A DAT for Stablecoins w/ Colin Bulter (Mega Matrix)

Rex (00:02.892) sure everything's going right. Column, welcome to this signaling theory podcast. Colin Butler (00:08.151) Thanks so much, Rex. It's a pleasure to be here. Rex (00:10.356) Awesome. And so before, we just like dive right in, let's, can we do just like one or two sentences briefly on who you are, like the projects that you're working on and just get level, level. Excuse me. Let me start that over. and sorry, the reason I just, like messed up a little bit. It's matrix, mega matrix. I was thinking matrix port. That's the, yeah, yeah, they, they do freight stuff. Anyway, sorry about that. Colin Butler (00:30.326) Mega Matrix. Colin Butler (00:35.465) yeah, yeah, no, I'm familiar. Yeah. Rex (00:41.1) All right. Colin, welcome to the Signaling Theory podcast. Colin Butler (00:46.018) Thank you so much, Rex. It's a pleasure to be here. Rex (00:48.542) Awesome, and so before we get started, I would love if you could just do one or two sentences briefly on who you are, Mega Matrix, what you guys are doing, and let's just build a foundation so that we can jump right into the convo. Colin Butler (01:00.818) Yeah, let me try to distill it into two sentences because I could speak at length about these ideas forever. So Mega Matrix would like to be the number one publicly traded stablecoin company in the world. And there's a lot to unpack there. So I guess we'll spend the next hour or so kind of figuring out like what the details of that might look like. Rex (01:19.37) Yeah, great. Yeah. And so maybe can you talk a little bit about being the number one stable company in the world? That could mean anything from launching a stable coin to being a speculative investor to whatever. I think where I want to really build more foundation for this is to talk a little bit about the developments in the DAT space that happened over the summer and positioned us to where we are today. So can you talk a little bit about what is Megamatrix? Colin Butler (01:49.716) Yeah, so I think one of the core value propositions for a DAT is to be able to give the public exposure to themes for which they never had access. So there's a swath of, let's say, 4,000 hedge funds in the United States that on balance have essentially 0 % exposure to anything aligning with the crypto theme, including stablecoins. And so for the first time, DATs were really, I think, the solution. to be able to give your average investor that doesn't necessarily have specialist knowledge or even necessarily a Coinbase account. And of course, a of the aforementioned hedge funds, their mandate doesn't include crypto. So these vehicles will allow them exposure really for the first time. so what we at Mega Matrix want to do is create the first vehicle that investors can get basket exposure to stable coins. And just to frame it like in really macro terms, I'd like to try to keep it simple for everybody. We think about the stablecoin market as likely a $2 trillion market by the end of 2028. We didn't get that number ourselves. It's like what Scott Bissen, the Treasury Secretary, talks about. It's what Standard Charter talked about. There's a range of estimates. Some people say a billion, some people say maybe six billion, sorry, trillion dollars. But we're roughly aligned with the idea that it's two trillion towards the end of 2028 directionally. And so if you're taking a $280 billion number now, and it's going to $2 trillion number in the next two to three years, that's a 7X growth. So that's a theme for 7X growth that currently public equity investors don't have a vehicle with which to express an investment opinion. And I should step back. They actually do. They have one in its circle. So MegaMatrix would like to provide the second. Colin Butler (03:43.626) vehicle to express an investment opinion on the thesis for stable coin growth. And there is, there's levels of detail that we can also get into that I think make a lot of sense and happy to share them as kind of they make sense on the on the podcast. Rex (03:58.582) For sure. So eventually I'd kind of like to talk about what you guys are doing with Omega Matrix in context with like the explosions of digital asset treasury, DAT companies over the summer and kind of how you think that's evolved since then. But while we're just talking about what you're actually doing, so I would love to like kind of unpack a little bit. You know, there's this idea and like, let me just take it on full like faith or belief that let's say stable coins, I'll give you more than seven X. I'm going to say 10 X in the next three years, right? It's one thing to say that stable, like the not the notional value of stable coins that exists on all chains is going to 10 X. But how do you, do you see equivalent 10 X in the governance tokens related to stable coins? Do you see more than a 10X? Do you see less than a 10X? I guess like when you think about the explosion of stable coins, where do you think that the value captured in like, where do you think the value is generated and where do you think it's captured? Colin Butler (05:11.104) Yeah, so let's try to go through the value chain really quickly to help unpack the question. If you look at, let's take an example, let's take a specific example and let's talk about Athena. So Athena is a mechanism for decentralized profit distribution as one way to think about it. The current supply is somewhere around, let's just call it $15 billion for a round number. I think it's more like 14, but let's call it 15 just for the easy math. Rex (05:21.622) Mm-hmm. Colin Butler (05:40.61) The governance token should go up in line with stablecoin growth because the profit or the cash generation is directly tied to that growth. So for instance, just to walk through the really quick math, the value cruel to the token holder. Let's assume $15 trillion, man, the trillions, $15 billion, yeah, we talk about like $25 trillion in total addressable market. So $15 billion in supply of USDE, and again, the governance token, I think most people on the pod listening to the podcast probably know that governance token is ENA. So $15 billion in supply, let's assume they're getting a 10 % yield on the basis trade that underlies USDE. Right? It's long the underlying, shorting the perps, adding in staking. Last year the yield was 19%. Earlier in the year, it was right around 10%. So it fluctuates. But let's assume like a mid-range and let's assume it's 10%. So on $15 billion in supply, The ecosystem is getting 1.5 billion. Most of that's going to the holders of USD, right? So 15 billion, ecosystem's getting 1.5 billion. Now the holders of the governance token, the holders and the stakers of the governance token, will likely have a call on that revenue in the near future in the form of a fee switch. Rex (07:08.704) Mm-hmm. Colin Butler (07:08.866) And there's a range on that fee switch. So what I want to paint a picture for people is one of directional accuracy, but the numbers are fluctuating. So everyone has to do their own model. But I want to throw some ideas out there that are kind of the core of the foundation for MegaMatrix as to why we think this is the biggest, most novel idea in essentially all the stock market right now. And that's because directionally, there's exponential growth to be found in these stories. And so again, just to complete the model, of the $15 billion in supply at a 10 % yield, that's $1.5 billion flowing through the ecosystem, if you flip the fee switch on, which now all the conditions have currently been met since Binance agreed to support USDE, let's assume a 10 % fee switch, that means $150 million flowing through to the stakers of ENA. Well, what is also $150 million in cash generation is actually the cash generation for Circle in 2024. So if you took a public equity multiple and put it on Athena ENA, what that means is it was actually $155 million for Circle, to be specific. But let's assume $150 million in cash generation for Athena. If you're putting a $30 billion market cap on that, Rex (08:20.428) Thank you. Colin Butler (08:28.846) That's an 8X from where Athena ENA is trading right now. So again, is this a 2X, a 4X? I don't know, but the rough math indicates that it's not gonna be 10 % or 20%, like my friends still trading public equities are hoping to get every year. They're like, man, if I could have a 20 % year, that's phenomenal. That's a banger year for them. Rex (08:50.593) Yeah. Colin Butler (08:53.25) But we're talking about a theme that is very explicit in offering exponential growth over the next two to three years. And so for I think investors that one, want to play on the risk spectrum at a certain level, and two, can really underwrite the ideas that we're postulating here around stable coins and growth and the growth in on-chain vehicles for use as a better form of collateral, Like yield bearing collateral, collateral market being 25 trillion, and cross border payments now taking place essentially atomically with zero time instead of potentially multiple days with layers of fees, and the 1.4-ish, it always changes, 1.4 billion or so people that are unbanked, know, getting access to these ideas through inexpensive mobile phones. Like it creates a Cambrian explosion of technology that leads to business model innovation, that leads to new forms of revenue generation and cash generation for businesses. And if you bring all those together to one theme, we're gonna call it Mega Matrix. Like that's where we're going, right? And it's a little bit like that was a little bit simplistic, but that's the idea. And for the first time we wanna offer plays on those themes to your average equity investor. Rex (10:21.364) Mm-hmm. This all makes sense to me, but I guess the reason I bring this up is, you know, I've always had this idea in the back of my head, because it's been very clear for a long time that stable coins are like definitely the first, hopefully not the last, like killer app of crypto. And it's been clear for a long time. But in the back of my head, there's this question of like, just because there's going to be two or 10 or a hundred trillion dollars worth of stable coins, like who is going to benefit from that? Right. And the thing that happened, welcome to crypto. can't remember if it was last week or last year, right? But this whole bid for hyper liquids, like hype USD or USDH. Yeah. Colin Butler (11:11.018) USDH, Rex (11:13.408) And, you know, we won't go through the whole thing right now, but just like the TLDR was hyper liquid, like the hottest darling in crypto sort of did this kind of open RFP process. Every large stable coin submitted bids that were, you know, from hyper liquid standpoint, progressively more and more amazing because essentially it was, Hey, like first. First it was, you know, we'll provide our infrastructure and we'll reduce our fees. Then it was, we'll provide our infrastructure for fees. And then it was, we'll provide our infrastructure, no fees, and we'll like start to put some of our own money in. And so, you know, that, like really started to make me wonder like, why are these companies competing so hard for essentially vanity TVL metrics? Because they're not getting any value from these TVL. They're giving it straight back to hyper liquid. And so I don't know if there's a concrete question here or maybe just like I'm setting you up to riff a little bit, but what makes you so confident that the explosion of stable coins that I think both you and I believe in is gonna manifest in governance tokens that are deploying them? Colin Butler (12:30.572) The math, think, on the governance token is very clear. Like if X, then Y. if X is, you know, if you bring Guy Young on the podcast from Athena, he's going to say, well, if I do reach $30 billion in supply, this is where I want to set the fee switch. And so there's clear value accrual there, really for the first time. You know, I think... That's one of the reasons why stable coins are so powerful is because there is an element of cash generation that you can model. There are real businesses. What we think of in my former life on Wall Street as real businesses, right? If you have a token, you launch a token and there's a lot of trading and it's kind of like a casino mentality. How do I model that? Right? How is that investible? These are investable because they have businesses that people can understand. There's cash flow generated. It accrues to investors in this case, the governance token. And so the whole economy of stable coins will have some value accrual to a certain class of investor. And I think maybe our mission is, yours and mine over time, to figure out where that value accrues. Rex (13:43.52) Mm-hmm. Colin Butler (13:43.66) Right, so there are these huge TAMs, but if, I don't want to even name names, because I'm pretty friendly with a lot of the founders of these teams. Let's assume somebody's bidding on the hyperliquid contract, and they're lowering fees, and essentially they're basically giving the product away for free. Well, I could make some educated guesses. I could say, one, there are potentially network effects involved. So more users equals more liquidity, equals more adoption. So even if you bring in hyperliquids, ecosystem for essentially free, it does benefit your users because there's a flywheel effect at that point. Two, branding. Hyperliquid shows you it's the darling of crypto, it's the hottest project. Based on, I would argue based on its cash generation, by the way. I mean, there's a bunch of projects like, again, not naming names, but if you try to understand how value accrual comes to the holder of a top 10 token, you may be hard pressed depending on which token you choose. Hyperliquid clearly made, well, I'm gonna say it, let's just say they made a billion dollars in revenue in the last 12 months. I'd have to dig into the, I'd have to look at their books maybe, but that's the number that's in my mind. And that's something that investors should be able to access at some point, if not already. Now, can hyperliquid overtake NASDAQ? NASDAQ had, I think it was $8 billion in revenue, and I could be wrong, maybe 8 to 10. Could hyperliquid overtake NASDAQ in the next 12 to 24 months? Maybe they could, you know. So if you're a hedge fund manager or investor just modeling growth and you say, okay, here's my growth rate and it's 200 % a year and it happened for last two years, then you can make some pretty interesting bets that... Colin Butler (15:31.373) are just directionally much higher than a lot of the other alternatives, right? And even AI, I don't wanna go too far left field, right? There's a crypto pod, not an AI pod. But there's a lot of intersection, of course, in crypto and AI at this point, right? A lot of people trying to kinda combine the two ideas for even further business model change and growth. But how much growth is left in AI at this point, if you have like kind of a bubbly valuation at the larger places, is it like, is there another 10X involved here after the hyperbolic growth that we've seen in the last two years? I don't know, but I could argue, I think hopefully pretty coherently that there's a path to 10X growth in various aspects of crypto and specifically stable coins and things that have found product market fit. Rex (16:20.716) Mm-hmm. Colin Butler (16:21.056) So hopefully I didn't get too far afield, but I actually would say that the unifying theorem in my mind as to why this is interesting, this section of the market is interesting, is because it's based on cash generation. Out of the 25 trillion dollar capital, let's say the 25 trillion dollar collateral market, there's clearly value cruel that's gonna happen to someone at some level. And I think the early use cases, are very clear in the math behind their value-cruel, and Athena's the one that I just mentioned. That's the math, right? It's 15 billion, 10%, 1.5 billion, and 150 million in cash generation for the governance token holders, again, assuming a fee switch. And you could look at ideas like this that would also apply to, in theory, Aave, Sky. There is a very unique token that just came on the market. It's called STBL, co-sponsored by Dr. Abtar Sarah and Reeve Collins, one of the co-founders of Tether, whereby they split the principal and the yield. Remember, that's what Wall Street did decades ago, and it unleashed an explosion of growth in different areas of finance. It changed the entire landscape, and that was announced about a month ago. and so what I think is gonna happen is there's just gonna be a ton of experiments playing out and Some I believe are gonna be wildly successful similar to the internet in 1998 when you didn't know whether to bet on Alta Vista or Lycos I'm gonna throw out some old names or Google Colin Butler (17:58.191) But if you had a basket of those, you would have been wildly successful as an investor. And I believe the same thing is playing out in a very kind of similar timeframe, right? Like 1998 in the internet. Similarly, that's playing out right now, at least in the stable coin space, if not crypto. Rex (18:02.785) Mm-hmm. Rex (18:14.772) Yeah, I, I, I'm with you for the most part. You know, have you ever heard that like old adage that, God, I'm going to butcher, but essentially like this comes up with a Uniswap fee switch a lot, which is like the value of the uni token right now has like the built the baked in potential of the fee switch. And then the second you flip that fee switch, then you get real revenues and it becomes much less of this like speculative thing and more of a asset that's tied to like just cashflow. And maybe while that's more healthy, that actually can be very value destructive based on how crypto understands these assets today. Is that something that you buy at all or something that worries you or how do you just kind of like grapple with the fact that in crypto, we really, really want to build assets that have intrinsic value that are based on things like cashflow and like, sorry, but if that's the meta you've been building like really up until let's say 2024, 2025, like that's a losing meta and maybe things are changing, but yeah, I'd love to just get your reaction on the fact that crypto, you know, if our like major. like good product that we've created is stable coins. Like the major bag product that we've created is just like speculation. Colin Butler (19:44.749) It's a great question. I think you probably have a lot of examples to refer to and they generally come from web too. Maybe Amazon is one that I would look at. So Amazon had this argument about when they would become profitable. And Jeff Bezos over the years had generated a flywheel. by which he would just reinvest all the profits into a better user experience and better user experience drove more users. And eventually, I feel like it was like 10 years into the major Amazon theme, finally he said, okay, now we're going to have more of a focus on profit. And there was a range of companies. There was a range of companies in Web2 that said, okay, we're going to try to get to profitability as quickly as possible. And it was a dud. That didn't work at the time. The market didn't underwrite that. They wanted the guys that still had a massive vision for how we're going to take over the world. And the market rewarded those companies and didn't reward the companies that actually shipped and became profitable. And something similar to that could happen in crypto. In fact, it's happening right now. And I don't know. I don't think probably you and I, I certainly don't have an answer to this. I think that people are going to try a lot of different things. think that now is probably the time because you can now say if you're hyper liquid and maybe a small handful of others that we clearly have revenue generation, thing or cash generation. The thing about that that I find so important is that traditional financial investors care about that. crypto can still underwrite a very speculative pie in the sky story full of hopium and underwrite a narrative and idea and get everybody behind it and say, oh, this is the idea and everybody piles in and there's a small float relative to FDV and it works. But at some point that won't work mathematically. Colin Butler (21:43.001) For now, I believe if you have that ability to generate massive amounts of cash, you can take that story. Now that you have the DAT format, you have a digital asset treasury wrapper, you now can take that story to traditional investors that can model it. And that's where the big pool of capital is. Like, and by the way, I noticed that you interviewed a couple of the folks from Polygon in your past. I love those guys. Like, Polygon is my spiritual home. Like, that's really where I started in crypto. was running the institutional capital team there. And, man, I lost the thread on that one actually. So we're probably gonna have to edit that one out. yeah, so now I actually really have to retrain my thought. Rex (22:19.453) Ha! No worries, no worries. Rex (22:29.194) No, no worries. you are the edit points easy. Don't worry about that. But I can either ask you a new question or you can try to get back on the train of I asked you about essentially like turning on the fee switch for Uniswap like destroys the speculative value because now you have like real numbers to value it against. So up to you. Colin Butler (22:53.462) So I think by putting the hyper liquids of the world into a digital asset treasury wrapper, so IE, you can capture cash generation and offer access to that to traditional financial investors. The pool of buyers is so much deeper. The market is so much larger than just crypto. So. Back when I was at Polygon, I was always looking from the institutional lens as not how do we grow TVL by 10 or 20%, but how do we 50 to 100x DeFi? Because it was always my vision, and I think everybody, especially at Polygon, everyone's vision was much larger. Sandeep's vision was how do I touch all eight billion people in the world with this new technology that is an order of magnitude better than the existing technology? And so it was how do I offer products that the largest, deepest pool of capital in the world cares about, really, for the first time. It's not the three million users in DeFi. They were kind of trading back and forth between each other for two years, or two and a half years there, which was not exciting. But how do I get... Blackrock to really care about an idea or literally the biggest asset managers in the world to really care about DeFi and that's when we can make an impact as crypto people if we can create a product that has PMF for the largest most successful financial institutions in the world Then we can all stand up and say okay now we made a real difference in Rewiring the global financial system on a technology that we knew would work well for their use cases, but they didn't. It was a matter of education or it was a matter of testing and finding fit over time. And so that was also my vision for the team at Polygon. And I think that's what stable coins are really pursuing for the first time is how to bring in everybody else, including TradFi. And again, tying it back to DATs, now for the first time we can offer exposure. Colin Butler (25:06.924) to cash flows generated from the largest, hopefully not the only product that has generated product market fit in crypto to the deepest and most liquid pools of capital in the world for the first time. Rex (25:20.278) Yeah. So I don't know where you were during last cycle. But like my kind of entrance into crypto or maybe my first leap after figuring out that like don't get involved in Cardano, right, was in the curve wars and like in all of this, like, you know, there was like convex and blah, blah, blah. And, you know, I think the vision for that back at the time was Everyone is going to have a stable coin. at the terminal case for every protocol, no matter what you do is to be able to project your assets under management or TVL or whatever back out into the world as stable coins. And then you have this engine at the center that is like super powered by like bribes and incentives and all this stuff that will enable the one-to-one swapping of all stable coins. And, you know, one of the underlying questions to that was like, okay, like let's be real is. Like my grandma going to go buy, like is she going to hold something like fracks in her wallet? Right. Like, and, and understand that to be the same as having dollars in her Wells Fargo bank account. And my thought was always like, well, like, no, like, of course not, but maybe what we're doing is building like in the same way that grandma doesn't know anything about how UDP or TCP works. Right. But it is like totally capable of typing in a URL into a browser. And then there's this like really complicated stuff happening in the background. Maybe that's what DeFi and like all of these cool things that we're building are. And I'm wondering if, why I bring this up is because I see a lot of parallels to kind of how you're talking about what you're going to be able to do in DeFi. maybe, maybe. As we build these financial rails, the idea is not that individual users are going to be touching them and doing crazy stuff and like, you know, getting USDA and then staking it and then using that as a collateralized debt position to juice yield to here. But like, maybe what they'll do is interact in these like very simple financial products, like whether it's like a mega matrix bond or preferred equity or whatever. Right. And then you guys go in the background and. Rex (27:39.244) play with TCP and UDP and all of these technologies in order to provide a product back to these people that really don't know or care what's going on on chain. Does that resonate? Colin Butler (27:52.511) Yeah, 100%. So there's a lot of things to unpack there. One, I agree with a very user friendly, easy way to get exposure to a sophisticated theme. But what I want to offer is exposure to stable coin growth. And that's a wrapper for under the hood, which is risk management. It's a basket that gets reallocated periodically. It's DeFi, let's assume maybe we're going for an 8 % yield in DeFi. We're doing staking. These are very complex topics, operations. I don't know if I would short your grandma, by the way. I don't know her. Maybe she is incredibly sophisticated. She founded a tech company. I don't know. It's plausible. But for everybody else, yes. I would love to offer a very simple solution. You can go into your Schwab brokerage account and buy a product that gives you access to all those, including cash generation and including yield. Rex (28:36.076) you Colin Butler (28:50.026) Now, to speak to one of your points about will individual users use these things? Am I going to go on, are we going to be transferring USDC call into Rex? Probably, well, the answer is it depends, but for the vast majority of people, they will still go to JP Morgan Chase. But this time, instead of multiple affiliates taking my money that I want to send to say, Delhi, New Delhi in India, instead of multiple, I'm actually gonna have to, we're gonna edit that part actually. Let's assume somebody has an account at JPMorgan Chase and they want to do a cross border transaction. They want to send money from New York to their family in Dubai. Currently, JP Morgan Chase actually goes through a series of affiliates. And there's fees involved at every stop, and there is time involved at every stop. If you have blockchain rails, which JP Morgan Chase has been in the process of developing for years at this point, they have a very, very strong team, very deep in the weeds with these ideas, they will disintermediate their own systems to make them much more robust. and they will run on crypto rails to make it so the process no longer involves multiple stops and multiple days, but virtually atomic settlement and essentially one stop. Benefits everybody, benefits the customer, benefits JP Morgan because they have lower costs. Back to the example of your grandmother, she doesn't need to know crypto. She can do things just the way that she's always done, but now she has lower costs and the people that have been working in this industry for years trying to deliver that value, Rex (30:25.771) Mm-hmm. Colin Butler (30:36.802) will hopefully have been vindicated because they actually finally did it. Maybe not in the form of decentralization and the grand philosophical visions that, you know, Rune Christensen had when he started Maker. But even now, I think everybody's ideas are evolving to like, okay, you how do we come down from those, not even come down from the lofty ideals, but how do we also make it work for people in practice just to provide value? So that's one concrete way is essentially abstracting away the technology. Rex (31:03.884) Yeah, you know, one of my like favorite go-to stories, so sorry audience, if you've been following me, you've heard this one, but you know, in a previous life, I worked for Anheuser-Busch, which is like Budweiser, Bud Light. And I was on the treasury team and one year we divested a huge business. So meaning we were paid for that business. And because we were paid for that business, we owed, I think it was like a one point, I'm just gonna say $1.5 billion tax bill. And And so, you know, one day it was my responsibility to pay that tax bill. And the CFO walks up behind me, literally puts his chair behind me says, I'm gonna sit here until the wire clears. Okay. And so like literally that morning, I was living in New York, so I was in the office when this happened. Like I picked up the phone, they say, okay, as soon as the bank's open, we're gonna push the button and we'll let you know when it clears. 10 minutes after that started, CFO taps on my shoulder, says, what's the status? So I call the bank and they say, like, we'll tell you when it clears. And like every 45 minutes, CFO taps on my shoulder. And every time I call the bank and they go like, Rex, I don't know what the fuck to tell you. Like the way this works is we push the button. It goes out to like 20 correspondent banks. They have their correspondent banks. Like it goes through this network. It's literally untrackable. But like once all of the like essentially Inter-company lines of credit are like worked out we will like give you a guarantee that the money can get to the feds bank account and that's like when it's considered settled and like you just have to wait for us to tell you that that's done stop calling and You know a few years later I found crypto and I saw that like I could send $5 on in USDC in 12 seconds with one button push or I could send 1.5 billion and it's the exact same thing and You know, no matter how bearish I get on this space, like, like that's the thing that kind of keeps me around is like, this is just a better way to do things. And so, you know, like one pretty safe bet is that like, is technology going to make the way we did? Did some better technology replace the Telegraph? Like it did. And so, like that's so much of what I'm seeing here and with stable coins and Rex (33:24.672) just like a real reason to believe in crypto when like you kind of lost in all of the gambling and the speculation and that kind of stuff. Colin Butler (33:33.603) Yeah, that's a really good example. I think if you talk to people at the core of the global settlement system, like all the Wall Street folks at the big banks and the big custodians, BNY and all those guys, you find an incredibly inefficient system. And people that even loosely understand the value that blockchain could deliver, at least directionally align with, wow, this could be game changing. You won't be losing your hair and biting your nails over whether or not the wire is going through. So it's one great example. The second I would argue is collateral. So if you're sending collateral around the globe, and again, it's $25 trillion a year, or probably nominal value for global collateral, it's tremendously inefficient. people pick up the phone, is the collateral good? Where is it? With on-chain collateral, can see where it is 24-7, you can transfer it instantly, you can call it instantly. So there's a system, the global financial system that's been put into place over the last 100 years. It's not just ripe for disruption. It is so inefficient that people that work in the back offices at these places, they laugh at 20 year old code that hasn't been changed. And there's good reasons for that, right? Like you can't change that and make a mistake and then be like, you I'm sorry. was my bad. So it changes slowly. But from what I've seen in my three and a half years in blockchain, there are clearly use cases where this technology is an order of magnitude better than the prior solution. I think those are the two catalysts, the two... Colin Butler (35:25.614) needed requirements for for technological disruption, right? It's like order magnitude better solution or a solution for which there was no prior solution and in a lot of ways crypto for a lot of people offers both and your Your wiring example is is just one of probably hundreds Within the financial system alone by the way when you're saying that I was imagining you had this big check like one of those like, you know game show checks you're like 1.5 billion dollars to the IRS and you walk it down to the bank down Rex (35:49.64) Yeah. Rex (35:54.315) Yeah. Colin Butler (35:55.608) town right in Manhattan. Rex (35:57.035) Yeah, mean, at least it would have gotten me away from the office and away from the CFO behind me, right? But I just bring that up because, and especially in contrast to your example with, you know, wiring something to Dubai where it's like, okay, but like that's international. Like, this is a problem when our like Bank of America, which is where we started. you know, I don't, I can't remember who the IRS was banking with, but like they're literally in towers next to each other in New York. and we still have to deal with that. Colin Butler (36:27.394) Yeah, yeah, and it's minutes, so if an idea is to transfer value. Rex (36:30.572) Yeah. So, um, you know, the, this conversation has me going in a lot of directions, but, um, one thing I, the, the, this concept of like the DeFi mullet that I think the bankless guys like, um, really coined. Um, but the idea essentially is like, Hey, DeFi can be, you know, similar to the, um, the internet, like the TCP or UDP example where All the DeFi stuff can happen in the long tail backend in the front. It's just very polished, web two style interfaces, products that people don't really need to understand. They can just see, this is essentially a money market account, has some risk, but we can get 8 % and then companies can go deploy that. I know that today you are positioning MegaMatrix as a digital asset treasury company and what your role is is to raise money and then deploy it into DeFi. you can make that more specific if you want, but do you ever see a phase two or a role for you to be part of that DeFi mullet and say, hey, we're a company, why don't we offer consumer facing services where people can... deposit money and we can go deploy it and help grow stable coins like organically as well as like capture some of that upside. Colin Butler (37:59.009) Yeah, it runs the gamut. So the mission statement for MegaMatrix is to be the largest publicly traded stablecoin company in the world. And notice we don't really give the details. We give a roadmap for how we would start to approach that, but it's not necessarily restrictive in terms of the roadmap for the future, in terms of creating unique stable coins, in terms of working with governments to address stable coin needs, in terms of working with foundations at stable coins to create unique structures that allow them liquidity and distribution. All of those things are on the table for us. But the core underlying theme is exponential growth of the space. And I think that's one thing that we see as non-negotiable. That's something you're going to have to take a risk on. If you believe in that theme, we're going to give you a way to get deeply, deeply involved in that growth. Rex (38:56.236) When you see what's going on with Stripe and Tempo and some of the developments we're seeing with the very traditional banks and that kind of stuff that are getting involved in the stablecoin space but not really in... you know, this way that feels crypto native or maybe it's just like using the rail. Do you see something like Tempo as like really bullish for this space or do you see that as like, my God, they can kind of like take our technology and throw out all the values or help me just understand, are you bullish on these very private like. stablecoin based L1s or do you think that they're a flash in the pan? Like what do you see going on? Colin Butler (39:54.839) I would say I'm an innovation maxi. I believe that the most experiments should go out there to the market. Customers should have virtually unlimited options given by developers that are free from restraint within the bounds of certain ethical and moral obligations and may the best product win. And so I'm not opposed to Stripe or anybody coming in, like all the large players, JP Morgan, Visa, MasterCard, one because we can all learn from each other. The decentralized maxes can also learn from those guys as long as we have just kind of as many experiments running as we possibly can. And through that, on occasion, you get a hyper liquid or an Athena that come out with a novel product, a synthetic dollar that yields something that is outside of the genius act that is just an order of magnitude better than the prior solution as we discussed. If you can have collateral in a derivatives trade and your collateral is yielding you 0 % versus collateral that can yield you a range, I'd call it like five to 15%, there's clearly a better option for you. And there's, you you have to underwrite smart contractors and some other things like that. But once that works for a long time, you know, that works year after year after year, there's probably nobody in the world that should not be using those types of vehicles for their financial market transactions. So the point of that is I think everybody should be free to throw out an experiment. And I don't know if the ones that are winning in the market right now are winning for the long term, but as the professionals that are really focused on this day in and day out and speak with most of the senior leaders in the space, it will be one of our jobs to figure out where the traction is gonna be for what periods of time. Colin Butler (41:57.677) And so, you one of the things you're doing by hiring a management team and buying a DAT is buying experts in the field that will allow you to capture as much of that growth as possible, also in some cases, picking winners. And I think I want to just pivot slightly really quickly because I think it's a very important mention. There is centralized stablecoins versus decentralized stablecoins. And I think even that kind of foundational idea hasn't played out in terms of who's going to be a winner and a loser and what markets are compatible for each idea. Circle and Tether jumped out to a massive lead in stablecoins through taking a lot of risk and creating amazing products, but they are very centralized and they have certain actors that are deeply involved in that ecosystem that you have to trust. There's now a new wave of product offering coming to the market, including ideas like Ethena, including ideas like STBL. And my guess is that there are massive winners among that new breed of fully on-chain stablecoin player and stablecoin offering. Rex (43:16.446) I always take it as a blessing when a guest pivots exactly to where I want to go because you know what I kind of want to talk about is what I find so compelling about Athena is it is to my mind the first stable coin that is fundamentally backed and like trying to create stable value on top of something that is not let's buy treasury bills. which is essentially what tether is and, and circle and basically every centralized, stable coin we had before. And now even the decentralized stable coins like sky or make, I still don't like that rebrand, but sky is, is kind of pivoting to, I mean, I see a lot of fracks doing that as well. and so. You know, I think what's really cool about Athena is that they went and found something that is. that provide, I mean, it's hard to talk about how cool it is without really getting into it, but just for the sake of conversation, let's just say that what Athena did was found a product that generates yield and then says, hey, we're going to provide a farm for that, and then might as well issue a stable coin on top of that. And so I bring that up to say, are there any other things? that you're starting to see that you're getting really excited about where just like Athena where we're saying, let's step away from just going and buying treasury bonds. But like, let's figure out a way to deploy capital in productive ways. And not only can that back a stable coin and be really interesting stable coin business, but like Athena, the one of the purposes of that is to provide a lot of the, or, the short side that's needed to support leverage on ETH, right? And so we can also look at stable coins as like massive pools of capital that are like aggregated and then can be deployed into something productive. So is there anything cool that you're saying that like will back the next stable coin? Colin Butler (45:30.862) You know, I think the business model innovation that these kind of synthetic dollars allow is fascinating to me. I guess back to the idea that it's a much better form of collateral, right? Yield bearing, I'm gonna just call it yield bearing stable coins for lack of a better word, because that's the core concept. But according to the genus act, of course, you cannot. deliver yield if you're a stablecoin. Let's call it a synthetic dollar. But again, you go back to the $300 billion crypto derivatives market, and you assume 10 % of that is the collateral market. That's $30 billion. And the industry is fighting for $30 billion in TVL. Well, once the big places like Binance, OKEx, and Bybit can accept something like a USDE as collateral, And let's assume it's, you know, last year it was a shrinking 19%. Let's assume, you know, there's kind of a bull market and it goes back to 10 % yield. My view is that there's gonna be a lot of hedge funds that choose to adopt that, choose to use it as collateral just because, again, it's an order of magnitude better solution for them. So I'm extraordinarily bullish on ideas like that. I don't know if Athena is the one. I don't know if STBL is the one, but it has a really unique mechanism. It just came out the other day. I would recommend everybody take a look at STBL because it's extremely novel. That could be something that could be, underlie the future global stablecoin infrastructure. So there's ideas out there that are being put forward that I think are potential game changers and ideas will continue to be iterated upon. And so I think in the next three, six, 12 months, the space is going to be fascinating because you're going to find novel ways to not only transfer value but add value to that transferring process. Rex (46:58.101) Yeah. Rex (47:20.084) Yeah, you know, super fair. You know, I, I'm not sure if you've, heard of this protocol company. What do we call them these days? Right. But, I'm not, I like, you know, disclaimer here, I'm not familiar enough, nothing on this podcast, financial advice. I'm not familiar enough to like actually be bullish on this, but I think it's really interesting. but a friend just started working for this company called usd.ai and, you know, essentially the idea there is. Like a lot of people want to go buy graphics cards to do AI stuff. And like, what do you need to buy graphics cards? Money, right? And so essentially what they've done is saying like, we are going to lend people money to buy graphics cards. Those loans will be collateralized by the graphics cards and those people will be paying us interest based on whatever they're doing with their graphics cards. And then how do we get the money into this system so that like, we have the money to make the loans, let's issue a stable coin where people can give us money, get the representation of their dollar back, and they know that it's backed by these loans that are going out into the world and doing something productive. so that's what I'm really curious to see what the next wave of stable coin innovation is, is because this doesn't just have to be about the stable coin product side and the transferring and- like just the better financial system. This is also about like, can we use this new technology to like start to empower some other stuff that I guess was possible before, but just was, there's something different about what's going on. I mean, and this is the same thing that happened with Athena, right? Like it's told in the past, like it was totally possible for a hedge fund to like go do the basis trade and like capture. that exact same staking yield. what Athena did was put it in this stablecoin wrapper, allow basically anyone, maybe with a VPN, right? But anyone to participate in it. And like, that's cool for stablecoins, but there's something cooler there. You know what I mean? Colin Butler (49:36.845) Yeah, I think the landscape is ripe for an explosion of business model innovation based on these new ideas, right? Just like the graphics card example that you just gave. I think that's a phenomenal example. My guess is that there's going to be thousands and thousands of companies that can play with these ideas and can mold them to their own unique business needs. And some of them will likely create industries. Rex (49:42.422) Mm-hmm. Rex (50:04.342) For sure. Yeah. Yeah, for sure. For sure. No, and I mean, I think, you know, going back to like kind of your original point is like the fundamental bet here and that you have to believe is that there is like exponential growth coming here. And once you take that, like once you internalize that, then there's just so much possibility both on like the improving the things that we do today. Colin Butler (50:05.142) It's gonna be a super exciting time. Rex (50:30.604) like again, the wiring huge amounts of money example or cross border payments example, but also like they're, the point of transformational technology is to open up new things that weren't possible without these transformations. Colin Butler (50:48.822) Yeah, 100%. I think crypto does that in spades. I think one thing that's gonna, there's gonna be a couple of things that are really important to that mix. One of them is user interface. As you kind of, you user experience that you went through kind of with your grandmother, right? It's gotta be seamless. Ideally crypto is probably abstracted away. And then it's also interoperability. Like you don't want every single mom and pop shop to have their own stable coin. And none of these talk and it actually fragments liquidity and creates a reduction Rex (50:51.615) Yeah. Colin Butler (51:18.826) and value. So those are things that for sure people are actively solving. One thing I would point to in terms of interop is something like the Agile that Polygon has created. It's like you mentioned TCP IP a couple of times on this episode. That's a user experience whereby in the early days of the internet, you can go directly from Amazon to eBay and you're just like, it's kind of one seamless experience. Well, as we have it in crypto right now, you have to bridge your Amazon tokens over to your eBay tokens, you get wrapped eBay, Weebay. And now you can shop on eBay, and that's a user experience no one wants, right? So kind of back to like why an interop idea like an Ag layer, it's, I can now have essentially native tokens that go, you know, cross-chain in a seamless way, that particular solution is backed by zero knowledge, so it's extremely secure. Something like that probably makes up a backbone for interoperability. And in terms of user experience, we have a long way to go there in crypto. Even the big banks are challenged with it. They've got these massive global infrastructures. But at some point, maybe even it's like a DTCC. DTCC clears three quadrillion dollars a year. Almost probably every stock trade in the US, would say. Something like that. Maybe they're the ones. Rex (52:18.636) Mm-hmm. Colin Butler (52:44.844) that can unify global collateral. Like they actually had what they called the great collateral experiment. It's actually about a one and a half hour video and it deserves an Oscar for finance nerds. Like most people are like, my God, like my parents are like, what is this? But when I watched that, I was like, this is the future. Like this is gonna make things so much easier, seamless. This is what crypto is invented for. And so I think as ideas like that get integrated in the global finance system, you're gonna see an explosion of user friendliness, UX, UI improvements, and capital efficiency improvements just across the board. What that ultimately nets out to is cost savings for everybody. And then eventually you take that one step beyond and you get into all the cool crypto. Libertarian philosophy of how do we reach the one point for a billion dollar unbanked people and bring them into the economy and Hopefully those two systems can connect right? I think that'd be a beautiful vision right you actually make things better for everyone like you and I here in the US and you make things expert like basically a Solution for which there was no prior solution for the people that are currently cut out of that system. And I think by figuring out a way to bring them together through blockchain, you just create a much more stronger, much more valuable hole for everybody. I think those are the ideas that we're all working on. Rex (54:14.132) Yeah, no, man, for sure, for sure. So with our last like few minutes, our last segment here, I would love to like kind of get out of our crypto bubble and talk to you about what it's like on the other side, right? Because the the cool new thing that DATs have brought us is that like you're not talking to like the eight of us left in crypto, right? Like you're talking to public markets and people that like are hearing things like stable act or genius act and like are seeing circle IPOs and like want to understand what's going on and should they be involved? know, these are people you're selling to or not, like really couldn't follow most of the conversation that we had here. Can you just talk a little bit about like, what are those conversations like? Like what are, what are people, institutions, what are they like talking about, asking about? Is this like a You know, it seemed like a very bullish time in August. Seems like a pretty bearish time right now. Can you just like talk a little bit about like, what's it like outside of this bubble and what are the conversations you're having? Colin Butler (55:22.978) Yeah, a lot of it is education. It's red pilling those that are currently exist outside the matrix. Right? And, you know, we all saw the movie. That's a crazy process to get people really comfortable with these ideas that we think we can, that we think provide a lot of value. So at some point it is step one. You know, it's like, what is a blockchain? You usually start with Bitcoin. What are smart contracts? What kind of value can they provide? Generally, you want to get people bought into the themes and the ideas. think Michael Saylor at Strategy did a great job at creating a religion around what he's doing. Bitcoin is digital gold. It's a very simple theme that people can internalize for things that are increasingly more complex. It just involves longer conversations and figuring out new ways to get messaging across to participants in the ecosystem. And of course, eventually we want everybody to participate, right? We want everybody that's an investor, sophisticated and non-sophisticated, to at least underwrite the narratives and be able to participate in the growth of the various facets of the industry that we think are super valuable and super high growth. So. I think people with dedicated teams, they're further along. They kind of understand what DeFi is. They understand the different token offerings. But ultimately, there's an unlimited level of depth there, right? There's like every chain does something really well and something different. What's the difference between Solana and MVMN? Do people wanna slice? Yeah, yeah. Do people wanna go that far down? Rex (56:54.558) One exists. Colin Butler (56:59.854) Generally, it's probably like, if it's a scale of 1 to 10, it's probably like the 3 to 4 range. It's like, where is value accrued by the holders of X token? Right, even if it's Ethereum, right, you stake Ethereum and you get gas fees and that's how you get your cash. mean, most of the traditional financial people are focused on cash generation because that's how they know to model companies. They can model growth and they can model cash generation. And so you really have to kind of articulate like generally where that comes from, which is why I think the cash generation stories are better for a DAT format than something amorphous like, you know, Solana has $3 billion a year that... kind of comes into the ecosystem, but like how specifically does that come in? Then it's more of like a knife fight for that idea and it requires probably too much detail. I don't want get too far off track actually, sorry, I probably did, but you may have to edit that one. Rex (57:54.273) Honestly, you're not at all because the question that I was going to walk us out on, you know, is when, when I first started podcasting, my first episode was I got one of my friends on from the beer company and was just like, Hey, let me explain to you crypto. And we talked for like an hour and I don't really know if I got through to him or not, but you know, I thought about that doing the same format and seeing if I could do it better for signaling theory. you know, decided against it. But I guess I decided against it because, you know, I don't think it's easy to explain to anyone right now what's really going on, what the value is, and especially when it's so directly tied to corruption in like, not to get political, but everything from the government to just like the complete nonsense we see in, like there's a reason why there's regulations and finance, right? Like we learn it every other week in crypto. so I guess like what if you're in, if you're a game for it, what I would love is if you could give like the two minute elevator pitch to like, let's say that I am, you know, part of like the Rockefeller foundation who has like really, really old money that doesn't really understand anything about crypto and maybe it's heard of Bitcoin or whatever, but just want to know like, What's going on here? What's compelling? And like, why should we get involved? Like, what would you say today? Colin Butler (59:28.76) So if you have a portfolio of diversified risks, you have consumer, you have energy, you have tech, you hire managers by investing in public companies that are experts in their field. If it's clean tech, you hire a CEO that has a vision for how to capture market share within that vertical. Similarly, when you hire a CEO of a digital asset treasury, you hire somebody to do multiple things. One, pick within crypto what properties will be most valuable ultimately to the shareholders. Two, somebody that can use the capital markets to add Underlying per share and and that's actually the original primary reason for that right? It's if you buy Bitcoin Let's assume you buy one Bitcoin. You will always have one Bitcoin if you buy micro strategy Even at 1.5 Bitcoin per share, right? Let's say you pay 1.5 times nav So you're overpaying for Bitcoin, but over time through capital markets engineering You acquire more Bitcoin per share That's what you're actually paying that manager to do. And then you can add layers, and this is core to the modern DAT thesis, you can add layers of value, and those include staking, they include DeFi, they include other creative ways to use tokens to either one, increase yield, or two, increase underlying per share. And those are all ideas that we're focused on at MegaMatrix. Those are ideas that every DAT that is launching in the current vintage needs to think through. If they really want to be a leader in the space, they have to have answers and ideally develop a track record around all of those ideas. Rex (01:01:16.704) Yeah, man, think, you know, especially after this conversation, I'm walking away a lot more bullish, one, on the concept of digital treasury, sorry, digital asset treasury companies, because, you know, I think it's really easy to be cynical and... Especially when you start to see things pretty far down like the like we're the digital asset treasury company for like Gito the like largest LST for Solana staking like I Don't really get it right but I think what you're talking about with what you're doing with mega matrix is like a lot more compelling than Like it I would What do I know right? But I would almost like suggest like stepping away from this dat framing because It's not that you're going out there to like buy the assets and then like hold it a bunch. It's like you are going out there to be like the pioneers to figure out how to create like and capture the real value that is the opening of the West, right? Or the beginning of the gold rush or whatever. And to me, that's like not really a story about amassing as many like tokens as you can, right? And like going to raise debt to buy tokens. That's more about. Rex (01:02:40.992) figuring out what's interesting, right? Like maybe it's Athena today and then maybe tomorrow it's not Athena at all. And it turns out like you completely get out of Athena and move to Zeus. And so, yeah, I think the digital asset treasury companies like the Ethereum based ones that are saying we're gonna buy Ethereum, but then deploy the Ethereum that we use into the ecosystem or like everything that you're talking about with MegaMatrix, which is we're going to bring in value and then deploy that value. Like that's so interesting to me. And I, especially once you start to layer in, like maybe we're building products that are consumer facing, that are not even about like financial engineering. just like products that add value. You know, I think there's a lot more room to like get excited than there is like, Hey, can you just go buy Jito on my behalf? Colin Butler (01:03:36.705) Yeah, and I think there's an angle there that you just touched on that I think is super important. Dats at their core could be thought of as a way to bring liquidity. to products that are already working. Like I would argue that Athena, let's just say Ethereum. Ethereum has already found product market fit in a lot of ways. It underlies a lot of the stable coin economy. It's highly secure. It's got a million validators. By bringing money that wasn't otherwise in the ecosystem, using it within the ecosystem, it adds value to all those people via network effects and liquidity that were already in the ecosystem. So therefore it makes the ecosystem more valuable. It's almost like a two-way street where you have something that was kind of bootstrapped and found product market fit with a wide cross section of people globally. And then you add value from traditional finance in Wall Street by providing additional liquidity, which makes that product even more valuable. So you're almost getting like by forming a debt and bridging traditional capital with crypto capital, you're actually getting back to the Amazon flywheel whereby you're actually making the products more valuable. and then begets more investment and then begets more value for the user. And eventually, it's whatever final iteration it becomes, hopefully it's something that is as important, as impactful as the internet was originally. Rex (01:04:59.446) Yeah, awesome man. Well, like I said, I'm definitely walking away from this conversation much more, like much more curious and much more bullish. And like, I'll just be frank with you. Like when I sent this to a bunch of my friends in late August, where I was like, you guys who have been around for multiple cycles, like has it ever been this clear what the, like the vehicle that is going to like probably blow up in our faces is gonna be as it is that Dats are right now. And. I still worry about that a little bit. seems like a lot of the hot air was pulled out of the balloon in September, so maybe not. But the conversation that we're having is like, it's not about like, I'm sure most, some most whatever, Dats are about like essentially allowing us a more efficient way to dump on a larger group of retail. But, you know, there's more to it than that. And that's what I'm kind of walking away from from here. Colin Butler (01:05:54.959) All those ideas are valid. I don't think we know how the experiment is going to end either. know, dads haven't been through any kind of a real cycle. Like they were their own are their own cycle in and of themselves. But over time, I believe it's something like the creation of let's call it CDOs on Wall Street. Rat poison squared, massive leverage is created. But also, there's immense value that was created in financial markets through that experiment. Rex (01:05:59.98) you Colin Butler (01:06:22.71) And I think we're in a very early stage, the very early stages of a similar experiment, where I think a lot of value is gonna be created, but in the meantime, there's gonna be a lot of churn, there's gonna be a lot of failure, but from my perspective, that failure is also good because eventually that gets you to the place where you can create a lot of value for a lot of people over time. And that's, think, We're all underwriting the potential that there's going to be failure involved in a lot of learning, but we're all trying to get to a place where it's just that there's a better financial system, a better outcome, a better financial market, and more value created for more people over time. And I think that's the journey that the early call it DAT pioneers are all on together. And it's very early stages, but that to me is the exciting part. It's figuring out how to navigate this wildly turbulent river of innovation and coming out with an outcome. that ultimately, one, gave everybody a really exciting journey, but two, leads to an outcome that has a lot of value for lot of people. Rex (01:07:26.88) Yeah, no, I hear you and I think that's a bullish story, but also is like a definite warning to every investor that like we, you in order to get like these like tremendous unlocks and innovation in value like are inherently tied to the like 2008s of that dynamic as well. so. know, I think with all podcasts and all conversations in this space, like it's just important to remember to like manage your risk and to, to know what you're getting into. So, Colin, man, this is amazing. before I let you go, I would love for you to just like share where people can find you. and like maybe give, give people a little insight into the types of things that you're looking for. as you're looking to like. build a more comprehensive and interesting activity for MegaMatrix to be deploying assets into. Colin Butler (01:08:28.842) Yeah, mostly we're really just looking to educate people and to get the message out there that these themes exist. You know, there are exponential and exponential growth story in the market does exist right now. And we're one of the firms that are focused on delivering that as an option for public marketing, public market investors. In terms of where to find me, I'm real CryptoColin on Twitter. You know, obviously CryptoColin was taken. I don't know why. When I went to go spin up my Twitter account and I'm pretty easily accessible on LinkedIn. These are ideas and topics that I love. So happy to share thoughts with like-minded individuals. And, you know, before we hop off, Rex, I really want to thank you for having me on the pod. It was an absolute pleasure. Rex (01:09:10.774) No, man, pleasure is all mine. thank you so much and look forward to talking to you soon. Colin Butler (01:09:16.995) Yeah, likewise. Thank you.