The Growth Rocketship: Navigating the Institutional Evolution of the Blockchain World With ParaFi

Haim Zaltzman: Hello and welcome to Connected with Latham, where we discuss ideas, legal developments, and the business trends shaping the global economy. I'm Haim Zaltzman, Partner and Global Vice Chair of Latham & Watkins’ Emerging Companies and Growth Practice.

In this episode, I'm joined by Ben Forman, Founder and Managing Partner, and Adrian Uberto, Partner and CEO of ParaFi Capital, an alternative asset management technology firm focused on blockchain digital assets. Founded in 2018, it was among the earliest institutional investors in the blockchain industry and has evolved into a trusted partner by leading institutions globally. Adrian, Ben, thank you for being here.

Ben Forman: Thanks for having us, Haim.

Adrian Uberto: Thanks a lot. Great to be here.

Haim Zaltzman: They're definitely trusted by me, as I've had the privilege of working with Ben and Adrian for years. I think I actually met Ben through an introduction to another client in 2018, right after ParaFi was getting launched initially, and took a stroll in San Francisco with Ben as our first foray into our relationship, and then started slowly and surely working with ParaFi in the years since.

But less importantly about me and our initial start with ParaFi. ParaFi is one of the most prominent investors in the blockchain and digital assets world, with investments including Animoca, Polymarket, and basically every Bitcoin treasury and other play that has made the news in the last few years.

Before we dive deeply into ParaFi, I wanted the audience to know both of you, Ben and Adrian — your backgrounds, your journeys, and what makes you guys exceptional. Ben, I'll start with you. First of all, before I do start, I really appreciate you guys jumping on for this podcast. It's always a pleasure to do anything with you guys — work or personal, getting drinks. So having you guys do this podcast with me is extra cool.

Ben, tell me why you're so passionate about blockchain and fintech. And particularly, I would love the audience to hear how your background has shaped your views on driving ParaFi’s continued growth and innovation from the very start.

Ben Forman: Yeah. So one, great, great to be here, Haim. It's a pleasure.

So quick background on myself. I cut my teeth as an investor in traditional asset classes. Ten years at KKR, TPG, working across private equity, private credit, investing across the capital structure.

And I've always loved financial markets, genuinely just viewed them as puzzles. And I like puzzles. I like games, and, you know, financial markets are competitive, they are complex, and to me they're just a lot of fun. And I've just always gravitated towards them.

And in my ten years at KKR, TPG, I had the opportunity to learn a lot of new asset classes. I started in investment banking, moved to private equity, then moved to private credit, then did liquid credit, touched distressed debt. And as part of the journey of learning new asset classes, I was lucky enough to stumble across Bitcoin in 2015.

My roommate at the time was an engineer at Google, and he kept on mentioning Bitcoin to me. Curiosity took flight, and I ended up just kind of delving deep into what Bitcoin is, what money is. We'd have lunch at the Coinbase cafeteria when it was an early-stage company, and that kind of just thrust me into the ecosystem of crypto, which back, you know, 10 plus years ago was, candidly, just a whole lot smaller than it is today. It didn't even feel like an industry or an asset class. It just felt very much like a little cottage kind of technology — an area of the economy that was very niche and not really, you know, relevant to most people.

So what kind of started as my nights-and-weekends hobby just continued to kind of snowball and evolve alongside the industry. And, you know, people remember in 2015 there was a lot of activity around enterprise blockchain. In 2016, the earliest projects on Ethereum began to launch. In 2017, there was the ICO boom and crypto kind of started to go through this bull market.

And I got to a kind of a certain point in my time at KKR where, candidly, I was just so interested in this new technology, this new asset class. And because it's just a brand-new part of the economy, a brand-new part of financial markets, it just made sense to start a new investment firm to capitalize on it. You know, no firm in the space at the time was really taking an institutional approach to investing in this space. They were just generally kind of like a couple people in a garage in front of laptops, or there were some venture capital firms that were, you know, deploying, but no one was really kind of ushering institutional capital into the space.

And so I thought there was an opportunity to really take the KKR approach to asset management — everything from culture to decision-making to risk management — and apply it to this brand-new asset class. I ultimately decided to take the leap. This was in early 2018. So, we're effectively kind of eight years into the journey. It's felt like dog years, candidly. Like we joke crypto moves in dog years. It feels like a lot longer than eight years, but it's been really the journey of a lifetime. And I feel very fortunate and just grateful to be able to be in this asset class, which I consider just incredibly exciting, dynamic, disruptive, and also grateful just to be part of a great team and work with great people like Adrian and then also yourself. So maybe I didn't answer all your questions—

Haim Zaltzman: Well, actually you did. And we'll get to which dog year we're in right now a little bit later. But it's a great segue — not because of the dog, but because you mentioned Adrian — to get a little bit of background on him. Just for everybody, Adrian is a huge Dodgers fan and I am not. So, you know, it's not a bad segue when somebody says dog and Dodger, I think of the same thing. I know, I know, give me a hard time, Adrian.

So, Adrian, a great segue. What has brought you to ParaFi? I would love to hear your background, how it fits within the ParaFi framework and what you guys are doing generally and specifically. So yeah, we'd love to hear how you ended up at ParaFi and how your background really shapes the way you look at — just like Ben's very KKR approach — if you have anything similar from your background in how you look at what ParaFi is doing and how you guys are taking it forward.

Adrian Uberto: I think you're going to see a lot of similarities. We're probably at ParaFi because of, really, Ben. What Ben was building, what he was looking to kind of build at ParaFi, in terms of, at the time, not really having a lot of institutional firms out there and taking that approach. I'll probably substitute KKR with Blackstone, but, putting it in context for my background, starting my career at Lehman Brothers, which was a fascinating place to start. I was focused on the wind-down and restructuring across one of the largest, most complex bankruptcies, and really having and training your teeth on understanding the complexity of a global firm and how to wind it down and the restructuring plans. It was a really interesting way to kind of start someone's career.

From there, I went to Blackstone because Lehman Brothers was not going to be going on forever. At Blackstone, that's where I joined the multi-asset management team, which essentially is the team that deploys into investment managers. They’ve expanded their mandate since I was there but essentially I had real hands-on experience of first underwriting and understanding asset managers, hedge managers across every type of strategy across every part of the world. And Blackstone took a very unique way of not just understanding the risks, but also building with these managers — whether it's seeding, launching, creating specific products. It really forced you to understand what it truly meant to operate, underwrite, and launch a hedge fund as close as you can get as an allocator.

Similar to Ben, in some ways at that time my interests really focused on where I saw the world going, whether it was more of an engineering element in the investment side or tech or venture. And digital assets were really just coming on the radar for myself. But I knew I wanted to be an operator. So that transition from allocator to operator was very important to me. I made the hard decision — which at the time was probably the worst decision of my life, but looking backwards, a very good decision — to leave Blackstone and really start a small investment fund that was focused on digital asset investing at the time.

And, during a time — this was the early days — where there was no real set agreement on how you would invest into digital assets. Whether it was the first version of a SAFT that a law firm out there, unnamed, put together, which turned out to be not the best approach, but we needed to figure something out. How do we get capital into these zones?

That was all before ParaFI. Bringing it back to where I started, I knew we could build, and there could be a format that really took that Blackstone approach or Ben's KKR approach to really take an institutional approach — and not just “institutional” as the buzzword of institutional — but really being thoughtful and purposeful in terms of building over the long term. Yes, there are new things in this asset class. You know, there's barely any agreements that you knew covered how to capture value in your investment, and everyone's figuring it out together. But what I was focused on was how can we build a firm that can navigate this, evolve with this space?

And I think over the past eight years, that's what we're doing today. But in the past year, we've seen this industry really evolve, and being part of the ParaFi team, particularly in my role, has definitely come back to the decision made all those years ago to really go to the operator side — to really hands-on build our version of a firm that can navigate and evolve with the industry.

Haim Zaltzman: Yeah, I mean, for the audience, because I do love to take these moments to take a breath and distill what are the quick takeaways. My takeaways from both Ben and Adrian and your backgrounds, and pushing ParaFi forward, is that you're both builders. You've got to be builder-like from the start in crypto blockchain. That's the core. You’ve got to want something new. You’ve got to be constantly looking at that.

And then the real important thing, you build, but your backgrounds are really important. And if I may, both of you guys are total finance nerds. For the KKR and the Blackstone approach — that's the definition of nerding out. And by the way, that's not a negative. It's a huge positive to have that pedigree, that education framework you take forward, including in an area and building.

And that, by the way, leads me to one of my favorite questions on this. I'm going to ask each one of you, and I don't want you guys to cop out and take the easy route on this. Who is the biggest nerd at ParaFi?

Ben Forman: I can maybe take that question first. So, one of the things we do at ParaFi offsites is we often play board games, and things get very competitive. And one of our favorite board games is this game called Blokus. It's spelled B-L-O-K-U-S. Anyone listening, I highly recommend buying it.

Haim Zaltzman: Blokus?

Ben Forman: Yes, exactly. It's a four-person game. It involves placing tiles on a grid, and the object of the game is basically to place all your tiles on a grid and have as few remaining tiles left when no one can play any incremental piece. It'll make sense if you open up the board and look at it, but it's a really fascinating game.

Long story short, I was kind of the dominant person at Blokus for many years, but recently one of our engineers at an offsite just demolished me. His name's Corlan, and he confided in me that after losing to me at the prior offsite, he just went very, very deep in Blokus on the blogs, playing online, and he actually became top 20 in the world at Blokus, at this board game, just to beat me. So he is definitely the biggest nerd, and if Corlan’s listening, I also use the term nerd in the most endearing way.

Haim Zaltzman: That's awesome. Adrian, do you agree?

Adrian Uberto: Yeah, I mean, I'll say like any time you have a group of talented people, they go deep — like that's a perfect example. My example, or what I was thinking of while I was talking before you mentioned Corlan, was actually just landing on Corlan as well, so I probably shouldn't go down that route. I was going to say our trivia night.

But no, I mean overall, I think anytime you have a group like we do at ParaFi, you can see how deep people go. I mean, all things with the amount of time, first principles. You have people here who, no matter what it is that they're passionate about, they go, they nerd out on it.

And then there’s “nerd” more in the traditional sense of nerdy. There are a few names that we use at ParaFi for internal projects and systems that definitely derive from Star Wars. And without naming names, I mean, I can tell you that myself, you know, I’m one of the biggest Star Wars nerds that's out there and still have my collection of action figures. But again, that's not maybe the question you're asking.

Haim Zaltzman: No, it's good. I'll take it. Anytime you involve somebody becoming a top-20 player in a board game like Blokus and mentioning Star Wars in the same frame, that's a successful nerd session. I love it.

Cool. Well, let's take a step away from the nerd, and I do want to get, for our audience, some thoughts on the blockchain crypto world right now. Ben, I'll start with you, and we'd love to hear, particularly in the current market — and I'd love for you to take a perspective, because even though, as you say, it's only been a handful of years, right? Ten years of maturity in the market, if not more, and dog years than that. What is your financial strategy right now, particularly in light of the swings in the capital markets and the volatility, to make sure that you guys are top of the game in your blockchain and crypto investments, and how you handle them?

It's kind of a loaded question, and I know you could spend hours on this. So, if you could distill it in some sort of framework for the audience, that would be terrific.

Ben Forman: Yeah, the 10,000-foot view is: We view blockchain as a secular technological theme, similar to the internet, similar to cloud, similar to mobile, similar to AI, similar to quantum. This is, in our view, a technology that can be applied to many different parts of the economy.

But if you kind of think about where blockchain technology is really having the biggest impact today, it's in financial services. So financial services is 11% to 12% of global GDP. Think about areas like payments, insurance, structured products, debt, capital markets — the whole gamut of things that you can do from a financial standpoint. We call them kind of the “-ing” verbs of finance: lending, borrowing, hedging, insuring, spending. All these things that you can do with money in the financial system today, blockchain is really starting to have an impact.

And what we've seen really over the past couple of years is that you've seen the biggest financial institutions in the world — whether it's BlackRock tokenizing treasuries, Fidelity launching their own stablecoin, Stripe acquiring two stablecoin companies for over $1 billion each — and the list goes on. You've just seen this convergence between traditional finance and blockchain technology. In fact, it would be rare today to find a large financial institution that's not actively using blockchain in their business. It's oftentimes not visible or tangible for the user, but it's happening.

So, our goal at ParaFi is really simple, candidly. We want to be the best investors in the world behind this new technology, this theme of blockchain technology. And there are many ways to invest behind it. You can invest in companies that are building infrastructure for blockchain technology. You can invest in the tokens themselves that are underpinning these new networks. You can invest in directional and non-directional strategies, equity and token, early stage and late stage. It really doesn't matter. Bottom line is we're investing in all parts of the blockchain ecosystem and everywhere that value accrues from this technology.

That's really our goal, and that's why we set up the firm as a multi-strategy investment firm. Because oftentimes institutions will come to us and say, “How do we get exposure to this theme?” And it's not always a one-size-fits-all approach. You actually really need to think more holistically about what your strategy is.

Haim Zaltzman: One quick follow-up for you. You mentioned the dog years. You mentioned evolution. How has that strategy changed over the years, or has it not? Is it just continuing to execute? Has there been any tweaks to that strategy and what you're trying to do, what areas you want to conquer? Or have you been fairly consistent from the start?

Ben Forman: Yeah. I think there's two ways to kind of answer the question. One is our investment approach, and two is the way we’ve built the business. From an investing approach, over the years we've been very thoughtful about adding new strategies as the space has evolved.

If you think about building an investment firm, it is quite difficult. In fact, like 90% of hedge funds fail within the first three years. They actually have a lower survival rate than startups.

Haim Zaltzman: Audience, do you hear that? That is a true stat, and I've heard Ben say it before. So, 90% — nine-zero percent — of all hedge funds fail within, was it the first three years?

Ben Forman: Yes.

Haim Zaltzman: It's crazy. I'm sorry, I don't mean to cut you off. It's riveting. Yeah, please go ahead.

Ben Forman: No, it is crazy. And I mean, from the beginning, we thought to ourselves, in order to survive, not only do we have to make great investments, but we also have to build a great investment firm. And those two things are actually very different. A lot of people are great investors but not great builders of an investment firm. And a lot of people are great builders of an investment firm but not great investors. Clearly that's one of the reasons why I love working with Adrian, because I think he's the best at what he does from a business-building standpoint.

But as we built ParaFi, we aimed to be really thoughtful about building different products and strategies, growing our team in a really thoughtful way. Our approach has always been very long-term, focused on partnering with the right people. It’s not always just speed, but just thoughtfulness. I think it served us well because over time, the number of other crypto funds in the space has ebbed and flowed, but we've kind of continued to compound and grow.

So yeah, there's building the investment firm, and that's part of what we've done over time. We've added new strategies, grown our team, continued to grow existing strategies.

Then there's the investing side of things. And just to take a moment of reflection, back in 2021, and even in 2017 during the ICO boom, I think the industry got, candidly, way out over its skis in terms of what it thought blockchain technology could do. I think from the beginning we've been very focused on where we think there'll be the most disruption from this technology, which is finance. That's why the firm's called ParaFi. It's short for “paradigm shift in finance.” And by staying really focused around our thesis — which again has evolved, we haven't gotten everything right — we've been just very zeroed in on areas that we think we know very well and areas that we have high conviction.

And so that's led us to invest in Polymarket in 2020. It led us to investing in stablecoins long before they were a buzzword, or tokenization, or DeFi. We've been investing behind these themes for the better part of a decade, just because we've been super focused around this one area of the blockchain space.

You know, we're, candidly, focused around that theme. You know, we sometimes look at other areas, but I think that focus is important because it's very grounding, because crypto tends to move in hype cycles, and it can be distracting. I think having your core thesis that you can always fall back on is critical as an investor.

Haim Zaltzman: Ben's being a little humble, but that core thesis has made ParaFi one of the most successful — I know it's early innings — but one of the most successful blockchain/crypto investment firms out there. I won't disclose any percentages or statistics, you can see the stuff that's out there. But I do also happen to be a very small limited partner in some of the ParaFi funds, and the success has been absolutely unreal, particularly at a fund level, but just generally. As an investor, thank you for that.

But before we jump to Adrian, you know, ParaFi has been through an incredible journey. I would love for you to tell me and the audience what's evolved the most since you joined. And it can either be about the firm itself, the market. But I'd love to hear the top three things that you've seen change the most with ParaFi broadly since you joined the firm.

Adrian Uberto: I think it's been interesting over the past eight years to see the industry and the way the industry has evolved, especially if you see then what our goal was from the beginning in building a firm. As we mentioned, it's really institutional-focused. There are key things that are important to any asset manager, regardless if it's digital assets or not. There are things like custody. There are things like valuation. There are things like reconciling investments — things that are really part of every fund regardless of what they invest in.

And what was very interesting to go through is — especially coming from Blackstone where we underwrote the risk of firms across multiple strategies, but a lot of them in established markets, — being in a new asset classes, and going from allocator to operator combined with a new asset class is interesting. We knew what was important when it came to custody. What was the industry? Had they built all the pipes and plumbing eight years ago? No, it just wasn't there yet. So, there were different ways of approaching things like custody.

The industry over the past years has really caught up in the way that custody, as one example, has been approached. Before, the top question was do you use a qualified custodian? How do you custody with a qualified custodian? That's no longer as tough of a question because the qualified custodians have come a long way, both from the traditional firms as well as the established firms that are here, as well as the partners that we have.

Right, early on we knew that we wanted the right partners to be navigating the asset class — Latham being a key one to us, where it was a new asset class for everybody.

Haim Zaltzman: Yeah, I'll pay you for that later really quickly. That’s very nice.

Adrian Uberto: Yeah of course. But no, seriously, if you look at our auditors, look at all that — these are things that are not maybe the traditional sense set and out there, but they are the basic building blocks that are incredibly important for any asset manager. And being part of the journey of educating some of the top firms, partnering with the top firms as they themselves are navigating it — as well as those things that I already mentioned — was partly an obstacle, was also what allows us to continue to evolve the firm.

And I think right now an interesting thing that we're seeing is, just like Ben's mentioned on the investment side, this convergence of traditional assets and digital assets. We as a firm have to be able to invest, the same things, custody, transact, value — the full life cycle of a trade — as we now have both traditional assets that are crypto-linked as well as digital assets all within one firm. Being able to evolve ahead of it and then with it is incredibly important. We have elements of both. We have elements of both what we used to call a traditional asset firm and more of a digital asset firm.

Haim Zaltzman: This is actually a perfect segue, based on that, to just macro, broad micro trends that we've been seeing in the market. So Adrian, I'll actually stick with you since you just kind of touched on some of those things.

What's been the most challenging aspect from an operator perspective? Is it more the tech-company-specific issues that you guys face like every other operating company? Or has it been the more blockchain/crypto-specific issues? Or a third option, which is probably where I'm leaning for the answer, but I would love for you to confirm or deny: just the macro-level challenges right now — the global politics, obviously. Would love your view on what's been the most challenging aspect, particularly in this market.

Adrian Uberto: Yeah, I mean, I think — not a cop-out answer — it kind of has been all of the above. I mean, over the past few years there's a lot that we've had to navigate, especially certain technology that we are focused on or the asset that we are. There are things that can be very specific to its evolution, its development. But in the backdrop, there are these large macro events, political events, both at the agenda, at the macro level. And then also the theme I've talked about, where the asset class itself is having a stage where it's seeing how can it formally be part of existing laws? How can it formally be part of the existing overall incumbents’ overall structure?

So you see that both in the regulatory clarity that people have been pushing forward, looking for. In that backdrop, then you have the macro backdrop and you have the political backdrop. So it really compounds that process. But again, over time we've navigated a good amount of this. I think it's part of a new asset class, part of the world we live in today. And I think it's kind of where we've been really focused on navigating. We kind of know that there will be still different versions of clarity, different things to navigate, even looking now.

I think with this asset class on which we're focused you have to understand what is truly new, where we need to recreate the wheel, or when you don't need to and you can kind of navigate with that firm you've built.

Haim Zaltzman: Ben, I'm going to ask you a similar question because I actually think Adrian touched upon it. I'm wondering if you'll have a different response. What are the macro trends now that are really shaping the blockchain/crypto world?

It's been a super interesting environment. Obviously, the current Trump administration has pushed through some legislation that has been very favorable to the industry. At the same time, it seems like the macro and other headwinds have put pressure on the industry and the returns, particularly if you look at, you know, where Bitcoin prices are right now. It's not where you would think in light of the availability of capital and the framework that's been developed and opened up with the new legislation. So we'd love to hear why are we here, and where are those trends going to take the blockchain/crypto world in the future?

Ben Forman: I think you're absolutely right. There's been a massive decoupling between fundamental adoption and growth of blockchain technology and the actual prices of digital assets. More so than at any point I can remember running ParaFi, investing in the space.

If you just kind of look at the biggest macro trends and what's actually happening: one, stablecoins are now, you know, $300 billion-plus, doing more settlement volume than Visa. They're basically dollarizing emerging market economies. The US government is starting to understand that stablecoins are actually a mechanism to drive dollar dominance globally.

And you've heard this from Scott Bessent in the administration. You had the Genius Act that obviously passed last April. Blockchains as a medium for moving dollars — i.e., stablecoins — is massive. This is growing and compounding, you know, 50% to 100% year over year across most metrics. If you look at unique senders of stablecoins, transaction volume, supply outstanding, etc. And also, this isn't like a SaaS-pocalyptic part of the economy. When we're talking about moving money, this is very insulated.

Stablecoins have truly hit product-market fit. You know, you have tokenization, where this is the idea of just tokenizing real-world assets, whether it's real estate, private credit, treasuries. You know, Larry Fink has said that tokenization is, as he views it, as transformational as when we went from analog to electronic in the stock markets in the ’70s and ’80s.

Tokenization is a major theme, and it's actually growing faster than stablecoins. The idea here is basically that you take an asset that may be memorialized in a legal agreement — which is like a PDF agreement or maybe held on, like, DTCC’s ledger — and you move it on-chain. You now have a better modality, atomic settlement, more transparency, etc. That is a pretty big 0-to-1 unlock.

And actually, candidly, one of the really interesting things about ParaFi, by the way, is a lot of what's being disrupted here are things where we're consumers of. If we participate in a PIPE for a public company, I mean, just getting settlement of our shares into our brokerage account — it actually takes a lot of back and middle office muscle to get that across the line. It's not very efficient. It's very painful. It involves a lot of legal and compliance work. Versus taking settlement of a token on-chain — it's a lot more elegant and efficient.

We're kind of in an interesting position because we're investing in and dogfooding the exact technology that we use in our existing business on the traditional side. But we also engage on-chain and use tokens. So, it's interesting to kind of straddle both worlds.

I'll kind of shortcut this answer. It's stablecoins. It's tokenization. Prediction markets are having a truly genuine moment in the zeitgeist and on social media, as a new disruptive way to understand the truth. You're seeing a lot with the convergence between crypto and AI, which I think is really, really fascinating. I think crypto and AI are very closely intertwined. If you go to Silicon Valley and talk to people building in AI, oftentimes they're more excited about crypto than the people building in crypto. You're seeing a lot of interesting use cases around agentic finance.

Haim Zaltzman: Why is that, Ben? I mean, for a lot of folks that don't have the history, a lot of the GPU and that kind of stuff came from folks who were in blockchain and crypto, and getting the whole CoreWeave history being in the industry. And there's a few others like that. How do you see AI take blockchain forward? Is it just going to be intensifying the speed at which the transactions on the blockchain occur, or is it going to be something much more fundamental, monumental than that?

Ben Forman: There are a few different areas of intersection. There are definitely some of the Bitcoin miners and proof-of-stake validators that basically took their existing physical infrastructure and pivoted to servicing model training and inference. That's more of an area of, I would say, cannibalization and then collaboration between AI and crypto.

The areas that I'm most excited about are AI agents will need to be able to move value on the internet. And it's difficult to do that using banking APIs or credit cards, especially if you want to move, like, $0.05 on the internet. It's not economic to use traditional rails. That's really where stablecoins come into play.

Only humans, companies, and governments can open bank accounts. AI agents can't open bank accounts. And so having a 24/7 environment that's global, programmable, and kind of frictionless, and you can move very small quantities — in many ways, blockchains are purpose-built for agentic finance.

There's kind of a growing consensus around this. If you think, Stripe in their annual letter, the founders mentioned that most of agentic finance will occur using stablecoins. And you've seen Coinbase has the 402 protocol; the number of agents and volume on that network is materially compounding.

Stablecoins are very much, you know, money for machines, money for AI. And I think that, you know, the majority of usage on blockchains will not be human-driven. It will likely be AI agents interacting with one another and/or interacting with financial institutions.

The second big area, AI is also being used to do things like audit smart contracts to make using financial products on-chain safer. Some people are experimenting around creating products that make inference more private. So, your data is not living with Anthropic or OpenAI.

Haim Zaltzman: It could actually live on the blockchain just for you?

Ben Forman: Yes, exactly. Like everything you query is encrypted, and it doesn't live on some company's servers. There are also people that are building more aggregators for inference so that you can ask a question and different AI models effectively bid on responding to that question. And the model with the lowest bid effectively is able to win —so you're paying more of a market for inference.

I think there's a bunch of interesting experiments. There's also decentralized networks of GPUs — so people effectively aiming to train models by pooling their compute. There are a lot of interesting areas of overlap. But I think the most obvious or most salient is just this idea of AI agents moving value using blockchains, and I think that that alone is going to be pretty big.

Adrian Uberto: One fundamental building block from there is, as that continues to evolve and solve for other problems that lead from the use of that, you'll just continue to see that evolve and expand over time.

Haim Zaltzman: I mean, the whole thought of the blockchain being purpose-built for agentic AI is something that, you know, I think we'll be facing in the near term. It’s just something that folks should double or triple click on, on top of all these megatrends that we have with stablecoins, tokenization — which is, you know, for my simple-minded finance background, tokenization is just the higher level of the great, awesome monetization that we've been seeing occur through finance. It’s the next level that takes it to the digital realm on the blockchain. And then, obviously, the prediction markets are all the rage now. And good, bad, or ugly, it's definitely a very new way — or I guess the old way in the new age — of looking at information and sharing it and actually making decision-making on it. And it's amazing: that combo of all these things with AI can really be a crescendo moment for the blockchain.

Before we jump into the last part — maybe this is a question for you, Ben or Adrian — because obviously the prices have decoupled, and you mentioned it earlier. Why do you think that is? Is it just because of the global, more macro issues and going to certain asset classes like gold or others vis-à-vis Bitcoin or other blockchain assets?

I think, from a viewer looking outside and saying, “Hey, all these great things are trending. It's an unbelievable moment. It's built for it. You’ve got now the rails on the legislation side that are really built through. So why are we seeing, at this particular time, the blockchain — at least the price structures — really get stressed?”

Ben Forman: The number one reason is that retail capital that was previously invested in tokens has completely pivoted out of the space to invest in AI stocks. That's the single biggest reason. So, crypto is generally less volatile now than it's ever been. It's a bit less exciting to trade. A lot of attention has shifted to AI. A lot of attention has shifted to quantum. A lot of attention has shifted to defense stocks, to defense tech, robotics, other areas of the economy.

And so you've seen retail, which historically has driven prior crypto bull markets — all that capital, not all of it, but a majority of it based on the data we see — has really pivoted out of crypto capital markets.

What's interesting is the crosscurrent is a lot of institutional capital is coming into crypto at a time when a lot of retail capital is leaving. Like, on the ground floor, in terms of what we're seeing, we're talking to very large allocators: sovereign wealth funds, endowments, foundations, etc., who are allocating to this asset class and space today. But there's that crosscurrent with retail leaving, institutional capital coming in. I think that that is the single biggest driver.

I think there are some other, more flows-driven structural components to it. I think there's some concern around quantum computing and how that could affect Bitcoin and other digital assets. But in general, I think it's just cannibalizing attention and capital flows.

I think this all reverses. I mean, we're not underwriting this to reverse and for retail capital to come in. In general, our view is that a lot of these networks and companies are just growing and compounding revenue, earnings, users, etc., and more institutional capital is coming into these markets. And our sense is, over time, that will be an important factor in driving price. But our underwriting expectation is you don't really need retail capital to come back for this asset class to perform really well in the future. Of course, if it does, that's gravy.

But my sense is that crypto has always been very cyclical. Sometimes it moves in ways that are a bit counterintuitive. Like, if you were to just look at all the facts on the field — all the regulation, all of the the support from this administration, Genius Act, clarity that’s coming soon, all the institutional involvement in the space, all the growth around stablecoins, tokenization, prediction markets, DeFi — and you weren't looking at prices, you would be shocked to see that things are where they are. At least, that's my view.

I think there's just been this decoupling or this divergence that doesn't really make sense. I think we'll look back on this moment as a moment where it's like, “Oh yeah, that didn't make sense. And, of course, nature healed and things kind of course-corrected.”

But we've always kind of taken the long-term view, as you know, with our capital and our investments. Yes, it can be a little distracting if prices in the near term don't move as we underwrite them to move necessarily. But as you zoom out, all the trends are very much intact. I mean, if anything, we're just more confident than ever and view this as a great opportunity to deploy.

Haim Zaltzman: You're making me think of the famous quote — I think it's Warren Buffett but maybe it's someone else — that in the short term the markets are a voting machine; in the long term, they're a measuring machine or something of that nature. And it sounds like that's going to be where this ends; this market is no different. So, that's amazing.

We're going to jump into the last part of our podcast. It's what I call the speed poker round. Now, Ben, we didn't mention it, but the audience should know that you were a competitive chess player. I know I'm making you switch from chess to poker, but as you know, I prefer the more stochastic poker game, with all the things that come with it, than the more deterministic chess game. So, if you'll entertain me, I'm going to ask you guys two or three questions. I would love a crisp response — not vacillating back and forth, no hedging.

And I'll ask each of you guys, and I'll start with Adrian. I'll start with you. What's the biggest professional obstacle you faced?

Adrian Uberto: The transition from allocator to operator in a new asset class.

Haim Zaltzman: Why is that? What was so difficult — was it just a different skill set and different pressures?

Adrian Uberto: It ended up being an incredible strength. But it's one thing to underwrite risk and measure risk, and it's another to operate within risk. And combining both has been incredibly valuable for me. The initial transition for anyone who goes from underwriting to operating can be a steep curve.

Haim Zaltzman: Got it. Okay. Ben, how about you? What's the biggest professional obstacle you faced?

Ben Forman: Well, I think the crypto bear markets of 2018 and 2022 were pretty challenging. Obviously, we emerged from them stronger than ever, and we learned a lot. But it would not be honest to say that they were easy. Those were probably two of the periods where I learned a lot, and they were professional obstacles.

Haim Zaltzman: I'm just happy that neither of you guys said the biggest professional obstacle is working with me, so I'll take that as a win.

Next question. Ideal teammate. You’ve got to pick one. What do you value most: education, experience, or temperament? Ben, I'll start with you on this one.

Ben Forman: Oof. I would say temperament. I actually think that's probably of those three the easiest choice for me. You can have the smartest person, the most pedigreed academic person with decades of experience, but if their temperament isn't good, it's just miserable to work with them. I kind of view business as a kind of war, right? It's a competitive arena. You're in the trenches with people, and you want to really feel good about the people you work with. Life's short. So, I'm going with temperament.

Haim Zaltzman: Adrian?

Adrian Uberto: Same. I think experience and education can be manifest in how it reflects in their temperament. We focus here on “how you do anything is how you do everything,” and I think to approach to challenging, difficult problems we need that. I’m going to go temperament.

Haim Zaltzman: I'm just upset, as someone whose parents spent so much money on education, that no one says education. It's pretty consistent, and everybody should remember that, because it never ends or starts with education. It's part of who you are that feeds into your experiences, and most importantly, which I think is consistent with your guys' response, temperament is the way that you reflect all of your education, all of your experience, in a way that actually makes a practical difference.

Ben Forman: Well Haim we like to refer to you as the triple threat because you have all three — education, experience, and temperament.

Haim Zaltzman: For this podcast, we may actually lead with that “the triple threat.” I love that. I haven't been called that for a very long time, so I appreciate that. That's the kindest thing anyone has ever, ever called me, Ben.

Next question is my favorite. It's the poker table question. You guys, imagine that at ParaFi today you get to change just one thing, one thing only. Is it the game itself, i.e., the broader economy? Is it the table, i.e., the crypto blockchain industry? Is it the house, which is the regulatory regime and government? Is it the stack of chips, i.e., how much cash you have and how you can play with it? Or is it the other players in the industry — are folks not playing fair or nice, they're not coordinated enough, they're sticking it to each other?

Adrian, I'll start with you on this one. Which single thing — and I'm not going to let you pick more than one — what single thing do you change or adjust?

Adrian Uberto: I feel like we have to navigate all of these, but I’ll answer one. It's always great when you have additional clarity in how to play the game, how to navigate the game. So, I would go with the house — any improvement to that clarity, improvement to that, yeah, is always helpful as you continue to navigate something new.

Ben Forman: I would say the stack of chips. I don't always mind the lack of clarity, just because it can kind of create alpha. When there is too much clarity and conditions are smooth sailing, there's more competition. I would say more chips.

Haim Zaltzman: All right. Well, look, Biggie reminds us “Mo Money Mo Problems” is not necessarily the right way to go. But cash is king and you need more of it — it really does help, for sure.

Speaking of you guys talking about money, it's almost noontime here in California where I'm at. I'm hungry. What's your favorite food to eat at work and while playing poker — or, Ben, for you, while playing chess? I'm fine to give you what food you eat in the more distinguished chess game.

Ben Forman: I have two answers to this. I know I should only choose one, but I can't help it. I'll go with two. The first is the chocolate matzah that Latham sent to our office. And happy Passover to those who celebrate.

Haim Zaltzman: Likewise, Happy Passover. Chag Pesach Sameach to everyone.

Ben Forman: The second is, I love a good Wise Sons everything bagel with whitefish salad, or maybe scallion cream cheese with some smoked salmon on top. So, shout out to Haim.

Haim Zaltzman: All right, you're really trying to butter me up. I'm going to make sure to deliver that stuff for you. Hopefully the audience knows that Wise Sons is Latham & Watkins’ claim — I’m an early investor and very involved — and Ben has been a lover of all their food options. So, I'll continue to make sure those come your way. Very, very good answers. I like those. Adrian, your end?

Adrian Uberto: Wow. Well, I'm going to go with the most boring answer, but something I absolutely love is roasted, unsalted, raw cashews. And I can eat those by the pound, and that's one of them.

Haim Zaltzman: Is that because that's the best thing you can buy at Dodger Stadium?

Adrian Uberto: No answer. And then the other — I mean, you said don't ask for one — but the other is beef jerky and from one specific place that Ben can get it from. It's honestly the best. It's almost like an actual steak that was turned into beef jerky. It's the best beef jerky in the absolute world.

Haim Zaltzman: Wow. Well, I know what I'm going to ask you guys for in exchange for some Wise Sons in the future. All right, very nice. I'll take it.

It's been an absolute pleasure, Adrian and Ben, to have you guys on. I really appreciate, obviously, your time today on this podcast and you working with me and our Latham & Watkins team for all these years. It's really been a pleasure. Thank you very much.

Ben Forman: I appreciate it. Thanks, Haim.

Adrian Uberto: Yeah, thanks a lot.

Haim Zaltzman: That was my interview with Ben and Adrian from ParaFi Capital. Thanks again to both for being here.

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