GRTiQ Podcast: 186 Mark Smargon

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Mark Smargon (00:18):

And not only that, I think it’s really not only my love for the project, but also the fact that it was insanely useful for us. It was really powering a lot of the projects we built, and pretty much every product that we have has The Graph aspect to it.

Nick (01:03):

Welcome to the GRTiQ Podcast. Today I’m speaking with Mark Smargon, Co-founder and CEO of Fuse, a leading web3 platform for business and finance. With a deep-rooted background in tech entrepreneurship that began at the age of 14, Mark has been a pioneering force in the crypto space for a lot of years, particularly in building payment solutions that merge the worlds of traditional finance and decentralization. During this interview, Mark shares his incredible journey, starting with his early ventures in tech alongside his twin brother to his time in the Israeli Intelligence unit, which he says shaped his approach to leadership and management.

(01:39):

We also explore Mark’s insights on the evolutions of payments and the payments industry, his views on the tech and crypto scene in Israel and how Fuse is revolutionizing payment infrastructure by blending the best of centralized and decentralized infrastructure.

(01:53):

Along the way, Mark shares his thoughts on the role of The Graph in Fuse’s ecosystem, why he chose to pursue being a blockchain in those early days of Fuse, and his vision for the future of web3. I started the discussion with Mark by asking about how he got started at the age of only 14 as an entrepreneur and the business still exists today.

Mark Smargon (02:14):

So hey, Nick, and thanks for the first question. I basically didn’t know in real time that I was an entrepreneur. It’s only in hindsight I can say that this is a profession. I think it’s more of like a bug or a disease than a profession, and Fuse is actually my fourth company since then. So when I started my first company, I didn’t know what I’m doing. It was the year 2000, something like that, and I did this with my brother, back then building websites and e-commerce. E-commerce didn’t exist. Amazon was tiny, and you couldn’t really have too much understanding of what’s going on because internet was in diapers. It was more than 56 bits, and everything was slow, and you actually needed to go to a bookstore to build something, which wasn’t even… it wasn’t web2, it was Web1. web2 came only in 2010, 2007, something like that.

(03:13):

So in Web1, you couldn’t use Google or Stack Overflow to learn how to build stuff. So I think it’s really interesting in this perspective of 24 years what roads the internet made, and I think we’ll talk about it probably more in this conversation.

Nick (03:30):

How did that early experience as a young person sort of getting involved in tech, getting involved in entrepreneurship and exploring these types of things shape the rest of your life?

Mark Smargon (03:41):

I’m very fortunate. I think it’s pretty unique to find your destiny in the age of 14 and basically never be concerned about what I want to do with my life. And I think Jeff Bezos said it, again, Amazon that everybody has a job and some have a career and not everybody have a calling, and I think that sometimes your career chooses you. It’s not like you’re choosing it. I was fortunate, but now I can talk in hindsight and really say, okay, this was significant. In real time, I thought that’s fun, let’s build an e-commerce. There’s a new thing called the ASP, it was .Net and PHP. It was really like the early days of those technologies. So I said, “Let’s use it.” So that’s basically how it started.

Nick (04:27):

So talk to us about where you’re from and where you grew up and outside of sort of being entrepreneurial, what other types of things interested you as a young person?

Mark Smargon (04:36):

So I was born in Latvia. I have a twin brother. We always work together, even at school, learn together. So basically our first company, we started it together, and today he manages it. It actually still exists, and working with e-commerce providers in Israel. So we came to Israel when I was five years old. We immigrated. I don’t remember the point where we actually had to learn a new language and stuff like that. Just when you’re small, five years old, it’s relatively easy.

(05:06):

And I think we were really children of the internet. I feel fortunate we just had been at the right place at the right time. I think Israel is a very interesting hub for technology. There’s mentality of entrepreneurship and there’s a mentality of early adopters. It reflects in pretty much any aspect of living. People are very open and also like technology, and I don’t know exactly where I fit in all of this. I just think it was the right place in the right time.

(05:37):

I’m saying we’re children of the internet because I really feel like we’re the last generation that knows how it’s like you don’t know who’s calling you. Those simple things that you can appreciate that the new generation can’t really understand, and I think we’re natives, but we also know how it’s like to play outside before internet. We have a really interesting perspective in specifically this time and specifically this place.

Nick (06:03):

I’ve had other guests of the podcast on before who’ve been able to talk about the tech scene and even a little bit of the crypto scene in Israel. I’m thinking primarily of Uri from The Guild and of course I had Uri from Starknet on before he stepped down as CEO. But do you mind just sharing sort of your perspective on the crypto scene and community in Israel and how you sort of see that evolving or changing over time?

Mark Smargon (06:29):

Maybe some people will be surprised to know that Israel is probably one of the more influential countries in crypto. Surprising because I don’t think today Israel is dominating this scene anymore, but Israelis are still very, very dominant. I would say that this is a bit like the India story, just that India is a very big market and a lot of users, and this is a tiny 10 million people country that is basically invented a lot of the stuff that we’re looking at.

(07:00):

And I don’t think I’m exaggerating in saying that without this little island of technology, probably crypto and the internet, web3 in general would probably evolve much slower. So we can look at things like Colored Coins. My first company in crypto was working on that. We had Adi Shamir building the SHA-256, which is the encryption that pretty much all the internet is powered with. It’s not only him, but he was very influential on a very central piece of the puzzle. The encryption part, we have zero knowledge proofs, wasn’t really invented only in Israel, so Israelis were involved, but it’s definitely been commercialized in Israel.

(07:41):

A lot of the things that you have in the academy, Israel has a very strong academy. A lot of it is like global cooperation, but when you need to actually create a commercial go-to market strategy or find somebody that will pay for it or Israel is a pioneer at popularizing technologies that are under the hood. In the ’70s, crypto was in all government and spy stuff, spy tech. Only in the ’70s we started seeing this kind of seep into academy and into the public domain and into commercial stuff. And with blockchain, there’s a lot of pieces of the stack that were built here from the academy, and you also have a lot of cryptographers to actually pioneering the use cases themselves. The application for instance, for multi-party computation, MPC. So you can see that MPC for instance is something that was really exported from Israel. It’s not invented only by Israelis, but I would say that it’s basically exported and commercialized by Israel.

(08:49):

You have the company called Curve that was bought by PayPal, and you have Fireblocks that pioneer this. You mentioned Uri, those guys from Stark who invented Starks that use ZK proofs for blockchain for scaling Ethereum. The list goes on and on. I can talk about mining and there’s DAGs, things like Kaspa think it’s like in the top 10 currencies or something like that, top 20, scaling how mining works for Bitcoin but also for Ethereum, two very different ecosystems. Both of them kind of took a lot of upgrades from this. You have the Ethereum Foundation and the account abstraction was… I wouldn’t say invented, it’s co-worked.

(09:31):

All that being said, you kind of see that pretty much all those companies only export technology. None of them get their hands dirty. When Starknet started, they didn’t really push any code out. It was closed source. They sell licenses. So Israel is really good at SaaS product and B2B. Crypto is not really something that we really found a way to make money outside of the SaaS model. So we’re really good at the tech, but we have a lot of blockers for building big crypto companies. That’s definitely the case.

Nick (10:06):

It’s an amazing background in history on the tech that has emerged from Israel, and I really appreciate you going through all that. I think listeners will find that super interesting, and as I’ve said, it’s come up in other Episodes as well. You brought up the academy there. As you said, you moved from Latvia to Israel when you were five. What can you tell us about your educational pursuits and what you decided to do in terms of studies?

Mark Smargon (10:29):

I went to the army. I didn’t want to go to the army because I had my business and e-commerce, and it was booming. And I stayed in the army for more. I was in the intelligence, and I just stayed in the army, and I think it’s the best education I could have got. And when I got out of the army, I decided that I don’t want to waste time. I already spend it in the army. I also didn’t want to learn computer science. I didn’t think it would be interesting for me because I didn’t see myself as a developer. I prefer to talk with people than with computers, and I like the business part, so I took some business courses and MBA and stuff like that and never really graduated.

Nick (11:11):

Not an uncommon theme for a lot of the entrepreneurs that I interview on this podcast. What can you tell us about working in the army and intelligence? I mean, I’m sure some of that still is protected and top secret type stuff, but what was that experience like for you, and how did that shape the way you sort of approach business as an entrepreneur?

Mark Smargon (11:29):

I would say that probably Israel is successful with startups because of the army. It’s a big reason. It’s like a startup bootcamp is because you’re learning how to do stuff that are really interesting and important, and you suddenly get responsibility at 18, 19, 20 years of age that people usually wouldn’t get. I was 20-something and managed 10 people, and sometimes they give you things that you’re way underqualified. So it’s like a maturing experience, and I think that in general it’s just gave me a lot of leadership skills more than anything. And I think this is something that usually you don’t have any way of getting at the age of 18 or 19.

Nick (12:17):

Mark, as you know, we live in a world full of conspiracy theories, and social media is not helping us out in that regard. One conspiracy theory is that the emergence of Bitcoin and a lot of this crypto came from the intelligence community. You’ve been in the intelligence community, you worked in the army there. What’s your sense of that conspiracy theory? Is there some credence to it, or is that pretty outlandish from your perspective?

Mark Smargon (12:42):

Well, I think that the reason the army intelligence works in Israel specifically is because you just have access to a really brilliant pool of talent, young, brilliant pool of talent, and mostly people that are self-taught. They have very minimal… In general, you go to the army only for two or three years depending if you’re a girl or a boy. And in those two, three years some people don’t do anything, don’t make any impact, but they really try to cherry-pick the best people, put them together, and just let them do their thing, be very, very empowering. And it’s not the classical army you would hear about.

(13:20):

The classical army you would hear about would not be able to pull off something like Bitcoin. I’m pretty sure of it, and I think any government organization maybe accidentally, maybe it’s plausible to think somebody did this accidentally, but on purpose to plan what we had the last 15 years with this Bitcoin revolution, I think it’s farfetched. I don’t know who is Satoshi, but I think Occam’s Brazier probably the simplest explanation is probably true. And I don’t think that the intelligence or CIA or Mossad created Satoshi is probably the best or the simple answer, so I would quote, it’s probably not true.

Nick (15:05):

Want to ask you now this question about entrepreneurship. So you got started at 14, the first company you worked on with your brother is still around, and you’ve worked on several others since then. If you had to sort of say what the two or three most important characteristics of an entrepreneur are based on your experience, what are they?

Mark Smargon (15:24):

So you need to be curious. I think it’s not only for entrepreneurs. You need to be stubborn. The last thing is self-aware because sometimes can be too stubborn and not enough self-aware. Putting your time and your money in the same thing usually is not recommended. This is why self-awareness and stubbornness, they come hand in hand. I would say probably that a lot of people are doing it for the wrong reasons. It’s not a way to get rich, and it’s not a way to be happy. People really need to do it from love for the process and not necessarily for short-term gain.

(16:09):

Average startups reach profitability after 10 years on average. And I think most people don’t really realize that when they venture out into the unknown and get money from investors and putting their own life on hold and putting their employees’ lives on hold and their weekends and their relationship with their friends and basically taking their lives into your management. And imagine doing this for 10 years or committing to do something for 10 years. People today have zero loyalty for their workplace. So an entrepreneur needs to be in love with an idea for the next 10 years. And I think this is for very specific types of people.

(16:54):

And the last thing, you need to be hopelessly optimistic. You wouldn’t be able to convince anyone, let alone employees and investors with pessimism and depression. You need to have hopeless optimism, like chronic optimism.

Nick (17:13):

So if those are the characteristics of a successful entrepreneur, let’s talk about maybe one or two of the most important lessons you’ve learned about entrepreneurship through your experience. And I always sort of envision a listener of this podcast who’s sitting on an idea, maybe they can’t find the courage to get started, or maybe they’re already getting started and it’s a little bit difficult out there. What is the one or two lessons that you think can sort of save people a lot of the heartache or pain that you’ve had to go through over your career?

Mark Smargon (17:42):

I have a lot of debates with people. It’s not like I have monopoly on truth. I do feel like I have some lessons that I learned that it’s really hard to deny that they’re true. It’s not subjective, it’s probably an objective truth. So I think it’s a cliche, but the main thing is about product-market fit. Usually when you have product-market fit, you know it. When you don’t have it, you don’t necessarily know it.

(18:12):

And I think in crypto, it’s a really good example, and I had lessons learned with my companies also that sometimes you over-raise too early. Raising too much money might kill a project. It’s not the worst thing in the world, but it makes you slower. And I know because I had to start different kind of strategies in different startups and different approaches, and one thing is clear, you can’t really outsource anything from the CEO until you have product-market fit, even if you raised shitload of money.

(18:49):

If you’re, for instance, not sure if you have product-market fit, 100% you don’t have it. And if you raise a lot of money and start hiring sales teams and product teams and different people to start scaling that certificate for the startup. Thinking that you have product-market fit and starting to hire people only to just fire them when the money is over, and then people realize there’s no product-market fit. So I would say that this is the real understanding. You can’t outsource anything, it’s all you. Sales, marketing, and product, until you get this fit, it’s the founding team. No one else.

Nick (19:33):

Mark, I think there’s a lot of buzzwords in business such as product-market fit. I would put marketing strategy, some of these other buzzwords sort of in that bucket as well where we all assume we know what we’re talking about, but maybe we don’t sort of have a shared definition. So when you say product-market fit, can you just take us through a little bit of what you mean by that? What is product-market fit?

Mark Smargon (19:55):

It’s a great question. I think that people usually learn how to do product, and if they look back on who invented product and when, what was it invented? So product is a pretty much web2 invention. So it’s recent. It’s not like we have product people for thousands of years and pretty much all of our professions are web2 professions, a lot of them.

(20:21):

When I look at those definitions, they’re very contentious. There’s a lot of debate, there’s a lot of argument. I don’t think there’s right and wrong. It’s like project management, there’s no one way of doing it and everybody else are wrong. And same goes for product management, but when people are onboarding users, if the user acquisition cost is lower than the lifetime value of a user and your usage grows, it doesn’t churn, you have product-market fit. I hope it makes sense. Trying to minimize it to a small formula.

Nick (20:58):

And when you have something like that that can be verified and someone can sort of calculate it makes arriving at consensus around what this thing actually means much easier.

Mark Smargon (21:07):

If you’re just paying money and users don’t stick around, you don’t have product-market.

Nick (21:13):

It’s a great litmus test for anybody out there who’s wondering if they have it. This question about web3, you talked about in your own history kind of starting in Web1, experiencing the rise and working in building on web2, and here we are today soon we’re going to talk about what you’re working on now and sort of the state of web3, but as you place the emergence of web3, how do you place it? Do you see it as a revolution against sort of the sins of web2, if you will? Do you see it just as a natural evolution of technology, it’s just sort of the next most natural thing to happen, or something else?

Mark Smargon (21:52):

Yeah, so it’s pretty clear that web3 is a buzzword. It’s not a bad thing that it’s a buzzword, but it wasn’t a buzzword in 2005 and through 2010 when we started seeing web2 emerge, and web2 wasn’t even called web2 in real time. Definitely nobody pushed it or advertised it. Actually web3 itself originally is just a way to whitewash or kind of create this friendlier term for crypto, because I remember the early days of Bitcoin when we started our first company in the space, it was called Bitcoin 2.0. There was no blockchain industry. Then the bank said don’t say Bitcoin, say blockchain. And then they were friends of Bitcoin again.

(22:41):

I don’t think people have a problem of saying Bitcoin anymore, but they do have a problem with all this confusing world of crypto assets, and because not everything is about money. Social media on chain how do we call it, NFTs or gaming, sports, music, fashion, how do we call it now? Is it still blockchain? Because some people think that NFTs have nothing to do with crypto. There was a little bit of confusion about it. So I’m saying there’s a lot of hype cycles. This is probably one that will stick. This term really works well I think to describe the larger vision. And I can talk about my definition of web3, but I don’t think everybody has the same definition. That’s for sure.

Nick (23:27):

I’d love to hear your definition, and sometimes the way I get to that definition with guests of the podcast is asking them how web2 and web3 sort of coexist in the future. And there’s always this argument, well, they don’t coexist. web3 eats web2, and then there’s this other argument of like no, eventually it just becomes web3 rails and web2 sort of leverages that in certain sectors. And so yeah, I would love to hear sort of your opinion on that and how you define it.

Mark Smargon (23:54):

I think the definition is probably less outrageous. I was around when web2 came. You saw what was specifically developed, what was the technology, and what was actually built with that technology. So what was the technological upgrade that created web2 and what was the business application that monetized web2? Web1 took years to monetize, like decades, in the ’90s and 2000s. Only until I would say probably web2, people realized, okay, we can make money.

(24:29):

So web2 was originally something called Ajax and the popularization of JavaScript as a way to build websites and to build the backend and to build the frontend. And really what it created is like this two-way communication where people can generate content. The internet wasn’t read only again, it was read-write, and suddenly you could see social media created and mobile created and chats, the early forums, and chats and search engines and they really needed this technology, and specifically blogs and forums and user-generated content and social media.

(25:05):

But the biggest thing that web2 created, the biggest application is SaaS. The biggest, I would say, business model. This is what powers web2. If you look at most of the startups get funded, in most companies in the world, there are SaaS companies. Cloud model is part of SaaS and Shopify is part of SaaS, and Israel for instance is a SaaS Mecca, B2B powerhouse. It’s really the majority of businesses here are SaaS businesses and B2B businesses.

(25:35):

And I think web3 will just make SaaS better because SaaS has a lot of problems. So decentralizing SaaS products, I would say unlocks a lot of value and specifically with technological problems that can benefit from decentralization. As we go through decentralized model to something radically decentralized, it’s clear that there’s businesses need something in the middle. This is also why we created Fuse, and not everything needs to be anonymous, trustless, permissionless.

(26:11):

It could be something in the middle between centralized and decentralized that businesses… like a sweet spot where businesses can actually benefit, where businesses can benefit from web3, from new business models, where the old business models don’t work. And this is why you saw fashion, music, sports, and a lot of those verticals getting into NFTs because they have… especially in corona, they have problems making money.

(26:41):

When you see a business like CloudFlare that is aggressively getting into crypto, you realize, okay, this is a centralized company with a very problematic business model. They basically ask a lot of money for DDoS protection, which could actually be better served by a distributed network. Same goes for Visa and Mastercard and Stripe, the biggest private company in the world.

(27:04):

The second-biggest company, private company in the world is Revolut. It’s also a crypto powerhouse. You kind of see a lot of businesses that are super profitable, but they know that they’re probably first mover advantage, and somebody will come and either the regulators will break them apart or something will happen, so they want to keep their competitive edge. So web3 is when two companies want to collaborate together and they don’t want to necessarily use the old traditional SaaS model.

Nick (27:38):

You bring up Fuse there, and I’d like to turn our attention now to talking about Fuse and the value it brings. Maybe to get the conversation started, can you take us back in time to when you started having the early ideas related to what Fuse has become and what you were thinking about at the time and where you think this sort of came from?

Mark Smargon (27:59):

About 12 years ago, I bought my first Bitcoin. It was one Bitcoin. Just I think it was something psychological. A lot of people just want to own one whole Bitcoin. It was $20 back then. I’m not a good investor, but I do like to play with stuff early. So I wanted to play with some Bitcoin, and immediately I would say after buying, I fell in the rabbit hole.

(28:22):

We had a really nice community here in Israel, very big for its size, a few hundred people. It was really interesting to kind of understand the technology a little bit better. A lot of it sounded very, very complicated. There’s a learning curve to understand how all of this works, but some people, after they understand, they basically fell in love. This is what happened to me. I think in the last 12 years I’ve been doing it full time basically ever since.

(28:49):

The first thing we did is trying to push it with POS as point of sale and let people buy. So again, because of our work in e-commerce, we said, okay, let’s make it easy to buy and let’s make it easy to spend. So we said, let’s remove all the friction. People will go to the bar, order a beer, they will get the payment slip, they will send the money to the QR code on the payment slip. Within 10 minutes, they will get approval for the POS and buy beer with their Bitcoin, and let’s see who wants to spend their Bitcoins. And the result was nobody wants to spend their Bitcoins because it makes sense to use Bitcoin for payments as much as it makes sense to use Facebook stocks for payment. I wouldn’t go use gold to buy anything. I’m buying gold to hedge against the apocalypse. It’s not really to spend money on beer. For this, I have fiat, for this, I have dollars or euros or shekels, right?

(29:45):

So that was a super interesting lesson. This is why we closed this company and started next one. We actually met Vitalik back then. He wasn’t famous. He was 19. He was the head of the Bitcoin Magazine, and he was working at eToro with Yoni Assia on a white paper called Colored Coins. You can call it the predecessor of Ethereum. So before Ethereum was created, that was like the Bitcoin version of it. I don’t know how many people remember, but Tether before USDT was minted on Ethereum, it was actually minted on Bitcoin before Ethereum existed. Stable coins didn’t appear with the ERC-20 with Ethereum. They actually existed way before.

(30:31):

We were a company that started in 2013. I will probably fast-forward really fast. At some point, we decided to focus on actual consumer payments. We built one of the first payment apps in Israel, but since it was so early, this company was a custodian. So basically we just had an e-money license and then I felt like this would be less of interesting to use a non-custodial technology and via custodian. And I left and started Fuse.

(31:03):

So this is the third iteration for using blockchain for payments. And I would say that only now, only in the last, I would say, last two years, in all the 12 years I’ve been in this space and in the last two years I can really say for non-investors, for actual people that know this and understand how it works, only now I can convince people that blockchains are good for payments. It was a really tough sell, especially early days of Ethereum. There was a lot of ideas, but it was really hard to sell merchants.

(31:37):

We called it the falafel seller test. You need the technology that your falafel seller can use. So it was really hard to imagine this back in the day, but today I feel like all the gaps are over. This is why all the narratives are so confusing, and this is money time. This is not the time for, in my opinion, this killer app to actually demonstrate what it can do with businesses.

Nick (32:02):

You said earlier when you were talking about entrepreneurship that it really needs to be about being in love with [inaudible 00:32:08] idea or an idea. What’s the idea behind Fuse that you’re in love with that sort of powers your passion for this?

Mark Smargon (32:16):

I think Stripe, the biggest private company in the world, it’s also very, very profitable, it wouldn’t exist without web2, and we need something like Stripe for web3. So Fuse is basically Stripe for web3. It’s like a B2B2C product that uses Visa as a settlement layer and offers a lot of value add services. So can Fuse as kind of like a Visa plus Stripe that is built tailor-made for the long tail of businesses. That’s the longer pitch.

(32:48):

But we don’t believe blockchains are consumer facing. They’re investor facing right now, so you need to be an investor to use a blockchain. And I don’t think account abstraction changes this. What works for money managers doesn’t work for consumers, and let’s not confuse our investors for being our consumers. If we want this to scale, we need to hide the complexity under the hood.

(33:13):

If you look at all the big web2 companies, all the big tech conglomerates, there’s really one clear common denominator and they revolutionized UX. This is their claim to fame. They didn’t invent any interesting technologies or nobody really knows what technologies they invented. They invented business applications and good UX, and everything else is a bonus.

(33:40):

What I feel like Fuse as well is making crypto that everybody with the phone can use, but doesn’t really rely on you understanding crypto. So I don’t want to teach you new habits for you to be my customer. I want to give you the habits you’re already used to. And I think this is also a sign of things to come because I don’t think crypto is a revolution like people think. And web3 is not going to replace web2. Crypto is going to meet traditional assets in the middle, and web3 will meet web2 in the middle, and DeFi will meet TradFi in the middle. Not everything would be on chain, but also not everything will be off chain. Not everything will be anonymous, but also not everything would require KYC.

(34:35):

So people don’t need to think black and white. Technology is very great all the time, and at the moment it stops being sexy, this is the moment it starts to actually work.

Nick (34:46):

I’m going to ask you a question here, and I’m non-technical, longtime listeners of the podcast know this and you’re just meeting me today, so I’m warning you, I’m a non-technical person, but as a founder building a solution in web3, I think you probably have a matrix of decisions to make, and some of this is sort of infrastructural facing, meaning you decide whether you’re going to be a dapp or whether you’re going to be a chain, and if you’re going to be a dapp, what chain to build on and so forth. You’re clearly building a solution that kind of feels and sounds like a dapp, but it’s actually a chain, Fuse is a chain. So can you talk us through sort of that decision of why this needed to be a chain, why didn’t you leverage something like Ethereum or an L2 or something like this?

Mark Smargon (35:29):

Perfect question. So it was really, again, a lot of mistakes led me to this point. We had a lot of trial and error and we’re building wallets and explorers. It’s not for the lack of building that I realized, okay, we need to be a chain. So there are several explanations. One, we understand technology is not there yet, it’s not mature yet. One of the main things that I kind of pivoted in the last five years, Fuse started exactly five years. We have a birthday now in August. The main thing I would say that changed in the last five years in my understanding, the main thing that I realized is how premature we are. Because when I started Fuse I thought, okay, crypto is great for developers, it’s just not yet great for consumers. But if you’re a developer, go have fun. It’s a free buffet. Everything is open source.

(36:19):

The only problem is that some of the food will poison you if you don’t really know what you’re doing, and actually developing contracts, it’s counterintuitive, you shouldn’t develop a contract. There should be a strong disincentivization for developers to actually build their own contracts. The real value add of this technology, every contract is like a standard backend that is supported by all exchanges, all wallets and all the institutions. So when you have this consensus where you have all the big institutions in the world agree that this address represents dollars and all the big wallets in the world support it and all the big exchanges in the world support it, this is not a small thing. If you know how businesses work and how the tech stack works and how ERP systems work and POSs work and Visa works, you realize that this is a huge, huge innovation.

(37:12):

So how to create a project that you can raise money for that has a way to protect itself. How do I protect my business model where this technology is up for grabs, everybody can access it, and actually anybody can fork you? What do we do? We build a chain because a chain can be upgraded, it can be forked. A lot of times somebody is confusing Ethereum as a currency and Ethereum as a chain, as a network, and Ethereum as a technology. Until we start to kind of separate those things, chains is all we got.

(37:52):

So Fuse as a chain is able to build the community that will create this idea that those businesses can work together. We don’t own the network, it’s otherwise what’s the [inaudible 00:38:05]. We don’t want to replace Visa with another Visa, right? So we want the community ownership aspect. We want the grassroots, bottom-up approach where we don’t exactly build the technology because we don’t know if ERC-20 is the best standard out there. Maybe there’s something better.

(38:21):

So we don’t have an opinion about what is the best standard. We’re using the standard that everybody else are using. Or in other words, we’re not trying to compete with the internet, we’re just using HTTP and TCP/IP. And Ethereum is kind of like the HTTP of money. So we realized this and launched an EVM. That was a really good approach. It wasn’t fashionable to launch chains, and there was no L1 or 2 in 2019, but it became fashionable a little bit later. But we got a lot of growth from just choosing to be a chain.

(38:57):

Another aspect is that once you have a community, nobody can fork you. Since you’re a chain, you can think about they can fork the technology, they can’t fork the users, they can’t fork the liquidity, so you have a way to defend your business model, and in a nutshell, you can think about a use case that is built around your chain, around your stack. In my opinion, payments, they need a vertical stack and they need vertical integration.

(39:26):

If you sit in the US, you probably know Starbucks is the biggest loyalty program in America and probably the world. And the reason it’s so popular because they did vertical integration, they have the app and they have the POS system and everything vertically integrated and everything like super frictionless. And this is the holy grail of how payments should look and work. This is why we need a vertical stack, which is totally free, totally open source, absolutely non-custodial, but it’s built around payments. So there needs to be some thought about the unit economics of a transaction.

(40:05):

And if you look at blockchains and fees, it’s notoriously bad. The situation is really bad. There’s no equilibrium in the market where people know exactly how much a transaction should cost. So you ask yourself what is the intrinsic value of settling on Ethereum versus Fuse, or how can you even compare?

(40:28):

You’re also thinking about what should be… We want the fees to be high enough so they won’t spam us, but low enough so they won’t fork us, so that you have this different verticals or different equilibriums will exist, and our world businesses shouldn’t pay retail prices for block space. In our world, they’re paying wholesale prices. So it’s a whole different thinking about the unit economics of a transaction because we’re trying to be comparing it to Stripe, which are just 3%, and Visa, which charges roughly 1%, and not compare it to Ethereum that has very wide fluctuations in fees. And probably Ethereum will change, and it would be more stable and the fees would be lower, but I don’t think there would be lower on a scale that we’re thinking about. We’re thinking about onboarding billions of users to crypto.

(41:29):

So I don’t imagine in the future that users will pay gas in chains. They don’t pay Facebook and they’re not going to pay Ethereum. There’s not enough investors in the world to pay Ethereum. So if we want Ethereum to scale, we need to think about a different way to price transactions. Of course, low denomination transactions, they shouldn’t go on chain. You don’t announce $5, I bought the coffee on a global settlement network, right? You use Ethereum to move billions across continents. You wouldn’t use it the same way for buying $5 of coffee.

(42:09):

So my point is that you need to think about the use case and you need to think about the vertical stack. And this is why we chose to build Fuse as a chain bottom up, and we build the middleware and build the SDKs for the app. So we’re really trying to think what an operator needs, operator that doesn’t want to do the heavy lifting of building non-custodial wallets and loyalty systems that are powered by Ethereum. I think this is really hard for someone in 12 years in the space to build. So definitely newcomers shouldn’t worry about it. They should just go to our website and check out the stack and start building from templates and white label wallets and really thinking about onboarding businesses because that’s the way to scale this world.

Nick (42:56):

It’s an amazing answer. I really appreciate you walking us through that, and I’ll put links in the show notes for any listeners that want to go learn more and get involved and active in the Fuse community and review that stack that you’re referring to there.

(43:08):

A lot of my listeners, Mark, are enthusiastic about The Graph, and at the time of this recording, Fuse is in the final stages of completing the chain integration process. If you don’t mind, can you just shed a little light given the context you just shared about how Fuse works and the decision to be a chain, why something like The Graph is important to Fuse in the community?

Mark Smargon (43:30):

I was a big fan of The Graph even before it launched. I even participated in the fundraise, and I was fortunate enough to be one of the early users, and actually Fuse is one of the first chains on the hosted service, which is surprising now because there’s so many big giant chains that are launched last year that have come and went. But last five years, we’ve been pretty loyal to The Graph.

(43:57):

And not only that, I think it’s really not only my love for the project, but also the fact that it was insanely useful for us. It was really powering a lot of the projects we built, and pretty much every product that we have has The Graph aspect to it. So much so that last June, I think when we migrated to the hosted service, we had so many problems because it was long overdue, but also it was painful.

(44:25):

We have a lot, a lot… And not only us, but also other third-party subgraphs and DeFi protocols, they have to use it, NFTs have to use it. There’s some verticals already that you don’t have any alternative. We realized some of the pain in our use case or some of the problems with this technology, it’s notoriously unreliable. Running open source code, I’m not talking about The Graph in general, running open source code that somebody else built is not a way to offer SLA for businesses service level agreements. We can’t just say we take responsibility for outages for this third-party protocol.

(45:09):

I think we and The Graph have a really interesting business case. So how do we actually take this to the next level? So one of the things we’re trying to do, first of all, understanding how to make real-time payments better because we’re not the Indexers, you guys, the Indexers. How to solve latency problems, concurrency problems, we had a music festival in Thailand where people were going and actually using it for buying drinks. So the experience have to be flawless. Even if it’s a little second too long, it would be pretty bad experience. In crypto, everything under a minute is like, wow, it’s so fast. It’s only five-second block time.

(45:51):

But actually it feels clunky relative to any other centralized app. It feels slow. We don’t think blockchain technology should be slow. It doesn’t even need to be faster. I think it’s not comparable to different technologies. One can scale up to what Visa can offer and the other can scale infinitely. And I think this is the story behind the decentralized service and this is the story behind web3 where you can actually decentralize things very cheaply and actually benefit from this decentralization in places that are important.

(46:33):

For instance, I want to get access to my queries in my geography or I want the indexing to be immutable. So there’s a lot of points that The Graph kind of tackles, and I think it’s a really big challenge since the entire space is using you. But I think we have an interesting insight in how to use your products as the backbone of our payment stack, the backbone of the financial system, not just something for NFTs.

Nick (47:08):

Mark, only have a few more questions for you before I ask you the GRTiQ 10, these are 10 questions I ask each week. They’re fun. They give us the chance, the opportunity to learn a little bit more about you, but also for you to share some interesting ideas and information with us. So the first question is what would you say your long-term vision is for Fuse? It’s exciting to think about some of the things you’ve shared already about the tech you’re working on, but what’s the long-term vision here?

Mark Smargon (47:32):

I believe that most of the world, if you look at it, if you zoom out, you see that there’s basically two worlds. In the West, you have a lot of Visa adoption and still a lot of cash, and in the, I wouldn’t say East, but in the developing world, you see China, India, maybe China is more developed, but definitely Brazil and Africa, you can see no Visa, no cash, and they just leap frogged and use mobile phones to pay.

(48:07):

I don’t think it’s my vision, it’s actually happening. It’s accelerated by corona, and I think that this is really expensive to compete with. If you look at the West and the East, it’s pretty much one vendor per country. In the US, you have three companies control the payments industry, but in a lot of other places, it’s the central bank, like in China or Brazil or India or in Africa, it’s like one telecom company, you have a problem. It’s very expensive and it’s very fragmented and it’s very local, and the demand is insane and nobody can really compete with Starbucks. You can’t really show me so many apps in the US that are on that level. So even in very developed market, you still have a lot of cash, you still have a lot of centralization.

(49:05):

My vision is that the blockchain technology will fix that. It wouldn’t be 100% on Ethereum. I don’t think we should look at this this is a false dichotomy, like centralized, decentralized. You need less centralized, but you don’t need everything to be on Ethereum. So I hope it makes sense.

Nick (49:28):

It does make sense. And the final question I want to ask you is you said earlier that consumer payments is probably a huge unlock for greater adoption of the crypto industry. I totally agree. Are there other narratives or stories that you’re tracking? You sort of refer to web3 as a little bit of a buzzword or whitewashing crypto. There’s other words that circulate in the industry, composability, modularity, these other things, AI seems to be… Are any of these other narratives interesting to you?

Mark Smargon (50:00):

Yeah, of course. I’m also a marketer. I’m not just like a tech guy that is coding all day. I think in general, developers are really bad at investment. It’s not like I’m good at investment, but I see myself as someone that can understand those hype cycles, and they’re important. But usually what happens is they don’t really die. The hype cycles just have a new term. It’s just an ongoing thing where narratives are created and then being solidified or reinvented.

(50:35):

So every cycle you have this… I remember a decade ago in 2013, the narrative of that full run, that cycle was that there’s a taboo, you can create money outside of the central bank. So it was like a taboo back then to create money outside of central bank. And then in 2017, it was a taboo to create securities outside of the SCC. And then fast-forward to now, and those institutions are embracing crypto, presidential nominees are embracing crypto. So I know that probably crypto will not die and probably some smart marketers think about the next buzzword, the next narrative, and some other narratives will probably not work. In my opinion, AI is overhyped just like blockchain was at the beginning. I think AI is much bigger than blockchain. AI is like the internet, but it’s more like electricity than it is blockchain.

(51:40):

Blockchain is like, oh, okay, it’s a database. Databases in the ’60s, ’70s were insanely profound, but nobody would actually use a database as a consumer and nobody will use blockchains as a consumer. So it’s very profound innovation, but it’s not necessarily a game changer like AI. AI is like electricity, but as electricity today, I wouldn’t say that… I think there was a lot of first movers in the electricity space. In the second revolution, the second industrial revolution, there was some winners for electricity, and I think there would be some winners here for AI. But technologies for storing data and analyzing data are adjacent.

(52:37):

So whenever you have a blockchain, you will have AI. Already today, most of the volume, most transactions that are done on blockchains are not done by humans, they’re done by bots. I’m not saying it’s ChatGPT, but I’m just saying, it’s not actually exclusive to talk about blockchain and AI because those are two different ways of dealing with data, maybe two adjacent technologies. I’m just looking at those things from a marketing perspective.

(53:03):

But I do think that everything, all those buzzwords are probably overhyped in the short term, underhyped in the long term. I know it’s a cliche, I just don’t think we will win with calling everything AI and not reinvent this narrative a little. People will just get tired otherwise. It’s really like a market signal. It’s a bad sign for something to stagnate. So usually when it starts to be boring, you switch the name.

Nick (53:32):

I appreciate the answer there. So Mark, now I’m going to ask you the GRTiQ 10. Like I said, these are 10 questions somewhat of a lightning round that I ask each guest of the podcast every week. And I do it because it lets us get to know you a little bit better, but I think it also introduces guests to new ideas or encourage them to try something different or possibly even achieve more in their own life. So Mark, are you ready for the GRTiQ 10?

Mark Smargon (53:54):

Yes.

Nick (54:06):

Mark, is there a movie or a TV show that you would recommend everybody should watch?

Mark Smargon (54:10):

Just fresh in my mind, I feel like it’s like an association quiz, but yesterday I saw Netflix, the white or a documentary. It’s really changed my understanding of the Wild West in the US. Apparently the Cowboys were the bad guys.

Nick (54:25):

If you could only listen to one music album for the rest of your life, which one would you choose?

Mark Smargon (54:30):

Oh, that would be terrible. I would probably get sick of it, but maybe Pink Floyd, again, just already hear it quite a lot.

Nick (54:38):

What’s the best advice someone’s ever given to you?

Mark Smargon (54:40):

Don’t take investment advice from developers and don’t take development advice from investors.

Nick (54:49):

What’s one thing you’ve learned in your life that you don’t think most other people have learned or know quite yet?

Mark Smargon (54:54):

That’s a pretty pretentious answer, so I’ll skip it.

Nick (55:01):

What’s the best life hack you’ve discovered for yourself?

Mark Smargon (55:04):

It’s not a life hack, routine. I thought I hate routine, but I think it’s actually the most productive thing I’m doing. Going to sleep at the same time, eating in the same time. I used to hate routine, but it’s probably better to have routine if you want to do something in a sustainable way, not for a week, but for your whole life.

Nick (55:28):

Based on your own life experiences and observations, what’s the one habit or characteristic that you think best explains how people find success in life?

Mark Smargon (55:38):

I think I mentioned it before, but it’s probably curiosity. I think not curious people are off-putting, and you need to have a little bit of diehard optimism to be successful. It’s not like pessimists can’t be successful, but I think there is a correlation. Maybe I’m wrong.

Nick (56:01):

And then the final three questions are complete-descendants-type questions. So the first one is, the thing that most excites me about the future of web3 is?

Mark Smargon (56:10):

Non-custodial B2B2C.

Nick (56:12):

And how about this? If you’re on Twitter or X, whatever people call it, then you should be following?

Mark Smargon (56:18):

Wow, my Twitter is such a mess. Balaji. I don’t know, just from the top of my head.

Nick (56:27):

And then, Mark, the final question. I’m happiest when?

Mark Smargon (56:31):

I’m happiest when I slept well.

Nick (56:44):

Mark, thank you so much for joining the GRTiQ Podcast. It was incredible to get some of your thoughts here, not only on sort of the history of the industry and some of the things that you’ve witnessed over your career, but also deeper insight into Fuse and the problems and opportunities that it’s creating in the industry. If listeners want to stay in touch with you, follow the things that you’re working on, what’s the best way for them to stay in touch?

Mark Smargon (57:07):

Thanks for having me, Nick, and I hope you guys can check out our website. We’re actually launching a new one next week, so stay tuned. We have a lot of really exciting updates, including the first web3 merchant bank that we want to kind of introduce to the world because I think web3 merchants can come together on Fuse.

(57:29):

I don’t think the business community as a whole uses blockchains yet, but the biggest companies start to use it, so we want to create something for the smaller companies, and we really want to be the biggest and the first and the biggest community for merchants in web3. And it’s starting to kind of grow as a category. Go to Fuse.io, check me out at Smargon on Twitter or X, and check out our Telegram channels for all the updates. And if you are a consumer, just want to see how the product works for a developer, you want to see how the SDK works, everything on our website, Fuse.io.