Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Halloway. We haven't talked
Speaker 1: about it in a few weeks, but crypto crisis side,
Speaker 1: there's always volatility. It's clearly not slowing down at all.
Speaker 1: I feel like we have been talking about crypto over
Speaker 1: the past few weeks, but I guess I guess we
Speaker 1: haven't on the podcast, We've written about it on the
Speaker 1: Odd Lots site. There's still a lot going on. I mean,
Speaker 1: like every day it seems there's a new investment in
Speaker 1: the space. People are getting more and more excited about defy. Uh.
Speaker 1: These random tokens keep taking off at the same time, Um,
Speaker 1: everyone's talking about n f t s. The list goes on, right.
Speaker 1: You know what I feel like with crypto, and it's funny,
Speaker 1: like a joke, you know, it's kind of half true.
Speaker 1: We haven't been talking about it lately. I think guess
Speaker 1: the issue is if you I feel like, if you
Speaker 1: go three weeks without having a crypto episode of the podcast,
Speaker 1: or if I sort of tune out of crypto for
Speaker 1: a few weeks because say I'm interested in supply chains
Speaker 1: or lumber or inflation or something. Then when I try
Speaker 1: to tune back in, I'm like, what the heck just happened?
Speaker 1: Because everything the stand has changed so fast, and the
Speaker 1: news story of the new coin that people are to
Speaker 1: exchange so fast that I feel like I'm totally behind.
Speaker 1: So three weeks of the crypto space feels like three
Speaker 1: months or a year. Yeah, it's sort of like a
Speaker 1: dog years type phenomenon, right, Like crypto just seems to
Speaker 1: be moving faster than everyone else. Yeah, So anyway, let's
Speaker 1: I want to just get right into it. I'm very excited. Um.
Speaker 1: There's a long time by crypto standards VC firm or
Speaker 1: investment firm called Paradigm. If you say the name Paradigm
Speaker 1: to people like in crypto circles, it's like this like
Speaker 1: hushed tone, because like there's such reverence for this firm.
Speaker 1: Everyone respects this firm, and they've recently raised the biggest
Speaker 1: crypto I think VC is the right word term, but
Speaker 1: the biggest crypto investment fund as of now and today
Speaker 1: we're recording this November. Who knows, the record is probably
Speaker 1: gonna be broken in about three days, but they have
Speaker 1: raised the biggest fund ever to invest in in the
Speaker 1: space of two point five billion dollars and we are
Speaker 1: going to uh talk to one of their co founders
Speaker 1: about what they planned to do. Great, can't wait. I'm
Speaker 1: very excited. I want to bring in Matt Wong. He
Speaker 1: is the co founder and managing partner at Paradigm. Matt,
Speaker 1: thank you so much for coming on odd lots, Hi Joe,
Speaker 1: Hi Tracy, thanks for having me. Absolutely so. Like I
Speaker 1: said in the intro, I feel like when I've been
Speaker 1: in crypto circles, are hanging out with crypto people, and
Speaker 1: like you bring up Paradigm, people are like, oh, yeah,
Speaker 1: they're legit. Like there's a lot of like kind of
Speaker 1: fakers in the space. We all sort of know that,
Speaker 1: and there's a lot of people that just arrived on
Speaker 1: the scene five minutes ago. But before we talk about
Speaker 1: this new fund, what do you talk about, Uh, where
Speaker 1: did Paradigm come from? What is its background and history
Speaker 1: and what's its sort of basic story. Yeah? Sure, well
Speaker 1: you very grateful that that's what people are saying about us. Look,
Speaker 1: I think Paradigm started from a pretty simple place. My
Speaker 1: co founder, whose name is Fred Arison, who had previously
Speaker 1: co founded coin Base, and I were longtime acquaintances and friends.
Speaker 1: Back in two thousand seventeen, when I was I like
Speaker 1: to say, a boring venture capitalist at Sequoia focused on
Speaker 1: all kinds of different technology investing and started to spend
Speaker 1: a lot more time in the crypto space. We would
Speaker 1: you know, meet up often and consider new investments. And
Speaker 1: one of our observations at the time, actually there were two.
Speaker 1: The first was, and you know, Fred gained this early
Speaker 1: but a very very deep conviction that what was enabled
Speaker 1: by crypto was likely to be one of the most
Speaker 1: impactful sort of spaces to be spending time and over
Speaker 1: the next ten years. And we had already seen bitcoin
Speaker 1: as a digital monetary asset grow from effectively zero two
Speaker 1: hundreds of billions. We started to see the early days
Speaker 1: of defied take off on top of the theory um
Speaker 1: and so it was just very clear to us that
Speaker 1: this was the future. And yet when you looked at
Speaker 1: the traditional tech investing establishment, I think it was very underrated.
Speaker 1: In fact, most very smart and well meaning people often
Speaker 1: when they take a first look at crypto, especially back then,
Speaker 1: you know, they couldn't help but come away with a
Speaker 1: sense that maybe there wasn't so much substance, it was
Speaker 1: you know, there were dog coins and cat coins, and
Speaker 1: it was sort of what what is the point of
Speaker 1: all this? And and yet when we spent time on
Speaker 1: the front lines with some of the protocol developers and
Speaker 1: the team's building real you know, hard technology in the space,
Speaker 1: we just haven't had a totally different view. So so
Speaker 1: sort of born out of that conviction in crypto. And then,
Speaker 1: you know, somewhat separately, we looked around and you know,
Speaker 1: I would talk to Fred he had co founded coin
Speaker 1: based in two thousand and twelve. So if you were
Speaker 1: starting another crypto project today, is there another investor that
Speaker 1: you would be really excited to work with? And I
Speaker 1: think the answer for both of us at that point
Speaker 1: in time was no. And so Paradigm really came from
Speaker 1: us kind of building the investment firm that we would
Speaker 1: have wanted as entrepreneurs. And to us, one of the
Speaker 1: biggest parts of that is how native we are and
Speaker 1: our team is to the technology. And I think this
Speaker 1: is a general pattern you see across technology waves where
Speaker 1: some new platform exists, whether it's mobile phones or the
Speaker 1: Internet or crypto, and it's very easy to apply kind
Speaker 1: of old analogies to the new medium, and yet it
Speaker 1: turns out that some of the most important companies are
Speaker 1: innovations that come out of a particular wave end up
Speaker 1: being deeply native to it. And so that was kind
Speaker 1: of our aspiration around paradigm is sort of getting very
Speaker 1: close to the metal technically and being able to help
Speaker 1: support and guide the people building this future. So I
Speaker 1: want to go back to something you said, what exactly
Speaker 1: in your opinion does crypto enable And this kind of
Speaker 1: gets to the tension that you were describing with some
Speaker 1: other vcs they don't see that much value in it.
Speaker 1: You know, critics have described blockchain at various points in
Speaker 1: time as a solution in search of a problem. We've
Speaker 1: talked on the show about how a lot of DeFi
Speaker 1: technology seems to be focused on more defied So it's
Speaker 1: sort of, you know, trading coins or tokens all the
Speaker 1: way down, But what is it that you see give
Speaker 1: us the elevator pitch? Sure. I think at the very
Speaker 1: highest level we're seeing crypto disrupt in several stages. The
Speaker 1: first was this idea of bitcoin as digital money, and
Speaker 1: you know, looking into the history of bitcoin, I think
Speaker 1: a similar dynamic was always present, which was is bitcoin
Speaker 1: distinguishable from two lips? Is it tulips or is it
Speaker 1: you know, the next digital monetary standard. And one observation
Speaker 1: would be like when you talk to people in developed countries,
Speaker 1: they often don't see the point of bitcoin, and when
Speaker 1: you talk to people in developing countries, it almost clicks immediately,
Speaker 1: whether it's countries in Latin or countries like China and
Speaker 1: Russia where perhaps the rule of law or currency stability
Speaker 1: is less taken for granted, and so there's a form
Speaker 1: of dollar privilege in a lot of ways around bitcoin.
Speaker 1: So I think that is the first category and not
Speaker 1: to be underrated. I think that could be tremendously powerful
Speaker 1: for the world as it progresses. The second is, which
Speaker 1: is quite a natural extension of digital money, is this
Speaker 1: idea of to centralized finance. Now that you have digitally
Speaker 1: native assets, beyond just sending them back and forth or
Speaker 1: holding them, you can now do much more complex things
Speaker 1: with them and program them. And I think one thing
Speaker 1: that's unique about defies the protocol can encode certain rules
Speaker 1: that you can trust will continue to be the case
Speaker 1: several years from now. In a lot of ways, It's
Speaker 1: much like you know in the in the country governance context.
Speaker 1: The idea of strong property rights. Strong property rights enables
Speaker 1: an economy to form in a way that's truly long term.
Speaker 1: People can build businesses and make decisions knowing that there
Speaker 1: will be stability over many years or decades. And similarly,
Speaker 1: around DEFY, the idea that say a decentralized exchange protocol
Speaker 1: like unit swap might continue operating exactly the way it's
Speaker 1: operating today ten years from now or twenty years from now,
Speaker 1: really enables other people who might want to plug into
Speaker 1: that protocol are build on top of it to do so.
Speaker 1: So I think that digital commitment is sort of a
Speaker 1: key part of what these blockchains enable. And then finally,
Speaker 1: I think now that defy has really scaled. I think
Speaker 1: we're seeing, especially over the past year, cryptocurrencies and crypto
Speaker 1: protocols broaden in the sort of types of industries that
Speaker 1: they a can touch. And you know, this year we've
Speaker 1: seen the rise of n f t s and the
Speaker 1: notions of digital art. Crypto gaming has been become really popular,
Speaker 1: and so I think we'll see crypto brought into touch many,
Speaker 1: many different parts of the modern Internet. So let's talk
Speaker 1: about this fund As I mentioned, I think it was
Speaker 1: just a couple of weeks ago you announced it a
Speaker 1: two and a half billion dollar fund, which as of
Speaker 1: now is the biggest crypto fund that's been raised. What
Speaker 1: do you see as the big opportunities I mean you
Speaker 1: talked to sort of broad categories defy that's very broad now.
Speaker 1: It means a lot of things, n f T, the
Speaker 1: sort of n f T S, gaming, sort of like
Speaker 1: certain culture of things. What specifically do you see as
Speaker 1: the big opportunities that they're going to go after with
Speaker 1: this fund, with this money. You know, back to when
Speaker 1: we started Paradigm in two thousand and eighteen, we had
Speaker 1: a lot of conviction about the progression of crypto over
Speaker 1: the coming decade, and we spent a lot of the
Speaker 1: early years investing across defy, UM, you know, various other areas.
Speaker 1: I think one thing that's become very notable over the
Speaker 1: past year is this the rise of what I think
Speaker 1: the industry is terming Web three. This notion of blockchains
Speaker 1: is a way to build for many different other categories
Speaker 1: of the Internet, you know, stepping back from the specific opportunities,
Speaker 1: one thing that's particularly notable to us, and we pay
Speaker 1: a lot of attention to is kind of the talent
Speaker 1: flows into the industry. When we started in two thousand eighteen,
Speaker 1: it was Crypto was mostly a ghost town. It was
Speaker 1: people who were present in two thousand six, two thousand
Speaker 1: seventeen who despite the bear market, we're continuing to build.
Speaker 1: Today it's become much more consensus almost that Web three
Speaker 1: and Crypto might present part of the future for the Internet.
Speaker 1: So we're seeing a lot of interesting engineering and entrepreneurial
Speaker 1: talent come into the space. And you know, I'm not
Speaker 1: trying to avoid the question. I do think what we're
Speaker 1: focused on is sort of the long term potential that's possible,
Speaker 1: and also kind of the short term signs of quality
Speaker 1: and innovation and following that because I think ultimately, for
Speaker 1: any new innovation that's you know, happening at such a
Speaker 1: primitive level, I think it's always hard to fully predict
Speaker 1: exactly what's going to happen, whether it's like the Internet itself,
Speaker 1: for you know, the advent of electricity or something. I
Speaker 1: think the applications eventually surprise us, and so we're more
Speaker 1: focused on keeping our ear to the ground, understanding the
Speaker 1: tech deeply, and spending time where the builders are spending.
Speaker 1: So how do you actually go about investing in a
Speaker 1: crypto business if you find one that you like, Because
Speaker 1: I mean, there are multiple ways to do this, but
Speaker 1: I guess the two big ones would be, you know,
Speaker 1: you just buy a stake in a crypto business sort
Speaker 1: of the old fashioned venture capitalist way, or you could
Speaker 1: buy the project's token and maybe that comes with some
Speaker 1: sort of governance, say via a dow or something like that.
Speaker 1: How do how do you sort of weigh those options? Yes,
Speaker 1: it's a very fascinating question, and I think it's you know,
Speaker 1: as a whole somewhat an open one for the industry,
Speaker 1: which is, you know, for hundreds of years even we've
Speaker 1: had this very well established and evolved form of kind
Speaker 1: of coordinating human activity around corporations or elcs and having
Speaker 1: sort of investors and outside folks participate in that. And
Speaker 1: now all of a sudden, we have the ability to
Speaker 1: kind of store the cap table or the you know,
Speaker 1: record of value on the blockchain in a sort of trustless,
Speaker 1: immutable way that is equivalently good in various ways. And
Speaker 1: so there's sort of a question which is a better
Speaker 1: fit for the crypto startup of today, And I think
Speaker 1: depending on the startup, the answer could be different. Sort
Speaker 1: of In practice, we're often investing at the earliest stages
Speaker 1: before any digital token might exist, and we do that
Speaker 1: through corporate entities as a way to kind of preserve
Speaker 1: optionality for the way that the project might ultimately want
Speaker 1: to distribute the record of participation. You sort of anticipated
Speaker 1: a question that I was go to ask, but I
Speaker 1: want to talk about there's something interesting And I think
Speaker 1: one of the reasons that people do have this reverence
Speaker 1: for Paradigm specifically is because it's clear that you have
Speaker 1: a lot of like technical talent, and I think like
Speaker 1: vcs always like they love to blog and they love
Speaker 1: to opine. They do these like big tweet threads about
Speaker 1: how like you know, the future of work is going
Speaker 1: to change and stuff like that, and you know, they
Speaker 1: all sort of like I want to be writers or something.
Speaker 1: But I feel like Paradigm is unique. Like if you
Speaker 1: look on your blog, like there's a lot of like
Speaker 1: technical stuff and you have colleagues who are literally inventing
Speaker 1: new financial products all the time, Like I'm looking at
Speaker 1: your blog and one of your colleagues, Dave White, like
Speaker 1: introduced a new type of like futures idea that could
Speaker 1: be connected to n f T S. And you have
Speaker 1: another like another colleague who I think is Tudonymous, who
Speaker 1: like frequently like writes about like finding hacks and stuff
Speaker 1: like that, or like sort of finding exploits in a
Speaker 1: token before they're discovered. And so I'm curious, Like it
Speaker 1: sounds like the strategy is having your ears close to
Speaker 1: the ground, knowing the tech deeply because you don't necessarily
Speaker 1: know where it's going, like nobody really does, but you
Speaker 1: know where the talent is going. Talk about this, like
Speaker 1: how much of a mote you see that for paradigm,
Speaker 1: the idea of like having like deep technical people working
Speaker 1: for the fund itself as opposed to just being like
Speaker 1: money people. So first of all, I would sort of
Speaker 1: acknowledge that I don't think this is what most investment
Speaker 1: firms look like. And certainly when we were starting out,
Speaker 1: there's always this temptation you know, what have other people done?
Speaker 1: And you know what have successful investment firms throughout history done.
Speaker 1: There's always wisdom and lessons to be gleaned there, but
Speaker 1: we were very focused on just trying to think from
Speaker 1: first principles, like if we were an entrepreneur building a
Speaker 1: new crypto startup, who would we want around the table?
Speaker 1: Is it possible for an investment firms such as ours
Speaker 1: to be able to add value in a way that
Speaker 1: was really meaningful? You know, investors can always write tweet threads,
Speaker 1: but we thought we should go further and you know,
Speaker 1: be able to code alongside the companies and you know,
Speaker 1: audit their code, etcetera. I think, you know, that's clearly
Speaker 1: very valuable and our practical level, and we're continuing to
Speaker 1: explore other ways to lean into that. I think also
Speaker 1: at an abstract level, you know, one of the potential
Speaker 1: promises of cryptos this notion of digitizing more and more
Speaker 1: of our institutions and our companies and our infrastructure into
Speaker 1: these sort of protocolized forms. And if you envision sort
Speaker 1: of a future state in which more and more of
Speaker 1: our economy is running on crypto rails, then it seems
Speaker 1: almost inevitable that you know, having deeply technical people is
Speaker 1: a really important part of participating in that. And so
Speaker 1: just generally in philosoph ethically, we feel like technical expertise
Speaker 1: must be one of the core parts of what we
Speaker 1: do at PARA. So in addition to technical expertise, there
Speaker 1: was something that you tweeted recently where you asked people, Um,
Speaker 1: you know, if if they're good at memes and they
Speaker 1: want to work at Paradigm, could they get in touch? Like,
Speaker 1: is that is that Tracy is good at memes, so
Speaker 1: she's sort of she's thinking about going from the media
Speaker 1: the media the crypto pipeline here is this a job
Speaker 1: requirement for the crypto space now? Like you have to
Speaker 1: be able to deal in memes and ideas given that,
Speaker 1: you know, Joe kind of touched on this in the intro,
Speaker 1: but like, given that a lot of what's happening in
Speaker 1: the space seems to be driven by different narratives and
Speaker 1: those are shifting all the time. Yeah, there's again both
Speaker 1: this practical element of I think a lot of modern marketing,
Speaker 1: whether it is for investment firms or come Benese, occurs
Speaker 1: through sort of the medium of Twitter and memes and
Speaker 1: memes drive culture in a lot of ways, and so
Speaker 1: I think that skill is is very useful. I think
Speaker 1: it you know, there's a whole world that operates on
Speaker 1: crypto twitter is because you both know from following it,
Speaker 1: it's almost a parallel universe to what's happening in the
Speaker 1: real world, and if you aren't on crypto Twitter and
Speaker 1: aren't sort of one of these very online people who
Speaker 1: is following what's happening, you're sort of not up to
Speaker 1: date on the latest in the culture or the substance
Speaker 1: of what's happening in crypto. So I think there's another
Speaker 1: element there that's really important. And then finally, I think
Speaker 1: if you think about, you know, the hardest problem for
Speaker 1: every upstart, whether it's us at Paradigm or one of
Speaker 1: the companies or projects we're backing, it's sort of assembling
Speaker 1: a really talented group of people to work on a
Speaker 1: single problem for a long period of time. And I
Speaker 1: think that's ultimately what it teks to build something really
Speaker 1: great and special. And in a lot of ways, someone
Speaker 1: like Elon Musk is a huge part of his success
Speaker 1: is his ability to attract sort of all the best
Speaker 1: people who want to work on rockets at at this
Speaker 1: one rocket company. If you think about the role of
Speaker 1: memes and marketing in that effort, I think, you know,
Speaker 1: memes are sort of the new way in which one
Speaker 1: can build a narrative around division. It could be something silly,
Speaker 1: like you know, a dog coin, or it could be
Speaker 1: something you know, serious and important like rockets and everything
Speaker 1: in between. And so I think, you know, memes are
Speaker 1: all good and fun, and we have you know, a
Speaker 1: great internal channel where everyone's sharing memes. But I think
Speaker 1: there's also something deeply powerful about, you know, their role
Speaker 1: in the way they're sort of shaping attention and directing
Speaker 1: energy towards certain projects that people get about. So I
Speaker 1: want to ask you. You mentioned that sort of like
Speaker 1: one of the interesting properties of crypto is this sort
Speaker 1: of predictability. And you mentioned that there's you know, unit swap,
Speaker 1: and I think that's a paradigm investment. You're an investor
Speaker 1: in unit swap. You know that code may live on
Speaker 1: in its current form for ten or maybe a hundred years,
Speaker 1: and so someone could build on top of that code
Speaker 1: and build something new and have some expectation that that
Speaker 1: is not going to change. When you think about investing,
Speaker 1: to what extent do you think about different portfolio investments
Speaker 1: or different tokens or different taos that you invest in
Speaker 1: as somewhat being like like, uh, the network effects within
Speaker 1: your own companies, within paradigm companies, or within paradigm investments.
Speaker 1: I mean people in traditional tech. But I always talk
Speaker 1: about network effects, but it's sort of uh confined. There's
Speaker 1: like Facebook's network effect or Twitter, etcetera. To what extent
Speaker 1: do you think about sort of compounding network effects of
Speaker 1: different tokens you invest in that in some way old
Speaker 1: or enhance another company or token within your family. It's
Speaker 1: a great question, and I think it's present in the
Speaker 1: dynamics of the portfolio, which is, if we invest in
Speaker 1: protocols that are providing a great value to the ecosystem
Speaker 1: and its users, then it often makes a lot of
Speaker 1: sense for those protocols to start interoperating or building on
Speaker 1: top of each other. And so that's definitely a dynamic
Speaker 1: that we'd love to encourage and do think about. I
Speaker 1: think there is actually a nice sort of pre existing
Speaker 1: analogy to that effect, where if you look at a
Speaker 1: incubator like y Combinator, it's sort of a very common
Speaker 1: element that new hy Combinator startups often their first customers
Speaker 1: or first hundred customers are actually like other y combinator startups,
Speaker 1: and I think that's been a powerful flywheel for that
Speaker 1: community overall. And certainly we do hope that if we're
Speaker 1: doing our jobs right, which is, you know, finding and
Speaker 1: supporting some of the most ambitious and special crypto entrepreneurs
Speaker 1: around the world, that there will be a lot of
Speaker 1: benefits to them being in that same community and being
Speaker 1: able to work together. I have a slightly theoretical question,
Speaker 1: but you know, one of the benefits, or one of
Speaker 1: the sort of selling points for crypto has at various
Speaker 1: times been described as the manufacturing of artificial scarcity. So
Speaker 1: something like bitcoin, there is a limited amount, only a
Speaker 1: certain number of coins are ever going to be mined,
Speaker 1: and so there's something valuable about them. The same thing
Speaker 1: sort of for and f t s. You know, if
Speaker 1: you collect a certain type of arts or pieces from
Speaker 1: one artist in particular, there's a limited amount. But one
Speaker 1: of the things I sometimes wonder about is, with all
Speaker 1: the attention on crypto at the moment, and all the
Speaker 1: money flooding into the space, does the artificial scarcity benefit
Speaker 1: or case get sort of eroded because you just see
Speaker 1: more and more projects, you know, more tokens, more coins,
Speaker 1: more n f t s, and people are just sort
Speaker 1: of flitting from one thing to the next, such that
Speaker 1: a market, never actually an individual market might get scarce,
Speaker 1: but crypto as a total is just multiplying perhaps the
Speaker 1: the core underlying question is this one of with an
Speaker 1: oversupply of capital, is that kind of efficient in terms
Speaker 1: of driving towards the innovation that you know, crypto has
Speaker 1: the potential to achieve, and at least we think about
Speaker 1: it in these terms in which you know, I think
Speaker 1: when markets get overheated, you think of investing as a
Speaker 1: sort of a capital allocation and function for sort of
Speaker 1: which experiment mints are worthy of running and once they
Speaker 1: start working, which ones are worth supporting more. And in
Speaker 1: this environment in which capital is abundant, I think that
Speaker 1: sort of selection function is probably a bit weaker, and
Speaker 1: that does make it very hard as an investor, or
Speaker 1: an engineer or an entrepreneur to kind of know what
Speaker 1: to pay attention to. And there's certainly this this dynamic
Speaker 1: of the flavor of the week, you know, we we
Speaker 1: often remark internally in some ways there were elements to
Speaker 1: miss about the bear market of two thousand eighteen, because
Speaker 1: with nobody paying attention and not that much capital around,
Speaker 1: it was actually easier to get work done. People made
Speaker 1: more progress, and the people who were building were really
Speaker 1: committed because they were doing it even though it was
Speaker 1: really not cool and you know, people made fun of
Speaker 1: them for doing it. So I think we are at
Speaker 1: the other end of the spectrum now and the pendulum
Speaker 1: has swung. It's a great time to be a crypto investor, entrepreneur,
Speaker 1: and there's a lot of opportunity, but I also think
Speaker 1: there's there's a lot of signal to noise to to
Speaker 1: work through. Speaking of, um, the other end of the pendulum,
Speaker 1: and I want to get your take on something. One
Speaker 1: of the things that gets discussed I don't think particularly
Speaker 1: loudly in crypto Twitter or crypto generally, but it's definitely
Speaker 1: discussed is the huge gap that people sometimes site between
Speaker 1: how coins are valued when they're offered up privately versus
Speaker 1: when those same token projects become ultimately listed. So there
Speaker 1: may be some sort of crypto thing but it's pre token,
Speaker 1: and then the token becomes available on the decentralized exchanges
Speaker 1: or on f t X or binance, and people like
Speaker 1: oh ten exits A. Is that the case that they're
Speaker 1: in your view right now, that there is still this
Speaker 1: huge gap between private valuations and then what how coins
Speaker 1: are valued once they're sort of listed and be you know,
Speaker 1: you talk about at the very beginning or early on.
Speaker 1: You want Paradigm to be a place that if I were,
Speaker 1: say raising money for a you know, some new token offering,
Speaker 1: I would want to go to you. And so how
Speaker 1: much is it is? Just sort of like that access
Speaker 1: to deal flow you want the first look. You want
Speaker 1: people to say, I want Paradigm money as opposed to
Speaker 1: you know, I want to name another one, but as
Speaker 1: opposed to some other fun money. How important is that
Speaker 1: sort of like early stage investment in sort of like
Speaker 1: where you see delivering returns. Yeah, I think crypto markets
Speaker 1: have always been sometimes a puzzle on the valuation side.
Speaker 1: I think, you know, relative to other markets, and I
Speaker 1: won't name specific names, but I think there are really substantive,
Speaker 1: credible projects that are maybe worthy of what they're worth,
Speaker 1: and there are others that may be less so. And
Speaker 1: I think there's maybe not as much of a forcing
Speaker 1: function in crypto markets around that. But I think to
Speaker 1: your point on you know, the stage of getting involved,
Speaker 1: we do aspire to get involved as early as possible.
Speaker 1: That's in part because we believe that we've built a
Speaker 1: team that can help from the earliest days, and especially
Speaker 1: when you're building a protocol related project, so much of
Speaker 1: getting a protocol right is sort of the initial protocol
Speaker 1: you launch with. In contrast to say a website or
Speaker 1: a mobile app that you're updating every day or every week,
Speaker 1: protocols are much less frequent in terms of upgrade cycle,
Speaker 1: and so there's a lot of importance We believe in
Speaker 1: in getting things right up front, and so we aspire
Speaker 1: to to get involved from the earliest days. That being said,
Speaker 1: we're humble about the fact that there's going to be
Speaker 1: plenty of great projects that will miss and we we
Speaker 1: love participating down the line too, if that's when it
Speaker 1: makes sense. So at the other end of getting in
Speaker 1: early is um, you know, actually getting out and the
Speaker 1: exit process um for companies, and I'm curious what that
Speaker 1: looks like for crypto businesses. So, you know, coin Base
Speaker 1: went public, but I don't think we've seen many other
Speaker 1: crypto entities that have done the same, and part of
Speaker 1: me gets the sense that a lot of them wouldn't
Speaker 1: want to. There's sort of attention between disrupting the existing
Speaker 1: world of finance, you know, the traditional listening process, and
Speaker 1: what they're trying to do in various ways with crypto
Speaker 1: and blockchain. It seems like listing might be sort of contradictory.
Speaker 1: So how do you see the exits for your investments? Sure, so,
Speaker 1: for first we we tend not to think too much
Speaker 1: about that because we do you know, we're only three
Speaker 1: years into the life of Paradigm, and we believe a
Speaker 1: lot of the best companies or projects will be ten
Speaker 1: year or more journeys. But in terms of your structural question,
Speaker 1: I think it sort of gets back to the question
Speaker 1: earlier about tokens versus equity. There are certain types of
Speaker 1: crypto businesses that are, at least today a much better
Speaker 1: fit for the traditional you know, see court model, coin
Speaker 1: based being an example, or you know, exchanges globally around
Speaker 1: the world, software as a service businesses that might be
Speaker 1: you know, building software for crypto companies as two examples,
Speaker 1: And so I think a lot of those businesses will
Speaker 1: probably take a more traditional I P O path, And
Speaker 1: maybe the distinction is that their regular businesses and generate
Speaker 1: revenue in a normal way, they just happened to serve
Speaker 1: the crypto market. And then on the other end of
Speaker 1: the spectrum, there's sort of the crypto protocols that you know,
Speaker 1: have tokens from early on, and I would guess You're
Speaker 1: probably right that you know, a lot of those protocols
Speaker 1: probably don't take the traditional I P O path in
Speaker 1: the long run. So I just want to sort of
Speaker 1: crystallize these different options with an actual example. So, if
Speaker 1: if you had the option of investing in so Lana
Speaker 1: the token or the coin versus investing in so Lana
Speaker 1: as like a business, which would be the better long
Speaker 1: term investment in your view? Well, so maybe apologies for
Speaker 1: resisting this particular example, but maybe let me share, Maybe
Speaker 1: let me share sort of protocols like Salona, which I
Speaker 1: would categorize as sort of layer one protocols that are
Speaker 1: sort of building a full blockchain have sort of a
Speaker 1: core monetary unit at their center. I think those types
Speaker 1: of investments we believe ultimately the monetary unit or the
Speaker 1: unit of account in Salona's case, sol or an Ethereum's
Speaker 1: case ether, those are the sort of most natural place
Speaker 1: for value to accrue in the long run, relative to
Speaker 1: a corporate structure that might exist. And in a lot
Speaker 1: of ways, the corporate structure maybe there's sort of somewhat orthogonal,
Speaker 1: and that it's maybe a labs entity or something else
Speaker 1: that's responsible for the development of the core protocol, but
Speaker 1: maybe other things around the ecosystem, but not necessarily um
Speaker 1: a core revenue driver. Right. A lot of these are
Speaker 1: non not for profit foundations, right, that's right, that's right,
Speaker 1: And I think that the ecosystem is sort of still
Speaker 1: exploring best practices on exactly how to structure all this stuff.
Speaker 1: But that's right. And then on the flip side, you know,
Speaker 1: we're investors in a company that provides accounting software or
Speaker 1: tax software called tax Bit, and that's an example where
Speaker 1: besides the fact that it serves the crypto industry, it
Speaker 1: looks very much like a traditional software as a service company.
Speaker 1: So you've mentioned that right now kind of feels like
Speaker 1: the other end of the pendulum from and that was
Speaker 1: like the sort of the crypto winter, as was called,
Speaker 1: and we're definitely not we're you know, long crypto summer.
Speaker 1: Do you ever look at things that are going on
Speaker 1: right now, whether it's like the million fork of Home,
Speaker 1: you know, some sort of crazy, uh you know, projects
Speaker 1: that even the adherents joke about, like they blatantly call
Speaker 1: them ponzis in many cases, or say, you know, the
Speaker 1: twentie version of a coin that has a puppy and
Speaker 1: Elon Musk's name, do you ever like worry about like
Speaker 1: a sort of hot money, or maybe better term that
Speaker 1: I think about it, like cynical money, which is like
Speaker 1: projects that are clearly I don't know, do not seem
Speaker 1: to be built with some sort of longer vision other
Speaker 1: than like capitalizing and trying to make money right now.
Speaker 1: Do you worry that that has corrosive effects on the
Speaker 1: space or is that just like or do you not
Speaker 1: see it that way? And that's just like some people
Speaker 1: are having fun and throwing things against the wall and
Speaker 1: there's no reason to view it cynically. Yeah, it's a
Speaker 1: great question. I mean, on one level, it just is
Speaker 1: it's it's neither good or bad. It's it's all part
Speaker 1: of a whole. And I think, you know, would it
Speaker 1: be better if more labor and capital and attention was
Speaker 1: focused on really great, long term innovative projects. I think yes.
Speaker 1: And then sort of any market that attracts, any market
Speaker 1: that starts to do well and attracts other participants, I
Speaker 1: think ends up with these sorts of you know, speculative dynamics,
Speaker 1: and I think there's somewhat inseparable and so you know,
Speaker 1: it's hard to to sort of critique one part of
Speaker 1: it without thinking about the broader hole. I do think
Speaker 1: we'll see cyclical effects over time as a result, because
Speaker 1: to your point, and you know, I love that you're
Speaker 1: following the twentie ome fork, but you know, eventually people
Speaker 1: probably tire of the ome forks, and so there's sort
Speaker 1: of attention and interest that can exhaust. But you know, ultimately,
Speaker 1: I think Crypto as a whole feels very robust relative
Speaker 1: to you to three years ago. There's a guy in
Speaker 1: my d MS every week who I really like personally.
Speaker 1: Actually I don't know who he is. I don't even
Speaker 1: know if it's a guy. And he's like, what are
Speaker 1: you doing an OME episode? What are you doing an
Speaker 1: episode of? Like, we're not doing an OLM episode. We're
Speaker 1: not doing an episode on something that you blatantly joke
Speaker 1: of as a Ponzi. But anyway, sorry, keep going anyway.
Speaker 1: I just get a kick out of that hole. So
Speaker 1: that's actually the fascinating because I think the you know,
Speaker 1: to your point, there's sort of like a decentralized signal filter, right,
Speaker 1: so you know, Bloomberg is not going to cover home,
Speaker 1: and Bloomberg is going to focus on you know, more
Speaker 1: substantive long term projects, and I think that's generally speaking
Speaker 1: a decent place to go, although maybe I'm like, you know,
Speaker 1: that's gonna really come back to haunt me. And when
Speaker 1: Home is truly the sort of like the unbacked stable
Speaker 1: coin of the Internet, I'll feel like that person who
Speaker 1: dismissed all the Bitcoin pitches in my inbox from that's right,
Speaker 1: you should do an Home episode as insurance then, just
Speaker 1: as ensure. Do you think case it's the currency of
Speaker 1: the future, right? I guess this is kind of a
Speaker 1: related question, but just in terms of evaluating use cases
Speaker 1: for different um coins or technologies, like so much of
Speaker 1: it right now depends on their ability to scale up
Speaker 1: um and I know this is something that you've been
Speaker 1: watching quite closely when it comes to ethereum, but like,
Speaker 1: how how are those efforts going in your view, and
Speaker 1: what are the challenges of scaling up or making the
Speaker 1: networks more efficient for a lot of those coins, Because
Speaker 1: this is going to be the thing that you know
Speaker 1: drives defy expansion, So if the underlying tech isn't working
Speaker 1: that smooth, that would seem to be a problem. I
Speaker 1: think it maybe it's worth elucidating sort of why there
Speaker 1: is this core issue, which is part of what blockchains
Speaker 1: do is to ensure that there's sort of this immutable
Speaker 1: record of what happened. You know, transactions are basically repeated
Speaker 1: on a lot of different machines in a consensus process,
Speaker 1: and that's inherently going to be more costly and less
Speaker 1: efficient than sort of traditional Internet services. And I think
Speaker 1: when you think about that process, there's a couple of
Speaker 1: different ways of solving it. One way is to sort
Speaker 1: of batch transactions together and either make proofs about them
Speaker 1: or you know, optimistically accept them and accept fraud proofs
Speaker 1: about them. And that's a type of scaling solution that's
Speaker 1: emerging around ethereum called roll ups. Another approach is to
Speaker 1: think about the hardware that you're using to run these
Speaker 1: and be able to run them in larger and better hardware.
Speaker 1: I would say right now we're at a phase in
Speaker 1: the ecosystem where basically every potential solution is being explored,
Speaker 1: and I think that's great for the ecosystem overall, and
Speaker 1: relative to two or three years ago, we're a lot
Speaker 1: further along. There's optimistic roll ups and zero knowledge roll ups,
Speaker 1: both in production around Ethereum. There's other layer, ones like Salana,
Speaker 1: which are more scalable, and so we're sort of seeing
Speaker 1: this play out in real time, and I would guess
Speaker 1: another couple of years from now, scaling will still be
Speaker 1: an issue, but it will no longer feel as existential
Speaker 1: or uncertain. The sort of fog of war will have lifted,
Speaker 1: and we'll have much more clarity on sort of the
Speaker 1: specific paths and directions that are going to work. So
Speaker 1: I want to ask you a question about this sort
Speaker 1: of you know, we've been talking about crypto, the term
Speaker 1: web three point oh has sort of become synonymous, and
Speaker 1: I think, like you know, people like here web three
Speaker 1: point oh, there's this debate and this was This is
Speaker 1: actually another thing that got discussed recently on crypto Twitter recently,
Speaker 1: which is will the services that we've come to associate with,
Speaker 1: like the last iteration of the web web two point oh,
Speaker 1: will they all become sort of like on blockchain? And
Speaker 1: so the classic examples like will there be an uber
Speaker 1: on the blockchain where instead of an uber inc, like
Speaker 1: a company that there is like some sort of like
Speaker 1: decentralized protocol that routed drivers and they collected token and
Speaker 1: it's sort of and the every passenger and driver get
Speaker 1: some sort of reputation score. We no longer need like
Speaker 1: a sort of like corporate o man or something like that,
Speaker 1: or Twitter or could could that entirely exist on a
Speaker 1: blockchain without an LLC as we know it? And I'm curious,
Speaker 1: you know, you've kind of been a little bit reluctant
Speaker 1: to sort of elucidate specifically the investment idea. But what
Speaker 1: do you think about that? Like, are all these sort
Speaker 1: of Web two point oh things in your view going
Speaker 1: to get recreated on chain or do you think all
Speaker 1: those are sort of more or less exist in their
Speaker 1: current form, And what happens on web three point I
Speaker 1: would just be something novel that we can't really anticipate yet.
Speaker 1: I think there's sort of two thoughts on this. The
Speaker 1: first is that we tend to think that it's much
Speaker 1: easier for the blockchain to kind of reason about things
Speaker 1: that are on the blockchain or at least digital and
Speaker 1: sort of accessible via oracle or some other mechanism. And
Speaker 1: so the example of Uber on the blockchain, you know,
Speaker 1: I would guess that that's really far off if it
Speaker 1: ever happens. In contrast, I think gaming is a great
Speaker 1: example where you know, most games aren't fully on chain,
Speaker 1: but the idea of putting game items or gain currency
Speaker 1: on chain is a very natural one, and we're likely
Speaker 1: to see that happen much sooner. So that would be
Speaker 1: one general principle we think about is sort of how
Speaker 1: blockchain or crypto native is the application or how digitally
Speaker 1: native is it. I think the second thing we think
Speaker 1: about is it's always easy to think in analogies like
Speaker 1: Facebook on the block chain, Uber on the blockchain. I
Speaker 1: think we tend to have the view that the most
Speaker 1: compelling applications will be kind of uniquely enabled by the
Speaker 1: new technology. You wouldn't have been able to build it
Speaker 1: without it, and so you know the example, but the
Speaker 1: Internet might be something like you could put the New
Speaker 1: York Times or Bloomberg on line, but you couldn't have
Speaker 1: done Wikipedia before the Internet, and I think that was
Speaker 1: you know, ultimately much more interesting, although not a huge business.
Speaker 1: In the crypto world, I think there's sort of this
Speaker 1: example of unit swap, of the idea of like this
Speaker 1: on chain always available sort of permission this market maker
Speaker 1: was not possible before and now it's it's suddenly possible.
Speaker 1: Because sort of ethereum is is kind of live all
Speaker 1: the time, and so that's what we're really looking for
Speaker 1: at Paradigm is sort of these uniquely enabled applications that
Speaker 1: wouldn't have been possible before. Can you give us an example,
Speaker 1: like a really concrete example of something that's exciting you
Speaker 1: in the space right now, Like, what is it that
Speaker 1: that you're most like optimistic about or enthusiastic about. I
Speaker 1: think the the idea of and I've already sort of
Speaker 1: already mentioned it, but the idea of digital games adopting blockchains.
Speaker 1: I think it's just a really compelling area, both because
Speaker 1: this is a behavior that's already sort of decades old,
Speaker 1: the idea of placing value and digital items potentially trading them,
Speaker 1: and it's a really natural fit for what you know,
Speaker 1: crypto and blockchain enables, which is true digital property rights.
Speaker 1: And so you know, imagine the person who's maybe playing
Speaker 1: World of Warcraft for ten hours a day and really
Speaker 1: investing time, energy, money into their digital life effectively in
Speaker 1: this game, and yet most of the value is purely
Speaker 1: subject to the platform. One analogy we think about is,
Speaker 1: you know a lot of these digital worlds, whether it's games,
Speaker 1: or you know, Facebook's metaverse or your digital cryptosystems. You're
Speaker 1: sort of moving to a new country in a lot
Speaker 1: of ways and sort of adopting the rules of this
Speaker 1: new country. And it turns out that today most of
Speaker 1: those digital systems are you know, effectively autocratic in contrast
Speaker 1: to you know, what we think of as good governance
Speaker 1: today more broadly, So I think that's a tremendous intersection.
Speaker 1: And then just very practically, we're seeing the gaming industry
Speaker 1: really adopt this seriously. All the major large studios, small studios,
Speaker 1: gaming entrepreneurs from past waves are really sort of rushing
Speaker 1: head first because Crypto has all all of a sudden,
Speaker 1: cracked open, this you know, creative canvas that I think
Speaker 1: people are really excited to explore. So I just have
Speaker 1: one last question, and it's sort of pragmatic, but you know,
Speaker 1: two and a half billion dollar raised for this new fund,
Speaker 1: what is do you have like a sort of estimated
Speaker 1: internal guesses to the length of time that you expect
Speaker 1: to deploy that over and sort of the cycle of
Speaker 1: it's so you know, we sort of, you know, we
Speaker 1: joked at the beginning three weeks or three months in crypto,
Speaker 1: it feels like years. What is the cycle of which
Speaker 1: you expect to deploy two and a half billion dollars?
Speaker 1: And uh, you know how many different projects give some
Speaker 1: guests of how far that will how far that will go?
Speaker 1: Like what's your what's your goal here? So the top
Speaker 1: level answers that were very focus bottoms up and you know,
Speaker 1: not not trying to adadge the question, but just very
Speaker 1: genuinely we're always just trying to find interesting people and
Speaker 1: projects and back the ones that we get very excited about.
Speaker 1: And that could be at the really early stage with
Speaker 1: small checks, it could be at the growth stage with
Speaker 1: larger checks. I would guess that it's not dissimilar to
Speaker 1: any other venture capital fund, which might you know, have
Speaker 1: a deployment period of a couple of years. Well, Matt,
Speaker 1: it was a it was a real pleasure to have
Speaker 1: you on odd lots. Really appreciate it, really fascinating conversation
Speaker 1: and looking forward to uh seeing what you do. Cool.
Speaker 1: Thanks for the time, Yeah, take care of Matt. Thanks
Speaker 1: so much, Matt. Truth so trazy. I found that conversation
Speaker 1: to be really interesting, and I think the thing that
Speaker 1: struck me the most, I mean, at the end, what
Speaker 1: he said to you about you know, his interest in
Speaker 1: blockchain gaming is clearly but I think like one of
Speaker 1: the things that struck me most was sort of like
Speaker 1: how open ended they seem to be, or mad seems
Speaker 1: to be about where this might go, which is like,
Speaker 1: we don't really know, it might look totally different. No
Speaker 1: one could have anticipated Wikipedia prior to the Internet, and
Speaker 1: just the sort of idea of let's just see what
Speaker 1: the talented people are building. Yeah, I think the thing
Speaker 1: that stood out to me um was that bit towards
Speaker 1: the end of the conversation where he was talking about
Speaker 1: what you put all this stuff on the chain and
Speaker 1: you're building Web three point oh or Web three or whatever.
Speaker 1: But what you're essentially doing is sort of move moving
Speaker 1: from those vertical models of trust where everything you know,
Speaker 1: was controlled by a single entity, like I mean, Facebook's
Speaker 1: about example, because it's going to be starting the metaverse,
Speaker 1: but like everything is controlled by Facebook, the social network,
Speaker 1: and now you're moving to sort of more horizontal structure
Speaker 1: of trust that's enabled by the protocols that might be
Speaker 1: embedded in a particular crypto project like Needless to Stay
Speaker 1: and probably I think both of us, you know, still
Speaker 1: have some I don't know crypto. Neither of us are
Speaker 1: like totally drinking the kool aid crypto converts, And I
Speaker 1: kind of see myself as somewhere in the middle these days.
Speaker 1: But I think a lot of the problem that people
Speaker 1: have what they is they sort of like, oh, like
Speaker 1: Uber already works fine, um as it is, it doesn't
Speaker 1: need to be on the blockchain, or Facebook already works fine,
Speaker 1: or Twitter works fine, or banking works fine, or Robin
Speaker 1: hood works fine. And it kind of feels like, as
Speaker 1: he put it, or the way he's thinking about it,
Speaker 1: it's like, yeah, maybe it's not about solving some obvious
Speaker 1: problem that already exists, and maybe that's the wrong question
Speaker 1: as opposed to what organically emerges out of these new
Speaker 1: governance structures or property right structures that we sort of
Speaker 1: came conceive of. And so it's like the yeah, but
Speaker 1: what is crypto four question? Maybe in a sense, maybe
Speaker 1: it's the wrong question to be asking at some level. Yeah,
Speaker 1: although I kind of feel like, with the amount of
Speaker 1: money that is pouring into the space, you would want
Speaker 1: you would want to be asking that question. And again,
Speaker 1: like part of me is very interested to see what
Speaker 1: comes out of all of this. But the other part
Speaker 1: of me is thinking, why can't all this money go
Speaker 1: into I don't know, some sort of environmental technology or
Speaker 1: something like that, rather than who's making like the most
Speaker 1: efficient way to move n f T s from one
Speaker 1: owner to the other. But who knows, like maybe maybe
Speaker 1: the metaverse or web three or whatever is going to
Speaker 1: be absolutely amazing and you know we'll take it all back. Yeah.
Speaker 1: Well no, I mean I remember, like you sort of
Speaker 1: made fun of me, like, you know, when so we
Speaker 1: did some of our defy me make fun of you?
Speaker 1: Yeah right, that would never happened when we did some
Speaker 1: of our like first Defy like episodes, like early in one,
Speaker 1: because I was like, yeah, well, what is the thing
Speaker 1: that's like getting funded? It's great to invent invent finance,
Speaker 1: but like finance has a reason. It's like to fund
Speaker 1: whaling expeditions and to distribute the risk of that, and
Speaker 1: so it's like, yeah, well what other things? And I
Speaker 1: guess like that is still where I stand. On some level,
Speaker 1: defy or crypto finance will seems like it has to
Speaker 1: like finance something of some use rather than just and
Speaker 1: I saw and also I wonder, like, you know, looking
Speaker 1: at this in December or November. At this point was
Speaker 1: like all of these own forks, many of which like
Speaker 1: are like you know, they like called themselves Ponzi schemes.
Speaker 1: It's like, is this really going in the other direction
Speaker 1: where it's like these are just blatant the games. First
Speaker 1: of all, I can tell already that we are going
Speaker 1: to end up doing an episode on on and then secondly,
Speaker 1: I love that all our de fi episodes always come
Speaker 1: back to the whaling industry. That's the whole point of finance.
Speaker 1: Distribute risk from something that has, you know, very unpredictable return.
Speaker 1: All right, shall we leave it there, Let's leave it there. Okay,
Speaker 1: this has been another episode of the All Thoughts Podcast.
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at
Speaker 1: Tracy Alloway and I'm Joey Isn't All. You can follow
Speaker 1: me on Twitter at the Stalwart. Follow our guests on Twitter.
Speaker 1: Matt Wong, He's Matt Long. Follow our producer Laura Carlson,
Speaker 1: She's at Laura M. Carlson. Follow the Bloomberg Head podcast
Speaker 1: Francesco Levi at Francesca Today, and check out all of
Speaker 1: our podcast at Bloomberg under the handle at podcasts thanks
Speaker 1: for listening,