Unchained - The Chopping Block: Do Aragon Association Members Get 'Fat Salaries' With 'Zero Accountability'? - Ep. 492

Episode Date: May 14, 2023

Welcome to “The Chopping Block” – where crypto insiders Haseeb Qureshi, Robert Leshner, Tom Schmidt, and Tarun Chitra chop it up about the latest news. In this episode, they talk about the recent issues surrounding the Aragon Foundation, the likelihood of Montenegro becoming an ETH hub, the BRC-20s mania, and much more! Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Stitcher, Castbox, Google Podcasts, TuneIn, Amazon Music, or on your favorite podcast platform. Show highlights:  why Zuzalu is “Burning Man in the daytime” whether Montenegro could become the “ETH El Salvador doppelganger” why the Aragon Foundation alleged that they were under attack why Aragon has “missed the boat on a lot of everything that’s happened in DAOs” whether the Aragon Foundation is “suckling on the teat of the DAO for a fat salary” whether Arca was right about wanting the Aragon treasury to be part of the on-chain governance how on-chain governance can do even more than many of the investment banking functions that exist currently why some Bitcoin developers want to censor BRC-20 transactions why the way XEN works gives Haseeb a headache whether Binance CEO CZ invented the memecoin PEPE what the impact of Jump and Jane Street decreasing their market making activity is where the next market makers will come from Hosts Haseeb Qureshi, managing partner at Dragonfly  Robert Leshner, founder of Compound  Tarun Chitra, managing partner at Robot Ventures Tom Schmidt, general partner at Dragonfly  Disclosures Links Unchained:  Coinbase Apologizes After Calling PEPE a ‘Hate Symbol’ Market Makers Jump and Jane Street Withdraw From U.S. Crypto Trading: Report CoinDesk: Aragon Cancels Planned Community Control of $200M Treasury Amid Battle With Activist Investors The Block: Coinbase cuddles up to UAE policymakers as US outlook sours Learn more about your ad choices. Visit megaphone.fm/adchoices

Not a dividend. It's a tale of two-quan. Now, your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways. Unnamed trading firms who are very involved. D5.Eat is the ultimate. DFI protocols are the antidote to this problem. Hello, everybody. Welcome to the chopping block.

Every couple weeks, the four of us get together and give the industry insider's perspective on the crypto topics of the day. So first up, we've got Tom, the Defy Maven and Master of Memes. Next, we've got Robert, the Cryptoconisour, and Captain of Compound. then we've got Tarun, the gigabrain and Grand Pupah and Conlet. I was about to call you Garoon because it does rhyme. And then I received the head hype man at Dragonfly. I thought you were going to replace Gigabrain with Guru.

That was like, what I was like, whoa, that's like a funny chance. I feel like that could be a good second act for you, actually. If you, like, retire from crypto and you just become like a yoga teacher, I feel like the gigar brain and guru of, you know, Kundalini. I think that would work for you. Anyway. Sorry, I got to read out the disclosures. Okay.

We're really seeing investors in Crypto. I want a caveat. Nothing we say here is investment advice, legal advice, or even life advice. Please see chopping block that XYZ for more disclosures. Robert, you are looking incredibly French today. You know, every time I wear a striped shirt, you know, people assume it's like a French look. So today's episode is dedicated to the future of France. Oh, amazing.

Well, I want to hear, speaking of France. Well, both Tom and Turun, Tom right now is in Europe in Montenegro. Tarun is very recently in Montenegro, where I understand we alluded to this earlier. There is a, I don't know exactly what to call it, like a pop-up city. It's a intentional community. Yeah, I'm in Montenegro at this thing called Zuzalu, Zuzalu. And I don't, I feel like I'm going to offend someone in any description, but I'll give my my best shot.

It's two months, different types of people who are. are trying to do research or, I don't know, contribute in some way, get together and people give talks, people do workshops, people do sort of different things. And so they do different segments. There was like a crypto AI thing that in the room was at. There was like a ZK research week, this longevity week right now. So it's it's sort of like maybe like, you know, Burning Man meets like TED Talks meets, I don't know. I feel like that's, that was pretty. cringy, but, you know, it's, it's all right. I would say introverts burning men. Like, take OSHA and sort of like, you know, like the 1980s, like intentional communities, they were more

about like exercise, yoga, orgies. This is much more in the vein of futurism, like biotech changes, like whether there exists longevity drugs, open source AI. So the AI week was actually focused on like, you know, if we have this huge movement towards, you know, centralized AI, like OpenAI or Anthropic or Adapt or whatever, versus, you know, the stable diffusions and other open source AI stuff. And so there was, there was a little, there was like less of the hedonism of, say, I would say intentional communities historically, like the 1980s, 1990s, 2000s were much more hedonistic. This had like almost no hedonism. Like because there was longevity week.

It was like... Are you sure you just weren't invited to the orgies? I feel like that's a possibility you have to take seriously. It could be true, but I highly recommend reading some tweets from Aella about her experience in at Zuzlou. And I would say those kind of suggest exactly what I'm saying, which is it was perhaps an introverts paradise. A kind of sexless.

Not. Okay. Got it. I didn't say that. She said that. But once I got there after she said that, I couldn't not observe that, I guess, which was very weird. But I will say the interesting thing is I think that it sort of reminded me a bit of the energy there was a little bit like what I think the earliest days of Bitcoiners in El Salvador was. And I think the Montenegrin people are very big Eith believers.

Like I got stuck in Pagorica, which was the capital for a day. and there are like ETH ATMs everywhere throughout the capital. So it's actually interesting. It's kind of like the doppelganger. I wouldn't be surprised if Montenegro becomes like the doppelgank, the Eth El Salvador in like a couple of years. Yeah, apparently Vitalik has a honorary Montenegro and passport, and there's sort of a movement with this new PM to develop Montenegro

and more of a sort of digital nomad, new destination, maybe a charter city location within your, up. Cool. Interesting. What is an actual, what does a day in a Montenegro pop-up city social experiment look like? Like, when you wake up, what do you actually do? Well, it's a little surreal, too, because you're at this sort of private resort set up. So it's very not representative of what I assume the average day is like there's no real town. It's like a little food desert kind of thing. But, you know, there's a schedule. So there's people giving talks through most of the day. There's a workshop. There's people doing exercise classes, people doing kind of breath work stuff. There's a

party tonight that I'm missing. But there's, you know, sort of stuff like that. And you can run your own workshop. You can contribute to the schedule. You can do a cooking class, whatever. So it's sort of summer camp like in that way too. That's sort of the burning man in the daytime. It's burning man in the daytime type of. Okay. That's a, that's a very good way to put it actually. But with bathrooms, with real bathroom. So not Port-a-Potties. Okay. Got it.

That's a big difference. Trust me. That is a huge change lifestyle-wise. Turin, I have to ask, how often do you go to Burning Man? Are you like, a yearly, are you, like, gone off? Okay. I think I went six times, but like, yeah, it's been a while. I haven't gone.

How many times have you been? Zero. I've never been to Burning Man. I bet, I bet Tom is gone. Yeah. You've never been? I've never been. I don't really...

You've never been? I don't really... I don't really... The whole burner aesthetic. Yeah, I find it kind of cringy, honestly. Not my scene. Sorry. I've been twice.

So right now... Robert, surely you were invited to like the French kid. I was part of the future de France. Very nice. I mean, the thing is the thing about Burning Man is it like became this like tech meme trope in like 2015 or 16. And I don't think it was ever able to escape that. Yeah.

it just like kind of lost this this like genuineness and so i think i'll give this is all a lot of credit it does seem to have there are a lot of people there who really believe in kind of crazy future endeavors in a way that i don't think you would have that many people saying that much crazy stuff in one place normally yeah i'm poking fun at it but it does sound genuinely really awesome and i hope they i hope they continue doing like this because i feel like it is it's really valuable for the community to have these just like pockets of really concentrated cultural activity. You know, you kind of need those caldrons, especially after COVID when everyone scrambled, everyone who got super separated and everything was happening on Twitter.

It's nice to have it in one place. Yeah. Yeah, it's just long. Yeah, but I think that's actually kind of nice. You can rotate out. It's a fresh cast. I think, Trin at some point you said, you know, East Global Hackathons are responsible for the majority of the EF development roadmap.

And I feel like this has a similar kind of vibe of, you know, people. people not having structured time and therefore being more productive. Okay. So there's some, let's start getting into some news this week. It's been a relatively chill week, but it being crypto, there's always some weird thing to talk about. So the weird thing to talk about this week is Aragon. So for those of you who don't know, Aragon, super OG project. Aragon is basically like a Dow operating system is the way they describe it.

They were very, very early in the formation of Dow's kind of before 2020 and all the kind of Dow mania kicked off. So these are like super OG diehard believers. They did an ICO way back in the day, and they have this token called A&T, which has kind of been sitting around. It owns a big pile. It owns a big treasury of Bitcoin and ether and a bunch of other stuff.

Today that treasury is worth about 176 million. The token itself, A&T, which is supposed to give you a claim on the rights to the treasury and everything within it, because it's supposed to be a Dow, because it's kind of good point. That token, on a fully diluted basis,

is only worth $150 million compared to the 176 that's in the treasury. So a lot of people have been very disappointed with Aragon. Aragon very famously has kind of been sitting on their hands, sort of waiting for the world to come around to their view of how DOWs ought to work. And some people got frustrated, including some token holders, namely ARCA. So ARCA, they're like a fund, I don't know exactly what I think they're like New York and L.A. or something.

They basically started instigating publicly to A&T holders to say, hey, Aragon has not done a good job of sort of shipping what they were supposed to ship or really gaining market share or gaining product market fit and they have a giant treasury so we should just have them transfer the treasury into Dow governance because apparently the treasury was managed off-chain

was not managed by the Dow directly. They were like, look, Aragon should push the treasury into full-on token governance so that the A&T token holders have control over that Dow. And separately, they were pushing for buybacks to basically buyback the token using the treasury to essentially return value. you to token holders that they felt was not being well spent by the Treasury. So that's the,

that's the backdrop. That's been happening all for a while. Then a few days ago, Aragon published a statement saying that they are under attack. So what is this attack? This attack supposedly is that ARCA, as well as a group called the RFV raiders, were basically trying to essentially act like corporate raiders and as activist token holders effectively, trying to get the A&T token holders to vote to basically do a complete buyback to essentially wind down the token and unwind the treasury and give the treasury back to token holders, essentially a liquidation, more or less of the the treasury. And A&T, or I guess the Aragon Foundation, which is some foundation set up somewhere in Liechtenstein or something, the Aragon Foundation was like, this is an

attack. And because this is an attack, we are not going to listen to token governance because these attackers came into our discord. They were saying things that were instigating a ruckus. They banned them from the discord. They said that we're not going to listen to the Dow on this because this is a malicious attack. Or rather, we're not going to listen to token votes. And instead, we are going to take the funds. We're not going to fully put them on chain because they had not fully transitioned on chain yet. We're not going to fully put them on chain because clearly we are not decentralized enough yet. Progressive decentralization has not fully completed its course. We still need to retain some security here. And we are going to start a grants program,

which we are going to transfer some funds to that. The last I recall it was like a few hundred thousand dollars, which is a very small amount of the treasury that they pre-committed to a grants program that's going to be administered on chain. So this has got the whole internet, or not the whole internet. Our little corner of the internet. our tiny little corner of the internet into a giant shouting match about what, what, what is a Dow, what is decentralization mean, what is governance, what's the point of a treasury? What's your guys take on the Aragon Raider drama? I'll start just by saying that, you know, Aragon was extremely early on the bandwagon of decentralized governance and tooling.

You know, they were writing frameworks and libraries and voting systems and all this stuff years before, really, there was much traction for Dow's in general. They came before, I think, a lot of the use case. And what's interesting is that, you know, since then, every community has sort of had to make up its own mind about what frameworks to use. You know, MakerDAO was also an early pioneer of, you know, having their own, you know, approach that was not part of the Aragon stack when compound was designing a governance system, we wrote one from the ground up from scratch, having looked at Aragon, having looked at MakerDAO,

having looked at other systems to say, oh, well, we want something that isn't those things. And in the multiple years since, you know, we've seen a lot of other governance frameworks and tooling pop-up snapshot has been incredibly popular for essentially, off-chain voting using tokens. And governance has really come a long way. And one of the things I haven't really seen a lot of traction for at all is the Aragon stack. I don't know of any major D5 protocols or communities that are using.

I'm sure there are some. Curve is the number one user of Aragon. But I don't see it that frequently. And so, you know, the thing that surprises me the most is that Aragon itself, Dow, is relying so much on off-chain systems versus on-chain tool. The craziest part of the story you just told is that all of the assets are existing in some traditional legal entity off-chain under the control of people that have nothing to do with on-chain governance. And so, you know, I think if there's any one action item for them to do, it's to sort of embrace and embody

on-chain governance more than they currently do. So here's the crux of the question. is like, is this an attack? Like, first of all, what does an attack mean in this context? Like somebody saying, like, look, screw what you're doing. This is stupid. Take the, you know, take all the treasury out and give it back to token holders. Is that an attack or is that legitimate Dow governance? Yeah, I think, to Robert's point, it is like, you have to appreciate the irony of, like, the,

the RFV and ARCA have done this to a few of their protocols. So, like, Rook, for example, they basically forced to dissolve and return most of their treasury. we have to appreciate some of the irony in like this attacking happening to a Dow tooling company, not having a actual on-chain Dow. But I think maybe one point of clarification is that like it was actually placeholder who, you know, almost a year over a year ago put together the proposal to migrate to a true on-chain Dow managed treasury and it was passed and it was just like never implemented. So it wasn't like from the beginning ARCA was trying to force them to do that.

It was the token holders legitimately wanted this. over a year ago and they just never responded. And of course, now that, you know, push comes a shove, they're sort of refusing to. And so I think in some respects, they're kind of acting in bad faith and that it was not that they're not turning over the treasury because of this attack, but they just weren't doing it in the first place and not really responding to token holders. I do feel like it's pretty damning for them. I mean, I agree with a lot of what Robert said. Like, they have kind of missed the boat on a lot of everything that's happened in DOWs, everything that's happening in crypto.

And effectively, the market is saying that you've created, you know, negative $25 million in equity value. I think at some point you kind of look yourself in the mirror and think about what you are doing versus like continuing to sort of suckle on the teat of the Dow for a fat salary, which is kind of what they've been doing for the past however many years. So I don't know. I don't think you're, if you want to be a Dow and you want to be liable to token holders, then I think you have to commit to that.

You can't just sort of larp at it as it. and then try to get rid of it when becomes inconvenient. Yeah, I guess, yeah, in the similar vein, I definitely don't really consider an attack. I think if you agree to community-owned assets, like this is just, you know, you can reduce the likelihood or make it more expensive or change structure,

but there's inevitably going to be some way because that's what it means to have, you know, distributed asset management to some extent. I think the weird thing about Aragon to me is, is sort of, there's sort of this first mover disadvantage. So I think, you know, in 2017, late 2017, early 2018, you know, governance was almost a weasily bad word, right? Like the only DAOs that existed were like that had users were like Moloch and DX Dow, not to give people throwback nostalgia and Aragon. And at that time, it was considered really bad to talk about governance. Why? Because of the. Dow hack on Ethereum, everyone would just be like, oh, you're just doing that again, you're just doing that again. And Aragon, to their credit, in spite of all of that, like, kept kind of trudging through. And you could argue that, like, the only two people of the 2017 era who really, their entire thing was

based off governance that made it to 2020, you know, like the promised land of not crashing and burning, were Tezos and Aragon, right? And who were really focused. on governance as like a first-class primitive. And there's sort of this weird thing that Tezos did continue to do stuff. I mean, they had to as a layer one, whereas Aragon kind of didn't. You know, the only time other than curve stuff

that I've ever really interacted with Aragon is the thing that people kind of make fun of Aragon for, which is Aragon court. So like instead of building like on-chain doubt, you're moving their treasury on chain, they built this thing where you could vote on like penalties to particular Dow members and have a court that a jury of peer Dow members who like vote on whether to slash you or take some of your assets. It's like, I don't know. The fact that they

were like, not only did they miss the plot, but they went off this like very weird end was kind of a little bit odd to me. But it's also crazy because they did convince a lot of really big projects to use them in 2020 curve. And I believe the earlier version of Lido had some elements. And like they actually had reasonably okay tooling, but then they just kind of went off this like, the Aragon Court thing, I think, thing was very weird. It would like got rid of a lot of the on-chain niceties. So yeah, I agree. Negative equity value is negative equity value.

I mean, they're unclear if their tokens in equity or security. I'm not making any such judgment. Negative token holder redeemable value, let's say, is negative. Yeah, we need a new word for whatever. that is, but there's definitely a concept there that needs to be reified. And I think it's healthy for a market to do this when it's correcting, right? Like, reallocation of assets from things that aren't working to things that are, that that is the inevitable path forward of capitalists, right?

Like, yeah, capitalism. So, like, I don't understand how this wouldn't happen. Yeah, no, it's true. It's funny, you know, crypto in some way, like, like, Dows are at this weird intersection where crypto is both very, kind of libertarian free market in one way. But then DAOs are also kind of like this sort of socialist co-op utopianism. And Aragon is kind of sitting in this weird intersection of the two where the free marketness

of crypto is like, hey, there's a misallocation of resources. Let's like go fix it. And the token holders like, you know, it's up to their, they can decide. Like, hey, we think it's not economically ideal for these assets to be sitting in the treasury. But then they have this sort of kumbaya like, no, our mission is to advance the existence of Dow's and so we're going to give out like, you know, $50,000 grants forever. And like we'll just sit on this money

until it eventually runs out. I feel like Aragon reminds me a lot of, you guys know the story of the Japanese holdouts after World War II? Like there was like some general who was like stranded on some random island and they just kept thinking World War II was still on until like the 50s or something.

And they just kept fighting. Like they didn't know how to do anything other than fight. And I feel like that's Aragon. Aragon is like still stuck in like 2019. And the only thing they know what to do is like just hold on to the money and wait until at some point everybody is going to use DOWs. And like 20, 21 and like the Dow market came and went and nobody was, you know, okay, they had a couple clients. But like mostly people were not using Aragon. They were using like compound stack and they were using a bunch of other stuff.

But they're just still waiting. And these guys showing up and say, hey guys, guess what? the war's over, let's give the money back, come on. And they're like, no, no, no, the Dow's must succeed. Like, you don't understand. You're taking away the Tao's. And I feel bad for them in a sense, but I can't remember who it was I spoke to. Somebody who'd worked at Aragon. Oh, I actually remember who it is. Somebody told me they'd worked at Aragon for a little while. This was like 2019, I think, 2018, 2019. And they were telling me, like, Aragon had so much money. And the attitude there was that basically, look, we have like 10 plus

years of runway, we're basically just going to wait. We're going to wait until the world changes this mind about the Ergon stack. And until then, we're just going to like hang out and write blog posts. And it was a very depressing place to work for that reason, which, you know, if you're somebody who wants to like build something and do stuff, like Eragon is just kind of where nothing really happens. So it is a really unhealthy place.

And I think I can see how you get defensive like this where you're like, oh my God, token holders want us to give the money in the treasury. back, which, like, to be clear, giving the money, distributing the money in the treasury to token holders doesn't prevent you from continuing to proselytize about DAOs. Like, you can do that, right block posts all day long. You know, like, this stuff is not that expensive to do. Yeah, I think you give them too much credit in, in a sense of, like, being missionaries around Dow's. I think maybe in the beginning, sure, but at this point, it's like, I'm sure, a very cushy job. I mean, I was looking on chain. There's like millions of dollars in USDC flowing out of that

treasury, you know, every month or so. And so it's like, yeah, it's, yeah, it's, It's a job with zero accountability. You can pay herself whatever you want. I don't know. I think it's kind of gross. Okay, fair enough. Okay. I'm giving the benefit of the doubt.

I don't actually know Aragon people. Tom, how's the strongest opinions here? Yeah, as much as it pains me to support ARCA, I got to back them up here. Also, I mean, the fact is we're not even really debating if the funds are being misappropriate or not. It's like, you know, the vote doesn't even matter. It's not even really a doubt. Like, it's very different than the Rook situation. in that, you know, like the vote doesn't even really matter because it's not binding it anyway.

So the whole situation is kind of absurd. Also, RFV stands for real fucking value. Is that right? No, risk-free value. The idea being, if a treasury has a bunch of people in it, risk-free to buy it for less. Real fucking value. I like this rebrand. I like this rebrand.

Sorry, sorry. I saw, I never, I read some article that was claiming it was that. And I was like, really? Like, this is like weird, brother. That is very, you know, it's like LFG, you know, it's like kind of adjacent. R&B. Um, okay. Sorry.

Apologies to the RFB people for, for misunderstanding your name. They, they have, I'm sure they're not, they're not, they're not easily hurt if they're doing this. Speaking of, of this recently, I was talking about this also with the BTFP bank term funding program. Do you think they, they intended to make it. sound like BTFD? Like, it's too close and too similar to be... No, I think that's a accidental homage. I don't think, like, I don't think they're like on

crypto Twitter being like, you know what would really cause people like Tom to ask questions, like, about whether or not we made a meme? But BTFP. But BTFD is beyond crypto though. It is like, you know, it's like Wall Street Betts also, right? that. So it has surpassed. I'm sure some staffer wrote it up and, you know, it's sort of like a subtle thing versus being intentional maybe. I don't know. I think they literally take whatever words they want to use that like sort of make a maybe a word and like that's a word. Like,

do you guys remember tarp? Like that just sounded silly. Yeah. You know, and it became the number of word. That did not sound. I mean, well, it's sort of like you put a tarp over you protect you from all the fallout, you know, I can see it. I, you know, to be honest, when the word tarp, it did give me this feeling of like, shit's really bad and you need just something to protect you.

All we got is this tarp and then that's all that's going to keep you alive. I mean, and I was like, okay, that actually what about the COVID Cares Act, you know? Yeah, all sorts of cute things going on. Well, Congress in the DUTE totally word-wept these things, very deliberately.

Yeah, like whenever you see their program. always like, you know, rock it, like, you know, read only, you know, comma, you know. But actually, imagine, imagine if someone convinced the Fed officials to go to Zuzalu to become intentional about their naming. That would be hilarious. Okay. I want to ask, before we move off this topic, before we move on this topic, I want to ask one more question.

So we ask like, okay, is what Aragon is doing cool? the answer is no. What about what real fucking value is doing? Do we feel that what RFV is doing is good for crypto or is this bad for crypto? What's your guys feeling about this? Well, I think it actually brings up a more important point, which is whether it's defy or tradfi, it's fine. It's finance. And those people in RFV are just being the Carl icon of defy. Yes, it's a newer and smaller market, but the stuff they're doing, which is essentially just activist investing, is extremely old. And so they're just taking some very basic principles and applying it to a small niche

newer market that really hasn't seen this stuff before. and, you know, I think it's just an inevitable consequence. You know, obviously someone's going to be out there creating RFV, you know, because the ecosystem allows it. You know, I think it's far less shocking than the crypto-native financial activity. I'll just use activity in this way. It's like MEV and things that are far more profitable and far more direct. taking money out of users' hands that couldn't really and don't really in the same way exist in other forms of finance, but only exist in on-chain finance.

And so I don't think RFV is really unique or innate to defy. I think it's inevitable. And it's really just, you know, a generic economic activity. It's not new. Well, so here's the interesting thing, though, in my mind. It's like, you know, for something, what Aragon was doing in defending against, against this, defending against this attack, was that it's kind of like the closest thing that they could do to a poison pill, right? So for those of you don't know, a poison pill is basically

a defense against a activist investor that basically allows you to dilute the active investor in a way that doesn't dilute everybody else. So it's sort of like a kind of like a defense mechanism against somebody taking over too much ownership that you don't want them to. So famously, this is what happened to Elon Musk is that they sort of, threatened to do a poison pill. Twitter was threatening to do a poison pill against him. Now, we don't have anything like that in DFI. Right? The closest thing we have is basically what Aragon did, which is basically, look, we

won't listen to the Dow. That's effectively what Aragon decided to do. Now, this is a case where the proposals that were being made were actually equitable to all token holders, right? So the proposal was, let's return the capital to everybody and everyone gets made equally. In corporate governance, like in normal corporate governance, There are certain kinds of proposals that are just illegitimate. Like, for example, you can't take over a company and then say, all of the money in the company goes only to me and to nobody else and then vote it, you know, vote into passing because it's not equitably treating all shareholders. We don't have anything like that for tokens that can say, look, even if you have a majority of the token voting power, you say, look, everybody who votes, only people who vote on this proposal, get all the money in the treasury. and then 30% vote against, 70% of vote for it,

now 70% of people rated the treasury and basically 30% of people got stiffed. There's nothing in Dow governance intrinsically that stops that. So it does feel like if we're moving into this world, basically kind of, you know, activist investors, corporate raters, whatever you want to call this,

then we kind of need more robust mechanisms to prevent from basically inequitable outcomes. And looking at this, I'm like, okay, well, shit, we get, like the proposal I just described could very easily have gotten passed instead of the proposal that was actually put forward. Well, actually, a similar proposal, if I remember correctly, was either proposed or succeeded or maybe occurred. Back during Faye and Rari and their merger, their unwind, someone who was pissed off

said, like, oh, if you do this thing, I'll pay every voter in such a way. I don't know if that wound up going through, but they basically tried to have this, you know, economic incentives for voting to build a majority. You know, someone on Twitter might remember the details of how that was down, but. Yeah, I know what you're talking about. I think it was also obviously, for Fay, the concern of like if hack victims should be considered debtors and, you know, potentially superior or senior to token holders in the event of liquidation.

And there's some kerfuffle about that. But, yeah, I mean, I feel you like, obviously that kind of proposal will be pretty impalible, but would work, you know, if they actually did have on-tane governance, which, again, they don't. So there's a little bit of a moot point. But, yeah, I mean, I think, you know, poison pills are obviously, in any way, self-serving to the current board, right? Like, they're not actually thinking about maximizing shareholder value. They're thinking about, hey, how can I retain this current role and keep doing the thing that I'm currently doing, which I think is kind of the mindset that Aragon has. Like, this is fundamentally about sort of, you know, correcting

the market. They're like, people who get, you know, trying to ban short sellers. In my mind, this is spiritually similar. Like, they play an important role in pricing things correctly and allocating capital correctly. And right now, capital is being pretty grossly misallocated in the, in the Aragon treasury. Yeah, I think I'm actually, I find this to be a very generically positive element. It has, has nothing to do with Aragon in particular as much as just like, if crypto is going to be a real market that continues to grow, it's going to have to just overall improve allocative efficiency. There's like no, that's just like the second law of thermodynamics of capitalism, right?

Like either you die or you get better at allocated efficiency. Those are the two options. And like, clearly that's not happening here. I do think the interesting thing as a sort of ironic spin-off Aragon is that there's a whole world of what I would call, like, what defi should look like next. You know, right now we've like really focused, defy spent the last couple of years focusing on trading and leverage in some fashion. But it hasn't spent much.

And governance is the bare minimum of the investment banking automation layer, right? Like the compound governance stack or Aragon governance stack. But there's a whole other set of investment banking like things to do for protocols. it's like how do you do M&A correctly? How do you do kind of these like dividending vote type of systems that in normal finance you can't do because you can't really discriminate between the different voters or different classes or different things like programmatically, like the type of thing Hizib is talking about basically impossible to do with stocks, with equities. But you could totally program that into governance.

It's like five lines of code to do that. So like I think like the opportunity, I guess maybe future looking is that, all of these investment banking functions can be protocolized for doing this type of stuff in a more efficient way. And I think that's what we're going to see over the next year or two. Very interesting. Well, I agree with you guys that this was, obviously the story is not over, but it's a very fascinating case study of kind of what happens when governance stops being quite so polyana-ish. And we start coming up against the hard reality of how these projects are actually delivering value.

So let's move on. One of the other big stories has been this, I think almost everybody at this point is aware of the craziness going on on Bitcoin, as well as the meme coin frenzy that's been going on both on Bitcoin and Ethereum. But a lot of it today is really focused on what's happening on Bitcoin because it's so rare, but this be happening on Bitcoin. So I think we alluded to a little bit before Ordinals, and I think previously we were a little bit dismissive of what was happening in Ordinals land. Well, it has grown to become an absolute force of nature. It's driven up Bitcoin fees by over 100x since it began, just to pull some stats. So the total value, so there are two things actually going on now on BTC. So one is ordinals, which are the inscriptions themselves that we talked about.

But there's also this new thing, which is using the same kind of general protocol, which is called BRC20s. And BRC20s are basically ERC20s on Bitcoin that are using the same mechanism of jumping onto taproot scripts to basically just encode, you know, ownership of a fungible token instead of non-fungible tokens, which are ordinals themselves. So the total value of BTC ordinals and BRC 20s was basically approaching, as of May 8th, it was approaching over $900 million of total value. Over 20,000 weekly actives on the biggest market, which is called UNISAT. Volume spiked all the way up to 18 million, which was more than the volume on OpenC. Now, today it's down.

quite a bit, so it seems like volumes are coming down. There's a lot of arguing now about what's happening on Bitcoin. So one, it's massively increasing fees, which for people who are trying to use Bitcoin for ordinary stuff, their fees are now in the tens of dollars to interact with Bitcoin, just, you know, sending ordinary UTXO transactions. But then the second thing is that there's a big debate now going on within the Bitcoin community. Is this good for Bitcoin?

Is this bad for Bitcoin? This kind of makes Bitcoin more difficult to use for traditional payment use cases. maybe this is good because this allows Bitcoin to become sustainable without fees, or this is just a bunch of nonsense that's bloating the UTXO set, and ultimately is kind of a giant time-waster. You should put this crap on Ethereum. So Bitcoin maxis seem to be quite split on is Ordinals good, is Ordnals bad? What have your guys' observations been on the memecoin frenzy going on on Bitcoin?

The largest meme coin on Bitcoin is a meme coin made by Zan. X-E-N, which has historically been a gas fee, a tractor, let's say, on other chains in that they build protocols that try to maximize gas usage to generate fees. So it's not that surprising that the Zen community, the moment that they saw, they like went in and put up a very gas inefficient on-purpose protocol. You might think that that's bad for a particular protocol with the Zen community, like the Hex community, is this thing that people don't talk about, but is insane. If you ever go look at their Discord, you'll be like, how are there this many people? Wait, is Zen a rebrand of Hex?

It's the Hex community fork, but if I call it a fork, the Hex Manxies will be after me. So it's someone who started in the Hex community and shares some amount of code with the Hex code base and the Pulse Chain Codebase. The fact that I know this tells you, I talk to Eric Wall. It's like I really, the hex community, of course, is quite gross to me to steal Tom's earlier word. Just more the weird materialism of the. There's something kind of beautiful about Eric Wall being like the taproot ordinals guy and also the anti-hex guy. And then Zen being like the ordinals application. Like it's good.

I know. It's poetic. It's poem. It's amazing. It's amazing. Wait, I totally, I do not understand. How can Zen run an application and collect fees on Bitcoin using? No, no, no.

They write very gas inefficient code that emit has very high inflation or like has these Ponzi scheme dynamics. And their entire thing is about writing code that costs a lot to use, which sounds very unintuitive. And it makes no sense. Their entire Ponzi scheme is, their Ponzi scheme. Or this is on Bitcoin? It started on Ethereum, but they are now on Bitcoin, and they're the largest.

They're the largest ordinal. It's XF. I'm trying to remember the exact four letters. This isn't Vampyrex, is it? Like, VM. Yes, yes. Vampirx. Yeah, yeah.

And that's the reason. And that's the reason. It's called that because the goal of this community is they tie their inflation of their token or number of mince to the transaction fees use. So the more transaction fees use, the higher their token. emission. And it's like it obviously is unsustainable. They just keep moving from chain to chain to chain and and you know, it blows up, goes to the next chain. You know, just. What? Sorry, Haseeb. I'm really sorry. I see I see you rubbing your head and I'm not trying to, I'm not trying to hurt,

give you a headache. I'm having a really hard time understanding why you would do that. It's not, it's not rational, but the hex community is not very rational. They've all lost insane out some money and they have this still, this belief that it's all coming back. You need to see the hex memes. The hex memes are a way to destroy your brain cells. Obviously, it's incredibly waste that they're basically trying to say the more you waste, the more tokens you get. It's the same economic principle as if you just dig a bunch of holes or break a bunch of glass windows. It's good for the economy. It's not. You're actually like creating a deadweight loss. And so they're going to long term be losers. But what's interesting is actually a similar concept, if I remember this correctly,

existed on Ethereum way back in the day and it wasn't actually utilized. So, you know, feel free to correct me if I'm getting this slightly off, but this is what I remember. There was the ability to make or mint ERC20 tokens with the sort of like mining like coin base where like as mine, as blocks were made. you could like program your ERC 20 to mint for whoever the miner was. So one of the ideas about how tokens would be created was, oh, you could piggyback on the proof of work that was already existing on Ethereum, not creating any additional work or any additional transaction costs, but use it as a way of distributing the supply of a token

across the miners of Ethereum itself. So basically like, think of it like merge mining, but with zero actual mining. So piggybacking and you could actually implement, and this is like, I don't know, it's much been in like 2016, 2017 era, the ability to like mint tokens with each block mines to the miner. And I don't think that ever took off. No one like ever like launched a successful token that utilized this. I assume this code is like still there maybe or like got removed at some point. But this was an idea that was popular then and like was part of like the protocol that you could use and like no one ever launched it.

And if the Hex community was around all the way back then, maybe they would have. They are, they are launching something very similar in Pulse Chain, which is their own. Trude, how do you know all the like the roadmap of all these? Tarun doesn't sleep and he's a member of 490 discords. I, I, all I have to say is Eric Wall, I, you know, bless his soul. We're going to get Eric on the show at some point. Actually, we should get him on the, actually, we should have him as a guest to talk about ordinals because he's like the ultimate expert. Yeah, yeah, yeah.

I'm just parroting what I learn. I'm parroting what I learn. So we should actually just have him talk about it. Didn't him and Udi launch something like some? They are. They are. Yeah. Yeah.

Yeah. It's sort of, you could think of it as like the open sea, an open sea of ordinals, but like in a weird way for handling these BRC 20s. All right. I feel like now is the moment for every kind of. Bitcoin Maxi to like do their NFT drop effectively. Like we need Nick Carter to drop something and then it'll just be, everybody who's got a bunch of social cloud, they haven't monetized yet.

Now is your chance to do it in Bitcoin land. I mean, the best thing is to read the Bitcoin developer forum. So that's the part I find more interesting. And you just like read the two sides of like, the like, yes, we're generating fees and the, oh my God, like we need to censor these transactions and get rid of them. I know censor is a bad word, but censor. And it's like hilarious to read these. Oh, man. Oh, man. Yeah, it is, it is, in a way, the kind of poetic justice within crypto, that Bitcoin, which is the most stalwart, most sort of august and serious protocol that's like, no, we're about transferring large amounts of value very efficiently. And it's like, oh, shit, our chain is getting clogged up by like, you know, random NFTs and meme coins. And that's the only way that there are actually enough fees to be comparable to the block reward.

And now, you know, Bitcoin is now convulsed with this face-to-face with the stupidity of what crypto people actually want to do, which is to speculate on meme coins. Yeah, it's, it's, you know, this is the world that we live in. Now, that said, like, the mania seems to be dying down. although, you know, there are obviously false starts in the history of NFT, so it's possible that this might be a temporary lull. But, yeah, I mean, the same thing has been happening on Ethereum. There's been a lot of mean coin activity on Ethereum. Pepe very famously has kind of blown through like a billion-dollar-plus market cap.

Now it's down quite a bit from the highs. What do you guys think is driving this? Seems kind of random. Seems like it sort of came out of nowhere. Maybe it's just like the NFT traders got bored, and now it's time to play around with meme coins. I heard that CZ invented Pepe. You heard it here first.

That is confirmed news. That is confirmed news. CZ didn't invent Pepe. That's right. We are a leader in breaking news that we heard from a guy. I did see, you know, Coinbase writes these like informational pages for assets that they list. Or I think assets that just exist,

I don't think they've listed Pepe. And on the Pepe one, they like said, oh, it's affiliated with like the alt-right and like the proud boys or whatever. And then Paul grueled at the CLO had to like issue a retraction and an apology. And it was like, you know, Apollo out to the Pepe community. So we got, we got the facts wrong. That was the funniest tweet of the week by far. But by far, Coinbase of General Counsel really won this week.

Yeah. Yeah, welcome back to crypto. Okay. Well, yeah, it's been, it's been weird. guess let's see what happens. Hopefully we can get Eric on to kind of walk us through the circus that we're currently living in on Bitcoin land. So other news. So there's been obviously over the last few months a lot of pressure on market making firms, not just the fact that, of course, they lost a lot of money and just the market going down and exchanges blowing up and lenders

dying, but also in many of the indictments that have been brought down or many of the lawsuits that have been filed, there's been a lot of references to trading firms, basically getting up to no good. So there was a report by Bloomberg that both jump, which is a large crypto trading firm as well as Jane Street, which is also, you know, they make a lot of markets, obviously, broadly in equities and other asset classes, but they're very active in crypto, that both of them are starting to pull back from their crypto market making activities in the U.S. they're citing regulatory uncertainty and increased scrutiny. There was also recently a class action lawsuit that was filed against Jump

with respect to their involvement in the alleged involvement in the Terra-depegging debacle. So it seems like a very tough time for market-making firms in the U.S., especially given the lack of clarity that we have domestically. In addition to that, we've also seen liquidity dry up and trading volumes also dry up over the last three to four months. So it's strange, although prices have done very well since the beginning of the year, Bitcoin is up like 60 something percent since the beginning of the year.

Volumes are down a lot and liquidity is down, you know, even more so. So what do you guys think happens from here with respect to the trading firms? Well, just from a very simple laws of financial physics perspective, if they all go away, liquidity will be less and volatility will be higher. and I think it's hard to anticipate what impact that would have on the market as a whole. It's possible that that's like what people innately want. They want volatility and they want things to be going up and down wildly, and that's exciting. But on the other hand, like, you know, it's hard to predict.

And so, you know, it could just be fundamentally bad for asset prices. Imagine if Bitcoin is just less liquid and more volatile. But that was also like, you know, the days of your when every day crypto would move 10%. Nowadays, it's like it feels a lot less volatile. And I'm sure you could look at volatility over time. And maybe it is starting to increase over the last couple of days. But, you know, I anticipate that like the average retail trader might want more of all. Yeah, I think we can see, you know, a lot of that.

I agree. I think I do have to imagine, I mean, some of the. regulatory stuff is probably factoring in. But I think a lot of it, frankly, is just like there is much less, you know, lend on the market right now just in terms of overall liquidity. And so if you're a crypto market maker, it's like sourcing inventory is going to be harder. volumes are down. It's probably going to be less retail activities. It's probably less profitable. And so I think, you know, by and large, it's probably more just like market driven than anything else versus, oh, you know, we're scared of trading on finance now. And so we're refusing to do so.

another thing is I think this is not just true for crypto if I remember correctly like even US equity volume is down like you know it's like everyone like a lot of people just like went super risk off and whoever's left has been pushing the price up but like yeah I guess because the the bond market has been so wild there's like been way more capital there um like the the yield curve is inverted and uninverted so many times this year especially at the like short duration stuff, like over you, whatever, like, government debt ceiling, every, you know, the five million things that have happened this year, that the rates market seems to have taken a lot of liquidity from everywhere else. And that's like a macro thing that might, is also somewhat independent of crypto. But I do think that the regulatory pressure must be high because like all the people who removed were like also heavy on-chain traders. And some of them have notable changes on chain, which I thought was, that seems more. regulatory related than other things.

Yeah, if it was like Tower or some of these other groups, I would think like, okay, maybe it's just not profitable anymore. Jump, I feel like it must be deep in their DNA at this point that like crypto makes money. So if they're backing off, I have to assume that it's more for regulatory reasons. Because Jump was active through the last bar market as well. Like they were, they've been very, very kind of steadfast in their commitment to the industry. and I kind of feel like the biggest thing that I notice generally among whether it's trading firms or institutions, whether it's individuals, if you've made money from crypto and cash it out,

you always come back. Like you just have this association with crypto that like, yeah, crypto is a good thing. And I like it and I want to be close to it and I never want to get too far. Even in a bare market, I want to like hang around the rim. I think for jump, my overwhelming sense is that it must be because of, regulation, not because of they don't think that they can afford the, you know, that the profitability is not there right now. I think that they're willing to invest for the long run. They made so much money in the bull market. Yeah, I just like, I suspect it's more regulatory stuff. But the

interesting thing is the nice thing about the global open market of crypto is there's always someone else who will show up. You know, like, I do think, I do think like even if the biggest market makers leave, it's, there's going to be a new exchange somewhere else and there's going to be market makers from that venue, that jurisdiction, that region of the world. And, you know, probably my suspicion is it's going to be somewhere in the Middle East or like related to that, but we'll see. I mean, right now, Binance is in the Middle East. So that. And Coinbase. And Coinbase, right? I mean, Coinbase, like Brian Armstrong went there this week, right? And did a whole like roadshow with all their officials.

So like, yeah, I mean, the UAE, sorry. And so like, I sort of, I wouldn't be surprised if like you see some, like, some, you know, there's a ton of government incentives also to move there. So I wouldn't be surprised if like whoever is the takes over from the U.S. firms were treating is like going to just be based there and doesn't leave there ever. Yeah, it seems plausible. And I can tell that, you know, the UAE is really serious about courting the crypto industry. and they're putting a lot of energy and resources into it.

It feels like it's sort of the Singapore and Mina at this point where they are, not only do they have the capital and the capital markets, but also they have this just view on the space that is just very positive. Even in spite of FTX and all the other stuff that's been going on globally, they believe in the stuff. It's interesting. It's kind of adjacent, I feel like, to their interest in e-sports and gaming. is that they're like I don't know if you guys know this but like Saudi particularly Saudi

UAE as well but Saudi is like crazy crazy big investor into gaming and e-sports and they're like trying to buy up studios and convince them to move to Saudi to create like a sort of homegrown game development ecosystem because they're just massive on gaming and I heard when so when I was there what I heard was that Saudi which is not a big country right is like it's single-digit millions, or maybe two-digit millions. Maybe it's like 20 million people or something in Saudi. I forget exactly. But they have an extremely high penetration of like hardcore gamers,

which I guess there's not a lot else to do in Saudi. I don't know. But there's people just like gaming a lot. Like it's really intense. It's like Japan or something. So they're just, you know, the whole society is just very, very bullish on gaming becoming a huge thing. And crypto, I think for them feels very adjacent to that.

Yeah. So I think like the U.S. market makers leaving is probably just, yeah, there's going to be, so someone will take up that mantle. I don't, I don't have any doubt that it's not like, oh, it disappeared forever. I think like if the U.S. government thinks that, then they don't understand the world dynamics. I think it probably disappears temporarily. But yeah, when volumes come back, I agree it comes back. Right. But right now, volumes are low. Retail activation is relatively muted other than meme coins. But I agree with you about the macro point. Once. macro settles down, I think that demand and liquidity is going to come back. But, you know, a lot of people are just putting their money into, you know, into treasuries right now. So there's, there's not quite as much willing as to gamble. Except Circle. Did you see that they're like, we're not buying any longer than one month. Because they're worried about the U.S. defaulting. Yeah. Yeah. Meanwhile, you always see Tether made a $1.5 billion in profit in Q1. And they're rolling it into Bitcoin. So it's like, yeah, I don't know.

They're rolling. They're taking the interest income and buying Bitcoin with it. Wow. Are they starting that? They've been doing that. I mean, they don't tell people what they're up to. Oh, my God. That's, wow, that's impressive.

Okay. Well, shit. Well, we are up on time. Next time, we're going to do everything we can to get Eric on the next show so we can talk us through the Bitcoin Mania. Yes. Yeah. Yeah.

You hit up Eric. Make sure you, make sure you can go. I'm messaging him right now. Okay, perfect. All right. That's it for this week. Thanks, everybody. See y'all.