Polygon's Colin Butler on institutional adoption

0:01I'm Ashton Addison from Block West capital for investment pitch media and today on the Crypto Coin Show we have Colin Butler the global head of institutional Capital at polygon Colin thank you so much for taking the time and pleasure to speak with you today yeah pleasure to be here thanks Ashton you're very welcome so much has happened since our team has spoken to

0:20polygon almost a year ago now it's you guys have completely continued to expand I'm very impressed with the Partnerships that polygon is making and the growth compared to some of the other blockchains and even so just getting in a lot of huge companies some of the biggest companies in the world understanding the value proposition from web3 and utilizing polygons technology

0:42to bring value to the to their users into the world I would love to start off a conversation with just you know a little bit on yourself and how you got involved with the institutional side at polygon and then we'll dive into the polygon specifics yeah absolutely just a quick background on me I spent about 20 years on Wall Street with various Physicians within

1:03investment Banks from Equity sales and trading to Investment Banking I came into crypto a little under a year ago really started reading things like the Bitcoins standard and Missouri and getting down the rabbit hole and at some point I think everybody that goes on this journey everyone has their own story right and it almost like takes over your entire

1:24body where you just like you feel like possessed like you have to work in this business because you think like oh my God like there's X Y and Z and it's just so much better than kind of traditional rails like orders of magnitude better but really what it is I guess I mean everyone has their own reasons right it's democratization but one of the things that really

1:41stuck with me was that real really like the alignment of Interest where the Builders of the network containers of the network and the users of the network were all aligned right there's there's no more kind of misalignment where there's a certain small Cadre people at the very top with kind of all the power and control all the data and then there's a bunch of people down here that

2:00are essentially providing those people with high high incomes and yet not extracting a lot of value out of it so that was that was kind of like one of the core thoughts that made me say okay you know this is a paradigm shift for the way human beings interact I mean it's not a you know it's not a small Vision right and at my personal angle because of

2:19my history was really that institutional Capital side because I did relationships with a lot of the hedge funds and Pension funds and asked the managers out there so when it came time for those folks to think about how they're going to interact with the blockchain that was kind of a natural focal point in transition for me to really marry those two bring those

2:40two worlds together which I think polygon has done a really really good job of very cool I'm interested in hearing more about the institutional side because I've seen so much on the major Partnerships and the gaming fund and the tens of thousands of dapps that are now working on polygon but I just I haven't seen too much of the institutional Capital side but I know

3:01that there's a lot going on and you have the insights so I'm excited to dive into that but for the people that you know have they've seen polygon a while back or they're just learning about it from when it started you know you sort of mentioned there at the beginning you get that feeling that's like it overtakes you and you like just feel

3:20like this is the future and you know I think you and me are both have that conviction that it is and I felt that in like Bitcoin in 2014-15 and that was before the smart contracts and all that stuff and I had no idea what was to come but even when polygon started to where it is now it's completely evolved and revolutionized itself over

3:42and over again it's it's completely different from when it started from where polygon is at right now you know how would you explain to somebody who is sort of familiar with Bitcoin and ethereum what is the paradigm shift and what makes polygon different and great yeah absolutely I think evolution is a great word because that's really what it

4:03was polygon really started as a way to get developers building in this ecosystem with the existing technology and at first you know there wasn't really anything ethereum came out with smart contracts it really quickly ran up against a scalability wall right and gasps were becoming very expensive it was very challenging to actually make meaningful app layer execution layer products on

4:27ethereum given its its restrictions right it's kind of like low block time 12 to 13 seconds to create a block like all the challenges that ethereum faced wouldn't really allow that to be the sole enabler of mass adoption and so polygon came along it's really Sandeep and JD and the other folks that are the co-founders of polygon and they said we need to get something out to market

4:50right now that is user friendly and just allows these developers that see the vision that you and I see to get started and just start creating and so really what they came out with was proof of stake and it wasn't I wouldn't say it was it was not the most elegant technology right there's a lot of like kind of other startups around that era that came out with like these

5:11math professors said this is the most elegant technology and some of the stuff they created is really cool but what polygon was really focused on was always user adoption it's like how do I get something in someone's hands to where they can get up and running and it's easy to use and it's very functional it's kind of like the Workhorse and I think that by by

5:30listening to the customers customers listening to the developers right the people that we wanted to build out this ecosystem the founders were able to create that thing that was just very functional and I think that's why there was a community that coalesced around polygon really quickly right it's all very organic it wasn't sponsored by headline Venture

5:52Capital firm in the United States like like some of the other startups of that generation were it was really organic it was really like polygon of every small team going developer to developer and saying what do you need what do you want to see in order to develop the blockchain and the kind of incorporating those ideas and features and I think that really

6:10resonated with a lot of people and the result that you see from that is the early you kind of call it them BD wins right business developments it would be like open CE and Ave and some of the other kind of early crypto native applications building on polygon and from there almost surprisingly so you saw an ecosystem spring up where it was like the first 100 daps were like oh

6:34my wow like there's 100 dabs building on polygon like that was exciting you know this was not even almost like two years ago and now you see a number right like Alchemy would say there's 53 000 tabs and it's like seeing that is pretty cool so what polygon really became was there was actually a great podcast somebody turned me on to was like really

6:52Blockchains As Cities so if you think of like ethereum is kind of like the downtown Manhattan where there's very limited call it space I mean kind of all these challenges in terms of like infrastructure but everybody wants to be there and prices are very high polygon really came around to try and enable that like in terms of accessibility time right

7:14that was why you know that we created the supply chain with kind of the check-ins but ultimately through that Journey you know with the full recognition that POS has been very successful there's still a lot of people building on it works very well and it's a very it's a much-loved product by the crypto community but even back when the founders started

7:33POS they realized that there was more of a final iteration of blockchain scaling and so they said listen like we think ethereum is where it's at we want to enable the world to come to ethereum everybody from Banks to Big corporations you know you've seen all the big big announcements right from in you know call it like Instagram and Robin Hood and Reddit

7:57Probably some that I can't mention you saw JPMorgan put up a public trade on polygon the other day but really the Holy Grail as vitalik would say would be zero knowledge Roll-Ups for scaling ethereum right and so even early on the founders had in the back of their minds that proof of stake was potentially an interim solution for certain people that needed a very high

8:21level of security so what wound up happening was polygon as they continued to build the ecosystem and proof of stake polygon is the second highest ecosystem outside of ethereum they also started focusing on this the zero knowledge idea which really took the world multiple decades to figure out like the math behind zero knowledge or ZK is incredibly incredibly

8:42difficult so polygon when I was spending billion dollars to buy kind of the most promising zero knowledge Technologies with the idea that was the Holy Grail change scaling and we could ultimately provide that to everybody if they wanted that is already built on polygon so you know there's kind of various trade-offs in the blockchain right there's the blockchain try Lemma there's

9:04kind of security versus decentralization what this allows us to do is to provide a full Suite of scaling Solutions really for ethereum for everybody that needs to build on the blockchain in kind of whatever use case right for a bank it's high security for a gaming platform it's more like I would say speed but we wanna you know Mahalo one of our

9:26co-founders letting a thousand flowers bloom it's really like we wanted to provide whatever it is that somebody needed to build on this with the idea that we would gain large-scale adoption wow right so when I when I say large-scale adoption like the end goal is like onboarding the next billion users right for sure and I love that analogy about Manhattan and it's hard to fit a

9:50billion people into Manhattan but you know the polygon ecosystem continues to sort of expand out and grow out to those outer city limits and it's great to see and a billion dollars is a lot and I'm really curious you know on the in on the insides of the institutional Capital side you mentioned Venture Capital there you mentioned at the

10:12beginning about about hedge funds and you know often we hear on the Bitcoin side you know institutions are like secretly buying Bitcoin or you know they don't really give away their positions as well as some of the retail or crypto traders that are like touting it on the internet so what's sort of the inside relationship that you can share with how do the institutions work on the capital

10:34side with polygon yeah absolutely I think that there's a range of interaction I think that first off I from speaking with the heads of a lot of these you know digital asset heads within these organizations I would say that the idea that they're secretly buying Bitcoin is somewhat that's not what I would focus on let's just say I think there's a much

10:57bigger picture out there and I think what the bigger picture looks like I personally find it very exciting I hope the listeners on the on the podcast do as well but what it means to me is the idea that you can disintermediate large traditional institutions that are just taking a piece of every transaction and not adding the value that I think

11:19that potentially they're getting compensated for if that makes sense so think of the idea that if you are a you're a retailer in any form you could be small you could be large you could be a mom and pop you could be Walmart if you go through the Visa and MasterCard payment rails you wind up paying two to three percent to various intermediaries from Banks to Visa Mastercard and then

11:41you get the idea that well Bitcoin comes along it's a peer-to-peer transaction you could in theory cut out those intermediaries right that was kind of the Holy Grail I think for the first people the early people in crypto like you don't need these Banks anymore you know you don't need these intermediaries but it took a long time to actually build out the infrastructure to

11:59facilitate that vision I still see it being built out it's happening in the background it's just not very public because the banks and exchanges and all the other large Financial players are not ready to announce it to take it live because it's not complete right they can't go out and we're building this technology they don't want to set expectations but the

12:23reality is there's there's a couple major reasons why they adopt and one of them would be cost Savings in the case of banks right that there's call it like when you need to settle a transaction it winds up going through a very archaic kind of creaky process of multiple parties doing sometimes manual work on a transaction it works fairly well you don't

12:47necessarily need all that creaky infrastructure I say creaky because it was built over the course of decades so the vision for the blockchain for that specific use case is to have just one easy to use reliable solution that takes out a lot of that traditional infrastructure and then your focus for finance and I think maybe even more in bigger picture like you could

13:12think banks could save tens of millions in costs potentially by settling on the blockchain that's a clear use case but by tokenizing assets you know some people there's all kinds of numbers out there but one that I don't mind using is 700 trillion dollars of asset sets that could eventually get you probably heard this before right there's a range but

13:30you could think like all these assets that can go on chain from fixed income to derivatives I don't get too technical stuff box bonds cold eventually real estate like these can be tokenized they can be fractionalized but really what that allows for it is the people that provide these products can distribute them to a wider range of potential customers by taking

13:56them on team and so for them I talked about Banks solving for the cost side this actually increases revenue for the large call it asset managers of the world because now instead of just a very specific subset of qualified purchasers you can shift to accredited investors and a wider audience of people that can now have access to your products so if you think of the idea that formerly only

14:24wealthy Rich individuals had access to these higher turn kind of very secure best of breed investment products what I think tokenization can do is democratize that in some way where you can take the less fortunate Among Us right the people that didn't start out at a certain level in society and give put those amazing products into the hands of those people not just

14:51wealthy privileged individuals so I think I think those are a couple of compelling ideas and I would say why it's so exciting is because this stuff is happening right like we're all kind of living through this crypto winter this sort of bear Market but the reality is institutions move inch by inch but they are they're moving like an unstoppable train going forward so what

15:12you're gonna see in the pipeline in the next six to 12 months are a lot of major announcements and to people kind of on the outside it's like wow like where did this come from but I'm telling you like this is happening it's not stopping product Market fit has really been found for this industry in the background right it's very quiet right now

15:32but it's going to be very public at some point in the not too distant future in my opinion and it's going to be very very powerful that's very exciting and you know tokenization of the financial assets you know then the market is just so big to be able to tokenize you know the entire stock market and derivatives and real world assets that you know you

15:53can tokenize the world and the current market cap of cryptocurrency is just like a little tiny pinch compared to you know what it can become and I saw news you know in the past year into about JPMorgan and consensus trying to use utilize like sort of like ethereum smart contract technology to tokenize like the stock market I feel like polygon would be an even better use

16:17case for this and so where where do you start you know it's like you want to tokenize the whole world you want to tokenize all the financial assets what are sort of the low-hanging fruits there and how do we get the financial world to start using web3 technology yeah the short answer you start small right you start with test cases you know everybody on this call could

16:42look up the most recent trade done with JP Morgan and authority of Singapore is kind of one example right it's a very small trade but it is Meaningful in terms of the concept that it's really open opened up a Pandora's Box like we can dudes but I don't think you necessarily start there I think the first use cases in finance are going to be tokenization of

17:04funds like I think that's the most natural sort of on-ramp for this idea you could think of the idea that KKR and securitize tokenize one of the funds in KKR I think you're going to see a lot more of that in the future and I think that's just the entree and then over time I think you're going to see tokenization of less liquid things and when I say over time again

17:25like people are working on this stuff very diligently putting a lot of resources towards it so it's it's happening now it's being built now for the announcements that ye that we will all see come to the public in the next several quarters and then and then you progressively get deeper right the thing about like equities markets and fixed income markets are they

17:49actually work very well like they're very efficient so I think those will be potentially the last to be tokenized because the use case isn't strong but in the meantime gonna see the on-ramps come to the public you're going to see many of the major firms make these announcements that's where it's going to start and at some point I think you know

18:10I think this is one of those cases where it you know it kind of goes comes slowly and then all at once and that's the way it's going to feel like to most people to me it feels like it's all happening because we're involved in a lot of these conversations like as they build it so to me like I've never been busier you know to me there's they're just like things are happening

18:31so quickly but I realized that I sit in a seat that's kind of privileged that gets to see that the airplane as it's being built not just when it gets launched but I would tell it I would tell everybody on this call that the airplane is being built it's gonna be like really really cool to see the launch over the coming you know months and years and

18:50it's huge by the way I mean the trillions and trillions of billions of institutional Capital are all very focused on this industry just again starting small and going inch by inch that's why it feels like probably to an outsider that's not happening yeah that no that's very exciting and even just saying you know in the next quarters it's like that's really quickly

19:11especially in crypto you know and like I don't expect the bull market to have already taken off by then like it's it's just around the corner you know Bitcoin moves sort of slow and you know what you mentioned there also about you know how it feels like it's going really slowly at first and then it's going to ramp up sort of all at once I feel like

19:33the equity markets and you know for Bitcoin products at least it felt really slow it was like years and years of like rejecting this Bitcoin ETF and like no digital assets are like allowed on the stock market and like they're still rejecting things but I feel like there's going to be a turning point where it all of that's gonna once some big event happens then

19:58it will all sort of be accepted and I feel like polygon will be like a major part of that yeah no I agree I think we're well positioned to be an integral part of a lot of people that are building on the blockchain but I would say that it won't be one thing like I'd say that when it feels like it comes all at once it will be the result of years of very very hard work

20:18for individuals they get no credit and it all happened behind the scenes very cool and leaning into 2023 I know you're super busy and you know even if the Market's started going sideways or down I feel like all of the builders are building more than ever what are some of the things that we might expect from from your side of a team at polygon you know in the next

20:44quarter or two yeah and you don't even have to stick with my side of the team so some of the big themes are the rule out of our zke EVMS urinal knowledge evm on mainnet so basically that will make it like fully functional publicly ready to go that to me actually does represent a paradigm shift in blockchain technology so really what it does is in the past you were always reliant on a

21:10bridge and what ZKA really does is just submits proofs back to ethereum so it's it's really like you know I think one of the founders on our team that was a progenitor of that product really had it in his mind that this was the biggest thing to happen to the blockchain since ethereum and since smart contracts were created so it's it's a pretty huge deal

21:30in my mind it really opens up that Financial vertical because Financial people that are you know you're going to send like trillions of dollars in assets over what on blockchain you're gonna need a very high level of security to do that and zkevm offers that really for the first time right call it like an unhackable Bridge a lot of there's so many interesting things

21:48happening across the space I would include gaming as one of those you know so polygon CEO comes from the gaming side of it right he came from YouTube he was head of gaming at at YouTube and so what we have in the pipeline is kind of those really like prior to this you had those kind of play to earn games that were you know a little bit ponzi-ish who knows

22:06what the what the actual use case was but what we think gains real adoption is like the web 3 Call of Duty that people really want to play that triple A game that has that kind of organic adoption only now you can own your own digital assets right you own your own scans you own your own Weaponry or whatever it is we think that's a super compelling value

22:27proposition and I think you're going to see like more that side of things in the first half of next year and then of course you know I can't talk about exciting future developments about what we call web2 webbed two is a great thing that's that's not crypto take you know Fortune 100 companies right think of the most recent this week as a case study you're going

22:54to see more and more Premier Brands coming on chain and creating kind of metaverses and cool ecosystems I think you're going to see announcement after announcement after announcement because everybody has a strategy for that and I think it's going to be really exciting as it as it rolls up that's very exciting and yeah I feel like you know a lot of these large

23:15Brands they're they want to dip their toe in but that sometimes they don't want to be the first one and like now that we've seen some of these major companies it's like you know everyone else is doing it we better jump on before you know they get too far ahead we need to catch up and like make sure that we're also experimenting at least with this technology and I feel like

23:342023 is going to be the year for that yeah I couldn't agree more I mean you don't like a lot of people don't want to be the first one but you definitely don't want to be the last one exactly amazing Colin I'm really looking forward to you know the next year and despite which direction the markets are going I understand that and web3 is going to bring a lot of value to

23:55people that don't know anything about web3 and that's what I'm very excited about is it is driving more value through technology to people's everyday lives so I really appreciate you taking the time to speak a little bit about what polygon has been working on and the institutional side you know I'm learning here and is there any other information that you know people could learn about

24:18the institutional side or other ways that they can just follow along with polygon and stay in touch with the latest updates yeah absolutely I you know I try to make in a habit of regularly posting my insights on Twitter real crypto calling for those of you that are interested because I like to communicate like kind of what I see internally I don't want people to lose

24:40the excitement because crypto is here to stay and from my personal perspective it's never been more exciting so I really hope that everybody still feels bad they don't lose that in a lot of the noise that's kind of surrounding the industry right now because I just hope that everybody stays along for the ride because I think it's going to be you know it's

24:59only going up from here in my personal opinion I completely agree and I will leave the links to your platform and probably go on as well in the description box below thank you so much Colin appreciate it all the best with polygon moving forward and let's follow up in the near future my pleasure Ashton great to speak thanks