The Future of Crypto: Stablecoins, AI Integration, and the Path to Mass Adoption (Jesse Walden, Founder & Managing Partner at Variant)

27:04Double clicking on meme coins specifically, you know, I think there's no question that, you know, there's a casino element to it. I think another way to look at meme coins is as a kind of a weighing machine for something that's very valuable on the Internet, and that is attention. All right. So attention on the Internet, we know is very valuable because it is monetized typically with ads and social networks monetize it very, very effectively. I think meme coins are a market that quantifies the value of attention on the Internet directly. So if you look at the chart, the price chart of a meme coin, right, very often it's spiky, it's up into the right and then it's kind of straight down.

27:54that the shape of that chart looks very similar to the shape of the chart of virality of a tweet, for example, or social media posts. You know, when something is going viral, it spikes up, and then, you know, very quickly, it goes away. And so for that reason, you know, I think meme coins as an asset class are not going away, right? It is, you know, it is a market that, prescribes or puts a value on something that is very, very valuable on the internet. And that's going to continue to be very valuable, which is attention. And there's a lot of experiments going on with ways to enable creators to capture some of that value in the market.

28:37And so for example, if you create a meme on Pomp or on Zora, or with a protocol like Doppel, which is one of our investments, creators can capture some of the value that's being traded back and forth in these markets as a way to monetize their work directly. So I think it's not all bad. It certainly is consistent with a secular trend, which is more financialization, more markets and everything. And I don't think it's going away. I think we'll look out 10 years from now, and we'll see that the market cap of meme coins as an asset class, not any single one, but as a total asset class, will grow many orders of magnitude from here.

29:22Interesting. Okay. So the sort of best case scenario sounds like it's useful in that it sort of does chart this attention cycle. And so there's some informational value in that. And then also, you know, maybe it becomes an interesting source for the internet vernacular of memes and the people who are sort of best at creating that vernacular to capture some of the upside in it. Is that right? Is that like a fair encapsulation? That's right. And I would, you know, maybe suggest broadening the definition from just like memes in the classical sense to, you know, just kind of media on, you know, media and memes are one variety, you know, news is another.

30:01I think, you know, when when the Pope died, if you went on the front page of Pumped Up Fun, you know, there were all these memes about the Pope dying. And I heard from somebody that they found out about the Pope dying on pump. That's a hilarious indication of that person's information diet, right? Right, right. But but I think, you know, if Zora is another portfolio company that's building this space, if you go on the Zora app, you know, it's a social media feed. not you know visual one not on like instagram um but where every you know piece of media is is also a token and has a market value and that market value is is is kind of a new type of signal in in terms of what you know people on the internet are valuing and paying attention to and and so you could look at it as just a new kind of way to curate um and you know a feed it's an input to the algorithm zooming out i think prediction markets are very similar right It's like there are markets for information and there's a class of people speculating on the value of a given outcome.

31:06But there's also a lot of information in that market where people are learning about their news through prediction markets. They're learning about the outcome of election before journalists are predicting it and more accurately in many cases. And so there's a similar underlying trend where markets are creating new information. that information can be harnessed to produce news. It's broader than just laughs on the internet. It's all kinds of media, including news, potentially. I suspect this actually happened, like not just meme coins around the Pope's death, but probably meme coins for each of the major candidates who were being considered in the conclave.

31:43And in that way, you get a peek into people's revealed beliefs, or at least where they're willing to make a bet on the rest of the rest of the public. To go in a slightly new direction, you've written about the fact that this stage of crypto is really less about these net new ideas and more about this productization. And we've talked about that now with stables and meme coins and all these other sort of pieces of it. When you think about the teams and the startups that are best equipped to win in this new phase, do they look like the same sort of teams that they did when these use cases were maybe less legible?

32:22Or is it a different style of company? That's a good question. I do think that the shift from invention to productization is a meaningful one in terms of what the opportunity set is. And there's some teams that can kind of navigate that shift gracefully. And then there's a lot of new opportunity in the space as well for teams that are more well suited to productize versus invent. I'd say a lot of the opportunity today is more to do with execution,

32:52distribution, great user experiences versus coming up with the fundamental primitives. That's not to say that there's no primitives left to be built. Of course, there are more continuing to back teams doing that. But I do think that the DNA of teams that we see coming into this space and where we think there's a lot of opportunity resembles that of more traditional Silicon Valley startups where there's a very heavy focus on product, on user experience, on sort of growth. There's both traditional tools in the toolkit that you can bring to bear to execute. There's also new tools that are crypto native.

33:26And so you kind of need to find a mix of both the crypto native entrepreneur and the experienced kind of Silicon Valley entrepreneur. And so, but we're really excited about that. We're seeing them come back to the space. And again, I think that's because there's now kind of, progress and real hope that there's going to be a path to building here. I think one of the things that has been historically hard for crypto is the lack of this hyper-performant infrastructure. And there's been so much investment in that over the years that it's gotten better and better. But also some of these big user experience gaps that, again, feel like they've closed.

34:03But I think except in maybe a few cases, there's not real parity with Web2. How close do you think we are? What's missing on both of the UX and the infrastructure piece? How do you sort of benchmark that? Yeah. So we've definitely made a lot of progress. But to your point, I don't think we're quite there yet. I'd say we're nearly there. So for example, it used to be the case that if you want to use any crypto app, the first thing you have to do is install a wallet and go right down this kind of 24 word seed phrase, which was your private key. And if you lost that, you lost everything. And And so that's a pretty terrible user experience.

34:44Today, there's a number of companies. Privy was just acquired by Stripe, Portfolio Turnkey, which provide private key management and wallets as a service, essentially. And the result is you no longer have to do that complicated 24-word seed phrase. You just sign up with an email and you've got a wallet. And downstream of that is every mobile app becoming wallet aware or having an embedded wallet within it. that's huge progress. That's a, and that wallet still needs to get funded. Um, right. You still need, you know, money in it to transact on chain. And as we talked about previously, the on and off rounds are, are, are still a key point of friction.

35:23Um, and I would say that there's a huge drop off rate in, in, um, you know, signups today because, um, you know, once you get your wallet, you, you have to go through this funding process and that's still pretty janky. Again, I think that's going to change because of Genius, where you will be able to get dollars from your bank account into stable coins and into a crypto wallet much more easily over the next couple of years. Now, one of the other things that I think needs to change is that, you know, there's an increasing number of blockchains, there's applications on different chains. And interoperability between the chains is still kind of a point of friction.

36:00I had a friend texting me the other day, you know, how do I get my USDC on Ethereum to this application I want to use on Solana? And it's not easy is the bottom line. I've always thought this is a huge opportunity for wallets to solve. And we're investors in Phantom, which is one of the biggest wallets in crypto. And they are multi-chain wallet. They're on Solana, they're on Vase, and they do enable kind of swapping between them. But I still think there's a lot of low hanging fruit to just make that kind of completely seamless and something that the user doesn't have to think about at all. What I would say is, zooming out, we've made a ton of progress.

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38:13Join them at brex.com slash Mario. You mentioned Phantom, which I also got to be a small angel investor in a few years ago. Amazing product, I think. And I think a good sort of example of maybe what like the next in line class of like really big crypto companies maybe look like. You know, we obviously have had the big exchanges like Coinbase and, you know, maybe Kraken goes public this year and so on and so forth. But as you look at that maybe next in line set of secular winners, I think you've talked about like who's in that batch, you know, alongside the Phantoms and so on and so forth. Yeah, that's a good question.

38:52By the way, I would say Phantom is a really great example of the team DNA I was just describing where they're very crypto native. But, you know, the founders, Brandon and Francesco, both worked at Twitter prior to getting into crypto. They have this kind of Silicon Valley experience. They've seen what greatness looks like. I think they've built a really excellent organization with a really sort of laser focus on delivering really great product experiences. Yeah, absolutely. Distribution, distribution. So, yeah, Phantom is certainly one of the key secular winners. I think the opportunity for Phantom here is enormous.

39:29Simple way to think about Phantom is the gateway to everything that the on-chain world has to offer. So it's very similar in some respects to a browser, right? Like the browser gets you access to all the Web 2 applications. Phantom gives you access to all the Web 3 applications on-chain. and because Web3 is financial, they sit right in the flow of all the value that users are transacting in that world. So I'm very excited about Phantom. I think Uniswap is another, I think, secular winner, decentralized exchange protocol. Increasingly, DEXs are doing more and more percentage volume relative to their centralized counterparts.

40:10And Uniswap is the market leader and has been very dominant for a very long time as all the world's value gets tokenized, that value is going to need a venue to trade. I think Uniswap is going to keep compounding as a secular winner as the biggest decentralized exchange. Morpho is another I mentioned already. Lending, right? Huge, huge category in crypto. That's been driven historically by speculation, right? People wanting to borrow against their crypto to buy more crypto. But as we see more stable coins, come online and other types of tokenized value stocks, the value of a lending protocol will shift into this less speculative, more traditional case where people want to borrow against hard assets.

40:59So today, Morpho is the second or third biggest lending protocol. We think they've got the right market structure and focus on distribution. For example, the Coinbase integration that's already filed to really take it to the next level as, you know, there's a secular tailwind behind them of stablecoin growth, you know, which we think is going to be many, many orders of magnitude to go. So those are a few. Worldcoin is maybe another one that I would mention where they're really in a category of their own. Worldcoin, of course, started by Sam Altman. What they're building is what they call proof of personhood.

41:40a proof that you are a unique human as opposed to an AI. They're signing up over 100 ,000 people every day. At the current rate, I think they're on board, like millions of people. This year, they've already got north of 30 million installs. And the goal is to provide a kind of new form of identity for every human on the planet. They're in a category of their own, and I would say they are increasingly becoming a secular winner in terms of just the distribution that they've got. And that's another great example of a team with real Silicon Valley DNA focus on distribution while also understanding the crypto native opportunity.

42:20WorldCoin's a good segue into the sort of intersection between crypto and AI, I think. When I think a little bit about the teams that we're talking about that maybe do have that more traditional Silicon Valley DNA, one of the things that I could imagine being a little bit of an impediment to the next wave of crypto startups is that crypto now has to really compete with AI on the opportunity set. Like if you're a really talented builder today, you could decide, hey, I want to build something around stable coins and all of that. Or I could say this large language model revolution or any other sort of associated part of this renaissance is more fertile and is better for me to spend my time on.

43:03And how do you feel like crypto is faring from a talent perspective? And has it struggled over the past few years? Yeah. So no denying the fact that ChatTBT was 2023, right? And that was a huge reflection point. I think even 22, right? Yeah. Yeah. Sorry. You're right. I think 22. And then, yeah, I think by 23, they had the fastest growth of any consumer product. So there's no denying that Silicon Valley loves to chase kind of shiny new thing and Chatswt was it. And so a lot of talent over 22, 23 and the better part of 24 was going into AI. And I think right, if you think about it, it makes sense, right?

43:47Like, meanwhile, on crypto, even the even the best entrepreneurs, like, you know, Uniswap and all these companies I was just mentioning, were like under investigation for four years, right? So like, even the best projects, the best founders, you know, the headlines about them were extremely negative. And if you're kind of college kids studying computer science, like, you know, you got to make a choice, are you going to go to where there's all this exciting, you know, opportunity, or are you going to go where the government's trying to run you out of the country? So there was definitely a lot of reversal and inflows of talent into crypto over the last few years.

44:25That said, I think Electric Capital did this data analysis, where if you take out the spike in talent that came into the space in 21, 22 and stayed for under a year, those would be described as kind of tourist entrepreneurs. If you take that out, the compound annual growth rate of developers in crypto has been growing at a very steady clip. I forget exactly. I think it was roughly like 20, 25 percent year on year growth. And so I don't want to give the impression that like, you know, talent is not coming in because it has been very steadily coming in. It was just this crazy spike during the speculative boom and bust.

45:04But if you normalize, you know, over a wired time frame, it's been compounding. And what I will say is, along with the shift in the regulatory environment, we've seen a meaningful shift in the number and quality of entrepreneurs coming into the space now. And that's because I think you're starting to see some of the secular winners, you know, double down, win bigger, you know, have the, you know, their investigations dropped, right? But I think talent that's been on the sidelines is looking at that saying, hey, this has become a kind of contrarian thing, but there's actually a lot of opportunity here.

45:39And we're starting to see that result in more entrepreneurs getting off the ground. And in many cases, it's second time entrepreneurs. People have been here for a long time for funding Greenfield, new opportunity, ideas they wouldn't have executed on a year ago and that they're coming back to do now. Hmm. Yeah, that's interesting. Normalizing that big spike, because that's also just anecdotally something I'm sure you saw a ton in your seat as a VC of just like the number of crypto to AI pivots in 2022, 2023, where you had you did have a lot of those folks who I think were dipping their toe in and then the water got really, really cold.

46:16and they, for better and worse, decided their talents were best devoted elsewhere. But that's interesting. Okay, so things are sort of trending in a positive direction when you sort of look at it from a little bit more of a zoomed out view. One thing I would share is like in our portfolio at Variant, we had a handful, like maybe two, three, certainly less than, I want to say even less than 5 % of our portfolio pivoted from crypto to AI. If I had to attribute that, I think there's been much higher, you know, rates of attrition than what we've seen in our portfolio. And that's because I think one of the things we screen for at Variant is we really want to invest in founders who are doing their life's work.

47:02And we invest at the earliest possible stage. So like very often, we assume that the idea that we're being pitched is going to change and evolve with the market. So the thing that we really index on is, you know, is this person here to do their life's work? Even if the idea changes, are they going to stick with the general kind of scope of or intent of the thing that they're pitching? And so most of our founders have stayed in the crypto space through thick and thin. And like, we really want to be the best partner for entrepreneurs who are going to be here for the ups and downs. And so that's why I think we've seen very low attrition in our own portfolio.

47:42Well, I can't help but dig into that a little bit, but it doesn't surprise me in some respect, because I do think that, well, crypto in general is just such a high variance industry. I find that you meet some of the very, very smartest people you'll ever meet. And then a lot of the folks who maybe are not, you know, are balancing the other end of the spectrum. And same for, you know, you meet some of the most principled people possible who have really thought super deeply about, you know, their morals and their values. And then, you know, obviously you have the total other end of the spectrum.

48:09And on the founder side, I think you do have those tourists maybe on the one end, but then you have people who will truly walk through any possible brick wall because of their devotion to this technology and what it sort of signifies for them. What are your ways for figuring out if someone is doing their life's work? Have you found any ways that you're sort of able to get a feel for that in the moment and as part of a process? So what I will say is like, I think within the first five minutes of talking to someone generally, you know, which side of the spectrum they're on. And very often it comes out when you hear the story as to why they got into crypto in the first place.

48:51And as you said, for a lot of people, it's some kind of principle about the technology that is really close to their heart or their motivation for working on the thing that they're building. And, you know, there's a lot. The great thing about crypto is it's such a multidisciplinary space, you know, combines deep technology with economics, with, you know, I would say kind of social norms and even politics, right? Because the politics of how to govern these permissionless systems. systems. And so there's a number of different reasons you might have gotten into crypto. Maybe you grew up in a country that didn't have a stable currency or had capital controls.

49:36Maybe you're just really fascinated by distributed systems where the control is with the edges of the network as opposed to the center. There's a number of different fundamental reasons why people get really intensely nerd sniped by this technology. And I'm not saying you have to have one of those. as a like raison d 'etre to be in the space. But very often, you know, that comes out at the outset and you can just tell, okay, this person is here to do their life's work. And I would say during that blip in 21, 22, when there were a lot of tourists that were here for under a year, you didn't hear that.

50:13You kind of heard the opposite, right? Which is like, you heard some story around how there was, you know, an opportunity to just make a lot of money fast. And that's always been another facet in crypto. And so I like to think that one thing we're, we're, we're decently good at and that we haven't been involved in any of the kind of blowups or is, is just like sniffing that outlet. Why are you here? And are you going to continue to be here when, when things get tough? Yeah, absolutely. Absolutely. To return to AI a little bit, you know, I think on the one hand, there is just this like collision of buzzwords that's happening around some of some of these projects where you just feel like there's not a clear reason why AI and crypto should go together.

50:53But on the other hand, there are some really, I think, promising and interesting ideas. I think, you know, the idea that we need to be able to prove our humanity to digital systems is a really, really powerful one. And where are the sort of collisions that you've spotted that have been most interesting when you think of that? So I like to approach this, you know, the question around AI and crypto in like two parts and two pairs. So pair number one is, you know, you can approach it in terms of what AI can do for crypto and also what, you know, what can crypto do for AI? right and and then separately and another pair is um just looking at the fundamental properties of each technology and i think you can you can contrast the two and by saying that ai is a technology of abundance right you can create you know anything that you know you can possibly imagine um with with ai and and the result is just an explosion of new information new creativity in the world.

51:58And crypto, on the other hand, is a technology that is fundamentally about scarcity. Yeah, totally. Right? Scarce digital assets, the ability to own digital property is built on top of this idea of scarcity. So that's a very high contrast way to pin the two off each other. And I think abundance versus scarcity is kind of why these two things are such a good fit and are going to propel one another forward. Let me come back to the first pair, what AI can do for crypto. One thing crypto is very good at is global, fast, cheap payments. We talked about that with stable coins. I think we're very early in starting to see an explosion of AI agents that can do these very micro, highly specialized tasks.

52:48It's my view that those agents are going to want to be paid for their work and that traditional payment rails historically, you know, have not supported micropayments very well. Um, you know, because the fees often, you know, can exceed the value being transferred. And so as the internet evolves into a network of agents, I think, you know, interacting with each other, you know, via APIs, I do think that stable coins will end up being kind of the preferred way to settle these very small automated payments, giving agents their own wallets to figure out how to transact without oversight. So that's an example of what sort of crypto can do for AI, right?

53:30You can enable these kind of micropayments. On the other side of things, a huge amount of volume in crypto is trading, right? And a lot of the trading, especially meme coins, for example, is driven by sentiment. Yes. Unstructured data that you find on Twitter, on Telegram chats, on Reddit. And one thing AI is very, very good at is parsing all this unstructured information in the world and synthesizing it down for you. And so, you know, I do think that AI will increasingly play a role in financial markets, including crypto. And we're starting to see more and more teams experiment with that, starting with the thing that's been working.

54:10One of the things that's been working in crypto, which is speculation and using AI to make investing more efficient and drive better outcomes. So that's what AI can do for crypto. So I've kind of saved the best for last, which is, and this is back to the camera, what can crypto do for AI? So needless to say, you know, AI models, foundation models, large language models are very expensive to build. They need a huge amount of upfront capital invested in hardware and energy, right, to train models, to run inference. And today it's the case that if you want to go work on one of the frontier models, you need to go work at one of five companies, basically, in the West.

54:57Google, Amazon, Meta, OpenAI. Crypto offers an alternative to that world. One thing that crypto is very good at is using incentives to bootstrap massive networks of machines. Bitcoin is, I think, the most powerful computing network on the planet. And that's because miners are able to earn this global asset. I think that what we're going to see is sort of a similar phenomena play out where we will build one of the biggest computing networks in the world, a network that is specialized in compute for AI, both for training and for inference, where a token is essentially coordinating the running of these machines.

55:46And the result of that is we can build actually open AI. We can build models that are not controlled by a single company where any developer anywhere in the world can contribute to them without having to go work at one of those five companies. And this is exactly what Pluralis, which is a portfolio company, is working on. That team is five PhDs in machine learning. All of them came out of Amazon's Applied Machine Learning Research Lab. It was previously thought that, you know, doing training of large language models over a decentralized network was impossible. It was thought that you had to do it kind of in concurrently in one data center.

56:26These guys have proven that impossibility to be false. And so that's that's probably the most exciting, you know, idea of what crypto can do for AI. We can build actually open AI that rivals the best proprietary models because you have machines all over the world and talented people all over the world able to contribute to their development. Wow. Interesting. I've got to read more about pluralist, I think. Um, okay. I could dig so much more into this, but, uh, for the sake of, of, uh, efficiency, I want to ask about sort of two big narratives of the last cycle and where you think they're sort of at today, what the sort of 2.0 versions of them might look like.

57:08And, and both are things I think you in particular have spent a lot of time thinking about, and I'm sort of talking about NFTs and DAOs, uh, NFTs. I know you're thinking about because you're tweeting about what the next NFT marketplace should look like and asking for suggestions. So I suspect that one's a little top of mind. And then you had a really interesting post about sort of like what the 2.0s of DAOs look like. So maybe we should start with NFTs. With the sort of profile picture phase a little bit behind us, where are we now? What are we sort of like, what needs to happen for this to become more useful or more important than it is?

57:45Right. So again, NFTs are kind of a flavor of the Carlota Perez hype cycle in 2021. They kind of went through their boom bust. And today I'd say they're probably somewhere in the trough of disillusionment. They're not yet on the steady slope of productivity like stable coins and DeFi and Bitcoin. The way that I've always thought about the opportunity with NFTs is that NFTs can be the port of entry for all digital media. um so not just like collectibles highly valued speculative collectibles but a really like foundational um kind of infrastructure that enables true digital ownership and exchange of any type of digital content and you really worked on this even before variant right yeah so 2014 i started a company called media chain where we had kind of same idea right to make every piece of media, bring every piece of media in the world on chain so that you could kind of know where it came from, its provenance, you know, what it was about, all the information about that media could be accessible to anyone, just like a token is accessible to anyone instantly anywhere in the world.

58:57And so, you know, as a primitive, I think NFTs are still incredibly promising. And I think what we saw last cycle is that kind of speculative fervor around collecting NFTs really squeezed out any thinking around the utility of the primitive itself. I continue to believe that NFTs are going to be a thing. The number of actual non-fungible tokens on blockchains is going to grow many, many orders of magnitude over the next 10 years. But I think what we've seen is there's less interest in the consumer speculative side of that. And hopefully there's going to be more interest going forward in the developer opportunity.

59:38And yeah, I recently tweeted, you know, asking, you know, what are people thinking about building in and around NFTs in 2025? And I think the best response to the tweet was right along these lines, which is like, in 2025, you shouldn't necessarily be building a quote unquote NFT marketplace. You should be building, you know, a product that has need for some digital asset that benefits from ownership. And so, you know, maybe that's a game, right, where all the in-game items are NFTs and the market around those, you know, makes the gameplay better. So the concept of like a horizontal NFT marketplace for speculation, I think, was a 2021-22 phenomenon.

1:00:17The new opportunity is like, you know, just build a product people want that utilizes ownership as a keystone of the user experience. Yes, I got it. It's not going to be the user behavior won't be, hey, I'm going to step into this digital gallery or storefront and sort of browse the different pictures or items that I might want to collect. And instead, it's going to be I'm using this application, which happens to create digital property that is given to me in some function. Yeah. I mean, the headline story here, I think, is broader than just NFTs. It's the shift. Again, it's from crypto as the what.

1:00:53Crypto was this new invention. And everyone was like, oh, what is that? And learned about it. And then the speculative kind of fervor took over to today where crypto is the how. Stable coins, to most users, are just dollars. You don't need to know or care that it's running on crypto. Similar thing is going to be the case with NFTs where it's just how it works. You don't need to know or care that it's crypto. One exception that I think is an important one, digital art. you know, there didn't have a market before NFTs. I think there is a really strong product market fit around digital art and NFTs today.

1:01:32You know, I have a bunch of digital art on my walls and in our office and a lot of the artists whose work we've got, you know, they didn't have a means to monetize their work prior. And so that's going to continue to be one area where crypto is both the how, but also the what, right? You're buying the digital work and you're buying it because it's an NFT on the blockchain. But for the most part, I think that the expansion and growth in NFTs is not going to be like that. Amazing. Let's talk a little bit about DAOs. What were the lessons from the last cycle and how does the 2.0 start to address that?

1:02:05Because there was a lot of excitement, but I think a lot of them just got lost in designing by committee and the struggles of that. So DAO, for those uninitiated, stands for Decentralized Autonomous organization, DAO. And Vitalik Buterin, the creator of Ethereum, I think coined this term in a 2014 blog post, wherein he offers a definition that I really like that I think we're finally starting to get back to now and that we really got away from in 2021. one. And in his definition, he puts a lot of emphasis on the A in DAO, automaton, right? He centralized autonomous organization. And he says, you know, automation at the center, humans at the hedges, right?

1:02:56And the A is at the center of DAO for that reason. In other words, you know, DAO should really lean into automation, which is the superpower of smart contract blockchains like Ethereum and Solana. It's also the superpower of AI, right? Automation. And in 2021, we had a lot of experiments around DAOs, but I would say almost all of them had very little automation at the center. And in fact, it was humans at the center was the opposite of what Vitalik was saying was humans at the center and no automation. um and so so the 2021 version of dao was an organization that was kind of owned by users but functioned very much like a classic kind of cooperative you know and and not in the charitable sense right like the best cooperatives the biggest there are multi-billion dollar cooperatives all of them have have adopted a management structure that looks like a corporation which is kind of a tested and true way to scale an organization that you know cooperatives that haven't succeeded typically, one reason they fail is because they are being managed by committee.

1:04:04There's a lot of bureaucracy. They're slow moving. And that's, I think, what we saw happen to 2021 DAOs. They're member-owned or community-owned organizations without any automation, with a lot of humans trying to manage the thing by committee. And ultimately, that was slow, not competitive, didn't work. DAOs 2.0, I think we'll go back to this original definition where we will have automation at the center. The automation will be the result of improvements in both, you know, blockchain, smart contract blockchains and AI. And, you know, I mentioned earlier, I think we're going to see an explosion of the number of agents.

1:04:39These agents need things for humans, right? They're automating things, but they also need things from humans at the edges that they can't automate themselves. And the opportunity with crypto is to incentivize humans at the edges to contribute what the agents need. And so in short, I think the opportunity is to finally realize the original definition of DAO, what I've been calling DAO 2.0, which is real automation at the center, specifically AI at the center and AI paying humans at the edges to do work that the automaton itself cannot do. And actively looking for people working on this, we've got one investment, which is kind of a cute example of this called Botto, which is a AI artist.

1:05:22You're right. And it's incentivizing humans at the edges to contribute to training its model in terms of what art it should produce and so on. But I think the idea is much, much broader than that. Essentially, any economic activity that can be automated and needs human input could be structured as a DAO. And so I think we will realize that idea in the fullness of time. And maybe we're just getting started now that the two technologies are more mature. And so a DAO becomes in that respect, sort of a pool of human labors for the AI to tap. And the reason it's useful for there to be a DAO structure is that, I don't know, you don't want to have to keep finding people each new time you need this help.

1:05:58You have some consistent flow of work that needs humans. First of all, anyone can contribute, right? As you said, it's permissionless, anyone can contribute. And that's true because the agent is using, you know, a global permissionless rail, which is crypto, where you can pay anyone. You can kind of structure your incentives in a transparent, reliable way. And so, yeah, I think that's always been the opportunity is you can have this automaton kind of incentivizing humans. And by the way, the original DAO, and I think this fits the definition of DAO 2.0 that I'm offering is Bitcoin, right? Bitcoin is this core protocol where at the center, you have this automation, which is solving this very complex hashing algorithm and then paying the humans at the edges who are running that hashing algorithm for the network with Bitcoin, incentivizing them to secure the network.

1:06:52So Bitcoin is the original DAO and it's what we should be getting back to with DAOs 2.0. There's no AI in Bitcoin, but it is fully deterministic and automated at the center. And there's humans at the edges who are making it all work. Amazing. Well, with that, I'd love to get into our sort of wrap up questions, which are on the more abstract side. To start, if you had unlimited resources and no operational constraints, what is an experiment you'd like to run? You know, I love the freedom of the question. And so the answer I came up with has actually nothing to do with crypto. And, you know, I'd say I'm obsessed.

1:07:31I've got a green thumb. And if I had unlimited resources and no operational constraints, what I'd love to experiment with is just planting trees at mass scale in urban environments. I think it would be an amazing experiment to see kind of the effect that that can happen. This was, by the way, in part inspired by my own kind of interest, but also Paul Graham had a great post around planting trees in small towns and how I can impact. No kidding. Just like, you know, there was some study done, I think, that planting trees actually increased the economic productivity. Wow, no way. So totally random, but like that's what came to mind when I thought about this.

1:08:12It's, you know, if I had unlimited resources and no operational constraints, meaning I had all the time in the world, like I think that would be a really productive experiment to run at scale, to scale. I love that idea. What's the closest you've seen to that in a cityscape? Is there any city that you're like, wow, they actually have done a really good job at this? I got to say, I think New York has been doing a really good job. They've been planting a lot of trees. I think there's some plan to plant a quote unquote urban forest. So they're like scaling it up now. But you know what? The no operational constraints and unlimited resources are key here because I haven't dug that deep into it.

1:08:49Yes. Perfectly honest. looked into it in a small town where my wife's family is from, and I was astounded to find that to plant one tree costs$10 ,000 on a size, you know, town size. And so, yeah, that got me thinking, like, there's an opportunity here to fix that. Yeah, totally. Amazing. Which tradition or practice from another culture or era do you think we should bring back or adopt more widely? In America, I think there's this little known tradition from way back around the turn of the century industrial revolution around community ownership or cooperative business structures. You know, so while like the West was getting settled and industrialized, right, small towns, for example, like often got their power, their electricity by virtue of like setting up a cooperative utility company.

1:09:45because that was the only way to fund and manage a utility at small scale. Same thing with agriculture, right? Farmers kind of pulled resources to create kind of a community-owned dairy cooperative or something. And today, Land of Lakes Butter is like a multi-multi-billion dollar cooperative. Some of these things have really scaled up. That's a tradition that's, I think, less studied in America, America being kind of the most capitalist country, when you hear cooperative, very often people immediately jump to, oh, that's kind of socialist. But in fact, there's a rich tradition, a cooperative tradition in America, and it very often kind of coincided with these kind of small communities that were looking to leverage markets to actually get their product out.

1:10:38I think there's a lot to learn from that. And I do think that crypto has the opportunity to scale up this idea of community ownership to internet scale, particularly if we leverage automation and we leverage free markets and incentives to enable global participation. So crypto, in short, combines the best of free market capitalism with this kind of cooperative tradition of community ownership. And I think the result is we can use market incentives to build networks bigger, faster than ever before. Fascinating. Okay, final question. If you had the power to assign a book to everyone on earth to read and understand, what book would you assign?

1:11:21It's narrative economics by Robert Shiller. And it just explains by way of a number of examples, how narratives can drive economic outcomes that really change the world. And it gives the example, one of the examples as a crypto example, which is Bitcoin. And it sort of gives the example, all the components of Bitcoin narrative that have led to its success. And I would say it's Bitcoin success. that has opened up the possibility for all these other networks that, you know, things like Ethereum and others have followed down that path. And that in turn has enabled all this, you know, programmable permissionless innovation on top like stable coins and so on.

1:11:58So I think that's a good foundational read for anyone looking to understand the genesis of the crypto space and sort of what could potentially still come. I love that. I thought non-zero chance you pick satoshi white paper uh and so this is you know uh an extra layer that i that i love that that frames it all uh in a bigger bigger canvas the debate honestly you know i had to pick one so i picked i picked this one but the the runner-up was the ethereum white paper okay i'd highly recommend that too the ethereum white paper is i think it reads like a sci-fi novel um it's it's one of the things that got me so excited about the space i think a lot of the ideas that are going to come to fruition in the fullness of time.

1:12:40So definitely recommend that as well. Amazing. Well, Jesse, thank you so much for spending your time with me and talking through so much of this. I really appreciate it. And I really enjoyed it. Yeah, likewise. Great questions. Thanks for having me. That's it. Thank you for listening to this episode of The Generalist Podcast. Please subscribe on Apple Podcasts, Spotify, or your preferred podcast app. Ratings and reviews help others discover these discussions. So if you enjoyed the conversation, I'd be grateful if you could take a moment to leave one. For all past episodes and more, visit us at thegeneralist.substack.com See you next time as we continue to explore the future.