Dean Thomas on Polygon’s institutional growth strategy in 2021

0:01i'm ashton addison from block west capital for investmentpitch media in the cryptocoin show and today on blockchain interviews we have dean thomas the global head of institutional capital at polygon dean welcome to the show and thank you for taking the time to come on what's up ashton thank you for uh having me on it's an honor you're very welcome i'm excited to dive

0:21into the world of polygon in the institutional capital side i know your team is super busy creating new funds diving into all the different spaces in cryptocurrency and there's a lot to talk about but i do want to dive into the institutional side for this interview but first i would love for you to kick it off for us with just a high level on polygon

0:41a little bit about the platform what your team has been working on in the last year and then we can dive into those details sure so polygon uh is a approximately 15 billion dollar protocol so what we do the core problem that we solved initially was ethereum's high gas fees so if anybody's played around in ethereum and metamask moving money around you'll

1:01notice that it costs you sometimes 50 hundred maybe thousands of dollars to move uh from one transaction to another so it's quite pricey um and so polygon initially was was named matic um they sought out to provide a scaling solution to allow these transactions to occur instead of costing fifty hundred thousands of dollars for fractions of a penny and so from there we've blossomed

1:22into this conglomerate of different scaling solutions and so we have basically sought to either acquire or invest behind or grow with teams that want to solve the evm compatible future and to make it accessible to everybody whether it's a corporate so we have polygon nightfall which we've partnered with ernst young on to something like the the plasmachain which

1:44is the original chain that we we've worked with to um something like polygon hermes which is a perfect solution for uh microprocessing in terms of payments and we acquired them recently in the first ever m a deal for 250 million so it's an interesting time to be alive in this space for sure i did see that and congratulations on that that's a huge move for

2:04cryptocurrency one of the largest acquisitions of crypto company into another um and yeah it's been quite a wild ride i remember back when it was manic network and people were like man ethereum so expensive we can use matic um as the layer two solution and then now with polygon expanding out there's just so much going on with the hundred million dollar fund and all of the other

2:28initiatives in d5 and you know i wanted to talk about some of those challenges i know the main one that you mentioned is solving the transaction fees making it faster and cheaper and that was a huge pain in the d5 space specifically because you didn't have centralized exchange covering those costs for you it can be really expensive for new users and you know maybe for

2:50institutional capital that has a lot of capital it doesn't matter as much but it's still a huge burden and and polygons solve that but now you've ventured into other spots in d5 maybe you can talk about some of the main solutions that institutions are using uh with polygon uh right now that you've built out yeah it's interesting that you said that uh if you're you're a larger institution

3:12it might matter less actually uh transaction costs scale just as much as the transactions that you perform right so uh recently i was linking up with one of the centralized borrow lend players um which i'm sure your listeners will be very familiar with i'm not gonna say which one but the ceo pulled out his app and said listen dean this is how much we've covered in terms of ethereum gas

3:31costs this year just for our customers alone and we were looking at a number of around like 10 million dollars or something it was just constantly racking up as people withdrawing depositing live and so we linked up with their team we're like what would this cost look like if we were to put it on polygon mainnet and so they spent two weeks or so they came back and the number was

3:49around three hundred dollars and so as you can imagine like a difference of you know for pnl of 10 million dollars is quite drastic for just one simple use case such as a borrowland uh centralized business and so this has scaled into all other areas you mentioned some of them like defy but also nfts metaverse gaming so as you can imagine if i'm in a game

4:10with you and my character kills your character in order to lodge that transaction in the blockchain or register the fact that now your gold is now my gold or your weapon is not my weapon if you want to pay 50 in gas fees every time we do that that game you know quickly doesn't work right whereas if i'm giving fractions of a penny to do that suddenly it's much more feasible

4:27and the game designer themselves can either eat that cost or pass it on to their users through various subscription models etc and so all the things that were theoretically possible on ethereum that metallic described as white paper they're now becoming practically possible because we're offering in a way that allows users and developers to transact very very cheaply and still use

4:48the same evm compatible tools and the ethereum based uh solidity programming that a lot of developers are used to and kind of become battle tested over the past few years definitely and i really love that everyone is on board with the evm compatibility making sure that all of these different blockchain protocols are able to work together for a common goal and not fight against each

5:11other because the the market share of cryptocurrency compared to you know the entire stock market equities derivatives is just so small and i want to talk about that a little bit more because people say in 2021 like institutions are here you know institutional capital is investing in a lot of these major protocols yet the market cap is still fractions of a percent of you know what

5:35it could be in if you consider derivatives and stocks and all other types of investments so maybe you could give your perspective as head of institutional capital on institutions coming into cryptocurrency in 2021 you know is there still a lot more capital to come in where are we at right now and where are we headed in the coming years with institutions

5:54yeah that's exactly right so uh right now our cryptocurrency market cap and totality is around 2.8 trillion dollars plus or minus um that number like you said very accurately is probably less than one percent of global assets whether you can consider it global equities global credit real estate commodities etc and so a question i like to always ask is what does the

6:14world look like when that less than one percent number becomes five percent becomes ten becomes 20 because us operating the world this this web 3 world we firmly believe that it's going to swallow all aspects of traditional finance traditional media technology social networking etc and so when that engulfment of the traditional world happens there's going to be a mountain of

6:36tsunami or a tsunami of capital that comes into this space and the question is then which projects which protocols and which forms will absorb the pareto 80 20 of that right and so a large part of my job is helping be in touch with the traditional finance players with the massive balance sheets and figure out okay like what is holding you guys back from investing in something like polygon

6:57through our matic token there are other ways that we can create vehicles that it's easier for you to to hold exposure and so we recently launched the osprey and bitwise vehicles which allow accredited investors to hold an equity-like instrument on their balance sheet and then that equity-like instrument then will give direct manic exposure instead of having to solve the

7:15issues of self-custody figuring out kind of who your custodian would be you know which wallet to use et cetera et cetera just keep your mandate as is and you can buy these uh vehicles and we have around four or five more coming out um that will then eventually be publicly traded and so the eventual goal is and i think all of us can can agree to this i think

7:34uh because a lot of crypto native people people come and say hey dean if we already have a metamask we have coinbase we have like finance we have ftx why would we need these equity-like instruments and a very a simple question uh answers that is um we all at least in the u.s we have retirement accounts right like 401ks rras et cetera there's money that's kind

7:53of tracked there until your your retirement age and money that's trapped there right now does not have access to buying bitcoin does not have access to buying eth like as the coin itself right but the only way that they can have access is by buying vehicles like these that we are creating such that they can you can use your kind of simple stock brokerage account click buy and you'll

8:13have exposure to the matic token or the ethereum token or btc such that if you pay them a small fee you still have most of the upside which we believe you know will far outweigh in the long term any uh space management fees that these vehicles will charge definitely very cool dean yeah i was just going to ask you about those vehicles and and how it's going to grow

8:35and that's very interesting that your team has just created you know some more traditional equities and i would love to dive into that a little bit more i've i know about you know there's bitcoin etfs there's ethereum ones as well in canada where now traditional investors can buy publicly listed stocks that have exposure to ethereum is that similar to

8:57what polygon is doing or where it's at right now or that's where you're working towards yeah so i think the whatever shape it is whether it's an etf etp etn trust whatever you want to call the name the fundamental uh problem that we're looking to solve is how do you allow investors who are very familiar with traditional equity credit etc to invest behind and bring non-crypto

9:21assets into the crypto world right so as you as we quoted earlier like the 2.8 trillion dollar number which is the entire market capitalization of our space you compare that with a real traditional finance asset manager like a blackrock for example who has nine trillion dollars plus in assets that one asset manager has multiples of what our entire space is right in terms of assets and

9:42management and so the question is how do you educate and allow the portfolio managers of those traditional asset managers to get comfortable with investing crypto first and foremost and then how do you give them the vehicles and tools so that they don't have to figure out how to download and install metamask how to add the token how to do it all the stuff that we've learned to

10:00do sd gens in the space but you know as traditional finals people who are used to kind of their bloomberg terminals etc how do you bring it to them right which is kind of part of our job is to basically educate and bring ease of access to the technology that we've created to these investors with massive balance sheets and allow them to get comfort putting their name and

10:19reputation behind our projects definitely well said dean and you also mentioned part of your work is finding through pareto's law you know where is 80 of the that institutional capital going to move into now is it going to be in those assets that are able to uh get exposure from traditional investors through these equity-like vehicles like with bitcoin ethereum and

10:44polygon or are there other uh strategies in in finding out you know where's that capital gonna move into so i can make a move ahead of time and and look towards the future yeah that's a great question i think if you look at the crypto markets you'll like historically speaking for example there's always been the coinbase premium right which is the idea that like once a

11:04token is announced to be listing out a coinbase or another big exchange there's going to be a massive rise in price and what is the fundamental driver of that the fundamental driver of that is you previously had an asset that was largely inaccessible to the broader investor universe and then once they get listed onto an exchange like a coinbase etc you suddenly have so many more

11:25access points and investors and eyeballs on this asset class which then obviously brings in a lot more attention and capital that raises the price of this asset so similarly my job at polygon is essentially bringing thematic token and the polygon name and what we stand for and all the research that comes to kind of the ethereum scaling problem that we bring with us to traditional

11:50investors and creating vehicles so that they too can have eyeballs and attention capital flow towards thematic token which we think we want everybody to be involved in this revolution and we think that as we continue to scale and as our network effects continue to grow this is going to be an exponentially growing asset in terms of value and so just for

12:11context um last year around this time we had around i think 30 to 50 daps on our network total today we have over three thousand and so like as just like a pure growth standpoint we're on a crazy rocket ship and the question then becomes like as more functionalities built out as more people adopt our infrastructure as what they want to build on um what

12:37does what is the value of that network and if you look at all metrics valuation whether it's transactions whether it's um you know apys in terms of yield on staking et cetera we are at the top of those metrics relative to any other major chain and in many regards we're largely undervalued relative to the matrix that people are familiar with and so a large part of my job is to help

12:58educate people to who we are what we're about what the key metrics are to measure and look at us with and some of them for example daily transaction volume right we have far exceeded the daily transaction volume of base ethereum anywhere from six to eight times consistently and we this month or maybe two months ago uh exceeded the daily active users of ethereum for the

13:21first time ever um and and so it's really cool because like anybody who enters into crypto i think you first learn about um you know the inflationary problem people are printing a lot of money you learn about bitcoin you learn about you know 21 number and how there's a finite quantity et cetera and from bitcoin you learn about ethereum and then you start playing

13:38ethereum you're like oh wait stuff doesn't actually quite work this is very expensive and you know it cost me more than my yield to just deposit it in this vault are there other solutions and then they learn about us right polygon and then that's when things start really taking off and um i'm excited to just be a part of the space very grateful uh to

13:54be where we are definitely yeah it's very exciting and i think you nailed the story right on the head that was that was it for me it was bitcoin ethereum and then then from there you just break through into there's just so much to learn about and polygon is obviously a huge staple uh to to know about um and now i want to look forward but maybe you could give a quick snapshot and remind

14:16me this um this vehicle that you have for institutional investors is that live right now on on the private side can institutional investors invest today and then where are you moving forward uh down through 2022 to get more institutional investors through this same vehicle yeah so right now we have two uh institutional vehicles live so you have been accredited investor but you can

14:39invest as small as a track as ten thousand dollars so we have one with osprey we have them with bitwise and we're we're going to be launching several more that eventually will go public in the european stock markets and so the eventual goal is like if i have a robin hood account that has access to the swiss stock exchange where i have a fidelity account or charles schwab

15:01account um or my grandma has it you know you can be like hey this polygon thing is really exciting and if you want exposure behind the narratives that we are and growing into then this is a good asset class to to have in your retirement account and so it could be as easy as just putting the ticker and then clicking by and you know there you go and you have exposure to

15:20the matic token very cool and with moving into those traditional financial markets especially in different jurisdictions you know going from united states to europe as well does polygon work with the regulators or are you following the regulation on how that moving these crypto assets into the traditional markets you know it affects uh the regulation

15:44uh regulation is something that we keep uh an active eye on i i don't know that anybody really knows what um you know things are gonna come down looking like we all we can do is just kind of keep building keep growing keep solving problems and then when regulators decide hey this is kind of the rules of the game that we want to establish we'll be in perfect compliance

16:05with that right we'll work work with them and try to figure out solutions definitely and for the viewers that are looking to learn more about polygon about the dapps that have launched and for institutional investors that are looking to have access to these vehicles and for exposure to manic and polygon what's the best way for everyone to learn more

16:26yeah so our website is polygon.technology uh if you're an institutional investor or just trying to to learn more about ways we can partner together my emails dean at polygon.technology if you want to buy exposure to our underlying token it's matic m-a-t-i-c it's available in most exchanges centralized and decentralized and these vehicles that we're launching

16:48you know check out the bitwise website the osprey website we have you know four or five other ones coming up down the pipeline and i'm just excited um to be a part of this uh and um you know a very small piece of it but we're helping bring like we said the next 10 trillion dollars into this crest class definitely uh it's it is super exciting dean and thank you so much for taking

17:09the time to come on and to talk about polygon and these vehicles uh i'm looking forward to the future and to follow up with polygon in the near future until then have a great day awesome thank you so much ashley really appreciate it