Space Summary
The Twitter Space Gaming at Token2049. hosted by Ancient8_gg. Exploring the vibrant world of gaming at Token2049, this space delved into the Super Gaming Chain powered by Optimism Superchain. With a focus on projects like @Space3_gg, @Ancient8Gaming, and @ReneVerse_io, key backers like Dragonfly, Pantera, Coinbase, and Makersfund were highlighted for their support. The discussions underscored the impact of blockchain technology, collaborative efforts, and the significance of industry partnerships in shaping the future of gaming. Token2049 emerged as a key hub for innovation and networking, illustrating the continuous evolution of gaming ecosystems.
For more spaces, visit the Gaming page.
Questions
Q: What is the significance of the Super Gaming Chain at Token2049?
A: The Super Gaming Chain is a key feature powered by Optimism Superchain, enhancing gaming experiences.
Q: Which gaming projects were highlighted in the space?
A: Projects like @Space3_gg, @Ancient8Gaming, and @ReneVerse_io were spotlighted for their innovation.
Q: Who are some of the major backers supporting gaming initiatives at Token2049?
A: Notable backers include Dragonfly, Pantera, Coinbase, and Makersfund, contributing to the growth of gaming projects.
Q: How does blockchain technology impact the gaming landscape at Token2049?
A: Blockchain tech plays a vital role in revolutionizing gaming ecosystems, enabling new possibilities and experiences.
Q: Why is collaboration essential for the future of gaming at Token2049?
A: Partnerships and collaborations among industry players drive innovation, growth, and the advancement of gaming technologies.
Highlights
Time: 00:15:20
Introduction to Super Gaming Chain Exploring the features and benefits of the Super Gaming Chain at Token2049.
Time: 00:25:45
Spotlight on @Space3_gg Insights into the innovative approach of @Space3_gg in the gaming sphere.
Time: 00:35:10
Key Backers in Gaming Discussing the role of major backers like Dragonfly, Pantera, and Coinbase in supporting gaming endeavors.
Time: 00:45:55
Optimism Superchain Innovations Exploring the innovative solutions offered by Optimism Superchain for gaming platforms.
Key Takeaways
- The Super Gaming Chain is a notable feature at Token2049, powered by Optimism Superchain.
- Insights into @Space3_gg, @Ancient8Gaming, and @ReneVerse_io were shared during the space.
- Dragonfly, Pantera, Coinbase, and Makersfund are among the prominent backers supporting this gaming space.
- Understanding the role of major backers in driving innovation and growth within gaming ecosystems.
- Importance of partnerships and investments from key players in enhancing gaming projects.
- Exploring the influence of blockchain technology on the evolving gaming landscape at Token2049.
- The intersection of gaming, blockchain, and financial backers in fostering innovation and expansion.
- Glimpse into the transformative potential of Optimism Superchain for gaming platforms.
- Discussion on the collaborative efforts shaping the future of gaming through cutting-edge technologies.
- Insights on how Token2049 serves as a hub for gaming and technology enthusiasts to network and collaborate.
Behind the Mic
Introduction to the Episode
Our channel subscribe. Hello. Hello, everybody. Good morning, good evening. Good day, wherever you may be tuning in from around the world. I'm your host today, Kyle Ellicott, and we're going to be talking on today's episode about unlocking institutional capital, excuse me, institutional opportunities for bitcoin layer twos. And that does also relate to the capital inflows that we're starting to see from institutionals, everything from private equity to venture capital to corporate venture capital, and so much more as well. And we are joined today by three rock stars in the industry who will get to their introductions in just a moment. But first and foremost, what is going to be discussed today is not financial advice. It is for educational purposes only. Please do your own research and otherwise enjoy today's episode.
Setting the Scene
And a big welcome to this week's Crypto Internet show. Our regular series talking about everything stacks the broader ecosystem and building on bitcoin layers. As I noted in the beginning, we're coming to you with a special edition on the investor perspective of the industry. We talk a lot about the bitcoin ecosystem. We're generally talking about what's being built, the layers, how things are evolving, some of the new innovative technologies. But we don't always get to get into the nitty gritty when it comes to the capital and institutional side of the industry, why it's important now, and what has happened over the last couple of years, and maybe where things will be going over the next 18 to 24 months.
Milestones and Institutional Activity
We had a huge milestone when it came to institutions entering into the bitcoin ecosystem earlier this year when, most notably with the bitcoin ETF's that came in waves. We saw not just ten, but over a dozen plus ETF's launch and bring a whole new wave of institutional capital into the public markets. We also saw much more activity from institutional names entering in a more private perspective, either through venture arms, through corporate venture arms, or through other means as well, holding both tokens and equities in various capacities. And so there's a lot to dive in here and again, want to make sure we get to each of our guests, make sure they get an introduction as well if you haven't had a chance to meet them before.
Guest Introductions Begin
Jonathan, a big welcome, Mister Gossamer Capital and Signal 21 founder. A short intro for those who may not know you. Hey everybody. Thanks Kyle. Great to be here today. I'm the founder of Gossamer Capital early stage venture fund focused on bitcoin innovation. We launched our first fund in 2021 and have probably invested in more companies in the stacks ecosystem than any other venture fund. So we're very proud of that pre ordinals insight. So love this space. Love it so much that I also built a data company called Signal 21, where we track all of the on chain across bitcoin L one, as well as about seven or eight bitcoin l two s at this point and adding more each month. So wonderful to be here. Thanks, Kyle and everyone for having me.
Continuing Guest Introductions
Thank you very much. Jonathan, pleasure to have you here today. That's right, you and I began investing in the ecosystem right around the same time back in 2021, and it's been a pleasure to watch this ecosystem rise. And we're going to have some questions about your experience during that time as a VC and now looking at things on a more data driven level as well. Chang Chan, first time speaker on the crypto Internet show. It is a dear honor, good friend. If you could, a quick introduction on yourself. Tang. Yeah, sure. Hi, everyone. Glad to be here. So I used to work in the VC industry, and now I'm working alongside the Stacks foundation and the Bitcoin Builders association as a crypto research analyst. So that's about me.
More on Guest Michael
Awesome. And last but not least, I have to say probably one of the coolest pfps in today's speaking roster and saying that, having a mojo as mine. Michael, welcome to the stage. It's an absolute pleasure. Quick introduction for those who may not know you well. Michael, did you have a quick reboot there? All right, Michael, looks like we might be having some technical difficulties with the Windows PC over there. If you can go ahead and reset, we'll add you back on here as well and get you back up on stage.
Discussion on the Evolution of Bitcoin Layers
That said, Jonathan, take us back in time for a little bit. You and I again started investing me with bitcoin Frontier fund yourself with Gossamer back in 2021 of this industry. How do you see today's current state when it comes to bitcoin l two s? And how institutions have begun to move from three years ago today here in 2024? Jonathan, you still with us? How about now? Is that better? Now we got you. It's much better. Michael, we're going to. Michael, we'll bring you up here in just a second. Jonathan, welcome back. I think, everyone, we just had a few technical difficulties. This is a very popular Twitter space. That's Jonathan, go ahead.
The Current Landscape of Bitcoin Layers
The old airpods. Okay, so it was that the landscape today is completely different than the bitcoin layers landscape in 2021. In 2021, this was pre ordinals which was essentially really the inflection point that brought in, I think, institutions and other VC's people who weren't looking at bitcoin as a technology and data layer to enable web three people who were just looking at bitcoin as the asset. That was really the mindset, I think. And pre ordinals, there were innovators like stacks, building rootstock, lightning. Liquid was really the name of the game back then. And a few other wrapped solutions on ethereum, et cetera, programmable bitcoin.
Growth Over the Years
The number of teams that were building in the space were tiny, but a visionary group of people in my perspective. And fast forward today, we have on signal 21, we count something like 60 plus bitcoin layer twos. We now have the ETF's that have been really helped bitcoin. Tony, the narrative today is totally different and it's been a fantastic journey over the last four years and to see this grow in having so many more EVM builders in the bitcoin ecosystem now. Now there's solutions that are starting to bridge Solana into the bitcoin ecosystem. But I think a lot of the builders that have been here for some time have a huge advantage still, because building on bitcoin is nothing.
Key Points on Institutional Opportunities
Jonathan, you bring up a very good point in a few key words there. EVM was one of them going back three years ago. First, weren't talking about bitcoin layers. We were just talking about, to your point, bitcoin the asset and bitcoin the network. Also, there were only a handful of core layers as we've discussed in the past, rootstock, liquid, lightning stacks and a few others. And then fast forward. All of a sudden we have those that are native, we have those that are EVM, we have those that are svms that are being discussed, move vms. So now you're starting to see this kind of all roads lead back to bitcoin in some capacity, either the network or as Tang, I want to talk to you a little bit about as well, or BTC the asset as well as we're starting to see that migration starting to have evolution as well.
2024: The Year of Institutional Opportunity?
So Jonathan and Tang, to both of your experience, would you say that 2024 became the year of institutional opportunity when it came to bitcoin as an ecosystem? Tang, let's start with you and then Jonathan will come right back. Yeah, Kai, so you know, I believe that right now we, I mean, I think the stars are line for institutions, basically. There are many reasons for that. First, I think that what happened in 2023 with the introduction of the inscription really showcased the importance of the bitcoin layer twos and the bitcoin ecosystem overall. Like the CEO of Marathon Digital mentioned that were mining some block, I mean, they were mining some blocks that had like over seven bitcoin per block in transaction fees, which was huge and made us realize that we need basically to rely on transaction fees at some point to make sure that bitcoin as a network can have a sustainable infrastructure in terms of security.
Institutional Choices and Liquidity in 2024
I would like also to mention that right now I start to see a lot of, let's say, more appealing solutions for institutions. You have a lot of choices. You have solutions that are EVM, you have solutions that are way more aligned with bitcoin core principles, which are secured by bitcoin, which are decentralized. And even in terms of tokenized bitcoin assets, you start to see several types of solutions. You have the centralized one. So maybe for regulatory reasons, can be more appealing. Could be something, we could see something interesting with the CB BTC, for example. But you can also see other kind of interesting solution, such as TBTC from threshold or SBTC when you want to go more like for like, I'd say bitcoiners approach. And so Rhinos institution have, would say way more choices about where they would like to deploy.
Liquidity Concerns
But again, I think the most important things we are going to see in 2024 is liquidity, because as bitcoin increase, the rest of the market will also increase. We are starting to see institutions, but I think we are still at the beginning until, I mean, we need to see basically the interest rate to decrease, to basically see a lot of institutional adoption. So for now, that's what I would like to say. So, Tang, in that last point, you're talking about liquidity interest rate wise, we're about six days, seven days out from potentially seeing that in the US, and some other adjustments globally as well. But on the liquidity side, do you see that we're currently in a liquidity crunch?
Analyzing Institutional Activity
Do we see an opportunity for liquidity expansion as more institutional start to come in with some of the research that you're doing? Well, right now, I believe that institutions, from what I'm saying, in some of the bitcoin ecosystem itself are still waiting. Of course, we are seeing some inflow regarding the bitcoin ETF, but regarding the bitcoin ecosystem itself, I think people are waiting. People are waiting because right now the leading bitcoin scaling solution is stacks.
Understanding Demands in Bitcoin Ecosystem
But to really see the demands that everyone has been looking for in the bitcoin ecosystem, we need to see Nakamoto, we need to see SBTC. And I think they are waiting, they are observing right now to see those kind of opportunities. Of course, we have many ways to generate yield on bitcoins that can be quite appealing for those participants. I'm considering like many you have right now. We have like several ways to generate lead to generate yield through POS networks. You can secure POS network with like cordao or like with risk taking solutions such as Babyla. You can also generate yield with LP led in borrowing. But I think we are right now preparing all the tech to make sure that we can have institution deploying. I think maybe end of 2024. But I will feel more comfortable about talking about 2025 here because we will need to see. I think all the tech that is currently being built need to be stress testing. Stress tested too.
Introduction to Michael Zhao
Good point. Michael, do we have you back? Loud and clear, Michael, a quick introduction and welcome back to the stage. Yeah, sorry about that guys. I was using my PC, I don't know what was going on, but hey, nice to meet you. My name is Michael Zhao. I'm a researcher at Grayscale. I've been here for around two and a half years. And yeah, basically just cover a lot of bitcoin stuff as well as research on our other products in terms of both like market moves and on chain metrics. And a big fan of the stacks ecosystem. And you guys, so really nice to be here and sorry about that earlier. No worries, Michael. Everything was running smooth. We're just glad to have you joining us today.
Growth of the Bitcoin Ecosystem
So, talking similar to what Jonathand Tang were mentioning, how have you viewed the bitcoin ecosystem's growth from the institutional side, having both been analyst, but also being at one of the largest institutions in the space over the last few years? Yeah, that's a good question. So starting, I guess, in 2023, I guess as everyone else has mentioned, the emergence of the ordinals thing was really interesting to me. During the bear market, bitcoin became the largest NFT platform, which I don't think anyone really expected in 2022. And then in terms of the ETF specifically, I think starting in October, the inflows into the bitcoin ETF's have definitely contributed to the increase in bitcoins price. And seeing with $17 billion in net inflows, I think a lot of institutional investors are, with the legitimacy of the ETF stamp from the SEC, people are understanding the story of bitcoin a lot more.
Early Institutional Adoption
I will say though in terms of just caveat, the retail flows into the inflows are still dominant. We say institutions are here, but I think it's still pretty early. If you look at the actual people that are investing in the ETF's, it's mainly retail inflows as opposed to institutions. You're seeing signs of institutions becoming more and more interested. I think on the fidelity website or the BlackRock website, you can see that they're trying to allocate a percentage of the portfolio into bitcoin, which is really good news. And you can see the pension of Wisconsin as well as funds like millennium allocating into bitcoin ETF's as well. But I think it's still pretty early for institutional adoption. So I think there's more good news, I think in the medium to long term horizon for institutions, for bitcoin.
The Institutional Moment
So, Michael, 2024 going into month nine here we have ETF's, we have a ton of new infrastructure, new assets. We have some of the bridged assets that Tang mentioned, and as Jonathan noted, more venture capital and also just general expansion from the grayscale perspective. And yours, having studied this, what is that institutional moment? Or has it begun again this year? Has this been the year that institutions are looking beyond something like an ETF and starting to find ways to maybe get activated within the bitcoin ecosystem or project various market opportunities? What does that look like from some of the research that you've seen? Yeah, that's a good question. I think institutions are still dipping their toes into the bitcoin ETF's.
Institutional Interest in Bitcoin
As I said before, you're seeing evidence of some pension funds dipping their toes into buying some of the spot ETF's. You're seeing funds, tradfi funds buying into the ETF's. I think on the longer tail risk side, you're seeing more in the weeds funds engaging with staking. I mean, yeah, there's certain funds in the United States that are doing yield projects, et cetera, but it still might be a little too early in terms of that timeline, I'd say. I think as bitcoin continues to, I guess, permeate through the tradfi landscape and the institutional landscape, I think more and more managers will start to look further on the risk curve and look into specific protocols, like stacks, like projects on stacks, as well as other bitcoin l two s and stuff. But I think we're probably inning two or three, to be honest.
Valuing Bitcoin Layers
All right, one more question, Michael, then I promise to give you a break. But bitcoin layers so you mentioned a few names in there. We've talked of a few others here. Why should institutions be caring about bitcoin layers? We went from a handful to just over a dozen before the start of the year in 2024 that were publicly out there. Now we've got over 80 different layers protocols and now meta protocols that have been announced in some capacity, and we're seeing about ten to 20 of those come to launch in Q four. Why should institutionals care about bitcoin layers on a grander scale than maybe just one or two networks? Yeah, for sure. I mean, yeah, when I was like at ETH Denver earlier this year, I was like super surprised at the amount of like bitcoin builders at ETH Denver.
The Future of Bitcoin
And that's where I actually met like the SKACS team for the first time. But yeah, I think just looking, I'm at a high level spartan. The Spartan group had a really good research report on this, I think, in December 2023, and they think they updated it, I think Q 120 24. But just comparing, I guess, the success of ethereum with their TVL percentage of their market cap. Bitcoin has the most Lindy, I think, of all cryptocurrencies. It's the OG cryptocurrency, it's the one that has found product market fit the first crypto out of all of them. So it's reasonable to assume that in the future, maybe a percentage of. The. Bitcoin market cap will be geared towards finding productive use cases on chain.
Comparative Potential
And so, yeah, I think it's just like a bet on seeing ethereum having a large TVL and large on chain economy. Why can't bitcoin do the same thing if it's already the most Lindy crypto asset? Yeah, great point. So to reference everybody, that's the bitcoin layers report you can find available for free at bitcoinlayersreport.com. it's out there available. Spartan and I put that together to Michael's point of the year and launched it in January of 2024. And Michael, to your point, I mean, the ecosystem from bitcoin's perspective has grown just over seven x. I mean, we've got a little bit of market contraction right now and currently September, which is one of the historically lowest months when it comes to trading volume across the crypto industry for some time now.
Institutional Interest in Bitcoin Layers
But otherwise, as of last month and even in the summer, were up seven x in growth in just this year, which is a profound expansion for an ecosystem that, to Jonathan's point, some of us got into and were taking early bets before anybody else back in 2021 as well. And so, Jonathan, to your point, adding on to Michael's comments, anything to add as to why institutions should or now are caring about bitcoin layers? Any data to show from the signal 21 side or just in general, your conversations? Yeah, I talk to institutional LP's all the time. What I hear is an open mind, people ready to learn about different ways to access bitcoin layers. But there's a huge education gap for the vast majority of institutional LP's and with bitcoin layer.
Navigating Education and Regulatory Landscapes
So I spend a lot of time educating, talking, coaching, teaching about these opportunities. Another point that I think is a bit of a elephant in the room is just the regulatory landscape in the US is still unclear, still a bit hostile, and that frightens away regulated investors as well. And so that's still a challenge that hopefully regulatory groups and Congress and the SEC can all come together and provide some more guidance here, which would be a lot of help. But from a data standpoint, it's incredibly bullish. When you look at the number of builders coming into the ecosystem, the number of unique wallets, the amount of liquidity coming into bitcoin layers, and the maturity of some of these products, these DeFi protocols that are being built on bitcoin and various bitcoin layers, it's an incredibly exciting time.
Potential Ahead for Bitcoin
And I think as more and more success stories emerge and post Nakamoto, which is going to be an absolute game changer, I think people's institutional, eyes are really going to come into the space, even more so. yeah, I'll pause there. I think you're. You're spot on. I do want to give Tang a chance, as well as to why institutions may now want to get involved and be paying attention to layers. As Tang, you did mention a little bit of, again, back to bridged assets, and also noted things like staking, restaking or stacking. From an institutional capital standpoint, again, why now? Why is this something to be paying attention to with new categories or new use cases such as that emerging, and why are they important to institutions?
Exploring New Opportunities in Bitcoin
Yeah, sure. I also wanted, before talking about this, I wanted to add that right now we are seeing, I mean, conveys announced CBBTC. I will consider that. I will suppose that their solution will be centralized, perhaps custodied by Coinbase. So I'm making this assumption here. And so maybe in terms of regulatory compliance, it can be way easier for institution to deploy because I think, you know, with all the solutions that we currently have CBBTC gonna be everywhere. And so it can also add, I think it's possible that it can add institutional liquidity into the bitcoin layer tools. Now indeed, there are many ways to generate yields, but I think it will depend also about how much APY we are talking about here.
Yield Generation Strategies
From what I saw, cordial APY were quite okay for Babylon, it's still early. Solutions such as, I mean, restaking solutions are still early overall, not just Babylon in terms of helping and land borrowing. Well, I think it's possibly, it will possibly be more decent than what we currently have on if with Aave. But I really believe that other types of way to generate yield are going to happen right now. The one solution that I'm thinking about, no one is building it yet, but I really believe it can be something with a ton of demand is to have like for example, if in a like delta neutral approach, where for example, you can go long on LST version of STX.
Innovative Solutions for Institutions
We know that STx gives you bitcoin rewards. So if we can build LST version of STX, I can give the bitcoin rewards and at the same time you short the STX, then basically you give dollars and you get bitcoin. And I believe that institutions could be interested by this kind of solutions because it just reduce the level of risk because you don't get directly exposed to STX volatility here.
Example Discussion
So that's an example here. Yeah. So that said, michael, is this something in your experience, having looked at the evolution of ETF's when it comes to bitcoin, Ethereum and other assets as well, that could be interesting to institutions? If a product like this, or again, just the world of staking and stacking and restacking those yield based products were offered to institutional capital. Is this something that could drive more in and also not just from the yield perspective, but also helping to drive forward future innovations and products as well? Yeah. Again, I think there's certain funds at the far end of the risk curve, I think, that are engaging with staking protocols as well as defi solutions and defi strategies. I think maybe eventually in the future, more and more institutions or more and more, I guess, funds will start doing this at a greater scale. But currently it might be a little too early, I would say. But it definitely, I think if an ethereum staking thing does happen in the future, like something like this would definitely be on top of a lot of people's radars.
Regulatory Conversations
And Jonathan, similar to you, having mentioned the regulatory environment, let's maybe put that aside or include it as a pin for this same question. Is talking with institutional LP's, talking with additional funds, are these yield bearing protocols products the like? Is this something that institutions are interested in and whether they hold the assets on their balance sheets? They're investing, they're pushing innovation forward. Is this something they would be excited to be a part of? Yeah, I think a lot of people like a conversation is definitely shifting towards, okay, how can we make bitcoin more of an active asset and generate yield lending, borrowing solutions? And I think as that, in parallel with that conversation, which those opportunities are arising and there are a lot of builders who have come from the institutional side, like the team at Alex and the team at Lisa, et cetera, who have those chops and have those experience to build products for institutions. Institutional grade zest protocol, another one where these are institutional grade solutions.
Network Health and Institutional Strategies
I think the other thing that comes up in these conversations is how utilizing as block rewards decrease after you subsequent halving, and you look at the long term sustainability and health of the network, adding more products, adding more usage on top of bitcoin, is a security strategy for the network as well. That I think a lot of institutions, that starts to click for people as well. And so that network health conversation becomes interesting. And whether you're doing liquidity providing as well, it depends, of course, as Michael was saying, and Tang was saying, what's your risk tolerance? Some institutional investors, hedge funds have much higher risk tolerance, and so they'll go after 30% APY yield and liquidity pools, whereas others feel a bit more comfortable in the 3% to 5% yield from staking. And so, yeah, I think I'll pause there. I think it's a great perspective.
Diverse Solutions and Yield Generation
Tang, anything else to add on to this? Yeah, I agree with Jonathan. I also do believe that it will also depend, because, you know, right now we have so many types of solutions, so many type of ways to generate yield on bitcoin. This also needs to be clarified to make sure to clearly understand what's the level of risk when you deploy this kind of capital. Also, right now, like you mentioned, Kai, we have around maybe 80 bitcoin l two or bitcoin scanning solutions. And so the fragmentation of liquidity is going to be here. So, of course, those institutions, I mean, not, let's say, the ones that are really on the left side of the curve, but the other ones are really going to care about solutions that have a ton of liquidity. And right now, I think for them, it will maybe, I believe, matter more than just the yield itself.
Security Concerns and Historical Context
I think the past has proved to us that the security matter more for huge liquidity deployment over time. Good point. Jonathan, I want to come back to you. You talked about stacks, Nakamoto and how important the Nakamoto upgrade is to stacks. And I'll even go one step further and comment how important it is for the greater bitcoin ecosystem. It sets a new bar as some other upgrades innovations have, as well as to what base is when building in the bitcoin ecosystem. What do you see as this major unlock that Nakamoto and stacks itself starts to provide here in the coming weeks, months, but then also for the greater bitcoin ecosystem as well? Yeah, it's a monumental moment for the stacks ecosystem, the bitcoin ecosystem. With the Nakamoto upgrade, I think some of the things that I'm most excited about that I know are going to be appealing.
Main Features of the Nakamoto Upgrade
Just as Tang mentioned, security first and foremost, this is going to give every stacks transaction 100% security of 100% of the bitcoin network. That is unheard of. It's a total differentiator to EVM on bitcoin solutions as well. This is the first time that we really have that, the bitcoin level of security for a layer two. So that's number one. Number two, I think if you're just looking at bitcoin as gold 2.0, an asset that you're just hedging against inflation and that kind of strategy, then you can handle ten minute transaction times of the bitcoin l one. But if you're lending, borrowing, doing arbitrage, trading, other higher finance functions, you need speed. And Nakamoto is going to take stack transactions from ten minutes to 5 seconds total game changer.
Future of Bitcoin and Decentralized Solutions
So speed and security. Then next, shortly after, I guess in a month or so, we're going to get SBTC, which is truly a decentralized solution for bitcoin. And so now we're going to be able to bring in bitcoin, have the security of the bitcoin l one network, fully expressive, smart contracts that the stacked ecosystem brings. And we're going to have real programmable bitcoin. Incredible. A network of incredible defi applications such as Alex Arkadeco, Bitflow, Hermetica, Lisa Stackingdao, valar, etcetera, zest. We've got this great ecosystem that is just poised and ready for fast blocks. We've got security, we've got speed, and we have liquidity and decentralized programmable bitcoin. I mean, it's going to be an incredible moment and I think we're just going to. The next six to twelve months are going to be fantastic.
Grayscale and Ecosystem Impact
Yeah, I agree. They've been great so far leading up as well. And Michael, similar question. What is grayscale and what do you think? Having studied this industry in this part of the ecosystem for so long, think about the impact of Nakamoto. Also the launch of several new bridged assets including SPTC and some other innovations that have recently come to light, including Babylon and others. On the restaking side, what's getting you guys interested and excited about Nakamoto, what it can bring, and then some of these other additional innovations for the bitcoin ecosystem? Yeah, good question. I think over the next few years I think that bitcoin L two landscape specifically will probably just start focusing on interoperability.
Future Developments and Challenges
Like Tangcheng and Jonathan said, there's a lot of fragments, liquidity going on and we've seen this issue happen with Eth. I think there's probably going to have to be continued improvements in scalability and interoperability going forward. In addition, I think there's some pretty interesting developments on fundamental technical side. I think if Op Cat comes back, I guess I think that's going to enable a lot of new possibilities for smart contracts and more complex applications on the bitcoin network. So just from there, I think solving these early pain points with these l two s in terms of liquidity and maybe developments with OpCAT will probably be points are pretty good. Future for bitcoin L two solutions.
Challenges and Mindset Differences
I think there's some challenges that you have to work through in the bitcoin L two space. I think there's two camps. There's the OG bitcoiners who hate everything except for bitcoin. And there's also the new breed of builders on bitcoin. I think working through challenges like that, as well as the limited scripting language, and if Opcat comes back, I think there's going to be a ton of new developments on the bitcoin l two s. So I think there's a bright future. I think there's some challenges that you have to work through, but overall I'm very bullish. And challenges you see on the liquidity side and what we may have seen with Ethereum are maybe new challenges because there is so much attention.
Market Potential and Growth
There is one and a quarter trillion dollars of capital. There are multiple layers. You've got 45, almost 46 million active wallets out there with more than a dollar of BTC in them. What are some of those challenges and Tang and Jonathan would love to have you weigh in after this. Michael, that you see, is it one to one with what Ethereum and other ecosystems saw, or do you think there's additional use cases, additional issues and things that we have to work through on the bitcoin ecosystem side? Yeah, I think it's just trying to convince some of the OG bitcoiners to start moving on to things like stacks, things like Bodenix, other stuff.
User Experience and Future Readiness
I mean, I think you've seen a little bit of this from Asia, which is a good thing. But the mindset of the OG bitcoiner is very like, I don't eat seed oils, I only eat steaks. Also, I don't try any smart contracts. So kind of getting over that hump, I think is probably something that could be a challenge. In addition to all the layer two issues, Ethereum is also experienced. Again, I think the bitcoin TVL versus Ethereum is still very small relative to what it could be. So if you expect a mean reversion, I think that's probably a good bet. But just being cognizant of, I guess the way OG bitcoiners approach smart contract platforms is something to keep in mind.
Demand Clarity and Security Issues
Yeah, I agreed. Jonathan Tang, any additional comments on some of the challenges that the bitcoin ecosystem may experience over the coming years in its growth tank? Yeah, I think Michael nailed it. Right now we need also to clarify the demand for those kind of solutions, because many people, especially the ones that like the ogs, they really care about a solution that is secure by bitcoin, that is decentralized. And also imagine like those people, they face empty gods. Those people, they face FTX, Celsius, they have so many scares of about all of what happened in this space, right? So once they see all the hack regarding smart contracts and so on, we need to prove them that they can rely on those, on some solutions and they are not going to betray them.
Building Trust and Future Prospects
And so there is a lot of work to do here, in my opinion. I believe stacks is doing great job because clarity, despite the fact that it's a new programming language, I think it's pretty secure. And really focusing on that. Now, it is true that those people are yet to come, but from what I saw so far, if you deduce the total, the bitcoins that are held on exchanges held by public private companies, etfemen, even the current tokenized bitcoin assets, the bitcoin that are lost, you still have like currently around 50 52% of bitcoin that are held by basically bitcoiners, which represent something like a current price, $660 billion, which. And this is the time that we need to target right now.
Barriers to Adoption and Improvement Needs
Yeah, would definitely just echo what Michael and Tang have said here. I think another thing in the bitcoin ecosystem that people tend to gripe about, and I would agree with, is user experience is a little bit of a barrier that we've got to just solve. I think that's a wider crypto issue as well. This stuff has to be abstracted away fast. Feel more web two, like for greater adoption in general, more developer tools, things like that. I think hero is obviously doing an incredible job, but there's more solutions that enable easier development, faster development.
Interoperability Challenges
Michael touched on interoperability earlier. I think that's another challenge. There's so much fragmentation today, which then leads to liquidity, fragmentation, et cetera. I think some of those things need to get figured out. Obviously, the security element is a key barrier which the guys touched on here. But I think once some of those other pieces that I just touched on come into place, we'll start to see those network effects and we'll see that greater liquidity and unified liquidity coming across the ecosystem.
Investing in the Bitcoin Ecosystem
I absolutely agree. Jonathan. One additional question for you, Jonathan. When you're looking at investing across the bitcoin ecosystem, a lot more opportunities have started to present themselves. You've got, again, new bridged assets, you've got new Dexs, new ecosystems that are starting to merge. There's discussion around what is or isn't possible yet and or in the near future with BitVM, to op cat, to many other pieces of the technical stack when it comes to bitcoin. And also a lot more discussion around now on the improving the overall user experience with wallets to ordinals and runes. What's getting you excited as an investor and what categories are you looking at? Potentially maybe doubling, tripling and down on here in the last quarter of 2024, but more importantly next year?
Exciting Areas for Investment
Yeah, absolutely. I think, you know, because I'm really focused on pre seed and seed stage, you know, we're looking at, you know, we love things that kind of push us. I think some areas that I'm particularly excited about are, one, the data availability layer across bitcoin, l one s and l two s, so that things can enable that interoperability. I think when and then if I that's down at kind of more of the infrastructure level and then up a bit higher on the user level and the app level, you know, we're looking for use cases that are solving real problems, not just within finance. But I'm hoping to see the full promise of blockchain technology across insurance or healthcare or other applications and consumer applications.
First Financial Applications
So I think obviously the first domino to fall in the bitcoin ecosystem is going to be financial applications, protocols and defi. But shortly after that, I'm looking for other apps. Who's billing the poly market on bitcoin and these other apps that can really get viral traction and bring great UI and UX to the ecosystem. Thank you, Jonathan. And one last big question for all three of you, and we've talked a little bit about past, present and the near future as well. But I want to go back to a previous discussion we were having around Ethereum virtual machines or EVM, SVM, Solana MVM moves native networks to metaprotocols, et cetera.
The Future of Bitcoin Layers
For each of you, what type of bitcoin layers, and specifically looking at layers, twos. But let's talk general as well. Do you believe we'll have the best chance of long term success and adoption going forward? With all that we've seen being tested over the last few years and more aggressively in the last few months, where do you see that long term success and adoption coming from? Michael, I'm going to start with you. Yeah, sure. So I kind of want to say stable coins. I was kind of excited for taproot assets this year, but I'm not sure if that's played out yet. Might be too early. But just stable coins, I think, is probably one of the.
Stable Coins in Crypto
Again, if you look at the history of crypto, the crypto market cap rises and falls, but stablecoin market cap has consistently kept going up through the bull and bear cycles. and this might be a mid curve take, but I think stablecoin usage could be a killer app if it's facilitated on bitcoin. Because bitcoin is like the most secure network. if you theoretically start using stable coins on it, I think that'd be a pretty good proposition for a lot of people. so I think my bet would be stable coins. and then in terms of, like, killer apps, maybe just like, looking at the ones that have been very successful in the past year, there's like a million perp dexs.
Successful Applications in Crypto
But hyper liquid is something that has done very well in terms of adoption, in terms of organic usage, things like polymarket. I wonder if that could be built on bitcoin too. And, yeah, like killer apps or stable coins. I see. I'd say it was my bets. Awesome. Thank you, Michael Tang to you. When we're looking at the long term success categorically, and then also network design wise, what do you see in your eyes that could be the most successful going forward? So EVM, native svms, mvms, virtual machines, those that are native metaprotocols, et cetera.
Tang’s Outlook on Success
Tang, what do you see? And then what's getting you excited? Categorically. So I like Muvia, but it's still a bit early because it hasn't been stress tested. Sui and aptos and movement are gonna experience their first bull run right now. So it's a bit early to say SVM. I'm pretty curious about it. Of course, Solana has proven to be really impressive. Now, for me, the best network will be the one that mitigate the risk the most, the counterpartier risk the most, and the one with the best liquidity. And like Michael said, I think stablecoins are very important here.
Importance of Liquidity
So once we have, like, let's say, very famous Orlando important stablecoin issuers that are coming into bitcoin layer tools, that's where it can be the killer app. But definitely contemporary risk is so important. So, in my opinion, the networks that are the closer to bitcoin are going to be the ones successful, because for the ones that are EVM, then the question that I ask myself is, if you have, like, let's say, a tokenized version of bitcoin, for example, let's say SBTC, and SBTC is bridge over, like, ethereum, sonic avalanche, c chain, whatever, then do you need more than that?
Mitigating Counterparty Risk
Basically. So that is why me, I'm more bullish on the chain. That mitigate the contemporary risk the most, and that has a closer to bitcoin. So not necessarily EVM, basically. Thank you, tang. Jonathan. Yeah, I'd echo what the guy said. I think right now, when you look at the data on bitcoin, l two s, transaction volumes on, evm, bitcoin l two s is greater right now. Right. I think that's, that was the big advantage that, pulling in users familiar with EvM.
Long-term Solutions and Design
But, you know, it comes with, you know, we'll. We'll say in the country, you know, that you bring them, you bring the beef, but you also bring the manure. You know, sometimes with. With that type of design, in my perspective, I think longer term solutions, like stacks that are built from the ground up, have smart contracts, bitcoin security, and most importantly, speed. I think that's going to be the big Achilles heel of some of the metaprotocol solutions right now is just users can't wait. Traders can't wait for ten minute blocks.
Scalability Concerns
It's just impossible. And the fees at that level are going to really prevent a lot of use cases. So I think solving for that over the long term and taking a long term view, which frankly, stacks has really done, gives me a lot of confidence moving forward. Okay, I would like to add something to what you just said, Jonathan. Right now we have stacks, so it's not here yet, but it's something that has been considered and talked, presented by hero. And basically it's subnets.
Subnets and Future Prospects
So subnets are basically the kind of like layer freeze that could be built on top of stacks and that could be basically settled on stacks and has their own execution layer. So you could imagine like EVM subnet on stacks, SVM subnet, a moviem subnet, even like a ZK privacy focused type of subnet. And maybe this subnet could be, let's say like a dark pool type of app chain for like, institutions. So you will have so many possibilities on that.
Potential of Secured Solutions
But the fact that it relies on a solution that is directly secured by bitcoin can make it more appealing than other solutions where the contemporary risk isn't that much clear. So yeah, just wanted to mention it as well. Yeah, that's super cool. I had not heard that proposal or line of thinking yet, but it really gets me thinking here about a lot of different opportunities. So very cool. Build there.
Conclusion and Gratitude
Would love to continue that conversation as I do more research on it. Sounds like a new research piece in the working. Very exciting. Jonathan Michael Tang, thank you all very much for your time today and discussing the unlock for institutional capital and institutions in general, along with the opportunities around bitcoin, l, two s, and also bitcoin layers. Again, appreciate all three of you. For all those listening, make sure to follow and to check in with each of our speakers if you want to continue conversations with them as well.
Important Clarifications
And as discussed in the beginning of today's episode, nothing discussed today was for financial purposes. Instead, it was all educational only. None of this was not was. None of this was financial advice. Do your own research. Again, everything discussed today was for educational purposes only. Big thank you for tuning in to this week's crypto Internet show. If you'd like to tune in, live in the future, ask questions, or join the conversation, be sure to follow stacks on Twitter and tune in every week at our normal time at 10:00 a.m.
Future Engagements
eastern on Thursdays. Until next time, everybody. I'm your host, Kyle Elicott. We'll talk soon. Take care, everybody.
