Unchained - Unconfirmed: What Is the Role of Investors in a Decentralized World? - Ep.281

Episode Date: October 15, 2021

Four investors talk about the decentralized web, explain how the crypto industry is improving upon Web 2, and discuss what can be done to increase diversity and financial inclusion within Web 3. Featuring Rik Willard, founder of Agentic Group, Thomas France, co-founder of Cygni Capital, Dylan Hixon, president of Arden Road Investments, and Nick Grossman,general partner at Union Square Ventures . Show highlights:   how funding rounds for decentralized protocols differ from investing in traditional companies what VC investors can do to 1) participate in the protocols they invest in, and 2) not take advantage of whale holdings in governance voting how Web 3 has the potential to displace the “plantation economy” the difference between crypto idealism (i.e., banking the unbanked) versus what has actually played out (i.e., Salvadorans being mandated to accept BTC) what area of blockchain is delivering on the promise of financial inclusion how to bring diversity to the blockchain + crypto industry what can be done to solve the gender imbalance in crypto how investors are navigating the murky waters of US regulations regarding crypto projects how institutions fit into the Web 3 landscape what I think about the state of sexism within the crypto industry   Thank you to our sponsors! Crypto.com: https://crypto.onelink.me/J9Lg/unconfirmedcardearnfeb2021 Nodle: https://bit.ly/3AXGydJ   Episode Links   Original Link: https://vimeo.com/showcase/8884996/video/614236078   Rik Willard Twitter: https://twitter.com/rik_willard?lang=en Agentic Group: https://www.agenticgroup.com/   Nick Grossman Twitter: https://twitter.com/nickgrossman?lang=en Website: https://www.nickgrossman.xyz/ Union Square Ventures: https://twitter.com/usv   Dylan Hixon LinkedIn: https://www.linkedin.com/in/dylan-hixon-1887803 Arden Road Investments: https://www.ardenrd.com/   Thomas France Twitter: https://twitter.com/totofrance?lang=en LinkedIn: https://www.linkedin.com/in/thomasfrance/   Topics mentioned Fereshteh Forough on Unchained https://unchainedpodcast.com/crypto-actually-fixes-this-how-code-to-inspire-uses-crypto-in-afghanistan/ Discussing crypto’s gender disparity on Unchained https://unchainedpodcast.com/cryptos-gender-disparity-what-can-be-done-about-it-4-women-weigh-in/ she256 https://she256.org/ El Salvador and BTC https://www.coindesk.com/policy/2021/09/24/why-el-salvador-is-botching-its-bitcoin-experiment/   Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, all, before we begin, some quick announcements. First, thanks so much to those of you who have fell out the Unchained Survey. We have two winners for the BTC candle. They are Elizabeth Strickler and Robert Omen. Thanks to everyone who filled out the survey, as well as to Elizabeth and Robert, and to both of you enjoy your candles. Second, as I mentioned earlier, I'm now writing a Facebook Bulletin newsletter. If you're interested in the stories that we mentioned in the weekly news recap, you can get all the links delivered right to your inbox. If you're not already signed up, head to laura shinn.bulletin.com and subscribe today.

Finally, this week's episode is a panel discussion recorded at Unfinished Live 2021. The future is decentralized. It was a great event here in New York in late September. And if this panel interests you, be sure to check out the full program at unfinished.com. And now, on to the show. Wish you could earn crypto but don't want to spend thousands on hardware? Just download the Nodal Cash app on your smart. phone. Visit nodal.com, that's Nod-L-E-D-L-E dot com, to start earning NodalCash today.

The crypto.com app pays you up to 8.5% interest on your Bitcoin. Get $25 when you download the crypto.com app with code Laura. The link is in the description. Welcome to our panel. Here to discuss with me are Nick Grossman, who is a partner at Unions for Ventures. He's here virtually. Hello, Nick. And we also have Thomas France to I write, co-founder and GP of Cigney Capital. And then Tillinghamixon, president of Arden Road Investments. And at the end is Rick Willard, founder of Argentin Group and managing director of World Ethical Data Foundation. Welcome, everyone.

All right. Thanks. So, why don't we start by talking about how a decentralized world changes things for investors? So in an ideal to centralized world, everything is kind of like user-owned and everything's a little bit more egalitarian. So how does that change things for investors in a world where generally the business model is kind of predicated on things not being super egalitarian? I think the decentralized web is an interesting term and concept. And I think one of the key things that's happening is that it's enabling more people to be owners of more things, of protocols, of doubts, of assets, of, you know, systems. And I think that's really exciting. A lot of the early people who've been participating in these networks and these projects are earning the equivalent of sweat equity and then are going on to launch new things.

the need for outside capital really is decreasing as, you know, as the community itself builds up wealth in assets that have been generated here, and the role of investors is really changing. A lot of projects are launching without any investors at all. There's, you know, projects get forked, and project that launched fair to launch. You know, rounds are getting financing rounds when they happen tend to be getting tighter and smaller. And so the role of the investor, I think, is really changing. I don't think the role of capital in the system is necessarily changing, but I think the role of, like, you know, traditional funds is definitely evolving,

and we're working to adapt to that. And so how have you tried to evolve to stay relevant? There's a, I mean, I think every generation of investing that we've been through, and we've been around for 15 years through Web 2 and now into Web 3, and my partner's been investing for longer than that, I think it's forced us or caused us to learn new tricks. You know, there's some mechanical administrative changes to how we organize funds and the kind of activities that we undertake, whether we're, you know, staking or, you know, participating in protocols using capital in different ways. A lot of the things that we're investing in now look less like companies and more like loose collectives or Dow's where we're just one of many members and the sort of way that we engage and participate in influence, you know, the project.

is changing. So I think it's too early to say exactly how, but we're learning new moves every day. Does anyone want to add? Yeah, I think there's a wide variety of projects that you can invest in in that space. And it's generally like some very long-term projects you believe in.

So it's not solely that you're going to invest like in Dow's or in protocols where you're going to actually make a deal with an entity that lives on the business. blockchain and you're going to receive a token for it. But that's a possibility. There's also some companies that are like equity base, are building like some pick and shovel infrastructure play

that kind of bridge the world between the real world and crypto. There's some developer tooling. So there's also all that variety of project that is, let's say, acceptable for any type of investors, but for everything to do with a pure blockchain organization or pure like smart contracts you're interacting with. It's true that it changes the world of the investor as well. In the type of structure you need to have,

you need to make sure that you can invest in non-venture capital assets, that you can like custody these tokens. And once you get like these tokens that are not like actual equity, you also want to participate in it. So you want to stake, you want to participate in governance, You want to provide value and liquidity to this protocol. So there's all set up that need to be refought in terms of how to best participate in all these networks. Yeah, as a family office, we make a lot of venture capital investments.

We are prepared now to hold tokens directly and look at alternate forms of investment. In terms of the structure, you know, we're getting cited about obviously growing big companies. some of these intricate new applications, but also the idea of financial inclusion, even stakeholder capitalism, are some kind of new twists on capitalism that are going to be enabled by blockchain. And like we actually, we have a family foundation,

we do a lot of work with social entrepreneurs. Some of what we're seeing in blockchain is starting to overlap with that. So I think capitalism has a place in this. I think it's going to be modified. But we're excited about that for return perspective. but also from an impact perspective. And did you want to add some?

Please, yeah. So let's talk about the modification of capital and what funds look like and financial inclusion, stakeholder capital. I think if we're going to look at what can be with a decentralized, democratized,

we have to look at what is. And what is is really a continuation of sort of plantocracy economics, right? Plantation Economics. And I mean that very seriously. The platform, let's say Facebook in this particular case, would be a plantation. The workers aren't the people who work at Facebook.

Those are the farmhands. The actual workers are us. And the crop is your data, right? So if you look at it that way, then there's a point at which you have to ask yourself to frighten McCourt's mom's point. What do you do about that? What are you going to do about that? So what we're engaged in, the business that we're engaged in, is about overturning that model,

reimagining what capital looks like, reimagining what structures look like. I think that in the case of tokenization and token economies, it does actually open up a place for sovereign identity. It opens up room for the ownership of data. It opens up new vistas for our common. concept of capital and what that means and introducing human capital into the equation. So there are a lot of changes that are going to be happening over the next five, ten years

that will look very different from, I think, what funds even look like now. So I would add that a lot of that investment will stop, hopefully, coming from us as gatekeepers, quite frankly, because funds will invest in an array of things to see what works. and the optimization of a fund is a return, a financial return. So we're going to look more at things like outcomes, human outcomes, and the governance part of tokens is going to help us do that. Of course, if you invest in something, you don't want to go broke doing it. You want to make sure you make some money.

But it's about communities making money, individuals, owning their data, owning their rights, owning their attribution for whatever they're contributing, and then amassing in communities that then amplify and extrude value as opposed to extract it. So I think that's one of the major differences that we're talking about here. Yeah, and actually that leads me to my next question, which is in this world where we have these tokens launching, and they're oftentimes saying, hey, we're a fair launch token,

and then meanwhile they're kind of deriding what they call the VC coins. It's very clear that if you are an early-stage investor, a VC participating, then you kind of almost automatically become a whale in these governance tokens, and you have a lot of weight in these votes. So how are you guys managing that? Are you just happy to have that power, or are you, you know, trying to, but kind of like shift the way things are done? I know that a lot of communities are looking at quadratic voting, too, which is a system of voting in which the number of coins or a number of individual entities that vote a particular way can increase their weight if the number is greater and if it's just whales

dominating on the other side of the vote then their weight is lessened. So, curious to hear how that's being managed. I think it comes up to also like the style of investing and when you invest in a company, you've got some shares and you've got some rights and you've got like some potential influence on the decision of the company we share ourselves as investors who want to be like next to the for the best interest of the companies

of the founders and when it talks about like now it's the best interest of the community, the founding team and all that. So we try to always stick to the mentor of do no arm and be like a founder-friendly and it comes back to the same thing in these protocols.

It's about like part of, like participating, whenever you can stake and participate in the network to add security to the network. We do that, whether it be by mining, by farming, by staking, by providing liquidity. But not so much in the role of pure activism and trying to use that dominant position to influence in our side, I'm always trying to think about the community of stakeholders and act in the best interests of these networks. Okay, so just in the votes, you even just basically try not to wield your power so much. Is that what you're saying?

What was it? Like you're trying to not wield the power that you have. No, exactly. Do no arm. Like, we review the governance proposal, and we don't, like, actively participate in creating those proposals. we kind of review them, vote for them, check the community feedback and take the decision from there. Oh, I see.

I also feel like a lot of firms are just figuring this out and how to strike the right balance. And I think one thing to point out is that most VCs, you know, historically looking at regular, when investing in regular companies are owning maybe 10, 15, 20%, and they have, you know, with that minority control position, which is what we're used to. So we're not coming at this generally from the point of expecting to have sort of real control. But now as we're investing more in token networks, the ownership percentages are way, way lower. So, you know, whereas we may just have 10 to 20% of a company. Now we have a half a percent to three or maybe four percent of a token network.

And so I think even in cases where BCs do have a large percentage relative to any single person, I think everybody is getting accustomed to having much, much, much overall influence when it comes to a project. Okay, so now let's actually talk a little bit about something that Rick had brought up, which is that I think for a long time in crypto there's been this kind of idealistic notion that it would create a more inclusive world, or it would bank the unbanked. And I was curious to know what you guys thought in terms of what is actually played out.

Do you feel that the technology is accomplishing those things? And if not, why not? And what could be done better? Okay. So I truly believe, let's take Bitcoin as a case study in that. Forget the weight of ownership. We wouldn't even go there for the time being. but you see all kinds of questionable applications of digital currencies.

I'll look at El Salvador as a great example. Actually adopting Bitcoin as a national currency is not only a huge mistake, but perhaps a crime. Also, the stress testing of digital currencies on people of color in Africa, in Asia, in Latin America is, I think, emblemic of the kinds of issues that we're going to have to face. It touches on all of these things. Because America doesn't allow for that. You know, SEC does not allow us to test certain things. They're being tested in other places.

They're being dropped into other localities, and usually that is with people who don't have much of a say. El Salvador is probably the most egregious example of that. But all in all, I think the token economy, Bitcoin, notwithstanding, Ethereum notwithstanding, but with platforms like Pocod or Bubbler that is being built and things like that, then you're actually talking about egalitarianism being built into code. And I think that's a very important way to look at this, is that the trust that we talk about, the trustless networks, and these are all algorithmic issues.

And we have yet to get that right. So human factors are always going to wait a little bit towards greed. I think that's probably part of your book, I think. But it's up to us to determine and to get right these sorts of code issues and not to test them on populations as if they're lab rats. I think that's a big mistake because it always has negative outcomes. So obviously, Bias is an investor. I think free market capitalism is a powerful tool,

but it's an algorithm for allocating resources. It's not an ideology, and it's garbage in, garbage out. So we've started to get this idea that, like, maybe you should consider environmental considerations as part of the allocation of capital, not just pure profits. Maybe you should consider child labor. Like, obviously, we're not doing a perfect job on any of these, but they're starting to get baked in.

What excites me about blockchain is, if you get this right, you can actually code this in and start to steer the direction of where how this blockchain grows and what you said as the goal that the free market is going to optimize for. We're going to solve climate change by putting a price on carbon because then the free market all of a sudden works its magic and perfectly allocates the resources to reduce carbon because that's rolled into the cost. So I think we're not there. I think we're building a platform that could potentially allow us to address some of these non-financial issues. You know, get stakeholder capitalism at play where you actually include people. Kai Foo-Lee talks about what he calls human-centered capitalism, that, you know, you might want to optimize for human happiness plus profits, maybe not just profits. And so I think blockchain is going to open up a lot of possibilities to start to look at capitalism in a different way.

way. I guess blockchain is like one of the most like inclusive technology you could imagine like anybody could get access to it. Anybody if it's open source, it's open to anyone. It's a censorship resistant. It's true like the infrastructure currently is just not there whether it be like fees on the network and fees on Bitcoin fees on Ethereum. It's just not there yet simply because the infrastructure is not there yet to to create. cater for the type of interesting use case that you can have here. So coming back to the idea that it's a super long-term play, and there's always these big infrastructure bet that still needs to be done

all of the side on the actual base layers on the scalability solution, the layer-two layers. Think of Bitcoin and Lightning. Think of Ethereum and other side chain on it. I think of the layer one. So it's still like a very long-term. on play where this infrastructure needs to be built out. And in that process, application needs to start testing the boundaries of this infrastructure

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So it seems like you mostly think that as long as the technology becomes more user-friendly, then gradually the inclusion piece will sort of solve itself. I mean, is there anything kind of more proactive now that people either can do or that you think is already working? I think that what's exciting to us is that fundamentally, architecturally, the technology is open and inclusive, meaning all you need is software. You don't need a bank account. You don't need a credit card.

There's all the things that you need to join the traditional financial world. Technically you don't need to join here. At the same time, if you look at the distribution of capital in crypto right now, it's more concentrated than it is probably in the real world because you've got early adopters who've been paying attention and there's a big GD coefficient and so on.

And I think as has been mentioned, a lot of the technology itself is still pretty raw in terms of, and puts up a barrier in terms of high fees on Ethereum and other things, which are adding to sort of a snowball of you've got a wealthy group in here that's participating more and earning more and so on. And so in practice, it doesn't feel that way. You know, one of the areas that feels like an opening to me is overseeing and play to earn games. So, you know, you've got folks like playing AXI mostly in the Philippines and earning and treating that, you know, like a job. And I think you've, there's one example

where the technology has opened up a window into a financial world that wasn't there before to a way broader group of people than, for instance, are participating in, you know, defy protocols or mining Bitcoin. And so I don't, I don't think we can declare victory that this is inclusive, I think the potential for it to be very inclusive is built into the technology. But I also think it's going to take a while, hopefully, for that to become more real to more people. Yeah, yeah, that feels more right, because, you know, if anybody's been following the yield farming craze, that's something that, you know, you can only really benefit from it if you're

a whale and you have a lot of money to invest because the fees to do that are quite high. You have to solve hunger first. I'm sorry. You have to solve hunger first. You have to solve housing first. You have to solve certain human issues that allow people to actually have access to the things that we take for granted, quite frankly. Yeah, I mean, it feels like, you know, just a little bit of a missed opportunity if it's just a lot of the kind of same inequality that we see. And I'm, you know, it's not like I'm against capitalism because obviously I am for capitalism, but I'm just saying here we have this opportunity. of kind of people who are already wealthy are just getting wealthier than, you know, it doesn't. One of the things I've been watching in blockchain also is, it's a meritocracy in the sense that you don't have to go to a fancy university or work at a big company, just, you know, how good is your code and how smart are you? Then you rise to the top. So it's a meritocracy in that sense, but those people still have very similar backgrounds. And so when you try to think

about inclusion, it's hard for a group that's not diverse to even think about inclusion. So I think one of the things that blockchain and the company's big built on I need to think about is how do you get that inclusive mindset, not just I want to be inclusive because, you know, folks like us from the same background have blind spots where you don't even know you're not being inclusive because you don't know what you don't know. I think blockchain needs to grow in that sense and find ways to bring people from the outside who can get. those voices to the table. Is blockchain need to grow or do we need to grow?

Well, I think blockchain is a great, it's a great platform that can be built in many different ways. We just need to write voices at the table when it's put in stone or when it's finished. Sorry, I didn't mean to be the... Good point. Yeah. Yeah, and one... Oh, go ahead. I was just saying one thing that excites me, and I acknowledge it's really early,

is that, you know, wealth is the basis for a lot of things, right? And a big issue is how do you make it easier to create wealth? And whether you believe that blockchain assets like NFTs or tokens or anything else are actually worth anything, what is particularly exciting to me is that people can make them kind of from scratch and build value around them. And what you're starting to see is a community of folks who are holding assets with value as the basis for creating platforms and creating communities. And a thousand percent acknowledge that this is still mostly tech geeks, you know, getting wealthy using computers, you know, just like the old things. But the idea that you're able to form assets and bring a broader and broader number of people into. the ownership of those assets feels important.

The same way that Facebook users can't own a sake of Facebook and Uber drivers can't own a stake of Uber, that model is different in crypto, where you can start by earning the assets and holding the assets and potentially benefiting as these ecosystems brought in. And starting with ownership feels like an important change. With over 10 million users, crypto.com is the easiest place to buy and sell over 90 cryptocurrencies. Grow your crypto with crypto.com earn, which pays up to 8.5%

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Notal Cash is the crypto you earn 24-7. Go to Nodal.com, N-O-D-L-E-D-L-E-D-O-Com to get started today. Or go directly to Nodal.io-S-Cash. That's N-D-L-E-D-O-S-Cash. Yeah, and I actually just did an interview on my show. It's coming out next week. But it's with a woman named Ferrejta Faru, who is an Afghan computer scientist who founded Code Inspire, which is a school in Afghanistan that teaches girls to code. And she began, or her school began teaching the girls how to code like solidity and stuff like that. And they were doing other things like creating video games where they decided to make the protagonist an Afghan girl. And then there were like Afghan boys playing this in a society where, you know,

like typically you wouldn't kind of put a girl front and center. So anyway, the point is that, you know, like the fact that her organization was able to use crypto and needed it because Western Union wasn't like a viable option and PayPal wasn't a viable option. And so this actually became like a good way for them to, you know, kind of pay out the student. who had earned through, like, doing gigs for, you know, different places and even for collecting their own donations and things like that. So, clearly, you know, what you were saying about how the technology is open, like, it's, you know, reaching places that typically don't have access to financial services. And yet at the same time, there is still so much inequality.

And I actually just want to ask one question, which is for people who follow the space a lot, you will probably recognize any time you go to a conference. that it's mostly men and there aren't that many women. And I was curious to know just, you know, what your thoughts are on how to bring more women in the fold. If you feel like there is any particular strategies that are effective. And, you know, I, as just an observer of this space, I feel like even a lot of the outreach currently to more mainstream audiences is still more directed at men like these NFT partnerships with like the NBA or La Liga. You know, I mean, I have some female friends who are in the sports, but I wouldn't say that's predominantly, you know, who are sports fans. So I was just curious for your thoughts on the gender imbalance in crypto.

I mean, there's obviously a gender imbalance in computer science in general. I was a trustee of Harvey Mudd College for 10 years in Claremont, California. It's a small but extremely rigorous institution. It was one-third women. It was, you know, I've been around for about 60 years. Oh, was a male president. We hired the first female president, and she showed up. She wrote a handwritten note to every accepted female student every year.

And then she's a computer scientist. In computer science, she switched the introductory language to Python, which was not so well-known at that point. So everyone learned a new language together. It was relatively simple. They switched the kind of projects they would do to be more sort of projects and result-oriented than, you know, grindy tasks, and brought the number of women in computer science up to around 50% in the major. And so, you know, it was really just about, it's about initial structure and sort of who gets in the door. Like, you know, if you show up as a computer genius, as a young guy, a lot of these places just push them. through. And do you have ideas and how

that could be applied here in this, in crypto or like a decentralized web? So, I mean, I don't know specifically, but like, that's the mindset of you need to open it up and you need to, you need to explain to the potential programmers and participants

what they can do with it to change the world more than just sort of the needy-gritty aspects of the technology. But it's, I mean, it's obvious you know, you have a trained base that's overall only male, so it's going to be hard to shift that on a dime. Can I just add, I think that's correct.

I think that there's an institutional approach to it, but you could also stop having crypto-brough meetings and strip clubs. You can, there's a lot of things that we do that we take for granted. You can stop painting girls' gold and having them dance at Bitcoin conventions. Seriously. Simple stuff. Simple stuff. With Freshly, I'm glad you referenced her.

She's a friend of mine. And Roya, her ex-partner, Roya Mabob, is a good friend of mine. Roya's also a friend of mine. And I helped them with Bitlanders with Francesco Ruli when they first started in this business. So they were helping Afghani women, but also Afghani young men, but mostly women, young women, hold money through Bitcoin in the form of Amazon cards. Because, of course, in Afghanistan at the time, it may be the same now, women couldn't hold money. Their brothers, their husbands, their significant men in their life would simply take it from them.

So the phone produced the opportunity to have a wallet that they could own. So this has been a question throughout this space. In tech in general, but really in crypto, it's especially important. And I forget crypto. In blockchain, it's especially important. Because we do have these tools, to Dillon's point, to everyone's point, we have these tools. The question is, how are we going to implement? meant them. It's almost like we have to throw a grenade into our own, the seat of our own souls

and figure out what's really important, what kinds of things do we want to invest our attention in and not having our attention monetized by other platforms, but making our attention the platform. But so is there something that you all, as investors, feel that you can do to address this issue, or do you sort of feel like the source of the problem is kind of outside of your scope? Nothing's outside. I mean, I think investors can and should play a big role in increasing diversity of all kinds in their portfolio and the companies they back and the companies they work with and the boards that they're on and so on. And I think everybody can, many firms are taking this on in different ways. I know we are.

I think it probably starts with, at the very least, keeping track. You know, we've been tracking for the last year over, you know, who we're backing, you know, keeping. better track of that kind of information. We've, you know, taking it upon ourselves to try and be more proactive in a lot of ways about increasing diversity in our portfolio. I think investors are in a position of, you know, some influence and power and have networks and have a burden to diversify their networks, you know, and bring, you know, new people into the fold.

Another part of it is, like, try and identify leaders and organizations that are doing good work, you know, adjacent to the investing. So, like, in crypto, there's a group called C-256, which is, like, focused on, you know, bringing diversity in the blockchain. There should be more and there will be, and, you know, there are female leaders of a couple of very high-profile crypto projects, but that's not enough. And so it's a cliche and terrible answer to say that it will take time, but I think it will take time. But I do also think that it won't change unless people focus on it. Okay, so now we're going to really switch tax because this is also relevant to investing in a decentralized world.

And it's a hot topic right now, which is the regulatory environment here in the U.S. I think a lot of people know for a long time there was kind of the sense that there wasn't a lot of clarity. And maybe now we're getting a little bit more clarity than it seems what I would say people in the industry perceive as negative. So I'm curious to know how this is affecting investment activity in the crypto and blockchain space for U.S. investors. Clearly, it's always been like a tough thing to work in crypto just to get access to bank accounts. And my previous company back in 2014, even though we were not touching with crypto directly, you had this thing with like to get access to bank account. And that was always a big struggle.

and it gets even worse with all the regulation for crypto exchanges or protocols that are building stuff that looks like security or that engage in trades. And as investors, we see that we're based in the U.S. we're structured as a U.S. Venture Fund. And we sometimes cannot have access to some projects simply because they start to not accept any U.S. investors, so that they are outside of the scope of the U.S. regulation. And like you can still get back this project by having like some offshore entities. But we see that like as investors for some projects. They simply do not accept any more U.S. investors. And it looks like part of the innovation is going to go on some other jurisdictions

because like entrepreneurs, they need clarity. That's the worst thing that you can have. have, like this uncertainty on what's going to happen or the regulator is going to change in mind. I think what's lacking is to have like some guidelines and frameworks where you know a little bit how you're going to fit in that box. And if that's not the case, I guess like entrepreneurs and companies will go the path of this resistance and go in some jurisdiction that are more friendly for their business.

So, yeah, I want to hear other people's answers to that, but I'm also curious, like, how does that affect the development of this decentralized web if you have kind of these different silos? I'm just curious if you guys are trying to solve for that or if you think it's just going to be like that, there will be one decentralized web in the U.S. and another decentralized web elsewhere? You know, I think would some consider a hindrance with U.S. regulations, I think we're missing opportunities because we're looking at the space as a Wall Street casino and not as a a place where we can actually grow ideas and we can grow access and utility. The regulations are clear.

We can build inclusive structures, but we keep defaulting to casinos. We keep defaulting to existing structures like Wall Street. Now, who says that the crypto space has to look like Wall Street? Who says that we have to focus on returns as opposed to outcomes? This is us saying that. The regulators have actually given us a strange. path into a different way of looking at this whole thing, yet we continue to try to force it into the square hole of Wall Street. So that's really a lot on us. I mean, we could change that

calculus if we can change the idea of value and make that something that people want to be a part of and we can build other structures that then help us trade and value that way through communities. But we keep going to the same stuff and we get the same results and then we start crying about, oh, what the SEC is doing to us. Does anyone want to add? I mean, this is one of the most complicated, difficult issues in the space. I think at the very beginning, there's a sort of impedance mismatch here because this technology establishes trust in a different way, through transparency, through cryptographic

proofs, through open source code, and it also enables the creation. of sort of these digital artifacts that can look a little bit like money, can look a little bit like stocks, can look a little bit like commodities, can look a little bit like packets of data. And so it touches on everything. And a lot of those are regulated sectors. And so I think there's going to continue to be a challenge to figure out what is this stuff and who should regulate it. And I think what we're seeing right now is a combination of every different sort of, regulator looks at it through their lens and sees it as the thing that they regulate. And eventually, I think, and also whether it's, you know, on the financial crime side and security

side or other places, is looking to regulate through the existing mechanisms, which is, you know, reporting and filings and so on. And I think what I would hope we would see over time are new regulatory structures that are more native to this medium that understand it for what it is. is and ways of, and by structures I mean like bodies, and then also regulatory mechanisms that can really harness the openness and transparency and open source nature of this technology to achieve the sort of outcomes which we want, which are safety, integrity, you know, investor protection and so on.

But over time, I think, come at it in a different way. And what I hope we don't do is sort of destroy the technology by trying to regulate it in the old way before we get to see the benefits of it at a broader scale. And, you know, we run the risk of pushing more and more offshore into other jurisdictions where there's, you know, less safety and so on for consumers. So it's a really, really, really hard problem. And I think it's front and center for every investor in every project. operating in the space. So do you think that what might happen is that we'll end up with kind of crypto slash decentralized web for the U.S. and then a different version for elsewhere? And also, Nick, it seemed like you were saying that you wish that there were either a different

new agency or at least a new set of rules for crypto specifically. Like you're saying you feel like the old regulations just don't apply here? I'm not saying they don't apply. And I think the concept of protecting against financial crimes of various kinds and protecting investors and having markets with integrity. These are important reasons why we have regulations that get at all those things. I just think that it will take a while for us to adapt the mechanisms, to achieve them that kind of fit with the way that this technology works. I think there are a lot of built-in benefits in this technology towards those.

those goals, which we would want, which we hope to keep persisting and take advantage of to harness the goals. And I think my guess is that over time, that's going to result in new agencies with new techniques. I don't think that's going to happen tomorrow. Oh, no. Yeah. At the moment, it really doesn't look like it's going to happen tomorrow.

Okay, so I could keep asking questions, but if anybody would like to ask a question of the panelists, You can come right up to this mic here and go ahead. Hey, everyone. My name is Alejandro. What do you see the role of institutions sort of balancing out with individuals? And will this technology sort of just set a new framework for institutions to take advantage of the automation that's going on? Or, yeah, sort of like, what do you see the role of institutions in this new, decentralized future? And actually, can you just elaborate on what you mean by institutions?

do you mean like traditional financial financial? Yeah, maybe like Facebook, banks, et cetera. Will they use this technology to just deploy their services more efficiently, which then you just kind of like re-institute the same frameworks that we have now? Or I guess open up to a long tail of startups and smaller companies being able to take advantage of this technology? Using existing frameworks, institutions will always get it wrong. Look at Facebook Libra.

Look at credits before that. we have to, people like us, actually have to build new sorts of frameworks if institutions have a place in. I can't answer that question personally. I don't know if you guys can. I mean, I'll just give one example. I know a lot of the conversation in this conference

has been about the role of traditional tech platforms, Google, Facebook, Apple, so on. And I think one of the directional trends we see that we're not excited about is the potential for this technology to migrate control of data and other sort of technical infrastructure away from a company, an institutional company, and more into the hands of users. So, for instance, the data that you publish in a social networking context or blogging context today all gets piped through these platforms, and that's where they exercise control

and ad advertising and all this other stuff. And I think what one of the many things that Web 3 is changing is an architecture where users have more direct control over their data, you know, signing data packets and messages, encrypting them, storing them in different places, re-aggregating, you know, them in a different way. So I think the role of the data aggregator in Web 3, I think, is going to be very different than the data aggregator in Web 2. And that's one of the themes that we think is important. It was a technology that was like from its beginning as an asset, as a technology, something that was for retail, before institution, like for Bitcoin, for like crypto assets. I say like it was for retail users. And it's after on that institution came in to get access to it because they just couldn't at the beginning. And I guess with that technology, it's similar that it's mostly like new developers that are going to build some frameworks that are going to.

compete against the actual institution. And it's contradictory a little bit for them. They build their trust through time, and with that, they can monetize data aggregated and attention of users within their platform. I guess, like, well, WebFree in this technology gives the opportunity for new companies to have their time to trust to be tremendously faster and build trust within. in the community and build new networks based on that. And accelerating this time to trust is super important to compete against this

dis-institution and get by some better forms of product that are more like a concern about data privacy, data ownership kind of thing. So I think the part of the idea of unfinished labs and Project Liberty is if you build an open source protocol that's a social graph, and you make that available to everybody, but you own your data. If you like Facebook, then hook Facebook into it, and they'll continue to give what they give.

If you want to choose a different one, you turn Facebook off, you turn someone else on. If you want to build your own, you build your own. If you want a friend to build one for you. So I think the Facebooks will still exist, and I think they'll be great opportunities to build new versions of Facebook, but rather than being big because they own your data

and won't give it back, they'll be big because they use. use your data to provide value to you. And if they stop providing value, you give it to someone else. So I think that's the goal. If you separate the data from the company, then you see what the company really can do and what value they can really give you. I wouldn't think of Facebook as an institution.

I would think of governments as institutions or libraries or things like that. But go on. Yes, go ahead. I was just want to ask a question. And Rick, you know, kind of led us to the issue around, you know, the sexism and greed and the culture that, you know, has prevailed in the world led by Peter Thiel. There's a number of articles out today. Not to call anybody out, but Palantir has just, you know, gotten away with murder, not playing taxes, just building billions and billions of dollars in wealth. and having just gotten more government contracts than, you know, could ever be thought of.

So what is going to change a culture that has been repeating itself? I was with Drexel Burn and Land Bear. The Predator's Ball is alive and crypt out now. So it's like, you know, what's happening? It's 40 years later, and we're still doing the same thing and expecting different results. Yeah, I almost want to answer that. this myself being the woman on the panel, even though I'm the moderator. And that's to say that, you know, it's pretty shocking that Me Too only happened in 2018.

It's, you know, obviously very, very recent past, though. It's kind of interesting just how ingrained sexism can be and how difficult and hard it is to change things. But it is changing. I do think actually, you know, crypto has the full range. It has, you know, a lot of sexism like we see in a lot of parts of the world. But there's also plenty of lovely people. I'm a woman in the space, and I deal with men all the time. And, you know, I wouldn't say I've had, like, too much sexism.

I would say, though, that one thing that is interesting to me that I've noticed is that people recognize and they will call out racism. If women in the space bring up sexism, there's a lot of denial and a lot of push back and a lot of things that are said like, oh, this technology, you know, has no barriers. Women just aren't interested. And it's like, oh, wow, like, really you don't recognize the barriers? Like, you think that this is a true meritocracy here. So anyway, but, you know, I do think that things are changing. It's just, as our panel has said, that a conscious approach helps a lot.

And I think, you know, a lot of great ideas were discussed here. and I think that hopefully we'll see more implementation and change. Laura, can I say one thing for 10 seconds? Yes. Literally. I know we have to wrap up. I know. We have to wrap up.

So, look, if I want to leave you with anything, and I think if any of us want to leave you with anything here, it would be that a decentralized web is a democratized web. A democracy requires eternal vigilance. And so you have to take your attention off the distractions and on to your own self-sovereignty. If you're going to make this work, because it doesn't work without you, We're just people who help fund this stuff or people who help build this stuff. But really, it's about people like yourselves.

And if, as a whole, we're going to let distraction rule us and put our attention into things that don't matter, then that's what we're going to get as a people. So where we point our attention is what we're going to get out of it. That's all I have to say. You're here. Great. Excellent last words. All right.

Thank you all so much for attending this panel. Thanks for tuning in to this week's news. recap. First headline. Move over China, the U.S. now leads the way in BTC hash rate. According to the University of Cambridge, the United States now accounts for more of Bitcoin's hash rate than any other country in the world. As of August 2021, more than one-third, 35.4% of Bitcoin's hash rate, which is a measure of the computing power securing the network, was located in the United States. The figure marks a drastic shift in mining power. Last summer, the U.S. only accounted for four point. of the hash rate and for 21.8% in May of this year. Following behind the U.S. in terms of

hash rate was Kazakhstan at 18.1%, Russia at 11.2%, and Canada at 9.6%. No other country currently houses more than 5% of Bitcoin's hash rate. Just like the U.S., Kazakhstan, Russia, and Canada have each seen their share of the global hash rate increase over the past year. This upward trend in global hash rate for these countries coincides with an equally severe decrease in hash rate for China, which began cracking down on cryptocurrency mining in earnest earlier this year. Data from Cambridge recorded precisely 0% of Bitcoin's hash rate coming from China in July of 2021, marking an abrupt about-face for a country that used to be a mining powerhouse. For context, in August of 2020, China miners made up 67.1% of Bitcoin's hash rate. As recently as May of 2021,

China is still accounted for 34.3%. Michelle Rauch's digital assets lead at the Cambridge Center for Alternative Finance believes that the shift in power away from China is a positive development for the health of Bitcoin's network. The effect of the Chinese crackdown is an increased geographic distribution of hash rate across the world, which can be considered a positive development for network security and the decentralized principles of Bitcoin, Rausch wrote. Stripes reentry to Bitcoin starts with engineers. Stripes beginning to assemble a team of crypto engineers to navigate the payment company's journey into Web 3.

Guillame Poncine, the former head of engineering for banking and financial products at Stripe, will be heading the team. The engineers will be joining a brand new team at Stripe and will, quote, design and build the core components that we need to support crypto use cases, as the job description states. Poncine says he is looking for engineers and designers to build the future of Web3 payments. The job posts do not specify which cryptocurrency stripe will be working on or what aspects of blockchain technology strike will be attempting to leverage. A coin desk report says that the company, quote, wants to remain tech neutral while building in crypto. And perhaps a hint at where Stripe's focus will be, Stripe CEO John Collison described crypto as, quote, a very exciting tool. in solving the issue of cross-border transactions earlier this year. Notably, this is not the payment company's first time down the crypto rabbit hole.

Stripe was an early supporter of Bitcoin and one of the first major companies to accept the cryptocurrency back in 2014. That being said, Stripe ended its Bitcoin program in 2018, saying that customer demand was not there for Bitcoin-based payment rails. Centralized exchanges love NFTs. Two of the most popular cryptocurrency exchanges in the U.S. are moving in at NFTs. On Monday, FTCS, the American subsidiary of Sam Bankman-Fries FTX, launched a Salon-based NFT marketplace, dubbed FDX NFTs, the marketplace plans to add support for Ethereum NFTs in the next few weeks.

Unlike decentralized markets, like OpenC or SalonArt, FTX NFT will allow users to purchase NFTs with U.S. dollars via credit card or ACH payments. However, with the ability to pay in cash, becomes the cost of KYC, as all users must undergo know-your-custom-your-customer identity checks to be eligible to trade on the platform. In a similar move, Coinbase, the larger exchange by far in this story, announced a waitlist for Coinbase NFT. Though support for other chains is expected, the new platform will initially only allow users to mint, purchase, and showcase Ethereum-based NFTs.

Interestingly, a Coinbase will be using self-custody wallets, so users will not need to go through KYC check to utilize the NFT platform. Coinbase seems bullish on NFTs as an economic force. Quote, our ambition with Coinbase NFT is to allow everyone to benefit from their creative spark to contribute to a future where the creator economy isn't a small subset of the real economy, but a central driver, Coinbase said. According to DeCripps, over 1.4 million users have already signed up for the waitlist, a number that ended up briefly shutting down the site due to heavy traffic.

In related news, Sotheby's is launching a new platform called Sotheby's Metaverse to auction NFTs for Fiat, ETH, BTC, and Stable Coins. Next headline. CryptoMOM wants a crypto safe harbor. Other SAC commissioners disagree. Two commissioners of the Securities and Exchange Commission disagree on crypto regulation. Commissioner Heser Perce, aka Cryptomomom, is widely known. for a more favorable stance toward crypto, and has even proposed that token issuers have a three-year safe harbor period to develop their coins. Commissioner Caroline Crenshaw made waves by saying Perth's safe harbor proposal could

potentially be harmful to the crypto community. She said, quote, had a safe harbor been in place during the initial coin offering or ICO boom of 2017 and 2018, I think the results would have been even worse for investors and the markets. ICOs and other digital asset offerings raised billions from investors, but most never delivered on their promises. Commissioner Perse, for her part, continues to take the SEC to task, as she did in this speech at the Texas Blockchain Summit on October 8th. Regarding the prevailing attitude inside the SEC that digital assets already have legal clarity, Perce said, quote, the idea that there is legal clarity as to when crypto assets are securities must come as a surprise to the lawyers advising

crypto projects that have struggled with this issue for years. On the recent trend of Americans being geoblocked from airdrops due to regulatory uncertainty, Peres added, quote, widespread geo-blocking of Americans should concern American regulators, even if it does lighten their regulatory load. Take a look at Twitter after one of these airdrops. The SEC is not being thanked. And finally, after lamenting over the jurisdictional jockeying between regulators, Pursk turned to staple coins saying, quote, I believe that we must take strong account of the potential benefits of stablecoins, including the possibility that a U.S. dollar stable coin might support the role of the dollar in the global economy. To wrap up our thoughts, Peres took to Twitter, writing, quote,

if government wants to bring law to crypto, it should behave lawfully. In related news, White House Moles Executive Order for Crypto Oversight. Bloomberg reports that the Biden administration is weighing an executive order on cryptocurrency. The order would task federal agencies to study the crypto industry and offer recommendations regarding financial regulation, innovation, and national security. The executive order is still under consideration, but the administration will soon announce its strategy for cryptocurrencies, according to Bloomberg's sources, who are described as being familiar with the matter. Speaking of crypto oversight, three separate crypto entities unveiled proposals for regulation. Coinbase published a piece titled,

digital asset policy proposal, safeguarding America's financial leadership. A16C unveiled an agenda for the future of the internet. And FTX announced its own set of policy goals for crypto market regulation. Clearly, the topic is on the mind of many people. Time for fun bits. Bitcoin is worthless, according to JPM CEO J.B. Diamond. Bitcoin is. trading above $50,000 and has a market capitalization of over $1 trillion. However, according to J.B. Morgan's CEO, Jamie Diamond, the emperor of cryptocurrency has no value. Quote, I personally think that Bitcoin is worthless, said Diamond during an Institute of International Finance event on Monday. Diamond's words were on brand. The billionaire CEO has spoken out against Bitcoin numerous times, dating back to

2015 when Bitcoin was priced at $400. Diamond went on. to clarify that his negative stance on Bitcoin does not affect J.P. Morgan. Quote, our clients are adults. They disagree. That's what makes markets. So if they want to have access to buy yourself Bitcoin, we can't custody it, but we can give them legitimate, as clean as possible, access, concluded Diamond. Funnly enough, just at publishing time, Morgan Stanley CEO, James Gorman, said on the bank's third quarter earnings call, quote, I don't think crypto's a fad. I don't think it's going away. All right. Thanks for tuning in. to learn more about all of our speakers and unfinished live, 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 Ness. Thanks for listening.