On The Brink with Castle Island - Weekly News Roundup 09/11/20 (Crypto penetration by country, DeFi moats and valuations, how DeFi reminds us of PoW launches) (EP.124)

Episode Date: September 11, 2020

Matt and Nic return for deals and news of the week. In this episode:  the NFL is BACK Matt's predictions for the Patriots season New data on countries where crypto penetration is highest Mastercard launches a CBDC testing platform USDC launches on Algorand Past is prologue for stablecoins moving chains DCG continues to grow into a juggernaut Our Sushiswap explainer Can DeFi projects maintain sustainable moats? What distinguishes DeFi tokens from ICOs? Why you can't apply traditional equity earnings multiples to DeFi valuations How Sushi reminds us of Monero's origins How Curve reminds us of Dash's launch Why communities often stick with botched 'fair launches' Content mentioned in this episode:  Avichal Garg and Curtis Spencer on On The Brink Ruben Galindo appears on the show Jump Capital's mid-2020 crypto theses Chainalysis' 2020 global crypto adoption index Bitcoin: A Novel Economic Institution from Ark Invest

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 into Britain's ailing economy with a new round of concentrated easing. You print a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something, call the Bitcoin. Bitcoin. Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. And we've just

been staring at each other all day on Zoom. It's been a good nine or ten hours of Zoom calls today. I mean, it cuts both ways because I don't think I've ever talked to more people, which is good. We're talking to some crazy talented entrepreneurs and things like that. But I mean, who knew Zoom could be so exhausting. This has been an absolute marathon. I don't know why everyone's back to work, maybe, September. But yeah, this has been one of the longest. We never, we never stopped. That's true. We didn't take any time off. Just, I mean, where are you going to go on vacation? Where are you going to go? I took a vacation. I went to upstate New York, but I also worked. So it was a fake vacation. I just worked from home in a different place. I guess it's like in normal times you,

You go out for coffee, but you have like breaks in between. This is just boom, boom, boom. That's the problem with being fully remote. You just don't have an excuse to take time off. Well, we're recording this and we're trying to get it done so that you can go watch the football game, which, you know, I'm going to watch too. Yeah, I think we both want to watch the football game. So that's honestly the big news of the week. The NFL is back.

Everyone, it's back. It just, it feels like things are getting back to normal. There's not going to be any fans. but you know it'll still be okay i mean you might have whole teams that get wiped out by covid which could really like you know throw the league in for a loop i've taken a close look at this patriots lineup and i'm predicting 16 to know that sounds about right my uh my team over the off season was struck by tragedy we lost our name so we have no identity now we're just the Washington football team. What is it? It's just the football team. Honestly, I don't even know what

like branding they're going to use. We're just the the football team now. It's crazy. The exciting thing is that I'm in a fantasy league, which has a Bitcoin buy-in with a bunch of other bitcoinsers now. Shout out to the Sat Bowl, I think it's called, Sat Bowl 2020. Shout out to you guys. I heard Matt O'Dell talking about this. Matt O'Dell's in it. Alex Gladstein. you know, a bunch of coiners, Parker Lewis, Gigi, if you know, Gigi. I mean, would it be too much to ask to get Draft Kings to integrate cryptocurrency? Really should. I mean, it's, yeah, it's all, a lot of people's first brush with Bitcoin was based on trying to gamble online, trying to get access to these venues.

Well, we had a busy podcast week. You interviewed the founders of Electric Capital. Yeah, I talked to Avichel and Curtis Spencer over at Electric. Those guys are super thoughtful guys, as we knew. But they just raised $110 million fund too. And we talked about their thesis, their experience raising this fund. And just super thoughtful people. So I had a lot of fun with that one.

I feel like that one could have gone on for two hours. We were just really hitting our groove there, the hour and 10 mark. Yeah, and I talked to Ruben Galindo, who founded Airtiam. and that one kind of blew my mind because the U.S. Treasury is now putting their finger on the scale. They're unfreezing funds that they froze from the Maduro regime in Venezuela, and they're effectively granting them to the opposition, Juan Guido. And Airtiam is in the mix here because they're the mechanism that the Venezuelan opposition is using to distribute these frozen funds to health workers in Venezuela.

So it's this whole crazy thing where the U.S. Treasury and crypto and Venezuela are all embroiled in this kind of geopolitical game of intrigue. Pretty crazy. Shout out Peter Johnson from Jump for suggesting that we do that episode. It turned out great. By the way, I had some really great feedback on the podcast from Colleen at CMT Digital. So shout out Colleen. Thank you for listening. Oh, shout out.

friend of the pod. That's right. Speaking of Jump, actually, remember that table they did of the most compelling markets for crypto adoption worldwide in their Q2 letter? I do. So there was an interesting kind of confirmation of actually what they were saying this week. Chainalysis did some global indexing of crypto adoption. They actually had some really similar results. So they basically used on-chain data and P-to-P exchange data to triangulate the countries where crypto had the most penetration effectively. And they got pretty similar results. Nothing surprising, but it was cool to see this supported by data. What were the countries that had the most activity?

So I don't know if they've done it in absolute terms or per capita terms. I'm guessing it's per capita, but the most popular countries in order. And I don't know. know if this is something that's going to confirm your priors or be surprising to you are Ukraine, Russia, Venezuela, no surprise, China, Kenya, USA, South Africa, Nigeria, Colombia, and Vietnam. What would be driving Ukraine to have such a high penetration rate? That's honestly a great question, but we kind of knew that Eastern Europe was a hotbed for crypto already. I knew that looking at the, looking at the geo location for visitors to coin metrics, for instance. It could be, you know, the fact that there's just a bunch of conflict there

and this kind of weak rule of law and you also have a very tech savvy population, you know, had that strong mathematical Soviet education, you know, tech savvy plus weak institutions maybe equals fleeing to crypto, something like that. It's a good hypothesis. I mean, you look at Venezuela and China and you think that capital control of Asian has to be high on the list of use cases there. Yeah, so Columbia is also where the biggest Venezuelan diaspora is. And we know for a fact, we've covered it many times on the show, they're using local bitcoins, you know, using Bitcoin as a bridge currency to move sovereign currencies in and out. So no surprise that Venezuela and Colombia are on the list.

really no surprise that the USA is on there. We don't need political collapse or chaos to be crypto enthusiasts. We just, you know, love gambling and trading and capital markets and stuff. It was interesting to see Vietnam on the list. I wouldn't have guessed. Would not I guess Vietnam. I wouldn't have guessed that either. Kenya and Nigeria also you could tell, look at local Bitcoin volumes.

They're growing. Pax full volumes in particular. Paxful. is a monster over there. Yeah, actually some news on Paxville's, they added tether markets as of today. So this is kind of what we expected, moving on from just Bitcoin

and leaning into this dollarization trend, maybe they listen to the podcast or something. BlackFi added Tether as well. That's right, yeah. Internationally, yeah. So some people might have been surprised by that, but I guess Paxfels really recognize that people in many cases were using Bitcoin

is a bridge asset to acquire Tether, so they're cutting out the middleman a little bit and giving them local liquidity against Tether on their platform and effectively dollarizing all of these countries where people don't like their local sovereign currency. So something that we've forecasted and spoken about and it's really happening now. I haven't paid much attention to what's going on with the Bitfinex case in New York, but I saw some news today that there was a hearing coming up. It would be interesting to see what effect that has on tether. Yeah, I mean, it's still the shadow looming over the whole crypto dollar industry. I checked today there's about $18 billion worth of crypto dollars.

13 billion of those are tethers. Well, while we're on that topic, I guess we're going to do the deal section, but maybe we'll do it a little bit later and let's just stay on crypto dollars because this is, I mean, there's a lot in the press this week about it. Did you see MasterCard launched a testing platform for central bank? bank digital currencies this week. So what do you make of this? Is this their rejoinder to Facebook's Libra?

I don't know. It might be too early to tell. But I, so, you know, I think we are going to live in this world where there's a coexistence between central bank issued digital currencies, private U.S. dollar backed digital currencies, and just open public blockchain-based assets. That's my belief, at least. And it seems like MasterCard, you know, obviously they were in that Libra consortium and then they pulled out. And this is, it seems to be a big move towards just providing infrastructure

to central banks to allow them to issue their own cryptocurrencies. And, you know, I guess are we calling them cryptocurrencies, digital currencies on blockchains that are private? So my take is that MasterCard is aligning themselves and sees themselves as a potential service provider to these central banks and maybe thinks that that's a more fruitful path versus going, uh, the private crypto dollar route. But that's total speculation on my part. What do you make of this theory that people like Eric Townsend on macrovoices have been expounding on about how tech companies are going to issue their own, not dollar-based currencies, but novel units of account, effectively backed by the full faith and credit of these large Silicon Valley behemoths? Yeah, I totally buy it. I didn't listen to that.

episode, but I completely see a world where we sort of return to kind of a pre-Civil War banking system here where we have private companies issuing currencies. It used to be that when you traveled from Boston to California, you'd have to move in and out of 12 different currencies along the way before there was kind of a national dollar. But I mean, some of these tech stocks lately for the past few months have been trading like just speculative currencies anyway. I mean, they're not really grounded in a fundamental valuation frame. work. These things are belief systems. How long that keeps up, who knows? I mean, I sort of want to get Larry White back on the show because whenever anyone maligns the quote-unquote Wildcat era

in the pre-Civil War, George Saldjan and Larry White will point out that the reason that they traded at the reason the bank IAUs effectively traded at disparate rates was because of the state regulation. So it wasn't because there's anything wrong with free banking inherently. It's because the states prohibited them from expanding and branching and growing regionally. So you ended up all these little liquidity ponds and you'd have to do things like get magazines which would tell you, you know, which banks were credible and where they traded and at what discount they would be trading depending on where you were. But the point is free banking is unfairly maligned

if you're taking this narrow historical reading. Just had to point that out. That's really interesting. I mean, I see a couple different paths here. You know, a company issuing their own currency is one thing. You could also see a world where security tokens just become a lot more popular as a legal fundraising mechanism. So what if you could issue a security token

that represented a claim on cash flows for the revenue of a specific product line as opposed to the entire enterprise, things like that. I think we'll probably see some experimentation in that category. It's interesting to see, it's kind of the barbell. We're seeing the completely buttoned up approach with the SEC disclosures with the INXs of the world. And then you have the complete opposite where it's very similar. Structurally, you're selling a claim on cash flows with some of these defy to.

tokens, but complete opposite, no disclosure whatsoever. The only disclosure is the code, no legal process or registration or anything like that. So it's kind of the same concept, but like completely divergent approach to the law and to kind of responsible disclosure, which is interesting to watch them both play out at the same time. I think that's what's so great about this industry is that there are reasons to be excited about it for, and they're totally different reasons. I have lately, the way that we've started to talk about it is just the tribes, right? Like, I guess we've been talking about the tribes for a long time, actually. But, you know, you have the folks that are all about the non-sovereign money.

You have the folks that are all about targeting data monopolies and self-sovereignty over your own personal data and community ownership over things that are happening on the internet, like social networks and file storage. And then you have the traditional kind of security token people that just see this as a more efficient financial market infrastructure to settle real world securities. And I guess the good news is that it's all happening. There's common infrastructure, actually, to support all of it, which I think we see a lot of opportunities for that infrastructure.

But you can be excited about defy and security tokens too, although you don't see a lot of that on crypto Twitter. Yeah, I'm not sure I've ever met anyone that is simultaneously excited by SEC registered security tokens and defy, although I have met people that are excited by either. there's people that are investing in both categories in this industry for sure let's just the last one on the on the dollarization narrative here so usdc which is the dollar back stable coin project that's managed by the center consortium which is circle and coinbase

they launched a new version of their product on algorans so it seems like they're really moving towards a multi-chain world and you'd have to think that some of this is just looking at some of the scalability challenges on Ethereum and just moving that asset onto whatever blockchain they can that they think is reliable and can actually settle quickly. Yeah, they're taking a leaf out of Tether's book. Tether actually launched on Solana today. So they're eight or nine blockchains they're kind of live on now. And actually, if you look back historically, kind of past his prologue, really,

because Tether launched on Ethereum back when Bitcoin fees were really high. in 2017. And they got rapidly overtook Bitcoin as like the main settlement venue, you know, because Bitcoin is very expensive. And now the same thing is sort of happening. I mean, TBD. But if you look at it, there have been more tethers released on Tron recently than on Ethereum. People are sleeping on Tether Tron. Tron transactions, I guess, are effectively free. I don't know exactly. But so it's kind of, you see the same thing. playing out where now Ethereum is really congested and some of those applications are looking for alternatives. There's definitely not an equilibrium here where we end up with 50 or 100 of these

things though because the engineering challenges for the exchanges will just be too extreme. So my guess is that we're going to have a handful and that we're just going to have to see these stable coins issued on layer 2s on top of some of these networks at some point. Maybe in, you know, a lot of, you know, if you listen to Vitalik on what Bitcoin did, that's his big campaign right now is to convince those heavy users of gas to use these altos, like the roll-ups. My intuition is that there is a, it's going to be hard to convince everyone to move to L-2s because that requires an engineering effort. And we saw with Bitcoin, nobody even wants to do simple things like batching.

So are these big service providers going to be willing to put in the hours to move to an L2? The other thing which I think people aren't talking about as much is that L2s effectively introduced this notion of deferred settlement. So the settlement guarantees are not exactly the same comparing base layer and an L2. And so I think some participants are actually just going to be averse to using L2s because it just slightly changes the settlement quality. and base slayers is what they prefer, and it's what's best understood in terms of finality guarantees. So I'm actually not that optimistic that, you know,

the congestion is going to be dealt with in a short order by having everyone move to roll-ups, for instance. I think it's a really good point. By the way, that podcast episode was so good with Vatala and Palisra. I mean, that was such a good podcast. I think it was the best one. did. I think it's the best what Big One did podcast. It was really good and very technical. But on that point that you just brought up around sort of the propensity to use layer two for

settlement, I think it might be on a case-by-case basis. I mean, you could imagine two exchanges that want to have a lightning channel open between themselves and do that periodic netting. But that obviously doesn't work for everything. So I think skillability really just is a use-case dependent thing where we're not going to have a one-size-fits-all solution. There's going to be a bunch of different things proposed in some work depending on what you're trying to do. Yeah, if exchanges start to trust each other, they can just do nut settlement and completely almost eliminate the on-chain impact. And maybe they don't even need lightning. Maybe they transfer IOS between each other. That was kind of like what Ciphedian talked about

back in the day, his paper economics of Bitcoin is a settlement network. He figured that, you know, Bitcoin could be the venue where 500 financial institutions settled with each other once a day, all mutually settling up with each other once a day. And that would consume the 300,000 or so transactions the Bitcoin had to offer for that day. And that would be it. And that might be kind of a reasonable vision of the future, honestly. Yeah, I think so. I think that's probably where we're headed, at least for Bitcoin.

A lot of people don't like that idea. But a lot of those people went down with the Bitcoin cash ship as well. You just can't. Blockchains are not scalable to be world computers. This is just not going to happen. So you just need to take as much off of the base level chain as you can and build layers of abstraction while maintaining that trust. Yeah, that's why some people say that you scale by removing data from the chain

as opposed to adding data capacity. you know, which is one of those kind of inversions, but a lot of people eventually have that realization. Yeah, I used to be a big blocker. I confess, there was a time when I was really influenced by what Gavin was saying around moving to 20 megabyte blocks. But, yeah, everyone has their journey. Yeah, I was a big blocker for a few weeks, maybe, a few months.

But I think Jameson Lopp said he was a big blocker at some point. You know, like everyone has been one. I've been a private blockchain guy for a hot minute too. You know, that's where I draw the line. I don't think I ever found private blockchains interesting. I was in a lot of rooms where private blockchains were the topic. A lot of consortium efforts. A lot of these CBDCs kind of look like private blockchains.

At least they're running on open infrastructure, though. I mean, the problem with the private blockchains was not a technology problem. All this technology was really cool. It was just, you know, you have 20. banks around a table and they're all staring at each other, wondering who's going to go first and what their angle is. It's just a tough way to just politically get something done. So here's something interesting that was published this week. Ark Invest, the always good Ark Invest, co-wrote a white paper with the folks of coin metrics

called Bitcoin a novel economic institution. And I got to say, this might actually be. my new go-to in terms of introducing serious people to Bitcoin. It's that good. Yassine is just crazy talented over there. So this was a phenomenal read. I've sent it to a ton of people this week. I mean, the way that Yacine zooms out and, you know, it doesn't get too bogged down in the details of how it works, but just talks about trust models for institutions and how Bitcoin satisfies these key economic assurances, it's incredibly good. It's incredibly good. I think it's going to be really enduring. I think, you know, a piece like this is not going to, it's going to age very

well because it's just a highly kind of generalizable model. So if you haven't read it yet, read it. It's very stylish too. They always have great design over there at Arc. All right. You want to talk about some deals? There's really just one big one. that I want to talk about. There's a big deal. DCG acquires Luno, a retail focus exchange and brokerage platform based in London with offices in Singapore and South Africa.

Yeah, and I continue to just say that what Barry is building over at DCG with those folks is just an incredible franchise. So there's going to be a Harvard Business School case study on what he's done over there. So just think about this kind of strategically, in terms of the business units that they have over at DCG. So they have the venture group, which, you know, they're in some phenomenal companies. They're in most of the top companies in the entire industry, actually.

They have gray scale, which is the asset manager. Last time I checked they had north of, what, $6 billion under management, Bitcoin Investment Trust, I think 10 other products. So he's really a pioneer in this OTC trust for crypto asset space. So that's really compelling. They have Genesis, which is the originally started as the trading desk. and is now doing lending and derivatives. So Genesis Capital or registered broker-dealer.

So really driving a lot of the capital markets activity in this space. And then they have Foundry, which is the mining business unit, which is brand new. And so if you just look at that and you say, well, what are they actually kind of missing? Like what else would you layer onto this? There's probably a few things you'd think of. But the biggest one would be just a retail deposit base. And so can they go out and just get retail users? and, you know, obviously with Genesis, the capital markets division, they can power all sorts of

stuff for these retail users now. They can power interest-bearing accounts. They can give you a cash loan. They can do all sorts of stuff. And so having that captive retail flow on top of the infrastructure that they've already built is just a crazy, crazy good idea. And not to mention the fact that Luno is in a lot of countries, right? So they already have kind of an entrenched user base. they have a bunch of employees internationally. So I think it's kind of a master stroke. Like people kind of look at Luna's like, hey, you know, maybe not a lot of people have heard of it or, you know, whatever. But like this is a missing component piece that really just adds to the enterprise value of the entire business, in my opinion.

So terms of the deal, not disclosed, but as you say, Luno quietly building a solid base of deposits, especially abroad, which is probably why they're not as well known here. but DCG does a lot of exchanges abroad. They have a global scope by their very nature. And that's the nature of the industry. It is a global industry, first and foremost. You know, as we said to start the episode, the USA is a big part of it, but there's a huge number of countries in, you know,

Eastern Europe, Southeast Asia, Africa, Latin America, all over the map, hot spots. I can't wait to see what this looks like as a public company. The other deal this week was linear finance, which is a cross-chain-compatible, decentralized asset protocol for trading and managing synthetic assets. And they raised $1.8 million in a seed round from NGC Ventures, hashed CMS, Genesis Block, kinetic capital, Alameda, a whole bunch of funds. so the D5 venture deals keep rolling in.

That's a party round if I've ever seen one. Big time, yeah. And some good party participants on there. Oh, yeah. I wore my CMS sweatshirt to the beach this weekend. You know, I don't have one, so I don't know what's going on there. I was wearing my hat and my CMS sweatshirt. I was waiting for people to ask me about like Salana or something, or FTT.

No one did, though. Give it time. I got a call from a journalist about sushi swap today. Oh, are we going to talk about sushi swap? Let's do it. I don't know, but it's on the brink of getting into mainstream finance. So just be aware. Well, now I feel like you have to tee it up and explain what it is.

Did we talk about it before on the show? No. Well, here's the TLDR, I guess. there's uniswap, which has no tokens, just contracts that exist on Ethereum to trade, effectively swap tokens, automated market maker. Then I think it was actually Larry Sermak at the block who had this kind of idle thought, and he suggested forking Uniswap, adding in a token to kind of encourage people to use it because Uniswap didn't have a token.

So it's kind of an inversion of what you had before, where you had protocols, that were with maybe a pre-mine and then there was a fork to eliminate that kind of rent seeking or run extraction. This is the opposite. You had something which was completely free of any intermediation and then a founding team forked in a token. So it's kind of interesting to see that happening in that direction. And so it was effective a clone of uniswap with some, you know, with a token with some alternative token economics. designed to kind of siphon liquidity from uniswop, so it was pretty adversarial. And then I guess the guy behind it, who's a pseudonymous guy, abruptly left and sold off the

Founders Reserve, which was denominated in sushi's four ether, which caused an enormous stir. But that wasn't the end of the story by any means. then Sam from Alameda took it under its wing and sort of gained control over the project and then decided to hold a vote effectively on social media almost for the new set of kind of keyholders who would, you know, collaboratively manage the funds, which is one of the craziest things I've ever seen because we're talking about, you know, close to a billion dollars worth of funds that are being trusted to people on the basis of their kind of Twitter reputations. And as of today, Sushi Swap is live and appeared for brief moments at least to be more liquid than Uniswap. I don't know if that's going to last. But this wasn't actually to Uniswap's detriment. Uniswap is more liquidity today than it did before Sushi Swap actually came into an existence. So it's a really weird 2 plus 2 equals 5 situation where somehow the inclusion of a competitor actually made Uniswap better off too.

So the particular journalist that called me today asked me who the losers were in this situation and I didn't have an answer because it seems like somehow everyone was pretty much a winner here. Aside from maybe the pseudonymous developer who sort of sacrificed his reputation for $13 million, but it seems like he might have been a winner too, you know. I mean, he has $13 million. Yeah, he won. He lost one reputation. He gained $13 million.

I don't know if I'd make that trade, but it seemed to work out for him. Well, this is the part of the podcast where we just express empathy for anyone who, you know, might not be deep in the crypto space. That was a lot. Yeah, but so, you know, I think the mainstream press is now kind of getting attenuated to this. And they're trying to figure it out, too. So this is now the way we're, we're going to. going to be represented out to the wider world through the lens of sushi swan. Yeah. So what's your take on just how defensible some of these projects are? I mean, one of the big questions that I talked about with

Avichel and Curtis from Electric Capital this week was just, you know, can you have network effects on just purely open source software if it's not competing to be money? I mean, if these things, some of these things in defy are just going to get forked at infinitum. Yeah. So, I'm probably in the middle of the road on that discussion. I mean, there's some takes out there that there's no possibility for value capture in D5 because anything good will be forked until all intermediation is gone and all of those corporate margins are expressed in the form of consumer surplus, which is kind of the promise of the industry, honestly. And that's maybe the interesting thing. That said, and while I do find that to be quite compelling, and sushi is maybe a good example of that,

there's also some barriers to entry, I would say primarily in the form of credibility and security, which you can't just copy and paste. So, you know, auditability is key. We've seen some of these forks fail catastrophically where a certain parameter was changed, but that actually introduced a vulnerability. BZX would be a good example. So getting audits done is pretty expensive. So I think that is one vera to entry.

Unless you're literally doing a carbon copy of some existing contract, you're not changing anything. The moment you change anything, you probably have to get the whole system re-audited. So that might be one of the inhibitors to this complete radical free market system where no value capture is possible. The other thing would just be credibility. I mean, you look at stuff like Maker and Compound. Anyone could have forked them at this point, but they're, you know, fairly intricate systems. And they've been running for a while now, and people seem to trust them. So that's a domain where I think you have some momentum.

There is some social value there, right? Because people know who's behind some of these projects and they actually trust the people. And so there's some value there. I don't know how you quantify it. Yeah. If you look at Maker, for instance, the fact that they have, you know, well-heeled backers is actually part of the security model for the system, right? Because Maker became insolvent after, I don't know if you call it an exploit,

but after things went pretty badly wrong in March, and it was effectively the funds that owned a lot of Maker that backstop that system and acted as the buyer of the last resort and bought that new issuance of Maker to return the system to solvency. So in the more complex systems like that, having capital behind the system actually is part of the security model. So that's something that can easily be forked. What's your take when people ask you about what's going on in defy right now as compared to the ICO craziness and whether or not the SEC is going to have something to say about these tokens and whether or not some of them were going to be unregistered securities offerings? Well, undoubtedly the SEC is going to have someone to say, probably sooner rather than later.

And also undoubtedly, a lot of these things are securities and there are nexus of control that will reveal themselves. So there's a lot of decentralization theater going on, maybe less than in the ICO bubble, but there is still elements of that. I would say the distinction is that now we're not talking about brand new base layer chains being created, although that is still happening to a certain extent, but it's more collections of contracts, which maybe have some cash flow associated with them, and then the token is potentially an entitlement to that cash flow and maybe control rights over the whole system. So we've moved on from very nebulous theories, value cruel, like, hey, I'm making digital real estate and I'm going to hopefully populate it with, you know, a thriving, you know, cosmopolitan digital city. That was kind of the ICO idea, you know, kind of selling plots of land in the desert and claiming you're going to build a city there. Whereas now it's, hey, I've already built a whole set of.

contracts, they have cash flows associated with them. I'm going to sell you a portion of those cash flows. Maybe I'm not even going to sell it to you. I'm just going to do effectively a fair launch. And, you know, so I think that's, you know, the latter is much more straightforward. It's easier to understand. You don't need to invent fanciful theories of valuation in order to reason about it. You can actually reason about it in much the same ways you reason about other capital generating assets. It's just that when I see the price to earnings analysis of some of these things and I see P ratios of 20 or 30, people compare that to equities, I think there's enormous disanalogies because, again, there's not the stickiness or the persistence of earnings that you see

in equities because these things can be copy-pasted. They can be forked. Yeah, some really good points there. I mean, when I compare this to the ICAO craze, as you said, a lot of these things were just selling something that didn't exist, selling a plot of land in the desert and saying you're going to build a city. This is really different in some cases because the technology exists. And I guess the other thing that really makes it interesting, and I'm going to be curious to see how this is analyzed by the regulators is you can imagine, and some of these systems don't really have a sale at all. And they launch a network and then the community at some later point decides to grant like a founder's reward. So you could imagine something like

yams, which the people that put that into the wild, as far as I know, didn't make any money. But at some point in the future, who's to say that the community doesn't vote to say, you know, 1% of this network goes to the founders who put this into the wild or something? And I'm just throwing yams out there as a representative example. But if that happens, like is that a security? Probably, probably not. I don't know. It's hard to say in that instance. but it's certainly we're seeing a lot of there's nothing new under the sun a lot of what's happening people might falsely believe that it's completely new but it reminds me of the era of fair launch proof of work coins from kind of 2013 to 2016 and there was some a bit earlier than that

where you know someone who just release some code on Bitcoin talk they would say start mining on X-Date and it would just be a you know a mad rush to get those first hashes in and sometimes there was a covert pre-mine and sometimes there was a crippled mining software which gave the developers a big advantage sometimes there was a weird insta-mine where if you were mining the first 24 hours you had a big advantage so some of these scandals were seeing around fair launches where the fairness of the launch is questionable. We've seen kind of the same thing in the proof of work fair launch era. So it's really funny that we've kind of come full circle. But I do like fair launches. I think they make a lot of sense and potentially their way to

avoid the glare of securities regulator. We should link to the in the show notes to your master's thesis because you dug into a bunch of these. That's actually how I met you is that Chris Berniske sent me the write-up that you did. And you looked at, as you were talking about this reminding you, I was thinking about what was the predecessor to Monaro again? Bytecoin.

They had some of these dynamics too, actually. Yeah, actually, the Minera story is quite analogous to sushi, believe it or not. It is. So the Bitcoin developers did a covert preamon, which they tried to backdate, actually, and claimed that they had been in existence since 2012.

They claimed this in 2014, and then people looked around and said, hey, no, this didn't exist. This blockchain just didn't exist in 2012. So they tried to disguise like a colossal pre-mine by doing that. Then there was a, sound familiar, there was a community effort

to do a fair relaunch of bike coin. Sound familiar? And then here's another sound familiar moment. The guy who did that, this guy, thankful underscore 4, underscore, today who launched what became Minero he called a bit Minero was kind of this like domineering guy who nobody liked and he got kicked out by the community and and replaced kind of like sushi swap maybe without the kind of exit scam element and so we've seen all this before and then you know

minero is kind of a thriving project you know still still going today but it took some effort to take it from this code base that was associated with effectively a scam to, you know, there was definitely some questions around Monaro's actual launch to get it to a more community-owned project over time. Yeah, I mean, we've seen this stuff before. I think there's a lot of really interesting history that people are missing out on. Maybe we should do an episode where we just talk about those early fair launch projects because there's so much interesting stuff in there. I think we could go through a bunch of them, right? Because Dash had a huge pre-mine, right?

Yeah, Dash had the InstaMine, which was really infamous. And much like, I would say, curve, again, so many historical analogies. Dash had an Instamine and something like 2 million Dash were released in the first 48 hours, quote unquote, by accident. Probably not an accident. And after that, the Dash community, which already owned Dash, they'll like, screw it. Let's just keep going on this chain. We can't restart it. Somewhat like Curve, their launch was botched in a certain way.

Maybe not at the same magnitude. But then the curve community was like, well, we've done the launch. Why don't we just like, we might as well keep doing it now. It's the same, it's like same scenario. So crazy. You only get one shot to do one of these big fair launches. And if you screw it up, some people will say you should just do it over, but actually what tends to happen is at that point everyone's a stakeholder in the new launch, right?

So they just, they stick with it. There really needs to be a blockchain archaeology podcast here that we do at some point. Yeah, I want to get someone who's like a real expert on this stuff, someone that did a bunch of speculative mining back in the day. I mean, you know, I wasn't myself much of a miner. I paid attention to it. But if you're out there, DM us. You know, come on the show, come and talk about it.

All right. So I think that's just about it for the week. You know how I love ending these with recommendations on rival podcasts and other content. I will leave you with this. Alex Leashman's appearance on Real Vision, very worthwhile watch. Alex is the founder and CEO and CTO of River Financial. Yeah, the Real Vision, Raoul Powell keeps talking about how he's way. overweight Bitcoin in his portfolio.

He's a good ally. He's a good friend of the cause. Oh, yeah. And Real Vision is becoming decidedly more crypto-focused, dare I say. Who knows, you might even see me on there in the very near future. Yes, I can't wait for that. I'm a subscriber. I actually, I think their app is awesome.

You can look at things on 2X speed, which is definitely my style. I listen to podcasts at somewhere between one point. 5 and 2x depending on how I'm feeling and you can do that for video on the real vision app the thing I like is that they put the questions in the kind of scroll area of the video so you can actually see what topics are discussed at what point it's actually very well produced overall shout out to real vision for good yeah it's really well done so Alex was on that we already mentioned the what bitcoin did podcast but that was a really good episode so we'll talk about it again yeah and you said that that you listen on, I was trying to listen on 1.5x. I can't really handle anything faster than that.

But listening to Vitalik on 1.5x was breaking my brain. So I just let it back down to one. That was one too. And when Andrew Poelstra starts to talk, you're just like, man, this guy is so freaking smart. What I like is that they were kind of mutually respectful about each other's blockchains, even though clearly they wildly disagree on how to architect a blockchain. And You could kind of tell that Vitalik was like, man, these guys are so conservative in their blockchain architecture. At one point, he said, you know, like in terms of scalability improvements, we're looking for 100x improvement.

And I could almost feel Poelstra and Tadj like cringing at that. You know, like we'd like to eke out a very small efficiency and not sacrifice a single ounce of safety. Yeah, that was really telling. the whole thing about Schnor and kind of why that's taken so long was really interesting. Sometimes we'll see these guys around Boston

and when I see like Taj driving his bike or whatever it's kind of like seeing Tom Brady. He's like such an influential developer in the community and it kind of walks down the street and no one recognizes them. Yeah, it's like I kind of feel like prodding pedestrians be like, hey, like you know that guy invented the Lightning Network, right? like hello like Andrew Palisstra walks up here and he does like a seminar at Boston Bit

Devs and it's like this guy is like a major league celebrity here does anyone like want his autograph yeah I I do I remember when I first met him actually I was totally starstruck and I I rattled off how much I liked his his treaties on Alcoins which is actually a really great paper and he was really impressed that I'd read that and I you know not to tube my own horn or anything. But yeah, Andrew should come on the show. We're way overdue. I think we'd have a great, great conversation with him. Yeah, he's really good at explaining very complicated things in an easy to understand kind of human readable format. The ones he's done on Peter McCormack show, crack me up so much because the whole thing is Andrew explaining, you know, really complex topics.

And Peter is just dumbfounded the whole time, just like, and it. it turns into kind of a joke by the end of the episode, but I just love those episodes. They are so funny. Peter's a lot smarter than he portrays in those episodes. I think he does a really good job of getting it to a level where people can understand. He really teases out a lot of nuance just with the self-deprecating way that he does it. Yeah,

that's what people don't understand about Peter. It's much more subtle than people think. Well, I'm looking forward to when we can do in-person Boston bit devs again. Yeah, we really need to restart that, actually. maybe we can do it sooner rather than later actually maybe before the end of the year jp morgan just sent their trading desk back to work today we're we're in an office yeah let's uh let's get things resumed you know let's let's open back up dare i say all right you heard it there i mean just open it up let it rip all right so what's up for next week

on the podcast so we have another crypto lawyer coming on the show that's actually becoming somewhat of a fixture on this show getting the crypto lawyers on. We've had quite a few at this point. But I just, I like making them explain securities law to me every time. But I don't know. They always have good things to save. So we've got Gabriel Shapiro on, also known as Lex Node. And Gabriel is very interesting.

He's very strong opinions on stuff. If you follow him on Twitter, you'll know that for sure. He's kind of caught between enthusiasm, for the industry and then also feeling pretty skeptical about it, which is great. I love people like that. So really pumped to release this episode. I'm looking forward to that. If you're a lawyer right now and you know a lot about blockchain and crypto, then you're

probably doing really well. Oh, yeah. The other thing that this industry really needs that people are doing really well is just business development. So if you know financial services and you know blockchains, you can do really well right now. Yeah. Like a half dozen of our startups right now are hiring BD people. So if you are a high-powered BD person, please get in touch.

There's jobs. Yes, please do. And if you're a private blockchain person, just forget we said that. Yeah. No soup for you. But if you like the public chains and you know financial services, there are a lot of jobs out there. I don't think people even need to be convinced that it's about the public chains anymore. Like, are there still holdouts on the private chains?

private blockchain side of the fence? Yeah, I think you're right. I think it's kind of coming around. I was talking to someone today who is in a non-financial services industry, and they were telling me that people are starting to get really excited about blockchains, but it's all these like consortium chains. This was like an agriculture guy. And I was like, yeah, I've been there.

It's like, that's like five years ago for the banks that were all spending time on the, you know, like. That's a 2015 era talking point. We moved on. Financial services moved on. That was just because, you know, Fidelity and a bunch of other firms started to build out that infrastructure and it was clear that the private stuff wasn't working. Well, the NFL is about to start. So I think that's our cue to wrap it up.

That's our cue to wrap. We will see you next week. Everyone have a great weekend.