51% with Mable Jiang, Presented by Multicoin Capital

EP.0: [EN] Kyle Samani & Tushar Jain - Multicoin的东行之路 / Multicoin Going East

Episode Summary

Welcome to the Genesis episode of our Asia podcast series. I'm your host Mable Jiang. Today we have the co-founders and managing partners of Multicoin Capital Kyle Samani and Tushar Jain to join us. In this conversation we cover a ton of ground. We talk about how Kyle and Tushar got into crypto, why they doubled down on Asia, and what technologies, projects, and ideas they find most compelling within the region.

Episode Notes

《伍拾壹说》很高兴跟大家见面了!本节目由Multicoin Capital的Mable Jiang主理,每期旨在向听众呈现一些区块链从业者的创意想法、有趣经历与开发运营进展,围绕华语世界从业者为主,也会不定期邀请亚洲其他地区非华语的从业者参与。

这一期是在2020年8月录制的,到今天在行业内已经经历了许多事情,因此这一期算是一个小小的回顾。本期对话里,Multicoin Capital 创始人 Kyle Samani 和 Tushar Jain 为大家讲述了最初创业的故事,Multicoin Capital 的东行之路,他们对于为项目方提供价值与赋能所做的思考与努力,以及他们在接下来一段时间感到兴奋的行业方向。



重要声明:Mable或嘉宾在播客中的观点仅代表他们的个人看法,并不代表Multicoin Capital官方的观点。此播客仅用于提供信息,不作为投资参考。Multicoin Capital有时可能会在此节目中讨论的某些代币或公司中持有头寸。


Hello everyone! Welcome to the Genesis episode of our Asia podcast series. I'm your host Mable Jiang. Today we have the co-founders and managing partners of Multicoin Capital Kyle Samani and Tushar Jain to join us.

In this conversation we cover a ton of ground. We talk about how Kyle and Tushar got into crypto, why they doubled down on Asia, and what technologies, projects, and ideas they find most compelling within the region. 

Below are some quick audio bookmarks to help you jump around and find what you're looking for: 

For more information about this podcast, please visit https://multicoin.capital/

Important Disclaimers: All opinions expressed by Mable Jiang, or other podcast guests, are solely their opinion and do not represent the opinions of Multicoin Capital in any way. This podcast is for informational purposes only and should not be construed as investment advice. Multicoin Capital may hold positions in some of the tokens and/or companies discussed on this show.


Episode Transcription

Mable Jiang: Hello everyone! Welcome to the Genesis episode of our Asia podcast series. I'm the host Mable Jiang. Today we have the co-founders and managing partners of Multicoin Capital Kyle Samani and Tushar Jain to join us. 

Kyle and Tushar, thanks for joining us.

Tushar Jain: Thank you for having us. This is going to be an exciting podcast.

Kyle Samani: Hey Mable, thanks so much for launching this and super excited to jump in.

Mable Jiang: Yup. Great. I mean, before we get started, do you guys want to talk a little bit about how Multicoin was founded, and I guess like the background of both of you, maybe let's start with Kyle.

Kyle Samani: Sure. So I grew up in Austin, Texas, which is actually where Multicoin is based today. My dad's a computer engineer, and so I grew up around computers. I started programming when I was pretty young, maybe 10 or 11. And he got really passionate about software and technology in middle school and high school.

When it came time to go to college, I went to NYU to study finance and I thought I wanted to go down to kind of Wall Street, career track. I met Tushar at NYU, and we became good friends in college. After college or during college, I kind of realized that my passion was not going down the investment banking career path, but actually building software companies.

And so after we graduated, I came back to Austin and started my first tech company in May of 2013, called Pristine. Pristine built software for Google Glass for surgeons. And, you know Google glass was king of a stupid consumer product, but it was actually a pretty interesting product for surgeons because they work with their hands all day on they're steril and they're gloved up.

And so, we launched that firm and grew it to a few million in revenue and then Google killed Google Glass, which was a big problem for my business. After that happened, I pivoted the company, but it was ultimately acquired for intellectual property and engineering talent. And so I had to kind of figure out what I was going to do next with life.

It was early 2016, and I discovered this thing called Ethereum in March of 2016, and  Ethereum is what really pulled me into crypto. The really big draw to me for Ethereum was that I understood the pain of platform risk.  Google had just pulled the rug out from under me,  which had effectively destroyed my business.

And so, what I saw in Ethereum was this truly open, neutral, decentralized platform that no one could take away from me. And that really spoke to me in a very deep and powerful way. Over the course of 2016 I just spent more and more time reading about crypto and learning about crypto, getting into the space, investing my own money. And then by spring of 2017 Tushar and I both realized that, hey, we want to do this, not just as a hobby, but do this professionally. So we made the decision to launch Multicoin, and we launched our first fund on October 1st, 2017.

Mable Jiang: Great. How about you Tushar?

Tushar Jain: My background is pretty similar actually. I grew up in New York City, and was always  passionate about technology growing up, you know, I was the kid building computers in high school and, loved playing video games. I decided to go to school at NYU to study finance and political science, but along the way I realized that my passion for technology really fit very well with what I was studying and that there was an interesting combination of those specialties and finance, political science, and technology.

When I left NYU, I decided to go work in the technology world rather than, you know, go the traditional finance path. And after working at a company for a year, I decided to start my own company in the healthcare IT space. And that was going pretty well. But one of the key challenges that we ran into was just coordinating all of these different parties was very difficult. Everyone's incentives were misaligned. And along the way I heard about this thing called Bitcoin. And Bitcoin to me was really interesting because it was a way to organize incentives based on technology and based on these distributed systems.

And so I started to get pretty interested, but I was pretty busy at the time. And in 2013, you couldn't really do anything with Bitcoin. All I could do is buy it and hold it, and that wasn't interesting enough for me. So, you know, I kind of put it away on the shelf and said, I'll come back when the industry is a bit more mature and I can actually have an impact, and I can do stuff. And so, when Kyle  discovered Ethereum, he shared that with me and I started to get much more excited because, with Ethereum, I saw much or potential to create useful applications, and that year in 2016 now I just went down the rabbit hole, and, along with Kyle, we just started researching all these different protocols. We started investing a lot of our own money into these different protocols. We were spending all day arguing with people on the internet about how this technology would develop. And in 2017, I realized that I really wanted to be in this space full time. So I knew that I wanted to be in the space full time, and I knew that I wanted to work with Kyle, and so we sat down and we thought, what should we do? Where can we add the most value? And what we realized was that our skill set was really in being able to take information from these different fields, in terms of the distributed systems, cutting edge technology, the economic game theory that ties everything together, the political science to govern these systems, and of course the finance of how do you price these assets, and be able to take that information and create useful heuristics or frameworks that we can use to make decisions. And we thought that that was very well aligned with being investors and something else that we very much focused on was communicating those insights. And so you might've noticed  that we have always from the very beginning been very public with our thoughts and always written a lot. And I think that that's one of the key things that we see as a core competency. So once we launched Multicion in October of 2017, like Kyle mentioned, we were very lucky to bring on some great partners and some great team members.

And now, you know, almost three years later, it's amazing to see how far the industry has come and amazing to see how far Multicoin has come.

Mable Jiang: Great story. Interestingly, we actually have probably had some years overlap in New York city. I actually also went to school in New York city. I went to school at Columbia. I studied Art History and Statistics, and that's actually... Art History was the really subject matter that got me into crypto because I've been following digital assets and the digital arts for a long time, but I didn't think there was actual value. So when the NFC started to break up in 2017, I started noticing, I was like, oh, this is very interesting. So that's really how I really fully started to engage with crypto. But like, you know, we, we had so many years, you know, that we spent together in New York, but didn't know each other and only I met Kyle last year in Shanghai.

So I'm really curious to understand, and I'm sure our audience is also curious about like why you guys were inspired to have someone in the East. What was the experience that made you have the thought?

Kyle Samani: You know, I think... Our first couple of years in crypto in '16 and '17 were pretty U.S.-Centric. You know, we were reading a lot of the social media, Reddit and Twitter and the kind of Western press. The press at the time was pretty dismissive of Asia and China specifically,  and we just kind of, I think took it for granted, or at least I did maybe, I don't wanna speak for Tushar. And so we just kind of didn't pay too much attention. By the first half of 2018 we started to see--I think the thing that really kind of struck for us was to watch the rise of Binance because it just rose so quickly, and at first we were very skeptical of Binance. I remember the ICO in July of 2017 and I was like, we're never going to touch this thing. And, you know by the first half of Q2 2018 Multicoin trading on Binance. And I remember, you know, going through my head like, wow, we went from thinking this thing was, you know, not going to be good to exposing our capital on the exchange, some lightbulb and said, hey, we need to really figure out what to do in Asia. And so over the course of the second half of 2018,  we made a few trips to Asia and China and Singapore. I started kind of growing connections and relationships there, and I think those  two or three trips that we took as a team kind of helped us realize that like there's just a very vibrant, very diverse ecosystem in different parts of Asia and actually each kind of sub-region is very different. And that kind of opened their eyes. And so we made the decision in early 2019  to really start investing in and growing our business and our relationships overseas. And so we started off by doing that by translating our website. We translated our website into Mandarin and Korean. We launched that I believe in April or May of 2019. And I think we actually just addd Japanese very recently. I think we're the only firm in the space to translate all of our content into three different languages. Our four, I guess. And then, we also made a decision of course, to try and hire someone on the ground.

And I started looking, and then of course that ended up being you, Mabel! I started looking in June and I think we met in September, and you joined in December. So it was a, it was a long and challenging search process, but we're super excited to have recruited you on the team.

Mable Jiang: Thank you. Tushar do you have anything to add?

Tushar Jain: I do. I remember in September of 2017, just prior to launching our fund, I went to Shanghai for a big blockchain conference. And I just remember being blown away by the level of engagement and the number of people that were so interested in this technology. And that really opened my eyes to how big the community for crypto was in Asia.

And then going back to first principles, I think blockchain technology is all about breaking down borders. There should be no borders on the internet. The internet is global. And I think that products that succeed in crypto are going to be the products that can be global because global products have better liquidity network effects, they have more users, they get more investment to put into research and development to make even better products. And so, I really think that being able to understand what people in both the East and the West want is really, really important to building good products and crypto. And I think it's really important to investing in the right crypto assets.

Mable Jiang: Absolutely. You brought up a very good point about the community. How would you compare the crypto community and the East versus in the West? I guess like from the observation of social media, like Twitter and some of the information that I brought over. Do you have any comments on this, Kyle?

Kyle Samani: I don't want to overgeneralize for Asia cause I think it's different between, let's say Singapore, Southeast Asia, Korea, and China, and probably even different in different sub-regions in China. But I think that the biggest observation I see is the delta between Asia and the West is, I think just the level of passion and energy for crypto. There's a lot of people in the U.S. who are excited and obviously I live and breathe this stuff all day, so I'm excited about it, but, when I was in China last September of 19 at the Shanghai lBockchain Conference the level of energy was just unreal. I haven't seen an event like that ever in my life and that excitement and passion is really just breathtaking. It's not just developers who were interested in building stuff. It's actual real people who aren't developers, who aren't libertarians, who aren't, they don't have strong ideological beliefs, but they do understand that ethos of crypto and they want to see this technology get adopted and succeed, and I find that energy level to be really unparalleled.

Mable Jiang: Got it. I guess like the next question is actually for Tushar.  Any significant result you've been seeing or any milestones that you thought Multicion has achieved ever since you had someone on the ground, and what has been the value added to our portfolio? Cause I think you also mentioned you would like to create a lot of value for the space and to the portfolio, for sure.

Tushar Jain: That's a good question. You know, we really like investing in early-stage teams. Right? We, we do a lot of that. Of course we make some later stage investments too, but when we're investing in an early stage crypto project, it's usually a very small team. And  usually the team is either based in the East or in the West, and that's just because that's where the founders are. They know each other, they have a relationship, and they want to go and build something. And so they understand their portion of the crypto industry pretty well, but usually they don't understand the other side. So for example, when we're working with Western entrepreneurs being able to help introduce them to people in the East, help introduce them to, you know, the, the right key opinion leaders, help introduce them to other investors, engineers, potential customers and other business development relationships is incredibly valuable, and the same goes in the other direction too. And so I think that there is a lot of value by the bridge, and it's almost like having some network effects actually, where, because we can help people in the East meet people in the West, it helps make it easier for us to go the other way, too, where we can help people in the West meet the right people in the East.

Mable Jiang: Absolutely. Since, like, you didn't really specify, I'd like to chime in for a little bit on the specific examples that we've actually had done; for example, for Solan we definitely help a lot in terms of helping them get actual awareness underground, even hiring someone as a community manager, and also obviously like hosting some of the online events and the AMAs, and also for our other other portfolio, like Helium and Arweave. Even Arweave doesn't have anyone official on the ground. We were able to help organize a local group. I think that was also very powerful. And for Helium, there is also you know, things like AMAs and engagement with different non-custodial wallets. So I think all of these are the specific values that we were able to add to our portfolio.

Tushar Jain: I think those examples are really great. I would say, if the listeners are interested, I wrote a blog post last year called The Evolving Role of Cypto Investors. And I think that that explains kind of our general philosophy around crypto investors should be engaged with the community. I don't think that investing in crypto is like investing in traditional companies. I think that there's some very big differences. And some of those very big differences are that when you invest in a company, let's say as a regular venture capital firm, you don't need to interact with the customers or the community as much. Really, you let the team do that. But I think in crypto the whole point is that these products are decentralized and the community interacts with each other, and I think that investors have an important responsibility to help their portfolio companies in crypto. That's a little different than it is in traditional equity markets.

Mable Jiang: I agree. So now that we talked a little bit about how we helped a Western projects to really grow their strength and the east, let's focus a bit more on Asia and China specifically. So what are the private and public investment that Multicoin has made in the past in Asia? Kyle, would you like to name a few?

Kyle Samani: Sure. So, we started our first investment we made in China was in the Nervous team back in May of 2018. I remember meeting them. I was in New York city at Consensus, and I was just extremely impressed with their technical depth and their vision for what they wanted to build. They had strong views about how to think about baseline security and Layer 2 and I was very drawn to that and impressed by how they thought. So we made that investment. 

As we started to get more interested in China in the back half of 2018, we started to travel, I met a team in Singapore in January of 2019 called Torus. Torus was building a novel key management and login system for d-apps. And I met Zen and Leonard at the Binance event in  Singapore, and I remember they chased me down in the hallway and pulled me aside and to talk to me. And I was like, what is it that your thing does? And they started explaining it and I was, I was pretty intrigued. They said, you know, you can log into a crypto app with your Google login. And that sounded very intriguing to me. So we got to know the team and then over the next month or so, and ultimately led their seed round. And then fast forward today they're integrated in I think 200 or 300 applications and have just a phenomenal product and are growing really fast now.

I'll let Tushar touch on some of the more, more recent ones, but those are, those are two private deals that I was very excited about that we got lead. 

Tushar Jain: Yeah. I'd like to add something about our work with exchange tokens. Actually I think exchange tokens were a major innovation that came out of Asia. We're very interested in these types of platform tokens because I think that these platform tokens enable new types of capital formation, as well as customer loyalty. Crypto exchanges were the first business to have platform tokens at scale. We recognized this innovation in late 2018 and we wrote about it quite a lot. And so when we realized that these platform tokens were interesting, we thought, well, why don't people take it these seriously? We saw a lot of Western investors really discounting these exchange tokens and we realized it was because of a lack of understanding and a lack of trust.

So we did a lot of deep diligence on both Binance, as well as on Huobi, in order to understand that one, you know their volumes were absolutely real. A lot of people in the West were worried that those volumes were not real, but you know, when talking to the traders and when actually trading on these exchanges ourselves, we found that the volumes were very real and that these exchanges were very liquid. And so we thought that by explaining that to other Western traders and Western investors, that we could add value for those exchanges. And we had invested in those exchange tokens ourselves. So, of course this was a way to help advance our portfolio too. And I think that that went quite well and we've really brought exchange tokens into a new category of legitimacy, and I think that there are a lot more legitimate now than they were in 2018 when we started looking at them.

Mable Jiang: Absolutely. I think a lot of people did not have as much transparency or understanding of $HT and they had specific biases, especially from people in the West. So I think that's absolutely a great initiative for people to understand it better. And in fact, there were people on Twitter, or like even some of the other investors, they were reaching out to us asking about like some of the details of Huobi. So I thought that was definitely very effective. 

So the next question I actually would love to ask Kyle separately, cause I think there is  recently a very hot news about FTX, which is also a Hong Kong-based exchange that they are launching Serum, and Serum is actually built on top of Solana, which is also one of our portfolio. Would you like to share a bit more details about this deal and then why you're excited about it?

Kyle Samani: Serum is the most exciting thing I've seen in crypto, maybe since like I got into the space. For some context in history, I met Anatoly, who's the founder of Solana in March of 2018, and we ended up investing a month or so thereafter. The first time Anatoly pitched me, he pitched me a DEX and he said, "I'm going to build the fastest, most performant decentralized exchange in the world, and I'm going to do it because I've invented this thing called Proof of History, and we're going to have parallel transactions, and we're going to make it the fastest thing possible. Whatever the limits of physics say in terms of the speed of light, we are going to get as close to that as we possibly can."

And I loved the audacity of his vision and what he wanted to do. And so we started investing in back in April or May of 2018. We continued to invest more over the following two years. And of course Solana launched on Binance on April 7th of this year. And as you know over the last few months really proven all of the claims technically about what the system can do.

Um, so meanwhile, you know, in the last two months or so, DeFi has gotten really, really hot. And obviously all of the kind of major centralized exchanges are looking at all this DeFi activity and trying to figure out what to do. It's pretty obvious that all of the major exchanges realize that a lot of volumes are gonna move over time to DeFi. It may not be 100%, but it's certainly going to be a meaningful percentage, maybe 20%, maybe 40%, maybe 60%. You know, I think that that's a real probability over the next five years. And so we saw Binance kind of be the first exchange to embrace this and launch their DEX about a year ago, and we've seen basically all of the other major exchanges since then announced their own separate blockchains to do this. 

The challenge, I think for most of those exchanges has been that the Dex has been kind of a side thought and an afterthought for the core exchange business--it's been an experiment. And the kind of technology they've been using has just not been hyper-optimized for super low latency, super high performance trading. And that's what Solana was built for from the ground up. 

And so, you know, and this DeFi bubble took off on in the last kind of two months, and a lot of the major exchange operators obviously you know are scrambling to figure things out. Sam, who's the CEO of FTX, you know, took a really keen interest personally in DeFi and sort of just digging into everything as fast as he could. And he was calling all the guys at Compound and UMA and Gauntlet and all these teams. And he started getting involved in governance and you know the light bulb went off for him. He said, oh my God, this is the future. DeFi is going to be a huge part of the future. And then he said, okay, I want to know, how do we build something?

You know, FTX has tons of resources. They have a ton of engineers, and they have lots of money, and they have their own trading desks, called Alameda, and they want to provide liquidity. And so they said like, how do we build a future that we want to see? 

And they started kind of poking around Ethereuem and trying to figure out what to do. And they just kept running into technical bottlenecks and limitations. They just couldn't make Ethereum work with 15 second block times. They looked at the gas fees and they said like, this, this just isn't going to work. And so they never launched anything there. At some point they said, you know what, we're going to stop trying to make something based on the technical limitations that we see here. And instead of we're going to start from scratch and say, how do we build something from the ground up to be as performant as possible for a next generation decentralized exchange? They, for a little while, considered actually building their own chain. Sam  talked about FTX chain a couple of months ago publicly,  but as I started digging around and doing the research, they found Solana. And what they realized was that they can't build a system faster. Solana is designed to go as fast as the speed of light will let you go. And so they said, wow, this is exactly what we want. And they said, let's build on it. Let's go. And so that this has all happened over the last few weeks now. It's been moving incredibly quickly, but what's so exciting to me for Serum is that it's just going to have by far the lowest latency, by far the lowest transaction fees. It's going to be a true on-chain limit order book, which has been like the dream ofDeFi since we got started. I mean, Ether Delta back in 2016 was doing this on top of Ethereum. People try to use it on top of Bitcoin with the Omni protocol back in 2015 or 2014. Like everyone in crypto has been dreaming about this. And for the first time, Solana makes it possible. On top of that, you look at the FTX team and I cannot think of a better set of people in the world to build Serum. They understand deeply trading and liquidity and financial markets because they run one of the largest exchanges in the space. They have one of the largest trading desks in the form of Alameda. Alameda trades more than a billion dollars a day across all kinds of venues. And of course, Alameda is going to provide liquidity on Serum, so Serum is going to be liquid on day one. And then the FTX team just has a deep sense for product vision. And they're ultimately building the products that --they are traders. Sam and a lot of the core FTX team are traders. And so they're building the product that they want to use to trade, and they have a very, very strong sense of what people want and they're moving super aggressively to build all of this.

They have the money, they have the engineering resources, and they have the vision--and they're moving at lightning speed. And so when I look ahead for the opportunity for Serum, I am just incredibly excited about what Serum is going to enable, and the team both technically and financially behind it.

Mable Jiang: Kyle, you talk a lot about the technical details of Solana, which is also very exciting for a lot of people because you know, it's, it's very cheap. It's very fast. It basically satisfies a lot of people's technical requirements.

So  we know a lot of these DeFi protocols are actually built on top of Ethereum. So how would the Serum team actually solve the problem of compatibility and interoperability?

Kyle Samani: Yeah. So this is the biggest challenge that Serum faces. And this is the big trade off that Sam and the team discussed. They said, do we try to embrace the existing  DeFI infrastructure and make sure that we're fully interoperable there, despite the major technical limitations, or do we say we're gonna, you know, solve all of the technical problems, but you know, have to kind of rethink about composability and network effects?

And ultimately, the FTX team decided they wanted to build something as optimized as possible for the future. That of course means they need to figure out how to bridge the existing DeFi infrastructure and ecosystem over to Serum on top of Solana, which is a pretty hard problem, although it's by no means impossible.

The key there, there's going to be, there's not going to be one single answer on how this interoperability becomes possible, but what you'll see is there's going to be probably half a dozen to a dozen major initiatives that will help with different forms of interoperability. So,  f you just look at the last few weeks, FTX has announced investments in protocols like Thorchain, which fortunately obviously it makes it easier for people to move assets between blockchains.

And Thorchain actually I think today announced that they're going to be adding support for Serum as soon as possible,  which is super exciting to see. There's other initiatives like Ren and like Keep and like Cosmos's IBC that all are also are going to help make it easier to move assets like Bitcoin, Ethereum and ERC-20s between these different exchanges.

So right now, if you look at all the people working on Serum, a large percentage of the resources are going towards making all of these bridges work correctly and as fast and effectively as possible. And so we'll see all that happen. It's not going to be quite as elegant as, you know, moving between curve and Uniswap swap let's say; there's going to be a little bit more lag time and some delay, but once you're in the Serum world, transaction fees are going to be effectively zero. Transactions will complete instantly, and I expect, you know, when people kind of experience that for the first time, they're going to say, wow, this is the future. And you're going to start to see a lot of people get excited and start to build on top of Serum and on top of Solana to help kind of grow that DeFi ecosystem.

Mable Jiang: Thank you. That's absolutely great insight. Now that we talk a bit abou DeFi already, let's switch gear towards CeFi. People talk lot about prime brokerage a lot this year. We observe a lot of M&A's happening in the sector. Many PB players, such as, Genesis, Bitgo Prime, or even Coinbase, which recently acquired Tagomi, are all in  the West. Yet, more than 60% to 70% of the trading volume today are actually in Asia, but the demand for institutional custody seems very little. So for Tushar, this question is for Tushar, what are the current institutional demand in the U.S.? Would you like to let our audience know a little bit more about it?

Tushar Jain: Yeah, I think that's an interesting question. Why are there no big institutional-grade custody providers in the East? And. I think it might be because the people in the East understand the idea of, "not your keys, not your coins" much better than, than the Westerners. Right? And in the West  we are a little spoiled in that we have trusted institutions and they work really well most of the  time and we have had fewer stability problems for those types of institutions. And so a lot of people in the West would rather have their assets custodied by an institution, and they think that that's lower risk for them because I think the institution will do a better job and also if something goes wrong, they can go after that institution and try and get their money back in a legal process. However I think in the East, that's much harder to do and so I think that a lot of people in the East actually understand the value of "be your own bank" much better than the people in the West. Now for institutional investor or institutions that own crypto, they are going to need custody, and I think that there will be an opportunity for an Eastern prime broker that just has much better access into the market to win clients. And I think that, you know, there's a few competitors for that now already, and they're probably going to continue to grow their service offerings from lending to trading to custody, and then eventually get to the full blown prime broker product.

The big question in my mind that I'm working on right now is, what is the cornerstone or what is the key linchpin of a prime broker product? What's the most important component? Is it custody? Is it having a balance sheet for lending? Is it, um, trading capabilities? Is it, uh, introductions to investors and, other people who can be involved in that investment process? And I'm not sure. I don't have conviction yet, but I think that that's going to be the key question that we need to answer to understand and have a better perspective on which prime broker will have the best chance of winning the market or winning a big market share.

Mable Jiang:  That's very interesting and a very pivotal question to consider. I would definitely agree.  And we are actually seeing all these merger-acquisitions happening this year, especially starting from, I think, April or May. So I think, to my understanding, having a balance sheet might be an edge, but I agree with you that we probably need to observe a little bit more. 

So coming back to the question about trading volumes, it is actually a very interesting phenomena because in the traditional finance it's obviously more advanced in the West. However, right now the crypto trading volumes are significantly higher in Asia than in the West. Can the institutional trading demand in the West pickup? Do you expect that or more specifically, do you think they will outrun the trading volume in Asia?

Tushar Jain: That's a really interesting question. I don't think so. I think at this point, the main liquidity centers for spot liquidity have been established. It is very, very hard to compete on spot liquidity now with, you know, the three big players, which has really Binance, Huobi and Coinbase. They have the majority of spot liquidity, and I think that there is a very powerful network effect to spot liquidity. That's why all the new exchanges that are coming up are derivatives because it's much easier to compete on derivatives. It's just much more of a flexible product. You don't actually need to have the underlying in your custody on your exchange in order to be able to trade it. And so the failure of newer spot exchanges that have tried to launch and the new trend that, you know, almost no one tries to launch a spot exchange anymore, makes it pretty clear to me that the entrepreneurs also realize that their best bet, if they want to start an exchange, is to focus on derivatives because the spot winners have already been chosen.

And so. Even if we see institutional demand come out of Western institutions, I think that they'll probably end up going to the same trading venues that are already the most liquid. They might go through a front end, they might go through a broker or they might go through a different exchange that feel safer for them, but then the backend liquidity will still be filled by, you know, market makers who are connecting from Binance to Bakkt or something. I don't see a new exchange, like Bakkt, becoming the liquidity center for spot trading.

Mable Jiang: Interesting comment. I think I would add a caveat that right now we don't have the actual dark pool that can compare to the traditional finance. I think that will be also interesting to watch because I think there is indeed demand for that. You need institutional type of settlement for large trading volume. So I'm very excited to see like what happens next in terms of dark pools.

Tushar Jain: Yeah, I think dark pools will be interesting, but you know, for example, Bitfinex kind of has that with their hidden order functionality already, and so dark pools sound like this cool mysterious thing, but really all a dark pool is, is the ability to place an order without it being visible. And so, I'm not sure that a dark pool needs to be separated from a lit pool. I think the two can live on the same platform and you can have dark oders and lit orders on the same platform.

Mable Jiang: Right. Interesting. That makes sense. So, Kyle, you early on had a comment on Twitter that the majority of financial innovation will come out of Asia, which kind of also corresponded to what Tushar just commented about: these exchanges are all in Asia. Some of the largest exchanges are all in Asia.  Can you expand on that argument a bit more?

Kyle Samani: I think that there's two ways to think about this. One is regulation side, and then one is kind of a demand and user side. On the regulation side, it's pretty clear today that U.S. teams that want to experiment with new forms of financial innovation are--it's almost impossible to do so out of the U.S. The amount of time and energy you have to spend on lawyers trying to figure out weird work arounds, then, you know, you have to block U.S. users and then, you know, like thinking about your token and is it a security and just, there's so many compounding problems...

I suspect we have, you know, out of all the money we've invested into our portfolio companies in the U.S., I think probably 2-3, or maybe $4 million of that, has gone to pay lawyers. And that's just, that's very frustrating to see, and it also slows the teams down just tremendously. So just being in the U S makes it extremely difficult to actually innovate from a regulatory perspective.

And I think that's why we've seen so much of the exciting stuff happening out of it out of Asia and China. I think probably the single best example of that is really FTX. FTX came out of no where one year ago and  today is the  number four or number five exchange in the world. And they have, in my opinion, the best product out there.

Then, so, that's one side is regulatory. The other side is the demand side and the users. And when I just look at, and Tushar kind of touched on this earlier, but you know, there's a lot less trust in large institutions I think in Asia than there is in the U.S., and so for that reason, I think that the users themselves are much more prone to being open to trying these non-custodial offerings that are all DeFi-based whether they're using DAI or Compound, or dForce or any of these other things, I just think there's a much more open willingness for people to try this stuff than there is in the U.S. And so as I think about, you know, where the next 30 million DeFi users are gonna come from, I think with very high conviction, they're going to come out of Asia as opposed to the U S.

Mable Jiang: Very interesting observation. I definitely agree with you, especially on the first point that Asian companies usually they execute very  fast, iterate a lot, and then tried to just match whatever the market wants--deliver it immediately right after they realized there a demand. So I think that's the magic power of Asian crypto founders.

So coming up to the end of our podcast, I do want to ask both of you as the founders of Multicoin, what's the vision of the firm and how do you see Multicoin's next step. Let's start with  Kyle and then Tushar.  

Kyle Samani: The crypto ecosystem is I think, just starting to get interesting. I mean, DeFi took off in a meaningful way this year. It was working a little bit last year, but really took off this year. You know, Serum is launching. We have stuff like Arweave, stuff like Audius, stuff like Livepeer.  There's a lot of really cool products, like Helium, that are all just starting to hit their stride. These are things that were in R & D for a long time, or they were, you know, they launched last year, but they were just early and we can just start to see the growth curves of some of these things kind of coming into stride, and that's so exciting because that means those things can now grow and that's gonna inspire another generation of entrepreneurs to build new products. And those, these companies that I just mentioned, these protocols are all gonna create a more robust foundation on top of which new people can build new and exciting things.

So the next few years in crypto I think are going to be some of the most exciting we are ever going to experience, and so for that reason, I'm incredibly excited to be here. I'll let  Tushar add anything else to that...

Tushar Jain: Yeah. In terms of vision, I think that this is going to be a huge shift in capital markets. I think we're going to see a shift in capital markets from these traditional, kind of thinkers and traditional firms, into new crypto-native firms, and so my vision  for Multicoin is to grow to become one of the largest asset managers and be a crypto-native asset manager. And we're betting  our careers that crypto is going to become the largest financial markets in the world. And, you know, we're going to grow alongside it and do everything we can to help make that happen.

Mable Jiang: That's great. I'm glad to have both of you on the episode. This is the first episode that we will have for this series. I hope everyone enjoyed listening. Thank you both again.