Unchained - The Chopping Block: Has Crypto Lost Its Soul? Cypherpunk Nostalgia, Prediction Markets, & Permissionless Perps

Episode Date: March 5, 2026

Crypto’s vibe check time: Jez (izebel_eth) joins the crew to dissect whether idealism is RIP, if cypherpunks should abandon hope, how Memecoins and asset mayhem changed the game, why prediction markets are both truth engines and regulatory minefields, and where real permissionless finance is actually winning in the middle of global chaos. Welcome to The Chopping Block — where crypto insiders Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner chop it up about the latest in crypto. This week the gang is joined by super-perpetuals-junkie Jez for a spicy look at whether crypto has lost its soul — or if things are just getting interesting. Is crypto’s vibe shift just growing pains, or did Memecoins and jaded traders nuke our idealism for good? The crew rehashes dreams of cypherpunk glory, debates the “death of the dream,” and gets existential about crypto’s place in a world where everything is either a commodity, a meme, or a permissionless financial machine. Plus: War in Iran sends TradFi running, but DeFi markets are live, and prediction markets step up just as the regulators get weird. Enough nostalgia — let’s get into it. Listen to the episode on Apple Podcasts, Spotify, Pods, Fountain, Podcast Addict, Pocket Casts, Amazon Music, or on your favorite podcast platform. Show highlights 🔹 Jez and Tarun’s crypto origin story: from MIT outcast to NFT party degens. 🔹 Has crypto really lost its soul, or just shed its rose-tinted glasses? The hosts debate. 🔹 The rise and rise of Memecoins, rampant speculation, and Solana’s culture shift. 🔹 Do “return to cypherpunk” calls matter—or is this what crypto winning looks like? 🔹 Why stablecoins, perps, and DeFi are actually success stories (despite maximalist whining). 🔹 AI eating crypto’s lunch: the “everything on the blockchain” promise gets a reality check. 🔹 Real world chaos, onchain price discovery: Iran war, commodities, and DeFi’s 24/7 edge. 🔹 Prediction markets—Kalshi vs. Polymarket—tripped up by the ambiguous reality of war and death. 🔹 CFTC, insider trading, and whether banning informed bets is just protecting “the fish.” 🔹 The future: agents, open-source AI, and keeping the door open for true permissionless finance. Hosts ⭐️Haseeb Qureshi, Managing Partner at Dragonfly ⭐️Tarun Chitra, Managing Partner at Robot Ventures ⭐️Tom Schmidt, General Partner at Dragonfly  Guest ⭐️ Jez, LegendDisclosures Timestamps 00:00 Intro 01:07 Jez x Tarun Lore 03:24 Cynicism & Rug Culture 09:00 Back To Cypherpunk Roots? 14:37 Compromises & Reality 23:36 Intermediaries Coexist 25:23 Gates Closing Fears 28:10 Stablecoins & Policy 29:24 Agents As Middlemen 30:28 Microfinance to DeFi Agents 31:57 Open Source AI and Crypto Control 32:41 Iran War DeFi Price Discovery 33:57 Why Perps Beat TradFi 37:21 Kalshi vs Polymarket Dispute 44:31 Are Prediction Markets Just Toys? 50:50 Insider Trading Crackdown 54:15 Adverse Selection and Market Design Learn more about your ad choices. Visit megaphone.fm/adchoices

And the most cypher punk thing that you can do is not to have no connection to the real world. The most cypher punk thing you can do is to fucking survive and to allow anyone to be able to use it. Not a dividend. It's a tale of two fun. Now, your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways. Unimmed to trading firms who are very involved. Dalek.eat E is the ultimate pump. DFI protocols are the antidote to this problem.

Hello, everybody. Welcome to the chopping block. Every couple weeks before us get together and give the industry, insider perspective on the cryptotopics of the day. So quick intro, this is Tristan. Tom, the Defy Maven and Master of Memes. Hello, everyone. Thanks, we've got Tarun, the Gigabrain, and Grand Puba and Gauntlet. Yo.

And joining us today, we've got special guest, Jez, the perpetually online pundit of Perps. Welcome to show, Jaz. Hey, guys. Glad to be here. Wow. That was one of the best ones you've made. There you go. It's all me. And I'm Steve the Head Hype Man at Dragonfly and the Head Screenwriter. We are early-station 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. at XYZ for more disclosures. So, Jess, my understanding is that this is a reunion for you between you and Tarun. You were telling us just before the show started that Tarun was the first guy you met in crypto? Yeah, the first person that I met in real life. So I sort of, you know, I came, there's a very good article why the up the elite hate Bitcoin. I sort of came from that circles, everyone from MIT, everyone in my roles at Quant. finance sort of like hated crypto. So I was sort of on this island. I had a lot of internet friends,

but no one sort of like in real life that I could talk to about this topic. In 2021, sort of at the peak of it all, everything was very frothy. I had in mind this old image from the Wall Street Journal where it's like everyone is getting filthy rich and you're not. And it was those guys wearing the Bitcoin and the Ethereum sweatshirt. And I had never been to one of those events. And so things were frothy in 21. And I was like, I want to go experience one of these events and parties in real life. before the cycle ends. And there was a Cryptopunks, Christi's auction viewing party that a photographer named Justin Arsano was hosting in New York.

I was like, all right, this seems like a good one. I have a couple punks. I filled up a backpack full of beers, and I walked into the venue. And the first, like, I get in, it's kind of like this dark room. And there's a guy in front of me with, like, colored hair and colorful glasses. And I'm like, this guy looks interesting to talk to. And so I think me, and we both went to the same school. We had a bunch of similar background.

And you were like, surely there's a get-up for the, like, he doesn't actually look like it. This is like a joke, right? He's an atmosphere man. Yeah, yeah, yeah, yeah, exactly. I graduated to wearing tennis shirts of people playing tennis. Yeah, what's going on? Yeah. It's just like a shirt of people playing tennis.

It's like a projection. Oh, it's literally a shirt that's literally of people playing tennis. I thought you meant like a tennis shirt like that people wear. It is a tennis shirt, but also a tennis shirt of people playing tennis. Okay. Wow. Yeah. So Tarun was the very first person that I met. I think we talked for like 45 minutes. I then went and I met the pleaser.

And you left and you were like, I've never come to one of these. No, it was amazing. I turned around and I ran into, you know, James, rest in peace and a bunch of the pleaser guys and people pleaser. And they kind of became a bunch of my friends as well. So it was sort of like one of those things where, you know, sort of just show up. You can just do things, make friends. That was a moment in time. A lot of people now on the timeline of lamenting that crypto feels really different. I mean, Jess, how do you feel about that? We've been talking about it in the show for the last few weeks. What's your sense of it?

I would completely agree. For a lot of things outside of a very few subset of successful vertical niches, the dream is dead. I've told this story before where in 2021, when I fumbled my uniswap spot position, I like cried. Because I was like, my dream was to rent seek global finance. I was going to stake my uniswap and get like a percentage of all, you know, know, financial transactions that were going to happen in swap. And I was like, you know, I was, I was sort of like in shambles that like I'd lost what I had thought was an important part of my dream. And now like, who's ever crying over like a missed position in this market? It's just sort

like, oh, you know, you miss whatever L2 trade. Like either there'll be another one or you don't really feel like it was a moment in time. Maybe for special projects like hype where there still is really belief. But I think in general sort of like the asset diaspora that we have, had. NFTs to some extent, like certainly started it and helped proliferate it. Meme coins, I'm going to like name as sort of like the obvious detractor here. But there's too many assets and people don't believe in the assets as they're buying them and there's no long-term belief for most things. And I think that that's the core difference.

It's that the idealism is gone. Yeah. The sense that there's like this one one megatray that's going to save you. If you look at the demographic of. crypto participants in, like, certainly like 2017, it's a lot of like punk and our, like, anarcho punk technologists who really believe that like this technology is going to change the world and they're investing like their entire net worths into it because they believe that this is like, you know, the future. And I think if you look at a large set, I'll call out Solana for,

I think having cultivated a bad culture here, but a large set of just general crypto, I think Today is much more short term. It's much more about, you know, how can, it's always been about how can I make money. Like, let's not lie here. Like, that's always been like a very underlying strong product market fit. But I think, you know, rugging a pool, even two, three years ago was like, you know, red mark on ether scan and completely like blacklisted from the community. If people remember, who's the guy that did bald on base?

He was a big D-YDX basis trader. it's embarrassing right now that I can't. It'll come back to me. But he got shunned out of all the communities because he rubbed the bald token on base. And now on Seoul, it's just like if you don't rub, people will kind of look down on you as like,

oh, you're not playing the game optimally. Certainly the tools themselves and the protocols have made it one click. Whereas like before you had to think a little bit, now it's like encouraged and like into U.S. It's even more crazy. So I would say it's just a different participant set. And that's sort of a lot of the

follow-on effects that we're seeing are coming from that. Is it a different participant set or is it just that the participants who are still around have hardened, you know, like their hearts have blackened with age and like, you know, it's kind of like the idealism has gotten beaten out of them. Like I don't know that, like it is the same generation, right? Like there was a big onboarding event in 21, 22. A lot of those people fell out when the NFT market collapsed. And then there was another onboarding event in like 23, 24, 25 coming into the meme

coin cycle and like the Trump NFT, sorry, the Trump meme coin. And I think for those people, it does feel like every subsequent generation of crypto is less idealistic than the one before. You know, like the meme coin generation, they came in literally under the philosophy of financial nihilism, right? The NFT people, like, they weren't cypherpunks, but they believed like, oh, we're all going to make it together. Like that was literally, you know, Wagmi was this big aphorism that everybody used. And then before that, like in 2017, that was the era where people genuinely believe that we were changing the world, not because we're all going to make money, but changing the world in the sense of disrupting traditional political systems and financial

systems. Every subsequent generation, like the ambition is getting narrower. You know, it's more about, you know, like, I don't know, we were just chatting before the show about like these Pokemon card platforms, which it's like, now the ambition is like even, you know, it's like a sort of pinpoint ambition that like, yeah, we're going to disrupt gotcha games, you know, and like, now you can buy a Pokemon card directly in Solana instead of going to the local grocery store and buying it there. Yeah, I think even if no matter how we decide on the demographics, I think if you look at where the capital has aggregated, the capital has certainly aggregated to the more cynical

and short term, mainly because those have been the successful trades for the most part. I talk about there was a phenomenon in NFTs where all the floors, all the NFTs, all the NFT rarities compressed to floor. Part of that was the airdrops that made all the NFTs kind of fungible in terms of the amount of tokens that they got. But part of it was because pretty much everyone who really cared about like NFT rarity died in art blocks because they bought a bunch of rare art blocks. And then those things went illiquid and they didn't have the capital anymore.

And so that sort of like market pressure of like rarity hunting that maybe started with punks and some of the other on-chain NFTs really lost a lot of effect after those people like they made their preferences on chain with art blocks. They were wrong with their capital. And so their future voting power with their money was diminished. So a lot of people have been talking about this need for crypto to return to its cypherpunk roots. So if Guinea from Wintermute, who famously controls the prices of everything, he wrote this article recently that he felt that like, hey, okay, maybe TradFi is embracing crypto. Maybe Bitcoin has now gotten subsumed by the traditional financial system.

but the idea that this is what it looks like to win is a betrayal of the core values of crypto and that we need to go back to our roots which is that look if crypto is not a fundamental challenge if it's not subversive in this deeper way then we failed and I think Gabriel Shapiro also wrote recently something very similar about Ethereum I'm curious to get the response from you guys to this

I feel like this kind of philosophy is gaining steam among a lot of OGs who are still in the space, that like somehow we've silently failed something. Then there are voices, you know, I've been one of these voices that says, like, actually, no, things are going great. Like, okay, maybe the meme corn traders are down bad, but like when, you know, I don't know, that's happened so many times in so many previous cycles that the ICO traders are down bad, the NFT traders are down bad?

That's not the barometer of success. The barometer success is like, are we doing the thing that we set out to do 10 years ago when this all started? And my view has been like, yeah, things are working. Prediction markets were a paragraph in the Ethereum white paper and now they're taking over the world. You know, stable coins were also a paragraph in the Ethereum white paper. Now they're 300 billion. Like, defy is going crazy.

Perps are going nuts. Like we're, you were going to talk about how much this stuff is taking over the world and actually creating permissionless finance. So my view has been like, actually, no, this is what it looks like to win. Tom, Tarun, Jazz, how do you guys, how do you guys respond to that, that charge that many people are making? I think there was like a thing in 2021, right? where like Web 3 ownership economy was supposed to be like every industry, every kind of walk of life would be illuminated by our holy lord and savior, the NFT and its derived assets and

protocols and stuff, right? Like that kind of led the decentralized social network, decentralized whatever. I mean, like you started getting like the Uber on the blockchain pitches again, right? And I think there was a pitch that was much bigger than finance from 2017 to 2022. That was like every industry is going to be left behind and vanquished if they don't adopt crypto in some way. And right now you see that AI is doing that. And it has lived up to the promises that were made. Whereas like in crypto, I feel like the finance stuff, you could have seen those promises in 2014.

Right. Like realistically, most of the concepts that are, of all the things you're talking about, be it in prediction markets and getting implemented being stable because, like, they didn't reach their final form. They needed a lot of other things to work. Like, they needed D5 for liquidity to make it more feasible. They needed, like, infrastructure for bridging. They needed dot, dot, right?

Like, totally fine, but like the concept was there. And that, it feels more like the 2014 and 2015 vision of crypto succeeded. But it feels like the 2017 through 2022, let's say, vision completely failed. has been usurped by AI and there's no way back. That's sort of how it would. What was the 2017 vision of crypto? Everything on the blockchain. I don't think anyone's serious, like, wanted Uber on the blockchain or like blog posts on the on the blockchain. Maybe that, some people. I don't know. I don't know.

Do you remember the social network Justin Sun took over? What was that, what was that thing called? Steam it. Steam it. Right. Right. Right. I kind of, by the way, I thought his attack was based. That was like kind of funny. He just showed how useless the thing was. I find myself in this paradigm a lot where I was genuinely excited about a lot of the financial stuff. I remember in 2017 reading a bunch of the supply chain white papers. And I'm like, well, this is dumb.

Like if you trust coach, you trust them to like run their own cryptographic database that you can check. Like why is this a public rent seeking? And but then dealing with everyone else's disappointment when these dumb narratives falls through is always like, yeah, well, that was dumb. Why did you guys even get excited about it? But then dealing with their disappointment and the falling, like sort of like, whether it's enthusiasm or price on the back end,

always sort of sucks. I think my take on sort of like, whether it's disappointment on the arc that crypto has gone, for the most part comes from getting overshadowed by the speculation and sort of like Gamma product market fit. Like when I look at like the core things, like USDT on Tron is like actually working for millions of people. Stable coins in general are actually working.

defy over collateralized is actually working. And then when I look at like, okay, well, what's cyberpunk and what's disrupting? Perps are massively cyberpunk to the rest of the tradfi. If you're NASDAQ or if you're NYSE, Perps are this kind of like vigilante, like kind of terrifying market structure thing that's coming to eat your lunch. So I think like the core spirit of the disruption and the punk is there. But then, you know, I understand how you can get disillusioned when you're in it for like debanking and then everyone else is buying Joe Bowden on salon or something.

I like the speculation, I mean, that's honestly like I feel like that's been there since like day one. You know, people are doing like, you know, satoshi dice and you're doing colored coins. They're like, okay, that is just human. It's kind of like, like something very deep within our monkey brains. You give them, you give us something. We're just like, we're going to find a way to speculate on this thing. And I think that's very true. I think, I mean, I agree, like the original vision of the space or of Bitcoin at least and why a lot of people got into space was like, yes, there should be an internet, a digital native money, and that is, seems like the natural successor to this kind of fiat experiment that we've been, we've been having.

And like, that feels like less true. That feels like that hasn't really manifested. And I think it's, one, I mean, this is, I think every technology goes through this like commercialization phase where, you know, these sort of pioneers are very idealistic and that this big vision. And then, you know, yeah, then everyone gets used net and then like your mom's on it. And then, you know, then it's a lot less, like, it's more likely that there's going to be themselves and not like, you know, oh, yes, we should totally revolt against, you know,

the U.S. dollar and do everything in Bitcoin. Like, obviously, that's not going to happen on day one. And so I think there is a lot of sort of fertile ground left in that, like, we've, it's sort of like, the spacious field is very balkanized right now, where it's like there are very commercial applications that are working, but doesn't feel part of like one kind of cohesive vision of what the future of finance is going to be. But that said, I think, you know, we've seen time and time again, like these ideas that didn't work at, At one point, at some point, the right ingredients are there in this kind of primordial soup, and they kind of end up happening.

And I think when I zoom out, I'm like, that still feels like it's going to happen. I think when the last kind of fiat currency has breathed with less breath, I think crypto is still going to be there. And I think you've asked me like 100 years from now, what is more likely. But that also seems more likely. And I don't know. I still think like on a long enough time horizon, this stuff is all going to happen. But like, the path, I guess, that we've taken is maybe not what people thought was going to happen

10 years ago. I was going to say I wanted to just bring up one really cool thing that I've been thinking about in terms of like, you know, you're putting pieces together and maybe just the time wasn't right. And, you know, as long as the foundation is there at some point in the future, I remember microtransactions from way back in like 2017. And I remember back in 2017 being like, that's dumb. Like, you know, you can just do batch. Like, you know, I just pay for a batch every day rather than like dealing with the individual micro. But now that we have agents, like, I can credibly see why agent microtransactions might actually be a real service. And so things that like, you know, maybe didn't have PMF before some other technology events and something.

Yeah, I guess part of the reason why I resist this story that like, oh, crypto's fallen and it's kind of unfulfilled its vision. I guess a couple reasons for it. One, I feel like it is a bit revisionist, right? Like in 2017, what was the vision in 2017? That's when I first got into crypto. So I remember very well what the stories I was being told. And the stories I was being told was mostly around, no, it was mostly around like

IoT stuff. Like that was what I was getting a lot of stuff about IoT. I forgot about how you. Yeah, there was, you know, it was like so much stuff about like swarms of cars that were going to be orchestrated by blockchains and like auditing, blockchain for auditing and for like, a bunch of stuff like that. Like, you know, it's basically authenticated databases for like business use cases. And I was like, this is obviously not interesting. This is not where the big story is. The big story is about disrupting money.

And that was very obvious to me. But when I first came into the industry, obviously there were a lot of Bitcoin maxis. That was when the Bitcoin block size war was happening. And I remember at the time. telling people when I came in the industry, I don't think everyone's going to be paying each other in Bitcoin in 10 years. I don't believe that. I think that people are probably going to use stable coins. They're going to use something tied to the U.S. dollar. But I think the way in which it's going to happen is going to be inflected by blockchains. Like there's no way the way we pay money,

pay people dollars, 20 years in the future is the way that we did 20 years ago. Now this technology exists. I was literally telling LPs that in our first fund. So that's why for me, like this is actually the vision that I have always had. I never, I never believed that we were all going to live in the fucking metaverse. And like that story was largely promulgated in 2021. It didn't exist before then. Like that was when meta renamed itself from Facebook to meta and like all this metaverse stuff started and this idea that like, oh, we're all going to live in cyberspace and NFTs are going to be our front ends. That was all in 2021. You know, if you were around crypto before then, this was not a concept of what crypto was supposed to be used for or why it was supposed to be

valuable. So now that being said, I don't want to dismiss it. Obviously of most people in the world who were introduced to crypto were introduced to it then. And that was their first impression is that, oh, this is supposed to be a like cyberspace 2.0 that is run on blockchains or whatever, you know, I don't know. It is obviously very hard for people to understand exactly what it was, but they got the vibe, you know, of like it's like Tron, not Tron the movie, not Tron the blockchain. But I think at point, like, nobody really believes that anymore. You know, like, and to the extent the people who came into the space in 2024,

23, 24, that's not the story they were told. So I think on some level, like, it's, it's hard for me to look at that as like, okay, this is a betrayal of what crypto is about. And I agree with Jez on the part that the whole idea that crypto creates this like shadow financial system that lives in a box, that anybody from anywhere in the world can plug into the internet and have a financial system. That happened.

It exists now. It's real. It's a big part of the reason why people are talking about Neofinance and all these neobanks and stable coin cards and all the stuff. That's why it's all happening is because we actually built that. It actually works. And it's gaining adoption. It does. But I think it is slightly superficial when you compare it to, I think, to the original vision.

Like I think even look at like Maker versus the new maker, which is we have this stable coin, but it's collateralized by this internet native stuff and its censorship. resistance and it's truly like self-running versus the new maker which is like yeah it's a bunch of rwa stuff and we stick it on chain i think that that is maybe more the disconnect like yes we do have permissionless exchanges and permissionless lending and permissionless you know derivatives and that's all cool but i think the point is like it's still sort of like you know we're sort of in this city of people that have like the gray flannel vests on and um and that's kind of maybe startening it's like it works but like not really yeah that i i agree there were so many compromises

was made, which is fine. Which of course they should be. How are you going to get moving to them? I think that's who's pumping the prices into these things, right? Every time we used USDC instead of Rye, we helped encourage these compromises.

No, no, no, no, no. No, no, no, no, no, no, that's a very real thing. I'm going to fight this. I'm going to fight this. I'm going to fight this. I'm going to fight this. Because like, the ultimate answer of like, what did we actually want to achieve?

It was not that we are this, like, tiny priesthood living in some monaster and the Czech Republic, you know, keeping a flame alive, right? Don't read Vitalik tweets from the last two weeks if you... Fine, yes, but the promise is that actually this is globally accessible and globally scalable. And like, look, go try to shut down one of the maker trusts and see what happens. Like, we actually have learned a lot.

We actually have improved on these things. And the most cyphor punk thing that you can do is not to have no connection to the real world. The most cypher punk thing you can do is to fucking survive and to allow anyone to be able to use it. And that, I think, to the great credit of these things that are not fully, like, you know, the maker of today, or Sky, as it's now called, Sky of Today, yes, it has corporeal entities. It has trust in the real world that take control of these assets and issues, it has connections to the real world.

And once upon a time, it was all computer in the sky stuff, and there was no physical entities anywhere. And that stuff didn't scale, didn't have a tight peg, could never compete with Fiat. and now it can. I agree. I mean, it's practically, this has created much more utility than the other path.

I think people were optimistic or maybe idealistic that like the other path would just end up getting really big and everyone would get kind of get converted and there would be this big kind of like, I don't know, global religious awakening around money and like,

I think that that was unlikely to happen. But it also like, it's more of a results based kind of focus of like when I zoom out, like we still don't really have permissionless internet money, which is kind of what, people really wanted in the first place. We still don't really have a permissionless financial system the same way, the way people wanted it, right?

Like, we have court orders forcing people to, like, swap out contracts to, like, go steal their funds. And, like, I think, I think that was a large part of the original vision. Like, the stuff is not really extra national. It's, it's, it's, yeah, or private, which I think is maybe a large part of people's. Yes. Privacy is a good point. Yes.

I think that is actually maybe a large part of the thing. But I think it's, it's not that things are bad today or, like, we, didn't succeed. It's just not in the way that people maybe imagined or kind of hoped it would. Like, not everyone's running their own jabber server and like chatting with their friends. They're using WhatsApp and like, remember when you were supposed to run a full note on your mobile phone? That was 2017. There's still people pitching me on that. That was a part of the same.

Yeah. But, but, but, but okay, one last thing I'll say. And then, you know, we can, I can, I can stop being annoying about this. But no, honestly, honestly, we haven't had an argument like this in a while. So it's kind of good. No, I know, I know. It's a good moment to like to like relitigate the kind of basics. But I guess look, the last thing I'll say is that like it's certainly true that we live in a world now that crypto is largely intermediated.

It's intermediated by exchanges. The vast majority of crypto users use exchanges. They don't, they're not operating directly on chain. We have things like, you know, websites with people, DNS blocks and IP blocks and, you know, there's all, you know, there's block builders who obey OFAC restrictions and blah, blah, blah. All that stuff, yes, I grant it, it all exists. You're totally right. This is not the great untarnished vision that we had once upon a time. But here's my claim is that those two things coexist.

And that's actually what the dream was. The dream was never that the regulated, intermediated version doesn't exist. If anybody had that dream, they were high. That is an absurd dream. It's never going to happen. That no intermediaries will ever form. That no middlemen will ever form. Of course they will.

middlemen exist for a reason, which is that people want them. They want middlemen. They want intermediaries because it's fucking scary and weird and hard to use the blockchain directly. So yeah, they want the Coinbase. They want the finance sitting in between. But although these things exist, although BlackRock exists, although the ETFs exist, you don't need to use them.

And the people who do live in cyberspace, the people who are completely anonymous, they have totally unperturbed access to everything that we have built. There's not a single thing I can think of that if you are anon, you cannot use in crypto. I mean, maybe courtyard or something like that, right? But like almost everything else that we've discussed so far on the show, almost every single one of them you can still use, despite being, you know, somebody from, you know, Mongolia or Iran or whatever,

who's totally in on and has no connection to any of these services directly. Totally. I think the worrying thing is like maybe it's more the trend, you know. It's like today that is true. I don't think in five years there will not be something where it's like you can't use it if you're in on. I think the gates will slowly come down. And again,

that overall increases like the tam and the size. And like in some ways that is very good. If that's the claim you're making that like there's an inevitable closing of the gates, right? So like you made the point about Jabber. Obviously a lot of people use WhatsApp. And WhatsApp is intermediated, it's centralized.

You know, okay, you're trusting Facebook or meta or whatever. But like, okay, if they ever shut it off, which they have in certain countries, right?

Like, you know, when countries sensors the internet or whatever, then people find something else. They use, I can't remember, what's the Bluetooth one that people use, like fire or something? Oh, yeah. The Jack Dorsey one. Yeah.

I forget what that is. Yeah. Bit chat. Something like that. Yeah, yeah, yeah. So, like, there are these sort of decentralized alternatives that people use in times of genuine crisis when the centralized intermediaries get shut off. So if your claim is that, well, that's going to happen, it hasn't happened yet, but it's

going to happen. We're on an inevitable road to the properties that we have today of crypto, that it is genuinely permissionless decentralized for those who want. want it, that is going to end. Then I think, okay, if you're right about that, you have a point. I don't think you're right about that. I don't think there's a good reason to believe because what have we seen that happened to so far?

The answer is like really nothing. I mean, look at the internet. I mean, I mean, in crypto. I mean, in crypto. No, I'm saying, I think the technologies are very similar and following a very similar path. And the worry is that like, oh, you know, it's just one sweet green, you know, what's wrong

with my neighborhood? And it's like, dude, the rent is about to go up. There's about to be, you know, hello people coming into the neighborhood and it's going to change pretty dramatically and you're going to be the minority and no one's going to give a fuck what you think. And I think the internet is very much going down this path. And the worry is like, well, maybe we're seeing ourselves 10 years in the future. Can we kind of like steer a little bit to try to make sure it's not the exact same path? I think to me, the worry that I have is like in the deficit of having done clean activities and having like entered the Fed. Like let's say there's like an on-chain fed zone where you're like, what?

whatever, you posted a ZK proof or whatever, this is like Fed chain. The worry is that as that grows, maybe rightfully, maybe just through convenience, everything outside of that subset gets automatically labeled dirty in the same way that like all of Tornado right now is labeled dirty because there's such a large, clean set of ETH outside of Tornado that anything in it is just dirty by default. That's the sort of thing I think about like in 20 years has is the only like crypto stable coins that say haven't like off-boarded the dirty ones and you who just held like naturally get lumped in through no fault of your own. If your claim is that my government will eventually close the

door on me being able to legal use this stuff, no doubt already many governments have, right? You go to China, you're not allowed to use this stuff. You go to many countries in Africa, you're not allowed to use this stuff. That is a matter between you and your government, right? It's like any individual does not have the guarantee absent their own civil engagement that they're going to have the right to do whatever the fuck they want, absent hurting anyone else, right? But the question is whether crypto will exist. And crypto is an international thing. Like, whatever the U.S. does, they're not going to be able to bend Bitcoin. They're not going to bend Ethereum. They may bend stablecoins and say that like, hey, stable coins are going to K.C.

Only, you have to, you know, you have to have some identity with Circle in order to hold a stable coin. Now, I don't think they will do that. I think they actually will explicitly never do that because the point of the stable coin is to internationalize the dollar. And the reason why Besson is saying the stable coins are so important is because of all the Chinese people and Russian people who are against the wishes of their government holding dollars. So I actually think it's the opposite. I think that the reason, like it's a feature, not a bug of this technology,

that it is open and permissionless and that we don't know who's using it. If we did know who's using it, maybe the government wouldn't have the stomach to allow stable coins to be open as they are. So I think I'm more optimistic, I feel like Tom and Jess's view in particular is sort of the one that got me into crypto, like, crypto full time is like, okay, yeah, it's a platform risk thing and like it concentrating and becoming a walled garden has like definitely ruined the quality of internet usage. Obviously, that's only increased exponentially since then. But I think there is this interesting question of like if we take the middlemen who most people use in crypto rely on, And we assume that the middleman gets replaced by an agent, that you have enough control over what they're doing. Like, maybe you do kind of go back to, like, the more ideal state.

If you really can trust your agent doing actions on your behalf as your middleman without it being like a company that's her middleman, someone else with their keys as a middleman, dot, dot, dot, right? Like, obviously there's a lot you have to get right on the cryptography side, security side, et cetera, like interpretability, making sure it's like you. can fit you know you say an intent you actually get executed that way but there is a version of the world you could imagine like to to just the point earlier like everyone in 2013 bitcoin all the fuck anyone would talk about is like micro loans and how there's going to be millions of people on the internet doing one dollar loans to each other and like that seems idiotic in that even when at that time when people were saying this i would like go to like these uh like bitcoin core dev meetups and i just would be like are you guys crazy?

like who the fuck would want to do this? Well, that was like microfinance mania, right? Like, yeah, yeah, exactly. But there's kind of a weird thing where like, yeah, it kind of sucks because the intermediary, you can't source stuff, you can't pool stuff efficiently, right? Like Bitcoin people weren't never thinking about pooling together assets and lending them out or doing all the stuff you do in defy, right? But fast forward to like post-Defi, post-stable coins, now we have these agents managing

that could actually optimize on that level. It's like, doesn't seem like such a crazy. crazy idea. And so maybe the hope is that the middlemen were just the blueprint that you can give your agent to do all those actions without you having to know them while still having some sovereignty. But like that's sort of the like there's a little canyon of optimism that you know like the jet has to like fly through. It could very easily crash and then all of these things are gone. But to me that like canyon, that little slit is like the thing you're really hoping that we steer to.

Open this soft landing. And that's also dependent on open source AI, right? Like if Tom's thesis is true that the walls are closing in and over the next five years, governments are going to become increasingly, or our government, the U.S. government is going to become increasingly draconian toward crypto. The thing that saves you is having the ability to control the intermediary. If you have to use open AI's models and open AI says, oh, I'm sorry, I'm not allowed to use defy, it's illegal and, you know, or it's like, oh, you know, your government has instructed me

not to do this. Or the Department of War has, you know, it's against my regulations. It's been requisitioned. Yeah, yeah, exactly. So speaking of which, maybe this is a, yeah, maybe this is a good transition point to talk about some of the news topics this week, which we did intend to get to. So obviously, the big thing happening in the world is the attack in Iran. So the joint U.S. and Israeli war that is now being wage in Iran has caused huge amounts of disruption in financial markets. And this attacks took place, I believe, a Friday night in the U.S. or Saturday morning in the U.S. And this caused huge volatility in commodities markets. And it turns out the only place

where you could trade these were in DFI. So this may be going exactly to the point about the permissionless kind of scary finance that's happening, the cyphorpunk stuff that we're still seeing. So you saw huge amounts of trading volume on both hyperliquid and lighter. I think I think the silver contracts on Hyperliquid did over $220 million. Gold did $170 million. Similar numbers took place on lighter. Huge amounts of spot volume traded on X-A-U-T and on Pax-G tokenized gold. So we saw enormous amounts of price discovery at a time when everybody in traditional finance

was saying, oh, man, I wonder what's going to happen when markets opened on Monday. And the answer was that the price discovery was happening in D-Fi. And I think this is a trend we're increasingly going to be seeing over the next few years. Any thoughts, Jez? I know that you're very deep in the perps trading world and especially with RWA's thoughts on what you saw over the weekend. This is sort of the most exciting thing to me. Now, one thing I want to point out is, like, I think the 24-7 is really good to bring

to people's attention. Like, it's something that doesn't really exist in the traditional finance market right now. So by that's absence, this, like, stands out. But to me, like, the benefit is much more around, like, liquidity aggregation in a per market than it is around like the fact that you can trade it off hours in NASDAQ. And I think like in general, if the desire to trade it off hours was like the main feature of this thing, you would actually seem like more elevated perp like trading generally after hours as market makers switched over, but you actually see less because most of the volume is like

whether it's arbing or like staying in line. So generally like I think super, super exciting. I think perps, like this has been one of the longest standing thesis of mine. I've got tweets from like 2021 and 2022. I remember going up to Brett Harrison at the FTX ego party in New York and being like, SPX perks are going to eat the world. And he's just like, who are you? Like, get out of it. Well, that's what he's doing now.

So who won that one? Yeah, exactly. But yeah, I mean, when you think about it, whether it's futures, sort of having confusing naming conventions, confusing pricing conventions, very high lift in terms of like getting access to as a retail trader. options are just the wrong instrument, despite having like fairly easy access, your trading volatility, which is just the wrong instrument. It just happens to be the best way for most people to get short-term delta leverage. And then when you're talking about like spot margin leverage,

you're usually capped at like 1.5 or 2.5x through like Robin Hood or Scott trade. And so perps are just like the most efficient, most fungible, most aggregatable way for retails to express retail or even market makers. Like you find in Tradfai, most market maker swaps, Most market maker trades happen through swaps of like an institutional desk to a market maker, which is essentially a perp trade, like just with the swap like Oracle in the background. And so markets over time have consistently found that this is just the best form factor. The fact that we're finally seeing it take over is what's allowing for like the 24-7 purpose. It's just the fact that it's such a good, but the form factor is what's letting people then go ahead and trade.

But I would point out that people have tried to do overnight trading before just on worse instruments, whether like tokenized stocks or rapid stocks or something. But without the perk form factor, it doesn't work. I think it's worth throat-cling here a little bit, which is that, like, obviously, for what DeFi offers, a lot of times what DeFi offers really shines in moments of crisis. What's happening with the war in Iran is fucking awful. I mean, depending on what side you're sitting,

it's awful for different reasons. And it's extremely disruptive to everybody who's in the region. I mean, we know a bunch of founders who are in Dubai, who are in the UAE, or just neighboring countries, I have family that are in some of these neighboring countries. It's genuinely, it's a fucking war zone. It's like actually a war zone to anybody who's in the region because anybody who's in one of these countries

just catching strays from Iran. That being said, the same thing happened in the Ukraine war, was that in a way, like crypto kind of shows its power in these moments of crisis, which is that because these are permissionless 24-7 markets, they allow people who need to price risk, who need to have an understanding of what's actually happening by looking at these financial markets

to be able to express that through finance. That's the reason why finance is so fucking important. So something similar was happening in Polly Market and also on Kalshi. So on Polymarketing and Kalshi, there were markets on basically the tenure of the Khomeini regime. So on Kulshi, it was, I believe the market was phrased.

Did I? I mean, it was literally, I mean, just like tenure is like a funny way out as supreme leader of Iran. That was the, that was the, that was the name. So it was not. It is technically his tenure. Yeah, yeah. Yeah. Yeah.

It was a proxy. It was a proxy. Well, that's the thing. It's like, obviously it's ambiguous, right? It could be that he steps down. Could be he dies of old age. Could be that he just, you know, whatever. There obviously there are many reasons.

And all those get priced into the market, right? Like, actuarial tables are part of how you look at an 80, whatever year old. I think it was 86, right? Like, he's an 86 year old man. So obviously. there's a possibility that he just like, hey, you know, I'm getting up there, long in the tooth, getting dementia, and I'll just, you know, hand off to my son or whatever. So they had these markets, both on probably market and on Kalshi for quite some time about how long Khamenei was

going to continue to be the Supreme Leader of Iran. Now, this market, unsurprisingly, became incredibly contentious because this market resolved, the obvious way to resolve this market is that Khamene was out at the moment that he was killed. But Kalshi, being regulated by the CFTC and being a domestic U.S. market has a rule against markets on death. This is a rule promulgated by the CFTC is a longstanding rule. And so I think it's death, war, terrorism, you're not allowed to have markets on these. So this market ended up becoming resolved because of a death. And because of that, Kulchi was like, we cannot resolve this market to a yes because of death.

And so they decided that they were going to resolve the market at the last traded price before Khamenei was killed. Okay, so at the time the Chaminet was killed, I don't remember what, maybe like 86, just to name a number. Let's say it's 86% chance that Chaminet is out by the end of March or whatever it is. Right. So it was very likely that Chaminet is going to be out the door, but it's not certain because he's not dead yet. So they were like, okay, we're booking everybody out at this price. This made a bunch of people very, very mad because they were like, hey, you know, I bought the market and actually went down.

I bet that he was going to die, and I bought it in 90, and it went down to 86. And like, I lost money even though I bet in the right direction. But people got really upset. Polymarket, of course, being offshore and being the international global prediction market that's on chain, they resolve the market as one would expect, which is that he died. Obviously, this is a, this resolves to, yes, Chaminet is out, he has been deposed. So now it's still in dispute, and they have a dispute resolution process, I think, with UMA, but the expectation is that it's going to resolve to, yes, obviously he's out, and therefore

the people who voted yes, should get $1 and everybody else should get $0. But there's been a big dispute about this. I think Adam Schiff in Congress has called out to say, hey, there should be investigations about this, about these markets and that these markets should not exist. It's a tricky problem because it's not obvious ex ante that this is a death market. Obviously, there are many ways for this to resolve without death. And there are many markets that can potentially resolve with death,

that do not necessarily resolve with death, right? And so I'm curious to get your guys' thoughts. Obviously, you guys have spent a lot of time thinking about prediction markets as well. But this is one of those things where permissionless markets intersect with the desire for trying to find the truth. Yeah, I find it like a little kind of facetious when, you know, Cali says, oh, well, you don't want to have a death market,

but then they're like actively promoting the market on like social and on the site. And it's like, this isn't like some random celebrity being assassinated and everyone, you know, didn't think they were going to die. And so obviously they're not going to win the Oscar if they're dead. This is like, yeah, he's like the leader of the nation that is people were rumoring for a long time

was going to be at war. I mean, the U.S. bombed them six months ago. So it's like very obviously death was a very likely outcome here. And so to still even like list the market, but then like not resolve it, the way that people anticipate it being resolved, I think is just like very kind of two-faced. So I understand, obviously they have to have, you know,

restrictions based on, you know, what the safety can offer. But like, it is like, you know, it's like if there's an international manhunt for somebody and you're like, oh, well, you know, if they catch him but they don't kill them, it doesn't count. I'm like, like, obviously it's a very likely, you know, scenario, and so that should be baked into the market. Well, the other thing I'd say is that

unexpected value terms, there is really no difference, right? If you freeze the market at a certain point, as long as there's no trading after that, if you freeze the market at the point at which he dies and you close the market there, for the people who were trading before that, there is effectively no difference, right? No.

You have a different boundary condition. The problem was that they announced before the market closed that if he died, it would close, sudden the market can only really trade like 40 to 60 because as soon as it's on tails, like you're pretty happy to like take a bunch of money and push it back. Right. So the timing matters, right? If they pre-announce this, is like, if he dies, we are going to freeze the market at the moment of death and resolve it at that price. In that case, it is isomorphic from an

expected value perspective. No, that made it. If they hadn't announced it. If they did it surprise when he died, then if they if they hadn't announced it and they did it surprise, it would have been isomorphic. Them announcing it changed the conditions of the market. Because now it's just a game of it. If I have more money than you, I can push the price in my direction. Exactly. Oh, I see, I see, I see. The conditional, the conditional thing is very difficult. Because I never have to get out of my train. I can just yeah. Yeah. There's another funny. Funny. Okay, I guess it gets weird if you can anticipate their death. There was another funny thing too where like this was all going down, you know, Saturday morning, the US, which was the 28th. And like, there was an expiry for the 28th at like,

like midnight ET so it's like there's just like rapidly like faded decaying and then it's like but then then they're like okay does Trump announcing it count and people like no that doesn't count like we need a journalist too I'm like the Trump the president announced that he's dead

like I don't what you know what more do you well the weird thing was like multiple people announced he's dead and then multiple people were like no he's not dead and then it took like 12 hours or something for Iran to be like yeah because the Iranian government was denying it right so clearly yeah yeah so it was like kind of a very weird it was a weird yeah it was a weird yeah it's a

weird thing. In general, if people are like, oh, yeah, like implicitly, it's a death market. I mean, like, yeah, I could also say, like, part of the Treasury Futures market is a Jerome Powell death market, because if he dies, then, like, all of a sudden, everyone's expectations of rates are suddenly very different. Like, I don't think you can, like, really try to be, like, unless the market is explicitly a death event, you can't really try to be like, oh, this market doesn't exist. Like there's, there's regulated financial markets that completely change and implicitly are a death market too. And so I like kind of don't, I think like the legal argument that these things should be illegal. Doesn't really make sense. If you don't grant that, then you can just say,

okay, well, here's a market on somebody's heartbeats per minute, you know, and like, okay, it's not a death market because your heart could stop without you dying. But it's like, come on, this is a death market. Like, let's be serious. Like, I think the law allows for some, like, it's common sense to interpret, is this a death market or not? I think all of this is a tremendous coup by CaliChi and Polymarket to even be like mentioned in these times, especially like compared to like the 24-7 markets. This is front page news. I know, but if you look at the actual market, it's 120 million lifetime volume on the

commany out by Feb 28th, which was like the big market. It's a 128 mil volume on Polymarket reported. And I've done the research where like, you know, if you minting out, if you have a tail polymarket position, that's point zero, like a super tail, point zero one cent, and you sell it to somebody else who buys it for 0.01 cents, so 2 cents or 0.02 cents is changed hands. Polymarket report that as $2 a volume because you've both traded a $1 contract. So like really highly capped at 120, but like somewhere maybe between like 30 mil and like,

it's not a large amount of volume compared to like actual billions pumping through trade XYZ and lighter on these sort of events. And so I think they're really fun to talk about. I do think that there's genuine societal value to being able to come to consensus on a sort of market as it's happening. But I think from a financial perspective, these things are like toys. And I don't think that they'll necessarily grow out of toys when you could just trade the asset. If you believe that they're going to missile strike, buying oil is the correct asset trade. It's much more liquid.

it'll move asymmetrically in the direction that you want. You can make more than 2x or 3x your entry bet. I agree with you. You don't have a time duration. I agree with you if you're trying to make money, right? If you're trying to size a big trade, obviously playing the oil futures is going to be a lot better than, you know, trying to bet on polymarket if you're trying to move like $20 million. But if you're trying to understand what is the likelihood that the Supreme Leader is dead, looking at oil futures will not give you the answer. It won't even suggest the answer.

Yes. And like if you're in the region, you really care about that. Yeah. And it's also the point is like to sort of disambiguate these, right? Like, you know, very famously like SPF predicted the 2016 election and then thought US equities would dump and they actually rallied. And it's actually like lost money, even though he accurately predicted that Trump would win. And so here it's like previously, yeah, you would have looked at oil futures gold.

So get a sense of how much chaos is there in the region. But like if I actually want to know is, you know, come in a dead or not, like there's not really a good way to do that versus like, yeah, I mean, I was, I was watching this over the weekend. because this is way more, you know, interesting. And I think like, you know, a distilled signal versus like just reading your headlines on, on Twitter. And it's not perfect. There is high volatility. Like it is, you know, influenceable in some ways.

But like, if that's what you care about, you're just trying to follow the news, like, this is actually like kind of pure kind of distilled signal. I was just going to say like the only thing I've realized for the last 10 years of both being crypto and not before that is like the monitoring the situation bros, unfortunately can be much more accurate than almost anyone who's like a journalist by like orders of magnitude. So it's kind of like, all right, do I want to aggregate the monitoring the situation, bro? Kind of. Like that's like, it's not just journalists.

It's like financial aggregates, right? Looking at the price of gold, looking at bonds, looking at oil, are these like huge aggregates of lots and lots of information that are basically distilled down to a point estimate of like, here is what I think the marginal demand for oil is. And that is compressing so much information. and what I want is not this like huge dimensionality reduction. I actually want to know how long do we expect this war to continue? And like oil prices just do not yield the answer.

You know, like yes, okay, but look at the oil futures curve and blah, blah, blah. It's like, yeah, okay, maybe. But like there's so much of this about like, okay, when are they going to open the Strait of Hormuz? And Trump says, oh, we're going to send troops in there. I mean, the Strait of Hormuz, regardless of whether a committee died or not, if there were any bombs that hit, they still could have closed there. right, so it means the oil price is almost like... Right, right, right, exactly. But it's also like, okay, well, the OPEC plus is doing this

and then China is doing that and da-da-da-da-da. We're tapping strategic reserves. All these things get priced into oil, which is not the information I'm looking for. So if I agree with you that the primary value from these polymarket and costly markets is like genuine information, like say information density in like a probability space

of like what I'm looking for, why are we banning the people with the correct? information. I agree. You won't find disagreement here. Yeah, I think it's... Who are we protected? Like, I understand investor security protections because there's like a huge social good to like distributing capital to these companies that can use the resources and reinvest it. Why are we protecting people that are gambling and the act many out? Well, I mean, so the rationale, obviously, behind the CFTC regulation is that we don't want to create incentives to kill people. And obviously a market on killing people is effectively a bounty.

That's the argument. And it's not an incoherent one. And I think there are good reasons to think that, like, hey, we should not have markets. There's like a moral outrage reason, which is that, you know, markets on war, I think are like not, that's not really a good argument for markets on war. I think markets on war are a little absurd, where it's like, oh, you know, how could you profit from war that's so evil? It's like, you know, there's a lot of public companies. Trading that country's bonds. Sure, yeah, I mean, exactly.

There's obviously nothing illegal about profiting from war. There's huge parts of the economy that do it. But there's a moral outrage component to like the war prohibition. I think that's absurd. But for terrorism and for assassinations or deaths of individual people, I think there's a reasonable argument that like the externalities of this market are not worth the information. I think if it's a head of state, especially in like a huge international conflict,

it's kind of a different story. If it's like some random person or some random celebrity, it's like, there's no value to society to know the likelihood that this celebrity dies, or this, you know, regional politician dies. But to know the likelihood that, like, Trump has a heart attack is actually incredibly important, right? Like, that's like, okay, what's the likelihood that, like, J.D. Vance has to step in and become the next president. So I don't know. I think there's nuance that isn't captured by the laws that's going to be.

I was actually more pointing out, like, Mr. Beasts, editor. Yeah, yeah, I was going to say it. Oh, I see. But I agree with you that we should not promote or incentivize people. steps directly. Okay. Do we want to talk about that? So there was another story unrelated to the Iran stuff that Kalshi brought the first actions against insider trading in prediction market. So they brought actions against the editor of Mr. Beast videos,

one of the editors of Mr. Beast video, I assume he has a team, who apparently insider traded on some kind of Mr. Beast related market. And then they brought another action against some California gubernatorial candidate who bet on his own candidacy. And so these fines were not, they were not huge fines. I think there was like disgorgement of profits, which are relatively small. And then the fines were like five X, $1,000. Yeah, it was like very kind of slap on the wrist. It was not like SEC or CFTC kind of fines. But obviously this doesn't preclude the CFTC from bringing their own charges against these people. That's obviously possible in principle. We don't know. But these were the first cases that we have

seen be prosecuted. We know that there were many other cases. I mean, there have to have been. There's no way these are the first. And it's possible that those are working their way through the Kalshi process or I don't know, whatever you want to call them. But these do seem to have been the first shot across the bow for,

okay, there is some enforcement of insider trading that's going to be publicized for these prediction markets. So, Jess, you were just speaking to that. And from my perspective, I completely understand why Kalshi and Polly Market would want to bring this because they want, you know, gamblers essentially to feel safe on their platform and not to feel like they're getting adversely

selected against. But I think when I take a step back and you look at like, okay, well, why does society sort of bring enforcement actions against, say, like, market manipulation or insider trading? Generally, it's because you want to protect the sanctity of a market or you want to protect, like, a social good that's being provided. Stock markets have a lot of protections because the capital that the stock market allocates is very useful to society. We can sit here and we can debate that putting a percentage on Trump's like heart attack percentage by end of year has value to society. But then why if his doctor came in and said, like, I know that Trump is like very likely to have a heart attack and would go in bed on that? Why are we stopping the most informed participant in the market from giving us his information?

I mean, I totally agree. Like, that's the point of these kinds of contracts. I mean, that's, like, it's risk transfer. I think also just like practically speaking, it's not really possible to enforce this in the way that like, you know, insider trading on companies is enforced in the SEC. because, like, you don't have to register as an officer of Mr. Beast, and you have to register as, like, a family member of an officer of Mr. Beast. It's like, you know, already, I think the SEC has so many issues and weird nuances around what constitutes insider trading and not shadow intruder or whatever,

but ultimately it is serving this end goal, which is good of, like, protecting capital formation and capital markets in the U.S. This just feels like, yeah, I mean, I think they want to show that they're doing something because there have been all these sort of high-profile cases recently that have been, again, sort of dealt with outside of the, of the, of the, of the, of the, of the If you're, you know, leaking state secrets through Kalshi, that you're probably a bigger concerns. But I agree. Like, within the protocol, like, that is kind of the whole point is, like, you want people

who have information to reveal it and get paid for it. And, you know, that, you should take that into account when you're, when you're trading. Yeah, I do think there is a special case where you are the subject of the market. I think that's like a unique situation. So if you're like the Mr. Beast editing team, I think that's, or you're the gubernatorial candidate, like when you're the subject of the market, there is really no positive value. Okay. So my take against that view in some ways is that one of the reasons these markets have so little liquidity and trading volume relatively is like there is this adverse selection cost, right? It's like almost anyone who's trading on like information that's like a martingale plus a little tiny bit of I read the news versus like someone who's like, oh, I actually know the truth of the event. The former are like the fish in a casino game where like you're losing 70. percent on every round, right? Like, it is a kind of negative EV type of thing.

Is this more true for providing liquidity than it is for trading itself? Yeah, yeah, yeah, for sure. But, but arguably, like a lot of the traders, I feel like are effectively implicitly liquid due providers because like a lot of these markets are so illiquid that no one is quoting both sides at all time. So they're like placing limit orders and waiting there. So they're just kind of like bad market makers in like as you go down on the volume side. So I think like there's an argument that the adverse selection cost should be learned by the market participants and like they should be bringing their win rate closer to 50-50 than like 70-30 loss to win. And and and the argument I think from the social good standpoint is like,

well, maybe that just takes so long that people will just like go bankrupt before they can reach the point of parity to know how to provide liquidity correctly. And so I think that's more of the question is like will people learn to adjust to this adverse selection? or are they just like, is it going to be like meme coins where they are the rugpole, you know, they are the adverse selection, right? Like any liquidity provider,

but putting money into the bonding curve is like becoming the adverse selection, right? Like there is something about these games that is similar. Whereas I think in the perps case or the spot trading case, it's like there's a notion of realized value that is not, there's no notion of any participant who has perfect information, right? Like, it just doesn't exist. per se, because the asset is an amalgamation of a lot of stuff. And I think that's sort of the difference here.

And that's why people have this emotional reaction, because prediction markets are like interpolating between the perps side, like the pure, there's no perfect answer and the like meme coin thing where it's like, ah, yes, obviously the deployer rug pulling you has perfect information on like, like. Yeah, I agree there's like this bimodal distribution of markets where there's like markets that have incredibly complex that are measuring something incredibly complex. Like what is the likelihood that Iran falls or whatever, there's regime change, right? And like, nobody really knows that.

And then there's like, you know, when is Mr. Beas going to release his next video? And like, there's seven people who definitely know that. And everybody else doesn't know. And so like I think. What's that? Just don't trade that market. Yeah, yeah. Well, I mean, not a lot of people do, right?

So like it is in a way self-correcting. Like, you just look at where the volume is. The volume is mostly on like sports games. and like big political questions and like Fed funds rate, it's not on, you know, Mr. Peace videos. But Mr. Bees videos scandalize people the most because, I mean, and here's the other thing is that people's moral intuitions about why insider trading is forbidden

is completely opposite from the legal justification for why insider trading is forbidden. The two are not in any way similar, right? And that breaks down when you have a new modality like prediction markets where it requires basically self-police because the rules are not yet written, and CFTC has not made clear exactly how they're going to be policing this stuff. So the platforms kind of have to police it themselves in order to win consumer trust.

And if you have to police yourself in order to win consumer trust, you kind of have to do what people's intuitions are and not what the law is. Right? So the law is that, okay, you can't trade on information that you did not fairly receive, that, you know, your court, you owe a duty of confidentiality, to the counter, blah, blah, blah. There's like all these rules that have nothing to do with, oh, it's unfair you made money. that's not why insider trading is illegal.

It's totally fair to make money. We don't give a fuck in the law whether you unfairly made money. But people's intuitions are like, well, obviously that's why insider training is illegal is because you didn't earn it and you should earn it if you make money, you know, or you should get lucky if you made money. You should not be guaranteed to make money. And that tension, I think, is the reason why this is going to continue to be really stupid is like what Kulchi and Polymarket U.S. have to project is we have an insider

trading policy that aligns of your intuitions, which is not at all what the law demands. And if I have to straw man, like, if I had to sit here and be like, okay, like, what are the best rationales for Cal Sheet prosecuting insider trading that's not just protecting their own gambling wild guarded fish? It's because maybe the market of a bunch of people, uninformed guessing is better than like a blown out, widespread market that one guy that informed can barely even cross because the market makers are like, fuck you, I'm only going to get hit by asymmetric information. So you're like, yeah.

No, totally agreed. Okay, well, we are up on time. Jez, where can people find you? Anything you want to plug? Twitter. Follow me on Twitter. I'm fucking around with, sorry, I shouldn't say that. I'm messing around with,

we're messing around with, Robert. We curse for all the time. We curse. He's fucking around. He's fucking around. Yeah. Robert's gone. I'm always fucking around.

Messing around with open claw a lot. So keep an eye out. So, I'm having a lot of fun. Okay, sick. What's your handle? I can people find you. Isabel underscore Heath on Twitter. Isabel underscore Heath.

Okay, Jez, it's been real. Thanks for joining us. Thanks for having it. Thanks, everyone.