On The Brink with Castle Island - Dennison Bertram and Raf Solari on Reforming DeFi Governance (EP.194)

Episode Date: March 18, 2021

Dennison Bertram and Raf Solari, the founders of Tally join the show. In this episode we discuss: Dennison and Raf's career journeys into crypto and to founding Tally The current state of DeFi and how they think about an emerging taxonomy of projects Views on how voting and user interaction with DeFi protocols are evolving Comparison to legacy financial services like proxy voting How Tally is engaging with open-source communities to promote user engagement To learn more about Tally visit www.withtally.com  

Today in the podcast, I sat down with Denison Bertram and Raf Salari, the founders of Talley, which is a company that's building governance capabilities for decentralized finance protocols. We're investors in Talley, and I'm really excited about the future of community-owned financial software systems, where users can vote and exert governance decisions on the networks themselves. So this was a wide-ranging conversation. We talked a lot about the state of the defy category. We talked about some of the projects that are getting the most attention. and we talked about the potential path forward for systems to coordinate voting and decision-making on these networks.

So without further ado, here's my conversation with Denison and Raff. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. Bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of quantitative easing. And print a couple trillion dollars and all of a sudden people start to worry.

So out of this worry, we have something called a Bitcoin. Bitcoin. All right, Denison and Raf, I'm really excited to have you on the show today. We haven't done too many episodes about defy. And I don't think we've done any episodes on defy governance. So thanks so much for joining us today. Our pleasure. I'm a big fan of the pod.

Well, that's a good way to start. We always like it when people are fans of the pod. I would love to get right into it, but maybe before we do, could maybe each of you start with a brief introduction of how you came at this problem and your history in the industry? So I've been in blockchain for a long time. I ran one of the first Bitcoin exchanges in the Czech Republic back in 2012, which was kind of a really wild, way too early kind of experience.

I've done a few other things. I was developer advocate at Open Zepplin. Prior to Talley, I'd built DAP Hero, which was a sort of abstraction layer on top of Web3. that let you build DAPs using HTML. And now I'm building Talley with Rapp. And Denson, I love that story about starting by building the exchange. Talk a little bit about the early days there. How did it occur to you that that was an opportunity?

I was an artist at the time, actually. And I had read the Bitcoin white paper, not at the very first time, but probably around the time that Bitcoin hit like $1 or something like that. And I've always sort of felt like the end is nigh. I'm sort of like an end is nigh kind of person in general. And I felt that very much after 2008. And it just spoke to me. And I was like, ah, this is the future.

Unfortunately, I was an artist, so I don't have tens of thousands of Bitcoin or anything like that. I did have sort of like the experience of people talk about like the 10,000 Bitcoin pizza. And I definitely had points where I paid like 100 Bitcoin for like a bug fix. And today you just sort of like cross. at night over that. You have to put that out of your mind.

Yeah, you have to put it out of your mind. But it was really great. It was wild. I do have to say that back then, trying to raise money, I wasn't able to raise money for the exchange, but trying to raise money for that, like going into like European VC offices

and telling them about magical internet money and why I need their real money so we could buy and sell the fake money. It was kind of like an experience. I won't forget. Maybe there's some similarities to talking about decentralized finance network. So I'm excited to explore some of the cutting edge stuff that you're building. Raff, how about you? Talk a little bit about your journey. I followed Bitcoin for a long

time from afar, but never got involved in the first few cycles. But maybe five years ago, I was getting excited about Web3 stuff. I come from a consumer tech background. I worked at various startups in Silicon Valley for most of my career. And I was very excited about the cool peer-to-peer stuff we can build with cryptography and blockchain. So I met Denison at Crypto-Nyc many years ago, which was a co-working space focused on crypto in New York. And I also worked at Namebase, which is a domain register and exchange for a domains on a blockchain project called Handshake. I've always been excited about governance. Dow's were a big theme, especially at this co-working space, Crypto, NYC. We'd bring in people to give talks on it. We read lots of papers in

our reading group about how DAVs would work. And I got very excited. The problem a few years ago was that DAWS were sort of a solution in search of a problem. And suddenly people have this problem, which is these defy protocols, have to figure out how to govern themselves. And a lot of the ideas that people have been kicking around for DAOs, decentralized autonomous organizations, suddenly are very applicable and very relevant to the problems that these defy projects have. So now you guys are building Talley, which we're going to talk a lot about and about governance, but maybe before we do, I'd be curious how you both describe what is actually going on here with Defi. Like, how do you explain this to someone that maybe has heard about Bitcoin, heard about

Ethereum, but has not spent the time to understand Defi? How do you think about it? So I have a sort of a strange analogy slash metaphor that I've always had in my head with decentralized technologies in general. I've always sort of felt like there were kind of like a revolution. But I always felt like there is this inversion happening. And something happens with a certain type of lake that's really, really deep and it's very steep sides, where the organic matter that falls into it, falls into the bottom and decomposes there, but it's sort of like trapped. And the gas that's sort of like building up at the bottom sort of like gets trapped there. And then something happens that sort of like destabilizes the layers of water. And suddenly you just have this massive eruption where all of this

potential, in this case like this organic matter is generating gas just like explodes upwards and just like absolutely flips the lake over. In real life, this happens, and it's kind of like a terrible event because everyone who lives around the lake gets suffocated by methane as this happens. But I kind of see that happening in the financial world, where you have all these people, you have the power of so many people, sort of trapped at the bottom of the industry that is very vertical that presses down on them. And I kind of feel like with Defi, we're at this moment where this inversions about to happen. I mean, I think this whole like Robin Hood game stop thing that's going on right now is a good example. There's just so much potential here to flip how everything works

around. And I'm just really excited about it. How about you, Rev? I mean, do you see this? I tend to agree that we're at this sort of cultural turning point where we have the ability to have non-sovereign money for the very first time. And you have other forces at play around just the centralization of internet services and people getting de-platformed and, you know, not having the ability to express voice or express kind of financial wherewithal. Do you come at it from a similar angle when you think about what Defi is trying to be? Definitely. I think of defy as in crypto generally very much tied up or built on top of social media

and the big changes that the internet brought with media. So I don't know if you've read this book called Revolt of the Publix by Martin Gurry. He was kind of in the middle of the decade. and he broadly is outlining how social media makes it very easy for crowds, people who don't have institutional power to understand when things are wrong in a way that they couldn't before. And we are still in the middle of this thing how it will play out. But one way it might play out is we will have to build new institutions that are digital

native and much more responsive to the crowds, much more transparent to the users. And I think Defi is very exciting because it's one of the places where people are trying to do that. Obviously, a big component of this when you're talking about decentralizing anything, really, is how do decisions happen on the network and how is the network governed? These things are not top-down governed. So maybe that's a good transition to maybe just explaining what Talley is and how you think about the governance opportunity in D-Fi. With Tally, our vision really is based around this idea of trying to make on-chain goals. governance work. We're really motivated by this idea of enabling the users, whether retail or otherwise, to really have participation in how the institutions and protocols that they interact with

work. That's something that's really kind of an amazing idea. We do see a little bit of that in the real world. That's really kind of our vision about tally and governance, really making these things democratic and making our money democratic. So how does it work, I guess, for the uninitiated who maybe haven't spent time on some of these protocols, how does Talley interface with things that are happening in the DFI space? With a caveat that a lot of this stuff is changing pretty quickly, but where we are right now is a lot of these DFI protocols have something that needs to be decided. And the teams that wrote the code originally for the protocols don't want to be the ones deciding it. They want their users, or more specifically the people who own the governance tokens,

to be the ones deciding it. And so what that leaves us doing is basically stake-weighted voting. So a reasonable analogy that wouldn't leave you too far off is equity holders voting for some question about a company, like we should be on the board of directors. But that vote itself takes place usually on the blockchain. So what Talley does is we make that very transparent. We show how many votes were cast, what votes are coming up. And we want to take this blockchain data, which is there, it's public, but it's very hard for people

to read it and understand it and have context around it. So that's where we started is making the data that's already on the blockchain more transparent. And then we want to add in more metadata so that people can understand what's going on, have more context around what the votes mean and what they're doing. When you think about some of the services, I guess, in the DFI space that are being built, they're trying to disrupt really large total addressable markets, things like banks and things like money market mutual funds and things like that. And so with those centralized institutions, corporate governance is how decisions happen. You have a board, you have a management team, and decisions kind of trickle down from there.

What is the kind of state of play as it relates to these decentralized alternatives right now? And I'd be curious where you see it going. That's kind of interesting. If you talk about like the state of play right now with the different sort of protocols that do, exist and the governance that they have right now. There are a number of different sort of like structures that you see. You see that some teams are not decentralized at all, which sort of gives the advantage of being able to move quickly. You see this more frequently with early on teams who are just launching a product and they're not ready to take off the training wheels yet.

They're sort of like there to catch their baby. That has some downsides, of course. Long term, that ends up being less legitimate in the eyes of the community, probably less legal in the eyes of regulators, depending on what sort of market they're trying to enter and disrupt. Then we see like signal voting with multi-sig, the sort of like council idea or this group of experts that sort of ideally responds to some sort of like gasless off-chain voting solution. People like this, it's cheap, it's fast, it's easy to do, it has a high community level to it. There are, of course, some decentralization questions around it.

There is no real mechanism that forces multi-sigs to follow through with what the signal voters decide. And actually, multisagin don't actually even need signal votes to initiate some sort of change. Where we're starting and where we see sort of like long term, the ecosystem going is really the on-chain voting, where here you have something that's decentralized. Maybe it's a bit plutocratic depending on how the system is set up, but it's trust minimized. It has disadvantages. It's expensive to vote. So you see less smaller holder participation, although the flip side is you see a greater large holder participation. You could argue that plutocracies in some way or maybe a more decentralized form of the centralized controlled by a team. You can kind of imagine their interests are

kind of aligned in that long term. They're probably going to divest as the economic consensive arrives, and that makes it more decentralized. So hopefully it's a good pathway forward to truly decentralized systems. So that's an interesting point. So you think about traditional corporate governance. The governance that a board of directors is taking into effect would be big decisions, like who is joining the board. Are we firing the management team? Or are we approving an acquisition? But within the context of software that is community owned, you really have big decisions and then you have really minute decisions, but they all sort of have to be made. So I'm envisioning decisions around how expensive certain things are to do on the network and what type of updates we want to push.

What are some of those decisions that are really critical now that some of these projects are contemplating with? One thing you got at was the question of big decisions and small decisions. And the way the governance systems are set up right now is they have to make all the decisions, the big ones and the small ones, which is I think one thing that will have to change. But the big decisions that protocols are making right now are things like how to spend their treasury funds and how to change the rules of the protocol. So things like should they pay money to users to incentivize usage and should they change things like for the lending protocol, should they change their interest rate or the automated market protocols should they change their fees or their take rate? So these are kind of big macro decisions about pricing and user acquisition. And just to go into what you were asking about previously, where are they going? I think the future of this looks like making it more scalable.

So it just doesn't work for every token holder to consider and vote on every decision. So there will have to figure out ways to scale the decision making, to not just scale it in terms of gas costs, but socially scale it. And there are obvious analogies in corporate governance where the equity holders pick the board who pick the CEO, who hires the executives and employees who actually do the work for the company. you can imagine how that analogy would work in defy, but it's, I think, a lot harder to do that without a legal system, like that whole, the legal system is very good at being an Oracle. If there's a dispute between a employee and a director of the company or between the shareholders on the board, the legal system can come in and figure out what people's intent were and draw on all of this common law, and it's very good at arbitrating these soft disputes compared to crypto,

which is we have no court system and we don't have very many humans in the loop. to decide what to do in these complicated decisions. So I think that's a big open question of how DAOs and Defi can scale that and do that in some way that makes sense on a blockchain. Yeah, I love the fact that you brought up the social scalability, because if you think about this in a context of a centralized company, the largest shareholder in a bank is not going to be making an underwriting decision on like a home mortgage or an auto loan. It's just, and if they had to, they probably just would ignore it because they just don't have the time to do it. And so how do you scale these networks in a decentralized way such that the largest holders of the protocol, A, just don't have total ability to just dictate everything? And I guess B, I'd be curious your view on just how you surface and figure out what's important and what's not important to vote on.

I'll take the first part of that. When we talk about how we sort of break up the decision making, I think you see that. right now with the introduction of these ecosystem funds, where the protocols have some sort of revenues and they have compound and Uniswap have voted to put this money essentially into a multi-sig and have a group of people make decisions on how to spend it. And that decision process doesn't require the participation of the entire governance community. Essentially, they said, hey, give us, I think a uniswap is like, give us a million dollars a quarter or something like that, and let these group of people make the decision on it.

And the scope of the size of something like Uniswop, a million dollars, like if somebody did take it and run, that would suck, but it's not catastrophic to the protocol in any way. So it's sort of like creating these sort of cellular governance structures that sort of like pop off the main thing to sort of have their own sphere of influence and their own responsibilities, which sort of scale the security required for that to the task at hand. And you see that now also with a lot of other projects,

Sushi swapped is a lot of granting or type of bounty things. We see this with a lot of other protocols that are bootstrapping their own ecosystem by paying for things with the money they invented. And that's really critical to that aspect of scaling. I think that's what we see happening right now. That's the sort of like first layer of like, okay, how do we spend this money? Well, let's get a group of people and trust them and they'll figure it out. That's an interesting point, that there are these points of centralization,

even within decentralized communities that actually just make things more efficient. Do you think that's a theme that we'll start to see more of? It's just centralized finance engaging with decentralized finance and the lines becoming blurred. I think in different things, yes. I think with the sort of treasuries, there's a little bit of clarity there where it's, here's the chunk of money. What happens with it is kind of clearly definable. You have this, you should spend it.

It should be spent on something worthwhile. The community should like it. So that's pretty clear. I think there will be a number of things that decentralized protocols end up needing to pay for that may not be so obvious. Legal concerns, accounting concerns, other type of things that for now, I think by and large, decentralized protocols kind of just look away from and they're not going to tackle. And that may be more difficult for them in coming years, I suppose. I wonder if we'll get to the point where you'll have on ramps that actually give you the ability to take out loans from centralized or decentralized. counter parties. You'll have banks that say, here's the rate for a centralized loan and here's how it works. And then here's the rate if you want to go take it out on a DFI protocol. That would be

exciting. I think the phase we're in right now for how to scale socially is what Denison was talking about, where we carve out a sphere of influence and we find some people and we give them a budget. And you can imagine that as kind of a direct port from how corporations do it. It's very hierarchical. to me, that doesn't feel like the end state. That feels like the first version where we put the front page of the newspaper on the internet. And I think the future version, the ultimate version probably looks pretty different from that. And I think it's still really early to tell exactly how it will look like. But some things I am watching are projects that use, they either call it futarchy or maybe just signal boosting where there is some type of voting. There's not just one vote. There are votes to decide what should be voted on. And there's kind of a prediction market where some small subset of the token holders predict whether the larger subset would vote for it or not. And I think this is a pretty interesting model. I think it doesn't work yet, but I'm following it pretty closely because that seems like a more crypto-native way of making decisions scalably than these models where you have to trust a subset of people to make decisions in their sphere, mostly

because I don't think that system works very well without a legal system. I think if we end up doing that, the fallback will be suing people or contract law. That's really interesting. You referenced some of these foundational building block capabilities. Obviously, governance is a big one in the context of software that is community owned. How do you make decisions? But over the past couple of years, we've started to see other primitives, building blocks, whatever you want to call them, built in this ecosystem.

So curious, just defy generally your state of the industry and what projects and important foundational infrastructure you guys are tracking. First of all, there is so much going on now that it is really getting crazy. It is really becoming really hard to track things. One of our team members, Nate Parton, he, thank God for him, he has like this finger on the pulse of it feels like everything. For myself, I find it really hard to keep up. I still, for myself, I find myself really interested in still some of the like base level

things. I'm really interested in what's going to happen for layer twos. I have my own theories about sort of like what the future looks like when it comes to gas prices on Ethereum. It's positive. So for me, I'm tracking layer two primarily. That's the most interesting thing because I think when we sort of decide on what the victor for layer two is, because there are a lot of layer twos right now. The problem is liquidity on them, mostly.

I mean, there's a little bit of like dev tooling and some like sharp edges. But the problem that's immediately going to be next will be the liquidity and the cost of getting there. And that is kind of this crazy open question. Is it optimism? Is it ZK. Sink? Is it something else? That's what I am primarily following, but I'm doing my best with the DFI. Very hard to keep up with.

I think looking back at the current cycle that we're in, it seems pretty clear to me that there are three important primitives, automated market makers like uniswap or sushi swap, collateralized lending like compound or aave, and yield aggregators like YERN. And those feel to me like, though there's still lots of work to do to polish them and improve them and optimize them, but they feel like they're set and definitely very important. But what I'm looking toward, and I think that's probably the stuff the rest of defy will be built on. I think there's still a few missing pieces. Dennis had mentioned layer two. Yeah, I agree.

It seems like DeFi is either going to, Ethereum either has to scale or DeFi will grow Ethereum. And also, there's kind of this holy grail of algorithmic stable coins. people keep taking shots at it, have been taking shots at it since 2017. I don't know if it's possible, but if it eventually works, if someone figures out a capital efficient way to make a thing worth a dollar, then that will be just massive and a huge change to a huge missing building block in the industry. And the other thing I think about is in terms of where we are on the D5 phase, it feels right now we're at a very modular phase.

There's a money Legos meme, which I think describes really well. what's going on. There are lots of projects that work together with other projects. They're all composable because they're all running in the same virtual machine, the Ethereum World Computer. And it makes it really easy to combine things, put them together, copy them, pull them apart. I think though long term, not anytime soon, there will be much more integration. And I don't know whether it'll happen in the exchanges or wallets or maybe the protocols themselves or the watch chains themselves will kind of integrate all these pieces together because there's some reasons to put a yield aggregator and a collateralized lending protocol into the same thing.

And that's a long-term trend that I'm watching now to see if there's any early indications that it's starting to happen. That's a really great answer. As you're saying the stable coin kind of primitive piece, I'm thinking that so many more people might be willing to engage in defy if it were in a U.S. dollar-based system that they're really comfortable moving in and out of. And you can have that, but you need to make some trade-offs. You might have to have an over-collateralized type of a product, or you might have to have a stable coin that has these centralization points that potentially

would make it less useful and less censorship-resistant. So do you see just U.S. dollars or fiat currencies on blockchains as a foundational kind of breakthrough that would open up the addressable market of users in this industry? Absolutely. I think one possible future of DeFi is that it dollarizes the world very quickly. Yeah, that's really interesting. Also, a sort of follow on that. I'm actually really interested in insurance on Defi. When we talk about stable coins, I think a lot of people see it as basically insurance against price volatility. But when you look at sort of like the traditional banking industry, federal deposit insurance corporation really when we're long way towards making Americans at least comfortable putting their money in the bank.

And if we could see that in Defi where you could have some sort of like coverage on your assets, I think that could also go a long way. Today's insurance providers on Defi probably aren't yet something that regular people would feel comfortable with. But you could certainly imagine that when you were talking earlier about like CFI offering access to Defi, maybe they are the on-reactors. ramp for the insurance part. Maybe they somehow work out the trust with the user.

And that could also be incredibly valuable. That's an interesting point. Dennis, you're talking about just the general scalability properties of Ethereum. And we've seen a wave of other layer ones introduced over the past few years that are ostensibly looking at Ethereum scalability as a insurmountable challenge in thinking they can build a better mousetrap at layer one. But as far as I can tell, almost all of the defy activity is on top of Ethereum. So what is your take from kind of a developer perspective on the network effect of

Ethereum and whether or not we'll see some of this built on other chains as well? I've been keeping track of basically all the L-1s out there that are trying to compete. At the end of the day, Ethereum has found product market fit and its money. In the beginning, I was a bigger believer in the sort of like world computer in generalized sense. I think the truth is it's the world computer for the financial markets. And as the cost of gas goes up, it'll drive away more and more participants, but it'll actually bring in a smaller number of much larger participants for he. Ethereum, the cost of gas really scales either in terms of negatively where there's more

people using it and it gets more expensive or by volume where the price of the transaction goes up, but the volume that you put into it is sort of unlimited. There's no cost difference or an extremely minor cost difference between sending a billion dollars and $1 because it's sort of a ticket to ride, essentially. I sort of see a future where the size of the transactions continue to go up and that works, that continues to work with people. Maybe it pushes small holders off, but then you have things like yearn finance, which sort of try and to offset that.

For other L1s, I think the catches is that a lot of people, I think a lot of teams have fallen a little bit prey to perfect enemy of the good kind of thing where they have better smart contract languages, better security for this, better this and this, this and that. And if developers really cared about that, first and foremost, JavaScript wouldn't be ruling the world. But there's a reason why JavaScript rules the world. It's easy and we all kind of understand a little bit of it and we all get it pretty easily. When we talk to defy developers today, the vast majority of them have only been in Ethereum months and they came because that's where the money is. And that's where the opportunity is. I think the L-1s,

have a catch-22 where they want people to build on them, but people can't build businesses unless there's a market to address with their product. And if the market to address the product isn't there, there's no point in sort of investing time to learn how your specialty thing works. And then they just don't show up anyway. So I think these L-1 should be giving away massive amounts of money so that developers would feel like, well, even if my idea doesn't work out and will still get rich around one with the rest of them. But for developers, If you're building anything on Ethereum, it's for defy. And if you're building anything that's defy, you need access to liquidity, and liquidity is here.

And the sort of special thing that's sort of the real catch is using Ethereum is expensive. And that means getting off of Ethereum is expensive. So the people who would get off are the small people for whom Ethereum is too expensive. But the cost of getting off goes up every day. So you're better off just staying put and doing nothing because I was listening to Bank podcast the other day. And they were talking about how they went through these sort of crypto trusts and their returns in the past three years. And all of them did worse than just holding the underlying asset. So for these small folks, why would you pay this money to leave the ecosystem when you

don't know what the future is? And there's nothing on the other side of the bridge. And for the big folks, the cost doesn't matter. You could be paying $1,000 per transaction. But if you're going to make millions or hundreds of thousands or even in this case, if you're a minor, if you're going to make even $5 in profit, it's fine. So I think that's what these other L2s, that's the challenge that it doesn't in my mind yet. And I'm totally open to be convinced I'm wrong to all the people who want to convince me I'm wrong. It doesn't make sense yet. There's certainly the argument that the developer concentration and network effect is so strong that it just doesn't make sense to get off. The other thing that's interesting is that the legal and regulatory status of Ethereum seems

pretty safe at this point. You could argue that, of course, stranger things have happened. It could be deemed a security, but there's been a vast amount of public comments from people that work at the SEC around Ethereum being a commodity. And we don't have that clarity for some of these other assets that have raised money via SAFT and whatnot. So, I mean, is that on the mind of developers? Does that matter? Do you think that that's a defensive moat for defy on Ethereum? The developers I've talked to don't think about it directly that way, but I think they are implicitly thinking about it that way. More, it's much harder to trust to build your business on another protocol because of, I think, the social dynamics. Like, do you trust everyone else

in the ecosystem? And is it a shelling point? Is everyone else going to build on this thing? I think the questions for developers are more social than regulatory. Yeah, absolutely. Maybe just teasing out that regulatory thing a little bit more. So one of the dynamics in the defy ecosystem is just the role of tokens as a fundraising mechanism and a way to compensate people in the ecosystem versus having more of a traditional company structure with equity and collecting fees. Do you see this continuing? Do you think that there will be projects that are equity based and then also projects that are token based?

Is it one or the other? How do you see this playing out? So, first of all, in 2017, I think a lot of people were quick to look down on ICOs. ICOs were great. They were great for the people who had no intention of building anything and they just ran away the money. But actually, a lot of projects didn't. You look around, you look at Ava, you look at synthetics, you look at Chainlink,

these folks that raise tens of millions of dollars and, lo and behold, billion-dollar companies. That speaks to actually the power of this sort of like token-based fundraising. And I would argue that if you take all the 2017 ICOs together and you count up who's still here and who's actually built something, I bet the success rate is higher than traditional venture capital, truthfully. Now, going forward, I personally think that there's a need for both. Today, the market looks a little bit different. You have a little bit of regulatory clarity that we can't pre-sell future profits like this.

And the role of BCs is actually really important for getting started. started a number of these projects. Sure, some people can come in, they can fork something big, and overnight their success. But for a lot of projects, it takes months of building in silence. When you need to be paying your rent, you need to be buying food, you need to be like paying Amazon, doing whatever you need for your project, paying gas. I mean, if you look at the deployment and auditing of contracts today, tens of thousands of dollars to get something audited. These things are out of the reach of traditional developers. They're leaving jobs, they're leaving security to build the future.

But the truth is building a business is risky. And that's where venture capital is for. People come in and they take the risk with you for some ownership of the company. And you have the opportunity to build. You can pay for food and heat during the months or even sometimes years while you build the product. The token on the other side is very important. It's not just because it's a norm of our community, but for these sort of projects to work long term, you do eventually have to decentralize. You do eventually have to have community

ownership. The people vote with their dollars more in this sense than ever. And participation, tokens give participation to the users. And if you look around, like everybody in this pandemic, I've been baking, my wife and I, we've been baking a lot. And we use only King Arthur's flour. And honest to God, King Arthur's flower is the best. King Arthur, you can send me free flour anytime. But King Arthur is an employee-owned company. The people at King Arthur, the flowerers, own the company. I buy King Arthur flour because I love the idea that the people who make this flower

are the people who own the company. And that's the same thing, I think, with Defy Fight Protocols. If you have an option to choose between AMM, you're using the AMM that you are a co-owner of. If you're going to borrow money from something, you're borrowing money from a protocol that you are a co-owner of, that you have ownership in. So I think you need both. You need the early BCs who will see your madness through the dark hours. And then you need the community who will power it through the future. We've had those threads of conversation on this podcast before.

Jesse Walden was on talking about the similarities of some of these D5 protocols to things like Vanguard or mutual life insurance companies that are community owned. And I totally see it. I think where a lot of, quote, unquote, traditional investors have a lot of questions is just around how do you value a token on some of these networks? And what should the value be at scale? So should a collateralized lending token be worth in the same neighborhood from a network value perspective as an automated market making token versus a digital gold token? How should we be thinking about these things or is it just too early to really think

about how to value these things at scale? I don't know. I think it's too early. One, we don't know how to value these things. And two, they could be just as reflexive and winner take all as the internet giants were and are. So I think it's just really crazy hard to, one, come up with a valuation model of if it's going to make this much revenue, how much gets captured by the token holders and how much

doesn't. And then two, how reflexive is it? How much does the price going up cause the thing to work? We've seen this in this past decade of tech investment where private equity firms and VC firms try to pick winners by giving them a bunch of money and causing them to fulfill themselves. And Defi might be the same way, but it's, I think, really hard to use traditional equity evaluations. And I think startup world heuristics are probably better than public equity heuristics, but I think probably both of them are going to be wrong in ways that we won't know for a long time.

The idea of capital as a moat kind of works until it doesn't work. I guess the textbook example would be we work. I'm sitting in a we work right now and it's actually my last day here because this location is going out of business. It works until it doesn't work. Works until it doesn't. Yeah, reflexive up, reflexive down. So this has been great, guys. Let's talk a little bit about what's up next for Talley, what you guys are building

towards over the next couple months and ways that people can interact with Talley. What's up next? We are launching publicly. We've been in sort of like a soft launch period for a little while as we bug fix. The new site is up now. We encourage people to go check it out, sign up to get notifications for when things happen on top of compound immunoswap. We're also reaching out to governance ecosystems, especially those building on compound governor alpha style governance to reach out so we can index your services feature you on the site. So if you're listening, head us up, reach out. We're really looking to make more tools, make it better. I mean, Raff has some opinions on this as well. We just got here and the field is just wide open. There's so many things. Yeah, tons of stuff to build. That's awesome, guys. So where can we send people to contact you, get in touch? I know you're hiring. Where can we send people? Probably the best place to hear what we're up to is on Twitter or on our substacks or Twitter is Vote WithTally, and our substack is tally.substack.com. And if you want to chat with us, send us a DM on Twitter or email us.

I'm Wrath at Withtelie.com. And we were always happy to chat. You can also, of course, visit the site. www.withtalli.com. Come to the site. You can easily reach us there. There's an intercom link on the site. You can just chat with us on the site.

the webpage. That's great. I really like what you guys are building and it feels like when I talk to you every three weeks, the industry looks totally different than it did three weeks before. So really excited to see where this goes. And thanks for coming on the podcast. Our pleasure being. Thank you so much for having us. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island.VC. To listen to all of our podcast episodes, please go to On the Brink dashpodcast.com or just

click on the tab in our website. Thanks for listening.