Everything Is Market: How Crypto Is Expanding Finance Into Culture | Jesse Walden

Many of the founders who come in that we work with in the portfolio, many founders who come in and pitch us,

they're all working towards one North Star KPI, which is daily active traders.

They want to see more people trading every day, and I would say we're somewhere on the

path, we're not quite there, but we're directly on the path, so they're being a billion traders,

daily active traders. That's intentionally being hyperbolic, but that's the goal of many of these

companies. This episode is sponsored by Canton, the only public permissionless blockchain built

for institutional finance. We'll hear more from Canton later in the episode. Blockwork's digital

asset summit is back in New York, March 24th through 26th. We'll have top speakers from leading

asset managers, financial institutions, DeFi protocols, crypto companies, and policy makers,

all under one roof. Think BlackRock, Coinbase, Robinhood, and more. Follow the link in today's

show notes to buy tickets and make sure to use code, bell $200 for $200 off at checkout.

See you there. Hey, everyone. Quick disclaimer before we get into today's episode. Nothing said

on bell curve is a recommendation to buy or sell securities or tokens. This podcast is for

informational purposes only, and the views expressed by anyone on the show are solely our opinions,

not financial advice. Our guests and I may hold positions in the companies, funds, or projects

discussed. All right, everyone. Welcome back to another episode of bell curve. Today,

I'm joined by Jesse Waldeno variant. Jesse, welcome back to the pod. Nice around me again.

Great to be back. Yeah, this is fun. We're going to take a break. Bell curve has been a little bit

of an AI pod recently, but we're going to rediscover our roots and talk about crypto. And Jesse,

you wrote something really interesting a week or so ago. And the title of this blog,

this tugs at my own kind of nerds night part strings here, which is everything is

market. And I love that title. And it really addresses one of the core debates of crypto at the

moment, which is is like these promises of Web 3 and kind of some of the early original nerd

stipes about crypto being this coordination layer and building all types of apps. Are we going

towards that world, the kind of critics inside of things? Or is every is crypto mainly suited for

financials and being an asset ledger and better financial rails? I love the way that you framed

this year. Talk us through the kind of opening inspiration for this piece. Yeah, so I guess the

backstory is like, I got into crypto over a decade ago as a founder and I started this company called

MediaChain. And the goal was to bring every piece of media a different type of digital asset onto

public book and help creators make more money. So I would say I was very inspired by a lot of the

kind of more expansive possibilities of what blockchain is going to enable for digital media for

creators for, you know, think things that I guess would typically be associated with Web 3.

And you know, today, I guess back even back then, one of the big lessons from that startup was

that markets drive new standards. So if you want to have a new standard for digital media assets

or digital media monetization, you need a market to pull that standard forward. So that's a

lesson I kind of learned the hard way through the startup and fast forward to today this piece

everything is market. It sort of puts forward the view that both the kind of Web 3 vision and

the view that blockchains are just for finance are correct in that blockchains are enabling

many more markets to proliferate. And so the definition of what finance is is going to be a lot

more expansive than most people realize. Yeah, I reference this post often, but one of the

inspirational posts for me when I was first getting into crypto was a post called

markets are eating the world by Taylor Pearson. I think you also know. And yeah, I just love this idea

of markets as a coordination layer. And by if, you know, you reduce the friction for

spinning up markets, you make them global. And I really love I want to dive into, you know,

some of the particular innovations that you see in crypto. I really love this idea that you have

of markets being an API endpoint and a potential input into other products that could get built

on top. But I think this idea of markets just coordinating and increasing amount of activity

people people kind of grasp the significance of that. But it's, you know, I think there's so much

white space. Yeah. So like in the piece, basically, I go through like three different angles on

this idea that everything, everything is market. And so the first driver that I go over is that

this idea that mass accessibility and participation in markets, enabled by crypto, enabled by the

fact that you can just spin up a market for anything from like, you know, derivatives to memes,

means that finance is increasingly intertwined with culture. Second idea I cover is the idea that

markets that are permissionless can function as these change agents in that basically, you know,

kind of twist the hand of regulators and institutions to enable new behaviors. And that's closely

related to culture and consumer behavior change. And third is this idea that once you have many more

markets and changes in what's, you know, behavior and what's possible, you start to turn markets

into infrastructure that increasingly, you know, intelligent agents can consume as inputs,

you know, to what they're capable of. And so these are kind of like free, like, I guess mega trends that

I see in crypto that are all rooted in this idea that finance is becoming a lot more expressive

and a lot sort of wider of a domain than it's been historically. So happy to go and cover any of those.

Yeah, maybe we could, maybe we could tackle just lowering the friction of spending up new markets

here. And, you know, I'm interested to maybe go one click deeper. And do you think that there are,

you know, if we if we were having this podcast 10 years from now, you know, when I hear

lowering the friction to spin up new markets in my head, I'm mostly thinking of prediction markets

today. But we've also seen the creation of, you know, markets for things like NFTs for memes.

And they've kind of risen and fallen. And I'm curious in your mind when you think about

lowering the friction to spin up new markets, do you think of that, you know, what chunk of that is

prediction markets today? Do you see that kind of eating some of the the new markets that crypto

has spun up? Or do you think that this is just the beginning of a phenomenon of lowering the friction

and creating many many new types of markets that, you know, will continue to see in the future?

It's a great question. I think my answer is like both. I think yeah, prediction markets I think

are really good example of the phenomenon of describing where you can literally spin up a market,

you know, with a binary outcome for anything. And so that's case in point example of markets

becoming a lot more expressive finance becoming a lot more expressive. But, but also, yes,

like meme coins, NFTs are examples of the same thing, right? Like it's literally, you know,

cost your dollars to launch a meme coin today. But I think it's also the going to be the case for

other types of value going forward. So, you know, a classic Dixonism, you know, next big thing

starts up looking like a toy. Some, you know, meme coins are kind of a toy and 10 years will they be

a major asset class? I think the asset class will be bigger than it is today. But also, you know,

we'll start to see, and we're already seeing this today, you had standing on recently talking about,

you know, tokenizing solar framework guys yesterday announced they're tokenizing mortgages.

So the cost to doing this, like, you know, bringing assets into this economy is going down by

cutting out many, many intermediaries. And so it's the same trend line of, you know, the cost to

making assets permissionless, programmable and global is going to zero.

So I agree with that as well. And I, one thing maybe to bookmark and we can do this podcast again

in a year or something and understand this. But I'm very interested. I'm sure you saw the news

this week of meta launching their stablecoin. And I'm very interested to see some of these markets

that looked like collectibles or toys. It's unlikely that meta is going to be getting into the

mean coin game. But I am very, you know, I know that both of us are fans of Jacob and Zora. And,

yeah, I'm very curious to see what happens potentially with, you know,

creator coin type content when you have, yeah, like Instagram and Instagram getting into

stablecoin payments. Like maybe that opens up the door for very new types of markets.

Potentially. Yeah. I think, I mean, that, I think that today, those things are probably unrelated,

but yeah, you know, on a longer time rise. And could there be an intersection? Absolutely.

Let's talk about the second component of that as well. And I guess maybe more of a

a question to you around the implications. I think that the reason I really like this point is

this isn't maybe an extension of a principle that people have known for a while, at least politically.

You know, there's this great, I forget if it's James or a Carville or Bill Clinton who said,

if I could come back as one thing, I'd come back as the bond market, right? This is famously

a very large market that is pushed around even US presidents in the past. So I really like this

idea, but it makes a lot of sense as markets get more global and potentially deeper and more liquid

that that trend should essentially continue. I guess, you know, I'd love you to maybe unpack

one or two levels deeper on, you know, how maybe zooming into crypto have crypto been

some of the new crypto markets been change agents. And how do you see that trend continuing?

Yeah, so I guess my background before I started in crypto a long time ago, I was really into

piracy and, you know, like many teenagers were in the early 2000s, you know, piracy was happening

on permissionless protocols, like FTP and BitTorrent. And so that experience, I think, was

formative in that BitTorrent in particular was this kind of breakthrough protocol innovation,

and what it enabled was streaming because the protocol enabled you to get all the packets of a

file, you know, in parts, so you could start playback almost immediately. And, you know, that was

a pretty profound experience at the time, when there was no YouTube, there was no Spotify.

One of the people who saw that was Danny Wack, founder of Spotify, who at that time was founder

the biggest BitTorrent client. And he had the great idea to, hey, they were in a protocol,

because it's making more accessible. And so, you know, little known fact is that Spotify actually

used BitTorrent under the hood in their early product. And so I think this is a really good example

of something that we see happening in crypto repeatedly, which is protocols first enable

developers and users to kind of express new behavior. So with BitTorrent, it was, you know,

we want access to instant access to all the world's media at our fingertips. That's streaming.

And then later, once that behavior was kind of proven out at scale, which in the case of

of a piracy, BitTorrent was like a third of all internet traffic at its peak. Once that's

proven out at scale, then, you know, the rules change and, you know, pragmatist founders come

along and productize the new behavior. So, you know, in the case of, again, with piracy, you know,

what what Danny Wack did is he went and got agreements done with all the record labels,

you know, who ultimately had to acquiesce and change their rules to enable this product.

And then Spotify won, right? So the example, there's many examples of this in crypto.

I think, you know, stablecoins are really good ones. Stablecoins started on off-shore exchanges.

That, you know, total gray market enterprise got big enough, you know, enough demand where,

you know, in the US, we just passed legislation to codify, you know, the rules for stables.

And now that the market is exploding. Same thing with prediction markets, you know,

all the market was off-shore for years before they launched the US. And, you know, interestingly,

their app that they launched in the US doesn't even function on Probibirks.

Spotify doesn't function on BitTorrent either. So that that one's actually lit up. It's kind of

a nuanced rabbit hole. It's, you know, again, the pattern is like the protocol enables users

and developers to break the rules, prove out new demand, and then pragmatist founders come along

and product cause it. And sometimes the productization doesn't imply it using the same rails.

Now, I'm pretty high conviction that crypto will ultimately prove to be the right rails

for many of these markets because, you know, permissionless programmable. It's just the cheapest

way to do it. So that's not where the analogy may break in the mid to long-term.

But there's a lot of similarities there. So the TLDR on this is that, you know, because crypto

is permissionless, programmable, global, censorship resistant, we get to break the rules on

any more markets and prove out demand for new things and ultimately change the rule and change,

you know, consumer behavior. And that's how we'll continue to get new products in the space.

Do you see, so one pattern maybe to draw out on the history of how markets develop is they,

you know, prediction markets and stablecoins are a really great example of they tend to crop up in

kind of a gray or less regulated area than they get big enough. And then eventually they do get

regulated. And I think we're in this era of crypto where finance is another good example of this.

It kind of existed. It was a period of time. I was like, where does he even live? Does he have

this office in Shanghai or not? And he was kind of bouncing all over the place. But now,

finance is trying to get regulated and move into the US market. Same thing with

polymarket. And it seems like we're in a maturation phase. One thing that might be a little bit

different about crypto is that it's global by nature. And so, you know, when these markets,

when we talk about these markets having rules, it's kind of like, well, whose rules are we talking

about here? And I'm also curious because kind of the ethos of crypto and, you know, in a lot of

places in the true DeFi today that has been less regulated. And there isn't aren't things like

KYC AML and things like that. So I'm curious, you know, if part of the destiny of markets to

become change agents, is they become regulated? How do you see that evolving in a very complicated

global world? Yeah. So I mean, yeah, I agree with the point that crypto is

is unique because the base, the base of it is in theory, permissionless decentralized.

But, you know, what the end users are facing, often it's not, right? They're often facing,

you know, front end interface control bias or centralized party. And so they're like, you know,

you've got to get regulated in the markets where your users are. I think probably the best

end state of this is that you are able to kind of unbundle the end user interface in the underlying

market kind of infrastructure. Um, so Jake Sraminsky, you know, who's the chief, was the chief

league officer apparent up until very, very recently is now an advisor to the firm. Um, he just

went off to start the hyper liquid policy center. And, you know, this is one of the things that,

that he's got his site set on right is like, let's figure out a way to scale decentralized

exchange, hyper, you know, the hyper liquid core, but also find a way to, um, for hyper liquid

to be able to answer the US market and face US users, which today are not allowed to access the

platform. Um, so yeah, that that's what I think the end state looks like. And that is going to be

the result, hopefully, of smart people at Jake going and doing the work to help educate regulators

in these markets about the difference between the base functionality and the end user product.

Um, and, you know, it's, it, it, I would say that, um, the historical analogy back to like

piracy, for example, it's, it's not all that dissimilar. Like BitTorne still exists, right?

Like BitTorne itself is not regulated because it's a pure, pure protocol. Same as the internet

protocol. The internet itself is not regulated. But the products on top, you know, that face

on users are and sponifest to go get what copyright licenses in every country that they deliver

to the citizen. So, you know, that's, I think, like, that would be a good place to end up as the

underlying protocols end up unregulated, but, but we have these, um, this layer on top. And that

layer gets kind of bullied around a little bit by the demand that's proving out by the permission

was base layer. Before we get back into the episode, here's a quick word from our sponsor,

Canton, the only public permissionless blockchain built for institutional finance.

Tradvi wasn't built for 24-7 markets. DeFi wasn't built for regulated institutions. But Canton

is where the power of finance meets the promise of blockchain. The only public blockchain with

institutional grade privacy, true composability, real assets, real markets.

Why reinvent finance when Canton makes it work the way it should?

Canton, where finance flows.

That also just makes sense from a specialization standpoint as well. But, um, all right,

let's talk about this, this third angle. I think this is the most interesting point that you

bring up as well in the piece. It is kind of using this idea of, um, markets being an API end point

that can be an input into other products. So, like, just help unpack that. This is a,

yeah, this is a particular interest of mine too. So, I'm happy to, would love to get into unpacking

this concept with you. Yeah, so, so the, I guess, the section of the piece is called markets or APIs,

or markets as APIs. And the idea is that, um, you know, in short, that, um, like financial markets

historically, I would say, you know, like, track, track, find markets. So, these kind of like

discrete venues, they do produce a lot of data and the data is consumed, um, uh, and, and used in

many ways today. But as we get this like explosion of new markets, like, that's probably going to expand

quite a lot too. And it's at a really interesting time where, um, increasingly, we have these, you know,

agents that are able to consume all the world's information in vast quantities, um, and markets are

this unique type of information that is very hard to fake and or generate, right? Because it's

costly to do so. Um, and almost by definition, it's information that the agents can't, uh,

already, right? Because markets are producing new information every single tick, right? And, and

you can have an LOM that's out there crawling the internet, like, you know, pulling in all the

information in the world, but markets are consistently every tick producing new information that, um,

that is, that is costly to fake. And so, like, that's, that in my view, is like a, you know, exciting

new terrain for agents to pull from. And so if you take this to the logical extreme, we may

happen in a, and a bit of a world where like, there's all the information, you know, that's

knowable is already inside of an LOM. And all the information that's not already knowable is inside

of a market. So, um, and so that, that's, I would say like the core, the core of the idea and, um,

this struck me like random stories, this struck me is like, I was going to bed one night,

plugged in my iPhone. And, um, I got this message on the phone that says, uh, your iPhone will

complete charging at like four and six hours. Um, and I was like, what's going on here? And like,

how is Apple kind of just making this decision about, you know, when to slow charge my phone?

So I've looked it up and what's going on is Apple's pinging API. And that API is aggregating

a bunch of data on the energy market and making a prediction about when it's going to be kind of,

you know, cheapest, most energy efficient, um, time to charge in my location. Um, so that's not on

chain today. Um, but you know, as we bring more energy assets on chain, it very well could be in

the future. But it's a really good example, kind of a mainstream example of like a market serving as

an endpoint for an API that enables this, this product feature. Um, and you know, I, and I, I think

there's like, there's another, a number of other examples I can talk about, but that was sort of

the inspiration for this is like, well, for, we're getting this explosion of expressive mean

markets because of crypto and we're getting this explosion of intelligence in agents. Um, you

know, probably it's the case, there's going to be a collision course where agents are consuming

information from these markets to inform decisions that they're making and enable new products

that services. So this is, uh, you know, block works, you know, our history is as a media

company and I'll just give an example of how I see media evolving and I have, I've told you

this before, but I have a long unfinished blog post about this. But, you know, um, for a long time,

I was kind of very confused about what the future of media was going to look like because I could just

see news dying as a business. It's a lost leader for everyone. It doesn't make any money. Um, there's,

there are all these challenges with the business model. Um, and it started to see prediction markets

as a, um, you know, one of the functions that news and media has historically done is it surfaces

information. That's what, by the way, the sub stack generation doesn't do. It's a bunch of

context and opinions, but it doesn't do the hard work of surfacing. And I'm actually not a huge

believer citizen journalism because there's not a strong incentive for a set of standards to enforce

that prediction markets do that beautifully. Um, and when you have agents, I kind of, my vision

of the future is that actually you basically just have prediction markets surfacing facts and then,

you know, in a couple of years, this won't be you and me on a podcast. It'll be an agent, uh, you

know, ripping, ripping a podcast based on a bunch of prediction markets style inputs. But

that was the genus. I didn't put it in the same, maybe it's as eloquently as you did, but

similar thing, right? There's a, there's an information source, which is prediction markets. It's

used as an endpoint as an input into this whole other business model. And yeah, the apple example

is a super interesting, there's also super interesting there, which is your, uh, and I think it's,

it's also extremely relevant in this world of AI where I think everyone is kind of thinking through

what is the moat here? Um, and for me, it's proprietary data and distribution. And that's what

markets have in, you know, there's no LLM in the world, right? That can get that information. It's a

totally discrete separate thing. Right. Exactly. And so, so like, I think to be like, and a few more

examples to try and make us a little bit more concrete, like, so the most like literal example of

this, I think we have today in, in crypto on-crupe rails is the defi mallet, right? Where it's like,

you have, you have, you have a lending marketplace, uh, which is on chain and is like a dynamic

market for, for borrow lend. And then you've got, you know, fintech front ends, like Coinbase and

Kraken and all these other, um, kind of, yes, traditional fintech products that are built on top

of the, the on chain marketplace. And they're just, you know, not exposing the dynamics of that

market to the user. They're just showing, okay, here's, here's the, here's your yield if you're,

if you're lending a borrow. Um, and so that's a very literal, literal example. The market is,

you know, the morph of laws is an endpoint. And then you're, you've got to front it. Um, but,

you know, another example is a little bit less literal, but still, um, you know, pretty one to one

is the, the polling market odds at the Golden Globes, where you're taking, you're taking the,

the market data and you're like, composing it into an entertainment product, essentially.

So, like, so, and then there's the Apple example I gave, which is not on chain today, right?

Which is like, the market is completely abstracted. You don't see it at all. You just get this

product that makes your life better. And, um, and, and yeah, so, so the, the kind of like,

directional bet, and I'll be honest, like, I don't know exactly, I don't know what the next thing,

um, you know, looks like exactly, but the directional bet is there's going to be many, many more

markets, prediction markets, um, you know, uh, creator tokens, whatever. And, and we'll be able to

take the price signals of those markets and compose them into interesting new products. Um, so

that's one thing I'm like, you know, I would be thrilled if founders are coming in and pitching

me and being like, Hey, I'm building a product that's uniquely enabled by an information

this market's produced. One question that I have for you is when I, again, when I think about

the underlying markets that are most likely going to produce these valuable signals,

I'm mostly thinking of prediction markets in my head. One criticism, early criticism of prediction

markets is that there's a lot of insider trading. And I, I have a difficult time myself, um,

fully thinking about the implications of this. Cause one thing that I think prediction markets do

is its surfaces information in a way, which is more globally recognized and consumable. So the

example would be markets always produce these types of signals to use your analogy. They were just

shittier, more confusing API endpoints. So, you know, when bonds sell off at the same time,

gold goes up and consumer staples, like there are 300 hedge fund guys in the world who was like,

I know exactly what this means. We're going to war with Iran. But the most people can't see that.

But what actually one of the simple innovations that I think prediction markets do is they improve

the understandability and the legibility of the API endpoint to be more applicable to a wider

audience. The criticism of, um, and I actually, I read a really interesting study because one of the

other criticisms of prediction markets is that in lower volume, uh, is it really accurate? Can you

just push it around? Read this, uh, this study that actually even in very low liquidity markets,

the signal is pretty much the same. There's only like about a 1% change in accuracy. Um,

and the criticism of that is because there's a lot of insider trading and it's not as regulated.

And I'm just curious how you think about the kind of societal benefits and the potential business

benefits of producing this valuable signal, uh, versus maybe the, the, uh, you know, the insider,

the kind of insider trading aspect of it. Yeah. So I mean, I would say, um,

it's, it's, it's, it's kind of, it's, it's a very trippy, uh, subject to tackle because

on the one hand, like the, you know, insider trading is producing useful information for the world.

And, um, and, and like, you know, the second order effect of that information being accessible

and understood by others, um, can be good and also be bad depending on what the market is. And,

and, and, and whether the insider has kind of got control over the outcome and, and, you know, like,

you get it, then you get into things like assassination markets and if somebody's doing insider

trading on a stash, niche market, like, that's a really bad thing, obviously, right? Um, so like,

yeah, it's, it's a new on topic because there's like, I think there's both positive and negative

aspects to it, like, like, many, you know, your technologies. Um, on the, oh, I, I guess where I

knit out, I think, I think there's more positive than negative, um, assuming like, um, like, you know,

really bad, um, outcomes like assassination markets and things are, are, uh, limited and, and

maybe that happens more so at the front end. Um, and, and so there, there's probably, there

probably has to be some, there has to be content moderation. These are, like, these, these markets are

new media type, um, new data type and like, some moderation is going to be necessary to mitigate

this problem, but I don't know that the answer is like eliminate all insider trading because then

you're eliminating a lot of the information signal that the markets produce. Um, slightly,

like related to this thread is, um, the idea that, uh, agents, in addition to being consumers

of the, you know, the information that these markets produce or, you know, consumers of markets

as APIs, um, agents can also be participants in the markets. Um, and essentially, like, if the cost

of running inference is one penny less than the value to be gained from making a bet in a

prediction market, you can, you can assume that agents are going to do that eventually, right?

They're, they're going to make the bet if the, you know, the gain is a penny more than, um,

than the inference cost. So, um, to your point, like, you, you know, earlier that you can have

these very, very kind of small markets and they're still somewhat accurate. Um, I, I think that's,

that's probably right and it's probably going to accelerate a lot and we'll get kind of prediction

markets on very, very long tail subjects where it wouldn't be worth it for, you know, a human to

spend their time and energy participating in a market where there's not a whole lot of stake or

a lot to be won. But for an agent, if, if you can pay for your own inference costs and make a,

you know, tiny edge on that, you know, agents will, we'll, we'll do that. Um, so the net of that is

like much more information in the world, um, and maybe the inverse of the, the title of the section

is, you know, markets as APIs is, or agents, sorry, being markets as APIs agents as participants in

these markets producing more information and, and that's kind of a flywheel, right? We're like,

we're getting many, many more markets, more information and that information is then being

composed, kind of reflexively into their second order of things that, um, that agents can make

decisions on. Everyone in crypto loves to talk about transparency, but would any serious business

publish its payroll for the world to see or hand competitors its contracts? That's not a feature.

That's a bug and it's why most financial institutions can't operate on today's public rails.

Canton Network is different. It's the only public permissionless layer one blockchain built with

privacy at its core, sharing data only on a neat to no basis. That's why Goldman Sachs,

NASDAQ and Broadridge are already building on the network. Only Canton delivers the network effects

of a public chain with the privacy and control of real finance demands. Learn more about Canton by

following the link in today's show notes. So the kind of segues into my next line of questioning

here, which is how do you see the proliferation of agents impacting the business model of markets?

And I mean, it's one thing that, um, you know, one thing that's been pointed out quite a bit is that

agents might have different preferences from humans. Um, and so it might, but there's a lot of

stuff, you know, I'm kind of thinking about this myself in, um, you know, when you look at like the

morphos of the world in the borrowed land type, uh, uh, protocols where you kind of have these

money markets that are being created on chain. No one's really built the equivalent of a credit

agency, a credit ratings agency, like a Moody's in, in the real world, uh, who pays for if you

want to issue bonds or something like that, the, uh, the issue or pays. Um, and it's just kind of a

human preference style there. But I could actually see that model flipping in the world of agents

where agents, uh, because there's, because the, what they need to overcome at the moment is trust

and security. I can actually see a, like agents pinging, um, and paying, like per API call,

essentially, to consume that number and the whole relationship flips. And it's the

demand side that actually pays for the credit rate. Like I'm, I'm just curious looking at the

business model of markets, um, you know, how you see agents impacting that. Um, yes. I, I mean,

it's, it, I, to be honest, I don't have a, like a super prescriptive view on it. I think like,

you know, there, there was the Satrini note this week that, you know, basically said agents are

going to like, you know, spin up a door dash competitor and then other agents are going to like,

you know, choose the door dash competitor that has like zero margin, um, because it's, it's just

cheaper. Um, and I was, I was, as I was reading this, I was thinking, you know, a lot of,

a lot of some more things have been said about crypto protocols, right? Where, um, essentially, like,

you know, the, the core idea there is like, well, we can just, agents can just fork anything.

You can, you can fork and rep, like, you can fork door dash and, and replicate the same exact

service at zero marginal cost and, and, and therefore, like the new agent is going to, you know,

hit that endpoint, as opposed to the original door dash. And so door dash margin is going to zero.

I, I've been deeply skeptical of that view in crypto, because, you know, where the same thing

has been said, for example, about, um, you know, we're going to, you, there, there's a zillion Uniswap

forks, right? And like, you know, each of them are, are, are, are going to not turn on the

fee search, therefore Uniswap, um, will not be able to turn on the fee search. Well, I think,

I think that's basically been debunked now that Uniswap has turned on the fee switch. And,

and so like, what, what, why, why did that work? Why were they able to turn on the fee switch?

Even though there were, there were, in fact, like, zillion forks of Uniswap. Um, and I think the

answer is that like, the world is just not perfectly efficient. Um, and, and, and, and yes,

agents might make us marginally more efficient, but I tend to think that agents will also come to

wait the things that humans wait like brand and trust, right? But people, I think a big part of

the reason Uniswap was able to turn on the fees is people just trust this kind of smart contracts

because they've been there for a long time. Um, and they have integrations with third parties that,

that have like built on top. And those integrations are fairly sticky. And, and like, the results of

those integrations, they have better liquidity. So there's all, there's all these kind of like,

you know, sticky network effects that, you know, in a perfectly efficient world wouldn't hold true.

And, and yeah, like, maybe the agents, um, compromise some of those things, but on the other hand,

maybe the agents just stick to the things that, that, you know, are entrenched, um, because they know

that humans have preference for that and humans prefer trust and safety. Yes. So, by the way,

there's an analog here. There's a proxy that you could very easily use to predict how these behaviors

are going to evolve in a world of agents, which is there are some people that have EAs. And

that's a pretty good proxy for people that have EAs. Do you just send your EA out and, hey,

just to make a bunch of rational, like I saw in the Satrini piece, it was like a, a human doesn't

have time to compare your favorite five brands of protein bars or something like that. Um, but agents

will. And I was like, willfully though, I find it much more realistic that a human will just say,

hey, I really like these RX bars and don't just get me the RX bars, you know, every Wednesday or

something like that. And so I think there's a difference in, in goods here. I think they're,

there might end up being a premium on, uh, anything that had that the consumer still has a strong

brand affinity towards versus actually something like money market funds, truly commoditized

products or actually financial services where there's been a lot of customer inertia and stickiness.

I can see that happening far more, right? Whereas like, what again, sticking to the morpher example,

hey, um, right now you kind of just deposit your fund, you know, your stable coins in one of several

different money market funds that's yielding mostly the same thing and you probably don't check

every single day and switch out. But I can see setting an agent print to like, hey, monitor these

10 vaults and then whichever one is giving me the best risk adjusted return on dates. Flip it.

So, right, I think that it's, but the key there, the key there is monitor these 10 vaults,

which are all on the morco protocol, right? And, and so yeah, like there would, there may be some

like intro vault competition, but if the agent wants to switch protocols and instead of it, you know,

integrating or watching these 10 vaults, now it's going to watch 10 other on this fork of morpo over

here. Well, there's a lot of like costs of doing that integration. It's the, and I'm not saying it's,

it's, uh, impossible, but, um, but it's just like additional tokens that need to be spent on,

on spitting up this new thing and, and that thing has a bunch of trust assumptions and, and whatever.

And so just make proof to be like, yeah, this is good enough. The, the 10 vaults here, you know,

there's enough competition among them that this one integration works and I'm not going to spend

those additional tokens to do the other thing. So, you know, I guess continuing this line of thought,

one thought experiment, I've been asking myself in this world of AI is, how is AI? Let's,

let's say you start from the, uh, from the, um, assumption that the frictional cost of spinning up

a product goes to zero. What changes in that world? I, I, I, I, I waffle all the time in between

it's totally different versus nothing is different and actually the, the lock in for producing software

or products in general had nothing to do with, at least in the world of software, like building

the product, it all had to do with distribution, um, integrations, brand and trust. And, and I think

that that just gets re-emphasized and the importance of brand connection distribution,

that is just even more important than its history. Exactly. And, and, and I think the key is, like,

some pure software businesses that do not have network effects, totally at risk. But where there

is a network effects at play, then, then it's exactly what you said. You need to, like, you know,

there's, there's the class of code start problem, um, and, and that's true for any new

entrance, right? So, like, the, you know, the, the, the mover that solves the code start problem and

builds the network effect has, um, has a mode, the mode would be, you know, in, in, in the case of,

lending, which we, you know, we've been talking about, it's, it's going to be a depth of liquidity,

for example, and like, just being able to offer a better rate. Um, and, and I think that will still

prove to be sticky even in the world of zero marginal cost software, because you can, you can

spin up a new lending marketplace, you can fork Uniswap, you can fork Morpho, all you want,

but you're not forking the liquidity in the conference. Um, so great. Um, I, I also really like

the analogy and I, I wonder if, you know, I see every day, I log onto Twitter and I see these charts,

more apps are being created on the app store than ever before. All these revenues, Yada Yada,

and I wonder if there's an analog here to something like 2021 in crypto, where you saw an

explosion of tokens, you also saw an explosion of underlying metrics that really kind of got people,

right? Like, uh, I went back and looked at just, um, you know, for my own understanding, the

amount of revenue that was generated on chain and also REV that was generated on protocols like

Ethereum. It's like 12 billion, which is down to 4 billion today. Um, and so, yeah, at the same time,

you also had the proliferation of many forks, right? There was sushi swap and things like that. Um,

and I wonder if we're seeing something similar happen in the world of AI and, and, you know, when I

think of, even when I think about from a block works perspective, how does our world change? I think

the importance of focus is far more important than it's ever been as well, because again, when the

friction of creating new products or features gets reduced to zero, the temptation is to go and

do everything. Go in a million directions. Do this, create that. It only takes a day. And I think

that, I think that over time, the nuance will be how can I redirect that productivity towards

my, my one goal that I, that I, uh, you know, really care about as opposed to doing a gajillion

things and going off in a million directions. And I, I guess we'll understand in a year,

how, um, how durable, you know, the revenue and some of these new essentially forks really are,

right? I would guess not very totally. I think that's a very apt analogy where it's like, you know,

you have this explosion in experimentation that similar to 2021 in crypto, you were seeing them

in AI, you know, like many of the experiments will not work. Um, some of them will work, will work,

but it'll be a power wall like, like everything else. Um, and, uh, and, and so yeah, it's an

interesting question. Like what, what happens with revenue and, and so on and when did we start

just that other side of that? Um, you know, that, that, that, this like, our idea that actually

reminds me of one other thing in the piece that we haven't covered yet that it, I think is worth

talking about. And that is, um, so part of the piece is a reflection on variance,

sounding thesis on, on the ownership economy, which I published in 2012 was like kind of the

coming out thesis for, for the fund. Um, and, you know, later, Dixon published Read Right Own,

which is a very similar idea. Um, cool. You know, the core ownership economy thesis was that

users are going to own their identity, their money, their data, and a piece of the products and

services they use every day. Right. So this was a very expansive view of what it was about.

We talked about a little bit like, okay, yeah, crypto is finance, but finance is is much more

expansive than people are giving credit for. Um, the, the thing that, um, that I think, you know,

so some problems here was power loss, right? I think, you know, five years later, reflecting on

the thesis, I think, you know, the thesis was generally right, but there's a power law on this idea

of users owning the products and services that they use every day. That's played, that's happened,

but it's happened in a very narrow sense of, you know, software verticals. It's happened in, um,

you know, blockchain decentralized blockchains like Bitcoin, Ethereum, Solana, and it's happened

in financial marketplaces like hyper liquid and morpheon, you just want where users can own a

piece of the underlying product. Um, it hasn't happened more broadly across all, you know,

verticals of software like SAS and consumer that, that hasn't played out and there's a number of

reasons why that might be the case. Um, you know, I, I think it's very real that like, you know,

regulatory impediments like gotten the way of experimentation. Um, but I don't think that's the

whole story. I think like, probably a better explanation is where it has, where it has worked,

where users have been able to own a piece of the products and services they use every day,

the value that the users contribute can be measured quantitatively.

So in a blockchain like Bitcoin, it's a hashing function. The miners are, you know,

doing math and you can measure the, you know, the, you know, the amount of hashing power

deterministically. And whoever has got the most gets the Bitcoin. Same with, you know, Ethereum,

Solana in, um, DeFi marketplaces, it's, you know, been a function of trading volume or liquidity

provision, which is again, you can measure it deterministically. And in both, in both of these

examples, it's all about quantity versus quality. You, the more trading volume, the more liquidity,

the better, the more hashing power, the better. So crypto is really good at rewarding quantity

and it's really bad at rewarding quality. And, you know, many protocols have tried to reward

quality. For example, like, you know, decentralized social projects where you're trying to reward

people for posting, for example, it just ends in, you know, crazy, simple attacks and, and farming

and like the quality goes off clip. So that's one reflection is this power was like, yeah, we've

been able to, you know, make users owners of products and services these every day. It's just

played out in this much now our set of, of verticals where the inputs that users are contributing

can be measured quantitatively. And, and so rolling that back to this broader idea, you know,

everything is market. You know, I'm optimistic that as we make many more markets for more things,

we can also make users owners of those marketplaces. Well, as we've done with, you know, lending and

exchange and it's, you know, the opportunity now is like to do it for more asset classes and more

marketplaces that exist, towered to those, those asset classes. But that's, that's, that's,

that's like, I would say it's been cathartic for me to like revisit this thesis post and come up

with a theory of why it's ended up in more power law than I thought. Yeah, I think, you know,

one of the really difficult things to predict and with any new technology, it's very difficult,

but you know, one thing I wanted to maybe relate it to the power law observation is there is a,

there's a social component sometimes of new paradigms. There's actually one of my,

there's a, the title of this book is something like the structure of scientific

revolutions. So I was written in like the 1960s by a guy named Daniel Coon and this is where we

get the title paradigm shift. It actually comes from the observation on how scientific

progress happens. And to oversimplify, there was a previous model of thought where science progressed

in this linear way where you accumulate more knowledge and you kind of think about laying bricks

in a wall and you eventually get better at laying the bricks and it unlocks new discoveries. And

through this guy introduced the concept of actually, they're being a social component

to how science developed. And the idea, the mental framework shift is there's a paradigm that

people operate in. So he gives all these examples of like before we knew germ theory, there was

an explanation of how all this stuff happened and then all these anomalies kind of build up.

There's a leapfrog of hey, there are these microorganisms called germs and then you kind of

operate within that paradigm. And by the way, the old paradigm fights you on it. But literally,

this is where we get this concept of paradigm shift. And to connect back to what you were saying

with power laws and markets, one observation or something that I find myself thinking about a lot

when we talk about this theory is that it seems like there's a bigger social element and component

of markets than almost ever before. And there's this idea and a new potentially a new paradigm of

an increasing amount of our life is going to be financialized and traded on markets. And the

social element of this is that some people would point out, hey, when finance advances and you get

things like, you know, central banking or global markets and yada, yada, there are all these

advantages, right? Like lower cost of funding, improvement and, you know, the lives of everyday

people. Some people are like, hey, there are actually some really negative impacts of financializing

and markets. And this is part of the pushback that you get on things like prediction markets.

I'm curious how you would unpack the social component of if your theory ends up playing out,

how does this impact the social lives of people? Yeah, totally. So, so the

when many of the founders who come in that we that we work with in the portfolio, many founders

who come in and pitch us, they're all working towards one North Star KPI, which is daily active

traders, right? Like they want to see more people trading every day. And, you know, today we're

I would say we're somewhere on the path. We're not quite there, but we're definitely

on the paths where they're being a billion traders, daily active traders. That's I'm intentionally

being hyperbolic, but that's the goal of many of these companies. And I think, you know,

what's going on here, this is actually related to what I was just talking about with the ownership

economy, right? The idea was we were going to own their their money, their identity, their data

and the products and services they use every day. It's played out in part, but not in full. What we

got instead, I want to see a billion users owning products. What we got instead is a

somewhere-a-long way to a billion traders. And so, whereas like I wanted to see

you know, users expressing long-term belief in products and service days by becoming investors,

instead like what's happening today is people are expressing belief in anything that they care about,

including products and services, but you know, what's going to happen in the game tomorrow?

What's the president going to say in his state of the union? You're expressing these on that,

and they're getting economic upside and downside in the same way you get from an investment.

And so, one of the things that I thought about and wrote about this piece is like, there's kind

of this continuum that I didn't appreciate as much when I initially wrote the ownership economy.

And that continuum is different modes of risk-taking in society. There's gambling, there's trade

there's nothing. And you know, I want to, you know, billion users become owners.

Ownership is typically associated with investment. Instead, we're somewhere in the path of,

you know, billion gamblers or traders. And I started thinking about why is that the case? And

one framework I found useful is Maslow's hierarchy of needs. You know, which basically describes

human nature, or that's the intent. It's like there's a hierarchy of needs that all humans have,

doesn't change very much. And essentially, like when I thought about it, it's like well gambling

and trading kind of solve for Maslow's lower runs of needs, which are basically safety and security.

Being able to like escape one's kind of an economic situation, you know, get to the higher runs,

like, you know, community and things like that. And I think for many participants in markets,

like gambling scratches that edge. It's in part its entertainment, but in part it's like,

hey, maybe I can escape my current situation, get a big lit. And trading, I think is somewhere

in there as well, right? It's like you're trying to make, you know, a quick 10-bagger and a trade.

And, but it's a game of skill as opposed to a game of luck. And a good trader potentially

can graduate to become a good investor over time if they make a send to be able to like, you know,

address the higher runs of Maslow's hierarchy, which are things like purpose and, and, you know,

self-actualization is what he calls it. So, you know, owning a house, for example, the American

game, I would, I pretty tightly to Maslow's self-actualization, right? It's kind of like

gives you a sense of purpose. You know, it's something to aspire to. And I think, you know,

my experience in crypto has been that many of the smartest people in this industry have kind of

done some version of this ascension where they came in like essentially gambling on some coin

that their friend told them about. And then, you know, got humbled by that lost, you know, lost

money. But then, like, starts to learn more about what was going on. And maybe they'd, you know,

made a good trade. And with proceeds from that, ended up taking a long-term view on a project that

they had high conviction in. And so, like, there's this, I think this spectrum from gambling to

trading to investing that I think is underappreciated. And so, yes, like coming back to a question,

long winded wind up, there's, um, we're definitely financializing more and more aspects of society

that is happening more and more people are participating in financial markets than ever before.

And that's because they're much more accessible to create and to participate in large part

because of crypto and because these markets are change engines, and they're making the rules

more permissive. Um, and so, yeah, like, culture is, chain is, is increasingly wrapped up in that.

And, you know, polymarket odds are on the building bloops. Like, the market is culture. And,

culture, our market is markets now, right? So, like, not, that's absolutely happening.

Um, but all, like, my kind of positive view of this is that in, in the long arc of this,

we're going to go through this, you know, this realm of a billion traders. And some portion of

those, you know, newly converted traders will become investors. And so, we may still get to this

world where there's a billion owners or billion users, you know, users owning things that they care

about. The path there just may be through this, um, you know, this period where more participants

are active in financial markets as traders. And, and, and I, I see that as like net good if more

participants are able to, you know, learn and become more sophisticated and ultimately participate

in, um, in capitalists. Um, uh, there's more that I have a lot more of a rant I can go into

into parallels to like the 1920s when there was a large, like, retail market for, for stocks, but

we can, we can, we could park that for another time. Yeah, well, that'll be the second podcast. I,

I mean, honestly, you know, where my mind goes, I've been, I've been listening to a lot of, um,

you know, big history nerd. And I wonder if there's a connection, you know, some of these

really large, well-developed ancient societies, like, you know, the Persians famous, they didn't have

anything like markets, um, think as didn't even have any, they didn't even have a concept of money.

Um, that's by the way, if anyone wants to nerd out on a crazy story, like, look at the conquest

of the Incas, which is one of the, but 12 million people, like, these are huge organizations and

bodies of people. And I wonder if part of the long-term benefit of markets is while there are,

I think what the need your criticism is is that it removes some of the purity of the,

uh, whatever the thing it, like, whatever the thing is,

as extrinsic, I know it's crowded entrance, the consent, I was right. Exactly. But

where you see organization that happens without markets, even like a more near-term example of

Soviet Union, it requires like a much more authoritative, centralized coordination mechanism for,

which maybe is AI, right? Maybe that's AI. And so maybe the perfect solution is that you've got AI,

that's able to coordinate much more information and you've got many more markets producing

information as APIs. And the combo of those two actually does enable us to, to like accomplish

much more complex, you know, organizational things than we've been able to in the past. I'm

pretty optimistic about that. That AI, maybe the, you know, the missing A in DAO, decentralized

autonomous organization, we actually get these kind of complex organizations where the AI at the

center is able to orchestrate them based on information that markets are producing.

You know, who was early to this idea was run at, at Sky, who's been talking about this for years.

And I gotta be honest, I was not a huge believer in this, but the more,

but yeah, it honestly, it's looking better and better by the day.

I would just, I would note that like, I wish more founders were thinking about this and,

and pitching ideas along these lines of like how to use agents at the center of, you know,

organizations that are, that are, again, consuming information for markets to do new things,

build new products. Like that's, that's one of the themes I'm really, really excited about.

I would love to invest in, and I would love to, you know, I'd love for founders coming

and tell me how they're, you know, tackling that or what problem they're tackling with that approach.

I agree. Well, Jesse, this has been phenomenal. Thanks so much for helping out.

If people want to, I will link everything is market in the show notes, so people can give it a

read. But I guess also just give us the update on variant as well. Like if folks want to follow

you, you know, figure out more about what you're doing at variant, give us the update on the

fund side of things. Yeah, for sure. So, yeah, we're, we're actively investing. Super excited

about crypto and, you know, sentiment is bad. We're fired up more than ever. And so, yeah,

come, come, you know, reader writing and, and see what we're thinking about on our website,

variant.fun, you know, follow, follow on Twitter. That's where, that's where I publish this piece

that everything is market. I'm at Jesse WLDN on Twitter. That's weird. All right. Well,

Jesse, this is a ton of fun. We'll have to do this again very soon. And yeah, I'll talk to you soon.

All right. Thanks for having me.