Alex Lin is Head of Research at Shima Capital.

Alex's Twitter: @linfluence
Shima's Twitter: @shimacapital
Shima's Website: https://shima.capital/

Logan Jastremski's Twitter: @LoganJastremski 
Frictionless's Twitter: @_Frictionless_
Frictionless's Website: https://frictionless.fund/

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Honestly, if I didn't look at the prices, if I didn't look at our market cap, I would say, you know, we're back in 2020.

And I think, you know, several trends like 0 knowledge, super, super hot topic, everything from privacy to scaling to a number of really unique use cases.

Discourse around infrastructure, the EVM, in my opinion, focuses a lot on infra, so on application layer protocols.

And I think that that was kind of visible and present.

That said, there was discourse on count abstraction, wallets, on ramps, whatnot.

I think it was just a good preface, in my opinion, to what's to come.

I think all of these protocols have really robust roadmaps that they're trying to fulfill over the next few years.

But it was a good reminder that, you know, things are still early.

Early can kind of mean different things, but I would say maybe immature.

And there's a long way to go, but super promising with respect to the types of people that are building these protocols, as well as kind of what they're envisioning.

Well, I'm super excited today to be joined by Alex from Shima Capital, who leads their head of research.

Alex and I have been chatting a little bit and I think this is going to be a great conversation.

I have obviously been a huge fan and viewer of the pod, so good to be on the other side.

Well, I would love to start a little bit about your background.

I always try to start the podcast with a little bit of context on who you are, how you got involved in the crypto world.

So if you could give a quick spiel, that'd be great to kick it off.

So I guess Kind of starting from the beginning with undergrad, I studied applied math, computer science and economics at the Virginia Military Institute.

I didn't end up commissioning for a number of reasons, which I'll explain.

In a moment, but through through my work.

I had a professor who 1st, kind of introduced me to.

Photography and a number of just base crypto systems in my degree.

And I remember thinking to myself, this stuff's really cool.

It was like, ranging from like Grosvenor basis concepts to obviously like the different encryption themes that we now see today.

And so I was kind of along the educational path of picking up what's kind of going on within the space.

But indirectly, I actually also was super into RuneScape growing up.

And I had sold a few accounts and was running a bot farm in college to people around the world.

And I had a few buyers of my accounts, And I played legitimately, I wasn't just a bot.

But I had a few buyers that purchased my accounts using Bitcoin for a number of reasons.

You know, they didn't want to use PayPal or they couldn't access PayPal.

And I remember it was very degenerate back then.

It was like using, I guess, degenerate in the word that we use today, in the sense that I was using like encrypted emails to communicate.

Like I was experiencing pseudonymity pretty early on, and I was receiving Bitcoin.

And Bitcoin, I think it was like 20 bucks at the time.

So that was like my first foray into the space.

Didn't really think much of it, read the white paper and was like kind of connecting the dots with the schoolwork that I had.

Fast forward to 2014, I was an intern at Dell.

And Dell had just started a partnership with Coinbase Commerce that summer when I was an intern.

And they essentially were accepting Bitcoin for the purchase of their products.

And I remember thinking, Oh, I have, I have some of this stuff or what remained from, you know, the Mount Gox hack and I'll just, you know, use this to purchase some items.

And this is kind of a sign that things are going mainstream in my mind.

Uh, it wasn't as bad as like the crypto or like the Bitcoin pizza purchase, but still, still hurts if I calculated out today.

Um, and so, and so that's kind of the second part of my, wow, things are kind of getting more serious time to dig a bit deeper And then, you know, I have these different kind of phases in my life.

I ended up going into consulting right after undergrad.

I didn't go into, you know, the space full-time or anything.

At Deloitte, when I was in S&O, Strategy and Operations, I tried to join the blockchain group in SF.

It was more so private blockchains at the time.

I think a lot of the big 4 consulting auditing firms were addressing kind of the hyperledgers of the world, trying to figure out what private blockchains and what they were and how could it change supply chain, for instance.

And obviously IBM leading that kind of initiative.

And then I ended up getting rejected from that opportunity just for a number of bureaucratic reasons, large consulting firm stuff, and then essentially removed myself from corporate opportunities with respect to blockchain, but kind of kept up with it over the years, 2017, 2018, so on and so forth until finally in 2020, summer, I guess, you know, DeFi summer, a number of other things kind of told me, hey, like you should probably consider getting into this full time.

During that time span, I was an engineer, PM, and founder at several Web2 companies.

I worked at Teed's AdTech, which was acquired in 2017, and then an enterprise SaaS company called Concertive, which was majority acquired in 2020, a long our capital PE firm.

And then I decided to go back to grad school to kind of focus specifically within crypto and studied computer engineering and got a technical MBA from Cornell, where strategically it was twofold, right?

I wanted to get into crypto full-time and I wanted to become an investor after being an operator for many years.

I think a lot of people realize how the power of crypto Twitter at the time during the bull market started tweeting, got the attention of a team called Old Fashioned Research, OFR, which is the former Binance executive team that helped bring in Axie Infinity, FTX, a number of other companies through Binance Labs.

They started a fund after they left Binance and joined them as a venture partner, did a number of deals for them.

And through that met the current GP of Shima capital Ida at Art Basel in 2021.

So like peak, you know, post above $3 trillion market cap, good days of crypto.

And yeah, joined Shima as I finished up my last semester in grad school, and this is now 2022.

And maybe just give like a quick overcap and then of Shima and then dive into, I know you recently went to Eat Denver, if you could kind of recap kind of that, but if you could share a little bit more about the firm and kind of like your high-level thesis.

So Shima Capital is an early stage, so pre-seed, seed venture fund focused exclusively within kind of the blockchain Web3 realm of investments.

And We raised about $200 million mid last year, pretty sizable for early stage.

But I think the way that we think about it is, we're really trying to build out a full stack firm that offers a number of different, I guess, support for our portfolio companies beyond the investment.

I think as an investor, you're aware capital is abundant even in the bear market.

Record number of capital is raised by firms to invest in the space.

And so you really have to differentiate yourself in a number of ways.

And so the way that we thought about it was, we're going to kind of focus on 4 core areas beyond the capital, which is we marketing.

So really focusing on amplifying the narratives of our portfolio companies.

We have a talent team to help recruit, you know, I would say beyond monetary capital, the most important capital is humans, human capital and what they bring to the space.

And so helping our portfolio companies hire the right people.

We do a lot of business development work, everything from table stakes of introductions and business development to strategic partnerships to just ensuring that our portfolio companies meet and get access to the right entities.

So we have a very technical operator driven team.

And I brought, I mentioned my background, a number of other investors on the team have previous operating experience.

And We provide a number of services from like technical advisory of architecture, design, token design, product development, to help kind of get our projects from 0 to 1.

We focus on a number of areas where general is fun within the space.

So DeFi infrastructure, middleware, to gaming, very heavy on gaming, NFTs, metaverse, so on and so forth, and kind of everything in between.

And that also kind of goes to the tech stack, right?

So application layer protocols all the way down to network layer.

Well, we'll definitely get into some of those specific names, but as a participant in the recent events at Eat Denver, I'd love for you to kind of like recap some of the big themes that you saw while attending at Eat Denver and kind of overall market sentiment?

The amount of people that came out, I think the record number kind of ranged between 25, 000 to 35, 000 people.

I arrived a few days earlier than from kind of the main event because there are a lot of side events from like Hacker Houses to the Interop Summit, which was sponsored by Axel Art.

That was an incredible two-day event focused on cross-chain interoperability.

And then there was like WallyCon, which was like a one-day event.

So there were a lot of kind of tertiary events in addition to the main event, which I think really boosted the attendance and really boosted just general overall positive sentiment, right?

So across all of the different side events, you know, builders are building.

Really good discourse among founders across, you know, the different protocols and organizations within each vertical.

And yeah, I couldn't be more bullish, honestly, if I didn't look at the prices, if I didn't look at our market cap, I would say, you know, we're back in 2020, we're back in, or I guess 2021, 2022, early 2022.

And I think several trends are kind of being rotated maybe a bit too much or discussed too much as like 0 knowledge, just a super, super hot topic.

Everything from privacy to scaling to a number of really unique use cases, which I think we'll touch on a little bit later.

A lot of kind of discussions and discourse around infrastructure.

I think that the EVM, in my opinion, focuses a lot on infra, less so on application layer protocols.

That said, there was, you know, discourse on count abstraction, wallets, on ramps, whatnot.

So I think it was a very, I would say, comprehensive and well-rounded ETH Denver.

So everything was pretty much touched on, but if I had to, I guess, extract a few things, big focus on interoperability, big focus on use cases from like kind of a web 2.5 on ramping wallet access perspective and then 0 knowledge.

Maybe if we could just touch upon those 3 then.

On the interoperability side, what were some of your biggest takeaways from the conference and just what people were specifically excited about from the interoperability point of view?

Yeah, so interoperability is a very catch-all term, as is with, I guess, CKs and a number of other themes.

I would say there's a lot of attention kind of with respect to EVM, you know, on like the Shanghai update coming up and the shared security around that, what it means for liquid staking and protocols like Eigen layer and Babylon chain with leveraging staked assets to improve the security of other middleware infrastructure protocols.

And so I think that that was a very common theme and I think that that's really exciting, but also just realizing how early it is.

If we just think about interoperability cross-chain at its kind of core idea of bridging different protocols, right?

Layer 1 protocols, layer twos as well, layer 0, Axelar, Orblabs, Hyperlane, right?

So a number of these different solutions are still pretty much, in my opinion, in its infancy.

And you can categorize them in its infancy in different areas, right?

From like the scalability to security, to really what can be built on top of these messaging protocols.

And so I think it was just a good preface, in my opinion, to what's to come.

But it was a good reminder that things are still early.

And there's a long way to go, but super promising with respect to the types of people that are building these protocols as well as kind of what they're envisioning.

And then is this like particularly interoperability between like the middle layers or between layer twos, like, or all of the above?

I would, you know, I think IBC is probably 1 of the most mature, I guess, examples of interoperability within the Cosmos ecosystem.

And they just had like an update, I think yesterday or 2 days ago, with respect to interchain querying.

And so, yeah, so I would say all of the above, but I think a lot of attention is around just like taking staked assets from 1 chain to another, and it's not, and it has been less so, you know, around, so like Babylon Chain, for instance, taking SACE Bitcoin and leveraging that to enhance the security on Cosmos or EVM, Eigen Layer to enhance security within EVM, So on and so forth.

So, there's that aspect, but then you have your typical, you know, XLR or layer 0, the applications being built on top, for instance, like a Cedro Finance, who's building out a lending borrowing protocol, to that's like native.

So you're not using any wrapped assets, unlike say for instance Aave's portal.

So it's kind of like these are all developments that are happening and I would say it could mean across layer ones, it could mean across layer twos, it could mean across or within an ecosystem like Cosmos.

And then on the layer 2 front, I mean, within like 0 knowledge, obviously being a hot topic, was there a main kind of focus because layers or 0 knowledge can also be kind of a all-encompassing term.

Was it more focused on privacy or like strictly kind of viewed through the lens of scalability?

Yeah, so I saw an interesting dichotomy occurring between attendees and builders.

A lot of the builders were looking at and leveraging 0 knowledge for use cases more focused on the application layer side.

So I met some great founders, or excuse me, builders at like the 1KX to Lindum Hacker House that was focused on building a ZK wallet.

Also, there was a project building out like a ZK Oracle that enhances kind of real-world assets, bridging on the chain, and which would enable a lot of applications to kind of be built on top of that.

Whereas a lot of the discourse at like ZK Day, for instance, in the discussions I had with people kind of walking around, it was very much around scaling, very much around privacy and kind of the consistent themes that we've seen with ZK over the last few years.

So I think that bifurcation is starting to happen, which I think is very healthy, right?

Because On the builder side, we need more application layer protocols.

And I think from a scaling perspective, there are a number of advancements that really need to be battle tested by applications.

And so, I'm very bullish on kind of the headspace that builders are kind of going through with respect to focusing more on applications when it comes to zk use cases.

Yeah, I think we'll probably maybe dive a little bit more into like layer twos down the line but on the last note that you kind of touched upon like as a main theme was like the wallet space and account abstraction.

How do you feel like that is going to kind of shift the momentum like in the Ethereum ecosystem?

Yeah, I think it's such an important topic.

That honestly, even with more attention being put on it.

It's still not enough in my opinion, and I believe there was an account of traction update.

That happened during the week, and I haven't I haven't even been able to catch up on it and I remember seeing a tweet that was highlighting, you know, account abstraction happened and no one's talking about it because everyone's at Denver or whatever.

But it's, I've always had kind of a problem with the, how we've addressed wallets and how we've addressed on ramps.

I think it was a necessary evil to kind of get to the point that we are today.

But I've been, you know, I've been pretty vocal about, you know, for instance, on the EOA side, how MetaMask, like the best thing that could probably happen to the space is if MetaMask were acquired by like a more product or first principle product company, like an Apple, for instance.

But, you know, I think before the podcast, we were talking about this distribution is something that MetaMask was able to achieve something that no other wallet to this day, even, you know, while it's that have exceptional user experience and user flows such as Phantom, Backpack, et cetera, on the Solana side, that they just haven't been able to reach, you know, I think 10 million plus, 11 million MAUs on the Metamask side.

And all that really needs to happen, and I'm obviously generalizing, but all that really needs to happen is this focus on ensuring that, you know, users have safety, have security, and have really good access to different application layer protocols that I think a lot of the work that has been done thus far has been ignoring.

And so I think we're kind of bringing up this MPC, multi-sig, a kind of traction conversation because nothing has happened yet.

And we're kind of thinking of different ways that we can enhance that experience.

But I would say, you know, the conversations at the conference kind of reflect a lot of what I'm saying now.

And hopefully very soon, some of these things will be realized, but still kind of in its infancy and hopefully we can speed that process up a bit more.

Now I'm definitely interested to see how it all plays out.

I think the fact, I mean, the industry is getting mature, more mature, but I would still argue it's very, very early in terms of like user adoption and just general adoption on chain.

So to that kind of point, I mean, Ethereum ecosystem, I mean, at the moment kind of undisputed as like the king of like where things are happening.

But how are you personally like thinking about other various ecosystems, whether it's layer ones or layer twos and like kind of the scaling roadmap that some of these different ecosystems are taking?

Yeah, I think it's really hard to say, right?

We constantly ask, why does there need to be another layer 2?

What does there need to be another layer 1?

I think when it comes to just the actual development of these protocols and you kind of break down the stack, it makes sense.

But it obviously comes at a cost, right, for the end user and for our industry as a whole.

For me, I think that if you kind of break down the stack, right, from consensus to the network protocol to the data availability that you choose, settlement, execution, right, all the different components, the node software, the client, there are incremental innovations happening at each part.

And the combinatorics of those like innovations exceed the number of protocols that we see today.

And so in my mind, right, the upper bound is a significantly higher number of alt L1s and L2s, which I'm not saying that there should be, but it makes sense as to why people continue trying to build out more and more.

And so, and then when you start tacking on the community and you start tacking on kind of more of the non-technical side of things, then you even have more, you have like, you know, I guess larger design space, right, to work with.

And so the current state of things, I would say, we obviously see our consistent players with Solana, Avalanche, EVM, of course.

It's like Phantom making a comeback with Andre coming back.

The Arbitrum, Optimism, ZK battles, between, I guess, Optimistic Proofs and ZKs.

In my mind, they're all just innovating at different parts of the stack, some more than others.

And I think it will continue to play out that way, right?

I think that it's kind of like this, you know, the whole competition drives innovation race, and I'm okay with that.

And I'm glad that there is a lot of conflict and discourse on, you know, Twitter and media between the 2 or between all the different players, because it really kind of breeds a good thing for the industry at the end of the day.

That said, you know, I guess kind of digging a bit further and kind of double clicking on some of these areas.

The question is, what is more important to focus on?

So for instance, parallel execution is very top of mind for a lot of these protocols.

Solana has done it quite well with C-level, but at the sacrifice of maybe some other issues that they've experienced and people like to call them out for the network and going down and whatever.

But if we just focus on C-level, that innovation is quite important in the overall competition and I guess market landscape of what is possible, right?

I would say that the idea of independent transactions, how to identify independent transactions is very difficult.

And Solana, for instance, makes programs stateless, requires transactions to specify all state, and to read or write that during execution is like, is really incredible.

And so that's why you see the record TPS that they've achieved over the last few years.

SWE, for instance, MIST and labs, so they do it at the bytecode level through MOVE, smart contract language, that is object oriented.

And so with kind of that functionality and that kind of difference, then you have digital assets that are represented by the built-in resource of that asset type.

And so on EVM, for instance, each transaction operates on the global block state, right?

But in suite, every transaction operates and provides reference to the actual objects itself, right?

And so any object that doesn't have the same input or output can be executed in parallel.

Multiple inputs, multiple outputs, and in any UTXOs that aren't aligned with a previous UTXO, then you can parallelize that relationship.

So like, it's really fascinating to see all of these developments and like, you're doing it in so many different ways and that's just 1 thing, right?

Parallel execution versus everything else that I listed as a component to the stack.

I mean, there's kind of these big innovations, I think that going from like 0 to 1 type things.

And I think going from like single threaded virtual machines to parallel virtual machine was a pretty big jump.

On that front, I mean, you kind of listed off like various different ways of doing parallelization.

In your point of view, is there 1 that has specific advantages that you think will, over time, as long as that community kind of gets built out, will kind of be the dominant kind of virtual machine strictly on like a technical side?

I think it's hard to say because a lot of the stuff that I mentioned isn't truly battle tested or proven out yet, in my opinion.

And like I said, on the Solana side, it comes at a cost maybe in other areas of their protocol.

You know, with proof of history, you know, not being able to, you know, once it gets bloated with transactions, it could go down.

And SWE, I think that SWE is really interesting because I'm not too sure how they're versioning the different objects, for instance, and the different states within those objects to allow for that kind of execution.

Monad, which is a recent investment that we made, like they're improving upon the EVM, right?

And so like the, how they identify the transactions and ensuring that, you know, transactions that don't need to be linear are pulled out and executed in parallel is kind of their innovation.

It's all super, you know, essentially they're like moving the bottleneck from 1 process to another part of the process.

And at the end of the day, it could all end up performing the same, right?

And so that's like another risk associated to kind of this method.

But I think that's a hard question to answer at this point in time.

But I think there are advantages conceptually that we can kind of see, right?

So like on the SWE side, doing it at the smart contract language side, it allows for a lot more flexibility with like the compiler and just being, you know, super low level, there's a lot more design space.

And I think there are limitations with hardware and latency of the actual blockchain that also affects what they can parallelize, depending on, you know, like for instance, fuel doing it with UTXO.

So, so yeah, I guess I could go on and on, but I think it's, I'm giving you a non-answer that it's too hard to tell.

I'm definitely, if anything, kind of a parallelization maxi.

I think it's super important to have parallel virtual machines.

But on that front, I think, I mean, industry is kind of bifurcating in some sense where you have these kind of like large kind of single state ecosystems where they're trying to keep everything on a single shard and then you have ecosystems like Cosmos and avalanche where they're trying to do application specific chains or either kind of migrating from an L1 to an L2 and having different L2s.

How do you kind of see in these like different architectures from an infrastructure like standpoint, like, are there any like kind of specific ecosystems and designs that you're leaning towards?

Are you kind of agnostic and just kind of like, we'll follow the builders and wherever they choose to build?

Yeah, I think that's, It's really interesting kind of the state that we're in.

Or I would say, okay, I think there are differences there.

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Alex Lin | Head of Research at Shima Capital | Market Outlook and New Developments | EP #67