Unchained - Unconfirmed: Alameda Research's Sam Trabucco: What Solana Does Better Than Ethereum - Ep.289

Starting point is 00:00:04 Hi, everyone. Welcome to Unconfirmed, the show that reveals how the marquee names in crypto are reacting to the week's top headlines and gets the insights scoop on what they see in the horizon. I'm your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto six years ago, and as a senior editor, Forbes, was the first mainstream meter reporter to cover cryptocurrency full-time. This is the November 12th episode of Unconfirmed. Tired of your exchange taking 25% of your staking profits? The Avato blockchain computer allows you to stake Ethereum and other crypto at home and keep 100% of the rewards. Go to ava.do. Wish you could earn crypto but don't want to spend thousands on hardware?

Starting point is 00:00:47 Just download the Nodalcash app on your smartphone. Visit nodal.io slash unconfirmed. That's Nod l-e.io slash unconfirmed to start earning Nodalcash today. With the crypto.com app, you can buy, earn, crypto in one place. Download and get $25 with the code Laura, link in the description. Today's guest is Sam Tribuco, co-CEO at Alameda Research. Welcome, Sam. Hey Laura, thanks for having me. This has been quite a week for the crypto markets, which hit a $3 trillion total market cap earlier this week. What would you say is the significance of that milestone and what drivers led us here? Yeah, the big news was that crypto hit like an all-time high.

Starting point is 00:01:32 for, or like Bitcoin hit an all-time high for like a few hours at least. Yeah, like it's, there's always a few things that like sort of point in various directions. I think there's like been a steady stream of good news for for crypto and Bitcoin in particular. Like the news that like Tim Cook owns crypto was was significant. Obviously a ton of regulatory news that's always coming in. And I generally think that especially the US regulation, like the news coming out of the U.S. has been mostly good for the most part in the past couple months. And the fact that there hasn't been any big negative news is really the most important thing, I think, given that like, their regulators are talking about crypto. Like Congress, it's like passing laws related

Starting point is 00:02:17 to crypto and like nothing bad has happened. There hasn't been like a China banning crypto level thing happening in the U.S. or really any other jurisdictions besides China. And I think that's like in general, that's been the biggest driver of crypto's price increases, which which culminated recently and getting almost a 70K. Obviously, there's been some pullback. That's sort of been the more standard stuff where, in general, leverage is very popular in the crypto trading ecosystem. These big moves tend to be driven by people trading with high leverage.

Starting point is 00:02:51 So if there's a small drawback, like if it goes from 69 to 68, there's some potential for there to be a lot of liquidations for people who got really levered long near the top, which can drive it back, you know, more than it might if it were just people who were, like, deciding to sell. And yeah, so there's all these effects that are pointing in different directions. Obviously has led to crypto sort of steadily rising and this week getting quite high. Yeah, I was surprised what you said about the regulators. So you feel that the crypto provisions and the infrastructure bill,

Starting point is 00:03:23 they're not negative enough to affect the market. And what we're talking about is, for instance, the one that defines brokers. so broadly as to perhaps encompass minors and validators, which would then require them to report on transactions in excess of $10,000 to the IRS, which they wouldn't have access to that information. But you feel that people kind of recognize that will be resolved, and so it's a non-issue? Yeah. So I'm not claiming the thing you're talking about, like any other news has come out. I'm not claiming it's the best possible pieces of news. that could have come out about crypto.

Starting point is 00:04:03 But, like, the U.S. has, like, a pretty, a pretty, like, consistent history about, like, the kinds of things that it does regulatorily for, you know, different kinds of asset classes. Obviously, crypto represents, like, this brand new thing that is, like, there is, it has a lot of features that other asset classes just don't have. But the U.S. is, like, you know, a reasonably aggressive jurisdiction, regulatory for the most part. And I would say that, yeah, the kinds of things that we've seen come out about how the U.S. plans to regulate crypto have been like probably a little better at least than the expected

Starting point is 00:04:40 set of things they might have done. Like, it's very much in flux and it's unclear how things are going to keep going. But yeah, like I've certainly seen takes that, you know, the infrastructure bill has represent this like, you know, betrayal of the system and how it's regulating crypto. but like I don't really know what people expect out of the U.S. Like you can look at like what it's done to or not what it's done to, but like how it regulates like various commodities. It's obviously very aggressive in terms of defining things as securities and like restricting people from trading securities. There's certainly going to do something.

Starting point is 00:05:13 And this is this hasn't, it hasn't represented anything too bad as of yet. And how have you seen the Bitcoin futures ETFs affect the Bitcoin markets? Yeah. So that's another thing. The fact that like an ETF, like multiple ETF at this point, I have gotten approval to get off the ground. It also represents like a decently big update, in my opinion. For years, there's been, there have been various parties trying to get a Bitcoin ETF passed. And, you know, the fact that it actually happened, like, is a pretty big update.

Starting point is 00:05:43 And I think the markets sort of agreed with that. The, like last week or like a few weeks ago, whenever, whenever like the first ETF, like started trading, Bitcoin, like hit a different. all-time high, you know, hit a new all-time high this week, but that week it also hit an all-time high. Yeah, like, the market obviously agreed that this was like, you know, like a decently positive update to the point where it like represented a big price increase. And the fact that it, and it didn't even exactly fizzle. The ETF, like, was this either the first or second most traded ETF in, you know, U.S. history, depending on like what metrics you're using. And yeah, it was a quite exciting launch, which, you know, led to sort of predictable price increases

Starting point is 00:06:25 And like I said before, there was like these big price increases, especially to local maximums, tend to sort of have always tended to get undone a bit in the days following. And that one did and the one this week did as well. The trend is what's really important to look at, the longer term trend. And obviously the market is seeing these things as good. And Ether has also been on a tear this week and has also hit an all-time high. It was above 4,800 earlier. what would you say is pushing up the price of Eath?

Starting point is 00:06:58 Yeah, I mean, so not even just specific to any one coin. Throughout the history of crypto trading, we've seen that every coin has some beta to Bitcoin, meaning that like when Bitcoin moves, like all the other coins will at least move like, you know, to some extent in response. That's part of what we're seeing, certainly. Basically every altcoin has followed Bitcoin to some extent. And I think that's, yeah, that's a lot of what we're seeing. There's all, but like, you know, like every coin.

Starting point is 00:07:24 also has various specific features to it. Ether has, like as a layer one, ether has quite a bit of adoption compared to, like, you know, various other, like, hot chains right now. And the fact that it's, like, it's continuing to, like, to increase with the rest of the crypto ecosystem indicates that people, you know, still have a decent amount of faith that Ether will be, like,

Starting point is 00:07:49 a part of the future of finance and the future of decentralized finance or whatever people are, like whichever specific application people are, you know, caring about. And I think, yeah, the fact that it's continuing to succeed just indicate that's what people think. And obviously, the network did also undergo a change in terms of its monetary policy back in August, which more closely ties the usage of the network to the price. But Ether is definitely facing a big question mark in the form of the merge, which is, when the applications on Ethereum 1.0 get moved to the proof of stake chain or Ethereum 2.0, and that change is going to take place next year. And meanwhile, there are a lot of competitors

Starting point is 00:08:34 that are nipping at the heels of Ethereum. So how do you see investors approaching both the opportunity with Ethereum, but also the risk in the form of this competition? Different people are doing different things. Like you mentioned, there are many competitors at this point. like Solana has been making a lot of headlines for reaching a pretty extraordinary market cap, considering where it was like a year ago and, you know, various other other chains as well. Something that like I've seen a decent amount of chatter about anyway is like the fact that like just diversifying into like multiple sets of these things tends to be good. Like over the past like couple years or whatever, like a ton of crypto projects have really

Starting point is 00:09:14 succeeded quite a lot. And it's never been exactly clear which of these projects were going to succeed like our a priori, like, you can find very, like, a ton of people who had very different, different investment species, upriori, who, you know, have all done quite well over the past few years. And that's because crypto as a whole has done quite well. And for the most part, like, like, I tend to think that, like, all of these, all these projects and, like, specifically what we're talking about right now, all these different chains, or not all of them, but, like, many of them have, like, you know, have some decent chance of, like, you know, like doing quite well, like getting some piece of the

Starting point is 00:09:49 adoption and, like, being relevant. and, you know, like, therefore succeeding price-wise as well. Yeah. So I, for the most part, I think that anyone who claims that this chain is definitely going to be the one that, you know, gets all adoption and like everything else is, like, terrible. That's just a bad opinion for the most part. And I think that, you know, the best investors and the best people who are thinking about these things a lot tend to think that diversifying is smart.

Starting point is 00:10:14 All right. So in a moment, we're going to discuss more about Solana as well as Luna. But first, a quick word from the sponsors who make this show possible. There's a new cryptocurrency made for mobile that you can earn by downloading the Nodal Cash app. It's free, easy to use, and there's no hardware to buy. The Nodal Cash app allows you to earn crypto whether you're on the go, stuck in traffic, or even while you're sleeping. Notal Cash is the crypto you earn 24-7. Go to nodle.io-unconfirmed to get started today.

Starting point is 00:10:45 That's N-O-D-L-E dot I-O-S-unconfirmed. Did you know that a... exchanges take up to a 25% cut on your staking rewards, but you don't need an exchange to stake. You can run a validator at home. To earn thousands of solo stakers, get an Avato device, plug it in, deposit your stake, and earn the full reward. Avato created the best hardware and specific software to stake and keeps your validator on the latest version through auto updates. One-time investment? One-d-percent profit. Go to Avato. That's ava.a.do. Back to my conversation with Sam. So as we were discussing, Salana's sole token has been on a tear this year, up from less than $50 just three months ago to close to $250 now. So what would you say has accounted for Salana's rise?

Starting point is 00:11:39 Yeah. So I think there's a lot of factors sort of in Salana's favor, especially as compared to, not exactly as compared to like some of the other newer chains, but like as compared to ether specifically. obviously there's a ton of it's very fast it can achieve a ton of like many many more transactions per unit of time than ether can and then most of its competitors can honestly and the fees are also

Starting point is 00:12:01 quite small as compared to many of these other chains and so yeah there's been a lot of excitement about this and in particular there's been a lot of exciting projects that are being built using Solana as a back end which I think that

Starting point is 00:12:15 has gotten investors quite excited as well And yeah, I think that's the big thing. Like there's been a Solana conference over the past week in Lisbon. And I wasn't there, but several of our team members have been there. And the excitement and all the different projects that are like composedable to each other and can actually represent like a future of finance to some extent are like legitimately happening on Solana. But yeah, which I think is an important piece of why it's, you know, risen to be in the top five by market cap of, you know, all coins at this point.

Starting point is 00:12:46 and why, yeah, why people are so excited. And what are some examples of those projects that are being built on Solana that people are excited about? Like, I don't want to, like, risk, like, not talking about any exciting projects. But, like, if you can name, like, a thing that is important for decentralized finance to be, like, a big piece of the ecosystem, like, there's someone doing it on Solana. Like, there are, like, there's perpetuals that are being built on Solana. There's all these lending platforms that are being built on Solana. there's dexes and whatnot. All these things are really important to have exists in a stable ecosystem.

Starting point is 00:13:23 And yeah, they're all being built on Solana. All right. So one of the interesting comments this week about Solana actually came from Sam Bankman Freed, the former CEO of Alameda Research. And he said at the Yahoo Finance and decrypt Crypto Go's mainstream conference, quote, Salana is one of the few currently existing public blockchains that has a really plausible roadmap to scale millions of transactions per second at, you know, fractions of a penny per transaction,

Starting point is 00:13:53 which is a scale that you need for this. And then he said, this is not where a lot of other blockchains have been focusing, including Ethereum. So what's your take on what the future looks like for Ethereum and Solana? Do you think the two will coexist or do you think that one will come to dominate or do you think they'll just kind of take different niches or what will that look like? Yeah, it's definitely an interesting question. And I don't, I'm not especially confident about, like, certainly any timelines or any, like, exact, exact answers here. Both have advantages right now. I think Solana, yeah, like, we've already mentioned, the technological advantages that Solana has.

Starting point is 00:14:27 And I basically agree with the things that Sam said. Yeah, Ethereum does have advantages, though. Like, it's something I can do a first mover advantage is, like, you know, like, really obviously something that Ethereum has going for it. It has a ton of adoption already. It's been around forever. There's, like, you know, as for all the, for all the talking I'm doing about how much is being built on Solana, like much more already is built on Ethereum. It's impossible to deny that. And yeah, so I think that it's like, it's unlikely that like certainly within like, you know, a year, like a couple years or whatever, Ethereum goes away. Because it already has so many users. There already has so many people who are like using it for, for applications that don't require anything that Salana is offering that Ethereum isn't. And so, yeah, I do think that it's like quite likely that. both will exist, or like, specifically that Ethereum will, like, continue being relevant. It's because, like, it's already, like, so, so important to the ecosystem in ways that are, like,

Starting point is 00:15:22 you know, kind of is unlikely to be completely eroded away. So no matter what chains are, you know, like the exciting chains going forward, the ones that people are building on going forward, Ethereum likely still has a place, yes. Yeah. And earlier when you were talking about some of the applications on Salina, I did also want to mention that Alexis O'Hanian and the co-founder of Reddit, is investing $100 million to grow decentralized social media projects on Solana. So that could be another way in which Solana differentiates itself and would be kind of like another application that would be popular on Solana.

Starting point is 00:15:59 So last topic, this week, Tara began one of the biggest token burnings ever. The community approved the burning of 89 million tokens, which were worth $4.5 billion. What do you think of this massive burning of Luna? And in general, what do you think is the outlook for Luna? I'll address the second question first. I think that Luna is sort of just another potentially exciting project, which has like, I don't want to quote any numbers here because I don't know the numbers offhand.

Starting point is 00:16:31 That doesn't tend to me my forte exactly. But I don't, but like it's certainly represents another competitor to Ethereum given like it's increased capacity to support various applications. I mentioned before that diversifying tends to be the smart thing with these kinds of investments. And I, yeah, I think that it's certainly a plausible competitor as well to the point where I wouldn't, like, specifically want to like bet for or against it compared to the other possible competitors. Regarding the burn itself, yeah, I think it's the kind of thing that is like is very supportive of people who are trying to build projects using Luna. and, you know, like, I think it's a probably a good move on their part. Okay, yeah, in a way, it really is similar to what's happening with ETH now where the base fee gets burned.

Starting point is 00:17:20 All right, well, this has been a great discussion. Thank you so much for coming on Unconfirmed. Yeah, thank you for having me. Don't forget. Next up is the weekly news recap. Stick around for this week in crypto after this short break. Join over 10 million people using crypto.com. the easiest place to buy, earn, and spend over 150 cryptocurrencies.

Starting point is 00:17:41 Spend your crypto anywhere using the crypto.com visa card. Get up to 8% cash back instantly. Plus, 100% rebates for your Netflix, Spotify, and Amazon Prime subscriptions. Download the crypto.com app now and get $25 with the code Laura. Link in the description. Thanks for tuning in to this week's news recap. The infrastructure bill will most likely become law on Monday. On November 5th, the United States House of Representatives passed the Infrastructure Investment and Jobs Act,

Starting point is 00:18:18 which contains two provisions that could heavily affect cryptocurrency tax reporting. So-called crypto brokers must report customer gains via a 1099 and any transactions over $10,000 to the Internal Revenue Service. To many in the crypto community, including advocacy groups such as Coin Center and the blockchain Association, the bill defines a broker too broadly and could potentially impose reporting requirements on entities such as crypto miners and wallet developers for whom it will be impossible to comply. In addition to the broad definition of broker, the bill includes an amendment to tax code 6050I, which would require entities to report personal data on trading partners, like social security numbers

Starting point is 00:19:01 for digital asset transactions over $10,000. Point Center described the requirements of the as unworkable and possibly unconstitutional. Even more striking, not reporting such an event would now be deemed a criminal felony, according to Abe Sutherland, in his appearance on Unchained in October. Jake Chravinsky, the newly hired executive vice president and head of policy at the Blockchain Association, explained that getting the language changed is most likely a lost cause in the short term. Importantly, nothing will happen right away, he said. The Crypto provisions don't go into effect until 2024. We can try to get them repealed or amended before then. He also noted that 2022 midterm elections could reshape Congress's attitude toward crypto.

Starting point is 00:19:50 However, if nothing can be done to amend the legislation by 2024, a redefinition could fall to the Treasury Department. It's up to the Treasury Department to decide who is subject to the provisions, said Ivory Johnson, founder of Delancey Wealth Management to CNBC. Similar to the broker definition, the Treasury Department will have to provide guidance. Twitter embraces Web 3 via dedicated crypto team. Twitter announced a new business unit dedicated solely to crypto. The news was first reported by the Financial Times. Tess Reniersen, formerly of Interchain Foundation, will be leading a team named simply Twitter

Starting point is 00:20:28 crypto. Reneerson said the new unit will be focused on supporting the existing crypto community on Twitter. Twitter truly gets crypto. Hello, Bitcoin tipping and NFTs. But there's so much more to explore here, she said. She went on to site DAPs and crypto communities as areas the team is looking forward to exploring. Twitter crypto will be working closely with Blue Sky, an offshoot of Twitter looking to build a decentralized social network. Twitter was far from the only Web 2 social media giant to dip its toes into the Web 3 waters this week. At the Salana Brinkpoint Conference, Reddit CEO Alexis O'Hanian, announced a $100 million investment.

Starting point is 00:21:07 into the Solana ecosystem through his 776 venture company. Additionally, Discord CEO Jason Citron posted a sneak peek of Discord's future, showing a direct integration with MetaMask into the popular gaming discussion platform. However, after a wave of negative responses to his tweet, Citron walked back the hint, saying, thanks for all the perspectives, everyone, we have no current plans to ship this internal concept. For now, we're focused on protecting you. users from spam, scams, and fraud. Web3 has lots of good, but also lots of problems we need to work through at our scale. More soon. A new home for Binance? Chang-Pang Zhao, co-founder and CEO of

Starting point is 00:21:49 Binance, hopes to secure status as a digital asset service provider in France in 2022. France will be a natural choice for a regional and even perhaps global head office, said Zhao in an interview with less echoes, according to a translation from the block. Zhao went on to add, We want to be regulated. At this stage of our development, this will allow us to grow faster. 5% of the world's population, 400 million people, have already adopted crypto. They are pioneers. We now want to convince the remaining 95%.

Starting point is 00:22:22 Zhao's words come as Binance faces regulatory scrutiny from the United Kingdom, Japan, Germany, the United States, and other jurisdictions. Q3 was tough for crypto communities, especially Coinbase. third quarter earnings reports have slowly begun filtering out and the numbers for crypto companies have not been pretty. Coinbase, for example, saw a decline in monthly transacting users by 16%, trading volume by 29% and net revenue by 39% between Q2 of 2021 and Q3. In response to the earnings report, Coinbase or coin shares fell roughly 10% on Tuesday afternoon in after hours trading. As of press time, is down 4.1% on the week. Other centralized crypto communities saw similar dips between

Starting point is 00:23:11 Q2 and Q3. Squares' cash app reported a 23% drop in its Bitcoin profits in Q3. Robin Hood's numbers were even more drastic, as crypto revenue fell 78% between Q2 and Q3. Accordingly, total revenue shrank from $565 million to $365 million between earnings reports. halted registration of tokens stemming from a Wyoming-based Dow. The U.S. Securities and Exchange Commission, or SEC, stopped a Wyoming-based decentralized autonomous organization, or Dow, from registering two tokens as securities. The Dow named the American Crypto Fed Dow LLC was legally recognized in Wyoming as a limited liability company, or LLC, back in July, following Wyoming's decision to allow such an action. The SEC alleges that the Dow filed

Starting point is 00:24:05 a materially deficient and misleading registration form known as a Form 10 that failed to contain certain required information about the Dow's business or tokens. The SEC alleges that the tokens, Duccott and Locke, are equity securities rather than utility tokens, as the Dow attempted to describe them. According to Gabriel Shapiro, General Counsel at Delphi Digital, it appears American crypto-fed Dow LLC was a sham. To be clear, I don't fault the SEC for this, he said. It clearly was control, but does show that the come in and register not so easy of a thing. He added, this is getting farcical. We need a better way. ENS rose 100% after airdrop. Ethereum name service or ENS, the company behind .eath domain names, began an air drop of its governance token,

Starting point is 00:24:54 ENS, to existing name registrants this week. Shortly after the air drop, which gives users the power to vote on how ENS will function going forward, the E&S token price skyrocketed. shooting up to a high of $85.69 cents on Wednesday morning. At such high prices, users are reporting their air drops are now worth upwards of $20,000. Interestingly, to claim a job, users had to vote on the E&S governance constitution. Furthermore, claimants were required to delegate tokens, aka their voting power, to addresses, owned by the likes of Coinbase that applied to be delegates. As of press time Thursday afternoon, E&S was at $63, and 57 cents, a 100% increase from its initial trading price of around $30.

Starting point is 00:25:40 Good for a market cap of approximately $930 million. Time for fun bits. Citicoin is coming to NYC. Citicoin has the full support of Eric Adams in the next mayor of New York City to launch its NYC coin. Said Adams, who takes office January 1st, 2022, we're glad to welcome me to the global home of Web 3. We're counting on tech and innovation to help drive our city forward.

Starting point is 00:26:07 Anyone can mine NYC coin and 30% of funds spent mining the coin goes to a crypto wallet reserved for the municipal government. A similar program in Miami, dubbed Miami Coin, which is already live, has already generated $20 million, according to Citigoin. Speaking of Miami Coin, Miami Mayor Francis Juarez announced that it will be the first city to give a Bitcoin yield directly to residents by using the proceeds of Miami Coin. All right, thanks for tuning in. To learn more about Sam and Alameda research, be sure to check out the links in the show notes. Unconfirmed is produced by me, Laura Shin, without from Anthony Yoon, Mark Murdoch, and Daniel Less. Thanks for listening.

Unchained - Unconfirmed: Alameda Research's Sam Trabucco: What Solana Does Better Than Ethereum - Ep.289

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