Merge Chaos, Coinbase’s Proposal & On-Chain IP | Roundup

Transcript

do you have tom brady like jump through a hoop on fire on like kisses for 20 seconds [Laughter] full makeout baby kiss me like a man [Music] before we jump into the app quick reminder that nothing on bell curve is financial advice everything is just a meme hope you guys enjoy all right everyone welcome back to another roundup of bell curves you've got mics one and two yano and vance folks welcome hey guys thanks guys i've got some exciting news um on the on the block works front uh jason actually just

accepted a position at kim kardashian's new private equity fund yeah congrats buddy i would i would in a heartbeat like make maker delegate or like kim kardashian associate like i mean there's an obvious choice there that'd be quite a resume i think she's getting money from this i think she's going to be so successful people who are fading her just like how can i i don't get it such a no-brainer such a no-brainer good idea yeah i think she's going to make some like the amount of like consumer packaged goods companies that are down bad that she can just buy turn around and put a sheen on and like resell like i think she's gonna just keep every single new to see brand that launches now is like a person's thing it's like ryan sheckler's pancake mix it's like you know this

person's nail gloss you know it's that's like every new brand and she's gonna be the queen of that it's like uh back in the 90s with cisco and oracle when you had the networking technology or the database technology and you had the relationships with all the businesses literally all their their entire growth strategy was just buy up businesses take the products from those business and cram them down the throats of your existing customers like that it worked i mean both of them became 150 plus billion dollar companies and i i mean this is the same thing it's just like the new the new age influencers are the new conduits how do you how do you think she translates it from like leveraging her brand and distribution to being on top at a private equity fund because she can't really take like every single

investment that they do do you think it's like expertise that she has in flipping it because she can't like put the kim k you know personal stamp on everything they invest in like how does that work from a fund i think if you're a cpg firm and the options are like sell for cash uh to one buyer or sell for like 90 cash plus 10 upside and whatever kim kardashian you know is gonna do to your brand like you probably take the upside so she has an advantage in sourcing and then i think once it works she has an advantage in fundraising too like no nobody the other guy who that she works with is probably very legit um but like people want to invest in kim kardashian that's the draw

i agree well you know it's a slow news week when we open the show with kim k thank you private equity fund seriously i love seriously proud of her though honestly started uh basically flipped a sex tape into a multi-billion dollar private equity empire gotta respect that i respect the hell out of it um no the the same people who are fading her the same people who are like pissed at these like tick tock people that they make 100 million bucks a year it's like that's just the world we live in middle middle curve middle curve real middle curve exactly seriously uh dead dead middle um all right we are like one one week out from the eth merge day right so that's going to be anywhere i don't know if you guys have heard a definitive uh a definitive time but

basically 13 through the 16th so we're quoting this on the eighth um i guess there are kind of two angles that we could talk about on this um uh one maybe it's like a little bit longer term like just structural changes post merge um maybe we can talk a little bit about our friend hal press's real yield thesis and i'd love to know how you guys kind of buy into that but maybe we could talk there's a lot of um uh i think people are kind of preparing for a little bit of chaos uh post post merge right so we saw a governance proposal pass on aubae where they're basically temporarily pausing borrowing eth because people are basically trying to get as much eath as they can before the snapshot is taken uh actually before i get into it um me michael advanced when you want to get into like why

that like what's going on why the ave thing happened and then some of the like arbitrage mischief that might be might be happening around the merge yep um on twitter i called it slippery business i feel like there's a bunch of positioning that's happening right now both in liquidity pools but also people like the big players kind of like getting ready for what is a pre-planned but like chaotic event which is like kind of where they thrive the most um and so like there's a couple of things going on if you look at the borrow utilization of these pools um where the eath is in them uh you know those are skyrocketing and so like you know i think the the utilization of the ave pool last i checked was like 70 almost um and that skyrockets the borrowing

rates so if you're still in there you're paying you know 24 at this point that was the last time i checked and so that's like a very painful trade um and that's happening at the same time you look at the you know spot liquidity pools things like steath and eath really any place where eth is in a smart contract people are pulling that out so that it's eligible for this airdrop um which is like funny because like you know they could have probably figured it out figured out a way to do this with all these assets in the pools but like instead they've chosen to kind of like intentionally have everyone like pull their assets out and then like put humpty dumpty back together again after the merge so there's gonna be all these like weird price despair kind of differences between the pools um

and yeah like you look at the price of steath it's like down to 0.95 you look at the price of coin base uh steak diet it's like down to 0.91 um there's just a lot going on and it will be interesting to see kind of it pull apart but also it come back together and at the end of the day we've said this before um i don't think the proof of work chain is gonna be you know very interesting at all i don't think i think it's gonna be a hugely you know profitable opportunity i haven't checked but i think the price is still like in the 30 range uh you know at least the futures price of where where it's trading right now on on some of these platforms i mean you could use like the benchmark of eth classic versus eth you know two

to three percent historically is where eth classic has traded but i think one of the bigger points to note uh is kind of what vance touched on last is just the fact that there's a lot of work that has to go in to make this chain live there has to be a client that's live there has to be miners that are ready to go there has to be people who are going to continue to use it there's already been tons of signaling from all the different platforms and providers already saying that they're not trying to support it and i i haven't seen any updates in fact there was something on twitter that i saw that suggested that there was basically zero client work that has gone in and maybe you've got the miners but then you just got miners who are mining something and and nobody can actually

use it so i i've i probably paid the chances of this you know greater than 50 not working and not being live for much much you know longer than it it starts out as um i don't know i don't know if you guys have a different perspective but i i'm just not i'm not very long eth pow it's tough to find someone who is honestly um let me ask you guys this are you guys doing any of this like what do you call advanced like cute business or whatever like are you guys positioning this you know i don't know it's slippery slippery business i like yours they're cute businesses yeah like are you like there are a couple things you can do right like you can pull each out of liquidity pools you can sell your teeth for eath you can unwrap your wrapped eath you can move

your eth off of an exchange and into like uh like onto a ledger or something because you don't know if the exchange is actually going to give you the proof of work token if obviously it happens so are you guys doing any of that we can't really talk about the stuff that we have in flight um what we can say is that uh like we're not optimizing for getting more proof of work eth like that of the things that we could optimize for doesn't feel like the best uh thing we could do um we're certainly getting ready for it uh in terms of uh if you have any trades on in a liquidity pool that looks like it has this concentration risk you know like that like the safest way to play this is just to be out of those and so we're

being mindful of that just from a safety perspective but yeah i mean uh the other side of it is like you know if you get these proof of work tokens what do you do with them um like are you sending them to like like where like bit max the futures like exchange um are you sending it to uh like a dex on the proof of work exchange like the mechanics of getting out of this are going to be very difficult um and i think kind of the sleight of hand that makes these airdrops work for a lot of people uh are a couple number one the exchanges are not gonna allow you to claim your proof of work eth right out of the gate coinbase has said that a number of other staking providers have said that in exchanges so like there's

gonna be kind of this artificial uh supply limitation for people who are just holding eth on exchange which is the vast majority of eth um at least that moves um but the people who have it off of uh you know a main exchange they're gonna have to like make decisions on what to do with it and i think those people will be advantaged uh in a moment where there's not a lot of supply so that's kind of like generally how we think it's going to break down but we're certainly not optimizing for proof of work i think these air drops are going to cause way more harm than they do good and like money because um uh there will be inevitably more than probably remember with bitcoin in 2017 2018 there were all these there were all these forks right it wasn't just like bitcoin

cash it was like bitcoin plus and bitcoin like one in bitcoin so she's vision satoshi's vision and like the segwit like all all these they're like 20 forks and um so yeah you get the air drops and obviously you want to sell them immediately there's going to be a bunch of scam air drops too though so probably inevitable you end up like let's say i get some pow i want to sell it well i'm going to have like seven other air drops in there and i'm gonna someone you're gonna a lot of people are gonna end up clicking those and just like giving right access to their wallets yeah be safe don't don't mess around with stuff that you don't know what it is um and yeah like we were talking about this before we started recording but the idea that you know like the amount

of open interest on dairy bit and hedging volume on ftx would suggest that like a lot of people are expecting this to be a very meaningful event from just like a raw value perspective and like you know probably hundreds of millions if not billions of dollars are expected to be kind of like claimed and sold from this uh that just seems so far out of the like you know realm of reality that i don't think that's possible and the other thing is like this has been you know a multi-year process of kind of like not kicking the miners out of the ecosystem but like just like diminishing their influence and i think this is kind of like the cresting of that wave where you know they're going to kind of put up a fight for proof of work youth but that's really all they're going to get and then

it's going to be kind of like you know they get to do bitcoin but they don't have a lot of sway or influence over the rest of the ecosystem which is really good in my opinion i will say this is the most positive i've ever seen kind of like the mainstream media cover crypto is around the merge um so i think that'll be pretty interesting like you're seeing a lot of articles maybe from like new york times or cnn or something uh from these like non uh non-crypto pubs be like this is a step in the right direction for ethereum they're moving towards a more environmentally friendly thing so it's uh it's actually been interesting to see the mainstream coverage of the merge i think i think the big angle here too just that mainstream loves to lash onto even today i think uh maybe it was

treasury or there was some announcement saying that uh proof-of-work consensus mining algorithms are probably something that might have to get regulated uh there was some note of that that i saw on twitter this morning and i i think the esg narrative is going to be an important one frankly if if there's nothing else that anybody who's not aware and and kind of uh paying attention to this industry is going to be able to latch on to it's going to be esg because every single time i've i've heard you know these arguments it's like oh well you know nfts they just they're destroying the planet it's like that's absolutely not true but you know okay fine we've got a solution for that um and and i think the fact that you can be able to now point to a solution is going to be a a huge opportunity and and latching on

to that i think is what we need to do as an as a base layer ethereum community i agree with that but with the one caveat so that that note they didn't point to specifically like proof of work it was just like energy intensive ways of you know it was there but obviously that refers to proof of work i would say though that it's always just been like from a just first principles thinking about it standpoint it's a frustrating thing because it's not about the energy consumed right it's about the output and what you get for that energy so i agree i think it's going to be a big powerful narrative but i also don't love some of the other like especially like layer one blockchains i feel like have been marketed as like you know uh eco-friendly which i don't love as a i just don't like that

as a as i'd read but you know for people who don't get it it's gonna be an easy narrative to latch on to yeah um let's talk about another narrative maybe post uh post merge which is um again credit to hal press who really i think was the first one who brought this concept into crypto real yield so that's a concept uh you know that's very familiar to uh you know traditional finance when you're talking about the returns that you get from fixed income and bonds right so there's like the nominative yield of something which is what you actually get paid and then you subtract out inflation right it's a more real representation of whether or not you maintain essentially purchasing power um that i think hal was kind of the one who outlined that and applied that concept to ethereum i know you guys are kind of

supporters or kind of buying to this idea can you just explain like what does real yield mean in the concept of uh the concept of eth and how is that going to change post-merge yeah so really what's happening right now is the there's an inflation rate that is being applied to ethereum every single block and um i don't know the exact block number off the top of my head but there's a number of ethereum tokens that are created every single block every 13 to 15 seconds um what that leads to is an inflation rate of somewhere in the three to four percent right now um and you can think of that as being the the necessary component of the value ecosystem that goes to compensate the miners who are running these proof of work change as we

just discussed energy intensive have to be able to subsidize the cost of running you know massive server farms essentially that suck up a lot of electricity cost money et cetera et cetera additionally the hardware cost of actually running that what changes with proof of work obviously is you move from a proof of with proof of stake is that you move away from the proof of work the amount of cost that goes into it drops so therefore the amount that you need to pay the security budget drops as well generally the concept that hal is talking about is this this change when you move uh from a from a high inflationary rewarding mechanism to something that is actually potentially deflationary is really the the mechanism that he's

talking about so you know as a staker uh there's the possibility based on throughput that you actually ultimately end up having less ethereum at the end of the year than you started um so that that's one component of it the other component of it is after eip1559 you have 80 90 percent of the transaction fees being burned to increase the amount of deflation that's going on in the ethereum network well all of this leads to this component of what's the actual yield that you're getting and his theory which i think is accurate is that the yield that you can get by staking a token is the inflation area is the total yield minus the inflation and the total yield could be you know whatever it is post-merge

but when you have a reduction in inflation you increase the amount of total yield and we've seen a ton of other staking opportunities you know we've all seen them throughout the industry where you've got massive staking yield but that staking yield is being subsidized by inflationary rewards and it's it's just the the separation of the concept of what's real versus what's nominal um i think that that's really kind of the key point to hit on here the the things that are like important to think about uh when you think about ethan real yield are kind of their [Music] you know counterparts in both the equity and bond world so in the equity world um obviously you're getting paid you know for some stocks at least like for instance like meta doesn't pay a

dividend um they have a stock buyback uh and that's going to be probably i think like 40 billion dollars this year but they're also issuing you know 20 25 billion dollars of new stock per year and so like you know some of it's kind of like your ownership increasing some of it's decreasing but like meta doesn't have a yield so there really is like it's apples to oranges there and if you think about you know treasuries like the 10-year or the two-year or whatever auctions they have going it's you know the real yield of those treasuries but they're selling more of those at auctions every single week and so there is this concept in most other asset classes but ethereum is is the one that's the most unique because it's on a block by block basis it's it's super transparent but you also have the

potential of this thing getting much larger in the future um and so for a lot of people i think like you know the real yield of whatever it is six seven percent is exciting um but i think the opportunity for that to be like a quasi-venture bed as well is unique when you look at you know every other asset class and the dynamics of both supply and potential deflation i i guess i mean just to put it in like super simple bell kirby type languages i mean basically if you think about it from that the dap kind of layer the inflation right is basically that's just customer acquisition costs right you're basically giving away ownership tokens of your your platform and you're generating something that looks like a yield from that but if the inflation rate is higher than the yield that you generate then

your owners or stakers of that platform basically losing value on a year-over-year basis uh and i guess you know one thing like one i guess the good parts about bear markets in general is like okay there's less hype and excitement and just like fo mowing into stuff so now is the time to actually think about like generating real sustainable value and that's kane's whole kind of push with real fees as well exactly but maybe maybe to go back real quick i think one component that's important here as well is um there's this there's obviously the concept of real and nominal yield and you know the the financial theoretic version of what your asset is worth versus you know the discounted cash flows versus you know the ownership percentage that you have and and what have you i think the other

component that's really important to note here is that when you have inflationary yield and you're you're adding more assets to the tradable amount of assets that are in the ecosystem you know to also take hal's point is that the flows and the supply and demand of these assets fundamentally change as well when you there are more inflationary rewards tokens uh sure you're earning those and maybe they're locked maybe they're not locked depending on the protocol but if you're earning those tokens eventually that just means that there's going to be more supply to sell and so even if it's just you know theoretical um on one end i think there is a structural component to it which is the flows can can you actually break that down a little bit exactly like which which part because like price is just a function of

supply and demand in general right and flows kind of describe uh more like the demand side of that so well i'm actually not exactly sure i follow like how does the um how does the flows kind of relate to what we're talking about here yeah so i i think um your point is is a good one in that the inflationary reward could be thought of as customer acquisition costs and you need to have sort of a top sticker price to incentivize people to to join an ecosystem jonah protocol state trade whatever whatever the incentive model is and i think that that's important at the beginning in the same way that you know uber subsidized the car rides uh in san francisco here for a couple of years at least when they started with uberx i remember it was like 250 to go across

the city and you can kind of think of it in the same way eventually you have to get to a point where they're charging enough and their take rate is high enough to where uber the company can make enough money and in in terms of the flows if you have consistently you know unit economic negative transactions going on uh you're gonna ultimately end up losing money and the way that that the way that that comes through is you're gonna have more people additionally you're going to have more people who have these assets who are going to be able to sell them on the market uh and so it may it may look nice and and get users involved initially but eventually it's going to be something that you have to move away from

otherwise you're not going to build a sustainable model yeah yeah i get you on that it's kind of going from like a like a not like a deeply unprofitable tech company but like a slightly unprofitable tech company it's like a very profitable tech company and you know that's kind of the the structure that drives the flow because you know if ethereum was a tech company and it was you know deeply unprofitable and had no assets they're just basically selling more ethan to the market to keep itself going and now they're just stopping and so there's just less sellers um and there's less sellers by 18 000 eats per day which is meaningful like we we've talked about this before but like we think probably there's like a 1 to 25 ratio of you know fundamental

flow to like quant flow um so that that matters when you think about that in that context you know what's just funny to me about this whole discussion is um you know it's been around for you know like seven or whatever years now um so it'd be very logical to be like okay this is the time and the the life cycle of the company where you want to transition from being deeply unprofitable to like we want to think from just growth at all costs to like unit economics right that's like a super traditional framework or way to think about it i feel like if you polled the rest of the world like how risky eth is and like where it should be in its life cycle they would have a very different thought so actually in a way this is almost like getting ahead of the curve

here right yes yes but it's not the same you know it's not like they're going through this process to become profitable it you know that would be how you look at something like an uber who's looking to go public per se who like needs to have positive unit economics so you can get you know the valuation for your next fundraiser or your ipa whatever it is the the thing about ethereum which is unique is that the technology is changing this is a move in the positive direction for the protocol so that you can enable further developments like you know all the things that are on the stealing roadmap like sharding a proof of state network is a requirement to move in that direction and and so it's it's both and in a really really unique way where you have this implicit change in the unit

economics but you also have the positive direction of the technology and that in the second point is actually leading the first which is unique interesting do you um do you see the concept of real yield does that apply to like non l1s like eth would you use a very similar framework to look at like a dap or like a dapp chain or you know it basically is basically can you kind of borrow that concept and apply it to non l ones couldn't you could you apply it to any to any app or protocol right any real field can you apply it to non-crypto things too or is this why like i mean melton tweeted that thing and then how was like this is really dumb but i think she was basically just saying you have the inflation rate you have treasuries at three percent inflation eight percent

so the real yields negative five how was like this is an incredibly dumb tweet i don't know why why i'm too middle of the velcro to know why i was a dumb tweet but like can't you apply this concept to anything i i didn't see the tweet but the thing that's unique about l1 is that they have to pay for security um and if they don't have that you know they're cooked um when you think about dapps like they don't have this like fundamental blockchain uh security need uh at least they don't need to pay for their own native currency and so they kind of are by default like more profitable than your average l1 just because they don't have as many costs um i think your l1 probably has your average l1 probably has more users than your average dap at this point but

i think that's going to change um and yeah i think it's always there's always been the question of like okay you cool you have this dap what do you do with the inflation um and those feel more like those decisions around what do you do with it feel more like you know how do you spend your growth marketing budget at a tech company that's small to medium-sized than like how do you re-architect this new asset class this new you know kind of technology paradigm it's like in games you know in digital game ecosystems what it ultimately comes down to in in mobile in particular but if it's somewhat based as well is that it comes down to ltv minus cac and and that lifetime value minus customer acquisition cost

and that is more of the equation i think when it talk when we're talking about dapps in particular to vance's point but ultimately we're getting to the same same conclusion here which is you just have different variables flowing into ltv and different variables flowing into cache whether it's adap or its base layer yeah it follows that you're gonna have a lot few like you know in ten years you're gonna have a lot fewer l ones that are profitable than you will dapps um the dapps just have much less cost it's much harder to get to the critical mass of users that's required to sustain an l1 from a security perspective um and like even look at bitcoin you know it's huge has a ton of users the market caps gigantic

right now it doesn't have enough fees to secure its future long term um and so i think we're really going to see the consolidation around kind of like kane's point i think is particularly relevant to the dapp sector but i think you're going to see the consolidation in the l1 sector as well because like you know 20 years from now like let's just pick on like you know harmony um who's really going to want to subsidize like who's going to want to subsidize the cost of like running those validators it's like non-trivial especially if you're underwater on them it's probably going to be like the foundation the investors that's probably it and a lot of them will shut down or just use ether's security layer as a result that's my guess at least you guys see uh suey raised

300 million dollars congrats everybody oh all right i think that concludes this section here let's talk about um the the coinbase institutional maker partnership yeah i know you uh you were talking about this for you want to lead us through uh what this is what's going on yeah give us a good description of it not a bad one [Laughter] don't [ __ ] this up uh i mean it's like it's pretty simple uh maker so maker has this thing called the psm there's like 5.2 billion dollars of uscc in the psm uh coinbase uh prime which is uh they're like institutional team they bought tagome and created this institutional

team and that's coinbase prime now coinbase made a proposal for maker to transfer 33 of the usdc out of maker's psm so that's 1.6 billion dollars out of the psm into coinbase primes custody uh the reason they would do this the reason this is good for maker is uh this would give them one and a half percent yield on that usdc so one and a half percent yield on 1.6 billion dollars is 24 million dollars uh so that's 24 mil in additional revenue that maker could be earning um and that's that's kind of the yeah that's the proposal so one point of clarification i think uh is like what is the psm and basically what does that usdc do what is the usc usdc doing right now

the ustc sits there and serv is acts as collateral for basically the die and it earns and the thought is that it earns no yield so yeah like one of my pushbacks on the forum i was like 1.5 feels low and they're like well until we have a better strategy 1.5 is better than zero so it's fair are there two buckets as well json for that usdc there's the usds like protocol owned usdc right and then there are customer deposits and this is only for the usdc that maker owns right correct yeah exactly so i mean if you look at like the yeah if you look at the balance sheet of maker right now it's like liability like die eq is the liabilities and then the assets are the psm and the user vault so the psm is like what is like the maker

owned assets and maker can invest those assets and that's like you know die is collateralized by those assets and then there's the user vaults and users own those assets and the maker protocol can't touch them so basically liabilities die assets is the psm and the user vaults what this would say is that so like on the asset side you have two buckets it's the psm in the user vaults this would kind of create like a third bucket so you'd have die as the liabilities and then the third bucket would be you have user vaults the psf and then you have like what what maker folks think of as like safe instruments so this would be like things that generate yields very small amount of yield highly liquid like liquid within a couple of minutes um and that would be like short-term data yes for example like

three-month t-bills yeah so yeah yeah i think the biggest um the biggest concern with this deal is like where is coinbase generating the yield um because if they are if they're doing something that feels safe like kind of similar to t-bill investing like that's probably fine that's a good thing whatever if it's something like unsecured lending to crypto market makers that's probably not a good thing and i probably wouldn't vote for that so i think that's like i think that's the unanswered thing is where does coinbase generate this yield i mean maybe even like a more umbrella question is like what's the benefit here at coinbase which is kind of the same same thing right what like how would they use this uscc how would they generate an additional in addition to the 24 that they have in cost how would they make a

spread on that like yeah they they can it's like any bank it's like they can they give out one and a half percent and they're gonna make more than one percent one and a half percent that's what i was going to say it's like any it's a bank you know the bank well it's that interest mark it's a net interest margin business as well so they're making spread on that um you know i feel like the last time we played this game we broke basically everything in crypto like i like i so i think it's there's always a question of what they're doing with this money um and i hope they're just putting it into t-bills or like you know the 10-year which is like yielding you know 3.4 i hope they're not just like turning around and lending this on a like on or

no collateral basis to funds uh probably it's a mix like at the end of the day but the reason i like this proposal for maker specifically is because it helps its regulatory resilience like if uh if uh coinbase is holding all the usdc and then the treasury department sanctions the psm the the maker uh like you know contract apparatus uh like you now have to kind of deal with coinbase as well like that usdc came from maker um it just makes it gives at least you know maker uh it ropes coinbase into their corner and makes them kind of play defense on their behalf so i really do like that um it's also kind of like a

lightweight version of the uh the rune proposal that he put forward uh two weeks ago like he's talking about like you know getting a bunch of youth and going yield farming with it like this is like all right let's just send the usdc to coinbase and generate 1.5 so it feels like a decent middle ground um but again like maker maker has like this like i can't tell if it's really good or really bad governance where like it seems like a million things are happening at the same time and it's kind of like going off in all these different directions like what part of like the phoenix you know max decentralization playbook is like sending all your usdc to coinbase um like yeah some of it feels a little bit confusing i was gonna say this feels like total at odds to roone's proposal based on that last point in general i

mean this is like literally the opposite direction which is let's go more in the put the stuff into centralized custodians and you know just one comment on on coinbase in general you know we use coinbase at framework and um you know they they are really upstanding in terms of you know their relationships with their uh lenders and providers and uh customers partners i i would not be nearly as concerned with this type of lending as i would be something you know historically at least like the celsius stuff that has been unraveling so i'm not nearly as concerned about you know us playing the same game again um but this i think the big point here is that this and we're going to see how people view it but this is in the total

opposite direction to runes post in my mind but isn't roone's post he's like for the next three years there's one though there's one north star now accumulate as much eath as humanly possible and we can do things that like aren't as decentralized like bring on real world assets like do basically basically my reading of bruins thing his updated one last week or two weeks ago was like do anything humanly possible to get as much crypto native collateral as possible as much eath as possible then in three years we can like pull things back now i don't think things will actually get pulled back in three years but i think that's like the north star in in his mind so and and by the way like usdc like they're already using real world at usdc is just a wrapper on t-bills so it's

uh it's already like you already have these t-bills you know like t-bills on chain or like 10-year notes on chain like not synthetically because that's like basically illegal but you know like a real representation of them the problem that they're trying to solve here is like maker can't talk to the outside world they need someone to do it on their behalf um and like i think that's a pretty profitable position for coinbase to be in um same with all of these other centralized exchanges like just the amount of capital creation that's going to happen in crypto is going to be quite large and then interfacing with the traditional world is going to be a big opportunity um i think this is like a move that like fits with runes proposal it's a very light version but it gives them room to expand it where like what if they send

coinbase like a billion die in a year you know coinbase now has to go out and defend die and you know in the same cases tornado cash like go bankroll lawsuits and like you generally want the most finance player to be fighting the biggest battles and that's certainly not maker and it certainly is coinbase and so i really like it i agree you know to go back to this uh that it is a timing thing and it's not necessarily ultimately at odds with the rune post but to one of the things that vance can have touched on but to bring it back is like who signs the legal agreement on behalf of maker like it's not like you're gonna have you know a lending agreement with coinbase without some sort of legal agreement or some sort of agreement in general is every single maker holder expected to vote and like

sign their name on the dotted line you know like there's this there's all the details of how you bridge digital you know on chain with something that's centralized off chain that yeah are yet to be discovered yeah i mean i think within these dows i will say any any doubt you dig deep enough there's usually one or two people behind this so like you dig into this proposal and there's it's the growth team so there are teams at makers and they're like full-time employees who work on those teams uh and so like this was the growth team and specifically with on within the growth team there's i think it was this woman jen who on the growth team who like did this deal not very different than like a block work sales person going out and selling coinbase on like a sponsorship deal or something you have a

cell phone you know so but it is very different in that you you have i mean this is like legal structure question like one of the biggest one of the biggest dows out there like one of the biggest d5 protocols we were we were gonna sign a contract with them for something and they were like we can't sign the contract because we're gonna we have to turn into like a c corp and we're going through that process now i was like interesting so wow not a doubt they're like no no we're still going to like keep our name like the x dao but uh we have this new idea for you oh they're like it's this game they're like it became too big of an issue to sign contracts and like it was really preventing our growth so but i think that's that's right there and like

this maker thing and all this this this is the most important question in crypto right now like this is the biggest dichotomy is like the people who are basically saying like everything needs to stay super stay super decentralized like create censorship resistant platforms uh at the sacrifice and detriment of like maybe expanding your your market and gaining market share and things like that and then the other folks are maybe saying like okay i'm a dow but like man my market share is 10 i could be like 50 by the end of this bear if i just like centralized a little more create created permissioned pools and like created a c corp and like those are very at odds with each other and you're seeing that pop up every single week all over the space this this also may be like more of a bear market phenomenon

where like the ten years yielding more than like basically yeah um so like you know in bear market you see higher yields outside you see capital outflows but not really like i mean there have been a lot of stable point redemptions but there's still a ton of them in the bear market you just see the opposite or in the bull market is the opposite you see the capital flow in um and yeah yeah i mean like in the bull market maker was not sending you know usdc to coinbase um that's for sure so some of these things can pass as well you know you stay in crypto long enough you see you know the seasons change i thought that was a funny uh thing like because a year ago everyone was talking about yield being the trojan horse that was going to draw you know uh you know

capital into crypto and now the business bottle has essentially flipped into importing tradify yields into crypto which is just like a funny complete flipping of that narrative but maybe that's just a temporary bear market thing because it makes sense like crypto's higher growth it should have higher yields yeah i would think well i mean this goes back to real versus nominal yield how much of those yields uh in the bull market were real yeah well yeah yeah but even in trad fights like deeply negative real yields so by the way they're putting this money into three month t-bills i think it is um the three-month t-bill's at like 2.9 percent so coin b like coinbase is basically that's a 1.4 spread that they're making

14 million whatever call it a day yeah call it a day yeah do you guys think um there was an article of financial times did an article a little while ago um it was like the the title of the article was stable coin issuers hold 80 billion dollars worth of short dated us government debt and they had this little chart of like the biggest holder of t bills uh it was pretty funny to see like circle was above uh berkshire hathaway on that chart which is pretty well actually um but uh do you guys think that's a positive or a negative thing um because on the on the one hand you know i what i've kind of heard from analysts in the like guys like jim bianco has made this point that you know regulators

start to be very worried when entities hold that many t-bills because what they're worried about is a proverbial like run on the bank so to speak right what they're really worried about is like uh hey like what if you know basically usdc faces a flood of redemptions and then you have to sell you know an enormous amount of security like treasuries basically and like that's fine today even like 80 billion is like a lot but look at how fast usdc expanded like that could be 500 billion or there are money market funds like a trillion you know uh so like i think that's the on the one hand it could be like invite more regulation but on the other hand maybe it's like the us government just wakes up and is like hey we are planning on running a trillion dollar deficit for the next forever uh

and we need people to buy these bills so like this is actually kind of a convenient thing you know what i mean like i kind of see it going either way you can you can buy them but like if you need to sell them just like let us know because let's give a sweater like it's like oh you're concerned about this like high yielding asset and like everyone buying it in the underlying liquidity like sounds kind of familiar yeah um i don't think this is like a problem in the next you know 10 years but i don't know seeing this year where bonds had their worst years since literally the civil war in the us you're like okay cool if this pillar goes like what else are we investing in just like stocks and crypto like how does this work yeah it's kind of remarkable how little of this has been

kind of like thought out and planned especially within the context of like massive trade deficits interest rates rising and just like qt nuking the liquidity and treasury markets i don't know like seems like you probably want more people to buy them and if they need to sell them like you should probably figure out a way to interface with them instead of just like holding them at arm's length and like not allowing them to touch the traditional financial system because like selling 80 billion of spot you know t-bills i don't know how that goes down probably not that smoothly if you need to do it i think that last point's the the best one in that uh they're now forced to take you seriously you have to be someone that they want and need to do business with and so because of that they can't stamp you out

there there's existential threats to them if they were to do something draconian and and onerous in it and so i think there's that but then you know you get taken seriously and and everybody's always talking about like oh no regulation it's going to be terrible like we're going to kill the industry bad regulation will kill the industry good regulation could make the industry and i think that that's where we really need to actually like be sensible in in terms of you know it's not it's not a black and white situation and like for this industry to grow as we've seen over the last few months like certain things should have been regulated probably um and i i think we should be at least willing to welcome that if if we want to see this thing grow to the size of i think

we all do side note on regulation um i actually i was listening to this this podcast called acquired i know if you guys ever listen it's a great great podcast they did this episode on standard oil which everyone should go back and listen to it's a phenomenal story but one thing that blew my mind was you know when he was when john rockefeller was doing this back in you know late 1870s 1880s it was actually illegal to do business in multiple states you know that how wild is that so they got around it by doing this thing they had like a trust and they were like oh yeah there's going to be a trust and there are trustees and the trustees leveraged something called a joint stock company which like no one had leveraged in the 200 years since it got created and like they did all these things uh

that were very like not technically in the spirit of the law but they found this weird and they had to act and they you know they took pains to like make it seem like they were not directors right of this big thing just reminded me um very much of like how dows like bending over backwards to not you know to appear like they're operating in a different way than they might actually be today and eventually the uh you know they broke up standard oil but then he basically wrote the playbook for what the modern day corporation looks like so he was kind of right at the end of the day but there was some friction in between getting from point a to point b i mean there's so many funny cases of this over time like cryptography used to be uh regarded as like a like a weapon

and like you know we have people on our team who instead of like sending their cryptography over the internet back in the day they would you know print it out and fax it because that was like how you could like communicate your work with other people um it was illegal to do commerce on the internet until the late 90s um like there were all these bills and all these pieces of regulation that made the internet and cryptography possible and like this is probably you know a good segue to the the kind of like tornado cache uh sanctions like this is always how it was gonna happen uh or the tornado cash velocity like this is always how it was gonna happen like something was gonna be bad or the administration would regard it as bad we would fight it with a lawsuit and you

know win or lose like we're gonna have more clarity and i think like i would put more odds on the winning side but that's how we kind of move the industry forward like it it's unfortunate that it has to be at the cost of like people in jail and stuff like that but like these are the battles that are kind of necessary to fight in order to push the space forward yeah um yeah i think the one thing that people almost like treat as a constant um or like never consider the fact that actually crypto could get so big that we just change a lot of the existing regulation and the way that we think and that's like i know that sounds a little extreme that's like kind of my base case you know there's a lot of stuff that i think if people like really sat down and

thought about it like that doesn't make a whole lot of sense the way we do kyc there are all these studies about how inefficient it really is right i think um you know actually after this this you know this sell-off in the beginning of this year you look at where a lot of like tech giant like huge success stories like twitter and snapchat and pinterest like where they ipo'd versus where they're at today it's like level or down it's nuts so it's like all of that value got created in the private markets and i i just don't think that's fair to be excluding people from frankly like i think that changes philosophically agree with you uh i mean i think even brian armstrong from coinbase said uh and he's been over the course of at least the last

four or five years he's always said uh we have the rulebook we should just operate in the confines of the rulebook in the last couple of years or in the last year in particular i think he's he's totally changed his tone um you know we probably need new rules i don't know if it means we need a new regulator but you can't put square pages into round holes consistently when we're dealing with regulations and laws that existed decades or potentially even centuries ago uh we're talking about a new asset class that existed less than 10 years ago in earnest yeah like like the the financial security apparatus is basically transition to the spectrum of like safety or opportunity and there is like some truth to the meme of like you know you'll eat the bugs and you'll watch the netflix and like you know but at least

you'll be safe um and your life may not go anywhere but like you know you're gonna be super safe um on the other side of that spectrum is like it's kind of open you know there's more opportunity there's more danger you know you might not be as safe and like we've gone so far over to the side of like safety and you know eating the bugs that i am i'm hopeful that there's you know a pendulum swing uh in the process but you know a lot of this is post 911 patriot act yeah and that's not going anywhere that's definitely not going to work but you know one last thought here is you know if you just look at d5 and you say okay composability transparency and global access are probably the the three biggest components tenants of what makes d5 powerful or the promise of d5 you can

maintain basically all of that in the same structure as financial services as just today and have the advantages that make it such that you know i i truly believe that d5 will ultimately be on the right side of regulatory history here because it provides a better system for what financial services should enable right you know if you have transparent transparency if the role of financial oversight is to monitor and guard and protect against you know opaque financial institutions well if you get rid of the opacity and you add transparency that's a huge advantage and i think there's very few people outside of this industry that get that right now i've got one closing question just to bring it back to maker and then we can move on to because i want to talk about

binance and their busd they're stable but what is the you know from a first principle standpoint what uh why would someone own and hold die i suppose uh if it really is something that's just backed by usdc then isn't it just kind of usdc with extra steps like what's the first principle's reason for why die should exist if we go on this route uh it's cheaper um in terms of if you're like die is mostly a stable coin that uh has a utility uh for lending and borrowing you know like you get die it's cheaper than ave it's cheaper than the centralized desks so check um

there's no receipt token so like in the us there's this weird thing where like if you get a receipt token potentially that's like a taxable event um with maker there is no receipt token and so that isn't you know you're just getting the stable point against it and so like that gives people marginally more uh confidence um other than that you know they're kind of apples to apples like we kind of most interact with the usdc um and i think there's also like additional risk of like you know the roadmap for usdc is pretty clear the roadmap for maker is like a million different things on you know any given day so yeah especially if it stop if it stops being

not pegged to the or pegged to the dollar like at least we would think differently about putting assets there i'd like to give a shout out to jeremy lair jeremy alaire like is i remember do you remember in 2018 it was like they were the darling remember goldman invested in them they had they had poloniex they had like all these different businesses and then it was like they're on the down there was the sheet that got passed around their their their like private stock was trading like 85 discount or something and they just went all in on this one thing and absolutely crushed it so shout out to them legends and cms came out of there one of the biggest props yeah one of the biggest pro otc desks they had the like uh a competitive app to coinbase like a great retail wallet too

yeah bob loneax or us i don't know so bob poloniex sold poloniex yeah they got instrumental yeah they rented it they rented it yeah the other interesting thing that i've i've seen from circle uh past like you know couple hours jeremy alaire kind of like teasing that like maybe usdc gets into the bridge game so smart where it's so fun it's so smart right like you just have like the on either side of the bridge you can just like mint usdc and burn it on the other one um that's such a no-brainer and such an improvement on what exists like it's it's inevitable that coinbase or circle or someone gets into the bridging space i think i like it i think circle is going to be you know a really awesome

company i do worry about like the amount of control that they're getting over the space like if they're dictating our fourth choice and also like our bridge choice yeah like at some point you know they're going to be kind of like the financial security apparatus themselves and yeah i just i there's a there's a very like the the line they're walking is so thin it's like you know like half tradify half the time like the other half like your d5 only jeremy layer could really do that i don't i think uh just from a higher level perspective like i think um i don't think that crypto ever gets enormous and successful without at least like the tacit if begrudging approval of the united states like i do think it's important to i think you have

to build uh you should be building like censorship resistant architecture and everything but we live in a world you know i i don't know i'm not ready to like live 100 in the bits like i don't know when i take my like when i leave this podcast like i'm gonna be in new york you know like i you know so i don't i don't know i i hear i hear these arguments and i agree with them on a first principles level but it's also like i'm a citizen of the us too and like i don't believe they're evil and i think if we build if we um i i really like the framework of like being big enough and like owning enough treasuries and like hey like we're a force to be reckoned with like take us seriously and by the way like we're gonna kind of do things how we

want is that cool i i'm not 100 sure we ever get to the full cipher punk vision of like entirely uh i just don't see a really uh a road map for doing that yeah but but mike this year in the behind this right now in the bahamas it's super nice that's true dude that's true yeah what what if that vision only works in the bahamas you know that's not the end of the world either i guess i guess that's not i'm i'm a believer in the crypto cypherpunk uh vision of the future i think it needs to be both um but i think like you know if eth you know had gone to 10k at the time uh of last bull market with the amount of value locked in defy and even if it does in the future that's more than a trillion dollars of value locked

in default like at some point you just got to call a win a win like we don't need to be like a 100 trillion dollar asset class to be like you know considered successful we can do it because the assets themselves have value and they're experiencing this like exponential move in their prices every few years and people use it as money like you know we we kind of do need them we kind of don't need them i think we can pick our battles but over the long term um i think the biggest outcome is integration and i mean i would say probably the the best entrepreneurs that we see that are building at least starting in the in the us are basically ready at a moment's notice to pack up and move and it's just kind of that mentality that you have to have right now because i i

don't think you could possibly i mean i'm sure you could come up with one but it's it's hard to imagine a more um uh aggressive and uh detracting regulatory environment in the u.s right now for crypto or anything related to crypto um and in a lot of ways rightfully so especially what's happened over the last couple of months with centralized crypto lending in particular but that's that's one bad apple one bad case um and it doesn't represent the entire industry so right now you kind of have to but and and that's where this like crypto punk version of the future has to has to exist because that's right now kind of the only logical and viable one uh but eventually if we want an order of magnitude higher than what we're talking

about or multiple orders of magnitude larger it's gonna have to be something that that threads the needle between the two let's um uh i want to get you guys view on binance and then just kind of like the stable coin space like writ large uh we haven't really i don't think we've talked on the show about like d5 protocols launching their own stables but just to give you an overview of what happened uh this week so starting september 29th binance is automatically converting usdc usdp and tusd stablecoin balances uh into new uh binance you know busd deposits at a ratio of one to one uh they said this is to enhance liquidity and capital efficiency for users uh basically if you're a user of binance you'll still be able to withdraw from your

you know chosen centralized stablecoin but the amount is just going to be deducted from your busd balance um uh notably can you throw the volume of these pairs up or just like coin gecko you know binance see their biggest markets i mean on the surface i know that this kind of got you know negative feedback and i actually had a couple of people text me and be like hey are you worried about usdc like it seems like it's being de-listed from finance i don't actually read that as being the case here like i actually think this is a really positive thing because it you know it basically unifies all the all the trading pairs within binance against the single asset which is busd so you don't have the fragmentation which i think i'm

sure we're going to see here in a minute um and you're still able to use you know deposit and withdraw all the different stable coins or just you know on on the platform represented as a different asset seems seems like a positive move yep i mean two thoughts the first one is tether is just like getting taken to the cleaners um you know that like tether was always kind of like the asia stable coin uh and like where what you would trade on finance when you traded on finance busd was kind of always this thing where you'd be like hey like i can use that maybe i'll get a reduction fees but like generally didn't really care about it tether is like probably in danger from this um in a significant way and my second thought is like this doesn't

really matter for usd my third thought is like the ecosystems are fragmenting right like western phi is like usdc like asia cz phi is like busd and tether is kind of like in no man's land um but yeah the ecosystem is fragmenting and this is kind of like one thing that just solidifies that here's a weird aspect of this is that but busd is just white labeled usdp or pusd basically paxos is stablecoin so binance and coin is just white labeled paxo stable coin which is actually the most regulated stable coin so it's the only stable coin that's regulated by the nydfs or something like it's got all the regulations because paxos deep in with

the regulators um so like you know i feel like binance is usually kind of uh a little maybe plays it fast and loose with the regulators but they're but their stable coin is actually just this white labeled like highly regulated stable coin it's pretty interesting it's regulated by nydfs was like one of the first stable coins to get their approval when that happened i was like what the hell is going on but it makes sense now i didn't know what the the pack says yeah i met someone from paxos at a like unrelated like dinner party thing the other day and you know whenever i meet someone from crypto i know it's like oh paxo says hey man like what's going on like good to hear like meet someone else who works in crypto is like crypto no blockchain was like yikes yikes flashback 20 to 2017

raging indictment uh right there this might be like a 3d chess move to move on on shore um for cz with binance and i i i wouldn't be surprised if there's some interesting tricks up of some slaves yeah i guess i just listened to this podcast on john rockefeller so i'm seeing the whole world through the lens of standard oil finance is just like this whale that is still just gigantic like if you just look at volumes uh i cried like dude everyone's like oh is sam banquet freed ft no dude no one's even like close to what binance is doing and you don't see him on the cover of like magazines and all that [ __ ] um the last 12 months have been the same show i i

don't think you know there's a reason why we haven't heard too much from cz but i think we undoubtedly will hear a lot from him soon yeah there's like you'll be in like a random city and you'll like turn around and just like sam's face like right in front of you like a gigantic billboard or painted on a wall it's he's like everywhere but i think uh long term those feel like the two that are going to be very competitive with each other and i think it's gonna be awesome to watch them kind of like try to like maneuver each other uh i think both have kind of like strategic mistakes uh recently like where's ftx state death product where's finances or i guess binance probably has something but like isn't quite scaled yet um where's ftx's stable coin is it coming like

you know there's a lot of stuff that ftx needs to do to to even make it dent and finance um yeah it's a bit more of like an optical illusion at this point i've got an i've got an open question uh for maybe you guys know the answer to this actually but when um when coinbase had their earnings a little you know because the narrative that brian is trying to push right is that we're transitioning away from this transaction based business where uh you know the spread that we take is going to fall over a period of time to something that's more like a you know they've rolled out something like a subscription but really they had this like 150 million dollar line item on their quarterly top line which was like i forget what they called it like services or something like that and it

basically the you know they didn't actually detail what this was but i think that's the income that they're generating from their uh like east staking like e-staking that you can do on the platform but i ca i have a lot of trouble backing into that number actually um because you can see how much eath they have uh and it doesn't really make sense and i remember that they bought bison trails a little while ago and bison trails does uh you know they're like the back end for like kraken's staked eath product right the the eat that you steak on christmas trails is the back end for cracking steak to eat are you sure about that i'm not sure that that's correct no no staked staked is the back end for exactly because it's cracking a card

stick yeah but that was post but remember that was post they already had a staked product at that time they they bought steaks and they integrated it into something and i'm pretty sure that bison trails is interesting it does it doesn't matter the point the point being maybe someone can help explain what that line item is because there was also this uh expense cost that was like associated with that revenue which basically outweighed sam bankman freed thus in a psyop you know like basically pointed this out to everyone and no one no one really caught on to it but he was basically like hey that 150 million of that revenue that they generated here's 150 million expense that's not associated that's not associated with

anything uh yeah so um if anyone could explain uh anyone who has any knowledge i'd be very curious for because i had a lot of trouble backing into that that line i mean i i think one you know i i don't have the answer off top of my head but um or nor do i have any information about it but i think it is interesting to think about the transition that coinbase is about to go through and thinking through where their long-term strategic value is going to be derived from i'm hard-pressed to see it anywhere other than staking and kind of the services that you could get from staking and having assets on chain uh or having assets on on the platform and i know that they've started to roll out cb eth um you know there's

discussion around them having sort of an institutional product as well um i i would i i think you know staking is gonna become really the dominant factor here and they bought bison trails coinbase cloud you know there's a lot of opportunity here for them to move in the services uh in sustainable revenue direction in lieu of transaction fees i think have you guys heard of alluvial we have we have yeah so they have that whole partnership right that they were supposed to be and like they just kind of rolled out their own alternative to olivia which is like cb eth um well i i think there is sort of a distinction here um i believe cb eth is taking 25 percent of the rewards and that is sort of the cut

that you can expect if you're using cb probably something that is fine for retail to get that cb moniker on your on your eth probably not something that's going to fly for institutions i i wouldn't be surprised if they're two separate products interesting okay cool before we move on from uh ftx or binance let me show you guys the traffic differences for the two companies just to show you like this is their web traffic so this is last month binance had 90 million visits ftx had 11 million which is actually really impressive for ftx um yeah it's actually higher than i thought it would be 17 million unique visitors which is just nuts um ftx had two right like if you look at the geography i bet

actually if you add coinbase i bet coinbase would be in the lead in the u.s and then yeah let's see yeah like so here's here's coinbase's business just the us right and then actually ftx is bigger than coinbase and russia turkey argentina ukraine everywhere else but binance has a 90 market share so i mean it just goes to show you like you you can't you can't like just advertise your way to having like a global brand you know you can get tom brady you can get matt damon you can get you know whoever you want but you know the time in the market and just like your first mover advantage and compounding that and like the you know every single time coinbase is mentioned on cnbc like 10 other people hear about it

it's it's uh yeah i mean i think these are how the rankings are going to stay probably oh my god look at this number it doesn't feel coin market cap 140 million last month so keep in mind right remember binance ends them so right i mean all of the like all of these like thinking about coin market cap versus binance coin market cap you go you check on the website you see the prices these days you just usually immediately exit um finance it's like you're just like you're going there you're logging into your account you're placing a trade like the fact that they have 75 of the volume of coin market cap is wild it's such like a more engaged project that product that i would have expected that to be much lower than coin market yeah i

will say that you can buy your way to success and ftx for how new they've come onto the scene totally but what what are the like i i think ftx is going to be super successful it's a question of like what do you do now that you've done all the things like do you have tom brady like jump through a hoop on fire on like kisses for 20 seconds [Laughter] full makeout baby kiss me like a man we're definitely keeping all of this yeah um i i hear you though i agree i'm not you know what actually i think is also

interesting to draw a distinction between the type of marketing that you can do as like a c5 uh as a c5 company in crypto versus like what would work in for like a protocol you know like we talked about like i think one of the criticisms like yield farming as a customer acquisition strategy is that it's really expensive but i would argue there's like you couldn't have translated that into just dollars to spend and advertised and like got companies to where they were right like the uni-swap airdrop it's like people love to be like oh it's like 150 million or whatever if they had spent 150 million dollars on advertising what would that have done nothing like i just don't think it's even possible you just hit the nail on the head of the the network effects that are derived from tokens

that's the power right there it makes sense it makes sense though like equity is much more expensive than dollars um so like it's not it's kind of like you probably spent like you know a billion on these airdrops versus like the 150 million cash equivalent um yeah i think one thing just to kind of tie some of the previous points together one thing that will differentiate between the three you know coinbase ftx binance going forward is product differentiation if you have the ability to have certain assets certain products that others don't in certain geographies that will be a distinct advantage now they're all three large enough to have enough captive audience to be able to have

something that scales like let's say you can start trading options on securities on ftx us like i don't know if that's in the market in the in the roadmap but like let's just say like you can do that right that changes the dynamic of the ftx because like all the people who potentially want robinhood access now just go to ftx because you can get a better service better product there like that i think is the differentiating part going forward but if you if you really break it down who's going to be best positioned to be able to go after these opportunities is it the one that's based in the the regulatory unfriendly us and trying to work with regulators or the one that's based offshore that has the ability to operate freely and or not freely but a little bit more freely you know like there's a distinct advantage

you know what else was a telling um i thought it was very interesting the way that block five versus celsius got treated by regulators like celsius like this is this is supposed to be the strategy right like you if you do everything by the book then the regulator should you know if if you're sitting down like being a strategy of this then the regular should call you'd be like hey seems like you guys are putting in best effort like we don't really get this space like what should the rules be and like you would ideally be able to help influence what those rules are and it seems like blockfi was basically trying to take that tack and strategy and do everything by the book and celsius was just kind of like yoloing into yield but like no pretense of being you know regulated or doing

anything by the books whatsoever and how did it work out for those two strategies block five got 100 million dollar slap on the wrist which was actually a huge deal for them at a time when they really probably needed that money um i guess celsius blew up because it was celsius but like you know what i mean they kind of got punished for doing the right thing so to speak so what's the incentive i block five wishes they had that hundred million dollars i mean uh it doesn't always apply but sometimes it's better to ask for forgiveness than permission i know we're i know we've been doing this for a while uh i want can we i want to get you guys to take on this so rare thing can we talk about that yes oh man let's bring it back to the pre-framework days uh

so contacts uh for those that maybe don't know vance and i prior to starting framework started an nft platform called hash leads that uh i think was the first license first major ip rights holder for blockchain based digital collectible we signed a contract with the nfl pa and had digital collectibles nfts representing uh nfl players in 2018 and 2019. i'd say there's a lot of lessons from that experience which we don't need to get into here one of them is the ip rights process and what happened this week which is hilarious you know that everybody seems

so surprised by it so rare who's been historically an epl english premier league focused platform for their nft platform uh started to get into uh the nba and taking some share and and some uh of the ip uh probably ipvalue let's say from uh other existing mba partners um and you know this is exactly how the ip rights usually play out and you know we we've saw this firsthand with the way that our deal was struck there were multiple players um multiple deals that that were made we were the only one that ended up signing it and historically the way that it works is you have multiple rights holders for the

same category usually in the like three to five range but not more than that and then over time they whittle it down and eventually have an exclusive contract um and and so this is i think just um at least from our experience what we would have expected to happen exactly is the way that it did um but unfortunate for those that had assets on other platforms that they thought they had exclusivity yeah it's uh if you're a user and you think about like the physical cards like the tops cards the baseball cards versus the panini baseball cards um you know there's a chance that in ten years uh maybe panini doesn't and they're one of the cards companies or maybe tops doesn't review their license great news you still got the physical card sitting

in your shoe box you know it probably gets more valuable because it's been discontinued here the nft they don't have the rights to those pictures anymore those colors those players all of the on-field photography like those just have to go to zero and you have to make cards blank and so you know it feels like the legacy ip holders and like the decentralized collectible movement are just like fundamentally at odds because one party just doesn't really get it and i think there's good reason right like you don't want to just like license your ip in perpetuity to somebody um and so i think that's the reason that you know all of the ip that we think is the most valuable has to be created by people that are you know in crypto a startup you know like a larger company but

that's where all the interesting long-term stuff is going to come from like the crypto punks nobody's ever going to tell you that you don't own your crypto punk again that's the difference i have a just because i guess this is coming to the forefront like a whole bunch of way just talking about ip if you guys had to like divide out value creation in between like the ip itself and then all of the work that goes into propagating the ip right so like building an infrastructure i'd like to invest in and buy more ip distribute that ip whatever like how would you break out the value there i guess what do you mean by that example the point the point i'm trying to get at is a lot of the i guess what i'm what i'm thinking about is um i guess what i was thinking a lot about

recently is like pseudoswap so pseudo did their token we don't need to like talk but it's not important but like it is this whole narrative right now of like uh you know is our nfts jpegs with or like all coins with pictures or is this like a new way for artists to like monetize their ip and uh i think there's a fundamental misunderstanding like ip's really important like the stuff that you create but then there's an enormous amount of work and value that gets created by like investing in building new ip and then distributing that ip and i think a lot of the argument that's taking place right now is just based off of a lack of understanding of the work that goes into curating investing and building new ip basically uh so that's why i was kind of

trying to get your sense of like well it was you're trying to value disney as a business like how much is their ip portfolio versus the infrastructure that goes around that ip that you make a park right out of the idea of mickey mouse basically if you think about like uh like the physical baseball card market for instance um the value is divided into two pieces there's the value creation all the stuff that happens on the field with the players their popularity the sports popularity and then there's the distribution which is basically panini and tops have relationships with all the card expos and all the card trading shops and like the nfl and the nba and the mlb are not set up to do that they don't want to do that and so like all of the val like the

value is kind of like mostly created on the field but like there's a substantial chunk of it that sits with the distributors in crypto the distributors basically have no value um you have a bilateral connection with your user i can send them tokens i can send them nfts i can message them there is nobody that can shut off my access to that person if i'm a brand and so like that's why nfts in my mind are able to charge you know and give back to the artist such a large percentage is because like the distributors have just been cut out um and you know like do i think pseudoswap is like you know an anthem to like the nft movement kind of like you know the whole the whole idea is like enough value should be created and captured by the creator

to give them some sort of share uh so i wouldn't be surprised to see other markets that are more vertical kind of like take a hard stance on this in terms of opinion and just try to like curate folks that really respect and want that both from the artist and customer side i'll kind of take maybe a slightly separate perspective or different perspective in that you have gotten rid of the distributors or frankly like the base layer blockchains are now the distributors and the users pay for them directly so like get that out of the the value chain but what has changed is you've basically shifted all of that towards what's what's the utility of these assets you know and in the case of so rare you know they built this game and they're building more games and and supposedly you're going to be able to use these

nfds mba nfts in the games that they're building that was also the case for us with hashtags who built like a fantasy football game that you could collect and buy sell and trade these these nfts so that you play them uh and win more in in the game i think you kind of have to shift from just having these be static collectibles that either increase or decrease in value over time to being something that has to have its value derived basically from pure utility and utility comes from like the software that the nft has itself the creator's ability to integrate it into applications that they build or basically the the potential to have integrations outside of the ecosystem and so you know the the portability or the um the overlapping of other applications i think is an important one but it does shift it's not necessarily

the supplier it's it's more of like it's more of the functionality that is imbued within the nft that drives the value yeah i don't have much to add to this does anyone have plays of the week tweets of the week memes of the week names of the week i have a meme i created it i went i went silent for like 10 minutes because i was creating a meme yeah hold on how'd we do kim the go give him the goat a lot of text on this one a lot of text too much text for the meme yeah so accurate though i like it i like it i'm trying to think of other i was trying to fit some like middle of the bell curve meme in there there's also did you guys see uh

this hilarious video this guy saw hillbloom tweeted this video of um the first astronauts the outtakes of the astronauts do you see this no this was amazing this is outtakes of nasa astronauts trying to walk on the moon oh i've seen this before yeah is so good it's so good i thought uh the moon landing was faked i thought this was a stanley kubrick production i have it on good authority from the internet [Music] i mean the moon does look pretty flat here so mike you got one no i honestly might play it like play i don't have a meme of the week my play of the week is just i actually um i think it's respect to kim for starting

the private equity fund i also think it's respect to the carlisle guy who went on a limb and did this because if it doesn't work everyone's gonna be like yeah dude you started fun with kim kardashian you know uh so i i just have respect i just have respect for the entire endeavor i think it's i love it i i wish them both success honestly that's why it's cool she's doing in the bear market too like that that's super bass that's how you know she's savvy a great yeah all right fellas i think we can call it there fun see same time next week take it easy [Music] you