Speaker 1: Hi everyone, I'm Emily Chang and this is Bloomberg Studio
Speaker 1: One Point Oh podcast, a series where I speak with
Speaker 1: the biggest influencers in technology and media. Over the last decade,
Speaker 1: I've had in depth conversations with the very people shaping
Speaker 1: the future of business of our world, sharing their vision
Speaker 1: for what comes next. Today, we take a deep dive
Speaker 1: into all things crypto as we speak to a true
Speaker 1: crypto o g Not long after bitcoin was born, Fred
Speaker 1: Urson became an analyst at Goldman Sachs. The new mysterious
Speaker 1: digital currency had been invented by Satoshi Nakamoto, a pseudonym
Speaker 1: for a person or group that wanted to circumvent the
Speaker 1: traditional banking system. On a good day, the price was
Speaker 1: mere sense and almost no one knew what it was.
Speaker 1: But Ersome saw the potential. He bought in as much
Speaker 1: as he could and found himself obsessively checking early cryptocurrency
Speaker 1: exchange mount cox and scouring Reddit threads, where he met
Speaker 1: another bitcoin enthusiast, Brian Armstraw. As mount gox was hacked
Speaker 1: and going bankrupt, Armstrong and Ersa were building coin base,
Speaker 1: which would become the most mainstream place to buy, sell,
Speaker 1: and store cryptocurrency in the United States. In the span
Speaker 1: of a little more than a decade, the crypto market
Speaker 1: went from zero to more than two trillion dollars, with
Speaker 1: some upo highs and gut wrenching lows in between. Joining
Speaker 1: me on this edition of Bloomberg Studio at one point,
Speaker 1: oh to talk about that wild ride and where it's
Speaker 1: going next. Co founder of coin Base and the crypto
Speaker 1: investment firm Paradigm, Fred Erson, take me to the very
Speaker 1: beginning of your crypto journey when you were an analyst
Speaker 1: at Goldman Sachs. What was it that drove you to
Speaker 1: this emerging technology. Jeez, I think I was lucky because
Speaker 1: I had three core ingredients to understand crypto. One was
Speaker 1: I was a computer scientist and engineer by training. The
Speaker 1: second is a Goldman I was trading fact specifically the
Speaker 1: Euro him watching the European crisis unfold every day, watching
Speaker 1: the I m F give the next tranche of bailouts
Speaker 1: degree seeing how the Euro would trade on that, thinking hey,
Speaker 1: maybe this isn't working so well. And the last is
Speaker 1: I was a hardcore gamer in high school. I was
Speaker 1: on the best team in the world at a video game.
Speaker 1: Lived in these virtual worlds that had virtual currency all
Speaker 1: the time, so that idea was pretty natural to me.
Speaker 1: UM and this was right around the time that bitcoin
Speaker 1: came out on the Internet. Around UH and nights and weekends,
Speaker 1: I would just spend my time getting further and further
Speaker 1: into it. Tell us about the moment when you realized
Speaker 1: that this crypto thing was really something, when the world
Speaker 1: and your friends probably had no idea what was going
Speaker 1: on or thought you were crazy. Well, when we launched
Speaker 1: coin base inve out of two bedroom apartment in San Francisco,
Speaker 1: it did seem like a crazy idea. At the time
Speaker 1: you walk down the street, nobody would know what bitcoin was.
Speaker 1: Those people who knew about it probably thought it was nuts. Um.
Speaker 1: The literal advertisement, even on the bitcoin subread at the time,
Speaker 1: was a bad Microsoft paint uh painting of a wizard
Speaker 1: that said magical Internet money. UM. So very very not
Speaker 1: obvious at the time. The thing though, that really stood
Speaker 1: out is the community was extremely strong, even though it
Speaker 1: was small um And if you look at the early
Speaker 1: coin based numbers, things grew really well, especially when we
Speaker 1: added the simple feature just to buy and sell bitcoin
Speaker 1: with any US bank account with one click. UM. So
Speaker 1: while it seemed crazy to most outsiders at the time,
Speaker 1: it was clearly growing on the inside, and I think
Speaker 1: that's even true in crypto today. On some level you
Speaker 1: have UM, these kind of radical believers on the inside,
Speaker 1: and then many people on the outside who might still
Speaker 1: be touching the elephants, still trying to figure out exactly
Speaker 1: what's going on here. How did you meet Brian Armstrong,
Speaker 1: founder of coin base, and what did you too set
Speaker 1: out to do? UM? Well, like any great crypto venture,
Speaker 1: it started decentralized in some sense. We met on Reddit.
Speaker 1: On the Bitcoin subreddit, he posted a prototype of an
Speaker 1: early version of coin base and I emailed them. We
Speaker 1: met up at the now infamous creamery in San Francisco,
Speaker 1: which is sort of the like back in twelve was
Speaker 1: the place where everybody would would do meetings. UM started
Speaker 1: working together fifteen hours a day for four weeks, weekends included.
Speaker 1: It turned out we both really cared about building something
Speaker 1: in crypto that allowed the whole thing to go mainstream.
Speaker 1: And at the time where you bought in, like had
Speaker 1: you invested your own money into this magical internet money
Speaker 1: not knowing what would happen? Yeah, I was fully bought in.
Speaker 1: Both financially and career wise. UM. I quit my job
Speaker 1: at Goldman UM and moved out to the West Coast,
Speaker 1: not even having a place to live. UM obviously started
Speaker 1: working on coin Base, and then financially I didn't have
Speaker 1: very much money, but the little money I did have
Speaker 1: UM I invested in bitcoin. And it's funny, the most
Speaker 1: expensive thing I own today is still a car I
Speaker 1: bought in twelve. I bought it for nineteen thousand dollars UM.
Speaker 1: At the time bitcoin was about ten dollars so an
Speaker 1: opportunity cost terms, that's about a fifty million dollar car.
Speaker 1: I still love the car, but just to give a
Speaker 1: sense for how expensive real world goods are in bitcoin
Speaker 1: terms over time. You were at coin base, co founder
Speaker 1: until UM you were president I believe at the time,
Speaker 1: and then you left. Why did you leave UM A
Speaker 1: couple of reasons. One I felt like the company was
Speaker 1: just in a very good spot. The second is for
Speaker 1: much of crypto's history, so from ten when bitcoin sort
Speaker 1: of came out two thousand nine up until really the
Speaker 1: only idea that seemed possible in crypto was this idea
Speaker 1: that it was a new global digital money. UM and
Speaker 1: the thing that really changed in sen Is. All of
Speaker 1: a sudden, the doors opened to much broader applications. Ethereum
Speaker 1: came on the scene and showed that blockchain based applications
Speaker 1: were possible to build, and people were both building very
Speaker 1: early versions of them. Today we know those things better
Speaker 1: as Defy or these decentralized financial applications that live on
Speaker 1: the blockchain, and even more broadly, I think over time
Speaker 1: we'll see mainstream consumer apps and perhaps n f t
Speaker 1: s are a weird bleeding edge of exactly that. Um
Speaker 1: so I found that that whole new frontier to be
Speaker 1: extremely exciting. Coin bases direct listing it's now a public
Speaker 1: company was a huge moment for mainstream institutional adoption. But
Speaker 1: it still seems like so much of the world doesn't
Speaker 1: get crypto and how big it can be. What do
Speaker 1: you think they're missing? The short answer is a lot um.
Speaker 1: I think. Look, crypto is its own rabbit hole UM,
Speaker 1: and just like any new powerful technology, it's extremely powerful
Speaker 1: because it reimagines very important systems that run the world
Speaker 1: today from the ground up. UM. Most people primarily think
Speaker 1: about crypto again as a new digital money. UM that's
Speaker 1: really worked, especially with bitcoin, is a store of value
Speaker 1: where we've seen bitcoin go from zero to a trillion
Speaker 1: dollars in market capitalization over the last ten years, but
Speaker 1: crypto goes much deeper than that. We think about crypto
Speaker 1: at Paradigm, which is UH, the investment firm I've started,
Speaker 1: along with Matt Long in three stages today, and of
Speaker 1: course that this model will evolve over time. The first
Speaker 1: is a new digital money, the second is a new
Speaker 1: financial system, and the third is just a broad UH
Speaker 1: Internet application platform. UM. So, in our minds, crypto isn't
Speaker 1: just kind of this new digital money or new digital gold. Um.
Speaker 1: It's a whole new financial system that we're seeing being
Speaker 1: built from the ground up by talented entrepreneurs all around
Speaker 1: the world. And while it's extremely early on the third frontier,
Speaker 1: a new application platform, we think that over over the
Speaker 1: course of decades, a lot of Internet applications that we're
Speaker 1: all using will also be crypto based. I've talked to
Speaker 1: investors who say coin Base could be the next a
Speaker 1: o l it's the first exchange that's you know, really
Speaker 1: gone mainstream, but it's too early and others will or
Speaker 1: something else will surpass it. What do you think, I
Speaker 1: think it's a fair question. I think history is yet
Speaker 1: to be written. UM. My view is that it's a
Speaker 1: very strong place to be to have the largest mainstream
Speaker 1: brand trust um, not only with users but also with regulators. UM.
Speaker 1: And that being that bridge into the crypto world is
Speaker 1: a great place to start. Now, as you mentioned, you
Speaker 1: now run a crypto focused investment firm called Paradigm. How
Speaker 1: is the crypto style of venture capital different from traditional
Speaker 1: venture capital? Yeah? Um, well I think in a few ways. UM.
Speaker 1: Just to talk about why we started Paradigm in the
Speaker 1: first place, myself and Matt Long, who was previously a
Speaker 1: partner at Sequoia focused and running their crypto investing efforts. Um,
Speaker 1: we we realized a couple of things. One, crypto is
Speaker 1: a whole new field that needs focus. To the core
Speaker 1: question that Matt and I asked ourselves and starting the
Speaker 1: firm is is there anybody out there who if we
Speaker 1: were crypto entrepreneurs building a business and Matt was a
Speaker 1: former y Combinator startup founder, I obviously started a large
Speaker 1: crypto company and coin base, who would we want to
Speaker 1: have as our first backers? And we couldn't really come
Speaker 1: up with a good answer to that question. UM. The
Speaker 1: last is, uh, I think the expertise required both on
Speaker 1: the team and operationally in crypto is very different. So
Speaker 1: we're really trying to build a firm UH from an
Speaker 1: engineering an entrepreneurial point of view to best support these
Speaker 1: crypto native companies and protocols. The crypto VC lands game
Speaker 1: is getting now more competitive, So where are you placing
Speaker 1: your bets? How do you stay ahead of the curve.
Speaker 1: The thing we're really excited about is a number of fronts.
Speaker 1: One is the picks and shovels businesses UM so, now
Speaker 1: that crypto has grown a lot, there are all sorts
Speaker 1: of basic infrastructure businesses that are being built out to
Speaker 1: support at ecosystem. Those of course include exchanges, also custodians,
Speaker 1: tax providers, k y C, a mL providers, lenders, cryptos
Speaker 1: back end as a service for any business that would
Speaker 1: like to integrate crypto, all sorts of these picks and
Speaker 1: shovel's businesses. A second big frontier, as we talked about before,
Speaker 1: is defy all of these crypto native financial building blocks
Speaker 1: UH that are being built out. Um and today's support
Speaker 1: around seventy five billion dollars and user assets, up from
Speaker 1: effectively zero three years ago. UM and This is sort
Speaker 1: of the bleeding edge of what we see as a
Speaker 1: whole series of crypto native applications. This is my conversation
Speaker 1: with the co founder of coin base and the crypto
Speaker 1: investment firm Paradigm thread person coming up. President Biden's sec
Speaker 1: has made it clear that crypto regulation is coming. How
Speaker 1: does Urson expect that to change the crypto landscape? And
Speaker 1: with thousands of cryptocurrencies out there, how many is too many?
Speaker 1: And we have to ask is dos coin a hustle?
Speaker 1: I'm Emily Chang, this is Bloomberg Studio. At one point, Oh,
Speaker 1: stay with us. There were something like four thousand cryptocurrencies
Speaker 1: at the start of the year. I mean, is that
Speaker 1: too many? Do you expect more? It's just like the Internet. Um,
Speaker 1: people are going to try all sorts of things. There
Speaker 1: will be millions and millions of cryptocurrencies and crypto assets,
Speaker 1: just like there were millions and millions of websites. Most
Speaker 1: of them won't work, especially early in the technology. There's
Speaker 1: a lot of dedicated communities out there and lot of tribalism.
Speaker 1: Is that a good thing? It's an interesting question. I'm
Speaker 1: I think every new, powerful technology tends to feel very
Speaker 1: polarizing at the beginning. UM, So I think some level
Speaker 1: of tribalism is inevitable at paradigm. We think that we're
Speaker 1: super early in this technology, so getting too caught up
Speaker 1: in any singular view or belief or paradigm no pun intended, UM,
Speaker 1: is probably unwise. What do you think about does is
Speaker 1: it a hustle or do you give it more credit
Speaker 1: than that? I think, UM, well, perhaps framing it from
Speaker 1: Ellen's point of view, and it's always dangerous to guess
Speaker 1: what's going on in the mind of Elon. Of course,
Speaker 1: if crypto has taught us anything, it's never to dismiss
Speaker 1: a good meme that could later manifest into UM more
Speaker 1: concrete progress. UM. I I tend to think there's less
Speaker 1: of that on the ground today. More holistically, I think
Speaker 1: whether it's does or more the n f T phenomenon,
Speaker 1: I do like that there are UM there are a
Speaker 1: lot of things recently that I think have just brought
Speaker 1: crypto to a much more mainstream awareness and audience. One
Speaker 1: joke we often tell is UM n f T has
Speaker 1: made it really obvious that most crypto insiders sort of
Speaker 1: word nerds that tended to care a lot about monetary
Speaker 1: theory or the intricacies of the financial system. And what
Speaker 1: n f T s really showed us is that, um,
Speaker 1: a lot more people, it turns out, care about culture, music, art,
Speaker 1: basically everybody does, UM, and that that's been a huge
Speaker 1: boon just for for public awareness of what the technology
Speaker 1: can do. Okay, but howsn't the n f T market
Speaker 1: kind of imploded over the last few weeks. I mean
Speaker 1: sales in almost every category or drawing up what's happening there, Yeah,
Speaker 1: is definitely down. And again I think that's natural, just
Speaker 1: like the cycles in crypto are. I go so far
Speaker 1: as to say that n f T s produced today
Speaker 1: probably will have little to no value in three to
Speaker 1: five years. You could say the same thing about early
Speaker 1: internet companies in the late nineties too, though. Um, it's
Speaker 1: sort of inevitable in a new technology that people are
Speaker 1: going to try a bunch of stuff. Most of it
Speaker 1: won't work at the beginning, but the technology itself is
Speaker 1: really important and really valuable over the long run, and
Speaker 1: there will be a few things that end up being
Speaker 1: fundamental building blocks that really do matter. I want to
Speaker 1: talk about regulation because the US government has yet to
Speaker 1: really take a stand on crypto, but President Biden's SEC
Speaker 1: has made it clear that some sort of stand is coming.
Speaker 1: What kind of regulation do you expect? So, I think
Speaker 1: the US is at a very important crossroads with crypto today.
Speaker 1: The US is blessed with the best currency and the
Speaker 1: world's reserve currency today. UM. It also tends to be
Speaker 1: the defect of financial regulator for a whole bunch of
Speaker 1: the world. We also have a history of being the
Speaker 1: strongest technology country in the world. If you look at
Speaker 1: the most valuable companies in the world today, most of
Speaker 1: them are American Internet technology companies, the Google's, the Microsoft's,
Speaker 1: the Facebook's. I do think, UH, that crypto is a
Speaker 1: nuanced issue, UM, and that it's possible the US gets
Speaker 1: crypto wrong. I'm I think today you have a lot
Speaker 1: of regulators whose job it is to mitigate risk and
Speaker 1: keep us all safe, and that's that's very appropriate. UM.
Speaker 1: At the same time, I think crypto is the next
Speaker 1: Internet sized opportunity for the United States. I think as
Speaker 1: the potential to create as many if not more jobs
Speaker 1: in the Internet, similar with economic growth. UM. I think
Speaker 1: it has the potential to who square the circle on
Speaker 1: the privacy Internet issues that we've been talking about with
Speaker 1: big tech companies for the last ten years, namely, we
Speaker 1: could use these technologies um to continue to own our
Speaker 1: own data while still getting all the benefits of the
Speaker 1: Internet platforms we know and love. Today, China is taking
Speaker 1: a stand on crypto for better or for worse, and
Speaker 1: that's also where most of the mining is happening. Do
Speaker 1: you have concerns that China is going to beat the
Speaker 1: US and crypto and that that's kind of a big deal. Yes,
Speaker 1: and it's on multiple fronts. To your point, one is
Speaker 1: there are government programs to explicitly build using crypto. This
Speaker 1: is true both with their dc EP initiative, which is
Speaker 1: basically making a digital remanby. It's also true of local
Speaker 1: governments who are trying to use blockchain technology. UM. And
Speaker 1: then to your point, historically most crypto mining has been
Speaker 1: in China. Recently, there was actually a government crackdown in
Speaker 1: China UM on mining, oftentimes because energy was being siphoned
Speaker 1: from the Chinese grid in ways that may or may
Speaker 1: not have been kosher. UM. So I think there's actually
Speaker 1: a huge moment of opportunity today, UH for miners in
Speaker 1: the United States or globally to h to step in
Speaker 1: and on the crypto side to make it more decentralized. Um.
Speaker 1: And then if you want to view it from a
Speaker 1: nation state point of view, to make sure that no
Speaker 1: single country is in control. You're listening to my conversation
Speaker 1: with cred or some co founder of coin base and Paradigm.
Speaker 1: Up next, The big promise of crypto is that it's
Speaker 1: the next so called iteration of the Internet. But how
Speaker 1: long until we get there and we bust the biggest
Speaker 1: cryptocurrency myths? Spoiler alert, It's not all about speculation. I'm
Speaker 1: Emily Chang. This is Bloombrook Studio. One point out, stay
Speaker 1: with us. There are folks out there who think crypto
Speaker 1: is a gimmick or a Ponzi scheme, or an unsafe
Speaker 1: hedge against inflation. What do you think are the biggest
Speaker 1: myths about crisp crypto that you want to bust? Oh jeez,
Speaker 1: so many good ones. Um. Well, perhaps number one that
Speaker 1: crypto is all about speculation. Um. I think all investment
Speaker 1: can be framed on some spectrum from it from speculation
Speaker 1: to extremely long term holding. And I think as people
Speaker 1: get more comfortable with the idea of crypto and why
Speaker 1: it is a superior money and store of value across
Speaker 1: all these different dimensions of money, whether it's scarcity, portability, divisibility,
Speaker 1: UM that people are viewing at as a more long
Speaker 1: term holding. In addition to the fact that there is
Speaker 1: real utility for crypto being built today all these financial
Speaker 1: services and new Internet applications. A second big one, of
Speaker 1: course is energy. UM. This is one of the hot
Speaker 1: topics no pun intended around crypto today. My meta view
Speaker 1: of the issue is that it takes far more energy
Speaker 1: and resources UH to protect and use physical assets than
Speaker 1: it does digital ones. So does that mean you think
Speaker 1: the energy concerns raised by Bill Gates and even Elon
Speaker 1: Musk are a red herring. I think they should examine
Speaker 1: the issue more closely UM, and I think the industry
Speaker 1: hasn't done the best job of making legible exactly what's
Speaker 1: going on here. So my personal view is, UM, it's
Speaker 1: actually going to be a lot more energy efficient to
Speaker 1: use these digital systems of value transfer over time time.
Speaker 1: But it's understandable that there's a lot of confusion early,
Speaker 1: especially given the nature of crypto, which is that it's decentralized,
Speaker 1: so nobody has all the information in some sense, as
Speaker 1: you said, you know, crypto is the next Internet sized
Speaker 1: opportunity for the United States, And the big promise of
Speaker 1: crypto is that it is the next iteration of the
Speaker 1: Internet that could free users from the power and control
Speaker 1: of the gatekeepers where whether it's the big banks, whether
Speaker 1: it's Google or Facebook. How long until we get there
Speaker 1: to that future that you see? Well, I think in
Speaker 1: very small ways, we're already there today in the sense
Speaker 1: that you can own your own global permissionless money UM,
Speaker 1: and you can be your own bank in crypto by
Speaker 1: simply downloading free desktop software that anybody in the world
Speaker 1: can run. I think it will take decades and decades
Speaker 1: for all of the applications to be built out around
Speaker 1: that base, so a full blown financial system. I think
Speaker 1: we're probably one tenth of one percent into what that
Speaker 1: looks like in a crypto native form mainstream applications. I
Speaker 1: think we're effectively at zero UM. And that's what we're
Speaker 1: so excited about. A paradigm is watching that whole space
Speaker 1: get built out UM and unferral. So what does that
Speaker 1: mean for the Googles and the facebooks? Do they disappear someday?
Speaker 1: I think this is kind of like e commerce where
Speaker 1: you know, the world doesn't change overnight, but you can
Speaker 1: see the seeds of exponential growth occurring already. Um so
Speaker 1: I do. I do think we will live in a
Speaker 1: future where for us to coordinate, we won't need these
Speaker 1: centralized platforms today. That's already true of uh financial services,
Speaker 1: in that in crypto you can be your own bank.
Speaker 1: You don't need a central institution to hold your money anymore.
Speaker 1: I think that's true in the web application sense, where
Speaker 1: already today there are creators who are pushing their work
Speaker 1: out over crypto rails from their own crypto wallet, where
Speaker 1: the social graph exists directly on Shane. You don't need
Speaker 1: Facebook or Twitter or Instagram um to have a follower graph.
Speaker 1: It just all happens right on the blockchain. I think
Speaker 1: that's where we're headed. We're headed into a world where
Speaker 1: both users and creators don't need centralized platforms or institutions anymore.
Speaker 1: Take me out ten twenty or fifty years. How has
Speaker 1: crypto changed the world. What's different? I think one thing
Speaker 1: people don't yet fully grasp about crypto is how, in
Speaker 1: a world that is increasingly going digital, your crypto wallet
Speaker 1: is the entire representation of the digital you. So that
Speaker 1: means it's your bank account, it's your online identity, it's
Speaker 1: your universal log in to every Internet application, it's your
Speaker 1: digital resume, UM sort of your digital LinkedIn, and all
Speaker 1: these things are in one place. You can use your
Speaker 1: real identity, you can use a pseudonym somewhere in between. UM,
Speaker 1: and I think, perhaps said quite simply, the future, I
Speaker 1: think will run on crypto rails, and I think it
Speaker 1: will be sort of the single source of truth and
Speaker 1: coordination that all systems in the world use today. Well,
Speaker 1: we'll have to check back in with you in fifty years,
Speaker 1: but hopefully sooner. UM Renter or some co founder of
Speaker 1: coin base in Paradigm, thank you so much for joining us.
Speaker 1: It's been wonderful to have you, and thanks for answering
Speaker 1: these very big picture questions and showing us of you
Speaker 1: of the future. Pleasures always, m H. Bloomberg Studio at
Speaker 1: One Point O is produced and edited by Kevin Hines.
Speaker 1: Our executive producer is Alison Weiss. Our managing editor is
Speaker 1: Danielle Culbertson, with production assistants from Lauren Ellis and Mallory Abelhausen.
Speaker 1: If you like this show, please share it or write
Speaker 1: a review. Wherever you get your podcasts, I'm Emily Chang,
Speaker 1: your hosts and executive producer. This is Bloomberg