The Wolf Of All Streets - How Matthew Roszak & Jeff Garzik Are Building A Super Empire In Crypto | Live Panel

Episode Date: January 19, 2023

Follow Jeff Garzik & Matthew Roszak, co-founders of Bloq: Jeff Garzik: https://twitter.com/jgarzik Matthew Roszak: https://twitter.com/matthewroszak ►► JOIN THE FREE WOLF DEN NEWSLETTER https://www.getrevue.co/profile/TheWolfDen  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  #Bitcoin #Crypto #trading  Timestamps: 0:00 Intro 2:00 Bitzlato 4:20 Bear market 7:00 Decentralization renaissance 19:30 Institutional participation 25:50 Peter Thiel’s trade 27:00 UI/UX problem 30:00 4 pillars of crypto 32:00 ChatGPT & AI 37:00 Factory of factories 40:00 Building a crypto empire 44:30 Stablecoins and CEXs 50:30 Synthetics for the real-world assets 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.

In the depths of a crypto ice age, we'll call it an ice age, not a winter, it's easy to lose sight of the promise of blockchain technology and of the crypto space as a whole. People start to talk about it being over and that it's going to zero and that it can never come back. But there are people who have been here all of the bear markets and winters and ice ages and have seen crypto come out on top and who are actively investing and continuing to build the future of this space. Two of those people are from the block, Jeff Garzik and Matthew Rozak, absolute legends of the crypto space. I've had them both on here a number of times before, but can't wait to finally have them in the same virtual room. You guys don't want to miss this one. Let's go. What is up, everybody? I'm Scott Melker, also known as the Wolf of Wall Street. Before we get

started, please subscribe to the channel and hit the like button. Now, it'd be hard to find an OG, more OG than today's guest, Jeff Garzik. And of course, his partner who, if he didn't know Jeff, probably would have been considered one of the oldest OGs of all time because he came at the late, late date, I believe, of 2012 to the crypto space. But both of them, as I said, have been actively building in this space for almost as long as there has been active building in this space and continue to do so. They have some very exciting developments,

things that they're continuing to work on that are largely getting lost because everybody is concerned with bear markets and price and macro and the Fed. All things that anyone who bothers to zoom out will understand is completely irrelevant. I'm going to go ahead and bring both of them on right now. I've got Jeff Garzik and Matthew Rozak. Gentlemen, thank you so much for being here. Thanks for having us, Scott. Hey, Scott. Good to see you again, man. Good to see you both as well. So first of all, the most important question I can possibly ask anyone today is, have you ever heard of BitsLotto before? That was the first time for me.

Right. For anyone who missed it, the DOJ made a huge announcement yesterday that they had the internationally coordinated prosecution of something in the crypto space. And people started to believe that Binance was going to go down or that we were going to get new laws. And it was Bits Lotto, right? As we watched Celsius Voyager, BlockFi, 3AC, Luna go down, they caught the sinister criminal enterprise of Bits Lotto. But doesn't that show you kind of how nonsensical still the outside view of this space and the way that we're being approached by regulators and legislators is it's lotto yeah it's uh it was surprising and kind of underwhelming uh especially how you put it you know all the calamity we've seen this year i think you know the pacing of that it takes longer for them to catch up to the pace of crypto pace of technology and all that stuff so i'm sure we we'll see more known folks getting called out.

But yeah, that was super underwhelming. I was expecting something a little bit more saucy there, for sure. Jeff. Yeah, my Twitter was full of jokes, I admit. Like, you know, Jared Leto's brother Bits was just arrested and stuff like that because nobody had ever heard of this exchange. So that was the tenor of the commentary. building while, you know, have metaphorically having a TV in the background with the SBF FTX show and all that's, you know, fallout and accoutrements playing in the background. That's kind of metaphorically how my workday goes is you got to tune it. You got to tune a little

bit of an ear to the crazy, but you got to focus on building at the end of the day. So let's talk about focusing on building. Obviously, you guys founded The Block together, have been working together for quite a long time. Has anything in this bear market or crypto ice age, as I referred to it earlier, has any of that impacted the vision or anything that's actually being built? Or is it largely just noise because prices are down? Yeah, I think it's largely noise. Prices are down, but it's also, you know, Darwin has entered the room, right? A lot of cleansing of the leverage and, you know, some of the, I would say shenanigans in this, in this space. I think the entire lending market in this space is getting reset. That's good.

It's also pressure testing liquidity. And on top of that, pressure testing the psychology of people's intestinal fortitude on crypto. And this is like every, we know this every three or four years, this industry tests you, right? It's like, you know, 10 steps forward and then eight steps back. Most people do not want to be on that roller coaster. But if you hold on for the medium to long-term, because that's the secret in crypto. It's like just be, you know, have it be a long-term play

and all those ups and downs will kind of average themselves out because they're big ups and certainly big downs. And so I think we're in this interesting moment where the initial time I kind of felt an industry-wide kind of punch like this was with Mt. Gox. That was pretty, you know, unsettling and rattled everything, top down, left, right was it's what instigated uh losky to do uh the new york uh bit license and all that kind of stuff came out the other end of uh of docs and then uh seeing this with fdx um uh you know super underwhelming it was just fraud it was terrible it was you know um uh at the same time, the calamity it gave this industry,

the black eye gave this industry is going to take us a while to kind of get that back because we had institutions, governments, you know, big enterprise, a lot of folks leaning into this in a good way. And now I think there's, you know, people are double checking their thesis. And then I think it's, you know, that classic, you know, 10 steps forward, eight steps back in crypto. And that's kind of the moment we're at today. For the hardcore, you know, crypto OGs, we definitely think about the not your keys, not your crypto kind of mantra. We think about there's been a lot of centralized exchange failures. And one of the themes is decentralization has actually come out of this looking a little bit better, I think, than centralized exchanges. And so in some

ways, we're quietly whispering in the block halls that it's a DeFi renaissance, because DeFi and its thesis really proved out this was the anti-FTX. And even in the summer of 2020, we saw some of the SBF Alameda shenanigans in DeFi. So we kind of saw SBF's true colors 18 months to two years before everyone else and new to shy away and new to focus on decentralization and focus on building i think that that that was the right call in uh summer of 2020 and it's uh still the right call today i think and it kind of is the takeaway yeah the takeaway there was yeah uh d5 worked according to plan everything that was engineered well uh worked well and then the stuff that you know, offline in documents and, you know, people's desk drawers, you know, they're like, we should probably see what the collateral is for this loan.

And I think everybody played catch up this year. But, you know, going back to Block in terms of how that tests our thesis, and it amplifies our thesis in many ways, because, you know, as Jeff said, you know, it hardens the thesis of DeFi, of non- this better than others, are trying to engage other folks and be more salesy. And some of the deficiencies in the tech, when it's centralized or whatever, that's a bad combo. So if you have DeFi gadgetry and better wallets and better onboarding, I think that kind of deflects a little bit of the risk of what we've seen historically. But again, the form factors in crypto are still not as intuitive as we want them. So we still have a lot of work to do. And that's where I think we're leaning towards a lot of that stuff at Block. So does that mean we effectively have a massive UX, UI problem? Go back to grandma

who can't use it. And that's our biggest stumbling block at this point. I mean, to everything that you guys said, every time we've removed humans from the equation, it seems to work really well. And every time we put them back in, we get FTX and Celsius and Voyager and BlockFi and the same sort of repeated mistakes of other markets past. I think it's time that we need to get past the crypto market and start talking about the technology, which is what you guys are saying, but what can we build so that people actually use this stuff? I'm sure you guys are doing quite a bit of it. Talk about some of the things you're excited about that are being built that might

actually move us in that direction. I think we've got a handful of elements that we've been building and building towards, one of which is kind of a baseline element of staking and nodes. But as these networks push to be more decentralized and trying to create incentives for their networks, etc., these nodes are very important centers of gravity for all these networks. And then the staking elements are another way to find yield. And I think a lot of institutions, if you think of the baby step of institutions engaging in crypto again, it's probably melting some cash into crypto and staking it. They're validating, they're participating, they're getting a yield. And that's kind of like a great baby step for institutions to kind of see these mechanics work and participate.

I think from there, you get more sophisticated with DeFi. But I think that timeline has been kind of pushed out. So I think adoption of staking and these node networks is going to be, is going to continue to be a big thing. At Block, we have Block Cloud, which does staking nodes and data. And we've partnered with lots of institutional players in that space. We'll be making some announcements, I think, in the next month or two, hopefully the next month on that particular platform that we've built and the partners

that we've surrounded ourselves with. So we're really excited about institutional staking. And it's, on one hand, kind of simple. On the other hand, it's a trapeze act to get any Fortune 100 company to do that. But that's a huge opportunity in this space. It continues to be. And then the other piece I'll mention, which is kind of like an interesting way in which things are built and found at Block, where Jeff, about this time last year, had a tweet about a container you could

build for crypto and you could put NFTs or tokens, et cetera, in that container. I could send it to you, Scott. And instead of sending you singular transactions, I could send you all in one batch and pack it into one capsule. And so our team built this module called Capsule off of Jeff's original tweet and GitHub link. And that our team built this module called Capsule off of Jeff's original tweet and GitHub link. And that's how kind of some of the innovation within Block happens. We're constantly iterating on what's around the corner. And then somebody gets inspired by a piece of tech that Jeff built and kind of extends it, commercializes it, et cetera. So with Capsule, this primitive that we built, you could shuttle multiple assets. And then, so think about this.

The thing that we're working on there is rerouting and getting finality on transactions. So if I send it to you, Scott, but I sent it to your wrong address, I can now reroute it to your right address. Or I could say, I'm going to send it to you, but you can't open it for three months. And so you have this whole open design space on composable assets. So what I stuff in here and then composable transactions, how it gets to you. So the composability at both ends is something that could help with the safety security of transactions. Obviously there's safety security of transactions. Obviously, there's safety security concerns on one direction, but on the other side, you kind of have more control

when you're parting with crypto. Because everybody, I think, has that moment where right before you hit send, you kind of have that moment of truth. And this will help kind of manage that a little better. Yeah to the day i love didn't you guys call it tupperware for crypto i remember seeing that that's a yeah it's kind of like a shipping container for crypto or something like that you can put whatever you want inside you can seal it and lock it shut you can reroute it to different destinations and uh eventually you can crack it open and there's your ERC-20s, your NFTs, your other digital assets. That's extremely cool.

Matthew, you talk about institutional adoption. It feels to me like yield has become a four-letter word in crypto, right? And that everybody's staying away from anything called yield, even to some degree Ethereum staking, because they're probably conflating it with what happened in CeFi. And of course, yeah to some degree, Ethereum staking, because they're probably conflating it with what happened in CeFi. And of course, I mean, you have short-term bonds yielding over 4%.

So I guess the hunt for yield just isn't that difficult right now. But are you still seeing interest, actual interest right now? Or is it theoretical? Either of you can answer. In institutions coming in and actually hunting for yield, parking their money here and just waiting? I think a couple of things. One, it depends on your definition of institutions. I think crypto institutions, people that have metamask are in the game, are absolutely looking and optimizing for yield because a lot of liquidity is gone so the incense a lot of the incentives and yields in particular networks are better um so the crypto institutions absolutely there's a lot of funds that are being um raised now you know we're at a market bottom so they want to do these uh d5 funds to really uh amplify uh exposure into this and so the yield has been a four-letter word uh word but in in uh d5 it's actually been very sus

you know in a particular way sustainable uh because you're getting yield off uh lending markets um but it's getting pressure tested the the this is the first time we have a macro uh you know dynamic where might be better uh to you know buy treasuries because it's risk-free. And so historically, a lot of the incentives, a lot of the bootstrapping of these networks was meant to incentivize people to just try and kind of get into it. Now, again, I'll go back to my Darwin has entered the room. There's a clearing now of liquidity, TVL, and yield. And I think we've gone through a lot of that over the last couple of months post-FTX. But now it's a lot clearer to see where to obtain some yield, and there's new staking

projects coming out. So I think it's evolved in a good way, a healthy way, especially through this last, you know, 60 days of turmoil. Yeah, there's definitely been a separating from the wheat and the chaff, the signal from the noise, kind of a little bit of a clearing out like the DeFi summer of, you know, two, two and a half years ago, there was a lot of noise. And now the some of the survivors that are left, I hope, are bubbling up in terms of quality. And specifically, you know, that's two open source projects that Block has been spearheading Vesper, Vesper.finance, and Metronome, metronome.io. And two of those play into that space very, very pointedly and very intentionally. You know, having lived through, what, four market cycles now in 12 years of crypto, it's, again, you know, I come back to Matt's kind of Darwin at work,

is we go through these cycles rapidly, but again, the quality gets separated out at a market bottom. And the people that are left swimming in the pool after a lot of the water goes out are the lifers like us who are dedicated to the space and who see that, and I know people are maybe tired of hearing this,

but I still believe it. We're still early. We are absolutely still early. We're still talking about BNY Mellon or JP Morgan experimenting with Ethereum staking. I'm just making up those names. They're just now putting a toe in the water and they're not even at the point of using DeFi, which is the next logical step. So they're just now getting, they were comfortable regulatory wise, institution

wise with Bitcoin. That's now expanded to Ethereum. That's now expanding to some of the staking gadgets, proof of staking, etc. Institutions just move far, far more slowly than crypto, DGINS, retail, just about every other player. And I think the FTX, SBF situation pumped the brakes a little bit on that. Not a lot. We're still seeing engagement from institutions. But I think there's a new level of due diligence in the room of, is this project real? Is it audited by multiple auditors? Is it beaten up left, right, and center? Or is it kind of a CEX, CeFi bleep show?

You can say shit show here, by the way. You guys are talking to a point that I've actually been sort of exploring and discussing here is I think that we cheered for the idea of institutional adoption. And we've largely now gotten that from the biggest institutions. When you're talking about JP Morgan and BlackRock and Fidelity, it really doesn't get much bigger. The problem is, I think that what we were cheering for ended up being institutions showing up and treating it like every other asset class that they're used to. And that we need, I just want to change the term, we need institutional participation, right? We need what Matthew's describing, which is where they get here, they show up, they actually use the technology,

they participate, it makes them long term stake, having a long term stake, no pun intended in the industry, rather than it's just something that they can short when they see an opportunity or something they can sell when they need liquidity. How do we, first of all, is that an accurate assessment? But second, how do we jump that chasm if it is? Because I think we got what we wished for and should have been a bit careful with these institutions. you know, blockchain web three use cases, it's very difficult for them to adopt in any material way, because, you know, they have quarterly reports, they're regulated, they're public, and they're more, they have antibodies on risk, and they're just super risk averse. And,

and quite frankly, a lot of the technology that is on the table has been, you know, in the field for months and years, not decades, you know, like they like to see most of the time. And so I think the adoption curves are weird. I think on their balance sheets, they've been, you know, having BlackRock and Fidelity and everybody starts to adopt the assets is cool adopting the technology i think is going to take a lot longer given volatility given hacks given all the maturity of the networks uh but once that happens i mean this you know will melt the face of finance let's be honest it's it's turning every bank and credit card company into software and uh it'll all you know be on on you all be on our supercomputer in our pocket. So they need to pay attention.

They can't elect, you know, this is like media companies in the late 90s when the internet was coming and saying, oh, it's, you know, we got journalists and printing presses and all this stuff. We got a network. And I think banks certainly see the same dynamic. And so, you know, they're not going to go without a fight and they're going to have some regulatory arbitrage to play through. But ultimately, when they participate in any meaningful way, there'll be more regulatory clarity. And I think that's where I think a good, it's a good excuse

for institutions as well right now. Instead of like being super innovative and engaging, they're saying, hey, it's too much risk. I'm going to wait for more clarity. And there's a little bit of that going on right now. That's the most amplified version of that in a while. Call out Fidelity for being really amazing, forward thinking, experimentive in crypto. Several years ago, the CEO, Abby Johnson, had a Bitcoin miner on her desk. They've been, you know, I think for a big institution, a big bank, they're really an example to emulate. They put a toe in the waters the right way. They experimented internally.

One of the projects in Block's history, we built Fidelity's first digital asset wallet for Bitcoin. So we got a little bit of an inside view several years ago. And they first stepped in on the charity side, then they spun up a product, then they spun up another product, and really took a risk adjusted stage approach. But at the same time, they were the first ones in the room, you know, taking that first, second, third step, and really made a commitment to kind of the decentralized digital asset future. So that's that I think is the example in the room to emulate institution wise is they're a major institution, they're regulated, they're public. And at the same time, they're within a sandbox,

innovating and taking some risks and looking at what we obviously think is the future of finance. So true. I mean, they're the ones who are participating, right? They're mining on a grand scale and basically participating in every single facet of the industry. So they might not get left behind,

like Matthew talked about. But it's an important look, Scott. I think what Jeff mentioned about Abby, it's an important look, Scott. I think what Jeff mentioned about Abby, it's like when I think about our engagement with large Fortune 500 institutional clients, if the CEO doesn't speak crypto, then the organization has no idea what to do. It has to be a top level down today because the way the hierarchies and the energies and the risk management is at these larger companies. So it's got to be top down. If it's just like innovation group or whatever, they are very limited in that. And so the best gauge of institutional adoption is can the CEO speak crypto?

And it's hard because it's a complicated tech. I had to laugh because we know that there's JP Morgan coin and they're copywriting or trademarking wallets and they're literally allowing their customers. But Jamie Dimon is the hugest hater in the world. Could you find a more antithetical position from the CEO to the company's actions than JP Morgan right now. Yeah, I mean, I go back memory banks to Peter Thiel's geriatric comments about certain, you know, folks like Warren Buffett and others looking at the technology a certain way, certain, you know, background and history and how they think about stuff. But, you know, Jamie Dimon says one thing, it seems like the bank does another. But, you know, Jimmy Diamond says one thing. It seems like the bank does another, which, you know, something that's interesting to see.

So, yeah, I think actions are probably more than words. And they got plenty of action there. Speaking of Peter Thiel, did you guys see that it came out literally today or yesterday that they had wound down their entire eight-year Bitcoin investment in his founder's fund for a profit of $1.8 billion earlier this year. I mean, he's the world's greatest trader if he sold at the top and bought at the bottom. You want to buy low and sell high, and apparently that's exactly what he did. Now we just want to see the news about them buying again over the last month. Did he do that out of his 401k again? It was Facebook and his 401k that he invested in, right? Like billions of dollars

in a 401k that's supposed to be $5,000 or $6,000 a year. The guy's got some skills. Nobody can debate that. So we talk about these huge institutions coming. And Matthew, you say, obviously, that the banks are on notice and they're going to get crushed by this technology. So what then does this look like for the average person in five years or 10 years? Maybe it's even 20. When we're at full maturity of the potential of everything you guys are building, what's the vision on a day-to-day basis for your average person who no longer has to go to their bank and can just use these things and can earn a yield and pay their bills? How does that work? I think, you know, back to your point about UI UX is I think crypto powers a lot of what you just said under the hood invisibly.

I've often said when crypto succeeds, you don't know that you're using crypto. You just, you know, you're using freedom. You're using technology that's self-sovereign and you can elect to be banked or not banked or use, you know, legacy institutions, not legacy institutions. But increasingly, you'll just engage with a product that's decentralized, audited, trustworthy, and you won't even blink an eye because it's all, to use a word from my former Linux lifetime, it's all plumbing. And really what we are are plumbers. And if we've succeeded, blockchain is invisible. If we've succeeded, crypto is invisible and you just have self-sovereign freedom. And so I think that's the ultimate iteration of this is not to get too far into the future, but Wall Street eventually runs a lot on blockchain rails. I know we've been saying that for 10 years and especially with like centralized blockchain and all that stuff. But I think the legacy world's coming around to public, open, as a level playing field, as something that you know that if you're a player

and there's another player, you're both playing by the same rules. And that is a very powerful fundamental factor of the plumbing. But again, it's just plumbing. And so I think for retail users, there'll be literally billions of retail users using crypto. It'll be stable coin instruments.

It'll be some volatiles like ETH and BTC. But a lot of it, again, will be hidden behind really advanced wallets that possibly AI powered that you say, well, I'd like to invest in these areas and I'd like to protect against these risks. And the automation just kind of carries the day with your instructions in mind. So that's a five to 10 year look, I'd say. Yeah, no, I totally agree. And I think a lot of it is wallet based. The wallet's a really important browser to all this stuff, especially the identity piece, which has been an elusive component of Web3. Everybody talks about it. We need it. It's been a kind of a clumsy approach to how we ultimately do it. But that's going to get, think going to get solved with uh with web3 tech and then and then our wallet uh with assets and everything else and i kind of go back to that one

little uh uh soliloquy i had on the four pillars of crypto you know tokenization financialization which is uh d5 orchestration which is uh dows and kind of communities and then last piece which quite frankly, with open AI and a lot of these other things, this automation piece. And then when Jeff was mentioning, like it kind of works for you, like having AI with crypto is very explosive in a massive advancement kind of way

because you have these orchestration engines, like the AI will give you smarts to say like, well, you should probably sell this token and just automatic and buy this token, or we'll have certain permutations or certain logic in there, and we'll work on that logic in that particular box. And so I think these orchestration engines

that could be used off the shelf from somebody's community or could be your own, and you start to develop the way you want to see the internet. Fast forward that, it's like, well, what internet are you connecting to? And maybe it's like your own personal node. And in your node, you have your wallet, you have your money layer, your identity layer, you have your own Siri. So you ask it questions, it informs you, it teaches it's, you know, it's, it's your own personal version of that. So it doesn't get externalized. If it does, and it wants ads, you get paid for those ads. And so that that I do this, like, wallet as a soft layer, and then this kind of

network layer as this node of, of one of, you know, for yourself on, and then this kind of network layer as this node of one for yourself on how you engage in kind of a new internet. So that is probably more of a 10, 20 year, but the wallet piece is less than 10. As a creator, I write a newsletter every single day. I've seen a lot of technology come and go in the last 46 years of my life. Chat GPT for me was arguably the most mind-blowing experience that I've had. I don't know if that's just because it's so consumer-facing and we can actually touch it. Maybe behind the scenes, AI has been doing much more mind-blowing things. But I feel like we just leaped decades ahead with AI with with the release of ChatGPT. Even for me, just acting as my editor or my first draft or things, it's just incredibly powerful. Absolutely. I've been playing a lot with

it as well. It's fantastic for generating a lot of content. I do trip up on its feature of I have to predict the next word, which is fundamentally how it works, even if I start making up stuff. And so sometimes you're trying, you know, fact, fact, fact. Oh, now it's running off into fiction land and you got to reign it back in.

And so I'm not ready to trust it with my assets just yet but uh that in stable diffusion the ai art uh was absolutely mind-blowing you you just type a couple words in and it creates for you and it's that's just upending every end of uh the creative world including the the crypto uh nft world so it's uh it's world you know no no exaggeration both of those are world changing and ultimately that is going to feed back into you know kind of the robo advisor asset management uh kind of uh mindscape where it's going to say, you know, I advise that you, you know, trade out of BTC because it looks like it's a top and Peter Thiel agrees. So, you know, yes, no. Should you follow Peter Thiel's trade? You know, that kind of thing. You'll have a conversation with your

robo asset manager, much like you have a conversation with your chat GPT instance, but it'll stay grounded. It won't start making up fiction and it'll have access to your assets. And so once it gets your approval, everything else is just gonna happen on that orchestration and automation side of things. So it's an exciting future, but I'm metaphorically buckling up because we're all

about to go 200 miles an hour. But are we going like full Skynet here? What you just described is extremely exciting until the day when it doesn't ask for your permission. Oh, so true. So true. Yeah. In all honesty, whenever anyone says the robots are going to take over, I disagree. I think that humans will get more and more creative and that'll be kind of the human value add uh economist tyler cowan in his book the average is over a recommended read he talks about man-machine teaming as being kind of the superior model and so you know the ai doesn't do anything interesting without the humans sitting there prompting it and And so you turn into, you know, the new wizards of the next decade are going to be the prompt wizards who know how to speak these

magic incantations to the AI art engine or the AI chat engine and have the right answers spit out. And that's a skill in and of itself. If any of the listeners get into AI art, it's not just draw me a picture of a cat. You have to be very explicit in the art style and the drawing style and all these other details. You really have to know some art just to produce AI art. So it's not kind of a pushy or dummy type experience. And again, I think these prompt wizards, these man-machine teams are going to be the ones that ultimately come out on top versus either humans or AI alone. So humans will always be on top. You think so, Matt? Well, I don't know if your question was, is AI or a virus going to kill

humanity? But I like Jeff's answer. You jumped a bit ahead, but sure. Go ahead. I like Jeff's answer. It might be a combo platter on that scale. But yeah, I mean, game changer with open AI and the data set they've been using is super interesting and it's about to expand whatever, a thousand X from what it's ingesting and spitting out. But I think it's a game changer for education around the world, getting the right answer. I think it's one of those things that when I first tried it, it brought me back to first email, first Bitcoin transaction.

I was like, this is one of those elements that we're not going to forget. And it felt like that for sure. I can only speak anecdotally. I was a DJ for 20 years and I started carrying the records around and the turntables and everything. And then one day, all of a sudden, you could start to do it on computers. And I still stuck to being analog, of course. And it evolved to the point where the software would do everything for you. But you still had to have a person standing there in front of the party, reading the audience and choosing what the next perfect song was going to be.

And that still hasn't been replaced, even with 15 years of advancement in that music technology. And I think it's probably a very similar thing to your point. Even if you've messed with chat GPT, one word in your prompt can vastly change the response that you get and the tone that it comes in. So I do think that that is absolutely true, that there will be the human element. But it is a bit scary, especially now when you put your money together with it, right?

To what you were talking about, Jeff, before. Now, I mean, that's a very serious level of trust. And both of these technologies are evolving so much faster than humans can really keep up, it seems. So, I mean, should we slow down or should we just let this thing go and see what, what is created? I mean, Jeff, you're building this stuff. So it's a, it's a fair question. You know, the, but at the same time I think that's, that's a little bit of a fantasy question in that the world never slows down. And so should we, could we, I don't know, we can't. So I never ponder the question. But kind of, you know, the way we think about Block, one of the ways I

describe Block is a factory of factories, such that we have, you know, an amazing group of builders at Block who are like Matt and myself, looking around corners and trying to understand what's the next human experience where we can really be additive. And that's how we arrived at this kind of factory of factories model where, again, you know, for example, two years ago, we looked at DeFi, the DeFi summer, and we saw a lot of very low quality yams and hams and other projects and said, what happens if we raise the quality level on yield farming and look at only quality yields and audit this thing 20x, that sort of thing. And so we cranked the factory crank at Block and bootstrap Vesper.

Similar story with Metronome, metronome.io, which just released a beta recently. Everybody check that out that was another situation where we looked at synthetics maker dao and some of the other synthetic uh d5 gadgetry and said we can kind of do it better so let's turn the factory crank and create a project that is really relevant for this space in 2023. So that model, we turn out projects, spin outs, et cetera. There's Lumarin, which is a Bitcoin mining hash power marketplace. Matt already mentioned Capsule,

kind of a shipping container for digital assets. Arch, which is our node and staking infrastructure. All of those really came from that core of Matt and myself looking at what do we want to build? What is the most relevant, most impactful, and most interesting and intellectually stimulating things to build, we have the team. Let's look at that shining star and build towards that. So that's really Block in a nutshell is kind of a factory of factories. And where does that kind of tie into chat GPT automation, stuff like that, is at the very beginning late 2015 when we formed block we were thinking about orchestration automation and how all that applies to crypto and only just now has the technology like chat gpt caught up so that we can you know begin to do some of the things that we were thinking about in 2015, 2016. So it's,

you know, ChatGPT and things like that are really, to me as a software engineer, those are tools that I can now take, import into Block, and build some really interesting projects based off that. So it's all just piling up cool, cool tools in a toolbox. I also love doing construction, like home improvement type stuff. Whenever there's a new tool at Home Depot that makes something 100x easier, I've got to buy it. And that's the way I feel about ChatGPT and Stable D stable diffusion, the AIR projects is that it just made a lot, several domains, a hundred X easier. And so it's going to apply to crypto UI UX eventually, I feel.

And I'll give another click for detail because Jeff said something important about, you know, how we approach DeFi and how we build towards DeFi. And when we built and launched Vesper, it was terrible UI UX, no documentation, no smart contract audits, unknown teams, the full panoply in the early days of DeFi. We obviously turned that around, known team, over 50 audits, that takes time and money, full documentation and UI UX that we think is state of the art in DeFi. And then we also scored our pools on conservative and aggressive. And two things that came out of this, people didn't care enough about the audits. People didn't care enough about conservative versus aggressive because they would short rank on the highest yield and go for it.

If you think about the risk nature of somebody with digital assets, MetaMask wallet going into DeFi, they're already risk on. Right. So so the conservative or aggressive is just like, oh, I want to short rank for the best. Fast forward to today. Those things matter a lot. The fact that we have over 50 audits, our next close competitor has three or four. And we think about things on a conservative and aggressive scale. That is now, I think, more in focus today than it's ever been before to say, how do we think about these things? How should we self-insure these things, et cetera. So some of that hard work, some of those hard decisions that we made early on are now coming out to be a good thing for making those bets. One of your four pillars, we've talked about it constantly, what I've had you on obviously is

tokenization. Do you think that any of the nonsense that we've seen over the past year could impact that or get in the way of us seeing that tokenized future that you envision, mostly because now regulators and legislators might step in and try to prevent that from happening? I mean, I think the regulators are going to focus on two areas, stable coins and centralized exchanges. And so I think it's really going to affect stable coins. And if you're a regulated public, like Coinbase, you pretty much have no issues per se. But I think a lot of the other private centralized exchanges might have to up their game. But from, you know, what we understand that they've mostly been, you know, working like a public company, think of Kraken, et cetera.

But then you see outliers with what happened with Gemini, et cetera. I think some of that stuff needs to get better rules and kind of behavioral stuff around that. So yeah, I think we're kind of in this new year post, it doesn't even feel like it's post FTX, but looking ahead past all of FTX, you know, the DeFi components of crypto is probably the piece that people want to gravitate to most because it's, you know, protocols are rules with incentives, right? So they could figure out the rules, figure out the incentives, it's transparent, et cetera. Hard to do that with a bank or a lender, et cetera. So I think the logic of that continues to permeate into TradFi and everything else to say, like, if we had anything close to that, we'd be we'd have a better outcome and a better standing today. It's yes, and that's a good thing. Like in 2013, which I was already three years into crypto in 2013, March of 2013 were the first Senate hearings for Bitcoin and crypto.

And that actually ushered in a new era of regulatory clarity and a new era of investment and both institutional, retail, professional people entering the space. And so I think we're going to see a repeat of that. We'll see regulatory clarity. And on tokenization, ultimately, I think that there'll be an explosion of investments and regulated tokens once all the dust clears. As I've been telling some of the folks connected to Washington, all you need to remove is this one technical detail in regulations, the requirement for an automated trading system, an ATS,

to trade stocks on a blockchain, you can Uniswap a stock token, a regulated equity token, as long as A, the regulations are in place, and B, you remove this ATS rule. So if we get that little technicality out of the way, it's really a green field for regulated equity tokens on uniswap where you have a management layer dcccc or nasdaq or nysc is a manager or owner of that token and they can start to stop the transfers of that token uh this little technical thing that I'm talking about unlocks a lot of investment in the crypto space, unlocks a lot of tokenization and unlocks a new level of comfort and trust in crypto in general, because you have that regulatory clarity and because you have the on-ramp that's regulated and trusted.

So I think that there's going to be, you know, some regulatory actions for sure. But once that dust settles, there's going to be so many more people with a higher level. This might sound paradoxical, a higher level of comfort with tokenization and tokens. I agree with that. Because, you know, the noise has been swept out, the chaff has been swept out, and you just have the signal, the wheat remaining. The flip side of that is it unlocks this incredible potential by just switching that one thing, but it also threatens the largest institutions on the planet by making it easy

and completely removing them from the process. We're talking about every processor, every Citadel, clearinghouses, central banks. What's funny is you're absolutely right. What's funny is you're absolutely right. And after 12 years in the space, I'm just going, oh, that's not so obvious. Oh, yes, we know that we're challenging central banks and institutions. And that's just, we got up and we had breakfast and we challenged the central bank and then we went on with our day. But that's when I asked Matthew the initial question. Now that I think we have sort of a higher likelihood of that regulatory heavy

handed approach coming. Maybe maybe that's not even true. But I mean, these guys are going to, you know, from their cold, dead hands like Charlton Heston and the NRA, they're not going to let this happen easily. There was something interesting from the press conference yesterday of the Bits Lotto, Bits Lato uh i don't even know what the exchange is called because it's so obscure uh regulatory enforcement action is uh one of the quotes from regulators was we want to get the the criminals out of crypto and i endorse that i want the criminals out of crypto too yeah you know arrest the guys that are doing frauds and scams and crime, just like all the laws on the books already engender you to. And so that's again, that's a positive thing.

That's interesting because we don't need any more laws to go after criminals and fraud. Exactly. Yeah, exactly. If it's fraud, prosecuted is fraud. Going back to the tokenization question, I was just thinking about what Jeff was talking about before with synthetics and Maker and our new primitive metronome is tokenizing and creating synthetics for real world assets, for your house, for your car for you know stocks etc and and and the uh synthetics on top of that you know it's almost like um a proxy for those assets obviously a digital native assets a lot easier for the custody and flow on stuff that's you know a token representing a real world asset there's uh a workflow between the token and then the asset. But as these systems and the adoption kind of, you know, develops and evolves, the liquidity and the assets on chain are going to be profound, right?

And then you still go into the financialization or, you know, all these things still matter. But that's a biggie where real world assets, you know, some people are, you know, we're tokenizing dollars, there's tokenized gold, there's these different uh assets are being tokenized but once real estate and other you know maybe not um obvious assets get tokenized i think it's it's really gonna um go quickly and and and i would have imagined this stuff happening before you know nfts or or d5 if you asked me five years ago i would say this would have been more of a thing and, you know, NFTs or DeFi, if you asked me five years ago, I would say this

would have been more of a thing. And so, you know, I think directly you could be right in crypto. And then some of these themes and ecosystems come out of nowhere, DeFi, NFTs, etc. They could definitely surprise you. Yeah, I can't wait to see which one comes next. He said, you know, we were farming yams and tacos only a couple of short years ago and at our NFT summer and our metaverse fall, and now AI coins are going next. So it'll be interesting to see what this market comes up with. Unfortunately, we are up against time. I'm glad we finally got both of you in the same, as I said, virtual room, but kind of the same room to join. Thank you so much for your commentary and for your vision.

I always love talking to both of you because you give me great hope that everything I think is still being built is still realistic and is likely to happen. Where can everybody follow both of you and check out Block after this conversation. Check out, check us out at block.com and some of our projects, vesper.finance, metronome.io, lumern.io as well. Yeah. And then we're, yeah, matt at block.com, jeff at block.com. And it's, I'll be clear here. It's bloQ.com. I know I said the block once earlier and I almost cringed at myself, but yes. Yeah, and I said that on purpose because it's definitely sticking a finger in that eye. I would imagine so,

especially in light of recent events over there, which we've gotten into in the past. Once again, thank you guys both. Everyone else, I will be back tomorrow morning, 9.30 a.m. Eastern Standard Time with the week in review that we do on Friday. It tends to be one of my favorite days of the week. Gentlemen, thank you once again.

Really an honor and a pleasure. I hope to have you both back very, very soon. Everyone, have a great day. Thanks, guys. You're welcome. Let's go.