The Wolf Of All Streets - The Richest Person In Crypto Gives His 2022 Predictions | Sam Bankman-Fried, FTX

Episode Date: January 4, 2022

Sam Bankman-Fried is a fan favorite and made his third appearance on the show, offering some bold predictions for 2022. In 2021, Sam tirelessly defended the cryptocurrency sector, going toe to toe with regulatory giants. FTX also led the charge towards mainstream adoption, with endorsement and sponsorship deals across the world. Now he is gearing up to do it all over again. He even revealed some of his plans and predictions in this episode. Without Sam’s guidance and leadership, the cryptocurrency space wouldn't be the same. -- Amber Group: WhaleFin is a digital investing experience offering easy portfolio management tools, attractive investment yields, and access to the emerging digital lifestyle. With over $1T in volume traded, WhaleFin offers personalized, compliant, and secure service across dozens of digital assets in 150+ countries.  Find out more at https://thewolfofallstreets.link/whalefin  -- HBAR Foundation: Fund your project quickly and easily with the HBAR Foundation. Apply for a grant and be put on the fast track to success at https://thewolfofallstreets.link/hbar  -- Horizen: Horizen is the zero-knowledge enabled network of blockchains powered by the largest node system with scalability and flexibility unmatched by others. Blockchains built on Horizen are enhanced by zk-SNARK privacy tech and provide massive throughput without compromising decentralization. Horizen can support up to 10,000 independent blockchains running in parallel and issue an unlimited amount of tokens.  More at https://thewolfofallstreets.link/horizen --- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by Blockworks. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworks.co ーーー Join the Wolf Den newsletter: ►►https://www.getrevue.co/profile/TheWolfDen/members

This episode of the Wolf of All Streets podcast is sponsored by Horizon, the HBAR Foundation, and Whalefin. Please stay tuned for more information on all three of them later in the episode. What is up, everybody? I'm Scott Melker, and this is the Wolf of All Streets podcast, where two times every week I talk to your favorite personalities from the worlds of Bitcoin, finance, music, art, sports, basically anyone with a good story to tell. I think we all know that today's guest has a very good story to tell. This will be the third time that he's had the opportunity to share it on this podcast. Sam Bateman-Fried really needs no introduction. He's the CEO of FTX. And actually, I don't know if you're officially the CEO of Alameda anymore, but you can correct me there.

I am not anymore, but a co-founder, I guess. Well, we'll call the co-founder. Obviously, Sam had a very big year from capturing the greatest NFL player of all time to naming an arena in Miami, proposing legislation on Capitol Hill with really awesome shoelaces. So Sam, thank you very much for taking the time to talk with me today. Well, thanks for having me as always. Yeah. So, man, this was a big year for crypto. Obviously, the biggest probably in history.

Is there anything that really surprised you in 2021? You know, I think like a lot of things surprised me. And I think especially like looking at sort of the spring, maybe roughly, I think was sort of like my time of greatest surprise. And it wasn't so much like price action related things. I mean, I think those were roughly normal-ish other than like going up a lot, but whatever we've had years before where that's happened. And at some point there's just a limit

to how much crypto went up this year is really going to shock me. But I think what caught me the most off guard was exactly how quickly regulation became just completely central to the ecosystem and i mean you go from like it's hard to even remember a year is so fucking long crypto right like it's like of what you can remember late 2020 anymore what is a bitcoin worth right like i i'm kind of saying like oh jesus like 8k or is it like 40k like i don't know somewhere in that range right? But I think maybe it went from, you know, through that range then. But one thing I think if you sort of rewind to that, like how much of the conversation around digital assets focused on regulation a year ago? Like, what was your sense of it?

Very little. It was sort of this non-existent boogeyman, a bridge that we would cross when we had to. Yeah, I think that sounds about right. I hesitate to say it was literally none, because it wasn't literally none, but it really was like the public consciousness, very, very small. And it wasn't just the public consciousness in which it was small um when you looked at regulatory attention how many how many centuries had there been from any government about any not completely fraudulent cryptocurrency project prior to 2021 i mean it's like single digits right like again whatever scams are scams right but like that's, it was just like, on so many dimensions, there was just massively less attention.

And now what's it look like? Like, it's, I don't know, what fraction of the discourse on crypto do you think regulation is today? Over half. Yeah, I think that sounds right i think it's like the average conversation i have is like probably probably is greater than 50 about regulation that's a massive fucking change right like in in one year we've gone from like not quite an afterthought but like you know really not a core piece of the ecosystem to the single biggest piece by far. And it wasn't shocking to me that regulation was going to become more central over time. That was,

I think, pretty clear. But I would have said, yeah, over the next five years, we're going to slowly see regulation play a bigger and bigger role in all aspects of the cryptocurrency ecosystem. And, you know, maybe three years from now, it'll be one of the three biggest topics or something. And instead, it's like, no, three months from now, it'll be the single biggest topic. It just, it happened in a heartbeat. And, you know, I can say that, like, all of the sort of like, private signals we have are just completely in line with all the public signals.

What fraction of global financial regulators are thinking about crypto at least 10% of their time? I think it's gone up from prior to this year like no regular ever had interest in talking to us really except for like people who had specific interfacing with crypto um and now all of a sudden it's like everyone does like it's like we get like random countries you know reaching out about this constantly and i mean you go on capitol hill right and like you want to talk to congressmen about something what do they want to talk about well same thing everyone you want to talk to congressmen about something? What do they want to talk about? Well, same thing everyone else wants to talk about, crypto. So it's just such a massive change that's permeated everything. And I was just, I was not expecting that evolution to happen

with anything like the rate that it did. I would think that if you're visiting Capitol Hill, they'd all want to talk to you about fundraising and getting reelected. But maybe now crypto becomes a part of that. But no, actually, way more talk about crypto than that. Yeah, it's interesting. So I guess we know, obviously, that it's happened. It's very clear. It's in the public eye. I guess the question then becomes why. Is this a function of Bitcoin becoming so mainstream that they just have to address it? Or do you think that we had a catalyst like the infrastructure bill, which sort of accidentally brought this to the forefront? You know, it's one sentence in the meant to raise more taxes and it threatens

crypto. Everybody comes together and all of a sudden, you know, I mean, it froze the infrastructure bill for four days. Biden's largest bill was frozen by a bunch sudden, you know, I mean, it froze the infrastructure bill for four days. Biden's largest bill was frozen by a bunch of, you know, what do they call us? What did Elizabeth Warren call us? Shady, shady, you know, super coders, super coders, something like that. I think that the infrastructure bill definitely accelerated this a little bit. And I think like a lot of people were pretty surprised by how big that became so quickly, but I think it was inevitable one way or another. And it wasn't the underlying thing that causes, it was just a little bit of a trigger. Intensity was ramping

up really quickly going into that and continued going out of that. And, you know, when I talk with lawmakers about, about crypto, they bring up the bill. They're like, oh, yeah, what do you think of that bill? That was kind of, I guess that was a big thing or something for this base, right? But it's not actually what they're focusing on the most. It's not like that's the first thing on their mind, even when you say talk about crypto. They've all moved way past that. And I think that it really is the amount, first of all, just the, the rise in price, the amount of, of, of wealth that was generated for, for people. And then just the amount of attention that the rest of the world was spending on it. Right. Like,

I don't know when you went home, like, I'm sure when you went home to your family, if you did for the holidays, almost certainly crypto came up, but that's because you're fucking in crypto, right? But I think if you're not in crypto and you went home for your families, it still probably came up. It's just like, this is the hottest topic right now, full stop. And so I think it's just like all of that just sort of dovetailed and got to a point where it's just sort of what people are thinking about top of mind right now. I wonder when people went home for the holidays, which part of crypto came up though, right? Because at the end of 2020, I would have said, you know, we have the Michael Saylor narrative, microstrategy, everything was Bitcoin, institutional adoption. But I would say if you went home, you know, Thanksgiving or Christmas 2021, you were probably either talking about how people sold an NFT for $69 million,

how you're going to live in the metaverse or which dog coin you're invested in. Yeah, I think that probably sounds right. I mean, I think the metaverse, by the way, again, completely expect over the next five years that that narrative is going to pick up steam i was shocked at how much steam it picked up in like seven days like going from right from like a word no one had heard of to like companies just like well yeah obviously you know we're a car company but like the metaverse is gonna and we're gonna be in metaverse car company soon you know i'm not i'm not sure they're gonna be a metaphor i don't even know what a metaverse car company is but but all the car companies sure sure you know seem like like they do and it's just like the the rapidness with which that went from like sort of tangential thing to just like assumed

future of the universe was shocking yeah it literally you said it happened i think in a week and all of a sudden you found out apparently that all these companies had these massive plans for the metaverse that had never mentioned them before, which means they're just probably have a good PR agent. Oh, yeah. I mean, right. Like you saw, was it Long Island blockchain? The Ice-T back in the day? Right. I mean, there's a little bit of like, this is the sort of 2021 era version of that, where I think metaverse is sort of a cute word because it means everything and nothing and like it's a little bit of mountain bay like you can't pin it down on anything right like someone wants to accuse you of doing something bad because you're

into the metaverse like what's it i don't know pretty easy to dodge that it's just like what what do you think metaverse meant you know yeah i mean you have these people who believe it's like the fully ready player one you go live an alternate life i don't think so i think it's more of like you play certainly not anytime soon yeah i think you you find the game or metaverse that you like and interact with or we start to get more i think sort of vr in our regular lives you look at a sign you're wearing your helmet it tells you the price of those chicken mcnuggets that you're salivating over something like that yeah those both seem totally plausible to me. And I think more generally, like, I don't know exactly what path some of this is, is going to take.

It's probably going to be winding. And I expect that there's going to be a lot of false starts. A lot of people start dive in to some aspect of it and then be like, Oh boy, that, that turned out people didn't give a shit about that. And then take a step back. And then like someone will strike gold in a place no one thought gold even existed. And everyone will spend a lot of time poring over it and trying to figure out like what did what they see, what they see there that that all of us missed, you know, and it's it's going to be sort of, you know, stop and start. Do you have any thoughts on what some of those things might be?

They're coming next. I mean, we obviously, you know, 2020 is like DeFi summer. Then this year was NFT summer. Then metaverse. There's always something next for crypto. Are there things that you're specifically looking at? Yeah, there are a few things. And I don't want to express confidence

that any of these will play out in a very particular way. All of this is me bullshitting. But, you know, if I had to guess, I would guess that like, you know, what's our first on the docket um uh i i think that like uh probably nfts and video games or it's it's i think that's a pretty good guess as to where we're where we're going next and uh it's there's just i mean there's obviously there's so much chatter about it and and i also think it makes sense, which helps from a narrative perspective when your narrative makes sense.

And I think that they could really enhance video games. And we've just seen every publisher, big and small in the world, is at least looking into it right now. Like they at least have a team that's looking into what their NFT plan is going to be or metaverse plan, whatever, they'll call it something different, but it's, it's, it's going to, it's not going to be nothing. And, and I think it might be a lot. That being said, I also think that a lot of people, especially in the crypto industry are thinking about it kind of lazily. And I do think that we're going to see a lot of false starts because of that.

Yeah, I think that makes a lot of sense, probably how it will proceed. And I think we're just going to see every company try. I think that most of them will completely fail. It'll probably be an embarrassment in the end. But what I find so interesting is that it's so much in its infancy, right? I mean, if you actually try to interact with Axie Infinity, for example, it's really complicated. You have to understand a MetaMask wallet, transferring you to a Ronin wallet, playing this game, which is kind of like 90s Tamagotchi, but people are doing it because they can make money, right?

So obviously, you have to assume that if you're the maker of a major video game, you realize the power of taking those in-game transactions and bringing them into the real world with real value. Yeah, I completely agree. Just like, and if anything, I think Axie is proof of how powerful this can be because it was, from a lot of perspectives, really coming from a place of weakness, not strength. Like it wasn't,

it didn't have adoption before getting involved with crypto to, to build off of. It wasn't, I mean, I hope I'm not offending anyone by saying it's not like the most engaging game ever built. If you take away the crypto aspect of it. It was sort of like CryptoKitties, the video game. Preston Pysh No one would play it if they couldn't make money. David Sherman Right. And so you start with that as a base, right? Which is really not, I think, the right place. it's not the most exciting place to start. And you look at AXS, it's marked tap as of, as of now is, is over 6 billion circulating.

And, and I think it's just like, wow, like that was, that was like version zero. And, and so I think it's, if, if anything, I think it's just like evidence that is super compelling, but I do worry that a lot of people take the wrong thing away from that, which is what if we made Axie, but even shittier and much later and not groundbreaking? Wouldn't people love that? I think the answer is no, they wouldn't. It'd be like, oh, 2021, I got a great idea. Let's start a cryptocurrency derivatives exchange without a risk engine that claws back a million dollars a day. Right. And it's like, no, that was 2015, maybe 2021 is

not, not the time for that, you know? And, and so I think that like, it's, I mean, it's, it's like, I mean, on the one hand, like, I think incredibly bullish for the space what it has accomplished but i also think it might set the space back a little bit because i think people might take the wrong thing away from it which is that they had this brilliant idea of like just fucking going for it with nfts in a video game and it's such a powerful idea that even B0 of it did well. But I think that the takeaway is it's a great idea, not that it can't get any better. Yeah, it has to get much better. You had that sort of epic thread that you recently posted, giving an honest sort of laughable it is that anyone believes that any single blockchain right now can operate at mainstream scale, right? We have a billion users.

We love to talk about speed and block size and transaction speed, but none of them are even close, right? Yeah. I mean, it's not hard math to do. I think a lot of people just didn't do the math and they're just like, oh, wow, like scaling, it's here. Thousands of TPS and thousands is a lot better than 10, but it's also not enough. you see all of the fastest blockchains have some downtime as they tend to cope with their scaling solutions and they fix it and they get better over time and it's really exciting and i think it's what has to happen and it's incredibly exciting and valuable for the space but the other context of this is like we'll take a step back at tens of thousands that's the cutting edge right now and that's like hard possible but hard to maintain that we're trying to work on as an industry. And we got to get another two orders of magnitude before we're at what scaling really, really means. So it has to be millions. I mean, it would have to be millions. I think so. Right. I mean, it's like how many,

you just look at like tweets per second. You can look at Facebook posts per second, trades per second on the New York Stock Exchange exchange or orders per second really like anything i mean you can look at like visas network you can look at i mean i don't i don't even know if robin hood which is a really low throughput application as far as they go i don't think it could exist on a current blockchain it's in it in its entirety i think you just blow out whatever chain it tried to be on. And so it's just like, if your scale is to even, I mean, FTX, that's an example of a company that doesn't fit on any blockchain right now. If you tried to put FTX entirely on chain, it would crop out. No current chain can contain the scale of it and we're having the biggest crypto exchange. So then how do you get over the hump of a decentralized platform actually being faster or superior technologically for the user than a decentralized platform? Because right now,

I mean, centralized is way faster, right? Right, right. There are some ways in which that will always be true. There are some ways in which that will always be true. There are some ways in which, I mean, look, centralized, there are computational advantages to it. There are a lot of disadvantages, but computationally, right, it's a lot more efficient if you have one validator and it's not geographically distributed, right? Like the task of merging what 10,000 independent validators think the state of a rapidly changing blockchain is in a decentralized way is like a hard computational problem. And like just at a minimum, if you have 10,000 validators, right, whatever compute it takes to process everything, you got like a, you got a big

multiplier there, you know, you got a multiplier of 10,000. And so if nothing else, right, just, just to start, you're never going to have, like, it's never going to be the fastest platform in a decentralized way. It's never going to be the lowest latency. And that's okay. It doesn't necessarily need to be, but we should be straightforward that it does have that drawback. And what you get for that is decentralization and composability. And I think the composability part of this is fucking huge right like facebook and twitter like they're centralized so they're computationally efficient but they're not composable in any way with each other right like i just don't see facebook posts i usually don't log on my i'm

on twitter and said that that's all dumb it's not like i'm like ah fuck people post on facebook i never want to see those like no it's like you know so like there's a lot of potential advantages to putting things on a blockchain but there are also disadvantages and like i think movies are like one thing you can look at a movie itself is probably never going to live on a decentralized blockchain because it's an absolutely massive file that just does not fit on a blockchain not even a little bit um but like a torrenting protocol for movies some communication network where you decide which nodes are going to then go download a movie from absolutely could and probably should be on a blockchain that's a completely natural fit for it and so i i think that that this is identifying the things that gain the most from decentralization and that I lose the least from the computational constraints on all of this.

So it's not going to be the underlying technology of everything. Obviously, it does have its purposes and it has its shortcomings. Yeah, I think that's basically right. It's going to be the underlying technology of some things, and maybe many things. That's enough. And maybe almost everything at least touches blockchain. Maybe almost everything on the communication side is interfacing with a decentralized blockchain network eventually. That's totally plausible. It's just like some of the actual data and processing downloading itself is gonna have to happen on centralized servers.

Yeah, I had Kyle Somani on recently and he echoed the same thing. What he was most excited about moving forward was basically composability and anything sort of in that space. And composability is really powerful and it knocks out a lot of nasty network effects. Um, and it, I, it makes it potentially massively easier to innovate. Yeah. Because you can, you can build

on the layers of course, but that said, does that mean that we never really, I can never say never, but that in the near future, we don't get a layer one that can operate at this scale. And so it's going to be up to layer twos and whatever we build on them to make them faster with less latency and cheaper fees. So I have, I think, somewhat idiosyncratic views on this, which I should flag. Like, what I'm about to say is not, I think, what everyone thinks. It's what I think. But when you say layer one versus layer two, I almost want to say define that. Show me what is the difference between a layer one and a layer two exactly? You're not the first person who said that. The layer twos are just layer ones that use another platform as the base, but they are layer ones. I mean, they are their own blockchains.

That's right. And they're often making trade-offs between decentralization and speed and like everything else. And a little bit of an embarrassing thing, this doesn't need to be true, but it is true right now. You look at mostly layer twos and you look at the sense in which the layer twos that they're quote unquote connected to or something like that, some other layer one, that bridge in today's world is almost always centralized. It's not actually different than the wrappers that you see for layer two, for other layer one. So I think the line between layer two and layer one is actually kind of thin right now. So do you think that that's just a marketing term or you think it's just because it simplifies a

complicated concept for people to just sort of put them into those two buckets? So I think it partially, I think it's a marketing term, but I think a lot of the people who use it believe it and believe that it is the right term to use, which I think says something about it maybe not being a crazy term to use. Right. And maybe to dig into that a little bit more, like I think it communicates something about intent. I think it communicates something about how, you know, if you say you have a layer two, you're sort of saying like,

morally speaking we're gonna try and keep this tied to to the layer one we're gonna like be growing sort of out of that ecosystem whatever that means like we're that that's how we're gonna be thinking about this and and that's i think like my biggest takeaway from when people call something a layer two is, again, they're just like they're not they the builders of the network are not thinking of it as something that is meant to stand alone. They're thinking of something that is meant to be intimately tied to a particular layer one, and that that's going to lead to a lot of interesting design decisions that you wouldn't need to make, but that layer two will make. But when you look at the actual technology, I think it's fairly similar, except when you say layer two, often people use that as a way of getting around saying, and also it's not going to be as decentralized. That's true. That makes sense. Well, you talked about the fact that

the bridges are almost always centralized. And then you sort Well, you talked about the fact that the bridges are almost always centralized. And then you sort of, that's just a bridge from a layer two to a layer one. But we're also, I think one of the narratives of the future will be how we make all of the chains interoperable and build bridges between all of them. There's obviously a number of platforms that are doing it. Do you think that that can be done in a decentralized manner and with appropriate speed? I think so. So my instinct here is yes, it absolutely can. Like that, my instinct is that, is basically say,

it can not only can it, but like, we have some idea how to do this. Like, you know, you can do this with roll-ups and we have, if not like a full framework for it, at least like sort of an outline of one. you know, you can do this with roll-ups and we have, if not like a full framework for it, at least like sort of an outline of one. And that there's nothing that, that says it can't scale, but that has to be impractical. That being said, like in practice, it's proven pretty difficult, I think for layer twos to to or for for any chains really to have a decentralized bridge and roll-ups are nasty like they're i think i underestimated this my first

thought about them there's a lot of awkward things involved in a roll-up where, you know, you have to, like, what if there's a fork on one of the chains? Like all of a sudden you tried to hard code in this logic about how they relate to each other. It turns out it doesn't end up being right. So anyway, I think it's like in theory doable, but has broken way harder than I thought it would. And that's maybe less confident that it will get there. The future of cryptocurrency is a multi-chain world. And you can't have a multi-chain world without Horizon, who allows these chains to be interoperable.

Horizon is the zero-knowledge-enabled network of blockchains powered by the largest node system, larger than either Bitcoin or Ethereum, with scalability and flexibility unmatched by others. Blockchains built on Horizon are enhanced by ZK-SNARK privacy tech and provide massive throughput without compromising decentralization. Horizon can support up to 10,000 independent blockchains running in parallel and issue an unlimited amount of tokens. That's why huge projects that you love like Celsius, Dash, IOTA, GameStation, Hero Engine, and LTO Network are all building their blockchains with Horizon. Anyone can build on Horizon using their platform Zendu,

and Horizon is going to issue their own first token on Zendu this year, Zeni Token. If you're not familiar with all the amazing things that this project is doing, check them out at the wolfofallstreets.link slash Horizon. That's H-O-R-I-Z-E-N. Do it now. Everybody in cryptocurrency already knows about Hedera Hashgraph. It's one of the fastest, most secure and trusted networks on the planet. But what they might not know about is the HBAR Foundation. With a budget of $2.5 billion already, they are funding entrepreneurs and projects that want to build on their blockchain and build within the ecosystem. Absolutely incredible. And they're not only giving them funding, they're actually helping them to develop it and then to get the word out as well.

You guys should check out the HBAR Foundation and what Hedera Hashgraph is doing. You can do all of that at thewolfofallstreets.link slash HBAR. That is thewolfofallstreets.link. Do it now. of the Amber Pro and the intuitive user interface and features of the Amber app. As we enter the metaverse, individual wealth is being built and managed in totally new ways. Whalefin is an all-in-one digital asset platform serving as the gateway to the metaverse and your secure digital wealth partner. Guys, Whalefin combines the world's best investing technology with valuable investment research. It provides the best prices from 100 plus exchanges and venues, all, as I said, with institutional backing and institutional grade security. If you're looking for more information and the perfect platform for trading and investing, then please go to www.thewolfofallstreets.link

slash whalefin. That's slash W-H-A-L-E-F-I-N. Check them n check them out now yeah on one hand it's like bummer when you really look into it you say this isn't really working that much but i think on the other hand i guess the more half glass with glass half full view is we are still so early on all of this every conversation we're having here it's like we're just scratching the surface of what's possible which means that you're not late if you're coming in now. I mean, we really still feels like we're so early. I think that's right. And, and, and I think that's probably is really the biggest big ways is just like we are. Right. Can't expect it all to work right now, but that actually gives presents quite a bit of opportunity, especially

if you're an average person who's just investing investing but like talking about layer twos and bridges and all this it's fun when you're in the community to talk about it be passionate about it but imagine just being an average person who's never interacted with crypto and you know you go and like get metamask and then you try to send usdc over to the solana chain and you lose it and it's gone or you know i mean it's just so many problems it's so complicated even if you're in the space yeah it really is it's gone or, you know, I mean, it's just so many problems. It's so complicated, even if you're in the space. Yeah, it really is. It's not, um, I, and, and of course, like there aren't like guidebooks you can trust really on most of this. Like you're, you're left, like, just sort of like fending for yourself. Yeah. You go to a YouTube account. It tells you how to send your funds to them. Yeah, exactly. Here's your

instructional video. Like half the companies out there that are supposed to help you like retrieve funds after you're hacked are just hackers. I mean, it's really, it's gross. I mean, that exists in any new technological, but it is the case. It's very hard to find someone to trust. You talked about earlier, obviously we're talking about the speed required and you sort of touched on how many tweets are sent a second, how many Facebook posts a second. Is decentralized social media going to be one of the big narratives or use cases, do you think, in the coming years? the sense that everyone agrees with me on this. And so I maybe take this with that as a caveat, but I think it will be. I think it makes a ton of sense and almost feel a little confused if it doesn't happen. Because I basically just think at its core that like, it's, it's something that can be put on a blockchain.

Like it's not at its core really like computationally impossible. It's something that I think there's real reasons to put on a blockchain. And, and it's something where there's a lot of attention and a lot of focus right now on how can we fix social media. So I overall am like pretty bullish on that. What does that look like? I mean, in the future, is it like we get a Twitter competitor that's on the blockchain and new social media and people can invest in that or there's a coin related to it? What does that look like for the average person who wants to i guess participate or benefit from what that looks like so what i think um what i

would be most excited by and you know maybe this won't be what happens but it is a world where um it's basically there's one underlying blockchain protocol for social media, for messaging with optional encryption. And lots of social networks can draw from that same protocol. This then makes them composable with each other. And the social networks are basically different user experiences that are sitting on top of the same underlying data feed and underlying set of posts. And so it makes them totally interoperable with each other, which I think is like super exciting. Yeah, super exciting. I mean, obviously we've had this sort of, just speaking of social media, Jack obviously is not the CEO of Twitter anymore. We've had this huge Web3 debate going on. Jack obviously posted that meme of all the money going into the VC's mouth and a trickle

into retail. I know where I stand on it. I'm curious where you stand on that entire debate. So mostly, I think it's sort of a lazy take. I mean, it's a very popular take. A lot of people are making it right now. But I think it's just sort of like, where did it come from exactly? Like, I think often in the end, the answer is like, I don't know, it's like not nuanced. And it's not understanding the differences between different situations. I think there are a lot of cases where like early funding can be really important for a project for getting off the ground where VCs can straddle the line between that and supporters of project helping to foster it. On the other hand, there's a lot of, I don't

know if predatory is the right word because it's consensual and it's not misinformed necessarily, but like, I think there are a lot of cases where like, you know, VCs end up getting to invest in a place that just the project shouldn't say yes to. And it's only saying yes because it sort of feels like it should. Like there's sort of a sense of like, good people say yes to this. This is how you become a good person. And I think that to some extent, that's something that has been fostered by those same VCs who then win from it. You know, I do think that there's like, I'm sympathetic to like the take that

at least some decent fraction of VC activity is like kind of shitty, but I definitely don't think it all is. And I know that like there are some VCs I'm really regret ever having dealt with. And there's some I'm really grateful having dealt with, even if they kind of made a lot of money off of us. I mean, you could replace the word probably VC

with anything in life and get that same sentiment. And I think that to me is why it's such a stupid argument. And first of all, it ignores the fact, obviously, that your average person just can't invest in these things because of accreditation laws anyways. VC is really the only place you can go if you want funding. But at the end of the day, also, it seems sort of rational that whoever's early is going to make the money on the investment, but that doesn't take anything away from the benefit that that platform has for your average

person. Right. Like if I'm using something and it's benefiting my life, do I care? Like, I love Twitter. I don't care who made money as the early investor in Twitter. I basically agree. And I think it's why these all have to be dirty words. One thing I will say is I do think there's a worry when you have a project whose ownership looks nothing like what's pushing them forward, the incentives get misaligned. And so we'll sometimes see with a company like VCs will come

in and take, not take, purchase 80% of the equity in the first six months. And maybe it's a good deal for the founders. Maybe it's good, maybe it's bad, independent of whether or not it was good. Now you're in this situation where sometimes VCs then just drop off the map. And now you're like, well, I guess we're now working and 80% of our work is for the benefit of some randos who no longer have anything to do with this project. And so I think that that sort of misalignment is not great and is a real risk if you're not careful. But yeah, I think overall, it's a lot of lazy thinking. Yeah. I mean, in life, if someone over promises and under delivers,

that's problematic. And I think that that's one of the big criticisms. I think the other one then to your point, if they've bought 80% of the company, I think there's concerns as to what influence they have on the future direction of it and whether that aligns with the initial, you know, what was promised by the founders to the public. Maybe, you know, there's this sort of sinister presence behind it. It's not really what you think it is. Totally agree. And so I think for all those reasons, like it's, you know, I'm somewhat sympathetic to like thinking that in some non-trivial fraction of cases, it ends up being a pretty shitty relationship, but, but that's really different from saying all cases or that like, you know,

people should be forced to just not raise anything from anyone because it's unfair that they can't raise from some people, which is, yeah, I think it's not like a constructive reaction. Yeah. And he could have literally put any industry on that pipe on his meme and say, it says web three, but it could be literally anything. If you want investment, like I said, you get it from VCs because how do you even fix that? Right. Even if they fix the accreditation laws and your average person could invest in these things, what average person is going to end up going all in on something that's probably going to zero? The thing that's being missed here is that nine out of 10 of these things that VCs invest in are literally worthless. It's absolutely right. And like,

to some extent, it's like, all right, well, did you want to take all this risk? Like, if so, great, start investing, or ideally, you would be able to. But for a lot of people, the answer is like, no, you know, that'd be an insane trade for me to make. And it's like, yeah, you're right. So like, you know, maybe it's okay that some other people are, are, are making it. Yeah. I want to circle back to regulation just as far as timeframe, now that it's so been pushed so much to the forefront, as you said, do you think we will

get clarity in 2022? At least in the United States, I guess, is what we all talk about regulation, but we're all talking about the US, right? Do you think that we will actually get some clarity? It's a good question. And I will say briefly that I think it's not crazy that we're talking about the US when we talk about regulation, because a lot of regulators look to the U.S. and look to what happens in the U.S. And so I think it's natural that that's where a lot of this gravitates towards. I think a year is about the timescale on which I think we're going to see changes. And so I think that like, you know, I don't know exactly when but but if i had to guess i would guess you know five years from now we'll definitely have them three months maybe some

trickle but probably nothing big you know a year from now you know may have a bunch of stuff maybe a bunch of stuff is not quite ready yet but he's getting there um and and and and what is it like what are the things that i would expect to be coming first here? I think biggest things are probably, first of all, stablecoin regulation. If they go down the straightforward path here of just a framework to ensure they're backed the way they say they are, it's just actually pretty simple to implement. And so it's something that just could happen soon. Like it's just like, it would take like 20 minutes draft up a Google block that basically lays out what it should be. Now, easier said than done, right? But like, in theory, this is not that challenging as far as these things go. So if that's the direction it goes in, which is the direction I think it should go in, we may get clarity real soon there.

Now, if instead it goes in what I think would be an unhelp fail, you know, failure to make progress because that's it's hard. Like it's it's I mean, you know, it's it's really prescriptive. I think it's the wrong thing to do. And I think it's something that's just like, it's like pretty likely to end up by frustrating people and by, yeah, failing to get where people want to go. So I think in that direction, you know, it might be a year with no progress. I think outside the stablecoin space, the asset issuance space definitely could really use some work. I think that will get better, but I don't necessarily think that's going to be one of the first things to happen because that's a nasty one. That one, there's legitimately, yes, there does need to be some framework for asset issuance. But also, it just isn't obvious how to think of the right one exactly.

And it's going to take some tinkering, whatever. That seems important, but probably it'll be longer. I think a market side is one where a year is about the timeframe on which I expect to see changes. And for that, I think it's just like all you have to say is something like, I don't know, CFTC and or SEC. Like, you already got some markets regulation. How about you use that on crypto too? Like with like the anti-market manipulation stuff. And so something of porting that over, I think, is something which it's not just like a, like it's a little bit more complicated.

There's like a lot of cooks in the kitchen, but I think, but, but I think either or both regulators would be ready to start making progress on that. Um, uh, basically now if, if sort of the world aligned for, for that to be, you know, encouraged for them. It's like eliminating spoofing and wash trading and sort of just the really obvious low hanging fruit that's happening maybe, you know, in the, in the space. Exactly. And I think that to be clear, I think that the space is cleaned up a hell of a lot. So much. I mean, you compare this to like a few years ago, you had like Twitter accounts, which were just like tweeting about spoofing, you know, and just like, like it was sort of like no plausible argument that there wasn't a problem. And I, now you look at it and it's like, like, there was sort of like no plausible argument that there wasn't a problem.

And now you look at it and it's like, yeah, you know, like there isn't a lot of oversight that the markets. It's like not obvious that there's like bad shit going on everywhere. In fact, I think there isn't that much bad shit going on. And so it's gotten a lot better. But but still just like, yeah, the standard anti-fraud, anti-market manipulation oversight, something's going to happen. And it's a little bit intricate, but there are real frameworks to work off of in a pretty straightforward manner. And so that's something that I think like in the next year or so, we will start to see real work on. Yeah, I think the reality is, we can't use

the Howey test or 1930s framework for right industry that's, you know, technologically, this technologically advanced, and this new, but to your point, that that's going to take years to develop a new framework, decide who oversees it, especially when we're talking about the government, which moves as slow as molasses. So it really is a problem. But to me, that means that, you know, like Hester Peirce has proposed safe harbor a number of times. Why not give a project two or three years to basically innovate and then prove that they're sufficiently decentralized, not be a security? And if not, then you apply the existing framework to them. It wouldn't be a crazy thing to do. I think that my instinct, which is maybe a little different from that, is that it's in the end, like right now, security is a bad word. It's like a four

letter word, right? In the US with respect to crypto. You absolutely don't want to be a security. It's basically a death sentence in the US. And on the other hand, if you take a step back and you ask, what is a security? I mean, in some sense, you could say it's something with real, well-defined value that flows through to its holders. Like in the rest of the world, it's not a bad word. It's often actually a good word, right? You'd want to be in an equity. would be if we could get to a place where rather than focusing on trying to not be a security, the focus is on create your security, what now? And I acknowledge we're not going to get there

tomorrow. And that there's a lot of intricacies in that. That involves building out a new framework. But that's what I would be most excited for. That's so true. It'd be nice to hear people talking about the value that they're going to deliver and not how they can avoid being deemed a security, basically. Yeah, that's exactly right. That makes a lot of sense.

And honestly, if that value was well-defined, regulators would be far less aggressive about trying to stop you. If it was very clear that consumers are protected and they're making money and it's a benefit to everyone, then why come after you? I completely agree. And I think that in the end, a lot of people are sort of aligned on wanting there to be real value and not scams. And it's a matter of getting there, getting a framework that works for that, which I don't think is easy. But I think it's easy to come up with something which is kind of reasonable. But there's a lot of details. Unlike with stable coins where there's just like the details are so a lot

fewer details. It's like, there's a fucking bank account. Like we all have to tell the government where our money is. Right. It's really not that hard. This is where our money is. Right. Largely though. I think that the risk is overblown in my mind. Maybe I'm wrong. I think the risk is overblown, but they should accurately report. Oh, I completely agree. And I think that while I do think it's really important that we do start getting accurate and prompt reporting of it, I think that today, I think probably none of the big stable coins are like substantially

underbacked. I think that like the transparency has a long way to go, but I don't think that there's something on fire. I just think we're like in a situation where if something did get on fire, there wouldn't necessarily be a regulator on the help of it. Right. That's true. We left to self-policing with unclear, it would be a mess. Yeah. I can't even imagine the mechanics of like a run on the tether bank that would be so bad that they would literally be illiquid and not able to cover, but maybe I don't have a good enough imagination. I mean, well, I know, I think, I think you have to imagine something very different than was likely true right now. Right. Like if by 3% of their assets and everything else was gone, then you got a real problem on your hands.

Then, yeah, there's going to be a fucking run on the bank. But if the question is, are some of the assets less liquid? There's questions about disclosure and transparency, but it's much less of an obvious systemic risk type thing. Yeah, I agree. So to pivot a bit, obviously, FTX, you guys have taken the lead on the mainstream adoption of crypto through advertising and sponsorships and endorsements. How much of that is about strictly a business pursuit for you guys, you know, ROI, signups, and how much of that is about just a sort of increasing a general awareness of crypto that

will, you know, have a trickle down effect for your business down the road? So it's the biggest thing for it is branding, not, not direct customer acquisition. Like if you want to do direct customer acquisition, you know, that looks a lot more like Facebook ads. And, you know, I think that we've had people say, look, the ROI that you're getting on these endorsement deals is, is really bad. Like here's how much we think you're spending, you know, here's the conversions. And when and, and when they do that, I think they're being a little lazy on it. I think they're often under undercounting, but,

but even if you put that aside for a second, I think more, more generally my response is like, yeah, you know, that actually wasn't our main goal with it to get users to date. We're, we're not in a place where everyone knows who we are and we just need to get them to bother signing up. Right. We're very much in the opposite place where no one knows who we are. Or at least that was true as of not too long ago. And we need to start to get our message out there. And that's a big goal of it. Yeah. I don't know what the number is, but there's always that sort of anecdotal advertising. Someone needs to see your name seven times or 10 times or

14 times, whatever it is before they can even consider signing up. So for you, I guess from inception, that's the bigger concern. How much do you think you've made progress towards becoming a household name? It's very easy. I'm in the space. And so I see your name everywhere. I feel like it's blanketed. I listen to Fantasy Sports Radio, your ads are on. I drive through Miami, obviously the arena, Tom Brady's talking about it. But for someone who maybe hasn't been in crypto at all, do you think that they've at least heard your name one or two or three times now? Yeah, I think it gets around. I mean, I certainly don't think that we've hit saturation or anything, but I think we've made a lot of progress on that front and we've been really excited by that um and obviously hoping to continue making progress there but um but yeah I do just think

that like it's it's already started to pay real big dividends and you know optimistic that it will continue to do so and you know I think my favorite moments are when people are like, like, Hey, I just heard about you guys. And I gotta say, like, I don't think that these endorsement deals are really bringing you much value. I'm like, wait, can we rewind the conversation a bit to the point where you said you just heard about us because of the endorsement deal that we did? Yeah. I mean, that that's totally valid, but maybe they didn't sign up. So they didn't think I didn't trade yet. So you obviously also because of the laws in the United States, you have this differentiation between FTX and FTX US. How much do you think you'll start to see those products sort of come together as we get maybe more clarity and more direction as to what you can and cannot do? I know that you guys are pushing very hard to allow, for example, futures and leverage trading in the coming year.

How realistic is that? I'm optimistic about it. I think it's going to be a lot of conversation with the CFTC. And maybe to give a little more color on that, what are the biggest things from the CFTC's perspective here? I think I mean, in general, there's just checking out a lot of different aspects of it. But there's a core thing of especially post 2008, looking at the risk of clearinghouses. And, you know, the biggest thing here is how do they get comfortable that we are managing risk correctly?

And obviously, we're not taking positions in these, but if you have leverage on the contracts, then you have to make sure that, like at Ascora, you have to make sure basically that accounts can be closed down before they go beyond bankrupt, that you don't have negative accounts. And like 2008, what happened? Lots of banks effectively had negative accounts right themselves and and and so that that sort of is the core piece of this we spent a lot of time working on our risk model over the years and you know i'm optimistic about really say about but it's going to be a you know deep examination um i but you know to answer the original question, yeah, the goal is for us to get, like the goal is to bring as much liquidity and activity and volume onshore

as we can for the crypto industry. And I'm pretty optimistic about that. I think some parts of it are going to take longer than others. I think the asset issuance framework is probably going to be one of the lagging pieces. And, but, but I think that you're going to start to see that convergence over time. And I think that'll be really healthy for the crypto industry if that happens, if like we can move away from this model of like the US is very different from the rest of the world and instead have like equal access to products. And, and along with that products, which have gone through the oversight of U S regulators,

it's going to take some time, but, but that that's the direction we're hoping to see things go. And that I, I feel pretty confident they are going to be going. Yeah. I just think it's ironic that, you know, their, their regulated platforms are equally, if not more problematic. I mean, it's not like we didn't just watch what happened with GameStop and Robinhood and clearing houses. I mean, this is a better way. Like objectively, there's a better way. And you can point to all the times that Bitcoin has made these huge moves and the risk engines have handled it, right? We don't need to be bailed out. Right. And if you think about it, we're sort of playing on hard mode a little bit where we've been assuming we are. FTX, we never call

you up and like, yo, wire more money. We can get liquidated in time. Your account's negative. Please stop. We assume we have no recourse and that we need to be managing the risk ourselves in real time 24-7, which is very different than how most risk engines work. I think it's safer. I think it sort of like helps answer the question of like what stops everything from being so hilariously leveraged and no one has any money anywhere that everything falls over like in 2008 when like there's just these regurgitated swamps that got, you know, churned again and again and again and again with no oversight and the answer is our risk engine does we we custody the collateral

and we make sure that just with what we can see with our own eyes we can get things done um and don't assume that things will work out outside of us at all and you know yeah we've been through 50 down swings 50 up swings we've never had a day where you know insurance fund had to pay out more than our revenue for that day even um so it's i and i mean 24 7 risk engines help a lot right like it was friday at 3 p.m you get 3x leverage as you know same year cbo contract, then like at 7pm news comes out. When can that position be reduced? Like Sunday night? Like you got days of risk out there. It's sort of, I don't know, it's sort of scary. Well, that was one of my favorite things that happened recently, obviously, on a weekend, Elon Musk tweeted that he was gonna, you know, sell a whole, should he ran the poll?

Should I sell a whole bunch of Twitter? Obviously on FTX, you can trade effectively tokenized Tesla, right? And so you saw that move over the weekend in real time on FTX that nobody could react to who was owned the underlying stock or was trading in the market. Yeah. It's really cool to see. I mean, isn't this a better way? So shouldn't they be putting themselves into your framework as opposed to you trying to fit into theirs? Yeah, I mean, I kind of think so. I mean, that's why we chose our framework. But yeah, I mean, if you start markets again today and you're like, when should markets

close down? I think the answer would be like, wait, why did you say they should close down? Let's start there, right? Like it's and we've put in. OK, so I think there's real arguments for having an hour a day of downtime for people to like roll shit out we we we put work into being able to like roll things out without taking down our matching engine but like you know i think i think if people want to say yeah four to five p.m each day everything shuts down for an hour so everything can take a breath and like restart systems

and stuff that I think that'd be a totally reasonable way to think about it. But like, I don't think it would say like, yeah, 35 hours a week. That sounds about right. Nothing important could happen during the other hundred. Yeah. It makes perfect sense. I know we're running out of time. I want to ask you the most important question of all how's life in the Bahamas. It's really nice. I mean, it's a nice place to be and be and it's i it's really nice to be at a place with a framework for crypto regulation it just it resolves so many of the tensions in the industry right now that's been a huge benefit and i can fucking travel people can visit us like we have a lot of people visiting us for the holidays it's really exciting you know and it's been

great i think on a lot of fronts like it's really really nice to be in the same place as people to be able to meet people and i i don't know the number of countries right now that you can like get into and out of it i mean not that big a lot of them kind of can't and yeah and it's just like it's it's a it's a functional place to be at a time where there actually aren't that many in the world. And so we've been really excited about it. So, yeah, you're not locked in a hotel room for two weeks, as we all remember you like doing. National television from your hotel room when you were quarantined.

Yeah, it seems like a better way. Well, where can everybody keep up with you and follow you after this conversation? SPF underscore FTX on Twitter, as always. Well, thank you, man, for everything you do and for taking the time for this third round. Inevitably, I think there'll be a fourth in the next couple months. I'm definitely looking forward to all the things we talked about for 2022 and hopefully getting some leverage trading on FTX US. I'll keep you posted. Thank you.