Bankless - 129 - Why the Crypto Critics Are Wrong | Matthew Green

Episode Date: July 25, 2022

Matthew Green is an Associate Professor of Computer Science at John Hopkins University, where he teaches courses, cryptography, distributed computing systems, blockchains, and cryptocurrency. He also helped create Zerocash, one of the first privacy cryptocurrency experiments, and ultimately influenced the Zcash protocol. He recently wrote an article titled, “In Defense of Crypto(Currency)”, in response to an open letter to Congress, signed by a large group of technologists, denouncing the entire premise of cryptocurrency and urging congress to strongly regulate the space. In this episode, Matthew talks about his article, how crypto can do better as an industry, and why to be optimistic about the future of crypto. ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/  🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/  ------ Topics Covered: 0:00 Intro 6:34 Letter to Congress 12:27 Matthew’s Background 15:45 Why Write This Letter 19:03 Crypto Haters 24:14 What to do About Scams 28:45 Regulation 32:28 Addressing Concrete Objections 35:36 PoW Climate Issue 38:06 Blockchains Transfer Reversal 45:50 Crypto Doesn’t Scale Claim 50:42 Privacy Claims 1:02:43 Annoying Hype 1:05:50 Doing Better as an Industry 1:10:25 Matthew’s Favorite Project 1:14:58 Why Be Optimistic About Crypto 1:17:13 Closing & Disclaimers ------ Resources: Matthew Green https://twitter.com/matthew_d_green  Letter to Congress https://concerned.tech/  In Defense of Crypto(Currency) https://blog.cryptographyengineering.com/2022/06/09/in-defense-of-cryptocurrency/  ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research.  

Welcome to bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and 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. Guys, we have a fantastic episode on why the crypto critics are wrong. This is in response to a letter that was recently written to Congress titled, a letter in support of responsible fintech policy, and this was a blistering letter written by over 15, tech experts critiquing crypto. We brought on Matt Green to talk about this letter and his response to that. Matthew Green is a cryptographer. He's an associate professor at Hopkins. So we talk about that letter,

the response. We talk about four common objections from those outside crypto and how to respond to those objections. And then what crypto natives should actually do when criticisms like these arise, how to react to them. This is overall a really great conversation with a cryptographer, someone who deep on the crypto side, but also sees kind of the regular everyday side of things and interacts with regulators all of the time. We also discussed privacy a little bit, which is one of my favorite topics. David, what were your thoughts going into this episode? I think Matthew is so perfectly positioned to span these two communities, where he is teaching not just cryptography and distributed systems, but straight up like blockchain and cryptocurrency courses at John

Hopkins. So like the guy can speak our language. He can speak crypto-native. He can speak crypto-native, but he's also in academia. He's like shoulder to shoulder with like all the other academics out there, which are shoulder to shoulder with, you know, regulators and other technologists. And so he's really spanning these two industries very, very well. And so he's not so far down the crypto-native hole where we would call him a D-Gen. I would not call him a D-Gen at all. He's very, you know, he's very academic. And he's also so far on like the academic side where like the people that wrote this scathing review of cryptocurrency, he knows these people. He has relationships with these people.

And so he has a unique perspective to bring to this table as to why 1,500 leaders, technology leaders signed on to this like scathing anti-crypto letter to Congress saying to regulate the hell out of our industry? And so he allows us to get into the shoes of those people while also getting into the shoes of somebody who understands cryptography works on the Zcash protocol and knows like many, many people in our industry as well. And so it was just like a nice breath of fresh air than just like. like, you're, you know, your typical crypto-native person who's, like, as far down the rabbit

hole ran as you and I, to like, get us to step back and be like, all right, here's what your industry looks like from the outside, but not just like your basic, just, you know, your basic normie take of how, like, everyone thinks that the crypto's going to scam them out of their private keys, for example. Yeah, I think he's a good person to respond to the critics in this way, because if someone like you or I responded, they'd be like, oh, my God, well, these guys have a podcast. These guys. They're crypto, like, evangelists.

You can't listen to anything that David or Ryan said. This guy's got a crypto punk in his background. Yeah, exactly. Loses all credibility. But Matthew Green is very credible, and he brings a steel man approach to their arguments as well. So that's the conversation we get into today. A really awesome conversation. Before we get to the chat with Matthew Green, we want to tell you about these awesome tools to help you go bankless from our sponsors.

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So if you're bullish e-staking, you can boost your yield by adding your node to the decentralized rocket pool network, which currently has over 1,000 independent node operators. It's yield farming, but with Ethereum notes. You can get started at rocket pool.net, and you can also join the rocket pool community in their Discord. You can find me hanging out there sometimes in the chat, so I'll see you there. Bankless Nation, we are super excited to introduce you to our next guest. First time on bankless, Matthew Green. He's an associate professor of computer science at John Hopkins, where he's taught courses

on cryptography, distributed computing systems, even blockchains and cryptocurrency. This is one of the people who helped create zero cash, which was very influential in the Zcash protocol. He's been involved in that project at times as well. So he definitely cares a lot about privacy preserving systems. digital money, all of these things. The reason we're having him on is because he wrote a brilliant response to an article that was put in front of Congress called In Defense of Cryptocurrency. That is the article he wrote. The letter, which we're going to kind of start with, was a letter

in support of responsible FinTech policy. This is a letter from many in the fintech space, the technology space, even the cryptography space deriding crypto. And so Matthew put together a response to that. We're going to get all into that and why he feels the need to defend crypto. Matthew Green, how are you doing today? I'm great. Thanks for having me on. It's really great to have you on, Matt. We've been wanting to chat with you at some point in time. You know, I think what I want to do is start by reading a few sections from this letter, this letter in support of responsible fintech policy just to ground everyone. Does that sound like an okay place to start? It's a great letter to read from it by all meets.

All right. So this was a letter that was put forward to Congress, I believe, by some technical experts, cryptographers, others in the community. Matt can give us some more insight into who these individuals are. American citizens, though, with concerns. And they put this in front of Chuck Schumer, Mitch McConnell, Nancy Pelosi, basically all the figures in Congress. And it starts in this way. Dear U.S. Congressional Leadership Committee chairs and ranking members, we are 15. 100 computer scientists, software engineers, and technologists who have spent decades working in these fields producing innovative and effective products for a variety of applications in fields of database technology, open source software, cryptography, and financial technology applications.

Today, we write to you, urging you to take a critical, skeptical approach toward industry claims that crypto assets, sometimes called cryptocurrencies, cryptocurrencies, cryptocurrencies, crypto tokens, or Web3, are an innovative technology that is unreservedly good. We urge you to resist pressure from digital asset industry financiers, lobbyists, and boosters to create a regulatory safe haven for these risky flawed and unproven digital financial instruments and to instead take an approach that protects the public interest and ensures technologies deployed in genuine service to the needs of ordinary citizens. It goes on. We strongly disagree with the narrative, peddled by those with a financial stake in the crypto asset

industry that these technologies represent a positive financial innovation and are in any way suited to solving the financial problems facing ordinary Americans. Not all innovation is unqualifiedly good. Not everything that we can build should be built. The history of technology is full of dead ends, false starts, and wrong turns. Append only digital letters. Ledgers are not a new innovation, they've been known and used since the 1980s, for rather limited functions. As software engineers and technologists with deep experience in our fields, we dispute the claims made in recent years about the novelty and potential of blockchain technology. I'm not going to read the entire letter.

Just suffice it to say, it goes on to this effect. A few maybe paragraphs, I'll jump in on. We implore you to take a truly responsible approach to technology innovation and ensure that individuals in the U.S. and elsewhere are not left vulnerable to predatory. finance fraud and a systemic economic risk in the name of technological potential, which does not exist. Given these vast externalities, together with the at best still ambiguous and at worst non-existent uses of blockchain, we recommend that the committee look beyond the hype and bluster the crypto industry and to understand not only its inherent flaws and extraordinary defects, but

also the litany of technological fallacies it is built on. It implores. It ends by imploring Congress to please act to protect investors and the global financial marketplace. Matt, can you give us some context for this letter? So who is writing this letter? And what do you think their intents are? So this letter, it's written by a bunch of people I really respect. That's what makes it so hard for me, right? So Bruce Schneier is a pretty famous, well-regarded cryptographer.

You know, Nick Weaver is a colleague of mine. I don't agree with a lot of his position. Stephen Deal, clearly, he's a pretty vocal person out on the Internet. I don't know him as well, has his feelings about blockchains and cryptocurrency in general. But, you know, there are a lot of people who feel this way. So let me try to tell you what makes me so frustrated about these folks. You know, they're saying two things at once. And I may be getting ahead of what you wanted to ask me.

But, you know, there are technical experts who are saying things like, you know, should blockchains be regulated, should cryptocurrency be regulated? That's one question. And there's another question which is, does this technology have applications? And when a bunch of people I respect technically say, no, it does not, that's where I get off. And that's what's so troubling about this letter to me. But yeah, it's a group of people who really have the credentials to make people listen to them. And that's really the problem with this letter.

So, Matt, I'm curious if you could give us some context for yourself, too. So I mentioned that you have a history in the crypto industry. But you're not actually part of the crypto industry. I mean, you're still at Hopkins. And you've been very critical of crypto at various points in time. Give us some context for some of your more critical positions you've taken on crypto and just your general posture because, you know, people that are listening in this podcast are probably like, well, you know, David and Ryan, surprise, surprise, they're upset about a crypto-critical letter. But these guys are industry advocates. They're very excited about the technology. They're clearly very biased. Give us some context on who you are and your relationship to

this industry. So I'm a computer science professor. I work in cryptography. I work in zero knowledge and privacy preserving protocols. And so that's how I kind of entered. And just before I, I tell you all the things that make me mad about crypto. Let me tell you the things I like about crypto. So I've worked in this area. I've worked in cryptography since the early 2000s. And I've thought a lot about payments because payments, I think, are one of the most important things that, you know, human beings do. They transfer value to one another. And we have these amazing cryptographic protocols to do this. We've had them since the 1980s to allow people to pay merchants privately, to basically get us the privacy features of cash back, you know, undo some of the damage that kind of the surveillance of credit cards, the way that we've turned our entire financial system into an Opticon, we could undo that. And I've watched consistently, I watched over about half my career as all of those attempts to build better payment systems failed. And they failed for the simple reason that if you want to deploy privacy in a payment system, you want to do anything controversial, you have to ask permission to a bank. And the bank say no.

And the banks control the payment industry and the regulators control the banks or vice versa. It's not totally clear. And so when Bitcoin came along, what was exciting to me about that technology is that all of a sudden it broke that prohibition. You now had the ability to start trying new experiments in a way that you could not do before 2008. And that's what excites me about it. Now, that does not mean I'm on board with every single thing that's happening in cryptocurrency. To be honest, I'm not even that on board with Bitcoin. I think that, you know, the price of volatility and Bitcoin is all over the map. I'm not a huge fan of the Bitcoin. I think Bitcoin itself, the community is kind of an anti-technology attitude, which I'm not in favor of. I mean,

they're allowed to do what they want. It's totally fine by me. But there are a lot of things that I'm not crazy about. And there's a lot of just plain centralized behavior where people are building essentially centralized scams and calling them cryptocurrencies, calling them decentralized, and just kind of stealing money from folks. And I could give you 100 examples. I think in the blog post I wrote I did give about a dozen. And come on, we all saw, you know, UST, the Terra, Stablecoin, and Luna, what happened recently. It's really easy to steal money from people in an under unregulated environment. That's not good.

We don't want that. At the same time, that doesn't mean we want to live in the world before 2008, where a bank was the person you had to ask permission to do any kind of experimentation. There's a middle ground. I'm all in favor of the middle ground. but this letter that you just read from, it's not the middle ground. It's something else. One thing I want to glean from your perspective, of course, there are so many parts about the crypto industry that are completely indefensible. And this letter definitely taps into them, talks about how Congress needs to regulate this industry based on how there are so many

indefensible parts of the crypto industry. And maybe that's something that people like Ryan and I need to put more emphasis on is that while we see the best in crypto, the best in crypto is really drowned out by the mountain of just the worst of crypto. And so sometimes maybe we don't talk about that, perhaps sufficiently to answer to many of the critiques in this letter. However, at the same time, so many of these statements in this letter are just so broad sweeping and lack the imagination that, like Ryan and I have. And as somebody who is in these circles, you talked about how these are your peers. And when I read this letter, it felt kind of emotional. Like this was coming from a place of these people are in their feels when they penned this letter. I'm wondering if you could

help us get in the perspective of the circles of people that signed on, that wrote this letter and signed off on this letter. Where are they coming from? Why do they take time out of their day to put this letter together and sign off on it? Yeah, good question. It's a really good question. Why is that? It's easy to get polarized, right? You get into a position where you're watching everybody else go crazy over something and you don't see the benefit and you don't see why this is valuable. And with crypto, it is easy to feel that way, right? Like we're not Facebook, right? I'm not saying Facebook is good, but we're not seeing the adoption that, say, a Facebook got. I'm not sure that's a good thing or a bad thing. It's just, you know, we are still seeking our first killer

applications in crypto. And that's fine, right? Like the internet didn't find its first killer applications until 30 years after the ARPANET was invented. It takes time to find these things. But look, you're a technologist. You see a lot of things happening, a lot of money being lost. You see carbon dioxide being pumped into the atmosphere. You see scams. You see all sorts of things happening. and you can start to be frustrated. And you see so much enthusiasm, you don't understand. You can start to react negatively. And I guess maybe what I'm trying to say here is that there is a lot of enthusiasm, right?

I know your audience is enthusiastic about these technologies and you're enthusiastic about these technologies. But enthusiasm begets negativity. If people are not part of that enthusiasm, they can become emotionally reactive in the opposite way, especially when they don't see the benefits. And I see a lot of emotional reaction. activity. And let me focus on one person in particular. So Bruce Schneier is a person I talk with a lot. We see eye to eye and many, many different things. He's, you know, a very smart person, technical engineer. And, you know, he quite rightly says, you know, I don't see the application here. People aren't using this. People are using traditional payment systems. Why do we need crypto? And I have to say to him, look, these things are coming. Trust me, they're coming and it's going to make a big difference. But I can't prove that, right? I have a belief. I have this kind of, you know, internal belief based on my experience. This is going to happen. He has a different one. Nobody can win that argument. There are just people who have different beliefs. And so, in so much as you have one belief, other people are going to have a different one.

Inside the crypto industry, we tend to stratify into tribes. Like, people tend to fall into camps. There's like the Bitcoin or camp. There's the Ethereum camp. Like, every single chain kind of has its own camp. Then there are tokens that have their own camps. It's all very tribal on the inside of the crypto industry. And I'm wondering, there also seems to be this tribe of crypto outsiders that definitely don't like cryptocurrency, and they are kind of like the crypto haters. Would you agree with this illustration of there's like this external tribe that's their common denominator is that they just hate on crypto? How much would you agree with that? We are talking about that group right now. Have you ever spent time on Twitter where you actually express a no-coiner kind of sentiment and you say

crypto sucks? Yes. And have you ever watched what happens to your replies? I mean, look, it doesn't take too much of that to become someone who hates crypto. And even if you started out with just a mild opinion, you're going to get polarized because that's the way it is. People feel very strongly. People feel too strongly, right? Look, these technology is important. They're going to go somewhere. That doesn't mean, you know, any specific community is going to win. But everyone wants their community to win. And, you know, like it drives some negativity. There's nothing wrong with that. I understand how people get feelings. Feelings are fine. Where I get off is I'm a computer science professor. I'm a researcher. And when people say things that are false, scientifically unsupportable,

that causes me a lot of heartburn. That, I think, is where this letter went. I could have agreed or ignored a different letter, but this letter went to a place that didn't have the evidence behind it, and that bothers me. I'm kind of like a certain group will believe in crypto, invest in crypto, whether capital time, whatever the investment is. Another group will not decide not to.

Why can't that other group just ignore it then? We'll see what happens. I mean, maybe Bruce and company, maybe they're right. Maybe we're right. But like time will ultimately be the arbitrator of whether the use cases are coming or not. So what I guess I don't understand, Matt, is like kind of the need to, I mean, so it feels like a little bit of gatekeeping. It's just like going to Congress, sending them a letter, and saying that the technology is worthless and cannot be used for any practical purpose. That it's a solution in search of a problem.

The certainty of that is when I put on even my investor cap is like, I'm not certain of anything. I'm not certain to that level of anything in life that would cause me to like be so certain that crypto is a bad idea that I need to push this in front. Where's this confidence coming from or where's this like vitriol coming from? And can you explain that aspect of it? Because I understand the tribalism piece of it, but there's always to me it's just like, oh, if you don't like it, don't ignore it. You don't like NFTs.

Don't buy a JPEG. Do you think there's actually maybe some concern here that putting it in its best, best light that the authors of this letter have for retail investors who are getting kind of sucked into the scams. Because if so, that is one small area where I actually, I share their concern and there could be some things that we do. I agree with everything you said except for the small part, right? It's big. It's a lot of money. A lot of people who are, you know, frankly, kind of idiots for getting into these scams in the first place. But, you know, like people are idiots. That's the fact of life, right? A lot of people are losing a lot of money. That's why, you know, the market

cap of the entire industry in like 2016 was what fraction of the market cap, you know, at the peak of this all-time high, right? It was, this has become a huge industry. Huge amounts of stuff are happening. You go to the movie theaters and you're going to see Matt Damon. I think that, by the way, the Matt Damon thing was a really big mistake. And I wish that, I wish that commercial had never been made. But, you know, like, it's hard for me to go and see Matt Damon chilling, you know, FDX or whatever

it is, Crypto.com. and tell people that crypto is no big deal because we hit the point where, yeah, it is a big deal, and we also hit the point where a lot of people lost a lot of money. If it had just stayed amongst us, you know, people who know a lot about crypto and are willing to, you know, make bets, it would have been fine. So I have to put on my devil's advocate cap and say they are right that the scams are getting out of control and we should all be worried about that because it is going to rebound even on a legitimate project.

And the second thing I would say, and I hate to say this, you know, because I know it will offend people, but like proof of work and the carbon dioxide output is a problem, right? Everyone recognizes that some people say, oh, Bitcoin's actually using renewable energy. I'm very skeptical of that claim. But regardless, like we should not have this problem. If we could eliminate that problem, I would say 50% of the grounds people have to be angry at cryptocurrency in general would disappear. But we haven't eliminated it, right? So people are looking at this.

It's, you know, some shocking amount. It's like the entire country of Finland's worth of carbon being emitted to secure one cryptocurrency network, it's not good. We should fix it. That's actually an aspect that basically everyone other than the Bitcoin community inside of the world of crypto would definitely align with. However, this is part goes back to like the whole tribal side of things. Some tribes get really, really, really loud and really, really defensive and they can represent a larger force than what they actually have behind the scenes. You talked about like all the scams in crypto. And I want to get your take on this because there's certainly a bunch of scams in crypto.

And they come in all sorts of flavors. They come in like fake. wallets that, like, you spin up a wallet and then you send your money there and it drains all your money. That's a scam that I've ever fallen victim to in the world of crypto. There are like rug poles for tokens, like, oh, we're going to make a token. It's going to go up in price. And then the founders just leave and then it goes to zero. Like, I could go on. There's a bunch of different flavors of scams. But my explanation for why crypto is so scammy is that it's kind of like a byproduct of something that has real fundamental value at the very foundation, right? There wouldn't be scams if there wasn't a there there. I'm wondering how using that kind of

frame of reference, like how we as an industry should think about these scams, what we should do about this knowledge that like, well, if there's scams are here, then we're onto something and we know there's something significant here, but like that's not going to like land well on the ears of crypto critics. How would you navigate this thing? Okay. So the first thing I would say is, look, we are, you know, you can talk about all these tribes, but right, 99% of the world is outside of all these tribes. They are sitting on the sidelines. And so the battle right now is not about who wins in this 1% that's fighting, which includes the, you know, anti-blockchain folks, as well as all the pro-crypto folks. It's the other 99%. And I have to tell you, like, giving

the anti-crypto folks the weapons to make inroads on that 99% is extremely stupid. Like all these scams, we should care about them as much as the regulators and all the politicians care about them because the battle for that 99% is what is actually going to define the future value of cryptocurrency, not whatever we've done in the past. So, okay, great. With all that said, you know, the biggest thing is, look, what are you going to do about the scams? The scams, they do indicate that there's value here, right? Like, watching, okay, there are two things about cryptocurrency that amaze me. The first is that it works, right? Like, literally that we've solved this incredibly hard problem of building networks that you can trust. Some of the networks aren't

even that good, right? Like, some of the networks don't even have that many validators and they're not like heavily secured and yet they still don't get broken it's really really impressive technologically that's a huge thing that people are not valuing enough the second is that you know human beings have this desperate need and want to transfer value that is a thing transfer value is almost a wrong word right like there is this natural human desire like you know what is that maslow's hierarchy of needs we want to give people five bucks for a cup of coffee it is a thing we need and you know we also want to invest we want to move money around we want to make money money money is just this powerful thing and has this deep hold in our psyche. And for years, we've had these machines in front

of us that can do it, that can transfer money, that can make new kinds of money, they can do all these things. And we've told people, no, you can't do that. I mean, there were companies that tried, like Liberty Reserve and E-Gold. They had their doors kicked down by federal agents. And we've tried to regulate all of that human need out of existence. And the problem is that our regulators were so captured by the idea of stopping it entirely that when people found a workaround to the regulations. They figured out how to build decentralized networks that were hard to regulate. All of a sudden, our regulators just threw up their hands in despair, and they walked away, and they can't distinguish between somebody who's starting some new decentralized,

reasonable project versus someone who's building a complete centralized scam. And I don't want to use the word scam too much, but there have been a lot of what we're seeing right now is these centralized lending platforms failing. And I'm not here. I've never used Celsius. I don't know if it was good or bad or a scam, but I sure think it should not have collapsed. And it was fundamentally just a traditional centralized lending platform. They had some crypto hooks. And regulators were nowhere to be seen.

And is that cryptocurrency's fault? Or is that regulators failing to kind of do their jobs? I feel like regulators have no idea what they're doing. And they do need guidance to figure out how to regulate intelligently. So I agree with all those parts of the letter. The problem is they're not getting good guidance. They're getting the wrong guidance. They're being told shut it all down.

There's no shutting it down. It's too late to shut it all down. and it would be stupid if you tried. Matt, this is what I struggle with so much, is like at some level is like the letter that these individuals wrote should have been coming from people in the crypto industry, if that makes sense. It's like there is an element of what you're saying where,

oh, we should be the ones to write to Congress and be like, hey, you know all of these things that don't represent the fundamental freedoms of this industry and don't represent what we're trying to do here, here they are. And by the way, we don't support them. they're not reflective of crypto, and here are some ideas on what you guys could do about them. Come, please help. I would love to maybe write a letter like this.

But the problem here, Matthew, is like, I feel like what will happen is because there's such a delta between some government and Congress, even, and the crypto industry, and that there's just this massive knowledge gap, but there's also like an intention gap, okay? I don't know if we go and invite Gary Gensler in, if he's going to be like, yeah, and by the way, ETH is a security, so you can't have none of that. Oh, and this uniswop thing, we're shutting that down because you can't trade outside of an ATS. Can't, don't touch that. Like, don't touch that. Oh, and this D-Fi stuff, well, it's the same as Celsius in BlockFi. And the transparency that you say is all unchained. We don't buy any of that, so you can't do any of it. So, like, we go and we invite

them in, and it feels like we're... Every miner is a money transmitter. Yes, it feels like we're inviting, like, the fox in the henhouse. And so I don't even know what to do about this other than just like what we are doing, which is educate people, advocate, built from the bottom up, help that 99% who don't understand crypto become 98%, 97%, whittle that down and hope the industry builds some use cases that actually convince everyone in government the way the internet convince people. So that's my hope. What do you say about this? So my dark theory of this is, you know, which is a little paranoid and will probably make people mad in the regulatory world is that really what we're seeing is what happens when you have a captured

regulatory industry, right? What this is all about is who are the regulators serving? And I think the regulators for the last end years have been very happy serving the banking and the sort of traditional finance and brokerage industries. You know, they learned how to do that. They learned how to do that so well that when people figured out how to route around them, they had no idea how to kind of do their jobs in a world where they couldn't just sort of say, oh, you know, we're going to put that all in the same number of people. And you're right, though. Like, Going to the regulators, there is some kind of learning process they have to do where they realize through painful experimentation that you can't just ban things, that you can't just will,

you know, new technologies away, that you have to adapt to new technologies or people will find ways to route around you. And that learning process hasn't happened. We're in the process. It's probably a five to 10 year, 15 year process where regulators try really stupid things. They fail. And then maybe, for lucky, they learn maybe there's another way to do this. right now they're sort of in this place.

And I think this letter reflected where they're thinking, people are thinking, you know what, we can go to Congress and say blockchains have no purpose, ban them. And it'll work. But that's over, right? We're not going back to 2007. That world is gone. So you either learn how to do this intelligently in a world where this stuff exists now, or you're going to end up with a million Celsius and a million tariffs.

And there's a new thing that's got to happen. And unfortunately, regulators, as much as I love some particular regulators, they're not the kind of people who can drive this innovation and I guess it has to come from you. It's going to take us all to be sure and it's going to be a messy process, I believe. And we're not all going to get it right. But I do have hope. And I guess maybe going back to kind of the education side of it. So another thing that you express, I think, very well in your article is just addressing some common objections.

And I want to maybe spend some time doing that right now. And this is as much as go send this episode to a friend, bankless listeners, if you're hearing this and somebody has some concrete objections, maybe some objections that we're about to go through. They can listen to this section and hear what the crypto industry, what people like Matthew would say about some of these objections. But also, this can kind of arm you to have a response when you're asked questions from your family members

with the next meeting of friends and the subject of crypto comes up. Because right now, of course, we're in a bare market. And so no matter what happens in crypto, everyone's going to have a negative view on it and probably a biased negative view if they're outside of the space. But let's go through some of these objections. I want to start with the first one that we hear so often. There's some merit in this objection, but not quite as stated.

And that is cryptocurrency is terrible for the environment. Proof of work is going to kill us all, and therefore all crypto is bad for the environment, and this is something that we should ethically stop. Can you react to that objection? What would you say about that when you're asked? Okay, so first of all, I really do think this. You know, climate change is real. We are heading towards a bad place, a really bad place. And if you disagree with that, I don't care. That's just a fact. And at the end of the day, the idea that we have to burn as much money, as much carbon as, you know, an entire country to achieve about seven transactions per second or whatever the Bitcoin transaction rate is globally. That's just not workable. It's not going to work. And we have technologies that can do better than this, right? We have proof of state technologies, which are now, operating and coming online. We have other technologies that are better. We even have things like, you know, Chia has this proof of storage or proof of time and space. I think they call it.

You know, it still burns through hard drives. I'm not crazy about it. But, you know, some smart people are thinking about this. And, you know, like, this is something that if you go out to the world and you tell them, like, hey, this isn't a problem, you've already lost, right? You have to start by saying this is a problem. And then once you admit it's a problem, you have to tell people what your plan is. Because if your plan is, don't work. all these people out in the world are going to stop burning coal to mine Bitcoins, you've got a problem. So I can't really tell you what to say. I just feel like this is where the source of a huge amount of negativity comes from.

And when you've got these people out there who are your adversaries and they're trying to convince the world that your technology sucks, that you are a problem in the universe, don't give them weapons to do it. Like, you know, you don't have to go solve these problems yourself. I'm not asking you to go out and stop the carbon emissions. But don't defend it because you're just putting yourself in a terrible place. I'm wondering to what degree. This is certainly the weak point of the industry, like the reliance on proof of work, which is something that I just do not ever see Bitcoin as a culture or community ever moving away from. Bitcoin will probably be proof of work until it stops working. But also, Bitcoin is increasingly a smaller and smaller and smaller part of this whole industry as a whole. Yet it becomes this whole like anti-crypto because it's going to burn down the planet. Critique of crypto seems to be getting larger and larger and larger. And I'm wondering if it's fair to call this just like an unfair smear of the whole entire industry using this much more smaller part of it. Like it's a weak point because people feel really strongly about the climate as they should. And they're using this to like defame the whole

rest of the industry. And it's a little bit of a malicious critique. While it is a valid critique, it's also kind of blown out of proportion. How would you feel about that? I see a lot of people who they hear the word crypto, even when we're talking about a proof of stake system and they say, oh, it's bad for the planet. And you know, you see these. These arguments happen, right? Where someone says, oh, crypto, bad for the planet. Someone says, oh, that's a proof of stake network. They're not burning any carbon or significant. And then the person's so attached to their position that they say, well, you know, how many, even so, like, it must be doing something really bad. And, you know, that is a thing that happens. People get very attached to that

position. Or where they switch to, it's all scams. And, you know, once people get into a position, like, you're human, right? We stay in our position. We will fight. Even if we have to change the actual details of our position, we're not switching it. Anyway, regarding proof of work, my feeling is right now that the only way out is through, that if we just let this technology develop, like we are so close to fixing this problem just through, you know, the deployment of better technologies that if we just let that play out, it will get better. And, you know, in the interim, mostly we just have to buy the time to do that. The thing that actually terrifies me is Congress or somebody says, hey, we're going to ban cryptocurrencies. And in a world where you ban cryptocurrencies,

you know what happens? Like proof of work may be the most robust solution in the world where governments are actually trying to shut down cryptocurrencies. We might inadvertently build a world where the only thing you can ever deploy is proof of work. And I'm actually very scared of that. Like let people advance, let projects launch and try new things. Because if you go after them, we're going to end up, it's going to be like prohibition. We're going to be stuck with the worst possible outcome. The Brave Browser is the User First browser for the Web3 Internet with over 60 million monthly active users.

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Financial technologies that serve the public must always have mechanisms for fraud mitigation and allow a human in the loop to reverse transactions. blockchains permits neither. I hear your exasperated sigh. What are your thoughts when you hear this sentence out of this letter? I mean, like this is just like apples and pairs, right? Like these are two different concepts. The blockchain is and should be immutable, right? We record transactions on a blockchain. It's hard to change those transactions. But that's got nothing to do with transaction reversibility. If you're a banker in a traditional bank, let's say you go back to the 1920s and he's writing down on a paper ledger with a pen that you did some transaction and your banker decides

the transaction was a mistake and wants to reverse it. They don't need to erase the pen. It has nothing to do with the pen and the paper. It has everything to do with the fact that you've got the capability to reverse transactions. And you could build that into blockchain-based systems too. In fact, and one of the things I point out in the blockpost is that some of the recent backed stable coins like USD and Paxos dollar and BUSD, these have. transaction freeze and burn capabilities built into them because they're regulated. Government said we need you to put those into the smart contracts that drive those systems. And yeah, the underlying Ethereum blockchain, it's irreversible, it's immutable.

But the smart contracts running on top of it, the drive USDC, they can do all sorts of things that the actual ETH currency can't do. And one of those is, you know, freeze transactions and reverse them. And the idea that like we have to have human beings in every single modern banking system is absurd. right? Today, if you send a wire transfer, there's no human being in the loop on every single one of those. If you send a Zell, I mean, Zells aren't even reversible, right? Zell, if I send you 50 bucks by Zell, there's a very limited chance I'm going to get someone to reverse that. And mostly that's because it's automated. So this entire, every aspect, I mean, it's like, it's wrong, but it's like fractally wrong. Like, it's so wrong that it's hard to explain how many different ways that statement is wrong. It's technically wrong. It's business-wise wrong. And it's, anyway, I'm very exasperated by it. that particular one, even though it seems like a small claim in the letter. It's just, it's the claim that kind of shows that people don't know what's happening. Do you think that this is just

really coming from a place of not understanding the technology where once we have blockchains and immutability, like people aren't used to immutability in this new level. Like, crypto as an industry changed the definition of what immutability means. We had never had this level of immutability before, all of a sudden, like, we have to, like, reconsider what it actually means to be immutable. And I'm wondering if you just think that what they're using here is they're just using a misunderstanding of this new word of immutable, which, like, the crypto industry has kind of redefined. So I think we've always had immutability. I mean, cash, the entire financial system that we live in was built on cash and other kinds of, you know, immutable assets. They weren't

ledgers, right? But if I give you 100 bucks or, you know, a chunk of gold, I can't undo that just because I want to unless you're willing to help me or I'm going to go rob you. So like the entire financial system we live with was built on immutable assets at some layer. But okay, that's a dumb, you know, technical point. But here's the real thing. Like I think a lot of people, I learned this myself recently. I've spent a lot of time working with Defi and smart contract protocols and kind of learning about the space and who's doing what. And I'm a computer scientist. I thought I was pretty well versed. I've been, I've taught classes on blockchain and cryptocurrency. But my knowledge kind of was a little out of date. I haven't really been following what's going on with the defy community and all the

different tech that people are using. And when I caught up with it, I was, I realized like, hey, you know, I'm living in the past. This is not how things work anymore. Things are moving so quickly in this community that you can lose track. So somebody who was very familiar with the basics of blockchains in 2015 would think, oh, Bitcoin, Ethereum, immutable. You can't reverse transactions. Therefore, I'll write this letter. And the result would be that. But this is not true anymore, right? Like we're way past that. We're technologically. That's like talking about the internet in 1990.

And, you know, it's 2010. Things are different now. And you have to be very, very closely. This is actually one of the problems with being anti-crypto. If you're anti-crypto, you're not using crypto. You can't criticize something you don't understand. And you have to understand it well to actually do a, you know, good job criticizing it. This is the problem with this letter.

Absolutely. Well said. It's, you know, retrospectfully with statements like this, it's hard to imagine they found 1,500 tech experts who were willing to sign this, actually, particularly that blockchain irreversibility piece was astounding to me as well. But how about this objection? This is an objection from all of the expensive gas fees and transaction fees that people in crypto have been paying, which is cryptocurrency doesn't scale. We saw this in the letter. Or, you know, the corollary of that is the fees are too damn high, like transaction fees will

never work because it's too expensive. What do you say about this? I worked at 18T Labs in the year 2000. I was going to put this in the blog post. I worked there. This is ancient for you, but like for me, it was when I was, you know, just coming out of college. It was my first job. And they were excited about wireless mobile phones. Like this is before mobile phones. We had mobile phones, before data mobile phones and smartphones were a thing, years before.

My first mobile data connection was 14,400 bits per second. It was 14.4K. And I think I checked my 5G cell phone recently, and it was 50 million bits per second. And so back then I was working at AT&T labs and these folks were visionaries. And they were talking about video streaming. They were talking about two-way video streaming like FaceTime things 20 years before this, you know, came to exist. They were talking about things like Periscope. And they were older folks.

And so I was just this kid. And I thought, you're nuts. Like this thing does 14,400 bits per second. If I'm lucky, there's no chance I'm going to do two-way video streaming or something like TikTok. That's not possible. And they just looked at me and said, you know, like, look, we've been doing this. We're 30 years into our career. We know one thing, which is that when it comes to technology,

if your claim is that such and such a thing can't happen because the technology isn't going to improve to the point where the bandwidth is going to be better, like forget it. You're not making a viable claim. We just know this. And now I sit here with my 5G cell phone. And of course, all that stuff has happened. It happened super fast.

So when somebody comes to me and says, you know, Bitcoin slow, I'm like, yeah, of course it is. It was the first cryptocurrency network. They see Ethereum slow. I'm like, yeah, of course it was. It was made in 2014. It was the same design as Bitcoin. But now we're seeing networks that can do, you know, thousands of transactions, tens, thousands, 100,000.

We're going to see the same kind of exponential scaling in terms of these systems. That is the one argument that, you know, frustrates me the most. Of course things are going to get better. That's just what we do. We're engineers. We make things better. Object to all the Celsius and all the rugpoles you want, but don't object to technologists doing technology things because you're always going to be wrong if you bet against them.

For all the critiques that I hear in this letter, and just around the crypto industry. Like we've gone through like, crypto is terrible for the environment. We should probably address that one head on. Public blockchains can never support banking features like transaction reversal. Like we can answer that when the time comes.

Like regulation, we need to address that head on. Of all critiques, though, the whole like crypto doesn't scale critique. I feel like this one's like safe to ignore because eventually it will just be true. And then that critique will just be eliminated. And we don't have to fight this fight. Would you agree with that, Matt? Absolutely.

It's going to be faster than you could possibly imagine. I mean, I would say, five years. We're in this amazing place right now. I can't stress how amazing this place is we're in. We are about to get very scalable chains. They're all coming online right now. We have backed and regulated stable coins, which I know that a lot of crypto people don't like, but I think that is kind of the missing ingredient for a lot of these financial applications that folks say don't exist. We have privacy layers and zero knowledge coming and all sorts of things. All of these pieces are somewhere between five and seven years away from jelling. And at that point,

this technology is going to eat the traditional financial system. It might take 15 years for it to happen, but it's going to do to the traditional financial system what the internet did to the long distance companies. And I think that a lot of people kind of know this, you know, it doesn't really mean very much. And by the way, when I say eat the financial system, I'm not saying we're all going to be spending Bitcoin. I mean that, you know, maybe you're still using Venmo. It's just that underneath the hood, in some way you don't even see, Venmo is transferring and

settling money on a public blockchain. And that's going to happen because why would you use technology? from the 1970s when we have reliable technology from 2022 that's instantaneous and cheap. And, you know, what that means for cryptocurrency, like floating cryptocurrencies like ETH and Bitcoin, I don't know. But, you know, they'll have a place to. What's always funny to me is when critics like those in this letter say cryptocurrency doesn't scale. And then same breath, they also say cryptocurrency has no use case. It's like, you got to pick one, guys. Because people are using it. That's why it's not scaling. It's like it's not scaling. It's like,

It's not scaling because there's too much demand, and also no one uses it and has no use case. So I really feel like you have to pick one side of that argument, but often that is not done. The last objection here, which I feel like is pretty near and dear to your heart in the cryptography space, Matthew, is this charge that there is no privacy on the blockchains. That's one side of it. The other side of it is sometimes people say there's too much privacy on the blockchain and we need our AMLKYC. What do you do with this objection?

Look, I have so many thoughts about AMLKYC. And I should say, by the way, I am working on a startup right now. This is my full disclosure that, you know, is working on how do we do this regulatory compliance stuff. This is why I said this in the post, but I should say this to you here too. This is why I care so much about this, right? I am actually kind of working for, you know, regulatory folks, or at least I'm trying to. You know, I'm not sure the regulators are totally on our side either. But, you know, I care about this.

I think people are going to have to solve this problem for cryptocurrency. to go mainstream. And so this is an ingredient I think that is worth building. Okay, good. So what do we do about that? Well, look, the hardest problem in privacy is making things private, right? We built Zcash, and Zcash was designed to be as private as possible. And similarly, Minero and other currencies, they don't make allowances for regulatory compliance. They're just private. They try to be private. So what do you say about that? Well, is that bad? No. I mean, look, the hard problem is being private. If you want to make things less private, once you've achieved 100% privacy, Going to, you know, privacy with limitations is super easy.

Just to jump in here. In the same way that once you go full privacy, you can start to have less privacy. Once you go full immutability, you can also have less immutability. But you've got to go all the way first. Yeah. Building things that are hard to do is hard. That's a really stupid thing to say. But it's like a trivial thing, right?

Privacy, hard. Immutability, hard. Trustless networks hard. Making systems that add trust to a trustless network is simple as like, hey, who's public key am I going to assign to be the trusted person? Making things that are less private is as simple as, hey, what data do I want to drop out of, you know, just put it in plain text? These are easy problems. And so, look, what's going to happen? My suspicion is we're going to see privacy layers built, and those privacy layers are going to have some regulatory compliance capability. And, you know,

maybe you'll have to KYC to use them. And that's fine. That's the future. Like, somebody has to build those. They haven't built them. Somebody's going to build those things. You know, like, what's the objection here? Like, it hasn't been built yet is not an objection. It's not. an objection to the extent that this letter wants it to be. This letter is saying there will never be any use for this technology. That's not true. Matthew, I'm curious your take on this in the privacy side of things. One weird, I guess, starting point I see when people are arguing against the ability to have

privacy and crypto is they seem to assume that in this transition that we're all making as a society and as humanity, from analog to digital, that that transition requires us to actually lose our privacy. And what I feel like the crypto industry is saying is like, no, we're just trying to preserve, you know, that thing that we had for hundreds of years called cash, where you just gave money to appear individually, and they received it, and they didn't need your name and your address and your citizenship and a photo ID. Remember that thing and how that didn't collapse society? We're just trying to preserve that in the digital world. Would that be okay? Is that too much to ask?

And like, they don't pitch it as that. They act as if having some base layer of assumed privacy is going to cause the end of civilization and let all the terrorists and child pornographers win. Can you talk about that base supposition? How do you feel about that? Do you even go back to like kind of question the whole starting point for the argument that we shouldn't have these things in the digital world? I was recently giving a talk to a crypto conference on the history.

of payment technology and how blockchains kind of came out of that. And one of the things I did is I read a bunch of stuff from the 90s and the 80s talking about, you know, this was the dawn of the era when people are moving to debit cards and cash was really king, like back in the 80s, 90s. People used it everywhere. People were moving to debit cards and more credit cards and online stuff. And it's amazing how much of that debate that was happening, like among serious people, not among like cypherpunks and like crazy crypto people who didn't exist, right, was about this problem, was about. the idea that, wait a second, if we deploy debit cards everywhere, what's going to happen to our privacy? And people, serious people, like presidents, you know, as Congress people, they took it seriously. And they were afraid of it. That whole aspect of the debate has vanished, right? You talk to somebody in this debate in, you know, 22. There's a position which is that maximum surveillance is the default. And therefore, we must stick with the current default. And I think that that kind of goes to, there's an Overton window that is defined by what we currently do. And in the 1980s, it was cash. So we just said that was fine.

The world isn't ending. Like you said, it's fine. Let's build systems at work like cash. And today, the Overton window says, anybody with a national security letter or maybe just the credit cards can access all my transactions and extract data mine that information. So let's build systems that look like that. It's really hard to move people away from what they see as the current standard. And sometimes to move people back to that world, you have to do some things that, you know, force them to grapple with the privacy implications. I think that is something we have to do.

I'm reminded as a child of the internet, the world of data is something that I grew up with and that it just became the status quo in my brain. And these things, like money phenomenon, money technology doesn't change very often. And like for a good reason, like the money that we use shouldn't be changing an ideal world ever or hopefully longer than multiple generations. If the form of money changes inside of one generation, it's because like things are chaotic and bad. And so it's useful that the form of money is relatively stable. And at the same time, like, you know, grown up with, like, watching my mom write, like, checks at the grocery store,

turned into credit cards, like, going up on the internet. Just like my mind is like, I'm a child of data. There's a data all around me. I give away my data for free because that's the paradigm I grew up in. I don't really know anything else. And so, like, convincing people that, like, it feels like a very much like Plato's allegory of the cave. Like, we're all stuck in the cave. and the cave is this paradigm that we just give away our data and like waking people up to this like new world where there's shining light outside. It's like, oh, here's the world of you actually get to choose

what data you disclose is like mind-breaking for so many people. Have you just had any like tricks or like communication tricks that you have for like helping people wake up to the world outside of the cave? I spent a lot of my time when I'm not doing cryptocurrency. I spent a lot of my time working on end-to-end encryption, things like Signal and WhatsApp, you know, like encrypted messaging. and mostly trying to convince government regulators not to ban it, which they really wanted to for a while. You know, the thing I learned from that is that people love it.

Even people who are the most boring people, you know, your suburban neighbors who have nothing, well, maybe have nothing interesting that the government would care about. They just think it's great that they can talk to their husband or wife or whatever or kids on a channel that isn't possibly surveilled and is secure. Maybe they care about hackers more than they care about, like the NSA, but they care a lot. You know, the thing about it is like it's not hard to convince people that privacy is good. It is not hard to convince them of that. And do I have any tricks for that?

Well, I don't know. I mean, it's not so much trick. It's kind of combating the idea. The only countervailing force is the idea that the world will end, that, you know, you will be unsafe if privacy is allowed. And the problem with that is it's very hard to convince people that the world won't end if you do a thing. You know, you can tell them in the 80s the world didn't end, but they didn't live. the 80s. So I don't have any tricks. I don't have any tricks, but I will say one last thing, since I'm kind of going off here, which is that the winning recipe is not to ask people to

change their lives. Right. I know a lot of people who tell me, like, I have Amazon Alexis in my house and everyone gives me crap about it because I'm a computer security researcher and privacy researcher and like Amazon Alexa is poison. And they're right. Like, they're absolutely right. But I do this because if you live in a log cabin in the woods, you've already lost. If you tell people they have to give up technology that they enjoy and they like in order to feel secure, you've lost. The goal here is to make things that are as easy to use as the non-private version and then make sure that when it comes to those other systems that you push very hard and you use them yourself and you make sure that you're not just opting out of the rest of the world that normal people live in. You have to live

in the same world that other people live in and then try to make things better. That is an angle that I definitely appreciate by some of my favorite builders in this space is that they see the values and the principles that are built into cryptography, and they understand that the only way to scale these values is by scaling the U.S. At the end of the day, like it just fundamentally, like all other previous products of the world, has to be a better product than the alternative.

And it's definitely hard mode to get cryptography to be a better U.S., but also at the end of the day, some of the things that you get out of cryptography are just useful products, and it's just a matter of problem-solving the way around and it's like the favorite builders in the space, they see this vision, they see this future, regardless of how many years away it is.

Well, a good example of this, too, David, and we've been talking so much Matthew about like Celsius, for example, and block fides. And I think a lot of the reason people didn't use some of the more the defy tools that were totally transparent and offered similar levels of yield is because they were nervous about taking custody of their own keys, right? Yeah. And you kind of understand because the U.S. is pretty tricky. you got to memorize these 12 seed words or these 24 seed words. And so they went and they defaulted

to you, okay, well, I'll just put it in Celsius. It's just easier. I don't have to think about it. And now they can't withdraw their funds. They had kept their keys. If they had kept their crypto, then they wouldn't have that problem right now. They would still be in complete custody. It would be the fully bankless solution. But they didn't go down that route because it was harder. and I think that gets at the heart of what you're saying. I think one of the hardest problems in our field right now is key management. How do you keep your keys? How do you deal with the fact that people lose their phones?

How do you deal with this and make them feel comfortable with it? And the only thing I would say to that is that we are slowly solving that problem. And we're doing that, you know, like for example, Apple has been deploying systems. WhatsApp has been deploying systems that use hardware in data centers to fix this. We can fix this problem. But yeah, we're not there yet. writing down, you know, 12 words or 24 words is a pain. And then where do you put it? Like, what do you do? It's rough. I have $300 in a, I shouldn't even say this. I have $300 in a

meta mask browser wallet right now. I didn't even bother write down the seed phrase. Like, I guess, you know, that money could get lost if I dropped my computer and I will feel really dumb about it. But it happens. Parts of one of the reasons why, like, people like me and Ryan and others in the crypto space are so optimistic about the future of crypto is that, we fundamentally believe that eventually cryptography will be able to produce a better UX than all previous products that the world has ever produced, which is a very grandiose statement, which is kind of where I'm going with this next question. For like private key management, we have solutions like account abstraction.

For proof of work removal, we have proof of stake. For scaling, we have layer twos. We even have layer threes. We've got validiums. We have all of these like complicated names and complicated technology solutions that are known quantities, importantly. Like we know these things exist. They're not theoretical. They are products being implemented. But it's not like these products being implemented just like become live and fix everything on day one. It takes one to three to 10 years for these things to like really get built out. And part of like the core most inner like circle of crypto are these people that like see the 10 plus year vision, like the 50 year vision. Sometimes even like the multi-generational vision of what happens when we have a crypto enabled society and like that like utopia that we can all like dream up as visionaries that. that are keeping us like why we wake up in the morning. But like the problem is like that daydream

is so far away. And also for like explaining crypto to the average person, like they're not getting on board with this daydream. You need to understand what the hell of a litium is. You need to understand what account abstraction is. In order to explain those things, you have to explain like 17 other things. And so that starts to be this like dividing line between like the crypto natives and the normies of the world, where we call normies, which is also a conversation to talk about, like, the labels that we give people. From their perspective, we're just, like, pushing daydreamy vaporware, and it's a big hype fest.

And so, like, Matthew, coming from the external perspective, I want to ask you, like, what's the most, like, annoying hype we push? What should we, like, really, like, tamp the brakes on and kind of keep that just to ourselves before it's ready? Yeah. Okay. So let me just say, like, one of the things that drives me nuts is when people say things like your keys, you know, your currency, right?

Like, yeah, fine. It's true. Right? If you own the keys, you own the currency, you control it. And I really like that aspect of crypto. But you've got to get rid of the word keys. You've got to tell people there's no secret key. You've got to get rid of that and hide that from people and make it transparent.

Because nobody needs to know there's TCP. Nobody needs to know there's HTTP or HDPS underneath Facebook is irrelevant to their lives. And you have to make sure those concepts. The thing that, you know, these are not hype things. I'm not really answering your question well. The idea that I need to send, if I want to send you some currency, I need to get your OX, you know, Ethereum address or your Bitcoin. coin address, horrible. Like, these are not hype things. They're perfectly workable things that need

to go away. You know, we need to get there and figure out, you know, one of the, yeah, I'm really trying to think of the hype thing. Somehow my mind is blank and I'm really failing you here. So, give me another question and maybe I'll pop into my head and I will have something better to offer you. Yeah. So what do you think is something, Matthew, that we could be doing better as an industry in terms of how we talk about this to those outside the industry? It's Congress, critics, everyone. and we were just talking about the subject of sometimes we're guilty of over-hyping things, hyping things too soon. But like David and I would say, we can't help it.

It's because we're so freaking excited. Like this stuff's going to change the world. This is like an internet level, you know, movement. We're just not saying it's just not going to happen overnight. So what advice do you have people, given that you've straddled the side of being on the outside looking into crypto, but you've also been in the industry. How can we better communicate this? I would say there's three different answers to this.

One is, you know, stop talking to your book. When people look at you and they think you're talking your book, you know, that you're just shilling this particular currency or whatever, they don't take you seriously. So say things that make it clear that you actually care about the issue. And it's not just you saying, like, this is my particular financial interest. I happen to think that whatever is best for my particular financial interest is best for the country. That's not going to make you credible.

Maybe it is honestly true, but try to think a little harder. The second thing I would say is like, put yourself in the regulator's shoes. You're Congress, right? What do you care about? You want to have some innovation in the financial services industry. That's fine. You do care a lot about those moms and pops who are getting caught in the Celsius and the terrors and the other rug bulls.

You care a lot about them. You want to do something. Come up with answers. Like there have to be some answers, like clear public answers. I'm not saying answers of the forum don't do this, but answers of the forum, if I were you, I would do this. And then the third thing, which I think is super important, is defy in particular. I'm thinking defy, maybe it's the whole industry, needs to think harder about how it can police itself.

And let me give you one very specific example. I was talking a few weeks ago to a person who's pretty high up in the national security establishment in the U.S. government. And they were asking a whole bunch of very influential crypto folks in DFI, mostly, how do we regulate you? And, you know, what are we going to do? And one of their big concerns was not about, like, crypto scams. It was about North Korea stealing money from DFI, poor lease. secure defy bridges and defy projects, like the two of two multi-sigs, you know, like the rainbow bridge and the one that happened recently, just tons of money, like hundreds of millions of

dollars. You know, their point was pretty valid, which is like it's not the U.S. government's job to defend you, but also we can't tolerate a billion dollars going to North Korea because they're going to use it to build, you know, hydrogen bombs. And I would really like to see the defy industry in particular come up with an answer to that question, an answer that's compatible with their values, an answer that's not like regulate us out of existence, but also isn't do nothing. I think that it's perfectly for what amounts to pocket change, that industry could come up with some way to like get ahead of the attackers, find the

vulnerable places, and get there and fix them. And I'm not just talking about fix their own systems, right? Like, of course, the wealthy DFI projects and the wealthy C5 projects can fix their own systems. I'm talking about going out and defending the ones who are stupid, who happen to have $200 million that's about to get stolen. And I would like to see some of that kind of self-policing. I know everybody in the space is a libertarian, but they think that it's, you know, they're not even libertarians. They're more like anarchists. Like let this problem solve itself. But like libertarianism doesn't mean do nothing while the world burns. It means sometimes self-organize and, you know, self-police fix these problems ourselves so that governments don't have to stay.

step in. And I don't see a lot of that plausible self-regulation, self-organizing happening. So if anyone knows a way to do it, do it. Like, that's the key. That's a great point, especially in that white hat hacker sort of motif. I think we could definitely do better, better with that and create a better incentive program. Did not think about the collateral national security damage that happens when a rogue nation state actually steals the funds. That's a very interesting line of conversation for sure. Matt, this has been so much fun and so helpful. And I just want to say, thank you for writing that post in response to that letter. We need your voice. We need people in the crypto community. We need their voice to help push back against some of these ideas. But also to do so

in a way that's, you know, humble and kind of admits where the critics have a point. This is a very important too. So we're not just talking our bags and talking our book, but we're kind of standing up for these core principles. I want to maybe end with this question. to you, take this as a summary or take this as kind of like an encapsulating question for the entire conversation we've just had. But how would you summarize things for you yourself? Why is crypto worth defending in your mind? I was hoping you were going to ask me, what is my favorite thing that has happened? What is my favorite project in this community? Which maybe is close enough to your question that I can answer it and then it will answer your question. It's your favorite token.

It's Iota. It's not literally Iota. It is I will tell you which project, and this is going to sound really stupid and everyone's going to think I'm an ass for saying this. But my favorite project is DEM, Libra Dium, Facebook's internal token project. And I know that sounds ridiculous. It's not literally my favorite project. I had nothing to do with it. I don't even know if there was no, like, token. But I'll tell you this, like, that was the one project where I saw real companies come together and say, you know what?

This technology is going to revolutionize a huge part of our industry. And they did it and they built it. And, you know, I think there are million things that are stupid. Like Facebook, having access to all my financial transactions, horrifying. You know, Facebook being in control of the banking system, horrifying. But what was impressive about that project is they made a bet. And a lot of other people made a bet, too, that said this technology is going to replace everything else. And really interestingly, when you look at the critics of that project, their objections were not, this is stupid, this is going to fail.

This blockchain-based system is not needed. There are criticisms were, if this project goes forward, Facebook's going to take over the world. And it's very weird. It's very weird for me to hear the regulatory folks, including the folks in this letter, saying things like blockchain has no applications in a world where Facebook's DM project was killed because folks were scared of it. And I think that is the strongest indication that this technology has legs, even though it's not like a crypto-native thing. And again, like I said, not defending it, don't want it. But that is to me the biggest indication that this technology is going to kind of devour everything. And we'll see what actually happens.

By the way, Matthew, isn't that another example of a time where the crypto industry kind of went to Congress and said, hey, can we have permission to go do this? Like Zuckerberg and the Libre team. And then they were like, hell no, you can't do that. Sorry, shut down your project. This is what I'm saying. It's like it's very hard to engage in Congress and the government when you're not sure exactly how. like this letter could have come from us, but all the times we've asked for permission, it's always a no. So why would we ever do this? I agree. I agree. But you know,

you've got to have both sides, right? You've got to have the people who are building things and doing things. And you've got to have the people who are after the fact going to Congress and saying, look, you screwed up. You banned Diem. And the result was you got $60 billion in stable coins on chain anyway. And now they're running on public chains, which you have even less control over. Like, don't do that again. And there have to be smart voices who are able to take, you know, there has to be both sides. There has to be the carrot and the stick. And, you know, the stick can be just building stuff that Congress can't regulate. But the carrot has to be people explaining to Congress why their regulation doesn't make any sense. And so, you know, there is benefit

to writing those letters if you write them. If we said that to Congress, though, just to push back on that a little bit. I mean, you alluded to it, if Facebook controlled the financial system, that would be absolutely horrifying. And so the fact that so many stable coins ended up on public ledgers in my mind is like, yes, huge win. And so, like, isn't that like the good thing? Isn't that the good outcome. Okay. So I think what you're saying is, yes, if regulators go in and they kill some projects and we still get the end result that, you know, that project was pushing towards, is it a good thing? Yes. I mean, sure. It's good. I think that's because, you know, there is definitely a pressure towards a particular outcome and that's going to happen anyway, but it's not good, right? Regulators could have been going after the scams and instead they poured their effort into going after Libra and DM, or Libra slash DM, whatever they were. That's just a bad user resources. How many people got scanned? from perfectly recognizable scams as a result of regulators looking the wrong way. And I think that's a bad outcome. Matthew, as you express this technology to the rest of the world,

how do you express your optimism to the world of the skeptics and the naysayers? Like obviously you see the potential in applying cryptography at scale in crypto-economic ways. In what ways you say to these naysayers like, hey, here's the good out of this technology. How do you say these things? So I would say that, you know, the two things that everybody agrees on is we do not like the banks. We do not like the banking industry all that much. And we certainly, you know, we don't think about the payment industry. They're just a part of the banking industry. But the thing that I like to try to convince people of, I never succeed is that every poor person in my city of Baltimore, of which there are many. When they go to the supermarket, every time they buy a banana, they're paying three percent of the dollar they spend on that banana in payment fees. And those payment fees are ending up in my wallet because I'm a, you know, affluent consumer who has. one of those credit cards that gives you points back. And so they're paying those prices. My rewards are baked into the price that they're paying, even if they're paying cash. And that 3%, you know, Baltimore's sales tax rate is 6%. The entire state of Maryland and Baltimore City are

basically collecting only twice as much money as, you know, their credit cards are collecting. And I would like to live in a world where that isn't the case. I think that would unlock a lot of money for people. I think that would unlock a lot of possibility. It's not a compelling point, you know, because people look at a number like 3%. They think, what's the big deal? But it's a huge deal. It is a huge deal. We could do so much more for society if that 3% was going towards our infrastructure or just going back to people. And I would like to live in a world where these kind of cartels don't control everything. I would like to live in a world where you don't have to pay 10% for your student loans. I would like to live in a world where, you know,

cash-backed loans didn't have a 5% or 4% interest rate because that makes no sense. Why would you pay a 4% interest rate on a cash-backed loan? That's crazy. Yet that's what the banks are charging right now. And that's just inefficiency that could easily be swept away by properly functioning competitors. And, you know, maybe it's not the top of mind for people. People have other problems. But the world would be better if we could fix some of these problems. Well, we certainly agree with you, Matthew. And well said, we will end it there. Thank you so much for joining us on bankless today. All right. Thank you. Bankless listeners, a couple action items for you. So first, the letter to Congress that we were reading earlier, we'll include a link to that in the show. The title of it is Letter in Support of Responsible FinTech Policy. You can read that at the source. We'll also include a link to Matthew's blog post where he goes through his objections to this letter

and some of the content that we just discussed on bankless today. As always, guys, risks and disclaimers wouldn't be a bankless show unless I let you know that crypto is risky. So is Bitcoin, so is ETH. All of it is, you could definitely lose what you put in. But we're headed west. This is the frontier. It's not for everyone.

You're with us on the bankless journey. Thanks a lot.