Bankless - How Futarchy Ends the Rug Pull Era | Felipe Montealegre & Proph3t

Episode Date: October 20, 2025

Futarchy flips governance on its head—decisions aren’t voted on, they’re traded on.  In this conversation with Felipe Montealegre of Thea Research and Proph3t, co-founder of MetaDAO, we explore how market-driven governance can eliminate the token “rug pull” problem, create true shareholder protections on-chain, and unlock the next era of crypto capital markets.  From prediction markets and token design to MetaDAO’s “ownership coins,” this is how futarchy could make crypto investable again. ------ TIMESTAMPS 0:00 Intro 1:51 What is Futarchy? 4:26 US Capital Markets vs Futarchy 6:39 Futarchy Incentives 12:01 Futarchy Market Participants 16:05 A New Form of Governance 18:59 Liquidity & Insider Participation 24:03 Futarchy Genesis 31:31 Crypto Rugs 47:45 Trustworthy Tokens 53:00 Umbra Example 1:00:37 MetaDao 1:07:20 Unrugable Tokens 1:12:42 Regulation 1:18:31 What’s Next? 1:20:48 Closing & Disclaimers ------ RESOURCES Felipe Montealegre https://x.com/theiaresearch  Proph3t https://x.com/metaproph3t  MetaDao https://metadao.fi/  ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠

all of these rugs are stopped by Futurkey. So if you say, for example, in Futurkey, funds go into a wallet and they are controlled by the governance process. So if you raise $50 million or $100 million in the ICO, and then the team is like, well, we want to take it, you know, we want to send it to our own finance accounts and cash out.

Obviously that market's going to vote no. Bankless Nation, very excited for this next episode. This is the Bull case for a Futarky. You've heard that term before. If you haven't, don't worry, we'll define it. How it's going to make our tokens more valuable. That's something we always want in crypto. We've got two self-ascribed futards on the podcast today.

No, I did not insult them. They are self-ascribed futards. Felipe Montalegre is an investor at Thea Research. He's actually been on the podcast before talking about how tokens kind of suck right now and they're in need of a revolution, let's say. But he is a long-term token bull. He's also a Futarki bull. Felipe, welcome to Bankless.

Thank you for having me on. Excited to be here. We also have Profit on the podcast. He is a co-founder of a neat little project. It's called Metadal. This is a Futarki and token launch platform on Solana. He, I think, is also a token bull, but he might call them, let's see, what's the term you use for this, profit?

Ownership coins. Ownership coins. Ownership coins. All right. Not just tokens. Ownership coins. Profit, welcome to Bankless for the first time. Yeah.

Thanks for having me. Okay, we should do a disclaimer here, of course. The project we're talking about a little bit today is Medidau, so profit is, of course, a co-founder. He's definitely pulled on the project. Felipe, I believe you are an investor in the project, too. So we should disclose that you're an investor, so naturally you're bullish as well.

That's the case, am I correct? That's right, yeah. Investors are Meta-Dal, investors in many of the companies that have spun out of Medi-Dal, and it's not investment advice. Very good, very good. Okay, with that out of the way, I think I want to divide this into three parts to really set this up. So part one is kind of like, what is Futarki?

We need to understand what this means. And then part two is kind of the case for why our tokens suck right now, at least from an investor perspective, I think we all kind of feel that. A lot of tokens in crypto, they're destined to go to zero. Many of them have been rugged. They kind of suck. We'll talk about that. And then we'll talk about how Futarki might actually fix this and Medidau's specific

implementation. So a three-party here. Let's start at the beginning. What is Futarki? I'll throw that over to maybe Profit. You give an answer. And then, Felipe, if you could give your investor answer after that. But Profit, go ahead.

What is Futarki? Sure. So Futarki is essentially governance by markets, right? Like, democracy is the word we use for countries that are governed by voters. And Futarki instead is market-driven governance. So instead of voting on what we should do, we bet on what the right thing would be to do. Okay, that sounds simple, but also I have so many questions, Felipe, how would you flesh that out? You know, I would just, before getting to the mechanism, I'll just echo what Prophet said.

It's basically in futarkey, you allow markets to say whether they think a particular proposal will make the price of the token go up or down. Okay. So, you know, in theory, when a company is deciding, when a CEO is saying what to do it in a company in the U.S., they're thinking about maximizing shareholders. ballot, right? Right. That's the culture of U.S. corporate America, of corporate America. And in futarchy, you actually let the market vote on the proposal, trade on the proposal, and say, do I think that if the CEO is replaced, the stock price will go up or down?

And then based on how the markets trade, you loop the outcome back into the actual decision. So just to make that real with one example, if you were deciding to hire Steve Jobs back to Apple, you know, after they had a few CEOs that weren't steep jobs, you could set proposals saying Apple stock right now is 100. Let's let the market trade on whether if we rehire a Steve Jobs CEO, it will be higher than 100 or lower than 100. And you have the markets trade those two proposals, which we'll get to in the second.

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and then if not Steve Jobs or if candidate B or C, then some other token price. I guess the way things work today with that sort of decision in a shareholder vote company type of structure, right, is large investors or the board of directors would make a decision on who the next CEO is. And they would just not consult the market at all pre-making the decision.

And then basically they'd make the decision. and after the fact the stock price would reflect whether their decision was bullish or bearish. But they don't get to ahead of time a priori test the other outcomes, right? And you're saying Futarki is different because you actually ahead of making the decision, get to somehow market validate and market test the outcomes ahead of time. And then it's simply a matter of like, oh, let's pick the one that maximizes, you know, share price. and you get to like make this, you get to almost like see into the future

before you make a decision. That's what's different here. Is that correct? That's right. When the board of directors makes a decision today in a current setup in U.S. capital markets, you assume that they have skin in the game because they are the large shareholders.

So they are trying to maximize their own share prices. And they use, you know, they kind of use their own common sense. They do analysis. They try to think about whether, you know, in this case, changing CEOs, increase or decrease the value of their holdings. In a futurearchy, you actually open up the decision to the entire market. So it's almost like prediction markets on whether the token will go

up or down based on the decision. And people who are outsiders in the company and maybe don't own a lot of tokens can go and can trade the market based on their best assessment of whether the decision will make the stock price go up or down. And the beauty of the mechanism, and a lot of profit explain it well is that if you trade and you are right, you will make money. And if you trade and you are wrong, you will lose money. How does that work, profit? So yeah, what are the mechanics of how this works? Because I'm still having a hard time gawking how, like why, you know, market participants will make money in one case and lose money in another. What's kind of the capital at stake? How is this whole thing incentivized. Sure. So probably something most, I imagine, of your listeners will be familiar

with is Uniswap. So let's take that as an example. So imagine Uniswap is deciding whether or not to turn on the fee switch, like the classic governance example. Here in Futarki, what would happen is you would have two markets, one for Unitokin if you turn on the fee switch, and one for Unitokin if you do not turn on the fee switch. Okay. And you place what are called Conductor. trades in these markets. You can essentially place an order such like, an order like I would buy uni at say a dollar if the fee switch were turned on. Maybe I'd buy 500 uni, so for $500 if the fee switch were turned on.

And then if the fee switch is not turned on, that trade is reverted. So if I place that by, I get my money back. And yeah, you place trades in both of these markets. So, like, you can buy if it happens. You can sell if it happens if you think it'd be bearish if it happened. You can be also, like, you can speculate on what would happen if the event didn't happen. Like, you could say, if someone could say, oh, uni would be worth, I don't know, 60 cents. If it doesn't happen, like, maybe that's the market price and you're like, no, I think it'd be higher.

So I'm going to buy there so I could either hold those uni that I've now acquired at a cheap price or just sell them on the open market. right? If I buy it's 60 cents and then it actually turns out to be 70, if the proposal fails, then I can sell and pocket that 10 cent difference. And then, yeah, so you have these two markets and we just take a time-weighted average price at both the markets. And if one of them, if the market is saying that you need to be worth like a dollar, if you turn on the fee switch and 60 cents if you don't, then that's a pretty clear signal that you should turn on the fee switch and then you can just turn it on automatically. Okay, and then you turn it on,

and those who voted that, okay, so how are the participants rewarded again? So let's say, you know, the market dictates which outcome increases unitoken price more. Then tell me again, how are participants in the market actually rewarded for this?

Yeah, we had these two markets, which were like, if this fee switch is turned on and if it isn't, all the trades in the if the switch is not turned on market would be reverted. Okay.

And then all the trades that happened in the if fee switch is turned on market would be finalized. And so if you, like, yeah, let's just say that the fee switch is turned on and then uni goes to a dollar and 10 cents.

So the market was like under by 10 cents of what the price was. Right. Then if you bought in that market at like, 70 cents per uni, then you could now sell at a 40 cent profit, right? Or you could just hold and be up, like have high unrealized P&L. On the other end, if you sold, like for every buyer, there's a seller. So the person who sold at 70 cents is probably not very happy right now because they sold a token

at 70 cents and then just watched it go up to a dollar in 10. And yeah, so like those are the, it's not really, it's pretty much the same way you make or lose money, just by buying and selling tokens in general. It's just that here you, it allows you to like speculate on, or like kind of remove risk for you, right? Because maybe you're bullish uni only if they turn on the fee switch. I see. And you think a dollar is a good price there.

So you buy there. Then you're not taking the risk that they don't turn on the fee switch, which is it actually happened before, right? Like, actually yes. And Uniswap, a lot of people, traders got burned because they thought the fees was going to turn on, get turned on. A lot of people bought uni. and then the fee switch ended up not being turned on

and then it's sold off. So if you bought at like the higher prices, you've just lost money, right? Right, there's been a lot of fakeouts with respect to the fee switch. It's always a kind of a one fee switch. I can't believe we're in 2025 and it's still sort of a when fee switch situation

for Unitoken. But then you said so the outcome would be based on some sort of time weighted average price, okay? And then there's, is there, would there be for an example of this type of an example, kind of a date, you know, within one week? you know, uni price will be X or Y. Is that kind of how it works?

There's like a time-based deadline. Or like, what are the specifics of this binary outcome? Sure. So it's just trading in these markets over three days, which... Okay. Yeah, are just like spot markets. They're not futures markets. You're just buying and selling unique, conditional on an outcome.

And we run those three years, take the time with average price, and then finalize whichever market and take the decision that the market thinks. is better. And you're saying we in this case profit, that is Medidau's specific implementation of these types of futarchy decisions, but there could be other implementations of that, right? Correct. Okay, that makes sense. All right. So who are the market participants in this case? So you sort of know who the market participants are if you did something like a uny token holder vote, which is anybody that has the uny token is eligible to vote on something with respect to governance. This is kind of like Dow 1.0 that we've seen in crypto, you know, since the beginning

of these governance token experiments, right? And the, you know, there's lots of problems with this, which we'll get into. One is like, who's participating, right? It's like, very few, there are very few participants or the participants even informed as the outcome. I get the sense that the participants for this type of futarkey market in driving one decision or another doesn't have to be the unique token holders. In fact, could be a completely different market in general. So profit, who is participating in the market for this type of a decision? And then, like, how informed are they?

Like, and do we know that they're informed that these are, you know, smart market participants who will drive towards an effective outcome? Yeah, so I think they are generally sophisticated, at least the people who trade in size, for the simple reason that like, yeah, I mean, if you're listening to this and you understood all that perfectly, you probably have like at least one standard definition above the average on IQ, right? Like, it's not super easy to grok the first time or even the second time. It takes people some time to like figure it out. And yeah, but it generally is like, Like the people who are kind of involved in the community is one. That's like one cohort of people that trade in these markets. They just care about the project. And then we also see some just generalized, we call them decision market traders. Like these are decision markets who trade in pretty much all organizations markets,

even if they're not like a quote unquote community member of that project. They're just basically saying like, no, I think this price is wrong. and I can profit by trading against it. I think that, you know, one thing to add is that these markets call the people with the most information to trade naturally. So, you know, one example is like, if you think about prediction markets,

the people with the most information have the most incentive to trade those markets. So there was a prediction market recently about whether Taylor Swift would get engaged. And obviously, you know, her family had the information that she was engaged for a few weeks before it was public. and they all had a strong incentive.

I don't know if they did, probably not, but they ought a strong incentive to trade the prediction markets because they had information that she was engaged and the market was trading like a 20 cents. Right? So they could have made a profit that way.

And that's true for every prediction market. Whoever has the best information can beat the market and make money by trading. It's true of futurkey as well. So if you are an investor and you have a very strong view on some governance decision,

you can come and trade markets, even if you're not an investor in the project and have never been an investor in the project. And ultimately, you will be, you know, you will own the, you will own the outcome. So, you know, one example is, I'd say, yeah, there was one market where we were a very small investor in a project. And there was this decision, you know, OZL, where we thought it was, it was pretty negative to the project. And we were willing to, to put our, our capital behind our, our, our, our, so we ended up trading very aggressively in the fail market, you know, for that, for that proposal, which means we said we were willing to buy a lot on this token if this proposal fails. And ultimately,

the proposal failed largely because of us trading the market. And is that fair? It is because then we ended up owning a lot of the token after the fail. So that's the beauty of the mechanism. If you are aggressive in trading a market, you have to own the outcome if it happens. So you own the outcome and you own a specific outcome, let's say. So I guess you're making the case, Felipe, that this will attract. So these are more granular types of decisions. This is not, are you bullish unitoken? Yes, no.

This is a decision, like, that's more granular. It's still sort of high level and very important, strategic, but still granular. That's like if token, if he switch on than this, if he switch off than that. And so you're getting more informed investors even than the average unitoken holder or the very involved uny token holder because you're getting investors that are willing to put skin in the game and substantial liquidity on a particular granular decision of which like you presume they know a lot about. And the reason you presume that is because they're willing to bet big on this particular decision,

right? So you almost like you broaden them. the market and you create a like more informed market participant for specific granular like issues or governance items. And I guess the expected outcome or the hope is that this leads to better governance decisions around in particular the thing that investors care the most about, which is capital allocation. So futarchy for these types of decisions is the idea that it even beats shareholder vote, and it can be even smarter than, say,

a very well-informed Board of Directors? Is that the concept here? Definitely. So in a board of directors, in the U.S. capital markets work well. But you do have board members who have outside incentives. Maybe they're friends with the CEO.

Maybe they are not big shareholders. They're just on because they're famous or they did something. I would say most board of directors are like that. Isn't that the default case, would you say? There's a lot. It's default to have some members like that. You know, I think the best case is private equity boards where everybody there is like 100% owner of the company.

And that's more, that's going to be more similar to Futarky. Right. But in a lot of public boards, you do have, you know, Dana White on the Facebook board. He's great, but he's not like a top 10 owner of Facebook, right? Sure. So it is the default for some companies. But in futarchy, you said, well, you only get to vote, trade. We say trade, but vote, to the extent that you're willing to put skin in the game behind that decision.

So you should actually call out the most informed and most aligned decision makers for every market. And ultimately, you do get better outcomes than from a typical board of director in terms of shareholder alignment with the token price. I could imagine some failure scenarios here with. with respect to liquidity. So say you had some sort of futarkey decision, but you didn't get enough market participation or enough liquidity or enough size to actually make it a meaningful decision.

Is that a failure mode? And how does one prevent that in a futarchy type scenario? Yeah, you definitely need liquidity because liquidity is what my... Like, you need liquidity so that traders have an incentive to look at these decisions and participate, right? like if there's $1

of liquidity, even if I think the market is super mispriced or if like I add a lot of alpha, it's just not worth me digging in and placing all those trades.

So you need liquidity and what's nice here that you have where you don't have in like prediction markets is there's an organization that's pretty well primed to provide that liquidity,

which is the project itself. So what we do is the projects themselves provide liquidity in their own token and, well, yeah, they provide USDC and then their own token. So, like, an example would be OMFG, which is one of the projects that launched on us, OMFG, USDC, and then that liquidity can also be used in decision markets.

Okay, talk more about that. So the liquidity of basically the project or even the founders can also participate in these markets. I think previously I'd been considering Futarki markets and sort of the decision is all outside investors, but certainly insiders could participate in these markets as well. And why again, profit is that a good thing? Does that not present some sort of conflict of interest or like, why is this, in addition to providing liquidity, why does insider participation drive to better outcomes? So the liquidity itself isn't coming from insiders. It's just coming from the project treasury. So like, yeah, today when a project launches on us, 20% of the USDC that they raise.

which I know we're going to get into this later, but basically it's all automatic, where they just automatically are providing liquidity, USC, and their native token, and that automatically goes into these decision markets. In terms of, is it good if insiders trade the markets? I think this is actually an open question in economics in general, right? Obviously, in U.S. and many other countries,

insider trading is illegal, like you're not allowed to trade a security where you have material non-public information. But actually, I mean, yeah, some economists think that insider trading would be better, like if we allowed it because this idea where, yeah, you generally want people with alpha in a market correcting prices so that they can like, so the prices can be more efficient. Well, it's always struck me that basically the bull case for all prediction markets,

just outside a few tarkey, but prediction markets is information markets is basically all insider trading. So, Felipe, like, even you mentioned Taylor Swift in kind of that market. I mean, you're basically advocating, these aren't securities, of course, but you're basically advocating for insiders to inform the market and to participate in that market because that's how we get the most accurate markets possible, right? So there's a certain element of, like, prediction markets kind of does depend on insider trading, and I guess that would extend into futarchy. I guess the one thing I'd say there is sometimes you have people with very informed views using public information.

And they would be very helpful to the price as well. So, you know, what most heads funds do today is that they kind of think deeply about a sector, think deep about companies, and then buy or sell based on their, you know, superior judgment on what company is good, what management is good, to allocate a capital. and for the most part, they're not using insider information because inside information is defined as it's like knowing whether a company will be earnings or not, right? Things like that.

You can also have a superior judgment on a stock or decision just based on doing analysis with public information. Sure, you can, but you'd have even better information on that if you're an insider, right? You'd be an even more informed participant. Yeah, and that's where you get into profits straight off, which is where do you want to cap

how much inside information people are allowed to have? But capping it does come at the cost of market efficiency. If you allowed perfect trading on insane information, markets would be slightly more efficient than they are today. You wouldn't have earnings pops.

Is a good way to, I guess, summarize what Futarki is, is it's applying prediction markets to decisions, to governance types of decisions? Is that a good summary? Sure. I would say just markets.

Like you don't need to add the prediction there. But if it makes it easier to understand, sure. Prediction markets for decision making. Okay. Who created the idea of Futarky? So I recall reading a post from Robin Hanson a long time ago. He talked about prediction markets. And I believe he was applying this to political systems, actually.

I think he's written some white papers after that. I've browsed them. I haven't dug fully into Robin Hansen's massive brain. I've also read posts from Vitalik talking about this in the early days, but how long has the idea of Futarki been around and who created this? Yeah, it was Robin Hansen, for those who don't know, Robin is an economist at George Mason University and who's also, some would call him the inventor of AMMs. Some would also call them like the primary person behind prediction markets. But yeah, he also invented Futarki and decision markets back in 1999. It's a fun fact, actually.

The only time we've had Robin Hansen on bankless, we actually didn't talk about any of those things. We talked about his grabby aliens theory. Have you guys run across this? Which is basically his answer to the Fermi paradox, which I think is like the best answer. And he basically thinks like, we're too early in the universe and they're too far,

but the aliens are all coming towards us as we approach them. It's just a really elegant, interesting theory. Anyway, we talked about that. talk about Futarky, and I feel like that was somewhat of a missed opportunity. I guess it shows you his brain, his mind on so many different subjects. Yes, he's very cross-disciplinary. And he also has this book called The Age of M, which is, I believe, like about minds

and potentially how we can create a computer mind, yeah. Yes, yes. Okay, so he wrote this paper sometime in the 2010s, I believe, or came up with this concept, Futarki, but we really haven't seen it applied anywhere. in practice. So certainly the governments of the world are still, like the U.S. is still running. Its government software is like representative democracy, you know, and so it's not using futarchy. We've got other nation states that are using some sort of, you know, a dictatorship or like small cabal kind of ruling their country is something like Russia. We already talked

about how our corporations are governed and that's shareholder vote. I think in crypto, generally aside from Dow governance vote, which is sort of similar, to shareholder vote, except like worse in some ways that maybe we'll talk about. We have this other governance mechanism that maybe partially we created. It's kind of the technocratic Linux-based technocracy, sort of, or benevolent dictatorship type of model where you have this technical elite and there's this rough consensus. I would say something like Linux and Bitcoin and Ethereum run on that governance mechanism. So yeah, that's four that I've named.

Futarki would maybe be a fifth, but so far it's just been concept. We haven't actually seen it at play. I know Medidao is starting to do some of this, but maybe my broad question is, why haven't we seen Futarki out in the wild if it's just like applying markets to making decisions? It seems fairly simple, but why haven't we seen it? Yeah, I mean, it's a really good question. The simple answer is just no one really tried it before Medi-Dow.

So, I mean, yeah, there were a few people who said they were going to do it. Like, yeah, Vitalik wrote that blog post, NOSIS said they were actually going to do featurekey as a NOSIS safe. But, yeah, no one really did it in production. Felipe, do you have any idea as to why? Like, what's, it's just the rest of the world is kind of entrenched in their existing decision-making frameworks and governance. And there's kind of power dynamics. And so it takes a net new experiment to actually, like, try things. I think that's part of it.

And I mean, there are a lot of cases where there have been these big ideas in economics and finance that were never tried until, until blockchain has made them possible. Because in the, you know, in the kind of traditional financial system, you have all of these permissions, regulations, blockers. And you can't have a situation where like a group of two engineers just tries an idea in the world. So you've seen it, like even like CalSwap is a good example too, right? like Professor Buddhist wrote about CalSysm mechanism 15 years ago tried to, or I think almost 20 years ago now, tried to get it on to every exchange

and just never had the opportunity to really try it out until Kauswap reached out to him and said, we want to try out, you know, the mechanism you wrote about 15 years ago. So there's a lot of precedent for things not really being tried until crypto rails opened up this permissionless system for, you know, two engineers to just give it a go.

I guess that makes sense, right? I mean, so Robin Hanson, if he dreamed up the concept of AMMs, he didn't specifically apply that to crypto. That could work in TradFi. It's just Tradify never tried it. And it took crypto to come along to actually have the blank white space to actually experiment and make that idea real. And I suppose something similar you're arguing is happening with Futarki.

Yeah. I mean, the number of new banks opened since 2008 is almost zero, right? The restriction on new experiments in the financial system is very severe. And that's why so many of these things are being tried for the first time in crypto worth for missionless. But I think the other big thing is, you know, in Vitalik's blog, he had a big con for featurekey, which was that token price isn't always the objective function. And I think that's that you can argue that for different scenarios. You can say that, for example, in a democracy, you know, GDP or whatever isn't the right objective function, right?

Sure. Or whatever you end up making it. Or even for Ethereum or Solana, where it's like an ecosystem, I think you can argue that token price may not be the objective function. Right. I would probably take the counter of that, but I think it's a debate. But when you're starting a company, right, when you're launching a token that represents the future cashels of a company or an equity, that's where you have, your tokenized price

has to be your objective function, right? Because you're asking sharehold, you're asking people to give you their savings so you can start a productive member of enterprise and make the money. So you have, I think that situation where, is a situation where like Futurkey found

it's, found it's like killer app with tokens, right? Because if you're launching a company in U.S. capital markets, US capital markets work fine. You don't have this kind of underserved market situation where you can raise capital through VC. You can go private equity.

You can go public through the NASDAQ or the NYZ. And corporate law is basically good enough to get you what you need out of capital markets. But if you're launching a token, you're in a situation where there's no legal protections. There's so many ways to rug investors. People don't even know. There's no way to govern these things

for the benefit of token holders. And you have this kind of underserved market with a severe problem. I think for the first time, that Futurkey just neatly exactly solves. So I think it's both things. It's a limit on, you know, limits to innovation outside of Crypto Rails,

but also you now have the killer app with tokens and token holder protections. I see. So what you're saying is like, you know, one of the limitations of Futarki is it has kind of singular objective functions, right? that can be too narrow. So, for example, if you're trying to, like, govern the United States of America,

and I think even Robin Hanson's initial proposal, he's still, you know, he's not saying not a democracy, he's saying you vote for representation, but then you use futarchy for these objective-based decisions, such as, like, which policy is going to increase GDP by the higher amount? And you use futarchy for that amount. But I suppose what you're saying for capital markets, and this is certainly true of stocks and U.S. capital markets, there really is a, essentially. single objective function. Now, it's not the only one, but it does make sense to have the focus of the

entire company be to maximize shareholder value. I would edit that and say maybe long-term shareholder value. In fact, that's the entire fiduciary responsibility of a board and a management team. It's kind of embedded in our laws around U.S. capital markets. Maybe let's talk about that for a little bit. So we've set up this idea of futarkey. Let's talk about, Felipe, something that you've, you've I've seen you write about many times. You think Futarki's a partial solution. But like today, our tokens kind of suck. Our defy tokens, that is.

And like as an investor, I still feel like I have better protection and better shareholder rights and better commitments to maximize the price of my investment with stocks versus tokens. Tell me why I feel like that. why you feel like that and why to date a lot of our crypto tokens just like don't have good investor rights.

You feel that way because it's true and it's been proven thousands of times across the past you know, 10 years since we've been launching tokens. So right now, most people who invest in tokens and believe

get rugged. That's the reality. So, and you're not just talking about meme coins here. You're actually talking about like everything legitimate projects that have some sort of concept, have some group of believers, are trying to build something here, right?

Yeah. If most likely case, in the majority of cases, not all, but the majority, if you gave money to somebody over the internet in the past 10 years through an ICEO, you were roged, which is really unfortunate because that is like one of the most exciting things that we're working on in crypto, right? The ability for anybody to raise capital on the internet

at a reasonable cost of capital and build a business with those funds. You're using the term rugged, which is different than the project not working, right? So, like, investing in anything at an early stage comes with massive amount of risk, what is, like, 95%, 99% of companies will fail anyway. But you're talking about not just failure,

you're actually talking about something that's, like, rug, get into that term. How are we getting rugged with our tokens? So I'll go through, there's many ways to get rugged. And yeah, I'm talking about not a good faith effort by a team where the project failed. That is to be expected. It's part of capital markets, part of capitalism. It's normal.

I mean a situation where the team acted in their best interest or the best interest of a few shareholders at the expense of everybody else who gave them money over the Internet. So I'll give you more specific examples. You know, we had a company a year ago where we gave, you know, we invested in them. when they were making like 400K in revenue. And it was an exciting investment. We put a few million dollars to work. And within about six months,

they were hitting $50 million of revenue. Right. So it's a tremendous outcome for us. That's the kind of thing that you live for as an investor. And the team reached out to us and said, we decided that, you know, we're going to abandon the token. And our response is,

what do you mean abandon the token? Oh, well, you know, this is a lot of money. You know, we built it as a team. We're going to just divot in ourselves, dividend ourselves the money. And did you just have the token, or did you have the token and also the equity

of whatever entity was receiving the revenue distribution? It was just the token. There was only a token. There was no equity entity here. That's a pretty common occurrence. There are many cases like that where projects do well

and teams either siphon all cash flow to themselves or part of the cash flow to themselves. You know, there's a case, so that's one type of rug, right? another rug is when there's a token in equity to your question and the team decides to siphon cash flow to the equity entity instead of the token entity.

So we mentioned Uniswap. If you bought the Neswap token, right now you have no rights at all to the cash flows of the Uniswap app. Only the Unswap labs, the equity entity, has the rights to those cash flows. I hope they're prepared that situation. But as of today, if you bought Uniswap token, you don't own the company. don't own their front end fees. You don't own any of the fees related to that.

There's the more obvious drug situation where people raise money through ICO and they just walk away from the project. So I think on the metadata website, you have a few examples like Pixelmon raised $70 million and $70 million dollars and the tokens

down 95% from... Our friend Kevin, right? This Pixelmon creature that was very popular in 2021. I believe that's right. Yeah, that's right. Yeah, okay. Am I remembering my NFT lore correctly, I think?

You know, the project's down 95% for mint price, where did that cash go, right? There are so many teams that have ICO and the cash goes to the team. They stop working in the projects altogether. Keep the cash and walk away, right? Parrot is the same thing, where they raise $90 million, they get back money, but they kept $45 million for themselves

for doing approximately no work. There's cases, where teams build a business, they have a token, they sell the company, and they get payments themselves, and don't distribute them back to token holders. Right.

There's the Bali Slow Rug, where the team raises money. They move to Bali, they work four hours a week, and they get paid 500K a year for working four hours a week in Bali, and there's no way to get the cash back to the investors. There's the, I mean,

I see this all, So I'm a liquid investor full-time. Right. I see this happen everywhere. Basically everywhere all the time, all at once. There's the kind of foundation rug where teams will keep all the money at the foundation, but then maybe they'll do a little bit of branding work through an agency and charge the foundation $5,000 for like an hour of branding work.

And what is that? That's a dividend being paid to the team to one team member as opposed to shareholders. And all this is really sad because, what's happening is people are giving money over the internet to people in good faith, hoping they build projects. And then either the team or a subset of investors end up taking that money in a way that would never be legal in U.S. capital markets, never even be close to legal. And that's happening to a extent that it makes it very difficult for internet capital markets to take off. The reality is that ICOs are a killer app for blockchain.

You know, people have trouble raising money outside the U.S. You can raise money over the Internet. That works. The tech works. We've been able to do ICEO funding since 2017, right? Like people were contributing hundreds of millions of dollars to projects. So the tech works. The problem is what happens after, which is all these rug problems.

And the natural consequences of all these rugs is that if you invest in people on the Internet, you lose your money because of something that you consider to be inappropriate or bad faith. you don't come back, right? And that's why we've seen these waves of ICEOs taking off and then failing. Because people get rugged, get burned and don't come back. Or if they come back, they come back smarter, which means that they sell the top. After you hear all the people talking about selling the top or kind of getting out before the music stops and some... Yeah, you call them.

What's your term for them? Is it there's the foxes and the rabbits, right? And sometimes once people get rugged, they come back as foxes, which is basically like predatory. that are just trying to kind of scalp the true believers and get them to bid up projects and then they dump it on them in some way. And so we've created these lemon-type tokens with more and more Fox types of incentives.

You're saying none of that would fly in U.S. equities markets and stock markets. Why? Because we have shareholder protections. We have a legal system. We have Delaware, C-Corps and LLCs. And shareholders would just take those, founders to court, right?

And get some sort of retribution. So there's a legal code protecting us in the share situation. Is that the difference? That's the difference. And by the way, before that legal code had fully developed, U.S. capital markets were also full fraud and rugs. Yeah, you have this story of how did shareholder primacy come to be? Was this a court case in the early 1900s?

That's right. The court case of Doge versus Ford. So Ford, you know, founder of Ford, Motorco, decided that he, you know, had to earn enough money and wanted to spend some of the routine earnings at Ford on social causes that he considered important. And the Doge brothers, which were too early investors. Is that Dodge, by the way? Maybe you're crypto-sizing that. Yeah, Dodge, not doing right. It's Dodge.

Okay. I've gotten too much. It's a Dodge Brothers. Yeah, too much crypto on the brain. Got it. Yeah, exactly. The Dodge versus Ford. the Dodge Brothers were 10% owners of the company. And they took him to court saying, you know, we invest in this company for a return.

We can't have the CEO making decisions for the benefit of social causes he considers important instead of shareholders. And the Supreme Court agreed with the Dodge Brothers and set up the doctrine of shareholder primacy. So now if you're the CEO of a company with outside investors, like any public company, you have to be making decisions. for the benefit of shareholders over the long term. Now, you get a lot of leeway. There's another rule called the business judgment rule that says, you know, if you turn down a big deal

because you thought it was bad for the reputation of company and would hurt you down the line, you can say those things, you can protect yourself that way. But ultimately, you have to be making decisions for the benefit of all shareholders. And if you do anything that obviously hurts all shareholders or shows negligence in terms of thinking about them,

you will be sued. you will be sued and that the shareholders will be made whole. I'll give you one easy example. And I don't want to go too hard on uniswap. But there was this case where the Dow voted through $20 million for the defy education fund, right? And that's fine. I have nothing against defy education fund. But there wasn't a discussion of how it benefited shareholders.

Right? And that was like a pretty... Unity tokenholders specifically, yes. You need tokenholders specifically. And that's like, again, a legitimate project with good people donate to a legitimate cause. But in any kind of, if it was a decision in the U.S. capital markets, the first thing discussed would be, how does this benefit?

You need token holders. How does this benefit our objective function? Right. And what Medadal does or what Futurkey does in general is it solves this token problem. Because now every decision needs to be go through the, test of whether it benefits token holders or not. So, and I've been going for a while now,

but this is kind of the big thing is, for me, is all of these rugs are stopped by Futurkey. So if you say, for example, you know, in Futurkey, funds go into a wallet and they are controlled by the governance process. So if you raise $50 million or $100 million in ICO, and then the team is like, well, we want to take it, you know,

We want to send it to our own finance accounts and cash out. Obviously, that market's going to vote no. Right? You don't need to think about all this insider information and who's smarter. The market is going to say, absolutely not. That would hurt the token price of this project. If you want to do the Bali slow rug, you know, the team's like, oh, we raise $100 million, we're going to move to Bali, work for hours a week.

You submit a proposal through a few-sharkies saying, return the funds. Because the token would start trading below cash value if that happened. And that actually happened to over 100 tokens during the bear market where the teams kind of went away, the tokens traded below cash value, and there was no way to get the cash out. If you turkey, it's simple. It's a three-day process.

I would submit a proposal saying, get the cash out, the team moved to Bali. It's over, right? They're not working on this project anymore. If you want to do, you know, back to our friends at Uniswap, and I think it's a great project, you know, there's reasons why they developed the way they did. But if they want to say we want to send funds to equity

as opposed to token, there would be a future key proposal saying, do we want to send funds to the equity entity? And the market would say, absolutely not. That's terrible for the univap token, right? So basically all of these, the example that I gave where the team took the IP away from the token, that would never pass because the IP is owned by the token, by the future key.

And it would put a similar proposal saying, can we remove the IP from the token and dividend it to ourselves? and the market would say absolutely not. So Futarki, I think the killer app is not really, you know, deciding so much on these like fine-grained hard issues. It's just baking in shareholder protections, token holder protections, directly into the mechanism so that whenever teams or minority shareholders proposing it's bad for token holders, it gets immediately shut down.

Okay, I really want to get into how this all works with Medadau and Futarki, and you've started to go there, Felipe. I do have one more question before we do. And this is sort of maybe partially a defense of the, you know, defy 1.0 tokens and the previous Dow type models. And like a defense in general of kind of the uni decisions and what they made, which is regulatory, which is basically Big Bad, Gary Gensler, didn't allow us to have actual on-chain tokens with any shareholder rights.

So we were forced into creating kind of these governance token charades that like couldn't provide true utility or revenue back to token holders. Basically because if like we did that, Gary Gensler would come down on us in our crypto capital markets. And indeed, I mean, Uniswap was like, what do they get a Wells notice along with how many other companies? So like part of the reason we are where we are in crypto with our futility tokens is because of regulators and Gary Gensler.

And it's not so much futarky. What do you say to that kind of like counterpoint or retort? You're absolutely right. I usually give that a disclaimer when I talk about Uniswap because I think they're a great project that's been acting good faith the whole time. The reason I mention it is because it's a very well-known example of sending funds to the equity entity.

You know, I believe there's a big chance that had Gary Gensler not been, you know, the chief regulator and Unoswap had been allowed to give utility to the token, they would have done so. So I think in this particular case, you're right. I don't think that's true for the much more obvious rugs, which I kind of don't mention because it's almost a criminal implication in the most case. But with Uniswap, I agree with you. They're well-intentioned.

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to the deal is futarkey, there are some experiments that actually worked, right? So let's take AVE, for example. You know, maybe they were a bit more cavalier with respect to regulation. Maybe that's because they weren't based in the U.S., for instance. There are tokens like AVE or even tokens like, you know, kind of new class of defy like fluid that are actually. actually returning revenue back to token holders. And so they're doing this without futarky. They're sort of, quote unquote, making the right decisions. And indeed, in the case of AVE, it seems like they're making fantastic decisions,

almost in kind of a dictatorial type of way where you have Stani and a fantastic management team and then input from the Dow and like they are the leaders in their respective ecosystem for collateralized lending. So without futarky, we've still made some of these token experiments. work. I know maybe we could make more work, but there are still some investable tokens that made it through this gauntlet. How do you explain that? So, I mean, I invest in liquid tokens for a liby. So certainly I agree with you that there are a lot of tokens that have worked. The entirety of my net worth fund is in these tokens that have worked. Again, so I couldn't agree with you

anymore. The problem is, there's two problems. One, there are too few of them, right? I count by all account, I think the max number of tokens I can say are investable is 50. You know, after all this time and one of the most exciting industries in the world, you know, 15 investable tokens at the most is just not enough. And those are investable because you have some sort of access to basically profits, upside shareholder revenue or like token revenue, something like this? Because you trust the team to do the right thing for the token. It's trust-based, right?

And sometimes as trust is earned because the teams went through brutal bear markets and prove that they can do that in the case of like maple, oil, or AVE, fluid, or sometimes you can trust them because you know them and you know they're based in the U.S. and you know they have family networks in the U.S., and that helps a lot, actually. So there are ways to earn investor trust

and there are people who want to do the right thing. Of course. Again, I make my living investing in those projects. The problem is, one, there's too few of them. Two, it really is hard. for new teams to prove that they are trustworthy. And this is where we get to the Lemon Pro, right? If you're a new team attempting to raise funds through an ICO, you don't have a good way to differentiate yourself

from the teams that are untrustworthy, which is the majority by number in these ICOs. So what you get is you get a higher cost of capital issue for tokens. So again, I invest the tokens for a living. the return I need to promise our investors is significantly, significantly higher than the returns that hedge funds needs to promise investors

in large part because of all these token rugs and all of these token holder rights problems. So if I go to an investor, I'm like, oh, we're going to earn you 15% a year or 20% a year. They're lapping out of the room. Again, because this industry is so fraught with all these token holder rights problems. So the, and then the downstream effect

of a higher cost of capital, is lower valuations. So if you are a token launching in a world where there are all these token on their problems, you're going to trade for the same earnings or for the same promise or the same team quality at a lower valuation than an equity company, trading in public markets

or trading even in venture markets because of all these issues. And then that, again, there's one more downstream effect, which is if you trade a lower valuation, if you raise a token, then if you're a really good, good teams, just go raise equity. Why not? We'd get a better valuation with better terms. So I just

think that this kind of, even though there are many good teams that can make it work with tokens, the fact that the majority by number don't make it work by tokens means you have higher cost of capital, lower valuations, and way fewer good teams launching tokens, than you would otherwise. Yeah, so recently we did an ICO for a project called UMRA, which is an early stage project. It's new, it's even pre-product, like many seed stage startups. Or they've developed a product, but they're waiting for Archea-made net. So, and there was a $156 million committed to that ICO. So they didn't take all that, but they actually, they could have.

All that could have gone to the project. And I think a big reason for that is because people knew, like, hey, if even if this money goes to the project, if it goes to the, it's not going to the team. Like, we're not just giving $156 million to some team to walk away with. It's going into this treasury governed by this, or like with oversight by markets such that, yeah, like if they try to rug, if they try to walk away with it, we can get our money back essentially.

Like, we can raise a proposal to do partial liquidation, do a full liquidation. Yeah, so I think that is like a pretty good data point for. Oh, let's talk about this more than profit. Okay, so, Lepe, your interest is in making, you know, our crypto capital markets, like, great and having more investable tokens and making these as good as, like, kind of U.S. equities markets. And so part of the solution to this is futarchy. So profit, let's go through that Umbra example some more. So Umbra, it's kind of a startup phase type of project. They have some sort of concept, similar to ICOs maybe we saw in 2017. It's a real team. Let's assume real team doing something real. and they're trying to raise on crypto capital markets instead of through securities. Now, and I believe it's like a privacy thing. Is that what they're doing in profit? Exactly.

Okay. All right. So, okay, so they raise 150 million using this mechanism. In ICO 1.0 in 2017, that would just be the team's money. Like there's no strings attached for investors. There's no protection here. How is this different with Umbra? You said profit, it goes into, I assume, some sort of smart contract-based system.

So it's not directly going to their bank accounts or their multi-sigs, the teams, I mean. It's going to a smart contract-based system, I assume, that has some strings attached, that has some governance associated with it, some sort of futarchy. Describe that in more detail, because I'm not sure I understand. Sure. And to be clear, they didn't take $156 million. They could have, though. That's like the key point.

Any, if you put money in, you risked that happening or like that could have happened. And they would have been 2017, right? They would have just taken all of it for sure. Yeah, for sure. Okay. And the reason why they didn't is actually because of the mechanism, which I'll explain. So they ended up taking $3 million. So that $3 million then goes to the project.

Just $3 million? That's very not greedy of them. Yeah. Because they don't want to trade for below nav because, yeah. So the $3 million goes. to the project treasury. That project treasury is on chain. It's like, yeah, smart contract.

The team, it's actually built on squads protocol, if you're familiar, like the multi-sig on Solana. But it's not a team multi-sig. It's a programmatic treasury where the team gets to spend their burn rate every month, which in this case,

they've set that to be 40K a month without needing to do any... And did they set that as part of the ICO terms, basically? Our burn rate is 40K per month and we're raising on that basis. And so we get to, the smart contract

kind of kicks that out every month to them as part of the initial programming. Yep. And we recommend adding a buffer just so like, you have enough. You don't have to constantly raise proposals if you're like, oh, it turns out we need to spend a little more whatnot. But yeah, so they get up to their burn rate every month that they can pull, which in, yeah, their case is around 40K. And if they want to make a large spend above that amount, so say they need to spend a million

on CapEx or something, that would need to go to a proposal where decision markets would decide whether it goes through. And also, if they want to issue new tokens, that also goes to a proposal. So yeah, every token in the system is mintable. And it can only be minted by decision markets. Why they only took $3 million, right? The status quo would be like, why not just take $156? Like if the market wants to give you $156.

And the reason why is because in this system, as a team, you have actually a lot of discretion. Like, as someone building a product, I can't expect founders to just be like constantly negotiating with their Dow and like raising proposals all the time. I think probably the right number of proposals is we'll see where this lands, but maybe between two and four a year. Like not a lot. But what would these be like big budgets, annual budgets, kind of, major capex spend above a million, like who the CEO is, kind of board level decisions? Is that the granularity for these types of futarkey votes? Yeah.

Like, fundraise is a big one. Like, if you want to OTC out tokens to a big investor, that would be one. If you want to issue new tokens for like a liquidity mining program, that would be one. Things like that. We've actually, we've not had a situation yet where a team needed to raise a proposal for a big cap-ex, like including ourselves. We're also based on this mechanism. Or like all of our money is stored in this programmatic treasury.

And yeah, so why did they take three million? Because imagine they took all 156 million. And then the market cap of the token traded down to like 130 million. In that case, then there would be the possibility of someone creating a proposal to do buybacks. and that proposal should, in theory, pass because it's trading below the net asset value. As in like the market, when a, if $156 million a cash is trading for $130 million,

the market is basically saying that this cash can be better invested elsewhere, right? If you're, if you're only willing to buy a dollar for like 70 cents, that implies that you think that dollar is going to kind of potentially be squandered away, at least partially. And so that would make it possible for someone to raise a proposal to do buybacks to like shrink to kind of return some of that capital to token holders, which we've actually had before. So yeah, Felipe earlier mentioned a fund that

was governed by this mechanism that kind of failed to deliver returns to shareholder or to token holders. And so gradually shut down. And yeah, so Umbra essentially, like I actually don't think it's that bad to have to deal with these buybacks, but it can be a distraction. I understand for teams to have to deal with this. And so they don't. want to deal with that. And so they want to have, they want to always trade above Nav and they've decided that there's probably enough market demand for the Umba Token so that they can trade above essentially a $3 million market cap. Okay. So they raise $3 million, right? I see right now their market cap right now in terms of token supply is something like $11 million. The fully diluted valuation

is $32 million. That excess in kind of the fully diluted valuation, that's not, on the market right now. Is that in their treasury or is that tokens to be minted later? Sure. So some of it is the coins in liquidity.

Like I mentioned earlier, the project actually provides a lot of liquidity in its own token. Okay. Which is, yeah, like kind of a pump fund inspired mechanism

where like, yeah, that people buy and then you take some of the money and you take some additional tokens and provide liquidity. And then the other component is we allow teams to do to set up these performance packages where they get uh they get tokens

dependent on both like time passing and hitting price targets. Uh, so in their case, they just use the default performance package where if it's, there's five tranches. Uh, and if they, uh, if the ICO price is, uh, two X or sorry, if the, if the prices is two X above the ICO price, they unlock 20%. If it's 4x, they unlock another 20%. If it's 8x, they unlock another 20%. Uh, and like another 20%. But yeah, basically this kind of like performance package where they get, they will, they would get tokens or they will get tokens if the price is higher than ICO price in about 21 months. Interesting. And so part of your job at Medidau is to be sort of a steward of kind of like the most, I guess, investor friendly kind of ICO and sort of launch kit with some of these recipes, right, which is like, you know, founder performance bonuses.

and just I guess some of the recipes that you guys are providing. Now, in the case of like Umbra, let's say, so let's say down the road they want to unlock a million in CAPEX, right, because they want to invest in something that exceeds their $40k per month burn rate. And their token right now is trading at $1.12, right? Then the Futarki decision, one of these two to four types of Board of Director type decisions per year would be give Umbra team $1 million, to do X, Y, Z, whatever their proposal is, versus do not give, you know, the team $1 million.

And then the market would determine whether the token price is higher an event that they release that one million capex, say, $2 for the Umbur token versus one, or whether it kind of like goes down in that scenario. And then Futarki would be at play and at work and essentially resolve as to whether the team would get $1 million in CAPEX from their smart contract multi-sig or not. Is that how it works, Profit? Yep, at a high level, yes. Interesting.

All right. And so it seems like you'd have to have tokens, like, fully launched on this platform from inception, from birth. You know, so they'd have to be involved in kind of the ICO process. And so it's really meant for new projects, new tokens. In other words, I guess Medidau doesn't allow for an existing token to sort of append futarchy governance decisions on top of it. You are more doing it from like inception and the full life cycle, but they have to really be born on Medidau for this whole thing to work, right? We actually do support the like an existing project wanting to migrate to decision markets.

And that's what I spent about a year, like we spent about a year trying to get existing doubts to move on. over. So it's less so us wanting to not support there. I just don't think that there's PMF there yet. As in the, it's not like the number one, two or three priority on an established projects priority list, which makes it a tough, especially on Solana, right? Like on Ethereum, you guys care about governance. We don't really care that much on Solana. And yeah, so we definitely support it, but I think the real value add is to an early stage founder, yeah. Yeah, I do have to say, mostly we cover a bankless, we cover the Ethereum ecosystem, and there have been many really interesting innovations on Solana. This is one of the first

ones where I'm like, oh my God, this is so Ethereum coded. Like, I'm jealous. Like, I want Medidau on Ethereum too, because it seems like it's really innovating in the governance space. So well done on this. What you're doing is very cool. And so, You like to call these, not Futarki, because that's governance nerd shit, but, Prof, you call these ownership coins. Can you talk about what that meme confers? Yeah, I mean, I think, yeah, there's been so many failed governance projects and, like, Dow projects.

I've even considered getting rid of meta-Dow. Like, we have Meta-Dow, that's our name. But then we would just be meta, which I guess is what Facebook is now. Yeah. It'd be a lawsuit for you there, Prophet. it. They've done it before. But yeah, so, and also I think Fiatarchy as a name, like I almost kind of want to distance a little bit from that because like if you're an early stage entrepreneur, you're not thinking

about, oh, I want to go start a democracy, right? You're just like, I want to go build a business. And ownership coin as a term, I think well encapsulates what we're doing here. because, yeah, if you think of the word ownership, it actually becomes obvious why, like, governance is actually some components of that, right? It's not the only components. We actually do a bunch of other stuff, too. So, yeah, like Felipe earlier mentioned the IP thing,

where we spin up legal entities for every project where the legal entity operating agreement, well, so that legal entity owns all the IP, and the operating agreement actually enshrines the on-chain governance as, like, the arbiter of what's allowed. Okay. All right. So talk about that piece because I think that's an important component here, right? So you're actually also spinning up a real world legal entity, some sort of C-Corp or Delaware thing somewhere that actually owns IP and is owned and that IP, say, whatever

code that they create is actually owned by sort of the token holders as well as part of the smart contract, is that correct? Yes. So yeah, like basically if there's a proposal that passes to, I don't know, sell, like yeah, to move IP, you would need to get a proposal passed essentially. And there is some legal structure, meat space structure that has to own that IP in the real world and that comes with the metadata package. Yes. And yeah, so for today, we use this offshore jurisdiction called the Marshall Islands. Oh, okay. I'll see.

And we're working with Metalex, like Gabe Shapiro, former Greciate at Delphi's company. No, Gabe, well, yeah, yeah, very cool. Okay, cool. Yeah, he's awesome. And we're probably going to move to Keman. Okay, wow, very cool. All right, so, Felipe, what do you think of when you see this?

Like, what's new and different versus kind of our Dow 1.0, governance 1.0 stuff. It's really just the token holder protection where you can't do anything that's adverse to token holders. I think that is the, it's really the killer app. Like, if we can solve, you know, raising money on the internet is the most exciting thing

that's, I'm going high level, it's the most exciting thing that I think we can solve as an industry over the next few years. And the thing that's been stopping that is poor token holder protection. and the ability to defraud or skim off the top from token holders. So I think if we can solve this token holder rights problem, all of a sudden we will get thousands, tens of thousands,

maybe hundreds of thousands of companies raising capital on chain through the internet. And just to be clear, so raising capital on chain through the internet is so great because it's borderless, it's available to anyone with an internet connection, it's a global market from day one, you get all the benefits of defy and liquidity in markets, and everything we built up. So it's way better than U.S. capital markets

in a certain perspective. What this is solving, profit calls it ownership coin. We've used the term futarky. It's almost sort of like an unruggable coin though, right? It's an unruggable token. So we're not solving all the problems here. Let's be clear.

So there are still tokens that will go to zero here because there are still projects that just won't achieve product market fit or founders that can't execute or ideas that were too early. in their life cycle or just things that didn't work, right? And that will always be the case. What we are

solving for here is something that feels small but is vitally important, which is we're creating ICO mechanisms, capital market mechanisms that can't be prone to all of the rug risks that you were talking about earlier. The Bali

slow rug, all the kind of the diverting, you know, share like revenue into some other like token, you know, All of those things, that's what we're solving for specifically. And that's going to improve the quality of tokens that we have on our platform. Is that the case? Oh, exactly.

And I think, you know, all the things that you mentioned, permissionless capital markets, global capital markets, D5, programmability of tokens, all these things are amazing. I think that the rug, the token problem, you know, the rug problem, we call it the token problem, is the Cheeto and the door meme. That's holding all of that back right now. because fundamentally we've created this amazing ecosystem in Defi. It is, all the things that are possible are incredible.

But people do not raise money for most businesses on chain. They don't hold most of their assets on chain because of, because you don't get, you can't pick up like high quality capital on chain, right? This team, the Umbra team, I don't think they would have gotten $156 million of demand had they launched a random ICO with no protection. Or I know for a fact that they wouldn't have, right? But as soon as that type of money becomes available on chain for people to raise funds on chain, like they will come.

And as soon as the returns are there, because you would remove the right problem, capital will flow into the space. It's very easy to raise liquid capital for an industry that's growing when returns are good. Right? if we had three years of good returns through ICOs, you would have billions of dollars on chain chasing these ICOs. That process is really fast. Like you get good returns,

a new fund, like new funds come up to get to take advantage of those returns, fund to fund see that they're like liquid token allocators doing well. Again, getting bills of dollars on chain is very fast. And for teams, you know, the Umbra ICO happened, they got $156 million in account, capital and, you know, profits getting dozens of DMs the next day from teams I want to raise on metadata, right? Like both sides here want to meet. Both sides you want to cooperate. But you have

this token problem, the rug problem in the middle, stopping that from happening. And I think that as soon as you kind of get rid of that through futurearchy, you were going to see a tidal wave of on-chain capital raising. And I would say, if I could just add to like the entrepreneur side, like why is an entrepreneur go this path? Because I think the obvious answer is just because they can raise money here where maybe they can't raise money elsewhere. But I think I'm also, I've seen, like, the really high quality founders that I talk to that want to raise with Medidau, they want to do a token because they like the distribution

edge of doing a token. Like, they like the idea of getting all these bag holders that are then instead of I just to, like, shill them on CT into their friends and whatnot. But they want to do it the right way. And today, there's a few playbooks of doing a token. Like the main one is this low-float high-fd-fd-vd-playbook, which is really not a fun game to play. Like, you're basically just trying to hype up your thing as much as possible,

get as many Koreans to buy it, and then, like, your token is going to go down over an extended period of time. And, like, it's not, yeah, it just is not really purpose-built for building a business, the established token playbook. And then we have this new token playbook where you can, can launch a meme coin on Pumphun or like some other bonding curve-based platform, which does solve the low-flit high FDD problem, but then you're not actually creating a valuable token, right?

You're launching a meme coin, and that tends to attract short-term holders and just like people betting on tension because the thing itself doesn't have value. And here's like, if you really want to do things like a grassroots way, we're launching a token on day one, allowing it to potentially appreciate over time because you're not launching it like a $5 billion FTV or $1 billion FTV, but you want to do it in a way that you can like sleep at night and

gets high quality people to surround you. I think that's like the main the main pitch. Right. And if you're right and if this works, then you become kind of the anti-lemon ICO platform where all of the good teams and the good projects kind of come to you and you slowly kind of transform our token markets to higher quality projects. Let me throw out one wrench that could totally gum up the works here. Sure. And this is, I'm going to invoke the G name again, Gary Gensler, okay? And let's talk about maybe a V2 of Gary Gensler.

Right now we have a favorable SEC and Paul Atkins, who seems to be sort of letting things happen, letting experiments play out. Indeed, someone like Hester Purse is very in favor of kind of sandboxes and all of these things. That, however, is not the last word on, you know, the SEC and securities regulation. And coming back to kind of like the full circle lessons from 2017 through 2022 is the SEC as kind of the king capital markets, they are going to have something to say about these types of setups and ICOs on internet capital markets, right?

And there's existing U.S. law for this, right? There's accredited investor laws. You know, they feel like they have the investor protection capital markets thing figured out. Of course, we being crypto natives, we're like, okay, well, we're still in the spirit of everything you're provided. You want investor protections? We could do you one better. Smart contract-based investor protections where no one gets the money and you could see it

all on chain and it's all glorious. If they were thinking from first principles, then they might come around to our idea. Anyway, this is a long-winded way of saying, what happens with regulation? Okay, so we've got to be still somewhat in the gray zone here. I've seen enough crypto projects get torched by, you know, angry regulators, the SEC. We've seen the anti-crypto army. This is not a settled matter in the U.S. So I don't know if you have a perspective on this, Felipe or profit,

but I'm a little bit worried that some sort of form of a Gary Gensler reincarnation comes back and strikes back at these ICOs that we're trying to do and kills our experiments. Do you have any takes on this or any perspective here that you can lend? I have a take, which is essentially this is a risk, like this is a real risk, and I understand that. And I mean, there's two things I would basically say. One is that there are countries outside the U.S. I know the U.S. has like a long arm. I live in U.S. in San Francisco, which I love. but there are plenty of entrepreneurs who are outside the U.S.

and potentially don't have to care that much about what the SEC says. And then the other point is that I think, like, if you work in crypto, like if you're building something in crypto and you're not willing to enter the gray area, at least, you should probably find a different industry to work in. Because, yeah, like if you go back the history of crypto, Bitcoin is an unlicensed money transmitter, right? There were previous iterations of Bitcoin that got shut down by the feds because they were unlicensed money transfer. Only difference with Bitcoin is that it's decentralized, so it's hard to shut down, right?

I think a lot of defy as well is like probably if you were to look at it with a really sharp eye is breaking at least some existing rules. I mean, I'm skeptical that the existing token playbook even is not a security, right? the model that Fenwick dreamed up where you have the labs entity, the foundation entity, and then the Dow, and there's like these different relationships between them.

Like, that's not been tested in court. We don't know that that's not a security. It still seems to satisfy some of the requirements of being a security, right? Investment of money in a common enterprise with the work, with expectations of profits based on the efforts of others, right? Most people are buying tokens

with expectations of profits on the efforts of others, right? Like if the team just went away tomorrow, aside for maybe Ethereum and Bitcoin, like there wouldn't, most tokens would go down at least 50%, if not more. And so, yeah, those, I guess then that's three points. One is like outside the U.S., two is, yeah, if you're working crypto, you'd probably be okay with gray area. And number three is like, even if, whether you like it or not, you're actually already

in the gray area. Can I add a number four, which feels like the, being on the, the right side of history, I feel like is important. And like when you're in the business of quote unquote doing the right thing and providing value to market participants, I think you are on the right side of history. And I think there's the case that you can blitz scale such that regulators just have to start accepting you. I was going to add something a lot like your point four, which is, you know, I have faith that people who are concerned about crypto and how it meshes with U.S. capital market regulation will be much more open to hearing arguments from the

people who just had a hour and a half podcast on how to secure shareholder protections and on-chain capital markets and how to stop rugs from happening and how to make sure that, you know, people who put their savings in these instruments don't lose all their money. Like, we are trying to achieve the same goals here. So there's always going to be some friction between old regulations and new technologies. But if you're on the right side of the argument and you're trying to, and you are trying to adhere to the spirit of the law as much as possible, I think even much better shot at being listened to and being in the conversation than if you are going very much against the spirit of the law, which is what I think a lot of the industry has been in over the past

few years, you know, you're better or worse. So profit, scale this forward. What's next for Meta Dow? It sounds like you've got active ICOs kind of launching today. What's kind of the next step in this platform? Yeah, I mean, really just scaling out the number of projects. I think it's a really really tough, like market sequencing is a really tough problem. Like how do you, how do you introduce this in a way where that's okay, basically, because you have this two-sided platform. On one side, you have the capital providers. On one side, you have the founders. If there's too many founders and not enough capital providers, then things under raise. And if there's not enough founders and too much capital, I guess that's slightly better, but still like people lose excitement because they're like,

I don't go to this platform because there's nothing to participate in. And that all happens in waves, right? There's never a time where you're going to have perfect balance, I suppose. Yeah, I think it's kind of like a zigzag. Some weeks I focus on getting more capital providers, like DMing people on Twitter and being like, hey, you should check out this ICO thing. It's actually kind of interesting.

And then some weeks I focus exclusively on meeting founders. But yeah, I think we are more. And there's also some things that we need to tweak with the mechanism itself. Like more, I would say, around the edges. than core changes. But yeah, basically just, I have reasonable conviction

that this market, like this product will work. And so now it's a question of how do we improve the product incrementally and then how do we, yeah, capture the market and like go to market as quickly as reasonably possible.

Felipe, what's your take on where all this leads? I think that you'll know that future key and ownership coins have won when existing projects get a valuation bump but from converting. So I think at some point in the future, you will see projects like AVE and Maker and these well-known tokens

that are reasonably good faith, convert into future keys, and get a valuation bump on the news, basically. Because investors will, and that's when you know that investors have appreciated the mechanism, understood why it's so valuable for them, and decided to put more money

allow us equal into future keys than unprotected tokens. Well, Felipe, profit, it's been really a pleasure to learn about this. Very interesting project. Love what you're doing over there. Hope maybe you come to an EVM chain at some point, profit. Maybe a base or something like that. But cheering you on in this governance experiment, it's certainly good for crypto.

I mean, yeah, if the market wills it, we'll go to base. But yeah, thanks so much for having me on. There you go. Maybe we'll put up a prediction market or Futarki decision on whether the market wills it at some point in the future. We'll see. Guys, thank you so much. Bankless Nation, got to let you know. None of this has been financial advice. Has not been ICO advice either.

Crypto is risky. You could lose what you put in. We are headed west. This is a frontier. It's not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot.