Podcast Summary
In this podcast, the host welcomes Spencer and Alex from Blockchain Cap, a crypto fund that recently raised $580 million. They discuss the fund’s strategy, the importance of managing expectations with their Limited Partners (LPs), and the challenges and opportunities in the crypto industry. The podcast also covers the introduction of Bumper, a protocol that protects crypto assets from market volatility, and Vouch, an insurer for crypto companies. The conversation delves into the potential of DeFi, the impact of regulatory uncertainty, and the future of blockchain technology.
Key Takeaways
Blockchain Cap’s Fundraising Success
- Significant Fundraise: Blockchain Cap managed to raise $580 million across two funds, despite the current market conditions and a two-year bear market. This success is attributed to the institutional nature of their LP base, which includes pensions, endowments, sovereign wealth funds, and strategic partners like PayPal and Visa.
- Consistent Investors: The LPs of Blockchain Cap tend to be consistent investors, regardless of market cycles, and many of them have been with the fund through multiple market cycles.
- Capital Deployment Strategy: Blockchain Cap is structured purely as a venture fund and deploys capital over a three to five year period. They aim to grow their fund sizes at a rate slower than the growth in the opportunity set in the industry to stay aligned with their LPs and deliver performance.
DeFi’s Potential and Challenges
- DeFi’s Success: DeFi is seen as the first vertical to be impacted by blockchain technology. Its success is crucial for other subsectors like gaming and social applications. Despite some DeFi protocols underperforming relative to Ethereum, there are great opportunities for funds.
- Infrastructure and Adoption: The infrastructure for mainstream usage of DeFi was not initially ready, leading to high transaction fees and limited adoption. However, despite lower user numbers, the impressive amount of capital amassed in the DeFi system and the significant volumes traded are highlighted.
- Regulatory Uncertainty: Regulatory uncertainty, particularly in the United States, has been holding back DeFi. There is no clear path for DeFi founders to scale their applications and products, which has led to a shift of capital allocation towards non-US markets.
Blockchain Technology and Innovations
- ZK Rollups: ZK rollups, a scaling solution for Ethereum, are highlighted for their potential to enable new use cases and improve security. They allow for off-chain computation and data availability, enabling games, microtransactions, and other economically feasible use cases.
- Open Blockchain: The open nature of blockchain technology is emphasized for its ability to enable innovation due to its minimal platform risk. The ability for anyone to build on an open blockchain with minimal rule changes allows for maximum experimentation and increases the chances of discovering new innovations.
- Legacy Boosters vs Horizon Breakers: Innovations are categorized as either “Legacy boosters” or “Horizon breakers,” with the former improving existing technologies and the latter introducing entirely new capabilities. The importance of considering opportunities in both categories is emphasized.
Sentiment Analysis
- Bullish: The speakers express a bullish sentiment towards the potential of DeFi and blockchain technology, despite the challenges. They highlight the success of their recent fundraise, the impressive amount of capital amassed in the DeFi system, and the potential of innovations like ZK rollups.
- Bearish: There is a bearish sentiment towards the regulatory environment in the United States, which is seen as holding back DeFi and causing a shift of capital allocation towards non-US markets. The speakers also express concern about the high transaction fees and limited adoption of DeFi.
- Neutral: The speakers maintain a neutral stance on certain aspects of the crypto industry, acknowledging the challenges and risks while also recognizing the opportunities and potential for growth. They emphasize the need for flexibility, open-mindedness, and a long-term horizon for investments.
