Is This Public?

It’s All Stocks

A portfolio manager I used to work with once remarked that if you stay in finance for long enough, you begin to see everything as a stock. When I first heard this, as an intern at an investment firm in 2017, it seemed like one of those Wall Street neologisms that sound true, but don’t feel true until you’ve lived them firsthand (other neologisms that fall under this category: “Don’t short on valuation”, “Don’t short on competition”, and my personal favorite: “Don’t try to predict the future. Try to describe the present”). This particular piece of wisdom was palpable almost immediately: in August of 2017, I drove to the Hamptons with some friends and realized that the PM who said that everything looked like a stock had a long or short position in half of the retailers occupying the strip malls along the Southhampton Bypass. In finance, even a trip to the beach is a quest for alpha.

The 2017 internship turned into a job offer, which turned into a full time position in 2018 after I graduated from college. I felt luckier than a lot of my peers who spent senior year either cramming for McKinsey case studies or lamenting because they doubted they had the quantitative skills to even attempt one. Before the summer of 2017, I probably would’ve put myself in the latter camp: a history major who only did theater, film, and journalism in college. But the internship taught me that you can learn any quantitative skill on the job, by sheer force of attrition. Someone will ask you for the diluted share count of an upcoming IPO, or to input a company’s EBITDA into an earnings model (which raises other questions, like what is depreciation and amortization, and how do you use Excel?), or might say to you “yes, gross margins are 50% right now, but what happens when GMs reach 65%, and S&M spend falls to 30% of revenue, and Trump manages to pass corporate tax cuts? How much are they earning then?” Early on in my internship, it might take me an hour to figure out what question I was even being asked, and another few hours to answer it. But over time -- through attrition -- the concepts fall into place. And then you begin to start seeing everything as a stock.

In the initial phase, “seeing stocks'' might just mean the sudden realization that the vast majority of items and systems you interact with on a daily basis are actually public companies. This understanding gets augmented even further when the above concepts (diluted shares, EBITDA, tax cuts) get layered in, and you begin to think of companies as their own little organisms: sentient income statements with hopes and dreams that evolve with every quarter. Then, the companies begin to talk to each other: you have a laser component company over here, and a global OEM powerhouse over there, and a Chinese phone manufacturer somewhere else, and a smorgasbord of social camera apps, and with all of that information you might ask yourself something like: where is the 3D imaging industry heading? If you were to peer inside the brain of a truly great portfolio manager it would look a bit like a timelapse of a rapidly industrializing metropolis. A single question about the destiny of 3D imaging would be the launching pad for a mental model around the P+L of dozens of companies, implications for global supply chains, and assumptions around how consumer behavior will continue to evolve. Change one input, and the other variables will instantly recalibrate.

The most exciting thing about investing (or learning something new in general) are the moments where your own brain surprises you. A few weeks into the internship, I pitched my first stock. A couple days later, I was writing up earnings calls. Even though I definitely didn’t understand everything I was hearing, I realized that writing was a great way to interrogate where the gaps in my knowledge actually were: moments where the logic didn’t compute or my ideas failed to flow seamlessly into the next were clearly places where I needed to do more research. In a short amount of time, no one needs to ask you “What happens when GMs reach 65%?” because the question automatically populates itself in your brain (and then you want to know what happens when gross margins reach 70%, 80% and 85%), and you can pipe over to Excel, change some cells, and figure out the answer. The truly great moments are when you preempt a question even before the smart people you work for ask it.

In this way, seeing things as stocks becomes its own network effect: everyone in the in-group is inculcated with a similar (though -- it should be emphasized -- not identical) set of priorities and platonic ideals to seek out in the investment process. In doing this, you learn to think not only on behalf of yourself, but on behalf of other investors, and the meta-game is the process of trying to parse the blind spots of the players around you. Yes, this can result in a lot of group-think (and sometimes compounds into a bubble) but the combination of being right, being wrong, being wrong about others being right, and being right about others being wrong (and vice versa) is a kind of palliative against things getting too out of hand. Generally, the people who make the most amount of money are optimists with a streak of paranoia: PMs whose heads are in the clouds, with eyes that glance constantly over their shoulders.

Toward the end of the summer, I knew I wanted a job offer. The desire went beyond my aversion to McKinsey case studies (after what I’d learned through attrition, I had more confidence in my ability to tackle one) and had more to do with the fact that I loved the job. I began to think of it as a privatized form of journalism or history scholarship: you speak to experts, read primary and secondary research, scrutinize transcripts, and try to form a narrative that never existed before (with the added component, of course, of being sensitive to what other investors are thinking). So when I got an offer, near the end of August, I accepted immediately on the spot.

But now onto other things that were happening around the same time.

You Either Grok It Or You Don’t

The period of 2017-2018 also happened to coincide with the third wave of crypto hype -- the runup of Bitcoin from $1,500 to $19,000, and Ethereum to $200 to $1,200 (and back down again). I wish I could say that the combination of a job offer, a light course load, and the relative abandon of senior year created the ideal environment for me to start picking up white papers and getting into crypto. But quite the opposite: getting TradFi-pilled made me dubious of anything that threatened to disrupt the cushy world I had just entered. During senior year, I’d sometimes visit my colleagues at the office, where we’d spot the occasional appearance of an ICO promoter or Winklevoss twin on the CNBC-designated flatscreen TV in our trading room. We’d gaze in silent, baffled horror, like we were observing a natural disaster in a foreign country.

When my colleagues and I did discuss crypto, it was mostly in an orthogonal (and subtly pessimistic) way: what would happen to the price of AMD and Nvidia stock when crypto ultimately crashed and demand for GPUs would plummet? Should we be shorting the public companies which were opportunistically appending “blockchain” to their name and business plans, but clearly had no prior bonafides in crypto (in retrospect, probably yes). Even among the TradFi people who bought Bitcoin and Ethereum, there was a degree of calculating opportunism -- the bubble would pop eventually, and the key was to sell before the crowd.

We didn’t grok.

But crypto wasn’t completely alien to me either. In June of 2017, right around the time I started my internship, I began getting a Ethereum-focused newsletter from my friend Teo (who now works at Uniswap). I can’t recall exactly how I ended up on his mailing list -- I must’ve run into him on Columbia’s campus or at a nearby bar and expressed interest, but anyway, I do know that I got the first issue, sent out on Saturday, Jun 24, 2017 at 1:52 PM. The subject header: Crypto Chat #1: Flash Crash, Visa, China, ICOs. It began:

Hello - hope this finds you well.
As I've become more and more involved in discussions around Ethereum (ETH) in past months, several of you have mentioned interest in some kind of regular newsletter sharing a roundup of thoughts/news, so here goes - please find attached.

Within the newsletter was a breathtaking roundup of recent crypto news: the GDAX flash crash, a Visa job posting for Ethereum developers, the staggering 65 million dollar Status ICO. Recall, I was still learning how exactly an IPO works (plus how to judge and value one), so the new mechanics of the crypto economy were a bit too much for me to wrap my head around. I opened Teo’s newsletters most weeks (they arrived at a steady near-weekly pace until October of 2018), but at best I skimmed them and at worst I raised my eyebrows and said to myself dubiously “well that shit’s crazy.”

I had other opportunities to grok, and flubbed those too. Fall semester of senior year I went on a few dates with a Turkish grad student with a mining rig set up in his Morningside Heights apartment. The way he talked about Bitcoin and Ethereum was completely different from how I heard the media describe what was going on. He came from a country with a debased currency, an untrustworthy government, and ungreased payment rails. He had grown up on the internet, and foresaw an interlinked, nationless society governed by the will of networked users and executed by code. The way he talked about it sounded exciting -- the kind of thing some of my SaaS-happy colleagues would’ve been into. The only problem was that...well the place I’d just accepted a job offer from only invested in enterprises that were public companies. Bitcoin and Ethereum were just ideas, and their most prominent manifestations were failed ICOs that were beginning to attract the wrath of the SEC.

By the time I graduated in May 2018, both Bitcoin and Ethereum had fallen below the high prices that attracted snarky clickbait pieces from the New York Times. Which meant that I pretty much stopped wondering about cryptocurrency and what all the hype was about. And then I stepped into full-time TradFi, which is an animal of its own.

The Social Network

One thing I was never told about Wall Street is that it’s one giant social network. From the outside it looks like numbers, lines, and glittering abstraction, but from the inside it’s essentially a high school cafeteria. Reputations are brokered and leveraged for allocations in an IPO, lavish, well-attended lunches are sponsored by investment banks, and the myth of the anonymous whale are overblown: your traders can call up pretty much any other desk in the industry and figure out who just made a block trade in a stock you’re jockeying to buy. You will attend dinners, and have the opportunity to rub shoulders with management teams. Names of prolific or disgraced traders who pop up in Bloomberg and the Financial Times are usually one degree of separation away. No one is incognito, even if the charts make it look that way.

This is a digression, but a private theory I have about the wave of SPACs in 2020 is that they had less to do with macroeconomic trends (COVID, low interest rates) or microeconomic trends (investment banks who wanted to earn a nice fee) than they did with the simple compulsion to sustain the social network. People were bored at home, and wanted to feel important. So they all did SPACs.

Stock investors aren’t even the most aggressively social creatures; our bond-trading counterparts are even more outgoing. About a year into my job, in April of 2019, I looked at the IPO of TradeWeb, a digital trading network for fixed-income assets. I was shocked to discover that just 20% of bonds, treasuries, swaps, and derivatives are traded electronically. The remaining 80% are done on the phone, over fax, or during lunch and golf. This is partially due to the fact that many fixed income assets have shallow liquidity pools or trade infrequently. But there’s another reason too: the social network keeps people locked into the old way of doing things.

Another thing you begin to notice as a stock investor is that some of the companies you’re evaluating -- the VC-annointed, so-called disruptors who are changing the world and giving the incumbents a million reasons to be fearful at night -- are not actually that innovative. They’ve just figured out one bit of arbitrage (better advertising, better branding, more money from VCs, clever financial engineering) to realize staggering growth, with punt-the-proverbial-can-down-the-road promises about future profitability.

This is especially true in the fintech space, where you might see, for example, a digital lender sell off consolidated loans in the form a variable interest entity, thus sacrificing the cash flows from those loans--and thus, the long-term upside (and so, the very “innovative” digital lender will be stuck losing money until the FDIC throws it a bone and lets it get a banking license...but by then the marketing dollars will have dried up so the growth will have slowed, and the earnings multiple will compress). Or you might see other forms of arbitrage, like an insure-tech company that gets its customer foothold in low-competition fields like renter’s insurance...but is forced to fight against high churn and low retention (which is why there’s so little competition in those fields -- you probably don’t want that customer to begin with). Or a home iBuyer that promises faster selling times...all in exchange for commission fees that are roughly double the industry average (and in a home-buying environment where homes sell at a staggering velocity without the need for an iBuyer to begin with). Just fun, late-stage growth stuff.

Now to be clear, I’m not saying that new public companies aren’t doing exciting and innovative things -- there are plenty of companies in biotechnology, data warehousing, web security, eCommerce, and retail that are delighting their customers and doing wildly great things. And even those fintechs have better customer service, and sometimes better APYs and lending rates than their more established rivals. But at the end of the day, everyone is subservient to the same master business model, and a lot of things that look like real change are just shiny skin-grafts atop the old way of doing things.

Understanding this was one part of why finance began to feel a little ridiculous to me. And the understanding was by no means instantaneous; it took me a little over a year and a half before I started recognizing the skin-graft business model. But once you see it, you can’t unsee it: you’ll look deep in the unconsolidated section of a company’s balance sheet, or maybe just glance at the sales and marketing expenses (if this product is really better, why do they need to spend 90% of revenue on S+M?) and begin to question whether what you’re being pitched is actually all that world-changing, or if you’ve just been seduced by the accoutrements of Wall Street life (nice lunches, smooth-talking management teams, brassy salespeople etc.). Of course, there are plenty of people who see all of this and love Wall Street for other reasons: the constant challenge and sense that you’re learning something every moment, being surrounded by brilliant people, the game of it all, and yes, the money. And of course, I enjoyed all of this...but I still couldn’t get beyond the skin-grafting.

At the beginning of 2020, I had a number of ideas that I wanted to try after TradFi. Most of the things on my list involved more creativity than being a stock analyst: I was weighing the idea of either returning to my film roots and working in production, or doing a bunch of coding bootcamps and trying to work in game design. I played a ton of games as a kid (Maplestory, The Sims, Runescape, and Civilization were some of my favorites), and my job had given me a fresh pair of eyes through which to view the various incentives and nuances at play when you orient people around mercenary goals. Between my love for devising narratives and the quantitative bent I’d picked up over the past few years, I thought that it might be worth trying out game development. In the time since graduation, I’d taught myself some coding basics but never sat down to undergo the requisite brain-attrition necessary to actually be proficient. Anyway, at the beginning of 2020, I had tentative plans to leave my job by the summer of 2020 -- exactly three years since the start of my 2017 internship -- and try something new.

And then a pandemic happened.

It’s All A Game

So, March 2020. COVID-19 is officially a national crisis. In the realm of finance, the Dow plunged 26%, the Vix spiked all the way up to 83, and in a panic I withdrew 50% of my stock portfolio from the market. On March 16th, 2020 my entire team called in for our first work-from-home 9am call, and spent about half the time speculating about when New York would reach herd immunity and the other half discussing what stocks we should buy when the pandemic ended (perhaps a testament to our enduring optimism). Stocks continued to plummet through the end of March, and then began their staggering, unprecedented recovery (thank you, Federal Reserve).

Unbeknownst to me, similar stress tests were unfolding in crypto: Bitcoin fell 50%, and the crash of Ethereum set off a chain reaction of pricing oracle lags, surging gas prices, decentralized exchange liquidations, and the Maker debt auction (on the bright side, Hayden Adams popped onto Twitter to chirpily inform people that Uniswap achieved a then-record amount of volume). Months later, when I finally started seriously getting into crypto (and to be honest, specifically Ethereum), I spent hours reading Medium posts, Twitter threads, and forums, unearthing lore across the ecosystem, and reliving not only the drama of March 2020, but sagas from the past decade. This is another instance where having majored in history really helped me: it’s just that my sources expanded beyond library archives and into stuff like blogs, DAO forums, Discord servers, and Etherscan transactions.

Anyway, back to Spring 2020. If Wall Street felt like a game before, this sense got further compounded when the sexiness and thrill of conferences and hand-shaking were stripped away, and all we were left with were Bloomberg terminal windows and Zoom meetings. In other words, the skin-graft of Wall Street itself was lifted. While the actual content of work was certainly getting more interesting -- markets and the narratives that animated them were being rewritten on a daily basis --- the substance of everyday life was, perhaps unsurprisingly, quite banal. Everything was unfolding on the interface-layer, on the screen, like a videogame.

I still remember why and when I started reading about crypto again. Every Sunday, I’d send out an email to my colleagues with a roundup of news related to stocks and trade ideas we’ve been discussing. On May 31st, 2020, I included a link to a New York Times article about Cameo, Patreon, and Substack -- one of the first mainstream pieces I’d read codifying the “creator economy” as a real force in the market. The Times also linked to a bunch of articles -- including a fewby Li Jin, which brought me to the a16z website, which (after the relentless hyperlink-clicking that I tend to do) landed me on a podcast with Jeff Jordan, Jesse Walden, Zoran Basich and the NBA player Spencer Dinwiddie. Spencer, a point guard with the Brooklyn Nets, was planning on tokenizing a portion of his three-year contract with the team, in an effort to receive more of his income upfront. What struck me about the podcast was the way Spencer articulated crypto as a unique enabler of an internet of value -- a way to create liquidity in an idiosyncratic pool of assets underpinned both by monetary worth and personal affinity. For the first time, crypto started to make sense, despite his occasional drops of industry lingo (Eth2, Polkadot, Tezos) that I still wasn’t totally familiar with.

From the podcast, I clicked on Jesse Walden’s name, which led me to his author page where I landed on his (then) most recent article: “Crypto’s Business Model is Familiar. What Isn’t is Who Benefits.” This piece was another crucial unlock for me. In it, Jesse described a system I was much more familiar with: network effects. But Jesse wasn’t just talking about the networked models I had grown familiar with as a stock analyst (Uber, Facebook/Instagram, Twilio, Wall Street life itself, etc.), but actually drawing analogies between Web 2.0 companies and their crypto counterparts. I hadn’t yet heard of Compound or Uniswap, but I knew about LendingClub and Coinbase, and what Jesse was describing seemed to be a far fairer model for organizing a business and aligning incentives. As Jesse writes in the piece: “[t]he principal innovation of crypto networks is their ability to grow network effects by enabling users to share in the value they create.”

To those already in the crypto space, this might seem like the most obvious observation in the world. Of course web3 protocols need users, and of course those users are attracted to networks with the deepest liquidity pools and most attractive incentives. But for someone who, up until that point, didn’t really grasp that actual businesses were being built on top of decentralized blockchains like Ethereum, this was an absolute revelation. The way I’d seen crypto written about by mainstream media tended to focus on cryptocurrencies as assets and investments -- but Jesse’s piece went a layer deeper and looked at crypto at the layer of ERC-20 tokens and business models.

That was a major turning point for me. Starting in June 2020, I began to follow the space a bit more closely. I began checking Coindesk and other crypto-focused news sites, and tracked the wave of token drops and liquidity-mining incentives that were picking up momentum. Admittedly, the significance of DeFi Summer (the launch of the Compound and Balancer tokens, rampant yield farming, and TVL reaching nearly $8 billion by the end of August) was actually a little lost on me. I assumed that everything that was going on was simply a continuation from the 2017-2018 hype cycle, rather than (as it now seems) a genuine shift forward in the energy and momentum of the industry. Still, I felt like things were different than they were two years prior. By the time the UNI token dropped in September 2020, I was beginning to develop a suspicion that tokens might one day shift the nature of traditional capital markets as well.

If users are given tokens, early investors are offered liquidity faster, and outsiders are given the opportunity to buy-in, is there a future where the need for traditional capital markets is reduced or rendered obsolete completely? Clearly, we’re still in a very early phase of this (and a large number of tokens dropped today have nebulous utility), but it does seem possible that with everything shifting upstream in the realm of finance (DeFi, token drops, faster and more-efficient asset trading), everything downstream will begin to adjust as well. The model of Uniswap loomed in my head when the Coinbase S1 dropped in February of this year. A decentralized exchange is running head-to-head in daily volume and revenue with a centralized leviathan valued at several magnitudes more -- and that leviathan has over a thousand employees, and likely lower margins (note: this should not be read as a knock against Coinbase which has a much more diverse business: an institutional segment, a nascent debit card and high-yield interest account, a much larger compliance/legal team, an investing arm, a strategic affiliation with USDC, a much more diverse balance sheet, etc...but still, the rise of Uniswap is truly staggering). It raises the question: how many more industries can crypto disrupt, when decentralized protocols replace employees and overhead costs, and value can instead be shared with users and stakeholders?

But I’m getting ahead of myself. In October of 2020, my friend Nikita invited me and a bunch of mutual friends to spend the month in a house in Maine. While there, I met Reggie, who was getting even deeper into crypto than I was. I had only been reading the articles and token drop announcements -- Reggie was investing, reading white papers, swapping tokens, yield farming, and just generally living in it (in addition to all of that, he’s also the CEO of an avatar social network company called Eternal). Anyway, the trip was the extra push I needed to begin seriously thinking about leaving my current job (I’d put that plan on temporary hiatus because of the pandemic). I was surrounded by people in various stages of mid-20’s self-discovery: everyone was either accepting a new position, about to quit a job, applying to grad school, launching an angel fund, raising money for a startup, working in VC, or working for Stripe. As a stock analyst I didn’t quite feel like a vampire squid, but I did feel a little like a barnacle -- hanging on the outer rim of life but not really participating in it substantially. The trip truly changed my life in a lot of ways -- I met people who loved their work, were optimistic about tech, and felt a clear sense of responsibility about the direction of the industry.

When I got back from the trip, I started really diving into crypto. I read the Ethereum White Paper for the first time (I know, I know, it took me awhile!). I discovered MEV; in fact, when I read the paper “Flash Boys 2.0: Frontrunning, Transaction Reordering, and Consensus Instability in Decentralized Exchanges, it was the first time I felt like I really understood how smart contracts work and orders are processed on the blockchain (what that paper does really well is highlight how the Ethereum network functions by exposing points of arbitrage). I started doing research and buying currencies and tokens -- trying to assess their businesses the way I evaluate a stock (once you start seeing things as stocks, anything is up for fair valuation). I discovered NFTs that I love, and met people like Toby Shorin and John Palmer who had been doing work in the industry for a few years.

In late January, I was still at the firm, but had already told my boss I was starting to look for new positions. I was already quietly buzzing with excitement about crypto, and was also jazzed by a few other personal projects I had just worked on (including messing a bit around with Unity and learning a bit of C#). That entire month had a kind of “crossing-the-Rubicon” valence to it. Between finally making it to 2021, the storm on the Capitol, and the promise of vaccines on the horizon, it seemed like the world was reconstituting itself.

Still, like everyone else at my job, in finance, and probably most people in the country, I was completely shocked to watch what happened in the final few weeks of January when Gamestop rose roughly 750% in the span of a few days, invigorated by the forces of Reddit. Among my colleagues, the reaction was a mix of fear, awe, and self-protection. Chief among the concerns: could one of our positions be next (a new neologism: “Don’t short something if r/WallStreetBets is about to send it to the moon. You will get rekt”). Over the next few days, our outlook evolved: by January 28th we had a deeper grasp of the months-long leadup to the saga. RoaringKitty had sowed the seeds for months on YouTube and the idea had been percolating for awhile on Reddit. This realization prompted a more nuanced discussion about the way the average retail investor was a lot more sophisticated than the elite Wall Streeter gives them credit for.

r/WallStreet bets had illuminated something: everyone was now playing the same game, mediated by the same interface. COVID rendered us all crouched, behind screens, contending to steer the same pools of capital in different directions. I think institutional Wall Street is afraid for a reason that’s even more intrinsic than the idea of being liquidated or margin-called. The game that we’d spent decades perfecting and protecting for a select group of insiders was now open to anyone. A great incursion on the social network was unfolding for everyone to witness. The funhouse culmination of Metcalfe’s law.

I believe crypto only intensifies that. Capital can now move at the same pace of online thought. Jesse Walden even hinted at that in the first article of his that I read: “We can now move bits of value in the way we move bits of information: using an open standard, in very granular transmissions, instantly, to anyone, anywhere in the world.” That ability will change everything.

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Describing the Present

Everyone’s journey down the crypto rabbit-hole is deeply personal to them. Mine is an amalgamation of my work in finance and investing, my private anxieties around whether I gave film enough of a shot (and underpinning that, a desire to make the act of creating art easier and more financially viable for my friends who were brave enough to go all-in), my personal tendencies toward light iconoclasm, my delight in uncertainty, and my desire to make the world a fairer, more economically just place. I think most people in crypto share some array of these traits, and have their own motivations as well. I think the key is finding the unlock for each person, and introducing them to crypto that way.

My dad began to grasp Ethereum after I suggested he read the white paper; as a lawyer, he immediately grokked the idea of immutable smart contracts. I’ve started a consulting gig with a resale and limited-run goods startup on a social token rewards system, and our conversations have centered around unifying the values of buyers, sellers, and creating relationships that endure beyond a transaction. Given the pace of sell-side notes, investment bank-hosted webinars, and recent high-profile announcements of potential TradFi-DeFi alliances (Compound Treasury, for example) I think Wall Street is beginning to wake up to the indelible momentum of crypto as well.

In my final weeks as a stock analyst, I pitched Ethereum, Uniswap, and MakerDAO as long positions to my colleagues (though no one bought...yet). We had numerous discussions around the promises of crypto, and what various crypto-native business models might look like. Marc Rubenstein’s excellent Reinventing The Financial System post about MakerDAO was the catalyst for a thorough, long-winding conversation about the fractional reserve banking system, and the way loans underpin the financial industry. I think my former teammates were surprised to hear that crypto could be used as a means to issue a dollar-backed stablecoin, and that a blockchain-based issuer could also begin to do work in new segments like real-world-asset-backed loans. While MakerDAO’s initial pool of RWA loans is quite small (just under ~4m in total loans outstanding today), it’s easy to see this scaling into a much larger operation (which could help diversify their collateral base away from USDC). These are early signs that crypto has the potential to grow to touch more than just value-exchange online.

It’s still so early for everything. A few nights ago, I went back and re-read some of the first messages I sent with the Turkish grad student from 2017. I wanted to revisit what I was really thinking about cryptocurrencies at the time. Our messages began in September, just a few weeks after my post-internship job offer. This part in particular stuck out to me:

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Essentially, I was asking -- how can Bitcoin (or Ethereum, or any other cryptocurrency) scale without the kind of leverage and rehypothecation that we see in traditional financial markets? In my own words “Bitcoin (or the blockchain) can’t replicate the international banking system we have where money and ‘value’ is basically manufactured through securitization and other fancy financial instruments.” Obviously, I was not anticipating DeFi. As I said in the second message “I’ve noticed that tech people are usually way more imaginative.” I was right about that. DeFi had a little under $2bn in TVL a year ago and now sits just above $50bn in TVL today (and much more if you include blockchains like Solana and Binance) -- a staggering amount of growth.

While you might argue that DeFi encourages some degree of reckless over-speculation, overleveraged trading, and is artificially inflating the value of certain crypto-assets today, I actually don’t think that matters longer-term. For one, price action in the industry serves as a form of advertising, and an early engine of innovation (Chris Dixon and Eddy Lazzarin had a good post that examined this phenomenon with respect to the price of Bitcoin, but the same is likely true if you map in assets like Ethereum or Solana). Even if certain assets fluctuate today (and those fluctuations are intensified by leverage), the overall impact of getting more people interested in crypto is a positive counterweight to any near-term mania (though yes, it does suck for the people who lose a lot of money).

And even if DeFi and yield farming is creating nearer-term hype, it’s also illuminating out the greater promise of crypto in general: the idea that if you eliminate middlemen and share value with users of a protocol instead, the positive externalities are so great that the crypto can start behaving like a public good. Grants issued by groups like Uniswap and the Ethereum Foundation are an early indication of this. And this isn’t confined to just DeFi; NFT projects allow creators and collectors to share in the value of art created by eliminating (or at the very least, reducing the take rate) of middlemen, while encoding an enduring revenue stream for the originator of a specific work. Hopefully we’ll soon see ways to map this model onto other scalable operations, like music and other forms of entertainment, DAOs that own real estate, and maybe a blockchain-based Uber.

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The “seeing things as stocks” mindset that was first inculcated in me four years ago will likely need to be reframed. In the future, public companies may see no separation between users, employees, and shareholders. In fact, “public companies” as we understand them today may not even exist, as they will have issued tokens at an earlier stage, and might not even IPO. While I realize I’m now violating my favorite neologism (“Don’t try to predict the future. Try to describe the present.”), I think we have early signals that this could come to pass. Everything from the increased focus on DAO treasury management to aforementioned efforts to collateralize real-world-assets with DeFi indicate that the need to tap public markets for capital may recede (it’s also quite possible that public markets and TradFi in general are reshaped from within by crypto, in ways that I’m not yet imagining, and they continue to endure in a revitalized form). Of course, there are tons of uncertainties here: the continued pace of user adoption, and regulatory overhangs are two big ones.

Mostly, I’m just unabashedly optimistic, for all the reasons I outlined above. In the four years since I first started paying attention to crypto, the industry has transitioned into an instrument of genuine value creation. I’ve met so many people in the past year who have inspired and galvanized me -- and my only hope is that I can contribute to an industry that I believe will revolutionize the way we live, both online and in the physical world.

Usually when I write an essay, I start with the concluding paragraph already written, at least in my head. I tend to begin already knowing what I want the lesson to be. This is one of the few exceptions -- an hour before publishing this, I’m sitting on the couch in my living room, trying to figure out the best way to bring both the past four years of my professional life, and the promise of crypto to some kind of satisfying finale. And I’m realizing that it’s probably an impossible task to achieve in writing. Because with crypto, you just have to live it. So now I’m off to go do that.

Also boundless thanks to the builders, writers, thinkers, tinkerers, and visionaries who have made their work available on everything from Github to blogs to forums to Discord messages. All of your contributions have made me, and numerous others so excited to be a part of this space.