Key Moments
Why Now Is The Best Time To Build In Crypto
Y CombinatorKey Moments
Crypto is entering its "golden age" for builders, with scaled chains, regulatory clarity, and maturing stablecoins making it easier and cheaper to create 10x impact on financial systems.
Key Insights
The cost of transactions on scaled chains like Base or Solana has dropped from $5 to fractions of a cent, enabling new consumer applications.
5-6 years ago, many early-stage crypto startups spent as much on lawyers as on engineers due to unclear regulations, hindering innovation.
Around $200 billion of stablecoins are now in the market, a significant increase from early years, enabling programmable dollars globally.
The new Shopify-Coinbase commerce payments protocol transformed millions of lines of legacy code into a ~1000-line smart contract for accepting payments.
Creators' content and capital are poised to become new on-chain asset classes, with platforms like Base allowing posts and creators to be tokenized as coins.
Crypto can provide a layer of hardness and verification for AI, ensuring authenticity, and serve as a native substrate for AI agents to transact.
The opportune moment for crypto innovation
The crypto space is described as entering a "golden age" for building, marked by the availability of mature infrastructure and the need for entrepreneurs to leverage these tools for significant impact. This era is characterized by the completion of foundational work, including stablecoins and scalable blockchain technology, creating a fertile ground for building novel consumer experiences. This moment is particularly crucial for breaking through due to the established infrastructure, creating an opportunity for "magical experiences" that can achieve widespread adoption. This sentiment is reinforced by Y Combinator and Coinbase's joint call for startups, signaling strong belief in the current potential of the crypto market.
The evolution from Fintech 1.0 to 3.0
The conversation positions the current era as Fintech 3.0, a departure from previous stages. Fintech 1.0, exemplified by early online payment systems like PayPal in the 90s, focused on making consumers comfortable with online transactions. Fintech 2.0, spanning the last decade, involved building user-friendly applications on top of existing legacy financial systems. Fintech 3.0, however, represents a paradigm shift, aiming to rebuild the financial system from the ground up using crypto as a programmable platform. This approach seeks to create a more efficient and inclusive financial system by leveraging blockchain technology and native digital assets.
Scaling chains and the broadband moment for crypto
A critical development enabling this new era is the significant progress in blockchain scalability. Early blockchains were often slow and expensive, with transaction costs sometimes equaling the value of the transaction itself, which was prohibitive for consumer applications. Innovations on chains like Base and Solana have drastically reduced these costs, often to fractions of a cent per transaction. This scaling is likened to the "broadband moment" for the internet, where increased throughput and reduced costs unlocked a new wave of applications and user experiences that were impossible with dial-up speeds. This cost reduction opens up the aperture for what developers can build, making previously unfeasible applications now practical and economically viable.
Understanding Layer 1 and Layer 2 blockchains
The discussion clarifies the distinction between Layer 1 (L1) and Layer 2 (L2) blockchains. L1s, such as Bitcoin, Ethereum, and Solana, are foundational infrastructure aiming for maximum decentralization and censorship resistance, serving as a global platform for building. Ethereum, while prioritizing decentralization, faced scalability challenges in supporting billions of users. To address this, it pioneered an architecture where L2 solutions are built on top of the L1. L2s, like Base, inherit the L1's decentralization and security while offering significantly higher scalability by processing and batching transactions off-chain before committing them to the L1. This approach drives down costs dramatically (e.g., by 1000%) while maintaining the core benefits of decentralization and censorship resistance.
Building a crypto 'Hello World' with AMMs
For developers new to crypto, building an interface to an Automated Market Maker (AMM) or decentralized exchange is recommended as a "hello world" application. AMMs are smart contracts that facilitate seamless swapping between digital assets without intermediaries. The logic for these swaps, once complex, is now distilled into relatively simple smart contracts. Creating a user interface that allows users to connect their wallets and swap assets demonstrates the power of crypto's programmability and permissionless nature. Experienced builders might even take on the more complex task of building their own AMM, understanding that financial systems that once required massive infrastructure can now be represented by hundreds of lines of code.
Regulatory clarity as a catalyst for innovation
Regulatory uncertainty has historically been a major hurdle for crypto innovation, often forcing startups to spend a disproportionate amount on legal counsel rather than engineering. This created a high barrier to entry, requiring deep expertise in securities law and regulatory compliance. Recent developments, such as potential legislation like the Clarity Act, are beginning to provide the necessary rules of the road for entrepreneurs. This regulatory clarity reduces the risk and uncertainty, enabling founders to innovate more freely and focus on building products rather than navigating complex legal landscapes. This shift is seen as a significant unlock, lowering the barrier to entry and stimulating more innovation in the space.
Stablecoins: Programmable money for the global economy
Stablecoins have emerged as a killer use case, particularly for enabling programmable dollars accessible to anyone globally. Previously, individuals outside the US lacked easy access to dollar accounts, hindering international transactions and financial stability. Stablecoins solve this by providing a way to transact, save, and build with dollars instantly and at low cost, representing a significant improvement for hundreds of millions worldwide. While dollar-stablecoins are prominent, there's a growing opportunity in creating stablecoins for local currencies, empowering local economies by allowing them to leverage the same innovations developed for dollar-stablecoins (like easy lending, borrowing, and swapping) within their own economic contexts.
Tokenization: Moving traditional assets and creating new ones
Tokenization involves representing real-world assets on a blockchain. This includes moving traditional asset classes like stocks, bonds, and real estate from legacy systems into a programmable, globally accessible on-chain environment, which represents a massive opportunity given the trillions of dollars in these assets worldwide. Beyond moving existing assets, crypto enables entirely new asset classes that couldn't exist before. One example is the tokenization of content and creators, where posts and individuals on platforms like Base are treated as coins. This allows for real-time valuation, monetization through borrowing or lending, and creators to capture value directly from their work, fundamentally changing the creator economy and enabling new forms of capital markets.
The intersection of AI and Crypto
The convergence of AI and crypto presents significant opportunities. Crypto can address key challenges in AI, such as verifying authenticity and combating misinformation by providing a layer of hardness and verifiable on-chain data. Furthermore, AI agents, which are essentially software programs, can operate natively on crypto rails. This allows them to directly transact and interact with smart contracts, treating money as software. This provides a more efficient and robust substrate for AI agents compared to navigating traditional web infrastructure. Crypto thus serves as a platform for AI, enhancing verifiability and offering a native environment for programmatic transactions.
Founders and team attributes for crypto startups
When evaluating teams, YC and Coinbase look for builders who possess technical skills, understand the technology deeply, and have a strong work ethic and creative drive, often encapsulated by the term 'based' (working hard, doing right, pushing boundaries, team-oriented). A key insight is that successful crypto founders often solve real problems for users, who may not even be aware that crypto is being used. The focus should be on identifying pain points and applying the technology to solve them, rather than forcing a crypto solution onto a non-existent problem. This approach, combined with the increasing regulatory clarity and influx of strong technical talent, signals a robust future for crypto startups.
Mentioned in This Episode
●Software & Apps
●Companies
●Organizations
Common Questions
The current period is described as the 'golden age of crypto building' because the necessary infrastructure and tools are in place, allowing entrepreneurs to focus on creating impactful new consumer experiences and business applications.
Topics
Mentioned in this video
A cryptocurrency exchange platform that collaborated with Y Combinator on a request for startups and also partnered with Circle to launch USDC. Coinbase is exploring opportunities in AI and crypto intersection.
Mentioned as an example of Fintech 1.0, representing the era when consumers first became comfortable paying for things online.
A startup accelerator that, in collaboration with Coinbase, issued a joint request for startups aiming to build in the crypto space, believing it to be an opportune time due to infrastructural advancements.
A major e-commerce platform with which Coinbase launched a commerce payments protocol allowing Shopify stores to accept USDC on Base. Shopify expressed interest in rewriting their acceptance systems in smart contracts.
A prominent Layer 1 blockchain that pioneered the concept of Layer 2 solutions to achieve greater scalability while preserving decentralization. Base is built on top of Ethereum.
Cited as the 'magic moment' for AI, prompting a comparison to whether crypto is experiencing a similar breakthrough moment.
A neo-banking service in India built around stablecoins, experiencing impressive growth rates and demonstrating the viability of this model in emerging markets.
Mentioned as a past YC-backed crypto company that started as a collectibles marketplace, focusing on verifying authenticity and putting that proof on the blockchain.
A company that began as a collectibles marketplace, using blockchain to immutably prove the authenticity of items like baseball cards and collectibles before selling them.
Used as an analogy to explain blockchain chains as globally distributed computing environments where code can run, accessible to anyone.
A neo-banking service operating in Latin America that is built around stablecoins and has shown incredible growth rates, highlighting the potential of stablecoin-based financial services.
Mentioned as a blockchain that has progressed significantly in scaling, enabling lower transaction costs. It takes a different approach by handling scaling primarily at the Layer 1 level.
A platform that started as Coinbase's blockchain and has expanded into an 'everything app' for crypto, enabling trading, storage, and community building. It operates as a Layer 2 solution on top of Ethereum, compressing transactions for efficiency.
Identified as a major Layer 1 blockchain, playing a foundational role at the base layer with a focus on decentralization and censorship resistance.
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