On The Brink with Castle Island - Weekly Roundup 07/16/21 (New mining data, Shapeshift decentralizes, are clay tablets proto blockchains?) (EP.230)

Episode Date: July 16, 2021

Nic and Matt are back for a sideways week. In this episode:  BlockFi's credit card comes out How mesopotamian clay tablets are blockchains Cambridge releases new data regarding bitcoin mining distribution Shapeshift decentralizes itself Can corporations successfully decentralize? Elizabeth Warren writes a letter to the SEC Larry Fink sees little demand for crypto Sponsor notes: This episode is brought to you by Withum, a top 25 accounting firm with a cutting-edge Digital Currency and Blockchain Technology practice. Wherever your company is at, from pre-seed to IPO, we have tailored solutions just for you. To learn what our advisory, tax and audit services can do for you, visit withum.com/crypto.

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 Concentive 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. Welcome to On the Brink. I'm Matt Walsh. And I'm Nick Carter. And this episode is brought to you by Witham. Witham is a top 25 accounting firm, and they have a cutting edge digital currency and blockchain technology practice. Wherever your company is, from a stage perspective, from pre-seed to IPO, they've tailored solutions just for you. Witham has helped some of the largest companies in the crypto industry with audit, tax, and advisory needs.

and they've also helped a number of Castle Island portfolio companies. So to learn more about their advisory, audit, and tax services, head over to on the brink. dot link forward slash with them. That's on the brink. dot link forward slash with them. And you can't underestimate how important it is to have accountants that actually know what they're talking about

and the with them people do. So glad to have them as part of the pod. Totally. Thank you for sponsoring. Not the most exciting week this week, you know, not that much happened. Some are doldrums a little bit, huh? Just prices going sideways.

But you got your BlockFi card, so that's good. You can go out and buy a bunch of stuff. Yeah, so I don't know if you can hear this. I hear it. But that's the BlockFi envelope thing that the card came in, which I must say is extremely slick. It's very cool and satisfying. So I got the card.

It's got a blue trim. to it. Very nice. Heavy. It's metal. Metal. Yeah. Metal. So that's how you know, you know, weight, metal, value. It's all related. I've been using this a lot, obviously, and I've had three or four people at the cash register ask me what it is.

Really? Yeah. I think the customer conversion just from cashiers seeing it and saying, well, I need some Bitcoin. That's a, yeah. I mean, that's an opportunity to jump into the history of money. Our story begins on the Isle of Yap. Okay. Ever heard about Rye Stones?

Actually, my new version of that is talking about Mesopotamian clay tablets. Oh, all right. Have I given you the spiel yet? No, all right. Hit me with that. Oh, man, this is great, especially because it's a slow newsweek, so we actually know that much to talk about. So basically, I have this theory that Mesopotamian clay tablets were the first

blockchain. Okay, because they were out in the open and they just have ingramed. ravings every time there's a debit or credit. Is that the idea? Well, kind of. It's sort of on the right track. So 3,000 BC, you're in the city of Err. You want to establish some economic relationship with your neighbor who, you know, owes you, let's say he owes you a few bushels of barley and you want everyone to know so that he pays you back, I guess. So you get your read from the river. and you inscribe this, you know, you press it into the clay tablet and then the clay tablet

dries in the sun. And then now you have this, you know, codified, formalized economic relationship that's immutable and can't be reversed, can't be repealed because the tablet went from this malleable wet thing to a sun-hardened tablet, which is going to last eons. That's, yeah. So, and now if you put that ledger, I don't know if they actually. actually did this in ancient Mesopotam. I need to look into it. If you take this ledger full of accounting symbols, because that's what, you know, Cuneiform was originally developed was for accounting before it was all about writing. It was, you know, financial and nature first. And then came the

generalized writing. Now, if you take that tablet and you put it in the center of town, now that it's a shared ledger, that's a shared immutable ledger of, you know, so you see kind of what I'm getting at here? And I'm sure there's just some clown who, was saying we need bigger tablets. This is not scalable. We got to make these things bigger. Well, we need more complex. We need more base layer complexity.

We got to add it to the reads. These things are not expressive enough. We need to introduce more ability. Smart tablets. Smarter tablets here. Anyway, so basically clay tablets in Mesopotamia were the original blockchains. All right.

Let's go. Let's get a medium post up and running. I think that could go viral. I'm sure someone has pointed this out before. I can't be the only one. But this is like my new thing, basically. Well, despite the kind of slow summer week here, Castle Island crew was busy.

So you were on CNBC. Ria just did a business insider panel. This is a, and I did a little Boston Globe talk. So this has been a busy week for us at least. Yeah. The globe is paywalled, but I've patented paywall busting technology. You said some pretty harsh things about Dogecoin. This is not a coordinated bashing of Doge, though.

You went on CNBC and you just dunked all over Dogecoin today. Yeah, well, you know, the thing is, so you go on TV, the producer reaches out and they say, hey, do you want to come on TV and talk about X? And then you actually go on TV and they ask you about why. So in between the time of them wanting to talk about X and then your time of your appearance, something new happens. And they ask you about the new thing. And then all the talking points you had prepared to like sound smart and, you know, calm and collected on TV, go completely out the window. So that's what happened to me this time.

They asked me about Dogecoin again. People care a lot about Dogecorn for some reason. I don't get it. That's like the third time I've been asked about Dochequin on one of these TV appearances. I mean, how much is there to say about it? In this case, they're talking about Jackson Palmer who had some sort of vitriolic, like dripping with hate, diatribe against the crypto industry. It's given him so much, you know, and yet all he does is take and take. He doesn't give back.

Yeah, I don't really have the appetite to spend too many cycles thinking about Jackson Palmer, to be honest with you. And like, you know, so in one sense, like, Dogecoin is a very successful joke on Bitcoiners because it, you know, got so much attention and, you know, it's a parody of Bitcoin, but it also got so big. So it makes Bitcoin look stupid because it's just like completely soulless and empty thing. So it makes Bitcoin look solace. So I get the joke. It's funny. But also the joke is definitely on Jackson because he didn't pre-mine Dogecoin. I mean, he should have, but he didn't make any money from it. And so. But he's got a ton of notoriety. And every day he's reminded Dogecoin is this multi, you know, decadillion market cap. Every day he's reminded of what could have been. So like really the joke is on him. Yeah, that's a good point. That's a good point.

Look, I would normally, I'm much nicer, but, you know, he really came at us with a very cruel and tough thread, which I thought was deeply unfair. Yeah, you can't do that. Can't do that. All right. Let's get into some deals. There are so many deals this week. I mean, do you remember when we started this newsletter thing that we do when we're still at Fidelity?

It was there was like three deals a week. This was like 2016. Maybe there would be some weeks with no deals. There's like 15 deals this week. There's so many deals. Well, I don't want to expose myself, but I've never written the newsletter. You have always done the newsletter. I hate to actually admit that.

Yeah, well, I don't even know if people know that there is a newsletter. Oh, yeah. Those are news. So this, probably most of our listeners don't know that this podcast is actually just the audio version of the newsletter. This podcast is based on a newsletter. It's a lot more witty and there's more banter. But there is a newsletter. You can head over to our website, Kessel Island.V.C. and scroll to the bottom. And there's a sign-up sheet. So you can be on that. Yeah. Honestly, it's a great newsletter. It's one of the only ones I read. Yeah, you know, actually, I want to give a shout out to one of our listeners because we got some good, feedback on the podcast recently. So Sal, you know, you are, said that he thought we'd reached the all-time high in terms of, you know, wittiness and quality of discourse on this

podcast. So I was very, I was very touched by that. I think he was, that was the episode we were talking about my fence of all things. Yeah. I also got some feedback that I left a comment in the episode, which I forgot to edit out, which was really harsh towards a project, which I won't name. And that was totally my mistake. I did actually mean to edit that out, but I left it in. Oh, all right. Well, maybe we'll delete that one. I get people. No one else, no one really complained. So yeah, I guess. So there is a newsletter. You can subscribe at our website. The newsletter gives us a guide, but I guess we have to inject some levity into it too. Well, there is just a ton of deals in that newsletter this week. So the

The first one is Buenbit. This is an Argentinian crypto exchange. They raised $11 million from Libertas, Galaxy, FJ Labs, and Amaya management. Next up we have Clipper, decentralized exchange. There is $21 million from Polychains, Xerox Labs, Defi Lines, and Meta Cartel Dow. These Dow's, these Dows are getting active. More on Dows later. Also, the Clipper is kind of a cool name.

Clipper chip. That reminds me of Clipper Chip. Yeah. I've been refreshing the history of that period. So I just interviewed Adam back this morning for conference, which would be really, really great for the square, the B-word conference that's coming up. Blockchain. And so I think it's for Bitcoin, if I'm not mistaken. And I just did all this reading about hash-cash and the, what were they called the crypto wars?

Yeah, Crypto Wars. The first Crypto Wars. I mean, we got some more crypto wars coming up here in a sec. People need to go read the book. It's called Crypto by Stephen Levy. It's just so good. We talk about it a lot on this podcast, actually. You have it.

I've got it. Do you have one? Yeah, I think it mine's behind me as well. I have one. I have an update. You guys can't see it, but I have one of the Bitcoin Sign Gays signs, by the way. So one of 21. Looks great.

Not that. Yeah. We'll see. It made an appearance on CNB. today. So Adam Back was like very involved in this. He printed on a t-shirt, the code to

PGP, I think, was it? Well, so Phil Zimmerman also was, I mean, obviously Phil Zimmerman came up with PGP. I think he was sued, right, by some arm of the government. Yeah, because the cryptography was regulated

as a munition at that point. And so the whole premise of putting it on a t-shirt was that you could leave the country with it, whereas if you sent it any other way, you'd be breaking the law. And I guess they were breaking the law technically to just have it on a t-shirt and fly out of the country. But it's absolutely wild to think about that time period where cryptography itself was regulated. Yeah. I mean, I might get a little heat for saying this. That actually reminds me of the 3D printing war that's happening right now where what the government is interpreting or

certain members of the government are interpreting as a gun is literally coordinates. So kind of the same concept. It's crazy to think that math itself was so protected. And I guess the other interesting thing is that compute power just wasn't as sophisticated back then. And so the government itself was really the only entity that could sufficiently crack some of these ciphers. And so there's just a tremendous power there. And so you had private sector actors. is building cryptography that was just a lot less sophisticated because the government, you know, didn't allow them to advance that level of sophistication. It's all in that book, crypto, which is fantastic. Yeah, and if I'm not misremembering, I believe public key cryptography was really

first invented in the kind of military government complex and then in parallel discovered by the academic kind of private sector. And so you initially had it for, you know, a good portion of the 70s, public key cryptography was just known only to the NSA. And then I think academia sort of independently discovered it. So the government kind of had a lead time on this, which makes you wonder, like, what else cryptographically do they know that we don't know? Like, where are they on quantum computing, you know? Right. I mean, yeah, you had Whit Diffy, basically. and a number of others that he collaborated with that were really pioneers of the public key cryptography movement along with Martin Hellman, I believe, and also obviously Ralph Merkel.

But yeah, it does call into question what technology out there does the government have access to right now that the private sector doesn't or may independently verify? How about those aliens? Maybe that's, you know, maybe that's just like the U.S. or Chinese government, you know, this is now a conspiracy theory podcast. Yeah, I mean, there's a lot of overlap between Bitcoin podcast and aliens. Pomp is always really obsessed with the alien question. I mean, my question is, what do you make of the Bitcoin Lab League hypothesis, that Bitcoin was actually an NSA project and then it's just somehow leaked? I mean, I definitely think that there's a possibility that, you know, if you just look at the number of people that realistically could have created Bitcoin, it's probably.

probably it's probably a small list. I mean, it's probably less than 10 people. And what are the chances that, you know, there's like five or six or 10 other people that are in the NSA that no one's ever heard of that could have done it? Yeah, I could buy it. I mean, what would the impetus be? Would it be that the government was sophisticated enough in playing 4D chess and thinking that at some point the dollar is going to die and we need Bitcoin or something? And so let's create it and we'll have all Satoshi's coins. Is that the theory? No, my theory doesn't go as deep as that. It's just simply that it was invented as a side project by the NSA, and then an NSA employee went rogue and was like, this is too good to keep secret and just released it pseudonymously. So that's my Bitcoin lab leak hypothesis. It's, I mean, it's not the craziest thing I've ever heard.

So the thing that just freaks me out is if you look at the Adam back 2002 hash cash cash paper, he specifically said, this would be one way to create a decentralization to work could the way die be money proposal, which architecturally is very, very similar to Bitcoin. So literally all the pieces were there in 2002. Yeah. And like technologically, all the pieces were there. And P2P existed, BitTorin existed. Everything was there. Yeah. Yeah. This was a, there's a great paper. I wish I remembered the name of it, but it talks about the academic roots of Bitcoin and Ethereum, and all of the disparate technologies that had to be put together over time. And public,

private key cryptography was obviously a big part of that. But you're talking about the genius of Satoshi is just taking things that existed and combining them in a really interesting way, is kind of what I think the major genius was. The Nuranan paper. Yeah. That's a great paper. I mean, I think, so I asked Adam, you know, what did it,

what was the incremental innovation? Like, what did it take to make Bitcoin from all these conceptual tools? And he said the difficulty adjustment. Yeah, the difficulty adjustment. That was the biggest problem is they couldn't figure out how to control the inflation of, you know, hash cash cash, of computationally linked hash collisions that were the tokens in these systems, R-POW, hash-cash, things like that. And, of course, the difficulty adjustment took care of that.

So a lot of people credit that with being the stroke of brilliance that. distinguish Bitcoin. The difficulty adjustment I've found in just talking to people about Bitcoin over the years is people start to understand Bitcoin. There's a tendency, particularly with really smart people, to just try to figure out how to break it or at least point out the flaws in it. So there's this kind of evolution that you go through. And then you start to understand it more and more.

And then when people actually understand the difficulty adjustment, I think there's a light ball that goes off in a lot of people's mind around, okay, this is like way, more interesting than I thought it was. Yeah, I think it's the number one most elegant feature of Bitcoin. I mean, layering the fact that we just had the greatest downwards difficulty adjustment in the history of Bitcoin, I think it was literally the number one, which is just unbelievable to think about. I mean, 2021, this thing's existed for 12 years straight, and it's still like repairing itself, like a starfish, you know, like loses a, what do you call them, a star? tentacle. An appendage? You used to talk about tentacles with starfish? Well, they're definitely not

losing a star. Well, I don't know, a tying a leg. A leg. I mean, it didn't really seem that leg like. Anyway, it loses, you know, a verticy or whatever and grows back. But in the case of Bitcoin, it lost 55% of its body mass. Crazy. And it grew back. And freaking grew back. So speaking of the difficulty adjustment, there's some really, really interesting news this week, which was the Cambridge Center for Alternative Finance, came out with their new disclosures or their new aggregates regarding where mining occurs. And the data only runs through April of this year, but now we have a continuous data set from September 2019 to April this year. And interestingly, they show the Chinese hash rate, and you have to caveat this with

the fact that it's a smallish sample of overall hash rate from three, four pools that they used to get this data from. But I, you know, have reason to believe that it's an analysis which can be extrapolated to all of Bitcoin. They found that Chinese hash rate was down below 50% in April. That was before the crackdown. So China's market share was shrinking. The U.S.'s market share was 17% and undoubtedly much higher now. That's interesting. You've definitely, you've had a couple announcements over the past couple weeks here around some interesting installations in the United States. There was a nuclear energy announcement this week. I don't know how big of an installation that was, but starting to see this come online in a big way in the United States.

Yeah, I'm feeling very optimistic about the future of Bitcoin mining. First of all, we have these bottom-up disclosures from the Mining Council. Now we've got these pool level geographic data, which is telling us where it's going. If you look at those ex-China miners, the other big domiciles are Russia, Canada, Kazakhstan, Iran is quite material, probably state-subsidized mining, very interesting, Malaysia, and of course the USA. And so in the case of Canada and the USA and also parts of Russia, we're talking very sustainable, very green energy. So that whole picture continues to get better. All right.

Let's get back into some deals here. The next one up is So Rare. This is a blockchain-based fantasy soccer platform. They're reportedly in talks to raise $532 million in a round led by SoftBank. That's a monster round. Next up, we have Claystack. They're a crypto-staking protocol. They raise $5.2 million from Coin Fund, Parify, Coinbase Ventures, Solana, Anna Moka, and

others. Next one is Sertic. This is a blockchain security firm. they raised a $37 million series B, led by Koto and Shunway Capital. Then we have Axelar cross-chain interoperability protocol. There is 25 million from polychain, dragonfly, galaxy, North Island, fellow island fund, robot ventures and others. Like I've always said, if you're going to be on an island that's not the Castle Island, you're going to be on, you should be on the North Island. Next one up is Phantom.

This is a crypto wallet company. building on Solana. They raised $9 million from A16Z, variant jump, defy alliance, and the Salana Foundation. Then we have Connected an Ethereum-based interop network. They raised 12 million from 82 investors. Is that, am I reading that correctly? 82 investors, including 1KX, consensus, Coinbase ventures, Oakhs, and hashed. Next one, we mentioned this last week, I think during the middle of the podcast, this broke, but Far Peak Acquisition Corp, which is a SPAC that's run by Tom Farley, who's formerly the president of New York Stock Exchange, they have agreed to merge with the bullish exchange. And so bullish is the exchange that's formed by the team at Block 1,

which is, of course, the team behind EOS. So it looks like bullish has about $6 billion worth of crypto assets. This deal is a $9 billion deal. So it's suggesting that the company portions worth you know, three billion. I thought Frank Shapiro did a really interesting podcast yesterday with Tom Farley talking about how this will actually work. And it's a automated market making concept, but also has traditional market making on the exchange as well. This will be fascinating. I guess the launch is within the next six months or so. Yeah, I mean, one of the most curious deals, I think, I've encountered to date. It was kind of never clear what Block 1 was planning to do with the gigantic horde of Bitcoin.

I mean, going from, I mean, effectively bullish doesn't exist outside of maybe some alpha user. I've never really seen any evidence that, you know, it actually exists as a marketplace. So we're talking about a concept stage exchange spacking at $9 billion or, sort of an implied $3 billion valuation for the exchange itself. I mean, that is, that's, that's, that's, raise a lot of eyebrows, let's say that. Yeah, it'll be, uh, so you don't think this is what people had in mind when they invested in the EOS crowd sale.

It's just, and it's so interesting to see the twists in the tail here. I mean, you went from investing in Dan Larimer's, like a second or third project, third at the time, expecting, you. a new interesting smart contract platform. Now EOS has been forgotten. Dan Larimer is on his fourth or fifth now. And now Block 1 is more of a Bitcoin company. And they're launching an exchange that's spacking in American capital markets.

I mean, you can't make this stuff up. It's crazy. It's going to be, I can't wait to see this AMM concept brought to bear in this construct, though. Because if you, you know, I don't think that's a, there's issues with AMM. But in periods of high volatility, there's issues with traditional market making as well. And you'll have people pulling bids and offers left and right during market turmoil. And so theoretically here, you'll have this AMM construct to complement that traditional construct. So I think we'll see how it works in the wild.

But maybe this is something that can be brought to bear on other types of assets other than just crypto bear assets if it works. I will point out that AMMs are not a concept that is new, as in it's not something that we can solely credit, you know, defy or crypto people with pioneering. They have existed, at least conceptually, prior to the existence of crypto. It's just that because of the gas constraints, I would say initially on Ethereum, AMMs came to dominate. So I maybe questioned the assumption that they have a role to play in traditional. regular old order book exchanges. But we'll, we're going to find out. I mean, what about perps?

I think it would be interesting to see perps really brought to bear. Maybe those have existed too. I don't know, but I, I'm not aware of perps existing outside of the crypto space. Maybe they have existed as like contracts for different style instruments. So anyway, keep an eye on the bullish exchange. The SPAC is the far peak acquisition corp. also in deals nifties a nfti social media platform raised $10 million from coinbase ventures dapper labs Samsung next tops Polaroid polychain and Liberty City ventures

tops and polari what a group what a crowd that's great I love it did I tell you that I repatriated all my baseball cards have we talked about this what does repatriated mean exactly They were at my parents' house. Now they're with me again. Thousands of them. You've rescued them. I mean, I guess all these collectibles went through the moon. So is your collection worth a small fortune?

I just need the time to go through them. And, you know, when I was a kid, I'd be buying these things called Beckett's, these magazines. And I'd be going through and saying, yeah, this is in men condition. This is what this is worth. But now, obviously, you can just get these prices quickly and look on eBay and places like that. So I don't know. I think I've got thousands of cards. I mean, I've got like enough cards.

I don't know how to quantify it. I probably have tens of thousands of baseball cards. So you were just a natural born corner. I was ready for Bitcoin. Yeah. Scarce goods, dubiously scarce goods for decades. This is my Monday mornings, little known fact, used to be, I wake up in the morning.

That was trash day. Ride my bike around town, collect cans. and then take those cans to the Redemption Center, get like $17, something like that, and then just go buy baseball cards. Well, did it pay off? Did your young teenage solve, did your endeavors pay off in terms of the cards being worth a lot?

I mean, I would have been better off buying Bitcoin if that existed back then, but in the absence of another store of value asset, I'd say it'd probably paid off. I've got like a Barry Bonds rookie card. I've got a Derek Jeter rookie card. I've got some good stuff. I mean, otherwise, that money would have been

wasted. This is your life under unsound money. You have to resort to baseball cards for your savings. It's terrible. We'll see how it works out. Speaking of cards, the next one up is moment ranks. This is an NFT resource and engagement platform. They do a bunch of stuff in the Topshots ecosystem. They raised $1.7 million from Boston Seed, dapper permit ventures, and Azure Capital. Then we have block native, pretty well-known blockchain mental infrastructure. company giving people insights on funds in transit. They raised $12 million in a series A from row capital, robot ventures, autonomy, and others. And then the last one is a private equity deal. So LMAX, which is a big cryptocurrency exchange, they've sold a 30% stake to J.C. Flowers,

who's a prominent financial services focused PE investor for $300 million. A nice little billion dollar valuation there for LMAX. So we're actually kind of light on news this week. There's a couple items. Fidelity digital assets are good friends over there, increasing their staff by 70% in the coming months. Probably a good sign. I'm sure they'll have a lot of success recruiting from a bunch of these banks

who are increasing their staffs by 0% for crypto asset and blockchain things. If you want to actually go work on something and not a private blockchain boondoggle, Fidelity is probably the place to look. Speaking of banks that are getting into crypto, Grayscale has a partnership with BNI Mellon, BNYMellon to provide asset servicing and ETF services for the Grayscale Bitcoin Trust, not giving up hope on the ETF front just yet.

I'm starting to get a little bit more positive on that. I've been in the troth of disillusionment on ETFs, and maybe that's probably where I should stay, but it seems like there's some stuff happening. Is this just because we've been so despondent about it for so long now? We might as well just have a change of pace and be optimistic again? Yeah, I'm thinking there's any catalyzing your optimism. No, we're in the troth of disillusionment on it.

So now I think it's the time to go all in on it. Okay. I mean, yeah, I'm good. I remember to start the year, we were totally bullish on the ETF. And then, you know, nothing actually happened to kind of shatter our dreams, but we obviously continued to not get an ETF. The one catalyst, which I did see the professional ETF watchers, now if you don't follow these people, Eric Balcunis is really my guru on the ETF front.

He had this theory that basically the SEC is stuck in this political holding pattern over the ETF. They've been guided by higher ups to basically not approve it, which totally makes sense to me because all of the practical considerations have been met as far as I'm concerned. one thing that Eric thought could snap the SEC out of this holding pattern, paradoxically, would be Elizabeth Warren's letter to Gary Gensler. So Elizabeth Warren wrote this pretty pointed letter asking a bunch of tough questions of Gensler, basically suggesting the SEC has been remiss in their perceived obligation to sort of regulate and surveil the cryptospace.

and Eric was speculating that maybe this might actually catalyze the SEC to do something ETF-wise, believe it or not. That's interesting. I don't know. That seems like a jump in logic to me. I don't know if he would come out and say, here, you want to see me be harsh? Here's a Bitcoin ETF, but maybe. I mean, I don't understand the political dynamics at all. But, yeah, it'll be interesting to see him answer this letter.

at least. Gensler hasn't really done much in terms of crypto. We all expected him to be pretty active and we haven't seen much. I don't think they even mentioned it on their agenda, the SEC's agenda for the forthcoming year. So maybe it could go either way, but I think he's going to have to do something. Well, if you get a letter from Elizabeth Warren, is there an option to just ignore it? I don't know. I mean, maybe. I mean, does she have any formal power over him? maybe not. It's like, hey, you're not my boss. Maybe she is.

I don't know. I mean, she's one-fifieth his boss, right? Yeah, I mean, I don't know how much power she has behind the scenes there, but stop giving me a hard time. I've only been in the seat for a couple months here. Well, I guess the Senate approves the SEC commissioner, right? Yes. So she is in a very small way, his boss, not directly.

Work for the people. Elizabeth. Where are your constituents, Elizabeth, okay? Stop being so harsh on crypto. We thought you were anti-banks. Hello. You can't be anti-banks and anti-cryptos. That makes sense.

Yeah, it's just anti. Speaking of the SEC, so they announced, this is an interesting one, so they announced the settlement. It was a small settlement with an ICO promotion website called Coin Schedule. And it was only, I think it was 100K, 200-K type of settlement here. not on the scale of some of these big ICO projects. But, I mean, it makes a ton of sense, right?

You had these ICO websites that were just popping up, just shilling these tokens, and they were getting paid by the projects, paid to promote. And so it was clearly just pumping an unregistered securities offering. I'd never heard of coin schedule, but there's five or six that I have heard of and could rattle off off the top of my head. So I wonder if this is going to be part of a broader crackdown. I mean, I appreciate it. You know, they're actually implementing their anti-touting.

laws, which if actually enforced, would doom most of, you know, crypto Twitter, frankly, probably including me. But like, you know, they're also dragging their feet on this so much. I mean, the pacing is painfully, painfully slow. Yeah, it takes forever. All right. So I want to talk about this one. So ShapeShift, which people who are in the industry will know this company's been around forever, probably since 2014. So it's had various permutations over time. It was funded by Eric Voorhe's, well-known entrepreneur in the space, was at Bit Instant before he started ShapeShift. Bit Instant was Charlie Shrem's company. So ShapeShift is a, think of it as a brokerage, an exchange. I don't know what you want to call it,

but they were the ideal place to exchange tokens, not really peer-to-peer since they were in the middle. And so think about this as like Uniswap before Uniswap was possible, I guess, might be a good analogy. So you could trade any pair basically on ShapeShift. And of course, they ran into some regulatory issues with that in the sense that they didn't have MSBs. They weren't fully K-Y-Cing all of their customers. And so they decided to step out of that business. They kind of shut down the core product for a while. And then they have recently reintroduced it and they're building it on top of Thorchain, which is an interoperability protocol. The company announced this week that they're shutting down the company and they're going to completely decentralized

themselves out of business and they're going to turn themselves into a decentralized autonomous organization. And so this Dow is going to be formed by shape shift air dropping Fox tokens, which is the token for the platform. So they're going to take 340 million of these tokens, which is, you know, has the time of this writing, this podcast, I guess is worth about $100 million. And they're going to airdrop them onto anyone, any address that's ever used ShapeShift, along with a bunch of other platforms, including Thorchain itself, so people who use Thorchain. So I think that's just about it. What do you make of this story? Well, on the one hand, I'm sympathetic to this idea that people are increasingly believing that Daos are a new, fundamentally new organizing model for capital.

They will join the ranks of the firm in terms of the way we organize society. I'm not fully persuaded by it yet, but I'm sympathetic to that view. On the other hand, I don't exactly see how dissolving a corporation and airdropping a token to a bunch of people actually yields a result whereby you are resistant to regulation, decisions get made expediently, and this thing continued to. to run itself in functional manner. I don't exactly see how the issuance of a token kind of actually solves, I mean, a lot of these sort of business continuity questions.

So calling me a little skeptical on that, a little skeptical. Well, I mean, wouldn't this just be no different if it works, then this essentially would just be a uniswap competitor and it would run on, you know, public blockchain. And so I don't see any reason why that wouldn't work. It's not like Hayden Adams has the ability to just shut down uniswap, right? Well, uniswap is the gold standard in terms of something that's like truly autonomous, really just exists as code. You can choose to use it or not.

But, you know, the team can't really change the parameters of the system. They can't undeploy the old contract. They're to the absolute gold standard, you know, 0.1% most decentralized. I haven't actually looked into shapeshifts operations that closely, but I would be surprised if they were at a similar level of autonomy. My guess is that there's still going to be some corporate operations here. They're just not going to happen under this corporate wrapper. But corporate wrappers exist for a reason, which is to kind of shield you from individual liability if something goes wrong. So I kind of I would question if there are still corporate, you know, individual.

acting on behalf of ShapeShift to making decisions and things like that, I'd question the dissolution of the rapper. I mean, for me, at the end of the day, this just comes down to admin keys. And so understanding the setup of the system, there's no doubt it could work now. When Shapeshift was founded in 2014,

this just technically would not have been possible. But it is now, or it seems to be. And so to me, the big question on if this is actually a decentralized autonomous organization is what is the admin key set up? is there a setup that is kind of most appropriate in your mind i don't know that there's a sufficiently decentralized setup i i wonder if there's going to ever be a view on that from the cc around sufficient levels of decentralization in a in a setup but i mean what's the saying

around uh knowing if something is pornography like i know it if i see it i almost feel like it falls into that category where you know if you have like three people controlling the system and two of them used to work at ShapeShift, that's obviously not going to work. Yeah, I mean, do we even know decentralization when we see it? I feel like it's, you've got wartime decentralization and peacetime decentralization. Like in peacetime, in the happy case, when everything's going well, you can kind of do decentralization theater. And when something goes wrong, there's like some crisis, the points of centralization emerge. Yeah. Whether it's a theorem, whether it's a smart contract, whether it's Bitcoin,

frankly. When things go wrong, you need, you know, catalytic events and organizations to be decisive. And that's when you see these critical points of centralization emerge. Yeah. I mean, people, there are a lot of adversarial thinkers in the crypto space, especially in the Bitcoin side of it. And so you'd think about situations where, hey, what if there's like a, an armed, a terrorist transaction happening and the NSA needs to lean on someone to get some information. If the admin key is like two of three and you know who two of the people are, then it's a pretty good chance that system is going to go down, right? I'm not even sure multi-sig admin keys like really solve the key issue.

They just add opacity at that point to who's in control. And it's not like people don't like to collude. I mean, people love to collude all the time. I mean, that's what conspiracies are. You know, conspiracy is a group of people colluding. I mean, the oil market is dominated by collusion, right, at Cartel. So the fact that you need keyholders to collude to do bad things doesn't mean those bad things can't happen. Right.

So more to come on this. I think the admin key issue is going to become a very, very critical part of the debate. If you want to learn about it, we did write it. Me and Linda Jang wrote a paper about critical risk factors in defy. which I'm told has penetrated some of the highest regulatory bodies. So read my paper. It's on SSR and go check it out. Check it out. All right. Well, another one that caught my eye this week. So LPL Financial, which is, this is the largest independent broker dealer in the country. And a lot of people haven't heard of

LPL because, you know, typically the way that they go to market is just being behind a financial advisor. So you'll have a neighborhood financial advisor that has their own shingle and they're on the LPL financial platform. And so they have announced that the Bitwise 10 crypto index fund is now available on their platform, which you wouldn't make a big deal out of this if it was just any old ETF because new ETFs get added to the platform all the time, but doesn't happen a lot in crypto. So this is 17,000 financial advisors, trillion dollars in assets. So big step forward for sure for the industry.

And I think we'll see more of this to come. We'll see more funds listed. We'll see SMA platforms. So huge, huge opportunity. there in the advisor channel, in my opinion. Big, big congrats to BitWise for that. They are having a great year. One thing I wanted to mention was Jack Dorsey's recent tweet, which was pretty

interesting. He says, Square is starting a new business joining Cellar. I don't know what seller is. Cash App and Title focus on building an open developer platform with the sole goal of making an easy to create non-custodial, permissionless, and decentralized financial services our primary focus is hashtag Bitcoin. Its name is TBD. Interesting. So is this Bitcoin D5? What's what's going on here? It kind of looks like it might be. And I've always loved the idea of Square, because Square is all

about financial inclusion. They're very strong force for financial inclusion. No question. The cash app had very strong penetration in the American South, which is where you find most underbanked individuals in the U.S. And so the cash app is 100% of course for financial inclusion without having done anything Bitcoin like. But you can totally imagine a world where they start to layer enlightening payments into their, you know, maybe to Twitter, but certainly into their terminals to the payment processing functionality of Square.

I mean, there's just so many opportunities here. And Jack is really not messing around. He also says he wants to create a Bitcoin Harbor wallet. I mean, dude loves Bitcoin. That'll be awesome to see. I can't wait until both of these projects come to fruition. They're also doing Twitter. They're doing like a decentralization exercise there.

I wonder what's happening with that. Oh, blue sky. Yeah, the noise I've heard out of the blue sky camp is not a lot of progress. And frankly, I'm not surprised. I mean, is any incumbent ever going to disrupt themselves? has that ever happened? Self-disruption? Yeah, what is the...

Maybe we can ask this on Twitter is give us the best example of the innovator's dilemma being actually addressed and an incumbent actually reacting. Okay, so I like that. We'll do a challenge. So Brink Nation,

tell us what's the best example of self-disruption. Cannibalizing yourself. I don't know. Have we seen one in the cryptospace? It would be like if Coinbase somehow became a Dex or something. Yeah.

I mean, it would be something like a shape shift, although this is just a no-brainer because they probably fill in the regulatory heat. So it wasn't really a business decision as much as it was a necessity from regulatory perspective. We'll wrap up in a second here. So Larry Fink says he sees very little demand from BlackRock clients for crypto. What do you make of that? Well, I think it's probably because the clients know that every chance Larry Fink gets, he goes on CNBC and says that this is all just BS. And so I'm sure they're not saying, hey, can you hold my? Bitcoin for me. I'm sure they're walking down the street to Fidelity and opening up a

Fidelity custody account. So maybe it's just they're going somewhere else, Larry. Well, Larry, I think, is the number one Cantillon Insider, literally on the planet, because BlackRock, more than any other organization has been the beneficiary of the accommodative Federal Reserve policy that's caused these asset prices to inflate. And so, you know, I don't fault the guy for not seeing the reality of the system that's disrupting him. Yeah, I don't think that you should expect Larry to be the example here of the defiance of the innovator's dilemma.

I don't think that this will be the next crypto asset management powerhouse. Well, I think that wraps it up for the week. We will be back next week with hopefully a busier news week, although it's kind of summer doldrum season right now. So we need some big announcements. I'm sure we'll have some more deals. So get in our mentions on the Twitter sphere about the best example of the defiance of the Innovator's Dilemma. And we'll see you next week.