Unchained - Spencer Bogart on the $20 Trillion in Store-of-Value Assets - Ep.138

Episode Date: September 24, 2019

Spencer Bogart, general partner at Blockchain Capital, the first VC firm to tokenize one of its funds, talks about how well offering tokenized shares has worked out, why it didn't do so for the following fund, the appeal of security tokens generally and what advantages tokenized securities offer over non-blockchain platforms like Second Market, in which investors can trade shares in private companies. He also explains what entrepreneurs are looking for from VCs now that they have more ways to raise from the crowd, how Blockchain Capital decides between investing in equity vs. tokens when there is an option, and why the firm believes there will only be five or fewer dominant blockchains. He describes why he thinks it's likely Bitcoin will take the lion's share of the market, noting its $200 billion market cap vs. the $20 trillion in other store-of-value assets such as gold, real estate and art, and whether or not it's possible to invest in Lightning, the second layer built on top of Bitcoin. We also cover the Bitcoin ETF proposals, stablecoins, how crypto might take off in video games and its 66x return within two years on its investment in Block.One.  Thank you to our sponsors! Simbachain: https://simbachain.com Kraken: https://kraken.com CipherTrace: http://ciphertrace.com/unchained Episode links:  Blockchain Capital: https://blockchain.capital/ Spencer Bogart: https://twitter.com/CremeDeLaCrypto Unchained interview with Brock Pierce: https://unchainedpodcast.com/this-vc-is-sure-venture-capital-is-about-to-be-disrupted/ BCAP Q2 Nav: https://blockchainloop.com/blockchain-capital-releases-q2-2019-bcap-token-nav/ Upgrading of BCAP to Securitize platform: https://www.globenewswire.com/news-release/2018/09/04/1565117/0/en/BCAP-Tokens-to-be-Upgraded-Utilizing-Securitize-Platform.html Funding of Securitize: https://www.coindesk.com/coinbase-backs-security-token-startups-12-75-million-funding-round Blockchain Capital’s fourth fund: https://www.prnewswire.com/news-releases/blockchain-capital-closes-fund-iv-at-150-million-300617495.html Story about Blockchain Capital trying to separate itself from Brock Pierce: https://decrypt.co/6876/is-blockchain-capital-trying-to-scrub-co-founder-and-mighty-ducks-star-brock-pierce-from-its-history Interview with Brock Pierce in which he describes leaving Blockchain Capital: https://hackernoon.com/brock-pierce-interview-tales-from-the-bitcoin-floor-e479693a49bd Lightning Network statistics: https://bitcoinvisuals.com/lightning Tweets from LNBig on how they earned $0.10-$0.30 a day on Lightning fees: https://twitter.com/lnbig_com/status/1163055682964348934?s=20 https://twitter.com/lnbig_com/status/1159538637597487104?s=20 LNBig on how they spent $1,000 or so to open their Lightning channels: https://www.reddit.com/r/btc/comments/bxh0ny/lightning_network_capacity_takes_a_sudden_dive/eq9x4i9/ Profitability of running a lightning node: https://www.reddit.com/r/Bitcoin/comments/a9dmzw/how_profitable_is_running_a_lightning_node/ Letter to the SEC: https://blockchain.capital/examining-bitcoins-valued-attributes-a-letter-to-the-sec/ Blog post about Bitcoin’s likely dominance: https://blockchain.capital/the-past-future-of-blockchain-where-were-going-and-why/ Spencer's Reddit post with questions/concerns about MakerDAO: https://www.reddit.com/r/MakerDAO/comments/asb9n6/a_couple_questions_concerns_about_maker_and_mkr/ + tweetstorm: https://twitter.com/cremedelacrypto/status/1103428046621618178 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. In case you haven't heard, I have another crypto podcast called Unconfirmed. It's shorter, newsier, and comes out Fridays. If you haven't yet, go subscribe now wherever you get your podcasts. Also, find out what I think are the top stories in crypto by sending up from my weekly newsletter at Unchainedpodcast.com. 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. Are you passionate about blockchain but fall short on the technical skills to build and deploy blockchain applications? Then check out SimbaChain, the smart contract as a service blockchain simplification layer on

simba chain.com and their new enterprise offering on the Microsoft Azure Marketplace. 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 futures trading, Cracken is the place for you. My guest today is Spencer Bogart, General Partner at Blockchain Capital. Welcome, Spencer. Hey, Laura. Tell us about your history, what you were doing before you worked at Blockchain Capital,

how you got in a Bitcoin and then how you came to work at this VC firm? Sure. So before I joined the team here at blockchain capital almost three years ago now, two and a half, three years ago, I was doing what's called cell-side equity research. So that meant I was covering about a dozen companies that were in the SaaS and Internet space, so companies like Salesforce.com and LinkedIn, and I'd follow their earnings reports, track their progress,

and your quarter and publish research for buy-side clients, so hedge funds, mutual funds, et cetera. and in kind of 2015 started to realize that my passion, everything I was spending my personal time on was kind of crypto and blockchain related. And in 2015, you could start to see the intersection where this was going to start to make more sense for a mid-sized investment bank like a Needman company, which was my employer at the time, to be able to start writing some research on this. And so in 2015, I published the industry's first Wall Street industry report covering blockchain technology, what is it? who are some of the large players in the space, where can we expect disruption in terms of traditional financial services? And then parlayed that into covering Bitcoin as an asset, so putting out price targets, talking about what's going on in the network, hosting quarterly

update calls, et cetera. And then in late 2016, so after about two years of doing that, realized that the industry was moving at such a rapid clip, that there was no way to truly excel at it without fully specializing in it. So at that point, I was probably spending 70% of my time doing crypto and blockchain-related things, but I felt anything less than 100% was going to mean that it would be difficult to excel. So decided to go full industry, and blockchain capital was a natural home. I'd already been working with the team off and on, just bouncing ideas and trying to understand what I'm seeing in the industry and if it checks out with what's going on, kind of the venture side. And so this was a natural place.

And yeah, that was early 2017. And to answer your question about how I first got involved with Bitcoin, I actually have to jump back to one prior employer, which was a startup called ETF.com, where we built a first of its kind analytic service for understanding ETFs. But we'd host a morning research call every morning to discuss what's going on in terms of global economy and anything that could be related to anything in the ETF world, which is basically anything that's relevant to the financial world. And in one of those discussions, I think it was the day that Bitcoin hit parity with $1. It came up as part of a news item as very competitive in terms of wanting to know more about everything than anyone else in the team.

And so when I didn't know about Bitcoin at that point, I just kind of dug in head first. And, you know, it's so intellectually stimulating to learn about it that, you know, it quickly consumed me like so many other people that have entered the space. Yeah. I feel like that's my story, too. So one thing is obviously right after you joined, that was when blockchain capital closed its third fund, which was tokenized with the B-CAP token. And for those people who don't know, there was actually a long time ago.

There was an episode about this, which I'll link to in the show notes. But the BKAP token is an ERC 20 token. And you guys essentially offered that to accredited investors in the U.S. You raised $10 million. I think you also offered it to investors outside the U.S. And I was kind of looking around to see what data I could find in BKAP. The most recent thing I could find was like a Q2 nav from July. So is there up-to-date data on B-CAP or is that kind of all there is, just like these quarterly reports?

Yeah, absolutely. So happy to dive into that topic. I'm not the one that spends most time on B-CAP tokens here at the firm. But I can definitely tell you that we do have a website that publishes a weekly NAV update. So every week we update where NAV stands based on any current marks in the portfolio. That is a website that we want to make sure that we want to make sure that we want to make sure that. were very compliant. So we did that token sale under a reg D and a reg S offering. So, you know, that information is actually only available to current holders. But we have a website called blockchain loop, called B loop. And yeah, that's where we publish all kind of updates for holders of the token. Okay. Yeah, that's where I found the nav two. So what is the token trading at now? Are you allowed to reveal that? I'm not sure exactly. I try to avoid discussing anything since it does trade in the market. But it does trade on open finance.

And open finances continue to attract liquidity. So I think it trades more than probably any other security token out there on open finance. But volumes are overall still growing. And so like for the data issue, so is it essentially that that data is supposed to be limited to the limited partners? And like outside people can't see that? We just want to be careful to make sure that we stay in lines of regulation and that we're not, we never cross over to anything that could ever look like selling or promoting, which is the reason why I'm trying to make sure I strike that balance in this conversation as well.

And so, like, if I, yeah, I'm just trying to understand kind of like how security tokens work. So like in this case where you also sold to non-U.S. investors. So if like I was in Singapore or something where at least from the last episode, your former partner, Brock Pierce, was saying there were some buyers there. Could people in Singapore easily see what it's trading at? Or like, yeah, just I'm trying to figure out how this works. Yeah, 100%. So I mean, you can go on open finance and see where things are trading. So anybody can go and do that. As far as our updates to two holders of the token, again, that is helped for token holders exclusively. But yeah, you can find that information on open finance and on blockchain loop.

Okay. And then so for those investors, is that also the platform? where they sell if they want to liquidate? Or like, is that easy for them to do? Or how do they do that? Yeah, so they don't sell through us. So all of this, like most assets kind of out there, that's all facilitated by kind of third parties. So that's entirely separate from what we do. But certainly people can go and they can acquire tokens or they can sell them, you know, depending on their accreditation standard and where they reside on a platform like open finance. And then obviously there's others that have been coming online that are facilitating trades as well. So the platform then kind of does the vetting to make sure that whoever's trading meets the requirements.

Is that it? Yeah, exactly. So in this case, we actually used a company called Securitize in whom we're also an investor, and they basically maintain a white list for who is able to hold the token. So if you can prove that you're an accredited investor in the U.S. or that reside outside the U.S. and are not an accredited investor, then you should be able to be added to a white list, which would allow you to kind of buy or sell tokens.

So then, like, so what is the benefit of doing it this way as opposed to the way that you would? Like, you know, I saw like for your fourth fund that you didn't tokenize the shares. So, you know, like what are, what do you guys feel like you learned are the pros and cons of, you know, kind of tokenizing the shares versus just doing it the traditional way? Yeah. So the benefits are largely liquidity. So, you know, even that, you know, early kind of volumes that we have today. It's still obviously an order of magnitude more liquid than a traditional venture fund where you're locked up for eight to 10 years. So at least you can find some liquidity in the market should you decide that either don't like new things that have been added to portfolio or whatever.

I need cash to be able to meet some liability. So that's certainly an improvement. As far as doing our fourth fund, the traditional way, you know, third fund was intentionally small, limiting a $10 million size. institutional capital, so the types of LPs that we bring into our larger funds are not quite ready to hold a tokenized security yet. So we do that in a very traditional way. But down the line as the ecosystem, as the kind of security token ecosystem, if it continues to improve and evolve, then it's something that we might redo again in the future. Oh, okay. Yeah, yeah. So your fourth fund was 150 million, which obviously is much bigger than the 10 million,

but essentially it was sort of like the 10 million attracted investors who kind of wanted to be on the cutting edge, whereas the 150 million maybe attracted fund attracted people who or institutions that maybe don't care so much about that, but just want exposure to this industry. Is that? Yeah, exactly. The additional liquidity that's offered by a token is not particularly appealing to the types of LPs that we bring into our larger funds. right. So they're, you know, totally okay with an eight to 10 year horizon, right? So, you know, fund of funds, endowments, pensions, et cetera, the long-term lockup there is not any issue, whereas for a broader kind of investor base, you know, having additional liquidity is certainly beneficial. So I realize you've only been around for the third and fourth ones, but in general, do you feel like you could characterize

how the LPs of blockchain capital have changed over time? Oh, yeah, certainly. It's certainly, so it's evolved from, you know, in Fund One, you know, largely being kind of industry insiders and people who were largely, you know, again, the idea there was, what if you're in the right place at the right time, but your company just doesn't work out? So let's help you get some exposure to other companies in the space because everyone was obviously tremendously enthusiastic about the space, but everyone taking a lot of individual execution risk on whether or not their particular business ends up panning out. So it was kind of a sort of diversification play there. You know, Fund 2 started to go into more like high net worth and ultra high net worth individuals.

I'd say Fund 3 is a little bit of an aberration in terms of, you know, just a very diverse client set or LP base there. And then Fund 4 is much more oriented towards like mostly LPs are fund to funds, large family offices, multifamily offices, etc. Yeah, I guess in a way it's obvious, I guess, that it would track kind of the way that the industry has grown. But I remember because I think you guys talked about how that first fund, the LPs were the entrepreneurs themselves. Like I don't know if I've heard of that before. I thought was pretty novel.

So then, you know, as you mentioned, you invested in securitize. And I believe, did you also invest in Harbor? We did. Yes. Oh, okay. Okay. And both of those are for security tokens. So in general, what future do you guys see for security tokens?

and like what infrastructure do you think would need to be in place to make that an appealing option for you guys again? Yeah, so I mean, as far as it being an appealing option for us doing another fund, it really depends on what our target LP base wants. So again, most of them, the additional benefits of tokenization just aren't terribly meaningful for them right now. Now, do I think that, you know, in a few years they could come around to appreciating that additional liquidity, even if they do have long-term time horizons the same way that we do? Potentially, I think that's an opportunity. you know, as far as the security token space overall, you know, I think it's still quite nascent. But as far as on the issuer side from higher quality institutions, you know, we're definitely here in increased interest of, you know, doing things like commercial paper and other things that kind of have a blockchain back end. You know, again, our approach as a venture firm and for each of our funds is really to have relatively diversified exposure within the space.

So any major theme that we think can be relevant longer term, even if it's a, going to take a few years to play out. That's our time horizon anyways. So, you know, something like security tokens, again, we've made a couple of investments in that space. And it continues to be, you know, one of the themes that we kind of track and, and we'll continue to deploy capital in if it sees, you know, more of an uptick. And so is the, like, is the main kind of innovation or appeal of security tokens just the liquidity? Because, and I did interview Josh Stein, I believe is his name from Harbor. And I even admitted to him, I was like, this doesn't feel like the sexiest application of blockchain because, and maybe I'm wrong, but it correct me if I am. I guess,

like my thinking is this appears to just take kind of like the same old securities with the same old rules and restrictions, but you're just issuing them in a different form. So it's not that it's more democratizing. And in fact, I wasn't super clear if there was a difference from, I, I, guess, like Barry Silbert's previous company second market, where I know that, you know, it was possible to trade shares in private companies, which they did without using blockchain technology. So, yeah, it just wasn't clear to me what exactly is the attraction for security tokens. Yeah, and I think that's fair. I think especially at this stage for the industry, it's appropriate to be reasonably skeptical about the kind of proposition here. You know, again, internally, you know,

we all kind of focus on different things. You know, I don't spend as much time on the security token space, but I certainly think it's an interesting opportunity longer term. I think that there are benefits in terms of additional liquidity, you know, in terms of having kind of 24-7 ability to be able to execute trades, I think will become more appealing over time. And then in addition, it's just, you know, the potential for very significant expense reduction in terms of issuing and being able to transfer, transfer shares

and be able to leverage a blockchain on the back end. Yeah. So then just generally for when you guys invest, obviously this is a new world where you guys can have equity, you guys can have tokens. There's also, and I mean broadly that breaks down into a choice of investing in traditional startups versus in the networks themselves. So how do you guys think about that when you approach an investment?

Yeah, so we have, I guess, relative to the industry at large, probably somewhat of an equity bias. We've had that through 2017, 2018, 2019, even as kind of crypto assets themselves became particularly attractive, or at least had some strong market performance or at least a lot of volatility. So, you know, typically, you know, our first preference is to invest in equity of companies that are building around some of these public protocols. But sometimes the only case, the only way to participate in a particular network might be through a, a crypto asset kind of investment. So, you know, we tend to, we do both, but certainly have an equity bias. And on the flip side, then in this world where entrepreneurs can raise money either from VCs or from the crowd in these like ICOs or IEOs, I guess, are the trend now, how are you finding that they're thinking about it or like if they come to you, you know,

what are they looking for from VCs? Has that changed? Yeah, absolutely. And this was part of the catalyst to tokenize the third fund was realizing that, you know, in 2017, and again, we did that offer in the early 2017. So before things got particularly crazy. But we started to notice very early on that some some projects in the space were routing around the traditional venture investors and going straight to a larger or broader at least investor base. So, you know, that was certainly part. of the thinking and going ahead and doing the token offering. But at large, I mean, in reality, most businesses, at least at this stage, probably should not be tokenized. And I think that for most businesses, like probably 95% or more, traditional equity is going to make more sense. And so that's overall what we're seeing in the market today. It's reflected in the deals that we see inbound. We certainly still see a lot of either new network launching with tokens involved or, you know, applications or things that might involve a token, but we've been much more hesitant

on that front. And is that because you have sort of like a general thesis that there will be just a few blockchain networks that succeed and then there will be more businesses built on top or something? 100%. So, you know, we don't believe necessarily. I mean, again, all of these are theses that evolve over time as real-world evidence kind of points one way or another. but certainly find it hard to believe that we'll end up in a world with hundreds of really functional and well-used blockchains,

and instead think that things will consolidate towards, or at least I do, think things will consolidate towards, you know, to one to five winners. And why is that? Overall, because otherwise the network security starts to become very redundant. So what you really want is a really strong security, highly decentralized chain. And you can build kind of any layers of flexibility built on top of that. So a lot of this comes back to, again, some of the strong guarantees that are afforded by a well-distributed network, something like a Bitcoin. And then when you say you think it will consolidate towards just a few chains, will those chains be differentiated by function, sort of the way maybe now some people might say Bitcoin is for money, the Bitcoin network is for money, and then the Ethereum network is for smart contracts, something like that? It could be. Absolutely. I think that there's a limit as to how.

how specialized and niche these things can be. When you get into hyper-specific use cases, I think it starts to become a little bit more challenging. But I think that's a reasonable thesis and certainly one that we track. I mean, overall, if I think about kind of like where the industry's come over the past couple years and where it's going to to kind of dig into that thesis a little bit more,

obviously we had the wave of Bitcoin first kind of rising in 2013. People kind of, you know, they'll give you the really abbreviated version here. But, you know, then kind of Silk Road happens. price comes crashing down. Everyone enters this kind of blockchain, not Bitcoin phase. So this whole notion of private enterprise blockchains. And kind of after several pilots and limited traction with any of those kind of use cases, that was kind of set against the backdrop of 2016 and then into 2017 when Bitcoin and crypto prices started to return. And people realized of, hey, these native assets are actually

critical to protocols. So, you know, just taking the underlying technology, stripping out the asset and making it private, actually removes most of the benefits and the things that actually make these networks function. So I think in 2017, then, especially with Ethereum kind of storming onto the scene, it led to this newfound enthusiasm among investors at large, that, you know, you could have kind of a plethora of large public blockchains with native assets. And I think that that helps describe a lot of the boom that we saw in 2017. And in general, I would describe that as, you know, the industry kind of looking at it and saying, hey, what are the odds that, you know, the 1.0 version, Bitcoin here is actually going to be the real winner.

And let's see how many different fronts you can kind of optimize on to see if anything can kind of surpass something like a Bitcoin. And so far, that is not proven out. And I think that that thesis at large will continue to be challenged. And as a result that we're going to see a lot of that activity. So I describe that as kind of horizontal building will shift to kind of vertical building. So I think a lot of it will consolidate to activity that's either on top of a Bitcoin, on top of an Ethereum or both.

And you're going to see kind of, again, development up the stack as opposed. to across and horizontal. So actually, to make sure I understood, so in the case of 2017 where there were a bunch of initial coin offerings mostly done on Ethereum, are you considering that vertical or horizontal growth? In that case, I guess I would consider part of the kind of vertical growth. But a lot of the token sales also revolved around, especially the largest ones, really revolved around new competing networks, as opposed to applications built on top of.

of Ethereum. And again, I think that, you know, there's a lot of learning lessons from the 2017 ICOs about what models demand an actual token and what don't. And again, part of my conviction around the fact that most businesses in the space are not going to need a token, nor should they have one. And therefore, equity financing is going to continue to be kind of the dominant trend for a while. Yeah, I want to ask you more about that. But actually, there's another question about the B-CAP token that I just wanted to ask before we move on. I also noticed that the the fund, a 2% of the fund is invested in the B-Cap token itself. Is that correct? So there's some ability to, you know, buy back the token if it trades below a certain discount

below its nav. And so there is a small amount of it in there. Oh, okay. Okay. Because, okay. So that, right. So, but then for the small amount, like, I guess I was just a little bit like, because, you know, I'm assuming that there are fees, right, of like two and 20 or something. So then is it paying itself or like, do you see why I was a little bit? Yeah, no, 100%. Yeah, I'd have to double check on all the mechanics there and double check with the auditors and everything to get the specific details. Again, it's not the space that I actually spend much time on, but our team at large does. So I can get those answers.

Okay. Yeah, no, it's just curious because, and I know I had a ton of questions about it, but like, obviously we saw with the ICA craze, everybody was saying like, oh, VC is getting disrupted. And I remember when I interviewed Brock about it, he was like, oh, you know, I figured we would eat our own dog food. And so I just was curious to know how this experiment worked out for you guys on like, you know, what lessons you felt like you were learning from it. Yeah, overall pretty happy with how things have worked out. Just, you know, in general, have encountered many of the kind of growing pains of that particular niche or sub-industry. And so, you know, that's helped inform some of our capital deployment decisions as well as far as what kind of key is. infrastructure components would need to be built to make something like the successful.

Oh, so that's why, like, that inspired you to invest in securitize and harbor and stuff like that. Exactly. So going back to that question about, you know, investing in, like, equity versus the tokens or, yeah, just about how, like, some of the ICA craze was to, you know, launch these other networks like EOS and stuff. I did see you guys invested in Block 1. You also invested in parity. So Block 1 obviously launched EOS and then parity is working on the Pocodot network.

So in both of those cases, you basically had this option of investing in equity versus in the token. So, you know, how did you guys approach that decision and how did you come to the decision you made? Yeah. So for a lot of this, it was, you know, okay, we're skeptical about how many new networks will really need to be launched. and what kind of rights more specifically when we think about our fiduciary responsibility to our LPs, but about what kind of rights we actually have withholding some of these assets. And in some cases, just felt a little bit more comfortable with the equity play that it was associated with any particular network and that they would be able to find significant operating kind of opportunities built around that new network

as opposed to owning the native asset of it in particular. But why? Because if you look at the predominant thinking, throughout this time, or, well, I don't know if it is still the thinking recently, but, you know, for a long time there was this thesis about the fat protocols where there was this idea that value would accrue at the protocol level more than at the application level. And obviously, you know, this is slightly different because it's equity, but, but it's still similar in the sense that I think a lot of people thought that it would be the protocols themselves, the tokens themselves that would generate the best ROI.

So why did you guys have a different view? Yeah, in general, I mean, I think, you know, whenever we see the industry particularly go one direction when it's still very early and there's limited evidence, you know, we tend to evaluate, okay, well, what's the other opportunity? What's an alternative here? And so, you know, the FAP protocol thesis is very much a thesis and not doctrine. And in some cases, it's proved quite accurate. And in other cases less so.

But in this case, again, you know, if you see a team that functions well and you think can have more optionality, I mean, when you think about the number of times that people have launched new crypto networks and then the main founders, the people that, you know, I would say purchasers were really trying to back and really gave conviction in the project actually walked away from it. It's pretty significant. And to some extent, that can, that risk does exist with equity as well. But overall, the reality is that equity sticks with founders better. And so, you know, if you're backing a team, which a lot of times that's a very core component to the investment decision, especially at an early stage, you know, equity again just has a little bit more sticking power to the founders themselves and any kind of opportunities they might subsequently pursue as opposed to, you know, we launch a network and, you know, maybe it doesn't get off the ground or maybe nobody ends up using it. But then, you know, afterwards we found a good revenue generation opportunity by, you know, launching a particular application or whatever it might be. Yeah, and in a way, I wonder if it's also simply the fact that VC has traditionally been set up anyway to invest in equity. Do you know what I'm saying? Like maybe it's just that it's a better fit? There's definitely that as a component, but I mean, we have the flexibility to do either, and we do do both. So, you know, we're not structurally limited in that way. It's just, you know, making sure that we continue to make, you know, really diligent decisions.

And equity honestly comes with more protections associated with it. So sometimes, you know, we think that's a better way to play the opportunity. One other thing that happened pretty soon after you arrived was that blockchain capital parted ways with former partner Brock Pierce. Why was that? Well, you know, Brock had a good run here at blockchain capital before I joined. And, you know, was, you know, Brock likes to start a lot of projects. And so he, you know, he got blockchain capital, helped get it off the ground. and then, you know, kind of continues.

He has a drive to continue building things. And so, you know, moved on to go launch the EOS network and has engaged in a number of kind of new entrepreneurial efforts as well. So, you know, I think for Brock is just a good fit. And, you know, I think everyone, you know, kind of parted on good terms and thinks well of him and wishes him the best. So, you know, all good things there. And so in a moment we'll discuss Bitcoin and related topics. But first, a quick word from the sponsors who make this show possible. Today's episode is brought to you by Cracken.

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CipherTrace 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. www.cifertrace.com slash keep crypto clean. Back to my conversation with Spencer Bogart of Blockchain Capital. So as you kind of briefly touched on earlier, blockchain capital is quite focused on Bitcoin. And in a blog post, you wrote, quote, Bitcoin has a massively disproportionate probability of taking the lion's share of the market over the next 10 years. Nobody cares about the second best email protocol after SMTP.

So in this case for Bitcoin, why do you feel comfortable seeing this early on that it will be the leader? Overall, in terms of user adoption, in terms of brand awareness, in terms of supporting infrastructure, I think Bitcoin is just far and away the lead. And I think that Bitcoin is really the zero to one moment. And everything else so far we've seen seems to be either a one to one point one or if not even a step backwards. So from a one to a zero point five. So overall, I think that while people have tried to optimize new networks on a number of fronts, you know, since Bitcoin started being successful, we saw people launch Bitcoin alternatives that were, they were faster, they were more private, they were more expressive, things that in theory tried to be critical differentiators. And so far, none of them have proved to be particularly useful. I mean, even on the smart contracts front, I mean, the most used smart contracts are multi-sid contracts, which is what's used on Bitcoin. So, you know, it's still early in that experiment. So we certainly keep an open mind. But we think that relative to where the investor, Community has been at large, thinking that Bitcoin is a slow dumb 1.0 that's guaranteed to be

surpassed by some new network that's optimized on one particular front is less likely to be true than what people are otherwise asserting. So what's your view on how Bitcoin will be used? Because there's been all these attempts to have Bitcoin be used for payments. There was that period when a lot of merchants were signing up for it. And it seems to me right now that it's really more of this digital gold. People are just buying it and holding it. Is that how you think it'll be used in the future?

That's the investment thesis for Bitcoin, is that people will mainly hold on to it as a store of value? So I think that that will remain for the foreseeable future as the main foundation, like the critical underpinning of what Bitcoin is. And before we go a little bit into that and how that might evolve and how people might use it for other things, you know, it's helpful to take a step back because, I mean, again, people talk a lot about store of value assets. And it's kind of a weird term, right? It's not something that people regularly discuss in normal financial circles and especially not outside of financial circles at all. But it's weird because when you think about the assets that represent store of value qualities, they're very familiar to most people. We just don't typically refer to them as store of value assets. You know, the most obvious one that people always refer to. And like you said, Bitcoin is a digital gold. So gold being a store of value type of asset. namely because of its scarcity and in terms of it's in terms of awareness,

in terms of that people know what gold is. So that's like a $9 trillion kind of dollar asset. So there's at least a very substantial portion of capital that's seeking an asset with those kinds of qualities. But it expands from there because if you think about high-end collectibles like Picasso paintings or vintage Ferraris, those also are store value assets. People are acquiring them. They're not buying Picasso paintings. because they look beautiful and they're going to put them on their wall.

Those things sit in vaults or in professional galleries where the purchaser is not looking at them. So they're not appreciating the beauty of them. The reason why they're purchasing them is because you can never make another Picasso painting. They are strictly limited in supply and broadly recognized. And then same thing with like a vintage Ferrari, something like that. People are not driving that around town. It sits in a warehouse. They rarely see it.

They don't do anything with it. It's only because you can't make any more 1957 vintage Ferraris. but it expands out from there as well. I mean, if you think about a lot of dynamics of the real estate market is actually attributed to store of value type qualities. So, you know, I think some people would push back on this and say, okay, well, but people actually, you know, receive some direct value from kind of consuming that real estate in a way. So whether that's by living in the home that they own or by renting it out and receiving

rental income. But that certainly does not account for at least some sizable portion of the real estate market. and that's really evident if you dig into any kind of the microeconomics of any particular geography. So, you know, if you look at Vancouver, I figure what the exact statistics are, but a very, very significant portion of homes that were being purchased being left completely empty because they were being purchased by overseas buyers that were seeking strong property rights. So I said, okay, this is a scarce asset. There's limited real estate available.

And I have strong property rights associated with it, you know, particularly if you're coming from an emerging market that may or may not respect your actual property rights. You know, purchasing an asset in different geography that does respect them is quite appealing. So, you know, some sizable portion of, I forget, the total real estate market is something like $250 trillion. You know, let's just say that, you know, 5% of that is associated with real estate as a store of value type of asset. You know, we're talking about another $10 trillion or so.

So in total, you know, we're talking over $20,000. trillion of a value that has sought assets would store a value type qualities. And in this respect, I think that Bitcoin presents a very compelling alternative to some of those types of assets. That's not to say that all of the capital deployed into those other assets, gold, high-end collectibles, real estate, et cetera, is going to flow to Bitcoin. But that in terms of it's the visibility, it's liquidity, its portability, its ease of verification, its absolute scarcity.

Bitcoin is actually superior to most of those. And so I think that it will continue to be a benefactor of asset flows over a long-term horizon. So at less than a 200 billion market cap, I think Bitcoin has a long ways to go. But sorry, that's a very long-winded way of answering the first question of, you know, what is the thesis around Bitcoin for the next few years? You know, I think like longer term as more capital flows in and as liquidity continues to increase with something like Bitcoin, it obviously starts to get a lot less volatile. So part of the reason why the payment stories early on in Bitcoin weren't successful

is that people don't acquire Bitcoin to spend it. They don't incur a multiple percentage transaction fee to acquire it, and then for the merchant to have to sell it for that kind of payment utility. Credit cards typically work pretty well. But longer term, as liquidity grows and market cap grows, those movements of capital in and out of Bitcoin start to have a less and less effect on its price. and over time it becomes much less volatile,

which makes it more useful for payments and more likely that people are kind of earning in it and spending it. And I think that that could create kind of a nice circular feedback loop at some point. If I had to guess, I'd guess that would revolve primarily around Bitcoin's superior attributes as programmable money.

So when I listed all those other store value assets, obviously Picasso paintings and gold are not programmable. And you can do things with Bitcoin that I just would not otherwise be able to do with any physical asset. And so I think, like, longer term, we're going to see an increasing number of either products or services that leverage this programmable nature of Bitcoin to present alternatives and solutions that just don't exist today.

So don't even have any kind of real competition. So in this case, you know, you really made a strong case for Bitcoin. But obviously, as a VC, you know, you're kind of looking for probably newer or not so well-known investments that can return the fund for you. So if Bitcoin is already so dominant and if it's also something where people can just go out and buy it themselves, they don't need you to do that. Like, what kind of opportunities are you looking for? And do you think it will be harder for you to deliver those kinds of returns that would normally be expected of a venture fund? I think that actually the opportunities, particularly as a venture fund, get more appealing over time,

particularly as Bitcoin appreciates, just because the opportunity to find early-stage companies that are solving particular problems that we're hearing from a lot of the financial institutions that would like to start working with Bitcoin, but have, you know, whether it's a custody hurdle or a compliance hurdle, et cetera, that helps inform our decision-making

in terms of deploying capital and making sure that we deliver it to businesses that are likely to see substantial growth in the future. So, you know, overall, the opportunity set as crypto prices have risen, has actually only increased from an equity side, it certainly has not decreased. So I think the relationship there is actually inverse to kind of what you proposed. And right now the main scaling solution being proposed for Bitcoin is the Lightning Network. And I was looking around,

and it, to my mind, like, it wasn't clear to me how there would be good investable opportunities in Lightning. Like even for some of the node operators themselves, I saw this one, big lightning node operator was revealing some of the details about how much they've been earning. And it was things like, like they tweet basically kind of what their earnings were for the past 24 hours. And like one day it was 10 cents. Another day it was 35 cents. So this is like three to $10 a month. And they also mentioned that they had spent $1,000 to open all these channels. So how do people make money in lightning and how do investors also make money in lightning? Yeah, so I think that that's very much an open question.

We have probably more evidence of things that don't seem likely to work at this point than things that will. So, you know, we have a couple of the investments we've made are, you know, doing something with lightning. But I don't think we've deployed any capital to something that's lightning specific. When we think about the future evolution of the Bitcoin Protocol, you know, we certainly think that something like lightning or something that's lightning like will be very important in the future, but that it's also just going to be one of many layers. offering a different range of kind of functionality and tradeoffs. So, you know, what will be the real business model around something like Lightning Network remains to be seen? It's also worth noting that it's just, it's very early stages. I mean, the Lightning Team is, you know, at Lightning Labs has always been very transparent about this.

So, you know, there's likely to be bugs. This is very much an early, early nascent kind of opportunity here. And so tread carefully. And we've seen a lot of the same things that you were just citing there as far as, you know, originally one of the business kind of ideas around this was running nodes. You know, so far that seems to deliver limited kind of revenue opportunity. And that's a good thing. I mean, overall, that's because anybody can kind of step in and start running nodes on the lightning network.

So with zero barriers to entry, you'd expect that there would be relatively limited margin opportunity. And I think that's so far what we've seen play out. But it's quite early stages and definitely too early to draw any conclusions. One thing I also noticed was lightning earlier this year. I had kind of a number of nodes come online and also payment channels that were open, but then recently the number of nodes has leveled off and then the number of payment channels has decreased. Although from the tweets of this LN Big, the node operator that I mentioned, it feels like they were the ones that closed a bunch because they weren't being used.

But so why do you think that there isn't more growth? Why do you think it has sort of plateaued? Well, for one, I think that, you know, there's always that kind of initial level of enthusiasm and hardcore supporters that really want to get on the network and start tinkering with it. I mean, this whole industry started with people that were tinkering with digital money. And so I think naturally, once thing becomes available, there's an initial surge. And then it kind of, you know, settles back into a bug fixing and development phase. And I think that's kind of where things are today. You know, again, while I think something like lightning, whether it's exactly lightning or something,

similar will be very important in the future. But for now, you know, what is that additional functionality that enables? Well, really fast and cheap transactions. So really fast, cheap payments. Overall, again, you know, that I think it's really important to have that functionality for future demand. But it doesn't change the fact that, again, people don't really want to spend their Bitcoin today. So for merchant purposes, yes, it makes things quick. Yes, it makes things cheap. But you still have a problem that people don't want to spend their Bitcoin. They're acquiring it because they want to hold it for a substantial period of time. So, you know, so far I don't see that changing any time in the near term. But again, at a much higher valuation where volatility levels off,

I think that that dynamic could shift. Yeah, that was actually going to be my next question for you, because I noticed that the activity on the Lightning Network is currently dwarfed by the defy activity on Ethereum, although, as I'm sure you know, much of that is spurred by the, the die stable coin, which is not only a stable coin, but a way of sort of leveraging more money to invest in ether, as far as I understand. But anyway, the current amount of money in lightning is about $8.5 million, and then there's about like a half a billion dollars in these various defy protocols. So like, why do you think lightning is so much smaller and does that concern you? Because lightning doesn't offer you leverage on your underlying asset.

So if you look at a lot of the defy usage to date, you know, mostly, and that's, I'm not even trying to be, you know, derogatory or anything. I mean, we track the defy space very eagerly and, you know, hope to see a lot more success there. Certainly some encouraging signs, but it's also hard to ignore that much of the traction to date is not simply people kind of leveraging up eath exposure or something that essentially boils down to that. So, you know, I think that if on Lightning Network, you could somehow, you know, be able to. attain leverage in a decentralized way, I think it would, adoption would be much, much higher. So it's a little bit of an apples to oranges kind of comparison and not trying to, again, be derogatory or anything to defy. Just, you know, very frankly, that's what it's being used for today. And yeah, so what is your take more broadly on defy in general? What you said you guys are watching it, what do you think of that trend and where it will go? You know, in general, I mean, I think that, you know, it's funny because I think when people talk about defy, they talk about it as something that's very Ethereum-specific, and certainly much of the conversation has revolved around it.

When I think about all of the original kind of conversations around Bitcoin, I think of Bitcoin as kind of the original defy. And I think that really it's a pretty broad tent. And so I think it includes both things. But as far as the kind of defy ecosystem on Ethereum specifically, we certainly track metrics on a very regular basis to see what's going on. and we would like to see things extend a little bit beyond leverage. And to see some of these applications either get to a way where they can definitely be compliant from a regulatory perspective

or find a way to truly decentralized so that maybe they can mitigate some of that burden. But for now, again, while I do think decentralized leverage is decently interesting, it's not something that brings in new users, right? So if you're already holding ether, you know, that might be a very compelling solution. but it doesn't really bring in people off the sidelines that are saying, hey, you know, oh, I can get leverage in a decentralized way and get extra exposure to ETH. Now I'm going to go ahead and do that. So we continue to watch for the expansion of that particular use case or expansion of applications of defy at large. But in general, this ties back to the notion of programmable money, which is something that we certainly have conviction in. It's just a question of exactly how that will evolve. Well, do you have any, do you have a hypothesis around how that will evolve? Like, yeah, what will the future look like when, Yeah, so, you know, speaking for myself, you know, within our team, we try to harbor a lot of different perspectives. And we certainly have, you know, some people that are particularly constructive on Ethereum.

I think, you know, for myself, I think that there's a good chance that actually some of this activity ends up, you know, being denominated largely on either Bitcoin or Ethereum. But at the end of the day, if people don't want to hold the base asset, if there's not a reason to treat it as a store. a value asset or as money, then I think it becomes increasingly difficult to build a future financial system on a different network. So I think Bitcoin certainly has a frontrunner advantage and that really were, I was going to say in the first ending, but we might be in batting practice as far as what the defy space is actually going to look like and evolve into. But again, I would mostly imagine that it's going to be development up the stack of a couple of winning protocols, as few as one, maybe as many as three, four, or five.

And again, things are going to take. But what I'm asking is, like, how will our everyday lives change? Like, how will we interact with money differently? What will it be able to do that we can't do with it now? That is the multi-billion dollar question. And it's one that we're trying to answer every day. You know, I think that by and large, what we've seen kind of from iterations, or at least the first segment of iterations has been trying to do things that we do

in the traditional financial world. but in a crypto context. I think that some of those are helpful and useful, but I think kind of a breakout moment, if there's going to be one, and I think there will be, will be around entirely novel use cases, so things that you really couldn't do before.

So I'll give you one example, and to give some more credit to the defy Ethereum community. This is an example that comes from that segment. It's actually, I think, a since deprecated product, but it'll give you an idea of some of the power here, right? So there was a company called Marble. I'm not 100% sure if they're still around, or not. But they had a really interesting initial product that I think is great brain food for

imagining where things could go. So they had their flash lending product where you could borrow capital arbitrage across two decentralized exchanges and return that capital in one transaction. So again, you've basically taken out a loan and returned the loan in the same transaction. It'd be like walking into a bank, taking out a loan, they hand you the cash, then you literally hand it right back to them, which at first seems ridiculous. Like, why would you bother going through the effort to do so? Except that in that in that... that you had an atomic transaction that allowed you to use that capital productively. So in this case, you know, again, borrow the capital by a particular ERC 20 token on one

decks, sell it on another decentralized exchange at a higher price, and then return that initial capital you borrowed a very tiny amount of interest for the, you know, zero seconds that it was outstanding, and then also to retain the profits. So if we zoom out and think about what just happened there, you had a loan that was outstanding for zero seconds with no counterparty risk yet allowed the borrower to use the capital productively. Now again, that's super interesting. That's the kind of thing where when I talk to people that I'm trying to get excited about this in the traditional financial world, there's kind of an aha moment of, okay, now I understand why programmable assets and programmable money can be really, really useful and allow us to do things or enable us to

do things that we simply could not do before. That just wasn't possible. What allowed that to happen? You said it was a deprecated product? Why? What was the name of it? And why? So that was by a company called Marble. They're actually not a portfolio company. We're not actually associated with them in any way, but I just thought it was a cool product. The company was called Marble. The product, I think, was called Flash Lending.

It has its own challenges in terms of the visibility on Ethereum and front running. So I think as soon as they launched that product, while it was working successfully for them, people started kind of front running those trades. But nothing that invalidates the notion of the value of having programmable money there. One other thing that I wanted to ask you about was, like, in the case now where you guys can invest in tokens or equity, do you feel that the lockup periods differ, or not necessarily like it? But just like even just your investment horizon differs if you're investing in tokens versus equity? It can. So there's some, you know, certainly having crypto assets or digital assets of some kind, you know, definitely gives you a different optionality in terms of liquidity than what you would traditionally have with equity. right? So typically with equity, either waiting for an acquisition, for the company to wind down, or for it to IPO.

You know, ideally an acquisition or an IPO, and those are your kind of exit opportunities. You know, if you are an early stage investor in some sort of digital asset, crypto asset, new network, et cetera, you know, we tend to approach it the exact same way we would as an equity position, which is we're here to be your partners and to work with you over the next, you know, seven, eight, nine years, as long as it takes to kind of make it successful. You know, that said, you know, the element of liquidity there provides some different level of optionality that I think is certainly interesting. I mean, you know, with an equity investment, you know, if you think the company is going the wrong direction, it's very difficult to, you know,

exit that position or to get them to shift into a direction that you think is more appropriate. Whereas, you know, you have a different set of options when you're holding a liquid asset, right? So if you really disagree with the direction, you don't think it's going to be fruitful, longer term, or you're just not seeing the company execute or not kind of earn the traction that you were hoping for, you know, there is some optionality in terms of exiting that position. So that's certainly something we track, but, you know, overall, we enter every position with a, with a long-term thesis that we're going to hold it for a while. And so obviously you guys did invest in Block 1, and I heard you say, I think it was on what

Bitcoin did, that you exited in less than two years at a 66x return. So in that case, you know, why did you decide to exit and how did you think about, like, why didn't you stay invested in it longer? And do you feel like EOS has achieved this sort of success that would be typical for when a VC would exit a project? Yeah, so you always have to keep in mind, like risk management. And so, you know, certainly was an outsized outcome for relative to what we would have expected. You know, it's the kind of thing that you, that you certainly hope for to be able to exit a position at, you know, a 666 or whatever it was type of return. But not something that comes about every day.

But when, you know, an investor comes to you and wants to buy your shares at that kind of a return and you're willing to trim down your risk a little bit in terms of exposure, you know, it can certainly be an appealing opportunity. And in this case, you know, those are fantastic returns that we would like to be able to deliver back to our LPs. And so that's what we chose to do there. You know, as far as like, does that, you know, mean that there's not, I mean, keep in mind, we have to differentiate between EOS and Block 1 here, because Block 1, you know,

I don't know exactly what all of their plans are going to be going forward, but they're certainly not one in the same with EOS. They might be closely interlinked, though. So, you know, overall, it's just, you know, a good opportunity to be able to return capitals to LPs with a very successful outcome. And that was basically equity in Block 1, not EOS tokens. Exactly. All right. Well, so Brock, you know, your former partner, was one of the founders there.

And at the time, actually, just going all the way back to when he and the other co-founders of blockchain capital started the firm, which, you know, your other partners are Bart and Brad Stevens, the three of them actually met through the video game industry, which this is like a pretty colorful section of the interview I previously did with Rock. They basically had this massive business out of digital goods from video. games. And I wondered if that history that Bart and Brad have, if that has affected some of the investment thesis at blockchain capital today, like, do you guys see that blockchain-based digital goods are part of the future? And if so, like, what do you think will happen in that

space and how big could it be? Yeah, great question. So we certainly see very strong overlap. You know, I don't spend as much of my time on gaming because like you said, two of my partners here, Bart and Brad both have very deep, deep experience investing in the video games. space. But you're right, that's what brought them into it originally, was seeing, you know, the large secondary markets on World of Warcraft Gold. And then eventually, once you've kind of tapped out that market opportunity, realizing that there's this tangential opportunity and this brand new type of digital asset that doesn't have the same kind of problems that a World of Warcraft gold had, and that asset was obviously Bitcoin. And, you know, one of the opportunities they considered very

early on was Mount Cox itself. And so, you know, that helped bring them into the space. And I think we certainly still think that there will be, that there's a good opportunity for overlap. I mean, if you think in terms of geography, the places where video games have been most popular over the past 20 years are the same places where crypto is most popular today. So namely, China, Korea, Japan, and the U.S. In terms of, you know, demographic overlap, there's a lot of similarities there as well. You know, they tend to be young, tech forward, typically, you know, kind of a, again, a millennial kind of age range.

And for better or worse, you know, unfortunately, mostly male. And so that's what the legacy video game industry has looked like historically. And that's kind of what crypto looks like today. So, you know, is there going to be a strong overlap between the two? You know, we're certainly optimistic. You know, and again, do go back to your point about thinking about owning digital assets versus owning equity. You know, I can give you a, this is actually a good case study here. So, again, we have this thesis that there could be some great opportunities within gaming,

you know, leveraging Bart and Brad's experience of investing in video games directly. You know, you take a tremendous amount of hit risk when you invest in a particular game. It's very, very hard to predict which games are going to be successful, especially if it's not coming from kind of already an established brand of some kind. But instead we find ways to kind of make a horizontal investment. So instead of betting on, you know, this new blockchain-based game, whatever it's going to be, we could buy the native asset of that of that particular game and hope that it appreciates because there's going to be lots of demand or we could take more of a horizontal equity play.

So in this case, we invested in a company called OpenC, which is essentially a marketplace for NFTs or for these in-game digital assets. So whatever your wing dragon or your sword or what have you, whatever might be. So in that way, from a kind of portfolio management perspective, you know, it allows us to make sure that we have exposure to that space without taking particular hit risk. Because, you know, we figured that if the secondary trading of those types of assets are one of the critical advantages of using a, you know, blockchain-based digital asset, then a marketplace is going to be a benefactor of it.

So regardless of which game ends up driving that demand, you know, that's likely to flow through to the secondary marketplace. And so, again, that's where we kind of chose to deploy our capital and use that as an opportunity to see what's gaining traction and where. else and inform where else we might deploy capital. Yeah, I'm very interested to watch that space because I also feel like as a journalist, that would be a natural area where crypto would take off, but I haven't seen anything yet that really. I mean, I guess you could say crypto kidneys, but obviously that was sort of a flash in the pan. Yeah, exactly. One thing I wanted

to ask about also was, you know, as you mentioned, you previously worked in an ETF company. And there was news recently that Van Ack withdrew its Bitcoin ETF proposal. And the SEC has these upcoming deadlines for deciding on some other Bitcoin ETFs, like from BitWise, which I think is one of your portfolio companies and disclosure. They at some point in the past sponsored my podcast. So what do you think VNX withdrawal says about the likelihood of a Bitcoin ETF being approved soon? And what do you think needs to happen for the SEC to approve a Bitcoin ETF? Yeah, so you know, you run the risk of reading too much between the lines and something like this.

I mean, there's a few factors at play, right? So Vanek and Solid X had also launched their kind of, you know, call it a faux ETF, like kind of a week and a half ago for quibs, for qualified institutional buyers or qualified investors. And, you know, I'm not sure. Can you define that for people? Like how limited is that? Oh, yeah. Shoot. I think it is reserved for asset managers that have.

more than $100 million in AUM. I'm hesitant. I might be wrong on exactly what, but it's the most restrictive category. Okay. Yeah, if that's wrong, I'll insert a little thing. But so basically, yeah, it's not, it's definitely quite different from an ETF. And more importantly, from the name of exchange traded fund, ETF, like this doesn't trade in exchange. It's entirely secondary brokerage activity. So we'll see. So I have no idea it's possible that that played into their ETF filing. But I think probably more telling here would be Jay Clayton's most recent comments. I forget if it was on, might have been on CNBC somewhat recently, who said that some of the concerns that the SEC has had around a Bitcoin ETF are being addressed

and someday it might be approved, but that day is not today. I'm loosely paraphrasing, but it's along those lines. And so to echo to go back to some of their prior concerns is largely revolved around, again, kind of custody and having qualified custodians in the space and around market surveillance and kind of opportunity for any kind of manipulation of the underlying spot market for something like Bitcoin. So I think that obviously we've seen significant growth in the custody space. There's now a number of qualified custodians and more entering the space. So I think that either now or very soon, the SEC can kind of check that off their concern list. And then as far as kind of market surveillance and any ability to manipulate the spot prices.

You know, I think that more exchanges are kind of rolling out kind of surveillance software of some kind that will help alleviate or mitigate some of those concerns. And I think people are doing a good research to highlight exactly how difficult it would be to manipulate the market, which all I think are steps that helps get the SEC more comfortable. So, you know, long story short, I think a Bitcoin ETF will be approved at some point, whether that's now or in the next few months or if it's kind of three years down the line, I'm not sure. But I would guess that within the next three years, we will see a Bitcoin ETF.

Well, that's a long range. So, I mean, what do you think about the Bitwise proposal coming up? I think they've done an extremely studious job of educating the SEC on some of their concerns and trying to highlight that, okay, like even if we're, we take out some wash trade that might occur on some exchanges in international jurisdictions, that the surveilled and licensed spot market volume is still extraordinarily deep, that these markets would be very difficult to manipulate, particularly as more kind of derivatives volume comes online as well via the CME.

So, you know, I think they've done a great job positioning themselves in a space where ultimately the SEC has really been dragging its feet and kind of kicking the can down the road. You know, they're fighting the best fight they possibly can. I think they'll be well positioned for when the time is right. And hard to tell whether that's going to be this year or next year or two years from now. One of the other big trends now, which is even reaching beyond the pure crypto space is stable coins. And blockchain capital doesn't appear to have invested in any of the stable coin projects. Why not? Well, which of them have been particularly successful or good venture opportunities? Um, I'm not sure. But that would be, that would be like a lot of the concern is we're very interested in, yeah. Because obviously, Maker Dow has attracted a lot of big investors.

And then Libra also has, you know, these huge companies that have agreed to become notes in that. So, you know, I'm not, I'm not trying to pick any winners, but I just, if we're going to judge by kind of like what some of the other marquee investors in the space have been doing. those would be maybe two projects I might pick out. But there's a ton of others, obviously. Yeah. So we're not particularly bearish on either of those items. And in fact, are actually quite constructive. You know, we've certainly taken a very good look at Maker and are very interested in the

ongoing evolution of the project. You know, I've published a couple things online of kind of criticisms of maybe potential flaws in Maker's architecture and what the long-term opportunity might be. And what are those? Can you recap what you think those quotes are? Let's see. It's from about about a year ago now. I'd have to go back and make sure that I don't miss quote. And to be fair, some of those concerns have kind of been alleviated or mitigated since then, as our understanding of Maker continues to evolve. But I have to go back. I've written, I believe I published a blog post on it. So I can go and revisit that. We can discuss again. Yeah. And I'll try to, I can link to it in the show notes. Cool. Yeah. And then something like Libra, I mean, we're very interested in this thematically of what something like this might look like, whether it's Libra or something that looks very Libra-like. But that continues to be a very big focus on. And something I would not be surprised if you saw us deploy capital towards some opportunity along those lines over the next year or so.

And just I'm curious to know your take on Libra itself. Like obviously they're facing. a ton of regulatory headwinds, do you think it will launch? And if so, how will that affect the crypto space? I think it remains to be seen exactly if it will launch. I mean, I think that, you know, kind of coming out of the hearings, I think broadly, expectations had fallen significantly in terms of probability of launching within 2020 or if at all. But you have to keep in mind that things are very dynamic and fluid and evolving in real time here. So, you know, competing efforts in the space, whether it's what the PBOC and China has announced or, you know, projects from someone like a Binance, all of this starts to interplay and weave together. So, you know, really quickly

that we could end up in a situation where Libra looks like the most appealing solution relative to some of the alternatives that are out there, like a, you know, PBOC digital currency that allows people abroad to use it in a use digital cash essentially. So, You know, overall, what do I think is the probability? I think there's an above 50% chance that Libra actually does launch in 2020, but really hard to pin down beyond above 50-50 chance. Oh, wow. Okay. Okay. All right. Well, we will see what happens.

Where can people learn more about you and blockchain capital? Sure. If you want to learn more about the firm, our website is blockchaincapital.com. And if you want to reach out to me or follow me, you can follow me on Twitter at Crem. the crypto. Great. Well, thanks for coming on Unchained. Thanks so much for having me, Laura. Thanks so much for joining us today. To learn more about Spencer Bogart and Blockchain Capital, 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 stories each week in crypto by signing it from my email newsletter

at Unchainedpodcast.com. Unchained is produced by me, Laura Shin, from Fractual Recording, Anthony Yoon, Daniel Nuss, Rich Treffalino, and Josh Durham. Thanks for listening.