Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Ryan Sean Adams: Mythos Capital – On Becoming Bankless

Episode Date: April 7, 2020

Ryan Sean Adams is the Founder of Mythos Capital, a crypto fund and staking provider for “big fish” stakeholders. He also writes the popular DeFi newsletter, Bankless. In addition to providing excellent insights about the ecosystem, Bankless takes a very practical approach to leveraging DeFi. Ryan shares strategies and encourages readers to complete action items to utilize the full potential of decentralized finance and become bankless. He also hosts a podcast by the same name with David Hoffman.Topics covered in this episode:Ryan's background as a tech entrepreneur and how he got involved in cryptoLaunching ​Mythos Capital and the thesis behind this fundThe importance of becoming “bankless” to preserve self-sovereigntyWhat good analogies we can use to describe DeFi and the use of clear terminology to describe cryptoassetsThe power and advantage concentrated in centralized exchangesTrustless nature of Ethereum vs. BitcoinThe role of nation-states in the DeFi ecosystem as it continues to growThe idea that “Eth is money” and Eth as a store of value asset in EthereumThe impact of Covid19 on the economy and crypto marketsThe future of Ethereum and BitcoinEpisode links: Mythos CapitalBankless newsletterBankless podcastRyan Sean Adams on MediumMythos Capital on TwitterRyan Sean Adams on TwitterReset EverythingSponsors: Least Authority: Register for Security Sessions on April 30th to learn about security audits for your blockchain project - https://leastauthority.com/meetupThis episode is hosted by Sebastien Couture & Brian Fabian Crain. Show notes and listening options: epicenter.tv/334

This is Epicenter, Episode 334 with guest Ryan Sean Adams. Hi, welcome to Epicenter. My name is Sibbisankujuo. Today our guest is Ryan Sean Adams. Ryan is the founder of Mythos Capital. They're a crypto fund. They hold crypto assets, of course. And they also offer staking services to large stakeholders for the cosmos and loom networks. Ryan is also the author of a popular defy newsletter called Bankless. Now, if you're not a subscriber, I would encourage you to check it out. We'll leave the links in the show notes because it's one of the newsletters that takes a very practical approach to leveraging defy and becoming bankless,

as he puts it. So he shares a lot of thoughts about the ecosystem, of course, but one of the things that I like the most about it are the actionable strategies that you can implement to improve your utilization of defy and even make money. He's also the host of the bankless podcast, which was recently launched and that he hosts with David Hoffman, who was also recently on the podcast. So here's what you'll learn in this interview. Ryan's background as a tech entrepreneur and how he got involved in crypto, launching mythos capital and the thesis of his fund, why it's important to become bankless and being able to do money verbs like lending, spending, paying, et cetera, without banks. What good analogies we can use to describe defy? What good analysis we can use to describe defy? What good

analogies we can use to describe defy to people who are not familiar with it, the power concentrated in centralized exchanges and whether or not that's a threat to defy, the trustless nature of Ethereum versus Bitcoin, ether as a store of value asset in Ethereum, and the idea that eth is money, the importance of self-reinforcing feedback loops in Defi, the role of nation-states in the future Defy ecosystem, and a foreign. course, the effects of coronavirus on the world economy and crypto markets. So for the last two months, we've been running a survey on the podcast. And I wanted to extend my gratitude to everybody who participated in this survey. It was our first survey, and I wasn't really sure how it was going to

turn out, but about 200 of you participated. So thanks a lot, because the insights that we learned here are extremely valuable. So I'll be writing a blog post this week and posting it to our medium and also our blog on the website with some of the key insights here. So thanks to all of you and thanks to ShapeShift for offering to give Keepkees to everybody who participated. I hope you guys are enjoying your Keepkees. Now, I'm not one to watch a lot of TV. I don't have a TV. I don't usually have a Netflix account. But being in confinement these last couple of weeks, you've got to occupy yourself. And so I started watching a few things. And last week, I binge watched the entire 10 episodes of the new Star Trek Picard series. I got so excited about this thing because when I was a

kid, I was really into Star Trek. And so of course, you can't have Jean-Luc Picard without the Borg, right? And so if you're not familiar with Star Trek, the Borg are the species that co-op technologies from other species, and they sort of assimilate those technologies within their own collective hive mindset. And they have this incredible ability to adapt. Whenever they were attacked, The first few would fall, but then they would always adapt. In fact, they would always say that. They would say, they've adapted, and then the good guys would have to change up their strategies. Well, I feel this is a great analogy for security in the blockchain space. Every time there's a hack, or when a security vulnerability is discovered, we collectively adapt our strategies and our mindsets to improve our defenses.

So I'd like to tell you about an event that will help upgrade your security mindset. The privacy-focused security consulting company, Least Authority, is hosting their first security sessions on April 30th. This is a free online meetup for blockchain founders and tech leads where you will learn about the low-hanging fruit common vulnerabilities that you can fix today, what security audits actually looked like from start to finish, and exciting developments in blockchain security research. You can ask questions to their team of expert security researchers and get advice about the things that you're most concerned about. And it's free. So once again, it's happening on April 30th and there will be several sessions

throughout the day to accommodate for all time zones. To sign up for this free event, go to leased authority.com slash meetup. Be like the Borg and upgrade your security mindset. Once again, to sign up, go to leased authority.com slash meetup. And with that, that. Here's our conversation with Ryan Sean Adams. We're here with Ryan Sean Adams. Ryan Sean Adams is the founder of Mythos Capital and also writes a pretty popular newsletter, I'd say, in the in the defy space called Bankless. And so we're going to talk with Ryan today about a number of things, but primarily, you know, Defy, why it's important, and his thoughts on the long-term sustainability of Defy. Ryan, thanks for joining us.

today. It's great to be with you guys. I love the podcast. So it's fantastic to be on it. Thank you. It's a great pleasure to have you. So before we get started, tell us about your background and how you came to be involved in the crypto space. Yeah. So my background is, you know, tech entrepreneurship, kind of the Silicon Valley track, had a healthcare startup that I was involved as kind of a co-founder of, sold that. And in 2013, really started to you pop the lid on Bitcoin a bit. And this was through a friend of mine, actually, the co-friend of the company. He said that he was buying some A-6 to mine something called Bitcoin. And that sounded so weird and bizarre, I had to check it out. So I remember one Thanksgiving weekend

that year, I spent the entire weekend just absorbing everything I could. Andreas Antinoplas talks, you know, mastering Bitcoin books. documentaries, everything I could get my hands on. And I remember finishing that weekend being like, wow, this is a game changer. I want to quit my job now and go into this. I didn't. Cooler heads prevailed come Monday morning. And I kind of went back to business as usual. I didn't get further involved in this space. But my round two in the crypto rabbit hole was really Ethereum. So Bitcoin was really interesting, the things you could do with it and transferring cryptocurrency around. But for me, Ethereum was like the paradigm shift. And the reason I got into Ethereum

was because of this aspect of programmable money. So not only can you move ether from one place to another, you can create other assets on top of the Ethereum economy. You can create money protocols. You can accomplish other things like lending and borrowing, you know, fundraising. Even the ICOs were sort of an early example of permissionless fundraising and program of money around fundraising. So that was like the, you know, the second, I guess, one-two combo punch for me and I was just, I was just gone. I couldn't think of anything else. Nothing else was as interesting to me after that. You know, it's just the combination of economics and finance and psychology and monetary history and technology. It's all there. I realized that this

is sort of the birth of a new internet, kind of a once in a lifetime or generational type experience. I remember the early internet as a kid and playing around with that and how magical that was. And I decided I absolutely was not going to miss it, miss this revolution. So I kind of went all in at that point from a career perspective, do some crypto investing now, also I have a staking company. And this year, I created a newsletter program to explore the D5 space called bankless. And we're just helping people with tactics and strategy, how to think about crypto and become more and more bankless, because I think that is the promise of crypto. And I bet we'll get into that in a bit more.

But it's not just Bitcoin, it's bankless without a central bank, without a commercial bank, being able to do this on a pure to pure basis. That is the self-sovereign money aspect of crypto. And that's why this space is incredibly interesting, at least to me, that's why I'm here. I'm curious if you can dive into this a little bit more. You know, you discovered Bitcoin first and then sort of didn't fully fall down the rabbit hole, but kind of like partially. And then afterwards he did.

So why do you think, like, what was it about Ethereum that that second time, like, really fully caught you? I think something just kind of clicked for me, really the second go around with Ethereum. It was a much more expressive platform. So you could create other assets on top of it. You know, that was kind of the initial use case that was incredibly interesting. So with Bitcoin, it's sort of. this mono asset platform where you only kind of have Bitcoin, at least in a trustless way,

with Ethereum the ability to create all of these assets, even something early on with Ethereum like the tokenized gold, you know, with the DigEx platform. How interesting is that? Or the Auger platform was kind of an early Ethereum project with prediction markets and being able to create sort of this idea of an Oracle. It was that programmability that I think, think felt to me a lot more like the early internet. And the early internet I see as, and the internet today is it's, it's really a permissionless communication protocol. So anybody can create a website. You don't have to ask Google or Facebook. You know, you just create a website. Anyone can send an email using protocols like SMTP and pop.

You don't have to ask permission to do that. And the applications you can build around that. I mean, we've seen that play out over the last couple of decades. So it was this expressivity in Ethereum that kind of drew me in that second round. And I thought, wow, this is, this is like the internet. This is like a new set of protocols for digital scarcity and for value transfer. And the permissionless aspect of Ethereum, the ability to program things on top of it, that's like the early internet. And that could lead to kind of a, this, this, this massive second wave of innovation. And so, you know, after I kind of figured that out, you know, that was kind of it for me. I will say a little bit after that, I probably round-tripped on Bitcoin

a little bit and rediscovered the value of store of value-ness and, you know, kind of monetary premium inherent in the Bitcoin asset. And, you know, that kind of reinvigorated some excitement for Bitcoin for me too. And it helped kind of inform the model and the thesis I use for these assets today. The programmability and expressivity of Ethereum and its economy as a money platform. And also some of the monetary premium aspects of Bitcoin, both of those things, I think, are really important in a bankless system. Given this sort of personal thesis around,

crypto. Can you tell us a bit more about Mythos Capital and how that, how your personal convictions flow into the investment thesis here and what you're doing at Mythos? Yeah. So in 2017, I think, you know, I'm so excited about this space. I wasn't the only one to obviously think this. The first thing I wanted to do is like, you know, I should go start a hedge fund, right? That's what everyone's doing. Go start a hedge fund. That's a way to kind of, invest in the space and partake in the space. But what I realized about the kind of the hedge fund model is it's not, it doesn't kind of suit my strengths or sort of my thesis for the world. So the hedge fund model, of course, you pool assets from other investors and you get paid

20% annual, 2%, 3%, you know, performance, something like that. And, you know, your returns are really measured on a monthly, quarterly, annual basis. I don't think monthly, quarterly annual is the best time horizon, at least for me, in thinking about crypto monies as a narrative. What it tends to foster is hedge funds that do what I call narrative investing rather than more fundamentals, long-term investing. So the narrative investing is like, well, you know, staking is so hot this year. So we're going to buy a bunch of staking assets or, you know, initial exchange offerings is so hot right now. We're going to do that. Or exchange tokens, they're the thing.

And it keeps you kind of moving around from gain to gain. And that's fine. It's just not what I wanted to do. What I found is there were just, if you look at the coin, a market cap top 100, there are just a couple of assets, you know, maybe a handful that I felt excited about, that I felt would be able to accrue. maintain a monetary premium. And if I'm just holding, you know, assets like ether and assets like Bitcoin for investors, well, it makes no sense to charge investors, you know, two and 20% just to just to do that. They can go do that themselves. So I can, the hedge fund idea, have kind of a, you know, a smaller capital pool of some private investors where we're just kind of investing for the long

term. And primarily the thesis is crypto money type assets, like Bitcoin and Ether. We've got also some stuff going into the staking world as well with a couple of assets that we don't think will accrue monetary premium, but are nonetheless somewhat interesting, so a little bit there. And then really what I decided to spend most of my time on is kind of the long-term development of a community that's going on the same journey that I'm going on, which is the journey to become more bankless. So essentially to take these crypto money systems that we have, ether, Bitcoin, and all of the protocols built on top of them,

and then start using them, start using them in place of our bank accounts. So your Bank of America, your Wells Fargo account, the thesis is those will become less and less necessary over time. And your crypto accounts, your ether address, your Bitcoin wallet, those will become more and more valuable over time. And there might come a time in place where, you know, first, your net worth shifts to more crypto assets rather than traditional assets. And for some people, that's already happened.

And then the second wave is, you know, the activity, their account activity, their banking activity switches from their Wells Fargo bank account to their Ethereum address. You know, and that to me is a vision worth striving for, something I'm passionate about, and I think has a really interesting upside, monetary, accrual type of value proposition. So it just checks all the boxes for me. Why is it important to become bankless? Yeah, so I think that the reason it's important to become bankless is because over the last 100, you know, 200 years, and now I think the pace is accelerating, a lot of the sovereignty that

individuals have had has started to disappear. It seems to me when you kind of look across the world that we're moving in a direction of more authoritarian regimes, more totalitarian type control, less individual decision-making, and more decision-making by the few. who control the lives of the many. And I actually think that the advent of technologies, like not the internet, not the base internet protocols, but the tech giants that have built on top of those platforms are not helping us. They are causing more centralization. It shouldn't be the case that a government can control an individual's economic activity, shut off access to their bank accounts, you know, inflate the value of their assets. Essentially,

that's a power that the few shouldn't have. It gives governments too much power, the ability to, you know, label you as a dissident and lock you out of the global economic system. And I think that that is an unhealthy balance. So in some ways, we're in precarious times and we're moving more towards, you know, more greater control of the few and in more precarious times. So to me, the movement is about decentralization. And what I mean by decentralization is, you know, changing the structure of power from the few, taking some power from the few and distributing it to the many. And so I think a self-sovereign money system that includes not only a money that's not state-backed at the base layer, but also a banking system.

on top of that, that is permissionless, that is available to the 4.5 billion people across the world with an internet connection that can't be turned off by governments across the world that is accessible to all, that anyone can build on top of. That to me is a worthwhile and important project in these precarious times. Yeah, no, absolutely. Couldn't agree more if this. And so when you look at defy, is that, like, how would you describe defy or how do you describe defy? People are kind of like, you know, new to this thing. Maybe they've heard of Bitcoin and cryptocurrency, but they don't have a conception of defy. Like, how do you describe it?

So I like to use analogies because the problem is when we're talking about defy, the people in this space, we go into this like, you know, word salad of things that just no one understands, you know, I'm going to take my diet, I'm going to put it in the DSR, and I'm going to get chai out of it, and then I'm going to zap into, you know, synthetics and I'm going to zap out. Like, it's, it sounds crazy. I mean, to some of your listeners, this might sound normal because they're doing these sorts of things, but that's not the way to explain it to the mainstream. So, you know, the way I like to explain it is, you know, first of all, we've got a traditional system, traditional money system on the left, right? That's everything we use today. So we have Fiat money. That's the base layer money.

And then we have the banking system, right? That's the Wells Fargoes of the world, the Bank of America is the HSBCs, right? And together, that's the money platform that we use today and it allows us to do things with our money, do finance. So things that are important, like paying and spending and borrowing and lending, longing and shorting, all of those things happen in the traditional world today. Well, crypto, and this is even broader than defy, but the crypto is this parallel universe, right? So it operates in this kind of separate area. You have exchanges like Coinbase that serve as a bridge, so they will help you convert your traditional money over to this new money system. They're like a bridge for that.

But once you're in this new money system, you're kind of there. And it looks similar to the old money system in that there's a base layer instead of fiat currency like US dollars or the euro that base layer is crypto money systems and when I say crypto money people always get tripped up by the word money I just mean assets that are a store of value used as collateral reserve assets for the crypto ecosystem and Bitcoin has been and is one of those ether I think is is one of those too and is emerging as a kind of a defy reserve asset if you will but that's the bottom layer so that's that's like Fiat, right? The base money crypto layer, it's different than Fiat because issuance is trustless. So we don't have to trust, you know, 12 people at the Federal Reserve to make decisions.

We've got algorithms that make those decisions and issuance decisions, if you will. And those algorithms are really difficult to change. It requires lots of social consensus. So it's a better money system from that perspective. Now, it's much more volatile. So people get tripped up when you call it money, but we could talk about that more. So you've got this base money layer, these reserve assets like Bitcoin and Ether on the other side in this new world. And then above that, you've got the crypto banks, as I call them, so sort of the exchanges. And you also have the DFI protocols. So that's the banking layer. So those are our equivalents to Wells Fargo and Bank of America. And so if it's a crypto bank, it does have an element of centralization, of course. It's more similar

to Wells Fargo. So, you know, Coinbase is set up as a corporate entity. But Coinbase allows you to do things with your crypto money. It allows you to accept it in Coinbase Commerce. So you You put a plugin on our website and start accepting dye and ether. It allows you to trade. It allows you to borrow and lend. These exchanges will become more and more like banks over time. But then you also have this really interesting new set of protocols that are generally built on top of Ethereum.

And these are the DFI protocols, the money protocols, if you will. And these are really interesting because they allow you to accomplish those money verbs the borrowing and the lending and the trading, they allow you to start doing those things without a bank in between, right? So with Uniswap, for instance, it's just you and a protocol. You don't give up your private keys. You still maintain control of your crypto money. There's no one in the middle.

It's just code. That's the purest form of a defy protocol, like, you know, highly trustless. And now with Uniswap, you can start trading without anybody in between, right? That is a fully bankless system. And as those money protocols develop more and more, you know, we'll have a completely parallel system, I think, that replicates the traditional system, but has one key advantage. That advantage is it's trustless. So it's trustlessly settled.

And our crypto money is trustlessly issued. and we can go fully bankless. So with your Ethereum account, your Ethereum address, which anyone can access, anyone can open, there's no restrictions, it's not censorable, you have a passport to this parallel system. And that to me is what it means to go fully bankless, and that to me is the vision of Defi.

It's an extension of the original crypto vision that I feel like at times, the Bitcoin maximalist community has forgotten. The point of this whole thing is to go bankless. It's not to replace the traditional bankers with a new set of finance and Coinbase and new banking overlords. The point of this is complete self-sovereign money

and a completely self-sovereign parallel financial system. And D5 plays a key role in that in my mind. Maybe just be able to on that. So, I mean, I agree with this, that this is a desirable outcome. At the same time, it seems like what we've, you know, what we've seen in the last years is that exchanges have become increasingly powerful. They are doing more and more different things. For example, we had Jesse Powell from Cracken on a while ago, you know, he was talking about, okay, the idea, like the advantage of an exchange that, you know, if you trade on the exchange and if they also offer derivatives, you can use like, you know, you balance in the spot trade to like as margin for derivatives.

And, you know, then exchanges offering staking, exchanges offering lending. You know, there's ideas of some of the exchanges to go into trading other assets like stocks and stuff like that. So do you think this is going to happen in terms that, like, what are going to be the drivers that actually make this a sort of self-sovereign money, you know, I manage my own assets as opposed to, you know, just a new set of basically large financial institutions. I totally agree. That's the direction it's going, right? Or it might go. And I think the answer your question is defy. That's why I'm so excited about it's, it's defy. It's money protocols

rather than crypto banks. We want protocols, not banks. So what's, what's happening, as you say, is, is cracking is becoming our new JP Morgan, right? And Binance is becoming our new Goldman Sachs. And what alarms me somewhat is that I don't want to characterize or stereotype the Bitcoin community, but certainly among Bitcoin Maximilus, they seem totally fine with that. Some of them do. What they want to do, what many of them want to do, is usher in a new gold standard, right? Where Bitcoin is kind of the Bitcoin standard. But the problem with the Bitcoin network is it's not expressive enough.

to contain an entire trustless financial system. So with Bitcoin, there's one thing you can do on Bitcoin trustlessly, and you can only do it at three to four transactions per second, and that's move Bitcoin from one place to another. That's the thing you do. That's the verb you can accomplish. You can pay someone. You can receive Bitcoin.

That's it. It's not expressive enough to create an entire trustless banking layer on top of it. And so what happens is due to this limitation, I feel like the Bitcoin community has someone said, well, you know, who needs all this DFi stuff anyway? Right? We have Cracken Coinbase and, you know, we don't need high transactions per second on the base layer anyway. This is all about, you know, even Safedin in his book, the Bitcoin standard. He's like, I'd be fine with the world where there's, you know, a thousand maybe different crypto banks settling on the Bitcoin main chain. and individuals really don't do it day to day. Well, like, I mean, that's not compelling to me. That means we're all, you know, kind of keeping, we're using crypto banks for all of the money verbs, and they become our new banking overlords.

And so maybe that serves to make original Bitcoin holders rich, but it doesn't lead to a completely self-sovereign money system, right? Because the thing you have to realize is that, you know, in the traditional world works the same way. The central banks and the banking structure, they're all part of the same apparatus, right? You know, the banking structure in the U.S., they're kind of an extension of the Fed.

So the central banks, you know, sets the monetary policy, sets the interest, right, all of these things, and commercial banks essentially carried out. If the Fed requires something, commercial banks do it. They are nodes on the Fed's network, right? So unless you disrupt and have replacements for both of those, things, it's just going to re-centralize on the banking layer. So to me, that limited Bitcoin vision is not at all compelling. What is compelling is having money protocols actually compete on the banking

layer in Ethereum, for example. And, you know, a world where uniswap is bigger in terms of liquidity pool than Binance and Coinbase, you know, maybe not uniswap, maybe a protocol like it. something that is completely permissionless and trustless, that's the world I want to see. And I think that's the world of the original crypto vision. So it's about these protocols getting stronger and even starting to disrupt some of the banks. And I think what will happen is this. I wrote a post on bankless recently called the Great Protocol Sync, which is in this, this gives me hope because it seems right now that the exchanges in the crypto banks,

they will kind of control this banking layer. But what I think could happen is protocols could kind of drop below, and the crypto banks might start serving as onboarding for these DFI protocols. So you already saw Qcoin, which is a exchange in Asia, they're incorporating the die savings rate into their accounts. So you can deposit directly into the die savings rate. So DFI protocol has kind of slipped, underneath a crypto bank in that case, right? Well, how long until crypto banks start tapping into

the liquidity reserves of uniswap? Hopefully, hopefully that might come soon. I made the prediction. I think a top three exchange will incorporate the die savings rate into its platform sometime this year. And once one does, then they all will. So that is kind of the great hope. The great protocol sync is that some of these defy protocols start to become so credibly neutral and start to acquire enough state to actually be used by these crypto banks the same way the crypto banks are using crypto money protocols like Bitcoin and Ether. That's the hope. Yeah, I know. So I love that you bring this up because this is a topic that, you know, at course one, we've spent tons of time working on and especially around the topic of proof of stake, right? Because in proof of stake, you

have now many exchanges supporting staking, and they can kind of do defy-like things where, let's say you can stake and you can maybe lend the money at the same time and you can still trade. And it's actually, it's more powerful than if you kind of custody the asset on your own. So we've been doing work and there's currently kind of a working group that we've been running on this topic that's been funded from the Interchain Foundation around how you can basically kind of bring defy to proof of stake protocols so that you could do those things in a decentralized way so you don't have to give up custody of assets and i totally agree i think it's a super important thing it's actually especially around proof of stake because if you have the proof of stake

assets all all mostly controlled by changes and then those assets also become kind of the deciding things around a consensus it means really they they control the chains in a way that they don't control Bitcoin, you know, even if like 50% of Bitcoin are held on a bunch of exchanges, they can't really 51% attack Bitcoin because it's a separate thing. But with proof or stake, they kind of can. So I think it's a super important topic. Yeah, I completely agree. And I think Defi needs a lot more innovation around what you're talking about, you know, creating staking assets that are useful in a permissionless way. If Defi doesn't do this and if these money print. goals don't become competitive. And let's talk about the third element is if consumers just don't

care about going, you know, fully trustless, and then I think the crypto banks will sort of win. You know, in the staking business with mythos, we participate in a network called Loom. There's like something like 300 million or something, Loom staked. Binance just launched a couple months ago on that network. They now have 153 million. Or, you know, like it's over 50%. That can easily happen to crypto networks and particularly in staking. And

I think the great defense that money protocols need to have is to be incredibly useful and ultimately to have liquidity. Liquidity pools are the hedge against crypto banks kind of running the entire crypto economy,

which not a lot of people are talking about to be honest right now. And I think we should be. There's a lot to unpack here, but I'd like to come back on a couple of things you said. As we're recording this, I just came back from ECC. Actually, it was happening here in town. But I heard a couple people say there that in the defy space, well, what people really care about and what people are really passionate about is the ability to sort of create money Legos in a permissionless way, right? If you know how to code solidity, if you know how to code a smart contract, like you can create new types of financial vehicles.

new money Legos and the composability of those different parts, right? So you talked about DeFi's app earlier, but that in the end, trustlessness as interesting as it is, like some people probably are fully aware that we're not going to go fully trustless or maybe have to resign themselves to that fact. So like you were talking earlier about exchanges, capturing, you know, the majority of the liquidity in the networks. And consumers need to care about that. Well, like, consumers are fully or perfectly fine with putting most of their information on Facebook or on medium or whatever, but their ability to create content there just at will and express themselves and talk about whatever they want is really what they care

about. So, you know, sort of overlapping the defy analogy to the internet of information analogy, do you think that it's possible that it just ends up going in a direction where, you have the ability to create all these interesting financial products, but that, the underlying networks themselves are not fully trustless. Yeah, so maybe I'll say two things on that. So the first is, I'm not on a crusade against the crypto banks, right? So, you know, I think crypto banks are incredibly useful. Coinbase has done so much for this space.

It's incredible. Bringing fiat over making crypto usable, tapping into Bitcoin, ether, and other crypto assets as a money protocol to enable exchanging, to enable lending, trading, all of these things massively useful. You know, love crypto banks from that vantage point. Don't want us to be limited to buy them. But the thing that makes, I think, crypto protocols and protocols in general, Ethereum, of course, as well, the thing that makes it so special is that it's permissionless. So anyone can build anything on it. I think that stable coins, bank stable coins, are a brilliant use case for crypto. That's not completely trustless at all,

but it allows you to move trusted US dollars using USDC across the world in a matter of seconds, billions worth for transaction fees that cost cents. That's magic, right? And of course, Ethereum as a platform can't say no to that use case and doesn't say no, wouldn't want to. So all that to say, I actually, you know, I say defy and I use the meme, but it's with like reservation and with objection because I don't actually love the term defy. I like the term open finance better because this is a lot like the internet. No one can stop you from publishing a blog or uploading a video or creating a website. It's permissionless like the internet.

It's open like the internet. That I think is the true potential. Anyone can build on top of it. You can build a trusted money application. You can build a trustless money application. So I don't think everything on Ethereum needs to be fully trustless or fully defy. I think there's a spectrum. On the one hand that totally decentralized money protocol left,

probably the best case of that is uniswap, right? But then we get things that are more and more trusted all the way to the other side of that where you get something like tokenized securities. And that's just a token representation of something that settles in legal meat space. But even that is highly useful. So it's about permissionless, not decentralized.

It's about open finance, I think. But the second thing I would say, to your point about, hey, look, consumers don't care. I mean, they're happy to lend on Coinbase. or defy, whichever is easier, right? And wherever they can get the best return and the most liquidity, right? You know, I tend to agree with that.

I don't think consumers care, but I will tell you another party that cares. If you think about like groups of people who care a bit more broadly, the crypto banks care about what protocols they build on. So I don't think that Coinbase is going to be very excited about building on top of Binance chain

with B&B as the reserve asset. that's Binance's token, right? Why? Because, you know, that entire finance economy is, is tilted in favor of Binance, right? It's kind of their system. It's the same reason, you know, China is not really excited to build on a protocol that's controlled by the U.S., right? You know, they'd like to establish their own money protocols and have dominance over their own money protocols. So kind of, I guess, all this goes to the thesis that The credible neutrality of a protocol is what really matters when you talk about these large consumer groups like banks and potentially countries.

China would never build on a crypto network that was controlled by the U.S. government. Would they build on Ethereum? Well, maybe if they think it's credibly neutral. If they think that it's a fair system, maybe they would. Coinbase would never hold or build massive trading pairs on B&B. that's the Binance coin. But would they on Bitcoin? Yeah, of course.

They've done that before, and they will continue. Will they on Ether? Yes. So what I'm saying is maybe individual consumers don't care as much. That would be the more pessimistic view, and I'm inclined to agree. But large consumer groups like nation states and like other crypto banks care about the credible neutrality of the underlying protocol, and they're going to build on protocols that aren't tilted in someone's favor, that aren't centralized, that are maximally

decentralized. So that I think is the bullcase for money protocols and why they kind of sink to the bottom just naturally. And we're seeing money protocols do that. We're seeing Bitcoin kind of sink to the bottom, continue to accrue value. We're seeing that happen with Ethereum. It's the most credibly neutral protocols that end up winning. Let's imagine a future where, you know, Ethereum and Defi in general, have grown to several hundreds of billions of dollars of locked value and massive economies built on top of these platforms. What role do you see central banks having, and by extension, of nation state money, what role do you see that having in the broader defy ecosystem as it continues to grow? I'm not one who believes that central banks or nation state powers will evaporate

overnight or even in decades, nor am I one to believe that's even like would be a good thing. The whole citadel view of the world where the world goes to hell, but some people construct citadals to survive Armageddon, it's not enticing. I hope that doesn't happen. And I actually don't think it well. I think central banks and nation states will continue to play an important role in the future. But I do think that as the world develops a digital alternative, Because we've had a physical alternative. We've had physical alternatives to fiat money before in the form of like gold and commodity assets like that.

But crypto is the first time we've had a digital alternative to centrally backed digital US dollars. As we have an alternative, and if the old system, the traditional system, makes missteps, mistakes, abuses their trust, doesn't innovate fast enough, well, more of that trust and more of that monetary premium and more of the value will flow from the traditional world to the new crypto world over time. And I think that that's the crypto bet that anyone who's invested in crypto assets is at least monetary crypto assets. That's the bet that they're making, that funds and capital will flow from this old traditional world to this new traditional world. It could take decades. It might take generations. But future generations will have an alternative

to the traditional system. And hopefully that restores a bit more balance. We have a backup system to the traditional central banks and fiat system. And we can use that backup system if things go wrong. And that backup system has some really nice perks. Anyone with an internet connection can access it. No one can stop you from moving funds or going bankless on it. So it's a nice system to have in place as a check. on central powers and to use if central powers again just don't innovate and increasingly interfere in an unfair way with the lives of their citizens. I would love to touch a little bit on this topic if is money. I know there's been kind of a raging debate going on in that, or maybe that's slightly exaggerated, but like a lot of discussion about that in the Ethereum community where I think some people

strongly like this notion and you're one of them and some you know very much against it I probably flat Sam fear the one that comes most of mind but what do you mean when you say eth is money how do you define money and how does eth kind of fit in this context I'm definitely a proponent of the view that eth is money I think it's absolutely essential for to have a bankless financial system to have a bankless store value at the base layer. I think that ETH as a store of value asset in Ethereum is probably the most important, or money Lego in the entire stack, is that store of value. It collateralizes loans. It provides liquidity for trading pairs and protocols like Uniswap. It's the backing for

entire permissionless stable coins like die. So it's vital. It's essential. So I guess the opposing view on the like, ETH is not money camp. Like, I don't understand how Ethereum works or even matters as a global economic open finance system unless ETH is money. I haven't heard that case yet. People do get tripped up on the word money. And I totally understand that because there's a classical definition of money that economists use. It's store of value. So that means you put your your future value in it. It's a medium of exchange. So you can pay vendors with it. You can buy your coffee at Starbucks with it. And it's a unit of account. So things are priced in ether. And ether certainly is not all three of those things yet. Now, it is three of those things

in some small ways inside of its own economy. So within the borders of Ethereum, the digital nation state, in the digital economy, I would argue ether is used as money across all three of those dimensions. But even in the Ethereum economy, there are better monies in some ways if you're using that, you know, it's got to be all three things definition. Like die is a better money than ether when it comes to being a better unit of account and being a better store of value in the short run and also a medium of exchange. I like to spend die. I don't like to spend ether. But even die itself is only possible because ether is a highly liquid monetary asset. And you can see this fairly easily, right?

So there's about 100 million dye today. Just ask yourself the question, well, if we were trying to get to 100 billion die or a trillion die, what would that take? And if you were to do it in a permissionless way, one that doesn't depend on tokenized assets that are settled in meat space in the legal system, Well, it would depend on a term I used to describe the economic bandwidth of assets like ether inside of Ethereum to back that die. So to get die to a trillion, you have to have multiple trillions worth of eth in value if

eth is going to be the thing that backs die moving forward. By eth is money, what I generally mean when I say it is, ETH is a reserve asset. ETH is an asset that has monetary premium that people choose to store that is used as collateral, that is used as a trading pair inside of the Ethereum economy. So it seems to me like it's actually, if you use that definition, you know, people are like, well, yeah, yeah, of course it's money, or at least some people think it's money. And the thing with money is it's a social coordination mechanism. What is money?

Well, money is the thing that people agree is money, right? has been various things throughout history, and the more people who believe ETH is money and partake in a bankless system and use ETH as money to lend, to borrow against, to transfer all of these things, the more it actually becomes money. So it's this kind of feedback loop, self-reinforcing feedback loop. And I think that's happening with ETH. I think that's happening with Bitcoin. I would say Bitcoin is money too, watching to see if it starts happening with other crypto assets, haven't really seen it yet, but that's what ETH is money means, at least to me. I have not been extremely supportive of the idea that ETH is money because the claim that people

make that ETH is money, when they make the claim, it's like this fait accompli, right? It's like it's money because it has all these properties. When in fact, it doesn't have all the properties of money. And even if it did, it has the properties of money for a very small portion of people, right? You said the money is about social consensus. well, the broad social consensus of like the majority of the world's population or even just like the population of a country isn't that Eath is money. And so like there's still a long ways to go before we can get to the social consensus

that ETH is money and get past the fact that it doesn't necessarily fully align with the definition of what is money. And this is something I want to talk about earlier is like when trying to apply analogies to crypto, it might be helpful generally as a space. I think we should be trying to find new terms to qualify what these things are. You know, just like, you know, with sort of previous waves of innovation, let's just say, like the internet and publishing and, you know, the spread of information, we found new terms. Like, we don't use the same terminology as we did before because that old terminology doesn't

apply anymore. We just found words that we find, you know, more accurately describe what we're trying to convey as an idea. And so similarly with Heath's money, I think it's misleading and confusing to some people maybe on the periphery of the space to say that it's money. I agree with that. So one thing I would say is if you think. think of money as an adjective, right? So, you know, different assets have different degrees of

moneyness. So ETH has some degree of moniness. It has more moneyness than rep tokens from Auger. It probably has less moneyness than Bitcoin, right? It has less liquidity. Both those assets certainly have less moneyness than the U.S. dollar. But there's somewhere on the spectrum of moniness. And ETH is money is saying like, well, ETH is somewhere on the spectrum of moneyness and that moneyness is likely to you to increase. But, you know, I would ask if you feel like, would you say, Sebastian, that like, is dye money? Is that a closer definition to you than if you said ETH was money? Maybe. I mean, perhaps, you know, it does have more stability than Heath, for instance, which is like a property that one wants in money, but the ability to spend

die, right, like, which is another property of money, the ability to exchange it for goods and services, much like ether, is still fairly inexistent. And so from those perspectives, like, for me, Eiff or even Bitcoin to that extent, like maybe Bitcoin has a little bit more money because I can spend it more easily than ether, but not that much more. Again, we're seeing the spectrum, right? All these assets exist on a spectrum of moniness. You know, when I say ether's money or when I think of an asset like Dye, Dye is essentially just stabilized ETH, right? So when you're spending die, you're spending 98% ETH. So that's kind of spending ETH or the value of ETH is money. And I do think that when you make the transition from that old universe on the left,

the traditional financial system, right, where everything is trusted to this new universe on the right, crypto system, where we've got a trustless money system, trustless financial system. Well, in this new system, what else are the monies? It's not USC. That's not trustless. So if we're narrowing it down to what are the trustless monies? Well, it's Bitcoin, ETH, and Die. I don't know, to your point, about using another term. I don't know what other term we'd use. I would be more supportive of analogies to help people understand the space

and introduce them to the space, like schmorphisms, right? So when you, in the early days of operating systems, using terms like a file system or using terms like Windows, helped people understand a graphical user interface. I feel like we're kind of doing the same thing here with terms like wallets and terms like vaults and terms like money. It's possible also that just the term money loses some of its,

maybe the term gets diluted a little bit, similarly to the idea of news, right? Like 50 years ago, the concept of news had a lot more weight and gravity to it than it does now. You know, you say news, well, what does that mean? Are you talking about like your evening news or the New York Times writing a story about something or like something that you read on some blog

with no references or like no reputation. But that still doesn't discount the fact that people still get confused about what is news and people will give the same weight, I guess, the credibility to both of those things when they made two things that might be two different things. I get a portion of my news from Reddit, you know, and my parents think that's crazy.

But I call that news, they would not call that news, right? To your point. So we've kind of broadened the definition of what news is. or at least some of us have. And I think it's helpful to broaden the definition of what money is. But if that definition does not work for you, I would say, look, man, ignore the meme, throw it out. You can substitute it with a reserve asset if you want. Some people, when they hear that, okay, you know, eth isn't money, but yeah, I could see it being a reserve asset for defy.

It's obviously used as collateral. It's obviously used as economic bandwidth. That might be more helpful for some. You got to kind of pick the meme that you most resonate with, I think. We had Gabe Shapiro on recently, and he said something which really resonated with me that is really accurate, is that most people in the space who hold crypto behind all of the ideological memes and ethos money, et cetera, are holding crypto as investments. And they're waiting for those investments to go up in value.

And if we can all just be comfortable with that, then maybe we can use terms that really do kind of resonate with what we really see these things to be, right? And instead of being kind of, I don't want to say dishonest about it, because I don't think it's dishonest, but misleading what we think these starting things are. Well, one term I like, if you're thinking about new terms, is the term economic bandwidth to describe these reserve assets like ether and like Bitcoin. So the idea is just as we have internet bandwidth. And if you had a 56K modem, there's not enough bandwidth to load today's websites.

And today's internet, so you need broadband. You need faster connections, essentially. You can download, get more data with a faster connection. I don't think we should shy away from the fact that the value of these assets like Bitcoin and ether are the economic bandwidth constraints. for the value of trustless things we can put on top of them, right? So back to that die thought exercise. Die is not very interesting as a, as a hundred million dollar asset. It's really interesting as a trillion dollar asset that all of the world needs. And what does it take to

become a trillion dollar asset in a permissionless way? Well, the economic value, the trustless economic value of Ethereum or any system dies based on has to increase to meet that need. Otherwise, we're constrained. We're bandwidth constrained. We don't have enough economic bandwidth to grow dye in a trustless way. We'd have to take other assets like tokenized T-bills or tokenized gold, which again settle in meat space and aren't trustless and use that as bandwidth. And that is not trustless economic bandwidth. That at least has helped. me define it a bit more and understand it is this idea that the value of eth, the value of Bitcoin, those things are limiters, capacity limiters for the growth of Defi and even the growth

of crypto in general. So this whole speculation thing that we're doing in buying these crypto money assets at the base layer, we could be honest about that. That's what we're doing. I mean, I think this whole crypto money system is interesting because it has massive upside on the base layer. And if we're right, if the world becomes more and more bankless, then these assets will appreciate. And as they appreciate, they provide more economic bandwidth to make the system bigger and onboard more people. That's what makes the space so interesting. Let's go to the last topic that we want to talk about. So we're recording this right on Monday, March 9th. And for anyone who doesn't live under a rock, they're probably now aware of COVID-19 and

sort of the whole virus that's spreading very rapidly in all over the place now. And, you know, we've had some crypto downturn. I mean, we're also going to do a full episode on this topic soon. So we don't want to go too much into sort of the health implications and stuff like that. All listeners who haven't really looked into that, do your research. I think it's a very important topic to be on top of. But let's talk especially in this context here about, you know, what this means for crypto markets, the crypto industry, you know, both in the short and in the long term. What's your take on this? What do you think? I'm going to give you one guy's take and your thoughts on it, as they are now, such as they are now and subject to change. So Ryan Selkis

wrote a really great piece this morning. Actually, I just read called Rip Good Times, Rest in Peace, good times. And, you know, that post kind of goes about how you'd expect it from the title, where he walks through the side of coronavirus and its potential implications in the U.S. and economics and healthcare-wise, and I think it's a great read. I'm going to be publishing a Post and Bankless today. I just got to write it first called Don't Panic. Position yourself. I do think that coronavirus, there's a non-zero probability and it's an increasing probability

could be the catalyst for a paradigm shift that Ray Dalio, famous investor has kind of written about 2020s will be a lot different than the 2010s. And the way it could happen is coronavirus is kind of underestimated, I think, in the economy. It's a non-real chance that it is anyway. All of this could fade out, of course, but let's say it doesn't. And let's put those odds at maybe 30% right now. It would disagree with that assessment. Yeah, more than that. Let's say bad stuff happens in the U.S. and supply chains freeze, people can't go to work.

That's obviously going to cause recession, probably global recession, economic downturn. And what's going to happen, what's going to need to happen is the Fed is going to bring rates to 0%, maybe negative territory as in some European countries, but there's not much room to move there. And then once you've done that, you're trying to solve a problem that's not a monetary problem with monetary tools. Once you do that, then what do you do? Well, that's where you start injecting stimulus packages into the U.S. economy. Maybe you funnel that into the kind of the travel industry or, you know, sectors, energy, maybe even, sectors that have been worst hit.

You're going to have to adopt a modern monetary hyper-canesian policy in order to do that. You're going to have to be very easy with the money supply that you print and the liquidity you inject. That will just have to become the way world governments, the U.S. included, fails things out. So if that all comes to pass, what could happen, I think, is in the short run, things like stocks go down as they have been. There's economic recession potentially. Crypto, I think, will take a hit. Look, it's a risk-on asset right now. But on the other side of that, where you have governments that are essentially having to print cash to bail out particular industries. I think on the other side of that, this bankless world that we've been talking about

maybe has a resurgence and becomes more important in the economy and maybe starts to live up to the potential of a safe haven asset in certain conditions. One of those conditions is if central banks kind of lose a grip and lose restraint and start printing a lot of money. So on the other side of this, you know, maybe there's some upside for crypto, but it could be a bit rocky until we hit that inflection point. And look, it's just one thought as of today. And the only way to really see how this plays out is to wait and see. But I think what folks should be doing is thinking about how to position themselves for that type of scenario as a possibility, as a probability, not panic, but position, you know, in order to come out on the right side of that.

One thing that is an interesting question, right? There was often this idea that, okay, Bitcoin could be this hedge, this protection, this, you know, the notion of digital gold has often been used. Now, it doesn't tend to behave like that in times of like, you know, real volatility or instability. So far, maybe at some point it will. Do you see kind of Ether in the same way? Do you think this Ether becoming at some point? Yes, it's kind of digital gold. Both Ether and Bitcoin I see as a new type of commodity money, algorithmic protocol-backed money,

and both of them being at some point in the future alternatives to store values that are found in the Fiat system. So I would bucket them in the same category. Now, Ether is going to be higher beta asset than Bitcoin, right? So it's going to be a bit more risky. I would couple them in the same category. It's early for both of those assets in this type of sense. to be safe haven assets at the outset. Probably not this one.

Anyway, we'll see what happens, though. Is it just a question of size and kind of how widely spread they are? Or why is it early? What's going to change that they actually start acting like that? We need more economic bandwidth in the space. I think we need more applications in the space, more that you can do with your crypto. Right now, the population of people who own crypto is probably 50 million people-ish, you know, in that range. Population of people doing stuff with defy is like a small city, maybe 250K to be very generous.

People actually, you know, using crypto systems and going bankless today, fully bankless. So we need many more people. We need much more capital, much more liquidity. We need a better banking infrastructure, both, you know, exchanges and crypto. banks and also money protocols. Mostly, I think we just need time. I think that a generation, you know, millennial generation is kind of growing up and crypto is kind of normal for us, right? If you ask millennials, do you prefer Bitcoin or gold? They're going to pick the crypto, the digital asset, right? Because that's the world they grew up in. Well, you know, the generation

behind us, Gen Z, even more so. You know, they were brought up in games like Fortnite, right? It's all digital currency. Some of this is going to take decades. and generational shifts and that sort of thing. That's why for me, if you're in crypto and you're not doing the narrative thing where you're flipping assets getting in and out, you have to have a long-term, decades-long perspective. When the internet came out,

people didn't immediately cancel their magazine subscriptions and start sending everything via email and you're not sending postcards, right? It took time. And they phased out of those old legacy systems over time. and we had a new generation of digital natives on the other side of that. That took decades, right? It didn't all happen at once.

So I think crypto will happen in a similar way. We have an initial group of crypto natives that are going kind of bankless today, just sort of testing the system. There were alpha testers, if you will, it's not ready for mainstream. I can't drop my traditional bank accounts today. I would never do that. That'd be silly. It's not pragmatic to do that at this point in time.

But more and more, these crypto natives are shifting into this new cryptocurrency. world. And as more people join us as kind of the systems get better, then I think it'll just naturally happen. And at that point in time, then, you know, Bitcoin, Ether, they start to become safe haven assets. But not yet. We're not ready for that yet. There's still going to be highly volatile during a recession type of condition. It was really fantastic to speak with you. And I think it's an extremely exciting space. I think the work you're doing is really great in terms of educating people on how to actually use these products because that's going to be one of the big challenges and it's one of the important things to do. So yeah, we're going to, of course,

have links to bank lists so people can check that out, check out to your newsletter. And tell us about your podcast that you just started. You know, it's kind of moving the bankless program into a podcast format. Some people learn better that way. I myself do. I've learned so much from you guys over the years. I think Epicenter has been part of onboarding me. So I feel like this is kind of, you know, the second generation of, you know, folks that you've onboarding are doing this stuff. But the bankless podcast, it's just about folks on the journey of going bankless. So using crypto systems in real life as their bank account, like tactics, opportunities. Right now, we're starting things off with kind of defining what

it means to go bankless and starting with the money layer and work our way upwards. So people have a framework for how to understand this stuff. And we publish every week, so every Monday. So there'll be a new episode out. And I'm super excited about it. My co-host is David Hoffman, who's great. Who's also been on the podcast? Yeah, it's just fun. The reason I'm doing this is because I think that not enough people are talking about this, right?

And I feel like this is core and central to crypto, bankless, right? It's not just about Bitcoin price appreciation. It's about a new bankless money system. I'm just passionate about it. And everything else is boring in comparison. Well, I definitely agree there. All right. Thanks a lot for joining us today. Thanks, Sebastian. Thanks, Brian. It's been fun.

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