Unraveling Crypto’s Credit Crisis | Roundup

Transcript

all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-hosts today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with uh nothing in the episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode all right everyone welcome back to another bell curve Roundup today you've got me and Vance which I think most people would agree was strongest two of the show anyway yeah exactly not getting dragged down by those other two that always are just free loading just riding on our coattails it feels nice to have

two big squares on the screen versus four exactly it's so nice maybe we should reevaluate honestly this whole the whole rest of the dynamic here um so uh all right let's get into it today actually I love where we we want to start here uh talking about credit um so I'm gonna actually just turn it over to you people who are following Along on video uh can get this helpful visual here just looking at Genesis active loans uh quote over quarter but um could you just like kind of Tee It Up like why do you want to start this conversation talking about credit and what are we looking at here yeah so I think a lot of the stuff that I've been doing is taking stock of 2021 2020 uh seeing where you know things made sense in retrospect seeing where

you know there was a lot of credit created seeing where firms like three arrows you know you know took that credit and used it and I think it helps you understand you know both the past obviously but but also more likely the future and and where things are going to go because some of these things will be in the market cycle next time a lot of them won't and it'll just have a different type of impact on uh the market as we know it and so I think there's kind of three steps to this the first is how much credit was there in the aggregate um the second is who did it go to and then the third is um you know what was it used for and you know we don't have all of the answers on on this stuff uh a lot of it is unknowable these

are private companies but you can kind of start to piece together a little bit of like who like what went to who and what was it used for it and you know just starting the discussion um this is free form but this is a good place to start so on the screen right now you have Genesis active loans by quarter and uh Q4 2021 they had about 12 and a half billion outstanding um and that was uh not the high water Market actually went a little bit higher to about 14 billion in q1 of 2022. and so let's start with uh you know this call it 14 billion dollar number of credit um and if you look at this chart uh which is a super fascinating research

piece put out by uh uh Odessa uh Odessa cap on Twitter I have no idea who they are but this is good research it's interesting you know there's 14 billion of credit um more than half of that looked like it was USD um but about half of it was Bitcoin and Ethan so like let's start with that 14 billion number um there was a report that the Wall Street Journal released this month that said that at the height of of you know the amount of credit that was created six and a half billion of the Genesis active loans were to Alameda and we'll get back to like who was using this but let's start with this 14 billion dollar number 14 billion dollars from Celsius uh block buys Q2 2022 transparency

report they had 1.3 billion loans you know roughly double that so that we are you know at the peak of the credit Creation in 2021 to take us back there so so call it like two two and a half plus fourteen so we're at 17 and a half of total credit created um Voyager in their bankruptcy filing 200 million to Alameda 700 million to three arrows and a hundred million to 200 million to others so that's another billion so we're now at 18 and a half billion um let's call the battle Finance hold on blockchain.com bucket you know one let's say that was another billion so we have 19.5 billion of credit um and then you have the FTX situation where they were selling user assets to

pump their own coins call that credit as well and I think that's around you know three to four billion the the point of this is that you get to you know 20 to 22 billion of aggregate credit that was created in the market during 2020 and 2021 the credit Market is completely dead today you literally cannot borrow dollars from anyone except for maybe Maple um but they're still kind of rebuilding and doing their thing but that's a lot of credit and so just like let's stop there Mike any any questions or anything like that yeah well you know honestly one of the things that I don't know if you're kind of planning on getting into this but like one of the things that also stands out to me at looking at this chart here is this enormous green area which is USD like dollar based lending

and it seems like you know based on what I know purely about the the Genesis situation it seems like that's actually where they got into an enormous amount of their trouble uh sort of as well there was a really great thread that sort of came out about this which was you know if you look at you know US dollar credit creation how it works in the rest of the world it's like that happens at the level of you know commercial Banks and Commercial banks have like all these advantages right first of all they have enormous balance sheets they have uh you know the that window with the FED right there's like FDIC insurance but on top of that like even their Prime brokerage desks and stuff like that there are all these like tools and systems and processes and communication channels that have been

built up over the years and honestly just watch it there's a I'll see if I can find the the Tweet thread and Link it which gets into more detail but just watching you know when you look at this big green part of the chart and you saw Genesis trying to enter into this business the my thought is just it was like wow they're really taking a knife to a gunfight and they were just pretty ill-equipped at trying to participate in the business that like this is obviously where a lot of their revenue is being generated so that's a huge takeaway for me looking at this and and like this the growth of the chart is crazy too right crazy you can see how this went from something that was manageable a small cottage industry of you know micro loans to you know one book alone 14 billion

and 15 billion in credit from just Genesis I mean that's pretty wild yeah so where did this get end up getting used like how much can we piece together about like because I I sort of had my own little um theory about this but like where where have you been able to piece together like where was all this credit kind of going so I I do think in a just a backup I do think there's an intermediate question here which is um what was being lent out his credit you know about half of it was US dollars but the other half was Bitcoin and Ethan if you're a market maker and you get Bitcoin underneath the first thing you do is sell it put on a hedge if you have to get it back but you need US dollars to do your work you can you can do kind

of crypto collateral on different types of levels but that's pretty hard for market makers so that's one other thing to keep in mind so the numbers to remember 20 to probably 22 or 25 billion of credit was created in 2021 through all of the venues um and where did it go Alameda so let's just put that one out there there's a Wall Street Journal report that said there was six and a half billion loan six and a half billion about sending loans that were given to Alameda just from Genesis at a single point in time and so that's greater than 50 of their loan book at any given point and so you can kind of Imagine Genesis giving them a few billion of USD a couple billion of Bitcoin a couple billion of Youth they sell the Bitcoin and if they go off and Market make do

whatever they need to do and that loan was was eventually called so you know Alameda has six and a half billion from Genesis they have at least another 200 million from Alameda um and they probably have you know another billion or two billion or so just from other sources and uses um most specifically the FDX collateral that was stolen and and probably sold and then used to buy the other assets so I'm calling it at least 10 billion of credit was given to Alameda and you think about that that's a big number and where did it go you know probably a few different places and we'll get into that I have an answer there so Alameda there's 20 billion 25 million total credit Alameda gets about

half three arrows let's talk about that one hmm um the week that they got called the data that was put out and and they got margin called and they got blown up because they couldn't meet their their credit obligations they had three billion loans from Genesis they had 700 million from Voyager 700 million from blockfi and probably another few hundred million from blockchain.com they probably had five billion a credit and so if you think back during 2021 you had alimated with 10 billion you had three arrows as like a slightly smaller more scrappier competitor but they had they had probably 5 billion between those two you're talking about 66 to 75 of the entire credit Market was just from them and and you look at genesis's statements

they put out Alameda was their biggest counterparty it was about 33 of their loan book three hours or probably 20 but you know the figures match you know you're talking about roughly 15 billion of credit between those two and so the question that you know I get to is like where did the other credit go go to yeah there's 20 to 25 billion 15 billion is three hours in Alameda directional hedge funds probably pretty small mining you know that's probably another one and then maybe the gbtc trade you know that would be the third place but you know really you're talking about the entire Market encapsulated you know 75 between two people and that that's just wild to look back on a hundred percent and it you know the it's funny because like three arrows has now blown up I

mean it feels like a lifetime ago that those guys blew up but there are these like commonalities in between first of all just to like reiterate what we've talked about on the show a million times their tiles ensues explanation for how it's not their fault still just gets to me at my core they're like no one could they you know the big thing was oh well we didn't know that people would follow us into this trade despite publishing you know that they had like 1.5 billion dollars of outstanding gbtc in you know going to a trade so uh there was that but a lot of these guys ended up getting taken down by a pretty similar mistake and honestly even though so a huge part of the market was like these two entities that you're pointing out but honestly three arrows capital dcg and

Barry Alameda all kind of did this same thing they took they had a horrendous duration mismatch whereas they had a source of financing That was supposed to be geared towards like longer term less volatile risk-taking and they use that to lever up and go super long [ __ ] coins which is good when checkpoints are going up but then when the market turns and now like dcg this is I'm sure this is what's being talked about behind closed doors of dcgs like how do you get liquidity on that um and that's like what happened with three arrows it's what happened with I mean Alameda was kind of a whole different thing but kind of honestly same thing with Almeida and then dcg is I think facing that same same exact

problem right and and they had kind of the same symptoms and ultimate ultimate diagnosis of just being dead but how they got there was was two different ways like if you look at how they got the leverage uh Alameda printed the ftt token they used and this is all public information they used to collateralize the loans and you know if you think about that relationship where ftt is really the whole thing that's probably not the Empire Barry says I want the loan back you can't really say anything else you know what's the alternative they just sell FDT into the market and collapse everything and so it was not surprising in retrospect to see that that loan actually got paid off in the summer whereas they probably just extended the duration on everything else um

and then if you think about three arrows how they probably got the leverage was different right it was the gbtc trade which is kind of the self-encapsulated trade within um Genesis where you know three arrows comes up they they buy gpdc they pledge as collateral they get more loans they buy more gbt they pledge and so on and so forth and in that scenario it's kind of the opposite where Barry now has the token that is underpinning his Empire gptc and if that really gets Panic sold you know there's a different scenario and so a lot of the three arrows claims are you know Barry just liquidated us to steal our our gbtc and you know who knows if that's right or wrong but you can kind of generally assume that Barry really wanted to protect that gbt from

from being sold on the open market because that would really hurt you know a lot of his business so it's kind of different paths but it's just interesting to think about the power dynamics of the relationships between you know the lenders and the borrowers and how they each got there 100 although I do think to be fair to Barry there's much more like gbtc is more legitimate as an asset that ftt yeah you more to hang on there you also created it so like there's some rules around what you can do with it but it's just interesting nonetheless and so the last part of kind of like this analysis that I wanted to to do mostly for myself just understand what happened is how did these people use the collateral so these are just like round numbers that I'm guessing at but there's 20 25

billion of credit that no longer exists in the crypto ecosystem that used to [Music] um alameda's VC portfolio that's 5 billion you know right there you know that that's what they use that for um they probably use another two to three billion on on FTX and FTX exchange operations marketing personal loans things like that those those figures roughly match uh there was likely about 2 billion uh spent supporting Sam coins in my opinion two to three billion you know that that's a lot of money especially if you're Levering perps up with it and you're really charging against people in a no liquidation context and so that's another one and that's kind of like the Alameda bucket and that adds up to 10 billion but

um it just it reminds me of like this old saying you know like how did you lose all your money it's like well I spent the first third on like booze you know women and fast horses and the rest I just squandered like they didn't squander a good portion of it just on these stupid marketing things and all like that but the rest of it was used in ill-advised VC bets trying to probably up ecosystem coins the thing I want to drive home on how Alameda used the funds is that that was very self-contained within the Solana and the Solana ecosystem and the FTX ecosystem like you didn't really see Alameda going long eth or Bitcoin or gbtc like they were spending money to make money within their own ecosystem so what so is the long-term implication for that then

basically mechanically then in the market there was basically a lot of cell pressure sort of artificial cell pressure coming from uh the Solana FTX part of the ecosystem on kind of the core assets of Bitcoin and eth sort of artificially propping on a lot of artificial buy pressure on kind of the Sam coin ecosystem is that the the takeaway and you would expect that to kind of reverse moving into this new regime or what's your sort of takeaway from the analysis I I would say that you know the two to four billion spend on Sam coin is probably something that you don't really see again um I also think the 5 billion that they spent on just like VC style bets and you know propping up ecosystem token or

like doing all the Venture rounds for all the ecosystem tokens like you probably don't see that ever again um like the VC presence of setting the floran Solana projects was a phenomenon that you know just blew my mind where everything that was Raising private money on Solano was like two or three actually more expensive than Heath um and you probably don't see that again but I think the takeaway is you know it's it's there's going to be just less of a bid on on Sam coins and and like you know that Playbook of having this massive ecosystem fund really won't work again just the credit won't be there so that that is um what FTX did and like you know they were big Solana backers uh but that was really you know their game you look at three arrows it's it's most of the same

story but it's a little bit different they were uh you know Sue still has the red triangle uh so he's he's a long avax you know he did all those deals with Luna I think he was like a billion plus of deals with Luna um and so if you think they have five billion you know maybe that's like one and a half two billion of money that they spent there um you know they did near they did Mina uh they did the gbtc trade the things they didn't do were the majors honestly like they didn't put net buy pressure on to bitcoin or Eve like it was all used Within These relatively self-contained ecosystems and so you know I think the the long and the short of it is ethereum really didn't get much much for

many of these flows and I think that will be different next time going forward um but mostly you know and not to harp on the silver number you can kind of tie the source of funds to how they were used and I can just see these all L1 ecosystems really taking a hit as a result like you're gonna need um large ecosystem funds to support them and I just don't know if they're there anymore yeah I want to actually get back to the point of ecosystem funds there was an ecosystem fund that was announced this week I'm not sure if you saw it and I think it's actually very confusing how these things are phrased because it's not like 160 million dollars was raised for this ecosystem fund so I actually I would be great if you could explain like mechanically how this stuff works but I

have a question before we get there which is how would you contact because like the big story this week right it's like and I know uh the bank I know you're on the bank list pod this week and they were asking you about this but is like this Aptos sort of run here so if we're if we're looking at this in terms of like okay there was a big there's sort of this artificial by pressure there's propping up and injecting Capital that into these sort of contained L1 ecosystems and and eth and Bitcoin flows were suffering as a result like that Dynamic should so what you might expect to see in the reverse Dynamic is like Bitcoin and outperforming but actually the things that have performed the best right are some of these like all what like Aptos is like running away and now has

evaluation that's tied with zoom so like how does that square basically with this I mean you can generally say that like it doesn't make sense it's worth you know double coinbase at this point I think um yeah you know doesn't make a ton of sense when you think about it in the right context but you know the long term of how a bull cycle manifests over several years versus the short term of how a token launches gets shorted by the wrong people and then you know people long it and run over them forcing them to buy back you know those are those are two different things um and so my idea of how this app test run has come about is like mostly people are offside shorting it people are

longing into it trying to you know take out their stops and force them to buy back higher and it makes sense within the context of if you are a fund that did the Aptos early rounds and you're now sitting on you know a billion of unrealized paper gains like you're gonna try to short the perp the only question is do you have enough collateral to withstand people longing against you and I think the answer that we just learned is probably not um but you know things are things are expensive optimism is worth coinbase it's in and that's in our portfolio so you know glass houses don't throw stones I ultimately think in the fullness of time you're gonna see the flows dictate the price and I don't think we're at a point where you can make that conclusion yet I want to move on to just actually

it's like a because it was it was this was a subject of debate internally at blockworks this week actually this news came out but uh there was 160 million dollar ecosystem fund um uh that's in the injective ecosystem or 150 million dollar uh so Pantera jump crypto back 150 million dollar uh injective ecosystem fund um and the mechanic there were there was a period of time actually you know to your to your point before where there was is like every week there was a new 150 million dollar 300 million dollar like ecosystem fund for these different L1 sort of ecosystems and this wasn't it was there it's worded a little bit confusingly because it's not like there's money it's not like jump and Pantera just like deploy to Fresh 25

million dollar check into this fund that injective is going to use so each each ecosystem fund is frankly a little bit different in the structure and they're kind of opaque but do you talk a little bit about like ecosystem funds like when you hear that word what do you think about these things like how do they typically work actually so the fine print on most ecosystem funds is that to your point it's not US Dollars sitting in a bank account uh or at least I wouldn't assume that the vast majority of ones that I've seen are more than half the native token of the ecosystem plus you know some money from from outside investors and some sort of handshake agreement that you know they're going to get the first look at any project that comes out of it um and you know it can be used for uh

you know Venture funding it can be used for liquidity mining in the case of avacs but I think the Common Thread is that uh they're mostly tokens you know this isn't like real USD I remember when Avalanche had like the billion dollar uh uh I forget what it was called fund like blizzard or something they had the cool like snowboarder graphic actually it was pretty dope graphic it was a cool graphic yeah um but you know I haven't seen these things work very well over the long term there's something about like the nepotistic like we are the chain we are also the funds we are going to incubate the projects where like if it's too self-encapsulated nothing ever really breaks out into the mainstream it just becomes this Echo chamber

so we'll see how it how it does but I think generally I'm just you know happy that we're putting points on the board with new Funds New Capital new ways for entrepreneurs to do what they're doing what's up Yana what's happening yeah you know thank you for gracing us with your presence yeah I really know you know I wasn't going to join until I saw that Vance got a new headshot and he's looking pretty dapper in it so I figured I'd oh wow my comms guy he sent that to you we've been going back and forth on whether I look pretty sharp pretty cool you you and Michael have like similar look I know those were taken on the same day same photographer I've been there man I've been there it's okay we did that too the the first headshots that Michael and I ever did we went to this uh this

place in Oakland this fake brick office I remember that it was in the Forbes article there you guys yeah I remember and the guy was like you two are like so awkward that like do you want like a drink or do you want me to like start playing music and it was it was like an absolute gonco of a two-hour session like I was standing on the table really I could be the same height as Michael he did not like that that's awesome but we were just talking about ecosystem funds and all that good stuff oh Mike loves ecosystem funds we I was telling I don't you know it was a subject of intense internal debate if block Works

about we decided not to cover this this particular uh fund for it's just they're a little bit uh they can be misleading sometimes in the way that they're that they're announced honestly um you want to ask the specific questions of like what's it comprised of and they were unwilling to answer that that specific question so we ended up not covering what does that mean Vance what would it be comp what are you looking for there this is like mostly tokens you know like 150 million dollar fund based on the private valuation of uh you know X protocol marked at its highest and last round oh so you could have a 200 million dollar Aptos ecosystem fund based on app dose at 15 bucks right now and that and it's all app does token I see what you're saying right yeah the key is to

announce your ecosystem fund when your market cap is the largest so people think you're you're big and scary right and then the other question is where are those specific tokens coming from and oftentimes like the investors that are participating in the ecosystem fund is like hey there are all these investors and they were going to have their unlocks uh at one period of time so sometimes those unlocks instead of just unlocking into the wild are put into the ecosystem fund uh as well which is another little way sometimes those things end up happening um fancy footwork yeah yeah you know good for them for for going there even if it's all tokens are you willing to put something up and fun people you're cool with me I agree with that I agree

um let's talk a little bit about I don't know if you guys saw just speaking of uh um unlocks uh dydx actually had a pretty interesting move so they announced that they were doing the opposite of an unlock actually they had they had a big unlock that was scheduled uh for January and they pushed it back it was 282 million dollars worth of token unlocks that they pushed into the future uh and that's gonna be so that it's going to start in December 20 December 1st 2023 now so basically at the end of the year and then there's an unlock schedule which basically like 30 percent of the unlocks happen on December 1st 2023 then 40 in equal monthly installments first day of each month January to June then another 20 from June till the end of the

year and then 10 uh you know from July 1st uh 2025 to June 1st 2026. so basically they kick these unlocks um you know way down into the future and uh the the I mean dydx kind of exploded higher I mean it was up like 20 uh on the first day that this was announced and has since been doing doing pretty well I I can like without you know trying to put words like our analysts are on our research team are pretty excited about dydx overall um like on-chain perps are a pretty interesting use case especially right now like there are just so few dapps that people are actually using uh like you can always count on the the 24 hour casino to attract some amount of users and you know decentralized perps are a

pretty good way to do it even if you just look at like cumulative volume of dydx versus which has been around for like five years I think Antonio's been been building that um versus like gns and GMX uh games Network in GMX uh I think dydx has done like 800 billion dollars cumulative in terms of volume and uh combined uh gains and GMX have done just a fraction of that um so I don't know if you guys saw this this move to to delay the unlocks her if you had any any thoughts on it I don't have thoughts about the delaying the unlock of maybe maybe the instas but I also like I get why people are so excited about do idea because they did I I don't think it's about to unlock as much as it is about like they're one of

the best like app tokens right now they have they did 350 million in Revenue last year and they're about to turn on um Revenue the revenue return is about to be implemented this year not guaranteed but from right from what I've from what I've heard um and they launched V4 coming soon so like I don't know and they have some pretty big catalysts coming this year like with the returning the revenue launching V4 um I think it's like an it's an easy buy for an institution who's looking at defy to be like all right they have Revenue they div they're they're gonna do like dividends back they've got a massive Tam um low flow only one unlock this year and what what I think it's gonna be February now so I I see why people are so excited I I think you're going to see

these teams slowly put things together we're turning on the revenue we're launching the app chain okay like crypto and speculation and defy are like the most endogenous use cases to to criminal like we don't need anything else to happen for those things to be popular and I think you're going to see teams put it together and it starts with you know what is the token doing and like dydx's token has always been a sideshow but they're gonna put together the pieces to make it work they're going to direct Revenue to the token there's not a lot of these but you know the signs of of them putting it together is really encouraging and you know we uh yeah we like it fans I've got a question for you as a VC you know when you when these protocols talk about returning Revenue to token holders what

are your what are your thoughts about that uh don't until the last second like most technology companies don't return any Revenue any dividends ever let alone like in the first three years and that's because you're trying to capture this massive Market that you believe could generate substantially more Revenue if you you know internalize it and use it wisely in the beginning and that's what I want all of our protocols to do like who cares about them giving people one two three percent in in the bear Market you know they can go by t-bills if they want that um I would just say don't return money until you have like a massive scaled protocol it's fully decentralized and frankly because of Securities regulations a finished product I'm not a shoot a huge Bull on governance at all

I'm a bull on no governance and just like a finished product and that's what I ultimately want to see from these teams something that is beyond the reach of of you know any sort of uh reproach in terms of Securities but also able to generate massive revenue and give it back to token holders at scale I'm just simply not interested in a protocol that's worth a billion dollars it's returning 10 million dollars a year to it token holders just like not interesting will always want the fees even when they're faced with we will shut the product down if we can't get Revenue into the treasury like they'd rather have 100 of zero I'd rather have a much smaller percent of something much

larger next story kind of want to get your take on was uh I know you know you were talking about this a little bit earlier today but this is circles announcement so circles um they're launching circles cross chain transfer protocol so the background is they base they released uh this week developer documentation for cctp as is being called over the or it was this weekend I guess uh it aims to be a permissionless on-chain utility that can burn usdc on a source chain and then native usdc on a destination chain uh Circle will serve as the ultimate source of Truth serving as the Minter burner price Oracle for usdc they're not calling it a bridge and I guess there is a difference between most bridges which are

um like you lock and then Min and this would be burn and mint and the key difference here is that uh Circle it's only one asset it's a one asset bridge where Circle happens to be the issuer of the Native asset so it's it's pretty interesting you know I mean I think um there's there's definitely the desire in these different ecosystems for there to be usdc natively and I know it's been a pain in the ass for a circle to launch on like uh ethereum and then have to figure out if you want usdc on Solana or wherever else or in Cosmos or wherever else uh so it seems like it is a pretty big deal uh but I'm curious to get your guys your guys thoughts yeah bullet I'd say bullish Circle bullish D5 brings liquidity like helps assets move across

defies much smoother bearish for other Bridges um I think like I don't think anyone's gonna I don't know who uses a bridge when you can just burn usdc on chain a and then mint usdc on chain B except if you're like a decentralization maxi or if circle is forced to kyc um is forced to kyc it so like I think it's a I think it's smart that they're calling it a utility right like Bridges had like two billion of hacks last year so obviously people think about bridges now they're really scared of them um and like but Bridges like the ux experience of bridges sucked it was like you had like axolar usdc and then you had like Wormhole usdc it was like a total nightmare dealing with 10 different types of uscc on Solana and all that like just a nightmare I don't

know I think I think it's a great product I I like really tip my cap at Circle here the like counter argument is that they are the the mentor the issuer the like source of Truth and like that's kind of like anti-defy I'd say but I think it's a great product development I think we're going to see people use Bridges Less in the future I think what we're going to see instead of like the plain vanilla transferring uscc from one chain to the next chain okay I'm now on this next chain now I'm gonna go do this thing on this next chain and then I'm gonna go withdraw it to you know the original chain so I can go cash out I think what you're going to see is these interoperability protocols that are not just you know asset specific but they're they're more about moving data and

relaying transactions where you know you're on eth you need a bridge to optimism buy an nft and then like you know figure out how to sell it and Bridge it back you're going to be able to do that in in one two transactions and I think this will be part of a larger you know interoperability stack that really makes like the concept of like switching from one chain to another does not make a lot of sense to users that's where I roughly see this going there's always this like oh my God this is the new thing and like you know this is going to be the new way that we do it all the time forever and and for all time and but it's usually like okay this is like a stepping stone towards something a little bit more seamless from a user experience and I think

that's ultimately where we're going but we haven't seen the death of other Bridges I think we've seen like more of a rearrangement in terms of like what they're going to do and what they're going to be useful for and like the plain vanilla Bridges like you know things like hop I think those are going to be challenged just because you know we've looked at 70 80 of the monthly volume of transferred assets is either usdc or eth where there's a native you know East bridge that that's what I think is kind of smart about this uh it's just like if you just look at instead of trying to be a bridge that you can send like you know if the scope of what you're trying to achieve there is like be able to transfer any asset across to any other like from one now one to another is very technically

complex whereas if like 70 of the volume is going through this one asset and you can just win that one asset it kind of reminds me of the compound the compound strategy of just like just trying to instead of being able to deposit like any type of collateral people just want to get leverage on their dollars like people sweat a bar in London dollars like so just get maximum capital efficiency get the best rates for usdc tell you what I like we are scared shitless of using Bridges um and we will only use like you know ones that we've done on an audits on I'm glad to see something safer come to Market because I think we've probably lost a few billion dollars of customer Assets in bridges last year none of which we invested in by we I mean the proverbial we of the

industry but you know not not a great look either way so I don't know if you guys saw Antonio the founder of dydx responded uh you know like very quickly to Jeremy Lair when he tweeted this out uh but he said dydx would be uh you know they would use this basically instantly starting day one when they make their transfer from starknet to you know their own their own protocol their own chain in um in the cosmos ecosystem and this was like there was a there was an announcement of a general asset issuance chain which I think is called Noble now it's the name um and that's and circle's gonna leverage that basically to Mint usdc which then with IBC you know uh through the cosmos Hub you know you can basically you could basically have uh

Cosmos native usdc and that's kind of interesting because for Cosmos applications there's no native token like there is an eth like you have to use eth to uh to Mint or like to burn like gas fees and stuff um and if you want in a in a cosmos chain you could actually use usdc right to pay for things or if you're dydx and you want to reward your user they have like a whole bunch of trading rewards right that's a huge part of their uh token allocation you could actually pay your your users in usdc instead so it's kind of uh it'll be interesting honestly to see what ends up getting used there when are we going to stop calling it The Cosmos ecosystem I don't know the Kanto ecosystem yeah I've asked I

don't really know I haven't looked into what Kento is at all our analysts literally bridged assets over into Kanto before some of the devs at Kento Bridge their assets over they were literally if you look there look at the chain they were the first dollars I was like I was like guys I remember over the summer that I'm telling me about Kanto and uh and uh they're like yeah you definitely shouldn't do it none of us are going to get our money back you there's once you bridge over you there's no there's no way to even get it out right now I was like honestly that's how you make it that's how you make it I'm not willing to take those risks at this age I mean I like your analysts a lot there's always like three of them whenever I'm on a call with them it's

like they roll in packs exactly so Advanced we just had our off-site we just had our offsite in Savannah and uh and uh they they they move together like they moved yeah no no they roll together you know you might have like a tape where you know we're like there are different presentations given at the company and like we go to a bar we go to a restaurant different teams sit together you have like a sales person sitting with a marketer sitting with like you know like a developer or something the analyst you just look at a table it's just like anything else nobody wants to sit with that energy either because they got me roasted what other Bridges can we Aid to get into weird places like I love it there's no like at those at that table there's no like how was your

weekend like what do we what what game are we watching this weekend it's like d-gen only let me let me take you on a different path so I uh you know who entertain us right we all know who Andrews yeah well really a different path here huh yeah I'm not sure how these are going to bring us together but so so so I looked that it's gonna tie I looked at uh like Andrew has a thing called Hustlers Academy which is kind of like you know we'll train you to make lots of monies and get like a cool colored Bugatti like a member yeah uh yeah Mike's Mike's for sure remember Mike's for sure remember that was the first one I was like our animals were in the contest the first one for the top ten yeah so so he's got like three careers that he'll train you in you like

enter the website you enter the flow and it's kind of like you have to pick like a guild or like what you train in the first one is Drop Shipping so you know like somebody orders a fancy soap you order it from Alibaba and you send it to their house and like you don't have a front end like that's one career the next one is I think you can describe it as like multi-level marketing Ponzi schemes okay and then the third one is like we'll teach you how to trade crypto like those are the three wait but I heard but I thought we actually nailed a bunch of calls oh he nailed a bunch of calls I heard that on the bottom on a live stream he called the top in October 2021 like he was like you know but I thought it was funny you know it still

is if you're trying to make it Andrew Tate's telling you it's one of three options and the other two are Drop Shipping and Herbalife it's it's pretty compelling to to your analysts you know who are aping these like obscure bridges into these obscure chains I can see why can you imagine how embarrassing it would be if like that his like the list of people that were a member to that ended up getting leaked can you imagine that like that would be rude and if you were like on that you know like let's put it like this would you rather have it leaked to the world that you are a subscriber to like 10 only fans accounts or the Andrew Taylor or the Android date like self-help little Club listen I used to subscribe to willywoo sub stack uh that would

probably be the most embarrassing of the three oh man I bet I've subscribed some embarrassing stuff back in the day back in my self-help College days there's always that moment where you're like coming out of college like 22-24 like man am I Really Gonna work this corporate job for the rest of my life when I was like 19 I read a lot of like um Rich Dad Poor Dad Robert Kiyosaki oh yeah uh Think and Grow Rich Napoleon Hill yes um How to Win Friends and Influence People Like though you know those books like that like 19 year old me ripped those books the the worst self-help book is uh the game I don't know if you have any friends I never I it was it was in that group but I never read it if that's how you

talk to women if that's how you learn how to talk to women like you're gonna have some big problems later in life like you may turn into actual Andrew Tate at something oh is this the is this still like pickup book it's like yeah look up artist type thing and then you'll just like you know they're like the concept is like okay like all women are the same this is how you should approach them you should like act like an alpha male and like kind of a dick and like the people who've read that it's like you can't really bring them back yeah it's you know yeah once you go once you go full like the game you never come back you never come back but I think you know to the original point is like The Hustler Academy is filled with guys that are trying to make it and those are

your three best options according to Andrew Tate I was um I was listening to a podcast this is like a legacy podcast I still tune into everyone it's hosted by these two people that like don't know crypto but um actually I'll just I like this podcast a lot it's pivot I don't mean to [ __ ] on either I like Karen I like Scott Galloway oh wow yeah I've been listening to it for years it's like uh it's like my like guilty pleasure thing that I listen to and uh Scott was on the board of uh he's on the board of Ledger I actually he yeah so he and he was describing he was like yeah so people are buying up our you know our our wallets and I keep urging the founder that the future of crypto isn't in these

nfts or anything like that it's in you know storing digital assets like Health Care records and supply chain material and I was like I cannot imagine Pascal listening to that on board meeting I want to costume I was like get this guy out thanks Scott we'll get right on that thanks dude a hundred percent Scott I'm with you on that I actually I've got a big fat yeah but I don't mean to be mean it's like something I tweeted today like people are obsessed with like these like real world use cases where their mother will be able to use it and their grandmother will be keeping her health care records on that there's just like guys we're like building a large crypto economy and you're focused on like putting these things on chain like what types of Revenue are they going to generate how are they going to be reflexive and have

a flywheel I don't know I kind of think we're in this like Purgatory where any use case we come up with will be declared as like not a real use case but that's how people get sidelined it's it's interesting trying to talk to someone who like they're people that like the majority a lot of people came into crypto in the last 24 months or something and all they knew was the bull market before this and now this is the first iteration of these like real world use cases that they're seeing and it's like very compelling to people who've been in crypto for like two years you know because it's like oh okay like dog coins aren't really going to be a thing and they're like more skeptical in their head and they're like these real world use cases of like tokenization and real world assets which

there might be some Merit to real world assets I I'm really made up my mind but like it's basically just a rehashing of like blockchain not Bitcoin and Enterprise blockchain and like a lot of them same thing every single thing yeah and coinbase and uh Brian Armstrong have talked about this where I think after the 2014 or 2015 run they were kind of down in the dold rooms their exchange wasn't generating a lot of money and one of their board members was saying you guys need to Pivot to be and this company doesn't exist anymore and R3 competitor which built private blockchains for people who literally never use them I remember R3 remember uh remember uh digital assets with Blythe Masters as well yeah I remember them well yeah like yeah how are those things

going they did not survive they did not find product Market fit they were staffed with the smartest people in finance and and the reality is like those are interesting Enterprise SAS businesses but like that's not the movement it's not the revolution it's not like what we're trying to build it's just not that big of a market yeah I agree um but the the point that there are also like outside of that uh on on pivot is like that and this is I actually do kind of believe this as an idea it's like the ultimate buyers of these things like the reason why Bitcoin and ethereum and like crypto is so compelling to a younger like Millennial or gen z type generation is because if you talk to like especially gen z um there's this idea that like we the system is like we're already [ __ ] if

we if we try to do the thing that our parents did or people that are older than us like buy stocks like you're not gonna work never gonna make it um so we need to do something else something that's like higher risk higher volatility like higher convexity kind of and like crypto is that is that thing and I actually do I think I buy that argument because I also think like that a little bit like uh there's a part of me where it's like yeah I'm not gonna like make money buying the stock market right like look at it it's ridiculous um I I think I think it's different now too because of social media like what do you see when you go on Instagram models and private jets and movie stars and rock stars and everyone was brought up with the idea of like you you too will

someday be one of these people but there's a lot of daylight between the average person and getting to that level and so it's like it's logical you know you you don't you didn't have that mirror of Pop Culture 20 30 years ago that was instant on demand like if you're living in New York you probably didn't even know what was going on you know in Los Angeles like now that culture the movie star you know big life that's everywhere and I think that's what people are all aiming for just because of social media so I think it's it's now like that more than ever yeah I think so too social media is a tricky thing I mean I know uh I have a lot of conversation with my dad about this who like ascribes a lot of the ill in society to social media and I've kind of

defended it for a long time Mr ippolito can you imagine that damn social networks yeah I'm just kidding I do love your dad and I think and I think and I think I increasingly I've defended him a lot and I increasingly think he might be right no I'm completely on this page too yeah you go on Instagram now it's just trash like you know like it's all like it looks like a chat GPT 3 instance took over the internet and just it's just like all models and movie stars and like you know cool houses and it's so cute you guys should watch the social uh the social Dilemma on Netflix you will if you're not already convinced that social media is horrible you will delete Instagram from your phone immediately

Instagram and Twitter haven't had them for like a year I haven't had Twitter I also haven't had Twitter and Instagram on my phone and I don't have any social media on my phone actually if I need to tweet something I need to go sit down on my computer open the computer take a breath me too type in my password you know tweet if I have Twitter on my phone it is endless scrolling so I just don't I just don't have it yeah that's you know all you really need to know is that all these like these exacts at Apple and like Facebook they don't let their kids use it they like limit their kids that's the only that's the only thing you need to know would you let your kid buy crypto why wouldn't you yeah exactly you know what though there was like a you know

it's not totally binary either I mean there was like we let people smoke cigarettes even though it's bad for them but they're but like someone has stepped in and be like yo you like can't inject this [ __ ] right into people's veins like you need to put you need to like put a filter on that you know like you don't like me as a kid you can't use this chemical you can't Market it honestly we might just be living in the the part of society before they introduce whatever that equivalent is for social media and phones and all this stuff The Tick Tock band bill is out today yeah uh I think Senator Josh Harley or something Holly so like we're getting there you know yeah it that used to feel like the cardinal rule of like America like you know capitalism do whatever you want but like

don't [ __ ] with the kids they're the future and now it's like okay like we're finally getting there to the point where we realize these things are semi-poisonous and we probably need to curtail them so I think it's really good benioff called uh Facebook the the new cigarettes like three or four years ago and I actually remember listening to it at the time be like what are you talking about dude and I'm like yeah he has his own reasons for saying that but he's probably more right than wrong I'd say most people can identify the point in their lives where they started using social media and there's kind of like the before and after that's probably not a good thing I agree with that I oh you know what else just last last uh point on this topic have you guys ever heard of a

movie called eighth grade um okay watch eighth grade eighth grade is eighth grade is it follows like an a girl who's in the eighth grade basically and like you know and it's it's just dude it's pretty depressed because you remember being that old like you were super young in a middle school and like I don't know what you guys did at that period of your lives like I played a lot of Xbox I had no access to any of this stuff then and watch her experience like it's Bo Burnham Bo Burnham did the movie if you guys know who he is no my plan was to become a professional skateboarder that's what I was able to really looking for at that point yeah didn't work but we found something else there's just two stories that I want to get to before uh before we jump so something happened

earlier this week with Stargate Finance this is this is kind of funny but it's also indicative of a bigger problem so this was this got posted in their governance Forum the Stargate Foundation has been approached by an individual representing that he works with a family office that is looking to acquire two million dollars of STG at market price from the Stargate Dao is this the first time this has happened this issue is being brought forward to the Stargate dial should the Stargate dial complete this transaction selling two million worth of STG price is a three day time weighted average price t-wop uh for usdc this usdc would then be used to purchase each that is locked in Stargate uh Pol and supports Stargate liquidity on ethereum assuming a Target apy five percent this would reduce STG emissions by a hundred thousand per year and

strengthen stargate's permanent liquidity blah blah blah basically like we just want to let the community know you know fast forward to two seconds later you know Stargate pumps from 47 cents straight up to 69 cents that's really funny uh and it's just like obviously you know everyone Fran front ran this when you know you publish that there might be a huge OTC buy so one that's kind of funny unless unless it's psyops and the family office already bought and then that was their way to pump it it could be psyops yeah but how could they like I don't know what the liquidity doesn't started I would guess it's super thin so I guess this would reflect poorly on Stargate or I guess maybe the family office somehow Source the liquidity

outside of this or I don't know how they would have done that but you're right it could be psyops probably not psyopsis probably they just got front ran and this is a good lesson in governance though like what's the let me just ask you because we've talked about this in the context of like not airing Dirty Laundry necessarily like sometimes you see these really personal like work feuds that get aired out in governance forums what do you think is appropriate you know how much should we kept behind closed doors because it's frankly better for everyone involved versus what are things that should be run through governance most should be kept behind closed doors I don't think that like the idea of a dow needs to be like transparent everything and every

decision goes through like Pub like I think there's this idea that Dows have to have everything 100 transparent and Dows have to have every decision made by committee and I think both of those things are will be seen as like a remnant of like the early days of Dao's you can't build good companies like that I agree with that I agree especially especially HR issues and stuff I mean that's just that doesn't serve anyone why would you want to know yeah but this does this is a good reminder too like also why there's why there's Alpha and governance and it pays to pay attention to this stuff every now and again I think the most Alpha and crypto is in governance right now yeah there was there was something else it got we didn't really want to talk about on this

but there was a curve pumped because basically Avalanche or uh sorry Ave was unwinding uh the impact of some bad debt that was in one of their their curve pools uh which is courtesy of Abby Eisenberg uh R.I.P um and this also went through the governance form and and curve also pumped because basically all they bought back a bunch of uh a bunch of curve so you can pay attention to the stuff and it actually is it is very helpful uh last thing I wanted to get your take on because I know you've got some some thoughts on this is just uh is Doodles moving over to moving over to flow so the background is on Wednesday they announced that uh doodle 2 which was premiered back in June is going to launch on Flow Doodles 2 is to span

millions of nfts instead of the 10 000 avatars in the first Google series which I actually think is is very interesting core Doodles collections were made on ethereum uh so that's not changing this is just doodles 2. but basically the founder posted a threat of for why they chose flow which has to do with kind of the it's almost like the customer Journey for signing up and and be you know getting an nft so you can just create a wallet really easily in Gmail when you use flow you can buy wearables with your credit card in a couple of clicks uh no transaction fees so there's some like legitimate reasons to to using flow what's what's your sort of thought on this decision from Doodles uh it's a big risk that I disagree with

but I could be wrong and I think it basically what they're doing is they're um so you have the doodle you have Doodles core which is like the 10 000 Doodles and those I think my understanding is they're staying on ethereum and then there's like Doodles 2 which are which are gonna be like millions of Doodles and those are moving over to flow or those will be built on flow um I think that they're basically jeopardizing their core audience for this like hypothetical and like potential massive Tam audience and which is like normies you know who like use flow because it's super easy to use and it doesn't feel like crypto and like every time I've seen that strategy over the last four or five six years it's never worked but I get how the decision

was made which is like today we're just this 10 000 pfp crypto thing I I think there's actually a broader problem here which is like Doodles raised 54 million at or 50 million at 700 million valuation the they have to grow into this valuation right they if you raised it 700 million they have to make it if they want to get a 10x they have to be become a 7 billion dollar project so um you don't do that by staying as a 10 000 pfp collection that's like just held by crypto people so like this is them needing to take a swing because they raise so much money at such a high valuation and like I think that's why they're moving over

to flow but like I don't know flow is um flow like is delete like no I never hear about flow who uses flow like Top Shot is dead they did a big thing with Dr Seuss I don't even think that got off the ground um and like they created uh they created a nice IP with like NBA top shots but I haven't heard about that in like a year and also they built a completely permissioned it's not defy and it's not like a permissionless crypto platform like it's a completely walled off Garden which I think like I don't know I would assume what happened here is Flo went to Doodles and and they you know most of the Doodles team came out of crypto kitties and crypt and most of the flow team came out of crypto kitties too so

what I would assume happened is like they're close friends Flo went to Doodles and like you know I'm sure they gave him a decent chunk of change to go move on to flow and that's fine to happen I just probably disagree with the decision one thing I think is kind of interesting is the decision to launch Millions so I don't know if you ever uh read or listened to any of the interviews by Gabe Laden but he kind of has this idea that most people will get their first exposure to crypto through an nft and he has this whole thing about free to own there'll be free nfts and then I'll make you sign up for a wallet and like that'll be the Trojan Horse I do think there's this weird thing that's happened with the initial punks collection uh you know kind of picked an

arbitrary number of punks out of thin air when it was unclear clear that any real value would occur there and ever since everyone's just copied this 10 000 number for for no real reason and what that's given rise to is just these like whale Community it's just made nfts like a whale game and the whole nfts all you do is you find them that you're that you can be early to you mint the nft you either flip it or you hold on to it when you can become like a whale and it means that there's like no sustainable Revenue model for nfts and if you look at Yuga Labs all they do is just find new ways to there's like the secondary trading fees and then there's minting you know like new primary Sales Event if they're just primary sailing this primary sailing that and uh I think the way that you

open up your your base to a broader number of people and therefore increase transaction revenue is to have larger collections of uh less expensive nfts so maybe Doodles is doing that that would be cool but that but I I don't know that that's their strategy so um with you it's kind of a feels a little bit weird to be honest move yeah I don't know I'm I'm also like I just don't know any who else is built on flow I don't know one other thing built up though no I'm either they got it they gotta open I know they have plans to open up and become permissionless but if they did then I would be more excited about it and kind of change for him I've also

it's like liquidity rules everything and rules everything in the nft space um and there's like there's no liquidity there's six million dollars of like nft volume on flow in total like users don't want to store high value entities on Flow so I think you'll see these like the the good Doodles will stay on eth and then the you know like the bad Doodles go to flow I don't know it just doesn't feel like a good strategy yeah I agree yeah so all right buddy I think any other stories anything else you want to catch up on no that's about it it's funny that we went out for Kevin Rose he got hacked two million bucks well it sucks poor guy honestly big fan of that guy and you know if he's not safe and he's

getting hacked in this space I'll be honest it makes me feel a little bit nervous as well one thing that everyone needs to do is just have two wallets you have a wallet where you hold your valuable stuff and then a wallet that you use to interact with smart contracts like know if fans or Bots everyone should have that and he didn't have that he had all of his nfts in one wallet probably the reason you do that is like either laziness or like to flex to show like I've got all these nfts in this one public wallet like look at me um and like this is what I think this is what happens when when that when when you have all when you have all your stuff in like this one valuable wallet and you're interacting with smart contracts so like what I do is I have a

smart I have a wallet that like never touches anything never touches smart contracts and then if I want to like mint or I want to sell something or like interact with a smart contract I move the asset over into that wallet I know let's give them the benefit of the doubt and say I don't know if it's about maybe he's just very active that's a huge pain in the ass what you're describing that system is a gigantic pain in the ass so I I mean I pour one out for him for sure I feel really bad for him I'm just saying I don't think like yeah I yeah I just wouldn't have all I wouldn't have two million bucks in a wallet where you're interacting with smart contracts and that's a that's not on him that's on that's on the industry to like I don't know there's got to be a better

way to do this I don't know the better way but like I feel like metamask could give a flag being like this is a bad contract I I don't know I don't know I don't know I'm with you there yeah all right buddy I think we can uh hey we can close that I love how you you missed the crypto stuff in the beginning and just came back and talk about social networks yeah about social media I I you know what I've I've drank the cool I think it's after like a long time defending it and maybe trying to be too contrarian for my own good I I think they're I think they're pretty bad and I'm not me too I'm going Boomer on it I agree all right don't boom there all right partner good chat peace bye peace [Music]