Morning everyone. Guys, it's great to be here. None of you need an introduction, so we'll get straight to it. The panel is the end of the beginning. It's a great time to be in crypto yet again. We're still here. We've known each other for over 10 years. We've invested in so many different things.
I want to start with something that came out yesterday. There's an interesting tweet about Justin Drake about crypto, you know, cryptography. Could that be broken? Has he... Maybe starting with you, how do you think about that? Is that truly the beginning of the end or is it the end of the beginning?
Yeah, so maybe just to give a little bit of context. So, yesterday Justin Drake tweeted that he thinks it's time for the industry to go into bunker mode. So, bunker mode means that, for those of you who saw yesterday, OpenAI published a giant drop of new mathematical results. Some of them, one of them in particular, which was a solution to the quasi-Riemann hypothesis, which many people consider to be one of the biggest mathematical results in a century. An enormous result. And all of this supposedly is only one of the three drops that OpenAI is going to do of a huge amount of new mathematical progress. And the weird thing about this drop is that there's nothing in there about cryptography.
They had something like 700 different results, no cryptography. Cryptography is probably the most economically significant part of mathematics, and yet OpenAI didn't release anything about cryptography. Many people conjecture, and this is what Justin Drake was hypothesizing, is that this is because maybe they're holding things back. That they have new cryptographic results. Some of them might be very bad in that they found vulnerabilities in cryptographic protocols, but they might be coordinating, they might be doing some kind of responsible disclosure, or they just genuinely might be so damaging that they're trying to figure out what to do. And so he basically claims, 'Look, we're now speed running mathematics at a pace that we've never seen in human history, and that may mean that a lot of the cryptographic assumptions underlying blockchains and public key cryptography might be in jeopardy.'
But that doesn't mean we know for certain that anything is the case, but we do know for a fact that we don't have proofs for almost anything that underlies our public key cryptography in blockchains. We're pretty sure they're hard because, you know, the usual hardness assumptions in cryptography are that a lot of really, really smart people have looked at this for decades and they haven't found anything. That's what we think of as, you know, very strong evidence that these cryptographic techniques are sound, but we have no proofs that ECDSA is sound and that it's cryptographically hard, meaning that you can't break it with a classical computer. We're pretty sure it is, but we don't know. If God forbid some kind of AI-accelerated mathematician figures out that there's actually some way for a classical computer to break an ECDSA key, we're in a lot of trouble. And so his claim is that we need to go into bunker mode, which means stop signing transactions on addresses that are holding a lot of money. If you never sign a transaction, almost certainly your stuff is safe because we know that hash functions are much more secure than public keys, and if you just send money to an address and you never move it, you're protected by a hash function as opposed to an exposed public key.
The question is, what do we think about this? I tweeted last night upon reading this that it's a little bit of the doomer impulse that's now come into cryptography. I think it's reasonable. Look, the probability, it's kind of like when people talk about existential risk from AI, the probabilities people are talking about are like, you know, 5%, 10%. It's almost certainly not going to happen that ECDSA is going to be broken, but we have to take seriously that, look, cryptography changes over time. You know, hash functions that we used 15 years ago we don't use anymore because actually we have found vulnerabilities against MD5, against SHA-2. And so there's always this migration that's happening in cryptography. It's why today, you know, Ethereum does not use SHA-2 anymore, it uses SHA-3 because it's considered to be more secure.
If in fact AI is accelerating everything, if like we have 10 years or 20 years or 50 years of math research that's happening in the span of 6 months, then it probably is reasonable to start asking deeper questions about how much risk we should be taking during this critical period when math is accelerating so much faster than it has before.
Kyle, maybe over to you because you've been very vocal about like blockchains are, you know, very good for financial applications in a world where other investors really have tried other things and you've really stuck to that over so many years. I want to get your perspective on, you know, if this is truly the end of the beginning. Like what has ended in crypto as you think about it? And what are we entering now?
Yeah, so I definitely sprayed a lot of money into non-finance things. Some of them kind of worked, some didn't work, but most didn't. Web3 having been the word du jour. At this point it's been very clear that these are financial systems and not more than that. And, you know, we're just modernizing finance. That's fairly obvious.
And then we've kind of found some interesting new forms of capital formation. You know, my favorite example that I'm partial to is DePIN, which like didn't quite get as big as I was hoping it would get, but like there are some success stories there. Beyond that then we have just like interesting social things happening, right? Pump, FOMO, Axiom, all these things. When I think, you know, the point of the panel was say the end of the beginning, I think it's kind of like just a recognition that we're not throwing spaghetti at the wall like Web3 is dead. We understand that it's finance.
You know, in 2020 we all thought, 'Hey, maybe there's going to be 40 or 400 new standardized contracts for trading risk.' And turns out no, we want spot, perps, options, borrow-lend, like the CDS. Like there are like eight major financial contracts that govern almost all risk transfer in the world are what the world wants. So I think, you know, the end of the beginning to me just means like, 'Hey, we know what we're doing and we're going to stop wasting time on all these other things.'
A lot is happening in crypto. I want to stick in this thread. You know, you left Multicoin, probably one of the most successful runs in crypto and venture at large. How does your new role allow you to kind of express your thesis?
Can we talk about the Multicoin thesis?
I mean, I would love to hear it.
I don't think this is the right forum for that.
[laughter] But what has changed for you, I guess?
You know, like I'm building a new startup on Solana. I can't talk about it too much, but you know, I feel fortunate I was there early Solana and not just Solana core, but all the like important ecosystem teams around Solana. Jito and Camino and Marginfi and a bunch of other teams that were necessary to make this thing all work. Pyth and all the trading firms and all these things.
And, you know, like that job is done as a venture capitalist. Like these guys needed to get off the ground, they needed money, they needed support, they needed strategic help, whatever. They're all successful and making money and stuff. As a VC, I'm like no longer substantially moving the needle on like making Solana become the global permissionless financial layer to power global finance. So a lot of how I think about my time now is like, well, what can I do to like complete the job or finish the job. And I think I can actually do that in an operating role now much more than I can as a VC. So that's in my new startup certainly you can think of it through that lens.
And then I think there's opportunities in the kind of like the private equity side of the world, takeovers side of the world that I can also use to like accelerate the mission. So via Forward and via as an angel I've been doing some other stuff like that too.
That's great. So Haseeb, maybe turning it over to you. I mean, Dragonfly, you guys raised a fund probably at the bottom of the market, you know, what was it like, six, nine months ago?
Again, thematically you guys have invested in a lot of things over the years. Like what is something that you've really changed your mind on as it relates to crypto, maybe the opportunities side, or what you're really focused on that the Haseeb of five years ago wouldn't believe you talking about this today?
Yeah, so I think like 2020, 2021 was peak crypto psychosis for all of us where we were just totally convinced hook, line and sinker. I think it's important to rewind the clock a little bit to like 2016, 2017. I remember, Kyle, I first met you I think in the expo or the...
Yes.
And at that time you were still, it was a fledgling fund, you guys had just gotten off the ground, you were like tweeting about publishing a bunch of, you know, posts about, I think it was like an XRP fork or something. There was like all this crazy stuff and none of it was working, it was all tiny and like we were all weirdos. Okay? We were weirdos, crypto was weird, nobody thought what we were doing was...
Haseeb, I hate to tell you that you're still a...
Yeah, I was going to say before...
[laughter] Okay, I'm still weird. These guys are cool and, you know, respectable now.
But like at that time all of us were taking huge amounts of career risk. Like we were all people who could have had, you know, could have been in, you know, natural prestigious industries, but instead we were crypto weirdos. And 2020, all of a sudden the entire world screamed at us, you were [__] right. Everything you decided to do was absolutely right. Crypto's going to eat everything. Everybody in the world now agrees. And you know what? It's going to be even bigger than you thought. In fact, it's going to take over culture, every celebrity in the world, NFTs, it's going to be on TV. Like you were more right than you ever thought you were. And it's going to eat every single industry. And we really wanted to believe it.
We really wanted to believe it. Because of course, like why would we not want that to be true? And so, you know, I was probably among most of the big VCs, I was the most resistant to the idea that crypto was going to take over gaming, that NFTs weren't a bubble, and I fought it for months when this stuff really started exploding. I would get into big arguments with both my team as well as a bunch of other VCs. And eventually I too was like, you know what? I'm probably just wrong. I'm probably just like not young and cool enough to get it. And I just got to get with the picture that NFTs are going to eat the world and, you know, we're all going to live on the blockchain and DAOs are going to take over everything. And turns out none of those things happened. DAOs are a mess. Crypto games are all terrible. And NFTs, I mean, they kind of exist, but they're kind of this, you know, weird corner of the internet.
We call them RWAs now, Haseeb.
