Recorded Dec 2022
Guests: Ryan Zurrer, Jake Brukhman
Interviewer: Tommy @ Delphi
Ryan – 10 years in crypto, mining in 2012-13, SAFTs / ICOs in 2017, defi summer in 2020, p2earn gaming in 2021
Jake – CoinFund in 2015, one of first to focus on digital assets, 8 years full time crypto investing, invested 150 projects, “technical discipline”
Ryan
More shoes to drop in crypto (eg, FileCoin because DCG in massive selloff)
OGs have driven the market for last decade, crypto native values matter
Starting defi summer, whole space got drunk on debt
Jake
FTX not failure of technology, traditional failure
If we adopted more decentralization, smart contracts – could have mitigated FTX risks
Founder quality has gone up – especially if you’re entering in bear market
Infra is more mature
DCG / Genesis
Ryan – could allow Genesis (lending book) to chapter 11, keep the rest safe
Jake – big dent in institutional investor interest
Ryan
After DAO hack, ETH developers disappointed from $30 back to $10 – but was great buying opportunity
Now possibly generational buying opportunity for ETH
Systemic risks?
Ryan – wants CZ to release audited crypto reserves – thousands of low liquidity projects depend on Binance; if Microstrategy starts to unwind, could be cascading waterfall; would be nice to see Binance buy their way into compliance eg by buying Coinbase
Jake – “should use a DEX no matter what”
Web3 social media
Jake – Twitter cannot become true free speech platform unless its decentralized, which Elon will not completely do; web3 social usability not quite there; Farcaster is familiar Twitter experience (low friction switching); people need to coordinate switching at same time, ideally with token rewards; lots of people jumping to Mastodon
Ryan – thought creator incentives would drive great migration, but haven’t been able to sign up big ticket influencers
Tommy – Audius brought successful musicians early on
Ryan – category of artists most oppressed is musicians; believes NFTs will help unlock for musicians; music needs radically different biz model; would be nice to tokenize record portfolio and have DAO buy it – but still regulatory uncertainty
Jake – what crypto product can you explain and try in 3 seconds?
DAOs
Jake
-Major reason why DEXes struggle is because you can’t move $1M from bank account to a DEX
-2015 Vitalik defined DAOs, everything revolves around smart contract
-2022 a typical DAO – very little is onchain, and vast majority of actions use web2 SaaS
-you need to build 10K iPhone apps to find one that really takes off – we’re in same process with web3
Ryan
-If too much ownership by too few people, there’s resistance to using it – eg, Uniswap “Gini coefficient” is too high
-Financial incentives can enable, but can also be huge drag on apps if you do it improperly – eg, Play2earn gaming
Jake
-DAO use cases today: Governance of public good, Grant writing organization
-future of DAOs – package of software that just works, easily upgrade your entire community
Ryan
-Most current DAOs aren’t decentralized, nor autonomous
-Broad mandate investment DAOs – have any distributed more than their fund back?
-Disappointed in how these funds are organized and operated today
-no multi-B fund has returned above 3 DPI
Tommy – best DAOs have a strong lead, clear vision, high alignment among members
Would be interested in investment DAO that is a collection of sub-DAOs with different themes, small teams
Jake – funds need to be good at 1) sourcing, 2) due diligence, and 3) portfolio construction
-Flamingo DAO has excellent network – one of best investment DAOs
-DAOs struggle at due diligence – voting isn’t the best method, how to allow non-consensus investments
Ryan – “You don’t need 50 people to do due diligence – you need one great guy”
NFTs
Jake
-NFTs are financial rails for many classes of assets
-Movies and music going on-chain
-Stock photography, AI outputs
-Real estate – more of them looking at NFTs to go onchain (instead of security tokens)
Ryan
-traditional art world has strong interest in “phygitals” – some physical manifestation of the digital art
-recommend that aspect to all NFT projects – a print, a physical piece, etc – tactile connection, “necessarily digital and necessarily physical”
-PFPs as social club
-decided to focus on art – personally resonated, impossible to focus on all areas of NFTs
-Hollywood model has not worked for most – better to focus on crypto native experiments
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Tommy
-wish more NFT projects would lean into web2 experts, have good bizdev – eg, like what Bored Apes did
-if PFP collection is successful, automatically boxes out much of the community (bc price is too high)
-PFPs can go in movies / media – but it’s about the quality of the content, not the NFT
-license characters to legit movies and games – don’t need to build it yourself – Ryan: “just go and cut the deal with Netflix”
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Macro
Ryan
-last 2 years saw coupling of crypto and macro
-does lot of MEV, delta-neutral, alt strategies beyond DeFi is now table stakes given high fed funds rate
-focused on timeline to liquidity – no more 7 years for full vesting
-crypto is fastest, most Darwinist industry in the world
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Tommy
-hard to take bullish liquid position given current macro
-crypto sells off ahead – maybe it bottoms earlier
-VC: be disciplined on valuations
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2023 predictions
Most exciting category: AI
Where will be crossover between crypto and AI?
Where does value accrue in AI? Or does it all flow to OpenAI?
If fat protocols is true, can you keep those as open public goods? What will happen to OpenAI?
Tommy – surprised by how quickly AI evolves, MidJourney, ChatGPT, “iteration cycle is insane”
Crypto use cases for AI: Auditing smart contracts, auto-rebalancing Uniswap LP positions
Ryan – early 2020s culture will be embedded into all the AI training data, could have huge impact as AI grows exponentially