Podcast Summary
In this podcast episode, Tushar Jain, co-founder of Multicoin Capital, discusses the dynamics of the cryptocurrency industry, focusing on the potential of Solana and the future of Layer 1 (L1) blockchains. Chitra also delves into the value of tokens built on top of L1, the potential of decentralized finance (DeFi), and the future of non-fungible tokens (NFTs). The conversation also touches on the importance of contrarian thinking in investment and the diminishing relevance of Bitcoin in the crypto ecosystem.
Key Takeaways
Understanding Solana’s Potential
- Surviving Existential Risks: Solana’s survival of the existential risk of community fragmentation, similar to Ethereum’s experience in 2018-2019, is highlighted as a testament to its resilience.
- Low-Cost Transactions: Solana’s focus on offering the lowest cost transactions with the aim of attracting the most users is praised. However, concerns are raised about the potential impact of cheap transactions on network security and the value of the native coin.
- Global, Non-Sovereign, Internet-Native Money: The vision for Solana’s L1 token is to become global, non-sovereign, internet-native money, with the most widely held asset in human civilization.
Value of Tokens Built on L1
- Monetary Premium: Tokens built on top of L1 blockchains may not have the same monetary premium as the L1 asset itself. Therefore, it’s important to find alternative ways to capture value for protocols built on top of L1.
- Unforkable State: Unforkable state, referring to off-chain elements that cannot be easily replicated or forked, is identified as a key property that makes a protocol built on top of L1 more investable.
Future of NFTs
- Utility-Based NFTs: The next phase of NFTs is expected to focus on their utility, such as using NFTs for tickets or proof of ownership. Compressed NFTs are necessary for scalability and cost-effectiveness, especially for large-scale ticketing systems.
- Vertical Specialization: The market has not yet evolved in the direction of vertical specialization, possibly due to the bear market and the influence of larger, consolidated players with more capital. However, the thesis of vertical specialization in NFT marketplaces remains valid.
Contrarian Thinking in Investment
- Being Contrarian and Right: Being contrarian and being right is crucial for investors. Layer 2 solutions, particularly those using the EVM, are seen as an opportunity.
- Discouraging Use of TVL: TVL (total value locked) is criticized as a useless and actively harmful metric that can be easily manipulated and does not accurately predict success. Instead, the number of new projects being built and the number of users interacting with them are the metrics that truly matter.
Diminishing Relevance of Bitcoin
- Bitcoin’s Technical Design: Skepticism is expressed about Bitcoin’s technical design and its security model, suggesting that major reorganizations may occur on the Bitcoin blockchain within the next 20 years.
- Decreasing Dependence on Bitcoin: While Bitcoin remains relevant and has the largest market cap, its importance to the crypto ecosystem is diminishing, and it is expected to become even less relevant in the future.
Sentiment Analysis
- Bullish: The podcast expresses a bullish sentiment towards Solana, emphasizing its potential to become global, non-sovereign, internet-native money. The guest also shows optimism about the future of utility-based NFTs and the potential of DeFi to drive the next crypto bull cycle.
- Bearish: A bearish sentiment is expressed towards Bitcoin, with the guest suggesting that its importance to the crypto ecosystem is diminishing. The guest also criticizes the use of TVL as a metric, arguing that it can be easily manipulated and does not accurately predict success.
- Neutral: The sentiment towards the future of NFT marketplaces is neutral, with the guest stating that the data so far is inconclusive, but the thesis of vertical specialization in NFT marketplaces remains valid.
