Paradigm founders Fred Ehrsam and Matt Huang

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That's right. Let's get to our show and say hello again to our good friend Kobe. How you doing, buddy?

Oh my god, still rugged it. Where are we? You disappeared, your own face. I'm all right, mate. I can't hear out of my right ear, but that's all right. I got my left one. I'm on loads of antibiotics so I can't drink anything. Maybe it's a good thing, might get my life on track. How are you doing? Missed you.

I missed you too. I thought I had done everything after not doing a show for like a month, and I ended up messing it up immediately because our intro video didn't roll because my Dropbox rugged me and I only got the one video back. So whatever, that's okay. We're back. I'm happy to see you. You've been in Africa.

I was in Africa. We didn't see each other though. That would have been too much. Yeah, we got to avoid each other for the rest of time. And we've got the Paradigm founders with us, so while you've been messing around, you're wasting very important people's time.

Yeah, what else is new? Matt, Fred, welcome. How you doing?

Good, thanks for having us.

Welcome. So we don't really have a plan or do anything. We just sit here for a while, normally get drunk, but I can't get drunk. And we just see what happens. So hopefully they're up for that. And why don't you send us drinks in advance? We're sitting here with water.

100%. Look, we've got a low budget. Times are hard. You see it in the charts, it's down like 7% or something. So how did you two meet? How do you know each other? What happened?

Yeah, and then maybe got to classic Fred troll. But yeah, I mean, meeting him, talking to him about this VR idea kind of had the light bulb click. I don't know if you've ever felt it, of there's something special about this person, I'd love to work with them someday, whether it was like fund his next company or something else.

What year was this? Because I've only known the word metaverse for about three weeks now.

Yet it's half of the words that you say out loud.

So what you're saying is it's not just that weird voxel Doom graphics style world where you just walk around and look at the three other people that are in there, but it's the idea that you can take the stuff that you have into that world, but also a hundred other worlds just like it that other people have created. It's like state between all those worlds.

And you don't just think this is trendy because of the new Marvel timeline stuff they're doing?

How do you think this is going to play out over the next, I don't know, this is a hard question, but like 15 to 20 years? What do you think it practically looks like in the future?

Oh god, so many things. One observation that we often think about is how, to state the obvious, people are spending more time in these digital worlds. You could think of Twitter, Discord as a version of that. You could think of World of Warcraft or Fortnite. And as people spend more time there, they're also spending money. The in-game item economy is massive, totally outside of the crypto context. But if you really think about that, that's kind of like putting all your energy into these systems that are ultimately owned by someone else. And it's not a government that has a clear code of law and property rights, it's sort of the whims of Google or Facebook or someone else. So I think one thing that's really potentially compelling is blockchains enabling these property rights. And I think much like developed countries or developing countries are limited if they don't have strong property rights, if the government can come in and seize your assets or there's local warlords that are going to come after you, I think enabling strong property rights in crypto could make these digital worlds a lot bigger than they are today. So I think that's just a general trend that we're probably going to see over 10, 15 years.

When you talked about the Web 2 being feudalism, is it because apps took such a dominant space within the web versus just websites themselves, like kind of an open HTTP environment? Now so many people, like Facebook is their internet, or they spend all of their social media time on Instagram. Is that the reason? Or could it have been more open in a web-based internet? Or do you think it's kind of either way, it's still feudalism?

I think it was missing a key technical ingredient, which was the ability to store state in a decentralized way. And that's ultimately what blockchains allow you to do. Because even though you take email as a great decentralized protocol, but everyone on this podcast probably uses Gmail or Outlook, and so there still are these centralized systems that end up with all the data. So I think for the first time with blockchains and Web 3, we have the chance to change that. I think crypto fundamentally changes the barrier to entry and the barrier to exit. So it's not that everything in crypto is going to be fully decentralized, and clearly that's not right. There's going to be a bunch of great centralized experiences that are built on this decentralized base. And the observation I think we would have is, again going back to the feudalism analogy, today you look at the major web platforms, they haven't really changed over the last 10 years. The top 10 apps in the App Store have effectively been static, which leads you to believe this is not a competitive, a free competition environment. There's massive barriers to entry if you want to create something new. It's sort of like imagine somebody leaving the castle walls and trying to start a new castle over here, it's really hard. So we think the barrier to entry will just be much lower because there's this new paradigm, there's a new base layer on which people can openly build. And then in terms of barrier to exit, we talked about that with the property rights idea. It's sort of like let's say you're a creator on Instagram and you want to take your following somewhere else, you can't directly port it, you don't own your images, etc. So I don't think it's a binary centralized/decentralized. It's that the friction to starting something new, either as an entrepreneur or a creator or user, is just much lower. And we think that'll just create a lot more innovation and also a lot more composability as we've already seen in crypto.

It feels a little bit like the Web 2 gatekeepers have started to realize this trend and that ownership will mean that Web 3 is able to threaten Web 2. Because you got Jack from Twitter who's started funding decentralized Twitter and trying to build a decentralized version of his own company, I guess. You've got Facebook, and obviously they just changed the name to Meta in the last couple months. I don't know, I thought that story was a joke. I was like, no way this actually happens. It's like them changing their name to Loom Dart or something. I was like, no way this actually happens. But I guess it did. What do you think the strategy is for companies like that? Do you think there will be a war for the metaverse?

I think the challenge in any big technological paradigm shift is whether or not the companies fully embrace from the ground up the new technology. It's sort of like media companies going into the internet. How many of them just put their existing media property on the internet relative to trying some totally new approach? Of course, the thing that got really big was fundamentally totally different. It was social media, it wasn't traditional media, right? So I think that's the big question for a lot of these incumbents is how crypto native can they really get? And are they willing to adopt totally new approaches that might be very different or even orthogonal or cannibalizing short term to some of their existing businesses? So we'll see. I think if you were to poll us today, and I'm curious what you think, I think we're maybe more bullish on some categories than others. Like gaming companies, it feels like they might be more likely to be able to make the jump because just installing an open economy into games might be the right or one right approach to games. If you're current gen social media, that feels like it might be harder in the full ground-up sense, just because the social media networks of the future, whatever that means, that term will probably look wrong in retrospect, are just going to look a lot different. So there's always the innovator dilemma and there's probably an it depends element.

One other thing that you guys brought up before is it may be that we look back on this and realize as a network effects-based business, which all the largest internet platforms, which are also the largest companies by market cap in the world, we look back and it's sort of like the only approach is one in which you give users some ownership. It doesn't mean it's a lot, but that might sort of just become the norm over the next 20 years. And if so, that's a pretty radical sea change.

Do you think that requires users essentially seeing some of what's in it for them? So if you look at play-to-earn type stuff with Axie, maybe that's the linchpin that tells them, oh yeah, we can earn stuff because we're using these companies' products. We can share in the network effects growth of this ecosystem.

I think that's right. The hardest part about getting a network effects-based business going is the chicken and the egg problem. At the beginning, you're starting new Twitter, you're the first user there, you shout into an empty room, there's no utility, you leave, and that problem goes on at infinitum. Which is why some of these Web 2 giants, they just haven't changed. Network effects are so big at this point that overcoming that is really hard. And I think our view is that crypto presents the first real potential orthogonal solve to overcoming that cold start problem, which is at the beginning, when the network has low utility, you're the first user who shows up on Twitter 2.0, whatever it is, you get ownership in the network, and the potential economic upside in being an early owner of the network offsets the fact that the utility is low at the start.

I think play-to-earn is just yield farming with a waste of time component added on top.

People love, on some level, I think work equals purpose for humans. There's a lot of good theory on this where a lot of the most popular games, like World of Warcraft, they actually have a strong work component to them. People actually find a lot of meaning in building towards these experiences in these games. So I think you're right. I think that actually might be a feature in some ways, as much as it could be viewed as a bug.

Yeah, one thing that made it click for me, the metaverse stuff, because I'm always incredibly skeptical. I've been in crypto from 2012-ish and I just saw everything was just like, everything went to zero. No one ever did what they said they were going to do. I used Crypto Rush, I used CSGO, like all these things, they all just disappeared. So I became very, very skeptical. And it was always a case of get in, get your 5x multiple and just bail because it's not going to be a real thing anyway. Do you remember when they did the Iceland coin airdrop? They were going to airdrop it to everyone in Iceland. That never happened, did it? That was a lie. I became really skeptical thinking too small, world coins got to work, not just the whole thing. Yeah, you just trade an eyeball for it. But so metaverse, it's a thing to be skeptical of. And I think I'm extra skeptical when stuff translates onto Saturday Night Live and they start talking about the metaverse and they make it sound even more stupid. But the thing that made it click for me was I remembered when I was younger and I played the early Halo games and the early Call of Duty games and I did those weird things in the game where you jump through all these hoops and you go around and you do this extremely long mission, you get a special helmet. I did it, spent ages getting this special helmet. And I stopped playing the game and then a different game came out later and you could maybe get the helmet again if you connected your account and you could do some stuff. But I've done that with loads of games through my life where I've spent a lot of time on some meaningless objective and there's no record of all the things I've done. I probably have some quite good clout now from all these weird secret objectives I found in games. I also have some embarrassing clout for the eight years I've spent playing League of Legends like 12 hours a day. But connecting all that together and then allowing it to influence the next game I play, like when you create your character in Skyrim or something, I've been creating it for the last 15 years of my life. I don't want to just change the guy's hair. I want to import my history and all the mistakes and stuff I made back then. And then it kind of clicked. I play a video game and it knows who I am and it's got my stuff from my real world and my game history. And then I was like, all right, the metaverse is maybe a thing. Maybe a thing I can stand them talking about for a bit.

Yeah, well, I mean, you were saying before we started, right? Like you've had to handle Crypto Kobe for what, how long? Started as just this random idea you had as a kid and now it's built all this brand value. So in some sense, you're kind of living this in a way.

Yeah, yeah, because yeah, it's weird. I also met Francis Korda's daughter at a festival. Someone brought up the account and it was one of the worst experiences of my entire life. Like, you pretend to be my dead father on the internet, all right? But yeah, I made it ages ago and it was just a way to talk about crypto all the time but not as myself because I had a bunch of followers from other things. I didn't want to bother them all the time with this weird drug money because Silk Road was popping back in those days. And then yeah, it became a thing and now I got this split personality disorder that I inflicted on myself.

I have a question for y'all, which is why is it important, like what we wear and who we are in the metaverse? Why is it just this default standard that we're going to have a profile picture or a 3D character or something in the metaverse that represents us and it's not just ourselves? Why can't it be video or some actual representation of ourselves? Why is that such a big part of this and seems to be the only thing anyone focuses on right now, at least in terms of what the metaverse will look like?

Well, I mean, part of the beauty of the internet or anything virtual is that you can create the world that you want to create, right? So I think that's where people's creativity will be unleashed. And like, you know, I'm guessing if you ask most people what is really important to you or what is your mental image of yourself, would they literally describe their exact physical appearance? And even that is kind of a limiting frame, right? So yeah. And then I think to answer another part of the question which you're getting at, which is sort of why do people place value in this stuff, I think we're already living in a world where people's digital identities are as valuable, if not more valuable to a lot of people than their physical or meatspace ones. I think we were all early on this in some sense. I know Matt and I both played a bunch of games. Like I spent 4,000 hours in World of Warcraft when I was 16 years old. I cared way more about my WoW character and my armor than anything else. Like that was, you could not pay me any dollar amount to sell that.

You just ruined a lot of college parents' lives. They're like, you're never going to make it, kid. You're never going to make it playing these games all day. And they're like, here's the co-founder of Paradigm and he just did nothing but World of Warcraft.

Nice. Anyway, sorry, just to return to your original point of how people value their digital identities relative to physical ones. Actually, Kobe, I'm curious your view on this. How much do you care about your Twitter account relative to when you walk down the street, what somebody thinks of you?

Yeah, I've not really walked down the street. I've just been outside for the previous year. I haven't spent much time on streets. I don't go outside very much, mate. Somebody in the chat was like, Kobe's white balance kind of a lesson too, right? It's sort of like the digital world is sort of like, yeah, what I do like is that I can separate the two things out. Like I can go outside and I can go wander around and no one's going to be like, that tweet you posted was offensive. So it just feels like they're two separate things and I can sort of turn it off and I can just put my phone away and then I don't have to pretend to be Crypto Kobe on the internet for a bit. And like I think I have several personalities. I got that Twitter account, I got some other Twitter accounts. I play video games with a group of people and they know me as something different as well. So I think there's several characters or whatever, or heteronyms or something, that I sort of care about, I guess, uniquely.

That makes sense. What I like about it is you can be very creative if you allow yourself to abandon your own opinions and say, this character I have in my head, they like these certain things, they think about stuff in a different way to me, and I get into that person's mind. What would they think about this situation? It gets to be very creative like that. Like I would never say that, but that person would say that, and that's quite interesting. Anyway, we're not really talking about crypto anymore. We're talking about my mental illnesses.

So the chat's even further off on a tangent, so it's fine. I stopped looking at chat because they were making me laugh. They were mocking my... Yeah, somebody asked if your white balance was off on your camera. You've just been outside for the first time in two years.

Yeah, they were mocking my ear as well. Not very nice. They're bullying me. All right, so we've been baited by the late 2021 straight to the metaverse stuff. Let's cycle back a bit. We know how you both met. Now you decide to start Paradigm together. How did it go from there? You now have a research team and other VCs trying to do the Paradigm method of having sort of co-building or research-first work. I guess they see it as for brand purposes, but otherwise don't call it the Paradigm method. But lots happened since you founded this. Can you take us on a quick version of what that was like and why some of those decisions were made?

Yeah, I mean, after we met in 2017, started spending more time together. I think the biggest question we had was, we became convinced that this crypto thing, I mean, Fred much earlier than me to his credit, Coinbase started 2012. But 2017, we started to see that crypto was definitely going to be part of the future, probably the most interesting thing we could work on for 10, 20 years. Like we grew up on the internet, but in a lot of ways we missed it, right? A lot of the biggest internet companies were already built. Crypto felt like this place that we could actually contribute, make a difference. But when we looked out there, we didn't see another crypto investment firm that if we were starting something, we'd want to take money from. So that was the core of where it came from. And we started to, we went on walks, we did an offsite in the woods, we started to put ideas on paper of what that would look like. And I think one of the early seeds was this idea of the type of talent in crypto that's going to make a difference is very different than like the staff engineer at Google or the famous XYZ person in Web 2. It was just a unique skill set. Some of them are anonymous or pseudonymous. So a core premise for the firm was always be a place that really special, brilliant people would want to spend time. And if we could get that part right, regardless of what they were doing, everything else would probably fall into place. And it's like we never had a job spec for the research role. We just knew Dan Robinson and we were like, how do we get him on the team? Let's make something up. You can spend time however you want. At the time he was working on Stellar open source stuff. And we just took it from there. Or Samczsun, like we never thought we needed a security person, but we started seeing Sam the Legend just finding all the bugs. And so we were like, maybe we should talk to him. And everything's evolved from there. Obviously a lot of structure has come into place and we've developed more of an intentional strategy, but really coming back to first principles, it's really that talent-first approach that I think continues to guide us today.

I think it's a general phenomenon actually that, obviously it's sort of obvious when you state it, but the talented young people are the people that actually create the future. And so if you think about where the talented young people want to go, 20 years ago maybe it was Goldman Sachs or McKinsey. 10 years ago it was Google, Facebook. I think today most of the young people we meet or talk to are already messing around with crypto, right? Like Anish who's on our team or Charlie, they were in crypto when they were 12. And if you capture the inspiration and the minds of people who are up and coming and brilliant, I think that's really powerful for crypto as a whole. And obviously we think about that in Paradigm too.

You mentioned you wanted to build this because you couldn't find a place you'd want to raise money from if you were building a thing. Do you think that's got better or worse since 2017? Might be an unfair question. You can just stare blankly at the screen if it's politically bad to answer the question.

I think it's got more extreme. There's many more good examples now and then many more much, much, much worse examples as well. And it's interesting to see.

Sorry, I was still thinking about the people that you bring on. You just announced today an entrepreneur in residence, Jackson Dai from 100 Thieves. But I was also thinking, between Dan or Hu or a bunch of these people, really, really smart people. Sam, which Sam? Samczsun. It's like his name is a combination of three giga billionaires in crypto. But a lot of these people are so talented they could probably go do billion-dollar protocols, get infinite funding on their own. So how do you incentivize people, from a culture perspective, not talking about money necessarily, but make them say, I'm at Paradigm because this is the best freaking place to be versus go chasing doing their own project or something?

Well, maybe we can both rip on this. I'd say our goal is just to help the people building the most ambitious things out there. And one cool thing if you're on the team is you probably want to work on those things too. And it might be that you get to help multiple of them at once. So it's sort of like for the right brains, that can be a pretty epic setup. They don't have to marry the bag.

Well, you've only been in profit. You have to be desperate in your position and down horrendous like somebody like me to know what it means to marry the bag.

That was like the light had gone out in life. It was 2018, 19, that was nothing compared to the 2014 one because it was like Gox and everything. It was horrible.

Yeah, exactly. That was Ethereum and a bunch of the stuff we see today. So it was time and some internal sense.

Mark Cuban in the chat wants to know how many anons are on the Paradigm team. It might be the real Mark Cuban, we're never sure.

So if you look at the website, we have at least Sam and Hu, and we've got another joining soon. And we're experimenting with it. I think what's great about crypto is people can come out of nowhere and do amazing stuff on the internet and you don't have to go look at where they went to school or what they did in the past. The work is just out there and speaks for itself. And I think that's super powerful. So for us, we love that talent and it comes from everywhere around the world.

Another question I have about the research side of things that you'll do is you'll put out a blog post and it's like you just throw it out there for everybody. And I look at it and I'm like, somebody definitely could have taken this idea and raised a ton of money. And you're just like, well, here's how you financialize NFTs, and you just give it to everybody. What's the strategy with that? And then where does that, how do you encourage that type of culture where you're not like, okay, well here's exactly how we're strategizing what we're going to build around this primitive concept in crypto that nobody else has thought about? It's just an interesting model for me. I love reading the posts and then I instantly start thinking like, who's going to do this? This is a huge product.

One thing both learned is, having started companies and worked on them and invested in a bunch, it takes a lot of energy and dedication and time to build anything that succeeds, right? And so even if you have the idea, to actually put together a team and a company or a DAO and actually execute on it is a lot of work. And so part of what we hope when the research team publishes some of these ideas is that that actually brings people to reach out to us and maybe that's the start of the collaboration.

Also say one belief we had going in is a lot of the best ideas, whether it's research-related, investment-related, or otherwise, come from people just following their natural curiosity. That's how you get to the good stuff. It's not necessarily the hot thing at the time. That's how kind of first principles, how you get the good stuff. And we wanted to try to create an environment where people not only could do that, but they were explicitly encouraged to do it.

I like it. That makes a lot of sense. There's another question from the chat about anons. I've got my own theory, but they want to know which one of you is 0xSifu.

He's in the background over there. Can't you see? It's him, right? We've got that's like on the, is it Guess Who where you got to flip all the faces down? Yeah, Guess Who. We can erase like 50% of the board now. All right, we've narrowed it down. Has a mustache.

So over the last sort of, I don't know, time all blows into one. I don't know what month is this, end of November. It's my birthday in three days, messed up. So over the last few months, people have been starting talking about DeFi 2.0, which to me seems like forks of DeFi 1.0 with new logos and stuff. Or like, yeah. And a lot of the traditional DeFi stuff has been in a bit of a bear market, especially against ETH. And there's often people saying on the internet that it's feeling a bit stale and they haven't seen anything interesting in DeFi in a while. And then a new primitive or something pops up and everyone's skeptical about it and then it goes to a multi-billion dollar valuation and then someone just says they haven't seen anything in a while again and it sort of repeats. So where do you think we're at in the life story of DeFi? Where do you think we are and what do you think happens next?

I think we're super early. I mean, if what's happening is we're building a financial system from the ground up on blockchains, I think there's still a lot left to build. And we often think about this idea of the periodic table of DeFi. There are these elemental primitives that we're discovering, and basic decentralized exchange is one of those, lending, leverage, synthetic assets. And maybe there's some squares where there could be something like algorithmic stablecoins, but maybe we haven't figured out what exactly the right way to do that or even if it's possible. So I think innovation will come in waves. The new hot thing every month, this month it might be some NFT thing or some Web 3 thing, but in the background we meet a lot of people who are still working on DeFi. And so I think if DeFi is interesting at all, it's probably interesting for the next 10 years.

Is it half that yours though? Isn't half of that yours? They still can't hear.

What do you think are the missing pieces to take us from that 100 billion to those multi-trillions? What are the stepping stones along a big buy?

Money. You have a... well, I think your point around just embedded trust in systems is a good one. Yeah, I mean, I think one thing that's missing is, well, some of these things just take time, right? You can analogize to software as a service, which today is like the hottest tech category and there's a new SaaS IPO every week. But actually, people don't remember back like 15 years ago the idea that you would outsource some really important...

Piece of software to someone else in the cloud was like this really controversial idea. Companies like Fortune 500s used to not buy software that way, they used to do it on-prem and buy CDs and stuff. But what you saw happen is over time as the SaaS software exists and people use it and it works and it doesn't get hacked or go down, people start to trust it more and more. And I think the same thing will happen with DeFi. We put 100 billion assets in DeFi, sometimes there are hacks and hopefully Samsung can start saving some of that, but over time it'll get more and more hard. That was a brutal one. And it's like one of those things, once it's existed for five years you start to trust it a little more, maybe people put more money in it. I think another thing that will happen is right now crypto obviously is very yield-seeking and speculation-driven. And I think in the long run, when this DeFi infrastructure is serving trillions in assets, it's going to be a little less speculative. It'll be a little more like what are the actual financial services that are being demanded by companies and users. And I think there's a lot to build until we get there and it just takes time. And I think we'll see these waves of people will speculate on DeFi, a bunch of infrastructure will get built, and then that infrastructure will then be able to serve more real use cases over time.

Around the trust you talked about, time and people's willingness to just realize that these things are possible, it makes me think of when elevators came out, they had the attendant and a lot of it was basically because people felt safer if there was a person operating it versus just being able to push the button and it does its own thing. One of the things I hear a lot is just this fear of it's gone forever. So the finality of the blockchain is a feature and also can establish fear for people. And do you think in addition to time and best practices, some other feel-good things like insurance on-chain for your assets or some product-driven stuff could assist in establishing more trust for people?

Just a riff on the first point for a second. There's a great book by Robin Hanson called The Elephant in the Brain where he talks about how some industries or some products might actually be mostly superfluous and just because people want this sensation of feeling cared for. He argues most of healthcare is actually just because people want to feel like a person is taking care of them, totally independent of the efficacy of the treatment. Not to say that's the case, I don't think that's the case at least. Maybe that happens, who knows. On the product question, I think it's your thought. Well, one thing I'd say is I think crypto, you can always add reversibility on top of an irreversible protocol using some centralized or layer 2 sort of solution. And so whether it's on-chain insurance or insurance that gets built on top, to the extent Coinbase was to ever offer that, I think some people sort of have the model that the blockchain has to solve everything. But I think we often forget society can build a lot of stuff around these core primitives that end up solving the issues that people have. And on the flip side, irreversible transactions can be really powerful for certain use cases. So I think it's great we have those too.

I think you going into the Lloyd's of London would be a bit more successful than me because I look like I'm homeless so they'd be like, show me out the door.

Right, you have the accent though. Maybe that doesn't work in London. It's sort of like the British accent only makes you smart when you're in the US.

Yeah, I don't think it even works there anymore. I think it worked maybe 30 years ago or something.

For sure. Social recovery and user-controlled wallets is probably a great example of that where people kind of put their money in this user-controlled wallet and they're like, shoot, if I lose my private key then all my money is gone. So just some of the mechanisms around that, all the ways to go.

Yeah, the chat has asked me to stop talking about insurance so I will. Wait, wait, you're taxing me. I want to talk about, we spoke about going from 100 billion to the multi-trillions and crypto getting much bigger than it is, that it's early. At the same time, we've sort of, this year particularly, dominated a lot of popular culture. The richest man in the world went on television to talk about Dogecoins and it was super weird, he dressed up like Waluigi. And there's been a massive, massive rise in retail traders, option traders and stuff. And you've sort of begun to see this divide between people who are very okay with crypto, they think it's super cool, they think it's going to be the future, blah blah blah. And then this sort of visceral outcries of anger from people. Like Discord, we're doing this Web3 integration and they got hundreds of maybe thousands of reports saying like, if you do this I'm going to cancel my Discord Prime subscription or whatever. And that guy that does that late night show in America, Jimmy, they're all called Jimmy, he called Jimmy, Jimmy him, he put his profile picture to a Bored Ape and in the replies there were loads of other Bored Apes being like thumbs up and then there was loads of people being like, Jimmy I can't believe you've done this, you could not sink lower than this, you have completely destroyed the Amazon rainforest just by pointing. And it does seem very split now where there's people like, yeah it's cool I own an NFT and then there's people like, you own an NFT I'm going to find out where you live and kill you. Why do you think this has happened? And then how do you think that public perception changes as it goes to multi-trillions in DeFi? I just think they just keep getting angry on their phone.

Well, I think one thing I'd observe is there's always, passion is better than indifference. And I think you always have to worry about releasing a product or doing something new and nobody cares. And I think that's the most common outcome. So the fact that people care enough to be really, really against something, I think is a signal in of itself. I think it speaks to how a lot of what crypto is doing is challenging very basic notions that we have. You saw this with Bitcoin in 2012, 2014. Most people don't think about the nature of money, especially in the US or Europe. We kind of have dollar privilege or Euro privilege, right? Like we have good money, we've never thought about why it might be good to have Bitcoin. So I think the same thing is true for NFTs or DeFi. It's really challenging people and sometimes people react a certain way, but I think in the long run optimism tends to win.

Can you clarify whether or not you hate the rainforests?

Yeah, yeah, that's also the Saylor route, didn't he? Posted all those anti-Bitcoin tweets when you were building Coinbase and then decided to buy loads of Bitcoin from you a bit later on. He went down a similar route. I think it is relatively common. People don't like to admit that they were wrong often in public. Play pretty good too by the way, if anybody needs to short this, this is a long podcast, that's a short podcast so we can say it's good. Yeah, the competition. Worried about competition from... look, people don't tune into this because it's a good podcast, mate. The thing's good, it's not competition. Good guests despite the quality of the podcast. I want to ask, who's the smartest person that either of you know that is bearish crypto and do they have a good point?

I don't know if we want to call out specific people. Yeah, hate mob right. In our conversation this morning, I don't think he would mind. We had a team chat with Moxie this morning, the founder of Signal. And I don't think he's... I think he's very rational in his view, which is to say he has worked on decentralizing user-enabling technologies for I think decades at this point. Extremely experienced cryptographer. And his question is sort of like, okay, we've seen these waves of decentralized protocols with the internet, SMTP, etc. and at the end of the day it turns out centralized entities can build faster and can create better user experiences because they don't need to worry about decentralized infrastructure. So is that where we're heading with crypto? And then I think one can get into all the nuances and debate, well is it possible that you have some decentralized layer and then centralized layers built on top of that and that's a better world than we exist in today? Even that's an unfair example because I think he's actually quite optimistic and open-minded. I actually struggle to come up with an example of somebody where their feeling is they're well-informed and they think it won't work. The only thing I could put in that category are people who are just really worried about politics or something like that. Outside of that, I think the chat brought up Charlie Munger, some of the old guard, really smart people. But I wonder if that's just a generation difference, like they're just not going to get it no matter what.

Yeah, I think that makes sense. I think a lot of the smart people that I know that are bearish just see the stuff that seems silly. They see the dog money and they see rugs or whatever and they're just like, what is going on? And you're like, yeah but look a bit closer. They're like, no I'm not looking any closer, it looks ridiculous. And yeah, you can't blame them sometimes. Sometimes you're like, okay, I think we have to train ourselves actively to kind of ignore that impulse because even being people in crypto, sometimes you see stuff you're like, that couldn't be more stupid. But let me turn off that part of my brain and lean in a little bit to try and understand what's happening. And I think usually when you do that, at least you learn something even if you don't end up investing. I feel that way about Worldcoin, I really do. I mean, it seems a bit dystopian but I understand at the same time they're trying to be like whatever UBI or something. So I understand there's some ideas there. I don't think y'all backed it, but I looked on the investor list to make sure I'm not shaming your investments.

The first due diligence ever done on the show.

To be fair, it wasn't until the show started, it's like on my phone. Am I making fun of... they're backed. But there's smart people behind it both on the investor side and the team side and I kind of get what they're talking about. I just can't imagine a world where you're staring into basketballs and scanning your eyes and calling it UBI and giving like 30% of it to the team and investors. It just doesn't make sense to me. It would be sick to have one of those orbs though, wouldn't it?

Oh man, I want you to put that next to your tungsten cube.

Gold. They look super cool at a minimum.

So given your bullishness in like a multi-decade sense, and at the same time you all have multiple cycles under your belts, Kobe does going back a pretty long ways, to see the cyclical ups and downs and the volatility that can occur in the market where the valuations of even like Ethereum can go down 85, 90% even though it's got some product-market fit even in 2017 and stuff like that will happen again. How do you approach investing or the market in general, maybe choosing what you're investing in and then balancing that against deploying... what did you raise, two billion? 2.5 billion? Did I... it's like a half a billion dollar difference. I don't know. But you know, then you go deploy those funds and I assume you're also considering where are we in the cycle? How do you balance all this as a fund?

Yeah, I mean at the highest level, because of the long-term bullishness and conviction in what crypto might become, what we really care about is what is going to happen 10 years from now and not what's going to happen one year from now. And so as long as we don't market buy something for the whole fund tomorrow, but we're sort of investing over time in... wasn't that the whole point of coming on the show? Yeah. Have an announcement? No. As long as we're investing in the best entrepreneurs or the best opportunities we're seeing over the next couple years, I think in 10 years, regardless of what happens in between, if we pick the right folks to back, I think it'll all work out. So we're really, I think part of the blessing and curse of crypto is it is liquid and you can track a price day-to-day, month-to-month. It is also really distracting and sometimes the biggest things that have been built take 10 years to build. So we're really trying to orient our vision out there versus shorter term.

If you think about it, it actually feels much easier, don't it? I mean if you try and think what's going to be important in 10 years, it seems much easier than what's going to be important in 10 minutes or 10 days. It's like you take a step back and go, right, what's really... don't get wrapped up in all these weird trends and thinking like is the money going to rotate from Solana to Avalanche or back to Luna, which way is it gonna go. And I think there are some people who are really good at that and all the respect in the world to them, that's not what we're good at. I don't think. I think that's a really hard game to play. And I do think having the luxury to think really long term makes the game a lot easier.

So this might be an unfair question because it's quite hard, but if you're thinking 10 years out, or decades or multi-decades or whatever, how do you think about layer one blockchains? Do you believe in a world where Ethereum scales and everyone's got like Vitalik on the newly printed Ethereum dollars? Or do you see a multi-chain world where people are, it's abstracted away from them from a user experience point of view, but they're jumping between on these bridges between a bunch of different blockchains? And maybe the primary blockchain is not yet even invented and you are doing the seed round for it at the moment?

I think one thing to think about is there's always this question of theoretically, should something be a win-or-take-all market? Theoretically maybe there should only be one social network or there should be one operating system or there should be one whatever. And I think a lot of people have made smart arguments around there should only be one cryptocurrency because store of value blah blah blah, or there should only be one layer one smart contract system. And I think empirically that just hasn't been the case. And if you look at Bitcoin and Ether just as two examples, they've sort of carved out, although people yell on Twitter all the time, they've carved out pretty distinct communities and use cases and they occupy a different part of the tradeoff space. And I think the same is happening for other layer ones. And so it all depends on your time horizon. In a hundred years, what's the answer? I don't know, maybe there'll be one winner-take-all. But I think for any time horizon that is meaningful, there's probably going to be a bunch. And so we spend less time thinking about which one is going to win above everything else and just focus on what's providing value to users and developers and what are ecosystems that are likely to grow. You might disagree.

Do you think when that happens a lot of the opportunity in crypto disappears quickly for investors and stuff? Because when you have those mainstream apps, suddenly it clicks into place for so many people at once, where at the moment it's this weird magic internet money thing and they're like, well does it solve any real problems? And then when you have these consumer apps and they see it and they go, ah, right, no, I get it now. But it happens for so many people at the same time that there's sort of a dilution in opportunity. Therefore right now is the time to be deploying $2.5 billion into stuff?

Well, I think two things to point out there. One would be judgment and taste matters. Just because crypto is going to be a thing doesn't mean every crypto project is going to exist in 10 years and be really valuable. So I think picking the right ones matters. The other thing I'd say is no matter how bullish you are, I think we're just wired as humans to underestimate what exponential growth can look like. It's a really funny question actually to think about, which is even if you asked Fred what he thought Coinbase would do today back in 2012, there's no way he could paint the picture of what it's become with a straight face. Because you're talking about Bitcoin at over 50,000, you're talking about a company that's worth over 50 billion in public market. Entrepreneurs are ambitious but they're not going to paint that specific picture. And so I think even as we all sit here today, as mainstream as crypto has been, as excited as we are about it, I think even us are probably not intuitively understanding how big it might be in 10 years. And so we always have to remind ourselves that even if you're the most bullish person, exponential curves are hard to.

Yeah, I think it's reasonable for the richest people in the world 10 years from now to be made up mostly of people that were early to a trend as big as crypto, if crypto follows kind of this growth path of the internet. Right now the richest people in the world are from the internet age and before that it was oil companies or whatever. I don't think we're there in terms of... except for maybe Sam. I think CZ is already secretly the richest person in the world. I think CZ, people are saying that in the chat and I think that's a really interesting feature of crypto, which is these aren't people showing up on fancy lists and they're not flying to Davos and networking with the existing establishment. They're people that are coming out of nowhere. It's global. I think we're probably really underestimating the kind of effects of that. And hopefully it's for the good. I think generally the people benefiting off crypto probably self-select for more open-minded people and people who are interested in weird things and excited to take them seriously. I think having more resources in society go to that type of person is actually tremendously optimistic for the future.

We're gonna get so much good anime funded.

There you go. That's what they need.

Yeah, so hopefully it all continues. I mean Justin Sun almost got liquidated for like four billion just because this collateral wasn't quite there. Do you reckon Justin's just going to rug the ConstitutionDAO and outbid him, go flying at the last minute and just like, sorry I double-bid, that's just something to do. It seems like the ConstitutionDAO thing is way too public to work. Somebody's just going to be like, I know exactly what you've done, I can bid $1 more. Yeah, I know how much you've raised. Yeah, it's gonna be Justin, I guarantee it. You just gave me the idea. Somebody's gonna send him this. I'm gonna text him. Justin, please buy the ConstitutionDAO. Nice flex. So I want to pull back to some of the identity-driven stuff. You talked about the metaverse earlier and I know y'all are really interested in the Web3 plays in kind of this next iteration of social, metaverse stuff, whatever it ends up being. And the wallet being a part of that, is the wallet the identity? Is it a multi-wallet future? What does a login look like into the metaverse? How do you blend all that? Where is our being established?

Yeah, I think the top-level framing of it is... there's so many good ones on this. It's sort of like there's an iPhone bundling moment that is happening with the crypto wallet in the same way that the iPhone bundled a bunch of different physical devices into one: an MP3 player, a mobile email device, a literal mobile telephone, or a computer to access the internet, put it all into one user portal. The same thing is happening with crypto wallets but with virtual services. So what is your crypto wallet? It is your bank account, it is your identity, it is your reputation, it is your ability, it's your universal internet login, it's all in one place. It's effectively the digital you. As time goes on it will be the digital representation and ownership layer for everything that is you on the internet. I think that's a pretty dramatic shift that people may not fully grok yet. So I think they'll be extremely central just to the way that we live over the coming decades. Assuming that is true, in the same way that an iPhone or smartphone in general is really key to our lives today, I could imagine that crypto wallets are even more important than that 10 years from today.

Can we do that and maintain any degree of personal financial privacy? Zero-knowledge proofs maybe?

To be less cryptic about that, it's a really good question. Right now everything you do on a blockchain is tracked. It's this kind of interesting thought in that in some sense there are the early beginnings of next-gen social networks just from on-chain data. It's like I have fred.eth, you have your ETH identifier, you're doing all sorts of actions on-chain like buying NFTs, that's basically a social graph and an activity feed in some abstract sense. To hit the privacy point, we're definitely going to need to evolve better privacy tools, otherwise we're going to live in a pretty bizarre transparent world. Maybe that would be good in some ways, I'm not sure. But one thing that a lot of our team is very into are zero-knowledge proofs where you can still cryptographically prove certain things or take certain actions without your bank statement being public on the internet. And that'll probably bleed into people building applications and all that good stuff too.

Yeah, or like your medical records or your vote or things that are very real world.

Exactly, yeah.

So how come Zcash just keeps going down? Zooko, the two billion dollar buy is going straight... Zooko is just rugging on purpose.

Yeah, one thing that's been interesting to watch in Web 2.0 land is how much people actually care about privacy. Empirically, billions of people have given over troves of their public data to large companies in exchange for convenience. I think people might react to that a little bit differently if it were fully transparent. So it's not only like are you giving it to a company, but it's on this big public web that anybody can read.

It might also get more sensitive too if it was their bank. If it's financial transactions, bank records in addition.

So I think there's a bit of a shift there. One other kind of related but separate point is sort of like, I think this is a big question for Web3 in general. It's sort of like, okay, people clearly valued convenience and centralization in Web2 land, so is that actually going to change or not? And will people actually use these Web3 apps for that reason when they are way worse user experiences in many different ways? And one thing that we go back to a lot is the idea that ownership is really the key ingredient of Web3 and a huge sea change in how people think about the value proposition of different applications online. So yeah, it might be that people really like great centralized user experiences, but it also might be that if you say, hey, you're an early adopter of this application and there's huge economic upside for that, that could be the most powerful factor of all.

Did seem to work for BitClout at first, didn't it? Until all the weird stuff came out. But I think it does make sense and it puts you in... it's sort of like, I don't know how to phrase this, it's kind of like what crypto people do now, right? They use these protocols and then they get an airdrop and then they decide whether they keep the airdrop, sell the airdrop, buy more of the airdrop. But they have some ownership over a product that they use. But you just extrapolate out to anything, you could potentially use games, social networks, whatever app you use. But imagine the anxiety and stress of like, I've got all these little fractions of tokens of all these apps I've ever used, which ones do I... it's going to be a right mess. Blockfolio is going to be way too long.

We need a dust collector.

I'm just going to leave them all. I really like your point about the way Web2 companies, they just don't put out there like, here's your exact net worth and what your bank statement is. It's more you see it in the sense of like, here's some recommended products that we think you should buy because you talked about these last night around the living room. And they're just really good with ad awareness and targeting and we kind of forgive that because it doesn't feel as directly intrusive.

I think that's a really good point. But they know all that stuff. They know when you're pregnant or they know when you're whatever, they know all these things about you. They know your spending habits. So yeah, maybe it's just figuring that out.

Yeah, that makes sense. I know we're running a little bit long on time but I think we have a couple of questions maybe from the chat. And Kobe got follow. First I need to know, based on all those things you said, it sounds like maybe you're still pretty bullish on something like Punks. So like kind of the OG avatar, are Punks overpriced or underpriced right now? That's what I want to know. That's what I want to know, just selfish. I'm just, it's for the people, it's for the people. You're going to like buy or sell after this. I didn't ask, I can't afford a Punk. I didn't ask about my bags. Now if I asked about Cryptodes, you know, it's a whole different story. But obviously we can't get V money, that's fine. You can.

I think one thing we can say is I do think if you look at the world of art, there is always something special about unique pieces of art that end up changing the paradigm or getting people to think about something in a different way. And they can be self-reinforcing.

When you both say paradigm, which you use normally in a sentence, it's like in a movie when they say the title of the movie in the movie. It's like, do you use it more or less? Do you try and avoid the word or do you...?

Yeah.

Kobe, did you use my bad question to prepare your show-ending questions?

Yeah, I got a couple of quick fire ones because we have like four minutes over. So we'll do a couple of quick fire ones and then we'll peace out. I want to know, what have you been wrong on? Your biggest, I'm firm on this thesis and you just totally messed it up, you were so off the mark. Because like very impressive people, but tell us when you were wrong. Catastrophically wrong with huge consequences if possible.

We're wrong all the time. I'll rip a little while, pick an example. We're wrong all the time. I think that's just being an investor. One observation is often the most expensive mistakes are the sins of omission rather than the sins of commission. Especially in a venture context where if you're right it could be a 10x, if you're wrong you're down 1x. So that's just a very asymmetric risk-reward. So I would say the ones we beat ourselves up about the most are probably the ones that we missed or chose not to invest in.

Yeah, any favorites, guys?

Yeah, that makes sense. The scar tissue thing hits home for me quite a lot. Next rapid fire question, how do you get to work with Paradigm? If you're listening to this, there's a bunch of people listening, they might go, I want a job at Paradigm. How do they make that happen?

I think we're always interested in thoughtful, energy, special people. Just send us something cool that you made on the internet or in crypto. That's the best way.

Okay, we should do... yeah. Final question, we ask it to every single guest at the end of this podcast or whatever we're doing right now. We want to know a piece of, a sort of mantra or something that you often find yourself reflecting on that guides your actions in life. Maybe you got it from a book or an old teacher when you were young or a parent or something. But some sort of life advice that our listeners or viewers can use to make themselves happier, smarter, more fulfilled, richer, you know, just make their lives a bit better. Something that you find yourself applying to life quite often. I rant a lot, ramble, so it gives you time to think. People that watch just like, goes on about this for ages. It's not that complicated of a question.

I mean, the biggest one for me is, I mean it's easy in life to sweat the small stuff and all kinds of stuff happens to the best of us. I think for me it's always been about zooming out and what are the one or two things that really matters in a job, in an investment, in a situation. And I think usually if you get those right, everything else kind of takes care of itself. So figuring out what those things are is super important.

I like it. Amazing. Thank you both for your time. Sorry we ran over a little bit. Thank you so much for coming on. And if you've tuned in, thanks for watching. Thank you all so much. You can catch them at paradigm.xyz, got the social handles there, all that good stuff. Appreciate you all being here. Fred, Matt, thank you so much for being here with us. As a reminder, go to up.tv, FTX, you can trade crypto right there on the FTX app just like we do. We bought the dip today. I did, I don't know about you, Kobe. You can do it on FTX. Up only.

I haven't looked at the price since I got back.

FTX as well. It's not bad. It's okay. It's okay. You still have time. God, yeah, I'm not looking. Thanks for joining. Not off holiday. We're back. We're back. We're happy to be here. See you later. Bye.