The Pomp Podcast - Ryan Selkis: Building Accountability in Crypto

Episode Date: November 26, 2018

Ryan Selkis is the founder of Messari, an open data library and curation tool that helps researchers, investors, and regulators make sense of the crypto industry. In this conversation, Selkis and Anthony Pompliano discuss macro-crypto trends, the importance of data transparency and disclosures, and how to go viral on Twitter.

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. Ryan Selkis is the founder of Masari, an open data library and curation tool that helps researchers, investors, and regulators make sense of the crypto industry. We cover a lot in this conversation, including macro crypto trends, the importance of data transparency and disclosures, and how to go viral on Twitter. I really enjoyed the conversation, and I hope you find it as entertaining and informative as I did. 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 uh i've got ryan here uh we got a whole bunch of stuff to talk about we're gonna go real fast and furious i think is how you say it uh to get through it all uh thank you so much for coming thank you for having me this is long overdue it is we uh we had it scheduled one time and then you had like this really important event happen you can uh you can get into that later if you want uh which one

uh your second baby oh yeah that was pretty important yeah yeah that i i'd say that was a milestone. All right. All right. So a lot of babies. The company's a baby, two-year-old's a baby. That's all fair. The baby's a baby. Yeah. Background real quick for those that don't know. Sure. So I started my career in venture capital, got into Bitcoin in 2013, and really just started as an independent analyst accidentally because when I bought Bitcoin, I'd been following it for a couple of years, but when I bought it in mid to late 2013, it was right after Fred Wilson and the Winklevoss twins had kind of come out. So, you know, became clear that this was not just going to be a tool for kiddie pornographers and terrorists and all that. And then it immediately

went up six times in the quarter of, in the course of just a few weeks. You're a great, you're a great investor for that. Oh yeah. Well, I mean, if that happened last year, I would have been a crypto fund manager, but at that point I was winding down my previous uh, startup. So I came at this from the angle of, you know, buy, sell, hold, like, how am I going to, should I sell this and just chalk it up as a win and then, you know, use that to cover rent. Um, I ended up going down the rabbit hole on a long weekend, uh, in, uh, I think it was like Halloween weekend of 2013 and decided I was just going to be all in on this. And it was really where I thought I might be able to spend the rest of my career. Um, so I sold, uh, whatever good

finance uh professional should do i sold my 401k and took the penalty i used half of it to buy more and then uh the other half uh used to pay rent um you're gonna love this so there's a video that has never been made public i'm not gonna tell you who has it but it's of me saying if bitcoin goes to three thousand dollars 401k is gone i'm going all in oh man so i'm putting that on the record now if it happens i hope we don't i hope we don't go i'm a part of me hopes that we do and the other part is it's, it's, it's very painful. Um, we'll see the 85% a lot. Yeah. But because that was 23rd. So, okay. So twice before I get in right during the first bubble and then, um, uh, broke the Malcock story in short order. Cause I was writing a daily, uh, email newsletter,

much like, uh, you really started to build your following. Um, and I got to know most of the executives and then for better or for worse with that story, you know, still maybe one of the biggest, uh, in the industry's history. Um, everybody knew who I was overnight. Um, even though I was just this, you know, 28 year old kid that, you know, really didn't know anything yet, still don't. Um, but, uh, one of the people that I got to know was Barry Silbert's, uh, joined DCG before it was DCG. It was the first hire kind of a skunk works employee at second market, um, helped, uh, recruit the core team. We raised a large round of funding in the doldrums of, of 2015. Um, and I was helping with seed investing, um, given my background, but

before you go on i want to talk about this for a second what was the general pitch right so 2015 the not a lot of g pitch just to recruit people right so there's not that many people who really know about crypto outside of you know a small subset of the population it's not being covered by cnbc i actually it it wasn't exactly like that because um there were a lot of people that got hooked intellectually in 2013 during the run-up during this what was the second bubble but yeah and so you know and then everything crashed and and you know there was a vicious correction so a bunch of people washed out but the people that like this happens in every single bull and and uh boom and bust cycle like some people stay at that point though there were no business jobs

right there was no way for you to do this full-time and get paid to you know kind of scratch the the crypto itch because the industry was just so so much smaller and the only people that were getting jobs were um were the developers right um and there were only a few funds right it was like us uh pantera blockchain capital you know maybe a couple of others but that was that was pretty much it they're all small at the time too right obviously now you know we kind of take for we hear about another hundred you know million dollar fund every other week it feels like which is great right because there's a lot more talent that that's coming in that's fundable but um but still It was, it was much different. Um, so it was, it was actually pretty easy to find people that

were of like mind that were really, really excited about it. Um, so, uh, you know, obviously, you know, Meltem joined very, very shortly, you know, after me, um, and, uh, and then, you know, Travis, uh, a few months, uh, after that. But, but, you know, when I joined, I said, you know, I don't really want to, um, just be cutting seed checks. I, I just started a company and it didn't work out, but I, I like to be on that side of the table. So, um, as soon as we closed the fundraise, CoinDesk came up for sale. I was like, ah, this is perfect because we were thinking about doing a large events. And, you know, I had this vision, okay, we could do like the money 2020 for, for crypto and CoinDesk had, you know, phenomenal beta run in, in the consensus 2015 event. It was

a single day event here in the time center, um, uh, New York times, uh, building right here in, right at Times Square. And we said, we'll buy the business, we'll restructure it, we'll bring the team over here to New York and we'll use basically the CoinDesk brand almost like as our top of the marketing funnel for the events. And so between that and then the DCG network and all the portfolio companies we had, we were able to throw fuel on that fire and over the course of the next couple of years, grow the events itself about 10X and got the business to profitability. And now they're off to the race. I mean, this year they're going to have a monster year. So, um, so that was Coindesk. Um, those guys are doing great. I think most of the team's

still there, which is good. I, I took a sabbatical last summer, um, after Coindesk, um, and, you know, just trying to think what I wanted to do next, started to go down the Ethereum rabbit hole. Is there, is there a there there for anything that's built on top of Ethereum or is it all just like pyramid schemes and, um, and kind of get rich quickism, um, which, you know, directionally was, was not an incorrect bet, but my, um, you know, through the process, I pretty quickly got excited about the potential, even if none of the assets themselves, uh, were, were super attractive at that point. Um, it was just, you know, I, I made the comparison. Okay. Bitcoin was like the, uh, the central bank, uh, of the, you know, the, the new technological era

and, uh, ether is the new investment bank because it didn't take off because people were using it for, for distributed applications, it took off because it was becoming a reserve currency for ICOs. So, um, the first thing that I try to do is just understand the supply dynamics of some of these assets and you'd go down the top 10 on coin market cap, and you couldn't figure out what the circulating supply was for, you know, these half billion or, you know, uh, multi-billion dollar currencies that were in the top 10 i mean even um even ripple even um you know eos and and some of these other larger ones you have no idea how much is actually held um by third parties and how much is held by the founders and the companies the thing that was so interesting um i forget what

day it was i think of last year when coin market cap basically changed some of the data right they just said look we i can't remember if they said they were counting incorrectly or they used new data set or clean the data or whatever they did yeah that graph's in our pitch deck just a need for better debt and you know i i i i'm actually very quick to defend coin market cap because you know we've been you know in the thick of this for the last you know 14 months now trying to figure out like how to how to produce better data for the industry um and we'll you know i'm sure go through the full masari pitch but um it's it's not easy because there are no standards from the exchanges they actually do a very good job i was going to argue that everyone still uses it

Oh, yeah. That's the dirty little secret. Everybody uses CoinMarketCap. Luckily, we're able to wean ourselves off of that pretty quickly. I think we're still in process. But for the long tail of assets, they're still the only game in town. So for some of the major assets, it's a different story. And for some of the exchanges that actually have very clean documentation. But that's a big lift, what they've done. And so now there are others, us included, that are, you know, starting to put this together and, you know, hopefully up the standards. But it's going to take a lot of time and energy in between, you know, them and us and guys like Nomex and so on. I think, you know, better solutions are coming, which is good. But, you know, the kind of core thesis behind Masari was we had to actually usher in an era of transparency from the projects themselves because so much of the really material data about these new assets, by definition, were only going to be known by these token sellers because of the reserves, because of the founders' rewards and the vesting schedules. and, and, you know, what restrictions they put on resale for any of their pre ICO investors. That's a lot of hidden inflation in the system. And we were trying to model that out, Dan McArdle, my co-founder and I, and, um, and, uh, you know, I had written a couple of blog posts on the subject

and he DMs me, um, we'd worked together previously. We funded one of his earlier companies at DCG and he says, you got to check out this, this side project that I'm working on. and he sent me the link for on-chain fx and i think i called him like 15 minutes later after i looked at it i was like this is amazing like we're gonna start a company together like we do this this is he's like hey uh that that sounds fun tap the brakes uh you want to get coffee but the rest is history right so um little did he know oh yeah but but i mean it was like same wavelength uh what he had already put into code you know i was banging my my head against the desk trying to put in Excel. And I think the marriage really worked out because on-chain

was the front end, but we both talked about it and we said, the ethos of this industry is not going to just allow another Bloomberg, another walled garden of data to emerge. You're going to need some base data layer and some common standard that people can access. So we decided we were going to build an open data library at Masari and focus on disclosures from the projects themselves um and then you know on a more proprietary basis we would do the uh markets data integrations and and uh you know actually spin up these nodes for the different networks and and parse blockchain data and then you know progressively over time um uh pull more and more proprietary info but certain information like who's on the team what's your fucking website

like what's the circulating supply like that's kind of table stakes um for for an industry even as as nascent as crypto right you want to know that information and that shouldn't be behind a paywall that's that's like front of an s1 i was just gonna say most of the information that becomes public in the non-crypto world is through the s1s right and and so all of the things you just described in terms of you know what's the cap structure what are some of the uh lockups right Some of this hidden or harder to get information naturally comes public through disclosures of the IPO process. And this is tricky because the SEC obviously thinks everything is a security. And many of the processes, they did look like securities offerings in terms of how they were sold.

These tokens weren't useful when they were sold, blah, blah, blah. Obviously, people were speculating like crazy. We don't think that most – well, I shouldn't say most. We don't think that many of these tokens that we look at on a day-to-day basis structurally are securities. Like we just don't agree with that, but there's existing precedent. And if it looks like a duck, quacks like a duck, walks like a duck, you know, the SEC is going to say it's a duck.

But, you know, as we think about disclosures and how we can actually bring some common sense disclosures and transparency to these assets, let's start with the extreme. Who speaks on behalf of Bitcoin? Who speaks on behalf of Nero? You're not followed on Twitter by the Bitcoin CEO? I've got like six of them following me. Oh, yeah. Well, I mean, aside from those guys, of course.

And the SEC has even said, right, like, you know, Ether, probably not a security anymore, which implies maybe it was central. So if that seed has already been planted, there's probably a continuum. And one of the things that we're trying to do, because we do believe in the future of this ecosystem and many of the assets that haven't even emerged yet, but that will emerge, we're trying to make that path a little clearer. And if you think about the regulatory mandate that most securities regulators have, they just want to protect investors and promote fair and efficient markets and ultimately, you know, facilitate healthy capital formation, all of which, you know, has been missing in crypto, but is starting to get a little bit more tightly wrapped. Absolutely. It would be fair to say that Masari's... Masari. Masari.

It's Italian. Masari, Masari. look you're gonna like really confuse me now no i i just i just wanted to give you a hard time but it is i'm sorry if you could see him see him sitting here saying this to me with his starbucks cup you would just be like go home but is it fair to say that the goal here is transparency of data or is there some other way that you normally describe it um well our our mission is to promote transparency and smarter decision-making in the industry. And it's always been those two things,

right? So on-chain effects was always this fundamentals-oriented investor tool. Masari was all about transparency because you need certain inputs to get the outputs that you want that are going to be like fundamentals, right? So yeah. So we think about, okay, if we're going to be the one setting some of these data standards, how do you do that without some government or or regulatory body or self-regulatory body that comes and has some type of enforcement teeth to make those rules um what do you think the answer is um well we're going to talk about token curator registries i'm sure um and let's talk about it right yeah so uh i think you can use economic incentives um and you're talking about the economic incentive can drive

a enforceable disclosures a collection of people to all follow the same rules and actually have some sort of stick that keeps them in line. We call it the crappy data chasm, right? So earlier this year, we launched Agora, which is our open library that we have 200 plus community analysts contributing crypto asset research into. That looks a lot like Crunchbase. The problem with Crunchbase is that the information is static. And that's fine for private markets because any new venture investor is going to do their own due diligence in an ensuing round. In crypto, you have private market information asymmetries and public market liquidity. So you need events driven disclosures and you need to find a way to level the playing field. But there is no top down

regulator that can globally enforce these standards because these assets trade across borders, right? By definition. So you're not going to have a global equivalent of the SEC, at least not one that really works. And self-regulatory bodies only work when they're actually sanctioned by a regulator, right? FINRA with the SEC, NFA for the CFTC, and those are like 80 and 40 years old, respectively, the regulators. So without that type of teeth,

how can you actually herd cats and create some economic pressure on projects to abide by event-driven disclosures and some type of common standards so that the quality of the data that's in those libraries doesn't just degrade over time? I don't think a lot of people know

when you say event driven disclosures describe what that means uh if a if you're selling off your token treasury you have a co-founder leaves if so specific if there's an actual if there's an actual partnership that you're going to announce that that is real and it's not just you know marketing fluff um you know those are things that move markets and if you and and you know it's very easy and in fact it probably happens all the time people get tipped off on any, you know, major announcement. And you see this, you know, it's very difficult to prevent insider trading. That's why, you know, Coinbase is, and they're trying to do things as close to the, you know, by the book as possible and try and do things the right way.

And even still, you'll see some of those assets, they announce a new listing a few minutes before, it's not much, like it's impressive how tight to the vest they've been able to keep it. They've gotten much, much better. They've gotten much, much better, but it's still, you still see like in the, in the minutes, right. You see some action. So like, you know, how, how do you prevent that? So we're trying to get closer and closer to leveling the playing field.

And, and how do you create one common data library where everybody would have access to that information at the same time? So we said, we're going to build this open source. We're going to build APIs that allow anybody to freely access this information, including maybe our direct competitors for some of the, you know, other, you know, SaaS solutions that we offer. And ultimately we shouldn't even be governing this open source system. So one way that you might be able to create some urgency and consistency of disclosures would be to create a registry of provably transparent projects. And if you had them actually put up some financial

stake and they broke the rules, then they could get booted off the registry loser stake. And in the long term, if you can actually bootstrap that credential on the market, deems it as valuable and exchanges use it, banks use it as a seal of approval that if you don't have, we're not going to do business with you, then it becomes something that's kind of really powerful. And because you actually have money locked up in the system, you can incentivize a third party validator set, like kind of like a big four accounting firm, but on a global scale, or even just incentivize whistleblowers, you now have a pool of financial incentives that would encourage people to do the work, to make sure that projects are being legitimate and they're

following the rules of the system. If you and I have a project and we're interfacing with this, and we've got the economic incentive that is staked, we do something nefarious and we lose that we booted out do you think that because i think of it as kind of a carrot and stick and the stick is it the incentive or the uh economic loss or is it the ensuing reputational impact that comes from the economic loss to the both today it's probably just the economic loss okay because if you can build a network effect around this and it hits scale then it becomes reputational loss got it because it's basically saying it i'm trying to think of like a comparison but it's you know like delisting yeah delisting off a stock or if you're some sort of uh you know

bad actor or something from raising capital or whatever got it okay um where are you guys today right in terms of what you've got built um you guys just launched the new website and stuff so kind of walk us through the product offering as it is today and then kind of let's just touch on how you see this evolving over time and what work you guys have ahead of you sure um so you know You know, I've always been a firm believer that data without any type of context is useless. And, you know, narratives without any type of data is also equally useless. And we've got a lot of that in the industry on both sides, right? Get off Twitter.

Yeah, exactly. I've been on diet Twitter, so I go on every once in a while. But I've been trying to limit my intake. You know, I generally think that we're coming at this from three angles. So we've got curated news research analysis, very tightly synthesized and tagged and categorized so that it's easy to search and it's easy to come up with a repository of information if you're trying to get smart on a person, a project, a company. And so this is what I'll call third party or external media, right? So this is everything from the Bloomberg, the Block, all these different media outlets that are producing. Aggregated, summarized, tagged, categorized.

And then you guys are doing proprietary research and also some summarized news yourself. Yeah. I mean, I'd say that like our newsletter is a synthesis of, of everything that we see on a daily basis. And it's, it's, you know, it's also, you know, primary marketing channel, right? Yep. How do people find the newsletter? It's very good.

It's one of the only ones I open every day. Uh, it's right at, uh, above the folds, uh, top of the homepage, Masari.io, um, sign up by the way, that's how you pronounce it. Yeah. It's, it's, it's very sophisticated. I wish I had an Italian. I'm not even, no, I strike that, edit that out, that botched Italian accent impression. All right, so you've got the news.

Do you know where the name Masari comes from? I do not. This is fun. Well, you just said Masari Ferrari, so that's where it came from. Well, so it kind of plays off of the merchants of Venice. So the Venetian merchants were the ones that popularized double-entry bookkeeping. Um, and, uh, actually it's, it's fascinating because a Franciscan friar, Luca Pacioli, uh, was the one that actually wrote down the Venetian playbook, uh, for accounting and

popularize that. And he was able to popularize it in large part. And it stuck because, uh, for the longest time, merchants were not exactly the most revered professions, right? Money changers, et cetera. Um, and he kind of changed that because he was able to convince people that clean books was not just good business but kind of a moral imperative if you're going to trust the people you're doing business with and obviously you know that is a big reason that we had a capitalist

explosion and the you know after the 14th century and the renaissance that was a great marketing ploy by him to change the narrative there oh yeah phenomenal right and so that's what we're trying to do with crypto right but instead of double entry we're talking about triple entry accounting using these uh these public ledgers how do you actually parse them how do you build standards around them um my favorite thing my favorite thing is the first time you say triple entry accounting to anybody in finance they look at you like you've got two heads what the hell is that yeah and then when they look at it like oh it's actually pretty interesting yeah exactly yeah maybe we wouldn't have had a financial crisis or maybe the next one will be so much worse we don't

know yet we'll get there in a second all right so let's go back to the product itself so you've got the news summary analysis is what you stole. So there's curated content and then quantitative data, which is markets data and blockchain data primarily, but also other bits of information. So that's primarily on chain effects. Okay. How do you get the quantitative data? So if it's markets data, it's exchange integrations pulling from their APIs. If it's blockchain data, we're spinning up our own nodes for all the major networks and then parsing those data sets and, you know, throwing them into a database and, and running our own queries. Um, and then, uh, you know, over time, I think we want to add more and more, uh, data feeds.

So, uh, you know, there's a really interesting company called Hive that does, uh, Twitter rankings, but based on, uh, instead of like page rank that Google has, it's kind of like people rank. So they do the rankings, not based on number of followers, but on who, you know, do you have really high quality followers and vice versa? And so like they've created this, this web so something like that if we're talking about um people data then you know we'd plug something like that in hopefully um and i think we want to continue to do that with with you know very high quality data feeds um whether it's ours or somebody else's well the beauty of this is you're taking a hybrid approach you can integrate or you can build it out yourself and i'm guessing

is that you can the default is you're going to build it yourself unless there's something that's better. Yes. Right. That's a good way to think about it. Okay. Uh, all right. So you got qualitative data, quantitative data was a third. Uh, and then there's this, uh, disclosures library, right? So it's the first party, um, disclosures from the projects themselves. And we kind of put that into its own category because it's, uh, it's relatively static information. It shouldn't change too much, but as soon as we have it and we can consistently go back and, and, you know, check against it, um, then, you know, we can build software around it that makes that ongoing disclosure headache go away long-term.

So let's talk about this for a second, though. You and I have got a project. We kind of do everything we're supposed to do. We put the disclosures out there. They know who the founders are, what the supply is, what the treasury is, the whole nine yards. When we go to, let's say, sell some of the treasury, how does the product or other people in the ecosystem

know that we sold some of the treasury if we don't report it? You don't? Okay, today. Yeah. And the incentive- So one of the fields in our application is what are your treasury wallet addresses?

And then- So we can just look directly at the blockchain. And you periodically will check. And because we have these nodes spun up, we will just flag those wallets. And if funds move, then we, you know, would send a ping to the system and could reach out directly to the project and say, Hey, was this an internal transfer? Was this a distribution? Did you just do some type of business deal where you had to transfer this? Like what, you know, help them tag and categorize. This is the fun part about this entire industry, right? Is what you basically. And by the way, this is only, this is only from the project itself or like whoever's making these attestations. So, you know, no one's speaking on behalf of the entire token supply because once it's out, it's out. And that goes back to the comment I had about, you know, these assets existing on a, on a continuum, right? Probably all start fully centralized and look a lot like a security. And that's why we have things like the SAFT long-term fully decentralized. That's at least the goal.

Yep. And, and, and so if we can help in that path, should a project, should there be any person, company, entity that files or, or, you know, does any disclosures with us once the treasury token supply is depleted or, or an entity no longer officially exists to control the development roadmap? Probably not. Right. And so you could have projects that no longer do any type of disclosures in Masari, not because they decided they were going to be opaque, but because they didn't have any stake, like who's to speak on behalf of Bitcoin, that kind of thing. Yeah, it's funny because what you're essentially doing is you're getting people to opt into a disclosure system when there is a low likelihood of nefarious activity, right? in the beginning early when there's more centralization everyone's gung-ho about doing the right thing they're probably fundraising or just fundraiser kind of all that stuff and the longer or the farther you get away from that point in time the more important it is actually that they already opted in right because now you actually are you kind of got your hooks in and so if they start to do things that maybe they actually wouldn't necessarily um disclose

you can detect something happened right and kind of figure that stuff out i wouldn't i wouldn't frame it quite like we have our hooks in, right? Um, maybe this is just marketing speak, but no, seriously, I mean the, the projects that we're working with. So we're going to announce our first dozen or so, uh, uh, the week of consensus invest here, uh, in a couple of weeks. Um, they're all projects that are already pretty transparent by design. The issue is there is no single place to host all that information. Um, no one has represented that they would build an open source project, uh, out of something like this and truly make this freely accessible to anybody. And really very few companies have the cloud or the distribution channels to actually

brute force something like this into existence. I'd say Binance, right? They do have real clout because if you want your token traded on Binance and they tell you to do something, how high do you need me to jump, CZ, right? That's real. The question is, do you want that owned by the largest exchange? Um, or does that create an issue in terms of monopoly of information? Um, and so I think our approach to make this completely open source is, is, you know, it's going to work whether we do it or we do it, you know, with other partners and, and, you know, we can work on this together. We don't, it doesn't really matter to us because we're not making money on it. Um, we're just trying to design the system that'll actually get this off the ground and, and

ensure that uh the the industry can continue to exist and flourish and people don't go to jail listen i i think people don't underestimate or they don't understand yet how important the work you guys are doing is and i think over time it's going to become more and more obvious to more people uh so i'm cheering for you but uh thanks pop yeah it's like the only nice thing i'll say um actually never i wouldn't say that uh i want to talk about a couple of more macro type things in crypto um one you recently tweeted that uh there's a issue around bitcoin with uh fungibility and you said you're overweight monero explain what you mean by all that and kind of how you think about it um dan uh my co-founder calls this the consensus contrarian portfolio um which is

bitcoin eth uh monero and zcash right like all the basically all the true cryptocurrencies if you want to play that card. Um, and, um, you know, I, I've written about this a number of times over the course of many years. The thing that is, um, one of the things that's still kind of scary about Bitcoin is, uh, they're not, they're not private, right? So with enough forensics, you can trace most actors in the system. Um, and that's good for catching bad guys. That's not great for censorship resistance. And we already see kind of anecdotally some of this behavior play out where large institutional buyers like in the past have gone directly to the exchanges and said, give us virgin coins. And they'll pay a premium because they don't

want to have to deal with all the coin taint. Who's actually owned it, right? Has this flown through Iran or someone on the OFAC sanctions list? And so if you kind of zoom out, if this asset class continues to grow and grow and grow one of the things that is a threat um when people use crypto even though we say oh if you don't hold your keys like it's not not your keys not your crypto um most people are going to use the third-party service right and that's the other dirty little secret in the industry everybody knows don't hold your crypto on exchange but so many people do except for like the the stuff that you really suck away this and this may be really controversial, but I actually, but basically, basically if that's the system, um, you have

two types of coins, right? And so they're not perfectly fungible, which is why I made the statement about Monero. Um, I, I, I, there's definitely a lot of developers that are talking about this, but none of that, but none of the companies really are. And, and to actually pull off, uh, incorporating something like confidential transactions or nimble wimble or any of these, you know, cloaking features, um, you're going to need a broad community consensus and some the regulated entities might just say, I don't know if we can do that because that puts us in a pretty bad place. We can't use chain analysis. We can't use elliptic now. And we can't, you know, represent to regulators that we're surveilling, uh, you know, potentially suspicious transactions.

I'll buy that, that the regulated entities are not going to be ecstatic about doing it. But at some point, if you've got virgin coins and non-virgin coins, and you get the virgin coins into the hands of some party over time the number of virgin coins is going to decline until eventually it could be zero right you end up with all non-virgin coins because they've all been transacted is it something where you think at that point it's just there's one bucket of coins and it's all non-virgin coins or do you think that there's like a good actor you know where you can actually trace hey these are all good actors in the kyc the aml you know etc and then there's the we don't know bucket i think the the issue is just with enough

forensics you can basically say these are blacklisted these are whitelisted right so you don't accept these coins you think that there could like let's take bitcoin for example there could be a separation of good bitcoins and bad bitcoins for you know for lack of better terminology uh and some people will definitely avoid the bad bitcoins yeah i mean you know people were talking about this back in in 2013 um you know earlier right um but you know certainly when i when i first got in how do you actually um should you be able to track uh it's fascinating because u.s dollars right what's that 70 80 percent of u.s dollars have traces of cocaine on it right so if that if you could label a physical u.s dollar as good or bad you know how much of

the money supply would be affected and put into the bad category yeah right i always hear that stat it's fascinating and i'm i always use it i think everybody uses it i feel like it's one of those things that someone just made up and then a bunch of people said it and then it just it just happened look i've looked here's the fact is it really is it really true so he i've always used the 80 number and i look maybe this is probably six months ago uh the number has actually been decreasing which i did not expect right because you would think oh the longer period of time you know the bills are in circulation so actually it has a higher probability whatever everyone's just doing heroin now jesus i'm not even going there

all right so uh the other thing i want to talk about is um this idea of uh influence in crypto right and so there's a couple of different ways it gets applied there's like the twitter influence which is just how many followers do you have who are they and can you get them rallied up to go do something right or be excited about something whatever then there's like the hash wars type influence where can you actually get people with computing power to go your way when there's contentious hard forks all that kind of stuff and then there is what i'll consider uh logo influence right which basically means uh if you're an investor and your logo is on something that must mean it's legitimate if you're a new source and you wrote

it it must be legitimate right all that kind of stuff those are three very different types of influence but in crypto specifically the impact of exercising that influence is unlike any other industry in my opinion right so if you look at if you can get on twitter a bunch of verified accounts to tweet about a project the odds that it becomes legitimate in the eyes of people is really important and i'll use a direct example so tron there's a person who leads a project with a verified account also they start tweeting about it there's a lot of people who immediately put more credence to what the verified account is saying about that project and let's say maybe another project that has no verified account as the creator of the project how do we deal with

it right because what you're doing is you're going after transparency of information but you're talking about reputation scoring which is just a you know mathematical way to do what we all already do, which is assess brand quality and trustworthiness. But I think that with the reputation scoring, you've got to get to- I will agree that you can move markets much, much faster in crypto, at least for now. Yeah. Okay. For now it's fair. With things like just having a brand and using some of those social cues. But I would argue that part of the reason that's true is because there isn't really good data in general. And

And there certainly aren't good data aggregation or information aggregation platforms. And it's hard for the counter-narrative to fight back. Because we live in an era of fake news and everybody's opinion seems equal on the internet. I don't think reputation systems are inherently bad. We use those heuristics all the time, like the verified, not verified. This kind of goes back to the token curator registry example. You want to be on a list versus off. uh, you know, we're, we're very good at making lists. I like, um, I always say that I like the,

the token curator registry primitive because lists are probably the one thing in this industry as an application that's older than money, right? Like it's hardwired in our DNA to be able to make like, okay, this is the list of plants you shouldn't eat. Like this is the, this is the census of the village. If you don't recognize this person, then he's here to kill you. Like we're, we're, we're good at those. Um, and then, you know, that, uh, you know, that there's intrinsic value to having certain information and you know, that you have a limit on how much information you can handle. So you need those heuristics. So the question is how do we get better at actually, um, doing reputation scoring and how do we make sure that people don't get

duped by a bunch of fake accounts from, uh, an army that's, you know, trying to, to, you know, create a new world currency. I'm, I'm not going to name any names. I, you're smiling ear to ear. don't don't make me do it oh what i'm actually thinking is you know we're talking about the reputation and verified accounts is the easiest thing i think because it's on a list of verified accounts or it's not right but uh where i think it becomes really interesting and potentially dangerous depending how it's used is um you know we just sat and watched the bitcoin cash like the fork of the fork i think you guys called it right and it is some it's like half popularity contest of like i mean literally like high school politics type stuff and then it's half

like a bunch of technologists sitting around like really trying to figure out what's better what's not how's this gonna work etc and those two things clash so violently in these hard forks and they're led by people and it's all about influence i mean it is literally i believe this person over that person and i was thinking about the other day it's like we're also at the stage where that can happen because no one uses crypto. It's all funny. Okay. Explain this. It's all, it's all game right now. It's all funny money. There's no, there's no fundamentals. There's no underpinnings. No one uses even Bitcoin for, uh, transactions. That's, that's probably the one exception. Like, yes, some people are using Bitcoin in Venezuela in, you know, uh, dark

markets, right? Like, okay. That's a single currency. And still 99% of that currency is just based on wild speculation so of course narratives are going to move the markets um we've now started to say holding is a form of usage yeah that's how bad it is right yeah and it's not it's not entirely inaccurate right because you got to shore up the monetary base right like this is this you know i actually believe that there is an argument demand otherwise uh and this is the problem with all the payment tokens and this is how you knew that most And we're going to go down 99.99% until they get all the way to zero. But you can't do that really with crypto.

But basically, these payment tokens are completely worthless because there's no reservation demand. If you need to actually use a payment token to access a service, you'll only hold it for as long as you need to use the service, which is normally a split second. And then you're out, right? So if you're just converting in and out, in and out, and you don't have any reason to hold any working capital, then it's all funny money, right? And as long as people aren't using Bitcoin cash or even Bitcoin or ether and go down the list, um, yeah, then, then you're going to have a bunch of people that got paper wealthy, ridiculously, uh, wealthy from, from this asset class though. They're going to be able to throw their weight around and make, uh, wildly, uh, outlandish decisions about how to spend their money. And, and, and the game theory, it's all thrown off because these people have more money than they know what to do with. And it's now just about egos.

I think the worst part about what we saw the last couple of days, I can't imagine the SEC approving an ETF this year. I just, I can't. No way. It's not. It's just, you watch, like, you just, again, not going to name names. Everybody can look it up. But you just watch those principles, like, going back and forth. It's fucking embarrassing.

And this is a multi-billion dollar asset. Right? So if that's the current state of things, then we've still got quite a ways until you can actually put this in your 401k. Yeah, I've got a very unpopular opinion when it comes to the ETF. It's dangerous, so it should be a little bit harder to access, I guess, is my general thinking. I don't think the ETF even goes like Q1. Like I could see ETF being like another year away, right? So we're just starting Q4.

It could be much farther than people think. The only argument, I think, for the ETF is people, if you're going to drink here, if you're going to drink, do it here. We'll take your keys, right? I guess that's not a bad argument, right? People are going to speculate with these assets. Would you rather do it in a regulated, more secure vehicle that's got some rules in place? That makes sense.

Fair. And that's the argument for Bakkt and Fidelity and all these other big, legitimate institutions that are getting into the space. The other thing I could see happen that, and this goes to the 3K Bitcoin price, I could see an ETF getting approved, let's say Q1, and then we go down 50%. Right? So basically the big moment everyone expects, oh, if an ETF gets approved, then we're going to be off to the races and price is going to recover. If for some reason the ETF gets approved and it doesn't do that, then what happens? I mean, I don't do price predictions really.

i'm really bad at it forget price predictions what i'm talking about is sorry maybe i missed the back half of your question because we just had microphone issues the mic was collapsing i just thought i was having a seizure because it was just like slow motion i think we got that on video he looked at me like he did something wrong i'm talking too hard so so so the etf gets approved everyone thinks that's going to be a catalyst for price increase forget where it goes but just increase if an etf actually gets approved and then there's not a price increase we go sideways or down i think those are the types of moments that really drive the capitulation and just like like people psychologically don't know

what to do in that situation because there's been so much time and built-in expectation around that moment right um yeah just because the etf gets approved doesn't mean all the institutions start buying. Absolutely. Um, and, and, and, you know, that's the surprising thing. I think people were surprised that there wasn't more of a move on some of the news from like ice fidelity back to ice is, is, is interested fidelity, you know, as a service, uh, and there's going to be more announcements like that. And the question is, you know, is, is anybody can actually step up and start, start buying. Um, and if you just look at this from a momentum perspective, uh, until the next rally starts it's tough to see those institutions just piling in for sure none of the

major uh institutional money managers are going to try to catch a falling knife in a market where it's personality driven as we just discussed i think there's a ton of funds shutting down we're in november right now december by q2 of 2019 i think a a larger number than we expect of funds start shutting down because the high watermark issue right so basically they monetized in sure december 2017 they don't understand the economics 18 is going to happen right december 18 they're not going to make the money they thought they were going to make and then all of a sudden why am i doing this it's going to take me another 18 24 months to come back they're going to start shutting funds down and so i think that it could prolong bear market all

stuff um before we wrap up i got two more questions for you then you could ask me one which scares the hell out of me. But you wrote this blog post about how people can get into crypto. Explain your logic as to what people should do if they want to learn, get involved, et cetera. Well, I was getting a lot of inquiries on, you know, this is in the peak, right?

December, January, and all hell was breaking loose. So I started to get just bombarded on Twitter and LinkedIn and, you know, a bunch of, and, and like good intentions, you know, not, Hey, how do I make a quick buck? Like people saying, I'm really fascinated by this. How do I break into the industry? Um, and I just wanted to put my thoughts on paper, um, so I could just fire off a link. And, um, and, and so I wrote this blog post, uh, the apprentice crypto and, and it had a slant where I figured, Hey, this, if this works, I'm just going to put this out there. Maybe we'll get, you know, a handful of volunteer analysts that will help us populate some of this

research in our open data library. Um, and in it, I said, um, you know, I, I get these questions all the time. How do you break in? You know, my answer is write about this industry every day for two years for free. And, um, and then you'll, you know, probably have a few good ideas that during that time period, which is what I did. And, you know, it's kind of what you did. Um, it's what, uh, Nick Carter has done. It's what, uh, Chris Berniski has done, uh, Kyle Samani. Like if you think about like some of the, um, non engineers that have broken in and just had an insane trajectory in terms of how quickly they were able to build their networks and followings, um, because the market is so wide open and you know, you're, you're

judged purely on the quality of your ideas and kind of consistency. Um, that's probably the best way to stand out. And that's, that's the good part of Twitter. Right. Um, so, you know, leading into, into my question, when are you going to write the social media a playbook for crypto people or are you really really definitely afraid of losing all of your secret sauce i've actually tweeted people think that like i'm not open to telling actually you you i do remember that yeah i tweeted listen this is how you win at twitter and i i made a list

and it was point by point this is what you do and here's the the two things that are really interesting so one is there's just some people who are better at writing than others right and so if you writing does not just what words you use but how do you construct thoughts and and and kind of um you know layer in and refer back and do all this kind of stuff so some people are really good at that some people are horrible at it i think that your idea of just writing makes people better no matter where they are on the spectrum but twitter specifically um there's this quote that nabal i think it's nabal had it he was like you know most blog posts should just be tweets and so literally when i first started like taking twitter seriously it

was I have all these thoughts of like, oh, I should write something about X. Yes. And I would never write it. Can you just distill it to 280? 280. Well, this is back in 140. I love 280 like right out of the gate.

So it's like you can actually write a full sentence. So here's the secret. When 280 came out, I was like, come on. We could put spaces. Drop everything. We could put bullet points, spaces. Yeah. So, all right.

So we'll talk about, all right, let's talk about whoa real quick. Okay. And I do have a 1A because we were just joking about this before but my 1a would be um what tweet do you regret the most oh okay uh i actually know which one it is um but the whole thing around twitter is that blog posts you actually have to have enough substance in order for people to understand what you're saying you have to have a point and you gotta kind of hammer it home to make it

valuable. Sometimes you don't have all that. On Twitter, you can actually say something that people find interesting, not because you hammer home a point, but because you made them think about something, right? And so you have more leeway and people kind of interpret things different ways, et cetera. The second thing is if you can show people you're excited, they get excited. They might not even know what you're talking about. and so there's been a couple times i've tweeted all capital letters w-h-o-a right at the beginning of the tweet and i go down to another paragraph and i type whatever it is and it says whoa and people whoa oh okay and so it's become this running joke now that uh i've got a couple friends

who they're like i tweet whoa and there's no whoa in the engagement uh but the tweet that i i probably regret the most and it's not i don't regret it because i said it i regret it because i actually didn't write a blog post so this is one of the flip sides of normally i i like the fact that i just tweeted it didn't write the blog post this is one where i wish i'd written a blog post yeah uh it's when i use the terminology uh the the uh terminology around bitcoin terrorist yes and here's why that was when you took the break so is it pretty soon after that sorry it was right around tell the story yeah so i'd come out and i'd said listen if tokenized securities work the way that i envision them working tokenized securities will be more

disruptive on a global basis than bitcoin itself and the entire argument was predicated on the fact that if bitcoin was to completely replace all money right so actual fiat currencies gold and silver it's like 90 trillion dollars or something right global real estate alone is 215 trillion so on a just a pure dollar basis you know changing real estate and completely ripping it out and having this new infrastructure is more impactful than money now the bitcoin maximus came out of the woodwork right this was like the most blasphemous thing i'd ever heard and so both in private telegram groups and on twitter all of a sudden what you got was the the propaganda machine yeah right and i actually think most of them have super legitimate arguments

i tend to agree with many of the points that they said now that i've spent more time with them and they've kind of explained it etc what just sent me over the edge was i would say something so you know some simple sentence and they would then later on in the thread refer back to what i said with a little twist right now i was like whoa i didn't say that and i'd go screenshot right now getting the whole thing you're like this is what terrorism's like it's propaganda machine and you basically bully people and you threaten and all stuff right now that's a word that everyone knows look i am it's a little it's a little loaded i'm prone to be hyperbole right but it was this is bad actually right if we all act like this it is going to scare away the people who don't understand

that you know the attrition of ideas and stuff is a good thing right it's going to scare away the masses um and so that's one where i wish i had really taken the time to write out hey here's what happened here's why it's important here's why i'm using this terminology and here's what we need to do differently about it now the funny part about that is most of the people who are offended i've now become friends with and they've kind of come a little to the center of thought i've come a little to the center of the thought are you not friends with anybody i'm friends with I'm saying that as a good, I'm saying that as a good thing.

Yeah. The best part about it's tough to meet you in person. It's tough to meet you in person and not be like, I kind of want to have a beer with pop. Well, I just think that that's why so many people like coming on the podcast. If you're positive. Yeah.

Other people, no matter how much they hate, how much they have negative connotations, all stuff. You can kill people with kindness. I believe that I need to get better at that. I just have way too many battle scars. So I have too much snark in my blood.

You'll love this. Ready? This is my girlfriend's going to listen to this and she's going to roll her eyes and might go to the back of her head. Right. I texted her one day and I said, I hope you're having a great day. And she literally responded, LOL. That's what you tell the trolls on Twitter.

I was like, I've gotten myself into position. Did you just copy paste it from like a tweet? That would have made it so much better if you accidentally had like the at somebody else and sent that whole thing just as like a copy paste job. I would have been good. I was like, are you kidding me? I've now gotten myself in a position where I can't say that without her thinking that I'm trolling her.

Look, man, there is there. You can't have too much of a good thing, I guess. Listen, it's a long positivity, short everything else. So we're good to go. Well, makes it fun for your guests too. Yeah. Look, thank you so much for coming. People have to go watch the video because when the,

when the microphone fell, that was pretty epic. We'll we'll get a couple of screenshots and hopefully make a meme out of that at some point. All right. I just felt like I had to do that then he just did the finger guns at the, at the video. So it's, it's been a long week. I appreciate it. I'm awful. We'll do this again soon. On that note, maybe there will be a part two. Thanks. Thanks, Bob.

All right, guys, we're back here with John Belizer, the CEO of Saluna. Again, you can find them at saluna.io. So John, why exactly are you guys choosing to mine Bitcoin with your renewable energy sources? Well, first of all, I get that question a lot, especially talking to renewable energy investors, why Bitcoin on a great energy site like this. And the thing that I always say is, well, you may not know this, but Bitcoin is a multi-billion dollar industry. In fact, every year, $5 billion of revenue is generated from mining that currency alone. And they only represent about 50% of the whole market. And on top of that, if you look at the ecosystem around

that billions of dollars is generated in profit through the sale of ancillary and supporting technologies to the industry. So it's a real ecosystem that just so happens to need unlimited and low cost energy, and that energy should be renewable. So that's one way I answer the question. The second way I answer the question is I get them to think differently about a typical renewable energy project. Most renewable energy projects, you have to find a great site, which in our case, we just so happen to have. Then you have to connect that resource to the grid and find someone to buy that energy. So we're talking about 900 megawatts of power. You can't just put 900 megawatts of power to the grid. But let's say you did. In the traditional sense, governments would

pay you very large feed-in tariffs, the rate that they pay you for putting that energy online, or support you with a number of subsidies, for example. Well, that's kind of come out of favor in the world right now, generally because governments are somewhat bankrupt, if you will, and so they can't support that. And that's put a huge depression on the profitability of a traditional renewable energy project. What we're saying is, what if you could combine everything you normally do? So you can build an energy site, put that to the grid, sell it through a host of different commercial offtakers that would buy the energy, but also combine it with a co-located, vertically integrated computing center that would also generate revenue.

What that does for you is, number one, you can start generating revenue from day one, so you don't have to wait until you find that grid offtaker, if you will. But then you can use the grid to sort of offset the volatility of cryptocurrency. The net result is you have a much more successful, potentially way more profitable energy infrastructure project. So those two answers together kind of form the basis for Soluna's business model and also drives the opportunity to build something pretty unique in the whole blockchain ecosystem space. Got it. No, it makes complete sense.

Thank you so much. And again, guys, you can check them out at soluna.io. Hey, everyone. Pomp 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

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