Crypto ETFs: Trojan Horse or Big Win? - Austin Griffith, Mona El Isa, Peter Van Valkenburgh. Ep. 549

Transcript

crypto is maybe a little less partisan than we were afraid it was becoming and that's a very good thing fit 21 is like reasonable regulation of custodial intermediaries to prevent another FTX from happening I'm actually quite bearish on ETFs like as and I don't think they're necessarily a good thing for in space aggressive clamp down on anything that is sort of privacy enhancing even if the thing that's doing the Privacy enhancing is is immutable software on the ethereum blockchain it didn't make sense to do that when it cost $5 every time you made each interaction with that but now that it costs a fraction of a cent a lot of weird things like that that we weren't even thinking about I think can go on chain anything that needs that kind of

credibly neutral layer can now settle on chain for very cheap this is a very tricky question because it's there's a lot there and it's sort of like you don't need decentralization until you need decentralization I actually don't think it's going to be the values behind what we're building that bring users in I think it's going to be you know depending on the industry content performance uh ux UI this episode is brought to you by nosis nosis builds decentralized infrastructure for the ethereum ecosystem with a rich history dating back to 2015 and products like safe cow swap or nosis chain nosis combines needs driven development with deep technical

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high yield staking to your own customers using their API your assets always remain in your custody so you can have complete Peace of Mind start sing today at chorus. one so we are here at Decon 2024 thank you all for coming to the Decon debrief episode for Etta maybe we can do a very quick round of introductions this guy you may know name is Brian Brian what do you do well aside from being a co-host web Center so main thing I do is I run a company called CH one so we run like staking infrastructure for you know maybe around 60 different networks and uh yeah I'm also on the

deol in Cosmos and then in urbit as well as I'm Board of the urbit foundation and pretty involved in that ecosystem I'm Austin Griffith uh I'm supported by the EF I focus on developer onboarding we have speedrun ethereum.org um I'm Mona um I founded enzyme protocol in 2016 which or was known as melon back then which is the first decentralized Asset Management protocol and I still contribute to enzyme but I now uh Focus most of my time on avanguard finance which is a onchain uh asset manager and uh we also support Dows with treasury

management and advisory and I'm Peter Van valkenberg I've been on episenter a few times lucky and uh I work at coin Center which is a Washington DC based non profit that educates policy makers in Congress and the agencies about cryptocurrencies and advocates for good policies uh that preserve the freedom to innovate since 2014 oh yeah so everyone who's on this panel is a true crypto OG I don't even know who's been in the space longest but I think I'm the earliest probably yeah I think I think like 2017 is when I came in you'll be the latest I guess lat been here for like 10 years plus

yeah it's like ancient oh listen to the old farts talking aboutto yeah now I really came in watching you guys on epicenter it was awesome that's how I learned a lot yeah yeah so maybe let's start with you Peter because there's a lot of things currently happening in the US or it seems like there may be a lot of things happening soon in the US can can you kind of catch us up on that so there's sort of like two like dominant trajectories right now that almost move in different directions I think there's a lot of people talking on crypto Twitter about the recent vote in the house for fit 21 and the recent vote in the house and the Senate to repeal the

uh staff accounting uh bulletin from the SEC we don't need to get into the details of these particular pieces of legislation suffice it to say that fit 21 is like reasonable regulation of custodial intermediaries to prevent another FTX from happening that also does include sensible and well-written carve outs for things like defi so we don't apply aggressive permission-based regulation to defi software developers and I think what's what's notable with fit 21's vote is you have 71 Democrats in the house which is a substantial minority of Democrats but a substantial number nonetheless voting in favor of fit 21 and I think people see this is part of the reason it passed because

with with just a bare um support from Republicans it probably wouldn't have passed I think people also see it as symbolic that crypto is maybe a little less partisan than we were afraid it was becoming and that's a very good thing and that maybe aspects of the Democratic Leadership are are warming to a less aggressive anti- crypto position and more of a reasonable moderate regulation and these things you know if we put guard rails in place these things will be good for people in the long run so that's promising the counterveiling trajectory aside from the more Progressive wing of the democratic party like embodied by Elizabeth Warren that want to simply just regulate to the

point of banning effectively you look at the bills that she's proposed they're they're they're not things that people could ever comply with so they're really not regulations they're just banss um but aside from that you also see very aggressive um prosecutions from the the Department of Justice in the southern district of New York against tornado cash and against most recently Samurai wallet uh there was an indictment and in both of these prosecutions you see an extremely broad theory of culpability for money laundry culpability for unlicensed money transmission and for sanctions evasion at least in the tornado cach case sanctions evasion not in the Wasabi or Samurai wallet case and I think what this seems to represent is

an aggressive clamp down on anything that is sort of privacy enhancing even if the thing that's doing the Privacy enhancing is is immutable software on the ethereum blockchain doesn't matter people should be held responsible for having written that software for having encourage people to use those tools and they should ultimately be held equally culpable with the Bad actors who did use those tools even though it was not their expressed intent for Bad actors to use those tools and the implications of those prosecutions if they move forward and the defendants lose their defense are pretty profound and Broad for the crypto space because it it could mean that any kind of defi development um short of just publishing a GitHub repository

maybe which would be pretty firmly protected speech but going any anywhere beyond that deploying things to the chain these sorts of things can leave you culpable for money laundering prosecutions leave you open to a lot of criminal liability and the chilling effects there would be I think extreme do you you think these questions are going to get settled uh on the Supreme Court or like how how will this be resolved I mean we've written multiple research reports at coin Center on the constitutionality of prohibiting people from building privacy tools like we we wrote a paper called electronic cash decentralized exchange of the Constitution we wrote a whole paper on

the constitutionality of over Brad application of the bank secrecy act and in these papers we go through recent Supreme Court opinions on First Amendment and Fourth Amendment rights and we say look it's going to be hard for justices who've stood up for these principles to not equally apply these principles and protect software developers in these contexts depending on the specific facts of any particular case and so I think I would be happy if some of these questions made their way up to the Supreme Court it could be very sad because it could mean that people are in jail and trapped in an appeals process for years but I do think that Supreme Court would actually vindicate um the rights of developers in in many factual contexts it's ultimately going

to depend on which case makes it up to the Supreme Court and are the facts good for us or bad for us these things could also I mean the best outcome for the Romans in southern district of New York the developers of tornado cache would be that the that the prosecution is just dismissed they' filed a motion to dismiss the charges um saying that the doj has insufficiently alleg uh criminal conduct and so it would honestly be better if it didn't go up to the Supreme Court yeah it just went away yeah um coin Center has also um sued the treasury for the um sanctions designation of tornado cach we're arguing that as Americans who just want to use the immutable pool contracts for our own private purposes our rights have

been violated by the announcement of these sanctions and that aipa the statute that gives the treasury authority to sanction persons and property cannot be stretched to sanction things that are not persons in property that are just immutable smart contracts that lawsuit could also progress up potentially up to the Supreme Court and we think we have a good chance of winning uh in the long run we we are currently uh on appeal we lost at The District Court we're on appeal in the 11th circuit so how long will that take uh I mean I'm not I'm not a this is my first rodeo we but I'm not the lead attorney and I'm I'm at work coin Center's the pl we have excellent lawyers um so they'd be the best to

answer that question but it's definitely on order of years and not months so to get all the way up that is is there anything Community Driven being done to support the actual developers being indicted because it feels like this is a really you know big thing for our industry like if yes you know if if they're not protected you know it's it's just it's just so a failure on our parts in a way there's a group called Justice Dow I believe I've talked with some of the organizers of that that are raising funds to support Alexi pof's defense in the Netherlands uh and also the Romans in the southern district of New York coin Center the defi education uh Foundation or defi education fund rather

and the blockchain association all filed amicus briefs in the southern district of New York case arguing that the prosecution is way off base here and the rights of developers in general are being endangered so we've we've received some donations I think in part because of our support of that and the Justice St has received donations all of these nonprofits um that I've mentioned I think are Bonafide good actors and deserve more donations I'm selfishly saying that from coin Center's perspective but I I I think we're doing good work and important work and so those are the best channels I think right now for Community Action I mean the US elections right there coming up

soon do you think if Trump wins what will the impact of that be on like the regulatory environment in crypto I mean there's a lot that's unpredictable about President Trump so it's very kind of you I probably would have we it this way stronger yeah I I hesitate to make any firm predictions could be a plus the unpredictability what I would say is this is that generally speaking he actually probably less ideologically motivated than some other politicians and so I don't see him ever being on a war path against crypto and as we've seen lately it's the complete opposite

you know he's actually sold nfts and yeah maybe because that's been beneficial to his campaign Finance efforts he's now you know happy about it um is he going to be a lasting and strong Ally that would be a harder a harder case to sort of defend maybe uh yeah maybe I mean the most well he certainly has never shown any proclivities to like regulate stuff right to me it seems like the most likely scenario is it would just like sort of not do much but I don't know what that would yeah consequences and I I mean I think no matter what the fact that it's an election year is a good thing I mean we've we've had um at the agency level a number of political appointees who are fairly entrenched and fairly anti- crypto many of them um sort

of they run with Elizabeth Warren if you will and even if Biden wins the second term it is a very wellestablished Norm that you sort of hand in your resignation and you hope to be reappointed even if your your part's the incumbent in a lot of these agency positions so even if Biden wins reelection it's not at all clear that we would get another cycle of Gary gendler as chair of the SEC it's not at all clear that we would get the same staff within or the same uh political appointees within treasury who have potentially sort of like pushed for these sanctions a lot is up for grabs and an election year generally means that like we're going to see change and

right now given how bad things got over the last few years with respect to crypto policy change will hopefully only be able to go in One Direction which is improving but if I if I sound still somewhat less optimistic that's because that's just sort of the nature of the space unfortunately right now yeah knock on wood there's also rumors flying around um about etherum ETFs being approved imminently yeah are these credible I don't work at the SEC I I I I no one's given me any non-public information I think you know there's reasons to believe that by approving a Bitcoin ETF the SEC is sort of boxed into some inevitabilities as to how they

interpret approvals of other ETFs for other cryptocurrencies right and so even if you have a fair hostile perspective towards crypto embodied in the chair's office there's limits as to what they can do within a constraint system that still in theory operates under the rule of law and so the cynical way of looking at this is not that suddenly the sec's bullish on ethereum because that's definitely not the way they tend to operate is you know is on like Mania I think the the the more sober way to look at this is there's there's certain inevitabilities as to how they enforce the law evenly across all all potential investment products that could lead to an ETF being approved I also

think I mean if we keep the cynical hat on for a second ETFs I'm I'm actually quite bearish on ETFs like as and I don't think they're necessarily a good thing for in space but ETFs they're basically just fitting this like amazing new technology into like old finance and if you want to be cynical that's a way for the SEC and the government to control crypto participants again but in a way it kind of um it sways more people into being pro crypto which then kind of makes taking these really hard anti crypto stances much much harder right yeah know I see that side of it but the

you know the other side of it is like you're removing like oh yeah yeah % of the benefits that crypto absolutely yeah 100% you could see a lot of money flowing into each f for people who want to invest in this technology and simultaneously crackdowns on any kind of like host your own wallet technology at which point we become a much more inefficient version of venmo or like Charles Schwab and it's kind of sad right yeah I mean then it literally becomes a casino right it's a casino but it's a casino that's gotten sort of the no obl you're the casino that's allowed to operate in our jurisdiction because we tax you you pay your taxes and you follow our regulations oh it just becomes a speculation a

specul speculating um but I don't know I I feel more like ETFs they'll just bring a lot of money into the space right and that is a good thing right because it will accelerate development and then I think also agree on the political protection aspect and so I don't know I think it's a positive thing I think that the two things counterbalance each other and generally I'd be in favor of ETF approval not that they're going to ask me for my and speculating on whether it could happen we should be watching the prediction markets some of the past apps we see on ethereum are these cool prediction markets and they seem to be able to predict these things better than us there there was a comment on uh on poly Market a couple of days before the

price action and the and the renewed uh filings and so on saying uh a friend's Uncle works at the SEC um the E bit uh the E ETFs almost been approved Gary Gensler won't leave his office so yeah so Alpha on PO Market we never we we questioned the uh the reliability of comments on N the comment doesn't have the value but the people buying into the prediction Market that's they've got money where your mouth is yeah but if this e ETF is approved does this mean anything kind of for the recent recl reclassification efforts of ethereum as a security or maybe maybe

then not a security again yeah so to to sort of strongman that argument the suggestion is well if there's an ETF and the underlying asset is eth and it is a commodity because the ETF is based on Commodities Futures and other things that means that eth can't also be a security right yeah the and there's a different regulator on point it's the Commodities Futures Trading commission not the SEC as far as regulating the secondary markets and that sort of thing that's the strongman case the problem is the way the US code is drafted doesn't really say that once something is a commodity or once something is regulated by the cftc it can't also be regulated by the SEC as a security has there been precedence for this the most extreme

examples are situations where you have something that's definitively not a security um like say um certificates of deposits issued by Banks but a company Merl Lynch in the in the case that's on point here is offering these Certificate of Deposits with additional promises like a CD hasn't has a maturity date of say 5 years we Merl Lynch will sell you the CD but if you want to get out before 5 years we'll buy it back from you or we'll maintain secondary markets where we won't buy it back from you but we're pretty sure someone else will buy it back from you or will claim the FDIC Insurance in the event of a default of the underlying financial institution if you sell the CD with those additional promises you fit into this case Gary

plastic and you selling a security because of the manner of sale of a non-security asset and the additional promises that people are relying upon relying um from you upon and so you could make the argument and I'm sure you know the SEC especially say shered gendler who seems to take a very broad view of the secc's jurisdiction here I think it's non-controversial to say that that when you sell or issue say ethereum ethereum might itself be a commodity but if you make additional statements upon which investors rely about say an impending switch to proof of stake or something like that your manner of sale is nonetheless securi issuance even if

the underlying isn't a commodity so that would be the counterargument to this because they've approved the ETF eat is a commodity and therefore is not a security that's not at all that simple unfortunately M so every wary Market we kind of see this now mainstream adoption and so on narrative we see this again right now kind of with fast and kind of like the rise of kind of like uh wallets that are targeted towards uh actual retail investors or retail users how do you guys see that I I think it's I always I I was saying this years ago also I think it's going to happen and we're going to

get a ton of mainstream adoption it seems like this pycho all the pieces are in place yeah but I said that last cycle and I don't know so but we we've got smart contract wallets and that kind of gets the the the account abstraction stuff kind of gets the some of the elephants out of the room about if you lose your key it's gone forever if you leak your key it's leaked forever there's some things that normies just can't deal with and that fixes that also the pricing on l2s it costs a fraction of a cent to interact with a smart contract it costs a couple pennies to deploy a smart contract and that allows us to build way more things on chain and bring way more people on chain and we have cool culture creators on bass and

we have farcaster and a bunch of other l2s that are coming up in different ways so personally I'm very excited about the new kinds of apps that you can build on chain and the users that those will bring can you talk about the kinds of apps that you think will happen first because I mean in principle there's lots of things that would kind of could benefit from kind of a permissionless platform exactly like it's like incredibly neutral it's weird cuz when we're trying to teach developers what to build on ethereum it takes a while for them to stop using it like a really expensive database and understand it's more about like oth and permissions and it's more like a registry and we were just talking about a dow could put their entire website on chain and it would

actually render from the chain and you would never do that before you would never have like a sponsorship place for your Dow that's an nft that someone buys and when they buy that nft your actual website updates because of that and it's all coming from a chain that makes a lot of sense for a dow to do that but it didn't make sense to do that when it cost $5 every time you made each interaction with that but now that it costs a fraction of a cent a lot of weird things like that that we weren't even thinking about I think can go on chain anything that needs that kind of credibly neutral layer can now settle on chain for very cheap I'm excited because it's been very hard to convince even friendly politicians who their default position

is maybe this is good like technology tends to be good it's been hard to convince them that there's real Innovation here because if you show them something like um coinbase you say like look people can buy and sell these assets it looks a lot like online banking and and if they then ask like so this is decentralized you like well no this is just coinbase they run a central server they've got a cool wallet product I'm not knocking coinbase at all just saying it's doesn't seem that revolutionary aside from that there's these non-state assets which a certain politician might be excited about if they're like highly skeptical of fed policy but most in the US government don't care about and in general the non-financial use cases are

are important to show that this is more than just a big online casino to be very pejorative or a big experiment in private money to be somewhat less perjorative because the non-financial use cases show that there's like similar patterns of innovation here to the early web uh with like when the Mosaic browser comes out now anyone can build you know a massively important tool for communication look how great that turned out maybe it didn't I don't know um but I I remember one of our early briefings with member of the House of Representatives Tom emmer who's um the Republican whip right now uh so he's he's actually a very high level

Republican actually he was a early on Enthusiast about the technology and so he he like asked for a briefing from coin Center and we were like what can we show you it' be fun to show you something cool um we did organize a staff briefing where we showed micro payments on the lightning Network because it was the only way to like sort of show that there was something different here you could pay for a tiny little bit of candy out of a machine um but that use case only makes sense with scalability and then the other demo we did for him was peep yeah social network Little Penguin yeah it was supposed to be decentralized Twitter um long before far farcaster and that demo went okay Tom emmer um member of the House of

Representatives did peep all right if that's what it was called but I think we did pay like $4 in transaction fees and it didn't show up on the blockchain for like a while and it was kind of like oh great you've built a very inefficient Twitter that said to representative ever's credit he got it because there was a lot of talk at the time about whether social media platforms are manipulating elections and um in sort of like whether the government is pushing these major intermediaries to favor certain political messages over others and the idea of a censorship resistant social media platform that was credibly neutral was powerful even if you have to pay $4 per tweet but if you don't it's much better and that's where we're

moving into is a world where it was it only made sense to make financial apps until just recently unless you're deploying to maybe like nosis chain where it was cheaper uh but now we kind of have l2s that are selling to l1s that have the same security and they cost a fraction of a cent so you can now have these credibly neutral neutral social layers and lots of non-financial apps that still use blockchain on the background to be censorship resistant incly neutral to inject a tiny bit of skepticism into what is otherwise a pretty positive conversation I do worry you said the same Securities assumption security assumptions yeah I do worry that some of these projects may be intermediating a bit like decentralized sequencers or centralized sequencers or

you mean there's a whole conversation to be had about how decentralized are the scaling Solutions and there a lot of centralized sequen to the extent there's still a lot of centralization that could be itself a kind of legal and Regulatory risk especially if that isn't made clear and disclaimed and because the last thing you want is to say oh it's it's all just software and then when you know it turns out that actually like a guy had the keys the key the wrong way everyone in government will hate us again and kind of for the right reason and the guys do have the keys so basically every single L2 is mutable and I mean for for good reasons right because ethereum is still changing so much so for instance you introduce uh

New Concepts like veral trees it can bring your L2 you want to be able to upgrade it but yeah so basically best case currently it's from a mck worst case it's from a single address and both of these exist scary yeah I think the lack of disclosure is scary as well although it's starting to get a bit better on that front I think we're really excited about I think is um you know we've been in the space as Builders now for nearly eight years and um I think you know we've we've we've experienced ups and downs like markets three or four times now together but I remember a couple of years ago we were talking about like okay uh we've always said okay enzyme is this like layer that people can build on chain Asset

Management products and verticals on but we never really had the toolings that made it easy for people to do so and so what I'm really excited about and I'm assuming a lot of other projects are at the same place now where they've been building for a few years and finally the toolings to build on top of infrastructure have become like so much easier to use and we're really seeing that now like for the first time ever we're seeing projects spin up on top of enzyme like in a few days or in a couple of days and it's because the tools are finally there and that's something that we've never seen in the past it's always been like you know a few months to Market before you know the tools weren't there we need to help you we need to handhold you we need to like figure it

out on our side um so I'm hoping you know it's not going to be like we're not going to solve everything in this bull market but I think that there's definitely a lot of innovation and it's the barriers to entry are lower than they've ever been so you're speaking my language about tooling this is where policy I'm a long ways from I'm I'm working with developers but tooling is where it's coming together and we we built scaffold eth on ethereum and it goes to any L2 or any L1 you sit down and write your smart contract and your frontend auto adapts to your smart contract then you build a little react you do one line to deploy it you do one line to put your front end out there and you can build a decentralized app like that website idea in a matter of hours

rather than a matter of weeks or months so it's much less about the tools now it's about the other stuff and the fear of building things and other things that are stopping us but but now you have the tools for developers to build stuff y um so let's talk about the users who who we actually want to want to use this right what will be the tangible benefits to them rather than using the equivalent Web Two product this is a very tricky question because it's there's a lot there and it's sort of like you don't need decentralization until you need decentralization and I don't think that like forecaster I don't think the people that are using farcaster right now are thinking that any moment they could get

kicked off Twitter so they're over in foraster and that kind of is the reason but maybe not maybe there's more to it and I just don't know it seems to me like a huge chicken and egg problem with decentralization and how to bring in users and how to sell decentralization to users I mean what we need is a massive Awakening because the people who use Instagram and Twitter I think they all I think like most people are actually pretty smart they know like okay there's an algorithm it's biased it's Zuckerberg trying to force feed me content that I will become addicted to and want to see more of so that they can Target me with ads and that's the monetary model for these

giant corporations and yeah maybe they'll even let you know powerful people in government or corporations put the thumbs on the scale of the content I should see if it's like morally appropriate or inappropriate for me to see certain things but they just don't care because the tool was built to be addictive like the infinite scroll on Instagram where like 30 minutes in you're like why am I still looking at this and you have that Mo I have that moment I think I'm a reasonably like well-informed nzen if you will but I'm like Jesus what did I just I have kids I have responsibilities why am I looking at this garbage and I so I'm becoming increasingly angry about the way web 2 is built the incentive structures behind

it the um user interface um techniques which are straight out of Casino playbooks not that defi is immune to that problem either unfortunately that's the only area where we've seen crypto take off is in Casino like apps but like we need to have a real serious Awakening of like what are the systems we're exposing ourselves to daily on our phones see fabian's doing it right now on his s me and and like should we use systems that are credibly neutral have backend Revenue models that aren't based on like addicting you to targeted ads maybe cost a little bit but are worth it

because the the information systems you expose yourself to ultimately like change the way you see the world and and the way you interact with it and that's something that matters that's a public good shouldn't be left to the hands of a major web 2 corporation like Google or Facebook but like as nice as that whole ideology is and we all know like yeah the the the benefit I mean the non- censorship the you know transparency decentralization we all like you know you don't need to sell to anyone here at dcon those you know qualities but the users the majority of the users I don't think they care like frankly I don't think they care um I know like people in my own family extended family are addicted to Facebook you know and I say

to them you I I shot my Facebook account years ago I had one briefly and and they're like why aren't you on Facebook and I tell them and I get these blank looks like you're so weird you know and and they're like but how do you stay in touch with people how do you know when it's somebody's birthday and blah so I actually don't think it's going to be the values behind what we're building that bring users in I think it's going to be you know depending on the industry content performance uh ux UI performance in the case of onchain asset management you know those are the things that are going to bring people in unfortunately there's only so many people you can sell the sort of web 3 Vision to and after that you know there's just a huge amount of people that simply don't care I mean

I I feel like the whole so actually The Social Network thing for me has been for like a long time I felt like well that that could be like super powerful if you did it in a decentralized way and I feel like the the probably the two biggest things I see there as like you know really massive benefits that people would care a lot about is I feel like one thing is sort of the aspect that you could have it owned by the users and you can you can like use the economic cuz in the end right you will have like users that you know really get a lot of people onto these platforms and they do a lot to grow them but then the economic benefit goes to the platforms themselves

so but I feel like if if they then proportionately had like tokens in their platform and were incentivized and like I think that would be but that's what I mean that's monetization that's that's monetization that's driving them is not any of the web three values it's like oh there's something in this for me will it is the repb three value also of like feeling that you're like you own a part of this thing right the two are connected and I I agree with you I I am most of the time fairly cynical about whether people will like wake up from their stuper and realize that they're using tools that exploit them and destroy their privacy and autonomy because unfortunately if the tools really engaging addicting even and

cheaper and faster than the Alternatives which is almost always true between like something that protects your privacy versus something that doesn't they're just going to keep using the easier tool yeah but I think it's I think it's cynical to think that the only way we can address that is by building tools that allow the market to sort it out that ultimately are faster and even easier and maybe even reward the user through mon ation I think we also need to we need to be even broader in our advocacy you're right it's easy to convince people at dcon about the importance of privacy and autonomy online we need to get better at having a more mainstream audience yeah this Happ I mean some of this happened

in the 90s like with the dawn of the internet there was a broader social Consciousness about like the way we consume information and how the internet could revolutionize that for the better and we lost our way people started using crypto then too SSL like SSL became you B price yeah right and we didn't have to sell that to him it was just a better option and we had an uneasy partnership with the lumpy big big players in the space like for a while the interests of a just an individual user of the internet were actually fairly aligned with Google because Google didn't want aggressive enforcement of copyright because it destroyed their search business and the user didn't want aggressive enforcement of copyright because they just want to watch a YouTube video and you're not actually like violating some artist's copyright if there happens to be a snippet of the

song in the background like there were aligned incentives there I think that movement can happen again but we have to do a much better job of convincing your average Joe on the street that there's some really important at stake here like your kids are going to have these phones in their pockets and you can decide whether they're fed garbage from a corporation that's beholden to the to the Shadi or elements of the US government or whether they're going to use an application that actually like respects their child's and feeds them information that they want to be fed and that is good for them in general socially yeah no I think going back to your point earlier I think I think there is a big chicken and egg

situation and I think there comes a Tipping Point where so many people are now using web 3 that you know there's more content available on web 3 there's more you know news information Etc available on W3 that you don't need web 2 anymore because everything is on web 3 but how we get there I think we're not quite there yet I think there's still like you said a lot of Education a lot of work a lot of um maybe incentives that we need to like promote across the ecosystem I'm sure like there's going to be a lot of in innovative ways to bring users across but you know if you're you know if all the interesting content you want to follow is still on X then you're on X you're on X the thing is though like I felt like I was at best only

telling half truths and at worse a liar if 5 years ago I went around saying everyone should be on web 3 yeah the systems are ready we can replace all of these Web Two exploitative intermediaries because it just wasn't true yeah the the if you directed people to these apps they would then spend $5 per tweet if they got their medic it wouldn't even work well for them and they'd probably just lose a bunch of money and so and and that kind of advocacy is very dangerous then because then you appear to say like say if I'm going into Congress and I'm working with a more liberal you know Democrat office and I'm saying this is actually good for financial inclusion this is good for fairness and equity on platforms but then they see it and all they actually see is like their constituents losing

money to systems that either don't work or are actually deliberately designed to defraud them which some of the worst stuff out there were doing there's still a lot of risk of that kind of over promising but at least now you can credibly say that there are systems that now actually have enough scale and enough low cost to to start building these Alternatives and the systems are transparent and immutable if built correctly right but they're not transparent to anyone right so basically in principle you can look at them and kind of understand what understand what they're doing but kind of yeah I mean it's it's very much a niche kind of skill right but I I totally agree on the take um of decentralized ownership I think the other thing that kind of web 3

can really offer to people is individual agency so I mean there there are all these use cases where kind of people are kept out of things more or less deliberately because of people or entities in positions of power so we can start kind of with the social media example so kind of like on on Twitter you have two options you either take the the algorithm that they give you it's kind of the For You tab or it's kind of like everything in sequential order and you see all of these things that you don't really want to see but you can't really you can't really um ask for a different way of ordering the things like in the for you have right in principle there could be like an entire

host of algorithms that you could choose from for instance or even things like that we don't actually see as products anymore in this space so like access to a dollarized account like holding usdc right this is this is something that is not possible for large parts of the world population because it's kind of it's uh having a dollarized account is a status symbol in in in in many countries so kind of like may maybe kind of like what I often didn't see and where I feel like we've heard somewhat is kind of like this oh we we need to make everything decentralized and I think kind of decentralization in itself is not a value right kind of what what are you a achieving with it so what what are you actually making better for people

and I think kind of like this decentralizing ownership thing kind of like not everything you do automatically Acres value to like the same five corporations and the US dollar um and uh and the individual agency kind of just empowering you to do things that previously you couldn't and I think kind of like doubling down on these things and seeing how we can kind of get them to as many people as possible I think that should be the way I agree and and you're right the decentralization in and of itself is not a value that said that the permissionless aspect of decentral like when these things are properly designed I feel like I'm usually forced into talking about decentralization when

I actually want to talk about permissionless yeah and the permissionless of these protocols is core to their ultimate value proposition it that one is a value in itself because of the autonomy part but also you were saying like the 4 U Tab versus the following tab shouldn't there be something in between this won't solve that but what permissionless networks especially if they can scale which now we're finally seeing they can is they lower the barriers to entry for competitors in the space so that somebody could with relatively lowc cost build the in between tab of a of an otherwise public web 3 social media data feed so that that's something we also need to do a

much better job communicating to policy makers because there's lots of people who are very worried about say like monopolistic corporations and their exploitative practices and they're very interested in competition policy like antitrust for this Century right but they also see crypto as just another giant like money-making scheme to defraud the consumers and so they don't see the the potential Alliance here that we're lowering the barriers to competition we'll actually see naturally more competitive markets hopefully for information with these systems finally reaching maturity and scale yeah I mean permission or like uh it's just also composability basically you can build on top I think that is the

one of the most powerful things to if we just provide an example of that with foraster the way I follow people is probably going to be different than the way I follow people within Twitter I would like to see all of my followers and then do some kind of second check about how many people I follow follow them how many how many of them just like some of my own metrics and I just could not do that with Twitter I couldn't build that in and I couldn't sell that within Twitter but it's permissionless in forecaster so I can build that in and then if somehow there's an incentive layer there the combination of those two things like the permissionless where I can get in and build and then some kind of incent structure for me to build those things for people to use will create a whole like you said composable

ecosystem of really neat extensions on really good extensible immutable permissionless platforms like the forecaster frames thing is just an unfurl they all they did was add if you put in a link it's going to unfurl usually it used to do like a Twitter card and it was just an image but on forecaster they're like all right we're going to make these frames and when you paste in a link it's going to go out to the web server and serve you a picture but it's going to have some little extra buttons it reminds me of like hyper card way back in the day but just by making that small change it like blew I was like Wow because it's so composable any developer can make their web server catch this stuff and display some neat stuff in line with the

person's feed and you never had control enough to display things in line in people's feed now and so just by adding that little turn to things and making it more composable it kind of opened a lot of eyes to how this composability layer could work on web 3 you know it's so funny too because the vibe between web 2 and web 3 is actually quite a morphous like Twitter started out as sort of a protocol and they had an open API and they wanted devs to build on top of Twitter and you could build your own ver like tweet deck was originally just a third party software developer who said like I could surface content on Twitter better and they were happy to keep that API open because you get the network effects and you get the differentiation and like people will experiment with

things and end users might end up finding that some third party plugin to a product is actually better than the product itself and then inevitably they buy the third party plugin and then they close the API and like that's the end of The Innovation cycle and now the thing will just grow old and decrepit and eventually become shitty and die the nice thing about web 3 to the extent there's something fundamentally different here is that maybe we can keep that Innovation cycle going longer and hopefully even perpetually because there won't be ultim a way to sort of lock the thing down once it becomes highly profitable and then you can exploit your users okay now we have usability through permissionless Innovation decentralized ownership and individual agency what are

the blockers regulation I mean so you know it's interesting I was thinking about the the the Motions um in the defense of Roman storm the Motions in the in the criminal proceedings and how like we we need to make this argument that there's a massive First Amendment issue here and it's hard because people who are not native to crypto and don't understand how these systems work think that that couldn't be a First Amendment issue like these are clearly businesses for-profit doing a lot of things not just publishing software and when they're doing things in an agency like

relationship in a traditional fiduciary relationship of course they can be regulated without First Amendment implications this is not my argument this is the other side the the best way of exemplifying that argument is to say that and I think it's actually in the reply brief that the doj filed to the motion to dismiss if the tornado cach theory of the First Amendment triumphs here banks will be able to escape all regulation because everyone uses online banking software and that's an absurdity actually because if a bank actually did fully disaggregate itself in to just software it should get the benefit of first amendment protection A and B that's not how online banking software Works in fact the bank secrecy act will

hold the bank liable for violations it will not hold the thirdparty software developer of the bank's software liable cuz why would they that's insane the difference here is that a bank is actually a trusted agent they're doing a lot of business things in the background in the case of tornado cash they're not doing a lot of trusted things in the background argu they're doing none there's a fact intensive inquiry here that will ultimately determine the liabilities like there were relay there were some humans in the loop though they were not associated with the devs who are being charged with criminal liability so ultimately you are coming down to an actual pretty clear First Amendment argument that if what you did was published to a GitHub repository a website that you maintained and deployed

the code on chain which is just another way of saying published it do you still have robust First Amendment protections and the the answer has to at some point be yes certainly with the GitHub repository otherwise it's game over for the First Amendment and software development being something that we promote and protect in America at least um the answer as far as these other aspects is a little bit more nebulous but it's really important because it's pretty clear just from the prosecution in the Netherlands and the prosecution in the US and from me spending time here in Berlin talking with developers like last night at Cabas people are have the scared out of them people who want to build tools just

to allow people to maintain their own privacy and autonomy don't want to build those tools anymore because they don't see where the line is I mean I think that's the whole point from yeah the prosecution side and if that's the point this is absolutely unconstitutional that is just straight up Viewpoint discrimination and there's some really important cases I mean there's this case creative LLC versus elanus in um the us where the Colorado law said you you can't discriminate based on sexual orientation in your business and the person who started creative LLC was in the business of web development and they made wedding

websites and they sued they said I'm deeply religious I don't want to make a wedding website celebrating a homosexual couple I personally think that that's a abhorent like moral viewpoint but should they be legally obligated to make websites for homosexuals even if they don't want to no they have a deeply held belief I happen to disagree with it and think it's wrong but they have a right to express that belief including in the way they write software and that case went all the way up to the Supreme Court and the Supreme Court said the Colorado law has to go on this particular count the Colorado law can't force software developers to write software that does certain things and

doesn't do certain things and that's to me a politically charged Edge case because some of my best friends are homosexual and I think they they should there there's like extremes of that where they shouldn't they shouldn't be not served at restaurants and things like obviously the Privacy case seems like it should be so much simpler like if what you're doing genuinely is I I believe that we used to have a lot more freedom and autonomy when most of our transactions were made using cash and then fast forward to the 1970s and ' 80s and 90s and now everyone's doing all their transactions using their visa and MasterCard and that hurts their privacy and autonomy because it obviously does I just want to build tools that

create an alternative that allow us to reclaim some of our protections for ourselves and you the government say those are the kind of tools we don't want you building that's not just you the government regulating conduct or regulating businesses that's the government explaining what kinds of information content they want to see in the marketplace for ideas we don't want certain ideas and that's patently unconstitutional so assuming the regulatory issues were all fixed Mona and Austin do you see any barriers to kind of mainstream adoption I mean in terms of like purely technolog technology and culture and psychology of people using it psychology is big I

still I think we we failed multiple Cycles to bring in the right kind of people and we have like nft hype and all this other stuff that we now have to deal with for the rest of our time when I go try to onboard somebody they have to Wade through 95% of our history that's embarrassing before we get to the 5% that's really important so I think there is definitely when you said psychological there is some psychological stuff we have to get through also in onboarding users I think it's still a big educational element as well as much as I hate to say it but like you know I think there's still there's you know there's still lots of people in my network who still haven't understood what Bitcoin is you know maybe they don't need to understand

that shift um but again I I still think it comes back to the chicken and egg situation and you know for the shift to for the shift to happen without any education necessary the content has to be the product has to be really good exactly so do they should they have to understand what Bitcoin is or is it kind of like the internet where kind of you go out there even at corn and you ask um explain tcpip to me uh I mean there's probably three people out there who can explain it to you in any coherent way right everyone uses it everyone knows the advantages of using it yeah um same for most technology that we use right kind of like you use Google Maps and it it magically tells you where you are in the freaking map yeah like can you

explain how that works exactly solving problems for people or like giving them an experience that they really really enjoy and those are that's why nfts took offer because they're like there's not much to understand it's just cool There Was You know it's easy to understand it's like some form of art a collectible everyone understood it it's very easy it's very new novel easy to understand uh the product was well not all of them but you know some of the products were good um and you know got people it got people interested at that level I think you know with social media apps and maybe more complicated things like asset management apps and things like that it's still you know we're still not quite there maybe with the product the

products are not uh there outperforming you know the web 2 experience or the financial chadly experience and yeah no I think like I mean this is an interesting question like do what to what extent do people need to understand what's actually going on and I think if crypto is about people having more like ownership and control over their assets it also means they have more responsibility right and if things go wrong they like you know maybe they can't recover it and things like that and that they trust less you know they put less trust in some other third party and I think that that just does require like having some understanding of you know maybe what's a private key and like

how does this actually work I mean maybe it's not necessary if it's you know just some easy consumer application and uh that's like like on web 3 but I think as soon as you know people actually have some kind of more substantial amount of maybe Assets in there that they manage I think I think I would actually I would be comfortable debating that yeah because I don't think people actually understand how money works and this is kind of like this kind of declares that argument absurd right so because if people don't understand how money I mean people know how money works from personal experience they don't understand how money Works kind of like at a macroeconomic level does anybody exactly that's exactly the point I've

met I've heard it can be exchanged for goods and services beyond that exactly and that's kind of like the person experience kind of like you can run out of money like as soon as as long as you have money but where does it come from where does it go how is it created kind of who decides how much is created even if you kind of look at um politicians kind of debating things like the State deficit they kind of they they often treat this like this is like a personal you know a person spending habits that are under review not kind of like the The Entity that's kind of somehow you know it's interesting I think you need people to take a greater interest in the inherently political choice of the Technologies they choose to use right because actually even non- crypto people

even more casual internet users do sometimes develop that kind of awareness that that I would want to say Clash Consciousness but I sound like a Marxist but I Berlin it's okay yeah it's you know and because we've actually seen some fairly successful efforts at like boycotting um it was what in the US it's Chick-fil-A that's associated with very sort of um Far Far Right Christian um and and probably anti-homosexuality views and things like that and like for a while people were like stop buying Chick-fil-A like so this is maybe not the best example but there there have been moments in time where people start to realize that yeah the chicken's good here but what what when I when I use

this chicken what is what am I actually doing in the world and I we need to have that moment with Facebook and with Instagram and with Google we like why am I making Mark Zuckerberg Rich why am I do it like I I don't like him and you know he's actually one of the less bad guys maybe but like he certainly doesn't need more of my money and I'm not sure what he's built is is healthy for my kids so it's really interesting point and you know the first thing it makes me think of is um how dependent we've become in the space on the US dollar yeah so like if the US government is taking a regulatory direction that we

may be in web 3 disagree with like what's happening with Toro cash what's the first thing you'd want to boycott the US dollar can any of us imagine be kind of hard for me well yeah so I said it I said it to my husband the other day I was like you know I think we should divest out of of our dollars and he was like okay tell me how and I was like you know I like I got like one minute into my speech and then I was like yeah he was like what about that stable coin fund what about this what and I was like yeah the fact that we're even having these conversations is important yeah because I don't think until recently I don't think a lot of people said like well it actually like the currency you choose to use actually

is a political choice that has pretty big implications in the world just like I I use money it's the money that's around me that's that's the thing I have I I guess and you know people would say this I think during the Vietnam War people would say like not just by paying taxes but also by like being an active participant in the US economy am I am I furthering what is like a really disgusting violent conflict that's not actually achieving like justifiable ends and there were boycotts right and God knows there's a lot going on right now in the US um on college campuses with respect to Israel Palestine and I'm not going to voice anything here cuz I don't want to wait into that but like the best way to actually move your

political agenda is to choose Technologies and tools and things in the world that the because of the way they operate support your cause I think that's actually more effective and more powerful often than than being very vocal and loud and and blocking highways and things that actually turn a lot of people against you I I not to get like too profound but like that was that was from my limited understanding why like Gandhi's nonviolence movement in India was so successful is like the making your own cloth at home is a huge political protest that also if done in Mass undercuts the powerful and exploitative British fabric companies like that's interesting and it it gets

in the headlines and it's important right yeah I think there's a lot of that happening too though but yeah point taken I think Bo cutting is a very like or divestment is a very powerful tool and I think probably one that even we are not practicing in many ways like when we you know we are web three native I I don't think so I think most normies in America are are not thinking very politically when they're thinking about their money and their software I think that we you said back to the 90s and that was the time what what were they thinking and why why was it different and how can we get our society more lined up with tcpip and SSL and rs say all these crypto things that we're already using it's it's happening a little though I I mean people are people

left Twitter in Mass when Elon bought it I wasn't exactly sure what the idea there was but it happened some people stayed a lot of people went to um Mastadon a lot of people went to foraster and there there was a politics there there was like a billionaire just bought this thing and I don't like some of the things he's said on it and so I'm going to go somewhere else just tweeted something in all caps at their friend and went on with their day and then they still come back to X when they want to actually reach a larger audience but it it's things are getting frothy and weird I'm optimistic interesting okay yeah I I agree I think kind of uh there's a lot of people who will kind of

just ape into it when they think it's the next cool thing maybe you just needs a couple of people kind of make a point and kind of just kind of drive this drive this kind of in the right direction and kind of like ni 98% you know won't wouldn't have done it on their own but they're happy to kind of ape into it especially if they're early and kind of they get to kind of you know virtue signal that they're no longer using I don't know Gmail and they have instead migrated to proton M we'll get we'll get Tom Brady and Matt Damon on a commercial and yeah there's a very successful book in in in the US at least it might be more popular globally too called the the anxious generation

and I've sort of like tacitly quoted from it throughout this podcast so I should give some credit to it's by Jonathan height and it's about what social media has done predominantly to the Zoomer generation who whose brains came of age and matured with Instagram and Tik talk plugged right into their visual cortex and the statistics are actually really scary and sad especially amongst um teenage girls the rates of self harm and suicidal uh ideology or um have spiked and the interesting thing is in the research Jonathan ik goes through it and says look you can actually do interesting controlled analysis like there's always a lot of correlation

versus causation but Portugal got high-speed internet wireless for social for things like social media with this 2-year delay compared to Spain and you can control for a lot of things and there's similar cultures there and you see the spikes in self harm at the exact same lag and like I read this book and I I have kids myself and now I'm like I'm actually starting to question some of my more libertarian ideas about technology regulation like I I I don't know if I would strongly object to like more robust age verification requirements and um and and things like um like maybe outright bands for providing certain tools to people under a certain age if if it's if it's fairly

clear that there are real harms happening here and an interesting question is like are there ways that our space can actually better comply with some of those by say giving parents true cryptographic control if you will over the information that their kids are consuming on their phones and and can we maybe through regulation take the wind out of the sales of the giant web 2 corporations cuz they're going to cry bloody murder you can't force us to you can't force us to do this you can't force us to do age verific you can't force us to give our our users choices because that kills their revenue model well maybe their revenue model deserves to die we're running out of

time this is I would I would love to keep talking about this but uh let's briefly touch on bin blockchain week and dcon and uh sentiments you picked up here and kind of uh what other events you looking forward to you know this summer I I'll start with just hacking stuff I love seeing hackathons I love the energy around just Builders around here we see uh kind of it was about 2019 2020 we saw people quit Reinventing everything and started using components and now we're at a different stage where we have l2s and AA and not just components but like highlevel protocols and paradigms of how to go about building an app and it's way

easier to do so we're much more at the like f around and find out kind of stage and I think think it's time for that we like it's all lined up and I'm probably overly optimistic about it but I'm really excited to see what developers do this year and I mean you go to a lot of hackathon so I think I mean it's it's not like uh wish we thinking right you actually see this yeah I see a lot of stuff getting built but it's getting users that's the hard part I think and I think getting users in a way that's not you know you're overly speculating on something or you're gambling but getting users in a way where this is incredibly neutral layer of permissionless software that's composable and because of those things we can do these new things and

let's build stuff that people can use I think we're still zooming in on what that looks like and still trying to figure it out but I think everything is lined up it almost needs the it almost needs Society to figure out like oh shoot you know this this other way isn't working but I don't know if Society is going to move that way I just see like the only going back to you only need decentralization decentralization when you need it the only way they have that personal experience is if they actually get kicked off of Instagram or something and then they have to go oh well where do I go I can't go anywhere I'm in the dark now or whatever and that personal experience Roots a whole bunch more behaviors but without that I don't know if we'll have this big shift but I'm

hopeful and optimistic that that does happen yeah I mean from my side it's been a great week it's been um I mean I always love dcon because it's like it's not too big and it's not too small and you have like this it feels very cozy and you see a lot of uh it's just so much easier to meet and talk to people without that kind of loud echo in the background um but couple of things that I'm one that I'm cautiously optimistic interesting how much there is going on in the intersection of web 3 and AI I say cautiously because I recognize there's probably a lot of hype in there too but I'm really excited to see how AI agents can and will be incorporated into other apps and apps um moving forwards um I'm also uh really interested and

maybe that's because of the the SE what the perspective we're seeing uh on enzyme is we're having a lot of interaction with um liquid staking and reaking protocols who want to leverage enzyme to build on top of it other like reaking projects with risk management overlaid and again I'm really excited about that because I think divers diversifying the the the liquid staking or just the staking um environment in general is a positive thing for the ecos system and then I'm kind of cautious on the other side because um you know obviously that has to be done in a risk-managed way so we you know wanting to encourage that to be done in a in a good way but really excited to see like you know even like new protocols like nectar coming into the space um you know which hopefully will I think igen L has

been great for the space but you know it it it's great to see other players coming in like Nector to prevent another liol like situation uh with market shares so that's been interesting to observe to speak so I've just been sort of very gratified to find a community of developers where there's a number who are deeply interested in privacy there's a lot of tornado cast shirts around yeah and and that's not always the case at crypto events like I'm going to go to consensus next week and maybe I'm being unfair but I don't think there'll be quite as many like true Cipher punks if you will um and this has been a sort of Ed sword for me because as I said I've

learned sort of firsthand how many people are now scared to death of building the things they think would make the world better and that's sad and it's scary that some of them who've already built some of these tools might end up on the wrong side of prosecutions and potentially even be arrested in front of their kids at dinner time which is apparently what happened to Roman storm and that pisses me off and makes me angry but I have to bring up a silver lining like if these are un fortunately the stories we need to share to make people understand that this is a battle of ideas and the government's trying to put their thumbs on the scale and that's unamerican and unconstitutional and this has happened before with pgp right I

mean you we have fought this exact same fight before and it's the right fight so I'm sad but I'm um sort of doubling down on my commitment what about you Brian yeah know I've really enjoyed enjoyed being back here so I I lived in Berlin for many years and then moved to Portugal like three and a half years ago this is my first time I came back and uh it's been great it's also nice to see a whole bunch of different eventss I think going to stop by the the decentralized science you went today and there was some you had the F yesterday I gave a talk here so it's like a whole bunch of different uh it feels yeah it feels pretty vibrant and I heard from people

that said there's a lot more going on this year um yeah yeah no it's it's I agree it's it's it's in principle a good ecosystem and there's even people coming back from from Portugal like for good which is uh nice to see cool fantastic thank you all um have a fantastic last day at Decon and uh a fantastic rest of your but and blockchain week thank you thank you for having us yeah thank