There's Gotta Be More to Ethereum Than Just Trading | Jason Nelson, Evin McMullen, Mason Nystrom

[music] All right, we're coming towards the the latter half of the day. Very excited. I'm going to introduce Jason Nielsen with Decrypt and he is going to bring on a very interesting panel um and introduce them all to you soon. So, let's give him a round of applause.

Hi, everyone. How are you enjoying the ETH member so far, everybody? [laughter]

Um, I'm going to go down the line and let you each uh introduce yourself and then we'll get into what we're going to talk about. Uh, please starting on my left.

All right, GM. Beautiful people of Denver, thank you guys so much for being here today. My name is Evan McMullen. I'm the co-founder and CEO of Billions Network, and we are here on a mission to save the internet in the age of AI.

I don't know if I can follow that, but uh I'll try to meet the energy. Uh my name is Mason Nestrom. I'm an investor at Panta Capital.

That was short and sweet. I like it. Hi, my name is Adam Mosny. Been building communities across different crypto projects for a decade now.

Well, thank you so much for joining me today. Uh what we're basically going to talk about is, you know, Ethereum has a long story history. There's I don't even know if we can actually count how many projects are actually on it now, but we're in a downturn. The market cratered pretty badly over the last few weeks. So, let's try to make it a little bit more optimistic for everybody in the audience.

you know, with Ethereum, Bitcoin, the whole market being in a downturn, what do you see as the main reason to still be building on Ethereum today?

So, I want to I want to have a little beef with that question here, a little little little challenge to the framing. I I think it's an opportunity for us to discuss here today crypto as in cryptography. uh an ecosystem built not only on cryptocurrencies which are a single but very valid use case. Um and so for me the reason to be building here is because the technical tools that we leverage at billions network things like client side proving uh zero knowledge proofs the ability to represent traits about yourself with revealing your underlying data. Um the the concepts and need for these capabilities long predates the existence of modern blockchains.

In fact, that very example, being able to represent traits about yourself, like the fact you're over 21 without revealing your birthday, was originally posited by Harvard professor Larry Leesig in 1997. And we are now just able to do that like literally this year. So you know slowly then suddenly as with the adoption of many technologies and many of our human experiences um I think Ethereum represents the most you know verdant vibrant feasible place for you know essential technologies to be cultivated and scaled. Uh, and while I appreciate the the stress of a single use case wavering in market movements, um, I think that that far from represents the ecosystem and should be far from a deterrent from all of these other amazing ways that we can use cryptography.

Well, that's actually an interesting point because that's something I've been hearing a lot today is that, you know, even though the conference does appear smaller than in the past, the people who are here really want to be here. the people who really care about Ethereum and blockchain and the technology and it's not just about uh number go up right it's about actually what are we doing with this thing and Adam next let me have your opinion on on where you see us and in Ethereum right now

oh Adam sorry [laughter]

I saw you looking at Adam I mean I don't think we're done yet like when I when I kind of got into the crypto space in late 2017 I mean I got in for all the reasons probably Most of the folks here did, you know, decentralizing the internet. And I'm sure most of you are still using Apple phones. Most of you still have Pixels. Well, maybe just me, but we're not we're not done yet. And for me, that's why I'm sticking around.

I feel like I've been in it this long. And it's important that I finish the job. And I think most of the folks here are kind of eager to finish the job. Are we ready to finish the job?

Hell yeah.

Thank you. [laughter]

Yeah. I mean I think we are at a time obviously in in a market downturn but simultaneously the growth of blockchains or or crypto if we want to like broaden the category has never been more inevitable. Uh stable coins are 300 billion in TVL that number is going to you know just continue to grow. We're going to see all of finance move on chain. Any asset that can be tokenized will be tokenized.

And so while I still do believe that the largest value creation over the next decade in crypto is going to be financial applications and payments um you know I think that there are other interesting things that are they're happening uh at the adjacent identity being one of those categories. Adam. [laughter]

Well, uh, speaking of the use cases, uh, over the last few years, one of the primary use cases of cryptos appeared to be memecoins and before that it was NFTTS. What are you seeing? And then I'll turn it over to the rest of the panel. What are you seeing today as the major use case that can drive adoption?

I mean, there's the ones everyone knows, Mason touched on, stables, real world assets, you know, that type of stuff, getting that onchain. Um, I I made a call out maybe a year or two ago. I thought privacy was going to be the next thing that really like brought on the bull market. Um, but honestly, I don't know. I'm not going to pretend.

I actually think these guys would have a lot more to say about that than I would, to be honest. I think you're always going to have some level of onchain speculation. Memecoins uh have proven that. They've been resilient across cycles. And so, you're always going to have some level of of onchain speculation in that camp.

But there are tons of categories that will continue to grow. Adam mentioned a few. There's others like per uh even remittances or like if you want to drill into the more specific use cases of stable coins. Uh there's going to be multi-deion if not seen billion dollar opportunities there.

Deca billion dollar opportunities. Damn, I like the sound of that. Um I think we can we can kind of divide um uh drivers of adoption into you know kind of large carrots and sticks. Um, so when we think about the carrots, these are are our delightful speculation fueled by cheap dopamine and ready access, improving UX and uh yield farms that work, you know, at a certain scale, but certainly not for a billion people. Um, and so I think we've, you know, started to see that in the trading space making its way into the institutional space in terms of efficiency.

But I think maybe you know unsexy opinion here but um uh compliance is going to be the next major forcing function for adoption because we've seen incredible institutional and government appetite for these technologies but we have had neither guard rails nor sophisticated enough implementation capabilities to actually follow them. So now after eons more like a decade of government sandbox capabilities and the evolution of of these regulations um I think we are now seeing a a fertile enough regulatory environment in some places and enough demand for use cases like identity systems like stable coin banking um like you know digital assets and remittances like Mason was saying um and so I think the conversion of of you know hype cycle driven delight with um actual business fundamentals in a regulatory environment ready to receive them. I think you know that's what that's what the next 5 years look like. I I do think this presents a hard pill that a lot of people who got into the space in 2017, Adam, myself, Devon, uh do have to swallow and that like the ethos in which we came to the space is evolving. And you when we talk about moving to compliant DeFi, like I 100% agree that's going to be a thing, but that also looks much more like a permissioned financial network, hopefully built on open permissionless rails like Ethereum or Salana or uh even, you know, DeFi protocols like Morpho.

uh but that is going to evolve towards that type of end state. I do wonder though because one of the issues that still plagued crypto and blockchain to this day, not blockchain in and of itself, but I'd say the projects that are built on it is cyber security and like you're saying about the regulations, the guard rules and like that, those things are going to need to be ironed out before you're going to see governments really going into this thing because if if I allow this network or this project to have the funds of my retirement programs and then next month I hear that it was liquidated for a million dollars. That might make me a little hesitant to explore these things further. So, how do we balance cyber security with adoption with not stifling the innovation that moves the industry forward?

So, I I would again challenge the question a little bit in that if if you're yoloing your retirement funds into Farttcoin, that's not a cyber security issue. That's a user education and riskmanagement decision-making issue. Uh but I completely agree with the the sort of general proposal that uh risk management is vital when we're implementing at government scale. I feel incredibly fortunate that over the last nearly decade I've had the opportunity to be in the room with government decision makers around the world and go on the journey with them from you know 2017 2018 what is Bitcoin to today where entire nation states are now embracing ZK credentiing as a new method of interacting securely with their citizens. Um I think the evolution of some of that um of course is the maturity of the technology but on the other hand it's also the technical literacy and readiness of the government.

Um so specifically in the identity space for example we've only recently the last three or four years started to see governments treat digital identity as a critical national infrastructure as opposed to an a novelty uh because I think you know this internet thing is going to stick around for a while. But I think the disparity between wildly riskon memedriven, you know, dopamine hits and government infrastructure that needs to work for everyone also illustrates the broad variety of ways in which you can use these tools and that's that they are just tools. They do not define the plane of play. But curious, what do you guys think?

I think it's just a spectrum of adoption, right? Like certain things the government will be more readily h like available to handle. For example, like the CFTC is looking at how they want to regulate prediction markets going forward. they've actually been very proactive in thinking about a framework and how they want to be uh you know regulating these these new types of markets and so that's an instance where government's not going to take that long actually to come into the space but then there also are things that take uh longer to Devon's point like the internet's been around for decades and you know getting your idea on your phone is like still not common so it's it's a spectrum of adoption it's really just about sequencing and what is the government poised to handle first uh Uh, and we should focus on that first.

I'm I'm actually um kind of going to go off of what what Evan was saying and I actually think the technology is fairly ready and some somewhat proven to kind of utilize or be implemented in these larger systems. I think I'm a little bit more interested in the word of the day agents and what what happens there because I feel like that's way more unproven and that scares me a lot more than like what already exists out there within the crypto like systems. So

well so you opened two doors that I would like to take you boy take you through. The first is about identity online and I've one of my main coverages is Dows and DAO communities and a lot of the members of the Dows are on web 2 platforms like Discord and Telegram and things like that which don't require you to identify yourself to provide some type of ID in order to use it. But that's changing and we covered recently that Discord is implementing um age verification to access some servers. So how do we use web 3 technology with that we're talking about up here on web 2 platforms that may not even know that we're even using their platforms? Like how do how do we bridge the two?

So I think you know there there's a massive opportunity to space to bring new superpowers that solve business problems to the market without requiring a PhD in computer science to get through the first 10 seconds of the pitch. And I think that's certainly where I've observed and I know you know alongside these guys for many years have have observed a a shortcoming in the way that we technologists often like to explain blockchainbased tools is that well first let's talk about consensus mechanisms like no I run a content site I need to make sure my users are adults. I I do not give a rat's ass about how your Bitcoin works or whatever. Um and I think that was a tough pill to swallow because not everyone was excited as we were about the inner workings of the protocol guts. Um but this also means that you know now our technology is mature enough to compete pound-for-pound with so-called more traditional or less secure more centralized solutions.

Um so I think the method of product marketing and product offerings is really the the vehicle for delivery here. Are we able to meet you know enterprises, corporations, you know, small businesses um in a form of product that they are able to readily consume where the switching costs is not so arduous it defeats the purpose and the compliance or improved capital distribution or usage of capital that they have is superior to what they had before. And now this may sound like unbelievably elementary basic business logic,

but I think you know it it bears repeating in an environment where magical thinking and the promise of what tomorrow can look like was often the punchline before such products were available.

Um Mason, for for you though with these with these web two companies, they tend to want as much information about you as possible. And for example, show your show post your ID. Well, your ID is not just your face. Your ID is also your birthday or could be your social security number, could be your address. So, how do we convince the platforms that the limited exposure that crypto that web 3 ID products are the better option?

Like you don't need to warehouse all this information to be able to prove who I am.

Totally. It's about convincing them of the value proposition. So if you want any large enterprise or business to use some type of crypto focused identity, the way you want to sell them is on something like counterparty risk. Like why have we been able to sell every single fintech that they should have a non-custodial wallet? Well, like you're not actually custoing the funds.

It's still in your application, but you as the the bank or the financial institution don't own it. That's actually great for them because now they remove counterparty risk, which is a huge issue for them and that solves a lot of pain points. You can do the same thing with non-custodial data, right? like that organization can still technically that data can live in its ecosystem. They can use it, but you can also allow the user to selectively share pieces of it.

And so in the same way that non-custodial wallets have been really powerful, I think you can have a a non-custodial data identity uh which is already happening like like ZKTLS is like a very commercialized version of this where there are already you know lots of companies uh using this as a solution for identity for employee verification uh and other things like that. And so if you can find the pain point that the enterprise is focused on, you can get them to adopt this type of identity solution.

What do you think, Adam?

Yeah, my answer is probably a copout answer. And it's pro it's honestly just build a better Discord. Like why do you ha why do we have to go onto Discord? Why does billions have to approach Discord and say use us? But they might not.

Who knows? There's probably a good reason why they should, but they might not. So why don't we just why don't we just go out there and build I mean, I So, like I said, I've been building kind of communities for the better part of a decade now, and I'm still using Discord because that's where people are, and it's because no one's built something that's better than Discord. And it's it's a bit of a copout answer, but it's the honest truth.

Yeah. Well, network effects are really hard to overcome. And that's why you have to approach it from a a value proposition standpoint. Like, it has to actually solve a painoint for Discord.

And Mason, you are 100% spot on with counterparty risk assessment. We experience that every day in our interactions with enterprises, even folks like the homies of Discord. Um, where uh the cost and complexity of consuming a bunch of really sensitive data that you never set out to because your business does something totally different uh than having to curate, protect, even remove parts of that data adds, you know, potentially a few employees to your team solely to respond to these data management requests. And so the cost and complexity of these overreaching surveillance, you know, actions um in excess of the minimal disclosure required is, you know, that's actually playing out exactly as Mason was saying. And I think the terrifying thing there is that we are seeing this type of overreach now um occurring in the name of child protection uh in countries around the world where they're banning social media and performing similar overreach.

Now, Adam, we're going to go through door number two and we're going to talk about agents.

Word of the day.

All right. So agents have been AI agents have dominated the media field for gez the last year I'd say and we all everyone in here is probably either know of or at least tried openclaw or cloudbot but we're seeing more projects rolling out AI agent applications and is is there any concern when it comes to not only privacy but identity and things like that of turning over crypto to an AI infrastructure as opposed to people. And what does that do to the community that built up around Ethereum over the last however many years if we're now going to say I'll let my AI agent do it? Who would like to go first?

Oh, I mean I I love this song. I'm playing my song. Um, I think, you know, we have a massive opportunity as an ecosystem who loves a good meta and narrative to recognize that the the memes we have put forth that stable coins are machine money uh invite us to also figure out, you know, okay, how are we going to facilitate payments if we don't know who we're paying? And so the implied union of cryptographic technologies like you know identity solutions and zk proving um paired with the infinite generation and emergence of of agents you know deployed and uh in you know now quite coordinated ways like I I see this as as a uniquely well suited pairing. We have verifiable scarcity with you know stochastic emergence and infinite generation.

We have payment rails that do not require standard interactions like we would with the tradition traditional financial system. And we have the largest unbanked population the internet has ever seen. Right now more than half of online and onchain transactions come from these unidentified unaccountable bots. Um and so I think this is a call to action for uh decentralized infrastructure. I see no more well suited use case um than right now.

Uh but it also requires us to as we were discussing earlier have a a a healthy respect for risk um and understanding like you know the the fact that we are totally out of our depth to understand what um iteration cycles and risk management looks like in this new environment.

What do you think miss I think two things are true uh when it comes to consumers using agents. one is a consumer will happily give an agent free reign of all their data and systems and we've already seen that happening with cloudbot in the same way that we've seen that happening with uh social media data and so I I don't think that uh is ever going to change now can those agents and systems get better yes uh and the second thing that is true is that's on a related note is that bots and agents are first class citizens of blockchains right like they already are today most transactions are are are bot- based not human based and that's only going to continue in the future and so the question is How do we build agents that are safer? Uh that are compartmentalized so they can't just like ruin, you know, uh your life if they get access to your bank account and and hallucinate. Uh but also prioritize those types of interactions uh with other agents cuz that's only going to continue to grow. I think the last point here is businesses, enterprises will care more about the risk concerns when it comes to agents.

But uh that's why I think you'll end up having probably a different set of uh agent interactions when it's a businessto business use case versus a consumer use case. Adam,

I mean I don't know how to follow both those things up, but honestly at the at the end of the day, I think agents need identity because we didn't know who these agents are talking to each other. And I think like you said as I don't know if this is the same word, but first class citizens. I think crypto is built for this. Crypto is built to talk to agents. It's like basically it's all code just talking to code.

So, I feel like we have a really unique opportunity to kind of like lift up crypto through this a agent buzz that's happening right now. Um, so I'm excited to see where it goes. So, all right. Well, I think we're wrapping up and everyone, thank you so much for joining us today for this at East Denver. Um, how's everyone enjoying the conf conference today?

Another beautiful on day on chain. Man, I am grateful to be here and thank you all for for taking time to join us.

Uh, it's always fun when the tourists leave. So, thank you all for being here. [laughter] Um, I love these guys. Round of applause for these guys. Thank you.

All right. Thank you everybody. Thanks, [music]