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Terry Tateossian (00:03):
I am excited to introduce our guests today Miko Matsumura. Miko is a serial entrepreneur and the co founder of Evercoin, which is a Silicon Valley-based cryptocurrency exchange platform. He is also a general partner at Gumi cryptos capital, which is a 30 million venture capital fund focused on early-stage blockchain startups. Also a venture partner at bit bull capital, which is a cryptocurrency fund of funds. Miko is also an advisor to Arrington XRP capital, and one of the founding fathers and chief ambassadors of the first wave of the internet as chief evangelist for the Java language Platon platform at sun Microsystems Miko has over 25 years of enterprise software marketing experience in Silicon Valley and has raised over 50 million in venture capital for open source startups. He holds a master’s degree in neuroscience from Yale University where he worked on abstract computational neural networks. Welcome Miko and thank you very much for joining us today. It’s a great pleasure to be here. So can you take us through your early entrepreneurial journey and how you got to where you are today?
Miko Matsumura (02:06):
Yeah, it’s a such a winding and twisty road, right? Because I, I got my academic chops, uh, at Yale in neuroscience. So, you know, it’s been a really interesting windy road. Uh, I, at the time I was doing abstract computational neural networks using C plus plus on Unix machines. So, you know, I really got into that and, you know, eventually I decided that I wasn’t really cut out to be in pure science, but the science ended up being a great thing for me later on. But eventually what happened was, was I kind of found my way to Silicon Valley and, you know, eventually sort of fell in love with this Java programming language. So, you know, it really had all of the things to take care of all the shortcomings that I found in C plus plus, and it really started taking. So that was kind of where I kind of got my start is really in developer evangelism platform marketing.
Miko Matsumura (03:06):
And, you know, I really got excited about this stuff. So, you know, I think that’s where, uh, the road started for me after that I caught the startup bug. So, you know, then I’d been involved in, uh, venture capital and startups, uh, ever since then. So that’s been sort of the road for me, very very twisty road, lots of turns. What were some of your first startups? Uh, yeah, so I did this one startup straight out of sun. And it’s amazing when you go from a big company to your first startup, like you just make lots of mistakes. Right. You know, so I went to the startup and it’s not that interesting when it’s called, cause it doesn’t really exist anymore. Uh, you know, and we pretty much, I joined, you know, I got up fancy title and I, you know, but the thing that was amazing, that I didn’t know about is that they didn’t actually have any money.
Miko Matsumura (03:58):
So it was a really interesting time. Uh, I learned how to raise venture capital eventually raised five and a quarter million bucks up for their series a, but you know, the whole thing was a big stretch because I worked there for like nine months the whole time, I didn’t actually know how to raise VC and it took me nine months to figure it out. Uh, you know, and during that time, like, you know, no paycheck to speak of or anything else. So it’s, you know, very kind of a abrupt cold water experience, right. Cause you know, it’s sink or swim, you know, and do or die and, you know, rightly so, which is what I’m increasingly appreciative of is that, you know, Silicon Valley and venture and startups is really in that mode, it’s in the mood of like sink or swim do or die.
Miko Matsumura (04:40):
And that, that energy is a vital energy, right? It’s an energy of like really that drives and motivates people to do extraordinary things. So what was the startup? Well? So it was kind of application service provider before it was cool. So it was kind of like trying to do almost like an SAP as a service. So this is way kind of early days before Salesforce. So it was really futuristic vision, but like obviously vision is only so much of the game, right. Execution becomes a big part of the game. So, you know, I was enamored of the vision, I thought application. So at the time was called application service providers or ASP and it eventually became SAS, right. So SAS became kind of this dominant force. Obviously Salesforce is a big deal in that. And you know, so eventually that happened, but you know, one of the other things that I really learned the hard way is I learned that like my vision of what’s about to happen is usually like early. So I learned kind of the hard way that, you know, if I think something’s about to happen, it’s probably going to take three, four years or five years for it to actually happen.
Terry Tateossian (05:49):
So you’ve raised, nine months into your first startup. You raised, you learn how to raise VC and you’ve raised $5 million and then what happened?
Miko Matsumura (05:59):
Uh, so, you know, basically we struggled to get product market fit, which is really ultimately like where it’s at. So, you know, I think the thing to learn, one of the tough things to learn in the marketing profession is that you’re really a one to many specialists and not a zero to one specialist. Right. So what it means is it means that you want the engineering and product geniuses to have already sold the thing to the first customer, and then you can come in and make that replicable. Right. So if you’re in the marketing profession, you know, the way I see it is it’s sort of really related to kind of scaling something that’s already been achieved as opposed to kind of doing something from the ground up, which is just hard. It’s a hard thing to do.
Terry Tateossian (06:43):
Yeah. From the ground up is the hardest that’s Peter Thiel spoke. So then after, after that startup, what came next for you?
Miko Matsumura (06:53):
Well, you know, a series of startups and, you know, this actually became a, you know, so I did, I did a startup called in Flavio and you know, that was a lot nicer because we ended up kind of selling that one, uh, you know, in a cash acquisition, it was, you know, positive and liquid for everyone. And then, you know, it’s sold to a company called web methods, which we then sold that to a company called software ag, a German software company. Uh, and then eventually we grew software G to like a billion euros in annual revenue. So this was kind of like this big roll up trajectory for me. So I ended up working there for a while and, you know, I really learned a heck of a lot about data. And I learned a lot about enterprise software through that, through that journey to successive acquisitions.
Terry Tateossian (07:42):
How did you encounter blockchain and cryptocurrency for the first time? Like when did you see that?
Miko Matsumura (07:49):
Yeah, so I’m not super, Oh gee, like I’m not this old school guy. Like what happened was, was I ran across a Bitcoin checkout at my local cafe. So in Palo Alto, there’s the Coupa cafe and they had a Bitcoin checkout. So, you know, this is like 2016. So, you know, it was before kind of this big run up, but like, you know, it definitely was not, you know, some of these really serious like 2012 types, right? So for me that was kind of eyeopening. So I decided I would do a little mining project and I would try to mine out a cup of tea worth of Bitcoin. So that was kind of my first entree into the field. But you know, the thing that dragged me in most professionally was, uh, I worked on another open source software startup called Hazelcast and to leap Ulster, the CEO and founder of Hazelcast actually pulled me aside and said, Hey, we’ve got to get into this blockchain thing. You know, uh, let’s start a company which turned out to be ever coin. So, you know, he was the one that really got both of my feet squarely in this space.
Terry Tateossian (08:55):
So tell me a bit about
Miko Matsumura (08:56):
ever coin. How did you come up with the idea and how did you guys develop it and build it? Yeah, so ever quien has been through like this amazing sort of pinball machine that I think, uh, sort of blitz scaling venture capital folks in Silicon Valley called the idea maze. So, you know, I don’t want to kind of belabor this with kind of depicting our journey through the idea maze, but I can tell you where we have arrived, which is the destination of ever coin is really a safer or safest crypto hardware wallet. So the thing that we’ve really decided is that, you know, the first decision point becomes whether you’re holding your own cryptographic keys or whether you’re not right. And so we’re of the school of what people call your keys, your crypto, right? So we’re really into self custody and ownership. So as soon as you fork that way, then what ends up happening is is you end up starting to get more involved in both securing that and also ensuring that there are no accidents or mistakes in self custody. So that’s where we’ve gone. So I think we now have, I think the safest crypto wallet and exchange. So, you know, from our perspective safest means non-custodial, which means that there’s no third party holding your asset.
Terry Tateossian (10:21):
What’s a brave Bree venture, I think, to have a crypto exchange, nowadays just wit all the commotion and things going on in general. How did you guys achieve that?
Miko Matsumura (10:35):
Yeah, it’s a, it’s been an amazing road. Uh, I think from our perspective, the thing that’s very important is to make sure that you’re in everything for the right reasons. Right. So, you know, the reason why that becomes important is, is that I think all markets kind of go up and down, right. And all startup journeys go up and down. Right. So if you’re really kind of, you know, in it to make a quick buck, like it’s, it’s I saw a tweet the other day that I really enjoyed, which is, uh, Bitcoin is not a get rich quick scheme. It is a don’t get poor, slowly scheme. Right. So I thought that was clever. Right. And yeah, I enjoyed that. And so the mood around it is, is like, you know, it is, the mood is more like, why are you committed to this? And the way I look at this, as I look at it personally, as my ethos being that I’ve been 25 years in open source software, and I’ve actually seen the huge benefits of open source software.
Miko Matsumura (11:40):
It’s, it’s one of the few places on the internet that seems to have like radically reversed the tragedy of the commons. Right. Which is that if you look inside of someplace place, like get hub, you just see what I claim as trillions dollars worth of software that have been built and offered to everyone for free. I mean, it’s almost like the burning man gift economy on the internet. You know, if people are just offering their hard work and labor to everyone else, anyone else for $0 million. Right. So that’s an amazing thing. And to me, the biggest clash in the world now is basically is money going to ruin open source or is open source going to like penetrate money and make it like virtuous and, and you know, much like one of the best places on the internet.
Terry Tateossian (12:29):
I like where you’re going with that. Now, as far as Bitcoin money, now that we’re on this topic topic. Yeah. A lot of people are saying that we’re in a crypto economy slash you know, ICO is of the past kind of bubble. What are your thoughts on, you know, if we are in fact in a bubble and if you know, Bitcoin itself and you know, all the other cryptos that are dependent on the Bitcoin all rise at the same time, let’s say, you know, today it’s at whatever 8,000 per coin, let’s say in two weeks, it goes up to 90,000 per coin and then drastically drops back down to let’s say, 8,000, 8,000 per coin. What will that volatility do to our global economy in your opinion? Yeah.
Miko Matsumura (13:20):
So first of all, I really would love to address this idea of bubble, right? Because I feel like people really focus on this word and they’re using it in a pejorative sense, right. Because, you know, they say, Oh, it’s an economic bubble. Right. So obviously that implies it’s temporary. Right. But for example, what’s known is that the global economy is in fact also a bubble and what’s actually known is that the universe itself is a bubble. That’s about maybe 13.8 billion years old. And it’s possible that that will like pop or contract back down to a single dot. So like, you know, so the thing that is important to kind of understand, it’s kind of like whether it is a harmful, like as Warren buffet says sort of rat poison or, or, or whether it’s beneficial. Right. And I think the jury is out ultimately, right.
Miko Matsumura (14:11):
I’m placing my faith and bet on open source. And to me, the place where this twists is it twists around when people say like, uh, I think Cindy lopper says money changes everything, you know, and the question is, is like, will money poison open source or we’ll open source liberate money. Right. And, and when you look at that, I don’t actually know how this turns out. Like I would like to see open source actually kind of penetrate the financial infrastructure culminating in a much better global financial infrastructure. So when you look at the history of bubble economies, like people point to things like tulip mania, and in the Netherlands, that’s really all, I would call it a fictitious market bubble. When you actually look deeply into it, it’s actually something that’s apocryphal. So to let media kind of didn’t happen the way people report it.
Miko Matsumura (15:07):
But the point being that it’s already clear that Bitcoin is not to Lithuania, because what happens into a mania is, is there’s this very, it’s called an infinite hangover, right. Which is the price goes exponential. Then it crashes to zero or near zero. Obviously a tulip bulb has a nominal value because people are pretty, uh, but it stays at the nominal value or zero, depending on what it is the asset is. And it stays there forever, right? Because people are like, what were we thinking? You know, that was insane. Let’s never do that again. Right. And, and if you look at the price of Bitcoin, it’s dropped by 25%, I think seven times in its history. And each time it’s gone from there to an all time high, which is clearly not like a, a tulip mania style bubble, you know, it may have other properties that reflect a bubble like quality.
Miko Matsumura (16:01):
But to me, the bigger question becomes, is there a benefit to this type of volatility? I think it’s a little unfortunate, but we are in the era of what, uh, Mark Andreessen calls the disagreeable era. And so what Bitcoin is doing is maybe a little bit like what Donald Trump does on Twitter, right. Which is what Bitcoin is doing his Bitcoins, getting everyone’s attention by kind of like blowing up and then dropping and then blowing up and then dropping. And everyone’s kind of now just unable to avert their eyes. Right? Like they just can’t stop looking at Bitcoin. And it’s unfortunate that it’s doing that, but that’s what it does. And it does that essentially automatically. So the thing that’s really unfortunate, and it’s an a, in a way of why maybe Warren buffet feels kind of very negative towards it, right. Because you know, what is that?
Miko Matsumura (16:54):
That’s new, it’s a new creature. And I like to say this, I like to say that. So the Keynesians have this concept called animal spirits that occupy the economy, right. We’re sitting here in New York, very close to wall street, and there’s a giant bull statue there. Right. Uh, the other animal spirit that’s super common in the Keynesian model is the bear, right? So the bear hides and hibernates and the bull charges ahead. Right. But Bitcoin represents almost what I call a third animal spirit, which is one of the origin stories of Bitcoin. And the earliest days of Bitcoin marketing is that Eric Vorhees, the CEO of shapeshift, created a billboard with a Honeybadger on it. And it was a Honeybadger represents Bitcoin. And Roger veer actually sponsored the placement of that on some major highway. And so the Honeybadger is actually the third animal spirit in the market, and it’s just relentless creature that represents like Bitcoin.
Miko Matsumura (17:53):
Right? So to me, the idea of this third animal spirit is this idea of like this incredibly weird, an unknown force in the market and that that’s, uh, in some ways and needed. Uh, and what I mean by it’s in some ways needed is, is that in 2008, what we saw as the effects of overcentralisation. And if you look at the stock price of Lehman brothers that’s tool at mania, because the stock price of Lehman brothers went from $600 billion to zero, and it stayed at zero. Right. And everyone after that were like, what were we thinking? Let’s never do that again. Right. So that’s what two Amenia looks like.
Terry Tateossian (18:33):
So when you talk about volatility, having a benefit, tell me a bit about that. What are the, what are the benefits of having that type of volatility?
Miko Matsumura (18:42):
Yeah, so, uh, you know, I think the best way to look back at it is harken back to the early days of the internet. So, you know, if you remember the internet bubble, like one of the amazing things that happened is, is that you get this incredible vector of change, right? So the energy and the forces that come into play actually enable the investment in the infrastructure. Right? So that, that’s what happens during the, during these bubbles is, is that, uh, infrastructural investment that would otherwise not be possible, like become possible. So it’s really this huge push to build the roads, you know, and then like maybe this contractal feeling, but if you, if you look at what came out of the internet bubble, you know, it’s really the largest, most valuable public companies in the world, like the apples and the Facebooks and the Microsofts and the Googles. And obviously like we’re troubled by how they’re behaving now. And so we’re reaching kind of the limitations of the benefits of that, but like, you know, we’re, the stakes are, we’re rebuilding the internet now, uh, based on, basically the storage and transfer of value. And that means safety and cryptography, and it means kind of a new internet. And that’s, that’s, those are the stakes.
Terry Tateossian (19:59):
So you talk a bit about internet of value and open source money, explain, explain what exactly that means. When you say let’s start with open source money.
Miko Matsumura (20:12):
Yeah. So, so to me, the most important thing that’s happened, and this is a big, big change, which is that for the past 30 plus years, we’ve had an internet that’s been optimized for the use case of storing and transmitting information, right? So it’s this beautiful network of transmitting information, very cheaply and very quickly anywhere. Right? So the thing that the internet has not been good at is there’s been no internet protocol for storing and transmitting value, which is really like economic value, right? So, you know, Bitcoin is really the first example of this kind of storage and transmission medium of value. And the thing that makes it kind of this crazily opensource beast is that not only is the code open source, as you would expect, right? The governance model is classically open source, so anyone can copy and fork the thing. But the thing that Satoshi Nakamoto did in the white paper is he actually posited a new concept, which is almost like what I would call an open source runtime.
Miko Matsumura (21:17):
And what does that mean? What I mean by an open source runtime is, is that who runs the bank of Bitcoin. And it’s basically anyone who wants to download the code and run it, or build their own code, right. Because it’s in the protocol. So basically whoever’s compliant to the protocol is now a node on the Bitcoin network. So in a sense, it’s basically like it’s, it’s radically open and it’s, the transformation is not just the developer software code, but it’s actually now the runtime that’s become open. So that’s new and that’s a really, really radically different vision that enables, uh, you know, what people are calling decentralization, you know, to me, I think the value of decentralization is just the creation of an alternative financial infrastructure, right. And the, we know factually that the existing financial infrastructure suffers from overcentralisation. So, you know, and, and when I say de-centralization, you know, I’m not religious about it. I just think that we need, uh, alternative rails that enable the system to be much more resilient.
Terry Tateossian (22:25):
The things that I’m finding really interesting is that, although we’re really hyping up decentralization, there’s a lot of efforts right now to centralize the decentralization. So that, that’s a really interesting concept to me. And there’s a lot of, uh, initiatives by banks and institutions like that to actually take the blockchain and create their own private centralized blockchains, leveraging that infrastructure and that technology for a more centralized use.
Miko Matsumura (22:58):
Yeah. Yeah. So, so, you know, since I’m kind of an open source financial infrastructure sort of zealot, uh, I’m so welcoming of all of these efforts. So when you look at something like a JPM coin, uh, from JP Morgan, you know, Jamie, Diamond’s really known to be one of the kind of biggest skeptics on Bitcoin and everything else, but now he has his own kind of blockchain based cryptographic currency payment rail system. So, you know, to me, I welcomed them because when you look at the history of open source, and I mentioned the most valuable companies in the world, in the public markets, you start to look at things like Apple and Amazon. So Apple and Amazon are huge participants and huge beneficiaries of open source. And they’re very poor contributors, right? So Amazon does, they would probably argue with me and say, Oh, we’re contributing plenty.
Miko Matsumura (23:49):
But if you contrast that with like Facebook, Microsoft, and Google, like those are massive contributors to open source and also beneficiaries. So what can you notice about the most powerful information technology companies in the world? Possibly the most powerful companies in the world is that they’re all beneficiaries of open source. Some are contributors. So to me, when you look at the financial services market, why would it be different? So to me, there will only be beneficiaries of open source financial infrastructure and the dead, right? So in other words, like you won’t be a financial service provider. If you don’t benefit from financial opensource financial infrastructure, right? That’s those are going to be the most valuable financial service companies in the world. But half of those fully half of those companies I fully expect will be completely closed and proprietary, but they will be beneficiaries, right?
Miko Matsumura (24:48):
There’ll be beneficiaries. Cause they’ll say, thank you for writing that code. Thank you for writing that white paper. All that’s brilliant. We’re taking it right. And I welcome them to do that because if you actually look at the way the economy works, it works in this mode of competition and people who are attempted monopolists, try to maintain their pricing power and they’re forcing power. But when you look at Apple and Amazon, like they’re great beneficiary. So they’re absolutely saying, give me the opensource. I’m going to like put it behind proprietary APIs. And I’m going to control my market and create this walled garden. And thing is it’s working, right? Like Apple is a super powerful ecosystem. Amazon is a super powerful ecosystem. So like, I’m not saying like that doesn’t work. It totally works. But the point being that there’s actually an entire opposing side that contributes heavily and opensource and actually reflects a more open model.
Miko Matsumura (25:46):
So to me, the question becomes, you know, how do you look at something like a JPM coin? How do you look at something like what people’s bank of China are doing alongside Ali pay? And we chat and these super powerful 900 million user messenger systems that are not used as payment rails. So if you look at those centralizers yes, they are definitely going to own 50% of this future. So really when you look at the future, there are only beneficiaries of opensource financial infrastructure, and some of them are contributors and others are basically just using them to power proprietary systems. Hold that thought,
Terry Tateossian (26:22):
let’s take a quick break. And thank our sponsors. The production of the amplified podcast has been brought to you by social fixed medium social fixed is a transformational growth hacker agency focused on emerging technology platforms, video and podcast, production, content marketing, and overall startup strategy. Social
Terry Tateossian (26:44):
fixed has helped over 300 clients generate millions of dollars in revenue, but raising and a profit. If you’d like help launching or growing your business visit [inaudible] dot com. What are your thoughts on the Libra?
Miko Matsumura (27:00):
Facebook Libra. Yeah. Yeah. Yeah. So what’s funny is, is like, you know, applauded Facebook as a significant contributor to open source, obviously like they’re extremely well known for things like the react framework they’ve made tremendous contributions in areas like in memory databases, no SQL databases like there they’re great contributors. So, you know, some people argued to me that, Oh, Libra is not real open source. Like I’m really confused. You can go to the get hub. It says, Oh, there’s an Apache license. You can download all of it. You can read all of it. It’s a hundred percent open source. The thing that they’re getting angry about is more about Collibra and they’re getting a little more angry about the Lieber foundation, which is sort of a gated private foundation that controls the runtime, but like, that’s fine. You know, if you’re upset about it, then you, maybe you can fork it.
Miko Matsumura (27:48):
There has been an effort to fork it. I personally think that without the foundation and its founding members, uh, which, you know, are reduced in number, but, you know, without that, like you’re losing a lot of the steam, like the code itself is not super interesting. So I guess the way I respond to the Libra is, is it’s great. Like let them all come. And the reason why is the mood again of the Honeybadger, right? Which is open source doesn’t mind, right? Like it’s not going to be derailed. It’s not going to be stopped. So like, why is it it’s not worried. Right. It’s super, unworried about all these things. People are worried that Facebook will take over. It’s like take over what they can’t.
Terry Tateossian (28:31):
They’re trying. How do you envision down the road overcoming some of these or people called a blockchain try dilemmas of scalability
Miko Matsumura (28:45):
in a decentralized. Yeah. Yeah. So, so, you know, to me, when you think about this, like, I like to reason about this with respect to this thing, I call the slider, right? So imagine a slider and the slider is simply has numbers on it. And it says, it asks this question of how many people or organizations can you trust. Right. So the thing that’s funny about this as the slider gives you different performance characteristics, depending on where you put it. Right? So what we know is we know that if you bring the slider all the way to zero, then you get the coin, which is Bitcoin is like, I cannot trust anyone. I have trust, no other parties. I trust no institutions, no humans. I don’t trust anyone. It’s. So what’s known is that, that you, you come down to about seven transactions per second.
Miko Matsumura (29:34):
Right now the question becomes, what are the applications for which seven transactions per second are adequate. And it turns out storing and transmitting value is a meaningful application for which it’s working. Right. So everyone’s like, wow. So, you know, a recently a state owned newspaper in China published a article that said, Bitcoin is the killer application for blockchain, right. State owned newspaper. Like that’s a big story, right? It’s like, it’s amazing that China’s talking about it this way. And I think they hit the nail on the head, surprisingly, which is fine. Right? So to me, what then comes along is people are talking about novel applications. For example, the Ethereum network talks about things like a world computer. So the question then becomes, okay, well, if you get some of the performance improvements in there, how many transactions per second can you get?
Miko Matsumura (30:28):
Right? And obviously, you know, there’s a lot of wailing and gnashing of teeth around Ethereum’s lack of performance because they were promised a world computer, and it’s not acting like one, it’s not fast enough to be a world computer. So, uh, however, it was a tremendously good vending machine for what turned out to be securities. So it vended, it’s a vending machine that vended, maybe $20 billion worth of securities. And, you know, that’s a record. Like that’s certainly a good vending machine. So, but the point I want to make about this is, is if you can move the slider of trust to one party, I can give you a million transactions per second. Right. Cause I can run an Oracle database with like Hazel cast in memory, data grid. I can, I can run, I can run a stack. I can buy like a terabyte of Ram and I can basically like blow your socks off.
Miko Matsumura (31:21):
Right. So, you know, if you want any number of transactions, just move the slider to, I can trust one entity. Right. And so the point being that, I think there’s a lot of experiments, right? So if you look at iOS, it’s like, Oh, there are 21 entities that are blocked producers. And people are like, Oh, that’s super centralized. But if you actually look at what happened, they actually had problems because they were too decentralized because every two minutes, those 21 block producers can be revolted and shifted and change. And it turns out things like centralized exchanges have so much EOS because like, if you look at like a finance, like finance holds all of their users EOS. So if finance wants to create block producers, they can create all the block producers they want by just manipulating their users coins. Right. So which they’re doing.
Miko Matsumura (32:07):
So the point being that, like in some ways that experiment is kind of challenged by over democratizing and over de-centralizing, you know, and then people complained about it being like too centralized. So I guess what’s happening. And what I want to emphasize is is that what’s the performance for what are the applications that require the performance and, you know, at the end of the day, like how can we fix problems of trust? Because that’s really where the action is, right? The action is, and question becomes, how many can you trust? And what are you trying to solve by manipulating these assets on a blockchain?
Terry Tateossian (32:46):
So essentially some of the questions that you have to answer when first starting to build an application or a use case is, you know, what are the needs of the users? What are you trying to achieve? What is the speed or latency that you’re looking to achieve?
Miko Matsumura (32:59):
Yes, 100%. Because the key, the key, the key topic here is not TPS or transactions per second. That’s not a material topic, what’s a material. Cause we, the reason why is that’s been solved, right? Which is if you can, the key topic is trust. So if you can trust one party, then you can get a million TPS. Right. Uh, and so then the question becomes what, you know, first of all, like what are the situations where you can’t trust any one party, which is pretty much Bitcoin, you know? And then the question becomes, okay, what are the additional applications where you may want to trust additional numbers of parties? Like for example, if you look at the United States government, it has a three coequal branch structure right. Of checks and balances. So if you look at the governance technology behind that, it’s like a couple hundred plus years old and it’s not on a blockchain, but it’s, uh, it’s basically running three nodes and they’re, they’re essentially checking and balancing each other.
Miko Matsumura (33:58):
Are they doing so in a sort of accurate way, are they doing so in a reliable way? Uh, probably not. Like they’re probably struggling to do their jobs, but like, you know, the thing that becomes interesting is how many nodes do you need? And what’s the problem of trust. Like who’s not trusted and whose work needs to be checked. And how do you kind of like ensure that the system works for everyone? What are your predictions on Bitcoin? Yeah. So I’m not a big future prognosticator because you know, the thing that’s amazing about this is is Bitcoin is just like the Honeybadger and then it kind of does whatever Bitcoin wants. And so it’s very hard to time markets. I’m not a market timing person, but what I can tell you is that, you know, if you base the idea of Bitcoin behind the trajectory of open source software over the past 30 years, what you’re going to come up with is a very clear conclusion, which is that it’s inevitable.
Miko Matsumura (34:52):
Right? So, you know, if you look at, uh, you know, when I say Bitcoin, I’m really using the term in the broadest possible sense, which is that open source financial infrastructure is inevitable, you know, and because of its inevitability, it, you know, it’s going to continue to capture value, right. And, and it’s just a, it’s a phenomenally, beautifully designed, uh, construct. And, you know, so I think from my perspective, you know, uh, I definitely predict that Bitcoin and its children will be, uh, you know, continue to be extremely valuable part of the financial infrastructure of the world increasingly. So, so
Terry Tateossian (35:33):
in your VC type of work, what type startups do you look for
Miko Matsumura (35:38):
when evaluating whether they’re a potential inter interesting. Yes. So we believe that this is very early, right? Because at the end of the day, what we believe is we believe that we’re in the need of rebuilding the internet and you know, most of the internet works. Okay. Uh, but there are parts of the internet that don’t work well, because what’s happening is, is that value is being copied and pasted everywhere. Like, for example, your passwords, your accounts, your social security number, they’re just being hacked and pasted everywhere. And that’s not what you want. Right? You want value to kind of stay where it is. Another thing that’s being valued is your privacy and your activities and your personal life. So that’s value and that’s value. That’s being copied and pasted everywhere and, you know, stolen from you and your data and everything. So to me, like, you know, we’re rebuilding the internet on the basis of an internet of value and that’s actually going to take time.
Miko Matsumura (36:35):
So when we look at startups and we evaluate them, what we know is we know it’s early days for the technology. So we really look for horizontal technology. So we look for what we call layer zero one and two solutions. You know, we also, yeah, so layer, so layer one solutions typically can refer to kind of new consensus models. So we’re excited. For example, we invested in a space mesh, which is using this novel space-time consensus, which is not proof of work and it’s not proof of stake. So that’s an extremely promising, uh, concept. Uh, so that’s layer one, which is consensus layer. There’s actually this concept of layer zero that’s emerged and layer zero is basically the network layer, which sits underneath the consensus and accelerates that and makes it higher performance. And then layer two is really typically payment channels and ways of kind of doing stuff that’s off chain and it’s much faster, right?
Miko Matsumura (37:32):
So, you know, that’s more like scalability. The other thing that we look at as we look at things like middleware solutions, we’re investors in origin protocol. So we’re very interested in kind of middleware, which is horizontal, but it makes the blockchain technologies and the underlying tokens more accessible and usable to applications. So we’re interested in that. We also invested in a company called a GORUCK and a GORUCK has smart contract technology that makes developers, uh, especially JavaScript developers, very happy to build smart contracts, you know, in, in classical blockchain. So, uh, for us, like the horizontal stuff is really, really valuable. The developer tool stuff, because it’s early. When we go into vertical applications, we really think it’s so early that there are only two application verticals that we really entertain. One of them is financial services. So, you know, we’re very excited about financial services.
Miko Matsumura (38:29):
For example, obviously, ever coin is a great example of financial services. It’s an exchange. Uh, the other piece that we look at are things like, uh, the Abe exchange, which is a better exchange for doing traditional, uh, securities. Uh, so that’s a, that’s a really interesting, uh, space. And then the other vertical that we entertain is gaming. So we have a couple of plays there, wax token robot cash. We have FITA token, which is streaming, but it’s streaming video of mostly gamers. Uh, so you know, what we believe is that gaming is a very early adopter vertical for any new technology. And so because of that, we think financial services and gaming are applications that we love to look at and invest. So that’s kind of what I call our L shaped investment thesis, which is mostly horizontal. And then the two verticals, gaming and finance.
Terry Tateossian (39:26):
What type of challenges do you feel that most companies or most startups that are developing in, you know, on the, on the chain are going to encounter in the next five years?
Miko Matsumura (39:38):
Uh, I think that this is a challenging time. I think uncertainty is obviously a huge issue. Uh, I’d say that there’s multiple domains of uncertainty. I’d say one of the uncertainties is liquidity, right? So in terms of things like, did we, have we done any kind of blockchain IPOs, like obviously things like BitMaker, like, there’s definitely ones that are candidates out there, but like with respect to liquidity, uh, that’s uncertain. Uh, the other one that’s a little uncertain is the regulatory landscape and clarity. So that’s another uncertainty. Uh, you know, I would say that regional liquidity around funding rounds. So at the moment, you know, the transformation has gone from like ICO, which is not a thing to I E O, which is kind of no longer a thing. And then now it’s swung all the way back to kind of venture capital as a function of this kind of very mature diligence and governance model that kind of really helps to build companies and products.
Miko Matsumura (40:39):
So I feel like all of those uncertainties are gonna weigh pretty heavily on, uh, these companies. Uh, and, and the, I think the last unknown is kind of the timing for mass adoption. You know, it’s our fund thesis that that’s coming. Uh, we think that there’s a huge divide that’s emerging, which is what we call before payments and after payments. And if you’re on the enterprise side, the payments are going to be coming from a bank. They’re going to be regulated. They’re going to be pegged to the local Fiat currency. Uh, and the bank is going to tell you, this is a dollar, this is a Euro. This is a yen. This is where I’m going to be. So the bank will tell you, right, for example, the people’s bank of China, the central bank of China is going to point to a currency unit and say, this is renminbi.
Miko Matsumura (41:25):
This is the local currency, right? And every enterprise in the world recognize it. They’ll be like, we agree with you because the said so, right. That’s what is going to happen. So the enterprise payment side is already kind of on rails. And, you know, we invested in a company called tacit here in New York, and they’re supplying their payment rails technology to signature bank. So signature bank now has a blockchain based payment rail system. They’re a multibillion dollar bank, a terrific bank and very forward-looking. So from our perspective, the enterprise side is going to be payment enabled, and that’s going to light the whole place up enterprise applications before payments are a desert. They’re a wasteland. They’re mostly, there are people trying to use blockchain to store and transfer information, which is a mistake because it’s competing against 30 years of internet infrastructure, that’s optimized store and transfer information, things like databases, right?
Miko Matsumura (42:22):
So if you’re using a blockchain as a database to store and transfer information, it’s super sub-optimized for that. It’s like, wow, I have a database. And it does seven transactions per second. It’s like, why? Right. It’s like, Oh, because it’s now in the enterprise. It’s like, well, the enterprise has to be trusted, right? So if the enterprise isn’t trusted, then there shouldn’t be an enterprise. Right? So the goal of an enterprise is to have an entity you can trust. So if the, if you’re storing and transmitting information out of the enterprise, you should be using a centralized database because who is it that doesn’t trust your enterprise? That’s, that’s a bad problem for you. If, if they don’t trust you with the transactions that you’re supposed to process. Right? So to make a long story short, what changes the game utterly is the emergence of regulated pegged assets, right?
Miko Matsumura (43:11):
Because enterprises won’t on balance sheet ether, right? It’s, it’s just, they don’t know what to do. They’re w what did the tax people do? What are the accounting people do? Everyone’s super confused. They’re like, this is not a thing, right? They will on balance sheet U S dollars. And if a bank says, this is a dollar, it’s a dollar, and everyone knows what to do, everyone’s ready to go. And at that point, now you have the ability to create an API economy, and you have the ability to have enterprise payments inside of these vending machines called smart contracts. And the enterprise can now expose all of its capabilities to the world in the form of these payment powered API. So that’s like a huge explosion of creativity. Uh, and then on the consumer side or retail side, of course, payments are coming through messengers, right? So from my perspective, blockchain before payments is kind of silly because it’s mostly applications that focus on storing and transferring information for which there are amazing infrastructures. The thing that we don’t have is the ability to store and transfer information until now. So those are the applications that we’re excited about. And obviously once the payments arrived, both in retail and enterprise, then it’s kind of game on for rebuilding the internet around transferring,
Terry Tateossian (44:34):
how will cryptography shape humanity?
Miko Matsumura (44:37):
Cryptography is an astonishingly valuable technology it’s already in use securing things like your bank account, you know, and securing things like your government, you know, and so like, it’s, it’s really, really an instrumental fundamental technology. And you can’t have a new internet of value without cryptography, because cryptography is what’s protecting your information and your assets and your data and your privacy. So like everything of value that’s on the internet in the form of information requires protection and it requires, and therefore requires cryptography. So the thing that’s novel that’s emerged in this landscape is, uh, this blockchain technology and the blockchain technology. I think people really misunderstand it, but the simplest way of looking at it is, is it’s a way of storing and transferring value. And the value is protected by cryptography. So like, you know, that’s a great achievement. And, you know, I think the magic that happened with Satoshi Nakamoto is Bitcoin white paper is the idea that the internet can perform a function as a fabric for storing and transmitting value with zero trusted third parties. Right. That’s the cool trick, right? So that at that point, that’s what makes Bitcoin into an internet protocol, right? Because the internet is just protocols that everyone agrees on. And then as soon as you have agreement on the protocols that everyone starts behaving in a coordinated fashion, and that’s Bitcoin represents the first of many financial infrastructures based on this new principle,
Terry Tateossian (46:14):
brilliant. In terms of what you see down the road in the different, the, the different categories, I’m about to kind of shoot out, uh, banking. We talked about quite a bit IOT and IOT, we talked about how about healthcare?
Miko Matsumura (46:30):
Yeah. So to me, the thing that’s fascinating about healthcare and health records, right, is that that becomes kind of, I would say, a later adopting vertical, but like at the end of the day, the same principles do apply. Right. And I think one of the problems that people talk about is sort of like, how do you store and transfer information? And the thing that becomes complicated is, is private information becomes value, right? So one of the things that we saw for example, is that centralized banks like Lehman brothers were proven to be too big to fail, and then they failed. Right. Which is a nightmare, but what’s happening now on the internet is that data is becoming money. Right. And so what’s happening is we’re getting these new data banks that are centralized like Facebook, and they’re too big to fail. And yet they’re also failing.
Miko Matsumura (47:14):
Right? So the thing that I think is fascinating becomes what happens to things like genomic data, right? So that becomes private data that belongs to the person. So the question becomes, how do you manage that now at the moment, the thing that’s really complicated is that, you know, the payload of a person’s entire genome doesn’t itself belong on a blockchain, right? Because it’s too big. Like, are you storing that data on a blockchain is kind of a nonsensical proposition. However, you can certainly protect the using cryptography and you can certainly pay for it using like a blockchain based payment system. So the thing becomes a question of how do you kind of preserve people’s rights and privacy in a new internet concept or context, right? So things like simple, simple things like pay patient records, HIPAA and transfer of patient information, insurance information. So I think the healthcare industry has the potential to be transformed by the technology in terms of protecting and transferring the value of information and valuable information it’s securing privacy rights.
Miko Matsumura (48:17):
But I would say at the end of the day, I don’t see that as an early adopter. I see that as kind of a later adopter. How about voting? Yeah. So I think voting is definitely a big topic. I think one of the things that needs to be solved in the case of voting is we really need to solve fundamentally this concept of ownership, right? So it kind of hearkens all the way back to the conversation around ever coin, which is a real coin, is really concerned with people owning their own, the coins and their own cryptocurrencies. You know? So the idea becomes like one of the things we’re introducing is, uh, with our partner, you B co we’re introducing a YubiKey that allows you to truly own your Bitcoin. So, you know, when you plug it into your phone, that’s your key, you know, it’s your key for your Bitcoins?
Miko Matsumura (49:04):
So in the future, what we envision is we envision that people have a key for everything, including their private information. So the idea is, so let me give you a feeling, right. Which is that, how do you, what, what’s the feeling of owning a house? So the feeling is, is you signed all of the papers and then the agent hands you the house keys. Right. And what’s the feeling of owning a car. Okay. You’ve signed all the papers and now the car salesman gives you the keys to the car, right? So with respect to your bank account, with your Bitcoins, with your logins, with like everything of value on that you have on the internet, you’re not the owner of any of those things, which is really sad. Right. And people who are using centralized exchanges for storing Bitcoin are also not the owners. Right.
Miko Matsumura (49:52):
Because they don’t have the keys. Right. So, you know, you have the keys that represent your ownership of the house, because it allows you to access the house. Right. You have the keys that represent the ownership of your car, right? So for us, what we’re really trying to enable is a future where people have the keys to everything that they should own. So when you, when you come back to your question about voting, what is voting, voting is a right. That is conferred by kind of a government and it’s conferred to a citizen. So the question then becomes, how do you preserve that? Right. Right. So for us, the idea is that ideally a cryptographic key would represent ownership. And then the question becomes, how do you properly, I authenticate that person. Right. So how do you properly identify that person? I mean, in the case of Evercore and we’re using things like phone-based biometrics, you know, obviously the ownership of the key is a thing, right? So you own the key, but like, if someone swipes your key, then are they, you it’s like no biometrics helps. Right. So to us, like it needs to end up being a multifactor problem where we really need to ensure, because at the end of the day, that’s an individual sort of sovereign right. As governed by their chosen electoral system. Right. So, so for me, uh, that’s something of value on the network that needs to be, uh, defended and preserved using cryptography as, as it were
Terry Tateossian (51:15):
marketing cop, that’s a twist say more, how will marketing change? How will the landscape of marketers change photography?
Miko Matsumura (51:28):
So the thing that I think will be the hallmark, and this is kind of like a really longterm view, right? Because marketing as a vertical industry is like a late adopter of this kind of tech, right. Cause I think the transformation will, will move towards authenticity, right. Because the thing that happens now, and it will move towards consent. Right. Cause I think today, for example, people are, are doing all kinds of things. They’re copying and pasting things on the internet and they’re getting things they shouldn’t have, you know, they’re sending emails, they shouldn’t send, you know, all of those things are just a function of value. That’s being transferred by copy paste and it’s not being protected by cryptography. So I think in the long run, maybe 10 years out, like, you know, marketing will really have to be focused on much more authenticity and the delivery of kind of excellent products and product experiences. Right. Because more and more and more will people sovereignty, you know, uh, things like fake fake users, right. So it’s like, Oh, a lot of social media is filled with fake users with fake information, you know, and controlled by like troll farms, you know? And so, uh, you know, if you look at something like sovereignty and voting and authentication, like all of a sudden, if you start solving those problems, then marketing transforms and it becomes much closer to product and it becomes much closer to like authenticity. Right. And so that becomes a more valuable,
Terry Tateossian (52:54):
yeah, I think marketing in general has a real need because right now, you know, engagement rates and impression rates and those things are really important to marketers, but a lot of them are fake and not authenticated. So if you eliminate all the fake impressions, you kind of have a more data
Miko Matsumura (53:15):
again, we’re kind of in the field of marketing, you know, we’re probably 10 years out from solution. So like from my perspective, like inauthenticity continues to prevail, you know, spam continues to fill our inboxes. Like it’s, it’s really not awesome and it will probably continue to be not awesome for the foreseeable future. You know, Facebook is like, Oh, we’re going to carry political ads. And like that’s complicated. And you know, it’s, it’s a mess.
Terry Tateossian (53:42):
Yes, it is. Well, on that note, Miko, how do people get in touch with you? How can we find you?
Miko Matsumura (53:49):
Yeah. I’m very easy to find. I’m on the web I’m on miko.com. On Twitter. It’s MikoJava. M I K O J A V A. So that’s my Twitter handle. So I think both of those channels are easy ways of getting hold of me, keeping track of my funny doings. You can find me also on LinkedIn. So these are all kind of places to kind of keep track of my various doings.
Terry Tateossian (54:16):
Awesome. Thank you so much. I really appreciate your time. I think you’re absolutely brilliant. And I’m going to have to listen to this podcast, like probably about 10 times to absorb everything you said. I appreciate it. So thank you so much. Thank you.
Terry Tateossian (54:32):
Thanks for listening to the amplified podcast. Follow us on our social channels and subscribe on Apple and Google podcasts, Spotify Podbean, or wherever you get your podcasts on. The next step is sewed. Stay tuned for more trailblazing insights, energy and culture to help fuel your pursuit in the modern digital era.
