Crypto’s on Fire But Devs Are Still Building

The crypto world is full of volatile moments and heavy market swings, but in between it all: developers are still building. But what’s really happening behind the scenes? When the whole crypto world is seemingly focused on the currently imploding market, what are developers focused on creating and scaling? Where do they see the future of web3 and how can these developers and builders alike prevent their own projects from facing an unwanted death?

[Music] Yeah [Music] All right Oh all right hey nikhil how are you I'm Great thanks for having me yeah thanks For being here where'd you fly in from Uh I was actually doing a talk at HBS Right before this so it came in from Boston okay hopefully this one's better Uh I guess to start he is the CEO and Founder of alchemy for those of you who Do not know it is commonly called the AWS or the web 3 of AWS but prior to That you founded your own company and You also worked for Facebook but you've Been building Alchemy for the past five Years I'm curious in terms of what You've learned at those previous Companies how does that help you kind of Build this web 3 company yeah this is a Great question so In kind of a short brief bio went to Stanford studied artificial intelligence Machine learning computer science and Really had the time in my life and knew I wanted to do startup stuff post that Uh Joe and I my co-founder for Alchemy Started a bunch of different consumer Companies for a long uh and it was Really difficult we built a bunch of Different products nothing really worked Finally we built this one app where like No one's going to use it ends up being

The number one app in the app store Millions people around the world and Then got really excited about crypto and Have been working on that for a long Time one of the I think there's a lot of Important lessons like startups or Startups regardless of the domain There's a lot of principles that carry On between different domains and the Main things that we really took from the Consumer world was speed and the idea That as a startup you don't have Advantages in cash you don't have Advantages in team size you don't have Advantages and press you don't have Advantages and basically anything versus A big company but the one thing you do Have is you can move a lot faster and we Did a lot of things like you know back In the day when we had this consumer app We would dress up as kind of Berkeley Students and go to Berkeley and test our App and now we do similar things where We don't dress up anymore but we're very Close in touch with our customers and Things like that so a lot of the mindset Of moving quickly creating great Products and being obsessed about our Customer experiences been carried over So you don't dress up for crypto Conferences this is uh not my normal Outfit so fair enough I guess how has The industry and developers focus on Infrastructure change since you know you

Started Alchemy 2 where we are today It's a great question so maybe for those Of you who might not be developers the Way to think about our business is There's kind of three major shifts in Technology over the past 100 years the First one was this thing that we call The computer the second one was a thing We called the internet and the third one Is web3 or crypto and each one formed in A similar way where you have this Underlying core technology that enables People to build applications Um and but you need a developer platform On top of that so for the computer the Thing that let you build apps was Windows and Mac right like the operating Systems um or iOS and on top of that you Can build things like Excel word Chrome Or on your phone iMessage you know the Photos app Instagram all these different Things for the internet there's a Similar company that you've heard of That you've never heard of it's called Amazon Amazon has two businesses one of Their businesses is their shopping Business which we all know but the other Business is actually where they make all Of their money and that business is Called Amazon web services every time You open your phone and you use Uber or Doordash or Airbnb or whatever it's Actually Amazon running all the Computers behind that and that's a

Trillion dollar business and it runs Like roughly 80 percent of their Operating income comes from that Business so we think of ourselves as the Web 3 or sorry the AWS of web3 And you know we power a large chunk of The ecosystem and one of the really cool Things that and a lot of applications That you've might have heard of or used Everything from like openc to Instagram Nfts to uh you name it uh kind of crypto Defy all these things so the really Interesting thing that we've noticed is In 2017 uh when we started 2017-18 there Was no major crash developer adoption Was still very early and we didn't see a Lot of traction in strong applications And especially once you saw the crash in 2018 we were working with several kind Of large web 2 companies institutional Banks these kind of things we saw a Major pullback from people so for Example I won't say the name but there Was a large Bank we were working with I Probably shouldn't say anything one of The large banks that we are working with Uh had a research team building a stable Coin and building Um kind of like payments on crypto and After that they pulled back and they Said hey you know we're this crypto Thing we're not really sure about it in This year over the past year one of the Things that we've really seen that's

Been very exciting to us you know the Market has pulled back 75 percent Roughly since the heights uh caught last November and yet we've seen a massive Increase in the developer adoption uh We've seen roughly a 4X increase in the Growth of the developer ecosystem over The past 12 months that's both on kind Of core ethereum which is seen about a 3X increase and across l2s and other Chains which we've actually seen a very Significant increase there almost like Seven and a half X there and not only That we're also seeing in the web 2 in The institutional Banks there's not the Fear that crypto is going to go away and It's going to be this thing that no one Talks about anymore and people are Actually leaning in you're looking if You look at Facebook or Robinhood or all These different companies they're Deploying web 3 products to their entire User base which is billions of users and That's one of the most exciting and kind Of hopeful things we've seen yeah I Think given everything going on right Now there's a lot of talk that this may Be the end of crypto and of course based Off what you just said I think you Disagree on that so what are you seeing These developers building and what does The future kind of look like in terms of Developer activity on web3 that's a Great question so I think there's a

Couple questions wrapped up in there Um one of the questions that wasn't Wasn't your exact question but I think Is a really important question to ask is Like which is I get maybe you know Multiple times a week because like when Is crypto going to be mainstream what Does that look like and how is that Integrated into our daily lives and one Of the things that we always talk about And think about in terms of bringing Crypto mainstream to you know the next Several billion users is that when you Use a technology let's say you go to Dinner right and you you don't say hey I Use this computer application that was Connected to the the internet and I use An internet application to get there and To pay it's like no you just I just used Uber and then I paid with Apple pay Whatever right and when you think about Crypto we're still talking about Technology and I think what you when you Look at the time scales of these things The real when we know crypto will be Adopted is when we don't even talk about Crypto there's no mention of blockchain There's no mention of web 3 there's no Mention of ethereum when the technology Disappears and the core products are Stand for themselves and drive utility So the products are what people are Going to be talking about not the actual Technology and when you look

Historically at a time scale of how long It takes for these Innovations to happen Right internet was invented I believe in Like 1968 arpanet was started and then Darpanet and which was the kind of Precursor to the internet and what Happened is even 30 years later in the 1995 people still thought it was a toy Right you looked at 2000 you have crash everyone says the Internet's over and yet the internet Hadn't even started and we hadn't even Seen started to scratch the full Potential we're still seeing the powers Of the internet right and when you look At crypto it's not been 40 years and Computer was kind of a similar time Scale actually a bit longer but crypto Hasn't been 40 years it's been 30 13 Years since Bitcoin was invented right And when we look at that it's still in The very early nascent stages and you Can't compare it to a mature technology Or a more mature technology like the Internet and say oh but this is so Primitive new Innovative technology Disruptive technologies always look like Toys in the beginning and one of the Things that's really hopeful and Exciting is that yes it's only been 13 Years but I don't think it'll take 40 Years like the internet the reason being That we have the internet to build web3 We didn't have the internet when we were

Building the internet so I think we'll See an accelerated timeline of adoption That being said it's very early and if You look at these things on a long Enough time scale you'll realize that It's kind of inevitable regardless of Whether the price is up 25 today or down 75 percent that's kind of irrelevant to The people who are actually building in The space okay and going off of that What can drive consumer interest in the Next wave I I one of the things I'm super super Excited about is actually web 2 Companies deploying it to their entire User bases so when you look at Instagram Deploying nfts to you know billions of Users that's super exciting because it Gives you the reach that it's very Difficult to build Facebook has spent a Decade and a half like building that Reach almost two decades and now we get To harness that user base so whether It's Shopify who we power or DraftKings Or Um making sure all the names I see are I'm allowed to say or Facebook Um you know there's a huge opportunity Here to educate the broader web 2 or the Broader World about the benefits of Crypto And what would be your advice to Developers Builders Founders and all These people alike because you know

You've built what seems to be a Successful company so far uh knock on Wood whatever but what would be your Advice to tell them you know So they don't end up with a similar fate As a company that runs out of Runway all The way up to something that we saw last Week with FTX this week even so I think There are a few different things you Have to think about here Um This actually ties in tacos giving at Harvard last night There's a couple principles around What's important in an early stage Startup and there's a couple principles Which are kind of important in the Context of crypto and maybe we'll cover A few both the first one I would say is If you're an early stage Builder the Only thing that matters is product Market fit right there's a lot of noise Around just startups in general you know VCS fundraising conferences speaking Opportunities like all these things Um you know that is all a distraction And you have to focus on building your Product and making sure you build that Something that people actually want so I Think if you look at the truly great Companies they've done a great job doing That and they've done a really great job Focusing and obsessing on building Something that actually provides benefit

To the people who are using that bridge Companies like any example any companies That have like have been really Successful now so like maybe in web 2 if You look at the Facebooks or the Google Or whatever right like and actually like Any company that has done uh done well Is means that they're providing value to Their users most companies actually Don't find product Market fit the ones You see you know the companies that you See that are worth 10 million 100 Million a billion dollars like these are This is a survivorship bias you're not Seeing the 99 of companies that fail It's a really really hard thing to do so I would say really focusing on making Sure you have great product Market fit And you're building something of value The second thing is if you're in web3 Particularly you have to get really deep Into the space I think what I've seen For a lot of Founders that that we talk To is the the best Founders are the ones That truly understand the technology Truly are crypto native and and no uh Kind of deeply the experience of using Web3 products and once you become the User you can design much better products I think that's super important I think In in light of the recent events uh with FTX you know very unfortunate Um there are a few things which we we've Always practiced that we we try to talk

Tell our so we have we have a venture Fund now and we tell our portfolio Companies number one the general Guidance for cash is that when you do a Fundraise you want 18 to 24 months of Cash we've always said we want to keep Almost like five to ten years cash Reserves and and that's usually we have Usually it's been in the tens of years But but now it's you know at minimum we Always say we want to have 10 years cash If we make no money okay and for the Next 10 years will we be able to survive Right and there's two things you have to Do to do that one is raise more money Than you think you need but two is more Important one you have to be really Really Frugal and try not to grow your Team that quickly you know when we did Our 10 billion fundraise around most Companies that are 10 billion dollars Are like you know five thousand ten Thousand people we were 37 people so the Idea is like you can actually have Really high leverage with software in a Web 3 that in a way that wasn't possible Before so keep your keep your cash burn Low the other thing which is really Important is If you are a uh and this might be Slightly controversial uh if you are a Startup company I would keep your assets In in US dollars or the US dollar Equivalent I would not hold it in eth

This was something that we looked at Early on because unlike we didn't do an Ico most Ico projects raised all their Money in eth and when you know 2017 even Last year price of each skyrocketed in Their treasury like 5 10x and we're like Man maybe we should have kept some of Our treasure underneath but we actually Kept it all in cash and now when it Tanked we're in a really good position So there's different types of risks you Take in your business you take Market Risk you take team risk you take product Risk you take execution risk but you Don't want to take risk on your cash Balance because you want to make sure That that's something that no matter What happens uh you have stable you can Take some percentage of it and invest it But you the majority you know 80 plus Percent I would say keep in in cash or US dollar equivalent stable coin like Whatever it is Got it thank you of course and in terms Of uh blockchain growth uh earlier you Mentioned that there's a lot of Developer activity across a bunch of Different blockchains but obviously the Most prominent is ethereum How can other smaller blockchains kind Of grab that market share and incline Developers to build on their blockchain That's a super great question Um we work closely with a lot of

Different blockchains I think a couple Things that we notice So building a new blockchain is very Difficult right it's in huge uh props to People who've done who've attempted to Do this or done this it's a very very Difficult thing you can kind of make an Analogy to different kind of social Networks right like if you're building a New blockchain it's almost like you're Building a new version of Facebook that You're trying to get people to go to Right and if you look historically it's Been a very difficult thing because of Strong Network effects like when you Look at a social network you have Network effects meaning all of your Friends are on it all of your photos are On it all of your Histories on it so It's difficult to move off when you look At blockchains there's a few different Axes of net Network effects the first Axes is the first axi is basically the Idea that liquidity so these different Applications are all having uh like Liquidity pools and and money put into It and then you can trade across them so That is a very big thing the second Thing is developer adoption so Developers building applications and Being and being able to kind of have That ecosystem of tooling and people who Are building infrastructure for the Ecosystem

So if you build so how do you how do you Break those Network effects and build a New product you have to build something That is absolutely unique and provides More than a 10x value right if you look At the companies that have posed like a Serious threat to Facebook it wasn't a Clone of Facebook it was uh Instagram it Was WhatsApp it was Snapchat it's tick Tock right it's like different things And I think when you look at new Blockchains there's two things you have To do one is you have to make sure that You're providing value that's not like Oh this is slightly better or it's Slightly faster or it's slightly easier To use it needs to be I can get this new Experience I could not get with with Ethereum because ethereum is like very Very strong Network effects the second Thing I'll say is when you have a new Blockchain you really need the developer Ecosystem and you need that both in Terms of developers and in terms of the Tooling and infrastructure and that's One of the reasons we partner with a lot Of different blockchains because we're Able to say Hey you know we can just Enable the whole your blockchain for the Whole developer ecosystem I'm in crypto And we can also kind of provide all of Our infrastructure and tooling for you That's like absolutely necessary yeah There we go so obviously the panel title

Says crypto is on fire and I don't think We meant that in a good way uh and You've been in the space for a little While now I'm curious what is your Market sentiment like is this the bottom To you Um great question so what does the Bottom feel like if it's not yeah what Was the bottom feel like I think it it's Tough well first I have no clue if I did Like you know I wouldn't be here I'd Just be relaxing on my yacht or Something like that because perfectly Um but the the thing to understand is When you look at it on a really one Thing that you know I encourage all my Friends I encourage all of our team is Like don't try to time the market in Terms of trading like you just don't Know like no one knows even like the Smartest investors that we know that Manage like 100 billion dollar plus Funds they're like here's our thoughts But we have no idea right and and the Reality is it's like almost impossible It is basically impossible to to predict The market and what you need to look at Is like what's your goal I think there's Two or three different goals that you Can think of right number one is maybe You wanna you wanna make money and if You want to make money my advice to all Of my friends disclaimers not Financial Advice but my not Financial advice is

Just take a little bit of money that you Are not worried about losing if you lose And you never see again you're totally Fine and basic basically put that into Bitcoin in ethereum whatever crypto you Want uh I suggest Bitcoin ethereum Because that's that they're the most Likely to win over a long time frame uh And don't touch it for the next five Years what's going to happen in the next Three months what's going to happen in The next year what's going to happen Next two years I have no clue but I'm Like very confident if you look over a Long enough time scale that it's so Obvious that web 3 will be the future Right like you just just like imagine Theoretically right like are we going to Go to a world where we're going to be Carrying around pieces of paper and gold Bricks and like you know shells to trade Value or are we going to go to a world That's like digital universal currency Uh anyone any War can trade all the time Right 24 7. and it's obvious that it's Going in that way And then I think the the second and Maybe like bigger and more important Question is as a developer or as an Entrepreneur or as someone who's excited About the space is this something you Should get into or is crypto dead right Is this a bottom and it's just going to Keep going down and I think that

Question to me is really obvious and This is where we have a lot of data that Other people can't see Um like I said before cryptos dropped About 75 in the last uh when I say Crypto I benchmarking roughly Bitcoin Ethereum prices dropped 75 in the last Year since last November what we have Seen is completely the opposite in terms Of developer adoption and this was not The same in 2018 when you saw the crash You did see a cleaning out of a lot of People building apps now we've seen a 4X Uh in total developer adoption over the Last year we've seen and developer Adoption means people actually building Real products we've seen a 3X in in Ethereum alone one of the things we Launched this thing called Alchemy University it's basically like free Education for anyone in crypto and we in Within a couple weeks we had 65 000 Students from around the world sign up To use this thing which was crazy we Didn't do a ton of marketing we didn't Do any a lot of press around it and it Was just seeing the in addition like we Launched this like 10 million grants Program for developers and we've had Like hundreds of grants that we've given I think we believe we've given about 300 Grants Um uh so far so I think what we're Seeing is we're building the foundation

And then I think the last thing I'll say About this is there's a really important Cycle of Life As We like to call it so In any industry you have kind of these Three layer Cycles so the first thing is You need developers and those developers Build products and then users use those Products right and then it's a kind of Reinforcing cycle as more people use Products more developers come more users And more products and so on and so forth And we're seeing that start to Accelerate and accelerate and what that Will eventually lead to is the price of Crypto will go up as people find utility In it and and now because we have a Strong Foundation I'm like very bullish For the future okay and in terms of the Future I'm hearing a lot of talk that D5 Is the next core area for Investments is That how your team feels with the Venture division yeah it's super Interesting Um the reality of what we see is there's Growth across the board it's not like Relegated to one sector so obviously There's D5 summer in 2020 which was like You know the ecosystem was D5 was Blowing up last year was nfts right now We're seeing a lot of excitement around Both nfts and D5 but also we see a lot Of wallets popping up we see a lot of Developer infrastructure which is very Exciting to us we also see a lot of web

Twos when we talk about web twos we're Talking about the Facebooks the Googles Like all these these type of companies We're also seeing large Banks Institutions we're seeing government Entities so kind of across the board We're seeing broad adoption which is Honestly the most exciting thing for us Okay I have a few rapid fire questions for You I just don't even think about it When I asked just answer most expensive Nft you've bought Uh and what was it Actually I'm trying to remember it it Could be like probably one of the chain Runners okay why is your company named After a medieval branch of science it's A great question Um I don't actually think I've said this Publicly but we were trying to come up With the name uh this will be a slightly Longer answer but it'll be worth it uh There was this bar next to our apartment Called The Alchemist and I used to go on Dates there all the time Um and basically we were trying to think Of a name for a company and the first Product we're actually building wasn't The developer platform it was a kind of Data science machine learning platform And I came back one night and I was like Brushing my teeth and we're kind of Brainstorming names for like a day or

Two and I was like Alchemist I know Will Smith said it was his favorite book I Hadn't read it at the time has anybody Read it raise your hands it's awesome Book highly recommend Um and then I was like oh blockchain is Digital gold we're trying to turn data Into gold uh and we're like all right I Think this is the name so that's uh I Think it's literally the first time I've Ever told that story well thank you for Sharing that with cool and everyone else Um do you ever tell the bar I did tell them actually I tried to I Tried to book it out for an Alchemy Party and I was like oh we named it After you they're like sorry we're still Booked We're not gonna let you know it's Like oh they didn't care yeah yeah all Right next question what company will be More successful long term with the web3 Crowd apple or Microsoft Uh Microsoft What's the most dead token you ever got Excited about sorry what's the most what Dead token like it's now dead uh it's Probably Luna honestly yeah how much Money did you lose in the Ico boom a lot Well I guess I didn't technically none Because I didn't sell anything I just Kept it my parents were like you lost All your money I was like I didn't lose It it's still there and now uh you know I think I'm above Break Even what's your

Favorite item in your house I don't have a lot of items in my house I lived for nine months with one fork One spoon and one knife and a mattress On the floor so uh not even like a clock I would say I have I have a couch that I Like okay When's alchemy's uh next fun race uh Hopefully never All right all right well those are all My questions I guess you know we have a Few minutes left and my last major one To you is like looking forward at the Industry what has been the biggest you Know Revelation in working in this space That you're excited to continue going Into the future this one's super easy so In 2017 uh the way Alchemy started Actually was Joe and I had been we were Working on our consumer app we had built A lot of um a lot of different products In the space there was these two guys Downstairs in our apartment we lived on The third floor they lived on first Floor it was a guy called Michael and Yani they built this company called wire It was like a it was a Fiat on-ramp Company and we would play beer pong Together uh and host parties together And basically they would always be like Bitcoin Bitcoin Bitcoin we're like oh we Totally believe in it but you know this Is this is basically like our life is Building consumer products 2017 happens

Crypto starts taking off I think there Was a big shift for us and and one is no Longer just a digital currency but a new Building block if you think about those Three shifts computer internet Blockchain each one gives you a new Building block so the computer enables Machines to follow human instructions The internet says machines can now Exchange information and now crypto says Machines can exchange value we saw this And basically we're like oh my God this Could be the future we're not sure but If we're wrong and it is the future We'll never forgive ourselves and this Could be the opportunity of our lifetime To build a really transformational Company a lot of our investors have Built companies like Google and Facebook And Microsoft and all these different Yahoo and all these different companies So basically we said this could be a Massive opportunity the key thing which I'm most excited about is that in 2017 We felt like it was too late and we Missed it and we were like ah we missed It everyone's already done it's already Finished we're too late uh and now I Realize it's still the beginning it's Not even day one it's like day Zero and That to me is the absolute most exciting Thing because if you look forward this Is not like the 2001 2005 of the Internet this is like 1994.

And again

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