Unchained - The Chopping Block: SBF on a Crazy Week of Bitfinex, Wormhole and ENS Drama - Ep.318

Episode Date: February 9, 2022

Welcome to The Chopping Block! Crypto insiders Haseeb Qureshi, Tom Schmidt, and Tarun Chitra chop it up about the latest news in the digital asset industry. On this week’s episode, Sam Bankman-Friend (SBF), CEO and founder of FTX, also dropped by. Show topics: Robert and SBF’s takeaways from previous experiences speaking to regulators what happened during the Wormhole hack and why building decentralized systems is difficult  whether AssangeDAO is a good use of money and how it showcases the power of DAOs + NFTs why GameStop dumping IMX tokens might have been Immutable X’s fault ENS drama, cancel culture, and whether or not the guys would have fired Brantly Millegan if it had been their company making the decision how the US was able to recover funds from the Bitfinex hack (and how Tarun knows one of the individuals arrested for allegedly using the stolen BTC via money laundering) Shape rotators versus wordcels: what is the meme, how does SBF identify, and Arthur Hayes?    Hosts Haseeb Qureshi, managing partner at Dragonfly Capital https://twitter.com/hosseeb Tom Schmidt, general partner at Dragonfly Capital https://twitter.com/tomhschmidt Tarun Chitra, managing partner at Robot Ventures https://twitter.com/tarunchitra  Robert Leshner, founder of Compound  https://twitter.com/rleshner  Guest Sam Bankman-Fried, CEO and founder of FTX https://twitter.com/SBF_Alameda   Links Wormhole hack https://www.theverge.com/2022/2/3/22916111/wormhole-hack-github-error-325-million-theft-ethereum-solana AssangeDAO raises ~$41M on Juicebox, larger than ConstitutionDAO https://juicebox.money/#/p/assangedao ENS drama https://www.coindesk.com/markets/2022/02/07/ethereum-name-service-removes-brantly-millegan-as-steward-over-2016-tweet/ https://unchainedpodcast.com/this-big-4-firm-added-btc-and-eth-to-its-balance-sheet/  Gamestop and ImmutableX https://twitter.com/polarply/status/1489572631649083394 https://unchainedpodcast.com/another-gamestop-pump-and-dump/  Bitfinex Hack https://www.reuters.com/technology/us-arrests-couple-allegedly-laundering-45-bln-crypto-tied-bitfinex-hack-2022-02-08/ https://twitter.com/tarunchitra/status/1491104365683552256?s=20&t=7KkfnSsGjDz-MxJjYWBB6A  https://www.youtube.com/watch?v=JmahJCWJ8iM&t=1s  https://www.coindesk.com/policy/2022/02/08/us-officials-seize-bitcoin-from-2016-bitfinex-hack/  Wordcels vs. Shape Rotators https://twitter.com/VitalikButerin/status/1489998900438077441  Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, everybody, and welcome to the shopping block. Every couple weeks, the four of us get together and give industry insiders perspective on the crypto topics of the day. So very quick intros. First, we got Tom, the D-Fi Maven, and Master of Memes. Next up, there's Robert,

the Cryptoconasur, and Captain of Compound. Next, we have Turun, Gigabrain, and Grand Puba at Gauntlet. And myself, Haseeb, I'm the chief hype man at Dragonfly. And today we have joining us a special guest, the Baron of the Bahamas, Sam Bankpenfried, otherwise known as SBF.

So I usually say the four of us, but the original four of us are early stage investors in crypto, and then we've got an amazing founder who's joining us today. But I want to caveat that nothing we say here is investment advice or legal advice or even life advice. So with that out of the way, Sam, how are you doing? I know that you've had some tech trolls getting on board. How's life? You know, it's been pretty good. It's been busy as always.

I'm in D.C. right now for the second time this month and testifying in a about 16 hours. That's exciting. How many of those hours will you be sleeping? Oh, I'm guessing five, four, something like that. Okay, that sounds, that, so the rumors are true. Yeah, we'll see. I'll try to get eight, but, yeah.

Any, any lessons learned from last go-around that you were testifying? Yeah, I mean, I think to some extent the lesson was like, it was sort of what it seemed like, like, I don't know. I think that the biggest surprising thing honestly was how constructive it was. Like I was honestly expecting a bit of a shit show. Like I was sort of like expecting a lot of partisan bickering and there just wasn't like it is sort of like almost everyone had a constructive attitude in across both aisles. That was like legitimately was surprising. You know, and then beyond that, you know, I think everyone has, you know, their own questions that they're like most interested in in the house. But I but I don't know, it was it was fun. Robert, you spend a good amount of time talking to legislators and lawmakers, right? Yeah, I mean, historically, you know, I've been one of the advocates for Defi and one of the founders that has been sort of championing the idea and the cause long before it got to what Defi is today. So today, it's a huge umbrella, which encompasses so many different things.

You know, the Defi, you know, of yesterday was, you know, a very limited number of projects like compound, Maker Dow. systems like that. And so, you know, I've been, you know, educating, you know, are elected and appointed officials for a long time about what is defy. The phrase has sort of evolved a bit. And now, you know, when you read a Bloomberg headline, oftentimes things that are not defy get called defy. And so I think it's, you know, creating a little bit more confusion than there used to be. But, you know, it's been a long time passion. So let's go ahead and jump into news. So what we're going to do this for this for this today's show is we'll start by going through some of the interesting news items of the week and then we'll circle back and start asking sam questions so that's the that's the that's the

game plan so uh first piece of news um well well first of all wanted to congratulate sam for the amazing fundraiser was recently announced for ftx i think between ftx us and ftx the parent co or whatever ftx main fdx dot com uh you guys are now collectively 40 billion in valuation which we're puts you almost on par with Coinbase. Thoughts? Yeah, I think that's true. It's been a wild ride. And I mean, just the difference between now and a year ago is really, you know, two or two, especially massive. And I mean, I think the weirdest thing to me about it is, or the most surprising thing is just that like the best predictor, I think, of our path was like if you sort of throughout all the outside views and throughout all the

sanity checking and just like, I don't know, write down on a piece of paper what could happen. It still would not have predicted it correctly. I think like a billion dollars a day of volume on FDX is sort of my like, wow, there's chance we could get there. And we're, you know, 15 times that. But I still think that was a better predictor than like trying to bake into it any, any other sort of like conventional wisdom or or anything like that. Well, yeah, it's completely incredible to see how meteoric the rise of FTCS has been.

and I think we've got a lot more questions for you that we'll hold to the end. But that was probably one of the, probably the blockbuster fundraising news of the last couple of weeks. So congratulations to you for being a part of that. Then, again, part of the kind of the Sam universe, of course, is Solana.

And the other big news of the week was this wormhole hack that took place on Solana. So just the very kind of headline summary, basically what happened is that, so wormhole is one of the major bridges that extends into Salana. It's a multi-chain bridge, so it's not just Salana,

but the Salonah. side was the part that got hacked. And the entire size of the hack was $325 million that was hacked. Basically, the attacker was able to go onto the Salonah side of the chain, issue unbacked ether, and then withdraw that unbacked ether into Ethereum and run off with the money. And what ended up happening is, I believe, within a day, Jump, which acquired Sirtis, which actually developed the original Wormhole Bridge, and Jump is now the primary maintainer of Wormhole, they basically decided, my understanding is that entirely off-balance sheet to fill the hole and recapitalize all $325 million worth of ether in order to save the day and basically patch

the hole in the bridge. So all is relatively well in Solana land, but it was something of a near-death experience for a lot of folks, especially in Salana Defi, who realized all of a sudden that they're, you know, the bank that they thought they had money in, was empty. And so it was a pretty wild experience. Any reflections from folks on what happened that day? Yeah, I guess one, you know, the obvious statement is building bridges is hard. The second statement is, you know, there's actually been this fight sort of in between sort of like the Solana and Cosmos ecosystem. I would call it a fight. I call it a philosophical disagreement of whether you should have multiple rap token types for bridged assets versus non-bridged assets.

And I actually think in the Salano world, people went a little crazy with like how many different synthetic wrapped eth versions there were. And that made it a lot harder to actually be able to reason about sort of like the state of like a lot of the lending protocols because they would have like one type of steak teeth that was on wormhole, another type that was on a different bridge. And, you know, people had loans where they were sort of borrowing both against a single type of collateral or barring. table coins against both of those. And it became, that was like one of the crazier and more gnarly types of things we saw. And, you know, getting used to these like bridge synthetics, I think, is a really big part of cross-chain defa that has not been solved. Well, just to step back and go to like 90,000 feet real quick. So as I understand what happened for anyone who's listening who hasn't gone into like the deep detail about what happened,

you had wormhole, which allowed people to take ether from the Ethereum blockchain. and create essentially a shadow asset on Solana, which is wormhole with. And the incident was somebody was able to print a huge amount of unbacked wormhole wheth on Salada. And this wormhole with was redeemed on Ethereum. And they took real ether out on the Ethereum side. And they had extra wormhole with tokens on Salana, which, they then cause havoc intentionally and unintentionally with in the Slani ecosystem, in that, you know, wormhole with didn't have any assets backing it, and the attacker had

extra wormhole with to play with. So this is how we sort of begin the story. Yeah. I thought the mechanism was also pretty interesting. Like, I think Samsung had this, had this threat about it. And it was, like, so, so innocent. It was basically, there's like this one pre-compile that Solano uses to basically verify a signature and it was like missing in like what the solidity version or the or the program version rather that Wormo was using versus like a prior version and so therefore like the signature wasn't checked and so really really innocent mistake but of course it now it's a you know $325 million mistake i don't know if it's totally innocent it was the PR was already the PR was already up for it in fact that was the craziest part right

the PR was sitting there for a while the PR the PR was up but i jumped and not realize the consequence of the it was just kind of of a routine upgrade, right? It's like, okay, well, there's some deprecation in the code. We got to change over to this thing. But they had no idea that there was this level of vulnerability introduced by the coaching. Turin, I'm sure you could not cite all the intricacies of every different, you know, version and subversion of solidity. I agree. I agree. I'm just more pointing out that it was, it was actually a known issue. It just like people didn't realize the spoofing level could be as high. Like you could actually call something of that

function size like mint. Yeah, I think, I think one of the, the repeated bad takes that I saw is that like, oh, this shows that like Solana is broken or that, oh, you're going to be layer two in order to solve this problem. And the reality is that it was a software layer bug. And the software layer bug was at the connective tissue between two systems, right?

It's like how these two systems are going to talk to each other and authenticate that decisions are being made correctly. And the problem was not, like, if this was a layer two bridge, you would have, like, the same kind of failure could have happened. So the problem is not intrinsically even about Salana, or I mean, in some sense it is, because obviously this was a Salana co-chains that ended up triggering this mistake. But it's fundamentally a problem about connecting up two blockchains.

And those two blockchains can be a layer one to layer two. They can be two different layer ones. It can be really anything they're connecting to. The important take home is that cross-chain is really freaking hard. And it's very likely this is not going to be the last mistake we see in the cross-chain universe. To completely agree. Bridging is hard. And all bridges are sort of hard in similar ways. whether you're bridging a layer two, layer one, two layer two layers, bridging, I don't know, two countries, whatever. It's, you've got like two different ledgers that aren't the same ledger and that don't

read each other. And, you know, and I think in particular maybe an interesting part of this is wormhole was intended to be one of the more decentralized bridges. There's a lot of bridges and they will all brand themselves to decentralize. Most of them is decentralized and that there's two different keys that one person has both of that are necessary in order to mint the asset or, like, they're just central. Right. They just like, the guy is he like, guys ledger.

And it's like, oh, someone sent me some of this token. Yeah, sure, I'll send back some of this other one. I'll mint them. You know, I got the key for that. That's how bridges usually. Right. And like, you know, being a little bit glib, but, but, you know, the more decentralized you try and make it, on the one hand, it provides a lot of great property.

It's also way easier to fuck up. Right? Because fundamentally, like, it's a lot easier just run a native. the U.S. service that, like, checks that the balances are correct and, like, never give anyone else permission to do anything. If you're trying to make permission be something much more complicated than what you dictate, it's, again, really powerful, but also really easy to disrupt. It's 100% right. And I think, you know, one of the concepts we were discussing this internally, and one of the concepts that I've started to really like is this notion of

private bridges and state-back bridges. And what you see today is that, actually, you know, the vast majority of the bridges are quote unquote state backed or sort of state sponsored, meaning that the blockchain themselves endorse and like kind of route traffic through a particular bridge. And I think what you're going to see over time is that these bridges are just going to be absolutely dominant, the ones that are state backed. It's very hard for these private bridges that are sort of third parties developing on these chains to win. And the reason why, at least for cross-chain transfers, why that's so hard to break that is because bridges are by and large a public good for the blockchain that wants to get assets over the bridge. And as a result,

bridges are basically banks when it comes to these sort of bidirectional type bridges. They're basically banks. They have assets on one side, liability to the other side. And the goal is to make sure that the bank vault is always correctly sized for all the liabilities. And if something goes wrong, as it did with Wormhole, as it has with other bridges in the past, the ultimate thing that's going to give you confidence that the bridge is going to be okay is the size of the sovereign backing the bridge. And in this case, you know, it was, jump was this sort of pseudo sovereign player that

was like, okay, look, you know, this wormhole is so important and Solana is so important that we're just going to put all the money in and make sure that we have enough capital to keep this whole thing alive. You know, if this was some other bridge, like some other, you know, small startup that was creating a bridge between a couple chains. And if it got hacked for $300 million, it's game over, right? It's sort of a bitfinex situation where now, you know, we're trading IOUs about whether this bridge will ever make enough money again. Yeah. I mean, it's, it's been sort of shitty to say, but the honest answer is like, yeah, the size of the bankroll, the person who issues the bridge tokens matters. And it matters, you know, even if there's an explicit insurance

fund for it, it gives you a sense of how big the implicit insurance fund may or might not be. And that's sort of the world we live in. Actually, I mean, I feel like compound the protocol is one of the cleanest examples of like, I think he's one of the protocols, which has a maximized ratio of like complexity to failure while being fully decentralized. Like it's like like I think in terms it's like one of the, it's not that's the most complex perk all ever. It definitely isn't. But like I think that's one thing that's impressed me about it is having even the

updating code for it be actually fully on chain, but also it's not broken. And it doesn't break periodically. I think it's like somewhat impressive. and it's like somewhere somewhere in a weird corner of this spectrum that doesn't be explored very much of like high decentralization, moderate complexity, and like low failure. Well, that's like the original DFI vision, right? Which is like you can take a smart contract, which is a piece of code that is going to do one thing really well and really robustly, so well and so robustly that you can rely on it in a different,

program and it's composable. And you build it so that it will always work with a very simple API or interface. And we'll work in a decentralized fashion and we'll work forever. And since then, you know, that's slow and hard to build. And so I think a lot of the development activity has really excelled in other corners of the world, which is like, oh, it's centralized and it's fast and we change it every single day. Or, you know, it's, you know, a different approach entirely. But yeah, it's, you know, It's a great approach. It's just really, the downside is it's very slow to develop a system like that to prove out product market fit and to get things going. Yeah.

And actually one thing I'd say historically, you know, if we look at the history of compute in general, right, like parallel processors, like getting to single core Linux took, you know, five years, let's say, roughly. Getting to like SMP and like multi-core Linux took like 15 years. So there's a lot of, it just takes. It takes a long time to get many different systems to interact in a way that's sort of efficient. I had this one really awesome coworker a long time ago who actually now is the head of research or jump, who had this statement, which is, you can pull a carriage with two horses, but can you pull a carriage with 1024 chickens? And that's sort of a thing to think about when you're thinking about these systems in a lot of ways. I love that. That's great.

It's just very intuitive as to like what the problem is, right? Like when you stay that way, yeah. Yeah, very true. Okay, so let's go ahead and move on. So another piece of news. I mean, because we tend to talk about weird dows, another tidbit in the world of weird dows. We now have a Dow that's even larger than Constitution Dow, Assange Dow, which raised $41 million on Juice Box to try to, I'm not exactly sure

what it's trying to do. It's something related to getting Julian Assange out of where he is, which I don't know why money is going to solve this problem. Does anyone know the story here? Yes. It's actually, it is a bit strange. So people probably remember Constitution Dow also also use Juke's to, you know, do fundraising to buy this copy of the U.S. Constitution. Assange Dow actually has more an ETH, but roughly the same amount in dollar amount, to, you know, ostensibly support Julian Assange, but the way they do it is a bit strange. Basically, they are buying this one-of-one NFT by PAC, who's a famous NFT artist. And the PAC sale, the proceeds from that are going to Julian Assange's defense fund,

basically fighting this case saying that the UK is unfairly extraditing him to the US. And so, yeah, it's basically going into his defense fund, but in a very sort of roundabout crypto-e way. that sounds like a so they're buying an NFT with all that money yes yes I'm like

why can't they just donate directly or but but you know that aside I think you know we talked about Constitution Dow go ahead oh I mean it seems brilliant

way better than donating it directly right if you donate directly you get nothing here you get an NFT that is a very fair point right this NFT is worth

$41 million clearly they get the NFT and they give the money to Julian's song. Amazing. It's like we added intellectual property to philanthropy. Impact certificate. This is, in fact, almost exactly an impact certificate. The problem, though, is that it's unclear that Julian needs $41 million for his defense.

It's an open question whether this is a good way to get to... Oh, I'm not necessarily making comments about the hyper-quality... The actual impact. Right. Yeah, yeah. This does feel like... I think someone said this a while ago, which was like if sort of the, you know, if the 2000s and 2010s was sort of about, you know, internet mobs collectively communicating and, you know, exacting some sort of, you know, real world action or real world consequence, basically defy allows them to do that with finance. And we sort of are seeing this more and more of sort of like, you know, global crowdfunding and global capital formation.

And this is like the latest incarnation of it, right? I think, you know, 4chan and Reddit and all these internet forums have been, you know, long supporters of Julian Assange, but there's only so much that, you know, writing to your congressman will do. But now they have $42 million, you know, move your cause pretty far with that amount of capital. And I'd expect to see more and more things like this going forward. Yeah, I feel like in some way this is like, what's it called when you take like a neural net and you kind of like figure out like what is the thing that's going to activate it the most? I feel like this is like that version for the internet. Like Julian Assange plus Dow plus lots of money plus NFT. And like you just end up with this thing.

And it's like, oh yeah, this is like tickled the hindbrain of the internet as deeply as you can. And this is what happened. I mean, it would be better if Julian Assange minted NFTs for everybody who donated. Then it would raise 200 million. And we'd be having a very different year of conversation. Yeah, Sam, Sam, you've probably thought the most about alternative donation mechanisms. How do you feel about this? I'm like, you know, what would you optimize differently if you were in charge?

Well, overall, I think it's a really good idea. Sorry, I think it's a cool idea as far as not commenting on the donation itself on the sort of like method here. I think it's basically an impact certificate. And what it can let you do is be entrepreneurial about philanthropy. And so maybe to flesh this out a little bit. Like part of the cool thing here is let's say that like there is someone who's going to do something really good for the work. Right. And like you didn't have like a lot of capital to donate yourself, but you eventually thought the whole world would be like, I guess fucking smaller. Like what he did was great, right? But the problem is he needs the money before he does the great thing. Right. Or it doesn't work. You can't you can't go into debt to do it. But like you're stretched pretty thin. You'd have to give like literally everything you have or something in order to fund him to do this thing. And there will lots of people with lots of money who will in retrospect, which they had funded it. were to happen, but only if it happens and proves they should have funded it.

So what you can do is something like this where you say, all right, here's the deal. I'll fund it. And I get the NFD for having funded it at the impact certificate, NFD, whatever you want to call it. Then they go, they do the thing. Hold was like, holy shit, this guy's awesome. It's an amazing thing to you. You're like, great. Here's this certificate of having done this great thing.

How much is worth? You know, people like, $200 million. Like, great, sold. And now the guy got to say, funding, you were, you know, making the market more efficient, right? Bringing the funding to the good causes that needed it before the rest of the world realized they needed it. You get rewarded for that.

You bought the NFD and then sold it for more or later. And the large donors still get to cause good things to happen because if they make a sort of like pattern of this, people like, oh, great, like we fund good things that we see and others don't. we can later sell the impact of that to the ultimate donors for a profit. And so thus, we will go search out cool, awesome things to do for the world that other people wouldn't notice and make those happen. There's a sense in which what we are seeing here is a kind of permutation of what was previously called impact certificates. So it's interesting.

I think it's a... Well, I think the interesting thing is that people didn't trade impact certificates before, right? Well, the intrinsic idea was that they were supposed to, but of course nobody actually cared because there were no NFTs back then. So now that we have any T's, we have solved in one fell swoop the entire illiquidity problem. Juice box contributions are tokenized, right? You sort of saw with that with people with Constitution Dow, which went up like 100x. And so if you do, you donate to Assange Dow, you are getting justice tokens, which who knows what those who will trade at, but you could sort of think of them in the sense of impact certificates. Do you think the contributions

are a response to the overvaluation of people? Potentially, but you know, who's a say what people's motivations are and is it so wrong if there's some profit motivation and someone to get a donation to Assange's out? Yeah, I mean, obviously, like most of these crazy dows we're seeing are just the things that manage to, they're the most evolutionarily fit memes that just kind of burst their way onto headlines. And it sort of becomes this like this kind of ratcheting up game of kind of who can do the most, you know, a ridiculous thing and get attention. Now that being said, look, I'm not taking any view on, do you know, in Assange, I think, you know, this is not an unreasonable thing to care about.

It'd be surprising to me if he needs $41 million for his legal defense fund. But, you know, what do I know? Maybe he's got a very expensive set of lawyers. What would you do differently, Sam? Like, let's say you wanted to make it an impactful Assange Dow. I mean, well, okay, sorry, do differently in the market construct or in like what the money would do? Well, you have the market construct.

Let's suppose there was some way of measuring an outcome, right? Because the problem is the outcome is completely not tied to this fund. raising vehicle. Yeah. Well, I think it's quite, in the end, I think it's quite hard to have, you could imagine, so here's the thing you could do in this specific case, but it doesn't work necessarily in general, is you could say that there's, you know, that there's some payoff related to whether or not he is extradited or have some measurable outcome here that this is like ultimately

tied to. And then what you could get is a bunch of people to pledge to. pay some amount for it conditional on that. Right. You can imagine that like what happens is that, you know, some foundation says, look, conditional on achieving this well-defined goal, we will pay $200 million for this NFT. And otherwise, we will have absolutely no interest in the NFD. And then it, if theoretically had no mean value, which maybe it does, but if it. Sam, we just last year again. In fact, the thing Sam's pointing out is actually this very old sort of mech

that Vitalik proposed in 2018, the Dico, which was like supposed to basically do this. It's kind of like a DECO. Pre-NFT. Dico didn't have this NFT concept. I would say it's like a DICO. It's more like a prize. It's effectively like a prize. I mean, Dico is like a prize, right?

It was like a meter. It was more like a, yeah. It's more like you achieve sort of further funding goals if you hit certain milestones. Yeah. Yeah. So I think it's basically like a permutation of a prize that then, you know, the receipt of that prize is tradable in some sense or a certificate of that prize. Yeah.

Which in some sense, like kind of defeats the point of the prize maybe in some, you know, if you had a Nobel prize that was just being traded around and the secondary market would be a little bit weird, but it's weird, but I'm not sure it's crazy, right? Because what it means is that like if you can do something Nobel Prize worthy, you'll get actually paid money for it according to how cool people think that is. More than the nominal prize. More than the nominal now. Yeah.

Yeah. You'll get paid how much the world actually values your NFT, which is exactly. exactly seem as they value what you did. Of course, that's how it works. Right, right. That's interesting. Okay, let's let's move on. So there was another piece of news, this thing, so GameStop and Immutable X did a partnership. And so GameStop is going to be launching their NFT marketplace in partnership with Immutable X. You guys remember Immutable X. They're a Starkware powered ZK roll-up NFT marketplace. They originally came out of the team that built Gods Unchained. and later they also,

they did this partnership with TikTok. It's like TikTok moments thing. And so, Immutable X gave GameStop a bunch of IMX tokens, which is the tokens for the Mutable X platform. And GameStop then subsequently immediately market dumped, something like, what was it, like $40, $35 million worth of this token?

And people got mad on Twitter. But we had a big debate internally about whether this is even a story. because ultimately, like, you know, if you give somebody a grant and you don't have any investing on that grant, the understanding is like, okay, well, we have costs associated with, like, building stuff. So when you give us tokens, like, what do you want to say? Like, we need working capital. We need to sell it to go hire engineers. But it was very interesting how very strongly the reaction is, oh, no, no, no, you guys are assholes and you're terrible and how could you have done this to us? So curious what you guys think. Like, what are the norms here when you receive a grant from a group like this? Dude, here's the fucked up thing. Right. Right. Like if they'd gotten dollars, let's say mutable X take them 100 million US dollar bill for this, no one would have complained that they weren't toddlers, right? No one would have said why didn't you use those dollars to buy the immutable X token in the market? Right. But if you have them immutable X tokens and they sell the tokens, people aren't like, oh, we're back to that original estate that we're fine with. But like, what the fuck? You sold the token, right? The framing is very different, even though it's a similar. Sam, we lost you. Maybe part of the lesson here is GameStop needs better trade execution. So then just immediately, you know, market dump however much it was and said, you know, spread it out for time.

So, you know, it's not so immediately noticeable. But I'm kind of inclined to agree. I think like at ZRX or Xerox, we give out grants in ZRX. And it's expected, especially for a lot of these early-stage startups, which actually are very castraps, maybe unlike GameStop, that's expected that they, you know, sell it to, you know, pay their employees and to pay for servers and stuff like that. Maybe part of the weirdness, too, was GameStop has raised a bunch of money by selling stock in the stock market recently. And so it's like, did you really need that extra $40 million or whatever the number was? Well, I think the thing that made people unhappy was that there was an expectation when you're giving tokens, then you're going to have long-term alignment of interest, right?

That GameStop and Immutable X are going to be partners and teammates for a long time. And it's the view of GameStop and Immutable X, like, oh, yeah, of course we're team. teammates, right? Like, we gave them a whole bucket worth of value and we're building this huge thing together. But to a community member, you know, you see that there's a more pure alignment of interest that's possible. They hold the token. They benefit when token go up, right? And that didn't happen here. So I think there's really two, you know, modifications that you might see down the road in a future BD world. One is vested tokens or something that like unlocked over time. You know, we're seeing this pop up all the time in Dow's and defy and protocol to protocol interactions, it's becoming way more common.

It's always been common with investors and things with tokens, especially when there isn't investing or lockups, you know, the market learns why there should be very quickly. So I think it's the first change that might happen in future projects is you'll see lockups. If it's like a system like Immutable X giving tokens to a company like GameStop for a massive BD deal, it probably won't be immediately liquid. It might invest over years, right? And the second thing you might start to see is it looking more like how you incentivize employees, which is, you know, you might see it look more like options or upside in a relationship

as opposed to here's a huge amount of value today. And, you know, I don't think, you know, obviously I'm a little bit biased as an investor and immutable, but like I don't think what they did today was that bad. I think the communities are going to learn better approaches to structuring these long-term relationships over time. and then next time there's a company like Immutable and a company like GameStop, it probably won't be tokens that get markets sold at the very outset of the relationship. Maybe a few other things.

I basically agree. A few other things. First of all, if you want to blame someone, like, I think you can blame Immutable as much at GameStop here. Like, Immutable could have paid in dollars. Instead, they paid in tokens. Were they the ones who dumped? Like, really, instead of Immutables Treasury that dumped that $100 million. And GameStop just purchased in that.

and sold them if you want to think about it that way, right? And so I think it's as much a question of like why they pay with tokens and not dollars as anything else. And I think what it gets to is something like like Robert's point, which is like there's sort of not that much point in giving someone unlocked fully vested liquid tokens instead of dollars because they could use the dollars to buy the tokens if they wanted. They could sell the tokens for the dollars. It's the one, half dozen at the other. But yeah, I think basically if you're giving unlocked fully blood-vested liquid tokens, is the same as dollars. And it's just a sort of fiction that they're like very different.

And it's just the frame. Yeah, that makes sense. Okay, well, there are two remaining items, so we'll try to be relatively quick. So the big drama of the week in kind of, you know, social media, cancel culture stuff. This wasn't a week of just one big drama. I know. There's multiple. There's always big dramas because it's crypto Twitter.

So, okay, so E&S, the Ethereum naming service, is basically like a big, you know, it's kind of, you get something, something, something. DNS associated with your name. Dot-eath. Dot-eath. I'm sorry, dot-eath. There is a gentleman by the name of Brantley Milligan, who is a director of operations at ENS.

He's been there for a long time. And he wrote a bunch of tweets in 2016. My understanding is that he actually wrote a bunch of tweets like in his entire career as a tweeter that basically were very, so he's a staunch Catholic, and he's very anti-gay, anti-kind of everything that Catholics don't like, I guess. And he's been very public about it and very, you know, offensive of, you know, first-world norms. And this broke out into this big conflict, especially as, you know, the tent of Ethereum has

grown quite a bit with the advent of NFTs. You know, it used to be that people in Ethereum were going to be like, ah, whatever, who cares, you know, everybody can just have their crazy libertarian views and go live off in a corner, it's fine. But there's now this big conversation going on in Ethereum about cancel culture. free speech, you know, this guy's a Catholic. A lot of people in the world believe this stuff, but it's also not inclusionary. And so what do you want to do? As of yesterday, he was removed from ENS, basically fired. But it kind of brought about this big culture war that has been

noticeably missing in crypto that kind of reared its head in the Ethereum community. Also, he was fired by a company that's contracted to do work for the Dow, technically not fired from the right let's let's get this correct for in terms of Dow related things he was undelegated from but he was undelegated from the Dow thank you for that clarification to ruin so I mean look I just very quickly give my two cents I you know I in general I don't have a very strong view about people who are just sitting around doing their jobs having beliefs that I disagree with but I kind of agree like look man it's 2022 like I don't know this is not even like a mainstream Catholic thing to be constantly

hating on, you know, people who are into same-sex marriage. So I just think, like, at certain point, like, if you're going to be loud about it on Twitter, I don't know, we can find other director of ops, you know, like, it's fine. There are plenty of people out there who want to help out with the NS. So, but in general, the cancel culture thing coming to crypto is interesting. And I think this is kind of the first beachhead. We saw something like this with open source happen, you know, probably about, started probably about four or five years ago.

And then the kind of culture around open source totally. changed, but open source used to look a lot like crypto in that regard. I mean, let's put this way. The Rust community is 80% crypto haters, 20% crypto lovers. And it's very closely related to this. There was a schism there as well. Right. I mean, I think like one thing, and this doesn't answer the ultimate question,

but I think it's like relevant for the proximate one is acknowledging that like maybe he was fired because the company and or Dow and or. company Dow combination that had hired him disagreed with his belief. Maybe he was fired because they were worried about the PR impact of other people disagreeing with his belief, not clear exactly which one of those it is or where on that spectrum it is. I think it maybe doesn't impact the end result or the impact of it on society, but it impacts where you should direct your love and or hatred, depending on how you feel about it. Well, I think it's also at the heart of crypto, right? If you remember the Coinbase drama when Brian Armstrong posted his big piece about

Coinbase being an apolitical place. Oh, yeah, that's a really smart piece to have posted. Yeah. Well, in retrospect, but it goes to the soul of crypto. I mean, I feel like this is really intrinsic to how our industry works. Like the, I mean, Sam, how do you think about this given that, you know, you just caught up to Coinbase. And Coinbase has kind of put out this big memorandum about their view on the intersection of politics, you know, cancel culture, kind of, you know, cultural battles. Where does FTCX fit in that spectrum? I mean, I'd like to say that that's like, you know, we're not trying to take aside in it. It's sort of like my, my, my, Sam's Mike just went out. No, I'm kidding. I was hopeful. I was grateful, but no, no, no, you're going. Keep going.

It's still there. It's complicated. Yeah, I know. It's a shitty answer. But like, you know, And I think I will say that like two different things you could say that I feel somewhat differently about. One of them is like, you know, one could say like that, you know, they don't think that people could bring their policy, that their politics should be knowable or no network at all. And another thing is like that people should be able to work productively with each other as a team independent of their political beliefs. I certainly agree with the second one much more so than the first one. I wasn't sure exactly which of those was intended, I think, by Coinbase's piece on this. And I think that, like, you know, my take is roughly like, you know, people are welcome to have the belief that they want. And I'm not going to pretend that none of those are ever going to make it into work and that none of those are ever going to be discussed at the office.

Oh, I guess I was just more going to say, I actually think the Coinbase posts reads better now than it did then. in some ways. And also the interesting thing is like, I think Nick from ENS had like a tweet, like criticizing FWB for retroactively changing their mind on something. And it kind of, there's kind of, I think it's like hard when you're in the hot seat and that happens.

And oftentimes history will judge you from the future or not from, you know, at that moment, you know, you'll get judged relative to the context of the future rather than like the context at that moment. Okay. So quick speed round.

So if somebody Brantley-like was at your organization, would you fire him? So we'll just go around one by one, because I think most of us are currently in the position of running or having run organizations. Tarun, you first. I don't know, honestly. You have to go. I'm going to equivocate here and say, probably not, but, you know, yeah, probably not. All right.

You know, there's been a saying at compound for many years, which is, you know, we hire people regardless of their views about religion, sexual orientation, and cryptocurrencies. You know, I personally believe in, you know, allowing people to be a part of an organization with extremely broad views. I think the cardinal rule is, you know, don't be, you know, offensive to people. I think it's one thing to have views. I think it's another thing to not being willing to engage in fruitful conversation. you know, it would depend on the circumstances, but, you know, if it became, you know, a very public situation like that, and they, let's say double down and triple down and refuse to apologize and refuse to engage in fruitful conversation, you know, I would lean towards, you know, firing them, but it would still be extremely difficult and, you know, my bias would be towards keeping them. Got it. Tom. Yeah, I mean, this is like classic, you know, paradox of tolerance kind of kind of stuff.

I think the thing with Brantley, and I've talked to a few folks who have worked with him is like, everyone said he's extremely nice, you know, very inclusive. I don't think there's any sort of idea that he would have maybe treated people who, you know, were in his tweet maybe differently.

And I don't think it would have had any impact on E&S, the product, which is another part of the concern with like, you know, thinking about inclusion in the workplace. I think the problem is just maybe as Sam said, like, if you want to build a team, a lot of people will not or want to work with somebody like that.

And therefore it just becomes a problem for performance and company performance independent of the actual output of the person or independent of the actual product impact. Yeah, I would say I agree with Robert Stake here, but I think that makes me say fire. Because somebody posted this like very, very long collection of like every single time he said the word gay. And he's posted like 200 different tweets basically saying that like gay people are evil and bad and that they should go to hell or whatever. I'm just like, what? Why do you need to talk about this? Could have done that. Yeah, but then that's a hiring time decision.

That's true. That's true. But look, if you get it wrong when hiring somebody, like, at least get it right. You know? So, yeah, I would say fine. Also, I think, you know, while the ENS drama was drama, I think the real drama still hasn't been talked about on the show. And in the comments, everyone wants to hear about Biffinx.

So I think let's start with Sam, because I actually feel like, you know, you were around when Leo came into existence and were probably. more close to that. So, like, how do you feel about the overall situation? I mean, like, super excited that that it was found. I think that's great. And I think, rewinding a little bit, I think, you know, the news today, I think is straightforwardly good and really happy for them. You know, whatever. I've heard a lot of rumors and stories about what happened. Sorry, really briefly just interrupt you. Because I think a lot of our audience maybe not know what the hell we're talking about. So BitFinex recently announced.

that $4.5 billion had been recovered by the DOJ. Biffinx was hacked many, many years ago. And there's a U.S. couple that has been accused, but not yet indicted, is my understanding, of having been responsible for laundering some of that $4.5 billion in Bitcoin. So that was recently recovered by the DOJ. Sorry, go ahead. Yeah. And I think the implication is that they have the whole $4.5 billion and probably are the ones

who hacked it. I don't know if that's been said explicitly. Allegedly, allegedly, you do not get know the facts. But I think the allegation is that they are the HACTA, not just that they were somewhere in the food chain there. Although I don't know that for sure. You know, I think like I've heard a lot of different versions of what actually happened, you know, six years ago when the hack took place. But I think that the recovery here is remarkable from a number, not just the recovery of the coins, but the recovery of Bitman. I think like them going under as a business and their customers losing a third of their money was probably what most people would have guessed the outcome of that hack was going to be.

And instead, they were able to keep operating. They gave everyone an option if they could take a haircut or they could take equity or they could get an IOU. And they ended up making everyone a poll according to what they chose. And, you know, if you'd held on, you got paid back fully. If you took equity, you probably did better than that. So it's, I mean, I think it's sort of a, is remarkable how well that story ended up, given the circumstances, ending for, for everyone involved and for the customers. And I think it displayed some amount of, it was a gutsy move, but I think one that was probably the right one and showed a lot of dedication from the team involved there during what I know is that absolutely hellish thing to be involved in. I think the story that's funnier is that the, uh,

The culprits are people, well, at least I will say as someone I knew reasonably well, one of them, a couple of years ago. And the weirdest thing is I used to run this meetup where people gave talks, and she gave a talk about basically how the social engineer your way into anything. And there was also this very weird scenario where BitGo also had her doing a talk on cybersecurity. And hidden in this BitFinex thing, and maybe this is actually something when Sam gets back, we can talk about, is what's the relationship that BitGo had with this sort of incident? Because I do think they were involved in a lot of the custody portion around this time. And like the relationship between Bifenex and Bickgo somehow like that that's something that has never been understood to me. I don't totally understand about like this attack and Sam probably knows way better. I don't know for sure.

I, I hear things. I don't have firsthand knowledge here that I can say with confidence. But I can echo what the word said that there is, I think a lot of things that are not generally understood or public about that relationship. And I think what it gets to is this really fucking nasty. problem in custody for crypto. I think we hear a lot of people saying is like, well, I want to store my crypto the third party custodian. And I think my response is like, okay, first of all, there's like a question of how secure

that custodian is. But second ball, how about that interface between the custodian and the exchange? Like, let's say that you sell a Bitcoin that you're storing at a third party custodian to someone on the exchange. And then that other person requests a withdrawal of that Bitcoin, their private wallet. then the exchange asked the custodian to send it and do they just do it without asking questions? Like if so, like if the exchange gets compromised, probably you're not safe if you're in a third party custodian. If they don't, how are they filling withdrawals?

And whose coins are those really? And like, what's the governance around that? How do you get settlement to work on two different, very different systems? what if the line between them is compromised, right? Like, what if someone, like, imitates the exchange talking to the custodian or vice versa? Like, it's the centralized bridge problem. It is.

I mean, it's, instead of bridging to decentralized things where you can actually look at the public ledgers of both, you're bridging to centralized things that you're hoping are both telling the truth and correct about everything. This bridges all the way down is what you're telling us. God damn it. So, Tarun, I am fascinated by the story of this woman because I keep hearing tidbits about her.

She'd actually be like a funny person to hang out with. It's just that she always did talk about these kind of a little bit weird things. Like she also knew a lot of cybersecurity people in New York, which is how I met her. And so, you know, I'm not totally surprised in some ways. But she's a very good speaker. Her talk was hilarious. I don't know about her. rap career as much as the internet does

seems to know right now. They know much more than me. I was going to say the details of the case are also pretty funny. Basically, it looks like they were like sometimes spending like the Bitcoin on via gift and that somehow tied some of the addresses to their email

addresses and they were just like storing the raw private keys on this guy's iCloud account with like a weak password, which is I think how the FBI actually like got a hold of it. So it's just like classic terrible like opsec. But, you know, somehow they were also maybe able to allegedly steal several billion dollars of Bitcoin. Also, this guy was talking about, like, on Twitter, like, how he needs to teach people like crypto-opsec, which was also kind of a little bit comical.

I mean, the fact that they were cashing out via gift cards and Bitcoin ATMs and sending money to many different exchange accounts, all of which was, like, Bitcoin from an extremely well-known and visible. hack shows that they are not criminal masterminds, whether or not, you know, they're involved with the original hack or just the recipients of the Bitcoin, you know, or something else. I have no idea. But a lot of that behavior is not, you know, mastermind tier. It's really bad amateur too. And sorry, I may have missed something here, but what exactly was their relationship with BitGo and with BitFenet?

Oh, so she actually was a consultant for Bitcoin. go for a while and did basically like taught like cybersecurity for consumers class. We don't know if this has any relationship to the hack. Like when the hack happened? No, this was way later actually. Way later. Did she have a relationship with either of them while the while or before the hack? Not unknown.

Right now the internet is full of innuendo and like a lot of whatever that, you know, Charlie from Always Sunny meme of. You know, drawing lines. The reality right now is that we don't really know a whole lot. And so it's not super useful to speculate. Also, Laura has repeatedly instructed us to use the word allegedly over and over again so that we make clear that right now, you know, there's not been an actual case that has been seen a judge. So we don't know.

Anyway, we're running up on time and we did have some questions we wanted to ask Sam to wrap everything up. So, Trude, I think you're first up. Yeah. So the big question. this is the one that was sort of advertised on the internet was whether Sam is a word cell or a shape rotator. And so just to give a little background, so Sam, how much do you know about the word cell versus shape rotator meme? I have seen it and have no idea what it means. Okay, cool.

So it's basically a meme that makes, is basically argues that there's two types of people in the world. There's one, the word cells who are the cell. as a suffix referring to self-sabotage, those who are, you know, very like... No, no, no, no. But in-cell comes from that, too. They're both the same Latin suffix. Wait, really? Incel is...

Incel's involuntary celibacy. Oh. Well, you should read the actual... You should read, you should read the etymology of word cell, which is in this... In this... Tarun is all shape rotators, which is zero percent word cell, 100%. Yeah, that is definitely true. That is definitely true.

Well, there is the kind of the god guide by the other Turun, so it was invented by another person named Turun who's probably soon going to be more famous than me on the internet. So basically, shape rotators, you know, really like logical, almost to a fault, can't express things that they want in words very well, but, you know, can get a, you know, be a Putnam fella. Exactly like Turun. Word cell is like really good at writing, but. but maybe like kind of, I don't know, has sort of the feeling of like a journalist. And the self-sabotage thing is actually where the cell comes from, according to the manifesto. But the idea of a word cell is someone who sort of like complains online on the internet a lot with big words. And so that for some reason that dichotomy has been just taken over the internet.

And so the thought is the shape rotator. There's not exactly just a mathematical versus literary. It's kind of like your spatial intelligence versus your verbal intelligence. It's more like an IQ test, right? Like if you break down IQ tests, they have like half of those like shape matching problems of like, hey, are these the two sense shape or can you turn twist one to another? And the other one are sort of the vocab ones. And there's this argument that you should split IQ into, I mean, I don't really believe in

any of this stuff, but like the internet decided to go on onto it. I don't know. I mean, I guess, three to one paper potato to word seller or something. I don't know. Okay, that's pretty good.

Tarun, how would you classify yourself on that spectrum? If you had to do ratio. Similar, probably similar. You tell you, like maybe four to one.

Wait, Robert, you said four to one? No, Turin is four to zero. Oh, four to zero. Damn.

If Tarun was four to zero, he would not be, you know, on the show. He would be off in a closet. My hair, my hair, My hair color, at least, it gets me a couple word cell points.

You definitely get word cell points for the hair in the sweater. Yes. Yeah. So you're getting a good word cell bump there. And I think, you know, it's good. It's good that now, how do you feel about this meme? Now that you've seen it so many times and now you've kind of like sort of got an idea for it. I think there's maybe something I've left to get about it.

I think there's probably a spirit behind it that I haven't quite dived or melded with yet. That'll see where I'm going to look to like, oh, that's fucking words. So like that's a fucking paper rotator. I'm not at that point yet where I can be like that is the classic example of one of these. I want to diagnose it. I think the reason why this has taken off is that it's the first dichotomy of this kind that basically puts literary people in a lower position than mathematical people. And like classically it's the other way around.

Like the journalists are yelling at tech people on the internet. And that's kind of the thing that's mostly happening on Twitter. Whereas like, oh, you're a word cell. Word cell is like basically an insult. And it's kind of like being able to define your terms and like, no, no, no, I'm not the nerd. You're the nerd. Yeah, this is like, it's like proxy war for tech versus media. But like, you know, we're playing it through this other little thing.

So it's not as direct. Or another way of saying it is, you know, shape rotator versus word cell is just Myers-Briggs for shape rotators. You know, you want to make up your own dichotomy. And here you go. Myers-Briggs for shape rotators. Now, now you, that means Tom is a five out of five on the. Yeah, to be clear, I think we're probably all five of us are shape rotators, which is why we're talking about this. If you were a word cell, you're not talking about this.

This is true. I think maybe I feel, maybe to give a slightly better answer, I think I feel natively much more like a shape rotator, but I think that I can rotate words as well if I need to or something like that. Hey. That sounds like a $40 billion CEO answer. Are you a shape cell? That's the other thing. No, much more word rotator. I know. Okay, a word

rotating. All right, I like that. I like that. Okay, I think we only have time for one more question, so I'm going to go ahead and ask one. So this is something I was chatting about with a friend, actually. So if you look at like the real big characters that have come out of crypto in the U.S., who've led big companies

and started new exchanges, the first one was Arthur Hayes. And Arthur Hayes is like almost the perfect polar opposite of you, Sam. He's like a big, super buff black guy who's like kind of a super villain in a lot of ways. And just the way that he was like very brusky, like, you know, just, it's sort of out there and like fighting with people and was willing to kind of,

you know, put a middle finger to, you know, U.S. regulators. And you are very much the opposite, right? Like, you sort of have this heroic status. You've donated a bunch of money to political campaigns. You're like this effect of altruist. You're giving away a bunch of money. You're much more, you're much more shape rotating. You know, it's hard to get mad at you. How much of this is intentional and how much of this do you attribute to just like, how much of this was like, you saw what happened to Arthur? You're like, holy shit, I should not do that. I should do the opposite. And how much of it is just incidental to your differences in personality?

Oh, I could be that buff. I just do is not. No. I think there's some of each. I mean, I think maybe the way that I would phrase it is something like, and look, I don't, I don't want to put words in other people's mouths. But my sense is that Arthur is Arthur. Arthur is being Arthur and he's being true to himself. And, you know, the Arthur that you see, it is sort of like, you know, there's some bluster, there's provol.

But I think that's a reflection of what he fails. And it's a reflection of what he thinks and how he thinks. And I think there's lots of interesting things that he thinks that he talks about. I think that like the way that I approach it is almost just perpendicular to that as opposed to like going in the opposite way or something, which is something like, look, like I'm not, I feel like I didn't get. born with like being like pro regulator or anti-regulator. Sam, we lost you. I also saw Arthur kind of recently. He seems to be having fun lately.

Yeah, to be clear, I love Arthur. Actually, I saw him at the same time as you saw him. He seems to be just chill. He's chilling. No, Arthur, Arthur is great. I don't say that with anything but love for Arthur. He's great, and he's authentic, and I really respect that about him. And I don't know, it's interesting listening to him.

And it can be fun. And I admire that he says what he thinks. And I think not enough people do that in general. But yeah, no, I think I sort of like it purchase more from the person. I don't know. Let's sit down. Let's think about like what makes sense for society. What makes sense?

What's the right thing to do here? Like what's the appropriate action? And then like, let's do that thing. And I think that like that turns out to have like come out in a very different place on like regulatory matters than it then I think Arthur did. But it's not because I was like born hating that or something. like that and they're like that you know seems like some regulatory provision to be healthy seems kind of dumb like go to war over that like you know let's try and like work construct with

regulators that like build a regulatory environment that like achieves the you know 80% of reference goals or something like that it's sort of like my my like you know takeaway on that is not very blustery it's not very sexy I don't know no no it's it's great spoken like a true shape rotator. That's right. Okay. All right. Well, on that note, Sam, we're going to have to lose you one last time because it's time for a sign off. All right. Thanks, everybody. We'll be back in a couple of weeks.