AI ROLLUP #13: Crypto AI vs Silicon Valley | Live From ETH Denver

Welcome, Bankless Nation, to the AI rollup, where we say up to speed with the emerging trends, developments in the AI crypto space. I'm David Hoffman here on the ground floor of ETH Denver. We did this episode, this AI rollup with EJAWS in person, but we also did it with Tom Shaughnessy. So this is gonna be a little bit different than our usual weekly recap episode. It's more of just a discussion around the uh current AI crypto sector. Joined by Tom, a new face from Delphi Digital. They've been investing in AI for a very long time, uh, since well before the AI agent meta really took root in last like November. Uh they have been investing in the crypto AI intersection for over two years now. Uh so they've actually already seen a number of waves of investing cycles. And so, as young as this space is, Tom is one of the few veterans out there. So Ejaz and I had a fun time just chatting with Tom, uh, just about everything that he's seen so far in the AI space, what he what he thinks about it, how he thinks about investing in this space, uh, and what he thinks is on the horizon. So let's go ahead and get into that conversation with Tom and Ijaz. But first, a message from some of these fantastic sponsors that make the show possible.

All right, welcome Bankless Nation. We are on the ground at Ethereum Denver. We'll call it AI Denver this week. I'm

I'm here with eJaz, our regular AI weekly roll-up co-host. This has taken the uh the AI roll-up show show uh slot of the week this week. And we're also joined by Tommy, who has been investing in the AI crypto space for a very long time. And uh we've wanted to do this up for a while. Now we're doing it in person. Tommy, welcome to the AI roll-up.

Yeah, thanks for having me. I listen every week and it's my favorite AI role show. So proud to be here.

Yeah, I think this doing this episode with you has been a long time coming. Uh maybe I want to start off the conversation here. Uh Delphi has been investing in the AI crypto space since I think even people really really realized it was a space. And so I kind of want to just go and roll back the years to whenever you guys started. What gave you conviction and uh belief in investing in the space in the first place? Uh, what was the thesis then and when was that?

Yeah, uh, we started over two years ago, uh, at a time when we got significant pushback uh even internally because uh we didn't, you know, some people just didn't view it as a viable space, right? And that's how you know you're early. Um, I got really interested through an existential crisis using Mid Journey and early Chat GPT, right? Like this is gonna take over the world. Are we in the matrix? How do I get exposure to this? And that just drove me down a full rabbit hole learning curve of I gotta figure this out.

I need to invest here. I gotta be aligned. Um

the best resource I had at the time was Stephen Wolfram's chat GPT Explainer. It was incredible.

It was so yeah, I appreciate it. Yeah, I did a a thread on it.

It it oddly got like three million views or something. I pinned it and

The rest is history. We kept going.

Did you have any sort of general idea about why it made sense to invest in that sector, or was it just more of a sentiment, a vibe, or did you actually have a clear thesis about like what you were looking to see come out of this uh sector of crypto?

Yeah. Initially it was just this is the new tech wave. This is the explosion. This is where it's going to happen.

Um, and I wanted the exposure to that. Over time, the thesis grew and cemented my view that I do not want to live in a world where Sam Altman controls a single model that controls our life. Right. And that is my North Star on what I want to not uh empower and what are the things I want to invest in.

And it's pretty hard for people to understand what that means because people love using O1 Pro. They like using ChatGPT, they like getting their summaries. But when you have dating apps and insurance and banks and all the apps that you use today built on a model and it knows you better than you know yourself and it's able to convince you of things, you don't even want to like a political belief, uh a girl, a guy, whatever, that is scary. Um, so the open source crypto AI movement across the stack of AI is what I'm extremely interested in.

How did you see crypto actually becoming relevant in that stack? Because you could have just pivoted and yeah, around the time you guys started pivot uh investing in crypto AI was right around that time of the Jason Kalkanis, if you're in crypto, pivot to AI tweet. So you could have just done AI and not done crypto. How did you see the crypto part of that ingredient uh mixed in there?

Yeah, I mean, two years ago, it was super contrarian, right? I mean, you looked at the big AI labs and you said,

They have all the GPUs, they have all the talent, they have all the funding. There's no way we'll be able to compete with this.

Um, but the core

metrics and tenants of crypto that we all know and love.

Like rang true, right? Like instead of being in a small lab with a limited number of people, with top-down, this is how we want to build things, this is the alignment, the safety we want. You can have millions of developers around the world raise overnight for their startup, create a new AI application, and change the world, right? We saw it with Uniswap, we saw it with DeFi, but the difference was you needed to know how to code with DeFi, right? In this world, you don't have to know how to code. You can launch your token and build your startup with Cloud or OpenAI or whatever. So the barrier to entry is literally on the ground. Um so I expect we'll see literally millions of agents

and hopefully some products.

I actually have a quick follow-on question. Were when you like

discovered this match between crypto and AI, were there any burning like uses that immediately kind of popped up? Like I'm curious.

Um, I mean, the the initial ones were the easy ones, like the the deep pins around compute and your unused hardware and clustering. Like that was an easy one.

But and that sort of that sort of started our our investments, right? Like

It was like the first

real thing that people were like.

exactly. So we started investing at the the bottom of the stack, like the infra players, the compute providers, the few decentralized or distributed training projects. And we started moving up the stack to like middleware and inference, then eventually to like the app layer, like MyShell and things like that.

Um

but the interesting part is it's sort of playing out the opposite, right? We're seeing agents.

at the top

having their virality, um leveraging closed source models and infra and now backing into open source stuff. So

um it's working. It's just not the way I thought it would go.

I think uh people who are in crypto, but not necessarily in the AI side of crypto have probably absolutely noticed the Cambrian explosion of agents invading their Twitter replies. And that's kind of marked the AI crypto wave for them. Unless you've been like actually what you've been doing, which is investing deep into the stack, crypto AI just means like the last three months of virtuals, AI 16Z, you know, Zero Bro, some of these, some of these agents. And that has been crypto AI. But I think what most listeners who are, if that's been their experience, what they've been missing is like there's actually been multiple waves of crypto AI activity before the agent meta really blossomed at the top. And that's that's really the like cosmetic layer of crypto AI. Maybe you can kind of like run through the eras. I know it's only been since like 2022, 2023, but maybe you can kind of like run through the eras that we've seen in investing in the AI crypto fundamentals since you guys started investing.

Yeah, yeah, for sure. Um, I mean, on the liquid side, BitTensor uh started the space, right? Right. I have plenty of critiques, but they did start the space and they should uh they should be known for that, right? And that's on the liquid side. On the venture private deal side, it was a lot of those compute networks, infra plays, essentialized training, distributed training type investments. The likes of like a noose research or prime intellect, ionet, akash was liquid, that that sort of uh realm. It we spent a lot of time on the coordination networks for a while. Um, there's a Laura out there, there's Sentian, obviously, there's there was Morpheus launched publicly, like a lot of trying to coordinate the model creator with with the use case. And then

Uh, we sort of went full-fledged into the agent side and the model side. Um, the models obviously power the agents, but the agents are what people see and use and love. Uh, so that's what we're seeing now. Um,

I've always said that I think that the reply bot, infinite slot bots are going to zero. I've tweeted that many times over the last couple of months. And I honestly feel kind of bad that they did, right? Um, it sucks, but

it's not where the space is going, right? The space wants utility based, functional agents that are doing things, things that are trading, managing a DeFi protocol, managing risks, um, potentially creating bankless content. I don't know, you know, it doesn't matter, but agents that are doing things are valuable. And that's where I think we're going. And we're starting to see that, right?

There's uh a couple of agents out there, like uh Billy Betts is an interesting one, has a hundred K in its book and it's betting its own on all NBA games and it's powered by BitNets or Subnet. So I think the move to the utility functional agent side is where we have to go.

Yeah. Well, is there any evolution or development in your own thesis about the crypto AI investment vertical as we've gotten more deep into this space? We're in 2025 now. We've seen agents come and then some of them, most of them go, but they're still here. Um and so when you were just kind of like, you know, yeeting some cat some checks back in 2022, 2023, just kind of maybe on a on a vibe that you know AI is very cool and it's gonna integrate with crypto somehow. Now we're in 2025. Has it has your thesis gotten like more precise or developed or iterated over the years at all?

Yeah, it's interesting. Um

Even six months or a year ago, there was significant pushback on the idea that we could compete and win against AI labs.

Again, they have

the GPUs and like the amount of GPUs that like Meta has is like nuts.

Like there's no way, like it's really hard to compete with that.

Um, and the talent and their outputs and things like that.

But you saw a huge inflection recently with DeepSeek, right? The idea that you have an open source model that's a reasoning model and that could search the internet before even Anthropic had a searching or reasoning model out there is nuts. Anybody around the world could use that to create an agent. But more so, it just demonstrates that the closed source lab could be

uh changed, right? Like there is real competition out there. And Deep Seek was expensive. There's hundreds of authors on that paper. It's a legitimate, huge innovation. But there are well funded entities out there, just like DeepSeek, that can do something similar. They can take, take Deep Seek and change it and edit it and grow it. There'll be totally new open source models out there.

Um, and I'm sure OpenAI will get better and continue to lead, but

I don't necessarily think

crypto AI has to beat

OpenAI at what they're doing. I think we just need open source models that people could mess around with and create projects with. And that's how we win.

Where do you think I think this is the big question, the trillion dollar question, which is where does value accrue in the stack? And we're seeing this tug of war happen on the centralized AI lab side of things where OpenAI maybe has the most sophisticated model, maybe it is generating the most margins for its model, but it's being materially compressed by people like Facebook Meta, which is very quickly open sourcing their not.

They're their inferior model, but if you just give it out for free and it's only 20%, 15% worse, then you're really compressing the mod the value of OpenAI's lead. And you know, Meta is just giving this out to the open source world. And then the open source world, well, I've always interpreted that as crypto. And so, like, where do you see like maybe just like

How do you see the value accruing to either the centralized AI labs versus open source? And like, do where do you see that equilibrium lie in terms of like total value creation? And like there's a tug, I see it as a tug of war between the open source side of the AI world and then the closed source AI world is always on the frontier. They're the best funded, they're going to make the most sophisticated models. But open source always seems to be so hot on the heels and is so seemingly able to monetize via crypto very well. So, like, very broad, loose questions. It's just a broad stroke vibe of a question, but like, where do you see the tug of war between open source and closed source? And where do you see value accruing inside of those domains?

Yeah. I I'll give my answer. I need you as I'm curious your take afterward. But the

the closed source

labs are clearly winning and are clearly valued higher.

Mm-hmm.