On The Brink with Castle Island - Ryan Selkis (Messari) on Crypto Theses for 2024 (EP.491)

Episode Date: December 25, 2023

Ryan Selkis, the co-founder and CEO of Messari joins the show. In this episode we discuss: The regulatory landscape and how the industry should be prioritizing policy initiatives. Grayscale, GBTC and the evolution of exchange traded products. The institutional market and the impact of a Bitcoin ETF. The many failures of the SEC with regards to crypto policy in the USA. Messari's roadmap in 2024 To learn more visit messari.io and download the Crypto Theses 2024 report. Follow Ryan on X.  

Today on the podcast, I sat down with Ryan Selkis, the founder and CEO of Masari. Ryan writes a great annual thesis piece that covers the year in review and the stories to watch in the upcoming year. And this year's version was awesome. You can access it at masari.io. In this conversation, we discuss the institutional landscape, the regulatory battles that are currently being waged in Washington, and the fallout of SBF. I think you'll enjoy this one. So without further ado, here's my conversation with Ryan Selkis. 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. Guest 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 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. The Bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of quantitative easing. 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. Bitcoin. All right, well, Ryan, welcome back to the podcast. What is this, your third appearance maybe? But a pleasure to have you back on. I wasn't even sure if we'd actually done one of these. We've just known each other for so long in so many different roles that I can't actually keep track of whether we've spoken on camera or off because I'm generally the same person.

And so are you and Nick, which is why the podcast is so enjoyable. But yeah, if you say so, third, maybe. You were one of our first ones ever. Remember I was in your office? I think you were episode three or four of this entire thing. Oh, okay. That's right. Yeah, that's why it's a little bit unfamiliar because I do remember doing the first one

in person. So whether there have been subsequent, everything, just all the conversation is blend together when you're virtual. But anyway, I'm glad to do it again. And this is basically the last thing I'm doing before signing off for the holidays. I love it. Well, maybe we'll release this on Christmas. It'll be a nice little Christmas present for people. But I want to dig into this Crypto Theses report. I guess maybe before we do, I told you before we started recording, I thought this was the best one you have done so far. But what was the backdrop on when you decided to do this report in the first place all those years ago? It's evolved a little bit. It's funny.

I wrote it almost like stream of conscious January 1st, 2018, which is technically, it was like the first or the third. Somewhere in there, I just put this together almost like it was a Twitter thread, and it ended up evolving in the media post. And it was essentially like the day before, I think we officially founded Missouri. So I had a couple of quick hit medium posts back to back the day or two before we found out the company. And then people loved it. And the next year, I was going to do it again. And then Argent Bology from Paradigm, he wasn't at paradigm at the time, but he basically front ran me and he dropped it on New Year's Day.

And it was great. And so I was like, this is bullshit. So I had to rethink what I was going to do. And I ended up dropping something a little bit smaller that January and then that December, I was just, no one's ever going to beat me to the punch again, just because this is actually something that we can have as a brand asset. It's a forcing function for me. It's good for our analysts.

It highlights the work that we've been doing throughout the year. And so this is either the fifth or the seventh theses, depending on how you measure it. I would say that this is the fifth production level report with the first couple being just the MVP's and the prototypes. Well, it's a really good one. So we'll bounce around a little bit here, but you have this section on people to watch. And I want to talk about the Grayscale guys. So Michael Sonnishan and Craig Salm, and I guess my first question maybe to tee it up would be,

from where I sit, I think that these guys are almost single-handedly responsible for getting this ETF thing back on track in terms of the SEC actually taking it seriously? What's your take on just their role in the ETF conversation right now? I think that's 100% spot on. I think the SEC, not just within crypto, but in general, has lost a lot of cases and a lot of credibility over the last 12, 18 months. I think if you look at the gray scale ruling plus the ripple ruling and then the Coinbase challenge, it comes full circle a little bit when you think about Coinbase being the custodian for the Grayscale ETF and all of these other major Wall Street firms that are advancing their own ETFs. They're also using Coinbase on the back end. And Coinbase is yet, they're being

investigated and they've got this pending lawsuit where they're under threat from the SEC. Essentially, all of those blue chip firms have followed Grayscale's lead and used Coinbase as a custodian. They've implicitly said, this SEC is, who cares? They're not to be taken seriously. That's the subtext when you see everybody using a major exchange and custodian that was just sued by the SEC and is not doing it out in court. So I think Grayscale is certainly one of the big three cases that opened the door to question whether we had to just follow the SEC blindly, as if their tablets come from on high versus actually think from first principles about whether they're following the rule of law and the regular order that statutes and regulations are supposed to go

through in the U.S. Yeah, and I think Craig deserves a lot of credit for that. relationship with the GBTC product is very complex, as you know, because I've written about this trade and this asset for a long time, and I've called it a financial weapon of mass destruction, not because it is a bad product, but because the SEC has made it so through their obstinence and refusal to actually approve an ETF. So you've got this dynamic where this SEC reporting company and the Grayscale Trust has essentially created this really inferior product temporarily with the expectation that its volatility around what it should be will ultimately force the SEC's hand because it'll be better for investors to just have a clean

ATF. And the complexities of the GBTC product and why it's so volatile versus the underlying Bitcoin price. You and Nick, I think, have probably covered it in past episodes, and maybe it's a little bit too wonky or technical to spend a ton of time on. But the gist is the gray scale victory has closed this gap and basically helped their investors and basically almost created a prediction market in GBTC shares for whether ETFs would get approved in general. So this gap, between the underlying share price and then what the Bitcoins and the trust are worth has closed from, I think it was like $8 billion at its high point, the delta between the two that the GBT investors run or water. Now that's in the, I think, nine figures, maybe like low $0 billion,

and basically that reflects the market's confidence that the gray scale wins are ultimately going to force the SEC's hand and bring the gray scale product to market in addition to many others. So if you just look at the door that that opens to mainstream adoption, credibility, whatever you want to call it, I really do think it's a zero to one moment for the industry or a stepwise function in growth. In Grayscale, it could potentially be the third bull market that they've sparked. Back in 2013, that fall, remember, that was when the Bitcoin Investment Trust first started. That was the first vehicle that institutional investors or even high net worth individuals could really pile into without having to go through Mount Cox or something. And then you saw that

10x run up the fall of 2013. And then there was the gray scale trade in 2017 that drove the market. Now this one, if we see another bull run, it could be the third cycle with Gray Scales led. Arguments to be made whether they also caused one megacrash last year with all the unwinding of that GBTC role in that trade. But Sonny and Craig, that certainly emerged as leaders and probably to the best folks, performance-wise, that we've had this year across the industry. And I guess you have to really be in the weeds on this market structure to understand just how big of a weapon of mass destruction this product was.

if the SEC had allowed this to go through or had allowed some sort of a creative redemption process to occur, you could argue that some of these bankruptcies wouldn't have happened. Certainly, retail investors in the United States would have been better protected if the SEC was more proactive on either approving this thing or just giving a path to allow for this thing to liquefy. I don't know about globally because obviously, Booneu was pretty catastrophic internationally, but I think domestically within the U.S. ecosystem, I don't think this is crazy. I generally truly believe that Gary Densler has been more damaging for the crypto markets and therefore U.S. crypto investors and Sanbank McFried was. I don't disagree. Is it that opposite? Well, let's get

into that a little bit. So regulatory is obviously top of mind for everyone. I guess stepping back entirely, there's a lot of noise in this industry. There's a lot of back and forth on, okay, we should be supporting candidates in this state, that state, or we should be lobbying on this topic, that topic. If you were to boil it down on just what we should be coalescing around as an industry, what do you think is worth spending time on right now? What can we actually achieve here over the next year or so? There's a few different ways to slice this question. And I go into it in the full policy section.

It's actually the longest section again this year for the second year in a row. And mostly it's because I've spent a lot of time on this, I think, proportionately compared to other investors and founders in the space. And I think I have a bit of a unique take just from the collective number of hours that I've spent not just with folks in D.C. that are working around government, but a lot of folks that don't skip level to the other founders and CEOs in the industry, like the policy leads at a bunch of the major groups, and part of that is just proximity on relatively local. But if you were to boil it down, I'd say 2024 basically hold the line, survive in advance. And maybe we can get clarity on

stable coin legislation. Maybe, but very unlikely, we would get some type of market structure legislation. So essentially, how do the exchanges and custodians get registered, or how do they make decisions about which assets are regulated and how? I think that's very unlikely. The most likely legislation that could get passed would actually be some pernicious side door vehicles like Elizabeth Warren's bill that essentially seeks to ban crypto under the guise of consumer protection and national security. related legislation that's just technically unworkable. So it had the same effect of banning large swaths of the industry. And so when I say survive in advance, I think that sounds pretty bearish. But I would say the difference this year versus last year is we have several core assets on our side that just

were not the case 12 months ago. I think some goodwill and consumer credibility is coming back. There's a sense that a lot of the garbage has washed out. And a lot of the legal fears and regulatory overhead from big projects like Binance and FTX and Tether and what. Now, I do think that the concern level has come down quite a bit because some of these issues have by and large been addressed. Finance obviously had a big settlement. Now you've got a compliance monitor that's working at Binance. So even though it's still a global exchange, you have some clarity into the operations. Tether, I think just had an announcement a few days ago operating with all these major U.S. regulatory agencies. We knew that based on just knowing some of the principles and some of the

folks that interact with Tether that they operate at a certain standard, it just isn't always obvious to folks outside of the industry. But I think that there's almost a sense that nature is healing and the core bits of infrastructure in the industry are back on the up and up, and the market is surging. So now you've got market momentum, you washed away all the deadwood, and you've got Wall Street interested with the ETFs. And then maybe the last arrow in the quiver is we actually have not only notched wins in court that we just talked about that have slowed the SEC's role a little bit, but there's also been an awakening, I think partly because of the court victories and then partly because of the regulatory agency's reaction of the court victories, which is basically to double down

and say, like, no, that didn't happen. We're going to continue and just force you to challenge us in court. There's a recognition of sorts that we have to fight fire with fire, and it's the first time ever that the industry had really kind of come together and decided that they're going to activate politically. And so two things come to mind, one being CoinBases, Stand with Crypto campaign and entity that they help spin up. And then the other is Fairshake, which was a super PAC, led by a couple folks that did have some success in the last election cycle recruiting pro-crypto candidates and supporting pro-cropto-candidates in the house, but now has a six or seven-x-sized war chest to actually create a little bit of pressure and some real rewards for folks that are on the right or wrong

side of the crypto issue, depending on where you're looking. So I think just having that capital alone shows seriousness, and it doesn't always need to be aimed at whoever is opposing Senator Warren, Massachusetts. In fact, that'd be the worst way to possibly spend that money in that capital. But instead, you want to show that there's a long-term vision. This industry is not going away. People are serious about protecting not just the corporate interests here, but all of their collective users that they represent and are going to play the game if that's what it takes, because we're otherwise on the wrong end of the barrel from the Bank Policy Institute and some of these other bank-aligned or adversarial groups that are spending historically orders of

magnitude more than us in terms of time and capital in D.C. And this is basically just evening the playing field. It does seem like there's been a noticeable shift in the trade groups and the political action committees in terms of a couple of years ago, we were talking about, oh, we just need to educate and we need to get these meetings with the staffers and tell them all the good things about crypto. But it's turned into, now we will fight you, at least from the industry's perspective. So to me, I don't know if that's more productive or not, but that actually feels like you're accomplishing something because it seems the education piece was just going nowhere. I think there's some nuance here. I think it's still mostly positive.

incumbents have a 90% win rate. And if you talk to most people in Congress, whether they're a representative or whether they're a senator, they spend such an inordinate amount of time fundraising way more than they should. But leave aside the fact that we should probably have some campaign finance reform that sticks and that isn't a lot. Leave that aside for a second. They spent so much time fundraising. And you can be pretty cynical about it, which is essentially, Oh, well, money moves politics, and you might just have a guttural negative reaction to that. There is another way to think about it, though, which is that it's almost like DC's proof of work, for lack of a better term. And it does show a certain degree of seriousness and staying power,

and oftentimes will represent a political interest group that has real users behind it. And so I think the amount of money that has been raised is mostly a signal of long-term health, long-term seriousness and a commitment to ensure that pro-crypto candidates, or at least open-minded candidates and fair candidates, are making it into office on both sides of the aisle. So there are going to be some candidates on the Democratic side that we don't agree with on a lot that you might still want to support on margin because they might disagree with you on some principles, and they might be tough negotiators on some of the principles or some of the final legislation that's passed and might argue that there should be more stringent regulations or

there should be this, that, and the other thing, but they're actually engaging in good faith. And those people are just as important to support, counterintuitively sometimes as anybody that's a net promoter because they might be in such a safe district or in such an important position of influence on a key committee that having them be neutral is a huge win because they're not block progress or they're least engaging with an open mind. And so you have to score candidates on two axes. One, it is how likely are they to win and be powerful? And then the other is, is how friendly are they to the industry? You can have someone that is a five on guaranteed to win and that is a three on friendliness to the industry. And that could be enormously valuable

if they otherwise would be a one on friendliness. So in other words, you're arch enemy and actively impeding progress. So I think it's really important to do that scoring. But the other thing that capital does is it's almost a deterrent. If you only have a little bit that you're actually able to show you're capable of raising as an industry, it's almost a sign of unsuriness. But the money is the message sometimes. And the message now versus two years ago and four years ago is this is going to be a big problem for you if you're on the wrong side of this. And I think that's a good thing because the balance of where money hopefully can and will be spent is in good faith politicians on both sides of the aisle as it has been the last couple of cycles,

But also, because there's a little bit of surplus this time around, we can aim it strategically in a couple of key seats if and when there are folks that are in that very likely to be in positions of power. So five in influence and power and stickiness and likelihoodness and likeness to win, but one in terms of antagonism towards the industry. That's what that surplus allows for. And I think that's a really powerful combination. And if you can see the compounding effects of that time and energy invested and capital

invest in a cycle-to-cycle basis, that's ultimately how you get generation change. And cycle-to-cycle becomes more and more likely, if not inevitable, that this is going to be a fixture of American tech. That nuance is so important. And it actually reminds me of some nuance in the banking industry. So I've been very vocal against the Bank Policy Institute, this mouthpiece that is writing bills for Elizabeth Warren. But you don't have to squint too hard, I think, to see that the bank industry could become strange bedfellows in some ways when you look at just the custody business. So all of these banks now can be authorized participants for the cash create process on the ETF side. And they're looking around. They're saying, hold on a second. So Coinbase is the custodian for like

nine of these things. And you have Mika in the EU that allows the European banks to come in in custody. And hold on. So you can charge 45 basis points to custody Bitcoin. Let me get that right. And then you can build trading business on top of it. Why are all the banks except for the U.S. banks actually making money in this industry? So you could see a world where this actually becomes pretty interesting with the banks pushing in further. Would love your thoughts on that? I think that is the gateway drug. And I actually wrote up Project Guardian and some of the work that JPMorgan and Apollo have been doing, in particular with Monetary Authority of Singapore, MAS, as this Project Guardian, where they've essentially worked with institutions and those institutions

have worked with a number of technical teams in crypto, open public crypto, not permission blockchain in crypto to basically develop prototypes and proofs of concept for how these underlying ledgers could make these financial products and financial institutions more efficient. And the one that was demoed that opened my eyes to the fact that this could be real much sooner than maybe I had expected. My resting assumption is it's always five or ten years away with Wall Street and there'll be a laggard. But at least the hint of what is possible that I saw with Project Guardian, there was a collaboration between J.P. Morgan's onyx team, Apollo, asset management, and Axelar, Lair Zero, Provenance, Avalanche, they basically came together and they built

this proof of concept where there was auto rebalancing of actively managed funds on the Apollo side for like a certain slipper of their business. They basically showed, okay, this is a very manual process. You have to do this rebalancing and actively manage these positions on a month-a-month basis if you have this particular strategy developed. And if you do it on chain with tokenized assets and on-chain logic, you can just totally strip out all of the overhead for what used to be this very human-intensive process with a lot of paperwork and back and forth. That's one narrow use case in a sea of use cases that could be unlocked if there are just rules of the road and these institutions can get comfortable with the tech. To your point, part of that is

being able to custody digital assets. So we're talking about Bitcoin right now, but you also want to be able to custody a token that's secured with private keys that represents a real world asset. So basically, the tech is going to be very similar, but the gateway drug is going to be Bitcoin and this digital gold that the customers just want direct exposure to. Ultimately, that's going to translate, I think, further down the line to all sorts of digital assets or tokenized real world assets. And I think you and I have been around long enough to have seen multiple cycles of this. 2014, 2015, it was blockchain, not Bitcoin. And then it was, we're going to have tokenized real estate and security STOs instead of ICO, security token offerings and blah, blah, blah.

I do think the real world asset thesis is a little bit different this time around for two reasons. One that I just mentioned you, you can start to see the compounding effects of some of these unlocks from the public crypto side of things and how that can be applied to internal products or processes at some of the financial institutions. But then there's another really interesting wrinkle where crypto wealth is going to diversify into real world assets. And most people would rather do that through Coinbase than an incumbent. So if crypto continues to swell in size and we go from $1.7 trillion where we are today to $17 trillion, there's one more order of magnitude leg up here. As those gains get diversified, they're going to get diversified into financial products

that look a little bit more traditional. But right now, I think you're probably with me. When I diversify, quote unquote, and I move to cash, I don't move it to JPMorgan or Bank of America or sweep it into my cash account. Those assets stay in stablecoins and some of the crypto platforms I trust. And we know we're not alone because point basis is a public company and you can see the assets that they have on platform. And it's staggering how big it's gotten in such a short amount of time, not just on the Bitcoin and Ethereum side, but all manner of digital assets, including stable coins. I think that is a trend that is not going to go away. And if a Bitcoin ETF leads to a huge surge and deposits, the diversification away from Bitcoin and Ether and Solana,

And some of these big gainers is not going to be to a money market account or a chase account that yields three basis points a year. It's going to be to on-chain instruments that have certain security guarantees. I think that's spot on. I mean, the thing that feels healthier to me and maybe a reason for optimism on the regulatory front is we used to be very abstract with what we needed as an industry. And now it's very tactical. To me, the three most important ones are uniform treatment of digital assets from a custody perspective. So the bill that Richie Torres introduced on a bipartisan basis. So open up the custody market for the banks. Number two would be stable coins. So just make it very dead simple to know how to register a stable coin in the U.S.

and bring it to market. So that opens up asset management capabilities that expands the dollar internationally. There's positive byproducts there. And then three, to your point on the real world assets, I think you get that in a market structure bill. So I think you get clear, control location at a broker-dealer level. You can do that with Bitcoin and Eath, but you could also do that with a REIT. And to me, that's a huge unlock. And so if we were to get some combination of the three of those things, it really does feel like the type of market that could expand by an order of magnitude in terms of just capital inflows. No notes. Spot on. There's no question there. Well, there wasn't a question. I do agree with you. And I think the question is, when can we expect it?

And who can we expect it from? I think the thing that frustrates so many of us is there's been this political overreaction in some cases, almost a deflection of responsibility, I'd say, for the sins of 2022, where I think within crypto, and that's why this is good conversation to have with you based on your audience. I think within the crypto side of the audience, there's a lot of folks that will hear, well, Gary Gensler's done more damage to the industry than Sandbank-Bafrid did. and they'll be like, that is BS. This is just crypto just totally gone off the rails to think that that's a factual statement. Well, on the crypto side, people will think that's normal. On the Tradfai side, they'll think that's just totally off the rails. And I think when you actually

spell it out tactically, this has been, I think, an issue, and one of the reasons that the courts have agreed with this all year is when you spell it out tactically and you basically say, okay, they told us to register, but they didn't give us a registration process. But they told us this tokens of security, but never in history has just an on-chain instrument with no contract for an investment contract been considered a security. So there's been like all of these progressive wins, I think, in the courts, mostly because of what you just laid out, which is you just look at tactically speaking. How are we supposed to comply? Or what rules are we even breaking? Can you point to anything specifically? And when the answer is so frequently,

no, we can't point to anything, and it's not really clear. And anyone with an understanding of market structure or any of the law at play will say that. It just doesn't make any sense. I think that's just an awareness thing. And that, to me, is maybe one of the biggest tipping points of this year and reasons to be excited, not about 2024, but 2025, depending on what happens in the next election, because that defense mechanism and that politicization of some of the regulatory failures the last couple of years, that will slowly fade into the rearview mirror and we'll almost have a blank slate just thanks to the passage of time. So I think going back to what I said before, yes, survive in advance, but I think there's a lot of blocking and tackling that can be done in 2024 to just

really solidify that support for 25, even if the opportunism presents itself this coming year. And frankly, I think you and I probably agree that's unlikely given some of the opponents that we have in the Senate in particular. I think certainly Ohio stands out as one of the those key races that is just really important here with Sherry Brown, the head of the Senate Banking Committee, up for re-election, very competitive race. Obviously, that went red in Ohio during the last presidential candidacy election. So it'll be really interesting. I think there's two or three seats in the Senate that really make a big difference. And only one has to change hands for the changing controls with Joe Manchin and West Virginia stepping down. We're announcing a run for

Senate again, and that is about a safe, a Senate seat for the Republicans as it gets. So that's right off the bat, there's a change. And you don't necessarily need to be a proponent for a major Republican booster, or MAGA, very far right person, to say that swinging the Senate is the biggest unlock that we could have in terms of advancing clean public policy. Maybe we don't get everything that we want, but you're not supposed to. What we will get is clarity and then some clear path forward for how we can engage. And that really probably only happens with a change of control in the Senate, because of the way of the committee structures work. And because of folks like Sherer Brown and John Tester, who are very at risk. And Elizabeth Warren, who is very vocal,

but not really at risk. And frankly, I think is just trolling us at this point so that people misstep publicly and say the wrong thing or basically match her level of craziness, for lack of a better term. And then someone like John Tester or Sherry Brown can point to the crazy reactions to their colleague who's crazy. And they'll only show their constituents. look at how crazy these crypto guys are. So there's some 4D chess that's being played right now to defend those two seats in particular, but there's a couple of others that are also at risk, and that's going back to the Super PAC and the grassroots activation with something like Coinbase's staying with crypto. That's where those initiatives really start to matter,

because those states don't take a whole heck of a lot of votes to swing them one way or the other. Totally. So you mentioned the carnage in 2022. I would say that's something that I have been internalizing and really wrestling with just in terms of how I have interfaced with this industry over the years since 2014 when I was really starting to work in it and really have regretted not calling out some of the behavior that I was seeing in the earlier times. So the blatant conflicts and business model with owning a market making firm and I exchange probably would have said something if I knew there was an outright fraud, but there's bad things happening in this industry. And as I look back, not enough people, myself included calling out some of that

behavior. How have you thought about that over the years just in terms of your role in the industry? And I'd also be curious if there are things going on now in the industry that trouble you. I think it's a great question. I thought a lot about this. I know you guys have as well, because between you and Nick, me, a handful of others, I think there's very few people that call out bad activity within crypto. And we've done it from time to time. And we know how dangerous and socially costly it is, if not politically costly, and costly with customers or valuable network relationship. Because if you're wrong, the people that you're wrong about have a lot of friends and counterparts. And so it's really difficult to be in that position.

I think it's been important. I think some people have done that work. If anything, something like crypto Twitter, which people will think is toxic or you call what you will, it has been a little bit of an antibody of a self-regulating mechanism for the industry in the absence of comprehensive frameworks that are top down. And I would argue, I'm fairly libertarian, but the role of government is to create frameworks that protect investors, ensure financial stability, make sure that our markets are fair and efficient. Basically, there's a reason that the SEC exists, and it's not for Chair Gensler to decide that Elizabeth Warren is right and we need a central bank digital currency and everything in crypto needs to be shut down. They're guilty of double-speak,

primarily, in that they don't want crypto to exist for political reasons, but their actions essentially undermine the agency that they're supposed to advance. So the SECs is protect investors, ensure that markets are fair and efficient and promote capital formation. They're so clearly and obviously 0 for three when it comes to crypto that we just take that for granted. But it shouldn't be my job or your job or Nick's job or anyone else's job on Twitter to call out Sam Bankman-Fried. That should be handled because the way that a crypto exchange could come into compliance and someone like Coinbase or Cracken could be registered and then attract all of the Tradfai inflows without it routing through the Bahamas or Bermuda or wherever, that should have been a solved problem a few

years ago, quite honestly. We all know it. Coinbase and Crackens and Geminize and Paxos' business models and engagement with regulators have been top-notch because they're based here. They know the rules and they're not trying to take advantage of some. Iraqi jurisdictional arbitrage. And you can argue that, okay, maybe it's okay that a couple of years went by before this was solved because those regulators just needed to wrap their arm around, the magnitude of the challenges and the scale of the problems and whatnot. I'm not saying a bit license is net positive for society. But the irony is what Ben Lossky did in 2014, nine years ago is in some respects better than the status quo today that we have federally. And that's embarrassing.

talking about a decade of the evolution of a new industry, not being able to regulate the clear centralized quasi-bank, quasi-exchange, quasi-custodians, whatever you want to analogize them to in the traditional finance markets, they're still operating under this patchwork, state-by-state money services business licensure versus what they should be, which is there's a crypto entity, this is how we regulate these crypto exchanges and custodians and brokers and blah, blah, and we'll worry about the protocols and decentralized finance, which is three years old, essentially, when we can wrap our arms around that. But for right now, we know these look like banks or custodians or exchanges that we're used to. They use a different technology. Here's how we

custom fit it. And that's just laziness. Yeah, maybe it's lack of political will, but it's just laziness in general. And then maybe there's an element of politicization. I'm never going to be able to say that word. Anyway, but the general lack of political will to tackle this, or just political opposition to the industry that's clouding some of this decision making. Hester Persis' Safe Harbor has been on the book for five years. It's been proposed, it's been thought through, it's gone through industry peer review, and has received comments, and there's some good ideas that come from it. And there's zero progress. So I think the bigger problem is government failure, not us failing to call out good or bad actors. I love that answer. I mean, as you were saying that,

I was writing down Hester-Perses-Safe Harbor, because it's been about five years. And if I were to answer that question, I would be thinking about token unlock schedules and just the opacity around some of the retail exposure to some of this market, just not knowing lock ops. And I know you guys are doing awesome work on that front, but there's a lot going on there. And if you just had this safe harbor proposal, we had some construct to take something from a security to a commodity, that actually becomes a solved problem. I think that's actually one of the biggest investor risks in this market right now, is just not knowing supply schedules or not knowing side deals that have happened to unlock tokens ahead of time and whatnot. So you're right. A lot of this does get solved via some of the

things that have been proposed for years. And by the way, you and I, whether we ever call out another bad actor again, we already invest in this because we fucking pay taxes and a lot of them. So figure it out. I think the biggest, most frustrating thing for so many people is you look at the approval rating of agencies in D.C. and the government in general. And what they're responsible for is essentially what they're not doing and why everybody's frustrated with them in the first place. And then they point the finger and say, I can't believe you guys let Sam Bankman-Fried speak on your behalf in Washington, D.C. We weren't the ones that were taking his campaign contributions. Totally. And all these meetings because he was going around and flashing a pot in D.C.

And we weren't the ones writing the puff pieces on him in all the mainstream media as if the adult in the room and the savior finally arrives. You and I and many others had incentives to speak up against them publicly because that's not how it works in any industry to just shoot one of your friends when they're having important conversations with important people that are ultimately going to impact how your industry to regulate it. So I think no one put us behind the eight ball more in terms of some of those relationships than SPF. But I think the general obstinence and distaste towards our industry is that basically was just an excuse for them to run some of the playbook that they have the last couple of years. And again, I know there's going to be some more

tradfai listeners. Maybe I guess if they listen to Ambit Rank, they're probably a little bit more red pill, but there's some that are going to be like, okay, that's not entirely fair. That's not entirely accurate. But I'd say it's pretty accurate. Maybe it's not precise, but that's pretty accurate assessment for where we've been the last couple of years, particularly if you're an operator in the U.S., not fleet the scene to take advantage of some of these loop poles internationally. I think that's spot on. So maybe transitioning a little bit over to what you're building here at Masari. So you guys, the product has just come along amazingly. So we're big fans of the enterprise product.

The deal dashboard is great. I don't have to go hunt for all these deals anymore every podcast. So I'm really enjoying it. But maybe you could talk a little bit about what you guys are up to on the product side and what's on tap for 2024. We've come a tremendously long way this year. There's essentially two halves of the business. There's what we call protocol services and then market intelligence on the other side.

And protocol services essentially day one when I announced plans to start Missouri way back in 2017. It was in the midst of the ICO craze. And I essentially said, before you can build Bloomberg, you need to build Edgar. You need these baseline transparency standards for all of the emerging assets so that you could, as an investor, or as any market participant, go and look at a given asset and see similar information of what you'd expect from a public filing. And the benefit of crypto is the ledgers are open so anyone can do it. The markets are relatively open, so anyone can amalgamate these different exchange and decentralized exchange APIs. And most of the community discourse is open.

And discords in medium, if you're talking about governance and things like snapshot, and the code is open source. So there's nothing that prevents a third party from going in and getting all this information aggregated, distilled, and put into a form factor that would rival what you would get from a public filer. And so our protocol services, we basically have gone from work on from zero to 50 protocols now, including many of the biggest layer one communities, to just standardize and report on the quarterly metrics, the quarterly developments, on-chain, off-chain

that matter for their ecosystems through what looks like a traditional cell-side research report, but is really constituted of all the building blocks you'd expect from a 10K or 10Q. If you take all those sections from those quarterly reports and you break them out, that essentially makes up different products in the market intelligence platform that we have. So charting, screening, API access, alerts, functionality is part and parcel of that. It's not rocket science, but it looks a whole lot more like Bloomberg Terminal than anything that existed five years ago when we started, that's for sure. And that is just a relentless focus on tweaking the product, adding new features, and more recently just grappling with all the unlocks that are possible through these LLMs

that have really exploded in the last year. So we have a lot of really exciting stuff with Misari AI that we'll be working on and rolling out progressively, not just next year, but I think in perpetuity now. And that's going to make it all the more obvious that these public assets, frankly, don't even need a listing process or a registration process with a regulator like the SEC. If you basically just have all of the communication channels

and documentation to open source and then the ledgers themselves are open with the right structure to the information, you should be able to get a better snapshot, a real-time snapshot of what is going on with any of these, quote-unquote, publicly-traided assets than you'd get from any public filer in corporate America. So I think it's pretty powerful. We've come a long way, but there's a bunch of good stuff, particularly on the AI front that I'm excited about for our enterprise subscribers next year.

And a bunch of new protocols launching next year, too. So it's going to be a busy time to just stay up on top of what's going Mennat. All markets are good for token launches. So the Solana ecosystem alone, I think we'll have dozens of nine-figure protocols that get launched next year, most likely. So far, it looks like it's reminiscent of Defi summer in Ethereum a couple of years ago. So we'll see what the staying power is. But I know Solana is pretty controversial right now, maybe less so. Now it's almost like Ethereum has become controversial.

It's like, oh, is Ethereum going to die? It's a weird cycle. Ethereum's in the doghouse right now. It's super weird. People are overly emotional in both directions. I will say the one difference between Solana and in some ways, it's almost an evolution of Ethereum in a very different way than I hear most people talking about. Bitcoin versus Ethereum, I don't know about for you, but for me at least, the big unlock

with Ethereum was sending stable coin payments and using Uniswap. And it had everything to do with the settlement time. You'd send a Bitcoin transaction, you'd be like, okay, 20 minutes later, I'll come back to it, just to be sure that it actually cleared and it processed and we're all good. even if it was available in the Menpool in real time, you can see it on Block Explorer. There was something about that little bit of friction and confirmation process that I think really felt like there was something lacking in the UX and the whole system. And then Ethereum cut it down into a matter a second.

So you can see it. Now you go to EtherScan instead of blockchain.com. And now it's okay, I feel a little bit better. This whole trade or this whole transaction has process settled and we're good. Solana, it's just lightning fast. So it's the closest thing that I think anyone has seen right now to a sense. centralized exchange experience. And so what will be criticized as well, because the amount of data in the state of Ethereum, it's just astronomical and it's unsustainable and this and the other thing,

it's going to be very difficult or it's going to be quasi-centralized. I think it's good that we have a spectrum of those in crypto. And it's something that I expect is going to be true from now until the heat death of the universe where you're going to have these permission chains, fully permission, bilateral bank chains, maybe at the extreme. And then in the other extreme, you'll have something like Bitcoin and its metronome. And then everywhere in between, you'll have these various security and speed tradeoffs versus centralization tradeoffs. And that's arguably a good thing, but Solana is maybe in the perfect middle right now for that as a new universe of users getting onboard into crypto. It really is a magical experience. I was actually going back and I read the

John Feffer paper again last night. Someone was asking me about it randomly. And that was years ago at this point and institutional investors take on crypto assets. And I was reading it through the lens of Ethereum. And it's really come to pass that Ethereum is competing more on the monetary asset front than the technology front at this point. And maybe that's the basis for competition here where you're seeing all these Alt-Elwans emerge. I think that's still the biggest outstanding question to me, especially with the nature of what we do at Missouri and helping people understand how to approach this asset class, how do you value these things on a more fundamentals basis. Bitcoin is a pure currency or gold substitute. The decentralized defy

protocols may be some of these applications that have real economic throughput where the protocol self will sweep fees, those look almost like cooperatives and you can understand or underwrite what the value those networks should be. Then there's just really messy middle for how do you value their ones? Because they do feel like they're trading like monetary assets, but people are trying to hype up like, oh, look at all the fees that are generating. Salonah's in this weird position where the fees are still negligible, so will there ever be fees? I don't know. I think it's going to take the market years or maybe even a decade to figure out how to fairly value these things, and that could create some volatility in the median term.

But in the short term, I think the biggest and most important thing is, how are all of these operating systems getting built out in a medium-term sustainable basis so they can support all these emerging applications right atop them? And I think security in the middleware gets figured out long term. I don't particularly think that block space is much of a differentiator, it's a commodity product, but the ecosystems that are developing and the interoperability of all these applications, financial or otherwise, there's, I think, just going to be a massive, massive explosion of them in 2024 and 2025. So I do think that we're in the very early stages of the next cycle and the apps are going to be lightning fast this time around.

I totally agree. Well, I could talk to you for hours. That's a good place to leave it. Go read Crypto Theses 24 at Masari. Where do we want us to send people? Just missari.io. My goal for next year is ultimately to make it Masari.a.i, but that'll be a story maybe for another podcast this time next year. Well, hopefully sooner if we're doing our job, right? But yeah, missari.com is where you can test out all the apps. We have free trials available, and we do have a freemium model.

So a lot of these tools that we talked about are free up to certain points. And then the report right now is available for our pro subscribers, but early January, it will be available for Masses. Those who want to read it over the holidays, then get a jumpstart, go sign up from Star Road Pro. Awesome. All right, well, thanks so much for coming on.

Thank you, 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.

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