Into the Funtier | Packy McCormick

Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. Guys, we have a fantastic episode for you today with Packy McCormick. Into the Frontier. The combination of fun plus money wins. That is the secret recipe for crypto. A lot of themes we touch upon in this book. A few takeaways for you. Number one, we talk about the bull case for Ethereum, also Solana, and Web3. I think Packy has a great lens on this. Number two, why humans are just status monkeys. Status seeking monkeys. We talk about that and how it applies to NFTs. Number three, how making money on the internet with friends is the new normal. That's what we're doing here in crypto. And number four, a bonus, we talk a little bit about why Cardano is not gonna make it. Oof uh and the flaws in that community. Yeah, David, uh fun episode with Packy. He's a talented writer, great thinker on a number of uh subjects. He also came into crypto in 2021, uh, or recame into crypto in 2021, which gave him sort of a fresh lens to synthesize and look at everything that's going on. And we talk a lot about his journey in 2021. I'm really insightful. What were some of your thoughts?

Yeah, Packy's just such a fun guy. It was such a treat just to chat with him for 90 minutes. It didn't really feel like a podcast. It felt like just we're hanging out, chatting about crypto, chatting about what he's written. And it's always a treat when we bring on people who can write really, really well, who can make content really, really well, because they have already very well formulated thoughts. This is the process of writing. This is the process of podcasting, is these thoughts are already well formulated, and now we are just deliberating and discussing them. And Packy, he's intuitive and intelligent enough to really create some really awesome concepts and ideas of almost about everything that's related to Web3, but also how it relates to almost everything else in the world. And so he's bringing a lot of just prior knowledge, outside knowledge, to the world of Web3 to help guide his understanding. I think listeners are gonna are really gonna like it. We talk a lot about Ethereum, Solana, modular versus monolithic blockchains and the different niches that those play out. Of course, we talk about NFTs and how NFTs are making the internet fun again and how that kind of is changing the culture of people who pay attention to the internet and how engaging on the internet is fundamentally changing because of Web3. We also touched on Jack Dorsey and his whole anti Web3 narrative and a few other just fantastic topics. Overall, just a fun episode. I think you guys are going to be smiling while you listen to this one.

Yeah, we talk about the bull case, but we also end on some of the critiques on the bear case for Web3, which is always a good thing to add to a podcast of this type. Guys, we're super excited to bring you this podcast with Packy McCormick. Hey, Bankless Nation, super excited to dive into this conversation with our guest, Packy McCormick. He's an investor at Not Boring Capital. He's also an advisor to A16Z's Web3 Fund. He's a writer of one of my favorite newsletters, besides Bankless, of course. I gotta say bankless is number one, called Not Boring. This is business strategy meets technology. And more recently, he's had a big focus on Web3, which I've loved to see. And one thing I think we can promise about this podcast is that it will not be boring because we have the writer of Not Boring. Packy, welcome to Bankless. How are you doing?

Hello, bankless nation. Good to be here. Good to be here, guys. Thanks so much for having me.

Oh, it's awesome to have you. I think you know what? We want to start with sort of your crypto journey, if that's cool. Yeah. Hear a little bit more about it because I've been a follower of your newsletter for a little bit, like on and off. And then I think I really started tracking you when we got introduced. I think somebody from the Solana team actually introduced us and said, Hey, yo, do you know Packy McCormick's got some questions for you, Ryan, about Ethereum? And I was like, Cool. I love questions about Ethereum. And I think one of your first Telegram messages to me after we got introduced, you just like laid into some fantastic questions. Like, just like, bam, you hit me with the hard ones. Like, what's the counter to Solana's argument that L2s break composability? You hit me with that one. And then you asked why the TDL, the total locked value on Ethereum has been declining recently. And then you also asked of all the other L1s, which, if any, do I think is the biggest threat to Ethereum? And I think at the time, I want to get into your mind space at the time, but I think at the time you were kind of doing a deep dive on Ethereum and you were doing a deep dive on all of these various Web3 platforms. Can you give us like a sense of your journey at the time? So, where were you in the crypto journey? Had you been in crypto in the past? Were you taking another deep look? Tell us about that.

Yeah. So my crypto journey started in, I think, 2013, whenever Union Square Ventures led the round in Coinbase. I read the Fred Wilson blog post. I was at a bank at the time. So as I was going bankless and quitting my job at Bank of America Merrill Lynch, one of the things that I realized is that they didn't realize that Coinbase existed. So if you work at a bank, they track all the things that you trade. You have a 30 day holding period. It's kind of a pain to do anything.

Bitcoin, however, they had no idea about. And so I was able to kind of buy a bunch of Bitcoin. I think about 38 of them at about $100. And then a couple of months later, I went to Oktoberfest. I'd quit my job, went to Oktoberfest with some friends. They still work in finance. So we're going out and having a big night. I pretended like I still worked in finance and woke up the next morning mad at myself for spending all of that money when I was unemployed and about to start working at a startup, making a lot less money. So I sold the 38 Bitcoin for about $150 a coin. So that was kind of the beginning of my journey.

And because of that, I, you know, I dabbled a little bit in 2017, but really kind of avoided the space because I was so mad at myself for selling too early and for paper hands in that trade. Uh so by the time, you know, I think kind of early in 2021, January 2021 is when I started kind of getting interested in crypto and web 3 again. NFTs kind of brought me back in the space and just kind of thinking

about what the value chain looks like when you cut out the middleman. Like, you know, there's obviously all of the kind of like fervor and almost kind of like religious language around cutting out the middleman, but I was like, what does that actually mean? It means that more value accrues to both sides, to the creator and to the consumer. And that's a really powerful thing. And you can build new business models based off of that.

So by I think May is when I wrote about uh Ethereum and when we were introduced. And so my journey at that point was, you know, Ethereum is my biggest holding, still my biggest crypto holding. I think my biggest holding of anything at the point. Huge, huge fan, but you know, like to kind of battle test all of these things because my brain is naturally not skeptical. So I like to talk to people who are smarter than me. I even asked the internet, I got probably a thousand replies on why I shouldn't just put all of my money into Ethereum. But that was kind of the context of us talking was, you know, from you know some of the biggest Ethereum bulls that I know. And I think Ben at Solana introduced us that he knows, you know, what are the what are the drawbacks?

I always find it interesting for people who come into this space and then take a hiatus for a while and then come back because their perspectives as like, okay, how has this space developed is always interesting, especially when you you were gone for a it sounds like a decently long time. The difference between $150 Bitcoin and the rise of the alt layer ones is a very significant span of time. I actually don't know of anyone who has like a longer gap in their crypto history than that. So when you came back into the space, what were your first impressions about like, oh, how has this space developed? What were the things that really stood out to you as somebody that once paid attention, left, and then came back?

Yeah, so I mean I I think, you know, Bitcoin is obviously the OG and is interesting for its own sake and all of those types of things, but as someone who likes technology businesses and kind of diving into how companies work and business strategy, like there's not much there on the Bitcoin side. You know, price goes up, store value, nothing particularly exciting to kind of break down.

When I was kind of reintroduced to Ethereum and kind of what was happening there, seeing use cases being built on top, seeing dApps being built on top, seeing NFTs exploding, seeing DeFi exploding, I just realized that there's this whole new kind of ecosystem. This is like a whole different, you know, sort of internet. And so that was just really exciting to me, I think, coming back was that, you know, the New York Times just, I think, blamed me a little bit for, you know, the Web3 moniker in a post to Kevin Roosted this weekend. But I do think that there's something to, you know, it being a lot more than cryptocurrency at this point. And that was one of the things that drew me back in was that it wasn't just about the money at this point, it was about so much more and kind of building this thing that the users and the builders get to.

Yeah, it does seem from your journey, Packy, that you've been sort of a big bull of Web3. And I think we want to get into those themes too. So, you know, for David and I, we're also like content producers, and the way we learn about things is like by writing about them or like by hitting the record button on a podcast in order to do it. So we've always introduced like this stuff that we do on bankless, is it's really part of our journey. And like we're inviting a community around us to come.

You know, discover what we're discovering and co-discover with us this strange new world of crypto. And that's very much in like reading what you've been writing over the past year or so. That's very much what I've observed you doing is you like you do a deep dive, you ask a whole bunch of good questions, and then you kind of create a synthesis of the answers to those questions, the best answers you can find to those questions in some sort of a post that you publish. So I think that like maybe the best way to go through some of this podcast and to sort of unpack your brain in what you've discovered since coming back to crypto in 2021 is to actually go through some of those posts because they're fantastically written. And we want to get maybe the gist of the post. And so there's like five posts that I think would be really cool for us to go through. But let's start with this first one, which is the post you published, I think shortly after your Telegram message to me, where you were doing a deep dive on this Ethereum thing after hiatus, after you know, Bitcoin in 2013 and, you know, the sound money meme and all of that maybe didn't resonate with you. But now you've discovered this new thing. And so you wrote this post called Ethereum Own the Internet, a bull case for Ethereum. I want to start maybe with this question where we dive into some of the sub themes of this article, but what did you really discover about Ethereum during your deep dive at that time?

Yeah, so a fun bit of trivia is that the opening quote in that article was a Ryan Sean Adams quote, the most bullish thing for Ether is to be understood.

Stolen from David Hoff.

That one was me.

Wow.

So a misattributed

It was Ryan Sean Adams quoting David Hoffman. It was quite

Yeah. It's a it's

Packing McCormick, quoting Ryan Shawn Adams, quoting David Hoffman, the most bullish thing for Ether is to be understood.

Michael Scott style quote.

Exactly. So I mean a year ago, and it seems crazy, but a year ago is kind of when I think

Ethereum started breaking into like the very popular consciousness. Like, you know, it was getting written up in Bloomberg, and Patrick O'Shaughnessy was talking about it on his podcast. So, for people who were kind of interested in kind of business and technology more broadly, I think early 2021 is when people really started kind of re-learning about Ethereum. Obviously, you know, you guys have been a great resource for that. One of the things that I think, you know, there's a couple of things that I discovered or kind of just different ways of thinking about Ethereum that I thought were useful. One was kind of comparing it just to, you know, thinking about it as a company as opposed to just an asset. So there's obviously like the kind of triple point argument that y'all made that I quoted in the piece as well. But just the fact that, like, as usage goes up, fees go up, and you know, it behaves kind of you can kind of analyze this like you would analyze a business, I think is one interesting thing. A second one is

that Ethereum.

I realized kind of readiness I had just written about Excel that Ethereum really seems an awful lot like Excel in a lot of different ways. One, it's kind of Lindy. So the longer it's around, I think, you know, the less likely that anybody's going to come around and kill it. Two, that kind of composability is just built into this thing where in Excel you can build formulas that build off of each other and you get really, really good at it. And so as you build more and more complex formulas and build bigger and bigger models, you're kind of more and more locked into this thing and gets more and more magical. Same thing with, you know, Ethereum and composability and people kind of mixing and matching primitives. And then just the fact that it is this kind of just distributed computer, which now I think obviously anybody listening to this podcast, but really most people in the world kind of understand. But just was kind of radical to me thinking about it at the time when my previous exposure had really just been Bitcoin.

So you had this quote in your article as well. Owning ETH is like owning shares in the internet.

Demand for ETH will go up with increased Web3 adoption, while upcoming changes will decrease the supply of ETH and let more value accrue to holders. It's like a tech stock, a bond, a ticket to Web3, and money rolled into one. That's just a fantastic summary of the bull case for ETH. So you're seeing ETH the asset, both tied to Web3 adoption, but also it being sort of a unique asset that gives you exposure into like a lot of different, it's like not limited to just a money or a tech stock. It's kind of something new. It's all of these things combined. Can you talk a bit more about that?

Yeah, it's kind of this

index, right, on the adoption of of Web3 almost where

One of the most fascinating things, and this analogy has been, I think, used uh many times, but is if you had to say buy shares in Amazon and use that to pay for AWS, right? I think that idea of having to use Web3 by kind of starting by purchasing ETH and then going down the rabbit hole from there and swapping it for other things and staking it and doing all this other stuff all starts with buying this thing that also, you know, with the proof of stake switch and on the verge of the merge, will essentially, as people use it more and more.

You have to buy ETH as you use ETH, the value goes up. And so that was one of those really interesting kind of mental shifts for me is that it really is like kind of buying equity almost, except for the fact that you then go and use it.

We're about to keep on going down your journey into other layer ones because we're following Packy's journey through the process of understanding Web3. But before we talk about the other layer ones that Packy is interested in, what property or quality of Ethereum has that really, really excites you that no other L1 has?

I mean, I think the legitimacy is there for sure. And just the fact that that is where so much of the activity lives and so much of the culture lives. Uh, and you know, it just it has kind of that

beautiful blend of security, um, but you know, composability and flexibility and all those types of things that it just feels like a chain that is going to be around for a very, very long time and will continue to get more and more used and more and more valuable.

And then what about the inverse of that question? What about Ethereum do you think really holds you back?

I'm not gonna say anything novel here, right? Like, you know, I think the gas and, you know, speed, all the gas has been a little bit more palatable recently, but you know, paying ten dollars even limits the kind of use cases that you can do. But I I think that'll get fixed. I I'm like I said, super bullish.

Paki, did anything about your re entry into crypto in 2021 re excite you about Bitcoin at all? Or is it possible now to come back into crypto in 2021 and like completely ignore Bitcoin?

I've probably actually, to my detriment, I think ignored Bitcoin, maybe even too much. I mean, so much of the I think the value in the space moves with Bitcoin still. And I'm awaiting the flipping, listening to bankless and getting updates on how close we are to it. But I think for now, uh, you know, at least from a financial perspective, so much of the industry moves with Bitcoin that it's I probably ignore it at my own peril. I just don't find it particularly

interesting. I find the idea interesting and I own a little bit of it and it will sit there, but there's not like a ton more to explore from that point. And so I just haven't, you know, I watch the price and that's about it.

Before we move on from Ethereum 2, I'm wondering if you could kind of paint the picture of the Web3 value proposition for us a little bit more. So what is it about Web3? What does this term even mean to you? And how does that relate to what you first saw in Ethereum?

Sure. So Web3, the definition that I've used is that it's the internet owned by the users and the builders orchestrated with tokens. And I think there's just so much that you can do when you're able to give ownership in the thing that people are using and building. And when you're able to use tokens as incentives and use, you know, whether that's fungible tokens, non fungible tokens, use those things as incentives to guide behaviors and design richer systems than you could otherwise. And you cut out the middleman, not in any kind of zealous way, but in a real impactful way where both sides of the equation who are adding value to the system are able to pull more value out of the system. That's what I think is so powerful about Web3 to me.

Okay, well let's keep moving. So this is sort of the first milestone that we picked up in your newfound crypto journey in 2021, which is Ethereum, the ability to own the internet, right? And this is where you know the Web3 kind of starts at some level. Although some might argue Web3 is also a Bitcoin thing. I'm not sure Bitcoin Maximalist would embrace that, but um we tend to think Bitcoin is just another piece of web three. But you said this in your Ethereum article as well. You also talked about some of the risks to Ethereum being like kind of transaction fees and the cost to actually use the main chain network. And you said the L1 that I'm most excited about, besides Ethereum, is Solana. And of course, that was actually a good time to be excited about Solana, or at least it's a good time to be buying Solana for sure, the Soul token. At uh I don't know when did you publish the Ethereum article? Was that in like April?

It was May of 20.

Okay, so it's May. So it's right before this thing that Solana community calls Solana Summer, where Solana had a fantastic price run. And also we're seeing some real traction on Solana. So let's talk about the second article and the genesis for that article, which is Solana Summer. So clearly before this article, you had been looking at Solana and been bullish about Solana. But can you tell us why you were excited about it? Was it really the transaction fees? Were there other elements in play that made you excited about the Solana ecosystem?

So in the smallest of small worlds, uh Ben Sperango, who works at Solana and introduced us, was my neighbor growing up. And so I know that he'd been involved in the space for a little while and I'd kind of tracked him. But as I was kind of out of the space, wasn't tracking as closely, then I came back in and caught up with him and he told me kind of why he went to Solana and what he was so excited about and what he was working on, introduced me to Anatoly, and just kind of got more and more bullish. I mean transaction fees and speed are obviously two of the things that got me excited to start.

But I think the thing, you know, the way that I tried to frame the piece and the way that I try to frame a lot of the things that I write about crypto is not as this completely other thing, but as a thing that kind of follows, you know, some of the same rules that most businesses have to follow, but just with some supercharged tokenomics built into the mix. And so for Solana, it's really kind of a platform dynamic where it's Solana does well if it's able to acquire developers who build products that acquire users. And it's kind of you know that that simple. And so what attracted me was I started talking to more and more and more people who were building on top of Solana, and there felt like there was a lot of developer interest moving over there.

How about the transaction fees in Solana? So in your article, you wrote this. I think at the time it cost something like $3 to do a transaction on Bitcoin. And at the time, a massively high gas fees. People probably remember this in May of last year, $8 to $40 on Ethereum mainnet. And at the time, it only cost 0.001 cents, like a fraction of a penny to do a transaction on Solana. Do you think that is the big kind of value proposition that something like Solana brings? Aside from, like, of course, Ethereum has a fantastic community. But aside from that, is it mostly about transaction fees and decreasing the cost of those?

I think it's transaction fees and speed, right? It just feels performant. There's I'm gonna blank on the name. Maybe we can put it in the show notes afterwards, but there's a website that you can go to on Solana that actually lets you kind of just execute transactions in real time as fast as you can kind of hit a button and it shows those transactions settling like kind of within seconds. And it's just a very different experience than operating on Ethereum where you're used to you know signing a transaction with a MetaMask and just kind of waiting for a little while until you know something happens. So I think there's that speed element that attracts people in addition to the low transaction cost, which is really nice as well.

Do you think that's what a lot of people are looking for? Like when they come, I mean, everyone's used to mainstream, right? It's like mainstream is used to a web 2 experience where just like I click the button and the thing works, right? It's like very easy to use. In crypto, we're kind of used to like janky user interfaces. And so, like, I mean, people that use the original Maker Dow interface, you know, they see the abilities that the new generation have today and like the seamless things you can do in MetaMask and they think, oh man, this is fantastic. It's so easy to use. But if you talk to like,

you know, your mom and get her to do something in DeFi, she's going to be completely flustered, like, have no idea how things work because it's so clunky and difficult. Do you think that is part of the appeal of something like Solana? Hey, this thing just kind of works the same way the internet does, and you click a button and things happen, and that's it.

A hundred percent. I think.

You know, one of my maybe less popular takes is just that, you know, the people who care the most about decentralization, the people who are most willing to put up with janky experiences to interact with crypto are probably the people who are already in the space. And so as you think about onboarding the next billion users, which every product, including Solana, claims to want to do, I think making an experience that feels more and more and more like web two from a usability perspective, like kind of the promise of the you know, web three is that it combines the open, kind of permissionless nature of web one with the usability of web two. And so I think the closer and closer you move to usability experiences that people are used to, the better it will be.

So you're almost like a UX maximalist then, a little bit. Like not a maximalist, but things like the anything maybe, but like as far as you think that you would prioritize user experience is is one of the most important things about the crypto experience.

I think it really depends who you're building for. Like, so I wrote about flow recently as well. And I think kind of similar, similar argument there, where there is a portion of people for whom I would much rather they own their NFT and own their digital assets than not. And if that means that, you know, short term, you're not fully decentralized and you're using your credit card and it feels more like a web two experience, but you own the thing, that's great. And you know, there's a large portion of the population for whom that's really valuable. There's a smaller but super valuable and passionate portion of the community for whom the Jackie experience is kind of part of the fun. And it makes you feel like you're a part of something and it's almost like a video game where, you know, part of the beauty of a video game is that you're doing something that's hard but achievable. And there's something about that in crypto as well. So I'm not necessarily like a clean, smooth, easy on ramp maxi, although I think they're super valuable to get the next billion people into the space. But I do think that for certain use cases, speed, low cost, and just usability does matter.

One of the aspects about Solana that I know has compelled you, Paki, and many, many others is the commitment to blockchain-wide composability, right? Like not sharding, not having layer twos so that every single DeFi app is on the same plane as every other DeFi app. And that in combination with like the low transaction fees is really compelling to a lot of people. I believe that's what caught your attention about Solana in the first place. Philosophically, that has turned into a debate between people that kind of believe in the modular blockchain thesis versus people that are really committed to not trying to break composability. And I'm wondering how your thoughts and mental models about this has developed over time.

I'm probably a bad podcast guest because my answers are somewhere, you know, in the middle on a lot of things. I think for certain DeFi use cases, On Solana, I think having kind of full composability is valuable. I don't think full composability is valuable for everything. I think when you think about, again, going back to kind of the flow piece, like the fact that uh, you know, NFTs are able to kind of own different things and just kind of compose a little bit more nicely and do a lot in one transaction without sharding on flow.

I think there's value to that for certain use cases. And then there's some use cases for which I don't think it matters at all. But I, you know, I think Ryan, you when we first messaged had thoughts on kind of composability and sharding. So I'd love to hear your thoughts.