Dialogue with Bankless Founder David: The Growth of Bankless, Network States, and Ethereum

Source: Sunny & Min, Deep Tide TechFlow

If you are in the crypto world, you must have heard of Bankless!

This is a podcast, as well as a Substack subscription channel, and now there are also a DAO and Ventures under the name Bankless.

As one of the most influential media brands in the crypto world, how did Bankless grow and evolve from zero to one?

In a restaurant in Zuzalu, Black Mountain, TechFlow reporter had a conversation with David Hoffman, co-founder of Bankless and initiator of BanklessDAO. By the way, he now has a new title—Bankless Ventures General Partner.

The dialogue covered his journey in founding Bankless, investment strategies, views on network nation cities and nation-states, as well as the current research directions of the Ethereum Foundation, and even his guide to a healthier lifestyle.

The Journey to Bankless

TechFlow: Today, we are very pleased to welcome David, who will share his journey in the crypto world and the story of co-founding Bankless with Ryan. David, we can't wait to hear your story and learn about the origins of Bankless.

David:

The idea came to me while studying psychology. Through positive psychology, people can achieve significant effects at a very low cost! Additionally, to make people feel better mentally, you also need to get them to exercise. Since you are addressing these two issues, you can also incorporate good nutrition and diet.

Before fully diving into the crypto space, I stumbled upon Ethereum and learned about money and finance.

At that time, I thought, if I am genuinely interested in improving people's lives at minimal cost, I must talk about money, finance, and social structures.

Finance is as important as individual health issues; if you want people to take control of their lives, they first need to have the financial resources to do so. So it’s not just about pursuing psychology or physical therapy, but about addressing very deep-rooted issues.

• My first company was an ICO consulting firm, a product of the ICO boom at the time, but it never really went far and went bankrupt after seven or eight months.
• The second company was Bunker Capital, which was not a real venture capital firm; it replaced ICOs and focused on security tokenization. Similarly, that company did not go far and eventually went bankrupt.
• The third company was a real estate tokenization company, also focused on security tokenization but with a narrower use case. That company still exists.

In 2018, I met Ryan on Twitter, and we started talking about similar things and slowly grew together.

Between 2018 and 2020, I started my first podcast before Bankless, called Pod Crypto, co-hosted with my college friends. From that point on, I learned how to produce podcasts.

Ryan started producing the Bankless newsletter at that time, and I thought we should merge the podcast and the newsletter.

By the end of September 2020, I was fully prepared to dive into Bankless full-time, so I resigned from my position as COO of the real estate tokenization company.

From that moment on, I officially collaborated with Ryan to establish Bankless.

TechFlow: What is the relationship between Bankless and Bankless DAO? As a founder, what reflections do you have on operating a DAO?

David:

The origin of BanklessDAO is like this.

Many people contacted Ryan and me, saying they liked what we were doing at Bankless and were very willing to help.

We didn’t know how to incorporate them into the company because we weren’t interested in building a massive company, but we wanted to provide a way for everyone interested in advancing this movement to express themselves and do something for Bankless.

That’s the meaning of DAO; we found those who were validated on the blockchain, and they became part of our community.

So if you are a senior member, you have a voting application, for example, we have some tokenized T-shirts, which are traces left by some people on the blockchain that we can verify, like saying, oh, you are a member of our tribe.

So we issued a token and distributed it to all those willing to help and do things, calling it BanklessDAO.

As for the leadership, we did not intervene in the leadership of the DAO; we let them solve it themselves, so the development of Bankless DAO is entirely decided by their own community.

TechFlow: In Bankless DAO, is there a structure for resource and power distribution?

David:

Yes, for example, the distribution of the $BANK token, but mainly combined in many different ways, involving different aspects of each sub-DAO.

Each sub-DAO has its own way of making money; they are relatively independent, and most sub-DAOs are part of an overall DAO.

They all have a central resource pool. This resource pool is more decentralized and more focused on specific areas, like Bankless content production, while another sub-DAO might be about consulting, etc. There are many different ways to participate in the DAO.

They all make money independently, but when you put them together, you can call each individual part its own sovereign system.

TechFlow: Regarding financial sustainability, do you think the current premium user subscriptions of Bankless are a sustainable approach?

David:

There is a game relationship between premium subscribers and sponsors, mutually constraining each other, and Bankless has maintained this game model.

Therefore, we are not influenced by the public because we are obligated to our premium subscribers, so the public cannot control us.

Additionally, sponsors cannot control us either, because if sponsors do something we don’t like, we can fire them and rely on our community.

So it’s an interactive process, and the key is the uncontrollability of Bankless, which allows us to maintain our purity. We want it to be this way because no single source of income should dominate another.

Sponsorship allows us to inject energy into the company and help it grow, but our foundation is our premium subscription strategy.

So when power shifts from one side to the other, we know which side we should focus on more.

TechFlow: In Bankless, how does Web3 change or enhance the revenue model?

David:

The business model does not differentiate between Web3 and Web2.

Regardless of which industry we are in, the business model is the same. We have some additional revenue sources, for example, we tokenized and sold our podcast, and you can also pay with cryptocurrency.

In the future, there may be some other, more crypto-native revenue sources, like NFT websites, which are unique.

But the business model remains the same: the more listeners you have for your podcast or readers for your newsletter, the more value you can gain.

Because content is content, no matter which industry we are in.

TechFlow: The mission of Bankless is to bring the next billion users into Web3. What do you think distinguishes Bankless content from other media providers?

David:

I would say a large part of it is because the interaction between Ryan and me is very good.

So this pleasant atmosphere makes the audience enjoy it because we are like two partners chatting while discussing the news, which makes the podcast very powerful.

We have knowledge and involvement in many different fields.

• We understand photography.
• We understand distributed systems.
• We understand history.
• We understand cryptocurrency.
• We understand art.

Therefore, we can combine all this knowledge to produce a fairly educational podcast, and we are very invested in it. Now a one-hour podcast requires three hours of preparation.

TechFlow: How do you differentiate and combine media and investment?

David:

This involves the issue of conflicts of interest. Everyone thinks that we have both a media company and a venture capital fund, which seems conflicting.

We have always had the idea of doing angel investing. Over the years, Ryan and I have also played the role of angel investors, and we have been providing consulting work, which is roughly half of what is needed to become a venture capital firm.

We are already in this game; we are both investing in private markets and doing Bankless.

One reason Bankless has become what it is today is that people trust us; we have built a brand and legitimacy, which protects us.

We show the world that we exist for the right reasons; we do not engage in malicious manipulation, and we do not do anything evil.

So we intend to continue this way, and of course, there are some simple rules, such as our venture investments are unrelated to our media aspects.

When we started doing venture capital, the first thing we did was consult lawyers to ask what we needed to do, what we needed to change in the media aspect to start a venture capital firm, because we didn’t want to change anything. It turned out that what we had already done in terms of disclosure at Bankless, as well as the frequency and extent of our disclosures, far exceeded the compliance requirements needed to start a venture fund and was even more legitimate.

So the idea is that at some point, we will have the best exposure, and we will become one of the most transparent venture capital firms, due to the pure nature of Bankless.

At that time, it will depend on whether our community listens to what we say and determines whether there is a conflict of interest. I don’t think this will be a problem because I trust myself, I trust Ryan, and we know why we are here, to create content for Bankless.

Our community, if they feel our actions are illegitimate or not aligned with Bankless values, will call us out.

TechFlow: What investment strategies and methods do you adopt when determining whether to invest in a project?

David:

I think some venture capital firms place more emphasis on the team.

There was a project that I initially looked at from a technical perspective. When I communicated with another venture capital firm to seek different opinions on this project, they said it was a bet on the founders.

But in my mind, I didn’t see it as a bet on the founders at all because I was thinking from a technical perspective.

Although in the eyes of most venture capital firms, it is always a bet on the founders. But for me, the reason you invest in a project is because of what they are building.

I would think, does this technology really deliver the functionality they claim?

Different venture capital firms have different focuses. I like technology, but it is always the founders who make innovation happen. For me, the most important thing is whether the founders can truly execute; my focus is always on what potential the technology can unleash.

This industry will always have new areas being developed, so there will always be new investment opportunities, just like the narrative of cryptocurrency has always been that we have only completed 1%.

For example, we still have a lot of work to do in decentralized finance (DeFi), Layer 2 infrastructure, etc.

The current narrative is still young. Therefore, you can look for new narratives and find a dazzling new object; there are still many potentials to be explored in current projects.

So to some extent, it is necessary to balance attention to new things (like AI and cryptocurrency), which are genuinely promising and we should focus on. But at the same time, don’t forget that areas like DeFi are still young and easy to develop, with a lot of room for growth.

What I mean is that cryptocurrency has only completed 10%, and there is still a lot of investment needed in infrastructure.

TechFlow: Talk about AI and cryptocurrency. Have you seen some promising projects in this field?

David:

Yes, it depends on what you mean; the cryptocurrency field is very broad. The first thing everyone seems to be focusing on is zero-knowledge machine learning (ZK ML).

The combination of privacy protection and machine learning seems very promising. Besides that, there is a lot of potential in this field, but it may still be too early.

If a16z can find a groundbreaking project that establishes a new relationship between AI and cryptocurrency, it would mean a significant advancement in this field.

Therefore, I think the venture capital field is looking for how to find something truly new in the AI field because there may be thousands of project failures. Undoubtedly, there is a high market focus on this, but the real intersection is indeed hard to find.

TechFlow: Do you think it is easier to find valuable projects in a bear market? From an investment perspective, how do the mindsets of bear and bull markets differ?

David:

Yes, in a bull market, people quickly chase narratives. In a bear market, people are more focused. So I would say the signals are easier to identify, and they are largely driven by market sentiment.

TechFlow: Do you think it is important for startups to be profitable at the seed stage?

David:

The idea of startups is to achieve scalability through venture capital.

I think in the cryptocurrency space, many people overlook the importance of "Hey, let’s ensure this project achieves real profitability."

Of course, it varies by project; maybe you do want to pursue scalability first, maybe it’s a very ambitious project. But I think many people choose to raise funds too early when they could have built some foundation first.

Additionally, they can seek broad recognition from the market, which allows them to raise funds at a higher valuation while retaining most of the company’s shares.

People have a strong interest in raising funds early and striving to secure more capital.

From a venture investor's perspective, this is a good thing, but at the same time, it increases risk. Therefore, I really like founders who delay fundraising as much as possible.

TechFlow: Many people believe that 2023 is the starting year for Web3 social. What are your thoughts on this? Do you have a favorite social project?

David:

I agree with the idea behind this prediction that minimal viable decentralization makes sense.

However, currently, the Web3 social track is somewhat just a Twitter clone.

Lens (a decentralized social application) has a strategy of leaving a significant footprint on-chain, which is also easy to achieve.

But what does it mean for a social application to have composability? You don’t really know. So I don’t have a favorite project, but I’m glad to see many experiments taking place.

TechFlow: After working on real estate and securities tokenization, how do you see the trend of real-world assets (RWA) in cryptocurrency developing? Do you think it is still too early?

David:

I think it may take a long time to mature.

Tokenizing real estate and combining it with cryptocurrency presents a problem, as real estate is essentially a resource tied to the nation and bound by traditional laws.

I have always thought this way, yes, so there is a conflict between these two technologies. Projects that have succeeded in the cryptocurrency space, such as Aave, MakerDAO, or Uniswap, are crypto-native and have no dependencies on the real world.

While real estate has many real-world dependencies.

Therefore, you can see that when these two worlds collide, it will have a huge impact, and we need to innovate at the national level, which is a critically dependent industry.

Zuzalu and Network Nations

TechFlow: At the end of 2020, you wrote an article titled "On Coordination Vs. Defection," describing how humans have historically chosen between defection and coordination. According to your definition, what is a network nation?

David:

I would say there may be a pendulum between very large agricultural centralized non-nomadic societies (which we call cities and nations) and the number of hunter-gatherers swinging between the two. Throughout history, this pendulum has swung extremely towards cities and nations, with non-nomadic people being deeply rooted and stable.

The idea of a network nation is that, hey, this pendulum has swung too far. Things have become too rigid. The support of cities or existing governments for the network world has arrived, and there are various forms of coordination, charter cities, startup cities, network nations, whatever you want to call it, all saying, hey, let’s swing this pendulum in the other direction.

Let’s gain more freedom and mobility, let’s experiment more in governance, and let individuals gain more freedom rather than being bound and fixed. So however you call it, a network nation is just experimenting with what it means to be human in society and how we create new societies that allow for more autonomy for humanity.

TechFlow: Do you personally travel often to "rebalance the pendulum"?

David:

Recently, yes. A long time ago, I didn’t do this. Since cryptocurrency has flourished in the past year, I have indeed traveled frequently over the past two years.

TechFlow: For me, I live in London. So, I occasionally go to San Francisco because most opportunities are there. This fact has reflected that geographically, it seems all opportunities are concentrated in the US. Europe consists of many small countries, which are somewhat decentralized, making it difficult to scale businesses in certain aspects. So everyone goes to Silicon Valley to scale their businesses. For me, a network nation also means being able to bridge arbitrage opportunities between different geographical areas.

David:

Yes, the general idea is that cities no longer compete with each other, so network nations can make cities competitive, which will only benefit individuals.

TechFlow: Do you think that the way people self-organize into clusters in network nations can break the curse of human conflict caused by forming fenced tribes?

David:

It may go in the opposite direction. Previously, there was only competition between nations, like China competing with Russia and the US. Now, a new player has emerged, called network nations, and everyone will say, "Oh, now we all have to fight against this new force."

So not only are we competing within the national realm, but in this brand new domain, a whole new dimension of competition has emerged because of new participants.

Returning to the article, there are also coordination incentives between rewards and coordination. Therefore, some nations may wish to coordinate with certain specific network nations, while sub-networks may wish to ally with a larger nation. This is just a new variable that will at least trigger a series of changes, and change is progress.

TechFlow: In the future, when will network nations like Zuzalu become more organic/natural? What are your thoughts on Zuzalu?

David:

I think if the participants are different each time, people will become particularly picky about Zuzalu to the extent that they say, "Oh, I attended a network nation," in such a sarcastic way.

But that’s also the problem because we think no one really knows what a network nation is.

Zuzalu seems to symbolize progress. We Zuzaluans don’t really know what it will become because this is just the first time, but some people have some ideas about what it will look like in the future; it’s like a periodically occurring experimental pop-up city.

So when Zuzalu happens again in six months, or maybe a year, there may be some of the same people, and there will also be new people joining in. And the idea is to create a common identity called Zuzaluan.

So what exactly is Zuzalu? Besides the people in the world identifying themselves as Zuzaluans, we are just people appearing at different times and places on Earth.

TechFlow: Additionally, the mission and content of Zuzalu seem to perfectly align with David's interests in positive psychology, nutrition, and physical therapy. Can David share how blockchain can enhance or disrupt the development of longevity?

David:

It is a world of decentralized scientific research. Therefore, there are some interesting studies that can be conducted in the field of longevity, but due to regulatory constraints like the FDA, they cannot be conducted.

Thus, we need new experimental venues that need to exist in countries that can approve such research.

Network nations or other jurisdictions that allow such research will accelerate the development of longevity research. Therefore, we choose to have these discussions in Zuzalu; this is not a place for fundraising research, but we will discuss how and where to conduct research, which is a coordination-level issue. This may not be easy to understand, but it will serve as a topic for our discussions.

TechFlow: Do you think longevity is about improving lifestyle or about scientific discoveries that allow humans to live to 1000 years?

David:

It is one and the same, right? If you are not happy, what is the point of living for 1000 years? Just like I said, if you have arthritis and cannot move your body, you wouldn’t want to live forever.

Pursuing immortality and pursuing a healthy lifespan and well-being are also the same pursuit.

Therefore, some people are conducting research hoping to find a pill that can make people live forever.

But at the same time, they are overweight and unhappy, lacking exercise; what’s the point? You are just prolonging your suffering. Therefore, the pursuit of longevity must also pursue happiness.

The pursuit of happiness is fundamentally also a pursuit of health.

TechFlow: Can you share your longevity or healthy lifestyle? I see you drink green tea daily and do cold water immersion near Rok. What is your secret to longevity?

David:

My secret is to make it a habit; it must become a regular learning process.

Good nutrition is related to diet and lifestyle. Therefore, you must turn some things into a habit. That’s what Zuzalu has brought me, a foundation of regular healthy habits, doing cold water immersion every day, implementing autophagy.

So, Kiki's breakfast is not only the same and healthy every day but also a place where you can chat and communicate with people, fulfilling social needs.

Also, I don’t drink alcohol. In New York, socializing and drinking are almost inseparable.

But in Zuzalu, this is the easiest place I found to quit drinking. I quickly saw the benefits of doing so, like improvements in skin, overall health, and sleep.

In Zuzalu, since everything is here, food is here, social life is here, all the content is here. I can easily avoid commuting and not sacrifice sleep to do what I want to do.

Indeed, this is a highly optimized lifestyle.

Ethereum Ecosystem

Currently, if you search for the keyword "Ethereum" in Bankless, you can find 54 related articles, analyses, and videos. In contrast, there are only 13 pieces of content related to Bitcoin.

TechFlow: Did you engage with the Ethereum community during your time in Zuzalu? What are the recent focuses of the Ethereum Foundation?

David:

Yes, I often communicate with Justin, who has delved into the new field of zero-knowledge cryptography. Therefore, I asked him what this means for cryptocurrency, even though it is still very far away.

I discussed EigenLayer and the issue of re-staking with Dankrad, Tim Beiko, and Vitalik, as this seems to be a new area of concern for the Ethereum protocol.

The reason there are more articles about Ethereum on Bankless than Bitcoin is that Ethereum is more expressive. Bitcoin only does Bitcoin-related things, like sending Bitcoin to people. Ethereum is a smart contract platform, which means you can do anything. So there are more topics to discuss.

TechFlow: What do you think is the biggest challenge currently facing the Ethereum ecosystem? What can Bankless do to support the construction of the Ethereum ecosystem?

David:

Ethereum still faces difficulties, and there is no story explaining to me why it is the way it is now.

Within the cryptocurrency industry, there are issues of internal coordination because many people still have incentives to be skeptics of Ethereum. Returning to the article on "Coordination vs. Defection," there are still many incentives to defect from Ethereum.

For me, the whole purpose of the cryptocurrency industry is to get people to agree on the same protocol; that’s the whole point. So we still have a lot of work to do to get people on the same protocol and make them feel it’s a wise choice. This is an internal issue of cryptocurrency.

Then there are external issues, which is that we still need to build things that people want to use and care about. This seems to be an eternal challenge, but it always takes time to resolve.

TechFlow: When you return to New York, will you bring what you learned in Zuzalu to Bankless?

David:

Yes, I can say we have already started.

Many new types of content have emerged, more content about non-crypto fields. So there will be content about cutting-edge technologies, as well as some about cryptocurrency, which will merge together.

The new things I learned in Zuzalu have also begun to influence Bankless, particularly these entry-level contents.

But many new relationships have also been established here, which will have an impact, and there are many new stories.

Therefore, the people here will ultimately become supporters of this podcast. Overall, this is just a record of the significance of Ethereum in the world and cutting-edge technologies.