Speaker 1: Hey, folks, we are recording at the Injective Policy Summit
in DC and joining me is Joseph Shalom, who is
the CEO of Sharplink. Joseph, good to see you.
Speaker 2: Great to be with you again.
Speaker 1: We've done in person interview in the past and there's
lots happening around Sharplink, So excited to chat with you.
Tell us about the latest with sharpling. What's new.
Speaker 2: So for your viewers again, we're a digital asset treasury company.
We raised several billion dollars to buy Ether and we
make it really really productive. I think the two most
interesting things over the past month is we were able
to go back to the public markets and raise equity
and actually go back to buying eth actually at a
very good price, buying back some stock. And the second
thing that is quite interesting is we've been along with
Joe Lubin from Consensus and Tom Lee from bitmin, we've
started supporting and investing into spinoffs in the theory of
ecosystem and it's going to be really really positive for
the new narrative and the new era of ethereum.
Speaker 1: Joseph, there's been a lot of negativity around some things
around the foundation, but overall, the ecosystem around etherorem continues
to grow. There's more institutional adoption and much more. Do
you think it's just symptoms of the bear market that
you have that sentiment.
Speaker 2: I actually think for the last year and a half
or so, there's been a divergence from reality and sentiment.
And the reality is, let's start with a really positive
The reality is the Theeum ecosystem has over fifty percent
of all stable coin volume, nearly sixty percent of tokenized
real world assets, the vast majority of DeFi was built
on Ethereum, and so if you look at the scoreboard,
they're winning. The sentiment has been pretty negative, largely because
of some i would say malaise in the industry, and
the Theoreum Foundation, which has done an amazing job over
the past decade or so, has taken the decision to subtract,
to be smaller and to allow more ecosystem participants to
support the roadmap, and that communication led to a lot
of i would say, a lack of clarity and confidence
in the ecosystem even when it was winning. So a
number of us stood up as ecosystem stewards and large
owners of eth and we're putting our money where our
mouth is, and I'd love to share some of the
things we've been doing as a collective industry.
Speaker 1: Oh absolutely, So let's talk a bit about that. Let's
double click into that. What are some many initiatives.
Speaker 2: So let's start with a positive. Ethereum has the longest
track record of any blockchain other than Bitcoin, never gone down,
the most secure, the most trusted, with the most liquidity.
It also has a multi year, very very aggressive roadmap
to continue to scale. That said, their mantra and their
approach is to go back to the basics. The Theoeum
Foundation is going to focus on privacy, and they're going
to focus on censorship, resistance and some of the core
principles to make sure that Ethereum is credibly neutral for
decades to come. But what that meant is some of
the most critical talent and functions within the Theorem Foundation
were spun out, and over the last three weeks or so,
there have been three groups who've spun out of the
Theorem Foundation who've gotten the support from Joe Lubin, myself,
and Tom Lee from bitmin and they're actually really consequential
for institutional adoption. And I'll tell you who they are.
The first was eth Labs, you know, some of the
strongest developers in the theorem ecosystem, building the scale that
institutions require. The second was Ethereum Institutional. This is the
front door, the go to market, the BD activity for Ethereum,
spinning out of the foundation with our support, and just
earlier this week, the three of US funded eth Labs,
which is building the next generation of privacy and compliance
on Ethereum, which is an absolute requirement for the largest
institutions to transact but ensure their data is kept private.
And while these sound like three distinct nodes in the ecosystem,
these are the three most important things that are going
to drive institutional adoption over the next year and years
to come.
Speaker 1: Yeah, Joseph, it's fascinating because I see a lot of
institutions they start with etherorem when they're ready to tokenize
and delve into DeFi and much more, and then they
eventually branch out to other chains, but it always starts
with Ethereum. It's amazing.
Speaker 2: It's because, as I said earlier, Etheroreum has the characteristics
that institutions need. I don't know a lot for certain
in life, But I spent twenty years at Blackrock, and
I know for sure, before you move financial rails that
are forty to fifty sixty years old, you want it
to move to something that's trusted, always on, secure, with
the most liquidity. And most importantly, people don't talk enough
about decentralization. Blockchains that are truly decentralized means the rules
cannot be changed once you make that decision. So the
idea of having a fully distributed chain where no one
person or no one treasury controls it is really important
for institutionals when they're making a once in a generation
shift in infrastructure.
Speaker 1: Oh. Absolutely, Now, during the bear market, how has sharplink
been able to add value to shareholders? Is staking defive
protocols to generate that passive income so to speak?
Speaker 2: Sure, just for the benefit of your viewers. Last summer,
there were about six or seven Ethereum digital asset treasuries,
probably five Solana treasuries that launched during the summer of
digital asset treasuries last year, only a couple of us
were able to raise billions of dollars and get exit velocity.
Really to get scale, and you need scale in this
industry when you're competing, and what we've been able to
do is, first of all, use all that money to
buy ether, and then from day one make it productive.
Because ETH is a productive asset, you could stake it.
You can get two and a half to three percent yield.
We've been doing that and we've been making it even
more productive than that benchmark. We've been participating in DeFi.
We've announced a partnership and a fund with Galaxy, another
public company, one hundred and twenty five million dollar fund
to take our ETH and deploy it into new protocols
to help them start and get what's called TVL or
initial capital into their protocols. So we're making our ETH
more productive than native staking. And then the final thing
I'll say is when you start a business and three
months in there is a consolidation period, a winter, a cycle,
you really find out who is running their public company
institutionally in those who are not. And we have not
taken on debt, we've not issued preferred stock, we've not
borrowed against our ETH. We decided during a winter is
when you get a little bit conservative. And there's a
couple all of us who've survived, who owns who owned
billions of dollars of ETH, and that is how we've
been protecting our investors. And I'll be honest with you,
going through a winter has not been fun, but treating
your investors with respect has actually been what's motivated us.
And you know, after a winter comes a spring in
a summer, and we're really well situated for when the
market recovers, and we're starting to see recovery in ETH.
Just since these recent announcements, eth has run up about
twenty percent from it's low. So the short term picture
has been challenged, the long, long term adoption story has
never been more bullish.
Speaker 1: That's really great to hear. And I love the fact
that you guys are not raising debt because I believe
that's a risk and it's kind of the emphasis of crypto.
Speaker 2: Yeah, you know, I tip my hat to Michael's sailor
for really inventing a new exposure vehicle for assets. You know,
you can own a public company and you can get
access to bitcoin. The challenge in the bitcoin space is
that it's not natively productive, and the only way you
can actually continue to accumulate and make your bitcoin productive
is financializing your stock taking out convertible debt issuing prefs,
and then you can get in a pickle where eventually
you have to end up selling your reserve asset. And
it's been challenging for the bitcoin community because, you know,
the digital asset treasuries, including Michael Saylor, went from massive
net buyers of bitcoin to now they're selling, and that's
very difficult for short term price movement.
Speaker 1: Absolutely, Joseph, with your background at black Rock and tratfy,
and you have a plethora of experience, what is your
outlook on institutional adoption of this technology. It seems all
these folks on Wall Street are looking to tokenize get
involved with stable coins. DeFi do you see that trend
continuing and jumping in all the way?
Speaker 2: Yeah, I think you know. The tokenization space, whether you're
talking about tokenizing dollars as a stable coin, tokenizing treasuries,
or real world assets, it has been a phenomenon that's
been around for almost eight to nine years, and so
it's actually been going remarkably slowly to date because of
a lack of regulatory clarity. I'd like to describe to
your viewers in very simple terms, how these things work
together and how together they compound on one another. You
can think of stable coins as just being the dollar
or value layer of the future of finance. You can
think of tokenized assets being the asset exposure layer. DeFi
is the execution layer. So if you have the money layer,
the exposure layer, and the execution layer, you're off to
the races and you're starting to see tokenization not just
of new funds, you're seeing tokenization of existing multi billion
dollar funds. You're seeing tokenization of stocks. And then one
more layer, just to complicate it, is again you have
the cash, the asset, the execution layer. AGENTIC will be
the automation layer. And I think we're at the bottom
of the first inning. We're looking for a little bit
more regulatory clarity. But the institutions went from learning to
experimenting to now going into production and now it's a
race to not be left behind.
Speaker 1: Do you feel that once the Clarity Act is passed,
it'll give them the catalyst or the confidence excuse me
to go more and innovate more and invest more.
Speaker 2: One hundred percent. I think the Clarity Act is really
important for two things. One is to make it clear
that if you're a DeFi developer, you're a software provider,
you're not responsible for the things being done on your software,
But if you're holding the client's assets as a DeFi protocol,
you're regulated and you're responsible for what happened. So like
the future of DeFi will be brighter with the Clarity Act.
I think the second thing is just sentimental momentum. Crypto
is a very momentum driven and very narrative driven industry.
It is if you get a little bit of tailwind,
it goes a long way in crypto. And the third
thing is if you're in a large institution and your
leadership is interested in digital assets, having a stamp of
good house keeping, seal of approval from the government gives
you a lot more leeway to do things that you
would have done slowly in a much quicker way. And
I think, again, we're going to see a lot of
momentum this summer, and I think we're going to get
to a point where tokenization is going to become the
norm rather than exception to the rule.
Speaker 1: Not to get too much into weeds, because I know
we don't have much time, but do you see there
being any major challenges when you have some companies tokenizing
but you still have the traditional markets in place. So,
for example, you can have a tokenized version of a
Tesla stock, but the traditional stock in the equity markets.
Do you see any disparity there and problems that might
arise there.
Speaker 2: I think the biggest challenge is having different pools of liquidity,
and for tokenization to be successful, we need to make
sure that the digital version of a stock or a
fund has as much trading depth AS's liquidity as the
true additional analog version. So that to me is the
biggest impediment. But anytime you have technology progress, you have
analog and digital. You had slow speed trains and high
speed trains existing on parallel rails. Eventually they become high speed.
But I think the more important inflection point is going
to be as follows. Imagine a world where your government
declares a war in the Middle East on a Friday night.
Speaker 1: It just happens, yes.
Speaker 2: And you own an analog version of a stock in
your portfolio, and you want to sell it. If you
own the digital version, you can trade it twenty four
by seven and express your view. You want to go
long oil companies, great, You want to sell out consumer
cyclicals great. At a certain point, fiduciaries who are making
the decision to buy the analog version or the digital
on chain version are almost going to have to buy
and own the on chain version because it's tradable twenty
four to seven, it's programmable, and it's in ste and
least settleable. So you'll have to get to the point
where a fiduciary says to themselves, I can't own the
slow analog version because over the weekend, I can't express
my view. So it's going to be a tipping point
at some point, and I think that's a couple of
years away.
Speaker 1: That's such a great point because also holidays, right, and
with the markets heading towards twenty four to seven, you're
almost you're at a disadvantage if you're in the analog version.
You've got to get to this tokenized digital version.
Speaker 2: Yeah, but you need liquidity to tip back in the
favor of the liquid version, because that's important too.
Speaker 1: Well. I guess that's why it makes sense that the
stock exchanges, the major institutions, the banks, they're all headed
in the same direction to twenty four seven markets.
Speaker 2: Yeah, NASDAK New York Stock Exchange are going either twenty
three hours a day, seven days a week or twenty
four hours, and you would have seen just this week,
just yesterday, the DTCC, which processes and clears and settles
I think four quadrillion transactions a year US launched an
ability to tokenize collateral on chain. So I think it's
very exciting. You're seeing announcements every day that are becoming
so routine. They would have moved the markets three or
four years ago.
Speaker 1: And this is when you know you have momentum, absolutely,
and it feels the acid classes maturing. We're entering a
new level of adoption. It's pretty incredible. Final items, what's
on your role map that you can share?
Speaker 2: Sure, I think the most important thing right now for
what Sharplink is doing, beyond accumulating ETH and making it
productive and we've been the most productive DAT with our ETH,
is stepping up to do something that we never anticipated
we need to do, which is to become ecosystem stewards
and not just mouthpieces, but put your money into new capabilities,
spinouts from the Ethereum Foundation and basically help the go
to market for Ethereum. And it's very interesting. I get
the question of you know, whose interest is this in well,
it's in the interest of my shareholders. It's fully aligned.
So the idea that we're going to help Ethereum win,
whether it's the Layer one or the Layer two's and
tell the story about why ether the token is going
to become the in demand settlement and trust commodity, is
actually in the interest of my investors. So we're going
to lean into this along with our ecosystem partners and
try to be very good stewards. What we're not going
to do is get involved in the core protocol that's
fully decentralized. We're not going to get involved in the
management of Ethereum, but we are going to get involved
in funding the talent and funding the go to market capabilities,
and that's in our investors' long term interest.
Speaker 1: Love it, great stuff, Joseph. Always a pleasure, and I
look forward to our next interview and the future updates
around Sharplink.
Speaker 2: Thank you, Thank you, Tony. We've been in two cities.
I look forward next time to be in another city.
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