On The Brink with Castle Island - Hadley Stern (Marinade) on Institutional Staking (EP.572)

Episode Date: November 4, 2024

Hadley Stern, the Chief Commercial Officer of Marinade joins the show. In this episode we discuss: Hadley's career in the blockchain industry. The early days of researching and building blockchain products at Fidelity.   The landscape for banks in the United States as it relates to digital asset product development. The evolving regulatory landscape and the prospects of pro-innovation legislation. The staking landscape and how Marinade is going to market with its products and services. To learn more about Marinade visit www.marinade.finance    

Today on the podcast, I sat down with Hadley Stern, the chief commercial officer of Marinated Finance. Hadley is a good friend and we go way back together, having worked together at Fidelity, starting in 2014. In this conversation, we discussed the evolution of the market over the past decade, the institutional landscape and regulatory landscape. And we also talked about what got Hadley so excited about Marinated finance. Without further ado, here's my conversation with Hadley Stern. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. Guests and hosts may maintain positions in the assets discussed in this podcast.

You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion. This podcast is for informational purposes only. 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 mortgage. 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.

The Bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of course, it did easy. You 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. Hadley, well, thanks so much for joining us today on the show. Is this your first time on the podcast? I think it is. I think it's like I've asked you 20 or 50 times,

but somehow never happened, but I think it is the first time. It's unbelievable to me that you haven't been on this podcast, given how long we've known each other. It's probably because a lot of the places you've worked historically haven't allowed you to go on podcast. That's your excuse. That's exactly why. I didn't ask you all those times because I couldn't ask you.

So, yeah, but it's one of the benefits of being now more in the defy world is that some of these things are a little looser, which is awesome. Awesome. Well, we're going to talk a lot about Marinate on the show in the Slauna ecosystem, but I think you might be the person that I've known maybe the longest in the crypto industry when we work together at Fidelity. So I was trying to think about when I first met you. And I think it was in the context of actually Bitcoin.

It was, hey, let's get together and talk about Bitcoin and what's going on. So talk a little bit about your journey there at Fidelity. Yeah, it definitely is. You are definitely the first person that I worked with seriously in this space. I was at an organization called Fidelity Center for Applied Technology. and you, I believe, were in the internal Fidelity Consulting Group, and you were ahead of me, along with Katie Chase, in working for some months on this strategic request, right, around Bitcoin.

And then out of that, one of the action items was a request for the Fidelity Center of Applied Technology to spin up what was called the Bitcoin Incubator. And I basically got voluntold, so I got walked into by my boss, who you know well, And he said, yeah, you should reach out to Matt Walsh because he's been focused on this. And I reached out to you. And I think there started the crazy rabbit hole journey that we started very early together there.

I think that was in 2014. And yeah, there was no blockchain notion. There was no ETH. There certainly was no Solana or Dogecoin. It was just Bitcoin. I remember in those early days, we used to have a lot of conversations around how do we explain what Bitcoin is to people at this company that don't know what it is. And we were talking about credit card disruption. We were talking about securities settling on the Bitcoin blockchain.

And I look back on those days and I kind of think maybe we didn't even know what Bitcoin was ourselves, just given some of the conversations we were having. Yeah, there was definitely an education curve that we all had to go through. And like anyone who first gets into Bitcoin, it often starts with mining because people are just get so hung up on that word and they find it so weird. They're like, what, are you actually digging crap out of the ground and processing it? And so I definitely intellectually had to spend some time with it and really understanding it. And that was part of what was so fun and interesting, right? If you remember those early days, like our remit was basically, it was a wonderful remit.

It was like to understand this technology deeply and see how it could potentially apply. and to propose small research sprints, longer research sprints, partnerships on how we might do that. So I think mining is an excellent example where we said, well, you know what, to really understand mining, we probably need to mine. We can't just like read about it. We need to actually do it. And so that led to us, which is now public, spinning up a very small mining operation. And if you remember in those days, we were solo mining. And so we would sit there for months, zero, zero, zero.

And then I remember the first time we mined a block, it was like, holy crap, like, okay, this is real. And now we can start to understand the economics of this. And like, how much did that cost us? And how long did it take and going through the block rewards and the happening? So it was just such a privilege to be able to learn by doing there. It was such an awesome place to work because I remember having conversations with my friends. telling them, well, I'm working on all these things and there's this wall of ideas of things that we should build and the company keeps on letting us experiment. And at some point, they're going to shut

us down and people are going to turn on this, but it never happened. What were your kind of fondest early memories there in terms of some of the experiments that were conducted? One I think that was really interesting that still resonates to this day, that's still a problem in this industry has to do with, we had this idea, well, maybe we should create a software wallet. Like maybe it'll create a Fidelity software wallet. And sort of in the spirit of how we worked at FKAT before writing a like a code, we just did some mockups. And we did a mockup of a fidelity software wallet on a phone.

And we showed it to like 10 potential customers who identified themselves as Bitcoin knowledgeable, but not very knowledgeable. Like they were sort of half and half. And it was like, okay, first screen, here it is. Second screen, here's this phrase you need to write down. Do not lose this phrase because it's. if you lose the phrase, you'll lose access to your funds. Third screen, your phone cracked out, and you need to reset,

but you don't have the phrase, what do you do? And everyone answered, we would just call 1-800 fidelity. Like, you would have the pass phrase. And that's like this interesting conundrum that still exists within our industry where we haven't figured out some basic UI features and functions that are very hard for newbies or anyone to really get involved with. So that's kind of a fun story. The other fun one, I think, was we gave a little bit of Bitcoin to everyone and asked a couple of people to buy something on Overstock and go through that experience of what it was like.

And then someone tried to return something but couldn't return because Overstock couldn't return that Bitcoin for compliance reasons. So they're just all these fun little stories and experiments. I remember I bought socks on Overstock. Those were the most expensive socks of all time, other than the lunches that we used to buy at the World Trade. center using Bitcoin. Those were expensive too. I would say the industry has always had this fascination of, well, what are the use cases for blockchain technology? And certainly, you've been down that rabbit hole in terms of where you see product market fit. When you're talking to a layperson these days and explaining just what the crypto space is, how do you synthesize what it's useful for?

I think less of use cases to end consumers and more how it can disrupt and eventually save people so much money in different ways. So I think Stablecoin is a good example of this, where if you look at something like Apple Pay, on the face of it, it's incredibly convenient. Like, I can actually do it through my watch and I can pay for something. I don't have to take out any money. And it works really well. But then if you look at all the things that I'm paying for behind that, it's incredibly inefficient. And so in some ways, I think that's been the challenge of this technology where we have cobbled together all these other things that sort of do things from a user experience standpoint that are actually better than Bitcoin and better than crypto, like it's pretty much hard to be

just tapping my watch on something to pay. But it's all the stuff behind that that isn't better. And the other challenges, there are so many economic incentives for credit card companies and banks to keep it that way, that that's going to keep going for a while. The example that is very often spoken about our industry where I think it is better, faster, cheaper is stable coins, remittances, payments, etc., where that is just so much more convenient for people. However, it's still not mainstream, I would say. And so then this gets to the challenge of all the ways that we have to interact with payments right now are taking care of people that have firewalls and hardware and systems and infrastructure that are very hard barriers to break down.

That makes sense. That does make sense. I mean, if you just think about this maybe from a technology perspective, I think there's always been the view that certain things were possible using this technology. So we were talking about private blockchain, settling securities transactions, while we were at Fidelity. And I'd say we really went down that path for a while to try to figure out how that would work. kept on coming back to, well, you get the asset on the chain, but then how are you going to actually

settle it with cash? And stable coins didn't exist back then. Like Tether wasn't a thing, but we were talking about, I think we called it cash on chain. Like, we need to figure out a way to get the cash on chain and how will that happen? Who's going to do that? And obviously the industry responded and now we have a vibrant stablecoin ecosystem. I mean, the other one that comes to mind is around just the programmability of these blockchains. Before Ethereum launched, we were talking about the open assets protocol. And I think you can build this on Bitcoin. It's a little bit janky. We might need some forks at some point. But from my perspective, it's been really interesting to just see new blockchains and new primitives pop up to enable people to build what they've pretty much wanted to build

since the early days. I agree. And I think what's interesting about the stable coin example, thinking it through, and this is a question for where the innovation is going to come from, right, stable coins took off because of the need for people to have a place to park their liquidity between trades on crypto exchanges, right? That was really the first use case where stable coins took off because these crypto exchanges couldn't open U.S. bank accounts. You couldn't have a U.S. cash position. So if I wanted to go between Bitcoin and Eith and et cetera on Polly, as Stablecoin made sense.

So that leads me to a question that I have in this industry just writ large around where's the innovation going to come from? I think it's going to come again from Defi to TradFi versus TradFi figuring out, oh, we should have a stable coin, which they could have done and should have known years ago. Yeah, that makes a ton of sense. And I mean, this dovetails nicely, I think, into your career journey, right? Because you have dovetailed from Tradfai into Defi and back a couple of times. thought about just the most interesting ways to attack this from a career perspective? I talked to a lot of people about this and try to give advice based on my experience. Yeah, so after 18 years at Fidelity and four years in the crypto team at Fidelity, I left in 2018,

because I really wanted to dive deep into the technology in a way that you can only do sort of on the front lines of a startup company in this space. So I joined Block, BLOQ, Jeff Garzic, and Matt Rozac's blockchain infrastructure company. And yeah, there you're exposed to a whole different way of doing things. That's, I think one of the great things about this industry that's so different is that it's really tech-led first. You could argue for better or worse, but Block was certainly that. Jeff Garzik was the third developer on Bitcoin Core, incredibly technically brilliant.

And so I got to experience kind of how the soup was made from that side of the industry, both in terms of technology, product, and deal-making, which is, as you very well know, very different in that space. It's different. Also, it's very international as well in different in different international regions in terms of how deals get done and business gets done. But then I kind of wanted to scratch the itch and I just had a good opportunity at Bank of New York Mellon to help them build their digital asset custody business. And I kind of fell in love with custody of fidelity. I was very involved with the early FDES team. I was the leader of that before Tom Jessup came over. I love geeking out about security and custody. I think it's so interesting.

It's very challenging. And so the opportunity to do that for a bank was very appealing. So yes, I went back to the Tradfai side where you have all kinds of other challenges. And I kind of naively thought, well, Bank of New York Mellon, it's probably going to be similar to fidelity. Banks are very different. God bless Anchorage and what they're doing and what Bank of New York Mellon doing. The sort of regulatory oversight you have as a bank is order of magnitude greater than what you do as a trust company. But those were interesting challenges as well. And then now, yes, I flip back to the defy side. So I'm not sure if I can't make up my mind. I like to think the world where these two worlds come together. When I left the bank, it was largely because of SAV-121 and the pause that was put on

the business externally by regulators. And so I thought what I would do next. And I do fundamentally believe that just like in the stable coin example, innovation is going to come from the bottom up. It's not going to come from the top down. I think Traiti is going to be the very last to adopt it when they really, really have to. Yeah, that's a great observation. And it wouldn't be a Castle Island podcast without talking about Staff Accounting Bolton 121. So I'm glad you brought that up. But my observation is that people always talk about the institutions coming. And a lot of them have been here for a long time, they've been trying to do things, and they have maybe thought that they had a clear path to bring a product to market, but then something like Staff Accounting Bolton

121 gets introduced. And I really wonder what your view is on why some of these impediments have been introduced over the past four years and what is driving some of this behavior from the regulatory apparatus? Yeah, obviously a very heated question and a very heated moment in our election cycle. And I've had a lot of time to reflect on this. I think, think at the end of the day, it kind of goes back to Satoshi's white paper, and it goes back to this very provocative idea around decentralized ownership of the money economic system versus centralized ownership. And sort of my observation is that money is power. And at the end of the day, Bitcoin and this technology, but specifically really Bitcoin is incredibly

threatening to the notion of governments, to the notion of government power, and to the notion of institutional power. I mean, how the Fed is structured, how the banking system is structured, it's all kind of one system. So I am still curious to see, I'm delighted to see that my colleagues at Bank of New York Mallon have received some, or ex-colleagues have received some kind of exemption. I'm curious and skeptical to see how deep that will go. I'm very curious to see how big stable coins will be allowed to get. I just can't imagine a scenario where 20% of our money supply is tied up in stable coins. I just don't see the U.S. government allowing that. Yeah. Well, that'll be interesting. I mean, I think the crop of stable coin issuers clearly will change here if you get a

stable coin bill. And you probably see this all the time. There are quite a few firms that want to be in this game, but haven't been able to crack the regulatory code yet. And so I wonder if that will look different if banks and asset managers in the U.S. are allowed to issue these stable coins, because I guess you could make the same argument as digital money in the early days of the internet. People would have been saying, I cannot imagine like online banking will be 90% of the way people engage with banks. Yeah, if there's a regulatory framework for it, where I think the government has control in some way or oversight, then I can see it working. But even interesting in the case of Circle, who I respect and they're amazing, there was that weird moment when they broke the peg.

And so no one likes to remember that, but it was weird. And I think they fixed things, right? I think after that they made the decision to move a lot of their treasury over to bank in New York Mellon, actually. And so there was a self-regulatory correction there where they corrected what they did and they realized they were probably exposing themselves to too much risk. Then there's tether hanging out there, which is a whole other conversation around what's really going on there. So, yeah, I'm not anti-regulation. I'm just also not naive to the power dynamics that are at play of how this all goes down. Yeah, that makes sense.

Well, switching gears a little bit, I want to talk about marinade. I think a lot of people in the industry saw that you were popping over to marinade and said, hey, what's marinate? What's going on over there? So maybe tee that up for us. Yeah, I mean, I've had some funny, interesting reaction. to like, oh, you know, Fidelity Bank of New York Mellon marinate this relatively small startup. I decided after leaving Bank of New York Mellon

and part of this is a career arc thing that I really wanted to get back to the startup world and to the early product builders. And I was very expansive in my search and conversations and just happened to come across Nick Dukoff from the Salana Foundation generously introduced me to the marinade team. And it was one of those conversations that you have on one of those days.

And it was just very, very interesting. And when I think about teams and businesses and also how I like to work myself, I think about kind of the what and the how and the what Marinate does is very interesting and how they've done it is very interesting. So Marinate started about three years ago out of a Salana hackathon. And Salana, as I'm sure you know, has always had challenges with decentralization. Like it sort of balances more on the centralized aspect, especially in the early days. So the early team at Marinate had this idea to promote decentralization by basically creating this marketplace for staking, meaning when you stake with Marinate, we actually don't run any validators.

Your soul is kind of automatically distributed to hundreds of validators in real time based on highest reward and security. So that, by the way, promotes decentralization of the Salana network as well. So they started, they bootstrapped, no token raise, and positive ARR, which is very interesting, and also a healthy treasury. And they've got over, depending on market prices, a billion and a quarter of TVL locked up, largely an liquid token M-Sol. I think one of the things the company realized in the past year is there's not as much of a need for an LST on salon as there, say, an ETH. There's no 32 ETH minimum or 32 Sol minimum. You can just stake right away. And actually, Salana has some things built into the protocol natively that make it very

attractive for staking. So released a new product called Marinate Native that does not have an LST, no smart contract risk, no token, which is much better for the institutional market. And that's where I came into the conversation. They want help bringing this to the institutional market in the U.S. and globally for all types of asset managers, clients, etc., who want to have higher rewards and help support decentralization of the network. So, yeah, I'm at month three. It's been a fun journey so far. I think it leverages maybe the one superpower I have in life, which is connecting defy crypto to

the regulatory side. So we're helping going through SOC2 right now. We're going through a legal assessment, starting off a compliance program so that we're in good shape to serve that market. We've signed deals with Zodian Copper as custodian integrators and are working with all the large custody integrators. What I think is interesting as well and what appeal to me is thinking about staking not just as a financial product you can make yield on, but how staking is going to become a fundamental part of our financial ecosystem in terms of being the fact. validation mechanism for transaction flow. So I kind of see this as, yes, an economic product that's

interesting, but the bigger story and where I had to do some due diligence as well, because I described this job as kind of a rabbit hole. It's like a niche within a niche within a niche. And one of those niches that's important is Salana, right? Marinate is specifically Salana only. So I did a lot of due diligence on how Salon is doing and what that story is about. And I kind of known about it, but you and I were around for the birth of Eath. We probably didn't put enough money in it. But I've always been kind of emotionally attached to Ethereum because I was so early and kind of not paid as much attention to Solana. And once I did some due diligence, I realized meme coins aside, it's doing a lot of transaction volume. It's getting a lot of institutional

interest because it has the speed, security and efficiency. You don't have these crazy gas fees. And when I was at Breakpoint in Singapore, I did a short stint at AWS, and it kind of reminded me of AWS's reinvent, where you had this overall protocol and you have all these companies building up products and services around it. But what I think the Salana Foundation has done really well in a way that Ethereum has is they're a little more hands-on, a little more institutionally focused, a little more business-minded, but they're also hands-off and let a thousand-year-old. and flowers bloom. So that was the other part of the diligence around joining Marinate. Yeah, certainly the Solana community is just so powerful, almost religious, which I guess you kind of have to be as an L-1. These things are religions to some degree. I'd love to talk about what is driving institutional interest in staking. It seems to me, if you just take the regulatory piece aside for a moment, if you have an asset that has an emission schedule and you have this

dilution effectively happening, it makes a lot of sense to enable your customers to participate in the upside of that dilution. It would almost seem to me that that would be like a fiduciary obligation at some level where you enable the custodied asset to benefit from the new tokens that are being created on the network. Is that sort of what is driving this first wave of institutional adoption for staking? Yeah. I mean, at the end of the day, it is a brutal fact that if you hold this asset and you have an opportunity to earn 7 to 8% while you're holding it, why the hell wouldn't you? So there's a little bit of that just kind of blanket. It makes economic sense. Then I think the second piece is, and it gets back to kind of 2014, 2015, one of the reasons

we wanted to get involved with mining at Fidelity is, yes, there was the economic and educational piece, but there was the piece of like, well, if we're going to build businesses on top of Bitcoin, as a good citizen, we should be mining and we should be helping solidify the network. And not that that's a majority component of why people are interested in staking as well, but that's part of it as well, that they realize that they can have their cake and eat it too. In the case of Marinate, they can earn a reward, but they can also support the decentralization of the Salana Network, which is a good act to do as a citizen. And by the way, also helps grow the network, helps with price, action, etc.

So it's kind of a virtuous circle. If you think about what this market structure ought to look like for staking, and maybe let's even just take the U.S. as an example, because I don't think the U.S. institutional staking market has even really gotten started yet, you could argue. But some people would look at this and say there are software companies that will be the back-end service providers for asset managers and custodians for this. There are others that say, well, look, the custodians are just going to have to acquire some of these businesses because this is a strategic imperative to be doing this type of thing. The custodians to need to own it end to end. You'll run into other people that say the asset managers actually need to start buying these things too. This is a critical infrastructure piece. How does it look five years from now, assuming we get some regulatory clarity from your perspective in terms of what that market structure looks like? The other piece that I'd add there that is a really interesting dynamic I'm coming across as I'm coming up to on this marketplace is people running validators themselves. And the foundations, Salana Foundation, has a lot of incentives for BCs and other firms

to do that to help with decentralization. So I think that's going to be another interesting dynamic in this maturation cycle because there's, again, economic, just like with mining, there's economic and other reasons to run your own validator. But even that has a whole set of service providers needed around it. Like typically, if you're running your own validator, at least on Salana, it's truly something you can't do from home. You need like at least a one gigabit with no drop kind of signal and the kind of hardware requirements are really extreme. So I think this ecosystem or providers, whether it's software or hardware, note as a service, validate or as a service, is if anything, going to continue to mature as the economics of doing

this bespoke become less and less appealing. Some custodians do run their own. staking infrastructure. Coinbase is an example, but they did that through an acquisition of bison trails. Thank you very much. I was thinking of Unbound, which was the wallet side that's not about, yeah, bison trails, right? So even they, a powerhouse, to build it from scratch is a lot of work. And then bringing it back to Marinate, what we've built, which is this stake auction marketplace, no one else is built. Gito does have the notion of a staking kind of pool, if you will. So I just think there's going to continue to be more opportunity for innovation and expertise, just like there isn't any technology or software component. But I'm hopeful that what's best

for the Salon Network is that there actually is validators running all over the place and that it becomes easy for people to do. Anyone doing something like Franklin Templin just announced they're looking at, I think using Solana for a money market fund, I'm sure it would behoove that team to run a validator themselves. They should also participate in Marinate to help with decentralization of the network. So there may be multiple answers in ways this would go. I would expect as Salana gets more and more usage, there's just going to be more and more places for these types of validation services as the network grows. It's just kind of logical that you're going to need that power.

And let's talk about, I mean, some of the questions that you would have been asking if you were at Fidelity and Boney. Like, what are the hard questions to service providers in this category? And what would you worry about if you were back in one of your roles at those firms? Yeah, it's interesting. I was just in Salt Lake City last week, and I did a small roundtable discussion with Ben Sprango from the foundation. And the topic was institutional considerations for defy.

And in speaking to customers about, say something like what we're offering, there's three concerns in this order. The first is regulatory. The second is security. And then the third is the product. So the regulatory thing is like, well, who are you guys? Do you have a memorandum stating that you do or don't need to be registered with the 20 regulators we have in the U.S.? Do you not need money services business? Do you?

All that kind of stuff. And so going to market, you have to be very crystal clear on that. And then the second piece is security. No one wants to be doing business with a protocol or a company that gets tacked. So SOC to level one, leading to level two, and then also all your diligence there. And then finally the product. So that's, again, a place where I'm helping marinade because when I was a bank, New York Mellon and Fidelity, I was on the other side doing those deals.

I know how those companies think at an extreme level in the case of Bank New York Mellon in terms of risk and compliance and security. And this is, again, where I would hope regulatory guidance will help because the problem is right now is that we're all doing stuff kind of bespoke. We're all having to make some business risk-based decisions based on legal guidance, which isn't based on interpretation of rules. It's based on interpretation of whether. there could be someone coming after you. So it's a bit of a tough environment to operate in.

And that's why everyone is very focused on regulatory status first. Yeah, it's funny because you see the SEC naming Solana the token as a security in some of these lawsuits right now. And meanwhile, Solana is this magical, ubiquitous stablecoin rail that is being used like everywhere in the world. And it's certainly not a securities transaction, right? Like these US dollars moving internationally and being stored. So there's an issue there for sure. And I wonder what your sort of priority items would be right now from a regulatory perspective in terms of the part of the ecosystem that you're in today.

Like, what's on your wish list? I think a wish list would just be clear guidelines. So we've gone through the legal analysis with a legal partner to determine the things that we are pretty sure we don't have to do. It would just be nice to know some kind of staking guidance that would say, just like in proof of work for proof of stake, answering clearly questions like do or don't validators need to or not be concerned with OFAC

when it comes to validators, just like with mining, those questions are out there. Are you a market maker or not a market maker? Are you a broker dealer? Aren't you a broker dealer? There's a gazillion levels of obscurity and no clear answers

where everyone's operating on good legal advice that's expensive, by the way. It's not cheap. And everyone's having to go through the same thing where there were just some rules of the road that said, this is what staking is, this is what it isn't, this is what Salana

is, this is what it isn't, this is what an L2 is. This is what a bridge is. This is what an AVS is. AVS is another, like, who knows? And I can't imagine regulators trying to deal with that. Like, this emerging L2 thing, is it a market maker? Is it a brokerage? I mean, who the hell knows, right? So I guess a lot of requests.

Yeah, well, that's a fascinating one on the Eigen layer ecosystem and how that will be defined. It might be a few years before we start to get some of that clarity. And that's kind of the challenge is that industry is way ahead. Like, we're talking about those things. I mean, it's very hard to understand anyway, even if you've been in industry for a while. I don't know about you, but Eigenlayer took me kind of Bitcoin mining level reading and understanding at first to really get it. And so that's where I'm worried about the regulatory.

Like, I don't see this ending, but having some level of clarity, like at the top level, like, is this a security? Is this a commodity? Is it neither? Like, let's just start with the basics and then start going down the stack from there. I was talking about this with one of our partners the other day and just talking broadly speaking about the cost to start a new company has come down so exponentially over the past 15, 20 years.

Cloud computing has played a big role in that, the rise of open source software, distributed workforce. There's a lot of things that are driving down the cost to get a new company off the ground. And it's no surprise that you've seen venture capital respond to that. You know, pre-seed stage didn't used to exist. Seed stage even didn't exist 20 years ago. Now, within the blockchain space, it is pretty cheap to start a new company because there are open source primitives here that you can leverage. But you pointed out one of the things that's a little bit different between just, general tech startups and blockchain tech startups is, hey, you might have to go to all 50 states

to get licensed here. And like, that's $5 million for a typical startup. So there are these impediments. And I think if some of this was clarified from the regulators, you would actually see this spawning of innovation and new companies getting off the ground as a result of it. Absolutely. Because before you go to those 50 states, you've had a number of calls to determine whether you do need to go to those 50 states. And so that's the problem. right? If you want to be a responsible, which we all want to be actor, particularly in this jurisdiction, it's not efficient. I don't know if it's like if you were to open up a coffee shop and they were like, well, can you serve hot coffee? I don't know. Are we taking a risk serving hot coffee? Okay, so we can do hot. What about iced? Well, I don't know what the analogy is, but it certainly is an impediment. And I think you can start and be somewhat risky depending on what market you're operating in. Like, if you you're a pure tech L2, but as soon as you start wanting to do deals that touch anything related to the traditional financial rails, got to get the lawyers involved. Yeah, I mean, I use the coffee

shop analogy, and I think that's a good one. I often think about just other industries that have had market structure reform. And so if you think about the Telecommunications Act of 1996, and that really kind of shaped what the internet looked like. There would have been an alternate path maybe where the cable companies like own the internet. We ended up really lucking out in a lot of ways that there was a bipartisan consensus to allow this to thrive, right? So it's probably something like that where you saw this entire industry flourish as a result of just clear rules of the road. Yeah, it is an interesting dynamic. And thinking back to those examples, and this is what I think is unique about in many ways our industry, I think, is that a lot of those had government involvement

as part of their inception. Like, you think about telecommunications, the internet. This one kind of has come out of left field, and maybe that's why also governments are either allergic or don't know what to do with us. Think about the aerospace industry and even today the incredible things that SpaceX is doing, the FAA is along for the ride, mostly, because they've been part of it from its earliest inception. We're just kind of these weird people on the outside. You're clearly not of the view that Satoshi and the invention of Bitcoin was a lab leak from the NSA. Yeah, I am in disagreement.

I know Nick has that theory. I think it's a really interesting one. It's definitely not Peter Todd. I'll do respect to Peter. I've met him a couple of times. He's brilliant. But that was such a funny moment because I had some people in my network who know what I do, but don't really follow it.

Like, say, did you watch the documentary? I actually didn't. And do you think it's really Peter Todd? No, it's funny. But yeah, these are really interesting discussions around how we get there. And I think maybe Stable Coins is optimistically, like, maybe that's where we need to start. Because Stable Coins, people seem to wrap their heads around. So don't try to blow the whole ocean.

Just try to deal with stable coins and get some rules for the road there and then build upon that. Yeah, I think that's a great place to leave it. So Hadley, where can we send people to learn more about Marinate and track what you guys are up to? Sure. So you can go to Marinate.finance. That's the website, also on X and LinkedIn, but Marinate. Finance will give you everything you need to know. It will show you our recently launched product Marinate Native.

So people can stake directly through the Marinate website if they want, either to Native or to the liquid staking token. Candidly, we're starting to work on our institutional documentation on the website. So that's a little sparse right now, but that's one of our go-to-markets there. You can also follow me at Hadley-Stern. And you can drop me an email at Hadley at marinate.finance. Happy to answer any questions. Awesome.

All right. Well, this has been fun. Thanks so much for joining us today on the podcast. Awesome to talk to again, Matt. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island. 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.