Fidelity's Bull Case For Ethereum

Are the institutions serious about Ether the asset? That is the question today. So, Fidelity, the multi-trillion dollar asset company, just recently released an investment report. It was entitled Ethereum Investment Thesis. This is their case for why Ether the Asset. And the question on today's episode is: are the institutions really serious about Ether? Has Ether the asset passed through the institutional gauntlet the way Bitcoin has? This is the investment thesis from Fidelity. We bring on the researchers who wrote it. And I gotta say, they pretty much get it right. We talk about value accrual for Ether the asset. We talk about whether Ether is money or whether it's a capital asset or maybe a bit of both. We talk about this concept of blue chip block space, and maybe Ether block space is emerging as that. So stay tuned for this episode if you want to get more bullish on Ether with some conviction. David, before we get in, there's a message from our friends and sponsors over at all right. Let me ask the question before we begin. Why was this episode significant? Why'd we do it with Fidelity?

Fidelity is a amplifier of some of the core analysis that has gone on in this industry to much more capital than that is currently in this industry. How many AUM does Fidelity have, Ryan? How much did you say?

Uh something like four to five trillion.

45 trillion. What is the market cap of our industry right now? Yeah. One trillion. One trillion. Okay. So think about that leverage, right? Yes. They are putting in work to understand Ether. One of the lines that we've said frequently, and you'll hear it in this podcast, is the most bullish thing for ether is to be understood. And there are some tailwinds behind this. Ether, unlike Bitcoin, has metrics, it has staking yields, it has burn rate, it has all of these different metrics that help kind of define the contours of what Ether is. And these are being put into an investment report by Fidelity. And so we go through the authors of this report and kind of unpack the investment thesis behind Ether. But also I would say it's also a framework for general crypto networks who are interested in following in Ether's footsteps. Do you want an investment report written by Fidelity to broadcast the merits of your network to the broader Trad5, $5 trillion asset under management Fidelity world? We talk about what it takes to join the ranks of Bitcoin, because now there are two blue chips, Bitcoin and Ether. So we narrowly get to talk about Ether and its properties, but also kind of provide a framework for follow on crypto assets to join in the ranks. Because I mean the bullish case for crypto is that we get more blue chips than just Bitcoin and Ether. And so that's why I would say this is significant and why it's worthy listening to.

Yeah, for me it's not as much what they're saying, it's who's saying it. Yeah. And that's what makes the impact and the difference. And this is a message that goes directly to institutions. So you'll get a flavor of how the institutions think about ether the asset in this episode, I think.

Longtime bankless listeners will probably this is review content from them, but I mean it's different when that content first came in the form of like medium articles and subsec posts. Now it is in the form of, you know, professional PDFs from Fidelity. And so it's always nice to see the expansion of the narrative take on new forms.

Yeah, you got to check the footnotes in this white paper as well. They footnote ultrasound money, which is really cool. And guys, before we get into this episode, of course, first we disclose both David and I hold Ether. We are long-term investors. We are not journalists. We don't do paid content. There's always a link to all bankless disclosures in the show notes. All right, let's get to our episode on the Ethereum investment thesis with Chris and Jack. But before we do, we want to thank the sponsors that made this possible. Bankless Nation, we are super excited to introduce you to Chris Kuyper and Jack Newrider. They are research analysts at Fidelity, and they're here to talk about the Ethereum investment thesis from Fidelity's research perspective. Chris, Jack, how are you guys doing today?

Yeah, we're doing great. Happy to be here. Great. Thanks for having us.

Well, thanks for writing this report. David and I were really excited upon seeing it published and reading it. And of course, bankless listeners have heard the Ethereum investment thesis ad nauseum from David and myself. But I think it carries a different weight coming from an esteemed organization like Fidelity. I mean, Fidelity has something like $5 trillion in assets under management. You guys are, you know, kings in the TradFi world. And so you give an era of credibility to the Ethereum investment thesis that a couple of podcasters just simply don't. And we want to get into this paper today. So are you game to go through it?

Yeah. Absolutely. Sounds great.

So the white paper is entitled, the research paper is entitled The Ethereum Investment Thesis. We'll include a link to it in the show notes. And I want to kick it off with this because this is how it opens up. While users may get technological utility from the Ethereum network by accessing the various applications in the ecosystem, some may wonder, how does utility translate into value for Ether the token? That's a very good question. How do tokens like Ether accrue value? You go on. In other words, why would an investor buy and hold Ether the token rather than just use it to interact with the Ethereum network? That's what we're going to dive into today. Before we do, I'm just curious, Chris and Jack, can we get some background on why you guys are writing research papers on crypto assets like Ether?

Sure. Well, I guess we'll start with a little bit about Fidelity Digital Assets. We are kind of quiet. Not a lot of people have heard about us, but hopefully that's changing a little bit here. But Fidelity Digital Assets is a subsidiary of the big Fidelity Investments that you mentioned, the big trillion dollar money manager. And so we are a separate entity dedicated to the digital asset space.

Our history actually goes back almost a decade. We are not new to this. It goes all the way back to 2014 when Fidelity said, we need to understand Bitcoin. We need to understand the space. This is a potential disruptor. This is a potential way to create a lot of efficiencies for our business, right? And so they're always looking out for these things. They have an entire RD center specifically dedicated to look out for seismic shifts or changes in technology. And so of course they heard about Bitcoin. And the first thing they did was they said, Well, we got to get our hands dirty. We're not just going to read about it and write about it. So they started mining it in 2015. And so after they started mining Bitcoin, they had some and they said,

Well, we want to hold it, but there's no institutional enterprise grade product out there for us to hold it. So we're going to have to build it ourselves. And so that was the very first thing they did. That's how they scaled this business. And by 2018, they officially launched Fidelity Digital Assets, which is where Jack and myself sit. Our core products and services still include custody, so cold storage of Bitcoin. And to get to your point, about a year ago, we added capabilities of Ether now. And then we also have a platform and execution platform for buying, selling, and holding digital assets. So that's where we are today. We added Ether capabilities to our platform to buy, sell, custody Ether, the token. And so we first wrote a paper about understanding Ethereum, the whole network, very primer 101, that all of your listeners are familiar with, but the traditional finance world wasn't familiar with yet. And then we followed it up with this paper saying, okay, you might be on board with Ethereum, the ecosystem. Maybe you think this thing is going to succeed.

But as you stated in the introduction, the question we wanted to answer was well, why would you actually hold the token? Why would an investor buy and hold the token, just sit on it? Remember, our business is custody. So why would they just custody it with us rather than use it? And so that's what we're trying to address with this latest research paper that Jack and another colleague of ours, Max, wrote together.

One dynamic that I wanted to parse apart here is the scope of institutional money, TradFi, and what they are looking at in crypto. In crypto, of course, there is a very long tail of risk that people can choose to pay attention to, right? Bitcoin on the very safe side of the spectrum, and then like pool to yield APYs on the very far end of the spectrum. And the story of institutional relations with crypto is, and our perception of institutions is how far down the risk curve are they looking? And, you know, historically, I would say Fidelity has been kind of a Bitcoiner org, kind of called Bitcoin Safe, and hasn't proceeded too far beyond that realm up until recent history. And maybe you guys can just kind of shed some light on what it's like to be in the institutional world and being looked at by trillions of dollars and how it relates to the risk that crypto presents, especially as we go further down the stream, further than Bitcoin. Just can you shed some light on that just dynamic?

Yeah, I'll start and Jack and jump in here, but

You know, Fidelity's been around for over 75 years now, private company. And so just as much as a financial company, it's a risk management company, right? You do not survive over 75 years in the financial world unless you have risk management in your blood. And so that is probably just as important in our business as anything else, that risk management. And so it's funny you talking about Bitcoin being kind of the safe end of the spectrum and the other end is, you know, all this other DeFi stuff. That's kind of from your perspective, from the institutional perspective. Any kind of digital assets, Bitcoin included, is still in the really risky bucket for them, right? Like it is.

Oh so you guys are the edgy ones at Fidelity.

Absolutely. I mean, we were the first traditional finance company to kind of go down this path. And we still are way out ahead of the curve here, I think, in a number of ways. And so it's funny to think about it that way. But yeah, that translates into what we do with our products. You know, we're we're maybe slower moving than a crypto native firm out there, but it's because we're doing it right. We're doing it from the ground up, we're doing it with this risk management in mind. And so that's why it was Bitcoin first for a while. And then we have slowly now added Ether capabilities. So, Jack, I don't know if you have any other perspective as well on that.

Yeah, maybe just one thing to layer on to what you said there, Chris, which was great, is everybody uses the phrase, and we're even guilty of it too, of we support institutions and we run an institutional business. But at the same time, institutions can mean different things to different people. I think when you traditionally think of an institution, you think of the largest allocators in the world. So pension funds, endowments, sovereign wealth funds. And that certainly sits in the bucket. But what I would say from an actual token allocation standpoint, the largest entities of those size are few and far between. A lot of them are getting up the education curve, but in terms of actual token allocations, it's sparse. And in terms of meaningful allocations to the space as a whole, there's not much of it. There's a little bit here and there in terms of venture because the venture route is a it's a traditional wrapper and feel, right? You don't have to think about all of the operational complexities and the same like due diligence that you do if you're going to hold in custody Bitcoin or Ethereum or digital assets themselves. And then from an actual adoption perspective, I think what we've seen is a lot of it comes from the smaller, what we would consider institutional, which is more like wealth managers that have end clients. So family offices or registered investment advisors here in the United States. We see a lot of adoption in that category of investor because the end client is the one that's asking for it, because there's still a lot of career risk embedded with owning digital assets. It's not totally normalized, even though we've come a long way.

I think that's very important for listeners to understand as they get into this. Because of course, Bankless is talking to a much more crypto-savvy, crypto native type of audience. But from your perspective, you guys are the ones, maybe, you know, the talk of the office and going to the water cooler and here come the crypto guys, right? And even within that, even within Fidelity, Fidelity is kind of leading the charge. I mean, spinning up Bitcoin miners in 2015, other large asset allocators, I mean, like the black rocks of the world, aren't that far down the crypto rabbit hole. So you guys are sort of on the fringe on the fringe, and your perspective is TradFi, and they are massively under-allocated to crypto right now. And so the assets that you guys have taken some time to research on, like Bitcoin, Ether, maybe there are a few others, but some of the kind of the main stage lower risk crypto assets, but even those assets are considered extremely high risk to the rest of traditional finance. Maybe just to kind of level set the conversation before we get into the Ethereum report itself. So, what does traditional finance and institutions, and Jack, you gave much more nuance to the term institutions. We're talking about family office and pensions and everything else. So appreciate that nuance. But let me come back to generalize.

I will continue to be blunt about it.

Yeah, let me generalize it for a minute again. What do they think of Ether right now? I have kind of a sense that some institutions, maybe the more like aggressive ones, they see Bitcoin. It's lasted for a long time. They're looking at Bitcoin and they're saying, okay, this is weird, but maybe proto like store of value type of asset similar to gold, and we kind of get it, right? I feel like we've crossed that threshold, but maybe you can correct me. What do they think of Ether, the asset right now?

Yeah, I think you're right on there. And that's where we focused a lot of our research and education to get people to understand Bitcoin first. And we wrote a report called Bitcoin First, why institutional investors should consider Bitcoin before everything else. And that wasn't to say they should only invest in Bitcoin or don't look at anything else. It was just if you're starting in this space, it makes sense to start here because Bitcoin was first historically. It's also the simplest in many ways, simplest in terms of the technology, the capabilities, but also relatively simple to get your head around some of the investment thesis and narratives, right? And so I think you're right, Ryan. We've come to the point where the institutional investors are finally getting past the Bitcoin point. They're thinking, okay, I'm understanding this now. I've got my investment thesis. I've maybe even got my allocation, my risk parameters around this, how I'm going to approach it. And then they start to look at other things, right? And then, of course, the second largest one by market cap is Ether. So it makes sense to go there next. But I'd say we're still pretty early to Jack's point on nuance of institutional investors. That's very clear here. It's going to be more of the venture cap, the crypto hedge funds, the people who are much further down the space, they're the ones that are going to be considering this. But you know, it's starting to change. I think some people are coming around to this idea of okay, if I've got a bucket or a sleeve to digital assets, do I start to diversify? And I think what's helped with that is just all the changes that Ethereum has gone through. It has set itself apart from Bitcoin even more. So switch to proof of stake and all of these things coming up. It's making its differentiated use case. And that helps with the diversification narrative with institutional investors as well.

I'm curious if it's still so it has felt for a while like Bitcoin was kind of the king in TradFi's sort of understanding. It was just Bitcoin and Bitcoin kind of stood alone and there was all the other weird crypto assets that maybe you don't need to know about right now. It has felt increasingly like it's Bitcoin and Ether. So these two sort of stand out. But I know a lot of people would say, well, once you accept the second, then you're just kind of opening the door to the entire long tail. So I guess I'm curious from your perspective, do you still think that Bitcoin and Ether are kind of in a class of their own with respect to the investment thesis and risk? Or is it basically, is it now like Bitcoin, Ether, and all of the rest of the assets? With Ether and understanding Ether, do all of the other assets come, or is it still in sort of a class of its own with respect to understanding?

Yeah, maybe I can layer in a little bit here. There's a reason why we supported Bitcoin first, and then we've added Ethereum support around a year ago. And that's sort of where we're at currently. And you have to think about all of the different considerations from the liquidity constraints associated with tokens further down, right? So just quite literally, is the asset liquid enough for there to be significant trading volume on it? Two is what about the regulatory environment? Can we provide support for these assets or do they live in regulatory ambiguity? And even with Ethereum and ETH staking, we've seen that some of the ETH staking protocols the SEC has gone after this year, some of the providers, centralized providers. And so there's still some level of regulatory ambiguity around Ethereum, even.

And so I would just say that one, there's regulatory considerations, there's liquidity considerations. And then

the third thing is just quite lary, they're the two largest networks. And even during this bear market, like we could look at the entire ecosystem of cryptocurrencies.

Pull out stable coins because they're stable value. And if you look at the market cap of ETH ERC20 tokens, so the Ethereum ecosystem, and combine it with Bitcoin, it's like 80 to 90% throughout this bear market because that's where all the users really are on chain. That's where we see users accumulating Bitcoin as a store of value asset. And we see users utilizing Ethereum and not driving burn and driving fees down to stakers. And so there's actually like stuff going on in these ecosystems. Whereas it starts to get very experimental very fast once you leave either of those two ecosystems, I would argue. And then also, like we don't support outside of those two tokens because also there's not a ton of demand. Like we don't hear, you know, if you go back 18 or 24 months ago.

When you had Solana, Luna, Avalanche, right? Sol Luna AVAX was like the saying. And we had some that were asking us, like, why don't you support these tokens? And at the time we didn't even have support for Ethereum. So we were like, we don't even have Ethereum support yet. We're trying to consider and get that potentially up and running. How are we going to have all of these more speculative ecosystems up and running? And so there's a lot of other considerations, especially for traditional investors, given the regulatory environment as well.

Yeah, and I'll just drive home Jack's point. You got to take the perspective of an institutional investor, especially one that has hundreds of millions or even billions of dollars to allocate. They're going to put choose a small portion, if any, and that we're just trying to get them to a small portion of their entire fund of stocks, bonds, real estate, private equity, credit, all this stuff to allocate to digital assets. And if they've only got a few percent to allocate there, and the top two are 80 to 90% of the entire market, they are not going to waste their time on these other things. And that's, you know, no offense to these other projects. They might be exciting, but they just don't warrant the, you know, the juice isn't worth the squeeze for them, as they say. And so that's kind of just the reality that they're in. And I guess to your question, could it open it up down the line? Yeah, if the whole market gets bigger, I think that's going to be the necessary key component. The whole market has to get bigger, or you have to have very specialized kind of hedge funds or people who are trying to drive alpha by choosing specific tokens or projects.

Maybe one last question before we open up some of the details of this actual report. I think intuitively it's no surprise that it was harder for Ether to join the ranks of Bitcoin just by a nature of the properties of the protocol. Right? Bitcoin had its immaculate conception. It doesn't want to hard fork. It's not going to hard fork. It's going to be the same way that it is. There is no leadership. Ethereum is very different. There have been like five hard forks in the last like three years. These are changing the foundations of what Ethereum is. And each one has to probably be vetted if we're going to offer this to institutional clients. There is a community of people that come together and agree on changes to the protocol. Proof of stake is new. EIP 1559 is new. These are all things that are probably relevant when it comes to risk management for offering this to your guys as clients. And yet Ethereum has made it. Ethereum has made it into the ranks of Bitcoin, is being offered by Fidelity. So maybe if I am a downstream lower cap coin with aspirations of joining the ranks of Ether and Bitcoin, what are the properties that Ether got? Like, why is Ether joining the ranks? How did it earn its spot? And how might others also follow in its footsteps?

I think you've reached some level of critical mass in terms of network effects where there's a differentiated use case. And if you looked at like the digital asset ecosystem from the time of Bitcoin's launch in January 3rd of 2009 through 2015, until you had the launch of Ethereum, like what was the crypto space? It was basically just Bitcoin and then some forks of Bitcoin with different parameters, but there was no differentiated use case. So why would you use something other than Bitcoin to accomplish the same goal of storing value in the asset or using it for a means of payment? Then in 2015, you have the smart contract on top of Ethereum added and this idea of creating composable applications. And it's a differentiated use case, right? So it was like a to some degree, there was a first mover advantage of what Bitcoin had created. And I think you could craft an argument that there was a first mover advantage of what Ethereum created outside of Bitcoin, and that comes with trade-offs. They make different trade-offs in terms of complexity and simplicity, right? You mentioned Ethereum has multiple hard forks over the past few years. And Bitcoin, I mean, it's had its Bitcoin cash hard fork, but technically has never had a hard fork throughout its existence, right? And so like they are different networks. And I think we would argue that they're kind of doing different things, and that might converge or it may not, but there's a differentiated use case and there's a network of users. And so I think outside of that, you know, there are alternative layer one protocols that make other trade-offs, right, for more complexity and faster speeds that are competing with Ethereum, right? And of course, Ethereum is trying to defend itself with layer twos, and you know, we could get into all of that. But you know, there's a difference in terms of what Ethereum is doing versus what Bitcoin is doing there. And that has garnered network effects such that it's the second largest crypto asset, and there's enough liquidity there and interest for a company like Fidelity to support it.

All right guys, let's get to the report, shall we? And what I love about this report is it feels like you guys are starting from base principles and from a foundation. I remember one of the first articles I wrote on the Bankless newsletter back in 2019 was Ethereum the network versus ether the asset.

And this is interesting because this is exactly where this report starts in describing the difference between Ethereum the network and ether the asset. And Chris, as you already said, these are two different things. And so you've talked before in previous Fidelity reports, it sounds like about Ethereum the network. And what you're talking about here is Ether the asset. Some people also call it Ethereum the asset. And I don't care anymore to correct anyone. And that's fine. We could call it Ether the asset or Ethereum the asset. I just think that point is important going into this report for all investors to understand. Like these are two different things, and there's a difference between value creation and value capture. Do you have anything to reflect on that statement, Chris?

No, I think you nailed it exactly right. That's exactly what we tried to get across. So I'm glad it it resonated with you as well. But we've been fighting this with Bitcoin for a long time, you know, clearing up the misconception of Bitcoin Big B, the network, versus Bitcoin Little B, the asset or the token, right? And so

They're the same words, but we try to do capital and lowercase. Ethereum, we at least have different words, but as you say, a lot of people just use Ethereum for both. So we'll continue to fight that as well, I guess, or at least just be consistent in saying Ether the asset or Ethereum the asset. So yeah, that's the main point here. People need to understand, just like in traditional finance, a good company isn't necessarily a good stock or investment, right?

Yeah.

You can have the greatest company in the world, but if the value isn't accruing to the stockholders, or if the stock is already priced like it's more than the greatest company in the world, it's not a good investment, right? And so you have some similar parallels with the traditional finance world where you can have a great ecosystem, you can have a great network like Ethereum. It can be doing what it's set out to do. You can have more users, more applications built on it.

But the question for investors, who is what we're writing to and who we serve, is how does that translate to people who hold the token, Ether? Is there a link there? And are they going to benefit from that increased use? So the very first thing Jack and Max do in the paper is break that down and talk about tokenomics, of course, which is a term you guys are obviously familiar with as well as your listeners, but people in the traditional financial world are not as familiar with this idea of tokenomics. How does the network incentives align with the token holder incentives and value accrual?

Yeah, I think that's a great point and a much missed point, particularly for folks that are kind of looking at crypto and getting excited about the technology, the difference between value creation and value capture. Once again, it's just like number of Linux users. All of us use Linux on a day-to-day basis all the time. It's like underlying everything. And yet, what is the value capture for Linux? Linux is not a company, it doesn't have a stock, makes zero dollars. It's created all of this value for the world, but investors aren't able to capture that in value except through, you know, I guess if it's embedded an Apple type system. Do you know what I mean? So there is a distinction there, and that's important. Let's get to the two theses then for ether, the asset, token economics. The first thesis is the money thesis for ether. And the second is maybe a capital asset or productive asset thesis. So these are the two, but let's talk about the first. So thesis number one, and the question I think for investors is ether a money? Can you guys describe that? You write about this quite a bit in your paper. So tell me about the puts and takes of this question Is Ether money?

Yeah, I'll set it up and I'll let Jack answer the question. But the way we set up in the paper was similar to what we did with Bitcoin first. Whereas there in that paper, we argue that Bitcoin is a potentially emerging monetary good. And we say, from an economic perspective, first principles, like you said, what makes for good money? Divisible, durable, you can transport it through space and time, you can easily verify it. All those things are characteristics of good money. And we said, well, Bitcoin fulfills them, so why can't it become this aspiring form of money?

You get to ether the token and you go through those same characteristics. You say, well, they're quite similar, right? They're also on a blockchain. So they're divisible, verifiable. You can transport them through space and time. So the question then becomes well, is ether money or is ether an aspiring form of money? And you know, this is pretty highly contentious topic in some areas. So we come down on a little bit of a more of a nuanced answer, but I'll let you take what we went through when we thought about this.

Yeah, so I think there's different attributes that a money would have, right? Or a desirable form of money could have. Acting as a store of value is one, acting as a medium of exchange and a unit of account, which those two things can kind of go hand in hand to some degree. You're more likely to use something as a medium of exchange if you're denominating things in it, right? We do that with dollars, right? I think about how many dollars are in my bank account, and then I go and spend dollars. If we look at it through those two lenses, I think there's a pretty clear argument, especially given like the changes to, we just discussed tokenomics, the various upgrades from Ethereum have made the token or the asset more scarce, right? At least the protocol changes thus far over time have reduced issuance, have created a burning mechanism. And that has driven this sort of store of value attribute as being potentially more attractive around Ethereum. And so that element, I think, is quite clearly there, an aspiring store of value asset in the way that Bitcoin is an aspiring store of value asset relative to traditional store of value assets. I think that with Bitcoin and the narrative of digital gold and the unchanging supply cap where its scarcity, you know, at least thus far, has been absolute of 21 million. And with Ethereum, it's more nuanced. There have been changes to its issuance schedule. But at the same time, we could say now.

It's been deflationary since the merge, right? There's nuanced arguments in there. But I do think that there's a check in the box for store of value. As far as a means of payment or a medium of exchange within the Ethereum ecosystem, there's evidence that people that use ETH, the hardcore users, which we have to think about as a percentage of the global population, it is still very, very small, right? It's a niche community. But that niche community uses it as a money, right? And you also pay fees on the network in Ethereum. And so there's an element there of using it as a means of payment or as a unit of account inside of the Ethereum ecosystem. So to the degree that the Ethereum ecosystem continues to be successful, right, and grow and its user set grows, then we think that as a medium of exchange, that element could grow in the future. But store of value is more clear, especially after some of the recent protocol changes to Ethereum. But as far as a money, we still think that Bitcoin looks primarily like it makes trade offs to try to be a money, first and foremost, more than Ethereum tries to be like a technology platform, which is sort of the second thesis that I'm sure we'll get into in a few minutes.

I was just gonna say I'll play devil's advocate a little bit to what Jack said there and what we talked about in the paper, which is you do have the supply side of this down with the burn, right? It's becoming net deflationary. So you think that would help with the store value argument, yet

We haven't seen it in the price yet, right? We're down, you know, how many thousands of ether yet? The price has not appreciated. So that part hasn't resulted in value accrual. And I think that one of the biggest reasons is besides some of the macro stuff and obviously the bear market. So I want to be fair because it's only been a year or so. The other thing that you need, though, is the demand side, right? And so this is where Bitcoin shines because it's got the demand and the network effect. And that's a flywheel for Bitcoin. And because if Bitcoin's first, it's arguably going to attract that, right? It's also got

The established narrative around that. And so while you have the components of store of value for Ether in terms of it being scarce and deflationary at the moment, I think the two things fighting against it is it doesn't have the first mover advantage and the network effect of Bitcoin. And then as Jack mentioned as well, you also have maybe some people doubting whether or not that will continue in the future just because it has changed so many times in the past.

Go for a Jack.

We use a lot of analogies when we're talking about these things with traditional investors, just because we find that that helps kind of make those links, right? And people will use the digital gold for Bitcoin. And I think we can think of from a precious metals perspective, if you think of gold, there is an industrial component to gold, but the vast majority of its value, and the reason why people will buy it and hold it, is because they view it as a store of value that has an element of scarcity that's widely recognized. With Bitcoin, I think that that is the case, right? It's the element of scarcity, it's the store of value property for why primarily people are buying and holding Bitcoin. And then there is a small, like you can use it as a means of payment. There's a small subset of users that do that. Same thing with gold, right? With Ethereum, it's a lot more like silver, right? There's an element of scarcity, and like it is still like a precious metal like gold is, but it's far more used as an industrial component for different things. And that's with Ethereum. Like it's more useful and it's more of the platform and the applications that could be built on top of it. And so I think from like a translating it to traditional investors, that's kind of the framework we use. But there's evidence that there's a desire for Ethereum to compete on the monetary front, clearly, after the various protocol changes over the past few years.

Yeah, we've definitely found that leaning into metaphors works quite better than just doing the trench warfare of technical unpacking. I wanna actually zoom out and bring out the question of just like the money conversation at all. I remember giving a talk to a lot of my friends' parents in 2019 about crypto.

Wait, you g David, you gave a talk to your friend's parents? Yeah. Like they all assembled around and they were like, We're listening to David talk about crypto.

I had reserve a brewery. Shout out to Maker Dow who gave me the grant for reserving a brewery and ticed them with free beer. And then they came and listened to me give a basically a lecture for almost an hour. But the first 85% of the lecture that I was giving was not about crypto. It was actually about the historical progression of money. And it was really meant to deconstruct pre-existing notions about what money is. I want to put on the hat of a reader, you know, a TradFi institutional money manager who's reading this report, and they are reading about a new form of money because that's a very new concept. And one of the biggest enticing things about the poll down the crypto rabbit hole is like the shattering of like the dollar isn't actually money. Money is a social construct. And so I want to ask about just simply the role of even broaching the subject of a new money and how it's read and how it's received by some of the traditional.

Are they ready for that?

Yeah, are they ready for that conversation?

I'll give the classic story of the two fish swimming along. Another fish comes beside him and says, Water's great, isn't it? And the other fish turns to the other one and says, What the heck is water? Right. And the traditional finance world.

Is a wash in money. It's what it deals with every day. But

I think very few have considered what exactly money is itself, right? And I don't mean that disrespectfully. I mean it is the world they live in. I'm not saying they should, or actually I do think they should. It's a good question to be considering, but I just saying I understand where they're coming from. What is money? I mean, it's such a foundational question and it's such a nebulous thing. I mean, I went down the what is money kind of rabbit hole for years and culminated with me saying I have to take monetary history and theory classes at grad school because I think this is so fascinating. I mean, I'm a nerd in that way, but I think everyone needs to consider money in the terms of

zoomed out grand historical proportions, not just their own personal lives day to day, having to pay their bills, you know. And I get why people get caught up in that. We all have stuff to do, but it's a big question that people need to consider. And especially on the institutional side, it's more important than ever. But also