The Battle for Blockchain Dominance w/ Tushar Jain

Summary

In this insightful discussion, Ralpal, a seasoned hedge fund industry veteran, explores the crypto landscape with Tosh, the co-founder of Multicoin Capital. They delve into Tosh's journey from finance to crypto, the evolution of Multicoin Capital, and their investment philosophy. The conversation covers the potential of blockchain technology, the challenges of launching a crypto hedge fund, and the future of digital assets, emphasizing the importance of a long-term perspective in the volatile market.

Takeaways

• 🤖 The interview discusses the journey of 'Raoul Pal' from his hedge fund background to his current role in the crypto space, emphasizing his transition to focus on the exponential age and crypto markets.
• 💰 Raoul Pal highlights the potential of the crypto market to grow from $2 trillion to around $100 trillion, suggesting a massive opportunity for capturing alpha through hedge funds that specialize in this area.
• 📈 The conversation touches on the importance of having a long-term perspective in the crypto market, given its volatility and the potential for significant returns over time.
• 🔑 Raoul Pal and Tushar Jain delve into the differences between Bitcoin and other crypto assets like Solana, discussing the potential for Solana to outperform Ethereum in various metrics that matter for a decentralized platform.
• 💡 The interviewees explore the concept of token distribution mechanisms as a catalyst for new crypto bull markets, with each cycle seemingly kicked off by a new method of distributing tokens to the market.
• 🌐 The potential of decentralized applications (dApps) and DeFi is discussed, with a focus on the need for easier onboarding and the importance of giving users funded wallets to drive adoption.
• 🔄 The discussion highlights the challenges with current token economies, where many are experiencing outflows without enough mechanisms to recirculate the value and maintain equilibrium.
• 🎟️ NFTs and their applications in industries like ticketing are seen as an area with significant potential, offering a digital solution that could eventually replace physical tickets while adding extra benefits.
• 🌐 The interviewees consider the broader implications of tokenizing culture and brand, suggesting that there is a large amount of value yet to be unlocked in these areas as they become more integrated with blockchain technology.
• 🚀 The potential of 'Worldcoin' and its distribution model is considered, with the idea that providing people with a continuous drip of tokens could lead to increased holding and a stronger network effect.
• 💹 The interview concludes with a reminder of the importance of positioning in the crypto market, suggesting that while there are opportunities for speculative plays, the core assets like Bitcoin and Solana offer a more stable path for long-term investors.

Q & A

What is Kraken OTC and what services does it offer?

Kraken OTC is a premium over-the-counter trading service provided by Kraken that allows users to execute large cryptocurrency trades of more than 100,000 off the open exchange. It offers 24/7 access to deep liquidity, minimal slippage, and competitive execution and settlement services. Users can choose between a personalized high-touch service through secure chatting with the trade desk or a self-service RFQ for fast automated OTC trading.

What is the role of Ral Pal in the 'Journeyman' show?

Ral Pal is the host of the 'Journeyman' show, where he explores the nexus of the exponential age macro and crypto landscapes. He engages with guests who are experts in their respective fields to discuss and share insights on investment opportunities, market trends, and the future of cryptocurrencies and blockchain technology.

What was Ral Pal's background before starting the 'Global Macro Investor'?

Prior to starting 'Global Macro Investor', Ral Pal had a career spanning over 30 years in the hedge fund industry. He initially advised the world's largest hedge funds at Goldman Sachs and later ran a global macro hedge fund at GLG Partners. He then moved to Spain for a better quality of life and started his premium research service aimed at hedge funds, sovereign wealth funds, family offices, and high net worth individuals.

What is Toufi's perspective on the evolution of crypto markets and their potential growth?

Toufic believes that the crypto markets will experience significant growth, potentially expanding from the current $2 trillion to around 100 trillion. He emphasizes the importance of not just focusing on major cryptocurrencies like Bitcoin, Ethereum, and Solana, but also exploring opportunities in other areas of the market to capture this growth.

What was Toufi's journey like before co-founding Multicoin Capital?

Toufic's journey included growing up in New York, studying finance at NYU, and initially pursuing a career in finance which he later decided was not for him. He moved to Austin to work at a startup, which did not work out, leading him to start his own company in healthcare. After becoming excited about crypto upon discovering Ethereum in 2016, he co-founded Multicoin Capital with his friend Kyle, launching the fund in October 2017.

How did Toufi and Kyle approach the challenge of launching a crypto hedge fund without prior experience?

Toufic and Kyle approached the challenge by leveraging their diverse backgrounds in finance, technology, history, and economics. They believed that the crypto industry needed professional investors who could apply traditional evaluation frameworks and a multidisciplinary approach to understanding the new technology. They started by publishing their thoughts on the internet and launched their fund with their combined life savings and investments from previous companies.

What is Toufi's view on the importance of token economic design in crypto investments?

Toufic considers token economic design as a crucial aspect of crypto investments. He believes that understanding how tokens are designed, how they capture value, and what their velocity is, is essential for evaluating the potential success of a project. He suggests that many early investors focused on the founders or ideas, but a deep understanding of token economics is vital for long-term value capture.

How does Multicoin Capital differentiate between public market investments and venture capital investments?

Multicoin Capital differentiates between public market investments and venture capital investments based on the stage of the market and the opportunities presented. Initially, they focused on public markets due to the absence of private markets. However, as private markets evolved, they launched a venture fund in 2018 to capitalize on the emerging opportunities in the private crypto space.

What is the current state of competition in the crypto venture capital space according to Toufi?

According to Toufi, the current state of competition in the crypto venture capital space is quite high, with a lot of capital chasing fewer deals. He suggests that this increased competition has led to higher entry valuations, making it harder to achieve exceptional returns. He contrasts this with the public market side, where there is less competition and more opportunities for investment.

How does Toufi view the role of hedge funds in capturing opportunities in the crypto space?

Toufic views hedge funds as being well-positioned to capture opportunities in the crypto space due to their ability to focus on the best opportunities on a risk-adjusted return basis. He believes that hedge funds, with their professional investors and deliberate approach, can effectively identify and capitalize on the potential for alpha in the rapidly evolving crypto markets.

What is Toufi's perspective on the importance of having a long-term view in crypto investments?

Toufic emphasizes the importance of having a long-term view in crypto investments. He suggests that trying to time market cycles, either systematically or discretionarily, is not a viable strategy for most investors. Instead, he advocates for focusing on fundamental convictions and holding investments over longer periods, potentially switching assets as new opportunities arise.

What are the three main reasons Multicoin Capital would sell a crypto asset according to Toufi?

Multicoin Capital would sell a crypto asset if one of the following three conditions is met: 1) The original investment thesis has fully played out. 2) The market has become irrational, and the asset is now overvalued. 3) They have identified another investment opportunity that they believe will perform better, and they wish to allocate capital to that opportunity.

How does Toufi perceive the current market dynamics between Bitcoin and Solana?

Toufic perceives that Solana is gradually outperforming Ethereum across various key metrics such as transaction fees, trading volume, and active users. However, he notes that Ethereum's current market valuation is higher than Solana's despite the latter's growing performance. He attributes this to Ethereum's network effects and the value accrual from its layer 2 solutions.

What is the main challenge Toufi sees in the current state of DeFi?

Toufic identifies the main challenge in the current state of DeFi as the need for broader adoption and easier user access. He believes that DeFi needs more users with funded wallets before it can truly take off and that the current complexity of DeFi platforms is a barrier to entry for many potential users.

What does Toufi think about the potential of NFTs in non-financial applications?

Toufic sees significant potential for NFTs in non-financial applications, such as ticketing for concerts, sports events, and other experiences. He believes that NFTs can provide additional benefits and value compared to traditional tickets, including tradability and the potential for secondary market value.

How does Toufi view the role of 'dark markets' in the context of crypto and blockchain technology?

Toufic views 'dark markets' as areas with trapped value that can be unlocked through the application of blockchain technology. By making these markets more transparent and liquid, he believes that significant value can be created and captured.

What is Toufi's perspective on the future potential of tokenizing culture and brand?

Toufic believes that tokenizing culture and brand could unlock trillions of dollars in value. He sees the potential for tokenized entities like Disney to create new forms of value that are not currently possible through traditional equity and accounting methods.

What is the key to getting more users into the crypto space according to Toufi?

Toufic believes that the key to getting more users into the crypto space is to provide them with funded wallets and let them earn their way into the ecosystem. He suggests that this could be achieved through decentralized networks that reward users with tokens for their participation or through web3 gaming and other applications that integrate crypto in a user-friendly manner.

What does Toufi think about the future of Ethereum in comparison to Bitcoin?

Toufic thinks that Ethereum is in a challenging position as it tries to balance being a decentralized platform for various applications while also trying to compete with Bitcoin's maximal decentralization. He believes that Bitcoin has a strong narrative as a decentralized asset, making it difficult for Ethereum to compete on that front, while also struggling to keep up with high-performance chains like Solana for transaction throughput.

What is the main focus of Toufi's investment thesis in the crypto space?

Toufic's main investment thesis focuses on identifying and investing in crypto assets that are likely to outperform Bitcoin over a certain time horizon.