Unchained - Bits + Bips: $285M Hack, Iran's Crypto War Machine & the Token Fundamentals Crisis

Episode Date: April 7, 2026

A nation state hacked a startup and won. The hosts debate who's liable, what's fixable, and what isn't. --- Thank you to our sponsors: Bitcoin’s application layer, Citrea, launched its mainnet, expanding Bitcoin’s utility to privacy, lending, BTC yields, and more. Citrea enables: cBTC: The first trust-minimized Bitcoin on a fully programmable platform. ctUSD: A native stablecoin for Bitcoin, allowing for unified liquidity. Bitcoin Capital Markets bringing demand, and utility to the Bitcoin Network. Explore the Citrea Ecosystem. Ether.fi is giving Unchained listeners 15% cashback on food and ride apps — and that's on top of the 3% you get on everything else.  Your bank is charging you to use your own money. Laura switched and loves her card!Go to ether.fi/unchained to claim your offer. ---- North Korea just pulled off the largest DeFi hack of 2026, draining $285 million from Drift protocol in 12 minutes through a six-month social engineering campaign that included face-to-face meetings at industry conferences. Circle had a six-hour window to freeze $232 million in USDC moving through its own bridge and didn't act.  Meanwhile, Iran's IRGC is reportedly collecting crypto tolls at the Strait of Hormuz in USDT via Tron, and the token market is cracking under the weight of 750,000 issuances since 2020 with the median token down 80% from peak.  Ram, Austin, and Chris confront the liability question for stablecoin issuers, whether DeFi's security model can survive nation-state attackers, why Chris is calling for licensed "neoprivateers" to recover stolen funds, and what Franklin Templeton's acquisition of 250 Digital signals about where institutional capital is headed. Hosts: ⁠⁠⁠⁠Austin Campbell⁠⁠⁠⁠, Host of Bits + Bips, Zero Knowledge Consulting ⁠⁠⁠⁠Ram Ahluwalia⁠⁠⁠⁠, Co-Host, CEO of Lumida ⁠⁠⁠⁠Chris Perkins⁠⁠⁠⁠, Co-Host, President of CoinFund Learn more about your ad choices. Visit megaphone.fm/adchoices

All right, everybody. Hello and welcome to bits and bits, where we explore how crypto and macro collide one basis point at a time. We're here to discuss the latest stories of the worlds of crypto and macro. Just remember, nothing we say here is investment advice. Check unchained crypto.com slash bits and bips for more disclosures. And before we begin, a quick word from our sponsors. Bitcoin changed how money works. Satrea changes how Bitcoin scales. With a trust-minimized BTC and a native stable coin, CTUSD,

Citraea enables Bitcoin capital markets with lending, privacy, Bitcoin yield, and more. Get started at Citraea.xyZ slash unchained. Etherfi is giving Unchained listeners 15% cash back on food and ride apps, and that's on top of the 3% you get on everything else. Your bank is charging you to use your own money. I switched. Go to Ether.Fi slash Unchained to claim your discount. Quick note before we get into today's episode.

Bits and Bits Now has its dedicated feed. We're spinning off from the Unchained Feed and moving to a new podcast and YouTube channel. So if you want to keep up with our weekly live streams and macro meets crypto breakdowns, make sure to subscribe to Bits and Bips directly. We won't publish there until March, but subscribe today so you can be ready for launch. Be sure to subscribe to the new feeds at Unchained Crypto.com slash Bits and Bips. All right, welcome back. As always, I'm your host, Austin Campbell, high scholar of zero knowledge.

group here with my co-hosts, Ram Alawaliah, Maester of Wealth, leader of Lumina, and Chris Perkins, the golden hand of 250 digital, which Chris, we're going to be talking about later in the episode. So everybody, please stay tuned for that one. Starting today, though, I think we need to talk about drift and North Korea. So what happened is that there was an exploit, which was the biggest defy hack of 2026 so far, where 285 million was drained from drift protocol on April 1st, approximately in 12 minutes, most of which was subsequently bridged to Ethereum via Circle CCTV. This was the second biggest Salada hack ever behind only wormhole, $326 million in 2022.

And the attacks were quite complex. There was a six-month operation where the attackers posed as a. a quant trading firm, met contributors at major conferences across multiple countries, deposited over one million, built a functioning ecosystem vault, and then struck drift. Attack vectors were a VS code cursor zero day that silently executes code on file, no click, no warning, and a malicious test flight app. By the time the exploited happened, the group's telegram chat, and Melissa's software had been fully scrubbed. The attribution was the DPRK, their Apple JAS group.

Mandian was engaged. The on-chain fund flows traced also to the radiant capital hack attributed to the same group, basically medium to high, growing on very high now, confidence per seal 9-1-1, that this was DPRK related through third-party intermediary. for face-to-face work. Equally interesting, there was some backlash around Circle. Zach XPT said Circle could have moved faster to blacklist wallets, claiming inaction-enabled wandering of 232 million USDC across its own cross-chain bridge.

Circle's position, as reported by CoinDesk, is that they freeze only when legally required, which is highlighting a core tension between on-chain speed and legal knowledge. here. So, Chris, you've been in this space for a while. You yourself deal with a liquid token fund. I wanted to start by asking you, what do you make of this whole situation? What does it say about the ecosystem in defy right now? Yeah, this was a really scary attack because it was highly sophisticated. Look, when a nation state attacks a startup, the nation state's going to win every single time. And here you had a nation state that put significant resources. And the one thing that we've seen time and time again is there's sophistication around social engineering. What made

this so scary was that through proxies, they developed in-person trust at conferences. This is the first I've heard about. This is taking hacks to the next level, right? And no, North Korean folks didn't infiltrate whatever conference they attended, these were people that they hired to be the front. And it ended up being a very, very sophisticated attack. You talked about test flight. We were talking about that today. Do you stay away from test flight now because it hasn't gone through the full iterations on the app store? Very scary stuff.

And then, of course, on the stable corn, we've talked about this time and time again. When there's a hack, latency is everything. And so you have to ask yourself these rules. real difficult problems, due process versus latency, right? If you just start moving really quick and freezing and seizing everything, you lose confidence in the underlying stable coin. That doesn't work, not to mention the fact that you can have issues, legal issues, where if you go through the time of due process, which is the law, oftentimes it doesn't reconcile. So this really is something that crypto is going to have to come to grips with. And if we want to become the

crypto capital of the planet, security needs to be addressed immediately. It's a known gap. It's getting even scarier. Austin, we talk about all the time. Treasury thinks we've got three trillion dollars in stable coins coming online. I've said over and over again, I think that's too small. It's going to be much bigger. We have 127 trillion dollars in equities that are that are tokenizing, right? How do we address the security issue? Well, I think a few things. Number one, when was the last time we tolerated a nation state attacking one of our other industries? Is that acceptable? It's absolutely unacceptable. That's a non-kinetic attack on our sovereignty and our startups. So we need a much more robust government response. And then the one thing that I've been talking about over and over again on the show and to anyone who will listen to me, you know it's coming. We need privateers. Right. Now, these are totally different subjects, but let's talk about it. When we lost the pilot, we're going to talk about that F-15 weapon system officer. You know, we went and we recovered those assets. and those pokes. We need a recovery program in this country, a recovery program based on private

citizens who are licensed, who can go out and address that latency issue. These are what I call neo-privateers, right, where private citizens, regulated activity, there's a hack. Guys like XPT, see it immediately, right? We need these people to spring into action and to see if they can recover those assets. And we need a little bit of policy things to get through. I'm hearing in DC, Clarity Act is making very good progress or keeping some things under the radar right now because there's actually a roadmap. I would love to see us get recovery policy capabilities slipped into the bill because we need it more than ever. I'll hop in on the circle point then and say, Chris, I think post genius, especially after the rules are written, this is going to become significantly

more clear. And what I'll say on that is that I don't think we're going to have much of a problem and Circle will not have legal liability for freezing funds temporarily in these cases. Right. If you look at how traditional financial entities operate within the BSA, it is totally acceptable and in fact required for banks to deal with these situations by actually taking actions to verify what's going on. So if you've ever tried to send a large wire or you've had a large ACH hit, you get that text from your bank like, hey, was this you, that is essentially totally permitted. And by the way, I will remind everybody, they have frozen your funds in that moment. They are not moving. The requirement, though, is that those not be particularly onerous or long lasting without significantly more

substantive, call it weight behind that. That could be a judicial order. That could be a notice from regulators. That could be certain sort of national security concerns. So they can't hold your funds indefinitely, but they can definitely hold them temporarily. I would suggest that when our regulators have finished writing the rules for genius, it should not be surprising to anybody if U.S. dollar stablecoin issuers have legal requirements to monitor the ecosystem and then take action in cases like this where they're going to be asked to freeze things. The other thing that I think is a little bit unexplored territory, but I expect drift will be where the rubber finally meets the road, is to circle have liability here for no.

not acting. I will remind everybody, even ignoring the pending license with the OCC, Circle has money transmission licenses in most U.S. states. Money transmitters have to take some degree of care with user funds. They can't just give your stuff away. Like if I show up at MoneyGram claiming to be ROM with no ID and they give me $12,000 that was meant for him, MoneyGram has a problem in addition to being Rob. And so I think it's going to be very interesting to see how it plays out in court if somebody goes after Circle for this. And the reason I think it's so interesting is that in this one, it was very obviously some sort of hacker exploit. That circulated on social media very quickly. And then there was about a six-hour period where

funds were moving through CCTV. So I think it's going to be hard for Circle to argue they didn't have adequate time. Whereas, Chris, to your point, latency-wise, if this was like a sandwich attack within a single block, then I think your standard of what's feasible and what's functional is very different. So I'll go to Rahm on this one saying, Ram, you have a lot of experience with wealth management banks. How would you think about the argument I just made? Well, it reminds me of the competition we had last week about what happens when the legal

system, the regulatory framework interacts with nominally decentralized trustless system. You have a conflict here. Is this fintech or is this crypto 3.0? The big innovation after Satoshi Nakamoto's web paper was Defi. We also talked about before, because my view is that Defi is a civilization level advance when you don't need to rely on a trusted intermediary to stand in between two parties. You can have a trustless exchange, which is truly extraordinary innovation. That has been much focus around Defi.

It's an embarrassment for the industry. Now, this has had protocol audits. It shows that protocol audits are not enough. Social engineering still matters. The VC spent too much money investing in L1s and L2s instead of trying to get the quick flip as opposed to core infrastructure that's required to build trust and safety. Institutions are going to look at this and say this system is immature. This is 2026.

Defi has been out since like 2020. Six years later. And it's disappointing from that perspective. I think they'll continue to focus on their own system. or they have controls. You know, in the Trotify world, there are concepts of reversibility. People that have spent on American Express

and disputed transaction with the merchant understand what that means to get their funds back, goes through a dispute resolution process. They feel secure. They feel safe. There's some escrowed money somewhere. Similar things happen in institutional transactions. So there's a lot more work to be done.

On the espionage side, like China's been flagrant. currently committing espionage in American companies for a long time. I've not seen much in the way of consequences for China. I don't think that's going to stop. This isn't going to stop either. These crypto protocols are honeypots for North Korea and they continue to have wins. What do you think about the two of five multi-sig, Austin?

Oh, man. I think this goes back to something I've talked about in the past, which is if you have truly decentralized systems like say Bitcoin, I do think there's at least a colorable argument, in fact, like one that I believe, to be clear, that it is decentralized, an individual person should not have liability or be regulated for the conduct on there. You know, obviously, like sanctions, violations and all. But I'm saying if you lose your Bitcoin in a hack like this or something social engineering wise, there was no centralized intermediary that could have stepped into safety. If you tell me it's a two or five multi-sig, I have a lot of questions about

whether a protocol like that is actually, in fact, an unlicensed money transmitter. Because distinguishing this from, call it immutable smart contracts where you drop the contract, it can't be modified, you burn the private keys, like everything is gone, versus one where if you had a two of five smart like contract set up where you have the private keys, you could have upgraded that and taken control at any time. Chris, that feels to me like we both worked at banks, pretty bank-like, right? if I have the ability to just unilaterally seize control in that manner. And so I think it's driving us to that discussion we had last week of what is actual decentralization,

right? And it's also going to drive home ROM's point of what is security. And, you know, I've jokingly said before crypto is speed running the history of finance. Well, the thing they're speed running here is why financial regulation exists. Because if you think about the framework now, nobody individually has the incentive to spend money on security. because that just detracts from like building products, marketing, partnerships. But if everybody has that cost imposed upon them and then all of them need to do it. Yeah. That matters.

That was, uh, that was even more acute in the last cycle when all these protocols were spending their money on lawyers to figure it out if they were going to jail or not because of their security or not. That was a huge problem. But like at the same time, the answer is not to blame the victim. The answer is to call it how it is. We had a state in attack startups. That's no Bueno, right?

And so that's one thing. Rom, I'm glad you're back to trustless permissionless. I thought I lost you last week when you're talking about how everything has to be trusting and everything else. So thank you for coming back. You made a great point on reversibility. We still have that on blockchain when it comes to real world assets that use transfer agents. So you can have a permissionless chain with the transfer agent. that tracks who owns what. So that's not the problem. And even with like stable coins, we may not

have reversibility, but damn it, we have freeze and Cs. And to me, it all goes back to latency and then recovery. So I don't think we're too far off, you know, your trad-fye standard as you spoke about. And I totally get it. I'll also tell you that I was at a certain bank where they made a wire that was very, very big and it was erroneous. And the hedge funds who got it said, sorry, guys, it's mine. And there was no reversibility. I think that ended up getting worked out through a settlement. So it's not that clean and tradfai either. I think we can expect more of the ecosystem.

Microsoft's not getting these hacks. We're talking about moving hundreds of billions of dollars, trillions of stable coins. The standards and expectations need to be sovereign immune and institutional grade. In fact, the ethos around digital assets is sovereign immunity. So the industry, I do think, is accountable here. And people should expect more. It's been too long. I'll say I agree with Rom on that one and would raise a couple of points that this is brought up, which is one, if you've got teams who are not actually decentralized and not taking security seriously,

I am actually okay with them experiencing consequences for these things. If you want to fuck around and find out with other people's money, you should be prepared for the consequences there. It's very different than building your own software. to Chris's point, which I think is totally correct, part of the damage of the wasted opportunity from 2020 to 2024 by U.S. regulators was not laying down standards and expectations so that we could be interdicting this stuff already. Like we're doing rulemaking now. We should have been doing this in 2021. And it was a dereliction of duty not to do that. Because if we'd already made clear that, Guys, we count upgradable smart contracts where you have control of the keys as control.

The drift thing might not have happened, just to be totally blunt. Like, that could have been off the table. And then three, we're going to need multiply redundant choke points because, Chris, you were correct. You started this by saying it is a nation state attacking a startup. And it is not a reasonable expectation for any small to medium, maybe even large company to be able to withstand that amount of force. we are going to need an ecosystem with multiple points where we can interdict these things because any one person will get compromised. It's much harder to compromise like three in a row.

It's a tough situation, right? Security and centralization are often paired together because you have those gate points, toll gates, some actor that can supervise transactions, edit the ledger. But the issue then is you give up the principles of decentralization and permissionless, stressless systems, which are more porous to attacks. And regulation and compliance will have a tendency to go toward centralization and more security breaches. So now it's like, well, hey, what are we built here?

If it's, you're trying to straddle two different objectives. That's just been the tension that keeps building over the last five, six years. I think part of that, right, to take some advice from another domain is we really need to reduce the attack surface in crypto. If you'll notice a lot of the hacks that have occurred are relatively complex like smart contract based protocols here, right? Or it's like literal wrench attacks.

Those are kind of your two vectors here. The Bitcoin chain itself has not been successfully compromised or hacked. If you have a relatively small attack surface in terms of what you're capable of versus the decentralization, you've actually been winning in many ways. And I wonder if part of the lesson here is that if we're going to start building incredibly complex stuff in a decentralized form, we need to have way better security standards before we do that or essentially the techno barbarians will win. Well, to your point, it's been mostly social engineering, actually, not wrench attacks. It's social engineering, which it plays into humans and their vulnerabilities. So you have a lot of AI tools coming on online now, which is going to be both beneficial and a massive challenge, like through the deepfakes that we're seeing. So it works in both directions. I want to go back to protocol liability again.

And I think if you're decentralized, clearly it's hard to be liable. But if you're centralized, there's well-trodden laws. We talk about it all the time in the show. And like if you're grossly negligent, that's a standard where, yeah, you probably should be accountable. Now, of course, these protocols don't end up like executing end user license agreements with folks. But I think there's some nuance here, right? If you're grossly negligible, negligent, sorry. you should definitely be held accountable.

And by the way, that's the ideal sort of thing for Congress to pass laws on, is like where do the user rights attach, who is responsible for what, back to the push for clarity, among other things. All right. So let's talk about another downstream effect of crypto and on-chain commerce, which we're going to call Iran's crypto war machine. So the IRGC has been working on some interesting stuff around the Strait of Hormuz. and has what I'm going to call a toll booth now where operators can pay $1 a barrel to $2 million per supertanker in yuan or allegedly stable coins via Tron.

So this will allow people to move through the straight. The system allegedly is live and documented, I believe Bloomberg and Yahoo Finance have both reported on this. And the IRGC, as we know, moved $3 billion through crypto in 2025, according to chain aliasis. And the Ministry of Defense has begun accepting crypto for arms exports. So, Chris, I'm going to start with you here before we get to the second part of this. Do we now have the dollar on both sides of the war? Is this like that meme of the missiles and the interceptors that is my tax dollars, somehow also my tax dollars? Like what's going on?

Yeah, the Iranians are just keep buying treasuries. That's what it looks like, right? And like we said, the dollar is taking over the world. So it's perpetuating the U.S. dollar as a reserved currency. Even if you hate us, you're going to use it. Yeah. I mean, look, without getting myself in too much trouble, what if they were to keep, like, what are we saying?

Great guys. Buy even more with stable coins. You like, keep going. Yeah, it's a great thing to use. Use as many stable coins as possible. accumulate them like crazy. And then all of a sudden, overnight, we freeze and seize. How does that work?

Now, of course, they're smart. They're going to move. They're going to try to bridge that over to Bitcoin and other things. But let's remember, like, we have freeze and seize capabilities for stable coins. And, like, I think if they really are going down that route in a sustained way, I think it opens up the IRCG to a lot of risks. And that's one of the beautiful things about stable coins. is that those treasuries are sitting somewhere.

And that somewhere is a centralized accountable entity. And, you know, FAAFO, as you said, Austin, and I think it gives our national security apparatus a very good vector, not only to freeze and seize, but sometimes maybe they just watch it a little bit and see where it goes before they freeze and seize it. So I don't understand why anyone in their right mind who's a bad guy would use stable coins.

Rob, what do you think? Do you agree with Chris? disagree. You know, Iran, I think, continues to surprise everyone. You got them producing Lego videos for every tweet Trump has. Now they're adopting crypto technology. They're fracturing the US alliances. They're getting record revenues on oil.

Russia and China tankers are getting through. China's loving the present situation. I think it's embarrassing. I think we haven't prosecuted this conflict effectively. We're now approaching six weeks in. Iran is setting terms. Trump has moved delays, delay after delay from March 26th to April 1st to now tomorrow. I think the Pentagon is way over their skis here.

They made some miscalculations. I'm disappointed as an American in how our leaders have executed and prosecuted this campaign. We still don't have control of the uranium. They're shooting down American aircraft. It's embarrassing. So I'll say a couple of points here. One, I think it's very interesting that they're using USDT. I think as Chris alleges, people greatly underestimate the public part of public blockchains. I would keep an eye on that space and see what's ultimately going to happen there.

I don't know that we'll seize it. I don't know that we'll monitor it. On the actual kinetic war effort, leaving aside the straight, I'll be honest and say the fact that we've had one aircraft shot down for all of the flights that we put over Iran is actually a pretty good track record and we got both of the pilots back. That part bothers me significantly less, especially in A10 being one of the things shot down. Like, I don't know how familiar anybody is with the A10 war dog. But that is a war on. More aircraft were destroyed. More aircraft were destroyed. Shot down. Like you can, you know, the rescue operation. Let's, you know, we'll come back. We'll come back to destroying rescue operation stuff. I'm mostly concerned about.

like live fire aircraft where the enemy destroys them, right, which is to say that's an A10, that's an F-15. Now, shooting down an A-10, low altitude strafes you with a machine gun. And by the way, that thing's not a joke, but that is an infantry support vehicle there. I'm not totally shocked you could get one of those. Getting an F-15 to me is a little bit more interesting. Like, I'd be curious to know how that happened, what they shot it down with and where those weapons were supplied from because that was not happening earlier. Yeah. Is Russia supplying passive radar to the IRGC? And why are we capturing Russia? Let me chime in a little bit here. So I actually have a little bit of experience on these

types of things. I was on the USS Cure sergeant in 1995 when we rescued Scott O'Grady. So I've observed firsthand what we call back in the Marine Corps a trap mission. It's the most complex mission, one of the most complex missions in all the military. Was it perfectly flawless, Rahm? No, it wasn't flawless because we had some issues with some of our birds getting stuck in the sand. But what did it do? First off, it really showcased and highlighted American values, right? We galvanized these people.

We galvanized every asset. We said, you know what? One of our people, we don't care. We're all going to sacrifice. I'm going to go to the campaign. I'm going to get to that. I'm get to that. So we pulled off one of the most strategic, difficult.

Remember, when you have a pilot going down, they're flying in a little like parachute. Everyone's going after them. The weapon system officer uses Siri training. He evaded, he escaped. He did what he was trained to do. And then while everyone was coming, it was a full government action. What it tells you is that when the U.S. government wants to get something done, it typically happens. And man, we haven't gotten it there yet fully.

the Strait of Hormuz, but we put every instrument of national power to recover that, that weapon system officer, and it really showcased our values, right? Gosh, what if every organization was that good, right? Put your people first, rehearse like hell, accomplish the mission, things, you know, and of course, no plan ever survives the first shots. So what do they do? They adjusted and they overcame and they got it done, right? So to me, that was a huge boost, saw the president talking about it today.

Now, look, we talk about the different levels of war. we all want to see this thing get solved, right? And how does it get solved? The Strait of Hormuz needs to get open. But I'll remind you that it was an impossible position to begin with. These guys have been ravaging the global international community for the last 50 years. You know, they have killed numerous people. They said, look what they did with Thomas and Israel.

So we had a choice, right? Can we tolerate that as they were, you know, accelerating their quest to get nuclear weapons? If they were nuclear armed, what position would we be in right now as a globe? you know, particularly with their ability to reach here. It would be a terrible situation. So it's a bad situation. It was a growingly worse situation.

You know, is this a, is it great to be in a war? It's awful. But where are we? If you talk to former Central Command, I was listening to him on Face the Nation over the weekend. He said, we're far advanced beyond our military goals than I would have ever expected. So we forget how young this, how early we are in this exercise. You know, it's, it's been what, like 30-something days? It hasn't been that.

Well, if you listen to White House and Pentagon, they're saying we just need two to three more weeks and we're pretty much wrapped up. But as a military guy, you can never put a timeline. It has to be events based, right? So I have very, there's no way I could ever criticize the tactical actions of the U.S. military. I think it's been nearly flawlessly executed. Not perfect, but they've been executed very, very well. People are being held in. All right, so the chief, I just want to clarify, when you relieve the chief of staff of the Army, it has very little to do with the fighting forces.

Forces are fought by combatant commands. So Admiral Bradley Bradley Bradley, oh, sorry, what's his name? Cooper, not Bradley Cooper, sorry. Admiral Cooper, Naval Academy graduate. He's the one fighting the fight right now. Naval Academy graduate doing a good job. The Secretary of the Army, his job is to equip the forces, which is a little bit different. So you have to like kind of separate fighting versus equipping, and I don't know the reasons for that. But, you know, if they relieved Admiral Cooper, that would be, that would be a different message.

And it's not. So long story short, it is what it is. It's a difficult spot. We need to get that straight opened. I don't know if Trump, you know, we're not sure what he's going to do come tomorrow night. Is he going to take those bridges out? Right. Rob, you're going to say, no way.

You think he's going to taco. He's playing the ultimatum game. He can't even talk if you want. He's trying to taco, but it takes two to taco here. He's trying to do the taco. He's been to to towing for weeks. No one's biting the taco, right? He gave another delay, then another delay, then the five days.

And now, you know, yet another delay. It's, you know, the terms are being set by Iran. Iran is saying, hey, this is what we need. We want a permanent ceasefire and we want compensation for damages. So there's a difference between objectives and those objectives are good or not and how effectively is being prosecuted. A lot of clearly, like clearly a lot of miscalculations. you know, we're made here and standards of conduct and warfare were tossed out the window,

taking out leadership that you no longer can negotiate with. It's not, they know who they're negotiating with. Trump said that we can't communicate with them. They can't communicate. So what response are we expecting? Like smoke signals here? And what signal have we sent to China and Russia around how they might conduct warfare against Taiwan, Ukraine, or Washington, D.C.

We talk about values. We compromise our own values. That's not how you conduct warfare What specifically are you referring to? Well, just the manner of the execution of this campaign. There's essentially many goals and methods and efficacy Right. So I think I think this is it could have approached us very differently and now What we're in is and extend mode. We're in pretend mode. It's like hey, I need two to three more weeks They can't say it's one more week. That's that's unrealistic. They can't say four weeks weeks was markets were crashed. So I was saying two to three more weeks. It's doggie my homework and then scramble. Let's try to put Humpty Dumpty back together again. And Trump himself today said he said, look, the Iranians, our agency has been real clear,

simply needs to say that they laid minds. Whether they did or didn't, it would close the Strait of Hormuz. So the Pentagon's trying to prove a negative now. We're trying to prove there's no such things as a black swan. Very hard to prove that. Part of what's interesting to me is the disconnect between the methods used versus Trump's rhetoric, right? Because if you look at the way the war has been prosecuted, like at the tactical level, as Chris was talking about previously, we've mostly dominated. They've shot down what, one, two planes. We bombed our own equipment to prevent it from falling into their hands. American casualties are minimal. A lot of Iranian war fighting infrastructure is absolutely zeroed right now. But Rahm, as you pointed out,

we've also systematically eliminated a majority of their leadership. That is not the sort of war you would normally fight to negotiate in the short term. That's the kind of war you would prosecute to exhaust the enemy and force them to surrender. Right. So that is a certain sort of plan. that by the way, if the U.S. rhetoric from Trump was, we're just going to keep bombing you until either you give us what we want or there's none of you's left to bomb, in some ways it would seem more aligned because that is more what the military is doing. More consistent. Correct.

Trump, yeah, Trump is trying to send a very different message verbally about we want to negotiate, we're looking for a solution, we want the straight open in the short term. And it makes me question one of two things, right? One is, is there a lack of coordination internally within the United States? Or two, because, Ram, you said this earlier, so I'm just going to throw this out there. Does Trump know he's full of it and primarily what he's doing is talking in a way to try to keep markets up? Oh, of course, it's keeping markets up to buy time. Look, there's no love loss for the death of the Ayatollah, right?

It's a despot. The people deserve better. Of course, the straight of form of shouldn't be controlled by a regime that seeks nuclear weapons and wants to inflict harm upon its neighbors. Of course. Like, we all get that. Okay? But this isn't going well.

And the public's being misled. And I think it's kind of obvious. It's very obvious. Monday of last week, Trump was on the tarmac saying we've got 12 points of negotiation and alignment with Iran. And now Iran is issuing their own terms. And we're doing pretend and extend again. Like, this hasn't gone well.

And it's, Hexsla, takes off for nine days without any press. updates they they haven't acknowledged where they could have done better you know it's it's a weird situation when as an American you believe the Iranian characterization of the status of negotiations which is that they're not happening and you don't trust the Pentagon and they fired the former head of the Pentagon spokesperson who had some credibility too the Pentagon still has an account of four trillion dollars in spending now they want five hundred billion dollars more they get into a war then they had to go to Congress and ask for funding

to deplete munitions we've burned 10 years of tomahawks 10 years with the tomahawks and now we need to get a ceasefire because we're off sides this is this is like a c-minus execution effort so what do you do what you do is you hold your public leaders accountable that's what you do that's what I'm doing. And that's what we have. We have elections coming up, right? So that's the point of democracy. And again, the strategic level of world will be controlled by those elections. I think tactically, it's been a really well-prosecuted campaign. And look, I think in any conflict, there's always things you could do better. Could we have galvanized our allies better to get them on side earlier? I think so. But I guess my...

My question is, what do you do? It's easy to critique the past, play armchair, quarterback, but what do you do from here? I agree. It's a cluster. It's a cluster. I don't think everyone's recognized the kind of cluster this is. Okay. My main point is to highlight and recognize that.

That's my main. To say that it's a cluster is a non-consensus view right now. That's my main observation. Let's identify the issue. Then we can focus on the issue. So you're bullish crypto again? I was going to say we're back to long. Speaking of non-consensus, we're back to you,

you're bullish again or what? All not. Hold on that. Come back to me. Before we go further on this point, I want to talk about some other information, which is what do we make of polymarket having bets on whether the F-15 pilots would be rescued?

Obviously, some people were upset. Representative Seth Moulton, a marine vet like Chris, was out there. exact quote, this is disgusting and shamed Polly Market into publicly removing the market. There's a number of other war bets still active on the platform, though I think specific lives versus not as a reasonable ethical and regulatory discussion to have. Polymarket issued an apology saying it should not have been posted and quote, we are investigating how this slipped through our internal safeguards. What do you guys make of that one? I will jokingly say great ad for Kalshi, but other than that.

I think it's going to get harder to control these markets as they decentralized, and it's something that people are going to have to be mindful of. There's a lot of things that should not be a market, people's lives, anything that could endanger, I'm a military guy, anything that could endanger military forces, no, it's not good. And so you hope that these people either self-enforce or, that there are laws passed to prevent them from listing those markets. I do think it's going to get worse before it gets better. As you see, I mean, I've been in venture for a long time. How many

prediction markets come across your desk now that you have a couple of guys that are doing quite well? There's hundreds of them. And they're all going to try to find an edge and a differentiation. If one is like, hey, I'm free, crazy town, like anything goes, that could be their edge. And I just hope that I just don't want to see that. Agreed. All right. So we'll be back in a little bit to talk about token fundamentals, speaking of investing at venture capital. But before we do that, let's take a quick commercial break. Bitcoin changed how money works. Satrea changes how Bitcoin scales.

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Quick note before we continue with today's episode, Bits and Bips now has its own dedicated home. We're spinning off from Unchained and launching a standalone podcast and YouTube channel focused on the Fed, macro, AI, and how it all collides with crypto. If you want to keep up with our weekly live streams and macro meets crypto breakdowns, make sure you're following. Bits & Bips directly. We won't start publishing until March, but getting set up now means you'll be ready on day one. You can find the new Bits and Bips channels at UnchainedCripo.com slash Bits and Bips. You can also find us by searching bits and bips on YouTube, Apple Podcasts, Spotify, or wherever you listen. All right, everybody, welcome back. We've titled our next segment,

the quote, token fundamentals crisis. So the headline is the market cap chart looks fine, but the per token chart does not. So Mike Ippolito from Blockworks has a great threat on this on Twitter, but 750,000 tokens created since 2020, market cap per token in free fall, the median token is down 80% from the peak. The average coin is only slightly higher than where it was in 2020 and down 50% from 2021 to quote the thread.

So revenue is also decoupling from returns. In 2021, on-chain revenue and token prices moved together pretty tightly. Post-2021 revenue is recovered in some cases and prices didn't follow. The reason why, quote, revenue growth rarely became token holder returns. Investors can't trust that protocol success flows to them. And this is new. Even in the best revenue periods, token appreciation didn't follow this time around. So the transmission, mechanism appears to be broken. There's also the structural problem of dilution at scale. There were roughly 5,000 tokens in 2020. There are 75,000 major tokens today. Supply has grown

much faster than demand or value creation. And inflation being a known issue is a problem, but now protocol founders living in this environment knowing these dynamics are not being honest about their token valuations. So there was a call to action. which is this is the biggest issue in the industry today by a long shot. Tokens are why 90% of us are here. And the demands were standard transparency metrics driven by exchanges, protocol founders to make disclosures, and investors not to buy tokens if the fundamentals don't support it.

The end quote was, if we don't fix this soon, the only path I will see is to leave and go to finance. So, Ram, you're an investor. what do you make of that sort of rhetoric? What do you make of that sort of threat? I would assume you are not super long alt coins here. You set it up, wow, there's too much issuance. It's a basic issue.

And there's lack of liquidity. There's fake marks, thinly traded markets, lack of value. I mean, you nailed it. Those are all the issues, really issues. At the same time, there are some names that look interesting now, though. I don't want to name them because they're too small market cap. So, yeah, there could be some opportunity. here. There's so much headline risk in this market that it really does matter day to day.

We could have a different view three days from that. Everything turns on what happens Tuesday night, 8 p.m. That's just where we are. But, you know, sentiment is watched out. Yeah. I saw Ippolito's tweet. I think he completely misses new odds. I don't think there's too much issuance. And I'll tell you why. Because what are we talking about here. It's like somebody saying, oh, is this, I had an investor come up to me. He's just like, oh, tokens. I don't like them. And he was alluding to there's too much issuance, right? I'm like, you know what? Well, I don't like ETS either. And he's like, what do you mean? And I'm like, dude, it's a rapper. It doesn't matter like if there's too many tokens or too many ETFs. It's about what's inside. Right. And like a lot of people miss this nuance.

You can create a token out of anything, any time, any place, anywhere, very cheap, almost for nothing. Right. Of course it's going to be zero. Are you going to try to say, guys, enough, like, we can't issue any tokens anymore. There's just too many of them. I just don't buy that argument. What I do buy is that you can take value and you can wrap it in a token. And what does it do? It gives you utility. What is that utility? Anyone in the internet can access it 24-7. You can put private property into the internet and you can mobilize at any time. Right. And so like I just this argument drives me crazy. because a token is a wrapper. You can wrap energy, you can wrap compute, you can wrap all different types of stuff. You can wrap stocks. You can wrap bonds, right? So it's about what's underneath.

That's what matters. And yes, fundamentals absolutely matter. And every single token project, you have to understand the fundamentals what's underneath the hood, and that's what you underwrite. And yeah, there's some really exciting crypto-native token projects right now.

One that we're super excited about. I'm not going to go into the names either. But there's also 99% of its slot. And it's just going to continue to bifurcate. So give me more tokens. I don't care. I'm going to try to find the ones that have the value. So I'll say for my part, having looked at this and thought about it a bit,

this is probably one of those arguments where more granularity really helps what we're looking at here. Because if we start segmenting the token universe, like the fate of most, if not all meme coins, probably over time on average towards zero because these are sort of cultural point in time things and if you look at all goods of that sort most of them trend towards zero or you have the handful with historical significance that end up in a museum there's kind of never like a middle ground on many of those things but chris to go the other way if you look at protocols i think there is where what might be happening is people are looking at the rapper that they have around these things and being like, wait a minute, we have no legal rights.

There's unclear governance rights. And in some cases, people are taking cash flows we expected to be directed to us and directing them elsewhere. Like, I think it would be a fair criticism to say at least some of these projects. You unwrapped the thing and what was inside of it was, right? Because if I don't get the cash flows, I don't have meaningful governance rights, then I don't have, like, legal ownership. what do I have a token?

And obviously that leads to differentiation within projects. And it also matters how it's structured. I'll go back the other way and say that's the same question we also ask of equity, right? Let's take two examples in the crypto space. There are many people who probably feel very differently about coin-based stock versus Gemini stock for a number of reasons. But one of the big ones is who has control over those kinds of things. And so I think there's an investing component here that has been undervalued by the crypto community in the past where the chickens are coming home to roost.

This is probably one of the good things of institutional investors coming in. And part of what I take from Mike's thread is we either need to do significantly better at creating value for the token holders or maybe on some of these things, the rational price is zero. And that's just market discovery. But then as a final point, let's go to the L1s. Because if we really look at market cap decline, many of the things at the top end of the token space pulling these numbers down were L1s. And I think part of what we're learning here, and this is an investing lesson as well, is potentially that fat protocol thesis was wrong, right?

It's many ledgers, many options, and it's not clear to me that the value accrual is going to be to the ledger platform as opposed to apps. So Chris, I want to throw this ball back to you first. If you're investing out of nowhere, starting a new right now in the crypto space, are you buying the L1 thesis or are you looking at apps? I think you're spot on on the Fat Protocol thesis. Is there value that accrues to layer ones for sure?

And you have to underwrite that differently. In the long term, could you see a lot of value accruing to the apps themselves? Yeah. And I think that's consensus at this point. Part of the problem is, is we haven't seen a proliferation of, like, very, very successful apps. There's been a handful, and they've done pretty well. You know, we can go through some of the names if you want. But, yeah, look, you're seeing a proliferation of blockchains.

You're seeing a proliferation of the permission private blockchains. Corporations are having their blockchains as well. And so what are layer ones selling? They're selling block space. And is that a commodity? Yes. And so that's one way to track its value. I agree that apps are where a lot of value discovery is going to be.

And then look, on the token versus equity debate, like most things, there's nuance. How does the value accrue to each of them? And you really need to spend the time with the teams and the code and really understanding the value crew in governance mechanisms. And it's not easy to do. It's not easy to do at all. Rom, where would you? I'd agree.

I'd agree. The layer ones are like in a Hobbesian struggle. Nasty, brutish, and short, no value capture. Maybe there's one L-1 that has an interesting differentiation here. But I think, yeah, I think the app layer, there's some opportunities there. You can do the work. So many names have been sold off that there's some baby's been thrown out the bathwater there.

So I think if you do the work, you can time it. well. I don't think you have to rush. I think you have some time just because of the macro backdrop. You can be patient. Just do some work now. Do the research. Get a short list. And then maybe in a few weeks when the dust settles, there's some things you can go up. I think you're right. I think you're right. I think a lot of fundamentals have been developing behind the scenes, but you just have like macro with like a boot on the throat of these of these projects until the macro issues abate, which I hope they do, Ron. Well, certainly then. like it is a buyer's market for tokens in that regard.

I would say, Rom, I'll put this one back to you as I've been looking at the space and sort of thinking about it, the small subset of tokens where you have real users, durable revenue growth feel to me like the kind of space that we should be looking at. And what I mean by that, Chris, I think you were making a variety of this point earlier,

is that a lot of people have built a lot of things in crypto that were, for lack of a better one, to put it the thing they wanted to build. Many fewer people have built the thing that the users wanted, but all of them have traded kind of in the same vein. Rahm, without naming names, am I right that the things you probably find valuable are in that universe of actually accumulating? We all know them, okay? The things that have true product market fit that have real value to the end user with good teams built the right way, you know them. It's 75,000.

We talked about tokens issue. It's 99.99 with like 10-9s that you can just avoid and skip. So there will be, I think there will be kind of a phoenix rising from the ashes in some names that we already saw achieved good success in the last, in the recent cycle that I think can continue to do well where they maintain a community and ecosystem still executing well. Part of what I'm also finding interesting is some of those gains potentially, for lack of a better way to put it, moving either into more regular companies or the traditional financial space. Like one of the big winners here is potentially Stripe, right, as they're working on everything stable coin related. I wrote in my newsletter about how one of the crypto projects with the biggest actual KYC user base is MiniPay, and that's not a thing that's traditionally investable at all because some people just, just went and built it out of opera. And so to me, there may also be the disconnect of which of these are investable right now,

but your point is the market accelerates and people see what works, you would want to put capital back to work. Ironically, and a downturn is probably the best time to be venture investing. Agreed. So speaking of former venture investors and things that have happened here, Franklin Templeton has bought 250 Digital, a liquid crypto strategies firm spun out of coin fund to help launch Franklin Crypto. There's a guy we know named Chris Perkins who is going to head Franklin Crypto.

I think Seth is also going with you to become CIO of the new division, if I'm correct, Chris. And while I have a lot of things that I could talk about here, obviously you are the expert on this one, not me. So I'm going to shut up for a bit and ask you only this question. What is 250 crypto? What are you going to be doing with Franklin Templeton that you could talk about and what are you excited about here? Thank you so much, Austin. Yeah, so Franklin Templeton on April 1st, this was not an April Fool's joke. It was very, very serious.

They announced the acquisition of what we call 250 digital asset management, which really encompasses the liquid strategies for my current fund. And so the team and the strategies are moving across. We look forward to closing the transaction very soon. And I'll be honest with you, I couldn't be more excited. We are in an institutional era, and we all know this, right? And in the asset management space, it's my desire to provide very, very scalable outcomes for our clients. And if you look at a company like Franklin Templeton, again, led by Jenny Johnson,

they've been like, I would say institutional OGs. They've been around since 2018. Sandy Call, she's been a dear friend of mine for years. We actually got into crypto together back in Citigroup way back in the day. But they've set the tone from the top and they really want to differentiate. And now as we see all of the foundation come together for institutional adoption, when you look across the entirety of institutional clients, the pensions, the endowments, the corporations,

they have a lot of risk right now because they know they need to be in this space. they don't know how, and they need our help. And I couldn't be more excited to provide scalable solutions for these clients. What are we going to do? We're going to bring in the best talent in the world. We're going to solve the problems for our clients. You're going to hear a lot of subsequent announcements out of us. And we're also going to lead with controls.

And I know it doesn't, like people don't like to talk about this. But we talked about the hack in the beginning, right? We have to solve for those risks. You know, as you start talking to the compliance, the legal, the risk teams, that's one of the biggest differentiators there because institutional investors need to know that those parts of the system are the most robust. So leading with controls, leading with people, and then of course solving our clients' challenges. So I couldn't be more excited. Thank you to the coin fund team. And the team couldn't be more pumped up to get to work.

All right. Let me throw a ball at you then about this one. All right, let's go. What is this thing about bedside? G tokens in this transaction. Say more. Oh, I think in the announcement, what they talked about was that the, they were using the money market fund to help fund many of the costs of the transactions, which is just pretty cool. So you kind of got a, how do you say, eat your own cooking. So we're eating it. And it's, it's awesome. You know, again, whether it's that strategy or any other strategies, you know, we're really excited.

Who will the offerings be marketed to? Is it high net worth, IRAs, institutions, all the above, or is there like a focus customer segment? I think the answer is yes. As you can imagine, the company facilitates investment solutions for all different types of clients across the board. Their needs are nuanced and different. I think in the medium term, you're going to see much more You know, just speaking for myself, customizable vault-based solutions for various folks where you're able to take in a lot of data, digest it with AI, and then create something very bespoke and customizable.

But each client's going to need something nuanced and different. We have flagship strategies. You talked about the money market strategy as well. You're going to see other very institutional scalable strategies come out very, very soon where we're going to solve their needs. You know, our goal is to be the leading active investor in the crypto space, leveraging all that distribution and resources that Franklin brings to bear. So, for those who are not totally familiar, by the way, Franklin is one of the earliest tokenized money market funds. Chris, I think it may be number two behind only ARCA, who was the first. And there is a whole app, and they've been working on a lot of SEC relief so that you could actually use the token to pure.

to peer transfer it. You can exchange it at a $1 value. And essentially, I'm going to say something that the crypto people need to pay attention to use this thing as a stable coin. Right. Back to institutional standards and institutional builds, you have a regulated 40-act government money market fund here being used as a money instrument, which to me, when we're now at the point where you can do M&A transactions using those sorts of assets. Now we're moving what is relatively traditional financial activity onto a blockchain. That's not defy. That's just why, right?

That's the thesis. Yeah. Go on. Go ahead. No, Franklin Temples has been super impressive. I mean, yeah. Johnson, to her point, she's been leading on tokenization. She's way ahead for a peer group.

And she's the CEO of the company. Like that's the leadership and sponsorship coming from the the top she's leading the charge that that means a lot yes she i don't know if you guys know she came up the ranks through an o-and-t background she was she led technology so like it's ingrained culturally it's ingrained and she saw it early she got it and then sandy call as well one of the biggest brains in wall street and she's been talking about the transformation uh you know for years uh and i've partnered with her in the past we've done some like we've had so much fun building things together, building big things, big traditional things together.

So we're kind of putting the band back together in a way, and it is going to be amazing. Well, congratulations, Chris. I'm happy for you. We look forward to hearing more and seeing more of the headlines and discussing them on this show. And by the way, let's get Sandy on here as a guest sometime. But with that is our final point today, since I know we're at time, I will say thank you once again for joining us for this episode of Bits and Bips. We'll be back in one week to discuss more about how the worlds of crypto and macro are colliding.

Until then, everyone. Terrific. Have good one. Good one, guys. Cheers, yeah.