Neil, I've known you for almost ten years, and, uh, I've known you in many different capacities. Even before the world of YC began for you, you were a well-known head of the Coinbase developer platform and helped launch USDC, especially since it hit 1 billion. So my first question to you, before we move on to the world of startups: tell us what those early days of launching USDC were like? Did you have a plan for how to introduce USDC to everyone, or did you have to figure it out on your own, or what lessons did I learn from those early days? Thank you, Karartik.
Nice to see you. It seems like see you. It seems like we've known each other for 10 years. Uh, this is a homecoming to Ethereum. This is one of the first places that introduced me to cryptocurrency.
I still remember 2015-16 when there was a party in Times Square that Joe Luben threw, and they were just about to launch Ethereum. So that's really great to see. Um, so, uh, I spent about seven years at Coinbase, and one of my first roles was managing USDC. I think the first thing I want to say in crypto circles crypto circles is that sometimes there's a lot of purity testing going on, and I think a lot of people in crypto thought it was stupid and crazy that stablecoins, you know, were really about Bitcoin replacing everything. Um, and I actually just think that the ethos that I have, and I think the huge ethos of the Y- huge ethos of the Y- cominator is just about solving problems, and the movement of money is not being solved.
There is a huge set of problems with the movement of money in the world today, and I think blockchain can do an exceptional job in this regard. And so, uh, I would say we launched USDC, uh, in 2018, uh, with Circle, uh, and what was, I think, interesting at the time, is that one of the questions is, do stablecoins exist, if they do exist? Is there value in this, or isn't the goal of cryptocurrency simply to replace the dollar, not to improve its movement? And I think it was clear to us that the stability of the dollar was extremely valuable as a really important property, and a lot of people understood how to embrace that. The second part was that Tether was already big at the time, and I remember waking up every morning.
I was looking at Tether's market share, its market cap, and at the time we were thinking a lot about how we were going to go to market as a new, highly regulated product. So, Tether was in Asia. At the time, it had a very opaque structure in terms of how it was structured. And we asked, you know, how do we compete with him we compete with him ? And I remember that there were two pushes that people made towards me.
First, when you see something working, people want you to do the same. And I think that's often a really bad way to think about it, but at the time it was like, "Oh, Tether works." Coinbase needs to go to Asia, convince Asian investors Asian investors , because that's where all the Asian exchanges are. Uh, and all these investors want really high returns, 10-15%. If you can find a way to promise them that, that's a way to grow.
And that was one of the things we thought about. Um, and I thought, “That sounds crazy. We are an American company that thinks deeply about regulation. How the hell are we ever going we ever going to accomplish something like that? And the second thing that a lot of people talked to me about was, “This is great.
Um, so let's sell it to the banks." And that was 2018 . And for me, it was crazy too. And again , I was a person who came from Trati. I worked in finance I worked in finance , sales, and worked in banks.
And when I talked to them, they all looked at me like I was crazy about this cryptocurrency thing. In fact, all they knew about it at the time was Bitcoin. And for them, when I even thought about talking about it, it was like, " was like, " This is a beta dollar, right?" So, it's really hard to sell a beta version of a product to a truly mature market that needs 100% guarantees on everything. And so in those first months I thought deeply about what our product strategy should be?
And I think my biggest insight, and the other one was from Daniel Q, who was one of the early, you know, developers of USDC. Our basic understanding was that there is this amazing DeFi market. It's just starting out, and again, it was 2018, so the best you had was Maker Dow with a cube. Yes. I think the only signal then was essentially Maker, and I think compound compound compound, was about...
compound, was about... I think they just raised their round. And I, I was auditing smart contracts for a bunch of teams, including DYDX and others including DYDX and others , and we thought, "This is it." Like, if DeFi is going to grow, they're going to need a dollar, they're going to need really good launch and exit ramps, they're going to need something reliable, something that will something reliable, something that will hopefully provide 101- provide 101- pound support. And so we said, " so we said, " Okay, great, that's it."
And so, essentially, we launched a USDC bootstrap fund. We invested a bunch of money in the Unis swap. Um, I met Stani here, who at the time was running a product called Ethim (now A), um, and, uh, DYX, and there were a bunch of others that we had essentially invested in, and said, “Hey, we’re here to support you. Let us know what we can do and we want to be the stablecoin of choice.choice .
” And honestly, it's a huge testament, in my opinion, to the partnership between Circle and Coinbase to really get this off the ground. And I'm so glad now that we're talking about banks and all that. It's really exciting how far we've come, but you have to think a little differently when you're a contender, especially when you're a beta product. You can't just take a strategy like the big players and assume it works for you. I think it's a pretty good transition to just thinking about how you solve problems now as a startup.
I want to jump right into some of the things that you and YC are interested in in this space. But one, perhaps common question: How do you spend your time at YC? What does it mean to be a crypto referral partner? Do you work closely with teams, or is that mostly just during the interview stages? What is your role in the crypto project?
Yes, for those who don't know Y Cominator, it's probably the most successful incubator in America. I think over 5,000 teams have gone through it . Well-known companies like Airbnb and Doorbat Dash, as well as Coinbase and Stripe, and many others that are pushing Axiom and others who are pushing cryptocurrency forward. So YC's goal has always been to work with founders, to support them in various ways. We offer them $500,000 in seed capital.
We offer them a three-month program in an incubator. There is a whole social scene around YC where teams help each other. There are so many stories of YC startups that started by selling to other YC startups, grew, grew, grew, grew, and Stripe, you know, is a really good example of that as well. So now at YC, I spend my time doing what I do, which is my first, um, and deepest love—which is cryptocurrency and financial services. So I spend a lot of time with our teams at YC in the cryptocurrency space.
Historically, YC has funded over 100 cryptocurrency startups. And I suspect we'll probably increase that amount 10-fold over the next decade. Hmm, and the reason is that cryptocurrency is much more than a niche product that, niche product that, as you know, some people use. I think almost everyone in the country will use it. They just don't realize that many of them are using it.
Um, so I spent a lot of time with these startups, um, consulting them. I spoke to venture capitalists to help them get interested in some of the startups in our funds. Hmm, I spent time making sure they got the products they needed early on . And there are also a lot of these nuances about cryptocurrencies, like when to launch a token, whether to launch a token, etc., that I've had, you know, for over ten years.
I think I started working with Bitcoin in 2014. You've seen all the waves of ups and downs, and, uh and downs, and, uh , just things that worked and didn't work, and a lot of things didn't work. Yes. And I think, as one of my reflections, you probably feel the same way , I joke that there are two types of people in cryptocurrency. People have gone through one cycle, and those who haven't .
And if you've been through one cycle, you feel like the peaks are never as high as they seem. And much of this is based on speculation and hype. Hmm, and the minimums are not as low as they seem. And there are moments like this there are moments like this , when I think that's actually my favorite moment for construction, because a lot of the tourists have left. A lot of people here, um, are people who really care deeply about what they're creating, and they're trying to solve real problems.
Although I feel like in bull markets you attract a lot of people looking for rapid token growth, quick resells and other things...No, I actually agree 100% and one of the things that we, um, as Eth Global, notice is that the correlation between the number of developers we get at our hackathon goes up when the price goes down. Um, and, uh, it's always the other way around, which is very interesting because you see a lot of people registering, but the registration goes to general conferences general conferences , but builder events are always inversely correlated with price, and, uh, it tracks because people are generally excited about technology, they don't care about any other factors. They just want to see results. Um, and speaking of which, is there anything speaking of which, is there anything you're particularly looking for these days?
Um, looking at the 2026 version of crypto and startups, is there a wish list that YC is looking for? Do you advise people to engage in certain product categories or not engage in certain product categories product categories ? Uh, what do these general guidelines look like for what you think are the possibilities think are the possibilities ? Yes. So, I'm actually going to be tweeting a bunch of ideas over the next few weeks, um, about what specifically we're excited to fund, but maybe I'll bring up a few topics that I think are interesting.
One of them is everything related to stablecoins. I think we are excited to fund more stablecoins. We are also happy to finance a whole range of businesses that can be built on this foundation. And I think maybe one takeaway for people is that I see probably the most popular case in this issue is stablecoin-neo- stablecoin-neo- banks. And I think there must be a lot of them.
So I think for those of us who are often looking for what is a wedge? And when you say that, do you mean the fact that they should exist worldwide, or do you mean the case where there should be 50 other NEO banks in the US alone? I think there will be, how many banks in the US? For example, I think there will be many different NEO banks with different markets, different positioning. Hmm, I think since it can often be regulated, it would definitely be necessary to create different banks for different countries.
Um, I think finance has historically not been a global phenomenon, and I think cryptocurrency is changing that to some extent, but I think licenses and things like that, regulation means that each country will have their own unique approach to it as well. So it's just one huge category that fascinates us. Um, the other big one is just tokenized things. Uh, and I think stocks, um, maybe that's maybe a starting point, but I think debt, stocks, emerging market things. I like that we are looking at ways to tokenize YC investments over time.
I think early stage investments will be tokenized. You, I mean all the token launches in cryptocurrency or early versions of that. It just hasn't spread to the rest of the market. Um, and then one of the things I did, uh, at Coinbase was launch a protocol called X42. Uh, the team and I worked together.
We launched it, and I think what we saw there was a very clear vision where blockchain is an amazing API. Um, it's open access, and machines can use the API very well. So I think it's only a matter of time before AI meets cryptocurrency. I would just say that the feedback I get from a lot of people building in this market is that there's a ton of infrastructure out there, but I feel like you need to build something like Amazon.com before you build Stripe.
And by that I mean a use case that demonstrates traction, validates the premise, and then all of these developer tools and infrastructure are huge, and I think we're still in the very early stages of that. And by the way, the last thing I'll say on this is that it's probably a less popular statement at a crypto conference at a crypto conference , but I think a lot of things related to gender finance are gender finance are probably going to be agnostic to cryptocurrency or credit cards. I think X42 now supports credit cards like HTTP requests, no need for payment source context in this scenario. That's right. And so, I think one general way of thinking at YC that I really like is that it's not about technology, it's about solving problems.
Create something that people want. Yes. That's right. Create something people want—that's the slogan. So whatever solves the problem, we're happy.
So Agent 5 seems clear to me . Then I think there are probably some markets where cryptocurrency will start to take off early, like smaller transactions are global, and then there are other markets where, um, credit cards probably have a right to win at the moment, and maybe over time you could change those directions. I think this is very useful. Maybe I'll ask you a follow-up question just for clarity and to make sure I haven't misinterpreted it. A lot of the things you mentioned seem more like a wish list or where you see opportunities, but does that also reflect the type of companies that are applying now, or do you see a different group, a different model, or different prevalent types of products?
The best ideas are the ones that surprise us. That's fair. I think there's something like one, hmm, maybe I'm indirectly trying to ask: where is the saturated space for this? And if you see, for example, that one in three companies is a stable Coinbase credit card company , maybe the projections for the next 12 months are going to be a different world where you're going to see too much of that, and that's not the best place for a startup to be. So are there any other patterns to what's prevalent right now that aren't on this list?
Or do you just feel like it might not be the best place to start now because someone already has a six to twelve month head start? It may not matter in the end, but in general, categorically, what is super common? So, I think the things that we often see are development tools for cryptocurrencies, different parts of the stack like inputs/outputs, that's a very clear example of what we see. I would say that compared to previous years, we are seeing a lot fewer nodes, really fundamental infrastructure; rather the wallet level, a little higher, was a big part of what we're seeing. Hmm, we're seeing a lot of transitions to forecasted markets.
This is one thing I didn't mention, but we have a team called Tatalis in our current group that allows you to bet on anything. Hmm, and they are built on crypto rails. By the way crypto rails. By the way , one of the themes is that many of these teams in the old markets considered themselves crypto-savvy. They are now a fintech They are now a fintech play, with cryptocurrency being the main stack.
That's right. Hmm, how do the founders you're talking to today think about launching a token or just generally the decentralized side of things as opposed to keeping things traditional? We are seeing fewer fundamental fund launches. We see fewer token launches, people remain American electronic corporations. Did that influence anything, or do you generally give any advice to founders these days?
Yes. So, hmm, I think in general in bear markets people launch a lot fewer tokens simply because the price isn't going up and it's hard to sell them in the market. I guess you'll like my controversial statement, which would probably be that we think people should launch fewer tokens. Hmm, that doesn't mean we think blockchain is amazing. We are going to launch a lot of different tokens on it.
Stablecoins, debt instruments, stocks, all of these are different. But I think a lot of the tokens that we see people launching are what I call incentive tokens. These are really incentivizing ways to encourage people to use a product with the hope that they will use your product because the token is coming out. And I compare it to a marketing scheme marketing scheme where you pay people to use your product. So often when I look at traction in cryptocurrency, I have to distinguish between what is a token, what is the overall market, and what is the actual reality of the product itself.
And in many other markets you don't have to do that. You can simply tell if people are using it and why. But in cryptocurrency, many users are like mercenaries who work because they have a token, they can make money, and that's the only reason they use it. Another problem I face is that tokens often degrade the user experience. So I need a token to interact with it.
Imagine for a moment that you want to log in to Instagram, you need a token or to show your wallet or something like that. I think that would really kill the use of this kind of product and really reduce the size of that market. I think tokens are great in L1, L2, D5 protocols, especially where there is some kind of network effect associated with them. So DeFi is a really good example of where it's needed, because there's a market needed, because there's a market maker, and there's the fact that you want open governance for it. So the decentralized nature is really the foundation of a product like this.
The interesting configurations we saw were just with profitability optimization, as you can represent a larger portion of a particular pool. There is a lot of creativity. And I think that maybe the fundamental thing is that decentralization is important for certain things. Like L1, I think this is incredibly important. But as someone who ran USDC, I think my point is that we should be addressing the issues at hand, not decentralizing just for the sake of it.
And I think that on L1 it makes sense; you don't want someone [] to have a back door to the whole world of [] assets. But that's very different from asking, "Do we want to, for example, make sure that, I don't know, your social network or every level above []?" Is this also decentralized and what taxes are associated with it ? Of course. I apologize for embarrassing you with this question, but how should founders think about regulation and just the more complex aspects of doing business in finance now that they're doing it in the US?
We definitely have more clarity. We have a little more optimism about doing crypto business legally and properly. Um, are there things they should pay attention to? Is there anything you recommend doing or not doing, should people just start launching banks and getting licenses right away, or should they still remain startups where speed is important? How does this change, given that things are classified mostly as finance?
So, I have a funny story. Um, the founder of Cauchy came to YC. He is a YC-funded founder, and this story is crazy for anyone in cryptocurrency. He spent three years, all he did was talk to lawyers, not create a product at all. Um create a product at all.
Um , eventually, like every lawyer, told him that no one but the hundredth person he talked to, and then eventually the CFTC said no, and he sued them, won, and launched. And the reason I find this really instructive is because in cryptocurrency, I think the cryptocurrency, I think the default would be to say that in a month we're done. We are going to go abroad, create a Swiss fund and be done with it. And I think I would say the pain is much more severe, but if you can do that in certain markets, it's an insanely, insanely powerful moat. Um, and you can't actually work in these countries without it.
And so I like that, at least right now in the U.S. at least right now in the U.S. , that I think the administration has been much more fair to cryptocurrencies than perhaps historically, like it has been in the last few years, which is really exciting.
But that also doesn't mean there's no regulation. So, in my opinion, you have a choice. Should we move forward with regulation? Then you specialize, often in one country, starting with the EU, maybe in several countries, or do you follow more of the Binance scenario? You go abroad, try to develop that way, and then over time you move into the markets.
I think both paths are viable. Um, I think like them, I would say the founders are very different. So when I look for one founder, I don't think they can do another because that's the default, like, a founder who does it right. Like, for example, Brian Armstrong has a video from Coinbase in the early years where he said it was important to get regulation to get regulation , not that my job was to job was to develop it as quickly as possible. You don't move fast, breaking things here.
Yes. And I'm just saying that you don't need to conquer the entire market. For example, Binance and Coinbase coexist in this world. They are both incredibly successful businesses. And so you can do both.
Um, and one other thing I would say is if you're building a protocol that's probably more like an infrastructure layer. Um, and you can think about it globally, and a fund makes a lot more sense, and offshore might make more sense. If you think about end- user UX, etc., then I think it's more important to be offshore. Perfectly.
Um, my last question for you is: What should founders who are thinking about applying to YC know? What are the terms? What are the next steps? How can they contact you or YC? And any general advice for founders?
Yes. Well, we are very happy Yes. Well, we are very happy . If you are a founder- . If you are a founder- builder, we are very happy to talk.
Hmm, I'm on Twitter at nemild. Hmm, and you can write to me in private messages. I try to attend the reception. Today I got about six or seven about six or seven . So I usually like to attend such events.
So I will be at upcoming ETH global events. Very, very happy about this. You can apply on the Y Com website. We just finished our summer set, but we're starting to think about fall. So if you want to apply, you can, this is the application deadline.
You can apply in advance. And we also have a startup school we also have a startup school . It seems we now have a waiting list for late July in San Francisco. Hmm, the last thing I would like to say is that we spend a lot of time in the world of cryptocurrency. There is an amazing world where cryptocurrency and artificial intelligence come together.
I think artificial intelligence is transforming the interface of finance, and I see it quite consistently. And so, I think there's some magic in the meeting of these worlds. I often find, um, in New find, um, in New York it's very attractive for crypto and finance, and in San finance, and in San Francisco I find it's only attractive for artificial intelligence. And there's a part of me that some of the best founders I talk to actually put those right pieces together, not just as a fake presentation fake presentation , but actually creating a chatbot that sends you money, but that's actually leveraged on the problem you're trying to solve. I think every exchange now is probably an AI agent .
Hmm, and that's the trading interface, not how we did it. Hmm, and this is a really interesting example where it could be cryptocurrency, it could be non- cryptocurrency. Hmm, but we're really glad you applied and we're looking forward to seeing what happens with the next bill. Perfectly. Thank you very much for this conversation and please give him a round of applause.
Thank you.
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