Panel: Crypto Investment Thesis for 2025 | ETHSofia

[Music] hello everyone uh can you hear me good I guess uh yes uh first of all I would like to thank uh V Vlad dram for organizing the whole conference and he's one of the Pioneers uh in Bulgaria for the crypto industry and uh a a little round of applause for uh vlat for organizing uh in general uh what are the main risks for uh the ethereum and the whole ethereum ecosystem in the upcoming years from the point of view of uh competitors the technological problems issues uh some will call a little bit of lack of interest uh but what's your opinion I do think that one of the main risks is that users uh or the retail as we uh say in crypto would not uh be that active which will um which will be a bit of um stagnation for the for for the sector because uh ultimately um the interest of of retail is what drives all of the consumer apps and uh all of the innovations that uh um are being um um are being introduced I think that um um this interest of course uh uh is uh something that depends highly on the economy and uh yeah uh believe that ethereum will continue to be a playing the the main role in the infrastructure uh but definitely one of the big risk is that retail wouldn't be that active in the in the next years uh the same question also for uh Valentine as you have uh starting 2020 you have deep dive the the whole ethereum ecosystem also with Defi and uh other um ethereum implementations what's your opinion about the main risks uh maybe from a competitor side or maybe technological point of view as a developer as well you know a lot so we we need to keep in mind that ethereum is uh is actively developed so it's not like Bitcoin Bitcoin is very stable like the protocol is not changing it's kind of clear um so it's it's not being developed that that actively as ethereum so what happened is that a year ago the fees on ethereum were very high right so there was a lot of demand for uh uh people to to buy ethereum to pay for gas and everything but on the other hand you don't you can't have retail people you can't uh pay you know $20 for a for a swap on Unis swap so everybody like the narrative back then was that oh ethereum it's it's broken U it's going to die because it's just too expensive now there were some technological changes that made ethereum not very expensive so right now it's cheap like the gas fees that are pretty much at alltime low but we have all these l2s and the l2s they make the liquidation uh the liquidity to be fragmented so now the narrative is that well ethereum is not usable because you know all these l2s retail is very confused um they don't know how to use it it's very complicated and all that so the narrative is kind of changing but we need to keep in mind that the the developers behind ethereum they're working on solving all these problems so right now as I said the problems are in the liquidity fragmentation um and also all these chains that are kind of confusing for people to use so I believe the risk will be that I see is not solving these problems in some way but personally I'm kind of optimistic that I see a lot of interesting Solutions about solving these problems so personally I don't feel like ethereum is going to to to lose against the competitors and the main competitors I gu I guess will be monolitic blockchains so if we need to kind of uh form like two teams one will be modular which is let the ethereum approach one will be monolitic right now there is a lot of hype around monolitic uh blockchains that will be like saana hyp performance cvms like monat uh Mega e um and and um some some others so I guess one of the risks will be well maybe ethereum won't be able to solve the problems this time right uh in which case you know that that could be bad um and in that sense not being able to onboard um uh a lot of cons consumer apps uh but personally I I see a lot of development there I see a lot of brain power working on these problems and I feel confident that in the next one two years we're going to see uh these issues uh resolved and uh you Chris yeah I want to start with one observation so um first of all I'm very impressed that so many people came at the graveyard shift we're having here um because I was not super happy that uh we uh that the conference is also on Saturday so I'm really very impressed um our company has a team of four people in in Sofia so uh we're um we know uh the people here and we're very happy um our company is running a venture capital fund um so would like to ask um in the room um how many of you are investors and how many are looking for money so lot of investors so I I think that the big biggest issue what we're facing right now and the the bare Market is killing a lot of good projects because um one of the biggest issues is money right now very few well very little money is deployed um retail is kind of wrecked at the moment um but obviously still sticking around which I think is a is a great sign um and what I think everyone was hoping for that due to the Bitcoin ETF um that whenever this stopped that the altcoin season will begin again and the question is how long can you stay um can you stay liquid and I think that's the key thing is what we are seeing is definitely you need adoption it's like you can have the best technology you can have the fastest transaction the securest blockchain um if you don't have the adoption I think that will will cause a problem and the longer it takes the more difficult it is yeah of course and um now another round of uh questions um which uh ethereum competitor do you see as the uh the the the main competitor basically and uh why um do you see them as a competitor well let's just by by what the market thinks and the market thinks that one of the biggest competitors of ethereum so far is Solana um of course there are some other competitors that are tinier in um in in developers and in interest and in projects that are gaining um a lot of speed as uh as Valentine mentioned uh some of the reasons why um those um um blockchains uh or projects are gaining so much interest but uh but the thing is that yeah I mean at the moment it's uh the market is getting fragmented outside of ethereum um and um ethereum has to solve lot of issues with the high fees and with the complexity as Valentine pointed out I think that some of the other blockchains offer um offered uh solutions to those problems um of course is a trade off to other stuff that the um ethereum players and uh and projects uh um don't like for example uh centralization and uh um all of the other stuff that U uh is different but uh uh but yeah I mean I see uh that in the future there will be many more chains um I don't exclude the possibility that there'll be many Forks even a etherium that that will be used for particular use cases uh uh where um we need Innovation but uh yeah the the community goes in One Direction and there are certain subcommunities that want to go in other directions we saw this in Bitcoin uh we saw this uh um and I think it's a it's a natural or or organic process to have multiple lives multiple um uh multiple players as the market matures because this is how Innovation actually happens I mean uh you have more freedom more flexibility to um to go after what you think is a problem that is uh being um not addressed at the moment from from the market or by other players and just uh to to stay on this point uh a little bit to ask you because you mentioned Sana what's your opinion about the lack of uh decentralization in the project and um as we see um in the the last years the the point of decentralization from an investing point of view becomes less and less attractive and like most people would like to speculate more than be uh more decentralized so to say but what's your opinion on I think uh Solana attracts users that don't care about centralization so there are other chains that attract users that care a lot about centralization but yeah that's why I think that every Every Chain will will find its core users and uh depending on how active and the direction they they want to take uh this will determine the the future of the of the chain itself and uh Valentine do you also share uh miroslav's opinion about the multi-chain uh world in the in the upcoming years and which uh main competitors uh are you watching so Solana is clearly you know one of the biggest competitors that's for sure but when we look at what is happening on Solana it's basically like main coin trading which is basically for me that's a glorified Casino of some sort and I don't say that it's it's bad or something like this because the market decides and the market decided that this is something that uh the market wants people wants to do that which is fine I mean I it's it's it's fine but the thing is I believe that to be successful uh you you need to be much more than that and um when we talk about uh let's say serious use cases let's say where for example black rock is going to tokenize one of their funds then they going to decide that to be an ethereum because the economic security is the biggest there which which makes sense now whether it's going to be one chain that wins them all or not I I actually think there will be a lot of change and we're actually seeing this kind of unfolding you know we see ethereum being the ultimate settlement layer and then we see other players having some Niche use cases you know Solana might be you know the main coin chain whatever um Avalanche might be the the chain for gaming and we're actually seeing some interesting traction happening right now like last week there was this game off the grid that Lounge that has a very very big success and it's based on a Solana subnet we have base which is an L2 that uh coinbase stands behind that is a liquidity source and this also has quite a bit of traction happening there so if we if we look at the whole ecosystem I think we need to identify which are the narratives that are going to to pick up which will be the the best chain that these narratives are going to step on and and and and take it from there so yeah I mean from that perspective there are multiple uh competitors of ethereum but I believe that for certain use cases ethereum is basically providing the best infrastructure and and some of these use cases will be basically Defi and ultimately like tokenizing uh assets and putting money there and and all that so uh that that's my opinion and now you Chris well uh I'm a bit biased yeah because Gavin wood is an advisor and investor in our fund um so of course we see poodot as one of the main competitors um there and um it's having its issues I think um Solana has the best business development the best marketing um is hyped because of all the the mcoin franzy which me being uh a banker for many years um is um very fascinating for me um that this can happen and uh one of the memes on bulot is the Nerds love it yeah so basically you can build um very fast very secure just to give you an example one of our investments is a company called mythical games which built um a game called NFL Rivals where you play like a FIFA manager on on the NFL and they migrated from their private chain uh to padot and I think um they had more than 1 million transactions nothing happened so the tech works but of course the tech on its own is never going to be enough yeah you need to build something around it and a centralized solution like Solana is much faster in moving money to marketing money to Business Development bulka do is completely decentralized if you want to have fun buy a few dot go on open government and uh look at the all the proposals where you can get money for events for example um money for business development everything it's really in my opinion the the the most fascinating experiment out there um where we see how we as individuals um will be able to socially work and um interact with with each other so I think that's but I fully agree it's going to be a multi-chain um multi-chain World although many centralized institutions like Black Rock Blackstone and all the big ones will try to avoid that but I think it's unavoidable um that we will see um public blockchains because with the the a private blockchain is nothing but uh a database which you run so there's no point uh to switch uh now the the questioning to start uh with You Chris what are your favorite I prefer if the others talk first and it's EAS for me you just agree right then um let's H this ask let's honor this ask and then again start with Miroslav uh what are your favorite uh scaling Solutions uh for um a layer two scaling Solutions of ethereum well I think that um arbitrum is basically one of the best uh me it's been one of the most used um also um but yeah I mean um if I um if I want to talk about uh layer Layer Two um I also uh want to stress out that layer 2 at the moment is a bit frustrating for a lot of the newcomers probably the uxui yes uh and uh of course the more issues we try to solve in um a more complex way uh this will actually uh be um waiting on the uh ux of uh of new uh of newcomers and and the retail uh so that's what I'm afraid that at some point um things on ethereum will become so complex from a user point of view that there would be the need uh for someone to come and just um say okay we need to do a fork and do uh some form of a ux uh rewrite so that this thing can be used in a very very uh easy way for a lot of people for people that uh have not yet been crypto natives that don't know how wallets or blockchains or whatever work because most people they don't care about this uh of course in the future this might uh change but a lot of people don't care about the technology um they care only about the incentives that come with the technology but uh but yeah I I definitely think that layer layer two of the moments are um impediment to faster uh adoption uh from from retail and uh that's why I think that a lot of people will uh will start on on other chains and yes when it comes to defi um ethereum will be the number one choice uh for sure but uh but yeah um the ux need needs to change uh to merge uh the things that miros said with the question uh to you Valentine as you like uh testing a lot of different projects and uh chains um which uh Layer Two do you think or scaling solution do you think has the best uxui because I totally agree with M this this is a huge issue in the whole ecosystem and also which scaling Solutions do you see as the main drivers of uh the ethereum's adoption a while ago I was uh kind of opinionated about what kind of Technology will be you know the best for layer twos and I personally believe in layer tws for a very simple reason it makes a lot of sense because ler Tuesday allow you to move the computations outside of the main Network so when you do that you gain a lot of uh performance so you're kind of solving this bot onic and I was very opinionated I was thinking like oh like ZK rups they look so much better than optimistic and all that but recently I actually changed my mind and I believe that actually optimistic are just fine uh this uh long withdrawal period there are ways to solve that that is nice enough so it actually doesn't uh uh uh it doesn't matter whether you have like SW withdrawals or not or whatever so Market managed to fix all the problems that I was kind of it about and right now you know if if you ask me I think actually it doesn't really matter so much I would say that optimistic probably have a little bit of an edge over ZK because they provide a little bit cheaper transactions up front well ZK it's uh it's it's a little bit different so what I think is that right now it actually comes down to development experience and that's going to be like we have services like conduit that basically allows you to run a row up with like two clicks you go on a UI it's it's the same like running a digital ocean uh virtual machine you say like this is the rup I want to have with these properties you click deploy you you pay a monthly fee and you have a rollup and and that's it so uh I I feel like the the the things are shifting a little bit like the technology is not like the the the core of the technology is not so important anymore things are pretty much the same uh and now we have a bunch of upcoming new things uh basically for evm chains that should in uh improve the uh user on boarding and this is something that I'm uh I'm waiting uh uh uh you know um uh to happen very soon like maybe in a year where and I already see demos of that how people can on board in web free applications without a seat phrase without uh with Biometrics using like pass Keys you know the same user on boarding that is happening on let's say revolute or any of these like web 2.5 banking Solutions happening for blockchain and I think that will be the most important thing like the the consumer apps that will utilize this technology and going to make it so that people actually can use this thing not you know DG that are used to managing like Hardware wallets and Seed phrases and all that kind of crap yeah it's I think I fully agree it's like so first of all no one knows what's happening in the next 12 to 18 months yeah in crypto Everything Changes at such a high Pace that whenever people ask me well you know what do you think is going to happen next year I said well I can tell you what probably is going to happen in the next week but not in the next 12 months because there's so many factors um which are important I think what what you said is the developers need to want to build there because if you don't have developers you don't have projects then the chain then it's dead yeah the second is is the the uxix ux for the user um if this is not this needs to change dramatically if you want to bring it's like um the the phrase I saw a lot of people with a GM uh t-sh t-shirt going around and um one of our projects AAR I don't know if you heard of it he says GM should not stand for good morning but for go mainstream so I think that's the key is like um um we uh need to break out and H doing events like that I think is a great thing is to to educate and to bring more people into the space and then the more people then the easier will be the the development there um why actually do you think um uh maybe you can give your opinion starting out miros why do you think that um because a lot of retail investors are asking uh themselves this question why do you think the still so many years into the crypto equin system let's say starting 2016 with the ethereum um there to this day such ux UI issues scaling issues why is it technologically so hard to fix all those problems because each cycle people say this cycle or next cycle and uh again it's this cycle next cycle uh and people were still waiting for this these things to happen because these are hard problems uh I mean decentralization and having uh a very scalable solution in decentralized way is very hard um and uh and we see this uh uh with with many projects I mean uh that promised decentralization but actually fail to deliver it uh and uh yeah it's plenty of stuff it's it's a complex thing um especially when you have so many projects and so many um apps that uh um uh want to cover different aspects of defi of uh gaming uh they need different stuff and it's hard pleasing all of them at once uh and of course you need uh a focus uh and you need uh a lot of money and a lot of good people a lot of talent to work on some of the um primary problems some of the hardest problems uh um that are there and I think that it takes a lot of time um of course uh there is a lot of talent out there that uh is being um um sucked by the AI uh hype uh because uh now it is where the money is flowing and it is something that people and Retail actually see the value of it big time even companies etc etc so I think this St some of the some of the um shining of uh of crypto in the last few years and it sto some of the capital too uh definitely so uh um so I think that we need to find a good way to um to stimulate some of the brightest Minds to work on the crypto problems at the moment uh and although I see many bright people working I don't see that they are that they are um that they want to work in crypto as their first choice I mean uh because I mean the incentives are not uh that attractive as in other companies as as for example in Deep Mind or uh in some other hot startups and Valentine do you think that we should sacrifice a little bit of the decentralization in order to fix the other issues or do you think that we need to be straightforward on the path to decentralization I think we should provide the options so some use cases require a lot of decentralization other use cases are completely fine to be you know relatively centralized or completely centralized so it really comes down to uh what you want to achieve and what you're building and and and that's why it's important to have a set of different solu tions out there and and uh you know you as a as a founder and as a project to be able to choose and and know what are the tradeoffs CU know with all of these systems you have certain trade-offs you can't have all of it you need to do tradeoffs and uh the these trade-offs are going to impact how your product looks um so yeah I I wouldn't say that uh we should uh uh uh sacrifice the centralization we should be able to have the decentralized way we should have like the middle one and and like the the more centralized and uh these all options should be out there on the table and uh Chris uh a question to you is that you you said one uh your favorite actually because of Gavin wood polka do is your favorite uh decentralized project but if you have to pick one more centralized project that you like which one I it's we as as a company would not go down that road because in our opinion it goes against the idea of uh uh a blockchain so we avoided um that and so we we think why is it decentralized because you want to go against centralized institutions yeah because that's what you want to break basically but I want to add to what one of the points is like why are those problems so hard to solve well first of all most of the uh Protocols are are down I don't know 80% from the all-time high which basically means they have 80% less money to spend um to help projects to develop yeah if you if I go back to the polad do example there's currently 100 million in treasury which can be spent in whatever way and bulot is trading at at 6 billion at the moment if bulot is at 60 billion then theoretically the treasury would be around a billion and a billion and a half and that's just one uh one project yeah if you look at that what could be possible but you would need the money to invest there because it's like something has to catch up either the the fees generated or um what you can spend there but it's and and there we in in our opinion we are at uh 2000 maybe 2001 point now where basically a lot of it will be washed out if you don't have a use case I mean the mean coins is still fascinating for me it's not a use case but it's happening yeah so it is a use case in that sense but your reason to exist will stop yeah and we will see that of the 20,000 cryptos we're having right now probably 5% will survive in the next 5 years we should be very realistic about that because what we're seeing right now is not sustainable yeah so go with the ones where you believe and where you see a chance that projects will be built and users can be uh gained yeah I agree with you that the risk is the main thing that we need to um uh to be we need to be looking at and mentioning risks one of the main risks for the whole defi ecosystem in my opinion is the AML and um kyc procedures the upcoming uh ones from the e EU the US and so on uh how mirav do you think that defi will manage to survive or thrive in the upcoming uh years from that point of view I I do think that ethereum will be the main player in the def uh in the defi space and what Valentine pointed out with black rocks uh fund uh bidle uh that was launched earlier this year actually proved that um those institutions are looking to use uh ethereum for its Network effects but kyc and and AML procedures are the Cornerstone of uh a capitalistic um so to speak uh environment and it they are very important uh uh for uh for any industry that is managing money um and uh yeah I I do think that they impose risk on defi that some of the um users that value so much centralization privacy anonymity um and stuff will have to um oblige with something that uh um comes in uh is a tradeoff for the growth of um of that capital for for example uh if Black Rock says okay we need these procedures um in order to uh to build more and to U intertwine the traditional Finance world with the defi world uh but but we need those checks because we have to comply with the law uh we we want to on board us investors and uh they have to go through these crazy administrative checks and so on um uh and uh at some point uh there would be a crossroad in my opinion and uh the market has to decide whether to follow the big money and big money always follows law uh in the real world because Prison is a real thing uh and um and yeah um I think that this imposes a big a a big risk and um I I I do think that there are uh some some middle grounds but but definitely if defy uh if defi is to become a very big industry I think that um we'll have to abl with all of the regulation uh that is being imposed uh by the governments and uh Valentine uh the same question to you but with a little bit of caveat and and add on to it um what um do you see a world where we have decentralization but no one due to the kyc and AML procedures yeah privacy is a is a very tough topic um it's uh it's it's probably actually I'll be more concerned around the privacy issues compared to regulation am kyc because you know defi it's infrastructure um trfi will be using defi because it's going to reduce their operational cost it's all about money so if they can make more money using Defi and I think they understand that they can like they can run their business with less people if they use dii right with less intermediaries so it's going to be more money for them so they they going to figure out how to use it and then for regulation in AML I mean you put this at the border of the system where the money are entering or exiting and you're fine I mean Regulators are kind of figuring this out and you know they know that they can't regulate Unis swap but they can regulate on and off ramps so you know that that's fine but but privacy that's that's a tough one uh because we see what happened with tornado cash so basically if you want to have the ultimate privacy there is a high chance as a developer you're going to go to prison and that's not an option so nobody's going to develop such kind of solutions or these Solutions will be developed like I mean anonymously still but I mean still you're going to bear like huge risk so maybe maybe the solution is somewhere in the middle like I I I was thinking you know a what about this may maybe there is some kind of a solution that allows you to have privacy but be able to provide a kind of a paper tra about your activity in front of Institutions let's say let's say you want to open a binance account and you participate in some kind of a private Network where not all the transactions are visible so in that case you go to bance and you generate this report where you can show them uh and and verify that these money are not coming from from terrorism but are coming from my sellers something but but you show that only in front of bence or or you generate some kind of a ZK proof that that's the case and maybe maybe that's going to be enough you know some kind of a solution like that but ultimate privacy that will be very tough to uh to to to get going with Regulators like I I think they're going to fight very hard against that and personally I I think you know it will be great if we can have like a perfectly private Solutions but not sure that's going to happen unfortunately the same to you Chris again with an add-on is this the main risk for defi the kyca AML or do you think if you uh think you can add something to to the risks absolutely so you I I think it has to be regulatory compliant um otherwise it's not going to work and I think one of the biggest I would call it maybe a revolutions which will come will be an onchain digital identity like uh one of our projects called killed Ino ruer spoke uh uh yesterday about it is like with that you could solve a lot of issues yeah where you can say okay it's cleared once you can look it up and then you can say okay this is the guy this is where the money is coming from but right now I mean um come back to the same thing um if you do if you look at kyc and AML processes in Banks this is a nightmare yeah so this is not going to work in in in that environment so we we need to clear those steps first but it has to be absolutely regulatory compliant to uh to work in the future yeah and uh the last round of questioning is we have three four minutes left uh um this uh question will be um more General about the whole crypto uh ecosystem uh there is this thesis of diminishing returns some uh may say it's not a thesis it's actually happening um what what's your opinion mirav about the thesis of diminishing returns uh in each following cycle and do you expect less of a percentage increase in the upcoming one I definitely agree with this because um uh um crypto was the hottest thing four years ago now it's Ai and in the future there there'll be more stuff that that we cannot think of um right now that is that is hot if I had to guess it maybe it would be something like BoTech and AI uh something in the real world uh where people can touch where it blends with other stuff uh and um what is hot in the day actually steals people's attention and money so uh this this happens always also uh the market has a lot of assets at the moment uh and a lot of people are trapped into holding them uh and working them working for for some projects because uh yeah they have this sunken cost uh and U yeah I believe that uh uh the uh the biggest increases will be seen from new projects which have um no price history um no back holders left no vs that uh uh want to to dump on them and uh yeah I do believe uh um in this thesis and you Valentine for sure um so what's happening is that few years ago there was much less VCS much less money chasing you know the best projects um and I mean I I guess probably everyone here agrees that you know if Bitcoin has been like a,x for the I don't know the last uh five five seven eight years whatever uh it's not going to be THX you know in the next uh you know it's uh it's going to kind of plateau with the acceleration of the price but what is more interesting for me is like from an investment perspective like if we look at you know investing in early projects which is what we do at deos I believe that and I kind of see you know that I haven't done like some formal mat or published a paper or anything but I can easily see that people that were investing few years ago they were able to have a much bigger winners compared to people now and there is a very obvious explanation why is that right now we have much more funds that are competing against each other much more money com like it's basically more money competing and you have a lot of people trying to basically preempt the new narratives so it's not like a new narrative is going to start happening or something and then you know the FEC figures it out like it's it's like even before like the narrative will be like very very early stage and investors will be trying to preempt that which is you know pushing the valuations up it's it's making you know investing in generally in web free like quite quite expensive I would say so as the the time goes I think the expected returns that investors should be looking at uh especially for early stage companies will be much lower compared to let's say five years ago and Chris the same to you uh again with an add-on uh do you think that the diminishing returns are mostly due to this uh thing called the law the law of large numbers as the crypto market cap becomes larger and larger the percentage increases will become less and less or it's more due to what Miroslav said the different teams as AI biotech and so on first of all I want to start with like predictions are very hard especially about the future so um so sorry to interrupt but Howard marks has this incredible quote it's there are two types of people those that uh uh don't know and those that do not know they don't know uh what the future will happen so yeah so um I think it's um I'm going to make a a very bold prediction um I think we're going to see the last cycle now because crypto Mii uh funny enough is I think the only asset class which started from retail and is yet to get institutional adoption and I think if we get institutional adoption you you will see a wave of money coming in which basically Happ happened with uh with Bitcoin to a certain extent yeah so we haven't seen any institutional inflow in the in the asset class at at a bigger uh bigger scale so I think if you have that you will see the good projects but that's the cave yet will have you will have exponential returns again this will this will happen because as as he said so much money will be chasing the good projects that valuations will go crazy in that cycle yeah um afterwards if you have institutional adoption you will see that the volatility will go out a lot of the coming back again a lot of the the stupid projects will be washed out and won't exist you will have much more liquidity because the biggest issue right now is liquidity if you if you are at our size for example it's very hard so we have to make a lot of due diligence before we invest because we need to make sure that it gets a certain size that we can exit it's much easier if you have a few 100K to invest than to say you have a few million to invest and then you need because you need to exit as well so liquidity needs to come to the market and then the good projects will um will will strive and you will get exceptional returns AI is a hype of course yeah um but how many uh apart from high valuation how many exits have we seen in in this cycle so it needs to be needs to be proven and I think Crypton blockchain is in in my opinion A belief in a different way uh corporations Nations will be organized and uh and functioning and AI is a tool yeah but blockchain and crypto itself is is a belief in a different system yeah thank you for providing uh this uh value and your expertise and um uh again to all of you uh this was the the this uh conference [Applause] [Music]