The Crypto Landscape: A Conversation Between Mike Dudas and Anthony Pompliano

Mike Dudas
Sep 3, 2018 · 33 min read

The following is a transcript of the recent podcast discussion between Anthony Pompliano and Mike Dudas about the crypto landscape. You can find the recording here: Off The Chain: Anthony Pompliano and Mike Dudas. To receive daily information from Mike and his team at The Block, head on over to www.theblockcrypto.com!


Anthony Pompliano: 00:02 What’s up, everyone. This is Anthony Pompliano. Most of you know me as Pomp. You’re listening to Off The Chain, simply the best podcast in crypto. Let’s kick this thing off.

Anthony: 00:14 Mike Dudas is the founder of the The Block, a crypto-focused community to help people cut through the noise. He previously co-founded Button and worked at Venmo and PayPal. In this conversation, Mike and I discuss the role of media in the crypto industry, why Coinbase is the most important company in the space, and which media outlet he thinks is more entertainment than substance. I learned a lot about the intersection of content and crypto in this one, so I hope you find it as fascinating as I did.

Anthony: 00:40 Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

Anthony: 01:10 Why don’t you just give us a little bit about your background and what got you into crypto.

Mike: 01:14 Absolutely. I’m a relatively recent entrant into the crypto ecosystem full-time. In 2013, I started to dabble. Bought bitcoin, I was working at the time at Braintree, the payment processor. We had customers like Uber, Airbnb and obviously all of the big crypto companies wanted to work with them. So Coinbase came to us and said, “Hey, do you want to accept bitcoin in your gateway?” And at the time we chose not to, but it developed an interest in my mind, talking with the Andreessen Horowitz folks, talking with the Coinbase folks, and reading Chamath’s blog post, everybody should put 1–3 percent of their net worth into crypto at that time. I was like, hmm, let’s do this!

So I’d been paying attention to crypto due to my ownership since 2013, but I left the ecosystem for a while. I worked at Braintree / Venmo, started a company called Button here in New York, and we had our second child in the fall. And it coincided with a pretty significant price rise in bitcoin and in other cryptocurrencies. And I went down the rabbit hole for the first time. And the rabbit hole took about five months before I really felt comfortable having conversations with folks who had been in the ecosystem full-time for a number of years. And my interest was piqued, and I said, “ Hey, what do I want to do for the next 10 years?” And after meeting the people I had met in those five months and thinking the ideas I’d thought and having the conversations I’d had, I said, “Hey, it’s time to jump in.”

Anthony: 02:41 Amazing. And, and so what specific parts of the industry do you think are, the most interesting in terms of somebody who’s coming from a non-technical background but has had a high-degree of success in terms of companies he’d worked at, started at, et cetera? Like, what pulls you in and is so interesting?

Mike: 03:00 So the primary thing that pulls me in, relative to what I am calling traditional tech — and I have written a little bit about this, is the multi-disciplinary nature of crypto and blockchain technology. You know, it’s not just about technology or sales or marketing, or go to market. It’s about governance, it’s about economics, it’s about network security. It takes a team of world experts to execute on any protocol project. And the other thing that really attracted me is this is the first time — and I’ve been in FinTech for 10 years since the Google Wallet days and Braintree/Venmo, and this is the first time that I’ve actually seen something that could truly create a parallel financial system.

Anthony: 03:49 Yep.

Mike: 03:49 Versus what we’ve historically called FinTech, which are things that can kind of nibble at the edge of Wall Street and the traditional financial system.

Anthony: 03:57 Very, very interesting. And what do you think is the biggest mistake people are making in trying to build this decentralized financial system?

Mike: 04:07 The biggest thing that I’m seeing right now in the ecosystem as a whole, I think the biggest mistake that I’m seeing, and it’s kind of like a game theory thing and everything rational actor is probably is making the right move in terms of maximizing their own near-term wealth. But I do think that for crypto to succeed, we’re going to need to coalesce around the dominant protocol in each of the verticals that are being pursued. So let’s just say bitcoin as sound money. Ethereum as the worldwide universal computer. And I’m using extreme shorthand language here. Zcash or Monero as the privacy coin.

Now, I don’t think it’s reasonable to coalesce quite yet. But I think it’s supremely problematic when you see some of the leaders of the industry who are working on five or six projects. And I think it’s really problematic when you see some of the strongest voices in the industry, the Fred Wilson’s of the world and many others, who are using economic incentives to get developers to work on things that probably have very little chance of success, like Kik’s Kin. Relative to the other platforms out there that can do similar things better.

Anthony: 05:24 Got it. And so, I think that part of the beauty of crypto is the fact that people who have independent thoughts and kind of do a bunch of research, learn, formulate their opinions, and they’re able to share them and there’s a little bit less of a group mindset, right? In traditional tech if everyone’s into scooters, everyone’s into scooters, right?

Mike: 05:48 (laughs). Totally.

Anthony: 05:49 If everyone’s doing this and the tribalism and the kind of ferocious intellectual debates that happen in crypto, I think actually allow a lot of the best ideas to rise to the top. But that also allows people an environment to present unpopular or controversial ideas. Right?

Mike: 06:04 Mm-hmm (affirmative).

Anthony: 06:05 What would you say is your most unpopular or most controversial idea that a high-degree of people would disagree with, but that you believe?

Mike: 06:13 So as somebody who is a bitcoin maximalist…So basically I’m a bitcoin maximalist, but I would say that extreme bitcoin maximalists would disagree with me, as would people who aren’t bitcoin maximalists.

Anthony: 06:29 Okay. Explain that.

Mike: 06:29 I think there are multiple definitions of bitcoin maximalism-

Anthony: 06:33 Mm-hmm (affirmative).

Mike: 06:34 Or there should be. So I fundamentally believe that bitcoin has the highest probability of any coin by a wide margin of establishing the store of value use case and perhaps eventually medium of exchange and unit of account and becoming global sound money.

I think that if bitcoin went to zero, it’s a very low probability that cryptocurrency exists in 20 years successfully at scale. At the same time that I’m a bitcoin maximalist in terms of value of the token, I believe deeply in the other projects happening out there. Many of the other projects, including Ethereum, including, Zcash, including smaller ones like Poet?

And I think there are a lot of interesting projects, so I’m not sure that value will accrue to the token, but I wouldn’t call them shit coins. Like, I actually think that the token, in some respects from any of these projects, is a way to sort of market and signal interest, and get monetary incentives to get developers into the ecosystem.

Anthony: 07:42 Yep.

Mike: 07:42 And I applaud that, even though my more extreme bitcoin maximalist friends would probably frown upon that.

Anthony: 07:50 Absolutely. Well, and it’s also the incentive piece, right? So if you have a centralized company and you want to recruit talent you basically need to have a team and a mission that is attractive? You need to have the ability to pay money, actual cash. And then you’ve gotta usually use some other incentive mechanism to hire and retain that talent? And so you see everything from I’ll give people equity in a company to I’ll provide them free lunch? And so there’s a whole bunch of different things that you can do, but that’s in a centralized, single location or multiple single location type business, where everyone’s coming together at the same time.

Mike: 08:28 No question.

Anthony: 08:28 When you go to the crypto world, you have a distributed team for-profit entity type structure, where a lot of those incentive mechanisms that you use in traditional company-building is not available to the founders or the people who start these projects. And so the argument it sounds like you’re making is just that those incentive mechanisms are being replaced by these tokens which have monetary value associated with them, but they’re no different than the free lunches, the equity, et cetera.

Mike: 08:58 Yeah, I think that’s close to what I’m saying. And what’s interesting, the slight difference is, I think a lot of the investors who are investing in these tokens, do actually believe that many of them will have longterm value for a host of reasons, which would take a multi-hour podcast and you’d have to probably explore each vertical. I think most of them won’t have value.

Anthony: 09:22 Yep.

Mike: 09:23 But I’m more making the point, and you were making this as well, that these are the incentives that right now are encouraging folks to work on these problems that I think are real hard, and are worthwhile. But it will, there will be a day of reckoning when there’s kind separation of Bitcoin, Ethereum, and some of the other top tokens from some of the tokens that haven’t made progress. And I actually hope that some of the scam coins go away and some of the smaller market cap, tokens that actually have use cases and potential utility, even just to use a silly one like SpankChain that only has a market cap of 15 million in a really significant industry which should be a prime use for cryptocurrency. I could look at that and say, “hey, you know maybe there’s some room for this one to go up.”

Anthony: 10:18 Absolutely. And so let’s talk about community in crypto. Because I think that there’s both the good side and the bad side. Let’s talk first about the good side of the community? So, so if you look on social and you look at some of these projects and the tribalism that goes on, there’s just a rabid fan base or a rabid interest, right? How do you see that in comparison to the traditional technology start-up world where people are always trying to get customers that love me to now this rabid interest in the crypto world?

Mike: 10:48 So in the traditional tech world, outside of gaming and real consumer tech, eSports and things of that nature. And there are more examples, but those are a few of the examples where you see these rabid fan bases. And I actually think crypto is most analogous to those rabid ones, to sports teams in the real world.

Anthony: 11:11 Yep.

Mike: 11:11 In tech, you see developer fan bases and they’ll go to Google I/O and F8, but those are very different, very controlled experiences. In the crypto ecosystem, people come with, and you’ve heard this before, I’m not saying anything particularly novel in this area, but with almost a religious belief and an anchoring and a strong bias and as strong a tribal nature to associating with specific projects as I have ever seen.

Anthony: 11:42 Yep.

Mike: 11:42 And frankly, it’s because they’ve had access. I mean, it’s because these folks look at themselves as angel investors. True investors at the earliest stages of these projects, because almost none of them are even close to fully developed yet. And so I think that’s a positive.

Mike: 12:01 At the same time, it can be a curse. So an example of where it’s genuine is clearly Ethereum. And clearly bitcoin, but that’s been talked about a lot. You know, clearly Ethereum from a developer perspective and tons of developers, flocking to it. Solidity is a language that’s not just Ethereum-specific, but folks really want to work on the Ethereum blockchain and so you’re seeing apps and services build on top. And so I consider that a really healthy, organic, natural community.

At the same time, I see really unhealthy communities. The obviously canonical example of that is Ripple. Ripple has a centralized structure. Ripple Corp basically says, “hey, we put our tokens in escrow” but still, you know they’re obviously under their control and they’re released over a period of time.

And then they have a host of real people who are Ripple extremists and who knows that their motives are, what their compensation is and why they’re doing what they do. But they really become kind of a hive mind in public and really come after anybody who questions the validity of XRP and of Ripple. And then you can go one level past that, which is just false and fake communities.

And it has echos of what happened in our election. And bots, Ripple’s the case where yeah there’s certainly real people who are supporters, but there’s no question that there are tens of thousands of bots associated with Ripple.

Anthony: 13:47 And do you think that’s something where the company and the people in and around the company are actively trying to create this stuff, or do you think it’s a thing where community members who like the project, who hold the coins, have a financial incentive in seeing it succeed, are trying to push that narrative through, through social channels, et cetera?

Mike: 14:06 Yeah, the Ripple Corp team is an exceptionally professional, talented team. They truly are. I’ve spoken with them, I know, you know, some of them personally, and they’re very talented. They’re talented at creating functioning financial products.

Anthony: 14:27 Yep.

Mike: 14:28 And they’re also very talented at increasing the value of things related to the corporation they’re working for. And the token is clearly part of that? You know? So Brad Garlinghouse’s comments about pilots that might have eight transactions total, globally ever that they issue a press release about. Those are clearly strategic decisions they make where they know it’s not material but will impact the price of the token.

Mike: 14:59 So the management at Ripple clearly does things to move the token price, uh, separate from actually creating value for the core product. At the same time, they have an incredible team. Their product team is doing a good job on a number of financial institution and bank products that they’re working with and increasingly getting more and more partners.

That being said, if they were just a traditional equity-backed company, they’d be valued nowhere near what they’re valued at today. And then to the question of the community and the bots, I think they could do more to police it. And it’s not in their interest to do so today, so they don’t. And I’ve experienced it personally and I know many other folks that have, like my friend Geoff Golberg, who’s explored the Ripple bot problem.

And the Ripple team definitely invites many of the most prominent Tweeters affiliated with them to all of their events. And sort of encourages them to pursue this mini celebrity game. But I don’t think it’s a healthy one, and one that they know helps to artificially support the token price.

Anthony: 16:08 So I think that that argument is popular and relatively well-accepted by a lot of people. I would take the opposite side and, I don’t even know if I have a different opinion about Ripple specifically. I don’t know, and I haven’t spent enough time with them to have an opinion on them, but the mechanisms of, let’s walk through, so if they announce pilots that are early, you could say, “hey, they’re doing it to manipulate price”, right? Or you could say they are being overly transparent. The idea of them working with people who are big fans of a brand — every company in the world does that who has any sort of size — public influencers.

Mike: 16:58 True, and it happens throughout the industry. You know, ConsenSys… You know who does a lot of what they’re doing, IBM.

Anthony: 17:03 One of the things that I try to wrap my head around … and I don’t have an answer here… But what I think is really interesting is, part of the ethos of crypto, right in general as an industry, is decentralized, distributed teams. All of that, that goes in that bucket. At the same time, it’s experimentation. It’s trying different ideas, not getting tied to the sacred cows. All this stuff. And so, in the case of a Ripple or other projects, those are almost in direct conflict with each other. Right?

Because actually what they’re doing is — they’re doing experimentation. They’re really pushing the edge in trying to figure out, “do these new models work?” And how do they drive value? But they aren’t decentralized, they aren’t distributed, right? So how do you think about where that line is?

Mike: 17:48 It’s a great question. I think one way that they could basically eliminate all doubt is to say, “hey, instead of compensating ourselves in this token XRP” — which the founding team has, the leadership has and David Schwartz has. They could choose to basically renounce those tokens. And take more value in the equity of Ripple the corporation, which clearly has a connection to XRP the token. But it would reduce questions, as to whether there are ulterior motives when they are announcing things. That’s just one simple thing.

Anthony: 18:28 Yeah.

Mike: 18:29 Again, that being said, structurally it’s really difficult for that management team to execute, without people asking questions externally. Just given the structure of the corporation outside the tokens. And that‘s just one example. That’s even a healthier community than some of the other ones out there. You know, the TRON community, right?

Anthony: 18:52 (laughs).

Mike: 18:52 I mean, it’s a total scam. It’s not even worth getting into that. But, you mention TRON and say, scam. And you’re gonna have 100 bots, and your inbox, uh, ends up…

Anthony: 19:03 Quickly (laughs).

Mike: 19:03 Yeah.

Anthony: 19:04 All right. So, so let’s switch gears. Let’s talk about the media in crypto. So that’s something you care about a lot. It seems like there are three separate buckets of media outlets or types. You’ve got the crypto media. These are people who are super well connected in the industry. They really understand what’s going on. They do a fairly good job in terms of reporting in detail and accurately. Maybe a little bit smaller audiences.

But very much, these are people who understand this industry. Then you’ve got the traditional media which depending on who you’re talking about may or may not understand what’s going on, accuracy is questionable sometimes. And the way that they are delivering the message can lead to a lot of retail investors changing their opinion about certain tokens, acting differently, et cetera, in the market. And then the third bucket is what I call the citizen journalist. Which is these Twitter accounts that explode, that all of a sudden…WhalePanda…or BullyEsq? And these guys, they’ve got a publishing platform, and what they’re doing people want to hear. And they grow this audience. I’m just having fun, but they’re actually providing legitimate value. And so through that, how do you see that ecosystem and the relationship between the three playing out over the next 5, 10 years?

Mike: 20:29 So I think all of them are important, but I think those three are all somewhat insular. Okay? The way that all three of those types of media today are writing, is in a very trade-oriented manner.

Anthony: 20:49 Meaning, price? Like, talking about price and what is happening in our market, where people are looking to trade.

Mike: 20:54 That would be one example. But another is basically writing about Ethereum governance. Or you’re writing about why has price gone up or down in the last six months? If I gave that article to a friend who’s an engineer working in traditional tech but with not a lot of knowledge about the crypto ecosystem, they probably need to read like four precursor pieces to get to the point where they understand it. So the way I think of those three categories right now — and I’ll just start there — is, I look at CoinDesk being the former. So there’s this sort of trade magazine type of ecosystem. And really, CoinDesk is the only one that has a brand that even in this ecosystem stands out.

Anthony: 21:37 Yeah, in quality.

Mike: 21:37 And this ecosystem is pretty de minimus, small number of folks compared to the global interest in cryptocurrency and blockchain technology. And then you’ve got Bitcoin Magazine, CoinTelegraph and CCN, which copies everybody’s stuff. It’s a big group of brands that write very similar things.

Then to your point, you’ve got the Bloombergs, the Fortunes. And then there’s a host of others who are writing about this, New York Times. But I think Bloomberg and Fortune are doing the best job. And they have folks on the beat who are deeply informed. And they write, and they break news. And they write some really good pieces. And they write some pieces that I wouldn’t write, that aren’t good.

I think there’s a group that’s a little bit different than that. They have better editorial judgment. You know, CNBC is a disaster. I mean, it’s just terrible for the industry. It’s a shit show. It’s basically, no holds barred, completely unethical. So basically you’ve got these folks on air … Brian Kelly, Cryptoman Ran, who blocked me on Twitter for calling him out for being an absolute shill of coins that he owns. He buys them, and then tweets about them, through his private vehicle.

CNBC literally allows people who are telling people how to buy cryptocurrencies and informing and educating them supposedly, to literally run hedge funds on the side. It’s a fucking joke. It’s a disgrace, it’s embarrassing. It makes me irate, and it hurts people. It hurts people’s pockets. They’re a sham, okay? So CBNC is different than everybody else. And it’s embarrassing. Comcast should be embarrassed to allow this on television. And it’s probably the thing I’m most passionate about right now. I care less about Ripple than about CNBC being held accountable for hurting the common investor. They’re terrible for the industry, and they mislead people. So sorry for going off on that tangent, but I think it’s important that people understand…

Anthony: 23:38 So you believe that…

Mike: 23:39 I believe it deeply.

Mike: 23:40 And that’s sort of the mass market. If you ask people walking down the street, a thousand people, what’s the biggest brand in media of bitcoin, crypto, blockchain … name all the terms, I think they’d probably say Bloomberg. Yeah. A thousand people, even in New York. Maybe a couple would say CoinDesk. But they’d say Bloomberg, Fortune, New York Times, a couple of others.

Anthony: 24:00 So the name brand recognition.

Mike: 24:02 And then lastly, the last category said, I think it’s sort of aggregated on Twitter and Medium. So personal blogs and then Medium. And it is the richest source of high signal information in the industry.

Anthony: 24:15 I agree.

Mike: 24:16 It’s abundance, just absolute abundance. It’s a shame that Medium needs to hire somebody, a cryptocurrency expert to really curate this and highlight the best stuff. They’re not doing a good job there. Frankly in the industry we just need to find some rich person to give them a bunch of tokens to hire somebody to do this. Because it’s so wonderful. And every week now I’m urating the best on Medium.

Anthony: 24:43 Yeah. Do you think that, because they’re practitioners, you’re getting what people are actually doing…

Mike: 25:04 Versus I think that … sorry to interrupt. But I think the direction you were headed is, you know, this, this authentic deep, “I thought about this thing that I personally care about.”

Anthony: 25:12 Yeah.

Mike: 25:12 And Nic Carter, some of these folks don’t even have their real names. Hasufly, who’s very bright. A number of folks who have gotten me really interested in token economics… the Kyle Samani’s of the world. And, Arianna Simpson.

Anthony: 25:27 It’s original ideas.

Mike: 25:28 Exactly. You get Ryan Selkis… you know, those are the folks … the folks day in and day out, who are living and breathing this, are the folks who are sharing right now the best information. And I’m actually writing a blog post that will be published, uh, tomorrow in The Block, which is my new business, which we haven’t talked about yet. But we’re publishing. And somebody asked me this morning on Twitter, “hey, why do you guys talk so much about what you’re building, instead of actually building?” And I listed a few reasons. But I think it’s important that we talk about it, because we have so few believers, we have so much information, so much change so fast. And so much of what’s being shared isn’t accurate. And therefore, it’s really important for the folks who are in the know, who have that judgment and good information to talk. And to get it out there and evangelize.

Anthony: 26:16 Well, I think what we’re seeing is … this is probably one of the first industries where part of it is the nature of crypto. Part of it is the nature of just communication and tools, outside of crypto, is the practitioners, the operators, the engineers are able to talk directly to audiences without the middleman, mediator, et cetera.

Mike: 26:38 It’s incredible.

Anthony: 26:40 And we’re seeing it, by the way, we’re seeing it in… our president does it. Elon Musk is doing it. Kanye West is doing it … I mean, you go through, there’s a bunch of people who are figuring out …I can talk directly to my audience.

Mike: 26:49 Jeremy Rubin wrote a piece on, giving… airdropping tokens. Giving wealth to people, that I read this morning. And by the way, I’m being completely honest. I read the whole thing, and I didn’t understand any of the equations.

Anthony: 27:03 (laughs).

Mike: 27:03 But it made some sense to me. And I loved sharing it, and putting it out there. And having it be debated and discussed. And another guy I respect greatly, Jeremy Gardner said, “hey, I don’t necessarily agree with that.”

And it, it’s a wonderful … it’s just wonderful to see all these different viewpoints coming from different backgrounds. Some mathematical, some practical… having these discussions, it’s really exciting.

Anthony: 27:25 Absolutely. So what do you think is the intersection with what you’re doing with The Block? Tell us something about what you’re doing with The Block.

Mike: 27:35 Yeah. So there’s a fourth type of media that I don’t believe has existed. And it’s starting to exist. It’s basically about media and information and community around the crypto and blockchain ecosystem. Today, media reaches let’s just say (I’m making up numbers here) one million people in the world who know a lot. Those first three categories we’ve talked about are super serving those one million people who already know a bunch of stuff.

Well, hey, there’s a 100 million people … and I’m just, again making up numbers. But, you know, relatively I think the ratios are, are probably somewhat accurate — who are getting terrible information. They’re just following random Twitter feeds, pump groups on Telegram. They don’t have access to the best information — the insider information that we’re fortunate enough to have access to. So I looked at this ecosystem and said, “hey, I really feel like this is where I wanna be for the next 10 years. I’ve been successful in the past. So I can take a 10 to 15-year horizon … and I’d love to do this the rest of my life.”

But I want this industry or this ecosystem to succeed so badly, and I’d love to do this for the rest of my life. So The Block is “Crypto Simplified.” And the whole idea is that we take these concepts that you and I understand and probably many of our listeners understand. And we basically start at the base layer of those. And then build up from there, and build this education base. And we will create what I call a “Reddit meets Slack.” I’ve created a Slack group. It’s a thousand people strong, where people are learning from one another. I think people learn best in groups as we see from Telegram.

But effectively liberating this and giving it to people so that they can discuss the news, the analysis, the topics of the day together. So, anyway, The Block has launched a newsletter that we publish every other day. Our website is launching at the end of September. And it’s gonna be that thing that you check in your phone for a quick take on what’s happening. And we’ll aggregate all of the analysis and other information. But it’s approachable, and we wanna reduce — people are fearful. I was fearful when I came into this industry five, six, seven, eight months ago. We wanna reduce the fear, so people can jump in and learn.

Anthony: 29:40 Well, and a lot of it too is, if I said, “hey, go learn everything you can about quantum mechanics” … you would say, I don’t know anything. Right? Or may-, maybe you’re an expert, but I don’t know.

Mike: 29:50 I’d be like, “give me a link, dude, I have no idea.”

Anthony: 29:52 (laughs) Yeah. And, and so you would start Googling, right? You’d find some things, ok these look like these are the people who understand a bunch. I can search on YouTube. Okay. I’m gonna go watch these videos. I’m gonna read, you know, some stuff off of Wikipedia, and I’m gonna find a book and an expert. And you just go down this rabbit hole. And you eventually come up with some degree of knowledge. The problem in crypto is, those people, those videos, et cetera, don’t look anything like we’ve ever seen before. Right?

Mike: 30:21 Yeah.

Anthony: 30:22 … pseudo-anonymous accounts on Twitter. It’s these secret Telegram groups. It’s these videos where I’ve literally seen people who are incredibly intelligent, are doing videos and their faces are covered.

Mike: 30:31 Yeah. It’s like Medium sort of gives text credibility. You know, we’re looking to have The Block give a number of these concepts, these voices, credibility. And then to basically take a lot of what they’re doing with their endorsement, and present it in a way that people feel comfortable. And then we’re actually going to ground that in a physical community as well. We’re starting here in New York with something called The Block @ WeWork.

It’s a co-working space that’s going to be launching this fall. And we’re gonna invite crypto projects … 100 plus people to join us. And folks who are part of The Block community will be able to drop in. We think right now New York is one of the top three, if not the top, crypto ecosystems in the world. So we’ll start here, and we’ll see how it manifests itself, that physical plus digital community that’s welcoming. And one other thing I wanna say, there are some other fantastic teams that are doing this right now. Again, huge kudos to you with your newsletter, which I think is much more approachable than a lot of what I’ve seen out there. The team at Messari Crypto is doing some phenomenal work. They have a team, Ryan Selkis just wrote about it this morning, a guy I respect tremendously. 125 folks who are offering up analysis of tokens and other things. They’re working through transparency and token information.

And Token Daily is another one. These are different things … Token Daily, who is having just amazing people contribute. Like, they have on Medium historically, and then allowing conversation around it. So The Block isn’t the only one. And I think we’re all gonna be able to work together. And I think this is the time and the place. And what’s great is, because price has gone to shit over the last six, eight months, we can all just focus on building.

And this is not a permanent thing. I think we all believe in this technology. I mean, in this ecosystem and its ability to change so many industries, and to change money. When we come out of this it’s going to be wonderful, that we’ve all been working heads down. It’s like the 2008, 2009 “quote” crisis, I think you may have said it … you said it in your newsletter, it birthed Uber, it birthed Airbnb. Birthed some of the greatest companies of the last decade. So it’s really exciting.

Anthony: For sure. What, what do you think is.. If you could wave a magic wand, right now and change one thing about the crypto industry, what would you change?

Mike: 32:53 I would change this mindset that I sometimes see, where people judge others. And this is not universal, but I do see a significant portion of people who judge others. Either explicitly or just, you can kind of see it in the back of their head by how long they’ve been 100% immersed in the industry. As somebody who has immersed myself fully recently … but been caring about it and an owner for a long time, I think it’s bullshit when somebody says, “hey, you weren’t around when we did X-Y-Z and therefore you don’t understand.” I would shut down, and my response would be, “hey, explain it to me.” Because by the way, my whole mission is that the person who joins in three years has a platform in The Block where nobody is going to treat them like that and scare them off. That’s really the biggest thing. And I would change the lack of focus on design.

And the last thing I’d change is frankly — and I wrote about it this morning in a tweet — is this presale …pre-, pre-, pre-, pre-, presale. Like triple pre, pre, pre, pre, pre sale, and I know Meltem probably talked about it this morning, the shitcoin waterfall. It’s disgusting, it’s a terrible, terrible funding mechanism. I know we’re moving away from it. But a number of very prominent investors have benefited from it. And I just think it sends a bad signal, and I think some of those folks should stay quiet for a while. And stop with their moralizing.

Anthony: 34:51 Let’s fast forward 10 years, uh, you know, you’ve built an incredible company, a bunch of other people have, have continued to build what they’re doing. What do you think is the outcome of all of this talent, and capital that’s flowing into this space? Right. Is it Bitcoin becomes a global reserve currency, and nothing else? Is it Bitcoin plus everything else that’s being built? Like, like where do we end up. So 10 years, I mean it’s hard to pick the date right.

Mike: 35:01 The beauty is when people listen to the podcast, if they listen to it from a year from now, 10 years is still 10 years away. I’m hopeful, it’s a very low probability that Bitcoin becomes, like just from a pure probability perspective, that Bitcoin does become the global reserve currency, and you know, eats the US dollar’s dominance.

Anthony: 35:28 What do you think the probability is right now, not what you believe but just like the sober probability that that happens.

Mike: 35:33 I’m going to go below 5%. That’s currency is like that’s, hey we’re talking hundreds of trillions of dollars worth of value for- for Bitcoin, I may have actually, is there even hundreds of trillions? I may be off by an order of numbers but there’s a lot of value to that.

But becoming a better gold, in my mind it’s so obvious that it’s a near certainty. That if Paul Krugman and I saw each other, we wouldn’t even be able to talk because we literally would be from such a different grounding of ideas.

Anthony: 36:13 But do you think somebody like that actually believes what he’s saying?

Mike: 36:16 I believe Nouriel does not believe what he’s saying, and is a troll. I believe Paul Krugman does believe what he’s saying and he’s just old. And by old I don’t mean it in an ageist way, I mean it old of economic philosophy. And what makes money and what he has seen throughout his life.

Anthony: 36:34 Okay, so, we put uh, less than 5% chance that Bitcoin becomes global reserve-

Mike: 36:40 The global reserve currency Now Jack Dorsey said it’s going to happen in 10 years. Pierre Richard will probably not allow me at any more of his Bitcoin dinners for saying less than 5%. Now the hopeful part of me says one in five chance. And I think over not a 10 year horizon, but a 20, 30 year horizon.

Anthony: 36:58 Okay. And then what outside of Bitcoin? What, what happens to all of this tens of billions of dollars that now have come into the space? You know, thousands of people.

Mike: 37:07 Yeah the good news is it’s not that much money. If you look at it outside of Bitcoin, I expect Bitcoin dominance to actually increase through the end of the year. Literally, as I was taking the subway up here, Chris Burniske said what do you think is going to be one big thing that happens — a milestone to watch in the crypto industry this year? I think Bitcoin dominance, going over 70% is something I’m going to keep an eye out for, and I think very well might happen. Because I think you’re going to see people realize that most of these protocols that have significant value are nowhere close to delivering anything of value.

So that doesn’t mean Bitcoin will skyrocket, I just think you’re going to see… I’m actually hopeful, whether it happens this year or next year, to see every coin not rise and fall the same percentage every day. Outside of Bitcoin, I think you’re going to see a flight to quality. So things like Ethereum, right now is a 35 billion market cap, maybe a little less. That’s not unreasonable compared to Airbnb’s 30 billion. It’s not unreasonable for the ambition and the potential of that platform and the developer activity. Of course, it’s certainly way over it’s skis.

But look, when Stripe was valued at $9 billion, having been somebody who was competing with them, I was like holy shit- that’s an overpayment, and Keith Rabois was dead right about that company being a generational company, and I love the Collison’s, the brothers who run the company. They are incredible entrepreneurs, great people and geniuses. Sometimes things surprise you to the upside that you never could see, because you were thinking of the business model in a different way. And I just couldn’t imagine Stripe turning a simple few lines of code into something that had the margins that it has, just based on my knowledge of Braintree. So when you look at Ethereum, you see that it crashes when one specific app gets a ton of usage on a given day, it’s easy to say hey they’re not going to scale, there’s nothing there, right? And by the way, like my probability bet, I would say there’s more likelihood that it doesn’t, but it’s very reasonable to think that the value of Ethereum, increases significantly. So, my point isn’t about Ethereum, my point is I expect a flight to quality.

And I don’t know if I expect it or I hope for it — I hope NEO, I hope IOTA, I hope TRON, just absolutely evaporate.

Anthony: 39:42 Absolutely. And then, what do you think is the most important company in crypto today?

Mike: 39:47 Yeah, so I’ve long thought about this, and this will rile most of my closest crypto folks in terms of philosophy. I think the most important company in crypto — in the history of crypto — is Coinbase.

They are the first folks who made crypto accessible — who attracted investors and got the backing of folks who the financial industry took seriously. Union Square Ventures and Andreessen Horowitz — they are the first company that made it something where people like me who were intellectually interested in it felt comfortable and safe putting money into this token that was vapor, effectively, at the time, 2013. I don’t believe it’s vapor, I’ve done a lot more studying today.

My brother invested. I can convince other folks to do so. And they stuck with it and they grew. And they’ve evolved. I don’t necessarily agree with everything that their CEO says, and one of their founders has moved on. But the company, the entity itself, folks like Dan Romero who have been there since the beginning and are amazing people.

They take criticism. And have really brought this to the masses. And I am so sympathetic to people who bring important technology to the masses. I think engineers and really extreme religious minded people don’t believe and understand how important that is. So Coinbase is super easy to hate, and is against much of the sort of libertarian philosophy of why some people support Bitcoin, for example. But we wouldn’t be here without them. It’s a company that almost went out of business a couple of years ago and is now a behemoth, and I’m very optimistic about their future. I’m hopeful for their future, I’m rooting for them because I think they’ve done so much for the industry. I think they’re the single most important company in the industry.

Anthony: 41:48 That’s awesome. All right last question for you is: What do you do on a daily or weekly basis that you think has formed much of your opinion in this space?

Mike: 42:00 The number one thing that forms my opinions, that helps me to learn, and that directs and guides me uh, to where I should be paying attention — and I’m very fortunate for this — is Telegram. I’m in three Telegram groups that I value very, very highly. I can’t name them, it’s like you know, once you name them you’re out.

Anthony: 42:28 This is where a real journalist would get you to name them, but I’ll let you off the hook.

Mike: 42:33 I wouldn’t, because you’re in, I think, all of them. You can’t pay attention to everything. It’s overload, but if you pick and choose you’re going to happen upon, and certainly when I was learning and I had more time. Paternity leave I was fortunate enough, but starting my day with Telegram, moving some of those thoughts to Twitter and then engaging has been the most important thing in my learning.

And then broadcasting my ideas on Twitter, and sharing has been what has helped me build our company, The Block. The two folks who are already accepted — Mark Rogowsky’s my co-founder and editor in chief — and I can’t name the person who’s joining as our head of research in a week and a half, both “met” me on Twitter.

Anthony: 43:22 Amazing.

Mike: 43:23 And I’m speaking to two more people over the next couple of days and have had multiple conversations with them, and I’m going to close them, I hope they’re listening, I hope this gets published really soon. They are also folks that I’ve met through Twitter in some way.

Anthony: 43:37 Twitter is the new LinkedIn.

Mike: 43:39 It is, LinkedIn is just a total shit show, it’s a wonderful, wonderful broadcast medium. It’s a terrible, terrible business connected medium (laughs).

Anthony: 44:34 What one question do you have for me?

Mike: 44:37 Okay. What is one important thing that you have strongly asserted over the past six months about the tokenization of securities that you believed at the time and that you strongly disagree with or disagree with today?

Anthony: 44:57 I think that there are a number of things that I strongly believed, and I can’t say that I strongly disagree with them, but I am much less excited about. How I arrive at being less excited about or thinking that they’re less important, probably a mixture of the two. Part of it is education, especially on the technical side of, let’s go deeper into the tech and understand exactly how this is going to work. And then two is having more data points from a timeline perspective. So just watching some of this play out.

There’s two things. One is the idea that tokenization is going to occur because of the technology, I’m probably less excited about. The idea that instantaneous settlement, 24 hour trading, fractional ownership, I think these are all features that are important and interesting, but I don’t think that’s actually why people are going to use tokenized securities or interact with them.

I’m a much bigger believer that it’s a user behavior. Where people interface into a digital world, it’s going to be a digital wallet. In order for them to have that digital wallet act like a bank and brokerage account, they can hold stocks, bonds, currencies, commodities. And in order for anybody with an asset to allow that person to hold those assets, they have to digitize it. So it’s more of the digital aspect and, and the support of a digital wallet than it is all the transactions, etc. So I think that’s one thing I’ve kind of walked back into a different thesis around.

Mike: 46:43 I love that, like it actually, I remember some of the rebuttals to some of the things you were saying four or five months ago. And that seems eminently reasonable as a rebuttal. Because we all know user experience, if it’s in the place where you do the other things, than you know, hey you’ll do it, if you can make it as easy as the other things are. And valuable is the other thing.

Anthony: 47:03 Yeah, and I think the second thing that I would argue on is, tokenized securities specifically is the idea that people are going to want to buy this for liquidity, etc. I think that I’m very much in the camp of, at the end of the day, if you’re going to buy tokenized equity, you’re going to evaluate it as equity. If you’re going to buy tokenized real estate, you’re going to evaluate it as real estate, right? If the asset is good, people will want it. And therefore it will get a premium in price. If the asset is bad, and it is not going to appreciate value, then people are not going to want it, it’s going to depreciate, or it’s going to decrease in price. And so this idea that if I have capital that I want to invest, I already understand the asset classes, right. Stocks, bonds, currencies, commodities, the technology in between me and that asset is probably less important to me, right. Now, tokenization for a whole host of reasons I think is actually going to be the winner, in terms of what people are going to use, but I don’t think the mass consumer, mass investor is as interested in “Oh, I bought the tokenized version of the equity versus the non tokenized.”

They just want to buy the equity right? And so the egregious example is nobody runs around and says, “Uh, I bought electronic shares of Apple, settle in DDTC.” Instead they just say I bought shares of Apple. Same thing whether it’s tokenized or not.

Mike: 48:30 What’s your biggest worry or do you worry that we maybe end up in an analogous situation to the Blythe Masters CDO situation of 2008, 2009?

Anthony: 48:42 I think that tokenization is not going to be the cause, I think that people will do it right. But I also think that’s going to happen with Bitcoin, and it happens with a lot of financial products. I haven’t fully formulated this yet, but if you think about engineers, really good engineers that understand this kind of decentralized distributed world, they have a super power that Wall Street has never had available to them. When you take those people who have a super power and allow them to play in a financial system that they probably don’t have a deep understanding or experience in, there’s a lot of good that comes out of it, because they don’t know which rules are not supposed to break, right? The unwritten rules kind of disappear. But that also means they haven’t learned the lesson from past bubbles and problems. And so I think what we’re going to see is, all of the elements of Wall Street are going to get exaggerated. The good and the bad. And so when that happens you bring these people with the super power into that financial system, just buckle up. Because you’re going to get both up and down.

Mike: 49:58 And I guess my hope would be that because we have these sort of religious people, who are feeling like “hey this is our ecosystem”, that there will be a level of checks and balances and transparency. But it’s going to be fun to watch. We’ll see how it evolves.

Anthony: 50:11 Absolutely, that is the hope. Look man, I appreciate you coming on. Obviously, best of luck with what you’re doing, I think that you’re definitely off to the races here, and we’ll talk soon.

Mike: 50:20 Likewise, thank you so much buddy.

Mike Dudas

Written by

Technology builder: blockchain, cryptoassets, FinTech, Mobile Commerce

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