Polychain Capital founder Olaf Carlson-Wee became a poster boy of the initial coin offering (ICO) boom when he appeared on the cover of Forbes’ July 2017 issue under the caption, “Craziest Bubble Ever.” At the time, the crypto market was in the midst of an unprecedented climb that would see bitcoin approach $20,000, a level that it would not revisit for another three years. Before breaking off on his own, Carlson-Wee was Coinbase’s very first hire and ultimately led its risk management.
Fast forward to today, and the market is once again breaking records and Olaf’s venture capital/hedge fund Polychain has more than $4 billion in assets under management. However instead of ICOs, which were white hot in the crypto bubble of 2017, the new crazes are decentralized finance (DeFi) applications and non-fungible tokens (NFTs).
I spoke with him to find out his takeaways from the ICO craze and whether he believes that history is going to repeat itself with these new trends. He also shared fascinating insight into decentralized governance structures, how DeFi platforms can use them to bootstrap traction and then ultimately scale, and how he is approaching the NFT space.
Forbes: How would you articulate the Polychain thesis to a prospective investor?
Carlson-Wee: We like to be very early and long-term-oriented. Our goal is to invest in breakthrough technologies that will enable new types of human organization and behavior. It’s no accident that all the things you see in the decentralized financial ecosystem are happening on top of ethereum, from capital coordination in the form of ICOs to decentralized financial primitives, like lending and trading to stablecoins and other types of synthetic assets. It is all due to low-level changes to ethereum, relative to bitcoin, namely its ability to write in solidity (an ethereum-native programming language) that allows for more complicated types of financial instructions. So, this is one type of enabling platform that can unlock new types of behavior. The other big brush strokes category that we invest in are new applications that had not been previously possible. A lot of the time these new applications are also paired with a new human and capital structure that is also on the blockchain. These are called DAOs (decentralized autonomous organizations).
Forbes: Let’s talk about the ICO boom in 2017. There was a famous bubble and you ended up on the cover of Forbes. Why do you think that prices rose so quickly and did you think that they were sustainable at the time?
Carlson-Wee: Keeping it in context, when I was on that cover, the headline was “Craziest Bubble Ever.” The market value of cryptocurrency never went that low ever again. I think people have sort of famously misread the scale of things happening in cryptocurrency. At the time, it felt to me pretty natural that the world was kind of catching up to a lot of the fundamental technology and infrastructure in crypto that had been developed between 2013 and 2016. A lot had happened in that time period, both in terms of the sophistication of businesses like Coinbase, that service retail users, as well as the more cutting edge stuff in the ethereum landscape. I do think that anytime you see a nascent area, that’s sort of global and grassroots, kind of like the internet, it grows in these really sudden bursts. This is how crypto has always been. I’ve been through several of these sort of run ups in price and media attention. But the prices in my mind are often not very correlated, if at all, with sort of fundamental…