Podcast Summary
Reflecting on the Past Year and Looking Forward in Crypto: Messari's annual thesis provides industry context and predictions, while MetaMask expands hardware wallet support for improved security and user experience.
The crypto industry is reflecting on the past year and looking forward to the future, as evidenced by the annual thesis released by Messari's Ryan Selkis. This thesis provides valuable context and predictions for the coming year, making it a highly anticipated event in the crypto community. The consistency and depth of Selkis' work are appreciated by many in the industry, and it serves as a useful recap of the year's events. Additionally, MetaMask, a popular crypto wallet, is expanding its hardware wallet support, adding the Lattice 1 and other devices to its list. This move is aimed at improving security and user experience, making it an exciting development for the crypto community. Overall, the crypto industry is in a state of reflection and preparation, looking forward to another potentially groundbreaking year in 2022.
Decentralized finance and web 3 technologies gaining popularity due to high inflation and corruption in traditional finance: The shift towards decentralized finance and web 3 technologies is driven by inflation and perceived corruption in traditional financial systems. Decentralized autonomous organizations like Uniswap DAO and proof of stake systems like Ethereum, Terra, and Solana are leading the trend towards individual participation and a more decentralized industry.
That the high inflation and perceived corruption in traditional financial systems have driven more people towards decentralized finance (DeFi) and web 3 technologies. The Uniswap DAO, as an example, is a decentralized autonomous organization with a large treasury seeking labor, illustrating the growing need for decentralized projects and the potential for individuals to contribute and benefit. The shift towards proof of stake systems, such as Ethereum, Terra, and Solana, is another significant trend, allowing for a more decentralized industry and individual participation in network validation through services like Lido. Ryan Selkis' year-end crypto thesis, a comprehensive analysis of the crypto space, further highlights these themes and provides valuable insights into the trends and developments of 2021.
Collapse of Institutional Trust and the Opportunity for Crypto: The collapse of trust in institutions can be addressed through better incentive alignment in organizations. Crypto, with its decentralized nature, presents an opportunity to create effective, efficient, and incentive-aligned institutions, starting with decentralized finance and media.
We are witnessing a collapse of institutional trust, particularly in government and media, but also extending to NGOs and businesses. This trend has been building for a long time, and institutions are increasingly perceived as incompetent and unethical. The thesis suggests that this issue can be addressed through better incentive alignment between all stakeholders within an organization. Crypto, with its decentralized nature, has the potential to bring about effective, efficient, and incentive-aligned institutions, starting with decentralized finance and media. The empty "competent and ethical" quadrant in the current institutional landscape presents an opportunity for crypto and web 3 to fill this gap and bring about positive change. The Andreessen Horowitz thesis "How to Win the Future" provides a clear explanation of how this can be achieved. It's a must-read for anyone trying to understand the potential of crypto and web 3.
Crypto and Web 3 seen as potential solutions to fill the gap of ethical and competent institutions: Crypto's potential lies in disrupting the incumbent system, offering aligned end user incentives, and transforming our understanding of ownership and digital scarcity in the digital age
According to a survey conducted by Edelman, people perceive a lack of ethical and competent institutions in the current landscape. Crypto and Web 3 are seen as potential solutions to fill this gap. The reasoning behind this is that crypto has gained momentum due to various developments, institutional capital, and user base. However, for it to reach its full potential, it needs to disrupt the incumbent system. Crypto's inevitability comes from the fact that it offers aligned end user incentives, with users often acting as owners and governors, leading to a transformative understanding and adoption. While it may take time for some to fully grasp the concepts, the belief in digital scarcity and ownership is becoming increasingly important as we spend more time online. Ultimately, crypto and Web 3 have the potential to provide both ethical and competent solutions, addressing the perceived void in the current institutional landscape.
Crypto's Future: Progress, Institutional Backing, and Talent: Despite potential setbacks from price corrections and regulatory challenges, the crypto industry's long-term potential remains strong due to its infrastructure, institutional backing, and ongoing talent influx.
The crypto industry's current infrastructure, institutional backing, and talent influx make it unlikely to experience prolonged setbacks, despite potential price corrections and regulatory challenges. The speaker believes that the industry's growth and success are inevitable, but the medium-term viability depends on measured regulatory responses. The speaker also predicts that inflation will remain high in 2022, causing late-year interest rate hikes that could stall the stock market and hurt growth stocks. These challenges, however, do not diminish the industry's long-term potential. The speaker emphasizes the importance of considering the industry's progress, institutional support, and ongoing talent influx when assessing its future.
Crypto Market Faces Short-Term Gains and Medium-Term Risks: The crypto market could see short-term gains due to inflation and interest rate hikes, but faces medium-term risks from deplatforming and regulation under the Biden administration. Adoption beyond Bitcoin, including Ethereum, Defi, NFTs, and gaming, is growing, but it's unclear if NFTs will get dollarized, abstracting volatile cryptos from the process.
The crypto market could experience short-term gains due to inflation and interest rate hikes, but faces medium-term risks from increasing deplatforming and regulation under the Biden administration. Another significant development is the growing adoption of crypto use cases beyond Bitcoin, which is becoming less essential for newcomers' first crypto exposure. This shift is seen in the rise of Ethereum, Defi, NFTs, and gaming, where users can engage without directly dealing with Bitcoin. However, it remains to be seen if NFTs will follow the same path as Defi and ultimately get dollarized, abstracting volatile cryptos from the process. Overall, the crypto landscape is evolving, and these trends will shape the market's future dynamics.
Shift towards multi-asset crypto ecosystem: Ethereum faces competition, high info asymmetry, and diverse use cases offer opportunities for investors in a dynamic crypto market.
The crypto market is experiencing a significant shift towards a multi-asset ecosystem, where various blockchains and their underlying assets have unique value propositions beyond just Bitcoin. The discussion suggests that Ethereum, as a leading blockchain, faces competition from other layer 1 assets and must contend with the value distribution between its primary chain and layer twos. This environment presents opportunities for activist and fundamental-oriented crypto investors, as information asymmetry is high and markets are fluid. The notion of Bitcoin maximalism, which held that Bitcoin is the only use case for blockchain technology, is no longer dominant as various use cases like DeFi, NFTs, and others have emerged. However, it's essential to recognize that investors will have biases based on their holdings and the communities they engage with. As long as these biases don't lead to over-indexing or blind dismissal of other projects, the crypto market's diversity can be beneficial. The future holds potential for various layer twos interoperating with Ethereum and other chains, and even meme coins can have their unique value propositions.
Explosive growth in crypto market with diverse ecosystem of decentralized financial services: Despite competition and potential setbacks, the crypto market is expected to continue growing with a diverse ecosystem of decentralized financial services, rather than at the expense of established players like Ethereum or Bitcoin.
The crypto market is experiencing explosive growth, with multiple sectors and projects seeing significant expansion. The "we all gonna make it" slogan represents the optimistic belief that most crypto applications will be successful in some form, and that the sector as a whole has unlimited upside potential. However, as the market matures, competition and shuffling in market share may occur, but it's uncertain if it will come at the expense of established players like Ethereum or Bitcoin. Instead, it's more likely that new decentralized platforms will emerge and compete in specific niches, leading to a diverse ecosystem of decentralized financial services. The market's response to potential setbacks and competitive pressures will be an important trend to watch in 2022.
China's departure from crypto marks a turning point: China's exit from crypto reduced market risks and shifted focus towards cleaner energy sources in the West
The competitive landscape in crypto may become less cutthroat and more collaborative in the future, as seen in the context of China's departure from the industry. This event marked a significant de-risking moment for the market, as it put to rest concerns about China's potential ban on mining and its role as a dominant source of demand. Furthermore, China's actions addressed criticisms regarding Bitcoin and Ethereum's ties to China and their impact on climate, as mining shifts towards cleaner energy sources in the West. Overall, this development was a turning point for the crypto industry in 2021, with implications for the macro perspective in 2022 and beyond.
US Opportunity to Lead in Crypto Innovation: The US can embrace crypto to lead in financial services and tech development or risk falling behind China by banning it. Regulatory bodies present challenges, but a more favorable regulatory environment could be achieved through a bipartisan effort and industry collaboration.
The US has an opportunity to embrace crypto and win the global race in crypto innovation or risk falling behind China by banning it. The Chinese mining ban and the infrastructure bill over the summer sparked a bipartisan movement in the US, with politicians seeing potential economic benefits and popularity gains by supporting crypto. However, the US faces challenges from regulatory bodies like the FSOC and SEC, which have taken a harsh stance on crypto. Embracing crypto with a lighter touch could position the US as a leader in financial services and tech development, contrasting China's approach. The crypto community, including organizations like Messari, CoinCenter, and the Blockchain Association, is forming a coalition to push for a more favorable regulatory environment.
Regulatory chess game between crypto industry and US regulators: The future of crypto in the US depends on the outcome of the regulatory chess game between the industry and bodies like the FSOC and SEC, with key appointments and advocacy shaping the outcome.
The regulatory landscape for cryptocurrencies in the US is shaping up to be a complex game of chess between the crypto industry and regulatory bodies. The Financial Stability Oversight Council (FSOC), which plays a crucial role in maintaining the stability of the financial system, has seen a change in leadership, with some appointees being more favorable to crypto than others. The SEC, under Janet Yellen, has pushed for broad regulatory authority over DeFi, stablecoins, and individuals in the crypto space. The crypto industry, represented by the crypto coalition, is advocating for clarity and certainty in regulations. The outcome of this regulatory chess game will determine the future of the crypto industry in the US and its ability to operate within the traditional financial system. The crypto side, while still facing opposition, has shown strength through advocacy and the appointment of crypto-friendly figures in key regulatory positions. The next year will be critical in determining which side will make the first strategic move.
Regulatory landscape for crypto shifting under Biden: Biden's approval rating could lead to a more conciliatory approach towards crypto industry, despite SEC's stance being a concern.
The regulatory environment for crypto is currently under intense scrutiny from the SEC, with Chair Gary Gensler being a vocal critic of the industry. Gensler's stance is seen as an enemy to the crypto industry due to his past negative comments and actions. However, the political landscape may be shifting, with Biden's approval rating impacting the regulatory tone. The Democrats' fear of potential midterm losses could lead to a more conciliatory approach towards the crypto community, which is increasingly organizing and lobbying for their interests. The crypto industry is responding with more resources and engagement in policy matters. The SEC's stance remains a significant concern, but the overall regulatory environment may be improving.
Crypto Industry's Growing Influence and Changes: The crypto industry is gaining significant attention and investment, with potential regulatory progress through legal battles, court challenges, and Congress. NFTs, Ethereum's earnings, layer 1 valuations, and the Solana summer were also discussed.
The crypto industry is experiencing significant investment and attention from various sectors, including lobbying groups and political parties. This trend is expected to continue through Biden's first term, with potential progress on regulatory fronts coming through legal battles, court challenges, and the court of public opinion. The discussion also touched upon the importance of having knowledgeable representatives in Congress to help craft crypto policies. The conversation also mentioned the significance of NFTs, Ethereum's Q3 earnings report, layer 1 valuations, and the Solana summer. The speaker, Ryan, also mentioned his disagreement with the Bankless Boys' stance on Ether. Sponsors discussed included Gemini, a trusted cryptocurrency exchange, and Aave, a decentralized liquidity protocol on Ethereum. Overall, the crypto landscape is undergoing significant changes, and these developments are expected to continue shaping the industry in the coming years.
NFTs Drive Massive Growth in Crypto Space: NFTs, including digital art and tokenized securities, experienced massive growth in 2021, contributing significantly to the crypto space's expansion. Despite some unsustainable prices, the market reached 1% of the traditional art market's size, with potential applications in tokenized securities and real estate.
2021 was the breakout year for NFTs (Non-Fungible Tokens) in the crypto world. NFTs, which include digital art, tokenized securities, and more, experienced massive growth, with popular projects like Beeple's $69 million Mona Lisa JPEG and Axie Infinity's $8 billion market cap. NFTs paved the way for the popularization of the term "metaverse," with Facebook even changing its name to Meta. While some may argue that layer ones like Ethereum were also major drivers of demand, NFTs were a significant contributor to the crypto space's growth. Despite the unsustainable nature of some NFT prices, the market reached around 1% of the traditional art market's size, mirroring Bitcoin's early days as digital gold. NFTs' sustainability and infrastructure build-out are expected to continue, with potential applications in tokenized securities and real estate.
Innovative uses of NFTs beyond digital art: NFTs are transforming the digital world, enabling digital avatars, proof of reputation, community-oriented projects, and metaverse real estate, while unlocking value through decentralized infrastructure like Ethereum's impressive growth.
NFTs, specifically digital art, have paved the way for innovative developments in the digital world, beyond just visual art. This includes the use of NFTs as digital avatars or proof of reputation, community-oriented NFTs, and even representation of real estate in the metaverse. The decentralized nature of NFTs and the infrastructure built around them, such as wallets, have the potential to unlock tremendous value and solve complex issues like illiquidity and composability. The growth of Ethereum, a key player in the NFT market, is evident in its impressive Q3 earnings report, which shows significant increases in network revenue, value settled, active addresses, DeFi TVL, DeX volume, and stablecoin issued, among other metrics. This decentralized reporting provides a 1,000x improvement in investor information symmetry, allowing for real-time updates and valuable insights into the crypto community without the need for traditional investor relations teams. Valuing a company with this growth profile would require considering various factors, including the size of the potential market, the unique value proposition, and the infrastructure being built to support it. The potential market for NFTs is vast, and the infrastructure is being developed to address challenges and unlock new opportunities.
Transparency and Self-Governance in Crypto: Crypto's transparency sets it apart, offering investor protection via financial statements and open auditing. Debates continue on where value will be most effectively captured in crypto, with Ethereum and layer 1s favored.
Crypto's transparency and self-governance sets it apart as a unique investment landscape, providing investor protection through accessibility to financial statements and open auditing. This transparency is a defining feature of crypto, and it's crucial to emphasize when educating policymakers and the public. Additionally, the value capture in the crypto space, particularly in smart contract platforms, is still uncertain, with debates ongoing about where value will be most effectively captured – at the layer 1 or a combination of layer 1 and layer 2. The speaker is bullish on Ethereum and other layer 1s, but acknowledges the importance of considering both relative and fundamental valuations when assessing the worth of various crypto projects.
The Future of Blockchain: A Few Dominant Layer 1 Networks: Ethereum, due to its massive head start and infrastructure, is a strong contender for one of the dominant layer 1 networks in the future, but competition from other networks like Solana, Polkadot, Cosmos, and Terra is uncertain.
The future of the blockchain space may consist of a few dominant layer 1 networks, similar to how there are only a few winning operating systems in the tech industry. The exact identity of these dominant networks is still uncertain, but Ethereum, due to its massive head start and the vast amount of development already built on it, is a strong contender. However, other networks like Solana, Polkadot, Cosmos, and Terra are making different trade-offs and gaining ground. The outcome of this competition is still uncertain, but it's likely that there will be a couple of dominant standards in the long term. Ryan Watkins and the Bankless team believe that Ethereum, particularly the Ethereum Virtual Machine (EVM), is one of these standards due to the significant amount of infrastructure already built on it. However, they also acknowledge that Ethereum is not without risks and that other networks may eventually surpass it. The Bankless duo, Ryan and David, were recognized by Ryan for their accurate predictions about Ethereum, but they were not included in the top ten people to watch due to concerns about the reasons behind their bullishness on Ethereum. These reasons may be seen as semantic or related to memes such as "ETH is money" and "ultrasound money." Regardless, the Bankless team's bullishness on Ethereum was vindicated towards the end of last year when the network experienced significant growth.
Addressing Ethereum's challenges for long-term sustainability: Ethereum must prioritize reducing high transaction fees and improving scalability to retain users and solidify its reputation as ultra sound money in 2022
The Ethereum community should prioritize addressing high transaction fees and improving scalability to retain users, especially those who don't prioritize decentralization. The speaker acknowledges that Ethereum developers are working on these issues, but the community must remain humble and recognize the importance of addressing these concerns to ensure long-term sustainability. Additionally, the speaker believes that 2022 could be the year Ethereum solidifies its reputation as ultra sound money through advancements in modular blockchains and layer twos. The speaker appreciates Messari's role in providing neutral analysis and reporting in the crypto industry.
Exploring the Crypto Frontier with Bankless: Consider educating yourself about crypto and joining the Bankless community for resources and potential investment opportunities, but be aware of the risks and uncertainties in the market.
The speakers on the podcast are sharing their crypto thesis for 2022, encouraging listeners to download it for their own education and potential investment opportunities. However, they emphasize the risks involved in crypto investing and remind listeners that it's not for everyone. They encourage those interested in crypto to join the Bankless community for resources, analysis, and exclusive content. In essence, the speakers are advocating for individuals to educate themselves about crypto and consider joining the community as a way to gain skills and potentially achieve financial independence. But they also stress the importance of being aware of the risks and uncertainties in the crypto market. Overall, the speakers are inviting listeners to join them on the journey of exploring the crypto frontier, while also providing a safety net of resources and community support.
