Jason Yanowitz on the Transparency Alliance: Blockworks' Plan to Fix the Token Market

Bang. Jason,

how are we doing? Gus, hey. How are you guys doing? I didn't get the memo. The black button down memo.

Yeah. I've seen it. Yeah. This is the second guest I think we've had this week that could said, hey. If you if you would've let me know, we're we'll not see this. That would've worked. Yeah. Well, yeah, I'll take this off. Yeah. So you're Jason, you said you're on the move. Where are you where are you right now? Traveling?

Yeah. I'm in California right now. Yeah. Been big big month of travel in May. Did you know, I was in Miami for consensus. I was out in Japan last week in California right now, and then, yeah, back to New York. So It was

nice to bump into you at consensus. We had a a random ten minute exchange, so it's good to good to find some time with you here virtually. So we the news of, you know, why we reached out to you guys, the Transparency Alliance, we'd love to start there and then pick that apart a little bit, what what led to that, what that what that's all about. Seems really significant. The companies that you guys are working with there is really great.

But Zach and I, I mean, just given given the focus of what we're doing here, like, we'd love to spend some time getting to understand the, like, media data evolution of BlockWorks and and hear about that. But do the quick intro. I'll pop up the transparency alliance here.

Yeah. A 100%. So this is the so Block for those who don't know, I'm one of the founders of BlockWorks. We're information platform. We this is year nine of the business. So we launched in 2017. Wow. The we we launched this thing called the transparency alliance yesterday with the whole goal of bringing more trust to crypto markets. So the whole vision and thesis of the company is that all assets eventually move on chain.

So stocks, bonds, currencies, commodities, and, yes, we we do believe that tokens will make tokens great again. And the the issue that we have right now, though, is we've entered this kind of I think we've entered another bull market. We're very early days of entering a new bull market. I think this will be seen as the institutional bull market. The last one, right, in 2021, you had the institutions starting to buy some tokens beyond just Bitcoin. Right?

A little bit of ETH, a little bit of Solana, but they really stopped there. I think this is the cycle where these tokens become seen as just you know, it's like you're you're backing hot startups, and you're backing the great companies. But to do that, you have to fix this token dynamic where people don't actually know what they're buying when they buy a token. So if you if you buy a stock in, you know, the equities market, you know what you're buying.

If you buy a token, you you really have no clue what you're buying. So we started working about a year ago on this thing called the token transparency framework. It is a disclosures framework for the industry. We went to the SEC a couple times, worked with them on it a little bit, and they're they're great. They give us a lot of feedback.

The last time we met with them, they said, well, it could be really helpful if there was an alliance of people, industry and market participants, who all aligned on this on one single disclosures framework. And so we said, let's go build it. Let's go get everyone together. The most important group to get together are the exchanges. And so we're very lucky and honored to have the the biggest exchanges in the industry. Right? We have Coinbase, Kraken, Binance US, a bunch of other great companies, the custodians.

Anyone who lists assets anywhere want to those are the key to making a disclosure framework. Right? Industry will you know, have industry wide adoption for disclosures framework. And so that's what that's what we did. So we have forty forty plus companies in cohort number one of the Transparency Alliance. We'll have another,

you know, cohort number two going live relatively soon. And, yeah, the goal is to have hundreds of companies adopting the token transparency framework. I love what you said about make tokens great again. But where my head goes, you know, we see this trend of tokenization continuing to to take off. We're seeing, you know, capital formation happening on chain with protocols like star .fund.

Do you see this like, are they heading towards a, like, a convergence point where the tokens, the frameworks are just gonna be the same, Or do you still see this distinction between, hey. There's gonna be tokens that are independent of actual ownership in the company. Where do you see that, and where does that fit into this framework right now? Look. I'm not a securities lawyer, so I don't wanna, you know, go into topics too too too deep there where where, you know, talking out of my book. But

what what I do know is that there should be one single way to bet on the company. Right now, it's very confusing if you're an investor in crypto assets. If you wanna, you know, make a bet on Airbnb, there is one single way to make a bet on Airbnb. You buy the Airbnb stock. Right? If you wanna, you know, bet on OpenAI, there's one single way you bet on OpenAI's private company equity. If you wanna buy if you wanna bet on many of the crypto companies that are around today, there's two different ways to bet on them.

Right? There's the private investment, which oftentimes the VCs do, and then there's the public token. So it's very confusing. Where does the value accrue? Yeah. There needs to be one single way that value accrues. It can be to the equity. That's the company's decision. It can be to the equity. Can be to the token. Ideally, there's just one single structure, and that's what we would like to make.

We're not here to tell founders and CEOs what is the best way, but we're here to tell the investors in the market, this is exactly what you're getting when you own the token. And with that, hopefully, it brings better disclosures and transparency to a market. Well, for those who are just entering this chat now,

the idea of, like, making tokens great again, like, give us some context of maybe where we've been in the last couple years. It seems like a really difficult time even for a business like ours as we think about the future. Like, if we were even to do something like this, thinking about a place to start that wouldn't be completely ridic it it seems so difficult right now to have a trusted place to even think through this. I know, you know, I was looking at Blockworks has an advisory arm.

I don't know if that's looped into this at all. But give us maybe the the brief history of, like, why this is so dynamic right now.

Yeah. So okay. So Bitcoin launches in 2009. 2015. We I think you have to go all the way back. Right? 2000, you know, '15, we we we get Ethereum for a ten year time period. From 2015 to roughly 2025, maybe 2024, tokens had a premium. Tokens probably traded higher than they should have traded. We have now entered an era where tokens trade lower than they should.

So we so now if you have a disc if you're a founder and you have a company and a startup and you launch a token, you are going to get a discount to what your real valuation should be. So, again, we had a ten year period where if you're if you launch a token, you would actually oftentimes get a premium to what your valuation should be. And that's think about, like, the l ones Yeah. Trading at 20,000,000,000, and they probably shouldn't have that that's the that's the token premium. Even the apps. Right?

Many of the, you know, DEXs, you know, getting a $5,000,000,000 valuation in year two. May maybe that shouldn't actually happen. But that's fine. That, you know, you that that brings a lot of capital. It brings people into the space. Now there's a discount. So then why why is there a discount? Well, because people don't actually know what they're buying. They don't actually have any trust in the market. And so I think that's why it's really the theoretically, the token should trade at par to the valuation.

They should trade what the company is worth. But right now, they're trading at a discount. And that you know, I think that's I think that's for building these on chain capital markets. So I think the you know, my my belief is I tweeted this after I, you know, saw Drew down at consensus. You know, I said, look. I think we are just entering the token bull market. And I think what you're gonna see I think I tweeted this three weeks ago.

You're gonna see a couple of tokens two to three x from here, and the timeline's gonna be silent. And that's what happened early twenty twenty three. So this this period of time really reminds me of early twenty twenty three. Right? Solana's trading at $8.

It runs to 40. It runs to 50. No one's really talking about it except for a few niche groups on the timeline. And, you know, it wasn't until, like, late twenty twenty three that I think people accepted. Okay. We we are in a bull market. Now that's where I think we're we are today. I just found it. It took me a minute. All we'll say is here, giddy up. Beginning of a new bull market. I agree.

It it feels refreshing almost that we're still in this, like, suppressed valuation moment, but it does seem really exciting and the dawn of something new. Why does it make sense for Blockworks? And maybe this leads us into a little bit, like, the current moment of the company. You guys just rebranded. Everything looks beautiful. You're really seeming to go all in on the data and analytics side of this. I remember the 2¢ that you gave me as we were talking, as you were leaving is, like, have your logo on the chart.

You wanna be in in the data business. Like, that's the business you wanna be in. What is that business? Where does that conviction come from? What have you guys learned in the last, you know, few years of of going into this news, media, and and into what you're doing now?

Yeah. And just one one last note on the token markets, then I do wanna get into Blockworks, is if you go to the Blockworks website, and you go to prices, which is in the top left, and you sort by thirty days to see who are the top performing tokens, the the trend you will notice that I think if there's any founders listening to this, they should really take you know, they should really look at this is the tokens that are doing well right now. Right? Z you know, sort by thirty days. Yeah. Sort by right.

Venice, Zcash, Hyperliquid. There there's a there's a trend here. There's only one single way to bet on that token, right, or to bet on that company. You you can't go buy equity in Venice. You can't go buy equity in Zcash. Can't go buy equity in Hyperliquid. This is a you have to have a single mechanism to which you're driving value of access.

It's just the the last note I would leave people on is, like, really, I think that will be the single defining feature of the tokens that do well in this cycle is that there's one way to bet on the company, not two. Okay. Drew, to answer your question, Blockwork started as a media and events business. The original idea here is that crypto would become this big institutional asset class. All the this, you know, all this capital and money and markets would eventually move on chain.

And to do that, you would need, you know, a bun a bunch of stuff. You'd need information to make decisions. There's what we call soft information and hard information. There's two ways to build an information platform. You can either start with the soft or the hard. So the hard would be data. Right? The soft would be, like, live streaming and podcasts and news and things like that. Everybody all of our competitors, right, started with the hard information, so the data. And why why did they do that? Way sexier.

You can go raise a bunch of venture capital money, but the problem with that was the TAM of the market was just way too small. The institutional market for crypto assets was too small to go build a data business. And so we actually started with the top of the funnel. Top of the funnel is interesting. Right? Because I don't know if you guys have raised money for StableDash or if you're bootstrapping it, but it's very tough to raise money as a media business. You know, media multiples are very low.

Events revenue gets treated as, like, you know, very low multi you know, low low valuation, low multiple revenue. But what what VCs and investors miss is that you actually have this amazing growth engine that gets discounted, discounted, discounted, discounted until it doesn't when you have a product at the bottom of your funnel that you can actually sell. So it's a weird almost arbitrage that you can do where nobody was focusing on media and events when we were doing it. And so we got to build.

You know, we got to 25,000,000 in revenue just bootstrapping this media and events business. And it wasn't until year five of the business that we turned on the data business, and now we're the fastest growing largest data business in crypto because we own the media and events business. And so we we definitely would not have had the success that we're having today on the data business and software business if we didn't own media and events. And so media is an interesting business. It's a tough business.

The revenue gets treated very low multiple by investors, but it actually gives the company a superpower, which is you can push your own products through it when the time is right.

Was that So interesting. Was data always in the back of your head, or did you have, like, a trusted adviser or somebody, like, kinda chirping in your ear that, like, this is the route that you would go one day? If you look at the biggest financial information platforms, Morningstar, S and P, Cap IQ, FactSet, Dow Jones,

they all they're all they're all really data businesses at their core, even Nasdaq. Right? How does Nasdaq, you know, one of the largest exchanges in the world, maybe largest, second largest behind NYSI, how do they make money? It's not from trading fees. It's from selling data feeds. So I think people underestimate just how large these data businesses can get. I think Morningstar is like an $80,000,000,000 business. S and P is, like, a $120,000,000,000 business.

But I will give a you know, I think the the the greatest products ever at Blockworks have come from single employees who are maniacally focused on building that product. And we had a you know, we had an employee two employees, Ryan West, Westy, and Dan Smith, who basically said, I will make this data product work no matter what. And so when products have failed at Blockworks, it's because Mike and I tell people that we should go do something.

When products have been very successful, it's almost more bottoms up when employees have just taken it, grabbed it, and said, I I will die trying to make this product work. And that's what we have right now. That's That's awesome. Yeah. There's a guy, Robert, who you know, we were with Token Transparency Framework, there's a yeah. A guy, Robert. Yeah. I think he's, like, early twenties or something. He's I mean, this might be his first job out of college, and he's just taking the TTF and and run with this thing.

And, yeah, TTF and Transparency Alliance would not exist if it was not for Robert. So that's that's, I think, our learned product experiences. You you've gotta find people who are maniacally focused on making that product work. Did you cultivate that culture?

Like, did that just happen organically? Like, being in this space that just moves fast and is pushing the boundaries and just innovating, especially I imagine being surrounded with founders doing that on Empire. Or was this a, hey. Actually, I need to slow back, slow down, look at this, look at what my people are coming to me wanting to build, and I need to change and adapt? Show me the incentives, I'll show you the outcome. Right? It was that, you know, Charlie Munger or something who said that. So

I think the problem that mow I think, actually, most companies have this in their early days. If people who are just diehard and they grab things and they build it, and then around fifty, sixty, seventy, eighty employees, something breaks. And the thing that breaks is you start to hire, you know, executives above the people who are doing the work. You you hire professional managers.

And what that is doing is the incentive there, you you're breaking the incentive to do the really hard work and to be maniacally focused on that on that product and to, like, die on the sword of building this one product and making it your baby. Because you're saying no matter how hard you work, I'm gonna go hire someone above you. So I think the thing that and we got that wrong originally at Blockworks. It was only from learned experience.

And so now what we try really try to do at Blockworks is almost put take out the, like, the experience criteria in terms of, like, how senior you are. Are you getting promoted? Are you making more money? Are you getting more equity? Experience doesn't really matter. It's what have you actually done at BlockWorks. And, yeah, that was we, you know, we we only learned that through through failure. We did the whole go try to hire external executives, like and some you know, sometimes that works.

We have, you know, some some great executives at Blockworks. But, you know, many of the best people at Blockworks are technically, I'd say, younger and more junior

than would typically Yeah. You would typically see at that stage of an org chart, but it's, yeah, it's been it's been incredible. They got hard we partially asked that for our own own benefit when we're thinking about hiring and growing our team. And, again, do you look for somebody with massive amounts of experience, or do I wanna go find, like, just a young hungry kid out of, you know, coming out of college that just wants to get to work and go hands on?

Yeah. Yep. I mean, nine nine nine out of 10 times, I would say young, hungry, completely dedicated, maniacally focused, willing to die on the sword of building their product. There are some roles where maybe that doesn't, you know, work. Like, you know, Blockworks wouldn't be here if it wasn't for our VP of finance, Phil, who is, you know, is a seasoned vet in the Okay. In the finance in the you don't you don't wanna hire 22 year old out of college to be your head of finance. So there there are some roles.

Everyone's gotta have a fill. That's great.

Jason, this has been fun, man. I know it's quick. Absolutely would love to have you back. Black collar next time. That's the heads up. But safe travels. Really appreciate you making time for this, and it's great to learn from you. There's so much that you guys have gone through in the the journey. I've I've loved some of the stuff, I think, on LinkedIn I've been seeing with, like, the side by sides of the events, like, the starting, how it started at where it's at now.

It's cool to see your journey as a founder and very inspiring stuff. So thanks for taking time. Yeah. Cheers, guys. Love what you guys have built too. Thanks for having me on.