1 00:00:03,420 --> 00:00:05,790 Sean Aylmer: Welcome to the Fear and Greed daily interview. I'm Sean 2 00:00:05,830 --> 00:00:08,410 Sean Aylmer: Aylmer. What a crazy start it's been for the tech 3 00:00:08,410 --> 00:00:12,060 Sean Aylmer: sector in 2022. It's a sector that's grown quickly in 4 00:00:12,060 --> 00:00:15,340 Sean Aylmer: recent years and continues to change the way we live 5 00:00:15,340 --> 00:00:18,150 Sean Aylmer: and work. I wanted today to see what the future holds for the sector, 6 00:00:18,650 --> 00:00:21,739 Sean Aylmer: not just from an investment perspective, but what the next great 7 00:00:21,739 --> 00:00:25,530 Sean Aylmer: innovations might just be. Chris Barter is a former investment 8 00:00:25,530 --> 00:00:28,020 Sean Aylmer: banker at Goldman Sachs,, and now one of the founding 9 00:00:28,020 --> 00:00:31,090 Sean Aylmer: partners of King River Capital. Chris, welcome to Fear and Greed. 10 00:00:31,710 --> 00:00:32,320 Chris Barter: Thanks, Sean. 11 00:00:32,950 --> 00:00:36,250 Sean Aylmer: So just before we get into the future, what a crazy sector to 12 00:00:36,250 --> 00:00:38,220 Sean Aylmer: be investing in. Talk about fickle. 13 00:00:38,690 --> 00:00:43,300 Chris Barter: Yeah, I think technology is no stranger to volatility, and 14 00:00:43,590 --> 00:00:47,020 Chris Barter: we're experiencing that right now. I think no one really 15 00:00:47,020 --> 00:00:49,080 Chris Barter: complains when the volatility's upwards. 16 00:00:49,250 --> 00:00:49,420 Sean Aylmer: Yeah. 17 00:00:49,420 --> 00:00:53,370 Chris Barter: We've seen extraordinary volatility upwards over the last 18 months, 18 00:00:54,020 --> 00:01:00,250 Chris Barter: and it feels like the huge markets crisis that we 19 00:01:00,250 --> 00:01:03,260 Chris Barter: faced 18 months ago when the pandemic was at its 20 00:01:03,260 --> 00:01:07,980 Chris Barter: peak feels like 20 years ago. But here we are, 21 00:01:07,980 --> 00:01:11,540 Chris Barter: and we're entering a new phase of volatility. This one 22 00:01:11,630 --> 00:01:16,490 Chris Barter: driven by inflationary fears as opposed to fears of pandemic 23 00:01:16,490 --> 00:01:20,560 Chris Barter: impact and the unknown. We haven't really faced this kind 24 00:01:20,560 --> 00:01:25,310 Chris Barter: of inflationary- driven crisis and quite some time. So, there's a 25 00:01:25,310 --> 00:01:26,240 Chris Barter: lot of newness here. 26 00:01:26,660 --> 00:01:28,470 Sean Aylmer: Yeah. It'll be really interesting, I think, to see how 27 00:01:28,470 --> 00:01:31,350 Sean Aylmer: the investors in the tech sector but the sector itself 28 00:01:31,850 --> 00:01:34,800 Sean Aylmer: evolves in the next few years given the challenges, which 29 00:01:34,800 --> 00:01:37,440 Sean Aylmer: really they have never faced to be perfectly honest, because 30 00:01:37,440 --> 00:01:39,760 Sean Aylmer: inflation has pretty much been in control for 20 years, 31 00:01:40,250 --> 00:01:44,200 Sean Aylmer: you can argue. It almost is like a maturation of 32 00:01:44,200 --> 00:01:46,550 Sean Aylmer: the tech sector to some extent, in terms of investments. 33 00:01:47,080 --> 00:01:49,860 Chris Barter: Yeah, I agree with that. I think the reality is 34 00:01:49,860 --> 00:01:52,760 Chris Barter: that the markets just don't really know at this stage. 35 00:01:52,760 --> 00:01:54,280 Chris Barter: I mean, people have been talking about inflation for the 36 00:01:54,280 --> 00:01:57,900 Chris Barter: last over a year and worried about it, but markets 37 00:01:57,900 --> 00:02:01,150 Chris Barter: have shrugged it off, technology's shrugged it off saying, " Oh, 38 00:02:01,640 --> 00:02:04,480 Chris Barter: well they'll figure it out." And Central Banks are telling 39 00:02:04,480 --> 00:02:08,040 Chris Barter: us that it's all transitory. But now, it's pretty clear 40 00:02:08,040 --> 00:02:12,290 Chris Barter: that it's not, and it's very, very unclear how many 41 00:02:12,290 --> 00:02:14,619 Chris Barter: rate hikes or what the Central Banks have to do 42 00:02:14,620 --> 00:02:18,370 Chris Barter: to put the genie back in the bottle. So, feels 43 00:02:18,370 --> 00:02:21,419 Chris Barter: a little bit reminiscent of what was going on in the world 44 00:02:21,419 --> 00:02:23,940 Chris Barter: in the '70s. And as we all know, they had 45 00:02:23,940 --> 00:02:27,360 Chris Barter: to be very, very draconian action taken by Volker and other 46 00:02:27,360 --> 00:02:29,400 Chris Barter: Central Bankers to get that genie back in the bottle 47 00:02:29,400 --> 00:02:31,040 Chris Barter: back then we all. We all hope that won't be 48 00:02:31,040 --> 00:02:34,530 Chris Barter: the case now. But technology is along for the ride 49 00:02:34,530 --> 00:02:37,510 Chris Barter: at this stage. It's not driving that volatility, it's being 50 00:02:37,510 --> 00:02:39,490 Chris Barter: driven by it, but that's why it's great to be 51 00:02:39,490 --> 00:02:42,380 Chris Barter: a VC and not a public markets investor right now. 52 00:02:42,380 --> 00:02:44,720 Chris Barter: I mean, we take five to 10 year views on 53 00:02:44,720 --> 00:02:47,450 Chris Barter: companies, not five to 10 weeks. 54 00:02:47,930 --> 00:02:50,610 Sean Aylmer: Okay. So, King River Capital, as you said, is a 55 00:02:50,610 --> 00:02:54,630 Sean Aylmer: venture capital company. When you're investing in a company at 56 00:02:54,630 --> 00:02:57,419 Sean Aylmer: the moment, are you thinking more about big trends? Is 57 00:02:57,419 --> 00:03:00,630 Sean Aylmer: it more about specific companies that you just really like 58 00:03:00,630 --> 00:03:04,169 Sean Aylmer: their management or what they're working on? You're going to answer, " It's a bit 59 00:03:04,169 --> 00:03:06,470 Sean Aylmer: of both," I know that, but where do you start? 60 00:03:06,600 --> 00:03:08,040 Sean Aylmer: Is it the really big picture? 61 00:03:08,440 --> 00:03:12,730 Chris Barter: Yeah, really good question, because it always looks very easy 62 00:03:12,730 --> 00:03:15,070 Chris Barter: in hindsight to pick a great company say, " Oh, yeah, 63 00:03:15,070 --> 00:03:17,380 Chris Barter: that was obvious." But let's talk a little bit about, 64 00:03:18,770 --> 00:03:22,320 Chris Barter: what is the pattern recognition that we look for when 65 00:03:22,320 --> 00:03:24,580 Chris Barter: we start looking at companies? And we look hundreds and 66 00:03:24,580 --> 00:03:27,750 Chris Barter: hundreds of companies every year and invest in only a 67 00:03:27,750 --> 00:03:31,040 Chris Barter: handful of those companies. So first and foremost, we're looking 68 00:03:31,040 --> 00:03:34,619 Chris Barter: at the founder. The founder herself. I mean, is she 69 00:03:34,680 --> 00:03:38,000 Chris Barter: one of these visionaries, one of these people that, within 70 00:03:38,000 --> 00:03:39,900 Chris Barter: the first five minutes of talking to you get the 71 00:03:39,900 --> 00:03:43,620 Chris Barter: feeling that, come hell or high water, she's going to 72 00:03:43,690 --> 00:03:45,660 Chris Barter: be a money maker? She's going to figure out how 73 00:03:45,660 --> 00:03:50,240 Chris Barter: to crack the market? I say that, it sounds glib, 74 00:03:50,240 --> 00:03:54,730 Chris Barter: but it's really probably the most important initial gateway that 75 00:03:54,730 --> 00:03:57,870 Chris Barter: we look at. The next gateway we look at is 76 00:03:58,120 --> 00:04:01,220 Chris Barter: obviously the product itself. And if we see the product 77 00:04:01,220 --> 00:04:06,510 Chris Barter: as being on the one hand IP that's truly distinct 78 00:04:06,890 --> 00:04:10,920 Chris Barter: and that has a sizable moat and the particular company 79 00:04:10,920 --> 00:04:12,520 Chris Barter: has a really good head start, it would be hard 80 00:04:12,520 --> 00:04:15,880 Chris Barter: to catch up. And then thirdly and very, very importantly, 81 00:04:15,880 --> 00:04:18,979 Chris Barter: we look at the total addressable market, the TAM. Because you 82 00:04:18,980 --> 00:04:20,610 Chris Barter: can have the best idea in the world and it can 83 00:04:20,610 --> 00:04:23,539 Chris Barter: be very, very unique IP and no one else can 84 00:04:23,540 --> 00:04:26,210 Chris Barter: be anywhere close. But if it's solving a very, very 85 00:04:26,210 --> 00:04:29,170 Chris Barter: small problem, that's just not what we really want to 86 00:04:29,170 --> 00:04:33,510 Chris Barter: invest in. But typically, a very, very visionary, very inspiring 87 00:04:34,279 --> 00:04:37,410 Chris Barter: type of founder that we like to invest in, she's 88 00:04:37,410 --> 00:04:40,500 Chris Barter: going to have a focus that's already on a very, a 89 00:04:40,730 --> 00:04:42,810 Chris Barter: large problem that's being solved. 90 00:04:43,360 --> 00:04:45,279 Sean Aylmer: So, how many of those hundreds of companies that you 91 00:04:45,279 --> 00:04:47,560 Sean Aylmer: see every year... Well, you say you only invest in 92 00:04:47,560 --> 00:04:49,960 Sean Aylmer: a handful so I suppose that's the answer, but there 93 00:04:49,960 --> 00:04:52,500 Sean Aylmer: must be many companies with great ideas that just don't 94 00:04:52,500 --> 00:04:56,370 Sean Aylmer: have a market for it? Or alternatively, huge markets that 95 00:04:56,500 --> 00:04:57,839 Sean Aylmer: there's no answer from the founder. 96 00:04:58,290 --> 00:05:03,040 Chris Barter: Yeah. That's true. Typically though, what we see, we see 97 00:05:03,040 --> 00:05:07,260 Chris Barter: a lot of really extraordinary companies. I mean, really well 98 00:05:07,260 --> 00:05:11,520 Chris Barter: run companies, really good founders that are working on problems 99 00:05:11,810 --> 00:05:16,440 Chris Barter: that are more trend driven, meaning there are just many, 100 00:05:16,440 --> 00:05:18,739 Chris Barter: many companies working on the same problem. The problem's very 101 00:05:18,740 --> 00:05:24,480 Chris Barter: large and it's very large TAM, but it's extremely competitive. But what 102 00:05:24,480 --> 00:05:27,010 Chris Barter: they find is it's easier to start in a very 103 00:05:27,010 --> 00:05:30,790 Chris Barter: competitive area because it's a known area and it's well 104 00:05:30,790 --> 00:05:34,310 Chris Barter: funded. We tend to steer a little bit away from 105 00:05:34,310 --> 00:05:37,120 Chris Barter: that because it's just about return expectations. I mean, King 106 00:05:37,120 --> 00:05:39,810 Chris Barter: River won't invest in a business where we don't see at 107 00:05:39,810 --> 00:05:41,070 Chris Barter: least a 10X return. 108 00:05:41,420 --> 00:05:41,570 Sean Aylmer: Right. 109 00:05:41,640 --> 00:05:44,920 Chris Barter: And that does not mean in any sense that we 110 00:05:44,920 --> 00:05:46,970 Chris Barter: always achieve a 10X return. That's impossible. 111 00:05:47,190 --> 00:05:48,159 Sean Aylmer: No, no, no, but that's the goal. Yep. 112 00:05:48,180 --> 00:05:51,380 Chris Barter: That's the goal. But we turn down many, many great 113 00:05:51,380 --> 00:05:55,950 Chris Barter: companies solving these very competitive problems that are very likely 3X- 114 00:05:56,029 --> 00:06:00,779 Chris Barter: 4X returns, but we can't afford to make those bets 115 00:06:00,790 --> 00:06:03,330 Chris Barter: in a small portfolio because otherwise our average return will 116 00:06:03,330 --> 00:06:03,850 Chris Barter: be dragged down. 117 00:06:04,170 --> 00:06:05,589 Sean Aylmer: Stay with me, Chris, we'll be back in a minute. 118 00:06:10,270 --> 00:06:13,210 Sean Aylmer: My guest this morning is Chris Barter, founding partner at 119 00:06:13,210 --> 00:06:16,700 Sean Aylmer: King River Capital. Okay. So, tell me about Immutable. It's 120 00:06:16,700 --> 00:06:19,310 Sean Aylmer: an Australian business. Just explain what they do and why 121 00:06:19,310 --> 00:06:20,160 Sean Aylmer: you invested in them, 122 00:06:20,420 --> 00:06:24,950 Chris Barter: Yeah. That's a really interesting company. We came across Immutable 123 00:06:25,210 --> 00:06:27,630 Chris Barter: about a year ago. One of our LPs actually invested 124 00:06:27,630 --> 00:06:30,570 Chris Barter: in their A round, and we just wanted to... 125 00:06:30,570 --> 00:06:31,510 Sean Aylmer: Sorry, an LP is a...? 126 00:06:31,920 --> 00:06:35,920 Chris Barter: Oh, sorry. Limited Partners. One of our investors in one of 127 00:06:35,920 --> 00:06:39,580 Chris Barter: our earlier funds had invested in their Series A, which 128 00:06:39,580 --> 00:06:43,799 Chris Barter: was led by Naspers and Galaxy. We had heard about 129 00:06:43,800 --> 00:06:45,830 Chris Barter: it through him, so we went to meet the founders, 130 00:06:45,830 --> 00:06:50,980 Chris Barter: Robbie and James Ferguson. So, Immutable has, like many great 131 00:06:50,980 --> 00:06:56,040 Chris Barter: technology companies gone through an odyssey, a series of pivots 132 00:06:56,040 --> 00:07:00,850 Chris Barter: and transformations. Initially what Robbie and James wanted to tackle 133 00:07:00,850 --> 00:07:03,690 Chris Barter: was the ownership of in- game items. So, they launched 134 00:07:03,830 --> 00:07:06,930 Chris Barter: one of the world's first crypto gaming companies. They built 135 00:07:06,930 --> 00:07:10,320 Chris Barter: a game called Gods Unchained, which is a card game. 136 00:07:10,700 --> 00:07:14,590 Chris Barter: It's a mix of Pokemon meets Dungeons and Dragons kind 137 00:07:14,590 --> 00:07:14,650 Chris Barter: of thing. 138 00:07:14,650 --> 00:07:16,080 Sean Aylmer: Right. Right. 139 00:07:16,150 --> 00:07:20,860 Chris Barter: Players purchase playing cards and compete with each other in 140 00:07:20,860 --> 00:07:23,610 Chris Barter: a game setting. And so, what Robbie and James thought 141 00:07:23,610 --> 00:07:26,380 Chris Barter: was perplexing was, at that time, many, many billions of 142 00:07:26,380 --> 00:07:28,840 Chris Barter: dollars were being spent every year on in game items, 143 00:07:29,240 --> 00:07:33,350 Chris Barter: but players don't really own those items. They just borrow 144 00:07:33,350 --> 00:07:36,980 Chris Barter: them from the game. And to them, it seemed strange 145 00:07:36,980 --> 00:07:39,250 Chris Barter: that you wouldn't, if you're paying a lot of money 146 00:07:39,250 --> 00:07:41,200 Chris Barter: for the items or games are making most of the 147 00:07:41,200 --> 00:07:44,550 Chris Barter: revenue from the items that people wouldn't want to be 148 00:07:44,550 --> 00:07:47,440 Chris Barter: able to have a deed of ownership for those items 149 00:07:47,500 --> 00:07:49,140 Chris Barter: and be able to trade those items or move them 150 00:07:49,140 --> 00:07:54,040 Chris Barter: to other games. So, they built Gods Unchained on Ethereum, 151 00:07:54,600 --> 00:07:58,970 Chris Barter: and used an NFT, a Non- Fungible Token, as a 152 00:07:58,970 --> 00:08:02,710 Chris Barter: deed of ownership for the playing cards. And that was 153 00:08:02,710 --> 00:08:07,390 Chris Barter: concept they launched in 2018. The beta officially launched in 154 00:08:07,400 --> 00:08:12,980 Chris Barter: 2019, and they sold up till 2021 something around $ 15 155 00:08:12,980 --> 00:08:16,490 Chris Barter: million of in game items, which was a lot, and 156 00:08:16,490 --> 00:08:19,760 Chris Barter: players really liked it. They then took another step and 157 00:08:19,760 --> 00:08:26,220 Chris Barter: they said, " Well, why wouldn't we allow other games to 158 00:08:26,350 --> 00:08:29,320 Chris Barter: trade their in- game items on the infrastructure that we 159 00:08:29,320 --> 00:08:32,069 Chris Barter: built? Why should it just be Gods Unchained?" But they 160 00:08:32,070 --> 00:08:35,210 Chris Barter: had to solve a very, very big problem before they 161 00:08:35,210 --> 00:08:39,530 Chris Barter: could expand their NFT infrastructure to other games, and that's 162 00:08:39,530 --> 00:08:43,930 Chris Barter: called the scaling problem on Ethereum. So, many of your 163 00:08:44,340 --> 00:08:46,590 Chris Barter: listeners are probably familiar with this, but I'll just explain 164 00:08:46,590 --> 00:08:50,900 Chris Barter: it. Because of the sheer size and scale of Ethereum, 165 00:08:51,429 --> 00:08:55,450 Chris Barter: it takes a huge amount of energy consumption and time 166 00:08:55,700 --> 00:09:00,010 Chris Barter: to update the entirety of Ethereum for every new transaction 167 00:09:00,010 --> 00:09:02,250 Chris Barter: that occurs. So every time when they mint a new 168 00:09:02,250 --> 00:09:05,150 Chris Barter: playing card or someone trades a playing card, the entirety 169 00:09:05,150 --> 00:09:08,790 Chris Barter: of Ethereum needs to be updated. And that entails very 170 00:09:08,790 --> 00:09:11,810 Chris Barter: high, what we call, gas fees. Gas fees now are 171 00:09:11,890 --> 00:09:15,980 Chris Barter: north of $ 30. When we looked at Immutable, they were about $ 15. 172 00:09:15,980 --> 00:09:19,530 Chris Barter: So, the gas fees are a reflection of energy cost 173 00:09:19,530 --> 00:09:24,030 Chris Barter: to do this huge update process globally. And Robbie and 174 00:09:24,030 --> 00:09:27,260 Chris Barter: James sensibly asked the question, " Well, why would anyone spend $ 175 00:09:27,270 --> 00:09:31,150 Chris Barter: 15 or $ 20 or $ 30 to purchase in- game items 176 00:09:31,150 --> 00:09:33,760 Chris Barter: like a playing card or any other skin or a 177 00:09:33,760 --> 00:09:36,770 Chris Barter: weapon or any type of in game item, if the 178 00:09:36,770 --> 00:09:38,980 Chris Barter: item only costs $ 5, $ 10, or $ 15? No one's going 179 00:09:38,980 --> 00:09:40,870 Chris Barter: to do it." So, they had to solve this problem. 180 00:09:40,870 --> 00:09:43,559 Chris Barter: And what they ended up creating is very unique IP 181 00:09:44,200 --> 00:09:47,820 Chris Barter: called a ZK- rollup. So, without going down the rabbit 182 00:09:47,820 --> 00:09:51,050 Chris Barter: hole of really the cryptography and everything behind a ZK- 183 00:09:51,050 --> 00:09:55,809 Chris Barter: rollup, effectively what it does is batches 7, 000 transactions 184 00:09:55,809 --> 00:10:00,760 Chris Barter: at a time, 7,000 Ethereum updates, into one update. So, the 185 00:10:00,760 --> 00:10:04,260 Chris Barter: gas costs are 1/ 7000th of the gas cost of 186 00:10:04,260 --> 00:10:07,650 Chris Barter: a normal ledger update, and you can do not seven 187 00:10:07,650 --> 00:10:09,570 Chris Barter: trades a second, but 7, 000 trades a second. 188 00:10:10,050 --> 00:10:12,620 Sean Aylmer: This is a world of which I'm not particularly familiar 189 00:10:12,700 --> 00:10:16,160 Sean Aylmer: with, though my children might be. The whole non- fungible 190 00:10:16,160 --> 00:10:21,699 Sean Aylmer: tokens idea, it is creating or perhaps it's already there 191 00:10:22,020 --> 00:10:25,699 Sean Aylmer: a real world value and use for NFTs rather than 192 00:10:25,700 --> 00:10:28,710 Sean Aylmer: just the novelty factor. It really is a whole new 193 00:10:28,710 --> 00:10:33,140 Sean Aylmer: world. NFTs with a real world value, which someone can 194 00:10:33,140 --> 00:10:36,110 Sean Aylmer: ascribe to in the way that Immutable does it. Is that 195 00:10:36,110 --> 00:10:36,620 Sean Aylmer: fair to say? 196 00:10:36,860 --> 00:10:40,940 Chris Barter: Yes, you're absolutely right. So, we're moving away from the 197 00:10:41,230 --> 00:10:47,150 Chris Barter: novelty concept of NFTs; very elite art collectors buying pieces 198 00:10:47,150 --> 00:10:49,580 Chris Barter: of digital art for tens and hundreds or millions of 199 00:10:49,580 --> 00:10:54,079 Chris Barter: dollars, and moving into a realm where people, everyday users 200 00:10:54,130 --> 00:10:57,970 Chris Barter: of in- game items are able to own those items, 201 00:10:57,970 --> 00:11:00,710 Chris Barter: so mint them as NFTs, and be able to trade 202 00:11:00,710 --> 00:11:05,449 Chris Barter: then with each other. So, that's where this gets really, 203 00:11:05,450 --> 00:11:09,199 Chris Barter: really interesting because we're entering a world of utility away 204 00:11:09,200 --> 00:11:13,319 Chris Barter: from a world of speculation and just very, very niche 205 00:11:13,320 --> 00:11:16,410 Chris Barter: application. Just to give you a sense of, we talked 206 00:11:16,410 --> 00:11:19,350 Chris Barter: about TAM earlier as being a key gating item for 207 00:11:19,400 --> 00:11:22,450 Chris Barter: King River and our investing. The TAM for the in 208 00:11:22,450 --> 00:11:26,360 Chris Barter: game item market last year alone was $ 100 billion. 209 00:11:27,690 --> 00:11:27,691 Sean Aylmer: Wow. 210 00:11:27,691 --> 00:11:31,870 Chris Barter: $ 100 billion of in- game items were purchased. And 211 00:11:31,960 --> 00:11:34,790 Chris Barter: as I said before, very small fraction of that are 212 00:11:35,160 --> 00:11:37,610 Chris Barter: minted as NFTs. And so, no one's even able to trade 213 00:11:37,610 --> 00:11:41,360 Chris Barter: them. So, think of the scale of being able to 214 00:11:41,470 --> 00:11:45,770 Chris Barter: use this solution that Immutable has developed called the ZK- 215 00:11:45,770 --> 00:11:49,570 Chris Barter: rollup, which is built onto its NFT exchange that it 216 00:11:49,570 --> 00:11:52,500 Chris Barter: launched to the world last year. So, you get a 217 00:11:52,500 --> 00:11:56,170 Chris Barter: sense for this very, very massive scale of the problem 218 00:11:56,170 --> 00:11:56,989 Chris Barter: that they're solving. 219 00:11:57,510 --> 00:12:02,340 Sean Aylmer: Yeah. I mean, notwithstanding Immutable's solution to the gas fee, 220 00:12:02,640 --> 00:12:05,850 Sean Aylmer: there still is a cloud hanging over a lot of 221 00:12:06,050 --> 00:12:09,559 Sean Aylmer: NFTs, cryptos, just the energy they use still. Is that 222 00:12:09,559 --> 00:12:12,490 Sean Aylmer: something that innovation will solve eventually, do you think, or 223 00:12:12,490 --> 00:12:13,900 Sean Aylmer: is it a real issue? 224 00:12:14,340 --> 00:12:16,800 Chris Barter: Well, first of all, it's a massive issue for the 225 00:12:16,800 --> 00:12:22,290 Chris Barter: world today, and King River has a very high ESG 226 00:12:22,290 --> 00:12:25,209 Chris Barter: bar for everything we invest in. And so, this is 227 00:12:25,309 --> 00:12:28,850 Chris Barter: absolutely mission critical to get solved. Will it get solved? 228 00:12:29,370 --> 00:12:33,570 Chris Barter: Absolutely convinced it will, and there are many, many different 229 00:12:33,650 --> 00:12:36,990 Chris Barter: work streams to solve this. One is the upgrade of 230 00:12:37,000 --> 00:12:40,910 Chris Barter: Ethereum to 2. 0, which is going to move from 231 00:12:41,580 --> 00:12:44,490 Chris Barter: proof of work to proof of stake. That will save 232 00:12:44,580 --> 00:12:46,990 Chris Barter: a large amount of energy, but that's not really good 233 00:12:46,990 --> 00:12:51,270 Chris Barter: enough. ZK- rollup Solutions is part of a class of 234 00:12:51,270 --> 00:12:56,540 Chris Barter: solutions on Ethereum called Layer 2 Solutions, which still sit 235 00:12:56,830 --> 00:13:02,720 Chris Barter: in the decentralized trustless realm of Ethereum. It's on the 236 00:13:02,720 --> 00:13:05,590 Chris Barter: main chain, but it's a layer above it. 237 00:13:05,720 --> 00:13:05,940 Sean Aylmer: Right. 238 00:13:05,940 --> 00:13:09,610 Chris Barter: And that's really important because the other types of solutions 239 00:13:09,610 --> 00:13:13,510 Chris Barter: to the scaling problem are so- called side chains. The problem 240 00:13:13,540 --> 00:13:16,860 Chris Barter: with side is you actually leave the main chain to 241 00:13:16,860 --> 00:13:20,330 Chris Barter: very, very small chains and then reenter the main chain 242 00:13:20,420 --> 00:13:24,190 Chris Barter: like Ethereum. And the issue there is your security's very 243 00:13:24,190 --> 00:13:26,730 Chris Barter: compromised when you're on a very small chain. Security of 244 00:13:26,730 --> 00:13:30,540 Chris Barter: a chain is directly correlated to the size of the 245 00:13:30,540 --> 00:13:34,020 Chris Barter: total value lock on that chain. And so, to truly 246 00:13:34,020 --> 00:13:37,530 Chris Barter: solve this scaling problem, you need to stay on Ethereum, 247 00:13:37,710 --> 00:13:41,340 Chris Barter: and Layer 2 is so far the most innovative and 248 00:13:41,400 --> 00:13:46,210 Chris Barter: breakthrough solution to tackling the scaling problem. But look, this 249 00:13:46,210 --> 00:13:48,260 Chris Barter: is an arms race. There will be many, many other 250 00:13:48,270 --> 00:13:50,689 Chris Barter: Layer 2 solutions developed, and we know of many that 251 00:13:50,690 --> 00:13:54,110 Chris Barter: are going on, which is great because that, to us, 252 00:13:54,110 --> 00:13:59,010 Chris Barter: means that scaling problem, this gas cost energy problem will 253 00:13:59,010 --> 00:13:59,750 Chris Barter: get tackled. 254 00:14:00,309 --> 00:14:02,679 Sean Aylmer: Chris, we are way over time, but I have really found this 255 00:14:02,679 --> 00:14:05,420 Sean Aylmer: interesting so I have learnt so much about that NFT 256 00:14:05,420 --> 00:14:07,650 Sean Aylmer: market and what's going on there. I do have to 257 00:14:07,650 --> 00:14:10,209 Sean Aylmer: ask though, what's the next big thing? What is it 258 00:14:10,210 --> 00:14:13,569 Sean Aylmer: that, in terms of your venture capital fund, what is it that 259 00:14:13,740 --> 00:14:15,900 Sean Aylmer: you are looking at thinking, " Ah, that's so we should 260 00:14:15,900 --> 00:14:16,500 Sean Aylmer: keep an eye on"? 261 00:14:16,790 --> 00:14:20,570 Chris Barter: Yeah, look. So, I would say the biggest revolution we 262 00:14:20,570 --> 00:14:25,040 Chris Barter: are seeing right now is in the area of decentralized 263 00:14:25,050 --> 00:14:29,610 Chris Barter: finance, DeFi, and I throw NFTs into that bucket too. 264 00:14:29,960 --> 00:14:35,610 Chris Barter: We think that the world of financial services is undergoing 265 00:14:36,240 --> 00:14:40,070 Chris Barter: first innings, the beginnings of a disruption on a scale 266 00:14:40,070 --> 00:14:43,220 Chris Barter: that will be even larger than the disruption of eCommerce 267 00:14:43,220 --> 00:14:44,260 Chris Barter: in the late '90s. 268 00:14:44,600 --> 00:14:44,840 Sean Aylmer: Wow. 269 00:14:44,840 --> 00:14:51,100 Chris Barter: So, this feels like the ability to use blockchain to 270 00:14:51,400 --> 00:14:57,830 Chris Barter: effortlessly and basically costlessly execute very mundane financial transactions like 271 00:14:57,830 --> 00:15:03,080 Chris Barter: transferring money, doing FX, earning deposits, borrowing money; is going 272 00:15:03,080 --> 00:15:06,530 Chris Barter: to completely upend financial services globally and has huge, huge 273 00:15:06,530 --> 00:15:09,440 Chris Barter: implications. And we're at the very, very beginning of that. So, we see 274 00:15:09,440 --> 00:15:14,120 Chris Barter: that as the biggest revolution happening right now. We're playing 275 00:15:14,120 --> 00:15:16,560 Chris Barter: the theme very heavily of, we have three of those 276 00:15:16,560 --> 00:15:21,760 Chris Barter: investments in fund two, and we're close to launching a 277 00:15:21,810 --> 00:15:24,620 Chris Barter: token fund that will be playing on the utility of 278 00:15:24,700 --> 00:15:26,201 Chris Barter: DeFi and NFTs. 279 00:15:26,201 --> 00:15:30,090 Sean Aylmer: And presumably, a lot of the disruption will be people we haven't heard 280 00:15:30,090 --> 00:15:31,940 Sean Aylmer: of. I mean, certainly not the banks, the banks may 281 00:15:31,940 --> 00:15:34,140 Sean Aylmer: disrupt a little bit, but we're talking about well and 282 00:15:34,140 --> 00:15:36,190 Sean Aylmer: truly outside the traditional banking sector here. 283 00:15:36,530 --> 00:15:39,000 Chris Barter: That's correct, yeah. I think it's going to be, the 284 00:15:39,000 --> 00:15:41,200 Chris Barter: big stakeholders in the financial system that are going to 285 00:15:41,200 --> 00:15:46,010 Chris Barter: really struggle here are the banks, because a big, big 286 00:15:46,600 --> 00:15:49,619 Chris Barter: component of the banks value add in today's economy and 287 00:15:49,620 --> 00:15:53,570 Chris Barter: traditional finance is effectively being a middle man in transactions. 288 00:15:53,570 --> 00:15:56,220 Chris Barter: Being a broker and being a trusted source of truth. 289 00:15:56,740 --> 00:16:01,060 Chris Barter: And none of that is necessary on the blockchain and 290 00:16:01,060 --> 00:16:05,380 Chris Barter: decentralized finance. And secondly, the regulators. I mean, I find 291 00:16:05,380 --> 00:16:07,620 Chris Barter: it quite sad to see a lot of commentators on 292 00:16:07,620 --> 00:16:11,730 Chris Barter: Twitter in the crypto world just deriding regulators and saying 293 00:16:11,730 --> 00:16:14,340 Chris Barter: they don't know what they're doing. They're trapped in the 294 00:16:14,350 --> 00:16:17,080 Chris Barter: 20th century, and they just don't understand the power of 295 00:16:18,110 --> 00:16:21,040 Chris Barter: Web 3 and DeFi. If you really look at the 296 00:16:21,040 --> 00:16:23,520 Chris Barter: enormity of the problem that the regulators have to solve, 297 00:16:25,190 --> 00:16:28,210 Chris Barter: it's very tough because they need to put sensible guardrails 298 00:16:28,210 --> 00:16:31,620 Chris Barter: on, on the system. But allowing things to go in 299 00:16:31,620 --> 00:16:34,680 Chris Barter: one direction or another has massive implications for everything from 300 00:16:34,680 --> 00:16:38,830 Chris Barter: money supply to inflation, to regulating anti- money laundering, et 301 00:16:38,850 --> 00:16:42,270 Chris Barter: cetera. So, they have to tread carefully. But the regulator 302 00:16:42,270 --> 00:16:44,440 Chris Barter: really needs to get on top of this stuff as 303 00:16:44,440 --> 00:16:48,650 Chris Barter: soon as possible because it's growing bigger than nation state economies. 304 00:16:49,230 --> 00:16:50,960 Sean Aylmer: Chris, thank you for talking to Fear and Greed. 305 00:16:51,370 --> 00:16:53,490 Chris Barter: Thanks, Sean. Thanks for having me. Really appreciate it. 306 00:16:53,890 --> 00:16:56,330 Sean Aylmer: That was Chris Barter, one of the founding partners of 307 00:16:56,330 --> 00:16:59,400 Sean Aylmer: King River Capital. This is the Fear and Green daily interview. 308 00:16:59,400 --> 00:17:01,500 Sean Aylmer: Join me every morning for the full Fear and Greed 309 00:17:01,500 --> 00:17:03,770 Sean Aylmer: podcast with all the business news you need to know. 310 00:17:04,130 --> 00:17:05,570 Sean Aylmer: I'm Sean Aylmer, enjoy your day.