Paradigm Huang Gongyu: Details of early investment in Zhang Yiming, encryption technology trends

Author: MD, Source: Mingliang Company

Recently, the well-known investment podcast InvestLikeTheBestAnchorPatrick O’ShaughnessyParaDIGMCo-founder ofMatt Huang(Huang Gongyu) conducted an in-depth interview, and Huang Gongyu had previously worked as a partner at Sequoia Capital in the United States.at present,ParaDIGMSuper management scale$12 billion.In 2018, Huang Gongyu founded Paradigm with Coinbase co-founder Fred Ehrsam.

In the interview, Huang Gongyu also recalled his experience of investing in ByteDance in 2012.

At that time, in his opinion, Silicon Valley did not have much information gap; in terms of C-end applications, it has become very “predictable” for interesting work and considerable returns.A company he founded previously sold to Twitter,During his vacation, heGo to Beijing with the idea of ​​starting a Chinese technology company.Six founders were visited.One of them is Zhang Yiming.At that time, Zhang Yiming was making headlines, but from Huang Gongyu’s perspective, the possibility of this path being successful is very small (the same type of projects in the United States ended in failure).

Zhang Yiming talked to Huang Gongyu through the translation, butHuang GongyuBy the founder“Nonverbal clues”Attracted – his gestures, expressions and intensity paint a picture that he can understand without words.

During the communication process, Zhang Yiming left an extremely deep impression on Huang Gongyu. In the interview, Huang Gongyu said: “I remember having a very deep feeling at that time,He is an extremely capable and very focused person. He is also very balanced and will not be crazy enough to self-destruct, but is also extremely aggressive and has the ambition to conquer the world.I think this is a rare combination.”

And when he left ByteDance’s newly started apartment (probably Huaqing Jiayuan), heWhat I thought was: “I have to find a way to support this person.”

Soon, Huang Gongyu wrote a check to ByteDance at a valuation of US$20-30 million, which was his largest personal investment at the time.With ByteDance nowadaysReached 2000-$300 billion, his investment increased by about 10,000 times,He still owns a majority of the shares, and he admits that “it’s probably the best investment I’ve ever made.”

Huang Gongyu’s educational experience was also influenced by East Asian families and once wanted to complete his doctoral degree at MIT.His father, Huang Qifu, was a well-known financial economist and was the head of LTCM’s Asia Office; his mother was a computer science professor.

The following is the main text of the interview compiled by “Bright Company” (with abridged)

Patrick=Patrick O’ShaughnessyInvestLikeTheBestAnchor,Postive sum CEO

Matt=Matt HuangHuang Gongyu, ParaDIGMCo-founder, former partner of Sequoia Capital

Patrick:Today’s guest is Matt Huang, co-founder of Paradigm, a leading Crypto investment company that manages over $12 billion in assets.In 2018, Matt founded Paradigm with Coinbase co-founder Fred Ehrsam.Prior to that, Matt was a partner at Sequoia Capital, where he led many of the company’s Crypto investments.Michael Moritz has widely reported that Matt is the only regrettable loss in Sequoia’s history.

In our conversation,Matt shared his navigation framework in the often difficult-to-understand cutting-edge field of Crypto, his early investment in ByteDance—now the return is 10,000 of his initial investment.Time –How he has shaped his approach to identifying outstanding founders and why he is so firmly convinced of the long-term potential of Crypto technology.His company Paradigm not only invests in many industry-leading companies, but also builds open source tools that are widely used by the entire Crypto world.

Matt has a rare IQ and EQ that allows him to understand technical complexity, gather unique talents, and deal with well-known volatility in Crypto.Whether you are interested or skeptical about Crypto, I think his views are valuable.

01Early life, education shaping

Patrick: If you divide your life into early chapters, say, until you become a professional, what are those chapters?What happened in these chapters?Why do you divide it like this?

Matt: Let me think about it.I want to say there is a chapter in childhood, like many people, my main goal is to get into college.Looking back now, it makes me feel a little frustrated for many reasons and I don’t want my kids to do the same in the future.But this is a very primitive goal in my life.My parents are both PhDs and professors, so education is the North Star of our family.

Patrick: Guiding principles.

Matt:Yes.I’m lucky that they are relatively enlightened if they look at the stereotypical Asian parenting style.So they were very supportive of me for the second half of my life, when I took the risk and decided not to go that path.

But no matter what, this is the first stage.The second stage may be a period of exploration in college, and naturally figure out what to do next.The third phase is to start a failed startup.The fourth stage is learning to become an investor.I think I’m in the fifth stage now,That is, to create Paradigm and find ways to express yourself.

Patrick: When did you first realize this family guiding principle?

Matt: This is only realized when reviewing it later.It was as natural as water at that time.This is an interesting thing, I think back to family gatherings,Parents will invite their friends or introduce people they know, almost every time they are talking about titles, they will say which university they graduate from..So from a very young age, I deeply instilled with the idea that this (education) is what defines a person’s value.I think this is totally wrong, but that’s what drove me forward in the first place.

Patrick: Did you have a good time in college?

Matt: Yes, it was actually quite enjoyable.

Patrick:Why?

Matt: I went to MIT, which is a super special place.I didn’t realize it at the time, but it was probably one of the most concentrated places on Earth with strange crowds.I think there are few such centers, I think Silicon Valley is one, and Crypto field is one, but they are relatively rare, and I think there will be a lot of creative and interesting fringe activities coming from these places.

I also met my wife here, which I didn’t realize at the time, but now watching some of my friends struggle in their life after college, I don’t envy the environment they are in.

Patrick: Apart from meeting your wife, what was your most memorable day at MIT?

Matt: Well, the most memorable thing… Actually, this continues to the next chapter.Startups are very popular now, but around 2008, they were relatively new.Maybe if you go to Stanford, this may be the default choice for many people to pay attention to, but at MIT, most people take other typical routes—finance, consulting, high-frequency trading.

I remember I had a close friend who was a first grade higher.He told me he was dropping out of school and joining a San Francisco startup called Dropbox.He might be the sixth or seventh employee there.This broke my worldview at that time.Given my growing up background and the influence of my parents,This concept is very strong——Not only does a person have to get into a good university, but he also has to graduate and may even have to pursue a PhD, but dropping out seems crazy.

However, this is a person I respect very much, and I think he is very capable, not the kind of person who fails academically or pursues completely unrealistic things (such as being an actor).This is a real turning point because it makes me think about what kind of thinking chains will allow a capable person to make such a choice.This led me to discover Paul Graham’s articles and Y Combinator and start to understand the entire Silicon Valley ecosystem.

Patrick: I remember reading Paul Graham’s article.These articles or these windows can open doors to possibilities for you.Can you tell me in detail what you think next and what you are actually doing?

Matt: Speaking of which, this is a very leverage behavior.PaulGraham wrote some text on the website, which I think has changed the world a lot, opened up a universe for nerds and taught them how to start a company.In a previous world, they would be completely subject to CEOs with MBA degrees.So, I think it’s a very interesting topic.

But for me, it has a big impact becauseThe gains of metacognition are very actionable.I was in a state of mind at the time: I was going to MIT, and my parents wanted me to study for my Ph.D.I need to think about what major I want to study and where to apply.I’m not sure what I should do in the summer to start contributing to research.

Not even sure if this is something I should optimize.What makes me feel very liberated in Paul Graham’s article is that you don’t need to seek permission from others, because all PhD programs are the case.You can figure out what you want to do by yourself and then go straight to it.There is a popular meme now,That is, you can do things directly.I think it’s a cliché, but I think it has deep truths.

I found it very illuminating and it reshapes my worldview of what I want to do.I major in applied mathematics.I have been making websites since I was a kid and have fiddled with Photoshop.Many children have done these things.But I didn’t really learn how to program or computer science.

I immediately turned to that time – a lot of computer science courses actually counted in mathematics as well.So from that point on, I started to learn how to build things.Then my roommate and I started doing something that ultimately led to our entrepreneurship.

02Startups Growth Gift

Patrick: Tell the story of a failed startup.This is the only way to grow.

Matt:We applied for Y Combinator twice, but the first time we were not selected.I clearly remember that we flew to California for an interview, we had an interview with Paul Graham (PG), and he called us that night.Maybe they still do this and will reply that day.He said: “We like you very much, but are very dissatisfied with your ideas. Can you come back? Let’s brainstorm and try to come up with something for you to do.”

We did this, but still didn’t come up with something that interests them.Then I think about a week later he published a paper,The content is probably “why young people have bad ideas.”

Patrick: You are very enlightening (laughs).

Matt: Yes, that’s right.So I think we are indeed trapped in common traps that young entrepreneurs have.You overestimate the problems you encountered in college. Many young people will be attracted by the problems they encountered in college, but college students do not represent ordinary consumers well.

From there, six months later, we continue to build and develop things.Ultimately, in the next batch, we already have a prototype with users… but even so, it’s still a bad idea.If you remember that period, it was the first time streaming content went live.For example, Netflix and Hulu.

Patrick:What year was that?

Matt: This is 2010.So we raised some angel rounds and seed funds at Y Combinator and continued to build, but in the end it didn’t develop the way we wanted it to be.So we started looking for opportunities to be acquired and eventually acquired by Twitter.This is also an interesting chapter in itself.

Patrick:What did you learn during the merger and acquisition process?

Matt: During that period, they acquired not business, but talents.We went to interview Airbnb and Palantir.I ended up choosing Twitter, which is probably the worst-run of the three companies.

What I want to say is that from a failed or failed startup, I don’t think there is much substantial to learn, but I think there are some lessons to learn.As a parent, I have definitely experienced this more than before.There are some things you have to experience before you can learn.youThere are so many things you can read, you can think you understand them, but the real epiphany doesn’t happen until you are in.

I think the ambiguity of creating new things from scratch and the loneliness of the founders, and the empathy of all founders, which are probably the main gains I got from that experience.I think this is the biggest help that experience has brought me.

Patrick: If I could go back to that period, back to the last day of that chapter, and ask you, “Matt, what is your worldview? What do you think you would say?”

Matt: Well, I know I want to work in technology and build things.I’m really not sure if Silicon Valley is the ideal place to do this.This is actually related to…I have briefly considered the past China entrepreneurship.Because this is 2012.At the time, everyone in Silicon Valley felt that there was a little saturation there.Obviously this is not the case, but the iPhone was released in 2007 and many mobile applications have been developed.

I think 2012 is the year when Instacart and Snapchat were founded.These may be the last batch of large-scale consumer outcomes dominated by mobile.This is the area of ​​interest to me.Enterprise-grade applications are very interesting to some people, but not to me.

Therefore, China seems to be a field that can achieve this compound annual growth rate.I think, hey,I’m Chinese-American, maybe I’ll have some advantages there.When I went there, I realized, no, I am not really Chinese.This is a completely different thing.But this also eventually led to investment in ByteDance.We can discuss this in detail.But when I came back again, I felt there was potential for many decades of compound growth opportunities there, and the Crypto field was one such area.

03Talk about the early stageinvestByteDanceWith Zhang Yiming: Very focused, aggressive, ambitious, and will not lose control

Patrick: There is a picture in my mind, like we are making a movie about you.The opening scene is when you boarded a plane to China during that trip in 2012.This will be the opening shot.Can we do this in audio?Can you tell me as much detail as possible about that critical trip, every detail you can recall?

Matt:I’ll try.If you think back to 2012, every American venture capitalist and company was trying to enter China.China is entering Hollywood.Globalization is at the forefront.I think maybe there is where I should go.

I took a week off from Twitter.I have some common friends who know people in venture capital or tech in China.So they arranged some meetings for me.So, I landed in Beijing.I’ve been there before, and during my summer break at MIT, I went there to learn languages.But even in that short six years, the entire city has changed dramatically.As soon as you land, you will find that this is a huge city, which is gray.But I still remember feeling this energy on the ground, a culture that is experiencing rapid growth.In Silicon Valley at that time, despite its passion for startups, its culture was already somewhat complacent in some aspects.

This is very inspiring.So, I went from one meeting to another,There is no intention of making any investment, just trying to learn.I met Dropbox in China, and ChinaX and Y.

I remember coming to ByteDance, which is an apartment building divided into two apartments.I brought an interpreter.We took the elevator up and the floor was very simple.I was pulled into a small kitchen and you imagine a refrigerator that looked very old and could be dirty inside.There is also a very simple IKEA-style kitchen table with some stools.I just sat there and talked to Translator and Yiming, the founder of ByteDance.

There is one very interesting thing, we have a common friend, Graham Duncan, who talks about interviews, recommendations and observations.Looking back, this was a very unique experience. I might not understand what he meant when he spoke, and then the translator would translate it to me so that I could understand it.But as he speaks, I can observe his nonverbal information with all my heart.

I remember having a very profound feeling at that time.This is an extremely capable and very focused person who is also very balanced, not crazy enough to self-destruct, but extremely aggressive, with ambition to conquer the world.I think this is a rare combination.I don’t like the idea either, it’s a personal news app (i.e. Toutiao).This was before TikTok or TikTok came out, so at the time their main business and the idea of ​​building a company was a personalized news app.

I remember that this idea was not successful in the United States at that time, and many people tried it.I now have some hindsight on why it will succeed in China, but I didn’t like the idea at the time.But since that meeting, I felt, my goodness, I have to find a way to support this person.

Patrick:How did you do it?Did you take out $20,000 and say, “Let me invest in your company?” Just like, what are the actual conversations and operations?

Matt: After we left that trip,I talked with some other investors who also introduced us to.What I gained from that trip was that he was that person.Then, that group basically begged existing venture capitalists to find ways to get us involved.They are very kind.

Patrick:What is your valuation when investing?

Matt: There are some different types of shares, but it is around $20 million to $30 million.

Patrick: OK, what started to gather and let you enter the investor’s brain and investment chapters?Is there a feeling like, like, “Wow, this is something I want to do repeatedly?” What has happened to you?

Matt: I want to be in that stage of life,He is probably the most impressive person I’ve ever met – you must have experienced so many times – an impressive person I’ve really spent time with.I’ve read a lot of stories about impressive people, which is very inspiring and a little addictive.Now as a venture capitalist, we basically do this all day long.

Patrick: So, back in the past, you mentioned his two traits,He doesn’t lose control, he has control,But bold and aggressive.Maybe let me talk about it in detail. If it weren’t for these two traits, try to describe the meeting in more detail.What you see and what you feel.

Matt:He has a very clear understanding of what to build and why.I recently reread Elon Musk’s Tesla Master Plan for 2006.If you read that document, it has an extremely clear description of business strategy.Zhang Yiming also has such a clear understanding of this personalized news idea – in fact, personalized news underestimates it.

I think what he sees is what it ends up being, the market for global attention and media.Just like before the algorithm appears, you might use social networks to get information.Before the social networks came along, you used newspaper editors to do this.But this is the high-frequency trading version of the media market, and he saw it at that time.

It took me a little longer to fully understand this.But his clarity and radical ambitions,I think since day one, he has been very focused on building an international business.At that time, every Chinese company had a Chinese business, even Tencent and Alibaba.Therefore, he actually believed that he could do this, which was very bold.

Patrick: I assume you have been holding this investment for a long time.What I want to know is whether you still hold it.We can also discuss this issue from the perspective of Crypto currency.Many of my mutual friends are early investors in Bitcoin.One noteworthy phenomenon is that they are rich from the beginning, which makes them easier to hold.

And those investors who have achieved great success for the first time, if they get 100 times the return, they may sell because they have made a lot of money.But then, this may make them miss out on bigger gains because they are not holding for longer.So, do you still hold it?If so, what is it like to hold an investment like this that is worth much more than you might have expected of it at first?

Matt: I hold most of it.This is a very strange situation because it is illiquid most of the time.So this is much easier compared to Crypto currency.I think when a sound secondary market appears and it is possible to sell, I don’t know that I’m not comparing with the original cost.At that time,It is always possible to become the largest company in China.

As an investor, this will certainly confuse you because it is probably the best investment I have ever been involved in.

Patrick:What is the return on investment?

Matt: I have not calculated the specific numbers after adjustment and dilution in my mind.butIn old stocks (SeCondary)marketThe current transaction price is between $200 billion and $300 billion.The simple calculation is that this is a 10,000-fold return, assuming it is a 5,000-fold return…

Patrick: Very good.

Matt: If a U.S. company had these numbers, it would be worth $1 trillion to $2 trillion.So it may grow 10 times more.

Patrick:Yes.Is it weird to know that this is probably the best investment you have ever made?

Matt: Yes, that’s weird.I find that I am increasingly accepting this reality,But let’s not pretend that it’s some great skill.I think I have some intuition and it’s a good investment.But like many early stage investments, it’s just an opportunity to say “yes”.

Patrick: Yes, what I want to know is, if I arranged my five most successful investments from 1 to 5, how many times did they share that kind of “energy trait” you described?Maybe list what are they?

Matt: Yes, I think this is true for all investments except Crypto currency investment.

Patrick:certainly.

Matt: I think there, there is an analogy of the “energy characteristics” of the community or meme.

Patrick:Yes.Give me a feeling.What do you think are the other four most important investments?

Matt: So I don’t have a spreadsheet.Somehow, I didn’t follow this.

Patrick: You can say it based on your feelings.

Matt: Yes, that’s right.If I have to guess,I would say it is ByteDance, Bitcoin, Ethereum.Are these personal or fund-related?

Patrick: Both.

Matt: I should be responsible for Uniswap, which we can discuss in detail later.There are also some ordinary technology investments, such as Instacart, for example, I participated in the seed round.

04Lessons learned from the high demands of Sequoia Capital

Patrick: OK, so let’s go into the pure investor chapter, especially Sequoia Capital.So how did you get to Sequoia Capital?This is a transitional story.Then I have a lot of questions about formative experiences there.

Matt: So I was sitting on Twitter and a random email suddenly appeared in my inbox, sent by a recruiter about a job opening at Sequoia Capital.At the time I had no real ambition or intention to become an investor or venture capitalist.So I initially thought this email was a wrong spam.How could they email me?They won’t go to people who might enter the investment world, like bankers or similar people, who might enter the investment world.

I didn’t really understand the diverse backgrounds that entered this field at the time.But I was attracted and finally got on the phone with Pat Grady, and I think you know him.whenWhen he introduced me to Sequoia Capital, I began to have a great interest in it.I’ve met more and more team members.I still think it is one of the highest quality teams and cultures I’ve ever experienced.

Again, I’m interested in investing, but I’m not sure if I want to do it, but I decided to join almost entirely based on the strength of the team.

Patrick: Looking back, how long have you been there during the time you were there?

Matt: Four and a half years.

Patrick:What changes have happened in these four and a half years?If I talk to you on the first and last day, what is the “therapeutic effect” of Sequoia Capital for you?

Matt: This must be very profound.I think the biggest thing is probably exposure to high demands.This is probably the most demanding place I have ever experienced, including the startups I have participated in, and Paradigm.They maintain extremely high standards of ability.I think having legendary history like Apple, Google, and Cisco helps that.

Patrick: When you walk in, that wall impresses people.Those sign walls are quite impressive.

Matt: Yes, those posters and S-1 files.existThe 20% figure for Nasdaq listed companies is shocking.So I think that helps… When your track record includes that, even something that others think is a huge success is considered a piece of cake.So there are many days when investment results of hundreds of millions of dollars are seen as mediocre success.

I remember the day I joined, the day when the WhatsApp acquisition was announced, there was a very awkward champagne celebration in the lobby.They called out everyone, glasses everywhere, everyone raised their glasses but no one drank them.Five minutes later, everyone returned to their desk to continue working.So it’s not a culture that is often celebrated.

But in general, high requirements – not just about the company or investment level, but about the personal taste and the individual’s requirements for themselves.They strive to operate at such a high level,I think TylerCowen mentioned on his blog that one of the free lunches is to raise the ambitions of those around him.I think a demanding culture is this way of putting surplus into the world.If you expose a person to this culture, you can permanently change their standards for everything.

Patrick: Is there a personal story that makes you feel this impact?Is it the team or a particular person that makes you feel like, “Oh my goodness, I have to do better than I am now.”

Matt: This question is a bit raised in a negative way, that is, you don’t do well, you need to do better.There is another version that is positive, that is, you are excellent and we trust you.I want to say that Sequoia Capital – especially Doug Leone – has had a great influence on me.

I think the first investment I brought to the company was when I worked with him.In the process, watching him work with the team and then having him verify my view on investment and what actions we should do with the company is an experience of increasing ambition and confidence.

But many high requirements are self-evident.They are habits and rituals that you can see that everyone embodies, like a $100 million investment result.I thought everyone would celebrate.Instead, everyone is saying, “This company is a bit of a waste of time. Why did it take us six years to get this mediocre result?” This culture will influence you subtly.

Patrick: What’s the difference between you as an investor when you set your goal as the next Apple, rather than a billion dollar company that we’ll soon forget?

Matt: In some ways, this is daunting because the standards are too high, but in some ways it is also a relief because as an investor,The temptation to pursue “good” rather than “great” is very large at every level—whether it’s the way you spend your time, or actually investing, the quality of the company or the quality of the founder—is very large.So unless you have very high standards, you may be wasting a lot of time chasing things that won’t make a difference in the end.

Patrick: There are a lot of incredible investors out there, and while you’re there, of course, many of them are still there now.They are very different from each other, and it will be a big topic for us, just like the idea of ​​this “outlier collection” and I think you’re doing a really good job at Paradigm.What do you think is the key to creating a very different and very heterogeneous population from each other while ensuring they work together well?

Matt: Sequoia Capital has many people with different personalities, but there are also some impressive coherence in key dimensions.Another revelation from my previous experience at Sequoia Capital is thatFor the first time I realized that there are many roads to greatness, no matter what you call it.Because at Sequoia Capital, there are many great people that are incredible if you only look at their track record or what they have achieved.However, their styles are very different.

It was a liberation for me and I realized that I could find my way to do it the way I wanted.This is actually a very interesting thing and worth pursuing.You can see this from athletes or from various performers.Sometimes you can read from their interviews that they realize that they don’t need to follow some existing mentor or some orthodox dogma, but can figure it out for themselves, and this ends up being their great catalyst.

05BitcoinApplication curve

Patrick: I want to go back to two key parts of the timeline.The first part is your initial exposure to Bitcoin and Crypto currency.Part 2, related, you decide to leave Sequoia Capital and start Paradigm.Maybe start with the first one.Similar to TikTok, how and when did you first encounter it?We just introduced the word “readability”, which will be an important topic we will explore throughout the discussion.Let’s go back to the past.Regarding Bitcoin, what is readable and what is unreadable?What did you look like when you first saw it?What did you look like when you first saw it?Just like, tell us.

Matt: So I first came into contact with Bitcoin when it was just launched…

Patrick: 2009?

Matt: 2010.white paper.I was still in college at the time and I internalized it into a very beautiful concept.It brings together the intersections between computer science and mathematics, economics, game theory, currency history and other fields.It allowed me to delve into some related concepts.

Because if you look at the quotes in the Bitcoin white paper, people have been thinking about this for a long time.It cites a lot of early work.So it’s very interesting.I didn’t have funds at the time, and it didn’t look like an investment, it was more like a toy.

The next time I came into contact with it was in 2013,I think that was the first bitcoin bubble and I was involved.I think an important point about Bitcoin adoption is thatYou almost need to lose money or do stupid things on your first contact.Then I found out – it must be true for me – you gave it up and probably thought it was dead.Then when you see it come back again, you start to doubt because there are a lot of bubbles and tulip foam and stuff like that.But the tulips do not have multiple consecutive foam cycles.

Patrick: They don’t appear repeatedly, yes.

Matt: Beanie Babies (Note: Bear Asset Bubble, or Doudou Babies Bubble) also has no second, third and fourth cycles.

Patrick: This is a key point.

Matt: And there is a time delay adoption curve if you consider Bitcoin adoption based on exposure to Bitcoin.So 2013 was the first cycle for me.I don’t think I was a professional investor at the time.I’m doing day trading on my Coinbase account and I buy it at $200 or $300 and it goes up to $1000 and then it falls back to $600 and then slowly starts to fall from there.

Actually, that’s when I joined Sequoia Capital.So this is before I joined.I remember thinking at the time that this was a topic that I was very interested in.When I interviewed Sequoia Capital, they asked me to prepare a one-page report about the companies I think we should invest in.

I chose Coinbase, which had only seven employees at the time.This is before a16z investment, so there are only Union Square and Ribbit.I firmly believe this will be an interesting field and this company is probably the best in this field.

But after joining, and after that crash, I kind of stopped paying attention to it anymore.Bitcoin is just an asset, and there are companies that serve it, but it is not clear that it is a truly creative software platform.It wasn’t until a few years later, when I saw the activity happening on Ethereum that I rejoined.

Patrick: So, when, assuming it was at Sequoia Capital, you first felt that I needed to place a bigger bet in this ecosystem that ultimately led you to found Paradigm with Fred?

Matt: I no longer focus on Crypto currency.I still own some bitcoins, and I still follow some accounts that will post the price of bitcoins on Twitter.I think in those years they stopped posting prices, or maybe I missed that news.But when I saw the price rise again, I started to notice these signs, the ecosystem is still alive.

Then I also noticed the activity that was happening on Ethereum.It’s not just a digital asset like Bitcoin, it actually has these projects.For example, Augur, this is an early forecasting market.I think, well, this is not just an asset, it is now a startup platform.so,I started to invest my time there, and Sequoia Capital was very supportive of it.We made some interesting investments related to Crypto currency on behalf of Sequoia Capital.

And, to be honest, I think the greatness of Sequoia Capital is that this multi-generational team, with 12 views on any given technical philosophy, and then search for the truth through intellectual arguments.And in the Crypto currency field, this debate is missing.

So I ended up looking outside the company for thought partners to test my ideas and learn from them.And Fred is one of those who left Coinbase, who started investing in angels in early 2017.We watched a lot of projects together, and in the process, I found that sitting down and talking to him, and when he started to articulate his ideas, I had a strong feeling—this is someone I wanted to work with in some way.I don’t know, I certainly didn’t think about starting a company, but maybe I’ll invest in the next project he’s going to do.It was from there that the seeds of Paradigm were born.

Patrick: People often mention you and say, Oh, yes, Matt is a partner who left Sequoia Capital, and they really don’t want to lose him.Let’s discuss it.You tell them how it feels when you are leaving?Are they trying to keep you?How did all this happen?

Matt: First of all, I don’t know if this is true.I know this is hard for me.I remember when I came to Sequoia Capital and experienced this culture, all the great personality, the standard of excellence that everyone pursued – I think, wow.I can stay there for a long time.It’s not like work.It felt like a place where I could retire.

And then eventually, I was fascinated by Bitcoin.This is the simple answer.I do feel strongly that this will be one of the most important tech-economic trends in the coming decades, and that developing this technology is very important to humans from the perspective of financial freedom, privacy and individual sovereignty.For the first time I really felt that this was a sense of mission to make it happen.So from there, intellectually, it’s the right choice.But on a relationship and personal level, this is difficult.

06Building Paradigm’s Vision

Patrick: So in the end we can finally talk about Paradigm and Crypto currencies, and what is happening in the world today.Paradigm is an asset management company focused on Crypto currency that manages over $10 billion in assets.Maybe a brief overview of how you think of Paradigm, what it is, and what you want it to be, a general overview?

Matt: Well, our founding insights when we founded Paradigm were, Fred and I both firmly believe that the Crypto currency will be one of the most important tech-economic trends.We believe that to invest in Crypto currency, we need to become what is called “Crypto native”.We strive to build such an environment.

We don’t have a top-down plan.For us, this means making sure we have the right team that can handle uncertain futures.Go back to the problem of readability and unreadability.I think the Crypto currency, even today, is certainly an extremely unreadable frontier at the time.It is difficult to understand what is valuable, what will be valuable, and how to distinguish noise from signals.

This is a deep technology field and we know that recruiting investors from central casting is not feasible.We are lucky that our first recruitment tends to move us in a more technical direction.I would say that today, I think there are two main things that drive Paradigm.First, we see our mission as the forefront of advancing the Crypto currency.We certainly care about the return on investment, but we are not mainly optimizing for this.I think if we push the frontier of the Crypto currency, let the Crypto currency work and expand the size of the cake.

Patrick: Make a lot of money.

Matt: Better luck.I think we will also get a good return on investment.But mainly the first thing, it’s a set of technologies that really need to exist.We believe that a lot of value will be created.

The second thing is,We try to build a team that embodies “builders” rather than just “investors.”Part of the reason is aesthetic orientation.I think both Fred and I love making things, as do many on the early team.We just tend to think about where the cutting-edge should go from the technology or product side.But in part, we think this is one of the best ways to invest in this area.

Perhaps analogy to biotechnology, it is such a technical field, you really need subject matter experts to understand what is going on.That’s not enough in itself, because you also have to combine it with business awareness.But we think that not only considering ourselves as an investment company, but as a place to build products and conduct research, there will be a lot of things coming.

Patrick: The original chapter of Paradigm is very interesting because I think you raised hundreds of millions of dollars and effectively put them all into Bitcoin.You can tell that story because the result is pretty good.

Matt: When you describe it like this, it sounds reckless.But what I want to say is that our founding philosophy is to create a very flexible tool – we don’t even consider ourselves to be venture capitalists.We want to create a tool that can participate in the value creation we see in the Crypto currency and contribute to it.Moreover, it was not clear at the time what form this would take.

In the early days of Bitcoin, there was always a problem.Should we invest in a Bitcoin startup, or buy Bitcoin directly?I think a lot of people are stuck in this problem.The correct answer is to do both.But it is very important for us to be able to participate in the entire stack from early stage investments, the currency itself, to the tokenization protocol.

Patrick:How much money have you raised?What was the action in the first few months?

Matt: The first fund is an evergreen fund that can hold public companies, private companies and everything in between.We raised $400 million, which is an interesting process in itself.The Crypto currency was a little hot the year before, so it was on everyone’s radar.

Patrick: This is 2018.

Matt: This is early 2018.Yes, early 2018.It’s still very controversial, and there are a lot of skeptics about Bitcoin in almost every place we talk to.But we raised $400 million, which started in late 2018, and our plan was to start stepping into our most confident positions, at the time Bitcoin and Ethereum.

Patrick: Yes, in order to give everyone a concept, the price of Bitcoin at that time was about – about $3,000.

Matt: Yes, it’s about $3,000 to $6,000.And Ethereum is $100.Then in the first year after the startup, we raised about $300 million to $400 million, a total of about $700 million to $800 million.Then we raised another venture fund in 2021.That’s $2.5 billion, and we’re investing in this fund now.Then we raised another $850 million in commitments for our second venture fund in early 2024, or I guess, in 2024.

Patrick: But I haven’t started investing yet.

Matt: Haven’t started investing yet.

Patrick:How is the team going?

Matt: We have 65 people, most in San Francisco, some in New York, some in Washington.Policy team in Washington.What we call “investment and research teams”,It is the core team that makes investment decisions and tries to figure out the future of Crypto currency, with about 10 or 11 people.

Patrick: Does that scale feel right?I hear a lot of people say that when the number of people exceeds that number, it is no longer a team, but more like a structure.

Matt: You mean 10 or 11 people?

Patrick: Yes, 10 or 11 people.Can you imagine it has 20 people?

Matt: Well, we have 20 people on that team in 2021.Yes, in hindsight, I think it’s a little too big.There are many ways to build a successful investment team.II think some teams are large, but the larger the team, the more dynamic a group of people makes decisions will definitely change.I think it is still possible to have full contact, mutual discussion and find the truth in 10 people or less.The bigger the room, the more people become self-aware, afraid of saying stupid things, or challenging people who are more advanced than them, or something like that.

So this works for us.This is a diverse crowd.In fact, I don’t think anyone on the team will meet the criteria for hiring for other investment companies.Regardless, everyone has a unique entry point for the future of Crypto currency.We have engineers, researchers, and safety experts.

Patrick: What would I see if I came in, sat down and looked at people’s shoulders, those builders and research activities that were not investment activities?

Matt: You rarely see Excel models.More commonly, several people may discuss some math problems on the whiteboard.You will see that Georgios has three screens, 200 tabs, and is entering the code.A lot of the work we do is actually in the details of the protocols and mechanisms we think are important to the Crypto currency.We spend time there because we think they are huge leverage points.

On the open source side, Georgios does the work that code can be used throughout the Crypto currency field.In terms of mechanisms, Dan Robinson, Dave White and many on the team, these mechanisms are at the heart of the protocol.Uniswap, for example, serves thousands, millions, hundreds of millions, trillions of transaction volumes, all from a mathematical formula.

In Crypto currency,The leverage of correctly obtaining the mechanism is huge.We think this applies not only to what we have seen, but there will be a new frontier to invent.So most of the team are focused on this – these mechanisms will eventually be reflected in the product.

07responseencryptionVolatility in the money market

Patrick: A story that is emerging is that you are a very outstanding personality type above volatility.Whether it’s a team, asset class, or return.You are in a unique structure, which is a long-term structure.But the daily volatility of Crypto currency is totally crazy.Can you talk about this experience?

So, like the numbers you mentioned earlier.If you only look at two points in time, the funds raised and the funds today.Wow, it’s awesome.12x or 13x, or some ridiculous number.

I was interested in the painful aspects of the team and performance.So this is a super volatile asset class.You have a team with high variance.You seem to be a person who stands very firmly and calmly above both.But I would love to know what these painful, difficult parts of your history so far, whether it’s a team or an asset.

Matt: Honestly, assets are easier for me because that’s just a number.I think that when your belief in Bitcoin or the broadly Crypto currency has a clear long-term nature, there is much less volatility.If you look at the potential volatility of our belief in Bitcoin or Crypto, there will certainly be ups and downs, but the amplitude is much smaller than the price.By comparison, this is easier.

Organizational and personnel effects are much more difficult.You can see this throughout the Crypto currency field, when Crypto currency is hot and appears in the news, it is the easiest time for recruiters to be in all roles, whether it’s a company or Paradigm.If you consider choosing a function, it’s also the 10-year timeframe for those who might enter for error reasons or may not really believe in the Crypto currency, but today it’s the hot stuff.So, during periods of volatility, this creates a lot of turmoil.So, we’ve been a bit inclined toward this way, but it’s even more so today, we’re very focused on locking in people who really understand it and are involved for a long time.

Patrick: What is the maximum peak to valley retracement you have experienced?

Matt:I have no idea.

Patrick: Do you know when, if not percentages?

Matt: When is it? It must be after 2022-2023.

Patrick: Tell me about the situation during that period.what happened?What do you have to do?Are you caught off guard?Or, you know, I’ve been through it five times…

Matt: In terms of public assets, our way of thinking is point-to-point, so our focus is less on the fluctuations in the middle.So, most of our focus is that this obviously affects the entire private portfolio – the runway, financing capabilities, employee morale, revenue, etc. of these companies.So, most of our focus is on categorizing to ensure that other companies in these Crypto currencies survive.

Then we have a lot of reflection on 2021 because, broadly speaking, it is a very unusual time, whether it is Crypto currency or technology.So, waking up is basically 2022-2023, and many of the decisions we made in 2021 don’t fit our expectations for the next five to ten years.

Patrick: If I try to find out the best criticism of Paradigm, what do you think would be?What kind of criticism you would think, when someone says it, you think, “Oh, damn” – it really hits the point.

Matt: I think the trade-off of having a team that is deeply tech-oriented and very focused on construction and research is that we essentially have a strong view of the future of Bitcoin’s technology.If you think of an idealized version of investor, it would be even more agnostic.This is a conscious trade-off that we always have to weigh.But I think a reasonable criticism of Paradigm is that sometimes we rely too much on our technical perspective.

Patrick: What is the worst thing in Paradigm’s history?

Matt:The most obvious thing is that we invested in FTX.I don’t actually know what the correct conclusion about SBF is.He is a unique and distinctive individual, but so are many great founders.Another problem is that we do find the core issue that ends up being the problem, namely the nature of the related party between the market maker and the exchange.

We actually delved into this in due diligence and ended up being cheated.So, I think venture capital is very difficult when a founder is willing to do this, because the entire ecosystem depends on trust and it is difficult to do due diligence.We have no reason to think he is lying.

Patrick:Was that the most personal pressure on you in Paradigm history?You look pretty calm, but…

Matt: Yes, maybe in the first few days, we didn’t quite know what was going on at that time.

08“Unreadability“As an investment advantage

Patrick: Maybe we can explore the concept of “readability” in detail, as well as the relationship between your views on Bitcoin and investment opportunities.I know you’ve thought a lot.Let’s learn what you think.Why is this topic interesting?What do you mean by “readability”?What does it have to do with investment opportunities?

Matt:I think the more unread a field, that is, the harder it is to be understood by others, the more likely the potential returns are to be inversely proportional.Because it is almost certainlyThe more you understand a field, the more you(easy)Being priced, in other words, everything should be taken into account.

Silicon Valley is an interesting case study because it is always a certain cutting-edge field.But in some ways, Silicon Valley’s ecosystem has also become increasingly readable.Things that used to be tailored are now a bit like factory.I think the cutting-edge field of AI is still very unreadable at the moment, and it is a very interesting space for builders and investors.Software as a Service (SaaS) is no longer unreadable.Perhaps the perfect pricing of SaaS valuations by companies like Tiger and Coatue is exactly what they expect.

I think readability has a strong gravity.Or in other words,Making things readable inevitably reduces accuracy.So, there is a view that the relationship between maps and territory.We create readable explanations to better understand things and communicate and disseminate ideas, but they are always an approximation of the complete texture of reality.

I think in the cryptocurrency field,Especially now, there is a strong temptation to make it readable too early.I think in some cases,Some value lies in tolerance of unreadability.For example, many people are asking, what are the use cases of Crypto currency?First, I think we can achieve this.But money and finance are obvious.But many people want to know, what after that?

I think there is a temptation, the term “Web3” and I think it’s useful to some extent because it’s an analogy to help technicians understand what Crypto currency might be, but it also introduces a lot of wrong comparisons.So, if you are building in the Crypto currency field and take this readable meme too seriously, you might actually build something very wrong because you misunderstand the underlying complexity possible.

Patrick: This reminds me of…what is the author’s name…James Scott or a similar name – the book “The Perspective of the Country”.

Matt: That’s right.

Patrick: My memory of that book is,Top-down desire makes something understandable, thus distorting it.So you plant the trees neatly.The first generation trees are good, but all the complexity that happens in the organic forest disappears.The second generation of trees cannot grow.By oversimplifying things that shouldn’t have been simplified, you lose complexity.

Or even the way of urban layout.Should they grow organically from the bottom up or should they be designed from the top down?It is difficult to design a great system from the top down, and this is an important point of view of this book.Do you think the views of this book have a place in your thinking?

Matt: Totally agree.Maybe the modern version of this book is to see ameme.The ecosystem chooses those very simple memes because simple memes can gather a lot of power and energy and spread.You can basically see the current topic on Twitter every day, and people are more dimensionalmeme to argue, and thesememeCauses people to misunderstand each other’s true intentions.But without meme, you can’t actually start the discussion.Here, it’s not clear what to do, but the same thing happened in the investment field.Peter ThielThiel) hates buzzwords.Once an ecosystem has buzzwords, run away quickly.

Patrick:stop.Too late.

Matt: Moritz said,“Look for the bird that has only interesting, complexity, not a flock of birds.”I think they are all trying to express this point: outliers are unique.If you invest through meme, you actually lose all the underlying texture and complexity.

Patrick: Does this also reflect an appreciation of “product selectivity”, that is, the world often explains possible products through the lens of existing markets, without appreciating a new product or platform technology that just creates something we cannot imagine, and most of the reward comes from this unimaginable part?Is this the reason why something unreadable may produce better returns?

Matt: I think some of the most basic platforms, things that can produce generative exceptions, are the most unreadable at the beginning.I think the Internet is an example.Today, everyone takes the Internet for granted.But if you think about it, even Google’s idea, its promotional word is “This helps you search the internet, but what does the internet do?”

Well, Google is a use case for the internet.Here is a circular reference.And it turns out that over time, more and more things are on the internet and become very useful.

09Crypto Asset Positioning, Reconstruction of Financial System, and Intersection with AI

Patrick: Let’s apply this topic to today.Use your words to describe your views on Bitcoin so that those who don’t pay attention to it can understand it.

Matt: So, I think Bitcoin is a very basic change in the way humans coordinate.

Patrick:What does “basic” mean?

Matt: Basic means that this is a very basic building block.Changes occurring on the ground floor of the building.Historically, we have always coordinated through centralized institutions, companies, governments, and monetary systems.And Bitcoin allows us to coordinate in a decentralized way.

I think it turns out thatThe most valuable application of this coordination method is currency.I think Bitcoin is going through three rough stages.First, it is as a currency, second, it is as a financial system, and third, it is as an Internet platform.I think it’s getting clearer in the first two aspects.As a currency, as a financial system is useful.I think the internet platform is probably the most unreadable part at the moment.

But in terms of currency,I think Bitcoin is the most valuable startup in the past 15 years.Except that most people don’t think it is a startup, because it competes with a very unusual market – the money market.It does not have a traditional corporate structure, team or CEO.But if you take a step back and think about it, I think it’s a pretty amazing fact that in a completely new industrial organization, Satoshi published a nine-page white paper, wrote some initial code, and then the entire ecosystem grew around it, now worth trillions of dollars.

It is not only the most valuable startup.I think if we said in Paradigm in 2018 that the state would discuss and even adopt Bitcoin as a treasury reserve, we would think you were crazy.We thought that this might be achieved in 10 to 15 years.So, to be honest, I was very surprised at the legal growth of Bitcoin as a monetary asset.This is not only at the government level, but also at the institutional level.I think in 2017, Larry Fink (founder of BlackRock) called Bitcoin an index of money laundering, and now he talks about it on CNBC every month that it is the future, it is digital gold.

Jerome Powell (current Fed chairman) was asked at a meeting last month whether they would adopt Bitcoin or whether it poses a threat to the dollar.He said no, it has no threat to the dollar, it is just digital gold.Even the recognition of digital gold, I think five years ago was very anti-traditional.If you consider the adoption of any new monetary assets, it is a process of building acceptance and legitimacy, and this is the real KPI.Price is the output of this process, but the main input is to believe that this may be possible for the number of people.

Patrick: Let’s take a few more minutes to talk about Bitcoin as a currency.Why is this important or interesting?Its current market value is probably…?

Matt: Just below $2 trillion.

Patrick: So, let’s say it’s somehow one of the largest companies in the world.But as a currency, it feels like…if put it together with Amazon, Google, Microsoft and other trillions of dollars in assets, itProbably the mostCrimeof.It does not have a prominent supporter like Satoshi Nakamoto, the creator of Bitcoin, and has some suspicious characters along the way.Why is it valuable or interesting?From your point of view, this is a basic question, but it seems important and I want to hear your answer.

Matt: I think the idea of ​​a non-sovereign currency is valuable.I’m not the kind of person who thinks Crypto currency or Bitcoin should replace all fiat currencies.I think they actually coexist well, and the rise of stablecoins is a great example.

But Bitcoin is more than just a hedging tool.It also helps individuals and families maintain value in the most unsafe places on the planet.You see, whether it’s someone who fled Ukraine or Venezuela or other countries in trouble, the Crypto currency has begun to play a bigger role in it.So, I think, from a humanitarian perspective, it is a very valuable tool.Gold once solved some of the problems.But gold is physical, bulky, and inconvenient.There are many reasons why digital versions are better.

Patrick: Do you think it is a currency or is it just a means of store of value?Or currency means a means of exchange, a unit of valuation and a means of store of value.

Matt: I think it is currently mainly a means of store of value, or more accurately, a bet on future store of value.I think it might find some trading uses over time, but I don’t think it’s necessary so that it becomes really useful and fun.

Patrick: You think institutions like Powell and Fink’s understanding of Bitcoin as digital gold is extremely readable, becauseThis Bitcoin itself has a rather low potential return relative to other options?It has won in a sense.

Matt: It has won somehow, which is beyond my expectations a few years ago.

But I think we are still in the early stages of this really being understood, although there are some comments around it.A rough way to think about Bitcoin is how many people around the world, weighted by dollar amounts, think they should own Bitcoin.Then there is another axis, which is how much proportion of their portfolio is Bitcoin.

I think we are at a node and many institutions are starting to think that maybe we should start from scratch.Maybe 1% to 2% to 5%.Even Fidelity is recommending baskets containing this weight.I don’t think we will or should reach the point where people generally hold 100% of Bitcoin.But I think that will be much higher than where we are today.

Patrick: So, let’s get into the second basket.I think “programmable financial system” is the term used.Well, Bitcoin is still very young but relatively mature. Most people’s readable concepts about Bitcoin are digital gold or something.So, where are we in this story about the second phase of the new financial system, what are the possibilities today, and what excites you?Then we can go to the most unreadable frontier section.

Matt: I think one of the notable things about stablecoins is that they are mainly tokens pegged to the US dollar, which exists on the blockchain but are pegged to the US dollar.I think the growth of stablecoins has exceeded $200 billion in the past few years and they are starting to be used in real-life use cases, not just in the Crypto currency space.

They were initially conceived as a way to facilitate transactions in Crypto currency.This is how you go ashore and offshore USD on certain foreign exchanges.But now companies like SpaceX are starting to use stablecoins to transfer funds, and there are a lot of other companies that use this kind of corporate financial use case for stablecoins, they generate revenue in a certain country, like in Africa or Latin America, and then they want to remit these dollars back to the United States, so they will exchange local currencies for stablecoins on local exchanges, and then they can send these stablecoins through the blockchain.This is ultimately a cheaper way to trade forex than the traditional way.

Patrick: Yes, stablecoin is very interesting because it is a perfect controlled experiment.It is a dollar, and its purpose is not to replace or outperform, or surpass the dollar.It’s just a dollar.So in a pure sense, it’s really the technical part, programmability, etc.So, now that we have abstracted the price considerations, what are the core characteristics of these technologies?Why are they so important?What is the industry structure of stablecoins?

Matt: It is a 24/7 global and programmable payment track.I think these are quite critical.I think we live in a world of internet 24/7, but the payment system is shut down on the weekends.So in a sense, it’s just a way to modernize finance and payments, just like we’re used to the internet.

Many fintech innovations are actually product and market innovations based on outdated backends.You can think of Crypto currency as a new financial backend built from scratch.I think one way of looking at a programmable financial system or framing it is that it is a bilateral market between assets and programs.

So, every financial activity we do through traditional institutions or through applications is a procedure.There is some logic to decide who pays who.Maybe there is a hosting, maybe there is a payment condition.Think about insurance, mortgage or salary payment.All of this is essentially a programming payment method on top of traditional finance.All of this can be built on the new Crypto track.

But there is a guided problem because most people don’t trust these tracks and don’t use them.There aren’t many assets out there.Therefore, there is a problem of guiding between assets and procedures.I think the interesting thing about stablecoins is that we are already guiding Crypto native currencies like Bitcoin, Ethereum, Solana.

With stablecoins, we now have a very widely used currency asset, and as you said, there is no volatility or complexity of Crypto currency.I think we’re starting to see people building all these different ways to program and use them for the first time.I think 10 years, 20 years, 30 years later, it seems inevitable that basically all of our financial transactions will be done through such a track in some way.

Patrick: Have you seen examples of stablecoins being used creatively that are impossible in traditional finance?

Matt: I think a recent and relevant example is a prediction market platform (polymarket, etc.) where these are contracts where you deposit X dollars and if X people win the election and you bet on that person, you get paid.If another person wins the election, you won’t get paid.This logic is reflected in smart contracts.There is a Crypto-based way to resolve this event.So this is an example that was impossible to achieve before.

Patrick: It automatically settles based on the results.

Matt:Yes.

Patrick: If we enter the third gear.What do you think is the most marginal part of Crypto currency today?Now everyone knows something about Bitcoin, and many people have heard of stablecoins, especially listeners like you.So, you think most people may not have heard of or used it, but what are you interested in?

Matt:I think a very interesting and still very vague frontier area is the intersection of AI and Crypto currency.If AI is intelligent, then Crypto currency is a way to coordinate intelligence.And this is actually the essence of money.It is a database of value that we transfer.This is the coordination mechanism of capitalism.

It’s hard to imagine that if AI Agents really emerge and become possible, they trade primarily through traditional systems.Crypto currency is basically tailored for use by computer agents.I think a lot of people are focusing on the idea of ​​paying between agents or paying online now.

But I think a more interesting step is,You can think of Crypto currency as a way to build a market, allowing participants to participate in it through purely programmatic means.If you want to run some kind of auction or allocate scarce resources through programmatic means, Crypto currency is born for this.So I envision a world where AI agents are basically building more complex ways to coordinate with each other, not just pay.

Patrick: When you see something like artificial intelligence, you have built a company with a mission to push the frontier of Crypto currency, how do you weigh this temptation: “Wow, this is a new enablement technology, a universal technology. Maybe there are only 25 such technologies in our human history. There is a new one here. Maybe this one is bigger than what I’m doing now, don’t want to dive head-on into the biggest universal technology?” Is this a question you’ve considered?

Matt: First of all, we have a team driven by curiosity.Part of our team is that everyone can take the time to research and explore what they are interested in.We do have some people who are very interested in Bitcoin.

We actually took some time to explore this rabbit hole and finally decided, well, first of all, we certainly were interested in the intersection of Bitcoin and AI.I think this is probably one of the most interesting times in this field.But at the same time, I think there is an extreme reward in terms of specialization, and there is also the feeling that Bitcoin is something everyone is studying and it will develop well anyway, even without us.

I think Crypto currency is a very important technology that needs to coexist with Bitcoin.As you said, there aren’t many great advocates, we believe it is very important and we need to work hard to make it truly come true.

Patrick: Can you give your point from your research on Bitcoin, compare it with other historical technological infrastructure construction you have studied, and the nature of this boom and bust?I am thinking about Carlota Perez’s (Note: Economist, the “technology-economic paradigm” that mainly promotes social development has been systematically elaborated).i.e. speculative fanaticism may actually be a good thing because it provides the capabilities for the next generation of entrepreneurs,Whether it’s fiber from the 90s or something else.

It seems that this has generated so much interest and builders in Bitcoin for a while,Most of this is driven by the public pricing of underlying assets.Critics might say, look, this thing is just a casino, an unregulated gambling game.

If you compare the pipelines and infrastructure of Bitcoin today, I’m a little behind, I realize that I’m very interested in the technical details of the previous cycle, and then in this cycle, I’m a little lost in touch.I wonder if this speculation brings a higher level of more valuable infrastructure?Is this prosperity and bust as good as the traditional sense?Or is it different because Bitcoin is sometimes too speculative?

Matt: Yes, I think this kind of speculation is fruitful.You can debate the speculative nature of Bitcoin and the resulting utilityand compare it with other trends.Bitcoin is definitely more speculative than typical ones.But partly because the assets that can be speculative are core things and core forms that are being enabled.

But in Bitcoin, I think there are two ways to speculate.One is that it is actually the core of any new monetary asset adoption, because it is a speculation to believe that others will eventually accept some kind of asset as currency.Well, you can have some basic reasons that this supply is fixed or it has some technical characteristics to believe it, but ultimately, your belief depends on what you believe in others.

I think it can be uncomfortable at times, and I see a lot of people who are very confident in Bitcoin and think it cannot be a currency or gold.I think this comes from the inherent disgust of Bitcoin, rather than looking at it more closely.

Then yes,And CarlotaPerez’s view, speculation as a guiding mechanism.I think we’ve seen this productive speculation in Bitcoin.For example, now possible stablecoin activity, $200 billion in stablecoin assets, many stablecoins are used in areas outside of Bitcoin.Whether it is cross-border payments, or obtaining USD in countries that fight their own currencies, corporate payments, etc., all of which are the result of infrastructure efforts built over the past two or three years.

If you look at Layer2 solutions like Ethereum, like Base or Solana, we now have very cheap and fast stablecoin transactions, and in 2017 or 2021 the same transaction may require $10 or $100 for mainnet transaction fees.So I think we are in a completely different position in terms of infrastructure, and while mostly invisible to the public, it is being reflected in real applications like stablecoin payments.

Patrick: The answer is sometimes easier to find away from the United States, things that have become very useful tools in economic freedom and these things have become, whether it is El Salvador putting its treasury reserves in Bitcoin, or cross-border payments or storing value in high-inflation countries.

I really want to ask you to talk about your opinion on Paradigm’s mission and its support for the Bitcoin ecosystem, and what I call “unfinished business.”You personally and many people in your team are in this situation now, and you don’t need to do this.Of course, maybe you will get a good return.It’s clear to me that this is not your motivation, it’s a by-product.

I want to learn more about your view of Bitcoin’s mission and how this mission has evolved over time.Today is early 2025, compared with 2018, what is your “why”?I think some of the things you might have said in 2018 may have happened.You even mentioned things you never expected, such as the government putting its treasury reserves in Bitcoin.So, today, starting from early 2025, why do you want to do this?What is the point?

Matt: I don’t want to give people a person who doesn’t care about the return on investment or is not managing the money for LPs, but I do think that promoting Bitcoin technology to succeed in the world is a mission that inspires us.

If we look at the internet, today we have end-to-end Crypto messaging, like WhatsApp and Signal, I think it is a coincidence, that is, there are many possible worlds in which we don’t have these.It’s not necessarily true, and we may have lost or approached losing it many times.

…

Patrick:Going back to you and your team, why do you personally care so much about it?This is a good answer.If I see this answer without a signature, I would say, yes, that makes sense.But I don’t think that those who are really pushing the frontier, like you do, and are trying to do it, just having a good rational answer is not enough.Why do you believe so deeply in everything you just said?What is the story behind it?

Matt: Well, I’m not sure.I think I may always be a little skeptical about authority.So, when I see authority exercising power, it makes me think, is this really the way the world works we want?

Patrick: Where does this suspicion of authority come from?Trace back to the source.What early authoritative figures made you feel this suspicious?What authoritative experiences do you remember that may be debatable?

Matt: I’m not sure, but my assumption might be my mom, or my parents.It sounds like I have a bad relationship with them.But I think I realized early on that the trade-off between authority and personal freedom in real small things, such as in unimportant things.

Now I see this from the perspective of my parents, but no matter what, every child and parent will encounter some situations that the child feels unfair.Maybe it’s really unfair from some objective point of view, but it’s the parents’ decision, which I think makes me feel intuitively suspicious about any system that allows one party to force the other.

I have a very strong mentality of “a person should be able to choose his own path”.

Patrick: If I could bring your entire team here, investing in research teams, do you think any of them would have a very different answer to Bitcoin’s motivations, why are they committed to pushing this particular frontier?

Matt: I think everyone will have different motivations, but I do think there is a common underlying direction.I think many of us do this work, too, just out of pure curiosity.It’s fun, and I think you have to really go deep into it to fully experience that.

Because from a distance,The noise of speculation is certainly greater, but it is indeed decomposing the way human coordination isBreaking it into its most basic component and trying to figure out how to achieve a better, more unique combination, I think it’s a very interesting frontier area.

Patrick:What are the “primary colors” of these most basic human interactions?What is the way humans coordinate?

Matt: I think a lot of bitcoins is a new security technology that can guarantee different types of human coordination.An interesting thing is when people think about safety, what they think of is preventing bad things from happening.But security is also a huge driver for good things to happen.Countries with strong property rights do better than countries with weak property rights.

If you think from a micro level, like physical retail, we have big supermarkets like Walmart today, which may not be possible without many different security innovations.For example, the idea of ​​cash registers, which tracks all payments and locks the drawer so you can trust the cashier not to steal your money.In a small family-run shop, this is actually a problem.For a long time, the only people who can operate cash registers were family members who run the store because those are the people you trust.

Or think of a security camera that can monitor a portion of the store, which is much larger than the cashier can see on its own, or a tag and security bar that automatically detects whether you are taking items out of the store without paying.These are security techniques to prevent bad things from happening.You can say, well, you can make theft illegal, but the cost of enforcement is too high.

So, the role of a security technology is to reduce the cost of enforcement of these things you don’t want to happen, thereby promoting more GDP and more economic activities.I think a lot of Bitcoin reduces the cost of facilitating these transactions by removing the middleman and creating security around contract rules on the chain.

Patrick: If you take Walmart as an example, all these security technologies combined together make Walmart a miracle in this world.So, what do you think in the Bitcoin field, we are not safe yet, and you hope we can achieve that maybe Bitcoin can solve, at least in the near future?

Matt: I have thought of the use cases of emerging markets, and there has been a lot of discussion about this.Get a good currency, whether it’s the US dollar or other cryptocurrency, not your own high inflation currency.

But what I think is undervalued is how useful the stablecoins may be for American consumers.If you go to the Chase website and look at the interest rates they pay to the Chase savings account, I think it’s a few percentage points.

Patrick: Yes, this is crazy.

Matt: At this time, the interest rate of the treasury bond is 4% or 5%.So, I think somehow the motivation for retail banks to pass this kind of gain to depositors is flawed.This is a very simple proposal, that is, it is a stablecoin.When stablecoins are regulated, there will be stricter controls to support their asset base.It will be very safe, it is not a partial reserve system, and you will get the basic full benefits.I think this is a strong value proposition for everyone in the United States who have savings, rather than allowing others to get all the spreads.

So, I think this is one of those places and I’m excited to be able to solve existing inefficiency issues.What I might be most excited about is exploring what is new possibilities.An abstract framework is that a platform without permission can enable organic bottom-up innovation and an exploration function that does not exist at the moment.

I think YouTube is a very useful analogy, there was a time when cable companies controlled content programming, you had 50 to 100 channels, and some editors would decide what people wanted.With YouTube, we basically explore every possible permutation combination of human entertainment and discover all these new verticals, whether it’s unboxing videos or watching other people eat and so on.And we may not be over yet, and as culture evolves, we may discover new areas in the future.

The same thing hasn’t happened in the financial field yet.The fixed costs of financial exploration are so high, either you have to start a company to list a new futures contract, or you have to do some startup costs around it.When the Bitcoin track is more mature, I think we will see this breadth-first search, exploring all these different financial use cases that were previously impossible.

…

Patrick: This is really fun.Thank you for doing this with me.I know this is not what you expect to do, but I feel like I’ve always understood what Bitcoin works, just from a distance, now I feel like I’ve learned more about Bitcoin, which makes me even more excited about the prospects for Bitcoin in the next five years.I think I’ll have a better understanding of the development process of Bitcoin, which is so cool.

My usual question is, for everyone, what is the kindest thing someone has ever done to you?

Matt: Two things came to my mind.One thing may be a bit cliché, but my mom is a PhD in Computer Science who studied under Carver Mead at Caltech.She was involved in what became the field of parallel computing revolution very early, eventually becoming a professor at Yale University and Boston University.She gave up all of this to raise my brother and me.For a long time, I didn’t even realize there were other options.Then for a long time, I was confused about Bitcoin because she was in a very interesting area at the time.

But now,Especially as a parent, I understand better that my brothers and I have benefited a lot from her.And the second thing, I think, the kindest thing one can do for another is to believe them and improve their future ambitions.Doug Leone did that.Many people have done the same, but Doug in particular.He didn’t need to do this, and I will always be grateful to him.