This interview debates whether crypto's value comes from being a store of value (like gold) or from being useful (used by people daily). Multicoin Capital's Kyle Samani and Tushar Jain disagree. Kyle is bullish on Ethereum (ETH) because it's used for apps, and he's 'intellectually short' Bitcoin (BTC), calling its network effect weak. They also discuss EOS, which has zero fees and higher speed, as a competitor. Kyle even predicts zero-knowledge proofs (a math trick that verifies data without revealing it) could make blockchains obsolete in 10 years.
Multicoin Capital managing partners Kyle Samani and Tushar Jain discussed the core investment logic of the cryptocurrency ecosystem on a program. They noted that for the total market cap of cryptocurrencies to reach $5–10 trillion, it must be driven by "utility value" rather than solely "store of va
Multicoin Capital Managing Partners Kyle Samani and Tushar Jain debated the investment logic of cryptocurrencies on the show, with the core disagreement centering on whether value derives from "store of value" or "utility." Kyle Samani argues that the war among smart contract platforms will be the most epic battle in tech history—more intense than iOS vs Android, given the larger number of participants, greater capital availability, and stronger global reach.
Kyle Samani argues that there are two fundamentally different paths for the total market capitalization of cryptocurrencies to reach $5–10 trillion.
Store Value Hypothesis: Championed by the Bitcoin community. The core requirements are minimal — security, self-sovereignty, censorship resistance, and fixed or extremely low inflation. Bitcoin is the purest representative of this hypothesis. "Any other functionality that comes at the expense of these core features may not be worth having."
Utility Hypothesis: The most useful (most widely used) cryptocurrency will become the most valuable. This is classic Silicon Valley thinking — get people to use it, solve problems, and the market will ultimately crown the most widely adopted asset as the global digital reserve asset.
Tushar Jain adds a key historical analogy: The reason the dollar succeeded after leaving the gold standard "is because people were already accustomed to using the dollar as money — no one truly relied on its convertibility to gold to deem it valuable." He believes the dollar actually falls under the utility hypothesis, not the store of value hypothesis.
Kyle Samani claims to be "intellectually shorting Bitcoin" and is relatively bullish on Ethereum.
His chain of reasoning: In the long run, the bubble will eventually burst. When people look around and realize that "this one (Ethereum) is being used to do things every day," it will create a price floor for the most useful asset. "I believe there will ultimately be an even bigger bubble, and when expectations fail to materialize, people will ask: which assets are being used every day?"
Tushar Jain adds: Most people’s first encounter with cryptocurrency is likely not through Bitcoin, but through a decentralized application (dApp), such as the Augur prediction market or a decentralized social platform. This reinforces the utility hypothesis—"things become money by being used as money."
Kyle Samani breaks down the fundamental architectural differences between Ethereum and EOS in detail:
| Dimension | Ethereum | EOS |
|---|---|---|
| Decentralization | Extremely high (all nodes validate all transactions) | Moderate (limited number of block producers, replaceable) |
| Throughput | ~15-20 TPS | Significantly higher |
| Latency | ~15 seconds/block | Lower |
| Transaction fees | Users pay Gas | Zero transaction fees for users |
| Economic model | Ether used to pay Gas | Holding EOS grants access to network resources |
Kyle's assessment: "Consumers in 2018 will not accept 15-second latency — we are used to LTE." Ethereum's architecture is "better suited as a store of value that happens to have smart contract functionality."
Tushar Jain emphasizes: These design trade-offs are "political/philosophical decisions that cannot be replicated." Ethereum could copy EOS's account recovery feature, but altering the decentralization trade-off "will not be seriously considered."
Kyle Samani proposes a framework for classifying network effects, challenging the misuse of Metcalfe's Law:
1. Metcalfe's Law (N²): The theoretical upper limit; in practice, "nothing can sustain quadratic growth forever."
2. N log N Curve: Superlinear but with diminishing acceleration — applicable to early-stage telecommunications networks, explaining the defensibility of platforms like Facebook.
3. S-Curve: Marginal value eventually diminishes — explains why Uber and Lyft can coexist, and why there are seven global instant messaging giants.
4. Logarithmic Curve (log N): Network effects of store-of-value assets — "the value of each marginal unit of liquidity declines rapidly."
Kyle's core judgment: "If Bitcoin becomes digital gold, its network effect is roughly log N; if it becomes digital cash, the network effect is closer to an S-curve. Exponential growth from the start (even in the first half) is far more valuable than logarithmic growth from the start."
Empirical evidence: The cryptocurrency exchange market — "If an exchange has a daily trading volume of $100 million and you are only selling $500,000 worth of Bitcoin, do you care whether the liquidity is $100 million or $1 billion? The answer is no."
Kyle Samani presents a counterintuitive long-term thesis: current blockchain technology could become irrelevant within 10 years.
Mechanism Breakdown: Nick Szabo proposed that Bitcoin uses "technical inefficiency in exchange for social scalability"—replicating transactions across 100,000 nodes to ensure trust. However, zero-knowledge proofs (ZK-proofs) can achieve this: someone runs an arbitrarily large computation, generates a proof of a few hundred bytes, and the verifier can confirm the computation is correct without knowing the input or the function.
Extrapolation: "10 years from now, will we look back and say: 'Remember when we thought the right answer was to replicate everything 100,000 times? When you could just generate a proof and get the same mathematical guarantees?'"
Tushar Jain adds: This does not negate digital assets themselves, but changes the way "who maintains the network"—from 1 million nodes to a few trusted proof generators, because their proofs mathematically guarantee that no protocol has been violated.
Tushar Jain explains Multicoin's investment methodology:
Core Premise: In the open-source world, all features can be copied. "It's not as simple as Ctrl+C, Ctrl+V, but it's far easier than in the closed-source world."
Key Question: What cannot be copied? The answer is design trade-offs.
12-Dimensional Trade-off Space (examples):
Investment Decision Process:
1. Identify the asset's position in the trade-off space
2. Assess the probability of that position capturing value
3. Compare market pricing with own pricing
4. Invest when a discrepancy exists
Kyle adds: Go-to-market is equally critical. "My favorite blog post title is 'If SaaS Could Sell Itself, Why Would You Need Sales?' — sales create value in the customer's mind. Engineers love the 'build it and they will come' mentality, but in reality, you have to instill 'why this thing is useful' into the customer's brain."
| Point of Disagreement | Kyle's Position | Tushar's Position |
|---|---|---|
| Bitcoin/Lightning Network | More pessimistic—believes the utility hypothesis will prevail in the long run | More optimistic—believes the Lightning Network can solve Bitcoin's scalability issues |
| Research Direction | Explores "which of the current assumptions might be wrong"—zero-knowledge proofs could disrupt blockchain itself | Focuses on the infrastructure layer—financial primitives such as prediction markets and tokenized securities |
Tushar describes the internal culture: "Our job is to make decisions. The best decisions come from productive debate. We encourage arguments within the team, as long as the reasoning is sound."
| Position | Guest Sentiment | Key Data |
|---|---|---|
| Bitcoin | Kyle: intellectually bearish; Tushar: relatively bullish | Transaction fees reached $50 in December 2017; still dominant by market cap |
| Ethereum | Bullish (Kyle especially positive) | Throughput 15-20 TPS; 15-second block latency; Foundation holds over $1B |
| EOS | Bullish (as an Ethereum competitor) | Raised $4-5B; zero transaction fees; limited block producer model |
| Augur | Bullish (as a financial primitive) | Launch imminent; decentralized prediction market; REP token used for dispute arbitration |
| DFINITY | Mentioned in portfolio | No explicit sentiment stated |
| Tezos | Mentioned in portfolio | No explicit sentiment stated |
| Cadena | Mentioned in portfolio | No explicit sentiment stated |
| Solana | Mentioned in portfolio | No explicit sentiment stated |
| Monero | Mentioned as a privacy coin candidate | No explicit position stated |
1. Kyle Samani’s judgment: The smart contract platform war will be the most epic battle in tech history. More intense than iOS vs Android — with more participants (30–40 platforms), deeper pockets (EOS raised $4–5 billion, the Ethereum Foundation over $1 billion), and greater global reach. "These teams all believe these things could be worth $100 trillion, so spending $10 billion to compete is rational."
2. Kyle Samani argues: The network effect of a store-of-value asset follows a logarithmic curve (log N), not an exponential one. "The value of each marginal unit of liquidity declines rapidly" — which explains why so many crypto exchanges coexist. If Bitcoin is merely "digital gold," its defensibility is far weaker than market consensus suggests.
3. Tushar Jain argues: Things become money by being used as money. The dollar succeeded after leaving the gold standard because people were already using it. Similarly, people will first encounter cryptocurrency through dApps (e.g., Augur’s prediction market) rather than by buying Bitcoin directly.
4. Kyle Samani argues: Zero-knowledge proofs could render current blockchain technology irrelevant within a decade. "Replicating transactions 100,000 times" could be replaced by "generating a few hundred bytes of mathematical proof" — achieving the same trust guarantees but with orders of magnitude greater efficiency.
5. Tushar Jain argues: The open-source world changes the rules of investing — features can be copied, but design trade-offs cannot. The core of investment evaluation is identifying where an asset sits in a 12-dimensional trade-off space (e.g., decentralization vs. scalability) and judging whether the market has priced it correctly.
6. Kyle Samani argues: Go-to-market is severely undervalued in the crypto world. "Sales create value in the customer’s mind" — the engineer’s "build it and they will come" mentality doesn’t work in a world that requires mass adoption.
7. Tushar Jain argues: Tokenized securities will create an entirely new design space. For example, "hold 10 shares of Apple stock for one year and get an iPhone discount," or "hold REIT shares and receive a rent discount" — financial products that traditional finance cannot offer.
8. Kyle Samani argues: Ethereum’s architecture is better suited as a "store-of-value asset that happens to have smart contract functionality." With 15-second latency and 15–20 TPS throughput, it cannot support globally usable applications — consumers will not accept it.