Unchained - Why Chatroulette Founder Andrey Ternovskiy Fell in Love With Crypto - Ep.327

Starting point is 00:00:00 Hi, all, I had a really wonderful first official book reading here in New York at The Strand. It was totally sold out and people were even being turned away at the door. We will try to do another reading somewhere in New York for those of you who couldn't make it. It was a blast meeting so many of you. Thanks to those of you who came and asked such engaging questions. Thanks also to Christine Lee of Coindesk who did a fantastic job moderating. There are a few more in-person events that I'll be doing in case you want to get your book signed or just say hello.

Starting point is 00:00:37 For folks in the Bay Area, on Tuesday, March 8th, I'll be doing a reading and signing at San Francisco's Commonwealth Club, moderated by the information's Kate Clark. Doors open at 5.15 p.m., the program begins at 6 p.m., and the book signing is at 7 p.m. For people in Seattle, I'll be doing a reading and signing as part of Town Hallsend. Seattle on March 9th at 7.30 p.m. at the forum, moderated by Steve Scherer of Town Hall, Seattle. Check out the show notes to buy tickets to both of these events. And I may also be at South by Southwest on March 12th. Details still TBD. And I might also be in Boston at Harvard the weekend of March 26th. No promises on either score, but I guess if you feel strongly about either way,

Starting point is 00:01:29 one, you can tweet at me, as that might tip the scales. On April 5th, I will be in Miami doing a reading, and on April 9th, I'll be in Annapolis at the Annapolis Book Festival. Finally, on March 23rd, I'll be doing a virtual reading with Powell's bookstore at 8 p.m. Eastern, 5 p.m. Pacific, and Jeff Roberts, executive editor of DeCript, and author of Kings of Crypto, will be moderating. Thanks again for attending if you came to New York, and if you want to come to the San Francisco or Seattle events, you can check out the show notes for tickets. And now, on to the show. Hi, everyone. Welcome to Unchained. You're a no-high resource for all things crypto. I'm your host, Laura Shin, author of The Cryptopians. I started covering crypto six years ago, and as a senior editor at Forbes,

Starting point is 00:02:26 was the first Main Tree Media Reporter to cover cryptocurrency full-time. This is the March 8th, 2022 episode of Unchained. Buy, earn, and spend crypto on the Crypto.com app. New users can enjoy zero credit card fees on crypto purchases in the first 30 days. Download the Crypto.com app and get $25 with the code, Laura. Link in the description. This episode of Unchained is brought to you by Beefy Finance, the multi-chain yield optimizer.

Starting point is 00:02:58 Beefy is the easiest way to earn more from your crypto. Deposit funds into Beefy's secure vaults to auto-compound yield across 12 blockchains. Got crypto? Choose Beefy. Welcome to a new world of crypto-friendly banking with Cross River Bank. Request your Fiat-on-OffRamp solution now at crossriver.com slash crypto. Today's guest is Andre Ternofsky. founder of Chat Roulette. Welcome, Andre.

Starting point is 00:03:28 Hello. For people who haven't read my book, it may come as a surprise that Andre has any involvement in crypto at all, but a quick heads up for listeners who are worried about spoilers, we won't give away too much that's in the book. For those of you who have read it

Starting point is 00:03:44 and want to discuss the parts that involve Andre, I will be doing book clubs where you can discuss the book with other people who've read it, so nobody has to worry about spoilers. So Andre, before we discuss crypto, why don't you tell us your background. How did you come to found chat roulette? I was a typical gig, like many kids playing with computers, but it was a pure chance that I put something together that went viral.

Starting point is 00:04:13 Many projects tried to do the same, but they're not succeeding because it's a bit like lottery. And I was just on the receiving end of that luck. So made that website, went viral, got a lot of attention from people, from society, from mass media, from the venture capital. That was 12 years ago. During the course of development, developing this project, I kind of run into similar problems that many digital entrepreneurs are experiencing, running into, such as, working with PayPal. One of the issues when you work with PayPal

Starting point is 00:04:56 is that because it's such a strong monopoly, you are always you're very dependent on them and you're in, for instance, if they ask you something and they don't like the answer, you have no recourse

Starting point is 00:05:10 and they might block your account and it's kind of funny how private company can have such a power that you actually beg them to bank you. And that's actually a pattern which I frequently experienced that actually people want banks to bank them.

Starting point is 00:05:24 Like they're begging and the banks say no. That's like completely twisted logic, right? It's not like free market. That's actually what I see. People want. I mean, there's two types of people. I mean, one is, of course, where the banks are running after them. And then there is one where they're trying to get a bank

Starting point is 00:05:44 that will open a bank account. And I mean, that's certainly a case for Russians today. But in general was always the case for, anybody who wanted to do international, well, maybe not always the case, but at least in the last 10 years, it was always a challenge to try to get the banks to explain,

Starting point is 00:06:03 like why is this like Russian kid wants to open a business bank account here? Wait, so even with the popularity of Chatrelet, they didn't want it. Even with the popularity of Chaturlade, because people in the bank, they don't always Google, you know. I mean, for them,

Starting point is 00:06:20 It's just like bureaucrats. If you run into somebody who knows chat roulette, then it's easier. If somebody doesn't, then you get the full array of questioning. So you couldn't add PayPal to chat roulette? No, I could. I could, but I just saw all this bureaucracy and et cetera. It's a bit known story. There is a seven website called PayPalSucks.com,

Starting point is 00:06:48 where people are, People are complaining that PayPal freeze their account, block their account. It never happened to me. Anyway, so it's all like this digital payments. It's just, you know, every aspect of it is so messed up. Again, I saw it as a merchant. I think that's like the angle that public doesn't know because the public sees it from the perspective of the end user and they may be pen.

Starting point is 00:07:15 End users actually don't really see the whole value of crypto. But the merchant side, the merchant side is paying out of fees, he has to deal with his middleman. I mean, nobody likes middleman, you know. So I think it's kind of natural instinct when you see crypto. You have a lot less dependencies. And I mean, one of the reasons for being an entrepreneur in the first place is to be free, right?

Starting point is 00:07:38 To not be a wage slave. And then if you made it, but then you're still kind of, you're still accountable to a private company. or like a bunch of private companies, it's a bit like a shadow justice system, right? Because the companies get to decide and it doesn't go through like proper due process. So I don't know if I fully understand. So you were able to add PayPal to chat roulette. Yes, I was. I was.

Starting point is 00:08:05 But you acted as if you couldn't or something. I was, but I just know how difficult it is and how tense it is to accept payments. and they are always very touchy about it, you know. And they ask a lot of questions, and you never know that if it will work tomorrow. You know, that's kind of the thing. And one other thing I wanted to ask you about was, I mean, you were just a teenager.

Starting point is 00:08:32 So I don't know, I'm assuming maybe, you know, you didn't come from a wealthy background, but after you created chat roulette, I imagine that your life changed on that score. So can you just talk a little bit about that? Yeah, for sure, I mean, that was something. I mean, yes, definitely came from like a normal family, maybe on the upper end of normal

Starting point is 00:08:57 because my parents were working in university and that's, well, that makes a big difference, of course, in terms of how you grow up. But in terms of finances, well, I was actually, I was feeling like a bit like rich kid. But I mean, what means rich in Russia is different. and then one means reach here. Like, you know, I still had to do like all the other kids, like, save up two years for a new phone and just all this typical things, you know.

Starting point is 00:09:28 And I was living in the same, exactly the same, like typical, like a commie block apartment. I mean, again, I, maybe my classmates had like a computer that was 10 year old. I had five-year-old computer, you know. I had the latest video card. They had one before or like, you know, things like that. But actually, I was the first one who had a computer in my class. I mean, actually, for the first five, for the first like five, six years of my school, I was like one of the only kids who had a computer.

Starting point is 00:10:02 And of course, that was also creating, like, traumatizing me socially. Because just imagine the distance. I mean, it's like people who don't have a computer, they live completely. different life. Just imagine that someone who is socializing every day on the street and you're sitting like a dork, you grow into different directions cognitively. So after you found a chat roulette, how did you get into crypto? I saw the problem of middlemen of just this impossible problems. you have a monopoly the monopoly

Starting point is 00:10:41 is not even efficient because it's again it's because it's rich so they don't need to optimize everything Monopoly doesn't care about small players all sorts of reasons

Starting point is 00:10:54 monopoly and I'm not even talking about like monopoly abusing this power right I'm just even on the efficiency level you will expect from monopoly something like that it would not work on the weekends you know, or it will work only two hours a day. Like if you try to go to embassy,

Starting point is 00:11:13 embassies work like two hours a day once a week. Look, for instance, like App Store on the phone. It's a brilliant idea to have an app store, really. It's one place where all the apps are. And it has like all this moderation and reviews. What users want? And it's secure because apps don't get from outside. But again, in practice,

Starting point is 00:11:36 It's a bit like dystopian, what happens. Because in the end, then the big one company, private company, starts to get all this power. They send their apps that compete with their own apps, they start to say, okay, if you take payments, you should give us a cut. So then at some point you must have heard about Bitcoin or something? Is that? Yeah, I, yes.

Starting point is 00:11:58 Was it like 2011 or 2012? I don't remember, but I think it was maybe 13. Actually, I heard later than. others. Like when the price went to 1,000? Probably, yes. And I mean, I bought after the first bubble collapsed. And so did you become interested in it right away because of this experience that you had? No, not really. Not really. You know, like Russians are skeptical of crypto. Because we had in 90s experienced a series of Ponzi schemes and just all these high yield investment schemes. And it's just in general, like, I mean, this was like a value that was taught in my family that you should do

Starting point is 00:12:39 useful things for others, you know? Don't think that you can buy some coin or a stock and get rich because, I mean, even mathematically, that doesn't work, right? Because if everybody would do that, how would the world work, right? I mean, you know, it's what it's a concept. Only the things that are right are the ones that would be valid if it would become universal law. Like, you cannot say, as a strategy, buy coins to get rich, because the strategy doesn't work for others, for everybody. It's a lot of it. But it's also interesting how in the professional, well, it's not professional, but in all these investment books that you get from Amazon, it was always saying the opposite. Like it would say, do not think you can beat the market. Because if it's,

Starting point is 00:13:26 everything is already priced in. So basically, be a good boy and, you know, just buy into a fund, a diversified fund and you pay less list fees and you're diversified. And again, if you think you can beat the market, you are under some kind of cognitive bias because more than half of the

Starting point is 00:13:46 drivers think they are better than other drivers. You read these books and you stop believing that you in yourself. That's kind of funny. In crypto, I think the people who made it big, you're either too ignorant of what a professional advice is or because they had like the balls to read this and say,

Starting point is 00:14:06 you know what? I disagree with this. I am actually smart than others. Right, right. I've written things saying that, yeah, you should just buy an index fund and et cetera, et cetera. But so then how long, after you found out of it, Bitcoin, how long did it take you to decide to buy some?

Starting point is 00:14:21 I don't know. I was, it's slowly, I mean, again, first I had this reaction because it was like, it's unsustainable. You cannot have an asset that grows. fundamentally as an activity. I mean, if I have a real job, why do I need to gamble? And to be honest, this is something I think even today

Starting point is 00:14:39 that if you have your own business, that's where you should invest. And not crypto. Because if you have your own business, you have an edge. You have a private information and you have, you're not dependent on others. So you become the master of your own destiny.

Starting point is 00:14:57 And when you touch the markets, you just cannot control. all how other people behave. But then it's actually more complicated, of course, because crypto becomes a bit like hedge that everything else screws up, right? So it's more complicated. Anyhow, I slowly progressed in me,

Starting point is 00:15:16 and I would say one of the strong statements in crypto. Again, for me, I feel like I was always not taken seriously because I was always somehow not right, you know? either like, I'm somehow kind of, as you wrote, and I'm not perceived as someone serious. And, you know, like there's like two types of people. The ones who have like a hollow effect and they get like the benefit of the doubt, I was the opposite.

Starting point is 00:15:45 And what I like about crypto is that crypto just doesn't care. It doesn't care how eloquent you speak, who you know, what kind of credentials you have. You have private key for tech people. it's perfect because it's like it's ultimate meritocracy. But by the way, tech people hate crypto as well. And because I'm also reading tech forums, I mean, the ones who didn't buy, the no-coiners, they are very salty.

Starting point is 00:16:13 Anyhow, but again, tech people like meritocracy, because tech people can't compete on looks and appearances. Yeah, I'm going to have to disagree with you, but we're going to, we'll talk about that after a quick word from the sponsors who make this show possible. Building the next big thing in crypto, Cross River has your back. Whether you are a crypto exchange, NFT Marketplace, or wallet, Cross River's integrated API-based platform provides the payments solutions you need to grow. Cross River is powering the future of financial services.

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Starting point is 00:18:35 Plus, 100% rebates for your Netflix, Spotify, and Amazon Prime subscriptions, and zero annual fees. Download the crypto.com app and get $25 with the code Laura. Link in the description. Back to my conversation with Andre. So the reason why I disagree with you, and I know you haven't read my whole book, but you've read, you know, the parts that involve you, you are a whale in crypto. And as people will read about it in my book, or maybe they've already read it, whales have a lot of influence. So I wonder, do you think that takes away from crypto's claim to be a democratizing force in finance?

Starting point is 00:19:15 There is the theory and there's a practice, you know? Right, right. But you were saying that it's the ultimate meritocracy. But based on the events that actually happened, I disagree. I was sold on the vision. I was sold on the vision, like on the theory of it, you know. Of course, there is the pure mathematical model and there is reality. And the reality is that it's not a pure meritocracy. This is based on the events that I discovered in my book.

Starting point is 00:19:42 It's oligarchy. It's oligarchy. Yeah, yeah. Now you're backtrack, you're saying different from what you said before. I know, I would say the truth is always in the middle, right? So it's, or maybe it's not, which is also a policy. But I would say, again, this was the vision that I was sold into. I bought into, and I think that's the vision many other people are buying.

Starting point is 00:20:07 But of course, the more time you spend into it, the more you understand how things are more difficult than your region that you perceive them. To me, it looks like exchanges treat whales like you very well. I mean, do you think that everyday users of exchanges get the kind of treatment that you get? It's complicated. Like I say, it's on a case-to-case basis. You know, also, I think in general, crypto isn't like one thing. It's many different ideas which are organized.

Starting point is 00:20:36 You know, I mean, I guess dismalization is one thing. But, for instance, BitTorrent was also decentralized, you know. I mean, crypto as in that the cryptography is used. Okay, that also exists. But then you also always had this PGP. You had the before, way before, PGP corporation, probably the inventor of Bitcoin was employ number two.

Starting point is 00:20:58 You know, Halfini. Yeah, because PGP Corporation, I mean, it's used to never I mean, again, this was a thing before crypto. I think every browser has this like support for PGP and it's like a de facto standard for communicating encrypted messages over internet with public key crypto. I mean, in particular PGP, And Hal Fini was employee number two.

Starting point is 00:21:25 I mean, you know, so I take that pretty seriously. And I mean, so anyways, so you have this crypto punks. So you have decentralization. You have crypto punks. And crypto isn't about blockchain. Crypto is about usage of cryptography. Right. Safer punks.

Starting point is 00:21:42 Cryptopunks, the NFTs are different from safer puns. Yeah, safe place, yes. Again, then of course you have things like proof of work. And proof of work was also, it's like also independent strength, because originally designed to combat the problem of spam. Yeah. It's from the 90s, 1993, yeah. I guess the ledger is the one is the breakthrough, right?

Starting point is 00:22:05 The blockchain, the one that united at all. So I would say, yeah, probably blockchain is the big concept, but also blockchain can mean many different things. You know, they also say that technology is neutral, right? It depends how you use it. Right, right, right. But that's what I'm saying, that with this, I don't know, I definitely think after writing my book, I have a much greater awareness of just how much influence whales have.

Starting point is 00:22:33 That's only one factor out of many, you know, the whales. I would say it's, I mean, it also depends what is your criteria of success. What is the goal? I mean, this is all very complicated. Like you have an artifact, which is this invention, but you have to separate what is being promised and who is promising what? because that's also what people say. Ask me, people ask me, well, isn't it a bubble?

Starting point is 00:22:56 Isn't it like a Ponzi scheme? I'm saying, no, it's not a Poncer scheme. It's a bubble. Because the Ponza scheme, you have, you're promised something. In crypto, you're promised nothing. So, like, nobody's promising you anything in crypto, you know? So I also have to separate that. Like, it's just the blockchain.

Starting point is 00:23:13 It's what you make of it, you know. Yeah, but like I said, I do think if you have a lot of coins, you get treated differently. Yeah, yeah. But you know, I think it's a bit like constitutional monarchy. So yes, you are treated differently, but there is still some framework around. So that like the average guy, average Joe has a chance. I'm sorry, you called it constitutional anarchy? Constitutional monarchy.

Starting point is 00:23:37 But constitutional monarchy is also funny, but constitutional monarchy, you know, which is like you have essentially a person who has a lot of power, but there is still some constitution that puts some boundaries on this power. and also gives an average person some kind of chance. Okay, yeah, oligarchy, I guess, because there's multiple power players, not a single one. Again, I say it's about boundaries, that you have these people who have tremendous amount of power,

Starting point is 00:24:07 but still an average jaw still has a chance. He can still buy his shit coin, and he has a chance to make it big. In the real world, we don't have that, because you know the investor protection. Yeah. Okay, I do agree. I do agree on some level with what you said.

Starting point is 00:24:29 So we've just talked a little bit about Bitcoin, but what's your take on Ethereum? What do you think of it and how do you hear about it and get interested? Well, I fell in love. I mean, I moved to Zook. Then after I moved to Zook. And why Zook? It's really the most logical choice.

Starting point is 00:24:47 Just for tax reasons? to minimize your taxes? In Europe, you don't live in Europe, and it's not from outside obvious, but Europe is very socialist, and it has extremely high taxation rate. I mean, so most of the countries, when you're in the upper tax bracket,

Starting point is 00:25:08 there is minimum 50% of income tax that you have to pay. So you can look at Scandinavia, beautiful countries, but if you move here, you will pay 60% of your income will go to the budget, to the state. I mean, that's how they make the country's beautiful. You pay Thai taxes and then you get the beautiful country. Yes, so in whole Europe, there is only limited countries

Starting point is 00:25:34 which you would move to if you want to pay a reasonable amount of tax. Really, very few. It's like Monaco, Liechtenstein, Andorra, maybe you can work out some non-domincile agreement in UK, but it's like, it's really like UK, Switzerland, again, you just have really few countries and even within these countries is only very few places you can move to. Because for instance, in Switzerland, you also have different countries, different taxes depending on the Canton. Zurich, for instance, it has a 39% income tax.

Starting point is 00:26:10 Zuck has 22. So if you just run this like algorithm, find the cheapest taxes. arrived to Zook. Okay. So you moved there in 2016, I believe. And then afterward, you found out about Ethereum. How did you hear about it? And what were your thoughts about it? I heard about it. I think from Wikipedia, I searched Duke. And by the time, they already moved out of Zook. I mean, obviously, it was no-brainer. It was everything that Bitcoin had, but better. Because you can, I felt actually, I was mistakenly thinking that on Ethereum, you could like a proper decentralized apps, like decentralized websites like chaturlid.

Starting point is 00:26:52 I was thinking that Bitcoin is just is decentralized money sending and Ethereum is like decentralized platform for any apps. So you could like make it like a Reddit on it or something. And I actually that was I invested based on that idea, but actually it's not true. And we all know, you know, it's the practical limitations, the fees, the throughput. Well, the fact that it's so open is good, but also makes it, create some challenges to make an app like chat roulette. Anyhow, I was thinking this is like a decentralized cloud. You put your app and nobody can stop it, stop it. It was in that direction, but it was a subset of features, but actually quite like crucial features.

Starting point is 00:27:40 What we see now, we have this ideas coming. but they all come as a separate project. Probably the future of blockchain since kind of silly. But it's like where you could put images and stuff, you know? Not just the code for the financial transactions.

Starting point is 00:27:59 And of course, like their experience, people will disagree with me because they will say, well, you have IPFEST for it. I'm not going to get into that. One thing, I do describe in the book, your involvement in the Dow. And I've seen people talking about it on Twitter. And obviously we promised we wouldn't divulge any of that.

Starting point is 00:28:21 So people who haven't read the book won't have it spoiled for them. But I was curious, you know, you did not reveal your role in that for many years. So then why did you decide to talk to me and and reveal that in the book? Because you asked. Because nobody asked. Oh, really? There were no other journalists that ever asked. you? No. No. Oh, okay, because I don't know if you remember that I... Because I didn't have the

Starting point is 00:28:48 contact. Well, but do you remember that I initially was contacting you on Signal? Yes. Yeah, and but I can't remember how long I did that. That was for months and you kind of just were being cagey. So it's, it felt like you were on the fence. Well, that is also true. But I mean, it's like, it was an intuitive decision. I didn't want to push it, you know, because you were, you were very mild and your initial request. And the second time around, you were more insistent and you had more details. Because initially it was like cold call, cold mail.

Starting point is 00:29:24 And then after that, you already were like, these people and that people. And, you know, I felt that it would be a shame if you only have bits of the story. Because, I mean, at the end of the day, I wanted to help you, I guess. Why not? And I mean, I'm, I'm, I mean, it's all interesting guy from like, from history,

Starting point is 00:29:47 his, historiography perspective. I mean, it's all, like, life is a case study, you know. There are the facts, but then there is the analysis of the facts. And there is the experience. So I like to talk about, I like to reflect on the metal level about things. Because, like, otherwise, what's the point of life, you know? If you just, like, solve problems one by one, but you don't. stop and think back. That's kind of boring. So anyhow. No, I think what you did is great because

Starting point is 00:30:20 not, you're right. I personally think that the historical record is important. So for people just to know what are the basic facts. But then at the end, we also have your reflection about it. And, you know, that was interesting to me to see your arc as a person, even with the kind of small role that you had in the book. You know, you've changed by the end. which is fascinating. People can read about it, but I definitely think it's one of the most interesting storylines in the book. And I really have to thank you for sharing it,

Starting point is 00:30:52 because I just feel that, you know, the understanding of what happened at that time would not be complete without that story. And I love it that you also reflected on why you did those things, and it showed, you know, how much you had changed as a person in that time. How do I carefully describe it? without giving the spoilers.

Starting point is 00:31:15 Well, I think what you said about how you had been kind of a troll and immature and then later you. You know, I would say there is, I would say there are layers to this. I mean, that's like one dimension that I thought it was funny all these games with the... It was funny to see and play in all these games around this Dowo, White Hat, Black Hat.

Starting point is 00:31:38 And I feel like I don't regret that, you know. I feel that's, yeah, it was like living in a movie, you know. I mean, I do see some other people are a bit more tense and took it more seriously than I did. I mean, particularly like a white hat group because they felt the pressure of all these fans on their shoulders. But it's also like a mindset, you know, because that's one view. But another view, like, holy shit.

Starting point is 00:32:09 Like we are now playing with millions and we are now like on the forefront of innovations and yesterday we were nobody and now we are like rescuing the community I mean holy shit that's amazing I mean what else can you ask for

Starting point is 00:32:23 like that's highlight of your life in a way you know but I think there is different mentalities because as you can tell I am more like I'm more treating it in a way that I treat more like life as a game more like in an abstract way

Starting point is 00:32:37 and some other people, they get really serious about things, you know. Yeah, but also you, and you also said that some of it for you was an intellectual exercise, which I also think is a good point and really interesting. Academic, academic, yes. And I would just say to give more nuance. I don't, look, I think, I think if we said A, we should say, we should just say B, especially to the readers that watch this after reading the book, right? Because let me just describe it in my own words.

Starting point is 00:33:06 Wait, so are you going to spoil? Because if you are, then we should tell people that if they haven't read the book, then maybe they want to do that before they finish. I just find my commentary to be a bit out of context. Let me try to give the commentary to people who read the book without giving the spoilers. Okay, let's continue that. Again, I think that there is like, basically, again, there is a lot of layers here. For instance, one aspect of it.

Starting point is 00:33:32 Let me just talk about, like, Dow. Again, as a spoiler, I was not the hacker, right? So did not hack anybody. But I, for instance, I don't think that hacker is a bad person. Yeah, did you read my article about who I? Yes, yes, yes. Well, yes, okay. Well, whether he's a good or bad person is a super topic.

Starting point is 00:33:51 I don't know him. Personally, I noticed that his project went from like billion to seven million. So probably that's maybe even worse than what he has done in Tao. So that's maybe like... Yeah, I think it was more like $535 million to... Yeah. Yeah. But imagine how many people bought into it.

Starting point is 00:34:13 So like, you know, the karma came back there now through you. So it's not the initial hack. It's the ICO. I would find even more concerning. But the initial hack I actually think was brilliant. I believe that the whole idea of smart contracts is that we don't want to use private company because we don't trust humans, so we want to use algorithms because they're better than humans. And then someone finds the flow in this algorithm and people lose the money.

Starting point is 00:34:49 Yeah. But, you know, if people didn't want to do that, they should have just went to the, I don't know, Wells Fargo. I mean, I just fundamentally don't agree to the people with people that would think that hacking smart contracts is in any way unethical. I mean, wow. It's like, it's a strong word. It's maybe it's maybe an ethical. Yes, it's an ethical. It's unethical. But it's not, it's not, it's not like illegal, you know. It's it shouldn't be illegal. Like, you know, like if you hack a smart contract, I would say don't take 100%, you know, take 10%. Okay. Yeah. I mean, well, in this case, they took 31%. Yes. And that was maybe a bit more

Starting point is 00:35:33 than they should have. If they would have taken 10 or 20, they would have been no hard fork. But wait, but wait, because in crypto all the time, there are researchers who find flaws. And instead of taking the money, what they do is they fork the code to, you know, a safer version and then rescue the money. And so, but you think that they should instead just hack it and only take 10%? Is that what you're saying? Well, look, everybody has different reasons for doing things, you know? you have to separate as well that if people perceive that there is criminal liability and they want to sleep well at night, that's one aspect.

Starting point is 00:36:13 They just want to have simple life. And I mean, I can say if I would to find an exploit, I would definitely today not exploited. So you would tell the developers and try to fork it to something. Okay, but you just said that you would, or that you think it's okay if people take 10%. it's more complicated. Like for me personally, I want to be like in harmony with society, with government,

Starting point is 00:36:40 because I want to sleep well at night. I don't want to have anything to hide. I don't want to, you know, I want to be free. You want to pay your low taxes. Yes. Like now, you know, I'm free. So I want freedom.

Starting point is 00:36:54 And because I'm like, I'm already rich. Why should I have more problems, you know? But again, for someone else, the calculus might be different. But I would still. separated from the person on the personal level. Honestly, if I lose money, I would probably also seek legal recourse for of because I can because government is also a system. Right, which which people will read. You definitely seem to like doing that. Like I know this

Starting point is 00:37:21 maybe is going to veer off the topic a little bit, but I am curious because right now you are in Russia and it has this conflict with Ukraine and we've seen crypto being used in this historic way in this conflict. And, well, I don't know. I mean, you texted me. I don't know if I can say this that you're trying to leave Russia. I'm just curious what your thoughts are. Yes. I think it's almost unethical to not talk about it today because there is something happening a lot more important than Tao in the short term. It's a mass murder, you know? Now it's like, really it's, there is darkness, there is mass murder and there is no way back. You know, when the first hundred people kill, are killed, there is no way back. Yes, it's basically, it's shocking. Personally, I'm blessed

Starting point is 00:38:11 to not be affected. So I cannot fully, even fully emphasize with the people that are, that maybe have somebody injury or have their relatives. It's, I mean, health, health is, is, is the, is the biggest wealth you can have, right? So, and now these people, uh, are, and now these people, risk. But as you're watching crypto being used here in this way, what are your thoughts? Well, fantastic, fantastic. I mean, crowdfunded war. Well, like, you know, the water finds a way, right? So innovations, they trickle down whenever they need it. I would say probably Russia should, if Ukraine added this donation wallet, Russia can do the same. And I would not be surprised if some people donate to Russia as well.

Starting point is 00:39:04 And then we will have like two wars, two sides, crowdfunding war from both sides. Yeah, I'm surprised Russia hasn't. I mean, I don't think they would get much in donations. Maybe that's why they haven't. I did want to ask you, you know, obviously you have been very engaged in crypto, even if people didn't know it until now.

Starting point is 00:39:23 Do you have any plans to launch anything in crypto or do anything entrepreneurial in it? Can I just finish to the crypto topic? with the war because I think the initial idea was to talk about the crypto aspect of it. Because now we have sanctions. I think that's an interesting topic. More like less controversial. Where Russia is being sanctioned now and crypto de facto today becomes, I mean this is like a no-brainer.

Starting point is 00:39:50 But I have employees in Russia and I was just told by the bank that the bank, that the bank cannot send any further transfers to Russia. So it means I cannot pay my employees. And it seems like the only way is to use crypto. So at least on my personal level, it's happening from the every direction. Russia is blocking outside transfers to preserve the foreign capital inside the country. So if you want to make transfers into Russia or outside of Russia, crypto already becomes probably if not already, it will become one of the only options. So I could expect a demand for crypto to go up. From Russia, from Ukraine, and you know already Ukrainians and Russians have 11, 12%.

Starting point is 00:40:44 I read somewhere a study that 10% of Russians have crypto and seem in Ukraine. And again, especially now with all this political instability, there is a strong case for crypto. So, you know, it's like gold went up 6% in the last month. And gold is a very big market. So 6% is a lot. Again, for sanctions, for the reasons of sanctions, for the reason of political instability, there is a strong case for crypto, even stronger than the case during the COVID. Because in COVID, people were also fearing the end of the world.

Starting point is 00:41:24 So this is a similar situation now. So does this inspire you to try to launch anything in crypto? There are some people who think that decentralizing chaturlet could be interesting. I think that chaturates can be decentralized because just this model of peer-to-peer connections essentially already decentralized. So it's not that much work. But it's more complicated, you know, because for chaturlet, the question is like, why do people need decentralized chaturlilet?

Starting point is 00:41:52 What problem are we solving? So it's because look, do you want to meet people or do you want to meet people in decentralized way? You know, so it's, there is more complicated case for why to do that. Because when you decentralize a project, you don't just offer decentralization to your end users. You're also creating a DAO. And in DAO, you can let your users own a piece of the platform. you can also source talent and you can compensate the talent. And as I was told, there are many people today

Starting point is 00:42:29 that would actually not like to work for a traditional company anymore and they would prefer to work for a DAO. So if you want to tap into this kind of pool, into this kind of talent pool, it seems you might consider the centralized project just for that. But it's a big decision because Chatterlette unlike other some other projects already exists and already has real users and I don't need to make like a white paper and push some shit coin actually for me I'm thinking in

Starting point is 00:43:03 terms of the what value it brings to the end user you know and it's kind of decentralization is you have to pay tax for it because look at China China is very centralized and that's why it has some efficiencies which Democratic countries don't. Because for a decision to be taken in a democratic country, it has to go through multiple layers of approval. If you look at how projects are built, there is actually a lot of centralization built in to them in the backdoor.

Starting point is 00:43:36 Like DeFi projects, like compound finance, the operator has a backdoor to make a change inside. Oh, even now? Now, I don't know, but it used to. to have. And I wouldn't be surprised if they don't, because if you remove a backdoor, it's very, very dangerous. It's, you know, you want to have a backdoor. What we learned from Dow is that there's always an illusion that if things work today, that they will work tomorrow. But it's amazing when you have a complicated system that there always comes up each cases, which you could not have thought up in advance.

Starting point is 00:44:19 And actually there is a theory behind it, right? It's called halting theory that there is certain properties of the program which you cannot predict up front without executing the program. Because of the loops. So if you don't have loops, just like one direction,

Starting point is 00:44:38 you can kind of like do static analysis. You can see all the states that can happen during the execution of the program. But if you have, loops, it becomes what mathematicians call a weak-formed problem. You cannot compute

Starting point is 00:44:55 that if you have loops. Okay. Because you don't know if the loop was taken or not. Long story short, you need a backdoor. And I think also on the government level, you need a backdoor that you can have a bureaucracy, but you

Starting point is 00:45:11 need also a backdoor where like an individual can intervene if you can see something going wrong. And that's we have in Europe, we have a constitutional monarchy where monarchs have a veto power. Like they don't have any other powers

Starting point is 00:45:27 except the veto power. So that's just like back door is. I would make I would suggest to do the same for projects like, look, I think the goal is not complete decentralization from the day one. You know, leave humans. Yeah. You know like it's called mechanical Turk.

Starting point is 00:45:44 Right. Where you put humans in kind of certain stages. You put humans, but you put like a boundary around them. So you can say, okay, here we need a human confirmation and here is like the public key of this person who should confirm. And if we're not happy with this person, we should vote and put someone else's private key, private public key. Anyway, sorry, I'm not, I'm going too technical. But I do some of the projects that I think they've started that way, but then obviously because of, in the US, you know, the SEC would come after.

Starting point is 00:46:19 you if you're too centralized. So I think over time they try to shift away from that. They're centralized, but they're hiding it. Or they decentralize over time. They start decentralized and then they shift. And I mean like look, look, the thing is there is lots of interesting problems around Daos that people don't understand upfront. For instance, one of, for me, one of the first learnings was that Dao is not just to ask all the people for the vote. and then 51% decides what is right. Vitelek talks about that. But even in the real world,

Starting point is 00:46:58 if you would run the companies like this, what would happen is that 51% of the shareholders would say, look, this 49% of the shareholders didn't attend this meeting, we are here. So let's strike them off. In terms of the majority is correct, right? Majority is right, but is it fair? no. And that is why in the traditional corporate law, we have minority protection. And then

Starting point is 00:47:22 another problem is insider trading. You also, in traditional world, you cannot announce something that you cannot sell your shares, then say, okay, you know what, we have some big problems. Then the price dumps and you say, oh, you know what, never mind, and you buy them back cheap. because there are inside the trading law. In Dao, there are no protection. So there is lots of things like this. And I would say it's layers of layers of security and checks and balances and redundancies.

Starting point is 00:47:57 Because look, for instance, Russia is being attacked. There's not a democracy. But what we forget is that in West, democracies were being evolved for hundreds of years, for centuries. Because essentially, what every government experiences every year is a kind of form of a Dow attack. Because someone finds an edge case in all these regulations and exploits it. And next year, they make like a net hoc patch.

Starting point is 00:48:27 And that's why we have like 100 books of tax code, which is another problem. It has been so great talking to you. Thank you for coming on the show. Thank you for talking to me for my book. I'm very interested for more people to read the book and hear their opinions on what happened. I think I will be doing some book clubs. So maybe what we can do is have you back for one of the book clubs. And then you can talk to people who've read the whole thing.

Starting point is 00:48:52 We can talk freely. No worry about spoilers. And yeah. And so then that will be, then we can get into the details. But thank you so much for coming on Unchained. Thank you. Thanks so much for joining us today to learn more about Andre and my book, The Cryptopians, Idealism, greed, lies, and the making of the first big cryptocurrency craze, check out the show

Starting point is 00:49:13 us for this episode. Unchained is produced by me, Laura Shin, with help from Anthony Yun, Daniel Ness, Mark Murdoch, Shishak, and CLK transcription. Thanks for listening.

Unchained - Why Chatroulette Founder Andrey Ternovskiy Fell in Love With Crypto - Ep.327

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