“Bitcoin is the ultimate collector’s item. It’s the Honus Wagner card of money.”
Meltem Demirors is chief strategy officer at CoinShares, a digital asset investment firm managing over $4B in assets. Tegan Kline is the co-founder and business leader of Edge & Node, the organization behind The Graph Protocol, an indexing protocol that makes applications on the blockchain possible.
Bitcoin and other cryptocurrencies will have the same level of impact on value and storage as the Internet had on information and communication. Bitcoin offers greater freedom in the ownership and transfer of money. 70% of the world lives under totalitarian regimes and blockchain technology creates one of the most effective remedies to the encroachment of civil liberties. “In a world where governments vie for control and want to dictate every aspect of our lives, Bitcoin is this bastion of freedom… Bitcoin is the next step in the evolution of what it means to have freedom of expression; financial censorship is to the predominant form of censorship.”
Blockchain technology has led to a fundamental rethink of money and value storage. Bitcoin can often be understood when compared to the value assigned to rare baseball cards. “Bitcoin is the ultimate collector’s item. It’s the Honus Wagner card of money.”
LISTEN AND SUBSCRIBE
SPEAKERS
Tegan Kline
Co-Founder & Business Lead
Edge & Node
Meltem Demirors
Chief Strategy Officer
CoinShares
EPISODE TRANSCRIPT
John Darcie: (00:08)
And welcome back to salt talks. My name is John Darcie. I'm the managing director of salt, which is a global thought leadership forum and networking platform at the intersection of finance technology and public policy. Salt talks are a digital interview series with leading investors, creators, and thinkers. And our goal on these salt talks is the same as our goal at our salt conferences, which is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. We're very excited today to welcome you to the latest episode in our series of salt talks about the digital asset space, uh, with two fantastic panelists who have, uh, started and ran major companies within that industry, our panelists today are Meltem to mirrors and Taegan Klein. Uh, Meltem is the chief strategy officer of coin shares a digital asset investment firm that manages about 4 billion in assets on behalf of a global client base and serves as a trusted partner to investors and entrepreneurs navigating the digital asset ecosystem prior to joining coin shares, Melton helped build and grow the digital currency group, raising capital from the world's largest corporations and managing a portfolio of 120 companies and four subsidiaries before she was bitten by the Bitcoin bug.
John Darcie: (01:24)
Meltem worked in the oil and gas industry and trading, uh, corporate treasury and MNA roles, uh, taken Klein is the co-founder and business leader of edge in node, which is the organization behind the graph protocol, which is an indexing and query protocol making applications on the blockchain possible. I've taken helps leaders and innovators connect more deeply with stakeholders across the blockchain ecosystem. She's the former, an international business development manager and OST relations lead, uh, for orchid and a 16 Z and Sequoia backed blockchain company that created tools and protocols for users to obtain digital freedom and an open and accessible internet. Taegan successfully helped to launch orchid at a $400 million valuation on Coinbase hosting. Today's talk is yours truly John Darcie, again on the managing director of salt, as well as a director of business development at SkyBridge, which is a global alternative investment firm. And the way we like to start out, most of these talks Meltem and Taegan is how did you get bit by that Bitcoin or that digital asset bug we'll start with you Melton, but how did you go from working in oil and gas to deciding that this whole decentralized internet crypto Bitcoin thing was what you wanted to be involved in?
Meltem Demirors: (02:39)
Hi, John, it's a delight to be here. Thanks for having me, um, and hosting this conversation. I like to call this story, the Bitcoin origin story, you know, um, different cultures and different communities have different rituals. And definitely the predominant ritual in our industry is everyone has their own crypto origin story. So, um, this is a fun one, and I'm sure you, now that you're a part of the crypto community have told your story many times. Uh Tayga and I know she and I are good friends, and I've heard that story many times. So I'll share mine very briefly. Um, I spent my early career working in the energy industry and at the time that I started to get into Bitcoin, I worked in corporate treasury at ExxonMobil at the duct star in Irving, Texas. These are the days of Rex Tillerson when Exxon mobile at $400 billion market cap was the largest company in the world.
Meltem Demirors: (03:28)
Uh, so it's very different. Time is hard to believe. This was only seven years ago. That was a very different world. And as I was looking around, um, you know, the world was changing very quickly. Um, the things that accrued value were no longer companies that produce physical things. There are companies that operated in the digital realm and it really didn't take a crystal ball to see the direction in which the world was headed. And then on top of that, you know, it sends so much in my time in legacy capital markets and market microstructure and legacy capital markets is just so fundamentally broken. Um, I started my career trading, physical ethanol and methanol through the financial crisis with two phones, strapped to my ear, right, buying and shipping distressed cargoes, buying LOC, et cetera. Then I started trading carbon again, you know, highly phone and voice-driven, and as I started to learn more about Bitcoin interacts with Bitcoin, it was just so obvious to me that what the internet had done for information and communication cryptocurrencies and in particular Bitcoin was going to do for value.
Meltem Demirors: (04:26)
And, um, I had never really taken a risk in my life up to that point, you know, as the good girl went rules, I know what happened to me. Um, and along the way, I was like, you know what, I'm going to take a risk and do something totally crazy. If it doesn't work out, you know, at least I'll get to work with some of the most interesting, most intellectually sort of engaged people I've ever met. And, um, that was seven years ago and the rest is history. I've never had more fun. I've never been more scared, more freaked out. Um, but look, I think if you are an intellectually curious person and you look at what's happening around you, it's just, it's not a question of if, but a question of when, and I think we've already hit that inflection points. So, um, I am delighted that I'm in this industry versus the energy industry when March of last year hit, you know, and, um, the, the oil trade went negative. I think we're at negative $40. A barrel is like, this was the right choice. I think
John Darcie: (05:23)
I was, I was calling up family and friends and trying to figure out if there was anywhere we could store barrels of oil like delivery. But I wasn't able, there was a journalist who actually
Meltem Demirors: (05:32)
Did that. There was a journalist a few years ago actually took physical delivery of a, of an oil contract. I don't recommend it. I think that like the EPA come to your house. Yeah.
John Darcie: (05:42)
I read that one and it didn't sound as glamorous as maybe I thought it would be at the time, but I have a few followup questions on your origin story, but before we get into that, I'm going to ask Taegan the same thing.
Tegan Kline: (05:52)
Yeah, absolutely. Thank you so much for hosting. We're really, really grateful to be here and the next to melt a good friend. And also I think one of the greatest Bitcoin advocates of our time. And so it's really wonderful to be here, but yes. So my origin story, I was in finance, I was on the sales and trading floor in fixed income. And I learned about, um, Ethereum. And for me a theory was really when it kind of captivated my mind and attention. I had learned about Bitcoin in 2011, but still kind of went into a traditional wall street route. Um, but what I learned about Ethereum about four and a half years ago, I really saw the opportunity to kind of create a new financial system outside of the one that existed and kind of compete with that financial system. Um, and so I started kind of trading my own book well at Barclays and then moved over to, uh, the distributed VPN you mentioned. And then the graft really makes sure that, um, the blockchain becomes kind of the future of the internet. What
John Darcie: (06:45)
Was, what was it about a theorem that intrigued you? You know, a lot of people talk about Bitcoin as sort of their gateway drug into the digital asset, decentralized finance world. What was it about Ethereum that gave you that sort of Eureka moment
Tegan Kline: (06:57)
For me, you know, Bitcoin revolutionized finance where Ethereum kind of revolutionizes the internet and kind of Ethereum explodes it into every asset class as opposed to just money and finance. And for me, that's really what clicked. Um, but a lot of the brilliant software engineers that I know, and, and Meltem saw Bitcoin a lot sooner than I did.
John Darcie: (07:18)
Very cool. So Melton, you talked about how you felt scared, you know, you felt butterflies when you left the traditional finance industry and jumped into crypto and it's been obviously fits and starts in terms of how Bitcoin the price of Bitcoin has rallied. And in terms of mainstream adoption and an understanding and acceptance of decentralized finance, when did you start to think to yourself, wow, this actually is going to be something real and this sort of no turning back we've crossed the Rubicon.
Meltem Demirors: (07:46)
Yeah, I think it's the first time I sent a Bitcoin transaction. And I think, um, you know, I, I grew up in Europe. I've lived in the United States for the last 20 years now. Um, but my family's from rural Turkey. And so, um, for me, the aha moment was when I sent a Bitcoin transaction, I think it was, you know, a Sunday night at midnight. Um, and all I had to do was download a Bitcoin wallet, which is just as a software client. And all I needed was a 32 character string, right. Uh, a public address and I could send value. I had never had that experience before today when I want to send money. You know, I think with JP Morgan chase, I have to go to chase bank branch. I recently had an incident where I had to bring two forms of ID and I wasn't even allowed to send my own money, my own bank.
Meltem Demirors: (08:37)
Um, so this idea that 24 7 365, there is this permission was open network that allows anyone with an internet connection and a compatible software client and a public wallet address to send value to anyone anywhere. You don't need to know who they are. You don't need to know about them. Um, to me, it was just so obvious in that moment that this is the direction things were headed. And look, I think there's a really big second narrative that's unfolding here. We live in an age and time where civil liberties are being eroded on a daily basis, right? Surveillance capitalism is the predominant business model of the internet. And I think many of us are becoming aware of the perils of, of these business models. There is no alternative. And so I think what's been introduced by the client and then extended by other protocols like Ethereum, um, and other platforms that are being built and sort of this decentralized open source permissionless manner is in a world where government's right vibe for control and want to dictate every aspects of our lives.
Meltem Demirors: (09:40)
Bitcoin is sort of this bastion of freedom and it has freedom of access, freedom of opportunity. Anyone can build anything on top of the Bitcoin network. Now businesses that interact with Bitcoin are going to be regulated based on the jurisdictions in which they operate and the facts of what their business does, which you know, were subject to a whole lot of regulation. We're regulated more tightly than a bank at this point, I think. But, um, at the end of the day, you know, if you look at what's happening around our world, 70% of the world's population lives under a totalitarian regime, it's to me, right. Bitcoin is like the next step in, in sort of the evolution of what it means to have freedom of expression and financial censorship is the predominant form of censorship. Right? If we look at economic sanctions, if we look at the inability, people have to invest and allocate their capital, they way they want, or even move their capital around.
Meltem Demirors: (10:31)
And how sort of, um, money operates in these tiny networks that are still defined by physical borders, nothing in our life is defined by physical borders anymore, right? We're all in three different locations on a video chat, having conversation, how preposterous is it that our money is still constrained by physical borders that were dreamed up like three millennia ago. It's completely wild to me. And, um, so yeah, as I started interacting with Bitcoin, I was like, this is, I'm an avid reader, OSI five huge nerd. So I was like, this is the future of what money should look like. And once we do that, the types of economic activity we'll be able to enable, not just human to human, but machine to machine payments, as we start to move towards an economy where we have more automation and, you know, non-human entities that exist and operate. It's just very interesting. And I think it opens your mind to all of the possibilities and just unleashes a tremendous amount of creative potential.
John Darcie: (11:24)
Yeah, I think, uh, in terms of mainstream, uh, understanding of adoption of Bitcoin, I think honestly, things like NBA top shots have really cut through to the average American or person around the world, in terms of understanding if a physical piece of cardboard with a rookie card of Michael Jordan on it has value, why wouldn't a digital rendering of the same type of thing has value seeing digital art and things go for what most people would perceive as astronomical, uh, values. But I think it just reinforces the shift to digital money, uh, but taken, I want to build on some of what Meltem just said in terms of regulatory issues, right. Uh, you know, the decentralized finance world, Bitcoin, Ethereum, all these other protocols, they are disintermediating the world and they are, they're definitely threatening the, the autocratic power, not just of, you know, uh, nations that are fully autocratic, but even countries that, uh, monitor people's activity related to money and technology, what type of threat do you perceive as regulation, whether it be in the United States or abroad in terms of its long-term threat to decentralized finance Bitcoin and the whole ecosystem?
Tegan Kline: (12:32)
Yeah, I mean, I think that's a really great question. So, you know, the most powerful thing about Bitcoin to me is that there's no government, there's no individual, there's no corporation, the middle of that, you know, you can send a transaction directly and that does threaten a lot of individuals power. Um, if you look at Bitcoin, it's kind of competition with central banks and central banks have never before had competition. And when we see the fed print $9 trillion in just one year in 2020 alone, which is over 22% of the total circulating supply, which is, you know, no individual should have that kind of power. Um, we will likely see more regulate regulations come in, um, and tried to kind of threaten that power. And we've already kind of seen some of that with, um, the limitations on, on wallets and, and things like that. Um, but I do think that a lot of the regulations that are coming, um, hopefully will kind of continue to be fair. And, um, and yeah, and so, so we'll see kind of the, the powers that be, but hopefully more folks kind of get in and, and, um, contribute to this decentralized ecosystem. And, and, um, it makes, you know, central banks, um, more favorable to individuals yeah.
John Darcie: (13:41)
And melt them in terms of the macro environment, you know, you and I were talking before we went live here, about how much of this right pre contest.
Speaker 5: (13:49)
We did a show, we did appreciate it. And the pre-show
John Darcie: (13:52)
The VIP, the VIP green room, uh, where we were loitering before the show where we talk about the super secret stuff that, you know, it's like sort of the Bitcoin Illuminati, but, um, very secret how much, how much of this recent boom in the prices of crypto assets or digital assets, Bitcoin being the poster child, but also Ethereum and others, how much of it is driven by the macro environment? So the money printing that taken just mentioned, we created over 20%. I think the number is 22% of all dollars in circulation were created in 2020. How much of that accelerated, uh, the rise of Bitcoin? Or do you think it was inevitable just based on the strength of, of the, the technology that underlies Bitcoin?
Meltem Demirors: (14:34)
Yeah. So I want to take a moment and sort of separate the two narratives. I think the macro narrative and attributing Bitcoin's success in the crypto sector's overall success to this money printer Gober narrative. If I may use that God level meme, um, is, is very popular, but look at the end of the day, right? In, in March of 2020, when Jay Powell, you know, did money printer go Burr. Um, and by the way, it's very interesting that for the first time in modern history, we had a meme enter sort of the popular lexicon that alluded to fiscal and monetary policy. I mean, I can't tell you, I had conversations with people who don't know anything about fiscal and monetary policy about the impact of money printing on their savings and their financial wellbeing. And then I think what you really saw is, um, people flocked to assets that would appreciate and value in general, right?
Meltem Demirors: (15:24)
So the momentum that we've seen and the, just the frenzy we've seen for investible assets has really been consistent across the board. We saw a rotation out of core equities into tech, right? The three most popular trades in 2020, where long tech, which continues to be the trade. And that's both in private capital markets and public capital markets, as we've seen, you know, about the crazy outperformance of IPOs Tesla, I think is the poster child for this, right. Um, we've seen this in private capital markets where companies are raising rounds at astronomical valuations pre-product and the types of people I'm competing with and venture deals that used to be other VC firms. Now it's family offices, PE firms, publicly listed companies, foreign wealth funds investing directly. So the cohort of people investing in tech has just shifted monumentally. Second, most popular trade was short dollar, right?
Meltem Demirors: (16:08)
And there are a number of different ways you can shorten dollar. But I think generally, you know, the selloff we saw across bonds and treasuries was indicative of that. And then the fact that the U S now owns, you know, an astronomical amount of the treasuries to notes and circulation is another symptom of that overall reduced foreign ownership of dollar denominated assets, I think is another symptom of that. And then the last trade was long crypto, right? And, um, the long crypto trade I think is interesting because I don't think it's people necessarily saying, wait a minute, I believe Bitcoin or cryptocurrencies are going to be the thing that defines the future. It's really people saying, I need somewhere to put my money. That isn't the dollar cause asset inflation isn't happening in CPI. I know we're looking at, you know, 2.5%, or we finally crossed into 2.6% for CPI inflation.
Meltem Demirors: (16:53)
That's not where inflation is happening. Your stocks are worth more. The market is going up. Not because these assets are worth more it's because the dollar is worth, worth less than I think that's conceptually what people are starting to grasp money is flowing into real estate collectibles, right? We look at baseball cards. You mentioned NBA top shot in December a Honus Wagner card, which is the most rare, like holy grail of all baseball cards sold for $3.7 million in January ALS good version of that card sold for 5.2 million, right? That's almost a doubling in price of that collectible in less than a month's time span. And the way I sort of described Bitcoin to people is Bitcoin is the ultimate collector's item. It is the Honus Wagner card of money. There will only ever be 21 million Bitcoin in circulation. There are 47 million millionaires around the world today.
Meltem Demirors: (17:41)
So there's not even enough for every millionaire to own one Bitcoin. Um, so I think, again, as we look at that narrative that's unfolding, it really became a recursive loop, right? It's the macro environment yes. Contributed to people's awareness. But do I believe that people are buying Bitcoin as a hedge against inflation? No, they're buying that coin because then a number go up environment, which is the environment we're in, right? When you print an absolute boatload of money, numbers starts to go up. As people start plowing that money into assets, um, Bitcoin is just another asset that you can plow money into. And as a result, I also think the momentum got sort of took on a life of its own. One of the common misconceptions I want to quickly address John is there's this popular narrative, but there's a lot of leverage in crypto. And the actually is not true. The antithesis of that is true. There's no leverage in crypto.
John Darcie: (18:30)
So is this like tether thing is this whole tether thing now dead now that they settled with the New York attorney general?
Meltem Demirors: (18:35)
No, the FID never does. I've been through seven years of this. The FID never dies. The tether FID will never die. Bitcoin mining boils the oceans. Quantum computing will break the blockchain. Like we do this every cycle. It will never die. It's just that we have better data this time around. Um, but look at the end of the day, I think what happens is anytime there's momentum in decline, people want to get leveraged right now in crypto, you can't really get leveraged. There's no reg T there's nowhere. You can get margin or use your securities as collateral. So the rate to borrow cash in crypto is quite high. It's 12 to 18% annualized. And then the predominant contracts that you utilize to obtain exposure to a lever trade is something called a perpetual swap, which is a, a swap contract. And that's, that's repriced on an, at a daily basis, typically every eight hours and the cash funding cost of that contract can be as high as 10 to 15% per month.
Meltem Demirors: (19:26)
So the cost of having levered exposure to crypto is very, very high. Some periods where we have momentum in the Bitcoin space. We see a lot of people buying these perps swaps and obtaining leverage through this contract, but because the funding rate is so high, when that momentum slows down, we see a lot of de-levering in that contract, which results consequently, in a dip in prices and the market flipping back into backwardation. And so again, I think a lot of what we've seen here is just the Bitcoin market operates is operated the same for the last six years. Really, these dynamics haven't changed. So we're seeing this momentum becoming recursive and I, whenever we stay range-bound that leverage gets taken off. And then we see more people coming in, buying leverage gets added back on again, we see that momentum run, but again, I think this narrative of like, oh, it's the macro environment that has sovereign wealth funds signed Bitcoin?
Meltem Demirors: (20:11)
No they're buying anything and everything under the sun. Um, we've done research on optimal allocation. We found in a traditional 64, 40 portfolio, 4% allocation to Bitcoin that's rebalanced quarterly, sort of the optimal risk reward approach. I'm happy to share that research with your viewers, but again, you know, I'm certainly not out there telling people, put your entire treasury into Bitcoin. I don't think that's prudent. I don't think that helps with money for inter go for any of the things we talked about. Um, so I think a lot of the popular rhetoric, you know, it sounds sexy. Is it prudent or logical? Absolutely not. What I advocate for that. Absolutely not. Do I think people should be exposed to decline? Absolutely. But I also think they should be exposed to a wide range of, of different assets. Yeah.
Tegan Kline: (20:51)
And I think a lot of the listeners there, their roles are to enter, you know, allocate capital efficiently, be it into their business, be into their portfolios, their client portfolios. And at this point it's almost become irresponsible, not to put a piece of your, of that into Bitcoin and other digital assets. And the question really is, do you believe that the dollar will continue to depreciate against Bitcoin? I firmly believe it will. Um, and I think Bitcoin has gone beyond the narrative of just digital gold Bitcoin is better gold than gold. Bitcoin is better than Fiat. You know, Fiat now does not incentivize us to save saving rates are so incredibly low. It incentivizes us to spend it actually beyond that. It incentivizes us to go into debt because the rates on debt are so low that you're incentivized to take on more debt. And that's why we are at the moment in time that we have never, before seen as much debt as we are in. Um, and the market for Bitcoin, you know, is it's a gold and Fiat and savings market kind of combined. Um, and Bitcoin is teaching us to save it, enforced. It forces you to kind of have the mindset of saving because as you hold Bitcoin and think in terms of Bitcoin, everything around you gets cheaper, be it realistic, you know, the Fiat dollar, your lunch, you know, everything gets cheaper. Um, and
Meltem Demirors: (22:05)
Long time preference, I definitely bought them stuff in 2015 with Bitcoin that I wish I hadn't bought.
Tegan Kline: (22:12)
People are just like incapable of spending their Bitcoins for this reason. Um, you know, and you start to just think in terms of Bitcoin, and then you start thinking, you know, what is money and people argue money is for spending. But I disagree with that. I think money is supposed to hold value long enough so that when you do want to spend it, you can. Um, and that's why I think Bitcoin is so powerful.
John Darcie: (22:31)
Yeah. I mean, at dinner last night, I was having this conversation with my wife's grandmother. She's 82 years old, very lucid, but I was trying to explain Bitcoin and digital assets to her because, you know, anytime these things bubble up into the mainstream consciousness, orange pill, her, I tried, but I tried to just explain the origins of money and how the caveman, you know, they bartered. And then they picked rocks that they thought looked nice and they use that as currency. And then Julius Caesar stamped his face on, on coins and just the evolution of money. And she says, well, well, if I send my money from my bank of New York to, to another bank in Austin, Texas, you know that they're obviously they're delivering that money from one bank to the other. I said, well, that's, that's not exactly true. We already have digital money. But the difference is that digital money can 20% more of it can be created in one year based on the stroke of a pen from a central banker. So there's no reason why Bitcoin is any different than any other currency or, or a store of value or collectible that's existed throughout history.
Meltem Demirors: (23:29)
But John, there's something I want to touch on that. I think both of you and Taegan have just raised that maybe will help bridge us into a bit of a conversation around what's happening in blockchain technology and sort of decentralized finance and protocols more broadly. One of the things I think is so interesting to talk is, um, you know, why, why did humans utilize gold? And you articulated it really well, the association of empire and money, right? It was really made by Julius Caesar who stamped his face on a gold coin. And what gold allowed people to do is transport value and energy, right? Um, across vast distances of both space and time, right? If I'm a chicken farmer and I have a chicken, I can transport my chicken, maybe a hundred miles, but I can transport a gold coin, right. Thousands of miles and over a millennia.
Meltem Demirors: (24:17)
Um, and so I think about this idea of like gold was really a store of value because it allowed us to preserve economic activity and transmute it across space and time. Right. And over time, what human civilizations did is we created piles of this gold, right? And we built citadels and fortresses around these piles of literal shiny rocks. And that's how our, our society has developed. And today still, what does a bank do in terms of form and function? You know, BNY Mellon in New York, they have a massive vault in their basement, their stores, gold and other assets. Um, you know, it's like very Lord of Lord of the rings, Gollum style, the gold sitting in the sitting in the basement. Um, and I just think that idea in the 21st century is absolutely preposterous. Like I don't have a vault in my house if I'm traveling, you know, I'm wearing a track suit, I don't have pockets big enough to hold a gold bar. Certainly I'm not traveling around with a briefcase filled with, with gold bars. So I think this idea of, um, you know, so much of what we do in our world has been modernized. I have a super computer in my, in my pocket that I use on a daily basis. How is it that the basis of how we construct and conceptualize value is still based on shiny gold rocks that we store inside of big marble buildings. It just doesn't make any sense to me. People
John Darcie: (25:36)
Talk about Fiat. They say, well, Bitcoin doesn't have an army. That's there to enforce its credibility. I said, actually it does. It has the biggest, it has the biggest and most powerful and most of noxious meme army in the history of the planet, uh, protecting us integrity.
Meltem Demirors: (25:52)
Yeah. But I'll look, and I think this is what's so important. Right? All, all reality is just belief. Um, and we've named a new monetary reality into existence. I think if you look at what's happening in equities as well, I think, you know, Elon Musk for all his faults has also named a new reality into existence. I mean, Tesla, if you look the fundamentals of that business, you know, it's not really sure about that, but in terms of narratives and excellent job, meaning this new reality and this perception into existence. And as you alluded to, you know, Bitcoin doesn't have an ER department, we don't have leaders or people who are spokespeople for Bitcoin. What we have is a group of millions of people around the world who really passionately believe in a different version of reality in the future. And we're all working to try to bring that reality into existence.
Meltem Demirors: (26:41)
Now what's really cool about Bitcoin is from an ideological perspective, the umbrella is big enough to accommodate a lot of different viewpoints, right? And you also have all of these different sort of ancillary ecosystems, like the theory of ecosystem, what taken in her team are working on it, the graph and, you know, thousands of other networks that people are working on. And they're all sort of recursive and complimentary. Um, but what I really would love to talk about a bit more beyond just the asset it's it's felt is like, what are we doing with building companies? You know, the corporation, it is really becoming more powerful than the state. We look at apple, apple has a $2 trillion market cap, you know, more than the GDP of most countries. We look at companies like micro strategy, issuing billion dollar corporate bond is 0%. Like it's just preposterous. Um, but I think one of the things we're also experimenting with is changing the form of corporations and how people engage in economic activity. So I think maybe Taegan could tell us a bit more about, you know, what's happening with protocols and this new way of conceptualizing the way that people build economic value outside of the confines of a corporation with its leaders and mostly male leaders who then become defacto sort of leaders of, of the world. Yeah,
Tegan Kline: (27:55)
Absolutely. You know, protocols and tokens really are kind of this new business model. I think it took a while for individuals to kind of get their minds around SAS as a new business model. And then Salesforce turned it into a 200, $200 billion industry. Um, and you know, and now, you know, there's over 15,000 SAS companies, but tokens are really the next evolution of the business model. And I think that's going to take folks a lot longer to get their minds around than SAS did because it's a little bit, you know, further out there. Um, and so, you know, th th now's the opportunity for individuals to kind of get their minds around that new business model, because that's really where the alpha is. And with tokens, you know, the way, it's the way that you have a sustainable business model, when you have kind of a decentralized protocol and also open-source technology, oftentimes an opensource technology you're asking for donations, and you rely on those donations with tokens, you can see like Bitcoin and Ethereum, the graph chain length, they've all kind of mastered that art of creating the, the token as the business model and not limiting it with SAS or with revenue.
Tegan Kline: (29:00)
And it's kind of a radical idea, but that I think is where a lot of the future potential and opportunity lies. And I do think that, you know, this will be, I think we've already started to see it, but this will be probably the largest wealth transfer we see in our lifetime. And there's so much opportunity ahead. Another thing that I like to speak about is just kind of the future of work and individuals can now work for ideas or protocols, as opposed to just centralized companies where kind of the money trickles up to the top wall street gets a bad rap, you know, for being kind of greedy and money hungry. But analysts on wall street are not making a ton of money. They're like with the regulations came, you know, it kind of dried up a lot of that earning potential. And so you have to work your way up from analyst to associate VP before you can really become like, you know, wealthy within finance. And so this is giving an opportunity for individuals in centralized finance, and also in web to, to come and build in a new ecosystem.
John Darcie: (29:52)
Yeah. I mean, you saw Goldman Sachs his tone, uh, around Bitcoin and digital assets change as soon as Coinbase is a private valuation and its direct listing was trading at the same market cap as Goldman Sachs. I think they looked around the room and said, you know, this is an unstoppable train. We better get out of the way, uh, and maybe grab on, uh, as well. So interesting to see that news this week as well. So let's, let's think into the future, uh, we'll start with Meltem and, and taken. I know you have thoughts on this as well, but what does that world look like? We have flying cars and tunnels. We have web 3.0 for
Meltem Demirors: (30:30)
Flying cars since I was five years old and I haven't gotten it yet, like low key. I'm mad about that
John Darcie: (30:38)
Flying cars. And all we got was a, you know, this is crazy cryptographic money that, that transcends space and time, but, uh, what does web 3.0, look like? What does the world look like with a decentralized internet? What is investing look like in a world that's fully decentralized?
Meltem Demirors: (30:53)
Sure. Um, and maybe the way I'd articulate that John is, um, first of all, what you've just started circulated is inconceivable to most people. So I'll go ahead and say, certainly believe this is evolutionary, right. I don't think it happens overnight. I don't think this is a sudden shift. I think this is evolutionary and happens over a much longer arc of time. Like humans are notoriously bad at internalizing change. Um, and a lot of that is really a limitation, um, based on like how we construct our mental models and our view of the world. So unfortunately I do think this will be a 5, 10, 15, 20 year sort of arc of time. But as you've alluded to the macro environment, we're living in does accelerate some of that timeline because I think it started to show just the extreme level of institutional dysfunction. We have not just in corporations, but in markets, in our, um, governments, in our NGOs, just the institutions that we've constructed are so frail, frankly.
Meltem Demirors: (31:53)
Um, and you know, you see that in the United States, the way this pandemic was handled was just an absolute disaster is embarrassing to be an American during this pandemic. And it's, it's, it's frightening, quite candidly. Um, I think the other pieces, I think a lot of people have not yet accepted or recognized that we no longer live in a world where the us dollar is the great hedge Amman. We live in a multipolar currency world. It's just that most people haven't internalized that yet. And the multi-polar currency world we live in, right. We have new sort of players emerging, certainly China with DCP, their digital, remember the project. And just the fact that finance and transactions like the monetary system in China is entirely digitized. I think that is something most people don't appreciate until they go to China. Like, I went there with my little paper MMB and people were like, please, nobody wants that. Like, you need to use the app. I felt like so incompetent because I was there with like my boomer box and they were like, lady, nobody, nobody does that anymore. I felt China's
John Darcie: (32:57)
End game, you know, just to, to go slightly off topic, but you know, they, they have restricted, you know, usage of Bitcoin. Meanwhile, they're one of the largest miners of Bitcoin. They're launching their own central bank, digital currency. And they're obviously very intrigued by the space. What is the game they're playing, uh, in Bitcoin?
Meltem Demirors: (33:16)
Yeah, look, um, I think it's the idea that all empires play, right. It's domination. Um, and, and when I say domination, I don't necessarily mean that in a negative sense. So historic, I come from the energy industry, right? The last really century of human history in terms of conflict and physical conflict, um, has been defined by the quest for oil, right? And really the shift to the petrodollar as a result of what happened in 1973, like really what has shaped the modern world, even the way we drew borders after world war II, or it was predicated on the basis that we were on the hunt for fuel for oil, the new oil is semiconductors, right? The U S is woefully behind when it comes to semiconductor production. And Silicon Ray is the primary input, compute and connectivity is the most important resource that nation states will have.
Meltem Demirors: (34:08)
And Bitcoin in and of itself is just a giant telecommunications network. Bitcoin is a privately owned, privately operated source communication network that communicates value. And it's the most secure financial network that we have. It's never been hacked. It's never been taken down. There are billions of dollars of value that go into it. In fact, in December a charge in January alone, the Bitcoin network generated 1.3, $6 billion of fees and rewards for people who participated in the physical maintenance of that infrastructure. So I think the new frontier we see emerging is this, this digital frontier, digital warfighter frontier. And that gets fought on several different fronts. It's value, it's cybersecurity, it's disinformation campaigns, right. Um, and we've seen all of that over the last few years. And so what I think has been really interesting to observe, like there are these different sort of poles that are emerging.
Meltem Demirors: (34:57)
There's obviously the U S there's obviously China, Russia is a prominent player. I think we're underestimating the middle east as well. But on top of that, you start to add in online communities, right, as you alluded to Bitcoin is an online community of millions of people around the world who fervently believe in and work for, and work on advocating for making that coin better. Um, Taegan and I just funded an initiative at MIT to fund open-source development of the Bitcoin protocol, neutral and free of corporate influence. But look, there's, there's a lot of effort and energy that people are putting into this, like online, purely digital instantiation of a new type of nation state, which is the coin. Now that sounds a bit farfetched, but I think what we will start to see is, you know, I don't have just one identity anymore. Yes. My digital ID card, you know, my physical ID card, pardon says, I'm Melton.
Meltem Demirors: (35:48)
And I'm a resident of the state of New Hampshire and I'm a citizen of the United States, but online, I can have many different personas and belong to many different communities and have many different identities. And I think, again, this is just part of the natural evolution of how we live our lives. Like where, when I meet someone, I don't talk about where I'm from or where I live anymore. I talk about what I'm into and what communities I'm a part of. I talked about being a Bitcoin, or I talk about, you know, being into scifi books, great tracks. I mean, this is it's fire. Not going to lie. You have to look good. It's a global pandemic. John, I'm trying to have some fun. I know, obviously
John Darcie: (36:26)
I'm dressed head to toe in wool here. So I don't, I don't have shorts on underneath my jacket, but,
Meltem Demirors: (36:31)
And you're still, you're still operating, you know, you have your John, the financier persona on that. There are many elements of, you know, your persona. So, so I do think giving people more flexibility to choose, right, this idea of the exit or voice, right. To choose what communities they want to be a part of is so powerful. And we, as a result of the pandemic, again, we've all spent the last year sitting inside of our houses with nothing to do, but beyond line. Right? And so I think again, um, what governments are missing is like ideas are incredibly powerful and incredibly dangerous to the existing power structure. And this idea has just reached like a point of no return. Now how this idea gets expressed and implemented. There's a lot of different permutations of that. I think you will see nation states and corporations attempt to co-opt the Bitcoin narrative, which we already saw with Facebook's DM, right?
Meltem Demirors: (37:24)
Like I'm saying, oh, this is another type of Bitcoin. I'm like, absolutely not going to work. Is that going to work DM? Um, I think it, I think it well, and I actually think it might be a very positive catalyst because at the end of the day, you know, 3 billion people using Facebook now also having a digital wallet that's compatible with not only DM, but also with other public open blockchains is potentially a great way to orange pill, 3 billion Facebook users. So I'm supportive. And again, I think it's evolutionary at the end of the day, you know, the approaches we took in the past of physically shutting people down or shutting off their access to financial system, how are you going to shut down Bitcoin? Right.
John Darcie: (38:07)
Why, why is quantum computing not an existential threat to Bitcoin?
Meltem Demirors: (38:12)
Because quantum computing is not yet at a point where like it could have quote unquote, the blockchain shot 2 56 is highly secure. And also, I think people forget like the pace of technological innovation on the cryptography side. Like we're talking about robust research academically into next gen cryptography is going to keep pace with whatever innovations exist in super computing. Right. It's sort of like, um, technology is just a tool, right? And there are people it for good and use it for bad and it's sort of a cat and mouse game. Um, but I think the amount of innovation we see happening in the cryptography space will keep pace with whatever innovations we see on the computing side that allow us to potentially break, um, really complex types of encryption.
John Darcie: (38:51)
All right. Taegan, what's the next step in this decentralized internet finance world, you know, first of all, why are blockchains and distributed ledgers better than just normal databases and traditional ways of storing technology and information. And, you know, we've seen the rise of NFTE NFTs, non fungible tokens, whether it be NBA top shots, but it's, what's the next iteration of all this. Yeah.
Meltem Demirors: (39:16)
I mean, I think we're only at the beginning of kind of the decentralized internet, which I call web three. Um, I think that that is really the future. And Dubai is a piece of that, you know, Dubai, you asked, you know, why are blockchains better than databases? Um, and I think the big answer is really open data and getting access to that data. For example, in web to the centralized space with Facebook, LinkedIn, those APIs are closed. So I can't port LinkedIn data to my own application, nor can I afford it to a Crunchbase or, or another application because the API are closed. So I can't access that data in the blockchain space, specifically with the graph, we call them sub graphs, they're open API APIs. And so anyone can pull data from those open APIs to their applications, to another applications. And this is leading. This is creating a lot of innovation in the space
Tegan Kline: (40:05)
And it's kind of like Lego building blocks of innovation
Meltem Demirors: (40:07)
That we're seeing. And Dubai is a prime example of that because of the transparency within Dubai, there was so much more innovation. And I think if we look back to the mortgage crisis from, from 2008, if we had transparency, and if the banks were able to identify where those mortgage backed securities lied, who owned them, I don't think that crisis would have been as big potentially we could have prevented that crisis. And do you buy, because you have all these little fires everywhere, it prevents this big, massive fire because of that trance, that transparency that's there. And this is leading into NFTs, which are non fungible tokens that we've kind of alluded to earlier kind of having ownership of digital art and proving that it's an original, just like you have like an original Gucci belt, um, moving that it's original copy. And so we're seeing a lot of the individuals that made a lot of money in the decentralized finance space, according into the NMT space.
Meltem Demirors: (41:00)
And then that money is going to artists and creators bringing a whole new way of, of individuals into the crypto space. And I think that will only continue, you know, I think where every application that you have on your iPhone will become decentralized. Um, and you know, it will lead into the music space. We have, you know, audience, we have, um, like, you know, different storage systems. Um, and there's so much more to go, you know, we need a social network, we need the Robin hood of crypto. We need the Bloomberg of crypto, all of which, you know, hasn't arrived yet. And there's so much innovation to happen.
John Darcie: (41:32)
Three DS, uh, digital disinformation distribution. Can you tell me what that means? What those are?
Meltem Demirors: (41:40)
Yeah, so, so, um, my business partners like coin shares, um, Danny masters, Ross Newton, John Raymond, Yeti, before they started coin shares, they ran a commodities fund. Um, my background, you know, is more on the corporate finance corporate treasury dominated side. And one of the things they did, um, on the commodity side is they built a really robust approach, sort of analyzing potties market based on something they called the three D's. Um, and so we've done the same thing in the crypto space is something Dan and I like to work on. We have our, you know, daily chats where we sort of spitball and brainstorm. So what we've arrived at is sort of this framework that sort of, um, articulates our approach to building coin shares in our business, which we're an asset management firm, but we're also in an investment firm that builds digital infrastructure.
Meltem Demirors: (42:22)
So the 3d is our digital, everything's becoming digital, and we've already seen that across the finance landscape it's, um, disintermediation, right? So we're removing intermediaries and allowing people to interact directly with one another. And the rise of peer-to-peer financial systems, I think is one example of that. And then the last one that's so critical is distribution. Um, the way that financial products and services are distributed is changing. It used to be that the pipe would go from the fed to a tier one bank, right, to SyFy from the SyFy to a smaller bank, and then from smaller bank to service provider and the service provider to the consumer. And along that path, right, maybe three to 5% of the value gets shaved off through fees and whatever else. Now, what we have is the ability to distribute tokens and digital assets and value directly to consumers and users, which is something that the grafted, right.
Meltem Demirors: (43:13)
They airdrop tokens to people who are participants in sort of bootstrapping the protocol. So this fundamental shift in how we distribute financial products and services, I think is going to lead to a massive amount of, um, disintermediation. And so what we really try to do at coin shares is the analyze data in a data-driven way, right? We have a large research team and we spend a lot of time doing fundamental research on what's happening here. But as we look at the trend of digitization, which we already saw with FinTech, right, that's not a new trend, but it's happening in a much faster way of cryptocurrencies. We see this trend of disintermediation, which now for the first time as possible, I don't need a commercial bank to interact with Bitcoin, which is fun. Like it's mine, it's absolutely mind blowing. If you haven't done it, I highly recommend downloading something like blue wallet and sending even a one Satoshi lightning transaction.
Meltem Demirors: (44:00)
It will absolutely blow your mind, but really the biggest trend. And the one that I think should be scariest to financial institutions is distribution. You no longer need a broker or a guy in a suit to distribute financial products, a dog or cat on the internet, right? And then on dev building a defy protocol can distribute products and services. And because the code is publicly verifiable by anyone who wants to look at it and because everything is extremely transparent, you no longer have this information asymmetry or this gatekeeping that we've the traditional financial system. And I think that is so profoundly transformative people still aren't really grasping it. We're seeing people trying to build products and services around crypto using traditional finance business models. But I don't need to give my Bitcoin to BNY Mellon to lock in a vault. That's not going to keep my Bitcoin any more secure. Um, so I think this idea of distribution fundamentally shifting is one that people are just completely underestimating and those fees are going to flow elsewhere, and it's not going to be bankers and, and, you know, fund managers who get those fees, it's going to be developers and people building protocols and open source tools who capitalize on those feeds
John Darcie: (45:10)
Like taken so taken. What's unique
Speaker 5: (45:12)
About the graph protocol.
John Darcie: (45:14)
What's unique about the graph protocol, how you've built it. She talked about how you, you incentivize, you know, early, uh, developers who bootstrapped the protocol by, by cutting them into, uh, the, basically the currency that operates on the graph protocol. But what's unique about the way you've built in the way you've conceptualized it. Yeah.
Tegan Kline: (45:33)
So the graph has the potential to become larger than any layer, one blockchain, because the graph integrates with every level of the stack. Um, and so you have like the applications on top, they use the graph to index inquiry, their protocol kind of like what Google does for the web. The graph does for the blockchain. You have all this great data within the web, but until Google came up with search, you couldn't access that data. Same with the blockchain. There's a lot of wonderful data there, but getting to that data is really difficult and time consuming. And so we have strapped, you know, 12 months line of code away from those developers and allow the developers to easily serve data to their users. Um, but what's great about the graph is it can integrate with every piece of the stack yet, you know, the, the layer one blockchains, the layer two blockchains, like optimism scale, um, there's many, many different arbitrary, many different layer twos to help with scaling, which is one of the issues, you know, Ethereum has grown so big and there's so much development on Ethereum that folks are kind of looking to go to other places.
Tegan Kline: (46:29)
And so wherever developers and users go, the graph will be,
John Darcie: (46:33)
Yeah, obviously, you know, I have a lot of conversations with people in the digital asset space and, and graph has come up in a number of conversations. So congratulations on what you've built with that. I know there's, there's a ton of excitement, uh, in the digital asset ecosystem about what, what you've built and what's continuing to be built on that protocol. Uh, but we could probably go on for another two hours, but we'll wrap it up there for today. Uh Meltem T uh, Taegan, what's your Twitter handles. You guys are very lively on Twitter. How do we follow you on Twitter Meltem and take it.
Meltem Demirors: (47:01)
Sure. I'm at Mel underscore done. Um, and my company's at coin shares co I do have to disclose I am an investor in the graph protocol. Um, so I'm probably a bit biased and all of my personal investments, as well as those I made through coin shares are disclosed on my website, which is Meltem generis.com. Um, I always like to disclose what my interests are. Um, so I am a long-term believer in the graph and obviously in my incentives, they're pretty clear. I just wanted to disclose that since disclosure is a part of traditional finance, that I certainly think we should replicate in the crypto space.
Tegan Kline: (47:36)
Absolutely agree. And I'm the client venture on Twitter. You can follow the graph protocol at graft protocol, and you can follow edge and node at edge node.
John Darcie: (47:47)
Meltem you're my go-to source. When, when people start coming at me with the fact that Bitcoin uses all the is going to use all the world's energy in the next decade, and that it's, uh, a massive suck on, on energy use. You're my go-to resource. I just say, go, go talk to them, melt them, go, go follow them on Twitter. She'll she'll take them. We're putting out.
Meltem Demirors: (48:06)
Yeah. So I have a website. Bitcoin will not boil the ocean.com. Um, queen shares have published a lot of research on the use of renewables and Bitcoin mining. We're about to announce a whole slew of investments we've made in this space, but in my view, Bitcoin will actually be the catalyst for an energy revolution, the likes of which we've never seen before. Um, so I'd love to continue talking about that. There are a lot of great people, including Russ Stephens at N Y dig, who've done great work, sort of helping evangelize that narrative. And so, you know, the energy industry and the Bitcoin industry in an odd way, like my two loves are coming back together again. And if we want to have an intergalactic, you know, experience as humans and intergalactic existence, we need intergalactic money. That's the coin. We also need energy sources that will allow us to be an intergalactic race. So I'm, I'm very optimistic about the longterm compatibility between sustainability energy and Bitcoin more broadly. So anytime you want to chat Sean, I'm your girl. I
John Darcie: (49:01)
Love it. I love it. And Elon Musk is sort of solving all those problems at one time. He's a sorry, in the energy revolution piece, he's taken us to Mars. Uh, and he's also creating star Lincoln, new new telecommunication system, uh, via space. Okay. And
Meltem Demirors: (49:15)
He thought dank means he's got to, encomium strong. Let's not forget. Yeah. And he has tagged
John Darcie: (49:19)
Me. That's what it really comes down to. This is a meme war and he has dank memes. Uh, and so he's winning that battle, but thank you again. Meltem and Taegan for joining us today here on salt talks. It's been a pleasure and thank you everybody who tuned into today's salt talk, uh, with Meltem dimmers and Teagan Klein. Just a reminder, if you miss any part of this episode or any of our previous episodes, you can access them on our website. It's salt.org, and you can also watch them all on our YouTube channel called salt tube. Uh, we're also on social media at salt conferences where we're most active, but we're also on Instagram, Facebook and LinkedIn as well. And please spread the word about these salt talks. Particularly if you have an 82 year old, a great-grand mother-in-law who needs to learn about the history of money and why Bitcoin is not boiling the oceans, please send them to these episodes. Uh, this series that we do on digital assets, I think it's been really informative for a lot of people, but on behalf of the entire salt team, this is John Darcie signing off from salt talks for today. We hope to see you back here soon.