The Wolf Of All Streets - The Future Of Web3 Is Being Built By Shahaf Bar-Geffen In The Depths Of The Bear Market

Episode Date: March 15, 2023

Join me for an exclusive interview with Shahaf Bar Geffen, a seasoned entrepreneur and a key player in the Web3 ecosystem. With over two decades of experience building successful startups, Shahaf is now at the forefront of the crypto and blockchain industry. In this insightful episode, Shahaf shares his journey and sheds light on his latest ventures. He discusses his passion for Web3 gaming, his innovative algorithmic stablecoin on the Cardano network, and his plans for regtech. Most importantly, Shahaf reveals his secret weapon for funding his Web3 businesses and achieving success in this rapidly-evolving space. Tune in to gain valuable insights from one of the industry's most respected pioneers! https://twitter.com/shahafbg ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/   ►►BITGET GET UP TO A $8,000 BONUS IN USDT AND GET MASSIVE DISCOUNTS ON TRADING FEES! 👉 https://thewolfofallstreets.info/bitget    ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd  ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #Trading 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.

If you listen to the mainstream media, you may believe that crypto is dead and that Web3 is no longer a thing. But I can assure you that there are people still building for the future the technologies that we'll be using that underlie everything in Web3. It's a meme, but bear markets are for building and nobody is building more than Shachaf Bar-Geffen. You don't want to miss this conversation and see what's being built in Web3. You started a company in 2006 called Web3. Do you think that you were the first person to ever use that term? Probably not the first, but of the first and most definitely before Satoshi Nakamoto. Most definitely.

But what did Web3 mean to you in 2006, considering we didn't even yet have blockchain or Bitcoin? Yeah, well, to be honest, it was a farce. The company did really well. It ended up being acquired by IPG. When we started it, we were three folks. And Web 2 was all the rage. And we were like, let's just call it Web 3 because there are three of us and everybody's talking about Web 2.

So let's just be Web 3. And that was that. And who knew that it ended up doing really well, lasting so many years. But it did. That's incredible. What did the company actually do, though? It was a media company.

So I started it with two other guys. One of them ended up being the founder of Iron Source that was acquired, merged this year with Unity. And the company was a media company. So we were one of the first to celebrate marketing on the internet back in 2006. So really focused on that and everything that emerged from that, like mobile, ad networks, etc. So unrelated, you eventually found crypto. I think you got into crypto in around 2016. Now you've told me that you're cynical about a lot of things, but Web3 is not one of them. So the Web3 theme has come back around for you big time. Yeah, I guess it was meant to be.

Yes, that's true. It did have some relation because when everybody started doing ICOs, it became like a marketing vertical. So we noticed that. And I have a story. Yael Herzog, one of the founders of Bancor, he did a lot of things way early. And back in 2012, I think, he sent a bunch of us an email about buying this thing called Bitcoin. And I just put it in my to-do list and never got around to this until three or four years later. Eyal also talks about aliens and other things. So there's some reason why we didn't listen to everything, right? But he did mention that.

So it was always on my radar. But yeah, actively 2016. But you're building a lot of things right now. I would say that there's been this sort of mainstream, maybe idea that Web3 is dying or that there's not as much interest. But I think that we have the meme, the bear market is the best time to build.

And that certainly has applied to you. So I know that you're working on things in gaming, stable coins, literally across the board. So let's maybe just start with one of them. Payments. Obviously, you have Coty, which is one of the more popular projects that you are the head of. Is that how you got started in crypto? Is that your first major project? Yeah, it is. It is.

So like the silver lining in everything is that I want to be where I believe adoption will happen. So that's payments, stablecoins, games, and also taking a big leap into RegTech this year because if regulation might kill adoption unless we find a way to solve that. So that's kind of what binds it all together. It's about adoption and where I think it comes from. But yeah, this is the first thing. It's a layer one that we built back in 2017 to solve consumer merchant payments, essentially to build an infrastructure that allows you to build on-chain PayPal. So that was way before L2s and we based our infrastructure on a graph to make it super

scalable. So that still is the reasoning behind Kodi. And so do you still see the same use cases and vision for payments in crypto as you did in 2017? Because obviously a lot's happened. You even talked about sort of the proliferation here of L2s and other platforms. And do you think that what you've built is still the solution for that? So yeah, how we plan on solving regulation is also

related to korea and i'll get into that but like what we learned over time is that um where now merchant is doing you know pay with crypto he just usually replaces the legacy payments problems that he wanted to solve with a new set of problems that come with crypto payments like settlement time compliance issues operational operational difficulties, and all of that. So we needed to evolve what we're doing. So to solve settlement time and all of that, obviously, we build a very scalable infrastructure. As we cater enterprises, so when we thought about our L1, the classic trilemma of decentralization, scalability, security. We can't at all compromise about scalability and security.

When we offer an A to Z solution, and this is what enterprises are actually looking for. They're not looking for a layer one. They don't need new problems. They're looking for solutions. What we call the private payment network. And that allows that an enterprise can issue maybe a loyalty token as well, a wallet, processing gateway, etc. It's an A to Z solution. And it helps enterprises because it slashes fees, it improves their settlement time,

it increases the loyalty and kind of allows them to own back their financial data that they're sacrificing now for third-party providers. Preston Pyshko That makes perfect sense. I think the next obvious topic then is stablecoins, right? Because there's a major integration there between the payment side and the stablecoin side. And since you started, Koti, in 2017, I would imagine the stablecoin boom has fundamentally changed the way that you view all of this. I remember coming into crypto in 2016, 2017 as a trader, and we just traded Bitcoin pairs because there was no such thing really as stablecoins and stablecoin pairs. And you could argue even that stablecoins have somewhat become the killer app of crypto.

So I guess talk about your involvement in stablecoins and how you think that that interplay will work out in the future. You've mentioned trading BTC pairs. And believe it or not, this was still the case in Cardano until a while back. So we just launched Jed. Jed, it's a funny name. It's come from the Egyptian word or symbol for stability. So it's DJED and you can find it on JED.xyz. So what it is, it's an over collateralized decentralized stablecoin on Cardano.

And we chose Cardano because we're still missing a big stablecoin for DeFi to flourish on. And it's doing well. It was launched about a month ago and it already captures 12% of Cardano's TVL. So it's doing really well and it helped Cardano DeFi flourish again. So we're very happy about this. What's cool about JED is it's the design. So I think it's pretty clear, especially with the BUSD thing now, that we're looking for more decentralized stablecoins than centralized stablecoins. And JED is backed by ADA and it's over collateralized. So it keeps it back because it's over collateralized 4x to 8x. So for every dollar worth of JED, at least $4 worth of ADA.

What's the problem with that? Yes, it's very safe, but it's not really capital efficient. That's the problem with over collateralized stablecoins. There is another token, it's called SHEN. And SHEN holders are the ones that provide the over collateralized to this ecosystem. They are the ones that put in all the ADA that is required. Now, why would they do that? They do that because they are the one that put in all the ADA that is required. Now, why would they do that? They do that because they are the one that picks up all the mint and burn fees from the protocol. So instead of, you know, Circle collecting the treasury bill and whatnot, it's actually the user base that collects all the earnings, all the fees that are accumulated in the platform. And this is why they provide this.

So there's this symbiotic relationship between ADA, Shen, and Jed. And this is a very novel type of architecture for a stablecoin. And it allows it to be fully decentralized. And we will launch this on other chains as well because it works. I have to ask you because it's the tough question. We just saw the algorithmic stablecoin collapse last year with Luna. Obviously, it was not 4 to 8x over collateralized. But Luna dropped a hell of a lot more than eight times very quickly, right?

We saw Luna go from $100 to less than $1 in just a matter of days. So that black swan and understanding that at least the possibility is there, how do you make sure that Jed remains a safe stable coin? Because Luna... By the way, Luna was a non-clific stable coin. This is an over-collateralized non-clific stable coin. And what's the big difference? It's the circular dependency that luna had right luna and ust uh if people lose faith in ust they lose faith in luna and vice versa right

there's a ada not he that is not reliant on jed right uh there is no reason why um if jed drops the price of ada will drop right right? There's no dependency there. ADA is very independent asset that does all other things. It has very deep liquidity, completely unrelated to Jed. So in order to de-peg Jed, you need to make the ADA price drop by at least 80% very fast. And that is a different thing than Luna, obviously. Other than that, Jet is really

decentralized. Luna really wasn't. The revenue level is different. And then there are other things. But I think the big thing is obviously the circular dependency that UST and Luna had that Jet and ADA doesn't have. You mentioned that you intend to do it on other chains. So was Cardano sort of the test case for it to make sure that it worked and to increase the TVL? Because it's kind of risky to launch initially on Cardano, right? A lot of people think that, but we actually have a long-lasting relationship with Cardano.

We actually love Cardano. We did ADA pay with Cardano. We actually love Cardano. We did a pay-to-pay on Cardano and we have a very good relationship with Cardano. It's worth mentioning that the white paper for Jed was actually

written by a research team of IOG, which is one of the founders of Cardano. That's actually the company that Charles Hoskinson is the CEO of. And in the design of JED, they were actually building the smart contract. So this was done with IOG Cardano. So that's kind of how it's built. over time yes we will build it on on other chains um especially when or where it's needed like we just saw cz uh talks about uh needing a decentralized table coin on binance smart chain for instance so that's a way to go if it's deployed on binance smart

chain or on ethereum or other layer ones would it be backed by those assets or would the structure still be where it was somehow backed by ADA? No, it would be backed by those assets. But in reality, in theory, you can bridge assets and then kind of like clock them on that specific chain. So for JED, for instance, we're thinking, what about ReptBTC or ReptEth as collateral in the small contract? But that's 2024 sort of thing to think about. That's 100 years in crypto.

2024, that's like 100 years away. I hope I live to that age. I hope I live past the next month in crypto at any given time. So obviously you now, payments in stable coins, you somehow somewhat have figured out, right? You have a plan moving forward. These are the things that you're going to be focused on. I mentioned before, actually, that stable coins are somewhat the killer app. I want to go into that a little further because as you said, things in crypto largely haven't stuck. We have these huge bubbles, right? The DeFi summer and the metaverse fall.

And what do we just have? AI coins and China coins and all these things. But I think it's an interesting interplay because people initially get into crypto largely because they hate legacy systems. They want to opt out of the dollar. But it turns out that in most places in the world, there's a lack of dollar liquidity. And what people actually want if you're in a society or a country with hyperinflation is access to dollars, right? You're not buying Bitcoin necessarily to transact.

So that has sort of evolved. It's kind of contradictory, but to me that has evolved as the main use case. So do you think that's going to continue or do you think that will actually start to see people looking for wider adoption in these places for other coins and digital assets? So yeah, I think it's very interesting because like the narrative of Bitcoin was a currency where like the idea is that nobody can inflate your currency. There's like a no supply of it, right? It's immune to decentralized inflation of assets. A lot of people assume that because of all the money printing, we'll see the dollar price actually dropping. You're probably familiar with the milkshake theory.

Dollar milkshake, yeah, of course. Yeah, everybody owes money in dollars, so dollar price actually will not drop. So I actually think we'll see more of what we're seeing right now. Bitcoin as like a counterinflationary currency solution did not actually happen. Maybe it will, by the way. And in that sense, I believe in Bitcoin. So maybe it will. But I don't think we've seen enough pain yet for this to happen. So, you know, when fear is around, usually, you know, run back to the leader to be under his wings, right, for protection.

And I think the dollar kind of serves this in our world right now. Will it be the case 10 years from now? I'm not sure. But for now, I think we'll see more of the same. I think the narrative sort of evolved from inflation hedge to hedge against monetary debasement or against money printing. And I guess you can look back at the period when they were actually actively doing this heavy money printing, how high Bitcoin went. but then again, so did everything else. Right.

I mean, Bitcoin pulled off many multiples. I think from the bottom, it was about 17X from March 2020 to the top. But even real estate on average and gold, all these things went up 40%, right? Every asset went up 40%. So I guess you just get to view it as a high beta asset against money printing. I agree. Yeah. So listen, you've also talked about other areas of Web3 where you're extremely excited and where you're building

none bigger, I would imagine, than gaming, right? I mean, that's probably arguably your largest focus at the moment. Can you talk about what you're building there and why you believe that that's going to be a major use case for adoption? So Amcage is a free native gaming studio, really AAA team, backers and vision. We're building an ecosystem of casual mobile games. So the first game, Monkey League, is launching its alpha version actually next month. Partnering with the Mates Inc. athletes. I think like 12 minutes ago, it finished an NFT drop with Paulo Dybala.

One of the co-founders is the co-founder of Playtika and also my best friend. So that was kind of obvious for us to do this. And then also competed in Series A, raised $24 million in equity from Griffin Gaming Partners, DraftKings and other leaders of the space. So GameFi and why am I a big believer in what the studio is doing? So let's start with the problems obviously, like what went wrong with GameFi 1.0, so Axie and all of that. The obvious things are that, we were talking about inflation, is that the play to earn was about inflating tokens to pay rewards.

And this is obviously unsustainable and it's a bootstrapping strategy. It's not a business model. That was problem one. Problem two was barriers to entry. Just too high, it was too one. Problem two was barriers to entry. Just too high. It was too expensive. And as a prerequisite... Yeah, just terrible UX UI. I mean, people in the Philippines found a way, but your average person isn't going to buy Ethereum, move it to a MetaMask, open a Ronin wallet, send it

over to a Ronin wallet. Exactly. I can't believe I have to do all of this to just play the game. This is a very broken funnel, right? And lastly, and that was the thing, games weren't entertaining. So, you know, players definitely needed to pay players to play the game. So I think these are the big things. Yet, if you think about all these problems, GameFi 1 was pretty big, just looking at valuation. And still, as you know, Axie is still a thing that is hundreds of billions of dollars in market cap, and others as well. But why am I very bullish about this, about how OneCage is planning to solve things? As I mentioned, the team, and Raz know, Raz is like one of the world's best game makers. He sort of invented free-to-play and the way he sees things is as follows.

Think about an ecosystem. First, you have one game. So in our case, Monkey League Soccer. Well, that's the first game. This is part of a franchise and that franchise is called Monkey League Sports. So you have baseball, basketball, football, whatnot. Then you have an ecosystem and that ecosystem has multiple franchises in it. So some you build your own, some you develop, some you buy and so on and so forth. Now how does this whole thing work? On a single game level, three things come into play. Free-to-play, skills, and free-to-own.

How does it work? The game, first of all, is super entertaining, to the extent that players are willing to pay in the game store for this entertainment, like they do in many other games in the world. Free games is actually the other way around, right? But if you build a nice free to play game, people will actually pay for the entertainment. And the idea in Monkey League Soccer is that you don't need any crypto wallet. You don't need anything. You can just download the game from your favorite app store and start playing the game. So that will be available pretty soon. So people spending is one thing, free to play. The second big thing is like

the question, like where do rewards come from, right? If you can't answer that question directly, it means that this is Ponzi-nomics. So what are we doing? The idea here is skills. So if I'm playing better than you, it means that you bought in, let's say, for a tournament, and I bought in for a tournament, but I won. So I win rewards and you don't. So I ate your lunch. So this is where rewards come from, from skill-based sort of playing. Obviously, some tokens will be there for bootstrapping everything, but over time, this system needs to feed itself. And lastly, just to make sure that barriers to entry remains low, the game is free to play. You don't need a wallet unless you actually want to interact with the Web3 economy of the game.

And there will be, and I think this is the first time people talk about this, so I hope you don't hate me in the studio, but there will be a free mint. There's going to be a huge drop of monkey athletes. They'll be non-transferable, not tradable, but this will be part of the go-to market. So in this intersection of free-to-play skill and free-to-own, this is where the single game in a franchise sits. When you think about a franchise like Monkey League Sports, you can actually port athletes from one game to the other. So today they're playing soccer, tomorrow they'll play basketball. In games it's easier than in real life, obviously, thinking about Michael Jordan moving to baseball, etc. So on the franchise level assets are portable. Now when you think about the ecosystem, the idea is that this whole ecosystem is binded with one ecosystem token

that governs all the game treasuries. So every game, every single game has its own treasury, its own in-game currency, right? So right now we have Monkey Box. But as an ecosystem, there is one token. It will probably be named SCORE. You can't buy this, there's no selling of this token. The only way to get it is by committing your in-game assets for long periods of time to this ecosystem,

and then you kind of mine it. And this token gives you access to treasuries of all games. So this is what binds this whole ecosystem together. And it's super exciting because the first game is coming now. There are conversations with multiple studios about core development of assets. I'm very bullish about this ecosystem. Monkey Bucks, you can correct me if I'm wrong, but the actual token launched quite a while ago, correct? Yeah, this was curated, you know, to be honest, this was more of a tactical decision of the team back then. Just, you know, understanding that crypto winter is coming.

So that's the best bootstrapping you can do with the currency. But the actual utility, the hardcore utility is coming around right now. You can use it right now to buy assets. So this whole Telo de Bala NFT drop that we just did, it was all paid with monkey bucks. So there is all of that but the the deep utility of the game as the car the in-game currency is coming around um april or so yeah you talked about some of the challenges obviously in the game 5 1.0 whatever you want to call it of course obviously the games just sucked.

Flat out. Nobody wanted to pay them. You're clearly solving for that. But do you see the evolution of gaming in crypto to largely come from studios like your own where we build AAA competitive games to the rock stars? Obviously, Fortnite and Call of Duty, games of that quality that then include some sort of Web3 component? Or do you think that maybe we'll see it? And the answer could be both coming from those games who finally see the light, have an aha moment and say, we need to offer some sort of in-game economy that's blockchain or Web3 based. So this is actually a question that comes in in

um in a lot of panels when you uh like industry-wide panels like is it going to be a native experience or or kind of like top-down sort of experience and and obviously I'm talking from the position of believing it's it's a it's going to be an active experience but when you're looking at you know where the big funds are putting their money, the big gaming funds, traditional gaming funds, they're actually also betting on native studios because this has always been the case, right? It's not Kodak that brought in digital photos. And most of these Web2 studios are already sitting in a position. They have the innovator's dilemma. Like, why would they? Everybody talks about disrupting their own business

and being their own competitor, blah, blah, blah. But nobody's actually doing that. Banks are not printing stable coins right now. And it's not the studios that bring this. And it's not TradeFi that builds DeFi, etc. Nobody's actually doing that. So I believe like the

A to Z story of Uncaged I think may be that Uncaged builds a very good Web3 open economy ecosystem of games. And in a few years time, regulation is solved and this whole thing kind of unveils itself as a very good thing. And then one of the big players in the ecosystem tries

to buy Uncaged. This is kind of like how I see this rolls out. Will it even be possible with tokens and everything out there? Maybe, maybe not, but we'll see. It's interesting that you've effectively still taken the other model. You're sort of a hybrid because you are allowing free gameplay for people who have no interest in the crypto or Web3 side, and that is not the approach that was originally taken. I mean, I guess I asked you about the two different directions, but you're actually threading the needle right down the middle. I think that over time, I built... Okay, so there's a good example. Scott Brown, I think, I know, made it. And it's pretty... Think about the following. Think about a soccer game, right? There's a big business around soccer,

right? But there is actually no money in soccer itself the game in itself has no money in it you can go and play with your kids or with your friends there is no expectation of any monetary value that is coming out of it it's just the pure fun of playing the game the actual business happens around the game you know with uh franchises and professional teams and players and merchandise and viewership and commercials and all that. But all of this happens around the game. It's not the game itself, it's the business around the game. And Uncaged is building the same sort of experience. The game itself, the core game, is just fun. And if people love the game, then they may or may not want to

interact with the business around the game. If they do want to interact with it because they want to be a professional esport player or because they want to own assets and maybe trade assets like scouts do, maybe they want to own stadiums and take some sponsorship fees, etc. Only if they want to do that, then they need to connect the wallet and become part of the economy around the game. But none of it will happen if the game is not fun. The soccer business would not work if soccer was boring. It's not that the business in soccer was so amazing that people started playing the game. It's always the other way around. So this is the approach of how we structure things. The core game is fun. It's free.

It's casual. It's mobile. It's something that you can just do for a few minutes. If you love it, then you can just connect a wallet. You can do that later on. So this is kind of like how we thread the needles. And I believe over time, you know, people will realize that it's not that complicated and will make life easier for them. And they will connect and will convert. And some Web 2 players will become Web 3 players. In 10 years time, everybody's Web 3 players. So then how do you solve for the UX UI problem that we discussed for those who do want to do it? I haven't seen a great solution, but I do believe we've had the zero to one moment and now we're just heading in the direction of doing it better.

But like, you know, we use the same meme, but like if grandma loves playing, you know, loves playing Monkey League, is she going to actually be able to figure out how to then monetize and connect it? So I think of it this way. First of all, I'm happy that, you know, a lot of companies out there are actually working really hard to solve exactly that. And it can be, you know, the Reddit of the world with Polygon. And there can be many other companies that really want to solve this. You know, Meta back then with DM needed to solve that. A lot of companies are trying to solve exactly that, and I'm sure some of them will. I don't actually think it's our problem to solve that because so many people are trying.

He's a third party. Right. Yeah. But what's very interesting is my 12-year-old started playing a crypto game, right? Obviously, I pushed him. And I told him nothing, really. And remember, I live in Israel. English is not his native tongue, right? He speaks English, but just because of games, by the way. And he needed to figure out like a Solana wallet connection and everything. And I deliberately gave him no guidance.

And, you know, 20 minutes later, he's connected. He doesn't even think it's a thing. It's just connected because why not, right? It took me like an hour to understand Discord because I'm such a boomer. And he does it all the time with his kids, with his friends, right? So I think it's not that complicated, to be honest. And also, it's going to be a lot easier. And lastly, it's not really the grandmothers that we aim to.

It's, you know, the 20, 30, 40-year-olds with crypto games and down the line teenagers. And you know what? They'll be fine. They'll really be fine. I mean, the people who are going to be the core audience for these games in the next five, 10 years are already so tech savvy that it's almost irrelevant. Yeah. They don't even see, to think about us trying to explain technologies to our

parents, not really getting what don't they get, right? I'm getting the same things right now from my kids that they don't get what I don't get. Right. So I think moving into the future, to the future, it's going to be a lot easier. But also like the bar for kids is a lot higher right now. They don't they just get it immediately. They're natives. They never lived in a world where computers were not connected. And they also never lived in a world that didn't have crypto. Really.

I mean, you know, your kids were, if your 12 year old was born with Bitcoin. Wow, I never thought of it. My kid was born with Bitcoin whitepaper. The first kid, right? The others. I had one with Ethereum actually. Wow. I never thought of it that way. I should have. Yeah. So they'll never be in a world where this wasn't something that existed and was relatively important or at least known to the mainstream, right? I mean, Bitcoin is on the CNBC and Fox news tickers at this point, so you can't live in your shelter under a rock anymore. Yeah. By the way, they know what Bitcoin is, or at least they're familiar with the term,

right? So it's not threatening to try and figure it out. Not like it is for Warren Buffett and Charlie Munger and the other 90-year-olds on the planet. So obviously, I want to circle back. I don't want to forget because when we were moving from stablecoins to gaming in the conversation, you said you really want to talk about reg tech. Yes. And first of all, explain what that means. Obviously, it's technology that helps be compliant with regulation, I would imagine. But what does that really mean? And why is that important? Yeah. So you're spot on. This is the exact definition. And while regulation is always not very sexy, this is actually like the next iteration of Coddy will be a lot about that.

And why is it important? Look, the pendulum shifts, right? And there is no doubt that regulation is coming to crypto and globally. So the question is, what do we do about this? Is it good? Is it bad? Are we just going to sit there and let ourselves be regulated out of existence? I think not. And a lot of people are doing a lot of work everywhere.

And we do what we do best and we're building a technology. So, you know, we had, So we had hours and hours of conversation about where cutting is, where regulation is, what is about to happen, what do we need to do. And we're thinking as follows. This is the mental model that we have right now. Bitcoin is V1. This is value, data, and then the primitive of Bitcoin is the token. Ethereum, Cardano, Solana, whatnot, this is V2, and this is computation, decentralized computation, and the primitive is a smart contract. What we're thinking with Cody is that V3 is actually policy, and the primitive is a network policy.

So what is a network policy and why is that important? A network policy is a policy that allows you to build a policy or multiple policies and to prove to any relevant third party that all actors on the network are in compliance. And why is it important to have network policies other than the obvious things that people think about financial compliance, financial regulation and all of that? And I want you to think about the status quo that we have right now. Think about email and spam. Okay? So SMTP, the email protocol, is the email layer one, and it doesn't block spam. Spam wars are fought on the app level, right? On the Gmail level,

on the Outlook level. And it means that every developer needs to solve the same problem on his own, if he wants to have a policy that does not allow spam. Now, if policy is enforced on the network level, apps don't need to solve the problem independently. Policies are developed and then audited once, and then all apps can use them. And users can also look at dApps and see

what sort of policies these dApps consume and decide if they want to interact with them or not. It does not limit your freedom. You can, as a dApp, decide what sort of policies you want to consume. So a developer developed this policy, someone developed SEC policy, someone developed privacy policy, all of that. And you can decide what you want to include in your DAP.

And then you adopt this policy. And you can prove compliance with that. And users can see the same thing and decide the same thing. Users can decide, I'm not going to interact with any dApp that enforces any type of policy, or some decide otherwise, or some institutions decide, I'm only going to interact with dApps that enforce these types of policy. Now it's very... And policy developers, auditors, it immediately creates a token economy around this that incentivizes people to create all these things. Now, it's very easy to immediately think about, okay, so regulation is compliance, compliance is AML, KYC, but it goes way deeper than that.

Web3 is innovating in decentralized social, like, you know, Noster, physical infrastructure, decentralized science, real fi, right? We're going to need many types of policies. So the potential is huge. You're going to need them in DAOs, not just in centralized systems. Yeah, that was going to be my next question. Is this really about governance? Because every single time somebody starts a DAO or starts a DAP, as you said, they basically have to reinvent the wheel. They start from scratch. They have to somehow pretend that their core competency

is coming up with a reasonable policy. They have to get everybody on board. That's a huge barrier to entry if you could just go pick and choose ones that exist and that you like. I never even thought about this. Never even thought. Yeah, and everybody's building the same smart contracts

and to enforce these policy standards, they're good. They can have bugs in there. And the definition of composability in software is that we only need to solve the same problem once, and then everybody can consume it. And the protocols, the Yale ones, what they did that TCP IP didn't do is have this token to incentivize the builders of the protocols. And you can do the same thing where the primitive is the policy. So people will be developing all sorts of policies,

financial, non-financial, social, whatnot, for doubt, nothing, everything can be developed. Things can be also be audited, right? So you can potentially have, you know, KPMG auditing a set of policies and signing on these policies. And then Dapps can consume these policies without focusing on their core competence, which is, I don't know, maybe it's DeFi, maybe it's not. But they can focus on one thing and just consume the policies that has been audited over time.

So regulators kind of like get familiar with this and KPMG has signed this and so on and so forth. And you can incentivize builders to do so. So this is what we think may be. And again, I'm agnostic to the question whether regulation is good or bad. Right? It's

just something I acknowledge the fact that it's coming. And if we don't align and think what sort of structures we can put in place so when the hatchet falls, it just doesn't kill everything. We need to be proactive. And this is the mission that we see in Codi right now. How do we take the next iteration of our infrastructure that we plan on revamping anyway and have these sort of things ready there? And it doesn't mean that people will have to move all their TVL to Kodi.

The idea is that our chain can interact with multiple chains, EVN compatible, non-EVN compatible, etc. So TVL can remain on whatever it is, but it interacts with our chain with relayers and everything. Let's not bore everybody with this, but we're very pragmatic and practical in how we see this. Because when you sent me the idea of reg tech, when we just started talking about that, I assumed we were talking about SEC regulation and government regulation, but this is effectively, so I was wrong. It's effectively self-regulation to get

ahead of what's coming there or to guarantee that when that hammer drops, you are compliant. Yeah. And also like, it's kind of like, okay, let's look at reality. What sort of structures we have in reality, right? In physical world, not reality. And we have all these social structures. It's not all based on contracts, right? When you want to cross the intersection in green light, you don't sign a contract with all other drivers out there. There's a policy for that, right?

Green, you drive. Red, you stop, et cetera. And this kind of helps things move. There's some standards that are already happening out there. And that is actually freedom. This sort of compliance actually brings in freedom because you don't need to worry every time you cross the road, are you going to get killed? Because people comply with that, right? So it's not always bad. It's not always good. It's just another way to achieve freedom. And I think the ethos in everything, in a lot of the things that we do, is about freedom, right? And the freedom to consume certain policies and not consume others and being able to prove that you are

in compliance will actually save us a lot of the freedoms that we want in how we build things and the sort of innovation that we want to achieve without eventually compromising on, okay, so now we're just going to add whatever, KYC and everything. This is not the future that we're looking for. So this is why we build this and we're very excited because if we get it right, this is V3 of Web3. So we're really gearing up towards this year. So interesting. Not something that I really considered, but I always sort of mocked the concept of the DAO because to me it was like Lord of the Flies. It was, like I said, reinventing the wheel, trying to figure out every single time, self-cannibalism, somebody inevitably takes control.

But this really solved that. Yeah, but I think just imagine that whenever you wanted to start a company like an LTDd you needed to come up with the entire rulebook again right like what's legal what's illegal what's a dividend policy like when is it allowed like a lot of the things uh like in israel there's like uh like this book with all the rules that companies uh uh like in the formation of companies you don't need to invent this again and again and again it's so unpractical but with dowsOs, which is like the decentralized form of a company on the internet, you actually do come up with everything the entire time. It doesn't make a lot of sense. So this is the digital version of that.

So I know we're getting up against time here, but anything left that you're not cynical about and are extremely excited about in the crypto space? One of the things that people don't know about us is what has been our secret weapon, because we never raised a lot of funds or sold a lot of tokens. And we managed to somehow fund a lot of the beautiful things you're hearing about. And so the secret weapon has been hedge funds that we're all partnering. So my co-founder is a math PhD with 14 patents around AI and patent recognition, solar company to IBM. The smartest guy in any given room, right? And he's been training a neural network for 10 years, and we're trading using its prediction

for the past five years. It takes about 40 proprietary signals from the market, takes it all to the neural network, and that creates like a short-term prediction about major assets. So it essentially tells you, I believe BTC will rise, drop to this price in the next 48 hours. And this really sounds borderline crazy, but the reality is that the win rates of it has been about 80% in the last five years.

And it allows you to take small bets and that becomes major upside over time. You don't need to risk much because the win rate is pretty good. And it kind of like did about 100% a year, every year with very low drawdown. So today it's mostly prop trading. Every now and then we kind of onboard friends or high net worth individuals that we work with. But this has been like the secret sauce of like how we funded things over time. Incredible.

Most people fail utterly and entirely at trading and you guys are funding multi-million dollar businesses. It's because we don't... And by the way, one of the things that we don't really trade a lot, it's like very low frequency trading. That's like one or two trades a day, usually major assets,

usually in a very small amount. But it's just pretty accurate, right? And that has done all the difference. Absolutely incredible, man. So listen, where can everybody follow you and keep up with what you're doing? Because my name is Shachaf Balgifan, which is impossible, right? So it's S-H-A-H-A-F-B-G. And that's me on every social because nobody else has that name.

So Twitter and Telegram and whatnot would be the easiest. Also, Shachaf at Kodi.io. I'm pretty accessible. So, yeah. True story, man. Well, I appreciate the positivity and everything that you're building in a world where all we hear is how crypto is dead. Oh, no, it's far from dead.

Thank you, man. All right. Let's go.