Ex-BlackRock Exec: Why Ethereum Will Reshape Global Finance | Joseph Chalom
Summary
Investment Thesis: The podcast emphasizes the long-term potential of Ethereum, likening its current state to the early days of the internet, with a focus on the network scale adoption story and the opportunity for tokenized assets to reach trillions in value.
Market Outlook: There is a significant macro trend towards the tokenization of assets, including stocks, bonds, and real estate, on decentralized platforms like Ethereum, which is expected to reshape global finance.
Company Strategy: Joseph Chalom discusses Sharplink's strategy to bridge traditional finance with digital assets, focusing on Ethereum as a long-term opportunity and leveraging partnerships, such as with ConsenSys, to differentiate and drive growth.
Risk Management: Emphasis is placed on prudent risk management, with a focus on understanding smart contract risks, protocol risks, and maintaining a disciplined approach to capital raising and ETH accumulation.
Competitive Landscape: The discussion highlights the cooperative competition among Ethereum treasury companies, with a focus on transparency, institutional trust, and strategic partnerships as key differentiators.
Future Vision: The podcast outlines a vision for the future where finance is seamless and integrated, with no distinction between traditional and decentralized finance, and emphasizes the importance of accumulating ETH as a strategic commodity.
Operational Goals: Sharplink aims to build a world-class team, raise capital efficiently, and develop Ethereum-oriented businesses to support ecosystem adoption and drive ETH-denominated revenue.
Transcript
It's more important to understand why there's a long-term thesis and a macro trend because it's almost like betting on the early days of the internet. It's a network scale adoption story. There's an opportunity for tokenized assets, funds, stocks, bonds, real estate, private equity to actually be measured in the trillions when we look forward in a few years from now. And that'll be running on a decentralized platform like Ethereum. [Music] If you have any questions about how to navigate the current environment, Wealthon can help connect you with a vetted advisor to get a free portfolio review. Just click the link in the description below or head to wealthon.com/free. There's no obligation and it will just take a few minutes of your time. Again, that's wealthon.com/free. Ladies and gentlemen, welcome back to the Wealthon podcast. I'm Chris Perkins, president and managing partner at Coinfund. And today I'm incredibly excited. Uh I'm here with Joseph Shalom, who is the co-CEO of Sharplink, who is uh was a titan of Across Wall Street. Uh I can't wait for him to tell us about all of his accomplishments at at BlackRock. Uh but most of all, he's a friend and uh so just wanted to uh welcome you, Joseph. Can't wait to hear what you're building and uh how's it going today? >> It is going great. and you use the word friend. I was going to call you out in the beginning because we met a couple of years ago and while we haven't done business together, we probably had four or five meals and I learned from every one of them and you're one of the reasons why um our teams have been successful. So, uh super excited to be on this podcast. >> Thank you so much. And I never told you this uh but my personal journey started uh with Joe Luben, uh chairman of of ESBET. uh when I was thinking about leaving City, he was one of my first meetings and I was like, Joe, like I'm thinking about doing this. And he said, Chris, you know, don't join a company. He said, I want you to help a bunch of companies. And so he was really influential. So it kind of comes full circle. He got me into Ethereum in a material way. Um and uh I think now we all have the ETH bug. Um and uh >> so yeah, >> let's start off with a little bit about your background. Um it's I think it's important for listeners to know where you came from. uh and and like you know I could talk all day about how you provided such leadership you know when you were at Black Rockck but would love to like hear a little bit about your background in your own words. >> Sure. Um I've been at Sharlink for a total of five weeks as the new CEO but life doesn't start or end with a new job. Um I spent 20 years at BlackRock and that was an absolute incred incredible privilege. Um the first dozen or so were about helping scale uh Black Rockck's Aladdin fintech business. You can think of it as one of the largest centralized uh enterprise um portfolio and risk management systems. And it actually gave me a bird's eyee view on how how to both scale a business but to really understand the the frictions in the ecosystem. And then for the last five years at BlackRock were in some ways my most fun and impactful. And that was running uh an incredibly young bright team who was leading digital assets. And it was an it was an opportunity to actually be benevolent and positive in an ecosystem that really needed institutional level quality. Um on a personal note, I am a child of immigrants. I grew up in the DC area. I'm a transplant to New York for 31 years and um this is where I derive my energy. >> That's awesome. I don't think a lot of people understand how big Aladdin is. Um I think it's a 20 I think it has 22 trillion under management and so you know you know really leading a platform like that is a pretty big deal. And then you also you know were you know you had the most successful ETF products across crypto during your tenure there. Um, so you were at the top of the world. You decide to retire and then what happened? I thought I thought you were going to, you know, spend a little time on the beach and then all of a sudden I get this call. It's like, "Hey, Joseph is back." And I'm like, "What?" >> Yeah. So, I need to disabuse a myth that's running around my ecosystem and family, which was, um, I didn't retire and I came straight to Sharlink. I actually did retire and I gave really long notice and left on amazing terms at Black Rockck and my goal was to decompress and then I got a phone call. Um it sounds like in your life in my life sometimes all roads lead to uh Joe Luben and you know there was this opportunity to continue the mission and it sounds trit but if you think about you know we're all trying to leave a legacy we're trying to leave the world in a better place. We all have to define who we, you know, why do you work 40, 50, 60 hours a week. In my case, it was trying to be a bridge between traditional finance and digital assets and crypto. Um, to do it in a way where we rose their standards and didn't lower ours. And I got a phone call saying, you know, there was a digital asset treasury. It was looking for a leader. And to be very transparent, I was pretty wary about jumping into a new job right away. But the idea of being able to partner with Consensus, Joe being on our board, um, but just the depth of knowledge within Consensus and how it can help Sharpink differentiate itself like got me out of bed. And so, uh, my retirement was shortlived. Uh, in an ideal world, we would all have two to three months off to clear your heads. But it was um a pretty precient time and I feel like there's been a market shift in mind share not from Bitcoin to ETH or from ETH to Bitcoin but a mind share shift for Ethereum and it's having its moment and it shouldn't be at the at the at the at the risk or at you know um of Bitcoin. um you know to be very honest with you there's there's a religious divide in this world and I don't subscribe to that and so I think there's a role of all of these uh opportunities in people's portfolio. So I got out of bed because I believe in this long-term Ethereum opportunity. >> I I I totally share that sentiment. Um I love Ethereum but I love many of the other ecosystems as well. They they serve a particular purpose and they do it very very well. Um, so I I I think that this religion has been holding people back. But it's funny, it's it's very territorial in crypto. I think as we, you know, as as traditional finance comes together, we're going to be less focused on the back end and more focused on the capabilities and that the system will work itself out. I mean, completely. So, so when you made the transition, I think there's two things you had to get your head around. The first was DATs and we've had people like Seth Gins on the podcast um and others who have really explained what a digital asset treasury company is and then you also had to you know essentially you've gone all in on Ethereum now and I appreciate it's not a religion but you're very long Ethereum. Can can you talk through that calculus and you know how you got your head around DATs why you believe obviously now in in DATs as a thing like I was on a pod yesterday and people like oh Perkins it's a fad. I don't think it's a fad. I imagine you don't think it's a fad. To me, this was a long-term market structure change. Um, but can you talk through how you got your head around both and then that commitment to Ethereum? >> Sure. But I will start the other way, which is this idea, and we can talk more about it, that there's a macro trend. >> Yeah. >> That I believe is going to be decade or decades long. And if you have a long-term thesis, and I mean an investment um opportunity, not a trade, not speculation, but you believe there's going to be a secular rewiring of the entire financial services industry, then you ask yourself, where is the seed where you can be most impactful? And if you take a step back, there are different ways to own Ether, the token that secures Ethereum as a network. You know, many people are very comfortable owning it in spot form in a self-custodial wallet or with a custodian. There are some institutions that really enjoy the ETFs, including the ETF that Black Rockck launched because it's it's crypto. You have an opportunity to put it in your portfolio, but in a really really comfortable wallet. You know, you probably own dozens of other ETFs. This is just a really convenient way. Um there are limitations and risks of every product. The beautiful thing about owning ETH through a public equity uh listed on NASDAQ and ours is Sharlink and and it's it's uh ticker is SPED is you get a few benefits. One is there's no management fees associated with owning a public equity and so that sometimes is a drag even a small drag on your returns. Second is, you know, there's an opportunity that Ethereum presents where if you own the Ether tokens, you could stake it on the network to secure transactions. Very different than Bitcoin. And Bitcoin is a good reserve asset. And Michael Sailor has done an amazing job in demonstrating that you can create excess value through through a treasury. Ethereum actually works for you. So, the ability to own it in a public rapper, appreciate and take advantage of the value uh appreciation of Ether, which has been tremendous over the last several months, and third, have it staked and work for you and earn a yield on that uh asset. That is a really good reserve asset. Um the second benefit is just the wrapper. So the idea that if you own the underlying ether in another format, you just get the return of of that capital appreciation. But if you can own it in a vehicle where the staking is revenue and in public companies, revenues generally attract some forward multiple. If there's a belief that your company is going to undergo growth, you know, owning it at a public equity has been proven in the long run that you can generate excess returns beyond just holding ETH itself. So that is enticing. But the order of operations for me is believing there's a long-term Ethereum opportunity then the vehicle you own it in. And we could talk more about each of those. >> Yeah, I mean these are amazing points of we can go in a lot of different directions. I think first on the product breath. Um, we've seen and you built this. We saw Ethereum wrapped in a in a security before in the form of ETF. I've always been critical of that product. No offense to to BlackRock, but it's not yielding. And it it's been really tough. And the reason why is because of the characteristics of of Ethereum. You understand this, right? Like you can't unbond. There's a 13-day unbonding queue. So, if you want to unstake, you have it takes a long time. and you have daily liquidity requirements. So, it's really hard and and yeah, you know, the last administration was very hard from regulatory perspective. The good news now is that's turning into a risk challenge, but that product, the ETF is really hard. It gives you that wrapper, but it doesn't give you the full return. Along come DATs like ESB. And now to your point on the low manage no management fees, you can generate that yield just, you know, we we've talked about the risk-free rate and and you know, we built something at Coin Fund called Caesar. That's a 3% almost real yield. It's it's a little inflationary now, but it's it's around 3%. I mean, that you you can take the full yield, and that's even before you do what you guys really in consensus are know about, which is enter into DeFi and generate incremental yield. Um, it it's really it's really ironic to me. I was talking to a research analyst the other day and he's just like, you know, treasury operations, treasury operations and I really want to get your opinion here and all he could think about was the the Michael Sailor treasury operations playbook of issuing convertibles or preferred or you know the ATM at the right time to generate your your uh Bitcoin to NAV. He had no concept of the underlying fundamentals that you can drive with Ethereum as you mentioned putting it to work. So, as you think about driving your MNAV into the future, h how how do you bifurcate what we call treasury operations and and issuing equity at the right time to increase your equity per share versus the fundamentals of driving that underlying yield? >> I think there's two elements that come together. The first is just how do you raise capital in a way that's accreative? Most treasuries including sharp link have to date raised capital primarily through equity issuance. You know you issue equity when your stock is has a premium to the ownership of the underlying. So it's called a multiple of nav. So the enterprise value is higher than the value of your Ethereum. In those days, you raise equity and sometimes it's through an at the market, sometimes it's in a registered direct offering. Very often it starts with a pipe. But you need to do it in a way that's accreative because otherwise investors and early investors and shareholders feel like you're just diluting them to buy ETH. But actually that creates a different uh opportunity. And for us, we call it ETH concentration. you know in in common parliament is how much do you how much ETH do you own per share and if you raise capital properly and you acquire the ETH efficiently and you stake it and get those ETH rewards over time your ETH per share would go up you know when we started um even before I joined in early June our ETH concentration was about 2.0 0 think of it as a northstar metric and today it's in the high threes. So so long as you can raise capital and increase your ETH per share it's accreative for shareholders. That said there are going to be moments when the multiple of NAV or MNAV is very high in the high ones. There are moments where it can go below one and a lot of this is sentiment based. A lot of it will end up being mean reverting. And in my view there have been moments where uh Michael Sailor has been in the twos and that is a very high multiple and there are moments you know when people are under and I think in the long run it'll mean a revert and I think that's okay. It's just important to be disciplined not to raise capital when it would be really diluted for shareholders and wait till your multiple is a little bit better and then go out and raise and go out and buy ETH and go out and stake it. So essentially monitor the MNAV MNAV becomes uh less than one sounds like a buying opportunity is you know what you're describing in many cases. >> Yeah I mean it's it's very interesting um this product is interesting to three or four investor types. There's retail and long-term holders who believe in the thesis of Ethereum long-term um capital appreciation and even before the yield. Great. Get go and buy as much of this as you can own it through a public treasury company like ourselves and you hold it and you let it appreciate and work for you. There are also people who like the volatility involved in Ethereum. Ethereum today is a more volatile asset as Bitcoin has become a little bit more institutionalized and there are people who are willing to lend in that gamma trade in some equity linked format. So there'll be different investor types who are willing to take advantage of this. I will share with you one of the reasons why I was attracted to Sharlink is not only having consensus as a strategic partner but the ability to hire the best institutional minds to do this in a riskadjusted way. You know I think the biggest risk is no longer regulatory. I think the biggest risk is how we behave and what types of risks we take in order to get rewards. And we need to be more self-regulating than the industry was in the days before FTX. That's my very strong view and conviction. >> Yeah. Can you unpack that a little bit because we deal with this all the time. Talent is really hard to find. I mean, you can find people are really good at DeFi, people have been in Wall Street for years. It's really hard to find those unicorns. Um, how do you find that talent? And the second question is to to your risks. Can you tell us about the risk? Yes, it's a volatile asset, but you have things that people don't normally think about. I think you're right. Regulatory risk is now kind of on the back burner because this SEC has been very forward thinking and thoughtful and principles based. But you have hacking risk, you have smart contract risk, you have other things out there. What risks are you focused on and how do you mitigate them? So those are the two questions, people and risks. >> Sure. The the people is the easier part. And what I mean by that is look, I I was at Black Rockck and led a digital asset team. It started with one exceptional individual. We built a small team around them. Like five people and seven engineers, you know, collectively with the Black Rockck brand and machinery and reputation raised products that raised over a hundred billion dollars in a year and a half, right? It means that small motivated teams who are forced to do only a few things. Well, that's the beauty of having a small team. You can't do 11 things. Allow you to be really focused. And as I'm building my team, we're hiring just the smartest, most missiondriven people. Um, by the way, I have a rule, no jerks. I I could use a different word, like no jerks. And then you find people who actually believe in that long-term mission. And I don't mean that ETH is going to go up or I don't mean that they want to run a treasury. These are people who believe there's a long-term transformation happening. They know it doesn't happen every day and it doesn't happen in quarters. It could take a long time, but they want to be part of that massive transformation. So, I think the talent thing, if you build a team of likable people who are smart and have the same mission, I don't think it's that hard. And to be honest with you, the best hires are not coming through headunting firms. They're coming through recommendations from people I respect. And Chris, I think you've shared a few names with me and I'll follow up on every one of them. You know the second question about risk in our domain is you know there's a few ways you can really mess up. One is to believe that you have to generate the highest yield possible. >> And some people want that because it they think it drives financial returns. Other people will raise capital or seek that last basis point of yield because they feel like they're in catchup mode. And if you believe you're measuring yourself in days, weeks, or months, then it actually can motivate you to to make real mistakes. If you take the view that we're in a very long-term opportunity, you will accumulate as much as you can, but you do it responsibly. To answer your question very candidly, the number one way that you create risk in these treasury companies is think about it. You raise a dollar, you buy a dollar of ETH, and you end up having a portfolio of billions of dollars of ETH that you have to think of as a suite of portfolio holdings, ranging from the most native, safe, delegated staking with custodians earning 3%. To, you know, liquid staking to restaking to looping to potentially lending your ETH in OTC markets. Like there's lots of ways to take risks and create leverage. And I think risk is okay because it gives you rewards risks without being aware of what risks you're taking. You should not be in this business. You need to understand what's the smart contract risk and do the diligence. What's the protocol risk? What's the risk of the counterparties? What's the duration risk you have? Is there convexity in the trade you're doing? It needs to be thought of as building an efficient frontier of rewards to risk. And I'll tell you in the beginning, we're going to start slow. We're going to walk before we run. >> And then we'll build an ideal portfolio, but not because we're trying to get a home run every day, but because we want to win the game and that game is driving returns to investors. But people who don't know what they're doing or think it's all about rewards can actually create headwinds for the entire industry. We saw that in 22. >> Yeah. I think I've come to the realization that even in fiat world, there's no such thing as the risk-free rate. Anytime you're driving yield, there is an element of risk. And I think investors need to understand that to your point, you know, we could go into DeFi right now and in fact, I've got agents that will do it for me and they'll blow out yield through the roof. Um, but that may not be the most prudent thing to do. Um, so it sounds like risk management is is core to the focus of a long of long-term success. So, did I get that right? You said you had five people, seven engineers to drive 100 billion in products. It sounds like you're going to apply that model when it comes to keeping your opex nice and tight. So, no management fees, but but very tight opex. Um, and that's going to be a core of your business success. >> Yeah, if you even just going back to my Black Rockck days, it's really interesting. I think people in this industry, the more successful your products are, the more humble you need to be. >> Yeah. >> Did you hear what I just said? The more successful your products, the more humble >> because it's usually not a handful of people. >> You know, the team at Black Rockck was just a tip of a spear. And that spear was a giant trusted fiduciary with an amazing brand and amazing distribution. So, I'm quite proud of what the team is did, but it took a village. And the beautiful thing about digital asset treasuries are they are an incredibly scalable business. What do I mean by that? >> You need a staff that can handle the fact that you need to be a compliant public company. You have to have the right accountants and compliance rules and the like, but you probably need a very small team raising capital. >> Yeah. >> Because you have relationships through bankers who help you. you have a very small team who's actually going out and buying and staking the ETH. And to be honest with you, it doesn't matter if you have $ three and a half billion dollars of ETH like we do or $ 35 billion of ETH. If you're building an efficient portfolio, if you're building something that's good enough for a billion, it should be able to satisfy larger scale. Where things get tricky is when these dats get really, really large. You need to be careful not to disrupt or create questions about the protocol and its sanctity and safety. And you also need to be careful that if you have that much ETH, how do you make sure that whatever you're staking in can support your liquidity for a bad day. >> Yeah. >> And you talked about being prudent. I have a first principle. Treasures aren't meant to lose money. >> 100%. >> So treasures are not meant to lose money. And we live in a risky world and you have to balance that trade. >> That's such a great point. I uh I was at City for a long time and I remember before I made managing director, the global head of credit took me out and we went to a Ranger game together and he's just like, you know what I am? I'm the I'm the defensive line right there. But the most important person at the firm is the goalie. You know who that is? It's the treasurer. And and he was right. And I I took that really with me. Um, I want to >> Chris, when I was at BlackRock, they use different words and the words were as follows. If 65 70% of the assets that you manage are in pension funds and retirement. >> Yeah. >> You actually can't mess up. >> You know why, Chris? If you mess up, people don't retire in dignity. >> That's right. >> How about that for for a sense of responsibility? >> It's a massive responsibility. Massive. I want to talk a little bit about the competitive landscape. I thought it was amazing to see you and a bunch of your competitors on stage in New York a couple weeks ago um at the at the ETH New York event. Um obviously not looking for you to bash them, but what I am looking for you to do is like how are you going to differentiate? Like you know I p my my personal belief is that Bitcoin, Ethereum, it's big enough for multiple players. That's my sense. In a way you're kind of linked because as they buy um that forces upward pricing pressure. So in a way they're kind of you're linked but at the same time I think there's a key way that each of these folks are trying to differentiate. I know I've heard you speak on the wire before and it's really a focus on transparency but long term how do you want to position yourself visav some of the competitors and I imagine I'm I'm thinking about ETH competitors but we also know that there are a number of other token competitors as well but how do you think about the competitive landscape and differentiation? >> Sure. I I actually you know we can learn a lot of lessons from what Michael Sailor did but I think ETH is a completely different treasury strategy because of the yield. So when I think of competitors I actually think of these are people who I compete with but people who I actually root for. >> Yes. And you know um we are the second largest ETH treasury BMR which Tom Lee chairs um we admire what they're doing like he is spreading the message and >> to the extent that there are multiple people who come from institutional backgrounds who believe there's a long-term Ethereum opportunity and the way to capitalize on that is twofold. One is to own ETH >> the token and two is to make it productive in the ecosystem. welcome that coopetition and you know what the more the marrier I think this industry will end up um getting consolidated with a handful of folks who uh race to accumulate ETH I think we're trying to different differentiate ourselves in three simple ways one is to be the most institutional and trusted and to have the strongest team a small team but team of experts who will make sure we do it the right way Uh second is you can't overemphasize our relationship with consensus. Not just because Joe Luben is a co-founder of Ethereum. It's because Consensus is the most expert company in the Ethereum ecosystem. They are in some ways the Ethereum company in terms of applications and protocols and you know core support for um for the for for for the entire ecosystem. Having that expertise in a strategic partnership is completely differentiating like as we seek out yield opportunities whether it's through consensus based products or chains that they support including Lineia. >> Yeah. >> Imagine having a team of people who have already done the due diligence on every protocol. Imagine that you know a team of people who are experts in smart contract risk. Imagine a team of people who know where the yieldbearing opportunities are. That is a huge differentiating advantage. And I think the third thing is we all forget that treasury companies while their primary strategy is to accumulate their treasury asset and make it productive and hopefully over time create multiples of value, they often have operating companies and that's to make sure you're you're running clear of all the SEC and NASDAQ rules. Um, we have a legacy uh operating company in affiliate marketing related to the gaming industry, but you can imagine a world where a company like ours who's so close to consensus would find ways, and I'm not going to tip our hat or share anything confidential, will find ways to build Ethereum oriented businesses that would make sure that you're promoting ecosystem adoption. And if you can make money in a business, an operating business that has ETH denominated revenue, what a flywheel. >> Yeah. >> Like we're going to have so much staking yield as will all the debts that if you can compound that and then add in revenue that's ETH denominated, it's just another way of continuing to grow uh the treasury. So I think that is in the future. Um I'm not sure that every ETH treasury has that plan. Yeah. But our relationship to consensus makes it not only a good decision but a very natural decision. >> Yeah. I I I personally have some ideas on on those some of those ways to make Ethan nominated capital. Um and so it sounds like building some of those businesses are in scope. What about M&A? And obviously you can't talk about potential targets or anything, but how do you think about M&A uh in the future? And and is that would that M&A be targeted on a sister that that's you know you're at a premium demnav? They're they're not um or is it some kind of operating business or is hey it's a green fields you can go in any direction. I >> I'll go in two directions. Um, yes, there's going to be an opportunity if we have a proliferation of ETH debts and some don't get liquidity. What I mean by that is the primary way public companies in this space raise capital is through an a daily at the market program. What that means is if your stock has really good liquid trading volume and I think um Bitmine and Sharlink at on some days have had 95 98% of all the on uh on exchange trading volume and that's how you raise capital. There'll be those who just can't raise capital and they may trade at a discount to NAV or they may just say let's combine forces and it's a a creative way to acquire more ETH. You know, there are other options. As we all mature and we go from earning half a percent to 1% to one and a half to two and a half percent of the ETH supply, it may be prudent to actually have sister DATs in different regions. >> Yeah. >> Maybe in Asia, maybe in Europe, uh that are equally listed that can probably take advantage of a lot of the core operating costs and infrastructure. Yeah. >> But targeted additional audiences. And I can see a world where um you know there can be almost a hold co and having dats in several regions. But I don't want to get ahead of myself. I've been at this job for five and a half weeks. But having a public equity allows this type of accretive M&A in the future. And I don't know when that's going to occur. I think there'll be a an an initial period of fragmentation before there's a period of consolidation. It's like that in every technology. every business, every business. I think the same thing is going to happen in stable coins, frankly. Um, you know, there will be there will be consolidation, some of that will be through M&A. Super interesting. Um, the one thing that I've been really impressed by is your focus on transparency. Uh, you have your dashboard. Can you talk us through like obviously that's one of the ways you're trying to differentiate, but it's it's not easy, right? You're out there showing everyone what's under the hood every day. Um, what made you what led you to that decision? >> Sure. Can I educate listeners for a moment? Like most companies don't issue stock every day. Most companies, you know, very often can go years without doing uh additional offerings. So the requirement from from the SEC and most exchanges, you just on your quarterly report in your 10 Q, you tell people how many outstanding shares you have. Right? In our space where you may be raising new capital through issuing shares daily or weekly or some other period of time, for someone to fully understand you on a day-to-day or week- toeek basis, they have to understand a number of metrics. How many ETH you own? How much capital you've raised? How much ETH have you purchased in the last week? Do you actually own the ETH or do you have derivative exposure to the ETH? How much are you staking? What's been your staking yield? But most importantly, you take that number of ETH and you divide it by the number of outstanding shares, even shares full on a fully diluted basis. And that tells you, it gives you a multiple a multiple of what's the value of your company relative to your ownership of your treasury assets. We happen to do that every week. So every Tuesday morning there's a press release and not just a press release, there's an AK that give it gives investors that information. Others have chosen to do it at different times. Um our goal is to be the most trusted and transparent and sometimes it may hurt us because the metrics don't compare favorably to others for periods of time and then everyone ultimately has to be transparent. We would hope others adopt our approach and I think it's really really important especially in an ecosystem that's not known for transparency the crypto ecosystem having more transparency actually will drive in the long run more investor stickiness and I think that's that's who we want to be. >> Yeah. When it comes to investors it's it's really hard to make an argument on why you should not be transparent right like people should know what they're buying and uh I commend you for that. Um, so you've been in the in in the role for a few weeks getting settled. Um, crypto is always a wild ride. Um, take us through the next 12 to 18 months. What are you seeking to accomplish? Uh, what are your what are your goals? And, you know, you look back, you know, a year, 18 months from now, what would you like to see? >> Sure. I think the first thing is just to build a world-class team. And you don't build a world-class team in two days. You continually um hire for the most important needs. and you build a team of like less than 20 people who poundfor-pound are just excellent at what they do and they're kind and they're roaming together. The second thing is to just continue to raise capital in a way that's not really dilutive for shareholders. >> Yeah, >> there are times where you want to be more aggressive in raising capital. other times you're you take your foot off the gas. But the whole purpose here is to in the long run drive higher concentration of ETH per share. That's outstanding. Two, accumulate ETH um in large amounts because if you believe in an Ethereum opportunity, and I want to get there, you want to accumulate as much ETH now as you can. Um, and even those who say they're only going to raise they're only going to own 5% of ETH in their fund, you still want to accumulate it quickly at the lowest cost. >> Yep. >> Um, the last thing is, you know, building uh connections to the ecosystem. It would be like really silly to say you're an Ethereum company or you're just an Ethereum treasury and not take that Ethereum and create opportunities in the ecosystem. And when you hold billions of dollars of ETH, you can actually help protocols be successful. You can, you know, lend and provide liquidity. And so doing it in a way that's productive for the ecosystem is important. And then finally, when we look back, I hope we've built a business or two that is helping support some transaction life cycle in the Ethereum ecosystem that spits off ETH denominated revenue because it's that righteous flywheel we're trying to have. And you know, when I look back in a year and a half, whether I have X billion or Y billion of ETH, that's not going to be the definition of success. It's going to be the whole thing I just described. >> What a vision that that's fantastic. So, uh, going forward, investors should be on the lookout for those Tuesday press releases to see how things are going. Um, any last thoughts, uh, to share with potential, uh, investors and people who are thinking about ESPE as an investment play? Yeah, I keep on talking about the Ethereum opportunity and if you give me one minute, >> yeah, >> the idea that the current rails that support traditional finance where there's frictions in money movement, there are delays in when you can trade, uh even the best of trades will settle in a day and that introduces massive risk to the ecosystem. Settlement risk, you know, will your trade actually settle? counterparty risk. Will your counterparty be there the next day to make hole on that trade or on that swap? Um there is financing risk. There's collateral management risk. And I think uh very strongly that it all starts with stable coins. We're at 275 billion of stable coins mostly running on Ethereum. But tokenized assets are the dark horse here because I think that Secretary Vess said that stable coins will go from current levels potentially two or three trillion in the next few years. I think there's an opportunity for tokenized assets, funds, stocks, bonds, real estate, private equity to actually be measured in the trillions when we look forward in a few years from now. And that'll be running on a decentralized platform like Ethereum. So, if you believe that's coming and you believe like we do that there's a correlation between the amount of assets being secured on a chain and its native token, Ether, now is the time to start accumulating. And I think we just provide an excellent smarter wrapper to get that long-term exposure. And I I think it's less about, you know, do you buy a treasury company? It's more important to understand why there's a long-term thesis and a macro trend because it's almost like betting on the early days of the internet. It's a network scale adoption story and many many people like the yield. Most like the idea that they're betting on the future. >> Yeah, it's it's a really amazing little asset, isn't it? It's a commodity, but it has a yield. You know, love what you talked about, Bess, and I think about it all the time. You've got trillions of dollars of stable coins coming in. They're going to they're going to many of them are going to end up in the Ethereum ecosystem. How is Ether not a strategic commodity? Like how how do we not have a strategic reserve in in Ether? Like this is a very precious commodity because you need to control some supply to allow your dollars and your risk weighted and your and your assets to move through the system. I mean I couldn't think of anything more strategic. So I I totally support that vision. Um I I think on on top of that uh as as we look forward um this asset and and assets like it um for example yesterday I saw Superstate and Galaxy issue the first canonical security on chain right this is one of the biggest unlocks people didn't realize for blockchains because to date we had to lock up the the real world asset in a box put in a custodian We put a little token on top of it and we set it off in the ecosystem. I I think the point I'm trying to make, Joseph, is that this is moving so fast and like yesterday now we have canonical assets. As canonical assets start coming on board, I think that's an entirely new world that's going to I guess accelerate those assets on on Ethereum and other chains. Chris, if I can put a plug here on why tokenization and there's lots of words people use programmable, borderless, yeah, >> you know, instant or atomic settlement, neutral, trusted. I think if you just take a step back, people fail to remember that in our current global system, things are venue specific. Yeah. >> Like this stock only trades here, that bond only trades there. It's geographically limited and they're not composable. Meaning every transaction in one form or another is buy a stock, give up fiat. Buy a bond, give up fiat. People forget that in the future um when things can settle instantly. When I people use the word composable, not only these transactions going to run on smart contracts, many of them will be automated and rebalanced, but you can almost go back to the early caveman days where you can trade anything for anything. >> Why does the S&P 500 have to trade for a dollar? Why can't the S&P 500 trade for the MAG7 rapper? Like things are going to be highly composable both in swapping, in lending, in borrowing. And I think we're going to forget about this idea that instruments have venues. And I think it's going to unlock tremendous economic value. Tremendous economic value, not because of velocity, but because what this uh unlocks. >> Do you see yourself uh canonically tokenizing ESP going forward? >> I think that that that is in our near future. um we would do it on the Ethereum rails and not Salana. But I think >> we'll do it on the Ethereum rails but not Salana. But I think what's really interesting is that um >> there is a giant general wealth generational wealth transfer happening from boomers to Gen X and their heirs. Many of these younger investors and I call them investors >> don't have brokerage accounts. >> Yeah, >> Chris, they literally have wallets and it's all crypto. as they start saving for whatever goals matter for them, they will want to own traditional assets, but they're going to want to own it in token form in their wallets. And so, I think this is going to be bridging. And I'm looking forward to a world I'm a really optimistic person where there's no such thing as trady and DeFi. >> Yeah, >> it's just finance. >> That's right. >> And that will take a while. It's been part of my mission at BlackRock. It's certainly part of my mission at Sharplink. And I think it's going to create a world where um investors are actually going to keep more of what they put into their investments and people who believe in closed systems will keep less. >> Totally agree. Joseph, it's been amazing to have you on uh today. Did you have any final thoughts? >> Um I think we should do more business with friends. >> You forget that um in the traditional world, you know, trust is done through contracts. I think in this arena it's not just done through smart contracts. It's done by people you admire and people you trust and people who you think are tied into the same mission. I think it's less about we win, you win. We all need to win together. >> Chris, that's why I will never use the words we're flipping something. I want Bitcoin to be successful. >> Yeah. >> I want Ethereum to be successful. Um and we should be successful together. >> 100%. Well, thank you so much for coming on. We'll get you again soon. Can't wait to see what you're going to build over at ESBET. And uh thanks again, Joseph. Have a wonderful, wonderful day. And good luck to you, sir. >> Thanks, Chris. Really enjoyed this. >> Likewise. >> If you have any questions about how to navigate the current environment, Wealthon can help connect you with a vetted advisor to get a free portfolio review. Just click the link in the description below or head to wealthon.com/free. There's no obligation and it will just take a few minutes of your time. Again, that's wealthy.comfree. Thanks so much for joining us. We'll see you again next time. [Music]
Ex-BlackRock Exec: Why Ethereum Will Reshape Global Finance | Joseph Chalom
Summary
Transcript
It's more important to understand why there's a long-term thesis and a macro trend because it's almost like betting on the early days of the internet. It's a network scale adoption story. There's an opportunity for tokenized assets, funds, stocks, bonds, real estate, private equity to actually be measured in the trillions when we look forward in a few years from now. And that'll be running on a decentralized platform like Ethereum. [Music] If you have any questions about how to navigate the current environment, Wealthon can help connect you with a vetted advisor to get a free portfolio review. Just click the link in the description below or head to wealthon.com/free. There's no obligation and it will just take a few minutes of your time. Again, that's wealthon.com/free. Ladies and gentlemen, welcome back to the Wealthon podcast. I'm Chris Perkins, president and managing partner at Coinfund. And today I'm incredibly excited. Uh I'm here with Joseph Shalom, who is the co-CEO of Sharplink, who is uh was a titan of Across Wall Street. Uh I can't wait for him to tell us about all of his accomplishments at at BlackRock. Uh but most of all, he's a friend and uh so just wanted to uh welcome you, Joseph. Can't wait to hear what you're building and uh how's it going today? >> It is going great. and you use the word friend. I was going to call you out in the beginning because we met a couple of years ago and while we haven't done business together, we probably had four or five meals and I learned from every one of them and you're one of the reasons why um our teams have been successful. So, uh super excited to be on this podcast. >> Thank you so much. And I never told you this uh but my personal journey started uh with Joe Luben, uh chairman of of ESBET. uh when I was thinking about leaving City, he was one of my first meetings and I was like, Joe, like I'm thinking about doing this. And he said, Chris, you know, don't join a company. He said, I want you to help a bunch of companies. And so he was really influential. So it kind of comes full circle. He got me into Ethereum in a material way. Um and uh I think now we all have the ETH bug. Um and uh >> so yeah, >> let's start off with a little bit about your background. Um it's I think it's important for listeners to know where you came from. uh and and like you know I could talk all day about how you provided such leadership you know when you were at Black Rockck but would love to like hear a little bit about your background in your own words. >> Sure. Um I've been at Sharlink for a total of five weeks as the new CEO but life doesn't start or end with a new job. Um I spent 20 years at BlackRock and that was an absolute incred incredible privilege. Um the first dozen or so were about helping scale uh Black Rockck's Aladdin fintech business. You can think of it as one of the largest centralized uh enterprise um portfolio and risk management systems. And it actually gave me a bird's eyee view on how how to both scale a business but to really understand the the frictions in the ecosystem. And then for the last five years at BlackRock were in some ways my most fun and impactful. And that was running uh an incredibly young bright team who was leading digital assets. And it was an it was an opportunity to actually be benevolent and positive in an ecosystem that really needed institutional level quality. Um on a personal note, I am a child of immigrants. I grew up in the DC area. I'm a transplant to New York for 31 years and um this is where I derive my energy. >> That's awesome. I don't think a lot of people understand how big Aladdin is. Um I think it's a 20 I think it has 22 trillion under management and so you know you know really leading a platform like that is a pretty big deal. And then you also you know were you know you had the most successful ETF products across crypto during your tenure there. Um, so you were at the top of the world. You decide to retire and then what happened? I thought I thought you were going to, you know, spend a little time on the beach and then all of a sudden I get this call. It's like, "Hey, Joseph is back." And I'm like, "What?" >> Yeah. So, I need to disabuse a myth that's running around my ecosystem and family, which was, um, I didn't retire and I came straight to Sharlink. I actually did retire and I gave really long notice and left on amazing terms at Black Rockck and my goal was to decompress and then I got a phone call. Um it sounds like in your life in my life sometimes all roads lead to uh Joe Luben and you know there was this opportunity to continue the mission and it sounds trit but if you think about you know we're all trying to leave a legacy we're trying to leave the world in a better place. We all have to define who we, you know, why do you work 40, 50, 60 hours a week. In my case, it was trying to be a bridge between traditional finance and digital assets and crypto. Um, to do it in a way where we rose their standards and didn't lower ours. And I got a phone call saying, you know, there was a digital asset treasury. It was looking for a leader. And to be very transparent, I was pretty wary about jumping into a new job right away. But the idea of being able to partner with Consensus, Joe being on our board, um, but just the depth of knowledge within Consensus and how it can help Sharpink differentiate itself like got me out of bed. And so, uh, my retirement was shortlived. Uh, in an ideal world, we would all have two to three months off to clear your heads. But it was um a pretty precient time and I feel like there's been a market shift in mind share not from Bitcoin to ETH or from ETH to Bitcoin but a mind share shift for Ethereum and it's having its moment and it shouldn't be at the at the at the at the risk or at you know um of Bitcoin. um you know to be very honest with you there's there's a religious divide in this world and I don't subscribe to that and so I think there's a role of all of these uh opportunities in people's portfolio. So I got out of bed because I believe in this long-term Ethereum opportunity. >> I I I totally share that sentiment. Um I love Ethereum but I love many of the other ecosystems as well. They they serve a particular purpose and they do it very very well. Um, so I I I think that this religion has been holding people back. But it's funny, it's it's very territorial in crypto. I think as we, you know, as as traditional finance comes together, we're going to be less focused on the back end and more focused on the capabilities and that the system will work itself out. I mean, completely. So, so when you made the transition, I think there's two things you had to get your head around. The first was DATs and we've had people like Seth Gins on the podcast um and others who have really explained what a digital asset treasury company is and then you also had to you know essentially you've gone all in on Ethereum now and I appreciate it's not a religion but you're very long Ethereum. Can can you talk through that calculus and you know how you got your head around DATs why you believe obviously now in in DATs as a thing like I was on a pod yesterday and people like oh Perkins it's a fad. I don't think it's a fad. I imagine you don't think it's a fad. To me, this was a long-term market structure change. Um, but can you talk through how you got your head around both and then that commitment to Ethereum? >> Sure. But I will start the other way, which is this idea, and we can talk more about it, that there's a macro trend. >> Yeah. >> That I believe is going to be decade or decades long. And if you have a long-term thesis, and I mean an investment um opportunity, not a trade, not speculation, but you believe there's going to be a secular rewiring of the entire financial services industry, then you ask yourself, where is the seed where you can be most impactful? And if you take a step back, there are different ways to own Ether, the token that secures Ethereum as a network. You know, many people are very comfortable owning it in spot form in a self-custodial wallet or with a custodian. There are some institutions that really enjoy the ETFs, including the ETF that Black Rockck launched because it's it's crypto. You have an opportunity to put it in your portfolio, but in a really really comfortable wallet. You know, you probably own dozens of other ETFs. This is just a really convenient way. Um there are limitations and risks of every product. The beautiful thing about owning ETH through a public equity uh listed on NASDAQ and ours is Sharlink and and it's it's uh ticker is SPED is you get a few benefits. One is there's no management fees associated with owning a public equity and so that sometimes is a drag even a small drag on your returns. Second is, you know, there's an opportunity that Ethereum presents where if you own the Ether tokens, you could stake it on the network to secure transactions. Very different than Bitcoin. And Bitcoin is a good reserve asset. And Michael Sailor has done an amazing job in demonstrating that you can create excess value through through a treasury. Ethereum actually works for you. So, the ability to own it in a public rapper, appreciate and take advantage of the value uh appreciation of Ether, which has been tremendous over the last several months, and third, have it staked and work for you and earn a yield on that uh asset. That is a really good reserve asset. Um the second benefit is just the wrapper. So the idea that if you own the underlying ether in another format, you just get the return of of that capital appreciation. But if you can own it in a vehicle where the staking is revenue and in public companies, revenues generally attract some forward multiple. If there's a belief that your company is going to undergo growth, you know, owning it at a public equity has been proven in the long run that you can generate excess returns beyond just holding ETH itself. So that is enticing. But the order of operations for me is believing there's a long-term Ethereum opportunity then the vehicle you own it in. And we could talk more about each of those. >> Yeah, I mean these are amazing points of we can go in a lot of different directions. I think first on the product breath. Um, we've seen and you built this. We saw Ethereum wrapped in a in a security before in the form of ETF. I've always been critical of that product. No offense to to BlackRock, but it's not yielding. And it it's been really tough. And the reason why is because of the characteristics of of Ethereum. You understand this, right? Like you can't unbond. There's a 13-day unbonding queue. So, if you want to unstake, you have it takes a long time. and you have daily liquidity requirements. So, it's really hard and and yeah, you know, the last administration was very hard from regulatory perspective. The good news now is that's turning into a risk challenge, but that product, the ETF is really hard. It gives you that wrapper, but it doesn't give you the full return. Along come DATs like ESB. And now to your point on the low manage no management fees, you can generate that yield just, you know, we we've talked about the risk-free rate and and you know, we built something at Coin Fund called Caesar. That's a 3% almost real yield. It's it's a little inflationary now, but it's it's around 3%. I mean, that you you can take the full yield, and that's even before you do what you guys really in consensus are know about, which is enter into DeFi and generate incremental yield. Um, it it's really it's really ironic to me. I was talking to a research analyst the other day and he's just like, you know, treasury operations, treasury operations and I really want to get your opinion here and all he could think about was the the Michael Sailor treasury operations playbook of issuing convertibles or preferred or you know the ATM at the right time to generate your your uh Bitcoin to NAV. He had no concept of the underlying fundamentals that you can drive with Ethereum as you mentioned putting it to work. So, as you think about driving your MNAV into the future, h how how do you bifurcate what we call treasury operations and and issuing equity at the right time to increase your equity per share versus the fundamentals of driving that underlying yield? >> I think there's two elements that come together. The first is just how do you raise capital in a way that's accreative? Most treasuries including sharp link have to date raised capital primarily through equity issuance. You know you issue equity when your stock is has a premium to the ownership of the underlying. So it's called a multiple of nav. So the enterprise value is higher than the value of your Ethereum. In those days, you raise equity and sometimes it's through an at the market, sometimes it's in a registered direct offering. Very often it starts with a pipe. But you need to do it in a way that's accreative because otherwise investors and early investors and shareholders feel like you're just diluting them to buy ETH. But actually that creates a different uh opportunity. And for us, we call it ETH concentration. you know in in common parliament is how much do you how much ETH do you own per share and if you raise capital properly and you acquire the ETH efficiently and you stake it and get those ETH rewards over time your ETH per share would go up you know when we started um even before I joined in early June our ETH concentration was about 2.0 0 think of it as a northstar metric and today it's in the high threes. So so long as you can raise capital and increase your ETH per share it's accreative for shareholders. That said there are going to be moments when the multiple of NAV or MNAV is very high in the high ones. There are moments where it can go below one and a lot of this is sentiment based. A lot of it will end up being mean reverting. And in my view there have been moments where uh Michael Sailor has been in the twos and that is a very high multiple and there are moments you know when people are under and I think in the long run it'll mean a revert and I think that's okay. It's just important to be disciplined not to raise capital when it would be really diluted for shareholders and wait till your multiple is a little bit better and then go out and raise and go out and buy ETH and go out and stake it. So essentially monitor the MNAV MNAV becomes uh less than one sounds like a buying opportunity is you know what you're describing in many cases. >> Yeah I mean it's it's very interesting um this product is interesting to three or four investor types. There's retail and long-term holders who believe in the thesis of Ethereum long-term um capital appreciation and even before the yield. Great. Get go and buy as much of this as you can own it through a public treasury company like ourselves and you hold it and you let it appreciate and work for you. There are also people who like the volatility involved in Ethereum. Ethereum today is a more volatile asset as Bitcoin has become a little bit more institutionalized and there are people who are willing to lend in that gamma trade in some equity linked format. So there'll be different investor types who are willing to take advantage of this. I will share with you one of the reasons why I was attracted to Sharlink is not only having consensus as a strategic partner but the ability to hire the best institutional minds to do this in a riskadjusted way. You know I think the biggest risk is no longer regulatory. I think the biggest risk is how we behave and what types of risks we take in order to get rewards. And we need to be more self-regulating than the industry was in the days before FTX. That's my very strong view and conviction. >> Yeah. Can you unpack that a little bit because we deal with this all the time. Talent is really hard to find. I mean, you can find people are really good at DeFi, people have been in Wall Street for years. It's really hard to find those unicorns. Um, how do you find that talent? And the second question is to to your risks. Can you tell us about the risk? Yes, it's a volatile asset, but you have things that people don't normally think about. I think you're right. Regulatory risk is now kind of on the back burner because this SEC has been very forward thinking and thoughtful and principles based. But you have hacking risk, you have smart contract risk, you have other things out there. What risks are you focused on and how do you mitigate them? So those are the two questions, people and risks. >> Sure. The the people is the easier part. And what I mean by that is look, I I was at Black Rockck and led a digital asset team. It started with one exceptional individual. We built a small team around them. Like five people and seven engineers, you know, collectively with the Black Rockck brand and machinery and reputation raised products that raised over a hundred billion dollars in a year and a half, right? It means that small motivated teams who are forced to do only a few things. Well, that's the beauty of having a small team. You can't do 11 things. Allow you to be really focused. And as I'm building my team, we're hiring just the smartest, most missiondriven people. Um, by the way, I have a rule, no jerks. I I could use a different word, like no jerks. And then you find people who actually believe in that long-term mission. And I don't mean that ETH is going to go up or I don't mean that they want to run a treasury. These are people who believe there's a long-term transformation happening. They know it doesn't happen every day and it doesn't happen in quarters. It could take a long time, but they want to be part of that massive transformation. So, I think the talent thing, if you build a team of likable people who are smart and have the same mission, I don't think it's that hard. And to be honest with you, the best hires are not coming through headunting firms. They're coming through recommendations from people I respect. And Chris, I think you've shared a few names with me and I'll follow up on every one of them. You know the second question about risk in our domain is you know there's a few ways you can really mess up. One is to believe that you have to generate the highest yield possible. >> And some people want that because it they think it drives financial returns. Other people will raise capital or seek that last basis point of yield because they feel like they're in catchup mode. And if you believe you're measuring yourself in days, weeks, or months, then it actually can motivate you to to make real mistakes. If you take the view that we're in a very long-term opportunity, you will accumulate as much as you can, but you do it responsibly. To answer your question very candidly, the number one way that you create risk in these treasury companies is think about it. You raise a dollar, you buy a dollar of ETH, and you end up having a portfolio of billions of dollars of ETH that you have to think of as a suite of portfolio holdings, ranging from the most native, safe, delegated staking with custodians earning 3%. To, you know, liquid staking to restaking to looping to potentially lending your ETH in OTC markets. Like there's lots of ways to take risks and create leverage. And I think risk is okay because it gives you rewards risks without being aware of what risks you're taking. You should not be in this business. You need to understand what's the smart contract risk and do the diligence. What's the protocol risk? What's the risk of the counterparties? What's the duration risk you have? Is there convexity in the trade you're doing? It needs to be thought of as building an efficient frontier of rewards to risk. And I'll tell you in the beginning, we're going to start slow. We're going to walk before we run. >> And then we'll build an ideal portfolio, but not because we're trying to get a home run every day, but because we want to win the game and that game is driving returns to investors. But people who don't know what they're doing or think it's all about rewards can actually create headwinds for the entire industry. We saw that in 22. >> Yeah. I think I've come to the realization that even in fiat world, there's no such thing as the risk-free rate. Anytime you're driving yield, there is an element of risk. And I think investors need to understand that to your point, you know, we could go into DeFi right now and in fact, I've got agents that will do it for me and they'll blow out yield through the roof. Um, but that may not be the most prudent thing to do. Um, so it sounds like risk management is is core to the focus of a long of long-term success. So, did I get that right? You said you had five people, seven engineers to drive 100 billion in products. It sounds like you're going to apply that model when it comes to keeping your opex nice and tight. So, no management fees, but but very tight opex. Um, and that's going to be a core of your business success. >> Yeah, if you even just going back to my Black Rockck days, it's really interesting. I think people in this industry, the more successful your products are, the more humble you need to be. >> Yeah. >> Did you hear what I just said? The more successful your products, the more humble >> because it's usually not a handful of people. >> You know, the team at Black Rockck was just a tip of a spear. And that spear was a giant trusted fiduciary with an amazing brand and amazing distribution. So, I'm quite proud of what the team is did, but it took a village. And the beautiful thing about digital asset treasuries are they are an incredibly scalable business. What do I mean by that? >> You need a staff that can handle the fact that you need to be a compliant public company. You have to have the right accountants and compliance rules and the like, but you probably need a very small team raising capital. >> Yeah. >> Because you have relationships through bankers who help you. you have a very small team who's actually going out and buying and staking the ETH. And to be honest with you, it doesn't matter if you have $ three and a half billion dollars of ETH like we do or $ 35 billion of ETH. If you're building an efficient portfolio, if you're building something that's good enough for a billion, it should be able to satisfy larger scale. Where things get tricky is when these dats get really, really large. You need to be careful not to disrupt or create questions about the protocol and its sanctity and safety. And you also need to be careful that if you have that much ETH, how do you make sure that whatever you're staking in can support your liquidity for a bad day. >> Yeah. >> And you talked about being prudent. I have a first principle. Treasures aren't meant to lose money. >> 100%. >> So treasures are not meant to lose money. And we live in a risky world and you have to balance that trade. >> That's such a great point. I uh I was at City for a long time and I remember before I made managing director, the global head of credit took me out and we went to a Ranger game together and he's just like, you know what I am? I'm the I'm the defensive line right there. But the most important person at the firm is the goalie. You know who that is? It's the treasurer. And and he was right. And I I took that really with me. Um, I want to >> Chris, when I was at BlackRock, they use different words and the words were as follows. If 65 70% of the assets that you manage are in pension funds and retirement. >> Yeah. >> You actually can't mess up. >> You know why, Chris? If you mess up, people don't retire in dignity. >> That's right. >> How about that for for a sense of responsibility? >> It's a massive responsibility. Massive. I want to talk a little bit about the competitive landscape. I thought it was amazing to see you and a bunch of your competitors on stage in New York a couple weeks ago um at the at the ETH New York event. Um obviously not looking for you to bash them, but what I am looking for you to do is like how are you going to differentiate? Like you know I p my my personal belief is that Bitcoin, Ethereum, it's big enough for multiple players. That's my sense. In a way you're kind of linked because as they buy um that forces upward pricing pressure. So in a way they're kind of you're linked but at the same time I think there's a key way that each of these folks are trying to differentiate. I know I've heard you speak on the wire before and it's really a focus on transparency but long term how do you want to position yourself visav some of the competitors and I imagine I'm I'm thinking about ETH competitors but we also know that there are a number of other token competitors as well but how do you think about the competitive landscape and differentiation? >> Sure. I I actually you know we can learn a lot of lessons from what Michael Sailor did but I think ETH is a completely different treasury strategy because of the yield. So when I think of competitors I actually think of these are people who I compete with but people who I actually root for. >> Yes. And you know um we are the second largest ETH treasury BMR which Tom Lee chairs um we admire what they're doing like he is spreading the message and >> to the extent that there are multiple people who come from institutional backgrounds who believe there's a long-term Ethereum opportunity and the way to capitalize on that is twofold. One is to own ETH >> the token and two is to make it productive in the ecosystem. welcome that coopetition and you know what the more the marrier I think this industry will end up um getting consolidated with a handful of folks who uh race to accumulate ETH I think we're trying to different differentiate ourselves in three simple ways one is to be the most institutional and trusted and to have the strongest team a small team but team of experts who will make sure we do it the right way Uh second is you can't overemphasize our relationship with consensus. Not just because Joe Luben is a co-founder of Ethereum. It's because Consensus is the most expert company in the Ethereum ecosystem. They are in some ways the Ethereum company in terms of applications and protocols and you know core support for um for the for for for the entire ecosystem. Having that expertise in a strategic partnership is completely differentiating like as we seek out yield opportunities whether it's through consensus based products or chains that they support including Lineia. >> Yeah. >> Imagine having a team of people who have already done the due diligence on every protocol. Imagine that you know a team of people who are experts in smart contract risk. Imagine a team of people who know where the yieldbearing opportunities are. That is a huge differentiating advantage. And I think the third thing is we all forget that treasury companies while their primary strategy is to accumulate their treasury asset and make it productive and hopefully over time create multiples of value, they often have operating companies and that's to make sure you're you're running clear of all the SEC and NASDAQ rules. Um, we have a legacy uh operating company in affiliate marketing related to the gaming industry, but you can imagine a world where a company like ours who's so close to consensus would find ways, and I'm not going to tip our hat or share anything confidential, will find ways to build Ethereum oriented businesses that would make sure that you're promoting ecosystem adoption. And if you can make money in a business, an operating business that has ETH denominated revenue, what a flywheel. >> Yeah. >> Like we're going to have so much staking yield as will all the debts that if you can compound that and then add in revenue that's ETH denominated, it's just another way of continuing to grow uh the treasury. So I think that is in the future. Um I'm not sure that every ETH treasury has that plan. Yeah. But our relationship to consensus makes it not only a good decision but a very natural decision. >> Yeah. I I I personally have some ideas on on those some of those ways to make Ethan nominated capital. Um and so it sounds like building some of those businesses are in scope. What about M&A? And obviously you can't talk about potential targets or anything, but how do you think about M&A uh in the future? And and is that would that M&A be targeted on a sister that that's you know you're at a premium demnav? They're they're not um or is it some kind of operating business or is hey it's a green fields you can go in any direction. I >> I'll go in two directions. Um, yes, there's going to be an opportunity if we have a proliferation of ETH debts and some don't get liquidity. What I mean by that is the primary way public companies in this space raise capital is through an a daily at the market program. What that means is if your stock has really good liquid trading volume and I think um Bitmine and Sharlink at on some days have had 95 98% of all the on uh on exchange trading volume and that's how you raise capital. There'll be those who just can't raise capital and they may trade at a discount to NAV or they may just say let's combine forces and it's a a creative way to acquire more ETH. You know, there are other options. As we all mature and we go from earning half a percent to 1% to one and a half to two and a half percent of the ETH supply, it may be prudent to actually have sister DATs in different regions. >> Yeah. >> Maybe in Asia, maybe in Europe, uh that are equally listed that can probably take advantage of a lot of the core operating costs and infrastructure. Yeah. >> But targeted additional audiences. And I can see a world where um you know there can be almost a hold co and having dats in several regions. But I don't want to get ahead of myself. I've been at this job for five and a half weeks. But having a public equity allows this type of accretive M&A in the future. And I don't know when that's going to occur. I think there'll be a an an initial period of fragmentation before there's a period of consolidation. It's like that in every technology. every business, every business. I think the same thing is going to happen in stable coins, frankly. Um, you know, there will be there will be consolidation, some of that will be through M&A. Super interesting. Um, the one thing that I've been really impressed by is your focus on transparency. Uh, you have your dashboard. Can you talk us through like obviously that's one of the ways you're trying to differentiate, but it's it's not easy, right? You're out there showing everyone what's under the hood every day. Um, what made you what led you to that decision? >> Sure. Can I educate listeners for a moment? Like most companies don't issue stock every day. Most companies, you know, very often can go years without doing uh additional offerings. So the requirement from from the SEC and most exchanges, you just on your quarterly report in your 10 Q, you tell people how many outstanding shares you have. Right? In our space where you may be raising new capital through issuing shares daily or weekly or some other period of time, for someone to fully understand you on a day-to-day or week- toeek basis, they have to understand a number of metrics. How many ETH you own? How much capital you've raised? How much ETH have you purchased in the last week? Do you actually own the ETH or do you have derivative exposure to the ETH? How much are you staking? What's been your staking yield? But most importantly, you take that number of ETH and you divide it by the number of outstanding shares, even shares full on a fully diluted basis. And that tells you, it gives you a multiple a multiple of what's the value of your company relative to your ownership of your treasury assets. We happen to do that every week. So every Tuesday morning there's a press release and not just a press release, there's an AK that give it gives investors that information. Others have chosen to do it at different times. Um our goal is to be the most trusted and transparent and sometimes it may hurt us because the metrics don't compare favorably to others for periods of time and then everyone ultimately has to be transparent. We would hope others adopt our approach and I think it's really really important especially in an ecosystem that's not known for transparency the crypto ecosystem having more transparency actually will drive in the long run more investor stickiness and I think that's that's who we want to be. >> Yeah. When it comes to investors it's it's really hard to make an argument on why you should not be transparent right like people should know what they're buying and uh I commend you for that. Um, so you've been in the in in the role for a few weeks getting settled. Um, crypto is always a wild ride. Um, take us through the next 12 to 18 months. What are you seeking to accomplish? Uh, what are your what are your goals? And, you know, you look back, you know, a year, 18 months from now, what would you like to see? >> Sure. I think the first thing is just to build a world-class team. And you don't build a world-class team in two days. You continually um hire for the most important needs. and you build a team of like less than 20 people who poundfor-pound are just excellent at what they do and they're kind and they're roaming together. The second thing is to just continue to raise capital in a way that's not really dilutive for shareholders. >> Yeah, >> there are times where you want to be more aggressive in raising capital. other times you're you take your foot off the gas. But the whole purpose here is to in the long run drive higher concentration of ETH per share. That's outstanding. Two, accumulate ETH um in large amounts because if you believe in an Ethereum opportunity, and I want to get there, you want to accumulate as much ETH now as you can. Um, and even those who say they're only going to raise they're only going to own 5% of ETH in their fund, you still want to accumulate it quickly at the lowest cost. >> Yep. >> Um, the last thing is, you know, building uh connections to the ecosystem. It would be like really silly to say you're an Ethereum company or you're just an Ethereum treasury and not take that Ethereum and create opportunities in the ecosystem. And when you hold billions of dollars of ETH, you can actually help protocols be successful. You can, you know, lend and provide liquidity. And so doing it in a way that's productive for the ecosystem is important. And then finally, when we look back, I hope we've built a business or two that is helping support some transaction life cycle in the Ethereum ecosystem that spits off ETH denominated revenue because it's that righteous flywheel we're trying to have. And you know, when I look back in a year and a half, whether I have X billion or Y billion of ETH, that's not going to be the definition of success. It's going to be the whole thing I just described. >> What a vision that that's fantastic. So, uh, going forward, investors should be on the lookout for those Tuesday press releases to see how things are going. Um, any last thoughts, uh, to share with potential, uh, investors and people who are thinking about ESPE as an investment play? Yeah, I keep on talking about the Ethereum opportunity and if you give me one minute, >> yeah, >> the idea that the current rails that support traditional finance where there's frictions in money movement, there are delays in when you can trade, uh even the best of trades will settle in a day and that introduces massive risk to the ecosystem. Settlement risk, you know, will your trade actually settle? counterparty risk. Will your counterparty be there the next day to make hole on that trade or on that swap? Um there is financing risk. There's collateral management risk. And I think uh very strongly that it all starts with stable coins. We're at 275 billion of stable coins mostly running on Ethereum. But tokenized assets are the dark horse here because I think that Secretary Vess said that stable coins will go from current levels potentially two or three trillion in the next few years. I think there's an opportunity for tokenized assets, funds, stocks, bonds, real estate, private equity to actually be measured in the trillions when we look forward in a few years from now. And that'll be running on a decentralized platform like Ethereum. So, if you believe that's coming and you believe like we do that there's a correlation between the amount of assets being secured on a chain and its native token, Ether, now is the time to start accumulating. And I think we just provide an excellent smarter wrapper to get that long-term exposure. And I I think it's less about, you know, do you buy a treasury company? It's more important to understand why there's a long-term thesis and a macro trend because it's almost like betting on the early days of the internet. It's a network scale adoption story and many many people like the yield. Most like the idea that they're betting on the future. >> Yeah, it's it's a really amazing little asset, isn't it? It's a commodity, but it has a yield. You know, love what you talked about, Bess, and I think about it all the time. You've got trillions of dollars of stable coins coming in. They're going to they're going to many of them are going to end up in the Ethereum ecosystem. How is Ether not a strategic commodity? Like how how do we not have a strategic reserve in in Ether? Like this is a very precious commodity because you need to control some supply to allow your dollars and your risk weighted and your and your assets to move through the system. I mean I couldn't think of anything more strategic. So I I totally support that vision. Um I I think on on top of that uh as as we look forward um this asset and and assets like it um for example yesterday I saw Superstate and Galaxy issue the first canonical security on chain right this is one of the biggest unlocks people didn't realize for blockchains because to date we had to lock up the the real world asset in a box put in a custodian We put a little token on top of it and we set it off in the ecosystem. I I think the point I'm trying to make, Joseph, is that this is moving so fast and like yesterday now we have canonical assets. As canonical assets start coming on board, I think that's an entirely new world that's going to I guess accelerate those assets on on Ethereum and other chains. Chris, if I can put a plug here on why tokenization and there's lots of words people use programmable, borderless, yeah, >> you know, instant or atomic settlement, neutral, trusted. I think if you just take a step back, people fail to remember that in our current global system, things are venue specific. Yeah. >> Like this stock only trades here, that bond only trades there. It's geographically limited and they're not composable. Meaning every transaction in one form or another is buy a stock, give up fiat. Buy a bond, give up fiat. People forget that in the future um when things can settle instantly. When I people use the word composable, not only these transactions going to run on smart contracts, many of them will be automated and rebalanced, but you can almost go back to the early caveman days where you can trade anything for anything. >> Why does the S&P 500 have to trade for a dollar? Why can't the S&P 500 trade for the MAG7 rapper? Like things are going to be highly composable both in swapping, in lending, in borrowing. And I think we're going to forget about this idea that instruments have venues. And I think it's going to unlock tremendous economic value. Tremendous economic value, not because of velocity, but because what this uh unlocks. >> Do you see yourself uh canonically tokenizing ESP going forward? >> I think that that that is in our near future. um we would do it on the Ethereum rails and not Salana. But I think >> we'll do it on the Ethereum rails but not Salana. But I think what's really interesting is that um >> there is a giant general wealth generational wealth transfer happening from boomers to Gen X and their heirs. Many of these younger investors and I call them investors >> don't have brokerage accounts. >> Yeah, >> Chris, they literally have wallets and it's all crypto. as they start saving for whatever goals matter for them, they will want to own traditional assets, but they're going to want to own it in token form in their wallets. And so, I think this is going to be bridging. And I'm looking forward to a world I'm a really optimistic person where there's no such thing as trady and DeFi. >> Yeah, >> it's just finance. >> That's right. >> And that will take a while. It's been part of my mission at BlackRock. It's certainly part of my mission at Sharplink. And I think it's going to create a world where um investors are actually going to keep more of what they put into their investments and people who believe in closed systems will keep less. >> Totally agree. Joseph, it's been amazing to have you on uh today. Did you have any final thoughts? >> Um I think we should do more business with friends. >> You forget that um in the traditional world, you know, trust is done through contracts. I think in this arena it's not just done through smart contracts. It's done by people you admire and people you trust and people who you think are tied into the same mission. I think it's less about we win, you win. We all need to win together. >> Chris, that's why I will never use the words we're flipping something. I want Bitcoin to be successful. >> Yeah. >> I want Ethereum to be successful. Um and we should be successful together. >> 100%. Well, thank you so much for coming on. We'll get you again soon. Can't wait to see what you're going to build over at ESBET. And uh thanks again, Joseph. Have a wonderful, wonderful day. And good luck to you, sir. >> Thanks, Chris. Really enjoyed this. >> Likewise. >> If you have any questions about how to navigate the current environment, Wealthon can help connect you with a vetted advisor to get a free portfolio review. Just click the link in the description below or head to wealthon.com/free. There's no obligation and it will just take a few minutes of your time. Again, that's wealthy.comfree. Thanks so much for joining us. We'll see you again next time. [Music]