Paul Ford In fact, this podcast, if you were billing for it, it would cost about $1200 an hour, it’s an expensive podcast. [Rich laughs] You’re welcome.
Rich Ziade It’s not very expensive, Paul, but go ahead. [Tim laughs]
Tim Meaney You divide that $1200 however you want, listener. [music fades in, plays alone for 15 seconds, ramps down]
PF I’m Paul Ford, co-founder of Postlight.
RZ And I’m Rich Ziade, the other, the less famous co-founder of Postlight.
PF That’s not what it’s about today. Let me be the internet for a minute. “Hey Rich!”
RZ Yes! Internet?
PF “You wanna buy something?”
RZ Sure.
PF “You want to read something?”
RZ Sure!
PF “Look it up, go get it.” Now let me get, let me get you up to 2021. “Ethereum! Ethereum! Ethereum! Bitcoin! Bitcoin! Bitcoin! $58,000. Bitcoin! Bitcoin! Bitcoin! Bitcoooiiin!” Okay, that’s the internet now. You know who else is like that?
RZ Who?
PF Our friend Tim Meaney. [Tim laughs]
RZ Tim Meaney is the only three timer on the podcast. And I have a feeling this won’t be the last one because Tim Meaney is going to be mining rare metals in two years. And we’ll have him back on explaining why that’s what we should be buying. [Paul laughs]
PF You get to have your friends on. Tim, come on in, come on in, how you doing?
TM Speaking of rare metals, do I get a watch for my third appearance or something like a plaque? Maybe one of those cool little glass—
PF You get a Casio calculator?
TM Ah, I just bought one.
RZ For those that don’t know, Tim is an old colleague and old friend. I’ve known him for many, many years, thinks on our wavelength and a lot of ways about technology.
PF And well, let’s be, Tim is enthusiastic about change in the world of technology. He gets really into it. And he’s he’s usually pretty ahead of the curve.
RZ He also shares our fascination with culture and how it intersects with technology. Right? So, so it’s a couple of weeks ago, and usually I’ll get an image on chat of him, like holding up a glass of whiskey, which is like, Oh, hey, Tim, which doesn’t mean much more than enjoying life. Then he said, “so are you in?” and I said in what? And then he threw out a couple of acronyms. And then he said DeFi to me, and then he said, “Okay, you’re behind, but this is gonna resonate for you.” So Tim, let me set it up this way. I’m gonna set it up with where I understand things to be because I frankly have not paid attention to this part of the world. I understand blockchain, I understand the integrity behind it and how it sort of self enforces would in a very nice way I don’t know under also understand the blockchain can be used in many many ways. One way is a sort of virtual currency like Bitcoin but can be used for anything, right, to store contracts to store files to score deeds on properties, store, I should say. And I watched Bitcoin go bananas. And then I watched Bitcoin kind of take a dive. I’m talking three, four years ago. And lately I’ve been hearing about how Bitcoin is more real than it’s ever been, and then it’s worth a lot more than it’s ever been. And then you’ve got those articles about, you know, the journalists who was supposed to research Bitcoin, he bought a dollars worth like 20 years ago, or whatever it is, and sold it off, and now would have been a millionaire. So I have my views, but I’m gonna I’m gonna sit on my views for a second here. So catch us up, we know that Bitcoin is the real deal.
PF Oh, and we should also—quick ethical disclosure. Tim’s a client, Tim is one of the, he’s a stakeholder and one of our clients said. SageSure. So we should just say that out loud, so that people know.
TM Thank you.
PF Alright, so Tim, what the hell is DeFi? What are you talking about?
TM Alright. So there’s a lot going on here. Let me first throw it back to you, Rich. You started a company in 2005?
RZ Correct.
TM What was going on in 2005? And why did you feel the need to start a company? Give just a little narrative about what happened on the web prior to that. And then what was going on in 2005? I promise I’ll relate it back to where we are today with crypto.
RZ In 2005, I was living down in Georgia, in Atlanta doing some work, some consulting work for Georgia Tech Research Institute. And, I was a refugee of the .com boom, I was part of a company. It’s actually how I met Tim Meaney. Way back in the in the late 90s. I just been in love with the web and the standards around the web. I’ve been reading a lot about the web and its impact and its influence and whatnot. And then this sort of weird undercurrent kicked in and it started with Dave Winer wrote a post I wrote a post about XML RPC. And it was a probably 180 words and I understood all of it and I saw like, literally a door opened up in my brain that the Web is going to evolve from a publishing platform to effectively an operating system, right, essentially and then Tim O’Reilly comes out with the Web 2.0 essay. And you’re starting to see stuff like what used to be called Ajax with very dynamic experience. I was like, okay, this is crazy. So this at this time, I’m in Georgia in an apartment, I quit my job, literally quit my job, came to New York and said, rest, this is 2005 that Rest and XML and simple interfaces are going to power the world one day. And I started a company with Tim Meaney, people don’t know this, probably it’s all come full circle. But that was the, that was the the thought shift. Right?
TM Okay. So many analogies with where we are right now 2021 crypto. The boom, everybody flooding in and ’99 all kinds of capital flying around. Everybody thinks they’re going to get rich, it busts, but people stick around. And the people who stick around, start building in the case of ’99, those are browser companies, standards bodies. And a couple of years later, all of a sudden that starts to bear fruit, and it creates another cycle. The 2017 crypto boom, brought a lot of money, a lot of eyes and it got really weird and crazy. All of a sudden, every celebrity had an ICO. ICOs themselves were bizarre and weird, was like, let’s just create a coin out of every possible asset. And turns out that wasn’t a great idea. But what stuck around in 2018, and 19 and 20 is starting to bear fruit. And what stuck around was protocols and standards and innovation happening. DeFi is a decent analogy to remember that moment in Google Maps. What was that 2008? The first time somebody linked you to the new relaunched Google Maps on the web. And it was like, whoa, this is possible on the on the web, this sort of dynamic behavior? People don’t realize that if you weren’t a web person back then, how awesome a moment that was. It was because you can see you can see with your own eyes, what was interesting about what was going on on the web, and everybody thought, Oh, I can internalize this and make this mine. What’s happening now with DeFi or NFT’s, have you heard of the NFT boom? Non-fungible tokens?
PF Get us all the way in there, man, assume we know nothing.
TM So crypto and more specifically, blockchain have found two use cases that are bearing fruit that are working and that are interesting, and it’s art. And its finance. Kind of weird and strange. If you think back to the web in the 2003 to 2005 era, it was like commerce and music and communication. The use case so far with blockchain is art, which is NF T’s, which is basically an artist making digital art and selling it on the Ethereum network. And it’s one of a kind. It’s immutable, because it’s on a blockchain. And I can own it, like a baseball card. I can own that art, it’s mine. The blockchain insists that it’s mine. It can never change. I can sell it. Now we can transact. So art in NFTs, total booming economy, 10s of millions of dollars, one just sold for $660,000 last week, a piece of digital.
PF Alright, what sold?
TM It was a super rare, they’re sold kind of like baseball cards, where they’re like packs, and then they get mined. And the most rare one kind of emerges. And the most rare one just transacted for like $660,000 in this one little subculture of NFT’s. So that’s all happening on the blockchain. And the other thing that’s happening on the blockchain is DeFi. DeFi is basically why do we need central authority to transact finance? Why do we need Wall Street?
PF I want to break you for one sec. I want us to ask that the fundamental question but Tim, how deep are you into this?
TM My interest level is very high. I happen to invest in it. But I think that’s the least interesting thing going on with crypto is buying it as an asset. It’s the least interesting.
PF I feel like you still, your house is still, there’s like a mortgage from the bank. We just need to know, you’re okay? [Rich laughs]
TM I’m okay. Okay.
PF You got kids going to college, you got kid, I get a little worried. I get a little worried.
TM I’m gonna make a prediction. Six weeks from now, you guys are going to be as deep in this rabbit hole as I am. Because it’s so matches your aesthetic about how you think about technology and culture. It’s shocking that you’re not there yet, but we’ll get there.
PF So we’re talking about Ethereum of a lot now, right? So different currency. We’re talking about smart contracts, what the hell is a smart contract?
TM Alright, so Bitcoin is a singularly amazing innovation, right? It’s the idea that you don’t need a bank to send a financial asset to somebody. That is a staggeringly interesting idea that got launched on the world in 2009. And really hasn’t changed since. And we don’t know who had the idea. And it’s going pretty strong considering it just hit $58,000 for a fake internet money coin. So that concept that was birthed onto the world—
RZ Just to jump in here for a second. It’s still, you just said you said earlier, you know the idea that you can use this currency to transact, but you really can’t. If I want to buy a house with my Bitcoin money, I still have to sell my Bitcoin to someone else who wants to buy some Bitcoin, turn it into actual fiat currency and then go buy my house, I can’t go buy a house with Bitcoin, we’re not there.
TM It’s such a liquid market that that’s almost a moot point, you can immediately sub second turn your money into USD and buy a house with it. So, but you’re right, right now, the use case of Bitcoin hasn’t proven out yet to be, we’re going to transact as a currency, it’s more of a store of value.
RZ It’s more of a rare mineral. It’s a rare mineral.
TM It’s like gold, it’s literally gold. Except if you’re trying to escape a country with your assets, it’s much easier to hide Bitcoin than gold, right? It’s literally a store of value. It’s inflation proof. It can’t get devalued over time, because there’s only 21 million of them, period. However, there’s a kid back in the, you know, the 2013 era who’s like playing around with Bitcoin and blockchain and thinking, why does this just have to be about currency? Why can’t it do anything? Why can’t I write an application on this idea of peer to peer decentralized networks? And that’s what Ethereum is. It says, alright, I’m going to take the underpinnings of the blockchain technology, Bitcoin, but I’m going to let anyone do anything on it. Just like the open web was back in 2004. Do whatever you want. There’s no gatekeepers. There’s nobody to tell you you can or can’t do it. That’s the aesthetic of Ethereum do it. You can do whatever you want.
RZ Is Ethereum another currency, like, can I look up its value today?
TM So Ethereum is a network. It’s powered by a currency called ETH, which is what makes the system run, it provides the incentives to put your computer into the network and participate. Remember, the whole SETI thing people would like connect their computers to search for?
PF And look for aliens?
TM They look for aliens.
PF Using your home computer.
TM So the payoff there was you felt like you were helping Earth humans find aliens. The payoff of Bitcoin is that you’ll mine transactions to get rewarded with Bitcoin, the payoff in Ethereum is your transact in order and validate transactions in order to earn eth. And eth is now a $2,000 asset.
RZ ETH is an asset itself, right?
TM Correct.
RZ Alright. Now, you mentioned the term DeFi, explain that. D-E-F-I, what is that?
TM So decentralized finance. So it’s the idea that take a bank, I want to go get a loan. So I go to a bank and a bank is a centralized authority, right? What if I want to get a loan in a manner that’s decentralized, peer to peer? What if I did? That would be hard to do. But protocols have been created that sit on top of Ethereum, once called Aave, which provides a pooling mechanism for people to put their collateral in, their digital currency, and people to borrow against it and earn interest, all happening on the Ethereum network, all powered by ETH. And all just happening in a trustless environment. I don’t even need to know who you are, okay. And I can earn interest against the loan, or I could provide capital to other people to borrow.
RZ So let me say this back to you. So I’m understanding it. I’ve got $1,000 worth of Ethereum, I want to borrow against that $1,000.
TM Or maybe you want to earn interest by staking it into the network and earn 7% interest.
RZ Okay, so you could put it in the network. So Tim shows up. He’s like, I want to borrow $50,000, you could actually collect all the fractions of that 50k for many people to give you the loan, and then they would earn interest on lending you the money.
TM Yep, that’s exactly right. All happening without your local or local bank and $5 billion have been transacted in that way, like over the last couple months.
RZ Alright, so this is fascinating. There seems to be less friction in this environment. So things are actually happening. So help me here. Okay? I open and this is total coincidence, I opened Twitter this morning. And there’s this cat animation, Paul, of a rainbow flying out of its ass through space. And it’s called Nyan Cat. I don’t even know how to pronounce it.
PF Nyan Cat.
RZ The original creator of Nyan Cat posted his original GIF. Essentially, he’s essentially certifying that this is the original and he put it on a site called foundation.am where people are selling digital art and you buy that digital art. I don’t know what the currency is they’re using the by though?
TM There’s a few different networks that transact NFTs, I bet it’s Ethereum. Let’s say it’s aetherium or ETH. It’s ETH in this case.
RZ So ETH currency, you can buy the one sole official representation of Nyan Cat on this network, it goes up starts at about $15,000 – $20,000 I guess of equivalent ETH.
TM Yep.
RZ And now it has crossed $500,000 to purchase this piece of digital art, which means a marketplace took hold, it was like an auction. Sounds like what foundation is it’s an auction site for digital art. And this thing skyrockets, there’s nothing to put on my wall. And that’s not the point.
TM We’ll get there in a minute.
RZ Yeah, so there’s nothing to really do. All I have is a certificate. And well, it’s some virtual certificate of some kind. That tells me that tells the world that you don’t own it, I do. I’ve got it. Rich Ziade owns that cat, I’m having trouble wrapping my head around the idea that I’m going to be able to resell this thing for $2 million in three years. In fact, I would even put forward that the purchase is fiction, because the money that it was used to purchase it is itself fiction. So the $500,000 is itself based on it, which is a bubble, right? Like that’s how bubbles take hold, right? Because bubbles are essentially an ad hoc pact of trust that a network of people is making, such that the value is elevated, because as soon as that that trust is punctured, a collapse occurs, which has happened since the beginning of time, right, in economies around the world, and the thing about bubbles is this as they get bigger, the skin, the layer that holds the bubble together gets thinner, and when you puncture it, it pops. Now I’m not saying this is a bubble, but what I’m saying is this is a bubble.
TM Okay, so it probably is a bubble, may or may not be. You just said something really interesting. You said the ETH and the art are fictions. Guess what else is a fiction?
RZ What?
TM Everything.
PF “Fiat currency!” “Social reality!” Oh, come on!
TM No, no, give, give me a second. A Michael Jordan rookie card that just sold for X million dollars. What’s that? It’s a piece of cardboard with a little bit of paint splattered on it in a perceptible format that looks like Michael Jordan, that just sold for $2 million. Is that more real, because it’s on cardboard? The art has value because someone perceived it to have value, just like the Michael Jordan rookie card did. Now as for “can I put it on my wall one day?” Of course, you’re going to be able to put it on your wall one day. But that’s less important than you owning something that has value present to your fellow humans, your friends. You have your friends over in 2038 and your Nyan Cat v1 is projected onto your wall. You don’t think that’s cool? That’s not as cool as having a piece of Van Gogh in you know, 1930 sitting in your parlor? It’s just as fictional and just as real at the same time.
PF Yeah. Okay. Alright. So that part of the economy where non-fungible art assets make sense and can appreciate value like, okay, fine. It’s the same kind of nonsense as that other part of the economy that we like to make fun of around the art market. But yeah, it’s real. Absolutely. People are going to, you know, maybe there’s a crash and Nyan Cat is worth $2. But it’s not worth negative $2. It’s not worth zero, it’s worth something, people are gonna think it’s worth something, that’ll happen for a while. But I’m just sort of like, alright, yeah, but you know, I buy groceries. Just like, you want to get a good sandwich. Like, when are we gonna get there, man, like, everybody talks about I’m going to be grumpy for a minute, every DAP, every distributed app, every DeFi app. It’s just more financialization, like, I look at smart contracts, and it’s just banking. Like, it’s just like, okay, so everybody’s, you know, when do you tell me that this is, here is what the web, let me do it, let me put things online. And then it let me buy books, and then let me buy furniture, and then let me get shoes, and then easily send the shoes back. Those are really good things for me. Overall, they might not be good for the economy or the world at a macro level, but boy, are they great sometimes. But here’s, here’s what I’m getting at, right, which is just like, I’m now in year 3 or 4 of “don’t worry, the decentralized apps are going to be really exciting and motivating. And they’re gonna be really interesting, and you’re gonna see them.” What I see, again, and again, is marketplace apps. I see charts like these are tools that let you do things with Ethereum, and the thing that you can do with the Ethereum is transact and you can monitor the transactions.” And I’m like, but I don’t want to do that, I want to get my shoes.
TM I think this is a really fair criticism. And I’m actually not here to defend or advocate DeFi or NFTs. I don’t buy any NFTs personally, I don’t participate in DeFi. I think they’re use cases that show an example of what can happen on a protocol like this. And the protocol is interesting to me. And the thinking behind the protocol is really compelling to me. Who cares about the art? Who cares about Aave? I don’t collateralize my loans. I actually think it’s kind of weird, to be on the grumpy side for a minute. I listened to a bunch of crypto podcasts and it’s kind of weird that like finance is the thing that gets everybody jazzed up, like collateralized loans is like the super hot cool thing. It’s like, can’t we find a more interesting use case, to your point, but it is what it is. It’s a real use case that’s happening.
PF VCs love to create markets, they don’t actually want to create new value, they create a new kind of middleman. This is like flawless because you literally upload the code to GitHub and it runs, people start running it in their binding rigs. And now you’ve you’ve created a marketplace without actually having to actually create a marketplace or buyer sellers like those show up as well. Yeah, it is absolute catnip to the like, the ultimate Silicon Valley ethos.
TM The interesting thing for me is, boy, what a crazy idea. First of all, what a crazy idea Bitcoin was. It’s up there among the craziest ideas, seriously, when you really think about it.
PF Well, I always I think it’s a joke that went out of control, right? Like, it was just like, “We’ll show the central bankers what to think!” It was just like, ha, this will never work. And then it worked.
TM How prescient the thinking was that went into it. Think of other apps that launched in 2009. How many times have they been revised since then? Every week since 2009. This thing hasn’t been revised in its thinking, once. It’s astounding.
PF It’s essentially a computer virus that went completely out of control carried by a human minds.
TM It also understood the human mind, you know, the whole thing about halving? Do you know what that is? Every four years, the reward structure for Bitcoin mining, which is the thing that powers the network gets halved, it gets chopped by 50%. Right? So the reward structure decreases over time, however, the value goes up, right? So the idea and what naturally happens after having is the price goes up? And what happens to humans when prices go up? They go crazy. They start having FOMO and they start doing what’s happened over the last three months with Bitcoin, which is like Tesla, you know, putting 1.5 billion down.
PF Yeah, I mean, it’s a relatively small subset of humans that are getting into this.
TM Oh, there’s, I’ve been on, I’ve been to two friends houses in the last two weeks, I’ve never had a conversation about technology with and both people one of them said, out of nowhere, turned to me and said, “Tim, I’m sure you know
27 Aug 2020
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