Bankless - 109 - SBF and the Future of FTX

Starting point is 00:00:07 Welcome to bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. David, excellent episode today with SBF, Sam Bankman-Fried, bankless listeners, a few things to listen for as we go through this episode. Number one, we cover how Sam built a $30 billion crypto exchange in less than three years. simply incredible. Number two, what FDX will actually look like in the future's vision for things. Number three, what the FDX Super Bowl ad did for crypto, what it did for FDX as well. Interesting story there. Number four, and finally, is Sam on team DFI or does he plan to position FTX as a competitor?

Starting point is 00:00:56 David, really cool episode today. What did you think? Yeah, I think people in the crypto Twitter sphere will think that this episode is going to be spicy just because it would appear at least the cursory level that FTX and the bankless thesis are kind of misaligned. But I think once you get SBF and both Ryan and I into the same room, all of those things kind of disappear. And I really enjoyed this conversation with Sam and kind of just getting to peek under the hood is really what motivates him to build such gargantuan institutions in the world of crypto and how we are actually aligned on some of our fundamental principles about how there are these islands of centralization or pockets of centralization that decentralized crypto rails can allow

Starting point is 00:01:38 the navigation between, which I think is just another interpretation of the defy mullet. And so I think we definitely align there as well as some other things. And in addition to talking about the FTX ad, we also ask Sam's opinion on the Coinbase ad. It was more than just a conversation of two ads. It was more about just like what did each ad do for the industry as a whole. So just a small snippet of topics that we talked about in this podcast. Guys, the reason we're having these conversations with the big crypto exchange of the world, we think of them as the banks of the future, the crypto banks of the futures, because these are people who are shaping, like it or not, they are shaping the industry.

Starting point is 00:02:14 And Brian Armstrong, we had that conversation in October, November of last year. Go back and listen to that one for another. Now we have SBF. I think we'll have CZ from Binance on in time. We really want to understand their takes on the world and their value systems. And so we definitely get into that with SBF. Why is he here? Does he care about decentralization? Is he worried that the crypto exchanges of the world might lead to a more centralized future and become the same thing that we're leaving? These are

Starting point is 00:02:44 questions we asked SBF today and why you should tune into this is because people like SBF are helping to shape the future. It's important that we hear what he has to say and know how he thinks. Guys, we are going to get right to the conversation. But before we do, we want to tell you about these fantastic tools for going bankless from the following sponsors. The Brave browser is the user-first browser for the Web3 internet, with built-in privacy and ad-blocking to keep you in charge of your digital footprint. And inside the Brave browser, you'll find the Brave Wallet, the first secure crypto wallet built natively inside of a Web3 crypto browser.

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Starting point is 00:05:46 FDX has got to be the fastest growing cryptocurrency exchange in the world. At least it feels that way. He also manages assets through Alameda Research, which is a quant trading firm that he founded in 2017, always a busy guy, a brilliant trader. Now he's the leader of one of the world's largest crypto exchanges. So he's definitely someone to pay attention to. And SBF, it's great to have you on bankless. Welcome, my friend. Thanks for having me. We heard you recently celebrated your 30th birthday. So also, happy birthday. Thank you. Thank you. I'm glad you're choosing to spend some time early in your 30s with the bankless community. We're grateful for that. We're excited about that.

Starting point is 00:06:24 Nothing else I'd rather do. How does it feel to be 30 and to have accomplished so much in crypto? You know, I mean, in many ways, it honestly doesn't feel that different than 29. It's been a wild few years. And I think it's been particularly interesting just sort of seeing, you know, the difference between what sort of like a standard trajectory is. And then what happens if you really sort of, you know, put your feet on the gas pedal a little bit. And sort of don't assume that anything is impossible until proven otherwise. Well, it feels like you've had your foot on the gas pedal ever since you joined crypto.

Starting point is 00:06:58 And that's actually where we want to start the story here with you, SBF, is you somehow, man, I was looking back at when FTX was founded. And it was 2019, May 2019, less than three years ago, which is incredible. You are now a top three crypto exchange, and you've built all of this in the last three years. How did you do it? Going back to what you just said, is just you haven't taken your foot off the gas. pass pedal, but like, how is this even possible? Yeah, I mean, you know, that's a piece of it, but it's not all of it. And, you know, I think other things that that really contributed to this, I mean, one of them

Starting point is 00:07:34 is just like taking a step back and saying, all right, like, what's the right thing to build in the first place? Like, where is there a real need? And, you know, sort of a combination of like, there's a lot of demand and not enough supply of some products. You know, I think we felt like the exchange space was one of those spaces. and it's a place where there would, they really are one of the core pieces of infrastructure in the crypto ecosystem.

Starting point is 00:08:01 And, you know, the exchanges circuit 20s, they just weren't that good. And I think we sort of looked at that and like, all right, there's a big opportunity here to really jump in. And that if we do, like, you know, and if we build a really great product, you know, we could pretty quickly become a pretty big, big piece of the space of sort of everything goes exactly right. And I think that, like, yeah. choosing the right place to come in was one piece of it.

Starting point is 00:08:27 And then, you know, I feel little silly saying this, but like building a great product is a thing that I feel like a lot of people legitimately sort of fail to emphasize nearly enough. And but obviously it's incredibly important. Sam, you made it build, the creation of FTX just look easy. From like the outside in at the cursory level glance, it just kind of looks like FTX just was built out and manifested basically perfectly according to plan. And I remember being a person coming into the class of 2017 crypto, watching people comment on the rise of Binance and how Binance was this underdog exchange that penetrated into a market that seemed completely saturated

Starting point is 00:09:10 and seemed unpenetrable. And that was in 2017, 2018. And then FTX did it even more so in 2019. Was it as easy as it looked from the outside? Yes and no. There are a lot of details. I mean, there's just a lot of specific things to get right and a lot of sort of deep dives into those. And, you know, understanding everything from, you know, licensing regulatory compliance to customer support, how to manage a team that's growing payments, you know, fiat integrations. Like, there's a bunch of pieces of it. But I think what I would say is like none of these pieces have felt sort of insurmountable.

Starting point is 00:09:46 And so I think there is a sense in which it was at least close, at least close to as sort of like straightforward of a high-level pathway available as it looked like if you executed really well. You know, the devil's in the details there. But I do think that there was just a straightforward opportunity. Tell us what you saw when you saw that opportunity. Is FTX successful because it capitalized on a specific niche? Or what did FTCX do well that other exchanges left on the table?

Starting point is 00:10:15 Yeah, I think that, like, there's a lot of different pieces of this. And I do think a lot of this traces back in the end to, like, sort of, we tried hard and built a good product. And weirdly enough, that sort of set us apart from a number of other products in the space. But more specifically, like, margin models are one of these, right? Like, you know, anytime you have futures or derivatives or leverage, you have to figure out, like, you know, how do you liquidate people? how'd you margin call? And those were just like absolute shit shows in 2018 for most exchanges. They were losing a million dollars a day to having incompetent margin models.

Starting point is 00:10:53 They'd just like let people put on a position with way too much leverage, you know, not nearly enough collateral. And then wait to margin call for too long. And by the time they got around to it, it was too late. And, you know, a position was already underwater. And then they, you know, claw that back from Pufford made money that week. And that's not a good system. And so one piece of it was just cleaning that up a lot and thinking about, look, like, how do the people, you know, first of all, like, how do people do this in the rest of the world? And what are the right models for this?

Starting point is 00:11:23 What's the right way to think about this? So I think that that was like, that was one piece of this. And that's something that we really focused on a lot. You know, another piece of this was thinking about what like, like, and it's cross-marketing, maybe I should add as well, sort of another interesting piece of that, you know, which is basically, instead of having a ton of different completely independent margin, you know, for each different product on the exchange, which becomes a mess really quickly, just having, you know, one wallet where you deposit whatever you want. So that is sort of another important piece of this. Other things, I guess, like, you know, thinking about, like, how can we help build a product

Starting point is 00:12:05 that, like, just, like, works the way people are expecting it to. And I think especially on whenever something goes weird or wrong. Like whenever, whenever wacky things happen is always when, you know, everything breaks and, and customers get frustrated. What happens when there's a fork, what you do with the futures on the underlying? What happens if there are network halts?

Starting point is 00:12:31 And what happens if teachers start going to a really big discount? And having a plan for those cases that sort of like was reasonable and fair to people was sort of another thing we thought about. And then I think the last thing that I'll say is on the regulatory side. And this has become an increasingly big deal over time. You know, we've been thinking about, you know, from sort of like, you know, first principles almost like what is the right, you know, what's the right way to think about the regulation for a crypto exchange?

Starting point is 00:12:59 And I think this is a really, really hard problem at this point, but it's not an unsolvable one. And I think the world is to some extent divided up between people who have sort of like, you know, are trying half-heartedly on this, people who have given up. Like, it's, there's a lot of messes here. But I think that, like, this is a thing on which you can figure out what the right thing to do is and do it if you try hard enough. And that's another thing that we've really been emphasizing a lot. So I think, I know, those were like some things that I guess we did differently than,

Starting point is 00:13:27 you know, many of our competitors. But I think a lot of this was just like trying to have consistently good execution across the board. You guys have certainly had that. You know, I can't help but wonder as we look back through the, other exchange founders throughout history is like every two to three years, a new exchange seems to come along. So we had Brian Armstrong launch, you know, Coinbase with his co-founders 2012, the Winkle Voss Twins 2014, Gemini. And they had 2017, was CZ and Binance. 2019 was FTCS and which you just launched SBF. So it feels like we're due for another, you know, crypto exchange founder.

Starting point is 00:14:03 Do you think that there's someone out there who could come and give you guys a run for your money? the trajectory of things, or do you think things have solidified you have the big players now, and that's all there's going to be for the foreseeable future? I don't expect there to be another traditional crypto exchange coming out anytime soon, which is going to become a big player. I think that there's a lot of appetite a few years ago for new players in the space. I just don't think there's nearly as much appetite now. That being said, I think there are going to be new players of the space, which are sort of

Starting point is 00:14:33 tangential. I think, you know, looking at players like PayPal, right, which are not crypto-execis. changes, but there are mass retail products that are starting to integrate crypto as a front end. And I think we're going to see more and more people like that start to dip their toes in the space and play lately some role in it. Sam, I want to zoom all the way back out and get down to some of the basic questions in here. Everyone who comes into crypto, I think, comes into crypto for their own specific reasons. And so I want to pick your brain as to why you're in crypto. So when you look at crypto, why are you here? Like, why did you start Alameda? Why? Why did you start Alameda?

Starting point is 00:15:08 Why did you start FTX? What about this industry interests you? Yeah. Well, it's, you know, as for why I got here in the first place, you know, originally I was trading and I just saw arbitrage opportunities. You know, I looked around in the space and there was, there billions of dollars a day of volume trading globally in crypto. That's a lot of volume.

Starting point is 00:15:28 The spreads were just absolutely ludicrous given that. You saw 1% spreads all over the place, occasionally 5% or 10% spreads. And so originally got involved just trading, doing arbitrariness. on those. And I think when I got involved, I basically had no idea why crypto would be useful for the world. I just sort of thought, look, this is the thing you can trade these numbers. You know, I'm used to seeing tickers, trading up prices. And that was sort of how I initially thought of it. And I think it wasn't until I'd been in the crypto ecosystem for a while that I started to understand why it existed in the first place. And I think a big piece of this

Starting point is 00:16:02 is thinking about, like, well, like, what's the alternative? And what's it, what's it replacing what's it doing in the world, you know, it's one thing you can do is be a payments vehicle method, whatever you want to call it. And, you know, as I got more involved in the crypto ecosystem, I started to have to, among other things, like send money to and from exchanges, you know, just because like I was trading on them, right? So I had to like, wire money to Coinbase. And as I was doing arbitrage, as I was like just trying to make money doing crypto arms, nothing sort of more complicated that, weirdly kind of quickly became clear that the hardest part of that job was actually going to be the Fiat part, that that it was going to be harder to, like,

Starting point is 00:16:45 send the wire transfers necessary in order to trade crypto than it was going to be to do the actual crypto trading. And that was sort of the point at which I started to think, like, oh, wow, that's pretty weird. Like, that shouldn't be the hard part of what I'm doing right now. That should just be an afterthought. But it was the hard part. And it started getting me thinking like, boy, there's something wrong with that system. Right. If like I'm trying to trade crypto and fiat is still the hardest part of that.

Starting point is 00:17:14 And, you know, we're spending probably five man hours in banks, physically branches, banks, like sitting there, talking to tellers and stuff in order to do the wires that we're, you know, a three month old startup with like 12 people. So that was like a big part of the task. And I think it's like a really compelling example to me of like, you know, something here is just not working smoothly. What was it that wasn't working smoothly to you that you identified? Was it kind of the existing banking system, would you say? Or was this just an opportunity in crypto that you felt like was unfulfilled and needed some fulfilling? It's an interesting question. And I think there's a little bit of both, frankly.

Starting point is 00:17:58 I don't think it was only one or the other. And I do think that like both the existing systems, like part of this was just like banks were not excited to support cryptocurrency, right? And they weren't excited to support crypto companies. And, you know, that meant that it was pretty messy. So that was definitely a piece of this. But I think another piece of this, frankly, was that, you know, they were, even when we started looking outside just the raw crypto ecosystem, it still. seemed like a mess. And, you know, it was a mess even when we were trying to do payroll. Like, that was not nearly as easy as it should have been. And to be clear, that is not something that

Starting point is 00:18:42 should be super hard. Like, that should be like just about the easiest thing, you know, that you can do. Everything that we tried to do in fiat was difficult. And if you tried to cross border, it got so much harder. Anytime you're trying to send from one country to another, sort of optimistically, it would cost you a percent. it would take like two days. That was like the best case scenario. And you had to get pretty lucky for that to happen. There's often like this, I guess this list of reasons that people join crypto, right? And I think this is distilled down probably, it's too reductionist, but it is still down

Starting point is 00:19:16 to these three things. Money, you're either here for the money, you're here for the tech, or you're here for the movement, you know, the values of the thing. Read a recent Forbes article with you, SBF, and a few quotes from that I'm interested in your thoughts on. Bank McFreed is no crypto evangelist. He's a mercenary, dedicated to make as much money as possible. He doesn't really care how so he can give it away.

Starting point is 00:19:39 He doesn't really know to whom or when. We'll get to that giving it away part in a little bit. The writer goes on, asked if he would abandon crypto, if he thought he could pile up more money doing something else, say trading orange juice futures. He doesn't even pause. I would, yeah. Can you talk about that a little bit more?

Starting point is 00:19:54 I thought that was a really illuminating part of the article. And I'm curious if that kind of explains, little bit why you're here. I think what you've described so far about your journey in crypto is like the entrepreneur's journey. It's like I saw a problem in the market that wasn't getting fixed. And so I decided I could do a better job of fixing it. And there was this massive market opportunity. So I'm here to fix it, right? Maybe that's not quite the money reason why you're in crypto. It's sort of like you saw a need and sort of the entrepreneur's reason you're in crypto. But I'm wondering if that is true. If you saw a need in the orange juice futures,

Starting point is 00:20:30 market and there was a big market opportunity there. Could you have been there instead? Is there anything particular about crypto's value system that compels you? Or is it really about the entrepreneur's journey and kind of the money side of the equation? You know, it's complicated. And I mean, certainly at the beginning, right? When it's first getting involved, there's nothing crypto specific about what I was again. I don't really know what crypto was even. And so I think certainly from, you know, at the beginning, absolutely could have ended up in a different place. You know, I think today, like, if I see, you know, a good opportunity somewhere, I want to be, you know, able to take advantage of that, you know, whatever space that's in. And so that's definitely true as well. Now, I will also say that, like, it was, I think there are really great things to be doing in crypto that I'm really excited about.

Starting point is 00:21:17 And I'm not super tempted to be giving those up. And I think that's true from sort of a monetization perspective. But I also think that that's just true from, you know, the sort of impact that I can have on the world perspective. And I think that's something that I've gotten a lot more excited about in crypto over time is the opportunity to use it to have impact on the world. And I think that, like, that again, I don't think that's something that I was like super attentive to when I first got involved in the space. I think that's something which, you know, much more has sort of come over time. For me, as I've explored things more.

Starting point is 00:21:52 But I do think that I feel pretty compelled by its use case now in a way that that that wasn't obvious to me at the beginning, and that I want to see through. And I think this is from the perspective of like disintermediating financial markets. I think it's from the perspective of, you know, allowing international monetary transfers to work reasonably and a bunch of other things. Sam, there's this term that I've learned recently that I've been using more and more because it seems to describe the reasons as to why so many people feel compelled to join crypto regardless.

Starting point is 00:22:22 And that term is being nerd-sniped. as in crypto has just like this insane amount of surface area of problems to be solved and well perhaps you didn't come into crypto because of like the ethos alignment you just came in here because there was this arbitrage opportunity and then there was this problem that you discovered crypto eventually pulls in all people that are obsessed with like problems or puzzles and like they like to solve these puzzles because it's they're fun puzzles to solve inside the crypto industry is this a reflection of what you got in here for It absolutely does. And I do think that, like, you know, that a big part of this is, like, the more I've been here, the more opportunity that I've seen to find something really impactful to do in this space. And I think I didn't appreciate all of that when I was sort of like first looking at it a long time ago. But I think it's huge.

Starting point is 00:23:15 There's this common trope in crypto where you, like, you come for the money and you stay for the tech. Is that kind of the trajectory that you've seen yourself on is like, oh, first there was arbitrage. Then I found. discovered I could build this business, but then you just recently alluded to there's more and more use cases that you can see crypto helping create more and more real world impact. Is this kind of the trajectory that you've seen yourself on? Yeah, I think that sounds about right. What are those use cases? What are those like high impact things that have really captivated your attention? Yeah, so I think one piece of this is like every time that we pay for something in the States, you know, we're sort of like by default bleeding something like 3% to various fees along the way, which is a lot to be paying.

Starting point is 00:23:56 That survey is one piece of this. A second piece of this is whenever we send money overseas, and we're losing optimistically 5%, sometimes 20%, on spreads there, that's horribly inefficient. And a lot of what's going on is like, you know, how does the payment work right now? Like if one person wants to pay another, what does that mean?

Starting point is 00:24:22 What's it entail? And I think part of the answer here is like, well, that payment only works if there are two people who both respect the same payment method, right? Like they both agree on what it means for that payment to happen. But in order for that to happen, what you have to have, you have to have a situation where, like, there is some payment method if you're talking overseas, which is, well, it's probably not run by. a country because it's cross-border. It's probably not run by a company. I don't think we're into like one company having sort of the proprietary payment method for the whole world.

Starting point is 00:25:04 You need a third option. And I think blockchain is one of the first times that we've found another way to do, you know, to have a ledger, right, to have some ledger that you reconcile between two parties. And so I think that's super compelling. I think that when we, so there's payments internationally, there's payments domestically, I think you will get holding assets. especially, I mean, Ukraine right now, I think is a great example of this, right?

Starting point is 00:25:26 Like, right now there's huge amounts of cryptocurrency-based donations going to Ukraine because how else are you going to get funds there easily? And I think if you're in Ukraine, right, a lot of people are thinking hard about, like, what should they be storing their assets in? Where, you know, where do they feel confident that it's going to be stable? And so I think, like, that's another side of this. And so I think all of those are like various reasons that, like, that we're starting to see more and more usage of it.

Starting point is 00:25:57 And I think those are just some of, you know, that's just sort of the tip of it. And I think you can just sort of keep going here and keep finding like more and more reasons why existing payment messages don't work in a lot of cases. And crypto presents a really compelling, you know, alternative to that. How much does decentralization matter in all of that SBF? Do you think decentralization is overrated or underrated in the crypto community?

Starting point is 00:26:22 I think that's a good. good question. So I guess I'll say here's a vision for decentralization, which I feel like moderately compelled by as like my current best guess for the way to do it, which is basically that you have like a bunch of centralized islands, you know, whether they're centralized exchanges, whether, whatever they are, which are then connected to each other by decentralized rails. And so you have like, and that's sort of like in some sense is what we have right now, right, where there's like, there are all these exchanges, and each one of them is centralized, but you can withdraw your assets from them to your own self-custody wallet or to another exchange,

Starting point is 00:27:01 your account at another exchange, you can decentralize blockchain rails. My guess is that, like, that's roughly how we're going to see things building out. And it means that you can have the efficiency of a centralized entity performing some operation, but the exit strategy of being able to go to a decentralized platform or to self-custity and a native language that each of these platforms can all talk with each other in order to communicate more of the send assets between each other, and that if you're building a new platform, you can do that with as well. Now, that's obviously ignoring Defi, which is a more fully decentralized vision

Starting point is 00:27:35 of a financial ecosystem. And I think that can work for some things. I think that when you look at things that are not incredibly computationally intensive, I think that Defi makes a ton of sense. I think there are some balance on it, right? You're looking at like a few hundred mills, seconds of latency at the minimum. You know, you'll look at some costs. You're going to be massively duplicating server costs effectively for all the validators. And so for like, you know,

Starting point is 00:27:59 things where compute or throughput or something like that is the current biggest bottleneck, it's not a great fit. But for things for which that's not much of a bottleneck, I think you can start to build them fully decentralized. Sam, the concept of getting all of humans onto the same ledger is definitely something that I resonate with. And as we're looking back to FTX and also the future of FTX, how does FTCX fit into that model where we have international transfers, just leaking value left and right? We have domestic transfers leaking value left and right. And then even our current state of just like commodities markets and equities markets could definitely use a glow up, if you will. So with FTCX, what does FTCS look like in five to 10 years?

Starting point is 00:28:40 What does FTCS want to be when it grows up? And how will it help kind of solve some of the problems that you recently listed off. Yeah. So, you know, I think we see FTCS as one of those centralized islands, right? It's not a decentralized entity, but it intervenes with a lot of them. And I think what we see it as is it's a venue where you can transact, you know, where you can trade and where you can send both fiat currencies and cryptocurrencies in and out easily. And, you know, I think ultimately seeing it potentially as really a full-stack financial

Starting point is 00:29:09 experience for, you know, for people where they can access all the things that they want to access, where they can access, you know, stocks, crypto, investing, trading, deposits, withdrawals of crypto and Piat, you know, direct deposits, card payments, and everything else. But that's also natively integrated into a lot of blockchain rails. And so anything that you want to do in Defi, in the rest of the crypto ecosystem, you can easily get, you know, funds from FTCS too there. You can do swaps that you need to do on FTCS in order to get the right assets. And that's, like, my sort of like sense for for where you know high level it's going. I think it's sort of a combination of like exchange, you know, financial exchange and financial product and especially like consumer

Starting point is 00:29:55 mobile app. The centralized island that you're talking about, Sam, is this most disruptive, do you think, to the big banks of the world? Like, you know, the brokerages of the world, the Robin Hoods maybe, like even the Goldman Sachs, for instance? Or is it more of a tech company? Is it more disruptive long term to like the metas of the world? world and the Twitters. It's an interesting place I think these exchanges are in because like maybe it's one, maybe it's the other, maybe it's both. What do you think FTX is really disrupting here? It's a good question. And I think like part of the question is like, well, what mobile, neo, natively digital neobank do you do 100% of your finances through today? Yeah.

Starting point is 00:30:35 The answer is none. None. Yeah. No one does. I've like basically never met anyone who does. I think that's a little weird, frankly. There are places. where we do see that, right? Like, there are countries where you see Move Laps being the primary way that people are transacting storing their finances. You know, the U.S. is certainly not one of them. And so I think to your question of, like, who is that disrupting? I think there's sort of a hole there, right?

Starting point is 00:31:00 Like, I don't think anyone has quite built that product. And, you know, I think there's a lot of people that might be sort of probabilistically disrupting. But I don't know that anyone is quite exactly in that corner right now. you know, putting that aside for a second, like, I think that there's a disintermediation part of this, which is important as well, right? Which is basically when you, and maybe one way to think about this is like, if you want to buy Robb, if you want to buy Apple stock on Robin Hood, right? What's that process look like sort of like market structure wise? It's messy.

Starting point is 00:31:33 I mean, you're going through, you know, mobile app, PFA firm, ATSPIFR firm, clearing firm, custody firm, exchange, and then the whole thing duplicated on the other side. Like, our traditional financial ecosystem is heavily intermediated for everyone except for, like, HFT firms that are going direct to exchanges. And that's a big difference as well versus, I mean, FX, but also just more generally, the crypto ecosystem, where it sort of the ethos is everyone has direct access, the exchange of direct access to the product. And again, removes intermediaries that are just charging fees and removing information.

Starting point is 00:32:06 It seems like after you layer on a lot of these products that FTCS seems to have built and perhaps has aspirations to build, it kind of seems that FTCS just turns into like this financial superstructure where we have so many different financial sectors of the world. We have banking, we have exchanges, we have commodity like risk management tools. And it seems like FTCS is getting a little bit in getting their fingers into all of them, including NFTs too. is kind of the concept just to combine as many financial products under the same umbrella as possible. And just like, there's always a joke that even like Starbucks is becoming a bank, right? Where they do their gift cards. Basically, they have like a hundred, a billion dollars in deposits. And the meme is that everything ultimately converges to a bank.

Starting point is 00:32:48 Well, a bank ultimately converges to a brokerage. And it goes from there and everything kind of just converges upon this one central superstructure. And I think FTCX is just going there even faster by leveraging crypto rails on the background, which is what crypto really enables. Is that kind of like the long-term goal of FTCS just to be this one product to serve them all? I think there's definitely a piece of that. And I think that there's a few important addendums

Starting point is 00:33:10 that one is doing that, but putting things on blockchain rails as much as possible, and being able to leverage the infrastructure that cryptocurrency and the digital assets space have. And so I think that, you know, you look at sort of a lot of the things that blockchains have enabled crypto exchanges to do and trying to make that a more general structure, that's definitely one of the angles here

Starting point is 00:33:33 and something I think long term we're super excited for. So I want to talk about some of the other sectors that you bump up against in crypto when you have sort of a centralized island of the type you've described FTX as. And the first contrast point is FDX and Defi, compare and contrast. So like friends or competitors, is FTCX a friend of Defi or does it see DFI? as kind of a competitor that's maybe out to eat its lunch? What's your take? I think we think we're a friend of DFI.

Starting point is 00:34:03 I think maybe DIPI thinks they're a competitor true, but I certainly think of us as friends. And I think a lot of the reason is like, I think that there are pros and cons that there are reasons to use one and there are reasons to use, you know, another. And I think that like, you know, one piece of this is looking at, again, things that are computationally intensive, not a great fit to me directly on chain. Now, they can interface with blockchain, right? But you're never going to have the same GPS on a DEX as you do on a centralized exchange. You're not have the same latency or fees.

Starting point is 00:34:36 On the other hand, I think there are a lot of things that do fit natively on chain. I think that like, you know, decks are one thing which I think especially for like the consumer side, you know, where latency is a lot less important and where throughput is a lot lower, it would be totally reasonable. Another side of this is social media. I think that, like, it could make a ton of sense for social media messages to end up on-chain, decentralized. I think it would go a long way towards sort of, like, breaking into the giant sort of moats that each social media network builds because they're not interoperable with any other one. They have all this captive, you know, all these captive messages and user base. I think there's a lot to be said for making social media interoperable for having users own their messages and permission whatever platforms they want to be able to act.

Starting point is 00:35:22 access it. And I think that using a blockchain for the underlying social media rails could make a ton of sense from that perspective. Sam, I'm interested in that you said maybe Defi doesn't always think FDX is its friend. I'm curious, why do you think that? Why is that your perception? And, you know, why do you think maybe part of the defy community believes this? Yeah, totally. So, and to be clear, I think, you know, I don't want to make an absolute statement about all of Depi or anything like that. But I definitely think that there is, you know, I think that there are some people who, I, you know, see GFI is eating everything, like literally everything. And so I think CID as like, well, anything that like does financial services is going to be effectively competitor, eventually one way or another. And I think that's not so much my guess. I do think that there's like ways in which like there will be competition. But I think there's also things that are better suited to each part and that there's a lot of ways that they can just complement each other and interface nicely,

Starting point is 00:36:20 you know, with each other. But I have to think that's, the sort of like defy literally the whole world mentality would see anything that is a centralized island as potentially competitive. There's definitely some hardcore decentralization maximalists out there who might take that approach certainly. I think most in the bankless community at least are somewhat pragmatic about it. It's sort of like we don't want centralized institutions, what we might call banks, gaining too much control of the system or we sort of revert back to our prior system. But there's definitely a pragmatism about it because there's a ton of good that centralized islands do for the ecosystem as a whole. But I'm curious about this. So given everything you've said,

Starting point is 00:37:01 so far, you know, FDX's strategy, how you see the world, DFI being more of a friend than a competitor, what does this mean about FTC's support of particular blockchains? Do you have any preferences, right? So there are some exchanges out there who might say, no, we're neutral, right? May the best one win. There are others, I might say, maybe a Binance, for example, that clearly they favor BNB chain, finance chain, don't they, for reasons that anyone can guess, obviously. There are some exchanges that haven't really, like, picked. Maybe some are yet to launch their own chains, side chains. I'm not sure. Does FTCS have any preferences? It has seemed in the past like FTCS might have some preferences. I know Solana has been

Starting point is 00:37:44 a chain that, you know, FTCS has established many partnerships with. Is that one? And if you do have preferences, what drives those? Totally. So I think the way I come at this is, I don't have native preferences. You know, we want to support as many chains as we can on FDX, and I think we do support a number of them, including supporting cross-chain through a number of different chains. And, you know, in the end, I think is a combination of what makes sort of technological sense and where the demand is that we respond to. Now, that doesn't mean that, like, we don't have opinions on it. And obviously, like, I'm seeing everything that's happening there. And, you know, I do end up with, like, thoughts on, you know, what chains make more and less sense.

Starting point is 00:38:25 And, you know, obviously, that's also going to impact, you know, how we prioritize things. We try and come at it from the beginning from a neutral perspective, though. And so I think that, like, high level, yeah, what are things, you know, looking for? Basically, basically three criteria. One is basically how fast and cheap it is. Second is how much demand there is for it. And the third is how decentralized or. trustworthy it is. And I think that, you know, that third thing we think is like not an issue with

Starting point is 00:38:55 most chains, but, but maybe an issue with some, you know, from those perspectives, you know, perspective, basically thinking like, well, okay, what should we prioritize in terms of onboarding chains to FTX? And so anyway, you know, I think that like, there's obviously huge demand for Ethereum. I mean, that that's probably always going to be the case. Bitcoin is what it is. And that, that, that's going to be a big piece of it. And then there's a, ton of different attempts to have, I don't know, different forms of scaling solutions. And there are lots of different framings of it and lots of different approaches to it between layer two, new layer ones, roll-ups, and everything else.

Starting point is 00:39:32 You know, I think my sort of thought on a lot of this is like, you know, we'll support a lot of them, we'll see where the demand goes, make sure that, you know, that we are giving sufficient attention to the, you know, to where the huge to be the most demand. And, you know, I think that we've seen that with a few of the other ones. I think Swan has been the most popular by far so far. And I think it makes sense as one of the most economically efficient chains. I think there's some roll-ups in layer twos, which are like going live soon-ish or have recently gone live.

Starting point is 00:40:04 I think you can like start where Arbitrum and a few others. And I think we're excited to see what happens with those. I think we've seen like Avalanche, Maddoz and a few others have real uptake as well, but mostly I think it's too early to know for sure. And I think that a lot of this is going to depend on the future development of the blockchains of their ecosystems to see which ultimately ends up sort of like with the act, you know, both the best product and the most demands. When you shop for plane tickets, you probably use kayak, Expedia, or Google to compare ticket prices. So why would you limit yourself to just one exchange when you trade crypto? When you make your

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Starting point is 00:43:16 there is a tweet that's absolutely famous in the Twitter sphere that you tweeted on January 9th, 2021, and it was in a debate with whoever coin Mamba is, and you tweeted out, I'll buy as much SOL Sol Solana's token as you have right now at $3. Sell me all you want, then go fuck off. and that was at Solana price at $3, of which it's now at $81. So obviously that was a good tweet, not to mention coming down off of the high $250 at the peak of the SOL price. Sam, what gave you the conviction to send this tweet? Because it was one of those things where you had to have had conviction to send it, and you have been proven absolutely right.

Starting point is 00:43:57 What were the indications? What were the signs that you knew that this was going to be a good trade? You know, obviously, I don't know anything for sure. And I was like certainly going out there on a limb a little bit. But basically I think like looking at where it was back then, you know, market cap wise, you know, it was around a billion dollars or so. I thought that, you know, of the chains at the time, it had sort of like clearly the most compelling vision for how it was going to scale, you know, thought that that it had like a real chance of becoming one of the top chains. and, you know, I think, but like, how big would it get if it got there? I think the answer is like, you know, 100x, right?

Starting point is 00:44:38 It was like a real possibility. And I thought the odds were like way above 1% of that. And so, you know, I think putting all those together just sort of seemed like, look, like this is, this is an insanely low price for what I think is one of the strongest technical teams in the ecosystem. And, you know, at that price, yeah, I don't know, as much as there is. Were you surprised that the price went from $3? to ultimately $250? Like, at what point were you like,

Starting point is 00:45:05 oh my God, this exceeded my expectations? It definitely happened a lot faster than I thought it would. And, you know, I think it was sort of like an optimistic case that ended up being realized and ended up being realized shockingly quickly. I don't think it was like out of the realm of possibility. But I think it was definitely a lot faster than I was sort of expecting. And, you know, I think like, I don't know exactly why it happened that fast. I was, it definitely outperformed my expectations.

Starting point is 00:45:34 Are there any other changes you feel similarly about today now, Sam? I mean, I think, like, people are curious because it still seems like it's the early stages of what we might call kind of the execution layer of these blockchains. And there are new competitors that are entering the ring. You mentioned a few, like Avalanche and Maddo. And there's also layer twos, which haven't yet seen their season. Anything you're particularly bullish on from your vantage point on alternative. chain front. Yeah, I mean, I think those are

Starting point is 00:46:02 a lot of the chains that I want to be looking at and doing a deeper dive into. And I think that, like, I wouldn't be shocked to see one of those come out as a real competitor. I think part of this is looking at what do bridges look like, especially when you look at, like, you know, StarCware and Arbitrum and others that are sort of like explicitly meant to be viewed as sort of like layers on top of Ethereum. I think this sort of like complicated piece there is always like what happens on that interface. But, you know, if you can get that working in a really great way, I think that's a real

Starting point is 00:46:34 competitor. And I think that would be really interesting. And then, you know, I think outside of that, I think, like, Avalanche is one of the chains that we see is, like, you know, they've got a really smart team and, you know, been grinding away at a product, a good product for a while, would not be surprised to see them start to play a larger role in the ecosystem. And then wouldn't be surprised for there to be a chain that, like, we're just not expecting at all. And, and, and, and, and, up playing a big role. I mean, I don't think that, you know, we certainly don't feel like we know everything that's going to be going on. You mentioned bridges a couple of times now, and I'm curious if you think central exchange, centralized exchanges like FTX play a role in the bridging process.

Starting point is 00:47:14 I know FTCS recently announced support for arbitram, which is awesome, layer two, so withdrawals and deposits there. How does FTCS see itself as a bridge from Fiat to the more native blockchain an ecosystem. Yeah, I mean, we absolutely see ourselves as a bridge in that sense. And I think that, you know, basically what that means is building as many debt integrations as we can, as many different currencies as we can, that work as well as we can, and then

Starting point is 00:47:39 combine that together with as many blockchain integrations as we can, so that you can easily convert between euros and, you know, ERC20 tokens, between pounds and S-DEL token, between dollars and Bitcoin, basically being a central

Starting point is 00:47:55 repository of liquidity, you know, addition to on ramps and off ramps so that it's super, super easy for people to just like convert between all of those without having to worry about. So that's really what I'm, one of the big things that I see it as and that starts to bleed into the sort of payment processor side of this.

Starting point is 00:48:13 Let's talk about maybe the second contrast point. So if we've established that FTX sees itself as a friend of Defi, are you a friend of the banks? Are you a friend of the Goldman Sachs of the world? If you're more a competitor, I know earlier we were talking about how you see FDX as maybe occupying some new white space that these institutions don't currently occupy.

Starting point is 00:48:34 But, you know, the banks are hungry. They're looking to grow and they're looking to gain more market share. Do you think they go down without a fight? And let's talk about that. And then maybe I want to talk a little bit more about regulatory. But the banks themselves, how does FDX win against them? I mean, I think that there's a big question of what role they want to play in the digital acid ecosystem. And I don't think it's clear yet.

Starting point is 00:48:54 Like, I don't think that we've seen banks really stake out what their direction is going to be. You know, when we talk to them, this sort of classic thing. Why? Why are they so slow? So imagine that, like, what's the biggest company that you've worked on in terms of number of employees? Above a thousand, but, you know, 1,200 or so. Very small.

Starting point is 00:49:13 Cool. So how many employees do you think, like, Citibank has globalists and Googling this right now, Jesus? I'm going to guess 130,000. Oh, God. It's my guess. What do you think, David? Oh, I don't know, but it's a large number, and I'm scared of it already. 210,000.

Starting point is 00:49:31 Oh, what do they do? A lot of fucking employees, right? Right, right? That's a good question, right? Like, imagine, like, how much you can get done with 12 people. And then you're like, oh, wait, there's like 200,000. It's hard to even imagine what that means. Okay, so that's one interesting piece of it.

Starting point is 00:49:49 Another thing, though, is like, imagine that something has to get, not consensus, but like general approval in order to happen. You have all these committees of like 15 members each. I mean, there's like tens of thousands of these committees. Giant organization. You get 15 people sitting around a table. And they're like, all right, so should we do something in crypto? You know, I don't know, like trade it or give access to trading it

Starting point is 00:50:16 or maybe make a fund or bank it or, you know, I don't know, something like that, right? And then someone says, well, what do we think compliance is going to say? say about this. And I don't know, someone that tells going to like, yeah, that's a concern. I don't know. And someone else is like, well, do we, do I understand the regulatory structure here? And someone says, I think it's kind of messy. I'm not totally sure. And okay, so you see, you're starting into the meeting. And so like, well, who's going to take the lead on this project? And someone's like, well, I can, I can try and work on it, but I'm going to need more clarity from compliance. And someone's also like, well, yeah, I don't, I talked to compliance last week. And they

Starting point is 00:50:53 weren't, they felt nervous. And they didn't know either. And they know, and now you're like, of course that committee is not going to make a decision, right? Like, they're like so far away from being able to actually give a green light on something. And everyone is nervous, that someone's going to be nervous, that someone is going to decide that there isn't enough clarity for them to feel comfortable moving forward with some piece of this is how this all is going to bottom out in the end, right? Like some, some long chain of nervousness. And, you know, where does that, What does that sort of end up? Like, I think it just ends up inaction.

Starting point is 00:51:27 And I think that's what happens is you just get like there's so many video points and everyone is nervous. And of course, they're thinking, look, are we going to get a billion dollar fine for this? And so it's like, what are you worried about getting fined for? Like, I don't know. I want you to convince me we're not going to get fine for this. Can we get clarity from the regulatory bodies? And like, well, they're still thinking about what the regime looks like in some places. And they're like, oh, so we're not going to get clarity that we're definitely not going to get fined for doing something here.

Starting point is 00:51:51 And it was like, I don't know. think so I don't know. And then she stalls out, you know. And so I think just sort of like a large collection of sort of like issues and concerns like that that just lead in the end to like, to a mess that can't make progress on something like this. It sounds like the only type of organization that works under this like context that you've kind of laid out for us is one that asks for forgiveness, not for permission. And it kind of lends itself to the upstarts of the crypto world rather than the incumbents of the legacy world. I think there's definitely a piece of And, you know, the other thing that I'll say is, like, it's not, I wouldn't say that it's impossible to get regulatory clarity.

Starting point is 00:52:29 It's just hard. You have a lot of work. And you have to really understand what's going on deeply and have lots of conversations with regulators. And, like, that's something that a more nimble organization you do when you look at the larger organizations. Like, it's not even just about doing that. It's about doing that and then giving comfort 209,99 other employees that you've done that to the extent that they should not have to themselves do that. do that digging again and not have to duplicate that same extremely long investigation 200,000 times in order to be comfortable moving forward. Like that's a pretty tall time. Let's talk about that then, the regulatory side, because I know you've been quite busy on the regulatory front.

Starting point is 00:53:08 I've got a number of questions for you. But regulatory could also be a cudgel that banks use on the crypto industry as well. Like somebody might hear what you're saying, Sam, and say, yeah, but like I understand, but you don't know someone from the banking sector. You don't know my compliance department. And the reason we have compliance is not because we want to. It's because it's all of the government makes us. And it's because all of this, you know,

Starting point is 00:53:32 legislation and regulatory cruft has been added over the decades of the financial systems life. So like, you don't have to abide by those things, Sam. And so it's easy for you to say compliance gets solved by indecision, but you should be forced under our same compliance and regulatory regimes. And so they might use that as a mechanism as a choke point for the crypto industry. Talk about the regulatory situation in general, because it feels like the crypto industry is in a long series of battles, right, to establish crypto in our nation states,

Starting point is 00:54:08 like in particular talking about maybe the U.S. Are we winning or are we losing this battle? In the end, does a crypto exchange just get regulated as a bank and have the same sorts of compliance departments causing hundreds of thousands of employees that the old regime had. Talk to us a little bit about the regulatory landscape right now. Yeah. And I will say that some of this, right, when you talk about doesn't get regulated as a bank, well, there's one part of this sort of like mess comes from that, but another part just comes from having a gigantic messy institution

Starting point is 00:54:39 that has trouble making sort of decisive calls in general. And so I think it's important to sort of like keep those, you know, the distinction between those clear. But, you know, putting that aside for a second, like, it's less about, like, do you become regulated or not? It's more about, like, is there a reasonable path forward? And do you find it and take it? And I think that, like, there's been a lot of cases where, like, where there's, you know, difficulty and where, like, there isn't a clear path forward. I think there are other cases where there is one. And the biggest thing that I think that, like, my takeaway has been and that I found is, like, our goal,

Starting point is 00:55:18 rather than fighting about whether or not we get regulated as something that we wouldn't want to be regulated as, I think it's like we have to find a proactive way to get regulated that makes sense, right? We have to find a licensing regime that makes sense that fits the product, that is appropriate, and that can sort of provide for the, you know, customer protections that need to be provided for without, you know, killing the use case in the first place. And I think that that is a thing which is doable. I feel like cautiously optimistic about that, about that being possible and about it in practice happening, but it's going to take a lot of work, like a lot of hard work for us to get there.

Starting point is 00:55:54 It's not going to be something that's automatic. And so I think, like, that sort of is my core sense of it is the longer that you try and say, look, we're just not part of any regular array system. The consequence of that is going to be, you get stuck into a regulatory system you didn't want to get stuck into. Yeah. Andrew Yang's come to podcast and said you're either at the table or on the menu. you and I think that's what you're saying. Exactly. I think that's exactly right. Like, you know, just saying like, yeah, we're going to opt out of being part of a regulatory system.

Starting point is 00:56:24 That's not an option. And so instead, what I think we should be thinking about is like, well, of the realistic options in front of us, which of those seems most reasonable and likes the best fit? And how do we work within, how do we work to become a part of those in one way or another? And I think that's a big thing that we've been focusing on, you know, over the last year or so. And, you know, I think we're making pretty good progress on. I think we have real answers that question that we didn't have at the beginning, which I'm pretty excited about. Well, Sam, you were recently in front of Congress, I believe, right? Or some congressional panel.

Starting point is 00:56:58 What was that experience like? What's that like just being, you know, talking to legislators face to face and them seeing not a shadowy supercoder, but like a real human being who wants to engage in a conversation? It was really good. and it is really constructive. And I think that is a piece of it is sort of like, you know, being able to say, look, I'm here. Like we're real people. We'd like to be productive.

Starting point is 00:57:19 We'd like to have a reasonable conversation about what the right pathways forward are for the industry. You know, this isn't something where like you're never going to have any insight into what's going on. Being there to educate, being there to answer questions and being there to try and collaboratively work on like what's the real answer here, right? like what is something that solves for the main concerns that regulators have and has to have and that lawmakers have to have in order to protect consumers in order to protect our financial ecosystem. And I think that there are real answers to a lot of that. And I think that lawmakers are really, really appreciative of, you know, seeing straightforward,

Starting point is 00:57:56 like, hey, here's the thing we could do that I think would help, you know. And I think one example is out of like audits for stable points, right? Like everyone was in favor of it. And I think that for all of the sort of like, you know, all the worry and all of the sort of back and forth and the sort of saber rattling on the worries of stable coins. And I think, you know, some amount of perceived lack of interest from some stable coins in sort of responding to that. Just having like, here's the thing we can do that will like address your core problem. Let's do it. I think reframes the conversation a lot away from being a debate between crypto and regulators and more towards.

Starting point is 00:58:34 being like, how can we allow crypto and regulators to work constructively with each other? We certainly are observing all the work that you're doing on the regulatory front and, you know, cheering it on and, you know, fantastic. And if you bring the same level of execution that you brought to FDX through the last three years, we're going to be in a pretty good place three years from now. And that's certainly my hope. After the hope. Okay.

Starting point is 00:58:54 I want to address maybe another concern. Somebody hears this who's skewing more towards the decentralization maximalist or mostimalist side of things, which I got to confess, is. probably myself, probably David, probably many members of the bankless community. What we're most worried about, Sam, is that an entity or a set of entities like FTX, coin base, finance, what if they become the new banks? What have they become the new Goldman Sachs of the world? And then what we've done is this process, a multi-decade process of replacing the old boss for the

Starting point is 00:59:28 new boss, and we still don't have like the self-sovereign, decentralized financial system that we've wanted and things consolidate and pretty soon you're back to paying like 3% payment fees again and governments all over the world being able to inflate your money supply. That's what we're worried about. Do you think that there's any merit in that worry or how would you respond to that concern? I don't think it's a crazy worry. I totally see where it's coming from. And I think it's absolutely something that, you know, we have to watch out for as a community

Starting point is 00:59:56 is that we are actually creating something more decentralized and more open. I think that one big piece of this is when you have your finance, and I think one thing that makes me optimistic there is, you know, when you have your finances with a traditional financial institution, you don't have any control over those. They're basically stuck there. And I think one of the big goals that I see here for the crypto ecosystem

Starting point is 01:00:21 is to build a system where, yes, you do have decentralized islands, but where you really are free to move between them, where you really are free to decide, you want, that wasn't the right one for me. I'm going to move my eyes. assets to another one. And you can just do that with a click of button, that you can do it to your own. And that it's that they sort of like startup costs for building a new one is not prohibitively high, you know, for becoming a new player in the space that you don't have these gigantic centralized modes. And I think a big part of ensuring that is making sure that it's not, you know, we're not in a position where like, you know, in order to be able to participate at all in the, the crypto ecosystem, you know, that you know, that you

Starting point is 01:01:01 have to get acceptance from the existing players, right? And I think we are sort of in that position right now with a lot of traditional finance where if you want to become a part of the system, right? If you want to, what you need, you need to get accepted by the banks for banking. You know, if you want to be an exchange, you need brokers to connect with you. If you want to be a broker, you need the exchanges, need the peop firms to connect with you. And there's this gigantic chain of like breaking into this is very difficult. And even once you do, it's very hard for people to switch to using your service if they were previously using a different one. I would love to, you know, see a system where at the very least, it's people not only have choice, but have the

Starting point is 01:01:46 actual practical ability to change where they are, to move where they are, and for new entrants to be able to get into this space and have a real stake in impact there. And I think we should make as regulation sort of rolls out here, that it allows for that and that it doesn't create impenetrable moods or penetrable in theory, but not in practice moves. Well, the ability for users to permissionlessly and freely exit from systems, I think it's going to become increasingly important in these 2020 decades. And I think that is how crypto will ultimately win the hearts and minds of its users, of the people.

Starting point is 01:02:24 but also there's the battle of hearts and minds of just everyone else, which brings us to a topic that I wanted to bring up for a while, which is the FTX Super Bowl ad, which I think did a fantastic job of having a major, major PR win for the entire crypto community. Because imagine, for those that haven't watched the ad, you're going to have to go watch it on YouTube, but it's basically a series of inventions being made,

Starting point is 01:02:49 the wheel, the light bulb, indoor plumbing. And there's always this old balding, gray-haired incumbent individual who's always like, no, that's never going to work. And I just would love to be a fly on the wall of so many households in America and the world who have the kids of the family being all gung-ho about crypto and NFTs and then the parents being like, no, it's just a scam, and having them watch the ad together as a family. I think that's added a really good job of just putting crypto in a really positive light on perhaps the biggest stage that we have every single year, which is the Super Bowl. And so Sam, I'm wondering if you could just tell the listeners a little bit

Starting point is 01:03:24 of the story of how that ad came to be. Like, who produced it, where the idea come from? Just tell us a little bit of the backstory of this. Yeah, I mean, it was, I'm a huge fan of it and super appreciative that, you know, everyone who helped put it together. It originally came and basically we, you know, decided that we wanted to at least, hopefully, probably do a super lot, that we at least wanted to seriously consider doing one. You know, we sort of started brainstorming ads.

Starting point is 01:03:52 we didn't like immediately come up with anything we loved and we reached out to some agencies many of them came back with kind of mediocre shit you know i i guess there's like one thing you know one of the first sort of this wasn't for a super bowl i but one of the first things were presented was like sort of graphic of like Trevor lawrence like holding a football thing like fdx the cheapest way to buy crypto and it's kind of like it's okay i mean it's not like i'm not offended by it but like i feel like if you told her graphic designer it's like hey you got like 24 hours you're like make it's a poster. That's like roughly what they would have come back with, you know? And so it just sort of felt like, all right, that doesn't seem super exciting or impressive.

Starting point is 01:04:31 Like that's, you know, not told on that one. And, you know, basically went back to a bunch of them and said, hey, can you like, you know, do a better job maybe? Like, I was like a great job, you know? Like, we'd love to see a great dad if we could. I think there are some existentialist like, all right, yeah, we can do that. I mean, query why it didn't happen at the beginning, but okay, whatever. I don't know, came back with some more and eventually one of them came back to us with the, you know, with the Larry David idea. And as soon as we saw it, we're like, yeah, that's awesome. That's the one.

Starting point is 01:04:58 And the fact that that he was really excited to do it was an important part of this for us. Well, you can tell when someone's exciting and whether or not. And it just would not have been a great, it wouldn't have been a great ad if he wasn't excited for it. Wait, so the ad agency came back and said, hey, here's this pitch for an ad. Larry, we've already talked to Larry David and Larry David's on board. Yeah. Wow.

Starting point is 01:05:19 Well, that's a good ad. Can see. Does Larry David hold crypto? Is he like, is he into the scene here? Not that I know of. I mean, he obviously,

Starting point is 01:05:29 you know, he would be the expert in the end on this, but I don't, I don't know him to hold crypto. I suspect he does not. Which is also an interesting part of this. So this is not like, it wasn't that he came back and said like,

Starting point is 01:05:40 oh, I would just love to do a crypto ad. Like, I've been, that's all I ever wanted. You know, I think it much more was like, I do this ad in particular.

Starting point is 01:05:48 And thinking like, this is a really cool ad. Larry David was, perfectly cast for that. He was. He was. The role of just saying no is just like so perfect for him. He's a perfect fit for it, you know? And the nice things I put him in a position where he didn't

Starting point is 01:06:00 have to be endorsing crypto. We didn't want him to be endorsing crypto for that. That's the whole point. Right. And I think she felt like, yeah, that, you know, that sounds like me, you know? I'm the guy saying no to that whether or not I'm sure it's really not the right thing to do. So were you watching the Super Bowl? I was actually at the Super Bowl. Oh, you're at the Super Bowl?

Starting point is 01:06:20 Okay, so you were not seeing the ads. Unfortunately, no. I saw them afterwards, you know, on YouTube and stuff. Well, but fortunately, you're at the Super Bowl, so that's even better. I made up for it in the end. Yeah, I'll take it. So what were your thoughts on the Coinbase ad? I think it was really trying to accomplish a very different thing than what our ad was.

Starting point is 01:06:38 Oh, certainly. And I think that, like, I mean, there are a lot of ways of seeing that, but I think one of them is, like, if you look at, like, what was the impact of those ads? Looking at sort of, like, between before and after the ads, I think that, like Coinbase had a massive, massive jump in like the ranking of the app store. Like they said a fuck ton of signups out there. And I think that is an incredibly effective ad for getting people to sign up for Coinbase. And you know, good for them.

Starting point is 01:07:06 It's a reasonable thing for them to be focusing on. Some might say more than just a reasonable thing. It wasn't what our primary focus was. Like our primary focus rather than trying to get people to sign up for the platform, you know, our primary focus was how do we spread who we are and who the industry is as a brand in a way which is going to stick with people. And so from that perspective, you know, the flip side, they say that they got massively more registrations than we did. But we got, you know, our Twitter, FTCS officials Twitter following like doubled or I think grew by 50% over the

Starting point is 01:07:42 quest of that ad. And Coinbase is basically didn't budge. And so they usually had like totally different impact on those two metrics. And I think that actually does a pretty decent job. was summarizing what the difference was between their aims. I think they were both good execution for what they were going for. But I think we're aiming for very different things in Coinbase was. I do think there's something to be said for the narrative public good of crypto that you contributed towards with that ad. And I think people in crypto are appreciative of it.

Starting point is 01:08:09 I send it to family members and such. And we've talked about it a couple of times on bankless already. But, you know, this Super Bowl ad is kind of just the start of I feel like this renewed effort or this major push in 2021 of FTX breaking into mainstream in ways I didn't anticipate crypto would break into last year, which is like a Tom Brady endorsement? Like, how did we do that? And how did you guys do that? You bought up the naming rights to the FTX arena.

Starting point is 01:08:38 So this is where the Miami Heat reside, I believe. You took it from American Airlines. So bye-bye Airlines. Hello crypto industry. You've also more recently, I think in the last week or two, just hired ahead of luxury brands. Like there's now someone who works as a luxury brand type ambassador at FTX, which is interesting. This almost makes me think of like it's a little Apple-esque of you to go and do that. But all of this feels like it's a breakout of the finance geek culture that crypto has sort of been in a little bit and breaking into mainstream.

Starting point is 01:09:12 What's the unified approach to all of this? Is this a strategy of some sort? Yeah, I mean, I think the way you put it is pretty reasonable, which is like, look, as this becomes more mainstream, I think that there's going to be a lot of areas of intersection between crypto and culture and the rest of the world. I don't think we know what all of those are going to be right now. Like, we're still making these up as we go. And I think the world still is. And so a lot of this, frankly, is, you know, we don't know where things are going, but wherever it is, we want to be there and we want to be ready. and we want to start to build those bridges before they're necessary.

Starting point is 01:09:47 And so I think that's an important piece of what we're aiming for here. You know, I would be surprised if there wasn't significant intersection between crypto and fashion. And I think that's a lot of the reason that that was an area that we wanted to get, start to put a footprint down in, even though I don't know what that is going to actually look like in the end. We talked about how FTX is kind of leaning into being a financial superstructure. but is it also trying to get into culture too? I think so. And again, I don't want to be too specific about how because I just don't know. Like, it's very much a, you know, we are, we're making this up as we go.

Starting point is 01:10:24 The whole world is. But I think that it is like there's going to be something there. I think NFTs are probably the most obvious play. I think that we want FTCS be a part of that culture. And I think we want the crypto industry to be a part of that culture as well. And I think that like, you know, to the extent that we're not. we can start to build those bridges now. I think that can do a lot of good because it gives us more time to prepare.

Starting point is 01:10:49 It gives the industry more time to prepare. It's just starting great products, having great ideation before having to go on the center stage. And it's always shitty when you sort of have to like, you know, wing it for, you know, when the whole world is watching. Sam, I'm curious about NFTs. I know you guys launched an NFT platform not too long ago. Do you own any NFTs yourself? Are you personally excited about it? I don't generally personally invest myself.

Starting point is 01:11:15 I think it's all all through like, you know, companies. And the other thing that I will say is I am completely non-visual as a person. I don't know. I was born without that gene or something. And so, you know, from my perspective, like, I don't personally think that I am the target audience for many of these NFTs. That doesn't mean they're not cool. It just means, like, they aren't built for me. Or maybe I'm not built for them.

Starting point is 01:11:37 You know, I think I really like sort of NFTs that have some interaction with the outside world. Like whether you're talking about, you know, tickets, whether you're talking about songs, whether you're talking about, you know, achievements or something like that, you know, something where I feel like it's meaningful that I have this NFT or that the NFT gives me some meaning, or represents some meaning or some object or something. Those are the types that I'm personally, I think, like more excited for. But I also acknowledge that I'm wrong on that point. The world has, you know, and markets have definitively decided I'm wrong, and I'm comfortable

Starting point is 01:12:09 with that. Can we talk a little bit more about something we maybe alluded to at the beginning? It's not only crypto becoming mainstream, but like crypto people are sort of becoming part of mainstream as well. And the story of how quickly you've accrued a significant amount of wealth is like a story that's reverberating outside of crypto circles as well, because you've become one of the wealthiest under 30 individuals ever. And I guess I can't say that now that you've.

Starting point is 01:12:34 are 30 SBF. Happy birthday again. But you've also pledged to donate a significant amount of this wealth to charity. But you're already one of the wealthiest people in history, in that age reign, 30 and under. Where did all of this wealth come from? So, I mean, we're in crypto, and like we understand how quickly these sorts of things can happen. Was this from some of the 2017 type trading that you did? Is it mainly FTX? Tell us about the stuff. story of going from like relatively, I don't know what your pre-crypto life was, but more modest amount to something that's now in the tens of billions. Yeah, I mean, the biggest piece of this was, is FTCS. You know, I think that like it's a lot of this is tied up in how well FGX does

Starting point is 01:13:21 as a company, which obviously is also tied up to some extent how the industry does. I think there are a lot of pieces that one of which is like things are scaling in a way that the world hasn't seen things scale before. And I think that you're seeing sort of things grew to an extent that just wasn't, is much more rapid than what people are used to. And the whole world is speeding up. I think social media is a big piece of this. The rate at which the world can decide on something can move into something new is a lot faster. You know, obviously it's been cool to see and, you know, really grateful for everyone and everything that helped me get there. You know, I think it's been sort of shocking from the outside to see how quickly a lot of this has happened and to see it just sort of like everything snowball and dovetail.

Starting point is 01:14:09 I think from the inside, it's been a little bit less shocking. I think from the inside, frankly, it feels a little bit more, well, you know, you straightforwardly sort of like follow through on what seems like a promising direction and ultimately gets you to where you're going. Like really does feel from the inside perspective more like what's been going on. on. And it feels less magical and more sort of like, yeah, that's what we're hoping was going to happen. You know, glad that it worked out and glad that we're able to execute on it. Sam, I want to take a peek into the person of SBF. There's a general theme, not amongst everyone, but generally a theme of sometimes people come into crypto and they have a background of like World of Warcraft or Starcraft or like, you know, real-time role-playing games.

Starting point is 01:14:55 But then there's also the niche of people that came into crypto because they played poker. There's a lot of poker players in crypto. Do you have any pre-crypto hobbies that just alluded itself to crypto very, very well? You know, I've played games. I mean, I've always liked video games. I've always played them a decent amount. And I certainly think that there's some tie in there. You know, I was a traitor, obviously, you know, before this and really enjoyed that.

Starting point is 01:15:18 I think that was a really good fit for me as a person as well. And so, you know, that was great too. And then I think the last thing is just on the donation side that, you know, I've always been looking for. or how I can have the most positive impact on the world. And I think a lot of that is, you know, flowing through where I can be giving my money to. Can you tell us a bit more, Sam, about your giving pledge and what you're planning to give to? Yeah, totally. So, you know, in the end, I want to give way basically everything that I make.

Starting point is 01:15:47 And, you know, that sort of comes from a number of angles potentially. You know, we're probably going to be giving somewhere between $100 million and billion this year through the FTCS Foundation. and, you know, part of that is animal welfare, part of that is global poverty. A big piece that is looking at what might really change the long-term vision of the future. I think that, like, there are trillions of people who might live, which is a lot of people. It's a lot compared to how many people are alive now. And so a lot of this is thinking about, like, well, what could we do today that might actually have long-term impact? That might change the lives of the world and sort of the direction of the rest of the world.

Starting point is 01:16:22 And a lot of that looks like, what can we do that has sort of reliable impact? that you can trace out to a long way from here. And I don't think there's like a single obvious, easy answer to that. I think it's complicated. But I think that there are things that we can do. I don't think it's hopeless. And I think that like politics is one thing that that probably has like persistent impact. I think that pandemics. I mean, we got lucky that COVID wasn't more deadly than it is. We might not get that lucky next time. We were not prepared for this one. We're not going to be prepared for the next one unless we change something. And, you know, I think they might get nastier over time. And so I think that that's sort of another area where we should really be focusing on

Starting point is 01:17:02 getting prepared. Sam, as we start to wrap this up, and it's been a pleasure to have you on, I got to ask about, since you're a trader, of course, and you still live in the world of crypto, about the 2022 crypto market so far, because it's already felt like a year has gone by and we're only in like early March. What is your outlook for crypto in 2022? Are the good times over? Is this a bear market? Is this 2018 again? There's talk of a global recession. What do you think? How is this going to shake out? You know, I don't know for sure. We'll see. But I think that it's been, it's been a weird time because on the one hand, we have sort of like potential changes in monetary policy, right? Where we have like, you know, interest rates potentially starting to come up.

Starting point is 01:17:44 And I think that that probably is bad for crypto prices in the same way that the last few years were good for crypto prices. On the other hand, we also have global conflict, right? I mean, the sort of like story of the year so far as in Russia and Ukraine. And while that might be bad for equity markets, I think there's a sense in which can be good for crypto markets because crypto can play a really important role in running, you know, financial access to Ukraine. And I think we've already seen that playing out to some extent so far. And so I think that there may be a bit of recalibration there about what correlations people are actually expecting, especially when we see, for instance, commodities diverging from equities, which we've seen so far this year. And so

Starting point is 01:18:23 year and which is very different than what we saw the previous year. So I don't think the world knows for sure how this all plays out. And I've sort of been taking what we've seen so far with a healthy dose of skepticism. How do you think this plays out? Because you're right. I haven't been in crypto at a time where I've seen things do this, right? Your commodities diverging from equities, never seen a decently sized global conflict. It's all a very weird time and a unique time. How do you think it plays out? I don't know, but I think there's a compelling argument that that like crypto should be outperforming. here and I sort of would expect it to, I think it still might. And I think it might piece in a little bit of

Starting point is 01:19:00 the move towards a more digital world. If it is a bear market or the state that we're in right now, what should traders do? Anyone who's kind of seeking alpha in this type of a market, how should they react? I mean, look, I don't want to give financial advice. But I think what I'd say is, you know, whenever we're more of a bare market, the single most consistent thing is that like what falls off the hardest are assets where it was never clear why their price they were in how they were in the first place. That sort of like meme stocks, the super growth assets that aren't backed by like really solid fundamentals. I think those things are things that, you know, tend to not perform so well in bare markets. I would expect to see some of that here. I think, you know, outside of

Starting point is 01:19:40 that, like, that doesn't mean, I don't want to necessarily say you should sell them, right, because like things can recover. Like, this isn't necessarily permanent either. But I think that's definitely a pattern that I would expect to see play out. and that I think we already have seen play out to some extent. You know, I think beyond that, like, you know, basically looking at, like, what are sort of, you know, thinking longer term with the positions that you're taking, right? Like, not thinking like anything I do, it better be good by like a billion percent by next week or it's a failure. Like, that's not the market we're in right now, you know?

Starting point is 01:20:10 And I think it's kind of sort of a dumb market to be in, frankly. And there are things to be said for not being in that market. And so I think, yeah, just taking a longer term view is going to be. really important for navigating it. Sam, as we maybe close with this question, you already answered what you think FTX will look like in five years. I'm curious, what's your perspective? Where will crypto be five years from now if you zoom all the way out? So I don't know for sure, but here's the optimistic take. The optimistic take is that it will be half of finance will be crypto based. And both sort of like native crypto assets, but also other assets will be tokenized.

Starting point is 01:20:46 that social media will be starting to break in there, that digital universes, metaverses, whatever you want to call them, will be tied together by blockchain rails with NFTs, that everyone will have a crypto-enabled wallet and that it'll be a global phenomenon. And I think that's like, that's sort of, I think, the optimistic take,

Starting point is 01:21:05 and I think there's a real chance of that. But I do think that it's dependent on us as an industry playing our cards right, and that, you know, if we fuck it up, it may not happen. That's great to end on. hopefully this will all be okay. I'm definitely bullish going into this year. But on a longer term time horizon and bankless listeners, we hope you are as well.

Starting point is 01:21:24 SBF, thank you so much for letting us dive into your brain and understand what the future is. We really appreciate it. Of course. Bankless listeners, some action items for you. Number one is we're going to include a link to that Larry David commercial we were mentioning. If you haven't seen it by now, go check it out. It's a ton of fun. Also, secondly, like, subscribe, and review this podcast.

Starting point is 01:21:45 That's how we get crypto out to the world, the top of the charts. Make sure you do that wherever you listen to the bankless podcast. Finally, risk and disclaimers, none of this has been financial advice. It never is on bankless. Bitcoin, Eith, defy, all of these things are risky. You could definitely lose what you put in. But we are headed west. This is the frontier.

Starting point is 01:22:05 It's not for everyone. We're glad you're with us on the bankless journey. Thanks a lot.

Bankless - 109 - SBF and the Future of FTX

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