Epicenter Hosts – The Bear Is Back: Recollections From 2022 #473

Transcript

welcome to epicenter this is episode 473. this is a show that talks about the Technologies projects and people driving decentralization and the blockchain revolution I'm Sylvester Joe and I'm here with my co-host Brian Crane and Felix Lush how's it going guy very good pretty good A little tired but looking forward to this I think we're all a little bit tired um we all have a little lies I can see um it is early though but uh we are today going to discuss um you know this is kind of our year-end wrap-up episode it's coming towards the end of the year and well I guess it's safe to say lots has happened this year and uh we're gonna go over all of that and hopefully make some sense of it and

hopefully makes a sense of what's coming in the future um that is if there is a future uh to be had but before we do that I'd like to first talk about our sponsor this week tally ho tally ho is an open source wallet redefining the wallet as a public good with Tally Ho you can safely connect to D5 and web3 plus a lot more you could view your nfts in their wallet across ethereum polygon optimism and arbitrum and they have really great Ledger support you can also swap between assets and view all of your account balances across their portfolio tab currently they're running a layer 2 Adventure that rewards is just for exploring Arboretum the arbitrary ecosystem with Tally Ho you can get a space dog nft when you participate and you'll be entered to

into a giveaway uh for another nft so head over to the website tally.cash to check it out I think Federica told me that tally is a type of dog that hunts foxes um which is kind of clever branding when you think about it um yeah head over to yakash check it out so guys there's another really great product that I've been using over the last couple of weeks and it's like this really great Resume Builder and it's going to come in handy when we're all looking for new jobs in January um I wonder if you are also like you know sprucing up your resume uh for uh you know for when when you're out of work in a couple of months well actually I've been trying to open a bank account and then they were like required a resume so I actually did that

what kind of kyc is going on these days I seriously I know oh my God that's that's pretty good that's pretty good wow um well so you know we we uh we came here to talk about uh like you know kind of look back on the last year and um you make some sense of what's going on now and what the sentiment is and how that might affect uh the future for the industry and so yeah I think I I'm not really sure where to start I mean like lots of great things happen this year um you know like the merge happened

which which was huge I feel like it was eclipsed by a whole bunch of other stuff but uh at least like the ecosystem that I roll in um but then of course there was like the Luna collapse uh which was a huge blow to the system and like I think just like General confidence in the space um affected lots of teams uh also like tangibly and then you know we thought we were kind of out of the woods and then well this happens like the FTX um fraud uh debacle whatever you want to call it and now like Luna just you know pales in comparison I feel like I feel like uh Luna was like a minor events compared to uh what what

this will um what this will provoke in terms of you know potential like backlash on ecosystem and just like regulation and just overall trust being degraded um in uh in the technology and also just like the space generally do you guys uh do you guys uh sort of agree with uh with that thesis uh yeah I I'm not sure right like one of the things that's like so I I've had a financial time subscription for the last maybe three years or something I don't know and I uh I I tend to sort of check out the crypto articles a little bit in there and especially the comment section

and it was always pretty skeptical I would say there was a time maybe last year where there was a little bit more balance you know there was like some people who were like yeah no it's actually some interesting stuff happening and there was a little bit of that but then I feel like this year you know earlier this year it just changed to I mean one is the articles are mostly negative but the comment section is basically just this is a complete scam like this is all a gigantic scam it has to like die there was an interesting article I read like some months ago where I mean maybe like a month ago or something like

that but it was basically like hey you really should stop trying to regulate this crypto thing because this crypto thing is just a scam and by like regulating it you're giving it to some sort of legitimacy that it doesn't deserve but as we've seen now with FTX collapse and stuff like that it's kind of isolated it doesn't sort of affect you know the real economy and the the real Banks so like let's just you know segregate it say that like none of the financial institutions are allowed to touch this sort of dumpster fire and then it will just sort of die its own death there and and that sort of the way to go and you know all of the comments were like that makes no more sense

finally someone is saying finally someone is like saying it out loud and like so and I saw this threat from Zuzu which is another bizarre thing you know because the guy is basically also uh seems like a bit of a scammer no with his three arrows Capital where they were you know trying to borrow money like when they were already in solvent and like I guess it looks like lying about their assets by making stuff up and so it was interesting you know how how they're like briefly disappeared and then you know come back like a month later and two months later like giving or sharing wisdom about the other

scammers and stuff like that but I I think I think I read somewhere he's trying to raise another fund I heard that this was read that somewhere too yeah I don't know if that's true but one of the things he did say that I actually felt was quite accurate which was basically that and then I feel she very much reflected in this kind of financial times you know type commentary that I think for a lot of people like outside of crypto and you know let's say in the traditional Financial system or it this crypto thing it's just like one huge scam right like it's all and so then FS FTX and like as you know sandbankment Freedom stuff

doesn't look any worse than any of the rest right and if anything may be slightly better because he was at least like giving some money away to even if it wasn't his money to some kind of causes so I feel like it also explains a little bit maybe that you know to people in the crypto thing there's like big difference right there's like a lot of great things and then there are like someone like SPF who's like complete fraud and we're all like find it bizarre that they sort of that he doesn't get treated like this complete fraud in the mainstream media but I think if you look at it kind of through that lens so it kind of makes sense

um yeah I don't know what that whole means yeah I mean I would definitely say just maybe just the the kind of Yeah final comment here yeah I I would say in the times you know that I've been in crypto which is now I guess nine and a half years or something like that this is the most negative uh I think that the opinions that I feel like you see about crypto uh in in The Wider media and world I feel like the most negative that they've ever been

um yeah I was just gonna say I I uh I was reading a tweet this morning yeah because there there was this I think this um this confusion or or people people were somewhat surprised that the people in the audience when so as uh SPF did this interview with at this New York Times event and you know people were applauding him and but what uh what this what this tweet was was like a screenshot of of some article but we're basically that was claiming that the people were plotting him for for essentially like having destroyed crypto it was you know they weren't applying him to to congratulate him or you know to to like uphold him as like some some

sort of uh a good person but it was in fact uh because uh you know because like he was he was in fact like sort of destroying this this dumpster fire like finally destroyed this dumpster fire and and I was like oh okay yeah like that kind of makes sense I wish I could find the Tweet but I can't find it anymore anyway but yeah I mean yeah Felix what do you think yeah I I guess I actually like related to the financial times thing I've followed a little bit the Reddit communities over time and they've also been switching a lot into more yeah the solar scam you know like it's pretty negative sentiment for sure I think overall though

I guess you know the killer use case for crypto is finance or defy and I think that propped up a lot of the market it created a lot of Leverage right and then these these people like like actually Luna is full of Leverage right SBF is full of Leverage uh Zuzu every one of those and they're they're like the loud voices I guess and obviously when the market as a whole changes Burma comes they get washed out which should actually be a good thing but in this case I guess it takes with it a bunch of like innocent people but um I I guess that's that's kind of what happened and it's not super surprising

if you look at it in in hindsight because I guess svf it was actually his first um cycle basically he came in in 2019 it was a bear market and I think he sat somewhere in interview the maximum he expected was a 30 drawdown or something which is uh obviously not what happened he should have looked at the crypto charts you know yeah so so but yeah I guess you know then these are the things that people see right the big high is the big lows but I guess in parallel we have all these technology being built but that's not really being talked about in the mainstream Media or because I guess the

use cases are just also very limited to the finance thing and so I'm not super surprised that this is is the sentiment in The Wider sense but I guess yeah to me still nothing much has changed about the fundamentals um I think uh I think we all underestimate the amount of understanding that people outside our bubble have about this stuff and uh like even even people who are kind of informed about Finance so I'll give you an example I was in Dubai last week and we were at this uh alternative alternative investment manager Summit and you know like a lot of the folks here are

obviously um like smart and like educated about finance and about markets and about yeah like the whole Space of Finance uh like tri-fi but also fintech and overwhelmingly the people I spoke with had like no notion or like very fuzzy Notions about the distinction between you know C5 FTX type platforms like Finance Etc Finance was a sponsor there also by the way um and like D5 you know I've I had to have several conversations where you know really coming back to First principles and like explaining what the differences between like a decentralized finance platform

and and like an FTX type platform and um it was kind of surprising you know um you know I would talk to people and like start I and I I felt I was kind of losing them it's like okay oh wait like I need to come back and kind of explain things from from first principles and um and so it is it's kind of like not surprising that like the media I mean like the media is even less informed um and um yeah like I think that's one of the biggest challenges here is the it's like crafting narratives that that are accurate that make sense and um that uh that differentiate between like what what FTX is and what D5 is

yeah I mean the maybe a little bit to I guess would feed the example you said now um did was the interesting thing is that in D5 there's basically like no leverage if anything I think Luna was like a one system where you could say there was a kind of like Leverage mechanism or you had this kind of feedback mechanism that kind of was like leveraged like and um and I guess what we did see is that Luna grew so much because of that right it because it just allows a kind of explosive growth that is really hard when you don't have that

and then but in D5 you basically almost don't have that at this point maybe it's going to come probably it's going to come at least increasingly so but then you've had people build these uh systems on top which were all centralized and off chain and then they were basically you know running kind of high delivered fractional Reserve System all like lending money to each other and using it as collateral to lend more money and buy more and and then in the end right for the most part this was really like a big deal averaging uh now Victory leveraging with also a big amount of fraud mixed in there right because I think there's a lot of lying

about uh oh we're not leveraged uh when they were or or lying about how much leverage there was and then I mean but yeah I think in the long run of course there isn't a healthy aspect to it I think block five is especially a good example of that right where when they put out these Financial results the vlogfa at some point they were like published and they lost like I think it was like 200 million in you know 20 20 21 like the two years or something like that and they had like a thousand people uh in this company

all doing this interest account so you it's just like and even in the bull market right they lost so much money and you know you can also see that's just like a really bad business right that uh was you know I don't think there was like fraud there as as much as a crappy business that then relied on like you know lots of venture funding lots of risk but kind of being in denial about the risks they were actually having and then you know their market and it gets wiped out and of course that's a good thing in some level too right because it um I think what remains is is going to

be much healthier but pretty painful in the process yeah I mean but block five was like this you know respected company you know I mean like to some extent FTX as well but I think even more I mean from my my perspective like even more so block fi uh in terms of I don't know like you know it's been the space for a long time I mean like at some point even we were like hey block five would be a good sponsor for epicenter you know um I mean I was a user of block five and I did recommend it sometimes I mean I felt like when Celsius went down it was like kind of very clear or like yeah no

you don't want to be in this vein and so uh uh you know I guess um I didn't end up uh you know managed to get out and I think also tweeted at some point like hey if you're in one of these centralized lending things like get out well if anyone still is right I think that's what I'm still standing highly highly recommend taking money out of that um yeah I mean like again I think it comes down to a lot of like understanding of what these things are in education and like I'll I'll give you an example like uh

like Zengo for instance is a wallet that I recommend to a lot of people and that I use you know on my phone and stuff like great you know NPC wallet but then in Zengo it's like hey earn interest on your crypto and then you just like move your crypto over to this line but like people I think like most people don't know where they're putting their money they just have like some application they've downloaded they've bought some crypto um someone told them about it and then they end up uh using some service that like is centralized uh maybe doing leveraging um isn't regulated I mean I I think the the really the issue here

it comes down to like we need to regulate like we need to regularly centralize crypto actors in the same way that we rate their financial institutions like that that seems like the only solution um that will that makes sense like yeah I think a crypto lending platform or crypto exchange is just a traditional Finance business running on like a new asset class right yeah I think it's ironic that like SPF was trying to get the D5 front ends regulated but actually centralized actors are the ones that need the regulation and the defy system kind of works the way it is and doesn't need separate regulation in my opinion too because

obviously everything is transparent and you can check how these the systems work how solvent they are and there cannot be any extra liabilities of chain for uh for a defy system so I think um yeah definitely agree to that what what what's your sense that because my my biggest fear here and and I think we'll certainly see some of that is um this this lack of Separation in the narrative right uh between C5 platforms and D5 platforms will end up uh hurting defy

because it will also get regulated or um it will like regulations will apply to it that don't make sense for it um I haven't kept up on Mika so much in the last like six months I probably should but um you know from like some conversations I've had with people uh who are close to that issue you know there's a desire to accelerate passing of Mika uh probably apply pretty strict regulations to stable coins and and um and I think probably like D5 some some parts of D5 will end up having uh some of the same constraints as C5 even though it doesn't make sense for them from like a practical or operational

perspective yeah I mean I of course there's also the big question of like why you know why do they regulate in the first place right is it to actually you know reduce risk for people and maybe a little bit but you know I think mostly it's because uh they are Regulators governments central banks are just worried about losing control and the D5 thing is more threatening then uh you know some centralized platform that you can more regulate so I think if they can like try to crack down on that then uh you know they're they're they'll try

now maybe one thing where um I have sort of like a question mark of I'm not sure about which way it's gonna go or like the events of this year like what do they make more likely because I think on on one level it's also ties into my earlier point right I I think for many people Bitcoin crypto looks a lot less threatening now you know because that the asset size is like much smaller you know a bunch of people lost money but it's you know it's these crypto people anyway right and if you don't like crypto and a bunch of crypto people lose money and they're like well

you know bad bad luck who do I care and it didn't really affect the normal Financial system right it didn't there was no kind of contagion so again it's like okay are you really gonna spend all of this time diving into this complex thing to try to regulate it are you just gonna like be yeah whatever uh now of course if there's like I guess it's not going to be like one or the other but I I do think the kind of Market contraction bear Market is is on balance gonna make regulation like less likely uh but yeah if of course let's say Mika things that are in work over years it's not like they're gonna stop that and it's not like more regulation isn't

still coming but the thing that was also I feel was which is uh something that I did not expect and that was interesting this year I would say most people in crypto that I spoken to her in the last years they were more of the opinion that you know we had these early crypto adopters and they're more technically Savvy and they're more interested in the technology and and and uh and they'll be more likely to use you know Hardware wallet or like self-custodial wallets

and then you know you're gonna have all these new people coming in and they're much more going to be on you know coinbase or binance and they use some centralized product but of course this year we've seen uh we have seen the risk of that and the Pains of that right and you know we see more people I think moving towards uh custodial or you know where people do self-custody and then I think when you think of the regulation that's also something where it's probably going to be way easier if you do self-custody you can have more control and and maybe you could use

stuff that you wouldn't be able to use otherwise so I do feel hopeful that uh that the sort of trend is there where actually a lot more crypto is it goes back to like why was this in the first place where you know people actually control their own assets they control their own private keys they you know initiate their own transactions um and that that's of course really good yeah yeah I think uh I I follow Oriel again uh talking about Zengo here they're not a sponsor but I do I just do love that wallet uh in in in the days after FTX like they're

their installs just like went up like crazy I think also Ledger um probably uh had a lot of uh you know orders right after after the FTX thing um yeah um all right let's talk about all right what else yeah let's talk about what else do you guys think was most important this year or like what did you feel is when we look back in the future on 2022 what will people kind of think oh that that that happened and that that ended up having a big impact or was the beginning of something significant

yeah I guess the obvious one that we kind of already mentioned is probably the ethereum merge so I guess it's like the huge event of like kind of finally moving to proof of stake for ethereum um and it also like going that smoothly that it kind of didn't make the news I guess that's also the data new the new thing that the new cycle you need like something to go wrong to to be on people's minds and but overall right it's it's impressive how that went down and now how it's all working because it's I guess the first we weren't really sure right proof mistake

was running the the Pikachu was running quite a while almost two years now with without any like actual transactions and and it wasn't really clear how it would look if this entire D5 ecosystem of like billions of dollars would move across and just seeing that that worked and that's such a big transition can work in a distributed system I think is is something that is very impressive and probably I don't know if something like this will happen again in the future or or maybe it also proves that like we can do these kind of decentralized upgrades uh to to our systems at such a big scale so I think that's kind of my main one I'm not sure

if you guys yeah probably hopefully agree but definitely I think that was a huge uh huge huge event and uh yeah congratulations to everyone involved I guess that's like an endless amount of organization and people involved I guess you know Vehicles one we're also working on that and like I mean we of course uh this was already right in ethereum white paper at the end of 2013 it's like oh it's going to move to proof of stake and I remember I think we did like podcasts with vitalik in I think maybe 2015 or something he's like oh it's like six months or something or five months episode 58 yeah yeah yeah so um did you say six months back then yeah

yeah yeah yeah I remember we also did like MMOs we did like lightning episodes in like 2015 and then like yeah three months lightning is alive and you know I've taken like six years or whatever five years uh but yeah I know they had this but in the end it succeeded uh I mean it was very successful in um in many aspects I guess there is a sort of lingering question probably mostly around you know this flashbots and maybe censorship you know like obviously it's way better in terms of

you know it's the economics of ethereum have improved right so it's good for ether holders you know because there's less dilution and that's a great thing and the energy impact has gone down like dramatically and and sort of game theoretically the security has gone up I think it's gonna be very positive for ethereum when when more even more kind of institutional interest comes back because the whole of like Energy Efficiency green blockchain is going to be huge right I think that would be a massive massive advantage that ethereum is going to have over Bitcoin and but at the same time I just hold yeah also the separation of proposals

Builders and you know now we have that I think a huge percentage right of ethereum validators are um following this ufac sanctions list I guess that's another thing we didn't add it to the topics but I think the tornado cache thing is actually a significant event of this here as well yeah but so that that does raise the question of yeah like the censorship resistance is I think a big big uh question and challenge for ethereum that that is ahead what's the uh yeah what's what how's the community trying are I mean are is the ethereum community trying to remedy this

yeah I think they do have now as a sort of on ethereum roadmap like censorship resistance so I think it's it's very at least there is I think consensus that this is something that's necessary and that you know they're going to work towards and it's an explicit goal so that like something like okay uh uh you know the tornado cast more contract uh transactions are being censored to that or something like that that that's not possible so I think at least as a as a goal I think there's consensus on that and there's like research towards that I'm not sure I think there are like ideas for how to

address it no super up to date with like what the ideas are and how long it's going to take and how well they're going to work and what are the other side effects of those ideas yeah I I think at a at a high level right it I guess you know this Mev topic came up pretty late right basically D5 summer 2021 maybe even or 2020 and then flashpot's already building this tool to democratize it and then as a side effect because they are building this tool and running it themselves they get a lot of traction with it and kind of centralize this RPC layer to some degree that everyone is using math boost and then

yeah this tornado cash thing happens in parallel which probably also no one really saw coming like this and it somehow ended up with them obviously having to make the choice that they will include Essentials because they're a US company and I I guess it's just kind of a matter of time though because the goals like like you said Brian they are there and many people are working towards it I think even the flash would seem themselves right allow others to run relayers it's just that their relayer has been dominating based on kind of the traction it already had with with Searchers and validators beforehand so it's just generating more um income so but but I you can already see it going down a little bit with like

other relayers coming in and some of them not um following this the sanction list and I guess with when the full proposal Builder separation is there I I feel like it would be addressed uh so it's just a matter of time in some degree and yeah good to see that you know people realize the importance of it foreign I really enjoyed this um this panel from Defcon that we released a couple of weeks ago that felica uh moderated and there was a pretty I was like not heated but you know someone someone disagreeing conversation between Chiron from eigenlayer and and Phil Diane of uh flashbots and yeah I really like the way that SRI Ram

uh framed it which was essentially you know validators you know beyond the obvious like validating blocks and making sure blocks are like technically valid they're simply they should simply you know be a testing transactions uh and and um and notarizing those transactions just basically they're just like a tests of like the state of a block and like publish that block through the chain and um I thought that was like an interesting way to frame the the topic of credible neutrality in in the context of validators and yeah I think like the ecosystems should uh do everything it can to like

you know arrive at that goal where a validator is is simply just like a testing transactions and it's not doing any sort of um you know censorship or like choosing what transactions should make it in the block or not yeah I guess in the end the thing is like who chooses it then you know I guess you need someone to build a block or somehow to have this order I guess in proposal Builder separation you just have let's build a role and then it's kind of like outsourced to them to do this which I don't know if it changed much just shifts the responsibility I guess yeah I might end up being more centralized too right because I think uh

at least it seems like a high likelihood if you're gonna have some specialized Builder which may be pretty complex role that then you end up having you know to three parties that are like making all the blocks right like yeah validators they already have quite a few in a sense right like companies that do it like a builder is definitely I don't see how it how it can be probably less confidence I agree how are you guys thinking about this at chorus what's your your philosophy around this I mean maybe Felix is that trade secrets yeah yeah we can't give away our competitive Advantage here

I mean yeah I think I guess I think also one thing that definitely happened is that it's kind of like over compliance I would say in in for some of the people that they like just kind of put the censorship list in in practices even though like no one really asked them maybe and I think that is probably too much I think we definitely chorus write our philosophy is that we need the censorship resistance we need a decentralized ecosystem and I guess we would support that but obviously if like there's like super clear regulatory regardless you can't do this then you probably wouldn't do it but I guess uh or maybe at least then we will try to like engage with The Regulators to the extent possible for us

and convince them of the the need of this uh I guess it's already what we would support now but yeah I do feel that some of the organizations maybe over complied to this um and yes also I think we would avoid this I mean that's also my personal view of how we internally afraid yeah and including of course the right over is a U.S thing right this really applies to U.S person so that then you have like non-us um organizations kind of complying to that is I think I I I'm sorry but I think the fatf uh

guidelines probably include ofax sanctions lists and therefore anyone who wants to comply with fatf guidelines probably will no but fatf is like not a regulatory thing right they basically it's not but if they do have tremendous influence on the way Banks and other institutions and anyone who interacts with financial system works I mean maybe the us thing it does not apply sure no no it is yeah but I think fetf in their guidelines probably include sofac or like the oh faction sanctions list no I'm not sure about this but I I mean I I think if you're that

I mean the I think fatf I mean again else I'm not the next bit on this at all right so maybe I'm wrong but I think fatf definitely has like guidance that you know different countries have to do some sort of money you know uh you know money laundering controls and whatnot but then um but yeah f80 the oh fact thing is like U.S Treasury Department you know declaring some countries being like you know I mean mostly surround countries right they're all fact thing right it's mostly like oh you can't deal with Iran because the US doesn't like Iran but for example that doesn't apply to European companies

they can deal with Iran I guess where it becomes tricky is let's say if you're a European bank but you're sort of relying on you know access to like or connections with the U.S and institutions then you're like okay uh maybe we also have to comply with this even though technical doesn't apply because we're worried about like our U.S counterparties then saying like well we don't deal with you or like losing access to some kind of you know U.S financial services that they need right so I think in the in the traditional financial industry I think definitely this kind of ofax stuff ends up getting adopted by uh non-us organizations just because they're scared of like

having losing access to the U.S things but yeah so I immunity yeah yeah I think you're right I mean fetf does have uh I'm looking here like countries that they monitor and like also the EU uh publishes a list of uh either blacklisted or they don't call it Blacklist but essentially it's like blacklisted countries um so um what uh yeah with regards to like ethereum and um I think like in the continuation of our conversation here with regress to

ethereum um you guys had written here uh ZK VM and uh eigenlayer why are you so excited about uh these two things yeah I guess uh I think these were like for my perspectives I was on a bunch of ethereum conferences this year too and I guess I'm following quite closely so I feel like these are the two big Innovative or like interesting things that that happened in in the ethereum ecosystem this year I mean CK evm I guess it's just like a very technological um Advanced and quiet

uh advanced in in that space it seems so that you know you can fully um basically write normal evm solidity code and in in the ZK so I guess that might like change the way we see decentralized applications or how they work and how they scale and the Privacy components of it so I I think that could be just a big game changer in that sense and I mean yeah just impressive how how fast this CK is based also moving I guess which which we we all saw over the last two years three years right I guess it has

been really like a Cambrian explosion of all these cryptographic advances and and I think it's like slowly moving into yeah practice in the crypto networks with with actual applications around it uh and um yeah I guess that that's exciting I mean I'm personally not even you know you don't you don't even know what to expect right it's it's I think some of the killer apps will come from this uh from CK stuff in general right that because there you actually can do things that you couldn't do really before in the in the C5 or off chain world um and um so I'm quite excited about

that I don't know yeah what do you guys think about like your knowledge in general maybe or I guess ckvm specific uh yeah I think it's I mean I think it's super cool I mean um the all the I I think that the I think one thing that crypto has accelerated ZK research in a way that no other technology or industry has in the last years and and then there's all these really interesting and cool use cases so like I was talking with like penumbra a couple weeks ago and you know it just like blew my mind that you know in the you know more like in the IBC ecosystem you could use penumbra to execute transactions in IBC uh you know in in

like non-zk uh zones but you're sort of executing those transactions from the literal penumbra right like you are in the shadows and you're executing your transactions and like things like that like get me super excited about crypto uh yeah where where I have doubts is about like usability and this is always a challenge and you know for a lot of privacy preserving Technologies and applications it's it's often the case that they're used by like a small niche of people who are you know very very passionate about the stuff and um it rarely makes its way into like I think the mainstream at least I don't

have any good examples of that so yeah I hope that will SSL SSL yeah SSL is one example uh SSL is one uh good example but like things like signal and stuff like that um but SSL was implemented as a kind of infrastructure layer and and and you know in in that in that sense you know SSL was implemented to protect payment information you know in the early days of the web in the 90s like they built https SSL to protect credit card data and um you know this could be where like also where uh ZK plays a huge role is like protecting people's financial information

um for that though you need like a massive kind of adoption of crypto as a as a starting point and then a um an implementation that would allow people to remain private in the transactions well I mean I I guess the ZK thing right has like several Dimensions I'm per you know there is the the kind of scalability aspect which uh which I guess is probably where like most of the activity is at the moment um and um I think that's seems pretty promising I guess there

seem to be like issues around now you have something that have yeah I I mean the it's there's a lot of complexity there right and I think a lot of open questions still are like you know how well is that gonna work I am personally especially excited I think kind of Sebastian what you brought up is the whole privacy thing because I think this is like a huge huge huge issue it's really the biggest issue I think in crypto today is like a lack of privacy and I think it's gonna it's very scary right because all of this information is here and you will be able to go back in time and it will all still be here and now if you

see like Ai and all of the progress here like I think you can kind of have to assume that like everything will be fully known about you know what all your wallet addresses what is everything that you were doing and probably kind of soon and that's just like hmm you know really not great right because I think that's I mean from a private security perspective right like makes a vulnerable to being like robbed and attacked from that perspective of the government cracking down and stuff it makes it you know if you know I don't know there's

some doll and you can just figure out who are all the token holders and like pretty easy to shut down the doll and and I'm definitely worried that the pro I mean yeah taxes no to for sure I mean I I still think this is going to be the the main way that governments are going to like crack down on crypto I think it's going to be through taxation you know that they're basically going to be like you've been saying this for years yeah I think it's gonna happen I I feel like pretty confident on that um because it's just gonna be so easy you know like you're gonna have all of

the data uh given the tax rules and given how crypto works it's basically inevitable that almost everyone didn't pay the taxes correctly and then you can go after them and you don't even have to amend any new rules regulations you can find them you can make make their lives a pain um and I am worried that the progress uh when it comes to a privacy Tech in crypto is it's very slow it's not great uh like we are nowhere near having kind of privacy preserving crypto I think that's like how far is that away five years more right like it's far away

right like scalability we're kind of solving right but privacy not at all uh yeah and I think that is that's a bit concerned yeah I mean there is like the linear growth of these of these Technologies like people building use cases and like people trying to adopt them and stuff but then they're like you know you're mentioning SSL uh up until like the early 2010s I think it was like 2011 2012. uh or maybe even earlier um most websites didn't use SSL you use SSL when you interacted with your bank to do when you went to the payment portal but when you were just like logging in or whatever you weren't using SSL and then Google decided that it was a good idea for everyone to start using

SSL and since Chrome was one of the major browsers and most used browsers on the internet um they uh they they basically like force everyone to start using SSL because if you didn't use ssl1 your website would be um not ranked so well in SEO and then the other reason was that you would get like this big kind of like red warning this website is not secure Etc and so like that forced the whole industry to move to SSL and it would be great if we had like some sort of forcing event in crypto where like some uh you know application that was used by like you know lots and lots of people um would sort of impose uh privacy on on on users but like we're not at a scale yet where like enough people are using

crypto and also crypto is super fragmented where you know there's like tons of wallets nothing is um you know very few standards across different ecosystems I mean like you have standards in ethereum you don't have the same standards in Cosmos or in Solana or anything else and it's hard like I was I I was talking to those most about this yesterday and it's like the fragmentation at the at the wallet layer and also at the infrastructure there makes it very difficult to create like industry-wide standards yeah well I mean the issue is like you I mean someone creates an application that's like private I don't know let's say someone creates some private decks it's like okay that's nice but now if all of my addresses are like the anonymized and I'm like moving something in there and

then like taking something out like how much does it really help right like not that much uh maybe it helps with some things but maybe helps with like I don't know thumbs are more comfortable to trade because you maybe you can't like link some trade so maybe there are like some things like that right but I think the you know that the fundamental privacy super hard right I mean I guess private transact like this sort of private payments like Z cash Monera have it uh you know that that I guess seems like um you know achievable and maybe the technology is kind of there for that but then smart contract

interactions and like defy and like cross chain and I mean so hard or nft stuff how are you gonna do private nft stuff uh secret Network they're already doing it we'll see if your network was just like kind of fell apart no uh it's just like a sgx I mean they I I guess okay I don't know exactly what I guess some of the history was I think all of them now all of the history oh really I mean I'm I I also have not so I have not super closely read about this

so yeah I may be wrong but what I did kind of it was basically there's some like there was some sgx vulnerability that basically allows anyone to go back through like all of the history of the of the secret blockchain and like be anonymized like you could like decrypt yeah sure yeah I think something like this I'm not sure if that's still possible or definitely I think there is like a new architecture where I guess they mitigated it and from now going forward it would not be like that but yeah it's obviously would be a big event yeah I mean for now yeah yeah yeah I guess that's also the issue with this technology right that will not be in

production for long before you yeah you need to have like a certain time it's running to understand if it's really like non-exploitable like I guess the kind of Lindy effect so I do agree that everything would be like five plus years out I think though right if you can have private computation or like on the smart then then it doesn't remember then you can do private nfts then you can do whatever right it doesn't really limit you if you can do it like generalize and I guess that's what ZK evm and and these kind of things are trying to do um right here is a making use of the stream yard features here Seb

yeah I mean I'm on this website it's like sjx.fail and uh you know one of the like the top thing is secret Network and then I guess like some DVD technology that got that got pumped but yeah uh this is this just came out like a couple days ago okay well my uh my my meta rats nfts are now doxed exactly I guess probably it won't be there um yeah um how about yeah how about the cosmos ecosystem uh uh let's uh yeah maybe some of the interesting things here I think you know obviously well I mean they're I think like there's been some progress but it's

also been I feel like it's it's been a little sluggish um you know the the whole like atom 2.0 thing over the last couple of well I guess like two months uh has been a little bit draining I feel like on the on the community and um I'm not really sure like where things go from here um it's it's unclear to me now like I feel like there's a there's a lot of questions around what is the future of the Hub like more so than um than like when we were having these debates and um yeah like I guess interchange security

is going to get implemented fairly soon but as for all of the other you know features that um that were included in this in this white paper you know the Mev stuff the uh the the allocator all these other things I feel like we're a long time away from from seeing these things being implemented or like at least some progress being made on this front um what are your thoughts on where where the cosmos Hub is heading I mean not not that this is like the entire custom ecosystem but how did you come out of that hold the page yeah I mean I guess first of all yeah I mean Cosmos I feel like Cosmic ecosystem

is doing super well right like lots of new chains and like lots of activity the interest from VCS has increased a lot this year so there's like funding I think it's up like I don't know how much but like by a huge amount uh so I think Cosmic ecosystem you know looks super bullish now when it comes to the cosmos hub um I mean on some level this is there was always this this question right for a long time there's been this question of like what's the cause on the top four I mean there was this kind of idea back in the white paper of this IBC routing hub

but people didn't really seem to like believe in that so much and that hasn't happened and I guess it doesn't you know IVC at this point is much more like point-to-point connections which of course has like uh big advantages too and so I think it's unlikely that this whole routing Hub thing comes and of course that has kind of been I think abandoned more or less uh uh and then yeah but then it was like okay what's the hub for industry security right is is obviously coming or it seems to be coming right uh progressing well and stuff and there's like demand so I think this is pretty good right like that's something that I think was way less certain before and

now it seems like you know very likely including like a whole bunch of like solid things that want to deploy on it so I think from that point of view like the Hub looks like uh better than a year ago right nowadays of course a question of like how much value does interchange security bring and you know does it kind of justify like the market cap of atoms because I think to some extent Adam has been treated as this uh you know you buy items and you have some kind of you know exposure to the cosmos ecosystem even though that's not not really true uh or maybe it's true to some extent but you know it doesn't

like someone builds a chain on Cosmos and it succeeds doesn't necessarily mean it any any value Cruise atoms I think the whole atom 2.0 thing yeah I'm not sure exactly how things are gonna progress further um yeah I mean if you like the discussion was very vibrant and vigorous and very engaged and I think that was good you know I did have a lot of reservations around I think the way the proposal was done which I guess was shared by others so it kind of got rejected in the end it was quite close um

I yeah and I I do feel like coming back with more uh you know more actually concrete limited clear proposals uh you know it's the right way uh and it yeah I guess so let's see let's see but I I would say overall I feel the cosmos Hub has progressed in the last year although maybe not as much and as fast as one would have hoped yeah Felix yeah I

I yeah I would agree to all this I think the it's also kind of what's it's not too surprising right because it's such a decentralized system and they're so hard to convince everyone of something and I mean a lot of the things in the past even before all this have struggled to to gain the right like traction that that other ecosystems or other like centralized more centralized layer ones or ecosystems have less problems with because there is I guess just one um United like company organization that kind of pushes forward with a certain direction so

yeah I I think in this case I do agree that interchange security seems to at least have that traction I think the issue then is Right interchange security can be implemented by every Cosmos Zone and um a lot of the zones also are chains plan to kind of offer security to some some other chains like I think fmos for example or or I actually probably almost everyone osmosis wanting to also interchange secure a chain so I do kind of believe that there will also be this the smash security system in the long run that like you know chains provide security to each other uh both being a provider and the kind of um consumer so

in that sense I guess it again questions a little bit what that means for the cosmos hub if if that's the um future um but yeah overall I think the ecosystem is developing very fast a lot of people entering the cosmos ecosystem like almost everyone we speak to um or like I guess we're also pretty heavy in the in the Customs ecosystem but still you know you see a lot of teams coming in that that weren't really native or new to crypto from other uh web 2 or threat fi and they they start building in Cosmos so I think that's extremely bullish and we we've really seen a lot of new teams like that emerge and um

yeah uh super excited for that um I guess you know um yeah I don't know what your guys thoughts are on on that traction that the cosmos has and I think also that application specific I guess story overall seems to like be adopted even by other ecosystems like ethereum with the L2 stuff so I do think Cosmos uh what's on the right path and the first is the law in that sense I think the I think um I I call you sentiment about the uh you know like just tons of people coming into the ecosystem what I think is really exciting about that is we have all these people who are coming to the ecosystem that

you know weren't weren't in Cosmos before like these are like new people they just like found about found out about it on their own and now they're using the technology and they're using it to build things um that they think are interesting or valuable and uh it's bringing all this these new ideas and this kind of like diversity of like people and backgrounds to the space uh that you know makes for like really good Innovation and like um uh like a good like lots of great ideas coming into space just generally um and uh yeah like the app the app chain thesis seems to be also picking up in other spaces as well I wonder like I the thing that I'm struggling to to like

wrap my head around right now is how the app shooting thesis and the modular thesis um sort of come together you know uh do they start overlapping at some point do app chains you know merge or slowly become you know a more modular either through shared security uh by Outsourcing uh maybe like parts of the settlement uh or data availability to other to other kind of infrastructure layers and uh yeah I think like this whole Space is super interesting to me and I find that like any Innovation and like any kind of new design patterns happening in the space is uh you know it's great because like we get

to see we get to figure out which which is the best way to build this stuff so that scales and it could be usable and like it you know uh remains secure and maybe also by scaling it and by modularizing it at some point we can start putting in more like ZK and privacy layers that um that spread out across the whole ecosystem foreign yeah I mean I I totally think right that that this experimentation is yeah what makes Cosmo so strong right and then

you can have like one chain to like a certain thing a little different way and if it works out right others will adopt it so I guess this emergent properties um it's a very strong starting point and yeah then let's see when Celestia comes along and all these these things how that will change the space I am definitely excited for that I think also you know like from some of the new teams like say and there's so there's also like talks of Layer Two on Cosmos you know so basically that kind of uh this this structure uh also being adopted in in Cosmos uh and maybe other VMS so that that seems super interesting yeah

Brian uh I know you want to talk about her but uh yeah you can talk a little bit about that uh yeah I mean there's definitely some one things I've been most excited about this year and uh yeah I mean we've done some podcasts about it too and Nino's at the conference in Miami in uh September I think which was pretty great and you know this I mean it's like an old project right that's been kind of developing for a long time but I think has evolved into more of a vibrant ecosystem with other companies and I think there is uh you know the crypto synergies are

also becoming coming more up um you know some examples of that include you know bar where you know the building basically a ZK roll up blockchain on orbit uh it's kind of like ethereum roll up but like on orbit and using like you know smart contracts are written in the kind of urban language so it's pretty powerful right because you could write like your application uh in this as long with your smart contracts and of course the way Urban applications work is that they're running on people's servers right so you and that becomes I think quite relevant when you tie it in with some of the

things we talked about before around you know trying to crack down on front ends and regulating defy and um there was I think it's just I don't know two weeks ago a few weeks ago I saw someone show like a demo uh you know them having the Unison up front and running on earth right because uh you know that's pretty powerful right because you could just take the front end deploy in an orbit and then people can sort of run their own front ends and interface with that and then you don't really have that ability to regulate front ends anymore so I do think that it's uh it's a more resilient way of

um of addressing some of these issues around uh you know some privacy right like you can have a lot more privacy this way too and uh you can have more control it could it could be more censorship resistant so I do expect that you know we're gonna see a lot more of that now Urban is still kind of early as an ecosystem so it's probably another year or more until that kind of stuff really starts working um but you know I think it's it's coming and um and I think it will it could end up

becoming like you know very powerful where it becomes kind of this like operating system player uh for crypto there's also one thing actually there's a very in a way one of the best arguments I think for urban and crypto is ironically this you know big criticism of crypto where um you know the the signal founder Moxie Marlin Spike wrote this article [Music] um let me just look for it briefly so it was it was a few months ago and was very widely shared uh my first impressions of web three we can put the link in the show notes um but it's basically he you know he was

like okay this crypto thing is nice uh well he's like well they talk about all this decentralization and and maybe there is that kind of decentralization like you know on the blockchain level but then when people actually interface with this stuff right it's you're using some RPC note that like you kind of trust or at the very least they're like tracking all your data and you don't have any privacy and he's like what is this and he talks a lot about like you know here people don't want to run their own servers and never will uh and so he's basically says like hey crypto without people running their own

servers like doesn't make sense because he's still trusting others and uh and of course that's exactly what everybody is addressing right to make it really easy for people to run their own server um and yeah and so I think it's I think it was yeah I think it's all going to become very important and uh you know a tremendous area of like Innovation and growth and and sort of merging of I think orbiting crypto that's going to happen in the next you know year two years three years not not to like dive deep into make make this an Arabic dive deep deep dive but can you uh can you run like an orbit

server on your phone or something like that or is it something that's possible to do on on this sort of device or does it have to be like an always-on kind of thing or that you know where you're either running on a computer in your house or like on a Raspberry Pi or on a server or a VM well yeah well it doesn't it has to be on when you use it right or when you rely on it so you could have it run on your computer I mean you can do that right and then you could just uh I mean it's definitely it definitely works in terms of you know the amount of resources needs totally totally suitable to run on on someone's computer uh maybe you could run in on a phone

uh I don't think that's possible today but maybe you could the issue with that though is if you think of if you think of um it like if you're using like a SAS product where you're using some application and then it into it interfaces with like a server right then and maybe the application is on your phone or on your computer or somewhere else then you need that server to be running uh and you know that service may be on AWS and it's by some company so like you can rely on that that works so when you in an orbit world uh let's say now you have a smart contract

app it and you wanted to use on your car and on your phone and other times using on your computer and stuff you you will want to speak like you basically want to make API calls to your server uh and if the server like let's say if you have it on your computer and then your computer is not running and now you have an urban app on your phone and you can't use the app anymore because you can't talk to the server right because the computer is not running right so I think uh so I think it's going to depend on like what are you using it for I think if you like let's say you're using it for like I'm just I'm doing crypto transactions with her a bit right and I have it on my

home computer and I'm just booting it up when I'm doing crypto transactions and otherwise like I think that should actually work fine uh but if you use it if you want to use it as a more I mean the ambitional verb is much larger right to do a lot more things then I think you do need to have the always-on thing uh could you just let the state be safe like could you say like have the state like the encrypted State just sink to say like an iCloud and then your phone just is always kind of syncing in the same way that you use like a Google Drive sync or something like that you mean you're sinking your Urban server to the iCloud and then you're syncing the phone from there yeah I don't know like I don't know what

like whatever well I mean I suppose there's data in there and there must be like some package that you can just kind of sync well but if if you are thinking you're like if you have your your Urban node on your phone and then you're sinking into the cloud uh and then you like thinking like you communicate with that from your phone then why not just run it in the cloud right like what's the point of your yeah I guess yeah uh I I think there's like two I think there's like basically two paths right one is that you you having you're hosting it with a third party in the cloud

uh or the hosting of the third party who guarantees reliability and stuff so we have been actually working on that of course one right to like build this stuff and I think the other option is that you're gonna have like a divide like a hardware device that's like on you know in this also company working on this this one called native planet looks really cool uh but uh you know they basically have something you can just plug in at home and then there's your orbit thing and you know you'll be able to connect with it and it can always be on or there could be more limited use case right if you say like oh I'm going to use it for crypto and you know I just use it when I use it and then it runs on my computer and otherwise it's off and

and I think that actually makes a lot of sense also because maybe you want to segregate it right maybe you'd have like one orbit where like you're doing a communication stuff maybe you have another one where it's like crypto transactions and that you run on your own computer at home and it just runs sometimes so maybe something like that could make sense overall though it's it's easier to run like if you if you would say just compare like a orbit node or ship or whatever it's called with with the with a ethereum validator or something you think yeah it would be much easier to run it yeah yeah definitely and even if you go down right you could do this immediate like that

Financial penalty or no there's no Financial penalty you're going down at all yeah so also you don't have to sit if you boot up again there's nothing to sync right there's no like yeah state um I had another question do you have upgrades or something for the urban software on this yeah but they're all automated like you don't have to do anything okay but and then who decides What's the upgrade or how is this well I think depends on the kind of upgrade right uh but uh I think the apps can upgrade themselves right or um

if you have a more like if it's like a a whole network level yeah a little upgrade and I think that you know there's kind of like a governance body that will have would have to vote on uh you know if there's like some very low level upgrade um but that those are I mean the whole design of it is that this is like those would be extremely rare events or like you get to the point where like that never happens um I think that's gonna be my Christmas uh vacation uh project I'm gonna install an orbit server on my I've got a little server here in the house so I'm trying to set that up oh cool that sounds great um is there anything else we uh

we wanna uh we want to talk about here I think we cover most of it yeah I mean there was Salon is there anything and uh your thoughts on that shorts what's what's going on with Solana and what is this yeah the secret system given the pain they're suffering yeah I think it's like a big trial by fire right of the whole community and um the resilience of the ecosystem I do think there's a lot of like developers on there right there's dabs there is thieves that are doing interesting work and and I do think will come out stronger from from it um you know

funnily enough right there was the breakpoint conference the second one this year just before they hold FTX collapse and um I felt you know the stuff going on there are even like one of the first ecosystems or I think actually maybe the first outside of ethereum that is working on client diversity in a serious way right with jump building this fire dancer client that will essentially also improve the performance of Salon even more in and kind of finally uh even like create a spec for what Solana is and I guess also improve the actual Solana Labs client itself so I think that that's a very mature sign of maturity

and um yeah so overall I think quite exciting here to stay and um keep building keep building I think that's uh I think that's probably a good note to end on and and certainly um I guess the the sentiment that a lot of people who are building um have right now you know beyond the flood and everything I think the overwhelming narrative that that I see on like crypto Twitter and you know people who are coming in the podcast and everything is like just gotta keep building and I mean like we've been through this before

already and uh we built and like we built a bunch of stuff during those during those those bear markets and out of all that work and Innovation and uh came new applications and so yeah I think just keep on biddling yeah absolutely I think nothing really has changed right like I mean a lot has changed and nothing has changed right I feel like when it comes to it like yeah the why and where it's all going and stuff it's it's I think it's the same and it's it's just a long journey right like I mean we're still I mean we talked about the Privacy thing

right and I think everyone was always aligned that okay privacy is essential there needs to be privacy or pretty much everyone but then also like oh it's like five years of 10 years old right so I think for crypto to really like realize is potential you know it's another you know it's 10 20 30 40 years ahead still right like it's a long long time and but still so exciting and so much happening and so cool to work on it yeah I mean I think like we're still super early and I keep telling us to people you know like uh look look at 15 years ago where the web was and like in

like 15 years ago we didn't have you know secure websites we were still using flash to do video uh you know there was like no unified experience between browsers and certainly not between mobile and desktop um yeah like it it was like a mess I mean I was building on the web 15 years ago and like it was really hard and uh there were all these problems that um we didn't know how to solve and we solved them in the last 15 years and you know we think that like we've always had you know flashy mobile phones like we forget that 15 years ago like building on the web was a show and it didn't scale very well and um and then yeah massive investments in

infrastructure and tooling and and standards allowed us to get to where we are now and we're still at only 60 of the population using the web of the world's population you know so yeah it's a long game um yeah guys uh this has been great and um I wish you both uh Happy year-end holidays and also to all our listeners uh thanks for tuning in and thanks for being here for with us for yet another year and uh we'll do this again next year yeah thanks so much looking forward to episode 500.

it's coming soon all right yeah bye-bye cool thanks so much everyone and enjoy your holidays