The Two Biggest Issues In Crypto Today | Weekly Roundup

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Crypto was easy on a relative basis for venture for a long time. You could invest in anything at the early stages and the token would launch or people would sell the token. And this is why there was so much discontent on the timeline about, hey, we don't have opportunities as the venture capitalists do. And now when people are no longer making money, it has to consolidate to the few that are. You're going to see a few funds raise a bunch of money and you're going to see a bunch of other funds um kind of at that small niche scale and everyone else is going to die. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of

Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed. All right, everyone. What's up? Good to be back. Welcome back. This is where April 2nd ratings just go parabolic >> cuz you got to tank the show. >> You tank the show. [laughter] >> This is a This is the pivot that we all need coming at a time where the industry >> we we really needed a moderator. Like Santi and I, we're like ideas guys, okay? We're not we're not running ourselves in a straight line. Like we're not making sure that we're, you know, on schedule. So, we need we need Jason to to keep us.

>> As long as you don't compare me to Jason Calcanis, I will be I'm happy to be your moderator. But just just never make that comparison. >> I I might have done that during the the live uh live pod that um absolutely nobody listened to or was at. >> So, I called Mike. I was like, "Dude, we got to get these live podcasts." By the way, thanks for everyone who attended death. It was great. 3,000 of you. Thanks for the 12 of you who came to our Santi for th I mean for those who weren't there which was you know 2,900 you know 80 of you of the you know 3,000 Santi forced all of his employees to come watch them >> watch the 100 whatever% inversion was like 10% or 15% of the

people in the audience and people kept leaving during the chat it was bad um state of the industry I don't think we need to cover macro too much that just paints the picture of where we are. >> So, I called Mike. I was like, "Dude, we can't put these live podcasts at the very at 4:30 p.m. on the last day of the conference." I was like, "We only had 12 people in the audience." He's He's like, "I had zero for Beler." [laughter] He's like, "We did a podcast for no people in the audience, but we sat on stage." [clears throat] So, at least Empire's overtaking poker.

But Jana, you remember in the early days we kept people we kept telling people like because we've been through now five years in the running at least when I joined. >> Um >> we've been through a lot and it was like we're going to do this every week. >> Buller bear we're going to keep [snorts] doing this. >> Honestly really rewarding just doing things. >> I I have a I have a lot of friends and founders and investors who are like I want to get into the podcast game. How do I like what do I need to do? And I was like, you just need to show up every single week and just even when people your listeners falls off or you don't have a guest episode, like you just got to publish the episode and that I mean that's the Yeah, that's the hardest

part. So, >> do you think we're getting better or worse? >> I mean I mean the numbers >> quality numbers >> I mean it's you guys skewed the numbers the the numbers tanked without me obviously. So, >> okay, let me ask you a question now. So I I started joining full-time in I guess it was like June or July >> actually our engagement so you can track how many people listen to the end of an episode since Rob has joined pe more people listen to the end of an episode. >> There you go. They want to hear the week >> that that Yano is not sharing the qu the actual data because it's it's it's not as hard you know it's like how many more people are listening and Rob we

sympathize because there's a lot of noise you could point to I know what you're going to say which is dude the market hasn't been great since I joined the the podcast so the fact >> that's not what I was going to say I was gonna say that is not what I was gonna say I was gonna say clearly the pod did better after I joined until the market tanked and now it's just a market issue. >> No, the real the real differentiator for empire. You guys don't realize I did this show by myself for a whole year and and no, I wanted to build the how I built this for crypto. I I don't know if you guys ever listen to that podcast, but I was like all these great stories like Brian Armstrong and Jeremy Aair like I want to do the how I built this.

Turns out nobody cared. No, I mean also I was just really boring by myself. Incredibly boring by myself actually. and Santi joined and uh you know we were actually debating at one point I won't share the too many details we like should we give this guy a little like rev share of this thing and then Santi joined and the show went [snorts and laughter] >> there was rev share on the table was I supposed to get rev share >> at at the time there was Rob back back down back down >> Rob you're still in the probation period so like >> Rob we got to get you on the we got to get you on the you're not even on the cover my guy we gota you're still auditioning >> how am I still on the cover. That's not my fault.

>> Well, you know, you're still in the probation period and we're still gauging if the quality of the conversation's there and you know, you know, you keep showing up every week, Robin. The the discourse needs to go up and up. >> Yeah. >> I'm looking for Freedberg over here. So, >> yeah, >> that's what this >> If you keep investing in inversion, then uh you know, we'll put you on the cover. [laughter] >> All right, let's let's get into the topics. We got a All right, here's what I want to cover this week. We've got the drift hack. Um yeah, we've got the drift hack. We've got uh so Rob in your in your guys's announcement for the fund raise you called it like a crypto mass extinction and that was the cryptovc mass extinction and that was the first time I heard those terms and I've seen a

few other people now tweeting about that. Dudas was tweeting about it. Santi you're talking about tokens are trading you know secondaries for tokens are down 90 95%. So I want to talk about that. Um there's this like token to equity idea of like there we've got onchain equities but now it's you know heart and across was you know saying we're going to flip our token back into equity. There's a few other names I you know maybe can share that I think are thinking about doing that. Um there's this whole Canton versana debacle that was on Twitter and then there's obviously this Google quantum paper which um you know I feel like half the industry is brushing it off and half is like this is the most important thing that we have to address.

So, but maybe we can actually start with none of those, which is um which is stons, which is the good old the good old stock market. Santi, you tweeted um after de-risking heavily across the board since Q4, went to cash, I'm now nibbling at names I like and are down 30 to 50%, not jumping out of my seat. Don't think we've bottomed, but I'm not buying tokens, only equities. And to give maybe a little more context, right, Microsoft is down 24% year-to- date. Google down 20%, Meta is down 17%. Um Uber you know is uh you know you know you got Acman saying it's trading at this massive discount to intrinsic value right Brookfield uh is trading at a huge discount to NA like you've got you've

got these names that are down right so how are you thinking about this >> well look I [clears throat] I I'm sort of the opinion that you're never going to time markets but if you're if you have a reasonably long time horizon then you start seeing opportunities like it's just incredible edge if you just want to hold stuff for greater than a year. Um and so there are names in my shopping list that I just track and you know um you mentioned some that I like you know like you know Google and the the entire software as a service industry like before being crypto full-time I was an analyst you know associate investing in enterprise software so I think the the there is a disconnect between like you know some some of these names like service now and others are just trading

at a you know pretty down um and and just multiples wise I think are are pretty compelling. selling. Um, obviously I'm interested in stuff like Western Union, which I've been very vocal about. Um, so I'm not so like going into Q4 when we started having this like I I started writing more. I obviously went to cash. I was like, look, I just don't think I'm getting paid enough to take this level of risk. Everything's alltime high. Uh, and then like I didn't have the foresight of the war in the ran and all that stuff. I just didn't feel like I was getting paid enough to be totally honest. I mean, maybe I'm allocated less than 10% of my cash back into the market. I still am not fully compelled, but I'm like accumulating, right? There's names that I like and as soon as they trade down,

um, it's really hard. Like I think you remember going back to when Solano was going down. I think you were public on the pod when it hit eight. You're like, this is a generational bottom. How many people do you think actually bought at 8, but I think you still would have done well if you bought at 20 and then you bought at 15 and you bought at 12 and you bought at eight and then like you sort of accumulate because it's, you know, we're a tweet away from the market ripping again. >> Yeah. and the straight of hormma is opening up. And so I I'm just of the opinion that if you're well capitalized, like I'm not jumping out of my seat yet, but I am willing to put some trades in and buy stuff that I just want to hold long term. Like Google I feel really

comfortable owning for multi-year periods because it's a monopoly. Like I don't think they're going to be unseated. So yeah. >> What names do you like other than Google? >> So I mean I do have a position in Google. I have a position in Western Union obviously I have a position in service now um and that's really it like specific names >> other things that I'm tracking beyond like the broader market right like the S&P um in the short list of companies that I'm tracking is this theme that I have which is crypto enabled businesses like in that bucket is CLA Robin Hood figure those three names Um I'm monitoring just

because it fits in I want to understand how they can transform their business with stable coins and tokenization. >> Um and then there's like better homes for instance I don't have a position I don't know much about it. It's just interesting that they have a facility with Sky and Framework guys invested in that. So these are businesses that I'm tracking that I like. Um but it takes time to do work on these names. So I you know it's it's Western Union have just spent so much time in the rem that I willing to take a small position in and figure is another company that we've done a lot of work. So it just just bodess well with what I'm seeing. I don't have a position in figure yet but I'm just monitoring it.

>> Yeahing the situation. >> Yeah. >> I don't know if it's as easy as Santi is making it out to be. I mean we've I mean Sunday and I talked about this too when when you weren't here Jason and like everything is just downstream from macro right now and has been all all year right and there's obviously like crypto specific issues and crypto specific >> concerns around the the token specifically and you know whether value acral and you know uh all of the things that we we're going to continue to talk about but I don't think it's so simple right now as uh you know President Trump comes out and says says, "Hey, listen.

We're the war's over." They, you know, the I think uh Iran's been very clear that, you know, they are going to they're happy to go the distance. Like there's a lot of conversation right now about uh you know, negotiation, but there's actually no negotiation going on. We're passing some, you know, some messages back and forth through uh the um the Pakistanis, but there's there's literally no direct engagement whatsoever at the moment. Um, I don't know if you guys listened to the the press conference last night, but you know, I got no confidence whatsoever in that press conference that one, this is likely to end anytime soon. I mean, it was very, uh, I think amorphous around, you know, time frame, but two, um, you you pretty much got nothing from it

around like how it would get resolved either. You know, what we would do if the trading premise would open, what that would mean for, uh, oil, uh, going forward. I think oil's back up over almost 120 bucks. The futures are down, you know, call it up a point and a half, maybe two points. I think you haven't quite seen capitulation yet from the the equity market. So, we've definitely there was some conversation I think in the news that go maybe we've seen capitulation at the end of last week because we we had a couple of really bad trading days and then we, you know, kind of we were up a point and a half yesterday or maybe two. We were up two points the day before and there was like, you know, the market very clearly wanted to rush back in uh on any sign of

good news potentially. And that means to me that people still expect that there's some possibility that this ends quickly. And even if it does end quickly, we're at the point now where we're going to have a supply shock. We're going to continue to have uh inflation work its way through the market. It's going to mean bad things for potential rate cuts. And so I think macro is going to continue to be challenged for the rest of the year to be honest. And so that means that it's not as easy as hey listen the rain war is over and everything rips for you know some extended period of time. I'm sure we'll get a relief rally but um I think all of that to be said what a talking about which is like finding names that you want to hold for the next few years who

have secular tailwinds like that is absolutely like what you should be doing right now. But if you're trading the short-term market right now, I I don't think you can be, you know, I don't think you can be in the market at all at the moment. >> I mean, you get paid, you get paid, you know, four and a quarter, four and a half to to sit on treasuries every time there's like a massive leg down. I think you're supposed to be buying the names you like, just adding to the position, not not like buy 100% of of your B, you know, rotate, but um I I totally agree with what you said. Like I I just don't think I think it was Index Ventures that sent a memo to their portfolio companies a couple a month ago or so and it's like look guys if you're a startup factor in

the fact that it's going to cost you way more for everything that you're buying right now. Have enough runway. Um so it's kind of like the Sequoia memo. I think index are really smart investors too. They've done very well. U we had Josh Wolf right on the podcast talking about nuclear uh a year or so ago. Nuclear's done really well. Um, >> he's not Index, >> is he not? >> He's Lux. He's Lux. >> Lux. Sorry. Sorry. He's Lux. >> I think it was Lux. Maybe I'm confused. But anyways, it was one of those two guys that sent out the memo. That was pretty good. >> Oh, it was Lux. Lux sent it out to >> I think it was Lux. Yeah.

>> But anyways, I think like if you're a if you're listening and you're a startup, I think you should probably bake a lot lot more conservatism in how you run your business because capital markets likely are not going to be open as much. I mean, they certainly aren't as open in crypto. Rob, you guys are one of the few that actually have capital out there to deploy, but are you uh really excited to jump out of your seat and, you know, fund? Hey, I don't think the quality is there. And if we've talked about this here, um, but you're not like jumping out of your seat to deploy.

>> Listen, we've been slow. I I'll I'll tell you. Um, >> are you slow because you you just you just got the capital like you just raised this fund or you've had it for a while? So the way venture funding works is that you do >> Yeah. So so you do like a first close and then you know you do some number of closes after that. You know usually it's anywhere from two to four total closes and then you announce the fund at the end of the final close. And so we've had capital or been deploying out of this fund for you know call it a little over a year 14 months. So, you know, it took us about 12 months start to finish to to raise the full the full fund, which is very typical. That's like a that's like actually above median in terms of how

quickly uh venture funds actually raise. And so, we're you know, we we've deployed some of the funds. Uh but we've we actually last year we were not that slow. We didn't do as high a number of deals as we have done in the past in a year, but we put a lot of money to work because we really, you know, leaned into the things that we knew were working. And and that feels to me right now like the the lesson, which is that it is easier than ever to be an entrepreneur. It is easier ever to vibe code something. It's easier to ever that to also get disrupted really quickly. It's harder than ever to get a moat in anything in software when and in the end of the day crypto is mostly just software. And so, you know, finding

things that you see kind of running away with it and piling into that is where we've we've kind of decided that the opportunity lies right now. And I think what's happened is because of the pace of which people can build and the pace of which people can build their moes that once you see someone pulling away, they pull away that much quicker. Right? the way ramp has pulled away from the rest of the markets and just left Brex behind. The way Rain is pulling away from everybody else who's doing the same thing that they are doing and we we were talking about a little bit before the pod started, but they're, you know, their month-on-month growth continues to accelerate even at, you know, at the size they are at now, which is just very very big business. And so what we've done is we've said, "Okay, well, let's

identify those. Let's wait, you know, and see where there's opportunity and then and then really pile in." And we've done that. So we we put tens of millions of dollars into a few different companies that we know are really working. Poly market ran who talked about a bunch. >> I I think it doesn't mean that we're not continuing to look at all seed deals. We're not continue to and we're not going to continue to invest in seed, but I think seed has gotten harder than it's ever been at my time doing venture investing. Yeah, I actually think Rob that's uh an extremely important point that signals this way bigger change in the industry that's happening right now, which is for 15 years, everyone is excited about the new thing, new thing, new thing, new thing, new thing. And now, and I've said it way too many times

on the podcast, but last year was this line in the sand moment. And I think we've moved into the phase of the big companies will the winners, there are winners, and the winners are going to win really big. And I'm seeing that in the in the venture space right now is yeah, I mean it's not just Dragonfly, right? It's people are instead of betting on the new L1 or the new L2 or the new DeFi app, it's like, hey, I think we've actually got like three to five winners in our portfolio. Let's just put 100 million into each of them or 50 or 20. So, um, yeah, it's interesting and you're seeing it behind the scenes, too. Like major, I mean, a lot of companies talking about going public and a lot of M&A. Um, and a lot of series A seed, even some series B

being like, I think it's time to sell this thing. Let me let me exit this business because there's just no way I can compete. >> I've gotten every month I get at least five to 10 uh crypto ventureback businesses like, hey, do you guys want to buy us from Inversion? I said, well, what am I buying here? >> Yeah. Like if you've built a business and and you haven't gotten traction like >> I mean I'm not getting I think 80% of the crypto data companies have tried to sell in the last in the last month or in the last year or two. >> Yeah, of course we've seen a lot of businesses get acquired for the equity and the token just gets deprecated like Tensor and a few others. Yeah, it's uh there's the whole cohort of companies that have raised over the last four

years that are their cash position is is low and they're shutting down or trying to find like even today I just got two companies that I invested in like four or five years ago. They're just closing shop. They just couldn't find product market fit. Um >> yeah, >> but there's no >> by the way like this is not specific >> to Yeah, this is not specific to crypto. I mean we're seeing in the traditional market too. everybody like every single fund in the world has exposure to a foundational model now like one of the three or four big foundational models right and they've had to pile into there and they piled a bunch of money in and you know that is >> everybody's aum that's what they've seen increasing I was talking to um you know we we've been talking to some IR candidates and one of the people we were

talking to a fund they were at went from 4 billion to 26 billion over like a 5year span and you you dig into why that is and it's literally a single investment that they were in early that is one of the big companies that's going to IPO this year and is going to you know do a trillion dollar plus IPO and so it's like that that's been just like pile in pile in pile and that's what we've done and and that's what we've seen work and and I think broadly the biggest outcomes are getting bigger the uh amount of competition at the earlier stage is getting tougher and breaking out of that early stage that seed series A l is harder than ever but the ones who do who are going to win big. And so that's why I think it's you've seen a

lot of people like us spend a little bit more time there. But the interesting thing for me and I was having this discussion with um somebody yesterday which is that it doesn't actually change my job that much because to be good and to win against you know you know we're seeing like lighteed and ribbit and like all of these like traditional funds want to come and you know be in in that space especially in stable coins or neo banks or tokenization etc. But to be good and to compete against those guys, um I still have to spend as much time as I was before with the seed companies so that I know early which ones are actually going to win in the future and that you're able to be on top of that early. And so it it's changed a little bit the way we

write checks, but I don't know if it's changed the way we engage with founders uh at the moment. >> Um so I track like uh religiously kind of my hit rate, my failure rate, like my cohort, like as professional as systematized as it gets. Like of course on the venture side I want to you would it's just important to put it into context like um is the failure rate higher than other cohorts? Like are companies failing more? Maybe it's a scale issue but I do think like I while I agree that like outcomes are getting larger like you have like a SpaceX is going to IPO at a trillion plus like right two like that. Oh yeah, one and a half trillion probably.

>> OpenAI just raised the largest venture round in history like 100 what is it? 110 120 billion >> 122 by the way on the back >> hundred billion dollar. >> If you were on the timeline you would have gotten all the negativity that Claude is pulling away and opening eyes dead and you know has a whole host of issues internally and lo and behold it just pulled off the greatest thing. So it's an important it's just important to like zoom out and say like what you hear in the timeline is very different than what's actually happening. So don't believe >> is like a negative signal these days >> but not that hasn't changed like social media is always skewed negative. So I think it's important if you want to be a good investor just like separate the noise because it's there's a lot of

noise. Uh and I don't >> mean I think the timeline is more wrong than it's ever been like like objectively like wrong. And >> well the now everyone's a content creator because you can you know you have Claude whip out or you know Chad whip out a nice post uh which to round this out I think active management is only going to get more valuable because you know I don't buy this where where most people just putting their money in index funds and are passive you should be paying that smart guy to like do research for you because that I think is like and you're seeing in crypto this too like if you're an investor in hyperlquid or bitcoin coin um or I guess I don't know what else you meaningfully

underperformed but there's a few funds that are really pulled away and are doing a really good job but if you're not in three four names or rain or poly if you're an investor in a prediction market uh in hyperlquid you're should be looking at yourself and questioning like am I really >> I mean it was either it was either prediction markets pers or stable >> well one per one per really >> because all I mean like wear and lighter And you know, it certainly hasn't performed as well as Hyperlquid yet. And I do I think Vlad is great and I think Lighter is going to do well and continue to do well, but there's I mean there's a it's still worth $800 million. So there's a lot of people who are in that investment who you know are up a lot on that investment. Should we should we

talk about secondaries because I think I want to make one one last point on this specifically is I do think the failure rate in crypto is getting a lot higher >> in terms of you know companies going bankrupt earlier tokens not coming out of the gate you know particularly well them trading down very quickly and I think the venture capitalists hit rates are getting a lot lower as well because crypto was easy on a relative basis for venture for a long time. You could invest in anything at the early stages and the token would launch or people would sell the token. And this is why there was so much discontent on the timeline about hey we don't have opportunities as the venture capitalists do and now it's becoming much harder but

it's becoming much more like traditional venture right so it's not like it it's you know getting harder than traditional venture it is just a not that big of an industry it's getting much harder and that means only a few funds will survive and this is why on that um you know that that article you talked about Yano and I think other people have said it you know there's been and talk about okay well crypto investors VCs liquid funds going through a mass extinction event I think that's true because there was a mis there was too much capital for a space that's not that big and now when people are no longer making money it has to consolidate to the few that are right and that is what we're going to see and it's going to look more like traditional venture that way in the same way that

you know it's obviously going to be a different scale but that inre is raising you know 151 18 billion dollars now you're going to see a few funds raise a bunch of money and you're going to see a bunch of other funds um kind of at that small niche scale and everyone else is going to die. >> What I will say is like valuations on the seed stage are now sensible. Like I did one investment the other day um and it was like a 20 25 million that would have been probably 4050 uh a year or two ago. um which is like if you're a smart team you're raising that level >> but but even that like it's bifurcation among the the team and the idea right there's a um there's an AI crypto crossover deal getting done right now which >> it's really kind of a seed investment

maybe they're calling it an A you know something like that but it's getting done in the hundreds of millions of dollars because it's like got this like hot topic but there's no fundamental investment that would say it was worth anything more than like 50 60 million bucks but like, oh, it's this hot topic and and people are doing it. And I see some of that in the stable coin side as well. Um, you know, we we there's probably a few deals I've seen get done in the last, you know, few months where, you know, pre-revenue seed preede getting done in, you know, 50 to 100 and like, you know, pre and then the second round pre-revenue getting done at over 100. There's one happening right now. I know of doing that. And these things are like people see the things that are working and so they're they're trying to

kind of really get some sort of exposure to that if they don't have it already. Stable coins, you know, being one of them. Prediction markets being being another. And I think there's so there's still this bifurcation. There was actually, I believe it was Carta data which said something like the top 10% of seed deals, the median of the top 10% is now $120 million valuation. It was like $125 million valuation. That's the meeting of the top 10% which is up like two and a halfx in the last year and it's because this thing is happening like what I talked about earlier where everyone's piling into the things that they think are going to win and they're just all and they're ignoring everything else.

>> Is that is that Carter data just crypto or just as a whole? >> It's every it's everything. So it's obviously skewed by the big AI. >> Is that is that median or average? Because that there's >> it was median. It was median. Yeah. >> Okay. Yeah. You have to look at median and and yeah, AI is just pulling it because you have one or two companies raising out like billion dollar valuations because they come out of OpenAI or or you know >> I I just put money personally into a thing that raised at $4 billion for their first round. >> Let let's talk about secondaries because that's um Santi you tweeted discount on vast majority of crypto secondaries is average 90%. And we've seen this before right every bare market there's usually these 50 60 70% you know drop downs in secondaries. I've never really seen 90%.

Um I'd love to hear Yeah. What? >> So, so just so people understand when I say 90% these are tokens that have launched say that they did that the token launched within a year and they haven't had the first unlock for investors because most of the time the vesting schedule is such that the token launches airdrop got people get an airdrop or liquid. So you have some price discovery like 10 to 50% 20% of the float and then you have uh the team and the investors are locked for a year and then you vest over you know three to four year period you know and so when I'm saying 90% discount 90% discount on spot and spot by the way is like down and below the last round or even below the series A round of the so spot is not

spot is pretty low already. So when retail complaints say I actually don't have access, I'm like well you can go and buy stuff in the public a liquid token right now that is below the last round or maybe the series A or the seed round. Now of course the obvious answer is well that that last round was overvalued which is true. Uh the clearly the market agrees with that but I have never seen that big of a discount. And and a lot of times when you're when you're looking to buy or sell OTC like secondary, some people get a bit more nuance like they'll buy the first year strip and then they don't buy the full lot of like the full position. Some teams don't allow it. Some people do allow

reassignment. But by and large, it was pretty I'd like to just get a pulse of what that discount is to understand sentiment in the market. And that, as I said, you know, I don't I've never seen it like across the board. Quality names that Rob and I have invested in and like everything is basically bucketed in maybe there's uh 80 90 like one is a 80 82% discount, the other one's 90% discount. >> Yeah.

>> And then there's no bid for like the no venture back just like absolute. >> What What about the secondaries on non-token companies? um crypto. >> Yeah. Yeah. Just like a crypto equity business. >> In this case, I didn't I didn't I didn't ask for that. I can come back to you guys in the next part. But I was just simply focusing on on the tokens. >> Yeah. >> Um and there's no bid. And by the way, like people will coach you this crazy number and then there's literally when you look at the volume like have people transacted >> because I'm seeing a less less of a discount on the secondaries in equity businesses, right? So I know someone who's raising who ra uh basically around four you know four four and a half billion dollar valuation but their secondaries are now around like two and

a half 2.6 six 2.7 so what is that 40%ish discount so this I think this is a story of crypto companies struggling but also I think just like pure hatred towards tokens and I think >> hatred I just think I don't think there's hatred I think it's just >> oh I think there's hatred >> yeah I mean I don't >> I think people have completely written off hatred token I just simply think most of them are very very broken >> I think people have written off tokens as an investable asset class right now the long except for maybe 10 of them, most people, most funds would say, "I do not invest in crypto tokens right now."

>> Well, if that were true, then the market wouldn't be at, you know, a trillion x bitcoin. You your total market cap is 2.3 trillion. And then if you exclude Bitcoin, you still have Ethereum at 250 billion. >> Yeah. Take out take out take out Bitcoin. What's the market cap? Sons, >> you know. >> No, no, no. That's saying Bitcoin is as we are recording 1.3 trillion. The total crypto market cap 2 point of liquid stuff is 2.3 trillion. Not fully diluted. It's just like circulating. So you still have like a trillion dollars and a hundred billion that gets traded every single day. 24-hour volume is 107 billion. There are people out there that are willing buyers and

sellers of these things. You're saying that everyone >> I I think there's two there's two different things happening here. So one is a lot of the crypto traders a lot of the trading in crypto is quantitative in nature right there are tons of tons of people all of the big you know kind of quantitative funds that you know are all trading a bunch of crypto right now and they're trading kind of short-term V or they're trading you know some sort of maybe they're still trading basis in certain to tokens like etc. I think what what YANO is talking about is like fundamental longoriented buy and hold investors. And I absolutely believe

>> there's no buy and hold investors in crypto, man. So, people just get themselves. >> I'm holding for three months. I'm a long-term investor. No, you're not. >> There's definitely been at times, and there was at times last year, >> everyone is like unlock the per what I'm saying, if you look at new, we should get an OTC guy here because the Hicks guys or second guys, >> there's the volume is way down. Per volume is down 60% since October. like clearly even if people are hedging even if people are hedging there's still long long to I mean for years there still are >> I'm not I'm not here's why I don't hate like I I been critical about valuations and the structure of tokens versus equity I'm just paying more attention to

a business-like figure that I can actually see in real time onchain data that Wall Street doesn't look at onchain data that's an edge right >> nobody said you hate tokens. >> I don't, by the way, I I don't hate tokens in the sense I think they're overvalued structurally. They're inferior to equity, but I can appreciate why certain people want to have a tokenized uh like like the you know on hyperlquid you want to trade oil over the weekend like that is a valuable instrument. Um, but it is alarming that at 90% discount and where I'm I'm not going to do the math here. Well, but historically the discount of 60% for the

lot was like you're selling to someone that is likely going to do something on pers and hedge that and come like almost categorically like not be very unlikely that they lose money. Um, a 90%. Yeah, I like I'm not trying to be picky here. like there is still people that believe in it. Uh but if you're buying something 90%. You're almost you're almost saying I don't even want to buy this thing. I think it goes to zero. Historically tokens just don't go to zero. Um I'd actually take the other side. Like I would actually be interested in buying something at 90% discount. 95% discount.

I'll I'll buy that thing. Like at that point it's like price is the single determinant of returns. >> All right. So if we're at the point you I mean you for a year you've been like >> I will flip. That's what I'm saying. I'm flipping. I'm now a buyer at that level of certain. >> You're now a buyer of token of to I mean >> I don't spend that much time doing it. I just pulse people to understand but at that level if I know the team >> I don't think I don't think 90% is a number that is like actively happening in most of the names that Santi and I want to want to own. Right. >> No, you're an investor in four out of the 10 that I I got quotes from. Uh I I >> we chat about it offline on the exact

names, but uh I I'm certain that I'm I'm almost certain depending on who those names are that I can sell them for a lot less of a discount than 90%. I'm certain of that. So the >> Well, you mark you mark your stuff whatever you want in your [laughter] >> regardless is not there. >> Uh regardless I mean aggressively. >> We should get Omar, you know, winter mutes of the world. Big Boss. We we mark we mark our our our our book very aggressively. We do discounted for for lock tokens and lack of marketability. We also do a bunch of other stuff. Um but I'm certain that of anyone that you're talking about that is like liquid and that people actually have a positive outlook on that there's buyers at 60% discounts for most of these things

because people to your point if they're liquid we'll just hedge them out in per right. So you see that all the time. But regardless, I think the the bigger point that was being made here and to to Yano's question around the equity is there is definitely for the right names in equity more of a bid today than there is for most of the right names and in tokens, right? So other than like there probably two or three, you know, call it tokens that like people um or maybe maybe maybe five to 10 tokens that people like really really like. there's another group of them that people are constructive on at the right price over the right time. Maybe that's another 10 to 20 tokens. After you get past 30 tokens, there's probably not a buyer for

for the vast majority of those today. There will be in a bull market. >> So what so when we when you say the tokens that people like, I think when you're coming out is the institutional perspective. Uh now historically I mean >> I mean the marginal buyer on crypto is a retail user still. So >> that's what I'm saying. If we look at volume as a proxy for what stuff people like. >> Volume is not a good proxy for what people like though because most volume is market maker quantitative volume. >> Okay. So explain to me the rationale for a market maker. It's it's like a loop, right? If market makers are going to participate in markets that retail likes because markets that have like there's like a correlation there soft flow.

That's absolutely true. But you also have people who are going to participate on something they think might have soft flow in the future even if there sharp flow today at times. You see a lot of that happening on a lot of hyperlquid markets where there is definitely at times sharp flow depending on the market. You also see a lot of people trading, you know, quantitatively, right? Whether it's, you know, call it they're trading V or whether they're trading basis or whether they're hedging out um or they're doing like crosschain arb like or or cross uh cross venue arb like you that's the vast majority of volume in crypto. That's always been true. Like crypto is the single best place to do delta neutral today. Like it has and it has been the single best

place to do delta neutral for years. And so like that has always been the vast majority of the volume in these places. The marginal buyer of that has made price go up that is directional is retail. But that's not a good volume is not a good proxy for that necessarily because that nothing's going up right now, right? But if you're marketing those other strategies, >> isn't it true that if you're a market maker, you're going to play the pers, right? The funding rate. You're looking at the funding rate and and retail really drives that. And so it's like if you're in a poker table, you always want if you're >> What is the base funding rate? Base funding rates are 10.95%. Right? And like if the market is neither bullish nor bearish on a specific token, like the base funding rate, it still exists.

>> The So you're dis We disagree. I actually >> I'm moving us. I'm mov I'm moving forward. >> We're not going to get the bottom. I'm moving us forward. All right. There's a bunch of other topics. >> This is why I need a >> Yeah. Can I make one last point on this though, which is that on the equity piece, it's the same thing that's happening in traditional markets where there's there's a few names on the equity side that trade at premiums to the last round of valuation and that there's basically insatiable demand for in the secondary markets and then there's a bunch of names that, you know, people are kind of okay with and then nobody cares about anything else even if it's a good company, right? And you're seeing the same thing in in traditional equity.

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As always, investments in blockchain technology involve risk terms and conditions apply. Hey all, Blockworks co-founder Michael Aelledo here. Quick break to talk about something we've just launched, Block Works investor relations. As the market shifts toward institutional capital, investors want more transparency, more standardization, and a higher level of professionalism. But the traditional IR model is slow, manual, and not built for how crypto works. If you're building onchain, your data is already live. Your business is already transparent. The challenge is turning that into a clear, credible story for investors. That's exactly what we're solving with Block Works IR. It's a single platform that brings together real time analytics, branded investor portals, and hands-on

advisory support so you can communicate what matters. If you're an onchain business looking to level up your investor strategy, check out blockworks investor relations at blockworks.cominvestor- relations. All right, back to the episode. All right, let's talk about the Drift hack. So, I'm guessing most people know Drift, but if you don't, it's a pers deck on Salana. It's one of the biggest. They had um like half a billion of TVL going into the day. Uh yes. So, we're recording this on Thursday. Uh it was on Wednesday, April 1st. 200 I'm going to get I'm going to get hopefully most of this information right. This is how I understand it. There's like 270 280 285 was drained in like 10 minutes 11 minutes 12 minutes. Um so here here's

how I understand it. Maybe you guys can correct me because I'm sure I'll get this wrong. So basically the attacker created this really worth created a completely worthless token. I think it was called CVT and they seated a liquidity pool with like you know couple hundred bucks and they wash traded it until the price oracles started treating it as actual collateral um and Salana has this feature called um this is where I'm like getting a little out ofhead of my skis but durable nons and so normally a Salana transaction expires in a couple minutes if you don't submit it but this durable nons transaction can be pre-signed and held indefinitely. So what the attacker did is they staged all these things in advance, every withdrawal, every parameter change and

they pre-signed everything like ready to go at the click of a button. And so when they pulled the trigger, these 30 plus transactions executed immediately in sequence and you you know $280 million was wiped out before anyone could really respond. Um, and the problem here, kind of what allowed this to happen, again, as I understand it, is a couple weeks ago, Drift's Security Council multisig had been changed from a higher threshold down to a I think it was two of five signers.

>> Two of five. Yeah. >> Yeah. With no time lock. And what that means is that anyone can go through instantly with just two people signing off. So, the attacker got two of the five keys. I don't think we know how they but they compromised. I think what what happened most likely was that one PE person >> got um got hacked essentially most likely >> and then somebody else blindsed because oh like this person did and that's fine >> right so they probably so they compromised one of the keys someone blindsigned um I think it's similar to the bybit playbook what happened last year where this malicious >> look a little bit different because there was a the by bit playbook was there was an actual hack at uh AWS and so then the they were able to surface a

fake UI at AWS, >> right? So here I think the to close the loop on this and I want to hear you guys' take is drift basically once they had these two keys they changed the admin key entirely locked the original team out drift couldn't freeze anything they couldn't stop it and there had been two security audits had passed this protocol like no no no one caught this nobody you know people let the two 205 multisig happen um and I think the big question for me is like I mean I my take I think this is a huge deal actually I know we have hacks all the time but All right, this is coming on the back of a Resolve.

Um, I'm trying to remember how much the Resolve hack was for, but it's coming on the back of a the Resolve Labs hack in it's like a week ago or two weeks ago, right, where the hacker compromised the AWS environment and um yeah, they received 50 million USR stable coins back in return. So, you've got the Resolve hack. You've got stable uh steakhouse. There was a basically a phone social engineering thing um where their front end their front end pointed to a wallet trainer. That was two days ago. And then yesterday's drift. Like this is this is this is bad. Like they the you know, how do you use DeFi after something like this? And I was it's just um I mean I think the three of

us are the people who would be power users of this stuff. I'm like, I'm not keeping any money on DeFi right now. I'm just not like why? It's just not worth the risk. >> I mean, I still have a bunch of money in DeFi, so I um you know, I it's I still got a lot. >> Where do you keep it though? Like >> why why why do you take that risk? >> The rate rates are lower in a than they are T bills. Like >> I am getting I'm getting better rates in the Devi that I am in than I would be getting elsewhere. And >> are you willing to take the risk? Like if you were getting better rates >> Yeah. What's the incre the the math that I've done for a while is I am not paid enough to take that level of risk because I

just >> listen here here's what here's what I would say the vast majority of hacks happening today are social engineering right and like that has been true for a lot >> right they're no longer smart contract >> uh there's there's there's there's oracle issues that have happened time and time again >> yes yes there's oracle issues in terms of like you know some of the the um people kind of causing liquidations or minting new tokens etc. But the end of the day, most of what has happened and and this is this is true of things that are happening outside of crypto as well is social engineering is actually the biggest issue right now because that is actually what Lazarus primarily does.

That's what most of the North Korean hackers do. And so there there is this issue right now where it's just that much harder to stop yourself from making a mistake to get social engineered. And so your operational security needs to be at all-time highs. And there are people that I trust that have significantly better operational security than others. And so there are DeFi founders that I would absolutely trust to have as good operational security uh as you know uh and in people offchain as well. And so there are places where where I would keep my money. I'm very thoughtful about what that where that is though. Um that said, I I think in in this case and in others like there is just a a sense of

oh like you know it's kind of annoying to do these different things and to have a bunch of signers and maybe if we have too many signers we can't respond to something as quickly and we move a little bit more slowly and it causes people to get lulled into kind of a sense of of security and then they get socially engineered and something like this happens and it's it's it's terrible. And so I I think the I think there is something to be said around needing to do more work on operational security and this was true of of of Bybit as well, right? You know, the hack was actually at AWS and then through their Nosis front end, but there were still not the right controls in place of checking the pathways and where the

actual smart contracts uh were sending the capital to. And so there was a operational issue and the biggest hacks have been that. And so I'm I have a general concern around security related to AI and we've seen these supply chain hacks happen outside of crypto as well and the attack vector and the surface area is much higher than it's ever been. It's much easier to find issues. On the same side, you need to be using AI on the security and so that should also make theoretically more robust security. But we continue to have in my mind the biggest issue be social engineering.

>> So I was just um looking at DeFi hacks excluding by bit by bits but like just D5 protocols if you're going to use onchain stuff. My quant says 205 you had uh roughly 1.1 billion in D5 protocol losses. That excludes by bit. Um, and so there's six hacks that, you know, only six hacks that were like 50 million plus. One of them was Balancer and then there was a few others. Um, this quarter alone we've had, including Drift now 350 million.

Um, so it's not necessarily going up, but this idea of Lindy like there's there's more protocols. So like the surface area to your point Rob keeps expanding. Um do do I feel marginally better putting my money in a than like a random protocol? Yes. But the rates like my point is the rates in the protocols that have more lindy and you feel comfortable and are pretty battle tested are fairly low. And if you want to go out of the risk spectrum and like you know chase the higher yield there's like a lot of risk.

>> Yeah. And >> so Robbie Yeah. >> Yeah. So I my point Janna like as as we were recording D like the number is just alarming. Let me ask you a question. Do you in your conversations with like D participants like is this a topic that keeps coming up like like vaults were all the rage? Right. So well let's talk about vaults but like the value proposition of a vault. >> Yeah. So this is where it starts to be okay. So the so we've got this token transparency framework and we rate these tokens right and you know we're building this big disclosures framework for the industry. The thing that I didn't realize that a lot of people wanted and this came up at DS in like you know our meetings with people is that they want us to rate RWAS and we don't need to

rate RWA like we're not trying to compete with Moody's. We're not going to rate bonds or you know we're not going to rate the underlying like equity here but they want to know the smart you know the smart contract risk or they want to know what vaults the you know the RWAS are held in. And so I think I think that is and actually it was Hosu who tweeted out you know every DeFi protocol should have circuit breakers for deposits and withdrawals time locks for any change and security councils that can shut down things immediately and I don't think you actually need to impact the a lot of people were saying you have to you should change the UI and the or the UX of for the front end you know for the front-end consumer. I don't think you need to do that, but you do need to take

better precautions as security precautions as a team. And Rob, you're saying a lot of these are social engineering. It's like Drift had a time lock and then they removed it. I like what I'd love to know why why did that decision get made? Like why did you move down to a 205 multisig? Why did you remove the time lock? I just I just don't Yeah. Don't really get that decision. >> It makes no sense. Like is this a talent turkey? Like why why would you? >> Yeah. like slow like if you're already securing that amount of money like why would you put your like also I think your op not not like in there's no I get like moving fast and making but that going down in size to reach quorum there's no I don't know who recommended

that there's >> you had a um you had a security audit of yourself like son s I'm sure you've probably done this before they don't test your the code of your Hey, what I realized is um we have all these audit firms that cover code and they audit the code, but nobody really audits the ops of teams and it's just like when you do a security audit, it's like they're not auditing, I don't know, the code of your bank account. They're auditing like hey, like if somebody like sends you a picture of your kidification, do you have a password manager? Do you have like >> Right. And I think we need like I'm curious what it would look like to start auditing the ops of these teams because Rob, you know the counters. You're like, I know the DeFi founders who are where I

can put my money. I mean, you know, because you you have you're in a unique spot and you're you can you can talk to these guys, but we got to audit the >> I think it's like there are firms who do very indepth security work around social engineering around your operational security and people do not take it seriously enough. And yet that is the mean everyone knows of Lazarus. They know North Korea. They're like, "Oh, these guys are terrible. They're, you know, the the largest hackers in the world and the most sophisticated. And I don't think people realize the vast majority of the things they do are social engineering.

The vast majority of things they do are not that they've that they've, you know, found some flaw in your smart contract and they're they're, you know, smarter than you and maybe they are, but the vast majority of what they're doing is they're getting you to click on an email that you shouldn't have or click on a button that you shouldn't have or spoofing a a a front end through, you know, some other service provider that then gives them access to your computer or to your wallets, right? Like that is the vast majority of what they're doing and that is where the things have gone the most wrong. And so there's no reason not to be taking this incredibly incredibly serious.

>> So, so Rob, the issue that you have like, >> yeah, you trust some teams more than others. Like say you trust Morpho as an example because you see Apollo get in the fold and you know has a track record. The issue though is that DeFi has high contagion risk. Composability is a beautiful thing, but you're only as secure as your weakest link. If you're a vault manager and you're interacting with a number of protocols, there's a lot of there's a lot of fragility in the system if if one of those components protocols that you're using goes down.

And you saw that, right? Morpho had bad debt, I think, with with the uh resolve hack last month, right? You have morpher, >> you're talking about a different thing, though. You're talking about bad debt because you took on some sort of risk in a structured product that you know >> but but that's what I'm saying like like my point is if you go and a yield on a for stables is less in treasuries right now. >> Sure. >> So there's no there's no way that we can agree that there's less risk there than going direct and buying from government. Like there's none, right? There's no smart. >> But if I if I go and buy a private credit fund like you might be taking 10% losses right now on the private credit fund.

This is the same I was in the It's an unfair comparison. I don't disagree with you. Like if I I made the point in the RWA summit at ECC, which is the the human risk of them gating you and not like promising that it's a liquid instrument and then saying, "Oh, no, sorry guys, it's not. It's like terra." Same issue. There's like there's an asset liability mismatch. They just kind of characterize it and they just gated it. um you still are in if you're underwriting a vault, if you're underwriting Blackstone, like you're underwriting their the manager's ability to underwrite and you know make sure that it's extending credit correctly. I think the quality of Apollo is higher than uh and Sixth Street is higher than uh you know your your your typical crypto vault manager personally.

>> Sure. I agree with that. Yeah. >> Like like I don't think a lot of the I don't think a lot of the private credit stuff is dislocated right now because you have more redemptions than there are ability to to to honor them. But I think the underlying quality is is quite high. Uh and so anyways, but like Moro for instance, you can get paid 5 to 9%. That's definitely higher than treasuries. So like if you have your wealth in crypto and stables, like fine. A lot of this is I think just people don't have access to maybe buying treasuries or that, you know, their bank account doesn't pay them or they don't just don't know. So it's the convenience factor of moving your stables quickly between farm and farm and or vault is is high. And I think there's a reason why there's like a lot of volume on chain.

Um, but to me it's a headscratcher. I personally don't think that these APYs are reflective of the amount of risk that is hidden in DeFi because of composability. Because if you're looping and you're interacting with many different protocols, I think you should be paying 30% APY, not 10 or eight. And that's where to me the calculus is just not the the riskreward tra pay payoff is not compelling enough for me to come on chain and I you know I just don't see it. Uh I'm more worried about capital preservation and impairment than maybe someone that just has like less of a B like a you know hey do you have I don't

know for me it's I think my view is more representative of institutional capital like Rob maybe let me ask you a question you personally might have stuff on DeFi how much of Dragonflyy's funds are I know you call capital and whatever and maybe you're recycling are you guys like going out and buying a you putting your money in a vault >> well we've We've never done that. That's not our fund and that's not what our LPs allow. So we we it hasn't mattered when you know D5 farming was paying you 60% either because uh well >> used to have one, right? You used to have a strategy.

>> We had a liquid fund of which that was part of what they would do but we spun that out years ago now. It's almost four years ago at this point because we we just that wasn't what we wanted to focus on. If I want to focus on the core of the the VC side. >> Yeah. I think this is a classic Talib Turkey though. I don't even if I struggle institutions to to do and saying okay maybe I'm clipping like four or 500 bips more on a vault but the risk of impairment is there and it's greater than 5% and the expected value though at that point is negative versus going to private credit.

>> I think this is just very very situation context specific. I ab I think there's absolutely risk involved with every financial product. I think in some cases you're getting paid for risk and in a lot of cases to your point if you're just lending stables on a you're you're probably not right. And so I think it's very very situation specific. I think this like it it feels a little bit like this whole pod has been like you being like the death of crypto and like that and like Santi believes crypto is dead and like I think that's like a very maybe that's like a bottom signal because it feels very myopic relative to like the things that are happening.

>> No, I'm let me summarize this. >> I'm just being I'm just being critical. I mean I wouldn't be in this industry. I would just be chilling and playing with AI. >> Let me use Mike's tweet to summarize this whole this maybe the last 50 minutes of this conversation. Then I do want to talk about the quantum thing because I'm curious to get your take. Maybe we can wrap on that. Mike tweeted out yesterday or this morning. He said, "The two biggest issues in crypto today are transparency around security and transparency around tokens." He said, "I still think we're 12 to 18 months away from solving both, but it's clear capital won't come back until we do.

Investors won't risk their entire principle for 4% yields." That's the second half of this conversation. Or ape an asset class down 80 80% over the first, you know, over the last five years. That's the first half of this conversation. And um I mean the good thing is these are very solvable problems, right? We can we can bring shareholder rights back to tokens. We can fix a lot of the security, but like I do think it's yeah, maybe it's a bottom signal Santi calling this stuff, but I do think it's important to call out what I think are the two biggest issues in the industry. Maybe that's the title of this episode, the two biggest issues in crypto today. Like that's um I do I do think it's you know we can we can have other episodes where we highlight you know poly market and rain

for Rob and uh but you know >> that's every that's every episode >> that's every episode. Let's talk let's talk quantum because I want to maybe wrap on that. I think it's you know we're running up on time and it's important to get to that. >> Yeah I do think just to to wrap that up though is like the um like tokens being down is not like an inherent issue with crypto. The issue with crypto is something else that has caused tokens to be down obviously but yeah but I think generally people don't make money then yeah they don't want to they don't want to participate in that asset class and that's always going to be true of any asset >> the the thing before we go to quantum I mean I don't think that this is a problem that I have in industry because

as soon as you're critical people say you're a bear and you you're like a heretic if we're going to advance the industries if we call out these things like there's structural mispricing in DeFi yields like I don't think anyone can disagree with that I don't you know Yeah, but that's a different statement than saying I can't put money into DeFi any ever anywhere. Like >> I just said the yields are not there. >> The the yields are not like I'm not I don't think I'm being hyperbolic. >> There are places where there there are yields that you can get that are above the risk-free rate. >> Yes. Not enough. My point is not enough. You're not getting paid enough to take that amount of risk. Not owning tokens, not putting money in DeFi to capture yield. Not right now.

>> Yeah, I would I would disagree on that on that piece. You disagree, but you're not putting all your, you know, size. We're talking. All right, we're moving on. Move on. >> Okay, let's move. All right, >> we're moving on. Now I see what's happened to the podcast. Jesus. All right. So, these two papers dropped this week um within hours of each other and u they kind of move the goalpost of quantum I would say is the I mean look a lot of this I'm just kind of taking from people on Twitter because I'm you know I've spent a lot of hours watching videos and reading papers about quantum stuff and I'm you know still trying to wrap my head around it. So take all this with a massive grain of salt. Maybe you two are much smarter than me here but one was this Google paper and one was a

Caltech paper. So the Google paper as I understand it is the one getting most of the attention. So Google's quantum AI team which is people think they're one of the best in the world uh showed that kind of the implication of what they showed is that Bitcoin and breaking Bitcoin and Ethereum's cryptography specifically the elliptic curve signatures that protect like basically every wallet requires far fewer resources than anyone previously thought. I think previous estimates said you'd need roughly uh I think it the number was 10 million physical cubits and Google's number now puts it at 500,000 which is a 20x reduction. So on a really fast supercomputing or superconducting quantum computer they calculated that one of these keys could

be cracked in I think it was eight or nine or 10 minutes. Bitcoin's block confirmation is, you know, like 10 minutes, meaning a attacker could theoretically intercept a transaction mid-flight, you know, before the block gets finalized. And then the Caltech paper is uh newer and less vetted, but I think it was potentially more alarming is what people said. So there's this startup called Aura Ora oric I think it is. It's ex Google researchers and Caltech faculty and they took these Google improvements applied them to a different type of quant quantum computer which is uh neutral this is the first time I'd ever heard about this neutral atom architecture and their estimate is 26,000 physical cubits which is you know obviously much bigger reduction than the

Google 500,000 physical cubits and the trade-off here is speed neutral atom machines are much slower so you're looking at like 10 days to crack one key rather than nine nine minutes. Um, anyways, I don't fully understand that one, but implications seem big. You've got like, you know, CZ came out and said, you know, saw some people panicking about quantum computing's impact on crypto. At a high level, all crypto has all crypto has to do is to upgrade to quantum resistant postquantum algorithms, so no need to public. But you also get Brian Armstrong coming out saying, you know, I'm going to start spending a lot more time on this personally. Seems like this is an issue that we all need to solve sooner rather than later. So, I'd love to Yeah. I don't know if you guys have takes here

if you guys understand quantum better than me, hopefully. But >> can I ask maybe a question more so than a comment because I am not an expert by any stretch of the imagination. Um what um when someone says we can upgrade a quantum resistance, do we have the soft like do we have that today? And if not, what stops you from doing it now? Is it because you just don't know what the attack? So like why wouldn't you upgrade now in advance of something that you feel like is coming or is around the corner?

>> Yeah. So the I'm definitely not a an expert by any means, but you certainly can't just like flip a switch and upgrade to like quantum resistance today. Um they're I mean even Google says they won't be postquantum until 2029 or so, right? And they're actively working on their systems for it. um the the timeline to do an upgrade for Bitcoin probably is going to take like maybe a couple of years and then there's kind of this generally a uh just like all of these people who have you know are self- custodying who

you know may not actually be part of a any sort of upgrade and like what happens to their um their tokens in the future. I I think the a lot of the concern has been more than anything like how do you get the Bitcoin community which is not really centrally operated in the same way other communities are to upgrade Bitcoin as a whole to postquantum over the next few years and to move with an agreed upon action and in the time frame needed if quantum is going to break current cryptography.

um in in the near term. And so it's actually I think technically supposed to be easier and it should be easier to upgrade Bitcoin to be quantum resistant than it would be for like a Salana or Ethereum um because for a bunch of different reasons around um how you would reverse engineer a private key. But there's a there's just a a a a really tough conversation around how this very decentralized asset >> is able to align itself versus >> I would bucket it is I would answer that Santi in two ways which Rob let me summarize Rob's thing. There's two buckets two reasons this is hard. One is

there's no actual qu postquantum Bitcoin address format you can switch to now. So if people want to read about it there's a proposal it's BIP 360. Um, and I I I got dinner with one of the Bitcoin core devs, like this is this is six months outdated info, but I'm guessing it still kind of stands true today, which is this is really new code. So, actually, if you if you do this stuff too soon, you actually weirdly introduce new bugs. So, maybe you could fix the quantum pro problem, but you might create this catastrophic vulnerability in the same move. So, there's like, yeah, we don't actually have the postquantum resistant wallet formats yet. So, that's the technical side. And then there's the um you got to hard fork Bitcoin basically.

And that's um yeah, like Rob said, like there's no CEO who can just do this. And I don't know if you guys have been following Nick Carter's tweets. I'm going to go on the record and just say, you know, I think once again, Nick Carter was right. You know, per usual, he's usually one or two years ahead of a lot of this stuff. Um especially, you know, with regards to Bitcoin. And um you know, I think you can see how much, you know, push back he's gotten from the bit from the hardcore Bitcoiners who are like, "We're not upgrading this thing." and he's like, "You idiots, like we we have to upgrade this." And I think he's going to be be right on this. Um, and if you guys remember 2017, like I think we are going to actually my prediction last year was that there's going to be a hard

fork, a Bitcoin hard fork becomes incredibly contentious. I think I was off by a year. I think it's I think it's this year a Bitcoin hard fork will become very contentious. And um I mean yeah Sante you remember 2017 like the the big blockers versus the the small blockers like I'm not saying we get something of that scale here but um because now a hard fork will probably actually get done will be done because so much of the Bitcoin is held by a lot of the exchange I think it'll be actually get done faster but um yeah you've got a coordination problem on our hands. Yeah. I I do think one thing that's worth pointing out here is that the main thing about this this Google uh research paper is just the timeline of

which it kind of accelerated or that now it brings up the timeline for which people are concerned because the US government had already said hey listen like we have to phase out current types of crypto cryptography by 2035 and be postquantum by 2035 and then the NSA had kind of said oh maybe that's as early as 2030 for certain types of systems for that are very very at risk. And now Google is saying maybe as early as 2029. And so I I think the the major thing that has people very concerned here is most people not not all Bitcoiners but most people have understood quantum is a risk at some point in the future. But I think everyone expected that we had a much longer time frame than 2029. And that's the thing that has people really

scared now. We should um we should bring on someone like Jameson Lop or Nick or a combination of or like James Preswitch uh who's been more at the forefront of like pushing stuff in Bitcoin like the security budget. James is like a pretty big advocate of that. Um especially talking about Satoshi coins like old addresses that have like just are dormant I think are more exposed. Um so we should have someone come in and talk about it. um other than us like prompting Claude and trying to figure out how to articulate this well on a pond, but it does I agree with you. It's uh is the biggest risk you're describing that the Bitcoin community would just is just so gridlocked and can't reach consensus

fast enough to adapt and does that mean that other networks are Zcashes of the world are perhaps more uh going to be ready to migrate and and survive. And and then the third is like what happens if a crypto what happens if a h like an attacker gets access to Satoshi's like you know 1 million Bitcoin like what do you do at that point? People see that those coins move. Do you sell? Do you like do you immediately dump? Uh what do you do? >> Yeah. I don't know.

>> Anyways, I think this is I think this is a I think Nick was right. I think this is a big problem that people have to solve. So, all right. I got to jump to a meeting in a few. Um, let's Anything else? >> Content of the week. >> Content of the week. >> We have to do content. >> I know. I didn't know if there's any other topics. All right. Let's do content of the week. What do we got? >> Dante, you're up first. You've been You've been You've been going for this whole the whole pod. >> Oh. Um, I guess uh I want to start uh cokelin.

>> Yeah, turn around and and I can't hear you. >> This one. >> I just picked this up. >> Yeah. >> Interesting. >> The Koch brothers. >> Yeah. CO Industries. Uh the secret history of Koch Industries and corporate uh power in America. Coke Industries is one of the largest private companies in the in the US. I think in the world they own uh they're just a diversified conglomerate. Um kind of so I want to I want to read that. I haven't read it so it's kind of a cop out answer but yeah I'm excited to dig in. All right. Uh listen it's final four this week. Okay. And I'd be remiss if I didn't talk about this Yukon Illinois game. So, we've we've got a my um Lori,

who who you guys know, uh has won her her pool at her her work two out of the last three years. And if if uh if Yukon wins again this year, she'll have won three out of the last four years. And what is like probably the single best run in work pool NCAA tournament pool history. So, >> dude, >> maybe she should reconsider careers. I mean, there's she should be raising a hedge fund for poly market. >> Yeah, >> she should be. I mean, she's just she's just running circles around the mid-market private equity.

>> So, how did how'd she do this, Rob? What uh what wizardry? >> Uh what the wizardry has been? She is unadashedly extraordinarily bullish on Yukon every year. And Yukon just got money. [laughter] >> Wow. She got lucky there. She got lucky. >> No, she didn't get lucky. She just she picked a horse and she she ran she ran with it. So, you know, Yukon is her is her market. >> Let's go. Love that. Um I read my first fantasy or first fiction book in a long time. Um there's this author I kept seeing I asked a bunch of people like because you know I took took a little took a little time off and you know been had had time to read a fiction book which was which was lovely and uh

everyone was like you got to read this guy Patrick Rothfus the King Killer Chronicle. It's a it's a trilogy. So I read >> You've read it? >> Yeah, I've read them years ago. >> Yeah. Yeah. I never I didn't know about them. So I read The Name of the Wind, which is the first one is incredible. And now I'm on the second one which is uh The Wise Man's Fear. And so if people are looking for a fiction book, it was um I mean it's really it's the first fantasy book I've read since her I mean you could categorize Harry Potter as a fantasy book. Like it's uh you know Santi right up your alley. So yeah, it's really really good book though.

>> Nice. >> Are we still waiting for like the We're still waiting for the third one. Still >> still waiting for the third one. Yeah. >> Yeah. This is like a Game of Thrones situation where we're like 12 15 years later and we still haven't gotten there. >> Exactly. Exactly. So, all right folks, good to be back with you guys. Thanks for listening. We have a really good episode coming out on Monday with um um Chad Cascarilla, who's the founder of Paxos. Yeah. He's been building Paxos since 2012. They've raised $540 million and uh yeah, they got a lot right. They got some things wrong. And um yeah, he's a real Chad is uh Chad is one of those people you can ask him pretty much about anything in the world, health or food or meditation or markets or macro or

crypto, and he will have a really thoughtful answer on it. So, hope you guys enjoy it. >> That's great. >> Yeah, >> good to have you back. >> Thanks, folks.