Unchained - Pantera Capital: How Bitcoin Could Reach $356,000 in a Few Years - Ep.129

Episode Date: July 23, 2019

Dan Morehead, founder and CEO of Pantera Capital, and Joey Krug, co-chief investment officer of Pantera and founder of Augur, discuss where we are in the development cycle of blockchain technology, how Bitcoin, if stays on past trend lines, could hit $42,000 by year's end and $356,000 a couple years after that, and why the biggest challenges now are around scaling and onboarding. We also cover what the adoption of the technology will mean long-term — how creating assets and markets will no longer be the realm of a privileged view — but why payments may be one of the last areas to be disrupted. Morehead and Krug also talk about how Libra walks the line between decentralized and centralized, and it's unclear how Libra will become decentralized. Plus, hear how they respond to questions about the SEC vs. Kik.  Sign up for the Virtues of the Crypto Revolution retreat with me, Meltem Demirors of CoinShares and Jalak Jobanputra of Future Perfect Ventures at Omega Institute!!  Thank you to our sponsors! Crypto.com: https://www.crypto.com/ Kraken: https://www.kraken.com CipherTrace: http://ciphertrace.com/unchained Episode links: Pantera Capital: https://www.panteracapital.com Dan Morehead: https://twitter.com/dan_pantera Joey Krug: https://twitter.com/joeykrug Dan Morehead on Unconfirmed: https://unchainedpodcast.com/dan-morehead-of-pantera-capital-on-why-this-crypto-winter-is-different/ Unchained with Joey Krug: https://unchainedpodcast.com/joey-krug-on-how-augur-is-like-any-other-tool-ep-79/ A Crypto Thesis: https://medium.com/@PanteraCapital/a-crypto-thesis-47eaacf861ca Unconfirmed about Congressional hearings on Libra: https://unchainedpodcast.com/why-the-congressional-hearings-on-facebooks-libra-were-good-for-bitcoin/ Unconfirmed about why it would be good if Libra rivaled the USD: https://unchainedpodcast.com/why-it-would-be-good-if-libra-rivaled-the-us-dollar/ Unconfirmed with Dante Disparte of the Libra Association: https://unchainedpodcast.com/libras-dante-disparte-on-why-we-should-trust-a-financial-system-designed-by-facebook/ Some crypto industry players fed up with US regulators: https://www.forbes.com/sites/laurashin/2019/05/29/crypto-companies-and-investors-fed-up-with-the-sec/#3f348ad7701c The SEC vs. Kik: https://unchainedpodcast.com/kin-sets-up-5-million-defendcrypto-org-to-take-on-the-sec/ Bitcoin ETF: https://www.cryptoglobe.com/latest/2018/10/pantera-capital-ceo-sec-doesnt-want-widows-and-orphans-buying-bitcoin-etfs-i-think-an-etf-is-years-away/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin. I've been doing a survey, and it's come to my attention that not all of you know that I have another podcast. It's shorter, newsier, and comes out Friday, and it's still all about crypto, and it's called Unconfirmed. If you haven't taken a listen, go check it out. In particular, I'd recommend my recent interviews with Dante Desparte, head of communications and global policy for the Libra Association, and the first. ever podcast interview with local bitcoins. Also, if you're making vacation plans, consider the crypto weekend retreat I'm teaching with Melton Demiris of coin shares and Jalach Jobh and Putra of Future Perfect Ventures in September. It'll be at the beautiful Omega Institute in Rimbach, New York, from September 20th to the 22nd. Be sure to check out the show notes for the link to sign up. Cipher trace cutting-edge cryptocurrency intelligence powers anti-money laundering, blockchain analytics, and threat intel. Leading exchanges. virtual currency businesses, banks, and regulators themselves use ciphertrace to comply with regulation

and to monitor compliance. Grow your crypto and earn up to 8% per year with crypto.com. It's the place to buy over 40 coins at true cost with no fees and no markups. Download the crypto.com app today. Cracken is the best exchange in the world for buying and selling digital assets. It has the tightest security, deep liquidity, and a great fee structure with no minimum or hidden fees. Whether you're looking for a simple fiat on-ramp or leveraged options trading, Cracken is the place for you. My guest for today are Dan Moorhead, founder and CEO of Pantara Capital and Joey Kroog, co-chief investment officer of Pantara and founder of Auger. Welcome, Dan and Joey. Thanks, Lord. Thanks.

Dan, let's start with you. Tell us how you learned about Bitcoin and came to found Pantara. So I've been investing in interesting disruptions over the last 30 years from Russian privatization to Argentine farmland or Tesla Motors. And friends of mine, Pete Brigger and Mike Novagratz called and asked if I had looked at Bitcoin. And my brother had introduced it to me about 18 months before in 2011. But I hadn't really – I read about it and I thought it was really great and I really hoped it happened. But I didn't actually do anything to help bring that about. And we really got talking about it and got so excited that I basically spent two or three weeks reading everything that existed. And back then, that basically was a very short list of things you could actually find to read about it.

And came to the conclusion that it would be just a massively asymmetrical trade that, you know, obviously there's some risks or some ways that this project wouldn't work. But if it did work, it was going to disrupt the biggest things on Earth, payments, wealth, storage, cross-border money movement, all these really, really important industries. And even ultimately cash, the world has $100 trillion worth of cash. And most countries, their fiat currency systems are terrible. So their citizens really do want something better to use. And so after about two or three months, decided to launch Pantir Bitcoin Fund. And I think it was the first crypto fund in the U.S.

And it actually just turned six years old. So it's been a really wild six years. Congrats. Thanks. Yeah, well, so keep going. So you founded that. But I just want to know. I mean, it feels like for somebody with your kind of experience that it was a real departure from what you knew.

So, you know, aside from, I mean, I guess you sort of explained, you kind of felt like this would be really disruptive and a big opportunity. But like, but why do you think it captured your imagination so in a way that, well, I don't know. you tell me, was that sort of similar to how you felt about previous investments? So my previous role was as head of macro trading at Tiger Management, working with Julian Robertson. And in that role, my day job was trading things like dollar yen or, you know, the very normal big liquid markets. And if you think about it, things like dollar yen, it hasn't moved 20 points from 120 my entire career, basically. So you're trying to to kind of scrape out little moves on these massive markets. And that's essentially what the

main part of my job was. But my passion was always these little kind of funky disruptions. I went to Russia when Gorbachev was doing glass-nosed in 1990 and invested in Gazprom and its voucher privatization in the early 90s. And those are the things I did kind of as a little hobby on the side because I thought they were really interesting, but they didn't kind of fit the big corporate mold that we were in. And when I found in Pantera in 2003, we were able to do those types of trades as more of our, you know, more meaningfully, you know, raise funds to invest in Abu Dhabi and Dubai and Saudi equities in 2006 or seven before most Westerners are there, trades like that

and always looking for ones that had, you know, many, much more upside than they did downside. And then when I saw Bitcoin, it was trading at a $1 billion. market cap. And that just struck me as just an amazing trade that if it worked, it'd be worth potentially trillions of dollars, definitely hundreds of millions of dollars. And if it didn't work, hey, it could only go down a billion dollars. So it's, you know, very low risk for the potential upside. And since then, now there's been all kinds of other new developments. We began our first blockchain venture fund in 2013, investing in companies, you know, they're helping people use

blockchain in the background. And then there have been other innovations like our pre-oction ICO fund that invests in blockchain tokens before they're sold to the public. Yeah. And one thing I want to mention, which is just a really fun tidbit from your history, is that you're also friends from Princeton with Mike Novagatz, who you mentioned, and also Joe Lubin, both of who are huge figures in the crypto space. So I find it pretty amazing that you guys have all landed in this industry and our big figures in it. So let's turn to Joey now. Joey, you were on the show before and at that time you handled some really tough questions from me with Grace. Thank you for that. And you told us a bit back then about how you got into Bitcoin and came to found Auger.

So when did you usually just summarize that briefly, since you already explained it, but then also then kind of explain how you became co-chief investment officer at Pinterra? Sure. So for Bitcoin. I came across it in May of 2011 on an online form called Overclock.net. And it was about how you could basically earn free money with your graphics card on your computer. And so I started mining at the time. The next month, Mount Cox got hacked the first time. And then so I decided to just kind of hold on to my Bitcoin and basically lay low until maybe late 2013 when I started getting excited about the space again.

Thought Bitcoin was cool for kind of the same reason as Dan did. It's this new kind of self-sovereign money. And then in 2014, kind of came across Ethereum and smart contracts. And at that point, my view kind of changed. And I began to kind of consider Bitcoin to just be this sort of digital gold. And Ethereum to be this platform where you could create all this sort of decentralized finance stuff that I thought was going to be kind of the equivalent of what the Internet did to information about doing that to money and finance. And so I ended up started working on Ocker and kind of the fall of talking. 2014 because I thought that if you had this decentralized financial system, what's the main kind of most important thing that you need that also benefits from blockchain tech? And so Auger, the idea

in a nutshell is basically it's a peer-to-peer platform that lets you bet or essentially trade on anything with kind of no limit. So that can be anything from a presidential election to, you know, a sports match. And the way I got involved with Pantera is, so I'd known Dan and Paul kind of on and off throughout the years because of Auger and because the space was so small back in 2014. It literally was only, you know, maybe 100 people in San Francisco, whoever went to any of these meetups or anything. So I kind of knew them from that. And then I started talking to them again when Paul reached out kind of late 2016, early 2017. I was busy with something with Auger's. I didn't respond for like six to eight

weeks and then eventually ended up meeting up with them and grabbing pizza. We actually had a bunch of pizza lunches. And after like the first two, Dan started joining. And we just kept talking about the space. Paul had liked a lot of the investments I'd made on my angelus syndicate. And so we just kind of kept talking back and forth. And Dan and Paul basically decided that they wanted to bring someone on, someone on as co-CIO who had, you know, built something in the space who understood kind of the technical challenges and what problems need to be solved. And somebody could have done something from the kind of operational aspect. And I thought that made a lot of sense. And I also thought that for things like Auger to succeed in pretty much everything else in the D5 space,

there needs to be a lot of companies and infrastructure and other problems need to be solved that are way bigger than any one company being able to solve them. And so at Pantera, we're kind of funding a lot of that infrastructure. And you're still working on Auger, correct? So how do you split your time? Yeah, pretty much all my time is on Pantera. For Auger, you know, I hop on a weekly call with the team, that's maybe like an hour. And kind of we talk about, very high-level stuff, like what the future product roadmap is going to look like, what the kind of future direction looks like, what features should be worked on that sort of thing.

But I don't, you know, write software anymore for it or anything like that. Once in a while, if I have a couple free hours on a weekend or something, I might help, you know, solve like a really hard algorithm problem, like for trying to figure out, you know, how should markets be ranked on auger such that it's hard to manipulate the ranking and rank the markets by liquidity or something. That's something I spent a few hours on last weekend. But other than that, kind of one-off stuff, the rest of my time is pretty much all Pantera. Both of you have quite a long view on the development of this industry.

How would you describe where we are in the cycle of the development of blockchain technology and the sector overall? Yeah, I say there's a great Gartner hype cycle that has the huge manic wave up where a small kernel of something very important gets people to be crazed about it and in the trough of disillusionment. And we've already gone through two of those cycles in the six years that we've been investing in it. And I think people just need to keep that in perspective that this is a two-decade-long project. We're actually 10 years into it, but we still have another solid 10 or more years to go until this is fully fleshed out. And for the people that use price as a proxy, which is not great, but that's the human instinct. The thing to keep in mind is if you ever go back and zoom out your lens more than a year, Bitcoin as a proxy for the industry is always going up. And I know from our own fund history, we've only had one down year in six years.

And there's only been one year that Bitcoin in the calendar years had a lower price for a low for that year than it did a lower low from the previous years. And so we're always trying to look, you know, three to five years out and be thinking about where the industry will be then rather than, you know, worrying about these kind of manic, you know, phases of bubbles and then the crypto winners where everyone thinks that it's never going to work. And so between those bubbles and winners, where do you feel like we are now in terms of either what has been a success so far and what still needs to be built and, et cetera? Well, one perspective would be to graph the price of Bitcoin logarithmically to take away the crazy exponential growth. And it's typically a pretty consistent line. And there's a few bubbles. 2013, obviously, Bitcoin was up 83x year and year. And then at the end of 2017, it was also a bubble.

It deflated so much that at the beginning of this year, when we're at the kind of the trough of the crypto winner, we graphed. what it would be like if Bitcoin spent the next 12 months getting back to its trend line, and then from there out just stated as trend. And its trend has been to grow at 235 percent compound annual growth rate. And that put, at the time Bitcoin was 3 or 4,000. That put Bitcoin at $42,000 at the end of 2019, which I know sounds crazy. But essentially we're halfway back there. It's right on the trend line.

And I think it's a good shot that by the end of the year, we're, we hit that. And then if you just extrapolate that line out, for another year, it's $122,000 per Bitcoin, and then one more year, $356,000. And those sound crazy, but our first research piece that we wrote on Bitcoin, we predicted it would go to $5,000. And when it was $100,000, everyone thought that was totally nuts. But these numbers in two or three years, people look back and go, oh, yeah, that makes sense. And how have the investors interested in crypto changed over time? you know, I mean, so you started your fund in 2013 and I guess Joey had his, you know, had interest in this even before then. So how would you describe the kind of demographics of the

investors from back then and on through today? Like how they changed? So it is changing. You know, in the early days, it was Wall Street or tech professionals investing their own money in our funds. So, you know, high net worth individuals, but very sophisticated about this industry. We now have 850 limited partners, which is just a crazy amount of LPs. In our previous days, we managed a billion dollars with maybe 50 different investors. And now we just have an order of magnitude more than that. We're starting to see that transition to more institutional management or institutional investors, pensions, endowments. But that's a really, a really, relatively slow change. You know, there's a handful that have invested, but most still have no exposure. And that's one of the reasons we're still, you know, so bullish on the space that if 95% of institutional investors don't have any direct exposure to blockchain, you just need five or 10% of those to make an allocation over the next couple of years to keep pushing the prices higher.

That makes sense. I actually want to direct my previous question to Joey, too, about where we are in the development of this industry. because, you know, so obviously, Dan, you're coming at this from the financial background, but Joey, since you are, you know, you started kind of on the tech side of things. I was curious to hear where you think we are in the cycle. Sure. I think the thing about the crypto space is the tech is so new. It's like the Internet in the late 80s to very, very early 90s. And so it's really hard to do lots of the things that people want to do.

And so if you look at the use cases that have succeeded thus far, there are things that aren't really price sensitive. So the transaction cost doesn't matter that much and they don't require much throughput. So right now, basically the only use case that's worked so far is collateralized loans or peer-to-peer lending. So things like Maker, compound,

Dharma, none of the DFI stuff outside of that has really taken off. And I think the reason is from the technology standpoint, there's no throughput. So Ethereum still does, you know, 10 to 15 transactions per second. If you were to put that quantify that in like augur trades for second,

you can do about one-fourth of an auger trade per second. Every four seconds, you can do one trade. If you look at a site like Betfair, they have dozens of trades in a random, you know, English Premier League soccer match. And so the throughput's nowhere near there. The cost is very expensive. If you think of financial markets, you need to be placing, canceling, and modifying orders to provide liquidity.

And each one of those actions cost quite a bit of money on Ethereum. And so it makes, it's almost like an anti-network effect. you can't really get any adoption because of these reasons. And there's one kind of other problem, which is onboarding is still a pretty bad experience. The way I describe it is, you know, imagine if when you went to Amazon, when it first came out, they said first, you know, create a bank account at this other bank, take a selfie with your passport, and then wait a week to get verified and, you know, wait another week to get your deposit limits raised. That's kind of like buying crypto today.

And so these two main problems, the scalability one, and the onboarding, one need to be solved. On scalability, two years ago, if you'd ask me, you know, I would have said, well, I hope that it gets solved, but I don't really know how it's going to be solved. Today, it's much clearer. So there are solutions that, you know, theoretically on paper, the algorithms make sense. They should work. They should be able to be implemented. And at this point, the text just being, the software is being written. That's a much better position to be in. And there's a bunch of projects that are supposed to ship kind of by the end of the year, even if only, you know, one to three of them actually ship,

I think it's going to be a big thing for blockchain scalability because I think it's not going to be linear. Like we're not going to go from 10 PPS to 20 to 50 to 100. It's going to be more like 10 to 1,000 in kind of one or two big phase shifts. And then on the onboarding side, there's companies like Wire, which is one that's in our portfolio that are working on making it so you can buy small amounts of crypto and pretty much get it immediately. And which scaling solutions are most interesting or do you find most promising?

Yes, I think the kinds that are interesting to me are ones that require minimal changes for developers. Because if you think of software development, it's an inherently kind of like lazy activity in the sense that you're trying to automate as much as possible. So you have to do as little work as possible. So if somebody comes up to me as a developer and says, hey, I had this way to let your application scale, but it's going to require a year and a half of work in rewriting everything to make it scale. I'm just going to be like, no, I'm not going to spend my time on that. A year and a half later, things could look drastically different.

Now, if somebody comes to me and says, hey, I have a way for you to scale. It doesn't require you any of your software at all. It just requires making these small changes that you can do in four to six weeks. That's an entirely different story. And so if you look at projects that are enabling that kind of scale phase shift, there's two in our portfolio. There's one outside of it.

So those three projects are Arbitrum, Blox Route, and Maddick Network. And so Arbitrum and Madic Network, what they do is they're creating basically side chains to Ethereum. So similar to kind of that old school idea that Blockstream had in 2014, except the difference is with Ethereum, since it's turning complete, you can actually do all the things you need to send data back and forth between Ethereum and these other chains and do it in a secure way without requiring any sort of model. modifications on the Ethereum protocol layer. So the reason why Blockstream sidechains never really

took off is they would have required Bitcoin to make a modification that the Bitcoin Core status never got pushed through. And so Ethereum is different because you can just write that all in a smart contract. So these things are already on TestNet. They're functional on test net, and they're kind of polishing them up before they release main net versions. And then Blockstrowd, if you look at that, they're trying to solve scalability on the networking layer. So the fundamental problem with blockchains is that if I broadcast the transaction, I broadcast it to seven to ten computers and I'm connected to you. Those seven to ten broadcast it to seven to ten they're connected to. This continues to happen until the whole network's aware of a given transaction.

Blocks are essentially creating a CDN. So if you've heard of Akamai or Cloudflare, they're basically creating a layer where you can kind of broadcast your transactions to those computers that everybody is connected to and it sort of cuts the number of hops down. If that layer gets shut down or censored or whatever, you kind of fall back to the same slow system that we have today. Interesting. Yeah. It sounds like those are really promising. And there was one more that you said was outside. Why is that one interesting to you? Oh, yes. Thematic network, it's similar to how Arbitrum works. It's a little different in the kind of mechanism design. But it's another sort of layer two scaling thing. What's significant about these networks like Arbitrum and Madic is that they, they, don't have any weird capital requirements. So if you look at the past five years, everybody on the Ethereum landscape has been talking about, oh, we're going to use state channels or payment

channels, be sort of lightning. Lightning's a version of that on Bitcoin. Everybody says, oh, we're going to use that to scale. That doesn't work for financial applications, though. And the reason is it requires excess collateral. So like if you told, you know, Dan, when he was a trader at Tiger, hey, you're going to have to over-cladilize your position by 5x. And there's no leverage. So you're just basically putting up $500 to trade $100 of some underlying asset, that would be crazy. And no trader would do it because it doesn't make any sense. But that's how state channels work. So what's significant about Maddo and Arbitrum is they get rid of this problem.

So if you're trading a $100 position, you only need to put up $100. And that's kind of a big improvement in the tech that wasn't really possible in the past. And Laura, I'd love to link your two questions. You know, you just asked about, you know, the kind of manic cycles up and down. and then the challenges now. And there was a time where people thought blockchain was going to change everything and to do it all overnight. And then we realized you can only do seven transactions per second. And the block was maxed out.

So transactions were no longer essentially free. They were actually really expensive. And then everyone got super pessimistic. I think a lot of the rally in the last six months is from projects like Arbitroman Block's route getting close to launching. I was just out of it. at the Block Shrout office in Evanston, Illinois. And they're doing 2,000 Bitcoin transactions per second. So it's not, like Joey said, we're not going to go from 7 to 10 to 20. We're going to go from 7 to 2000 or something like that. And I think that's, when those things do go live during 2019,

it's going to essentially blow people's minds. And that's why that's at least a huge part of why I think the market's rallying right now. And one other thing I wanted to be sure to touch on was Joey's essay a cryptothesis, which he published in January. Joey, can you just briefly summarize that? It was kind of a long piece, but you might want to just pick out, you know, your main points. But then there was one question specifically I wanted to ask you about, which was at one point in the essay, you said that you felt that cash and payments would be some of the last financial areas to be disrupted. And I was curious about why. Sure. So kind of high level of the essay is it's pretty straightforward. Basically, the idea is I kind of tell a story

about the printing press and the essay. So if you look at how information has changed, the first big innovation and information was the creation of the printing press. It allowed people to basically disseminate information, create books very cheaply, and kind of spread them around the globe. And afterwards, you know, you had radio, television,

and internet. If you look at every information revolution besides the internet, they only really transformed, for the most part, with the exception of the printing press, They transformed kind of consumption of content. But they never really democratized creation of that content. Like most people don't author books.

Most people aren't on radio. Most people aren't on television. But the Internet, what it did differently is it transformed both sides of the equation. So not only consumption of content changed, but also creation of new content. Sites like YouTube, Twitter, Facebook, etc., basically democratize that and really kind of blew it up. And so if you look at blockchain tech, my, thesis here is that we'll see the same thing but for finance. And so I would argue for finance, it hasn't really changed all that much since, you know, the Dutch were trading tulips

hundreds of years ago. And things have become electronic. So trading is electronic. But creation of new financial instruments, creation of new assets, it's always kind of been in the realm of a privilege-litched few. It has never really been easy to do or cheap or kind of on the same scale as creating, say, a tweet. And so my view is that the same thing is going to happen with blockchain tax. So if you want to bet on some real world event, you can create that market very easily, easily. If you want to take out a collateralized loan at 3 in the morning, that may not be the best idea, but you can actually do it on Ethereum today. And there's going to be tons of applications that, you know, I haven't foreseen and nobody else is foreseen of this. But I think that's the high-level

kind of thesis. And then you had to answer your question about why I think, payments and kind of money will be some of the last areas that are really transformed. I think it's because it's just such an entrenched market. And there's other kind of higher inefficiencies in other areas. So if you look at betting or derivatives, there's things where you can enable people to do things they couldn't do in the past or you can save them literally 10% in fees. If you look at payments, the fees are much lower. It's really competitive.

The margins are razor thin. if you look at Visa MasterCard, Visa MasterCard, actually surprisingly, most people don't know this, they don't make that much. The banks in the middle are the ones that make the majority of the Visa MasterCard interchange fee. And so disintermediating that is extremely difficult. If you look at the payments area, I do think where blockchain tech could maybe be useful kind of immediately is going after area where merchants can't accept Visa MasterCard, either because their fraud rate is too high or because they're on a list of merchants

that feeds in MasterCard won't do business with. But I think disrupting those two entities, which is what people usually talk about when they say crypto payments, is kind of extraordinarily difficult. Yeah, one other area might be remittances, too, for certain corridors where the fees are really high. But so speaking about money and payments, what do you guys think about the announcement of Libra, the sort of quasi-stable coin that Facebook hopes to launch? Like, what do you think the significance will be?

Oh, I think they did a great job, you know, walking this tightrope between the two extremes, one extreme being totally decentralized, totally independent. And then the other one be completely centralized, you know, Facebook controlling everything. And they have the foundation set up so that over time it'll grow to be decentralized. And one of the, I think that they're really clever things they did was to make it a stable coin backed by currencies that we all try. trust, but the interesting bit is to do it as a basket of currencies, kind of like the IMF's special drawing rights. So it's not just a U.S. dollar backed coin. It's backed by the pound, which is the oldest currency in the world, has been around for 1,000 years, the Japanese yen and the euro. And that way it's, it has very low volatility with respect to the dollar, but it's better for Europeans or for Japanese or for British citizens to use because it's lower volatility relative to their currency than it is to the dollar. So I think they did a great job packaging it as a basket of currencies. Joey, your thoughts. So we actually, before we go to

Joey's thoughts, so by that, what you mean is like that will help adoption in those markets as well because I guess like, you know, one of the common, I guess observations a lot of people make is that crypto will probably not take off in the same way in developed markets because we already have good functioning financial services, but what you're saying is that the way that they've designed it, despite that sort of like obstacle, like the fact that they made it a basket of these currencies in strong economies will help the adoption there. Is that what you meant? Yeah, I think stable coins are a great concept, right? Tocans have incredible utility. They can be transferred to anyone anywhere on earth, real time, almost free. But the exact, the exact same,

existing ones like XRP or Ethereum or Bitcoin have incredible volatility relative to the U.S. dollar or relative to the British pound. So that makes it kind of dangerous and scary for the typical consumer to use it. And so if you had the promise of a stable coin is to have all the benefits of tokens, but to have not as much volatility or if it's pegged to a specific currency like the U.S. dollar, no volatility against the dollar. but a U.S. dollar stable coin like Circles coin has a lot of volatility against the British pound or the euro or the Japanese yen. So for people who live outside the United States, they still have to deal with currency risk.

So this thing, the Libra coin will essentially blend all those currencies together into a single SDR-like basket, which will reduce its volatility with respect to all those other currencies. obviously don't have some volatility with respect to the U.S. dollar, but it'll be better for the developed world as a whole. And then it can be, I think its other function is in the long run. And this is definitely, you know, a decade or so. It could become a reserve currency. There's, uh, the reserve currency, you know, has shifted four or five times over the last five centuries. Always to the country with the biggest military might used to be the Portuguese escudo and then it was the British pound. Now it's the U.S.

dollar, there really isn't any alternative in the fiat space for an alternative reserve currency. But you could imagine something like Libra, a basket token, ultimately becoming a place that countries can store wealth in that's not essentially the U.S. dollar hegemony. And Joey, do you want to give your thoughts on Libra and what the significance could be? Sure, yeah. I think it's super fascinating development in this. space. It's something that, you know, if you told me 10 years ago, I would have thought never would have happened. It's kind of like almost something out of a sci-fi novel where a big,

you know, group of multinational corporations decide to create a currency. So I think it's a super interesting development. I think it has, you know, it definitely has a long way to go in the sense, in the development standpoint. You know, I would estimate kind of ballpark napkin cloth. It's like, you know, 10 to 15 percent done. And with any kind of software project, this is not only a software project, it's also a finance project. You know, the last 10% takes 90% of the time. So I think it's got a really long way to go from that perspective. I think there's a lot of interesting kind of open questions that kind of solving

are really interesting kind of fun challenges to think about. Like I think the biggest open question from my perspective is, you know, there's this long-term plan to transition to being a permissionless network. How do you kind of incentivize the, you know, 100 validators? to actually end up doing that. And then also, since it's collateral backed and there's collateral sitting around in the real world, how do you ensure that the permissionless version actually has control over that collateral? And that's interesting from a legal perspective.

Like you might have to do something really creative from like a corporate structure standpoint to get something where, you know, people staking actually do own the collateral underneath it. if they don't, it's, I think it's a bit less interesting. Like if you don't solve that problem, then it's not really a permissionless network long term. So I think that's the biggest challenge. And if that, if that can be solved, it would be super fascinating because it would be a global currency that truly is, you know, owned by the people who are using it. We're going to discuss regulation, institutional money, smart contract wars, and more. But first, a quick word from our sponsors. Today's episode is brought to you by Cracken.

Cracken is the best exchange in the world for buying and selling digital assets. With all the recent exchange hacks and other troubles, you want to trade on an exchange you can trust. Cracken's focus on security is utterly amazing. Their liquidity is deep and their fee structure is great with no minimum or hidden fees. They even reward you for trading so you can make more trades for less. If you're a beginner, you will find an easy on-ramp from five Viat currencies. and if you're an advanced trader, you'll love their 5X margin and futures trading. To learn more, please go to crackin.com.

That's KRAK-K-E-N.com. When buying crypto, price matters. With the crypto.com app, you can buy more than 40 coins at true cost. Our multi-exchange trading engine ensures the lowest possible prices to buy crypto with no fees or markups. Not only is the app good for buying crypto, it's also good. good for growing crypto. You can earn up to 8% per year on BTC, ETH, XRP, and more when you make a deposit into the one month, three month, or flexible terms. You just have to deposit your crypto to begin. Interests are paid out weekly and immediately available for use. Start earning through the

crypto.com app. Available on the app store and Google Play. Will the world follow France and Advocate banning privacy coins? Will government-backed stable coins become the new fiat? Are distributed and peer-to-peer exchanges just a flash in the pan? The answer is maybe. Virtual currencies can flourish and create a new, private, and more versatile economy. But that grand vision can't happen without keeping crypto clean. And that requires support of governments and accountability for bad actors. Privacy enhanced compliance using cryptograms, using cryptography Controls has the potential to preserve anonymity without compromising legitimate investigations. CypherTrace is working on this vision of the future.

Sign up to stay up to date on the Privacy-enhanced Compliance Initiative and receive authoritative crypto-aML reports quarterly. Back to my conversation with Dan Moorhead and Joey Krug of Pantera. one of the main issues that's cropped up time and again in crypto is regulation. On the one hand, compliance can help legitimize projects or products and also help ensure their longevity. On the other hand, compliance is costly, and it can also cause companies or projects to move so much slower than their competition that that poses a threat to their survival. And Jeremy Aller of Circle and Fred Wilson of Union Square Ventures have actually spoken up quite a bit about this recently. How do you guys advise your portfolio companies on how

they should thread that needle? And how does that Catch-22 also inform how you make your own investments? I think from the compliance standpoint, you know, we definitely encourage all the companies and projects in our portfolio to get good legal advice and seek good counsel. I think one of the challenges in this space is that, you know, a couple of years ago, there was really lack of clarity on pretty much anything. That has changed a lot over the past two years. There's clarity now from FinC, there's clarity from the SEC, there's clarity from FINRA. All these agencies at this point kind of come out and said something about how they view the space. I think some of the more... And wait, do you really think that there's clarity from the SEC? Yeah, I think so. I mean,

if you look at companies we've invested in, pretty much nobody that I'm aware of in our portfolio anyway, has done an ICO that wasn't under reg D or reg S since, you know, kind of mid-2018. All right. Well, so is there more that you want to, like, so when you choose to make your investments, how do you think about compliance? Do you, and how that affects competition, you know, like, I feel like we're seeing this kind of happen in real time where Coinbase sort of started as being, like I once wrote a magazine feature on them that was titled Bitcoin's Blue Chip. And then now, you know, they appear to have this different strategy where they're just listing all kinds of coins, ones that go against their very own digital asset framework that they

published where, you know, it's coins without a lot of volume and stuff like that. And, you know, they're maybe going more in the direction of Binance. But is that something that you guys think about as well when you're talking with your projects, like how they can, you know, get market share, but also not run afoul of regulation? Yeah, it's something we think about a lot. I think that the probably the biggest concept in which we think about it, you know, concretely would be surrounding whether projects are doing things, you know, it makes them an operator, especially on like the more defy side of things. If you're, you know, custody and funds, if you're processing payments, if you do all these things that makes you an operator of whatever X is,

then that opens you up to kind of a lot of regulatory burden. It's trying to figure out things where that's not the case, I think is where kind of the opportunities are able to be had. If you look at somebody like Coinbase, you know, we don't think about that too much because there's nobody in our portfolio who really kind of falls into that category. Like where investors in BACT, for instance,

and they're not going to go and, you know, list chain link as an example. You know, they're going to list Bitcoin and then, you know, hopefully eventually Ether. and then maybe as the space evolves, you know, there was some more assets. Kind of same thing for AresX. We're investors at the moment in more of these institutional grade exchanges that are trying to, I think with the next runoff, kind of capture the institutional market.

And you were investors in BitStamp, which I believe got acquired, but are you still working with them? Yeah, we used to own 34% of BitStamp, and we sold such that we now owned 10% of BitStamp, but we're still very actively involved with them. And do you, how do you, like I noticed that they only list Bitcoin, Bitcoin Cash, Ethereum, like coin and XRP. How do you or how are they thinking about which assets to list? You know, I think you're right that they've taken a conservative approach to the compliance in this industry. And I think they were the first firm to ask for full KYC for clients wishing to open an account way back in 2013, I think, way before any government agency, you know,

required any exchange to do that. And so they've tried to be very careful. And it reminds you of a great quote that Jim Freeze, who used to be with Vincent said maybe in 2013 or so, he said that financial services are just different. There's no beta release. And that's a great line because in every other kind of startup you could do like photo sharing, it really just doesn't matter. You can just spin up some servers, you know, see what happens. There's some photos get stolen or hacked. Nobody really cares. But there are some potentially bad uses of money.

So, you know, the government really does need to be sure it's being used correctly. And so exchanges like BitStamp are trying to be very, you know, cautious. And, you know, everybody knows that the Silk Road guy was using Bitcoins and he's arrested and he's in prison. Not that many people know that they were actually. two federal agents that went rogue who were being paid by U.S. taxpayers to try and find the Silk Road guy, who money laundered over a million dollars each across five big banks and one mutual fund complex in the United States doing things like writing $30,000 checks to cash, paying off their entire mortgage in one payment, which is not what a normal federal worker does.

And they did all these very, very suspicious activities. and none of the companies, banks and mutual fund companies that were dealing with these two rogue agents filed any suspicious activity reports as they're required to. It was actually two peer-to-peer companies, Venmo and BitStamp, that turned these in. And I remember at the time I was the chairman of BitStamp, and so I spent a lot of time in lovely Slovenia talking to the management team. And they told me before this became public that they thought they had a federal agent. laundering a million dollars on their site. And I was like, oh, man, you guys watched way too many Tom Cruise movies. That just isn't happening. And so I went and looked at all the data. I was like, oh, man, this is pretty grim. We do have to report this. So we reported it to another

agent we knew. And he resigned that day. And I was like, oh, that's not good. So we reported to a third one. And ultimately, it got to Katie Hahn, the prosecutor, and the two pleaded guilty to a bunch of money laundering crimes that are doing nine years in prison. But that is just kind of, that story, I love it, because it shows that companies like Coinbase or BitStamp, they really have to hold themselves to a higher standard than even, you know, big money center banks that you know well or big mutual fund companies that you know well. Oh, that's interesting. But actually, just to go back to my original question, do you feel like by kind of taking the high road in this regard that that has hurt BitStamps market share and, like, ability to compete against the likes of

finance and some of these other exchanges that list hundreds of trading pairs? Yes. I mean, that's obviously true that they've chosen not to take on trading and things that might be deemed to be securities by bodies like the U.S. SEC or other countries' regulators. And so, yeah, they've taken a very conservative approach. And in this, short run, they certainly have given up some profit opportunities, but you could imagine that some of these exchanges, you know, for example, you know, BitFinex now is the subject of investigations by the New York Attorney General. You could imagine issues like that in BitStamps taking a strategic decision to, they've been in the business longer than anyone. They're the oldest

existing exchange and they want to be here, you know, 20 years from now rather than make a ton of money in the short run. Pentara invested in Kin, which is the cryptocurrency created by the company KIC, and KIC is currently being sued by the SAC for conducting an unregistered securities offering. What's your stance on the lawsuit? Oh, we're not actively involved. Oh, okay. But you did invest at the time.

Are you... Oh, no, we're investors, but we're not taking an active stance in the suit. All right. So, okay, so I guess, I guess you haven't contributed to defend crypto and you, you know, don't have, I guess, any kind of criticism of the SEC's action or? Yeah, we're investors in the project. We think it's a great project, but we're not active in the suit itself. All right. So everyone talks about how the methodology for valuing crypto networks is still being formed. What technical aspects of blockchains do you tend to look at to see what's worth investing in? I think there's really two types of assets in this space.

And I think it's actually pretty similar to traditional finance, what the two types of assets are. There's assets that will have a yield someday. And so you can model a discounted cash flow for them and think about, you know, how much you think they'll be worth based on that. And then there's assets that don't. And the assets that don't are going after things like, digital gold and money. Those are the ones that are super hard to value. If you look at Bitcoin, you can say, well, I think maybe the market cap preaches 50% of the market cap of gold in the

next decade and then figure out what you think of Bitcoin is worth, discount that back to present value and determine whether you should buy or not. But it's not like you're building a revenue model for it. On the other hand, for something like Maker, you can actually do a discounted tax. People have done them. They've published them. And you can kind of see, well, based on certain loan volumes, and based on how much is kind of locked up in collateral, and then based on whatever you think the interest rate will be, you can calculate how much makers is essentially going to be bought back, which you can model similar to a dividend, and then you can come up with the kind of cash flow model for it. And so I think people love to talk about how, like, crypto is

impossible to value, and it's so different than everything else. But I think the kind of contrary answer is that it's really not that different. It's just that when people, say that, they're mostly looking at assets like Bitcoin or ones that are trying to be money, which are very hard to value. They're not looking at things like Maker where you contribute a cash flow to it. And for the ones that are trying to be money, I don't think there necessarily will ever be a sophisticated valuation model for them until they're significantly larger. So like if you look at Bitcoin, it's entirely possible that there never is a good valuation model for it beyond, you know, the well, I think it could be X percent of gold.

I think there's only good valuation models in the short term. Like if you look at gold, you can do some modeling of it, but it's really hard to predict the price of gold out over a year time span. You can do it over the next day, over the next week, maybe even the next month, you can quantitative models. But doing it over a year time span is basically impossible because there's no cash flow associated with it. And I think that's kind of how I think about it.

Yeah, I'd add to that. I've heard some of my kind of stock-oriented friends say, hey, I'm not going to trade crypto because there's no cash. flows to discount. I have no idea, you know, how you can. But I think about, you know, I've traded paper currencies for, you know, years. And there's no cash flows to dollar yen or the euro or whatever. You're seeing how useful it is, how many consumers want to use it. And it's supply and demand. And that's basically what the price of Bitcoin is. There's a fixed amount of them, 21 million ultimately. And as Joey said, you know, in the early days, there's only a couple hundred people that cared about

Bitcoin and a few years ago there's a million people that cared. Now maybe there's 30, 50 million, some number like that, that care about it. And if 10 years from now a billion people care about it, if the demand curve shifts up, you know, from 30 million people to 1 billion people and the supply curve is fixed or flat, the price will just go way up. And so that, you know, I wish we could say was, you know, more sophisticated and quantifiable, but there is, uh, some of that, some of it is, is just the big picture supply and demand on how useful a currency is. I happen to see that you guys, um, automate, I guess a lot of the analysis as well. And I noticed that one of the factors you look at is sentiment. And I was kind of curious how that

works because I feel like one thing that a lot of people talk about in the space is how there's rampant, you know, like Twitter bots and, you know, I, I, I, I, actually don't know what all the little things are that people do to automate a kind of positive comments or whatever it is that they're trying to do on social media. But how do you, I guess, how do you quantify that and also filter out some of the, I guess, fake sentiment? Yeah. At this point, we only have a very, very tiny amount of our fund in models that use stuff like sentiment, like it's, you know, on the scale of basis points. So stuff like that isn't, isn't super proven out yet. And it's also really hard to scale up because the assets where that does work well,

like where it does empirically work well, are ones where there's not really good trading infrastructure to trade those assets across exchanges. Like if you look at Togomi, they support, you know, stuff in the top 10 really well. If you want to buy asset 47 on coin market cap, you know, they just don't support it today. And so you have to write all that in-house. And it just takes a really long time to do. And so, but if you do look at the sentiment models, like how you actually do it. What they do is, there's a different ways you can do it, but the way we do is you take like a bunch of data on Twitter,

so a bunch of tweets, and then you kind of do basic natural language processing on them to figure out for each tweet, is it a neutral, positive, or negative sentiment, just based on what words are in it and what order the words are in. And then you can kind of sum that up and figure it out for a given time window of tweets about a given asset, which you can find by like looking for Bitcoin,

you would search, you know, hashtag Bitcoin, hashtag BTC. I think you can create a sentiment score. It's like the average of kind of all those tweets over a given time period. If it's a sticker where there's a lots of bots, then you have to do things to kind of filter out the bots by looking at, you know, like the age of a Twitter account, what its tweet patterns have been. Lots of bots, you know, don't have even profile pictures. There's lots of little things you can do. But even then, it's still pretty imperfect. And we don't really use them for very much of the fund.

All right. Yeah, I was wondering about that because somebody tagged me in some tweet where there's like a gazillion bots going on it. And so I've been getting a ton of notifications, but it's pretty obvious that this is not real engagement. So anyway, I was just like, where is this coming from? And how are you doing it? And why? Why? But anyway, I also want to talk about institutional money for a long time. People talked about how this wall of institutional money was coming in. And it's like, almost embarrassing to bring it up now because that doesn't really happen. But obviously, as you guys have mentioned, Pantera has invested in ERIS X and backed. And Dan, I saw at a conference last fall, you said that you thought that five years from now we'll look back and realize that backed and fidelity were hugely significant and brought large amounts of capital into the industry. So where do you think institutional money is right now? And what impact exactly? Do you, you you think we'll see from companies like backed Fidelity and Erisex? I think having those institutional-grade CFTC regulated exchanges are really going to give institutions

and more comfort to enter the market. But again, I think it's a, it's not kind of a light switch. You just flick on and we go from 3% of institutions having direct blockchain exposure to then 100%. I think it'll be a process over the next few years. But it's such a massive investor base that if we go from, you know, 5% institutional ownership, you know, to 15 over the next couple of years, that's a massive amount of money. And we're seeing that with those announcements. But then you also have things like one of the biggest advisors to pensions and endowments. Cambridge Associates put out a positive paper maybe four or five months ago about blockchain suggesting their clients, at it. We've talked to quite a number of the largest endowments who are doing serious work. A few

have made investments directly in the space, and the rest are trying to get their heads around it. And so I think you're going to see most institutions take a look in, you know, 5, 10, 15 percent of them over the next year or so will make commitments. And Dan, you've also said a few different times that a Bitcoin ETF is not that exciting to you. Why not? Oh, it's exciting. It'd be great. It's just, I don't think it's going to happen anytime soon. And when we set up our Bitcoin tracker, Pantara Bitcoin Fund, we looked at ETFs. We looked at a bunch of other different structures. And we came to the conclusion that it would be a long time before an ETF was approved. And that was six years ago. I still think it's a while. If you listen to the comments from the chairman of the SEC,

see still questioning supposed market manipulation. I frankly am not sure what that is and as a reason to not yet approve an ETF. And if you look at one of the last major assets, don't you think what he's referring to is the fake volumes that Bitwise and some of the other companies have pointed out? Well, I think, you know, the fake volumes have been an issue that a bunch of people talked about for a long time. But I don't think that actually moves the price. Just printing that you're doing 10 times as much volume as you're actually doing doesn't in and of itself move the markets very much. But the point I would make is the SEC has been very cautious as they should in encouraging retail investors to invest in new asset class ETFs. And the last asset class that got ETF certification

was copper. And it took three years. And copper's been around for 10,000 years, right? So I just, I've always been in the belief that it's going to take quite a while for an ETF to come out. And that's why our tracker fund has all the benefits, it's daily liquidity. You can come in and out on any U.S. banking day. It's the lowest fees of all the products we know out there. But it is technically set up as a hedge fund. Oh, and so that's not available to the everyday person, right? It has a $50,000 minimum. So you have to, you know, it's obviously for a higher net, a net worth category. All right.

One of the hotter topics this year has been smart contract platform wars. Will Ethereum 2.0 arrive before being undercut by one of the newer competitors? Can another network convince developers to move to a new ecosystem, et cetera? What is your take on how this battle will play out? Yeah, I think the weird thing about it is I think it is totally doable. And the reason why I think it's doable to kind of unseed Ethereum is if you look at, there's a great essay called the cathedral and the bazaar. And it's about how open stores projects are like a bazaar. They kind of get everyone involved, everyone's involved in making a decision.

Whereas the cathedral is where you design something kind of in a closed room, whether that's a company or an academic circle or something like that. And the point is you can move really quickly in the cathedral. And then once something's kind of pretty close to being done, you can push it into the bazaar. I think with Ethereum, one mistake in hindsight was that they figured that they could solve scalability pretty straightforward once it was in the bizarre. And it turns out that's really hard because you have to make a bunch of different tradeoffs. The simplest way to make this concrete is imagine you had a way to scale Ethereum by a factor of 10,000 times. But it only had a 30% chance of success. Say even it had a 60% chance of success.

Nobody wants to risk whatever the market cap is today, $15, $20 billion market cap on something that only had. has a 60% chance in success. But our new upstart can kind of easily do that. I think the problem with all these upstarts thus far has been, you need to understand a bunch of different things really well to do it. So you need to understand the tech and actually have a credible solution there. You need to understand actually managing people in shipping and building software projects. You need to understand what developers of smart contracts actually need.

They need things like making it easy to write contracts in solidity, making it easy to port their existing contracts over. You need a bridge to Ethereum. people will probably initially migrate part of their contracts over to new chains and not the whole thing. They'll migrate the part that's like needs scalability the most. And so nobody has really released anything yet to date. It kind of has all these requirements. And the last piece is you need to be good at, you know, building communities and making people have awareness of whatever it is you're building.

But at this point today, nobody even has all the technical requirements set that would make it possible to build something like Maker or ZeroX on another one of these Ethereum competitors. And so I think there's a chance that this happens. We've invested in a few of them. But to date, it turns out that finding a team of people who kind of understand all these things and then also understand the merits of decentralization is really hard. And so the challenges, you need a team that can kind of do all these things and then release it pretty quickly while developing it in the cathedral, whereas Ethereum 2.0 is kind of moving along.

That is essentially the snail space. but it's continuing to move along, whereas these upstarts have much higher blow-up risk. So that's kind of the two tradeoffs. I think it's like a I think it's like a 30 to 40 percent chance that somebody does it before Ethereum and maybe a 50 to 60 percent chance that Ethereum 2.0 is what ends up winning. Yeah, I noticed that you guys had only invested in Pocod, which isn't exactly a competitor to Ethereum. you know, I mean, there are worries, I guess, that it could reduce the theorem's dominance, but it's not quite exactly the same type of network. So that's interesting that you guys have

not done that. One thing I also wanted to ask about is IEO's initial exchange offerings. That's one of the newer trends from this year. And actually prior to taping, you guys sent me a chart showing that only 2% of your investments last year were done via IEOs, and that 82% of your investments this year have been through IEOs as opposed to ICOs. So why have you switched primarily to this new way of investing? Yeah. So for us, you know, we're, we're usually investing before the auction. So for us, we're kind of doing the same behavior. What's different is the projects that we have invested in, the mechanism by which they're going live and tradable. And most of them are doing these IEOs. And the reason is, I think, one, is it's a bit more natural.

It's kind of how traditional financial markets work. Very rarely do you see a direct listing. Slack was kind of an anomaly. Usually the entity sells some asset when they're getting listed. And so in the case of IEOs, that's kind of the dynamic that's played out. I think it's actually more a thing driven by the exchanges as opposed to the companies or investors in the space. So the exchanges have realized that if they just list an asset, kind of like a direct listing, It's rare that they actually get volume.

And so they kind of ask themselves, well, how do we get volume for an asset? And the answer is, well, you sell a small amount of it on the exchange at a cheaper price so that the people are basically buying into something that has a very high probability of going up, if then people will trade it after it gets listed. And so I think that's why we've seen this kind of shift in market dynamic, and it's primarily driven by the exchanges. One of your portfolio companies, Flexa, recently launched an app that enables people to spend crypto at stores like Barnes & Noble, Nordstrom, Jamba Juice, and more. But I feel like back in

2014 and 2015, we learned that people aren't super psyched about spending their crypto assets on a coffee or a juice that could be worth not just $4, but $400 in a year. So why, what's the appeal of Flexa for you? Yeah. So the idea behind Flexa, you know, my view isn't really well. You're going to go spend your Bitcoin on a coffee at Starbucks. It's more that, um, it's sort of a Trojan horse almost, right? So they're not riding on using aftercard rails. They're riding on kind of rewards rails, which are much cheaper and better for the merchant.

And so if you look at that, you could have things like, well, you could pay in Dai or you could pay in Libra. And so they're kind of an infrastructure company that's basically facilitating this and getting tons of integrations with merchants. But I don't think, you know, you can pay up Bitcoin and Ether. That's more of a novelty.

I think longer term, the endgame would be, you know, they are one of those companies, which is the thing I said that's very hard to do, is, you know, trying to disintermediate Visa MasterCard. And I think with Flexa, the kind of expected value of it made sense. You know, the odds are sort of stacked against them. But I think if there's a team that can do it, I think it would be these guys. Pantera is also invested in staked, a company which users can delegate their staking duties to, since they may not want to actually take on all the requirements that they have to fulfill

in order to receive the yield that's available through staking. So I totally get why people would want to delegate their staking. But it made me wonder, does that, does staking as a service take the industry away from this ideal of this peer-to-peer financial system? And it does to some degree. But I think as long as there's competition and to know, no one staking provider has a huge share of the market. I think that's fine. The other piece that's really critical here is they actually don't have custody of your funds. So you can basically

withdraw your capital and restake it somewhere else pretty seamlessly. And so it means there's going to be a pretty competitive market there. And that, you know, if they ever got too centralized, I think somebody would kind of start an upstart competitor that, you know, maybe had lower fees or something. And so I think it's unlikely that any one player has, you know, greater than 10 to 15% market share in this space. Yeah, I was going to say that, you know, staking as a service, I think it's going to be a huge business. Proof of work is incredibly environmentally intensive. And so I think most of the blockchains that are developed in the future will be proof of stake. And we've actually, you know, we invest in quite a number of them and we've done our own staking.

it's a huge hassle, right? Like getting separate equipment and doing all the staking. So people will want to have services that do that for them. And the analog in the real world is proxy voting. Shareholders almost never actually vote their shares. They have proxy companies do that for them. And it doesn't matter that there's only a handful of massive proxy companies. If the proxy companies ever started doing something that was not in the best,

interests of the ultimate shareholders, they would just switch to new proxy companies or take the voting services back. And that's the way I see staking as a service that staked, the company that's in our portfolio, as long as they're behaving in a way that their ultimate owners of the tokens want to have these stakes, they'll gain business. And if they ever do anything that removes the trust of their clients, their clients are going to either take back staking themselves or move on to companies that do it the way they want. All right. Going forward, which trends do you guys have your eyes on in the crypto space?

We've actually still been investing in some exchanges. There's obviously some huge opportunities on the institutional level, like with Bax and AirsX. And then there are a handful of countries that are massive potential users of crypto. So we recently invested in BITZO last year. exchange in Mexico. So we're still building out our exchange investment space. We've invested in scaling solutions. We've talked about a couple of them today. Starkware was another one that we've invested in a year and a half ago that are going to help this bottleneck of the throughput.

All right. Well, where can people learn more about you at both of you and Pantera Capital? Yeah, we have some of the information on our website, but then our main way to communicate is either medium posts from Joey, Paul, or our investor letter that we send out about once a month. It's actually going, goes out about once a month. And if someone wants to subscribe to that and just go on our website, and it shares all the trends we see in the blockchain industry. And then often we have links to really cool podcasts like yours and other books and articles people would find interesting. Great. Well, thanks for coming on Unchained. Laura, thank you. Thanks so much for joining us today.

To learn more about Dan, Joey, and Pantera, check out the show notes inside your podcast player. If you're not yet subscribed to my other podcast Unconfirmed, which is shorter and a bit newsier, be sure to check that out. Also, find out what I think are the top crypto stories each week by signing up for my weekly newsletter at www. Unchainedpodcast.com. You can sign right up on the homepage. Unchained is produced by me, Laura Shin, with help from fractal recording Anthony Yoon, Daniel Ness, and Rich Strampolino. Thanks for listening.