Conversation with Bankless Founder David: The Growth Story of Bankless, Cyber Countries, and Ethereum
Bankless Founder David on the Growth Story of Bankless, Cyber Countries, and Ethereum
If you are in the crypto world, you must have heard of Bankless!
This is a podcast, a Substack subscription channel, and now, a DAO and Ventures named after Bankless.
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As one of the most influential media brands in the crypto world, how did Bankless grow and evolve from scratch?
In a restaurant in Zuzalu, Montenegro, TechFlow reporter had a conversation with David Hoffman, co-founder of Bankless and initiator of BanklessDAO, who now has a new title – General Blockingrtner of Bankless Ventures.
The conversation covers his journey to create Bankless, investment strategy, views on networked city-states and nation-states, the current research direction of the Ethereum Foundation, and even his guide to a healthier lifestyle.
Journey to Bankless
TechFlow: Today, we are very happy to welcome David, who will share his journey in the crypto world and the story of co-founding Bankless with Ryan. David, we can’t wait to hear your story and learn about the origin of Bankless.
This idea is what I learned while studying psychology. Through positive psychology, people can get a lot of benefits at a very low cost! In addition, if you want to make people feel better mentally, you also need to make them exercise. Since you are solving these two problems, you can also join good nutrition and diet.
Before fully entering the crypto field, I accidentally discovered Ethereum and learned about money and finance.
At that time, I thought, if I am really interested in improving people’s lives at minimal cost, I must talk about money, finance, and social structure.
Finance is as important as individual health issues. If you want people to take control of their lives, they first need money and financial resources to do so, so it is not simply pursuing psychology or physical therapy, but pursuing to solve very deep-seated problems.
My first company was an ICO consulting firm, which was a product of the ICO boom at the time, but it never went too far and went bankrupt after seven or eight months.
The second company was Bunker Capital, which was not a real venture capital firm, but instead focused on security tokenization as a replacement for ICOs. Similarly, that company did not go too far and eventually went bankrupt.
The third company was a real estate tokenization company, which was also security tokenization, but with a narrower use case, and that company still exists.
In 2018, I met Ryan on Twitter and we started talking about similar things, and we slowly grew together.
Between 2018 and 2020, before Bankless, I started my first podcast called Pod Crypto, which was hosted by me and my college friends, and from that time on I learned how to make podcasts.
At that time, Ryan started making Bankless news briefings, and I was thinking that we should merge podcasts and news briefings.
By the end of September 2020, I was fully prepared to start full-time on Bankless, so I quit my job as the Chief Operating Officer of a real estate tokenization company.
Since then, I have officially partnered with Ryan to establish Bankless.
TechFlow: What is the relationship between Bankless and Bankless DAO? As a founder, what are your reflections on operating the DAO?
The origin of BanklessDAO is like this.
Many people contacted me and Ryan, saying they liked what we were doing at Bankless and were very willing to help.
We didn’t know how to bring them into the company because we were not interested in building a very large company, but we wanted to provide a way for everyone who was interested in driving this movement to express themselves, and they also wanted to do something for Bankless.
That’s the meaning of DAO, we found those who were validated on the blockchain, they are part of our community.
So if you are a senior member, you have a voting application, such as some tokenized T-shirts we have, these are some traces left by people on the blockchain, we can verify them, like saying, oh, you are a member of our tribe.
So we issued a token and distributed it to anyone willing to help and do things, called BanklessDAO.
As for leadership, we didn’t get involved in the leadership of the DAO, we let them figure it out themselves, so the development of Bankless DAO is entirely community driven.
TechFlow: Is there a structure of resource and power allocation in Bankless DAO?
Yes, like the allocation of $BANK tokens, but it’s mostly a combination of many different ways that come together, involving different aspects of each sub-DAO.
Each sub-DAO has its own way of making money, they are relatively independent, and most sub-DAOs are a whole DAO.
They all have a central pool of resources. This pool is more dispersed and focused on specific areas, such as Bankless content creation, while another sub-DAO might be about consulting, etc. There are many different ways to get involved in the DAO.
They all make money independently of each other, but when you put them together and call each individual part its own sovereignty system.
TechFlow: In terms of financial sustainability, do you think Bankless’ current premium user subscription is a sustainable way?
There is a game of balance between us and our sponsors, where we constrain each other, and Bankless has always maintained this game.
So, we are not influenced by the masses because we owe it to our premium subscribers, so the public cannot control us.
In addition, sponsors cannot control us because if sponsors make behavior we don’t like, we can fire them and rely on our community.
Therefore, this is an interactive process, and the key is Bankless’ uncontrollability, which allows us to maintain our purity, which we hope is the case, because no one source of income can dominate another.
Sponsorship allows us to inject energy into the company and make it grow, but our foundation is our premium subscription strategy.
Therefore, when power shifts from one party to another, we know which party to pay more attention to.
TechFlow: In Bankless, how is Web3 changing or adding to the revenue model?
The business model does not differentiate between Web3 and Web2.
Regardless of which industry we are in, the business model is the same. We have some additional sources of revenue, such as tokenizing and selling our podcast, which can also be paid for with cryptocurrency.
There may be some other, more crypto-native revenue streams in the future, such as NFT websites, which are unique.
But the business model is still the same, which is that the more listeners or readers your podcast or newsletter has, the more value you can derive from it.
Because content is content, no matter which industry we are in.
TechFlow: Bankless’ mission is to onboard the next billion users to Web3. What sets Bankless’ content apart from other media providers?
I would say a large part of it is the great interaction between Ryan and myself.
So, this enjoyable atmosphere makes the listeners feel very comfortable, because we are like two buddies chatting, while also discussing the news, which makes the podcast very powerful.
We have knowledge and experience in many different fields.
We understand photography.
We understand distributed systems.
We understand history.
We understand cryptocurrency.
We understand art.
Therefore, we can create quite educational podcasts that combine all of this knowledge, and we are very dedicated to it, now it takes three hours of preparation for a one-hour podcast.
TechFlow: How do you differentiate and combine media and investment?
This involves the issue of conflicts of interest, and everyone thinks that we are both a media company and a venture capital fund, which seems conflicting.
We have always had the idea of doing angel investing, and Ryan and I have also played the role of angel investors for many years, and we have also been offering advisory work, which is roughly half of what is required to become a venture capitalist.
We’ve been playing this game where we invest in the private market and do Bankless.
One of the reasons Bankless is what it is today is because people trust us, we’ve built brand and legitimacy, and it’s a shield that protects us.
We’ve shown the world that we exist for the right reasons, we’re not going to engage in malicious manipulation, we’re not going to do anything evil.
So we plan to keep going, with some simple rules of course, like we’re investing in you and we’re not in the media.
When we started doing venture capital, the first thing we did was consult lawyers and ask what we needed to do, what we needed to change in the media to start a venture capital firm, because we didn’t want to change anything. And it turns out that what we’ve been doing in terms of Bankless disclosures, the frequency and degree of disclosures we’ve been making, far exceeds the compliance requirements for starting a venture fund, and it’s more legit.
So the idea is that at some point, we’ll have the best exposure and we’ll be one of the most transparent venture capital firms because of the pure nature of Bankless.
At that point, it’s up to our community to listen to what we’re saying and determine if there’s a conflict of interest. I don’t think that will be a problem because I trust myself, I trust Ryan, we know why we’re here, to create content for Bankless.
If our community feels that our behavior is illegal or not in line with Bankless values, they will call us out.
TechFlow: What investment strategies and methods do you use to determine whether to invest in a project?
I think some venture capital firms value the team more.
There’s a project that I initially looked at from a technical perspective. When I talked to another venture capital firm, seeking different opinions about the project, they said it was a bet on the founder.
But in my mind, I didn’t see it as a bet on the founder because I was thinking about it from a technical standpoint.
Although in the eyes of most venture capital firms, it’s always a bet on the founder. But for me, the reason you invest in a project is because of what they’re building.
I would wonder, can this technology really do what they say it can do ?
Different venture capital firms have different focuses. I like tech, but it’s always the founders who make the innovation happen, and for me, the most important thing is whether the founders can really execute and whether the technology can release what potential.
There will always be new areas developed in this industry, so there will always be new investment opportunities, just like the narrative of cryptocurrencies, we still only complete 1%.
For example, we still have a lot of work to do in areas such as decentralized finance (DeFi), Layer2 infrastructure, etc.
The current narrative is still very young . Therefore, you can look for new narratives and find a shining new object. There is still a lot of potential to be tapped in current projects.
So, to some extent, it is necessary to balance the focus on new things (such as artificial intelligence and cryptocurrencies), which are truly potential and we should fully pay attention. But at the same time, don’t forget that areas like DeFi are still young and easy to develop, and there is still a lot of room for development.
What I mean is that cryptocurrencies have only completed 10% and still require a lot of investment in infrastructure.
TechFlow: Let’s talk about AI and cryptocurrencies. Have you seen some promising projects in this field?
Yes, it depends on what you mean, the cryptocurrency field is very broad. The first thing everyone seems to be focusing on now is zero-knowledge machine learning (ZK ML) .
The combination of privacy protection and machine learning seems to be very promising . In addition, there is still a lot of potential in this field, but it may be too early.
If a16z can find a breakthrough project that can establish a new relationship between artificial intelligence and cryptocurrencies, it means that there will be great progress in this field .
Therefore, I think what the venture capital field is looking for is how to find something truly new in the field of artificial intelligence, because there may be thousands of examples of failed projects. There is no doubt that the market attention in this regard is very high, but the real point of integration is indeed difficult to find.
TechFlow: Do you think it’s easier to find valuable projects in a bear market? What are the differences in investment mentality between bear and bull markets?
Yes, in a bull market, people will quickly chase after the narrative. In a bear market, people are more focused. So I would say that signals are easier to recognize and are largely driven by market sentiment.
TechFlow: Do you think it’s important for startups to be profitable at the seed stage?
The idea of a startup is to achieve scale through venture capital.
I think in the cryptocurrency space, a lot of people overlook the importance of saying, “Hey, let’s make sure this project actually achieves real profitability.”
Of course, it depends on the project, maybe you do want to pursue scaling first, maybe it’s a very ambitious project. But I think a lot of people choose to fundraise too early when they could have established some foundation.
Additionally, they can seek broad market acceptance, which can lead to fundraising at a higher valuation while retaining most of the company’s equity.
People are very interested in fundraising early and raising more capital.
From the perspective of a venture capitalist, this is a good thing, but at the same time, it also increases risk. Therefore, I really like founders who delay fundraising as much as possible.
TechFlow: Many people believe that 2023 is the starting year for Web3 social, what is your opinion on this? Do you have a favorite social project?
I agree with the idea behind this prediction, that the minimum viable decentralization makes sense.
But currently on the Web3 social track, it’s essentially a Twitter clone to some extent.
Lens (a decentralized social application) has a strategy of leaving a large footprint on the chain, which is also easy to achieve.
But what does it mean to make social applications composable? You don’t really know. So I don’t have a favorite project, but I’m happy to see that there are many experiments going on.
TechFlow: After working on the securitization of real estate and securities in the cryptocurrency space, how do you think real-world assets (RWA) will develop as a trend in cryptocurrencies? Do you think it’s still too early?
I think it may take a long time to mature. The problem with tokenizing real estate and combining it with cryptocurrency is that real estate is essentially a state-related resource that is subject to traditional law. I have always thought so, yes, so there is a conflict between these two technologies. Successful projects in the cryptocurrency field, such as Aave, MakerDAO, or Uniswap, are all cryptocurrency localization, without any dependence on the real world. Real estate has many real-world dependencies. Therefore, you can see that when these two worlds collide, there will be a huge impact, and we need to innovate at the national level. This is an industry that is critically dependent on external dependencies.
Zuzalu and the Network State
TechFlow: In late 2020, you wrote an article titled “On Coordination Vs. Defection,” describing how humans have chosen to deviate from and coordinate throughout history. According to your definition, what is a network state?
I would say there may be a pendulum between very large agricultural centralized non-nomadic societies (what we call cities and countries), and the number of hunter-gatherers also swings between the two. In the course of history, this pendulum has tilted extremely towards cities and countries, and non-nomadic people are deeply rooted.
The idea of a network state is, hey, this pendulum has swung too far. Things have become too rigid. The city or existing government’s support for the network world has arrived, and there are various other forms of coordination, charter cities, entrepreneurial cities, network countries, whatever you want to call them, they are all saying, hey, let us swing this pendulum in another direction.
Let us get more freedom and mobility, let us conduct more experiments in governance, let individuals get more freedom instead of being bound and fixed. So no matter how you call it, the network state is just experimenting with what human beings mean in society and how we create new societies to make humanity more autonomous.
TechFlow: Do you personally travel frequently to “rebalance the pendulum”?
Recently it’s been like that. A long time ago, I didn’t do that. Since cryptocurrency has been flourishing in the past year, I have indeed traveled frequently in the past two years.
TechFlow: For me, I live in London. So I occasionally go to San Francisco because most of the opportunities are there. This fact has reflected this. Geographically, it seems like all the opportunities are concentrated in the United States. And Europe is made up of many different small countries, a bit fragmented, and it’s difficult to expand business in certain areas. So everyone goes to Silicon Valley to expand their business. For me, the network country also means being able to bridge arbitrage opportunities between different geographical areas.
Yes, the general idea is that cities no longer compete with each other, so network countries can make cities competitive, which will only benefit individuals.
TechFlow: Do you think that people self-organize into clusters in network countries can break the curse of human conflicts caused by the formation of fenced tribes?
It may go in the opposite direction. Previously, there was only competition between countries, such as China competing with Russia and the United States. Now, a new player has emerged, called the network country, and everyone will say, “Oh, now we all have to confront this new force.”
So not only are we competing with each other within the national arena, in this brand new arena, a brand new dimension of competition has emerged because new players have emerged.
Going back to the article, there will also be coordination motivation between rewards and coordination. Therefore, some countries may want to coordinate with certain specific network countries, and sub-networks may want to ally with a larger country. This is just a new variable, which will at least cause a series of changes, and change is progress.
TechFlow: When will network countries like Zuzalu become more organic/natural in the future? What do you think of Zuzalu?
I think that if the people who participate are different each time, people will become particularly picky about Zuzalu, to the point where they say, “Oh, I participated in a network country” with such ridicule.
But that’s the thing, because we don’t really know what a network nation is. Zuzalu seems to be a symbol of progress. We Zuzaluans don’t really know what it will become, because this is just the first time, but someone has some ideas about what it will look like in the future, and it’s like a pop-up experimental city that happens regularly. So when Zuzalu happens again in six months or maybe a year, there may be some of the same people and new people joining in. And the idea is to create a common identity called Zuzaluan.
So, what is Zuzalu? It’s just people in the world identifying themselves as Zuzaluans, who are people who appear at different times and places on Earth.
TechFlow: Additionally, Zuzalu’s mission and content seem to perfectly match David’s interest in positive psychology, nutrition, and physical therapy. David, can you share how blockchain can enhance or disrupt the development of longevity?
It’s a world of decentralized scientific research. So, there are some interesting studies that can be done in the field of longevity, but they can’t be done because of restrictions from regulatory agencies like the FDA. So, we need new experimental venues, which need to exist in countries that can approve this kind of research. A network nation or other jurisdiction that allows this kind of research will accelerate the development of longevity research. So, we choose to discuss these topics in Zuzalu, which is not actually a place for fundraising research, but we will discuss how and where research can be conducted, which is a coordination issue. This may not be easy to understand, but it will be a topic of our discussion.
TechFlow: Do you think longevity is a matter of improving lifestyle or a matter of scientific discovery that allows humans to live up to 1,000 years old?
It’s both, right? If you’re not happy, then what’s the point of living 1,000 years? Like I said, if you have arthritis and can’t move your body, you don’t want to live forever. Pursuing longevity and pursuing healthy lifespan and well-being are the same pursuit.
Therefore, some people are conducting research hoping to find a pill that can make people live forever. But at the same time, they are fat and unhappy, lack exercise, what’s the point? You’re just extending your suffering. So the pursuit of longevity must also be the pursuit of happiness.
The pursuit of happiness is fundamentally the pursuit of health.
TechFlow: Can you share your longevity or healthy lifestyle? I see you drink green tea every day and do cold water immersion near Rok. What is your secret to longevity?
My secret is to turn it into a habit, it has to become a regular learning.
Good nutrition and diet are related to lifestyle. So you have to turn some things into habits. This is also what Zuzalu brought to me, it is a regular health habit foundation, cold water immersion every day, implementing cell autophagy.
So, Kiki’s breakfast is not only the same every day and healthy, but also a place where you can chat and communicate with people, meeting social needs.
Also, I don’t drink alcohol. In New York, socializing and drinking are almost inseparable.
But at Zuzalu, this is the easiest place I’ve found to quit drinking. I quickly saw the benefits of doing so, such as improving my skin and overall health and sleep.
At Zuzalu, since everything is here, food is here, social life is here, all the content is here. I can easily do what I want without commuting or sacrificing sleep.
Indeed, this is a highly optimized lifestyle.
Currently, if you search for the keyword “Ethereum” in Bankless, you can find 54 related articles, analyses, and videos. In comparison, there are only 13 contents related to Bitcoin.
TechFlow: Did you communicate with the Ethereum community during your time at Zuzalu? What are the recent focuses of the Ethereum Foundation?
Yes, I talk to Justin a lot, who’s been diving deep into new areas of zero-knowledge cryptography. So I asked him what this means for cryptocurrencies, although it’s still very far off.
I discussed EigenLayer and re-collateralization with Dankrad, Tim Beiko, and Vitalik because it seems like a new area problem that the Ethereum protocol is facing.
The reason there are more articles about Ethereum than Bitcoin on Bankless is because Ethereum is more expressive. Bitcoin only does Bitcoin-related things, like sending Bitcoin to people. Ethereum is a smart contract platform, meaning you can do anything. So there are more topics to discuss.
TechFlow: What do you think is the biggest challenge facing the Ethereum ecosystem right now? What can Bankless do to support the construction of the Ethereum ecosystem?
Ethereum is still difficult and the story of why it is the way it is now has not been explained to me.
There is a coordination issue within the cryptocurrency industry because a lot of people still have incentives to be Ethereum skeptics and, as the article on “Coordination and Betrayal” indicates, there are still a lot of incentives to betray Ethereum.
To me, the whole point of the cryptocurrency industry is to get people to agree on one protocol, and that’s the whole point. So we still have a lot of work to do to get people to join the same protocol and make them feel like it’s a wise choice. This is an internal issue for cryptocurrencies.
There are also external issues, namely that we still need to build things that people want to use and care about. This seems like an eternal challenge, but it always takes time to solve.
TechFlow: When you return to New York, will you bring what you’ve learned at Zuzalu to Bankless?
Yes, I can say we’ve already started.
Many new types of content have emerged, more content about non-cryptocurrency areas. So there will be content about the world of cutting-edge technology, as well as some content about cryptocurrencies, which will be integrated together.
I have also learned new things at Zuzalu that have already begun to impact Bankless, namely these introductory-level contents.
But many new relationships have also been established here, which will have an impact, as well as many new stories.
Therefore, the people here will eventually become supporters of this podcast. Overall, this is just a record of the significance of Ethereum in the world and cutting-edge technology.