The Wolf Of All Streets - An Epic Battle With The SEC And The Future Of Decentralized Media Platforms | Jeremy Kauffman, CEO At LBRY

Episode Date: October 13, 2022

Jeremy Kauffman is an American entrepreneur and political activist known for founding LBRY, a blockchain-based file-sharing and payment network that powers decentralized platforms. We met during Mainnet to discuss the future of decentralized social media platforms and the role of the SEC in the adoption of crypto. Jeremy Kauffman https://twitter.com/jeremykauffman LBRY https://lbry.com/ ►► JOIN THE FREE WOLF DEN NEWSLETTER https://www.getrevue.co/profile/TheWolfDen  GET UP TO A $8,000 BONUS IN USDT AND TRADE ALL SPOT PAIRS ON BITGET FOR ZERO FEES! ►► https://thewolfofallstreets.info/bitget    Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Facebook: https://www.facebook.com/wolfofallstreets   Web: https://www.thewolfofallstreets.io  Spotify: https://spoti.fi/30N5FDe  Apple podcast: https://apple.co/3FASB2c  The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor.  Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

Any creator runs the risk of being deplatformed from any of the major platforms that we use. Well, YouTube is one of them, and we've seen people removed, but this has actually been solved by crypto and decentralization. Jeremy Kaufman is the founder of Library Credits, who is actually in a very active and pressing suit with the SEC for whether their coin is a token. We talked very much about that and all of the potential of decentralized social media and decentralized media platforms. What are the problems with the centralized platforms that we have now like YouTube that you're effectively looking to replace? Yeah. Well, I mean, we just saw a ton of this happening nonstop over the last two years,

where similar to Bitcoin, not your keys, not your wallet. If you build up a following on these big tech platforms, you don't own that following. And all of a sudden, for political reasons or other reasons, that can be at risk. And so with the library system, we now have millions of content creators that own their identities, and those identities can't be taken away from them. So it's that same sort of the same thing that Bitcoin does to money we're trying to do to publishing. And we've had a ton of success. Do you find that those content creators are posting unique content to your platform or are they posting it there and YouTube and then it's a

hedge against the takedown? Yeah, well, there are definitely some that post unique stuff or post first. There are a lot that choose to post to both. So most people use it through a website called Odyssey. In fact, a lot of people use Odyssey without even knowing about the library technology behind it. Over 30 million people will watch a video on Odyssey this month. So it's getting really big. In fact, for a lot of people, it's even their first interaction with blockchain. And Odyssey has a really cool tool where if you're a YouTube creator, it can bring all of your content over and allow you to dual publish very, very easily. And so that's allowed us to onboard a lot of really great content, and then people will start that way, and then a lot of them will then go on to do some Odyssey-specific

or Odyssey-first type publishing. So library is sort of moving into the background. Yeah, we want library to become sort of more of a background technology. When you go on the Internet, you're not like, I'm going to go use HTTP. If you go and check your email the internet you're not like i'm going to go use http you know if you go if you go and check your email you're not like i'm going to go use that homework yeah so so that you're not because library can enable all kinds of things like um there's um some people in the in the cad community in the in the um in the 3d printing community which has actually become either the second or third biggest use case behind

video they're now launching their own app that's going to be, you know, oriented that way. That's also going to be built on top of the library protocol. So libraries moving into the background, becoming a more pure technology. Odyssey is the brand that has established itself as sort of the easiest way to watch and access this content. And, you know, if you're a kind of more power user, if you're the kind of guy who is not like, you know, who wants to own those keys, who wants to do full custody, there's still some library branded software. But for for kind of the normies, we're not using the library name on anything. I mean, you could argue that that's the most important thing in the crypto space is to put everything in the background.

And so we don't have to talk about blockchain anymore. We don't have to talk about crypto anymore. You can just go use it. I agree so much. Something I say a lot at my company, in fact, I've said it so much I don't have to say it anymore, is that blockchain is a how, not a why. Like blockchain is not intrinsically good. We don't do things because blockchain, right?

Blockchain has to be enabling us to do something that we couldn't do before. Blockchain has to be making something possible that's better than what came before. And users don't care. Everyone loves cars. Most people don't know how they work. Don't make people understand how this stuff works. You get it all out of the way as much as possible. And of course, there are trade-offs here. But yeah, that's the way we try to orient ourselves is get the blockchain stuff out of the way, just give people a nice user experience. Yeah, I talk about all the time the fact that a lot of things in blockchain, to me, feel like a solution in search of a problem rather than a problem in search of a solution.

Like I can build something really cool, but why? I feel that way so much. And I'm a huge blockchain optimist. As am I. It doesn't fix everything. Right. I'm here walking around mainnet. You know, I'm like, do we really need to blockchain that? Is that, you know, because blockchains,

sometimes I give introductions to blockchains, to audiences and stuff like that. And when I give it to a technical audience, I say, blockchain is the world's crappiest database technology. It really is. It's expensive. You're giving up a lot. Now, obviously you get this really miraculous property that we never had before of consensus without ownership. Fascinating kind of thing. But we give up a lot to get that. And so it's not this thing that we should do everything on blockchain.

Yeah. The censorship resistance and permission lists are amazing, but there's a reason the Visa network is so fast. Yeah. Right. And so you can't replace everything. How do you deal with then? Obviously, the idea is that somebody doesn't want to be deplatformed on YouTube. So they use Odyssey

and Library. How do you deal with copyright claims and issues that come in when you don't have that sort of centralized authority that's sweeping it and taking those? I'll talk about that. I do want to say it's not a network where it's just the fringe stuff. We're talking about over 20 million videos. There are privacy reasons that YouTube is bad. Everything we do is open source. You have more ownership. You have more control.

So there's all kinds of reasons. Just in terms of impression for people who haven't been on there, load up the Odyssey homepage. I mean, you'll see stuff that's very mainstream, nothing that's offensive. Sure, yeah. Let's not. I did not mean to imply that at all. No, I didn't say whatever. You. Yeah. Let's not. I did not mean to imply that at all. No, I didn't say whatever.

You have to give a disclaimer. You don't want people to think that it's a bunch of snuff videos and... Right. Yeah. Right. As you talked to... It's funny how this is... I think it's getting less and less this way, but there was this...

You talk too much about free speech, you get three principled libertarians and a room full of Nazis, right? And it's not... But that hasn't really been the way that this network has gone. But to bring it back to the illegal content, the way that the library network works, the content is not on the blockchain, of course. So content, blockchain can't fit it. What we do is we put metadata on the blockchain. So that's who created it, a signature, it's cryptographically verified and signed and all of these things.

And then we put a pointer in that metadata to a traditional peer-to-peer network. Where it's hosting. Yeah. And so, essentially, if someone has published something that's illegal, that metadata that, by the way, we'll find out. Part of the answer here is, well, we'll find out because the courts, of course, will have to rule on some of these things because we have some laws that are a little bit unclear. So what we do, we follow our legal advice as well as our conscience. We want to do the right thing. But what we do is since the blockchain segments that contain illegal metadata can't be rescinded, what we allow is, and this is something that both our company can do, but actually any agent can do, can issue a statement about other blockchain segments, you know, being illegal or infringing, or even just something like,

this is mislabeled, you know, right? So you can make these sort of additional statements. And then what node operators can do is they can subscribe to blacklist certain segments. So they can listen to these statements and say, for example, statements that Odyssey makes that says they've received a DMCA, and that's what Odyssey does. Odyssey says, we, Odyssey, have received a DMCA that this segment contains infringing metadata.

And then nodes listen to that configuration. If someone wants to operate illegally, or maybe you're in a country that you don't have to obey those laws, those nodes can still return those segments. But this way, people can follow the laws of their country. Us as a United States company, any of our nodes, any of Odyssey's nodes aren't going to return those segments. You talk about being a United States company, which means you're sort of at the whim of regulators, the courts, and some of that is in focus right now, correct? Yeah. And I will say, I think even being outside of the U.S., the U.S. does tend to have this attitude that,

you know, our laws. The long fingers, right. But yeah, we are. We've been in a court battle with the SEC for four and a half, more than four and a half years now, I think. It's coming to a head right now. We're like literally both sides have mutually filed for summary judgment, just like in the Ripple case. And we're going to hear back, could hear back today, and we'll hear back no later than a week from today. And this is four and a half years coming to a head right now. Can you talk about the actual case? Oh, yeah, yeah. So why you've been doing this

for four and a half years, which, by the way, is like 400 years in crypto. Yeah, it's yeah, right. We've made all of this progress and I'm dragging around an anchor trying to build a company. It has been a real encumbrance.

But basically, my company, we have our own blockchain token that powers the network. Our blockchain is old. It launched in 2016. So that's quite old in blockchain time. More than a year after the blockchain was launched. So we didn't do an ICO. And this was during the ICO boom. So we were trying to be a conservative company. We got legal advice. The legal advice that we got all the way back in 2016 was don't do an ICO, but that you can deal in the token once the network is live and if it's decentralized and sufficiently

functional. So we went on to sell the token. We made up our own rules and tried to follow them. Of course, the SEC would never comment on them, never give any feedback. And eventually, the SEC sued us. So the facts in our case would apply to really almost any blockchain company because they're saying that basically, if an entity sells the token, and any of that money then goes on to fund development, then that token is

a security. And of course, there are all kinds of people who contribute to the library protocol. Hundreds of people have contributed to the source code. The majority of people who have contributed aren't employees. So there's, and it's a very robust ecosystem where there's lots of different nodes and lots of different clients and lots of different software. And if we lose this case, it will set a precedent that's going to affect, I think, thousands of companies. It's pretty much you guys and Ripple right now versus the world, it seems like, because if either are deemed security sort of retroactively, like you said, that's precedent.

Yeah, yeah. And the SEC is actually trying to go as slowly as possible. They waited. They were going to hit the statute of limitations in our case. They originally subpoenaed us in 2018, early in 2018. And they declined to actually bring the trial until shortly before the statute of limitations was going to hit on our first- Buying time.

Yeah. Why do you think they came after you when there were literally thousands of actual ICOs that were probably unregistered security offerings? So naively, I kind of thought that by being sort of like forthright, they'd come after me last. I think it was the opposite. Don't they tell you to come in and talk to us? Yeah, that was also a mistake that we made. So I encourage you to do not listen to them when they say to come in and talk. Absolutely do not do that. We came in and we did a whole presentation and they just used that stuff against us. Never answered a single one of our questions, never gave us any, like literally I've never heard them answer any, like, because the whole fight is

over registration. They want everything to be a security. So it's like, in my view, as a kind of logical computer science mind, it's like very simple, right? Like there's this thing over here, like even the SEC, we can debate whether what they've said about Ethereum, but they very clearly said that like Bitcoin is not right. Commodity or is not a security. All right. So like logically there must be a set of steps there that like other companies can follow. Are you saying that the only way to do it is you have to launch it anonymously and hide your identity? Is that the, is that the, they can't. Because that actually seems like something they would not want. Yeah, right. Exactly. Right. Is that what you're saying? Like, tell me what you're saying. Cause

I've said, we've said we'll destroy the entire company. We'll give you our entire pre-mine. You can have every dollar in our bank accounts. But what we want is the status that Bitcoin has. If I have to blow everything up, if that's what's somehow the difference here, okay, fine. Just tell me that that's what I have to do. They won't tell you that. They'll say, seriously, it gives me an energy. Do you think they're not telling you because it's malicious or they're not telling you because they literally don't know and don't want to say anything they can set press they don't know they don't know they're making it up as they go completely and they're trying to get everything under their umbrella they want every single thing it's a power grab uh you know they want they want everything you know under under

their umbrella it's interesting because i think the perception is that that power grab stigma has come since Gensler, which is not four and a half years ago. Right. So you're saying this sort of battle for who gets regulatory control over the crypto space has existed for a very long time. And maybe now it's just become a mainstream. Yeah. I think you could argue that Gensler is worse, but you could replace Gensler.

I mean, if you would have to replace Gensler with someone radically different. Yes, it was bad before. Right? So. That's pretty crazy. So let's go ahead and say you're not a security. Okay. You know, and the funny thing is also like, I'm, all the financial stuff is cool with me, but we like explicitly tried to be the least financial thing possible. Like we're not trying to be money. I'm not trying to compete with Bitcoin. I love Bitcoin. We're not trying to be a reserve currency or any of these things. We think the idea of using a public blockchain to maintain this shared listing of content that's not owned by anyone, where everyone owns their own little piece of the catalog. I just thought that idea was so beautiful. The token has to be traded to make the system

work. You can't do a blockchain without a tradable token. And so it's like, all right, I don't want to be, you know, tell me how. How can I distribute? How can I do any of these things? It's just so, it's so frustrating because, you know, we're really trying to build something and they've just been doing their best to destroy it. And to answer, I think I didn't finish this all the way. Oh, it was the transparency, I think, that did this. I was publishing spreadsheets saying, here's what we're doing.

I was publishing these very detailed reports. And they just used all that stuff. They're just like, this idiot, he made our jobs easy. We're not going to go unwind the people who set up four different corporations and moved all the money around. We're going to go after the guy where we can download the spreadsheet right off of his homepage. Or can't you just make the argument that it's a utility token? Sure, of course. I mean, we're making that argument. I think we have a better argument. We had a third party analysis, independent analysis done, and they said a higher percentage of library transactions were used for their

intended purpose than Ethereum. Yeah. Yeah. Because which is logically- Ethereum is a much more traded- Yeah, Ethereum's traded a lot. You can trade perpetual swaps on Ethereum. And I'm not saying Ethereum doesn't have a trade- No, I think you're telling me it is also a utility token and not a security. But Ethereum is traded more than the library token is in terms of percentage of what

appears to be trading versus usage. Well, talk about something that probably is not as triggering, unfortunately, I'm sorry. What's the future grand vision for what you're building, assuming that regulators get out of the way? And is it to literally replace the YouTubes of the world? Is it to compete? Yeah. So I think what replaces is never exactly what came before. And this is also, I think this is important to remember for people who are interested in alternatives to big tech, like the straight clone. Facebook wasn't a straight clone of MySpace or like, you know, whenever- Yeah, MySpace was better but right yeah google was

yeah i love myspace i love myspace man you embed music so it will be this kind of evolution but you know i i think that um library can become this this shared global protocol for for publishing where like anyone who is who is creating things um will have a handle on that network and they'll own that handle they'll use that handle. They'll use that handle to say, hey, world, these are the things that I've made. They'll set the rules by which they can be accessed, by which they can be sold, licensed, this kind of thing. And it will become this marketplace for digital content that is not owned or controlled by anyone the same way that the Bitcoin network is, but serving this much different purpose. Do you think then that creators theoretically in this utopian future could make as much or more, I would imagine, money owning their own content and publishing on these platforms than they do

with the pittance they get on the back end from YouTube? Absolutely. Because we know that there's people who make $50 million a year plus. Absolutely. There's always trade-offs. Is it better for every single creator? I probably shouldn't make that claim on video. But I think, you know, if you look at the sort of rent that these middlemen are getting, frequently 30, 40, 50% or more, that is a share that they are getting a rent share that's, you know, sort of beyond, I think, what's appropriate. I also think that the indie content creator, the little guy, gets screwed even more disproportionately.

I think YouTube has become all about the big creator and so on. Yeah. I don't know. Is our system better for PewDiePie? I don't know. Is it better for 99, 95 plus percent of creators? I think it, I think it will end up, end up being that way. Yeah. So now that library is sort of becoming the technology in the background that we don't talk about, what else can be built using it? Can we decentralize social media? Yeah. I mean, I, I, the, the idea as in, this is some of the

active development on library currently is, is, and they're, your identities are already like fairly portable, but there's always like usability improvements to get made. And we want that, where else can you bring that identity into? What other systems can that be brought into? That's definitely something that we're pushing because the network has so many handles on it. And it's not just crypto users. I mean, these are big content creators who have established these handles who have built up reputation over time because there's this whole reputation and staking system as well. We think there's really something here and how can that be brought into other places? My attitude is not to be jealous.

I want to do things in this open way and make these things more portable and be more interoperable. It's interesting to talk to you about it because I obviously have a YouTube channel and I do not have a presence on your platform, but I believe in the ethos of everything you're saying. So how do we get me and everyone else to transfer? So it's so easy. If you go to odyssey.com, when you create an account, you can check a box and prove that you own a YouTube account

and we'll bring everything over every video, both your past catalog and going forward. So it's like literally. So you don't have to co-publish. You don't have to go over there. Yeah. So it's not all this additional overhead for you. Your channel will of course do better if you also engage over there, right? If you, you know, so it is good to, to, you know, check your notifications and reply to the comments and that kind of thing. But it's very low overhead. It's really easy. The completely non-technical, non-crypto users, this isn't like some of these Web3 wallets where there's all this complex

setup. It's very, very easy to get started. And honestly, the way that we start you is you do start with a custodial wallet. You can later download that wallet and leave if you want to, but Odyssey starts you with a custodial wallet. And so it's very, very easy. Yeah. Right. So do you think that there's a future where what you're building and others that are building similar things completely replace the platforms that are so popular now? Yeah, I think so. I think this is the kind of shift in how things are done that matches, not just in tech, but just in business generally, the pattern of how something new supplants what came before, which is like there's something new that some kind of shift from what was done before that makes it hard for the incumbent to copy it.

Because if all it was was like, oh, we figured out some new UI or some new trick or some new algorithm, they have so much money and so much time that the ability to catch up is there. Instagram stories didn't exist until Snapchat got popular. Vine was the predecessor to that. This is all, I mean, the biggest entity is just copying right that thing that's successful and incorporating it into their larger platform but because the design here requires them fundamentally giving this thing up that's essential to the status quo of their

business i don't think they'll be able to i don't think they'll do it until it's it's too late because they'd have to give like they've been moving in this direction of more and more control more and more you know sort of stricter and stricter rules right uh and um and getting you more and more uh trapped and so it would be such a switch that i just i can't see them doing it making everything open and saying like because like think about our design like if we ever became evil someone could launch you know odyssey 2 you know uh because all the code is open source it can all be forced and someone could launch, you know, Odyssey 2, you know, because all the code is open source, it can all be forged, and someone could just launch it. Could you imagine YouTube being like, yeah, yeah, just go ahead and leave, you know, just go ahead. Yeah, you can take all your content and we don't, you don't need to stay on YouTube. Like they would

never do it. Facebook would never do that. And that's why I think that there is this viability for web, for some of these web three solutions to flip the Web2. Well, it's sort of like you're the product on all of these, and then you move to yours where you actually then become the platform and you can monetize. Yeah, well, I will say, you know, there's no free lunch out there, right? So someone's got either the viewer's got to put in money or the viewer will have to watch some ads. And look, advertisers, you're going to have to watch more ads

if you're not willing to tell advertisers about you. So you've either got to pay money, you've got to watch some ads and tell advertisers about you, or you've got to tell advertisers nothing about you and watch a lot of ads. But our model, our goal is always to give people choices. So we're not going to do... Do you want to watch the ads? Do you want to watch the ads or do you want to pay?

I mean, listen, I think the Brave browser has become extremely popular in the crypto community and people make those choices in a very similar manner. Great product. Right. Do you want to be served an ad or do you want to block everything? But do you want to earn the coin or not? Right. Right.

And hopefully, I mean, this is with getting the base broader and broader, hopefully these will be the products that ultimately bring all of blockchain and cryptocurrency to the mainstream. Do you think that will happen? Yeah, I do. I think so. Again, I'm a little disappointed at times having been paying attention for a while

because right now we're going through this thing. There's this fight over credit card processing and firearms purchases, or even just people getting like the free speech union got pushed off of PayPal, you know, the other day. And it's like the fact that they're still complaining about that. And like, we haven't solved these problems with Bitcoin or some other technology. And you people would say, oh, well, Bitcoin does solve them, but not in the you know, not in the sense that people are like, yeah, it doesn't, I don't care that PayPal, like that, I want to reach that world. And I thought we would be farther there by now, you know, five or 10 years ago, we're like, cause it's the same stuff

happening that happened eight years ago. I mean, I always laugh. It's like, you, you have that friend who rails against giving their privacy to big tech, like as they're texting it to you from there. Yeah. Yeah, yeah, yeah. But I just I really want I want I want like normal people to have a little bit of Bitcoin, not as an investment, but so that like when when these kinds of things happen, you know, or like Trudeau and the truckers or, you know, where yeah, and Ukraine and charity. I mean, there's absolutely massive on unsort of seen use cases before. All of them. And I don't mean to bias them politically one way or another. It's left,

it's right, it's everything. And that to me is like, that's why I fell in love with this technology. And it's not to reinvent financial casinos or whatever, but on blockchain or some of these things. And some people are doing really interesting finance stuff. There is some really great stuff there. But I want to empower people to be doing these things. And it's frustrating that we haven't been able to make more progress. What do you think of people who are trying to build all similar type of things on Bitcoin as opposed to on Ethereum or other networks? Yeah, I think the design of Bitcoin makes it fundamentally hard. I think the design of blockchain in general makes it fundamentally hard. I don't see blockchain as a winner-take-all kind of thing. I think it's more

likely, just thinking through it from first principles, I think it's more likely that you'll have your different blockchain sort of tailored to different specific things. Yeah. The only scenario in which I see that not playing out that way is if somehow some of these sharding models work where you could actually have independent shards with different properties from other shards, but they're all then somehow part of some larger whole. That's the only scenario, I think. But I think it's more likely that you just end up having separate chains with potentially some interoperability. Let's go assume that you win your case, which maybe we'll know actually by the time this even comes out, are there any other regulatory or legislative threats that you would be concerned about once you get past being deemed not a security? Yeah, I think that's the big one and we'd be in much

better shape. There's still both money transmission issues, which are still really annoying where it's like you want people to be able to move five or 10 bucks of stuff without having all of this. And then we also will ultimately probably end up having some big court case over some of this, some of the copyright stuff. Now, we've had very few issues with infringement actually, but just because having read the laws or becoming familiar with the laws and understanding how our system works, it's just another one of those things. A lot of these things, it's like, you had a bunch of laws about sandwiches and then someone invents the hot dog or someone invents

the Pop-Tart. And it's like this kind of argument. It's like, is this a sandwich or is this a hot dog? Yeah. And it's like, it's well, you know, like this idea that you can somehow parse this out of the law. Like my answer is like, no, it's well, you know, like this idea that you can somehow parse this out of the law. Like my answer is like, no, it's just not there. Like you wrote a law about sandwiches. That doesn't answer whether a hot dog is a sandwich. We can have an argument about it, but what we should really be doing is like updating the law to just be clear. You mean the Howey test isn't a great test for, you know, 80, 90 years later for what is or is not a security with a new nascent technology that doesn't apply in any way, shape or form?

Oh, weird. It's insane. It's insane. Everything's a security, the way they argue it so aggressively, like all these collectibles should be securities. I saw someone argue on social media the other day that Teslas should be a security because you bought them expecting them to build out the electrical network, which would increase the value of your Tesla. So therefore your Tesla is a security.

Well by that rationale, every single used car on the planet because of inflation and supply chain issues is now security because you can buy a car and sell it for more six months later because we're living in the upside down. So I guess the most important final question is a hot dog and sandwich. Yes. Okay. I agree. We're on the upside down. So I guess the most important final question is a hot dog and sandwich. Yes. Okay. I agree. We're on the same page.

Thank you. Let's go.