The Pomp Podcast - Marco Santori: The Godfather of Crypto Law

Episode Date: November 7, 2018

Marco Santori is the President and Chief Legal Officer of Blockchain, the easy way to send, receive, store, and trade digital currencies. In this conversation, Santori and Anthony Pompliano discuss what Santori's original conversations with federal regulators were like, how the SAFF Document became so popular, why ICOs have essentially disappeared in the U.S., and what Marco believes is the most view of crypto's potential impact on the world.

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. Marco Santori is the president and chief legal officer of blockchain, the easy way to send, receive, store, and trade digital currencies. In this conversation, we covered what his original conversations with federal regulators were like, how the SAF document became so popular, why ICOs have essentially disappeared in the US, and what Marco believes is the most optimistic view of crypto's potential impact on the world. I really enjoyed this conversation, and I hope you like it as well. This podcast is presented by BlockWorks Group,

the only blockchain event and media production company I trust. If you're an investor, lawyer, accountant, or entrepreneur, and want to attend exclusive events and dinners, visit them at blockworksgroup.io. I promise you won't be disappointed. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

Before we get into this episode, I want to give a quick shout out to one of our sponsors, Saluna is a blockchain computing company powered by its own renewable energy. The team is planning to build a 900 megawatt facility on top of a 37,000 acre location, one of the best wind sites in the world in southern Morocco. You'll hear more from them later in this episode, but I'd love if you could go check out their website. You can find them at saluna.io. All right, guys, I'm super excited about this episode. We've got Marco here.

you've been in crypto for a really long time and you've got all kinds of interesting perspectives so thank you so much for coming and sharing with us thanks for having me i'm glad to be here absolutely um all right so for those that don't know let's just go through a quick background on you and then we can talk about how how you originally got into crypto early on yeah happy to do it so my name is marco santori i'm the president chief legal officer at blockchain blockchain is the world's largest software platform for digital assets though you probably you probably know us because of the wallet you probably know us because we have almost 30 million wallets although today we may have actually crossed that mark but

um 30 million wallets all around the world we aren't like an exchange we're not like the custodial providers we are a place where you don't really go to speculate you go to actually use this stuff you go to to hold and buy to hold and send and actually um you know use functional cryptocurrencies got it um and so let's talk about pre-blockchain right so you're 2011 2012 originally discover crypto yeah 2012 late late 2012 i helped form a a currency trading fund for people who were they weren't doing anything interesting they were like shorting the euro or something and but at the end of the day you know they they joke with me and they say oh marco you know, ha, ha, ha, what we're really doing is trading crypto. Well, back then they just said

Bitcoin. Um, and back then it was, it was a joke. There really weren't that many people trading Bitcoin. Um, certainly not successfully. Um, but they referred a client to me who actually was, and that person referred somebody to me and that person referred somebody to me. And I started posting on Bitcoin talk. If you've ever been on, if you've ever been on Bitcoin talk, you can still see the tweets. They are, they are totally cringeworthy. It's, you know, hi, my name is marco santori and i'm a lawyer and i want to learn more about bitcoin um epic and and the word got out there was a lawyer uh there was a lawyer in bitcoin and uh well i then i was the chairman of the regulatory affairs committee for the bitcoin foundation back when that back when that was a

thing um i was the among the first team of i think five or six of us who went down to dc and explained to the federal government, this is Bitcoin. This is how it works. This is the blockchain. And we actually projected a copy of blockchain back then, blockchain.info up on the screen and took them through a transaction and said, this is a Bitcoin address. It has an associated private key, you know, and took them through the whole thing. And the look of wonder and confusion and disgust in some of these regulators and policymakers faces back in 2013 it's something that that has stuck with me for a long time but um after that i was a partner at pillsbury and a partner at cooley two global law firms where um at cooley i worked on the on

the saft project framework which we published with protocol labs um and then recently i i left private practice. I, I, I, I caught the virus as, as you like to say, and I went all in crypto and now I'm the chief legal officer at blockchain. So what's fascinating to me is in 2013, the federal government, right, is actually listening to private citizens describe a digital currency, what it is, how it works, what the advantages, disadvantages are, et cetera. And this is really before most people in crypto today even knew what this stuff was. So the federal government was actually pretty far ahead in terms of at least being aware and hearing about it. But it sounds like they weren't very receptive.

So they were listening, but maybe they weren't actually hearing what was going on. Well, so to start from the first principle, the U.S. was in 2013 and remains the farthest ahead on crypto policy almost anywhere in the world. And that's a crazy thing to hear. It's certainly a crazy thing for me to say because I can't say that about a lot of places in U.S. policy. But crypto is one of those places where the U.S. federal government got this stuff. understood the what this stuff can do and took reasonable approaches to it before any any government did and now we have japan with a license south korea considering a license um some some places some smaller countries geographically smaller have jumped ahead

because they can move faster right but here in the u.s we've got federal government plus we have 54 well 53 other sovereigns that we have to deal with um so things can move a little bit more slowly here um and it has it's been a long conversation but you know i i got i have to say so far the federal government has has not taken crazy positions uh on crypto yeah they've actually been very measured they've taken their time to understand this stuff and and uh especially when you compare them to you know china or other uh jurisdictions where you know one week they're banning something the next week they're not and just the uncertainty i think um is one thing Right. So if you don't know what the position is, that's a risk that you have to deal with.

But I think it's even worse when there is kind of the jarring or chaos of the regulation actually changing on a pretty consistent or frequent basis. Yeah, absolutely. And today, right, everyone's talking about the SEC and the CFTC. And I have my thoughts on on why that is and how that happened. But back in 2013, nobody nobody was talking about the SEC's involvement in crypto or the CFTC's involvement in crypto. And not just because, you know, certain internal champions in those agencies weren't there yet, but really because Bitcoin was just money and that's all there was. So what were people talking about? So they're not talking about securities. They're not talking about kind of all of the things that are being talked about today. What was that conversation? Was it just I want to understand and I'm a regulator and I want to understand this stuff?

Or was it some deeper conversation? There were two things that regulators were worried about. One, money laundering. They wanted to make sure that illicit activity wasn't happening on these financial networks and there weren't any black holes where the government didn't have visibility. The second thing was prudential concerns. They wanted to make sure that at the end of the day, your uncle or your aunt or whomever you were sending money to got their money.

Those are the two very different concerns under the law. The federal government mostly was concerned with preventing illicit activity, anti-money laundering. The states mostly don't play in that sandbox. They're not concerned with AML, with the exception of New York and maybe a little bit in Arizona. States are mostly concerned with making sure that the people who are supposed to get their money at the end of the day, like in the case of like MoneyGram or Western Union, get their money at the end of the day. so it was two very very different different concerns um competing against each other and of course crypto entrepreneurs caught in the middle absolutely and you know last question

about this but when you guys go down and you have these conversations there's probably some follow-up conversation or whatever and you guys leave what's the feeling among the pro crypto private citizens right is it man this is really depressing these people don't care is it frustration do you leave actually encouraged kind of what was that reaction to to those meetings and conversations it depends who you speak to the when when you're on social media and you're reading about the next thing happening in crypto in dc it always seems to be something yep but in reality nobody in dc is talking about crypto there's very few people there there's very few people who are concerned with it there are very few people um that uh that it's on the radar there

are staffers that are very deep in this stuff, but there's maybe a dozen of them on the Hill. There are great policy shops like Coin Center. There are new trade organizations forming, but as far as regulators and policymakers, well, I should say as far as policymakers go, like the legislature, right? Congress, not a whole lot of discussion about this stuff. There's a few different bills pending, but in the day to day, it's not very popular. Regulators though, there was a point there when, you know, half of some of these agencies resources were dedicated to making a statement in this industry. Do you think that the policymakers aren't focused on it because of like an opportunity cost? So there's just so much other things going on that this is so small

today compared to the other stuff? That's that's really all there is. I mean, over the last over the last few years, we've entered a period of political discourse in this country that is overshadowed so much of the rest of our public lives that um you know crypto hasn't been as high on the radar as it could have been and um okay so that's super interesting right because basically clients brought you bitcoin you start kind of understanding it etc what was the reaction inside of the law firms at the time right so the policymakers you know that i got that that's kind of a natural reaction from them. The law firms, you know, these are clients, right? You're supposed to be trying to help them accomplish their business goals and things like that. But are

there people in that law firm that are, you know, this stuff is illegal and we should not play in it? Was everyone pretty open-minded? What was that like? Maybe I was really lucky, but each of the three law firms that I worked at that had, where I had a crypto practice, were encouraging, encouraging supportive they wanted me to do more they were happy that i was out when i was you know when i was first starting out um in crypto they were kind of surprised that we now had like a fintech practice right we we went from litigating these laws to actually advising on them which is a jump that you know not all lawyers make um and then by the time i got to cooley i mean we had built one of the biggest practices in the industry um and it was sort of a thought leadership

practice in a lot of ways. And, and there were, there were risks around that. Um, and that, you know, people there, there are always people who don't want, who don't want to upset things who they don't want to upset the apple cart. But I got to tell you, there are very few of those in the law firms I worked at. And, and by the time I got the Cooley, we were, we were all just thrilled to be able to do this kind of work. Um, the kind of work that most lawyers never get to do. Absolutely. All right. So as you're kind of working through, you know, a couple of years there, ICOs, utility tokens, and eventually the SAFT all pop up because previously it had just been Bitcoin only, right? And so now we get to, oh, there's Bitcoin and there's this other stuff.

What's kind of your early experience with ICOs and the idea of a utility token or non-Bitcoin type, um you know assets you know back in 2013 we just called this stuff bitcoin 2.0 and there nobody was talking about crypto generally the cryptographers were not yet up in arms for losing their uh their their precious crypto namesake um to the to the cryptocurrency people the the thought was that maybe one day you'll be able to use Bitcoin for something other than money. That was, that was the baseline thought that, you know, you can, we call these entries in the blockchain, we call them Bitcoins, but are they UTXOs? You know, what are they? They're nothing. They're just entries that we, that we happen, that are

scarce and we happen to call them money. And there was a thought that one day it could be more than that. There was a thought that you could use these entries, you could call them something else. And And so the first one of the first implementations of that was something called colored coins, which is an unfortunate name, I think. But the idea being that you could color if you could imagine a coin, a physical coin, you could color it in purple. Right. After you take that out of the bag of coins and throw it back into the bag, you'd always be able to trace it no matter where it went. Those were no longer fungible, sort of non fungible coins. Now we call those NFTs, non fungible tokens when we implement them on Ethereum. But, um, back then that was still like sci-fi that, that was science fiction.

And there were some implementations of that, like, um, Matt, it was colored coins, master coin. Um, and what were people using the colored coins, right? So somebody comes up with, Hey, we should color the coins and, and kind of create these non-fungible, um, assets. But what was the thought process behind creating them? I think it was mostly experimentation. um these people didn't really know where the meets and bounds were they didn't know what this

was going to be what applications what use cases this was going to be good for so um the the the simple ability to do it was kind of mind-blowing yeah it's super interesting how uh some of these ideas already in a short you know five six year cycle have already kind of gone away and come back Right. So non fungible tokens being a prime example of, you know, it's popular in 2013, 2014. They go away. Then all of a sudden they come roaring back, backed by VCs, you know, and kind of now the new hot raging thing again. And maybe they're not as new as people kind of originally thought. All right. So let's talk about ICOs and the utility tokens. Right. So we go from the colored coins to eventually somebody says, hey, I'm going to create a new block chain that has differences or improvements to it.

and i'm going to raise capital for it via a new funding mechanism what is the the reaction there um you know from your perspective well i think the the fundamental innovation was that people realized it was more than just bitcoin and if you know people ask me why i think the price run-up of 2017 happened and i usually tell them i don't have a whole lot of thoughts on price i don't have a whole lot of thoughts on speculation. But this is one of those exceptions in that I do know why that run-up happened. And that's because people realized there was more to this than just Bitcoin. And that's not to diminish the impact of Bitcoin. It's to highlight the public perception around the industry. And so when people started to realize there was

more to this than just this one asset this this one money that people that some people preferred the government money for certain for certain applications um i think that expanded a lot of people's minds they started to realize oh my gosh this technology is actually really encompassing it could it could change almost everything that we do and um look it it sounds trite now but the introduction of smart contracts changed the way that people think about blockchains. It was no longer, blockchains were no longer just a vehicle for like libertarian money, right? They were a vehicle for implementing business logic in a trustless way. Um, and that meant a lot of different things that, for example, um, you know,

for example, creating tokenized assets, but also being to programmatic, but also being able to programmatically do things with those assets in a way that you never had to really trust some central intermediary. That brought the power of Bitcoin outside of just the world of money and into the world of, well, anything that has a value. Absolutely. And so where's the SAF come out of this, right? So does Protocol Labs come to you guys and say, we need some sort of standardized documentation in order to empower the funding of all this? Is this something where you guys are working with a single client and say, well, we need to make sure that we're really thoughtful about this. Kind of how does that originate from an idea and then eventually how you go and build

it? Well, Protocol Labs came to me as a client and I advised them on a number of different matters. And one of them was the sale of this instrument that people were using. We didn't invent it. People were using this thing called a SAFT, Simple Agreement for Future Tokens, which was, of course, just a simple agreement for future equity that somebody had held down control and pressed F and replaced equity with tokens. So originally, there's no there's really no innovation other than swapping out the word equity for token. That's it. That's the end of the conversation. No, we we saw this thing and we thought, wow, this is a lot of people are using this. And it's it's it's kind of toxic in a lot of ways.

If you look at this document there, it just didn't make a whole lot of operational sense in the way that people were using it. That said, we had this notion that maybe it could if we used it correctly. And so you have to understand the SAFT in context, well, the SAFT project in context. It was the first self-regulatory reaction to this rash of pre-functional token sales, which people colloquially called ICOs, initial coin offerings. People came up with a bigger and better Ethereum or a bigger and better Bitcoin, something they thought was going to be better than what's out there. And in order to raise money, what they were doing was just selling this very basic token, which was, if you're familiar with the expression, a can of trading sardines. It didn't actually do anything. The sardines weren't actually good for eating.

They were just good for trading. And so it gave rise to this speculative frenzy that when we looked at this, we thought, wow, there's actually investor protection risks involved in these pre-functional token sales. We think that these aren't just consumer goods. They're people that are buying these things for speculation. There's nothing wrong with that. But there are laws about people who are buying speculative goods that are reliant on the efforts of the issuer of that good. they're the securities laws and so the saft project uh well i should say this the saft framework generally says look you can use this very simple document you should negotiate it

it should include the additional investor protections that you want and that you should apportion risk but at the end of the day you should use it and sell it as a security because that's that's what the thing is when someone buys this document this saft um well they're buying it with the expectation of profit from the efforts of others, from the efforts of the issuer. And if you know in the United States, that is, of course, the Howey test for what is an investment contract

and therefore security. But then once those tokens work, once they actually are put to their intended purpose, once anyone who buys them is no longer reliant on the efforts of the person who issued it, well, I mean, there are risks there, but they're not investor risks, are they? They're, they're like the risks of someone who buys a used car. Like, yeah, maybe the engine doesn't work, but that's not because someone failed to expend

their efforts. And so you need disclosures around like their finances and like, who cares if Ford goes bankrupt next year? The question is, does my engine work? Um, and so there, there are consumer protection laws that you should apply at that point. So that, that, that was the, that was the breakdown of the, of the SAFT framework. And we released the SAFT project white paper, um, around this time last year and about a month later we stopped seeing icls in the united states the saft framework um for better or for worse became a market standard in the u.s yeah you've used a uh a terminology uh pre-functional token sale right or pre-functioning token sale um and my guess is you're using that in in a very intentional way because that describes a token um having to do

with the how we test and things compared to if i just go on you know a coinbase and buy bitcoin for example right where do regulators in the united states right now from your perspective shake out on the difference between that pre-functioning token and then the circulating or functioning token you know on a network i'd say like an ethereum today um where we are Yeah. So, um, after we released, after we published the white paper a month later, the ICO started to kind of trickle off and disappear. Um, and then a few months, well, several months after that, actually just, just this summer, um, the, uh, the director of the division of corporation finance at the SEC, um, gave a speech, which was not officially the SEC's

the SEC's position. It isn't law and it's, it's, it's not even binding on the SEC, but he said, look, there's been a lot of talk around what is and isn't a security in the world of crypto. Here's what I think personally. And what he said is important, but it's also important how he said it, right? And then he says, look, this isn't law, but look, realistically, the head of the director of the division of corporation finance is a pretty important guy. And it's up to him in his official capacity to determine what is and is not a security from the SEC's perspective. And this is what he said. He said, yeah, your pre-functional, post-functional distinction is right, but it's actually not the whole story. There's more to it. There's a question. There's a whole litany of things. There's a whole litany of questions you can ask to try to figure out where your risk of being a security is. Um, and some of those things included how many people actually own the token?

Is it just concentrated in the hands of a few people, a few whales, right? That are going to dump on a bunch of retail investors later. Um, did you sell it using speculative language? You try to whip up a frenzy with a countdown timer and, you know, all these things we see in ICOs and, um, and there's, there's a few more. You can, you can, you can check it out. You can check out the text of the speech online. But, you know, I think people today are still are still they still want more.

I personally think we've we've gotten as much as as as we could really ask for in such a difficult determination. But SEC has said recently, I think just just yesterday or two days ago, I should say Bill Hinman again, the director of the Division of Corporation Finance, just said, actually, you know what? We gave you a lot. We gave you this heuristic, this sort of, you know, this fuzzy list of questions to help you think about this. But we're going to give you some plain English guidance. And I don't know when that will come. I don't think anybody, maybe the SEC itself doesn't even know precisely when it'll come. But it's an important question, and it's not wrong that they've taken their time to answer it.

Yeah. And he made it sound when he said this that it's near term. That could be weeks, months. you know, I don't think to your point, anyone really actually knows, but, um, it sounded like the way I read it is they hear that people are saying we want more clarity, right? And some of that's coming from institutional investors. Some of that's coming from projects that want to actually, um, you know, kind of push the envelope in a compliant way. Um, but, but, but I do think it's interesting. He has kind of led the charge and some of the public comments, right. Given

where you know he sits in the organization um how does the sec and other uh western you know north american regulators compare to the rest of the world right so we talked about their approach in terms of they're definitely more tempered and and kind of patient and maybe focused on learning first before they actually act but from an actual regulatory guidance standpoint do they look at it differently or is it just their approach is different but everyone's coming to the same conclusion around this stuff yeah this is this is more a question about the law than it is about the regulators who interpret and apply the law okay uh because in the in the united states the sec you know isn't isn't a judge they're not they're not the courts they are plaintiffs now

they're much more powerful than other plaintiffs right um but the question is really about what is the law in the u.s versus what is the law abroad and and it's it's an important it's it's an important question because when it comes to money services laws, like, you know, anti-money laundering and consumer protection and that kind of thing, everyone around the world, they're pretty uniform on this. We have something called the FATF, the Financial Action Task Force, that ensures harmony and commonality among those laws. That doesn't, I mean, there are analogous bodies in the world of securities, but in the U.S., the perimeter that you draw around what is a security is enormous as compared to the rest of the world, because we have this notion of

an investment contract, which doesn't exist in most other jurisdictions. There are things called collective investment schemes in other jurisdictions, but they're much more restrictive because other jurisdictions generally have what's called a positive listing system. They say, look, these eight things are securities and they stop. In the U.S. we say these 30 things are securities. also there's this catch-all called the investment contract then most of these most of these uh tokens we argued in in the white paper that were sold pursuant to icos um well i should say in most of these icos there was an investment contract created got it and so we'll come back to this idea of an investment contract in a second but before we do that let's talk about uh

blockchain in kind of your role there right so you're in private practice you've got all these clients, you're one of the foremost thought leaders when it comes to applying the existing laws to this new technology, new industry. Why leave? Why kind of get out of the direct legal private practice and go more on to the operator side? You know, as you like to say, I caught the virus. But the thing is, I caught the virus in 2012. So, okay, you got to tell a story, right? So before the show, we were talking, and I actually didn't know this. So as everybody knows, I've been using this tagline, the virus is spreading for a while now. And the thought process was the idea of crypto was going viral, right?

And people were, as they learned about it, they would tell their friends, and it just kind of continued to permeate through society. But you said that the word virus is not new to crypto, so maybe tell that story. I'm shocked. When I first saw you tweeting about, you know, the virus is spreading, I assumed you were referring to what we always used to say back in 2013, which were 2012 for that matter, that Bitcoin is the mind virus. Once you catch it, it's actually tough to stop thinking about it, not just because it's an amazing invention and is filled with so much possibility and power, but also because it starts to make you question things that you always sort of held as, as obvious

as axiomatic. Um, and that's one of the, one of the great things about being a lawyer in this space is, um, you get to revisit first principles. Most lawyers don't get to do that. They sit behind a desk and like securitize the same asset over and over again, or they litigate the same kind of case over and over again. And we got to make people think about money in a way that they never did before. I mean, I'd consider it a victory to get people to think about something in a way that they never really did before. And Bitcoin did that for all of us. Yeah, it's fun. It is. It's a blast, especially, again, for lawyers who aren't really known for having fun jobs. It's not like suits. Yeah. It's not like suits. Um, all right. So, so you're, uh, there you get the, the mind

virus or the virus spreads to you and you leave. Um, and so talk a little bit about, uh, what you're doing at blockchain today. Yeah. So I, you know, I, I worked with a lot of different, uh, crypto companies over the, over my years in private practice. Um, and I was, I was impressed by a great many of them. At the end of the day, there was one that was really fighting for the things that I believed in, individual financial freedom, taking ownership and control of your money. And the exchanges weren't doing that. Especially in 2017, what we saw was the headlines start to shift toward Lambos and One Moon and stuff like that. And it's exciting and it's part of what has gotten a lot of people into crypto, but it wasn't for me, right? Some people have said

that um bitcoin is a is a tool for overthrowing oligarchs and despots wrapped up in a get in wrapped up in a get rich quick scheme um and that that may be the case i don't know about overthrowing oligarchs and despots and all that but um i i do know that the get rich quick part of this of that story started to um pull so much of the narrative um away from why i was involved in this in the first place, which was to give people control over their finances in a way that they couldn't achieve in the traditional banking system. I mean, you know, there are people not just in this world, not just in this state, but in this zip code who can't get a bank account without being charged $15 a month for inactivity fees. It is expensive, right, to be poor in this

country and in much of the world people don't use blockchain just to speculate they don't use it to buy something for a dollar and sell it for two um they use it so they can actually they can actually well use crypto so that some people use use their blockchain wallets um at to as as as their primary banking source um and you can and you can do that we've we've done it and we've supported it as successfully as we can over the last years to the point where now there's 30 million different wallets doing that. So the difference between what blockchain does and what most other exchanges, for example, do is, well, you have your coins, you have your private keys. When you have coins on an exchange, for example, and you want to send those coins, you want to use them, you want

to do something with them. If they're tokens that run a decentralized application or it's just Bitcoin and your coins are on an exchange, what you do is exactly what you do with your bank. You say, dear bank, dear exchange, can I please, pretty please have my money back? And you know what? Send it over to Alice or Bob. And sometimes the exchange says no. That's not why people use Bitcoin. That's not why people got into this in the first instance. Or they say, yes, but only so much. Right. Yes, but only so much. Right. Right. Exactly. You can only say $25,000 a day. Yep, exactly. And blockchain from the beginning was pure software and it still is. We never take custody of your funds. We never take control of your funds. We give you software so that you can

interact directly with the Bitcoin network. If an exchange gets hacked, the wallet can get emptied. If blockchain gets hacked, we don't have your money. That's the difference. You can store the very same coins in a blockchain wallet at the very same time they are being stored in any number of any of other industry standard software wallets and spend them out from underneath it that is that is that is self-custody that's what it means to have control and power over your own money and that's kind of the point right so when i when i had uh the choice of which which company to go to to to to really drive this forward i chose the one that really instantiates the values that i whole deer. Yeah. It's funny. I've got a funny euphemism and then I've got a serious one, but I

say that most of our parents grew up with sex, drugs and rock and roll. Right. And we grew up with Lambos and moons. So when you kind of think of that, like, I don't know who's who's winning on that trade. Yeah. But I do think the other thing, you know, look, we've we've got around the country and we've been talking to everyone from institutional investors down to family offices, high net worth individuals, and just kind of general what I would consider the retail investors of crypto. And we hold these events and in these different cities. And the thing that's always struck me when people ask me, what's the most surprising thing throughout all of those conversations with different people? It's how many people actually believe and question the

very kind of core elements of crypto, right? So they don't trust the traditional banking system. They have questions about the fiat currency system or the Federal Reserve, right? All of these elements that I think they're a little scary to think about at first, right? And they're probably not the first thing that you're going to go and publicly talk about until you're really comfortable with your own thoughts, with your own opinions. You've had enough conversations. but it's always shocked me at how many people have the exact same feelings that you just described where you had your pick to go to all these companies and you end up being attracted to the one where it really is about financial freedom it really is about you know a different system

or an alternative system giving people choice yeah and so i talk to investors actually about this all the time not not people who invest in crypto uh but i talk to like venture capitalists for example all the time and they say what's the difference between you and the big exchanges out there like why why should we invest in you and not to make exchanges and you know in my opinion that sometimes those big exchanges are good investments um but there's a there's a market difference in our customer base versus theirs their customers go there to take their dollars and turn them into more dollars put dollars in there's a ticker that goes up and down you take take your dollars out. People don't come to blockchain to do that. People come to blockchain

to use their money. We provide liquidity services. We just launched Lockbox and Swap, which is a little bit, it's actually nothing like Netflix and chill, but it sounds like it. It's a lot less fun than Netflix and chill, but it does mean that you can actually hold your own crypto in a hardware wallet. And when you want to move between cryptos, you can swap between cryptos. We do offer liquidity services but at the end of the day people don't come to blockchain so that they can speculate they come to blockchain so that they can use crypto and that's and that's that's part of what our airdrops program is all about yeah absolutely well the other piece too is i think uh at least when we talk with folks who are a little bit older um you know from an age perspective they're

shocked when i start to describe you know there's a demographic of people um you know younger people who they've got double digit, maybe mid double digit or higher percentages of their net worth in digital assets, right? And to them, it's not risky, right? It is, of course, there's going to be digital money, digital stores of value. Of course, I'm going to have a digital wallet and, you know, kind of have this hybrid between a bank accountant or a brokerage account and, you know, all this kind of stuff that I think is new and different and possibly scary to people who one don't understand it or two grew up just having it beaten to their head that the fiat system and the traditional legacy banking system is just the way it is um and so i think the work

that you guys are doing is you're really empowering that generation of people who believe something different to actually uh interact with the technology in a way that keeps them in power but but also um reduces some of the risk of doing it right in terms of the security and things like that yeah it's absolutely right and that's that's that's that's the way that we see it too i mean we we we we could have taken the company i think um i say we've i i joined in february but i've been the company's lawyer for the last four years and i you know the the company could have gone in any number of different directions but they stayed the course in 2015 when nobody was talking about public blockchains and bitcoins and everybody was talking about dlt do you remember dlt distributed

ledger technology it's the term that the banks had come up with to sanitize crypto as much as they could to try to get uh to try to get their boards on board um but even back when people were thinking about um we're talking about dlt blockchain never started doing proofs of concept with banks we never that wasn't us that's just not the vision that we had and it's not the vision that we have today well look it is uh the user base speaks for itself right um let me ask you this question what do you think um and i've never asked anybody this but i think you've kind of your perspective is very different and you were kind of an outsider that was friendly to the company for a while and now are an insider what would you say is the most legitimate criticism people have of that approach

right so while everyone else is out working with the banks and legacy system and they're all trying to jockey for different kind of advantages or or ways to get ahead you guys stayed the course and so there's obviously people who are going to disagree with that approach what's the most legitimate criticism of that i think that the the legitimate criticisms come from time scale they say so when i say hey when people ask me when is blockchain gonna have um when when is the man on the street going to have a blockchain wallet just as um just as surely as they have a cell phone right i give them a long time scale um and that's because it's actually difficult in this country to explain to people that, you know, the, the benefits of having

control, having self, having user controlled wallets. Some people think it's risky. Some people think that, um, it's just not a job that they want to do. You know what, at the end of the day, I have a bank account, you know, I have a credit card. I respect that. I don't, I don't, I don't want to do that work myself. Um, but you know, that's just here. That's just the U S Blockchain isn't even a U.S. company. That's what most people don't realize. Blockchain was founded in not New York, but York. Right. We this this this this is a very, very old and very international company. We were not U.S. first. And you'll be surprised to learn how much even after the events of 2008, you still trust your bank. You still walk up there. You still give them your money every day. And you ask them pretty please, can I take it out? And I ask the same thing, you know, I, I do the same thing, but in many parts of the world, that is, that is not the case. And it shows in our numbers, we, we, we have plenty of users in the United States, but a couple of months ago, I was, I was, I was, um, the management team shared

metrics with me and it, and we had signed on more users from Kenya, uh, that month than we had, um, from Texas. And you see that happen occasionally because people in the rest of the world, well, their banks have not been good stewards of their money. Um, and you could argue that's happened here in the United States too, where our money is worth less and less every day, but by and large, we've done our, our government has actually done a very good job compared to most of the world. Um, so it's why the company decided that it was not going to be, uh, why the company decided had to have an international first approach. Yeah. What you're describing is this, uh, you know, good gets in the way of great. Right. And the U S banking system is good

enough for a majority of people to do a majority of the things that they want to do. Right. And so, you know, how many people have their, uh, their wealth devalued away in the United States financial system? Very little, right. How many people have their capital seized or their wealth seized very little right how many people want to move money and can't do it or the bank you know restricts them from doing it not very many right and so because the financial system is good enough and there's just enough infrastructure that people can get by with it i think they become complacent right they don't want to aspire for the great thing that could be possible um that the base of the other technology breaks yeah it's it's it's not a uniquely american thing but um it is

uh, it is amplified here in the United States, in Western Europe, uh, places where people have sound money, uh, relative to the rest of the world, right? You use that phrase sound money and the Mac and the Bitcoin maximalists start to say, well, us doesn't have sound money. And well, I mean, on a relative scale, maybe gold is the only thing that's truly pure, right? But, um, I, I certainly don't feel that way. I'm, I don't count myself among them. Um, but then you look at places like Japan, which, yeah, the money has not been spectacular there, but they have so many different kinds of payment systems. And adoption has been so much quicker there for things like contactless, cardless payments. The rest of the world is a big place.

Absolutely. Yeah. And, you know, look, we saw this in African countries, right? I talk a lot about this idea that citizens of African countries had no banking infrastructure maybe 20 years ago, and they leapfrogged the U.S. when it came to mobile banking, right? And it was just because they had nothing. And so all of a sudden I can text you money, right? It just became very popular. Yeah, like landlines, landline phones, right? It was just a stage they skipped.

Yep. And so I think that we're seeing some of that with this decentralized kind of open finance or user-first type financial products in other parts of the world, right? And some, you know, the classic examples are the Venezuelans, Argentinians, et cetera. But I think this is happening in Africa. I think it's happening across Asia. It's just places where they don't have good enough infrastructure. And so they go from, you know, very bad to great infrastructure. It's still going to take some time. But in some ways, they're lucky that they're not distracted by the good enough infrastructure. Yep. All right. All right. So let's get back to blockchain real quick. Let's talk about airdrops. Right. So obviously, blockchain and the securities world, finance, etc. The traditional markets are pretty well understood. There's been plenty of time, plenty of smart people who have looked at all this stuff. But the blockchain ecosystem and crypto specifically bring quite a number of nuances. Right. So these airdrops, hard forks. what is the company blockchain right how do you guys look at that and then talk about this airdrop program that you guys create because i think it's a pretty new um and nuanced thing that's pretty

powerful well blockchain serves as the on-ramp for millions and millions of people all around the world um one of the difficult things about getting into crypto is getting crypto right you You have to sign on to an exchange that might lose your money. You have to buy it in some shady ICO. You have to mine it, which is difficult. Or you can be like me, and I actually earned my first crypto. I actually accepted it for legal fees. But let me tell you, that's hard.

Actually doing work for stuff is sometimes really hard. So we thought, look, there can be a better way. And as you can tell from the theme of this, I've actually dedicated a lot of my time to try to figure out better ways to crypto adoption. We did that with the SAFT project white paper. We tried to set ICOs aside and say there could be a better way. And this is another way to do it. If you want to invent the next Bitcoin or the next Ethereum or the next, the bigger and better thing, bigger and better crypto network, you're a creator.

Well, at first, you've got a bunch of crypto and you want people to use it. one necessary but not sufficient qualification requirement for getting people to use it is them actually having it so what an airdrop can do and is is put crypto in the hands of many people it can take crypto out of the hands of just a few usually a few creators and put it in the hands of many people the way that happens is that well remember i said with blockchain you have our our users anybody with a blockchain wallet actually has the private keys to their crypto they are the ones who are in control of it not some bank or intermediary financial institution so in an airdrop that creator takes the crypto and gives it away for free and if they

do it through blockchain they certainly don't pay us any of it we don't keep any of it we don't charge listing fees or anything um every uh every every piece of crypto we get we give to our users we work for our users. And we published a set of guiding principles on airdrops. You can read that on our website at blockchain.com. It's easy to remember. You can read the guiding principles there. And today, we actually announced our very first airdrop, our very first implementation of those guiding principles. We're airdropping something called Stellar, Stellar XLM. We're we're giving it away for free to our users um and it's all it's all starting now all right so let's back up for a second so the airdrops are merely the creators you know in an overgeneralized

world the creators are giving away um these crypto assets right to everyone else sometimes it's to incentivize them to participate in a network sometimes it's money it could be a whole bunch of different use cases but it's a giveaway to some degree for free why would they do that Right. What is the great question? What is the creator's benefit in giving something away for what appears to be free? This is a uniquely a uniquely crypto element. Virtual currencies benefit from network effects. The more people that actually have and use a particular coin, the more valuable each particular coin is. not in terms of sticker price but into her sticker uh sorry stock ticker value but in terms of actual functionality if you have a dollar and i don't accept dollars all i accept is yen and no one

around you no one around you accepts dollars that dollar is well it's not very functional is it it has no utility if i accept dollars and you accept dollars that dollar becomes marginally more useful because you might be able to pay me with it. But I mean, why do I even accept dollars if some third person over here across the room isn't going to accept it from me, right? So the more people that actually use these things, the more people that want to use them in commerce

and know how to use them in commerce and have experience using them in commerce, the more valuable they are. So if you're a crypto creator, you can benefit from these network effects that drive the adoption, going to drive the actual functional use of your token. I have no idea what happens to the price in an airdrop. Nobody at blockchain really, I would assume nobody at blockchain really does,

and it's not really the point anyway. This isn't for speculators. This is for people who want to get their first bit of crypto so they can settle up a tab at the bar, pay for lunch, or settle a bet, or put in for a poker game, or do all the things that you do with money. And one of the But one of the nice things is that, you know, decentralization has become a very powerful thing. And when just a few people have a particular crypto, it's not very decentralized. Airdrops, blockchain airdrops can be a tool to drive decentralization because each of our users has a private key. Yeah, I wrote about this today. It's this debate between decentralization and centralization.

Right. And I think that the crypto community, especially on Twitter and stuff, whenever something happens, everyone's like, you know, decentralize it, decentralize it, and they start screaming about it. And the point I was trying to make when I was writing this was, look, centralization is not inherently bad, right? And I would actually argue that many of the most popular

internet companies of today would not be as successful as they are if they hadn't been decentralized when they started, right? So there was no ICOs, there was no cryptocurrency, there was no airdrop, all of these elements did not exist. And so you needed a centralized team with a centralized focus,

a centralized office, all these things to build the initial network effect that then grew. So you look at a Facebook, a Twitter, Google, et cetera. Today, actually, a lot of these projects are starting out with some sort of centralized organization, right? And not organization as an illegal entity, but there's a group of people that come together and they're organizing themselves and their resources to create something. And then what decentralization is really kind of proliferating as is their ability to go from highly centralized to quickly dissipate out or distribute out their resources and their workload to as many people as possible. Right. And so it's almost like there's a spectrum and they start out in somewhat of a centralized

manner because you've got to organize those resources. You've got to organize ideas. You to build something. And then as quickly as you can, if you can decentralize yourself and your organization, that's where value is accruing, right? Yeah. What do you think about that? Well, I think that, so decentralization has acquired this sort of talismanic power in the industry, somewhat for good reason, somewhat for good reason. It's a term of art in the law now. In fact, decentralized convertible virtual currencies, as the Department of the Treasury categorizes bitcoin um have different regulatory uh overhead in fact much lower regulatory overhead than centralized convertible virtual currency systems like paypal interesting right centralized

convertible virtual currency system uh bitcoin is a decentralized convertible virtual currency system there is a money transmitter there must be a money transmitter who requires licenses who requires registration, a chief compliance officer, an AML policy, KYC, et cetera. This was the kind of law that I practiced, right? At PayPal, there has to be one of those. But at Bitcoin, well, there's no Bitcoin Inc., right? There's nobody to do that because it is sufficiently decentralized. So in the money services law, decentralization,

there's a very good reason why it's become talismanic, because it is now a term of art. Interesting. And it's the same way. We just saw the director of the Division of Corporation Finance at SEC, Bill Hinman. He said, look, there's actually kind of a set of traps you can run on your offering to tell whether it's a security. And what is the bar called? What is the line called? Decentralization. Is your network decentralized enough? Is it sufficiently decentralized to not be a security? And so not only in the money services law, but in the context of the securities law, if the network is decentralized, then it is less likely or maybe just not a security. so um the power of an airdrop of at least the way of a blockchain airdrop the way that we do it is that it can really drive those effects it can drive those decentralization effects those network effects so that if you're a crypto creator um this is something that you should be really

attractive a bunch of people who really don't have a whole lot of incentive to speculate on your current on your currency or your coin or whatever it is but um have a lot of tools available to use it that's that's that's the power that we see in it let's say that airdrops become the de facto way to bootstrap network effects right and so creators are building products services companies networks etc that they're going to use these airdrops to distribute some sort of asset and really get people to use it right does it become saturated at some point right every day i'm receiving a new airdrop and i don't know you know monday from tuesday And now all of a sudden I've just got all this what looks like free money or, you know, kind of spam email.

Yeah. Are you worried that we get into a world where there's not enough kind of skin in the game maybe for the users? Right. And it's too frictionless. Or do you think that kind of the best projects rise to the top and users will be attracted to just understand that and kind of buy into those network effects? I think that's a really good point. And it's something that we've struggled with at blockchain. sort of at what is the macro consequence if this really catches on it's something that we struggled

with for the saft project framework too right one of the consequences of it well maybe people can't do icos anymore if this thing really if this thing really picks up yeah um and with regard to airdrops like we're not trying to kill anything with airdrops or or even become a market standard for that matter but what um what we have done is well a little bit of curation right i i don't think we foresee this as um a tool as i don't think we foresee this as um uh every day some weird worthless new piece of spam hits your wallet because we have to do integration work right yes first of all there's a limiting factor but also we uh have users that really you know most of them never heard of an erc20 token right most of them don't know about icos they just think this is this

might be a better way to use their money and so it's it's it's should come as no surprise that we started off with something that we believe to be a high quality asset something that we think can be good money something that is built to scale that works even when there's millions of people using a network at the same time something that you can actually create cool things with you can build assets on top of stellar um i i don't see us doing this for every project that comes along the way right this is this is not like a a tool for like revenue generation for us we'd like i said we don't we don't take any listing fees so we're not just trying to like jam a bunch of crypto down our you know down our users throat at the same time we do want this to be a platform

for discovery so that if you don't know a whole lot about crypto but you know that everybody that you trust and respect has said this stuff is amazing, you can open a blockchain wallet and occasionally you'll find something new and exciting in it that you can use. Really, you can really functionally use it and give it a try. Yeah. I mean, to some degree, right, people will associate the quality of blockchain, the company with the quality of the things that get through, right, and get airdropped to them, et cetera. And so there's a little bit of you guys need to pay attention to that yeah right um okay so let's switch gears a little bit and i i will make one final point on that go ahead and that's that if every single coin we airdrop ends up being

like a high quality asset that everybody uses every day we'll know we've failed okay it means we haven't pushed the envelope we're not we're like this company doesn't exist so that um we so that people uh don't experience anything new and and have to think out and never have to think outside of the box and never get confronted with something that changes the way they think about money. This company exists to push that envelope. And so if we never deliver even one token, even one coin that doesn't really take off, we'll know we played it too safe. Yeah. I think it's super interesting and very similar to the way venture capitalists think, right? If none of the companies go to zero, you actually failed.

There you go. Right. All right. Let's switch gears and talk about asset tokenization, right? So I think that You you've really helped and been kind of integral part of these crypto entrepreneurs funding network growth and these decentralized organizations and a whole bunch of stuff there. I think what's become a popular narrative, right, you know, we are big proponents of it ourselves, is taking assets, stocks, bonds, currencies and commodities and digitizing them or tokenizing them onto blockchains. What's your personal view on that market, how it will, if at all, kind of grow and where we're going there? um this is a great uh other side of the coin from what we were talking about no pun intended well it's actually a bad expression it's it's a great uh foil it's a great whatever it's it's it's the opposite i'm not i'm just a lawyer i'm not i'm not good with words the um so what you're talking

about as opposed to uh cryptocurrencies and utility tokens um is tokenized securities right they are investment products that are intended to be investment products. It's not a question of, oh, golly, this is going to pass the Howey test. No, we know the thing is a security was always intended to be one, except instead of writing it into Carta or writing it into a MySQL database or onto a stock certificate, we wrote it into a smart contract on a blockchain. Those things are tokenized securities. They don't benefit from network effects in as much as they are tokenized securities. We see some weird hybrid things out there. But so much as they're just meant to represent a share in a company, it doesn't matter how many people use the network that represents

the share in the company, right? The value doesn't come from the network. It comes from the performance of the issuer and the efforts of the issuer, right? To use the Howey language. I think those are powerful for a different reason. And what we're going to see is that And in my opinion, what we'll probably see is that the tokens that really capitalize on the tokenized securities, I should say, that really capitalize on the blockchain infrastructure are the ones that investors will see value in. And we don't airdrop those, right? We don't airdrop tokenized securities. It's not part of our mission. But I did a lot of work on this when I was in private practice.

In fact, I was the blockchain ambassador to the state of Delaware in connection with the Delaware Blockchain Initiative, where we actually amended the Delaware General Corporation law to permit or to at least clarify that corporations could use a blockchain as their books and records. So they could rely on the contents of the blockchain as their books and records, which is kind of bonkers when you think about it. But that's what it means. So first of all, I didn't know that we had a Delaware state law celebrity in here. We'll have to get an autograph later. But you said it's bonkers, right? And I would push back on that in the sense of today the books and records are usually kept by the company. They're periodically audited by some third party and external parties.

So, you know, investors, analysts, researchers, the general public make decisions based on a couple of things. One, the information that is provided by the company, which is usually dictated by some sort of law or regulatory guidance. Two, that the auditors are correctly and accurately auditing that information and representing it as fact. And then three is that nothing changes or nothing material has changed since the last either guidance given by the company report given by the company or audit. Right. So kind of there's no real time information. There's no kind of third party immutable record of truth. right? All the things that we know the blockchain promises. Wouldn't it make sense, though, that if you're an external third party and you say, I trust no one, you would want that immutable

record, right? You would want that those books and records held somewhere that you could self audit it, right? You didn't have to rely on other people or take on that counterparty risk. Yeah. And there's a great example of that in the Dole Foods case, which is a piece of law. It's a It's a decision in the Delaware Chancery Court, back to Delaware, in the Delaware Chancery Court, where the company had requests for redemptions of like thousands and thousands of more shares than they actually had record owners on their books. OK, so explain this. So Dole had given out shares or sold shares in the company, whatever the number was, and they wrote that down in their books and records saying, you know, 10,000, right? They had given out 10,000 shares that they had articulated in their books and records. And at some point in the future, more than 10,000 share requests basically came back, right?

And so there was a mismatch between what the books and records internally were representing versus what people were showing up to almost a run on the bank to some degree saying, hey, give us this back. How does that happen? That's right. You have to ask why. What possible scenario could lead to that? I mean, I can pay a chicken farmer using a lightning network payment with my Bitcoin to dispense corn feed to the chickens in Australia from New York. But Dole Foods can't keep track of how many owners it has? that's crazy. And in reality, in the world we live in, that's not crazy. That's how the net

settlement system in the public markets of securities works. That's how the system of securities entitlement works. So for example, how many people in this room own a share of publicly traded stock? Raise your hand. No, there's four people in the room. It's not that much. But they all raise their hands. You don't. You actually don't. You are not the owner of that stock. There's a company called CD&Co that owns that stock. They are the nominee. And you have a securities entitlement. You have the subordinated right to that stock. And in between you and the issuer, there are a dozen intermediaries that can lose track of things. And just so people really understand what you're describing here, would it be fair to kind of simplify the complexity between

the issuer and the individual investor who believes they own that stock as really what they have is a lien on somebody else's ownership of the stock? I mean, it's called an entitlement, right? It's, you know, a lien is you're asking a lawyer to be technical. Technically, it's not a lien. But the idea is that I'm getting the Delaware state law celebrity to give me lessons now. Definitely. I'm absolutely not the expert.

I was lucky enough to be involved in this single project. but um no the idea is that you you have a right to what your broker has your broker has a right to what maybe some other broker has who all the way up the chain has a right to um this share that is actually owned on the books and records of the corporation by the depository trust and clearing corporation technically by cd and co its nominee um and that happened back in the paper in the paper blizzard of the 1960s 1970s when um stock when the markets had to shut down in the middle of the day because people just had to keep up they had to keep up with with with recording the transfer of these securities finally uh the street said look enough is enough let's set let's

set up let's set up a new process and there were two alternatives one was a distributed ledger i was just gonna say that's basically what in the 70s it's solving the double spend problem It could have, but the technology just wasn't there yet, right? Just like with Uber, right? In the 90s, we were talking about this before we got on the mic. But, you know, back in the 90s, we'd tell our kids not to take rides from strangers. Don't get into cars with strangers. And now you literally...

You pay a stranger to come pick you up. Don't talk to strangers on the internet. Don't get into rides, right? Because the technology changed. Yep. And now we have technology that actually allows that that actually allows people to all join this distributed ledger. So you don't have to have a small group of people that are permitted to write to a ledger that are that are permitted to trade entitlements back and forth or net settle between their clients. Yeah, the the hyperbole statement that we usually use is, you know, everyone talks about crypto and blockchain as it's risky, right?

it's new, it's unproven. And we make the argument a lot of times to especially older CIOs, look, this is actually less risky, right? And they kind of shrink back a little. What do you mean? How could you say that? And you start walking them through it. And because they're so deep in the nuances of underwriting risk and things like that, they actually very quickly come up to speed and say, oh, you know what, this is very interesting, right? A piece of technology can reduce my counterparty risk, it can really give me true ownership of the asset, right? And kind of what of the ramifications of that, um, I think becomes attractive. And so it's this whole idea that they just kind of get educated. Yeah. Right. And once they get educated, once they get educated, then

they start to believe, right. And you get back to the whole, the virus is spreading and all that stuff. Um, cool. So let me ask this. Uh, one of the things we've talked about on, on previous episodes with folks is, um, you know, as we get deeper and deeper down the rabbit hole and talk to people across the industry, one theme that continues to emerge is what if we're actually underestimating the potential of blockchain, Bitcoin, cryptocurrency. Right. And I think most of us who are excited about this have dedicated parts of our careers to working on it. We have high ambitions or believe in the in the prospects of the technology. What's like the farthest out or most extreme view of this industry that you could see or believe in? Well, you know, this is

this has sort of become this has sort of become hackneyed at this point but um when we think uh when when when the first um internet pioneers were were doing their work they were they thought oh my gosh we are going to be able to send a single packet of data and it's going to make its way all the way around the world one day and i don't i don't know who among them really envisioned, you know, billions of those packets of data being sent around the world in, I don't know the numbers in a second. I mean, we, we, we don't, we didn't think of that. We never understand the, the holistic impact of new technologies like this. I think that we like saying how impactful they're going to be. What, when asked for an application, this is where

uh the venture capitalists in particular are you know are are successful because they can predict the future um but most of us can't and when i look at crypto uh today i see people amazed when they when they use their first bit of crypto this is why we're giving away 25 bucks to somebody so they can just try it so they can so they can move crypto uh around the world in the blink of an eye um when i when i see the the magic in people's eyes when they do that and they're shocked that it worked. I think how shocked are they going to be when that little bit of value is no more special or unique than a packet of data that runs across the internet and people are sending not just individuals, but machines are sending money, sending value around the world in as frictionless

and liquid away as people send generic data today, I don't fully understand the consequences of that. You know, you can think of the sort of the examples that are now somewhat overused of the car pulling up to the gas station and the car independently of you settling up with the gas station owner in some form of cryptocurrency. Maybe it's Stellar XLM, maybe it's Bitcoin. Um, and you know, that, that seems like a very basic example of one day, maybe we'll be able to send a packet of data all the way around the world.

Who knows what life is going to be like when, um, well, money is, is being sent around in those packets. We, we, we talk a lot about blockchain and crypto has to happen for automation to actually work, right? So if you think of this idea of in an automated world, you're going to get machines that have to trust other machines. And so what better way to do that than in a fully transparent machine driven or algorithmically driven world? And so going back to asset tokenization, if you get every stock bond currency and commodity that ends up being tokenized or digitized, you now unlock the potential for things that you and I probably can't even comprehend or imagine. Yeah, it's like email is just a faster letter, right?

Yep. Kind of. But nobody really realized that we would be, you know, how how it would just fundamentally change the way that we do business. Absolutely. All right. So let's go into a kind of a quick round of questions and then we'll we'll end up with you asking me one question. But what do you think is the most important company in crypto outside of blockchain? The most important company. Yeah. If you had to pick one other than where you work, what's the most important company? right now uh oh gosh that's a good question cloudflare cloudflare okay why well they control what websites you get to see it's that simple it's it's it's true it's truly it's truly

that simple they are the gatekeepers to the web in the same way that um google is the gatekeeper to email like there are no websites there's just what cloudflare stops ddos is against there is no email there's just what google allows to get through its spam filters interesting we we have never had anyone who uh who has thought that way um so that's a really good one um okay what is uh if you had a magic wand and you could wave it and change any one regulation or improve any one regulation what would it be and you specifically i ask everybody this question but i'm really interested in what your uh your opinion is these are hard you didn't tell me about any of these before, uh, that's part of the game. I would, um, I would harmonize investor protection

regulations around the world. Interesting. I wouldn't know how to do it. Yep. I wouldn't know how to do it. If I could snap my fingers and do it, believe me, I, I would have. Um, but it's something that lawyers struggle against constantly. It's something that I know regulators struggle against constantly and entrepreneurs in the space. That is, that is the one question on all of their minds is how do I actually execute this thing? I just want to do a Kickstarter like issuance, but is it a security? Is it not? And you're talking about each jurisdiction has different laws, protections, regulations, et cetera. And some of them are consistent. Some of them are very fragmented. They're out of step. And you know, I've been, I've been working with

policymakers and regulators in cryptos since 2013. And if there's one thing I've found is that it is an uneven landscape. It is an incredibly uneven landscape. Regulators and legislators in the United Kingdom, for example, don't always even know what the law is in the United States. And part of that is because we in the United States don't even really know what the law is. And it's this it's this it's this stutter start. It's a sort of punctuated, hurry up and stop approach to creating new regulations where one one jurisdiction juts out ahead, but not too far. And they're a little bit wishy washy on it. But that kind of sets a little bit of a precedent. Another jurisdiction goes out and they'll say a little bit of, you know, they'll they'll they'll put their own take on it, but they won't commit. And then depending on what the third and fourth and fifth people do, there's some equilibrium reached.

But then someone steps a little bit further, like what happened in the BitLicense in New York. So it's punctuated. Two more questions. What's the one thought you have or belief in crypto that you think majority of other people would disagree with you? The one thought I have in, oh, so in unpopular crypto. Exactly. An unpopular crypto opinion. Oh, wow.

everyone in crypto is not short on the unpopular opinions but what's the one that you like really believe in that you think most other people would would expect no way hmm that is a difficult one how much hemming and hawing can i do that you'll edit out at the end of this so i could take a little bit i can i can take a little bit longer you could think yeah look the bottom line is i i feel like all i've all i've had are unpopular opinions uh you know people didn't like what, um, uh, what we said in the SAF project framework, at least some people didn't like it. Right. Because it called out a lot of people for doing things they probably shouldn't have been doing. Is that the one thing that you think you've been involved in where it felt like

there was the most pushback? I think that's, I think that's probably fair to say. I think that's probably fair to say. Um, who knows if airdrops will be something like that. I, we hope not. I mean, we're giving people free stuff to try to actually, you know, get into crypto for the first time and use it um and the risks are pretty low there but you know when we published the staff project white paper there are a lot of people who had just done icos and some people whose whole business model was built on doing icos and they didn't they didn't take it well yeah so yeah there were consequences doesn't mean you're right doesn't mean you're wrong though right um all right and so uh last question not crypto related but i'm excited to talk about this one

because we've had big developments in the alien space so i usually ask everybody hold on one what is it that the asteroid i always say yeah if uh if aliens are real right do you think there's alien pets right we always think of aliens as like a human-like creature no one ever talks about are they showing up off the spaceship with uh with dogs and cats and you know other forms of life that are pets absolutely there's a whole episode of star trek about this i feel like i how am i the nerdiest how am i the nerdiest person in the room of course everybody every all the aliens in star trek right they mostly look like each other two arms two legs two eyes uh one nose uh because well life always kind of evolves in the same way so yeah of course they're gonna have pets just

like we do now maybe they got a little farther along the spectrum and the pets aren't allowed on the spaceships yet because hell we don't even have spaceships but there you there you go you got my sci-fi thought for the year well so here here's the thing right i'm shocked at how few people are talking about uh the spaceship and for those that don't know uh the head of the astrology department at harvard do you say astrology or i'm sorry man it has been a long day well no no well it could it could some people probably think he is the head of the astrology department if he's talking about aliens maybe maybe jupiter is in his third house but but what he came out and he said right was that look there is this uh i don't

even know we call it what do you call interstellar object i think is what they're calling it yeah that uh was picked up by a bunch of telescopes and uh the way that it moved it accelerated in kind of a weird way uh it was shaped in a weird way uh and he's basically saying listen this may have been some sort of uh transportation vehicle where an alien species was actually sending it to look at earth come near earth etc harvard professor right how far in the left field spectrum are we getting there with uh but he's a he's a professor of astrology so i don't i don't i don't trust him all right um so i end each episode with uh uh letting the guest ask me one question what uh what one question do you have for me when did you open your blockchain wallet

when did i open my blockchain wallet um so i've got two answers to this one is uh the first thing i actually did which in hindsight was really dumb was uh i actually turned on a uh cryptocurrency mining rig first nothing attached to it and so we plugged it in and we didn't know right we're just like what are we doing here and so plugged it in then okay now we get a wallet right then once you get the tokens into the wallet um what do you do with it how do i go back to fiat and so the way that i actually got into crypto was um my my business partner and i had uh both invested in and he was running um a power company and so it takes uh car tires it puts it into a um a reactor burns the car tires and turns it into oil steel carbon and syngas there's a company called prti

and so it sells the oil and steel as a commodity and takes the carbon and syngas turns it into power and was supposed to sell the power into the grid. We started learning about cryptocurrency mining. We said, hey, we've got really advantageous economics of the power. We should actually just build crypto mines. And so I bought a rig, plugged it in, had no clue what I was doing, right? And kind of worked our way through the whole ecosystem. And it wasn't until, like the machines, oh, we actually probably should capture what we're mining, right? Do that. Then once you get into the wallet, how do I get in onto an exchange? On the exchange, how do I get into fiat, right? You know, I mean, literally every mistake along the way, which in hindsight makes you feel good that if you could figure it out and you're that dumb to start, like anyone can do this.

But that was in 2016. And I think that I'm so thankful that that's how we came across this stuff was because it was at the kind of true essence of how the blockchains work. What's the value? And to your point, I think with these airdrops, right, it's once people experience it, right? Whether it's you airdropped me something and I can use it, or it's back in 2013 when you guys are sitting there doing a presentation for federal regulators saying, here's a wallet address, we're going to take some cryptocurrency, we're going to send it to a new wallet address, it's appeared in the new one, right? Just the visual unlocking or the experience of actually doing it, I think just gets people hooked, right? It definitely did it for me. And so him and I always get a good laugh at it.

We still got a picture that's pretty, you know, outrageous in terms of the first mines we built and things like that. But yes, 2016. Right on. Awesome, man. Thank you so much for coming. This is this is super, super helpful. And I think you've got a unique perspective. So we're we're cheering for you guys.

And hopefully we'll do this again. Thanks for having me. Hey, guys. Thanks for listening. We're back with the CEO of Saluna, John Belzier. John, what are you most excited about right now? What excites me the most is that we're really in the midst of a revolution. Satoshi Nakamoto's paper that came out eight years ago really launched a revolution globally.

And the blockchain is definitely here to stay. Today's blockchains are predominantly seen as the core technology for cryptocurrencies, among other things. But in the future, blockchains will do more. They'll be the foundation for entire new ecosystems. They will revolutionize a host of different industries around the world. And taken as a whole, these new distributed applications will form a new kind of internet. one where protocols replace companies and algorithms choose the best computing backend and solutions that they can find. This new ecosystem, this new internet, if you will, will need dedicated infrastructure to power it.

And what excites me is that Saluna aims to be the key part of this infrastructure. We have the opportunity to build the next great infrastructure company to power this revolution. Thank you for taking the time. If you'd like to learn more about Saluna, please visit saluna.io. Pop here. If you like this episode of Off The Chain and want to help us take crypto to the top of the Apple, Spotify, and other podcast charts,

please do us a favor and rate, review, and subscribe. To review, simply go to the Off The Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off The Chain.

Thanks for watching!