The Wolf Of All Streets - Should DeFi Be Regulated? Why Germany Is Crypto Friendly | Timo Lehes, Swarm

Episode Date: December 25, 2022

I sat down with Timo Lehes of Swarm to discuss regulated decentralized finance (DeFi) and why after 10 years in Silicon Valley, Timo decided to move Swarm to Germany. Listen to learn about crypto regulation for DeFi in different countries, what Timo is building with Swarm and why he believes in total tokenization. Timo Lehes: https://twitter.com/timolehes ►► 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  #Bitcoin #Crypto #Trading Timestamps: 0:00 Intro 1:04 Regulated defi 3:15 Bitget ad 4:12 German crypto regulation 6:45 Pursuing licenses  12:10 Centralization problem 15:00 Crypto is a huge market 16:20 Why Germany likes crypto 20:50 Doing business in the US 24:36 Tokenization of everything 28:05 How to avoid hacks and scams 29:50 Ethereum and other POS protocols 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.

Swarm is the first licensed DeFi platform in the world. I spoke with their co-founder Timo and he told me why they chose to get regulated and to follow that path and why they chose specifically to do that in Germany. I had never heard of Germany being a regulatorily friendly country to the crypto industry, but he tells us why that is the case. You don't want to miss this conversation. So Swarm is the first licensed DeFi platform in the world. Yeah, as far as we are aware it is.

What does that mean? Well, it means that basically everything that we've built has been built like any kind of decentralized app as you would expect. It kind of looks and feels exactly like Uniswap or something else that you would engage with using a MetaMask wallet or any kind of like self-custody kind of crypto application or hardware device. So I think from that point of view,

like it just looks and feels exactly like everything else that's out there. And I mean, to some degree, you can argue that what it means to be regulated is that of course, we're gonna KYC everybody that's out there. And I mean, to some degree, you can argue that what it means to be regulated is that, of course, we're gonna KYC everybody that goes on there. So that's like the visible piece for the users. So they basically, as they try to use the DEX

or the OTC contract or the invest platform, which kind of has a liquid staking nodes, any of those things, as soon as they kind of enter there, it's similar to like a centralized exchange onboarding. If you go on there and you're like serious about doing something at like meaningful value level, then you're going to onboard and it's going to be the usual kind of KYC process. So it feels like a hybrid. Yeah, yeah. So it is. So that's like the visible piece, but it's like once you've onboarded, it's really just like, okay, it just looks and feels like DeFi. There's like the visible piece, but it's like once you've onboarded, it's really just like, okay, it just looks and feels like DeFi. There's like nothing else that you would be able to say,

okay, this is like wonky or it doesn't work as expected. So like AMM pools, liquidity provision, swaps, you know, the DOTC contract is maybe a little bit different because it's just like, it's a way of avoiding slippage in a pool. So it's just like a sitting order book where you take out positions, block trades, boom, boom. And then, but it's on a small contract, so. Well, it's always nice not to see the price go down 9% because of your order. Because there's not enough liquidity in depth, right?

So, which like. That's an advantage. Yeah, yeah, so for smaller asset categories, that happens, right? Yeah, all the time. So the OTC contract has that, like, that has like a separate role. I remember the early days of Uniswap. You'd go on there and be like, if you do this $200 order, you will change the price by 15%. Are you sure that you want to do that?

And they didn't allow you unless you actually had to prove that in your settings, right? If you've been following me for the last few months, then you definitely know that I've been trading and investing on BitGet. Now listen, it took me six months to decide that they were going to be the sponsor for the newsletter. But once I saw their partnership with Juventus, that they were the world's leading copy trading platform in crypto, and also that they're a top five exchange by volume, well, I was sold and I was convinced. And I've been using it ever since to dollar cost average and to invest in Bitcoin. You can also trade there with leverage, but of course,

be careful if you're going to do that. And I don't know if you saw the recent news, but they've also done a deal with Lionel Messi. Now you can get up to an $8,000 bonus using my link below and you can trade spot with absolutely no fees you also get a 15 discount on trading leverage go ahead and sign up right now using the wolf of all Streets dot info slash bitget claim that huge reward and use the world's best trading platform so so that's kind of what we built and and I think like there's a couple of ways to look at this I mean obviously behind the scenes there's a bunch of stuff going on that's more like centralized functions in terms of like AML checks

and like reporting to regulators and stuff like that. So those are the things that we have to do as a regulated entity, just to kind of stay compliant with the, so it's a German regulator, Buffin, which incidentally, I mean, as far as I'm aware, it's like really the only regulator that said like, okay, here's how we look at,

so we recognize crypto as something that's different from securities. So we don't have like the security token versus utility token conversation like here in the US at all. Your regulators aren't children, that's nice. Well, yeah, so they, I don't know where that came from,

but it's like somehow they just decided that here's how we're gonna deal with it And and it's like we recognize payment tokens recognize utility tokens We recognize all these things as digital assets and also we will classify them However as financial instruments So by doing that in basically means that if you're going to provide custody services or an exchange in Germany to kind of trade or hold custody of digital assets, well, then you need to have the following licenses. So that's what we went for. Right. And it's just like, oh, okay, so let's do that.

You're not actually custodying assets, though. But you just went that regulatory route because that was actually a more strict framework probably than what you were doing. Yeah, and also we wanted to have the ability to actually hold custody because from a user experience point of view, all us geeks and early adopters, we don't care. I mean, it's like we can use all the weird stuff. But in the end, somebody's going to want to see a Robin Hood type application that just kind of deals with everything. And that requires us to have a custody license as well. The hybrid makes a ton of sense because as much as you just alluded to the early ethos

of crypto is to be your own bank, but everyone who's their own bank generally loses all their money. People are very bad at being their own bank, at least in the mainstream if you're not very hard down the rabbit hole. You need to have both options for people. I'm a big fan of self-custody, of course, but only for people who understand what they're doing. Yeah.

And I think that's a question of maturity as well, because like in some sense, like there's an aha moment that happens if you kind of get self-custody and really kind of feel the benefits of it. So I think it's important that it's there as an option. But then again, like you said, I mean, it's like it's actually quite complicated and most people probably shouldn't be dealing with it. So why pursue the regulatory approval and go that route

rather than just becoming another anonymous, decentralized platform? Yeah, there was two reasons, really. I mean, one was like we were building a, first we built like an issuance platform for security tokens when we were in California. So basically built that as an open source project. Like here's a transfer restricted ERC20 token.

You can kind of make that an asset backed token by saying this token represents a certain portion of a private equity fund or some other asset that you want to tokenize. So that was the first thing that we built. And then once we had built that, then it was pretty obvious that, that okay so why would you want to do that because you want to have liquidity and what's the two reasons one you want to raise capital for that asset for whatever reason or you want to have liquidity for the token and then so to build a secondary liquidity market in the us under the ats broker dealer structure transfer agent all that stuff we just concluded by talking to t0 and open finance and some of the other people that this is not like the place to build that. So sad. Yeah. So we just kind of, and also we had spent like in my case, like seven years in the

Valley. Philip had been there, my co-founder for 10 years. And so we were like pretty kind of ready to move back to Europe anyway, from a personal point of view. So I think we were like, well, I'm just giggling because I'm thinking about my friends who sold houses there and had 30 offers move back to Europe anyway from a personal point of view. So I think we were like, well, it's a lot. I'm just giggling because I'm thinking about my friends who sold houses there and had 30 offers before they were even on the market. Oh yeah, yeah, yeah. 40% over, it just seems like a very different place. Yeah, yeah, yeah.

So the Bay Area is very particular from that point of view. So then we did the tour of Europe, like all the regulars like Jersey, London, FCA, Gibraltar, Estonia, Liechtenstein, Switzerland. We went through the whole kind of thing. And then, and this was in 2019. And then Germany just came out and said, we're gonna change our legislation for the financial services, kind of regulatory environment.

And here's what we're gonna do. And then they went out and said, we're gonna deal with custody for digital assets. And then we're, and we. And then they went out and said, we're going to deal with custody for digital assets. And then we kind of, our lawyer interpreted that as, well, if you do custody, you probably need to have a separate license for trading as well. So we applied for all of that stuff,

which basically also meant that even though our initial idea was to actually deal with security tokens with like rev share things for various things, being it like, you know, a boring asset, like let's say real estate or something like, or a cap table or a private equity fund or like a music license or a sports team Ticket rev share whatever it is, right? They obviously classifies as a security. That was our like original idea

But then also with the German kind of framework in place. It was like oh shit this applies for crypto and everything So then we say okay, let's and everything. So then we say, okay, let's just do everything. And then we said, okay, so the, the AMM pool, the first thing we did was just like put a bunch of crypto in it to say, oh, you can just trade on that. There's some liquidity. Regulated counterparty removes counterparty risk. And we have, you know, no AML risk. There's KYC for every,

anyone you're swapping with or trading with has been KYC on the other side. So there's not going to be any people that you're dealing with that aren't like allowed to be there uh including us people by the way because we couldn't allow us people on board because then they would be under sec purview so it's just like a bunch of stuff that we're just like okay this is pretty cool let's just launch that and then of course like i think it's pretty obvious that okay we probably need to do something a little bit more specific than that because that's not enough of a reason for people to go there.

Just because it's a regulated counterparty, you would also need to have products that were somewhat distinguishing from whatever else was already out there. So then we started building liquid staking products on a single chain. So first we launched on Ethereum, but then gas prices were like through the roof last summer. It was a hundred bucks. I'd like to swap a hundred dollars. It cost me $700. That's right. So, and liquidity provision was even worse. So I think, so then we started putting to Polygon. And once we started the Polygon port, we just decided like, so what if we build a staking product so that all the assets sit on Polygon and then you just kind of buy into staked Sol, staked AVAX,

staked DOT, and then you can just rebalance and build your portfolio in any way you want. That's a really good way to do staking because then it becomes super accessible. Just use your MetaMask, boom, go in USDC to whatever staking network that you're buying into. And then once you've done that, then you kind of sit there and kind of think about like, you know, I'm just going to do this or do I want to do something else? And that's where the other, like the DeFi benefit comes in where, okay, so now I have this token that represents my staked SOL position, which by the way, has gone through, in our case, into a BlockDemon managed validator node.

And then it sits in institutional custody as well. So it's basically like a protected asset at that point. And then you put that asset token into a, either a liquidity pool, or you can use it as collateral for bonds. Yeah, I was just gonna ask, are you staking so that you can be an LP and already yield? I mean, is that a fact?

Yeah. So you're contributing to the liquidity pool. Yeah. And that's why you're doing it. This is not a one way passive asset. It actually becomes an active asset at that point. So right. And you have obviously this background in securitizing things as non-fiber.

Yeah, so basically as NFTs I'm assuming. Well, yeah. So I have a Tradfire background, right? So I think and Philip also has a private equity background. So we we just thought about this from a securities point of view from from the from the get go. So I think we were always like a little bit different from a lot of the like the um the more extreme kind of d5 projects out there that were just like doing everything to avoid regulation and centralization yeah and i understand the centralization piece i mean look it's like

you know there's a lot of problems with centralization in in some ways and and and like the whole premise of building something That's like totally decentralized and accessible globally. I think it's like a great idea And now it's just a matter of like figuring out Okay So there are a couple of things that needs to be solved within that vision Which is like why we built for example the onboarding I think the onboarding is like what we do is we put an NFT into your wallet.

If you say, I'm going to use this wallet when I trade with you guys or any kind of regulated DeFi infrastructure, then what happens is that you get an NFT that you can't move or transfer into your wallet. That proves your KYC. Basically proves your KYC. So our smart contracts are verifying that you have the NFT. As long as you have the NFT, you can do whatever, right? So I think that's like, and that's invisible. Once you've done it, you've done it, it's gone. So it's like, so I think from a user experience point of view, it's actually really straightforward. So it becomes almost like a philosophical problem more than anything else to have a centralized DeFi implementation, because it becomes a question of like, but what about like sanctions and what about like you know the the tornado cash situation if

you were to and the way we look at it is like well if you if you put like crypto into let's say Lido or like any other kind of decentralized platform that doesn't have the same kind of AML checks that could potentially become a pretty big risk for you as a staker in that situation. And if you're an institutional staker, you probably wouldn't get it past compliance anyway, because like- No chance.

Somebody would just say like, nah, we're not doing that. And also there's no counterparty really to kind of deal with. It's a vet. Well, it's a DAO. It's a DAO and a smart contract. So I believe in trust the code and all that stuff, but it's like, there's some aspects that just like maybe need to be built and then maybe we can kind of merge towards something that's a bit more like, you know. There's nothing wrong with desiring decentralization, but also being pragmatic and understanding that we live in a real world and it's not going to fly right now.

Yeah, yeah. I think everybody wants to get to decentralization, but it feels like people are so bipolar and they don't realize it's a sliding scale between the two. Right. And most things can't start decentralized. That's right. And I think, but the value is there, right? I think in decentralization and like providing like ubiquitous access to financial services,

that's important, right? So I think like just the entry ticket for being able to build fairly complicated financial products and get decent returns for anyone, whether it's like 10 bucks, 100 bucks, or 1,000 bucks, or a million bucks, I think that's a great vision. And I think that's what blockchain does from a broader point of view. But then right now, I think we're so early in this kind of market evolution. The geeks understand the usability aspects of self-custody, and most people don't. So if you want to get to mass market, you kind of have to solve that. So it needs to look and feel more like a normal finance app.

And then the other piece is that, well, there's a lot of money sitting on the sidelines because there's so much wonky stuff going on in DeFi in terms of hacks and other uncertainties that people have no way of assessing the risk of, right? And the lack of regulatory clarity. Exactly. Because you may even assess the risk and realize that you're not going to get hacked and then be in fear of being uncompliant with a regulation that doesn't exist yet.

Right. And so, yeah, it's a double whammy, right? And so I think that's why we see that this market is way more than we anticipated initially being like only security tokens. But now we're just looking at it like more as a ubiquitous regulated infrastructure for any kind of transactions with digital assets, being it like a wrapped Bitcoin or ETH or whatever, combined with like a tokenized stock or anything like that. We don't really care because we have now kind of the regulatory framework to

do both. So we can kind of mix and match and build whatever kind of products that we feel make sense or the market feel has demand for. I've probably spoken with a thousand people in this space at some point between podcasts and interviews, and I don't think I've ever heard one tell me that German had a favorable regulatory regime for crypto. No, it's like, who would have thought, right? But I didn't, I literally never knew. Yeah.

Bahamas, you know, Malta, Portugal has good taxes, but I've never heard that Germany was favorable. Is that because you think they actually understand the space or do you think just the way that they viewed it worked for what you were building? No, well, it's like the actual origin of that, I can't really speak to. But like, here's my thesis. Okay, so after Brexit, I think Germany kind of saw a chance to become like the go-to place for the financial services industry in Europe. Sure. And so it's kind of obvious that if we do something really good from a kind of a futuristic point of view, that that will attract a lot of capital and like investment and so forth.

So that's just my kind of guess. But like what happened was actually really important because like it was so refreshing to come from the US in 2019 to Europe and the whole kind of, is it a security, it's not a security, the whole kind of how we conversation was non-existent. It was just like, here's what it is and we've defined both and if you're going to transact or custody, here's how you do it and here's what you need. And then we just kind of, okay, great, let's do it. Because really coming from the US, we realized that, okay, this is really good.

This is like super good. Yeah, it's 2022 and we're still doing that dance. Yeah, yeah, yeah. And I would argue actually we have probably less clarity now and more controversy as to what it will be. Yeah, I would agree. I think it's actually less clear now almost with all the kind of the mixed messages. And the jockeying between agencies and that's right and sort of power tripping and then yeah and then sometimes they're you know come and talk to us and then it's like

super aggressive enforcement on the other hand come and talk to us so that we can threaten you with a lawsuit yeah so fun so i think that's problematic but then the other piece was that germany is like a it's a really credible jurisdiction as well so it's not like you know not to dunk on like but i mean i think malta and Estonia- It's not the Bahamas and Malta. Exactly. Of course. It's Germany. It's not the Seychelles. It's Germany in the middle of freaking EU, which also means our vision is that whatever

they do is probably going to be very likely going to be setting the tone for Europe in general and the whole Mika framework and whatever is going on across European Union is going to be pretty much that. So we think that by doing Germany really well, we basically cover Europe and then that's it. There are people with a lot of fear about the MICA framework though. Yeah, yeah. No, I mean, look- Although the worst parts did not pass as

of yet, but the very fact that they've been discussed, I think until very recently people had fear that Europe as a whole, not Germany specifically, would be more difficult to operate in than the United States. Yeah. Yeah. And there were some things in those drafts that were really bad, like really bad. And I think some of them survived. I think there were some, if I remember correctly, some really silly stuff about enforcing KYC

regardless of transaction size. I mean, come on. You send $100 to your friend for dinner and you need to KYC your friend. And the vending machine use case, right? So like, okay, I spent five bucks in a vending machine. Come on, you're going to what? Scan the passport?

You got to KYC that machine. So it's like some of this stuff doesn't make sense because blockchain is actually a ubiquitous technology and it's easy to forget that. It's not a financial services infrastructure. It's not. It's a technology layer. It's like an internet. That's where it gets a little bit weird.

So yeah, I think there are some other things as well. The last draft with the white paper thing, that's really weird as well. So specifically, you have to provide a technical roadmap as part of your white paper. You think, okay, come on. Because I could do that. I mean- It just shows that they're completely ignorant. It's like a business plan in DC.

Everybody kind of understands what it is. Trying to fit, it's basically taking crypto and trying to fit it into a framework that they understand even though there's effectively no way to do that. You touched earlier on Tornado Cash. You sort of mentioned it in passing, but to your point, it's just technology. Oh, yeah. It's agnostic. Yeah.

Right? It's like, you know, banning cars because somebody wants to put drugs in their trunk and travel across. It is. It's like the cars, the knives and... Ban my phone because you called, you know, not mine. Ban someone's phone because they, you know, made a call about a crime that they were committing. So take away the phone.

How is it any different than that to ban code or technology? No, but I think there's going to be some serious backpedaling even beyond what we've seen already. So, you know, the code thing is like a freedom of speech thing. So there are like fundamental issues with that initial call that they made.

So you guys are licensed and regulated. Do you believe that the platforms that are not could effectively be regulated into oblivion? Certainly in some places. Yes, in some places for sure. They can just be shut down. So that's obvious.

But I still think that the market right now is becoming a bit bifurcated in the sense that you almost have to choose where you're going to operate. It's ridiculous. Do it or don't do it. But I'm also thinking that a lot of the stuff that's kind of maybe departing now in different directions is actually going to emerge at some point. At least from a customer use case point of view. I agree, but those customers won't be me

because I live in the United States, and they think we're useless children who can't make decisions for ourselves, apparently. It's unbelievable. When will Americans be able to use your platform um well we have some partner conversations with us but that's what you have to do you have to partner with a us-based company that already has the licensing how damaging is it to your business to have to operate in specific jurisdictions and have to ignore some of the largest ones on the planet. It's really bad.

So you would think that like, okay, you have a big enough market, like 300 plus million people, whatever. But that's not like a lot of our clients that come to us, basically they're like, whether they are in the, you know, music licensing business or it's like in the sports industry, they want to do something that's like a, you know, a, let's call it a fan token with some economics in it, built into it, like, I don't know, Rev Share for ticket sales or something like that, or merch or whatever. Those audiences don't confine themselves according to the regulatory frameworks of whatever the regulators came up with, right?

So those audiences are everywhere. So what happens is then you have, well, we need to be able to offer this. This actually happened already in a couple of cases where we have to cover like Europe and the US and then some parts of Asia from day one. And then it was like, okay, that's complicated. You just can't. Yeah. Well, then you're looking at like multiple filings and right. And then actually doing a one type of filing in the US and then that has like certain characteristics and lead times and things, and then do another one in Europe. And then you kind of build from there. And it becomes really complicated, right?

And that's where like the operation that we have now is like it's sufficient for what we're kind of what we set out to do. But then now our clients are telling us that you need to have a broader scope. You need to be global. You need to be in the U.S. And yeah, no, it's problematic. You talk about music licensing what's the application there rev share you know buy into your favorite artists right right royalties royalties yeah which is the worst

process on the planet for anybody who's in part of it I was in music for 20 years oh yeah I've joked about this on other podcasts like you know you would get a check for 87 cents for some listening to your song yeah 12 years ago yeah it cost 10 bucks what is this what is this check but i mean those are extremely practical use cases that should be available in every country everywhere oh yeah improve clunky and just ancient systems yeah and And also like once you have that piece in place, then you can build on it, right? So you can kind of expand from that and, you know,

make it bigger than just like the music licensing itself. And so I think, and also like we're seeing like that, like audience basis are like the new market. I mean, that's the marketing channel today. So like we go from paid to audiences so audiences is really where it's at and i think and music is just showing the way for that and because it's always been that way and sports as well but now we're seeing more and more like products just being completely like originated from within audience owners and that's kind of how

the world is is working i agree let's's pretend that you had regulatory approval everywhere or that it wasn't even an issue. What would you build? What would be the grand vision? Oh, it's just to build the financialization of everything. Tokenize everything. Yeah, pretty much. And it's like it can be just to create a very streamlined and simple way of providing, oh, maybe I should sell whatever percentage

of this future stream of that. Or we just give the flexibility to be able to do whatever from a creative point of view and not being completely restricted by regulatory and all the other stuff. So we look at financialization of different industries as a big deal. It just becomes that you can basically put an economic value to anything that has like, where somebody like a user or a customer has an emotional connection to something, being an artist or a product or a community, whatever it is, you can just like, create some dynamics that are totally different than having, you know, Facebook being owned by a bunch of people. And then, you know, all the economic value going to those owners as opposed to kind of revert flipping that upside down,

basically saying, no, the community is the value. Therefore a lot of the economic value should go back to the community, which is, you know, as you know, kind of part of the crypto vision, right? And so, but doing that for things that are explicitly securities that actually include like revenue streams explicitly and being able to do that that's what we want to do that makes perfect sense and then obviously once you've assigned a value to it in that perfect world i'm assuming then you can also take a loan against it trade it every every single basically financial service that exists you should

be able to do with everything of value that you own yeah yeah so then instead of having these compartmentalized things like like sitting with different kind of financial services providers, everything is on a horizontal layer instead. And then you can start cross-using assets and money and loans and things across, right? So it just becomes much more flexible. And it's much more user-centric at that point instead of financial institution-centric. Do you think that we get there? I mean, do you think that one day my car is outside, I send you hopefully not on MetaMask, but my car and you buy, you send me some USDC

and we call it a day and now you own the car? We're going there for sure. Yeah. So it's, I think it's inevitable because like it's a little bit like the stock broker before digital brokers came along and then it's like the travel industry before the internet came along. It's just- Remember travel agents? Yeah, yeah. It's like, when did you call a travel agent?

It's like, come on. I got married almost 11 years ago and I used a travel agent for my honeymoon. It's not so long ago. Sometimes digitization and self-service becomes a little bit too, I guess, cumbersome for the end user. But at the same time, it's inevitable. So these things are going in that direction. So I think we just need to iron it out. Sounds like there's going to be a lot of people who lose their jobs.

Yeah. Every middleman in every industry effectively needs to go find something better to do soon. Yeah. But that is sort of the key and core ethos of crypto, right? Is eliminating third parties so that we can transact directly. For sure. Yeah. And it's the whole digitization as well.

I mean, Web 2 had the same, Web 1 even had the same vision as well. So it was like, basically, like digitization removes a bunch of people in the middle. You can just access things directly. And so I think that trend is a mega trend, just continues. Well, everybody's seen how effective it's been with Web 2.0, obviously. The sort of decentralization, we won't call it decentralization,

but direct exchange of information. I never thought I'd be able to just email you something, right, and you'd be able to get it. But it gets very, people get very emotional about it when it's their money. And I think Web 3. the ability to transact that value in that same manner is really exciting, but also really scary. We've seen the reasons that it's really scary with hacks, exploits, failures.

How do we avoid all of that? Yeah. Right now, that's one of the bigger challenges. And the way that we approach some of that is by basically having these like, so, I mean, all our assets are wrapped. So, you know, part of the benefit and the problem with crypto is that it's bare instruments. If it's gone, it's gone. If it's gone, it's gone.

And it's, you know, which is the value is in there, right? So I think that's one of the things where, you know, we basically said, Okay, in order to stay regulatory compliant, we're going to wrap these assets and then put them into a contract so that like, so basically, they allow movement between whoever has been approved to acquire or receive something on the network, as per kind of our and our partners definition, right? So that's like one layer of protection because then it's not like this free-flying

better instrument that you can just hack and then move into a curve pool and then all of a sudden it's like, oh, okay. Do you get to a world where it doesn't matter what chain you're on, you can use your platform regardless? Yeah, I think so now we're Ethereum Polygon. I think like with certainly with the EVM compatible chain,

we're just going to continue like to where it makes sense. I think it's really hard to read like where this is going right now. Yeah, it's hard to pick a winner. Yeah, it is. I think Ethereum is going nowhere. Okay. I think. Okay.

I think Ethereum is good. Like we've got the network effect. It's there to stay. Yeah, I think Ethereum is here forever. Yes, true. The rest, I hope so. Yeah, but also now we're on Ethereum and Polygon. I think even that dynamic in itself was kind of a result of there's something being like a deficiency on Ethereum that we fixed by going to Polygon, right?

And I think there's some interesting stuff happening with Nier and with AVAX and some of the other ones. So I think there's like, yeah, I mean, we don't really care that much. Yeah, it doesn't matter. Because they're all proof of stake. They're all proof of stake. So like all those arguments around like the pros and cons of proof of stake and the whole kind of, you know, Bitcoin maxi conversation with like, you know, Ethereum being this or that or not being decentralized anymore or whatever happened after the merge. I think, well, let's just have it play out, right?

I mean, we're kind of application layer. We're not layer one developers. Yeah, I don't see any reason that it would benefit you to get involved in arguments between tribes and maximalists. No. Just let them do their Lord of the Flies thing and see who comes out as the winner at the end. The Bitcoin maximalist argument about decentralization kind of makes me laugh.

I'm a Bitcoiner, I think, at heart, but that's like pretending that major mining pools don't control the bulk of Bitcoin hash rate. I don't really see the difference. Yeah. No, no. I saw that like the Lido Coinbase argument about 40%- Which is valid. Which is valid. It's very. I saw that like the Lido Coinbase argument about 40%-

Which is valid. Which is valid. Very valid that 60% of the staking is seven entities or something like that. That's right. Yeah. Which, yeah, but I mean- But I think that will change. Yeah, for sure. As people start to stake more into the contract. I think there's a lot of people who have been waiting for the merge to stake their assets. I mean, we're like one week in. That's nothing, right? It's nothing. It's a new paradigm.

It was actually a huge change. I would argue it's the biggest fundamental moment we've had in this space. Yeah. Beyond the creation of Bitcoin. Yeah. Well, yeah. And then, yes, I think the mining pools,

like the consolidation or concentration, whatever you want to call it, on the Bitcoin side, there's like a counter argument there. But then again, I think what was fascinating was like with the China ban, I think just the migration of the Bitcoin hash power, that was so cool to watch as well.

It's just like took care of itself. That's beautiful, right? Yeah, if that had been a regulated market in the United States, we would have had the Fed coming in and bailing people out and figuring it out and it's my favorite argument for Bitcoin. We lost 50% of the hash rate overnight and now we're at all-time high difficulty. Yeah, no that was very cool. Yeah absolutely an incredible illustration of why this stuff is so impactful. Well I look forward to seeing what you guys continue

to build in the future and hopefully the regulation gets in line and it's not too damaging. I hope so too. Thank you so much. Thanks. Thanks, Scott.