Now Is The Best Time To Build In Crypto

Key Concepts

Fintech 1.0, Fintech 2.0, Fintech 3.0, Blockchain, Layer 1 Blockchain, Layer 2 Blockchain, Base (Layer 2), Ethereum, Solana, AMM (Automated Market Maker), Stablecoins (Dollar-pegged, Local Currency), Programmable Money, Regulatory Clarity, Wallets, Tokenization, Creator Economy, AI & Crypto Intersection, Decentralization, Composability.

Fintech Evolution

• Fintech 1.0: The 90s, exemplified by PayPal, where consumers became comfortable with online payments.
• Fintech 2.0: The last decade, focused on improving user experience on top of existing financial systems.
• Fintech 3.0: Rewriting the financial system from the ground up using crypto as a programmable software platform with native money.

Crypto's "Chat GPT Moment"

• Crypto hasn't had a single "magic moment" like ChatGPT. Many people are still fearful or unaware of its potential.
• This presents an opportunity for entrepreneurs to build breakthrough experiences.
• The infrastructure is now in place (stablecoins, chains), making it possible to create magical experiences that can grow rapidly.

Blockchain Stack & Scalability

• Building crypto apps involves a stack, with chains as the programming environment (like AWS).
• Chains have matured significantly. 5 years ago, transactions were slow and expensive (e.g., $5 to send $5).
• Scaling solutions like Base and Solana have drastically reduced costs (fractions of a cent per transaction).
• This is considered the "broadband moment" for crypto, enabling new applications.

Layer 1 vs. Layer 2 Blockchains

• Layer 1 (L1): The base infrastructure (Bitcoin, Ethereum, Solana), aiming for maximal decentralization and censorship resistance.
• Layer 2 (L2): Built on top of L1s (like Ethereum) to scale while preserving decentralization.
• Base acts as an "HOV lane" on Ethereum, compressing millions of transactions and publishing them to Ethereum, reducing costs by 1000%.
• Solana takes a different approach, aiming to achieve scalability at the L1 level.

"Hello World" Crypto Apps

• UI for interacting with AMMs (Automated Market Makers): Build an interface to connect a wallet and swap assets without needing API keys or permissions.
• Building your own AMM: Implement the smart contract logic for asset swaps (hundreds of lines of code). This demonstrates how traditional exchanges can be distilled into simple code.

Regulatory Impact

• Unclear regulations have forced early-stage crypto startups to spend more on lawyers than engineers, hindering innovation.
• Regulatory clarity (e.g., Genius Act for stablecoins, Clarity Act for crypto tokens) lowers the barrier to entry for entrepreneurs.
• This allows them to focus on customer-centric development instead of legal compliance.

Key Enablers for Crypto's Golden Age

• Chain Scaling: Reduced transaction costs and increased throughput.
• Regulatory Clarity: Clearer rules for entrepreneurs to build on the platform.
• Stablecoin Maturity: Programmable money that is widely accessible.
• Simplified Wallets: Easier integration into user experiences.

Stablecoins: Programmable Money

• Stablecoins enable programmable dollars to be accessible to anyone in the world.
• Previously, individuals and businesses outside the US lacked access to dollar accounts.
• Stablecoins allow building with dollars on a programmable platform with instant, global, and low-cost transactions.
• Killer use cases include remittances and international money transfers.

Local Currency Stablecoins

• While dollar stablecoins are popular, there's a growing opportunity for local currency stablecoins (Brazilian Real, Nigerian Naira, etc.).
• These allow applying innovations built on dollar stablecoins to local economies (business loans, etc.).
• Entrepreneurs can either launch their own stablecoins (requiring government and bank partnerships) or build solutions that work with existing stablecoins.
• Building solutions that support multiple stablecoins (dollar and local) provides flexibility for users.

US-Centric Builder Opportunities

• The opportunity is to rewrite legacy financial systems (50-100 years old) into programmable smart contracts on-chain.
• Example: Coinbase's commerce payments protocol with Shopify, which translated millions of lines of code into a thousand-line smart contract.
• This protocol allows any Shopify store to accept USDC on Base from anyone in the world.

Decentralization & Network Effects

• Decentralization is crucial at the base layer (Ethereum, Base) to create a global platform for participation.
• Shopify's expertise in commerce is valuable, and the goal is to use decentralized platforms to build more efficient systems.
• Entrepreneurs can leverage tools like the commerce payments protocol to build acceptance products that are 10x cheaper and faster.
• The internet originally lacked native money, leading to intermediaries (payment networks, social networks) that take fees.
• Crypto turns network effects inside out, creating open networks where anyone can participate.

Tokenization

• Traditional Asset Tokenization: Moving existing asset classes (stocks, bonds, real estate) from legacy systems to programmable environments.
• New Asset Classes: Creating entirely new asset classes that are only possible on-chain.
• Example: Tokenizing content and creators, where every post and creator is a coin, valued in real-time.
• This allows creators to raise capital, monetize their content, and benefit from its value.

Qualities of Successful Crypto Teams

• Builders: Teams must have the skills to build the product (code, community, content).
• Technology Understanding: Teams must understand the technology to solve problems effectively.
• "Based": Teams must work hard, do the right thing, push boundaries, and prioritize the team over the individual.

AI & Crypto Intersection

• Crypto can solve AI's problems:
  • Verifiability: Crypto provides a level of hardness and verification to authenticate AI-generated content.
  • Programmable Money: Crypto serves as a native platform for AI agents to transact.

YC's Perspective on Crypto

• YC is open for business for crypto and wants to fund great teams.
• YC looks for technical founders who are willing to learn about customer pain and business.
• The regulatory environment is becoming safer, attracting high-quality teams.

Advice for Technical Founders

• Come up with a thesis of what you think is broken.
• Show up every single day trying to either prove or disprove that thesis.

Synthesis/Conclusion

The transcript highlights a pivotal moment for crypto, transitioning from infrastructure development to application building. Key enablers include chain scaling, regulatory clarity, stablecoin maturity, and simplified wallets. Opportunities abound for entrepreneurs to rewrite legacy financial systems, create new asset classes, and leverage the intersection of AI and crypto. The focus should be on solving real-world problems with a deep understanding of the technology, building strong teams, and embracing the principles of decentralization and composability. Y Combinator is actively seeking and funding promising crypto startups.