probably will be

some version of several layers, right, that help abstract the execution layer from the data layer from the storage, the same way we've seen, compute and storage split up in cloud and some of the other parallels to just broader tech history. If that's true, then you'd need better interoperability because what we have now, where you have, for instance, Sushi Swap as an application deployed on 13 chains, each of those deployments, none of them talk to each other. So you have fragmentation of users, of data, of liquidity, which is in a marketplace vastly

less efficient. You know, the examples that we were using as Sean and I were working on Layer Zero explaining to some of our colleagues who don't spend as much time in this space is like, okay, imagine you were trying to use DoorDash and you could only order from restaurants that were also on iPhones. And the Android people could only order from Android restaurants. Like that is just vastly less efficient or Uber, whatever marketplace you want. It doesn't make any sense. You need a way to have connectivity at the application layer for these to be more useful to people.

Then that brings us to, okay, well, what? is that solution? And there are a lot of people trying to solve bridges and interoperability in different ways. We fell in love with the layer zero team and their approach for a lot of reasons. It's a really hard problem to solve incredibly high security needs, a lot of demands on like simplifying, really complex transactions. I'm sure you know like the old way of doing it of going through like, you know, 27 different steps to bridge between this and that wrapped asset right to get something across. It's total pain. And I also wouldn't call it the old way. It's still, you know, It's still prominent.

Absolutely. That's totally fair. Hopefully we make it the old way. But yeah, that's why we said we just think this has got to be a part of the future of crypto. All right. And let's also talk about scaling because I've noticed that some of your investments in this area are kind of across some of the different scaling solutions. For instance, we mentioned StarCQWare and CK roll-ups earlier. I also saw an investment having to do with Polygon, another one having to do with Rale.

Arbitram. So how do you think about scaling? And is there a reason why you kind of haven't focused on any one particular type of technology or layer two? So we're still so early in crypto. It's really hard to know what the end state is going to be. And there's certain just to the question of why invests in multiple things, there's certain areas in crypto that it's just impossible to know what the end state will be. But we kind of believe in the idea. but it's hard to know which layer ones other than Bitcoin and Ethereum will be important in 10 years. Like for layer two, it's really hard to know if it's going to be ZK or if it's going to be optimistic roll-ups, like at what different time frame, you know, and how that's all going to evolve.

And so in some of these areas, we've had a little bit of a portfolio approach. But the underlying problem they're solving is incredibly obvious. And even when you talk to the Ethereum Foundation, their vision for the future is that they'll be the underlined base data layer and kind of all the most important balances and data will be written to the Ethereum blockchain, but that there will be like a whole layer of higher, throughput, lower cost transactions on top of it. And so like even even the Ethereum Foundation believes in layer two's hopefully both on top of it is their goal.

But multiple technologies of it. Yes, multiple. Yeah. Yeah, and a lot of them think, too, there's a phase. And that's some of the reason, like today, the side chains and early polygon stuff, right? It's so easy for developers to use. So easy to get started. And it solves some really big pain points immediately for people to lower transaction fees and just get things going.

Optimistic is this bridge solution potentially that, you know, maybe it goes beyond that. But that's kind of the prevailing thought right now. and ZK is much harder. There's some usability problems to solve with it in terms of developers having to write in a new language or pour applications over rather than a more plug-and-play solution on top. And so there's things to be solved there, but long-term, there's a lot of belief that that could be the right answer.

That said, I think it's a space where there are just so many great teams. I hope, you know, Sandeep at Polygon is just like an amazing founder or Sequoia India team back to him. He's just an awesome person. And so there's no, it's not that we're putting Polygon in a box that they can't scale to do all these things, for instance, but they have a fantastic founder and a solution that's getting incredible developer update right now. And similarly with Starkware, you have a really hard computation and cryptography problem that very few people in the world are really capable of solving. And these completely technically brilliant founders who are working really hard on doing that and making some general purpose layer.

to solve it. So over time, we imagine there's a good chance that both of these get used a lot and optimistic may as well. But the end goal is all growing crypto and growing Ethereum. And so they all share the same end purpose and are more additive to each other definitely than anything else. Another one of your investments, Salana-based Marketplace Magic Eden, announced it had raised another $130 million at a $1.6 billion evaluation. What is your projection of what the metaverse will become? Do you think that VR-A-R have to be a part of it or do you think it does not need that? Everybody's using this word nowadays metaverse and I feel like there isn't a really good definition. So I'm interested to hear where you think this is all going. Oh my gosh. You're asking

the hard questions. To me, I think about the metaverse. And I agree there's no good definition. except reading Neil Stevenson books and like his version of the metaverse is obviously the metaverse we're going to live in. Obviously. Obviously. Anyways, I think of the metaverse like maybe two different ways. One is just the next big phase transition of the internet. And it's hard to even know what that'll be.

But like when the internet evolves into something that's unrecognizable from today, like I would call that the metaverse. And one thing that I think will probably be an important property of that is some type of spatial component where it's like we're invested in a company called Gather where it's easy to build maps and you know you can link maps together like offices together. So you can have a bunch of remote crypto companies that all, you know, like their base, teams based around the world, but they can have their offices in like a digital Tokyo where you can kind of walk from one crypto company to another's office. and there can be like a shared game room and all of that. And God, there's 2D. It's very early. But that sense of like linking humans that are at different places on the planet,

but where like they can just kind of walk digitally from one space to the other and go talk to people that there's some deep commonality, deep shared purpose, like they're big crypto fans or whatever, like that. And so you're organizing instead of based on geography, you're organizing based on idea in cyberspace. Like to me, that's like a property that I would expect to be very strong in the, whatever the metaverse is. So I'll say that.

And then on Magic Eden, I just want to say that similar to the comment about the layer two, like the Magic Eden team is just insanely good. Sid, one of the founders, he tweeted today kind of the backstory behind Magic Eden, which is his first company failed. and while he was doing it, who's living on a tiny little sailboat because oftentimes it's actually cheaper to live, you know, like on boats than on land. And that team has just been hustling like crazy for years, kind of iterating.

And then Magic Eden has grown unbelievably quickly. And I'll just say, like, I view NFTs today and I view Magic Eden as like Amazon in the early 90s where they started off by selling books. and, you know, like, Amazon books were not the right end point. It was just Bezos was insanely talented, a freaking genius, workaholic, visionary. And it's more like backing Bezos when he's selling books was a good bet because the internet was growing really fast. And it was like a bet that he would go figure out other things to sell in this space. And I would just say with Magic Eden, it's something very similar where they're just incredibly talented people.

And Fort of the OpenC team is very talented too, but it's just like two incredibly talented teams that are the book vendors of the internet, like that analogy for the metaverse or for early crypto. And so anyways, that's how I think about it. All right. So we talked at the very beginning about kind of the 20 or 30 year vision that you have. But Michelle, you wrote this blog post. Ask not when moon? Ask why moon? And in it you laid out the adoption S curve of blockchain technology.

can you just give a very, I mean, it's only three steps, but why don't you give a brief overview of it and then explain where you think crypto is now and will be for the next year or two? Roughly, there's the early phases of the S curve, which look like nothing's happening. And we think about that in some ways as, you know, crypto as an island. It's very disconnected from other sources, right? On ramps just for assets are still clunky information flows. it's hard to get data from the rest of the internet on chain into certain smart contracts. So it's this island with less to do. But overall, as that island continues to grow in terms of users and dollars,

there will be more crypto-native applications that are built to serve that universe than it is more likely for the rest of the world of incumbents to connect and start serving those needs. then we've got to get into phase two as the infrastructure improves a lot and basic things like going from the dial-up phase to the broadband phase or LTE 5G where we are now right those core infrastructure layers are dramatically improved orders of magnitude faster, cheaper and we start having more connectivity with fluidity of assets and information between applications that are on-chain and off-chain. And I think we're just starting to see a lot of those pieces fall into place because the core

infrastructure just has to get solved first. It's like a foundation of a building. You really do have to start from the bottom. And then once that takes place and we reach internet scale users, you can start to get really big applications. And so that's something that people often miss is that through that S-curve of growth, you think, oh wow, this company or this product has grown. Amazingly, I'm sure it's tapped out by now.

But you're nowhere close what it looks like when we have 4 billion crypto users or more. I mean, you're just not even close to that. And we think we will get there over time. And that's when you start to see the trillion dollar companies, the two trillion dollar companies, because they're really serving an internet scale population in a really important way. And so we think we are still very early on in phase one, and maybe just heading into phase two, hopefully.

But it's still truly early days as much as that is a meme and a trope at this point. All right. Well, I look forward to seeing how you guys navigate going through these early innings. Where can people learn more about each of you and Sequoia? Yeah, I'm at Sean M. McGuire on Twitter. Perfect. And Michelle yours is. Yeah, at Michelle and then my funky last name, B-I-L-H-E.

but I'm easy on the website. Can't miss us. Those are our real emails, ping us anytime. We're very reachable. Laura, thank you so much for having us on. I mean, you do an incredible community service with this podcast. Thank you. Oh, thank you. Well, it has been a pleasure having you both. So thanks so much for coming on the show. Thank you so much. Thanks so much for joining us today. To learn more about Sean, Michelle, Sequoia, and their cryptothesis. Check out the show notes for this episode. Unchained is produced by me. Laura Shin, with help from Anthony Youne, Matt Pilchard, Juan Orenovich, Pamajimdar, Shashonk, and CLK transcription. Thanks for listening.