Andy Bromberg – Coinlist Co-founder & President Ep #6

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Andy Bromberg: Hey, my name’s Andy Bromberg. I’m the co-founder and president of CoinList. CoinList is a platform where the best digital asset companies manage their token sales, Airdrops, Hackathons. And our big goal is just trying to help the best projects win, help them grow their community, help them with their fundraising processes and help them succeed and build all this technology that’s so important for the space and for the world to exist.

Andy Bromberg: A little backstory on CoinList, we got started back in 2017. Protocol Labs, who built Filecoin, were going to run a Filecoin token sale and needed some help with the compliance side of things. They looped in AngelList, and AngelList and Protocol Labs ended up collaborating on building this platform to run the Filecoin token sale. That went really well. They raised about $205 million. In that process, they realized that every single token issuer was going to need that exact same set of services. Everyone who was running a token sale would need things like compliance and transaction processing and managing the documents and investors and the whole flow of logistically running a token sale, which is really complicated.

Anatoly Yakovenko and Andy Bromberg in San Francisco

Andy Bromberg: At that point, decided to spin CoinList out into a new entity. We spun out in the fall of 2017 to do exactly that, to support the top token projects as they fundraise and scale. Since then, we’ve done a lot more. We’ve launched our Airdrops product. We’ve launched our hackathons product, and we’ve just tried to help the best Crypto projects grow, fundraise, scale their communities, and be successful. So that’s what we’re working on right now. I’m really excited to be here and talk a little bit about that, and the industry, and Solana, and anything else that comes up.

Anatoly Yakovenko: I was at Dropbox when the Filecoin ICO happened. Because Dropbox is the storage service company, Filecoin was really on everyone’s mind. They’re like, “Is this really possible? Are they actually going to launch a decentralized storage network?” So that honestly was the catalyst for me to start Solana.

Andy Bromberg: That’s awesome.

Anatoly Yakovenko: I wasn’t even thinking about the space seriously. It was obvious that things were happening, but after that ICO and I saw that there’s this huge opportunity for decentralized services right now to compete with centralized ones. That really made me kind of turn on my engineering brain on this like, “Okay, what are the actual problems? How can I solve them?”

Andy Bromberg: Yeah, I can imagine. Even being at Dropbox, massively successful at building a file storage service, there are pain points that a decentralized system could solve at scale for something like Dropbox.

Anatoly Yakovenko: Yeah. I’m super excited about the progress that Filecoin is making too. Hoping they will succeed later this year. I’m not sure when their launch date actually is though.

Andy Bromberg: Yeah. They’re targeting the next six months at least, getting out there. I think that’ll be, you’re right, kind of a milestone moment. I think for the entire space, because it really was that keystone sale of that first 2017 cycle. And so they were finally getting ready to launch, and that should cascade into a lot of other people launching. We’re certainly seeing other projects go live around the same time. Then projects that were started coming after that will cycle in. But I do think we’ve been in a little bit of a waiting period. Where the sales that ran in 2017 are just now getting ready to launch. And so the last 12 or 18 months has been… There hasn’t been as much launching, token and network-wise, and that’s going to start very soon, I think.

Anatoly Yakovenko: You guys have been, I think, kind of at that point between regulation and the Crypto space, which is like I would say there’s a lot of folks in the space that are anti-regulation. How do you balance that?

Andy Bromberg: Yeah. It’s something, I think a constant source of tension, but also where we see our biggest advantage, right? That we can bridge being Crypto people and being able to help and support Crypto projects, but also spending time and money and effort on the regulation, legal, and compliance side of things. That’s where we see our biggest advantage, is that if you want to operate in the United States or even abroad in different jurisdictions, you’ve got to follow the law. You can choose not to. That’s certainly a path that some people have taken. It may work out for some people. I think for most, it will not.

Andy Bromberg: And so, It feels to us that the same people in this space are going and saying, “Well, we need to abide by this regulation wherever we happen to be.” Our role at CoinList, or at least one of them, is helping with that. So because we’ve now helped with so many token sales, we’ve spent so much time, we get economies of scale on working on the legal and compliance and regulatory side, because when we learn something or we build something to support that side of things, we can then apply it to dozens and dozens of token sales, and that’s what we do.

Andy Bromberg: So helping with things like KYC, AML, investor accreditation, all of that stuff, a lot of what we do. It’s nitty-gritty, grind-out work, but I think it’s important that the people are able to do that. And what we would love to be able to do is abstract as much of that away from projects as possible so that the great projects can go and build their networks and not have to worry as much about that side of things.

Anatoly Yakovenko: So CoinList does this nitty-gritty, almost the grind of, “I need to go verify who this person is and do their accreditation,” but your background, I think, you did computer science and mathematics at Stanford?

Andy Bromberg: That’s right.

Anatoly Yakovenko: Started the Bitcoin Group at Stanford?

Andy Bromberg: Yeah.

Anatoly Yakovenko: That’s a very technical, deep tech background. What do you see, like your view as a technologist, do you guys see CoinList becoming a technology company?

Andy Bromberg: Yeah. We really do. I think broadly, our approach is that we believe that the Crypto space is going to, in fairly short order, be 10, 100, 1,000 times bigger than it is today. What we want to do is position ourselves at the Nexus of that and help all the best projects and, in some sense, be able to get an index across the space. And bet on the space as a whole, because we feel like we’ve got really high conviction in this idea that Crypto is going to grow. So we wanted to build a business that would grow with Crypto. That’s where we’re aiming to do so.

Andy Bromberg: Absolutely, yeah, I was at Stanford studying Math and Computer science. Met a professor there at the time, Balaji Srinivasan, who was most recently the CTO of Coinbase, and before that, a partner of Andreessen Horowitz, a founder of, and he was our professor. He, back in 2012 or 2013, sat a bunch of us down and basically said, “Listen, this Bitcoin thing is going to be a big deal. You should pay attention to it,” which I am eternally grateful for. We ended up starting the Stanford Bitcoin Group.

Andy Bromberg: That was interestingly pretty early days. Not the earliest, but 2012, 2013. The space was not as big as it is today, and there was not as much talk about the regulatory side of things, which is kind of operating on this pure technology mindset. Then in 2014, 2015, 2016, we started to see the regulatory questions come in. In 2017 when these ICOs started happening in earnest, I think that’s where we saw this opportunity was, yeah, okay, lots of people are building great technology. We trust that people can do that. What those people are coming to us and saying is hard is the regulatory side and the legal side and just understanding how to structure these things. Maybe we can start a company that will scale with the space by doing exactly those sorts of things.

Anatoly Yakovenko: That’s really cool. It’s such a small space. Like Balaji was the professor at Stanford that was working… that was talking to you guys about Bitcoin. That’s an awesome history.

Andy Bromberg: And it’s amazing too, by the way, when we were starting that group, we spent a lot of time just running around and meeting people in the Crypto space and trying to learn and understand what was happening and almost everyone who was in Crypto in 2012 or 2013 still is.

Anatoly Yakovenko: Yeah.

Andy Bromberg: And so we run into the same people and we’re like, “hey, I remember meeting you when I was at Stanford and the Bitcoin group that Coupa Cafe and Palo Alto and talking about Bitcoin and now here we are six or seven years later and they’re doing something totally different in the space, which is really exciting.

Anatoly Yakovenko: I’ve been to a few conferences now and I still meet the exact same people everywhere I go.

Andy Bromberg: Always.

Anatoly Yakovenko: Yes. I still like the space is still so small. So, I don’t know if you saw like Jeremy from Augur recently had a tweet about scalability and that as being a primary UX challenge right now. At least from this perspective. Do you agree? Like is that really the problem?

Andy Bromberg: Yes and no. So I think that one of the things that we’re going to see is that scalability in and of itself is not a UX challenge. Scalability should not be exposed to the user. Things should just work for the average user and it shouldn’t matter. For the majority of use cases of Crypto today. That is speculation and investment. scalability is actually not a huge issue. People mostly trade on centralized exchanges. Centralized exchanges typically don’t even touch the ledger with every transaction.

Andy Bromberg: So scalability isn’t stopping people from trading in and out. And that’s, I think the majority of use cases today. What’s concerning to me from a scalability perspective, is that I think a lot of the most promising consumer UX cases will be bottlenecked on scalability at their current rates. And so you people always cite this example, but the classic Cryptokitties example. That this was one of the first really compelling, true non-investment non-speculation, consumer use cases for Crypto. There was evidence of that. People got really excited, Cryptokitties example got bit up, there was a ton of activity on the network and it suffered as a result of the Ethereum network not being able to handle it properly. So what’s concerning to me is not scalability itself as a UX challenge, but scalability as being the bottleneck on a really promising consumer use cases.

Andy Bromberg: And I think that can happen in one of two ways. Either really promising use cases do get developed like Cryptokitties and then they can’t reach their full potential as a result of scalability issues on existing networks. Or people who would otherwise build really compelling consumer UX cases, look at it and say, “I’m just not even going to try.” Because this is, it’s not going to work. There’s going to be scalability issues. And so when you look at that all of a sudden you wonder about these unknowns. Who out there could build the next great consumer UX case in Crypto and is not doing it because they’re just scared of the scalability issues. So that to me is almost the more concerning one is the ones that, that never even make it to the first stage. And so from that perspective, scalability is kind of a second order, biggest UX challenge in the space I totally agree with. I think it’s really important. There are certainly also other ones too. It is not the only one but, but I do think it has the potential to stop a lot of otherwise promising consumer use cases.

Anatoly Yakovenko: I agree with you, but that’s simply because of, I’m trying to solve that problem.[crosstalk 00:10:37].

Andy Bromberg: I think everyone’s glad you are. Hopefully that breaks some of those people out into the field and makes them willing to try and build these products that need to exist.

Anatoly Yakovenko: Do you guys like a… like what you guys do primarily deals with identity, and identity has been like this really massive kind of, use case that people always talk about in this space. Do you guys see practical applications of using digital identity for something that CoinList does?

Andy Bromberg: Oh yeah, absolutely. So, I think this is a really interesting topic and I think that identity has been explored a little bit but not fully and there was a lot of untrod ground here in terms of what identity really is. One of the things that I think about a lot is, identity means many different things. So I’ll give you two examples really simply there’s a whole spectrum in between. One is perfect identity, that is I am Andy Bromberg, I have social security number, I have an address, I have a phone number that is a unique identifier for who I am as this kind of sum of all of this data and exactly who I am. That type of identity is useful for things like addressing regulatory concerns.

Andy Bromberg: So going through our KYC process where someone needs to know who you are truly uniquely and so you need to give that information. On the flip side, another end of the spectrum is that when you talk about Airdrops are giving away tokens or allowing for participation on a network. A lot of people talk about using identity to make sure you avoid civil attacks. Where one person pretends to be many and in such a way as able to do something adversarial on the network. In order to do that, you actually don’t need perfect identity. You don’t need the person’s social security number to avoid a civil attack. All you need is sufficient visibility that the people are unique from each other. And so those are two very different use cases for identity that required different sorts of identity, different sorts of data about the person. And there’s a whole spectrum in between.

Andy Bromberg: So I think the first step in thinking about this identity stuff in general, is not to think about it in terms of well we need a identity solution for Crypto. I think what we need to talk about is what are the actual use cases that we need it for. So I would argue that on the totally unique identity side for regulatory concerns, I’m not convinced that there is a really valuable kind of Crypto based identity use case there, because at the end of the day if you have a burden of doing KYC on someone, you still actually need their social security number or their passport or whatever else it is you need.

Andy Bromberg: And so, showing that someone has a unique identity over there doing something, putting that on the Blockchain somehow might be a little bit valuable. But for the most part you need to collect all of the personal data anyway again for regulatory reasons, so it’s not really that helpful to have that. On the flip side, when you look at the other end of the spectrum, that’s where I see some of these Blockchain based use cases for identity being really valuable is how can we actually prove uniqueness identity? Or how can we show that someone is carrying the same identity and reputation across multiple systems? But not necessarily having information about that person just having a guarantee that they have the keys to this sort of wallet or identity.

Andy Bromberg: And so that to me is really interesting and valuable. It is a very hard problem. We’ve heard so many pitches at CoinLists from people that kind of, they’re talking about the use case for their token or for the project, and they kind of gloss over it. They’re like, “well, yeah.” And then of course, we’ll have an identity system and a reputation system. And we’re like, “whoa, hold on.” This is not trivial to go in and build these things and no one has really solved those in any sort of complete fashion yet. There’s bits and pieces here and there. So, yeah, there’s a lot of work to do there and I think it is valuable at least on one side of the spectrum, if not for more of it.

Anatoly Yakovenko: You brought up an interesting concept that I haven’t even thought of before. If I have a reputation in one system, can they prove that I have that reputation in another one without actually revealing who i am? That’s like a really interesting concept.

Andy Bromberg: Yeah. I think there’s a couple related concepts here that I think will end up being powerful drivers in the Blockchain space of a lot of usage early on. One is exactly that reputation. When I have reputation on an existing centralized service, I cannot port it over. My Uber rating does not become my lift rating. And you see sometimes hacks around this. So I always think of this example of Airline status challenges. So if you have a certain status with American Airlines, sometimes you can call United and say, I’m going to prove to you that I have status on American, so you give me status too and try and sell me as a customer. But the way they do that right now is literally asking you to send a screenshot of your account.

Andy Bromberg: So this does not seem… it seems like there’s something here and it’s not being done right. And so that reputation I think is really interesting. And then more generally just this whole idea of compatibility between systems. So, where I’ve seen this discussed the most in the Blockchain space so far is with games. That you could somehow get an item or some sort of attain a level or something in one game and then you’re able to port that over to another game and those games can actually be cross compatible. And maybe the sword you picked up in one game can be used in a different game. And so you can kind of allow these things to build off each other. Both of those concepts, the reputation and this compatibility fit under this umbrella of, “wow, if we build all of these things on the same systems and you can prove ownership of something.” whether that’s ownership of reputation, ownership of an item or ownership or something else. That can can drive some really interesting network effects between different systems and empower the consumer that user more than they ordinarily would be.

Anatoly Yakovenko: Do you see a real insight to this? If it becomes easy to approve all these aspects of your life, are people go to request it, like at the coffee shop that I have a particular like consumer ranking or something like that.

Andy Bromberg: Yeah. There’s some black mirror stuff here, right?

Anatoly Yakovenko: Yeah.

Andy Bromberg: So, I think there’s a world where we go down that path in a world where we don’t, and whenever topics like this come up, I always just kind of default to talking about the Internet, Where the Internet exists. I’m a huge fan of the Internet. I would not be where I am today if not for this crazy thing. It can be used in all sorts of incredibly perverse ways. And it sometimes is and hopefully most of the time isn’t. And I just hope that by having the right people in the space, which I think is something that the Blockchain space has done a really good job of, the technology can be kind of directed in the right direction, but the technology is not opinionated itself.

Andy Bromberg: The technology is just a medium for allowing some sort of transaction to happen. And it’s up to us, the people in the space to push it in the right direction. So, I hope that there a direction, which is… When I go to the coffee shop and I go to pay, if I want to, I can say, “listen, I’m a big spender at the coffee shop across the street. And so maybe you want to give me a discount.” And that’s great, but it’s up to me to do that. And it’s not a situation where I walk up and they say, “we’re not serving you unless you tell us what your coffee customer ranking is.” Because that would be a really… I’m not sure that’s the world I want to live in.

Andy Bromberg: And maybe sometimes feels a little bit inevitable that that sort of data sharing is going to happen. But the hope is that market forces would compete the overly aggressive data grabbers out of the marketplace. If there’s two coffee shops next to each other and one of them doesn’t let me in unless I can prove that I’m a good coffee customer and another one lets me in regardless, I probably picked the latter and so hopefully that that competes it out of existence.

Anatoly Yakovenko: I think the other side of that people don’t quite understand is, a form on the Internet may seem simple, but building one that works that doesn’t have a lot of errors just take so much time and work that when you’re talking about like having people prove other attestations of properties and other networks for small business transactions, I just don’t see that like actually being feasible. There just not enough engineers to build all this stuff.

Andy Bromberg: Certainly not for a very long time.

Anatoly Yakovenko: Yeah.

Andy Bromberg: I mean that I do like the concept that has emerged of attestations as the way of doing this that I can Cryptographically attest that something is true about me and that mental model fits really well with how I think the space will develop. But it does not mean it’s trivial. And you look at how long it’s taken for merchants to accept different payment methods in the first place and that’s them getting paid. Now trying to imagine them integrating Crypto attestations for personality traits or things I’ve done that seems like a long shot for initial reasonable timeframe.

Anatoly Yakovenko: Do you guys, I guess this has been on my mind because we recently just ported Ethereum from the republished Libra platform. What do you guys think of Facebook? Like Libra in general?

Andy Bromberg: I’m net really, really excited about it and the biggest reason is simple. I think they’re going to expose a lot of people to the space that otherwise would not have been exposed to Blockchain for a very long time. And core to my mental concept of how the Blockchain space works, is open markets and competition and that projects compete against each other on a level playing field. And people can move their data from one to another and they can choose the product that they want to use. And so I’ve talked to a lot of people that have concerns about certain aspects of Libra. They don’t like the way they’ve done something or something else or something else. And that’s totally fine. I actually think their team is very open to talking about that and they have not shipped the product yet.

Andy Bromberg: They have announced it well in advance to try and incorporate suggestions and thoughts. But at the end of the day, it’s hard to imagine that any specific project is perfect for anyone except the team building it. So there’s always going to be things where you’re like, “that is not precisely the way I want it.” And it’s just a matter of competing on an open market for who is the best to do that service that that project is offering. And so I kind of discount some of the issues that people have pointed out with Libra, because my view is if you don’t want to use it, don’t use it. And I think they will bring hopefully millions and millions and millions, maybe billions of people to the space well before they otherwise would have been exposed. And that to me is really exciting. Those users will then come into the Blockchain and Crypto space and have freedom of choice as to which projects and assets they want to use and everyone’s going to compete against them.

Andy Bromberg: The one sense in which it’s not a level playing field is that they have distribution channels already. And they’ve got lots of capital and can hire huge team and do all that. But to me that’s again, just the market at play here. And lots of big companies have launched products before that have failed to smaller competitors and I certainly think that’s a possibility for them. So it really is… they’ve got advantages, they’ve got disadvantages as a result of being big and established. And it’s just a matter of competing against that.

Anatoly Yakovenko: As an engineer, I’m happy that everything’s opensource and it’s patched to 2.0, which means there’s really no patent fear or Software patent fear from using it. I think fundamentally that the concern that I have is we are building this decentralized space and because decentralization is hard and I’m like, “self custody it’s hard.” it’s just slower. Adoption is slower and you see these centralized players exchanges take a lot of advantage of this and make a lot of money and gain a lot of market share. The amount of volume that’s run on AdEx compared to any of the top tier centralized exchanges like one, 1% of it. So, I’m worried that Facebook, while the technology they’re building is trying to achieve this like fully decentralized, open BFT style Cosmos network. But I think that because they have this centralized rollout and this distribution channel that they kind of have a monopoly. No one’s going to at Facebook and then let Solana compete at the same level or equal playing field as Libra. They might kind of establish themselves as a dominant player.

Andy Bromberg: I don’t think that’s wrong. I think, and certainly your point on, AdEx is where centralized exchange is and really any sort of decentralized service versus it’s centralized counterparts is certainly well taken. I see that as a burden on the space. That as with any new technology, it’s hard for people to use and understand and conceptualize and there are always going to be things in the space that say that they’re doing this decentralized stuff and they’re really not. And part of the job of, of the people that are building decentralized networks in this space is to cut through that deception and expose the benefits of being a truly decentralized network. And what that can do for you. And at some level I think we have to believe that we’re building for the consumer. We have to believe that we’re building for the end user and doing what’s in their best interests.

Andy Bromberg: And I believe maybe naively that if that is the case and the truly decentralized path is truly the best path for the consumer. At some point and it may not be as quickly as we want it, we’ll win out and that will, surface as the victor. And if it turns out that I find this wildly unlikely, that truly centralization is not the best thing for the consumer, then they won’t win. And that’s okay too. But I find that very hard to believe that’s clearly why I’ve dedicated my life to doing this stuff is because I believe in decentralization to believe that that’s what will win in the end. And it may take time, it may take a lot of arguments, may take down some giants. But I believe that we’ll get there.

Anatoly Yakovenko: I think we have our work cut out just like my experience in the Internet and the birth of it is, I was in High school and then in the 90s and Microsoft kind of have this monopoly and access points of the Internet. Everyone run windows. Internet explorer was the only way to really use it. Even though Netscape was this company, but Microsoft basically killed him. I think what people should remember is that even though they had all this control they didn’t build Google or Facebook or any of the really big internet companies. Facebook maybe the biggest Cryptocurrency for the next five years. But I have my doubts that that’s going to be true 10 15 years from now.

Andy Bromberg: Or I would argue if it is, it will be for very good reason. It will be the day executed and did went down the path of decentralization really effectively in one on that basis. And so yeah, I think you’re exactly right. These markets trend towards the meritorious people winning. And so whether that’s an incumbent that does things the right way or it’s, a disruptor that comes and does things the right way. Those are the people that ended up winning and we just have to bet on that. And of course, to your point, there’s a lot of work in doing that. And a lot of struggle and a lot of people will fail along the way and so we have to be aware of that. But I believe that in the end those people fighting for true centralization will win.

Anatoly Yakovenko: Yeah, same here. I’m like the, the UX issues are just so hard. I can’t imagine something that would make it easy for my parents to have self custody of private keys.

Andy Bromberg: [crosstalk 00:25:22]. What do you think the biggest UX issues are right now?

Anatoly Yakovenko: I’m working in scalability and I think honestly it’s going to get solved like in the next few like one year at most. We’re going to launch a bunch other projects that are going launch the space is Predator efficient. The things we’re doing to optimize other networks can’t do. So there’s going to be some trade-offs between each one and you’ll find that some use cases work better on our network versus like the super shared approach that NEO and Ethereum 2.0 are taking. And that’s fine, but I think the real challenge is like, “how do I convince my parents to store private keys? How do I even make him understand that this is like a secret that’s not like just the password. There’s no way to reset it.” That if the more money you put into it, the more you should spend on custody. That kind of thing becomes very complicated.

Andy Bromberg: Yeah. I totally agree with that. I think those are, in terms of raw UX, those are the biggest pieces. Because I look at it and I’ve been in this space for six or seven years. I’m a trained computer scientists. I have this background, I’m still scared handling my own private keys. And that’s me. I shudder to think of people that don’t have that experience going and doing this stuff. And maybe I’m more scared because I really understand it, but that’s kind of equally concerning that some people might not be scared about this because of a lack of knowledge. And so I agree that the combination of just education with actually building product to solve those things feels really, really important.

Anatoly Yakovenko: I spend, most of them are carrier at Qualcomm, which is like a semiconductor company and I am terrified of using Hardware wallet.

Andy Bromberg: Yeah. You know too much.

Anatoly Yakovenko: Yeah. I know too much. I would rather write it on a piece of paper and put it on like a physical wallet. That to me seems like a far more secure space to store.

Andy Bromberg: Yeah, you heard it here first folks. Regular piece of paper. Write it on these paper. I think that’s right. And I think there’s always this question of, do we want to educate people on the risks of private key custody and then use that to spur a movement to go and build product to support it? Or do we kind of just want to sprint to building the product really quickly and then try and get everyone onboard there after. And both seem like viable approaches. I probably tend towards, let’s try and solve this problem within the Crypto space with the people that understand these issues already and solve it for them and then be able to expand out from there. But certainly I’ve seen a lot of people take the other track of let’s educate as broadly as possible and use that. Than mass of educated consumers to try and encourage people to build things that need to exist.

Anatoly Yakovenko: How do you guys feel about… I think 2017 was like this year of ICOs and the space has moved down to, I think people are calling in by IEOs. These guys see a huge difference between the two or is it still the same thing just rebrand?

Andy Bromberg: I think the terminology is same tricky given the space. People use the same word to describe different things or different words to describe the same thing. So when I think ICO, I try to just generalize that term to token sale. Because for some people in ICO was a lot like an IEO where they were selling a token it was immediately liquid. Usually on the Ethereum Blockchain, you could go and move the token around. For a lot of people, including most CoinList customers, if they call it an ICO, what they really meant was kind of a pre-functional sale of tokens. They were going and selling stuffs or some other legal agreement, and then those would turn into tokens. At some point we were talking about FileCoin. That’s what they did. They said, “we’re going to run an ICO or a token sale and no one’s going to get their tokens for a while because we’re still building the network.

Andy Bromberg: And so from that perspective, when you look at that type of token sale or ICO, the pre functional sale. That’s very different from the IEO, because those token sales were locked up for a while. You have to wait until the network gets built. An IEO happens when the token is liquid and on exchanges. And so from that perspective, we always have people, media, other people asking us, “ICO and IPOs, what’s the difference?” And what we’re always saying is most ICOs are not liquid. It’s more like a venture private equity round where it’s a liquid and held for a while before it becomes liquid. IEOs on the other hand, look a lot more like IPOs. In the traditional equities markets where it is selling onto an exchange and people are then able to freely trade the asset. And so I think what we see is that people will continue to run these private or even public facing, but illiquid token sales. That’s going to keep happening.

Andy Bromberg: Whether it’s a super early stage just getting started sale of a few tokens or it’s a much larger public facing token sale, generally solicited token sale. Those will keep happening and then a lot of teams, we’ll do things at the time of liquidity, whether that’s an IEO or an auction or something else. A lot of teams will then go and do something to kind of kick their market off. But I don’t think those two things come in conflict with each other necessarily and I don’t think they kind of replace each other. And I think we are far from seeing where these markets land on the right way to go and there’s been a lot of experimentation over the last couple of years. And maybe some trends are coming out, but I do not think we’re settled yet on the right road of structure, kind of a fundraising process from earliest days to to liquidity for a token project.

Anatoly Yakovenko: Do you guys see kind of Dow coming back and Vogue?

Andy Bromberg: I personally love Dows. Just this idea is incredibly compelling to me that it feels like such a, it is such a pure Crypto idea of autonomy without a human involved is really exciting. I think there’s a lot to talk about there in terms of a Dow as an investment vehicle into other tokens. I think that will exist and in fact, I think it was just announce a rise of previously Polychain is going off and working on one right now and I think those are going to happen. But to me those are kind of like the prototypes for what is hopefully a future with many, many more general decentralized autonomous organizations that can interact with each other and do all sorts of different things.

Andy Bromberg: But taking a step back, so much of what happens in Crypto comes from investment as the use case. That’s what we’ve seen just over the past few years. And so it feels natural to me that the first successful autonomous organizations are going to be investment based. And from there we’ll be able to use the learnings and kind of bootstrap up more advanced or different use cases. But I expect that the first Dow’s will be investment based investing into other Crypto projects. Because it’s both kind of the easiest form, it’s very, very hard to build one. But it’s the easiest, because it’s interacting with other Crypto only and it’s has the most appeal to the community that already exists.

Anatoly Yakovenko: I kind of felt that the true first was really like the layer ones Ethereum and it sound, it’s just a protocol. But there is this artificial pressure on everyone that holds the asset to like build tools and [crosstalk 00:32:34] building applications on top of it and it’s almost like there isn’t like a direct vote on this amount of resources should be spent on wallets, but simply owning the token and having value in wanting that values to increase, people start building on top of it. So to me that seemed like a really interesting way to create value. Totally different from how corporations are run.

Andy Bromberg: Yeah. I mean absolutely right there, only the most major non-employees shareholders of corporations do anything to try and help the corporation. If I own a bunch of Amazon stock that’s not really caused me to go and buy stuff on Amazon or like become an Amazon seller. It just doesn’t trickle down to me strongly enough. But it does feel like that, especially the early days of an individual protocol. The community can add so much value and they do it because they can see the upside. And the upsides meaningful to them. That’s really interesting. I wonder if there’s a way to formalize that a little bit more. And this may not be in a totally decentralized sense, but it feels like some of the bounty programs that certain projects have run kind of approximate that where the network is willing to give away some… Where there’s this kind of sponsoring company that is initially building the network just kind of wants to give away some number of tokens to people that are actually actively contributing to the network. And so that’s maybe one kind of Dow-ish approach that we’re seeing.

Anatoly Yakovenko: That’s kind of an… I think an early start. So we were running our Tour de SOL, which is an incentivizing task. Very similar to Cosmos game stakes. There were the trailblazers in the space, but we’re really borrowing a lot from their model and our program is designed to really incentivize the validator running this and from my perspective, it’s kind of boring job. It’s IT work. You run a computer, you’re make sure that the software keeps running right. Maybe there’s PagerDuty involved. It’s not very glorious, but reality is that those people are like the heartbeat of the network without them there’s nothing. So it’s kind of… it’s interesting. We’re kind of making it more fun. So we have a competition where people can be clever about the Hardware they use or the connectivity and kind of show that their machine is faster. But still at the end of the day you’re doing IT work.

Andy Bromberg: That’s right. Yeah, you need something to incentivize people there. And I think we’re probably fortunate right now that the community as a whole is excited about pushing the space forward. And so even IT work can be exciting. Because it’s part of a larger mission, but I do think there’s a lot of work to be done on how to incentivize contributions. Whether that’s running validators or at some point, I think it’s died down a little bit, but there’s a lot of talk about inflation funding to encourage developers to build things than the network would. And this is kind of a very Dow approach too. The network would inflate and issue more tokens to significantly rewarded developer that shift a meaningful change to the network and got it approved.

Andy Bromberg: I think that’s an interesting route. I don’t know that anyone’s really nailed that quite yet and gotten massive upside from it. But it does feel like the incentives for contributors are at large, whoever that is, do need to be sorted out a little bit better. Because when it was really just a Ethereum as the layer one protocol that everyone used, the whole community was concentrated around that. And so the incentive of just being an Ethereum contributor, maybe seeing the price go up was significant enough. But now that the field has gotten more crowded and there are choices that naturally fragments the community and so more I think strict incentives probably need to come into play rather than just the general you’re supporting this project, it might do well.

Anatoly Yakovenko: Yeah, exactly.

Andy Bromberg: I think its the upside.

Anatoly Yakovenko: Have you followed the Zcash kind of ask for a new developer fund?

Andy Bromberg: Yeah, I’ve been tracking that.

Anatoly Yakovenko: I think it’s really cool. Honestly, I think again Zooko and that community I think are setting the standard and I would love that in the future for project like ours, that will be a possibility that we’re established enough to where the network is running that the company when it runs out of tokens. Can come and ask like, “hey can we have a developer fund?” Not only that, I would hope that multiple companies can compete for and like multiple grants can be given because that the more the merrier. If we had five electric companies working on Zcash, that’s better than one.

Andy Bromberg: That’s right. Yeah. And it’s been very funny to be tracking that discussion a little bit in some of the kind of minor uproar around it. People will be like, “how dare they ask for this?” Like, well they’re asking for it. [crosstalk 00:37:08] They’re not kind of swinging the hammer down and like stealing your tokens. This is a conversation that’s happening very transparently and an up front fashion in front of all of us, including those of us that may not be deeply rooted members of the community. I think that’s amazing and hopefully everyone decides to do the right thing and meaningfully keep this project going and growing as as it should be. But yeah, I’m with you like that… The inflation funding, all of these concepts really come from, I think this core idea that unlike corporations, there’s this idealized concept that if I’m a shareholder of the corporation, I am completely aligned with that corporation.

Andy Bromberg: But for a variety of reasons, largely around the mechanics of how equity works as a minor public shareholder of a corporation, it doesn’t really feel that way. And these networks really can feel that way. And allowing for inflation funding, putting some of my tokens into a developer fund. I could feel very incentivized to do that because I genuinely believe it will increase the overall value of my whole things. And sure, maybe I have a hundred tokens today that are worth a dollar a piece. But if I’m willing to give up five of them and those tokens go up to a dollar 25, I’ve made money and that incentive I hope should play out and people shouldn’t end up doing the right thing with these projects.

Anatoly Yakovenko: These protocols are hard. The stuff that Zcash is working on is not trivial. So you need to pay engineers to actually build this stuff. Again, I think I mentioned this earlier, the space is probably efficient where a number that is… We were working on like computer science problems that are known to have no solution. So anything that we do that’s different from peripheral work. Any trade-off that we make, something changes about the system that there’s a trade-off. So performance wise, our particular implementation, we don’t do any sharding, which means that validators have to be brief here because they’re processing more data. So the incentives around running a validator are different than, let’s say if Ethereum 2.0 launches and every 10,000 shards. All those machines can be very, very kind of low power. And that’s a totally different kind of network. So I don’t even see us even competing with Ethereum. And a lot of people ask us, “are you like an the Ethereum killer? I’m like, “it doesn’t make any sense.” It’s all open sought of sack and we’re focusing on two different sides of the coin.

Andy Bromberg: It always is and it’s not just in the Blockchain space this is true, but defining competition and kind of who you’re up against is such an art. Like we could go out and say that the nicest three Michelin Star restaurant in San Francisco is competing against McDonald’s because they’re both serving food. But I wouldn’t really say so in any sort of meaningful sense. There’s not anyone who’s on a given night making a decision about which place to go to between those two spots. And so, yeah, they’re both serving food. They’re both restaurants. They both take my money and cook something and hand it to me. but that doesn’t mean they’re doing the same thing. And so I do think we have kind of bucketed, and I did this a couple of minutes ago. We just say layer one protocols. Like that’s our… and then it’s like saying restaurants.

Andy Bromberg: It is a very broad category with a lot of nuance inside. And when you… I think it’s fine to do that because it does describe the platform or the venue it serves. But it does not meaningfully describe the competitive dynamics within it. And so, once you get a little bit deeper and you say, okay, let’s talk about layer one protocols, what are they good for? Who Do they serve? What are the trade-offs on each one? That then is a totally different discussion than just saying, “layer on protocols don’t compete with each other.”

Anatoly Yakovenko: Yeah, I agree. I often think of this and like I think proof of work in itself has intrinsic value. That there’s a data structure that tick like a trillion joules of electricity to rebuild. And if I think of it as a work of art, I want like a small piece of it or like. Something built this giant artwork and even if it does nothing else besides owning that, I kind of find that really fascinating. Do you think a hundred years from now there’s still going to be some proof work system out there?

Andy Bromberg: I absolutely do. I couldn’t agree more with you. And there’s a number of reasons for that. One of those interesting ones to me is the Sunk cost fallacy. And it is a fallacy, especially when we humans put a lot of work into something we don’t like letting it die. And I really do believe that there is momentum behind that. If I believe that the Bitcoin of 2010 was weaker than Bitcoin in 2011 was weaker than of Bitcoin in 2012 it’s certainly weaker than the Bitcoin in 2019. And the reason for that is this accumulation. It’s not just the hash rate and at any given moment that gives it power. It’s also all of the past hash rates. It’s been contributed to your point, the work that’s gone into it. And so, I believe that our fallacious failure to appropriately evaluate Sunk costs as humans actually makes a really compelling argument for some of the proof of work.

Andy Bromberg: And then beyond that, I do just think there’s momentum there and I think there’s a real aesthetic viewpoint to your point that, there are lots of things out there in the world. Monuments, art, buildings, all sorts of things that are appreciated. Large part is the amount of work that went into them. You look at the pyramids, you look at Stonehenge, these may be the classic, almost silly examples. But it’s meaningful. We look at Stonehenge and where we’ve got some rock stacked on top of each other that seemed to serve no purpose whatsoever, not even a little bit. No purpose and for some reason we are attracted to them and we say this is interesting. And why is it interesting? Because work was done. That seems almost impossible in hindsight. And I do think that a a hundred years from now, you look back at whatever the number is of how many jewels were contributed to the Bitcoin or any other proof of work, Blockchain people are going to look at that and say, that is incredible. That the human race went ahead and contributed all these quadrillions of jewels to building this thing and this ledger and it stuck around for a hundred years. So that must mean something.

Anatoly Yakovenko: But it’s like a crazy thing to think about that it’s a digital thing that’s permanent.

Andy Bromberg: Yeah, absolutely.

Anatoly Yakovenko: Nearly mathematical construct that’s going to survive.Like-

Andy Bromberg: It hasn’t existed until now. That’s what’s so exciting about it.

Anatoly Yakovenko: Yeah. Do you think that we’ll finally see like the space decoupling from Bitcoin that this is like, one concern that I have is everything like Crypto winter. Do people even talk about Crypto winter anymore? It just happened.

Andy Bromberg: And it may still be happening. We don’t know yet. I think it just depends on your timescale. It feels like it is. It is decoupling a little bit. I do not think we are anywhere close to them being anti-correlated or zero correlation or anything like that. That is Bitcoin and the rest of the space. But it does feel like it’s breaking apart a little bit. And I think that is probably the result of a more consistent narrative evolving for Bitcoin and where Bitcoin value comes from. And that’s a long way to break away from kind of Crypto as a whole because it now has its own story. And I think we’re going to start to see hopefully other assets do the same where as soon as you can develop a meaningful narrative as an asset for why you exist, that is separate from I’m one of the Crypto things, then you can hopefully start seeing decoupling. It feels like Bitcoin is getting there a little bit and I do think that each boom and bust cycle breaks it apart a little bit more.

Andy Bromberg: It kind of shakes it out when things are relatively steady, there’s no absent some crazy news. There’s no compelling reason for decoupling to continue in any sort of meaningful way. But when you see these big booms and busts, that kind of momentum going up and down should shake it out a little bit and decouple them more.

Anatoly Yakovenko: Yeah, I agree. I do wonder if they have an inflation book though. If a network can survive on just purely fees, especially on that store value.

Andy Bromberg: It’s a big question and I think people forget some times that Bitcoin gets to its cap pretty quickly. It hits its floating point over the 2140. But it’s basically in the next 15 years at 21 million Bitcoin roughly that. And so we will find out very soon. It’s not… This is not a century away that we find out if Bitcoin can run on fees or not.

Anatoly Yakovenko: What’s interesting is that like the owners of the old Bitcoin can start producing transactions with lunch fees just to keep a going.

Andy Bromberg: Now, I think we’ve never… and this is one of the things I love about the space, we’ve never really seen a lot of these game theoretic dynamics play out before and we’ve got front row seats to seeing exactly what’s going to happen when these these play out. And I think it’s likely that some totally unexpected things that you and I sitting here today have no way of predicting are going to emerge as I feel like it’s happened over and over again in this space. Whether it’s different coalitions doing certain things or adversarial attacks that actually try and preserve the sanctity of the network somehow or there’s a million different possibilities here and we’re going to get to see it all play out in the next decade or two.

Anatoly Yakovenko: Yeah, I don’t know, what else would I be working on.

Andy Bromberg: Right there with it.

Anatoly Yakovenko: Honestly, like in that 2017 moment when I had the idea for a Solana, I couldn’t really sleep for four days. I was like, “Oh man, I think I’ve solved this.” And I haven’t stopped really thinking about the space since.

Andy Bromberg: It’s one of those things that just needs to exist.

Anatoly Yakovenko: Yeah, totally. Cool. Well, I think we’re getting close to the time a little bit. This was super fun. [crosstalk 00:46:29] conversation.

Andy Bromberg: I love talking about this stuff.

Anatoly Yakovenko: Yeah. Same here.

Andy Bromberg: And it’s so much more fun by the way to talk about like fun Crypto stuff that like no business. Good idea we do a lot of the business chatter and so it’s nice to share the other stuff sometimes.

Speaker 1: Hey everybody, thanks for listening to this episode. If you have any questions for our guests or want to continue this discussion, please check out our website at that’s S. O. L. A. N. A. Com. There are links to our discord where most of our communication happens in the company. Also, you should check out our get hub page where we post all of our code for you to checkout and even help out with. Get You also follow us on Twitter at Solana. Thanks for listening. See you next week.

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