The Exchanges

Q Okay. Final two, but they're kind of tied 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?

A Biggest win? I mean, we've talked about it. I think it would have to be OpenSea. That was a product that I just believed in from a user perspective more than anything. It's like I was buying and selling CryptoKitties, um, back in, um, I believe it was late 2016. Initially on the CryptoKitties website, um, was the only place that you could trade CryptoKitties and they charge five percent. And then OpenSea was just a product that allowed you to trade Crypto kitties for two percent rather than five percent. If this is truly an NFT, users can do what they want with it. Right. And so it's just a marketplace to allow people to, 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 this, you know, they came out of Y Combinator, but they, it wasn't a hot deal at all. Um, like actually, you know, we, we led the round. Um, and we were, uh, kind of trying to convince our LPs to invest. Um, it wasn't like, and some of them did and, and, and did incredibly well, but it was like, there were crypto funds at that time. Um, everyone kind of looked at NFTs as kind of this stupid thing that didn't make sense. Um, for the most part, that was the, that was a Silicon Valley kind of perspective and narrative. And we let kind of our user perspective kind of guide us. And that, that is, I think what allowed to, for th…

AI assessment note: “Biggest win? I mean, we've talked about it. I think it would have to be OpenSea.”

Q 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?

A It aligns incentives between creators and their suppliers. Supporters, right? So incentive alignment is kind of, um, is a underrated aspect of what crypto can do both within cryptocurrencies, but also NFTs. And so, you know, as a creator, you can, um, you know, sell NFTs to your supporters and they can have, you know, an ownership, uh, you know, interest in, in your success. The combination of those two, it's not just the business model for creators. It's the new asset Investable asset class for anyone in the world to participate in. To me, that combination is really powerful. You're looking skeptical. Um, I, I, I, you know, I get, I understand the skepticism, right? Because at the end of the day, like.

AI assessment note: “sell NFTs to your supporters and they can have, you know, an ownership”

Q Cuban also told me that, uh, you can be a little bit dogmatic, Nick, uh, 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 maybe ineffective decision making?

A Yes, I think, um, I'm principled. Um, and sometimes that can be, um, an issue. I think that is a, certainly a, a, a flaw of mine. Um, and I think it's also, it can also be a good thing. Um, but there are, there are situations where, where it can be a bad thing. I don't know. One thing I think about is like, I think we all live kind of in our own world. Um, And, and we all have a way that we perceive the world, and I think there are people that are kind of too in their own world, um, and maybe sometimes I can be too in my own world, and then there are people that maybe are too out of their own world and, you know, paying attention to, you know, what everything else that's going on, and there, there can also be an extreme of that, so I think finding a balance of, like, Kind of being in your own world and having, uh, principles, um, that you live by, um, but also seeing, you know, what's going on in the world, um, deeply, um, and paying attention to that and kind of combining those two. I think that's really the, the approach that you need, um, to live a, you know, whatever, however you define in terms of happiness or success. I guess a good practical example, right, is, um, Solana in the crypto space. Um, so you, you know, I'm sure heard of, of Solana and, um, And Solana, to me, you know, we use this framework of, like, there's, there's purists and there's tourists, and the, the …

AI assessment note: “Yes, I think, um, I'm principled. Um, and sometimes that can be, um, an issue.”

Q 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?

A It aligns incentives between creators and their suppliers. Supporters, right? So incentive alignment is kind of, um, is a underrated aspect of what crypto can do both within cryptocurrencies, but also NFTs. And so, you know, as a creator, you can, um, you know, sell NFTs to your supporters and they can have, you know, an ownership, uh, you know, interest in, in your success. The combination of those two, it's not just the business model for creators. It's the new asset Investable asset class for anyone in the world to participate in. To me, that combination is really powerful. You're looking skeptical. Um, I, I, I, you know, I get, I understand the skepticism, right? Because at the end of the day, like.

AI assessment note: “as a creator, you can, um, you know, sell NFTs to your supporters”

Q Nick, what does excessive speculation mean, and is that the same as shilling? Just help me understand the terminology. Is excessive also just like the quantity, or is it the, the quality of the speculation?

A Well, look, I think when everything is open in crypto has kind of been this free for all. And of course there's some regulation, but it is the most kind of open, transparent industry. And when, um, you have an industry like that, you can see greed, uh, get the better of people. Right. And I think we've seen a lot of kind of main characters who are, I would describe as just having this soulless greed for attention, for money, That, that's excessive speculation that the greed getting the best of them. And so, you know, I, I would say, um, you could look at the three major blow ups in crypto in the past, uh, you know, two years. Um, one was obviously FTX. Um, another is, um, kind of Luna Terra with, with, with Do Kwon and, and three hours capital. I would describe those as kind of showing, um, what can happen When speculation, uh, goes wrong. And, and there's lots of different manifestations of it, but to me, those are kind of three, uh, kind of key examples.

AI assessment note: “That, that's excessive speculation that the greed getting the best of them.”

Q Nick, what does excessive speculation mean, and is that the same as shilling? Just help me understand the terminology. Is excessive also just like the quantity, or is it the, the quality of the speculation?

A Well, look, I think when everything is open in crypto has kind of been this free for all. And of course there's some regulation, but it is the most kind of open, transparent industry. And when, um, you have an industry like that, you can see greed, uh, get the better of people. Right. And I think we've seen a lot of kind of main characters who are, I would describe as just having this soulless greed for attention, for money, That, that's excessive speculation that the greed getting the best of them. And so, you know, I, I would say, um, you could look at the three major blow ups in crypto in the past, uh, you know, two years. Um, one was obviously FTX. Um, another is, um, kind of Luna Terra with, with, with Do Kwon and, and three hours capital. I would describe those as kind of showing, um, what can happen When speculation, uh, goes wrong. And, and there's lots of different manifestations of it, but to me, those are kind of three, uh, kind of key examples.

AI assessment note: “soulless greed for attention, for money, That, that's excessive speculation”

Q How does it reduce the amount of violence in the world, Nick?

A Because people have economic skin in the game, that their new tribe is based on economic incentive Um, and shared values, not physical location or who your God is. Uh, how many people, you know, are, are, uh, part of a country and their country decides if they go to war and they don't have economic incentives that are aligned with their government. I think more and more people are just gonna be feel more attached to their crypto tribe than their like country tribe or their, Um, you know, their religious tribe, and I think that's potentially a good thing. Um, that said, like, you know, I think excessive shilling is bad, and especially, you know, like in bull markets when everyone is, um, you know, looking at the space. I think if you're like a leader, uh, in the space, I, I think shilling is, uh, you know, is, is pretty, Um, toxic. And there's a big, you know, crypto Twitter influencer culture of these people that are, you know, shilling loudly, dumping on retail, and that gives a bad experience to new people and actually sets the space back a little bit.

AI assessment note: “Because people have economic skin in the game, that their new tribe is based”

Q We're gonna talk about NFTs later. Um, I, I have to ask, in terms of actually, you mentioned there, 30 companies per fund. Right level of diversification with that. How do loss rates in crypto investing differ to normal, or are they very similar? How do you think about that? And downside protection as well, I guess.

A We've seen in our funds, loss rates have been, um, lower so far. And again, we're, we're still, 20 17 visitage, we're, uh, about six years in. So, you know, there's still a long way to go, but like in our fund one, Um, we have, um, I believe it's 22 investments in that fund, right? So I said about 20, between 20 and 30 in, in each fund, and that's how, that's how every fund, even fund three, which is a hundred and thirty million, we're still doing early stage, uh, bleeding edge crypto. We're still doing kind of first money in, like, we haven't changed our strategy. We do bigger checks now, but it's, it's really the same strategy, and that's something I think that has gone wrong in, in crypto, is like, You know, when you, when you have a lot of money being thrown at you and a lot of hype and things like that, you can go in different directions and raise massive funds, start doing growth stage. You know, I get why people do it for, uh, you know, to, to make more, um, management fees and to feel more important and things like that. But we've stayed very disciplined and focused on like what I just enjoy doing, which is like bleeding edge crypto. So that's, that's what we do. Um, I think I got a little off the question that you asked, but.

AI assessment note: “loss rates have been, um, lower so far”

Q Listen, I, Totally agree. And, uh, I, uh, I'm gonna add that to the show notes, and I'm also gonna try it and let you know what I think. Um, tell me, what was the single strongest belief you had which turned out to be wrong?

A One of my really strong convictions within crypto is that prediction markets are gonna be massive. You know, a prediction market is very simply a, um, a, a, Financial market for any outcome of, of any, um, event in the world. So you could have a prediction market for, um, you know, who's going to win, uh, the, the, the, the, the, the presidential election, uh, in, Um, you know, whatever country you're talking about, or is Israel, um, going to invade, do a grand invasion, um, in Gaza? Or, um, you know, is Bitcoin gonna be over 10,000? Any piece of information, uh, in the world you can create a market for. Um, and I think that is Really powerful. It could be the most powerful thing that you could do with crypto because right now, you know, everyone speculates on, um, you know, whether it's, it's, it's cryptocurrencies themselves or NFTs, you know, we could argue a lot of that. I think a lot of that is, um, is nonsense. There is a small Portion, which I obviously believe is very important. But, um, you know, a lot of the speculation, I think, isn't very, very valuable at all. But if you could create, like, global liquidity around information, I think that could be very valuable for the world. Because, you know, you, you have, um, how do we consume information today? Media. Whether it's, um, you know, the New York Times, or whether it's on X, you know, and, and everyone that create…

AI assessment note: “One of my really strong convictions within crypto is that prediction markets are gonna be massive.”

Q Was it easy to raise that first twenty six million dollars?

A Well, what, what, what helped in between was after Coinbase, I ended up joining, uh, Runa Capital, which is a venture fund. Um, it's not a super well-known venture fund, but, um, really good Russian entrepreneurs that had founded a few multi-billion dollar companies that, you know, were investing, um, in mostly, um, like SaaS, enterprise SaaS companies, but they were also curious about crypto. So I joined Runa, that was kind of my bridge, while also doing a lot of stuff personally, right? So I was, I was, you know, I got into venture through Runa, but I was also, you know, like I started a newsletter, um, called The Control at the time, where I was, um, you know, I was writing about the space a lot. Um, I also, uh, founded, um, an event called The Token Summit, which, um, If there's early kind of crypto people, they'll, they'll know. Token Summit is kind of a legendary event within crypto. Uh, it happened right, um, before kind of tokens kind of took off in, um, in 2017, and it was kind of all of the best founders from around the world, um, in the space coming together to talk about, uh, to talk about tokens and crypto. Um, and, you know, it was really cool. We, it was a 400 person event Um, and there was so much demand that tickets were selling, um, on Craigslist for, uh, like four times the price that we were selling them for. So this was a really, um, you know, big event at …

AI assessment note: “Well, what, what, what helped in between was after Coinbase, I ended up joining”

Q You can be an LP in a seed firm, a series A firm, and a growth firm. Which ones?

A I'm just going to use funds that I am LPs in, um, because the only L, the funds I'd want to be in is kind of like newish ones that aren't super well known. Um, because I think the, the well-known where there's strong narratives, and basically the newest ones, I'm at a point where I, I kind of can be, um, and I'm, I, I do that. The seed fund, I'd say, is a fund called, uh, Pronomos. Patry, um, is a, uh, very interesting guy that, um, was the, one of the, uh, the founders of the Seasteading Institute. He's a very, I would call him, uh, principled in some ways, uh, libertarian. Um, Who, um, his grandfather is Milton Friedman, the famous economist, and he's, uh, been, uh, very deep in kind of, uh, seasteading as an idea for, um, many years. Um, and seasteading, are you familiar with seasteading?

AI assessment note: “The seed fund, I'd say, is a fund called, uh, Pronomos.”

Q And so these rounds that we're investing in, are these tokens, are these equity rounds? How do they look in terms of both?

A That was something, you know, LPs early on, Uh, asked a lot. And this is when I, when you raised the first fund, it was in the middle of kind of the ICO boom. Um, and so some people thought, oh, are you investing in ICOs? We didn't invest in one ICO. Um, and some people were like, oh, you're not investing in ICOs. This is like the thing that's happening in crypto. How are you not investing in ICOs? And, um, we weren't necessarily opposed to ICOs, but what we saw was the founders that were doing ICOs felt Very, um, you know, short-term focus as opposed to long-term focus, right? They were doing the ICO because it was a way to raise a lot of money. They weren't really thinking strategically about how to build a product for the long-term that made sense. And the founders that we were talking to at the time that were, were thinking strategically about, you know, building a product that was useful for the world that could provide real value, um, you know, they were, they were just You know, launching, um, typical, uh, equity based businesses. We're not religious about, um, anything really. We're very practical in kind of seeing what, what is happening in the market, not on the surface level, but, but in talking to, to founders and to making decisions based on that. In terms of like the private stuff that we, we did for fund one, it was very much equity, but we also very much believe…

AI assessment note: “private stuff that we, we did for fund one, it was very much equity”

Q We're gonna talk about NFTs later. Um, I, I have to ask, in terms of actually, you mentioned there, 30 companies per fund. Right level of diversification with that. How do loss rates in crypto investing differ to normal, or are they very similar? How do you think about that? And downside protection as well, I guess.

A We've seen in our funds, loss rates have been, um, lower so far. And again, we're, we're still, 20 17 visitage, we're, uh, about six years in. So, you know, there's still a long way to go, but like in our fund one, Um, we have, um, I believe it's 22 investments in that fund, right? So I said about 20, between 20 and 30 in, in each fund, and that's how, that's how every fund, even fund three, which is a hundred and thirty million, we're still doing early stage, uh, bleeding edge crypto. We're still doing kind of first money in, like, we haven't changed our strategy. We do bigger checks now, but it's, it's really the same strategy, and that's something I think that has gone wrong in, in crypto, is like, You know, when you, when you have a lot of money being thrown at you and a lot of hype and things like that, you can go in different directions and raise massive funds, start doing growth stage. You know, I get why people do it for, uh, you know, to, to make more, um, management fees and to feel more important and things like that. But we've stayed very disciplined and focused on like what I just enjoy doing, which is like bleeding edge crypto. So that's, that's what we do. Um, I think I got a little off the question that you asked, but.

AI assessment note: “I think I got a little off the question that you asked, but.”

Q How does it reduce the amount of violence in the world, Nick?

A Because people have economic skin in the game, that their new tribe is based on economic incentive Um, and shared values, not physical location or who your God is. Uh, how many people, you know, are, are, uh, part of a country and their country decides if they go to war and they don't have economic incentives that are aligned with their government. I think more and more people are just gonna be feel more attached to their crypto tribe than their like country tribe or their, Um, you know, their religious tribe, and I think that's potentially a good thing. Um, that said, like, you know, I think excessive shilling is bad, and especially, you know, like in bull markets when everyone is, um, you know, looking at the space. I think if you're like a leader, uh, in the space, I, I think shilling is, uh, you know, is, is pretty, Um, toxic. And there's a big, you know, crypto Twitter influencer culture of these people that are, you know, shilling loudly, dumping on retail, and that gives a bad experience to new people and actually sets the space back a little bit.

AI assessment note: “Because people have economic skin in the game, that their new tribe is based on”

Q are today, which is very, very successful, so congratulations on that. I often think sometimes the hardest elements can shape you, but, no offense, kind of pushed out of Coinbase, and then raising a twenty-six million dollar fund? Like, that's quite a big jump, Nick. How, how does that happen? You either have a lot of rich friends, I mean, a lot of rich friends. How, how did that happen?

A No, I don't, I don't have any, uh, really, you know, I didn't have any really rich friends, um, I don't think, but, you know, had built a strong personal brand while I was at Coinbase, and I think that helped a lot, right? I wasn't just, Working at a company. I think a lot of people, to me, like working at Coinbase, it was more than working at a company. I was like working for an industry because, um, you know, crypto was very, you know, early, obviously when, when, when Coinbase started and, and Coinbase was kind of leading, um, you know, the industry in a lot of ways. Um, and I didn't, I, I wasn't like a Silicon Valley person that just wanted to work for like a brand name company or something like that. Like, I genuinely believe Uh, and still believe that, you know, crypto is the most important social technology of our lifetime. And, you know, I, I was gonna do anything that I could to, to help it grow. That was kind of my mindset. It wasn't like, you know, I'm working for this, you know, brand name, Silicon Valley company or anything like that.

AI assessment note: “had built a strong personal brand while I was at Coinbase, and I think that helped”

Q are today, which is very, very successful, so congratulations on that. I often think sometimes the hardest elements can shape you, but, no offense, kind of pushed out of Coinbase, and then raising a twenty-six million dollar fund? Like, that's quite a big jump, Nick. How, how does that happen? You either have a lot of rich friends, I mean, a lot of rich friends. How, how did that happen?

A No, I don't, I don't have any, uh, really, you know, I didn't have any really rich friends, um, I don't think, but, you know, had built a strong personal brand while I was at Coinbase, and I think that helped a lot, right? I wasn't just, Working at a company. I think a lot of people, to me, like working at Coinbase, it was more than working at a company. I was like working for an industry because, um, you know, crypto was very, you know, early, obviously when, when, when Coinbase started and, and Coinbase was kind of leading, um, you know, the industry in a lot of ways. Um, and I didn't, I, I wasn't like a Silicon Valley person that just wanted to work for like a brand name company or something like that. Like, I genuinely believe Uh, and still believe that, you know, crypto is the most important social technology of our lifetime. And, you know, I, I was gonna do anything that I could to, to help it grow. That was kind of my mindset. It wasn't like, you know, I'm working for this, you know, brand name, Silicon Valley company or anything like that.

AI assessment note: “had built a strong personal brand while I was at Coinbase, and I think that helped”