Investing Trends for 2026: DeFi, Tokenization, Capital Formation, Speculation & AI

I think the first and foremost thing that's been huge this year is you have this ultimate decline of not only career risk but this acceptance from Wall Street. Um obviously we have people like

Street. Um obviously we have people like Larry Frink writing the tokenization writing about tokenization in the economist. We have Black Rockck's

economist. We have Black Rockck's highest grossing ETF product being Bitcoin. Uh we have Hyperlid that

Bitcoin. Uh we have Hyperlid that actually just surpassed the NASDAQ in net income. So this is the first time I

net income. So this is the first time I would say that crypto is no longer a contrarian thesis. It's no longer a

contrarian thesis. It's no longer a contrarian thing. I would say it's a

contrarian thing. I would say it's a very consensus insight.

Welcome to Banklist where we explore investing on the frontier of crypto.

This is David Hoffman and I'm here with not only my co-host Ryan Tron Adams but we are also joined by two members of Banklist Ventures, fellow GP Ben Lakeoff and investment partner Arnav Pagadiala.

Ben Arnov, welcome to Banklist.

>> Thanks for having us.

>> Stoked to be here guys.

>> Broad question. Is there stuff to invest in in crypto in 2026? What do you guys think?

>> This would be a short podcast if there wasn't. So, yes is the short answer and

wasn't. So, yes is the short answer and we're very excited about a lot of things.

>> Yeah, we got over an hour probably of content to talk about. Arnov, uh you are the youngest of the group. Uh when you look at crypto investing in venture in the venture category in 2026, uh what

excites you? What gets you going?

excites you? What gets you going?

>> Yeah, I mean I think unlike prior cycles, there is stuff in every single sector that's kind of broken out. I

think DeFi is looking monstrous with the adoption of RWAS this year. Stable coin

payments, if you're into crypto, fintech is just monstrous. Uh, prediction

markets have just kind of hit escape velocity. I think it's the realm of

velocity. I think it's the realm of opportunity is 100x more than I think it's ever been. So, it's super exciting.

Some big statements. Uh, we're

definitely going to dive into why Arnov and the rest of the bank list team uh think that that is true and the sectors that we are investing in. Now,

previously in bankless, we have been very careful to not cross-contaminate between media and ventures. These are

two different organizations where only Ryan and myself cross the barrier. But

also at Bankless Media, we never let good content go to waste. And at

Bankless Ventures, we've been working pretty hard developing our investment focus themes for 2026. The the

categories, the trends that we want to focus our investments at Bankless Ventures for the next year. In this

episode, that is what you are going to hear. We want to share what Bankless

hear. We want to share what Bankless Ventures is looking to invest in in 2026 and why we've come to these conclusions.

A fundamental part of the entire Bankless journey is learning to be investors in crypto. Every Bankless

podcast episode has been in pursuit of learning how to effectively allocate capital in this industry. Answering the

question, how do I effectively invest is one of the main motivations behind creating the Bankless Podcast all the way back in 2020 when the industry was far more naive and unsophisticated. Now,

Ryan, myself, and Ben here, we've all been in crypto since 2017, 2016. We've

seen different investing metas come and go. And while each cycle has its own

go. And while each cycle has its own characters, the thematic common denominators of every cycle are about the same. DeFi, tokenization, capital

the same. DeFi, tokenization, capital formation, and speculation. These themes

are persistent across cycles, but generating outsiz returns in each of these themes requires some level of precision rather than broad capital allocation. It's not enough to just

allocation. It's not enough to just invest in DeFi. You must match the theme with the current market fitness of the era. Investing in DeFi in 2025 is just

era. Investing in DeFi in 2025 is just not the same as investing in DeFi in 2019, obviously. So, in this episode, we

2019, obviously. So, in this episode, we are going to go through each category I just mentioned and share how Bankless Ventures is allocating capital inside of these broad themes in pursuit of

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I think one thing that's like important to mention before we get in is some of the um particular ways that capital formation forms inside of crypto and

what that means. Um, a lot of bankless listeners will notice that crypto happens in these waves, right? Like

people have called these like four-year cycles before. There's a usually some

cycles before. There's a usually some sort of proof of concept stage uh followed by you know people see early traction and they get exuberant about

something happening in crypto and then narrative runs far ahead uh of um the fundamentals and price goes out of control and then things bubble and they

pop and then we get kind of the bare market. We go back to despair. Um, folks

market. We go back to despair. Um, folks

like A16Z have pointed this out that this really follows builder waves too, right? So, capital forms and builders

right? So, capital forms and builders have ideas and they pursue these narratives in these approximately like 4year waves. And one thing that I

4year waves. And one thing that I actually appreciate about crypto, this is a benefit to anyone who's investing in the space, is during the bare phase,

during that despair part, the bad projects are cult and the good projects survive. So it allows you to like

survive. So it allows you to like reunderwite your ideas and your thesis for the space. Gives you kind of a clean slate. So you can just be like, okay,

slate. So you can just be like, okay, what happened last cycle? What's still

real about this industry? I have a sober mind now. and we can consider what's

mind now. and we can consider what's going to be what's going to be important moving forward. And you can rebuild and

moving forward. And you can rebuild and then you can reload. And builders do this as well. And so do investors. It's

kind of like um you know you know the the the idea of a forest, right? If a

forest gets too dense, if it doesn't have a fire every once in a while, then kind of the new growth can't actually flourish and grow. And so every once in a while, a healthy forest needs a fire

to clear out all the underbrush. and you

create renewal so we can have something new >> or >> you got to roll the seven on the craps table.

>> Yeah, you totally do. Uh or to get like another metaphor basically is just kind of this is survival of the fittest. This

is like an evolutionary process and you have some maybe dominant uh organisms on the earth and every once in a while an asteroid comes destroys them all and we

get a chance to see what can um what can persist through these cycles and what can grow a new and we get all of these new life forms. For me and I think for a

lot of venture investors a lot of this starts I guess you could say Bitcoin but then after Bitcoin. And so Bitcoin is kind of the original store of value use case. We uh uncovered what like the

case. We uh uncovered what like the original use case for blockchains, but then Ethereum and the idea of programmable finance that's kind of birthed all of the other investment

categories and particularly the investment themes that we're going to talk about today. And since Ethereum, since the birth of the smart contract platform and programmable finance,

there's been roughly like four waves.

And I'll give the dates and I'll measure this by the crest. Some of you guys will have been here, been present during those years and and some have gotten in um you know in future waves but the

first was 2017. That's when we crested in in wave 1. Wave 2 was roughly 2021 and again this is the peak of the cycle.

Uh wave three is where we've been now 2024 and into 2025. And then wave 4 again we don't know when the next wave will crest. It doesn't have to happen in

will crest. It doesn't have to happen in 4-year cycles as it has previous, but let's say it does. That would be uh 2029. Maybe there are reasons this wave

2029. Maybe there are reasons this wave crests a little bit earlier or differently or something. But our job really as investors in the space and I think every everyone listening who's

deploying capital to crypto and by the way for retail investors, there's even more opportunity to do this because ICOs are back. seems like

are back. seems like >> you know your job is really to forecast the world of say 2028 2029 and invest in the founders and the categories that

will create that world. So that's the idea right now as we enter 2026 we have an opportunity of course to reunderate reunderwrite our themes and figure out

what we're still bullish on and figure out what the new unlocks are for the next wave of growth. So those four

themes DeFi tokenization capital formation, speculation markets, those have been present across all of the waves up until now. Like it's crypto

programmable money does all of those same things, but there are new manifestations and new subsegments to take a look at, and that's what we're

doing today. Maybe we could go through

doing today. Maybe we could go through each of those four themes. And um David, the first is DeFi. You mentioned it.

This has been really >> the theme that the bankless thesis was based around. And when you and I first

based around. And when you and I first got connected and started really investing in crypto and getting excited about it, that was uh 20 2019. So that

was in kind of wave 1 in the in between of wave 1 and wave two. But take us back to Ethereum in in 2017. And uh tell the story of of DeFi. Yeah, the building

blocks of D5 really got started, of course. I mean, if you want to go all

course. I mean, if you want to go all the way down to into the basement with the ERC20 token, and you could see a bunch of attempts to create structures and infrastructure on top of that. Ether

Delta being one being one early indication of what might be worthwhile of investment further down the line. Uh,

0x also came around that era and it was really all about just tokens and trading tokens. The ERC20 primitive was perhaps

tokens. The ERC20 primitive was perhaps the most important primitive in all of crypto and the the infrastructure that surrounded that was all about trading those tokens. And so it barely worked.

those tokens. And so it barely worked.

Oh my god, it sucked.

>> But it did work. Ether Delta didn't work.

>> It did work.

>> Uh and it really was all all these prototypes were just um premonitions of things to come. Now, if you were around in 2017 and if you're paying really close attention and you stuck around

through 2018, you might have been able to while I you know one through 99 were collapsing in a burning fire around you.

If you were still paying attention, you would have noticed this one one uh startup still chugging along called Maker Dow. And that was before DeFi was

Maker Dow. And that was before DeFi was even a thing. And so one of the themes that we see across waves is that there's

at least one or two examples of the next wave that is still still starting up as the wave that came before it is burning down. And Maker Dow was really the first

down. And Maker Dow was really the first era of real DeFi which we are calling the second wave the 2021 wave where uh as Ryan called it the the absolute peak

of wave 2 really really crested in 2029.

We're calling this slow defi collateral based applications like maker dow a compound that really fueled the store of value nature of ether and other tokens and then also things like like unis swap

the first decentralized exchange that as a uh an investment produced outsiz returns for for any and all of those >> was that was unis swap 2018 or 2019 I think it's 2019

>> the top of the valuation of the uni token was 2021 the investments into unis swap came in 2019 and and 2020. Uh and so right that

was right at the be the beginning of uh wave number one. We also had uh some uh failures some catastrophic failures.

Teruna is in this category as well. Some

weird platypus between a stable coin and DeFi and economic experiments. Uh and so this is kind of some of the history uh that wave two one and two brought us to

and starts to get us into wave three which is again like Ryan said uh we are starting to close the door on wave three looking into the rearview mirror and measuring successes and failures. So, a

through line you can see with a lot of these I it reminds me of the Chris Dixon, the next big thing starts off looking like a toy. Yeah. And then there also was a Py McCormack uh uh article

that I love that would say it's just practice >> and you see like all of these little glimmers of >> of of good ideas that are taken and then they're expanded upon. there that maybe

they blow up in that in incredible fashion, but there's pieces that sustain into these next waves as we move on.

>> Yeah, that's right. Um, and the bad ideas do collapse and they burn off and the good ideas kind of persist. I think

wave three has been interesting if if wave 2 is sort of the the birth of modern DeFi. Wave three has almost been

modern DeFi. Wave three has almost been like a refinement of the concept that we've seen in this kind of 2024 2025 cycle. So we saw early phases of

cycle. So we saw early phases of reststaking uh that's now pivoting into something a little bit different like IE layers going into the verifiable compute

realm. Um and then we saw an

realm. Um and then we saw an extrapolation on the A uh maker DAO idea of collateralized lending and borrowing with some more modularization like

Morpho has been a big success this wave and and so is Pendle for example. And we

actually did see a stable coin that is um not a completely centralized stable coin like a tether and USDC that has actually started. I think this will

actually started. I think this will persist across cycles. That's Athena,

right? With the idea of the kind of the basis trade yield type of um stable coin and uh per dexes have been a major

theme. So previously most of the per in

theme. So previously most of the per in crypto were traded on centralized exchanges. This has been the first wave

exchanges. This has been the first wave that we've seen decentralized exchange per dexes have the volume and the liquidity and the traction that they do.

There have been a few other things, but those are the things I would highlight as successes in this in this third wave.

And and broadly speaking, I will say that all a lot of the third wave stuff is a lot of what were what was previously centralized services from big prop trading firms or lending and

borrowing desks uncolateralized lending and borrowing desk start to move onchain in more sophisticated ways.

>> That's right. You can you can measure that too, right? Like by a percentage in terms of what percentage of spot and per volume is offch like offchain versus onchain and like what is it now David?

Like I've seen estimates of like 20% something like this. Yeah, something

like 22 to 26% uh is moving moving on chain. I think I think these are lessons

chain. I think I think these are lessons that the industry learned post FTX uh the the contagion of all the borrowing lending desks and that brings us to modern times wave four. And so there's a

line here. We're going from looking in

line here. We're going from looking in the rear view mirror to looking out of the front windshield of our car as we drive forward into 2026. And so now we are going to make predictive ideas as to

where we think is the appropriate place to allocate capital uh inside of the DeFi category across the next DeFi wave.

And now I want to turn it to to Arnov.

Arnov, you spoke briefly at the very beginning of the pod, but turning back to you. Uh when you look at DeFi in

to you. Uh when you look at DeFi in 2026, uh where do you think is the smart way to allocate capital?

>> Yeah, absolutely. I think I'll start by sharing before I go into the things I'm super bullish on for wave 4 and beyond.

A few of the constraints and the recent unlocks I think are very interesting so you can reason about what's coming next.

I think one of the most interesting pieces of the cycle is kind of this shift towards becoming more institutional today. I would still say

institutional today. I would still say things are not where they need to be. So

we don't have enough customizable infra institutions yet. We don't have credible

institutions yet. We don't have credible risk ratings of protocols. We still

don't have enough liquidity on most longtail assets so an institution can swap its size and we still have a lot of smart contract risk, right? And I think that's very well exemplified by the recent balancer hack, a protocol that

has been around for, you know, 5 years and had a zero day. Uh, so we still have these things. Um, and I think a few

these things. Um, and I think a few other things I call out are on-ramps are still not where they need to be. You

have like a 90% attrition rate when somebody's just trying to swap, you know, go $100 from their bank account to $100 on chain. And I think the last thing I'd mention is that we still don't

have enough exogenous assets on chain yet to justify the switching costs for institutions.

>> By exogenous arnov, do you mean like real world assets like just like um cuz we we have we have stable coins, we have dollars, I guess we have some degree of treasuries, but apart from that that we

don't have anything outside of our onchain crypto native assets.

>> We do, but it just proliferated this year.

>> Okay. Um, and we'll go into that more in the tokenization section. But yeah, that being said, I'd say 2025 was definitely a breakout year. It mostly driven by a lot more regulatory clarity and

institutional adoption. I think the

institutional adoption. I think the first and foremost thing that's been huge this year is you have this ultimate decline of not only career risk, but this acceptance from Wall Street. Um,

obviously we have people like Larry Frink writing the tokenization, writing about tokenization in the economist. We

have Black Rockck's highest grossing ETF product being Bitcoin. uh we have hyperlquid that actually just surpassed the NASDAQ in net income. So this is the first time I would say that crypto is no

longer a contrarian thesis. It's no

longer a contrarian thing. I would say it's a very consensus insight and stable coins only make that 100x more true when you see everybody adopting stable coin payment rails or even launching their own stable coin. And beyond all that I

would say stable coins tokenized treasuries are just straight up and to the right. It's it's honestly

the right. It's it's honestly unbelievable how parabolic that growth has been. Um and very last thing is that

has been. Um and very last thing is that from a regulatory front, we have a lot of unlocks this year. The CFTC providing a more advanced per framework. We have

the Genius Act, Clarity Act probably next year. All of these things will lend

next year. All of these things will lend itself to DeFi just proliferating like 100x more than it currently has. But

getting into the four things that I think are incredibly interesting over this next cycle. Um I think the first would be onchain lending. You might

think it's already done with a and morpho, but I would say we barely started. Pretty much all of lending

started. Pretty much all of lending today is predicated on some fashion of overcolateralized variable rate loans.

But in the future, I absolutely believe that we're going to get into fixed rate, unsecured, undercolateralized loans and lending against longtale assets. And

when you think about how lending works in Tradfi, it is primarily unsecured or underolateralized loans and they are usually fixed rate and fixedterm on a much wider variety of assets. I think

crypto will only follow the same path and we're like in our first innings of all of these things. I would say unsecured under collateralized. You have

people like three chain, wildcat, credit on worldcoin. Um for fixed rate lending,

on worldcoin. Um for fixed rate lending, morpho v2 is going to be huge this year.

This will be the first material swing I think we've had at fixed rate because we have a very lindy protocol breaking into it. Um and lastly, I think exotic

it. Um and lastly, I think exotic lending is going to take off a lot more.

You know, things like lending against RWAs. Um so I think that'll be awesome.

RWAs. Um so I think that'll be awesome.

So, I'd say it's the first area I'm super bullish on as far as thesises go.

The second area would probably be equity per so far. Obviously, PERS have been massive this year with Hyperlid and all these other new per techs is launching.

Uh, what's very interesting about US equity per is that the TAM is roughly 15 to 20x greater than that all of crypto than all of crypto trading today. And I

think that is massive.

>> I think Arnoff, um, people don't realize that crypto basically invented the perp, right? I mean some people may not be

right? I mean some people may not be aware of that but do can you talk about that for a minute?

>> Yeah absolutely. So perks are this really elegant mechanism where previously all we had is options right where you express trade with leverage

but it's dated right there is an expiry.

Uh perpetual futures essentially offer a more elegant conduit for leverage with no expiry. So you can take out 10, 20,

no expiry. So you can take out 10, 20, even 100x leverage on ETH and you cannot get like there is no expiry. However,

obviously you can get liquidated instead. So it's a different f like form

instead. So it's a different f like form factor to manage risk.

>> It feels like like traders in Tradfi like should love this. Equity traders

should love this. I mean do you think that it's like one of the mechanisms that they're looking over at crypto and being like, "Oh my god, we're jealous of you guys. like you have these per or do

you guys. like you have these per or do you think they're getting all of what they need in terms of leverage and margin from options?

>> I think there's a few things to unpack there. Definitely options are a great

there. Definitely options are a great instrument and there's a monstrous amount of volume in the options market.

I guess for reference there, hyperlquid has done about $4 trillion in volume to date cumulative. The options market does

date cumulative. The options market does that in one day in the US alone, right?

So, you know, these these guys are they're monsters, right? But they've

definitely taken notice to per. I think

the biggest thing that people really took notice to is that Hyperlid flipped the NASDAQ's revenue. That's kind of that was a really big turning point. But

beyond that, it's the fact that retail may find this product more interesting.

>> Retail loves PERS in contrast to options.

>> Yeah. I mean, I it needs to be tested in the broader market because a great example is Robin Hood does a billion dollars in pure retail options revenue a year. It is their highest grossing

year. It is their highest grossing product. Wow.

product. Wow.

>> One thing that I'm very interested to see is is Robin Hood or some other um exchange going to convert these options traders to per traders. And that is one

of the thesises I'm very interested in in 2026.

>> Okay. But by the way, the these two things, the first category of like um an expansion of onchain lending to like fixed rate and credit and longtail and equity per are are you saying when

you're listing these um these category ideas in the in the theme of DeFi, like are these investable to you? Like is

this coming from net new startups or to what extent are just the existing incumbents of the world going to capture all of this? Like does a expand into

fixed rate? Does Robin Hood expand into

fixed rate? Does Robin Hood expand into equity perks or is this investable as a net new category for some new low valuation startups to like become unicorns?

>> Yeah, it's a great question. I would say these two ideas are both investable.

We're so early and the market size is so insanely large that there definitely is multiple upcoming players who I think will grab a lot of market share.

>> What's the third?

>> Yeah. So the third one is definitely going to be DeFi neo banks. Uh it's

something I'm very excited about kind of from two areas. I think one neo banks in emerging markets are going to be absolutely huge. And a big reason for

absolutely huge. And a big reason for that is these people in emerging markets they want access to US dollars. They

want access to tokenized treasuries.

They want access to a number of these things. And not only that, DeFi or

things. And not only that, DeFi or stablecoin native neo banks you there is a regard there in the sense that if you want to implement certain products you can kind of you don't need licenses for

them inherently right an example of this is um Coinbase integrating the morpholo lend product right they're able to offer 5.63% 63% APY to their users. That's

pretty crazy. And DeFi neo banks can do that. And I think that presents a step

that. And I think that presents a step function unlock over what exists today.

>> What's an example of a DeFi neo bank? Is

that like um like Ether always comes to mind for me where there's sort of, you know, smart contracts onchain protocol, but then they have this extension where you can get like a Visa card that works

like in a lot of countries in the world and you that's kind of connected to your smart contract account. Is that what a DeFi bank is? that type of idea.

>> Exactly. That's exactly what it is. I

think Ether has nailed it though.

They're definitely more so focused on primary markets. These are people in

primary markets. These are people in like the US mostly who are probably using Etherfi, which is awesome. But

yes, but I think the True Step Function Unlock is going to be mostly in folks in emerging with folks in emerging markets because they desperately need these products. emerging market neo banks

products. emerging market neo banks because we've kind of seen the neo bank trend already arrive in inside of the crypto industry and in well financed financially served countries like the

United States like you said so what you're saying is this trend continues down into the developing country uh part of the part of the globe is that right >> absolutely and I actually think that's where the biggest outcomes are going to be you look at new bank that's like a

hundred billion dollar company and they're serving mostly users in the latam region neo banks also the TAM there is massive, right? So, that's also

why I think you're going to have not just one but multiple emerging bank emerging markets neo bankank unicorns because you can cater to specific

audience types. You can you can cater to

audience types. You can you can cater to emerging market gig workers, right? You

could um target emerging market freelance workers. Like there's so many

freelance workers. Like there's so many of these niches that sound like that's not really a venture scale outcome if you invest there. But definitely there

is. When you look through history like

is. When you look through history like we spent some time doing from 2017 up to today 2017 starting with the primitive of the ERC20 token which turned into the

ICO mania. Then we layered on swap and

ICO mania. Then we layered on swap and collateralized and lend products and services on top of that in 2021. And I

think now we are looking at the neo bankank era which has some inherent amount of centralization to it. So maybe

some listeners are throwing a flag about like why is this in the DeFi category but if you take all the puzzle pieces that we've created as an industry this is you know Ethereum becoming the bank

account the banking ledger uh USC tether the stable coins being the uh private money building block and now we are high enough up in the stack where we feel

comfortable building fintechy layers on top of the Ethereum ledger to uh to send outwards into the developing markets into the into the rest of the world. So,

as we get further and further down these waves of DeFi, which is what we're talking about, we're in the DeFi category right now. We start to look higher and higher up the stack and now we're at a pretty abstract layer of the stack. We're talking about the the

stack. We're talking about the the neoank layer. uh so many layers below us

neoank layer. uh so many layers below us already and those were the waves that you know he said 2017 to 2021 to 2024 and five and now uh it's bankless

centers's opinion that we are thinking about the neo banking layer as the investment focus for defi in 2029 that's not all of it though uh we also want to

talk about specialized exchanges arov specialized exchanges what do we mean by this >> yeah absolutely I actually want to say one last thing on the neo bank point is

I believe that DeFi NEO banks are going to grow the DeFi mullet by like 100x today alone with um again the Coinbase Morpho integration in literally just a

handful of months that drove the morpho based TVL from 700 million to about 3.3 billion and that is only that is only

>> with borrowing USC against your Bitcoin.

They just announced the lend product where you can actually earn a higher APY from your Coinbase account like in September. Like I fully expect this to

September. Like I fully expect this to probably eclipse over 10 billion by the end of the year. And that is just one CFI integration. Now imagine everybody

CFI integration. Now imagine everybody every NEO bank in emerging markets does this. I think it might be probably one

this. I think it might be probably one of the biggest sources of capital inflows in 2026 and beyond.

>> It's pretty incredible, David, because these are early bankless thesis, right?

It's like the whole money Lego thesis where we sort of build the base of all of these primitives and we kind of stack up the idea of the the DeFi mullet as well which is just you know fintech in the front and DeFi in the back the party.

>> It's growing longer and longer.

>> It's growing longer and longer and now we have gravitated to uh the app layer.

It's uh it's all coming together.

>> The fintech layer. The fintech layer.

>> That's right.

>> And the user experience is incredible. I

don't know if you've actually tried this. Use your Bitcoin as collateral for

this. Use your Bitcoin as collateral for a loan on on um Coinbase.

>> No, it's completely like doing everything the hard way, man. I'm old

school.

>> I don't like that.

>> Ron and I operate at the second wave.

>> I have friends that have no idea. I

mean, they they know that they can borrow and they've se you've seen these other startups, Blockfire, whatever that could lend you at 8% and Coinbase is able to do it at five, six, 7%, it's

variable based on Morpho, but it all happens underneath the hood and it's it's powered by Morpho, which is a a prominent D5 protocol in the background.

So pretty pretty awesome.

>> One of the big signs of maturity for this sector specifically is there's not a single blockchain reference inside of the A app. A app got released at Dub Connect not terribly long ago. You

cannot find anything related to a blockchain. Uh obviously there are

blockchain. Uh obviously there are tokens there like USDC but that's just not for the average user that's just that's just whatever. It's on a blockchain there. Uh and so this kind of

blockchain there. Uh and so this kind of indicates the market readiness and technological readiness to actually deliver some of these promises through the fintech layer that crypto uh the

promise that crypto made forever ago.

All right, Arnoff, let's polish off the DeFi section with uh specialized exchanges. What do we mean by this?

exchanges. What do we mean by this?

>> Uh so I think there's kind of two areas here with spot and pers. When I'm

referring to spot, I think one up and cominging area that has is relatively underexplored today is we're going to have specialized spot exchanges, exchanges meant for RWAs, exchanges

meant for longer tail assets, exchanges meant for FX markets, and even beyond that, exchanges that are more tailored for institutions. So things like onchain

for institutions. So things like onchain KYC exchanges, right? I think like an early rendition of this even though it's in lending is uh a horizon where borrowers actually have to KYC to borrow

but the lending side is completely permissionless. Um and then the per

permissionless. Um and then the per front um there's already a lot of perplexes launching. We're kind of in

perplexes launching. We're kind of in this perex war at the moment if you will. Oium does a good job here

will. Oium does a good job here differentiating because they're just offering per predominantly on traditional assets. But the thing I

traditional assets. But the thing I think is more interesting, not only with HIP 3, which HIP 3 is essentially this uh permissionless infrastructure where you can build on top of Hyperlid's

existing infrastructure. So you don't

existing infrastructure. So you don't got to go spin up your own chain to launch new per decks. You're just

handling the front end. And um what this gives way to is a lot more experimentation with more kinds of per.

This could be per on funding rates. This

could be per on emerging markets. This

could be per using Athena's SUSD as collateral. It's kind of like an

collateral. It's kind of like an infinite design space. So, I'm very excited for that on the perspation.

>> There is space as well in DeFi. Arav you

think for the fifth thing which is um actually options on chain. So, per

aren't going to perpify everything. We

still have a need for options. Talk

about this. Absolutely. I think going back to the the statistic I referenced earlier, the US option market, options market alone does about three to four trillion dollars in notional a day. It's

also from a retail perspective, it makes up a pretty healthy amount of Robin Hood's revenue. And I think there's no

Hood's revenue. And I think there's no reason why onchain options that deliver 24/7 experience can't do something big.

So if you think about why Hyperlid was so successful ultimately it made even though Pers existed before they they did two things really really well and I think one is they aggregated liquidity

properly and they have a phenomenal UIUX I think it's very probable that options maybe this year or next year could have their hyperlquid moment so that's the last I would say DeFi trend I'm excited about

>> Arnoff to what extent are we in thinking that across these categories we'll have I mean returns to kind of the like net new investments and net new startups

versus a lot of what you said the DeFi mullet stuff etc. That makes me very bullish on existing protocols that are out there. You know something like a a

out there. You know something like a a morpho or a pendle or even an ae that could be investable surface area but I know we're a VC company so we

focus on the net new things. To what

extent do you think there's new players in all of this game versus it just goes to the last waves? um success stories.

>> It's actually it's a very deep question because when you think about it, something that surprised me a lot of this last cycle was I thought a lot of liquidity would have left a intuitively.

A just kept growing and growing and growing and they haven't inherently innovated on the core product. It just

shows you that a v3 like people really care about that lindiness, that brand, that trust. Um so is it hard for another

that trust. Um so is it hard for another lending market to come in and offer some better feature set and aggregate a bunch of liquidity? Absolutely. that's very

of liquidity? Absolutely. that's very

difficult. Whereas in per it's a lot easier. So I think it depends kind of on

easier. So I think it depends kind of on who your end user is, what their preferences are. Um but I guess to

preferences are. Um but I guess to answer your question more directly, I think there's kind of two phases here.

One is I think you could argue that certain DeFi tokens that exist today, whether it's Pendle, ENA, a morpho, they there's an argument to be made, they could just get infinitely bigger. I

think that world exists. On the other front, um you could have people innovating at more of the cutting edge of each of these areas, right? A good

example is a is not going to innovate very high in the risk curve for RWA lending. There is opportunity for

lending. There is opportunity for somebody else to do that. So I would say there's a lot of edge cases. Let's talk

about the second theme which is uh tokenization. So the first theme was

tokenization. So the first theme was DeFi. The second is tokenization. A

DeFi. The second is tokenization. A

brief history of tokenization. Again, it

follows the wave 1, wave two, wave three thing. In wave 1, we had proof of

thing. In wave 1, we had proof of concept tokenization for stable coins.

Do you guys remember the days when Tether was, this was even pre-Ethereum, you know, 2016 or so, it was on Bitcoin.

The original like Tether implementation was on Bitcoin's omni. Do you guys remember >> weird Bitcoin side chain thing?

Wasn't even a real blockchain.

>> All right. So, that was the original kind of Tether. This was the the wave 1.

Wave two, we actually saw stable coins being used in DeFi for the first time.

So previously they were kind of um tether was a mechanism for Bitfinex and other exchanges like popularized by you know like Binance and centralized exchanges. Wave two of 2021 we actually

exchanges. Wave two of 2021 we actually saw stablecoin being used in DeFi to a large extent and then stage uh wave three we got all sorts of activity

happening in tokenization and stable coins. So stable coins got the genius

coins. So stable coins got the genius bill of course we have dollars that is going to a trillion and then we had this this wave of generalized issuers. You

had like securitize and centrifuge and and superstate and black rocks bidd uh third wave as basically tokenization became legal. I don't know before it was

became legal. I don't know before it was in this gray zone and now it's like >> even before it became legal we had generalized issuers positioning themselves.

>> Yes we did. Yes we did. And not only is it legal now it is uh being pushed and promoted by the biggest issuers on the planet like what's a big bigger issuer

than the secretary of treasury of the US government. Okay. Secretary Bessant is

government. Okay. Secretary Bessant is an issuer of stable coins now. All

right. How big is that? That's gotten

big. And then second to to him is probably uh Black Rockck and Larry Frink and he we just saw this week David he he wrote a entire love letter to tokenization and the economist and

published it. It was a love in. He loves

published it. It was a love in. He loves

this stuff. Okay, so that's where we are uh ending wave three. But the question is what is left that's investable?

Arnoff, we still have some problems with tokenization. You mentioned that we

tokenization. You mentioned that we still don't quite have all of the assets in crypto that we want to have. What are

you seeing when you look at what's investable in in tokenization and where we uh go from here?

>> Totally. I think before going into a few of the categories I'm super excited about, I think two things kind of stand out as far as problems we have today.

One is lack of very clear investor rights. Um, so I think this was made

rights. Um, so I think this was made very clear during the tokenized stock saga. People were like, "Hey, you know,

saga. People were like, "Hey, you know, what do I actually get when I have this tokenized Tesla stock? Is it real Tesla stock? Is it mirrored? Is it like in an

stock? Is it mirrored? Is it like in an SPV?" Um, and there's a lot of

SPV?" Um, and there's a lot of questions, right? Like what happens? Do

questions, right? Like what happens? Do

you get voting rights? Do you get access to a dividend? uh is in a bankruptcy remote structure and in the case of like preipo tokenization that's even like more significant and I think a lack of

clear regulation which I think again the clarity act will help this as well um issuers have to jump through a lot of hoops and this really hurts the end consumer who is just purchasing these things and doesn't know the actual risks

behind them I would say the second key problem with rwas today is lack of redemption ability and this kind of lies into this broader problem of the fact

that RWAs, the ones that like aren't as native on chain, like Athena is an RWA that's way very native on chain or is a tokenized asset that's very native on chain, whereas something like Paxos

Gold, you know, you're still relying on the T+2 T plus 3 um Trafi settlement rails, right? So, a great example of

rails, right? So, a great example of this is during the 1010 draw down, Paxos Gold, which was fully back the entire time, the spot price went from $4,000

and it almost dep.

>> Yeah. Crazy, right? And Paxos is like a hallmark issuer. They're not a random

hallmark issuer. They're not a random issuer. And this is not inherently

issuer. And this is not inherently Paxos' fault. Let me clarify. And the

Paxos' fault. Let me clarify. And the

PE's price actually went all the way down to $3,000. When 1010 happened, basically all the market makers, they pulled liquidity from Binance and basically people just started getting

liquidated. Then they started selling

liquidated. Then they started selling spot and it just created this downward spiral. And of course during this whole

spiral. And of course during this whole time like the gold was always backed one to one yet the price was a split at 4,3600.

>> Wow. and that the actual price of gold never really changed from that 4,000 but onchain prices of that had fluctuated by 25 plus%.

>> Exactly. And to sum this out, the reason why this happened is because we're relying on Trafy Rails. So what would have happened normally, let's say if it was T bills because that's an easier

example. If the price dagged, you have

example. If the price dagged, you have arbitrageers who will purchase the spot um asset on chain and then they'll redeem it and they will earn a spread on that. But the problem with gold is you

that. But the problem with gold is you can't just redeem gold very easily, right? Those are sitting in vaults in

right? Those are sitting in vaults in London um in the case of Paxos. So even

though this price was really just going down and down and down, no arbitrageers could come in and basically restore the peg. So that's a longer way of saying

peg. So that's a longer way of saying that with real world assets there are a new set of risks we are still dependent on a lot of these archaic settlement rails and we have to figure out ways

around this basically >> I love the notion well I don't love it but I love the notion that the archaic broken antiquated nature of tradfi is a

risk to DeFi like all of our tokenized assets on chain like one of the risks that you know the liquidity managers around a one of the risks they have is that there's two days of settlement

before anything moves and changes hands before we can get liquidity on chain if there's a significant market dislocation. Uh but I would suppose that

dislocation. Uh but I would suppose that those risks are are only temporary because uh the idea here is that this is a problem that a startup can solve is

kind of like what we are pointing to.

>> Temporary but not completely solvable by tokenization. like tokenization enables

tokenization. like tokenization enables it, but if you're still dealing with a physical asset that you need to drive down and inspect, it's like >> I mean, you guys know tokenizing a house

or real estate, eventually it will happen, but if you own that house that's represented as an NFT and the house burns down, like uh maybe there's a period of time that somebody doesn't know the house is burnt down, but the

NFT still has value or whatever. So that

the tokenization is one enabler but it doesn't solve all the issues.

>> So where does this leave us in terms of wave for investable opportunities for tokenization?

>> I think there's two really distinct ones that stand out in tokenization. The

first one is tokenizing latent markets and I think this one is relatively obvious to us in crypto. Uh at obviously on one side of the spectrum here you have things that are very easy to tokenize that are very low left things

like treasuries. On the farthest side of

like treasuries. On the farthest side of the spectrum, you have things like tokenized hedge funds, right? And in the middle, there's a lot of really cool things that can be tokenized. Things

like Pokemon cards to tokenized solar to tokenized receivables. My thesis is that

tokenized receivables. My thesis is that the tokenized assets or the RWAs that will gain a lot of traction are the ones that a bring a material amount of

exogenous yield on chain that just have good yield and then b there's like genuine consumer interest in that area.

So a very good example of that in action today is USD AI. They're tokenizing um data centers for AI and they're tokenizing those cash flows and they are

distributing that onchain in the form of a synthetic dollar and their growth has been like pretty monstrous recently. So

I think we'll continue to see this trend of tokenizing latent markets one way or the other >> and the composability of DeFi again with all of these things. A lot of these tokenization is one thing but you know

people have had access to private credit and other assets like that but now with DeFi you can use it as collateral you can loop it you can borrow against it all of these sorts of things that the

composability of DeFi enables.

>> Absolutely.

>> I can see why Larry's excited about all this. Uh you said there were two Arnoff.

this. Uh you said there were two Arnoff.

What's the second?

>> Yeah the second one is um verticalized tokenization platforms. This one's a little bit uh little bit of a interesting one as far as I haven't

heard anybody talk about this or frame it this way, but verticalized tokenization platforms are essentially platforms that effectively handle the entire value chain from the end

consumer, which is actually the borrower to the end investor, which is the lender. And the whole purpose of these

lender. And the whole purpose of these platforms is to drive the marginal cost of lending to zero. Basically eliminate

all of the costs imposed by Trady. So, a

good example of this is Figure for Home Equity line of credit. Uh, but the thing with them is they're not actually doing a lot of this onchain. They have their own blockchain. It's a whole thing. But

own blockchain. It's a whole thing. But

I do believe things like Figure will come onto Ethereum, will come onto Salana, like actual open composable ecosystems. And the reason why this is really significant is there's kind of

two key reasons why I think verticalized tokenization platforms will be huge in the coming years. The first is that they serve as this unified ledger for data

and value and that drastically reduces costs of reconciliation and time and effort. And as far as the costs that are

effort. And as far as the costs that are imposed in Trafi for a similar business, it's absolutely insane from a margins perspective. And then the second piece

perspective. And then the second piece is that it allows for onchain capital formation. So if you want to fund, let's

formation. So if you want to fund, let's just say auto loans, right? and you're

securitizing these auto loans, rather than going to a debt facility offchain that's maybe offering you 5.5%, you can instead go to DeFi where somebody might just borrow against their Bitcoin at a

4.5% USDC rate and source capital from there. And the last thing I'd mention on

there. And the last thing I'd mention on this front is again I think you'll have a lot of these products that are offered in neo banks or exchanges in the future.

So I'm very very bullish on this subcategory, verticalized tokenization platforms. I do want to dive a little bit more into this because this one's pretty exciting to me. But maybe just to give listeners a little bit more of a

grasp for what we're even talking about.

Verticalized stands in contrast to generalized and generalized this is the the securitizes the centrifuges super states the black rocks the people who maybe not black rocks the people who are

like come to us and we will tokenize your asset on your behalf. Do you have an asset for us to tokenize? We'll

tokenize it for you. and they're kind of like a white glove service provider to do your tokenization needs. Uh in

contrast to that, Verticaliz is a company that tokenizes one specific line of assets, one specific asset category

and there's data and like just baggage and compliance and you know CRM as it relates to that >> machines probably.

>> Yeah. Just like all all of the baggage it takes to just just tokenize this one vertical. But now this one vertical is

vertical. But now this one vertical is owned by this verticalized tokenization platform. And so we could go and point

platform. And so we could go and point that towards a specific more narrow asset class and that one asset class could be in theory owned by a company

that we would like to invest in. Uh

something that owns an entire vertical.

Maybe maybe that's a little bit a different way to articulate and illustrate exactly what we're going after. what kind of assets what kind of

after. what kind of assets what kind of assets uh uh classes Arnov do you think would be most interesting for a verticalized tokenization platform to go after?

>> Yeah, it's a great question. I think

there's a few areas where VTPs could really have an impact and it really is extensible to almost anything. I believe

there's a few areas where it's better versus not. It could be auto loans, it

versus not. It could be auto loans, it could be solar loans, it could be BNPL receivables. uh all of these areas

receivables. uh all of these areas could receive a crazy crazy cost benefit by moving basically everything onchain

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free. Link in the show notes for more information. Well, since you mentioned

information. Well, since you mentioned cap formation, I think that's the the third theme that we want to investigate.

And once again, every single wave, cap formation has been important for crypto.

It's something that we consistently find net new ways to do. And in the beginning, you know, the uh wave 1, there was the Ethereum ICO, which was one of the original cap formation

moments. And you guys remember that uh

moments. And you guys remember that uh that increased until a 2016 2017 ICO bubble. We had massive ICOs like Augur

bubble. We had massive ICOs like Augur in the early Simple days and basic attention token. People remember BAT and

attention token. People remember BAT and the Brave browser. And then it culminated with EOS which was a uh ICO

in June 26, 2017. uh lasted for roughly h a year and a ballpark of $4 billion dollars raised which was absolutely

monumental particularly at the time. So

we discovered that we can raise money in internet capital markets natively and we did a lot of that on projects that weren't worthwhile uh in a lot of cases

and some that were uh wave 2 we had a different form of capital formation saw that mainly in the form of NFTs because ICOs were basically like um regula regulatory gray zone or dark zone

couldn't touch those anymore and so capital formation took the form of hey we're doing an ICO. We're doing an NFT platform, right? Digital items. You guys

platform, right? Digital items. You guys remember board apes. You guys remember Sandbox, you remember the uh digital real estate into centraland that was a

new form of this. We also saw early Dpin type of experiments which is like raise capital to actually fund real world infrastructure, physical in infrastructure. And then we started to

infrastructure. And then we started to see some investor ICO accredited investor more regulatory friendly

mechanisms like Coin List. um wave three so 2025 this extended and we got some new innovation there's a pretty cool prototype u called I I call it a

prototype it's like early phase application called metadal we did an episode bankless episode with them and this is the idea of like can we incorporate greater investor protection

inside of a cryptonative capital raise we've also seen on the retail front echo sonar you know acquired by Coinbase And so there's an ICO platform. We've

really seen a resurgence of ICOs. Um,

recently too, we've got some cryptonative ICOs like the Aztec ICO that's that's ongoing with ZK Passport.

It feels like we're still in the early phases of this and once again it's become um less gray market and there seems to be a path to compliant uh ICOs

that actually work, but there still seem to be some big problems. So in the capital formation trend, what are we looking at going into this fourth wave?

>> I'll start with a few of the things that I think are existing issues. I think the first is we still have this lack of investor protections problem, which is what metadata is trying to solve, but we

end up with this market full of lemons type of issue. I think this was really portrayed by whether it's like recent token launch pads like Believe or HeavenX. Um, and this is also kind of

HeavenX. Um, and this is also kind of leads into this like adverse selection problem which is like only poorer projects raise from the token launchpads when the good ones raise from the VCs.

That's right.

>> Right. So, we almost want to figure out okay, how do we close that gap? Uh, the

other issue related is how do projects attribute value to their token without explicitly breaking securities laws? And

the more that we can get closer to this than just buybacks, the better, right? A

few unlocks though I think are going to be massive. We are receiving regulatory

be massive. We are receiving regulatory clarity from a number of fronts. I think

one big thing is that the Howie test is super outdated and it just shouldn't be retrofitted for digital assets. I think

that will be changed sooner than later.

The other thing which has been massive this past year is I think there's been this new social consensus around how important transparency is. Transparency

around market makers, transparency around token launches, around treasury.

I think there's been a number of strides in this direction. And one of them being the block works token transparency framework and a number of other related things here like coin glass and so forth. And the very last thing which is

forth. And the very last thing which is a huge unlock is there's been great experiments this cycle so far. Metadaf

utarch is obviously the notable one. I

think Doppler is building some phenomenal uh mechanisms for onchain price discovery. I think you have things

price discovery. I think you have things like ERCS tokens by street foundation that provide a framework to attribute value to tokens. So I'm excited about all of these things. Those things are

excited and but yet they're not yet scaled up uh to the level that we'd like to see them for internet capital markets to be like a primary or the primary capital formation tool that that the

world uses. Um so what kind of things

world uses. Um so what kind of things are we looking at investing in in uh going into 2026?

>> I think it's a handful of areas. The

most obvious to me is going to be compliant ICOs or ICOs broadly. I think

we will have a new gen of ICOs that are unlike what we've had in the past where these are real companies trying to do real things and we'll have the actual cap formation mechanisms to do it right.

The second thing which I think is going to be really interesting which is somewhat related to that and this is a little bit contrarian. I don't think it's crazy that small or and mid-market enterprises might actually start issuing

stock onchain natively and raising USDC and actually deploying that in the lending markets or just broadly on chain.

>> Wow.

>> Uh yeah, it's it's a little bit wild, but like why not, right? Because there

is a long tale of businesses out there that need financing that can't receive it. And there's a way that this can be

it. And there's a way that this can be done on chain in a curated manner, mind you. But yeah,

you. But yeah, >> and you happen you think that happens with kind of smaller businesses uh like first before some of the the large enterprises.

>> I think it's TBD how it happens. I think

it's likely large enterprises do it first. And I actually know of a few that

first. And I actually know of a few that are going to do it. But I don't think it's crazy again that I don't know maybe a car wash business that has been around for 5 years, why can't they raise

capital on chain in the right format? I

think that's what internet capital markets is supposed to be. How close are we to a world where Elon Musk's next company is uh rather than kind of going

through the you know I guess a traditional investment bank process of capital formation in the US it's actually natively raises on chain is that a wave four thing or is that like a

five six we have to wait a decade for that >> it's it's a little bit farther out but I would say there's a world in which a decacorn unicorn a decacorn crypto

company decides instead of IPOing, they're going to go do what they're doing on chain instead. We we've been practicing for this. I mean, crypto does

capital formation very well and these initial phase one IP ICOs were effectively an IPO onchain without the

arduous IPO process. So as we add more clarity around regulations and disclosures but not quite to the phase that's necessary for a traditional IPO

and then um removing the barriers to actually owning these things then it becomes a lot more feasible to actually issue uh stock onchain >> and it especially becomes pretty obvious

that this is going to be a thing when we piece some of the other other puzzle pieces that we've already discussed together mainly the neo bankanking thing like say Every person in a in a

developing country gets onchain with Ethereum with stable coins with a neo bank and then all of a sudden the internet capital markets is just one single button press away from some

user's neo bank to some capital formation activity because some company is raising a small medium amount of funds. But most much more people on the

funds. But most much more people on the internet have access to stable coins in 2028 than they had in 2024. and all of a sudden the the possible uh investor base

is just so much larger simply because some of the other puzzle pieces that we've talked about so far in this episode have grown to be much more mature. So that's what one of the the

mature. So that's what one of the the themes of perhaps what next wave four and and five look like is really a lot of the network effects of crypto really start to pay dividends in on itself uh

as crypto hopefully uh takes over the world. The last thing I wanted to

world. The last thing I wanted to mention about theme 3 and cab formation is that especially for cryptonative projects at least in the near term probably the most exciting thing to me

is is the entire capital stack is now onchain you don't have to actually go to the centralized exchanges give a huge percent of your token supply and pay these exorbitant fees for that

distribution. There is a lot more

distribution. There is a lot more distribution on chain today and we have the entire capital stack to support you and this effectively takes away uh power from these centralized exchange listing

committees and moves it back on chain which is really exciting. I think

hyperlid was the first really big thing there and a lot of these metadow projects are also headed in that direction but I think we will see this more and more in the future. A lot of these really hallmark projects will not

list on centralized exchanges. Rather,

they will just do what they need to do on chain because they can and we're going to have the infrastructure and the discovery mechanisms and the dex micro structure to go and do that. And the

last thing I'd mention on that front is we're seeing early renditions of this. I

think pump was somewhat of a good example in that if you look at the pre-market per open interest, it was actually significantly higher on Hyperlid than it was on Binance. So that

effectively made Hyperlid the venue of price discovery. And we've seen this

price discovery. And we've seen this also for the Mega ETH launch and for the Monad preo launch, right? So I think it's just an early indication that the entire stack could absolutely move on

chain and you don't need to go to these centralized venues. And the very last

centralized venues. And the very last thing I'll say in this point is that it's it's very true that centralized exchanges have been the biggest winner in crypto to date. They make the most revenue. They have the best economics.

revenue. They have the best economics.

So the more that we can move and this onchain and internalize those economics, the better it is for everybody. All

right, let's get into the last theme.

The theme that has always persisted in crypto that everyone is a participant in whether they like it or not. Speculation

and speculation markets. Now, we've

already talked about ICOs all the way back uh in the beginning of 2017. Uh but

interestingly, it's not just ICOs, which was the activity of people's speculation, but Augur, the world's first prediction market came online in in 2017. NFT marketplaces like OpenC and

in 2017. NFT marketplaces like OpenC and play to earn ecosystems like AXI and then also later another prediction market like Poly Market. These are all turned into venues of of speculation and

speculation is increasingly in in newer and younger generations as they become financially savvy and financially literate. Uh the most recent iteration

literate. Uh the most recent iteration of this probably the points meta starting with blur meme coins on pump fun but now I think we are getting into the professional and polished and at

least decently useful version of speculation which is in the form factor of prediction markets in poly market and kshi. Uh so this is kind of the

kshi. Uh so this is kind of the background of of speculation. It's

inherent to crypto. Uh everyone's kind of speculating more or less. Sometimes

it's actually somewhat useful. Arnov,

before we get into some of the problems that we still have and what the current market environment is like, uh what do you want to say about just the nature of speculation markets as it relates to uh

investing as a VC?

>> Yeah. So the reason why I think speculation markets are going to grow like 100x in the coming years is in one sentence is financial nihilism. I think

we've seen this really strong lack of opportunity in the job market, lack of wage growth, insane asset prices, inflation, especially young folks feel very financially boxed out and

speculation becomes that conduit that it feels like the only path to upward mobility financially. And this thesis

mobility financially. And this thesis has like very clearly fleshed out in traditional markets. So a good example

traditional markets. So a good example of this is over the last three years, sports betting is up 25% year-over-year in the US alone. And over $150 billion is wagered last year. And growth in

parlays, which is leverage sports betting, is even higher than that. And

what's crazy is this is by and large dominated by the sub25year-old crowd. So

that's like one interesting trend. The

other interesting trend is like how this is proliferating. So at the same time,

is proliferating. So at the same time, you would think that things like lottery sales, in-person casino gambling, like these things are growing as well. These

things are actually decreasing. And the

last thing I want to mention on this is it's this thesis of something called intellectual speculation, which is a way to actually reason about what might be popular in crypto next. And it's

essentially this thesis of risk-taking or justify or this risk-taking behavior.

Um, you do it only where you feel like you have an edge. And crypto is phenomenal at manufacturing these games where people feel like they have an edge. They feel like they have an edge

edge. They feel like they have an edge in ICOs, NFTts, PES, prediction markets, memecoins, and whatever is next. People

do not feel like they have an edge when they buy a lottery ticket. And that's

why the type of gambling where people feel like they have an edge is growing exponentially driven by financial nihilism, whereas uh the trad forms of gambling are actually dying. And crypto

actually shines because of this thesis.

Yeah, I do think you're right, Arnoff, that you know, much of this is is driven by kind of financial nihilism. Not to

say that speculation doesn't have a good side though and like a healthier side.

It's like um speculation is kind of knowledge discovery, isn't it? And it's

uh price discovery and it's hard in the early phases almost to separate kind of investing early stage and speculation like what indeed are the differences.

But it is it is true that crypto has increased the tendency to create speculation markets over just about everything. Um and we've seen one of the

everything. Um and we've seen one of the manifestations of that is like there's prediction markets for just about everything. What is the problem right

everything. What is the problem right now that we have to solve with speculation markets and what things are we looking to invest in in this theme

going to wave four? One way to tie back to what I said previously is not all of these things are zero sum. I think the first iteration of ICOs and NFTTS and

even memecoins to a great extent are very zero sum. I think prediction markets are phenomenal. I think the decentralized truth machine thesis is very real. I don't think per zero sum

very real. I don't think per zero sum and I think the next iteration of ICOs also will not be zero sum um and actually very value creative. So I'm

very yeah so I'm very very excited about those things. Not everything is hilistic

those things. Not everything is hilistic at all. Right. And that being said going

at all. Right. And that being said going into things that I am really excited about. So we already have kin poly

about. So we already have kin poly market which have really popularized the prediction market space. I'm not super bullish on people trying to like compete directly with those incumbents. Now uh

but there are a lot of alternative markets which are very interesting are kind of one degree away from prediction markets. So, precision markets,

markets. So, precision markets, consensus markets, opinion markets. A

good example of like an opinion market is you're able to bet with leverage on who would win, you know, uh, one gorilla versus 100 men. I think that's like a very very cool thing to speculate on,

right? So, that's definitely one area

right? So, that's definitely one area I'm very bullish on. You you gave out a handful of uh of these things with markets appended to them, opinion, consensus, precision markets. These are

all subjective uh opinion me wisdom of the crowd type of constructions different market mechanisms that all leverage some nature of wisdom of the crowd where I think

with polyark and kshi there is a binary outcome with a real world event but these things are even more subjective and starting to become a little bit more um maybe even nebulous and sci-fi than

uh the the prediction markets. What else

is worth saying about some of the like the these NEO prediction markets, opinion markets?

>> I I would say >> if you're looking to invest in this category, one thing that you actually have to really ask yourself is can these things >> attract liquidity or not? It's very

difficult to do that because even though Poly Market is monstrous and has had like a billion plus eyeballs on it, um, and has raised, you know, $2 billion from basically the New York Stock

Exchange, the OI is still quite low.

It's like around 250 million. And on

most markets, you can't really trade them because the spreads are so wide.

So, you as an emerging market doing new stuff, I have to make sure that like whatever I'm building can actually attract liquidity um, so that way traders can trade it. The reason why I think this category is so exciting and

you start to see it in poly market and prediction markets generally is financial markets are starting to like distort time which I think is really really cool. We're looking forwards into

really cool. We're looking forwards into the future. Uh when prediction markets

the future. Uh when prediction markets predict Donald Trump's presidency just a few hours ahead of mainstream media that illustrates something with the nature of time like we are moving faster and we

are able to look forward in time even more. And when I see more interesting

more. And when I see more interesting experimental uh frontier constructions of these same kind of things like opinion and

consensus markets uh trying to categorize and order people's opinions or people's thoughts about the future uh I start to get really excited because it's one of the most sci-fi

constructions of a marketplace that I think is possible where one outcome of this is the future whether that's just hours or days or weeks. weeks, not even

that long, but just becomes more int more tangible to society through markets and data and content through these market mechanisms. The future seems like it arrives a little bit sooner or is a

little bit more predictable or very nebulous truths that we would have never been able to discover before all become much more closer to society's grasp

which is why I'm particularly excited about this category.

>> Absolutely. Arnov, do you have do you have any predictions? Right. So, every

cycle we've seen a a breakout of some sort of speculation market, right? ICOs

wave 1, NFTs, wave two, wave three, it's been memecoins. What's what's the next

been memecoins. What's what's the next memecoin? What's the What's the wave

memecoin? What's the What's the wave four thing that's really going to break out here?

>> If I were to break it down into one new thing that I think will break out, I think it's going to be some rendition of an opinion market. I think there's a lot of virality built in to betting on crazy

topics uh that are very timely and they can draw a lot of attention. I think one team is definitely going to nail this and it will be a pretty large outcome.

>> Interesting. I have so many questions still about opinion markets and you know similar to David like how do they resolve who decides if it's an opinion like the the oracle problem of you know can these things be manipulated or

influenced? So, I'm I'm sure whatever

influenced? So, I'm I'm sure whatever team comes up with, you know, the the unicorn idea here is going to have to contend with all of those things.

>> It is a super interesting and complex design space. And to sum it up in one

design space. And to sum it up in one question or into one sentence is that traders need to have confidence about the resolution for sure. And that is the hardest problem with anything that does

not have an intrinsic spot market pretty much.

>> Okay, those are the four themes. I think

we've we've covered them. Um, one thing that's been noticeably absent here though, and I want you to weigh in on this maybe in a second, is we haven't talked about AI once, and yet everybody,

the whole world is talking about AI. I

guess if I were to maybe frame this out in terms of how I think about it, so far in crypto across all of these different waves, we've had one primary user, one

primary player, I guess, and that has been the human being or groups of human beings, and you get institutions. Um

these have been the cryptonatives even on bank list we talk this is you know podcast for crypton natives we're talking to the humans out there uh now

we have AI agents who have increasingly humanlike capabilities let's say and those capabilities are increasing at a fast rate it almost feels like a new

player has entered the chat or is about to enter the chat we've seen simple renditions of AI agents of course in the form of bots and we've bots with us since like the very early days of the

internet. But AI agents with some sort

internet. But AI agents with some sort of human level reasoning, that feels like something new. And it feels like the programmable money platform that we

have created is incredibly native to an AI agent, right? We said, how does an AI agent get a bank account? Well, they

can't they can't go to a bank and say, please, you know, can I can I deposit money here? It's going to be quite

money here? It's going to be quite clearly on crypto rails. How do AI agents as a new player entering the chat, you know, shake shake up all of these ideas across the themes that we've

talked about and like what's investable in uh I don't know if I'll call it crypto AI because it's it's more like the AI agent the presence of AI agents in crypto. What's investable there?

in crypto. What's investable there?

>> Yeah, it's it's a great question. I

think I'll break down like the areas of crypto AI that exist first and then I'll share what I think is investable. So you

have the decentralized compute inference training data aggregation that's been there for a little while. These are

things like your bit tensor subnetss and you know as a proliferation proliferation of that you have things like verifiable compute zkl and all that. Uh we also recently had the AI

that. Uh we also recently had the AI agent meta, things like AIXBT and virtuals and basically these just broadly these automated Twitter agents,

right? Um not so bullish on these areas

right? Um not so bullish on these areas as investment opportunities, though I do think there could be growth. Uh the two areas where I really see asymmetric

outcomes as far as an investment opportunity, I think the first one, even though it's a little bit abstract as to how, but X42 is going to be massive. So

for those who don't know, X42 is essentially a virtual payment standard allowing agents to transact uh using stable coins, right? And I think you could argue that X42 could become the

substrate to pay for all web resources, agent to agent or developer to X resource. Um the second area which I'm

resource. Um the second area which I'm very bullish on related to AI are AI agent asset managers. The reality is humans weren't designed to manage risk

uh on these 247 markets and AI agents can do that at scale. They can manage liquidity risks. They can manage smart

liquidity risks. They can manage smart contract risks, dagging risk. And I

think just generally speaking, we will have a proliferation of AI agents that know how to manage risk and can act in DeFi broadly.

>> Very cool. Exciting times ahead. So AI

agents having a um big effect on the space is is something we're all anticipating looking forward to. I I

guess as we zoom out too maybe Ben I want to ask you a question because um getting the themes right is important and predicting how the world will look

in 2027 2028 is maybe half the battle but the other half of the battle is investing in the teams that can execute the vision. So there's the idea and then

the vision. So there's the idea and then there's execution and for that you need founders who can ship, who can build, who can deliver, who have the durability. Can you talk about that

durability. Can you talk about that across all of these various themes when you look at the founders that are um going to succeed here? What specifically

do you look at? Like what are the characteristics? Yeah, I mean I think we

characteristics? Yeah, I mean I think we Arnold did a great job of like going in deep on a lot of these themes, but as you have seen they're the themes that have been persistent across the different cycles and that's why I think

it was helpful to go through the history of each one but for us at especially at Bankless Ventures I mean the big thing is staying agile like these are areas

that we think are very interesting and exciting but ultimately we're just laser focused on backing the strongest founders at the earlier stage.

they might end up pivoting. So, it's

really overindexing on the founder itself and and not getting so enamored by the idea that we forget to really get to know that founder and like what makes them tick with crypto especially as

we're talking through this. it I mean it highlights the kind of short termism or short-term nature of a lot of these different cycles or waves but for us

just really focusing on not where we can win over the next 3 to 6 months where people are everybody everybody is talking about it but like where we can back these durable founders over the

next 3 to 6 years. So that's that's another like throughine with all of these even though we're talking about these themes is really staying laser focused on the founders themselves.

>> All right guys, this has been great. Ben

Arnoff, uh is your guys' first time on bank list? Thank you guys for coming on.

bank list? Thank you guys for coming on.

I think this is a pretty cool opportunity to give some of the listeners how we think as a VC. And even

though these are the same four themes that our listeners are already very familiar with, especially the ones that came all the way back in 2017 when some of these themes first emerged into 2021 to where we are now in 2025, ending

2025. Uh I think this will be pretty

2025. Uh I think this will be pretty illustrative of what we think these themes will continue to look like as we work higher up the stack. And I think the market opportunities gets larger,

maybe more dispersed and proliferated. I

think the more quantity of uh potential startups is going to be higher especially as just the sphere of influence of crypto gets larger and larger. Uh but this is how we think as

larger. Uh but this is how we think as investors at investing in the same trends that we always have known. So I

appreciate you guys coming on and sharing some of the insights that we've been working on over on the bankless ventures side of things.

>> Uh thanks for having us on David Ryan.

This was awesome. Uh been listening the pod for going on five years now long before David had a beard. So, it's uh >> yeah, pretty full circle to be on here.

>> Thanks, guys. This was great.

>> If any of these uh categories interest you, you've got something to say about it, you are building in one of these categories, or you are interested in investing alongside Bankless Centuries, there are links in the show notes to do any and all of those things.

Nonetheless, this has not been financial advice. These are our crypto thesis for

advice. These are our crypto thesis for 2026 and beyond, not yours. Crypto is

risky. You can lose what you put in, but we are headed west. This is Frontier.

It's not for everyone, but we are glad you are with us on the bankless journey.

Thanks a lot.