AI Agents, Tokenization, and Ethereum’s Next Wave | Raoul Pal the Journey Man

0:00 Ethereum, proof of stake, the merge.

0:02 And the more I saw this, I was like,

0:03 this is the best product market fit for upgrading Wall Street.

0:06 I found it hilarious what a year and a half,

0:08 two years ago, people like ETH is dead.

0:09 The entire banking system will go to ETH.

0:11 We're trying to find the right end, build the right tech,

0:14 get people so[ __] excited about this thing

0:16 and how much money they're going to save

0:18 or how much money they're going to make that they can't help but jump in.

0:20 Wall Street's all based on incentives.

0:22 So, as long as we can get the incentive in the right place, anyone will move.

0:26 And the good part is blockchains are incentive mechanisms.

0:28 something like $110 trillion dollars of the $200 trillion

0:33 of investable assets in the world are managed by financial institutions.

0:36 It's like I think we got to have to crack

0:38 that nut if we're going to make the impact in the world.

0:40 However big Ethereum is because there is

0:43 the token that exists and it's fractionalizable.

0:46 Every single person on Earth can participate and that's the big difference.

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1:37 Hi, I'm Ral Pal and welcome to my show, The Journeyman,

1:40 where we travel to that nexus of understanding

1:43 between macro crypto and the exponential age of technology.

1:46 Now, I've been talking about the institutional

1:51 adoption of blockchain for a very long time.

1:54 In fact, I think I wrote my first first ever piece on it

1:57 in 2014 and said that Wall Street is going to use crypto rails.

2:02 It took a long time to get there.

2:04 First, they adopted the ETFs.

2:06 Now, the regulation changes and now it looks like they're coming in size.

2:11 They want to trade equities, fixed income, futures,

2:15 everything will end up getting traded on chain.

2:18 But there's many more ways with which

2:20 the financial institutions can interact with blockchain technology.

2:25 And at the heart of all of this has been

2:27 a thesis that I've held for a long time as well,

2:29 which is that Ethereum,

2:31 which has the most proven Lindy effects out of all the smart contract platforms,

2:34 is likely to be at the epicenter of it.

2:37 And I maintain that today.

2:38 Yes, many other chains will participate,

2:41 but a lot of it is about do you

2:43 get fired for using Ethereum and the answer is no.

2:46 It has more developers, more depth, more liquidity,

2:50 um more proven Lindy effects and so generally speaking,

2:55 that's where we should see a lot of activity coming.

2:57 So, it was important to me to dig into actually what's happening.

3:00 I've been Ethereum bull um ever since I

3:02 discovered Ethereum um and have made a lot

3:05 of money in that trade and I still think it's got a lot to go.

3:08 So I think no better to talk to than Vivec and Danny from Etherealize.

3:13 These guys are building out the institutional

3:15 rails for Ethereum itself and I think

3:18 they're going to give us some really good insights on where this is all going.

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3:56 Join me Ral Pal as I go on a journey of discovery through the macro,

4:01 crypto, and exponential age landscapes.

4:04 In the journeyman, I talk to the smartest people

4:07 in the world so we can all become smarter together.

4:15 VC Danny, great to see you on Real Vision.

4:17 Thanks for having us and good to see you.

4:20 Yeah, should be fun.

4:21 This is going to be a conversation I've been

4:22 want actually wanting to have for a while about

4:24 um what you guys are up to because it's

4:26 kind of squarely where I think the world is going.

4:28 So I think as ever let's start with your backgrounds because

4:31 you're both wildly different backgrounds which is half the fun of this.

4:34 So V do you want to do you want to start because you're more my background.

4:37 So I'm more of your background.

4:39 I feel like we've had the same vision for a long

4:41 time and I think it's all going to happen right now.

4:44 And so so I was on Wall Street for 12 years.

4:46 Uh I was on the sell side was not a Goldman but was everywhere else.

4:50 Morgan Stanley, UBS, Dosha Bank, and Numera.

4:53 And I was a credit trader.

4:54 So I traded all things from hyo bonds

4:56 to distress bonds to credit default swaps to loans.

4:59 And and I loved it.

5:01 I mean, frankly, I absolutely love Wall Street.

5:03 I love all the people.

5:03 I love the motivation.

5:04 I love the culture.

5:05 Really?

5:05 What's wrong with you?

5:07 I did not I did not love the technology, believe it or not.

5:11 The only thing was there wasn't enough of a sci-fi future.

5:14 There was watch a lot of your stuff there.

5:16 I love the exponential mindset and I love the positive mindset.

5:18 there wasn't an exponential growth era for Wall Street.

5:21 So I so I left um which is hard

5:24 to do because most people have pretty good careers there.

5:26 But I left after 12 years.

5:27 Um landed in Austin, Texas.

5:30 Immediately got introduced to this thing called Ethereum.

5:33 Met a guy at the Ethereum Foundation who was working for this.

5:35 What year was this?

5:36 This was 2020.

5:38 So pretty late.

5:39 I'm not an OG in the blockchain space.

5:40 Um uh I come from the Wall Street background.

5:43 in Austin, I met this guy at the Ethereum

5:45 Foundation who was working for this guy named Danny Ryan,

5:48 who is a mythical person behind Ethereum.

5:51 And uh he started teaching me everything about uh Ethereum,

5:53 proof of stake, the merge.

5:55 And the more I saw this, I was like,

5:57 this is the best product market fit for upgrading Wall Street.

6:00 Like I know exactly what's wrong

6:01 with Wall Street operations and settlement and trading,

6:03 and how to it needs technology badly.

6:06 And so that's always been product market fit to me.

6:08 So I come with a pretty pragmatic view.

6:10 And the deeper I got in, the more I was like,

6:12 Ethereum is not just the tokenization platform, it's the everything platform.

6:15 And ETH is one of the greatest assets I've ever seen.

6:18 Um, looking at from a fixed income lens,

6:21 from a Wall Street lens, from a technology lens.

6:23 So, yeah, I've been building ever since.

6:24 And then we'll get to Etherealiz,

6:26 but this is all crystallizing a year and a half with um with Etherealiz

6:29 being sort of the big bang that we want to bring for Ethereum.

6:32 So, Danny, do you want to give your wildly different story?

6:36 Um, yeah.

6:36 I lived in New Orleans.

6:38 Uh, I spent a long time or a few years after college trying to not have a job.

6:43 So, did freelance work, did a bunch of random stuff.

6:47 A friend of mine sent me an article in 2016 about the Dow.

6:51 It was a New York Times article

6:52 and I think they were saying largest crowdfund ever.

6:55 And I had heard about Bitcoin, hadn't had the aha moment,

6:58 read about it, and was just like,

7:00 "Oh[ __] this is crazy." like you can I you know like had

7:05 that moment that I think a lot of us have had um sent

7:09 my first mainet transaction at the time sat next to a friend and said

7:13 as I funded the DAO this is not going to end well um it

7:17 did not but crash course and blockchain learned you know not only about

7:22 how you can do things on top of them but how they're architected beginning

7:25 of 2017 said I'll give myself a year to make this my work I

7:29 don't know what that meant uh I

7:31 started contributing to open source first repositories.

7:34 I started being on random calls with Vitalic and like literally my heroes.

7:39 Uh the end of 2017 got hired to the EF

7:42 ended up running their research team then largely the research group.

7:46 Then the whole kind of technical infrastructure

7:48 at the EF did a lot of the research specification

7:51 writing and coordination for major protocol upgrades during many

7:55 many years um seven seven eight years over there.

7:58 Uh my baby was was the merge.

8:01 There's many many people's debut,

8:02 but it's what I worked on um day in day out for a very long time.

8:06 Um came up for air in 2024.

8:09 Well, actually got served by the SEC in 2024.

8:14 Nice.

8:13 The right of passage.

8:16 Uh and then decided to to part ways at the EF

8:19 um to see what else was going on in the world.

8:21 Saw the world rapidly change from being served by the SEC

8:24 to uh the SEC welcoming people in to have conversations.

8:28 got linked up with VC and and saw,

8:31 you know, the thing that that I've been passionate about,

8:33 the thing that I was confident could and and would

8:36 change the world that there was actually a major opportunity

8:38 at this like point in time to make sure that uh

8:42 we start using it in substantial ways and and world changing ways.

8:46 So here we are.

8:47 And so what was the idea behind Etherealize?

8:49 Who's whose idea was that?

8:50 Was that you Danny or you VC?

8:52 Who who kind of got together with this?

8:54 For a long time, I thought Ethereum had clear product market fit

8:57 and the world didn't agree with me after I left Wall Street.

9:00 So, so I mean talking about blockchain and crypto to banks as as you

9:05 know R um for during the Gendler era was was a non-starter.

9:09 And so from 2020 to 2024 when we actually started Etherealize we have

9:13 we have big networks across Wall Street across the buy side and sell

9:16 side and I thought this was the technology that was going to take

9:18 off and everyone agreed but no one wanted to actually do anything.

9:22 And so when we reached that inflection point in 2024 when the when

9:25 the regulatory regime changed um Ethereum was scaled it was ready uh and there

9:32 was the opportunity was right then there was a vacuum where even though

9:36 again the stars were aligned for real adoption there was no institutional arm

9:40 for the Ethereum ecosystem and the problem is there's a lot of other

9:43 blockchains that are pretty centralized that have

9:45 foundations that run everything and so you're

9:47 up against companies um that are seizing the moment for for for adoption

9:52 and Ethereum which is this beautifully decentralized

9:54 internet like network had nobody and so

9:56 yeah we stepped up we we got the opportunity we connected with Vitalic

9:59 got a got a small grant from him and some some sign off

10:02 from the EF to say let's go build an independent organization to go

10:06 out to Wall Street and educate Wall Street about why Ethereum is is

10:09 the best most credibly neutral spot for tokenizing the world's assets and there

10:15 was a there was a blank opportunity so we jumped on it and it's

10:18 been it's been completely inspiring then

10:20 because There's there was so much demand

10:22 for people to be able to talk to Ethereum people and learn about Ethereum.

10:25 And so when we stepped in, every bank, every asset manager,

10:28 everyone wanted to learn and do things in digital assets.

10:31 And so I mean, I'm just I'm inspired.

10:33 The best people from Wall Street joined us.

10:35 People like Danny joined us.

10:36 The greatest engineers in the Ethereum ecosystem and the ZK ecosystem joined us.

10:41 and bestialize.

10:43 And so I jumped in soon after kind of Bivik started

10:46 leading the charge doing broadly like BD for Ethereum on Wall Street.

10:51 Um and in those early conversations it became very

10:55 obvious that not only do they need to be educated,

10:58 not only do we need to make sure you know decision,

11:02 let's face it, banks are not going to take

11:04 some bearded bloke with long hair and take him seriously.

11:06 That's the issue, right?

11:08 No, I think I they seem to like talking to me.

11:15 They like to get you in the door.

11:16 It comes with balance each other out.

11:19 But but but it turns out there's a lot of stuff to build, right?

11:22 It's like you have the backbone, you have the decentralized consensus,

11:26 you have the security, you have the uptime,

11:27 you have the tools, the smart contracts, the whatever,

11:31 but like piecing it all together

11:32 in ways that substantially upgrade these markets.

11:34 There's work to do, right?

11:35 So that's that's what we've you know we're we're a champion for Ethereum

11:38 in that space but we're also spending a ton of time you know building

11:41 the next generation of of infrastructure for Wall Street because I mean when I

11:46 I was like class of 2012 2013 in Bitcoin and I think I wrote

11:52 a piece I checked back I think it was in 2014 I wrote

11:55 a piece about how everything had to be

11:58 tokenized all equities all credit markets all

12:01 derivatives all the whole lot because it was the only way of dealing

12:04 with this mass massive indebted system and who

12:06 owns what at the epicenter of it all.

12:09 I didn't even know about Ethereum then and eventually I got introduced to it.

12:12 Um and obviously followed that journey.

12:15 I was a bit late to invest in it but I then saw

12:17 a lot of the you know I'm a huge collector of digital art NFTTS

12:21 and it you know people don't realize that what that proven I mean it's

12:25 still the most expensive valuable piece of block

12:27 space ever sold is beles every day.

12:31 Exactly.

12:31 Yep.

12:32 um you know so it's proven to be the premier s of value

12:36 digital art has not taken off anywhere else in the same way because it

12:40 doesn't have the same effects it's a real signal I often think crypto

12:43 is amazing at testing stuff and what you do is step back and you

12:47 realize the signal from the noise like I think memecoins are capital formation

12:51 mechanisms and also you know tokenized attention

12:54 but the the instant capital formation is what memecoins have proven and crypto

12:58 loves taking something breaking it to pieces

13:00 by hypers specul calcation and then really what you get is is the right answer.

13:05 You know, obviously Ethereum then had DeFi summer which is still kind

13:10 of not as big as it's as as where it could be.

13:13 And then the rise of and we'll talk about this later,

13:16 the kind of layer 2 and some ability to scale faster.

13:20 And it became obvious to me and it was I found it hilarious

13:22 what a year and a half two years ago people like ETH is dead.

13:25 I'm like no no the entire banking system will go to ETH.

13:29 that that doesn't mean you know it's a monochain world

13:31 but it's like I know how banks work right every the moment

13:36 I left the financial system I've used nothing but Apple

13:39 but when you're in a bank every single computer is Microsoft

13:43 um you know they are you know because it's really

13:46 for them about Lindy effects um you know things that survive things

13:51 that you don't get fired for things that are proven um

13:54 because nobody wants to lose their jobs over a new technology

13:57 I had to I had to learn this I I had no

13:59 idea like we've worked for a decade on making sure Ethereum is resilient,

14:03 has multiclient, is distributed across the world, has zero like 100% uptime.

14:08 And I actually had no idea until I talked to the banks.

14:11 I was like, "Oh, I found a customer of decentralization.

14:13 They just don't know it." You know, they care about uptime.

14:15 They care about resilience.

14:16 They care about the thing that's been around for the longest.

14:18 They care about the thing that no one can turn off.

14:20 Um, you just have to translate the the language to them.

14:23 And yeah, the no one gets fired for picking Microsoft

14:25 is very it's very real and it's in Ethereum's favor.

14:28 Yeah, that that's right.

14:29 And and also just the fact that there's so many developers,

14:32 you know, because if not, it's hard.

14:35 So it kind of that's that's the other part too coming from the banks.

14:39 It's we were on the trading floors.

14:41 We saw trades settle.

14:42 We know that there are pain points and no one banks aren't

14:46 going to be first movers in adopting the most cutting edge technology.

14:49 They want the most reliable things.

14:51 So I'm not even the the reason I think you're and our my background

14:55 are similar is we're more pragmatic like

14:58 obviously I think ETH should most valuable asset

15:01 in the world obviously I think Ethereum should be the most um most used

15:04 blockchain but I'm also pragmatic too what

15:06 is the easiest pitch and the easiest sale

15:08 to everyone across Wall Street and it's it's the safest most secure chain that's

15:12 never had downtime and so I mean if Wall Street could build build on Bitcoin

15:15 they would but um Bitcoin doesn't have

15:17 smart contracts so it's okay what's the other

15:19 option um it's Ethereum And so every proof of concept has been on Ethereum.

15:24 Every major tokenized asset started on Ethereum.

15:26 It's like Laza said, the Lindy effects are more important.

15:28 And Ethereum is also getting better and faster and cheaper and scaling.

15:31 So you can kind of have your cake and eat it too

15:33 of having the perfect system and so we're here to amplify that.

15:36 So Danny, talk to me about the faster,

15:39 more efficient, cheaper, you know, the the scaling of Ethereum.

15:42 It's obviously been the big debate of everybody and, you know,

15:45 did we[ __] it up with layer twos or, you know,

15:47 have we just created just excess capacity for the my view

15:50 of lay twos has been always that we

15:52 just created excess capacity versus current usage and it

15:56 will acrue to the base chain over time anyway,

16:00 but there's now a move towards changing, you know, the theorem itself.

16:10 Yeah.

16:08 So like the layer twos will always

16:12 have advantages or have reasons to exist, right?

16:15 Like layer 2s will functionally always be cheaper than layer 1.

16:18 Layer twos will always be more extensively kind of customizable than layer 1.

16:24 And layer twos by virtue of you being able to have smart contracts on layer 1,

16:30 they just can exist period.

16:32 You know, it's like you can't really put the cat back in the bag.

16:34 And so, you know, I I think it plays to to Ethereum's favor

16:38 to have a a massive optionality

16:41 in this layer that inherits the security of Ethereum,

16:44 enhances the networks of network effects of Ethereum.

16:47 Um, you know, and we're going to continue

16:49 to work on how these things communicate,

16:52 how they resolve state differences, all all sorts of stuff like that.

16:55 You know, asynchron, synchrony is hard.

16:57 Um, but with advanced cryptographic techniques,

17:00 I think we're going to have some really cool stuff come out there.

17:02 Um, but one of the reasons many years ago that Ethereum went all in on that was

17:07 it was the only way to scale

17:10 out Ethereum without sacrificing decentralization of L1.

17:14 And we learn a ton.

17:15 We figure out how to do these constructions.

17:17 We figure out how not to do these constructions.

17:19 Um, and at the same time

17:21 have built out massively advanced cryptographic techniques,

17:26 not just on in academic papers,

17:28 but in production grade cryptographic techniques.

17:31 I think we poured literally billions

17:32 of dollars into applied zero knowledge proofs,

17:35 applied ZK, and now we have a lot of more tools at our disposal.

17:39 So we can look back at the layer 1 and say,

17:42 well, what if we integrate this new technique into layer 1?

17:47 Can we get scale more scale out of layer 1 without sacrificing decentralization?

17:52 And the answer 5 years ago was no.

17:54 And the answer now is yes.

17:55 So great, let's use advanced ZK and advanced cryptographic

17:59 techniques to get more scale out of layer 1.

18:01 Let's use scalable data availability and extensible smart

18:05 contracts to get scale out of layer 2.

18:07 And let's have Ethereum be everything.

18:12 I think the premise of this was like Vitalic had a post pretty much I think

18:15 was misrepres misinterpreted by many and and I

18:18 think the post boiled down to two things.

18:20 One, do better on the layer 2.

18:23 Layer twos can be more secure than they are

18:25 and they have to flip the switch and become

18:27 more secure and two you know like layer one

18:30 will have scale so have a reason to exist other

18:33 than just scale for layer 2 and maybe it's

18:35 privacy maybe it's global distribution because you're Coinbase maybe

18:39 it's who knows there's all sorts of reasons you

18:41 might have a customal customizable uh environment anchored into Ethereum

18:47 people underestimate scalability because they have no understanding

18:50 of the scale of the financial system They have no understanding

18:54 of the sheer amount of transactions that happen in the speed

18:58 that it happens and the value that it transacts.

19:02 People just kind of think, oh, tokenized equities.

19:04 Yeah.

19:05 They have no idea of what is required and how much

19:09 settled four quadrillion dollars of trades last year.

19:13 That's right.

19:14 You've got the DTCC, then you've got Euro Clear, you've got, you know,

19:18 I mean, there's endless numbers of people

19:20 don't even talk about the derivative markets.

19:22 The OTC derivative markets are another couple of quadrillion dollars.

19:25 And then you got the FX markets.

19:27 The FX markets themselves do I know five trillion a day.

19:31 I mean, these numbers are stupid, right?

19:33 Yeah.

19:34 And it's it's just naive for people to think

19:37 that all of global finance can live in one layer,

19:40 but it can live in one multi-layered ecosystem that has interoperability,

19:45 that has ZK, that's future proof, and that's what Ethereum is.

19:48 And even zooming out from that, I mean,

19:50 a we've we're such a at such a early part of the adoption curve.

19:54 That's why, yeah, people that say ETH want to acrew value

19:57 is just they're not seeing how big the market possibly can get.

20:00 And you obviously know that.

20:02 But the other thing too is it's something that brought me to become

20:05 a bit of a layer 2 maximalist is is from the bank's perspective,

20:08 from the asset manager perspective, people want to own their own businesses.

20:11 People want to maximize profit.

20:13 I always come back to and my take

20:15 is L2s are the best business model in blockchain.

20:18 And it's not just me saying that.

20:19 Um Robin Hood said that.

20:20 Robin Hood said, "Wait a second.

20:22 We can get the security of Ethereum for virtually nothing.

20:25 Um you pay almost nothing.

20:26 We can keep all our operating margins to ourselves and we get attached

20:29 to the liquidity of the largest ecosystem out

20:32 there with the most amount of stable coins, the most amount of tokenized assets,

20:34 and we get to have extremely high margins

20:37 and have our customers in our layer two.

20:39 That's that's the best pitch out there.

20:40 I mean instead of building your own blockchain,

20:42 just build an L2 and hook it to Ethereum and you kind of have Yeah.

20:45 Although it's interesting to see that the market seems

20:48 to be moving towards um non publicly traded layer twos,

20:54 you know, the base idea because they haven't acred value themselves.

20:58 They acrue value to the overall Ethereum ecosystem,

21:02 but they failed to hold acrude value.

21:05 But you can see the value to Coinbase

21:07 very clearly and it's it's slightly different I think.

21:12 Well, you're talking about sequencer fees are high.

21:14 So Coinbase has a they make money from sequencer fees for bass and so

21:17 that's that's one revenue driver and that's and from a tiny customer base.

21:21 Imagine when you have the world on on on layer 2 is transacting.

21:24 Imagine when you have I consumer I'm sure we'll talk about this later

21:27 biggest consumer of block lock block lock space going to be AI agents.

21:30 when you have them transacting and doing

21:32 a bunch of micro payments and transactions,

21:34 that's that's going to acrue a lot of thieves to the people running the layer 2.

21:38 So there's

21:39 I do I do think that like the value

21:41 proposition to Coinbase has probably been this more vertical integration.

21:45 Like we we have distribution,

21:47 we have applications, and we run the infrastructure.

21:50 And like the infrastructure I think is is is doing well

21:52 the last time I looked in terms of the fees and revenues.

21:55 But like it really makes sense because they're all in on creating

21:58 an application or an ecosystem and treating it like a product.

22:02 Whereas I think some of the layer twos that a lot

22:04 of the layers twos that we saw in the Ethereum ecosystem over the past

22:07 5 years were just like here's a scalable zone do something with it

22:11 right and maybe we'll have some token incentives go do something with it.

22:13 Whereas, you know, if you treat them much

22:15 more like these are places to create businesses,

22:19 to create opportunity, you know, using this infrastructure,

22:21 then I think you you end up with things that look like Coinbase's base,

22:24 which seem to work well.

22:27 Yeah.

22:27 Because not everything has to be a token in terms of a tradable token.

22:31 It doesn't need to acrue value that way

22:33 because if you vertically integrate it within your business,

22:36 it's part of your business infrastructure of which

22:38 you can generate unique applications and and other things.

22:42 And a lot of people miss that point.

22:44 So I think it's very clever, very interesting experiment that's being run.

22:47 But my mind is like that feels like it's going to be the bigger answer,

22:51 not the entire answer because there's room for everything in all of this.

22:57 What do um soc I mean Goldman's was there since 2015.

23:07 I mean, everyone's been there but quietly or asset managers,

23:12 where is everybody right now?

23:13 What is and where is the where's the push back coming from when you say,

23:19 you know, how can we help you with this?

23:21 Where's the push back?

23:24 So, it's been five years of of pitching

23:26 and speaking to banks and asset managers.

23:28 Honestly, I view blockchain I view Ethereum as the most positive sum pitch ever.

23:33 So, I I love pitching it because there's something for everybody.

23:35 There's it's increase revenue, cut cost.

23:38 It's not a difficult sell.

23:39 Yeah, it's it it really shouldn't be a difficult

23:41 sell or so I thought for four years.

23:43 But the reason um put Etherealize together is

23:47 because if all the tailwinds um finally lined up.

23:51 So every every objection it got for the first four years turned into a tailwind.

23:55 And so there isn't that much of a push back.

23:57 Like I don't want to sell some space age brand new technology.

24:01 Like you said, the banks have been in blockchain since 2015.

24:04 They know this is coming.

24:05 They know that blockchains are of the future.

24:07 They're just constrained by regulatory parameters.

24:10 So they couldn't use public chain.

24:12 So everyone had a Ethereum clone running in the background.

24:14 I mean JP Morgan had an Ethereum clone running um Hyperledger Best.

24:18 So again, this isn't new.

24:20 The real unlock and saw this at the early

24:22 stage of Etherealiz was no one could touch public chains.

24:25 And then Genius happened and so that's like

24:27 the that's the shout around the world for Ethereum.

24:29 Once genius happened, public chains are now enshrined in law.

24:32 Stable coins are now enshrined in law.

24:34 the biggest product market initial product market fit for blockchains are

24:37 now in in law when we got called in front of Congress

24:40 to testify about the Clarity Act and we're like wait there's actually

24:42 more legislation coming that's when the tone started to shift and it

24:46 went from banks and asset managers understanding this is a good

24:49 tech but not being able to adopt it to just complete FOMO

24:52 so I think we are in that FOMO stage of we

24:55 need to just like banks had to all adopt an AI strategy

24:59 ASAP they now have to adopt the blockchain strategy

25:01 and the the gaps that remain are can they do it fast enough

25:05 and can they build the right architecture and infrastructure and that's why

25:08 we stepped in like like Danny said we identified there's a lot

25:11 to build and there's a lot of infrastructure layers from tokenization

25:14 to privacy to customization all on Ethereum so we said okay let's

25:18 build it so we can help accelerate this but there's no push

25:21 back anymore it's just how fast can we go and how many

25:24 yeah I mean I'll I'll come on to the areas that I

25:26 know are sticking points for these guys but stable coins is

25:29 obviously the pointy end of the stick is the easy way

25:32 in now right because everyone everyone realizes that they have to do this.

25:35 But importantly, what the Genius Act did,

25:37 so previously it was like public blockchains felt

25:40 illegal or felt like they might become illegal.

25:43 What the Genius Act did is said you can do a legal thing.

25:46 We we made this legal thing with stable coins.

25:48 You can do it on on public chains and and so thus

25:52 banks and and financial institutions, they're like, well,

25:54 we there's all sorts of legal things that we do and we can do

25:57 it on this infrastructure because that infrastructure

25:59 implicitly is legal because of Genius Act.

26:01 let's do legal things on that.

26:03 You know, it doesn't that doesn't mean you can do wild west DeFi with all

26:07 of your classic assets and we're going to need to see SEC regulation changes.

26:11 We're going to need to see laws

26:12 continue to evolve to like handle this infrastructure,

26:15 but I can do I can take the legal world of things

26:18 that I can do and I can do it in a public chain now.

26:20 And so that was that was the big like opening for them.

26:23 And yes, stable coins are an obvious like place that some of them are playing

26:26 in, but largely I think what they're really interested

26:29 in is like how do we upgrade our processes?

26:32 How do we upgrade back office operations?

26:34 How do we encode the rules of assets on chain

26:37 and not have to do all sorts of manual reconciliation?

26:40 But there in there in lies the problem because

26:42 the banks all operate in small conglomerates around certain things, right?

26:47 Yeah.

26:48 And so you need to get everybody to agree to change the standard.

26:51 There is the hard part.

26:54 Yeah.

26:54 That's because they're all stuck on software

26:56 that was built 20 years ago with a particular But they all talk to each other.

27:01 Yeah.

27:01 Yeah.

27:01 And and the it's a it's a the coordination problem is harder than the technical.

27:06 Yeah, I agree.

27:08 But that's I think we're going to solve a coordination problem.

27:11 I think I think that there is enough industry-wide push

27:14 and also so half our team is seasoned Wall Street

27:18 veterans saying that okay we actually can get to a point

27:20 where again it's it's not a difficult cell anymore.

27:24 It's more saying that we've had this era where you've had a lot

27:27 of different internets and everyone ran their own

27:30 internet and everyone saw how that went.

27:32 But there needs to be a moment where

27:33 you plug into the public internet with your assets

27:36 to actually unlock all the operational benefits and people

27:39 get that and they were constrained from a regulatory perspective.

27:42 But I do think it's it's the moment to bring a lot of the industry

27:45 together and say let's connect to that public

27:47 internet and Ethereum is that public internet.

27:49 Yeah.

27:49 that most Wall Street banks are dicks and there's so much ego.

27:55 There's so much issue with

27:57 JP Morgan on Wall Street.

27:59 I can't I I Sorry.

28:01 It's staggering.

28:02 It's staggering.

28:05 I'm used to it.

28:05 You're used to it.

28:06 It's fine.

28:08 Yeah.

28:09 But but it just makes the coordination

28:10 problem which should be simple actually quite hard.

28:13 It's really hard to go, "Come on, guys.

28:15 JP Morgan Goldman, get together with this." They're like, "Well, no,

28:19 we think we're smarter and we want to do it this way." Because I've seen

28:22 it a thousand times because Wall Street's got

28:25 this coordination problem always in everything it does.

28:28 You know, how do you settle derivatives?

28:29 How do you do this?

28:30 It's always been the same problem.

28:31 And it's really hard.

28:33 You know, the amount of when I was at Goldman,

28:35 the amount of times you saw these kind of industry

28:38 groups trying to get together to solve a particular problem,

28:40 I would suggest 80% of them failed.

28:44 Well, that's where that's where the L2 use case comes in.

28:46 And it's how do we give someone their own customization,

28:50 their own business upside um especially as as ZK uh infiltrates

28:55 the entire not just blockchain but AI stack journey is it

28:58 just that it's the most exponential technology that's slept on I

29:01 think but as that happens every firm can run their own L2.

29:05 You can have groups of people running their own L2s.

29:07 They can all talk to each other.

29:08 They can all connect to L1 if you want that sort of security.

29:10 Um L2s kind of let you have your kick and eat it too.

29:14 the coordination problem becomes a little bit more uh palatable when

29:18 you have this Ethereum architecture where you can have different layers.

29:21 But but you're right, it's the Microsoft

29:22 I mean we have to find solution.

29:25 We have to find the right domino and we're we're close but I I think if

29:31 once one market upgrades, you know,

29:33 it's going to be like when commodities went digital with with ICE in the 90s.

29:37 It's just like there's no way everyone else is

29:39 going to stay in the in in the pit.

29:41 Um, and so, you know, that that's our job.

29:44 We're we're trying to find the we're trying

29:45 to find the right in, build the right tech,

29:48 get people so[ __] excited about this thing,

29:51 um, and how much money they're going to save or how much

29:53 money they're going to make that they can't help but jump in.

29:55 And then I think the rest of the markets are going to fall.

29:57 Yeah.

29:58 But I mean, generally generally the state

30:01 of the universe is always goes towards more intelligence.

30:06 So you're you're kind of for me how I think about the world

30:08 is the the universe solves for units of intelligence per unit of energy, right?

30:14 So what is always happening is you're always solving

30:17 efficiency at scale and it always flows to efficiency.

30:21 So faster, better, cheaper is the way of the world.

30:24 It always has been and always will be as long

30:27 as you're not having local maximas a lot of the time.

30:32 Yeah, you do.

30:33 But eventually it it folds.

30:35 You know the coordination problem solves itself because it has to because if

30:38 there's a group of people who coordinate

30:40 and they have increased profitability for example everyone else has to follow

30:44 then they have to follow suit.

30:46 So it it does happen.

30:47 It takes time and then you've got the other

30:49 problem is you've got these um very large moes in the middle of all of this like

30:55 DTCC like NASDAQ like you know name them all.

30:59 There's hundreds of them and they're all basically monopolies or duopolies

31:04 for a given market when we're thinking about you know how

31:06 do you upgrade that market from first principles you know it's first

31:09 it's like how does the market work and the second question

31:10 is whose vested interest is it for this market to not change

31:15 and those answers are large and profound almost every market you look at

31:22 Wall Street's all based on incentives so as long

31:24 as we can get the incentives in the right place anyone

31:28 will move and the Good part is blockchains are incentive

31:30 mechanisms as well as and coordination mechanisms as well as technology.

31:34 And so I mean you're seeing it the the DTC

31:36 is adopting they understand they have to tokenize their stocks.

31:39 So they're adopting blockchain.

31:41 NASDAQ is plugging into blockchain.

31:42 So all everyone's moving this direction and the bet

31:46 we're making is the only place that you have all

31:49 these large ego players the only place you can have

31:52 all the large ego players coordinate is a neutral playing ground.

31:55 And so that that's where Ethereum comes in.

31:57 It's it's it's no one wants to use anyone else's platform.

32:00 I think you've said this.

32:01 I think Jake and Morgan doesn't want to use Golden's

32:03 platform and and someone doesn't want to use DTC's platform,

32:05 but okay, the world lives on the internet.

32:08 What's the most neutral platform that's sort of the most accessible to everyone?

32:12 That's Ethereum.

32:12 And so that's why it's it's funny that that could actually

32:15 and as as you guys both said the layer 2 actually play into favor

32:18 of this because it it get gives them somewhat a feeling of control

32:24 because they can spin up their own chain

32:26 but it's within the ecosystem using the security of Ethereum.

32:29 It it gets them a lot closer to getting across the line.

32:32 Sure.

32:33 I mean and then it's getting more and more elegant to pitch.

32:35 I mean it's getting easier and easier and it's just it's getting momentum.

32:38 So I absolutely I agree.

32:40 we might be able to use some crypto native ways.

32:43 Here's a here's a layer 2 infrastructure for a new market.

32:46 The the more you use this this infrastructure for real

32:50 use cases over the next x period of time, the more you own the infrastructure,

32:53 you know, and you just design mechanism design for incentives

32:55 that that's not going to just work in a vacuum.

32:58 But that, you know, there there are cryptonative ways

33:01 to think about solving some of these coordination problems.

33:04 And also people don't people have forgotten you know when I worked

33:08 at Goldman we were hiring more

33:12 nuclear scientists and atomic physicists into derivatives

33:18 than the entire outside world.

33:22 That's why gold the the talent density in finance is staggering.

33:26 Why?

33:26 Because it's the closest to the money.

33:29 Yeah.

33:29 um it drifted to Silicon Valley in the end

33:31 because Silicon Valley came closer to the money,

33:34 but really there were some very smart people there.

33:37 So, it's not like it's a bunch of pinstriped English bankers with bowler hats.

33:40 You know, this is these are some serious people.

33:42 And I think Danny, if you your approach of first

33:45 principles actually will appeal to quite a lot of these people.

33:48 I think I blockchains are blockchains are spectacular because they're

33:53 an engineers's dream in that there's so many amazing things to tackle

33:58 and this is why I just been incredible seeing the engineering

34:01 come to Etherealiz but there's zero knowledge proofs there's there's

34:04 cryptography there's coordination there's mechanism

34:07 design but the most important

34:09 thing that also clicks for a lot of banks and asset

34:11 managers it's the only place where you can put digitized assets

34:15 and money in the same place And that's never existed before.

34:19 So now that allows for transactions to be auto

34:21 uh uh atomic that allows for like it's crazy,

34:24 but a database where you can have money and assets is mind-blowing.

34:28 And so that's the upgrade.

34:29 So yeah, we are getting as close to the money as you possibly can.

34:32 It's going to let Wall Street take back the narrative from Silicon Valley.

34:35 And blockchains are going to be the way in.

34:37 It's crazy.

34:38 Danny, it's got to be weird for you because we spent our early

34:41 days all fighting Wall Street and wanting to upend the banking system

34:46 and you kind of have to partner with them even though you are creating change.

34:53 I I it depends on the estimate but it's like something like $110 trillion

34:57 of the $200 trillion of investable assets

35:00 in the world are uh managed by financial institutions.

35:05 It's like I think I think we got to have to crack

35:07 that nut if we're going to make the impact in the world.

35:10 Um, and I, you know, there's when you're thinking about upgrading markets,

35:15 it's like you can make the markets more efficient.

35:19 That's good.

35:19 You can make the markets uh, you know, have have potentially more access.

35:25 That's good, you know, and that that that's that's in line with my values.

35:28 It's like more people having access to financial instruments and fin

35:32 and and you know both in the US and globally.

35:35 Very good.

35:36 You can have, you know, more interesting products layered on top.

35:39 There's all sorts of stuff that like they're not the black

35:43 and white like crypto anarchy uh answers in terms of, you know,

35:48 the extreme versions of the values,

35:50 but like moving the world's markets to be more open,

35:54 to be more fair, to be more globally accessible,

35:56 to be more programmable, to be more, you know,

35:59 th those are all like I think extremely positive outcomes.

36:03 Um, and they're really hard to get there.

36:04 But I I think with Ethereum and working, you know,

36:08 from the inside out on financial markets, we're going to get there.

36:11 So, a quick break in your regular programming.

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36:15 grab my free report called Prepare for 2030.

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36:27 And also how I've always argued this is whatever gets built on it,

36:33 however gigantic the scale of blockchain is in the future,

36:37 however big Ethereum is,

36:39 because there is the token that exists and it's fractionalizable,

36:44 every single person on Earth can participate in the economic

36:48 wealth that's generated from building the system out.

36:51 And that's the big difference.

36:53 It doesn't acrew to a private person.

36:54 It doesn't approve to a company where only some people can own shares in it.

36:59 And I'm talking even public shares, you know,

37:00 you try and buy Tesla shares from Nigeria.

37:03 It's not bloody easy.

37:04 But by the time, but with something like blockchain and having the ETH token,

37:10 I mean, that's a huge thing.

37:13 Yeah.

37:13 No, that's very interesting.

37:14 Like the assuming rearchitecting and moving global finance onto

37:19 Ethereum has a value cruel mechanism to ETH,

37:22 then everyone has access to that potential upside whereas that's right.

37:27 So it's very egalitarian in a weird way.

37:30 Even though you're driving capitalism,

37:32 what you're actually also doing is allowing everybody to participate in it.

37:35 If it works, everybody can make money.

37:38 That's never happened before.

37:40 It's like the internet, but we couldn't own shares in it.

37:44 It's it's one of my favorite.

37:46 It's the reason why I think ETH is such a convex asset and such

37:49 a has has such incredible properties because it's a it's a store of value.

37:55 Um b it's productive.

37:58 You can use it in the Ethereum economy.

37:59 It has a yield on it.

38:01 Um and c it has this embedded call option in it that as this system

38:06 scales and becomes the base layer

38:07 for finance and becomes the financial internet,

38:09 you can own a piece of that too.

38:10 So a productive asset with a call option to become um

38:14 the universal platform and to own the next internet that's pretty attractive.

38:18 So I I think I always say all roads flow through ETH in the end.

38:22 And

38:23 in the end ETH is the only blockchain where there is a currency

38:27 that is used and goods are priced in that currency which is digital art.

38:33 Yeah.

38:33 I mean everything I buy is priced in ETH.

38:34 I don't think of it in dollars, right?

38:36 I only think of it in ETH.

38:38 And I'm very comfortable.

38:39 Well, the whole market is pretty comfortable with that.

38:41 And that's amazing, right?

38:42 That's a moneyiness that nothing else has.

38:45 It's there's also

38:48 I'm not sure exactly where it stands,

38:49 but I think the most most like liquid markets for AMMs are,

38:54 you know, the ETH trading pair against most tokens.

38:57 Um, which it kind of functionally is pricing the exchange

39:01 of of assets on top of Ethereum and ETH.

39:03 I think one one point on it being the trading pair

39:07 like you know the FX markets well and and in terms

39:11 of global trust if if the world's assets are going to be

39:14 tokenized which which I think is actually an inevitability at this point

39:17 like the you can't put tokenization back into into the box

39:21 then most tokenized assets have some sort of root in some regulatory

39:26 jurisdiction or some geographic jurisdiction but there's only one asset that is

39:31 truly sovereign and truly independent and truly trustless and that's that's ETH.

39:36 So there is actually a world and this is sort of my hyperbull case

39:39 for ETH is where it is

39:40 the trading pair for coordinating across global economies.

39:43 It's it's it's the only trustless global collateral and so therefore it's

39:47 the best money out of any asset out there and so it

39:50 could be the trading pair for all tokenized assets and that's that's

39:53 where it becomes like the real collateral and has a real exponential outcome.

39:56 Yeah.

39:56 But the most important point is that doesn't matter, right?

40:00 For ETH to be successful, none of that needs to happen, right?

40:03 It just needs to do its job.

40:06 Fantastic.

40:06 And let people build on it.

40:07 And we don't have to have the war that ridiculous

40:10 war that the Bitcoin maximalist had with everybody else.

40:12 It's like, it doesn't matter.

40:14 It's technology in the end, right?

40:15 It's just a very good technology of which we can all participate in.

40:18 And it's a big world out there, and it'll be a multi-chain world,

40:21 and we're all going to have to learn to speak with each other,

40:23 and that'll be great.

40:25 And you know you guys are play incredibly important role in the space

40:29 because Ethereum is so big versus everything else you know but if

40:34 I look at you know where smart contracts over time are going

40:37 to go it's only going to get larger because it's not just

40:40 about finance you know we haven't even talked about I mean

40:42 the other thing you're going to have to uh learn is insurance because

40:47 that whole industry is basically derivative

40:49 contracts or contracts right that all

40:51 has to be tokenized because it's much more efficient for the insurance industry.

40:55 That's gigantic.

40:56 The whole commodity industry is the same.

40:59 Um, that needs to do.

41:00 I mean, there's a bunch of them are already doing this.

41:02 That needs to all happen.

41:03 Then we've got the whole digital ID side

41:05 of the entire planet as well that has to happen.

41:08 And we haven't got into the AI and the rise of the rise of of the agents either.

41:13 So, I mean, it's a staggeringly big thing that has to happen here

41:17 and kind of everybody needs to play their role in getting it across.

41:21 Danny, one of the questions I want to ask

41:22 you before we move into some of the bigger picture

41:24 stuff is privacy is a big problem or privacy

41:28 with with banks and dark pools and who does what

41:31 because you know there's a very fair and if

41:34 you guys follow Mertz you know from uh Helas he's

41:39 he makes the point which is like not every transaction

41:42 should be transparent and the banks certainly don't want it.

41:47 You know, if Fidelity is settling for a program trade with Goldman,

41:52 people don't want to know that that's happened, right?

41:55 No, I mean, we can't we can't even think we can't think about upgrading markets

41:59 to use blockchains if we don't can't have

42:02 as good of it's not better privacy, right?

42:04 Like markets don't work.

42:06 You know, there might be a market where you and I are going to make a trade.

42:08 Some affiliated agency gets to see the trade, but maybe not the price,

42:12 and then no one else gets to see it.

42:13 And you can't you can't think about upgrading and and that market

42:16 onto a blockchain if you can't preserve those same things.

42:20 Um I think very fortunately for Ethereum we uh

42:26 maybe I said this earlier but put literally billions

42:28 of dollars into applied ZK because applied ZK uh

42:35 can brings us massive scalability gains with ZK rollups.

42:38 But it turns out the same technology allows

42:41 you to hide information and programmatically hide information.

42:44 Um, you know, re reveal what you want to reveal, hide what you want to hide.

42:47 And so we now have efficient

42:50 high-level constructions to write privacy applications in.

42:54 You know, we have ZKVMs, we have ZKEVMs, we have uh bespoke languages like Noir,

42:59 we have lower level languages like CIRCOM.

43:01 And increasingly, and I think this is going to be how

43:06 we with math embed privacy into public blockchains rather than, you know,

43:12 there's many other types of constructions um that I think people

43:15 like to play with, but the ZK and the applied cryptographic constructions,

43:19 I think ultimately they're just they are the winner.

43:22 Um, you know, so a lot of what we're doing at at Etherealize

43:27 is what is the right stack

43:31 to program private institutional workflows onto Ethereum.

43:35 Um, and and largely that looks like ZK.

43:37 Largely that looks like some of the high level

43:39 languages that have come out in the past few years.

43:41 Um, and we and many other people across the ecosystem are

43:44 leveraging these tools to to do exactly what we need to do.

43:47 And I I think one of the biggest myths on Wall

43:51 Street right now when when people are talking about Ethereum is,

43:53 well, Ethereum is not private.

43:55 Well, it's not.

43:56 It's a public coordination layer.

43:59 And you can write public contracts that have

44:01 very explicit logic that everyone can read.

44:03 But you can also write public contracts that commit to private realities

44:10 and commit to private logics that you can embed on these chains.

44:13 And so, um, you know, I I I think a year ago,

44:19 two years ago, the answer was, well, we're we're pretty much there.

44:22 Um, I mean, the answer now today is we're there and we're building it

44:27 and we're going to see people adopting private

44:29 workloads on top of Ethereum more and more.

44:30 So, for what?

44:32 So, when we talk about push back that you get,

44:35 we talked about the coordination problem.

44:37 We've just talked about privacy,

44:38 which is another one that was I written down because I know that comes up a lot.

44:42 Uh, quantum will be the other just like how safe is this?

44:46 In fact, might as well ask Danny.

44:47 Danny, what where are we with quantum now?

44:51 Cuz I know that's the other hot topic.

44:53 There was a paper released yesterday, the day before,

44:54 and it turns out we're closer than we um you know,

44:57 there were some some speed ups in some of the classic algorithms.

45:00 Um, which interestingly, they didn't reveal the full algorithm for the speed up.

45:04 They did a ZK proof that they had it, which is kind of cool.

45:08 they wanted to hide it either for safety or maybe proprietary reasons.

45:12 Um, nonetheless, I you know,

45:14 one of the big design considerations for Ethereum over the past decade has

45:18 been not always not necessarily to use

45:20 a quantum safe component for every component,

45:24 but that every component needs to have a quantum safe analog.

45:28 So even though we might be using non-quantum safe cryptography for component X,

45:34 we know that there exists maybe it's not production ready yet five,

45:38 six years ago, but we know it exists in a theoretical

45:41 standpoint and we can swap it in when when we need to.

45:44 And so a lot of the a big effort at the Ethereum

45:47 Foundation over the past 12 months has been oh yep pro quantum's coming.

45:51 It's coming faster than we thought.

45:53 uh we need to expect it to continue

45:56 our timeline estimates to continue to accelerate

45:58 because of AI um and all of those quant quantum analoges that we knew about.

46:03 We need to actually have like a very robust plan uh to execute.

46:06 You can go to like pq postquantum.ethereum.org and there's

46:10 a very robust plan um and some of the smartest

46:13 people in the world working on figuring out how

46:15 to you know roll that over the next three years.

46:17 Um so I'm not terribly worried about it.

46:21 Now is the time though.

46:23 Um if your blockchain is not working on postquantum uh contact your local core

46:28 dev and and say this is definitely a problem you should be working on it.

46:34 So VC what other push backs are you getting outside

46:38 of just that the coordination and just get working through

46:40 the the machine it's a you know these are big

46:43 machines these banks and financial institutions and all of that.

46:46 Anything else we're missing still?

46:49 It's it you always get the regulatory question.

46:52 um especially around uh not just privacy but ZK but the very

46:59 inspiring part is we're not just saying ZK is is

47:02 the future because it's it's the right technology and it's a very

47:06 very far spanning technology again it's going to go beyond just blockchains

47:09 but because the regulators are asking about that like we we

47:11 were we were talking to Congress recently and educate them educating them

47:15 on what's possible with ZK uh our general counsel uh Stevie Alderman

47:19 did a panel in December with the SEC C on ZK privacy.

47:23 So, so a lot of the technological aspects of of privacy

47:26 and the regulatory aspects of privacy were blockers before

47:30 and as Danny said they're the headwinds are now becoming tailwinds

47:33 where they're saying okay we there's there's multiple ways to do privacy.

47:36 Some are just keep trust in the system and don't use

47:39 math and that's like saying don't use AI when AI is inevitable.

47:43 So um no that that headwind that was

47:45 one headwind that's now becoming a tailwind.

47:48 Otherwise, it's more just how do we upgrade the system

47:51 in a way that we're not left with a system that's worse.

47:55 And so that's that's the real push back

47:57 because if everyone just runs their own internal experiment,

48:00 it's actually more costly and doesn't actually create benefits.

48:02 And that's why I mean you saw Larry think uh earlier this year come out

48:07 at Davos and say this experiment kind of all

48:09 has to happen in one common blockchain ecosystem.

48:12 And so that's that's the solution that we're that that's

48:14 that's that we're bringing pragmatically is saying you want interoperability,

48:16 you want liquidity in one place that's we have

48:19 one internet and so we have one blockchain ecosystem.

48:21 So that's that's that's part of the push back that was

48:24 there before is that everyone's just running their own experiments.

48:27 Comes back to your coordination problem.

48:28 I think that's starting to call us around one one winner.

48:32 I think there's another problem

48:33 that you're you're unlikely to be underestimating,

48:36 but I think it's a bigger problem actually is

48:38 the speed of technological development right now is[ __] staggering.

48:44 Right?

48:44 We're not we're not in Metaf's law.

48:46 We're now in Reed's law, which is metaf's law squared.

48:48 We're seeing it in every chart, right?

48:50 And a log chart when it goes vertical.

48:52 That's very difficult for a bank or even you guys to plant

48:56 a flag in what we building because if you're building the DTCC from scratch,

49:03 you would build it very differently to to work in a world

49:06 for for 10 years time where it's entirely agentically run than what they've got.

49:11 And that's a really hard thing because a lot

49:14 of the institutions at the core of this are not technologists,

49:16 they're monopolists.

49:18 And we've got a huge problem cuz everything is going vertical.

49:22 I mean, none of us have lived through anything like in fact,

49:24 humanity's never lived through anything like

49:25 this and we somehow have to navigate it.

49:29 How the hell do we do that?

49:30 I don't know.

49:31 And I spend a lot of my time racking my brain around.

49:33 That was a good answer.

49:34 That was the right answer.

49:35 I don't[ __] doubt.

49:37 Yeah.

49:37 No, I mean, we're at the like I I we stand at or inside the event horizon.

49:42 And if you if someone says they know what it looks like in 12 months

49:45 and especially they they say they know what

49:47 it looks like in three years, they're wrong.

49:50 They're[ __] wrong.

49:51 Like and you know I I I think I think a lot

49:54 about like what is the value that we can bring here?

49:57 What is the and and what are the things

49:59 that remain in the world is going to change massively.

50:03 And I think the answer is agent of finance is

50:06 going to take over the world faster than we we think.

50:09 Agents speak protocols as their name.

50:12 financial institution.

50:13 Once you've got you can break

50:15 it down to coordinated agents that self-coordinate,

50:17 it becomes it becomes actually a much

50:19 more intellectually interesting thing than what currently exists

50:24 and it can happen at a speed that we don't really understand.

50:27 Yeah.

50:28 And secure agentic finance that can handle 10

50:30 billion workflows is is like one of the most

50:34 important things I think we can work

50:35 on when we're thinking about upgrading for the future.

50:38 And when we're thinking about like what are pro what are agents going to do?

50:41 They're going to want to come to agreements with each other,

50:43 interact with each other.

50:44 They're not going to send you the asset and then send you

50:47 a funding memo for you to send the the the wire after.

50:50 They're going to want atomic swaps.

50:52 They're going to want agreements.

50:53 They're going to want to coordinate not only in the US but globally.

50:57 And so neutral infrastructure, you know,

50:59 like when we're talking to banks in the EU,

51:01 um you know, they were pitched on on putting a stable coin in Salana.

51:04 They're like, "Hell no." Like what?

51:07 Like of course we're not going to do

51:08 that because they see it as like this US entity.

51:10 And so agents, it's only going to be more.

51:12 You you don't want this global swarm of agents co

51:15 coordinating over protocols and they're

51:17 going to coordinate over liquid protocols.

51:19 The a you and I or two agents could just

51:22 spin up their own protocol to communicate with each other,

51:25 but they're going to want to go where the assets are.

51:26 And the only reason they're not going to make

51:28 their own protocol on demand every time is because of liquidity.

51:30 And liquidity, I think,

51:31 is going to be one of the liquidity and probably like security,

51:35 the lendiness of security.

51:36 It's like that's the mode.

51:39 That's the mode in the AI future and I and I institutional finance or not

51:44 like Ethereum is the only answer which

51:47 is really exciting like a couple years ago.

51:49 Yeah.

51:50 You know whether Ethereum is the only answer or not

51:54 I don't probably agree with that but I would

51:56 say that at a base layer you know if you

51:59 talk about the base currency kind of makes total sense.

52:02 Um now the uh the other thing is VC if

52:10 you think about I've been thinking about this a lot.

52:11 If you think about a business like Millennium

52:13 right gigantic hedge fund what do they do?

52:16 where they allocate capital to a bunch of pods

52:20 which are internal teams that run capital, right?

52:25 That's a very expensive process of which most

52:28 of those in the next 3 years will be replaceable entirely by agents by agents.

52:36 I mean look a lot of us who are hedge fund managers

52:38 have egos and think we can't be replaced but that's not true.

52:40 So that's all gone.

52:41 Right?

52:41 So that's one side of the cost equation.

52:43 Then the mothership of millennium which is coordination of finance, regulation,

52:48 um capital raising, allocation of capital and risk that's all solvable by AI.

52:56 So I'm not sure what financial institutions exist, right?

53:02 It's a really interesting point because you

53:04 know I know this industry really well.

53:06 I know both industries really well.

53:08 I don't see how any of this exists.

53:11 I get to beyond about 2030 the kind

53:14 of understanding of what is finance crumbles, right?

53:17 Our understanding of agents are going to we

53:20 I talked about memecoins in the beginning, right?

53:22 Agents are going to be able to run

53:24 businesses and they will coordinate capital via a token

53:30 of which that opportunity that business opportunity could

53:34 be one month and then it collapses afterwards.

53:39 But it captures the opportunity and people get

53:41 to participate in it or lend capital into it

53:44 which is not possible in a regulatory I

53:46 need to hire humans and build this thing out.

53:48 All of this goes right velocity of capital goes

53:51 wild and it's not really meant for us any longer.

53:56 We we just have no place in it.

53:59 Yeah.

54:00 And we have no place one please.

54:02 Go for it.

54:03 Uh then there's a lot here.

54:04 It's that's the fun feature.

54:05 Go for it.

54:06 I just I I I I'm only I'm drinking from the firehouse.

54:10 I'm learning a ton about financial institutions.

54:12 And part of me the part of my discovery the past few months are like the thesis

54:15 here is DeFi protocolized finance on the outside

54:20 and hope like the world just came and joined.

54:23 And like our thesis is no, we have to protocolize finance from the inside out.

54:26 And but when I look at AI,

54:28 I'm like agents are going to protocolize finance no matter what.

54:33 So maybe maybe the thesis is wrong.

54:35 Maybe they're just like they're native DeFi users.

54:38 Um, but when we think about where is the capital,

54:41 the capital's being managed, the capital's allocated, the capital is in places.

54:44 We're also look at like 30-year credit agreements.

54:47 Like these don't these aren't going to just

54:49 disappear and go into this other void overnight.

54:53 Um, you know, and and I guess my answer is

54:57 these financial institutions are going to at least become way thinner, right?

55:01 they're going to become the people

55:02 that hold the capital and allocate the capital

55:04 and and utilize the world of agents

55:06 and protocolize protocols underneath the hood.

55:09 Um, but a lot going tomorrow.

55:12 You say that, but AGI is, you know, there thereabouts.

55:17 So, in which case we're all inferior allocators of that capital.

55:22 Oh, yeah.

55:22 So, you get to that people that own it own the capital maybe.

55:26 But maybe I don't know.

55:27 I don't know.

55:29 Does capital exist?

55:31 Like if you have actually have a super

55:33 intelligent swarm of beings in a data center,

55:40 does the economy work like we even know and think?

55:43 I don't I I don't know if the answer I don't think the answer is yes.

55:50 It's just fascinating, right?

55:51 Who thinks that these would be normal conversations,

55:54 but they are because this is happening so fast.

55:56 I mean, don't forget we had almost zero agents before

56:00 November and now they've gone the fastest scaling of GitHub

56:05 in history in g accumulation of GitHub stars in history

56:08 and now it's I don't nobody knows how many agents there are non technical

56:14 I made him an agent on a VPS he has

56:16 like a swarm of agents every night that dynamically bet

56:19 on basketball games on poly market and it's and he's

56:23 a non-technical user and just like had it comb academic research,

56:28 spin up different types of models, and he's he's making money.

56:30 He has an edge right now for some reason.

56:32 But like, and that's just that's a toy.

56:35 That's a toy.

56:36 And he and he like snapped his fingers in like

56:38 two hours had a swarm of of agentic finance.

56:41 Like it it's blowing my mind.

56:44 And then I had another interesting conversation.

56:48 Have you guys read the piece from Mickey Bala from Ribbit about token factories?

56:53 Okay.

56:53 I urge you both to read it.

56:55 It's a fantastic article.

56:56 Uh it's quite long form.

56:57 It's on the Rivet Capsule website.

56:59 Now Mickey is a good friend of mine.

57:00 He's one of the greatest, if not the greatest fintech investors of all time,

57:04 but now he's really into AI.

57:06 And what he talked about or what the paper

57:08 talks about was that we use the word tokenization.

57:12 We sit through our angle, right?

57:14 But tokenization is also what we're using for AI.

57:17 What we're doing is creating packets of m machine readable data.

57:20 That's all tokenization is essentially.

57:23 And some have value and some don't.

57:25 But over time this becomes more valuable because

57:30 if you think about what AI has to do, it has to absorb more information, right?

57:34 It needs to the move from AGI to ASI is a staggering

57:40 you know power of whatever more data that needs to go into this.

57:47 So all data is going to be stripped and tokenized.

57:50 So that's every privately held piece of data on Earth eventually

57:54 ends up getting tokenized into something that can be tradable or accessible.

57:59 All of this is going to be agent run

58:01 and it's going to dwarf the marketplaces we know

58:03 today and it's going to be completely invisible to us

58:07 because the agents will be going to get data.

58:09 The big AI companies, all of this will happen agentically.

58:12 There's no marketplace, there's no people, there's no employees,

58:14 there's no offices on Wall Street, there's no fancy, you know, whatever.

58:17 There's none of it.

58:18 It just all happens.

58:20 at scale and people get to monetize data that I think is also

58:23 where the the entire system is going which is another big thing and you

58:28 also get to the understanding that I got to is like we're all

58:32 so wrong about the TAM of all of this the TAM is infinity because

58:37 of the agents if they actually create economic value themselves the TAM is

58:44 infinity if they don't okay they're just

58:46 moving our capital around if they create

58:49 capital correct capital formation then the TAM of the entire thing is infinity

58:54 like the TAM of the internet is infinity and that's a weird world again

58:59 who owns it who owns the TAM I don't even know and this is why I get to you

59:06 know I have these conversations a lot and I get to the simple

59:09 conclusion is you need to own crypto just tokens because that's the only

59:17 thing we've not that will allow us to economically participate in this system.

59:23 So it's a kind of a it's a serious thing to me is like if I go

59:27 beyond 2030 2035 we have no idea what

59:30 what the world is what money is what abundance

59:33 we know nothing what value is so you know the bet I've taken is like sure you

59:38 can own some equity and technology companies but what

59:40 is equity what are financial markets in the end

59:43 right because right now there's inefficiencies j

59:46 based on humans or inefficient knowledge all

59:48 of that goes away but at least the token

59:53 will value the underlying value of the network.

59:56 Right?

59:56 So, it's kind of like, okay, that's pretty straightforward.

59:58 I can deal with that.

59:59 The cleanest neck's law and that's the other that's exactly what I got to.

1:00:04 And then the other one is why do I own so much digital art?

1:00:07 Because to humans, we going to want something

1:00:09 and culture is the most important thing we have.

1:00:11 It's the most human thing that we have

1:00:13 and digital art represents the culture of our times.

1:00:15 Yet, it's also built on blockchain.

1:00:17 So you get the double convexity because the value of art goes up over time

1:00:21 and it goes up versus the currency and the currency in this case would be ETH.

1:00:25 So you get ETH's gain plus the gain

1:00:27 of the asset itself because it becomes valuable to us.

1:00:31 So I've kind of thought through a lot

1:00:33 of this world and that's all I could get to.

1:00:34 I couldn't get to a simpler answer than you just need to own tokens.

1:00:41 You've called for the exponential era.

1:00:43 I'm sure it's accelerating way faster than you thought.

1:00:46 But no, a agents agents could be the one that end up buying your

1:00:49 I like Danny's face.

1:00:50 He's sitting there thinking about all of this now.

1:00:54 I'm like, I don't have any digital art.

1:00:55 What am I doing?

1:01:00 Yeah, I know.

1:01:00 I got honestly I' I've played through this high-end

1:01:04 real estate is going to matter to humans.

1:01:05 Not high-end, but special places, right?

1:01:08 Nature experiences, but culture is it.

1:01:12 It's what gives us humanness and relevance and storytelling, right?

1:01:17 Storytelling is what we do as humans.

1:01:19 It's the AI doesn't do.

1:01:20 It's the only thing it doesn't do.

1:01:22 It can make art, but it can't feel something

1:01:24 because it doesn't have qualia and we have qualia anyway.

1:01:29 That's an assumption.

1:01:32 That is an assumption for now.

1:01:34 Yeah.

1:01:34 Yeah.

1:01:34 I mean, and the I think I think the AI actually is starting to have culture,

1:01:38 you I think molt book was one of the first

1:01:40 examples of distributed evolutionary kind of AI culture

1:01:45 term terminal of terminal of truths.

1:01:47 That's when I went down the consciousness rabbit

1:01:49 hole when I saw Andy Ellie um putting those the the ones together and they come

1:01:55 up with goatsy which ended up launching a coin.

1:01:58 It's like who actually launched the coins?

1:01:59 Was that you know them you hyperstitioning the coin

1:02:02 into existence and manifesting it or what the hell happened there?

1:02:06 But that was the start of it for me.

1:02:07 It was like that was wild.

1:02:12 And Mark Andre sending him sending him

1:02:14 Bitcoin as well because of the whole thing.

1:02:18 VC's now looking at us thinking we're weird.

1:02:21 I love it.

1:02:21 No, it's I'm so hardwired from the way things were on Wall Street that it

1:02:26 just it is worth going back to first

1:02:29 principles and saying what does everything look like?

1:02:31 And it it probably will not it probably will

1:02:33 not be the same as it looked like before.

1:02:35 So just upgrading processes it's gonna be upgrade.

1:02:39 Yeah.

1:02:39 So but we're future proof for that.

1:02:41 That that's the coolest part is you can you can either

1:02:43 integrate it fast and be ready for that or resist change.

1:02:47 It kind of feels that the role

1:02:49 that you guys play at Etherealize in the ecosystem

1:02:52 almost has to be split into two which is this world and that world.

1:02:58 Because if you don't have this world and that world,

1:03:04 we can miss the whole thing.

1:03:06 And it's kind of that world is as important to build

1:03:09 out for the future of everything as this world is to fix.

1:03:13 Because really what we're doing is fixing the existing world.

1:03:16 But the issue is is the new world is is

1:03:20 the existing world for for the way the world exists today.

1:03:24 It is not ready for the way the world exists in two years.

1:03:28 No.

1:03:29 So then we got the same problem all over again.

1:03:32 I I think I think we have to move

1:03:35 these markets to be more like protocols because I

1:03:37 think that's the only like a protocol protocol is

1:03:39 finance is the future because agentic finance is the future.

1:03:42 And so the way block the way Wall Street moves and upgrades

1:03:46 to the future is like every single thing needs to be encoded.

1:03:51 All of the rules of the markets need to be encoded in smart contracts.

1:03:54 The middleman need to not exist.

1:03:56 Sorry.

1:03:57 Um and and these things need to you know the entirety of of Wall Street

1:04:01 and traditional finance is going to look it

1:04:04 has to look like DeFi but with the privacy

1:04:08 with the regulatory with the whatever you know it's going to look more and more

1:04:10 and more like that and if not I don't I don't know what happens

1:04:17 and you know it's really interesting when you

1:04:19 go to the Middle East talk to you know Abu Dhabi and all of the others they kind

1:04:24 of basically have put the entire bet on two

1:04:26 techn technologies which is blockchain and AI and so

1:04:31 VC when you're going around speaking to the banks

1:04:34 and the other participants that's a lot for them

1:04:38 to deal with this two technologies at once right I always say

1:04:43 highly disruptive the most disruptive thing they've ever seen

1:04:46 I always say the chat GPT moment was mind-blowing for all incumbents and now

1:04:52 people are saying okay this is going to be a thing and banks

1:04:54 are saying this is going to be a thing we have to all just

1:04:56 adopt Claude and ChatgBT getting hit with two ChatG moments at the same time.

1:05:02 It's it's mind-blowing.

1:05:03 It is it is mind-blowing.

1:05:04 And I think that that's the thing where the paradigm has to shift.

1:05:07 And you you phrased it exactly correctly.

1:05:09 We have the luxury of being able to fix the existing system

1:05:13 and work to make it very positive some with how it works,

1:05:16 but also imagine what the futures look like.

1:05:19 And that's kind of how D and I split

1:05:20 up our our day-to-day and how we think about things.

1:05:22 And it's very complimentary.

1:05:24 But yeah, it's a lot.

1:05:25 It's a lot for them to take on and and banks

1:05:28 and national vendors don't want to become dinosaurs.

1:05:30 So, they have to move very very quickly and there's there's an

1:05:35 but they're slow by nature.

1:05:36 Some parts are really fast.

1:05:37 You know, as I said, there's some really smart people there who can spin

1:05:40 up a business really fast if there's a profit motive,

1:05:42 but getting a whole system to change is really slow.

1:05:45 Yeah.

1:05:46 Well, I think I think when you think about blockchain and AI,

1:05:50 they're thinking about blockchain and they're thinking about AI,

1:05:53 but I don't think that they're thinking about

1:05:55 the impact of these two things together yet,

1:05:57 you know, and that that's definitely one of our goals over the next years.

1:06:00 I mean, you know, just start, you know, Yeah.

1:06:03 I mean, sit vet when you go and actually break apart all of these institutions.

1:06:09 What are they?

1:06:11 almost all of them, insurance companies,

1:06:12 all of this stuff can just be entirely replaced by agents and AI.

1:06:18 And it's like, wow, okay, I hadn't really kind of understood that.

1:06:22 You kind of think people get more efficient and developers get

1:06:25 more efficient and we don't need as many and blah blah blah.

1:06:28 But when you actually think of businesses,

1:06:30 the whole nature of, you know, what is a corporation?

1:06:33 You know, corporation makes it gives it that kind

1:06:35 of legality of being the same as a human, hence the name corporation.

1:06:40 But none of that needs to happen any longer.

1:06:43 And it's kind of like because of the programmability as well,

1:06:45 you don't need the legal system in the same way.

1:06:47 It's kind of okay gets weird.

1:06:50 It gets weird.

1:06:51 And also when people start to realize that legal system is based

1:06:54 on a lot of judgment and you can now codify judgment and you

1:06:58 can now codify contracts that that's the I mean yeah lawyers are again

1:07:03 they are that's that's another field that we don't we haven't even talked

1:07:05 about that they adopt they either have to adopt AI in a big

1:07:09 way and I mean contracts themselves execute on blockchain so like these two

1:07:14 technologies are very teed up for them but yeah why do they need

1:07:17 so many people why do you need junior junior lawyers it's say goodbye

1:07:23 but the point being is you you keep going through

1:07:25 this and you kind of think why do I need any of it?

1:07:28 Yeah, that's that's the point I keep getting to is like

1:07:31 you give it a small amount of thought and you sound smart.

1:07:33 It's like, well, we don't need this many lawyers

1:07:35 and all of that and then you start thinking, do we actually need a legal system?

1:07:40 Yeah.

1:07:39 Yeah.

1:07:39 No, I mean I I spend my time I spend a lot

1:07:41 of time with agentic coding and things to wrap supercharge the business,

1:07:46 think about agent finance, all sorts of stuff.

1:07:49 And like right now it's I have all this agency.

1:07:52 I'm like I I know what I want to build.

1:07:54 what do I want to do?

1:07:55 But I'm like in in 3 months or may max like 12 months like me

1:08:02 telling it what to do seems like I'm just going to be getting in the way.

1:08:07 Yeah.

1:08:07 Cuz you're the worst decision maker.

1:08:10 Yeah.

1:08:10 You're the idiot in the room soon, right?

1:08:11 That's a big thing.

1:08:14 And and and like you said, like the legal system might be the idiot in the room.

1:08:18 The financial system might be the idiot in the room,

1:08:20 you know, rather than just the humans.

1:08:21 Well, well, yeah, it will be.

1:08:24 Anyway, guys, look, fantastic conversation.

1:08:27 Uh, love what you're doing.

1:08:29 Um, I think it's, you know, it's important, but but even just talking today,

1:08:33 it's like I don't even know where this is going to go.

1:08:35 I don't even know how we're going to do it,

1:08:36 but it's going to have to happen because we need block in the end.

1:08:39 If you break it down to first principles,

1:08:41 we can't do any of this without blockchain.

1:08:45 So, whatever format is doesn't matter.

1:08:47 The same principle of what you guys are doing.

1:08:51 Like maybe the global coordination layer.

1:08:53 Sorry.

1:08:54 Yeah.

1:08:54 Maybe in the US you have a consortium and everyone's fine with that.

1:08:57 But like if you really are thinking globally,

1:08:59 you have to have a a neutral blockchain.

1:09:02 Yeah.

1:09:02 You need a coordination layer because none of this works without it.

1:09:06 They're the most complimentary technologies ever, AI and blockchain.

1:09:09 And when people when people get that, it's going to be mind-blowing.

1:09:13 Well, it's kind of people have now started to say

1:09:15 things and it it doesn't feel silly in the end,

1:09:18 which is that it felt like blockchain wasn't built for us.

1:09:21 Yeah, we were the beta users.

1:09:23 It's really it's built for this.

1:09:25 Exactly.

1:09:25 We're the meme coins.

1:09:27 Uh, you know, we're just the test.

1:09:32 Fabulous guys.

1:09:33 What a wonderful Great to chat.

1:09:34 Really enjoyed it.

1:09:35 Great to meet you, family stuff.

1:09:37 Yeah, we'll see you somewhere.

1:09:38 I think I'm at Consensus in May or whatever.

1:09:41 I don't know where you guys are,

1:09:42 but hopefully we'll we'll catch up in in person somewhere.

1:09:45 In person, it's the only thing left otherwise our agents to do.

1:09:48 It's true.

1:09:49 It's true.

1:09:50 And digital art.

1:09:52 Yeah.

1:09:52 And digital art.

1:09:53 I'm going to buy some right now.

1:09:55 Thanks for having Yeah.

1:09:57 Get your crypto punk.

1:09:58 That's the point.

1:10:00 All right, guys.

1:10:02 So, as you can see, great conversation.

1:10:05 Lovely guys, really smart.

1:10:07 And you can see how that thesis that I've had

1:10:10 for a while about Ethereum is really quite likely to play out.

1:10:14 And that's even without the agents coming because they're coming too.

1:10:18 So we've got the entire financial system,

1:10:20 the investment or the asset management industry and then

1:10:24 we've got the AI industry all coming for these rails.

1:10:27 Blockchain was purposely built for it all.

1:10:30 All we need to do is just hold on to the tokens

1:10:34 and wait it out because these things take time.

1:10:36 But over time, the trend is your friend.

1:10:39 See you next time.

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