Why Stablecoins Won’t Kill Cards Ft. a16z Partner Noah Levine

Sy Taylor  0:10  

Welcome to Tokenized, the show focused on stablecoins and the institutional adoption of tokenized real-world assets. My name's Simon Taylor. I'm your host, author of FinTech Brain Food, and head of market dev at Tempo. And back on our agentic commerce series is Bam Azizi, who's CEO and founder of Mesh. How you doing, Bam?

Bam Azizi  0:27  

Good, good, good. Super excited for this session.

Sy Taylor  0:30  

Yeah, this is going to be a good one. Joining us this week is a regular guest on the main show and somewhat of a co-host these days, helping us out when Kai or I have super secret missions to do. No, Levine, partner at A16Z. How are you doing, Noah?

Noah Levine  0:43  

Doing great. Excited to be on the show.

Sy Taylor  0:45  

Yeah, excited to get into your agentic commas thesis. I know you've been writing a lot lately. I know our good friend Sonal speaks very highly of some of your work as well. So before we get into all of that, I need to remind viewers and listeners that the views and opinions of our contributors today are their own and might not reflect those of companies they represent. Please don't take anything we say as tax, legal, or financial advice. This is for informational purposes only. And I'm very happy to remind you, of course, that this podcast is sponsored by our friends at Visa and our friends at Mesh. This episode, if it's not obvious, is brought to you by our friends at Visa, a global leader in payments. Visa's tokenized assets platform, VTAP, uses smart contracts and cryptography to help banks bring fiat currencies on chain. VTAP allows financial institutions to issue fiat-backed tokens, improving financial efficiency and enabling programmable finance. You can check out the links in this episode's description to express your interest in VTap. This episode is brought to you by Mesh, the global crypto payments network. Mesh makes it possible for anyone or any agent to get paid or pay instantly from any wallet on any chain anywhere in the world, you can learn more at meshpay.com. All right, now hit me with the thesis: Where are we on agentic commerce? There's no lack of hype, but where are we now?

Noah Levine  2:20  

Absolutely, yeah, definitely a lot of hype, and and I think you know as a starting point, I think we're still very early. A lot of the conversations about agentic commerce have really started in the last six to 12 months, especially coming out of the the development of Codex from OpenAI and Cloud Code from Anthropic, you know, and even just looking at the data, I think you know the work that Artemis did with Visa, coming out with some of the data was really good work, and it shows that when you look at the adjusted volume, there's only something like 15 million in volume, and a lot of that is concentrated amongst a small set of wallets. I think that being said, there's a tremendous amount of excitement right now. There's a lot of you know new protocols coming out, whether it's x4 102 or MPP. I think there's a lot more definition around what agentic commerce is going to look like, especially for some of the more developer-facing use cases, and you know, I think that's the the area that we've been spending a lot of time on, and and I'm most excited about. I think if you look at a year ago, a lot of the conversation around agentic commerce was really sort of using whether it's Claude or whether it's ChatGPT as sort of a new discovery tool, and you know, this is how you're going to be buying sneakers or buying groceries. And while I think there's opportunity there to improve how discovery works, it was kind of unclear how payments were actually going to change. And even in some early testing from players like OpenAI and in trying to embed payments within ChatGPT, like it was unclear that there was a significant amount of demand. And I think now where the direction of travel is going is is really more focused on you have this sort of two forces going to each other at once. On the one end, there's this whole new class of of developers who you know maybe never written a line of code before, but now all of a sudden can build full scale applications. They need to get access to developer tooling, and they're going to want to have to pay for that. And then I think on the other side, there's a whole new class of merchants that we're seeing that are not only building tools, but then going and looking to actually sell those and figuring out how the payments works. There is is quite complex, so I think that's the the area that we've been more excited about and where I think there's a lot of potential.

Sy Taylor  4:14  

You talk about a new class of merchant and a new class of of kind of buyer. I mean, the developer is fairly clear to me that this is somebody who you know might not have started a business before, but now you're getting these single-person million-dollar ARR companies popping up, and I think in Stripe's annual letter they said that as a category company formation is is through the roof, and so is this like scale of revenue growth for these single-person companies. But what's the merchant side of that look like?

Noah Levine  4:45  

Yeah, for sure. I mean, I think the an interesting parallel is sort of what Shopify enabled for e commerce sellers. You know, historically, like if you wanted to start a clothing brand, it was extremely complicated. You'd have to go and buy a ton of inventory and source suppliers, and you're basically building a whole operation. And what. Shopify did, and I think what the whole dropshipping kind of revolution did is it made it such that a very small team, if not a single person, could start a direct to consumer brand and get a storefront loaded and start accepting payments, and it made it very easy to do that. And I think in a similar way, what we're seeing with these AI coding tools is it's kind of doing the exact same thing, but for software. And so I think in a similar way, we're going to see a whole new revolution of merchants who are creating cool and interesting tools and services, and then want to go and sell it. And that's, I think, going to be a new wave of entrepreneurship.

Sy Taylor  5:31  

I got it. So the developer is both using AI tools and through their codecs, cloud code, they need to buy stuff in order to do the job and build the thing, so that that's a type of new buyer. But the seller is also that same developer who's building their product and selling it. You know, it could be software, it could be AI tools, and that person didn't exist before. And of course, famously, Stripe and Shopify made people who weren't previously sellers online or didn't take payments online be people who who could do exactly that. I'm so interested in your views in this, Bam, because you have this kind of global perspective. Given what you do at Mesh, are you seeing this type of customer base adopt what you do? And your thoughts on what Noah said so far?

Bam Azizi  6:17  

Yeah, like he's spot on. I think the trend that we are seeing at Mash is this new type of companies that they are basically building on top of agent. They have different type of needs, and that needs, from our perspective, doesn't fit with what TradFi or traditional payment networks can offer. For instance, we're seeing a lot of transactions happening on x4 102. We're seeing a lot of transactions happening to parse APIs, to parse websites at a different scale that requires new type of payments, which is global and can support microtransactions. That is the trend that we're seeing on our end, and I think that's kind of where stablecoin or blockchain and AI can emerge. That would be the crossroad. I'm super excited for seeing more type of payment methods or payment needs to be addressed by stablecoin and blockchain.

Sy Taylor  7:13  

No, you wrote a piece called "Agentic Commerce Won't Kill Cards, but It Will Open a Gap, and I think in in that you talked a little bit about these new new merchants, and you talked about the new developers. But can you tell me a little bit more about what your thesis was inside that, and why Agentic Commerce doesn't kill cards specifically? Because I do think there's a view in the stablecoin land that obviously stablecoins are better.

Noah Levine  7:37  

Yeah, no, for sure. I mean, I think from a starting point, the rationale for writing the piece was I think it was right after Citrini wrote his piece and sent some of the card network stocks down and saying that basically stablecoins were going to completely replace cards, and I think the the main challenge with that is it kind of ignores a lot of the benefits that cards provide. You know, for one thing, basically ubiquitous acceptance at 150 million merchants globally provides things like chargebacks, rewards. I think are a big component. And so, for a lot of the transactions that I kind of mentioned before, that are sort of like proxy commerce, where AI is helping with the discovery phase, but ultimately the consumer is the same and the merchant is the same. It feels like cards are actually very well positioned to continue to succeed in those types of payments. And you know, I kind of talked in the piece about how network tokenization, which has been around for like 15 years, and you know most commonly seen in things like in Apple Pay, you know, are actually very well suited for dealing with these types of transactions. But rather, where I see stablecoins having a really big opportunity is when either the type of the transaction changes, or you're fundamentally dealing with a new merchant that it would be challenging for them to accept cards, and and again, like kind of using the historical analogs, like whenever we've seen a platform shift in commerce or just a platform shift in general, there's been new payments companies or new payment methods that have come to form that have helped to serve those sort of ill-fitted transactions. You know, examples being things like PayPal with with eBay. You know, I just mentioned Shopify and Stripe. I think those are both good examples. And I think in the case of stablecoins, the way I look at it is, stablecoins are very much a digital cash, and so situations where cash-like payments are successful are ones where I could see this working. And so, you know, I think if you see a whole new class of merchants, these sort of headless merchants that I mentioned proliferating, it's going to be very challenging for them to immediately accept payments, getting underwritten, actually getting you know a processor to support them, getting a merchant bank account. Very much similar to kind of the role the payback played in in e-commerce. I think is a similar role to what stablecoins can play too. And then I think in addition to that, specifically for the types of transactions we're seeing here, which are oftentimes very small in nature, it's actually quite challenging from an economic standpoint for the card networks to support them. Now, in the piece, I do argue that I think over time we will see the incumbents develop either new types of transactions or or standards to help match or make these transactions work. But I think in that gap. There is a massive opportunity for stablecoins to to play a role, and I think the reason why stablecoins are such a great solution is because they're programmable, they're global by nature, and I also think they are conducive with something that's more a developer ecosystem rather than traditional merchants. So that's that's my general perspective.

Bam Azizi  10:17  

To add to that, I agree. I don't believe agentic commerce will kill card networks, but the stablecoin do. That's that's kind of where I can a little diverge from what what Noah was mentioning because if you think about it historically, we had commerce and then we had e-commerce. E-commerce didn't kill commerce; it just stacked on top of it. Then we had mobile commerce. It didn't kill e-commerce, right? Mobile commerce came on top of e-commerce. Agentic commerce is going to make the entire commerce 10x more valuable, and then 10x more transactions, or maybe 1000s x more transactions, because of the agentic nature of it and the micro transactions that we'll have. I mentioned it before that we have like 5 billion human being connected to internet, we do two transactions in average per day. We'll have hundreds of billions of agents connected to internet. They would do 1000s of transactions a day. So you can see that order of magnitude like higher number of transactions. But I I think we are slowly shifting toward an ecosystem that the 70-year-old technology, the card network that we have and we know as of today, it just doesn't make sense anymore, and it will be replaced by stablecoins. I'm not saying Visa or Mastercard will have problems. They they will adopt. They would use that as a weapon, as a ammunition, as a technology, as a tool to address the new and the modern needs of payments, but I don't believe mainframes are going to stay around, and the networks the way that we know it is going to be dead before we know it.

Sy Taylor  11:50  

Yeah, I think the way that we know it is doing a heavy lift in that sentence, right? Like the networks themselves sell something that I think is underpriced, which is trust and brand. So when you see the Visa logo, you kind of have this confidence on the consumer protections that if I make this payment, but the goods are never delivered, there's a rule book that says I'm going to get made whole. You know, I have some protections. There's a whole bunch of fraud rules that sit around that. It's kind of the boring, ugly stuff that you don't think about that, like you know, like you walk into another country with your currency. They don't necessarily accept it, but they accept the Visa card. You're accepted everywhere. Was always the the classic thing, and we sort of have that a little bit with stablecoins. They're not necessarily accepted everywhere, and which stablecoin on which network? And so you know, you need something like a mesh that can hopefully help make that a little bit easier. But I'm really curious to drill into that a little bit more, Noah, because we talked for a long time about having internet protocols for money, and we do have a couple of protocols. You mentioned at the outset, you know, MPP and x4 or two, but the volumes are very low. Are those protocols going to get adopted? Are they useful? I mean, I know Visa is quite involved in those, and they're looking to adopt them. But how does this shake out? Because I'm sitting here thinking this just looks like larping at like agentic commerce by the stablecoin industry right now. If we're being honest,

Noah Levine  13:23  

yeah, it's a great question, and frankly, I don't know the the the true answer. I'm I'm not clairvoyant. However, I will say, like, I think the with any standard, the ones that are going to be the most widely adopted are the ones that are the most neutral, that are the most open, and ultimately do the best job of getting the most connectivity. I think the real opportunity is what you build on top of it, whether it's on the consumer side and enabling you to have applications or ways to to actually do things on these protocols, as well as on the other side of the acceptance and in building widespread acceptance and usage of these protocols themselves. And so, I think right now it's it's sort of like you know to your point, everyone is trying to create their own standard or create their own protocol and play a role in that stack, but I think what people are going to find out is that a lot of the value, similar to what we've seen with with the internet, is not going to accrue to the whoever owns the standard. I think it's whatever gets built on top of it, and so that's why you know for me, like I spend a lot more of my time thinking about what what's going to actually get done on top of it versus actually thinking about the standard itself. And I also think the other problem too is there's a bit of I feel like a skeuomorphic point of view of moving from even e-commerce to agentic commerce, where everyone is thinking about flows where humans are in the loop. I think where adoption is going to accelerate significantly is actually when humans are not in the loop. In AI today, I think the biggest bottleneck is actually human involvement. If you think about why, like going from ChatGPT to Codex was so powerful. It is because it took humans increasingly out of the loop. And even today, I think the biggest problem that we see and why there hasn't been a significant amount of demand for agent to commerce is people don't know what they want to buy. They don't know you know what they want to build. I think there's going to be a really interesting opportunity where you're going to have literally. Sovereign agents that are going to be either building their own companies or doing their own tasks. Maybe they're funded by humans, but ultimately the entire decision set and the entire scope of what they do is going to be decided by them. And I think that's where it gets really interesting because you basically have something running 24/7 trying to accomplish a task and do something, and there's just a lot more room to actually transact and to have commerce happen versus needing a human to basically be involved in and say to do these things, and they may not know what exactly to do. And I think this matches a lot, Simon, with your thesis of the intention economy and this idea of you coming in with an intent of what you want to do, and then ultimately the agent is the buyer. I think the the difference could be well, what if the agent is actually not only the one that's doing the transacting, but also determining what they want to build in the first place. I think that's where you're going to see a lot more activity amongst these protocols.

Sy Taylor  15:47  

Yeah, just to zoom back on that for a second. Yeah, you're familiar with the attention economy. Most of e-commerce is based around trying to monetize the gap between you don't know what you want and will try and make you want this thing, and then you buy this thing. Whereas agents don't necessarily have desires; they have a mandate, they have you know an intent: go buy this thing for this price, or go find the cheapest price, or whatever. And so, for them, it's about collapsing the gap between their intent and the thing actually happening as short as possible, but their decision-making process might be quite different. You know, it might be you know what is the cheapest, what is the best, what do the reviews look like, and so there's some element there of like what does it look like when the agent is the decision maker, and I'm interested in knowing like okay, so if the value is accruing above the protocols, what are you seeing above the protocols right now, that's kind of out there along those lines.

Noah Levine  16:45  

Yeah, so I think the the two biggest opportunities is one on the sort of the wallet side. For example, we we invested a company Merit Systems. They have this product called Agent Cash, and basically what it is is an aggregation of a bunch of headless merchants that consumers can go and buy from. And I think the key lock in there is that they control the wallet which you fund and then ultimately can go and interact with these services. I think making it very simple for people to access these tools and then be able to pay for them is makes it a lot easier to not only for the discovery process but also in terms of how the actual payments get executed and the services get absorbed. And then I think the other side too, and I and I wrote about this is it feels like the infrastructure is is largely there. I mean I think there's still room for improvement and development, but it feels like the infrastructure is is largely there. The bigger opportunity is actually kind of creating these new merchants in new use cases and sort of workflows where they're actually useful and can accomplish tasks. And while we've definitely seen a lot of new services come up. I think there's still probably a lot of room for improvement and and new opportunities in the space.

Bam Azizi  17:46  

Makes sense. Do you think we will have like multiple protocols being used by these services that they're sitting on top of the protocols, or you see some consolidation on on X Road two or MPP or or any other protocols?

Noah Levine  18:01  

Yeah, I mean, I think in the fullness of time, it it makes sense for them to kind of consolidate. Obviously, it doesn't make sense to have 5050 protocols. I think that would you know make adoption really challenging because then everyone needs to go and adopt a million different protocols. I think in terms of like which one wins, I think a lot of it comes down to adoption and in distribution. So whoever can get the most interesting applications on on the developer consumer side, as well as being able to find useful endpoints that they can go and transact at, and I think over time there may be real network effects there. Now, those network effects may not translate into something that's very economically valuable for the protocol, but I think it will increase the utilization of it, so you know. I think right now because it's so early, everyone feels like they have a chance of winning with their protocol. But I think eventually, once they realize that there's not a tremendous amount of economic value at that layer, it'll ultimately go to again, like I said before, whatever is the most open, and ultimately sort of trying to commoditize that part of the stack so that they can have this sort of neutral governance and be able to compete around parts of the stack above it.

Sy Taylor  19:04  

So I thought it was so interesting that AWS have built something into Bedrock that lets AI software programs buy and sell things completely on their own. Like the hyperscalers are building this tooling, and they supported both MPP and x4 102. So now it seems the answer is well, we'll just support both and see what what gets involved. And there's a lot of tasks happening. If you think about the scaling companies in AI, it's companies like Exa and companies like Parallel who make search and organizing data just a whole lot better. And maybe it's the agent that wants to be the customer to that, and historically they've been selling subscriptions, but those subscriptions and card models might not make sense. Do you think this is a tipping point? Because I've seen a lot of people try and play with these companies, a lot of people try and get adoption with them, or you know, is the is the card kind of fine for those? And it really is just going to be the the. Net new micro merchant, the net new sort of Shopify type of thing that's going to be the space. And and have you seen any any counter data to that?

Noah Levine  20:10  

Yeah, it's a good question. I don't have counter data to it, but I think from a high level, you know, it feels like if what people are using these this tooling for becomes increasingly ephemeral, then the rationale for a subscription kind of goes down. So I think over time, like as people become more, they they experiment more and they're they're using things on a more short term basis. They just want to get access to it immediately. They don't want to go through a billing team and sales team and you know go through that whole process. And I think they want to just get access to something immediately and test it and try it and and then continuously use it over time. I also think it relates to kind of who the buyer is. To our point before, if the agent is ultimately the one that is sourcing this and purchasing it, I think then a lot of the components of what a subscription is good for goes away, and over time, I think that that will increasingly make this style of of selling increasingly popular. I don't

Sy Taylor  21:04  

know if you saw that, like both I think Cursor, Meta, Ramp, and few other companies have released open router like products for for token routing as as metered billing comes to enterprise and token costs become a real issue, and people are trying to get more per token, more value per token. I wonder as well if there's some opportunities there as as people become more cost pressured, and you know the all you can eat subscription models start to go away. Can the agents find the best value per token on on a pricing base? Like this is something that again, I don't know if it's if you've seen anything that looks like this now, and as you're looking at companies or any teams building this sort of stuff, but but interested in your views on on that whole space.

Noah Levine  21:51  

Yeah, for sure. I mean, I think any type of orchestration business is going to be more successful when there's more fragmentation at the level of what they're trying to orchestrate. So I think it really comes down to in the long run, how many models are relevant, whether that's a performance or even a cost basis will ultimately dictate that. I think the other way to look at it too is kind of wrapping it back to this idea of sort of headless merchants. There's also I think this interesting concept of composable commerce that could happen, where it's not necessarily that they're orchestrating between multiple models, but rather, if you're selling something on a per-use basis, you know it makes a lot of sense to kind of associate your costs on the same line. So you could have a situation where somebody hits your endpoint, and as soon as they hit your endpoint, it immediately hits your ability to go and get compute. And I think that that becomes a really interesting way, especially with these types of businesses where you know it's not like they're going and buying inventory. It's compute is like their number one cost item, and I think if you can attach whoever the end customer is, what they're doing to ultimately what your costs or the resources you need to execute it, you can run a much more efficient business. So I agree. Like I think there's a big opportunity on on compute both in terms of the model orchestration layer, but I also think there's a an interesting way to sort of have more predictable and real-time funding of your costs using this as well.

Sy Taylor  23:05  

Yeah, it's kind of that like, do you lock in the stable price of the futures market, or do you want sort of the best real-time price that's available in the market right now? Because it seems like every day, there's a new model, and the level of intelligence you can get per dollar is really variable. So you could potentially have much more efficient business by constantly routing that to whatever just came out on on OpenRouter. Bam, any thoughts on on this topic?

Bam Azizi  23:38  

Yeah, it's interesting. One of our customers, Kalshi, is building for that scenarios because that basically that would be the most expensive line item for a lot of these companies that they're building on top of AI, and that me token is their number one cost. So they they built and announced their purpose or future for computes as a commodity, if you you're spending a ton of money there, you can hedge against it. So that that would I thought I would shout out to Kaoshi for doing this interesting model, and they were like kind of the first one that they're doing it in in US. But I totally agree with what Noah mentioned. One question that I have for him is like, do you think the traditional payments can solve the need for just-in-time access to compute, or we really need the stablecoin? Do you see like because those are not microtransactions, right? So if you want to buy like 1000s of dollars worth of compute, why should you use a stablecoin or agentic commerce should do on top of stablecoin versus using like let's say old-fashioned payment cards.

Noah Levine  24:48  

Yeah, it's a good question. I mean, I think the benefit of stablecoins in this use case is the obviously the real-time settlement aspect. And again, like I think another mistake that I think people who aren't like super deep in payment. Make is they kind of look at authorization and settlement as as sort of one thing and one bundled product. When in reality, like they're they're two very different things. And so I think we could get to the point where cards are still the form factor of payments and still the authorization mechanism. But ultimately, stablecoins run on the back end, and you know you can enable things like real time sort of streaming settlement. And I know that's an area where the card networks are looking to advance. Obviously, Visa's investor credit have been doing stablecoin settlement for a while. Volumes have increased significantly there, but a lot of the use case has been more about you know making it easier for issuers to settle and certain acquirers who are supporting crypto merchants. Like I think the real unlock in that is when you can actually start to enable more real-time and more streaming settlement flows, and so yeah, I think stablecoins are very useful now, at least in the current form for that. But again, in the long run, I think if you believe that a lot of these providers still accept cards, and most consumers and developers and businesses also still use cards, then I think you can end up in a situation where cards are still the preferred payment method, but ultimately the back end settlement improves significantly, and the actual way that money moves happens much more on a real time basis.

Sy Taylor  26:09  

That 12 months ago, that back end settlement conversation was, I think, one that was not as mainstream. But now in my day job, I'm definitely seeing people go, "Oh yeah, no, this is a settlement thing. What Visa does is authorize the movement of money and build a trust and reputation network around the authorization of the movement of money. And if you could stream the settlement of that, it's kind of like when you walk into a gas station in the United States. You know, you sort of lift the nozzle, you swipe the card, and then you start pumping. What's happened there is you've opened an authorization, but they haven't captured and closed the off until you remove the nozzle from and place it back onto the tank. There's no reason why you couldn't do that in Agentic, right? Like if you need something faster, you swipe the card or you get started with a transaction. Agents move at light speed and then close the off, and then the payment happens and settles on a stablecoin kind of afterwards, because that can happen really quickly. One thing I want to quiz you about now is like, do you see this world where these micro merchants like spin up, become wildly successful, and have that classic inventory problem that merchants had, which is you know like if I sell out of all of my widgets, but I'm not getting paid for three days. Then I can't buy any more inventory, so now I can't make any more sales. And with like real time tokens, I could sell out of inventory and not get paid for three days.

Noah Levine  27:34  

Yeah, exactly. And this is kind of going back to the point I made before on this idea of composable commerce, where again, if the number one input or costs or even bottleneck is access to compute. Then I feel like it makes a lot of sense for them to be purchasing or acquiring this on a real time basis, rather than trying to forecast this out. And I think this is true both for the really small ones as well as as they get really large. I think for the larger ones, like maybe there's some interesting sort of like wholesale and enterprise agreements they could have to get access, and maybe that's less of an issue. But I do think there's a huge opportunity where, if you believe that commerce is going to again become more composable, where as soon as a an API call comes, you as the merchant are going and buying whatever you know service or resources you need. Maybe that's compute on the back end. I think you could have more predictable and in much more enduring scale as you would if you had to go and forecast that out. Because to your point, maybe one month you have a just significant amount of demand you didn't forecast for it, and now you know you're running into some cash flow issues, or just you know you you have a bottleneck on the amount of compute you can get. And so I think that's also another opportunity where this goes is it's not only is it the these merchants selling to developers, but also it's them buying the resources they need to operationalize what they're doing.

Sy Taylor  28:46  

Yeah, bring in the revenue in real time by selling to developers, but in real time, go buy the resources you need to manufacture and distribute your product. It's it's kind of that streaming is such a different way of thinking about things.

Noah Levine  28:57  

It's very much like you know. Again, I kind of similar to the example I gave earlier, it's very much like the drop shipping of software. You know what I mean? The exact same thing happens there, where you know you have somebody they open a Shopify store, they're selling T-shirts, and then they have a Printify in the back end that is doing just-in-time manufacturing or just-in-time production for them. I think you see a very similar thing here happening in this space as well.

Sy Taylor  29:20  

Drop shipping for software-that's a great blog post title. You need to make that happen. The other one that I saw you talk about is Jevons' paradoxes coming for finance, and of course, Jevons' paradox is this idea that as things get cheaper, the demand actually increases, not not decreases, and and you tend to end up with with a lot more of it. How do you see that manifesting?

Noah Levine  29:41  

Yeah, so I think in in that piece I was more so talking about sort of the role that stablecoins are playing for fintech more broadly, and this idea that what tokenization and stablecoin specifically are doing is it's fundamentally dropping the barriers to entry to to build financial products, and as a result, I think you're going to see net. Markets that maybe haven't been well served by incumbents because it's been so challenging to to build there, and as a result, the overall TAM and the overall market will grow to the point where maybe some markets where historically investors have been hesitant to participate from a fintech perspective suddenly it becomes a very compelling opportunity. I think this a similar thing could definitely happen in in agentic, especially from a software perspective, where if you know you have a lot more software coming out and the cost of that is as a result going down, you know maybe you see many more people having exposure and access to these things, and therefore the market becomes a lot more interesting and large as a result of that.

Bam Azizi  30:37  

Yeah, I think the overall we are like entering an environment that everything is like at a faster pace, right? From development of a software to shipping it to maintaining it to getting paid for it, right? So everything is sounds like used to be like month of work to get it done. Now everything is kind of instant. Everything is streamed. You don't have this traditional sense of like I will like build it and then I ship it and then I collect the payment for it. If you remember, like we had like net 30, net 60, net 90 for for accounting. Now everything is like instant, right? You build it and ship it at the same time, you get paid for it, or you have a resource which is could be like, for instance, compute or API that you enable it, and then people are using it, and the the instantly they would pay for it based on the amount that they're using. Everything seems like in a stream versus just sequence of things. So it's a it's a very fast pace word, but also very very interesting and exciting. There is no better time for entrepreneurs and builders to build. So I'm excited to see new type of softwares and technologies to be built in this era, and a stablecoin would be the, of course, the the winner of all because for every single service that you're offering, you have to collect payment. I think stablecoin is a perfect form of payments for global economy.

Sy Taylor  32:04  

No, I'm interested. What does it take to build a durable business in this world where money is streaming, software is incredibly cheap and fast to build? I could build a widget tomorrow, but somebody else can build it. Do the first principles still apply of like brand and trust and people buying from people. Where are you seeing durability, especially in financial services, and what are people clustering around as as you look at teams and potential investments?

Noah Levine  32:32  

Yeah, so I mean, I'd say in general, like as the barriers to entry get lower, I think distribution becomes increasingly important. You know, it's sort of the the LTV to CAC metric becomes a lot more important, where either you have to find a more niche subset that you're going to sell to that you can really own and and get you know strong retention within them, and then try and upsell around it, or it's just about having a really killer go to market strategy and doing it in a very lean way. And so, you know, I think historically, at least in fintech, a lot of it was around kind of who was there first and who can build for the really hard things, you know, whether it's licensing or banking integrations or whatnot. And I think now, as stablecoins reduce some of the barrier there, where you can just build new financial products with a lot more speed, I think the the distribution and in who your customers and how much you own them becomes increasingly important, and then I think in like the in the agentic commerce parallel, I think it's sort of similar. It's if you're a new merchant, I think it's you know having a subset of developers that, or even agents in this case, that have preference for you, and so maybe it's having better APIs so that it's easier to access your endpoint, or or maybe it's you know offering something that is novel or unique, so I think it's to your point. It's maybe harder to to build something more durable, but I also think that there's opportunity to go deeper amongst those types of users.

Sy Taylor  33:52  

I had a web page open for many months. I was just looking for it and I lost it, but it was like looking at the tools that Claude Code chose to use because it kind of recommends something when it goes to accept payments. It 96% of the time it picks Stripe. It's going to pick Vercel or Railway depending on what project it is that you're building for the hosting. And how do you become top of mind for those AI agents? I think is really interesting. And how does that evolve over time from you know what was in their training data to something that's you know more price sensitive or or something else? So I think that moat question is super interesting. I'm also interested in like fraud and risk here because if I can build 10 duplicates of like Noah's AI agent, how do I know I'm transacting with the right one? And have you seen anybody playing in that sort of space?

Noah Levine  34:44  

Yeah, it's a great question. Seen a couple teams thinking about what does fraud and chargebacks look like in this sort of new economic model. I've been a little bit resistant or hesitant about like how much of the need there is there, and the reason why I say that is I think if you're buying something that's very high value. And there's some sort of fraud that happens where you don't get the product that you want. Like that's really frustrating, really annoying. If I go and buy a $200 pair of sneakers and they send me a different shoe, well, that's you know that's that's very unfortunate, and I'm going to be upset about it. I think in this model, though, if you're buying something like an API, for example, and it's Ascent, and you know it doesn't give you what you want or you don't like it. I think there's less of a demand or a need to charge back on a cent. So I think in a lot of these transactions, chargebacks become less of a problem because if I go and interact with something and it doesn't work, well, then I'm just not going to interact with it again, and my economic loss is negligible. I think if you start seeing transactions get larger, maybe than that increases, and then therefore I think there's a lot of opportunity, maybe at a network level or or new types of companies that are coming in and build what is the sort of risk scoring and framework look like for for these types of outcomes. I also think even at a protocol level, I think there's some interesting ideas of like what does a verified merchant look like and how do we evaluate whether you know is there some sort of scoring or reputation system, almost like how many GitHub stars do they have? You know, maybe that become the new you know mechanism for trust. So I think a lot of it's unclear, but I think at least in in at least the data of the type of transactions we're seeing today, there's not as much of a problem because the nature of the transactions are super small.

Sy Taylor  36:19  

Cross that bridge when you get to it. I'm interested in of the companies and teams you've seen. What kind of categories are you looking for that you either haven't seen or that you thought you would see? You know, like if somebody were to walk in tomorrow that does X, what is X? What are you? What are you looking for?

Noah Levine  36:37  

Yeah. So, like I said before, I still think there's a massive opportunity within the what does the like developer wallet look like, and part of the reason why I think that's really exciting is because one you control I think a lot of the discovery of where does commerce actually go to you can sort of aggregate a lot of these merchants and then you know help to dictate which ones that the developers often go to but then I also think too like if you're dealing with very small transactions there's a lot of opportunity to upcharge on price. So, like for example, like if I sell you something for 100, use the sneaker example. Like if I have a $200 pair of shoes and I sell you it for $400, like mentally you're going to be like, that's like a way overpriced. You know, those sneakers are way overpriced. I think if you're dealing with something like an API call and it's a cent, and I now charge you two cents, you know my margins are 100% and it's very hard for you to interpret whether or not that you know is cheap or not. And again, if you own the developer and you're the the wallet and the discovery layer, I think you have a lot of control there. To the point earlier, I think what I'm really excited to see is more more things that are less humans in the flow, more of these like sort of sovereign agent ideas, and whether that's agents forming as a independent organization or company that can go and you know have a very high-level task and can just go and execute on it, or even workflows that are completely isolated from humans altogether, I don't think I've seen as much of that. Most of the companies that we've seen today are either infrastructure being built on top of existing protocols or some sort of you know application where humans are very much deeply in the loop, and I'm excited to see kind of the crazy ideas of where agents are sort of individual economic actors. And I think if that happens, you're also going to see a much bigger need for net new infrastructure. One of the big comments of like why people were like stablecoins are are better than cards for these types of payments is this whole identity notion. But realistically, like if you have an agent and that agent, the definition of agent is something that acts on behalf of someone else. Well, you can always tag that identity back to a human or back to a developer or back to a company, and so I think less of a need there. But when you have a an agent that is literally completely self sovereign, then you start to ask questions of like, well, what what even is this, and you know how do I think about this? How do I trust it? And so I think the two will will flow together, both in terms of these new agents as applications, but also in terms of that proliferation will create a new need for or a need for net new infrastructure.

Sy Taylor  38:53  

Zero human companies. It'd be interesting to see when when that's coming. That's that's certainly out there. Bam, your closing thoughts on this one.

Bam Azizi  39:00  

I'm a little bit biased, but I think the perfect tool for that sovereign AI tool that it can basically act on itself and take actions is smart contracts. Again, back to blockchain, like you can put set rules, even even for chargebacks or for like fraught situation that you need to get your money back. Maybe if you're a human, one cent doesn't matter, or just say like I won't go back to this specific service provider because I got burned once or twice. But if there is a smart contract in the middle, everything is rule based and everything is decentralized. There is no human or there is no manual supervision, and things will happen automatically, right? So I could see that even for like microtransactions, we'll have a better mechanisms in better chargebacks and and fraud detections using stablecoin and using smart contracts and blockchain as a technology. There are net new networks that are being built for the. Specific use cases I can call tempo as as one of them that basically is is built with the mindset of this is going to be used by machines it's going to be used by agents for the sake of payments so there are building tools and basically embedding tools that can be used to have a better sovereign agents and have a more optimized environment for these sovereign agents to be able to transact on the financial side. So super exciting era that we're living in. But I think that's kind of where the crossroad of agentic commerce or agents and stablecoin and blockchain as a broader topic will merge and emerge, and I think that opens up a lot of new opportunities for a lot of new startups that they can build in that era.

Sy Taylor  40:50  

No, is there anything I didn't ask you that you wish I had?

Noah Levine  40:53  

I mean, I'd be curious your take, especially given obviously your day job at Tempo. You know, what are you seeing in in agents of commerce? Like, where are you seeing demand, both from the sort of incumbents as well as net new use cases and net new actors?

Sy Taylor  41:07  

Do you want the really quiet part out loud? It's not there. It doesn't exist. It's a mirage, and I say that as somebody who really believes it will come, and it's a matter of when, not if. And I fully buy that. There's a generation of companies that got big enough that they don't need this on Stripe, and that teams of humans formed companies that built products that could accept payments as classical merchants. So I really like your idea of the headless merchant, and I don't know that the coding harnesses have got embedded wallets yet, and I don't know that the headless merchants have really got customers yet. And until that ecosystem kind of evolves, your thesis remains untested. I'm much much more interested in the settlement side of the conversation because my suspicion is when we get wallets inside of coding harnesses. That wallet will mostly work with cards and use cards most of the time, but the velocity of settlement and the amount that is settled would probably be too expensive to use the card rails. So we'll start to see that evolution. So I think cards are actually the gateway drug to agentic commerce and stablecoins in a way that people haven't really fully priced in. We would say that Kai Sheffield is our friend, but I also authentically believe that to be true. And I am seeing early shoots of developer interest. Like the the possibly the most interesting thing is that John Collison and Patrick are hacking away on MPP at the weekend for fun and really enjoying themselves, and what developers are doing at the weekend is generally what everybody will be doing for their job in 10 years' time. I think it was actually Chris Dixon that first made that observation, and that is something where the timeline is just wrong here against the hype that the companies you're all looking at now, Noah, and the things they're building might not have their time in the sun next year, but it's it's coming. And when it does, it's going to be orders of magnitude bigger than anything we've ever seen before, because the machine economy will dwarf the human economy. Yes, I've watched The Matrix. I know the dark side of that, but I think this is a positive future for humanity. And

Bam Azizi  43:24  

respectfully, Simon, I disagree with you. I agree with you that you're not there yet, but I don't think it takes 10 years. And I bet $1 on this will happen next whole month or so, not even next year. So that's my take. I'll

Sy Taylor  43:38  

take that dollar. I'll take that dollar. I'm not a betting man. You won't see me on Kelsey anytime soon, but I, I absolutely will. With that, I'm going to thank you for coming to my TED talk, Noah. And I'm also going to ask if people are interested in talking to you and learning a little bit more about what you're doing at A16Z. What do they go to do that?

Noah Levine  43:58  

Yeah, follow me at nlvine19 on X, Bam for you and Mesh.

Bam Azizi  44:03  

Bam is easy, Mesh or Mesh Pay on X.

Sy Taylor  44:06  

You'll find me at Sy Taylor on all of the socials, screaming into the void at fintechbrainfood.com, and of course at Tempo.xyz. And you'll find a lot more of this show if you hit the subscribe button, hit likes, leave reviews. It really helps us. If you want to say thank you for this type of content, that's the best way to do it. And also, thank you for watching. Thank you for listening, and we'll catch you next time.