113 - How to Be Early | Olaf Carlson-Wee

Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, 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 with Olaf Carlson We. We are picking his brain. This is an OG investor of OGs. He was first to just about everything. We're going to talk about all of that and more, what he thinks about the space, a few things that you want to take away from this episode. Number one, how did Olaf get in early to just about everything in crypto? The contrarian investor, independent thinking. He talks a lot about that in this episode. Number two, who's going to win the crypto chain wars? Is it ETH? Is it Bitcoin? Is it alt layer ones? Which chain is going to accrue the most value? That is a very relevant topic in 2022. Number three, how DAOs will look in the long run. Will decentralized governance actually work? As a bonus, really fun section near the end. David and I play a game we call overrated or underrated and get Olaf to name some things that are overrated and underrated in crypto. I think you will enjoy this episode and like those answers. David, what were some of your thoughts on this episode with Olaf?

It's always fun to pick the brain of people that got into this base really, really early and clearly saw it right. And Olaf definitely saw crypto unfold like relatively accurately for how it actually did unfold. And it takes a special kind of person to come into crypto early and really be able to call some of the things that happened. Of course, no one gets everything right, but the consistency of which Olaf's ideas and concepts and practices about how to operate in this space worked out for him is just something that's fantastic to learn about. I think the hottest take, the take that I appreciated most, Ryan, was his long-term model for DAOs and how DAOs are going to collectively, rather than just being a bunch of Discords where people, you know, shuffle around and do stuff and then settle up at the end of the month or however DAOs do it. He talked about how DAOs are going to be companies that apply for grants from a protocol. And I asked him after that about like, you know, what kind of example do you have of a DAO that's really getting something right? And I have my answer. And I was waiting for his answer. And the fact that he said that he hadn't seen any answer yet was actually surprising to me. But I think that is something that we will save for the debrief.

Yeah, we've got a lot to talk about in the debrief because Olaf shared some views that are sort of, I guess, counter to some of the ideas in Bankless, like concepts around sort of money when all assets are the same. There's not sort of you know crypto monies versus other assets. His ideas around sort of a multi L1 world as well.

It's called polychain for a reason.

Yeah, exactly. That's kind of what he said. So anyway, some really interesting ideas and a little bit of back and forth on that. But basically, David, this episode was everything I wanted it to be because we'd never had Olaf on the podcast. Certainly. And he's just someone you have to talk to in crypto and you have to pick his brain. We'd never had an opportunity to do that. And I feel like we got all of the questions in that we wanted asked, even if it got into like rapid fire mode near the end and they were kind of, you know, short and pithy responses. So it was just a fantastic episode from that perspective.

We've been hunting for Olaf for a really long time and kinda had just like given up. Like couldn't figure out how to get to him. And then one day he just shows up in our inbox. I was like, hey, can I come on bank list? And we're like, oh, fantastic, great. Uh and that's how this episode happened.

Sometimes it just works that way. So, guys, we think you're really gonna enjoy this episode. As always, if you're a premium subscriber, hang with us on the debrief where we talk about the episode after the episode. Guys, we're gonna get right into our episode with Olaf. Hey, Bankless Nation, super excited to have our next guest on. He's actually never been on the Bankless podcast before. That's why this is a special treat to talk to Olaf Carlson Wee. He's an OG of OGs. He was early to Bitcoin back when Bitcoin was this weird, obscure thing. He was early to Ethereum as well, figuring that out. He's one of the first investors in DeFi projects like MakerDAO, one of the first, maybe the first, crypto fund manager as well, starting Polychain Capital. He was one of Coinbase's first employees, a lot of firsts in Olaf's background. And I know when I was getting in the crypto space, Olaf was a key person for me to listen to to really wrap my head around the mental models for this industry and what's going on. So, Olaf, it is a pleasure to have you on Bankless. How are you doing?

I'm doing great. I'm very excited to be here and thanks for all your kind words.

Yeah, I think what we want to do is like pick your brain. I think we want to understand how you've been so consistently early to everything and understand your thesis now because of any what investor in crypto has been dedicated. I feel like you've seen the most. Like you've seen all of the cycles play out, basically. You've seen the development of Bitcoin and smart contracts and crypto banks and DeFi and now NFTs and Dallas. And so we're really looking to understand your thesis on the space. But let's start here. I want to zoom out and ask you this question How about this whole crypto thing? Has this crypto thing played out the way you thought? And what have been some of the surprises along the way?

Yeah, I mean, I think it's it was hard back in 2011, 2012 when I was really getting deep into this.

It's very hard to have, you know, back then I could not have imagined all the various ways this has gone. Um, now that said, you know, my thesis from the beginning was that this was going to grow a lot and and get very big, right? I think that the specific way that has happened is is extremely surprising.

You know, I think that the kind of advent of smart contracts and all of the various applications that those lead to, you know, driving a lot of what is now kind of the mainstream adoption through things like NFTs and DeFi was, you know, totally off my radar at the time. Right. That was just a Bitcoin world. You know, I was interested in some alternative systems like Namecoin at the time that was basically a

You know, similar system to ENS today, like a DNS registry on the blockchain. But really, that was the limit of what people were kind of imagining. We were talking about things like colored coins, which you could sort of think of as NFTs now. It's sort of, you know, I still have somewhere probably like some blue Bitcoin or something like that.

So I think some of these ideas have percolated from the beginning, but at the same time, just the way it's played out and the sheer magnitude that we've reached in such a short period of time, I think it's faster than anyone could have predicted. Like I think if I would have said this is how fast and this would happen and how big this would get 10 years ago, I think I would have sounded like a crackpot. And I and I probably did uh sound like that.

It's always interesting to me to peel back the layers of the OG crypto culture back like pre-2015 because there's a lot of things, you've named some of them, that were really prescient of things to come. Like color coins were just an early version of NFTs, as you said. Name coin where it was an early version of ENS. But then also at the same time, there were many, many other things that came about that no one really ever could have predicted back then. Like, you know, I think DeFi definitely could fall in that camp. But one thing I definitely think is true about you, Olaf, is you're not necessarily patient zero, but you're definitely really close to one of the earliest people that caught the bug, whatever the bug was. And so, you know, we can talk about like all these different use cases that were, you know, exciting and uh made you optimistic about the future of crypto, but catching the bug is something a little bit more holistic. When you kind of zoom out and not really focus on any one specific use case, what made you catch the bug so early?

So uh 2011, I read, you know, my first introduction was this Gawker article that was about Silk Road.

It talked about bitcoins in that article and how people were using bitcoins to sort of transact. And I, you know, I had some background in, you know, just internet, deep internet stuff, call it. I was always interested in video games and weird forums and stuff like that. And so I, you know, identified like, okay, this seems like the critical thing that makes this possible. I was familiar with the Tor network and all of these sorts of systems that uh something like Silk Road was built on. And when I started reading more about how Bitcoin worked, my immediate reaction was this is sort of too good to be true. This concept of an internet sovereign monetary system that's sort of run by an algorithm and not controlled by any central person, it just sounded like too sci-fi to be real. Um but once I really dove into how it worked and started using the software and everything, I realized that it worked. Like this actually was possible. We have this decentralized monetary system. Everybody can investigate, you know, how it all works. And while Bitcoin is is complicated, um I've always held that it's a lot less complicated than fiat money and the sort of shadowy mechanisms by which um every fiat money in the world operates, you know, through unelected people that are in closed door meetings, basically deciding the fate of the monetary system of a given nation state. So

I was really drawn to this idea of taking away control of the monetary system from, you know, what are basically global elites and putting it in the hands of, you know, regular people who can kind of opt into this internet-based monetary system. Again, it, you know, I think one of the beautiful things here is that it's an opt-in system. Nobody has to use it. Everyone can just sort of voluntarily go sign up for it if they want to. And the fact that anybody in the world can relatively easily audit how it works. Again, it's relatively easy. It's not the easiest thing in the world, but you can audit sort of how many Bitcoin will exist at any given date in the future. You can figure out, you know, exactly what you own, and it can't really be taken from you in a sort of network level way. And so all of those things added up to me feeling like this was both.

sort of one, the technological mega trend of my lifetime.

You know, I felt like I was a little too young for, you know, the early internet. I was a little too young for mobile, I I guess, and the shift to mobile. And I felt like this is this is going to be this sort of big technological mega trend. At the same time,

You know, I've always loved the fact that crypto, you know, in its core, it's it's deeply anti-authoritarian. I really do view it as a technology which has the capacity to sort of free people from systems that they didn't even know they were trapped in and to really just transform, you know, the entire substrate of global finance and global monetary systems. So all of those ideas were just very big to me and deeply appealing to me. I mean, they still are. Uh, the idea that we could sort of take away power from central locus of control and return it to decentralized voluntary systems just feels like, you know, it's very hard for me to imagine who is against that. And fundamentally, the only people that are really going to lose in that situation are the ones who control the current system, right? You know, I think broadly the other 99.99% of people benefit from a removal of central locus of power and a return to distributed systems that are kind of opt-in, open source, and anybody can interact with freely.

That's really what, you know, it's the it's what got me interested in this, and it's how I sort of caught the bug, so to speak. And so you combine sort of all that ideological stuff that I think is really cool, and I really think it's it's genuinely like a capital G good thing for the world. Um, you combine that with the fact that this is sort of this new high growth um tech area where you can actually be a software engineer and deploy, you know.

What are basically banks or trading systems or lending systems, you know, directly to the internet, have a global user base from day one without any sort of registration or licensure or permission from any particular nation state or government body or anything. It's just an absolutely fascinating universe to me. And so when I first got it involved in this, I felt like, you know, I can be part of this mega trend and I can change the world for the better by doing this. So

I just found it, you know, extremely appealing. The entire Bitcoin universe also filled with, you know, very odd, interesting people. And that was fun as well. You know, once I started going, you know, on the forums a lot, um, going to Bitcoin meetups and stuff, you know, I just felt like, okay, this is really like a ragtag group of very interesting people, extremely intelligent and often very unusual beliefs. But

Really fundamentally, I think, driven for the right reasons. You know, especially back in

2011, 2012, like there was no opportunism here.

There was no opportunity really. It was just sort of an open source software project, and everybody who was invested in it was, you know, just interested in what was maybe possible for the future. And I love that inherent futurism embedded in crypto, which is sort of we're all building for this future that doesn't yet exist, uh, but we all are confident, you know, will exist someday.

Well, I think many bankless listeners, and certainly David and myself, are uh deeply resonate with everything you just said, like the capital G good in crypto and the reasons we're here. Uh it's funny that you call the fiat system shadowy because some in the fiat system use that same word to describe us, you know, shadowy supercoders. But really, I mean, I think folks in crypto don't take enough opportunity to flip that around and say things like what you just said, which is no, the the existing banking and fiat system, that's the shadowy thing. Everything we do is fully transparent, auditable in code, and embedded in a consensus engine that don't privilege the elite few who can control the dials. Um, so that's a great description. I guess maybe in sort of a next stage of your crypto journey, I'm curious to hear because a lot of people who got into Bitcoin, for some of the reasons that you mentioned, actually stayed in Bitcoin. And so there was this development of what some might call Bitcoin maximalism, where sort of Bitcoin is the only asset in crypto. There shall be no other assets, and you know, that is the thing that we're here for. But you didn't fall prey to Bitcoin maximalism and just keep contained to the Bitcoin space. You made the jump into Ethereum, into other chains later, ultimately into DeFi. Can you talk about that? What was it that attracted you about Ethereum and about smart contract platforms? And how did you get out of the rut that some found themselves in of Bitcoin maximalism?

Yeah, so I think philosophically, every one of these blockchain systems has kind of two components. One is the ledger of who owns what,

and the other is kind of underlying tech platform that people can build on and transact on and interact with.

And I think part of it is a divergence of which of those two things is sort of more important.

I do think that unusual thing you see across all of crypto is not, you know, your underlying beliefs or thesis about the world or the future informing your investments, but rather the investments that you have chosen informing your sort of worldview. It's sort of this opposite thing, which I think is very unusual because it's so easy to move around, you know, assets that people hold or systems that people interact with. And so I do think there's, you know, a belief that every time you launch a new blockchain or any sort of new system, you sort of restart the ledger of who owns what. Um, in that, you know.

Ethereum wasn't airdropped to the existing Bitcoin holders. It was sort of a new group of holders launching a new parallel system. And so I do think that that's a lot of the mentality is that the ledger of who owns what is sort of the most important thing and that all the sort of tech that underlies it is secondary. I do think, you know, there is some sort of interesting argument to be made that if every altcoin had been airdrops, you know, to Bitcoin through like an equivalent equivalency system, we might have a much more cohesive and happy, happy world or something among all the various coin holders, because there's not this feeling that it that sort of etch a sketch was shaken um every time a new technology was launched. But I broadly have just always been interested in what's possible here. And the reality is when I met Vitalik in in 2013, read the Ethereum white paper the day it came out, and you know, was following the Ethereum development progress until the system launched in 2015 and then was using it.

you know, it felt like this is going to enable new things that weren't possible on Bitcoin. And it's it's just that simple. It's not

Litecoin, right? Where it's sort of like a couple simple variable changes and it's like tweaked. It's really a fundamentally new platform. I you know, and I think similarly

That same mentality has infected a lot of people that were early investors in Ethereum, actually. That now there's these alternative sets of trade-offs and novel systems that are launching, and people that are sort of wholly about the Ethereum ledger and of who owns what and don't like the idea that we're going to do a new etchat shake on who owns what every time we launch a new technology. I think that broadly, though, I just care about enabling new behaviors. And I think that efficiency improvements, so cost reductions and throughput improvements lead to new types of applications that weren't possible before. A lot of micropayment or like very fast payment type applications, you know, really aren't possible on Bitcoin or Ethereum. And, you know, just always looking at how can we make smart trade-offs to expand the universe of what is possible. Because every time you build something new in crypto, it comes with trade offs of some kind, right? Just the fact that there is programmable uh software on Ethereum adds complexity to reasoning about the core Ethereum mechanism. So concepts like minor extractable value.

Really alter your reasoning about like core Ethereum security. And those types of problems don't really exist on Bitcoin. So every every time you expand the system, you know, it comes with trade-offs. And I've always wanted to explore that trade-off space and see what's possible. A lot of the things that have been built since Ethereum make further trade-offs about, you know, various hardware requirements, for example, to run a node. You know, those bigger hardware requirements might mean there's fewer at home, you know, hobbyist node operators, but at the same time, it might lead to interesting applications that aren't possible on Ethereum. So I just broadly want to see all the experiments run. And I'm not religious about, you know, the ledgers of who owns what, you know, being sort of the most important thing here.

See all the experiments get run and maybe let the market decide at the end of the day. I'm curious about something. You've known a lot of people in this space for a long time. You said you met Vitalik in twenty thirteen and you've been able to observe him since that time. What do you think about Vitalik? What's your take on the guy?

I mean, I think he's a genius. Everybody agrees on that.

Like when I first met him, he showed me a Python tool that he'd written to make uh Bitcoin multisig.

And this is back in 2013. I'd actually never seen multisig before.

Before that, we didn't have multi sig at a blockchain level. You had to do something called Shamir's uh splitting in order to do multisig on like a private key level. So you could do multi sig, but it was like an offline multisig. You couldn't get a multisig that was enforced by Bitcoin economic security. And he was the one who first showed me like this command line tool to do that.

You know, I think I recognized right away that he was ahead of the curve on maybe what's possible here.

And he just struck me as incredibly intelligent. So yeah, I I mean

I also think that he's like a missionary. So, you know, I don't think any part of what Vitalik is working on is is sort of a mercenary approach to the world. I think he

Really just cares and wants to invent new things and wants to improve the world. Um, so

I have a lot of respect for Vitalik and really anybody who approaches the crypto space or really anything with that mentality.

One of the interesting things about your trajectory, Olaf, is that you had conviction. It appears that you had conviction on Bitcoin really, really early. Where most people, they see Bitcoin come across their feed and then they read the white paper and then they don't buy it and then they buy the top later. But one of the interesting components about you is that you had conviction very, very early. And I think you also had conviction on Ethereum very, very early in its in this lifespan as well. What would you say about Ethereum is what lent you to have so much conviction about it early in its history? When so many people were talking about how this would never work, it's way too ambitious, can't be done, stuff like that. What aspects about the crypto industry at the time told you, like, yeah, this Ethereum thing is kind of cool?

Yeah, I mean, I think the main thing is people listen to what other people chatter about

like

way more than they just download the software and interact with it and you know, see how it works. Maybe read a a paper that describes how it works.

So I just have always felt crypto is so young, yet 99.9% of the consumption by people in crypto is sort of secondary sources. For whatever reason, I just think most people spend a lot more time

on Twitter than they do just downloading software, you know, interacting with apps and sort of reading papers about how this stuff works.

So to me, it's actually really easy. It's just quit paying attention to all of this

noise and nonsense and chatter, a lot of which comes with vested interests, and just go actually

use the damn thing and see if it makes sense to you. I just think that it takes a certain amount of independent thinking to open the door and get into crypto on some level. But then I'm always amazed at how little independent thinking there is after that. With just sort of like go look at it, see it, see if it makes sense to you, um, see if it would be useful to you, see if it's fascinating to you.

So I I just am a big believer in crypto and everything in independent thinking. You know, you just have to, you know, go to primary sources and use your mind to decide what you think. And in crypto,

there's just a huge amount of sort of talking heads.

That determine what you know a lot of people think. And so I just think it's this very weird. One one way I've described it is like one nine ninety-nine. It's like one percent of people are like actually doing stuff. Nine percent of people are watching them really closely and understand broadly what they're doing. And then those nine turn around and talk to the other 90% of people. So the vast majority of people are listening to people who aren't even the ones doing the thing. They're like the ones. So it's kind of like this.

Vast majority of the information is coming from like second or third source. And so there's just all this chatter