Unchained - The Chopping Block: Unraveling the SEC Hack, Futarchy, and Twitter Trolls - Ep. 593

Episode Date: January 11, 2024

Listen to the episode on Apple Podcasts, Spotify, Overcast, Podcast Addict, Pocket Casts, Pandora, Castbox, Google Podcasts, TuneIn, Amazon Music, or on your favorite podcast platform. Welcome to The Chopping Block, where crypto experts Haseeb Qureshi, Tom Schmidt, Tarun Chitra, and Robert Leshner bring you inside perspectives on critical topics in the crypto world. In this episode, they're joined by Gwart, the caustic comedian of Crypto Twitter, as they explore questions like: What is Gwart's stance on the overhyped nature of DAOs and governance in crypto? How does Gwart view the potential and risks of NFTs, particularly Bitcoin-based Ordinals? The team also dives into the recent SEC Twitter hack - what does this incident reveal about market manipulation and the importance of cybersecurity? They then explore the competitive landscape of Bitcoin ETFs, discussing the implications of their fee structures. Finally, they consider the significance of developing crypto infrastructure that resonates with the average user, not just the niche crypto enthusiast. Tune in for an engaging exploration of these pivotal questions shaping the future of cryptocurrency. Show highlights:  🔹The concept of Ethereum alignment and its origins 🔹The SEC's Twitter account being hacked and a fake BTC ETF approval tweet 🔹Fees for different ETF issuers and Grayscale's fee reduction for GBTC 🔹The SEC's Twitter account being hacked and the fake BTC ETF approval tweet 🔹The potential use case of prediction markets in Taiwanese elections 🔹Imprisonment of individuals in Taiwan for betting on the election through PolyMarket 🔹Discussion on the concept of futarchy and its potential implementation 🔹The prevalence of centralized exchanges and their impact on user adoption 🔹Gwart's role as an observer and heckler in the crypto space 🔹Building infrastructure for onboarding users in crypto 🔹The dichotomy between the ideal of decentralization and the reality of user adoption 🔹Criticism of DAO governance and lack of significant innovation 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 Guest Gwart, Crypto Twitter Icon Disclosures Links Justin Drake on Bankless’ “57 - Ultra Sound Money | Justin Drake”: https://youtu.be/bWqhn1hXvVc  Justin Drake on “ETH’s Biggest Upgrade Since EIP1559 | MEV Burn w/ Justin Drake and Dom”: https://youtu.be/nb7x7n8Ga3U  Eliezer Yudkowsky – “AI Alignment: Why It's Hard, and Where to Start”: https://youtu.be/EUjc1WuyPT8   Eliezer Yudkowsky - “Why AI Will Kill Us, Aligning LLMs, Nature of Intelligence, SciFi, & Rationality”: https://www.dwarkeshpatel.com/p/eliezer-yudkowsky   Vitalik Buterin’s “An Introduction to Futarchy”: https://blog.ethereum.org/2014/08/21/introduction-futarchy   Arthur Breitman’s “Towards Futarchy in Tezos”: https://medium.com/tezos/towards-futarchy-in-tezos-54a7b8926967   “More arrests for betting crypto on Taiwan election via blocked website” by Jono Thomson (Taiwan News, Staff Writer): https://www.taiwannews.com.tw/en/news/5070386   Learn more about your ad choices. Visit megaphone.fm/adchoices

And now, building out like infrastructure surrounding this, of course, is important. But we need to be realistic in terms of like onboarding users. It's not like most people need to be able to 100x the dog with hat coin. You know what I mean? This isn't what people need. Not a dividend. It's a tale of two quons. Now, your losses are on someone else's balance.

Generally speaking, air drops are kind of pointless anyways. I'm in the trading firms who are very involved. I like that eat is the ultimate. DeFi protocols are the antidote to this problem. Hello, everybody. Welcome to the chopping block. Every couple weeks, the four of us get together and give the industry insider's perspective

on the crypto topics of the day. So quick intros, first you got Tom, the Defy Maven and Master of Memes. Hello, everyone. Next, we've got Tarun, The Gigabrain, and Grand Puba at Gauntlet. Yo. And today we've got special guest, Gwort,

the caustic comedian of crypto-Twitter. Welcome, Gord. Caustic comedian, wow. Caustic comedian, yeah. Did you come up with that one on your own? No, it was AI assisted. I have to admit. I just woke up, so I had to pull something together.

And I have received the head hype man at Dragonfly. So 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 ChoppingBlock. That XYZ for more disclosures. So, Gwart, welcome to the show. We've mentioned you on the show before. actually, I believe we have technically summoned you to the show rather than invited you.

So for those of you who don't know, Gwart is, I would describe Gwart as kind of the, he's the gadfly and maybe a little bit of the Mark Twain of crypto Twitter, where he just talks the most amazing shit about everything Web3 and everything that more or less crypto influencers and intelligentsia and VCs talk about and think is important and valuable. He just lampoons all of it. So, Gwart, you've asked us to anonymize you as best we can. You're an an anon on crypto Twitter. Welcome to the show.

How do you want people to perceive you? What is your goal in shit posting the way that you do nonstop on crypto Twitter? I mean, I think your descriptor is very fair. Yeah, I've been in the space for the better part of five years, not very seriously. but more seriously within the past couple years, and I've never really had a job in the space. I mean, a few small, I don't know, freelance gigs. But my point of saying this is that I've been primarily an observer.

And so it's sort of allowed me to be a heckler from the sidelines. And so, yeah, I think your description's fair. I don't think I would object to anything that you said. I think calling me Mark Twain is probably a little bit audacious. I wouldn't necessarily. I don't know that I would describe myself as Mark Twain, but I'll take it. I think you're pretty up there when it comes to shit talking. Wait, wait, wait, we have to, we have to find out one important thing.

You, a lot of your tweets have been about, well, especially during Ethereum alignment, the peak Ethereum alignment era, you, you inspired a set of copycats might be the wrong word. You inspired an army of heckling anon's. So how do you feel about Ethereum alignment, you know, a month later, a few months later? Yeah. I mean, I think it's, I don't know if it's run its course or not. I mean, it was, I definitely think that the people who tagged along, it was, I mean, it was quite fun there for a while. And I made a little list on Twitter so we could make sure to track all of the, all of the anti-party takes. I think Ethereum alignment, okay, so I don't know exactly.

me what the origin of this was. Actually, somebody asked me, maybe define it. Yeah, so I don't know. This is the thing is I don't actually know myself. I will tell you what spurred this for me. And the beginning of this for me was I saw, okay, so this was right around the AI alignment, like the throws of AI alignment, right? And we got, we got Eliezer up there talking about how if we don't get this right,

it is over for society, right? And then we get Justin Drake on bank lists right around the same time. And he's talking about how if we don't get restaking right, it's the end of society. And I could not take this seriously. To me, it was very much like almost piggybacking along this same, I think, yeah, movement. Like, it was almost like some of the Ethereum people were like, oh, man, that's a powerful movement right there. Like, we should really try to take advantage of this one. And so it sort of became extended to, okay, so like, to what degree are L2s, to what degree are, you know, this eigenlayer or Lido or so on and so forth, are these aligned with the Ethereum vision.

And of course, nobody could actually articulate what exactly it meant, which may even better to troll about, you know, because I don't think that anybody really knew. So that was the impetus. I don't know how, I mean, I think that it's at the point now where I'm like, ooh, I kind of feel bad about, you know, extending this much further. And also, we're in a bull market now. So we're going to start talking about positive things. But that was generally how I viewed it, at least in the beginning and end. I think there was maybe some positive discussions that came of this. I mean, to the extent that you find anything on Twitter, positive, I think it was, I don't know,

I think we learned something about the crypto community. Well, to the extent things are positive, I feel like, you know, today's sort of, SEC thing gives you some evidence of both positive and negative of Twitter. I don't know. Yeah, well, let's jump into news because this is maybe one of the most crypto days I've seen in a while. So basically, to top off the day, there was a tweet this morning from the SEC's official Twitter account stating definitively that the BTC ETFs are approved. And then a few minutes later, Gary Gensler from his official Twitter account,

announced that the tweet that came out of the SEC's Twitter account was false and that the SEC's Twitter account had been hacked and no BTC ETF has been approved. And then about 20 minutes later, the tweet was taken down. And so this caused Bitcoin to spike all the way up to 48K until it settled back down to about 46 as a press time when we're recording this. So this is the most crypto thing ever. It's absolutely hilarious that the SEC, which is in charge of cybersecurity for all these things, got its Twitter account hacked and, you know,

compromise in a way that it immediately led to market manipulation. That also said, I've read a lot of speculation, and here I'm going to go ahead and just wildly speculate that this does not feel to me like the SEC's Twitter account was hacked. This feels to me like somebody fucked up the scheduling feature on Twitter, because I've played around with that thing. It's actually, like, not very good.

It's not very intuitive. Because also, if the SEC's Twitter account was hacked, why is why would it not be like hey send me ether or the SEC's doing anirdrop or like there's a dogecoin ETF like wouldn't it be like instead of oh Bitcoin went up 2% because the ETF got approved that everyone was expecting today. This does not feel like what you would do if you hack the SEC. I agree because I mean you either made like custom you know graphics for this thing that are in the cell at the SEC so I'm like they clearly went the distance to make this happen. I remember when like Musk and I think Bill Gates and a few other famous people in like 2020 or 2021 got their

accounts hacked and it was like a Bitcoin donation scam kind of classic thing. And it was cheesy. It was really bad. Donation. It was like you know, it was send me Bitcoin and we'll give Bitcoin back. I think they only made like 800K and they got kind. It was stupid. But Matt Levine had a good take on this which is like it's actually a very bad way to monetize

your takeover of somebody's account. Actually like what they probably should have done is post something that you know would have I don't know, actually manipulated the Bitcoin market, something really bad or something really good. And then, you know, sort of blend their trade into this, you know, broader market movement. And then it's like, oh, you know, you can profit from manipulating the market, but it's not sort of directly tied to you. And I feel like that is probably what you would have done if you're taking over the SEC account and said this just looks like a very legitimate tweet from the SEC. And I think that's why it fooled so many people and why the market moved the way it did.

It fooled me. I mean, it fooled almost everyone I knew because everybody was waiting. for official news on the Bitcoin ETF. So when everybody saw this tweet, everybody was messaging like, oh, it happened. Hooray. Like there are Bitcoin ETFs. You know, it's finally occurred and, you know, there's been a lot of waiting. The probability of approvals in the market has been about 90% for this week. And so this just seemed like an extremely ordinary and expected tweet.

So I was fooled. I think most of us were. I was disappointed that if you're going to hack the SEC, can't you just say like, oh, all the cases are dropped. You know what? I changed my mind. Cryptos not a security. Like, do something fun rather than just, oh, Bitcoin ETF's approved.

You know, congratulations. Well, actually, didn't they originally do dollar sign BTC, then they deleted their tweet? Like, that's like that was tweeted shortly after the fake ETF and then deleted. So some people with really good eyes could have. been more clued in that this was fake, faster. So they just tweeted law dollar sign BTC out of the SEC account? And with the period at the end.

So it didn't like. Okay, wow. Oh, okay. It probably really was hacked then. You couldn't click it. It wasn't immediately after this. This was like minutes later. Like it's possible they were like, yeah, there's a lot of explanations.

They were high on their own supply of like writing the initial tweet and they're like, how do I make a follow up? Let me make it. I think the conspiracy theorist in Haseeb would say. that if they did publish the tweet inadvertently, they made that BTC tweet to appear as though they were hacked. All right, Gork, what's your, what's your, what's your, that's too many levels.

Yeah, that's a lot of levels, dude. I like that last one. I like that last one a lot. I mean, the thing is, I definitely don't think they would have, they're not going to, I don't think anybody's going to like click on something that says, pixelate your board ape or something from the SEC. So to be honest, in terms of actual being able to move markets, like truly move markets. But the problem is, I guess the only counterpoint I would make to this is if you didn't have good intuition on whether or not it'd be buy the news or sell the news event, you could have positioned yourself wrong hacking it, which would have been a disaster unto itself.

So I don't know. Honestly, I'm as confused as the rest of everybody. I mean, in a way, we maybe a little bit got the answer to that question. Because in the 20 minutes that the market thought that the Bitcoin ETF had been approved, Bitcoin went up. Now, it didn't go up much. It went up, you know, 3%. It was mostly down, like, afterwards.

When I thought it was real, my reaction was like, huh, BTC down a little bit on the news, like totally priced in. Was it? When did you see it after the announcement? Because I read that it went up to 48. Five minutes later, it was like down. Yeah, it spiked. And then it went back down.

immediately. Was that maybe after people saw the weird tweet, the weird follow-up tweet? I don't know the timestamp of the weird BTC follow tweet. I'm sure someone should dig out the exact forensics on this. Okay. Wow, because this is a very interesting, like, controlled experiment of maybe the FCC just wanted to test whether or not this would be bullish for Bitcoin. Yeah.

Well, in a way, I guess it's good news. It didn't move the market that much. After this happened, does this change any of the approval? Can they be like, oh, look, like, it's more manipulable than, you know, because that's always been their claim, right? Is it the Bitcoin? They manipulated it due to bad times. It's proof that the SEC can manipulate the price of Bitcoin,

which shows how manipulative what Bitcoin is. Yeah, through outright negligence, they allowed their account to manipulate the market. Wow. You know, that is a pretty knockdown argument in court, actually, that to show just a single actor can manipulate the price of Bitcoin. By the way, by the way, for manipulating the market, right? I suppose that is possible.

I suppose that is possible. But Bitcoin's not a security. Imagine Gary Gensler and Avi is in the same jail. You're still fraud. They're still fraud. They're still fraud. But the CFTC would have to sue Gary Gensler. That's the way it'd have to work.

Well, that's now a possibility. I mean, frankly. Yeah, unbelievable. Well, actually, the other thing that's been amazing is the fact that the SEC, you know, this particular SEC under Gensler has been all about tweeting nonsensical stock images and like crazy stuff. And it's turned out and, you know, compared to prior, you know, compared to the CFTC, for instance, right, they don't tweet all this stuff, make all these dog shit bad TikTok videos like Gensler does. but those are all a liability for them right now because like all of their tweets about how

they're going to be in charge of cybersecurity stuff are like biting them in the ass right like their senators retweeting it and being like are you kidding me there's like senators retweeting gary's tweet being like remember to use strong passwords and use a multi factor authentication at all times on your Twitter account like it's embarrassing yeah well um so connect So moving on from the SNAFU or the SEC, we got some indication of what the fees are going to look like for the different ETF issuers. And it looks like they're going to be quite fee competitive. It looks like BlackRock is going to be at, I think, 30 bibs. ARC dropped their fee to 25 bips, bitwise, at 24 bips, which dropped down to 20 bips.

Other people are somewhere in that vicinity slightly higher. But the BlackRock ETF is super low fees compared to what everyone else was expecting them to land. Now the one outlier to this is gray scale. So gray scale, when they convert their GBTC into a Bitcoin ETF, the fees will go from where they currently are at 2% a year to 1.5% a year, so 150 basis points, which is hilarious. Because basically, the whole thing is betting that people will not want to move their Bitcoin or that they're locked in due to their cost basis and taxes, or they just are not going to notice and assume that the fees are going to go down.

So it really does seem like they're going to squeeze the last bit of fees out of this thing that they can. I'm curious, what do you guys think is going to happen to GBTC when they have like five times the fees of the I shares ETF? Well, I think you raised a really good point, which is that a lot of the holders due to prior tax basis might not sell it, even when it's liquid. They might be relieved that the discount can. converges to zero and that there's liquidity when they want to exit.

But if you're sitting on capital gains from years ago, like Bitcoin being like a couple thousand to now in TBTC, you might decide that like paying, you know, $6,000 or something like that per Bitcoin in gains is worse than paying 1.5%, which is a lot. less money per year to avoid that. And so I can see a lot of people just sticking with it. You know, I think there's absolutely going to be a lot of compression on day one and probably not that much on day three, simply because if you want out, you've been waiting for a really, really, really, really long time. There's a lot of people that are sitting on GBTC that haven't sold it due to slippage, that haven't sold it due to the discount, that when they finally get that

window, we're going to leave. And I think if you're going to go, it's day one. I think from there, it probably is a zombie product where the only people left are the ones who are committed to it. And I think it sticks around that probably like, you know, $5 billion of Bitcoin for a really, really, really, really long time, which coincidentally will make it probably the number one ETF at first, if not for like a year, two years. It'll be really interesting to see how long it can hang on to the number one decision. Well, so last week, Laura actually repeated some speculation that if the GBTC trust converts into an ETF, that that would actually end up being a taxable event for the holders of GPTC.

So it turns out that's not true. So to your point, Robert, it is correct that you would retain your tax basis going from GBTC to the ETF, which is likely to keep a lot of people in a great scale, which was their calculus in deciding, hey, because if they're competing actually just for marginal flow, marginal buyers of the ETF, there's no way that they would be able to compete with I shares without dropping their fees significantly to the point where they just had to make a calculation that like, hey, people are going to be locked in because of their cap gains very, very early on. So I have to imagine that you're right. Basically, within a month or two, we're going to see that's the terminal

size of GBCC and, you know, no more new money is ever going to come in. But why drop it, why drop it at all then, right? Like, I'm assuming, you know, it's like, because the lawsuit was on this basis, right? They said specifically in the lawsuit this bad for our holders, not just because of the, um, uh, they were sued, right, by their, uh, by GBT holders. Yeah. Yeah. Yeah.

So it's kind of like a human centipede of lawsuits. And one of the basis is that the fees are too high. I see the human Suntipede meme has made it finally. It's very inspiring to come from you, Turin. Yes. So that, yeah, so I believe that they had to drop the fees because they made that argument to the SEC that the fees are high because we have to have this, you know, stupid trust structure and all this other stuff.

Well, two points on those fees. One is, you know, GP. TTC is going to be a massively more profitable product for DCG than the I share Bitcoin will be for BlackRock, right? Like, fees being six times higher, there's also all of the custody fees and other things that when there's coming out of a low basis point product makes the margins a lot worse than when it's coming out of a high base point product. So on a net profitability basis, I think the great scale product's probably going to be for the sponsor like seven or, eight times is lucrative. And so when you think about like how much money is Grayscale going to be making if $5 billion sticks around in the product, it's going to be equivalent almost on a break-even basis or profitability basis to BlackRock at like $40 billion. And it's going to be, you know,

it's going to be a feather in DCG's cap for some time. But the thing that's not come up in this discussion yet that I actually think is really relevant is the fact that most of the ETFs are waiving fees entirely to zero for their launch until they gather, you know, in most cases, a billion dollars of AUM or in some cases, $2 billion of AUM. And so in a lot of ways, the fees are even more of a disparity because they're going to be zero for most of these products when they actually launch. Right, but that's only for, you know, if it's the I show, the I Shores ETF is not doing this, or are they?

They are, I believe. I could be mistaken about that, but I believe they are. Okay. Yeah, I would assume, like, for the big. big ETFs, if you deposit money there, they're going to hit a billion pretty quick. And so it's like, okay, you get two weeks of discounted fees, you know, essentially, which is like nothing. But yeah, for some of the smaller ETFs, if they do have a big bogey that they have to hit

before they start charging fees, then that could be pretty good for depositors who are very fee sensitive. But to your point, you know, 30 basis points, 40 basis points, 35, like anything is fine relative to 1.5% a year plus custody. fees and all that other stuff, yeah. Especially zero, though. Zero is pretty good. Zero is pretty good.

Yeah, or you could just hold spot. You know, that's the other, if you really don't want to pay fees. Yeah. I'm going to sound like a trad-fi sellout here, but like for many people, I think holding an ETF is going to be just better, even with fees. Just from the security and the custody side of it alone, like holding spot is not free. There's risks associated with holding spot, even on an exchange you trust with two factor authentication. There's always that self-custody element. It's really hard to take

a ETF ownership away from you and a theft. Spoken like the true Tratify guy. Thank you. Thank you, Robert, for sobering us all up. I'm sorry. I honestly zoned out for the last four of my position because like the moment you were talking about basis point fees on ETS. I'm just like, please kill me already. All right. Well, this is a crypto show, so I'll show up. Yeah. Let's get back to more interesting parts of the world. It's been, I mean, it's been a pretty quiet week aside from ETF excitement. Like, honestly, there hasn't been that much happening. There was, one thing that I thought was interesting, actually,

maybe this might wake up word a little bit as well. There was news, we didn't have it on the docket, but I was reading through it yesterday. There's news that in Taiwan, so Taiwan right now is going through a presidential election. And it's illegal in Taiwan to bet. on presidential elections. And of course, polymarket, which is right now

the leading prediction market online, had a market for Taiwanese election where you could bet on the different presidential candidates. And numerous people

were actually imprisoned in Taiwan because it was discovered that they had bet in the, something like $10,000 a piece into the prediction market.

So I thought that was pretty surprising. Also, I didn't know how people had such bad obsec that that Taiwanese government was able to figure out that they were betting on the presidential election. But it kind of leaves a really bad taste in one's mouth. And it's funny enough, the news story that covered this for Taiwan, they also went and recounted what the

different odds were for the different presidential candidates, which is kind of like getting the value out of a prediction market without actually, you know, like, it felt like kind of like, okay, if you think presidential predictions are bad, don't even report on the prices, right? Because isn't that the point of a prediction market is to get the information of what happened? I don't know. Any reactions? Gore, any thoughts on prediction markets? Yeah, I mean, I don't know.

How liquid are crypto betting markets that are markets, I don't know, that somebody in Taiwan perhaps could bet on that they wouldn't necessarily be able to access through what we may have in the United States in some states or like, I don't know. Right? Are these like, because a lot of times, the reason I ask this, I guess, is a lot of times I'm looking at the public market. Like, remember the LK99 thing. It seemed like that was one example of, okay, maybe we found something here that is a viable use case, right? Like, because I don't think that this was really something that was being booked on, to my knowledge. I don't know, maybe if you went to Vegas. But I don't think this was like something that was probably going to be booked by like traditional books. But I also don't know how liquid these markets are. Because I, I I recall seeing like very low liquidity and that makes a huge difference obviously. And they're like very easily manipulable when that's the case. I don't know. So I guess that would be. I would answer that question with a question. I love the I love the minority report arc of the future where like news agencies don't really report news anymore.

They just ask chat GPT to summarize the prediction markets for them. And then, you know, some enterprising presidential candidate manipulates his own market so that the news always shows him with him or her winning in the polls. And then they actually win finally. So that could be in the future. It seems like good sci-fi. That is good sci-fi. Tarun, you hire a screenwriter. There's only 1.4 mil in open interest on the time when he's presidential election.

So, uh, anyone out there that's cheaper. That's cheaper than buying it in the Super Bowl for presidential candidate. Come on. Well, in Taiwan, how much do they spend on presidential elections? I mean, they spend more than one. This is actually a huge. Yeah, this is a huge presidential election because there's, uh, Taiwan has been very, the dominant party in Taiwan has been anti-China.

And there's like a push now from the pro-China arm of Taiwanese politics to try to regain some seats. And if they end up winning the presidential election, uh, then you can, could see Taiwan willingly rejoin China, which would be huge internationally. So there's a lot of concern right now in China, or sorry, in Taiwan about Chinese election interference and, you know, them trying to do some funny business. And so it's actually, it's actually a huge deal. I mean, look, if it only costs you $1.4 million to manipulate the prediction market and the Chinese government has seized significantly more than that in BTC, they could manipulate the market. The problem is

There is not actually been... ...to create ETF shares. It's amazing. Yeah, there's never actually been any evidence, though, that the market responds to the prediction market changing. Like, that is the missing leg we've not seen. Unless the news agencies are just calling perplexity or chat GPT and being like, hey, like, what are the current polls?

And instead of the polls, it just reports to you the prediction market value. Yeah. Hasn't this always been something that Vitalik has really wanted? Like there's been a number of big figures within crypto that have been very sold on prediction markets being like huge one of the yeah like Paul Stork. Yeah, like Paul Stork, the like one of the drive chain, like the drive chains guy from in Bitcoin, his like killer use case is a predictions market. Well, and I don't know exactly how it's supposed to be formatted.

But yeah, like, and I think Vitalik has always been like very bullish on on the premise of prediction markets as like this massive unlock. I don't know. I think 2015 Vitalik post on Futarki is about doing governance and on-chain mechanisms via prediction markets. Now, an interesting thing is I was talking to Vitalik like a year ago or something. And I was like, how do you feel about Futarki in 2023? because, you know, hey, look, there are some liquid prediction markets. They have their problems, right? They have maybe a centralized Oracle or, like, getting funds onto them is annoying.

And he was like, eh, not as enthusiastic. So, but I'm, I find this Taiwanese election stuff, the first real life use case of like, where a foreign government realizes they can control the news via a nuclear prediction market. The fact that Haseeb is mentioning is. it means that people, there's enough people watching it. Or it means it's a slow news week. That's the other possibility. Trump was an underdog in the polls, like, leading up to, like, I don't know,

for the entirety of his first election campaign. And so I tend to agree that. I don't know to what extent they respond. If anything, it could be like sort of a counterpoint to that. I don't know. Well, so, okay, we should, this featuregy thing is an interesting place to explore a little deeper. So very quickly, for those you're not aware, Futurkey was a term coined by Robin Hansen

that basically describes governance via prediction markets. So the idea would be instead of saying that, okay, we vote on whatever politician everyone likes. Instead, we run prediction markets that says, if this person were elected, GDP would go up this much or, you know, the key metric that we care about would go up by this much. And basically, whatever the prediction markets predict,

these sort of conditional prediction markets based on, you know, if X then Y, that is how we end up deciding who we elect and who ends up becoming head of secretary of treasury and, you know, which bills get passed and so on and so forth. That concept is known as Futarky. Now, it has not been implemented anywhere. Apparently, Vitalik back in the day was very, very pro-feutarchy, or at least experimenting with Futarki. I think he thought it was a very exciting idea. A lot of core Ethereum people felt that way. And according to Turin, sounds like that's no longer the case. What do you guys think of this concept, a futarchy, and why or why not would it be viable?

Well, I don't know if any countries are going to migrate from a democracy or a parliamentary system into a futarchy, but I could see a on-chain project of some variety trying it for control or governance of their own system. You know, the fact that I haven't seen any examples of it, even on-chain, you know, is- Oh, there have been examples. Tezos did it early. They did? But they just didn't get enough voter participation.

They didn't have enough prediction market. None of Futarki. There's a very good post on Futarki by Arthur Brightman from like 2016, 2017. That like is like an extension of this. I think like the interesting thing is that we're much closer to it now than we were then because we didn't have as much defy. You sort of need defy for Futarky to work at all because, you know, the existence of these things assumes there's some market maker that you can trade the yes and no shares for. But the old school automated market maker designs are actually really kind of bad for sourcing liquidity. Like, you know, they kind of were inefficient in some ways.

And so these uniswap looking things, even though they're not like perfect pricing for prediction markets are good enough. And that's why I think you've seen like the manifolds and polymarkets of the world is like they kind of needed stable coins and defy to like make liquidity aggregation easier. It wasn't like a theoretical problem with prediction markets. If a manifold please play money. Yeah, but I mean people are trying to to trade at OTC, right? And there are there are tokens. What are they? What?

Yeah. I did not know this. Yeah. So like, I mean, it's basically. people are making like synthetics of the real manifold value. But my point is I feel like basically you needed those two things for this to be much more efficient because the liquidity aggregation aspect is hard. Now, the interesting thing is no like layer one has, well, no surviving layer one has stable

coins as part of its consensus. You know, I guess there's the cellos and terrors and stuff, but you know, cellos becoming a layer two. Tara of course blew up. So there's really none that have it as a first class citizen. So I don't think layer ones will have few Tarky, but I could see a higher level protocols having it. I think a more interesting thing would be, you know, despite Quartz's amazing tweet on Web3 social networks, the SEC should really be diving into Web3 social networks because no one will read their posts. So then they won't have bad things happen. I actually think that's where a few would be funny. Like imagine if like people were betting on canceling people. You know,

it's like there's a prediction market for like, then you cancel them based on the outcome of the bowl? No, no, you, you bet on on on whether they're going to get canceled the next year. And if they do, then they get kicked off the site automatically. What is that? How does that get resolved? Why? What does that help? Is also cancellation a problem? Like that feels like it kind of happens on its own. Well, I think the idea is like if enough people bet, imagine if it's something where enough people bet correctly on someone getting canceled. Like there's some, you know, oh no, here's the way it should work. Hold on, Turin. If a huge number of people think someone's going to get canceled, then you just, you know, minority report, you know, predictively, you know,

pre-crime, you just ban them from the platform. If people think they're going to. This sounds like an actual vector for cyberbullying, though. Like, you know, You literally just pay a bunch of money to get someone wiped off the internet. Bill Ackman would really use this. That's like what he would get a lot of value out of this. He would 1,000% be into this. Well, here's why I don't think Futarki would work for systems that aren't this niche fun, cool, whatever. It just sounds too hard to me, right?

Like even in like the original, like use it for like two presidential candidates and which everyone's better for GDP is the one that like gets selected. I don't think people want to forecast GDP in order to vote. Like it's hard enough to get people to vote for like blue team versus red team. Like we have like in the U.S. last presidential election 60 something percent turnout, which means 40 percent of registered voters didn't make it out. Robert, I think the whole point of Futurkey is that those people who are like the marginal voter really doesn't have a good idea. But they don't vote at all, right? They have no say because they don't know which way it's going to go.

And like if they bet, they bet nominal amounts. It's like the real money that actually has predictive power that ends up determining who's going to win. So like, if you remember, yes, yeah, basically 12 head funds. She's the president. And if you, if you remember actually, like, markets do this already because when the presidential election in 2020 was going back and forth between Hillary and Trump, or just sorry. sorry, 2016. When it's going back and forth between Hillary and Trump, when the dials turn toward Trump

and everyone realized like, oh, shit, Trump's going to win, the market rallied under the expectation that, oh, you know, Trump is going to be really good for US GDP. So I think the, like this already happens, right? The head funds are already giving a bunch of signals. It's very indirect. It'd be more fun if it's direct. But I also love the idea of like crypto social networks allowing you to like, you know,

imagine if like Trump got voted out of Twitter. by a prediction market. But he kind of did. That's what Elon did. Front tech. He gets on stage. No one, not a individual,

not a market, right? That acquired that sure. Yeah, it wasn't a market. Orsie or whatever, right? Yeah,

yeah, yeah. I would rather, I would rather like people like Gwort become, you know, these whales on these, uh, cancellation markets and then they just start, you know,

Bill Ackmaning. Yeah, but I don't, I still, okay, I still don't get it. What do you mean? cancellation? Like,

how does an Oracle, determined being canceled. It's just, if you get ratio, if you get ratio, yeah, oh, it's, oh,

okay, okay. Yeah, all right. I think it's just like, if this, if this goes above like 70 cents, we're kicking them off the platform. And people just start pushing it as high as they can to,

to get them off. So it's really just tug of war. It's not even a prediction market. It's just a tug of war. So it's probably better described as, you know, pay this much to vote this person off the island. I mean,

I say this more because if you, if you read, between the lines of of Gort's tweets they're implicitly canceling certain people or certain entities right like we said with the Ethereum alignment thing I think there were certain ones who were put in the doghouse

so wouldn't it be more interesting if that would there was like some betting aspects to that not just you know no I honestly I do not understand this okay I mean I'm down I'm in I'm in to create a token for it But I don't understand it.

Yeah, yeah, it's fine. It's fine. We'll air drop the token. We'll do a point system. We don't need to make sense. Yeah, yeah. We definitely have points. No, no, I mean, just like imagine, imagine you've had prediction markets for just, like,

kicking people off a social media platform instead of like the dictatorial control. What are you predicting over? You're not predicting anything. You're just saying, put more money here if you want this person to get off the platform. Well, you can have some conditions like getting ratioed, like getting blocked. Like, if you get blocked by more than, more than 50, percent of your followers. True, why do you want to cancel people so badly?

Why do you want rich people to be able to cancel people so badly? I don't think it's actually rich people. I think it would be people who've earned the most stake in these networks. I'm the biggest user of the social network in terms of getting engagement and creating content. So I get the most of the... Each followers will vote. Right. So if you have a million followers, you're basically casting a million cancellation votes.

Yes. I think Tarude secretly wants to be Bill Ackman. He wants to be the Bill Ackman of Crypto-Twitter. I don't think I have the gravitas to be Bill Ackman. Who would you cancel if you could? Who or what thing? Magic wand here. Magic, magic wand.

Magic prediction with the wand. There are definitely a lot of Bitcoin maxis who have blocked over the years who I don't want their armies coming after me. One name. I don't want the armies coming after me. They already come up. I get the Cardano people coming after me for saying anything on this fucking show. So like, I don't need the roving herds of 4chan Bitcoin maxis coming after me. All right.

So what I heard was all Bitcoin Maxis, all Cardano Maxis cancel them all. Is that what I'm hearing? Just a mass grave of everyone who's into Cardano. Maybe I'll pick someone who is, I think, people are not one, find too controversial. Luke Dash Jr. Well, Gort's a maxi, right? Does he get a pass on this one? Are you a maxi?

No. I think the better question is, are there right? Yeah, I think the better question is always, what are you a maximalist of? Because everyone's a maxis. Sure. Where are you on the spectrum of maxi versus minimal? Uh. What do you really believe, Gort?

I think Alano is a future of money Salano I am like I am I'm a I'm a salon admirer certainly I think

they're like pragmatism in in the flesh and I admire that I would say I'm I'm not a Bitcoin maxi I'm probably closer to a Bitcoin maxi than most

almost certainly than anybody else who primarily has ingratiated themselves with crypto Twitter, if that would make sense. So, I mean, but I mean, you may have been able to sort of read between the lines with a lot of my tweets. I mean, I don't really take very much of it seriously. So it's kind of hard to gauge, you know, what I'm going to take more seriously than, I think

maybe to the extent that I'm dogmatic about anything is probably Bitcoin. But, I mean, I spend more time in the cryptosphere engaging with you people. And so I think that, yeah, I'm a. I'm a Bitcoin minimalist maybe then. Okay. Gort, what is the dunk? What is the dunk that you most regret? That you were like, you know what?

This is hilarious, but I, you know, this was hurtful and I shouldn't have said that. I delete them quick if I regret them. There was one. There was a tweet. I won't even say the subject. Because honestly, I generally think that I'm, I actively try to tow the line between like just, like, if it's humorous enough, then I can make it a bit edgier, but I mean,

generally I'm not like offensive. I did have a tweet that I thought was a certified banger that I deleted very quickly. It was pertaining to recent world events. It was really good. But somebody in the comments, like I'm never pressured to take down tweets.

I'm always like, oh, well, just leave that up. But this one, somebody popped in pretty quickly and was like, oh, I don't know about that one.

And I was like, okay. Fine, fine. one single person convince me delete it but I don't know this is why you want to market

to figure out whether you should delete work you don't solve this one this is just vibes I'm just kidding but I think it would be funny as a social experiment okay

I think we've established that Tarun is the purest futurkist here I don't think anybody else buys futi tagging besides Farro I still believe in it and I think there's ways to do I think this is a great example

of why Fujarki doesn't work because everybody has different objective self-functions, right? Like, you can't expect people to all expect that, like, yeah, we all want to be max GDP and we're betting on who's going to be max GDP. Everyone has sort of a different outcome that they want. Tauru wants to cancel everybody. Someone else wants, I don't know, whatever the fuck. And so it's just like, it's kind of nonsense.

How do you agree on the correct metric? Like, GDP sounds like the best one, right? Assuming it's real GDP, not like, you know, nominal. Like, that sounds like the best metric. But then, like, half our country would be like, no, it should be minimizing, unemployment, like wrong metric. You know, there's no system where we could ever shift into Futarky. That being said, it does actually sound pretty cool.

And I am becoming a Futarky maxi, but it's not going to happen. Okay. I'm still, I think there's some things where there are concrete metrics for some, you know, on-chain and online things where you could imagine that instead of like the centralized control of a network, like a social network, or something, you know, the market can dictate. And like, it'll be a niche, it'll be a niche social network. It'll be a social network of like the biggest losers on 4chan, but it'll still be a

social network. Actually, Gore, what's your, what's the tweet you're most proud of instead of, instead of, you know, Haseeb's little, you know, probably by, probably my pin tweet. I, by pin tweet gets, uh, it gets referenced like it gets alluded to pretty often. And I'm pretty proud of that. It says it is incredibly embarrassing that Satoshi did not think about yield. That one, like a lot of people will make. I feel like that one was a kind of people.

If I see other people alluding to that, then I'm like, all right, that was a good one. So I think that's the one I'm probably most proud of. Have you ever dumped on Tarun? A ton of times. Yeah. Yeah, subtly, subtly. I mean, it's just mainly because Turin's always writing, completely incomprehensible tweets.

Like there's nobody who can decipher what he's saying outside of like two or three quants at Citadel. And none of us can actually parse any of that. And turns like, oh, yeah, I'm crushing it right now. And all of us are like, dude, what are you saying? Well, now I'm getting dunked on, you know, right directly. Yeah, but it's endearing.

It's endearing when I dunk on you, I think, at least. That's true. That's true. Yeah. No prediction markets on dunking on Turin. I think that's that's all vibes based. Always vibes based. Okay. So 2023 you had this big rise. In fact, actually, I think your quote tweet was like January 2020. What's in store for 2024 in terms of your content or where you think it'll go? Do you think it'll? Yeah. I mean, Twitter is, there's no like real method to, I mean, you can probably see that just generally from how I tweet. I mean, there's no structure to that.

It's pretty pretty off the cuff. I'm thinking, I was convinced maybe to do a podcast, so we'll see. I don't know if I'm going to be good at podcast and be honest, but if I'm not, I'll just quit.

You know, it's like very very zoomer mentality that if you're not good at something, you just instantly quit. So I think it's worth trying. So yeah, but I mean, I don't, I've never really worked in the space and never, I feel like I would lose my, or I think podcasting is a good, is a good like equilibrium for me because I would lose my credible neutrality if I was to work in the space. But if I'm, if I'm able to heckle from the sidelines, I think that's a reasonable compromise. So we'll see. You still have a gesture's privilege.

Exactly, exactly. Yeah, so Gordon, let me add like, okay, so you don't work in the space, but you're kind of obviously very interested observer. why? Why don't you work in the space? I mean, I won't necessarily ask you what you do if you want to be anonymous with regards to that. But, you know, we're going to a bull market. A lot of people are going to be hiring. Why not be in the space full time given how much attention you pay to the industry? I mean, I think, well, first of all, I've invested as a retail investor, I suppose, for the better part of three years. So, I mean, I don't, I honestly, Honestly, I don't even know that I'm not very technical.

I don't know that I have a huge edge in, I mean, maybe I'm able to sort of see the forest for the trees, but it's because I literally do not understand the trees. So it's like, okay, well, you know, this is one of those things where I think I do have a pretty good pulse on crypto, but it's not for any specific reason. You know, and I mean, I'm probably just knowledgeable enough to troll, not really knowledgeable enough to want to engage on a technical level on a daily basis. It seems like quite burdensome when I can tweet from home and maybe podcast. What's your most embarrassing shit coin trade? Like what what, what, what, what, what, what, which, which coin are you most embarrassed to have say, said you bought or sold? That's a good question. I don't know, because I have so many off the top.

I probably have gotten nuked on so many terrible, terrible. I think probably holding too long, like, I think more than likely was holding some garbage coins too long. I think some of the first wave of Solana defy airdrops, I was like, ah, dude, these are great. Like, and it was, they were not great. like Nago Parkinson's and so on. Yeah, like radium, I mean, I don't know, the radium chart was horrendous, and I was very convinced that that was the decks of the future. Solend, I got a huge air drop, like, relatively, and I was like, man, this is the one lending

protocol in Solana. Like, this one's got to do pretty well. And, I mean, I think there's a lot of, a number of stories like that. So I would say, yeah, probably like the. first sort of wave of Solana Defi were, I mean, I was still in the midst of it. And I was like, man, this is the future of finance. And it was not. But now, now you're, now you're properly cynical. Yeah, I think, well, I was, I, I do think that ironically with a lot of, with a lot of garbage coins on Ethereum round one, not, not so much ICOs, but just, um, tail and DFI summer.

I was like, okay, well, I'm going to take some profits here. But then I don't know what it was about it. Maybe it was Suu just bull tweeting every day. I'm like, man, this is a super cycle. Like, if there's a super cycle, it's got to be this one, right? And I get a little bit more inspired that I would think that I normally would. So yeah, I would say I'm more cynical now. So in some ways you are sort of in the industry, I think is basically what we're.

Yeah, yeah, yeah. I'm D-channing with the rest of you guys. I'm just like ideologically, I'm sitting here like, oh, I'm definitely a bitcoiner. And then, you know, do as I say, not as I do, you know, that type of thing. How do you feel about more than all? Mix feelings, probably. I mean, I think, okay, so I like NFTs, actually, ironically. NFTs are honestly one of, are honestly one of the few things that I'm cautiously optimistic on insofar as I think that, man, I'm going to sound like a complete,

Web 3 LARP right now, but I think that something that is proven ownership on a blockchain, like, and its value is adjudicated by the blockchain. Like, this actually is sort of like an endearing concept to me, I think. So I'm like cautiously optimistic about Orinals. Now, with that said, it doesn't change that 99% of them are scams. You know what I mean? So to me, it's one of these things where like, I like the premise. I've been engaging a bit with the ordinal ecosystem myself.

But I think that, you know, I like NFTs. I think NFTs are fun. I also don't sit here and tell people to buy NFTs, you know? Most of them go to zero. So, but I would say the same thing with tokens in general. I don't, I try not to actively, you know, push people toward the speculation aspect, even if I may be doing it a little on the side myself. So let me ask you that we're running up on time, so I want to make sure we wrap soon.

But in your tweets, you talk a lot of shit, you lampoon a lot of different aspects of the crypto industry. But I'm curious to get like the kind of the real honest perspective. What is it most that you think the crypto industry or the crypto community does wrong and that it should really improve on, especially as we're going into a very different kind of market environment. Yeah, I think this is like the question probably people ask me most often as if I have some enlightened take on this because I, because I troll a lot about it, but I wouldn't say that

I necessarily do. I mean, I think that one thing that I feel pretty strongly about, and I don't know how I'm going to articulate this, but I still think that, and also this is something that a lot of people say, so this is some particularly revelatory. But I think that we still overestimate the degree to which crypto users in their current form are users of these systems. Like we are still a very, very small faction. I think that even when we're talking about viable use cases, right? Like this is like what I troll about a good bit.

Like, you know, are we going to finally find a viable use case? Right. But beyond that, beyond like that sort of myopically cynical take, I think my bigger, I don't know, I don't know if this is. is a fear, but just something that I think about a lot is, us, us, I don't know, 1%, a fraction of 1% of the world, we are not, like, over a long enough time frame. We are not what the average person needs from crypto. You know what I mean? Like, the average person realistically needs the ability to have a bank account and to spend their money and maybe like two or three loans over the course of their lifetimes. And now, building out like infrastructure surrounding this,

of course is important, but we need to be realistic in terms of like onboarding users. It's not like most people need to be able to 100x the dog with hat coin. You know what I mean? This isn't what people need. And even like building these systems out or I don't know, very capital efficient, so on and so forth, there's like still, this is, this is still like just for a very, very small subset of the world as a whole. So I don't know. I mean, that really doesn't answer your question.

I just, I think that that's still is something that. And also, you could probably tell it's a good bit of my trolling. It's like this disconnect between how in the weeds we are on pros or builder separation and like how little that type of thing matters to what the long, I mean, actually, maybe that's not such a great example. Maybe that matters a lot. But like maybe, maybe something like, uh, just these like very, you know, niche products. Like I don't know how valuable these are versus just getting a lot of people to, I

don't know, self-custody Bitcoin or use stablecoins if this is something that they need right now. As a follow-up to that, what do you think is the most overhyped thing and most under-hyped thing? Under-hyped, probably Bitcoin. Over-hyped? I don't have, I don't know, that puts me in a spot to make a critical statement about something. I haven't seen a sector. It can be like web- I'm three social.

I'm through gaming. Yeah, yeah, okay, okay. I am like very nonplussed by Dow governance. It's like, and I know that this is your domain, true. And so I do apologize. But this is just not interesting to me at all. Like this is.

I'm not sure you roasted me in the past. So I, I mean, just like mostly governance and like quadratic voting. I mean, this is truly the last thing that I want to hear about. And I also don't see, I really have seen, like, to be quite honest, in terms of how much funding and research in mechanism designers are working on DAOs, like, to what the actual innovation or disruption that has come out of them, it's like embarrassingly low, if any at all, in my opinion. Like, I just, I have not seen anything come out of a Dow or a.

decentralized governance system, that I'm like, yeah, that changed the world. Like, there's, there's, I haven't seen that yet. Now, could it happen? Maybe. But yeah, so I would say overhyped that that would be what I would consider to be somewhat overhyped, governance in general. Yeah, this does connect back a lot to what we're talking about in the last show with respect to the cypherpunk ethos, you know, with Vitalik versus Justin's Sun as like the kind of the sort of sun in the moon of crypto adoption, where almost everything, in a way, everything you were describing of like, look, what about actually getting stable coins in the hands of users and making this stuff cheap and easy for them to use in a way the further you get from the Ethereum Bitcoin ethos of you know the kind of pristine

decentralization ideal to just fuck it let's like get let's let's let's get stable coins into into wallets that is in a way that that that's Tron that's just the Sun that's like binet smart chain that's the that's the underbelly of crypto that actually is very user-centric and very adoption-centric it's a kind of a boring story It doesn't quite have all the intellectual prestige or the intellectual surface area that the other side of crypto does. But it is the one that on a user, if you're looking like, where are the users? The answer is that they're mostly on the chains where people don't talk about, you know, Dow governance and quadratic voting and, you know, all this other stuff. And so in a way, I think the interesting thing to me about crypto is that both those things are true about crypto.

Crypto has this super naval gasey, you know, extremely academic and esoteric element that people are kind of competing on how virtuous they are and, you know, adopting this ideal of decentralization. And on the other side, there are also tons and tons of people who are just doing the raw thing of, you know, like finance pay in emerging markets being one of the dominant ways that people pay each other, literally through a centralized exchange. And it's like, great, you know, and everybody who uses it thinks it's awesome. And they think that's crypto. and for all intents of purposes, perhaps it is.

So, yeah, very interesting parallel to that dichotomy we're talking about last time. Anyway, I'm mindful. We're over time and I want to make sure that we wrap everything up. Gort, awesome having you on the show. How can people check you out and follow your work? Well, I don't have any work, but you can follow me on Twitter at Gorty Ward. And also maybe your future podcast that you might. And maybe a possible podcast perhaps.

Yes. Do you have a name? Or is it the top secret? The court show. The court show. Obviously. Obviously. Obviously.

Come on. The Gort show. I knew that. Awesome. Well, Gort, great to have you on. That's going to be the first. That's going to be the first. Yeah.

Hopefully we'll have you back on again when things get sufficiently crazy. We need some perspective. So thank you, sir. Until next time, everybody.