Unchained - The Chopping Block: Michael Lewis Swindled, SBF’s Effective Altruism Ruse, Ethereum Protocol Enshrinement - Ep. 552

Episode Date: October 4, 2023

Welcome to The Chopping Block – where crypto insiders Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner chop it up about the latest news. This week, they discuss the wildest claims in Michael Lewis’ new book on Sam Bankman-Fried, debate whether SBF’s effective altruism was ever genuine, and whether Ethereum should enshrine more features onto its protocol. Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Stitcher, Castbox, Google Podcasts, TuneIn, Amazon Music, or on your favorite podcast platform. Show highlights:  Michael Lewis’ interview on “60 Minutes” and the wildest claims in his new book Whether SBF would have paid Donald Trump $5 billion not to run for president  Why Lewis characterizing FTX’s downfall as a bank run is misleading Whether FTX executives, in the moment of the collapse, fled to their parents’ homes Was SBF genuine in his belief in effective altruism or was it clever branding Whether we will still be talking about the SBF trial years down the line The debate on whether Ethereum should enshrine more features onto its core protocol Whether Lido poses a centralization risk to the Ethereum ecosystem Predictions on how the SBF trial will play out and whether SBF has a trick up his sleeve Hosts Haseeb Qureshi, managing partner at Dragonfly  Robert Leshner, founder of Compound Tom Schmidt, general partner at Dragonfly  Tarun Chitra, managing partner at Robot Ventures Disclosures Links SBF’s trial:  Unchained:  Here’s How Sam Bankman-Fried’s High-Stakes Trial Could Play Out SBF Trial: How Sam Bankman-Fried’s Lawyers Might Try and Win His Case The High-Stakes Trial of Sam Bankman-Fried Begins: What to Expect CBS: Rise, fall of Sam Bankman-Fried, FTX at center of Michael Lewis' new book | 60 Minutes Protocol enshrinement: Unchained:  Ethereum’s Vitalik Buterin Warns of Risks in Lido and Rocket Pool Some Ethereum Staking Services Commit to 22% Self-Limit of Validators Others: Cryptoslate: Terra's Do Kwon and Daniel Shin conspired to falsify transactions, chat logs show Learn more about your ad choices. Visit megaphone.fm/adchoices

The claim that Michael Lewis makes is that he thinks that Sam lost his way, but fundamentally, he was more or less the same guy. Like, he never really believed in crypto. He always saw crypto as instrumental. And that I think everybody who ever met Sam agrees with is that Sam was not a true believer. He didn't really care that much about the industry. He just saw it as an opportunity to make money. But it wasn't because he just, you know, he loves cars or private jets or whatever.

Not a dividend. It's a tale of two Kwan. Now, your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways. Unnamed trading firms who are very involved. D5.E. 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 perspective on the crypto topics of the day. So quick intros, first we got Tom, the DeFi Maven and Master of Memes. Next, we've got Robert, the Cryptoconassur, and Tsar of Superstate.

Then we've got Tarun, the Gigabrein and Grand Puba at Conlet. And finally, I'm Haseeb, the Head Hype Man at 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 XYZ for more disclosures. Okay. So just for context for everybody listening, we are recording this on Monday morning, US time. The news by the time this drops, I'm certain is going to be 100% about the FTX Sam Bankman-free trial.

So I believe the trial starts on Tuesday. So by the time this goes out, I think it's going to go out Wednesday morning. And so we're televising this from the past, basically. At the end, we should make our predictions, and then our listeners can listen to whether we're horribly wrong or not about what will happen. Okay, all right. All right.

We'll end the show with some predictions about how the trial's going to play out. That said, the trial is going to take multiple weeks, so we'll have plenty of time to do the play-by-play as the trial is actually playing out. But in the lead-up to the trial, all eyes have been on Michael Lewis. So Michael Lewis, very famous finance writer. He was the author of the Flash Boys book, if I'm not mistaken, yes. And so he, long story short, he was kind of embedded with Sam Bankman-Fried for something

about a year and a half since 2021, before FTX collapsed. Basically, more or less lived with him in the Bahamas and was writing a book, didn't know what the book was going to be about. And he's dropping the book tomorrow. So the day the trial begins, Michael Lewis's book is going to drop. It's called, what is it called, Finding Infinity or something? So, I don't know, something like that. And he appeared on 60 Minutes to give something of a preview of what the book is going

to be about and his perspective on Sam Bank of Fried. And this interview has got the entire internet in a tizzy. I watched the entire interview. The first thing I'll say about 60 Minutes is, it's really weird that 60 Minutes is not 60 Minutes long. Like if you watch it, it's like 27 minutes long, which is like, there are so many commercials on TV. Yeah.

It's crazy. There are multiple stories within it. episode. So an aggregate, it's 60 minutes long, but you're right that the content is like 40. Oh, oh, oh, oh, I didn't realize it wasn't the only story. Okay. Yeah, it's like 40 minutes. I do not watch 60 minutes except a very, very brief snippets when something important is up. To be fair, the ads definitely make it less than 60 minutes, I'm pretty sure. Yeah, well, I watched it on 2X. It was 13 minutes for whatever the period of that 60 minutes was. So there were a few snippets from the 60 minutes story that got the internet really excited. One of them was this anecdote.

that apparently near the end of the FTX, right before FTX collapsed, Sam Begman-Fried, in part of his effective altruistic mindset and thinking about ways to ameliate risk in the world, he believed that one of the biggest risks in the world was Donald Trump. And he knew that Donald Trump

was going to be running in the next election. And so he contemplated paying Trump, not to run in the upcoming election. And so apparently, the word of this got to Trump, Trump named a price, which was $5 billion, and SBF, at the time that FTCX collapsed, apparently SBF was trying to figure out the

legality of paying Trump not to run in the 2024 election, but then FTCS collapse and this never happened. Kind of an insane story. I don't know what you guys think of this. Obviously, there's no way he had the liquidity to be able to pay $5 billion in cash to Donald Trump. So this feels like kind of a hairbrain story. Well, Alameda had the customer liquidity, and I feel like at a certain point, you know,

when they were doing the math, they did have access to $5 billion. I mean, there was also other stories where he was trying to invest multiple billion dollars in Alon Musk's takeover of Twitter. Like when these multi-billion dollar opportunities came up, I assume they looked at the metaphorical piggy bank, saw that there was high, single-digit, low-double-digit billions of dollars available and thought, well, what are the craziest things possible at this? It's not the first time there's stories of him using multiple billions of dollars potentially on something.

So I believe it. I believe you probably tried. I'm sure that that's not legal. Maybe it is. I doubt it. I can't see why that wouldn't be illegal. Not to rib Haseeb like I did at that time, but you know who was doing all of these deals of trying to pay billions of dollars

for both Twitter and Trump was McCaskill. So apparently the book describes the McCaskill piece as like the interlocutor for all of these kind of ideas. So apparently he was the one who came up with the idea. Okay, but there's no way Wilma Castle could get to Donald Trump. That sounds like an implausible. Sure, sure, sure. But the idea that he's like the geppetto in the background to me is like the most

funny part, kind of even more embarrassing for EA in the long run. You know, to be honest, like, if it really does cost $5 billion to get Trump not to run, right if that is really if he really was like look raise my price and i will not run in the next election that actually doesn't seem like that much money for how much weighs on a u.s election like if you if you just imagine the the aggregate of all the corporate interests like if that's really a thing if trump is like i will not run in the next election if the entirety of the u.s can raise five billion dollars i i feel like that actually seems like way too low of a price for the aggregate willingness to pay you know, on the other side of that.

You know what I mean? Yeah, I should have just crowdsourced it, you know. I'm sure if you set up like a go-fund me in aggregate, the U.S. populace could probably scrounge up $5 billion to pay for Trump. But there's also been, I think, unfortunately, a missed opportunity for a very funny timeline where he does get the $5 billion, pays Trump. Trump announces that he's not going to run. And then it's clawed back in the, uh, uh, FDXIS, state, accuracy.

And he answers he actually is going to run, which a bit would have been good. But I, I feel like there's no enforcement for this type of, uh, hey, I'll pay you, don't run type of thing. Other than like, I'll only pay you half of it after. Wouldn't Trump just run anyway? I mean, it's Donald Trump, right? Like, he's just going to be like, oh, I took the money. Screw you.

Like, what are you going to sue me for $5 billion? Because you try to pay me off to not run an election. That would be the most interesting timeline. Just to put this in perspective from a quantitative background. In 2019 to 2020, across all candidates, according to my Googling, a total of 4.1, $1 billion was raised in spend for across all candidates for the entire cycle, you know, primaries in general. And so, you know, when you say could America crowd fund $5 billion for one specific

candidate, well, in some sense, they fundraised about half of that for, you know, the competing candidate. I don't know if America could come up with $5 billion. So it would make it like astoundingly expensive compared to private. I mean, other governments could fund this. I also think other governments like airdropping U.S. citizens to donate. That is very true.

China would instantly come up with $5 billion just to get to get Trump not to, you know, accelerate a trade war. I just looked up the North Korean GDP. Five billion is only 33% of their GDP. So theoretically, if they were really. I don't think North Korea would want to do that. North Korea loves Trump, don't they? Yeah.

Trump has been very friendly. Yeah, he's like their best friend. Yeah. But no, no, so I think what the difference, though, Robert, is that when you are funding a candidate to go against another candidate, it's a random process, right? You might win, you might lose, you don't really know what the outcome's going to be. If somebody says, pay me $5 billion, and I will definitely not run, that is such a different deal than funding a political candidate and having some probability of winning.

There's a lot of study in political science of the effectiveness of money in politics. And the trope is that, oh, money is, you know, it's kind of so you could buy anything in politics, like you just spend enough money. and the overwhelming consensus within this body of research that is just not true, right? Like the efficacy of using money to buy politicians or to win races is actually quite low. And you can see this actually from all the candidates

that SBF backed. SBF threw lots and lots of money into a lot of these small congressional races thinking that, okay, they were sort of uncontested. They had these EA aligned candidates who they sort of handpicked to run in these less competitive states. And I think almost every single one of them lost, despite the fact that they outspent their opponents

by a large margin. Same thing with like Michael Bloomberg, right? Michael Bloomberg's outspent almost every single Democratic candidate got almost no votes. And so there's a large body of research that basically says it's surprisingly hard to turn money into political outcomes in the U.S. It's less true in other countries. But if somebody said like, look, pay me $5 billion and like another candidate besides Trump will win, I think very quickly the money would get raised for that. Like you could probably just get a room of 10 people together who are sufficiently rich and they'd be like, yeah, fuck Trump. I will I will throw in, you know, a billion of my 50 billion to just avoid the next four years sucking.

Yes, but right now, absurdly rich people who would be able to raise $5 billion have the ability to donate $5 billion to a super PAC, which spends that much money to influence the outcome of the election. And, you know, if all candidates across the entire last cycle are $4.1 billion, I'm pretty sure $5 billion would be enough to move the needle to almost guarantee anyone. Yeah.

I don't think that's true. I think it's more raising that is going to, be difficult, right? Because the connection between the funds to the outcome is kind of nebulous. I think actually there's some studies to suggest the causality is reversed, where it's like the most popular candidates are therefore able to raise the most money instead of the other way around. And so, you know, if everyone knew that you spend this amount of money, you get this sort of guaranteed outcome, I think that is like a pretty compelling product versus, you know, hey, maybe things will sort of turn out in your favor in an incrementally better way.

Maybe another question I'm curious about is like, has there ever been a country where this strategy has worked or like has been tried and you know like what is the like win loss record of this strategy? Because I bet you this has been tried somewhere for much less money. I don't doubt it. Yeah. I'm sure in like highly corrupt countries you just pay off a political opponent. You just give them like some sinecure in some place and you say, look, you know, you get to run this, this oil company over here. And you get to own this real estate company over here.

kind of you could argue that Russia kind like Putin probably basically were yeah they like cut up the country and gave it to different people to prevent them from becoming political opponents. So if anything, that's like the hallmark of a corrupt country. Well, maybe then that's why Trump loves this idea. Well, we don't know if he did love this idea. All we know is SBF. Supposedly this price came from him. He said the price. He said the price. Come on.

Yeah, he set the price of $5 billion. It came back to SBF and SBF was contemplated. it. That's the story. Now again, we don't know how real that is, but that's the story. Yeah, he might have thrown it out as a joke number, you know? I mean, yeah, maybe. It's possible. It's possible. I mean, the problem, again, with Trump, though, is that, like, I think a large part of the reason why he wants the presidency is not for money. Obviously, he wants money. But I think a lot of it is really just the, all the criminal cases against him that he wants to, you know, if he can fend them off much more readily if he's president again. So that he doesn't get for $5 billion. So,

another story that Michael Lewis detailed in his book. So again, we don't have the book yet. It comes out tomorrow. But I heard him on another podcast where he talked about when everything was collapsing. So when the quote unquote bank run started.

One thing, I take a lot of issue with the way that Michael Lewis is talking about SBF. You can tell he's very sympathetic to Sam. So he keeps talking about it as a bank run, which like it's, you know, it was not a fucking bank run, right? It was a bank run in the sense that people were trying to,

to get out, but an exchange is never supposed to have a bank run, right? Exchange is supposed to be fully collateralized. So bank runs only exist for under-collateralized systems, which he somehow never quite gets that in his explanations of what happened with FTX. But anyway, when everything was collapsing, supposedly all of the lieutenants, like Nashad, Gary, Caroline, apparently everyone left to go to their parents' houses, which I thought was very weird, where he was like, yeah, you know, this multi-billion dollar company was collapsing. And instead of like going in and going through the books and trying to figure everything out, instead everyone went to their parents. And it's like, okay, there was never a clear moment when I realized this company was run by 20-somethings because that was their immediate instinct is, you know, go go hang out with your mom and try to get her to explain, you know, explain to the cops what's happening.

So any reactions to that? My reaction is that Michael Lewis was swindled by. SBF in some metaphorical sense. Like, he believed the Kool-Aid, you know? Yeah, so I actually talked to Michael Lewis about, well, for the book after, like, this year. And I got the vibe that it's just like he already wrote the book and he's not going to change most of it.

And like he's going to add a section at the end, you know, maybe Sam since the collapse. I don't know. That was like the vibe I got was that there's like, he's not really changing the book until the end. And, like, my argument is that that strategy probably dictated the media strategy, which is why we got the outcome that we saw. It wasn't necessarily an indicator of truth. It's more likely an indicator of a media strategy. So that's just my maybe somewhat.

I think it's also true. Like, when you're writing a book, you have to paint the central character as a complex figure. So if you just write a book that says he was a bad guy, he was lying the whole time. It's all genuine. He's a trossarian fraud. Everything was all set up in order to steal money. That's not an interesting book. That's just like a detail of a serial murderer or something.

It's an interesting book if there's a conflict at the center of it about the genuine tear of wanting to improve the world versus this utilitarian kind of calculus that ran too close to the cliff edge. I believe that he believes it. You can tell from his interactions with the way he, talks about SPF, that he was genuinely dazzled by him, and he genuinely thought he was a really smart guy. And I think everybody who knew Sam knew that he was a really smart guy, and that he was also very strange. And unlike pretty much anybody you've ever met who has ever run a company,

you know, like I know some people who are like Sam, but they don't run companies. That part of it was, there was another part where he mentioned that Sam said at one point that everybody over the age of 40 was obsolete. And that, that's part of the reason why he like kicked them out from all his companies. He ignored it. advice from lawyers. I mean, this is stuff that I think many of us have seen in our interactions with FTX is the fact that everybody who worked there was like in their 20s, more or less. I think the more details that come out about, you know, some of the famous crypto criminals from the past, you know, two years, like the less sympathetic they are. There's also this

evidence that came out in the terror trial and it was internal chat logs between Doe and I think Daniel or someone else at Terra. Talk about Doe basically intentionally creating fake transactions to simulate activity on the Terra network. And it's like, okay, it's very difficult to then buy the story that this was a deploy design scheme and I didn't know this was going to happen. And it's like, oh, no, you actually knew this whole time. And similarly with FTX, like, the more evidence that comes out, the more damning it is that, you know, this is simply fraud from the very beginning.

Well, so I'm going to go out on a limb here. And I'm going to say that I think the, so I think this is one place where Turun and I seem to disagree, which is the question of the genuineness of Sam's intentions versus what he actually did. So very obviously at this point, what Sam did was very fraudulent. You know, all this stuff about like the accounting backdoors and, you know, all the stuff that they did in order to obfuscate the fact that Alameda had privileged access in the exchange and even when they claimed they didn't and blah, blah, blah, all this stuff. So very clearly there was a lot of subterfuge and a lot a fraud taking place at FTCS.

The core question, though, is like, and this is, it seems like to be the central conflict of the book is, were Sam's intentions genuine of wanting to be an effective altruist, wanting to improve the world, blah, blah, blah. It seems to me like it's hard to come away with the answer not being yes. I don't know if, Turen, if you still disagree with that. Because it seemed like after, when we did the show after the FTC collapse, you disagree with it. Yeah. I definitely disagree with that. just my personal interactions have always just generally been was a generally extremely self-centered

person who had very little to care about all of these causes except that they were really good branding exercises for him. They're very little I've ever interacted with him where I actually think that he believed what he said if it wasn't just like optimizing his local utility function. And I just like, he was always like that. So it's like really hard. Just think about the linear versus logarithmic wealth debate he had with Dan Robinson. Do you remember this on Twitter? I do. Yes. I mean, there was just like insane amounts of, well, let me ask you what do you think he was actually, what do you think his actual utility function was, as you put it? What do you think he really was optimizing for? I mean, I think he just like likes fame and power and being rich, right? Like, I mean,

the whole type of like, hey, I'm like this ascetic billionaire narrative has happened before, by the way. There have been multiple of these, like, I'm a homeless billionaire and, like, I give away all men on any type of things. I won't name the one that I'm thinking of because I actually, I've met him before. He's a nice guy. He's much nice with him, Sam, I would say. But there is, there is a real assetical. Yeah, yeah, yeah, he's a real ascetic. And so there's sort of this thing of, like, I think he realized that was like a very clear way to differentiate himself in a market filled with sharks.

like, you know, Justin Son and CZ and people, you know, like they're extremely transparent in that dimension, right? Like their utility function is like, make more money or have more volume or whatever, right? Almost so transparent that it can be viewed as gross to a certain type of people.

But those certain type of people who also have a lot of money, they need a narrative to be wooed, to be swooned to part with their capital. And his entire thing was about making that narrative and that it was about trying to be like the Western institution friendly, but I'm still money grubbing type of person. And there's just like a general level of selfishness with him that I think was so palpable that it was like hard to square that with the other stuff he said. And then like, look, I feel like my first job was working with a billionaire who's spending all his money on doing science research. And all I have to say is like, I've seen people who actually give away their money and I will tell you that I, there's no fucking way in hell. Sam was close to that.

Robert, what's your take? Yeah, my take is very simple. Like there's no way that he had good intentions when the core of his identity was a facade, right? Like he would go into as much public as he can saying that SBF drove a Toyota Corolla and that he was a vegan and that everything he was doing was about giving back money. none of this was true. He didn't drive a carola. He wasn't giving any money back. I'm pretty sure he was a vegan.

No, he wasn't a vegan. I thought all information came out that he wasn't a vegan. No, no, he's vegan. He's vegan. He's vegan. He's vegan. He's being, he's being a vegan. Yeah, yeah, yeah.

Honestly, that is one thing. All my interactions with him have in person have been consistent. He's always at least. Okay, I've read information on the internet. Obviously, you cannot trust the internet completely. But I've been in a Technically if you only eat candy bars, that is technically vegan. So just FYI.

Okay. But there was people that were pointing out instances where he was like consuming non-vegan things. I'll go, I'll find this for a future chop. Okay. Very important investigating a journalism here on the chopping block. I do think that Toyota Krola thing is a great example, right?

It's a meme perpetrated by the second in command. Was that guy named Salami? Salami. Ryan Salome. It was a meme perpetrated. traded by him. But then, like, they bought this private jet, which just came out because, like, actually the private jet, uh, Lassore is like suing the FDX creditors and the FTCX creditors, like, you have to give us the money back and there's this big kerfuffle between them.

And it's like, he would always talk about like, oh, I have like humble behavior, but then like, you know, go by private jet. It's not consistent, right? I thought the other thing that's funny is that the, um, the, the yacht that, uh, what's his name thought? Trubuko was actually bought by the company. That came out in the same air. There's a lawsuit about the transportation costs that came out like last week.

I think probably just ahead of this trial. It was like purposely dumped. There was also a lot of stuff about the parents making a bunch of money, like getting millions of dollars on getting on payroll. His dad was being paid a million dollars a year. So there were a lot of instances of you know, kind of people picking at the corporate treasury in different ways. Yeah.

The parents one is interesting because I do wonder if there is criminal liability for that, not just strictly civil. I don't know. I mean, I hear what you guys are saying, and obviously I agree that there was a lot of bad actions and there was a lot of willful, just kind of, yeah, just sort of flagrant, you know, people just grabbing money out of FTX wherever they could. at the same time, it's hard to square. Like, look, if you wanted to just be Justin Sun, you can just be Justin Sun.

Like, this is the one industry where you can just do that. Like, as Justin Sun shows very convincingly. I don't think, I don't think there can be 10 Justin Suns, right? And so, like, if you're already starting after him, you have done. I think there are 10 Justin Sun's actually. And there's a lot of Justin's types in this industry. But if you're going for the opposite market where you're not going for the Asian market, is it quite different. I do think, like, you have to have, you have to be a very different.

story. Here's the problem with that story. So this is exactly one of the things also that Michael Lewis talks about. So in his interview, he says, here's a quote, this isn't a Ponzi scheme. Like when you think of a Ponzi scheme, I don't know, Bernie Madoff. The problem is there's no business there coming in is being used to pay a dollar out. In this case, they actually had a great real business. If no one ever cast aspersions of the business, if there had been a run on customer deposits, they'd still be sitting there making tons of money, right? Now, the reality is, and I think actually Michael Lewis, he mentions this in the interview, that FTXUS was a total failure.

FtXUS had almost no deposits. It had very few users. They'd almost no market share. And almost all the money he was spending on marketing was in the U.S. market. Their biggest market was Korea. Second biggest market, I believe, was Singapore. Like, their market share was almost entirely outside of the U.S.

And so the idea that, like, well, you know, like he was such a great cultural figure and, you know, it really resonated with people. like people outside the U.S. didn't give a shit that he was an effective altruist or whatever. They just like, they just trade on FTCS because it's just another crypto exchange. How many U.S. funds invested in finance? I agree with you. But do you think the U.S. funds invested because he was an effective altruist?

I think they invested because he's like an MIT crazy rad thing. No, did you read that fucking Sequoia thing? Yeah, but that's not why they invested. Are you kidding me? Come on. You think if he was not an effective altruist, they would not have invested in FTCS? I think if they didn't have a nice narrative. to be like, crypto has changed. It's not always criminals and scallywags. Look, there's this guy who's

doing something nice. It wouldn't have worked. It would not fucking work with the LPs. I really do think that that is a truism. Well, you can argue over the magnitude, but directionally, I think it only has. Directionally, yes. Directionally, yes. I just think that it was not, like, Tarun kind of makes it sound like, you know, he was sort of, he was sitting in his layer, you know, kind of, you know, playing with his fingers and being like, ah, ha, ha, ha, here's what I should do. I should pretend to be an effective altruist. He was playing League of Legends. He was doing this.

Yes, he was doing this for 10 years. He was doing this since he was at Jane Street. Before he had any LPs, for he had any capital, like, clearly the only sensible story is that it started from a place of very genuinely trying to perform effective altruism and continue to do it to the very end. He was talking about paying Trump $5 billion to not run. Again, I don't know how real that was. I think this idea that it can be genuine in the beginning and not genuine later is actually

quite important for you to consider. Like it can flip, right? It can metastasize. Look, I think I agree with you, it can metastasize, right? But did it flip in the sense that at a certain point, he stopped trying to do what he originally set out to do or that his means through which he was willing to do what he originally set out to do became more and more warped over time? I think those are two very different claims.

And that is kind of the claim that Michael Lewis makes, is that he thinks that Sam lost his way, but fundamentally he was more or less the same guy. Like, he never really believed in crypto. He always saw crypto as instrumental. And that I think everybody who ever met Sam agrees with is that Sam was not a true believer. He didn't really care that much about the industry. He just saw it as an opportunity to make money.

But it wasn't because he just, you know, he loves cars or private jets or whatever. Like, clearly he was motivated by all of the shit. shit that he was doing. And you can argue that he was incredibly ineffective at doing it. Clearly, he's done way more damage to effective altruism than any single person ever. And way more damage to every single one of the causes that he was trying to endorse, probably gave more ammunition to Republicans than Democrats in retrospect. But I think it's hard to argue that he, that it was a facade. I just think there's a difference between genuine intent at the beginning of a,

an idea and continued following of that intent or that intent got you to a place where you changed your direction. And in his case, it seems very clear that it was he got to a certain place because of that. And then at some point, he realized leaning into it, but not really believing the doctrine was more valuable. Now, do you tell me, would you tell me that's still genuine intent? I don't think so. I actually think that means that you're sort of like, you're piggybacking off a, um,

movement that in a way that is like disingenuous to its actual ideals. And, you know, clearly that's, that's been shown to be true at this point. But it just, I think this idea that genuine is a static quantity. Like I dictate I'm genuine 10 years ago and then I'm genuine forever is not, that's not really how this works. I feel. Yeah, here's my read. Just looking at things that actually occurred, not trying to read into SBF's mind and like think about. like, well, what did he want? In terms of things that actually occurred, he spent billions of dollars of money that didn't belong to him

to pump up the SBF and FTX brand, billions of dollars. How much money did he actually spend on altruistic things that weren't about pumping up SBF and FTX? How much did he actually spend on like really furthering the world or like charity or like genuinely good causes? Very, very little. And when I just look at the actual track record, yeah, sure, I bet even $5 billion to Trump was going to all be about the SBF, like Slade the Dragon marketing campaign if it ever happened, right? Like all of it was not altruism.

All of it was selfish that I can see. And so like even if he originally started off on this path of trying to do the most amount of good by making the most amount of money and giving it back, the track record doesn't say that. The track record says that he was just extremely selfish. and whether he started that way or not, I don't know. But like, from an external perspective, I think SBF was not altruistic in his intentions at all. That's fair. I definitely agree with you.

When you tally it up, SBF did enormous damage to pretty much everything he touched. Yeah, he was like to reverse Midas. I mean, like... Well, that is just Midas, right? Wait, wait, wait, wait. Some people, that's not true. All of these book authors are making a ton of money.

In fact, I just bought this book, the number go up book, I'm going to read it because I'm kind of curious. Okay, good, good. Tom, what do you give you the last word before we switch topics? I'm just so tired of talking about SBF and effective altruism. And like, you know, this feels very much flashback from like 12 months ago. And I feel like there's more and more news out there in crypto these days. There is not. We are going to be talking about this for the next fucking two, three weeks.

until this trial is over, dude. So get ready for it. Let's take another flashback to our friend Suu. Oh, good. Yes. So in other news of Crypto Villains, so Suu was just arrested in Singapore. So he was in Changi Airport. No idea why.

One would assume that he probably would not want to show his face outside of Dubai, where I understand he's normally living. But he was picked up for contempt of court. So I think a lot of people were hoping that, oh my God, Sousa's been arrested. It's probably for being a bad person and crashing the market. But the reason why he was arrested and why he's serving four months in jail for contempt of court is because of his

unresponsiveness in the bankruptcy proceedings. So basically he's not picking up the phone and being cooperative. And that's why he is in jail. So presumably now he will be forced to cooperate with the liquidators. But as far as we know, there's not been any broader criminal charges that have been brought or alleged, against Suu. So not quite the resolution we wanted, but at this point, now we do have the major crypto villains of the last cycle. SBF now under trial, Doe Kwan, also under arrest,

awaiting his trial, and Suzoo in jail. What about Kyle and his chicken shop? Chicken shop. Chicken shop? We talked about it like months ago. He was like speaking in code on the internet and like nobody knew what he was like meaning, but he was talking about opening up a chicken shop as his next business. And everyone thought he was talking about laundering money. But then he did actually open the chicken shop. He did actually open it.

Where? Like a fried chicken restaurant in Dubai, I think. I totally missed this. Yeah. I miss this completely. I don't think we talked about this on the show because I would remember this. Interesting. I did not know that he started a chicken shop.

Well, you know, if he does not leave Dubai, I'm sure that he will be able to run a great chicken shop in peace. So, but I would assume that both, I think, I think in the, in the press release about the arrest, they mentioned that they also wanted Kyle and Kyle was still at large. Or they could not, they could not determine his whereabouts, which I think means probably is in Dubai. They just have to show up to the chicken restaurant and look behind the time. Well, Dubai doesn't have extradition treaties.

So unfortunately, yeah, hard to get people out of here. Hey, can I ask a quick question? if you guys made a movie with Suzu and SBF, who would you cast? Because I just watched Dumb Money, the movie where they like cast the guy from Parks and Recreation as Ken Griffin and Ken Griffin got very mad and wrote on the internet about how this guy doesn't look like him or whatever.

But like who do you think you would cast in these worlds? Jonah Hill for SBF. John Hill was the guy who played in the social network, right? Wait, what? No, who's the guy? Yeah. What the fuck is the name? Jesse Eisenberg?

Yeah. Jesse Eisenberg. He's probably too old now, right? Probably. Yeah, he's probably like in his late 30s. I mean, in Hollywood. John Hill also lost a much of weight, so maybe not a good fit anymore. Okay, true, true.

A good actor can manage their weight for the role. Yeah, exactly, exactly. Christian Bale. Also, I feel like now all the, all the augmented crazy CG stuff, I'm sure. that it doesn't even matter. Like, you probably don't even... I'm sure the writer strike doesn't allow you to do that, but maybe the next writer strike

that doesn't have AI writer as well. Yeah, it's fine. At this point, in crypto, Chad GPD can write the script. It'll probably make more sense than what actually happened. But Suu is an interesting character. How about the guy who is Ken and Barbie? I forget that guy's name. Ryan Gossom.

You know what? No, no, no. I was sorry. The Asian Asian... The Asian... Asian 10. Wait, Ryan Gosling for Suzu would be a very interesting casting choice. That would be bold.

That would be bold, actually. That would be, I feel like that would be funded by Three Arrows. If he had Ryan Gosling play Suzu. They would have Ryan Gosling play Kyle. That actually does make sense because Kyle is, Kyle's a pretty handsome man. So I feel like that could work actually as a casting choice. Anyway.

Yeah, so I don't know. It does seem like we're now getting to the point. Okay, so let's take a step back. SBF trial's about to start. The entire world is going to be focused on this thing. Like, it's already front page news. The trial hasn't even started yet. How do you feel about the fact that once again,

the entire world is fixated on the SBF story? We're probably not going to see the end of this for like at least a couple weeks. And there's going to be more stuff after the trial. There's going to be sentencing. There's possibly more trials over some of the political donations. it does feel like maybe this is the last step before we finally get some closure on the 2022 kind of, you know, series of Terribles. Because we've got, you know, Doquan, we've got Suu kind of.

I mean, not really, you know, whatever contempt of court. But now finally the SBF trial is coming. How do you guys think about that? My assumption is this is not going to be the end. Even if he's guilty, he's going to appeal it. It's going to stretch on. I mean, do you remember what happened with Elizabeth Holmes? like that thing lasted for seven years.

I think SBF has the intention and the means to stretch it out. I feel like this is going to be a narrative for years, unfortunately. Like I wish it was the end of this chapter. But having watched like other cases just stretch on like in perpetuity, I see no reason why he's not going to pursue that same path. I do think if the FTX current, creditors are able to successfully sue for damages from his parents, it'll be kind of interesting because the Elizabeth Holmes trial didn't have the clawback aspect of like the company trying

to claw back the funds used to fund the trial, whereas in this case, that is actually true. And it'll be actually quite interesting to see how successful that is as a strategy. That said, I mean, it seems kind of symbolic, right? Like relative to the amount of money missing, the parents probably have, you know, maybe $10 million, $20 million. Still have to pay their legal bills. Yeah, but it's being funded by an outside party, I believe, right? I believe that was reported. There's some third party person's funding the.

I thought that was just the bail. I thought that was just bail. Oh, that might be right. That might be right. I see. So I, and he fucked that up, right? That bail money was useless because he went back to jail. Yes.

True. Yeah, it's, you are definitely right, Robert, that this is going to continue and drag on for some time. It's not, it's not really the end. That said, I think the media attention will end once there's a guilty verdict. Like, there will be, I mean, at this point, almost everybody expects that there will be a guilty verdict on at least some of the charges. There will be appeals and there will be other charges brought in, blah, blah, blah, blah, blah. But like, once you get the first guilty verdict, it's kind of like, oh, everyone sort of breathes a sigh of relief, justice system has worked. Now there's a question of sentencing and blah, blah, blah, and whatnot. But more or less, the answer that everyone was waiting for arrives, which is that, okay, he's, he's going to serve some time in prison.

I think that was also kind of true of Elizabeth Holmes. Like, I believe, you know, even she started her prison sentence, like, within the last year, I think. But like the totality of the attention and the grip that it had on the nation ended way, way before that. And so I think that will probably also be true of SBF. And I think crypto and the whole, I feel like the two big milestones are one, the SBF verdict, you know, at least one guilty verdict that, like, okay, there will be prison time, despite the, you know, other cases and the appeals and whatever. And then second is when people get paid back from FTX. So when you start seeing people getting their money back, whether it's 40 cents, 50 cents, 60 cents on the dollar, whatever it ends

being in the end, then people can finally move on, you know, and say, okay, that was a bad story, crazy for those who lived through it. But now, like, there's just not that much more to talk about. And I feel like we kind of need that as an industry to be able to really move forward. I don't know. It's part of the healing process, I think. I agree. But my production is not going to be the end of the FTX and SPF drama. I think there's going to be multiple movies. It's going to stay in the discourse long past the point where we were all bored to tears. Yeah. Yeah. Well, I really wish we didn't have to talk about the trial, but I'm, I think it's very likely we will, unfortunately. But we're. Which, we're just.

We should get a guest on. Yeah, we should get a guest on to talk about the trial who, like, knows exactly these things. No, dude, I don't want to get a guess on to talk about it. Like, I really don't want this show to be, every other freaking show is going to be about the SBF trial. We should at least try to minimize the amount of SBF stuff we have on here. No doubt we'll have to talk about some, but I want to at least not make this the SBF show. He's already taken enough from us, man. Yeah, that's true.

You've wrecked everybody's souls. direct all of our souls. Okay, so one more topic I want to talk about in the time that we have left. So there was a blog post that was dropped by Vitalik recently that's got a lot of people talking. And the subject of this blog post is protocol enshrinement. So protocol enthrinement is this idea where you have a lot of innovations taking place at the application layer. So people building things like liquid staking, people building things like private mempools or, you know, MEPA auctions, or, you know, different pre-compile pre-compiles, ZKVMs, all this stuff, much of the stuff that we invest in and we look at as

investors and as, you know, thinkers in the crypto space. The question that he asked in this blog post is, when does it make sense to say, ah, this thing is so important to what is happening in Ethereum and potentially even jeopardizes the neutrality of Ethereum to allow all this innovation just be happening in the application layer, that it makes sense to grab some of this stuff and pull it up into the protocol there itself and so-called enshrine it in to the protocol. So naturally, this has been done in the past with things like pre-compiles. So pre-compiles are when you have some piece of code that runs so often or so useful generally that's very inefficient to do directly in the Ethereum virtual machine. And so instead,

you have basically this machine code that's highly optimized that runs this thing for you so that it's not as gas inefficient as it would be running it in the EVM. And the question is, are there more things that we should sort of quote-unquote pre-compile or build directly into the base layer? A lot of this conversation has been triggered by Lido. So, Lido, for those you don't know, is a liquid staking protocol. We are investors into Lido. Basically, what they do is they allow you to tokenize your liquid staking stake and trade it, trade it and out of it. But you could just passively sit in it and get yield and sell it anytime you want to.

So Lido has now risen to something like 30-ish percent of total eat staking deposits. Is that correct? It's like 32-33, something like that. 32-33. And there's a lot of concern now that it is becoming one of the most dominant single players in the staking universe and that perhaps there should be something done at the protocol layer to avert the dominance of Lido because it could be a threat to protocol security. If there's a single proof of stake actor, that's a quote single actor, even though the proponents of Lido would argue well, Lido, it's a decentralized system. There are a bunch of different validators that are in the Lido network. So Lido looks like one big thing, but actually it's like 30 validators or something.

and whatever, some large number of professional validators that are part of the Lido network. And so when Stake goes to Lido, it's actually split among all these different validators, and they would have to individually collude with each other. Like Lido is one big monolith. That's the pro argument. There's a lot of people on the anti-side

who say Lido is unsafe, and I think a lot of that is what triggered this discussion from Vitalik. So curious to get your guys' reactions to this enshrinement conversation, and if you feel in particular about Lido, because it seems to be driving a lot of this conversation, whether there should be something

that takes place at the protocol layer to avert the dominance of Lido in staking? Well, I think the first debate is, is the dominance of problem? And I think, like, within the community, there's obviously two very different views. And, like, I think it's still too early to say that it necessarily is a problem. Right. if it's a problem and a large enough portion of the Ethereum community, staking community protocol developers, etc., think that it's a problem. Then it's like move to step B.

How do you potentially like take some of these pieces and move them into the Ethereum protocol? But like I don't know. I think like it's almost more contentious to sort of resolve that like Lido's a problem. because it's a successful application. Like, just because it's successful, does not make it, you know, necessarily a problem. Yeah, I think it was entirely predictable that there would be concentration

and extremely positive, strong network effects around liquid staking ahead of time. So I'm kind of surprised this was not discussed. And I think the intention or the decision not to include liquid staking was intentional to avoid sort of the, you know, few validator, you know, concentration that you get with like DPS. And so we're kind of just like bouncing around these different things

where it's like we want, and now that even the FSA amount there being too many validators, and that's really slowing consensus and slowing that way. So it's like you can't have your kick and eat it too where like you don't want, you want a bunch of validators, but you don't want too many validators and you want liquid staking, but you don't want, you know, there to be this third party, you know, dominant liquid staking provider. Like these are just sort of classic, I think, market dynamics, you know, playing out kind of, kind of as predicted.

And I think to Vodak's point in the block post too, he talks about, well, if we did build something like this and trying to the protocol, It probably looked like rocket pool. And so people can offer that today if they want, but it's, you know, it would effectively just be placing something like that as like a primitive in Ethereum. It's very clear one of the design goals of Ethereum proof of stake was that they really wanted to encourage sort of home stakers. People just running on their own commodity hardware, some staking stuff so that the staking pool or it's not sticking pool. The validator set is as broad as possible and involves as much normal folks on commodity. Harding hardware.

It's very clear that that drove a lot of their decisions, such as, for example, to not allow delegation, as you mentioned, Tom. Delegation now is kind of a mainstay of a lot of proof of stake networks. The theorem was like, no, we don't want that, because we don't want to get this concentration of professional validators that normal users will just point their lasers at this great validator, and they don't run anything themselves, and then you just get this concentration of validators. And so they were like, look, we're just going to make it hard.

We're going to make it hard for users to delegate or to do something like that. like delegation, and then hopefully that's going to create this ecosystem of home validators. And instead, what we see is that the market gives people what they want. And what people want is they want a passive way to get access to Staking Guild while delegating the responsibility of actually staking to others. And that's Lido and Rocket Pool and all these other, you know, staking systems. And so it does seem like there was a little bit of over-engineering or maybe over-optimism about their ability to kind of centrally plan how Ethereum staking would be composed.

And in a certain sense, it's backfiring now when they see, oh, wow, okay, it looks like regardless of what we want people to do, people want a Lido-like thing. They want a liquid staking token. And, you know, now we have to deal with the consequence of that without a lot of tools with which to mediate that market. I think there's another aspect to this that's actually extremely important in practice that people don't consider, which is that the reason you have some of the, these dominant effects is not just strictly the idea that like, hey, this particular staking pool service is the safest or has the longest track record. It's actually liquidity based where like people who have the stake asset, they may need to borrow against it for some reason or they may need to sell and not wait the withdrawal period. And the withdrawal period is for security reasons that

You can't just like immediately take your stake eth and remove eith out of it. But you may just like, I don't know, you use this collateral or like you got liquidated somewhere and you need to post more money somewhere or you, you know, need ETH for some other reason. And Lido from its inception focused insanely hard on incredibly insane, probably insane in hindsight amounts of liquidity incentives to get to that point. I think an interesting point about the rocket pool model is it's like rocket pull itself kind of is a bad model in some ways because the RPL token that doesn't have any other fee accrual mechanism. So like if the RPL token goes down a lot, then like the security of the rocket pool validators is actually quite quite a bit in trouble. On the other hand, if Ethereum offers a rocket pool like thing, that's great because it has natural transaction carry coming in from all the transaction fees. Can you real quick for the audience explain the difference between the Lido system and the Rottable system? Yeah. Yeah. So it's very, very high level. The Lido system is like a staking pool. So you give, you know, your ETH to it. So maybe you put two Eath. Haseeb puts in 30th. Robert puts in 16.9th. And Tom puts in 400th. And it makes a pool that adds up everything, which is around 550 or something like that. And basically,

it takes that pool and it says, okay, each of us own a pro rata share. So like Tom owns 400 divided by that and I own, you know, 1.6 or whatever divided by that. And then that pool is owned by a single validator, or well, really a set of validators who use that stake, use the pool that we gave to get to where they are. Rocket pool does something slightly different where it has the validators contributed in some of the ETH and the depositors contributing some of the ETH. And in order to deal with getting slashed, so the losses, how do the losses flow through from the validators and then to the users that the validators, ETH sort of is usually the first tranche. But if, if, say, like, there's more slashing, you need some more security.

They have their own token that you have to stake. The problem is that thing has no real fundamental fee-driven value. So, like, yes, if there's a great Ponzi time, like, yes, It will grow high and whatever. But when the value of that crashes, the security of their system is much more unsafe. Whereas in the Lido type of system, as long as there's many validators validating a single pool so that you don't get slashed for livenous faults, it is generally significantly safer. Now, there's other consequences because Lido is the governance token, but Lido is introducing dual staking. So I think that hopefully should ameliorate a lot of that.

that also disclaimer we are we are also a lot of investors but I think the the Rock and Pool models have a lot of merit because they do kind of lower they do force the validators have skin in the game and

the Lido model they will have more but like they make it more explicit but I guess my point is if Ethereum validators who are earning income in Ethereum are able to provide some fraction of their income into as sort of that their costs they have to provide to this structure.

It makes a lot more sense than Ethereum Valder is who are earning RPL, selling RPL or barring against RPL to contribute ETH. Because then that RPL, they're kind of like net negative on the RPL. They're either selling it or barring against it. So you can have these like very bad interactions in the worst case, like really bad slashing events. Now, of course, it's barely been any slashing. But I guess long story short is I actually think this enshrining thing is like, Once you do one thing, you have to do everything.

They, Ethereum entranes the rocket pool type of thing. Well, now they're going to have to source liquidity for, you know, I saw people joking on the internet calling it EF, ETH, like Ethereum Foundation ETH. So for EF, ETH, you would need to have liquidity and the liquidity we need to be owned in some ways by the protocol. And now you'd be enshrining a uniswap to ensure that I could trade out of EF, ETH to ETH. And then I need it in trying to comp. So I actually think it's not an easy thing to do. And I think that if you don't understand the market dynamics, you might think like,

okay, we just add the one gizmo and it works. But it's actually this kind of quite complex web and you may have to actually continually import the whole thing. So maybe that might more nuanced view of the. Yeah, it's also the reality is that, look, anything that Ethereum decides to enshrine goes at Ethereum development speed, which means it's going to be like fucking two years. It's going to be like a three-part upgrade. and it's going to be like two years or three years from now that we actually get the like Ethereum enshrined rocket pool or whatever.

And until then, okay, well, whatever centralization vectors you're worried about in just the raw marketplace are going to continue moving forward for the next three years. So one way or another, like I think, I mean, this is a drum that I constantly like to beat, which is that a lot of people, especially in crypto-economic design, really want to shy away from social consensus as being an enforcement mechanism.

in blockchains. And they just are. They just always are. They always have been. And I think Dankrad posted something about this, which I very strongly agreed with, which is that the number one thing that keeps Ethereum on path

is not the crypto economic mechanisms. They're never enough. You never are going to have a sufficiently specified crypto economic system that no bad thing can happen given all the incentives that you've constructed around you. You always need to have some culture

that's pushing people in the right direction. And a large part of the way that you can see it from Lido. Lido is intentionally trying to contort themselves with this dual staking and this, you know, the governance structure that they have to try to make it so that they are responsive to the overall needs of Ethereum governance rather than just, you know, token go up. One last thing I would add, though, the entrying of the ZK thing is actually quite useful because that actually would mean that the Ethereum Valderers are forced to provide ZK proofs

versus like having it completely bootstrap a new proving network. True, true. But I actually think that is a place where. it might actually make more sense. Yes, but it's another example of that place where the reality is that not everybody is fully EVM compatible, right? There's a range of EVM compatibility. And so basically if you say, like, oh, well, we're only going to do this for true

EVM compatibility or EVM execution, then now you're throwing up everybody under the bus who made a different design choice in building their ZKVMs. Other VMs can emulate partial EVM compatibility. So the question of whether the validators are willing to give up. Right. But then there's a lot of. of nuances to get right so that it's actually neutral among all implementations. It will take five or six years, don't worry.

Five or six years. Okay, good, good, good, good. All right, we're up on time. I really hope day one of the SBF trial was not that interesting because we have nothing to say about it. Quick predictions. What do you guys think happens in the beginning of the SBF trial? Tom, you're first.

I think he's going to try to throw some curveball. It sounds like there's a lot of restrictions on what he can say has been happening to him. Like he can't say he's been held in jail. and he can't say he was sort of forced to turn over, you know, FTC's power to Ryan or give bankruptcy. And so that's been interesting. But, I mean, it sounds like he's been researching and planning something for a while. And even with his whole thing around like leaking Caroline's diary, I feel like he has some sort

of weird trick up his sleeve. So I think there's going to be something that I expect the unexpected is maybe the prediction, which is kind of boring. All right. Tarun. What's your prediction? His parents will be on the stand at some point. All right.

Robert. I think there's going to be some bullshit because it's always what you want these to happen happens. I think there's going to be like a mistrial or something ridiculous. Wow, you're a truth. I would, jury no obligation. Yeah. I would guess that there's going to be a lot of disruptions in the trial. They're going to get covered very widely. He's probably going to be shaking uncontrollably.

He's going to ask for drugs in the middle of something. I think there's going to be a lot of disruptions. in the trial. That's going to be my guess. So anyway, we will see or we will be invalidated by the time this episode sees a light of day. But until then, enjoy the trial, or if you can, try to avoid the trial because I feel like

it's bad for your soul to pay too much attention to stuff like this. Anyway, until next week. Thanks, everybody.