Fed Payments Innovation, YQ on Black Friday, Virtuals, Daylight, and Synthetix Trading Competition

Transcript

[Music] Hey, Heat [Music] up here.

[Music] Hey, hey, hey. [Applause] Heat. Heat. [Music] Heat. Heat.

[Music] Heat. Heat.

Hey, hey, hey. [Music] own blockchain that has you know subset >> indeed we are live >> finality that that makes it very you know >> own crypto done you don't have to wait for probability there's no 51% concern

um using something that's very stable like a USDC as s and >> let's confirm that we got audio including primary. So it's just very important to say you you got to combine the programmability. >> We're going to get to our guests here in a little bit. We've got a banger show >> really unlock these >> use YQ who put together like a sevenpiece retrospective on Black Friday last week. >> Also market is >> one point of encouragement for anybody who is hosting it own crypto conference has to be bullish but also we're seeing a turnound in the gold market.

Wow, we are pumping >> total revenue the bank doesn't back to people who utilize software to eliminate some manual step whether it's recon or payment scheduling or otherwise >> there's a lot you can do with programmability that is technically better than people using bill pay services to schedule a payment right but it has to be much better in order for people to change the behavior like the law of good enough works against any new technology because if the existing method works Well, >> all right. We're going to get to our guests here in about 15 minutes. Had to jump on a little bit early for you guys.

>> We're going to use the Fed payments. You have to be able to demonstrate some significantly better value. So demonstrating programmability, showing people, hey, you can program the payment so that it moves uh consistent with, you know, your payment contract is not meaningfully better than just pre-programming uh, you know, your uh whatever sourcing software you're using to initiate an a instruction at the point in time when uh you've hit the date that the payment is due, you have to actually focus on the integration, right? That is the place where uh you can improve a step. So instead of having to pass contracts and have somebody sitting, you know, in a bullpen somewhere work in AP files, uh that there are agreements that are

standardized at the time of the procurement uh that then pass straight through to the financial institution uh or the wallet provider uh that then automated just because it owns. >> Who would have thought that this would have ever happened? All right. And then I think we have a follow on here for Heath. Um, what's actually production ready now for enterprises? Um, and specifically around things like elicit activity detention, uh, and where are false positives still going to bite us?

>> Yeah. So, so the whole area of making sure you're on something that's trusted, right, is in many ways critical for enterprise adoption, right? um an enterprise is going to feel is is going to be extremely hesitant to risk its reputation to go on a blockchain where potentially North Korea is a validator, right? And so there are always factors like that that we're taking into account. So for example, ARC, the blockchain that we're creating, will actually have permission validators. So everyone will be vetted in in advance and and also making sure that that the the institution that you're getting the digital assets from has an AMLCTF program. It's compliant with the Patriot

Act. All of those things matter. >> All right, next up we're going to interoperability and orchestration. This one's for all of y'all, so feel free to jump in. Keep it clean out there, boys. Um and uh where is >> these guys and these guys? Just keep clowning one another >> clowning the ninth biggest bank in the world >> actually I can get started from the consumer standpoint at the end of days it's not so expensive to maintain some liquidity buffers to orchestrate because even today like it's it's still pretty aggregated like the question is what happens if we end up in one of these like vertical situations where it's so uh atomized know that that but but right now my you know from the consumer

standpoint I would say we don't see that being a a big issue you need to hold some liquidity buffers But but again no like you don't really have FX exposure you have some credit risk that you need to manage but we have encoded that being a a big problem keen to see like on the on the scale side how do you guys perceive it know but but on our end it hasn't been a big deal >> I given the interest that we expressed in crossber payments it's the on-ramps and the off-ramps it's the point you made earlier about the need to cobble together your own ecosystem if you want to move money utilizing stable coins today the actual use of the rail is much easier than getting money in and then getting it out in another jurisdiction, ensuring that the person that you're paying has the ability to accept it and

to convert it back to fiat. Um I my my big fear like I think there are lots of really interesting things that can be done with tokenized deposits, but that's the place where I think the interoperability issues the biggest. If we can land on a handful of call it standard uh stable coin payment rails, I don't know that interoperability is a problem so much as it is just getting to a point where uh the uh adoption on both sides of the network on the send and the receive side are native as opposed to through a third party and then a transfer.

We're in a bit of a strange interregnum where the Genius Act has passed uh but and you can be uh forwardlooking Genius compliant but you aren't genius compliant today and uh and so that's actually created a huge proliferation of stable coin issuers uh from a white label side and otherwise and so I actually think if you had a moment of risk uh where something could go wrong it's probably now between now and 18 months from now uh because you have so many uh different firms that are operating in ways that um uh may or may not end up uh looking uh like they've aged well. Uh but I do think that once genius comes into effect when the rules are put into place and everyone is uh

have to follow them which I guess gets you all the way to three years from when it passed um you're going to have a clear set of rules and that should create a level of u fungeability uh that can be relied upon uh as long as uh you know the standards are widely enforced and I think also adopted in a number of different international jurisdictions uh so that you create this capacity where it is truly cash and cash equivalence. Um and I I think that's where we'll go. And so between blockchain and standards, you do create a capacity to have um interoperability um in a forward-looking basis. You don't today uh because stable coins still uh have counterparty risk to them uh

depending on exactly how they're constructed. Uh most of them still do and certainly a lot of the new ones also do as well. And so that's where there's a real interesting uh dynamic that exists right now. I think that also um and this is really I think Tim's point there is a lot of complexity around having to be able to manage that liquidity because those are not the same liabilities. Uh they're almost in some ways akin though not the exact same thing as a deposit uh because um you know you have the counterparty risk related to them. Uh I think that'll all get worked out over time and you know we'll get to that end state where um I think that will lessen uh maybe either the capital that you might have to hold

against stable coins, the amount of risk limits that you would have to put into place. Uh fired up charges that you might need to carry. Uh but I don't think we're there yet. >> Uh so we're seeing these guys that post on Twitter all day in suits up there. >> You asked about orchestration. And I think and this goes to sort of Tim's point about sort of not not unsolving problems that have been solved. You know, a lot of the domestic payment system works rather well. There there are obviously improvements that can be made, but once you step outside US borders, it becomes a lot more complex. So, one example of orchestration is something we've created called the Circle Payments Network, where we have institutions on various sides that are orchestrating FX flows using what

Governor Waller has called the stable coin sandwich. But uh right now to send money to to Brazil from the United States or European Union to the United States, it can take up to 72 hours going through various correspondent bank accounts. >> We've been able to get that down to 72 seconds using uh basically fiat on either end and then the stable coin rails in between. So it's a great example of where orchestration as you as you you ask the question actually can make a difference to solve a problem that is a real barrier to use case. The other point I just want to think about is is tokenized deposits. We've mentioned it a couple of times. There's a couple lines in the Genius Act that

just gives a scant reference to it, but this country has never really thought about tokenized deposits and the potential impact on the banking system. And and as a former regulator myself, I'd ask the question, I think you used the term used 490 996 banks in the United States. Yeah. If in fact 5,000 banks in the United States, many of which are community and smaller banks immediately overnight tokenized their deposits. They moved at the speed of the internet 24/7. As a bank regulator, I might be a little concerned about that, right? And so I think if we are going to go down the road of tokenized deposits, unlike stable coins that are backed onetoone with very high quality liquid assets, if we're using the fractional reserve

banking system which is subject to deposit insurance, the discount window and essentially a government um intervention model and we're going to tokenize that and and move it quickly through blockchains, I think more public policy work should be done. >> All right, then we're getting to the last question here before we open it up for Q&A. Uh this is for for all of you all. So please jump in. Um great tech always lets you do uh old things uh better and some new things that you couldn't do before. Uh could you all each please give one example of a use case that you think are going to become possible using stable coins in the next one to two years that are maybe not possible today. Um and maybe as a bonus if you want to get AI agents in there somehow. But y'all go for it.

I guess I can I can get started but um it was kind of mentioned already uh by by team before but the idea of having a large financial institution initiating uh transaction on blockchain is literally game changer because you suddenly move into 247 uh money movement made instant right so I think that would be like a the you know biggest change to to expect on that side I would say >> um I'm really excited about the potential for funible collateral that can move around the world and across exchanges and otherwise uh that uh we have a couple of clients who run large exchanges who are exploring that sort of mobility and it would make a material difference to the institutional investors uh and counterparties that trade on those exchanges.

>> Um I think one of the interesting components is that um if you really kind of uh look at the dollar on a a first principles basis, it's basically a wrapper. uh you know it's kind of a wrapper today for uh government securities uh maybe some gold some other things that are on the Fed balance sheet it's a it's a wrapper and uh but you know essentially a stable coin um is an even smaller subset of uh what the dollar is it's basically only cash and cash equivalent only T bills only overnight repo uh and some bank cash and um uh you can imagine once you have start having tokenized treasuries and tokenized repo as Tim was saying you can actually completely change the way in

which the collateral mechanisms work uh for how you could run repo programs um how you'd be able to instantaneously be able to create a stable coin on chain a lot of the frictional elements of stable coins start to disappear um it actually becomes you know quite democratized and you know I think >> this is pretty insane >> so many come up around the governor coins pay interest and I think the genus act struck a good compromise but in some ways I think um uh that they're removing the need for intermediary banks to access Fed rails tokenizable issuers, >> regional banks, national banks, any eligible institution giving you yield into something

>> will be able to interact directly with the Fed, you know, >> and so artificial construct >> closing the gap and making the distance between stable coin issuers >> and the origination of money, literally the money printer, they're closing that gap and making it as short a distance as possible. themselves be able to move just like a stable >> stable coin issuers have greater access to capital. One area you asked specifically about AI that I think about and this may be beyond 12 to 18 months but there are people right now that are thinking through these issues and working on them is sort of the economics of AI itself right if I have a website encyclopedia and AI is visiting that website calling data from it uh it's it's possible in the future no no one

will visit my website anymore so I'm a producer of data I'm a producer of content and at some point you've got to interact with the AI and perhaps charge something. And I can't help but think that aentic payments plus programmable money, stable coins, could play a role in that whole new emerging economic system that we're still trying to figure out. All righty. And now we will jump into Q&A. Uh our first question here, of course, is coming from anonymous. Uh and uh this one's for Charles and Heath. Uh fast forwarding a decade, how do you think proof of reserves will work and how will it be different from how it works today?

Well, the good news is we've got the Genius Act that'll be implemented. So, we'll have the transparency that's there. But I think if you potentially combine that with AI agents and and zero knowledge proofs, there could be something there as well. But right now, the Genius Act solves that through transparency, through audits, through sort of the the old-fashioned way. It's entirely possible there could be other ways of of making sure that those reserves are confirmed as well. >> You know, the way it works today is uh I think Circle and and and us we do monthly addestations. Uh we have KPMG and they look at what's in the bank accounts uh which is actually the hard part and then they look what's on chain and they say yes that that matches up and you could try to do that more

frequently but it's actually the complexity is is not what's on chain it's what's offchain. uh and you know how to get that snapshot and you know be able to get it reliably and um uh maybe the way I was just answering the prior uh prompt is that when you start having the underlying assets onchain uh for the stable coin well then you know it's very simple uh you know it's like very easy to do that match and be able to see it completely directly in real time at all times and so I don't think it's going to be take 10 years to get there I think uh you know the tokenized treasury market is already starting to grow and it could be quite significant in a relatively short period of time. I I could imagine in something like three or four years uh uh situation

where you know maybe the percentage of your reserves for a stable coin that are not um held in in on uh chain format uh could be quite low. Uh but ultimately you have to have it be 100% in order to be able to really have it be 100% uh uh matched uh same to same. Uh but I certainly think we're going to get there. >> All right. Uh, next one here is uh for large volume financial market settlements. What resilience features should stable coins have beyond those required in the Genius Act? This one's for anybody.

Maybe the Genius Act is perfect. All right, I guess I guess no one's got anything. Genius Act is perfect. There you go. Thank you, Senator Hagerty and team. Um, all right. Uh, Chad, here's the question you were expecting, of course, with the problems last week. Uh, what what went wrong with the minting process? Did the blockchain work as expected? And I guess for context for those who don't know, I think last week PayPal for 24 minutes or thereabouts printed 300 trillion dollars and and then unprinted them. Uh, we printed it actually. Uh, don't cast dispersions here. Uh, mistake was entirely ours. uh certainly we didn't operate at the standards that we expect of ourselves.

Um you know there's an interesting uh situation where you try to determine where does it make sense to uh be fully automated? Where where does it make sense to have manual interventions in order to be able to create uh additional levels of security and uh in this case our operational uh uh manual processes were put into place for a deliberate reason in terms of being able to create uh very secure cold minting uh processes. uh but it's something that we rarely use. Uh and so uh that led to an error in how much was minted. We knew within you know a minute or two it all was contained on our system. It never left our system which by the way should never diminish uh how seriously we take this. Uh but it did of course lead to

there being an over mint of a fantastically large number. Um and um and of course the unwind of it. Um I think that um you know uh the importance of this to me is it underscores the value of the blockchain. Uh it actually shows the transparency that you can immediately have into what's going on. And so in this case uh an operational error um that was entirely internal to our systems uh is now immediately visible to everybody. Uh so I'm sitting here of course talking about this um and making it really clear about what we could do better. But that's important because that means you can have this level of transparency throughout the entire financial system over time. Uh that's a really positive thing. uh you

know it's of course um uh painful to go through but I think you could just imagine having a world where you would be able to see exactly what's happening in real time and being able to have that level of transparency to understand how uh firms are functioning and that can create um confidence in the financial system in a way that the opacity that exists today um has really limited and that's why you get accelerator effects and that's why you get run on banks is because you don't know what you don't know um and so you're never going to have a perfect world where everything is completely be transparent, but the more transparency they have you have, I think the better the fin the financial system will be over time.

>> All right, I think we have time for maybe one more question in here. Uh, and of course, this is a nice nice phone one for us to wrap it up. Uh, if stable coin issuers can theoretically have Fed payment accounts themselves, what need is there for banks in the workflow? >> Well, there is a a big value intermediation, right? and and and you know like uh if you don't have bank deposits then the bakery perhaps cannot get a loan and and there's a massive value in that and I think like anyone who's rejecting that value is not really understanding how the economy works. So of course there would be a lot of value for banks. No and and perhaps this might be like a sort of Marxist view but if eventually bring transactional value to cost to zero and and the margins get compressed on transactional business

perhaps the implication will be that financial technology will be all about balance sheet in the end right. So so so perhaps the question will be the oppos you know and and you know banks will be even more important. >> I may just leave it at that. the the um I don't know that I I think the point that you made Fernando that's dead on is I don't know how much people understand about the business and not just the role that we play uh as a safekeeper of deposits but as an as a provider of multiple payment services uh as a lender >> ask these guys what role do banks play if we close the >> intermediary perspective >> why do you need to exist please justify your existence

>> and I just think at the end of the day uh all complex ecosystems require integrators. Okay, they just do. And uh there for the average individual potentially short of healthcare is no more complex, opaque, harder to navigate ecosystem than managing your personal finances. Uh and the byproduct of that is with the exception of people who uh live dayto-day there there will be values to bundling and to the buildout of uh there will be value to bundling and the buildout of services around uh the actual currency itself because if that wasn't the case then you know for the last 50 or 100 years we would have just been carrying stacks of cash around in wheelbarrows right

>> and maybe I'll add my two cents with two hats on. first my circle hat, then as a former regulator. So, wearing my circle hat, I mean, we put billions back into the banking system. It's really important to us that we're able to to put money back into the banking system. So, it is in fact uh continuing to do that. >> Guys, welcome back to the bull marketation credit intermediation. >> Took a little time off there for about >> we are very supportive of that. Last thing to do is have a situation where the banking system is disintermediated. Right? Stable coins are meant to be a payment mechanism meant to be a version of cash. wearing my former regulator hat. There are however certain instances and I witnessed those as CFTC chairman during the COVID crisis where our

clearing houses in the United States uh the large important financial market utilities that didn't necessarily have a title 8 designation and therefore didn't have Fed accounts found themselves a wash with cash. tons of cash for variation in initial margin with no place to put it because the banks to to argue your point many your point out there is the supplemental leverage ratio disincentivized banks to hold cash and therefore we had a scenario where the clearing houses had all this cash on hand banks didn't want to take the cash and we were in a major conundrum so I would say there are instances where having a deposionly account not discount window access not

any kind of you know borrowing facilities but just a safe place to put cash in certain circumstances would probably provide a stability back stop for the stable coin industry. Hm. >> I also think um you know one of the important benefits of genius and having payment stable coins is that you can now separate um fractional money which I think is very important from uh money that you're using in the payment system. And so having nonfractional money that is able to move through the payment system creates a capacity for there to be more resilience in financial crisis where you can have accelerator effects or you can have run on banks. And when they were conjoined together, which they really had to be because of just the

limitations from a tech technological standpoint, uh you know, you had whole parts of the payment system that were locking up when certain banks uh were having problems. And um actually having uh some capacity to have those not be totally inter intertwined uh can be very effective in times where I think there are systemic risks that uh really become uh endemic in the system. And uh certainly part of that could be having uh use of a Fed master account. Um and it doesn't even have to be necessarily going in be able to go into debit at the Fed. It's simply being able to have funds that you're able to put at the Fed. And so in that way you can uh not necessarily disintermediate the banking system, but you can create a mechanism for intermediation to continue um uh

through the payment system even when there are times of stress. >> Um all right, actually we do have a few more minutes. I uh misread the the clock. Um, so a couple more for y'all guys. Uh, any thoughts from this group on how the issue of revocabil revocability will might be addressed in the stable coin ecosystem? >> Kyle Smani having trouble saying words. >> It's probably for me >> revocability. >> Yeah. So, so it's very important that transactions on blockchains are irrevocable. And as I said before, one of the things that uh the the Basel committee and others have said is a shame not to have up here. clock changes the fact >> USDC circle still has a regulatory mode >> uh 51% attacks and you don't have you

have probabilistic settlement as opposed to final deterministic settlement. So no question that anytime something is on a blockchain we really do need settlement finality. That's a separate issue than the one which is in a world of consumer payments where chargebacks have become an important part of the way that our consumer payment system works. Is there the ability to create some kind of opt-in as an application layer on a blockchain to facilitate chargebacks, right? To to bring some of those great things that we have in the scaled financial system of today into the web 3 world. So that's the way I think it's

it's an entire if if there was a need for something like that, it would be done through an application layer that everyone would opt into voluntarily and at the same time preserving the the um the irrevocable nature of the underlying blockchain transaction. >> All right. Uh going down the list here. Uh just one >> I think there's a really interesting question on this one because >> this fifth third bank guy is >> clearly a pro knows exactly what he's doing >> use cases that are not amendable to being switched right I think one one of the things that drives me nuts is whenever we try to compare the cost of accepting a stable coin to the cost of

accepting a credit card payment because if uh the decision on what sort of payment to accept was entirely in the hands of the merchant, right? They wouldn't be accepting credit cards today. The reason they accept credit cards is because people want to pay with them. And people want to pay with them because they want float or credit uh or rewards or the consumer protection associated with uh the ability to charge back a payment that you didn't make. Right? So, those are features of the product. we spent too much time on the and and those features require economics to be able to provide them right it's just a simp simple utility um and the economics around the payment uh you

know then are attached to that the provision of those sorts of features and I my my own personal view on this one is we could spend a lot of trying time trying time trying time trying time trying time trying time trying time trying time trying time trying time trying time trying to replicate the feature functionality uh of all the different legacy payment methods and get nowhere because what would happen is the cost to accept a stable coin would have to go up in order to support all of these sorts of benefits and in turn you wouldn't see any sort of value shift where where as we have payments that move today in places where uh revocability isn't a requirement right it's not a valuable feature and just mining those markets has got to be a huge tam for people who uh are out there so trying to get every rail to do

everything doesn't seem to me to be the right long-term solution. Uh, you know, g given that the rail that exists, the tech that exists today, there's a massive capacity overhang to do things where some of the things it can't do aren't a big problem. >> How did how did no one call out >> when they're talking about irre irrevocability? >> Uh, >> they didn't refer back to the 300 trillion that got minted by stable coins. That was an example of revoking these coins from the chain, >> man. I feel like that one's mine.

And the the I'm fond of uh I think it's one of the A16Z folks, but that uh you know the saying that the sort of battle for any market comes down to whether the incumbents get the innovation faster than the disruptors get distribution, right? And I that's what you're going to see with all of the legacy payment utilities here is that legacy payment utilities have to find a way to rewire around new technologies, new protocols faster than the uh >> All right, we got YQ in the back. You know, >> we're live. We've been we went live a little bit early today so we could watch this uh Fed crypto.

>> I don't know that I would handicap, but we're gonna get up just been reacting to these guys. Kyle Samani taking on the suits. He's in a suit. All right, whenever whenever we're ready, let's get YQ going. Beauty. Here he is. YQ, welcome. Dude, so much has happened. We had an entire bare market and now we've resumed the bull market since you started posting. Yes. Uh about Black Friday. You wrote like a seven-part epic book about Black Friday, man. Um, and now we're now we're starting to to recover. I don't know if it's the gold rotation. I don't know if it's, you know, this Fed conference,

people signaling like there's real adoption here. Um, before we get into the more recent bullishness that has taken part over the last few hours, really, it's super recent that these things are rebounding. Let's go all the way back to what, 10 days ago? And >> yeah, it's exactly 10 days ago. Yeah, >> exactly 10 days ago. Um, you put together a ton of content essentially reconciling what happened during this Black Friday crash, the auto deleveraging. Um, we're still seeing things come out. Saw something today about a Binance market maker that effectively got his positions closed. He had a risk management system that worked for something like four years and then all of a sudden it just broke on Black

Friday. you know, we we've since that happened, we've talked a lot about auto deleveraging and kind of like picking up the pieces, but what do you think are some of the most important takeaways as an industry so that we avoid anything like that ever happening again and we can rebuild going forward? >> Yeah. So, yeah, thanks thanks for the invite as um as Robbie mentioned, right? Um somehow exactly during this episode the market has a very strong recovery. I mean I I I literally saw Bitcoin like rise to like I think 100 10 or something thousand dollars right now. I mean yeah the the the thing as uh Robbie mentioned

right uh like exactly like 10 days ago we had this Black Friday. I I don't know why it's always Black Friday you know it's not always Friday like Thursday or Black Monday or something. Um but but like when we dig into like sort of a lot of these details, we figure out like actually it was uh two uh major liquidations. The first one around like sort of I I will use the Singapore time zone. It's around like uh 5:20 a.m. uh on Saturday and I I I think it's like 9:20 something uh in this US time zone.

And then like sort of uh it was a first round of liquidation like basically major uh on the all the majors bitcoin eth and uh later on like sort of uh down 80 or 90% of all coins um somehow I at that time I was still awake and I literally watching like sort of all this uh waterfalls of all the altcoins like even this atm right this cosmos token down to almost zero. Um that that's sort of the first liquidation and then there was the second one. Second one is basically the depaging of USDE BNO and also WBT.

>> Yeah. So we we really like like sort of until right now as Robin mentioned right people are still trying to figure out sort of what are the root causes and based on the existing materials and also some statements from Binance and also from different exchanges uh DAX we found out for the first liquidation um it's sort of like a bunch of uh interesting um like sort of findings. The first thing of course this tariff sort of announcement and after that a bunch of market makers withdraw the liquidity and after that like sort of there's a lot of uh this kind of liquidation happening on Binance and bunch of the CEX and DAX and after that it trigger this different

ADLs and then the system became super busy and then like sort of a lot of market makers couldn't even play place be or they couldn't even withdraw liquidity. So in that case like we saw this kind of a liquidity uh vacuum and and basically that further caused this uh downside of these a lot of coins and then we saw the first uh liquidation um during that day and then after that we figure out like okay um after like around 10 to 20 minutes right around is 543 we saw the second major liquidation on USDE basically causing a DPAC uh there was around like over $60 million

US worth of tokens or USDE got dumped on like sort of Binance and different exchanges and then it cost the packag on sort of Binance after that basically you can see we got a lot of collects from this BNO and also this WBTH and then we further saw this kind of depack of these assets since they are not like 100% like sort of uh packed into ETH or the stay ETH or stay. So um and also and also there was an announcement like sort of one week before this kind of liquidation saying that uh Binance is trying to fix like sort of the index price for being

so and also WTH. So that's why we feel like uh it can be a coordinate attack on this sort of like collect and a further attack on Edina. So then that that's sort of like the somehow like root cause of the second liquidation basically pegging because a lot of these assets they are um their uh index price actually um is uh composing of different oracle data. One of them very important part is the spot price uh from the like sort of the exchange. So because a lot of dumping pressure at that time so a little bit deep hike on the spot price and after that it caused

this kind of cascading liquidation of a lot of users uh uh like accounts because like >> a lot of the accounts they are cross margin it's basically unifi account if if one sort of token down super bad and if you have some lending and borrowing at the same time also you use it for per and uh and in that case will easily cause this cascading like sort of liquidation. So so far that's sort of the analysis for these two liquidations. One is mainly on it sort of these all coins and the second one is mainly on this kind of um USD uh being so and WBET.

Um and the root cause are quite different. The first one I would say like sort of this downgraded services of CX, DX and also the market maker liquidity volume. The second one I think being mainly about this Oracle depaging and really cause a lot of these assets got further liquidated and then cause a massive like sort of cascading liquidation and uh then as you can see right it's basically >> uh make this black Friday as the biggest uh uh crash so far in this crypto history bigger than FTX. I think it's around like 20 billion dollars even more because a lot of people saying that a

lot of data from CX are not correct basically they are not reported. Yeah, >> man. One of the things that you mentioned is that, you know, Adam fell almost to zero. There were other coins that fell significantly more than, you know, like I'm not a big fan of Adam, but I'd be buying Adam at 1 cent. You know, you pro probably same for you. But you're saying that they couldn't place bids. No one could place bids. And and what you're saying is that we couldn't place bids because there was downtime, right? There was B B B B B B B B B B B B B B B B B B B B Binance was down. Coinbase, Robin Hood, everyone kind of had de deprecated services as a result of the load that was going

through the system at any given time. Is that what led to or or are you suggesting that there was more nefarious or malicious purposes as to why people weren't able to place bids? >> So, uh because most of the these kind of cases right now are still blackbox. um there's uh not many uh like open source evidence but based on the statements from Binance and a lot of these market makers um statements we can uh we can sort of like um uh be sure that there will be down uh there was like sort of downgraded services. It was not downtime because people can still send beats like probably you watch the podcast from

winter meal right I just two days ago uh they were saying that they can still play beats is that like um like out of 100% probably 10 to 20% beats still went through that's why I use a term called downgraded services >> downgraded services okay >> yeah yeah so so in that case like um because of these kind of downgrade services and also a lot of this liquidation happening Right. And some market makers um as I mentioned in the article basically they it disturbed their original strategy. So a lot of them just withdraw their liquidity.

>> So previously uh that's one of the reasons why they wanted to withdraw the liquidity. The second thing is like uh because the ADL right basically closed a lot of their short positions and then they couldn't do hatch on the long position because long position have made them lose a lot of money right for example winter mu like hold a lot of long position either on per or on spot but all their short positions already got closed by the ADL right either on the CEX or DAX like hyperl in that case they couldn't really hatch properly so that's why another reason cause a lot of market makers ers to withdraw their liquidity cost this kind of liquidity uh vacuum. So that's why like it's not like

you couldn't place a B. It's like I I also want to place a be at that time but >> like the thing is like the due to the downgraded services some of the bees went through but some of be didn't go through >> and um and of course people always like wanted to have the cheap >> sort of assets right but the thing is like at that time like it's it's really like everything in a mess and um it's it's not clear like how how like sort of the exchanges like handle this kind of situation, >> of course. I mean, what they they call it catching knives, right? Uh that that's the old thing. It's like it's dangerous work. Um I didn't get too risky. I bought a little bit of Bitcoin

under 110, maybe like 105, 107. Uh nothing on the altcoins. It's just it's just it's too difficult to really time the market like that. Um looking at more of the infrastructure, I'm curious. you know, Binance had uh the exclusive arrangement with ADL and not uh you know, not ADLing Athena. This came out afterwards. Um Hyperlid came out and effectively said, "Look, everything worked as it was intended." Uh HLP made, you know, a significant amount of money, but a lot of traders got liquidated and and ADL. Lighter came out. They said, "Look, we had downtime, but um we didn't liquidate a lot of

people. LLP actually took a loss." I don't know how much leverage trading you do if you trade on pers or margin or anything like that, but if you're let's say you are are winter or you're a market maker YQ and you're looking at where to trade and where to conduct most of your market business out of Binance, Lighter, Hyperlquid, which venue do you think stood up the best? and had the best performance during the market crash. Going forward, if you're if you're a market maker or a a margin trader on PEPS, where would you be trading?

>> Um, it's a it's a really great question. I I actually I talked to a bunch of my friends. Some of them doing this liquid fun and some of doing this market making. The thing is like um um I I I think uh still all of them um trust most of these uh centralized exchanges. Um you know right because of these regulation issues whatever if you really have a lot of funds like somehow you really need to diversify into multiple like sort of exchanges you won't really put everything into Binance or put into hyperlquid um but you can diversify like probably 20 here another 20 there. Um like the the the thing is like I just

feel like uh this kind of a case like the Black Friday this time, right? >> It was really the extreme case. >> Um like sort of the server or Binance really they really like sort of handle like probably I I would say tons of millions of requests per second at that time. um if you put that kind of volume into any perax I I I couldn't think like sort of they can handle it properly right now. Um so that's why in another article I mentioned right it's not just about one CEX not handling very well even like sort of we put all the like this volume into all different CEX or DX I I doubt any of them can really handle

it properly because the volume is really like a DOS you know like if you if you like sort of is immediately within a few seconds you got too much volume and traffic how you can scale that I mean and you can right AWS was down again yesterday. So I mean even even the web two infrastructure couldn't really sometimes handle like sort of the volume probably it's like um that's why in the article I mentioned we need a lot of redundancy and a lot of centralization for instruction as much as possible. So in that case if one point is done right or downgrade services but at least immediately you can autoscale as many services as possible handle the traffic.

So back to your point right um I I don't really do a lot of library trading but I use per I mean this hyperlid lighter binance and OKX all all these kind of doing like sort of some hash the thing the main issue is like um all the exchanges right even the perex like hyperlid the ADR the ADR algorithm is public but the problem is like how how they execute like they typically have a blackbox procedure like for example um for CX like Binance right the ADL actually was the last line of defense right >> they have this false liquidation they

also have the insurance fund right if all the things not working and then they trigger ADL but for some of the per example hyperlquid they will trigger ADL before like sort of like like like your assist uh like your HLP to take over of course previously you know jelly jelly Right. Yeah. >> You got HP took over too early and then got some loss but then later they changed the algorithm. So all these like are dynamic seem to lighter lighter actually um even we complain a lot the down like service was down but somehow LLP was used in a correct order. So basically LLP was used as insurance fund. they took over all these kind of

positions and then took the loss uh without trigger this ADL. Mhm. >> Um so that means like you really have the insurance fund to like sort of handle this kind of loss in general. >> But as you can see right community won't be happy about it and also like sort of got some loss there. But the thing is like that sort of this kind of liquidation or this kind of protection mechanum they have on their side with like based on the analysis I did that none of these exchanges have the same sort of procedure of this liquidation or false liquidation insurance and ADL mechanum. Um but in general as I mentioned right I think the best way we

can do of course we don't have a 247 team to manage all this kind of uh hedge stuff uh if we only have ourselves right I still recommend we should really diversify our positions across different like CEX or DX in that case at least if one >> place like due to various reasons couldn't handle like sort of the live traffic but and then we can still like sort sort of do a lot of uh h on the other places. Yeah. >> You know what the issue is though?

Because it's cross margin, you know, you can get cross margin across assets, but you can't get them across venues. And so once you start fragmenting liquidity, you end up with less collateral for positions to hedge and and do these things. >> Yeah, you're right. I I believe there's some projects at least some of my friends are trying to build something like that. But uh after agg they can unify liquidity across venues. >> Uh the the the the biggest issue is about the capital efficiency. >> Right.

>> Um like for example on hyperlquid the only collector they accept is uh USDC. Right. >> Right. >> Um but on Binance or some CEX uh you can put all different all coins as your collector. >> Right. >> You get my point. Right. It's it's not like like sort of so that's a capital efficiency we always highlight you can you can buy the token and pull as a collateral and then you can learn more tokens or you can use these collaterals as mar as a margin and then you can do 50x on the per but you couldn't do it cross exchange because like different exchange accepting different like sort of collects

>> and beyond that it's also about like for example if uh because the market price on Different exchange is different for example for lighter right lighter if you check the mark price for BTC right now it's quite different from hyper liquidate from also from this binance >> because it's correlated to the uh volume and also these positions on your own exchange >> you can't easily say that okay I can directly use the my price from Binance because because the long position short position on your exchange are quite different >> right >> so so So, so that's why like did you remember a few months ago uh there was like sort of this um short squeeze on

plasma on hyperlquid. >> Yes. Yes. And they said Justin >> premarket the premarket price manipulation. Right. >> Right. Right. They said Justin Sun was the one that tried to manipulate it. >> Yeah. It's original the price was 0.6 and then people pump it I think to a few dollars. >> Yeah. Like $5 $10. So in that case there was no way for you to do hatch, >> right? No, you couldn't. You could >> even 0.1 0.1 like like sort of like even you just have 10% um like sort of long, right?

Like your position still got liquidated. >> But this only happened on hyperlquid, >> right? >> So that's why like you you do this cross margin cross each chain. So so difficult because like >> I see what you're saying. I you can actually use the price dislocation to your advantage. Yes. As a way of isolating a certain portion of your collateral just if there was an oracle exploit or if there was some sort of quote or price feed manipulation, you have a a certain subset of your collateral just based on that. >> Yeah. Yeah. It's basically the mark price is quite different across different exchanges.

>> I see. >> Like that. That's why sometimes if you don't have enough liquidity or your oracle has some >> it may not have some problems but like sort of the attacker has enough like sort of for$20 million then you can manipulate the market um but you can only manipulate that market on hyperlid but you couldn't manipulate the market. So it's so the u the another like sort of difficulty if you want to do this cross margin cross exchange this kind of uh h arbitrage yeah >> understood um yq just a another question or two fast forwarding you know 10 days

forward to today things have changed like I don't know about you did you did you expect things to rebound so now ETH is back above uh 4k Bitcoin is, you know, headed back around 115. Did you think this was going to happen so quickly or did you think that we needed to repair some of the infrastructure at before we could we could eventually go higher? >> Um, as mentioned like in one of my tweets, I mentioned like right now it's a bull market for major coins like Bitcoin, >> Ether, and probably Soul, >> right? But it's still a bare market for all alcoins especially after the black Friday. um like most of the liquidity uh

for most of the altcoins actually um like draw down a lot and u and that's a big hurt on all these uh alcoin projects >> because like even we say that okay crypto like wall street like the bitcoin ether and so but we all know that the altcoin project actually are the the small businessmemes in crypto they are the real blood they are the real foundation for the crypto industry. >> Yeah. >> Um so I think it takes longer for these altcoin project to recover. Um because a lot of these liquidity as as you can see right um if you look at the chart right bitcoin is back ether is back but most of the altcoins like see basically the

price is still not recover that much probably recover like 50% but definitely not 100%. Um it will take a longer time. Um but beyond that um as you just mentioned like I feel like um if we really want to avoid this kind of black Friday we should seriously think about like how to fix these oracle issues especially for the per on CEX and DAX. >> Yeah. Um because the thing is like um there some people make claim that if it's a stable coin like USD let's just do one to one packing to USDC which I feel is not correct you know because like then you take all the liability yourself

>> um we all know that it's it's definitely based on the mechanum it's not one to one pegging even USDC not one to one pack to USD like two years ago the the we we we know like sort of there's some DPAG right due to the thes yeah and so so that's sort of the issue we should really figure out like ways to fix the oracle issue across all different exchange especially per to avoid this market manipulation or few uh further attacks >> and beyond that of course as I mentioned in the article right we need we need a much more redundant and also robust infrastructure no matter for CEX and also for the uh for the chains um so this time is really a good like sort of

practice on all these uh infrastructure right we we all know that it was not that robust especially we are running this 247 like financial market without like sort of any stop is it's pretty like sort of critical >> beyond I like yesterday the AWS sort of given us give us another warning right >> our blockchain is not decentralized enough I mean >> I All of them, Coinbase, Robin Hood, and the base. Even Bass, you know, everything is is based on the web to cloud services.

>> It's all these centralized RPC providers. Infura was down, L2s went down across the board. >> Yeah. Yeah. It was supposed to not be that. But we can see in reality due to uh various like sort of reason, right? efficiency cost. >> We choose to have the centralized services to have the best user experience and um the best performance. >> Um but the tradeoff is like the crypto or blockchains are not decentralized enough. Um sometimes it's it's really like a joke you know because like we all promote decentralization but in the end somehow most of our critical services

are most decentralized uh most centralized >> so that that that's a part I still feel like um um not not just for decentralization but even for the robustness you should have more redundancy for all the servers sequencers and validators. You say that's the number one issue facing our industry right now is we need more redundancy when it comes to >> RPCs and oracle issuers and and and all of these things. >> Yes, absolutely. And then the second thing, Oracle. Yeah, we we should definitely fix all the oracles here and there because like there are lot of new tools and the new like sort of projects and interesting ideas they all leveraging the oracles. For example,

even for prediction market, >> we don't call it oracle, but we all know that uh we need a very fair oracle, not manipulated by >> big players. Um but so far, we haven't seen any good solutions for that. Yeah. >> Yeah. >> Yeah, man. Well, YQ, it was incredible to see the the breadth that you took when it came to the reconciliation, the retrospective of Black Friday 10 days ago. Was it was any of this this content any of your writing was it AI generated or was it all off the dome because there was a lot there to unpack.

>> So the major data and also the most of the points or whatever I have to write a draft after that like sort of we need to use like sort of a cloud and something to really polish the content. >> I see. >> Yeah. Otherwise it won't be fast enough. right now like even inside our company we are forcing the team to use AI as much as possible uh because it's much faster. Yeah. >> Yeah. >> But but to be honest I I think the the the main main parts as you can see right it's really about the data um the most important thing is about data and also the uh the viewpoints you have and also the crucial content. Um that that's a

part like AI couldn't regenerate for you especially the analysis that that's the most important part. Yeah. >> Yeah. Um as we wrap up here last question uh you know h how did rumor react to this? Did you did you guys have anything any activity? I know it's closed beta still right? So so it's not totally open to the public but you know did you guys start to see a little bit of uh data or rumors start to trickle in? >> Yeah. So um as you mentioned right we already saw a bunch of interesting rumors either pre and post this kind of uh uh black Friday and uh either on these kind of uh market maker u sort of uh incidents and also some of the reports on these kind of CX and DAX. So

these are the super valuable information like probably you can only find like sort of on rumor. Uh even like last time I mentioned right this kind of neighbor uh was acquiring like a bit um you can you can find basically the uh the information on rumor like sort of a few hours before the news was released. So that were pretty fun like if you just use rumor as this kind of information terminal or like signal terminal and beyond that typically people have a lot of chats and discussions uh like with each other on that. Of course, if you want to trade, they also have these kind of trading features.

>> But in general, like we can see like more and more people trying to share and also discuss like sort of new and signals and uh this kind of uh like private information on this new app. Yeah. >> Yeah. Very cool. That's rumor.app, guys. Check it out. Um if you want an invite code, maybe YQ will be nice enough to give you one. Hit us up. We'll uh we'll make it happen. YQ, thank you so much, man. Uh, tons of content, a lot of really good information. Uh, on the heels of, uh, like you said, the biggest liquidation event to ever take place in crypto. It's really, really good to see that now we're starting to pick up the pieces. Asset prices are recovering, and I I do have uh, optimism that we will

fix the infrastructure. And you helped highlight exactly what infrastructure needs to get fixed. the oracles, the RPCs. We need more redundancy. We need our decentralized applications to actually be decentralized. >> Thank you so much for coming on. >> Yeah. Yeah. Yeah. Thank you. Yeah. Great chatting. >> Yeah. Same here. We'll see you next time. >> See you. >> Cheers, Y. >> Dang. All right, we're going to keep it moving. I think we're going to get Weak Key uh up in just a little bit. Great chatting with YQ as always. Um, lot of great takes. We're going to get a bunch of these clips rolling out and uh and broadcast all of this great

information to you guys. I know it's getting late there for YQ, so I had to let them go. Um, tons of things that we can go over. Uh, let's see. Let's see. Let's see. Um, man, I mean, we're just seeing things come out left and right. Uh if Wiki is not ready in a few minutes, maybe we'll just hop back over to the Fed crypto conference because there was alpha just out the wazoo. Um coming fresh off the wire, Circle has launched bridge kit developer toolkit design to simplify crosschain transfer starting with support for CCTP.

I mean, we're just seeing this uh we're just seeing this coming out of um the convergence between DeFi and Wall Street. This is what's coming out is is we're strengthening ties between stable coin issuers, DeFi providers, and just the bare foundational monetary rails that our current monetary system runs on. things are getting upgraded in real time. We're no longer going to be dependent on this legacy infrastructure. We're innovating it piece by piece and iterating on it. Um I think one of the most incredibly bullish things to come out of the Fed conference

is what Governor Waller said to open up the conference, which was that they're going to start to remove the intermediaries between stablecoin issuers and the Fed. And so the way that this works right now is you have to have a title 8 license in order to uh hold cash at the Fed. Um and cash that's held at the Fed gets the federal funds rate. The thing that we see Jerome Powell every, you know, month comes on the stage, he says, you know, we're going to increase the rate. We're going to decrease the rate. That's the rate that they're giving on bank deposits at the Fed right now. Tether, USDC, they need to go through these intermediary banks in

order to acquire treasuries and hold their cash at the Fed. This again just reduces capital efficiency. It causes friction and it's costing these guys money that ultimately they could pass back to the end consumer, in this case the holders of Tether or the holders of USDC. And so by closing this gap, we're removing intermediaries that are just there for regulatory bloat. They don't really need to be there. They don't really need to provide their service. As long as we just lower the barrier of entry for bankers, uh, excuse me, for banks and stable coin issuers to hold their money at the Fed, it's just, I mean, at this point, it's a

no-brainer. We just have to iterate one piece of technology at a time. Um, let's see. I'm gonna hop back over. I don't know if Wiki Key is going to be able to join. Uh, let's see. Leo, in the meantime, can we go to the Fed conference? Do we still have uh do we still have the stream? Uh, okay. So, uh, the Fed conference broke for lunch. All right. Why don't we just uh why don't we take a look at some of the

things, uh, this this, uh, what I'm referencing here. Uh, Arthur Hayes had a great tweet about about this uh, the Fed opening the door to crypto banking. Governor Chris Waller announces the central bank is proposing a new limited access or skinny master account that would give legally eligible institutions direct access to Fed's payment rails without relying on partner banks. That's a huge thing.

They don't they no longer need to rely on these partner banks and hold cash at these partner banks as kind of this pass through for acquiring treasuries. Remember, Secretary Bessant has said they want three trillion in stable coins circulating by the end of Trump's administration 2728. The only way to do that is to give stable coin issuers direct access to buying treasuries from the Fed. You know, you maybe you guys don't know, but the way that money is originated into the system, every uh few weeks, maybe every week or so, uh the Fed auctions off treasuries, uh they do this uh at in

the in this at the scale of billions. And right now there's only these title eight eligible institutions that are able to buy those treasuries. and they essentially they they you know gauge the demand for treasuries and that's how this thing works. Uh if there's not enough demand at a certain yield, they're going to have to raise the yield uh to incentivize uh these banks to buy their treasuries. And that that's how you kind of get these these uh these sharp rises and falls in the treasury market. You see T bills, you know, we're looking at the two-year, the 10-year, the 30-year. Uh these are what happens. And then if effectively if the banks have to hire they have to buy these treasuries at a higher rate, they have to pass on a higher rate when they

lend it out. Mortgage rates go up, all these things go up. If we can have stable coin issuers buy these things directly, we're going to see rates come down because they have a demand. They have a demand for stable coins. They have a demand for these treasury yields. um and and therefore it would lower the rates that are uh required to issue these treasuries. We would see yields come down across the board. All right, we're going to speedrun some of our guests. Let's get Wiki up here.

Um so let's get Wiki up. We're gonna speedun a quick conversation with virtuals founder weak key and uh we'll get going. Uh we'll make sure that we key we can hear him. We'll make sure that his uh his audio is all good. Let's put him in the live room and uh we'll be good to go. I already see him up, but we need to get him in the live room. We need to make sure that we can talk to him. It's a it's an operation back here.

All right, I think we've got Wi key coming in now. Pleasure to see you. I I appreciate your patience getting getting set up behind the scenes. How you doing, Wiki? Yeah, same here. Um, dude, I mean, just absolute legend in the flesh. uh Luna uh co-founder of virtuals uh one of the one of the uh legends behind the AI agent craze that happened in uh it was really like 2023 2024 uh when all of these things started to take off. Man, we've only I you know maybe we'll get you back when we have a little bit more time because I know you you know you you took some time to set up but uh I I'd love to get an understanding of of what you you

guys have been up to. you know, the AI agent uh phenomenon kind of slowed down a little bit, but you guys have continued to build. Can you just give us a sense of what you guys have been up to over the last few months? Uh, we key. Sorry, we're we don't we

don't have your audio. Not sure what not sure what the issue is. We might have to pull you back. Um, sorry. We're gonna we're gonna get you set up. Um, okay. All right. We're gonna we're gonna get you get you going. Not sure what the issue is there. Yeah. Let's see. Let's see. Let's see. Let's see.

It's what happens. Anything can happen when we're live. Anything can happen. Um I think we might have to reschedule with Wii key. Uh, I think we are going to figure out what's going on with him. Um, let's see. Let's see. The Fed conference is at lunch. They're going to be back at 1. Let's make sure uh let's make sure that we got we got our our systems dialed here.

Okay. Um so man, are we dialed? Coins are pumping. Wow, we're flying. Hyperlid 38. Hyperlink is kind of lagging. We're going to have to figure that one out. But ETH, Bitcoin, I think if we get above 115, it's just off to the races. We're going to keep pushing.

Let's go. Keep pushing. Um I really do think if we can get Bitcoin above 115 and just establish that as some support. I mean, if just when when you look at what is happening, even if you're not paying attention to technical analysis and Ben Cowan calling for 5,300, all these personalities, look at what is happening at an institutional scale, a nation state scale. Fed is hosting crypto conferences. They're giving stable coin issuers direct access to accounts at the Fed.

This is incredibly bullish. These are things that take lots of time to play out. As we said, Circle is innovating. Uh we're seeing this. We're iterating one piece at a time. And so it's going to take time, but you have to adjust your time horizon accordingly. Um, okay. Why don't we do uh maybe we'll

do some screen share here. Let's see. Uh or we got the comment cooking. Yes. But every time we get a super bullish news, we get a local top because people get bull trapped. I don't know. I mean, market's flying and we get tons of bullish news. So, how are you supposed to react to that? I think I mean, you could look at the event that we had last week and uh and say massive liquidation, $20 billion of liquidations. We're going to be cooked. you know, beginning of a new bare market, open interest is wiped, uh, coins have no bid, we need to rebuild spot volume. All of this,

it's not what's happening. I mean, we're we're rebuilding in real time. Chat's cooking. Great point. Seems like a lot of people are trading, not too many. Investing, more important to focus on bigger picture. Yes. Who is this? Ghost E- Money. Ghost E- Money. You're the goat e- money. That's on the money. I think you're right. I think what we saw was we saw a leverage wipe and those were the leverage traders. That was the mercenary capital. Now the people that are still in did not use leverage and are starting to rebuild.

These are guys that are sticky capital, sticky liquidity. Think about DATs. Think about guys. Okay, we're going to get Scott up in just a moment. Let's make sure. Let's bring him up. Haven't seen Scott since he came to our UF Bitcoin club talking about making sure we don't get sin swapped. That was a minute ago. Let's get Let's get Scott going. This one's fun. He came a little bit early, so we've got plenty of time. Scott, man, great to see you again. I I remember talking to Adam. I haven't seen Adam in a few years, but he was a man. Is he Is he uh He's still doing a good job.

I love it. Shout out, Adam. Uh and Scott, you're a Gator, right? Sort of. But 19-year-old kids do on a field. I'm 48. So, at some point in my like early 30s, I was like, I'm really getting angry because the team that has nothing to do with me is not winning and these could be my children, so what am I doing here? And I kind of just gave up on caring about sports and things like that. And once you see under the hood of uh college sports and what they do to win, it's pretty gross. So, I've kind of detached myself from the entire thing.

>> That's probably for the best, man. Um, well, there's there's probably something to be said about whether or not we've got more uh shenanigans uh going on at the college sports level or in the crypto Twitter uh echo chamber here going on. I've had a couple guys on today. Uh, one of them was YQ. We were talking about the Black Friday crash. Yes. Uh, about 10 days ago, but man, market recovering now. Um, generally there's people, it feels like we're we're we've diverged and people are at either one end of the spectrum or the other. You got people calling the top.

They're saying gold is a signal recession is coming. There's going to be no rotation. Uh, AI capex is slowing down. Micro strategy slowing down. All of these things are signaling a downturn. The leverage crash wiped out all the interest. And then at the other side, you have basically a renowned bullishness. You have sticky liquidity coming in. ETH DATs are continuing to buy. More DATs for longtail assets. Generally, where do you fall in this in this market stage conversation? >> I think trying to call the market top is extremely dangerous and usually makes you look like a fool. Eventually, you're right, but you're usually poor by the time that you are. So, if it ain't broke, don't try to fix it. I don't see any reason to believe that uh a market top is in besides the fact that people

are impatient and just think that the market has to go up every day or every week or else everything's over. We are in an environment right now where clearly we're going to be adding liquidity and I don't take a view based on a week or a month, right? So I'm looking at a much longer cycle or longer view whether Powell continues to cut or not. We know exactly what's going to be happening when Powell is gone in May. And that's that Trump is going to put in some sort of puppet that'll cut rates basically back to zero. And you have at that time 7.5 trillion, a record high right now as of today, literally sitting on the sidelines in mutual funds and treasuries. All that money when it's not seeking yield anymore is going to have to find a home and that's most likely to

come back into our beloved assets, right? And you have a president who whatever you think of him politically, don't really care. Whatever you think about what he says, whether it's true or whether it's not true, I I do politics about as much as I do college sports at this point. I'm utterly indifferent. There's one thing that we know he and Bent and Lutnik and all these guys deeply care about, and that's everybody getting rich. Uh, excuse me, everybody at the top getting rich and seeing markets pump as a gauge for the success of his presidency. and they have had an insane amount of but buttons to push and levers to pull over the past few years, the Biden administration as well to make sure that uh recessions remain illegal and that markets continue to go up. So,

you're basically betting that there's no buttons left to push or levers left to pull right now for the dead top of everything to be in. And that could be the case. I'm just saying nine out of 10en times when you call the top, you're going to be wrong, right? And so talking about a rotation, I I I I don't know whether it's a gold rotation into Bitcoin. I think that idea is a bit before its time. I think it's a wishful thinking a bit by Bitcoiners. I think a little of that does happen. But we do have some historical precedent that when gold tops, that's usually when Bitcoin is bottoming and gold is having its worst day since 2013. Right now, as we're speaking, silver was down 9% today. I mean, these are like shitcoin moves. Can I say that on this show?

Absolutely. >> Shitty shitcoin moves and you know so and and Bitcoin bottomed right when they were kind of topping and has risen since. So you know a few hours is not a data point but very clear that one is not necessarily dependent on the other at any given time and maybe it's just the power of the dollar that's wrecking all those things right as you see the dollar rise. But Bitcoin doing well in that environment up to almost 114,000 here off the lows like 107,000 at you know 2 am this morning Eastern Standard Time. So I mean where I put the market is no real reason besides uh disbelief that it can't continue to go up.

>> Yeah. >> Famous saying you know markets can remain irrational longer than you can remain solvent. >> Yes sir. >> You know if you just keep calling the top eventually you'll be right but you probably won't have any money left. I think we're going to go certainly with Bitcoin a lot higher. >> Love it. Um that makes a ton of sense. Uh if you click on uh we should have Yeah, if you click on the little control there in our in our meat, you'll see that we've got one of your tweets up. Uh in reference to what you're saying about gold and silver trading like shitcoins, gold's on an incredible run, but the chart doesn't tell the whole story.

Decades for decades holding gold instead of stocks has been like paying a premium on peace of mind. It's not a bad trade, but it's a costly one. It's actually returned less per year while the S&P 500 averaged 12.2%. And it hasn't even uh it's unimp underperformed inflation. Hasn't even beaten inflation. You'd have more dollars on paper, but they buy less than before. Do you think this has always been the case that gold has performed and traded like a memecoin? Is it a shitcoin? Is it essentially just a pet rock? What do you think is the play here?

>> I'm not saying that in that thread at all. I'm sorry that that's a funny notion and I can definitely say that today because you don't usually see six to 10% moves on a rock that like a percent a month is a lot, >> right? We've seen this massive move in gold, but that's not the norm. But the the point I'm making here is that you had a 30-year period where gold didn't even outperform inflation. So, it's a mean reversion catch-up trade to have gold where it is now. And it's not even remotely close to catching up if you take it on a 30 40 year time horizon, right? Gold would have to go many multiples higher here just to have outperformed over that time period any of these other assets. So, if you were holding gold as a hedge against

inflation from 1980 to 2019, 30 years, you literally lost money like against inflation. your inflation adjusted price of gold is lower than you paid for it. >> Quick quick followup, Scott. Does that mean that we've got more room to run in gold as we mean revert higher? >> I think so. So like I think that we could have a top but not the top, right? So once again, yes, I think that Bitcoin that gold, excuse me, is historically overbought here. If you're a technician and you look at, you know, chart analysis or RSI, it's extremely overbought. Maybe it's overshot, but you know, you get these mean reversions. I think the daily 50 MA on gold is like 3,700. Maybe the 200 MA is 3200. I don't

know. I'm not looking at exactly. I can actually pull it up. Yeah, the 200. It's 3270. They're rising. So even if price comes down retraces a bit 37 36 meets one of those lines that's normal bull market retracement but would be called a crash by anyone else's metric when you're going from >> once again a NASDAQ that's not supposed to be volatile. If you go from 43 to 3700 that's going to be a significant move >> but still doesn't really change anything. So yes, I think you may get corrections and cool offs, but once again, if you go back to government behavior of 37 38 trillion in debt, they've given up on trying to pay that down. What they've decided to do is outgrow it. And anyone who understands government speak knows that outgrow

means out print. >> So the goal here is to deflate. The goal here is to debase the dollar as much as possible to basically create asset inflation and to attempt to not create consumer and uh consumer inflation and inflation on goods at the same time, which is a tough needle to thread that they've thread for a long time. But they're literally telling you they're going to print money to make assets go higher. So you either believe they can do it or you don't, >> right? Um, I had a great >> I can do it for a while and then whenever it breaks it breaks big and you that's when you start talking about fourth turnings and great depressions and things like that. But is today the day for a great depression?

>> Don't think so. Yeah. I uh I had a great conversation with Arthur Hayes about this where what what you're describing about their ability to print money. Uh well there are certain puzzle pieces that fall into place or they start to break apart and that gives them more or less of an ability to print the money. For instance, Lisa Cook, the fourth Fed governor. If Trump has four out of seven of the Fed governors at his disposal, then he can start to take control of the Fed and print money at will. Lisa Cook is the fourth. And if she gets removed, like there's this mortgage crisis, whether or not she was, you know, fraudulent and gets removed for for cause, that would give uh Trump four out of seven that essentially pledge allegiance to him and and therefore would cut rates on his command. But I

want to I and and so generally printing money is going to help both gold and Bitcoin. You're very involved in both of these markets. I'm curious how you're thinking about the duality between the two. Where do you think the gold ratio to Bitcoin is headed from here? Got another one of your tweets up. Stocks up, gold way down, Bitcoin down. Bitcoin trades independently on any given day. Some days randomly with gold, some days randomly with stocks. An uncorrelated asset. Right now, these are both part of the debasement trade. Do you see one of these outperforming the other going forward? Uh I think over a long enough time frame you can just zoom out on the Bitcoin to gold ratio and it's nothing but up and to the right with a few uh with a few you know uh turns up and down here and there. Now if you look it does look like

Bitcoin has broken down against gold on the longer term chart. But let's be real, Bitcoin has probably a lot more room to run. And the more that gold runs, you have to assume that if there is a narrative that they're both part of the debasement trade and there are people who are younger who now understand the debasement trade are not going to buy gold, they're probably going to buy Bitcoin. You would think that he would either outpace it or keep it up. But I mean, what's gold's market cap now? 20 >> 30 trillion 28 >> trillion trillion dollars, right? So we're at less than a tenth even with Bitcoin going up this high. Well, I mean it's 25, right? So the ratio right now is 28. So I miss 28, >> dude. Think about 10% move in a $ 30 trillion asset is incredible.

>> That's right. So imagine if Bitcoin just outpaces gold by 10% and they're both going up, right? You have a massive move uh for for Bitcoin. So I think that over long enough time, Bitcoin will continue to outperform gold. And I actually think Bitcoin is more likely to go up regardless of what gold does because I do not really view it as a correlated asset. And I'll have these arguments and I'll have the argument with someone who thinks it's a risk asset and trades like Nvidia. And the flip side, I'll have someone who argues that it's a riskoff asset and trades like gold. >> You can't have it both ways. And that's what actually makes Bitcoin beautiful is if you look at any investor portfolio, the holy grail is to have an idiosyncratic asset. Something that has a chance of trading different than

everything else in your portfolio that's uncorrelated. Right? Even if it goes down when everything goes up, that's actually good for your portfolio because you have something that's different, right? And so Bitcoin really has you can look at sharp ratios, but historically it has offered that. Its correlation over long time frames is extremely low to either asset, you know, 0.06 or something to to stock. So I just really view it as one of the holy grails of a portfolio, even if it goes down. >> Yeah. Yeah. uncorrelation is great and and for so such a long time we saw everything in cryptocorrelated. Um things are starting to diverge. We're seeing large caps do quite well. Alts not do as well. I want to switch gears here a little bit because we had some

news that hit the wire this morning. I'm sure you saw yesterday Coinbase acquired the up only NFTt 25 million bucks. This was pretty insane uh to to pay $3 million for uh per live stream per per podcast episode. Um >> yeah, we're in the wrong business or doing the right business wrong, I should say. >> And we kind of we kind of realized that this was part of a marketing campaign that Coinbase ran for uh Echko, which they announced today, an acquisition for 375 million. I'm curious, do you have an Echo group? Have you used Echo?

generally what I mean you were around in the ICO days. I remember back you know 2017ish I remember following you now we've kind of revisited and revived the ICO um phenomenon but we've done it in a more KYCed and professional way. Do you think there's and there was plenty of grift that happened back then um Dentcoin and and the likes, right? Do do you think there was positives that we can pull out and now Ekko is in a position where it can provide some real value?

>> Uh I definitely think there's positives that we can pull out if they've built something that's good plumbing for launching projects on a reputable platform. I think that that's obviously a positive because Coinbase's reputation is likely to be behind anything that's launched on there. So when they inevitably go down 99.9% it'll be Coinbase instead of a bunch of uh influencers getting roasted. And um you know I I've never used Echo. I you know got pretty heavily rinsed uh both just for participating and actually monetarily in a lot of that ICO nonsense especially in 2021. uh in 2020, that sort of iteration of it. Um and I deeply

believed in a lot of the stuff only to realize, you know, after it all went down that it was just all kind of correlated nonsense and really dug into tokconomics and understood that, you know, we were all just buying a bunch of paper. If it changes that, I think that that would be great. I think what they're really buying here as you take a look at it is very clear from the, as you said, 25 million for the podcast. Clearly, they didn't pay 25 million for the podcast, right? It's just part of this deal. But a great, incredible marketing move to like, you know, preempt this deal with that news. I think they're buying Kobe.

>> Yeah. >> You know, I I don't know if he's worth $375 million or not, but a very powerful voice obviously in the industry. And so, if you're getting a platform that is I'm not, by the way, I'm not discounting the value of the platform itself, but you know, a lot of people look at this like they probably could have gotten it for 50 million or 100 million. you know, how did you arrive at the price of 375? I'm imagining that they paid a premium because they get exceptional marketing voice as well as a part of the deal who will be, you know, a cheerleader and obviously who will be uh sort of fogghorn megahorn for talking about this constantly.

I think that it's great if this helps eliminate some of that grift that you talked about that like there's another layer of research or due diligence that's done in some way because it's coming from Coinbase. >> Yeah. Yeah. Generally, we had VCs that are supposed to filter out some of that grift, but then the VCs started pushing the grift on us and profiting from it. It wasn't PvP anymore and the grift wasn't coming directly from the founders. Hopefully by getting some combination of the two, the VCs plus crowdsourcing more of this funding, we do get more filters, better quality founders as the space matures.

>> I mean, at the end of the day, the concept is brilliant, right? Fundraising that's crowdsourced that anyone can participate in that doesn't have accredited investor laws and isn't necessarily focused on predatory VCs, it's great. just as you said, it has to be used by the right founders in the right way and it should be used for things that are actually built and real and not just ideas and vaporware. >> Yeah, great call. Um, the next thing that I want to talk to you about is in this similar vein, uh, the space maturing, moving towards more professional nature. I mean, look, we're seeing that with the Fed, uh, payments innovation conference today. We were live streaming it. I saw it, you're live

streaming it as well. It's very very cool to see Fed literally hosting a crypto conference. I mean, who would have thought? >> Yeah, it it it's I mean it's awesome. And we're seeing a lot of RWA conversations, private credit, stable coins, all this great stuff. Um, two Goliaths when it comes to the RWA world, um, but also the DeFi world and and really two companies that are crossing the chasm here, partnered up today, Maple and A. I'm curious, what do you what do you think about this institutional DeFi wave and and RWAs and how these two worlds of Wall Street and DeFi are converging?

>> I I'm pretty friendly with Sid Powell, the uh founder of Maple. We had a conversation probably last a month or two months ago, so I wasn't necessarily on top of this move, but I think that what they're doing is incredible and is a pretty good window into this space, right? that you're going to have a lot of institutions that in various ways are holding a lot of these assets or gathering them and are going to want to put them to work, right? And the best way for them to put them to work right now, especially since we're still in the first inning of actual bank custody and yield products coming from Tradfi, right? I mean, we know that State Street and Bank of New York Melon and Cityroup, they're all coming, right? The biggest

custodians of the world. And once they come and they're cussing these assets, they're going to find ways to put them to work. But right now, the best way to do that is in DeFi. And for all of the that we've gotten in the crypto industry for things breaking and collapses and scams, DeFi smart contracts have hummed along along exceptionally well through every cycle of this market, right? I mean, your collateral goes in, you're over collateralized, you get a margin call, you get liquidated in an orderly manner for collateral that's already there. This you might be broken, but the system keeps humming. And so I I think that a has proven to be a great player in the industry. Uh extremely stable and reliable. And so I think that companies like Maple are going to offer a bridge

between those institutions that are holding the money and are looking for yield or looking for loans and they're going to be able to put these things to work in a so I think it's really uh this is very early innings of this but we will see Tradfi heavily using DeFi for yields. I I I totally agree. Um I think uh even once the custodians that you mentioned, these mega mega Wall Street custodian asset managers, even once they do get involved, they're going to go where the existing pool of liquidity is.

And right now that is on a $2 billion um if not more I think on A now puts them I think in the top 50 banks worldwide if I if I remember correctly. They posted something the other day and they're just rising through the ranks uh when it comes to the the size of bank that they they are based on their assets uh uh TVL and their assets in the platform. I think one thing that was interesting about this partnership in particular uh if we start from the bottom of this thread to uh Maple says to start syrup USDT uh will be listed on A's plasma market. Uh Maple says the deepest liquidity layer uh and the

largest onchain manager are now aligned. What do you think about Plasma and what do you think about uh Maple choosing to deploy this partnership on Plasma originally? To be quite honest, I wish I could give you a better answer, but I haven't dug deep enough in it to speak about it intelligently, and I don't want to make something up. >> No problem. No problem. >> I've obviously, you know, I'm aware of it, but I can't really get into the nuance of why they would have chosen that specifically versus any other platform with A. I can just say that uh if that's where they chose to go, there's definitely a good reason because these guys all know what they're doing.

>> Yeah, I totally agree. I think a is one of the like pure class acts out there. Uh I believe the A token rose about 10% on the news. This was before the market started ripping uh just a few hours ago and and could be up even more now. Um Mabel says the network of allocators and borrowers represents billions in deployable capital seeking stable scalable returns and deep liquidity through this partnership. A unlocks access to that demand and reinforces its position as the leading lending protocol in DeFi. This is just two two mega Goliaths. uh now partnering up and doing the steward the the stewardship and the pioneering into Wall Street to be bring these guys on chain which is really

really cool to see. >> Yeah. I think that we're going to see a lot more of this. >> Yeah. And so how do you think Wall Street and institutional finance is going to make their assets go to work? Just something that you mentioned earlier. Once these these guys get assets in their custody, they're going to put them to work and and you know program them uh so that they can get some yield and they can they can you know make a spread on the custody of these assets.

You know, previously this has been done kind of offchain behind the scenes lending out. Micro Strategy does this offchain. They get some Bitcoin yield. Do you think they're going to deploy some or all of the assets that they have under custody? Are we going to see it like the Ethereum ETFs and DATs? they're going to just stake it or what? How do you think they're going to deploy these assets? I >> I think it's going to depend. I think custodians have a whole other level of laws and regulations that they need to follow by and I don't think they can yolo into a with other people's assets that they're supposed to be keeping custodied. So, I doubt that they'll be able to put them to work in that way. I would say that when you look at the huge custodians, it'll probably be in line

with whatever they've done with traditional assets. I think the story there is that Bitcoin and crypto assets, at least the ones at the top, will be treated just like everything else in someone's portfolio and by these custodians. And before SAB 121 was recently overturned, after Gendler left office, they weren't even allowed to custody assets without having cash on the other side of the balance sheet to offset it. So, it was literally impossible for them to do it. And interestingly, as they tried to kill the industry by doing things like that, they actually handed Coinbase the custody of every single ETF because those ETF issuers like BlackRock couldn't go to their trusted custodians because of this rule. So, it actually ended up shooting them in the foot and giving crypto

native custodians like Coinbase the bulk of the business when it came to ETFs. Obviously, the banks freaked out. They overturned SAB 121 and now they can custody these assets like anything else. But imagine I mean what that means for people to understand if BNY Melon or State Street wanted to custody a hundred billion dollars in Bitcoin at that time they would have had to raise a hundred billion dollars in cash to offset it on the other side of the balance sheet and nobody would be insane if they even could to to do something like that. So they were basically liabilities, right? And so now they're assets like anything else. And how does that I guess the I think the more interesting question is how does that trickle down to the consumer? Like how they'll put it to work. I don't know. I think that institutions that

don't have that same custodial laws will just, you know, use normal lending and borrowing and may even go into DeFi and all these things. But what what really matters is for like a boomer or some wealthy person who has a Charles Schwab or JP Morgan account and now that we know that on Schwab and JP Morgan and Morgan Stanley very soon you'll be able to hold these assets spot you know Bitcoin and ETH you'll be able to trade them and then they'll just be treated as a part of your portfolio that you can take a security loan against. That's the real unlock here because wealthy people don't sell things, they take loans against them and those loans are at much lower yields than you see on the tape

for the 10-year treasuries. I mean, I think on Robin Hood >> even right now, you can use Bitcoin and Ethereum next to your stocks and get a four to 5% >> loan. Um, when you can just have Bitcoin bulked in with all of the other assets on your investing platform and take a loan against it in mass, that's where things get really, really interesting because a everybody's going to want to do it and b there's going to be a hell of a lot less selling pressure. Right? >> Right now, if you want to really capitalize on your Bitcoin, you either have to take a loan in, you know, DeFi or one of these platforms, but there's still, you know, 10, 12, nine really high pretty much uh, interest rates.

Imagine when that's thrown into your portfolio and you're getting four or five percent against it. Everybody's going to do that. Nobody's gonna be selling. >> Yep. And the administration has already outlined um proposals to to to include crypto assets on a customer's balance sheet when they go to get a mortgage. And so, you're absolutely right. If someone were to look at buying a house, uh, and they have a a significant portion of their net worth in crypto, they would have to sell it in order to to go finance the house. Um, I think now also >> not even to finance to qualify and you might not end up getting the house even now that you've sold your assets. So, yeah, it's wild.

>> Yep. And I think this is also it speaks to the money printer and this goes back to the debasement trade with gold and bitcoin all the things that we're talking about which is really one of the drivers of this movement in general is how money is created and we're seeing money be created at multiple levels of the system. We see it obviously when you know there's appropriations and the white house and congress they print money to finance some of these social programs. But there's also this concept of the money multiplier. As regional and commercial banks print loans, these guys are extending credit and that is how money is created. Oh, Scott, did we lose you?

>> Oh, I think we're so >> Okay, we're still here. Um >> I hope I'm here. >> Yeah, >> I'm enjoying listening to you. I don't know if you can see me, but I can definitely hear everything. >> I can see you now. Um and so and and so this is all an extension of credit as we can create um loans and and we use more of these assets as collateral. We can we can use this money multiplier to the effect of uh extending credit in the ecosystem. And this is generally going to be quite friendly to asset prices. Another point that I want to bring to you uh is something that uh Chris Waller, a Federal Reserve governor, just said at this conference this morning, uh which is that they're starting to close the gap between these stable coin issuers

and the Fed. Uh he said that the Federal Reserve is now looking into payment accounts that would grant crypto and fintech companies access to Fed payment rails. I looked a little bit more into this. It would mean that stable coin issuers could hold cash at the Fed, Tether US effectively be a bank. Exactly. And no longer have to go through an intermediary bank that has a title eight and has an account at the Fed in order to acquire these treasuries. Again, disintermediate these guys that are just rent seeeking somewhere in the middle.

Previously, they were providing a service, but now we have the technology where we can just provide that service to everybody and we can we can start to bring these guys closer into the banking system and and ultimately make their make this capital a lot more efficient and give a lot more access to stable coin issuers. I'm just generally curious about how you're thinking about the integration of Wall Street and crypto at the largest scale as we bring crypto companies closer and closer to the money printer itself. How do you think stable coin companies are going to continue to grow and distribute the dollar AC over over the world and acquire treasuries and distribute this uh over the world?

The irony is so incredibly thick, isn't it? That uh the whole point of crypto a of bitcoin was as a cash to cash, you know, a peer-to-peer cash that was going to disintermediate third parties and we're going to eliminate the toll collectors and institutions in the middle. And now the institutions we are trying to eliminate are trying to use this to eliminate other institutions in the middle. Um and uh it's just crazy to watch. And I think the other irony is that dollarized crypto aka sta stable coins, you know, crypto dollars which Bitcoin was created as a hedge against fiat uh debasement that arguably the best use case for the technology has been hyperdollization

basically to make dollars faster and cheaper to move and easier to access all over the world. So that I think that it's worth noting all that irony. That said, like the only way Bitcoin and crypto get to the top is to power through and that means co-opting or taking over all of the systems, right? And this at the very end of the day, stable coins are just a better way to do business for all of them, right? So, it's either you're going to be Blockbuster and Kodak and deny that there's going to be, you know, digital cameras and and uh streaming or you're going to have to find a way to slow things down enough that you can actually capture some of the value or integrate this technology yourselves. And I think that that's what's happening here. I

mean, I my friend Caitlyn Mong has to be scratching her head and screaming over at Custodia Bank where she got rejected for a Fed master account multiple times and has been suing the Fed for exactly these things. And now you just see them flippantly kind of mentioning it uh in a conference or you know in a in a round table. But this is the f future like stable coins are faster, they're cheaper, you don't need a third party, you don't need permission and they spread dollars all over the world. So what scares me here slightly obviously is this is just inching ever so close to a central bank digital that's what Europe which we know would give them ultimate control of money supply.

>> They've outright said that and we know Europe is intentionally going in that direction. They they've openly spoken about how central bank digital currencies are are great for transparency, right? And consumer protection. Like anytime the government starts talking about protecting us for our own good, that's when the libertarian in me just wants to just just explode out. Um >> yeah, >> man. Scott, this has been a fantastic conversation. Only a couple minutes left. Would love to just to get some closing thoughts on your end. We talked about so much today. Um I'm just curious, maybe you can just pull out some takeaways for us. What are the things that are sticking out to you?

What do you think are going to be the most important things to keep track of as we, you know, go into Q4 in the end of the year? >> Yeah. So I I think that it's very important as much as I hate to cheer for the government because I'm not but I think that Elizabeth War being head of the exactly who she would be in the anti-crypto army. Yeah.

all this every day. I try to figure out what's signal and what's noise. It's very tough, but I think that those are the things that are pretty important right now. >> Love it, Scott. Thanks so much, man. Uh tons of material here. I think this is one that uh everyone can dig through and they can go back into and and really learn a lot. We're going to have clips rolling. uh over the next couple days uh because we covered so much. So, we'll send those your way and uh absolute pleasure. Would love to have you on again soon. >> Anytime. Thanks so much. >> Cheers, Scott. See you next time. >> You too, >> Beauty Man. That was great. Um so much fun. Um I know we've got to let Scott go, but uh we're going to keep things

rolling on our end. Um man, I think there's also this crypto conference that the Fed is uh you know, it's just it's just getting started too. The the there is so much uh bullishness happening all across the board. Uh ultimately, you know, bringing these stable coin issuers, bringing stable coin companies. I think this is going to pave the way for crypto companies in general to become more entrenched in Wall Street, in the Fed. All of these things are happening right before our eyes and it's happening at a grand scale when it comes to the finance element of things, but then it's also happening at a micro scale when it hap when it comes to the technology of things. We're iterating and innovating one piece of the stack at

a time and it's it's incredible to see. Our next uh our next guest, co-founder of Daylight, Jason, uh is coming on now. We're gonna bring him up. Um uh and here he is. Jason, what's going on, brother? How you doing? >> How you doing, man? >> Good, man. Good. Just uh we were live streaming this Fed crypto conference, which was uh pretty incredible to see. I think Kathy Wood is going to be up in just a few. Um and they're just they're just talking about how we're we're bringing these two worlds together where I mean, just a year ago, they were tackling our industry. They were bringing it down with every shred of their being. Uh and things are just very, very different now. Have you guys seen this in practice? like, you know,

were you building in the Gendler era? Did you did you kind of have to adapt your go to market strategy for, you know, one way or the other to to kind of circumvent things or avoid getting in trouble? And now it's kind of, you know, blue skies, free and clear. >> Absolutely. Did we we actually founded Daylight and raised our initial kind of preede round all the way back in 2022 in the middle of 2022. So, we went straight through the Gensler area. Um, and as a result, kind of in the middle of 2023, right, we actually left crypto behind as a goto market wedge and as a capital markets wedge, not permanently, but you know, we it was clearly not it was a non-starter for a US-based company to be really experimenting with DeFi and with tokens as kind of a core part of the

product. And so we actually built just a very traditional electrification marketplace for the residential market for a while. And as the election started to shape up and we started to see pro crypto policies on uh on the the kind of agenda for the election, it really gave us the comfort uh to go back and build what our initial vision was. Um so we've we've been through it and I mean it's it's wonderful to be in the position we're in today. >> Absolutely. Um that I mean it's well said and this is just the general sentiment that we're hearing, you know, from builders. Uh sometimes they were p pushed off uh offshores, they went to other countries, sometimes they abandoned crypto altogether. Um, and now we're seeing this resurgence. Um, but Jason, man, it's your your first time on the show. It's a pleasure to have you. I

I'd love to get a little bit of an intro on yourself and also you mentioned what the overall vision for Daylight is. Please in, you know, introduce Daylight to our audience and and give us a sense of what that overall vision is. >> Absolutely. Um, well, it's really great to be here to introduce Daylight. Daylight at its core is really a new kind of energy network that connects people, capital markets, and power companies in the grid into one unified network. What that means in practice is daylight really offers energy that's cheaper and more affordable and more reliable than what their utility offers to homeowners through an energy as a service product. Homeowners can subscribe to daylight and at no cost get solar and storage installed on their roof and pay daylight rather than pay their traditional utility bill. Capital markets get access to electricity as a

brand new asset class for the first time through our onchain pools where we're offering the ability to participate directly in this new kind of unique infrastructure revenue stream. and power companies can tap into this network as an aggregated new flexible resource to support energy grids as energy grids are increasingly strained from new new demands and all of that is kind of bundled together into one core product that reduces costs for participants and increases the opportunity of the kind of global network. So really our northstar and our mission is to scale energy capacity for power grids to meet all the coming demand from AI, from robotics, from reshoring of industrial capacity while also ensuring that homeowners and business owners can get access to more affordable and reliable power than they traditionally can.

The headline that we have on here is uh is uh Jason on energy capital markets which if internet capital markets took the world by storm you know just a few months ago when when Salana was pioneering that I think energy capital markets are another meta here that is just getting tapped. Um I was just listening to uh allin to uh today I'm on my way to the studio. Uh these guys were talking about how Wisconsin, Indiana, these guys have data centers that are coming uh to their states and they're actually getting shut down at like the city level uh because people don't want a few things. They don't want a rise in their electricity. They don't want the uh the rise in their water and they

don't want the noise pollution. And they sort of started talking about how, you know, these uh these issues can be circumvented. Um, I'm just curious when it comes to these these energy capital markets, we're seeing data centers, we're seeing all of these things. We're seeing AI just starve our power grid, right? Did you also kind of before you started building daylight, did you see this trend how energy was becoming just this really really scarce commodity and you saw energy capital markets as a way of kind of transitioning to to more of an abundant uh era of energy?

>> Absolutely. >> Yeah. Maybe you could just expand upon that like what what were some of the early signals that you saw that kind of lit that light bulb in your head and said, "Oh, we've got to go build this." >> Absolutely. I mean that that was very clearly one of like the big north stars for kind of the genesis of daylight. My background is in energy finance. So started my career in energy and power investment banking moved into private equity investing in energy infrastructure. And what was very apparent all the way back in even 2022 for us is that for the last two decades, most people don't know this, but electricity demand growth in the US has been totally flat. any growth in electricity demand has been offset by efficiency gains for the most part. And so what we have is an entire generation

of grid operators, utility executives that have never in their career experience demand for power rising. Uh and all of a sudden we're moving into a world with the rise of AI, with the rise of compute, with the rise of robotics, reshoring of uh industrial capacity and kind of delobization, electric vehicles and autonomous vehicle fleets. All these things significantly number one change the profile of energy consumption and number two increase it significantly right we're expecting peak demand of electricity to more than double over the next 10 years now >> and so we need to find new solutions in order to meet all this coming energy demand the fact is these AI data centers just won't they just won't come if the power isn't available for them and we will lose out in this next version in

this next super cycle of the internet of capital markets of capitalism if we can't provide the most basic commodity in order to build it which is power. And so what daylight is here to do is be a new kind of generative resource for the grid to scale distributed energy to number one meet that energy demand because the more energy capacity generation storage we put on grids the more it frees up energy capacity to go to new sources like AI data centers. But what uniquely daylight does compared to a centralized energy developer is it does that while also lowering the cost for uh homeowners for business owners and gives them something that's more affordable and frankly a better product because it's more reliable and inherently protected from any kind of blackouts or storms. And so that's kind of the unique uh position that daylight

that daylight finds itself in. >> Awesome. And and I I I think you're you're hitting on what the capacity for this is, what the possibilities of this coming to market is, and what it does for electricity, what it can do for homeowners, what it can do for data centers, anyone, any any consumer of electricity, which is effectively everyone. But but how does it actually work? Maybe you could describe the mechanics, right? You're kind of you're you're consuming electricity, but you're also getting rewarded for it. There's a there's obviously a crypto tokenized element to it. Could you just kind of walk us through the game theory and the mechanism design?

>> Absolutely. The at the high level for the homeowner, right? Really, Daylight's product is more reliable and affordable power. So, the homeowner subscribes to Daylight. And when they subscribe to Daylight, solar gets installed on their roof, a oversized battery gets installed on the outside of the home, and they start consuming electricity from the system that's cited on their local home. So instead of having to pay cash$25 $30,000 for the system or take out a loan, they simply outsource it to Daylight and they just get the benefit of the hardware which is that the power itself and and the cheaper more affordable and reliable power at the same time as we scale this amount of >> nodes. No cost to the homeowner, >> no upfront cost, right? You're buy you're buying the power from the system rather than buying the hardware. And that's >> you're you guys are uh uh you guys are

innovating and replacing whoever their current power provider is. Exactly. The daylight becomes the main supplier of electricity through the hardware that's installed on the home. >> Got it. >> From there, as you as you expand the amount of of these little nodes in a network through software, you can actually aggregate the solar and batteries together and allow power traders, utility companies, other grid operators to tap directly into this aggregated power when demand on the grid is super strained. The p the grid itself is typic is not strained very often, but when it is, it needs power and it needs it now. and we have a resource that can supply it in a large quantity across this entire network of homes and generate additional revenues from doing so. So instead of purely just generating all your revenues from selling a product to the offtaker, the network can

generate something that's even more meaningful by taking its aggregated capacity and selling it to power grids. >> And the last component, right, is how do you how do you finance all this? And that's what we plan to do with DeFi and stable coin markets where we want to launch onchain yield products that make electricity investable globally for the first time. Today, if you want exposure to electricity and you're not Blackstone or Black Rockck and you're buying power plants at large scale, you can buy utility rappers, right? You can buy utility stocks, you can buy independent power producer stocks, you can't really get exposure to the underlying asset class itself.

>> And what Daylight is starting to offer is a tokenized version of electricity to allow investors to participate in its financing. Uh, and Daylight to scale the physical infrastructure on its network. So, that's kind of the core three-sided marketplace of Daylight between capital markets, homeowners, and the grid itself. and and really how it all works. >> Yeah, >> we plan to, you know, additionally, if you look at the kind of history of deep in in uh crypto, there's been a lot of interesting uh uh use cases in like scaling supply, maybe less so on on generating uh a ton of demand up to this point, but we've seen in incredibly exciting proof points from Helium, Hivemapper Filecoin Bitcoin Ethereum.

When you launch a token, you decentralize a network and you give ownership to a community, um you get these really interesting outcomes on the supply side. And so Daylight plans to do the same thing with actually decentralizing our network, turning it into what is almost a form of a electricity cooperative and distributing uh ownership to participants who are going and scaling that network. And we think that is the way that we could achieve significant scale kind of beyond the traditional sales model that's been in the solar space for a long time. This is fascinating because it's not just another financial engineering that you know Ponzi memecoin like there's actual real productivity that is being done at the electricity and the bare power level to to help people like improve people's lives. I remember hearing about uh in

Texas the p there was a power outage. It was due to the grid. The grid was significantly strained. You probably know a lot more about this than I do. Could you just explain why the grid was so strained in Texas and how how daylight could potentially solve an issue like that? >> Yeah, if you think this isn't specific to Texas, this is California. This is in the Northeast. This is really everywhere we've seen these massive growth events that either almost lead to blackouts or do lead to blackouts. Really, the nature of it is power grids have to be sized to peak demand, not to average demand. The reason for that is supply and demand of electricity always have to be in balance and if they become imbalanced the grid itself starts to fail. Uh it'll

destroy equipment uh it become dangerous and so operators actually shut the off whenever supply and demand become extremely unbalanced. So when you think about the rise um that what demand is happen in a matter of hours peak demand rise above the forecast is new ways to supply system or to reduce in the system in order to balance so like daylight offers basically a real resource to power grids an emergency reserve resource power grids increase supply or decrease demand to ensure that they keep the system

balanced uh in these periods of really really peak strain that may be of what their forecast does uh nuclear plants can't ramp up quickly. That's a big downside of nuclear. Coal plants, natural gas plants can ramp up a bit faster, but batteries and demand response are really resource. And Daylight's entire network of batteries and demand response can provide uh that support to power grids, help the system before it gets to a place of crisis. >> Dude, I love it. I'm curious like where are you guys at in your stage of development now? Um, how can people get involved? Like it it is the only way to get involved just from buying a solar panel and installing this hardware

and and becoming a part of the network that way. Can people buy the token without having hardware and and grab the free side marketplace here? But you just host of the equipment. So this is probably like the infrastructure and become a new that's available right now in states Massachusetts but we expanding that across the US uh pretty rapipate but and defy markets participate

in financing of distributing the equipment across the network. This looks to what doing on the GU side. Your team an you excellent working kind of design on stable coins to find product will look very similar to that for electricity. And then the third way uh is really kind of a supporter and it's deepen style if you will operator on daylight. So going around people into the system referring people the system can make their house more resilient bill cheaper and how they

work. So we'll actually be putting out a lot of education material and resources for people their own daylight want to get involved for the network community their families scale the networks up >> very traditional deep in way >> yeah and I can you help me understand how energy transfer works like when you have a battery attached to a house and you're cap so I'm getting this wrongly you're, you know, you panels, you're capturing from the sun, you're turning that into solar electricity and you're in the back

that's attached to the home. When it comes to the energy from home to another home with battery somewhere in a different because over there how is energy make that transfer Where is cover? man. Okay.

Um, oh, this is fascinating and like this is these are conversations that we don't have very often. A lot of times it's, you know, financialized kind of tokconomics here. um you guys are building hardware and I think there's only a select few projects that are building these deep infrastructure projects that ultimately I'm I'm curious actually how the network effects could could expand as you guys grow um like you you you said you're starting in Massachusetts maybe one other state why did you choose to start there and then as you start to expand regionally in the US maybe globally what are some of the network >> where we kind of prioritize markets is based on where the market is telling us to prioritize this market So think very high power prices compared to a national

average and where the market itself is uh deregulated enough for us to participate. So traditional power markets like back in the day were served by a vertically integrated monopoly utility and kind of the early 2000s the majority of power markets were deregulated where the generation of electricity is competitive. Anyone can really participate in this market to generate electricity and that's an attractive marketplace for us to monetize on the grid services side. So we look for the intersection of high power prices where we can provide a real benefit to consumers and markets that have very easy access for us to participate in and generate additional revenues. Um so that that's why we picked the northeast. We think there's a ton of strain both from um data centers and other reasons why there's kind of

very high power prices in that market. They have attractive uh deregulated markets for us to participate in and then we'll be expanding outward uh from there to other markets as as they come online. But the unique thing I think about decentralized networks is that they will at some point begin to just scale on their own. And as they scale on their own, that aggregated asset base allows us to do other interesting things that you wouldn't be able to do if that like upfront before that asset base existed. For example, there's an interesting thought experiment of what if uh data centers developers themselves could contract with a decentralized network to basically have a bilateral virtual power plant where they say hey I need you know an additional uh 10 megawatts of capacity. Can this can I pay this uh network directly to dispatch

when I need it to dispatch when the the the peak demand on the grid is highest in order to ensure that I can be interconnected in and the utility will accept my interconnection process. So there's interesting things like that that emerge as your asset base starts to scale and you have a physical resource that you can build markets around >> and and you justate what the token design is. The you're you're using the token transactions energy.

>> No. So you you'll pay with with with dollars that actually become stable coins on chain, but there's no kind of user needing to price their services in some crazy volatile token. >> It really is very much a economic alignment deepen style incentive tool for scaling the network and rewarding people for joining the network and reducing origination costs and customer acquisition costs. It's used for of course governance and shephering the network and we'll have like some interesting announcements on how the network design is actually structured legally to make that pretty enforceable. And then the last is economic rights on the protocol and protocol fees um from financing these assets for delivering them into the ground and then claiming fees on top of of uh the assets themselves. So this is very much a kind of deeper defi style network token

distributed to its participants to decentralize ownership and decentralized incentives and decentralized capital formation. Got it. So it's contribution means of uh measuring stake in the network stakeholder than um a utility token. >> Okay. Okay. Um cool. And uh what is how how does it cost stack up to current energy providers? like you said, no upfront cost. The equipment, the installation, all that is is is taken care of. Uh but you know, in Florida, I have FPNL.

>> Yeah. So, it certainly ranges, but our ideal target that we think is a sweet spot is 20 to 30% savings immediately on the utility bill with backup power built in. So, there's immediate savings to the customer. They get access to an oversized battery to protect them from any kind of power outage. And they get what is really a better service for a better price. So 20 to 30% is kind of our ideal target but it can fluctuate from there. >> Awesome. What were some of the learnings that you took from other projects like Helium and these guys that you know have have set up this infra? You even mentioned Bitcoin and ETH as you know ETH obviously started proof of work and

and Bitcoin still is. What what were some of the learnings? Do you think you know these did it the right way and it's just a matter of these are some guys that have stuck around they >> I think this is like it's also kind of back to like >> when it comes to the network right owned >> decentralizing a network especially in a regulatory regime like we have today as crypto is becoming um really professionalized and institutionalized in the US it is it is like taking the Bzosian your margins my opportunity and applying it even further which is I'm taking all of my economic value and distributing to my users and if you aren't doing the same thing, you won't be able to compete against me. And that's something that I think Helium did

in a really interesting way, which is build this huge ground swell, this huge community, you know, 200,000 people in Discord nerding out on on radios and and wireless signals. That's something no other company that has attempted to build a new wireless infrastructure network that's not AT&T, that's not Verizon, has ever accomplished or or even come close to. And so what we see is the opportunity to use tokens, to your point, to reward contribution, to reward ownership, to build a cult brand, around energy, around the the super cycle that we're attempting to to build and scale, and then to out compete other networks that are attempting to capture all of those economics back to themselves and extract all those economics back to themselves. Um, we

don't think anyone would be able to compete with us when rewards are actually rewarding those that are building the network rather than, you know, the company that might be trying to string it all together. [Music] >> This uh this is fascinating. I mean you guys do you anticipate more of the companies that are currently providing power? Are any of them think this? I have a feeling, you know, some of these guys are launching solar panels. They're doing installations and more of them or are, you know, and and then a subset of those guys are installing these batteries as as a means of uh capturing, storing energy. Maybe even a subset of

them are thinking about the transferability. But do you anticipate more companies going this direction? >> I think there there will be there are quite a few startups on this interesting and are chasing this opportunity. I think we all have our different styles. Daylight is certainly the only one that's attempting to build this in a community first way and is also attempting to tap into internet capital markets for what is basically infinite scale to actually develop the infrastructure required. Um but there are quite a few different companies who are starting to think about this today. What we've seen is kind of the legacy uh solar industry has really started to collapse on itself because it was propped up on really predatory and inefficient sales mechanics, really inefficient and predatory financing mechanics, uh an overreiance on tax credits that are now phasing out. And so

what we're seeing is really the old guard is kind of collapsing. What that that opens up is kind of a you know early 2010s fintech style opportunity in a totally different market where all these fintech emerged after the 2008 financial crisis to provide a better product at a better price to people. That's the similar opportunity here in energy and distributed energy today as the kind of old guard starts to falter and and these new companies are doing things in a network f first way. Developing batteries uh deploying them on the grid and using this kind of total network to support the grid rather than just purely being a high ticket sales business.

>> Got it. Jason, it's been talking to you. Um love just to to get some closing thoughts like you know where just what experience been like where you guys >> certainly not finished and you know our total focus is on scaling >> started megawatts under management eventually you know our goal we like to say terowatts in all of our posts because our goal is to build terowatts of new energy capacity and do it in a way that is community first and rewards people for doing so. So what you'll see from us is you know deployment of energy subscriptions at scale in our initial markets expansion outward into new markets and then opening up participation in the financing stack uh for these types of infrastructure assets coming in the next quarter which we think will be incredibly exciting for DeFi opening up a new uncorrelated yield

class getting exposure to the energy super cycle led by AI and robotics and really providing globally like the first access to that um opportunity for the first time. Um, so anybody listening should follow us on Twitter. It's daylightenergy_. Um, we're working on a better handle, but for now there is an underscore at the end. Make sure you don't miss it. And uh, and follow along on all the opportunities to get involved and participate across all components of the stack. >> Yeah. Well, you got a customer in me.

whenever you guys do uh launch in Florida, we got plenty of sun, so uh I can be a contributor to the network and uh yeah, I mean it's been it's been great to watch your rise up until now. Just getting started. >> Amazing. Thanks so much for having to you again soon, man. And uh best of luck on continuing to build. >> Yeah, same here. Cheers, man. We'll see you next time. Very very cool. Uh, awesome. We're gonna keep things moving. I I love these kind of alternate conversations where we just don't we have so many conversations

about DATs, real world assets, stable coins, all these things. Yeah, it is a stable super cycle, but it's also an energy super cycle. Um, as you guys heard from the last guest, appreciate Jason for coming out. Next guest, uh, we're gonna keep things moving here, is Kane from Synthetics. These guys just launched their trading competition last night. Very, very cool. I believe it is live now. Um, and uh, yeah, we're going to kick it over to to Kane. I think we're just going to take a break and we will hear from him and all exciting Uh Leo, is everything good on on your

end? >> Beautiful. uh Leo, is everything good

All right, I think we're ready rolling. So, we'll go ahead and get started. >> All right, three, two, one. We got Kane Warwick, the DeFi legend on the show today. What is going on, Kane? Welcome to the show. >> Hey, thanks for having me back. >> Absolutely, man. Well, it's uh it's exciting times. Uh regardless of what's going on in the market, there's all kinds of action left and right. Uh synthetics is just I'm not going to say coming out of nowhere, but an absolute comeback arc for synthetics. You guys have uh have a trading competition going live here very soon with I mean none other than some of the best the best traders or at the very least the best personalities on CT. Um and so I'm I'm pretty stoked. We're going to talk about

it. We're going to get into maybe some predictions or just general takes uh on what we think is going to happen during this during this trading competition. But before we do, man, maybe I I know people are, you know, they're aware of you, they're familiar with you and they're familiar with synthetics from from the OG days. Most of our audience comes from that DeFi summer, that OG time frame. Could you just catch people up on, you know, how it's been going? What is what is the latest uh happenings over at Synthetics in the last few months? Yeah. So, so uh synthetics like 2022 I stepped back um for for a while um almost a year. Um and then I came back in in 2023 and um they had just launched uh Purpose V3

>> and they were really excited about it. They're like, "We solved all the problems while you were gone. We like we did this amazing job. It's so good. Um it's going to like solve world hunger sort of And so I was like, "All right, I'm going to just let them cook. I'm not going to come in and and start, you know, like messing with things." Um, but I had this thesis that the biggest impediment to adoption for, um, you know, per other DeFi platforms was the fact that the UX was still not there and it was still really hard to get, you know, money onto L2s and all of the stuff that that, you know, we we kind of has become like very well understood in the last two years. But back then I think there was still a view that like people would learn to come on chain and

it would all be fine. Um and so I I launched Infinex. >> Mhm. >> The goal of Infinex was to build better uh D5 front ends to build build a thing that would make it easy to use DI the way that it's easy to use centralized exchange. Um and you know the initial idea was integrate synthetics and then uh it turned out that that synthetics v3 implementation was not amazing for reasons traders didn't love it. Um and so it it was probably about like a year of running that before I think everyone kind of capitulated and realized like this is not the solution. Um and so so then synthetics went back to the drawing

board and in the interim Infinex kept building. Um and now we've kind of come full circle because Infinex has deployed a purpose interface which you know in my humble opinion is the best per interface that's powered by Hyperlquid that we have in the space. You can go from desktop to mobile. It uses pass keys. It's it's genuinely amazing. It's it's a really good interface and we're about to finally integrate this new version of synthetics per on mainet but it's taken about a year to build that per you know um uh exchange on mainet and so we're in this we're in this kind of weird like full circle moment where you know Infinex one often did its own thing synthetics and then they've kind of come back together so it's pretty exciting it

feels like it's all coming together >> yeah and now these paths have converged and it's there's kind of this third prong to this as well which is the general market and sentiment perception around PERPS. It's like I mean this was an innovation. It was a crypto primitive that that came about and there's a lot of there was decentralized and centralized uh offerings of it. Synthetics was one of the earliest decentralized offerings of it. Um but it's really like the market infinex and synthetics have all converged to this one this one inflection point where we find ourselves today. Was it was it that you guys needed to get something right and there was things that you just didn't quite have in the arsenal at the time or do you think it was just a matter of the market catching up and kind of realizing that this is one of

the best mechanisms to trade? I >> I think it was, you know, Hyperlid proving that you could build uh decks that could compete with centralized exchanges. You just have to make the right trade-offs. And, you know, classic synthetics made very aggressive trade-offs around decentralization. um basically you know taking like a hard line on any elements of centralization. You know I've joked about the fact that like D was too centralized for synthetics for a long long period of time. Um, and I think that the experience with V3, the previous version of Perks, where it was purely decentralized, there were all these like intricate mechanisms to keep, you know, funding rates in line and and traders

just said like this is not you're optimizing the wrong direction basically, right? like what we want is a smooth trading experience and what you've given us is something that is limited by the fact that it's so decentralized and and so I think with V4 we made a decision to kind of remove all of those hardline requirements um you know obviously we still wanted DEX we still wanted to be non-custodial um you know this is one of the reasons and and this is kind of part of the strategy coming back to Ethereum mainet >> was was one of those trade-offs to say okay the margin engine, the collateral will be on mainet. You don't even need to bridge. We can we can access all the stable coins, all the wrapped ETH, all

of the, you know, CVBTC, all of these collateral assets that are sitting on mainet that do not want to bridge off onto an L2 or or somewhere else. We can access all of those, but then we'll build some off-chain infrastructure as well to make sure that the exchange is as performant as possible. And so it's this kind of barbell strategy of like go you know maximally secure on Ethereum mainet with no tradeoffs and then on the matching engine you know make the trade-offs in terms of performance and and latency. >> Got it. And it and back in DeFi summer back in the 2020 2021 days even that off-chain matching engine part even though it doesn't house the collateral itself it was still like a hardline decentralization.

>> Absolutely not. Like no chance like it would be like get the out of here. like no chance when no one's touching this. And you know, I think that um the the experience with Hyperlid in seeing again they've made some trade-offs in terms of centralization. The validator set is is much more centralized. Um and at the end of the day for most traders, um you know, they will weigh up all of the different components. That's their job is is weighing up risk, right? And they're like, "Okay, I understand this risk and this risk and this risk. There's a bit of counterparty risk.

There's some bridging risk. There's a few things, but you're giving me a much better exchange that is really performant and, you know, has a decent amount of leverage and has a bunch of different mar markets and, you know, has uh has like deep liquidity and so I'll make that trade-off. >> Yeah. And and so we said, okay, well, let's open up the design space and and really like rethink what are the trade-offs that traders are willing to make and and you know, optimize for the best exchange, not necessarily the most decentralized exchange on day one, >> right? I think even though you guys have made those corrections and you've optimized now you've shifted the optimization into this direction that is

more in line with the market people are still going to be skeptical of the the the house the Ethereum ccentric nature of this because now there's sort of this you know if you want something performant you want something purpose-built you go off of Ethereum >> I think you know what it's the best cover fire that we could possibly have right because the reality is in the experience Mh. >> And so when people try it, even if they're skeptical, you you can't deny what's in front of your face, right? Like so, you know, if we have the right uh the right incentives and and this is why we did this trading competition.

There's a bunch of people with very large audiences that are going to experience this and they're going to go I'm sure some of them are like, "Sure, this is going to be terrible. It's on Ethereum. It's going to be slow." And you know, there's even some Salana people who are are in the mix, right? you're going to, you know, have uh contractual obligations to fund it. But when you see what the actual experience feels like, you can't deny it. It is a really good experience. And and so, um, you know, my my hot take is it's actually protected us a little bit for the last six months while we've been building this that no one really takes it seriously.

>> I love it. And and before we talk about the the trading competition and everyone who's involved, and there's some there's some there's some big names here that are involved. What are the benefits of of of hosting this on Ethereum? Why why did Synthetics choose to come back? You mentioned kind of the security of it, the nature of it. You have the offchain matching engine, but what are the benefits that you get from hosting the collateral on Ethereum? >> I think the first benefit you get is not having to convince people to bridge. >> Okay. Just the most obvious, easy, laziest part of it is people have a ton of collateral on Ethereum and if they don't have to bridge, it's just one less thing they need to think about and and

reason about and worry about in terms of risk. Uh so, you know, it's just a contract running on Ethereum just like the OG DeFi days. It's as simple as that, right? Um so that's the first thing. Um I think the second thing is that you know there is this uh growing institutional adoption right and as we've seen there's a a big fight right now between Salana and Ethereum to attract that institutional liquidity and you know being credibly neutral is one of the really important components here right um which you know isn't to say who's going to win but I do think that Ethereum has a lead there in terms of mind share from from you know institutional adoption um and So bringing uh institutional market makers

and people like that you know which is not day one but it's you know day 365 or something like that uh is going to be I think you know much easier picking one of the L1s that is you know again incredibly neutral and you know has Lindy and people are confident in um you could pick Salana you could pick Ethereum um I don't think there's many other options >> right yeah >> realistically right as soon as you're like Okay, come over to our L3 that's running on Cosmos. It's like, yeah. >> No, then you you come full circle and then you're back at the bridge risk that you described first and foremost.

>> Agreed. Yeah. >> Um man, let's talk about some of these traders. Uh as far as institutional market makers, you've got some guys that might even qualify for that. Uh you've got a market prediction market live on Poly Market. Aveni is certain. Oh, no. Avenji uh Gavoy who is the winner. Yeah. >> Yeah. >> Um >> the funny thing is uh we're not gonna have APIs on day one. We have APIs but we're not going to let people trade by APIs. They literally have to click. So I don't know the last time of Genny was sitting there in front of the computer clicking buttons to trade, but it's going to be funny. We should live stream it.

>> Let's absolutely. Hey, let's host it at the rollup. We'll live stream it. Um what is okay what are the what are the rules before we get into what you think could happen during this trading competition. What are some of the assets? When does it start? How long is there is it based on size? Is it based on return uh relative returns? Yeah. What what is the general structure for this competition? >> So so the structure is it's an even playing field. It's it's the main net production uh trading venue that people will be trading on. Um but the way that we've done it is given everyone margin um in uh an account that we have basically uh created like a sub account for right so a delegated trading account. So they have delegated access to this account to trade. They have 100k

in which to trade. Um everyone starts with the exact same capital. So you know getting you can't just yolo a billion dollars in there and and you know make one trade. Um so so everyone starts on an equal playing field. Um it is based on pure ROI. So whoever has the the um highest P&L at the end of the competition given everyone starts in the same place. Um there's a few fun little tweaks to this. Um we're going to give people half the margin up front just so they don't blow themselves out. Um and then half after two weeks. So it goes for four weeks. Um 14 days in they get a top up of margin. But if someone does blow themselves up, we're going to have a daily vote where CT can vote whoever they want back in and they get top they

get a reby of 10k of margin, right? So there's some like t, you know, if you're handsome and you think you can get your followers to vote you back in every day, it could be worth early on just like swinging for the fence. Yeah. >> Out then you're going to be fine. >> And so every day CT is going to be able to vote on who they want to come back into the contest. >> Yeah. based on based on who's been liquidated, right? So, if you're below I think the the rule is if you're below 1K of margin, um you can you can get voted in for a top up margin. Uh 10K. >> Yep. Got it. Um okay, we're going to go down the list, but there's a pretty obvious place to start. Den, you're bringing Den Spartan out of retirement for this trading competition.

>> Yes. >> What? Tell us that there I mean there's just insane lore around DJ Spartan. How did you get this guy to come out of retirement? So uh well this this lady u because it's a 70 yearear-old Korean North Korean lady. So right so that's that's important. >> She went to Kim Jong-un you know you discuss it and >> it was a it was a tough visa process but we were able to we were able to get VPN access over there in Pyongyang. So um so look you know I have a very good and long-standing relationship with DJ Spartan. Um, you know, the DGEN part is obviously, you know, very clear. The Spartan part comes from synthetics, right? Synthetic Spartan. So, um, you know, it was DJ Spartan that that coined

the the Spartan meme if I remember correctly. So um that whole arc um where you know there's probably five people that became very very high-profile um you know if not main characters um that came out of the early synthetics ecosystem >> mainly because we were the only community that was still alive at the end of 2018 like early 2019 it was really dark like synthetics Discord was like the only place where you could still actually find some people who were who are still breeding. Um, so we had like Arthur0eroX came out of there and >> RIP um Djan Spartan uh Alex from Nansen people that that came out of the

synthetics uh Discord that you know cockroached their way through the bare market and and came out on the other side. So um so yeah I I pinged DJ Spartan and said hey we're doing this thing. Um, so yeah, you won't you won't uh be getting them on uh on the rollup anytime soon, but uh they'll win the call. >> Yeah. Hey, we can live stream with the PFP. That's no problem. Um, okay. So, DJ Spartan, I mean, criminally undervalued at 6%. Um, no one's really >> I think people must must think that uh they're washed at this point.

>> At this point, I mean, he's probably a little rusty. He she, you know, they is probably a little rusty. >> Yeah. on only $150 of volume. The leader right now, Keyboard Monkey at 27%. >> That's someone betting on themselves. I I don't see any other alternative there, but we'll see. Maybe I'm wrong. Maybe I'm wrong. Maybe someone's got the alpha. I don't know. >> Right. Right. Someone might have edge there. Um, okay. Some other some other names here. Defi dad, friend of the show, great guy. Gainy, another one who could potentially vote himself back vote himself back into the program. Gy I if I were Gainy I'd be swinging for the fences if just for the lulls first of all but I think decent chance of getting voted back in uh you know if if he blows

himself out >> and and the asset universe that's available to these traders during the competition is really anything on synthetics right meaning Zcash Bitcoin ETH out this is all fair game >> for the starting point because it is a new exchange so the old exchange had I think about 60 markets um which has been deprecated now the new exchange is going to start with five markets but we'll be rolling out new markets and we may or may not allow some of those markets to be voted in by CT. >> So yeah, you know, Zcash, I think, has a decent chance of getting in there. Um, you know, there's there's a few other assets that I'm sure people would would love to trade. So, we're going to be working hard to add new assets all throughout the competition throughout the 30 days. Um, and and yeah, my my

expectation is we probably end with about 20 or 25 markets. >> Oh, we're going to ramp ramp up quick then. Okay. Yeah. >> So, we'll start with five. Okay. 1520. >> Yeah. I mean, if you want to go like Doge is probably the most uh DGEN asset. I think the other ones are majors. So, >> yeah. Okay. Cool. And uh general question as far as your strategy, others might have, you know, their their approach. Would you suggest that, you know, over a four-week long competition, are we going to see people trade the one minute chart and and go tick for tick or or are we're going to see one trade just could be hold Bitcoin wins the competition?

>> Yeah, I mean, you know, if you if you go, you know, two 3x leverage, um, you know, timing is obviously interesting, right? Because we had that little dip to like 104, it would have been a really good time to start, but now we're sitting at 110. And it's like, oo, that's that's a bit tough. You know, I don't know if you can just yolo 3x and and uh hopefully get back to 130. >> It would have been a really fun time to start because we would have seen a lot of big numbers, but this time frame right now, >> it makes it harder and it's really going to separate the men from the boys or the 70-year-old Korean ladies from the boys, >> the monkeys with a keyboard. Exactly.

>> Exactly. Exactly. >> So, yeah, it's going to be it's going to be very interesting. It's a choppy it's a choppy market at the moment. It's tough to trade shop. I'm going to be trading like fairly short time frame like usually like one one to two hour time frame. Um so we'll see. Um but yeah, it's going to be it's going to be super fun. >> Yeah, I'm I'm looking forward to it. When does the competition officially start? >> We should be live by the time >> should be live right now. Yeah. >> Very cool. And so these these odds on this prediction market might change. Another big name here who's done well over the years but has crashed out as of recently, Bit Lord. He's got an XRP tattoo. Do you think that's going to serve him well?

>> Yeah, I mean, look, you know, we'll get XRP out there for him and and he yolo XRP as someone who I just bought Bit Lloyd in boxing and and >> Oh, that's right. >> Yeah. Yeah. So, u it was it was pretty bad loss. So, I'm looking forward to trying to uh you know, write the the ledger at least on the training side. All right, Kane Kane Warwick's revenge arc starts now. >> 100%. >> All right. Um, and so you're you're participating in your own competition. I think we're going to see how that plays out. Um, but I'm also curious if you don't win, who do you think is going to do well? Like, who are who are some of your top picks for who do you think is going to come out on top here

>> without without saying yourself? Yeah, I think there's some there's uh definitely some people who I know are pretty good traders who are kind of dark horses. Um so uh I think he should be on the list now, but Leto was was a late entrance. He's he's a pretty decent trader. He's he's a very kind of uh I think he's just going to like probably yolo maxi. Um and I'm I'm pretty bullish on it. So, I think if he goes like 5x8 long, um, he'll do pretty well. So, I think there's going to be some people who maybe have like some idiosyncratic trading strategies. Uh, and and you know, if we do rip a bit higher over the

next 30 days, which you know, my my hot take is we will >> and what I'd love to Yeah, I'm curious what what's the justification? What's your what's your basis? So, so our um our head of liquid trading at Bodie Ventures, my my prop fund and I um three weeks ago were like the only thing that is holding us back from a you know parabolic run into the end of the year is a big wash out and then we got that little wash out where everyone was like okay that was it and I was like I don't know I don't know if that was enough and then we got Black Friday and I was like that was maybe too much but um I think you know you cannot not possibly go back to up only without flushing out some

leverage. It's just not possible because if people have a ton of leverage sitting in the system that's in profit, they're just going to take profit all the way up, all the way up. You have to flush out the people that are that are going to be scalping you um and just replace it with people with like giga conviction. And once you you flush out that leverage and you've got people that are just super high conviction who bought the dip or whatever, uh then it's much easier to run up from there. And you know, we see it every single cycle. There's a there's a big flush, everyone freaks out, it's choppy for a little bit and then back to up only.

>> So there's not one particular catalyst. It's really just this big leverage wash. And now the the capital base of of holders in ETH is stickier than those who were just trimming profit, trimming profit all the way up. >> 100%. And and you know, like this is again a very well-known setup, right? Like we're in a bull market, it's very obviously still a bull market. Everyone's trying to call the top. The more people who are calling the top, like it's fatigue. People at the end of a bull market want the bull market to be over. They want to go back to they think they want to go back to a bare market.

It actually isn't very fun. But they they think like this is, you know, this is tiring, right? I'm like terminally online. I've got to be online hours a day so I don't miss things. Crazy shit's happening all the time. Coinbase just bought uh Kobe's up only NFT for 25 mil. Like you try and tell me this is not a bull market and crazy like I'm sorry. Like I you're you're like that's cope. It's massive cope. So you know we're in a bull market. We've had a massive flush. Everyone's a bit fragile. They're walking on eggshells and I think we're going to keep grinding up and we're seeing it. It's already happening back over 110. Um I think it's it's up only from here. U you know a couple of interest rate drops like you know 150

Bitcoin at the end of the year 200 250 is not out of the question in my mind. >> Beautiful. I mean don't overthink it guys. Basically just don't overthink it. >> Yeah. >> It's right in front of us. >> Here's the thing. You will not know it's a bare market until six months after the top. >> That's that's the the harsh reality. It takes six months after the top before people actually are convinced that we're in a bare market. Like a little correction and you're like, "Oh yeah, we're in a bare market." Like the out of here. Sorry. >> Right. Big leverage wash. People are call people are call calling uh for for the top. Um okay. A couple other names that are just could not we could not miss while we're while we're discussing

the competition. Den Ping, a main character of more recent of a more recent era. Uh very recently had a call publicly didn't necess I mean very vague. This guy's kind of mysterious. Do you also have a relationship with Den Ping? What's the lore behind the Synthetics DJ Ping collab? So, so DJ Ping, um, not with that handle, but, uh, was in the Synthetics Discord. Um, so I've been I've been talking to to him recently, and he's got some synthetics lore. Um, so I don't know exactly who this person is. if I my suspicion is there was someone fairly high-profile in

the 2021 cycle and then they rotated their their handle or something like there's something going on because I don't remember DJ Ping being in the synthetics discord so um unless I'm I'm very mistaken I think that uh that um yeah they they must have been operating under another handle >> very very interesting Kane I think that's all that I out for you. There's definitely some sleepers in here as well. I I wouldn't be surprised if Luca Nets is just savvy. Wouldn't be surprised if he makes it towards the top.

>> Yeah, if we can get Pangu in there for him, I think he's got a good shot because he'll just full poor Pangu. And then you know uh if the next if like at the end of the day if the next 30 days are up only it really comes down to who is DGEN enough to go deep and and you know high leverage and if they can get the access to some more reflexive assets uh which you know I think we will we will try our best to add. >> Okay. And what is the maximum amount of leverage available on synthetics? 100x >> 100x.

>> Yeah, >> there's plenty of room to to have some fun here. >> Oh, yeah. Absolutely. >> Beautiful. Kane, thank you so much for coming on, man. It's absolute pleasure. Really looking forward to this competition. Amazing. That's