Podcast Summary
Insights from an OG Crypto Investor: Independent thinking and contrarian investment strategies are crucial for early crypto investments. Chain wars continue between Bitcoin, Ethereum, and alt layer ones, with potential for significant value accrual. DAOs may evolve into companies seeking grants from protocols.
Learning from this episode of Bankless is the discussion around early investment in crypto and the insights from Olaf Carlson Wee, an OG investor in the space. Olaf emphasized the importance of independent thinking and contrarian investment strategies to get in early on various crypto projects. Another key topic was the ongoing chain wars between Bitcoin, Ethereum, and alt layer ones, with Olaf sharing his thoughts on which chain is likely to accrue the most value. Additionally, the future of DAOs and decentralized governance was explored, with Olaf suggesting that DAOs may evolve into companies that apply for grants from protocols. Overall, the episode offered valuable insights from an early crypto investor and provided food for thought on various aspects of the crypto industry.
Exploring New Frontiers in Crypto: Arbitrum, MakerDAO, and AAVE: Arbitrum simplifies access to DeFi and NFTs with fast, cheap, and secure transactions. MakerDAO lets users mint stablecoins without selling collateral, while AAVE offers DeFi maximization features.
The crypto space is continuously evolving, with new technologies and projects emerging to address the needs and demands of the growing community. Arbitrum, for instance, is a layer-2 scaling solution that has gained popularity among NFT collections and DeFi protocols due to its fast, cheap, and secure transactions. Arbitrum allows users to deposit directly into the platform through major exchanges, making it easier to access DeFi and NFTs. MakerDAO, an OG DeFi protocol, enables users to mint stablecoins using their collateral without selling it, while AAVE, a decentralized liquidity protocol, offers various features to maximize DeFi potential. Olaf Carlson, an OG crypto investor and early adopter, emphasizes the importance of staying informed and adaptable in the rapidly changing crypto landscape. Despite the unexpected twists and turns, Olaf's thesis remains that crypto will continue to grow significantly.
The allure of decentralization and transparency: Early adopters were captivated by Bitcoin's potential to create a decentralized monetary system, offering transparency, security, and opt-in usage. Smart contracts and applications like NFTs and DeFi hinted at the technology's vast potential, leading to widespread adoption.
The early adoption of cryptocurrencies like Bitcoin was driven by a fascination with the technology's potential to create a decentralized, Internet-based monetary system. This concept, which seemed too good to be true at first, became a reality as people delved deeper into the technology and saw its potential for transparency, security, and opt-in usage. The advent of smart contracts and applications like NFTs and DeFi were early indicators of this potential, but the sheer magnitude and speed of adoption was unexpected. Olaf, as an early adopter, was drawn to the technology's ability to remove control from central authorities and create a system that could not be taken away. The auditable and transparent nature of cryptocurrencies added to its appeal, making it a technological megatrend that continues to shape our world today.
Discovering the transformative potential of cryptocurrency: The speaker was drawn to Bitcoin's decentralized nature and potential to transform global finance, but also explored Ethereum and other platforms for their ability to create decentralized applications and ecosystems.
The speaker was drawn to the decentralized and anti-authoritarian nature of cryptocurrency, particularly Bitcoin, at a young age. He saw it as a technology with the potential to transform global finance and monetary systems by returning power to individuals and removing the need for centralized institutions. He was also attracted to the high-growth potential of the industry and the ability to build innovative systems directly on the Internet. However, he didn't limit himself to Bitcoin alone and eventually explored Ethereum and other smart contract platforms. He was attracted to their potential to go beyond just digital currency and create decentralized applications and entire ecosystems. He didn't fall into the trap of Bitcoin maximalism because he saw the value in exploring new possibilities within the broader crypto space.
People's investments shape their crypto worldview: The speaker believes that individuals' investments influence their perspective on crypto, and the ongoing experiments in the space are intriguing, despite potential divisions among holders.
In the world of blockchain, there are two primary components: the ledger of ownership and the underlying tech platform. While some prioritize the ledger, others see the tech as more important. The speaker believes that people's investments influence their worldview in crypto, rather than the other way around. They also note that the feeling of starting anew with each new blockchain can create division among holders. However, the speaker personally is more interested in enabling new behaviors and exploring the trade-offs that come with expanding the crypto universe. They admire Vitalik, whom they've known since 2013, as a genius and are intrigued by the ongoing experiments in the space. Ultimately, they're open to the market deciding the importance of various aspects of crypto systems.
Meeting Vitalik Buterin and the Value of Independent Thinking: Direct experience and independent thinking are crucial in the crypto industry. Meeting primary sources and exploring new technologies firsthand can lead to valuable insights and potential investment opportunities.
Having firsthand experience and independent thinking are crucial in understanding and investing in the crypto industry. When the speaker met Vitalik Buterin in 2013, he was impressed by Buterin's innovative thinking and the creation of a Python tool for Bitcoin multisig, which was ahead of its time. The speaker also had early conviction in Ethereum despite the skepticism and naysayers, as he believed that primary sources and personal exploration were more valuable than secondary sources and chatter. The crypto industry is unique in that a small percentage of people are actually building and creating, while the majority relies on secondary sources for information. This creates an opportunity for those who are willing to go directly to the source and think independently to gain valuable insights and potential investment opportunities. The speaker's belief in independent thinking and direct experience has served him well in the crypto space.
Be an early believer in radical crypto ideas: Challenging consensus and embracing contrarian thought can lead to successful crypto investments
It's essential to form your own opinions about projects in the crypto space rather than relying on the chatter and opinions of others. Olaf, a crypto investor, emphasizes the importance of being an early believer in radical ideas and supporting visionaries to build something new and groundbreaking. He's found the most successful investments have been those that initially seemed too crazy or unbelievable. However, humans often struggle to comprehend the true potential and size of the crypto industry, leading to groupthink and following the crowd. To gain an edge, it's crucial to challenge consensus and embrace contrarian thought. Olaf's successful investments include being early to Bitcoin, Ether, and DeFi.
The interconnection of DeFi and DAOs: DeFi and DAOs are interconnected, with the best way to house a DeFi application being inside a DAO's governance and ownership structure. Network mining, a block reward-style mechanism, can be used to reward various behaviors and bootstrap network effects.
The intersection of decentralized finance (DeFi) and decentralized autonomous organizations (DAOs) is a promising area with significant potential for innovation. The speaker, an early investor in various DeFi projects, has long believed in the potential of programmable finance and embedding financial tools directly into the blockchain. He sees DeFi and DAOs as two sides of the same coin, with the best way to house a DeFi application being inside a DAO's governance and ownership structure. The speaker is also excited about the potential of using a block reward-style mechanism to reward various types of behavior, such as liquidity mining in DeFi, which he calls "network mining." He believes this approach can be used to bootstrap network effects and create decentralized alternatives to modern web platforms. The speaker also mentions his excitement about alternative blockchain systems, like Avalanche and Terra, and more exotic experiments in the space. Overall, the speaker sees a lot of potential for growth and improvement in the DeFi and DAO space.
Decentralizing web and apps in crypto's future: Optimize taxes with Alto IRA, prioritize privacy and security, and adapt to the evolving smart contract and crypto money wars in 2022
The future of crypto is not just about decentralized financial logic within blockchains, but also about decentralizing the web and mobile applications that interact with them. This means creating interfaces that are open source, forkable, and censorship resistant. Another important aspect for crypto investors is optimizing taxes through platforms like Alto IRA, which allows tax-advantaged investment in over 150 coins and tokens. Additionally, privacy and security are crucial in the web 3.0 era, with browsers like Brave offering built-in wallets and ad blocking for better control and protection. The Brave Wallet, in particular, offers an extra level of security as it's natively built inside the browser. Another significant development is the layer 2 era, which requires fast and efficient bridges to move assets between different blockchain networks. Cross is one such bridge, offering instant and secure transfers between Ethereum, Optimism, Arbitrum, and Boba networks. Looking ahead to 2022, some of the big questions include determining the ultimate winner of the smart contract wars and the crypto money wars. These questions reflect the evolving nature of the crypto industry and the constant need to adapt and understand its changing landscape.
The relationship between utility and value accrual in crypto assets is complex due to bridge protocols: Investors must consider how effectively utility drives value accrual to crypto assets, as use and utility don't necessarily determine value in the era of bridge protocols.
The relationship between utility and value accrual in crypto assets is becoming increasingly complex due to the proliferation of bridge protocols enabling the easy movement of assets across different utility systems. This means that the question of which chain or protocol will be the biggest and most valuable is no longer straightforward, as use and utility do not necessarily determine value. Instead, investors must consider how effectively utility drives value accrual to the underlying asset. Additionally, the future of layer 2 systems suggests that they will integrate with various layer 1 blockchains, becoming sovereign systems in their own right. This complex ecosystem of chains and bridges will continue to challenge traditional notions of value accrual in crypto assets.
Understanding the Role of Chains and Bridges in the Future of Crypto: The future of crypto may involve a complex ecosystem of various chains and bridges, but understanding and addressing the security implications of asset transfers will be crucial for market makers and users alike.
The future of crypto may involve a complex interplay between various chains and bridges, but the question remains: where will value accrue in such a landscape? While bridges enable the transfer of assets between different blockchains, they can also introduce new security risks. The security profile of an asset can change significantly when it moves to a new chain, as seen in recent hacks of sidechains like Ronin and Wormhole. Some argue that it's not just about chains and bridges, but also understanding and addressing the security implications of these asset transfers. Market makers will likely play a role in pricing in the change in security posture. However, for the average user, the future may involve a more abstracted system where they are less aware of the underlying infrastructure and can interact with various blockchain applications without being siloed to a specific chain.
Understanding the crypto industry as a spectrum of money vs technology: The economic design of a crypto asset plays a significant role in its success, as it determines value accrual and functionality, security, and scalability of the entire system.
The crypto industry can be understood as a spectrum of blockchains focusing on money versus technology. However, the lines between these categories are not clear-cut, and economic design plays a significant role in determining the success of a crypto project. The economic properties of a crypto asset are crucial for its value accrual, which is essential for the functionality, security, and scalability of the entire system. As the crypto industry evolves, it may move beyond the comparison to traditional fiat currencies and be viewed as a distinct asset class. The value accrual across various ecosystem players and chains is a complex issue that is still being figured out, and it's possible that there will be one dominant asset with speculative value, such as Bitcoin, despite the existence of numerous utility-focused platforms.
Ethereum's Value from Transactions and Users: Ethereum's value is driven by transactions and users, making it a productive asset. Post-merge Ethereum could have even more attractive economics, and its age and current position give it an advantage despite competition.
The value of a blockchain network goes beyond just speculation on its native asset. The more transactions and users a system has, the more it directly drives value to that asset. Ethereum, as the current leader in transaction fee revenue, is a prime example of this. However, it's important to note that the high revenue is partly due to the current low throughput and high transaction fees. Post-merge Ethereum, with reduced issuance and potential negative issuance through burn, could have even more attractive economics and value accrual for its native asset, Ether. Ethereum is currently under competition from younger blockchain networks, but its age and current position as a productive asset give it an advantage. Ultimately, the future of Ethereum depends on its ability to scale and maintain its position as a leading blockchain network in the face of competition and changing market conditions.
The Role of Burned Ether in Propping Up Ether's Value: Burned ether, not transaction fees, supports ether's value. Decentralization is a complex issue, with Bitcoin and Ethereum becoming more decentralized over time, but trade-offs are necessary. The future of blockchain may involve multiple layer 1 systems or Ethereum's L2 solutions regaining market share.
While Ethereum and Bitcoin have revenue for miners through transaction fees, newer systems lack significant revenue due to their high throughput and bootstrapping phases. Burned ether, not revenue to miners, is what props up the value of ether. Decentralization is a complex issue, and every system makes trade-offs to achieve security properties. Bitcoin and Ethereum have become more decentralized over time, but it takes time. The future of the blockchain space may involve a multiple layer 1 world or Ethereum regaining market share through its L2 solutions. However, the debate around decentralization and its trade-offs continues, as each system offers unique benefits and challenges.
The Role of Layer 2 Systems and DAOs in the Future of Work: Layer 2 systems offer potential benefits, but DAOs with strong governance and capital allocation could significantly impact the future labor market, with a large percentage of work potentially being done for decentralized protocols.
While Layer 2 systems offer potential benefits, the distinction between them and EVM-compatible chains with strong bridges may not be as clear-cut as some believe. The speaker emphasizes the importance of betting on multiple chains and the growing significance of DAOs in a future labor market, where a large percentage of work could be done for decentralized protocols. DAOs, according to the speaker, need to focus on perfecting governance and capital allocation to scale effectively. Rather than envisioning DAOs as businesses with individually voted salaries, they should be imagined as funds that allocate capital to startups, providing funding based on performance. The speaker also touched upon the potential of DAOs to significantly impact the future of work and culture by increasing the number of people working for protocols, possibly making up a surprising percentage of global labor in the long term.
The Future of DAOs: More People, Less Nation States: DAOs may employ more people and disrupt the relationship between money and nation states, but nation states are not expected to disappear entirely.
The future of Decentralized Autonomous Organizations (DAOs) may involve a significant increase in the number of people working for them, as successful DAOs find ways to reduce barriers to entry and outsource various tasks. This could result in one person inadvertently working for multiple DAOs. Additionally, while crypto may disrupt the traditional relationship between money and nation states, it is unlikely to completely replace them. Instead, we may see the concept of money and state becoming divorced, but the nation state is not expected to disappear entirely. The decline of trust in institutions and the rise of cryptocurrency are two parallel trends, and it remains to be seen how they will shape the future of governance and finance.
Traditional institutions struggling to keep up with technology: Bitcoin and Ethereum have potential to disrupt finance, but NFTs and crypto hedge funds are currently overhyped. Focus on high-quality crypto games and long-term investment strategies.
The rapid pace of technology and cultural change is outpacing the ability of traditional institutions, including governments, to keep up. This disconnect is leading to feelings of incompetence and irrelevance from the state. Bitcoin and Ethereum, as well as other emerging technologies like zkEVMs, are seen as underrated due to their potential to disrupt traditional financial systems. However, NFTs and crypto hedge funds are currently overrated. The future of crypto lies in high-quality games with strong cryptoeconomic incentives, which are expected to grow faster than anything in the past. For those new to crypto, the best strategy is to stop trying to actively trade and instead focus on reading and using the technology. Buying and holding is the best approach for those in a long-term macro category. As always, all of this information is for educational purposes only and not financial advice. Crypto is a risky investment.
Exploring the new frontier of cryptocurrencies and DeFi: Investing in cryptocurrencies and DeFi involves risk, but offers potential rewards and represents the future of finance
Investing in cryptocurrencies and decentralized finance (DeFi) projects involves significant risk. Bitcoin, ether, alt layer ones, and other digital assets are not guaranteed to increase in value, and there's a real possibility that you could lose all or a significant portion of your investment. However, despite the risks, many people are drawn to this new frontier, including those on the Bank List journey. Cryptocurrencies and DeFi represent the future of finance and have the potential to bring about significant changes to the way we store, transfer, and use value. It's important to approach these investments with caution, thorough research, and a willingness to accept risk. But for those who are up for the challenge, the potential rewards could be substantial. So, while there's a real risk of losing money, the journey westward is worth it for those who are willing to embrace the uncertainty and explore the possibilities of this new frontier.
