For our Tuesday episode where we chat with a web3 expert, we talked to Meltem Demirors, chief strategy officer at publicly-traded digital asset manager Coinshares. Demirors was a core team member at crypto investment firm Digital Currency Group in 2015.
Welcome to Chain Reaction, where we unpack and explain the latest in crypto news, drama and trends, breaking things down block by block for the crypto curious.
For our Tuesday episode where we chat with a web3 expert, we talked to Meltem Demirors, chief strategy officer at publicly-traded digital asset manager Coinshares. Demirors was a core team member at crypto investment firm Digital Currency Group in 2015, we discussed:
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Lucas Matney 0:02
Hey everyone, it's Lucas and Anita. Welcome to chain reaction where we unpack and explain the latest in crypto news drama and trends breaking things down block by block for the crypto curious.
Anita Ramaswamy 0:17
I was really excited to get Meltem to mirrors on the show because she's an OG in the crypto space and she has a super broad view of the markets. She was a core team member at the crypto investment firm digital currency group starting in 2015. She co chairs the World Economic Council's crypto group, and she has been Chief Strategy Officer at the publicly traded European crypto company coinshares since 2018. They are an asset manager managing about $5 billion in digital assets specifically Meltem is super well known for being blunt and honest about her opinions in the crypto world and otherwise, so I am super excited to dive into the conversation. Hi, Meltem how are you? It's great to have you on the podcast.
Meltam Demirors 0:57
Yeah. Thanks for having me. I'm really excited to be here today.
Anita Ramaswamy 0:59
Yeah, so I've actually followed you on Twitter for forever, like actually long before I got into crypto professionally. So it's very cool that we're having this conversation.
Meltam Demirors 1:08
I'm so sorry, my eclectic mix. And mostly unhinge that
Anita Ramaswamy 1:15
I have stuck with it. So um, but yeah, to get us started, it would be awesome to hear about how you got into crypto like you're a very early voice in the space. I know that you were at digital currency group before joining coinshares where you are today. So yeah, what was it back then when like not that many people on at least my Twitter feed? Were talking about crypto?
Meltam Demirors 1:31
Yeah. So I think like many people who got into bitcoin early on, for me, it was really the internet. I'm a child of the internet. I grew up in Europe and as teenager moved to the Midwest and didn't really identify with the town I found myself in in the Midwest. So I played a lot of video games tell us all this time, exactly. Like it just affected teenager, in my parents basement on my little dial up connection, which then became a land connection guy exciting. And at the time there all of these Internet communities that I was a part of whether it was 4chan, which is probably not okay to say these days, but know back then that was the nexus of internet subculture, and went into very traditional career path, went to undergrad, got a job doing corporate America, things did that. And then I did what any corporate citizen in their mid 20s does. I was trying to figure out who I was ended up in grad school and ended up at MIT of all places. And at the time, in 2013, I started MIT, I had just started learning about Bitcoin, through Reddit and 4chan and sort of these Internet communities. And when I got to MIT, there were actually a lot of people doing things with Bitcoin on campus. There were research elements, research groups on campus, particularly at the Media Lab, which was right next door to the school where I was. And then there were also there was that MIT Bitcoin Club, which was a student organization, they would bring in different speakers circle, which back then, you know, was a wallet, apparently, and exchange was based in Boston. And so I just started to get more and more exposed to Bitcoin. I was actually really into FinTech during my grad school years. And then I was thinking about leaving grad school and I was like, What am I going to do with my life? I don't think I can go back to corporate America, I had just been immersed in this Fintech startup ecosystem. A lot of the FinTech startups at the time, didn't really resonate with me. And then I met Barry Silbert, and Ryan Seleucus, who were working on creating what would become digital currency group. And I thought, You know what, let's try this. Yeah, I love Bitcoin. It's super interesting. Everyone I interact with is intellectually really engaged, there was a political element, which I found interesting, because I've never really thought of myself as a political person. But really starting to get exposed to that ideology of, you know, I don't know if libertarianism is the right word, but really starting to think about the role of money in society and our political system. And so thought meandering path, I started a digital currency group or the entity that would become digital currency group before I graduated, and that was early 2015. And since then, you know, it's been seven, almost eight years now, I've been on this really interesting, meandering journey, the goal is still the same. The price of Bitcoin has changed our aspirations. I'm not sure if we're revolution or evolution at this stage. I think that's the big open question. But that was really my path.
Lucas Matney 4:28
I'm curious. You talked a little bit about the political and the ideological attraction to getting involved in the space in the first time. How is that? What's the report card score for crypto right now? Because I mean, like, there are a lot of institutions involved. There's a lot, you know, they're billions of venture capital dollars. Is this a Power to the People moment? Are we still kind of in between systems here?
Meltam Demirors 4:46
That's a really interesting question. And then I think the ideological tension has always been there in 2015. And really through 2018 It was more about the grassroots. sort of movement, Bitcoin and cryptocurrencies were still fairly isolated to tech circles, Wall Street. You know, I was based in New York, unlike most Bitcoin companies, which were in the Bay Area. And so Wall Street was all about blockchain, not Bitcoin, not cryptocurrency, in 2018, you might recall, we went through this huge phase of funding institutional infrastructure in the Bitcoin space for all of these institutions that were supposedly going to come and bring this wave of capital with them that didn't necessarily materialize in 2018. But all of these new ideas, particularly with the launch of Aetherium, the launch of the ERC 20 token standard, the launch of a number of new layer one blockchains, and the introduction of not just secure financial transactions, which Bitcoin introduced, but secure financial computation, which I think was really the novel innovation of the Ethereum, I think now where we're at is if we look at the poster children of the crypto movement, if we look at where the majority of capital resides, if we look at some of the big narrative catalysts, they are driven by institutions, they are driven by the black rocks and the JP Morgan's the Apollo's and the entry sons. So I think there's been an interesting shift, where we've recognized that in order for Bitcoin and cryptocurrencies to achieve adoption, we do need to collaborate with institutions, I also think there's growing recognition that the regulatory environment necessitates certain types of behavior, as we saw in tornado cash recently. And so I think where we're at now is, it doesn't necessarily feel like revolution, it feels more like evolution, I think that things we will ultimately do and are already doing on the fringes of cryptocurrencies feel very revolutionary from a capability perspective. But in terms of systemic change, which is really complex, and obviously involves far more than just tech, and far more, you know, than just a group of people believing in different future. It involves policy, it involves institutions and involves education, and a lot of other complex cultural and societal factors, I think we still haven't hit that major inflection point. And I think it will probably take some time to materialize. But this bifurcation and this interesting ideological tension between where we started and where we are today is certainly been interesting to observe,
Lucas Matney 7:27
you know, it's fascinating. I've been in a TechCrunch for a while. And I guess I look at what Uber was. And I look at Uber today. And it's looks a little bit more like the taxi industry, kind of standard. And it's really expensive. I know, it's so expensive. I'm like, I'm gonna go with the cheap option, I'll take a taxi. But then I was like, I was reading something on Netflix today. And they're like, they're talking about doing serialized TV and not dumping all the episodes at once. And like they've all these people have talked about live TV. So there's kind of this idea with the tech, like, the more things change, the more kind of the institutional forces, massage it into the future that there was before. And you know, you say that about crypto and the philosophical underpinnings like people who are big proponents of it, or just be like, no, no, this is totally different. But I guess if there's a future where they're like, all these central bank backed digital currencies, and like, you know, we've got all these institutions on board, what's the danger and you know, allowing these big financial powers to kind of massage it in the direction of returning to like a government issued Fiat? Like, I know, the Bitcoin argument is, like, strong going up against that. But like, when you look at all these other rising cryptocurrencies?
Meltam Demirors 8:28
This is a great question. And again, I think the challenge is, is it used to be when we were just focused on Bitcoin and Bitcoin was 80% of the market cap of all cryptocurrencies? I think the narrative was much more unified around Bitcoin and its potential to introduce a new monetary paradigm, the decoupling of money and state, I think, now that the industry is so large, and there's so much capital at stake. And there's so many different players in so many different incentives. There are a lot of different narratives. And there are also a lot of different audiences, right. This is no longer a unilateral industry, there is still I think, a large contingent of people who are very interested in the separation of money and state, there are also investors who are interested in adding decline to their portfolio for that reason. But there's also a growing contingent of institutions, enterprises, and startups, who are really more focused on digitization, disintermediation, and lowering transaction costs through using this technology. And so what has been challenging is there isn't one defining narrative anymore, because this movement has so many different niches and so many different audiences. So my approach and my viewpoint has always been I'm not dismissive of any of those because they all have a role to play. It's just understanding what I'm interested in excited about where coinshares as a firm can add value and what we think will have the biggest impact right now I think the areas that are really exciting if I can just quickly outline to
Anita Ramaswamy 10:03
Yes, please. Presenting my question there. Sorry about that. No, no. Yes. Where are you finding the most interest in the crypto space right now?
Meltam Demirors 10:13
Well, there, there's so much there's so much surface area. And I think one of the hard parts is there's so many generalist firms that do a little bit of everything. But because the industry is so massive, I do think it's helpful to focus and sort of recognize where your competence and your passion lies. So for me, there's two areas I'm really excited about. I do think the shift in global capital markets going from being fragmented localized markets to global on chain markets with global liquidity is really compelling. I think financial computation as a new primitive, whether you call that defy or central bank, digital currencies, they're all sort of arriving at the same thing, which is how do we utilize this new medium for financial computation with different security models with different transaction costs in interesting and novel ways. And I think that is a huge thematic, that could be something as boring as simple shifts in market microstructure, which is how we execute clear and settle trades. Sounds very boring, but it's actually really sexy and fun when you get into it. Because there's a lot of inefficiency. And a lot of stuff is still done very manually. And there's so many traditional asset classes out there that could be made more efficient. But there are also new asset classes we can create, right? So anything that can be virtualized and represented digitally can be traded on chain. That's what we're doing with NF T's in some instances. But there are also a ton of things that we can't price and transact and efficiently today, like, for example, cloud computing, yesterday, just pay your AWS Bill supply and demand waxes and wanes. In 2013. Actually, there was a big wave of startups that tried to create compute derivatives. And if you recall, Enron actually started with that vision in their early days, like the late 90s. What could go wrong? Well, they had some other issues. That idea, I think, was sound it was just very early. But now actually, we're doing in crypto in pricing block Spaces, we're pricing, secure financial computation. So there are new products that can create as well. So that's category one is just this broader capital market shift. And then the second area I'm really excited about that isn't really talked about as much yet. But I think it's going to be huge, dramatic over the next decade, is the ability for us to leverage decentralized protocols and decentralized infrastructure to actually make our physical systems and our physical networks and our physical infrastructure more resilient, and to create new models for financing and building out that infrastructure. And that has really come to light recently, I think in the global narrative with the ongoing energy economy here in the United States and abroad. Some of the challenges around meeting energy needs for you know, this highly rendered Metaverse that will exist someday meeting some of the computational needs of the future, as well as the really interesting challenges around the semiconductor industry data centers and the centralization of compute more generally, we now see enterprises, you know, who did the big migration to cloud looking back at shifting some of their compute to on prem, they're looking at some of the fundamental challenges with not owning their own compute. So I think taken together those two trends, capital markets, coupled with computation, connectivity, and energy infrastructure, are these really big, meaty, fundamentally transformative concepts? People are working on early iterations of them that again, I think, in crypto, the narrative cycles, and the adoption cycles are just much longer than we probably want to account for. It's really hard.
Anita Ramaswamy 13:39
Yeah. So when you're talking about the idea of compute as sort of an innovation, I guess, I'm curious about where you stand on this sort of broader debate. I know that there's, you know, a lot of discussion in the crypto community on like Bitcoin versus crypto. And I noticed that you were really specific in choosing your words when you were talking about your early earlier days in Bitcoin and then sort of now where you're at. So I'm curious if you can just give our listeners a little bit of context on the sort of Bitcoin versus crypto debate and then explain maybe where you fall on that spectrum today?
Meltam Demirors 14:06
Sure. That's a great question and a hot button topic, right? So fun, like anything I think it has become a highly polarizing people in the industry more broadly self identifies like Bitcoin maximalists people self identify as crypto maximalist, there's all of these labels, we sort of apply. But the truth is probably much more nuanced. The reason I make the distinction is I do think Bitcoin characteristically is very unique and very different from much of what else is being done in the crypto and broader blockchain digital assets space. And one of the challenges with any new industry and particularly one that is decentralized, we don't have institutions of authority in this industry that's sort of antithetical to the whole concept. So the challenge becomes like who creates the taxonomy who creates the lexicon who controls the syntax, because As there is no nexus of authority when it comes to these things, I think the terminology and the language we use is challenging. And it needs to be very specific and nuanced. For this reason. When I say Bitcoin with a capital B, it's really talking about the idea of secure financial transactions that settle on a permissionless immutable public ledger, the bitcoin ledger, I think Bitcoin from a censorship resistance and security perspective, you know, through its proof of work mechanism, which has been hotly debated for a variety of reasons, does offer the most secure, most reliable financial transaction layer that we have in crypto today. It's a very secure settlement layer. And so for me, Bitcoin as a store of value in Bitcoin as a secure settlement layer that's rooted in the fundamentals of physics and the laws of thermodynamics is a very important thing to have, and a very important thing to sort of separate. When we talk about crypto more broadly, I think there's a lot of really exciting innovation in our ones, I love what's happening in the theory of ecosystem, I invest heavily in the Solana ecosystem, Cosmos ecosystem, there's a lot of new layer ones, layer twos, as well as additive technologies, like zero knowledge proofs, optimistic roll ups, etc, that enable us to do all sorts of really interesting and exciting financial compute. But the objective there I think, is very different from Bitcoin. And I'm perfectly happy to use those as an execution layer, right? I'm perfectly happy to do all this really interesting computation there. But for being Bitcoin settlement is fundamentally different, because it is so tethered to the laws of thermodynamics, which sort of dictate what is and is not possible in our universe, right? Like, at the end of the day, we talk about the world of bits and bytes, but for bits and bytes to exist, there have to be atoms
Anita Ramaswamy 16:44
that back it, right. I mean, it sounds like you're sort of spending your time across a bunch of different layer ones when it comes to like your research and your investment.
Meltam Demirors 16:51
Absolutely. And I think you have to, but of course, people always want to put you in a category. So it's funny to people who are not Bitcoiners I'm a Bitcoin maximalist and to the Bitcoin community, I'm a shit coiner. So what category that I have fallen? And it's just funny, the tribalism is funny to me, at the end of the day, I think for the ecosystem as a whole to succeed, we have to recognize that different consensus mechanisms, different blockchains, they're not substitutes for one another, they have very different characteristics that make them suitable or not suitable for very specific applications. And at the end of the day, what we're trying to achieve functionally, right, the function we're trying to achieve should dictate our technology choice, not the other way around. And so I think for a lot of people this tribal attachment to specific cryptocurrency, because these things also are assets, right? There's a lot of money at stake. It's very tribal by nature. So it's been fun watching that play out. But for me, I don't identify as one specific thing I identify as a practical individual who wants to do things that make sense and will actually be sustainable. And the challenges in the crypto space, there's so many things that are not sustainable, are just fundamentally defy the laws of physics. And again, we live in a universe sadly, still, where what we can do is limited by what is possible physically, because we are highly dependent on physical infrastructure to support this digital virtualized world that we are spending an increasing amount of time in.
Lucas Matney 18:33
So you talked about sustainability, and I think you're talking about it in a different lens than how I'm going to say it but like with the merge coming up, how much do you think there's potential that Bitcoin is going to kind of grow further isolated, either like from a regulatory standpoint or just from from a PR perspective?
Meltam Demirors 18:47
Yeah, that's a great question. And one we debate a lot internally. One of the interesting things about both Bitcoin and Aetherium, is they're very much narrative driven assets. I think right now with Aetherium. The Etherium community has done an excellent job with the marketing narrative around the merge. The messaging is very unified. And again, Ethereum has some structural differences from Bitcoin here in the sense that the Etherium foundation is well capitalized the theorem, Foundation funds, Aetherium development theory and research and innovation. And there are several sizeable organizations that own a lot of theory on this as well as individuals in the community who are seen as de facto leaders, right. Vitalik, for example, is by many considered to be the leader of sort of the theorem community. Yeah, so I think that has made marketing and narrative around the merge extremely effective, which, you know, it's interesting, the theorem foundation will put out tweets about the merge its impact on the ESG score of Aetherium, and all sorts of other stuff. So that centralization within the community, I think enables for better narrative creation and better like propaganda, not in a negative sense, but in the Bernays sense if you will, which is not a bad thing, right? Like all institutions rely on propaganda and to a certain extent bitcoin does as well. I think the challenge with the Bitcoin community right now is its there is no narrative, the narrative is very discombobulated. And the challenge is and I spent a lot of time on Bitcoin Core earlier in my career, which is sort of the the group of developers that maintain the Bitcoin Core client and the community around that I work with the MIT DCI, which employs a lot of core developers or other organizations that employ and pay for core developers. But at the end of the day, Bitcoin doesn't have a foundation Bitcoin doesn't have a community treasury. Bitcoin doesn't have a group of individuals who are de facto leaders what we have, it's very interesting. It's almost like our Bible, you know, we have our Lord and Savior Satoshi. We have messages from the Bitcoin talk forums back in the day. And we parse through those to try to construct like, what was Satoshi trying to say, what are we supposed to do here? And I think the other really important indication that Bitcoin has sort of lost narrative is a lot of core developers are leaving the Bitcoin ecosystem, because there is a lot of vitriol. And again, I don't think communities are immune to this as they grow in size. And I think whenever there is this void of leadership, this tends to happen. But I do think Bitcoin continues to have very strong value proposition. I think that value proposition evolves over time as our understanding of Bitcoin and its role in the broader crypto ecosystem evolves, but I continue to have a lot of conviction in Bitcoin. But again, it really depends on what function are you trying to achieve. If you're trying to deploy a growth portfolio bitcoins value appreciation potential is not as high potentially as a new Alwan. So you may choose to allocate your capital into a different portfolio. If you're looking for inflation protection, Bitcoin historically has been marketed as an inflation hedge. We haven't had Bitcoin in an inflationary environment until about nine months ago. Yeah. And so the time period of data we have is not very long, but so far that thesis has not played out, Bitcoin has behaved more like a risk asset and traded in line with the NASDAQ with tech stocks. And so I think it's challenging right now to deduce a singular narrative for Bitcoin and the Bitcoin thesis. So that is challenging, but I also think it's characteristic of Bitcoin. And if there were a centralized organization, marketing Bitcoin and creating narratives for Bitcoin, in a way it would be antithetical to the entire nature of the Bitcoin movement, so creates this sort of catch 22 situation. And in fact, I was ostracized from the Bitcoin community in 2017, for suggesting that we create sort of a coalition of organizations to help with narrative and messaging, particularly around MIPS, or Bitcoin improvement proposals to help speed up adoption from a network perspective. So it's tough, right? Because the whole ideology is leaderless movement. And so attempting to insert any sort of structure, whether it's on narrative, whether it's on development, whether it's on you know, implementing development upgrades is very sensitive, because any sort of coordination is seen as an attack on this leaderless movement.
Anita Ramaswamy 23:19
I want to tie together a bunch of things that we just talked about throughout this conversation to sort of end it on this note, which is just that you've spoken a lot about crypto as like a quasi religious thing almost with like a cult like following and a lot of roots and ideology. And I also noticed that a couple weeks ago, Quinn shares put out a report about investor apathy towards some of the crypto markets. And yeah, I'm curious to know like, how does this industry this asset class that is so narrative driven, like you've mentioned, regain some excitement and break out of that apathy? apathy? Like what do you think will be the catalyst for that? If one at all?
Meltam Demirors 23:52
Money? Money? It sounds crass, but money is what compels people what got people so excited about crypto in 2021? Was the eye popping returns? What drove 10s of billions of dollars of venture capital into the crypto space was these incredible returns? And so I think it's very difficult to decouple the financial opportunity from the larger sort of opportunity. I do think that when prices in like people love buying the top, I don't know why people love buying the top cognitive bias, I guess. I've been talking to people a Bitcoin since 2013. I'm the crazy person that nobody wanted to hang out with. They're like, don't hang out with Meltem she's fucking crazy. She's gonna talk about Bitcoin. Don't invite her to this event. She's going to talk about Bitcoin and like three or four years later, they're like, I should have thought Bitcoin. And I'm like, I can't help getting all the party advice. Yeah, I can't help you with this. But I do think people do have this really interesting cognitive bias where or when something is already at peak narrative, right? When something is at the top of the bubble like they love buying it. We've seen this time and time again. And Carlota Perez writes about this in her book, financial capital and technological revolutions. But there is this interesting trend where it really is driven by returns. And then the second piece is it is also driven by narratives and people seeing real life like tangible use cases, I think one of the challenges is it's really difficult to explain new technology, particularly something that can be as esoteric as some of the things people are working on in the crypto space. So doesn't really until people see something that they can understand and directly relate to their own life are their own experiences that the light bulb goes off. That's why I think what's happened with NF T's and web three is actually been really useful, because it was a big lightbulb moment for millions of people because it wasn't a capital markets thing. It wasn't a finance thing. It wasn't a tech thing. It wasn't a distributed computing thing. It was like, Hey, you already consumed culture, here's a new way to consume culture that is financialized. And so I think it just takes time for those use cases that resonate with large groups of people to emerge. And then it's really a question of how effectively that narrative is propagated.
Anita Ramaswamy 26:10
Awesome, thank you so much. That's all the questions that we had for you, but really appreciate you chatting with us on the podcast today.
Meltam Demirors 26:16
Yeah, absolutely. Thanks so much for having me.
Lucas Matney 26:18
Thank you. We'll be back every week with interviews with the experts in the web three space catch Anita, Jackie and myself every Thursday for the latest in crypto news. You can keep up with us on Spotify, Apple Music or your favorite pod platform and subscribe to our companion newsletter also called chain reaction. Links to the newsletter and more from our guests can be found in our show notes and be sure to follow us on Twitter at chain underscore reaction. Chain Reaction is hosted by myself. Lucas Matney along with my co host and Anita Ramaswamy. We are produced by Yashad Kulkarni and our associate producer is Maggie Stamets with editing by Cal Keller Bryce Durbin is our Illustrator Alyssa stringer leads audience development and Henry pic of it manages TechCrunch his audio products thanks for listening