Unchained - The Chopping Block: EigenLayer Airdrop, LayerZero's Sybil Strategy, and Robinhood vs. SEC – What’s Shaping Crypto’s Future? - Ep. 644

Episode Date: May 10, 2024

Welcome to The Chopping Block – where crypto insiders Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and special guest Avichal Garg from Electric Capital dissect the latest trends in the crypto world. This episode dives deep into the buzz around EigenLayer’s airdrop: What sparked the controversy and how did EigenLayer respond to community backlash? We then explore LayerZero’s unique self-reporting strategy to combat Sybil farmers and analyze Friend.Tech’s bold, no-VC token launch. The discussion heats up with a look at ConsenSys’ proactive lawsuit against the SEC, setting the stage for a showdown over regulatory clarity. We also delve into Robinhood’s decision to challenge the SEC’s Wells Notice amidst soaring earnings, and tackle the ongoing debate between VC-backed tokens and memecoins: Which is captivating the market? Finally, we predict the future of SocialFi and its potential to revolutionize the crypto landscape. Join us for an insightful exploration of these pivotal topics shaping the cryptocurrency ecosystem. Show highlights 🔹 Breaking down the EigenLayer airdrop controversy and its impact on the community. 🔹 Exploring LayerZero's self-reporting mechanism to combat Sybil attacks. 🔹 Assessing Fantasy Top's growth and its significance in the NFT trading landscape. 🔹 Predicting the trajectory of SocialFi and its potential to reshape the crypto landscape. 🔹 Detailing Consensys’ proactive lawsuit against the SEC over regulatory clarity. 🔹 Robinhood's SEC Challenge and analyzing Robinhood's decision to fight the SEC’s Wells Notice amid record earnings. 🔹 VC Coins vs. Memecoins: Exploring the ongoing debate about the dominance and appeal of VC-backed tokens versus memecoins. 🔹 The Future of SocialFi: Predicting the trajectory of SocialFi and its potential to reshape the crypto landscape. Hosts ⭐️Haseeb Qureshi, Managing Partner at Dragonfly  ⭐️Tom Schmidt, General Partner at Dragonfly  ⭐️Tarun Chitra, Managing Partner at Robot Ventures Guest ⭐️ Avichal Garg, Co-Founder and General Partner at Electric Capital. Disclosures Learn more about your ad choices. Visit megaphone.fm/adchoices

I want you to play the role of Gary Gensler, put yourself into his mind, give me your best improv of what would Gary Gensler say if you were on the show. Well, you know, I don't really like the dominance of the U.S. dollar. I feel like the stablecoin thing is cementing the U.S. dollar. I'd rather be telling companies that they have to sell themselves for U.S. ownership, even though, you know, they are totally fine in their rights to free speech distribution. I don't know. Like, what else do you want to say? You failed your acting class. I'm sorry.

Not a dividend. It's a tale of two con. Now, your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways. Unimaged trading firms who are very involved. I like that eight is the ultimate pump. Defi 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 critical topics of the day. So quick intro, first you got Tom, the DFI Maven and Master of Memes. Hello, everyone. Next, we've got Tarun, the Gigabrain, and Grand Puba at Gauntlet. Aloha. And joining us today, we have a Vichel, managing partner, and discount Tarun at Electric Capital.

Good to see you guys. Wow. No, it's accurate. That's a fair and accurate description. The resemblance is astounding, and I felt like you're bringing it out today, so I wanted to acknowledge that. Doing my best to Roon. And so I am deceived, the head-hipe man of Dragonfly. We are early-stage investors in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life advice. Please see chopping block that X, Y, Z, for more disclosures.

You know, normally I would do, I would be the discount to ruin, but I don't have the hair. And I also don't have the fashion sense to be able to compete with them. So I respect the, I respect the attempt. Thank you. You were saying that, true, you were saying that the two of you get confused often. I was just, I can tell if Turin's, like, offended or flattered right now. Well, I think there are all these like Anon's who for a long time would just send me pictures being like, hey, you know, this guy looks like you. And I bet you you probably got the same thing.

I did. I was instructed today to wear clashing outfits as though I'm colorblind. That was the instructions I was given. Those are good. That's the right. That is the correct. I did my best. I tried.

So let's just. jump into, we got a lot of news to get through today. So, Vietel, just for everybody's context, Avichel runs one of the largest firms in the space. Electra Capital, they're also a VC fund based in Silicon Valley. You guys have been an early investor into EigenLayer. Everybody on the show is an

eigenLayer investor, to some extent, some more than others. So, EugenLayer, we talked about it last week. EigenLair, for those you don't know, it's a restaking protocol. I guess it's now more than a restaking protocol. Now it's an intersubjective work token, as it's called, but whatever, the market it says it's a restaking protocol, so we'll call it that.

So they had, they were one of the most, the highest TVL protocol in crypto. Over $15 billion were deposited into Eginlear. And those deposits were in search of points, which the expectation was that would eventually convert into anirdrop. So that airdrop took place last week, and that air drop was very widely criticized for several reasons.

One reason being that many people were geo-blocked, although they were allowed to receive points and participate in staking, they were not able to receive, they were not eligible to receive theirirdrop for their points. And then second, the fact that it was a linear distribution, meaning that the more dollars you had at stake, proportionally, the more tokens you received. And many people criticize Eganleur because they were small stakers,

they didn't get very much in the way of points. And as a result, they didn't get very much in the way of anirdrop. So after receiving lots and lots of criticism from the community, Eigenlare basically went to the community and said, hey guys, first of all, there's been a lot of speculation that the VCs are going to be unlocking before the rest of the team. This is not true. The investors and the investors and the team will be unlocking with a one-year cliff after the tokens are transferable. So the other element is that, so Eigen layer came out and announced that they were going to be, in response

to the community feedback, as they called it, they decided that they are now going to do an airdrop to all addresses that interacted with eigen layer. So 200,000 addresses will each get 100 eigen, which is something on the order of about $1,000, according to what right now the eigen tokens are being priced at using the AVO futures. Igen token, of course, is not transferable. There's no real price yet, but that's what the market thinks the price of these eigen tokens will be worth. So many people have described this as basically protocol bullying, essentially lots and lots of people getting really mad at the protocol and forcing the protocol, forcing the protocol to basically back down, change their mind,

and go ahead and distribute the fact, despite the fact that it's widely known that there were many, many industrial air drop farming operations taking place on Eigenlair. And Eigenler more or less capitulated and said, look, we were planning to create a distribution that didn't reward those people, but everybody's mad. So we are going to go ahead and distribute more tokens

in order to reward those people as well, which feels like, and many people criticize them for this, feels like fundamentally rewarding people and advancing the meta such that people who are doing industrial airdrop farming are more incentivized to continue doing that because of the scale of rewards that they've received for doing these kinds of very, very large scale air drop farming. Okay, so there's a second air drop farming story, and I want to tie these two together because it feels like the conversation about air drops is tying both of these together.

So a second protocol called Layer Zero. Layer Zero is probably the largest decentralized bridge protocol. They have a huge amount of activity crossing many, many chains, including salinas, sui, Aptos, as well as many of the things in the EVM ecosystem. So, Lair Zero's airdrop has been very, very widely anticipated, and they finally announced that they were going to do theirirdrop distribution, but they know that there's a lot of addresses that have been interacting with Lair Zero, who are Sibyls. Sibyl, meaning that these are users who are creating fake addresses to try to pretend that

they're multiple users when, in fact, it's only one person controlling many, many addresses. So, Lair Zero announced a Sibyl, Sibyl, self-reporting program, such that if you were a civil, if you were industrial airdrop farming, you're creating lots and lots of accounts, you know what you did. And if you are willing to report yourself, you will get 15% of the allocation you would have otherwise received if you were a good actor. However, if they find you and they know that you were a civil, they're going to take 100% of your allocation away. And if you report somebody else and you know that they were a civil, then you get some portion of their award. So now this

is a, this is actually not the first time that this mechanism has been tried, but it is by far the largest scale of this kind of air drop report or civil attack reporting structure that we have seen in crypto. And this is also resulted in a lot of both commentary on the positive side, as well as criticism. So this feels like a week where the meta game around air drops is shifting. And we're going to learn a lot from how these two air drops affect future air drops and future token and points distributions. So I want to stop there. and get a read from you guys, what do you think about eigenlayer back and down and layer zero doing this new self-reporting civil mechanism?

Avichael, want to get your response. Well, I think on the eigen layer one, it's interesting you framed it that way because I actually interpreted it slightly differently. I interpreted it as there were two separate things that were going on. They did this sort of linear drop to sort of disincentivize the civil attackers. but then people, my understanding or my read, I could be wrong on this obviously, but my read was people were upset that they didn't give enough to the small people. And so it was not so much that the Sibyl stuff was an issue as they felt that they were not being, like you want to sort of reward the small guy in some sense and that's what the purpose of these things is supposed to be. And so that adjustment that they were making my interpretation of it was that it was intended not so much as like a Sibble back down kind of a situation.

It just the side effect happens to be that if you had Sibble the thing, you might have gotten more. but the intention was to try to reward the small guys. I'm curious, Tom, you're nodding. Was that your route too? Yeah, I think that is right. The problem is you can't know which addresses are simple-generated addresses and which ones are genuine small stakers. Obviously, in an ideal world, it would be great to give every single individual

a fixed amount of the token supply and then maybe some, you know, linear scalar component based on how much they've staked or how much volume done or whatever, but in practice, it's just like basically impossible to, you know, do that. And I think that's why they kind of have this problem. And I don't know. I think it feels very goofy too just because, you know, for the amount of eigen that they're giving for the, you know, projected dollar amount, it's not like this is going to be so meaningful for the people who are transacting on ETH mainnet and therefore actually putting

ETH into EGELAIR. It feels like, you know, spiritually I understand the idea of, again, wanting to reward these small players. But it feels like it's really like, you can't really really. I think frame this in a way that that's actually what it's trying to accomplish. Like the only reason why someone would, you know, be happy about getting 100 eigen is if they had thousands of addresses and they were a civil attacker and, you know, this is their new sort of yield source.

That's an interesting way to think about it. I don't disagree with that. I think where it comes from more is that, like, you know, the points themselves were supposed to be signaling the token allocation that you'd be receiving, right? If you wanted points to be sublinear or superlinear, I guess, meaning that the fewer, no, wait, what does that function? Decaying, right? Decaying over time. If you wanted the points allocation to be decaying over time such that when you created a new address,

you got more points in the beginning and your points tapered off the bigger you were, that would be a way of signaling to people. I want more addresses, right? I expect you to receive fewer tokens the bigger you are. But that's not what they were signaling. They were signaling very clearly. we're rewarding one thing, which is TVL over time. And when you sort of go back and you say, oh, whoops, daisy, we didn't realize that there were a lot of real people who didn't get a lot of token allocation relative to the big guys,

really what they're saying is that, you know, the rewards that we gave you, which we signaled very, very clearly during the, you know, people knew very clearly what the allocative mechanism for the points were, that people were just ultimately not happy with the fact that, you know, this thing which had 15 billion dollars in it. That's actually where I disagree. That's where I disagree with you. I think the Bitcoin maxi equivalent for this cycle should be not your on-chain Merkel distribution, not your real tokens, right?

Like, if this point system doesn't give you any contractual guarantees over the actual redemption amount, then that's your fault for fucking believing that. Like, that's a terms of service thing that you participated in, and you misappropriately assumed it was prorado or had some minimum threshold, but, like, that's not true. right? It's not an airdrop in that side. It's not like a standard liquid demining air drop. And you, the user, subscribe to that. And that's, I don't know, to me that people are fighting. Sorry, are you, sorry, it's not clear to me what side you're criticizing in that.

Well, I'm criticizing this idea. Like, you're kind of making it seem like, oh, people like expected some allocation that the allocation was codified. And there was a allocation rule that was somehow mapping points to tokens that was publicly known. And that's not true, right? for none of these point systems, is that true, unless the points are actually on chain and there's like a... Right, but I mean, you've made this point on a previous show that, like, people back into figuring out what the allocative mechanism is. No, no.

I agree, but they made a wrong mistake in their model, right? That's the point. Like, there were a ton of people, for instance, Frontex points were the greatest example of this, where there was like many people writing out, like, you know, because I think Frontex's initial point distributions were really bad, and it was kind of easy to figure out the particular actions that were getting 90% of the points,

and people were doing these very simple linear regressions to what people's on-chain actions were. And they're like, oh, okay, clearly this thing is the highest elasticity. So we're all going to just, like, spam our own chat. Stuff like that would get you more points than having other people talk in your chat. There was a bunch of weird little mishaps and how they're doing the allocation.

And so the point of these points systems to give the dev team flexibility. But by that, that also means that you, the user, have no guarantee. right? You have some expected allocation that you can fit, but you might have fitted very incorrectly. And I think like that, this is not, this is not the point system turning into tokens. This is like, that was all done. That was the original token distribution was the point system converting into token. Then everyone got mad.

People are getting angry because they had some model in their head of what they thought it would be before is distributed. And then they saw this huge gap between what they got and what was distributed. And then they were like, okay, we want what we thought. Right. My point is is that this is the reason I bring up to not your keys, not your coins type of thing, is if you have no guarantees or commitment to the strategy for distribution, then don't fucking expect that you should get a certain number of tokens, right? That's a mindset problem. And obviously the teams are caving, but they're not caving fully either, right?

They're definitely not giving into all the demands. And I would say Layer Zero is taking the most aggressive version of not caving. The interesting thing that I've been kind of wondering about about the Sibyl stuff, in the long run is like who you know at some point the industrial air farmers will have sufficient resources and scale to just try to sue the teams and like the teams are very easy to sue what what basis is when they see the teams that's i think i think i think there will be a world in which so like your terms of service promises x you are in the u.s i don't think any of these have terms of service do these points programs of terms of service is a good question

I've never seen one. I think there could be... If anything, it's going to be the other way. If anything, if I'm a lawyer affiliated with any of these projects, I'm putting in a bunch of terms that are like, no expectation of anything. We can do whatever the F we want. Like, screw you.

You know, like... It's true, but someone will make a mistake. And someone will make a mistake. And I think there will be a way that you're going to deal up. That's a good negotiation tactic. Like, you know, I'm going to sue you. Like, the threat of the loss... It's like not in like practical terms in business.

the lawsuit doesn't often go to trial, more often than not, it's settled. It's just a negotiation tactic. So as I'm thinking about it, and I think I might be convinced by you, I think there will be resources that these Sybils have, and then they will threaten the lawsuit, and it's actually cheaper to settle than to deal with the threat of the lawsuit. And then, so you might just have to settle. That's a kind of an interesting take. It's an interesting tactic that's, I can imagine somebody using. I think especially if people view these anti-Cibble things as discriminating against them for what they consider a fair use strategy under whatever your terms said, and they try to sue you for that, I think that that could be a large legal trial. And so for the teams, the problem for the teams,

they're generally docs. They're generally the engineering teams and the teams that deploy the contracts are in jurisdictions that could be sued more easily. And so I actually think like we're going to eventually see the activists in the same way you're seeing like activists Dow investing stuff takeovers, I think you're going to see kind of some activist point farming stuff because the sheer economic amounts are huge. No, no, no, no, no. I mean, clearly these teams have no, they've made no public commitments. They have total discretion over how they distribute tokens. I agree, but the lawsuit doesn't, the Tavichel's point, the lawsuit isn't about the, about the actual merits, right? The lawsuit is like the people complaining. It's a frivolous lawsuit.

But these teams have, but these teams have money. right? These civil farmers don't have money. That's why they're sibling. But the civil farmers, I think the civil farmers will eventually have enough collective cash to do this. Maybe a civil farmer, class action. Is that the idea? Class action, yeah, class action for civil farmers. I do not buy this. The reason I think it is, I think these like civil detection things are going to be a

little bit like, you know the chain analysis lawsuit where they're like, oh, it's not scientific and, you know, like people are trying to sue them for like, oh, you use, use chain alices to detect us and whatever, I think you can make the exact same argument for a lot of the hero six people use in the civil farming stuff. And that is enough to like waste a lot of money in court. Like even if the teams win,

they're going to like end up distributing like 5% of their token to lawyers. So it's like, do you distribute to lawyers or these civil farmers? I think you're addressing. Look at FTXing. Look at the recovery. That's very different. That is very different.

That is very different. Like a bankruptcy is a totally different thing. I think the lawyers are going to get like your whatever X percent the farmers wanted, there's some conservation law. Either you give it all to the farmers or you give it to lawyers or both in some combo. I totally disagree. I think if you're battling a bunch of frivolous lawsuits from like stupid farmers who have these like ludicrous legal claims, it might cost you a couple hundred grand to like

defend against the lawsuit. It's not millions of dollars. It's definitely not billions of dollars. I don't think most of these teams. No, no, no. That's just not true. Like we've dealt with some of these frivolous lawsuits because we're, crypto VC. And it doesn't cost millions of dollars to defend against them, especially when

there's no real legal theory. I think when there's many of them, I think when there's many of them trying to do a class against you, it's quite different than just like three people, the usual three people I participate in a Dow lawsuit. No, no, no, three people is worse. A class action is easier because they're in one class. I think, I think you might get some. I don't know. I, you might, we'll see, we'll see, we'll see. I don't want to go down too far. I'm willing to bet on this, that this will have to work on commission for the, for the, for the, for the, for the eigen air drop. If you seriously want to bet on this,

I will bet you on this. But you've got to put an exclusion that Tarun can't be the one doing the lawsuit. Like, he can skew for the lawsuit. That's true, actually. You might civil.

Actually, he might civil his lawsuit himself. You can win this last year. I'm not doing a five years. I'm not doing a five year bet. Come on. Okay. Also,

this civil, this civil point stuff is probably not even going to continue for five years. Really? There's just going to be a new version of it. Oh, yeah.

It's going to get all. Yeah, the meta will shift. The metal will shift. There'll be some new thing. I mean, dude, imagine how good AI is going to get on this stuff and you're just like let a bunch of agents loose on this. It's going to be 10x harder to detect. Auto lawsuit.

Imagine they, they civil and they file the lawsuit. That's your real on-chain agent. Okay. All right. I want to get actually, Tom, I want you to give the last word here on theirdrop stuff. Again, you are the resident fuck airdrops person. What is your take on what a team should do now? Let's say you are starting from scratch.

You're beginning your points program. What have you learned from this week within Layer Zero and the eigenlare drama? What is the new playbook? Very hard to say. I think part of it is with something like Eigenlayer, there's a very clear narrative and story around why it should be kind capital weighted. Whereas for a lot of other, I think, air drops, it's like, well, if you provided, you know, liquidity on blur and you had sort of resting, you know, bids and asks, like, you know,

how do you sort of, you provide, you know, points for that? And how do you sort of provide some sort of sort of function that? that converts the value that you're providing into some sort of type of points. And so I think as always it's sort of context dependent. I do kind of wish I had not sort of folded to the community. I think most of people, what people were upset by

was the geo blocking stuff and the lockup terms. I don't really get the impression that, again, this was a meaningful sticking point for all of these addresses. I think that the layer zero thing, I think is very clever. or in self-reporting to get the 15% of the intended allocation. But it also reminds me a little bit of people who say that, oh, there should be a policy that if you hack a protocol, you can return 90% of the hack and keep 10%

and you can sort of walk away scot-free. And they're like, oh, well, that's our bug bounty effectively. And I think in practice, that just creates an incentive to hack the protocol because you sort of have this dollar value placed on what the proceeds are going to be. And so I think similarly, hey, maybe this worked one time for layer zero and maybe it's kind of clever. But I'm a little bit worried about this becoming a precedent going forward because, well, now you know that you can walk. You can civil attack a protocol as much as you want, self-report and walk away with still a pretty large, you know, some of cash.

And again, there's very little marginal cost to spending of new address doing some transactions, which is kind of the whole point of civil attacks in the first place. Yeah, 15% means that if you did seven civils, you basically get a one-x. You've made it up, yeah. Yeah, yeah. The reason I bring up the lawsuit stuff is like I just like generally feel like in crypto these things always kind of these like I'm excluding some subset of users or I'm censoring in some way. Always ends up somehow in the lawsuit.

Maybe in like five. The reason I bring this up is that chain analysis lawsuit I was kind of surprised by how long it lasted and how intense it was about trying to prove that it discredit it and try to get to not be used in police investigations. And I kind of feel like the Sibyl stuff could be viewed in a very similar light, legally. And so that was my real. Okay. So let's shift gears a little bit and talk about Socialify.

Because a lot of the stuff in Socialify feels like the exact opposite of what's happening with Lair Zero. Well, Tom's an influencer now. Tom's the biggest influencer on this. I've been starting to posting more on Twitter by my Fantasy Top. I was checking out. Thank you. Thank you. Can you explain what is Fantasy Top?

I think most people are not familiar. Fantasy top is fantasy sports for social media. So instead of drafting your favorite athletes and putting them into your roster and getting mesh up against somebody else for the week, you pick your favorite crypto Twitter influencers and you pick some of their cards from a deck and you enter a tournament and your performance is based on how well they perform in terms of engagement, views, reach, all that kind of stuff for the given tournament. So that's the sort of core idea.

So we've seen a lot of activity in SocialFi over the last couple of weeks. SocialFi meaning social finance, which is kind of this defy equivalent for social applications. The most famous of which, of course, was Frentec, which you might remember last year was the super hot Social Fi application that kind of more or less invented the category. Now FrenTech, their activity really fell off after last summer. But they've been teasing that they're going to launch a token. and they recently did over the course of the last week, they launched their token currently trading somewhere in the order

of about 200 million fully diluted valuation. But interestingly, again, in opposition to a lot of the tokens that have come out in this cycle, Frentex supposedly has no VC allocation and has also no team allocation. So the token is completely just 100% community distribution, or at least that's what the team

seems to be indicating. It's kind of not super clear, but that's what everybody seems to be interpreting them as saying. So they launched a couple new features, although the app was kind of buggy when initially launched. It's very much far from all-time highs, but we're seeing a little bit of a comeback for Frentec and getting a little bit of rejuvenation into the protocol.

And then you've got Fantasy Top, as Tom just mentioned, this new vital game on Blast. Right now it's got about 33,000 weekly active users, 9,000 Ethan trading volume. Apparently there are more addresses trading Fantasy Top cards than trading all NFTs on Ethereum. So Fantasy Top has really kind of grabbed people's I don't know, imagination is the word, but it's certainly been super high engagement.

So what do you guys see, what are you guys seeing with respect to this kind of comeback and this narrative shift with respect to socialify? Well, you know, for some historical context, I don't know if people know this or remember this, but my top friends, like this was a genre of apps on the Facebook app platform back in like 0, 2008, 09, you know, like almost 15 years ago at this point. And they also went super viral in the early days. and then the engagement just wasn't there. Like ultimately they weren't sticky.

I don't remember all the details exactly, but it sort of fell off pretty quick. What was the game? What was the mechanic? Oh, literally, you would like collect your top friends. There were all sorts of variations of it. You could collect your top friends. You could rank them.

You could buy and sell friends. And so there's sort of like an implicit leaderboard, like very similar mechanics that we're basically reinventing here. Now, of course, the two differences, I think, one, you're dealing with real money here, not like fake points, you know, inside some Canvas app. And two,

you know, back then, social wasn't nearly as developed as it is today. So there wasn't this notion of influencer. And so like you couldn't, you didn't have like data. You know, like in fantasy sports you have data.

Like you scored a touchdown or something. So it's like, what are you speculating on? Like you need some input that, that is variable over time and somewhat unpredictable to be able to speculate in that way. And I didn't really exist at the time on Facebook. It's just the network was not developed enough yet.

And so, I mean, there's an argument that between real money and sort of the randomness of, you know, like how many impressions is Tom going to get this week or something, that maybe there's some stickiness to this thing. But it's interesting because this is actually not the first time. You know, we're sort of like reinventing all the social stuff from 15, 20 years ago because humans haven't really changed in 20 years. So it's actually all the same mechanics from 20 years ago. What I find interesting, I mean, the Frentic allocation is kind of the perfect

counterpoint to what people, a lot of people have been criticizing, you know, I can layer zero for being these VC coins. FrenTech, although it was backed by a VC, you know, is backed by paradigm, supposedly paradigm has no allocation in the token, which, I mean, again, let's take it at face value that that's true. And yet the token doesn't seem to be doing amazing, doesn't have great liquidity, you know, not, people were kind of anticipating. But it has liquidity all in one venue. That's the money swap. Bunny swap. That's where the money is. Okay.

There's always money in the bunny swap. Why is that good? Why is that a positive? They take a huge fee. They take a huge fee on it. Oh, on trading in within Buddy Swamp. Yeah, I see. Yeah, yeah.

Okay. So trading fee is not zero, my friend. I see. In fact, it's quite high. It's like 1.5% or something. Yeah. But nothing stops you from just going and putting it into any other AMM, right? It's kind of like wrapped in a weird way.

Like there are ways around it, but it's much more gas expensive. So it's like, it's kind of this thing where it's like, oh, actually the effect. Yeah, it's kind of a clever, clever way of designing something so that you're kind of pseudo locked into a venue. Oh, that's kind of a thing. Oh, that's really interesting. Okay, so they're like intentionally advantaging their own AMM for trade efficiency for this token, just to like try to encourage themselves to be able to capture the trading revenue.

Yeah, but there is a wrapped version of friend I've seen floating around that in theory, you know, hey, if that gets enough liquidity and volume, it kind of gets around this, but I think it's just the gas thing is like, but the perps are trading a lot now. So like I feel like people, if they really care, don't really, aren't really trying spot. but the people of theirdropper trading spot. So it's kind of an interesting model, right, of like,

it's almost like being the ICO venue for your own token on chain. And then eventually people, you know, eventually it gets everywhere, but like for the first amount, you get to capture some revenue. Well, you know what this actually reminds me of? This is actually a really common pattern in consumer social, which is that your moat and your monetization are different. So like if you look at Facebook, the moat is all the friends content because you just can't get that anywhere else. It's like somebody had a baby or somebody got married or whatever.

But the monetization is all the public stuff. It's like some small business needs to promote something or like there's some news thing. And if you get rid of the moat, the monetization, you just sort of like Facebook would collapse to Yahoo News. It's just not that useful and not that good of business. And that combination is really powerful. And so it's actually really interesting to see that like the monetization is different than the moat. Like the moat is like the organic content that people want to sort of like come and see and the prices and all that kind of stuff. But then they sort of have a totally different monetization model.

That's actually really clever. And it parallels actually what you kind of see in traditional social as well. There was also FARCon this week, the Farkaster Conference. Curiously, get you guys take. Do you feel like we're seeing a renaissance in social, socialify on chain? Or is this like a isolated phenomenon? Is this like sort of one thing happening in one corner? Or does this feel like a bigger, part of a bigger wave? I'm in the bigger wave camp. Tom. I guess I'm also kind of in this bigger wave. It feels kind of like there are these little blips, and it's not overall indicative to me of, hey, it's clearly this thing is happening or, oh, yeah, there's definitely PMF, but it's like,

there's that kind of consumer PMF spark that sometimes starts to burn and turns into a fire, and sometimes it kind of fizzles out. But it's just very rare to see that spark, especially, frankly, in crypto, where a lot of stuff feels much more transactional, you know, purely sort of financialized, maybe game or incentivized in some way. And a lot of this does, it is organic, you know, independent of some of these other platforms. And I think it's just kind of rare to find and rare to see. Do you agree, Wave? I feel like, to be honest, it still feels like this is like, for lack of a better phrase, poke with money, you know, like Facebook pokes. It's like only a little

bit better than that. It doesn't feel like we've kind of like got the full experience. You know, when you compare the crypto social apps to like TikTok, I know you shouldn't be comparing the two extremes, but like, you know, it sort of feels a little bit like. Sure, sure, sure. That's true. That's true. That's true. There is. Also, disclosure, I'm a Dracula investor. So I shouldn't, I shouldn't, I shouldn't, I shouldn't, I shouldn't, I shouldn't, I shouldn't say that as a, but what I mean, it's still not the same. You know, like the, the content stuff isn't the same. The, the kind of like, true. The feed algorithms aren't the same.

But my point is, in the same way, like, pokes felt really dumb, but they, like, encouraged user actions that, like, people would thought were too silly or too weird or whatever. I feel like there's a lot of that in the social fight stuff now, where it's, like, silly actions that people are, like, spending money on. And so, so, like, there's sort of this, like, weird aspect of that, which feels like it's real,

but it's not clear to me what the velocity is. It's clearly like the gradient is positive. I just, is it like barely positive or is it really growing? And I don't have that much of opinion on that. I think the, the finding new monetization mechanisms outside of the airdrop thing, that is a very,

I think that if that can, if we can find more of those, then like that to me feels like a real thing. Yeah, true. I tend to agree with you that it feels a little too isolated to me of like these kind of little pocket. of things happening, but none of them are really, none of them are really, it's sort of like, you know, the early conditions for life, you kind of need a certain amount of acidity and a certain

amount of complexity in the air. I feel like that's what we have right now. We haven't actually seen life start to like self-replicate. This reminds me, we've been talking about this internally a lot, actually, because we have a bunch of, I mean, I was at Facebook for years and we have a much of ex-Facebook people. And so I don't know if you guys are talking about this internally, Tom, but to me, this feels like social 2003. Which is kind of like all of the pieces of what became a social network kind of existed. There's the notion of a graph. There's the notion of a friend.

There's a profile pick. There's a profile page. People had sort of proto feeds. You had the poke. You had kind of the beginnings of the like in 2005. All of those little components existed. And so now what we have are things like you have AMMs. You have frames on Farcaster.

You have the ability to do micropayments. You have every app as a wallet. but you have this notion of like, you know, friend content or like you can buy the friend. Like you kind of have these like little, you know, components and I see kind of the way you put it as I think right too. It's like it's sort of the preconditions for life. Like you got a bunch of RNA snippets like floating around.

And like they're going to come together at some point in the next couple of years because somebody's going to figure out like the magic is, oh, it's this kind of a graph propagated it in this way. It's this sort of an edge. It's bi-directional or unidirectional. It's this kind of privacy model. the asset that people really want to buy is XYZ. The way you monetize it is ABC

because you have the wallet baked in. All of the preconditions are there. And so to me, I don't even think we've hit MISP space yet, just to be clear. But that MySpace moment when it happened, there was this light bulb that went off for a lot of people that were like, okay, this is the thing. I don't think we're quite there yet.

Maybe Farcaster is that thing. But I think we have all the necessary preconditions now. And so I'm actually quite optimistic that sometime over the next two to four years, somebody's going to stumble into the thing that gets to 100 million users pretty fast. Yeah, I agree. I think it's it is sort of that that signs of life thing. And there's a people kind of get some of the components now to start remixing. Like this feels a lot more interesting and real than like steam it, you know, from like eight years ago or whatever where it's like not just random oh like decentralized Twitter. It's like, okay, there's a reason why this stuff is interesting and novel and differentiated from everything that that people have kind of been trying before. And I think that kind of shows in some of the numbers. So the one thing I will say is so far, other than this Frentec amm monetization thing,

I feel like we haven't seen anyone go do any radical experiments with how they're getting people to pay for things. Like for instance, one type of thing that is my personal hobby horse, and I'm always trying to find people who are working kind of adjacent to this. Because I always meet these people at hackathons, but no one ever wants to do it for longer than a hackathon, which maybe says something. But in the normal social world, the ranking algorithm,

the news feed, the ordering is sort of like completely controlled by the central entity. Like, yeah, sure, there's ad exchanges and ad auctions that like impact some of the feed. But generally the quality of feed is more valuable than like the ads in the feed for how in order to keep up like retention statistics and stuff. like that. But these open social graphs have this like kind of crazy ability where like I can give everyone their own sort of weird feed and they can and people can pay to be like higher in

your feed, more expressed in your feed, whatever. Right. And I think I think Frentec is kind of getting in that with these rooms where like, you know, and I the clubs. Yeah. And I kind of feel like that is the part that's like missing to me right now is like this idea of taking advantage of the graph to give very monetized views of the same data where like people pay to either show you a particular view of the world like an influencer you know it's not just the influence they're showing you like a montage right right they're showing you kind of like a they're giving you the entire TikTok recommendations they they would right they're able to like control the algorithm that generates recommendations or something that like does something like that that takes advantage

And I just feel like we haven't quite crossed the chasm where it's easy to do those types of things yet. Like it feels like it's still a little bit hard for developers to do that type of stuff. And the AMM thing is great because it's like people understand it. It's easy to add a fee to whatever, right? But I feel like the next level would be actually using the social data and like finding weird monetization things that makes sense. Well, I was going to say two things. One, actually, it's not immediately obvious to me that developer friction is necessarily a bad thing.

Like another little sort of tidbit from consumer social history, Friendster was really taking out. Friendster was the thing before Myspace. And Friendster fell apart because they didn't have a good way to do the perform. Like they did a bunch of assumptions

about how to load pages and the performance is terrible. And one of the things that they really struggled with was how to traverse the graph to find like your second degree connections. And so it was actually like still a pretty clunky developer experience to build a social network in 03. But like it was just good enough

that you could get a couple million people on it. And then one thing you said to ruin actually kind of, you know, for me, the light bulb moment was actually frames and the Girl Scout cookie experiment, if anybody was tracking that. Because the inline buy is a totally different modernization model and you don't need ads. If you can just buy stuff in line,

because you can just take a Vig. And that to me was a huge light bulb moment because all of a sudden it was like, oh, you don't need ads in this thing. If you can drive commerce through these things, which has always been actually one of the Holy Grails. Like if you think about the internet, internet, there's, there's like two business models at a high level on the internet, right?

There's attention and attention. And Facebook and YouTube really capture attention, but they've always struggled to capture intention, whereas like, you know, Google and Amazon capture intention. And so what's really interesting about these social networks to me is like if you could capture intent and then monetize that intent, you would actually have a fundamentally different business model. And so to me, the light bulb moment was actually frames on the monetization side. So this is kind of taking a slightly different direction, but I was catching up with

Kyle Simani recently, and he was telling me that in the multi-coin investment committee, Kyle has banned the use of any analogies. If you use an analogy, you are automatically kicked out of an investment committee. And so, like, all these analogies to traditional social media, I wonder a little bit if we are sort of over-reliant on the, basically this idea that, okay, we're kind of speed-running the history of social media, and we're going to, like, play it back in the same order. Because on some level, if we do, I think we, on some level, just kind of arrive at a worse version of what's already there. Right?

We're sort of kind of stamping in the territory of the, the Macedons and the truth socials and the whatever, because it's actually very hard to fill the niche that's just, okay, let's like find a very close permutation of a social network that already exists. It does seem to me like if social, if crypto social works, it's going to fill a niche that nobody else is filling. And that's why it's going to be so good, right? There's going to be something that's kind of weird about the particular way

in which you want to express yourself and you want to interact with this particular network. I don't have a clear enough thesis about what that is, but it does feel to me like if you hugh too closely to, well, we're going to go through the same iterations as, you know, kind of Web 2 social media. I think you end up arriving at what a lot of these social media pitches I get are, which are basically, look, I'm going to transpose an existing social network into crypto. And those seem to almost reliably not work. Yeah, well, they're guaranteed to not work.

But I think the interesting thing, and I do think reasoning by analogy is very, risky. But to me, the interesting takeaway is not that the reasoning by analogy gets you to the outcome. The interesting part of the exercise is that is how the market reasons through what to do. So like the first wave of stuff that doesn't work is going to be people doing these skemorphic things in social. And so they're going to pattern match to what worked. And so the fact that that's happening to me is why it's sort of like proto-social. It's like we're not actually at the place yet in the market where people are like combining these novel primitives in a way that is actually going to be crypto-native. But the fact that we've now gotten to a point where people are trying to recreate

and speed run the stuff that worked previously is actually to me the precursor signal. Because I agree with you. And I agree with Kyle that that's like not the right way to figure out what's going to work. But to me, the market has that that's like the necessary step that the market goes through before it figures out what's actually going to work. Right. Okay. So let's switch gears one more time going away from the product and going more towards the legal. So it's been a busy week for legal and regulatory, and we actually skipped one story last week that I'm going to tie in here. So the SEC has been very hard of work, basically, in their campaign against the crypto industry. So a couple weeks ago, the SEC, we talked about them filing a Wells notice, which is basically

letting somebody know that they intend to file a lawsuit or an enforcement action against them. They gave a Wells notice to Uniswap, and Uniswap announced that they were going to be fighting against any potential lawsuit from the SEC. The SEC also filed a Wells notice against consensus, which, of course, of course, which, of course is the company founded by Joe Lubin, which is, you know, kind of early Ethereum ecosystem company that is also the creator of Metamask. So apparently the SEC claimed that Metamask claimed that metamask was an unregistered broker, which of course is the claim that was dismissed in the Coinbase case about Coinbase wallet being an unregistered broker, as well as

Metamast staking being some, you know, metamast staking products being unregistered securities, which is much in line with their claims against all the staking products that they've gone after. So now consensus, beyond just saying we are going to defend ourselves and fight back, court, proactively sued the SEC in Texas, which I think is the fifth circuit, something, some circuit. It's, I don't know. I was just talking with something about this the other day. So basically, under the thesis that the SEC, apparently, they like to bring cases in

either New York or D.C. Because these circuits, basically the circuit being a sort of subsection of the country where basically your appellate system is segregated by these different circuits or these subsections of the country. They're nine, I believe. And so the SEC likes to bring cases in the circuits that tend to be kind of government favorable. So in D.C. and in New York, usually the judges tend to be more pro-government, whereas in Texas, surprise, surprise, the judges there tend not to like the government as much, and therefore the odds are all things equal that you're likely to get a more favorable ruling. And so consensus sort of went on the offensive and said, we are going to proactively

sue you for failing to make rules despite the fact that you're supposed to be making rules under the Administrative Procedures Act, and you are not giving the industry clarity and you're supposed to because of how agencies are supposed to function. So consensus to the SEC. Then a week later, Robin Hood announced that they also got a Wells notice from the SEC.

Now, Robin Hood is relatively unique among these players. If you think of Uniswap, you think of Coinbase, you think of consensus. These are all companies that are very active in crypto, and they do a lot of stuff. They have a lot of arms, and they're sort of, you know, taking a good amount of regulatory risk.

Okay. Robin Hood, of course, a public company, Robin Hood was pretty anodyne in their approach to crypto. They were fairly conservative. So they essentially only allowed trading of assets. They did not allow, you know, any kind of exotic tokens. It's basically, you know, Bitcoin, Ethereum, Seoul, doge, you know, stuff like that that they basically had on the platform. And they even delisted Seoul and XRP when the SEC named them in their lawsuit as an unregistered security, which none of the other platforms did. But now, Nevertheless, Robin Hood was hit with a well as noticed by the SEC. Robin Hood went to Twitter, basically, and did the same thing everyone else has done,

which has announced we're going to fight this lawsuit, and we believe the SEC is being unfair and capricious. Did you also see Robin Hood's quarterly earnings today? Apparently, yeah, they were way above expectations. They killed it. Because of crypto trading. Yes, they're cryptocurrency. That was the key thing to add. 230% outperforming.

But the interesting thing is well. Yes, no, no, no, no. The interesting thing as well is that when they announced that they were going to fight back against the Wells notice, their stock dipped 2% and then fully recovered by the end of interday trading, which also tells you that the market is no longer giving the SEC credit, right? Remember, when Coinbase got the lawsuit filed against them, the market tanked, it was like, oh, shit, this is terrible for the industry. Clearly this means that it's over, you know, when your regulator comes after you and basically says your business is, you know, de facto, elis. that generally means this lights out, right? But now, going down zero percent in a day, I think is crazy, right? That's like, you know, if you see the FTC, you know, Lena Khan has been famously very, very aggressive against all these mergers, her win rate in court is basically

zero. She's not a single one of these cases that have actually gone to trial. It feels like the same thing is now happening to the SEC, which is that the markets are no longer giving credibility to the SEC for actually being able to win these cases. Because if it was true, that the SEC is going to shut down their crypto trading business, then obviously a huge value, a huge part of the value of this business. SEC is learning a lesson from crypto itself, which is if you're a meme coin trader, you need to spam the blockchain.

So if you're at the SEC, you just need to spam lawsuits with the hope that it's just like, you know, it just overwhelms people. And I think that the spamming congestion problem has reached its max. Probably because of like, obviously like the bill that's just past the, House of Representatives today.

There's a lot of stuff that's not in their favor that's in government. Forget about these lawsuits. Basically, like, yeah, I feel like because the SEC has like all this kind of trouble in government per se, I don't think they have as many allies as they did maybe a year ago even. It feels like, I mean, the fact that so many Democrats voted against, or sorry, for this bill, as maybe some evidence for that. I feel like this is like, you know, kind of like a tantrum by a, you know, a child that's in trouble, you know, right?

Like they're like, I want everything. I think it's actually a little bit, I mean, it's certainly political, but I think it's a little bit more nefarious than that because I think, okay, so stepping back for a second, because I think, I see, your point on the FTC is a really good one. And tying that thread, I think is actually really important to understand what's happening. I spend a lot, I'm on the board of CCI, which is like us and paradigm and injuries and fidelity and block and a couple other folks. And I do a bunch of regulatory stuff. And so I have fortunately a bunch of sort of information flow and sort of off the record kind of stuff that we get to understand. I think what's happened is that there's been a material shift in strategy. And that's what it used to be was that if the FTC or the SEC took you to court, they were doing

it because they were really certain that they were going to win. And when, happens is there's been a strategic decision which has shifted, which is we're going to take cases to court. And if we're not losing some of these cases, we're not being aggressive enough in pursuing action. And that's a really, really important shift in terms of how the regulator interfaces with the markets and the entities that they're supposed to regulating. And now, I think sort of assuming best intent, you might argue that it's coming from a good place, which is you can, anybody can look at the structure of the markets right now or the

structure of society and be like, okay, like the rich are getting richer. there's a structural problem. There's no political will to actually solve some of these structural issues right now. And so there are people who arguably are well-intentioned. Let's give them the benefit of the doubt for a second. I think you could reasonably disagree that they're well-intentioned and are just being political, but let's assume for a second that they're being well-intentioned. What they're essentially saying is, look, the political process is so broken that there's no way

for us to meaningfully fix these issues at a structural level. And so we're going to be sort of turn these agencies into activist organizations. They're going to try to fix it. Now, the problem is that they're taking on, lawsuits and risks against companies like, you know, Activision and Microsoft or Coinbase or Ripple or consensus, which are extremely well-capitalized companies. And those companies are saying, wait a second, there's no legal basis for what you're doing. And we still have rule of law in this country. And so they're taking it to court. And then these agencies are losing. And so I think like

the second order effect of potentially well-intentioned action by people who see structural problems in society and in markets is actually causing the erosion of the integrity of these institutions, which is really, really bad. And that's actually what I worry about fundamentally is like, it's very clear these guys are going to lose in court. Like, they're just like, they're so overextended. They're just like, there's no legal basis for half the stuff that these guys are doing right now. So they're just going to lose in court. But the consequence of that is you now have, to your point, to see, the markets no longer trust the SEC at this point, which is terrible, like, because there's real fraud that might happen out there. And if the SEC is going to bring cases and

people don't believe that there's fraud, like, you start to lose, like, well-functioning markets. you start to lose like rule of law, which is such an important, like, construct and why the economy works and why the American markets work. And that actually is very concerning to me. Like the SEC, these guys are going to turn over. We'll outlast them. Consensus, well, you know, full disclosure, we're investors in consensus. Consensus will outlast them. Coinbase will outlast them. Robin Hood will outlast them. But the damage that they're doing is permanent. And that is, to me, is the real cost for concern here. So I very well said. And I will I will underscore that with also saying,

that there's also a big asymmetry of power, which is that the government, like part of the reason why our system of government is set up in the way that it is, is because of the fact that it's well known that the government is the most powerful entity that exists, right? There's an obvious asymmetry of powers that the government can subpoena whatever they want and their resources, you know, the SEC has billions of dollars, thousands of lawyers in their arsenal. And most of these companies are startups. Right now, obviously consensus. We are also investors. You know, they're fairly well capitalized. So is Uniswap. So is, you know, Robin Hood and Coinbase. They can fight for themselves. But of course, a lot of the people the SEC are going after do not have those

kinds of resources. And as a result, there's a big asymmetry of power in the system, which is why generally speaking, the presumption is that the government must have a very high burden to clear in order to go and target these people, right? These are enforcement agencies. They're basically one step removed from law enforcement. And the presumption is that you want to have a lot of checks and balances in place, such that these agencies cannot just go on political prosecutions, right? cannot just go say, look, I don't like this thing. Therefore, I'm going to go attack it in order to pursue some kind of policy agenda, right? Like, regulars are not supposed to be setting policy. The legislature is there to enact policy and the executive branch is there to execute the

policy that's been determined by Congress within certain bounds. Obviously, there's a bunch of gray areas at the margins. But what's really clear to my mind is that, like, the system of government we have is designed to slow this kind of thing down to make it difficult for each president to flip-flop and totally change the regime. And that's why we have a very slow-moving government. We have gridlock in Congress. And people say, oh, it sucks. Why can Congress pass laws? Why can nothing happen in this country? That is by design. We made a system of government intentionally so that people would have predictability. And it wouldn't be the case that every four years or every six years, you get entirely a new set of laws and a new set of rules. And basically, companies and citizens

are ultimately up to the whims of whoever gets elected over the next four years. And so I think that fight that we see, the fights in Congress, the fights in the courts, and the fights among the agencies is by design. And on some level, what the SEC is doing is kind of trying to sidestep those fights and not let them play out the way that they're supposed to and say, hey, instead of waiting for Congress to fight it out, instead of waiting for, you know, the courts to fight it out, we're just going to go and a civil attack essentially the industry and you know do a thousand lawsuits We started this episode with Sybilz we ended with Symbols you know one it one is and do you know the only commonality Me saying that lawsuits are involved in both that's all I have to say well mic drop amazing

Tom what's your what's your take on the the SEC drama here? Yeah and where do you think it's going? Yeah, I think I mostly agree. I think you know we'll see post-election what happens with, I mean, frankly, all the regulatory bodies right now and if there would be sort of a regime change or just overall policy change. But I mean, I saw Gensler was on with CNBC this week being interviewed. And again, I want to give these agencies credit and credibility and believe that they're acting in good faith. But as with sort of the Bitcoin ETF lawsuit, like, it just, there's no real reasoning or there's no really good arguments. And it's a shame because there is real fraud in the industry and there should be some regulation. People have been asking for clarity forever. Gensler goes on TV and says,

oh, well, you need disclosures. What disclosures? We've been asking for years and years and years around, you know, what is the path forward for these assets, you know, give some guidance and ultimately, you know, we've received silence. Yeah, I completely agree with that. Look, if the SEC were to go out and say, look, here is the disclosure's regime that makes sense for digital assets. Here's what you need to do in order to register. Then I think everybody in the industry would be like, great, awesome. We will do that, right? As long as they are sensible and they're tailored to what is different and meaningfully informative for digital assets.

Like we have sort of, to some level, figured out as an industry, what are the useful disclosures for a crypto asset, right? Like, what's the vesting schedule? What does a token do? Where's the white paper? What are the token mechanics? Where are the contracts? point to all these things on chain so people can go diligence them for themselves.

And when we diligence things, when we talk about things on the show, we are doing that diligence, which is what otherwise any financial investor would want access to, right? But if you say that, well, no, no, no, no, we already have well, we already have well, defined securities laws.

And it's like, oh, okay, well, I need to go fill out these forms that are, actually don't disclose any of the information that I just described, right? You can, you can register a security and say nothing about a token distribution or on-chain addresses or whatever. And as a result,

what's very clear is that this, No, the idea that, well, we already have laws and therefore just follow these and then you'll be fine, no other country, no other regulator in the world has come to that conclusion, except the SEC, which seems to be like, okay, this is just kind of a willful just kind of aggression toward the industry. I'm just saying, no, no, look, you guys don't have the right to exist.

If you don't fit into our pre-existing securities laws, as pre-existing securities do, then you don't have a right to exist in financial markets. And I think overwhelmingly, what you see is that, you know, beyond us the industry. I think most people think that that's bullshit, right? Yeah, like crypto or don't like crypto. Clearly, crypto is a thing and it will exist. And so the question is, okay, how are you going to subsume it into a investor protection regime, which I think everybody's on board with? You know, like, what does Binance do? What does Coinbase do? They protect investors.

They try to be thoughtful about making sure that you can read information about what is this token, who's working on it, what is, you know, where are the tokens? How many are there? When do they get distributed. Every single place you look to that actually has retail investors' interests at heart, which of course are these exchanges, which service retail, they try to give that information to retail investors. So that's why I think this narrative that the SEC has been giving that, look, we are the ones protecting retail. I think it's just disingenuous. Yeah, I think, I think it's also hard to have a podcast where everyone agrees. All right. Turin, what's the counterpoint? Devil's advocate.

No, no, no, no. I don't have one. It's like, how could you? No, let's try anyway. Let's try anyway. Turin, I want you to play the role of Gary Gensler, put yourself into his mind, give me your best improv of what would Gary Gensler say if you were on the show. I don't think on the merits, it's possible. I mean, that's what's so fascinating. Yeah, exactly.

It's just failure of imagination. Come on, turn. I believe in you. You can do it. Well, you know, I don't really like the dominance of the U.S. dollar. I feel like the stable coin thing is cementing the U.S. dollar. I'd rather be telling companies that they have to sell themselves for U.S. ownership, even though they are totally fine in their rights to free speech distribution.

I don't know. What else you want? You failed your actor class. I'm sorry. The best I could do on this, I think is like, I think the best you could do on this is. I think the best you could do on this is not so much like what is the case for the other side, because I don't think there are substantive merits to the case,

but I think you could grant that there are real problems in markets and there are real problems in society and anybody who sees the problem and has a hammer sees a bunch of nails and they're using the hammer, but that there are real secondary consequences to these things. And the thing that I worry about

in addition to sort of the integrity of these institutions being eroded is that there's a fundamental there's a fundamental even more like meta fundamental issue at stake here which is we've seen a shift in how government, the U.S.

government thinks about technology. And if you contrast this with how the U.S. government or other governments around the world are thinking about technology, I think the government's learned very different lessons from the internet. I think what the U.S. government learned inadvertently, which is incorrect,

is that this stuff has consequences, which is obvious, try to control it. But the reality is the world doesn't work the way that it did in 1995 anymore. Like markets are global, capital is global. People can pick up and leave. And literally we see that happening. Look at Ilya from near. He just moved to Europe. He's one of the authors on a transformer paper and started near blockchain and we're investors in near, just full disclosure. But that's such a huge loss to lose that person as a potential U.S. citizen. And so there's like this lack of understanding of what the assumptions have changed in society. Meanwhile, the rest of the

world that effectively lost the internet, like all the big internet companies are American, right, Facebook and Amazon and Google and so on, um, looks at this and says, oh, we botched it. What we actually need to do is embrace this stuff because if we don't have the tech companies in our jurisdiction, we have no oversight. We can't do anything about it. And so there's this like weird, bizarre world that we live in now where like the rest of the world, because they lost the internet is figuring out crypto. And the American government as a consequence of winning the internet, like we just didn't

learn the right lessons in this country. And so we're like totally mangling it. And it's because of the fundamental assumptions about what regulation, what power regulators have these days is just so wrong. It's stuck. And it's a consequence of just like the gerontocracy, right? It's like you have a bunch of these people who think the world works a certain way. Just the world doesn't work that way anymore. And it's not clear to me that they have internalized that the world doesn't work that way anymore.

And it's such a huge miss. Like I'm a thousand percent on Turin, what you were talking about with like stable coins and national security. It's just like anybody who understands the role of the dollar in the world should be running so fast at crypto in the U.S. government, and it's just such a, such a, like, missed opportunity. I think where a lot of it comes from as well is just cynicism, right? It feels like there's just an increasing cynicism about technology. And interestingly, we're also seeing it now happen in crypto. Yep. So this kind of ties, you know, some of the threads we were talking about earlier withirdrop farming and VC coins and all this. You know, there has been this increasing trend of people

talking about this idea that retail investors are getting exhausted with all these VC coins. And these VC coins, I mean, when people say VC coins, generally what they mean is that these are venture-backed startups with technologists that are telling this big technology story about, you know, a DA layer or a new L1 or a new L2 or whatever. And, you know, the criticism against these is that there are a lot of them. They all launch with relatively low floats and high FDVs, FDVs, FDV meaning fully diluted valuation. So a small amount of the token is floating. So, you know, 10%, 8%, whatever. But the total supply when it's fully unlocked is going to be, you know, 10 times that or something like that. And there's a sense, or at least many people have been claiming that retail is getting exhausted

by this because they keep losing, you know, as the supply gets unlocked and the VCs dump on them, they're just going to lose and lose and lose. So the canonical example is something like ICP or DFINITY, which, you know, started off with a very, very high valuation or fully delayed valuation has been slowly creeping down over time. And the sense of, okay, well, retail is kind of exiting by saying, you know what, we're just going to trade meme coins because meme coins, they're fully circulating day one. there's no extra supply we have to worry about. And yeah, okay, maybe you guys are telling us

big technology stories, but we don't buy it anymore. This whole thing is just a big game of musical chairs. And so we're just going to play the musical chairs amongst ourselves and cut out the middlemen, which are the bullshit VCs. So it does feel like I'm seeing the sentiment a lot. I'm also hearing it from other VCs, right? So, like, I was chatting with Regan Bosman from Lattis Fund. And he's been writing all these Twitter threads talking about how,

you know, this cycle has been. Like, I hate the casino person. I mean, I don't know exactly what he did. and doesn't hate, but he does, he does, he's been underscoring this idea that there's just like narrative exhaustion and there's too many of these VC coins and, you know, at this, at a certain point, you just can't keep playing this playbook. And so it feels like that cynicism is not just the US government, it's also retail or crypto-twitter, I can't tell how much of it is actually retail and how much of it is just this sentiment is what people want to upvote right now, but at the

same time, like all these high FTV launches are still having high FTVs. It's not as though, like, the FTVs are coming down. So I'm curious what you guys think and how that filters into how, you know, we talked about this a little bit on the last show, how there's all this anti-VC sentiment that seems to be materializing and maybe as a byproduct of this cycle. I don't know if it's VC versus non-VC coin. It is so much as just, there have not been that many extremely novel projects. It feels almost kind of like a defy summer moment where everyone was copy pasting, you know, Uniswap and Yam finance and making some tweaks and launching a token. but for L1s and L2s and bridges and all this sort of like miscellaneous infrastructure and obviously some applications as well.

And I think the stuff that is novel can do well in the market. The problem is like most of this stuff is not. It's an existing thing that has been tweaked slightly, has no real activity user. I mean, there's even an article in, I can remember which publication about like zombie chains from 2017 this week, which is, you know, I think kind of the equivalent from that era, but for this era. And I think the VC allocation really matters that much. I mean, again, most of the top products that we know and love, I mean, had meaningful VC

allocations. The difference was that they were doing something different. They had some sort of meaningful traction community developers, whatever it is. And that is ultimately the number one particular of success. Avichael, what's your take on this? I actually think it goes back to kind of what we're talking about with the SEC kind of stuff, which is there are real problems in society and people are frustrated. and so like a lot of this stuff to me is sort of this sense of I'm being left out of the system.

Like people have talked about this sort of financial nihilism kind of stuff and that leads to meme coins. So I think a lot of is like anti-VC sentiment is sort of like why are people who are not creating value getting rich? That doesn't feel fair, which I think is actually a fair sentiment. Like it does feel like, you know, like society has all these feedback loops. We talk about, you know, in technology we talk about feedback loops. Society has a bunch of feedback loops too. And a lot of those feedback loops have led to people who are creating far less value than they may have 20 years ago continuing to extract massive amounts of money. And that just feels fundamentally unfair.

So I'm actually sympathetic to the argument because, you know, it does feel like the rich getting richer and that's like that's not healthy for society. But I don't think the problem is that there are like categories of really high value add VCs. You can go talk to the founders. So I just go talk to the founders and be like, hey, does. electric create value, does robot create value, does Dragonfly create value, does Paradigm create value? You can like run through the list and you're like, yeah, there are actually people who roll up their sleeves and get to work with you. But I get the sentiment. Like I think the sentiment is coming from a reasonable place, actually, that like I'm being left out of the system

and these other people keep getting richer and that feels unfair. I just, that's like a bigger than crypto thing. Like I think it's being manifest in crypto, but it's also, it's happening all over the world. It's happening, you know, it's like the root causes of the SEC stuff. It's a root cause the FTC stuff, the root cause of the rise of populism, like, it's happening in a lot of places. I wish I knew how to solve it. But I look at this as not like a VC coin problem. I look at this as like the structures of society and capitalism and democracy need to be reformed, and that's going to take a long time. Do you agree with that? Is this like a meta-social problem or is this a more micro-problem to the crypto market structure?

I mean, I think it's this always happens every cycle. There's always like some angry. Every time it's like, oh, well, you know, we found a way to get liquidity on the first part's first set of those coins. Obviously, there's a lot of copy pasta diligence slash VC that's done where people fund things that look exactly the same, 500 of them, in fact. And then, you know, they're dumped on the market and the market says, I just don't have the demand for it anymore. And I don't know. This happens every cycle. I feel like what happens is you have this thing where it's overdone. And then in the depths of despair, you find the thing that people really care about, you know, like in the ETH or Solana or things like or uniswap, right?

Like things that came after that. But this is the usual, like, cynicism. I think there's just not an optimistic narrative in crypto right now, if they're going to be totally honest, right? like most of it is this nihilism stuff and like that I feel like you can only last so long on that narrative so I I was chatting with a couple people about this the day I actually don't buy this narrative I think it's it's obviously in fashion right now to talk about this of like oh there's too many low FTV launches and it's all these e-coins or who's going to buy all these tokens like just go on binance and just go look at what are the most traded tokens and the answer

That's retail. That's what retail actually is. It's not crypto Twitter. Crypto Twitter is not retail. Right? Crypto Twitter is crypto influencers. And like it's a very easy mistake to make, which is to assume that crypto influencers are representatives of retail.

But they are actually not. And that's true every cycle is that you can make the mistake of assuming that what people with big followings think are what retail thinks. And it's generally wrong. And it's always wrong in a different direction. And like if you just go look on Binance at what people are trading, people are trading people are trading VC coins. They're also trading meme coins.

But meme coins are not dominating the market. It's not as though like, well, they're trading mostly Doge and Whiff and Shiba Inu and almost nothing else. Like that's just not true. Anybody who thinks that like, well, everyone's exhausted with the VC coins, they don't care about technology. They only want to gamble on this financial nihilism stuff. That is incorrect. Go read the trading laws. That's not what they're mostly gambling on.

There's a lot of people gambling on that, of course. But there's way more people buying Bitcoin and Ether and Seoul and, you know, whatever. These newer coins as well that are hot and AI coins. and NIR and blah, blah, blah, these are also trading huge amounts of volume. And the reality is, like, most of what crypto is about is about technology. And what we're doing here is trying to build better technology, which is most of what retail cares about. They care about this story.

So there is a subset of the market that's just like, look, fuck it, Wall Street bets, nothing matters. Let's just like, let's just gamble and try to meet or make a thousand X on, you know, absolutely meaningless dog coins. And that's okay. And there's always going to be some version of that in every cycle, because crypto, is ultimately a very easy way to remix just convexity and make convexity fun and kind of dynamic.

But I just don't think it's that simple of a story that VC coin's bad, meme coin's good, and you guys have ruined the party for everyone. I do think there are a lot of tokens that will go down in value. But as Seroon said, that happens in every cycle. So I don't think that's unique. There will probably be a lot of these tokens

that are eventually traded for a fraction of what they're worth. and one or two of them that end up massively, massively valuable and are worth way more than they're even worth today, even though you might think today their valuations are eye-popping. And that's what venture looks like. That's what normal distribution of outcomes looks like for any cohort of technologies. So anyway, that's my two cents.

We just ran over, and I think Tarun unfortunately had to run, so I think we'll have to wrap it up here. But Avichel, thank you for coming on and for sharing your perspectives. And thank you for, you know, now that Turun's on. My excellent. My excellent Turin impression. You are now elected Turin now that Tarun is off. So anyway, thank you for coming on board and sharing your perspective with us.

Good to see you. I hope you can have you on again soon. Thanks, everybody.