Bankless - 30 - Synthetix To Billions | Kain Warwick

Episode Date: September 14, 2020

Episode: #30 September 14, 2020 ----- Tools from our sponsors to go bankless: 🌐 UNSTOPPABLE DOMAINS - GET A HUMAN READABLE CRYPTO DOMAIN 🌈 ZAPPER - ULTIMATE HUB FOR DEFI - ZAP INTO DEFI �� MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS 💸 AMPLFORTH - MONETARY EXPERIMENT FOR BASE MONEY ---- Synthetix to Billions | Kain Warwick Kain Warwick is the founder of the Synthetix Platform, a protocol for generating and trading synthetic digital assets. Kain himself is known for leaning towards crypto-anarchist side of the political spectrum How did this come about? How has this impacted the building of Synthetix? Synthetix itself has stood resilient against the 2018/19 bear market. Why? What was the unique advantage of Synthetix vs other 2017 ICO platforms? What's next for Synthetix now that gas fees are 200+ gwei? WE COVER: 1) Kain's political stance 2) How this reflected in Synthetix 3) Motivation and Grit around building and producing 4) Growing Community and Culture during a bear market 5) Degen Spartan, and 6 dolla SNX 6) Introducing the SIP process 7) Introducing Yield Farming 8) Recursive upside/downside to SNX + ETH collateral in Synthetix 9) L2 scaling with Optimism 10) Bull market predictions ------ FURTHER RESOURCES: Synthetix & Optimism: https://medium.com/ethereum-optimism/synthetix-exchange-meets-the-ovm-2de3a572d6df Rate the Podcast 5 Stars ----- Subscribe to podcast on iTunes | Spotify | YouTube | RSS Feed Leave a review on iTunes Share the episode with someone you know! ----- Don't stop at the podcast! Subscribe to the Bankless newsletter program Watch Bankless shows and tutorials on YouTube Visit official Bankless website for resources Follow Bankless on Twitter Follow Ryan on Twitter Follow David on Twitter ----- Not financial or tax advice. This podcast is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions.  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. David, what an epic interview with Kane, man. It was great. Yeah, I really think that this D-Fi Founders series that we're doing, that we started with Stani with our last episode, and this episode with Kane.

And then I really think that these episodes are really going to be a fantastic snapshot of the pre-bowl market before, before like all this explosion of innovation and development happens, which, you know, I'm crossing my fingers does happen, right? And so what we're trying to do with these episodes is we are both trying to focus in on the founders of these specific protocols, the actual individuals themselves, you know, Stani, Kane, Sergey, Hugh. and focus in on exactly what about them created these protocols, but then also simultaneously create like a canonical, what is AVE, what is synthetics, what is chain link episode at the same time,

and also create a snapshot for where these protocols are when the start of the bull market really got roaring, right? So that's what these episodes are about, and that's what this episode with Kane of Synthetics is all about. Kane himself is a really interesting figure, and he's done a ton of podcasts, right? But the reason why we wanted to get him specifically on is really the background on Kane himself, right?

Because Kane is a pretty interesting guy. He's a crypto anarchists, and crypto anarchists are super interesting. And so we get into that conversation, which I've never seen Kane talk about before. And so that was kind of my big highlight of this episode, is kind of seeing how Kane thinks in the world and how he thinks and how that got related into this synthetics protocol. Ryan, what did you take away from this episode?

Yeah, I think the patterns and the archetypes of these cryptos and native founders are basically, they're really setting the playbook for how other D5 protocols are going to be formed in the future, right? So you see these protocols like constantly learning from each other on, you know, how to, how to build a community, how to, you know, create your incentives. In our episode with Stani last week, he talked about. how his Avanomics, the AVEMICs of the AVE protocol, basically inspired by a whole slew of other D5 protocols.

So what we're really seeing is this entire ecosystem leveling up together. And some of these protocols, quite honestly, they're experimenting. They're flying by the seat of their pants. But when something works, when they iterate and something works, then that ripples across the entire ecosystem and it becomes like a pattern, a best practice for D5 protocols, moving forward. So I think these episodes are key if you're looking for what those patterns are. So you can identify the next synthetics. You can identify the next AVE. You can identify the next crypto native founder and front run the opportunity, as we always say here. This is also awesome

because we got a chance to hear about synthetics roadmap. And toward the end, Kane really spelled out what is happening next in three areas. Then he sort of added a fourth. And I don't left me very bullish on defy, left me particularly bullish on Eith, which I'm usually trending in that direction anyway, but also bullish on what synthetics has plans. So it's a great episode to get up to speed on everything synthetics. We start with the basics of what it is, but then we get down to sort of the depth and the meat of what it can be in the future. And yeah, fantastic. So far we're two for two on both of these DeFi founders, leaving us with a particularly bullish sentiment at the end of their podcast.

The flow through this podcast was pretty good. So like I said, we start with talking about Kane and his specific politics and personality, how that related to synthetics. Then we talk about, you know, the brutal bear market and growing community during that bear market. And then we talk about rising the ranks of Defi using the conviction and the strength of the community. And really what was the recipe that synthetics created that at all. ultimately created their success. And then, as we said, we go into the roadmap for synthetics and future predictions.

The episode speaks with the self, we don't need a long intro. So I think, Ryan, we're just going to go ahead and get right into the podcast. But first, we're going to talk about our sponsors. One of the tools I've started to use recently is Zapper. For those of you that were part of the 2017 bull market, it was characterized by just opening up blockfolio and refreshing it over and over and over again. And also, anytime you ever made a trade, you would have to go in, to blockfolio and manually input that trade information to make sure that your portfolio that you think

that you have matches what you actually have. With Zapper, you don't have to do any of that anymore because all you have to do is Zapper is input your Ethereum addresses and then Zapper will give you a really elegant report as to where all your money is. So there will never, ever be any disconnect between the money that you think that you have and the money that Zapper reports to you. Zapper looks directly on chain and gives you a nice portfolio. summary of all your assets and how many assets and all of your debt and all of your lending positions, all of your positions all at once. So there's no more editing your portfolio because Zapper just does it for you. One thing that I thought was really useful about Zappers was when I plugged my wallets in,

I found that I had submitted liquidity to Uniswap forever ago, and without Zapper, I would have probably lost that forever because Zapper knows where your money is better than you do. It's also the gateway to investing your money into this ever-expanding list of a visual. available defy platforms like Curve, Balancer, Uniswap, Yern. In the bankless nation, there is this growing number of money Legos and keeping track of them all is just super overwhelming, which is why you could just go to Zapper and Zapper will solve the problem of there just being too many money Legos to choose from. So check them out at zapper.fi. Enter your Ethereum addresses and check out your portfolio and see if there's anything that you missed. Your Ethereum address is a bankless

bank account. But here's the problem. It doesn't have a human readable name. It's represented by this long hexadecimal string that no one can read. Unstoppable Domains has the solution to that problem. It provides a domain name for your Ethereum address. So instead of telling someone to send you funds to 0x, E3Ba, blah, blah, blah, you can tell them to send funds to your name.cropto, a domain name for your Ethereum address. At Unstoppabledomains.com, you can search for blockchain domains, like this and find tools to easily launch websites on decentralized web technology like IPFS. You can even have unstoppable domains help you manage your dot crypto or dot eth or even dot zill domain name addresses at their unstoppable domains manager. websites have domain names.com.com.

Your bankless bank account on Ethereum should have a domain name too. So go to unstoppable domains.com, register a domain name for your Ethereum address now. Unstoppable domains.com. All right, let's get into the interview with Kane. Bankless Nation, we are so excited to have Kane Warwick from Synthetics on our show. He describes himself as the formerly semi-benevolent dictator of the Synthetics Foundation, but now he's currently aspiring synthetics Dow super delegate. Kane is really the founding father of defy liquidity mining and all of the things that we're seeing going on in the space today.

Kane, it's great to have you. We're super excited about this. How are you doing, sir? Yeah, yeah. Thanks for having me, guys. I really appreciate it. All right. So first question, as one of the founding fathers of all of this defy liquidity mining, hasn't gone too far. Do you have any regrets about starting this whole kind of trend? Kane, what have you done? I know. It's actually, it's so funny. I woke up this morning, and the first message that I saw was from a guy in Discord. was like, do you ever think, like, what have I done here?

That was literally the first message that I saw it. I was like, what's gone wrong? I was like, what's happening? I, like, immediately went and, like, looked at, like, sushi and saw the migration happened. So, you know, I think, I think at times, you know, it has gotten a little, a little crazy. But, you know, I've always been a big advocate for, you know, experimentation. And so I think that this idea of, like, distilling some of these incentives

and really kind of testing the edges of them is, you know, not necessarily the worst thing. So you like the experimentation is what you're saying? Yeah. Yeah. I think it's good. I think it's net positive in the end. So, Kane, you've gone on a bajillion podcast. And so there's plenty of podcasts that are just like, all right, what's synthetics? But all of the podcasts I've heard with you, Kane, I've yet to hear one that talks about your personal politics or your personal attitudes about life. And from what I've listen to, I've gotten a gist that you're kind of a crypto anarchist. Is that right? And can you elaborate on that? Yeah. So, so, you know, I definitely have like an anarchist bent, right? And,

and, you know, it comes from, I guess, like this, you know, anti-authoritarian viewpoint of, you know, power structures need to be justified. And, you know, anything, you know, any power structure, any sort of hierarchy or, you know, authority that can't be legitimized, you know, should be torn down. And, you know, I think that that's kind of the sort of core of my, my worldview from a political standpoint. So anti-authoritarian then, like, has it always been that way, Kane? Or is this sort of an awakening at some point in your life? No, I think it's always, it's always been that way, you know, probably, you know, coming from my

upbringing, I guess, right? Like, you know, I, my dad was a professional tennis player. So he was, you know, pretty intense person, is a pretty intense person. And, you know, definitely our family was, you know, I've got three younger brothers. So there's, you know, four, four boys competing all the time. So I, you know, we always had this, you know, really intense, highly competitive environment in my house. And so I think, at some point, kind of challenging that and sort of questioning, you know, authority just became ingrained in me. When did you get into crypto?

And would you say that all of those same values came before crypto or kind of after crypto and crypto helped instantiate them? Definitely before. You know, I was kind of, you know, someone that would read things like Chomsky and, you know, a bunch of different sort of political. viewpoints in my kind of late teens and early 20s and you know just really had a strong kind of view that the status quo was was not quite adequate and you know that there were a lot of issues in the status quo in terms of you know how how governance worked etc and so i think that when i

when i first saw bitcoin you know to be honest i didn't really get it i read the slash dot bread that I think a lot of people read in like 2011. And, you know, coming from a payments background and a retail background, you know, it just didn't quite sync with me. It was probably a couple of years later before I really, you know, sold the value from like a political perspective rather than just as a payment mechanism. Being a crypto anarchist of sorts, what is your hope for how crypto platforms, crypto protocols, how they help organize people.

Like what is the futuristic sci-fi version of crypto that you see in your head? Well, you know, this is part of the reason why I've been so bullish on tokens for such a long time, right? You know, even through the bare market where, you know, tokens were seen as, you know, this terrible kind of black mark, right, on, you know, people who had done ICOs and that sort of thing. And the reason behind that is that I believe that, you know, they're such a powerful coordination mechanism and that you know if you set up a system of rules that is is very clear

and you're open and anyone can participate that you know having a token that kind of unites that rule set is is a really powerful way of driving behavior and so you know the idea that you can create these coordination games and you provide services without needing some sort of like top down hierarchy or structure, I think is really exciting. And we're starting to see that. And obviously the first kind of wave of this is very financial in nature. But I think there is the possibility to extend it further than that and really kind of open it up and have these sort of self-governing systems that don't require essential authority to mediate them. How is this reflected in this synthetics protocol? Because all

crypto protocols have values baked into them to some degree. So how would you say that these values have been worked into synthetics? I think it kind of comes from our community, you know, where I've been a participant in the community from day one, you know, even when there were only maybe 10 of us that actually cared about the, you know, the project, right? And so, you know, my view has always been engage with the community as a community member. you know, and even though I do occupy a privilege position as the founder, I've really tried to, you know, not exercise that power and not, you know, not leverage it. And, you know, just to to try and, you know, advocate for whatever position I'm advocating, you know, on its merits, right,

rather than, you know, relying on some kind of authority. And so I think that the people who participate in our community and who've been kind of attracted to that have a very similar viewpoint, right? Like they believe that, you know, the kind of argument should be won on its own merits and that anyone can participate. And that's another reason why I think, you know, we haven't gone down the sort of on-chain governance path, right? We've kind of stuck with this idea of, you know, rough consensus and letting debate kind of, you know, live in the community and to decide things. So, Gain, something else I actually just learned today is you wrote a novel, right? I did, I did somewhat stupidly.

It's never a bad decision to write a book game. Yeah, you know, it was it was one of those things where like, I read a lot, right? You know, I read a lot. I read a lot of nonfiction and a lot of science fiction and, you know, fantasy and stuff. And I was reading a Nick Bostrom book about AI. And there was this example of like super intelligence. Super intelligence. Super intelligence.

So and, you know, he gets to the point about like the paperclip generating, you know, optimizer, right? That like is optimizing for, you know, generating as many paper clips as possible. And I, you know, was reading it a night, fell asleep and kind of, you know, was really stuck with me and then the next morning, I kind of had this idea for like a short story that kind of extended that, that, you know, thought experiment. And so I started writing it and, you know, throughout the rest of the day, like I, you know, put down like, I don't know, 8,000 words or something like that. Like it just was kind of like flowing out. And so that I was

like, well, maybe this is a bit bigger than a short story. And I'd never written anything longer than a short story before. And that was a huge mistake because the amount of pain and suffering that you go through an editing process. I just was not prepared for it. So it ended up taking me like almost 18 months to finish it because I went through like, you know, five different revisions and really changed a bunch of stuff. So I'm a bit of a perfectionist, which is, which is why starting to write a novel was maybe not the best plan, given that it was a side project. Well, good for you for sticking with it. But like, so I've read that book too, superintelligence. I think Elon Musk was talking about it for a while. And just,

kind of tune me into it. And I got to say that book, uh, somewhat haunted me, right? Because you're, part of the thesis, uh, is that basically AI is inevitable. And quite possibly an evil AI is the out, is the end outcome of all of this. And, you know, Nick's kind of caution to us is, we should be preparing for that now. In fact, I think he, he works as an ethicist, uh, to like come up with protocols to, uh, rein in the future AI that's coming. I almost wonder, so Peter Thiel, I think, has kind of painted this contrast where he talks about AI being almost an authoritarian type of technology versus crypto, blockchain, being a more classically liberal type of technology, an anti-authoritarian technology. And I'm wondering if that kind of fed into your interest in that book, Superintelligence,

and the novel itself, this whole kind of anti-authoritarian, like, I guess, path that you've been on your entire life, it seems. Did that feed into it? Well, you know, so I definitely had the naive view of AI, right, up to that point. And, you know, I definitely spent a lot of time, you know, reading about, you know, general artificial intelligence and, you know, for years, right? Like tons of books, you know, and I, you know, and I, I think reading Bostrom's book, it was haunting. It was really scary.

Like he really painted a picture of, you know, this alternative approach. And, you know, I think I'm fairly optimistic about the potential for technological progress. But that definitely was an eye-opening kind of experience reading. And what I remember in reading it was how fast it could happen, like in a blink of an eye, right? So it gets to human IQ, you know, 100 IQ, 120 IQ, right? And then a week later, it could be well beyond human's capability to even rein it in. Yeah, exactly. And that was part of, you know, writing the novel, I think.

Originally, the short story was like just a way for me to kind of, you know, take this very sort of troubling alternative viewpoint that I hadn't really, you know, considered previously and process it, you know, as a way of kind of processing it. And obviously it took on a lot of longer than I would have liked. But, you know, I think it was very. helpful for me to kind of incorporate that into my worldview. But I do think it's a little bit, you know, like, I don't know, you know, the heat death of the universe or something like that. It's like a thing that you know is true, but you kind of have to just, you know, continue operating.

Yeah, yeah, exactly. Like if we sat around all day, like worried about like, you know, this idea of like an AGI emerging, you know, in 10 seconds of the world being over, you know, maybe maybe that's too pessimistic. Maybe we should be trying harder to prevent it. But I kind of feel like it's either inevitable or it's not. And the hope is that we have some benevolent AGI rather than something that is malicious. And I do think, at least for me, right? So AI could grow very powerful. We're already seeing it today in centralized companies like Google and, you know, Bidu and all of these companies.

But crypto is almost like a little bit of the antidote to that, right? It's, it restores some balance in the universe. It restores some self-sovereignty for the individual. And we're starting with money systems, but there could be other systems. So I find personally, like after reading, you know, some of Nick's work and other things, it's just like that's, that's kind of the side I want to be on. At least right now is like more the decentralization side of things. That's helping to restore a little bit of the balance of, you know,

what centralized AI could have. eventually become. But yeah, anyway. Yeah, agreed. And I think, I think there's like the, the risk is really in opacity, right? And this is where, you know, crypto is so powerful, right? Like when the rule system that you're operating under is opaque and you can't, you know, understand what the implications are, you know, it's impossible to kind of see the rules, that's where, you know, power can really aggregate and become abusive. I think when everyone's operating, you know, on the same rule set and the rules are very clear, at least you have that, you know, advantage where you understand how everyone else is playing. So I think that that is

something that I see in crypto is, you know, a very powerful driver for, you know, maybe the potential for more fair outcomes, you know, in these systems. So, Kane, you wrote this novel out of just pure inspiration and motivation, which, you know, is something in of itself like a high effort activity, right? And then, ever in doing some research for this podcast i went to the synthetics slash haven blog which started in september of 2017 and you've been just pumping out blog posts ever blog posts ever since then right and then and then not to mention just being the leader for this crazy awesome defy protocol where does this motivation come from like where do you get the energy and meaning behind what you

are doing so that when you wake up in the morning you're ready to go and and build something like what motivates you to do what yeah what motivates you one of my favorite uh books to to stay on the book thread is the hard thing about hard things um by ben horowitz and and i think you know he talks about the idea that like hard things are the reward in themselves right just doing something that's really challenging and i think that you know there's there's definitely certain people who have uh you know a mindset And I think I fall into this category of, you know, it's just fun to do difficult things for, you know, it's its own reward. And so, you know, I think I'm a little bit crazy like that where, you know, I have this kind of perfectionistic streak and feel, you know, really driven to be challenged.

And, you know, if I'm if I'm not challenged, then I get bored really quickly. And so, you know, waking up at the moment and just being, you know, kind of inundated with like the D5, fire hose, it's, you know, it's definitely confronting. And I think everyone's feeling that. But, you know, there is an aspect of like trying to kind of synthesize it all and, you know, pull it all together into some coherent view, you know, is really fun at the same time. Right. So, you know, you got to be having some fun. But, you know, it's definitely, it's definitely challenging. I've been doing startups for a long time. And, you know, there are days where you kind of wake up and you're like, it's been 20 years of startup life. And, you know, you feel a little bit

burnt out. But I think it's fun enough to kind of keep going, you know, at the moment. And so what's the goal? Like when you are, when you do decide to wake up and decide that, you know, no longer is startup life fit for you and instead walking in the mountains is now fit for you. Like, what, what do you have hoped to achieve? Like, what are you trying to change the world to be like? Or what's your trying, what's the mark that you're trying to leave upon the world? You know, I think I have a very, strong sort of streak of like trying to achieve fairness and and trying to achieve equitable outcomes. You know, I feel very strongly about that. I think that, you know, arbitrary, and this comes back

again to like anti-authoritarian, you know, viewpoints, right? Like the idea that someone can exercise arbitrary power over someone else I find to be really abhorrent. And so, you know, to build a system or, you know, to contribute to systems being built where that, you know, you know, is limited and the ability for people to abuse power is limited. I think, you know, even if it's not necessarily, you know, synthetics being a world-changing thing, just contributing to, you know, crypto and defy, I think is something that, you know, keeps me motivated. And, you know, I'm hopeful that we can kind of continue experimenting and, you know, add to this, you know, body of knowledge about how you coordinate behavior and, you know, achieve things like

that necessarily, you know, looking for some specific outcome, right? You know, I don't think it really matters what the outcome is as long as, you know, we're kind of building up this, you know, new kind of technology and new way of coordinating people. So we're in the middle of our DFI founders series here on Bankless. And we started with Stani from Avey last week. we're now here with Kane from Synthetic. And one of the questions that we're asking everyone came from our episode with Van Spencer of Framework, which was also kind of like the VC start to this whole thing.

And one of the concepts that he talked about was when he is looking for, you know, DFI founders and then also DFI protocols to like invest in or you put their skin in the game into. They said they frequently asked the question for protocols that are looking to hand over governance over the protocol to the community. The question is, are you really about that life? Because that's a different lifestyle. That's a different choice than running a C-Corp with, you know, a board of directors and publicly owned company, right?

It's a different goal. And so, so Cain, why are you about that life? Like, what about you is particularly suited to building this community-owned and operated protocol? I've always, you know, in all the startups that I've run, you know, some of my friends and people that are close to me have always kind of pointed out. that you know one of the common threads with all of them is that there you know tends to be a community that kind of coalesces around them that gets really

passionate about it and really cares about it and I think you know part of that is the this kind of process of engagement right of you know genuinely engaging with people and wanting them to contribute and I think a lot of people will pay lip service to that process right but really they do want to retain power and they want to retain some sense of control. But, you know, I genuinely do want to engage and kind of hand over control as much as possible, you know, to this protocol. Like it's, it's an event. You want to be this the superdelegate instead of the benevolent dictator, right? That's what it says. A hundred percent.

Exactly. Exactly. And, you know, even though we don't have superdelegates yet, you know, when we do, you know my my genuine hope is that people you know think that I'm a you know viable candidate for that role and you know we might end up in a situation where we have you know seven people that are super delegates that are you know sort of responsible for you know helping to kind of direct the next you know phase of the project and you know obviously I want to be a part of that right but I also want to have earned it rather than, you know, be kind of grandfathered in because I, you know, happen to be here at the beginning. You want to be a voice in the protocol, not the voice in the synthetics protocol in time, over time. Absolutely. And, you know, this is already happening, right?

Like, people do not listen to it. If you go in and, like, honestly, if you go in and look at discord, right, like, I'm constantly advocating for things. And they're like, no, not, we're just not doing that. We don't think you're right on this. So it's, you know, it's definitely, getting overruled then on things? Oh, all the time. Are there times where the, are there times where you're like, oh, you know, the community is right about that and I was actually wrong and it led to a better decision? And I guess, you know, the opposite. Do you feel like sometimes the communities made bad decisions? You know, I think in the early days, everyone was very passionate. Everyone felt, you know, very, very strongly about, you know, the direction that things should be going in. But it was also very cohesive, right? Like, we all were really bored into

what we were trying to do. And so, you know, we would have debates and disagreements, but, you know, generally it was about, like, how do we achieve something? And I think what's kind of shifted as the community has grown is it's less debates about how do we achieve something, but, you know, sometimes even like what are we trying to achieve, which I think is an important thing. But, you know, even, you know, recently, probably I think the biggest one, and I've talked about this before, is the monetary policy change, right? And, you know, when we change the, the, the, inflation schedule. There was a community member, Delta Tiger, who, you know, was advocating for it. And I said, no, this is a bad idea. Like, we don't want to go down that path. We want to, you know,

have like a, you know, coherent monetary policy. And he advocated for it, you know, pushed it through. And, you know, it was definitely a good change. Like, that was a really positive thing. This was basically the decision, right? I guess I introduced as kind of the, you know, the founding father of defy liquidity mining, right? But the original design for a was more like Bitcoin, right, where it would be some kind of fixed cap and there wouldn't be a change to issuance policy. It was very kind of regimented, right? That was the prevailing thought at the time. So you're saying like this whole shift to liquidity mining wasn't even your idea. It came from the community. That's true. So, so, you know, I basically said, you know,

I had this idea when, I think this is going back to like 2018, right? So, I think it was around DevCon, so like, you know, maybe October or whatever of 2018. And we were clearly not getting traction, right? Like we weren't getting people to, you know, stake. We were having trouble with engagement. And I started talking about this idea of, you know, changing the monetary policy and, you know, essentially shifting to, you know, something more like a happening, right?

like to introduce inflation and we would have this harbening process. And so that initial process of changing the monetary policy to reward stakers was pushed through by me. But the stupid part of that was this harvening component, right? Of like each year it would halve. It just created like unnecessary risk. And basically six months later, someone came in and said, that's a really dumb idea. And I said, no, it's not.

And then everyone actually said, yeah, no, it is a dumb idea. We should change it. And they did. All right. So for folks who have not heard about synthetics, we want this to be kind of a canonical episode about synthetics in the future. Could you just do a quick, explain it like I'm five of the protocol? What does it do and what problem is it solving, Kane? So basically what it allows you to do is hold a token that gives you exposure to any asset that the protocol supports on Ethereum.

So on Ethereum, you want price exposure to Bitcoin. You want to be able to hold a token that will, you know, move like a Bitcoin. And so what the protocol allows you to do is hold that token. It uses Oracle's to essentially, you know, lock the token to that price. And it's, you know, effectively the same as holding a Bitcoin, right, with obviously some different properties. And the same thing goes for, you know, other assets like that. gold, silver, you know, you can hold an ounce of gold that's tokenized, and you're able to get your price exposure the same way as if you were holding a, you know, one ounce gold bar.

These things are called synthetics, right? That's what a synthetic is. It's essentially a kind of a price tracker for all of these assets, though it's not the actual asset itself that's getting traded around. It's just kind of the price representation of that asset. And importantly, it's supposed to be redeemable for an equal amount of that asset in real life. Although it is not a claim on the real life asset, it should be able to be redeemable for the same amount of value of that real asset. Correct. Yeah. So, you know, there's no, you can't, you know, front up and convert one token, you know, one X-A-U, S-X-X-A-U token for gold. but in theory you should be able to convert that into the right amount of dollars to go and buy a gold bar. And buy an equivalent amount.

Right. And so how do, explain how the oracles get integrated in synthetics and what the oracles do. So we made a decision about 18 months ago to work with Chainlink to implement their Oracle system. And we worked really closely with them since to get this done. And very excitingly, finally we've made the transition. So we've moved all of our oracles over the chain link. And, you know, it essentially allows us to kind of hand over the complexity of managing this Oracle network to, you know, people that that's all they do. And so we can, you know, focus on the things that, you know, make sense for us to focus on and kind of outsource this price speed component.

So, you know, it's a big deal. It's also very helpful for decentralization because, you know, previously, we were running an internal article that was, again, very opaque. People didn't know what the rules were. It wasn't clear where the price speeds were coming, et cetera. So we've now moved away from that, and I think it's made the protocol much more open and decentralized subsequently. And the oracles are crucial for synthetics, right?

Because all of the synthetic assets available in the synthetic marketplace, they need to know what the price of their real world correlates. it is, right? So if you buy a tokenized, a synthetic asset of one ounce of gold, what the Oracle does is it takes outside world data of the real world gold price from some source, and the ChainLink Oracle reports that to the synthetic marketplace to tell the synthetic marketplace to price all of the synthetic gold tokens appropriately, tell them what price it should be. And then we can copy and paste the same model for all possible assets, right? Like the SMP, 500 or the

Tesla stock or Apple stock or you know maybe something even crazier like the population of a country like so long as it can be like reported by chain link it can be turned into a synthetic asset on synthetics correct that's correct exactly

as long as there's enough liquidity in the the external market as well so we don't we don't want the market to be manipulable of course of course And so how does the SNX asset come into play here? Where does the SNX asset get involved?

So it's essentially the collateral token for the network. So it's this coordination point to get everyone to come together and operate within this rule set. So if you're holding SNX, you stake SNX and you're able to issue debt, which tracks these price articles. and the fees that accrue from people exchanging different synthetic assets, you know, between each other. So if someone goes from synthetic Bitcoin to synthetic gold, they pay a fee. All of those fees go into a pool. And the SNX stakers who have been collateralizing the network get their pro rata share of those fees each week. And so this is how synthetic assets come into existence, right?

Like we don't just get to start with all these assets. They need to be created somehow. And so what someone does is they take the SNX token, say they take $1,000 of the SNX token, and then they deposit it into synthetics in a comparable way that they deposit ether into MakerDAW or something. And then they have some amount of credit based on their deposits. And that credit can be turned into a synthetic asset by choosing which Oracle to make that credit turn into an asset buy, right? And so you can have, if you have like $200 worth of credit by your SNX deposits,

you can turn that into $200 worth of synthetic gold or synthetic Tesla. Was all that correct? That's right. That's exactly right. But that's not the only thing that SNX does because the other half of SNX is governance over synthetics, the protocol, right? So it's this dual collateral token for the SNX marketplace. and the governance token over how the X and X marketplace works.

How has that relationship between like this dual purpose of synthetics, how has that relationship kind of been absorbed and understood by the community? Like how are people thinking about this dual relationship? So, you know, at the moment, the S&X token does not give you governance rights. So, you know, the governance process that we use is very similar to Ethereum, right? You know, it's not a direct token vote, you know, based on how much ether you have, right, that feeds into the EIP process. And we have a similar approach where, you know, we've got a community. They're all token holders.

But, you know, your ability to kind of advocate for a specific change or, you know, for something you want to see in the protocol is not limited to your token holding. You know, it's actually your reputation within the community that is what really drives, you know, your, your, you're, you're, you're, ability to kind of make changes and propose modifications. And I think that, you know, that's something that maybe is a little bit different to some of the protocols that we've seen recently, where, you know, they are using direct-on-chain governance. And, you know, I've got some serious concerns about, you know, the implications of that. I think eventually we will get to a point where, you know, we have this delegated, you know, voting process and people can delegate towards specific people who are looking to kind of join this governing council essentially.

But at the moment, the process is very rough. It's a rough consensus process. And we need to get to a point where consensus is really strong in the community before we make any changes. And there's a risk of that as well, obviously, which is, you know, ossification like we've seen in Bitcoin, where it becomes really hard to change things. And I think this is where, you know, eventually we will get to a break point

where it becomes too hard to change things through rough consensus and we actually need to move to some form of on-chain governance. But we've been taking that very, very slowly for the kind of reasons that I stated there. Yeah, okay, pardon me for the mistake. The duality of the synthetic token model I should have been referring to was the fact that the SNX token does have rights over the cash flow over the protocol, right? And so the SNX token is both the collect. for generating assets and then also the asset that is has a claim on the cash flow of the system. And so if people will remember about a year ago and around then, I was kind of known, loosely known as generally an SMX asset skeptic because of this self-recursion, right?

Like the asset, the token, the quote unquote equity over the protocol is also the collateral of the protocol, which to me I kind of saw that as like a dangerous. feedback loop. But I kind of now consider that, I kind of think that that attitude came out of like a bare market attitude, like a pessimistic attitude, because there's also nothing more like awesome in the world of crypto than feedback loops, right? Self-recursive feedback loops. And, you know, let it be known that ether and Ethereum and proof of stake operates in the same sort of feedback loop. So now in my mind, in my 2020 mind, I'm now actually like relatively bullish on just the feedback loop between S&X, the asset being both the collateral for synthetic assets,

and also generating, collecting the fees from the synthetics marketplace. And so has there had been any community discussion or community like understanding about the duality of the both the cash flow slash collateral model of the synthetic asset? There has. And, you know, this is something that we talk about, you know, a lot. But I think to be fair to maybe, you know, 2019, David, you know, the reality is that we are still limited, right? Like, you know, using SNX as the only collateral is somewhat limiting. And so, you know, we're pushing ahead very, very aggressively to add ether as a collateral to borrow, not just synthetic ether, which is, you know, the current ability that you have, but to actually be able to buy.

borrow SUSD as well. Because in the current environment in a bull market, there's a lot of demand for decentralized stable points, both die and SUSD. And so we need to have a lever to kind of extend the supply and that's something that we're working on really closely. So I think some of your concerns are still very valid, right? And we still have to solve some of these issues.

So I don't think it's necessarily a solved problem. But to go back to the question, to go back to the question around like cash flow i think you know it's funny right because uh in 2018 you know 2019 the skepticism around tokens was uh you know at its peak right um and my view was always that if you wanted a token to have value it had to you know accrue some cash flow right like it wasn't going to accrue value just from being a payment token that you know was was kind of uh operating in this walled garden i you know i was always pretty skeptical of that idea. And so I think that, you know, the thing that limited people from

approaching things this way was like a regulatory fear, right? They were worried about, you know, looking like a security, etc. And so I think, you know, one of the things that synthetics has contributed, you know, hopefully is to reduce that fear and for people to realize that, you know, a passive cash flow asset is a security, but a token that's like this coordination mechanism that allows you to participate in an ecosystem and do work and receive fees for it is something else entirely, right? It's obviously not, you know, the exact definition of a security. And so I think that one of the things that we've really contributed is, you know, to push that, you know, to open up the Overton window on token design and, you know, make people more comfortable

with the idea of, you know, these cash flow generating tokens. You had a fantastic thread on the Overton window of, you know, Capital and how there's a range of new options at D5 founders should consider. We definitely want to talk about that in a little bit. But is this what you just described? Is that essentially the upside thesis for SNX that a ton of cash would be generated basically by the synthetics critical? And that would have a value accrual mechanism that feeds back into SNX. Is that the gist of the upside thesis? That's it. Yeah, exactly. That's the idea that if we all come together and create this service that allows people to have price exposure to almost any asset on Ethereum, that there'll be a lot of demand for that. And that demand will result in a lot of free cash flow that flows through the network and ultimately to token.

We were talking to Stani about this, about what you mentioned to Kaine, about the 2018, 2019, where everyone was buried. right? So 2019, January 2019, David or January 2019, Ryan, could have purchased S&X for four cents. Not to make you feel bad, David, but like right now it's $5. So we had some opportunity costs there and so did everyone. But like, I guess to be fair, it felt very much felt like at that time that, you know, DFI was dead, that kind of Ethereum was maybe, I don't though, just barely hanging on, that tokens, all tokens were futility tokens. None of them could deliver any value. And now here we are right now. And S&X is like 12,000 percent up in price. Like, Marky Cabot 2.5 million to like 500 million, right? And like a little over a year later,

like absolutely insane. I think our conversation with Vance from framework sort of illustrated the power of a contrarian bet in Defi in 2018 and 2019. But how did that feel for you on your side, right? So you're more than kind of an investor, obviously, in S&X because you're actually investing your life in the protocol. And you're investing your team time and that sort of thing. You mentioned Ben's book, The Hard Thing, About Hard Things. I remember this always stuck out with me.

He talked about startups having this WFIO moment, this like, we're effed, it's over movement. before they kind of come out another side. Did you ever have a moment like that where you thought synthetics is never going to work or even before Haven is never going to work? Yeah, I mean, you know, in late 2018, mid to late 2018, you know, regulated stable coins, a combination of regulated stable coins and die really had marginalized the utility of the protocol. And so, you know, we were in the situation where we had to make a decision to either

it, you know, or just keep driving off a cliff. And, you know, we were definitely in a bad place, I think, at the end of 2018, early 2019, where, you know, okay, we had enough runway to kind of keep going, but clearly not enough to be able to take on circle, right? You know, or, you know, Paxos or, you know, any of these, these regulated stable coins that we're starting to see pop up. And so, you know, we, we just basically decided to double down and, you know, accelerate the movement to this multi-currency system. And that's where we started to see some product market fit. So, you know, I think that was that was probably the moment, the late 2018 moment where, you know, we decided to just throw it all, you know, just kind of a bit of a Hail Mary and, you know, change the monetary policy, you know, the pivot, the rebrand, all of it. And, you know, I think we're, we're pretty lucky in a number of ways that, you know, we just happened to kind of, you know, hit that that inflection point in defy around about the same time.

But, you know, there was a part of me that, you know, always thought that this was pretty inevitable, right? You know, I was very, very convicted that, you know, what we were doing made sense and that it was necessary and that, you know, that it would work in spite of the skepticism. Right. And skepticism was totally reasonable. You know, I think, you know, we had a number of debates on Twitter and in various places, you know, back then. And, you know, the people like Teo and, you know, who are still skeptical about, you know, can this work. But I think, you know, my view was, was that, you know, I really believe that the mechanism would be successful. And so, you know, the vindication of kind of seeing the market respond. And, you know, we're not there yet, right?

Like we're not at a point where the cash flow from, you know, providing this service, this decentralized service is sufficient to kind of, you know, keep the network going in perpetuity. But I think we're getting closer and we're starting to see that, you know, there is genuine demand for it, which is, which is really. And you had to have that conviction in 2018 to continue to work on what you were working on in 2019. Like at the time, like you mentioned it, USDC and even Tether. these centralized stable coins were basically dominating, right? So it was very hard to be in the

decentralized stable coin business. But another element that was very difficult was there was no like onboarding of liquidity into defy at all. Like it was all through the centralized exchanges. And where were they going to route you? Well, they're going to list tether. We're going to list USDC as the trading pairs. And it almost seemed like to me this kind of inflection point that that you mentioned for Defi, kind of occurred as an ecosystem of money Legos, right? Like, it seemed to me that Uniswap really started to fuel a lot of the liquidity for this space, and that created almost a feedback loop for synthetics to become more successful and increase its volume. Did you feel that?

Did you feel like the space was kind of, you know, growing together and that some of these other money Legos, almost snapped into into place to make synthetics much more feasible? Absolutely. You know, Uniswap is a big deal. But I think, you know, we really can't overlook the fact that it was maker and die, which facilitated this. You know, if there's, if there's no dye, I don't think any of this happens, right? So, you know, die kind of enabled, you know, things like compound to, to, to, to

really, you know, had this like symbiotic relationship, right? And, and, and I think, you know, even set protocol and Dharma and like, you know, all of these things, the ability to, you know, kind of believe that this is, was workable. I think a lot of that came from Maker. And so, you know, it's, it's, it's, uh, I think it's, it's something that maybe, you know, it's kind of overlooked these days, you know, people look at compound and, you know, to watch the compound token. It's like this kind of, you know, moment. But I think you have to go way, way, way. further back, right, to like late 2017 and the launch of die. That was the genesis of Do you still feel that cohesion in Defi that like the ecosystem is all, you know, we're

all kind of in it together? I mean, look, it's gotten a lot noise here, right? You know, back I think it was, you know, just before DevCon right, like that was the first Defi conference and there were maybe 50 people in the room, you know, and funnily enough though, even then, there was definitely a little bit of like you know tension right you know not everyone was necessarily friendly there were there was a bit of competition and I think also you know we were definitely not in a mindset of abundance back then right it was a very much a scarcity mindset and you know in a little bit zero sum and I think I think that improved you know through 2019 as things started to kind of heat up a little bit and so I think that you know

people are probably a lot more friendly these things than they maybe were even back then at times. But, you know, it's much noisier and there's a lot of crazy stuff going on. So, you know, we don't have the same level of connectivity, you know, with some of the projects just because it's really hard with everything going on to stay connected. Hey, guys, before we start talking about the Synthetic Spartans, we're going to take a moment to talk about the sponsors that make the Bankless Nation possible. Bankless Nation.

want to go fully bankless, but in the real world, Monolith is the Defy account that you need. It wraps your ETH address in a bankless visa card, and it does so much more. It closes the loop from Fiat to DeFi. So you can onboard Fiat to die on Monolith with zero fees. Then you can convert that die to A-Di, which is an interest-bearing savings account. Again, zero fees. And then you can spend that interest in the real world on a visa card. So you can finally buy your couple.

of coffee with interest earned in defy. Guys, this is magic. This is the closest thing to the Holy Grail crypto card and Monolith gives you all of it. You need to download the app at monolith.xyz to get your bankless visa card. It's optimized for European listeners. They'll be coming to the U.S. soon. And when you get that visa card, the monolith card, tweet about it when you do. I love seeing people unpackaging. Their beautiful bankless visa cards makes me realize that the revolution is here, search monolith in the app store. Ampleforth is a new base money experiment on Ethereum. Many people have heard of this new rebasing mechanism, and Amplforth was the protocol to first introduce that into the Ethereum space. Ampleforth is very comparable to Bitcoin in the sense that it has a non-dilutive supply.

However, there's one thing about it that's inverse with Bitcoin, whereas Bitcoin has a completely inflexible supply, meaning any demand. for BTC the asset is therefore reflected in the price and Amplforth is the inverse of that where Amplforth is pegged to 2019 dollars and any demand for the Amplforth token is reflected in the supply of the asset not the price of the asset so the Amplforth token tracks 2019 slowly over time so it should never be too far away from 2019 dollars and in order to achieve that goal it adds or burns Ampleforth token supply so that the market generally prices it around the value of a 2019 dollar. It is definitely not a stable coin because the volatility of the value that you hold will fluctuate up and down wildly, but the token itself is supposed to track a dollar.

Pretty interesting experiment. There's been a lot of spinoffs using this rebasing mechanism. They also have this liquidity mining program where you can supply Amplforth and Ether. their tokens to the uniswap pool and you'll be able to get an extra dividend of Amplforth tokens from the Amplforth geyser. So check them out at Ampleforth.org and see if this is an experiment you want to partake in. I think the best piece of alpha that I think everyone knows about nowadays is that community is everything, right? And synthetics is known for having one of the earliest and most the strongest communities in the space that we can really think of. And any time,

some community generates this bottom up, like, their own sort of mascot or icon, then that's something to pay attention to. And like the Synthetic Spartans came really, really early. Was there any one particular moment that more or less like triggered the Spartan meme or the instantiation of the protocol or of the community around Synthetics the protocol? Or was it more of just a grassroots kind of bottom up type of thing where people just for somebody coined the term and then it just grew from there how did how did this synthetic spartan meme come about well i think it it kind of came from g right you know that was his avatar uh you know so um dj spartan right um you know his avatar in in discord was uh you know the um one of the spartans and and so you know when people started to feel that this

was really, you know, cohesive and, you know, starting to solidify. And they started looking around for, you know, what he was one of the people that really drove it, you know, and kind of gave this identity of, you know, we don't give fuck. We're just going to, you know, keep pushing here. And it doesn't matter if people don't believe in us. It doesn't matter if, you know, they're skeptical. We know what we're doing and we've got a vision of where we want to go and we're just going to keep pushing through. And so I think that was where it kind of, that was the genesis. And DGN Spartan for folks that aren't like on Twitter all the time, like many of, probably all of us here are. He's a pseudonymous Twitter account, right?

That tweets about lots of things in DFI, but was an early believer, particularly during the bear market in what synthetics was doing. And I like the Spartans analogy because there weren't a lot of you guys back then. You know, there's the 300, the money. 300 against it was less than 300 yeah it was against all of the forces that that were kind of opposing it and yeah it's it's fantastic that in crypto you're able to i mean we talked about chain link god recently in our episode with vance but crypto is able to attract these pseudo-anonymous yet incentivized very strong and very captivating and very

I guess, formative community members. It's like, have you seen that anywhere else? Like you were involved in developing, building communities before, but is that something unique to crypto in your mind? I really think it is. And maybe it's also unique to like this time on the internet and that people can really, you know, kind of create a persona. You know, I think there's been communities, you know, like IRC, you know,

things like that where, you know, people didn't necessarily identify with their, you know, their real world persona. But I think the kind of cut through an amount of impact that someone can have on crypto Twitter as an anonymous account is much, much more powerful than anywhere I've ever seen it. Kane, can you compare and contrast what the community's energy was like before and after the introduction of the SIP process. And maybe there wasn't any one formalized beginning of the SIP process. But I'm going to go ahead and guess that, you know, at some point there was this team-led

protocol changes. And then now it seems to be that there's this community-led protocol changes. During that pivot between the pre-the-team governance to the community governance, how can you kind of compare and contrast the community energy and, you know, self-actualization around the stewardship of the protocol. I think the most tangible immediate thing that happened when we introduced SIPs was it forced the team at the time to be more transparent. You know, it put a check on our power, right?

Like we weren't able to just arbitrarily do things. We had to actually go through the process ourselves. And it was something that I really strongly enforced, you know, know in the team right that we couldn't just pay lip service to this we were responsible for advocating for the positions and you know we would assign someone within the team to be the champion of that SIP to go out to the community and get it through and I think that that mindset then kind of you know went through the team and then you know kind of further out into the community where they all of a sudden again it wasn't just paying lip service to this idea of decentralized governance it was

You know, we were embodying it. We were, you know, actually, you know, forcing ourselves to participate in the process. And, you know, if we got it wrong and the community said no, then they said no. And it happened multiple times, you know, where there are things that before the SIPs, we would have just done it and then told them afterwards. And then all of a sudden, we had to tell them ahead of time. And they had the ability to say, actually, no, you're not doing this. We don't want it. And maybe if you could take a moment and define SIP and also where it came from, which are the EI.

and then maybe also comment on how and something like an SIP would enable community engagement. Yeah. So, you know, it's basically this idea of a formalized document that, you know, allows people to see what an improvement proposal is going to do, right? So, you know, there's a structure about here's why we think we should do it. Here's exactly what's going to happen. Here's the intent behind it. it and it puts, you know, it puts a lot of structure around any change to the protocol. So, you know, everyone can feel engaged with it. And one of the early ones that was rejected was this proposal that I wrote to allow people to migrate their escrowed S&X tokens from one account to another. So the issue was that, you know, we, one of the unintended consequences of the staking rewards being locked for a year,

was that if you started staking with multiple different accounts, you could end up with this situation where you had to maintain these accounts forever. And if you abandoned one of them, there was a huge opportunity cost. So I proposed this idea of allowing people to consolidate their escrowed tokens into a single account. And people said, no, we don't like that idea. We're worried that it's going to create like a secondary market for escrow tokens and all kinds of unintended consequences. And it was funny,

because that proposal that, you know, obviously there was, I had an vested interest in getting it over the line because, you know, I had a number of accounts that, you know, test accounts and things like that that I was maintaining. And they basically said bad luck. Sorry, you're not doing it. And it still hasn't happened to this day. So, and just to define SIP, it stands for a synthetic improvement proposal. And so this comes out of, you know, EIPs, which are Ethereum improvement proposals,

which came out of BIPs, which are Bitcoin. improvement proposals. So there's the there's just this common, uh, you know, something IP, which is how generally protocols, uh, and Maker has the same thing where they have maker improvement proposals. So this is a common theme throughout crypto. So when, when SIPs kind of just became a thing in the synthetics protocol and also in the synthetics discord, how did that change the team's relationship with the community, right? So now all of a sudden the community realizes that it has, it has new voice, it has power. It has a way to voice their wants and desires and then try and generate some sort of rough

consensus about what the community wants. And then they realize that they can get the team to change things in the ways that they want. So how did this kind of change the team's relationship with your guys' community? So are the community, is the community now steering the ship, would you say? Or who steers the synthetic ship? I think the biggest immediate impact that it had was to reduce this kind of voting block of the team, right? Because now all of a sudden there were people, you know, who now core contributors, right, that we have that are funded via the synthetics Dow.

But, you know, we're at that time funded by the Sythetics Foundation. It was this idea that, you know, oh, there's the team and the team thinks this. And then there's the community and the community thinks this. But actually what it did, which was one of the most meaningful impacts, I think, was to kind of break that up. And you would actually have people on the team who were like, well, I think this is a good idea. And then other people who didn't. And they would actually be in the community, you know, participating and kind of advocating for their view. And it really had this impact of kind of flattening, you know, already we didn't have much of a hierarchy.

But it allowed for, you know, someone in the team to disagree. with me, for example, on a specific point, and rally the community and get it over the line. Rather than, you know, needing to kind of all of us agree and present the United Front, you know, it really changed it to we're all members of the community. And even if we are funded by the foundation, we still have the responsibility to, you know, participate in this governance process the same way that any other token holder does. And because of the community being given a voice, did you see more community members enter the community? Did you see that community grow after that? I think what happened is as new people found

out about the project and kind of, you know, join the community, they really felt this like palpable sense of there's something different going on here. You know, for people who've been in crypto for a long time, you know, communities, uh, sometimes very shallow, right? You know, it's just a bunch of people that are holding the same bag, right? Um, but I think in in synthetics, uh, at that time and, you know, even today, uh, but, you know, very, very, very, you know, specifically at that time. If you turned up in the Discord, you're like, holy shit, there's something going on here. Like, people are very passionate about this. And I think for, you know, people with the right mindset who genuinely, you know, wanted to kind of participate in a protocol and, you know,

have an impact, it was really attractive. And they often stay. Every protocol should go through a bear market, right? Like, that's where the community is for in the trenches. It's not in this bull market, like, you know, 10x run up stuff. That's not where you build, like, the, the, the, the, the, the core folks. It's those that stick with you during the bear. Yeah, exactly. So next step in the story of the synthetic Spartan, like community growth, growth story, was the ability to leverage SNX as like this engagement tool where, you know, you would purchase SNX and then you would stake SNX to access the inflationary rewards. And we were talking about this earlier when we were talking about how the community kind of rallied up to say that Keynes, for, you know,

year happening model was stupid and there should be a more smooth, smooth happening model. And again, this was this was a community getting a voice to rally for something that, and advocate for something that they wanted in their protocol that they used. But then the inflation rewards are, it was a whole new, a whole new thing. And it started to create this feedback loop. Can you talk about how the inflation rewards impacted the growth of the community as well? So yeah, I think, you know, if you go back to 2016, 2017, this idea of artificial scarcity, right? You know, there's only X million or X thousand or X billion tokens, right?

And therefore, you know, if people want to use them to pay for something, you know, in some system and there's only so many of them, then the price will go up, right? Which, like, looking back on it is just like idiocy. Like, it's so obviously dumb, right? But we were all drinking the Kool-Aid and, you know, I think we kind of thought this might play out, right? But the thing that was missing was, you know, rewarding people for engagement, right? And I think that that, you know, when I kind of looked at why the engagement was low and took a step back and really, you know, took a longer view, the thing that was obvious to me was, you know, back in the day, if you were going to spend, you know, I think the first time I set up a Bitcoin miner, in like 2012. It took me like an entire weekend. I spent like 48 hours, didn't sleep, like, you know, sitting on forums, like reading different things, going through, you know,

hardware, config issues, et cetera, to like get this Bitcoin miner set up. And the reason why I did it was A, I was interested, but B, I wanted to mine Bitcoin. I, you know, thought it would be cool. And if I could mine some Bitcoin, that would be amazing, right? And I think that that was the thing that was missing from all of these artificial scarcity tokens, right? It was, okay, we're going send all the tokens out, everyone's going to hold the tokens, and then we're going to ask them to do something, but there was no way of the protocol actually rewarding them. And so the change to the monetary policy to add this inflationary component and reward people who were participating was the, you know, that was the thing that kind of kicked off this cycle and really drove

adoption engagement. So it seems like the thing maybe we thought was the secret sauce of Bitcoin and part of the secret sauce, this artificial scarcity in doing that. token was less important than the other element of the secret sauce, which was like community network participation, right? That's, I feel like, what you unlocked with SNX. Absolutely. And, you know, we've seen it now play out multiple times subsequently, you know, things like Wi-Fi and Yam and, you know, where people are doing something that the protocol wants and earning tokens from that. And it's an incredibly powerful, you know, driver behavior. Okay, so the high level roadmap so far during the synthetics 2018 bear market is that,

you know, the community is kind of spun up. It's pretty, it's pretty thin, like it's less than 300, but 300 Spartans regardless. And then the SIP process gets integrated. The community gets a voice. And then there is in the inflation rewards that's built into that. So from if you're on the inside, what you are seeing is that the team is starting to listen to the community, and the community is starting to grow a spine, grow a voice, and then also what the community wants does actually end up getting built. And then not only that, but also you are able to get access upside exposure to the growth of synthetics through the inflation rewards, meaning not only is the team executing to the will of the community, but also the community is getting engagement

rewards, right? So you're able to stake S and X and get inflation rewards. And then we're also going to talk about the farming rewards of Uniswap and the ETHSEth pair on Uniswap. But this is where we start to get this feedback loop where after these things happen, and especially with these inflation rewards, there starts to be the price increase of synthetics, right? And that's where I think synthetics first got on like a lot of people's radar when synthetic. first broke a dollar and then I saw D-Gen Spartan on Twitter saying like synthetics is going to $6 and like my bare market pessimistic mentality is like no no way dude since $6 that's not happening and you know not too long ago synthetics was the

token was at seven and a half dollars a couple months a couple weeks ago and so at this point we're starting to see this feedback loop where the price goes up and then more community gets created because more people are getting people are fundamentally interested in number go up, right? And so number goes up. People go into the discord. They get engaged with the community. They've accessed the SNX staking rewards and then and then price goes up further, right?

And this is this, to me, this is the story of the synthetics bear market turning into a bull market. And in my mind, the synthetics platform along with Avey and perhaps along with chain link too are the direct creators of this, this bull market at large. right and and perhaps even a little bit more credit to synthetics and maybe even you specifically came because you are the quote unquote father of modern agriculture because synthetics created the whole concept of yield farming right so can you talk about how the community was able to access further rewards SNX denominated rewards through through both through staking but also through providing liquidity to uniswap and then maybe tie that into how that's linked into the to the to the to the to the the farms that we see nowadays. Yeah. So, you know, all of the things that you described there are the elements that I think are necessary, but not sufficient, right? Like strong community, you know, the, you know, this inflation reward, your feedback

loop, et cetera. But I think it was, it was still really critical that there was some belief that we're building something that was going to be useful, right? you know if we hadn't have had this idea that you know we're building this derivatives platform you know after we pivoted away from the payment network and you know like it's funny because we've now come back to the point where sUSD is is becoming quite useful and people are using it's you know it's gaining traction but you know we've we've thrown out the idea of transfer fees and then transaction fees etc and now go into this this exchange fee but i think we needed to have that core

belief that we're building a protocol that was going to have utility, right? And, you know, that, that was really important to, uh, to kind of get people as they came into the community, uh, to kind of, you know, to engage. I think if there had been nothing there except for these feedback loops, it would have, uh, it would have kind of petered out. But once we realized that, you know, we had this, uh, this kind of S and X, you know, we had this inflation that we could direct at anything, right? So we could direct it at, you know, our own protocol, but we could actually directed at other things that were somewhat ancillary to, you know, to the protocol that we also needed, like liquid on reps. And, and what was really interesting is, you know, we went through

multiple iterations, different people proposing things. Gee, was one of them. And, you know, Arthur and I actually were on the other side, as often happens, you know, I was on the dumb side of the table. And, and, you know, we're like, oh, I don't know if it's a great idea. You know, it was still, like, I still have a bit of Bitcoin maxi in me, right? Where I'm like, oh, I don't really like the idea of changing the monetary policy. I feel like we should be careful about that, et cetera. And, you know, it's taken a while to kind of beat that out of me, but I think the market finally has.

But, you know, we got to this point where we're like, we need a liquid on ramp. We have Uniswap now. Uniswap is amazing. You know, we were one of the early projects that I think really saw the utility in Uniswap. And we said, okay, let's try it. You know, we finally got to a point where the community was comfortable with like, okay, let's take an ETH, S-Eth pair, right, where there's no impermanent loss. You know, let's direct some inflation at it. And, you know, we went from nothing to, you know, at one point, I think the equivalent of like 85,000 ETH in Uniswap.

Right, which was incredible for Uniswap, incredible for us. People were looking at it's going like, what is happening here? you know what's like how is this even you know this was pre the the total value locked you know crazy metrics that we're we're seeing these days you know the idea that you could lock up 85,000 eat uh you know over the course of like a month was pretty insane and and no one pretty I was just personally I was just surprised all this stuff worked like it was like wow it's working yeah yeah absolutely absolutely it was it was very it was eye opening I think for a lot of people You know, we had this belief that you could get behavior to kind of happen.

And, you know, previously it was only sort of happening internally in this, this kind of self-referential feedback loop, as you sort of said. But all of a sudden, we're like, this is real. There's, you know, 45,000 ETH in there and 45,000 synthetic ETH. Like, this is a real thing. Like, ETH is money. This is real. Like, people are putting real value into Uniswap and, you know, into this liquid on ramp to get access

to S&X and, you know, and you'll get access to this reward, which I think, you know, that was really kind of the, you know, the crossing the chasm moment where people were like, okay, this works. And so to me, the last cherry on top for like this bull market story and how synthetics fits into into Ethereum is, but the integration with uniswap is hugely important because everyone loves uniswap, right? But you guys also started to leverage chain link, right? And Chainlink has its own extremely robust community as well. And you guys really, really needed a solution like Chainlink to exist in order to produce all your synthetic assets.

And so now, from what I'm guessing, I was not in the chain link community in the bear market, nor was I in the synthetic community in the bear market. But I'm going to go ahead and guess that when the integration between synthetics and ChainLink was announced and then was actually manifested, that there was some sort of melancholy. of the communities, right? And so not only are protocols on Ethereum composable, but their communities are also composable as well. So can you, was there any sort of signal as a result of the integration between the protocols between the two communities? I think so. And, and, you know, for the Chalind community, it was a very similar situation to the synthetics community, right? There was a lot of belief. They, you know, they believed in the value prop of what Chalindling was building. You know, they believed in the approach that was being taken and they believed in the utility that it would bring to the

ecosystem, right? But belief is, you know, only gets you so far, right? They needed it to actually manifest in, you know, someone putting their hand up and saying, yes, we want to consume this protocol. You know, this is something that we really see as beneficial. And I think synthetics was probably the first, you know, protocol to really kind of go all in and say like, we're going, you know, we're doing chain link. This is it. We're going to, you know, deprecur. our external, sorry, our internal oracle and move to this external oracle. And I think that that was, you know, huge validation for the community, right, the chain link community that like this thing that they'd been saying was going to happen all

a sudden, you know, this was the first example of it. And then, you know, you had a bunch of other, other projects then, you know, kind of come along. But I'm pretty confident that we were one of the first to sort of go out there and say, this is the right solution. We've vetted everything. you know, we're really happy with not just the solution as it stood then, but our confidence in chain links ability to, you know, augment and improve the solution over time to get it to a point where we really, you know, thought it was going to be a long-term solution for synthetics. So, okay, so now here's where we are.

It's in 2020, yield farming is now a thing, thanks to the creation of agriculture. So thank you, Kane. The synthetics community is a community that, you know, other protocols would die for. The synthetics protocol is also integrated into other protocols like chain link, like Uniswap, and then, like, and more, maybe more passively into protocols like yam and sushi. And so it's getting its own integration and it's kind of organically. And the SIP process is alive and well.

And things are good in from, at least from my perspective of synthetics. So where are we going next, Kane? What's next for a synthetics? What's next on the roadmap? So, you know, there's there's still kind of three broad pillars, right, that, you know, are not quite there. You know, we're seeing a decent volume, decent exchange volume, but, you know, it can grow much further, right? You know, we've seen uniswap curve, you know, a lot of these AMMs generating incredible volumes, you know, volumes that are outside what I think a lot of us believe could happen this year, right?

And so I think that, you know, that's something that we just need to nail. And we're working on a number of things to make that happen. But then we've also got this other issue of, you know, supply constraints, right? So we need to get enough supply out there, which is, which is ensuring that, you know, we've got a collateral, that, you know, it's robust and people can, you know, lock eat and issue SUSD. And then the final component is, you know, gas costs and latency and, you know, throughput. Like, we need to get onto.

to L2. We need a scalability solution. And so we're working with the optimism team. And, you know, that's moving along really well. And I think we're kind of getting to a point where, you know, that's going to be something that is going to be the next kind of big phase shift for the project and, you know, get us to be able to scale up to, you know, tens of thousands of use. Okay.

So we've got three things. We've got volume, supply, and gas costs. Can we talk about each of those? So on the volume side of things, you guys today just announced a synthetics volume program. Is that important? Can you tell us about that, Kim? It is. And the reason why it's important and we wanted to kind of help to bootstrap this process is that, you know, synthetics is a protocol.

And at the moment, you know, it's fully vertically integrated. And, you know, we have to build the protocol itself. You know, we have to build, you know, all of the components all the way through to the DAP layer, right? But eventually we want to get to a point where, you know, we believe that there are people out there who can build much better DAPs, better wallets, better integrations, and can just consume the protocol and abstract away all the complexity for their users, right? And so this is our way of kind of starting that process and bootstrapping it by essentially, you know, funding this, this rebate for people who directly integrate synthetics, because we believe

that, you know, it'll be a net positive for their users over time. But we, we need to kind of kickstart that. And so, you know, this is a big deal of something we've been planning for probably about six months. And, you know, it's something that we think we can get, you know, maybe 10 or 15 different integrators to, you know, jump onto in the next couple months during the trial. All right. So that sounds huge. And on the supply question, I guess, you mentioned Heath Collateral. So last I had looked at that, there was kind of an initial amount, a capped amount of ETH Collateral that was going to be let in the protocol, maybe it already has been. Can you give us an update on the status of ETH collateral?

So there's some in there now. Is that correct? And then how are you looking to expand that? There is. The limiting factor, though, is less the supply cap right now and more the fact that you can only borrow synthetic ETH against your ETH, right? So what it effectively means is that, you know, someone who wants to lock ETH and be able to, you know, do yield.

or trade or whatever, it kind of has to short ETH, which is obviously not ideal. So the next phase, which is hopefully three or four weeks away, is the ability, like you can in Maker, to lock ETH and borrow SUSD, the same way that you can lock ETH and borrow D. And so that will significantly expand the supply of SUSD. And will there be a cap on that, the amount of ETH. There will be initially, yeah. It would probably be about 5,000 ETH, I think initially. But like Maker will increase the debt ceiling and allow that to kind of grow over time as we get confidence that, you know, liquidations are working and everything's working smoothly.

Okay. So that's going to be for SUSD, right? So SUSD is almost, would you, would you say it's like a dye alternative? And like one thing that I think the bankless space has been really clamoring for is a very bankless stable coin, the most decentralized stable coins. There's tons of staple coins in the space right now. very few of them are decentralized. Maybe Dai can kind of hold that title, although it's starting to incorporate some more centralized assets as well. What's the vision for SUSD so far? What's kind of governance thinking?

Is it going to be a more decentralized alternative? Potentially. But I think that what people are demanding in the market is a kind of low governance, low complexity, eat back stable coin. And I think we will see that. I think people will build that. The big question, right, is not, you know, will they build it, but can you actually bootstrap it? Right.

And so, you know, the thing that that I think, you know, Maker did incredibly well was, you know, to kind of bootstrap this initial liquidity, right? And I've said this on Twitter. It's incredibly hard to do that. I think people, you know, massively under underestimate the amount of effort and, you know, belief that was required to kind of bootstrap the initial dye supply. And so, you know, I do think that we, you know, we will be an alternative stable point, but there is a lot of complexity in the synthetics ecosystem that, you know, maybe won't satisfy everyone. They might want something a little simpler and less complex. So what is the incentive for someone to deposit ETH to mince some SUSD then?

Well, arbitrage profit for one, you know, so if we're trading above the peg, being able to, you know, sell and capture that premium is the first thing. The second thing is, you know, SUSD is used in a lot of yield farming system. You know, you can go and deposit it into Curb to farm curve, balancer, et cetera. And oftentimes the yield that's paid on SUSD is much higher than on EAT. So it kind of makes sense to lock your ETH up, get SUSD and use that rather than just depositing your ETH directly. But access to eth overall as collateral, just on the supply topic some more.

You know, we've written pieces on bankless about this concept of economic bandwidth, right? Where, you know, the chain, Ethereum in particular, needs to have assets that are highly valuable and highly liquid in order to provide bandwidth for the entire D5 financial system that's built on top. The thesis in bank lists is that, like, synthetics has a limited amount of economic bandwidth, right? Right now. So let's say the market cap of S&X is $500 million. That means you can create, like, you know, some proportion of $500 million in synthetics on top. But once you start introducing other economic bandwidth sources like potentially ETH, then you can start to create a lot more supply.

Does that theory resonate with you? Is that kind of an important aspect when you think about supply and when you think about collateral, just collecting all of these economic bandwidth sources from Ethereum? It is. You know, one thing, though, that I think is really critical that, you know, we've kind of, as a community, sort of, you know, leaned into this idea that we only want to use permissionless collateral, right? We don't want to go down the path of using, you know, centralized. stable points, et cetera, as collateral.

So, you know, being able to expand the supply of SUSD on, you know, on the back of ETH and maybe potentially, you know, with some tokenized BTC representations that are permissionless, which, you know, we still need to kind of let them play out a little bit. I think before we'll get comfortable enough to use that. But, you know, the ability to expand the SUSD supply, which is now, you know, sitting at around 100 million, which is kind of correct. I'm sure you guys remember when die hit 100 million. It was this huge deal, right? And, you know, SUSD just quietly hit 100 million, you know, a month or so ago. And it was... Wow, I didn't even know that. Yeah, it was just like... I was not tracking it. Yeah, but it's like we didn't even notice it, right? Like, it was just like, oh, wow. Yeah, it's 100 million, right? Like, it's just, you know, the way the clock is gone. But the ability to expand SOSD out to like 500 million or a billion just requires, uh, it's just, uh, it's just, uh, ETH, right? Like, it's just critical to the functioning of the system. So it's always been something

that we've considered. And it was just about trying to find the right way to do it without undermining, and this is really critical, without undermining the utility of S&X within the system. You know, S&X is still the backstop of the system. It's still the thing that, you know, accrues all the fees. So, you know, there needs to be the right incentives for people to use EAP as collateral, but not undermine the incentives to use SNX. And a quick definition for our listeners. So when you say permissioned assets, you specifically mentioned ETH and you mentioned possibly some future version of a tokenized Bitcoin. But apart from that, are there other permissioned assets on Ethereum?

And like why isn't something like USDC, the stable coin, not a permissionless asset? I mean, you've got essentially a custodian that's managing the funds, right? that's managing the fiat that's in a bank account somewhere and then you know issuing essentially an iow you against it right so you know that's that's a very different type of asset to something like eath right so um you know i think maybe we could consider uh you know like maker using tokens on ethereum um but even that uh is you know it brings its own issues right so i think for the time being you know, it will be and then maybe adding

some tokenized BTC but to get the next step of adding, you know, ERC 20 tokens as collateral, I think would be a stretch for the community, but we'll see. So when you say that you'll be able to mint SUSD via your ETH, listeners, and correct

me if I'm wrong, but listeners should also just be hearing that because you can just swap SUSD for any other synthetic asset, that you'll be able to to maximally leverage your ether deposits to create any sort of synthetic asset. It just starts with SUSD first, right? SUSD is like the default. It's like the water. And it's the, it's the substrate for going into any other synthetic asset. So, you know, maybe SUSD isn't really interesting to people because, you know, dollars aren't interesting to us because we're in crypto.

But it's just like, it's the substrate token to get into every other synthetic asset, right? That's, this is all true. Absolutely. And, you know, you can go SUSD into S-D-5, for example, which is a basket of all the different D-5 tokens on Ethereum. So, you know, there's a number that you can go into gold, for example, right? So if you want to, you know, lock your ETH and get some exposure to gold. But I think for most people who just want this price exposure, probably the safest thing is, you know, take some of your stable coins, for example, and just buy S-U-S-D and then convert it, rather than necessarily locking, you know, ETH and buying gold.

But, you know, we'll see. It's going to be interesting to see how that plays out and how much demand there is for people to add supply and just participate that way, or if they actually genuinely want to lock Heath and start trading. Yeah, as we said before, I mean, I think ETH has economic bandwidth, trustless economic bandwidth or permissionless is the word you used is definitely a bullcase and a, you know, tailwind for Eith price. but we will see how that pans out and look forward to you guys doing more with it and adding more

with it. So we talked volume. We talked to supply. The third area, which I think is really interesting, is gas cost optimization, right? So we've been living in a gas price or down as we're recording this, but I mean, it could be back up to 400 next week. Who knows? In one of our conversations, Kane, you had talked about the work that you're doing on roll-ups with OVM and with, the optimism team is like we had we talked about well kind of the main chain is like manhattan right and this ovm solution roll up solution as a a layer two chain that you're building is almost like a brooklyn right um where it's going to have more space the real estate's going to be a little bit cheaper uh and it's going to have more room for low cost transactions essentially so i'm i'm

curious to hear your progress on that and how are you planning to make Brooklyn a place that other protocols want to live and users want to come to? Funnily enough, I think we've gone a little bit over time, which is totally fine, but I was supposed to be on a call with the optimism team, which I told them a few minutes ago that I wouldn't be able to make. Oh, wow, that's a little bit funny. Yeah, I know. No, no, that's okay. It's totally fine. Yeah, no. We'll message them and apologize. Yeah, we have a weekly catch up that we do that was like right after this. But, you know, obviously we're having a good time here. So I just told them, I'll catch up with them later.

But, you know, tell them you'll show them on the pod. Exactly, right. So I typically do. And so, so, you know, I think the heavy lifting of this is obviously on the optimism team, right? You know, they're the ones. ones who are building the solution. We are kind of advocates for that solution and that specific, you know, chain for a couple of reasons. One, you know, they're building something that is going to be sort of, you know, optimized for getting people onto it as easily as possible. So, you know, with the most minimal changes to contracts and, you know, ideally they'll just be able to deploy their existing main contract straight onto L2. And that's important for composability because if we want,

you know, all of the fund that we're having now to continue, you know, in an L2 environment, we need those contracts to all be running on the same, you know, optimistic roll-up. And so, you know, they're working with a number of teams, but, you know, one of my, you know, main, main jobs at the moment is like going out and talking to other projects and kind of, you know, advocating for them coming along and participating in this optimistic roll-up chain that the OVM supports. And so, you know, that's something that is coming really soon. And I think it's going to be a huge bonus, particularly for smaller SNX stakers. So, you know, we've got this very problematic issue right now, which is that gas costs are so high.

and the transaction complexity on synthetics is so high that people are priced out. They actually can't even participate unless they've got a couple thousand S&X, for example, which is maybe $10,000. So there's a whole range of people that are just unable to participate in the system right now, which is really problematic. So this first phase of the OBM migration is going to directly address that and really be targeting the people who've been kind of left out, you know, for the last month or so with these high gas prices and trying to, you know, make it a little bit easier for them to participate and, you know, reduce some of the costs that they've been experiencing. We were talking with Stani in the previous episode, and he said that if somebody builds a great Brooklyn, you know, Avey will be like first to try to get in there.

Have you been coordinating with any of the other DFI protocol? towards this or is it mainly a synthetics initiative? No, no, I've definitely been, you know, I speak to Stani a couple times a week. You know, so I've been advocating for this, you know, with most of the DFI projects out there that, you know, that we talk to. And obviously, you know, the optimism team are working on that as well. But it's one thing for, you know, the project itself to say, hey, come and, you know, play in this, you know, this place that we built. It's another thing for a project to say, hey, like we've done our D.D. We're really comfortable.

This is the right approach and we're going all in on it. So I think that that carries a lot of weight. And so I'm very hopeful that we'll be able to have some of the critical money Legos, you know, over on this optimistic roll-up shard very, very quickly. Very cool. Very quickly. Any timeline on that? I just curious.

I mean, look, you know, the options in the team. have said main net by the end of the year, I think we'll have some interesting progress even before that, you know, specific synthetics progress to, you know, as I said, alleviate some of the gas price issues. So, you know, it's going to be a phased approach, but we're working really hard to try and get this done ASAP to get, you know, kind of pseudo main net stood up to kind of help with the gas costs for stakeholders. Well, well, well, that sounds fantastic. I'm really looking forward to that, lower gas prices. One other topic, I guess, on road map is how the whole synthetic space is shaping up. So there's this idea that a decentralized bitmax might come about. And synthetics is certainly

part of that story. But there are some other protocols as well that have maybe some different tradeoffs. So of course, there's Maker, which is, you know, produces dye, which is a synthetic in itself. But then more recently, there are protocols like the UMA protocol. And there's, of course, D-Y-D-X that takes a more order book-based approach. And then there's newer protocols like the perpetual protocol. Just curious, high level, what are synthetics's advantages or maybe some of the trade-offs relative to those other initiatives? So I think the main trade-off with something like UMA is that, you know, we don't have the ability to issue the exotic assets that they do. you know, because they have this kind of priceless oracle approach, they don't rely on a liquid market externally to pull a price speed in from.

So, you know, they can do they can do all kinds of weird exotic instruments, which I think is really cool. But the flip side of that is that, you know, each of those instruments or, you know, assets needs to bootstrap its own liquidity. You know, as we've kind of seen with their early experimentation, that can be somewhat challenging. sometimes. So, you know, getting liquidity in this environment right now is really, really hard, right? Like, you know, whatever liquidity premium you've been able to kind of accrue is a huge advantage. And, you know, obviously we've seen things like, you know, the vampire mining from Sushi to uniswap, which is, which is a whole other topic that, you know, we could spend a long time talking about. But, you know, liquidity modes are still, I think, a big deal. And so, you know, for us, the fact that we've got, you know, $100 million worth of SUSD

and I think, you know, 130 million in since is a big advantage that we've got. Do you think like designs like DYDX also suffer from that, like lack of or the liquidity challenge as well? But essentially when you're doing something in synthetics, you already have this nice pool of collateral. You kind of bet against the house, right? And that can be advantage for liquidity. Absolutely. You know, it definitely creates, it creates, you know, a lot of advantages. And one of the things that it will enable, which we've talked about a little bit,

is this idea of tokenized bridges between pools like Curve, right? So, you know, Curve is this AMM that is really amazing at allowing you to convert different assets that track the same price. So, you know, USDC, UST, die, SUSD, etc. And then, you know, tokenized Bitcoin, and, you know, tokenized gold. But it requires that, you know, all of those assets track the same price within the same pool. And it's hard to bridge the liquidity across. But what synthetics is potentially going to be able to do is be the bridge between two different curve pools. So you can imagine a curve pool that had, you know, ETH and S-Eth and then a curve pool that had, you know, S-BTC, T, BTC, Wren BTC, and RAPBTC, you'd be able to go E into RAPBPC via this tokenized bridge

in these curve pools. And, you know, I'm very confident in the next couple months we'll see, you know, E to wrap BTC transactions in the, you know, millions of dollars on chain. Kane, I want to turn the conversation to regulatory compliance because, you know, there's always kind of this, this monster in the back of crypto where with it, which is like the nation state. right, this thing that is inherently, generally it has an adversarial stance to probably some of the shenanigans that's going on in this space. And so how does, how do you guys as the centralized synthetics team think about compliance? And like what would happen if some regulatory three letter agency came in and said like, all right, you guys need to implement like KYC?

If that happened, what would be the next steps for the synthetics team? So I think this is kind of a critical point. Maybe the other pillar that we didn't talk about amongst those three, which is just generally decentralization and decentralized governance and getting to a point where the protocol is sufficiently decentralized that a regulator would look at it and say, well, this is something that we can't actually capture, we can't shut down. It's similar to where I think the Ethereum protocol got to, right, and where the SEC said, well, it's sufficiently decentralized that, you know, we don't believe it's a security.

We don't believe that it's within, you know, our kind of purview to regulate this thing. Maybe it's someone else's, but, you know, we're not going to step in. And I think that that was, you know, a very calculated decision on the basis that you couldn't really regulate Ethereum, right? It was genuinely sufficiently decentralized. You know, you couldn't just go and round up Italic and ask him to, you know, turn off the master node, right? That wasn't a thing. And so, you know, I think that I think that we are getting to a point now where, for example, you know, if you said to me shut it down, I actually can't. You know, like I don't have any power that would allow me to shut down the protocol.

You know, the articles are now decentralized. You know, governance is decentralized. We've got three different DALs that control protocol upgrades and distribution of funds, et cetera. and there's no single party within the protocol that has a level of control that could actually stop it. And I think that that's something that's only really happened in the last three months where we've gone to that point. So I want to drive this home for listeners because I think there's a lot of people that haven't totally appreciated how bullish, specifically synthetics is for synthetics to be completely decentralized and how bullish it is for the rest of Defi, right? Because coming out of realty and what is going to be coming out of realty is the realty asset,

which is an aggregate token that has the value of all of the real estate of the realty platform, like underlying the asset, including the rental income, right? It's all of realty tokenized into a single token. And that token is unfortunately going to be whitelisted because that's how security tokens work. Like realty is an American company and therefore it answers to the SEC and no one in Realty has any interest in going against the regulations of the SEC. However, what can happen when this asset is created is that synthetics can just make a synthetic realty asset, which is then therefore completely permissionless and then has all the robustness

of the decentralization of synthetics, right? And so any sort of token that comes to Ethereum that is KY seed and permissioned can have its decentralized permissionless counterpart on synthetics. Keene, have you thought about this potential world? We have. And obviously, there's lots of discussions around, you know, which assets we should support and, you know, ensuring that there's enough liquidity for them, et cetera. And so I think, you know, the only constraint for us is really liquidity in the sort of primary market, but the asset trades.

Right. But, you know, it's interesting to think about assets that are also on Ethereum for which, you know, we can kind of directly pull a price. speed, right? That there's already an existing price feed. And so something like, you know, realty, I think is a good candidate to create like a permissionless version, a little bit how, you know, people have made like wrapped Nexus Mutual to avoid the KIC and allow it to be sort of, you know, openly tradable. So I think that that's something that is going to emerge over time where, you know, you see these permissionless variants of security tokens and various things. But then, you know, the same thing goes for like synthetic Tesla. you know, synthetic Tesla share that, you know, is, is totally open and permissionless and, you know,

can be purchased by anyone anywhere in the world as long as they've got, you know, into that connection. So we talked about playbooks for capital formation really quick, Kane, as we start to wrap up here. You mentioned the Overton window has expanded, which means there's basically more possibilities for crypto-native, defy-native founders to essentially raise capital. And you put out this excellent, tweet thread that we can link to in the show notes that sort of talks about some of those things. Are you starting to see that manifest now? What advice, I guess, would you give a crypto-native defy protocol founder like yourself on just capital formation?

Yeah, one of the nice things about getting, you know, out of crypto winter and maybe crypto spring or, you know, whatever, maybe starting to kind of head into a ball market is that the ability to raise capital and the power kind of shifts into the back into the hands of founders, right? You know, we've gone from a situation where, you know, six months ago or 12 months ago, it was almost impossible to raise capital to a situation now where, you know, founders and project teams can dictate, you know, terms, which is good. It's good in the sense that, you know, it allows for people to do the things they want to do

rather than being forced into specific things. And so I think the ability to raise money directly into a Dow, which was probably going to be almost impossible, six months ago is now very possible, and we're seeing a lot of that. And so the ability to avoid the need for a foundation and having all of this infrastructure around a project is good. The flip side of that is, it means less sort of protections

for investors and participants in protocols, which is going to lead to, you know, losses and scams and things like that. But I think, you know, it's a double-edged sword. And so, you know, you'll see protocols that will do the right thing and projects that will do the right thing and be far, far better for it for being able to kind of dictate terms and launch in the way that they want to. And then, you know, you'll see some losses and inefficiency on the other side of it. All right. So crypto-native founders, going crypto-native and capital formation is, Sounds like that's the way to go. All right.

So just because it's fun, just because we're in a bull market, just a final question for you, Kane. Price predictions, my friend. So, ETH price, end of this year. So December 2020, what do you say? And then in three years, what do you say? And how about the same for total locked value in DFI? So I think that there's a very decent chance that

EVE will be back over 1,000 by the end of the year, you know, depending on the macro conditions that we're in. In three years' time, hard to say. You know, that's probably too far out for me to even, you know, try and make a prediction just because of the way crypto cycles work. But, you know, I certainly hope that we'll get to a point where, you know, if E2.0 is launched, the price will be, you know, far higher than it is today in three years. and then, you know, total value locked, it wouldn't surprise me at all, you know, over the next 12 months to see, you know, 50 billion in total value locked or more. There you go. That is bullish. And, Kane, it's been a pleasure when we talked about particularly the synthetics roadmap the future, volume, supply, gas costs, and increasing decentralization.

That's a very bullish roadmap, sir. and the Bankless Nation is looking to you guys and the Synthetics Governance to pull it off. I'm very excited about all of that. Kane, thanks for joining us today. Thanks. Yeah, it was a lot of fun. Really appreciate it. Awesome.

All right, Bankless Nation, some action items for you guys. We have included a link to the new volume incentive program that we mentioned on the show. Also a link to Kane's thread that we mentioned. You should also get involved in Synthetics governance. There's a link to that as well. Getting involved in these protocols is the way you learn about them. That's the bankless way for sure. We also have included a tactic from bankless on how to use synthetics.

So if you're just warming up to it, if it's just your first time, you can check that out as well. Finally, we are looking for your five-star reviews on Apple iTunes. David, we're at 154. So we want to get to 200. We want to get to 300. We want to get to 500. We want a bull run. You need to break ether price, right?

Yes. This is how it works, right? We are going to get the bankless podcast to the top of the iTunes chart as this, as this bull market continues. And we need your help to do so, right? We are now in the top 100 of the iTunes investing and finance categories for podcasts. And I totally think that in one, two years, we're going to be in the top 10. But we need your help to get there.

So if you could go to wherever you listen to your podcast and give us those five-star reviews so we can spread the bankless nation. across the world. We would really appreciate it. All right, let's do it, guys. Risk and disclaimers, ETH is risky. So is SNX. Crypto is risky in general. So is DFI. You could lose what you put in. So be careful out there. But we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.