Crypto Fund Investing Secrets Revealed! with Rob Hadick

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go to vchain dot org. Link will be in the description. Hey, folks, welcome into the Thinking Crypto Podcast. I'm your host, Tony Edward and joining me today is Rob Haddick, who is the general partner at Dragonfly and Dragonfly is a crossborder crypto venture fund. Rob.

Tell us a bit about where you're from and what's your professional background.

the last the last you know, thirteen fourteen years or so. Professionally, you know, I came to New York to work in finance. I was had one of my first jobs was was at Goldman, where I was doing essentially looking at a lot of internal M and A and looking at a lot of the kind of internal strategy of what Goldman was doing to start. So this was right after the

global financial crisis. It was during a period of time where Goldman was really leaning into becoming a bank holding company and was really looking at you know, consumer banking and low cost of capital solutions, and so I spent a lot of time thinking about kind of like consumer

fintech at the time. And during that period of time, it was also uh, this is you know, call it early twenty tens when you know, Bitcoin started to gain a little bit of interest across you know, the Wall Street or across you know, uh, you know, Silicon Valley had gone a little bit more mainstream. You know, Bitcoin went to three hundred dollars and everybody was, you know, like, oh wow, this is amazing how this thing come out

at thin air and become more three hundred dollars. And Goldman actually set up an initial kind of working group

that was looking at crypto. It wasn't uh, you know, necessarily hey, like you know, Goldman is going to be doing you know, all of the things they do today, and they involved in toganization, but it was a little bit of a focus on things like maybe there is you know, support that we should be doing for like OTC for the clients, you know, maybe we should be thinking about how to you know, provide access, et cetera.

And so I was involved in some of those early discussions at Goldman and that was kind of my first foray into crypto and to bitcoin and got really interested then things at that period of time at Goldman where

we started looking at tokenizations. So people might remember in the twenty fifteen twenty sixteen era, when you know, I think there was the initial like digital ledger technology or DLTS for you know, putting in like essentially a lot of tokenized things on chain, which obviously is still finally happening now but was been a topic for a long time.

And then you know, kind of spent the next I ended up leaving Goldman, spent a little bit of time in private equity, a little bit of time at a merchant bank looking at fintech, and really spend those those number of years being interested in crypto and doing crypto on the side, but really focused on you know, fintech more broadly until twenty twenty and twenty twenty one when DeFi Summer came around and I looked around and I said, this is incredible, Like, you know, what is happening with

smart contracts, what is happening with reinventing, and you know, financial market infrastructure is something that I need to be a part of and really to the dive in full time, you know, first initially launching crypto at a big traditional hetch fund called Golden Tree Asset Management, which has about fifty billion of AUM, and then having met the folks at Dragonfly and realizing that I wanted to get even deeper and not just be call it the crypto guy at a trad fi fund, but be you know, entirely

at a crypto fund and made the jump to become one of the gps here at a Dragonfly in early twenty two.

it's very analogous as to what's happening right now with some of the biggest names getting involved in crypto, even the big banks. You know, what is it like looking back at when you you know, first discovered crypto, Goldman and things like that, and where we're at now. It seems all of Wall Street, all the banks, all these firms are jumping neck deep into crypto. Yeah.

that theoretically you could reinvent the way money moves. It could be you know, programmatic, it could move instantaneously, it can you had a fast finality, right Like this is really interesting for also the ability to swallop different asset classes, you know, directly in a permissionless way or a permission way, but across you know, actors who otherwise theoretically would not

be interacting with each other. That story around Internet money, around Internet capital markets, like that story has been something that we've been focused on for you know, over a decade, right, But the infrastructure was not ready. The people understood that this could happen. The blockchain would enable us, but they did not understand, you know what, that what we needed on the infrastructure layer was not yet ready, and that it would also take longer, I think to build than

people expected. And so it's been amazing to see that, you know, the initial vision is now really actually happening, but the initial vision hasn't actually changed that much, which

has also been interesting to see. Because people understood the benefits of the technology early on, they just needed to get to a place where you know, we could start to actually achieve you know, those those those milestones, and so in many ways reminds you of some of the early Internet and some of the early writings of the Internet. And I don't think I think it's it's quite analogous.

But now that acceleration is really happening in terms of corporates and banks and just you know, everybody across you know, the financial sector and the payment sector, realizing that this is potentially for many use cases, you know, a better way to move value, to move money, to move information than the current leglacy systems.

time when you were at Goldman Sachs and they were exploring these things. At one point, Larry Fink, for example, a black rock called bitcoin it index of money Laundering, and they were saying, Hey, the blockchain is great, We're going to use that to build. But they were looking to do more of a private, permissioned blockchain versus public blockchains. Right, but we've seen that flip that they've kind of capitulated, well, bitcoin has a fit, it has the digital store value component,

and then we need to plug into public blockchains. What did you see along the way, was that things were discussed at Goldman and so forth.

private blockchains. And she went on the front of Bloomber I think with Bloomberg business Week, and the headline was blockchain, not Bitcoin, right, And all of the story across Wall Street at the time was that like, blockchains were going to reinvent the way financial markets were, but the tokens themselves were worthless crap that were being used on silk Road,

and we're being used, you know, for money laundering. And to your point, that story has flipped absolutely because people are starting to understand the network effects, the incentive mechanisms of tokens. People have started to understand the networks effect, of liquidity and of having open networks. Right. I think

about it again. There were private versions of the Internet, like intranets, right, that existed, and they served potentially a purpose, right, but those purposes were limited and there were they didn't accrue value in this way that you started to see the open Internet, right, which grew exponentially.

And so these you know, banks, these asset issuers like Larry Fink, they started to realize as these networks grew, as Etheroeum grew, as Salona grew, as as you know the others grew, that there would be more value that could accrue to them, and that if they were to

support permissionless networks. Now, what have we seen happen in you know, recent months, as we've seen a lot of people say, okay, well, like I believe that story, but I also believe that I need to you know, necessarily control the execution environment of how I go and deploy. And so we see people like Robin Hood say, well, I'm going to launch an L two that share security

with Ethereum. But that allows me to have the ability to think through, you know, how am I going to actually have the right validator set, what type of transactions am I going to prioritize? How do I think about accruing economic value to myself versus my customers? You know, what are the types of things I don't want to

operate in my blockchain. I think we're going to continue to see a lot of that, right, We're going to continue to see a lot of people will say I can build a better business utilizing and have interoperability with public blockchain. Mine will be public as well. But maybe I have you know, a permission validators set, or I have a permissioned way to think about sequencing transactions or at least incentivizing the type of transactions that I think are important for my business.

to be a hybrid approach, right, a mix of both. But the public blockchains, to your point, has the true network effects, and you have to plug into that to kind of get access to the world because these blockchains are running like a global market real time twenty four to seven three sixty five.

the uh you know, the on ramps off MPs. Anybody can also interact with this global permissionless ledger and pool of liquidity that you know, people have built a number of different novel use cases on top of and having access to that and being able to have interoperability with that,

I'll add a lot of value to grow exponentially. But you know, you don't necessarily want to compete with you know, building your execution environment for your business with a block space that like might also have a meaning coin in it or you know, that doesn't allow you to think through you know, how you arrange like for you know, MTV and how you arrange for economics sharing, uh doesn't allow you to have you know, potential uh you know,

prioritization of certain types of transactions like like those are the things that people are really worried about, and they're also worried about some regulatory concerns around you know, whether or not you know you're you know included in like an o faccationed transaction or invalidator set. But I think it's really more about like business reasons than it even is regulatory ones.

do you see the majority of companies and brands have let's say their own layer two or if it's like Avalanche, or they have their own subnet or Salona, you know, whatever the mechanisms are. These companies have their own layer too. Is maybe their own tokens. Because there's the clarity they can build more brand affinity, engage with their customers, have more retention, and add more value to their brands and companies. Do you think that's the world we're headed too?

The service providers you know, people or even the chains like an avalanche like to your point, but you can launch your own one on top of it is essentially like a piece of like enterprise software is stk's APIs that you can like you know, stand up pretty easily. Some companies say, hey, listen, like we're gonna roll like our own new l one, right like for instance, you

know when you think about Tempo and Stripe. You know, the reason that works is because it's essentially a Paradigm's engineering team, right, and they are you know, deeply technical, and they understand wrath and like there's a there. They

have the the technical expertise to do that. But the vast majority of these people are saying like, okay, well, I'm gonna launch an L two with you know, like a Conduit or you know, somebody who does you know, roll up as a service, and I'm gonna use you know, a DA layer like igen Da or Celestia, and like they have kind of the service providers there make this like super easy for me, or you know, like we talked about Avalanche where you can just they have essentially

have a package for you that you could stand that up. Because that is so easy now and because it looks a lot like enterprise software and it allows for customizability

that makes sense for people's business. I think most people are going to look at that and say, as long as I have interoperability with other you know, parts of the ecosystem, with other you know, corporations, with other you know, permissionless blockchains and liquidity layers, like I should just go and do that, right And I can do that like relatively easily without having to make turn my organization into an engineering one if they're not already an engineering organization.

You think we're headed to that token economy and you have this interoperability and the retailers all are like, hey, I'm going to form a partnership and accept your token and you can use it here in YadA YadA.

real incentives to do that for capital market participants. I think there's a question around the form factor that takes and the legality and the actual owners and the voting mechanisms, et cetera. But in that case, I expect that we will have tooknize equities, but I don't know if I would be shocked if they were able to be permissionlessly traded.

Right now, there's the question of like, okay, well, is there like a loyalty mechanism or a stable coin or something like that, which I think is more of what you're getting at for like a Walmart. And I think it's very clear that there's gonna be a Walmart loyalty token right now. Maybe that is a stable coin, or maybe that is a points token that is like pegged to the US dollars, so it essentially has the ability

or the form factor of a stable coin. That seems very clear to me that like most people are looking at at that type of form factor as something that they want to do. Now, the question will be incentives, right and so you know, is there an incentive for Walmart to make that open permissionists or is there an incentive for them to you know, make that a walled

garden right right now? What happens is you know, I, you know, get a whatever some like you know, a delta mile right or some sort of loyalty point, and now I'm like locked into you know, potentially you know, buying something at at at Starbucks or wherever, right, But they've already recognized it's already deferred revenue, so it's a liability on the balance sheet when they gave me that token, and so actually getting that off balance sheet and getting

that back into the consumer is is actually, uh, it's an uplift and earning for share for them. So I actually think that is a clear value add for them

in terms of doing like tokenized loyalty. Then the question is like who do they actually want to interact with, right, because like, you know, I'm sure Starbucks does not want me to be able to want to swap my Starbucks point for Tim Horton point, right, but maybe they're happy to do you know, some sort of like go to market with like the you know, the New York giants, right, And so I expect there will be called it open token or somewhat openly semi open like loyalty type tokenized

marketplace that will exist, and we're I mean we're seeing it right now. Like them, I think FIFA is doing some like World Cup loyalty on avalanche. And you know, the only place you can actually guarantee you take it to the World Cup right now is like through their loyalty program that is tokenized on Avalanche, and so I think we're going to continue to see a lot more of that.

sure they all align and so forth. But if I can, for example, just using the Amazon example there, if I can get an Amazon token and you know, for holding it, they maybe there's some staking or additional discounts that are added, and I can even put it in the open market and sell it or put into DeFi whatever it is, or lend it out. I don't know, I'm just spitballing here, but that would be really cool and I would be more engaged, you know, maybe going to Amazon dot com more often than I should.

to have you engage. They don't want you, they don't want to actually give you these points and then have you not do anything and then just sit there for years. And so they're going to want to make ways for this to be usable, and I think they're going to try, and we're going to see a lot of form factors specifically within defied to do things like lending that are able to increase the way that you know, people get points. And so I absolutely see that future.

think I don't know if you agree with this, but maybe once the market structure build the Clarity Act passes, we're going to see a boom and innovation and companies you know, looking to do get creative with these type of things. And maybe right now they're you know, holding back, waiting for the full clarity.

the investors, you know, react to these things. So we've seen some announcements by some big public companies that have come out and they've been positive or negative for the share prices. That will continue to be a big focus for people. So people have plans. They are focused on thinking about how this feature looks, but they don't want to put their traditional business or the rest of their

business at risk. And so as you know, they move into the space, it will continue to be kind of step by step slowly to make sure it doesn't you know, have some sort of adverse effect on the rest of what they're doing.

an overview of Dragonfly and your guys approach to investing in the crypto space. Are you investing in token projects as well as companies and things like that.

bit over time. I think if you look at, you know, the pillars of what has accrued the most value in crypto, those pillars have really been you know, finance, right, so whether that's sea FI or DeFi, those pillars have been stable coins. And the third pillar is really like the blockschains themselves.

paymous businesses or issuers themselves. Those are equity businesses, and we've seen circle Go Public can be well received by the public markets. We've seen anything we're going to see, you know, more of that on the finance side, you know, again DeFi very protocol driven, very much token driven. But on the sea FI side, the biggest businesses in the world are exchanges right alongside tether, right, so it's like tether and then it's finance, right, those are two biggest

crypto businesses in the world. And these are businesses that accrue value to the equity, right, And so we've we've invested in by Bit, which is the second biggest exchange in the world, invested in Pickett was the fourth biggest exchange in the world, and so we've seen a lot of a value you know, a crew there. And then you have the blockchains themselves, and of course the blockchains and the protocols they need tokens for intective mechanisms, for

coordination and for a secure in the network. And so what we view that is really important in the market is that the business or the protocol knows where the value should accrue. They're opinionated about it, and they're focused on that specific whether it's the token or the equity, and that's where we care about, not necessarily if the form factor is in and of itself a token or equity.

and there were some very big news this week of the Intercontinental Exchange investing I believe about two billion in polymarket and the Intracontinental Xchange for those listening and watching who don't know, they're the parent company of the Neukstock Exchange. So it seems like a pretty landmark moment. Rob What are your thoughts on your initial investment in poly market and this news, of course.

that was started before that. But what we saw over period of time was that while a lot of crypto natives really saw the benefit of you know, prediction markets. They weren't necessarily being seen you know in more mainstream parts of the financial services industry or you know call it, you know, other types of whether that's consumer business or

you know, et cetera. And so we were always a really big fan of Shane and of the idea, but I think we were slower to the uptake than maybe some other firms in terms of thinking, you know, what this could be in the future now, you know, fast forward.

We continued to stay close, We continued to track. You know, obviously, probly market did quite well during the the twenty twenty election, and you know people were, you know, really excited about it, but then you know, kind of volumes came down again. They obviously famously had the sort of the settlement with the CFTC in twenty twenty two. And we continued to see Shane be just maniacally focused on this idea of the markets for everything and having financial markets for all

types of things. And I became really impressed with even during the downturn in twenty two and into twenty three, just how unwavering he was and what this market should look like, where he should be going. That was the pointnumber one. I was like, Okay, this is a founder who has an unwavering and maniacal view on how the world should be, and that is something that you seem very rare, right, and so that was really impressive for us.

But the other thing that really clicked for me in twenty three was that we could see poly market start to become more social. So I think it was July of twenty three when Sam Altman was fired. You probably remember that as well. You know, he's fired on a Friday, he was rehired on a Monday, And that entire weekend, every text chain that I was on, every group chat that I was in, was speculating is Sam Altman going to be rehired? What is going to happen of the

future of open Ai. But not only were they speculating, you know, with each other and within the conversation, but they were talking about speculating on Polly market. And actually that market, on Parlad market, was I think the largest market they had had outside of politics up that period of time. Then the same thing happened with the around

the LK ninety nine room temperature superconductor chip. So for people who don't know that there they came out that there was potentially a superconductor that could be done at room temperature, and nobody really undersood like that was a new novel, really historic thing if that was true, and nobody understood whether that was true or not, and there was a lot of speculation whether that that was actually able to be reproduced. Turns out it wasn't, right, but

the same thing happened on polymarket. And so during those two things, and during me understanding or seeing in my you know, uh, my group chats and my friend group, that the social aspect of the conversation also became part of the polymarket conversation, or those two things merging was when it really clicked for me that the markets for everything now is the time Shane's Shane saw this before I did, and some other investors saw this before we did.

But I now clicked for me that I do believe that this is going to happen and that people are going to start seeing poly market as not just a place to make money but also a place to be social.

early j curve adoption. Then, of course in twenty four they had this incredible run into the in the US election. They raised another round right before the US election, which we participated in again, you know, but what was really interesting to see was they and this had happened in twenty twenty, but it happened in even a more real way time. They were just the information was more right

than the polls. Like it was clear that you know, poly market and the story around putting money to work to express a view resulted in a more accurate information

than you know, something like a poll. And they predicted everything that happened, you know, all fifty states in the election, right, And so then it clicked again that you know, okay, all these politicians, all of these journalists were citing pollly market as you know, one of the ways of which they should think about, you know, potential outcomes for the election, but then it clicked to that maybe it wasn't just one of the ways, but it was the most accurate way, right,

And so again we invested in that round. And a lot of people you know had said, oh, well, like after the election, the prediction markets will go away again, right, because he had seen it in twenty twenty, and then they picked up again in twenty four, and I was of the mindset that won't happen in the same way because of what we had talked about in twenty three.

And behold, that's what happened, right. You know, these other business markets, these other crypto markets, these other mentioned markets as they as they call them, they all started to do well. And it continued to do over billion dollars a month of volume, you know, into post election timeframes. So then Founder's funded an investment or let an investment out of their growth fund earlier this year at a one point two billion dollar valuation, and we participated again

because of that. And so we just saw you know, what was Shane's you know vision from the beginning, just really to start to take shape in a real way in twenty three and kind of accelerate through this year. And it culminated in now this intersection of traditional finance in ice in the New York Stock Exchange, wanting to partner up in a real way with a polymarket, a defive first prediction market, a defive first financial market, and wanting to build this business in a regulated way in

the US. As we continued to see that growth and so like listen, is the culmination of many, many years of hard work and maniacal focus and ambition from Shane and his team, and we couldn't be more more excited for them.

were talking about that, I thought of the blockchain is allowing these social interactions and conversations and even memes like we're seeing with meme coins to go on chain and we're able to financialize it and tokenize it. It's a fascinating concept, like human behavior on the blockchain. So you and I, you know, maybe meta for coffee and we're talking about who do you think my win this or who do you think is happening here? And that can go on the blockchain. And if I send you a

meme that I think it's funny. You know, That's what we knew each other for a long time, and I sent you a meme that can go on chain. It's kind of wild.

be turned into a tokenized market. Right. And if everything can be turned into a tokenized market, then all of a sudden you have a much more direct way to

express viewpoints than you've ever had before. Right. A lot of what happens in you know, financial markets, for when people think about, Okay, well I think X is gonna happen on the geopolitical stage, and so I had to figure out not just that X will happen and be right about that, but also the second and third order effects to be able to then go express my view and you know, to make money in the financial markets

that no longer needs to be happening. I can just be right on that X thing, right, I can just be right on you know, there was a lot of volume this year and like who would be Pope and you could be expressing in view and that now it happens to my financial markets. But now it's just like okay,

I could bet on that directly, right. But then that becomes at the same time where there is a financialization aspect happening to a lot of different parts of our lives that you and I can now more directly just you know, interact with each other, but we can interact with each other in those tokenized markets and through the group chats and through you know, going to get coffee, and it just becomes a much more social way to

put money to work or to interact, right. And I think we've you've kind of seen the beginning of that with sports betting, right where like a lot of people now like they want to you know, be putting five bucks to work while they're also you know, watching the game. But now you know, I also can put five bucks to work when we're debating any other aspect of life.

side of something. But you know, if you ask Shane, you know, he believes that there can be a market for anything, and I think within some parameter that is probably true, right, And I think we're going to see a lot more of that, and we're going to see that go you know, very far down you know, the Niche curve to your point, how far down and go to the Niche curve from a market structure perspective is definitely up for debate. It's so fascinating, man, what's happening.

Robin Hood and with you know, kind of more democratizing access to those financial markets like that is a relatively recent phenomenon here, but it is a part of life and more digital first economies. I mean, Asia was much more digital than the US was for many years. That's been how it's evolved. So I expect that's how it'll evolve here as well. And the key is to do it in a way that is like healthy for everybody

and that allows for good habits to exist. But I think you know, allowing for interaction with you know, all types of markets across all types of you know, different aspects like that is clearly net better than not having that.

time so I wanted to ask you about what are some interesting investment trends you're seeing from the fun point of view. Right from the outside, I'm seeing digital asted treasury companies, ETFs, and tokenization much more. But are you guys looking at those things? What you know? Maybe you can't give away your secret sauce, but what are some things you're seeing you know, as far as future trends.

large focus on tokenization. Genius Act really changed the way that corporates think about stable coins, so that's continued to be a big focus for us. We've it's probably our biggest focus over the last couple of years. We continue to still be very focused on DeFi. So yeah, you'll remember maybe I talked about the pillars you know earlier in this conversation. You know, this is starting to sound a lot like you know, us being continued to be focused on those pillars. We think DeFi is a form

factor that makes also like tokenized assets better. Right, If I can take a uh, you know, a tokenized equity, but then I can do better and easier securities lending on on chain on Camino, right, versus doing it or on ave or on Morpho versus doing it through my broker like people. I think that is a better form factor and another thing that people are going to do.

a big, big focus for us. And you know, then we're very focused on really continuing to build out that core infrastructure that allows for payments to actually exist on chain allows for interoperability between all of these different chains that we've talked about before. That is I think, very

very important. What we don't get caught up in, frankly, has been a lot of the stuff that we think are you know, more hype focused, right, So things like you know, AI crypto crossover to date, frankly has been primarily like meme coins attached to some sort of like you know, AI agent and you know, people acting like it's like some new you know, financial primitive that it doesn't really exist, right, We've I think the vast majority of the AI crypto prejudice has just been straight up

vaporware if I'm being honest, right, and people don't even plan on launching like, you know, real projects around it. I think that's been true of a lot of like you know, call it the social aspects of what people have tried to do in crypto. So I talked about you know, poly market being social. Well, poly market is an exchange and you know kind of at its core, but it is also like a social exchange. That's how

I think people will do social on crypto rails. I don't think a decentralized social network is necessarily going to work, and because being decentralized is not a product, right, you know, a product is something that like, you know, people want to interact with because they get a better experience, and decentralization doesn't add for that better experience. Right, you have to build something that you know has a good social graph,

has a good interest graph, et cetera. Right, And so I say all of that to say, you know, what we continue to be focused on is the things that blockchain do does does very well, which is the transfer of value, the transfer of money to the transfer of information.

way discover what our friends are doing. So, like if you think about you know, the way Instagram evolved, right, you know, you took what was our social graph and you made it into pictures, right, but it was really around interacting with people in maa network, right, Like that was what Facebook started, you know, the social graph, but they started the social graph just completely and written form. Instagram has the social graph, but it's completely in picture form.

That allowed for you know, more fomo to exist because and more people to want to you know, engage with different activities and et cetera because of that. But then when you take the next form factor, which was like TikTok, right, tech talk really reinvented the social graph because it became interest graph, right, and it became about like what are everyone that I'm social with? What are they interested in? And it does that imply something about how I am interested? Right?

And the reinventing of the form factor of the type of information that I see in the way I can see information that is the thing that makes for a better user experience, the things that makes for a better product. What does it make for a better product? Is say, and I'm going to give you Twitter, but it's going to be decentralized.

own metaverse, what would the theme be?