🚨LIVE: From CT Digital Forum Future Fest At UCONN

Transcript

JP Morgan, Black Rockck, DTCC, Fidelity, the entire thing was just institution. ions. It's just it's next level. This industry is going to the next level. And guys, I I don't know what else to say. I'm bullish. He said it. He finally said it. So bullish. It is bullish. I'm bullish. We're bullish. Heat.

Heat. Heat. Heat. Corola is headed to to the top. If we're

not already at the top, we're going to the top. >> Roll up is my favorite. >> People from all walks of life, all over the world, all over this industry come together for the roll up. Zoom out. The institutions aren't

coming. They're simply here. It's the golden age of crypto, guys. Get right. Let's go. >> Welcome to the next. see you on the show. >> And we're live, >> guys. I'm sorry. >> I'm so sorry. We're not gonna start there. >> We're live from the CT forum. >> We've got a lot to talk about today. We're not going to just We're not going to just bear all day. That's not what we're here for. >> We promise. We promise. >> You know, all my homies hate Arthur Hayes. Okay. We're live from the CT digital feature formfest in Stanford, Connecticut, Yukon campus. First time I've been on a college campus since 2019. CT does not stand for crypto

Twitter. It stands for Connecticut. And we are on the campus of Yukon. They've got some fast Ethernet. And uh we're going to be talking to a lot of very very smart people today. Very excited. >> An array of topics. So >> we've got robotics, we've got AI, we've got digital assets, of course. >> So we're going to be getting into it. >> Yeah. Uh good morning from Lakeland. Good morning Kevin. Good to have you. We've got our first guest here, Zack Pandle of Grayscale, the head of research. Gayscale recently launched their Hyperlid ETF. Um, I think it was yesterday. It It's definitely seen some great flows. Obviously, you guys have been tracking this with us for a while on the show. We're going to get Zach on and we're going to talk Hyperlid. We're going to talk what's going on in the market. Last time Zach was on, he

addresses as a crypto coldfront. The winter seems like it's coming. Let's see what Zach's got to say. Zack, welcome back to the show. Great to have you again. Hey, great to see you guys. Uh, great to have you in Connecticut. Grayscale, of course, home base is Stanford, Connecticut. So, you're you're here visiting our our home turf. Uh, great to be connecting here. A >> absolutely, Zach, you've been making making a tour. We saw you in Miami. Uh, we saw you speak all over. You've been to the tokenization tower. Uh, you know, there's trials and tribulations in the market, but what is it, you know, what is your reaction? You're coming home.

You know, Stanford, Connecticut is the Grayscale headquarters. you know what how does it feel to be here in Connecticut at the CT digital forum? >> Yeah, look, we're having fun in the market today. Of course, Bitcoin is down. We're happy to talk about what's happening with the majors and micro strategy and all that kind of thing, but there's so many things that are flying, so many innovations in the industry, regulatory clarity really driving a change from our institutional uh clients. So, we're busy, we're activated, we're investing for for the long haul. Certainly, no letup whatsoever from from Grayscale. uh and happy to talk about hyperlquid and all the new things coming. But I I think it's an really exciting time uh for working in digital assets and running a digital assets asset manager, you know, even if uh price is down for some of the

big tokens. >> Definitely. Yeah. I mean, we saw this really interesting market bifurcation that we've been talking about as of late. You've got a couple of these assets that have been, you know, performing very very well. A lot of flows seemingly go into them and then like kind of majors were at this point of like kind of just like chopping around last couple days. We we did see a bit of a a you know pretty strong pullback all majors then like this relative strength trade kind of unfolded overnight. It it it seemed like at least that's what our audience is going to say. Um when it comes to kind of viewing how the flows have changed in the market, right? Like I think the big question has been you know we used to live or we still do live in a bitcoin denominated kind of market where

everything follows bitcoin in this way and that the flows have been very concentrated basically on like bitcoin being like this risk on or risk off uh you know kind of like uh barometer for the market and that's just changing now it seems like flows are coming from different vehicles from different places people with different time horizons etc. How like are we still in a Bitcoin denominated market firmly? What's your take on kind of like how the flow structure in this market is changing? >> Yeah, I don't think we can totally escape the kind of gravitational pole of Bitcoin. It's still a huge share of the market. Most institutional allocators really, they still only have Bitcoin and they're beginning to dip their toe into the platforms that power stable coins, tokenized assets, decentralized finance.

These are, you know, what your audience would think of as the other majors. Ethereum, Salana, BNB chain, uh you know the kind of major smart contract platforms. That's where the institutional allocators are today. But I think what this uh you know what you guys have called the three-headed dragon and I have taken uh that term to heart as well near uh of of course hyperlquid zcash. I think what's happening here is that allocators are you know bringing a new discipline uh to uh putting capital to work in crypto. It's just not buy any random large cap token. find the things that really are new innovations uh driving real value to the token holders.

I think those are three great examples uh that are obviously leading the the market uh today and I think we'll continue to see that more of a selectivity among allocators and really innovative ideas rising uh to the top. I think it's a healthy thing uh for the the crypto ecosystem to see that differentiation trade playing out. you guys have been on top of and your audience I think very well up to speed and I would say Grayscale also very in this. We are the only fund manager that offers investment products in all three of those things as you said hyperlquid ETF launched this week shout out Hyperlid but we also offer a Zcash uh product a near uh product so you know certainly all these assets near and dear to our heart at Grayscale. It's been a thrill to see uh them really get the

recognition they deserve. Yeah, and it's been incredible to see Hyperlid surge into the top 10. It feels like there are still some assets that are in the top 10 crypto coins out there that don't really belong there. Um, and so we're we're seeing this uncorrelation in the market. Um, you know, we've seen other cycles things all go up at once, they all go down at once. This is fundamentally a it feels different this time, which is kind of funny to funny to think, but it it really feels as if there's this uh period in the market now where things are starting to separate. What do you do you also see it that way and and if so what do you attribute that to?

>> Yeah, absolutely. There's two things regulatory clarity and revenue. These are the two things that are changing all the conversations that that we have with uh professional investors. Uh these are the regulatory clarity allows them to look at the asset class in a new way and it allows other institutions that are building say using stable coins uh to engage with crypto. So that that's changing things from a fundamental uh standpoint. And then revenue and the revenue flowing to token holders I think is a way for people to reconsider the way they think of crypto. And I can't overstate how important hyperlquid has been in that regard. of course near an important part of that uh story, new revenue driving that to token holders.

But hyperlquid I think really stands apart as a very transparent uh use case, something that traditional Wall Street can understand, something that generates revenue and passes it back to token holders in a very straightforward uh way. So that clean value capture uh story of Hyperloop plus regulatory clarity, those are the things that are really activating institutional allocators that we engage with regularly. >> Yeah. Yeah man. So, I had a I had a dinner with the Bitwise guys a couple couple weeks ago or even it might have just been last week and they were saying that it's actually much easier to um talk about Hyperlid as an investment vehicle or as a opportunity than a lot of the other crypto assets that they have ETFs for. I think their ETF has been one of the largest that they've ever launched in terms of speed. Um when

it comes to explaining the value proposition of crypto assets to institutional allocators, you mentioned these you know two things regulatory clarity and revenue or just positive kind of like fundamental flows. How how different is it explaining crypto assets outside of Bitcoin that have real flows and a real kind of business model versus like the traditional L1s or kind of like infrastructure um you know projects. I'm I'm I'm not saying that those are like any worse or any better, but how different is the conversation of like the kind of rabbit hole of understanding when it's just like here's the cash flow, here's the business model, here's where it goes. How much different is that conversation?

>> It's a complete unlock. And our our approach has has changed, I think, uh now that we have these types of products and and ETFs that give access. What we tell allocators is that there are two types of crypto assets. There are things that look like commodities and things that look like traditional uh financial claims like stocks and bonds and are based on revenue. You think about valuing and allocating to those assets in in different ways. I think people completely get that and I think traditional allocators will come around uh to understanding the use case of Salana, Ethereum and uh Bitcoin but maybe they will come in uh the backdoor essentially through the kind of revenue uh generating projects like Hyperlid and and build to Bitcoin over time which I I continue to think is one of the marquee

assets in the financial system and an extremely important um asset and technology providing digital scarcity and a level of security that is unmatched within crypto. So people will come around to the bitcoin vision but cash flows discounted cash flow valuation approaches these are how most financial analysts and capital allocators start. So uh hyper liquid has become an excellent on-ramp for those types of users. Yeah. >> And the other thing was, you know, from their team that I kind of heard was that >> it's not that these buyers right now from the institutional side are price insensitive, right? They're always trying to look for a deal. They want to find a right place to get into some of these assets that are like these mega trends, tokenization, per stable coins, etc. But they're much less price sensitive than like the average trader

or investor from like the crypto native land. How accurate is that? are are these investors coming in and being like, "Look, we see PERPS and tokenized assets trading 24/7 is a mega trend that's going to happen. We we look at CME and NASDAQ and all these platforms and we see that they're going in this direction. We just want to kind of hop on board and be a part of that and not kind of like miss that opportunity or like what is the appetite of kind of like urgency in allocating to these mega trends?" Yeah, I would say they are price sensitive, but they have long uh horizons and they're allocating capital for a big structural trend that is expected to play out over say 5 to 10 years, not 5 to 10 weeks. So, uh so they're planning for the long haul, but

they are price sensitive and and I think that you know if I had to um you know explain why people may hesitate on hyperl just because the the prices run uh so so much. You know, when we were at 40, you know, the multiple was at one level. it's a different kind of multiple when you're at 70 or or 80. So, uh so that that price difference will will matter, but they're planning for the long haul. Uh and I think a longer term horizon allocator, they're they're focused on uh not only revenue, but the durability of that revenue to competition and the potential to grow that revenue uh over time. And those would be the tough questions that'll be asked about every project uh in crypto.

Not just can have you made money in the past, but can you sustain it? what what happens when other big competitors join the market and how do you find other vectors for growth? Those are the types of focus questions that we're getting from allocators. >> Yeah, Zach, we know you only have about two minutes left here before you, you know, you you end up on stage and and give it a talk there. So, I want to play a quick bullish bearish. Don't want to pigeon hole you, but want to, you know, there's plenty happening in the market. Um, Hyperlid, you know, obviously is the the topic of focus today. Uh, per regulation going live. People have said that could lead more competition to go live in the US. Also, hyperlquid could end up in the US. Uh, bullish or bearish for hyperlid per regulation in the US.

>> Look, it's it's incredibly bullish. Uh, don't don't miss the train uh here. The train on pers and hyperlquid is is leaving the station and I think uh most allocators are at risk of of missing it. You know, this is a extremely innovative uh platform uh that is providing a uh a compelling product in a highly competitive uh space. Futures trading, speculative trading, offshore, this is a highly competitive market. Hyperlink is leading that uh growth uh today. Um I think the CFTC uh changes are the first step to getting full access to the Hyperlid platform in the US and there will be a second step around decentralized exchanges that comes together over the next couple of quarters uh or so. Uh but I think that Hyperlquid is coming to the US market

before too long and that'll open access of course to many more users. >> Got it. Uh Bitmine launching a preferred offering at 9 and a half% yield. I'm going to reserve judgment on on this one and I I want to see what they're going to do with the proceeds and also how this fits in the context of ETH staking. Um I would expect a change uh to Ethereum's staking model uh in the not too distant future. And I think we're going to see uh a lot more discussion about that over the the coming months. And so if the reward rates are coming down, how does that uh fit with BitMine's ability to pay the the coupons? What are they doing with those proceeds? I want to see all that stuff.

You know, look, I think Tom is a great operator. I'm optimistic on the Ethereum ecosystem. I I looking forward to seeing what's happening there. I think Bitmine will be a great contributor to Ethereum, broadly speaking, over time. >> And and we've seen some great research coming out of Grayscale on the Ethereum staking uh model. Uh Arthur Hayes selling hype, selling near uh and you've got to get on stage, so I don't want to hold you up. >> Look, uh I'm a fan of Arthur. I think he's an exceptional trader. You know, our approach is a bit different. you know, we're we're trying to pick uh the winners again, not for for five weeks, but for for five years. And so we're we're still in all those trades, of course, and I think Arthur will be back in those trades. I think I think so, too, thanks so much, man. Really

appreciate as always. You guys have a great conference. >> Cheers, man. >> All right, guys. Um well, Sailor's down 11 and a half billion. Lee's down about 9 billion. Where did it all go wrong, Rob? Well, um, Bitcoin doesn't have a a native staking model >> at all. >> So, there's only one way, one way only to fund an 11 and a half, I think it's 11% or 11 12% dividend in the stretch product, which saw an, you know, impressive amount of volume and and interest uh from investors. People came in, they they loved the 11%. But uh you know they it's difficult to fund that because you're only doing it based on

you know the appreciation of the Bitcoin price. Yeah. Um Ethereum is different. It has uh staking in it. >> But they will try to lower the yields. Definitely going to try to lower the >> yield. So I I I would think that Tom Lee wouldn't have to sell um as much ETH to fund the dividend because he's already got revenue in Bitine. He's, you know, using this this yield uh as revenue trading at, >> you know, passing this passing this along. What is trading at? Oh, it's it's back up today. Yeah. 96. >> And I think that makes sense because Sailor has shown that he is uh willing and able to sell Bitcoin to fund that dividend. But of course, this comes with complications in the underlying Bitcoin price and it kind of fractures the flywheel that he has he has built and he

has talked about. >> So, we'll see. We'll see. Um our next guest, >> John Woo. Let's go, man. Let's go. We are in the institutional era of finance. Ladies and gentlemen, here at the CT digital future fest at Stamford, Connecticut Yukon campus and John is a leading voice for institutional asset management, digital assets, and more. Guy is dialed. Surprised he's not in Paris this week at Proof of Talk. I saw John was there or a separate John.

Different John. >> Different John. >> Um, >> great guy. John's the president of Avalab. Pleasure to have you on the show. You guys do a great job. >> Thank you, man. Andy, >> cheers. >> Yeah, thanks for coming. Um, Avalanche is leading tokenization. Uh, we've had the the pleasure of hosting Olivia uh on the show multiple times, multiple people from the Avalanche ecosystem. Uh, we just covered her article on the national best bid and uh offer um and and some of the evolving tokenization market structure. Um, so John, just curious, you know, what are what are you most excited about? What are you most focused on as it pertains to Avalanche tokenization and the CT digital forum today?

>> Yeah, I mean, well, this is a the CT digital forum was fantastic. Great group of people. Always nice to come out here from New York because the crowd here is a little bit older. They definitely understand traditional finance. And then they're really appreciative now of DeFi and crypto. Not so much two or three years ago. It's a little bit of lag, but it this is what's great about this crowd. Um, what I'm most excited about is a whole bunch of things that's happening on Avalanche. Like seven years ago when we started this journey, we're first of all 10 guys in a room. Now we're like over 200. And we always wanted to have the enterprise or or traditional finance >> come on chain. So we built it thinking we're going to have DeFi crypto native but we also wanted just get the

enterprise on and now this is actually happening. So it's uh one of the subject matters out there in the in the on stage was >> it's kind of bittersweet because yeah >> uh blockchain's gone from think of it as crypto asset speculation to real enterprise technology >> and zero to one is over and now it's 1 to 10 and that's a lot of blocking and tackling but I'm excited for all the real world activity and not just the tokenization of an asset whether it's a commodity security or a collectible but making that asset productive.

having continuous yield and making it more in the spirit of what DeFi was supposed to be. >> Yeah, man. I mean, we we've been trying to shatter this kind of like mental model of we've built this industry for this collective of, you know, a couple trillion dollars of total market cap, $150 billion of TVL in DeFi to like no, no, we have, you know, hundreds of trillions of dollars of assets in the world that will be coming on chain. may take five, may take 10 years, may take longer, but the entire complex that we're building here is so much larger than kind of I think what any of us perhaps initially thought when we set out. And so I feel like Avalanche has done an incredibly good job of like being very in the loop of like the early DeFi days, all the DeFi things and NFTTS

and the community building and all of that, but then very very quickly realizing that the future of this industry is in this enterprise institutional grade, you know, blockchain based company. And it's kind of an interesting world right now where we're in like this blockchain, not Bitcoin era again. I don't know if you're around in 2018, but that was kind of the entire thing. >> ETH is going through its own like Ethereum, the blockchain, tokenization of stable coins, but not ETH. And I think that there's a lot of that kind of rhetoric. How do you like reconcile the broad bullishness and adoption that's happening with Avalanche versus the kind of detrimental down downright like despair that people are feeling about token prices and about

kind of like the market? How do you kind of like balance these two things? >> I mean, it's a changing of the guard. It's that simple. I mean, you used to have very retail cryptonative people and that's great and you need them. They were the people who got this whole movement started and we you know want to keep servicing them. But if they want those original retail people it's now moved to more an institutional base from a ownership perspective from a usage perspective and the next big thing will be from real world assets that are usable collateral basically can move it around and and use it for more than just okay the right of ownership is on a blockchain. So I think once you do all of that and you put those pieces

together, the original cryptonative person is suddenly going to be saying, "Wait, if I can take Apollo's A credit, which gives me 8% yield, and use that as collateral, and then loop it or do whatever you want in a more easy user-friendly fashion, they may appreciate it far more, but you have to go through this, you know, bumpy rope to get there. I'm excited for a time when uh riskfree is obviously a very relative term, but you know, we're not getting a half a basis point in our savings account in interest. We're getting the 8% or we're getting upwards of 10% at a NEO bank because we're leveraging some of these composable benefits of tokenized products.

>> Um and and >> you know what what does that world look like? Stable coins have kind of gotten this, you know, this funky territory where we could see some capital flight. At least banks would have us convinced that that could happen. >> Ultimately, it almost feels like that's bullish for our industry because it speaks to the size and scale of what we're building here. >> How do you think that world shifts as more of these products come on chain and more of the banking landscape sort of reconfigures itself? >> The vision is to have what I call continuous yield. And we get paid, you know, our checks come in bi-weekly, right? So, in theory, we're acrewing value, but we're not getting it. and we can't put it to work and therefore we're

not getting the yield associated with that. And there are reasons for it. You know, obviously settlement is one reason. Stable coins can move that down a lot. Then there's also there's really just administrative paperwork like someone has to take the taxes out. Your employer has to figure things out. There's real stuff that has to be done. But it shouldn't be bi-weekly. And the vision is one day and probably more on a blockchain than not because it's, you know, if things move easier is that you're going to get a check at, you know, maybe it's two weeks, but you're going to be able to acrue that yield, continuous yield or maybe you can get it into your wallet >> even sooner >> and then you don't need these payday loan areas that are userous rates and all of that stuff and then the whole world just changes. It allows the

velocity of capital to happen. It'll take a lot of people who live paycheck to paycheck in a world that they don't have to go take out loans to just feed their families or buy some TV or something. It's going to improve the lives of a lot of people. That's the vision. That's where we want to get to. It's not going to be easy, but that's where we've been working. >> I mean, you're you're talking about a 10 billion industry. In 2022, borrowers took out more than 20 million payday loans totaling nearly$ 8.6 billion. It feels like every week we discover this new pocket of the traditional financial system and it's another10 billion here, another trillion dollars there. We're just chipping chipping away at these pockets of value that ultimately come on chain and those add up. Those compound

and then the world looks a lot different. >> Well, I mean you already talked about Neo finance. Neo banks have been really big for the last 10 years and you know >> using stable coins and aentic payments one day that's still a little bit away. It only accelerates it what you're saying what you guys are really into the whole neo finance and but you need to have all of those primitives and you need to have accessibility and again the blockchain is actually a very good place for that because it's immutable and it's and it's visible and if you have the p and it's composable so if you have all the print uh primitives and I'm not talking about technology primitives I'm talking about the apps all there for people to plug into or pieces of an app and and once that happens like far more

entrepreneurs can happen and faster. >> Yeah. Um I I have a question about value acrruel because we are in this >> you know okay we we can take the $ 8.6 billion um you know payday loan industry onchain. We've had a number of conversations uh we had Joseph Shalom on the show talking about this with respect to ETH. We had um Dell from Stellar talking about it uh with respect to Stellar. You know, obviously they're making a wave into RWAs and continuously we're hearing this model where okay, there is some strength and and the value proposition is very strong as it pertains to the technology. This is helping real businesses. We're moving these things on chain and those are billion dollar potentially trillion dollar industries. the value acrruel to the asset. It continuous it's such a

contentious topic and I'm just curious not you know if you want to speak to avalanche in particular feel free to but in general the model seems to be we want to scale these things so that we can we're ready and we can support lots of adoption but if we scale these things such that we're not charging very much for these transactions but then the asset is acrewing value based on the transaction fees and the transaction fees goes to zero. the these things feel very counterintuitive. Can you just help us square the circle? >> Yeah, that's a great point and I think the space in general is is trying to reconcile this. There's a tension here between a traditional revenue model and a traditional equity company that gives you a service, gives you something or product and gets paid in either a fee trans or a percentage per transaction or

monthly like a SAS type of thing. That's the traditional world. These things were built to not be a company. They were built for a permissionless open ecosystem and the token was supposed to be a function of many things whether it's like utility in the sense of gas to use the open source technology or for um governance and and many things but when you try to square a circle it it is very messy. And what's happened is basically you have token economics in the early generations of these uh systems if you will these blockchains networks >> that effectively you know algorithmically predicted the supply on

a regular basis >> it's really hard to figure out the demand side >> so I think some of the legacy and you know all the layer ones from previous generation you know we we started in 2019 um and you know So did Algoran, Polka Dot, uh Ethereum is our earlier generation, Salana was during our generation. We all have to figure out what it really is going forward. For the longest time, I think the um inorganic demand like extra demand was able to eat up some of the organic supply.

>> Now, um it's the AI bro, not the crypto bro, and some of that. So we have to figure out how an organic system will work well in a permissionless manner. Yeah. >> And I think a lot of us I know I think about this all the time for avalabs and avalanche um there's got to be different token economics. We've seen this new group of people called a hyperlquent um who've done it well and they have different twist on it. You know there's a lot of big buyback you know through a treasury that they have and those are the things that you can um do to create you know a better system. But I think right now I think all of us are figuring it out as to what's the better system >> and and I mean like a lot of this value

is you know you guys are doing work in Latin America and you guys are you know onboarding thousands and thousands of people to different neo banks and we were talking you know to Olivia about the work that you guys are doing there on payments and stable coins etc. you know, a lot of this is happening. So, there is like it's actually quite funny. You you could argue that the token valuations for a lot of things in the early days were far inflated comparatively to like the value that they created. And now it's going the other way where companies like Avalanche are going out and creating tons of real world value and then now the token market is kind of like the question mark. And so it's kind of interesting how like the pendulum has shifted from like you know uh not producing a lot but

a ton valuation to producing a lot and now the market's kind of like well you're still not good enough. It's honestly just not an easy spot to be in and it's not a fun conversation and we got yelled at by the stellar people for asking them the same question and and so um kind of getting away from from the token side. John, what is what is the what is the brand breakthrough for Avalanche here? Right. Like Hype Liquid has done well in the sense because they went and like they were trading non-crypto assets. Um you can think of other platforms in the space that have done well because they kind of like broken out of the little industry. What is Avalanch's um trading commodities 247 Gary Vee NFT?

What is Avalanche's like moment or like brand breakthrough that's going to like kind of like let it eclipse this small subset of users and institutional clients maybe in the states or in the crypto community? What is what is Avalanche's breakthrough? >> All right. So before we go to the brand breakthrough, I want to finish the and address the previous question. >> Okay. So >> prior to uh to running Aval's Avalanche and being an operator, um I was a tech investor >> and one of the things I always looked at was hidden value in companies. Sure. So, Ava Lanch, as a reminder, is kind of a network of networks. There are many layer ones or purpose-built blockchains for different companies and and all over the world and they they can easily tie

back to the main chain and they can it's interoperable with the main chain where more liquidity is and then also they can tie into any EVM compatible. So, it's very interoperable and that's why all of these enterprises want you know to be on avalanche. It's because they have their own tension of control versus interoperability. They want the interoperability and they want the um innovation on the permissions world, but they have regulation and they have compliance. So they have to have control of who's in it. So the hidden value is there is all of these layer ones that are tethered to avalanche right >> that is effectively proof of authority chains. We have this thing called pragmat 2.8 or almost three billion in Japan. three billion of tokenized real

assets and real estate and securities. It's in a priv it's going to be on a private network. There's similar things like that elsewhere. So, it's a lot more real world assets doing things on Avalanche that is not known to anyone else because it doesn't pop up in an explorer because it's private right now. >> Yeah. >> But they will be one day. So what we're focused on is how do we connect all of these different layer ones to each other and how can that acrue value to the avalanche token and ultimately you know the system the flywheel will go effect.

The way I look at it is the interesting thing about this space is if you look at a traditional balance sheet you know you have your assets on the left and then you have you know debt and then you have equity. Y >> the token in this space is actually both an asset because you need it to do things and it's also equity in some sense. So and obviously balance sheets have to net to zero on one side to the other. So when one goes the other side has to go then that's the flywheel and it's good when it goes up but it's also very bad when it goes down. So, we're thinking through all of this, but on the asset side, there's a lot of, you know, hidden value right now in Avalanche. And once we unleash it, things will go much

better. >> I I'm curious to hear more about this Japanese um, you know, private. >> You want me to answer the brand thing or you want to go to this thing, >> man? We're going to go wherever we want to go, ladies and gentlemen. So, I'm happy man. >> So, according to RWA XYZ, there's $1.6 $6 billion of RWA on Avalanche, but you're talking about a three billion dollar Japanese real estate and RWA private Cchain that is on >> private chain. Cain is >> private chain on Avalanche. >> Can you just tell can you tell us more about this like uh you you know and you're describing it as private for now implying that it's going to become composable and public later on >> and so yeah, tell us more about this

because I feel like this is probably flying under the radar for most. It is definitely flying on the rail because we've done a lot of things overseas in Asia and the rules and regulations are different there. What they want to do is take advantage of the efficiencies of having the the asset the registry on a blockchain. We're doing that here in the US as well. You know, you definitely get benefits from just cost savings and reducing and automating. So, reducing number of manual steps to keep track of things. That's their first step. But they're also going to marry it with also think of it as stable coin which is you know they have to decide which stable coin and then ultimately all those assets can trade far more in a free manner and that's ultimately their goal to like unleash the velocity of the

capital associated with that those assets. and real estate for so long has been such a locked asset class where there is very it's very difficult to get liquidity at at the same time we're talking about emerging markets quite often on this show and how you know a lot of a lot of people are excited about the thought of investing in tokenized US equities because you know this is a great asset class US equities but also there's emerging markets all over the world um you know we we've talked about the Korean stock market and you know some of some of these things as it pertains to the AI trade but there's also real estate abroad And people are very very excited about getting into this as well. And I think what you know another thing flying under the radar here is that tokenization implies the ability to not just invest you know

outside international investors investing in the US but us investing in emerging markets and opening up new asset classes as well. >> Absolutely. Like obviously the rage is AI trades and memory stocks right now. Right. So I can buy Micron very easily. I can buy Sandis very easily. It's very hard for me to buy SKH highix. >> Right. >> Very hard. So unless you have the right brokerage that has access to that, you're hoping there's an ADR. And usually if there is an ADR, it doesn't trade that liquid. So if there was a tokenized version of SKINEX or Tokyo Electron in Japan or one of these other companies, I mean think about how easy it would be to tokenize that and make it like we have dinari does that for what you said. Basically they take US stocks

that mostly is used outside where outside people get access to Apple. the reverse can also happen if that's what you're saying. >> Shout out to Dinari, proud sponsor of the show as of a couple days ago. >> The only like uh push back on the real estate tokenization is that we had um Carl from Sixman on the show like two weeks ago. He has like this tokenization spectrum. basically he's claiming that there's like a spectrum of value that tokenization brings to a set of assets and on one side is like tokenized deposits and stable coins for obvious reasons that I think all of us know and then on the other side it was more like highly liquid volatile assets that marked to market every minute every block every second whatever it is and in the middle of like the barbell that he

kind of claimed that wasn't so interesting was things like private equity and things like real estate and he said that because tokenization applies this framework of instant liquidity, instant redemptions, ability to get yield, ability to kind of get in and out of products. Um, amongst other claims that it has less value for real estate and private equity, these investments are much longer term and they're marked to market once a quarter. What would you say to that? >> He's not wrong. He's actually right about that. Let's just take the real estate example. You know, you I've been in the space forever. You guys have been in the space for a long time. Real estate's always been talked about because so you can fractionalize it, you can trade it easier and it's illquid right now. But then why is it not happened? That was like the first use

case for tokenizing a real world asset and it's now been like 15 years since I've heard it. It's not happened. I do remember that. So he's not wrong. The liquidity side of that argument has not come for whatever reason. However, that's only one way to think of creating value by tokenizing that piece of real estate. You can go and get a mortgage when you go buy a house, right? When you have art, that's a different type of real estate. If you're high-end, you can go to certain um call it asset uh wealth managers and they will take your art as collateral. That real estate once it's tokenized and you put it into and make it a productive asset, put it into some pool or some sort of you know borrowing capability, suddenly you turn that real estate and make it productive. And

that's a function that exists in web two and now it can also exist in web three. >> Yeah. Um, and I think uh, you know, part of the neo finance thesis is that these DeFi protocols are are built for cryptonnative assets initially, but are targeting the the broad spectrum of potential tokenized assets, real estate included, and going all the way through that barbell. Um, and we are starting with stable coins. We're going down the risk curve and continuously tokenizing more of these assets. And HIP 3 is a great example of this. You know, they've done so with, you know, starting with gold. you know, oil is getting a lot of traction there. And now we anticipate, and this is maybe an unpopular opinion, but we anticipate that RWA trading, HIP

3 trading is going to outpace volume and open interest and and general activity on these chains beyond cryptonnative tokens. Do you agree? If so, how do you prepare a blockchain to trade predominantly non-crypto assets? So, um I actually hope that happens because that's the vision we all wanted to to take these unproductive assets and make them more productive or less productive assets, make them more productive. Um so, how do you prepare a blockchain for that? Well, you know, Hyperlquid is as much a product as it is a layer one blockchain. They've combined the whole stack, if you will. Um you know, there's going to be many different types of assets. If you look at the stuff we're

doing in private credit, >> you need to have so many pieces of that. You need to have the origination. You need to have warehouse loans. You need to have a serer to make sure like administrate all the the payments and the the data flow of that. And you need to have the end you know lender. So you have to have you know for not it can't be just you know trading purposes. You have to create the life cycle of private equity or life cycle of the asset. And that's what we're doing at AVA Labs and Avalanche, you know, for Avalanche is making sure that all the like we have um OFI, which is effectively the originator of the loan. We're going to have someone who aggregates the loan, you know, basically sourcing it, lead generator.

You have a fence, which is basically the serer just like a traditional in web to finance some there's a service out there. And we have Valenor which is a fund that actually goes in the you know the ultimate bar uh buyer of the stuff or lender if you will in the credit world. So you have to have all of these I call it financial operating and regulatory comp primitives. It's not just tech anymore. So how do you prepare for as a chain? Well you have to have those non-technology primitives on chain so that other people can come in. I was just talking to um this guy at Dealport and they basically do a lot of uh financing for old school businesses.

They're going to think about coming on to Avalanche and see if they can help their old school manufacturing businesses get, you know, financing. Another thing I have to mention is we work with FIS, Fidelity National Services. They're a 25 billion publicly traded company. They work with a lot of community banks. They them Intane are working on top of Avalanche to make it cost-effective so that community banks and small businesses can now do CLLOs's and can originate loans that they could not have done before because they don't have to scale like a large bank of America or Wells Fargo and suddenly they're they can possibly come on chain also and connect to all of these other financial and operating primitives that

we're talking about creating. So I think it's far more than just trading that stuff. It's also creating the underlying primitive so the whole cycle of the asset can function properly. >> Just to kind of close up capital formation, >> someone in the audience says digitizing and tokenizing real estate is a massive undertaking. I don't see it happening anytime soon. I think I think we probably agree it's been a process. The the other thing I think is a bit more kind of like on the nose for you. You tokenize your home effectively turns it into collateral that can be used to get credit from any willing participant. Basically, it's gambling chips, lol. >> No, you you um you get a mortgage. Is that gambling chips as well?

>> Or a heliloc, right? >> Or a heliloc. And that's already happening. >> Yeah. Yeah. >> So I think that's actually nothing new. I mean, if you start trading it, it could be gambling. >> Yeah. >> Yeah. >> Uh John, thanks so much for coming on. >> Pleasure. Have a great pleasure as always. >> Pleasure to meet you as well. I think might be the first time. Pleasure. Um and thanks for thanks for joining us. Have a great conference. Please go spread the word to all the uh tech, robotics, AI investors about Avalanche, about digital assets, and what we're doing here. >> You guys doing a great job. Awesome. Thank you, man. Yeah. To have you in the tokenization tower next next time.

>> Definitely. >> Cool. Let's do it. All right, John. >> Beautiful. >> The Polaroid. >> Sweet. Love that Polaroid. Love it. >> You guys do a great job. >> Thank you so much. Appreciate it. >> All right, guys. How we feeling over here? How are we feeling? How we feeling out there in the uh quick little check-in here? >> Yeah, let's check in. Hype sitting at 67. BTC fighting for its life. Near fighting for its life.

>> World coin god candles up 12% in the last hour. >> Dude, so Arthur literally dumps on everyone. >> Dumps hype and near and says he's going to hold his world till the end. This guy >> pumps it. >> Dude, we had the chat firing. OG killer says you can't hype something then four days later dump it because you know your three reasons that everyone already knows of already. It's pump and dump. Simple. People are not happy with Arthur right now. Um >> guys, are we holding? Are we holding in this market when people are calling for Bitcoin in the high 30ks? >> I mean, >> 35 to 45K is what I was >> I got a text last night. I was watching the Knicks game.

>> Not not going to tell you who sent me that text about Bitcoin going to 39, 38 37K. >> I I doubt we get there. Look, if you are looking for a little bit of >> hopeium, >> 40s or 30s? >> No, I I think we get to 50s. I think maybe we get to 40s. >> I don't see us going below like 43, 435. I don't think we get to the 30s. >> Okay. >> I don't think we get to the 30s. >> 30s would be crazy. >> I 30s would be super crazy. The quant our quant is saying that emotional capitulation is sort of happening. Yeah, >> I think another 50% 40% decline on Bitcoin from here would be beyond capitulation. I don't see it

happening. >> I Yeah, it's it's hard to say. Um, what also is annoying is that we were we were all in this like relative strength positions, right? And those just got blown up overnight. Um, I saw a tweet that was like people hiding in relative strength and get hit by a truck. I don't think that we've been hit by a truck quite yet, but in these moments, I don't know. I just pull up the hl.eco dashboard and >> I think the we have to ask ourselves the question with Bitcoin in the 40s. Let's say it seems like that's sort of you know a consensus we're orbiting around potentially we get into the 40s.

>> I think if Bitcoin gets into the 40s how how does Hyperlid react? How does Near react? How does Zcash react? >> I don't know. I'm >> If Bitcoin gets in the 40s, >> I I mean, we're gonna get some good good discounts across the board there. >> I I would imagine if Bitcoin is in the 40s, Hyperliquid's in the 50s. >> Yeah, for sure. >> Right. I mean, that I don't think that gets unreasonable. >> That would be great if that's all we got to >> we we've gotten uncorrelation, but we haven't gotten divergence, right? >> We kind of had it.

>> We had it for maybe a little while, but now this is bigger. This is showing ourselves that we haven't quite It's not like it's not like Hyperliquid has pumped to new all-time highs as a result of this most recent Bitcoin dump. >> No, exactly. If that happened overnight, that would have been insane cuz it was happening. Like I was already at the bar at the Knicks game. >> Bitcoin was dropping 64 63. Hype was just staying at 75. And I think this is >> OG Killer says you're a true optimist. >> Me? >> I I agree. Rob is a true optimist. Like >> I am. I'm an optimist through and through. What? You're going to live your life? I mean, we we've got one life.

We're going to live it. you're gonna live your life sad and pessimistic. No, I'm gonna choose not to see it that way. And so, I'm gonna choose to see it optimistically. But I look, calling for a 50% decline in Bitcoin is an optimistic point of view, then I I think that now is starting to become the time to buy. If 40k Bitcoin is an optimistic point of view, I think everyone else out there is a little bit afraid. >> Yeah. I mean, a 33% discount on Bitcoin from here takes us to low 40s. I'd say that's about as that's about get >> as deep as we we go. I think 50s for Bitcoin. I I think we're going to see some support along the way. Um and I think ultimately this is going to take

some time to bottom out. Obviously, we've got the midterms coming up, but you know, one of one of the things that Arthur said that didn't really occur just to to me just until just now is very counter and contradictory to the way that things are typically done. M >> normally you pump the market going into the election cycle, >> right? >> One of the things that Arthur said is that he anticipates Trump taking an anti- AI stance to pander to Democrats and anti- AIers and and using that as political leverage going into the midterms to try to get get some political clout and win some of these, you know, Senate and and Congress elections. That would crash the market.

I mean, if Trump takes an anti- AI stance, and obviously AI is >> there's no way Trump's doing that. >> A AI is indicative of tech as a whole, crypto gets buckle bucketed up into that as well >> easily. >> We would see markets decline, which is typically not the way that things go when we're headed into an election cycle. But I could see it. I mean, it makes sense because there is a massive anti- AI cabal out there. What What is the chat saying? Just wait until we see Michael Sailor get liquidated. In the words of Dokcoan, steady lads.

>> If Bitcoin is deploying more capital, I don't think Sailor has more capital to deploy. >> If Bitcoin hits 40, all of MSTR products would implode and would be E. >> Okay, but look at what's happening to Stretch. You know, Stretch is actually bouncing and kind of it's headed back to, you know, like now Stretch back to $100 par. >> That's what we need. I mean that's what that's what sailing is bad if stretch maintains its peg gets back to $100 that is going to restore confidence in micro strategy >> and and it is going to feel weird that Bitcoin goes down but people have more confidence in Micro Strategy not MSTR but in Micro Strategy because Stretch isn't going to completely implode which

is going to be healthy for that you know that business and that portion of the Bitcoin ecosystem as a whole. >> Yeah. I mean, which would allow him to potentially like save this, you know, the billions that he's raised through this product. People wouldn't be, you know, bankrupting and suing him right off, right? You know, right off the bat, it would allow him to potentially raise more debt once Bitcoin kind of gets going again. But I, you know, he's in deep water. We're we're in we're in we're in for, you know, for some tough times. >> But it was always on the cards on the horizon. You know, Chris's tweet of like people are going to blame Sailor, but it was always on the cards. I think that's pretty accurate right now. People are already blaming Sailor, >> right? And it's not just Sailor, right?

But it is but it is fueled in part by Sailor. >> This feels just like Terra Luna. Yeah. I don't know. It's not that bad. I don't think um I don't think it's >> I don't think it's >> like it's not that endemic to the industry. >> Yeah. I mean, it's endemic to the Bitcoin uh uh capital formation, capital structure right now and and Bitcoin is systemic to the rest of the crypto industry. >> Yeah. >> So, yeah, I mean, in that in that sense, it sort of is. I I think we have to unpack the relative strength trade. I think it's no longer, you know, relative strength is kind of level one. And I was talking about this with a partner of ours actually as we were kind of

thinking through like this inception sort of you know idea and how how these ideas get brought to market. >> They get they get done in levels which coincidentally aligns with the way you know the movie Inception how they go deeper within the subconscious of this person. They go level one dream level two dream within a dream. >> And so as you go deeper in here you kind of get level one is been this relative strength. Okay. seems as if this cohort of apps are showing some relative strength against the quoteunquote majors. I think level two of this is the you know are they how uncorrelated are they? Are they uncorrelated such that they're holding up better in the face of, you know, deep deep major downturns or are they diverging? And I think now

we're starting to see this unfold where >> now would be the time for them to diverge, man. Like that this is when we would want to see that. >> It is still relative strength for them to hold up a little bit better. And if you just look at some of the larger time frames, Bitcoin's down 12% in the week. Ethereum's down 10%. Hyperlid's up 17% this week. >> Yeah. So it is diver out. >> Zcash is up 2% this week. Near is up 2% this week. World coin is up 103% this week. >> Jesus. You could see yesterday like I I was way too zoomed in. But obviously like you're trying to track this positions and this trade and you could see yesterday like Bitcoin started going down and then hype didn't really like explode when it bounced on the hourly

and then it would kind of come back and have a 4 hour bounce and hype wouldn't really go. So you could kind of see it starting to break. Perr on the other hand only down 4% today. Knock on wood here for >> Hyper Hyperlid's only down 6.8% today. >> I got nine and a I got 9.8 on Trading View here. I got 7% on Coin Gecko. >> OG Killer, I lost a Lambo during Luna. Damn bro. >> Shout out OG Killer. >> Barely made it through just a bit. Please Jeff, don't f this up. I agree. >> Continues to surge. I think that's what we're going to see. I think the market is telling us that we're going to have very very select winners and not everyone but but if you think about how you know the market reacted when Bitcoin

was holding up when it was just staying still at like 65 you started to see >> market going into a broader swath of this cohort meaning meaning you know obviously Hyperlid Zcash near VVV were the leaders in the privacy revenue and AI categories ories. Those I think are the categories that are showing relative strength. Whether we're going down, they will hold up better and when we're going up, they will outperform. I think that's the relative strength trade. Hyperlquid, Zcash, near VVV, revenue, privacy, and AI. When Bitcoin was holding steady, we started to get more we started to go deeper into those

categories and get a broader swath of assets in those categories that started to perform well. >> Yeah. When Bitcoin goes down, we're going to get consolidation in those categories. It's still going to be those categories, privacy, revenue, and AI, but >> depending and but we're not completely un untethered from the majors. We're we're worse makes new lows. >> When when Bitcoin makes new lows that those cohorts are going to consolidate and potentially there's going and it it could consolidate so far that zero coins in those categories make it through.

Okay. Right. ICP, guys. Oh my gosh, Marcos please. >> Get out of here with ICP. We don't want to hear that. >> Hey, let's pull up the screen. I just want to show you guys this. I mean, I don't know. It's not that comfy right now, but if there's anything to stay comfy in, it's it's this T-W chart. And I think it might be Sheamus smashing this right now. >> So, >> I think Shamus is looking at the T-W and he's like, "Look, man. We need this thing to keep this trend. I see $15 million next 24 hours. Um, we're still waiting on >> No, we got the data.

>> No, I think that is old. >> Um, this was six hours ago. They just >> they published that they bought 1.4. I'll send you the link. >> I'm going to get they published that they bought >> uh let's get it. Let's get it going. >> They're up today. I mean, they're not up, >> but they're relative strength. Relative strength. And we're going to see this in multiple stages of the market. So, >> let's just held up, man. Let's just be at $12. >> Let's just describe what's happening here with Hyperlquid Strategies. They published that they bought 1.4 million hype. That's worth around 95 million over the last 7 days and their cash position only fell by 15.5 million. So they bought 95 their c they only used 15 a.5 of cash or you know they they only

lost 15 and a half of cash. >> That's because they issued >> Exactly. Or they issued stocks. They tapped their credit >> or they tapped their credit facility. they were able to raise more cash uh which is effectively the same thing that you know when strategy was raising cash with stretch they were able to get investors into this ecosystem whether that means products that are funded by dividends produced by the asset itself or it means that they have investors that are willing to invest into the stock they're able to raise cash using the cash in Hyperlid strategies case to buy Hyperlid and so what this is telling us is that they were able to raise at least $80 million uh over the last seven days because they bought 95 and they only their cash position only fell by about 15 and a

half. >> Uh they're still around that 1.29 uh mnav uh which allows them to issue more ATM shares, sell them and buy more hype. >> Uh so so I've got that up on the screen here now as well. And you can see the hyperlid strategies uh financial metrics. >> Yep. And on the screen you can you can look at their current value of their holdings. Let's go ahead and get this up if it's not. And you can see the value of their holdings, the cash holdings. So it's at 1417 million. They've got about 1.5 billion or 1.6 billion in hype. Um and they cash from financing. Trying to see if

you can >> Jim Kramer says Michael Sailor murdered Bitcoin. >> Wow. So the MNAV is about 1.22. Uh the last update was this morning, guys. And so I think that's probably why PER is outperforming a little bit today amidst all this. Type set 777 says a memecoin. We're not buying memecoins. Uh the guys are fighting in the chat about ICP. Uh sold a bitcoin to go into hype last night. Don't rug me, Jeff. Dude, I don't blame you. I mean, like reading a script, Mark goes, "All right, guys. Let's keep it all cool. If you want to own ICP, you can own your ICP in peace, man. Everything's all right.

>> Sold a Bitcoin to go into hype last night. Don't rug me, Jeff. >> Feel you on that, man. >> I honestly think that's going to continue to happen. >> Selling Bitcoin to go into hype. >> So, I mean, >> that's going to help the relative strength trade. >> I would consider this a win for hypoc strategies this week. Not as big of a win as last week. Last week was like a major major like, you know, we sold the top. We we we have more cash and more hype now. But when you say they sold the top, they sold uh their equity, right? To raise cash. >> Uh >> they sold ATM shares.

>> They sold per to raise cash. >> Yeah. So they're not they're not selling hype. >> No, >> never that. Man, >> what do you think about Bitmine issuing the 300 million of preferred equity, the nine and a half percent rate? >> Uh I think the timing is uh is not great. I think if they're able to complete this raise, then it it's going to we're going to look back on this and and it's going to be a great great move.

>> It would be like a bottoming moment for them. They just have to they have so much work to do to lower their cost basis. So much work. So much work to do. >> Yeah. Um, coming back to HIPP3, uh, pulling this up. I mean, open interest just continues to rise, continues to hit new highs across the board. Um, I mean, it looks good. It looks good. Um, this is like the main story right now. If you if you heard from Capital Flows, he was telling us that, you know, sure, it's down a little bit from yesterday, like 200 mil or so in open interest. Um but the but the main story was Hypoc's diverging from

the market because a lot of its revenue is getting you know derived from trading non-crypto assets. Robbie's looking at the world coin chart. >> This thing is insane. You're talking about you think this is the main topic right now. Worldcoin was at $10. >> Yeah. >> You remember when this thing was at $10? >> It was at a hundred billion dollar FTV at $10. >> It's at 60 59 cents. >> Wow. Unreal. Wow. We got some pretty important four-hour closes. Not that the show is going to turn into a 4-hour trading show, but um near at 100 unreleases. Still up massively on my THYP position. Agreed.

Absolutely insane learning about ore yesterday. Yeah, I agree. You missed ore yesterday, but it was it's a $50 million market cap asset trading at um with 40 no sorry a $45 million market cap fully diluted one to one trading at a a with $50 million of revenue in less than a year. So its revenue is literally outperformed its market cap and it is unknown tackling privacy quantum kind of allin one. It's it's pretty incredible.

Pretty incredible, >> man. What do you >> What are we What are we buying? I hope you guys have some cash. I'm I'm getting I'm getting feisty around these levels. I'm getting on Bitcoin. >> Yeah. Like, you know, Bitcoin at like 50s in the 50s. Like, I'm definitely I'm definitely ready to start nibbling on that. I think we do go a I man I I could see hype in the I I think if Bitcoin gets in the 40s hype is in the 50s near is like near's under $2 but like maybe not by a lot.

>> Yeah. >> I don't think we go that like even hype at 50 I think people are going to be calling for a lot lower and there's going to be people that and that's going to be a great entry. I think hype in the 50s. >> Yeah, if we get it >> is a reasonable entry. If we get it, I would be bidding there. >> And man, and I'm honestly I'm honestly excited because I don't think they stay there for long. I don't think Bitcoin goes down, you know, maybe but but how you know when when the when our quant says that, you know, >> usually you don't have a lot of time to sell the top, but you have a lot of time to buy the bottom, right? because you have >> not the exact pico bottom, but you're going to have

>> apathetic market conditions over >> a period of weeks to months in the range of like 5 to $10,000 that you'll you'll be able to get into in into Bitcoin. It it is exciting because it's like, you know, as every day goes by, we're we're closer to like the four-year cycle, typical October lows. And, you know, now, you know, at the worst case, let's call it, we're we're we're, you know, we're four months out. Four months out. >> So, I I I I think I'm finally going to start taking our our own advice as as it pertains to the show. Anytime someone comes on here and says, "This time is different about anything," I'm going to just short that. Fade that. Nothing is ever different.

>> Yesterday the vibes on CT was full on this time is different. Like >> nothing is ever different. >> Full on >> full on. I mean four year cycle um you know we had you know hype flipped soul and price which what is soul soul doing right now? Is are we still flipped? >> It's in the 70s. No flipped hype. Is isn't that terrible? Some love for soul coming back to life there. man.

So, look, I I think um hype and soul. Yeah, Andy wants me to shill his bags while I'm up here solo. I I don't know if I can do it. I think uh I think we're going to get hype in the 50s. I think Bitcoin's going to get into the 40s. Uh, and I think uh I think we're going to end up in a position where we're going to get some good entries here. You know, we also had um we also had uh George on the show uh who was telling us that this time was different. And I think we're we're just seeing this play out in the market where this time is not

different. The four-year cycle is playing out. Um, we're we're getting closer to the uh mechanisms that we see play out every time. Guys, we are going to get ready for our next guests. Uh, we're going to do a quick standby, guys. Don't go anywhere. And we're going to bring up our next couple of guests chatting a little bit about robotics. We're going to branch out today, not just about digital assets today. AI, robotics. This is the great convergence. We're seeing privacy, AI, digital assets across the board. Uh, and we're going to include robotics in that. Don't go anywhere. right after this.

money power. big money. We get deep. We get deep know. We get deep. You know, we get deep. We get deep. You know, we get deep.

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deep. We get deep. We get deep. We know we get deep. Know we get deep. We get deep know we get deep know we get deep we get deep know we get deep know we get deep we get deep know we get deep we get we get deep we get deep we get we get deep know we get We get deep. We get deep, you know. We

get deep. We get deep. We get deep, you know. We get deep. We get deep. We get deep. You know we can see All right, guys. We are back here with

Cal and Randy of uh the New York Robotics Company and I'm excited to be talking to you guys. Um because this is something we don't cover too much on the show, but uh this is one of the mega trends that we're seeing for this great convergence. We're seeing it happen across finance, AI, robotics, hardware is becoming part of this revolution as well. Um would love just a bit about your background before we get started. And I think there's tons to dig into as we we think about how robotics is going to play into some of the the converging disruptive technologies that we're seeing play out.

>> All right. Yeah. First of all, I'm with a company called Battery. It's a AI startup studio. We're doing robotics now as well. Um the size of the AI market is actually 1/4 of what the physical world um AI could be. And so that's where the convergence of robotics and AI happen. So literally everything we've seen with AI for exit for the potential size of the market impact and even like Andrea Horowit said this could well be the largest market to tap into ever in the history of investments.

>> Yeah, it's it's incredible as we think about the market size and I think there's there's knock-on effects of this as we think through the the the market impact of bringing all of that to market. Um Randy, if you don't mind, New York Robotics, uh co-founder, managing partner. Um yeah, love a little bit about your story, how you found, uh robotics. >> Yeah. Uh well, I am the director of strategy and operations actually, not managing partner at uh at New York Robotics, just to just to make that correction. New York Robotics is a uh it's a nonprofit organization and it is committed to uh being part of the deep tech ecosystem in New York that's making New York a global hub for for robotics.

>> Yeah. >> Um my background I started my career programming robots. Uh I had an early uh experience at an AI startup which was 30 years ago. uh that that startup didn't make it, but I ended up acquiring some of its assets and starting my own my own consulting company. So when um when I ended up selling the consulting company, I looked back on the beginning of my career, I like the sort of tech portion of it and got back into robotics. Um how I found New York Robotics was it was a Meetup group. my uh co-founder had started a Meetup group to sort of bring together a

fragmented community in New York and then we incorporated and now we are over 5,000 strong. >> Awesome. We are updating your title as we speak on on the show. >> Wow, you guys are fast. >> Um guys, I I I'd love kind of a a general picture of where we are today because um for so long we were in this software revolution. We were operating in the world of bits. Now we're operating in the world of atoms and robotics is the the leading edge when it comes to the world of atoms. Um you know obviously we we hear quite a bit about humanoid robots. I kind of saw the Boston dynamics you know upwave of the the enhanced capabilities that these things have. You know I hear Elon talk

about the hand and how difficult it is to engineer and and you know I hear about China and the apparent lead that they have on the US as it pertains to the robotics industry. Can you guys just kind of highlight maybe some of the most prominent misconceptions? You know, just kind of level set us here. What what is where are we today in the robotics revolution and and what are some of the most important things to be focused on today? >> So, historically, we have always led in R&D and we continue to do so. We have um sadly lagged when it comes to actual deployment and and you talked about China. We we've studied uh China extensively. uh they now lead in dark factories, factories that are basically

run by robot robots where literally the lights are off and their workers inside those factories have a productivity advantage over our factory workers by a factor of 2.4 to one. So they're almost two and a half times more productive today. And we're kind of seeing that trend continue to like something like 10:1 advantage. So we're starting to see some impact of that. Let's say for example EVs. Um some senior executives, the CEO of Ford visited one of the dark factories and frankly they were scared.

They are terrified about how far behind they are. Uh you know we we have our Teslas here um because of tariffs we don't see the Chinese cars. Uh the BYD cars if they were to come here they would be 25 to 50% cheaper than like an entry-level uh Tesla Model 3. So, we're playing catch-up. I don't think uh the race is over yet. We have plenty opportunity to catch up, but we do need to form some sort of national strategy as best we can on how to catch up to China and surpass them, particularly in sectors like advanced manufacturing and defense.

>> Are our regulations here in the US holding us back? And is that why we haven't progressed to the point where we are on the same level or competing with China? because now you know those results will start to compound. Is it you know this coherent consistent philosophy that the Chinese have to band together around national priorities and and you know focus on them? Is that what is driving this or is it US regulations you know bottlenecking us and slowing us down? >> You want to take it? >> Yeah, I'll take that one. Um what's driving you're talking about what's driving the gap in competition between >> Exactly. the advantage that the Chinese have in robotics. Yeah. After World War II, we started outsourcing manufacturing >> and we at the time were manufacturing

95% of the goods consumed in the United States here in the United States. Now we manufacture 5%. The people who are in my children's generation don't even know the language of manufacturing. They can't speak to it at all. So what's driving the competition or what's driving us being behind is the fact that we outsourced the entire industry to China and and elsewhere. >> So that's the >> And why did we do that? >> Well, I think it started out as um you know the the the winners if you would the allied powers trying to um find ways to drive the economies uh throughout the globe. But I think it preceded to

uh service careers and other careers being more lucrative and uh people wanting to do them more than than manufacturing. >> Um and I obviously what was driving it a huge part of driving it was the cost of labor. >> Yeah. >> You know, so you saw three or four times lower cost of labor, sometimes 10 times lower cost of labor. You asked about misconceptions though. >> Yeah, >> it is a misconception that we can't compete with China. Um, we need to try and think we have um perhaps maybe it's provocative. We talk a lot about it and about how far ahead they are, but I

don't think we're trying hard enough. >> And I think Cal alluded to national strategy. I think that's just part of it. Um but another example of it is that um it's very hard to buy motors for robots in the United States. So every builder will say, "Oh, you got to buy your robots from China." The reason it's hard to buy motors from the United States is because nobody's making them. But there's no reason we can't. And so I think that we need to just take some of the uh some of the steps sort of on the ground, right? While we're also creating a national strategy while we're also figuring out how to finance what is ultimately going to be potentially a

huge movement to re-industrialize here in the United States. >> So this is a national priority. We've heard a lot about the reshoring of American manufacturing and industry. H how are we doing on that timeline and how sustainable is it given that you know there are some more unique policies that are put into place now with the current administration and in America things change every four years every two years you know when it comes to not the president but you know the rest of the government and those priorities sometimes shift with the changing you know regime how what what do we what are the through lines potentially that from administst administration to administration we can

carry through that maybe everyone agrees on because they are so such no-brainers. They were so obvious that we need to keep keep those in mind irregardless of who's in office and that can help us close the gap. What what are those things that we can keep in mind? >> Yeah, I I kind of agree with that that in the 1960s John F. Kennedy said, you know, in the next decade we will go to the moon and we had that moon mission and we had that northern light and we accomplished that goal. >> Uh times are different. I don't think we will have a national moon mission equivalent today from the government but we are seeing movement from our business leaders. Um Jeff Bezos has announced he's doing like a hundred billion dollar fund uh for um advanced manufacturing

completely done by robotics. So business leaders are doing it. Um similarly uh Randy and I were just talking about JP Morgan has announced something like a $ 1.5 trillion dollar um security and resilience initiative focused on a number of industries including robotics and and related uh industries specifically for um moving the economy forward and for the national security. So we're in a little bit of a different environment now that there are different players doing it and whoever it is for the sake of our country and for national security we should be doing it and I think there are roles for Ry's organization my organization and so forth and honestly it will take a village from all aspects

of going from idea to market launch and and scaling and I think that's the direction we we need to take >> uh mayor major forces that are going to impact re-industrialization. Uh defense, we are using robots in defense and we have conflicts going on throughout the world and conventional wisdom is that those conflicts are going to increase. There's going to be over the next 20 years uh more need for weapons and those weapons are becoming increasingly automated. So you have robots, air, land, sea, and space and defense. In the

United States, you're not allowed to build robots and and weapons with Chinese parts, >> right? >> But we are building them with Chinese parts because we need the parts and we can't get the parts from any place else. And the reason we can't get the parts from any place else is what I was talking about earlier. It's because we aren't we don't we've given up our manufacturing base that can build them. That is coming back. This force of defense and national security is hu is massive and that is part of what's driving driving it. There's also a lot of venture capital now going into manufacturing. They're looking for areas where fully automated manufacturing

particularly can can um can disrupt industries. Um, what else? Uh, I think labor is actually going to be a big force that's affecting this because there's such a huge labor shortage in manufacturing. So, there's a reason to automate because we can't find the labor to do the jobs that are necessary. But the labor we don't have is the labor to repair the robots and the scale of automation that is necessary in order to meet uh the national defense needs the the meet the you know re-industrialization

sort of uh uh flow that's happening back in the United States. It's huge. So we're going to need people who know how to repair robots, >> right? And as I said earlier, the generation my my kids, they don't know anything about manufacturing. >> They don't know how to fix a car, right? And and so people who do are going to be in high demand as we as we increasingly automate. >> Yeah. And and I think we're seeing that play out as, you know, people are increasingly young people are starting to, you know, go to college less. They're starting to realize I saw actually I wasn't watching it but the person next to me on the plane I happened to peek over. He was watching the news and there was a study that said 52% of people with college degrees regret their college degrees because of

either loans or know chosen career path this sort of thing. And I think more young people are realizing what you're saying Randy and they're going into these these career paths that they can get into. they can take an apprenticeship or take some sort of trade and use that to extend their potential earning power and potentially more sustainable and I think that attitude if they can continue that as that career shifts they will retrain with the emerging technologies >> and they're not they're they're good jobs >> uh so it's it's worth doing May I address a misconception please >> because earlier you you so I I talked about the misconception that we can't compete with China I mean People will

argue with that. Certainly we're not going to get lithium batteries back because there's a rare earth's issue. Um so uh not being able to compete with China is a misconception, but there's more to it than simply saying you got to try harder, which is kind of what I said earlier. Um but another misconception is the capability of these robots, particularly humanoids. Yeah, >> I I saw a recent video um from a company that is teaching humanoids to box.

>> Okay. >> I saw a video where a humanoid started to jab. You know, a jab involves sort of your hand and your foot moving at the same time. something happened and the humanoid's foot spun all the way back in ways that our legs and joints would never do, >> right? >> And it put its foot right through its own pelvis. >> Oh. >> And that happened within >> the first 10 seconds of trying to start this fight. >> So humanoids aren't anywhere close to where people think they are, where people imagine that they are. I didn't think you were. They aren't they aren't they aren't anywhere close to to where a

lot of the the the big tech leaders are claiming they are, >> right? >> And it's it's a it's a wild misconception >> and it and it's still so early and I think you're pointing at something where maybe the production capacity of China is is advanced and it is they have, you know, advantage as far as how many humanoids they currently have in production in these factories and factories are using them. But to your point, these are not perfect robots by any stretch of the imagination and and I I think it's fascinating to think about what potentially what capabilities we can add on to these structures, both hardware and software to make them not only, you know, better, you know, more smarter workers, but also just more

capable physical embodiment. you know, give them a third leg, give them a third arm, give them these structures that are more specific to the purpose that they're being built for doing both intellectually and physically. >> I I think you just hit the nail on the head because >> it's very narcissistic that we designed the humanoids after us >> and we are not the perfect form factor. Let's say for example, picking up a box. >> So if you're just saying the job to be done is picking up a box, you would invent a very different device. Similarly, you know, for years now, we've had the Roomba. Roomba does not look like a, you know, it's not going to become better by having a humanoid now pushing a traditional vacuum cleaner.

So, >> I think the winners will be the ones that invent the technology that works best for each use case and scales accordingly. And and you did say also humanoids in the dark factories. I don't think it's the humanoids. It is more the mechanical arm manufacturing robots and those are the ones that >> will create much more economic output than the humanoids. I I think especially the generation we have now are more charming toys to play with. >> Yeah. >> So, yeah, please. >> I mean, there's there's two sides to this and I I I love what you said because there are an awful lot of sort of purposebuilt robots. And there still needs to be even as robots learn how to do different

tasks and decide what those tasks are themselves. there's still a necessity to do certain tasks really really well in order to automate um the the so a lot of people who are talking about sort of pushing back on humanoids are saying why the human form >> right >> and you know is is being a narcissist bad by the way but but but they're saying why the human form and you know let's let's what about a quadriped with a hand you know what about three legs as you said, absolutely spot on. The other side of the argument is that robots are need to be in the human form because the

human the world is built around the human form. The other part of that argument is that foundation models need to be built for motion and behavior that don't exist now that would drive AI, physical AI, you know, >> and the most data you can get is from humans. Mhm. >> And so what's happening is you're you have companies that uh we have one company that has a $200 million series A and what they're doing is they're they're getting data out of video games >> where the video games have human forms >> and they're taking the data from those

human forms to create foundation models. And there are projects all over this world that are sort of combining to create to create foundation models for the h for the human form. Yeah. >> And so there's two sides to that argument. Like ultimately does AI need foundation models and where you it it does. And where are you going to get them? You're going to get them from humans because there's trillions. There's well there's not trillions. There's many hundreds of billions >> billions. But when you combine video game human, you know, form, video characters in video games, there could potentially be trillions.

>> That's exactly. And but this is what's happening like the the immersive experience, the data coming from the immersive experience, which so many of us have from either virtual reality or gaming >> that there's a lot of innovation going on to take that to to scrape that data. And there's also a lot of innovation going on to put sensors around in order to actually capture you know the motions of of human beings. So there's there's a considerable um I don't know how much but a considerable amount of venture money going into that problem of creating foundation models for motion. And of course Nvidia is is is wildly dedicated to it as well.

>> Yeah. Yeah. I I see this this trend playing out how we have technology that is accelerating and it's accelerating faster than some of the natural technology if you will like we we the robotics physical form is accelerating faster than our natural human form is eventually we will catch up at par then we can get really creative and and we can have a lot of fun with you know and and I want to get to that with my next question the same is happening with the intellect of these robots the LLM M you know discovered that we can put numbers into language and that is the most you know because we built that with our human you know intellect that is the most uh digestible form for this data

and this technology for us to use it effectively. Um it was really really dumb. Now it's really really smart. You could there's an argument that potentially it has found par and accelerated past and now we're in that really creative and fun you know discovery of what is new now because we've surpassed what we naturally you know uh kind of found when we were able to reach the pinnacle eventually I I believe physical forms with robots will will reach similar par and beyond my my question is around the R&D the strength because as we zoom out and thinking from a competitive philosophy point of Let's not play the China game, right?

Where they're mass-producing and they have massive manufacturing power. They're able to put these things and and really really churn them out. But because the quality of these robots is not equal and they're and and our game in America is R&D. That feels like our edge. that feels like we're able to out innovate and potentially maybe we only have 10 robots for every hundred that the Chinese have, but if those 10 are that much more uh capable, that much more performant, they can, you know, they don't kick themselves in the nuts every time they try to throw a jab like, you know, they're they're able to do some throw some real combinations, right? Whereas the Chinese are still lacking. That's where we're able to outperform.

Is this the edge? And if so, where are we able to innovate? where are you seeing the most innovation happen on the R&D front such that we can potentially and we're not going to get away from manufacturing and actually producing these things but you know where are the levers that we can pull where we can really out innovate and and ultimately win this race. I I first of all, I love what you're saying about the the role that the United States could play being to push the outside of the of the technology envelope as opposed to the race to the bottom in China.

>> Um I think though that it we're a long long way away from truly being able to think like that. >> Okay. >> So >> feels like we've gotten there with the LLMs and the the brain of these robots. Well, but I I think that that you're making a very solid point about LLMs and what they did for language sort of serving as a model and inspiration for what you can do with motion and behavior, but where the research and development is is there. It is about how do you create foundation models for motion and behavior. And you have to also consider that you know when we type something into a um you know whether it be Gen uh Gemini or or OpenAI or

whatever it might be or Chat GPT or whatever it might be if we don't like what it sends us back it's no big deal. If the foundation model for behavior translates to the behavior of a robot and that robot doesn't behave well that's a big deal. Yeah. >> So the challenge is way higher, right? The bar is higher >> and and and that very much is is is where the researches, but the research is also in actually making robots behave the way that we are imagining they behave. And again, you you know, you you repeated something I said. I didn't say it exactly the way

you said it, but but you know, we we actually have to realize the ability for for a humanoid or any other robot to be able to to perform the way it's expected to to perform. >> Yeah. And when you put AI into the equation, now you're suggesting that a robot is going to be able to make its own decisions and be able to perform the motion and perform and have the behavior that is necessary for self-determination, >> right? >> And we that the research to actually make robots that are capable of doing that is also where where the edge is.

And you're right, that that is necessary before we start really using our imagination uh to to think about how we can use them better. They need to be reliable. They need to do the things that we're asking them to do without messing up. >> I I will also I I will also say one more I'm so sorry. Um I one more thing. I don't think challenging the race to the bottom is a bad thing. >> Okay. >> I think we can build a $35,000 humanoid to compete with Unitaries, >> you know. So I don't think it's bad to try that. >> Yeah. And I think in fact I think it's necessary.

>> I think where again the the real in my opinion where the real challenge is is in in rare earths and having the rare earths to build the things that um that are necessary in order to compete. And I I think again a we have a lot of it. >> We just haven't mind it. And so it's again a matter of of just trying. >> Sorry. I just wanted to go back to what you were talking about like the research and development and that is definitely something I think we should lean into because we have the great universities, we have some of the great minds. So it's not any of the products that exist today. We will never u compete with you know consumer electronics or things like that. um let's focus on advanced manufacturing uh the new emerging

technologies and I think those are the ones that um we have invented a lot of stuff over the the centuries here >> lean into what our strengths are >> and and just what what are the things that have not been invented yet I think that's where we can definitely lead >> yeah uh guys the last question I have for and this has been a fantastic conversation really really appreciate it we you know we talk a lot about capital formation emerging markets both you know domest domestically and abroad. Um, you know, there there's a lot of capital flowing into these areas. Where are you guys allocating capital? Where where should we allocate more resources to ultimately move the needle the most as it pertains to robotics?

>> I'm going to give the first correct. So, one thing Randy and I have been working on, I do startup acceleration running um startup studios. We need more robotic studios. We need to be in at the universities collaborating with them with the innovators, the technologists, the ones that have that next generation of technology and help them find that path to commercialization. It's those fastmoving innovators that then could be coupled with legacy corporates and um forge a better faster path to market. That's my personal belief where there's a huge untapped market.

>> Yeah, >> I I I completely agree with Cal. Uh, one of the places where we have to put capital is in building more successful robotics companies. And this plays into some of the conversation we have had previously because we need to help those success those robotics companies understand that the components they need are available to them in places where right now they're not looking. And you need acceleration and venture studio and programs like that in order to do that because the entrepreneurs are under a ton of pressure to to as quickly as possible build what they can. So they'll take whatever's on the shelf and there are things on the shelf that they might

not be seeing as easily and and we also that that's developing. But I think the area uh you where capital one of the areas really needs to go is into um deploying more robots. Yeah. >> So maybe this is a simple equation. China's deploying 300,000 robots a month. We're deploying 30,000. >> Is it a month or a year? >> A year. >> Yeah. Sorry. Uh so we're deploying 30,000. So let's deploy more robots. >> So how do you put capital into deploying more robots? You put capital into the medium-sized manufacturers that can transform around automation. You have to teach them, help them understand what

the business case is and then have available to them the services that are necessary to actually uh deploy the automation. We can do that. We develop those programs, put capital into advanced manufacturing, we will end up deploying more robots and that number will start to look a little more like 300,000 versus 150,000. and and and and I do see capital already going into that. >> Yeah, guys, thanks so much. This this has been fantastic. Like I said, we don't talk about robotics too much, but this is a mega trend that is playing into the convergence of so many disruptive technologies and it feels as if now's the time. This is a race and we're we're accelerating towards a

convergence of this and uh you guys have been fantastic here. Really really appreciate it. >> A lot of fun to talk to you. >> Um we're going to do a quick standby guys. Don't go anywhere. We are live from the CT digital forum, the future fest here. Uh talking digital assets, talking robotics, talking AI. So we'll be right back. Funny power.

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Stanford Connecticut at the Yukon campus joined today by detect Detective Hogan talking digital assets fraud, Twinder, Tinder Swindlers, >> Swindlers, pig butchering, and more. Detective Hogan, how's this conference treating you? How's everything going? >> It's awesome, man. This is my I've been to the last one. This is the second annual, and I've gone to the monthly ones, and it's just a great They have great sessions here. Really good. >> Fantastic. >> Good crowd. >> Yeah, this is the most diverse crowd I've seen like with uh usually you don't see like investment banker type of people at crypto conferences. Yeah. In this one, you get a lot of you have New York coming up obviously and we have Connecticut based Stamford for people.

So, it's really interesting mix of people. >> Definitely, man. Well, I mean, look, man, I can't help my curiosity. Let's understand what is happening in the dating scam scene. My interpretation is from that Netflix documentary Tinder Swindler. The guy is just like siphoning off money from this woman or vice versa. I >> I didn't see this. >> Never shows up. >> It's a good movie. Yeah. >> Yeah. And so, what is happening in the dating romance market? What what is the fraud that is happening online now? >> Unfortunately, it's not US-based, which would make it a lot easier. Uh right now, it's transnational organized crime groups sponsored by like China, but mo for the most part. So, we're seeing everything from mostly based out of Southeast Asia, Myammar, Laos, Cambodia especially, and they're just uh attacking everyone. Doesn't know age

demographic. People think it's like primarily seniors, which it is heavily senior based, but we're getting people, you know, 30 and up that are getting scammed out of millions of dollars. >> Wow. >> Yeah. And and what's the usual >> how does it go? Like if you >> guys got me already. You've guys have you ever gotten a text message before? Hey bro, what are you doing this weekend? And you don't know who it is. >> I get these all the time. They're trying to like hire me for stuff. There's all kinds of things. It feels like we get a call. But at least the calls say spammerous. The texts are once a day at minimum. >> Yeah. So the the the ones that you'll get a lot of times, the job ones are based out of the same scam compounds a lot of times. So, when you're thinking

about these pig butchering scams, you really got to think about like a uh a CEO based type of scam where you have like a a crime boss and you have layers. You have people creating domains, you have people writing script for u uh apps, you have money launderers on the blockchain, you have a whole host of those and then you have people who are texting you those messages too. And and so you co-founded the Connecticut State Police cryptocurrency working group. So, most of these things are done through is it Bitcoin? Is it is it crypto? Is it, you know, do they go on the blockchain? How do these things typically go? Like, you know, we get a text. Yeah.

>> I, you know, I'm an elderly person or I don't think that, you know, it it is I I think that it's a real thing. And so, I respond and I kind of fall into the rabbit hole. What does the rabbit hole entail? So, it's it's a monthslong scam. So, they're go this is long plays here. They're not the quick fix kind of things that you get like Nigerian type of thing where they just pop up window scam and they just tell you to go to a kiosk and throw some money in it. These are long month plans where they build rapport with you and they move you from fiat to crypto by usually onboarding uh so you'll you know wire a money in from your bank to uh an exchange at the US so it feels legitimate but then you interact on the D5 web browser within

one of those wallets and they bring you to a scam website that's an investment page that's built by the scammers and it interacts just like you would with a normal a normal investment page but they provide you with the wallet address to send funds to but you're looking at a UI that looks legitim fluctuation to market, you're getting returns. You actually get to withdraw money for a little bit to build the reality of it. All the while, you're talking to someone who's built that trust with you. So over the over the month period, you start dumping in like, "All right, 1,000 bucks, maybe I get a little return, 5,000, I'm getting a nicer return." And then at some point, you're pulling a helock on your house and you're and then you find out your ass is and they're convincing us that we like they have

like a a signal group or something that they have some opportunity for us to make money. It's not just, you know, oh, this girl is catfishing me. >> All the time, man. It's It's like I was struggling in the markets. I'm a senior. I'm, you know, I'm 56. I've been trying to trade, but it's mostly been tough. But then I found Cara Escobar and her guidance has been elite. And then there's like eight YouTube comments under it that are like social proofing that are like, "Yes, Cara made me this much money. DM her on WhatsApp or hit like, you know, Cara did this for me." And it was just it's just like explodes.

>> We always have to delete these comments on our videos. >> Yeah, you I mean you get unfortunately blow up meta for that because I think a lot of them are are Facebook or Instagram based ones and then we get a lot of that and you can see that from their own reports. But it does exactly that. They have they have an entire stream of people whose goals are to bolster what they're doing and by you know commenting. So you'll like look at an app on like Apple or Google Play and it'll have ratings of 4.6 but then you read all the comments on it, you know, not even in English because they just have people just blowing it up, you know. So, it's it's a widespread problem. It's bad. >> Okay. And then what is this pig butchering?

>> Wait, before we before we get to pig butchering real quick, h how much money has been swindled, stolen as a result of of these scams? >> So, it's estimated it's like $75 billion. >> 75 billion over how long? >> Uh since 21. So, about four or five year period. >> So, four or five years. >> Yeah, it's a huge number. So pig butchering and romance scams are by and large the same thing because there's an aspect of either romance or just investment or vice versa involved in both of them. So romance scams, you still get the old school thing where you get like someone with a fake uh you know match profile or whatever the case is and you know it's a good-looking dude or girl interact and it's all nonsense.

Obviously it's it's some poor uh you know what uh fishing page or whatever, but those aren't nearly as bad as pig butchering ones are bad. >> What so what is the pig butchering? >> It is that. So it's those text messages you get. Okay. >> And that build rapport. They move you over to WhatsApp. They continue building rapport, sending cool emojis. They wake you up. Hey bro, how was your morning? Oh, I love you. Great night. You know, all that kind of stuff. >> And then um as soon as you get some investment advice from them, you start taking their uncle always works for Goldman Sachs or one of these investment firms. They get their heavy advice, you know. So, you start throwing money in. And that's when you like you're seeing the returns and you put more and more money in until you're We have people who

have lost 6 million, 7 million. >> Wow. Whoa. bad. >> And you know it's it's interesting that the beautiful thing about digital assets is this 247 crossborder payment mechanisms and then then you know you can't get the money back when you send it as well or if you get you know hacked or whatever you can't get that back and that's been something that's like you know it's a feature not a bug but in these instances it it is a bug. Yeah. >> You know >> well you know honestly these cases are easier than traditional white collar cases where it's just banks because like you're saying >> the blockchain's open. I can see where your money just went, right? So, for us, it's actually easier because I don't have to interact with the courts as often to trace your assets. The problem is because it's so decentralized, the

money can go across bridges and do all kinds of crazy things before you can even get to an exchange if the exchange is compliant with you. And then it also means that you know whether or not you're talking to a law enforcement knows what they're doing because this is not like a widespread skill yet. >> You have some federal agencies that are all doing it obviously, but the state and local law enforcement aren't at capacity to do this yet. Yeah, that's the problem. >> We just had a conversation with someone who was kind of caught up in this. It was uh but there was a North Korean scam group, but they they you know, Circle this this contract and this DeFi protocol got caught up in this, but the the reality was they didn't need to freeze it in order for Circle to to fix

the issue. Uh the judge just was lacking education and sort of made made the wrong order. >> Um >> and I'm actually curious about that. like there's this DPRK group that's been exploited D5 protocols Lazarus group. >> Have you done any work on you know with uh you know sleuths and things on on DPRK and >> No. So at the state local level we may get an instance of some flavor of that but a lot of times that gets pushed right to the FBI because it's such a a diverse nation state issue. >> Yeah. Is the FBI working on this actively?

>> Oh yeah sure. Is there anything that you can say about how much progress they've made to, you know, identify these people and ultimately get them into custody? >> I mean, it's tough, right, because you're dealing with a lot of different protocols that they're they're involved in. They're mixing things and there's a lot of stuff, but my my guess is they know what they're doing. The problem is is the jurisdictional capacity. Then you have obviously a lot of the >> uh conversation you have to have with these different countries that aren't really compliant with us. >> Yeah. >> Yeah. Because I mean these exploits from the DPRK have been a large part of their GDP on a yearly basis. >> But it's also the same thing for like Cambodia. So Cambodia estimated like 30% of their GDP is scam money.

>> Wow. >> Because of the c the compounds that are running the pig butchering, investment scams, romance scams are all based out of those countries and their GDP is primarily based on scam money now. >> And their government is reinvesting into this this business category because it's making them a significant amount of comp. >> Yep. And the problem is corruption. Honestly, it's the it's the broken heart of these people is that they can't uh get out of their own way because of the amount of money they're making. >> Yeah. >> Okay. So, so let's talk about solutions like what what have you found has been some of the most effective strategies to prevent businesses, people from falling for these scams and then you know once they do fall for it, what is the recourse?

>> Yeah, I think education obviously unfortunately is the number one topic, right? If if you're not understanding crypto, I don't think you really need understand how the blockchain works and all this kind of stuff you need to understand what it is and who knows about it, right? you need to find someone who can educate you or be on your team that can educate you. So if something happens then you can jump on it, right? I don't want to I don't want to wait until it happens to figure it out. You don't want to call the FBI two days after it happened. You want to call someone immediately when it happens, right? So I think that's one of the biggest things is education. And then the second part of that is having a a good contact at a local agency or state and local or federal agency that knows

this stuff. So if you are a business and you're compromised some capacity, you you have that contact immediately. It happens. >> Yeah. >> And and public private partnership is the biggest part of this. That's always like such like a catchphrase that people uses, but I think it's like a big part. I think a lot of our success in the beginning was was that. So like when the crypto kiosks were a big Bitcoin ATMs were a problem, we regulated them, but when we regulated them, we had them in the room making the conversation and and designing the regulations. So that built trust between the two of us. So if they had an issue, they came right to us now instead of us having a weird dynamic. Um, in the more digital assets, cryptospecific world, what are the what are the actual like in industry fraud that you're seeing rampantly run? Is it

like investment promotions and scams? Is it these exploits? Like what are the most common um, you know, fraud instances that you've identified within the state and actually had a successful case against and you know, prosecuted people for. prosecution almost never happens with these cases. And I think you kind of alleged to it a little bit. It's it's you're trying to get this complex issue across um judges and prosecutors offices that aren't there yet either. >> So again, back to the education aspect of this, right? But I think what we're seeing a lot of now is smart contract exploits. Um you know, unfortunately it's almost always scams, but then you also have rugps are huge. I've had a bunch of people are following like the Twitter bro that has really good investment advice. They put some money

in, right? and then they get rug pulled on a meme token, right, on Salon or whatever. So, I think that those are unfortunately still happening. >> Yeah. >> And you may lose 100k on it, which is not like big picture money, but if you have six, seven people doing it, it becomes a a problem, right? So, >> are you are you guys working with any private companies like chain analysis that can help automate and detect some of these unusual flows? >> Yeah. Yeah. Absolutely. So, I mean, you can't do this work without having blockchain intelligence, unfortunately. I can I can open trace this thing all day and you wouldn't have the insights that those tools provide, right? So, we ch analysis, TRM, right? uh Heights Labs, we're involved with a lot of the companies um because we need that insight. Um and we have, like you said

before, the public private partnerships, so you know, Anchorage Digital and some other companies that we're we're friends with that can help open those doors and have conversations with them. So, it's super important. >> And and so from from your perspective on the public side, you know, you you work with a lot of these private companies and and you know, we talk secure when we think security of these protocols, oftentimes it starts with the audit companies. That's kind of our, you know, portal into this world. >> A, as you're thinking about the private companies that are doing some of the best work and, you know, investors are thinking about, you know, putting their capital behind stopping some of this crime. It's a big industry, 75 billion.

You know, we we had, you know, someone on earlier today talking about, you know, how they're chipping away at the tokenization industry. They're getting payday loans. It was 10 billion. It's like felt like a massive, you know, potential opportunity. This is 75 billion of added value that we can add back into this industry. what what do you recommend to investors, venture capitalists, where should they be allocating resources to ultimately help, you know, establish more private companies and prevent some of this crime? >> Yeah, I mean the CISOs are like a super important part of this product, but I think beyond that, you know, not that like to law enforcement's capacity or whatever or capabilities, I think you need to have someone inhouse that that just does that. That's a relationship builder, right? All right. So, not like a BDR or something like that

potentially, but like they're more so focused on establishing relationship with the protocols and with the foundations and keeping those communication lines open from the enforcement side of the house. So, if something does happen, you have a direct line of communication. I feel like a lot of times like, you know, if I wanted to talk to someone about Ethereum Foundation, I'm not going to talk to a cop because it just it's weird probably or whatever, right? I think having those open doors is what's going to help because I I'm not like, you know, I'm good at what I do, but like these guys who are writing the protocols and designing these platforms, they're the experts and like I don't have that. I'm not a math teacher. I can't, you know, whatever. We need those people to kind of help.

>> Are are you guys using AI and and you know, have you gotten someone someone on your team like up to the level where they're able to? It doesn't it's not intuitive for you know uh you know law enforcement agencies to be hiring you know software engineers and developers but that's where we've gotten to. >> Yeah. I love that you said that because literally when we talked our session at 4:00 you're kind of like hitting on exactly what I was going to like reference that. So funny because like if you look at law enforcement's capacity to to move with technology, it's slow as hell, right? I forget the averages, but I think to to outfit an entire agency, get everyone trained and have all the sort um reoccurring education and software available to it, it's like 10 to 14 years, some crazy number like that.

>> Wow. >> So you have a technology like AI and crypto or blockchain that's moving as fast as it is, that time frame is not going to work. So we're not doing enough with it. And unfortunately, I'm not like a decision maker in that space. So you need to kind of find a way to get that conversation happening and I the only way I can think to bridge that gap is explaining like the level of fraud and like how how fast things are moving. >> Yeah. >> We're definitely not using enough though for sure. >> Yeah. >> Last thing from us I think Detective Hogan is what is your like like the rest of your year look like? Like is there cases that you're actively working on?

Are there new like areas that you're trying to get more involved in? What is your kind of next six to seven months look like? >> I look like I'm crushed. >> Yeah, we're crushed, dude. We we just get so many cases and because of that lack of capacity, we're helping state or we're helping local agencies out because they don't have that capacity and we're also helping the feds out too because not every state like we're kind of get small. So like the field offices may not have capacity either. So we'll get cases sometimes from them too. So like we just get smashed. So, I'm actually like I say this all the time, but I'm terrified of like egentic commerce. >> That like terrifies the hell of me because if you can imagine yourself in your own foot, you own a business that has like aentic agents going out and and

purchasing or doing things for your business with a a credit card or whatever they're using to do that. Now, you walk into an uh a barracks or a local police station and you go, "Hey officer, I want to report a a lararseny." And like, "Okay, what would happen?" Well, uh, an agent that I was using transacted using my card on this website to develop the blah blah blah. And then the cops can be like, >> "What the hell are you talking about?" Yeah. And they'll tell you, "Oh, go to IC3.gov and file a report, you know, and then that's what's going to happen." >> So, like that kind of stuff is what we need to be preparing for. And because by the time we prepare for it, something else way worse is going to be here. And that's that's why I'm I'm preparing for that.

>> Yeah. >> Like and then who do you blame? the agent, the the merchant, the person who developed the agent, the person who prompjected it, like who you know what I mean? >> Well, you know, that's like the tornado cash issue, right? Like they're trying to like, >> you know, how do you arrest someone who designed a protocol that functions by itself, right? Like I I you know, I like crypto, honestly, as as you know, from my perspective. I think it's really cool. I like the way it works, the use case for it, um, is there. So, I don't think arresting someone who wrote a protocol with the intent for good. Obviously, the intent's a big part of it, but you you can't you can't go out and do that kind of stuff because then it ruins it ruins innovation, right? It slows that process down. I think it

again having that conversation, leaving that door open is how you fix the problem. >> Yeah, >> Mr. Conversations. Pleasure, man. Thanks for Yeah. Appreciate you coming, >> guys. That is our local in-house detective here at the rollup for digital form fastest future Stanford. We're staying away from law enforcement here on this show, guys. We're going to take a real quick break and we'll be right back with our next guest. Money power

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Welcome back to AI Supercycle, our premier AI show airing every single week presented by Near. We cover the ins and outs of decentralized AI, privacy, and the future of this massive technology. Near is the blockchain for AI and the execution of AI native apps. You can check out Near's latest AI product at near.ai. Sit back, relax, and enjoy the show. >> Welcome back to the CT Digital Forum Future Fest in Stamford, Connecticut. >> Been working on that one all day. It's digital >> forum future fest >> here in Connecticut. We are talking with Sal Turnillo, the man behind Sovereign, the DAT for near the development

company, a friend of the show and a lovely, lovely man in a nice sport coat. S, great to have you. >> Thanks, man. Appreciate the warm intro. >> Yes, sir. Um, what a >> Yeah. >> What a what a couple weeks for near. Yeah. >> Right. I mean, probably surpassed a lot of our expectations. Take us back. Couple weeks back, we got this kind of trifecta. We got Arthur Hayes talking about it. Obviously, this kind of like AI agents using intense um using uh near intense confidentially. The TVL has been rising. People are kind of getting it. >> Take us back last couple weeks. What's been going on uh on your side in your mind? How have you been processing kind of like what the market's reaction has been?

>> Yeah, I mean this is I think if you guys remember the first time we chatted probably four or five months ago now, we kept talking about this market mispricing. like this is the perfect cohesive technology platform vertically integrated products with value acral mechanics to near and I think the market is now finally understanding how to underwrite near as an asset which is not as a comparable L1 basis you have to really think about revenue generation and market opportunity around intense and near AI as well um and I think there's also even as recently as this morning Arthur from defiance was making a point like intense TAM is not cryptoto crypto swaps intense TAM is the commercial architecture ure of intents being expressed in the real economy. So that might be the example I always gives

of like I want to deliver steel to this factory for this build. It's the architecture of a commercial deer where our payments are a layer of settlement and we're just really kind of scratching the surface in terms of the initial opportunities and use cases around it. So repricing in the asset obviously we've seen a lot of uptake in terms of Arthur and many other Kos picking up on it. We've also seen massive inbound from institutional investors in the liquid fund category >> AI side on the revenue story side like what's the exciting part for them >> more mostly digital asset funds to be clear like they're underwriting the AI opportunity the privacy narrative and seeing near uniquely positioned in that context but >> uh the amount of inbound like next week we have our our backer summit >> um it's going to be the most widely

attended backer summit like hundreds of funds will be there um and there's a lot of folks that are taking positions so I think we're just stabilizing here. A little bit of chop sideways through the summer and and we're going to be up for the end of the year >> despite Bitcoin's struggles >> struggles. I mean, this is one of the on a statistical basis near and Bitcoin over the last 30 days have had a negative correlation, right? >> It's crazy. I mean, I've never I've been doing this for a long time. I've never seen alts have negative correlations to Bitcoin. Like hype, Zcash near a select few others with real fundamentals. And what's interesting is like it's all fundamentals driven that's driving this negative correlation.

>> Yeah. >> Obviously with the sell-off with the stretch news yesterday and then Arthur talking about the dump in context of macro and midterms, everything started to recorrelate on the way down. Um but I've just I've never seen relationships between near or other assets in the alt space to Bitcoin like what we've seen. >> How long do you think it lasts? this this this disorrelation because it's not just uncorrelated at least for a little while it felt like they were actually divergent. >> Yeah, they were negative correlation was performing moving up 170% in 90 days and Bitcoin was flattened down through that period.

>> Um yeah, I I I haven't looked at the charts to say this is unprecedented. There's not been another example of this, but from an anecdotal experience perspective, I've not seen it. So, >> and so the question was like how sustainable like how long do you think this lasts? >> Uh that's a good question. I I was actually just talking with uh one of our team members, Frank Kamato, about this like >> do we expect this negative correlation to persist? And I think people are going to be taken by surprise with clarity act. I'm in the camp of I was just saying on stage that I think it's an 80 plus% probability despite the heat that we're getting from Jamie Diamond and many others being vocally against it. Um and I think that the industry just underappreciates how important rules are to institutional capital allocators

coming in. Um, so I see that as a major bullish catalyst. I do think the summer is sideways, but I think the end of the year, despite the midterms, is a really good setup. The biggest factor here is how long do how long does Iran last? How long do oil prices stay high and what's the trickle down effect in inflation data that the Fed's going to read on, you know, the dot plot on a forward outlook. So, >> um, yeah, I do I don't expect this negative correlation to continue forever. >> Okay. on the on the near specific side. H has your kind of investment thesis as you've been you know talking to funds about it to allocators about it to investors Kwells whomever has it changed materially over the past couple months obviously confidential intents have have

had a huge growth the AI kind of boom of Venice as a protocol as a company has done well and near is powering some of the private inference there like what has the what what has been the changing in pitch for near the asset in the last couple months. >> No, I think you honestly nailed them, man. Like you guys are pretty close to the ecosystem. Privacy as a narrative has continued to run hot. Started last September. It's continuing through today. I just got a question from uh Jamie Coots yesterday in terms of like where does Near sit relative to Zcash. Is it competitive? And my view is absolutely not. We're providing a privacy computation layer on top of a private sovereign asset. Um and that's a constructive and complimentary thing. Uh we also

>> just real quick I like to think of NER as the Ethereum to Zcash is Bitcoin if you will. >> Yeah, it's very similar kind of they're they're complimentary. They're not competitive. >> Um but privacy narrative running hot. >> The near AI product side is actually starting to get to a place now where like iron claw user experience is much much better. >> You're going to see some real use cases coming out around that. And then the part that gets me the most excited is the mechanic design behind private inference and ironclaw. And I think towards September October we'll be in a position where well we near foundation will be in a position where they can start to put forward views on how these mechanics around the AI product stack acrue value to near the same way that we see with intense buybacks today.

>> Yeah. So we've been speaking about this relative strength you know of these three categories it's been revenue >> leading hyperlquid has kind of been leading that charge privacy from you know Zcash has been leading that and and AI near VVV with Venice you know have been leading this now worldcoin is doing this as well they've been the most strong relative to the rest of the market in fact negatively correlated as you as you pointed out um and you know I think we anticipate that these will um continue to outperform once you know the market turns but they will hold up better than the rest of the market um because they are the ones that are garnering the most attention. Near feels like it's hitting on all three. I I know I put it in the AI bucket, you know, because hyperlquid and Zcash are kind of

even more pure representations of the other two, but in reality, near intense is confidential. Near intense is the best example of all three. It's surging on the revenue front. TVL is up and to the right. It's confidential and so it has privacy enabled and it is enabling AI on multiple levels near as a whole and so how do you think about these three do you think near is the best expression of the three as they converge and yeah I guess same question but just with this context in mind how do you see these categories progressing and generally you know how do you see near progressing as a leader in these three categories >> yeah I mean you're you guys are you guys are nailing it today very well done um it is like the spot-on expression of all

three and it's the most mispriced underlying asset what's hyped today 17 billion fully diluted revenue model through the roof on a comparative basis to near not contesting that in any way shape or form um but when you look at the only project that's hitting on all three of these kind of critical primitives that are narrative driven today near is really the only one playing in that group even if you look outside the near ecosystem and look at bit tensor a lot of really exciting academic and computer science work on decentralized training decentralized compute inference um not in the same position for Iran the way that NER is.

So super bullish man. I feel I think the whole ecosystem and a lot of the investors feel like to some extent validated that the market is now waking up to recognitions that people that have been investing in this ecosystem have had for a while. Um but really the work's just beginning. It's we're in the the meat of the product execution sprint now. >> Yeah. S what's you know you're an investor right? You're in a company that is meant to acquire near hold near be a long-term investor. Every great investor understands their upsides and their downsides. They understand their the risks associated with a given a given asset. It wouldn't be fair if I didn't ask what are the tail risks for near here. What is the what what are the things that from new investors who are listening watching what is there to be

aware of that that need to be understood for you know what what the the kind of more bare case is here? >> Yeah. I mean the the space where there is by far the thickest competition with the greatest capital depth is in the secure harness category and like what ironclaw has done in my opinion from a security architecture point of view has some real competitive advantages versus everything else you see in the market but we're taking crypto as a 1.75 trillion two trillion whatever the the total market cap of the asset class is and talking about competition and AI product that is comparable to companies that are raising 100 billion right and so to think there won't be competition and it won't be fierce on the AI product stack would be naive. I think the magic of this is the intersection of these

components allowing for intents to be this ubiquitous liquidity and transaction layer alongside privacy preservation alongside sovereign control um and introducing the the secure harness that ironclaw offers. But yeah, I think that side of the market is going to be very competitive and there there will be new entrance as well. I I saw a flowchart sort of design architecture diagram from the Near protocol account recently that described how Near underpins Venice and how it helps to secure these things and I and I think you're right. I think the convergence of these three categories is the the real value proposition and potential potential ceiling here. Can you describe a little bit more how near helps to

support some of these you know initiatives like Venice with you know their private models um and then you know there's other things like I think maybe Near and Hyperlid could potentially collab or Near and Zcash are seeing more collabs but with respect to Venice this one is already kind of you know it's already happening can you just describe it a little bit in more detail >> yeah there like the way that Venice is set up and I think Eric just gave this really good descriptor of like where it sits in the in the kind of like almost like a middleware but with a consumer front end that allows consumers to select different trust assumptions and different trust models of how they interact and different levels of privacy as as a part of that. Near's infrastructure on the private inference side is one of those underlying

providers uh which provides the greatest degree of of trust in cryptographic verification around users interactions through inference processes and confirmation over what models they're actually touching that are running inside of TEES. Um, so I think you're going to see a lot more of that where there's B2B integration and support of near private inference for those attributes. Um, but Venice has been doing an incredible job. Like it's all over the place right now. So hats off to Eric and the team. >> Yeah, Alibaba just uh posted about their models and yeah, it it was pretty insane. Um, one of the things that we've been asking a lot of these different kind of like L1s and chains is um, about the token value crew and like a lot of what we've been seeing is this

institutional adoption at scale and a kind of like a a lack of a rerating of the actual asset underneath due to kind of broken token models and we got some flak from that from a couple different teams for asking them this and same thing you know you know too near the goal is to get deflationary right at the underlying you want to be generating more revenue enough buybacks and buy pressure on on this asset to offset uh any future issuance which inflation is getting cut down uh and just general expenses. What is the realistic path to near becoming uh more deflationary? Is there an inflation reduction in in the future coming? Ilia says next year at some point potentially. what what is the

confluence of factors that needs to happen for us to be able to look at this asset and be like guys it is a no-brainer because it is objectively a net positive. >> Yeah. Yeah. It's a really good question and before I go into the actual technical answer to to be direct with you like I don't I think the jury's out in terms of what is the optimal economic design within a system like hyperlquid almost faces the opposite challenge which is like at a half a billion a year run rate revenue buying back tokens like is the 99% buyback actually the right structure for them or should they actually be generating revenue to drive further product development and expansion in other categories over time and like TBD We don't know. Um but for near in particular over the next 12

months, the number one metric to look at in terms of actual buybacks and value capture in the token is going to be intense volume scaling. We've been looking at intense on an average basis 50 to 70 million daily through pretty bearish market over the last six to nine months. >> Uh the research report we put out in March looked at 170 million with a blended take rate less than 10 bips on transactions being the inflection point to deflationary. I think we'll have a more objective point of view coming out from Jamie Coots and Real Vision over the next couple weeks in a report that they're they're painting. Um, and then I think the whole AI stack and the mechanic design around that will accelerate. And so we'll put out another research report September, October that doesn't just address the fundamental

bottoms up underwriting case for Intense, but actually contemplates both of these vertical product stacks coming together with united mechanics. Um, and then to IA's point, we will continually evaluate as an ecosystem the inflation mechanics around the system to optimize the design there. He has a better line of sight in terms of timing and thinking there, but obviously we're supportive of the scenario that drives the best value curl and market expression and near's token price. >> S do you think near charging a fair fee for near intense? because I'm looking at the the Dune dashboard here which has a ton of great stats >> $20 billion of alltime volume through near intense uh almost 2 billion no over two billion in the last 30 days um only

only 35 million in generated fees it feels like that number should be higher I don't know that like that feels really really affordable cheap if you will like in terms of like the costs that Near is charging for fees through this platform form. >> Mhm. >> Do you anticipate that near will increase fee? And and this actually plays into the conversation we've been having with several token protocol L1s. Like we had I'll just reiterate quickly. We had this exact same thing. We asked John from Avalanche and Avalabs earlier today. We asked uh Dell from Stellar. We asked Joe Shalom as it pertains to Ethereum. All of these blockchains are trying to scale. They're bringing their average transaction fee down, but their

business model, their token value horistic is built on fees flowing to the token. Yeah, >> these feel totally disconnected. They feel totally contradictory to one another. So, obviously, Near can drive even more volume by bringing fees down, but they're a business. They're meant to, >> you know, drive revenue. So, where does that barometer end up? What is equilibrium? Is this currently a fair, you know, fee model or generally what what should change up, down, sideways? >> Yeah. Yeah. I I think as compared to pretty much every one of these other L1s that you were describing, Near stands apart and is unique in that it has this vertical product integration and is monetizing intense in addition to the protocol burn transaction fee, which to

your point, Blockspace is commoditized. It's super cheap to transact. It's only going to get cheaper over time. Where near strategy is different from all of those others is that effectively the unis swap protocol is acrewing value to near. So in the ethereum context I explained this on bank list maybe like two weeks ago or something. This was the example I gave was in your world David unis swap is acrewing value to e. Uh that is the case in near. So in terms of actually pricing power and fee structure I think you've probably seen the last three weeks confidential intense has just literally ripped in terms of volume and TVL. I think there is a premium to be paid for private transactions in the world and so I think you may see more pricing power for confidential intents as compared to the pricing structure

that existed for you know vanilla intents um and the team if you look not only at the Dune dashboard but at the actual kind of profit that the protocol is making over time >> that is not reflective of the fact that the fee switch was flipped in February and then there were bilateral distribution agreements that were inked over the next 90 days and so pretty much 95% of the volume that's processed through intense has those in place now. Um, but the bottom line profit to the protocol is not reflective of that fee switch and 100% of everyone using intense was actually fee sharing at that time. So I think the next 90 days will be the first time where you can actually look not just at top-end fees but also at the bottom end profit to the protocol for net buybacks. Um, and I think that's

an important metric that people in the market are looking at and trying to really understand like, okay, to your point, 35 million fees, is that a fair take rate? Okay, what's the actual protocol take rate behind that? Why is there a variance between what we're seeing? And and this is the logic and kind of path it took to get there. >> Yeah. And I think I tweeted about he wanted to see a future where it's not just a button on the dashboard on your.com for confidential or not, that it just >> always by default. And so that could be a way to add that take crate to all the transactions a little bit of of a of a premium on it.

>> Yep. Yep. Absolutely. >> There there um was a dashboard that was launched by the Aerod Drrome Foundation recently or it was Dro you know was associated with Aerodrome and it it was illustrating this net token value flow across several protocols. Um and as I understand it it is essentially saying there's income into the token there's earnings you know there's revenue there's buybacks. this all value flows into the token and then there's emissions, there's expenses, there's things that flow out of the token. Very simple. If you have more coming in than you have going out, then you're going to be in that green category. You're going to be looking good.

>> Um, Hyperlquid is at the top of this, but you know, there's others on there like uh Cake, right? Cake Swap from Binance Chain. There's Pump Fun is on there. You know, Air's own token is on there. Um but all you know hype is clearly you know uh different amongst that category. Not all of those even though they are all have more coming in there's variance in in how they their tokens are performing. My question is here is you know I guess generally why and I I thought about this a little bit and the answer I came to is that Hyperlid is programmatically buying back their token. there is a pre-commitment that says 99% of the revenue here and we can forecast and project how much

revenue is probably going coming in is all going into the token whereas pump fund seems to kind of do these buybacks like once in a while when they feel like it you know I'm not sure you know cake arrow exactly how their models work but as we're thinking about this and then looking at near in particular >> how important is this pre-commitment for buying back the token and value flowing into it >> yeah it's a really good question it's a face where to your point like the approaches in the market are pretty wide right now. Like you have the pump fund fully programmatic, fully transparent on chain as a result of a validator vote despite at the time being pretty tightly controlled on the decision. Um all the way down to completely intermittent random decisions to buy back in bulk at

time to support price for some protocols. that's not the case in near um this is a space I think you will probably see standards start to emerge over time in terms of how value acrruel actually flows back to tokens and what is the reporting and transparency expectations around that and I know that from the sovereign perspective we're committed to driving the ecosystem in a direction that very much meets the edge of the market to give investors confidence and certainty in underwriting the asset we don't make those decisions but our view is whatever creates the most certain foundation to underwrite the asset with the best data and information available is net positive to everyone because we think that data and information leads to a really compelling investment case. Hence why I'm doing this job.

>> Yeah. >> Yeah. >> Sal man, thanks for spending this time with us. Um always fun guys. >> Absolutely love to see the growth over the last couple weeks and and I think you know there are some levels to take out but it's the fundamentals that are driving this and that's what matters. Um I think that the market's very much responding to the fundamental growth of certain crypto assets, blockchains, etc. And that's what we want to continue to kind of foster on on our show and just broadly as an industry. >> Love it, guys. Appreciate it. >> Yeah, >> as always. >> Thanks, Tom. Appreciate it, man. Good to see you as always. >> Oh, yeah. >> Oh, the boys >> linking.

>> Oh, I think you put on timer. >> Oh, >> is that what that is? Give it up for our for uh one with guys. >> There we go. >> There you go, >> guys. We're going to take a super quick break. We have our next guest here. We'll be right back. That was AI Supercycle episode number 36. >> Thanks, man. >> Next time money power.

big money. We get deep know we get deep. We get deep know. We get deep. We get we get deep. We get deep. We get we get we get deep, you know. We get deep.

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deep. We get deep. We get deep. You know, we get deep. You know, we get deep. We get >> All righty, guys. Welcome back to the CT digital form future fest in Stanford at the University of Connecticut campus. We are joined today by Diana Barrero, a big big blockchain enthusiast here at the conference, one of the few uh you know blockchain believers in the era of Bitcoin testing its lows. We're zooming out here, Rob. We're taking a step back

and we're and we're being bulls. >> And he's been watching, you know, these five minute charts on Trading View. So, we're taking a bit of a longer time horizon these days, looking a little bit more at the fundamentals, which >> better. >> Yeah. So, you know, I I think this is right up your alley. You're head of uh GSMI uh at uh and research at the global blockchain business council. Um I also noticed I think there's a a Yale association if I'm not mistaken. So, uh would love to understand a bit more about your background and your current focus.

>> Absolutely. So I run our global standards mapping initiative which is the GSMI and research at one of the industry associations called uh global blockchain business council GBBC another acronym but we're the largest leading industry association in the space advocating for innovation in responsible ways and um blockchain technology across all sectors from like nonprofits to large corporates u financial institutions academia and bring them all together to talk about the most pressing themes in blockchain technology. I'm also happy to be here at the Connecticut Digital Forum, the association with Yale. I've been putting together a number of convenings with alumni uh

especially from the MBA program to to again convene the industry especially along financial services to to connect and talk about the space right so it's it's an exciting time right now I think because we're finally getting regulatory clarity in many ways and we're also seeing institutions taking this technology for real in ways that we never would have heard of before like the level of partner partnerships between DeFi and traditional finance institutions. I can get into more detail, but it's it's a really interesting time right now if you take that long long-term horizon.

>> Absolutely. Which we've been focusing more on, you know, given uh you know, the GBBC is this industry association. Is it mostly focused on policy or kind of bringing people together like uh is it a nonprofit? Maybe you could just unpack a little bit more about how it works. >> Nonprofit. We have over 500 members across all walks of life looking into blockchain and digital assets from builders to regulators to standard setters. One of our focus areas also is standards which is something that I'm very very involved in and we're happy to say that we got um approved as a category A liaison as part of ISO the international organization for standards which sets the common rules of the game and and I mean there's many players but

it's really really important right now to have common rules of the game so that we can better scale ensure better interoperability growth so that everyone can agree for example if we're tokenizing right if I tokenize on my my platform and you tokenize on your platform. We're not going to be able to trade together across platforms and really reach that global interoperable marketplace unless we have common rules of the game. So, it's that kind of >> um conversations and obviously policy is a big part of it and also uh risk mitigation risk mitigation frameworks. You know, one of the things we covered earlier this week on the show was um Olivia's uh Van Wood who works at uh the Avalanche uh uh L1 and she u was talking about the national best bid and offer

which is this regulation that says you know when it comes to equities um if you trade on one of these 16 regulated exchanges you are legally required to get the best possible price um you know of any of those exchanges and in that sense those exchanges are very interoperable. able and composable with one another because they all legally are required to give you the best bid. >> Um, and she was arguing that this should extend to tokenized equities of course. >> Um, and and that we are currently missing the NBBO on chain, but an equity is an equity whether it's tokenized or not and so that rule should apply. Is this an example of some of the things that you're advocating for and and you know if if you know gen generally like are they maybe you could just provide

some more concrete examples >> especially across the board anything that has to do with common rules of the game and standards. One thing that is really important when when we're setting standards, it's also the the process in which a standard is um developed and the stakeholders that are involved in in basically giving an okay for those common rules of the game. I can set my standard right now, right? And and we don't want to have like a redundancy of yet again more rules of the game because there's so many. And what we want is harmonization. That's the meme is like okay you know we've got these standards and you know everyone's trying to come up with the next standard or come up with the same standard so it's like okay we need another standard right so that all we yeah you know that's that's yeah

and so how do you avoid this and generally you know what what are you working towards >> I mean a lot of it is convening and getting the right people in the room and getting the right process like an organization I mean the landscape of standards as part of the global standards mapping initiative I've worked with many of our stakeholders to map out over a hundred standard setting bodies all over the world that are doing different things towards standard setting. Whether it's actually setting a standard or providing the inputs to a standard or doing joint joint working groups or or providing common rules that are ad hoc approved by the industry or there's more formalized globally recognized standard setters like E or ISO that are kind of like the gold standard but they're very very

bureaucratic and and it takes long to both comply with them and it takes forever also to both um create those standards, right? So in in that vacuum sometimes organizations end up creating their own ad hoc industry based um rules of the game. So we're trying to harmonize putting it all together and everybody knows it's important. We It just takes time. It's a process. >> Yeah. >> Yeah. I mean, we have like the regulatory side with like laws and bills and then there's standards like onchain for different like token types and different types of assets and then there's like bringing these two worlds together. How much difficulty has there been by trying to kind of convene people to understand

and to educate them on kind of what's happening in this world and then bring that to like a consensus outside the world, especially when you're dealing with traditional financial firms maybe like what are what standards do they care about? what what core consensuses are you trying to achieve with them? So I imagine it's not all the nitty-gritty that people inside the industry really care about. What are the core core principles of what the institutional allocators and firms care about? >> Yeah, I think standards that are trustworthy and standards that are comprehensive. Another issue that we face in in the industry is is the convergence between like open source.

Some standards are open source, some standards you need to pay for. So the accessibility of standards and also um sometimes the the industry just happens to revolve toward one one direction as opposed to like u like the socialization there's like a network effect overall and and you bring a good point as well because there's also technical standards but there's also like reg regulation right and often we see that industry standards may precede and even provide input to regulatory developments so I think mostly it's getting the right people in the room and getting the people to agree on on the same rules.

But again, it's it's a set of conversations. You have to be very targeted. You you have to be very intentional because it's a very complex space with a lot of different players doing a lot of different initiatives, whether it's frameworks here and sometimes they don't even know that they're working on on their internal standards because they don't talk to each other. So there's redundant work going on where those silos should be better broken. what what are the um some of the frameworks and standards that the GL global blockchain business council has implemented up to now? >> Well, we're not essentially a standard setter.

>> Okay. >> We advocate for better standards in general. So part of that is our involvement with ISO where we're bringing experts into the ISO TC307 which is the technical committee on blockchain and distributed ledgers to bring the right expertise in place into the right working groups to talk about digital identity uh taxonomy often it starts with taxonomy what are these things how do you even define a digital asset if you're not on the same page like everything >> can can lead to discrepancies right >> um and then also regulation, a lot of engagement with regulation. And then we also have a token taxonomy framework as well, which is an open-source standard that has been

developed through one of our our um branches under the inner work alliance, which is a standard to tokenize anything. And it's been highly adopted in the world of carbon markets where again standardization leads to trust leads to more accountability especially in a market where where there's been significant costs due to lack of trust. >> Wow. Very very cool. And you know, we've had conversations with um uh like the digital chamber of commerce, which is this lobbyist group, and they do a lot of work in DC, and they have some of these member companies that help lobby for in in some cases the Genius Act or the Clarity Act. And people don't always agree, you know, uh famously Brian

Armstrong was sort of anti-clarity in in one form because there was a discrepancy around yield. Um and you know he was kind of pushing back on the crypto industry. Um and so given that you know you you've got a very general set of >> yeah we're very neutral as an association. We don't take sides. We talk to all all sides of the the picture and and we advocate we we advocate for responsible innovation but with with a very neutral with a very very neutral approach.

>> Yeah. >> So we don't do lobbying and like >> Yeah. And a lot of the the work that we do and we see is, you know, people come on the show and we see them on Twitter and in, you know, these conversations. They don't want to agree on definitions. They don't, you know, a lot of times people are very technical, very passionate about these things. Um, and and so how do you ultimately come to a common understanding of the space when things are so technical, so complex? We've actually had a working group going on for a number of different years on just focusing on taxonomy where step one has been focused on what are the key terms in the space and what is the landscape of definitions.

>> So instead of >> again instead of developing yet another definition just landscaping what are the globally recognized definitions from what sources? What are the globally reputable sources including standard setting setters, including different regulators, including um reputable industry, industry glosseries and um different associations and we see a lot of discrepancies still. >> I bet. Yeah. >> I bet. >> Yeah. Yeah. Last thing from me on the kind of like general work that you're doing here. Is there any specific sector or part of the industry that is demanding the most amount of your attention right now and and time? Is there a specific you know this kind of traditional finance and DeFi convergence is obviously happening obviously this

opens up a whole you know breadth of new situations what what part of this industry is is demanding the most amount of your attention >> for me right now as as you can see I run a lot of working groups on key themes in the space and I'm seeing more and more the interest in institutionalization so it's really bringing blockchain and digital assets and innovation and translating them within frameworks that can be acceptable and considered as legitimate by financial institutions, corporates and large scale players including um regulators because that is what's going to pave the path towards scalability.

Right. >> Yeah. >> Got it. >> Last thing for me is you know similar to how the digital chamber is sort of this liaison between blockchain companies and policy makers in DC. >> It it sounds as if the the uh you know the the blockchain business >> the right people into the room. >> Yeah. like this between you know digital asset companies and the um standard setters right and so my question is what is ISO looking for right and from these companies you know generally before something gets put into one of their >> yeah they have a very structured approach toward developing standards that again I said it takes a long time it goes through many reviews and

iterations once the standard is published it's the gold standard standard. It's very reputable, respectable, and everybody >> wants to adhere to it. But the process to get there requires and and they're they're very grateful for for inputs like ours from from experts. Uh whether it's in the form of reports that we've produced or industry recommendations or or right now we're focusing a lot on use cases. >> Sure. >> Uh blockchain digital asset use cases where it gets real, where it gets tangible. And we've documented 101 use cases across different industries.

um into a into a use case handbook, a volume and we're doing we're about to release uh version two this year. >> Oh, very cool. >> So, so just where it gets real and and what are the processes and what are the processes that are involved >> and where can our audience find that that handbook? >> Um it's it's in the uh gvc.io website. We have version one out right now, but then again um in very soon in a couple of weeks we're going to have version two. >> Beautiful. >> Beautiful. >> Diana, thank you for spending some time with us. Hope you had a great bless your conference. It's been a beautiful event.

There's a lot of different sectors here. >> Um and uh keep uh keep pushing this industry forward, right? Doing the Lord's work. >> Yeah. Thank you so much. >> Thank you so much. See you next time. >> Thank you. >> Yeah, absolutely. I think we're going to take a little >> We're going to get our our picture taken here. >> See if we can get it. >> Let's see if we got it this time. >> This time. >> Bang. Let's go. What's up? Thank you so much. Wow. I can't even see right now. >> Whoa. Flash.

>> Damn. >> Flashbang. >> That stuff's strong, man. What was that? >> Some of that new stuff. >> Why don't we uh >> talking smack? I had to up the, you know, the game. >> Yeah. Whoa. >> Oh, it hit. I had a delayed effect. I just I just got it. Whoa. >> Whoa. >> All right. >> What's going on out there, guys? >> Let's see. >> Chat, how we doing? >> I'll tell you what, right now, Canton has been a stable coin at 15 cents. >> Yeah. Whoa. World Coin down 10% in the last hour. >> Yeah, classic. >> We're back to the fiveminute candles. >> People are mad at Hayes right now, man.

I'll tell you that. >> Oh boy, >> they are mad at Hayes. >> Oh boy. >> They do not like Arthur right now. Thanks Diana. >> Thank you so much. We'll see you next time. >> Wow, >> look at that, >> man. Per fighting for his life here. What do we think about Sheamus buying at buying at 65 up like upping that cost average? You know, >> there is he next. He doesn't know when he's coming on. He's lost his schedule.

>> It's David Henderson. >> Hey, David. >> Hey, how are you? Um I maybe uh >> I think it's like 2:20. >> Yeah, I think >> Yeah, we got you at Yeah. 2:30ish, but if you've got Jeffrey Wallace coming up next and uh we'll talk then. What would you like to talk about or not talk about? >> Um I think we had here >> I did the governance panel >> a lot of this kind of AI in companies conversation. >> All right. Beautiful discussion of labor force boards governance all of that conversation.

>> Good. >> I think you're an expert. >> Can I bring some notes with you? >> Please do. Yeah. Okay. >> All righty sir. We'll see you then. >> Looking forward to it. Dig in the >> Yeah, man. All righty guys. Um, clearly there's a lot happening here. >> In the middle of it right here. We're in the thick of it. >> We've got >> Wow. >> We've got Banks past, present, future. >> Can I get you guys anything? Drink water. No, sir. We're sorted. >> Yeah. Thank you, David. >> Yeah, appreciate it. >> AB Con, what's going on, man? Still here. Still vibing. >> Got got another hour and a bit left.

Straight back to New York. >> Last 30 minutes. That's what we got on a Thursday >> guest coming in. >> Yes, sir. Come on over, >> Jeffrey. >> We're ready for you. >> Yes, sir. >> How are you doing, man? >> Excellent. Good to see you guys. >> Robbie, good to meet you. >> Jeffrey Wallace is the CEO at M3XT. We just had your colleague on the show, Scott. One of Robbie's friends from I don't know, from Gainesville or how you met Scott? >> I didn't. No, I uh met uh someone at N3XT at our modern money event series that we do in New York, right?

>> And uh he connected us with Scott and um you know, ultimately got us got us a little bit further along when it comes to N3XT, told us a little bit about the the origin history uh of which there is you know, quite a bit to dig into and I think Andy did uh with Scott. Um >> indeed I did. It was good. >> Yeah. Yeah. Yeah. And so Jeffrey, now you know, you're here with us today. Uh, and I think you know, Jarvis came in, he said, "Okay, let's get Jeffrey going on the uh on on the future of the banking industry." >> Um, and he said that you you've got a lot to say on this topic.

>> Well, I got I've got a lot of scars from it. How about that? And so, yeah, it gives me a lot of things to say. >> You were with Scott at Signet and all that or >> Yes. So, uh, at Signature, I ran the digital asset product and strategy. And so we built out the Signet platform uh created that uh ecosystem, built out the community of essentially traders and then logistics firms and payroll firms that really wanted to have their fiat dollars move 247 and instantaneously. And so this was a great product that was just really starting to roll and starting to really take off and we were excited about the prospects of it.

>> So I didn't really get much out of Scott as much as I wanted to about some of the battle wounds that you guys had gone through. Can you just take us through a bit of operation choke choke point on silvergate on what happened being inside having your funds frozen having accounts frozen customers panicking? Yeah. >> What happened like can you just give us like a on the ground quick anecdote as to kind of like what that was like? Well, what I can say to you is uh during that time there was obviously a lot of uncertainty in the industry as a whole because of what was happening with SVB and there was clearly a bankruptcy problem going on there and the FDI came out and said, "Hey, we're only going to

um cover 30, I think 30 cents on the dollar of every single SVB depositor uh funds." And when that happened, there was a tremendous panic in the marketplace. SVB is very much connected to the investor community, very much uh connected to the Silicon Valley VCs and that drove a tremendous panic through the marketplace. And so what that really kind of kicked off was a lot of questioning of regional banks that have been so good at servicing the investor community and building out uh funds and capabilities and products and services for them that it really started this uh this questions about what was what was happening. Frankly, at our from our standpoint, we received a lot of funds at that point in time. A lot of funds were moving from uh particularly

California regional banks into Signature at the time. And so, it was really much uh um a flight, what we thought was a flight to quality uh from our standpoint. But other industries were obviously questioning what was going on. They knew our uh commitment and our uh interest in our products and services for digital assets. And so, we al you know, just like any other bank, there was a lot of questions on what our balance sheet looked like. We put out statements. We're very clear about our solveny and what that looked like. Uh but ultimately when you're in a situation as a traditional bank, you have a lender of last resort because you have, you know, 10 to eight uh 10 cents to 8 cents depending upon how your what your capital reserves are. For every dollar uh on for every dollar you have

in deposits, you only have 8 to 10 cents in actual cash and the rest of it in some sort of investment portfolio that has been defined by the investment committee. And so you're you're limited on what your capital really is. And so, you know, depositors are always looking for that. So, you know, they started asking questions and but we were in a great solveny position and we were ready. We had a very strong loan portfolio and we're ready to borrow against that. And um you know, the the word will ultimately come out uh on how this all kind of came down. But uh ultimately we were denied that uh that lending opportunity or that borrowing opportunity to solve solve the capital problem or liquidity problem for our clients. was not a capital problem. It was a liquidity problem.

>> And so that uh that in of itself tells you where that policies and overreach by different regulators can decide what businesses win or lose. >> Yeah. Yeah. That I mean that's insane, right? >> Yeah, it is. It's fascinating and it's um it's indicative of uh centralized control, centralized power and I think there are lessons to learn as a result of this and you mentioned that you know now uh you know this was a result of Signet. uh you and Scott are now you know working on N3XT um and and my takeaway when I initially you know met the fellow at at your firm u is that this is a full reserve bank and so this is as I understand it fundamentally different from uh you know everything that you guys had in your previous venture maybe you can just tell

us you know specifically the learnings that ultimately led you to this structure. >> Sure. So I think two things. One, we chose a state regulated path. We wanted to combine or actually align to a state that had perseverance, experience, knowledge in digital assets and was committed to it. And we wanted to see that to the point of perseverance over the long haul. That's why we went with the Wyoming uh you know state banking associate banking uh division because they had shown a commitment to this space and wanted to find and present ideas that were going to challenge and rethink financial services. We love that. We appreciated that. Uh that was very important to us. Being at the state level, we also saw that comparatively to

the the federal level, there was a lot of volatility year to or not year to year necessarily, but administration to administration on how they looked at things. And so as one administration comes and another m administration goes, you start to see policy changes or philosophical changes as it relates to the diff the things that we cared about, which was innovation in digital assets. And we felt that was just too great of a risk. That's why we went state. Second piece, you mentioned it was full reserve. Going back to my previous statement, a lender of last resort is not something we wanted to subject our clients to. We wanted them to always know that their funds were available and ready for their use whenever they needed.

>> It was never a question on us, you know, untying it or unencumbering it from a loan or some sort of construction project, things like that. We wanted them to know that their liquidity, their funds were always available. The bank was always going to be solvent. And when you think about it, the way a a traditional bank works, if one client in one industry has a bad day, that starts to have a contagion effect, right? >> And that contagion effect leads to escalation and the run on the bank concept. That's what concentration risk risk is. In our world, we don't have that problem. Clients are always protected and they're always isolated from other people's bad problems or bad situations. They are protected in all kind at all times. I I think the

question I'm left with as a result of this is how do you guys make money be because the traditional structure of doing things is banks are going to take your deposits and then they're going to go lend them out. They're going to earn interest on those and then when you need your money, you're going to come back and as long as there's a healthy flow and to your point, no one has a terribly bad day, everything is right in the world. Or if there's a bad day, a lender of last resort steps in. In this world, you're fully reserved. >> 247 liquidity is available at all times for all depositors. So you're not lending out, you know, customer deposits. How do you make money?

>> Well, we we do put the we do put the funds in a safe, secure manner because FDIC insurance is has proven to be less than reliable. Uh unless there is a, you know, a perceived catastrophe that they create. So from our perspective, what we've done is we've said, okay, we're going to hold some of it in cash. We're going to hold a lot of it in short-term T bills, one to three months or less. And in that world, everything is a T plus zero uh cash in transaction. So you can always get and there's always liquidity in that marketplace. So you can always get your money when necessary against those T bills. And so we're we're making money off the interest associated with those T bills. That's part of the model. Uh part of the promise is that we're giving you a tech forward platform that gives you

assurance and security at all times. You can legally and transparently see what you have and you know what our overall holdings are. So you're when you're starting to evaluate the risk with a bank, you can look at us and and realize that hey, we're a safe and sound institution. we know uh you know what we have at all times and so we're selling the promise of security, safety, but also a tech forward platform that allows people to have uh to unlock their money. Some of the reasons you talked about uh people making yield uh on their deposits is because the money gets locked up in ways that they can't get access to it.

We're un we're changing that. We feel like the the concept of people working for the bank is changing and it really should be the bank working for its customers and its clients. And I mean I I maybe a kind of a funny way of saying it, but really when you when you put your money at a bank, you're looking you're actually buying into a blind uh you know blind hedge fund because you don't know what what um what particular assets sorry investments they're making at all times. that only comes out maybe uh with some some a little bit of transparency once a quarter at best and then if you can really really see you're you're really not sure where all that really kind of uh you know kind of aligns to what you know investment decisions or what level of risk they've

taken. You just don't know. >> There's this big picture transition happening right now and it's a com combination of banking and stable coins. Um and you know this fully reserved concept essentially is this narrow banking concept and and you you you at you know N3XD have chosen this path. At the same time you've got this digital dollar this this tokenized deposit. Um banks uh put up quite a fight around the clarity act. still are. And part of the reason is because they are they're cautioning the entire world around this capital flight that could take place if stable coins are truly brought into the regulatory environment and treated as cash.

I take it that N3XT has essentially leaprogged all of this has has um separated itself from the traditional banks and said all this is inevitable. There's no point in really fighting it. You've gone and you've tokenized the deposits. you're on the forefront of this technology and now you're saying to yourself, you know, we have the potential. The the world's going to go in this direction anyway. We have the potential to now be a leader and a pioneer in it. Do you see more banks going in a narrow bank direction and taking tokenized deposits and stable coins along with it?

And how do you see the banking system transitioning or evolving as a result of this? Is it capital flight out? Do reserve factors compress? Yeah. >> What happens in that world? >> So, a lot wrapped up in that and a great question um or questions. So, let me let me start with the inevitable. Banks in the future are going to look more like me than I do like them. Yeah. And let me tell you why. If you really kind of break it down. If you believe in the thesis that payments are moving towards instant settlement across whatever asset flow, asset class or asset type we're going to create, that's inevitable.

That's expected. Then if you believe that that kind of thesis then the banks have to do uh one of two things they either have to hold more capital in reserve to deal with the mobility of money to ensure that the the run on the bank doesn't happen or they have to borrow more against their lending portfolio. Either one is going to lower their net interest margin. So the conclusion is I lower my net interest margin. I either have to go reset expectations with the street, the people, my investors, or I have to invest at a higher risk level with a smaller pool of of funds. Neither one's a really great outcome.

>> Think about, you don't want to take more risk, but those that are now uh, you know, resetting expectations, they're going to have to introduce new technology. They're going to have to new introduce new models. They're going to have to cut costs. They're going to have to rethink their entire operations. And we know traditional banks have not really been what I would say the most uh the most the leading firms in doing those kind of things. And so what we believe is banks are going to look more like us in the future decoupling what will be the payment capital working capital preservation component of a client's relationship from the lending component. And as those things decouple we think there is uh actually a safer alternative for people uh when it comes to holding their money. But one of the

questions that is posed in the clarity act a lot of times and they hold the yield question is the flight of deposits uh into stable coins >> is fundamentally missing the point. The banks have missed the fact that a younger generation a digital generation has a different relationship to their money. They expect their money to be with them not necessarily where you have to go find it. And at traditional banks you have to go find it. And with the new concepts of the neo banks, stable coins, other things, the money comes with you. It's a part of your trans your uh entertainment uh applications, it's a part of your uh just uh you know, friend applications. Money is just ubiquitous in everything

>> and that's what they expect. And so it's not about stable coins taking over the world or taking over deposits. It's about the fact they've missed fundamentally what clients and consumers want. And so that change is what's really driving it, not the fact that it's stable coins. Stable coins are an outcome of the banks missing the missing the boat rather than stable coins creating this deposit flight. >> Yeah. and and so you guys are able to stay like very very you know from a conversation with Scott this kind of digital dollar enables you guys to also have another breadth of business model uh from your B2B kind of perspective but but also really just like a better user experience and a better experience than people are traditionally used to with a Wells Fargo or JP Morgan or whatever it

is. >> Yeah. I mean what we believe is that we're a bank for builders. We want the innovators to start uh creating these ideas on top of using US dollars as the mechanism to move funds and move uh move value between people. I look at the world very simply. Everything's a trade. There's a value for asset transfer. It is always the case. If you go down to the Bedadega in New York City, you're going down there, you're putting you're buying something, you're and you're giving uh they're giving you the asset, you're giving the value, whatever that may be through whatever mechanism. And that transaction is fundamental to all the things that we're doing. What we're saying is that the value for asset transactions should be synchronized and should be consistent in timing versus waiting in longer elongated periods. And

the more we do that, the better our economy works and more importantly, the better your cash flow projections as a business works. and also your expectation on when asurances the asurances of when uh funds are going to show up because we can settle funds within seconds where you might have a transaction coming from overseas that could take uh you know days if not weeks go through the existing rails and so we're compressing that time of risk and uncertainty to a level of certainty by using the US dollar >> which is should be something that we want to support as a country and an economic system.

>> Yeah. you know on the train today you know on that note on this expansion of kind of new primitives and innovation is better experience I I I saw an ad for Mercury the upcoming new bank the quite large um and Arabore is obviously doing quite quite a bit I think >> that is like that is seemingly sucking up the mind share of like this new era of banking how does how do you think about what you guys are building in relation to what Mercury and Arabore are doing >> yeah so I There are two different things. So with Mercury very very much geared towards uh the digital generation from a consumer perspective. We're institutional B2B only. So we have a different con construct of who we're

actually targeting. >> What uh how I would kind of combine it. We want to be the same technology level that a Mercury is, but bring it to institutions, but with that provide them a level of assurance and confidence that their funds are not being co-mingled into other uh risky assets or risky businesses because a lot of times the consumer side of this gets to be kind of the questionable piece. You know, what is the default rates on on various lending products out there? And so what we don't want is a particular uh institution to be uh up you know up bothered by uh what's happening on in a different sector and so we're trying to give them that assurance that confidence. So very different than a different target than than what Mercury but believe very heavily in their tech

focus. >> But so but my understanding of Mercury is that it's very friendly to crypto businesses and it's a really great banking option for crypto businesses. >> Is that not like directly tied to what you guys are trying to achieve as well? I see I think what we're what we are targeting is a lot of the capital markets side of the crypto businesses. So think in terms of the OTC trades, the stable coin uh liquidity plays. I mean the market has changed dramatically. And so what we are servicing are those trading companies that are really focusing on hey I've got uh a particular is a new FX. So the new effect, so the a stable coin for dollars or a stable coin or a bitcoin for dollars or it could be some sort of other conversion if you're getting into a particular trade. But

ultimately the the difference I think is going to be we're uh focused on the capital markets component of building out that infrastructure. Folks like Mercury, we should be working together on those kind of things. Not uh I don't think there's any separation between us really because we have a different focus and a different model. I think they do a lot in the payment space uh for the individual consumer side. So think in terms of cards and uh and PSPs to other uh types of AC offerings which are not uh you the area of focus for us. We're focused on creating large transactional uh asurances between our institutional clients.

>> Yeah. Um and and you're mentioning uh compressing the time that it takes to move between some of these uh and and you know on chain uh we've called these atomic swaps. Sometimes they're not atomic when we're going across different things but ultimately that time is compressing. >> Um the there was a report from city city bank that said we're we're moving towards a world that is going more in this atomic swap direction. Um, obviously we're talking about this relative to cash and cashlike instruments. City Bank was applying this to tokenized equities and and was talking about how there's a world where the US dollar gets removed from this equation because you can go directly

from equity to equity and we don't need to uh settle uh in in the dollar. How how disruptive is that? because that that to me poses a potential risk to a lot of the use case of the dollar as a reserve currency if we don't need a reserve currency. Just generally your reaction to this if you think city's thinking about this the right way and maybe some misconceptions that you know could help clarify this. >> Well, I think it's an interesting perspective and I think it's something that will play out. I don't think it's going to be the predominant way transactions occur over time. people still need that touchstone of something that has value to them uh that they can actually use in a ubiquitous manner and that still is the dollar. Now, if I were

to say to you, okay, I want Amazon for u for anthropic shares or or or whatever um shares, we can make a trade on that. We come to a price. Well, that's that price is still always a little bit hard to kind of negotiate because we don't have that kind of uh you know, kind of anchor by which we do that. we're still going to use the dollar to anchor anchor that transaction. >> And so your your dollar is still going to play a role there uh in anchoring these transactions for sure. But whether or not they get it gets traded um I mean ultimately what's what is going to happen is you know we could we could slow down or create efficiencies by doing those transactions directly. But the idea of moving uh you know people to uh between those into liquidity pools

that kind of find that uh that type of level or that level of uh of of uniqueness in the transaction is kind of hard. >> I think being able to go back to the uh the anchor point the dollar allows us to for someone that needs to get out of Amazon right away versus trying to find someone that I need to get into uh in uh in Shell. You know those are you know those are kind of hard to find. It's a lot harder finding that liquidity. So using the fiat currency I think is a little bit uh um important to create efficiency in the marketplace. >> Yeah. Uh Jeffrey, last question that I have for you is related to a conversation we were having earlier today about passing a lot of the efficiency and the savings back to the the depositor. You know, right now banks

pay half a basis point if you're lucky on these on these savings, you know, accounts and deposits and things. Um as we're tokenizing more of these assets, they become more available, uh more liquid, more transferable. Um it seems as if they could help to increase the amount of yield that we're paying on some of these these deposits. Um you know the the example earlier was Apollo's a credit is paying 8%. There could be neo banks. >> Maybe we don't want to call them banks per se but you know places where you can deposit your funds with liquidity and get 8% on your deposits. How likely is it that we increase the saving the base savings rate for depositors in America to, you know, high singledigit percentiles?

>> Yeah, I hope we do. And, you know, back to your original piece, what the banks are paying today, you're paying, you're getting, you know, a pennance for the money you're putting in, but you're taking on a lot of risk for for that little reward. So, there is a a riskreward question that has not been applied to banks traditionally that we need to start thinking about. What we believe is that we want clients working capital to be safe and sound and secure. We want their yield capital to be put into good use where it can actually find the best return for their investment and the best outcome. And that may be in in creative uh solutions that other people provide. We want to enable that. We're not there to compete with that. We're there to actually make sure that they can get to that as fast as possible. And

so having that quick movement saves one allows the individual company to get to yield bearing activities faster and allows the the yield creating company to get access to those dollars and do something with it as fast as possible. So efficiency is of the importance there. We want to do things that start to create yield on an hourby- hour basis not just a day a day kind of framework >> monthly or whatever it is. Right? And so how do we do that? We do that being by being able to move the value component as fast as possible and assurance that it's going to be there versus the risk that can that sits out there today.

>> Yeah, it makes it makes a lot of sense what what you're saying. Um, you know, the separation of working capital and yield capital, the rise of narrow banking and tokenized deposits. Uh, Jeff, thanks so so much for for coming here today and spending some time with us. Appreciate it. So much. Thanks, Jeff. See you next time. Photo. >> Yeah, let's do it. Got the Polaroid. It's a classic one here. >> All right. >> All right. Ready? Three, two, one. >> Sign up for us. >> Thanks, man. >> All righty, guys. We got a couple more left. We will be right back with a quick break. Might have a special guest for you guys. See you guys in just a second.

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Stanford, Connecticut at the digital forum future fest. Been a great event so far here with Christopher Hetner. Chris, welcome to the show. >> Good to see you, man. How are you? Absolutely, man. Yeah, thanks. >> I appreciate it. >> A lot going on in the world of AI, in the world of cyber. I'll tell you that, man. Um, man, give us a quick rundown. What like what has the last 6 12 months been like for you? You've you've been very busy. What do you What have you been working on? What what are you most excited about? So it's definitely an arms race, right? You know, just when we thought that we had this under control, suddenly some new type of platform is introduced. Now we're seeing, you know, Mythos and all these other frontier based AI platforms that are taking down companies within minutes. like three

years ago when I was a global chief information security officer um you know the average attack time frame would be probably around three months before the adversary would assess your situation conduct the reconnaissance and then infiltrate and perform the cyber attack. Now with the introduction of these agentic AI platforms it's happening within minutes and so unfortunately we as a community are still operating based on the threats that we've seen 20 years ago. So we need to retool for speed not only at the you know operational level right whether we're dealing with frontline analyst or security operations centers folks or folks that are running firewalls due diligence but that needs

to bubble up to the board of directors and so a lot of my focus now is to ensure that the governance frameworks and the risk management capabilities at the board level CEO level all the way down to the operational level is revamped for speed and Unfortunately, we're not there. >> Yeah. Well, these things are moving incredibly fast. And so, h how do you do that? It sounds as if you're restructuring companies or organizational components from like almost from, you know, the highest levels all the way down to the to the people that are on the ground. You're working with these CEOs. You're working with these companies, these board members. Um what does it take? A lot of times these are large large companies.

Takes a lot of time to restructure these things. But you know when when you're talking through some of these strategies, what have you found is most effective? >> Well, you have to speak the language of the board, right? If you enter the boardroom talking about the bits and bites and the deep tactical dynamics of artificial intelligence, supply chain risk, AI, it completely gets lost in translation. So you've got to contextualize that language to what does it mean to our business? How is it going to maintain our operational resilience? And then what's our financial impact? In fact, that's an approach that we've taken for our board community at the National Association of Corporate Directors. We support a community of about 25,000 members now and I also sit on three boards. So, I have to eat my

own dog food, right? But, you know, you've got to be in a position to really operationalize this for speed and really bring that business context. And that's something that we're leading >> with our community across the boardroom community. Um, we're bringing in peer benchmarking analysis. So, you know, if you're on the board of an insurance company, you're on the board of a retailer, you have very distinct contours in terms of your operating model, right? Some businesses are concentrated, some businesses are distributed. So, we bring in that context based on how the threats are impacting your industry segment, where the threats are most likely going to be realized in terms of a financial loss, and then what do you do about it? The analogy is like, you know, you go to a

cardiologist, you say, "Hey, I've got 80% blockage here. we'll see in a year. No, we're going to prescribe medication. You're going to stop eating McDonald's every day. You're going to cut back on smoking. You're going to exercise. So, we prescribe how to deploy capital and resources in such a way that reduces that risk over time. >> For AI, it sounds as if the prescription is to cut labor to lay off people to maybe deploy more capital and resources towards these models rather than deploying it towards human capital. Is this a a common prescription that you're finding to help cope with some of the adjustments in in the way that these businesses are are becoming reshaped and the the industries around them? H what what have you seen in this? How what is

the reaction when you know you're in in a boardroom and have you found yourself in these situations and you're telling you know potentially the leaders of a company, hey, it's in your financial best interest to lay off 20% of your workforce? It >> this is happening in real time. And here, so here's what concerns me. The investor community, right, the street is insisting that everybody become an AI company. Whether you're a pure tech play, >> pure software play, right? >> Now we're even bleeding into the industrials, whether it be healthcare, manufacturing, you have to deploy AI. So what's happening is the investor community is insisting that you deploy AI. It sits on the board agenda. They push it down to the CEO and lands in the lap of the operators, the CIO, the chief

information security officer, and they're looking around like we don't have any AI capability. And unfortunately, before we get to this other side of greatness in terms of AI adoption, we're going to see somewhere ballpark of about 75% failure rates. We're even seeing bots that are being deployed that have gone rogue, um that are spitting out data, uh exposing data inappropriately. So, and as mentioned before, the ability to monitor that agentic capability is not in place because we're still using manual process. So, the only way to manage and manage the risk and govern this agentic capability is to create agents. So, we're almost having an agentic to agentic dynamic. You know,

we're talking about Terminator here, guys. Yeah. And and that segment of the security industry is actually booming because, you know, you have to now retool. You have to create agents that are going to monitor agents. But unfortunately, again, you know, we're we're going to see an AI minefield before we get to the other side. >> And you know, you did some work with the Obama administration, a little bit with the Trump administration. What about with governments? What does the adoption curve look like as it pertains to private companies versus public companies and and governments? H how h what's the, you know, speed of adoption?

What is their openness? Right? Because there's a lot of talk that governments have had access to these tools for a lot longer than than the public knows and that they've hidden them and they've worked privately with these intelligence companies and they use them for a lot of their different intelligence needs. What's kind of the state there on on on the government side? Well, you know, historically, uh, governments across the world have used cyber as a as a as a weapon, right? And there's historically they've actively been engaged with exploits, right? And those exploits are conducted by specific companies. Think of it as creating a weapon. I'm going to sell you the rights to that weapon, you specifically as a government. That dynamic has flipped because of the

agentic, you know, AI capability that's widespread. There's countries throughout the world that are enhancing computing power to process a lot of this data quickly. Um, now we're talking about postquantum readiness, right? The ability to decrypt >> and the not only the data that's secured, but also the flow. So, think about it. You're as a financial institution, you're clearing and settling, you know, hundred million dollars a day. I'll make it up between two parties. That's all encrypted. That's layered in terms of control activity. here comes postquantum, right?

And the ability to decrypt and potentially disrupt that. So, the governments have always been forwardleaning. Um, the administration recently issued an executive order on AI security this week. And what we're trying to do is strike the balance between innovation, right? Don't stifle innovation, allow AI to thrive, but also balance it with risk management practices. And and so the executive order outlines that fairly clearly. um across critical infrastructure across various governments including department of war um department of homeland security but putting government aside the reality particularly within the US is roughly 85% of critical

infrastructure is owned and operated by the private sector and so we've got to create an incentive poll to pull these folks in that are running you know multi-billion dollar companies say you've got to invest into your defenses you need to understand where your AI inventory sits, what's your supply chain dependency, and really hit this hard in terms of business, operational, financial impact in order to drive that risk reduction and then have this collaboration with government. >> Chris, man, I know you're on a tight schedule here. Um, last thing for us, what is your uh what is your favorite thing to do with AI?

>> I essentially serve as an assistant, right? you know a lot of it's research um collating data um but you know it's uh you've got to balance that you know you've got to have that quality check what we call human in the loop >> right >> um but you know the days when I was in the corporate America building powerpoints for like three hours and sorting through >> you know research data or threat data those days are over like you know I'm working with companies that um a traditional threat an analyst would take a report, let's call it 20 pages, take them like four or five hours to determine, okay, so here are the threats that we should focus on. There's agents now that are doing this task within

minutes. And so right now is really the need for speed. >> Yeah, Chris, thanks, man. >> Buddy, good to see you, man. >> I appreciate it, guys. Take care. >> Awesome. Quick uh quick quick Polaroid before you go, Chris. Chris, come back down here for a quick sec buddy. >> Go Knicks. >> Go, baby. Go, baby. 10, baby. Go Knicks. >> Big game Friday.

>> Is this going to be posted or streamed online? >> Yeah, it's it was just live. It'll be streamed. It'll be posted. It'll be clipped. Got you, guys. We'll be right back with our next guest. Heat. Hey, Heat. money power.

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get deep. >> All righty, guys. Welcome back to Connecticut. We are at the Yukon Stanford campus today with David Hendrickson, one of the AI implementation experts into your favorite stocks that you hold in any big public company. This guy is your guy. David, welcome to the show, man. >> Welcome. Good to see you, Andy. Good to see you, Robbie. Might be an overstatement, but happy to try and field any questions. I don't want to get over my skis or or oversell.

>> You said it, I didn't, >> man. I mean so many places to start. I think you know I think when it comes to implementing AI into boards into businesses there's a lot of education that is required. There's a lot of education there's a gap of education and there's there's questions about literacy accountability about how these systems will be implemented. Maybe just give us like a 30,000 foot view here of the actual state of progress in your own work what you are doing with these companies. just kind of like give us an overview as to the actual adoption of AI tools in these large companies boards.

>> Sure. It's a a deep question, but I I'll do my best. And in terms of people being on a a board of directors, um the sort of three pillars are duty of care, actively participating in board meetings, uh reviewing financial records, and making informed uh diligent decisions. Then the second pillar is you've got duty of loyalty and that's always putting the interests of the organization ahead of personal gain or competing business ventures. And the last thing is duty of obedience and that's ensuring the company operates in a compliance uh manner with all relevant laws state, local, federal, could be

international as well as industry regulations and its own internal bylaws because all boards have bylaws by which they have to operate. But if if I may to uh to take you back a little bit. Uh you're a lot younger than I am, but uh and I wasn't born in the 18 1800s, but uh the second industrial uh revolution took place from roughly 1870 to 1890. Why do I bring that up? There are a number of economists that opine that that economic revolution was bigger and more dramatic than what we're going through now. So if you'll permit me, I just want to share some facts. So uh the two decades spanning 1870 to 1890

unleashed an unprecedented spike in epic inventing. So AI's been invented. We'll come back to that. We had the internet before that. We had the PC. We have the mobile phone blah blah blah. But in those uh 20 years of 1870 to 1890 uh you had uh electricity was born, the telephone was born, the international the internal combustion engine was born, modern plumbing and widespread steel production which was known as a Bessemer model and that actually collapsed the time to create steel. So what ended up happening is the uh GDP gross domestic product it increased three-fold in that period of time and it also because now

Americans had what we just mentioned those technological innovations the invention of the weekend came about the invention of the five-day work you know the eight hour fiveday work week came about >> sir Alex >> and modern retirement stem from that and you had all sorts of efficiency gains so okay that's good that is then this is now what's AI all about AI is obviously an incredibly uh powerful generalpurpose technology but its impact is in a narrower scope compared to the massive physical and infrastructure overhauls of that 1870 to 1890 period and while the 19th century innovations physically

connected the globe and expanded lifespans and revolutionized agriculture and manufacturing AI this is the key AI primarily automates cognitive and digital tasks. So AI is maturing much faster than physical technology revolutions ever did. If you look at the first industrial revolution, the second one I just commented about. But it operates AI operates as a tool augmenting white collar and digital labor rather than fundamentally changing basic human needs like illumination, sanitation, and transportation. So a big difference there.

>> Yeah, it is. And I mean we had a conversation about the robotic side of things and how you know the LLM capability in the digital form has certain implications but clearly as you've laid out putting that in the physical form has another set of implications from progress from innovation. So if these facts are true which clearly they are why why are we calling this the biggest invention since the inception of the human race itself? What is what are we missing here, David? >> Well, uh they're probably calling that because you don't know what you don't know. Um and when you don't know things, fear is a good motivator. Um I hosted a panel today on AI governance and one of my panelists was Byron Laughlin who

heads up global advisory services at NASDAQ and he and Mark Thompson just penned a new book called CEO Ready, uh what you need to know to get the job and to keep the job. But Byron and I are are uh birds of a feather in that we like the phrase presently there is artificial intelligence and there's artificial ignorance. You get to choose. Um and if you look at most board members if you look at their natural age and if you look at their career to date experience they didn't grow up with AI. No >> AI is a new invention. And I will take you back to the IBM PC because I was on the team that did the commercial launch

and announcement of the IBM PCow >> and I was your age or maybe a little bit younger. I was a young guy at the time and uh I remember a CEO saying, "Young man, are you telling me that that box, they called it a box, that box can go into a mainframe computer? You can download you, you'll never believe this, but this is true. you're able to download information, financial information, product information, and you put it on that floppy disc because when PCs first came out, it was a floppy disc. And I said, "Yes, sir, that's correct." And that was a correct answer.

Uh, they immediately left the ballroom. This would be a Ritz Carlton or a Four Seasons, and that's back in the days where we had pay telephones. This is premobile phones. And they were calling in to say, "Don't buy IBM." And so I overheard that. I had to pull him aside and I said, "Kescasay, why why are you saying this?" And they said, "Well, if you can download this onto a floppy disc, you can walk across the street to my competitor and you're going to give them all our financial information, all our product information." Why do I tell you that long-winded story? For PCs, the biggest concern, security, integrity, and control of information. Security, integrity, control of information. Fast forward to the internet. When the internet happened, guess what was

happening? Security, integrity, and control of information and nobody knew what the internet could do or not do and no one knew that pornography would become the financial backbone of the internet. And now we have this thing called artificial intelligence. What are people concerned about? Security, integrity, and control of information. So, we're probably in the first or second inning of AI. And because we don't know what it is or what it will evolve to, it's a wub. Everybody's getting nervous. And it's like anything else in life. You have to look for the benefits of it. And you also have to look for where do we need to put guard rails? When does the government get involved? Should the

government get involved? Where do we as individuals and as corporations and as governments come together and determine what are the best guard rails to have in place? >> These are big questions. I mean the these are questions that every facet of business and policy these days. This is you know a big question when it comes to government and and the laws and regulations that we're putting in place as to how we regulate AI. Every company is an AI company now. Uh every company has an AI strategy and they're faced with these same questions. And so as we're thinking through these we're we're faced with a a couple of different paths. um you know at in in America we're talking about regulating this

potentially at a state level or federal level otherwise we get fragmented there's also the open- source conversation um China's got their policy as it relates to AI and so given that you oversee a large swath of companies and and not directly oversee but you provide advice you're an adviser to uh boardrooms of several of these companies is there a one-sizefits-all solution here as to what you're prescribing to these companies or do you really have to look inside at the nuts and bolts do some analysis and say okay in your situation this makes sense you should treat AI like this that is obviously the much harder path but obviously in in

life sometimes the right path is the hard path what what is your approach >> well again it's a a great question when I look at the two of you you're both wearing nice sport coats and when you said one size fits all. Could you wear his and could he wear yours? >> This is actually not his. He forgot his and so our lovely had to lend his sport coat >> and it did fit. >> But it looks like a great fit, custom fit. >> Excellent. Very saratoral in your taste. It's an excellent sport coat. But the reason I use that analogy is uh one size does not fit all. So if you took your sport coat off, if he took his borrowed sport coat off and put it on someone else, it's probably not going to fit like a globe. So it it there's an old

English phrase horses for courses. It gets down to each company has to look at its strategy and if it's a product company or if it's both a product and a service company and uh what how do we uh employ and deploy um AI and it's a great question on the uh board that we had panel we had today told you we had Byron who heads up board service for NASDAQ and he consults to hundreds of boards and his book is a great book. I've got a copy for both of you. If you haven't had one yet, we'll get you a copy today. It's already pre-signed. I was just with him. He had to go to the airport. Um, but we also had Joan Amble. And Joan's on the board of Zurich Financial. She's on the board

of Booze Allen Hamilton. She's on the board of Spire. And she was previously on the board of directors at SiriusXM Satellite and also Brown Foreman, Consumer Products Goods Company. And then she's also on the advisory council for the PCAOB out of Washington DC and that's probably the largest regulatory entity. And then we also had Robin Elkawitz and Robin was general counsel and corporate secretary to Citizens Financial. Citizens Financial was uh private when she joined. When it went through its initial public offering, it was the biggest IPO uh in financial services history. And so the reason I had the three of them there, Joan sits

on boards, but she's also been chair of audit committees, on compensation committees, a nominating and governance committee. The most important committee in any board is the audit committee. And uh Robin is the one from a legal beagle standpoint, if I can use that term, and I say it in the most affectionate and uh and compelling way. she has to make sure to the earlier point that uh the board and the company's acting in an ethical manner. And then you've got Byron who sits down with boards and he actually assesses if you're a board member, Robbie, if you're a board member, uh he assesses you on an annual basis. And so you need that triumvirant really to make

sure that you're putting the best strategy forward. And out of that comes your AI strategy. And there are many people that try and push things into audit because it's the most important committee, but it's typically the most overt taxed committee. And now there's uh to get back to your question, there's a lot of debate. Should there be a new committee that embraces AI or do you stuff it in one of the top three committees that you have, which is again um audit, compensation, and nominating governance. and nominating governance as you would think. We nominate new members to come on the board and we have to concern ourselves with all the governance issues. What do we have to do for 10 Q's, 10Ks? Are we being compliant

with the reporting? What are we doing for shareholders? Blah blah blah blah blah. Um and uh audit, you know, is the definition of audit. It's it's the numbers. It's the beeswax of the business. >> Wow. And and so is that like accountability predictability auditability, like is that safety component? Is that the biggest push back that you get? Like like what is the biggest push back when you talk to these people about implementing these tools in their work? What what is that? What is the push back? Is it a fear of disrupting of their job, of their organizational structure? Is it is it this integrity um uh misplacing of information? Like like what is this push back that you're receiving?

>> Sure. It's not necessarily push back. It's an active conversation because the sort of vogue term right now is AI fluency. >> And um a board a board's key responsibility is governance. That's a noun. It's governance. It's not operating the business. And when you're on the board, uh there's a phrase that we use, nose is in, fingers out. You guys are the operators. You're in the seauite. You're doing the business dayto day. You're doing this podcast. You've got your technical team. You may have your sales team. You may have several other teams. You're going to know your business better than I do day in and day out. A board member is more concerned

with the future strategy, how we're going to grow the business, etc. So, there's probably not a whole lot I can tell you on the day-to-day of your operations. But to get you from point A to point B, what's the strategy? What's the milestones? And so with AI, what we talk about is AI fluency, but now boards are shifting. Governance is a noun, but if you put another noun in front of governance, it's technology. So boards now have to shift from just being governance to technology governance.

Because if we went out on summer street here in Stanford and opened up a fire hydrant, you've heard the proverbial phrase of it's like drinking out of a fire hydrant. We'd be blown away. That's what AI is right now. So, how do you harness AI? So, it's sympotico with the strategy of the company and where you're trying to take it and uh gets back to, you know, one suit size, one sport coat. It's not not one sizefits-all and it's got to be individually tailored. And those things take time. and Chris who was just recently here you need to bring in external people as well as your internal people because it's a new technology and there was a book by Michael Lewis a number of years ago the

new new thing with previous firm that I was with we placed a guy by the name of Eric Schmidt that went into a little unknown company called Google and we think you know everybody knows what Google is today and he did just fine thank you very much as did Google but those were the burgeoning days the startup days of the of of the whole search engine business. We're kind of in the in the same place today. >> Yeah. You know, I I I was previously unaware of the whole board complex as a lot of the work that we do is speaking with a lot of the um to a lot of startups to a lot of private companies.

uh and they are um and especially in the decentralized kind of like crypto network world a lot of them have taken a more collective approach to governance rather than kind of electing you know the the board if you will. Um, but it sounds as if there's a this this governance board is responsible for overseeing the business as as you're saying, governance with respect to that. And it sounds like a lot of what you're doing is making sure that you you build the business in a sustainable way. And I I I'm just kind of in awe of the way in which you're able to help guide a business despite maybe a lack of fluency in a particular area for those who are

on the board. Maybe they aren't the most technical and deep into AI or some of these more technical concepts, but the path that these businesses tend to take does show enough similarities where these governance structures are able to coalesce and manifest themselves such that they do, you know, progress through the stages of these businesses despite very very complex inner workings. and and so I'm just, you know, kind of just just it's a very rich experience, I'm sure, as you see more and more companies progress through these levels of scale.

>> Yeah, I I couldn't agree with you more. >> David, kind of last thing from me here. What is your ambition for what you're doing with implementation of AI into boards? What would you, you know, couple years, five years down the line, you know, what what do you want to look back and and and be like, this is what we accomplished with our clients? >> Sure. No, great question. Um, I think it's to educate, to elevate, and empower. And what do I mean by that? There's a company sitting across the hallway from us called Next Generation Governance Group. And what that entity concerns itself with be good for you to talk to them. Uh what that entity concerns itself with is AI governance and um they've created modules. You can

go out to Northwestern, you can go to MIT, you can go to Harvard, you can go to a lot of places for six months and spend $28,000. All great institutions, but board members don't have that time. And uh there's a shortage of time for everyone. And so what they've done is to get increase the AI fluency is put together video modules uh that are 15 to 18 minutes long because we've found from all sorts of science and research that's about the average attention span. But what's great about something like that is you can access it 247 365. You don't have to fly somewhere to a campus and and take a class etc. So, uh, it's entities like that that are helping others get educated. And that's not to

be dismissive of all the great schools I just mentioned where you could go spend six months and get a certificate or for that matter get a a master's degree, but it's uh getting people educated, getting people comfortable and and and and thank you both. It's things like this of socializing it and talking about it because, you know, as Dr. Uh Martin Luther King said, "We don't know uh what the future holds, but we do know who holds the future." And it's all of you gentlemen in this room and others outside of this room. So if we're not helping one another get educated on things and live in a harmonious way, we're not being good folks.

>> Yeah, that that is the essence of this show. >> Absolutely. >> Give him a couple of applausees. >> We appreciate you coming on. Thanks so much. Yeah, >> we have a photo with you here as well on the Polaroid >> bringing AI to the big businesses worldwide. >> Yeah, I don't know if you want to date Tilly, but that's the first AI generated model. >> Create Hollywood's next big star. >> That's Tilly. >> Beautiful. Go ahead and hold that up for the picture. >> Come on in there, man. >> Tilly, man.

>> But that that that was came out last Sunday. So this is now now you've got everybody out in La La Land all all mad because Tilly Norwood is everyone's trying to get her, you know, scripts and everything else, but she doesn't exist. It's a >> lot more. We'll be right back with our next guest. That is David. This guy came prepared. Thank you, David. >> Thank you, Joe. Appreciate you. >> Absolutely. >> Thank you. >> No, thank you. Oh my.

Oh my Hey. Oh my.

Oh my. Get out of here. down.

Yeah. All righty, guys. We are back here in Stanford, Connecticut at the Yukon campus. Thank you, Rugrarat. Awesome segment that the the audience wants the book. They don't even know about your book. They're going to find out. We've got Bob Dwey here. Bob, great to have you man. >> Thank you very much. >> Cheers, man. >> Absolutely. Thanks for coming on treating you. >> It's great. Great as always. fun time. >> The panels were particularly good today.

This about, you know, timeliness too about >> what's going on everywhere. >> What what have uh what has been your takeaways because we've been here in this room talking with some very, you know, smart intellectual people as well. Have some takeaways ourselves, but I'm curious from the panels outside. >> Um, apparently Bitcoin price is down. I learned that today. Yeah. >> Wow. I went to look at my feed this morning um and >> um AI must know a lot about me, but I noticed that um when I looked at all the prices, the Bitcoin prices blanked out. >> Oh boy.

>> Yikes. >> Oh no, that can't be good. >> Yikes. >> Uh so Bob, you are the founder and host of Exploring Prosperity podcast newsletter. Uh you examine how real human progress happens, challenges widespread collapse narratives. Um I'm curious, you know, we love this. We love this show. We talk to, you know, people uh all the time. We're constantly updating our mental model and our thesis about how how we view the world. I'm curious, you know, as exploring prosperity, it's a big topic generally as you explore prosperity, what have been what have been some of the most effective strategies, some of the some of >> Well, it all came from how pessimistic everybody is about prospects for the next generation. And it's it's record levels. It's been pretty much a straight

line down since World War II. And um and yet if you look at um all of the indicators, economic indicators for 275 years, which is when economic growth began recurring, >> it's been relatively a straight line. There have been a couple of depressions along the way that after a 10-year period, almost always you've recovered. And so World War I, World War II, the Civil War, other wars around the world, that hasn't really slowed it down. And so it's um I it was a curiosity to me why so many people thought that just suddenly we were going to stop this upward trend. Huh.

>> It is mostly economic and a lot of the pessimism stems from kind of non-economic you know standard of living type thinking >> even though most most measures of standard of living is all have also increased. So I my I just thought this is pretty interesting topic. Should we be as bummed out about the future as we are? And I don't really think so. I don't think we're likely to, >> you know, stop progressing. And so I get specialists on to talk about >> the things that make people bummed out.

I try. It's not really a political show at all. So the political polarization stuff is obvious to everybody and I don't do that. But the education system, the loss of confidence in institutions is a big source. Death and deficits a big source of pessimism. climate change is a big source of pessimism and so I go into those different topics >> and so the loss of confidence in institutions is one that I think a lot of us especially in this industry have started to orbit around because you're right there's loss of trust institutions as it pertains to governments uh as it pertains to religions uh these have been the ways in which we've you know these have been the curators of thought the leaders of the world over the last hundreds of years now we are sort of

kind of bringing things back to the individual uh and we're putting more and more trust into individuals in the sense of social media became more connected and you know this has led us to where we are today and so you know I'm curious why you think we've progressed in this direction despite all the positive economic growth as of you know the last recent recent history. Why do we continue to progress in this more pessimistic direction despite having the institutions that have always been here? They've felt good. It's almost like we know too much for our own good.

I think volatility, you know, disruption, um the just change in general is a is a very powerful motivator for humanity and and change has been progressively accelerating. >> Yeah. >> And um and cyclally too. If you look at the forth turning that idea or any kind of cyclicality, you're going to go through these cycles. And this is the time at least in the forth turning type theories that were ending entering that erosion of institutional confidence >> and and in the past it's typically wound up in war and changes in society and the emergence of new institutions that gain trust and confidence. But I think that the return to the individual is is

technology related. Yeah. You know, if you go back um 50 years, and you don't even have to go go back that far, but individuals couldn't really put together something and make a living and there has been a progression of advanced tools in the hands of individuals like yours and mine or we can start a a media company essentially, >> right? >> And what do you you don't need a fleet. You don't need a corporation. Um and AI, I think, is just a massive accelerant. Mhm. >> Um, you know, I think corporations are now in going to be competing. It's they're going to lose the competition of holding people in their companies and that was generally viewed and we still talk about jobs today as the most

important economic indicator. jobs are are a dependency on corporations for your stand your living that I think that those ties are loosening and that's a great release of human capability and labor >> you know one of the views on AI is that it's this disruptive technology in a negative way in the sense of it's disruptive to the human labor force and US jobless claims as of yesterday came in at new highs for the year there's another camp that says the AI is the great enabler of prosperity, of the arts, of the return to philosophy. How do you kind of juxtapose these two views into a reconciled accurate worldview for what the what what the future could look

like? >> Um, what I've read somewhere a while back that the greatest unlock of of human labor in one technological development was the washing machine. Wow. >> Where, you know, a third of the population that were homemakers washing clothes >> Yeah. was suddenly given four or five, six hours a day of time unreal >> to do something. >> And that's and a great example of when technology comes along and makes it it's solving problems that waste your time.

>> Yeah. >> And I think that that is the narrative that is missing today. These things are, you know, when you apply AI to be able to do things that you had to hire people to do. >> Yeah. Or a better way of saying it is um I uh I was one of my first job out of college. I was the first guy at Morgan Stanley to use Vizyal. There was one PC that was purchased. I happened to stumble across it. It wasn't purchased for anybody. It was sitting there. My job was I was hired to fill out numbers on a spreadsheet and I became the spreadsheet guy. So I got put on all the big projects and that was very exciting.

Um, within six months PCs were everywhere and there were headlines everywhere about how that's going to wipe out the need for investment banks to have analysts. >> The spreadsheet has gone. >> Totally wrong. >> Every analyst became so much more powerful. And in many ways, I believe that the LBO craze of the 1980s was driven by the ability to do all this modeling that you could never do before. And so you could be very precise about when you would default on the bank who lent you money to buy the company. But I think that's that's a not a bad analogy to what AI is doing in the language processing and communications.

>> It's the great washing machine. >> Exactly. >> It's the great online mixing washing machine. >> But individuals are going to be able to compete with companies. You know, individuals will be able to find gross profit dollars that are coming from corporations. you know, we're we're seeing this today. There's a company out there. Um, it's a little company. It's got like 11 employees, but it's driving billions of dollars of revenue. It's called Hyperlquid. And people describe it as Wall Street's convenience store because it's open 24/7. You can pretty much trade anything on it, >> washer and a dryer on it.

>> And and so there's 11 11 employees in this company, but it's competing. the Jeff Spectre uh uh co-founder of Inter Intercontinental Exchange, owner of the New York Stock Exchange, called this company Hyperlquid bigger than NASDAQ because it is operating at that scale yet it has 11 employees. And so living in this era where all of us are empowered to a much higher degree, it creates this dynamic where people that are not using this are falling behind and then the people that are moving ahead.

>> Yeah. >> And and so what why are people reluctant to use this? Is it a matter of misunderstanding, a matter of confusion? how generally through through your you know work you're discovering all of these mechanisms to drive prosperity yet people are yeah >> seemingly more and more unhappy h there's there's more out there that's left to be desired >> just as context it's like we we have friends that are like of the mind that AI is coming AGI is coming UBI's coming I don't really need to do anything because in 10 years why am I I'm not going to be working anyway so I'm just I'm just going to call it quits now Yeah, I mean I would put in the category of the people who are not using it, the

same category of the people that are using it as a crutch. Um, this is a really easy way to get by. >> Yeah. >> And against your competitors who are who are working to apply it and accelerate their impact, >> the gap is going to widen. >> Right? It's, you know, I also don't think that either of these groups is a static group because if you ignore it for a while, it doesn't mean you can't suddenly get motivated and, you know, come up with an idea and all of a sudden you're using it and you emerge into the other category.

>> But I think um I that's going to be probably one of the more noteworthy. >> We're gonna we talk about the K curve in the economy. >> There's probably going to be a K curve of the motivated against the unmotivated. >> Yeah. Um hopefully that will be temporary for anybody that's in the lower category. But the the fact is if you put if you apply your mind to AI, you really multiply your impact. >> Yeah. >> You know, one of the things that that uh is a knock-on effect of the empowerment of the individual and the dis the the the erosion in our institutions is the lack of lack of collective gathering.

Like in institutions, if you know, you go to school, everyone goes to school. You go to church, everyone goes to church. And it it is this mindmeld of everyone in a same common place. Granted, there's 11 people out there working on AI and they're able to build a big company. If I'm trying to do that solo and I'm so locked in, I can use AI to the best of its abilities. I'm going to lo I'm going to spend so much time doing this. I'm going to progress, you know, my my efforts because I'm highly motivated to use these tools, but I'm going to lose out on so much social cohesion and interactions.

What where do you f and I've been finding myself kind of using the term balance less and harmony more. Where is the harmony between this three-headed this three-headed trifecta? The individual, the AI tools, and the collective human interaction. >> I think that's really personal and I think that it's timeless. I think that you don't need AI to get lost in creating something because there are so many examples of people that get lost in creating something and sometimes it turns out great, sometimes it doesn't.

But it's it's a realization for each person eventually or not that I'm I'm I'm out of balance. I need to I need to make sure that I'm investing my time in whatever else it is besides this project that's consuming me. But I think also each person goes through this. I I I don't I don't know how many friends I have who haven't gone through a period of time where it was a requirement that they spend that kind of dedicated time to doing whatever it is, but it becomes more of a project than a lifestyle for most people. Um, and others just have to >> deal with the consequences, I guess.

>> Bob Dewey, man, exploring prosperity. I'm I mean, what a what a title of a show and of a newsletter. I mean very very compelling and >> especially for the younger generation who who kind of need this optimism. Thank you spending some time with us. I know it's been a great conference for you. It's been busy here for us. Um yeah I mean >> it's great. >> It's been deep and philosophical. Rob's favorite. >> I do. I enjoy the philosophical conversations. >> If uh it's great meeting you guys. >> Yeah. Likewise. Thanks for taking the time.

>> Thanks for coming on man. >> Cheers to you Bob. >> Appreciate it. Yeah. Thanks so much >> guys. Three out, four hours later. Boys have not done a marathon like this since uh been a while since >> it's been a while. >> But you know where we'll be tomorrow live from the tokenization tower, the financial capital of the world, the nest, 12:30 p.m. Eastern. We have an amazing set of guests for you guys tomorrow. It's been real at the Stamford, Connecticut Future Fest. Rob, sign us off, man. >> That's it. Well said. Uh, it's been a journey and uh, if AI lives up to everything that it's supposed to be, then we're going to be having a lot more of these conversations. So, I'm excited.

>> We'll see you guys in the chat tomorrow. Lots to talk about. Stay bullish.