20VC: Should Large Crypto Funds Give Money Back to LPs | What Will the Next Generation of Crypto Funds Look Like | What Should Happen with FTX; Who Should be Held to Account | The Future of NFTs & What Happens to Opensea w/ Nick Tomaino @ 1confirmation

25:51So I think what ultimately will happen is that people will realize this, but it might take much longer, right? It's not gonna happen quickly and maybe as quickly as I or some people would hope, but I think it will happen eventually I tweeted before this all played out. It's like truth reveals itself in time. The internet itself is a very good tool to reveal true But it takes a long time. Sam is gonna be the one that you know goes to jail and takes the brunt of it and it's the obvious but over a long period of time, I think people will realize, you know, the character of these people that are involved.

26:27Before we move on to NFTs, which I'm excited to talk about, because I want to be educated by you. But is there anything that you think there's a big misconception of the public in terms of SPF? They don't understand, they don't get, you constantly hear misquoted, mis -attributed. Is there anything that you think people should know that they don't? I would say the strong narrative now is that like F -S -B -F is this evil mastermind behind this. And again, the truth is often far from the strong narrative. And while it is true that S -B -F is a big part of this, I think maybe what people don't realize is that the broader fraud of perception that we've talked about, right?

27:09That's a misconception. conception, mentioned can improve the perception made me think of NFTs which you can tell me I'm wrong about my question Cheers. Why am I wrong to be negative still and why you still positive like what am I missing? Well at the end of the day I think NFTs are an incredible business model for creators on the internet if we just expand that then What does that look like in terms of tangible use case amazing for creators on the internet? What does that look like and why is that better than the traditional mechanism? It aligns incentives between creators and their orders, right?

27:45So incentive alignment is kind of is a underrated aspect of what crypto can do both within cryptocurrencies but also NFTs. You know, as a creator, you can, you know, sell NFTs to your supporters and they can have an ownership in your success. The combination of those two, it's not just the business model for creators, It's the new asset, investible asset class for anyone in the world to participate in to me that combination is really powerful and What were you looking skeptical? I'm I know I get I understand the skepticism right because at the end of the day like I'm a creator. Why would that work?

28:24I can do premium features. I can do pay -walls for those that are successful I don't need to sell you a part of my business and a part of my future earnings You get access to my content and I'm thrilled to have your support But I need to tell you a lot of my future and then for those that do you need it most often you probably won't have a huge amount of people But wanted so I don't understand how it works It may not solve a problem for you right now and that's okay But it does solve a problem for a lot of creators that are creating Content of any kind if you're taking a swift no not bad in the existing businesses as I don't think, maybe tell me if I'm wrong.

29:00And if you're a specific writer on knitting in England in the 18th century, only get sales of specific benefit over a paywall and a higher price for a smaller audience. So I'm just trying to understand where it's better. What I would say is new technology often isn't ideal for the incumbents, right? So if you're a massive creator that is already being served well by existing business models, then NFTs might not be for you. They're certainly not for you now. They may never be for you. What NFTs are really useful for is for these kind of new internet native creators that don't have an existing business model, but maybe have some true fans.

29:41Taylor Swift is never going to create music NFTs. The next Taylor Swift to maybe 13 right now and may be having a hard time getting distribution on existing distribution channels may sell music NFTs to 100 true fans who then may help her, you know, spread the awareness of the music. That's a use case that I think is quite interesting that really hasn't blown up yet, right? It's music NFTs and the idea of like giving a incentive for the music to grow at a very early stage. Because music itself is very mimetic, right? It's like, why do most people love Taylor Swift? Because everyone else loves Taylor Swift.

30:20And she's kind of cracked the mimetic code. Is it music good? Some people yes, some people... No, a lot of why people think she's good is because other people think she's good. That applies to cryptocurrency too. Why does everyone think Bitcoin is valuable because other people think it's valuable? And so you combine kind of the mimatic aspect of, sorry, I'm going for it. It's the end of the day, it's dark outside if you could see the time. But I'm like, I don't think they like it because other people like it. I think they find it because other people find it because other people have found it.

30:50So it's distributed because it's popular. So discovery is solved because it's popular. but they don't like it because other people like it. I think they just like it and musical taste and preferences evolved in a way where actually it's largely aligned. Humans do tend to like the same thing. It's why people love pizza or ramen or whatever that food source is. They discover it because a lot like it, but the liking is different. You haven't read any Renee Gerard, have you? No. Have you heard of Renee Gerard? I have. And I was warned that he would come up. This is exactly what René Gerard has written a lot about, this idea of a medic desire.

31:33And this is, I believe, what is unique about human is that a desire is actually not based internally. It's based externally on the desire of others. And so I think there's core human needs that everyone has. But outside of that, what we like, what we desire, what we want is fundamentally based on the desire of others. So why do I think, I mean, in the terms of music, this explains why Taylor Swift gets so popular. You know, some people may like Taylor Swift early, but then once she gets popular, it kind of becomes this dramatic switch that other people like her because other people like her. That's human nature.

32:13Humans are fundamentally mimetic. Okay, so if we take children and put them in a room and give them a carrot and a chocolate and they have no idea Which one is more popular or which one people like more? They will like the carrot as much as the chocolate. No, there is a chemical composition to the chocolate which Camicles in your brain that you need and want more of it same thing actually with music and tones and notes As the huge amount of research that sad music actually can make you feel comfortable when your heart broken, which is why Lurse Capaldi has such a strong grip. It's chemical. Yeah, there is a chemical component as well.

32:49Again, the truth is nuanced, right? So it's not to say that there aren't fundamental things, humans like more than others, but I think most people are way more influenced by others than they would fundamentally acknowledge. I guess would be my point. So there are some people that fundamentally gravitate to certain things for chemical reasons But I think there's way more people that gravitate towards those things just because other people gravitate to them That's what I'd say. We both operate in the venture world So I mean I can't disagree with the mimetic nature of human following you when it comes and deals Can I ask in terms of like people following what other people do?

33:31You obviously see that when you look at volumes in terms of purchases on trading platforms You're a very early investor in OpenC. How do you think about how do you bullish on OpenC or not given volumes being where they are? OpenC was the authentic NFT marketplace. That's not to say that their success is a given moving forward. But for OpenC, I think if NFTs become the massive asset class that I think they will, OpenC, as the kind of on -ramp into it, NFTs is a massive business. So that's my kind of long -term thesis on OpenC that really hasn't changed since we started. And again, we're early stage investors.

34:11We're not as much making judgments about, you know, was OpenC a great investment as 13 billion? You know, the last round was. I don't know about that, but do I think it's going to be an important product in the world in five years? Much more important than it is today. Yes, because I think NFTs are important and because I think and on ramp two NFTs is very valuable for people Did you sell open seat 13? I mean, it's a hype price. Yeah, again We we still on the majority of our or position, but yeah, we took some chips up the table Can I timeline I so as such a bad question? I always listen to interviewers and I'm like god these questions But and then I kind of end up asking because I'm just interested when you think about kind of that resurgence of NFTs for reinflation of trading activities on OpenC.

34:58Is that one year? Three years, 10 years? I would say three to five years. That's kind of the time horizon, which I think it's likely before that, but with a high degree of conviction, I would say three to five years. I mean, NFTs aren't going away, right? Like even the simplest form of an NFT visual artwork, traditional artwork is massive. And there is a new wave of crypto rich people that view crypto art, just like traditional rich people view traditional art. That's already happening. And even if that is the only thing that happens in NFTs, which I don't think it is, I think NFTs are still going to be very big.

35:34But then you have dynamic NFTs that can change on chain based on certain variables. You have NFTs within games, you have music NFTs, you have all these other directions that NFTs could go that they haven't yet. That's the lens which I view of the case for NFTs. Nick, I spoke to Mark Cuban before the show and he's quite slurical about you in many different ways. He gave me pros and cons. But one of the pros he said was, you're incredible independence of sort, which kind of goes back to the memetic -ness, or memetic nature of humankind, and how you avoid that. Blondie, that is a contrarian of pro -stor -NFTs today.

36:09How do you stay independent -minded when worlds and narratives are so strong today? I think it's just my nature. I've kind of always been a contrarian in some sense. Like I think about even in high school, I did really care what other people were doing or thought. A good example of this is drinking. I never drank in high school or college really. And I think of drinking as something that's also like supermimetic. I mean, maybe for some people it makes them feel good. And this goes back to what's biological and what's what's mimetic. It's like maybe for some people drinking makes them feel good.

36:45I think we're a lot of people but we're actually making them feel bad but they do it anyway because other people do it. To answer your question, I've just always thought about things a little differently and wasn't really influenced by what people thought. Maybe my parents are a good explanation for why. I think my parents raised me very well. I've always felt mentally strong and never felt really insecure about anything. I think insecurity can cause people to like fill a hole to be searching for more money or more attention or things like that And I've just kind of always stayed grounded. So it's amazing, Terry And I'm not to feel insecure is a very difficult thing.

37:27I think everyone is insecure in some way Do you disagree if you are the person who doesn't feel insecurity? That's amazing. I well done Like no, I'm not we should study There are certainly things I feel insecure about, right? So I'm not saying I'm never, I'm secure about everything in my life absolutely or something like that, but I don't know. I do think a competitive advantage that I have, especially in the crypto space, is a mental strength that I'm not constantly trying to get approval from anyone really. I'm just kind of living my life. And again, if I think about it, it's like maybe my parents are a big reason for that.

38:07I've never really thanked him for that. By the way, if they're watching, thank you, Mum and Dad. Yeah. Hey, in episode the touches on the heartstrings, Nick, you are just killing this show. And then, I would call them and thank them. Yeah. Science, Mum and Dad, for making me incredibly insecure, for making me drink copious in here. And fuck you for all his therapy bills.

38:32And my parents do watch this. And so I am... By the way. By the way, There's stuff I feel insecure about for sure. You know, we all do, but I do think that's maybe an explanation for again, my ability to not chase things, I guess. Keepin also told me that you can be a little bit dogmatic, Nick. When you have a position or a mindset, how are you cautious that you're not too dogmatic? Do you agree that you can be? And how do you sense check yourself to ensure that the dogmatism doesn't lead to ineffective decision making? Yes, I'm principled and sometimes that can be an issue. Yeah, and so I think that is a certainly a Law of mine.

39:13I think it can also be a good thing, but there are situations where it can be a bad thing and I know one thing I think about is like I think we all Live in our own world and we all have a way that we perceive the world and I think there are people that are kind of two in their own world. Sometimes I can be two in my own world. And then there are people that maybe are two out of their own world and paying attention to everything else that's going on. And there can also be an extreme of that. So I think finding a balance of being in your own world and having principles that you live by, but also seeing what's going on in the world deeply and paying attention to that and kind of combining those two.

39:56That's the approach that you need to live a power redefining in terms of happiness or success. But yeah, I mean, in terms of like, it practically, how is being talking dogmatic be bad for me? A good practical example, right, is Solana in the crypto space. Solana, to me, we use this framework of like, there's purists and there's tourists. The best crypto products are kind of at the intersection of purists and tourists. I historically viewed Solana as a very tourist thing. It came in right at the beginning of the last bull markets. It was you know aggressively marketing. It was also one of these insider VC coins that sold a lot to early insiders Who then marketed the shit out of it and kind of sold it to retail?

40:38So there are all these things about it bit from my perspective or tourist and Maybe I'm wrong on that right maybe I'm looking at it from a two of a tourist of a perspective and I'm a two dogmatic I think the jury is still out like I'm not some people would say I'm a salonet hater because some of my treats in the past or something but I'm very open to Solana. I've talked to some interesting founders that are building in Solana right now. I still haven't really seen anything from Solana that's new in pushing the space forward in unique ways and then kind of waiting for that. And by the way, the people that invested in Solana have done incredibly well.

41:12I missed a big investment opportunity as well. That's an example of the way where maybe I'm too dogmatic, too purest, and I'm constantly trying to reassess my frame and make sure that I'm not missing things because. Okay, final two, but they're kind of tying together, which is like, you learn a lot from wins and losses. What's your biggest win and how did that impact your mindset and what's your biggest loss and how did that impact your mindset? Biggest win, I mean, we've talked about it, I think it would have to be open to see. That was a product that I just believed in from a user perspective more than anything.

41:46It's like I was buying and selling crypto kitties back in, I believe it was late 2016. initially on the CryptoKitties website was the only place that you could trade CryptoKitties and they charged 5%. And then OpenC was just a product that allowed you to trade CryptoKitties for 2 % rather than 5%. A marketplace to allow people to buy and sell these kind of off the main creator's website just made a lot of sense for me and that was why we invested. And at the time, you know, they came out of Y -combinator but it wasn't a hot deal at all. Like actually, we led around and we were trying to convince our LPs to invest.

42:23It was it like in some of them did and did incredibly well but it was like there were crypto funds at that time. Everyone kind of looked at NIT's as kind of this stupid thing that didn't make sense for the most part. That was that was a Silicon Valley perspective and narrative and we let kind of our user perspective kind of guide us. That is I think what allowed for that big win. But the loss I would say or can I Just say it's down to see where you're going to see stay. If we talk about LPs and how they think about book value, but like, yeah, it's down to I would say down significantly clearly, but yeah, there's not like one billion is that like five billion.

43:01You're in the right ballpark, I'd say good. Yep, no, it won't push. I'm a Brit, so I can kind of sense when you're entering. Yeah. You're enough zone. Okay. In terms of the biggest loss or miss, they kind of can be either all what's the biggest loss will miss and how did that impact your mindset? Interestingly, I would say it's also opency because when we invested, we only invested 500K initially. And that was again, like at that time, we had a $26 million fund. Our mandate was, you know, checks between 500K and a million. It was within our mandate, but yeah, we invested 500K and then we brought a bunch of our LPs in to invest another between five -hour K and a million call it.

43:42That was one where I learned if you have conviction, be more aggressive. If you have the conviction then, it's harder to have conviction when you're just starting off. It takes the lessons like this. So yeah, I think you did have some conviction, but part of the reason we were doing that at the time was because we didn't really fully believe as much as we should in kind of, you know, our investment thesis. And we thought it would be a good thing for relationships to bring deals to our LPs. That was the thinking. And in some ways that, I think a lot of first -time fund managers do that. And that could be a good decision, by the way.

44:17It's like it's good to build strong relationships and to help other people get any deals and stuff like that. But at the end of the day, when it comes to generating returns for LPs, which again is what we're trying to do in venture, it's like that was not the optimal decision for that. Did you sell a cross -round on the way up? Because I think this is another one that just a lot of managers don't know, it's like should I sell M1 chunk across rounds? Did you sell kind of continuously on the way up? No, no, no, we just, yeah, I mean on the way up happened quickly and I mean it was more just a feel thing than anything else, it's like we actually invested on the way up a little bit and then sold on the big way up.

44:56Listen, I want to do a quick with you. So I say a short statement, you give me your immediate thoughts. You can be an LP and a seed firm, a series A firm and a growth firm, which ones? Well, I'm just going to use funds that I am LP's in. The funds I want to be in is kind of like newest ones that aren't super well known. And basically the newest ones, I'm at a point where I can be. So the seed fund I'd say is a one called Pronimos, Patrick Friedman, a very interesting guy, one of the founders of the Seasetting Institute, I would call him principal, in some ways, Libertarian. His grandfather is Milton Friedman, the famous economist, and he's been very deep in kind of seasteading as an idea for many years.

45:38So Seasetting is kind of one of these out there ideas that got some media of attention just because it sounds so crazy, which is the idea of building kind of new jurisdictions on the sea that are outside existing jurisdictions, which could lead to more innovation in finance or in, you know, biotech or healthcare or whatever. So, Pronimos is the idea that you can create new territories within countries. The government of the country could carve out new laws for. And that's the idea of Pronimos is kind of investing in these new cities, basically. What I learned from one confirmation is that you can be kind of this early stage fund.

46:17is investing in this kind of new category and be kind of first of its kind. Then I think there's really high upside there. Very outside of like the traditional kind of Silicon Valley, but I think it's very interesting. I love that series A and Growth. I'm an LP in a fund called 17 -89 Capital, Omed Malik and Chris Busker. They are creating a America First Venture Fund. This aligns with my sentiment in a lot of Silicon Valley. there's a lot of solace breed and just a desire to create these massive funds, massive attention. And I think against Sequoia is the best example of this. And 1789, I view as kind of this anti -Saquia that's very much focused on kind of America first, mostly growth stage, but some of past series eight type ones.

47:07And one of their first investments is public square, a Amazon of kind, but focused on values that are very different than Amazon. That's moved to those who favorite consumer brand, and why them? Well, I know you're, you're, you don't like NFTs here, right? So this might be surprising to you as well, but one of the things I love about NFTs, they're effectively user -owned brands. My, my favorite consumer brand, which again, this is a PFP project that you might not think of as, as a brand, but CryptoPumps, right? CryptoPumps is effectively a user -owned brand. There's not a ton that's been done with the brand, yet other than just there's 10 ,000 of these you know eight -bit pixelated characters that all have different traits but there's a really strong community.

47:51I love the artwork I love the community over a long period of time there's gonna be increasingly interesting things that come out of this consumer brand so crypto punks is my favorite super brand. You can have dinner with anyone that are alive, H .D .E. Cheese. Brenna Gerard. What was you asking? I'd ask him what he thinks of what's going on right now in the world in a lot of ways, whether it's in the US politics, whether it's in the Middle East conflict, and how his framework applies to US politics, Middle East conflict. I truly believe that deeper understanding of his framework could be a huge catalyst for more peace in the world.

48:30He's the father of a lot of these frameworks. So thinking about one, how you know you kind of applied the framework to those and then too how do we grow awareness on a lot of these frameworks? That was going to be my question. If we wanted to start our journey with René Girard, what should we start with? Is there a specific piece book? What's the scapegoat? It would be the first book that I would read by René Girard. Okay. And then there's a few really good interviews that he gave. That would be kind of how I would start. Tell me, what was the single strongest belief you had which turned out to be wrong?

49:03Well, okay, here's one. One of my really strong convictions within crypto is that prediction markets are gonna be massive So you know prediction market is very simply a financial market for any outcome of any Event in the world so you could have a prediction market for you know who's gonna win the 2024 Presidential election or is Israel going to do a ground invasion in Gaza any piece of information in the world you can create a market for. And I think that is really powerful. It could be the most powerful thing that you could do with crypto. Right now everyone speculates on whether it's crypto currencies themselves or NFTs or a lot of that is nonsense.

49:47There is a small portion which I obviously believe is very important, but a lot of the speculation I think isn't very valuable at all. But if you could create global liquidity around information, I think that could be very valuable for the world because how do we consume information today? Media, whether it's the New York Times or whether it's on X, and everyone that creates media has their own biases. And I think if you can incorporate massive amounts of information, many different perspectives into a market and it reveals a price which reflects kind of a probability for an outcome, that's very valuable information for the world.

50:25And this could be done on crypto because of the global payment rails and bridge markets haven't happened yet. Hayek, who's a famous Austrian economist, he wrote about prediction markets back in 1945 and he's written a lot of great stuff saying exactly what I'm saying right now that how useful that prediction markets could be for the world. It hasn't happened yet. You know, it was one of my early bets in crypto. You know, we invested in an early crypto project called auger that did it work out. It hasn't worked out yet in a big way. So that's I guess what I've been wrong about to date, but you know I'm dogmatic and principal.

51:01I still think they're gonna work. So I haven't given up on on me up by any means. And market timing is the hardest thing in venture. Yeah, always. Final one for you, Nick. Ten years time is 2033. Where do you and one confirmation want to be then? What type of firm do you want to build? You could build the next multi -billion dollar crypto firm. You can stay small. You can expand team. What do you want one confirmation to be and who do you want to be? I really kind of want to be doing much of the same that I'm doing now, but I just want crypto to be much more important in the world. And that's kind of the lens.

51:35If we've invested in a lot more products that broaden crypto to many more users, billions of people are using crypto. There's still a lot of innovation and stuff that's happening. We want to continue to be kind of leading edge crypto investors that are investing in the new stuff. There's a lot of people that come and go, I am in crypto for my lifetime and I want to be kind of doing what I'm doing now, but crypto being much more important. Nick, I love this. This has been so much fun. You've been amazing. So thank you for joining me. No, I appreciate it. And for real, I told you this before, I really appreciate how much effort that you put into your podcast.

52:12it's clear that again your success too, it's not luck, it's a lot of hard work and determination and that comes through and in the prep and everything else that you do, so thank you. I'm gonna read the skate goat now. Appreciate it. Honestly, I left that interview feeling, what a great guy. I mean, not that many people are willing to open up his native, but an incredible track record and firm he's built with one confirmation so far. If you'd like to see more from us behind the scenes, of course you can on YouTube by searching for 20VC and I love to see that. But before we leave you today, did you know that every 20VC episode you listen to is recorded with Riverside.

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