Transcription Episode 46

Hi everyone and welcome to another episode of Living on Blockchain. Today we are speaking to Wes Levitt. Wes is the head of strategy for Theta Network and Theta Network is basically a leading purpose-built blockchain for video media and entertainment.

He is also a partner at Alpha Sigma Fund. So we talked about the bear market and you know his investment thesis with Alpha Sigma Fund, what is happening next at Theta. It was a very exciting conversation and I can’t wait for you guys to hear this.

So let’s deep dive right in. Hi Wes, how are you doing today? I’m good, Tarusha. Thank you for having me on the podcast.

So thank you so much for making out the time once again for this recording. For our listeners, would you mind giving us a bit of an intro? You know, how did you get into Web3 and what you do currently? Yeah, sure. So my name is Wes Levitt.

I’m head of strategy at Theta Labs, which is the creator of the Theta blockchain and overall Theta ecosystem. Theta is a layer one focused in the media and entertainment space. Although it is a general purpose EVM compatible chain, so anything can be built on Theta.

Our focus comes from our background in the media and entertainment space and so we sell blockchain applications that benefit that sector. I’ve been with Theta since early 2018 and I got into the space originally as a hobbyist further back, maybe 2015, 2016, relatively early into BTC because I would always see a pop-up on Reddit and so started learning more about it and it traded a little bit back then, but nothing that material. Unfortunately, it was not a big holder from back in those days, but my background professionally, I was working in real estate finance and then in real estate private equity and wasn’t really looking at crypto as a sector for career-wise, but in grad school, I stepped into a few courses in Berkeley’s computer science department while I was doing an MBA and I was blown away in 2016 and 2017 by how much developer enthusiasm there was for crypto.

It seemed like half of the class of that year’s CS class was all focusing on crypto full-time and then half the students in my business school class and half the law school kids were trying to join these classes too, so that’s when it clicked for me that this had gone beyond this interesting experiment that I used to read about on Reddit to a lot of attention and resources was going into this and so around that time in 2017 is when I really got interested and wanted to move into the space full-time and was fortunate enough to meet the team at Theta through some contacts I had in the Bay Area and joined the team in 2018 and we’ve been building ever since. Awesome, so it’s been quite a journey that you’ve had so far. Yeah, it’s a very different space to be in than real estate, I can tell you, which is as staid and traditional as it gets, but their mentality of how they do business and and how fast change happens, so that was really the number one thing that attracted me to the space, it’s just that there’s so many interesting ideas about how blockchain tech is evolving and how different token economics models can be applied, so it’s just, it was fascinating to see a space that encouraged so much iteration and development and things moving so quickly compared to the boring old real estate, that’s really what hooked me and made me realize I wanted to be in this space full-time.

Right, so you know that is absolutely true, I think a lot of people are very intrigued by the Web3 space because just because of the sheer velocity at which things move in this space, right? Yeah, absolutely. So you mentioned that you were apart, you were taking some courses as well earlier and or you saw a lot of excitement around Web3 amongst the students there, do you feel that finally the students and the perhaps the new age developers who are now getting ready to the job market, they’re really taking Web3 seriously because I feel a few years ago, it was still considered very high risk and people were a little of us, do you think that perception has changed? Yeah, I think if we make the distinction what you’re talking about, how if it’s developers going into the space then yeah, I think that perhaps perception has changed. I think no one looks at crypto as low risk after the last year but that’s from a price or investment perspective that it’s still looked at as high risk but I think every year that goes by where development just keeps chugging along and protocols keep getting built even in the spare market, you haven’t seen development slow down one bit.

Right. So I think, yeah, the new, the either coming out of school and just young developers just independently looking to work in this space, I think they’re seeing it as just as valid as ever if not more so because at least that’s the message I’m seeing is that by this time everyone kind of knows about the market cycles in crypto, there’s going to be bull market and bear market but if you’re a developer who just wants to build interesting stuff, I think it’s pretty clear now that this space will be around for a long time. There’s enough critical mass of developer talent excited about it that even if there’s an extended decline in prices, that’s not going to stop people from being interested in building new crypto protocols.

Yeah, absolutely. I think especially with the bear market hitting us hard, I think more than the bull market perhaps, the real builders and people who really want to create sustainable solutions, they become more prominent. There’s less noise, right? Yeah, I agree with that.

It’s kind of a double-edged sword. It’s always painful in some ways and frustrating perspective of trying to do business development and that kind of things but yeah, in some ways, it is, I guess, the silver lining of the bear market is you get less of the the people just attracted to the returns and the people that are just jumping from one hot sector to another. They were in cannabis and then they were in this and that and then they were in EVs and then they’re in crypto just because they’re chasing whatever is kind of that thing at the moment.

Those people go away. So, that’s nice. Yeah, that is nice.

I agree. So, what about Theta Labs? What are you guys building next? What is the one milestone that you’re excited about? Yeah, the thing that I’m most excited about this coming year and it’s not something that’s brand new coming out but so, what we built originally, the core solution of Theta is we have our own startup video platform. We wanted a way to reduce the cost of distributing video, the bandwidth costs for video platforms like ours and so, we built the Theta protocol around that idea and then as part of that, there’s tens of thousands of users running what we call edge nodes around the world and they’re the backbone of how you get that done.

They take in video segments and relay them to other users who want to watch that same video stream but then once that network of nodes is out there, we started expanding what an edge node could do because users were saying, that’s great, I’ve got this bandwidth I can share with other users and earn tokens for the work I do for the network but I’ve also got compute power or I’ve got free storage and so, it’s evolved to where we started looking at the edge network as it can offer all kinds of decentralized services for primarily in the video segment sector but in other ways as well. So, the users that have a lot of spare compute on these devices that they want to contribute, we have started having these edge nodes do the encoding or transcoding of videos as well. So, they’re not just relaying it, taking a video segment and relaying it.

Sometimes, they’ll do transcoding work to make it a different bit rate or this year, we’re rolling out where they can do the actual storage of BOD video as well. So, that’s why I’m kind of excited about this. It’s becoming more and more generalized as just these worker nodes that can contribute all kinds of resources on this decentralized network.

There’s even a few AI startups that have announced they’re going to start working with our edge network because they’re going to use this distributed network of nodes to do compute for different language learning models and other dataset training that they use for these AI startups. So, even though our focus will always be media entertainment, that’s kind of our DNA and what we build around. It’s very cool to see other people seeing the value of this and saying, that’s great but we found some other uses for what you built as well and we think that’s great.

We’re encouraging that. Yeah. What you guys are doing, absolutely, there’s like immense value there and it’s very interesting that you’re staying ahead of the curve by integrating AI as well because I think AI has become like the next big thing.

Everybody is talking about it and everybody wants to incorporate or have a piece of it on the platform that they’re building on. I’m not sure how healthy is that but what you guys are bringing, I think that’s actual value. Yeah.

It’s definitely the new hot thing. So, I’m not surprised. You’ll probably see it creep pretty much every sector is going to find a way to incorporate AI in some way.

So, it’s almost like it’s being its own silo. Pretty much any business, any sector is going to start seeing ways that they’re going to start using it. So, I think it’s natural.

You’ll probably see it showing up in a lot of different places emerging that way where even if you didn’t intend to, it’s just going to be part of a lot of different use cases now. Right. Yeah.

So, can you tell me a little bit more about how you are perhaps integrating AI onto the platform because from what my understanding is that Theta is an infrastructure layer, right, for media and entertainment on chain. Correct me if I’m wrong. Yeah, that’s right.

So, we’re basically, this network, the Theta L1 is basically like you can the payment rails for this network of nodes that do productive work for the network. So, you could have all these users running devices around the world and streaming video and doing compute and storage tasks without a blockchain if you wanted to, but it wouldn’t be very robust because no one’s going to do it for free. So, that’s the whole reason why you have it connected to the blockchain so that the users earn rewards for doing this work and then they’re incentivized to keep doing it.

So, in the context of that, we’re not integrating AI specifically into anything we’re doing at Theta, at least not now. Who knows how it’s going to emerge where something could be useful for Theta users as well, but we have this platform that anyone can use to to tap into these nodes and have productive work done. And it’s just, we’re seeing a few AI startups that are seeing it.

Basically, they’re seeing an opportunity to be clients or customers of this network and start using it. So, yeah, it’s not nuclear, it’s not anything directly tied into Theta blockchain that we’re doing with AI, but it’s one more group of users or customers, you may want to call it, that are interested in using the network. Okay, that’s very interesting.

I think, and that’s a good use case, right, with your existing infrastructure. So, that’s brilliant. So, in case somebody wants to, you know, perhaps check it out, they can directly go on your website.

Is there any kind of a wait slide? Yeah, so, if you want to start building, I mean, the Theta blockchain is, you can check out our GitHub link to offer our easiest way to start is on our website,, and then you can find links to our GitHub and all documentation. But, of course, if you’re serious about building and want to get started, you can also reach out to any of our developers that are active on our social media. Since it’s early days, we do work pretty hand-in-hand with a lot of the teams to help them understand how to build out on Theta.

Awesome, awesome. And we, a developer, I think, or anybody who’s building on a platform loves that extra help, I feel. It takes a village to create a sound platform.

So, it’s great that you guys lend a helping hand there. So, moving on from Theta, I can see on your profile, I’ve seen that you’re a part of some investment syndicates as well. Is that something that you’re still doing actively? Yeah, that’s right.

So, since about 2020, I’ve been a partner at a small crypto fund called Alpha Sigma Capital. Okay. And so, we started basically with myself and a few other partners investing some crypto into the fund.

Okay. And there’s a few outside LPs as well now, too, that participate. But, yeah, we’ve been active investors for the last few years.

And we focus mostly on use cases that we think are interesting, that have some real-world use or revenue generation or something else because myself and the other partners come from finance or traditional backgrounds. So, that’s a little bit more what we know. But, yeah, I think it’s a really… I really enjoy doing this on the side because I feel like, one, it keeps me tapped into a lot of new developments in crypto, which is beneficial on the Theta side as well, but it’s also helped me see the trends coming and basically be better at positioning Theta to take advantage of what we’re seeing in the crypto space as well.

So, just by the nature of it, it keeps you where you have to be on top of the space 24-7 and you’re keeping abreast of all developments. So, I think it’s been really productive. Awesome.

Okay. So, this is something that I guess a lot of entrepreneurs would be curious about. Since the bear market has kind of hit, have you seen like a bit of a slowdown in the way you’re deploying capital or has the parameters changed perhaps? Like, have they changed in the way you decide to deploy capital in upcoming platforms? Yeah, it definitely slowed down the level that we’re nesting.

And it depends also if you’re talking on the liquid or illiquid side. Definitely on the liquid side, investing in trading tokens and cryptocurrencies, it slowed down a lot just because for the past 6 to 12 months, it’s hard to invest when you don’t know if things are still going down quite a bit more. But on the venture side, like at our side, we’re only doing early seed stage stuff.

But as long as it’s at a reasonable valuation, we’ve still been investing in some newer protocols or early stage companies because that’s a long-term bet anyway. If you’re expecting that to be a 5 to 10-year potentially before you’re seeing a return on it, you’re not as concerned about the exact point in the market you’re investing in. You’re just trying to focus on, is it a good team? Do they have a useful solution they’re building out? And do you trust that they have the ability to execute and get it done? So, that’s been ongoing.

But yes, we’ve been very skittish about our BTC and ETH holdings the last year. In fact, for a significant part of the last year, we’ve just been in cash or hedging to protect our other liquid investments. Throughout the past year, we’ve just seen that there’s always been another shoe to drop to butcher that expression.

But part of it is sentiment-based because as things get worse and worse, the people who aren’t true believers, they’re going to keep selling out. But part of it is also the contagion risk that you saw. Many of the blow-ups in the last year, it’s not like they were unrelated.

They were all counterparties. And even with Silvergate, over the last couple of days, it wasn’t explicitly their counterparties that blew up. It wasn’t like bad loans they were making as you might like a 2008 scenario.

Their loans were all safe. But the big catalyst for this run on Silvergate is most of their depositors, crypto companies, either losing money or pulling out of markets and for whatever reason, decreasing their deposits at the bank. So, if FTX hadn’t blown up, a lot of those companies would have been in a better position and had more reserves.

And so then Silvergate in turn would have more deposits and then they wouldn’t have a run on the bank. So, it’s all connected. They’re all counterparties to each other in one way or another.

And so, our concern has been, what is the extent of it? And are there any other dominoes waiting to fall? I think at this point, it seems like most of the leverage is out of this counterparty risk collectively seems to be out of the system. There’s a lot of companies left like Theta Labs where we don’t have any exposure to any of these guys. We just have our treasury and then we just build.

So, my sense is most companies in the crypto space are closer to like Theta Labs is now where it’s unfortunate, but none of these other companies blowing up really has any direct effect on our ability to continue to build next in our plan. I hope there’s not too many others coming, but it’s tough to say. Yeah, absolutely.

I think we can never be too careful, especially as you mentioned that there is a bit of a domino effect and I’ve actually seen this a lot. I think all the stake, it’s a small industry, it’s a small space and somehow it’s a very incestuous space. A bad actor can have like an impact on a lot of other platforms as well because everybody’s involved in one way or the other with the other platforms and because the ecosystem is smaller, it can create mass ripple effects.

So, in terms of what you’re perhaps because the market is the way it is and even you are being very careful, what trends or what kind of platforms or what category would you feel that you’re still very bullish on? The sort of general space I’m still most bullish on actually since this is both built in I guess is still entertainment and gaming and just broadly the non-financial aspect of the crypto space and for a couple reasons. One, I’ve just seen the interest in what we’re building in the space be a lot more resilient compared to some of the other crypto use cases. I think it’d be very tough to be running a leveraged derivatives trading platform right now because one, it’s got a bad name after some of these blow-ups and two, I think the regulatory pressure on those kind of platforms is going to be immense and it’s probably going to, they’re not done.

Even just the last few days, you’re seeing more activity from and I’m taking a US-centric approach here. The US regulators are still coming down quite hard. If you’re outside the US, I think there’s a lot of actually a lot of reasons to be hopeful about regulators.

Hong Kong is loosening restrictions. Dubai is obviously like we talked about earlier, a great hub for Web3, but in the US, it’s going to be tough and if you’re doing something complex in financial markets, it’s going to be even tougher for you. I think things we’re doing in the entertainment space and video streaming and compute power for these different products or in gaming, which we have a little bit of overlap with and touch on with NFT gaming, these are far less controversial.

The companies we talk to in the entertainment space don’t really care all that much about FTX blowing up because they’re like, well, that doesn’t exactly have much to do with us. With these clouds coming overhead with regulators coming in, I’m pretty happy about being in this side of the situation. I think it’s going to do well in the coming years, whereas if you’re trying to run something that, a stablecoin or something else that threatens or at least is perceived to threaten the traditional financial system, it could be a pretty tough few years.

I think that I do concur to quite an extent. Your insights are pretty good here. I think this is giving you a lot of food for thought.

I do think that it is important that some kind of regulation is there, especially because there are certain bad actors that have ruined the pie for quite a lot of platforms that were perhaps not doing anything wrong, but they did face the brunt of this entire thing that has happened, especially with the FTX debacle. That had quite a cascading effect. I saw it personally that a lot of my partners were affected and there were so many funds that had closed down as well because of the same impact.

Just to avoid that kind of repeat of something like that, we do need to put in certain stringent measures perhaps. Yeah, yeah, yeah. Agreed.

So, now to perhaps less serious subject matter. There are a lot of content creators and a lot of builders in this space and our listeners are always looking to follow and look at new people in the space that are actually perhaps making this space a little more approachable for them, pushing out the right kind of information. Do you have any recommendations of content creators or builders who are putting out the right kind of information? Yeah, I don’t have a go-to, but I do follow a bunch of folks on crypto Twitter, which for a long time I didn’t just because it can be a little of a wild west and you don’t know who you’re actually following.

It’s a lot of craziness. So, I kind of wrote off crypto Twitter as a little unserious. But the last year or so, I actually have started following a bunch of folks and there’s a lot of noise with the signal, but there’s a lot of good as well.

You have to sift through it a little bit, but it really is where some of the cutting edge discussions are happening about how EFI protocols should evolve or what’s actually generating value on Web3 and what’s just hype. In my opinion, now I’ve kind of come around, I think you have to be on crypto Twitter and following some of these folks, even the ones you disagree with to be in the conversation. It’s not the only place people discuss crypto, but Twitter is by far the most important one in my opinion.

So, you got to get on it if you’re not. Yeah, absolutely. I think I get so much information off my Twitter and people like you said, you have to follow the folks at times you perhaps even disagree with because otherwise it’s very easy to get into your own people chamber and just be talking to people who are agreeing or hold similar opinion like you do.

Then you don’t really get to challenge your own opinions. Yeah. One of the guys I like calling is Liron Shapira, who is very anti-crypto and basically calls out, half his Twitter is calling out why he thinks A16Z is basically a fraud, running Ponzi schemes and all this.

I don’t agree with everything he says, but I do agree with some of the criticisms he puts out of crypto and the hype versus actual value being delivered. I think it’s great to have a voice like that and keeps you honest to follow that and understand the other side of it. We all know it’s very easy to be in a crypto echo chamber and just hear people talking about only bullish things and how crypto is going to take over the world.

It’s not healthy to just be stuck in that mindset and never face any criticism. Yeah, absolutely. I think you’re right.

Because as builders in this space, if we are not perhaps listening or paying attention to the other side of people who have at times just criticism, but at times criticism is constructive as well, because actual value is only going to get created if we pay attention to that and make the space a little better, more mature. Yeah. Yeah.

So, we are running a little short on time, but there are a few more questions that I wanted to get to. But I think I would love to know your take about which particular sector within Web3, are you betting very high on infrastructure and you think that the next wave in the bull market, what would be the bedrock of that wave? What kind of, would it be tooling? It wouldn’t be infrastructure? Do you think it’d be more on DeFi or NFTs? What would your speculation there be? Yeah, it’s an interesting one, because I think now with the collapse of some of the big, largest companies in the space of the last year and FTX being obviously the biggest, there’s a lot of soul searching going on and people wondering what is the narratives that we put our faith in? Do they still make sense? Or what do we believe as crypto space overall, what’s going to be the moment that lets it go mainstream or deliver value or regain trust of people after a lot of skeptics have been created over the last year? I think broadly speaking, it’s going to come down to crypto apps or blockchain based apps that don’t necessarily come across in your face about the fact that it’s leveraging cryptocurrency because to the extent that in the mainstream, crypto has gotten a bit of a bad name, that probably is the hindrance to mass adoption of a lot of crypto protocols. But I don’t think people will refuse to use an app that is useful to them just because it involves crypto.

It may just be headline risk, if you want to call it that. NFTs in particular, I think most of the attention went to your 4Day Yacht Club or CryptoPunk. But there’s a lot of cool applications that are using NFTs for ticketing or we create a product where NFTs are used for DRM to give you rights to watching a video, like you buy a movie.

For example, you could use your token that shows that you purchased it in NFT. So it’s seamless with a crypto wallet that you have access to the movie and it’s immutable that you own this piece of content. But I don’t know that in our early versions that we’re putting out, this is mostly to crypto native folks.

So they like that the fact that it’s an NFT is front and center. I think if this really goes mainstream, it probably be in a case where we’ll obfuscate that it’s actually an NFT under there. In the same sense that most people using the internet don’t understand the inner workings of the plumbing of how data is routed over the internet.

I barely understand it. So I don’t think you need to or should need to understand that stuff. And that combined with the questionable reputation crypto has acquired in certain circles, it may be similar.

Just say, look, this is incredible technology under the hood. It’s great. You built it.

We’re going to keep it under the hood and we’re not going to say anything about crypto. We’re just going to build an app that’s really useful that uses that. And then users are going to enjoy that and see value in that app.

And I think that may be what we see in the next bull run driving it because just building something that’s only useful for the crypto faithful, which one, isn’t that many people, but two, it’s just the same people that are already well-versed in this stuff is not going to drive something. It needs to be something that’s useful to people outside of our small group of developers and crypto natives. Right.

No, I think you’re absolutely right there. It needs to be sound platforms that are actually running and value. Otherwise, that has to become like the bedrock of the next bull run.

I’m very hopeful that this bear market will push some folks into really building sound solutions and really proving the metal and proving the next year’s wrong. Because as you said, we already have a perception problem and we wouldn’t want to aggravate it in any way. Okay.

So before I wrap this up, I would love to ask you this question that I can actually ask all the guests to come on my show. Would you have any advice for people who are still a little dicey about getting into Web3 and what would be your two cents to make them start living on blockchain? Yeah, it depends on if it’s from a personal perspective. I mean, that’s the great thing about the space that you can get involved as much as you want.

There’s no barrier to entry. You don’t have to be certified or get a degree. Just start digging into different apps and protocols that interest you.

And if you’re so inclined and have some skills to offer, I mean, you can oftentimes start developing with them. It’s not like when you say get into the space, it doesn’t mean necessarily quit your job and then go apply for a job in crypto. You can just start building alongside or following but also helping out where you think you can help out.

And that’s how a lot of people get involved in the space to begin with. On the professional side, yeah, it’s a little more professional risk and enterprise, the headline risk of using blockchain now. But yeah, the protocols in this space are very used to doing proof of concepts or different types of demos that you can do.

So I think start that way with low risk ways. You can just prove value. You don’t have to start off by announcing that your entire product line now runs on blockchain rails out of nowhere.

Just test and experiment and iterate on what you’re building because that’s sort of the mindset of most builders in the crypto space anyway. So it’s a great way to get something started and see how it works. Absolutely.

I think that is sound advice for anybody who’s still sitting on the fence and peering at the edge and thinking of getting into Web3. Thank you so much, Wes, for taking out the time to do this conversation. Any parting thoughts before we wrap this up? No, thanks for having me, Tusha.

We’re still very excited about what we’re building regardless of the noise and fair market. In some ways, it’s actually a little easier. So definitely welcome any one of your listeners that wants to get involved.

Easiest way to find out is to start following us on Twitter, Theta underscore network, or check out our GitHub and docs and get started. And yeah, we’re always happy to bring more developers and bring them into our community. Awesome.

Awesome. I’m sure that a lot of our listeners will take you up on that offer. Thank you so much once again, Wes, for taking out the time.

This has been a lovely conversation. Yeah. Thanks a lot.

Nice talking to you, Tarusha.

Leave a Reply

Required fields are marked *