Welcome back, this week Lucas and Anita break down the chaotic rollout of Ethereum’s biggest drop yet — a virtual land sale for the Bored Apes metaverse. The startup behind it banked more than $400 million in the sale, but the auction of land tiles called Otherdeeds brought the Ethereum blockchain to a crashing halt, leaving users paying exorbitant transaction fees worth thousands and tens of thousands of dollars just to buy themselves some monkey land. Beyond that, they discuss Wikipedia’s abandonment of crypto donations after a vote from the Wikimedia Foundation’s editors and how the SEC is bulking up its crypto crime division with a few new hires that are tasked with the daunting challenge of policing web3. In their interview this week, Lucas and Anita chat with Jill Gunter. Jill is a crypto VC at Slow Ventures and the co-founder of Espresso Systems — a startup building a privacy-centric blockchain. Listen along as they get her take on why there are so many blockchains out there and whether we’re headed towards a future where one blockchain rules them all.
Welcome back, this week Lucas and Anita break down the chaotic rollout of Ethereum’s biggest drop yet — a virtual land sale for the Bored Apes metaverse. The startup behind it banked more than $400 million in the sale, but the auction of land tiles called Otherdeeds brought the Ethereum blockchain to a crashing halt, leaving users paying exorbitant transaction fees worth thousands and tens of thousands of dollars just to buy themselves some monkey land.
Beyond that, they discuss Wikipedia’s abandonment of crypto donations after a vote from the Wikimedia Foundation’s editors and how the SEC is bulking up its crypto crime division with a few new hires that are tasked with the daunting challenge of policing web3.
In their interview this week, Lucas and Anita chat with Jill Gunter. Jill is a crypto VC at Slow Ventures and the co-founder of Espresso Systems — a startup building a privacy-centric blockchain. Listen along as they get her take on why there are so many blockchains out there and whether we’re headed towards a future where one blockchain rules them all.
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Lucas Matney 0:00
Hi everyone. I'm Lucas Matney,
Anita Ramaswamy 0:08
and I'm Anita Ramaswamy.
Lucas Matney 0:10
And this is chain reaction.
As going in Nita,
Anita Ramaswamy 0:20
it's good. It's been a busy week of podcasting. We were on equities, Wednesday episode chatting about all things crypto. So be sure to check that out.
Lucas Matney 0:27
Yes. It has been quite the eventful week in crypto. I think there was one topic that's been on everyone's mind, though. So can you tell us about that?
Anita Ramaswamy 0:36
Yes, so the the labs, the company behind the board API club, NF t's very infamous NF T collection, that company actually did what could be the largest NFT sale in the history of a theory on this past weekend for this other side game that they were planning to launch. So it was a virtual land sale, and it ended up bringing in over $400 million for Hugo labs. But what really was controversial is that it also generated $100 million in Ethereum gas fees in less than an hour. So that's an unprecedented amount. And basically, the activity on the network from this sale was just so popular that it ended up clogging the entire Aetherium network. Yeah, so
Lucas Matney 1:11
this was huge. I mean, board apes are bigger than they've ever been Ureeka Labs, they've raised venture funding at 4 billion, it costs like four or $500,000 to buy a board ape these days. So the ecosystem is huge. Now, you collabs owns crypto punks, they own a lot of the big NFT projects, this game they're launching integrates a lot of NFT projects across the whole ecosystem. So this is like really just a huge thing. So they do this giant land sale, and it kind of is a bit chaotic. So it causes these failed transactions, which after the fact they pledged to refund, but people were paying huge fees. We noted here that there's one person who bought this NFT in the you know, they spent five or $6,000 on the NFT itself, but they ended up paying 45,000 in transaction fees. I mean, this is like this is kind of a nuts situation.
Anita Ramaswamy 1:58
Yeah. And it's wild, because I mean, basically, gas fee is just a little primer on that. For anyone who's listening, the way that they work is they go up with network activity. So if there's a lot of demand than gas fees are going to be higher, so you're essentially paying for your transaction to be processed on the Ethereum blockchain. And users can also give miners like a tip in order to prioritize their transaction. So if you want to mint your NFT, you want it to be first you can tip the miners. The problem is if everyone wants to tip the miners, and they want to send high tips, and if your tip is too low for the network, then your transaction ends up failing to process. So what happened to a lot of users who are trying to buy land in this land sale was that they ended up paying these super high gas fees. And a lot of them didn't even get the NFT that they were trying to mint in the first place.
Lucas Matney 2:38
It's wild, because so much money flew into this platform. And people absolutely know almost nothing about this game. There's a short little trailer, they know they were buying virtual land. But otherwise, this is complete trust in yoga labs as an organization and a multibillion dollar startup that they're going to produce something that's super cool. But meanwhile, they're jumping through all these hoops. So it was a bit of a wild weekend. This all happened over the weekend. And everybody was talking about it there. All the spaces on Twitter were had like 1000s of people in them. But yeah, this was why
Anita Ramaswamy 3:08
I'm sure many people are questioning like, is it worth it to get the latest cool hip thing? Was it really worth that? $40,000 in gas fees that I paid?
Lucas Matney 3:16
Yeah, I mean, you collabs drops, though, like people who minted board Apes at launch are several $100,000 richer right now, people who have done any of their drops have typically made a lot of money, whether that will be the case forever is unclear. This was their widest launch. So they have 100,000 Total other deeds they sold 50,000 in this drop. Yeah. But I thought was interesting
Anita Ramaswamy 3:37
is like, even though people are pretty loyal to yoga and pretty willing to line up for whatever they're selling this lens sale was such a disaster and so chaotic, that some of the crypto community is turning on yoga labs and saying that it's their fault, right? There's one quote from will poppers co founder of syndicate, Dow, and he wrote this Twitter thread over the weekend. And he said that modifying a few words in the code would have saved $80 million plus in gas fees. And basically what he was saying is he's saying that yoga Labs is accountable, and that they should have programmed the smart contracts to burn less gas so that this didn't happen in the first place. And users didn't have to pay this much. But I know there's some other incentives there. So I want to kind of unpack that,
Lucas Matney 4:13
right? Well, it kind of depends. Vitalik also tweeted something following all of this saying that, like, hey, who knows, maybe based on the market, it could have ended up where gas fees ended up being kind of around the same even if it was more efficient. So it's a little unclear there.
Anita Ramaswamy 4:27
But is it Hugo labs his fault? I guess it's sort of the question on everyone's mind. And Lukas, can you share a little more on why that was such a prominent point of discussion.
Lucas Matney 4:34
So there's a little bit of an uproar. A lot of people were upset that they paid 1000s of dollars and didn't even get a deed there was a lot more interest than there was available NF T's which is generally good for these projects. But afterwards, you labs basically put out this little Twitter thread in there like paraphrasing, this perhaps highlights the needs for our own layer one in the future, which means that they would essentially take some of their projects off of the Ethereum blockchain and put it onto their own blockchain and and immediately users were just like, What the hell? This is not what we signed up for in any capacity. Yeah,
Anita Ramaswamy 5:05
there were even some conspiracy theories. I mean, who knows, but basically some Twitter users who were saying that yoga might have actually orchestrated this sale to be a shitshow on purpose to build up hype for their own blockchain and basically make Ethereum look bad.
Lucas Matney 5:17
Yes. I mean, you know, the crypto world has no shortage of conspiracy theories, I'm sure as with all conspiracy theories, there's some truth to some of them. But who knows if that was the case with this one? I don't know. But ultimately, this project is in its very early stages of launching, they don't even have the game out there yet. People don't know what they bought, they roughly know where their land was. They don't necessarily know that much about what it looks like. So there's still a lot up in the air. But it was a it was a chaotic rollout.
Anita Ramaswamy 5:43
Yeah, a lot of people lost a lot of money. But it also goes to show how much people are willing to drop and how much people are willing to put on the line for a cool NFT I guess,
Lucas Matney 5:51
I guess, moving on to another interesting topic this week, Wikipedia, essentially declaring war on crypto this week, the Wikimedia Foundation, which is the nonprofit behind Wikipedia, they decided to end accepting crypto donations after this uprising of their editors who were saying that accepting crypto donations essentially offered this endorsement of crypto and its environmental effects. Yeah. So there's a lot going on here.
Anita Ramaswamy 6:17
There's been a lot of talk, I mean, ever since crypto has become popular and come into the mainstream about its environmental impacts and how it's not environmentally friendly, basically. But I think with Aetherium Aetherium, is transitioning from their current proof of work verification system to proof of stake system, I'm sure eventually at some point, right, they keep pushing back this rollout, but a lot of the blockchains, the layer ones are aware of this, and Ethereum is trying to basically become more eco friendly by transitioning into that new system. But still, there's a lot of concern over the carbon footprint. And it's
Lucas Matney 6:47
fascinating because Wikipedia, it's not like they just recently started accepting crypto, they've been accepting crypto donations since 2014. So they like got on extremely early. But I think this is kind of representative of the fact that even though they've been accepting it for a long time, these platforms become more energy intensive as use on them goes up. So like Bitcoin is, is utilizing a massive amount of energy. I think it's like I forget what country is comparable to I think it's like the Czech Republic or something. Yeah, they use the same amount of energy as as that country, but like, that's not going away, like Ethereum, maybe they transition to this proof of stake mechanism, and their energy usage goes way down. But Bitcoin probably is always going to be proof of work, none of the people on board seem to have any interest in kind of pivoting away from that. So there's always going to be some controversy tied up in that. And this was an interesting case where this group was just like, we're gonna just completely bow out. And you know, whether or not that was the right call, like up to the people involved.
Anita Ramaswamy 7:43
And people don't hear it. I mean, one of the editors who is sort of pushing for this actually wrote accepting cryptocurrency makes a joke out of the WMF commitment to environmental sustainability. So that's the Wikimedia Foundation. And he's saying that it's a joke that they even accept crypto because of its environmental impact. So obviously, this is very, very controversial and heated. There's something fascinating
Lucas Matney 8:02
about this also, because the Wikimedia Foundation operates in some ways, like not through voting, but they kind of operate like a Dow in some ways, like they have all these editors who are contributing their opinions and like chatting, some of them are synonymous, but they're all kind of like trying to arrive at a decision based on a community that doesn't necessarily know each other. They're just all editors of Wikipedia. Obviously, Wikipedia is decentralized in a lot of ways, fundamentally. So like, there are a lot of these things coming at it from different angles, where it feels like a very web three organization, but a lot of the people just are fundamentally feel like crypto is scammy. And that by accepting crypto donations, they are endorsing the scam Enos, I think one of the interesting things tied up in here is crypto donations at large. I need to I know you've written about this in the past, like why would someone even donate crypto? What's the advantage to doing that? Yeah, so
Anita Ramaswamy 8:49
it's a tax write off actually. And it works in the same way as donating stock. So every time that you're donating to an accredited nonprofit, basically 501 C three or other accredited nonprofit in the US, you would get a larger tax benefit than you would if you just donated cash. And then if you think about crypto holders, if they're holding these tokens, if they converted that crypto into fiat currency, they would have to then pay the tax bill on that. So instead of doing that, they can directly donate their cryptocurrency to an accredited nonprofit, save a little bit on taxes. And what's interesting about that is most crypto holders generally want to hold on to their crypto because they think it's going to appreciate in value. They don't want to necessarily transact and spend the cryptocurrency they're viewing it more as something they want to hold for the long term. But donations are actually the one case in which that's an exception. And crypto holders are more willing to part ways with their cryptocurrency because of the tax benefit. But one thing I did want to know is that for Wikipedia, I mean, it was only comprising less than 1% of donations since they rolled this feature out in 2014. It's really, really a negligible part of their user base. But for those users who do choose to do it, usually taxes are a pretty good motivator.
Lucas Matney 9:51
Yeah. And I think like it was less than 1% for some of the years but this year was less than point 1%. I think people who have crypto have a lot of places to donate where Are those organizations are directly kind of propping up crypto in some ways, like
Anita Ramaswamy 10:04
nonprofits for web three? Like that's a big thing. Right,
Lucas Matney 10:08
exactly. So maybe they're interested more in things that are like indirectly juicing their returns, as opposed to Wikipedia, which is more of a public good, that has kind of less crypto at its center, right? Because
Anita Ramaswamy 10:18
if you can get the tax benefit, you can also prop up your industry, I mean, makes sense for an investor?
Lucas Matney 10:24
And if you Yeah, if you have any libertarian leanings whatsoever, chances are, you're trying to minimize your tax footprint as much as possible.
Anita Ramaswamy 10:31
Right, right. But yeah, moving to our next piece of news. So the SEC is just announced that they are close to doubling their crypto enforcement staff. And they're actually looking to add another 20 positions 20 new roles to their crypto assets and cyber unit. And that would bring once they make those hires the unit to about 50 people total, the SEC says they're doing this to basically keep investors safe from fraud. I mean, they listed a bunch of different areas of the crypto industry that they're looking at. But the overall theme is investor protection.
Lucas Matney 10:57
Yes, this is fascinating. Honestly, first reaction is Wow, 50 people Oh, man,
Anita Ramaswamy 11:03
that seems small for such a huge industry. To be honest,
Lucas Matney 11:07
the SEC is so far behind in all of this stuff. They only prosecuted their first NFT scammers like a month ago and they were like two people. They're light years behind. And I'm sure anyone who's building a product right now is thinking like we've got a pretty healthy window, if we're doing something that's like not clearly illegal, that's like vaguely illegal. We've got a couple years basically before this is going to catch up to us. So let's just build now and get the users now get the money now. And then we can adjust our business later. So them kind of bulking up their division. Maybe that makes some changes. But I guess doubling it is substantial.
Anita Ramaswamy 11:41
Yeah, I guess the crypto industry was particularly triggered by this move, because these are actually enforcement roles. And they're not guidance roles. And so the difference between that is like often what the SEC will do is they'll issue a guidance letter on some sort of policy topic or some sort of regulation and say like, basically as a warning, like, hey, crypto companies stop doing this thing that could be scammy. Or it's probably illegal or bad. But instead of hiring more guidance staff, they've hired more enforcement staff, meaning that they're probably more likely to jump to just step two, which is just cracking down and forcing the rules that already do exist around crypto.
Lucas Matney 12:13
Yeah, there's this interesting conversation around this where like, the SEC, as an organization was built before handling companies that had reached a certain scale. But nowadays with crypto in Web3, anybody who has a technical knowledge of crypto could make their own security at the drop of a hat. And the organization just isn't built to handle someone in their basement making a fractionalized, NFT that involves like 1000 Other people buying into it, right. I mean, it's impossible to think of like an organization that could scale to that size inside the government quickly, like that's just not how the government works.
Anita Ramaswamy 12:45
Yes. So can you tell us a little more about like, just the history of this enforcement tool, because,
Lucas Matney 12:49
you know, they have like, brought a few dozen, I think it's over 80 enforcement actions so far related to some of these crypto asset offerings. And they said in the press release that all these actions have brought in monetary relief totaling more than 2 billion, which that's not nothing. I know that I know, 2 billion is a huge number. But I mean, in crypto, it's kind of like whatever. Yeah, I
Anita Ramaswamy 13:09
mean, all of crypto is worth like, what around 2 trillion today. So
Lucas Matney 13:13
yeah, like market cap of the most popular coins is up there. And that's not even counting for like equity of all these huge startups. That's something and I mean, there's something to be said for if I was thinking of starting an NFT project, and I saw that a month ago, someone got arrested for doing the exact same thing I was considering doing, it would obviously give me a little bit more pause than if no one had ever gotten arrested or prosecuted for what I was thinking of doing. So I think there's some bit of just like, hey, 50 people, we can make an example of someone in every industry and have it be enough of a looming threat that people will think twice before they do something that's probably 90% illegal.
Anita Ramaswamy 13:48
Yeah. And I think what's interesting is this actually circles us back to our UVA labs news, it makes a lot of sense that the SEC is looking to beef up its enforcement, because the company's responses to a lot of these situations where people lose a lot of their money. And crypto has really varied and it's been left up to the company like UGA has decided, Okay, we're gonna refund some of these users who lost their money. I know what the XE infinity hack, the same decision was made to sort of reimburse those who lost money, but companies don't have to do that. And there have been countless rug polls where the companies just sort of make off with the funds and there's no enforcement action following that,
Lucas Matney 14:20
right some of these legit companies right now, especially ones that have access to like a faucet of never ending funding from these funds are just like, you know, when something unexpected or bad happens, they're just like, this is just something that happens because we're early and we just kind of need to make it right so that we don't poison the well for like future consumer pickup. Yeah, they're
Anita Ramaswamy 14:39
treating as an inherent risks just innate to like transacting and being in the crypto space and like, okay, every time users lose money, I guess we'll just pay them
Lucas Matney 14:46
well, is that better for them than having strict regulations put in place because of one big accident that like triggers a lot of consumers and retail investors turning on them? Yeah, I mean, especially when you're like aligned with a big fund someone like Andreessen or so thing not that they have anything to do with the SEC. But they have so many investments, it's obviously in their best interest for this thing to be prolonged in terms of heavy enforcement. So So yeah,
Anita Ramaswamy 15:09
we'll see if there's actually an increase in enforcement action that stems from this hiring spree. But for now, it's just personnel thing and we'll have to watch what happens next indeed. For our interview this week, we caught up with Joe Gunther. Jill is a venture partner at slow ventures. She's also co founder and chief strategy officer at espresso systems, a startup launched last year that is building a new layer one blockchain focused on privacy. She previously worked at Enterprise blockchain company chain. And before that, as a credit trader at Goldman Sachs.
Lucas Matney 15:44
Jill, it's great to have you.
Jill Gunter 15:45
It's great to be here. Thank you.
Lucas Matney 15:47
Thanks for coming on board. I wanted to start things off just talking about kind of the landscape. But really a question some people might have on their mind is why are there so many different blockchains? Out there in the first place? Why are people still building new ones?
Jill Gunter 16:00
Yeah, that is a great question. To answer it, I think you have to go back to the original blockchain, which was Bitcoin, of course. And it's kind of funny for me to think back on this because I started following the crypto space. Sadly, I didn't invest at this point in time, I started following the crypto space, I guess back in 2011 2012. And that was before there was this kind of Cambrian explosion of blockchains. It was just the OG the Bitcoin Blockchain. So I got to kind of witness and lived through a little bit, the development over time of all of these alternatives. And I think that the alternatives that have come about, they kind of break down into few different eras of what's been built. So you have immediately post Bitcoin, the era of what I would call alt coins. So whether this is light coin, or Dogecoin, Zee cash, maybe almost kind of slips into this era, where basically what you had was a whole bunch of developers coming along looking at Bitcoin saying, Okay, this is kind of cool. But what if we tweaked it in some little way? What if we changed the block size to change what the throughput of the system would look like? What if we basically just forked it and gave it a different brand that has to do with dogs and memes? What if we tweaked something to try to add more privacy to the system? You know, what you came out with was a lot of blockchains, and a lot of tokens that had a lot of the same properties as Bitcoin, but again, change the feature set, the next phase of the development of new blockchains that came along was that of Ethereum, I would say. And so this is getting into kind of the 2015 2016 era. And suddenly what was added was not just a tweak. And that's maybe an unfair characterization, because some of those tweaks were actually quite meaningful. But what Aetherium brought with it was really kind of sea change and what you could do with a blockchain at the time, I remember reading about and hearing about Ethereum is a world computer that was kind of the initial messaging and branding around it to this day, I'm not sure that I know what that means yet. But what happened was this expansion of programmability. And so those were kind of the first two big phases of the development of alternative blockchains. And then you start to get into what I would almost call the modern era of, of new blockchains, and new layer ones, where I think that it's been established that there's a lot of really interesting utility and applications that can be built on I mean, specifically Ethereum, which is the canonical, of course, programmable blockchain. But there's still all of these issues. And so we're back actually into an era of trying to tweak the feature sets of programmable blockchains. Again, playing with things like throughput trying to lower fees, trying to increase the usability of these things, or my case, trying to add privacy into what you can do and what you can program in terms of applications on blockchains. But that's kind of how it would break down the evolution over time, but it's a huge question, obviously.
Anita Ramaswamy 19:05
Yeah, and you covered a lot of ground there. So I appreciate that just sort of fast forwarding to today, where do you think the major blockchains Bitcoin a theory, maybe we can also add Solana on some of the newer ones? Where are those sort of falling short?
Jill Gunter 19:17
Yeah. So for Bitcoin, I think it's pretty clear that Bitcoin is going to, I think, at least be around for a while, but strictly in this category of sort of digital money, maybe digital gold, I think certainly the difference obviously being money would have these other properties around being used kind of on a day to day basis, gold being worth just kind of the store value, but there's not all that much that you can reasonably easily do on Bitcoin beyond that, and so I think that that's an area that it falls short again, Ethereum came along to try to plug into some of that and create more optionality and more programmability. And I think with Ethereum, the very clear play so that it falls short is around throughput and what throughput really means people talk about it in terms of transactions per second, fine. But what that really means for users is the fees that they have to pay in order to get their transactions through on the network. And that has been a huge limiting factor, obviously, in terms of who is amongst the user base or Ethereum for a lot of people. Maybe they'll come and experiment with Ethereum and do a transaction or two. But as soon as they realize that each transaction is costing them $200, they're out. And so that's a limitation, again, in terms of who can access it and use it in a reasonable way. But I think almost more importantly, for the stage that we're at of the industry, it's also been a huge limiting factor in terms of the use cases that can be recently and viably developed. And I think that the fact that transactions can cost on a regular basis $200 per to get through has limited a lot of the utility of these things to speculation, which is what you see today, and prevented use cases that have been promised for a really long time, like remittances, like b2b payments, even you know a lot of these other things from taking off. So that's where you now see players like Solana coming in and promising better scalability, lower fees to users. But to answer your question to Anita of where those then fall short. The reality is, is that just about every blockchain infrastructure that has come along, that solves scalability in some way, firstly, has not been fully put to the test that Ethereum has been, it's very easy to say that you've solved scalability when you have a lot less usage that you're competing against. But secondly, they've all centralized something in some way, just about you see this with salon has architecture, you see this, as a lot of the layer twos exists today. And for the most part, these things have on the roadmap ways of continuing to decentralize over time. But again, we have yet to see those put to the test. And we also have yet to see in what ways decentralization really matters to users in terms of the architecture of these things. But you see, Solana going down, just went down again over the weekend, and you start to ask the question of, okay, where are the trade offs that we can make in order to make these things more accessible to users and to solve some of these issues like scalability? And where do we have to draw the line in terms of prioritizing decentralization? Yeah,
Lucas Matney 22:28
well, one of the things I'm curious about, there's so many different blockchains out there, developers have a lot of options in terms of where they can build their products. But blockchain developers historically are used to waiting to see what takes off before they make a commitment. And I think that that's kind of one of the interesting things where you have these giant unicorn startups that are still kind of struggling to get action moving on their platform. So I guess, you know, what's your sell for your platform? In terms of why should they take a chance on you essentially? Yeah,
Jill Gunter 22:57
developer acquisition is a really interesting kind of strategic question facing every project in the industry. And there are obviously sort of playbooks, whether it's Trad fi or just traditional web to tech companies that can be played upon. But there's a lot about developer acquisition, web three that I think is really unique. And part of it, as you say, is the enormous war chests that so many of these projects have to just throw, whether it's cash or tokens at developers to try to get action on their platform. So you asked about what I'm building specifically. So I am with a company called Espresso systems that is developing a scalable, decentralized, and also private layer one platform. So on the scalability and decentralization element of it, we are excited about new design that we've developed over the last couple of years that we think threads the needle in a new way on that trade off that I was talking about earlier between scalability for users, and decentralization, which leads, of course, into the robustness of the system. And then on top of that, we are also prioritizing the ability to develop private smart contracts and assets and so forth on the platform. Whereas today, everything you do on Aetherium is going to be publicly visible. If you wanted to, you could go in and figure out every embarrassing NFT I've bought or sold and every terrible altcoin that I've liquidated too soon, or whatever. And so we're trying to solve all of those issues listed. And that last part of it, actually the privacy element of it that, again, is a pretty new feature set really in terms of what you can design in these applications, smart contract systems. So that's a big part of our angle into developer acquisition. Personally, I don't think it's good enough anymore to just wave around a white paper that says, Oh, we're actually going to be more scalable and more decentralized than anything else. I think that you need to have true differentiated features that's from what already exists. And then I think that neither is good enough. without the other, I think you do need to make a case for why your system is going to be the most popular and the most sound going forward over time. But again, on that front, all of the projects out there are kind of making the right noises. And we have yet to see them really be put to the test. So it's important to have multiple ways of differentiating, knowing again, that everyone is sort of making similar claims and also throwing similar amounts of money around in order to try to solve the go to market issue.
Lucas Matney 25:31
What's the advantage in being a layer one versus a layer two for your blockchain? Specifically? Yeah, layer two on Ethereum, or something like that. Yeah, I
Jill Gunter 25:38
was actually just reading a great exchange this morning about how l twos and l ones will evolve will l twos become l ones over time, even just because of incentives, because the valuation difference for L ones tend to be valued higher, you know, there are all of these kinds of dynamics. But I can say from being in the trenches and working on an L one, specifically, a big part of why we went the route of working on L one, as opposed to an L two is that you have the benefit of being able to design the system holistically. There's a lot of hype around the notion of a modular blockchain these days modular, you can have the consensus layer and the italic liason layer. And yeah, I mean, if batalik likes it, who am I to hate on. And I'm actually not hating on it. Because I think that blockchains as with any system should be modular in terms of kind of logical design, but not necessarily in terms of the operations of it, meaning, you know, it suddenly becomes very hard if you have this thing that already exists, and you are trying to build in a backwards compatible way that is also optimizing for these finicky characteristics of it like throughput, it is a lot easier to take the thing from scratch and design it from scratch, as opposed to having to continually build onto it. So again, that was the input to our side of why we chose to go this direction of building another one. But at the same time, there are of course, trade offs to that were some of the problems that we're facing from the engineering perspective. And whatever would be easier if we were just inheriting security wholesale from Ethereum, for example. But we think that when you're trying to build for the long term, and when you're trying to compete for the long term, you're better off starting again.
Anita Ramaswamy 27:25
Got it. And Gil, so you are working on this layer one. And I think that's really interesting, because we hear a lot of back and forth about is there going to be a multi chain future? Or is this sort of a winner takes all space? I'm just curious to get your thoughts because it sounds like you know, you're talking a lot about layer ones being able to iterate and build something from scratch. Is that something that you think is happening now? But it's going to sort of stop in the future? Or do you think all these different layer ones are going to stay around and compete?
Jill Gunter 27:47
I think that for the next five, maybe even 10 years, all of these different layer ones will still exist, certainly. And I think that what we'll see is sort of specialization of different layer ones for different use cases where I could imagine, for example, Solana continuing to persist as a very defy heavy chain, I could imagine espresso, what I'm working on persisting as a more perhaps payments oriented chain, or the types of use cases and the types of users that need almost more kind of institutional style features, again, of privacy and low fees on locking those types of use cases. But I do think that over time, we will start to see a convergence of users and also use cases on to a few chains to start and then dare I say it to perhaps one chain over the lever. And I think that it's hard to see now, because we're still so in the early innings of all of this. But if you look at the history of technology in general, and the history of network effects, and how these things do tend to consolidate over time, and you look at the dynamics of crypto and blockchains, where so much of it also comes down to the gravitational pull not only of developers, not only of users, but also liquidity in the system, all of these types of things. I think that it's hard to see a world in which you have hundreds of chains persisting with any kind of meaningful activity a decade plus out. Right,
Anita Ramaswamy 29:15
right. I mean, you are kind of occupying this interesting space, because you're working on this layer one, and you've also worn the hat of a VC at slow ventures. Yeah. Are you still investing there? Yeah.
Jill Gunter 29:25
So I am still on board as an advisor or venture partner with Scott it sold working with my existing portfolio companies and still passing along the odd deal here and there to them.
Anita Ramaswamy 29:35
Yeah, totally. I'd love to hear your thoughts on just the state of the crypto venture world right now. And what's going on there?
Jill Gunter 29:41
Yeah, it's a wild time. And it's a wild time, in part because of, I guess, two dynamics playing out into kind of opposite directions where on the one hand, you have more institutional money flowing into crypto than you have ever had before. You've had multiple billions $2 billion funds get raised and be announced over the last year, you've had the likes of Apollo capital, even just over the weekend coming in tycker, SoftBank cetera. And so you have this flow of money into really primarily kind of the private markets around crypto. So startups and tokens that are not yet launched, and so forth. And then on the other hand, you have the macro environment, which is creating headwinds against basically every risk asset class out there, whether it's tech stocks, or whatever else, and that is obviously causing pain in the publicly traded crypto markets. So in the same way that this is happening, I think in the equity markets with private equity and publicly traded stocks, you have this bifurcation playing out in the crypto world where you still have this elevated level of interest and investment in the private markets, but real pain happening in the public markets. So it's a good time to be a startup. It's a tougher time, I think, to be a more mature company in the space. And we'll see how long this window of time lasts before one catches up to the other.
Lucas Matney 31:06
It is interesting that you know the answer to the question of what's the state of the crypto venture markets seems to be like changing every couple of weeks almost. You have some background in the traditional finance world, I guess just kind of wrapping things up. Are there some spaces you can highlight where mainstream institutions are still skeptical on crypto? And what do you think some of the ways you can swage? Some of those fears are?
Jill Gunter 31:28
Yeah, I mean, it's funny, I feel like I've spent a huge portion of my career within crypto trying to convince institutions to get on board with it in some form or another, whether that was on the investor side, or whether that's on the tech and go to market side of it. And the reality is, is it's firstly, so institution by institution, I mean, you look at Fidelity, who's been mining Bitcoins, since like 2014, and then compare them to, you know, some of the other big traditional asset managers and whatnot, whose head investment professionals won't touch Bitcoin, even with a 10 foot pole. And so that I think just demonstrates how idiosyncratic the dynamics still are. But I would say one observation that I've made is that it's astounding to me how many institutions are still afraid to touch an open decentralized blockchain and still want something called a permissioned blockchain or an enterprise blockchain, whatever that might be. The reality is, is I think that a permission blockchain, it's often been said is akin to the intranet and what you really want exposure to and what you really want to be building upon is the internet. And I think that that is a very true analogy. And my hope is that institutions, we'll gradually see over the coming five years that in fact, open, decentralized, blockchains can offer a lot of unique value that just an internal database, or ledger cannot in terms of the open innovation, they can foster in terms of, again, just some of the permissionless qualities of it. And that that's actually not a scary thing. These things can be built and designed, actually with their needs in mind that they don't need to resort to having controls around everything around the whole border of it. It's going to be okay. It's not just this sort of scary, scary bastion of illicit activity that the blockchain world for so long was made out to be not at
Anita Ramaswamy 33:21
all. Yeah. Well, it sounds like you have your work cut out for you in terms of convincing the financial institutions to get on board. Joe, thank you so much for joining us today. Yeah, it was awesome to hear from you.
Jill Gunter 33:32
Thank you so much. This is great.
Lucas Matney 33:38
Thanks for listening. We'll be back every week with the top crypto news and interviews with experts in the space. You can catch us on Spotify, Apple Music or your favorite podcast platform and subscribe to our companion newsletter also called Chain email@example.com. Forward slash newsletters. You can also follow us at at Chang underscore reaction on Twitter for the occasional Twitter space about breaking crypto news. If you are into crypto or financial news in general, be sure to check out TechCrunch is equity podcast. We're hosting Natasha, Marianne and Alex unpack the numbers and the nuance behind the headlines. You can find myself in a needle on equity this week, where we chat about the unpredictability of the crypto venture market. And if you are a founder want to start your own company or are interested in hearing how founders navigate fundraising building product roadmaps and manage failures. Well check out Darrell and Jordan on the found podcast where they have candid conversations with entrepreneurs on their startup journey. Thanks so much and we'll see you next week.
Anita Ramaswamy 34:35
Chain Reaction is hosted by myself Anita Ramaswamy. Along with my co host Lucas Matney. We are produced by Yashad Kulkarni on our associate producer is Maggie Stemettes with editing by Cal Keller, Henry pink Evette and Yashad Kulkarni, our executive producers Alisa stringer leads our social efforts and Bryce Durbin is our Illustrator. See you next week.