Unchained - 2022 in Review + How Cobie and Chris Burniske Are Playing the New Year - Ep. 434

Episode Date: December 20, 2022

What a year. Cobie, crypto investor and host of UpOnly, and Chris Burniske, partner at Placeholder Ventures, sift through 2022’s rubble for clues as to what lies ahead in 2023. The two bright lights of Crypto Twitter weigh in on SBF’s fraud, how to succeed through the bear market, and what remains promising despite the gloom and doom. Show highlights: why 2022 is “the hangover of 2021” why this year’s big meltdowns were different and dispiriting why it was actually a year to remind us of why we’re all here how the underlying protocols didn’t skip a beat how to survive the bear market what Chris feels guilty about in the wake of Alameda’s collapse why Cobie hopes SBF spends life in jail whether people will actually use decentralized alternatives – or if banking-like relationships will prevail what Chris sees as the 2023 version of proof-of-stake in 2017 why Cobie thinks bitcoin is an area of opportunity over the next few years whether the multichain thesis (“Solunavax”) will ever rise again whether the contagion is over if disgraced figureheads deserve a second chance a lightning round lookback on 2022 Thank you to our sponsors! Crypto.com Chainalysis Minima DeFi Saver Guests: Cobie: Twitter Substack UpOnly Previous appearances on Unchained: Erik Voorhees and Cobie on Why FTX Loaned Out Customers’ Assets Cobie and Chris Burniske on How to Navigate a Crypto Bear Market Chris: Twitter Placeholder VC Previous appearances on Unchained: Chris Burniske: A Blank Slate of State Chris Burniske of Placeholder on the Downsides of ICOs The year in crypto: FTX Unchained: CFTC and SEC File Damning Complaints Against Sam Bankman-Fried and FTX Former FTX CEO Sam Bankman-Fried Arrested Amid US Indictment FTX Bankruptcy Overseer Says Company’s Collapse Is Worst He’s Ever Seen Terra: CoinDesk: The Fall of Terra: A Timeline of the Meteoric Rise and Crash of UST and LUNA Three Arrows Capital CNBC’s full interview with Three Arrows Capital’s Kyle Davies on the downfall of the defunct crypto hedge fund CoinDesk: Three Arrows Capital Files for Bankruptcy in New York Tied to British Virgin Islands Proceeding DeCrypt: Bankrupt Three Arrows Capital Owes $3.5B to Creditors, Including $2.3B to Genesis Binance Unchained: Binance Passes Withdrawal ‘Stress Test’ After $3B in Daily Outflows Forbes: Kevin O’Leary Points Finger At Binance For FTX Crash In Senate Testimony Silvergate The Block: Silvergate CEO seeks to reassure investors over crypto contagion The Financial Times: Silvergate: from tiny local lender to bank behind the crypto boom Genesis/DCG:  Unchained:  Genesis Warns of Bankruptcy If Funding Plans Fail: Report On-chain Analysts ID 432 GBTC Addresses After Grayscale Says No to Proof-of-Reserves Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, everyone. My idea for this episode was that it would be a year in review with Chris Berniske and Kobe, one that I expected to be a doozy after the many collapses of crypto endured in 2022. However, they ended up talking a fair bit about where the industry is going, which seemed an appropriate question for this soul-searching moment in crypto. I hope you enjoy this look back and look forward. A year from now, we will find out whether the industry has not only learned but incorporated the lessons of 2022. And now enjoy this conversation with Chris and Kobe. Hi, everyone. Welcome to Unchained. You're a no-hype resource for all things Crypto.

I'm your host, Laura Shin, author of The Cryptopians. I started covering Crypto seven years ago, and as a senior editor, Forbes, was the first mainstream media reporter to cover Cryptocurrency full-time. This is the December 20th, 2022 episode of Unchained. In case you didn't know, every episode of Unchained is also available on YouTube. Go to YouTube.com slash c slash unchained podcast to subscribe. D5Saver is an all-in-one management app for top lending protocols on Ethereum, such as Ave, Maker, Liquity, and Compound.

They're best known for their one-transaction rebalancing options and automated liquidation protection features, and you can check them out on Ethereum, Arbitrum, and Optimism Today. Chainalysis demystifies cryptocurrency by providing industry-leading compliance, market intelligence, and investigation support for all, crypto assets for organizations like Gemini, Crypto.com, and BlockFi. Maximize your potential with the leading blockchain data platform by visiting Chainalysis.com slash unchained. Minima is a new Layer 1 blockchain designed to run in full on a smartphone.

Join over 300,000 Minima node runners on the incentive program today to start earning every month until mainnet launch. Get your node set up at minima.global. Buy, earn, and spend crypto on the crypto.com app. New users can enjoy zero credit card fees on crypto purchases in the first seven days. Download the crypto.com app and get $25 with the code Laura. Link in the description. Today's topic is 2022 Year in Review, or as I've been calling it, the crypto carnage of 2022. Here to discuss are Kobe, crypto investor and host of Up Only and Chris Berniske.

partner at Placeholder Ventures. Welcome, Kobe and Chris. Hello, mate. Thanks, Laura. Oh, Chris, who's lost more money this year, me or you? We both lost, but we're both surviving. Yeah, it's me then. Well, the last time we had both of you on, it was to talk about the crypto bear market, which at that time was just kind of starting. It's only been like about six months, which is kind of crazy to me because in that time, so by then, Tara Luna had already collapsed, but by then, or since then, now we've seen, you know, additional collapses. We've seen an even bigger drawdown in prices that took us below the highs of even the previous

cycle. We've seen additional falls from grace of previously lionized figures in the cryptic community. So as you guys are looking back on this year, what are your main takeaways? Kobe? I saw a tweet. It was a great tweet. I don't remember who it was from, maybe Thinking USD. And it just said,

crypto companies be like, our CFO, yeah, our chief fraud officer is the best. I think that sounds up a little bit of 2022 for me. And like 2022, in summary, it's also like the hangover of 2021, right?

So like people just borrowed a lot of stuff from the future that they have to pay back in 2020. I don't just mean like leverage borrowing money and stuff. They like took shortcuts and blah, blah, blah, blah, blah. So yeah, I mean, it's been pretty brutal. And what's remarkable about it is how much of it was like just fraud, not necessary. It wasn't, you know, some stuff is business practices that were, you know, either incompetent or really juiced to the max or whatever.

But some of it was just theft, stealing, you know, non-viable businesses using Ponzi scheme type structures or fraud in order to turn something into a real business. And I think that is what is most disheartening or demotivating for me. It's like we went through a lot of this kind of stuff in the last 10 years, big blowups, big meltdown stuff going wrong, all hope being lost. But a lot of the time it was because someone was hacked. Someone made a mistake that they didn't intend to make. Someone, you know, the Mount Gox, who knows what happened there, but I don't think Mark, like, tried to steal anyone's money. He tried to cover up a hole and maybe made some bad decisions along the way. But for

Nex was a big meltdown. It was just, you know, poorly configured BitGo. or whatever it was, I can't remember, which they managed to recover from. And this time around, it's like at least two of the big blobs was just like, oh, yeah, we were trading with customer money and we lost it. Like, it's just outright egregious fraud. So I think that is quite disheartening in a way that so much of the industry was just propped up by charlatans and, you know, confidence men and stuff. You can talk about also, like how it, on the flip side, is motivating for a lot of the

core reasons a lot of us are here. You know, like Bitcoin remains unaffected. And a lot of the DFI protocols are still operating and with the first place loans were repaid. And in often cases, the only place loans were repaid. So you can talk about the positive angles on this as well, but I just want to dwell on the misery for a moment. I'll counterbalance Kobe's misery, and I would carry on right where he left off, which is 2022 is the reminder year of why we're all here, and the truly decentralized protocols didn't skip a beat. Bitcoin kept producing blocks, Ethereum, kept producing blocks, Ethereum went through a major upgrade this year. And then, you know, if you look at defy on Ethereum,

as Kobe just pointed out, that protected consumers. Those loans were repaid. There was no favorable treatment to anyone within any of the truly decentralized protocols. And that's exactly as it should be. And then what we're seeing is the fallout of people who got over their skis who flew too close to the sun. I think that perhaps the thing that's most frustrating to me is that we as an industry allowed those people to rise to the positions they did. And in a Twitter space as I did in the midst of the FTX fallout with Jesse Powell and Spencer Bogart, we were discussing, you know, the trickiness of

when things are on the rise, like calling out these different folks, even if you have suspicions, and just to use Jesse's perspective for a moment, when he's running an exchange like Cracken, and he's got a competitor like FTX, and he's looking at those numbers and he's like, these numbers don't quite check out for me. If he voices that in that moment in time, people are going to be like, oh, you're such a sore loser, like, you know, go home. Like, we don't want to hear from you, right? And so the resistance that you're going to face from the masses when you're ahead of your time or when you're right in a period where everyone's enthusiastic and you're exercising caution, that resistance is tough to persist through. And I think it silences a lot of people.

people. And there's also the bystander effect, right? Where like everyone's looking and everyone's like, well, surely if someone knows something's wrong, then someone will say something. But the less that anyone says something, or if no one says anything, then everyone may end up being being silent. And there were some cautionary instances. And to crypto Twitter's credit, it did sniff out a lot of these collapses before the mainstream media did. I'd say it went crypto, Twitter, crypto, media and then mainstream media. But, you know, it was too little, too late still to protect people. So overarchingly, you know, the core systems are functioning as they should be functioning. I feel great about that. I, you know, on the venture side, am seeing still a bunch of great teams

that are building, that are raising capital, that are, you know, creating the systems that will excite people in the years to come. That hasn't changed. And we got to get through this quagmire. We'll see what happens regulation-wise. That's probably going to be the biggest thing we have to keep our eye on to the downside over the next six to 12 months, I'd say. Just, and I mean less downside, even market-wise, but more industry-wide. And this is more a U.S.-centric concern. So those would be some of my reflections. Yeah, I think for me, one other lesson, which maybe Chris alluded to a little bit at the beginning, is that, you know, crypto sort of created its own little mini great financial crisis, or not so many, but, you know, one just, you know, for the crypto sector. And so it just goes back to

the first block of the genesis block of the Bitcoin blockchain, you know, what Satoshi put in there. these centralized players really, you know, caused a lot of the problem. And so in a way, it feels to me like the community, hopefully at least we'll learn some of the, or relearn some of the core principles of crypto and why at least a lot of the early people, you know, we're trying to build this stuff. Right. When we took it on the chin, we didn't get a bailout, right? We're going through our own salvation arc here and it's painful and it's a lot of volatility. But the systems are continuing without, you know, an infinite balance sheet propping it up. Yeah.

Yeah, I definitely feel bad for all the, you know, retail people who definitely were hurt by all this. Earlier when you two were on the show, we were talking about what was then sort of like the coming bear market. Obviously, we're still in this bear market. So it's kind of curious to hear your takes on this particular moment right now of this bear market. Like, how would you characterize where we are in the overall bare market? cycle. I guess I can kick off. I will always lean more optimistic when we're this depressed. So, you know, my view is majority odds that the bottom is in. And so that would be Eath in the mid-800s and BTC in the mid-15,000s. That said, I would expect a retest or a couple retests next year. I don't

think next year's, you know, a joyous year. I think, you know, next year's a grind with a fair amount of volatility. But so if we, if we did have some pullbacks, I would expect retests, potentially inflationary high risk assets bleed lower. If BTC is retesting that mid-15's low, I could see some of those assets making new lows. But that doesn't mean that I'm not prepared for a reality where, you know, there's chaos in the traditional markets. S&P makes a new low for its own drawdown. And if things get really messy there, then, you know, I'm prepared to see BTC somewhere between 10 to 14K and either retesting where it was or, you know, making a bit of a new low. And so that those would be say the two realities that I'm preparing for. But regardless of

which of those happens, we will look back on this period as around the lows. Right. And this is where I think I see a lot of people on crypto Twitter get lost where they're like, oh, I'll buy when it's 50% lower. Right. And it's like, well, when you're 90% down and you're, you're going to wait to buy when it's 50% lower, you'll save yourself 5% depending on where you took cash or if you did take cash, take profits last year. And so I am of the view that the biggest mistake that you can make in crypto is not buying enough or not buying at all in these ranges. And so I'll tranche out and I'll continually buy. And I totally understand that I have the privilege of managing a lot of capital for placeholder and myself personally.

But like any amount of capital is very divisible. And so long as you're disciplined with your tranches, you can consistently have bullets. And I would say you shouldn't run out of bullets to put into the market until there's a clear policy shift from the Fed, which could be late next year. And so that's how I'm approaching things. And I would say that some people put too much weight into anything. any single commentator's ability to call the top or bottom. And that includes me, like, I'm by no means perfect any of this.

And I'm not, I don't consider myself a great trader. I'm a long-term investor. And so the way that I have succeeded through these cycles is just making sure that I, that, and Kobe said this somewhere of like, you got to make sure you keep paying attention. That's number one. So keep paying attention. And then number two, being disciplined and tranching out your capital so that you can always continue to buy each new like freak out point because you'll look back on the units

of the assets that you accumulated at those points you know years from now and you'll be like oh my god i bought you know this amount of that asset for for why dollars like that's crazy yeah i think that does happen i think the counter argument to it is so you're kind of saying like look back the people that bought bitcoin at 600 uh like they don't care they bought it at 600 when they went to 300 in the like, you know, months following or whatever. And I think if you manage to hold through the 300, you look back and go, cool, I bought it 600. I'm, I'm the guy. Look at me. And you don't go, I could have bought it 300 and doubled, like, you know, doubled up one more time. But I do think the risk is, and it's the thing I

struggle with myself, is that if you buy it 600, it goes to 300, when you're holding, holding at 300, it feels very bad. And the, like, it always looks bearish at the bottom, right? It always looks terrible. So if you're holding at 300, it looks like it's going to 250. It looks like it's going to 200. It looks like it's going to 150. You can buy at 600, be happy with yourself and then sell at 250. Be like, I'm just, I just need to, I need to get out of this and, like, let's take a little break. And then it's back at 600 again. Are you going to rebuy your exposure? So I think, at least for me personally, I find it so much easy. to buy after the bottom than before the bottom. Like once it, once you go to 300 and it rebounds to 600,

sure, you missed the bottom. You're back at the price where you were happy to buy. But like, you know, that's kind of in the past, things look a little bit better. You have some hope for the future again. You know, it's not in this like snowball running down the hill. I think it's much easier for people to wait for that. I'm allergic to sitting underwater in positions. I, like, feel terrible. I feel like an idiot. It makes me unable to think rationally about what's happening to the market. So I don't mind not buying the bottom as long as I'm buying after the bottom. If I'm not buying the bottom before the bottom, then I lose like my sense of my ability to think clearly about stuff because I've already like made terrible decisions. So for most people I think they can just kind of

chill, you know. Where we are in this bear market, like, dude, I don't know. Don't ask me. I don't I don't really trade anymore. And my only experience in the markets ever has been in crypto. I've never, like, really done anything in any other market. And I learned about crypto, Bitcoin in 2012-ish, maybe slightly before, slightly after. So my only experience has been in the last 10 years of markets where every single market in the world went up in a straight line for a decade. Rates trended to zero. And, you know, there was a couple of like hiccups here and there where the markets maybe dipped once or twice, traditional markets, I mean. But everything else was a straight line upwards. Crypto went through like these cycles that were very much powered by

low interest rates, cash being trash, nowhere for people to allocate capital and stuff like that. So honestly, I don't really know. We live in like economic circumstances that I've never experienced before. And I do not understand the levers of in order to really make sense of them. So like every day, it's like, oh, we've got the PPI, the CPI, the DNA, the BBC coming on. And I'm like, they're just making them up. They're making up new ones, new numbers that, so they can say it's bullish or bearish. I don't understand what any of them mean. And I don't understand how they interact with each other and stuff like that. It's like everyone's losing their jobs. It's a recession and apparently that's bullish.

That's great because then they're going to have to... It doesn't make sense to me. I've never studied it. I've never really thought about it in depth. So I don't really know. If those circumstances were the same as the previous circumstances, I'll be raving, you know, bottoms in. It's like we're going to...

If it's going to 3,300 and all, like, whatever. But that's not really the case, right? Like, money's getting more and more expensive. It's not cheap anymore. Money's getting expensive. And you can sit on your capital. and earn like how much per year, like 5% a year or something? You can just sit on your money.

Cool. So I really, really, really have no idea. The most demotivating sort of picture I can put in my head is the, what the chart of the stock market looked like after the tech bubble in the year 2000, right? It topped in around the year 2000. And until 2009, it kind of went sideways and down just like a boring decade. And I think like something like that kind of might make. make sense, right? If like inflation is like sticky, doesn't go straight back to 2%, sticks around,

but not like super high, but rates have to stay kind of high, globalisation is reversing, so you can't push rates so too far down. All that stuff really changes the environment within which Bitcoin and Ethereum has existed and reduces a little bit of that Yolo capitalism type in investing style when people don't have that spare cash hanging around anymore. On the flip side, asset prices are still insane. Young people can't afford houses, so they have to go to push out of the risk curve in order to have hope of ever buying a house and stuff. So who knows, man, as I said, and hopefully you can understand from this like monologue. I have got no idea. Yeah, I think actually many of the experts don't either. It's just they have a lot fancier words to make it selling they do.

So let's now talk. We kind of alluded to this earlier, but I do want to make sure to specifically discuss what I believe is the biggest story, not only of the year, but perhaps of crypto over its entire history, which is obviously FTX and Alameda. The biggest bad story. Biggest bad story, yes. Not the biggest good story. Yeah, or biggest news story is another way to frame it. Biggest bad story so far. Oh, God. Yeah, well, what's your take?

And this is just a high-level question. Like, what are your takeaways? Or what do you, yeah, what is, what are your main thoughts about what happened there? Sam was a fraud. He ran a fraudulent company or system of companies. He abused a powerful technology. Often criminals are very early adopters of new technologies because they can run ahead of law enforcement's ability to monitor those technologies. I never invested or used or interfaced with Sam or any of his products.

I think they were maybe in one or two rounds that we did. And this is where I carry some guilt. Like, it was well known that Alameda structurings were predatory. And so I was never part of a deal where Alameda structured something. Actually, I'm not sure that FTCX or Alameda and placeholder ever co-invested. I know we co-invested once with three arrows. And that was in Orca. AMM of Sala.

But the reason I carry some guilt is because it was known that Alameda was predatory and I didn't say enough. And so I'm shocked that it was such a house of cards. But I guess when I piece together the story, you know, you can connect the dots backwards. And really, I think it's a tale of someone who was bright and motivated, who was doing and thepphetamines and had some early success, broke a few rules, didn't get caught, and then it started to snowball. And I think it kind of all fed together with like the drugs, the money, the power, the sycophants, and the rules or the laws that he was breaking or the scale in which he was breaking them just kept getting bigger and bigger and bigger. And he thought he could get away

with it. I don't think he started off as a criminal mastermind. I think he ended up there through like a series of unfortunately linked events. Yeah, I don't know. I mean, the thing that's just crazy to me is like, you know, over the last month or so, he's been doing all these Twitter spaces and podcasts and interviews and stuff, telling a story that the new FTX CEO, John, whatever, John Ray. John Ray. Ray J. His just seems to be saying in, you know, in these filings is like so far away from being true that I can't really, I struggle to put myself in Sam's shoes or some state of mind where you would go around telling the story if it's like you're most months away from what actually I'm.

happened just becoming public. Like, I don't really get it. It just makes me think he's like either delusional or pathological liar. I have, I don't really understand like him as a person whatsoever. I also find it crazy that like they built the second or third highest volume exchange, which like from a product perspective was one of the better ones had its flaws. as most of them do. But that's the really hard bit, right? Like building a consumer product that people like to use is really difficult. And then they just like threw fraud in with it. It's not even,

it's like a profitable business too. It's not like crypto exchanges don't make money. And they just did this like really, really, really unnecessary egregious fraud. Like I struggle to even think, like what I don't even understand the incentive structure there. Like you build a business. It's worth $40 billion, like, why do you need to steal customer deposits to make, what, another $5 billion, $10 billion? Like, you make an extra $10 billion for risking everything and life in jail. Or you can just run the exchange, not steal customer funds and have a company worth $40 billion. And maybe you can say, okay, well, actually, it wasn't worth $40 billion. They were using customer deposits to provide liquidity making a better product, which means

FTCS would not have been as successful as it was if they were not doing that, right? So, like, maybe you can say that. I don't know if I buy it. But, yeah, I find the whole thing quite dismaying, honestly. Like, partially my, like, you know, I ran a podcast and FTCS was a sponsor of that podcast. We're getting in touch with the FDX estate to give all the money back, so we'll make a loss on that podcast. Thanks, Sam. When we were initially figuring out who could sponsor us, we had, like, loads of these people

reach out and make offers and, you know, lots of merit were much, much, much higher than what blockfolio, which was the original sponsor before FTCS acquired it, and then subsequently FTCS were willing to pay. And we said to ourselves, oh, we can't, like, you know, that company is like, they do this, that's kind of dodgy, they do this, it's kind of dodgy. FTCS is a top two, three volume exchange and they, you know, they sponsor like Mercedes and, you know, blah, blah, blah. And they have the biggest VCs in crypto, that is much more reputable. So we'll go with that. And like, oh, as you know, how that turned out. So I just find it's sort of phenomenal that you can be in a position that is as so much upside and you can just throw it all away with a really,

really poor trade, like risk everything, risk 50 billion of equity for stealing 10 billion of customer deposits, right? Yeah, but, you know, I don't know. I hope he spends life in jail, honestly. Well, yeah, I think it's pretty likely at this point. So, and I'm sorry, by the way, about what happened with the sponsorship. Oh, look, it's like, you know, yeah, it's like, it's worse for people that trusted them because they listened to us, right? Like, we lent credibility to this thing that we thought was legitimate. But, like, we don't need to, Sponsoring, right? We can give it backward and like a privilege to persistent to be able to do that. But the sponsorship money wasn't very much. And like, what, it adds like, no point not, not, not, not one cent on the dollar for creditors.

And like, yeah, we're not the people that deserve an apology, you know. Anyway, fuck Sam Bankman Fried. All my homies hate Sam Bankmentfried. Yeah, Chris alluded to this earlier, but I was curious to hear if you guys had any ideas on how to prevent this type of thing in the future. you know, you kind of identified the problem earlier, Chris, but I don't know if either of you have thoughts on what the industry can do going forward. Proof of reserves, definitely on the centralized exchange side. And as we're seeing with finance, one difficulty there is how do you account for liabilities and, you know, the audit firms that will do a good job of assuring people of the liabilities. So on the like centralized

exchange side, I think that needs to become an industry standard. And then, I'm, I mean, going to go back to the start of this podcast, which is this will push more people to the decentralized alternatives. You know, you often have the, like, the fall of one thing with the rise of another is not coincidental. It's mutually reinforcing. And so you see this with like traditional structures and like the upstarts, right? So like traditional finance with defy. But I think we'll also start to see it with centralized exchanges versus dexes. And we've seen it in the on-chain metrics, like there's been a lot of movement to self-custody and to on-chain alternatives because of FTCS. That's ultimately a good thing. I think it also comes about during a bare market where builders are working on deckses that are going to have close to centralized exchange performance fees user experience, but in a decentralized environment.

right and so like you see anatoly from salana rallying the troops right now where he really wants a dex that is basically everything that ftx was for people but in a decentralized format where you can see you know your positions on chain you know what your your reserves are you know say the whole balance of the exchange like it's it is the dream we have pursued for a long time of an open and transparent organization. And that is totally possible. Like that is the substrait of blockchains allow for that to be possible. It's just we're going through years of building layers of infrastructure to get there.

Maybe Kobe disagrees though. Yeah, I saw he. And I was wondering too because I was like, are block times fast enough for that? But anyway, what about you, Kobe? Yeah, so like maybe you can maybe make it work on Solana. But then everyone's got to bridge everything over to Solana. line, right? And then you have bridge risk and like, how do the bridges actually work in practice these days? They're just multi-sigs to recover the funds until you get, you know, some better, like,

optimistic bridges or like-client bridges or something in the future. But I've been thinking about this a lot, right? Like, how do you remove the custody risk of an exchange like FDX? How do you have FTCX or finance or whatever type experience without having to try? trust the CEO of that company. And then there's a second question, actually, do users even want that? Because there's tons of deposits in Binance, right? Like there's how many Bitcoin in there? There's like a million Bitcoin or something in Binance.

And the centralized exchanges are often the biggest staking deposits to a lot of the networks. I think the only exception to this is like Cardano or something, but I don't really totally understand their staking because there's like a limit per pool or something. So users actually seem to kind of appreciate this banking type relationship with an exchange where the deposit and they go, cool, it's safe in their self-custody's hard. So do users generally even want it? Maybe they will over the long term. So let's put that question to aside and just say, I want it. And like we on this call probably want it and users will want it more and more over time.

So then how do you actually build an exchange that supports that? where you take out a bunch of these risks and Anatoly wants like a fork of Solana or something with like it's all built as an app on top of a fork of Salana and assets. So then wormholed or layer zeroed or whatever in. I think it just adds a bunch of additional risks. Plus you don't actually get the FTX type experience because you can only trade from the place you store your private keys. so you have to have your private keys on a machine, which is the one that you use.

You can't switch to your mobile phone and then go make a trade on the train or whatever, unless you have your private keys on that device as well. And yeah, I think it gets a little bit messy there. I think one way that it could work, that could be quite nice, is if you had a just-in-time custody model where users can self-custody, an exchange builds like a very, very simple custom wallet fragments the key based on an email address or something so you can log in on multiple devices.

And then when you're using capital as collateral, it's used as open interest on the exchange. It moves into the custody of the exchange and then moves back perhaps after the trade. But I think a lot of this stuff is very messy. and decentralized exchanges kind of have to work without fear on ramps, right? Because if you have a fear on ramp, then you have like a centralized company running the fear on and off ramp. So you don't have a like a decentralized exchange. You have a centralized exchange that runs on smart contracts and stuff, which actually

might be totally fine, right? Maybe that is actually optimal is a centralized product that inherits a lot of what's good about defy, like the transparency, like openness, lack of requiring a custodian, etc. But I think it is actually a quite difficult product. And I think changing regs are going to make it harder. And I don't think there's a big incentive for any of the existing exchanges to start messing around with this stuff and saying to users. Actually, now like here's a private key, like you have to withdraw everything, but you can still use our platform. Like, they're going to stay basically as like banking type relationships with, with customers. So I think we will see a lot of

stuff here changing here over time. Plus, if you also have to consider what's going to happen with stable coins, right? Because there's this EU regs that are changing. I read something that you're not allowed to hold over a certain amount of non-EU denominated stable coins if you're like in these new EU regs or something. So you can't have more than like 100 grand in like USDC. That sounds, that seems like pretty wild. Wow. Wait, is that passed or it's like a proposed thing? I haven't heard of that? I don't know. It's proposed. It's definitely not passed. Otherwise, people would be going crazy about it. But yeah, there was something like that in something I read. And I don't know really what's going to happen with US stable coins in like the wake of all this FTCS fallout.

You know, every day there's a new like story about tether and like, who knows if any of these stories are I think tether's probably fine. But I thought FDX was probably fine. So like, you know, There's a lot of that, and then decentralized exchanges have to rely on centralized stable coins because there isn't really a decentralized and scalable stable coin yet. So there's a lot of stuff, I think, to monitor and keep an eye on over the next few years, because how this stuff plays out and which products are built, which are well adopted, how the existing centralized exchanges change will really impact what happens in crypto in the future and how the cycles play out and who's investing theses end up being the better ones.

So I think there is a lot of stuff to, I have no idea how it plays out, but I think there's a lot of stuff where you can put it in categories and try and research and monitor how those things progress. And one of the big ones, honestly, is like what happens with Bitcoin? and like how will Bitcoin work in these more decentralized on-chain worlds? Yeah, so there's a lot to like watch out for anything. From an investor and a crypto-optimist point of view, there is a lot of work for you to do. From a builder's point of view, there's a lot of opportunity and a lot of work for you to do now as well in an environment where less and less people want to do it.

2021, people were coming over like, oh, I'm going to work in a crypto company. I've quit my job at Goldman Sachs or Citadel or whatever. And now they're all quitting and going back like, no, that didn't happen. I was on sabbatical. So I think there is a lot of outsized opportunity, but you're also in an environment where like, who the fuck knows what's happening next? I think Kobe needs a hug. But I've needed a hug for the last 10 years. Oh my God. Did you see Sam's testimony to Congress, where one of the bullet points was basically like, I'd just like to get on the record. I am and have been for the better part of the last 10 years.

Sad. He was just like, I'm like depressed. That was like, it was a really, really well. Wow. Who isn't Sam? Wait, so Chris, it sounds like you want to respond, but why don't we do this? We're going to take a quick word from the sponsors

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potential with the leading blockchain data platform by visiting Chainelysis, dot com slash unchained. Back to my conversation with Kobe and Chris. So Chris, you want to respond to what Kobe just said. Yeah, I was going to... I'll have a hook, mate. Come on. I'll give probably a remote hug.

I hope you feel it from afar. But no, so Kobe's definitely raising true and important points that there's a bunch of hard problems left to solve in crypto. The smartest engineers I work with all want to solve hard problems, right? And so, like, when I go back to last year where we actually weren't that active in terms of deploying capital, because, like, a lot of the problems people were trying to work on were fluffier. And valuations were crazy. And what I see now is, like, a lot more focus and motivation to work on hardcore problems. And I say focus because it's just less crazy.

So you have more time. And like the conversations I'm having with people are way better. And like even myself, I'm more vocal now because I think that it's a more interesting time to be vocal and to converse. As I think about how we get ourselves out of the current situation we're in, I think that there's an opportunity for traditional finance players to come in. And so, and this is on the centralized exchange side. So, like, you look at what Fidelity's doing. Fidelity's not stopping, right? Fidelity, I think, sees an opportunity and I've met with Abby.

And, you know, she's all in on crypto. Like, she gets it. Abby Johnson, the CEO. Yeah. And so she's not, she's not a day tripper, right? So, like, I think that certain heavyweights from traditional finance will move in and see this as their opportunity. So that's one thing on the centralized exchange side. Then, you know, in terms of some of the existing players, like the two that I trust the most are Coinbase and Cracken.

And it's really just because they've been around for the longest, right? And they've made it through multiple bowls and bears. And they think their founders are ideologically driven. And they've learned how to manage through these situations. And they don't take undue risk. And then when I look at those two firms, they're like, Cracken has quite a good, staking environment for people. And I understand there are concerns around centralized stake. And that's real. And maybe we could come back to that later and liquid staking. But then when I look at Coinbase,

Coinbase doesn't have to be doing their Web3 wallet, but they are. And the Web3 wallet, both for retail and institutions, is quite cool because it starts to set up, you know, this non-custodial environment that is endorsed or built or like has the trust of the Coinbase brand, but that you don't need to trust in the way that you trust a centralized exchange. And so I see that as like something that you could argue in a way is almost against Coinbase's core business interest, but is very much aligned with crypto's ideals. And so like I think they need a round of applause for that basically or like I'm really happy to see them continuing to invest in that and that's a conversation that we're having with them on the institutional side and so it's not just retail and then you know

in terms of solving some of the or like some of the trickier problems I think that will be in the first innings of solving and the next expansion would be the multi-chain wallets and this is where I see progress both from Metamask, so going Ethereum native out and how you can switch networks, but then also from Phantom, which is Salamonam native, going into Ethereum. And so I think you're going to start to see a lot more maturity on the multi-chain wallet side and a smooth user experience. And that's key because that starts to get into what Kobe was talking about in terms of where your keys are. you know, if there are, because wallets are just basically private key management, right,

with candy-coded user experience. And so if that gets better, and that's getting better every single year that I've been in crypto, right? It used to be horrible. And now, you know, it feels like candy to me, but I understand how, like, it still has quite a ways to go. But that will start to enable more multi-chain gaps, right? and that idea of a Dex that is on par with FTX will in part rely upon that.

And then, you know, I expect interchained protocols to basically go through their boom in the height of the next expansion, similar to what alternative layer one smart contract protocols went through last year. And so there will be tons of examples of those by well-capitalized teams. They'll be relatively poorly understood, like value in technological models, like, some differences at the margin, a lot of copycats, but like a lot of capital and experiments pumping through excitement there. And there will be some like disasters that come out of it. But I also think that some winning models will get cemented through that process.

And that's a key, that is another like, say the next key layer of infrastructure, which needs to come in. And so I just kind of go back to the fact that this all takes time, you know, smart engineers like working on hard problems and they will continue to get supported by investors like us. A lot of capital allocators have gotten walloped. But I would say like the, maybe the most skilled or the most ideologically committed or whatever, we're all still allocating. And actually like placeholder was way more active this year as an allocator than last year and we'll be similarly active next year. So like those are the seeds of what will come later. And then to address an issue that Kobe raised earlier about Bitcoin, like you talked about,

you know, these different multi-chain wallets and stuff like, do you see any really good solutions for bringing Bitcoin in? Because I'm sure you saw that news about how Alameda asked Bicco to take the Bitcoin out of the Raps BTC, just like basically stealing it for the people who had wrapped it in there, which is kind of crazy and they refused. And I did hear that TBTC is going to be relaunching in a more decentralized way, which will be interesting to watch. There's also SBTC from Stacks, which they just published the white paper this week. So it's a trustless Bitcoin peg from Bitcoin into the Stacks ecosystem.

So we definitely need more trustless Bitcoin pegs. You know, it's a type of bridging. So like everyone is working on this. or interoperability problem because it's a hard one and we need it. But I think, you know, it's finally the time where people are so bearish on building on BTC where I think it's time to be bullish on it. And it's been increasingly a joke over the years that anyone would build anything on BTC. But like the protocol is still there.

It's still the most valuable asset in crypto. And there's motivated teams, probably the two that seek out to me most, would be lightning and stacks, we work with stacks, there are teams that are committed to making this more programmatic. I don't totally understand how stacks works. I'm not going to foot it because I don't understand how it works. I'll say something wrong, but it seems a little bit like woo-woo magic to me. Like it's like too good to be true. Anyway, I won't for your investment because I don't understand it. No, you can. But I would study it more. Yeah, I'll do that. I'll do that and then I'll foot it afterwards. Yeah. Munib's been around for a long time and I'd say he's committed. And what I'd like to

is like that team has spread. So like it's there's, it's not just like one core entity supporting it. And so the team has spread and different parts of the core founders of the protocol now run their own entities and they're tackling the problem from a number of ways. You can fud stacks, Kobe,

because Bitcoin Maximus fud stacks relentlessly. But I also, I'm seeing an interesting change within the Bitcoin Maxxie. maxi community because I went through a falling out with the Bitcoin Maximus basically 17, 18, 19, because when I was at Arc, like in 2014 and 15, I was really just doing Bitcoin, right? And so, like, that was my community. And then 16, things started to get tenuous. And then, you know, 17, when I started a placeholder, I started having fights and those

exploded in 18 and 19 with the maximum. So anyway, I had a lot of, like, falling outs with different people that I had been conversing with. But what's happened recently is a lot of those people have come back to me and said, you know, I'm more of a Bitcoin moderate now. And, you know, I understand what you were saying. They're working to reform Bitcoin culture, I would say. And a lot of them are supportive of stacks, even though like the more extreme remaining Bitcoin maxis who have, you know, a quarter of a brain will still like just scream that it's a useless shit coin or whatever. Yeah, I do think that like if you like Bitcoin is one of the areas that probably has the most

opportunity in it over the next few years, particularly if Bitcoin developers go, how can we rely less on centralized exchanges as like a form of acquiring and selling Bitcoin for like people that want to hold Bitcoin? Sometimes people will want to sell their Bitcoin. How do they have to, how can they do that in like a trustless way. You know, not going like back in the local Bitcoin days where you went peer to peer and met someone in a cafe with cash because that weren't very safe in hindsight. I'm interested that you think the multi-chain thesis still holds up and like, like, it's still interesting because like what were the big successes of multi-chain in 2021? I wouldn't say, I wouldn't say there were any. But like, I think that like, that means there's no

evidence for this thesis. The hacks, the hacks were very successful. Yeah, the bridge hack. were lucrative? Yeah, I mean, they were lucrative for the hackers. But I kind of see the bridging or multi-chain infrastructure in 2021 being where proof of stake protocols were in 2017. Right? So, like, in 2017, it was Ethan BTC.

And then there were like some weird proof of stake protocols, right? I think NXM was proof of stake or like some fringe ones. But then a lot of people were talking about it and were. working on it and capital was getting allocated to it. And everyone knew it needed to happen. And I guess I'm enough of a Promethean where I'm like, okay, if capital is getting allocated to it and smart people are working on the problem and motivated to solve it, then it will get solved. We'll try a bunch of stupid things in the interim. You know, we'll make a ton of mistakes. Things will blow up. People lose money. But out of that, eventually the solution will emerge.

And so, you know, using that cadencing, it's like in 17, proof of stake was theorized, but we were still a proof of work dominant environment. And there were a lot of people who were like, ah, proof of stake will never work. Like, there's no good examples of it. And then in 2021, proof of stake exploded. And people were like, whoa, like, this is valuable. And I think in value, there's probably more, or it's, it's probably roughly equal, right? Proof of work, proof of stake. I haven't summed the major proof of stake protocols against BTC. But like, certainly proof of stake is now, say, proven and on the rise. And then, you know, in the year that that happened is really when there's like looking forward to the bridging and interoperability stuff. And it's kind of like

the industry as a whole needs to solve the biggest, most pressing problem first to then free up the space, both labor and capital wise, to then move on to the next problem. And this is where it's a little frustrating. It just seems to me that the multi-chain thesis came around because Solana, Avalanche and Luna appeared to be doing very well. So it was like, oh, clearly we're going to live in a multi-chain world. Ethereum fees are too high, so everyone's using these other chains. But then each of those chains had like a backer that has since like totally blown up, right? So like FTX were obviously the big sponsor of Solana and perhaps allegedly, who knows,

selling everyone's user deposits to prop up Solana and FTT and Solana ecosystem things. avalanche obviously had 3AC as the flagship supporter who were like just constantly constantly bidding avalanche and sued his big yes i've abandoned ethereum fees are too high ran around the avalanche top and then lunar obviously had the unsustainable ustay doquan backing so like if you remove each of those actors from those ecosystems like what actually would have happened like obviously you can't say right because it's a parallel universe, you can't just go back and edit, edit stuff. But like, would the multi-chain thesis have become so popular then?

And then where does the economic activity actually happen today? Is there, like, surely it's like mostly on polygon versus any of these other layer ones. So I don't know. I think there's two ways to think about it, like in terms of the multi-chain. There's just pure, like if you want to take your argument that Avalanche, and soul are doomed now and they won't go anywhere because they're not necessarily doomed but like would that have happened would people have been so bullish on multi-chain if not for some people buying with other people's money so i think that um no people wouldn't have focused on it as much but

it still has to be a focus because even just if you set those two aside then you probably still believe in ethereum and cosmos right and um and even if you just don't want to believe in anything but Ethereum, I see the L2s as basically independent chains at this point. And so then you have to figure out bridging and the experience between those different execution environments. And so regardless of which coin you want to be a cheerleader for, if you believe in smart contracts at all, and even like, it's almost just inescapable because even with Bitcoin and stacks and lightning, you're getting different layers and different layers require

bridging and then they require interoperability between those execution environment layers. And so whether you're a Bitcoin believer, Ethereum believer, Cosmos believer, Salana believer, or believer of, you know, all of the above, I think that the next big problem to solve is the seamless flow of value and information between the environments in those ecosystems. But I agree, Kobe, that, like, yes, multi-chain got ahead of its skis. because things were, say, so overinflated last year. But I think it's going to come back in full force in a few years' time. And I think that in addition to Ethereum, we'll have a handful of key innovation environments.

And, you know, I've been vocal about Solana and Cosmos, and I'm happy to talk about that more, because I think in particular, Solana's probably been surprising for folks. The narrative got bigger than the reality, is it always? does, but I'm still seeing now in a bear market where there's very little narrative, the reality is still strong that there's a bunch of people working on bridging. Yeah. The way I see it is there is room for a layer one to exist if it provides the ability for new stuff to exist, like new primitives, new apps, new type of thing, right? Because you had Bitcoin and then you had Ethereum which brought this additional.

stuff you could do trustlessly. And all the other Bitcoin sort of forks that just changed part of the technology, added schnor signatures or something, perhaps, before Bitcoin did. Or like changed the like, you know, hashing algorithm or the block speed or whatever. All of those

just like trended down versus Bitcoin over time. And like, it didn't bring anything new. It didn't enable anything additional. And then Ethereum did. It enabled, you can do a series of actions that you can't on Bitcoin. So people go, oh, cool, now I can build this thing. Now I can build this thing. And those

things start to exist. And if you just like, again, then like change the Ethereum block time or like, you know, tweak a thing here or there, it doesn't seem super interesting to me outside of it being like slightly cheaper to use or, you know, blah, blah, blah, blah, blah. But if there is a layer one that enables functionality that just on Ethereum is non-viable. So like say Sway or whatever it's called enables like some app that you can't build an Ethereum because like you need parallelization or whatever. Then I can kind of see some life being had there because like people will build stuff that couldn't exist on Ethereum and users will go, oh wow, this is cool.

Look what I can do that I couldn't do before. And maybe that's just like a function of scale. or maybe it can even be done through layer 2s, right, where you can have like purpose-built roll-ups for apps that enable new functionality that was just not possible with Ethereum for scaling reasons or whatever. Then I can kind of see it, but like I'm, I really, really, like, I feel very bearish on this like multi-chain thesis where it's just like, we're just going to have loads of chains and they all kind of do the same thing, but like this one's got this language.

This one's got this one. This one's got subnets. Like, who cares? until there is something that is fundamentally enabled, or it's like, okay, we couldn't do that on Ethereum, and that's important to the world. People actually want to use that. Now you can build something in a trustless or decentralized way

that you couldn't build before. Then I maybe think this thesis comes alive. So I think that's another area that's worth, like, monitoring and researching, is someone building something in one of these new chains that could not fundamentally exist anywhere else, new chains or roll-ups or wherever. I mean, I think you guys are both making good points, and I think we're not going to know how things play out.

Because the show was meant to kind of recap 2020, I love it that we looked forward because I have been getting comments from people like, oh, you know, I kind of want to hear about the innovation that's happening or new things. So I'm so glad that we covered that at length. But I do still want to ask a few things about kind of current events in the past year. So at this moment in time, obviously you've had this huge, huge collapse. And yet, sad as it is to say, Contagent may not have fully played out yet in the industry. At the moment we're recording, there's, yeah, a number of concerns.

One that's in the news a lot is Binance. Another one I did a whole show on was DCG and Genesis. People were making noise about crypto.com, which disclosure is a sponsor of the show. Silvergate Bank is in a tough spot. There's a lot of short sellers on that stock right now. and they're, I think, the leading bank for crypto companies. So I don't know if you, you know, I meant to have you each discuss each of them, but we're kind of running out of time.

So I don't know if you guys want to call it any particular ones as being ones that you're either looking at in terms of being significant or, you know, if you want to say anything about what you think might happen with any of those or what the impact would be in the industry. Kobe, you want to go first? Yeah. I mean, obviously, like, I don't have any insight into the Binance stuff. Like a lot of the Binance stuff that's happening on Twitter,

you see these videos and they're like really taken out of context and I'm always like, is this person like intentional? Like they know it's taken out of context or have they been like fooled by someone else? So that like makes me a bit disheartened where we have this type of, um, people see the fear and like the panic and the dead bodies. And it feels a little bit like vultures of swoop like swoop swept. Swooped? God, what's the, do they swoop? Swipped in? They swoop in or they swept in.

They're swept in and they're just like picking at the carcasses and like, you know, it feels a little bit like that to me at the moment. Whereas in previous bear markets, it was like people rallied together and like, you know, we're going to make it through it. Now it's like people are egging on the catastrophes a little bit and hoping for new ones. Yeah, just to explain some of that quote unquote fud, I think the video that you're talking about is, whether or not Binance might have to pay a clawback for the FTX bankruptcy process of $2.1 billion, which is what FTX or slash Alameder or somebody or Sam or somebody paid to finance to buy finance out of its stake. However, I did, and granted, this is just one person. I think it was Wossey lawyer that I asked multiple lawyers about this, but I'm pretty sure Wassie lawyer was the one who responded. And he said, because that transaction took place in July of 2021. He said that's probably like too long ago or actually I don't remember his,

this is like literally in the minutes before we've recorded. But he said he thought it was unlikely to be subject to a clawback. So just to the way the video was presented on in those like tweets made it look like he was saying we'd let the lawyers handle it if a user tried to withdraw their money rather than like could you process the clawbacks. So it was like presented in this way where it looked like you had to take your money out of finance. That said, CZA is acting weird on Twitter these days. He used to be so, like, chill and didn't tweet very much. And now he's doing weird stuff, and he, you know, banned that guy's account

because they were having a fallout in the customer support chat or something. Coin member. Yeah. So, like, if, I mean, if finance goes down, it's going to be obviously very bad. They have, like, 80-odd percent market share. Their orders of magnitude larger than FTX was, even at its peak. So that would be bad. Like, I've seen tweets where people say their personal bank accounts are being closed

because they deposited or withdrew from FTX, which also seems very bad. It's always been difficult for crypto companies to get bank accounts and for large crypto investors or traders to have personal banking relationships, at least in the West, I think in the US, but definitely in the UK. If that gets worse,

I think that is just a real headache for normal people. But outside of that, like the rest of it, like, yeah, it doesn't matter. Like, does Bitcoin keep working? Does, uh, is there no major flaw in Ethereum's, uh, proof of stake implementation? Fine, that's, that worked seamlessly by the way. Like, kudos. But, you know, as long as those things are fine and everything keeps ticking, the core thesis remains the same to me. Like, do I believe that trustless and sensor resistant money is important? Do I believe, like, sensor resistant, like, trade? is important or commerce.

And do I think the world is getting more trusting or less trusting? Therefore, are these protocols and services in higher demand or lower demand? So yeah, sure. Let's say every single one of those things you just listed goes down like crypto.com blows up, finance blows up, Silvergate blows up. Fuck it, let's throw in tether USTC, et cetera, et cetera.

Does it actually matter at the end of the day? Like probably for a few years it matters. But if a bunch of, like, centralized businesses blowing up in the industry generally can kill the industry, then, like, in a way, it's maybe already dead. So I'm not super worried about any of them. Like, how much worse can it get? Touch wood. Fucking out. Maybe I'm worried.

So I don't have any edge, I would say, on any of those proceedings other than knowing. some of the people who run those organizations for a long time. I think that, you know, specific to DCG and Genesis, the fact that we don't have news yet means solutions are being worked upon, right? Like if it was a disaster emergency scenario, they probably would have been forced into action by now. So that's where I take, you know, the view that no news means nothing or no news is good news.

finance, I'd be pretty surprised, like much more surprised for Binance to go down than FDX to go down. I think that Tether has been fudded forever and, you know, there, there are things around Tether that if you're intellectually honest, you know, will raise your eyebrows. And that has pretty much always been true. That said, they have had. handled a massive amount of runs on USDT this year pretty seamlessly. And so I have nothing against Tether or BitFinex or any of the people who run those orgs, but I would enjoy, like, I think it would be good for the industry if Tether's share became less overtime.

And I don't think that has to happen through a blowup. It's interesting what Coinbase just did, I think, with zero fee trades. allowed into USDA from Tether. And I think, you know, that's one way in which share shifts will take place as people take the trust or the entity that is backing some of these stable coins more seriously. Crypto.com is probably the sketchiest one to me. I mean, it came out of nowhere. I know nothing about the team. Like, all of a sudden it was in the top 10 or 20 coin market cap. It has, it's like they're sponsoring the World Cup. Like, it has a lot of echoes of FTX. But I know nothing about it, you know.

And so I, yeah, that's one that is kind of a newer entrant. And at least within how I interpret crypto players. But like, I also trust newer entrants less. Like they have to prove themselves over cycles. And I think that's a key tenant. That's why I go back to Coinbase and Cracken. And for what it's worth, DCG has been around for a long time. I mean, I knew Barry in his second market days.

Before he sold that, I forget to who, and then started up DCG and then started to build out these conglomerates, or, you know, grayscale, acquired coin desk, Genesis, so on and so forth. And so I think that Barry's very well connected and savvy. And I think he's more pinched than he's ever been here, but I've consistently seen him make lemonade out of lemons. And so I'd be expecting that out of this situation. from him. And then overarchingly, like, I wish all these companies, you know, success. And if they do blow up, that that is a bummer. But the protocols will just keep chugging along. And that's what matters. And like, no core protocol has blown up this year. And, you know, that's the most, one of the most important takeaways. Luna, I don't consider, like, a core protocol for what it's worth.

I think it was like always poorly designed. It worked as intended. For a short period. No, I mean, even the blow it works as intended, right? Like if you, if UST de pegs, then it sells on Luna. Like that's literally the design. I mean, didn't restore the peg because it was a flawed design, but it worked as it was designed. So I was curious.

You probably heard that Doe was still trying to, you know, be on. entrepreneurial and build. In the interview I did with him, he emphasized that he wanted to keep contributing to the space. Is that something that you think the crypto community should be open to to more entrepreneurial efforts from Doquan? I mean, no, but like, I don't know. Would you use or invest in Elizabeth Holmes' next business?

Like, probably. Well, yeah, but hers was like an actual fraud. Do you think that Tara Luna was an actual fraud? Well, I read a threat. I don't know, right? Because I've got no internal view. And originally, I was actually of the view that there was no fraud, but there was, it was poorly designed and he believed in something stupid and, you know, like maybe acted

invincible because he'd made $50 billion or $100 billion or whatever his net worth was in a couple of years. And that went to his head. And, you know, he was just really believed this mechanism would work. work, which it somehow managed to do for a while. But then I read this, like, thread about, like, you know, there was this and there was all this lying and the chai numbers were all fake. And actually, the person that depegged the stable coin was like TFL or something I read. And, like, they were selling UST. And then, like, there's still the basis cash thing. Was that ever, like, confirmed to be real? He actually built basis cash and that went to zero. So, like, is one of the co-founders.

Yeah. Yeah. So it's like, you must have questioned a little bit if the exact same mechanism. could have the same result as last time. So, like, I don't know. Like, when I read through that thread, I was like, actually, this seems like really bad. But then again, when you read these Twitter threads, you like, is there also even credible? So I don't know.

The optimistic way to look at it was flawed mechanism that he believed in. The pessimistic way is fraud. Either way, I wouldn't use or invest in something that he, like, created again. Yeah. so like no. But if he does build something, like he's allowed to do it, right? It's like, do whatever you want. It's a free world. I wouldn't say, like, I'm not going to try and

cancel people that do want to use his stuff because I think people should be allowed to do whatever they want as long as there's information symmetry and people are acting, you know, openly and honestly. So yeah, I won't. I wouldn't recommend it to my friends or family or, you know, to you lot, but whatever you can do everyone, canny. I'm surprised. hasn't been arrested yet, but listen. Yeah. Apparently is like on the run. These are permissionless systems.

So anyone can do anything they want. And then I think it's upon all of us to educate people. Right. And like I don't trust Doquan. I don't trust Kyle Davies. I don't trust Suu. Like I don't trust a lot of these characters. And I think the,

the key thing for me is like, I haven't seen like a genuine apology. I've seen like thinly veiled apologies that are still, you know, dripping in ego and like, I'm still the greatest and, you know, this unfortunate thing happened to me. And so then it's like, well, you didn't actually learn your lesson. And if you didn't actually learn your lesson, then you're probably going to make the same mistakes and you're going to continue to hurt people. And so if I had my choice, yeah, I don't want them in the industry anymore, any of those characters. And, you know,

if someone really takes the time, learns their lesson, like, how, as like true reflection that is voiced or written or whatever on the things that they went through, then I do believe in second chances, but I haven't seen that here. And so I would really caution similar to Kobe people from trusting them. For the record, even if someone did what you just said, I would still not trust them. Honestly, because it's like easy to do that stuff, right? It's like easy to say sorry. And you just gave them the playbook.

They could just follow that now. I'm great. no, they're back in. So like, I, yeah, that's fair. I, you know, if Sam's willing to lie to literally everyone is, like, easy enough to lie in your apology as well. So in general, I think people's actions over time reveal them for who they are. And apology here, apology there, like, generally meaningless, I think. but like their actions afterwards will reveal more about what they learned from that,

you know, event. If Doquan goes like, you know, anonymous, builds something. And in five years, like one of the biggest DFI protocols is revealed was built by Doquan. But it's like economically sound. It's worked really well. There's no shady business practices. Blah, blah, blah, blah, blah. Well, at that point, I go, I'll reevaluate this thing that he's built.

and the action since is this like anonymous, hypothetical developer. Because you just have new evidence. But like, yeah, apology, like, in Pouquet's, apologies the minimum that these people should be issuing. Yeah, and I want to call out some of the statements that Sousou and Kyle Davies of Three Eros Capital have made recently. Kyle said in an interview with CNBC

that part of the reason 3AC collapsed was because their positions were hunted. in a recent 3AC bankruptcy hearing, a lawyer for the liquidator said, in the middle of June, as three arrows capital collapsed, it hired a security firm able to establish a secure communication system that could then allow those communications to be deleted. And they've both been very active on Twitter ever since FTS collapsed, like literally within the hour after collapsed. And in an interview with Bloomberg, Sue told the reporter that they're looking to

up a new trading shop. And Kyle also said on the Analyze Asia podcast that they are speaking with investors about a new venture. I've heard the same. And I think they're going to get the capital for what it's worth. Like I think they'll pull it off. From what I've heard, yeah, I think they will. I'm not happy about it. But hey, traders provide liquidity. I think them for the exit liquidity last year. And they can come back and we can do it all over again. Yeah, they raise money from other people to buy the top again. Cool. Okay. Oh, Kobe, did you want to add anything on the 3A stuff? Yeah, I mean, I like, I don't know. I was friends with Sue, not friends with Kyle.

And like I would chat to Sue sometimes during the bull market. I met him in like 2021, digitally and they've met him in real life in 2021. And he never did anything bad to me. but I was not one of the people that they tried to borrow money from in the dying hours, which is apparently one thing they did, they went to family, friends, portfolio companies to borrow money when they kind of knew the game was over, which I think is very difficult to defend. I imagine they probably were hunted on FDX, right? Like if you deposit money on FDX, it seems like Alameda was instantly selling your coins.

So, yeah, they were working on a rigged market, but like you can't blame that for all of your actions surrounding it, I don't think. Yeah, look, if they raise another fund, like, that's a relationship between them and the investors, I imagine they'll find deal flow much more difficult because investors will refuse to co-invest with them, I imagine, and projects will want them on their cap table much less than they did before, whereas before they were like founders would go after them as an investor I think so they're like yeah what can you do all right so we're going to do kind of a lightning round so just try to keep your answer to like a sentence who's the biggest winner of 2022 u.s government ethereum who's the biggest loser of 2022

ftx then yeah like yeah sam Well, no. FTCX users. All right. And then this last one, you can elaborate a little longer. But if you were to make a prediction about 2023 for crypto, what would it be? Renewed interest from crypto community in things like privacy and assumptions, like around how protocols work with regard to, like, custody risks. you know, those kind of things, and renewed interest in like decentralized stable coins and stuff, and renewed interest from the regulator's side in turning coin base into a securities exchange. I would say at some point next year, the majority of crypto Twitter will be

pounding their chest that a new bull market is upon us and we're going to future all-time highs very soon. whether it's true or not, I'll withhold judgment, but I expect that sentiment at some point on Crypto Twitter next year. I think it'll be wrong, actually. I'll just share that. I think people get whiplashed, but I think we'll have a strong move at some point before a retest.

No all-time high in 2023. No, no chance. But people will say. Yeah, yeah, yeah, fine. But I think we've got more chance of breaking the lows than making a new all-time high. That's true. I agree with that. Yeah. All right. Kind of a depressing note to end on. It's 2022. That's the way to do it. Here's a more uplifting note. I was thinking about this earlier.

So one thing is the calls of like the lost decade or, you know, I've seen some people saying it'll be six years until we have a new high or whatever. I think those will ultimately be looked back upon as markers of like the sentiment body. bottom of like how horrible things got. I think that the and this is where you know, some of my training comes from Kathy Wood where like the rate of change that we're seeing in the world is so fast and we kind of forget that. But that underlies a lot of the protocols and companies, you know, within crypto, within AI, within tech at large. And so like I don't believe in the last decade. I don't believe in six years until another boom. So that's one thing I want to say. The other thing is, I think a decent way to stay sane in bear markets is to stop looking at dollar amounts or dollar net worth and look at unit amounts of the crypto assets you care about.

And I try to never really fixate on like dollar net worth. Of course, like how I manage placeholder, I have to like produce results for for my investors. But specific to myself personally, I'm pretty much always. always thinking in units of the assets. And that's what I care about. And maybe that's where, you know, I'm just, I drink the Kool-Aid enough where, like, like, I'm stoked to be building significant unit position sizes of certain assets. And so then I don't really care what the dollars are. That would be my advice, I guess, to people is like, focus on the units you want to get to. If you want to make yourself happy, you can always say, if all these assets got back to their former all-time high, then, you know, these units would be worth, you know,

know, a certain dollar amount, you know, that's like some opium. Not all assets will get back to their all-time high, but the quality ones will go multiples of their prior all-time high, right? And so that's where you have to pick carefully. But just focus on the units. Focus on the units and stake, and you'll be fine. And the last thing, sorry, the last last thing, is I very strongly believe that, like, crypto has years for buying and for selling. And so I don't even think about selling this year, next year, whatever. Like, it's just not even, it's not even an action I'll really take. I just think about buying.

And on a year like last year, I don't even really think about buying in the public market that much. I just think about selling. And so, you know, kind of, and that's a very kind of glacial way to move capital, but it keeps me more sane as opposed to like trying to time every single thing. And so it's just like, oh, things go down more, there's even more opportunity.

I can stack even more units. And I guess that's one way that I keep myself optimistic and happy in this current environment. I like it. Good note to end on. All right, so where can people learn more about each of you and your work? I'm on Twitter at C Burnisky and placeholder's website is placeholder.com.com Kobe. Nothing good happens there. One of my favorite Twitter accounts. Sorry about that. All right. It's been a pleasure having you both again on Unchained. Thanks, Laura. Happy holidays. Thanks so much for joining us today. to learn more about Kobe, Chris, and the year of 2022 in crypto, check out the show notes for this episode.

Unchained is produced by me, Laura Shin with Alfred Anthony Yoon, Mark Murdoch, Matt Pilchard, Juan Naranovich, Sam Shreram, Pamajumdar, Shashonk, and CLK transcription. Thanks for listening.