Will Every Failed Crypto Idea Work? – The Chopping Block

I think the blockchain is the greatest capital innovation machine in the world.

I think we don't think it's big enough.

Like it literally is everything.

Like there's not a company in the world that doesn't have to deal with payments, capital raising and things like that, and the blockchain has shown that.

Not a dividend.

It's a tale of Tuan.

Now your losses are on someone else's balance sheet.

Generally speaking, airdrops are kind of pointless anyways.

Some unnamed trading firms who are very involved.

Alec.e is the ultimate on.

D5 protocols are the antidote to this problem.

Hello, everybody.

Welcome to Chopping Block.

Every couple of weeks, the four of us get together and give the industry insiders perspective on the crypto topics of the day.

So quick intro is first you got Tom, the Defi Maven and master of memes.

Hello, everyone.

Next we've got Troon, the Gigabra and Grand Puba at Gauntlet, but he is running a little bit late, so he will join us shortly.

But joining us today, we have special guest Nemil, crypto wiseguy at Y Combinator.

Welcome to the show, Nemil.

Great to be on, Hassib.

Yeah, great to have you.

And I am Steve, the head hype man at Dragonfly.

We're early stage investors in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life advice.

Please see chopping block.

XYZ for more disclosures.

So Emil, you're joining us from Y Combinator, the legendary startup incubator.

You were formerly at Coinbase.

I was seeing all these clips on social media of like this gigantic startup school, like stadium level event that was happening the other day.

We had an epic.

Yeah, we basically rented out the Chase Center in San Francisco.

Got about 7000 builders, so I had everyone from like 16 and 17 year olds building with AI all the way up to, you know, 40-year-olds like me all looking here from Jensen Wong.

We had Sam Altman there.

We had Patrick Collison talking about crypto and Agent P.

Uh, so it's a pretty epic event, um, but it's basically our way to really connect with people who want to build, uh, and want to start a startup.

Wow, I can't believe that you've got Jensen Huang, the famous guy, the guy who built his business on crypto mining, and Sam Altman, the coin founder, on stage.

That sounds like an incredible event.

I assume crypto was the start of the show.

Yeah, and so it's actually funny, but I think Agent 5 definitely was one part of the show, right, with Pat Patrick Collison talking, um, but I actually did panels on, uh, blockchains.

We got a ton of builders.

Uh, this is actually my favorite time in the cycle because you have a lot of the serious people who really want to build for the longer term coming in, and I ask people how many of them are launching a token early on, and almost no one raised their hand, which is pretty, pretty awesome to see in terms of like just an early builder and just really focusing on, you know, solving a user pain point.

We had a ton of people really focused on stablecoins, um, and then there's a whole group of people, uh, especially from traditional finance focused on, um, just agentic finance, and that was everything from using AI to pay for different things.

So, uh, I have an AI, it's going to do some work and it's gonna pay for some APIs with it to everything from a hedge fund that they wanted to build using AI models, you know, that could outcompete existing funds or at trade in crypto.

So it's a pretty like, I, I think it's a different market than you might get 2 or 3 years ago in the top of the crypto bowl, uh, but it felt like pretty, pretty awesome, awesome builders there.

Very cool.

So yeah, it's it's interesting because we're in this kind of moment right now where a lot of stuff in crypto is working.

But it's a lot of stuff that isn't exposed to the underlying Bitcoin price, right, or the underlying crypto asset prices.

So, on the other hand, you've got a lot of businesses that are exposed to underlying prices struggling.

One of the big news this week was the closure of BitMex, the infamous exchange, the, the inventor of the perp swap, kind of the, you know, the, the, the one of the seeds from which the entire derivatives industry has really emerged.

It was kind of the birthplace of derivatives and crypto, uh, which today are the majority of what's traded in the industry.

They shut down on, uh, September, or they're going to be shutting down on September 23rd, after 11 years of operating.

And they were once upon a time the number one derivatives exchange in crypto.

Now I don't even know where they are on the map.

You know, I presume this is one of these things that as the industry grows, as compliance costs increase, their market share has decreased, and of course, crypto trading volume is down quite a bit.

Bit it's become a much tougher market for a lot of these players to operate.

Then we got Bitmart announced another crypto exchange, less well known, but.

Yeah, I mean, it's one of those that was like always like, you know, number 30 on coin market cap.

It's like, oh, wait, they're doing.

15 billion in volume, and they're like exchange over 30, that's interesting.

And then uh there were some other announcements of wind-downs, storage Labs, movement labs, Balancer Labs, a lot of labs companies for projects that actually are on chain, not just exchanges, are also winding down.

And people are kind of realizing like, oh, you know, the, the amount of fanfare and the amount of surprise is sort of less and less with each one of these.

There used to be this joke that crypto protocols or companies, they, they never quite go bankrupt.

There's always someone out there willing to run a node, there's always someone around there willing to trade their token, so like nothing ever goes to zero.

But things are actually going to 0 now.

So, Namil, how, how do you, how do you react to this moment?

What do you, how do you interpret what we're seeing going on out there in the, uh, in the headlines?

I would say like despite all those shutdowns, I've never been more bullish.

So at least on, so I think you mentioned two sides, there's one is the trading companies.

And what I would say there is a lot of the other players in the market have adopted their innovations.

For example, Perps is a critical product.

I think Coinbase started announcing that in the US and other markets around the world.

Binance obviously has had it for a long while.

So clearly they said history, uh, and like, you know, any innovative market, other people caught on, realized that they have to do it.

Uh, and again, I think there's things like, uh, I think a guilty plea, uh, and some other challenges early, you know, in the last few years for, for a B back specifically, but I think if anything they like led the way.

And a lot of the industry learned from that and moved on from it.

Um, and so in terms of trading, like what I'm seeing is that basically trading is being added everywhere.

All major financial institutions in the US and worldwide are now adding it.

And so I think what you're seeing is this blurring of the lines where things like Coinbase with their everything exchange strategy.

I spent 7 years working there.

Basically it's like acknowledgement that you can't just do crypto.

You have to think about prediction markets, you have to think about stocks.

Everything else.

And I would say this is the opposite.

Every financial institution in the US is adding it, and again, volumes may be lower when Bitcoin prices are lower, but that's going to change.

We've all been in the industry and seen the way these cycles progress.

Absolutely, I think that's going to change.

And then on the lab side, I think it's really interesting where I think two things I'm seeing, like one is that these governance tokens and things like that, we're realizing that they might not be the best model, but part of it is.

There's actually clarity.

Even before the Clarity Act in the US is passed, there's starting to be more and more clarity, and you saw that in Hester Pierce's, you know, recent post that there is like a lot of this stuff should exist and the government for a lot of the things wants to get out of the way and allow people to be able to build.

And so I think that's really awesome because a lot of the growth of labs and governance tokens was a function of the lack of like regulatory clarity.

So I think that's really, really awesome to see.

And the flip side is I think Like anything I see, um, in the startup ecosystem, we see so many bets in the future.

And so for example, Move is a good example where the bet was a better programming language, would attract a ton more developers, and we saw that with Ethereum and Solidity early on.

I think that market has changed pretty dramatically and you're hearing, you know, developers vote one way or the other.

Um, so I think that's the, the follow-up there, but I think the big shift really is that a lot of things we don't talk about is all these.

Less sexy things happening.

So in YC, just to give you an example, there are 4 or 5 like stablecoin companies that very few people have heard of Jeeves, Infinia, Blinday.

These are all examples of companies that most people don't hear about.

They're not a consumer facing brand like an um Open Sea or Coinbase, but the developers using them.

They're building on stablecoins, and I.

The Last thing I'll, I'll say is that I don't think a week passes without a financial institution reaching out to me, a bank or institutional investment firm somewhere in the world that's excited to integrate crypto in some way, and a lot of times it's hidden from the user.

And so again, that's a very different mindset, I think, than I saw a few years ago where the idea was everyone's gonna interface with crypto, they're gonna know about it.

And so we're gonna have to make the W experience amazing for them and things like that.

And again, I think that will eventually happen, but really what I'm seeing right now is this is the infrastructure layer for everyone.

And institutions are getting in and the clarity is coming, you know, one way or another, clarity is coming, and so as a result, like a lot more people are building on it, but it's just not as sexy maybe than it was a few years ago during a bull market.

What do you feel like are the biggest like learnings or misconceptions or shifts that teams have to make when they're going from maybe having building web 2 to building even even like, you know, stablecoins and building a more sort of, you know, normal consumer product still using.

Table coins of the hood or maybe building something more exotic in YC and then vice versa, what are the biggest sort of like, you know, YC truisms or learnings that you feel like those teams like value the most or maybe take most to heart.

So like for the crypto builders, I, what I see a lot is um either they're decentralization maxis, and what I would say like YC in general and um I imagine for you guys as well is that the biggest focus is about solving a pain point.

Like users don't care about decentralization.

Um, some do, you know, some developers do, but a lot of people don't.

And so like you have to meet people where they are.

And again, you're talking to the person who used to run stablecoins at Coinbase, you know, so I've, I believe in the power of like anything that solves a user pain point, be it centralized, be decentralized.

And so I think that's one thing we definitely see with some of the best, the web 3 builders is that their default come in with an ideology, and I think one of the most important perspectives in YC is make something people want.

And so as a result, like think about what the pain points are, and that's where I think stablecoins are so interesting today is that even though they're centralized, they run a decentralized infrastructure, um, and they solve a very, very clear pain for, for people.

The other thing is I think that um, I love the idea of tokens.

I worry that for a lot of consumer products early on, that's kind of dangerous to launch a token if you're getting your product.

On having access to a token, I suddenly think your TA, your addressable market goes down a lot.

And so we really counsel people that we love the idea of launching tokens.

If they're real world assets, and things like that, awesome.

If there's some type of incentive token that's part of your, your product, we love it like later in the process once you have some PMF, uh, because again, if you're giving away money for free, a lot of people use your product that says nothing about what they, they really want to use the product.

Product or not.

And so that's probably like the other big thing that we, you know, talked to Houston about.

And the last thing I think in this market especially is those, you may not solve it directly for the consumer, you may solve it for an institution or developer or someone else behind the scenes.

And so like one of these themes we're seeing a lot is, for example, that I'm selling to a bank or I'm selling to a fintech and so for example, companies like Gusto, it's apparel company.

Uh, and they're doing payroll using stablecoins, and they need infrastructure to be able to do that.

Deal is another example of that, um, and they both need infrastructure to do that.

So it's not, you know, it's not like the, I think the bull market where it's all consumer, a lot of it's behind the scenes.

And then I think you asked me on the web side, but maybe the, the quick answer there would be is like, I think a lot of it is that everyone's AI pills.

So how do you get them to know and understand the value propositions and the, the financial people get it.

That, that's maybe the interesting thing that I've seen is a lot of people from Tradfire moving over to crypto and they look at it very differently.

And I like some of the things I actually disagree with.

I feel like, you know, crypto is unique and you can't just take tratify learnings, but the flip side is if you're selling to a bank, you're trying to do like a real world asset, they actually have a lot of muscles and skill set to be able to take that and think about how that's on the blockchain, especially if institutions are.

Using it.

And so that's kind of a cool like side effect that I wasn't expecting, um, and I would say most cycles in crypto would have like ignored their perspective because it was, I felt a little too early, but now actually it's the perfect time.

So, Emil, you're, you're talking about how, you know, more and more of crypto stuff is kind of pushing away from decentralization and kind of more practical, more focused on real world utility, and I completely agree with you.

I got into a bit of a tiff over the weekend with Imran at Alliance Dow, and he, he tweeted this tweet, which went quite viral.

Almost everything in crypto that failed the first time will eventually work sometime in the future.

Bitcoin looked like it had failed many times in the past.

The same will happen with NFTs, creator tokens, Dows, gaming, TCRs.

On chain reputation, rebates tokens, decentralized storage.

Uh, as time passes, each of these ideas will make more sense.

I was with you up until there.

I just think we're still too early for many of them, and we don't quite understand the need yet, but eventually it will make sense.

I, so I, I, you know, quote him and got and got pretty, uh, in his grill about it.

But I'm curious how you react to that, especially given that, you know, YC you guys are at the very, very early stages.

And, um, somebody made a very good point.

So I, I kind of had the obvious response, which is that I think this is a toxic attitude to take.

Uh, it's, it's almost like a toxic positivity.

Kind of thing where it's like, OK, this is, this is kind of too Pollyannaish, you should be learning from the failure of your predecessors, and like, in biology's parlance, like, you should, you should study the IDMAs and understand, like, who went down which corridors and what are the bodies that are, that are, you know, like, desiccated sitting there with their hand on uh uh some kind of booby trap.

But um somebody made a point in my comments, which I thought was a a very good one, is, um, If you think about something like polymarket.

If you think about something like hyperliquid, these are perfect examples of ideas that didn't work for a very, very, very long time.

And then started working.

And so, Namil, how do you think about this?

If, if you're responding to him, Ron, he says, look, all this stuff is gonna come back eventually, it's gonna work.

What do you say to that?

Before I say an answer, I just want to say thank you for the warm memories to TCRs.

I've not thought about that in almost a decade, and I was exciting to hear about TCRs again.

Um, and I actually worked for biology.

So like he made me a really good coroner to figure out like where the bodies were buried and what you can learn for the future.

And by the way, To Bai's credit, he's a huge, huge bull on Bitcoin, and he also saw the power of stablecoins very early, and that was one of the products that we worked on together.

So I think it's pretty amazing that you can have that both mindsets that Bitcoin is going to be insanely valuable and also stablecoins should exist and dollars should be on the blockchain rather than just replacing the dollar.

But um I like, to me it comes back to like, uh, I don't know if you heard of Webvan.

This is this 1990s internet startup.

There are all these examples of 19990s internet startups that flamed out, they raised too much money, had some fanciful vision of what the future was, and I was in Ycom in 2012.

There's this company called BitBank which turned into Coinbase.

But the other company was Instacart, and Instacart like had a very different model of how they approached it.

So one was obviously the time was different.

There are mobile phones that were available, but the second big thing was they didn't go build factories on day one.

They literally hired people and have them go into stores, you know, Whole Foods and others that already existed.

And bought something so they didn't have this massive capbacks.

So I felt like what Aurra did when he built the Instacart was a really, really smart, like go to market.

And then he also like really depended on the mobile phone.

No way.

I think Instacart succeeds without the idea of mobile phones being everywhere and Webvan in '97, 98 clearly didn't have that.

So I like, uh, if anything, like I think Steve, we might get into fight here is that like I actually believe that.

A fair number of those things that failed will come back.

But I think like you, like I, I guess I'm skeptical they're coming back right away, but I think that some of those things will.

TCR is like, I actually think they're probably gonna be a different form.

There's gonna be some form of data repository where there's tokens and you're incentivized to contributing data to some type of repository.

I've seen, I've seen that idea a bunch of times, and I think that eventually we'll figure out the right use case for it.

So, in my city, I think the way we think.

About it is, one is, what is different about this time?

The why now is such a critical part.

When I, I, we do 10 minute interviews with founders, and then we have to decide, do we make an investment in them or not.

And one of the core questions we always ask is the why now.

What's changed about the world that made this idea that maybe it was terrible a few years ago, a few months ago.

What is different about it and how do you approach it differently, you know, than other people did.

And so again, I, like, personally, I'm really excited.

For social, I think that's gonna come back like in a big way, but candidly, I'm not investing in a lot of that today, and I wonder, I'm curious, like, is that the way you approach it as well, is that do you think like which of those will come back someday?

I mean, if you, if you take the literal list that he promulgated, which is, you know, once again, NFTs, creator tokens, Dows, gaming, TCRs, on-chain reputation, rebase tokens, and decentralized storage.

This is kind of like, you know, it's like walking through a cemetery, um, ideas that even at the time, I thought like, man, I really don't know if this is gonna work, or like who this is for.

I think of these, which of these do I do, can I, can I, what kind of evidence would I need to see for me to believe that, OK, somebody is building new Dow infrastructure, somebody's building a new NFT platform, and like, OK, I, I think there's potentially they're there.

It would have to be to your point, something has fundamentally changed in the, in the environment.

Or in the the the other substrate on which blockchains are layering on top of, that that has changed.

And it's changed the underlying demand for this thing, right?

So, I, I made the point that like, look, NFTs.

I can believe that NFTs will come back if we are all living in VR.

If the year is 2035 and we're doing all of our Zoom meetings in some kind of virtual space and like we need some way to create digital scarcity, digital fashion, digital whatever, I can totally buy that they're going to be digital, like, you know, very clear universal ownership layer for scarce goods.

Makes perfect sense to me.

I can totally buy that.

We're not in that universe.

Anybody who goes and pitches me today on I think NFTs are gonna make a comeback because, you know, I'm like, no, of course not.

And I think for many of these things, it's difficult for me to even imagine.

What would have to change in the world for me to believe that this thing could come back.

So, I, you know, rebates tokens is so vague that I'm like, OK, well, that's just like a mechanic, that's not, that's not an idea.

But for something like creator tokens or gaming, I increasingly think that like these are just wrong.

But like these are just actually incorrect mappings between incentives or like, if you, it's kind of like, you know, you're you're you're a chef, and you're like, huh, what happens if I put salt and crab and I don't know, toothpaste into a cauldron?

And the answer might be like, oh well, there's one other thing you could add that would make it delicious, but sometimes the answer is like, no, these things just don't go together.

These things don't taste good together.

Stop trying to make it work.

So, one, these, these are not, you know, new ideas.

These are actually like generally very old ideas, right?

Like even stuff like Aldo, stablecoins and prediction markets.

These are like Bitcoin talk era or older ideas.

And so it's not even so much that, hey, you need someone to have this idea new or even from 2021 or something.

There's a Sort of, to Emil's point, I like the why now framing of, well, hey, now we have a different regulatory environment, different technology, different install base, sufficient stablecoin liquidity, better UX, whatever, whatever it actually is, that actually allows this thing to exist.

And I think like, you know, with Van and Instacart, like two great examples.

I think kind of sticking on this food delivery idea, I think there's also A path dependency to getting to whatever success looks like in kind of the heyday of the food delivery wars, you know, famously was like, you know, DoorDash and Postmates and, you know, Grubhub, and it was like, DoorDash took this approach of really going out into the suburbs and getting a lot of these chain stores, which is obviously how it's very uncontested territory and it was, you know, how a lot of the US looks.

And that ended up being a very successful strategy for them.

In terms of building an actual dedicated, you know, loyalty base and sort of remote there, and then be able to go into the cities.

And so you can have multiple teams executing well with a similar idea, just taking a different path to get there and ending up with a very different result.

And so, I, I look for a lot of teams like that too, where it's the initial people that sort of see the application or that are actually, you know, doing the original go to market that can end up actually sort of affecting, you know, the very, very long sort of end state of a, of a given company.

Well, OK, so to, to argue against myself a little bit, uh there's a famous line, I think by Mark Andreessen, where he says, you know, back in the uh late 90s when they were looking at the early generation of internet companies, when they saw the web vans and, you know, all the companies that famously failed, uh the Chewy's and so on, that uh what he said about that time was that every idea that we were pitched during the dot com bubble eventually came true, literally every single one, but of course timing is everything when it comes to making investments.

And I think many people, like, there there's a kind of an intuitive appeal to that idea that you can kind of just see the technology and just unroll the future.

And it's just really obvious how all of this is gonna integrate into society, that the internet is gonna be used for everything, that AI is gonna be used for everything, um, and of course, our version of that is that, well, crypto will be used for everything.

So, you know, crypto will be used for all the games, it'll be used for all the jewelry, it'll be used for all the watches, and, uh, you know, for creator tokens, every, you know, your income is gonna be coming from a creator token that you've issued or, you know, I, I still don't know exactly what TCRs are used for, but whatever, whatever lists you have will be TCRs and like, I think this is Like maybe there are some technologies for which this is true, right?

I'm, I'm willing to grant that like people in the late 90s could have just said everything will be on the internet and they were right about all of it, right?

I don't think that is true in general for technologies.

I think the internet was genuinely a unique everything technology, and I think crypto is not an everything technology.

I think it is a many things technology.

I think it is plausibly an everything financial technology, but the, the core thing about many of these ideas is that they're not financial.

Right?

Like you're talking about creator tokens and Dows and games and, you know, on chain reputation, decentralized storage.

These are not financial.

And my thesis for a long time, and I, you know, I've gotten into big arguments about this, is that like, the core of crypto has always been about money and finance.

Bitcoin was about money.

Ethereum was about contracts, right?

And, and DeFi, it's got finance in the name, and prediction markets, and stablecoins and tokenization, all this stuff, it's like very obviously all part of this, you know, mountain that it's been carved out of, and it's the mountain of finance and money and assets.

The farther you go from that, the more we're kind of telling a story.

And it's a story that just hasn't been vindicated.

It has not been borne out in, to your point, Emil, what do people want?

What do people actually want from us?

The answer is that they do not want us to solve their non-economic problems.

And crypto keeps trying to do it.

And so very famously, I mean, one of the stories that obviously connects to Coinbase is that Base very famously was trying like crazy to get this consumer social strategy to work.

Right, so very famously they were uh hawking creator tokens, you know, uh, Jesse from base was pushing Zora and uh this idea that everyone's gonna be using the Base app in order to own content and trade content and so on.

And he recently came out with a very long post where he more or less gave a mea culpa.

They're like, look, we got this wrong.

This is not what people use blockchains for.

Because of that, we were distracted, focused on the social thing, and we've now fallen behind.

It's very clear the story is about real world assets, asset tokenization, prediction markets, more financial things.

He did say, look, I, I, I don't believe that we're wrong forever, but we're definitely wrong for right now.

And because of that, Jesse acknowledged that he was handing off the base app to Kobe.

Uh, very famous crypto trader and crypto, uh, uh, celebrity who is now running the base app, while Jesse is going to be focused on the base chain.

And so this seems like from Coinbase an acknowledgement that like, hey, we made the wrong bet, we got this wrong, it's about money and finance once again.

Namil, curious, how do you respond to that?

I don't have inside information, but what I would say in general in crypto is that we sometimes try to solve things that are our problem, but not our customers' problem.

And in this case, like I think that like in Jesse's note, he basically said that like, hey, I thought this would expand crypto, which again, every crypto company is thinking about how to expand and how to grow, but that's different from what do people want and what is the value proposition they have from that.

And so I, I think the challenge in general in crypto for any builder is that when you have a token, it feels like people want it because they're making money.

Especially if you're early, right?

So it really, this is what I really, this is why I counsel against the token early, is it, it basically warps your vision.

It seems like, like I, I, I think you guys probably saw the trenches during that 6 month or 12 month period around Zora and Forecaster and Base app where it seemed like there are lots of social apps being thrown out, people are moving around these creator coins.

There's a good vision for like what this would do.

It suddenly make creators get money and monetize and things like that.

And I think there were, that's where I think the idea of token go up and meme coins and things like that.

The challenge is, is there something real there at the end of the day that isn't a function of just price go up, which works for a period of time like we've seen with NFTs and meme coins and L1 tokens back in the day, but you have to really get a sense for like what is the real pain point and problem.

That you're solving and that's the, I think the YC attitude that I always have is like, what is the ultimate value prop?

Do I think it's like ephemeral?

Is it something that's happening because of price action and in crypto, you know, that's the challenge is that it feels like it's the future, but if prices are going up, anything, you know, seems like reality at that moment in time.

And so that's really, I think the thing that I focus on and maybe you see just to push back on one thing you said is that like, I think money is everything.

So like, I know we say this is like crypto is like one portion of it, but I'm like, even for storage, the allocation of that storage is a money problem.

Who do I give it to for what price?

And when I see like Filecoin and others, like that's the reason they chose the blockchain was not just the storage layer itself, but the allocation of that problem.

I think that like, you know, one thing about, uh, I see it, the big thing has been capital raising.

How do we help startups raise capital?

I think the blockchain is the greatest capital innovation.

Machine in the world, right, right, and that like it has actually really good at that.

Now, how do we make it better so that's not just pump and dumps and it's just like flipping the tokens.

But I think that's an example where I'm like every company in the world has to raise capital, right?

And so there's a part of me that like I really, I, I think like money is so much, I think we don't think it's big enough.

Like it literally is everything.

Like there's not a company in the world that doesn't have to deal with payments, capital raising, and things like that, and the blockchain has shown that.

And then I think like, the last thing I'd just say is that like, I'm always intrigued.

I think there's gonna be someone out there who comes up with a different insight for why social should work.

And it didn't work this time, but I'm used to so many times things failing.

And the thing I'd like, I think back to Steve, is the number of times AI has failed.

And you go to Wikipedia, you can look up AI winter, but I don't think people realize for 40 years we've tried various different ways to do it.

No, no, no, no, no, no, no, no, no, I'm gonna throw that down.

No, no, no, no.

OK, so the reason why AI didn't work is because the product didn't work, right?

Everyone knows what they want AI to be.

Everybody knows they want it to be general human intelligence, like they know the properties that they would imagine from an AI.

And when AI actually delivers on the product that they are pretending to be able to give you, right, when it's like, you know, Tay or Bonzy buddy or whatever, like, OK, yeah, that's not that great of a problem.

Product, but they know what it, what it might feel like, right?

In the same way we can say, look, VR right now sucks, right?

It's OK, but it's not that great.

But we all know what we mean when we say real VR like when VR gets really good, it's gonna be a killer app, and we all know it, right?

That is the sense in which AI people always knew that AI, if it got there, it would be a killer product.

You cannot say that for decentralized social.

Is it true that if social were really decentralized, and if we're really, you know, fair or whatever, I don't know what the properties is that people nowadays are trying to claim, or if it was really financialized, that if they really just got it in just the right way, That then it would be a killer product and people would use it over centralized alternatives.

I think that's unclear.

But for VR, for AI, for so many of these things, like, it, it is actually clear, right?

For sample coins, it's actually clear.

If you, 10 years ago, if I told you, you can send dollars anywhere instantaneously, 24/7 to anyone with a mobile phone, will that have product market fit?

If you can do it, yes.

Now, do I believe you can do it?

Do I believe it's legal?

Do I believe it'll be liquid?

Do I believe, you know, yeah, OK, maybe all those things were standing in your way.

But if you can deliver that product, yeah, of course, people are going to want it.

So that I think that is the big distinction with a lot of the non-financial use cases.

No, no, no, I totally agree.

I think you, it's very clear with AI what the end outcome was.

And I think in crypto, it's harder for some of these things.

You're totally right, for stable coins is easy.

But I think, by the way, I think one thing that's interesting is like you said, decentralized social.

I think social is like creator loyalty is the way to frame it, and like I'm like one thing I always do is look at like antecedents, like what came before and what pain points that they had and like I'm like, all of us use loyalty tokens already.

Because of like freaking fire miles is just like one example of something that we use every day.

And now I'm like, should there be another form of that, that's tied to like these large massive podcasts or things like that, like a chopping block tokens someday.

I'm like, yeah, maybe, but I think the question is, what is the utility of it?

What's the value of it?

But by the way, that's where I agree with you is that like, I don't.

I'm not a believer in just generic decentralized social as the solution, and I don't know what pinpoint that's necessarily solving.

On the blockchain, I get it.

I'm like, you can't actually make this a reality like the internet, if you can backdoor it, um, and as a result, decentralization is critical, but for something like decentralized social, totally agree.

Creator coins, I'm like, I think the way it was implemented was not the right way.

Absolutely.

And now my question is, like, maybe a smart person will come out and figure out a new way or the world has changed in some way and make it a reality.

My, my take on these things is that like, blockchain is ultimately a mechanism, right?

It's a mechanic.

It is a way to implement the thing that you want, but what is the thing you're actually trying to solve for?

Like just stapling a blockchain to a use case. is not a thesis, right?

In the same way, calling something Uber for X, right?

There were some actual Ubers for actual X's, and like there were places where that actually made a genuinely better product.

But there are many things that you can Uberify an X or Y or Z, and it's not better, it doesn't make anything better.

And there is nothing intrinsic about the combination of two mechanics that is alone sufficient for answering, will something exist at this intersection.

So, blockchain plus, you know, I, I remember when I first got into crypto, the first thing that I was pitched on, cause I used to work at Airbnb, which also a YC company, was Airbnb for uh Airbnb on the blockchain, right?

And so many people told me like, well, obviously this will happen.

Obviously, Uber, Uber on the blockchain and Airbnb on the blockchain, inevitable, inevitable.

Why?

Because, oh, there's this platform in the middle, it's rent seeking.

What are they even doing?

They're just aggregating data.

Everyone should own a piece of it, right, because they're part of a two-sided network.

Very intuitive.

The explanation even still sounds intuitive.

Now, when you look at the details, you realize like, oh no, everybody who's tried this learns very quickly.

It's not actually primarily a two-sided market business, it's a trust business, a curation business, a fraud business, and blockchains suck at that stuff.

Blockchains are a disadvantage in curation, in anti-fraud, in all these other things.

It gives you certain properties at the expense of certain others.

And, you know, famously for Uber is, is kind of the same thing, right?

Is that like, so much of what Uber does is actually operations and like, you know, at this point regulatory stuff, uh, even as much as it is just, oh, it's an app that has two different, you know, sides of a market on it.

So, I, I, I bring all that up to make the point that I think the bias as an investor, and obviously, look, I'm putting my money where my mouth is, I will say it, it, this heuristic has, I think, done us very well to avoid a lot of the hypepe areas within crypto that have not panned out, is that, look, one, follow demand signals.

Right?

Almost all of these ideas, right?

To the Last man, NFTs, creator tokens, Dows, gaming, TCRs, entree reputation, rebates tokens, decentralized storage.

Almost every single one of them did not come from a demand signal.

Almost every single one of them came from, I have a hammer, here's a nail.

And this is like the classic crypto thing, right?

Is that like, you write a blog post, an investor writes a blog post, founders read the blog, you know, we like kind of blog post each other into a frenzy, and we're just like, oh well, obviously this should exist.

Like the same way that somebody was trying to obviously me into saying, oh well, Airbnb on the blockchain should exist.

And like after 10 years of this, I'm like, no, I think this is the wrong way to arrive at these kinds of ideas.

It's like, if you're not starting from a demand signal, you are probably fooling yourself.

And it's not always true, right?

I think there are genuine counterexamples like polymarket, um, but it's mostly true.

Yeah, I, I just don't know if I would group all of those together.

Like, I think there's some where it's clearly, there's clearly some burst of demand.

Like I would say NFTs, you have insane amounts of volume, it's celebrities, these others, it felt like always like pushing on a string.

It's like it's just this forced meme that when you look at the numbers, never really added up or to Neil's point, it was like, highly incentivized with, you know, a token, which happens in normal venture too, right?

Think of all the places that have VC dollars thrown at it, it's like, oh, actually, this is.

You're not economical.

We can't really get a marketplace bootstrapped, and so it's just going to kind of, kind of die out.

I do think again, that the, the path dependency thing is also very real.

Like I always think of, not to keep name dropping YC companies, but like Reddit versus Dig.

It's like, you know, basically the exact same product, totally different paths and totally different communities.

It's like why, it's like, one is seeded with YC people talking about YC stuff and a YC culture and like, that obviously ended up, ended up diffusing over time, but it's like this sort of founder effect, I think is very, very real.

So, it could be the case that, like, OK, the stuff that's been tried today, it didn't really have the right sort of first step.

It's like, you know, you, you landed in Jamestown, you didn't land, land in Plymouth Rock, and so therefore, you know, your colony is going to fail.

But like, you know, maybe you try it again and it's a different group of people this time and they have a different sort of thing and it's like every step is, is, is very important.

OK, so Tom, let me ask you more pointedly, what would you need to see to back a TCR?

I'm not gonna back convince you.

I'm gonna stop you right now.

Um, but I do, I think, I think Nemil's pointer end up reputation.

I actually think there's something interesting now, that, you know, vis a vis proof of humanity and on-chain reputation, right, where it's like, OK, we've actually seen orders of magnitude increase in terms of, you know, personas online and content and claims, and so great, like, when you see orders of magnitude, you know, increases, decreases, there's probably, you know, some, some change and required and how we've sort of done things previously.

I was linked to Neil's point around capital markets.

This is one of the oldest ideas that I think there's clearly, you know, demand and it's like, OK, well, You know, in the past, it's like you shoved the the plane off the cliff, and like, it was kind of airborne for a little bit and then it crashed, but like, it was airborne for a little bit.

There there's something in there, and it's like getting the details right, and it's gonna take some work.

It's clearly, I think such demand and clearly such good like technology uh product fit for something like that.

That that's fair.

Although if you're gonna read that broadly enough to be like identity, then, OK, yes, fine.

But I think on chain reputation is like if you said identity, I'd be like, yes, I agree that's a huge problem.

The solution would be very big.

Uh, go ahead.

Steve, are you bearish on chain identity or unchained reputation?

What is a reputation on an identity?

Well, no, I mean, I think I'm, I'm, I'm bullish on the concept of identity.

I don't know that it will be on chain, but if it is on chained, great.

On chain reputation, I think of more like, did you do good things?

Are you a, are you a nice guy?

Did you rug people?

Did you like this kind of thing?

There's a few protocols in the past that have tried to do this, right?

But I think reputation, obviously reputation is not identity, right?

Like, like reputation tracking services or reputation, you know.

The whole idea is to build a social profile of somebody despite the fact that they're pseudonymous.

That's what I interpret.

Is a credit bureau to you on chain reputation?

Oh sorry, reputation, plausibly, I think you can, you can, you can tie those things together.

I think it's very clear that like on chain credit, uh, purely on chain credit doesn't work very well because of the, uh, what's the term, repudiation, repudiability of addresses, right?

I can go do a bunch of bad stuff, I can default on loans, I can whatever, and then just never use that address, never opted into my system, and like credit underwriting requires a full view of a person's activities.

And this is historically one of the, and of course the fact that there's no recourse on chain, right?

I can't put a lien on somebody's address, and so there's no ability to garnish wages, there's no ability to like force any kind of payback.

So all these things have made it really difficult for reputation on chain.

Or credit or whatever to really emerge without going off chain.

And the reality is like there are people now that are doing on chain credit, but they're reaching off chain and they're saying, OK, you know, we need to do some KYC we need to understand your real business.

And so when I say on chain reputation, I'm assuming that's what is meant here, not off-chain reputation on the blockchain.

I think that's about, you know, bootstrapping, right?

Like that's, that's a different, you know, sort of path to penetra.

And then eventually we're we're just saying, OK, we're saying like, no, no, I see you and I take a bunch of docks and stuff like, OK, yes, of course, that's going to exist.

No, going back to like, again, the Instacart thing, it's like, OK, we're not going to boil the ocean.

It's like we're going to start very small and lean and like do this kind of pseudo MVP that doesn't really do the thing that we explicitly said we're gonna, we're going to Wizard of Oz basically.

And then over time, we sort of wean ourselves off of the Wizard of Oz version and we had the real thing going.

I think actually, like, there's something that's got a lot better with.

I was kind of like, it's the the Carl Sagan quote, It's like, if you want to bake a pie, you got to create the universe or whatever.

And um I feel like crypto is like that for a long time.

It's like, well, I want to like, make an app, so I'm going to make a new blockchain, which is obviously stupid.

But now it's like, OK, you can piece this stuff together with some APIs in an afternoon.

And then great, now you can kind of go and do the thing that you want to do and kind of, you know, gradually kind of swap pieces out in like a modular way as you get bigger.

Totally fair, totally fair.

And, and to be clear, I am not making the claim that like on-chain credit will never work or that on-chain identity is irrelevant or anything like that.

I take this to be like an index of 2021 ideas, right?

That's what I'm reading this as.

And so I'm thinking of the 2021 version of what people told me was going to exist, right?

Like I remember we did DebtDo, uh, if you remember DebtDo, Tom.

And like this was uh this idea that you could have Dows that are issuing credit because you could put like a ratchet directly into the protocol that allows them to basically be, you know, uh, you know, sort of take first cut of revenues in order to pay back the debt, and like, you know, it's like, OK, that I can buy that, that kind of makes sense that like you have mechanics similar to like a lien that is enforced by a court, but in in this case it's enforced by smart contracts.

It didn't work.

And maybe someday it'll work and like plausibly that you could do something like that into hyperliquid today.

Maybe hyperliquid could take on debt as a protocol, and basically like the debt holders are guaranteed to get paid first before equity holders get distributed dividends.

Makes perfect sense.

That could totally work.

But uh the 2021 version of this, you know, which I think was like a little simplistic, a little Pollyanna-ish.

I don't think it's like a matter of, oh, it'll all eventually happen because it was foretold and like God just plays mysterious games.

Yeah, I I think that's I think that's that's that's more the point, which is like, you know, startup ideas that are like too like naive or literal, almost like never work.

I'm just like, I want to build a payment network, so I'm gonna like.

Get, build an app that lets people and then to get everyone on that versus, oh, no, actually, I'm going to build this little widget that is like backwards compatible with the existing system and you can, great, you can swipe a card on your phone and you just have this like little hook into eventually what ends up being a big market, but it's starting with the kind of like simplest toy example, and then using that to grow.

Actually, I mean, Nemil, you've also been around the space for a while.

I'm curious if you have like pet favorite ideas that you like want to see happen or that you keep, keep wishing are gonna like, you know, happen someday.

Like one thing I will say is I think what I miss about 2021 is people are trying things or what I miss about the old Bitcoin talk days is like, by, by the way, X402 is one of the teams my product, my team launched at Coinbase.

There's a Bitcoin talk article from 2011, you know, about that, and the why now is basically agents exist now, you know, machine payments matter.

So what I, what I will say is like, what I really do enjoy about it is that people are trying things, we're iterating, we're learning what works and what doesn't work, and the world is changing.

I think the part that's a little actually disappointing to me now is a lot of the things we are building in crypto are direct analogs to what's in Tradfi.

And that's like saying that the internet was great for newspapers.

Clearly it's great for newspapers, but if you look at Facebook, that's a really weird, different thing and it's not a natural analog to the old world.

And so that's kind of like, I'm also excited to see more of that.

And right now at least I think the moment we're in crypto is a lot of like, oh it exists in the in the other world.

Silvercoins is a really great example, right?

And now let's find the.

Blockchain and it's instantaneous.

It's cheaper, it's faster, whatever, like, those are all the things that it comes with.

And I'm like, yeah, clearly, that's awesome.

And I think there's gonna be a massive business built on that.

But I'm also excited to see, you know, a little bit of more, more of the inventive and, you know, out there stuff.

And maybe to go back to TCR is like I, I think 11 I do wonder, like the way we talk about it is that like, we're overloading the term.

So when we say social, I'm not.

I believe in decentralized social, but I do wonder if there's a loyalty token eventually.

I think like TCR is an example where like I think data collectives need to exist, um, where like you need to contribute data and you might get equity, like a quasi form of equity in that data, like over time.

And I think I was really excited about early crypto was like one of the visions was that building double side marketplaces like Uber is hard.

You could use tokens to like accelerate that.

And again, like we've talked about this for 1015 years.

I'm not sure I've seen like a good way where you accelerate it, but the token doesn't turn into a game and then the thing implodes, you know, at some future point.

And that's, those are the types of things, Tom, that I'm personally really excited, like if someone tries and figures that out, that'll be like a huge net win for the world is if we can figure out double-sided marketplaces more easily.

You know, with the right crypto incentives, and I think that a lot of it is about like, how do we take the awesome power of the blockchain, let's say capital raising.

It's freaking amazing, like that, you know, in the world, it's like awesome, but then how do we get rid of the more extreme playing with gasoline dynamics of that, you know, that leads to too much capital for the wrong protocols and early exit liquidity and things like that.

And that's, I think, where we need to like start innovating and and just to give you like an example of a story is like. before YC, like all these VCs would like negotiate custom rounds.

You pay $300,000 to $60,000 for this.

Um, a lot of VCs would write in random terms that the founders couldn't push back on and basically like YC's innovation was like, let's launch the safe, a standard document that like everyone can align on the.

Lawyers already know about it, doesn't have weird terms in it.

And that's an example where you took a market that like maybe had a lot of lack of transparency and made that a little bit more transparent that was.

And that's why I think crypto needs is a little bit more of innovation like that, that takes the awesome power of this and harnesses it in the right direction.

OK, well, we have a special guest, Troon joining us.

Very lucky to have him on the show for, uh, you know, he, he, he rarely makes it on, but, uh, this time he came right on time.

I apologize for being late.

My phone got stolen and it just took me a long time to get home today, so.

Uh, so that was my, it's kind of a little of a disaster of an IR all day.

So I, I again apologize to all of yours.

So, well, if you, if you just to get you caught up, we are debating TCRs.

Uh, Namil is very bullish TCRs.

I embarrass you your take.

You know, there's something I'll give you, I'll give you, I'll give you context that.

Did you see the post by Imran?

Yeah, yeah, where he was like, almost everything that failed will come back around.

So I'm very anti this.

Nemil and Tom.

Emil is he more believes it.

Tom is somewhat temperate in the middle, if I can summarize very, very brutishly.

Tro, what's your, what's your take on this whole argument?

I think I'm probably somewhere in the middle where there's like clearly ideas when you're assuming, OK, so like, I think a lot about 2017 and 2013 in crypto.

Where there was kind of this hidden belief that homo economicus existed, like this perfectly rational person who would participate in every network that existed and allocate all their resources to my network, cause my network had the best white paper.

You, you know what I mean?

Like there was kind of this hidden assumption in all of the crypto inventions that was like, my thing is just so beautiful that everyone will drop everything else in the world that matters to them and only focus on my thing.

And I think like you need that little grandeur of delusion that kind of Get something, but obviously I think For a lot of these things, that has just not been true, right?

Like, Dow governance, great example, TCR is a great example where like, there are a lot of other incentives at play.

There's sort of this idea that like, people don't care, and when enough people don't care, it becomes much easier to manipulate, right?

So there is some argument that maybe some things with a world of agents and a representation of yourself that can feign interest and rationality at all times, maybe the world looks different.

Maybe homo economicus.

I like this.

Maybe homo economicus will be reborn.

I'm not really convinced of that for most things.

I think the payment one is a kind of interesting one because I think about the early Bitcoin. era where everyone was like, yeah, well, obviously the miners are machine to machine payments.

That's like, that was it, that was the machine to machine payments, like mining pools.

Like there was, there are some posts that say something almost exactly like that.

And then it was like 2017, Iota, machine to machine payments, all the IOT blockchain stuff is Realistically, the same thing.

And then it's like, actually now it actually seems like completely feasible and fathomable, whereas like in those cases, there was always this kind of like, you had to take some leap of faith.

And so, uh, in that sense, I think there are good ideas that exist.

I'm not sure all of them, in fact, 99% probably are still going to fail, because humans can only concentrate attention for a small amount of time, agents can concentrate attention for a certain amount of time.

But they're still resource heavy, so it's not like it's free.

But I do think there was a, a kind of, uh, I don't know if, I mean, I'm sure you guys all remember the, um, if you're in crypto Pivot to AI tweet by Jason Calacanis, and then I guess Brian Armstrong wrote this long tweet and that made Jason change his mind and write, if you're in crypto, use AI as his new version, which I think he wrote yesterday or today, I, I forget, sometime in the last week.

And uh I thought it was kind of an interesting thing where, There's a sense in which AI actually has a lot of the like white paper energy, like most, like not, you know, not mega labs, not the data center operators, but like everyone in the middle, right?

Like every new NEOab is like, I mean, all the US open source labs are white papers, right?

Like more or less, for being honest, like the Chinese ones are the only ones who've delivered.

It's like the opposite of the US versus Chinese L1s in 2017, where the Chinese L1s are all fake and the US ones existed, just a funny comparison.

But um, there's kind of an interesting question of like, hey, are there ideas there that mix with the crypto ideas and like suddenly that primordial soup is something, and then that's where I'm That's where I'm like, I'm willing to kind of bend them so no, if you're like I want Terra 5002, then that's like, OK, fine.

Yeah, I totally agree with you that like, look, underlying technology change means the rules have, the rules have changed.

We've, we've sort of shaken up the chessboard and now actually there are moves available to you that weren't available before, right?

If you, if you move your knight here every time you will die.

But now all of a sudden the chessboard has changed, you move your knight here, actually the board's open.

I think AI is one of these things that actually does change the landscape.

I totally agree with you there.

I, I think the same thing, like I said, you know, VR plausibly could change our, the, the market for NFTs.

That said, I, I actually really like the way you framed it, Tarun, about like, we had a lot of assumptions about people are going to pay very close attention to very subtle incentives.

And, you know, it's like, OK, well, normally, you know, if I'm if I'm bootstrapping Uber, uh, I might pay out some rider incentives, but now I'm giving you a token in Uber, which means that you must, if you're following your incentives and being rational, get all of your friends and everybody around you to start using Uber just like you, so you'll become unfathomably rich because multiply, you know, small probabilities together, you get very big numbers.

I think the reality is that some of these arguments are just wrong.

It's a little bit like, you know, it's it's it's crudely analogous to like the arguments for socialism, which is that, well, if everybody just follows this perfect equilibrium of like being good to their neighbors and thinking about, oh, the family unit is already socialist, so you just expand that outwards and like, isn't there a beautiful symmetry to this idea, but in practice, it just doesn't work.

And you can try again and try again and try again, and it doesn't work.

Now, maybe it'll work when the players are agents, and they're not humans, and they don't have bounded rationality, and they don't have, you know, whatever biases that we have.

But for many of these things, the answer is like, you know, why don't those work?

They should work rationally.

What exactly is so different about a Dow from any other form of governance, but very clearly Dows are really bad.

They are reliably worse than almost any other form of corporate of corporate governance or whatever.

And there's some deep property here that maybe we can't even articulate of what exactly is the reason why, but it's very obvious from the record that if you can avoid being a Dow, you should.

You will be better at doing your job if you're not a Dow.

And it's like we've genuinely learned that.

I don't think that's a like, oh well, you just don't have the right Dow tooling yet or you don't have the, you know, your Dow members are just not as good as my Dow members.

I think it's that, look, we've actually learned something about the world and we should be incorporating this into how we build things going forward, you know, in the same way you learn about management over time, we've learned about the quote unquote management of systems with crypto or decentralized networks being one of those quote unquote management tools.

I just think like this homo economicus are like this perfect rational human hidden, that's willing to like do all the the token incentives, and also isn't the person who made it, trying to get other people to buy it, like balancing those two is like a very hard game, but I think the agent world.

Like, I, I'm actually more of the mindset that we just haven't conceived of the correct financial like interactions they're gonna have, right?

We're thinking of these very like human speed peer to peer, but like, maybe they just love bundling millions of transactions as one, or like, things that we haven't really totally thought of, and that's more, I think maybe that's kind of what Namil is getting at at the end, but like, that's sort of what I'm more excited about than the things that are like, how do we like, give them human capabilities, right?

We should treat them as this like magic alien that can do something you can't do.

I, I feel like we landed on a foreign planet and T and we're like every day learning more about this entity that's out there, but like the, like the version I give is that like with AI agents like um e-commerce, I feel like it's gonna be like credit cards, they're gonna be connected to agents, we're just gonna do the same thing we do, like something like that.

But then there's these things like I think you guys maybe heard like Cloudflare announced that they're gonna start dating websites uh behind a call and pay for that with crypto to start with.

And I think like I'm really curious, how does that work?

Is that gonna work effectively or are they going instead just sign business development deals with large players like they've already been doing, you know, and that's the, the, the way this is gonna work, um, or the AI agents are gonna pay 3 cents and 2 cents and 5 cents for different types of transactions.

And I think personally that gets me excited to just see what's gonna happen, right?

So first of all, I agree, we don't know yet, way, way too early to be prognosticating any of these things, but I think we're also any new technology, the um, It's easy to fall into the trap of wanting to paper over complexity.

Right?

I think like with the early internet, people had this idea of like, oh, we're, we're all going to be online and it's going to be people from all over the world, and we're going to learn that we have no differences and blah blah blah.

And like, well, no, actually, like the Russian internet is very different from the Chinese internet, which is very different from the American internet, and like, inevitably that's going to happen.

There's going to be splintering.

Same way with the blockchain, I think we had these very simplistic.

Ideas about the complexities.

And I think it's, it's, it's likely to be even true for AI.

One can make the argument that like, well, it's very annoying for a human to like pay a cent to like read every web page, even if economically, like that is the right market clearing price, perhaps, but it's just annoying and high friction and like, you know, the reality is that you're not gonna be willing to do it, but agents will be willing to do it.

Kind of, kind of, but agents also pay tokens, and like, the cost of having to realize, oh, I need to do this and create this, like, I need, I need to create this HTML payload to like go pay this thing for like this one HTML web page that I'm scraping out of the, like, 5000 pages I'm scraping in the span of these two seconds.

And if I'm instead batching all of this with one batch payment, and I'm calling on a subscription, and I have something in the middle that's like handling all this complexity for me, and I'm not dealing individual payments for individual things, actually I cut down my token cost by 30%.

And that, like the friction that arrives in humans actually still exists just in a different form, and actually it's not so different from the old world, which is that we still have bundling, and we still have subscriptions, and we still have like, yeah, this thing is sort of too cheap to meter, even if it's metered in some more kind of loose sense.

Tom, what are your thoughts?

I'm trying to like, get, get concrete here for a minute.

Yeah, I mean, I think it kind of comes back to like, again, these, you're seeing orders of magnitude increase in in traffic, and so something's gonna break and you have to like rethink some, some assumptions.

But um I do think I I was kind of noodling on Turin's point around like the white paper era.

And I feel that actually a lot of the models that come out where it's like, you know, they report the benchmark numbers and you're like, wow, everyone's just Benchmarks look great.

And then you try and like, oh, it's like a actually a piece of shit.

And it's like, kind of, kind of like the problem with like chains that report TPS where it's like, OK, on paper, this is the thing that we care about, doesn't actually care, capture the thing that people want to do, which is like, they want to go swap some meme coins or something.

And I was actually thinking about this recently with with licensing, where I feel like crypto is very early in terms of like pushing DSL of like, it's open, and then you can verify what it does, but you don't get to use.

The actual code.

And now you see actually open source kind of moving more this direction, like Mongo has this new license came out a couple of years ago where it's like, you can use Mongo, but if you want to resell, you know, MongoDB services, you have to pay for a license in order to do that.

And like the new Kimmi weights are actually similar where it's like, You can use the Kimi weights and you can look at them, but if you want to sell Kimmi inference, you also need a license from us.

And so, I think there's some like some some interesting analogs of like, how do you monetize open source while also having a lot of the principles that that people want around like transparency, verifiability, things like that.

Uh, first of all, like we're, we're all figuring it out as we go.

That's the thing I love about this is we don't know the answer.

People are trying things and what I love every day is getting up and seeing what are people trying.

I think that like what you're saying is already happening, like the labs are already paying bulk rate to like scrape the New York Times, they're paying $10 million or $20 million but I think like when I get up, like when I look at the problem and I'm like, the thing that's crazy for me is that we're basically destroyed the monetization model of the internet, uh right now because ads essentially are gonna, are not gonna work in the way that they are today.

And at minimum, probably the AI agent may serve up the ad, they're gonna get the revenue.

Now how do they distribute that back, right?

This might not even be paying for it, but actually distributing back some money that they're making.

And I'm like, there's a version to me.

I'm like, I do see smaller content providers that are not gonna sign bulk deals.

Maybe they'll sign up for a subscription service that they're part of.

And I, I think like in my perfect world, I'd Love if I was more decentralized, so one company didn't have that power across every website that you have to sign up for my bulk billing service, you know, that like interface with AI labs.

So I'm hopeful that someone will figure it out, but you're totally right, it could end up in a world where like we're back, you know, back to the centralized version of power, and I think that like to me like it's kind of fun to mess a little bit with the powers that be, you know, and to think about models that can potentially break that up a little bit more.

Yeah.

Look, I, to be clear, I'm in this industry for a reason.

I completely agree with you.

I don't think, I think the big difference in my mind between how Hasib today thinks and how Haib in 2020 thought is that I think Hasib in 2020.

You know, very much being crypto pilled, had the sense that like, To crypto as a technology made decentralization inevitable, is that once the technology makes it possible for things to decentralize, they naturally will because things want to be decentralized.

And I, what I appreciate now is that it's the opposite.

Things don't want to be decentralized.

Things actually naturally push against decentralization.

Uh, things push to centralization, they push toward intermediaries, they push toward intermediation and aggregation and bundling and so on.

And it is only through a set of, of customers or a set of users who really truly demand decentralization be the de facto reality that the market forces will actually congeal to make something that's a decentralized alternative or push the system to stay decentralized.

And like unless that's there.

The default will almost always be it rolls downhill and downhill is some configuration that involves, no, it's not like 50 different exchanges that all have equal market share and we're all just like, you know, whatever, no, it's like 3 exchanges and they own most of the market, and ultimately if you can't, if you get kicked off of them, then you have no liquidity.

That's the default state of most markets, of most environments, of most technologies.

I 100% agree with that.

Um, and the thing I'd say actually I think innovation is the thing that breaks up older forms of centralization to create newer forms of centralization.

So I think there's a world where the last 15 years we're under the Google, you know, and Facebook and others, and now you look at the shift in that power.

So I'm actually an innovation maxi, which is that if you have new things like blockchains, if you have new things like AI, they actually disrupt the powers that be, and if we're in ever a moment where that slows down, you're gonna have those centralized forms be maintained.

And so like, really, I think the thing that I'm pushing, like I would push for it, and I think YC always does is smaller players being able to take big shots and candidly, some of them will become the big centralized players that we fear, but as long as you keep doing that, hopefully they won't be there for too long.

And by the way, tech is a really good example.

I think the other industries like financial services and others that like, don't feel like they changed that much, but in tech, I feel like even if you're the biggest company in the world, you're scared.

Like crazy right now and how much the world is changing, right?

And like that, I think to me the example of what Google has gone through in the last decade is a really good example from like a major, you know, large, almost monopolist, at least massive centralized player to someone who is actually running scared and actually having to make a lot of shifts in their strategy because of the innovation that's come.

But again, that's not blockchain decentralization leading into a natural state of decentralization.

It's actually innovation, forcing central like centralization apart and then bringing it back together.

Right.

And the story of history is always like the sort of, you know, the, are we the baddies meme?

Is that like, OK, you like rebel against the previous baddies and then you become the baddie.

And so like, OK, you know, Google fought against, you know, Microsoft and IBM and then now we're fighting against Google and like that, literally, you know, when I was growing up, I was like, Google is this amazing democratizing force in the world.

It's flattening the universe, making information free, it's a free part, everything is free, maps and search and all this stuff, you don't have to pay a dime for it.

And at the time, like, I was like, this is incredible.

What a bounty, what a, what a, what a uh inversion from what companies used to be like.

And now we look at that and we're just like these, these parasitic, how could they give these things away and steal our data and da da da, and um crypto was like the next stage of that rebellion.

And now we look at, you know, people look at Coinbase or they look at Binance, or they, they even look at like something like Hyperliquid, and they say, OK, well, this thing is, uh, you know, is it, is it, is it really so different?

And the answer is like, it is different.

But it's, um, there's no inevitability to it.

And so I'm sure today people look at OpenAI and they, I mean, now anthropics getting a lot of flak, but let, you know, let's take OpenAI.

Um, people are showering OpenAI with all this love, it's like, oh, they're supporting open source, and they're like pushing, you know, they signed the letter and they're pushing down, uh, um, you know, the token prices, and they're trying to make everything really cheap.

But there will come a time when we all look at OpenAI as these overlords that are controlling everything, and There will be a new generation of people.

It's like, it's like, I don't know, it's like Chinese history, right?

Like the emperor.

The old emperor was a tyrant, and so we killed the old emperor, we installed a new emperor and that one's good until we decide that's the, that's the new emperor, now we want to kill him too.

I mean, I, I think.

AI feels A little bit different in one kind of very weird way is like the internet when it started was trying to find direct monetization methods, right?

Like you had to pay for subscriptions or whatever, and then it just turned out that it was like actually find some other way of subsidizing PO online ads, whatever, like that kind of hides it from the end user because we want the end user to look like an American.

Because it's like they all, they all want health insurance, but they don't want to know how much it costs and they don't want to get a bill, but they have to somehow still pay it, right?

Like that, that's kind of what the internet ended up becoming, right?

It's like the US healthcare system in some way, right?

It's like a, a no bill, you don't know what you're paying, but like you're getting something, unclear if it's trash, but like, you know, and you, you might be paying in other ways you don't realize, and The Interesting thing is I feel like the AI capex stuff and, you know, obviously everyone's trying to decrease it, but like, let's suppose we do hit some threshold where it's like just so high and the OE costs are also high, right?

Like as as the inference stuff gets bulkier.

Then What is the monetization?

It doesn't feel like it's like this marginal cost of open source is zero type of thing, right?

Like the whole narrative, you know, you think about ESR and Linus Torvalds of, of Linux in the 90s, like a lot of the writing was about this like idea that like, the creation process was the expensive process and the thing to be valued and the thing that you had to spend all the money on, but after that, the marginal cost is zero forever.

Right, and now it's like actually the marginal cost is quite high forever.

There's not, there's not like a, just because the weights are open doesn't mean you're getting out the thing you want immediately, right?

You, you pay some new realized marginal costs, and it feels like that marginal cost, and maybe this is like me not dreaming of nuclear fusion or data centers in space enough or whatever thing you need to make this make sense, but like, It seems like it's too high to just be like a pure subsidy model, right?

And that to that to me that's like we moved the Parito frontier, but we also like moved back the payment, the economics of it, and I don't, I don't know how to reconcile that.

That to me feels like Industrial revolution.

Cause like, cause like I don't, I actually don't think it's gonna be out.

I don't think they're gonna be enough to subset.

I mean, look at the, look at the amount people are spending on Capex right now versus their revenue.

They're all cash flow, some of them are cash flow negative.

These are like the highest free cash flow businesses in the world, and in one year they're negative cash flow.

So like, if we think that that trend at all continues.

The ads are not enough, right?

That's like the stupidest like 30 IQ way of saying ads are not enough, right?

Just like look at the capex relative to free cash flow.

It's like, I don't think you've seen anything like this since the like.

World War II era.

Don't you think one is the cost curve is going down, and number 2 is I actually think they can take a transaction flow for the things that they help support you in buying, right?

It's not just like a straight up $20 or $1 or whatever an ad, but it's like I'm gonna take 2% of your Order because I helped like support it and set it up right to Amazon or whatever outcome based pricing click on an ad and you buy something, they took 2% outcome outcome based pricing that is beyond what you have in ads.

I think I agree like payment for order flow.

For this AI stuff is like, I feel like if the internet turns out to be only websites are generated on demand by an LOM, there's no like static servers anymore, no static websites, because like that is one thing people are starting to talk about is this purely on demand internet, like there's no, the, the tokens are generating the HTMLUC live, you're not.

Right, right, right, but, but, but in that world with no static content, then like you don't have this free copying thing anymore.

Now the marginal cost is forest of M dashes, you know, like moving your way through the foliage.

But, but like, like in that world, in that world, I, I think like Nemil's right, like there has to be some type of like order flow sharing type of thing that looks like ads, but it's ads with a much stronger performance fee than ads you have now, where there's way more spray and pray and like some conversion fee, but it's like kind of more of a lottery ticket.

Like it's becoming the gateway to everything.

Like, is, is, I think the viewIF it's like a browse, so the new version of the browser where that is the most critical, like the, the way we talk about wallets and crypto, right, it's the form of like what this is, and I think that like every user interface is going to be rethought to go through an AI agent.

And so therefore there's a tremendous amount of market power that you have there and like to me I think they're going to figure out ways to be able to gate and you know, toll gate that in various forms and it's going to be probably much more than like banner ads, but yeah, I mean, I, I did have this, this tweet a few weeks ago about how harnesses like front ends and harnesses for AI are like wallets, routers are like dex aggregators and kind of bridges and, and things along those lines.

Models are like protocols, and that basically means their fees are not gonna be, they're not going to be able to extract fees themselves as we see right now, and then inference providers or liquidity providers, right, they're putting up capital to earn some yield from the participants.

And there's like some stuff about that that's not true, like it's like a very overly simplified, makes crypto people feel good about themselves.

Oh, we, we discovered something first.

I suddenly felt very cool when you were drawing up those analogies.

But, but I do think there's some truth to that, like, because if I look at the monetization and that order flow, it's all payment for order flow at the edges, right?

Like to the liquidity prices and the wallets, and then the, the routers and protocols can't extract very much.

And maybe that's what the AI internet looks like.

Well, I mean, Saint Altman was actually NYC, and one of the things he said was the new phase of open AIs as a utility, right, which means like massive scale, low margins for some part of the business, right?

But the idea is that everyone's gonna use AI and so as a result, like that, that's gonna be different margins at, at that, that inference that that core like financial model layer.

Yeah, interesting.

OK, well, before we become an AI podcast, we are, we are up in time, so we gotta wrap.

Uh, Emil, where can people find you?

Um, I'm meant Twitter or X sorry, X Namil D, um, and by the way, today is Y Combinator's fall application deadline.

Actually, if you submit in the next few days, we'll, we'll look at it, so go ahead and submit at Y Combinator.com/apply.

OK, perfect.

Emil, thanks so much for coming on and we'll be back next week.

Thank you, everybody.