Market Vibez, Solana’s Mango Exploit & ZK Scaling Season | Roundup

Transcript

you know you're in a bear Market when any news is negative news in January of 2019 I was with Kane in the binance conference and like synthetics was putting out like really cool developments of Transit like very like updates and every time King said you know we're in like the worst part of the cycle when any news that we put out we just see the token collapse another nine five ten percent or more because people are reminded that they own this stuff that's that's horrible I think we're in that we're in that we're working our way through that [Music] all right everyone hope you're having a good start to October a good week we're back with another Roundup I feel like it's been a long time since it was just you and me on a round of Santi getting

together chatting about the week I've missed you my friend I have missed you too and you know I feel like I've been abandoned here uh because you now in a different capacity as a married man and so I've been abandoned but we're back at it so you know hopefully uh this relationship doesn't change as much no it can't change it can't I can't okay uh how you been what's going on good you know just uh there's a lot going on in crypto as always um I perhaps starting off like I was in Singapore for the token 2049 conference I've been to a few of these over the years in London I think they attract a fairly interesting institutional crowd similar to you know the blockworks conference permissionless

um I was shocked by the number of participants in Singapore I mean this was full bull market Vibes I mean it was packed Marina Bay Sands huge Convention Center packed packed absolutely packed uh it was really nice to catch up with teams a lot of excitement in the air a lot of enthusiasm and I was just comparing it to the first binance conference in Singapore in 2019 also in that venue and it was it was January of 2019 so kind of think of it the bottom of the like of the last bear Market it was crickets um and and so it was just a very good it was a very strong contrast which uh makes me wonder hey have we

bottomed and B uh I mean obviously the ecosystem has grown as a lot over the last three years well let me let me turn that into a question do so I think a lot of folk okay so when I hear that there are two ways to approach to think about that one is bullish one is bearish right uh the marina Sands in Singapore flooded with thousands of people a lot of Institutions really exciting the bearish take is damn we have not bottomed yet the bottom is when people lose interest the bottom is when the conferences are like not sold out the bottom is when like people just walk away and kind of call it quits the Bold take would be maybe we don't have that kind of bottom this time around right maybe we don't ever get that like remember in 2019 that

like endless pit in your stomach being like did I choose the wrong profession here like are we in the right like is this thing gonna work you know like a lot of people wait you you're telling me that you don't feel that and question yourself every time you wake up or like are staring at your phone at three in the morning I must be a rare breed sir I I don't I don't anymore I don't ever have that feeling um but I think that's because this is I think a lot of people have that feeling their in their first cycle yeah well to be fair I think that you are in a very interesting privileged position because news no matter in research no matter what is kind of like counter cyclical I mean it's just all weather kind of business right you can talk maybe tell

us like you know like do you get more interest I mean it sounds like the interest for blog like just research hasn't stopped even in current market environment yeah I mean I will literally pull up our growth numbers right now and I will give a little behind the scenes No I'm no no I mean some of our numbers are down right like some of our sales numbers like the advertising dollars are down um just because people like basically what drives at dollars in crypto is when it's a bull market more and more people come into the industry right there's more tax from friends oh holy [ __ ] check out bitcoin's price uh more people are coming into the industry marketers know that so what they do is they ramp up their ad budgets by like 10x trying to capture all those new people so add

budgets inherently pull down like 40 in the bear Market our ad dollars are down a bit but actually our number numbers are all still up right so if you look at Social growth Pages like to our editorial site podcast downloads like this podcast is booming right now um and we have like record number of downloads that's thanks to everyone yeah thanks everyone but actually when I did projections for the second half of the year I had this show I had all of our shows being basically flat because if you look at the numbers from other media companies in the bear Market in 2018 2019 their number fell between 40 to 60 page views podcast downloads conference attendees all their numbers fell so that was actually in our budget so it's pretty interesting that

our growth numbers are still going up do you have a sense of the composition of that is it mostly now institutional that are driving the growth versus retail is there a way to discern because it'd be really interesting to understand that yeah there there is I mean we have a decent bit of data on some of our different channels um I actually you know one one idea I was thinking is we could do a we should do a podcast survey on this podcast where if you like it's in the show notes and if you listen would love to hear like who you are Title Company like what you're interested in what you like about the show what you've done then maybe we could host a Meetup or something like that and like New York or London um yeah fill it out but so here so here's like

how we bucket it uh retail is leaping like retail our retail audience is kind of our retail non-crypto audience I would call it so the folks who are like crypto adjacent and they were retail and they were kind of just their friend maybe Works in crypto or maybe they have some Bitcoin underneath they are they have left essentially they're they're almost out the institutional and in 2018 and 2019 the institutional folks when the retail left institutional left too now the institutional folks are still very much in right so when I look at who's reading our newsletter every day shout out Byron really good pieces this week um yeah the who's reading our research it's I would call it prosumer and up I would call it like yeah prosumer and up though

I think for us like we're really focused on uh like the first half of building block works the first couple years was very much like bring the institutional crowd the capital markets crowd into crypto now we're really focused on uh I just I want to make content and build content that that is for a crypto native audience like I'm just we're taking a bet on crypto as as a as a market and as an asset class and as an industry growing um and less about like pulling people into the industry I'm like they'll come when they want to come I want to I want to build content for the folks who who have already made the leap into crypto so yeah that's very interesting yeah so I mean how are you feeling about things

we're we're like three weeks away from from the year mark of the top right like November of 2021 was the top yeah we're like three weeks away from that almost a year into the bear Market um how are you feeling about things um I think you mentioned something like have we seen Max Payne if people recall in the summer I I felt like I hadn't seen it I definitely didn't see it in Singapore um I mean the things that I look I'm not a macro guy nor do I want to spend all my time thinking or talking about macro um I think that but of course it's front and center and so I think the correlations of crypto to the NASDAQ and broader markets are all-time high I mean it's super tightly

correlated it's one narrative right now um I would have hoped that by now we would have had some resolution and Clarity obviously this pivot was front and center people were talking about a pivot um looking at what the Central Bank in Australia was doing is it like early indications and then they of course the FED didn't deliver on that um there the things that I'm mostly looking at and trying to just understand is uh obviously the war in Ukraine uh and how that would unfold hopefully no nuclear uh fallout or escalation um the inflation stuff I think is uh probably gonna I mean it's winter in the Northern Hemisphere and Europe is going to be hit pretty hard I'd live here and I'm seeing it uh firsthand I think it's

nothing nothing of that is transitory and so Harris turned off the lights on the Eiffel Tower like you're starting to see it yeah yeah absolutely and so I think that uh my my best guess is that look I haven't stopped my deployment on private stuff on on super early stage stuff continue to see really good teams uh macro wise I think is is still we're definitely not out of the work I think there's still going to be some pain and choppiness um is Bitcoin and crypto gonna kind of lead the recovery as it kind of marked the top before broader markets TBD but um my my putting my Trader hat on I think

we're gonna chop for the rest of the year and uh Market participants are just going to observe how this macro situation unfolds inflation geopolitical tension and then you know more importantly in specific to crypto I think uh the thing that I'm most excited about is getting Clarity on the regulatory front I think there are a number of moving bills in Europe and in the US there's a great interview today in Bloomberg with the cfdc commissioner talking about like you know updating Securities definitions and just working it to to adapt to this you know industry and so look we've been waiting for regulation and just Clarity for years and it seems like we're closer to that

which I think look no matter what that is isn't that positive because a lot of crypto markets specifically stuff like defy I think we're in a standstill um a lot of people have just been kind of on the fence and on the sidelines um you know talk about Eric who came on the podcast talking about look we don't touch D5 we don't want to touch it we're sticking to bitcoin maybe some ethereum Eve uh because of the regulatory risk and so I think um you know there there's a lot that we can talk about in this episode about recent developments on the regulatory front but I'm hopeful that we get some clarity in the next six 12 months and that will really open up and set the stage for if and when they're not it but when the recovery happens it

will be much more um I think much more clear uh and and because once we have regulatory Clarity you have a whole host of people that haven't touched this space for that reason alone and I think that's a very sizable number and both in number of funds number of people but also Capital that has been idle yeah there's one thing I want to dig into there which is um you're still investing in the private markets it was Arthur Adam yeah at Defiance had this tweet yesterday said there's a certain coin nuking 90 in a month even without any investors unlock that round was highly contexted uh highly contested extremely competitive and led by well-regarded investors this Venture

Market is broken AF the token is that VC is on the losing end here um the main point that I want to highlight is there's a massive disconnect between how crypto VCS and the public markets value a project right now the billion dollar question is how will this valuation discrepancy get resolved I don't see valuation in the primary Market coming down hard enough yet so I'd turn that into a question and just say you know Arthur's saying the billion dollar question is how does this valuation discrepancy between private markets and crypto versus the public markets get get resolved what what do you think about that yeah I mean I appreciate his his thoughts there um what was the token was it metaplex I actually don't know which one uh

probably yeah actually yeah uh it got pretty hard yeah look I mean in Bear you know you're in a bear Market when any news is negative news uh I remember like in February in January of 2019 I was with Kane in the finance conference and like synthetics was putting out like really cool developments of Transit like very like updates and every time King said you know we're in like the worst part of the cycle when any news that we put out we just see the token collapse another nine five ten percent or more because people are reminded that they own this stuff that's that's horrible I think we're in that we're in that we're working our way through that uh right um there's a lot of capital in the

private markets a lot of dry powder there still are a lot of the rounds that I've done are probably half of the valuation that that uh it you know that they would have gotten in the last you know nine months ago for instance um that is on the super early stage I still think there's some fluff on the growth rounds where you have uh pretty large Capital because think of it this way if you're like a greater than 250 million dollar fund 500 million to a billion and there's a number of these it is very hard to construct a portfolio on the early stage stuff where you're deploying like a million bucks you're

not going to do that it's not very viable from a portfolio construction standpoint so what do you do you're forced to do growth deals and so you want to allocate at least 20 30 50 million bucks and there's those are I think the rounds that tend to I don't so definitely I don't understand the valuation for a lot of these rounds like yeah you know you invest in something of 20 million it's largely a team bet it's human capital right it's uh for years you've priced these y combinator early stage rounds between 8 million and 25 million maybe a bit more of the team's very experienced some you know whatever um but for the most part like how do you go from we we were going from 20 million

round to like 100 million in a matter of months sometimes weeks and you're left wondering there it's like well there's really no reason to justify a bump in evaluation other than there's a fund out there that wants to deploy capital and and there are a number of deals like that that I was part of like I had invested earlier and it's just a really bad dynamic because it for instance this token if your token collapses you know you hire people they're like you you give them a grant they're left thinking that the company's worth all of a sudden 100 million you list the token and then it collapses that like is terrible for morale and

I think there's just an where crypto has historically been very difficult asset class from an investing standpoint and also probably for founders is this circulating versus total Supply and having like price discovery on super early stage stuff which like 99 of tokens out there aren't full price Discovery um there's a reason why you know a lot of traditional Venture hasn't like you don't have a price for a lot of these things because it's really hard to value in the panel that I was in Singapore the question was like you know have we bought them it's always the question right how do we value this asset class my question is I don't know we bought them because it's hard to Value this these these okay you value things on a

cash flow basis right okay fine I understand that but like you know valuing like the internet like internet companies like in the 90s and even in 2000 like takes time to like formalize a lot of these metrics right and like even when Facebook was doing its IPO a lot of people didn't understand how to like social networks work and I think we're still in that like we're so early that that's the challenge right uh is a company worth 100 million on a fully diluted basis probably but you know you had the market is not as sophisticated just to look at circulating and saying okay the token inflation is like 50 years and the curve is very like you know is you should look at

you should look at like circulating more than total or like circulating you know a year or two or three years to understand like you know can they really grow into the valuation but like I'm getting too intellectual here because I think the market right now is in full survival mode and as soon as you get like you know some ability to recoup your your Capital you're going to take it because you're a lot of most portfolios are in pain right now and they're people not being very rational right now all right let me let me ask you this so I had a call on I think it was on Saturday with one of the with a with a huge with a huge traditional fund not a crypto fund huge traditional fund he said it is he said you know the Market's bad the equities Market is bad when my friends other you

know billionaire fund managers are calling their congressmen they're Senators their local government officials telling them to fix the market he said I haven't seen he said that just started in the last two weeks folks are calling their congressmen to do something about the market you saw van Eck uh no excuse me not vanak my bad Van Arc uh whose Flagship fund is down 60 this uh this year just wrote a letter to the FED arguing that they should stop raising rates and that the central bank has quote shocked not just the us but the world and raised the risks of a deflationary bust so and and this guy this big fund manager said that he hasn't seen this since 2000 8 2009 when folks are so kind of upset and spooked

about where the Market's going that they called their congressmen I'll turn that into a question about crypto for the markets to reset oh and the last thing that he said is he said but I think that we have one leg down because we have we have to bust we have to hit full bust I think we have one more big leg down and then we bottom in equities now no one can predict the future but tying this into crypto for the market to healthily reset does the private Market have to break right like look I think we can all agree like it feels like liquid's underinvested it feels like you know I'm seeing a lot of funds that are fundraising with liquid strategies like more than ever with liquid strategies I think those will probably do really well but does the private Market have to

break like this guy is saying like one big leg down before we reset the question is are you even going to know if it breaks or not I guess like well you would say you would see down rounds like we haven't like you remember all those well you're seeing down rounds to be fair maybe in crypto not so much I guess not in crypto I mean their their companies are raising down rounds it hasn't been super public I would say I think you're advertising that that that's my argument a lot of times you know when I advertise if there's a Down Round and a lot of times and also anecdotally funds a lot of the down rounds are done by existing investors yeah that have reserves from capital for their existing portfolio now if you're an existing

investor and you do a Down Round you probably don't want to advertise that no you'll do whatever it takes not to have not to advertise that correct and so it's sort of this like adverse selection like it's it's it's difficult to understand if you actually down or like you've the private markets have totally shut down um I think I mean look Venture funding and crypto has come down pretty dramatically yeah uh there's a great report I think that that comes out we can link uh in the show notes but activities down quite substantially uh on the private side even though you still have a lot of capital out there I think you'd like to be deployed

um I think long gone are the days where you have these fluffy 100 million dollar Equity rounds uh 200 at 150. I mean I'm seeing at least a 50 haircut on the super early stage stuff which tends to be more defensive like again there's like a lower threshold if you're a smart team you're not not going to raise sub 10 sub 8. um but uh yeah it's really the growth rounds where I think you've gotten the most amount of um most amount of um impact on the downside yeah um there's also I one metric that I've probably is interesting to track in a perfect world is a secondary activity both on traditional Venture and also in

crypto where a lot of times just Equity gets traded because people are looking for what that means is there's not a fun there's not an actual raise that happens but maybe an investor is like I'm kind of done with this deal I'm willing to swap some um or a Founder two or early employees yeah I need liquidity like look at what's happening in the UK with all these Pension funds uh with guilt prices like basically you talk about like the fed and what it's done like in the UK it's actually more acute like with this like mini budget stuff that I've been tracking like Pension funds are like selling a lot of their liquid portfolio at like Pennies on the dollar uh because they need to raise cash to meet

liabilities and so that that's where I think I pay closer attention to illiquid assets because those are the ones that just when you see something that is a quality asset gets and someone willing to sell a particular project or something at like 20 cents 30 cents 40 50 cents on the dollar that's pain yeah that that's and that's where uh I mean that's personally where I see a lot of really interesting strategies going forward like if you could probably raise like a distress fund right now to pursue this particular strategy I think you're right it makes me think about um I had this interesting dinner that you would have you would have really liked this dinner it was um it was a couple

folks in the longevity space like it was uh God who's the big longevity oh David um Davidson Claire started this new longevity company and it was the guy that he one of the guys at the dinner is uh it was David Sinclair's basically right hand man who's like running the company uh so some longevity folks and then some like people investing in the Creator economy and this one woman who's at slow Ventures uh Sam lessons thing uh I think she leads their creator investing they have these insane deals that they do which is they will invest it like 25 to on these 25 to 30-year agreements with creators uh so this is it's like an income sharing agreement on

a massive amount of steroids right where it's not like an income sharing agreement you might get the first two or three years of their revenue after they graduate college or something like that or after they go through some program this is you know you could be a 20 year old influencer you're getting a 10 or 20 of their revenue that they make in their entire until they're like 50 years old that's great and the reason I bring that up right there is that sounds good until like things kind of I was gonna uh I was I've been thinking about like income sharing agreements and whether or not it makes sense to put a token around a person right and like what happens if you invest in I think Alex Mez mesmesh did that with the guy who runs Showtime yeah but it's like what happens when that token goes down

90 like if the Ave tokens down 95 that's fine like that that's all right like Ave is going to build their way out of this but if a person's token goes down 90 95 like you're kind of screwing that reputation I don't know just maybe yeah there's like uh this goes back to a more existential question that you always need to wonder is like does this need a token do should we be tokenizing XYZ should we be tokenizing music nfts I still don't know if you're a creator like in a bull market it's great right you meant these nfts your fans are super happy they make some money I'll I'll be shall from um the defiant Alliance uh has a great has a great observation which is culture

initially well one of the prerequisites of creating culture and Community is making a lot of people very rich and I think it's right and conversely if you are having if you have a token especially right now if you're a team like you wouldn't in your right mind issue a token now uh because like yeah you know it's not a very con it's like the reason why people companies are not ipoing right um and so it is it posed an interesting question of like what is the long-term viability of music nfts of Creator like social tokens and all this stuff like it's very difficult uh when when people lose money you know they they become really nasty

um you see the worst side of people uh I've seen it time and time again in these bear markets um and and people you know it's it's I understand why that happens but um it's one thing you know when you're attaching like pers more personal stuff culture we just record a great episode with Malta you know on on culture and the ability to tokenize this stuff I'm not entirely convinced it's it's like it's a killer use case to be honest for this particular reason yeah you sometimes you don't want to put a real-time price index on some things and there's there's a reason there's Beauty in that I wonder I should have we should have by the way great episode with Melton on arbitraging culture comes out

on Monday uh we should have asked her about this because I think meltam's take is that all making all markets more efficient equals good right there are downsides but like the more efficient you can make all markets the better um yeah man we should have asked her about that but yeah Jason I don't necessarily want to know if you're fully diluted valuation or circulating you know uh valuation of your token the Yano token is you know 2 billion or 2 million or two and mine is you know it's like I understand that people want to size each other up but sometimes you know we shouldn't do that or nothing that is probably what it would be I'd probably be around 2 billion you'd probably be around 2 million that is probably a fair

yeah fully absolutely there's a there's a DOT yes there's a thousand next differential between you and me at least let's get into um all right let's get into mango markets um all right so there are a couple hacks we didn't we weren't able to talk about the binance hack but I think it's just important to talk about that really quickly for anyone who missed it and then but I want to spend the majority talking about mango uh last Thursday a week ago there was a vulnerability in bnb's chain uh BNB chains bridge I think I'm going to get some of this correct most of this correct that allowed a hacker to steal almost 570 million dollars it was roughly like 2 million BNB tokens um the hacker only managed to move a hundred million of the 570 million

before 26 of BNB chains validators halted the they halted the chain which prevented what could have been uh this huge you know over half a billion dollar hack um Samson has always had a great like highly technical thread uh he describes the Bounty related to how the binance bridge verified proofs that allowed attackers to forge these arbitrary messages the attacker here only forged two messages of a damage could have been a lot a lot worse as he describes um I don't know there's been some some discussion around this hack if it demonstrated vulnerability and like the cosmos SDK or tendermen which BNB chain leverages I think that was just fud around Cosmos I don't think that's true it appears that this is really comes

down to just I think of BNB using pretty outdated code and just like failure to accept repository updates which is interesting because if you remember the Cog modes episode that we did oh no they were talking about how polygon polygon uses 2018 but anyways um I just like all of these hacks I'm not technical enough to really understand them but all of these hacks it just makes me think it's like it's like playing whack-a-mole it feels like it feels like there's like a new type of hack every time um all of these are like well you yes and no but I like there are there are hacks across different ecosystems I do think that you can narrow that down to some so like so like a lot of the hacks for instance similar to this BNB one where

you Fork a repo and then and then there's a vulnerability in the original repo that doesn't get patched by the team that forked that repo for instance someone forked compound and deployed it in I forget which other chain maybe it was b b maybe it was Avalanche there's an issue with that code that ended up getting patched by the compound team but that other team wasn't very technically Savvy in my estimation they didn't patch it they got exploited and so I think that's one bucket where the teams is not very technically Savvy and competent is forking code and look there are always wrong most of the time vulnerabilities get exposed and it's the

where they they fault is not updating that right so that's one the second one is really allow around um like this Oracle problem the Oracle price feed and the ability to manipulate the price feed is probably the number one if you look at the number of hacks and and the the the sheer number and also amount that has been lost is largely because of this Oracle problem uh a they're not using very um very sound resilient oracles price feeds um they're using like their own or a weighted one that it can be manipulated via flash loans or whatever and in this case with mango it was that they were

manipulating the price of mango token I think um and then leveraging in 4X because they they were able to manipulate the price of a of a liquid asset the liquid Market um that so anytime you have less volume on on a particular asset you can like the price moves much right much more and so you know they were able to manipulate the price of the token then leverage that 4X so what ended up being a 25 million like you know initial uh they were able to like take it to 100 million and borrow I think and withdraw that um and so I think like those two reasons alone I think encompassed most of the hacks of course there's some more like

that's a good point complex and esoteric ones but like yeah at least in D5 time and time again it ends up being bad oh of course there's always the the social engineering phishing hacks and attacks but like as it relates to like smart contract code it's really these two that in my estimation are the ones that end up being kind of the root cause of a lot of hacks out there um yeah um let me get your take on this GCR tweet they I don't know if you saw this this could just be like real real big fun but um they tweeted out once you realize the majority of defy exploits exploits in parenth in quotes uh the majority of D5 exploits are inside jobs you'll be more wary of where to keep your funds always bet on incentives in a

bear Market fud or some Truth uh perhaps some truth yeah like I wouldn't discredit the potential for inside jobs there's a lot of speculation around that of course um but uh yeah I'll be candid with you like I I don't for a while I haven't ventured into new protocols for a like a really long time actually yeah like I there's this idea of a Lindy effect the longer something exists the more certainty you have that it's secure and and security you never it's never an end State you never know anything that's perfectly secure can't have that all you can really bet on is the longer something exists then you

know you assume that people want to constantly hack into it especially if the Bounty keeps growing and if that hasn't happened then you can kind of rest not rest but like perhaps reasonable guarantees that it's fairly battle tested uh but like look I think we're in the state of the industry where it's chaotic Innovation and you know people want to push the batteries of new smart contract development you still don't have hardened standards yet um I and so I think you know things are going to break um although to be fair like like I've advocated for security it's an area where I spend a lot of time talking to teams that want a whitehead hackers like pot no more or immuneify some of these

like collectives that are white hat hackers that I think to a really important job to complement what our Auditors are doing um to like just police and like be Watchdogs in the industry uh and and look out for teams whenever there's a a hack that gets that happens um and so I think um but yeah it's it's just it's very difficult now especially like you know if you're yield farming in a new you know protocol that is really small whatever like I don't even think the yields are there anymore to if you measure like the risk I think the risk in D5 is still very high

um and high on the sense of like smart contract potential bugs but also just you messing stuff up you combine all the two and it's like you need to be very sophisticated like full-time and pretty technical to kind of venture into these things and the sad part of it is that a lot of people are not even buying Insurance like Nexus or you know or other Solutions out there um so yeah I'm surprised there was a hundred million dollars on Mango honestly like where's it it's one of the more um right I think I think that was the number I saw but like that's yeah I don't know it's a lot of capital wait so

this is what happened right let me just make sure I underst so the hacker exploited mango hacker basically levered up to get 100 million out of mango uh exploited mango for the 100 million they then turned around and offered to return a lot of the funds if the Dow promised to pursue criminal investigations against like some debts that they owed I don't fully and then they used because they had so many mango tokens they used 32 million votes from the exploit to vote Yes I'm doing this right now they they well the only correction there is that they The Proposal was that they would return the funds if they did not pursue criminal action against this hacks oh yeah if they pursued obviously pursued uh if they don't pursue criminal investigations against them that's then

they'll return the funds and then he voted yes which is like a decentralization theater this is the problem it's actually like a really interesting uh precedent for how governance goes wrong when you have I've said this for a while I mean the the surface the attack surface area for governance is there um the fact that you haven't seen as many exploits is not indicative of like governance is really battle tested I actually think that a lot of these Protocols are not being very thoughtful on how they design governance for a variety of reasons like economic voting like this is can be problematic in certain instances uh when people are borrowing tokens for instance in a in a market like Ave for instance if you borrow if saved in a

hypothetical example you have everyone is deposit protocol a everyone a lot like 30 of the supply is in this partic in Ave now the attacker borrows those tokens submits a proposal borrows the snapshot happens they have a voting power and then they vote on it and you're done uh like you can introduce a malicious like proposal or um and so that's one surface area uh I think a lot of Protocols are not being as thoughtful as perhaps maker and other protocols that have like thought about this from how to mitigate these type of attacks um but these are going to continue to happen like voter voter apathy just given that a cfdc recent kind of like bzx Dao or the renamed of the Dow like voting yeah and potential liability

there I think has has kept a lot of particularly institutional players on the fence of actually being involved and participating in on-chain governance until this matter gets resolved and so if you don't have like a threshold where if there's a proposal and you don't have at least five ten twenty percent of all votes being casted then the proposal cannot pass simple things like these that are intuitive are not embedded in most of these governance tokens that's very problematic yeah two interesting things that I'm thinking about here one is if the mango team so the mango team is obviously not going to implement the vote right so that just makes this vote very but what does that mean not implement the vote like honor it you mean yeah they're not

going to honor the I would assume they don't honor the proposal so then this government process just kind of looks like a farce then uh then you're back to Rari yeah so it's interesting right like it was a very it was actually a very smart proposal by the mango exploiter right they're proposing making the depositors whole by using the entirety of the 70 million Insurance Fund and in turning and returning 750 000 Solana and 800 000 like M Solana so I got one and a half million dollars of Solana or one and a half million Salon of tokens in exchange for immunity that covers all the depositors but it also pits the mango team against the depositors um which is very interesting that's

pretty very sophisticated attack yeah pretty smart this is the thing the operating assumption in crypto is it's a very adversial environment if it can be exploited it will be exploited it's just a matter of time yeah um anything else on the hacks I mean there are a number of other hacks out there um the question I guess is for the more critical listener out there would be like guys just what's the point of D5 like just close shop and there's just continues to be a lot of a lot of you know issues there and I and I think I don't want to I think that we all obviously there are issues um there are a lot of D5 protocols when I started there were like five now

there's like thousands right and so like everything I don't want to make it seem like D5 is like all of D5 is like this yes it's very risky yes we need better Insurance Solutions but that doesn't mean that because we have these hacks like things are like every incremental hack makes us smarter about things that we need to patch and we're going to really build truly the the future of Finance rails you know in many ways we're playing with relatively small dollars here like you know you want to settle a trillion trillions of dollars in D5 this the optimistic view is these hacks uh while very painful um just allow us to grow and become more

anti-fragile um and it's also to remember there are other protocols that are pretty battle tested out there and so I think um yeah it's just it's just a really unfortunate so you know anyone that's listening like whenever you're interacting with D5 play with small numbers like and and you know like use a horcrux model of use multiple wallets check your approvals there's a security hygiene unfortunately a lot of people become complacent become lazy it happens to all of us and look at what happened to wintermute like it's just it's unfortunately like there's no like undo button in crypto well unless you reverse the chain of course but like

that's not really crypto anyways you get my point I get your point let's move on let's go let's talk about uh Yuga and the advocacy so yeah yeah she's coming knocking on the door you got it's really not surprising I would say because um I mean they raised four billion dollars and launched a token or multiple tokens meant many tokens I would say or many many different nft brands and a token um right they're one of the biggest they they are the biggest nft brand they did a four billion dollar raise they launched a token uh it's a good one to go after I would say if you're the SEC just like headline wise I would also say as someone who would be on Hugo lives is side here obviously

um me being as biased as I can get it's probably a good one to go after with andreessen's policy team and like Andreessen um like I'm I'm assuming they'd you know cross their T's and dotted their eyes here so um yeah I mean I think that is it uh I just still don't know is it an investigation or a probe my understanding is that it's information requests okay well yeah I mean I think your point is a good one which is of course these this will be a very interesting precedent for other projects in the nft space um a lot of the on on the risk spectrum and this is just kind of I think on the risk spectrum of regulatory stuff D5 is farther out and

closer to things that you know are touching derivatives and opt-in financial markets and what have you nfts have been more on like perhaps Less on the Limelight let's call that but of course the ape token just changes its Dynamic a bit and so it sets an interesting precedent for a lot of nft teams that we always kind of talk about like this is utility being overhyped that we're promised what does this mean for other nft projects uh uh you know that are raised in capital and you know is are you relying on the effort of others what does the ape coin mean right and so it's one thing to buy a digital collectible it's another two

you know this ape you know the eight coin introduces another dimension that feels much closer to just you know uh well it is just like any other ERC token point and so yeah I wonder what the politics can or the the I this is perhaps going to be one of the more interesting um regulatory precedence set out there all right so I listen to this four minute clip from the Jon Stewart Gary Gensler podcast so Jon Stewart has a new podcast um and they're dropping an episode with he's dropped he did an episode with Gary Gensler and they put out this little four minute teaser and Jon Stewart really got to the heart of the issues right away he's like why are you going after but he was really he was talking about like DJ Khaled and like

uh like Kim Kardashian he's like why are you going after these Floyd Mayweather right he's like why are you going after them why are you going after them and not Nancy Pelosi Citadel BlackRock and Gary Gensler I thought had a horrible answer for himself he like he they didn't he was not media trained here it basically was along the lines of or if he was media trans media transitioned into a good job it was basically along the lines of well we will get sued is that we will have to face these guys in court if we go after them uh it was like a whine about he was trying to avoid directly saying that but like reading between the lines it sounded like we don't go after BlackRock and Citadel and Nancy Pelosi because we will

get fined uh or we will have to face them in court and we have a small bandwidth we don't have that much money as a government organization uh and so we go after other people and it was just like man it was such a bad answer and this poor Dave thing like the first thing I thought I was like these rule maybe it is a security I I don't know I'm not a lawyer I have no idea what is the security and what's really not a security like ever everyone's speculating on that I have no idea but we need a new system because what did bordape do it turned all these regular like 20 and 30 year olds into millionaires highly speculative sure but it turned a bunch of people into Millionaires and the SEC is like we need to protect people from this yeah I it's really I think it's the

heart of the question here Jason which is a fantastic one which is what is the spirit of the law yeah and what are we trying to accomplish here because I understand the most important thing from my perspective when I talk to teams that I invest in when when I'm thinking about regulation I always feel like it's it's consumer protection and Market integrity you want to have Fair markets and and you want to have protecting consumers which means most of the time information disclosures right um and so but other than that like I think like that should always be the guiding principle to your point what's the harm that is being done here I'm from you from tokens like okay absent like of course like price go down well

well that happens in any market like that doesn't necessarily mean it's bad it's just like a market right now the question of course is well like perhaps there should be some more standard and proper disclosures and like I get that a lot of this information is public and is embedded on chain and immutable records called blockchains it can't be tampered with and you have the certainty of of certain parameters and so the encouraging thing just to kind of I think like I've saw recently that the SEC created this sort of platform or department for like uh to to basically create the this information

uh what do you call it we shouldn't get in the show notes but it's like this information Department I think what they're trying to do is like just tell teams that have tokens like these are like the things that you like Fair disclosures and and so I'm very much in favor of that I think that's a great idea right uh of like you know what you're gonna put out a press release should it like you should communicate it on this venue not on you know or you know and I think that's a really good idea um but you're right I I sometimes I'm like how much harm or benefit have we had from these accreditation rules at this point yeah I just here's here's what here's the other

thing I don't like about this is It's regulation by enforcement um I I'm really happy we're not building a token company um and now we don't have like the blockworks token right now because I would be like here would be my mindset I think it's the mindset of a lot of protocol Founders right now and nft projects is like I will comply with your laws like I don't care I'm not trying to build the censorship resistant platform whatever most people a lot of people aren't they're like I want to comply with the laws what the hell are the laws just give me some but they're not going to do that because they don't they don't want another Howie test that that's not what they want and I think I'm scared that this is just going to keep happening like regulation by enforcement which is a horrible strategy yeah it's

uh it's unfortunate I'm optimistic that hopefully we'll get it um just because it has become crypto has become a very important topic among the constituent base for a lot of and politicians understand that and that is I think the most important thing here which is you know um I think the more that politicians understand how important this asset class is from an innovation standpoint from cultural standpoint really capturing the psychos of the generation then then you know at some point you're just forced to like face it and address it um of course like I've heard time and

time again the regulatory agency says the laws have been written and just follow them but I don't I don't agree with that I think uh I think most of if of most of the teams out there to your point in crypto want to do the right thing they just don't know what that is yeah or how or how to do it they want to do it they don't know how to like express it you know if you guys are interested in the regulatory side I would recommend you listen to um the podcast we did with Rebecca and Jake we also have I haven't even told you this we have a U.S senator coming on the show to talk about yeah his views on crypto and um he's one of the most prominent I would say pro-crypto Senators um so probably get some bias takes but that's okay

um so really excited to hear uh for that aspect yeah let's talk about um all right that was pretty bearish last like 30 minutes uh with the hacks and the and the uh and the SEC probe there's a lot of good stuff going on in crypto bear Market building that I want to talk about uh the first thing being there are three big ZK announcements over the past few days scroll who we've previously had on the podcast you are I think probably an angel investor in them I if I remember correctly um which ones are and scroll yeah scroll absolutely okay are you investor in ZK sync no there's an investor in okay well we'll get I want to be this is from a L2 perspective I'm an investor in scroll

and an arbitrum uh so scroll uh announce a release of an upgraded ZK evm testnet that now enables uh you to officially deploy smart contracts on scroll Network so that's first one really excited about that uh the scroll team is like a bunch of big brains uh polygon officially deployed their zkey ZK evm public test net um this one just because of polygons like just their all like what they've already built this one's gonna I think be pretty interesting to watch uh Ave uniswap and lens are three blue chip D5 projects that are already confirmed to join their test net um it's the first as I know it's the first ZK evm network with a full

featured open source proving system which is pretty interesting if you don't know what that means we wrote a there's a blockworks research piece on polygon that we can link to in the show notes and then ZK sync announced their layer 3 Pathfinder which enables app specific l3s which is going to be released to the public test net in q1 of 2023 so that's pretty interesting um I think Pathfinder is the first L3 prototype that has this like ZK roll up as a fractal hyper chain in layer three if you have no idea what that means uh go listen to our starkware episode that we did with the starkware founders um yeah I don't know this is pretty cool I'm really excited about the ZK stuff yeah absolutely look I mean I think of course the activity is not there right Gatsby's into your ml1 are really low

and so again I will remind listeners that there was a time where Gatsby's in ethereum and you know cumulative there's like a terrible website that you can go on there and check like the amount of gas that you've paid you're gonna put your wallet and it's you want to get yeah depressed just look at that right uh but now of course people these are the kind of developments that go unnoticed right because when you think about fast forward in a year or two three once you know macro side users will come there's killer great apps that are being built and these type of developments really set us up there's always a gap right between too much too much users or too much adoption and infrastructure there's like this deficit that grows in these cycles and I think we're in the part of the cycle now where

you have infrastructure really really kind of that Gap or at least converging on where usage meets infrastructure and now perhaps infrastructure now um you know being ahead of that and when when interests and usage is it comes back uh gaining nfts other applications payments social you have infrastructure like this it is critically important to support hundreds of millions even billions of users so really exciting across the L2 fronts uh and these uh these developments have been in the works for years uh and it's very exciting to see them kind of uh launch all kind of at the same time yeah feels like L2 season huh L2 season app

specific scaling season horizontal scaling right we've got Cosmos in the app chain hype we've got like Celestia and svm the Solana virtual machine um yeah like frax is launching frax chain which is this like hybrid eat roll up so a lot of cool stuff in the L2 roll-up space coming out absolutely I think just there are there are other things that I don't want to spend a full segment on but just kind of calling out some news um arbitrim acquired prism labs yes which is probably the biggest there's really cool news really cool excitement uh announcement can you just share like how much do you know about this deal you are the first one of the First Investors in arbitrome yeah I was not not the first because they had raised around okay way back I mean the arbits

from Team off team Labs is just thinking about scalability they came out of Princeton um really smart guys that have been thinking I'm gonna hear a funny story by the way about that is my wife's grandma lives in Princeton and she's like yeah she's like I met these uh I met this fella because one of the founders is like he's like I don't know 75 years old or something or like yeah he's like felt uh yeah yeah he's like I'm she's like I'm at this fella he's uh he's working on this crypto thing I was like oh I go oh okay a lot of Grandma like like what what is it and she's like that's called uh uh arbitrum or something I was like oh yeah that's a huge that's massive yeah okay uh yeah yeah no absolutely I mean this team has been like in the

background working on thinking about scalability for such a long time um and so this deal is is a really good one I think like the Prismatic Labs team has done a lot of great work on the um like skill like scale on the scalability side of ethereum um well they were like they were one of the core engineering teams yeah absolutely it's Preston Von Loom I think and um uh Jordan what's his this other guy's name uh Raul Jordan or Jordan I forget his I don't know anyways nonetheless it's a I think it's a really interesting yeah yeah that's right Raul Jordan yeah

really smart guys the entire team there is I think fantastic one of the stronger technical teams so it's great to see that obviously um uh the nice thing about Arboretum super well capitalized and so I think I think they found a really nice home to it's great to see very smart teams find a how a home where they can just think and have the resources in place um because again funding public goods if you think about like ethereum proof of work a lot of that you know is supported by the ethereum foundation and other people in the ecosystem but you know it's always good to have the muscle of an organization like arbitrum option Labs at a super well capitalized right and so yeah it's just from my perspective it's just very

positive for the ecosystem um of course some biased because I'm an investor in arbitrary but I still think I'm very happy to see these guys Prismatic lab teams find a home which is yeah um I had an interesting call so arbitrum with someone arbitrum arbitrum has been like very technically focused I would I would categorize arbitrum as focusing like the least on marketing and Biz Dev compared to a lot of other folks they just hired one of Jeff bezos's right-hand men uh right hand like people uh to be arbitrum's new CMO how to call it a guy he's brilliant uh like very very interesting um so that's I think I have a feeling you'll see a lot more coming from arbitrim soon I think so the look at how they did the rollout uh for the test net

and they'll uh and then Nitro like allowing every team to explore the tech like test net play around with it uh everyone on equal footing which is different than how other teams have done it and so I think uh it just speaks to the level of maturity of the team and we're we ought to have AJ and uh and Steven on the show uh talk about you know there's a lot of really exciting developments on the arbitrary side of things yeah speaking of Public Funding Goods just one I want to call out coinbase they announced that they have a dedicated team working on research for eip4844 um yes the the what is it called Proto dank sharding proposal I think it is which is just an awesome name but really what 4844 does it drastically reduces

fees for Roll-Ups uh creates this like dedicated roll-up call data fee Market um so that's yeah just shout out to coinbase good good on them to be uh funding public goods um yeah by the way do you see the coinbase documentary Brian Armstrong documentary no actually I've been yeah I don't is it out now it yeah it dropped on uh Friday it's uh okay I would recommend it I mean it's built it's a document it's uh I'd put quotes around the documentary I'd say it's funded and like built by the coinbase team so it's more of like a marketing and PR thing I I loved it I thought it was great I'm like a but I'm you know crypto person so I thought it was really interesting I'm not sure how

much like non-crypto folks would find it interesting but I just I you like I just I have a lot of respect for like for Founders and Brian like just seeing the Brian Armstrong journey and Fred Fred ursham's Journey like it's just seemed like there's some a couple of late nights in there and I I I like it I like seeing the story I'll have to check it out where do you find it Netflix Amazon Amazon Prime okay great yeah I'll have to check it out um other small news uh Jared gray nope never mind not talking about that Google cloud and uh selected coinbase Garrett's trying to make me uh dig into the horse no wait never mind move right along moving right along Google Cloud selected coinbase to expand their crypto offerings I thought that was pretty interesting uh oh this this was interesting Stefan uh the founder of

flashbots announced last Friday that he's left flashbots after a series of disagreements with the team um what happened here no idea not surprised bear Market's always uh make uh some of these problems more acute and or people just leave and so I don't know what the background here I just made a general statement yeah but I my I think we'll see a lot of uh well okay the what is it the CFO of openc also left there's been a number of Departures I think he left because I guess he realized it was not going to be an IPO inside anytime soon yeah that guy wanted IPO what he was I think it was like the left CFO before that that guy yeah yeah yeah I don't know big shout out to Stefan that he's like I what flashbots

has contributed to the industry is not recognized that much and I think um yeah just he's made a lot of great contributions to crypto so yeah big shout out to Stefan um bny melons probably the last news of the week uh on Tuesday bny melon which is one of the largest custodians in the world also America's largest bank no excuse me oldest bank uh announced that it's crypto platform is live in the US uh with select clients they're now able to hold and transfer Bitcoin and eth so big shout out to bny Mellon wait way way to go I think fireblocks is behind this I think fireblocks is powering this yeah very nice yeah so that's all I got well I do want to leave uh you made a

film recommendation I will do a book recommendation uh or audiobook uh on my way to Singapore I listened to influence Empire which is on the short list for the financial times uh book of the year um it is the story of tencent and the reason why I think is interesting is because my thesis and I've said this in Prior episodes I think there will there will be a tencent type of app in this space I think it's going to be a killer game it's just fascinating to observe how tencent built an Empire um and I've always felt that Asia offers a very good window into predicting the future because they're farther ahead in

so many ways in so many different aspects of you know like Finance like people don't have brick and mortar Banks there and they've just sort of leapfrogged a lot of things um and so uh yeah it's a really good book I I I I wanted to learn more about the origins of tencent and does it portray Pony ma as um is that the guy's name you started 10 cent Pony yeah does it portray him as someone who's like innovating and challenging Silicon Valley or is just like a copycat of Silicon Valley a little bit of both actually huh it goes into of course there were a lot of things that he also had a lot of reputation even in China of copying a lot of things uh but uh I think it's a balanced take on like everything it's like in this world

of Open Source like yeah everyone is standing on the shoulder of giants of course there's like more of course like like I feel like when when it's like blatant copying which I think is fair like there was a lot of it in that in the history of tencent um but you know point to me a company that hasn't borrowed uh Concepts from others I read a quote there's a quote that was circulating around Twitter from the book that I thought was just I was like damn that's a good that's a good line in the book I think the author's name is like Chen or something something like that uh I'll tell you yeah it is Lulu Chen yeah yeah okay Lulu Chen so I guess Chen has this great line it's like Pony so the guy who started 10 cent and

Tony uh yeah Pony ma Pony is a master of creating products so convenient and intuitive that billions of people want to join his Network yet in the back of everyone's Minds is the knowledge that their every move every location and utterance is documented and scrutinized a fact they're increasingly and openly reminded of by the Chinese guy in itself so I mean I haven't read the book that's the only two lines I've read from the book but it it seems like it might be this founder story that ends up turning into like this story about how does what has enabled tencent to like Thrive under this Communist Regime like I'm assuming they probably talk about Trump and like curtailing Americans in 10 cents so like yeah and they also talk about Alibaba and how you can oh completely good and when you don't play

good yeah yeah interesting so I would that that's a great recommendation I'm gonna read that it's it's a good book yeah I encourage everyone speaking of and the last parting thought and I think it's an important piece here is PayPal and their terms of service which were updated to like withdraw was it two thousand dollars if they if you were in violation or they if you did like in their estimation you were doing like discriminatory or some other type of like basically like the comments that you were doing in a social public context if they disagreed with that they could withdraw from your account like up to two thousand dollars twenty five hundred dollars which is ludicrous ludicrous David Marcus had the best tweet on this David Marcus yes uh chief

payments officer ran payments at Facebook uh and also I'm very involved in in meta or like in in I mean the CEO of PayPal or yeah anyways he said it's hard for me to openly criticize a company I used to love and gave so much to but PayPal's new AUP goes against everything I believe in a private company now gets to decide to take your money if you say something they disagree with insanity and a lot of the really good takes are well if you this is just foreshadowing what Central Bank digital currencies could do it's exactly right so anyways um good good place to round it up uh

it's good to be back and and hopefully people enjoy this and we ought to do this survey I think it'll be really interesting to see all right we'll do the surveys we're also announcing permissionless soon um so folks just get ready get your fingers on the trigger to buy tickets we're in honor of uh eip4844 we are going live with ticket prices at 484 bucks and 40 cents so get ready for that get this is going to be in the same venue as last year or a different one we are moving we will not be in uh we will not be in Palm Beach actually so you'll you'll see stay tuned in the US perfect well I I do want to go to this one assuming Airlines don't brag me again it's like the boy who cried wolf I can't trust you on these things anymore

no amount of no amount of words can disprove I'll just actions will speak here so uh you know I'll just this is the last thing I'll say I'm fair fair all right my friend uh this has been a great conversation uh if you guys enjoy this chat hit the Subscribe button it really helps saunting me if you guys dropped like a a review subscribe yeah santi's got the big grinning face throw it throw the throw the arrows down Sandy you turn it into a real YouTube influencer these days you got a question I know I haven't been media training conditioned by you God anyways awesome everyone all right welcome to me have a great rest of your Friday and a great weekend we'll see you next week thanks everyone [Applause] [Music]