The Wolf Of All Streets - The United States Vs. DeFi. Who Will Win? | Jared Grey, Julian Hosp, Nicolas Ramsrud

Episode Date: November 3, 2022

Regulation is the key to the development of Decentralized Finance. During the upcoming Thursday live panel we will discuss the future of DeFi and how DeFi platforms including SushiSwap, CakeDeFi and Kaddex are fighting for the future of finance. My guests are Jared Grey, CEO of SushiSwap, Julian Hosp, Co-Founder of DeFiChain, and Nicolas Ramsrud, CEO of Kaddex. Jared Grey: https://twitter.com/jaredgrey Julian Hosp: https://twitter.com/julianhosp Nicolas Ramsrud: https://twitter.com/nicolasramsrud ►► JOIN THE FREE WOLF DEN NEWSLETTER https://www.getrevue.co/profile/TheWolfDen  GET UP TO A $8,000 BONUS IN USDT AND TRADE ALL SPOT PAIRS ON BITGET FOR ZERO FEES! ►► https://thewolfofallstreets.info/bitget   Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Facebook: https://www.facebook.com/wolfofallstreets   Web: https://www.thewolfofallstreets.io  Spotify: https://spoti.fi/30N5FDe  Apple podcast: https://apple.co/3FASB2c  #DeFi #Crypto #Regulation 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.

Let's go. Arguably the hottest topic in crypto at the moment is DeFi and what regulators are going to do in the future, specifically regulators in the United States of America. Obviously, we had the epic debate between SBF and Eric Voorhees that led to this conversation. Well, we want to continue it here. I have some amazing guests, all DeFi experts working actively in the space to talk about this and what the future of DeFi looks like. You guys don't want to miss this. Let's go. What is up, everybody? I'm Scott Melker, also known as the Wolf of All Streets. Let's go. a shib of a myth to be sarcastic. We also all know that I don't really care about Doge or shib. I just think it's funny. As I mentioned in the introduction, the hot button topic right now seems to be regulation of the crypto space in general, but even more specifically about what

is going to happen with DeFi. Now, what I want to know is whether DeFi even should be regulated in the first place, how that would actually look considering that it's decentralized and unreachable by most governments. I have three incredible guests today. I've got Jared Gray, Nicholas Rambrun, and Julian Hosp all here to join. I'm going to go ahead and just bring them on without further ado. Gentlemen, welcome to the show. Thank you so much for taking the time. Great to be here. So listen, I'm going to go ahead and jump right in with that first question that I just mentioned. I think for context, should DeFi even be regulated? And is that possible? Jared, you're the head chef at Sushi, which always makes me think of chocolate salty balls from South Park for some reason, but

I would love to hear your response. Should DeFi be regulated? I think in a perfect world, no. Do regulators live in a perfect world for us? Probably not. Do we see a future where there's some type of compromise, whether it's on front ends or at the protocol level. I know there's the centralization debate going around ETH nodes right now in a little bit of the color that's being added to that conversation about, you know, protocol level censorship and stuff like that. You know, I got into crypto as a libertarian. I've been a lifelong libertarian. So anything that kind of encumbers the freedom of the people and the choices that they can make to control their own lives and destinies, I think is antithetical.

So from a personal standpoint, I would love to see DeFi live on without any kind of censorship and let people make their own types of decisions and, you know, choose their own types of decisions and choose their own financial solutions and products on chain without any kind of government oversight. Julian? I'm completely aligned here with Jared. I think the big thing is what's real DeFi and what just sells itself as DeFi, but is actually CeFi. So for me, the true DeFi is what once deployed cannot be changed and cannot be really interfered with. And I think regulating that, so that's really true protocol level.

To me, that makes no sense. Also super counterproductive. At the end, you're going to just keep the illegal use cases and push all the legit use cases away. So I think that would be an absolute destructive decision to do that. I think the big question really comes down to, yeah, a lot of things where there are ways that humans can actually step in and actually change stuff. And should that be regulated? And here, this is to me where it gets very tricky. And I would probably, probably tend more to regulating these pieces. And I'm just scared that regulators around the world don't understand the difference and just kind of put it all into the same basket. But that would be my suggestion, how I would approach that topic. Julian, I want to go back to something that you mentioned, which is the idea basically that true DeFi is different than what I think a lot of people are viewing

as DeFi, which leads us to the question of do we actually have true decentralization in these protocols or is everything sort of on that sliding gray scale? And if we were truly decentralized with any platforms, would regulators then have sort of power that sliding gray scale? And if we were truly decentralized with any platforms, would regulators then have sort of power over it? I mean, I think everything is on a... I think there is no 100% true decentralization. I think even, I mean, Ethereum to a certain extent

has some forms of centralization there. So there will always be some kind of gray scaling. It's not going to be black or white. So I don't know. I mean, I think it's a really difficult kind of from a regulatory standpoint. That's why I mean, it's going to be very, very tricky and very difficult. But there are things where on certain protocols, let me give a very specific example. I'm talking my own book here, but I do this on purpose so uh defy chain which is was designed to bring defy to bitcoin it was intentionally designed where there are no online interfaces so there's no website everything is basically done on a full note everything has to be downloaded you have to there are no centralized attack points that you

could say okay we're going to take over that domain. And then afterwards, it's not going to run anymore. And that was on purpose designed from the very start. And I think that's how it would begin to kind of think about these things. If I compare that to, I don't know, let's say Uniswap, sure, there are a lot of decentralized aspects to that, but then you still have possibilities to stop it. You have the possibilities to change stuff. You have centralized attack vectors. So to me, that would go a bit more into the centralized aspect. Now, obviously, if I go to Ethereum, Ethereum sits on the very, very other side again. So these are things that I would really ask as questions. And then where do you draw the line? I think that's really going to be the magic question. Yeah, that's interesting. Yeah, I mean, this kind of goes to both their points. Nicholas

was talking about centralized custodians versus like the AMM model that we have here at Sushi Swap and that Julian was talking about with Uniswap. And I ran a centralized exchange for a year and a half and that's heavily regulated and the reason for that is because you have a responsibility you have fiduciary responsibility to your clients deposits to to make sure that the integrity of the platform that they're engaged with reduces liability and that you're making sound financial decisions or giving them the opportunity to make those without the worry of of solvency I think specifically to like amms and on-chain protocols that have these centralized front ends right we take away that custodial um

you know portion of it and we allow people to interact without the intermediary. So we remove that fiduciary responsibility. We programmatically put it on chain so that it can be audited and anyone can look at what's going on. But you do have these centralized front ends that I think there's the challenge. And I think we're in a period of this experiment with DeFi that technologically doesn't allow people to interact with the protocol in a way that is familiar, like they have in a Web2 experience when they log into their bank. And so like what Julian's pointing out is for sure a solution for that, but you need a way that doesn't encumber people's access to those types of solutions. And so I think what would really be interesting to see is if we have a fully decentralized infrastructure to replace kind of the Web2, you know, way people access the internet right now, and you can move that on chain and you can have the experience

be one-to-one with the familiarity they have now with like their Chase Bank or Bank of America, what do regulators then take a position on for making a claim to wanting providers of those protocols have to be regulated by, right? Like what's the onus there? I'm interested to see how that plays out because I think the technology solves a lot of these problems. We're just not quite there yet in the experiment. To some degree, doesn't that mean that we need to also remove ourselves from Amazon Web

Services and Google Cloud and all of these things that DeFi is theoretically running on? Is there even a chance at true decentralization if it's on those platforms in the cloud? Yeah. I mean, I think it depends on what cloud infrastructure you're talking about, right? If it's a centralized provider, then likely not. We're only 10, 11 years into this experiment. And I think that if you look back on technological innovations that have revolutionized kind of industry and human civilization, these things can take 30, 40, 50, 100 years. So are we to the point where we've solved all of these issues at the current level of this experiment? I don't think so. I don't want to see regulators step in and, you know, over-regulate or encumber the progress that can be made to innovate towards

the optimal solution. So that's where I kind of step back and I say, you know, are these centralized in some aspects? Yes. Is it better than its counterpart in the Web2, you know, non-decentralized in some aspects, yes. Is it better than its counterpart in the Web2 non-decentralized arena? And I think the answer is yes. And I'd like to see it continually iterate to that optimal solution. One thing that I always ask myself is, do we actually need financial regulation in general? Do we actually need that? Right. Would it be like, why do we actually need that regulation? Is it really what how would the financial world look like if there were zero financial regulation? Would it be a better world? Would it be self-regulated? Would it be absolute chaos?

I don't know. I think this would be, I don't know, sometimes interesting to see, but I think sometimes it would be really shocking to see. Would this really bring out the worst of humans or would this actually bring out some really good kind of, I don't know, self-regulation where the right things are going to get called out? But then the question always is, if things get called out afterwards, that always means people lose first and then it gets called out. So I don't know. I think that's the question that I would always love to start with is we actually need regulation in the first place. As a libertarian, as someone that thinks that I have a good sense for certain things, I would say, well, I would prefer to have as little regulation as possible.

But I know a lot of people who really think the exact opposite, who say, and these are, I mean, really, these are smart people. And I know, and sometimes wealthy people who obviously, maybe they also talk in their own book, but they say, look, no, they would love to have more regulation, they would actually invest more in crypto, if it would be more regulated, they would actually use more DeFi, if there were if there were protocols that get the checkmark, right? And says, hey, the SEC checked that and it follows the guidelines and there is no kind of experimentation. And then the big money would follow, right? And then let's kind of think this through. I mean, a lot of people in DeFi, I mean, sure, they want to use the protocols,

but then at the same time, they want to invest and they want to make money out of this. So what is going to be the net positive? Is the net positive that it's completely open, it's a wild wild west and do as you go? Or is it actually that you set these rules, maybe you kind of hinder some things, but at the end, you're going to really open that pipe for a lot of capital that actually makes it more attractive? And I'm not saying I have the answer to that. I just see it from both angles. And if I were the emperor, like without any limitations, I would make it open and just no regulation. I'm just not sure it would actually be the right decision. I mean, to some degree, that's what we've had, right? I mean, we're heading into a period where we're going to get regulation, like let's be pragmatic. It's now it's a matter of how we approach the regulators and making sure

that it's in our best interest or as much as possible. But you could argue that what we have had is exactly what you're talking about, basically an unregulated space. And then you've had the obvious rug pulls and exploits and bridge hacks and all the obvious things are going to happen in that space. But to some degree that is also self-regulated and called out by the industry. Nicholas, I would love to A, hear your thoughts and B, test your mic. Yeah. How is this? Is this working better? Yep. You're good. Okay. Wow. Fantastic. So yeah,

this is something where I very definitely agree in the pure view of DeFi, which is really financial freedom and accessibility for the people by the people, right? This is the extension of the Bitcoin ideal and something I deeply believe in. And that is accessibility with no controls. But the balance here obviously is going to be how do we do this in such a way that enables people to feel comfortable with the technology so that it can grow and become more adopted and this is this is the problem that we're facing right now where there's a space of full of hacks scams and all these problems in which regulators see as as issues they need to solve and step in to take care of, right? And this is where we're in this dangerous zone of where we see regulation coming and what are we going to do

about it. And I think it's our job to ensure that we help them understand where that line is, where programmatic execution of these protocols can really solve a lot of these risks. But also that comes with, you know, a necessity to put security at the front of our job and make sure that we're doing that before, you know, we have any of these hacks continue. Yeah, I think so to what Julian was speaking about, and you kind of hit on it as well, Nicholas, the way I think about regulation is that it is truly from like the libertarian free market Austrian economics view that the best product or best service provider wins. Right. And they win because they just do a better job. And so when I think of what regulation could look like for DeFi, again, this is a perfect world kind of solution. It's that the best protocols win. Right. So like they're regulated by the market and those that cause issue. their lives to going after rug pulls, like, you know, Scott was pointing out and making sure that

people who do these types of things are, you know, brought to awareness and in the space. And so that's one part of, of self-regulation. And then I would say that like protocols that are launched. Can I, can I just say something? I'll let you continue. I actually fundamentally disagree with that. The best product hardly ever wins. It's the best marketed product that wins. We see this with hamburgers all around the world. McDonald's definitely does not have the best hamburger, but it's the most widely eaten hamburger, right? So I just want to push back there that it's not the best protocol that will win. I don't think he's saying the best protocol does win. I think he's saying in a perfect world, the best protocol would will win. I don't think you're saying the best protocol does win. I think you're saying in a perfect world, the best protocol would win,

but I will let Jared continue. Sorry, Jared. Yeah, okay. No, that's fine. I appreciate that point. I think, why does marketing exist, right? It's to make money for a brand or a company or to promote a persona.

I think true on-chain protocols should, in a sense, again, in a perfect world, they're devoid of financial incentive to provide these services to their counterparties. So I think that if you were to launch on-chain protocols that were DeFi specific, you remove the intermediary, you know, the centralized custodial specific, you remove the intermediary, you know, the centralized custodial aspect, you remove the financial incentive for the operator to make money. So there's no sense for marketing. And then the ones that execute programatically on chain for their customers, and I use the word customers kind of liberally. Users is probably a better word. Those would be the ones that I would see get the most usage and propagate

throughout the space at a greater degree of distribution. So that's kind of how I would love to see it happen. Is that going to be the case? Probably not. But that's how I think about it philosophically. Yeah. Yeah. I mean, I would love the world to work this way. But I mean, to me, it always comes down to incentives. And we have seen the entire world. I mean, this very famous Buffett quote, right? Show me someone's incentive. I show the outcome. And so to me, something where there's very little incentive to kind of get propagated forward and then you have something else that has very strong incentives to be propagated forward it's

just so much more likely that that thing starts becoming viral because more people have an incentive to spread the word forward so and and i always personally always felt that this was what many of the blockchains actually that had tokens on top of them made it so powerful for these blockchains because that's where the community started spreading stuff but i don't want to divert so much or digress so much away from the actual topic um to me where it really is going to come down to is that question on what are we hoping if i'm let's say we are let's say the four of us would be good regulators and we would have, let's put ourselves into the other side and we would have the best interest in mind, right? So

we would really want to actually have a good incentive. What would be that incentive? What would be the motivation that we would actually want to get out of regulation? And so I would hope, right, that we, all four of us would sit there and say, oh, we would love to avoid people losing money. So fall for scams or one actor abusing the system for their own financial benefit at the loss of everyone else. So I would assume that this is what, as a regulator, I would be doing. And so now the question really becomes if that is, and maybe you guys disagree and say no no i'm actually sure maybe in our unperfect world the world uh regulators also want to protect wall street and they want to protect the big guys sure but let's kind of put this aside but if we have this really pure true intentions

what would we regulate how would we actually approach the topic right would what would what would you actually do and and I think that's a, to me, when I think about this question, I put myself on the other side and say, okay, if I really tried to do this in a good way, would I actually have a good answer? And I don't know, I'm asking you because I actually think about this stuff and I don't really have a good answer. I wouldn't know how to do this. And then I think, look, I'm in this industry for a long time now. I'm dealing with this day in, day out. I think a lot of, I mean, many regulators around the world are going to get this completely wrong if I actually don't even have a good answer

to that. Yeah, Nicholas, I want your response first. But I would say for me personally, it would be simply starting at consumer protection and transparency, right? Listen, CeFi is not DeFi, but if me, even as a customer of Voyager, had known that they had given that loan to Three Arrows Capital, I would have exited the platform immediately, right? So there's a basic level of, I think, transparency, information that would lead to consumer protection. I mean, you touched on it perfectly, Julie, and you said basically,

listen, the regulator's mandate is supposed to be to protect consumers, but they're really protecting the interests of platforms and Wall Street, et cetera. So yes, I think in an ideal world, if we had to regulate, it would have to be a balance where people are free to do whatever they want, but at least they have the information to make the appropriate decision to do so, in my mind. Nicholas? Yeah, and I think that comes in the form of proper disclosures, right? I think anything beyond proper disclosures, we start to over-encumber the processes required in order to innovate in this space. And if we had that kind of control in the early days of the internet, would the internet be as powerful as it is today, where information is widely free and we're pushing

innovation continually and i think that if we do anything anything that adds any more requirements and cost to developing in this technology to pushing this technology forward what we risk is and possibly even the greatest risk of all, is preventing innovation from continuing to happen, right? And then it would just put us closer on a trajectory to traditional finance, whereas only the big players can come in because there's a high cost, a high barrier of entry. Yeah, that's the regulatory moat that you're talking about. And you see that has played out multiple times in the US over the last 100 plus years, specifically like in the telecom industry where like you had the Ma Bell conglomerate that was a monopoly and it was regulatorily enabled until they came in and deregulated it. And then you had Intralata Interstate, you know, long distance choice, which brought long distance costs down and allowed the really the advent of

competitive pricing for the cellular network. You saw with natural gas. I mean, it's just like part and parcel. They like to put regulatory moats in place so that they can kind of co-op an industry, make money from it, make their friends make money from it. And that's what I don't want to see happen to DeFi. And you kind of already see it now where those costs are, are encumbering development teams from being able to innovate. Right. Not quite yet to that level that of those examples I gave, but I think it's likely headed that way, unfortunately. But the question then becomes with a regulatory moat, can that

moat encircle the entire world or simply the country that's regulating? Because I think what we've seen largely is that DeFi, crypto in general, companies and platforms just don't operate in the United States. They've already just basically said, we have no clarity here, so we're not going to do it and we're going to innovate elsewhere. So even if we get, let's call it heavy handed regulation in the United States, does that just push the innovation offshore and it continues regardless? I mean, the United States is one of, if not the largest, and I'm not a macro economist, so if I'm wrong on this, Don't. Everyone follows us. We are a large, very large economy and people want access to build and innovate for U.S. customers. So I think the challenge is not do we build these

solutions offshore away from regulators in the U.S., but how do we get them to see that whatever actions they take, these are likely the results of those actions. And we'd rather this set of regulations or actions be taken again in a perfect world. I'd like them to just go, hey, this is a really cool experiment. We're going to use the laws on the book that on the books that exist and prosecute people that commit fraud and financial crimes. And we're not going to regulate this industry into the ground uh because you know it's doing really cool things and it's kind of self-regulating they're not going to do that that i mean that's the best point the bad actors what they're doing is already illegal without

regulation right like we have very clear laws in place about what people are allowed to and not do and all the scams hacks and exploits are already illegal, regardless of any regulation that we get. Exactly, yeah. And I guess that would be my hope, right? My hope is that with this current DCCPA bill being drafted, that they recognize that this line between centralized custodial technologies and decentralized custodial technologies and decentralized custodial

technologies, again, while the end result is very similar, that it's different enough that it's going to take some time to figure out the best policies going forward if there needs to be any regulation. Because I think the only thing that's stopping them is that worry of, you know, are we going to strangle innovation within the United States if we put too strong of controls in place? And and I just hope that they recognize that and that the risk is is there and that they don't go naively forward. That's interesting, because the way I think about how regulators view whether or not they strangle strangle innovation is are they strangling their ability to make money from from the industry that they want to regulate not are they helping it move forward so that's what i'm super skeptical of regulation aside from maybe like you know very basic consumer protection laws that emphasize the laws that are already on the book books i mean we

see this worldwide i mean you're 100 right right so i mean we don't only see this in the u.s i'm originally from europe obviously the baffin wire card case kind of aligns that i live in singapore right so obviously i look at it from the outside to many things and i see this left and right um i do have to say, and again, I think Singapore has done a fairly, I'm not saying a perfect job, but I think Singapore has actually done a fairly decent job with keeping those interests at check, right? Where it's more on maybe a very balanced kind of thing. But I think it's also always a bit easier to do this in a city state like Singapore, where 5 million people live in

one city, and that's the country versus you have, I don't know, what does the US have 300 million people with like, and they're not operating on laws that were passed in the 1930s and 1940s, because it's new, right? Like, they don't have the precedent of the Howey test to be concerned. Yeah, correct. That makes perfect sense and julian even once one example go ahead please one thing i just want to throw in i mean we have actually seen the u.s give away a lot of the innovation i mean you look at coinbase crocking when i got started in the crypto space in 2014 i mean these were the exchanges to look up to these were the dominant players. They are not anymore. Right. All of this got dragged out. And I know I think this is a bit of a fry. Again, I think from a regulator standpoint, I mean, Jared, I agree with you that the regulator really cares about obviously their own interests there.

But if you then start giving away this dominance and I would really say one of the reasons the U.S. actually still managed to keep their dominance for such a long time, especially, let's say, over the last 20 years, sure, was the dollar. But at the same time, it's because the U.S. has so much of the infrastructure when it comes to Apple, when it comes to Amazon, when it comes to social media companies. I mean, the entire world depends on that. And I would just be really amazed if the U.S. takes such a bad decision and gives the power of crypto up. That to me is just something where I don't know, if I would sit in the US government or in some kind of decision making position, I would be like, we need to figure out how we're going to keep the innovation, how we're going to actually get this stuff into our shore so that people are going to use our stuff and we have the oversight over this. You could argue that China already made that mistake and was in a greater position of power

to take advantage of the industry. So nothing would surprise me. Yeah. Yeah. I wouldn't want the job of a politician or a regulator whatsoever. You know, I'm just a computer nerd that's trying to navigate this industry. But I really, if you, I love doing this, right? I mean, I'm someone who really loves to kind of put myself into the other shoes, try to do this from like, well, how would I do this if I would have full integrity, if I would like wanted to really have best interest in mind, how would I do this? And I really think it is a super hard thing on that DeFi regulation.

So it's not that it's an easy one, but I'm just worried that the US is going to come out and actually, yeah, really stifle innovation and it's going to get this wrong. And I think that's, I mean, we saw this on with SBF also coming out on Twitter and you see that there is a bit of a very hostile kind of stance and that would be dramatic in my opinion. Yeah, I mean, I think that, you know, the alignment there with Sam is simply that he

operates a very large exchange and everything that he puts forward as a possible, you know, regulatory, like, compromise, if you will, is going to be seen through the lens of what financial incentives, you know, do, do FTX get from this? Um, is that fair to him? Maybe not, but it's just the position he has in the industry. And so if he's going to be involved in these discussions, he's gonna, he's gonna have to be like really aware of that. He might already be aware of that. I'm not, I don't want to put words in his mouth or anything like that but you know i i wouldn't want to be in the position he's in where he's trying to balance these two like really delicate you know um discussions that he needs to have where he likely wants to see innovation succeed and to defy and stuff like that to have the best chance to win. But are people going to view what he puts forward through that lens? And I think you saw many people

don't. But many people do, right? And so I agree with you. I think it's just the loudest voices, obviously. And we always sort of jump to supporting hatred. And it's amazing to see how fast people turn their bias towards people in this industry, of course. But to what Julian said, the biggest fear is that the regulators basically just take the context of all the old things that they've ever done. They try to smash this into the box. They don't understand it. They don't do any research and it just gets stifled. So whether it's SPF or not can be the debate. But somebody has to represent and it should be a collective has to represent this industry and educate them so that they at least delay long enough to have an idea of what they're regulating. my opinion yeah yeah absolutely i think this technology is so so different and you can see it even in in draft bills that i've seen on the dc cpa that that show the level of of differentness of this technology such that they're having to define out everything like what is a validator how does a validator actually play a role in executing transactions?

How could that be seen as taking part in executing and part of the centralized control of what actually happens in these markets? Do the people that develop the software, are they liable as well? And all of these thoughts, I think, just show how different this is from their normal regulatory framework for these kinds of services and it's it's certainly worrying because the the gap required for them to get from where they are to understanding it deeply enough to be able to apply a good regulatory framework if at all is is so significant uh that i i'm not sure how long it's going to take to get there. And then couple in the fact that many, many of many politicians simply don't care. Yeah.

They don't care what the outcome is. They're going to join in with their, you know, congressional constituents and whatever bandwagon choice kind of gains momentum. And that's really, that's a threat as well. I mean, that's kind of a threat in consensus mechanisms for on-chain protocols as well, right? It's just the nature of humans as well. I mean, you know, we have a thing in DeFi, right, where we're trying to figure out the best governance models, but humans have been trying to figure out how to govern themselves for 5,000 plus years. Are we going to get it right in the last five years, the DeFi protocols? No, right? So going

back to my original point of this experiment, being relatively new and needing to have that kind of unencumbered runway to experiment and get this thing right before regulators come in and chop us off at the knees, so to speak. Yeah, Hester Peirce, obviously an SEC commissioner, has proposed safe harbor countless times and it's effectively been ignored by Gary Gensler. If we're talking about something that's a grand compromise, that seems like the most rational approach that I've certainly seen from a regulator or from our industry, which is not even a part of. For anyone who doesn't know, it effectively says you can launch a project and you have three years to be sufficiently decentralized where according to certain yet to be defined steps, you will prove

that you're decentralized and that you're no longer a company and you should no longer be beholden to the Howey test or be called a security. So you have three years to start. Because let's be honest, every truly decentralized platform is probably going to start with some sort of centralization, right? Can you truly start decentralized, not have a leader and just hope for the best? It's Lord of the Flies. Bitcoin didn't start decentralized. It's impossible. It is impossible by definition, right? Something needs to start it. And it doesn't matter if this is an anonymous account, a known account. I think that's a good

part, right? If let's say you had those three years and it started today, what are definite knockout criteria, right? And I, for example, think if a protocol needs a centralized website access, I think that always makes it a bit harder. I think if there are decentralized gatekeepers, if there's a small group of people or a few individuals that can change the rules of that specific protocol or that specific project, to me, this is not DeFi. So to me, these are very clear knockout criteria. And I mean, on our side, we did a lot of thinking on this, what could be seen as knockout criteria, just because, yeah, if we can avoid those, then at least we do hope that there's a good shot in order not to kind of be captured in any kind of, not only the US, but in any kind of regulation globally, right? So I think that's also obviously a key question. What are those things that would definitely fall into the C-Fi category versus the DeFi category?

Well, we can actually see, I think we can see the direction that regulators are taking with this, at least their opinion with their enforcement action against Ukidow, right? And I think it comes down to control. Control in two different categories, technical control and business control. Technical control, I think that's easily definable. And I think that we're understanding now that immutability and inability to update smart contracts shows a level of control that, in their opinion, is very much like makes you as liable to centralized custodial technologies and services um whereas a little less defined but still very important is how business control impacts that right and that's you know they're being they're being charged with being an unregistered exchange because they've shown business control by being able to influence the

DAO in a large way. So those things are categories in which we need very clear guidance on what is control. Do we have an ability to upgrade contracts, prevent attacks? If we do find something later on down the line, once we've launched a protocol? Can we go and change it? Is that something that Dow needs to take precedence on? Or how do we go about dealing with these sorts of issues? We have three guests here who are actively building protocols with this lack of regulatory clarity, right? I mean, you guys are dealing with this every single day. How do you approach building and where you're going to deploy things and how you're going to approach American customers or users without any clarity? Some people would actually say, I've heard, we'd rather

have negative clarity than no clarity at all. So I guess we can go around the room, Jared, Julian, and Nicholas, what you're building and how you're approaching it without this clarity. Yeah, I mean, you know, sushi has, you know, has a heavy traditional kind of ethos of maintaining decentralized governance for all of what it does, right? How we view moving forward, you know, we recently had the Dow vote on a governance structure, a legal entity, organizational structure that was advised to us by Fenwick on how we can continue the way we've been doing business. And when I say business, I don't mean so much like make as much money or have as many customers or whatever, but to do business means to build protocols that,

you know, users can leverage for their financial autonomy and to have lending services and so, so forth. But that was under the advisement of Fenwick. And, you know, they have a fairly clear and battle tested structure for how to distribute the organization and its reliance on certain parts of the stack so that these things are segmented in a way that they're not so reliant on each other. So if one is in a jurisdiction that, you know, says no more of this, we can find another jurisdiction where we can go and we can set up. And so having that kind of organizational structure allows Sushi to move forward. It would be nice if there was some

clarity on what we can and can't do more definitively in certain jurisdictions. But this is the best structure that we have from, you know, arguably one of the best law firms in the world that has spearheaded a lot of this kind of legal approach to getting towards some type of, I don't want to say compliance, but I want to say operating in a space where you're not drawing the ire of regulatory regimes, you're being aware of what of what exists and operating in the in the environment that they've created. So, you know, it's it's a trying it's a trying process i'm on i'm on the phone with fendwick pretty regularly and making sure that as we move forward we're not exposing the dow to liability and stuff like that with with proposals that get put up for governance snapshot votes and stuff like that so it's a very nuanced approach and that kind of speaks to this whole discussion of without the regulatory clarity or without regulations at all, none of this, this would be a totally different environment in which we could build and it would move a lot faster. Julian. I mean, we've put a lot of thought

into this. DeFi chain is its own blockchain. It's a Bitcoin fork with added upcodes for changing the consensus algorithm through staking to adding. It's non-turing complete. So it adds a lot of upcodes to liquidity mining with an AMM on DEX, on loan structure, vault structure. So all these things got added non-turing complete. The way we approached this from the very beginning was there was no ICO. It was a pure fork with airdrops for Bitcoin holders. So we always thought from any kind of security perspective that just made the most sense. This decentralized the holdings right away from the start. There's no company around DeFiy chain there's a foundation that just holds the trademarks and and and holds the rights there um this is a douse kind of structure help all the the master

nodes um yeah then there are decisions like the website defychain.com is a pure informational piece that kind of guides to github guides to all the various kind of pieces. So just like any, and if you want to run the decks, you want to run the software, whatever, you need to download the node yourself and you need to run this all from your own device. So at least we tried. And I think we did a really, really good job as a community today to not have these single point of failures. I mean, sure, you can say, hey, I don't know, the repo on GitHub, it's there, and we can close that, and we've seen this. And sure, I mean, but that's not going to stop everything. That's all. I mean, we also had a lot of legal kind of guidance on this.

It's just that whenever we realize there's a centralized kind of aspect, then how are we going to get rid of that, right? And it's a step-by-step process. So I also wish that there was just more guidance and then try to kind of adjust to that guidance. But then at the same time, yeah, you just need to kind of try to do a best practice. And I think we have tried that over the past years every single day and we're going to keep trying yeah yeah make your app uh caddx is is an end-to-end d5 platform where we have an amm dex staking and dow that we've set up uh as a separate swiss entity kind of in the same in the same effort of creating something that is sustainable into the future while trying to navigate this this uh unclear space and the way this kind of stuff impacts us i think it's a way that it impacts any kind of innovator in this

space where you're you're instead of it just being about innovation, building the technology and finding proper market fit, there's a significant part of our business strategy that is, okay, develop an idea. Where are we going to go with this DeFi technology? How do we fill out our protocol stack and then take that back to our legal counsel and our advisors and spend a lot of time going through, you know, what do we know? Do we know? What can we learn from enforcement actions that are currently going on? And how do we navigate through that? And then it just becomes a balance of risk versus reward. And that risk versus reward, right, when we're going through and figuring out how do we want to leave our mark on this world and try to push DeFi forward? How do we do so in such a way that isn't a risk to us, isn't a risk to the DAO and create

something that's sustainable and going to live on? And I know, Jared, I know you guys are working on the same kind of issue with looking at what kind of protocols can we bring into sushi. And it's something that we spend a lot of time on. Unfortunately, in this space, that means that, you know, we have to spend a lot of money on hiring counsel that can help us navigate through this. Right. And that's that's the unfortunate bit about this. And until we get clear guidance, that's going to be a barrier. And it's going to be about risk versus reward instead of just innovation. You literally just made my next comment, which is nothing screams decentralization like millions of dollars in legal fees for multiple conflicting opinions where the lawyers are obviously hedging their bets and don't want to give you the wrong advice. I remember having SPF on the show and he was like, I have more lawyers working for me than people i have one in every single jurisdiction and they all conflict each other yep yeah and

because they're giving an opinion to not get themselves in trouble if their opinion is wrong so i i mean if that doesn't what we're saying about needing to get legal opinions and spend money on lawyers doesn't say how broken the system is. I don't think anything else does. Absolutely right. Absolutely. Yeah. And it's kind of a little bit of a red herring on where it's headed, whether we like it or not. You know, I mean, the banking industry and any other heavily regulated industry that isn't short on legal counsel fees, that's for sure. So I think, you know, we'll see what happens. I think all of us here kind of want to see a certain type of thing happen. And it sounds like we're kind of doing our part to work within the system that we have now to espouse that as the solution. Unfortunately,

it's a little bit out of our hands. Although I am involved politically at the local level here in Tampa, Florida, I'm not sure how much that's going to influence the congressional body in DC. But, you know, I think getting involved politically on whatever level you can in your jurisdiction is important. Yeah, I think one thing and I'm a bit repeating myself, but I just want to add that again. I think if we all sat here and said, yeah, you know, actually the regulation constructive about it. Let's discuss this. And we're very optimistic about it. But I think the reason there's so much frustration around it is because so many times we actually see that regulation is exactly not doing that. I think that's where the underlying frustration and skepticism comes from. I truly believe that because if it were the other way around, if we really said i know there's so much value it's so useful then i i don't think we would have that frustration or we wouldn't be so scared what could actually happen but because we know that many times there's this yeah very

questionable decision making there i think that's where the entire discussion actually comes from yeah sadly i mean sorry go ahead no please no i to say, Julian, you know, that's like it just kind of exists everywhere in the political realm. Right. Like in the US, one of the greatest philosophical debates is obviously we don't we have a form of crony capital capitalism or corporate interests influence the outcome of our you know legislation that's not a fair system i don't want to see anything like that take foot and become the status quo for for crypto i'm just very very uh i guess i'm very libertarian i guess when we get down to it. I just really like people to be able to have the autonomy and make their own decisions, choose their own fate. And, you know, I've been rug pulled plenty of times and it sucks every time, but I would not want to see that be the reason that we lose the industry to over-regulation, you and would it would it even solve any of those

problems which i don't think it ever would right and so that's where i take it back we have to really understand what the purpose and what do we want out of regulation and if it's if it's consumer protection well this technology solves many of the issues in which they cite for the reason for regulation right data open transparency, open transparency, execution on chain, all of that solves those problems. So what are we doing and what are we trying to solve? Yeah, Jared, to your point, I mean, I think we all probably agree here

that capitalism is a myth. As you said, it's crony capitalism. And I've always made the argument that perhaps my passion for Bitcoin comes from the fact that I view it as the last and only true free market on Earth. That's a great. Nobody had China. China.

China bans Bitcoin. Fifty percent of the hash rate goes offline. Nobody steps in and bails it out. There's no Fed. There's no floor. It just keeps on chugging along. Right. And some people lose money and some people make money and it's a free market.

Isn't that what we're all striving for here in the first place? Absolutely. Yeah. And to like that's I mean, that's a great point. And I would say that like Bitcoin is a prime example of us as a network becomes larger and more decentralized, becomes more secure and resistant to those types of issues. Right now, it's tied to parts of the traditional world of finance where it's ebbing and flowing in some correlation. But I think it gets to a point where maybe 10 years or 20 years down the road, I think that it really does showcase its store of value uh and its primary white paper purpose at that point of the experiment um i hope we get there without killing the industry with with regulation that's my really my my hope and desire julian or nick i mean you agree that's good. I'm not much bad.

Yeah, I think that's, yeah, not much bad. I mean, I'm for one, I guess that, Jared, what you just said, I mean, it circles back to the original topic, which is, you know, the United States versus DeFi, who will win. I think the consensus seems here that we all know what we would want in a perfect world. We all agree that perfect world doesn't exist and i think we all also agree that defy will continue regardless of regulation in the united states just how much it will be inhibited in those particular jurisdictions yeah i mean and you know and so if that's the worst case it's really not that bad in my opinion i would say it's important during that fight to maintain your principles and not compromise out of a sense of uh like bowing you know bowing to the king kind of approach uh i think i would like to see more fundamental

stances like what eric took in the debate be how yeah how the conversation moves forward bringing them to our side instead of crossing the aisle so much to make regulators comfortable, get them to see that maybe these hundred plus year old laws need to be updated or they need at least revisiting so that they can be applied correctly in this new, you know, paradigm of financial solutions that we're building. Yeah. Yeah. I think that that's part and parcel, our responsibility to, to help them see instead of the risks that they see, they see this, this space is just a, a huge bucket of risks that they need to step in to do something about. Instead, what are the opportunities that that this technology brings

to um you know the economy and i guess even in their their power of oversight with certain technologies like stable coins and and etc right and all those things i think we all have a part in stepping in to help that but also drawing a firm line on where where that ends and I really I really truly think that any regulation into DeFi that imposes more controls on this space will kill Innovation and will just put it on a collision course with TradFi yeah I mean you kill you kill people's ability to build right by, by over-regulating, and then you co-opt it with your buddies, and you allow them to build your version of the solution.

And that's what obviously none of us want, I don't think. And I don't think that provides better consumer protections or better consumer choices. I think think if anything it hinders both of those and um you're absolutely right nicholas like working together with them to educate where there's some you know where there's a divide between the understanding and i think there's actually a lot of really smart people involved in government regulating and so i'm less about giving them the benefit of the doubt on the educational side of things and more trying to understand what their their uh opaque uh

initiatives are for wanting a certain outcome right and then having that conversation on on level ground which we're right up against time. So Julian, you get the final word and then we'll close. I fundamentally actually believe that we're going to see some regulation all around the world, whether we like it or not. I also fundamentally believe

that none of the regulators are going to get it right because I think not even we can agree here what it means to have the right regulation so how are they going to do it um and then i also hope that those jurisdictions that get it more on the wrong side that they actually lose the talent and that they lose the project and they lose the incentives and they they lose the innovation and it shifts towards those regions that do it well because that should be that fair market punishment and then hopefully over time regulators cannot play their game of putting it into their own pockets but they

actually get penalized for bad decision making and and that is what i truly hope and actually believe to a certain degree. And then evolution will take its course. It may take a little bit. And then over time, we're going to get to a state of Deva regulation that is truly helpful for consumers, which I would actually be okay with. I don't have an issue with regulation as long as it's truly helpful to consumers and not this phony regulation that actually just works into the pockets of whatever politicians, corporations and so on. But then still be open to the innovation part. And I actually do think we're going to see this. I'm just a bit afraid that we're not going to see it maybe in the next 12 months, but maybe in the

next 12 months, we're going to see a bit of some stifling innovation regulation. And only over the next maybe 10 years, it's actually going to open up again. Well, we've all got 10 years. So if that's how long it takes, I think that we'll all be here and still hopefully be building and championing this space. Thank you all three of you, Jared, Nicholas, Julian,

for joining and for the time. And everyone who missed it, we got over a lot of technological issues right before we went live. My camera wasn't working, Nick's mic. So I'm glad we were able to make it work and that it was such high quality. I appreciate all of your perspective. Guys, I tagged all three of them on Twitter. So please go follow Jared, Julian and Nicholas and to find out more about what they're doing at Sushi Caddx and of course, Cake DeFi and DeFi Chain.

I will be back tomorrow morning at 930 a.m. Eastern Standard Time reviewing the week in news because that's what we do now on fridays guys thank you once again it's been a pleasure i appreciate all of your insight everyone else see you tomorrow peace thank you let's go.