Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe and I'm Tracy at Tracy, I have a question, Um, have you ever had negative encounters? Sorry, have you ever had negative encounters on Twitter with people with laser eyes in their in their profile? Because I'm just curious. Have you ever had that? Have you ever experienced it? This reminds me of that scene from Mean Girls where they say have you been personally victimized by Regina George? And
everyone raises their hand. Yes, yes, Joe, I have been personally victimized by laser eyes on Twitter and toxic bitcoin maximalists actually got really bad. Last year. I was tweeting a lot about bitcoin, and I actually stopped tweeting a lot about bitcoin because of this, which I think is to horrible. But last year I tweeted a chart of bitcoin falling immediately after the CPI data was released, and it came in hotter than expected, and people went absolutely nuts.
And I mean I could go through some of the insults because I saved them for posterity, but they would not be suitable for you know, the classy program that is all lots well, as you point out, lots of people have experienced this. There is certainly, at a very minimum a there's a lot of people in like the broader crypto space who really resent the media and how
it's portrayed and all this stuff. But there is certainly also a subfaction, most notably the bitcoin maxis, the maximalist, the laser eyes, people who only eat steak, people like that. We've written about them. But you know, to your point, like the inflation narrative, it's kind of totally blown up, like you were right, Uh, well, and we have so, I mean, we we can just talk about how terrible Bitcoin maxi's are for an hour. I would love that.
But I think this gets to a really important point about bitcoin, which is like, is it a cultural movement about creating a new type of currency that is outside the power or authority of you know, traditional figures like governments and central banks, or is it about the underlying technology actually enabling you to do something different? And I think at the moment you really see crypto split between those two camps. Yeah, is it a technology, is it a money? Is it a culture? I think, you know,
it's hard to separate. There is a bitcoin culture, and maybe that's the reason this thing that's sort of just made up is worth so much. But anyway, we all know what we all know the sort of like these questions, the bitcoin maxi is what it's like to talk about them on Twitter, all that stuff that Big said. Today, we're going to be speaking with a long time bitcoin er who has now earned the ire of many of the same laser eyed plubs that you have. Hey, Hey,
welcome to the club. Is all is all I can say. All right, let's just kick it off. We're gonna be speaking with Nick Carter. He's a general partner and Castle Island Ventures. Uh and uh, Nick, thank you so much for coming on odd lots, Hello, Joe and Tracy. I'm honored to be here. This is my favorite podcast. Um, I wish it was under more auspicious circumstances. So, Gavin Anderson, Mike Hearn, and now Nick Carter, why did you rage
quit bitcoin? I didn't quit, To be clear, I don't think I deserved that comparison because I didn't try and change bitcoin in anyway. But yeah, well let's back up, because you are I think one of the most prominent bitcoin investors bitcoin advocates. I think at one point you yourself may have had laser eyes on your Twitter profile, longtime investor in bitcoin related companies, and now a bunch of them hate you. So what do you back up? Like?
What do you do? And why are they mad at you? Yeah? Sure, so? I mean so I you know, for context, I co founded a venture firm that invests in all across the crypto industry. This is actually becomes part of the story later. You know, I identify as a bitcoin er. I think bick when it is important and good, and my work over the last five years is focused on really advocating for bitcoin and you know, putting my resources to work whatever they were in support of bitcoin specifically. And then
my fund. There is maybe a bit of a contradiction there in the eyes of some because my fund, which I started with Matt Walsh in invests all across all across the crypto industry, primarily sort of crypto financial infrastructure we call it, which is pretty you know, boring stuff for the most part, basically making this sort of underlying plumbing work better and connecting crypto to sort the FIAT system and so on. And then that tension finally sort
of broke. Uh. The last couple of weeks when the bitcoiners, I guess realized I don't know, had they never looked at my funds website or what, but they kind of realized that I don't exclusively invest in bitcoin stuff, and kind of a pylon began, and then I took the opportunity to clarify. You know, I'm personally a bitcoiner, but I'm not like one of the orthodox hardliners. I don't think it's immoral to, you know, invest in other blockchains. And that kicked off this enormous sort of brew haha,
which you know, I don't. I think people must be extremely bored because I don't see why it's such a big deal. To be honest, I have a ton of questions, but maybe maybe just to begin with, I would like to get your thoughts on why this happened now, Because, as you say, you've been investing in a variety of crypto ventures for many years. Why do you think the
outpouring of anger the pylon happened this time around? Well, yeah, it's a weird one because anyone that really knows me knows that I have made you know, I've been promoting my views on all kinds of topics, whether not just bitcoin stuff for a while now, whether it's defy or stable coins or anything like that, And so they know that I'm a pluralist. I mean the company I co founded, coin Metrics, you know that's been around since, runs notes
for dozens and dozens of blockchains. So if you need the smallest thing about me, you know that I don't just you know, consider it a sin to build on other block chains or run other notes. I think, really what happened is, you know, obviously by Quin is drawn down from whatever sixty nine thousand two, I don't know where it is today, exactly twenty thousand people want scapegoats. A lot of the sort of core premises of the
bitcoin ideology have been undone. Frankly, I think there's been a real collision with reality, like whether it's the stock to flow model having thesis this folk these folk economic ideas. For instance, bitcoin always you know, the cycle low is always higher than the previous cycle high. You know a lot of these concepts, you know, big quin becoming the reserve currency within head right, the inflation hedge. I mean
that it's undelotiniable, that that hasn't really occurred. And so a lot of these core premises and ideas were basically falsified or you know, like significantly challenged by real world events. You know, the like cycle was much smaller in magnitude than than prior cycles were, and I think people are just really upset and uh kind of on the hunt for scapegoats. And then I was sort of the perfect one.
Previously people have this like perverse like um, you guys know that movie like The wicker Man, where you know, to ensure the good harvest you have to sort of sacrifice someone. Basically you've been sacrificed on the altar of cry.
So if you look at the previous rage quits, like high profile ones, I'm not saying, hi, rage quit, but you know, my current are sort of historically at the bottoms of previous cycles, and so I think people are actually looking for that, looking for Thank you, Nick Carter for your service. So you wrote this article or after you know, you made the investment and it seemed interesting, is uh sort of like related to signing into a various services with your ethere and wall and we'll talk
about that, because I do think that's interesting stuff. People freaked out at the investment and then you sort of wrote this again, I know you're you're still a bitcoin or you didn't divorce, but there's sort of like, you know what, there really is this toxic element and you point out it's like, you know, there's a lot of bitcoin and Tracy brought this up at the beginning, is that a culture is that technology. You're like, bitcoin is not your like steak dinners that you like hang around with,
like your fellow laser eyes. But that Big said, like I think of you as also to some extent an advocate for bitcoin culture, and like you know, like you rail against seed oils and do you think that's something really bad happened in one and I think you're really you know, lifting weight, uh not worshiping false meat Bitcoin MAXI adjacent. Do you think like you contributed to this idea that in addition to maybe being a money or a technology, that there was also like this sort of
like hardline culture associated with owning the coins. Yeah, I mean that culture undeniably exists, whether it's you know, kind of a joke, like a lot of the stuff you mentioned is like a little silly and you sort of like lean into it, and also because it just sort of perplexes outsiders and right, that's like kind of the point is to you know, build up this edifice. It's like sort of not clear if it's ironic or sincere. Right, it means it's classic internet culture stuff. Why is that?
Why is that the point? Though? Because bitcoin, like it's all about the network effect. Why would you want to alienate good bothsiders? Sorry, yeah, I mean that's a good question. I think it's easier to unite against like outside of voices, whether it's like mainstream economists or the M s M. Right, the dreaded m s M. It's sort of hard to penetrate the culture, right if there's this veil of irony
coding everything, right, it's not clear if they're sincere. And so then from the inside you can sort of like mock these people when they sort of engage with your ideas because it's like they're not part of the joke. And I would say that's just like a classic defense tactic. And so you sort of embrace, like, you know, deliberately absurd ideas to maybe give like air covert to your
two maybe more serious ones. So what about the idea that this sort of like hardline Max Shue culture has at least in the past served Bitcoin well during periods in which entities were trying to sort of change the code, and of course I'm thinking most prominently about the block size war in and where there was a a bid by some largely more i would say, more corporate influence to change the code, to expand bit coins throughput, to reduce fees, and I think out of that there was
this sort of like hard line small block faction that held off the change and seemed to be benefit or a lot of people think that was the right direction, but that this idea that this sort of culture is beneficial and necessary, even if in the short term it does repel people. Yeah, I I that's a great question. I mean, I think if you go back to that time and you know, really the block size war started a long time ago, maybe even earlier than fourteen, was
probably the genesis. I would actually say a lot of the people that were active participants then are not the same participants now. I would say a lot of the people that are the so called self you know, toxic maxis or like self appointed defenders of the protocol like those are actually newer bitcoiners. So like you have to understand this churn, and I would say, what they're doing is like, and I said this previously, they're doing kind of like a sort of cargo cult like reenactment of
conflicts past. But you know, there's no real conflict right now. Nobody's really aggressively trying to change Bitcoin in any sort of hostile way. And so the block size war, like I I still you know, come down on the same side. I would support the small block idea. I think that's basically an engineering discussion. And then there was also a meta discussion about how should bitcoin be changed, what's the
most appropriate way to change bitcoin? And it's still clear to me that the attempt to add bigger blocks to bitcoin was pretty ham fisted and definitely very corporate and totally out of step with sort of the actual values of the bitcoin the way things had been done beforehand.
Whereas you know, if you know, and so like a lot of people, it's almost like stolen valor a little bit, right, It's like, um, it's like you know, someone taking to the streets today and like assaulting random people and like claiming lineage to you know, like their grandfather who fought at Normandy or something like that. Right, it's like they're reenacting the conflict from before, like you know, going through
the same emotions, but there's no real conflict today. I mean, nobody's trying to change bitcoin anyway, so it's not clear what they're defending bitcoin against. So you know, I think
there's been a bit of a subtle change there. Really simple question, but what's the difference between or can you just define toxic bitcoin maximalism, because I think one of the things that's been going around about you now that you know, um a lot of people are mad at you, is this tweet from where you said something to the effect of every bitcoin maximalist you've met had been friendly and approachable, and now fast forward too and it seems like you're saying, oh, no, you know, there's a lot
of toxicity in the community, so maybe you could just give us a definition of what a talk sick bitcoin maximalist is versus your run of the mill bitcoin MAXI yeah, that I that tweet was true in to be clear, Um, maybe I just hadn't met enough or I've only met the right ones, but yeah, people were very nice to me.
I always still knew her to bitcoin back then, so yeah, it's I think a lot of the issue here is definitional because basically bitcoin maximalism emerged as like an epithet that I think fatalic butterrant, actually coined in a kind of pejorative sense, like saying bitcoin or bitcoinners were too close minded and parochial and that's why he had to
make ethereum. And so a lot of the hatred for the term came from that, I believe, and then some people did embrace it though, and so then some bitcoinners sort of call themselves maximalists, and the debate now is really confused because nobody has their good definition for it, even though there are people that call themselves this, and there's a whole faction that does. And I think they're skating on that you know, ambiguity a little bit to
try and avoid being pinned down in their beliefs. Um So I think it's deliberate that they kind of refused to define it. But I'll define in two ways, so the soft form and hard form, so kind of like reminiscent of the E M H. So soft form bitcoin maximalism. And I wouldn't say this is toxic, but I think this one's you know, pretty justifiable. Is like, look, bitcoin is the only blockchain that's kind of worth building on. Blockchain should probably only pertain to moving money around as
opposed to non monetary use cases. Other crypto assets are tokens. They're sort of mostly waste of time, and there's definitely a lot of scams out there. Stable coins are probably interesting. This is sort of more adjacent, but maybe they should reside on Bitcoin is apposed to other blockchains. And then, like you're probably also pretty skeptical fractual reserve banking if you subscribe to this ideology, and so it's kind of like a more modern form of gold buggery, I would say.
And then you have the hard form, which I would say is pretty venomous. Really, Bitcoin is absolutely the only asset, certainly within the crypto sphere that is sort of moral and good to own, and other assets are deeply sinful. And you know, I'm using religious language because I consider this to be a secular religion, Like it's a secular
religion to me. It's very obvious that it is. Now they consider all coins is attacks on Bitcoin they've been really zero some mindset, whether maybe that's true, maybe it is zero some, but they consider all coins is like actually a kind of a fiat like a retaliation of the central bankers, um and uh. And they think that launch conditions are absolutely paramount, so like the origin of the blockchain is very important, and if there's an original sin like you did an I O or pre mind,
that can never be undone. And then they think other blockchains are literal scams, and they'll be explicit about this. There's no other worthy place to build anything other than Bitcoin. Anyone building another blockchains is sort of like being deeply misled, either being tricked or they're being cynical. Then there's kind of two competing views within this hard form camp. One is that there's no innovation outside of Bitcoin whatsoever, and
that it's all kind of artifice and fraud. And then the other view is that there is some innovation, but it will inevitably collapse back in a bitcoin, and anything good that's done anywhere else will collapse. And then there's like all kinds of crazy, crazier stuff, which I'm sure that both of you have encountered, which is like any asset that is used in a monetary context at all
will collapse into bitcoin when hyperbit qualization occurs. That's you know, sable coins are a waste of time because all fiats are going to zero probably imminently. And then there's like the lunatic fringe stuff like you know, stock to flow
dynamics being extremely important. You can even make models. These people tend to think fractionals are banking is literally fraud like literally fraudulent, and uh that you know, other adjacent stuff like the hardness of the monetary medium that you're using, like influences, like the very nature of society. It's off, so like your time preference and the quality of art and things and food and things like. Well, I was gonna say because all coiners eat seed oils and bitcoiners
don't write. I mean to be clear, I think there actually is a lot of scientific support from my anti seed oil view, but we're not gonna so I actually I would have a real question about soft form bitcoin maximalism. And I think you're in a really good position because to answer this, and you're because you're pregnantists, but also because your investor in this space. But like, what is
the state of building on bitcoin? And I guess this is something that uh, you know, the first time I ever like checked out unit swap and was able to like sign in with a wallet, meaning not just setting up an account and not the not having I was like, oh my god, this is like really cool. Like I don't know if it's gonna go anywhere, but just like the idea of like being able to click and you're like you're in the app, it seemed like extremely cool
to me. And I know that your new controversial investment is kind of related to that, But like, what is the state of other stuff like building on bitcoin? Like do you see it or people doing it? Doesn't work? Could you theoretically build like a unit swap type environment on just to be clear, the unit swap sign and that's on ethereum right, yeah, yeah, I mean, um, I guess there's two ideas here. One is like defy, like the composable um infrastructure you would use to do sort
of swaps on defy. And then there's also the web three like sign on with meta mask, so you definitely couldn't really, I mean, you can do wallet based sign on on Bitcoin with something like ellen off that is doable, Like if you're custoding your keys, then you can It
doesn't matter what blockchain it is. You can definitely use that as a log and but defy the more like that's just a whole ecosystem that hasn't emerged on bitcoin, and I think it'd be really challenging to rebuild all of that kind of from scratch on bitcoin a because like the underlying programming language is very very limited, and then be just because the critical mass is on a theorem and that that's kind of five six years of
development and understanding best practices and building out liquidity and things like that. That's one of the things that you know, I think it's very valid to be like a bitcoin only person. I don't even like the term maximalist. I totally hate it in fact um. But you know, we invest in plenty of bitcoin only startups like founders that are like, I only want to focus on bitcoin. I think this is the biggest problem facing the world right now,
you know, fix the money, fix the world. And uh, they're very sincere and we're completely fine with that, right And they're building custodial tools for bitcoin, or they're building exchanges or brokerage is you know, even like some stuff you can refer to a smart contracts. Certainly, Lightning has revitalized the developer community in bitcoin. To answer your question, Joe, there's definitely a lot of enthusiasm there, but you know,
bitcoiners and so that's a valid perspective completely. But you know, the hardliners, I would say, are totally They have to find a way to dismiss what's happening on other block chains and and dismiss the fact that Ethereum is charging, you know, fifty times more in fees, is earning you know, fifty times more in sort of blockchain revenue than Bitcoin is, and the critical massive developers and applications and liquidity and tokens,
if you're into that, it really is elsewhere. And that's just a reality the bitcoiners have to confront and and many of them are. They have a hard time confronting that. I think this is kind of the heart of a lot of this disagreement. And Joe, I remember last year you wrote a very very long and very good piece about the sort of cultural split between Bitcoin and Defy and this idea that a lot of Bitcoin supporters or maxis really wanted to preserve the blockchain. They didn't want
to tinker with it, you know, don't change anything. It's supposed to be as you know, immutable, timeless store of value kind of idea verse is a lot of the experimentation going on on DE five. So Nick, I'm curious for your your view here, like why is it that a lot of stuff seems to be built on other types of chains versus Bitcoin, Like what is the hold
back for Bitcoin use cases? Because again, you know, you can argue that there are some use cases and people are doing some interesting stuff, but it definitely seems to be less than what people are doing with other types of technology. Yeah, I mean, there's just this attitude, and I think comes down to design philosophy, right. You know, from the bitcoin ors engineer mindset, you're very risk averse. You want to make sure that the program is truly
bug free. You want to apply the same standards of like maybe nuclear engineering or the kind of software you put into plane that really can't fail. You can't have this, you know, because you're dealing with you know, people's money. That's sort of like the Bitcoin mindset, and and that's why bitcoin itself has this kind of soft fork ideology where you want everybody to up into changes. You don't want changes to be breaking back backwards compatibility with prior
you know, implementations. It's very deliberate and you know, necessarily slow. As a consequence, Bitcoin programming language has this thing called bitcoin script, which is very enough fourth i think, and it's very limited. And actually most of the sort of they're called op codes that would have allowed you to do creative things were basically disabled early on because they
would have also introduced a lot of bugs. And so that's sort of like the development mindset, whereas ethereum, you know, which is really emblematic of sort of like the alternatives. So that's certainly the smart contract focused ones. They took a deliberately very different attitude, much more aggressive, much more rapid iteration and change, making the bass layer much more suitable to build up, you know, rich applications, and they
also paid dearly for that. I mean, it's much more complex. Overall, they're still trying to move to proofastake. There have been many, many hacks. I mean, you can just look down the leaderboard of any of these defy exploits. There's dozens and dozens that are above a hundred million. It's kind of the way safety regulations are written in blood, defy programming best practices are written in hacks. But you know a lot of Etherians will argue that was a good trade off.
I think there's a synthesis possibility, you know. I think Bitcoin maybe did have the right attitude. They focused on monetary hardness above all else, and soundness of the protocol and security and resistance to hot hacks and inflation bugs and things like that, and then other protocols were kind of free to experiment, innovate and uh, you know, create a substrate that you could use to build interesting kind of composable infrastructures. And you would never have been able
to build modern day defy on bitcoin. That's just the reality of it. Um. I don't think it's the end of the world. The bitcoin doesn't have that built in. I don't think it necessarily needs that. But yeah, I think ultimately this whole thing comes down to design philosophy. Yeah. I was going to ask how much of a role does decentralization play in this, because I've always seen it when it comes to Bitcoin as sort of a strength
and a weakness. So on. On the one hand, if you're trying to design a censorship resistant currency, you know, something that can sit outside of traditional power structures and be relatively safe, then decentralization makes a lot of sense.
But if you're trying to do something you know, more defy, like or build something that people are actually going to use, often it ends up being done on something that is in some senses centralized, like ethereum, something that maybe has a leader who can kind of galvanize a support base and lead people in a particular direction. So how do you view that aspect of it? Yeah, I mean I would say it's it's pretty paramount. Maybe my views have evolved a little bit. I would say it's maybe less
of a binary, you know, decentralized versus holy centralized. I probably compare these systems along a number of variables, but you know, running in a theorem, note, if you compare it to other blockchains, it's actually much more doable because, like, ultimately, I would say decentralization is really a function of how easy it is to run a node and participate as
an equal peer on the network. There's a few blockchains that it's you know, virtually impossible, and so they sort of maxed out the node size in order to put push a lot of data through the network per unit time, and then you know, other blockchains tried to keep the data overhead low and make it really easy to participate with Bitcoin being emblematic at that, and so there's like
a whole whole spectrum. I think maybe you know, bitcoinners, some bitcoiners would say, you know, bitcoin made the right decision. The idea is for anybody on Earth to be able to run a node, maybe even on their smartphone, maybe even with weak Internet connection. You know, clearly there's market demand for an alternative model where that you're pushing you're doing more computation per unit time. Fees are lower because you're pushing more data through the system and so there's
more capacity. But you know, I would say, like you know, just looking at a theorem, if you compare it to the Bitcoin design philosophy, Bitcoin embraces layered model with initially side chains was a big part of the vision, and then with Lightning as an L two network, I would say Etherum culture is kind of downstream a Bitcoin culture in many ways they embrace the layered model too. There's many many different L two is being built on a theorem.
So they're also ended up being more pragmatic in understanding that you can't have the notes be arbitually large, so that you know, I would say they actually embraced the same philosophy at the end of the day. So, you know, one of the things that you mentioned in the beginning is a lot of like sort of bitcoin stories or bitcoin theses have sort of blown up. And the big one in two is that we have the highest inflation in the US in forty years, and bitcoin has not
proved to be particularly robust against that. It sort of
has been moving in line with the stock market. Another thing that happened in two that I don't think it's as much attention is that is, you know, and my one of my interests personally in bitcoin is this idea of like censorship resistant money, the idea that I could send you or Tracy some money and no third party could tell us no, which I think like in a time where you know, cash is going away and more and more commerce it's conduct online is potentially a very
powerful thing. But the other thing that happened in is we had the Canadian Trucker protests where a bunch of the participants and donors lost access or had money frozen, lost access to their bank accounts. But it didn't seem like, you know, it seemed like, oh, this is a great moment for bitcoin and theory, except that I don't think like bitcoin was that powerful or that My impression was, you know, it's easy for authorities to track the bitcoin
that were being sent to is like very public. There was no particularly great way from as far as I could tell, to coordinate donations. I think a lot of it just ended up like in the hands of someone and hopefully did they got it to the right people, like it seemed like that was a failure too, And hey, I'm curious, like if you agree and be if like, Okay, it's not a great inflation hedge and right now it's not really cut out for censorship resistant payments or store
like what exactly is the case for it? M Yeah,
that was a sobering moment. I think the Trucker protests for a lot of bitcoiners because it basically became clear that there was no platform or application that existed that could facilitate out funding with bitcoin, and it showed just and the tools that were put together we're pretty new, they were very analog, and so it's just evidenced kind of a lack of I don't know, developer talent or enthusiasm or interest for building these things, whereas it There
are good crowdfunding tools in quote unquote crypto generally, but for the most part they don't concern bitcoin. So maybe that's kind of a great example because it shows there's just less in it for a developer building on bitcoin. That's kind of part of the crowding out effect. I think that this easy token landscape and here's where I'm you know, very sympathetic to the views of bitcoin is right,
is is there's a landscape. You know, you look at your opportunity costs and if you're gonna build something, you might as well do it in a tokenized way and get your early liquidity, you know, and you can get your exit or you know, certainly get some liquidity without bringing a company to I p O and you can raise money more easily. Maybe you can raise money directly
from retail. Obviously there's like security you just put you just put the money in a box and more money comes out of the box with with with crypto, it seems pretty great. But in all seriousness, and I'm you know, I wanna shift focus a little bit to that you do invest in you know, that's the why we're talking non bitcoin crypto. But it seems to me like so much of what gets built and what has gotten built
over the last uh this cycle is de facto. I mean, there have been a lot of Ponzi schemes or things that aren't Ponzi schemes, but the Ponzi economics where mainly the only way they approuve value is by more people buying in, and then at some point it goes down when some people want to sell without actually like any real consumer product. And you know, like you've also been pretty critical of sort of like vcs in the broader crypto space for having uh spent the last several years
back in Ponzi schemes. Yeah, it's a mess. It's a total mess. I mean, you know that it seems like a lot of the quote unquote financial innovation that's occurred in the broader crypto space has been innovation and creating veiled or Ponzi is basically there or things that are Ponzi adjacent or have I mean, people talk on ironically about Ponzi nomics, and if you look at if you look at the field of token economics or quote unquote mechanism design, people dress these things up in this whole
like advisory firms that will help you with your token omics. It's just basically like if you look at the actual mechanics, it's a lot of it is ponzi. It's like, how do you juice returns? How do you tinker with the system a little bit too, you know, make the token price go up temporarily. Some of the biggest and and you know, virtually all of the vcs in the industry
are investing this stuff. Some of them really do believe in the projects, and that's kind of the curious thing is you know, they'll like maybe they like convinced themselves. Like if you look at the Terra discourse or on Tara, a lot of the firm's backing Tara, like they actually, you know, some of them got out and some of them didn't. Some of them round trip the position because they started to believe the research they were putting out where they were kind of justifying the Terra mechanics and
thinking like, hey, maybe this can work. But yeah, like you know, I don't know if I care to list them, but most of the really hyped sort of consumer applications in the crypto space, certainly the ones that involved tokens, A lot of them have very specific Ponzi dynamics which
can be pinpointed um and they're kind of all unwinding. Now, well, there was a certain game that was really popular in the Philippines and the last year he is like, oh, this is providing an economic lifeline, and we had the founder I'm talking about actually on it was like you had to like buy some and if tease and then they fought, and then you got more and still like the question was like, yeah, but is the game fund to play? Is there anything point here other than just
like trying to win more tokens? And now the prices crashed and it seems like usage is way down, and you know, it still seems like basically there's not much there as far as I can tell, beyond the idea that like you'll play, you're making money, but the game isn't that great. Yeah, it's remarkable, it's really astonishing, and you know, I'm not wanting to pile on specific projects aggressively or or vcs or anything like that, but actually
was I had some really negative consequences. I mean, it was super hyped, and you know, some of the best feasts or most reputable venture firms were investing in the likes of Axie or Stepan or Tera things that ended up having these like genuinely Ponzi like dynamics. Acxie was particularly bad because if you looked at where the player base was, it was in the Philippines, Cube of Venezuela, places where you know, relatively poor population shan and um.
People had Internet connections and then they could, you know, all of a sudden earned by playing this game. But it's nobody played the game for the sake of the game. They played the game to get the tokens, and of course, you know, as the tokens sold off, the game stopped being worth playing. There was some really perverse dynamics and
the Axis situation. I mean, you had sub theme that developed where basically Westerners would buy the n f T s that would you know, the characters that would make you eligible to play the game, and then kind of like lease them out to you know, local players and say the Philippines. And this was euphemistically called the scholar program. In my view, is kind of like a form of digital sharecropping. Basically where the you know, the locals playing the game earning a couple of bucks a day, didn't
even own the fruits of their labor. Basically, they were literally toiling on behalf of like Westerners that had the capitol to buy the assets to play the game. And then the worst part is that, you know, all utimately some of the some of these like Filipinos, etcetera, like
got fully bought in. They were persuaded like, yeah, this is a great thing, it's a great investment, this gonna be my livelihood, quit their jobs in some cases, bought the in game property, and then of course it all kind of collapsed and like the property values created, and so you know, you've got like Western it's all very
perverse in my view. You have like Western vcs like waxing lyrical about like the amazing benefits that uh, you know, Axe is bringing to logal places, you know, some of the poorer countries in the world, and then like meanwhile, the whole thing collapses and a lot of these folks inside poor countries are left holding the bag, and so like, not only is this just like a Ponzi like system that was like pretty obviously going to fail because like nobody played the game for any reason other than like
the token dynamics. It had this like nasty, sort of like colonial vibe to it, and I think ended up causing a lot of kind of real world damage to people that couldn't really afford it. It is very dystopian, isn't it, Like these people sort of toiling away on their phones in order to get like tokens back to rich people in advanced economies. Um, But just on the topic of use cases that are not related to ponsionomics,
like where are those? Because I think the thing that makes a lot of people suspicious of crypto as a whole is that we've been told now for over a decade that this is life changing, world changing technology, but it feels like people are still trying to force a use case. Like if it was so big, it feels like the use cases should come relatively naturally, but they
don't seem to. And I think something you said in your own UM post recently was you know that there just aren't enough bitcoin specific companies for you to invest in as a VC. And it feels like to some extent, like there are a lot of crypto companies out there that are fundraising and asking for money, but there are a lot of necessarily good ones. So where are those good use cases, those good companies, and why does it
feel like it's taking so long? Yeah, I mean I would carve bitcoind bitcoin out here and say, you know, think of it as a lodder day. Not to like make the pitch to either of you have heard a zillion times, but you know, if you think of it as a lodder day kind of improved gold with better auditability qualities and you know, better self custody and it's cheaper to take physical delivery and so on, then you don't really need that much adjacent infrastructure or applications around it.
You need ways for people to store it and hold it and transact with it. But that's kind of it, and so so it is naturally constrained sort of the startup environment for bitcoin. And that's kind of okay. Like the bitcoin movement is more about ideology, as you say, and it's like I call it a revanchist. I don't know if that's how you pronounced that movement to sort of like take back what we want ad so to speak, you know, in terms of trying to find a way
to obliquely um regain a gold standard. And so that's sort of like the bigcoin movement and there's maybe not that much to invest in aside from custody and exchanges sort of in the in the broader crypto space, which I guess has been rebranded to web three for reasons unknown to me, there's definitely a few things which are you know, really, I don't know why we call it that now, but I'll oblige. Like I am a proponent of stable coins, I have been for a long time.
I think they offer I think Baladi calls them a hundred x improvement over FIAT. You know, send an international bank choir and then send a stable coin and you'll know what I mean. I think there's clear product market fit there. They are a way to dollarize the world, and there's definitely crypto dollarization occurring out there, especially in emerging markets where maybe your local banking system is questionable, in your local currencies inflationary or untrustworthy. So that sector alone,
I don't think he needs any justification. It's sort of is very useful today. Obviously there have been failures there, but I'm pretty optimistic about the sector, assuming we can find a way from a regulatory perspective to treat tokens as equity right to sort of bite the bullet and acknowledge that tokens are or should be equity most of the time in a kind of an explicit way. I would say that would be a significant improvement over kind
of the default. Like right now, if I wanted to, you know, start a company and pay someone in equity, that would be really difficult to do with, you know, like just some you know, pay a user in equity for contributing some data or something. That would be very challenging to do, probably with traditional structures and tools. If you look at yield farming, I don't like the name, but that's basically contributing basically protocol equity to market makers
that are providing liquidity. You can imagine a world where you know, Uber is paying its driver as an Uber stock um maybe as a kicker on top of their normal salary for every mile driven, and you can maybe figure out a way to do that with you know, regular old equity. But that's kind of why people like tokens. Is one reason builders like them, because they just give you tons of flexibility in terms of like dolling out de facto equity and your thing. So I like that.
I also like the transparency you get from you know, you can go look at any of these DE five protocols and see the cash flows rolling in in real time. I think that's a big enhancement, a big improvement over your quarterly disclosures, right, and so you know, real time financial disclosures is really cool and uh, you know, very optimistic about that. The startup in question that you know, really kicked off the whole hullabaloo was a wallet based
authentication log in startup. That's another one which which is an easy when which is already you know, doesn't really need any defending because it just works because basically, if you're using a password set of passwords, you're probably using a password manager, which means you are a custoding your own sort of cryptographic material. This just sort of formalizes that.
It means you can, you know, hold your own online identity self sovereign and instead of allowing Google or Facebook to own it or Apple and then, um, you know, it's kind of hard to express in words, and I guess there's probably been a bit of a failure among the vcs that have talked about this, but yeah, the ability to log on with your keys, you know, that to me is like a critical part of um of flattening the Internet topology, of eliminating some of those hierarchies
that give web two companies so much power and and restoring a measure of power back to the users. So yeah, I actually think that's a you know, that's another sort of key went in here. So I'm actually really into the ease of signing in with that type of wallet. And both Joe and I have experimented with this. I can't remember who who sent us our names as like Ethan identity I forget. Yeah, yeah, I feel really bad that I've forgotten. Whatever. It's interesting and I can totally
see the use case for them. Yeah, that's right. I think he was preemptively squatted on our son on the day that we became It was so that the toxic bitcoin maximalist wouldn't take them and do something nefarious with them.
But anyway, UM, we've experimented with that, and I guess my question is, like I can see the use case for that, but does it justify the amount of money that's flowing into the space, Like is it a big enough market to justify some of the valuations that have been put on this The justification would be that you can actually really architect the whole Internet, and you know,
maybe that's a little bit questionable. Certainly, the amounts of money flowing into crypt oh Web three early stage venture in general private equity, I think we all agree are probably likely to drive or turns down just based on sort of like historical norms, and I think that a lot of that has been a rotation. It's just a function of sort of like institutional allocators rotating into those
riskier asset classes. You know, I don't know what the right number is in terms of Web three investment, but yeah, I mean, like I think if you wanted to tell yourself the exciting story, you would say, look, the fan companies are the biggest companies in the world, and they've built those valuations on the back of, you know, building these huge data silos systems that aren't interoperable, that are hard to leave, that are very sticky users kind of
stuck in those systems, and they can't you know, effectively like to you know, to take a different analysis, you could say these are like digital fiefdoms, you know, whether it's Twitter, Facebook, TikTok, whatever, Like the shareholders get all the value and the users that do all the work get nothing. They're the surfs, you know, toiling away in the fields. They don't even own the fruits. They're labor.
And so then the kind of Web three story is like, we're gonna do a kind of a digital form of enclosure where we're gonna you know, put up a fence and you're actually gonna be able to have your forty acres in a mule and uh, you know, really take ownership of the digital value you're creating. And that's a very appealing story, you know, I I believe it to
a certain extent. And and so part of the tools necessary there are these like decentralized domain system like e n S for instance, that's one while it based sign on tools where you're self custodying the data that's tied to your own identity. The pathway to get there is sort of like unclear, I would say, as of yet. So maybe it's a timing question whether now is the right time to deploy a ton of capital against it.
But the destination I think is clear, which is taking these very centralized, you know silos where you're very exposed to what a small handful of people in silicon Valley think about the world and the way they want to moderate things and uh, you know, completely changing that, putting the power back in the hands the users. Maybe the users are actually getting ownership in these platforms which is
commensurate to their contribution. You know, you maybe there's a notion of digital property rights which emerges here, but yeah, I would say it's still kind of like a bit of an unclear vision overall. So when you made your recent investment, one of your points that you made is, you know, this is an equity investment. This is a company. I'm buying private shares in it and hopefully it will be worth more. And you made the point is like,
this is not about getting access to some token. This company is not launching some new excrement coin that all the I don't know what I say that my understanding is in recent years many vcs have In fact, like it seems my impression, the way it works is you ostensibly make an investment in a company, but then the company itself has a big treasury of its own coin, and either you know, the ideas that coin goes up in value and so therefore the equity and the company
that holds those coins gives up a lot in value and then the vcs or maybe the vcs get a direct allocation of the coins. But then they also have like a incentive to like pump the pump the network or pump the coins to the public. And these are like on publicly. These are like publicly traded stock in
many cases, except not regulated. And also I get the impression there's like a huge gap between what some of these private rounds were and then where they immediately trade once the tokens are listed on binance or f t X or coin base or something like that. What's your view on what happened over the last couple of years, and what's your view on sort of like vcs doing
token investments. Yeah, I mean, uh, you know this one in particular, this company question they I don't believe they have any intention to create a token, and but you what, it's very common and when you're making any equity investment, the most common model is that is safe with a token warrant. So even if there is no token, it just gives it gives the investors the ability to you know,
exercise that option if a token does emerge. And basically you know, most vcs will pressure their investees into creating a token, even if it's spurious merit less has no purpose, right because token valuations are just a function of the hype for the most part that the team is able to generate around it. They're not really grounded and very much Now in some cases, you know, there's kind of actually an interesting tug at war that's going to develop
here between token holders and shareholders. When you have these, you basically have a shadow cap table, so you have you know, the shareholders in the business and then you have the token holders, and they're not necessarily the same, especially if the token has been trading or you know, there's a yield farming program or something like that. It doesn't really make sense to have two cat tables, right, It's like, oh, here's the equity and here's the junior equity.
Like why And then even weirder if you have a token that's accruing some revenue from the protocol or smart contracts that the team has built, right, And there's a lot of these things that accrue tons of revenue, right, and so you know, I think it's smarter to just be a straightforward company with a standard business model, or if you're going to go to the token route not to have the corporate equity, you know, kind of fighting against the token holders and and we're gonna find there
will be a ton of debates here, especially with some of these larger crypto companies that have both a token and they have equity. What we're gonna find is there will be fight here and the shareholders will probably prevail because ultimately the token holders have a claimand nothing, which is kind of the problem with the token. It's it's pretty perverse, but you don't really have a claim at all, and you know, when push comes to shove, I wouldn't
want to be a token at the moment. Like the Unit swap token holders don't really have any either control or claim or anything but that to can just trade it a lot. At one point it was really valuable. Yeah, it's Uni Swap as the poster child for this, because it's kind of the company that you want. I think it's called Uni Swap Labs. That's the kind it's that's the thing you want ownership over. The Uni swap token
has and it's not clear what the claim is. There's no real formal claim on anything aside from quote unquote governance, which is not even clear the token holders control governance either for that matter. So yeah, I think what would be a better situation is if maybe we got some legislative development which said, Okay, look tokens, we're gonna harmonize tokens with securities laws, and you have to do these kinds of disclosures and you can't lie about the disclosures either.
Maybe the tokens are or on chain business models are more amenable to real ton disclosures too, so maybe it's a boon for those regulators, but you'd have also to tie that to sort of insider trading and asymmetries and things like that. I think actually the European legislation that just amount MICAH has some interesting templates that maybe US
regulators could follow. But I think that would be the best outcome, because otherwise it's just going to be this nasty, drawn out all these sequence of battles between token holders and shareholders. Basically the shareholders are gonna win, and anybody that bought the token thinking that they're getting a claim on the you know, cash flows occurring to the protocol or whatever, uh, they're going to be mistaken in that.
So I want to go back to Twitter abuse. And you know, I mentioned in the intro that last year one of one of my worst experiences with it was this tweet about bitcoin after the CPI numbers came out. Joe, you also tweeted the same chart on that same day, and I actually I I screenshot at this for posterity because I'm really into data analysis obviously. So my tweet got sixty one replies. Your tweet of the same chart
got twenty seven reply. None of them were ad hominem attacks, nothing sexist, nothing racist, or you know, like personally insulting. So I I guess my question is, like Nick, when it comes to bitcoin maximalism, like it feels like a part of it is I'm thinking how to characterize it. But you know, it feels like women bear the brunt of a lot of criticism from a lot of bitcoin bros.
And they're almost all guys. Can you explain that aspect to us and like what needs to change in order to bring more women into crypto, because it does feel to me like, if this is about creating a network, leaving out half the population seems like a mistake. Yeah, and and it's very uncomfortable terrain. And I don't think many bitcoiners want to reckon with this, but there is an identitarian element to this whole philosophy, culture, religion, whatever
you want to call it. And yeah, the hardline or bitcoin maxie types are basically homogeneous of you know, their male for the most part white. You know, they are all kind of think and act the same. And uh, you know, it's really nasty strains in there. That's just a fact, you know, not just against women. There's a big anti Semitic strain in there, which is evident if you look onto the surface any movement that makes it it's hard like certain conspiracy theories about finance or central bankers,
like it's just a couple of degrees away. We all we all know where that goes. Yeah, And like I try to be pretty nice online, I've sort of maybe patchy track record there, I think, Tracy, I think I probably actually you probably look along the replies you'll see me and yes, you have, you have been filed on to me. I will just point that out. But I do think I totally acknowledge that. I don't think I
ever said anything too on toward. But yeah, I look, this is why I think it's important to draw a line with you know, and disassociate myself from from this community, not a bitcoin er. It's like, I just think you don't Bickoin doesn't have to be a religion, it doesn't have to be a lifestyle. It doesn't have to be something that is hyper emotional and causes you to lash out at anyone, whether it's journalists or you know, Paul Kirgman. I mean, frankly, he probably deserves some of the ire,
but um, you know, it doesn't have to be. It doesn't have to be this nasty, nasty movement based on ad hominems. You're not defending bitcoin from anything, You're just making it look incredibly insular and resistant outsiders. Now, I think bitcoin is gonna be fine. Right, Like Bitcoin's good idea. It kind of works just fine, whether or not there's armies of like cyber Hornet, toxy Max, he's quote unquote defending the protocol or anything like that. Bitcoin is pretty
indifferent to that. It's indifferent to sort of me defecting from hard line bitcoinism. It's indifferent to all that stuff. I think it's just sort of the economics that are ultimately persuasive. But yeah, I don't know. I I think, um, this is why I'm I'm trying to defect from. And
to be clear, I never consider myself a maximalist. But yeah, this is why I think it's important for a movement of like call them bitcoin secular risks to emerge rationalists as secularist people that believe in bitcoin but are also open minded. They believe in facts the world of reality, and acknowledge that there's development and other block chains, that it's not deeply sinful to build elsewhere too, transact elsewhere right, that you don't need to tie these like fringe beliefs
and acts to a monetary and technical project. Nick, I remember years ago, I don't know, maybe like twenty nine or something years ago on TV I asked you if the having was a myth or whether it's priced, and you said it was, and You're like, yeah, it doesn't really make any sense. And so the early seeds of you going soft were evident even back. And but Nick, it was it was great to have you on odd loads is a conversation I wanted to make happen for
a long time. So I really appreciate you, really really appreciate you coming on Thanks Joe, Thanks Tracy, Thanks Nick. I found this conversation very cathartic, very good things about the bear market. All right, Thanks Nick. I like that conversation. You know, I've always, even during his more Maxi period, Maxie, I've always thought Nick was like a bitcoin realist as opposed to a religionist, even during the more extreme thing. And I think he is pretty realistic still about like
the pluses and minuses of all of it. Well, so I question here's what I think. I think it all boils down to whether or not you think bitcoin is a technology play or a cultural play. And I do question nixt statement at the end about bitcoin doesn't have to be a religion, because if it doesn't have these certain connotations attached to it, then all you're left with is the actual technology, and I think there's still a
question mark over how useful that actually is. Now. If you're going to treat it as you know, something like gold, which to me is much more of a cultural thing that's about gold's position in society, then like you cannot divorce it from the way people feel about it. This is a really well put I actually I completely agree. Like on some level it's like why does a bitcoin have value? So it's like on Thethereum or on these other chains, you can actually sort of like explain pretty
crisply why it has value. Like I can transfer dollar denominated stable points very easily to you on ethereum and you sort of like pay the ethereum holder is for the service of conducting that transaction for us. There's no faith involved with that, there's no But why it is a bitcoin? Why is it worth something and not nothing? Is sort of like this really difficult question to answer with respect to bitcoin, And I do think there's a large faith element and even and this is something I've
always thought interesting, like even gold. Why did gold take off? In part, like one of some of the early mythology was like gold doesn't tarnish, and so the ancients said, like, oh, this must be a divine metal because it's unlike everything else that exists on earth. Gold doesn't have this sort of u uh, it doesn't degrade over time. It's divine and something like that. So I do feel like even if even just sort of like a reincarnated gold. But how do you how do you separate how do you
separate it from the culture and religion? So I agree. I agree, Like it's hard to know what bitcoin is if there's no culture, right and even today we talk about you know, gold bugs, which obviously connotes like a certain portion of society and a certain belief system. And because of that, gold still has like a role in
traditional financial assets. Also thought nixt point about like sort of the bitcoin laser eyes as kind of I don't know, maybe LARPing is the right word, or stolen valor where like there were one point these sort of like big conflicts with the history of bitcoin, and people are trying to change the protocol, but that's gone and you know, now that's not a big thing. People have moved on. If you don't like bitcoin, you can like build some
other chain. And so it feels like there's this desire to continuous state of conflict or perceived threats, like all the central bankers or after Jamie Diamond is after us whatever. It's like, no, they're probably like they don't know they're not, but that's sort of like they that they have to maintain that like permanent state of siege mentality to keep
it right. I mean, I would be happy if we could just go I don't want to go back, but if we could just have a situation where you can have a conversation about the strengths and the weaknesses a bitcoin without someone screaming at you. You know this is fund or have fun staying poor or just like insulting the way you love. Well, now we can say that to them. We can it have fun staying part Yeah, now that big plant has lost so much money. This
is a cathartic episode. All right, shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway and I'm Joe Why Isn't Thal? You can follow me on Twitter at the Stalwark. You can follow our guests Nick Carter on Twitter. He's Nick Double Underscore Carter. You can follow our producer Carmen Rodriguez at Carmen Armine and check out all of the
Bloomberg podcasts onto the handle at podcasts. Thanks for listening year to