1
00:00:02,080 --> 00:00:05,440
Speaker 1: I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News,

2
00:00:05,720 --> 00:00:08,920
Speaker 1: and this is Bloomberg Crypto at Daily Bloomberg I Heart Podcast.

3
00:00:09,520 --> 00:00:19,439
Speaker 1: It's Thursday, June nine. In March, two hackers stole about

4
00:00:19,440 --> 00:00:22,520
Speaker 1: six million dollars from a crypto network. It was one

5
00:00:22,560 --> 00:00:24,919
Speaker 1: of the biggest exploits of this asset class to date

6
00:00:25,280 --> 00:00:29,880
Speaker 1: and left many investors shaken. Canada centralized financial system like

7
00:00:30,000 --> 00:00:35,120
Speaker 1: crypto work if investors get spooked whenever significant assets are lost. Today,

8
00:00:35,200 --> 00:00:38,760
Speaker 1: I'm joined by Bloomberg reporta Olga Karif and Bloomberg Opinion

9
00:00:38,840 --> 00:00:41,640
Speaker 1: columnist Parmi Olsen for a look at the scope and

10
00:00:41,720 --> 00:00:45,080
Speaker 1: effect that these attacks are having on the decentralized financial

11
00:00:45,080 --> 00:00:52,360
Speaker 1: market place. Olga Harmy, great to have you here, Thank

12
00:00:52,400 --> 00:00:55,520
Speaker 1: you both for joining, Thank you, thank you. So we're

13
00:00:55,520 --> 00:00:59,480
Speaker 1: going to start with just some basic principles or you know,

14
00:00:59,560 --> 00:01:02,320
Speaker 1: frankly crypto. I'm not sure anything ever is really basic,

15
00:01:02,520 --> 00:01:05,520
Speaker 1: but algo, we're going to talk about defy hacks. But

16
00:01:05,600 --> 00:01:08,240
Speaker 1: I want to start with when we say defy or

17
00:01:08,280 --> 00:01:11,080
Speaker 1: decentralized finance, especially as it relates to these hacks and

18
00:01:11,120 --> 00:01:15,560
Speaker 1: these exploits, what are we actually talking about. We all

19
00:01:15,600 --> 00:01:20,520
Speaker 1: know how we can use a bank or a broker

20
00:01:20,680 --> 00:01:23,839
Speaker 1: to make a trade or to take out a loan,

21
00:01:24,440 --> 00:01:27,640
Speaker 1: And what Defy is aiming to do is to do

22
00:01:27,720 --> 00:01:32,600
Speaker 1: the same thing, but without this intermediary such as a bank.

23
00:01:33,120 --> 00:01:37,200
Speaker 1: So Defy uses computer code to essentially allow you to

24
00:01:37,319 --> 00:01:41,240
Speaker 1: do all of the same things. Um, and this computer

25
00:01:41,319 --> 00:01:45,920
Speaker 1: code can get pretty complicated, so I would be I mean,

26
00:01:46,000 --> 00:01:48,840
Speaker 1: are you saying I'm borrowing money from a robot? No,

27
00:01:49,320 --> 00:01:52,800
Speaker 1: you are borrowing money from another person using the same

28
00:01:53,720 --> 00:01:57,440
Speaker 1: Defy app. Got it. So what this computer code is

29
00:01:57,440 --> 00:02:02,720
Speaker 1: doing is matching borrowers and lenders without there being like

30
00:02:02,760 --> 00:02:04,760
Speaker 1: a city bank or a Bank of America or somebody

31
00:02:04,760 --> 00:02:09,240
Speaker 1: like that in between. Exactly exactly, And what makes these

32
00:02:09,360 --> 00:02:12,120
Speaker 1: prone to the kinds of hacks that we've seen. We're talking,

33
00:02:12,120 --> 00:02:15,560
Speaker 1: you know, six million dollars, five hundred million dollars. Why

34
00:02:15,600 --> 00:02:17,120
Speaker 1: are these things happening and who are some of the

35
00:02:17,120 --> 00:02:20,919
Speaker 1: folks being affected by them? Exactly? The numbers have been

36
00:02:20,960 --> 00:02:25,120
Speaker 1: staggering and the users are affected. So it's very often

37
00:02:25,160 --> 00:02:28,240
Speaker 1: who's affected is just the user for trying to do

38
00:02:29,120 --> 00:02:32,680
Speaker 1: lending or borrowing or trading directly with each other, and

39
00:02:32,720 --> 00:02:36,840
Speaker 1: the reason this hacks happen is that to avoid using

40
00:02:36,880 --> 00:02:41,919
Speaker 1: an intermediary, essentially the computer code governing this apps has

41
00:02:42,000 --> 00:02:46,440
Speaker 1: to get pretty complicated and it's very hard to audited

42
00:02:46,639 --> 00:02:48,919
Speaker 1: and to make sure there are no bugs, that it's

43
00:02:49,000 --> 00:02:54,200
Speaker 1: functioning properly. Uh In Plus the various defy apps that

44
00:02:54,240 --> 00:02:58,680
Speaker 1: are out there, they're intertwined with each other and they're

45
00:02:58,720 --> 00:03:02,240
Speaker 1: governed by communities of users very often, and there are

46
00:03:02,320 --> 00:03:06,480
Speaker 1: so many different sort of new ways for hackers to

47
00:03:06,680 --> 00:03:11,680
Speaker 1: try and steal steal funds. And you know, when you

48
00:03:11,720 --> 00:03:13,800
Speaker 1: say the sums are being very large, I think in

49
00:03:13,840 --> 00:03:16,840
Speaker 1: your reporting you mentioned that something like two point three

50
00:03:16,960 --> 00:03:20,200
Speaker 1: billion dollars was stolen from these de five platforms, in

51
00:03:21,320 --> 00:03:23,600
Speaker 1: which is a more than one thousand percent increase in

52
00:03:23,639 --> 00:03:26,040
Speaker 1: the year before. And we're in two and we're probably

53
00:03:26,080 --> 00:03:28,440
Speaker 1: already at that and we're only in you know, the

54
00:03:28,480 --> 00:03:32,480
Speaker 1: middle of the year. Absolutely so so, just so far

55
00:03:32,680 --> 00:03:39,160
Speaker 1: this year, just two hacks of ronan Bridge and wormhole Bridge,

56
00:03:39,520 --> 00:03:43,400
Speaker 1: they have added up to almost a billion dollars. And

57
00:03:43,520 --> 00:03:46,200
Speaker 1: you know, PARTI I would love to get your perspective

58
00:03:46,440 --> 00:03:50,440
Speaker 1: on in any other I guess financial market asset class.

59
00:03:50,480 --> 00:03:52,640
Speaker 1: If people were just you know, losing a billion dollars

60
00:03:52,640 --> 00:03:56,800
Speaker 1: at a time that would worry someone. Oh absolutely, I

61
00:03:56,840 --> 00:03:59,880
Speaker 1: think right now with what's happening to the price of

62
00:04:00,000 --> 00:04:04,360
Speaker 1: bitcoin and other crypto assets, essentially they're falling. It's kind

63
00:04:04,360 --> 00:04:07,560
Speaker 1: of hard to pinpoint whether that is any of that

64
00:04:07,920 --> 00:04:11,760
Speaker 1: can be attributed to concerns about the security of these

65
00:04:11,800 --> 00:04:16,360
Speaker 1: DeFi services, because there's this broader sell off happening in

66
00:04:16,480 --> 00:04:18,520
Speaker 1: tech at the moment. It's affecting a whole lot of

67
00:04:18,560 --> 00:04:22,360
Speaker 1: big text stocks. But I do wonder, you know, I'm

68
00:04:22,360 --> 00:04:26,800
Speaker 1: thinking about the people who are investing in these kinds

69
00:04:26,800 --> 00:04:29,200
Speaker 1: of services and the people who end up losing money,

70
00:04:29,320 --> 00:04:32,360
Speaker 1: And you know, you could argue that this is ultimately

71
00:04:32,400 --> 00:04:37,560
Speaker 1: just the rough path that decentralized financial services UM have

72
00:04:37,760 --> 00:04:44,360
Speaker 1: to go to through to become more secure. I thought

73
00:04:44,360 --> 00:04:47,800
Speaker 1: it was really telling UM with this one hack against

74
00:04:47,800 --> 00:04:53,599
Speaker 1: a bridge service called Wormhole, and the developers from that

75
00:04:53,720 --> 00:04:57,400
Speaker 1: service actually reached out to the hacker that robbed them

76
00:04:57,440 --> 00:05:01,279
Speaker 1: and offered them ten million dollars as bounty in exchange

77
00:05:01,320 --> 00:05:04,279
Speaker 1: for all the funds, of course, but also to figure

78
00:05:04,279 --> 00:05:07,040
Speaker 1: out all the details on how they hacked the system.

79
00:05:07,080 --> 00:05:09,200
Speaker 1: So you know, it's it's like they want justice but

80
00:05:09,240 --> 00:05:11,800
Speaker 1: almost more than that, they want to learn how to

81
00:05:11,920 --> 00:05:14,280
Speaker 1: be more secure. So I think this is the kind

82
00:05:14,279 --> 00:05:18,719
Speaker 1: of wild West that UM entrepreneurs are operating in and

83
00:05:18,800 --> 00:05:21,719
Speaker 1: investors are who are going into this. They're you know,

84
00:05:21,760 --> 00:05:24,680
Speaker 1: they're like pioneers of the wild West, and and with

85
00:05:24,800 --> 00:05:27,920
Speaker 1: that adventure is going to come a lot of risk.

86
00:05:31,920 --> 00:05:34,960
Speaker 1: One thing I would note is, you know, the early

87
00:05:35,040 --> 00:05:40,919
Speaker 1: days of banking were also chaotic. You did not necessarily

88
00:05:40,960 --> 00:05:44,200
Speaker 1: have the regulatory framework that you have right now. You know,

89
00:05:44,240 --> 00:05:46,600
Speaker 1: even f D I C insurance, which in the US

90
00:05:46,720 --> 00:05:49,920
Speaker 1: is the idea that if your bank goes under for

91
00:05:49,960 --> 00:05:52,200
Speaker 1: some reason and you have up to two fifty thou

92
00:05:52,400 --> 00:05:54,640
Speaker 1: dollars in it, the government will attempt to make you whole.

93
00:05:55,040 --> 00:05:58,320
Speaker 1: Like that number that two dollars was increased as a

94
00:05:58,360 --> 00:06:01,400
Speaker 1: result of the two thousand and eight Final Crisis, when

95
00:06:01,520 --> 00:06:03,760
Speaker 1: you know, suddenly the reality that major banks could go

96
00:06:03,839 --> 00:06:06,200
Speaker 1: under became a clear and present danger as opposed to

97
00:06:06,279 --> 00:06:09,280
Speaker 1: theoretical one. So we're always kind of dealing with this

98
00:06:09,360 --> 00:06:13,719
Speaker 1: idea of vulnerabilities in the financial system. And although I'm wondering,

99
00:06:13,720 --> 00:06:17,040
Speaker 1: are you seeing anything that is potentially going to make

100
00:06:17,080 --> 00:06:20,640
Speaker 1: defy less vulnerable or are we way way way off

101
00:06:20,640 --> 00:06:24,120
Speaker 1: from that. I feel that we are ways away from that.

102
00:06:24,360 --> 00:06:27,680
Speaker 1: You would think that all of these apps would learn

103
00:06:27,839 --> 00:06:32,080
Speaker 1: from what happened to them and you know, build more

104
00:06:32,960 --> 00:06:36,159
Speaker 1: secure and robust systems. But if you look at a

105
00:06:36,200 --> 00:06:39,839
Speaker 1: lot of the DeFi hacks that have happened, and I'm thinking,

106
00:06:39,920 --> 00:06:43,920
Speaker 1: you know, Cream five, for instance, it got essentially hacked

107
00:06:43,920 --> 00:06:47,400
Speaker 1: in the same way three times last year. Uh you know,

108
00:06:47,440 --> 00:06:51,919
Speaker 1: it's the same people got hacked three time. Yeah, in

109
00:06:51,960 --> 00:06:55,159
Speaker 1: the same way through so called sort of flash loans.

110
00:06:55,200 --> 00:07:00,880
Speaker 1: This is where, uh you the hacker would borrow money

111
00:07:01,000 --> 00:07:05,160
Speaker 1: and return it in sort of the same transaction, if

112
00:07:05,160 --> 00:07:08,479
Speaker 1: you will. And so you know, when you look at

113
00:07:08,560 --> 00:07:11,440
Speaker 1: this sort of things, you start to wonder. But of course,

114
00:07:11,480 --> 00:07:14,680
Speaker 1: the industry is doing a lot to fix this problem.

115
00:07:14,800 --> 00:07:18,600
Speaker 1: So a lot of different startups have sprung up that

116
00:07:18,760 --> 00:07:23,160
Speaker 1: do code auditing of DEFY projects. They try to find

117
00:07:23,200 --> 00:07:27,640
Speaker 1: different bugs and prevent hacks. But some of the projects

118
00:07:27,680 --> 00:07:31,040
Speaker 1: that got hacked last year, they were audited and the

119
00:07:31,120 --> 00:07:34,679
Speaker 1: auditors missed the bugs that eventually led to the hack.

120
00:07:35,160 --> 00:07:38,640
Speaker 1: So nothing, you know, no system is perfect. And I

121
00:07:38,680 --> 00:07:43,640
Speaker 1: think the main issues that if you want to displace intermediaries,

122
00:07:43,720 --> 00:07:47,760
Speaker 1: the computer code has to get very very complex and

123
00:07:47,880 --> 00:07:50,960
Speaker 1: to the point where it's just really hard to find

124
00:07:51,120 --> 00:07:53,480
Speaker 1: all the bugs in it. And I think this is

125
00:07:53,520 --> 00:07:57,240
Speaker 1: sort of the main problem that this industry is grappling with.

126
00:07:57,480 --> 00:07:59,600
Speaker 1: You know, it's just is set up in a way

127
00:07:59,680 --> 00:08:04,280
Speaker 1: that makes it more vulnerable to hackers than a lot

128
00:08:04,280 --> 00:08:08,960
Speaker 1: of other services. Party you wrote in one of your columns,

129
00:08:09,320 --> 00:08:11,720
Speaker 1: you know, I think it may have been in January

130
00:08:11,760 --> 00:08:15,960
Speaker 1: that this exact thing that Olga is describing it seems

131
00:08:16,000 --> 00:08:18,640
Speaker 1: to undermine the idea that Web three, or what we

132
00:08:18,720 --> 00:08:21,240
Speaker 1: like to call Web three, is necessarily an improvement on

133
00:08:21,320 --> 00:08:24,920
Speaker 1: Web two. Can you talk a little bit more about that. Yeah,

134
00:08:24,960 --> 00:08:27,720
Speaker 1: And I actually really want to reiterate the point that

135
00:08:27,760 --> 00:08:32,040
Speaker 1: Olga made about the complexity of the code underpinning a

136
00:08:32,080 --> 00:08:34,840
Speaker 1: lot of these services. And this is what I've also

137
00:08:34,960 --> 00:08:39,200
Speaker 1: heard from entrepreneurs who work on Web three services, which is,

138
00:08:39,280 --> 00:08:42,320
Speaker 1: for example, that the pro one of the very popular

139
00:08:42,360 --> 00:08:46,360
Speaker 1: programming languages used to make these apps UM called what

140
00:08:46,520 --> 00:08:51,360
Speaker 1: is called solidity. It's a very very complex form of programming.

141
00:08:51,559 --> 00:08:56,280
Speaker 1: It's very rigid and brittle, so UM coders, for instance,

142
00:08:56,600 --> 00:08:59,600
Speaker 1: you know, when you're building a Web two app, you

143
00:09:00,040 --> 00:09:02,840
Speaker 1: and write your code and then you can try it.

144
00:09:02,840 --> 00:09:05,240
Speaker 1: You've got lots of different opportunities to let it go

145
00:09:05,360 --> 00:09:07,400
Speaker 1: wrong and see where you went wrong, and then go

146
00:09:07,440 --> 00:09:09,480
Speaker 1: back and do it again. You can't really do that

147
00:09:09,559 --> 00:09:12,839
Speaker 1: as much with Web three services. You don't get multiple

148
00:09:12,880 --> 00:09:15,240
Speaker 1: tries to get something right. You have to plot your

149
00:09:15,240 --> 00:09:18,960
Speaker 1: steps out really carefully. UM and you know, something so

150
00:09:19,000 --> 00:09:22,240
Speaker 1: simple as a typo UH could potentially lead to a

151
00:09:22,280 --> 00:09:26,400
Speaker 1: security vulnerability, not just a glitch, but an actual vulnerability.

152
00:09:27,040 --> 00:09:30,360
Speaker 1: UM and I think what again, what makes this different

153
00:09:30,440 --> 00:09:34,640
Speaker 1: to Web two is that these aren't just UM services

154
00:09:34,679 --> 00:09:37,480
Speaker 1: for social networking or games or anything like that, but

155
00:09:37,679 --> 00:09:41,200
Speaker 1: UM people are actually storing large sums of money and

156
00:09:41,280 --> 00:09:45,320
Speaker 1: so if it if there's a security breach, it has

157
00:09:45,520 --> 00:09:50,160
Speaker 1: massive financial repercussions. And one thing, one other point that

158
00:09:50,240 --> 00:09:53,240
Speaker 1: was made to me by an entrepreneur recently, was there's

159
00:09:53,280 --> 00:09:57,920
Speaker 1: a really prevailing move fast and break things culture within

160
00:09:58,080 --> 00:10:02,119
Speaker 1: Web three. Well, yeah, us in Web two by Facebook exactly,

161
00:10:02,360 --> 00:10:05,000
Speaker 1: but more so now in Web three than with then

162
00:10:05,000 --> 00:10:07,480
Speaker 1: with Web two, which has become much more corporate and

163
00:10:07,720 --> 00:10:11,080
Speaker 1: very standardized and very very regulated or not as regulated

164
00:10:11,080 --> 00:10:13,160
Speaker 1: perhaps as it should be, but certainly much more than

165
00:10:13,559 --> 00:10:17,600
Speaker 1: UM blockchain services. UM and that just really um it

166
00:10:17,640 --> 00:10:21,760
Speaker 1: does not reconcile with the fact that there's so much

167
00:10:21,800 --> 00:10:27,839
Speaker 1: at stake financially when these services are breached. Back in

168
00:10:27,880 --> 00:10:31,000
Speaker 1: a moment with more from Olga Karif and Parmi Olson.

169
00:10:39,960 --> 00:10:42,720
Speaker 1: So this web two Web three conflation, before we go

170
00:10:42,800 --> 00:10:44,280
Speaker 1: too far, I want to just talk a little bit

171
00:10:44,320 --> 00:10:46,880
Speaker 1: more about how those things are different, because I also

172
00:10:46,920 --> 00:10:50,920
Speaker 1: think it's related to you know, Olga's point about defy

173
00:10:51,040 --> 00:10:53,320
Speaker 1: and and the point you are also making about complexity.

174
00:10:53,640 --> 00:10:56,079
Speaker 1: When we think about Web two, we're talking about companies

175
00:10:56,120 --> 00:11:00,280
Speaker 1: like you know, Facebook and social networking, or Spotify and music,

176
00:11:00,640 --> 00:11:03,839
Speaker 1: or Amazon and purchases, or Evay and purchases. When we're

177
00:11:03,880 --> 00:11:06,800
Speaker 1: talking about Web three, what are we actually saying. So

178
00:11:07,240 --> 00:11:12,400
Speaker 1: with Web three, we're talking about services that often use

179
00:11:12,960 --> 00:11:18,679
Speaker 1: coins for incentives. For example, we're talking about services that

180
00:11:18,920 --> 00:11:23,200
Speaker 1: typically run on blockchains, which are digital ledgers that support

181
00:11:23,280 --> 00:11:27,679
Speaker 1: those coins, and very often we are talking about just

182
00:11:27,760 --> 00:11:31,480
Speaker 1: a very different organizational structure. So a lot of these

183
00:11:31,559 --> 00:11:35,640
Speaker 1: apps are created by communities of users or supported by

184
00:11:35,679 --> 00:11:39,560
Speaker 1: their communities of users, and so uh, you know, in

185
00:11:39,640 --> 00:11:43,520
Speaker 1: many ways, the idea behind Web three is sort of

186
00:11:43,559 --> 00:11:48,599
Speaker 1: giving power to the people, taking power away from corporations

187
00:11:48,760 --> 00:11:51,240
Speaker 1: and giving it giving more of it to the people.

188
00:11:51,760 --> 00:11:58,520
Speaker 1: But in practice the power is still largely concentrated and

189
00:11:58,600 --> 00:12:02,160
Speaker 1: people who had power before, right, if if I'm understanding

190
00:12:02,160 --> 00:12:04,360
Speaker 1: it correctly, a lot of the folks who are making

191
00:12:04,400 --> 00:12:06,679
Speaker 1: money in Web three are the people who made a

192
00:12:06,679 --> 00:12:09,480
Speaker 1: ton of money in Web two, and as a result,

193
00:12:09,520 --> 00:12:13,960
Speaker 1: are you know, very well positioned to be informing those decisions. Absolutely,

194
00:12:14,040 --> 00:12:18,679
Speaker 1: and basically the people who are emerging as powerhouses and

195
00:12:18,800 --> 00:12:23,120
Speaker 1: Web three are venture capitalists who were also big investors

196
00:12:23,120 --> 00:12:27,680
Speaker 1: in Web two's and very heavily influenced a lot of

197
00:12:27,720 --> 00:12:31,040
Speaker 1: the decisions as well as coin prices Party August talking

198
00:12:31,040 --> 00:12:33,319
Speaker 1: about coin prices, right, I mean, there's a there's sort

199
00:12:33,320 --> 00:12:36,439
Speaker 1: of a phrase that is used both ironically and non

200
00:12:36,480 --> 00:12:39,480
Speaker 1: ironically in crypto about the idea of magic Internet money

201
00:12:39,520 --> 00:12:42,240
Speaker 1: and that none of these valuations really mean anything. Can

202
00:12:42,280 --> 00:12:43,640
Speaker 1: you just give me a little bit of a sense

203
00:12:43,640 --> 00:12:46,319
Speaker 1: of when people say, like this hack is seven hundred

204
00:12:46,360 --> 00:12:48,560
Speaker 1: million dollars or this company is valued at x y z,

205
00:12:48,679 --> 00:12:51,200
Speaker 1: what are they basing these things on? Well, as I

206
00:12:51,280 --> 00:12:53,880
Speaker 1: understand it, they're basing it on the value of a

207
00:12:53,960 --> 00:12:59,280
Speaker 1: particular cryptocurrency in that moment so something like a hundred

208
00:12:59,400 --> 00:13:03,800
Speaker 1: twenty thousand ether or wrapped ether as it was when

209
00:13:03,840 --> 00:13:07,319
Speaker 1: it was being transferred through a bridge, was worth three

210
00:13:07,600 --> 00:13:11,840
Speaker 1: d and twenty million dollars in US dollars um. But

211
00:13:11,960 --> 00:13:15,320
Speaker 1: of course that number can change all the time. And

212
00:13:15,800 --> 00:13:18,720
Speaker 1: somebody who's been covering this for longer than most people,

213
00:13:18,840 --> 00:13:21,560
Speaker 1: let's just say, um, and you you know so many

214
00:13:21,559 --> 00:13:23,960
Speaker 1: of the people in the space, and you've watched the

215
00:13:24,080 --> 00:13:26,559
Speaker 1: rise and fall and rise and fall of various things.

216
00:13:27,480 --> 00:13:30,520
Speaker 1: Is there anything about this year and the hacks that

217
00:13:30,559 --> 00:13:33,080
Speaker 1: we've seen, or the sizes that we've seen, the complexity

218
00:13:33,120 --> 00:13:36,400
Speaker 1: that you've both described, that has surprised you in any way?

219
00:13:37,120 --> 00:13:40,400
Speaker 1: You know? Um, I don't think it's surprising that we

220
00:13:40,440 --> 00:13:44,600
Speaker 1: are seeing more of this hacks. Uh. It just uh

221
00:13:44,800 --> 00:13:49,080
Speaker 1: more people are realizing that crypto, you know, is big,

222
00:13:49,120 --> 00:13:52,680
Speaker 1: and it's going to be probably bigger at some point. Uh.

223
00:13:52,720 --> 00:13:55,679
Speaker 1: And so there are more users and more money moving

224
00:13:55,720 --> 00:13:59,520
Speaker 1: into this space, and of course the hackers are following

225
00:13:59,520 --> 00:14:02,600
Speaker 1: the money, and so that's why we are seeing so much,

226
00:14:03,480 --> 00:14:06,360
Speaker 1: so much activity. It seems like almost every week some

227
00:14:06,480 --> 00:14:10,760
Speaker 1: hack happens. But but I think the bottom line here

228
00:14:10,800 --> 00:14:13,480
Speaker 1: in some ways is that a lot of money, A

229
00:14:13,480 --> 00:14:17,080
Speaker 1: lot of smart people are going into this space, and uh,

230
00:14:17,280 --> 00:14:20,760
Speaker 1: there are a lot of issues, but also with you know,

231
00:14:20,880 --> 00:14:24,160
Speaker 1: so much money and so much bring power going in,

232
00:14:24,680 --> 00:14:28,080
Speaker 1: things will get worked out. That's a lot of the

233
00:14:28,120 --> 00:14:33,640
Speaker 1: people I talked to feel this way. And part me

234
00:14:33,920 --> 00:14:36,360
Speaker 1: just going back to your point about how Web two

235
00:14:36,360 --> 00:14:38,520
Speaker 1: and Web three are the same. One of the big

236
00:14:38,560 --> 00:14:41,760
Speaker 1: ways in which they're different, or at least perceived as difference,

237
00:14:41,800 --> 00:14:43,840
Speaker 1: is that in general and Web two, you knew who

238
00:14:43,840 --> 00:14:45,720
Speaker 1: the people on the other side of a transaction were,

239
00:14:46,280 --> 00:14:48,400
Speaker 1: or you kind of knew who the company was, and

240
00:14:48,520 --> 00:14:51,480
Speaker 1: you you may know who their exacts were. In Web three,

241
00:14:51,640 --> 00:14:54,680
Speaker 1: you might be borrowing or lending on a protocol that's

242
00:14:54,720 --> 00:14:57,560
Speaker 1: written by, you know, surely very smart, but fifty and

243
00:14:57,600 --> 00:15:00,000
Speaker 1: mostly anonymous people who uploaded some stuff to get help

244
00:15:00,640 --> 00:15:02,880
Speaker 1: and and had some get and had some code review.

245
00:15:03,240 --> 00:15:04,960
Speaker 1: And everybody's like that seems great, but you have no

246
00:15:05,000 --> 00:15:08,600
Speaker 1: idea who they are. Does this pervasive anonymity affect any

247
00:15:08,600 --> 00:15:13,800
Speaker 1: of your analyses? Yeah, I think it's really um disconcerting.

248
00:15:13,960 --> 00:15:17,520
Speaker 1: I mean I would be disturbed by that if I

249
00:15:17,600 --> 00:15:20,160
Speaker 1: was an investor or someone who was putting my money

250
00:15:20,480 --> 00:15:23,240
Speaker 1: in these services. And I even just as a journalist,

251
00:15:23,360 --> 00:15:27,840
Speaker 1: like when you are looking at these companies websites or

252
00:15:27,880 --> 00:15:30,840
Speaker 1: their blog posts, and I remember reading one blog post

253
00:15:30,840 --> 00:15:33,480
Speaker 1: from a company that was describing what happened after they

254
00:15:33,520 --> 00:15:35,800
Speaker 1: had a hack and they had this kind of war

255
00:15:35,920 --> 00:15:39,080
Speaker 1: room conference call within an hour, which was pretty impressive

256
00:15:39,120 --> 00:15:42,080
Speaker 1: after the breach had happened, UM, and they were describing

257
00:15:42,120 --> 00:15:44,440
Speaker 1: the different UM types of people. There was like an

258
00:15:44,480 --> 00:15:48,440
Speaker 1: auditor and UM there were these different the validators but

259
00:15:48,600 --> 00:15:52,000
Speaker 1: no names, you know, And it's just kind of weird

260
00:15:52,040 --> 00:15:55,359
Speaker 1: to me that it's kind of these beast faceless organizations

261
00:15:55,360 --> 00:15:57,480
Speaker 1: are handling so much money, and I know that there

262
00:15:57,480 --> 00:16:01,000
Speaker 1: are names put to UM behind the man of some

263
00:16:01,080 --> 00:16:04,800
Speaker 1: of them, particularly the well known ones. UM. But I

264
00:16:04,840 --> 00:16:09,040
Speaker 1: think the anonymity, particularly as this industry matures, is really

265
00:16:09,040 --> 00:16:12,560
Speaker 1: going to have to change and UM, especially when money

266
00:16:12,640 --> 00:16:15,720
Speaker 1: is being lost, people need to be accountable, right, And

267
00:16:15,840 --> 00:16:18,440
Speaker 1: you know that that idea of people being accountable always

268
00:16:18,440 --> 00:16:21,160
Speaker 1: strikes me as so fascinating, which is that when everything

269
00:16:21,240 --> 00:16:24,520
Speaker 1: is going well, anonymity seems to be fine. Right, people

270
00:16:24,520 --> 00:16:25,840
Speaker 1: are like this is great. We don't need to know

271
00:16:25,840 --> 00:16:27,920
Speaker 1: who these people are that would be disrespectful of their

272
00:16:27,920 --> 00:16:30,800
Speaker 1: talents or whatever, and then as soon as anything falls

273
00:16:30,840 --> 00:16:33,040
Speaker 1: over there, like somebody called the police and have someone arrested,

274
00:16:33,040 --> 00:16:35,320
Speaker 1: but like you can't arrest a faceless entity and you

275
00:16:35,520 --> 00:16:38,920
Speaker 1: can't arrest a computer program. So you know, there's definitely

276
00:16:38,920 --> 00:16:42,200
Speaker 1: a disconnect between those competing desires. Yeah, and I mean

277
00:16:42,280 --> 00:16:45,520
Speaker 1: even like I'm still kind of trying to wrap my

278
00:16:45,520 --> 00:16:48,760
Speaker 1: head around how some of these systems work. But for example,

279
00:16:49,240 --> 00:16:53,040
Speaker 1: when you're doing transactions on certain networks, you have these

280
00:16:53,160 --> 00:16:56,400
Speaker 1: validator nodes and the validators or like these computers with

281
00:16:56,480 --> 00:17:01,360
Speaker 1: a human behind them, and UM, after one one big hack,

282
00:17:01,440 --> 00:17:04,440
Speaker 1: one of the companies UM behind it said, oh, we're

283
00:17:04,440 --> 00:17:07,000
Speaker 1: going to increase the number of validators from five to

284
00:17:07,040 --> 00:17:09,560
Speaker 1: twenty one. But again, like we don't know who these

285
00:17:09,640 --> 00:17:13,679
Speaker 1: validators are UM, and so it's very hard again to

286
00:17:13,720 --> 00:17:16,639
Speaker 1: hold people to account. So that's that's probably going to

287
00:17:16,720 --> 00:17:19,480
Speaker 1: be a culture shift that defied companies are going to

288
00:17:19,560 --> 00:17:22,240
Speaker 1: have to go through. Well, word to the wise, do

289
00:17:22,400 --> 00:17:25,639
Speaker 1: your research. Thank you Parmy, and thank you Olga. It

290
00:17:25,640 --> 00:17:27,040
Speaker 1: has been a real pleasure to have you here with

291
00:17:27,119 --> 00:17:31,840
Speaker 1: us today. Thanks for having me. Thank you. You can

292
00:17:31,880 --> 00:17:34,560
Speaker 1: find more of Olga's and parties reporting on the Bloomberg

293
00:17:34,680 --> 00:17:37,800
Speaker 1: terminal on Bloomberg dot com and follow them on Twitter

294
00:17:38,000 --> 00:17:44,240
Speaker 1: at Olga Karif and at Parmi. On the next episode

295
00:17:44,240 --> 00:17:49,280
Speaker 1: of Bloomberg Crypto. In January, the United Kingdom officially withdrew

296
00:17:49,359 --> 00:17:52,960
Speaker 1: from the European Union. The fallout from Brexit, as we

297
00:17:53,000 --> 00:17:55,719
Speaker 1: all came to know it, is still being measured across

298
00:17:55,720 --> 00:17:59,680
Speaker 1: all industries. Some analysts predict it will take years to

299
00:18:00,040 --> 00:18:03,480
Speaker 1: understand the full impact of this event on the UK economy.

300
00:18:04,240 --> 00:18:07,560
Speaker 1: Brexit even affected the crypto market, especially as far as

301
00:18:07,640 --> 00:18:12,160
Speaker 1: regulations are concerned. Bloomberg reporter to Emily Nicole sees cautious

302
00:18:12,160 --> 00:18:16,040
Speaker 1: optimism among investors about the UK's approach to crypto regulation.

303
00:18:16,640 --> 00:18:22,120
Speaker 1: She joins me tomorrow, I'm Stacy Marie Ishmael and this

304
00:18:22,200 --> 00:18:25,359
Speaker 1: is Bloomberg Crypto, a daily podcast from Bloomberg and I

305
00:18:25,480 --> 00:18:29,160
Speaker 1: Heart Radio. For more shows from I Heeart Radio, visit

306
00:18:29,200 --> 00:18:32,600
Speaker 1: the iHeart Radio app, Apple Podcasts, or wherever you get

307
00:18:32,640 --> 00:18:36,920
Speaker 1: your podcasts. Email your comments, questions or suggestions to Crypto

308
00:18:36,960 --> 00:18:40,520
Speaker 1: at Bloomberg dot net. Follow us on Twitter at Crypto.

309
00:18:42,800 --> 00:18:45,480
Speaker 1: The supervising producer and editor of this episode is Vicky

310
00:18:45,600 --> 00:18:49,520
Speaker 1: ver Galina. Our producer is Mohammed faruk Zan Absdiki is

311
00:18:49,520 --> 00:18:52,520
Speaker 1: our associate producer. Des To wonder At is our engineer.

312
00:18:52,800 --> 00:18:56,240
Speaker 1: Original music by Leo Sidron. Bloomberg's head of podcasts is

313
00:18:56,240 --> 00:19:08,200
Speaker 1: Francesca Levy n T. The Stablish It and Its Bad

314
00:19:08,280 --> 00:19:09,359
Speaker 1: in the sid