This Week in Startups - NFT NYC, Solend takeover, Why Non-Finance use cases are the key to Crypto, Magic Eden & more with Vinny Lingham | E1489

Episode Date: June 21, 2022

There’s been some crazy news in Crypto, so we bring on Vinny Lingham, an early investor in Solana, who runs a startup that encrypts identity information on the blockchain called Civic. We dig into NFT NYC (8:24), the fiasco on Solend protocol (22:29), and how South Korean prosecutors have instituted a flight ban for employees while they investigate the $40 billion collapse (45:54). Finally, we talk about how, despite all of this, the Solana NFT Marketplace Magic Eden still raised $130 million at a $1.6 billion valuation  (51:04).  (0:00) Jason and Molly introduce today’s show! (2:18) Weekend banter with Jason and Molly (8:24) Crypto Update: Solana Whale, NFT NYC, and Magic Eden w/ Vinny Lingham (13:58) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at https://Squarespace.com/TWIST (15:13) The crypto drawdown: Vinny’s thoughts (21:21) Notion - Get started for free at https://notion.com/thisweekinstartups (22:29) DeFi protocol built on Solana, called Solend, voted to take over a “whale” account on Sunday, which accounts for ~95% of the platform’s total deposits (35:29) OpenPhone - Get an extra 20% off any plan for your first 6 months at https://openphone.com/twist (36:34) Should humans be able to intervene on crypto systems? (45:54) South Korean prosecutors have BANNED Terraform Labs employees from leaving the country with a flight ban (51:04) Solana-based NFT marketplace Magic Eden has raised a $130M Series B at a $1.6B valuation (1:18:55) Outro: stories coming up this week

Hey, everybody. Welcome back after a long weekend for some, not all of us. It is going to be a short week for us, but a big week here on this weekend startups. Big. It's a lot of news going on and some crazy news in crypto. So we brought on our good friend Vinnie Lingham, who will be on in a moment. He was an early salon investor, early Bitcoin investor, and he runs Civic, a startup encrypts identity information on the blockchain famously, and he's going to talk to us about it all. Yeah, we're all. And there is a lot of. it. We're going to, he's actually coming to us live from NFT, NYC, which sounds like a bit of a fiasco itself. We will also talk about this, the fiasco on the Solana D-Bai app called Solend, and then how somehow

through all of this chaos, a Solana NFT marketplace called Magic Eden still managed to raise $130 million at a $1.6 billion valuation. Why not? And there's some news that a whale has had their account frozen. They can't liquidate it on Solana. I want to hear about that. And don't forget about a good friend, Do Kwan, who was on the pod last year. South Korean prosecutors, I kid you not, have instituted a flight ban for employees while they investigate the $40 billion dollar terra a lap. So we're going to dig in on that as well. Yeah, there's a lot going on.

It's going to be a great conversation. It's going to be a great show. Stick with us. This week in startups is brought to you by Squarespace. Turn your idea into a new website. Go to Squarespace.com slash twist for a free trial. When you're ready to launch, use offer code twist to save 10% off your first purchase of a website or domain. Notion.

Notion is one place for notes, docs, projects, and everyday work that goes way beyond a wiki. Go to notion.s.o and use promo code Twist to get $250 off an annual team plan. And Open Phone. As a startup founder, a lot of mistakes are easy to roll back, but using your personal cell phone number as your company number isn't one of them. Open Phone makes it easy to get business phone numbers for you and your team right on top of your existing devices. Visit openphone.com slash twist to get 20% off your first six months. All right, Molly, you had a good weekend, I take it. Here's her weekend banter.

We always go a little weekend banter. I know. It was lovely. we had some good Juneteenth conversations around the house. Had a nice Father's Day. Went to a concert. It was great. Oh, yes.

You went to the Indigo Girls. Yeah, they actually surprise opened for Randy Carlisle. I was going to see Randy Carlisle at the Greek in Berkeley. I love Brandy Carly. I love, I mean, her voice is just magical.

Amazing. Magical. And the Indigo girls happen to be opening for her as sort of like a bit of a surprise. And she sang with them and like, look, My high school and college experience flooded right back. There were tears. It was absolutely the earnestness level was infinity at this concert,

which is not my normal thing, but I don't care. I loved it. It was wonderful. You know, when I was in college, I loved the Indigo girls because they had done a cover of a Dias Straight song, Romeo and Juliet. Which I then listened to after you told me that. And it's amazing. It's like, I think it's their best song.

I mean, no offense. You know, whatever that song is, I went to see the doctor of philosophy, whatever that song is. Oh, yeah. Closer to find. Closer to find is their big one. But I didn't know that they had a certain, you know, audience. And I invited a girl on a date to see Indigo girls because I was so into them.

And she was very confused. But we went. And I was the only guy there. Yeah. They're very popular amongst the ladies. More than I would have thought. There were more men than I would have thought at this event. Oh, that's great.

I will say. Yeah. In fact, my ex-husband and his wife were all. also there. Like, we had all bought tickets to this and didn't know because we were all big Brandy Carlisle fans. And so Jason and I are texting during this concert. And I'm basically like, oh, so we're having almost the same night. Almost the same night. Well, this is a funny story. I was, okay. You know, I hate to name drop, but I'm friends with, you know, I'm good friends with Dray Montguerrian and the Warriors. And my friend Chamath, you know, owned a piece of the team. So I got to know everybody.

And I'm friendly. And Molly and I went to game two. Steph said hi to me. It's always very nice, like to see the Warriors and, you know, people always ask me like, aren't you a Nick fan? Yes, I'm diehard Nick fan. But I have adopted the Warriors as my team also because I'm here and they play a style of basketball I love. And the Knicks are, you know, never going to win a playoff game again in my lifetime until I buy them.

So, you know, at least it lets me go to some playoffs games. It was opportunistic. So there was a little, and I'm not speaking out of turn here because it was all over social media. But, you know, as teams do, they have a little celebration after winning a championship. I was lucky enough to go with my friend David Lee and Andrew Bogot to the first couple of wins in Shemoth when they celebrated in Las Vegas. So three of the four years they celebrate in Vegas and three of those three years I won.

So yes, on Saturday night I went to Vegas with the team and, you know, we hit a couple of nightlife spots and we're having dinner. And as fate would have it, you know, the team and I sat down and who's sitting directly next to me, but Molly's favorite player. So it's 1145 and I say, Molly, face-time me if you have a moment. And I've never asked Molly to FaceTime me. So I was like, this could be a weird request on Saturday night 1145. Like, hey, just randomly FaceTime me. I don't know if you think I'm. And of course, because I'm the weirdo that I'm, I'm like, is he okay?

Is he okay? Yes. Just an idiot. Just an idiot. So I happened to be sitting next to Molly's favorite player, Clay Thompson. My favorite. And I was talking to Clay and we have a nice conversation. I said, you know, my friend is like, you know, a huge fan.

And she literally got COVID for you. She went to your, she got tickets for your comeback game. She cried. It's like, oh, we'll tell her everything. I was like, well, maybe you could tell her herself. You know, would your mind if I had her FaceTime? And she goes, oh, of course, Jake out, whatever you want. So sure enough, Molly facetimes me.

I hand the phone to Clay. He goes, and then Molly can take the story from there. It just pans over. And I am in the car. Yeah. In the middle of, you know, like having just dropped off my sister-in-law, like trying to find the lights and new car. I don't know how the light comes on.

And then he pans over. And it takes me a second to even recognize that it's Clay Thompson. Like, I'm just like, oh. And just being the awkward dumb, dumb that I am, I'm like, a little awkward at times. Yeah. So awkward. Like, no, I mean, not at all.

Like, thank God for me, Clay is not going to remember any of this interaction because I. No, no chance. I barely remember. Like, he was, just like, congratulations. You're so great. I got COVID at your first game back, but I'm not mad because weirdo. Like, who says that? Yes.

No, it was always with the celebrity. You say stuff, your brain when you see a celebrity, especially when you love, your brain starts going at like variable speed and the word starts skipping. It happened to me, it happens to everybody. My face was all red, like it was all flush. But the good news for me again is that Clay was not even making words, right?

Clay was like, it was sort of blowing kisses like, and I was like, this is the best. He loved it. He loved it. He was like really, he was really, yeah. He was really into it. So anyway, congratulations, my worst friend. So I had like maybe 16 hours in Vegas, flew back the next morning because, listen, we all have kids.

We all had to get back for Father's Day. I would say a decent number of the players and I. So a group of us came back, you know, so it was like one of those, you know, late nights. But I met also a soccer player. So I'm at the table. And my friend's like, I want you to meet my friend. He's an athlete or whatever. Oh, hey, how you doing?

I'm Jason. Oh, hey, my name's Namar. I said, oh, okay, what do you do? You did not. Yeah, and he's, I play soccer. I was like, well, professionally. He's like, yeah, I was like, oh, are you any good? And how's that working out for you?

It's like, it's going okay. And then my friend's like, it's going okay. The number of two player in the world. You know, he's like a big deal. Okay, so then we just, me and name are. Oh my God, Jason. Tramon are dancing at the club. You didn't even ask him about his CSGO inventory?

I didn't know. This was your big chance. I don't even know what you're talking about. I know. I mean, the awkward nerd alert. Yes. Anyway, he's, I guess he's, I guess he's, into crypto himself as well.

So anyway, shout out to Nimar and all the other famous people who I really don't know. Well, anyway, speaking about things that are confusing, my lord, I don't know what's going on in crypto except to say that a lot is happening. And just like there's a lot happening in growth socks and the economy in the world writ large. So bringing, I'm going to bring on my good friend Vinnie Lingam, who is an expert in this field. Hey, Vinnie, how are you? Jason and Molly, great to see you guys. Vinny.

Thanks for your patience. I just want you to know in ongoing awkward comments, I bought $300 of Solana after we talked after the All-in summit. So either you owe me $300 or this is going to go great.

Yeah, I would stay. I am the whale. Everybody, I'm the whale. I owe you dinner. All right. So just to give us a background on Vinnie, you know, 10 years ago when we're all talking about crypto,

he had jumped full in, I did Civic. and invested in many projects. And I think you were the, you're a partner at, um, or somehow related to, I joined as a GP at Multicoin 2017 when Colin Tushar started up.

And, yeah, that's a been a fun run as well. That's a firm that had maybe $10 million for their first fund, invested in Solana or something to that effect. When I joined, it was like five and then I brought in sacks, uh,

into the fund and we set up the opportunities fund, which is the, probably the best venture capital fund of all time. Yeah. And that was early 2018. So, I mean, you know, obviously been... 10 million to work. I understood at the peak.

It was 20. It was 20. It was so that fund, the hedge fund was like 5 or 10 initially. And then we set up the venture fund for, I think it was 20 total. And Kraft anchored that fund for us. And yeah. How did that wind up at the peak on a multiple of cash? I don't know.

The peak, I think, is like 150, 200 times return. on a fund, which is crazy. $4 billion or something. Yeah, it's still pretty big right now. It's still like in the tens. Yeah, of course. Yeah, and you know, listen, crypto has had these incredibly volatile moments.

I want to unpack it with you. I think the place to start is you're at NFT, New York. People on Twitter are saying, like, I'm not going to do my, so somebody said, I'm not going to do my speaking gig. This thing is so terrible. It's the fire festival. What exactly is everybody complaining about there? And what is NFT Fest?

I wouldn't call it the fire festival. That's a little extreme. Okay. Yeah. So, I mean, you just ran the Orleans Summit. You know, it's hard doing a conference. And that was 1,000 people. I think it was executed really well.

But when these guys are trying to put, I think it's 20,000 people a year. The venue selection is terrible. It's the merit marquee. I don't think you can handle that many people. The lines are around. The lines go down multiple floors to get to get your pass. The pass security is terrible. I mean, like, if I look at my pass here somewhere,

it's literally just a printout. There's no security stickers. I can go and photopied and give you. You'll be 20 venues walking around. You just have a lanyard. So the lines are super long. And when you go into the venues, the speakers aren't even there. I was in a session this morning.

Two speakers are not there. Presumably they're stuck in line trying to get a pass to get in. There's no VIP pass. A line. Like, I've been to Money, 2020, many times. Times in Vegas. And it's like 30, 40, 50,000 people or whatever. And it's a perfect deal.

Like, that is an incredible show. At scale, you can't run conferences like this at scale. You just can't do it in Merriott-Markey Times Square. And then it also sounds like they don't know how to run registry. I mean, compare it to All In Summit we had, you know, tickets with your photo on them, custom printed for you with a QR code on it. Like, this is like just a modest amount of additional work. security.

Yeah, exactly. For a sophisticated NFT thing, like show, you should have maybe even have NFTs or something. Like, hey, it should be so simple. Like, every person who buys a ticket gets an NFT in their wallet and you scan when you go through the door and you need to make sure you have it with you using token proof. And, you know, token proof has a QR code that changes. So you can't even screenshot and give it to someone else. You have to have the NFT on you.

Just things like that, right? Moonbirds is doing that tonight, by the way. Kevin Rose's party. You have to own one of these moonbirds, which is a, worth 20-Eath right now at the minimum, which is, what, $25, $30,000, and to get in, and you have to have registered a few weeks ago to get in,

and then you get an NFT effectively on, the Moomba is the NFT, and then you use a token proof to get a pass, but you cannot screenshot that pass because the QR codes only valid, it's like an Athenicata app, right? Like that sort of thing. Yeah.

Constantly changes like Google offender. Yeah. And then what about these complaints, the sort of anonymous account that did the long tweet thread about how they weren't going to speak today was also just saying, like, in addition to the logistics, it just feels like the whole thing is sort of a big, salesy, grifty vibe. A total grifty vibe.

I mean, you go in there, the booths all over the place. It's like badly set up. People like, there's no, like, order, no structure to it. And then you're in the worst possible place. Like, if you're sitting in a session and you've got fire trucks and ambulance running down times, this is New York. It's really, like, I just didn't think that they thought through, you know, the logistics for a conference that size of this scale it should have been done in a different

place now i i get that it's attractive to do it where they did it um and maybe they got a really good deal but it's it wasn't a great deal for us okay we got some exciting news for you right now we're going to give one twist listener one thousand dollars in square space credits you ever go to a company's website and it looks absolutely gorgeous well we want to show off your best web designs it can be anything a landing page, a feature flow, a design aesthetic, anything that would wow your users. So use your creativity here. The possibilities for submissions are endless, and you can imply it's super simple. You head to Show Us YourSpace.com, which will redirect you to a tweet for me at Jason.

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So there's so much to talk about. And just this is against the backdrop of Bitcoin bottoming out. I think it hit like 18K or something around that. 17 and change. Yeah. Amazing. And Ethereum coming massively down. But you've been through this before.

Many times. Just broadly speaking, how does this drawdown feel qualitatively to you versus the others? Is it different and could it get much worse? Or does it feel analogous to I think. There's been four big drawdowns, if I'm correct, and this is the fifth, or is this the fourth? You know, when I say big drawdowns over 50, 60%. Yeah, I think this is the fifth, maybe in the six. Who knows?

But in percentage terms, right? So in absolute terms, this has been the biggest in absolute value terms. But in terms of percentages, I think it's not the biggest yet. But I do think that there was a massive deal leveraging that happened on the way down. And you had a lot of positions that are sold out. And we'll get into that now with what happened with Solana, with Solend. but, you know, it's kind of normal, right? So you had this crazy de-leveraging because everyone went on to Celsius and Luna and Anchor and whatever else and borrowed money to buy more crypto.

And that whole sort of, that whole system got unwound. And, you know, I'm a big fan of defy, but a certain flavor of defy. And let me give a very simple example. I think when, you know, if Jason, if I need to borrow money and I have one Bitcoin is worth 20K and Jason wants to lend, $10,000 against that, knowing that if a price drops to 15, he's going to sell me out or do a margin call. And at 14 or 13, like, I get liquidated. And he's guaranteed his money.

And I'm paying him 8% interest on that. That's kind of a good deal, right? And that's dollar and dollar interest. I borrow $10,000 USDC, and I'm going to pay him back $800 interest over a year. And he has my Bitcoin and security. And he knows if it price drops, he sells it. That's actually a very good, legitimate use for defy. I think we can all agree there.

That's basically taking out the banks, taking out the middlemen, and having a peer-to-peer transaction for a borrower and a lender to put up collateral and not use credit. And credits a whole different game. This is collateralized lending. The problem with Defi is that it evolved from that to guys thinking like, oh, how do I juice these returns? So how about it's 8% right now?

And if you lend on my platform, I'll give you some of these tokens for the platform. And then your effective yield is, you know, 20%, Jason. because so you're going to get some cash or you're going to get all these tokens. But these tokens are worth this because it becomes like a Ponzi. And this is what's really happened with Luna, right? Luna became somewhat of a Ponzi. And it totally collapsed because they couldn't sustain it. Let me reflect it back to you in plain English as best I can for the audience.

Okay, you have the Bitcoin. It's worth $20,000. I loan it out. I get $10,000. I can go spend my money without selling my crypto. I get to hoddle my Bitcoin. But I get to use that $10,000 to live my life. And listen, if it's always going up every year and it goes to 40,

I can, you know, now I've only got 25% of the value of it loan. So it's pretty cool. If you were thinking about it like a mortgage on your house, the value of the house goes up and you're paying down your mortgage over time. You know, the amount of equity you have in your home just keeps increasing and it's all good. And what's beautiful about this is I don't need to have a middle man. There's no broker in the middle. Now, I guess the criticism would be, if you were to get margin called, there would be somebody to call to say, hey, give me 48 hours or whatever.

There might be like a little grace period or something. But here, it's all programmatic. It just happens naturally, which keeps everybody honest. But people were not, in addition to doing this, to get you to put your Bitcoin on some of these exchanges or these defy-fi, I guess would be the better term. These defy-i exchanges or these defy-a-stervices. Defy-a-pl platforms, yeah. So these defy-y-y-platforms said, hey, we'll sweeten the pot. you get the 8%

but we'll throw in some of our name our defy platform tokens and yeah maybe they'll be worth something at some point but they basically gave people Chuckie cheese tokens so people were like oh I'm getting even more which then incentivize them to put more on these and then essentially the system am I correct worked the way it's supposed to

which is it's a smart contract when it hit a certain level it sold it out and the problem there is nobody really knew how much leverage or margin was in the system. So when it goes down, it just cascades until the breaking point.

Yes, except. So we're conflating two different scenarios here. On a totally transparent system like Solenn, you know exactly how much is in the account, how much is being lent out, and that's very transparent.

When it comes to Celsius and Luna, it's basically back to centralized banking because these platforms have got Celsius, It has their own token, et cetera, and it's blackbox. So you don't know what their books look like. You don't know how much collateral damage there's going to be when they sell. So we went from, hey, this is a great way to wrap a Bitcoin, you know, onto an Ethereum

tokens called WBT, lend it out, borrow money against it and get, you know, like you think about you're taking two relatively hard assets. You take Bitcoin and you take US dollars. And that actually makes sense. There's a trade that happens and you can do it in full transparency of everyone out there. But now you start bringing in third-party tokens. And, well, instead of using Bitcoin, let's use some other, you know, crap coin asset with a low market cap.

Let's start borrowing against like, coins, right? Like really low down the stack, low market caps. And then the volatility increases. Like Bitcoin's volatility in a single day, you don't get a 90% drop in Bitcoin in one day. It just doesn't happen. But you can get that on a low market cap, if someone decides to just dump it, right?

And so you went from two high-quality assets doing a trade to a multitude of high to low and then borrowing dollars and then interest being paid in dollars and a multitude of other currencies, which is just very opaque. Got it. Startups need a central hub to store information and collaborate on work more than ever, especially when you have remote teams. That's why you need to move to a right first culture. Any best practice, any project should be.

written down in one place. We went fully remote back in March of 2020, and Notion became our internal knowledge bank. Now, we use it for external purposes. You can go to this week in startups.com slash checklist to check one of the many ways we're using it externally. We took our 100-point founder checklist, which we made for the podcast, and we made for our founders. And you know what? We said, why don't we share this with everybody? This is like a book for free on Notion, and you can take it, copy it to your notion. You can write notes on it. And that's the magic of Notion. They have great templates. It puts everybody on the same platform, and it just accelerates your efficiency. When new people join your company, they go to Notion and they see all the projects going on and they quickly get up to speed. It's changed everything. So here is your call to action. Go to Notion.S.O and get addicted like the rest of us. Use the promo code twist. You're going to get $250 off their annual plan. Notion.S.O. And use the promo code twister and checkout for $250 off. Thanks to the notion team for making a great product that we love and enjoy every day. Okay, well, since you brought up Solend, which is supposed to be better,

at least around transparency, there has been, and we're hoping that you can help us understand this. Solend is this D5 protocol built on Solana, and it sounds like the Dow that built it voted on Sunday to take over this whale account that accounts for 95 about percent of the platform's total deposits. can you help us understand what happened here and why that, why and how it could happen that effectively the Dow that controls this protocol or app layer could say, like, you can't have your money, investor. Sure. So let's start with like understanding.

I want to just like set the ground here. So first of all, Solend is an application, right? It's a protocol. It sits on top of a blockchain. It happens to be Solana, right? And they call themselves Solent. They could have been built on Ethereum. They could have been built on Bitcoin or whatever.

But they chose obviously Solana. Now, they could also choose a multitude of assets to hold. They could say we will take wrapped Bitcoin, we'll take wrapped Ethereum, we'll take USDC, whatever it is. But in this case, it was a Solana contract. So the person who put the Salana on that, that was their collateral. That's their asset that they want to borrow against. And on the other side of the trade, there are people who are willing to lend dollars against

asset with enough margin between what the price was and what it could be in case of a drop and then the liquidation of end occurs. So, you know, at the very, very basic level, this is a very fair transaction because the people lending the money out believe that Solana was a hard enough asset at the time to allocate their funds to it. And there's always risk, right? And they took the risk of going with this platform and this governance structure that they had. Now, what happened was, as the market totally de-leavened and unwonged and the salina price dropped closer to a liquidation point, the risk at that point was that people would lose their money if they sold $100 million.

So if the spot price of Salana hit 22, for example, and now you start having cascading liquidations, if you try and dump $100 million, the average price you may get for that $100 million is going to be $15 or whatever, some number much lower. Because there's not that many buyers, especially in a down market like this. You might not have as many retail people as many people speculating. So to fill that order could be disastrous. Well, if you do that on Open Exchange order books are very thin relatively. The OTC desks are very different, right?

So if you have an OTC desk that, you know, if you want to go move $25 million with a Solana, they know who the buyers are. They contact them. You do a spot price. And this is the same as it works in stock exchanges as well. If you're doing a very large deal, you're not going to put it through the order books. You're going to do a book trade, right? And so you're going to buy and sell.

So what the protocol said is, look, we're going to vote to do that. If it drops a certain point or we're going to take ownership of now to prevent this thing being automatically sold into the market into a thin order book and dumping the price below what the real market price is. Now, by the way, I'm explaining the logic. Yeah, I'm not expressing an opinion. I'm trying to explain the logic behind this. So don't take anything I say as my opinion on what should or shouldn't have happened. Well, but it's, but you're saying like this is why, this is why a vote like this would occur.

And in this case, that vote happened to affect a single holder. Yes. So that's the other thing. There was concentration risk on the platform where one single holder had 90% of all the salonna on the platform or the lending contracts in the platform. So I want to finish up by saying that the vote that happened was reversed, I think yesterday. And $25 million of the book was moved to a different marketplace to spread it. around. So the community is figuring out how to do this. We are very early days in Dow's and whatever else, but I do believe at the core that the operators of this protocol

are trying to act in a responsible way and resolve the issue without taking damage to the people who are holding the dead. So then what happens? You get a whole bunch of attacks from everyone else. You get attached from other chains, other protocols, saying, oh, look, what's happening at Solana? Let's be clear. This is not a Solana issue. This is a protocol. designed on Salana, where they're making the decisions for what they do with their Dow and stuff. So it's not about decentralization of Solana. It's about do you trust protocols built on certain

blockchains or not? Do you trust who's running? This would be the equivalent of, you know, there might be an app in the Google Play Store. Exactly. But Google didn't write it. And people who bought into that Google Play app if it wound up having some problems

or crash your phone or was hacked or whatever, that's not a reflection on Android as necessarily. It's a reflection on the app that was built by some third party. But in fact, in this case, it seems like both parties are being served well here. Because if, and this goes back to what I was saying before, which is like, hey, it's programmatic. Most of the time when people set up this leverage or do these, you know, defy loans, it's programmatic. If Bitcoin falls to 15 bucks, everything gets sold and you get your money so your loan is not washed. The person who loses in that is maybe the person who loaned.

it who would rather have polled and kept it, and they took this risk to take a margin loan and get a margin call, basically. But in this case, this was a Dow, a decentralized autonomous organization. They had a voting structure. People bought into that voting structure, and the voting structure said, hey, listen, we're the ones who made the loan, we gave the money. We would like to see this happen in an orderly fashion so we can get back as much as possible. because if it did flood and it sold,

they might be underwater. Is that what I'm reading into it? Yeah. So it's bad for a number of parts. It's bad for the collateral. So the underlying collateral being Bitcoin. If this was $100 with a $1 million with a Bitcoin or Ethereum or any other coin, and over this past weekend with low liquidity,

everyone in that, anyone who owns those, like for example, it was Bitcoin, Bitcoin price would tank. If you sell $100 million, markets sell $100 million on Bitcoin on a low liquidity weekend, it's going to break the price of Bitcoin. It's going to drop a significant percentage. And so, I think the way to look at this was the Dow said, what is the greater good year? And this kind of goes back to Ethereum as well. They had the whole Dow hack back in 2016 where the Ethereum Dow was hacked.

And they did a 97% of all Ethereum holders decided to go away. with a hard fork and then you have Ethereum Classic, which is formed out of it, that whole thing, and everyone kind of disagreed. And at the time, I thought it was, I thought like people should just lose their money. But you know what? If you look back right now with hindsight, it was the right decision to preserve and, you know, and do the hard fork because like from a Bitcoin as sort of early view, you should never hard fork for that reason. It's like everyone takes risks to their own and that's fine. But Ethereum was just too young and too early on where they had to self-correct. And that's kind of what Salend is.

doing right now. They're saying, look, we're still learning. The space is new. We don't know how to deal with some of these things. But what is the greater good? Is it better just to dump the salon in the market? All the lenders who lent against it lose money. Everyone who holds salona suffers because this thing got market sold. Or do we try and just make sure that we can get out clean and the guy who borrowed the $100 million, well, you know, he put up his collateral and he's lost it because the market tanked. Like there's nothing we can do about it. And so they try to basically arrange and, you know, an organized sale of it. I think it's a really hard thing to give an opinion on because it's one of those things where if you're not in the seat of the CEO,

of the team of people running it, it's like it's hard to understand what it feels like having to make those decisions. And Jason, you know this. You've been there before. So I think that no one did anything dishonorable in my opinion. I think they made, they try to make the best of a bad situation, which was largely driven by exogenous forces in the market, and people had to figure how to deal with it. This whale had deposited 5.7 million Solana tokens. Those were worth a couple of hundred million. At the time, they took a $108 million loan.

Those $5.7 billion are still worth like $150. So I guess the people who loaned out that money are going to get their money back in all likelihood as they liquidate this. It's just a matter if it happens instantly or not. I mean, that is what this comes down to, is an instant liquidation rocks the market and could create fear and panic selling. It's been reversed. So the Dow decision, so the Dow is basically, you know, owners of the protocol, the people who own enough votes to decide on what it is. It's kind of a collective force. They've decided that they had a re-vote and they basically said, okay, we're not going to do this. And if it gets down to $22, we're going to just, you know, let the market decide what it does with this.

And because I think at this point, before this happened, the market was probably not well aware of this situation. And now the market's kind of priced it in. And I think, look, so long is up right now. I'm hoping it doesn't get down to $22. And they're now moving the, you know, they've already moved $25 million. So they're spreading the risk around. And quite frankly, I think that we, I think we hit the bottom at 17K. And I think we're on our way up right now, unless the Fred nukes the economy even more.

So I'm cautiously optimistic at the moment. I think there may be more nukes in the barrel. But before we get there, what are the sort of like learnings that will come out of this? Because it seems we've talked a lot about on this show about how one of the things that seems to have happened in the absence of like product is a more and more and more financialization of these assets that, you know, like what you're describing is effectively like, oh, well, mortgages. existed. And then we realized that we could trade, you know, package up mortgages and sell them. And then we realized that some of them were risky. And so we could package those up and sell them. And that would be a different kind of collateral and leverage. And that increasingly, there have been all these sort of financial tools employed to get value out of these assets that

look and walk a lot like regulated banking activities, but aren't. And so like at what point are we saying this is all something that's existed before and should be regulated thusly or even maybe you can't build a defy app on top of a layer one protocol that could crush the entire underlying token because it's not managed properly. So we're learning about concentration risk, which I think a lot of people know about, but we kind of ignore.

And when things are going well and everything's in a boom cycle, I mean, Jason, you're always the first to call this out, right? Like, when we're going to like a silly money era, everyone loses their sense of sensibility, and like it goes out the window. And that's the problem we had right now. And I'm hoping we had a wake-up call and we're going to rebuild from 20K back up to $69,000 again with Bitcoin.

But the bottom line is this. The more we try and recreate the banking system, the more we're going to fail. Because the banking system is a triad and tested model that works. Okay? It really does work for the banking world. But isn't that what's happening? I guess that's what I'm asking, because it feels like we're recreating parts of the banking system, but with less rules.

So, yes or no. The banking system is largely based on credit. Credit is an asset, but it's an intangible asset. Your credit score is an intangible asset. It belongs to you. You can use it. You can leverage. But at the end of the day, if your credit score goes down, you've devalued your asset.

It goes up. You value your asset. So the entire banking system works on credit and trust. Bitcoin was built to be a trustless system. Okay. With no counterparty risk, you have to know who you're dealing with. There's a decentralized ledger, and it's a native asset. Now, what we're doing now is the closer and closer we try and turn crypto into the banking

system, the more we're going to fail. The closer we get to the sort of trust is decentralized compute platforms, Ethereum, Bitcoin, I think the better. I think the point of crypto is to remove middlemen from all the transactions. and it just basically becomes trust as transactions and get to the point where there's just full transparency of what's going on. And the moment we use centralized companies like Luna and Celsius and even Blockfire and whoever else, the more we're basically just rebuilding banking.

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Because you could build systems that things happen automatically, but with some smart contracts that say, in the case of a disagreement, here's what happens. So where do you stand, you know, having done this for 10 years and built a lot of the infrastructure and participated in it? What do you think is best for, you know, crypto and for humanity writ large in terms of these things? Should there be middlemen who can, intermediaries, who can step in and say, hey, you know what, this was not the intention.

Or I hear some crypto people say, this is how it's supposed to work. I think they're kind of absolutists in that they don't want an intermediary to intervene. If you lose your money, you played a game in a system that you do not get your money back. So how do you, you know, at this point, fall on that spectrum? So, okay, let me start with, I go back to Bitcoin, because Bitcoin from these first principles of crypto. So in Bitcoin, Bitcoin was basically the design as a system where I can send you money, Jason. And if I said it to the wrong person or I send it to you and you don't deliver the goods, I'm out of pocket. It's not like the credit card system where I can go to Visa and say, hey, I need a charge back.

I'll go to my bank and say Jason to deliver. So it's a cash system if you think about it. Like it's a bearer system. And that was, that was like, I guess the genesis for the whole industry, is you can use this non-reputiatable system of moving value around. And now we've got at the point where, you know, it's looking a lot more like banking with, oh, this is who the person is, this is the risk you're taking through centralized and decentralized players.

But to answer your question more specifically, I think there is a spectrum that we need to look at. And the spectrum would be from on the sort of far left side being Bitcoin to the far right side being, I don't know, Celsius or Luna or whatever. And there's a spectrum of decentralization to centralization. In fact, if you go further right, it's probably banking, right? So the banking system. So you've got this like spectrum from Bitcoin to banking and you have all this white space in between.

And what's happening right now is we're testing a bunch of stuff in between right now. And on a long enough time frame, the winners will emerge. and you'll find maybe it's a hybrid, maybe it's an 80-20, maybe it's a 50-50, maybe it's a 70-30. But I think we need to run lots and lots of experiments in this industry and ecosystem to see what stands the test of time. I know for a fact that Bitcoin will stand the test of time and banking will stand the test of time because to some extent they both have. On the banking on the far rise, it's been around for hundreds of years and we know that

works. And other side, Bitcoin's been around for a decade in crypto. That's actually a long time. And it works. but all the stuff in the middle, we're still trying to figure out what works and what doesn't work. And the reason is, the reason this is difficult is because the moment you try and hybridize something,

because what we're trying to do is we're trying to hybridize Bitcoin and move it closer to what consumers are used to, what consumers understand. Because when you tell the consumer they just lost their money on a transaction, they don't understand it. Like, how do you just lose my money? How can I not get it back? They're comparing it to the Fiat system,

which has existed for a long time, and the government has regulated for a long time. And because it looks like that, increasingly. It looks increasingly like that, which I think is, you know, a problem for the ecosystem at some point, right? It's a comms problem. Like people are out here on Reddit forums

talking about the Celsius freeze being like, wait, they can't just keep, there's like FDIC or something, right? And it's like, peanut, no, there isn't. Yeah, you did something very risky. They just said, give us your money, will be custodians of it. You didn't do this in your wallet. You let somebody else, you know, do these transactions for you at Celsius. They're like a hedge fund. They, they, they, they, they have

tracked the whole process from you. You did not play by the actual crypto rule. So they wrapped crypto, not your coins, not your keys, not your coins. Exactly. You didn't. And the same thing is for Coinbase, except for the more custodial service they offer, correct? Like on Coin. If you're a rank and file, Coinbase person, they abstracted the Bitcoin. You don't have the keys. If something happens to Coinbase, which I think is a very small percentage, but they've had to talk about this, you don't have the keys to your coins. Whereas if you had the custodial account, I think at Coinbase and other places, you pay for them to custodian, but you still have your keys and they're in storage, I think. It's like a trust account.

It's in your benefit. So here's the difference, right? But Coinbase, we know, we know Brian and Coinbase, they're not going to take your funds and use it in a way which is risky, right? And by the way, banking has been through this already. In 2008, in the great financial crisis, the reality about banking is that they privatize their losses. They socialize their losses and they privatized their profits in the previous era. So the banks just took a lot of risk with your money. And when they made profits, they got big bonuses.

And when they made losses, the government had to bail them out. And so it kind of happened with Celsius already and others in the space. These guys have been taking ridiculous amounts of risk to juice their profits because they basically re-hypothecate the money. So you put the Bitcoin with them as a galette. So, you know, here's an example. This is like basically banking. You put a Bitcoin with them and you want an interest and someone puts dollars with them

and they give you that, you know, they give the dollars to you if you want to borrow against your Bitcoin, but then they take your Bitcoin and they go lend it out to someone else to get a higher interest on it. Or they come up in some fancy way using options and puts and whatever else. Because it's centralized, it's not transparent. You don't know what they're doing with your coins when it's there. And that's basically, we're going back to the banking world and we've learned all these mistakes in banking already over decades and centuries. And so the only thing I think that works in Defi is transparent transactions on smart contracts. using these like centralized third parties where there's a CEO that can take your money and lend it out to his buddies or like I mean there's the same problem with tether right tether we don't know what's in tether nobody knows okay I think they probably have the money they claim they do in assets and treasuries and bills and whatever else but we don't know what the liquidity reserves are we don't know whether they're sitting at 5% or 20% reserves if we don't know what we don't know how much money how much cash withdrawal from tether is required to break tether

And by the way, it's probably a good thing we don't know, Jason, because if we knew, then the hedge funds could go do a wrong and happen. Yeah. So I get why they're keeping it sort of opaque. But again, now we're treading into the banking world again. And so I personally hate banking. I think the banking world sucks and I think we have to reinvent it. But I don't think reinventing it means copying it into crypto.

I think that's the mistake we're going to make. So I love all these experiments that's playing out in DeFi. I think it's healthy. We have to tolerate a lot of failure that we tolerate the dot-com era. I mean, you didn't remember there was a ton of companies that failed. I mean, like 98% of the companies failed, 99% of the country. I mean, to this day, Angel investing is a pursuit where 90% fail, one out of 10, you know, are the bulk of your return.

So the best advice, Vinnie and Molly, correct me if I'm wrong here, is if people who are civilians choose to play in this, only invest money you can afford to lose, make small bets and learn as you go and don't be concentrated this is a very experimental space even in its second decade. Would you think that is good financial advice, Molly and Vinny?

$300, man. Molly makes her little bets. She's like, Molly's like you're on who goes to Vegas and she has like a little, she's like, I'm going to Vegas. I'm a P-shooter. I'm going to go see. I have a $1,500. Well, because Vinny,

everybody else in the world has heard the story. I don't know if you have, but I bought, I bought 300 Bitcoin at $1. Yeah. Wow. And then Montox. And on empty gocks. And it's gone now, which is why I'm sitting here on this show. Yeah, exactly. So now. Well, actually, did you file a train? Yeah. You know, it's a whole, it's a whole, it's a whole thing. It was the first one, not the second one. So then by the time those claims came, it was like too late and Dwalo was involved. And so. Let's go. to Luna here, because I'm interested in your position on this. There was a breaking story. I don't know if you're a story of Vinnie. But as of this

morning, South Korea has instituted a flight ban for all Terra employees. In other words, this isn't, does it mean that they're guilty, obviously? So let's be clear. But South Korean prosecutors have placed a travel ban on dozens of current and former Terraform Labs

employees. The country is conducting an investigation as they should into the company and its founder Doe Kwan. Do Kwan was on episode 1251 in July. last year, which is now, yeah, just on a year ago. This is after Terra, the algorithmic stable coin, and it's accompanying token Luna collapsed in May. Here's the quote from the article.

South Korea's no-fly ban on Terraform Labs came after a special financial crimes unit in the prosecutor's office launched an investigation last month into two complaints filed on behalf of 81 investors. This is typically how this stuff goes down, folks. You know, the investigators, somebody loses money, and then the investigations happen. When everything's going up, the investigator, nobody calls the investigators because they're making money. The investigators allege that Terraform founders and the company deceived investors with their flawed algorithmic coins, according to the documents.

Soquant has been ordered by a U.S. court to comply with subpoenas from the SEC regarding the sale of potential unregistered tokens. So this seems to be sort of, and near as we can tell, related to the collapse, but also may be suspicions of some insider trading that might have happened right before the collapse. So I don't know the details around this. I don't know the details around this, but... Talk to what I said about Terra. Yeah. Generally.

So I managed to dodge the bullets on these things because I never... I mean, as someone has been in crypto for a long time, people thought I was crazy for not buying Luna, for not putting money in anchor, for not to... And I'm like, I do it because I've been around crypto for a long time and I see how these things go bad. Right? So I'm, you know, and I actually warned people, I think I was on run show like two weeks before Luna even started to dip below the... the $1 range and before things sort of going bad,

I said, look, at some point this doesn't end well. And, you know, so my take is that this is part of the learning experience. People just need to learn the hard way. It's sad. I feel sorry for everyone who's lost money, but you shouldn't be putting money in places where the returns are being promised to you are way, way, way in excess of market returns, firstly. I think that the authorities in South Korea are actually being pretty reasonable about

this ban. I think we don't know what happened in terror. They need to do an investigation, and the flight risk is really high. If there are employees there that ran away with hundreds of millions or tens of millions of, whatever, of ill-gotten gains, it may not have been stolen. It may have been like they're shorting their own coin because they know it's going to collapse and things like that. You actually have to investigate everyone and maybe there's some way, you know, recover some funds

for the victims of this. So I'm kind of on the side of like, you know, they're not putting everyone in jail. It's just you cannot leave the country until we've figured out what the hell happened. And I think it's actually kind of reasonable. Seems reasonable. There's also trades that could have been made on these. So as a crypto expert,

you could have played a little game here, put some money into them knowing the hype cycle, but you just choose to focus on the ones you think are most important, yeah? Yeah, my portfolio is very focused on high-quality, long-term buy-and-hold projects where I think that, you know, these guys are going to do well. You know, I really, really trade. Sometimes I trade out because I'm wrong for a period and I want to take a,

you know, a tax loss or something. But that's the only time. Normally it's just buy and hold. And then sometimes, you know, you become overweight in certain projects, whatever and you have to take some cash at the table, rebalance your portfolio. But as a long-term sort of investor in crypto, I think that's, you know, speculating. And by the way, I've made these mistakes, right? I've bought all these, like, crappy coins and this and that.

and you wind up speculating some money in there and then you lose money. But those are always small bets relative to the portfolio. It's the same as Jason. Like, how many times you come across a, you know, a project where you just say, I'll give the guy 25K just because, you know, let's see where it goes. Yeah, you make a feeler bet, as we'd say in the poker business. Exactly. You know, you put out a little bet, see where you're at.

The flop comes down. You missed it. You put out a small pot-sized bed. And, you know, you put $200 into a $1,000 pot. You never know. Some people may not have anything. they don't want to fight it. I really like, though, the principles that you've sort of laid out in this conversation, right,

which is that if it looks like banking, as we have discussed, if it looks like the kind of financialization, money-making grab, without transparency behind it, don't do it, right? Stay away from that. Exactly. You're going to make the same mistakes the bankers have made for hundreds of years, and there's no way you can make all those mistakes in a couple of years and get it right. So it's like you have to, if we're going to reinvent banking, it has to be reinvented.

You've got to change the way the game is played. You cannot do it the same way. All right. So then what do you think about are you going to this next, this fundraise? I was going to, yeah. Go ahead, you take it. So then I would be curious to know. So there was also news today.

Solana based NFT Marketplace Magic Eden raised $130 million series B at a $1.6 billion valuation. It's a secondary marketplace for NFTs with over 7,000 collections. It is evidently responsible for 92% of all Solana-based NFT volume. And as of June 1st, made up almost 97% of the market share for daily Solana NFT transactions. What do you think about this part of the ecosystem right now? It's probably a pretty good deal. And the reason is it seems outrageous in terms of evaluation.

Why would that be a good deal? Is there a ton of volume? It's making money? The volume is higher some days than OpenC. OpenC was valued $14 billion a few months ago. OpenC and Magic Eden are the two sort of Jaggonauts going head to head. OpenC is native Ethereum, but they've added Solana support. Magic Eden is native Solana, and I don't know, but I don't think that they're adding

Ethereum support to this. Maybe they will, but I think they probably just doubling down Solana. I think if you look at the spectrum of what's happening in the NFT space, there are only two blockchains or maybe three that can compete in NFTs right now, and that is Ethereum number one, Solana is number two, and number three is probably flow, you know, Cryptokitties, etc. So those are the three top blockchains out there right now for NFTs, and Magic Eden is the number one player on Solana.

I think an evaluation of 1.6 billion is probably reasonable for what they're busy building. And it's a great product, it's a great service, I use it. these services make money? They get transaction fees on every single NFT sales. So, you know, Magic Eden, I think, takes two and a half. OpenCe takes two and a half percent. I'm not sure Magic Eden. It might be two and a half percent as well

on a transaction fee basis. And then, you obviously, the creators get something. Now, the difference between Ethereum and Solana is obviously Ethereum still got the upcoming merge, which who knows how that goes. And Ethereum does have a history of having high gas fees. And so that eats away at the profits

for both the exchanges as well as the creators and participants in the ecosystem. And Solana's got a good, I think, track record of being really, really cheap. And they're actually trying to increase the price rate and how to reduce spam using some new changes of the protocol. But the point is, like, well, these are all experiments. Let's see how they play it over the long term. But I don't think it's unreasonable to give Magic Eden a high valuation given the sheer volume that they're doing right now. some days, as I said, they've eclipsed open sea. Let's talk about NFTs, just writ large.

There was this collectible concept to them. They were kind of becoming a store of value for people, and there was obviously a lot of speculation in them, people buying them not because they love the art, but because they thought they would appreciate in value. Then there's this new thing, like Fryfish Club that Gary V did, where you're buying a membership. It's kind of Soho House. You don't own the Soho House, but you have a membership, and you can flip it and sell it.

And then Kevin Rose is doing his project, which is called Moonbirds. Moonbirds. And Kevin's pretty legit founder, obviously. His concept is he's going to just keep adding interesting benefits to it. We bought two NFTs for after-party and invested in the company. Again, a very small bet for us. But we thought, hey, okay, and we know the founders there are pretty legit. I shouldn't say pretty legit.

They're super legit. and their concept was to kind of make a music arts festival, I would think along the lines of Coachella or Burning Man, and the NFTs become access. And in fact, they gave us, I think, four VIP tickets with each NFT. And that's in perpetuity, I believe. And it's in perpetuity, right? So then if these things increase in value,

I could sell that NFT that we bought for maybe 10K or 9K. And it'd be like having season tickets to the Warriors, except to be season tickets to Coachella. So these are two very different use cases. One is access to real world events and being part of a club. The other one is art. And I guess you're somehow part of a club, but the club is just you get to own part of the art.

Is that what this is going to turn into club memberships? Because that seems to be the only part that's actual real world value. I will say I wouldn't write off the art. Art does have real world value. I'm advising an NFT project that is all about art right now. Okay. Just art. The reason I write it off is because it seems like they're flat.

it with commodity slash bull-shed art. So it's hard to determine. Like, I know Beeple's a real artist, but like, anybody can hire, like, you know, and make 10,000 of these, it seems, through third parties in Manila or Korea, whatever. And that's what people are doing. They just make. And I think some of these are auto-generated art, like, where, like, a computer is making it or something. So, like, when Dolly can make a million of these, who cares?

There's a spectrum. There's a spectrum here, right? So you get, you get one-of-one art pieces. So you've got unique, like a beepble every day that he puts out one of one, you can own it or not own it. And that's a unique art. And in the future, I already have these, by the way, have these like NFT art frames at home where I can actually put a verify NFT

barred. So it's the same as a fake Mona Lisa versus real Mona Lisa. I actually own the NFT and I have proof of ownership. And it's on the blockchain and he has the art displayed in my home versus, you know, a copy, okay, on a digital frame. So that's the one thing. So you get the one over one. Then you've got the generative art,

I think is part of what you're talking about, infinite. You can just create lots of this stuff, it doesn't matter. You can, but then you get high quality generative art. I'm involved with a project called Explorers, and you create the pieces,

and then you kind of generate the rarities and everything else, and you put it together, and that's, you know, we work at the concept art house on that. That's actually a legit way of doing it. Then you get,

you get, I mean, there's just a whole spectrum. I can probably go through a whole bunch, the examples. But, oh, you get AI art as well. My wife's working on AI art right now, and it's actually incredible and what artists can do there. And then the question is, how many prints, how many copies do you make? What is AI art? Describe with this. So AI art is basically using artificial intelligence to take, you know, scenes, objects,

etc. And basically create, it's hard to explain. I'll have to show it to you. You describe to the AI what you want and it makes something interesting. that maybe you didn't intend. So it's a collaboration between the AI and the actual human artists. Exactly. Exactly. Is that my understanding of it? Yes.

Or you take objects that you want to put together and say, you know, maybe it's a, you know, a chess piece and water and whatever else. You just create this complicated art, but it requires, it requires a good eye because, like, the AI has no idea what it's doing, right? It just kind of combines it. So you have to give instruction, you know. And so that, like, there's this whole spectrum of different types of art that you can create.

And I think digital art and NFTs are just the canvas. It's the canvas for artists, right? It's like the same as, you know, the same as a regular canvas. You know, and art just needs paint, things, and all right. I will say, I am surprised, like, I was very surprised to find myself agreeing with that. That there was, there is a, there is a goal behind this art project that there's, you know, a layer, a base layer that's been created specifically by the artist and then the rest is generated. It's sort of like you're describing. Like there's, you know, you generate permeations out of these base pieces that are original, that are beautiful, that have

been created with purpose, that have a philosophy behind them and that are purely driven out of like, I mean, I think what you are seeing when you talk to artists who are, you know, in this case, this woman is like not that techie, was just, is the last person you would think is genuinely an artist who is like, huh, there's a way to experiment with expression and the concept of ideas. identity and the way we present ourselves online here and to make something beautiful out of that. And I was like, yeah, okay, that's art. That has value. Oh, no. And look, this will be very clear here. There's different types of generative art. You get the cookie-cutter generated art, which is, I think, what I'm talking about is like the stuff that you get outsourced at, you know, five bucks an hour.

And like, that's junk. I think we all know that. But, but you can create generative pieces of art. Like I said, I have a project for 100,000 pieces of art we're busy creating. it's high quality. Exactly. And it's limited in scope. It's generative. It's generative. It's high quality. It's limited.

Right. It's the difference between it. I'm doing it. I'm doing it. I'm doing it too. We should totally talk. Yeah. This is,

I'm fascinated by it, but I just, it feels like there's. The difference between, right, there are a million artists everywhere making like drawings on the beach. I mean, there's like a story over the weekend about somebody who was selling like pieces for, you know, 50 bucks in Times Square or whatever. Now they're going for a million dollars.

Like, that's how art works. Here's a lot of job. It's hard to understand how art works. It's almost like crypto in that. It's like there's this opaque, really weird thing. And there's also a lot of, you know, like how something becomes a hit is part like manipulation. Because there's like people actually manipulating the art market, you know, like collectors and galleries.

And they like have insiders and like they sell to five insiders at a low price and they get the other 50 pieces to be bought by the public at a higher price. And everybody's getting, is flipping in between. And there's arbitrage going on. But then there's also like the actual. art is pleasing to people. And the problem I have with the whole thing is, because it is unlimited, then it's hard to have scarcity.

So it's just hard to navigate through it, like what actually things are working. But yeah, if you're into it. But let's go back to the, again, the spectrum of NFTs, right? So on the one end, you start with like one-of-one art, small collections,

large, large low-quality collections, large, high-quality collections. And then you're going to what else you do with N-N-T's? Well, memberships. I love the membership idea. To me, that's the biggest win I've seen in crypto besides store of value.

Well, so memberships and ticketing are the two big wins for me. If you can create tickets that are NFTs... Which I consider the same thing, yeah, yeah. Yeah, yeah. Well, memberships are more permanent, and ticketing is you can transfer it, you can sell it, you can do all those things with it.

And I think those are great use cases for NFTs right now, and we're going to see more and more that evolve. And the concept here is, when does the Apple wallet support NFTs? I mean, for me, the Apple wallet, when you go to a Warriors game, Ticketmaster gives you like a very specific essential NFT. It is one of one, I guess. And you can't screenshot it anymore.

By the way, I bought the Knicks playoff tickets last year and on Seeky, and they did the whole like, you know, send the PDF thing. And they wouldn't accept it last year. And literally I bought like thousands of dollars worth of tickets. And they stopped me at the door and said, your tickets are not valid. super embarrassing, right? I'm with like, three gas and I'm like, hold on. I went to the ticket window. I said, what's available?

Because they have the resale value there. And I just bought another set of tickets. And then I tweeted it and then Segey got back to me, we're sorry, we'll refund your money. But they're doing something with those that are QR coded or have like some uniqueness to it. So that's already coming. But do you have a prediction of when Apple wallet will support NFTs?

I would say knowing Apple probably, 24 to 36 months from now because they're always like they're not the first move is in the space pick a number pick a month we'll do an over under bet I'll set the line 36 36 months

okay 36.5 you want to pick a specific number so that we can not have this thing where it's a push you know if it happens to have around month 36.5 or 35.5 oh 35.5 okay Molly you take the over or the under I'll tell you on Apple Wallet supporting crypto

NFT specifically. NFT is in your Apple wallet. As an entry mechanism. Exactly. Or just to prove your membership. I'm just a storehouse and stuff. I'm just so how to think. Yeah.

Yeah. 35.5 is the line. 35.5. So almost three years. Yeah. You go over or under. Over or under? I'm going to go over because it's Apple.

I'm going to go under. So are we in for a Hyundai Molly? What are we in for? I'm in for a lawyer's game. I've told you. How much you want to bet against J-Kouse? I bet in two. dollar increments, $2 bills.

All right, let's go with the sushi dinner. We always are good of sushi dinner. Sushi dinner with Vinny, capped off at $500. Can't go too crazy. But we won't know for three years if we... I know, but that's the fun of it. That's the fun of it. I want all the long-batch producers on a notion page.

Within 20% inflation in a year, we probably have to go to like $575. It's going to be like a $10,000 dinner. I'm going to take the under. Nick, let's make this week in startups.com. slash bets. And we're just going to chronicle all the bets on a Notion page. Please. I love it. And I texted. I've been doing this for years. We've got to find all the old bets. Somebody needs to make an archive that we can search the whole transcripts. I bet the Nodies would do that for us. I bet they would. We'd maybe do that on, uh, Coda. Yeah, do it on Cota,

please. Yes. That's our sponsor. Coda. Well, both. Oh, they are both sponsors. Okay, let's do Cota for this. I did the, I did Notion on the last one. We both love notion and code. but make me a Coda page. Okay. Also, Ringo's, Ringo's dot co. I'm going to like shamelessly promote.

Here's my idea, Vinnie. Let me know if you like this grift. Rate my grift. I'm going to make, I'm going to pay a developer to create a portal between Dolly, the new AI that makes images. I'm going to have it take keywords that are trending on Twitter. I'm going to make a word cloud of trending stuff.

And I'm going to make a million. NFTs a day based on the trending topics on Twitter, just randomly put them to us. So if the Warriors are trending at the same time, I don't know. God, I don't want to say that because that's dark. The Warriors are trending at the same time as Obi-Wan, and it just does a dolly photo, Obi-Wan and Warriors. Obi-Wan with the Warriors, whatever. And then you all of a sudden have Steph and Obi-Wan and Darth Vader together.

In a dolly photo, we NFT, they sh-h-h-out of this. And then we just flood the system with NFTs. What do you think? Rate my grift. Uh, well, I think I think you'll have, you'll struggle. You mean, would it work? Yes. It would?

Sure. What does it cost of mint and NFT on Solana now? Because that's the key. If I do a million of these, if I did it on Ethereum, wouldn't it cost like 10 bucks each? Fraction of a penny. Fraction of a penny. If they flooded the system with that many NFTs, would that break the system? Why are people flooding?

No. No, not at all. I mean, Solana can handle 6,000 transactions a second at the moment, so that's pretty good. I mean, I'll do a quick shout out to Civic. We've got Civic.me, which it's kind of been soft release this week. And civic. Me is basically a way for you to connect all your different wallets to a single identity. And then you can do proof of uniqueness and get a Civic pass.

And so when you're doing a mint or whatever else, you can say it's, you know, unique for a certain person. So, Jason, if you have 20 wallets, you can link it to the same person. So you aggregate, curate. It's basically a decentralized web to your identity. How do you know the person at civic.me? Do you actually use a third-party system

to verify it's me or ask me to send my passport or driver's license? Because now in Instagram, I want to get verified. They're like, take a picture of your passport or driver's license. I'm like, okay, so they're manually checking to try to figure this out. I mean, of course, somebody could have stolen a picture

on my credit card or my driver's license or something, I guess, and try to do that. It would be a lot of work. But how do we actually know who is who? Is anybody doing that work? We are. So something's been building all this stuff for years. We've got all this infrastructure to do verification.

Pretty much, I'd say, 99% automated, 95%. Obviously, we throw out exceptions. We have to review those. But what we do more importantly for NFTs is we do uniqueness. And so what uniqueness is basically is your face, Without having to do identity in who you are, your face is used to create a 3D kind of map, a topographic map. So we know what your face looks like. We don't store your images.

We just have this map. And with that facial recognition, you can link multiple accounts to that. And now when someone wants to know that it's the same person or it's unique to you, you have to produce your 3D face. No one can go in there with the picture and try and pretend to be you. And so that's how we do it. We're trying to create this uniqueness infrastructure. Now, if someone requires that you are you, citizen, then you have to produce some documentation, scan your ID, those sorts of things.

But for general NFT usage, if it's just, is the person unique and not a bot, we do that with uniqueness testing in civic. And so a lot of NFT mince are using us because what Kevin Rose did really well, it's worth noting is when he did the drop for moonbirds and proof, et cetera, it was like one per person. And he had the raffle system and a whole bunch of other things built into it. But he was trying to make sure it was the most well-distrored. distributed an FD product in the world. And he did a really good job, I think, at the time, given the resources they had.

We want to make it a step better where we can do a drop to 100,000 people, and 99% of them are just unique individuals. Because the problem, and Elon talks about this all the time. I mean, the problem with Twitter right now is the bot problem is real. I mean, Elon is not kidding. People think Elon is like, you know, it's actually real. We have a major bot problem in Twitter. And the only way you solve this problem is by having it one.

What percentage do you think it is? What percentage do you think it's I think it depends how you define it right because they I think they probably like look at banned accounts as being not there and so like as a percentage of new accounts I don't know but I can tell you now I'm pretty sure that on on most Twitter profiles 15 to 25% the followers are fake the 5% number is Bs ridiculous I don't but it's ridiculous so what I mean what gymnastics do you know way more probably what gymnastics you think mental gymnastics Twitter has done to justify way less than 5% and think

is what they said. There's just lots of ways to master numbers. You could say, you know, if we catch it, then it's not fake, et cetera, et cetera.

You know, there's ways they can extrude bad, you know, locked accounts and ban accounts. Like, Jason, let me,

I spent years going to talk to Twitter executives and trying to get them to do identity and they won't do it. And they didn't want to do it for a reason. Why?

It's a very simple reason. Sinical reason. Honest reason. No, no, it's very simple. Like, they did not, they did not want to catch the fraud because they then go to tell advertisers that the impressions are fake and give refunds or whatever else. As an advertiser previously on Twitter, I know that just a lot of the views are bought. They're not real views.

We know this for a fact. The engagement levels don't make sense. But the ad people and the salespeople have been trying to sell ads on Twitter forever. Like, there was no willingness to solve the bot problem. You can solve, the way Twitter should work. work in my opinion is it should be one human multiple accounts. You can have 100 accounts linked to the same human. And that way you can analyze the system better. Because all we have in Twitter right now is it's like echo chamber and fake amplification. So what happens in Twitter is someone has

50 or 100 accounts or 500 accounts and Twitter goes and says, are you a real human? And the guy goes, yes, I'm a real human. Yes, I'm a real, like on multiple accounts. So because they and their argument is when we check these accounts, there's a real person behind it. Obviously, there's a real person behind it. What do you think? There's always someone behind the bot, and he can always respond and tell you he's real and message you back and say, hey, why are you blocking my account? I happen to have 500 of these, but who cares?

So there's always a real scammer. Every additional account that you don't actually need. Like, yeah, there should be. Yes, exactly. And mass accounts, yeah. Molly, what Vinnie's describing is true. And Twitter allowed the bot problem and Facebook. and Google.

Well, anybody who's selling digital apps. Facebook has done a really much different level of job because of the real name policy. So I think it's much different. Right?

It may be a lower number, but Facebook every single year has had some report come out to advertisers that was like, hey, we dramatically overcounted the number of accounts and users and views and, you know,

I mean, everybody who sells digital advertising on a big social media platform is benefiting from this, including Twitter. Well, I mean, one of the things that I've seen is... Twitter just makes it easier to create more, like maybe their volume, not as a percentage, but as, you know...

Twitter has a number of accounts created by... Twitter has a lower bar because you can go and comment on everyone else's feeds and whatever else. So it's easier to generate fake content or amplify, you know, fake opinions on Twitter. Facebook, I have to be a friend of Jason to see his feed and jump in there, right? So Twitter is an open platform and Facebook's close. So the amount of bot fraud and spam they're going to get there is very, very different to Twitter. And when I try talking to these Twitter execs, they refuse to do this.

We don't want identity. We want to give people their privacy. They convince themselves that privacy and anonymity is the same thing. It's not the same thing. Jason can have his own private Twitter account and he can have 20 bot accounts. but the algorithm could if it knew that Jason owns all these accounts, it could then not be gained

because what happens is when they want to amplify a certain tweet to have like 25, 30 years on it and it starts rising up in the rankings, oh, there's a lot of activity on this tweet. People are talking about this. This is a big deal, but it's the same guy is just typing multiple messages

and Twitter's argument is when we message each of those 30 accounts, someone responds to us. I'm like, no shit. All right. And it looks like activity and they love it. Like, look, they have benefited from it from years and, you know, bad actors on the platform have used it for brigading and harassment and political campaigning for years and Twitter ignored it. And now they have a problem.

And I'm sorry, I don't feel bad for anybody. And it's solvable. It's solvable. You just do like what we do in Syrac. Yes. It's so solid. It's the face map, right? If we just do a face map, you don't have to store the image of the person.

You don't have to store the video. You don't have store anything. You just link every single Twitter account to a real face. and there's no privacy concerns or issues. You don't know the idea any of the person. But if you see that face maps being used on 50 different accounts, it gives you, it's a lot easier to filter it out. A face map's a great idea.

I mean, this is just, when we use face ID and you roll your head around, like you're rolling your neck. Exactly. It's really hard to fake that, is what you're saying. So they could do that without you having to release your photo. It would just be done in your settings. It wouldn't be a public thing. Well, no, I mean, there's ways to do it.

You'd probably just have to use some sort of, SDK in Twitter or use a third party decentralized it any provider like Civic to do it, it could be done. But my point is, there's no willingness to do it right now. They don't want to solve the problem because then they have to go back to the street and report that, oh, we actually only have 50 million unique users, not the hundreds of millions we say we have. And that's the issue.

I have a counterview on this. If they actually had the real number and the real number was dramatically lower, then it would be like this huge opportunity. We only have this amount of penetration. look at how many we can add in the future if we get this right. So there's a crucible moment for this company to use Roloff's term at Sequoia,

and the crucible moment is, admit the reality of the situation and then explain the opportunity. If we get rid of these box, then more people will want to participate because a lot of people are not participating because of brigating because of these bile conversations

that go off the rails. And you see in the advertising, every time we advertise on Facebook or Instagram or Google search, or you advertise on Twitter, what you'll see is Google search is like, you know, the most crisp in terms of like people typed in a word and went to your page. And then, you know, Facebook and Instagram come next.

And then a distant third in terms of click-through rate and your actual cost for the acquisition of customers and the ability for this to actually move the needle is Twitter. And it's a distant, distant, you know, fifth or sixth, I think, in terms of advertising. it's just really pathetic the returns you get on Twitter. So, all right.

Vinnie, you're awesome. We'll have you on again. Thanks for you. And you're not the whale. You're not the crypto. No, it's on me. There's a lot of speculation that you put 100 million in Solana. Just as a semi-serious question,

is there any chance that Vinny is the whale? No. So I would never, I would never borrow more than like one or two percent of my assets against any crypto. Well, what a flex there. And so at a hundred I know

A quick back in the envelope To the math No not quite It's not me Close but not me We believe you We believe you Look at Vinny

Close Three comma Vinnie For a moment I'm totally I'm totally joking I'm not me Back to two comments I really want to compare notes

On our Who do we think it is On our Our projects too On our NFTR project You should guys I could probably Guess who it is

I could probably put together a short list. Who the whale is? Yeah, but I would never say. It has to be. End the stream. Well, before we, but we won't go there, but in terms of profile in the person, they would have to have been very early to Solana to have that big of a position in all likelihood.

This is probably only a portion of their Solana. So they probably have, you would guess, if they put $5 million into this thing, which is speculative, they probably would have 10 times that amount of salana, five times, at least. I'm not so sure. I'm not so sure. I don't think... Or you think somebody might want to clear the whole position? Well, it could be someone like, this is all my salon.

Maybe I'm going to... Look, I want to speculate too much, but I think it's someone who's at least I'm hoping responsible, but, you know, and I think they're moving the funds around. But I think probably responsible and reasonably illiquid because, you know, at these levels, they would have paid down the stuff not to get liquidated. So there's probably a liquidity issue there. So there's probably a short... list of people it could be.

I can almost guarantee you the soul in guys know who it is because, you know, like, they have to do. You're not going to take 90% of your, so of a book on a platform you don't trust, et cetera, et cetera. So they probably know. So that's between privacy and anonymity. Privacy is that, you know, someone knows who you are. Anonymity is nobody knows.

And I think this case, it's just a privacy issue. Yeah, the interesting thing with this is anybody who was in that venture fund, coin that you were GP in and the name of it is again. Multi coin. Multi coin decides when they distribute. So it can't be those folks in all likelihood because they're locked up.

It's not multi coin. It's not multi coin. Yeah, it can't be it because they were locked up. But multi coin doesn't use leverage either. So. I got it. I mean, to Shire's being public about this. We don't do the stuff like three arrows and like we just don't do that.

We know better. All right. Everybody follow Vinie Langham on The Twitter, great, great asset to the entrepreneurial community. We'll talk soon. Vinny. Thank you. Thanks for the time. Appreciate it.

Thanks, everyone. Take care. Talk soon. Really great guests, huh, Molly? He's so good. He's so good. I mean, that was like really understandable. And I think we're all, it's interesting because the more we talk about it, I think we

end up circling the same truth, which is like there are parts of this that are really real. It's really early days. It's going to be a hot mess and a lot of people are going to get robbed. But there are some fundamentals that you can employ. to do this the right way, maybe. I think the way you're doing it, which is like dabble, learn, dabble, learn, dabble learn. It's the same thing I teach people in Angel University or in the book.

Like, make the smallest bets possible as you're learning. Just like in poker, if you want to learn to gamble, play at the smallest tournaments, the $20 buy-in tournament at your local casino card room. And if you blow through three buy-ins and you blow $60 bucks on a Sunday afternoon and I get a free grilled cheese in the process, You get a free grilled cheese? I'm going.

I want to do that. Well, you know, the place I used to play Hollywood Park was super degenerate, but I played at the big table, which was like a $500 buy in minimum. Yeah, which is kind of hilarious. But, you know, you get all the free food you want. You just tip the waiters. And they actually had some pretty good food there. Because it was such an Asian base of users, they had a Korean food section,

a Vietnamese section, Chinese section. It was awesome. So you could get like foe, or you can get like gobi, or you could get just, I would just get a grilled cheese on sourdough with two different cheeses. I don't know if you've done that move, but that's the J-Cal special. The grilled cheese on sourdough, for sure.

Grill cheese on sourdough, but you go a slice of Swiss and two slices of cheddar. Boom. Just delightful. Amazing. Amazing. All that good stuff. All right. Listen, tomorrow on the show, Molly, you may have seen this over the last couple of days,

BuzzFeed, which has some great reporting, as you often correct me when I say they're about listicles. they did some really intense reporting on TikTok and the idea that I have said over and over again you cannot trust that TikTok is not sharing information back with the Chinese Communist Party, but maybe you can preview it for folks. Yeah, definitely.

There were some, and I will be honest, I have some questions about the reporting. Okay. I'm excited to talk about this. So we have a story that detailed some leaked audio from within TikTok, about the attempts of the U.S. team to try to make sure that data was not being accessed in China. And some of the concerns that it is and, of course, times when that data has been shared.

And, you know, that's been, of course, the big question about TikTok is like they say that all the data on U.S. users is stored in the U.S. but is that credible at all? And it sounds like during attempts to really crack down on TikTok and maybe former President Trump's attempts to ban it, that that really kicked up some serious internal efforts to make sure or at least figure out if that data was being shared. It's a really interesting story. The author of that story is Emily Baker-White. And then, of course, there have been lots of reports from the New York Times this week, too, about all the ways that China spies on its own citizens. And ideally everybody else in the world, too.

Live YouTube.com slash this weekend. We're live every day, 10 a.m. PT, Pacific Time. And we have reporters jump in or experts jump in for the live stream. Live streams gets you about 25% more content than the podcast because we do a little bantering, Molly and I. But this is a really important story. And dare I say, a victory lap for me. My position has been very clear, you know, like this is an issue of reciprocity. And it's very just straight up too dangerous for a communist country to have this level, this level of insight into our citizens. And these 80 internal TikTok meetings were recorded by somebody. And you have questions about

reporting, so do I, Molly. This seems to me like a heroic effort by somebody, and I think it's a developer because developers are incredibly principled. And in my experience, whether you agree with their principles or not, they tend to be incredibly principled and thoughtful people. And I think this is a developer who has grave concerns, and that's why this was leaked. And I'm telling you, if Emily has this at BuzzFeed, you know who else has it? CIA, FBI, this is going down. This story is underreported, and we're going to do a deep dive tomorrow on this week and startups on Wednesday. So join us tomorrow and everybody.

It's going to be great. See you there. See you then. Bye-bye. Bye-bye.