1 00:00:10,640 --> 00:00:14,680 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,760 --> 00:00:19,360 Speaker 1: I'm Joe Wisenthal and I'm Tracy all Away. So, Tracy, 3 00:00:19,600 --> 00:00:23,880 Speaker 1: we've obviously done a few at least a couple Defy 4 00:00:24,079 --> 00:00:28,120 Speaker 1: episodes this year to centralized finance sort of the hot 5 00:00:28,120 --> 00:00:31,600 Speaker 1: thing in crypto. But if I'm being honest, like, there's 6 00:00:31,640 --> 00:00:33,520 Speaker 1: just like still like a lot that I don't get. 7 00:00:35,000 --> 00:00:38,960 Speaker 1: I don't think you're the only one, to be fair, like, 8 00:00:39,280 --> 00:00:42,000 Speaker 1: I think there seems to be a lot of interesting 9 00:00:42,159 --> 00:00:46,680 Speaker 1: things happening in the space, but it's hard to wrap 10 00:00:46,720 --> 00:00:49,199 Speaker 1: your head around a lot of them because frankly, they 11 00:00:49,240 --> 00:00:52,680 Speaker 1: are so brand new, and in addition to that, as 12 00:00:52,720 --> 00:00:55,400 Speaker 1: we've spoken about before, a lot of them seem to 13 00:00:55,400 --> 00:00:58,360 Speaker 1: be kind of wrapped around each other. It's like df 14 00:00:58,440 --> 00:01:02,000 Speaker 1: I wrapped around DFI wrapped and DEFY sort of defy 15 00:01:02,040 --> 00:01:05,000 Speaker 1: all the way down, and it's hard to figure out 16 00:01:05,040 --> 00:01:11,800 Speaker 1: exactly what the application is to people outside of the space, right, 17 00:01:11,959 --> 00:01:14,360 Speaker 1: And this is of course, like I think, like you know, 18 00:01:14,800 --> 00:01:18,080 Speaker 1: there's a lot clearly a lot of like trading and speculation, 19 00:01:18,280 --> 00:01:21,280 Speaker 1: and we'll talk about how those markets work because they 20 00:01:21,319 --> 00:01:23,800 Speaker 1: work differently than say the stock market. But then there's 21 00:01:23,840 --> 00:01:26,000 Speaker 1: also like the question of like what is it for, 22 00:01:26,080 --> 00:01:29,240 Speaker 1: because like it's very easy for me to like conceptualize 23 00:01:29,240 --> 00:01:32,600 Speaker 1: sort of traditional equity or traditional lending, because I have 24 00:01:32,640 --> 00:01:35,880 Speaker 1: an idea of like what these financial instruments are for. 25 00:01:36,560 --> 00:01:39,320 Speaker 1: Where my impression of the Defy space and large part 26 00:01:39,440 --> 00:01:43,480 Speaker 1: is like it's incredibly sophisticated and derivatives and all this 27 00:01:43,600 --> 00:01:45,120 Speaker 1: kind of stuff, but like I still don't know what 28 00:01:45,200 --> 00:01:48,240 Speaker 1: it's like for per se. Yeah, I think that's right, 29 00:01:48,280 --> 00:01:50,440 Speaker 1: And I mean to what I was saying earlier, who 30 00:01:50,440 --> 00:01:52,360 Speaker 1: it's for. Right When I see a lot of before 31 00:01:52,400 --> 00:01:56,480 Speaker 1: you Defy accomplishments, I think, like, Okay, that's great. You 32 00:01:56,520 --> 00:02:00,320 Speaker 1: guys have built yourself a really interesting little defy eCos system. 33 00:02:00,360 --> 00:02:03,320 Speaker 1: And I know that sounds patronizing, but like I don't 34 00:02:03,320 --> 00:02:07,200 Speaker 1: know who's interested who's interested in an outside of that. 35 00:02:07,280 --> 00:02:10,000 Speaker 1: I feel like that's the missing part of Defy. The 36 00:02:10,040 --> 00:02:14,360 Speaker 1: space hasn't been very good at delivering the message about 37 00:02:14,440 --> 00:02:17,480 Speaker 1: what this means for people who are actually outside of 38 00:02:17,680 --> 00:02:21,600 Speaker 1: the DeFi space right where where it actually sort of 39 00:02:21,680 --> 00:02:25,359 Speaker 1: competes with traditional finance and so far anyway, we always 40 00:02:25,360 --> 00:02:28,240 Speaker 1: ask these questions, But I'm very excited to say, um, 41 00:02:28,280 --> 00:02:29,799 Speaker 1: I think our guest today is gonna be really good. 42 00:02:29,880 --> 00:02:33,480 Speaker 1: Multiple people have suggested that he's a great person to 43 00:02:33,520 --> 00:02:37,239 Speaker 1: talk to, very active in investing in the DeFi space. 44 00:02:37,280 --> 00:02:40,160 Speaker 1: So maybe we'll get maybe we'll get some answers today, 45 00:02:40,480 --> 00:02:43,000 Speaker 1: I hope. So let's do it all right, I'm very 46 00:02:43,000 --> 00:02:45,520 Speaker 1: excited we're going to be speaking with Tom Schmidt. He's 47 00:02:45,520 --> 00:02:49,360 Speaker 1: a general partner at Dragonfly Capital. It's a venture firm 48 00:02:49,440 --> 00:02:54,600 Speaker 1: that focuses on the crypto space. More broadly, Tom himself 49 00:02:54,680 --> 00:02:58,800 Speaker 1: as a fairly long background long as these things go, 50 00:02:59,600 --> 00:03:02,240 Speaker 1: in the DEFY space, a very active in it. So 51 00:03:02,240 --> 00:03:04,240 Speaker 1: we're going to get all our questions answered. Tom, thank 52 00:03:04,280 --> 00:03:06,720 Speaker 1: you so much for coming on odd Luck, thanks for 53 00:03:06,720 --> 00:03:09,400 Speaker 1: having me, Thanks being Tracy. So I'm let's start with 54 00:03:09,440 --> 00:03:12,120 Speaker 1: your background. I mean, like I think the average person 55 00:03:12,200 --> 00:03:14,240 Speaker 1: may be listening to this has been like sending the 56 00:03:14,320 --> 00:03:17,440 Speaker 1: last like two months trying to understand Defy and the 57 00:03:17,480 --> 00:03:21,120 Speaker 1: idea that like one could have a long lineage in 58 00:03:21,160 --> 00:03:23,640 Speaker 1: this space is kind of weird. But you actually legitimately 59 00:03:23,720 --> 00:03:25,400 Speaker 1: do what do you give us things sort of like 60 00:03:25,560 --> 00:03:30,000 Speaker 1: a little bit of like your background in crypto and Defy, etcetera. 61 00:03:30,000 --> 00:03:32,840 Speaker 1: How you got here. Yeah, it's it's funny that defy 62 00:03:33,000 --> 00:03:35,000 Speaker 1: is now sort of a thing that people talk about, 63 00:03:35,120 --> 00:03:37,600 Speaker 1: but you know, it's it did sort of come from nowhere. 64 00:03:37,800 --> 00:03:41,040 Speaker 1: I think in many respects, my sort of entrance into 65 00:03:41,080 --> 00:03:43,600 Speaker 1: crypto sort of parallels defy in some ways. Not to 66 00:03:43,640 --> 00:03:46,520 Speaker 1: get too poetic, I really got into you know, crypto 67 00:03:46,720 --> 00:03:50,200 Speaker 1: during college. Um, I was writing this sort of computer 68 00:03:50,240 --> 00:03:53,720 Speaker 1: science ethics paper on on your interesting topic that anyone 69 00:03:53,760 --> 00:03:55,560 Speaker 1: can choose, and I ended up doing this sort of 70 00:03:55,600 --> 00:03:58,120 Speaker 1: big coin regulation back and back in twelve and I thought, 71 00:03:58,400 --> 00:04:00,560 Speaker 1: this is this brand new asset, no one really knew 72 00:04:00,600 --> 00:04:02,280 Speaker 1: what to do with it, sort of thinking through, hey, 73 00:04:02,280 --> 00:04:04,040 Speaker 1: how many this thing be be viewed in the eyes 74 00:04:04,080 --> 00:04:05,800 Speaker 1: of the law, and then sort of actually put it 75 00:04:05,800 --> 00:04:08,000 Speaker 1: into bitcoin mining from from my dorm room along with 76 00:04:08,040 --> 00:04:09,800 Speaker 1: a couple of their friends. Um, and that was sort 77 00:04:09,800 --> 00:04:12,080 Speaker 1: of when I got interested in in you know, the 78 00:04:12,080 --> 00:04:15,160 Speaker 1: cryptocurrency space overall. If you look at you know, sort 79 00:04:15,160 --> 00:04:19,600 Speaker 1: of those early days of bitcoin, you the things that 80 00:04:19,640 --> 00:04:22,719 Speaker 1: people aren't doing are doing in defied. These days people 81 00:04:22,720 --> 00:04:25,080 Speaker 1: were talking about back then, back on you know bitcoin talk, 82 00:04:25,080 --> 00:04:28,120 Speaker 1: where they're trying to do where hey, there's this new asset, 83 00:04:28,520 --> 00:04:30,200 Speaker 1: but it's sort of stuck. You know, it's not it's 84 00:04:30,200 --> 00:04:31,840 Speaker 1: just it's this form of money, but you can only 85 00:04:31,839 --> 00:04:33,880 Speaker 1: just sort of send this money back and forth. And 86 00:04:33,960 --> 00:04:35,760 Speaker 1: people want to do other things with it, right. People 87 00:04:35,760 --> 00:04:39,000 Speaker 1: want financial services, People want to be able to exchange, 88 00:04:39,240 --> 00:04:41,400 Speaker 1: but in order to do that with bitcoin, you have 89 00:04:41,480 --> 00:04:44,120 Speaker 1: to go through a centralized party, UM like a coin 90 00:04:44,160 --> 00:04:46,159 Speaker 1: based or like a f t X, and they have 91 00:04:46,279 --> 00:04:48,720 Speaker 1: to um, you know, because of your bitcoin. They might 92 00:04:48,720 --> 00:04:51,120 Speaker 1: go down, they might lose funds that might exclude you, 93 00:04:51,520 --> 00:04:53,440 Speaker 1: and so there's sort of those weird paradox where you 94 00:04:53,480 --> 00:04:57,719 Speaker 1: have this great decentralized currency, but you don't have any 95 00:04:57,760 --> 00:05:00,719 Speaker 1: financial services that are also that also those same properties. 96 00:05:01,080 --> 00:05:03,159 Speaker 1: You know. One of those those main functions that I 97 00:05:03,160 --> 00:05:06,839 Speaker 1: mentioned was exchange. Decentrized exchanges have been around for a 98 00:05:06,839 --> 00:05:09,719 Speaker 1: long time. People have always been trying to build them. 99 00:05:09,760 --> 00:05:12,160 Speaker 1: I ended up getting back into the cryptocurrency space in 100 00:05:12,600 --> 00:05:14,960 Speaker 1: seen when I joined zero x, which is one of 101 00:05:15,000 --> 00:05:18,240 Speaker 1: the very first decentrized exchange protocols to run product for them. 102 00:05:18,640 --> 00:05:21,000 Speaker 1: And zero x is it's sort of this pure to 103 00:05:21,080 --> 00:05:24,320 Speaker 1: pure exchange where um, you and I can agree to 104 00:05:24,320 --> 00:05:26,640 Speaker 1: a trade off chain, you can sort of find each other, 105 00:05:26,960 --> 00:05:30,039 Speaker 1: and then this smart contract basically acts as uh, you know, 106 00:05:30,160 --> 00:05:33,159 Speaker 1: sort of the counterparties that executor at the trade, so 107 00:05:33,200 --> 00:05:34,920 Speaker 1: we don't have to trust each other. Um, no one's 108 00:05:34,920 --> 00:05:37,280 Speaker 1: actually taking custody. Um. This piece of code sort of 109 00:05:37,360 --> 00:05:39,839 Speaker 1: runs it for us. So I ended up working at 110 00:05:39,920 --> 00:05:41,920 Speaker 1: zo x for about two years, uh, and then joined 111 00:05:42,000 --> 00:05:44,440 Speaker 1: Dragonfly about a year and a half ago to do 112 00:05:44,600 --> 00:05:48,640 Speaker 1: investing for us and specifically focused on DeFi what was 113 00:05:48,680 --> 00:05:53,960 Speaker 1: the transition like from bitcoin to more of the Defy experience, 114 00:05:54,000 --> 00:05:56,440 Speaker 1: because we sort of take it for grounded now that 115 00:05:56,680 --> 00:06:00,440 Speaker 1: there's a Bitcoin and now there's all this off being 116 00:06:00,440 --> 00:06:04,200 Speaker 1: built on things like ethereum in the Defy space, but 117 00:06:04,640 --> 00:06:09,520 Speaker 1: years ago that split wasn't as a parent. So I'm 118 00:06:09,560 --> 00:06:12,640 Speaker 1: just curious what the move was like or the transition 119 00:06:12,680 --> 00:06:15,440 Speaker 1: a few years ago. There are a number of very 120 00:06:15,440 --> 00:06:19,360 Speaker 1: early attempts to basically build defy these same sort of 121 00:06:19,400 --> 00:06:22,880 Speaker 1: financial services on bitcoin. One of them is still around 122 00:06:23,040 --> 00:06:25,480 Speaker 1: quite you know, well known. It's called root Stock, basically 123 00:06:25,520 --> 00:06:28,520 Speaker 1: a sort of side chain that sits alongside Bitcoin where 124 00:06:28,520 --> 00:06:31,279 Speaker 1: people can write smart contracts that they can on Ethereum 125 00:06:31,600 --> 00:06:33,919 Speaker 1: that do the same sort of things that you know, Defy. 126 00:06:34,000 --> 00:06:37,039 Speaker 1: Early defined protocoles can do. Now another sort of blockchain 127 00:06:37,200 --> 00:06:39,400 Speaker 1: U called bit shares sort of that came around the 128 00:06:39,400 --> 00:06:41,320 Speaker 1: same time that again had a lot of the same 129 00:06:41,360 --> 00:06:44,320 Speaker 1: ideas that we see and defy now where you could 130 00:06:44,600 --> 00:06:47,279 Speaker 1: you know, meant that you could borrow, um, you could exchange. 131 00:06:47,760 --> 00:06:49,560 Speaker 1: It's it's hard to say why a lot of these 132 00:06:49,560 --> 00:06:52,680 Speaker 1: didn't take off. Certainly for some purposes. Uh, you know, 133 00:06:52,720 --> 00:06:55,520 Speaker 1: the developer experience of building these things is pretty brutal 134 00:06:55,880 --> 00:06:59,080 Speaker 1: um compared to the developer experience of building something on ethereum. 135 00:06:59,080 --> 00:07:01,320 Speaker 1: And so you know, the argument that hey, you just 136 00:07:01,400 --> 00:07:04,000 Speaker 1: don't have that sort of nexus of of developers you're 137 00:07:04,040 --> 00:07:06,440 Speaker 1: going to make all these things that um, you know, interlink, 138 00:07:06,960 --> 00:07:08,360 Speaker 1: it's just not probably not going to happen. You're not 139 00:07:08,400 --> 00:07:10,440 Speaker 1: going to sort of hit that that critical mass. You 140 00:07:10,480 --> 00:07:12,440 Speaker 1: can also say maybe it's just too early, right, A 141 00:07:12,440 --> 00:07:14,320 Speaker 1: lot of things that are happening in DeFi right now, 142 00:07:14,360 --> 00:07:17,680 Speaker 1: again we're being discussed you know, five years ago. But 143 00:07:17,800 --> 00:07:19,560 Speaker 1: if you don't have the users, if you don't have 144 00:07:19,600 --> 00:07:21,680 Speaker 1: the liquidity, if you don't sort of have you know, 145 00:07:21,720 --> 00:07:24,880 Speaker 1: sort of this confluence of people in capital, you can't 146 00:07:24,880 --> 00:07:27,320 Speaker 1: really get a true market farming and so some of 147 00:07:27,360 --> 00:07:30,120 Speaker 1: the problems were obviously technological, where you know, Bitcoin is 148 00:07:30,160 --> 00:07:32,840 Speaker 1: obviously very slow to upgrade, which is a plus in 149 00:07:32,880 --> 00:07:35,720 Speaker 1: many respects, but a downside when you're trying to build 150 00:07:35,760 --> 00:07:38,160 Speaker 1: something brand new and trying to um you know, tweak 151 00:07:38,240 --> 00:07:40,680 Speaker 1: the underlying platform to make it easier for developers to 152 00:07:40,680 --> 00:07:44,320 Speaker 1: actually start building these things. So one of the what 153 00:07:44,600 --> 00:07:48,240 Speaker 1: you know, within the defy realme, you know, one of 154 00:07:48,280 --> 00:07:50,560 Speaker 1: the pitches I guess, or one of the reasons people 155 00:07:50,600 --> 00:07:53,960 Speaker 1: get excited about it is like is the yield opportunity? 156 00:07:54,040 --> 00:07:56,320 Speaker 1: Like they was like, oh, you're like enter into this 157 00:07:56,400 --> 00:07:58,320 Speaker 1: trade or lock up your asset and you get two 158 00:07:59,080 --> 00:08:01,880 Speaker 1: a p y or thousand percent a p y in 159 00:08:01,920 --> 00:08:04,880 Speaker 1: some cases. And we actually talked to someone several weeks 160 00:08:04,880 --> 00:08:07,840 Speaker 1: ago it was like a yield farmer kind of more 161 00:08:07,880 --> 00:08:11,200 Speaker 1: from the trader perspective, but like, you know, this kind 162 00:08:11,200 --> 00:08:13,040 Speaker 1: of makes my head hurt because like, no one gives 163 00:08:13,040 --> 00:08:16,560 Speaker 1: away free money, right, So how would you describe like 164 00:08:16,960 --> 00:08:21,080 Speaker 1: where are these returns in DeFi come from? Like what 165 00:08:21,240 --> 00:08:24,240 Speaker 1: is the what is the activity? Who is paying you 166 00:08:24,720 --> 00:08:27,840 Speaker 1: for the service of say locking up your ether or 167 00:08:27,880 --> 00:08:29,960 Speaker 1: locking up your stable coin or whatever, Like how do 168 00:08:30,000 --> 00:08:32,360 Speaker 1: you sort of like describe some of the basic mechanics 169 00:08:32,360 --> 00:08:36,440 Speaker 1: at play. Yeah, this is I feel like what has 170 00:08:36,520 --> 00:08:39,120 Speaker 1: sort of brought in part defined in the mainstream maybe 171 00:08:39,120 --> 00:08:40,880 Speaker 1: over the past years. People see these, you know, I 172 00:08:41,000 --> 00:08:44,040 Speaker 1: popping returns, and you know when you're kind of what's 173 00:08:44,080 --> 00:08:46,360 Speaker 1: going on because it sounds kind of insane. I think 174 00:08:46,360 --> 00:08:48,280 Speaker 1: we sort of saw that with the whole mark cut 175 00:08:48,320 --> 00:08:50,840 Speaker 1: in iron finance thing maybe a week or two ago. 176 00:08:51,640 --> 00:08:54,480 Speaker 1: I think yield in sort of the DeFi space comes 177 00:08:54,520 --> 00:08:57,439 Speaker 1: from a couple of places. The main source of yield 178 00:08:57,800 --> 00:09:00,400 Speaker 1: that sort of drives again these huge meers that we 179 00:09:00,400 --> 00:09:04,040 Speaker 1: talk about actually comes from these protocol tokens that are 180 00:09:04,080 --> 00:09:06,959 Speaker 1: given away UM and very concrete example of this when 181 00:09:07,000 --> 00:09:10,760 Speaker 1: the first project did do liquidity mining was compound finance UM. 182 00:09:10,800 --> 00:09:14,800 Speaker 1: Compound Finance it's a decentralized money market on Ethereum where 183 00:09:14,880 --> 00:09:18,520 Speaker 1: people can deposit lenders and borrowers can deposit assets into 184 00:09:18,520 --> 00:09:21,560 Speaker 1: the smart contract um and then borrow against it and 185 00:09:21,760 --> 00:09:23,679 Speaker 1: if they wish, and so I don't have to call 186 00:09:23,720 --> 00:09:25,839 Speaker 1: up a lending desk get a quote. I hope that 187 00:09:25,880 --> 00:09:28,760 Speaker 1: they're open, have them custom my assets. The smart contracts 188 00:09:28,760 --> 00:09:30,440 Speaker 1: sort of take cares of all take cares of all 189 00:09:30,559 --> 00:09:33,640 Speaker 1: that for us, and then they also set the rates problemmatically, 190 00:09:34,160 --> 00:09:36,640 Speaker 1: so compound it's been around for about a year and 191 00:09:36,679 --> 00:09:38,840 Speaker 1: a half or so, but m about a year ago, 192 00:09:38,920 --> 00:09:43,400 Speaker 1: so it's March they announced this this program which has 193 00:09:43,640 --> 00:09:47,199 Speaker 1: since been dubbed liquidity money, where in addition to the 194 00:09:47,440 --> 00:09:49,040 Speaker 1: returns that you would get, the interest that you would 195 00:09:49,040 --> 00:09:50,880 Speaker 1: get just for lending out assets to somebody who wanted 196 00:09:50,920 --> 00:09:53,760 Speaker 1: to borrow, so let's say maybe six percent on your 197 00:09:53,760 --> 00:09:56,439 Speaker 1: young your stable coin, your USDC or ethery or whatever, 198 00:09:56,840 --> 00:09:59,760 Speaker 1: they'll also give you some comp tokens. So comp is 199 00:09:59,800 --> 00:10:03,800 Speaker 1: the native governance token of compound, where people who old 200 00:10:03,840 --> 00:10:07,480 Speaker 1: comp can vote on how to upgrade the compound smart 201 00:10:07,480 --> 00:10:09,079 Speaker 1: contracts over time. So if you want to add a 202 00:10:09,120 --> 00:10:11,800 Speaker 1: new feature, if you want to add new types of collateral, 203 00:10:11,880 --> 00:10:14,360 Speaker 1: if you want to adjust rate, comp holders get to 204 00:10:14,559 --> 00:10:17,240 Speaker 1: vote on shain as to how that actually gets upgraded. 205 00:10:17,280 --> 00:10:19,600 Speaker 1: So there's no central party that actually controls this thing. 206 00:10:20,080 --> 00:10:23,440 Speaker 1: So compounds started giving away about fifty of the total 207 00:10:23,520 --> 00:10:25,920 Speaker 1: supply of comp two people who are using compounds, so 208 00:10:25,960 --> 00:10:28,880 Speaker 1: people who are borrowing, people who are lending anyone sort 209 00:10:28,880 --> 00:10:31,640 Speaker 1: of proportionately to how much you actually you're doing either 210 00:10:31,720 --> 00:10:34,400 Speaker 1: those things, so how much capital you're actually borrowing or lending? 211 00:10:34,559 --> 00:10:37,040 Speaker 1: In addition to this six percent, you start to get 212 00:10:37,040 --> 00:10:40,480 Speaker 1: this supply of of COMP tokens, and basically that yield 213 00:10:40,679 --> 00:10:42,880 Speaker 1: comes from sort of the market price of where people 214 00:10:42,920 --> 00:10:45,040 Speaker 1: think comps should be trading at. So you know, if 215 00:10:45,040 --> 00:10:48,559 Speaker 1: I'm earning again six percent on that USDC, them earning 216 00:10:48,559 --> 00:10:50,880 Speaker 1: a few COMP tokens, and let's say compass trading at 217 00:10:50,920 --> 00:10:53,720 Speaker 1: a few hundred dollars, suddenly you sort of project out 218 00:10:53,720 --> 00:10:56,360 Speaker 1: these sort of two combined as with them getting both 219 00:10:56,400 --> 00:10:59,800 Speaker 1: the USDC the stable point interest plus the COMP and 220 00:10:59,800 --> 00:11:02,160 Speaker 1: so only my a R. It looks huge. And so 221 00:11:02,360 --> 00:11:04,640 Speaker 1: people have basically been tweaking this over and over again, 222 00:11:04,679 --> 00:11:07,800 Speaker 1: different ways of doing this liquidity binding where they're incentivizing 223 00:11:07,960 --> 00:11:10,480 Speaker 1: growth of the of the protocol by giving away this 224 00:11:10,559 --> 00:11:13,040 Speaker 1: native protocol token. And that's a large part of where 225 00:11:13,040 --> 00:11:14,840 Speaker 1: you see. You know a lot of these numbers come 226 00:11:14,880 --> 00:11:19,840 Speaker 1: from you call them governance tokens, but and you describe 227 00:11:19,840 --> 00:11:22,720 Speaker 1: their value as being able to vote on upgrading the protocol. 228 00:11:23,080 --> 00:11:26,120 Speaker 1: But obviously just voting rights typically aren't worth that much. 229 00:11:26,760 --> 00:11:29,720 Speaker 1: Are we really talking about de facto equity in a 230 00:11:29,760 --> 00:11:32,320 Speaker 1: different name, and as part of the part of the 231 00:11:32,440 --> 00:11:37,360 Speaker 1: upgrade that one can vote for is is directing trading 232 00:11:37,440 --> 00:11:41,720 Speaker 1: revenue to the token holders. Yes, this is uh, maybe 233 00:11:41,760 --> 00:11:44,200 Speaker 1: a little bit of a touchy subject and defied because 234 00:11:44,240 --> 00:11:46,000 Speaker 1: people do not want you want to sort of scirt 235 00:11:46,040 --> 00:11:48,080 Speaker 1: around this topic. But I think a lot of a 236 00:11:48,080 --> 00:11:50,000 Speaker 1: lot of people, a lot of investors definitely see it 237 00:11:50,040 --> 00:11:53,120 Speaker 1: that way. Where you know, with compound, there's no company, right, 238 00:11:53,160 --> 00:11:55,360 Speaker 1: there's no entity that I want to get take equity 239 00:11:55,360 --> 00:11:57,720 Speaker 1: in um that is, you're going to take some some profit. 240 00:11:57,960 --> 00:12:00,840 Speaker 1: But the protocol itself obviously generates ton of revenue. And 241 00:12:00,880 --> 00:12:02,679 Speaker 1: so there's sort of an idea that hey, these are 242 00:12:02,679 --> 00:12:05,160 Speaker 1: sort of going into the company treasury, they're on this 243 00:12:05,760 --> 00:12:08,440 Speaker 1: protocol balance sheet, and if I have control over that, 244 00:12:08,640 --> 00:12:10,240 Speaker 1: you know, much in the same way that you know, 245 00:12:10,320 --> 00:12:13,200 Speaker 1: maybe I, you know, have governance rights in a company 246 00:12:13,240 --> 00:12:15,400 Speaker 1: that has a hundred million dollars on the balance sheet, 247 00:12:15,679 --> 00:12:18,080 Speaker 1: Certainly those those governance rights should be worth something, even 248 00:12:18,120 --> 00:12:20,520 Speaker 1: if maybe I'm not entitled to to dividend rights at 249 00:12:20,559 --> 00:12:22,880 Speaker 1: the moment, because I can vote in dividend writes down 250 00:12:22,920 --> 00:12:25,280 Speaker 1: down down the road. I think one of the very 251 00:12:25,320 --> 00:12:29,160 Speaker 1: earliest defect protocols. Make it out actually launched with this 252 00:12:29,240 --> 00:12:32,320 Speaker 1: sort of baked in where make it out, it's a 253 00:12:32,320 --> 00:12:35,839 Speaker 1: decentralized credit facility where anybody can come up. They can 254 00:12:35,880 --> 00:12:39,040 Speaker 1: they can put down flateral and then they can borrow die, 255 00:12:39,160 --> 00:12:41,760 Speaker 1: which is the natural stable coin, the native stable coin 256 00:12:41,960 --> 00:12:43,800 Speaker 1: against that. So you can put down you know, two 257 00:12:44,400 --> 00:12:46,640 Speaker 1: worth of ether, you can borrow a hundred die against it, 258 00:12:46,840 --> 00:12:48,480 Speaker 1: and now you have liquidity which you can use to 259 00:12:48,840 --> 00:12:51,720 Speaker 1: you know, for operating expenses, to pay taxes, to pretend 260 00:12:51,760 --> 00:12:53,599 Speaker 1: to your friend whatever. You have this die which is 261 00:12:53,600 --> 00:12:54,760 Speaker 1: pegged to a dollar, and you can use it for 262 00:12:54,840 --> 00:12:57,880 Speaker 1: a new purpose now Maker Obviously it's the lending facilities. 263 00:12:57,880 --> 00:12:59,920 Speaker 1: So if they figure out how to set rates, ray 264 00:13:00,000 --> 00:13:02,400 Speaker 1: to get set by and care holders, so it's not 265 00:13:02,440 --> 00:13:05,520 Speaker 1: being done programmatically and care holders basically to determine how 266 00:13:05,600 --> 00:13:07,920 Speaker 1: much how much interest to charge people who want to 267 00:13:07,960 --> 00:13:09,720 Speaker 1: borrow against and how people who want to make die. 268 00:13:10,080 --> 00:13:13,439 Speaker 1: They also take on risk where let's say that they 269 00:13:13,480 --> 00:13:16,080 Speaker 1: onboard bad collateral, they want to add you know, iron 270 00:13:16,120 --> 00:13:18,720 Speaker 1: token as clatteral into maker. People who meant a bunch 271 00:13:18,760 --> 00:13:21,680 Speaker 1: of die suddenly dies, is suddenly you know the price 272 00:13:21,679 --> 00:13:25,520 Speaker 1: of iron, you know drops by and now you have 273 00:13:25,679 --> 00:13:28,440 Speaker 1: a bunch of unbacked die, so you really want die 274 00:13:28,440 --> 00:13:30,600 Speaker 1: to trade out of dollar um. Suddenly there's not enough 275 00:13:30,600 --> 00:13:32,480 Speaker 1: clatteral to back that up. So where you're going to 276 00:13:32,559 --> 00:13:35,160 Speaker 1: get enough collateral to sort of reback this die And 277 00:13:35,200 --> 00:13:38,440 Speaker 1: the answer is that the maker protocol will mint and 278 00:13:38,480 --> 00:13:42,360 Speaker 1: sell more in car in order to recollateralize itself. So 279 00:13:43,040 --> 00:13:45,120 Speaker 1: in one sense, you're you're governing the protocol, but you're 280 00:13:45,120 --> 00:13:47,439 Speaker 1: also taking on this risk because there's a chance you 281 00:13:47,520 --> 00:13:50,960 Speaker 1: might be deluded if this this system accrues debt and 282 00:13:51,040 --> 00:13:53,840 Speaker 1: so in response or you know, in compensation for that risk, 283 00:13:54,160 --> 00:13:56,559 Speaker 1: and care holders also get reward and that they are 284 00:13:56,679 --> 00:13:59,240 Speaker 1: entitled to all that interest that is being a crewed 285 00:13:59,240 --> 00:14:01,880 Speaker 1: by the system. That interest is then used to buy 286 00:14:01,880 --> 00:14:04,720 Speaker 1: back MKR off the market and you know, effectively give 287 00:14:04,760 --> 00:14:07,640 Speaker 1: that back to m care holders. So MKR you know 288 00:14:07,720 --> 00:14:09,440 Speaker 1: right now, you can you can look online. There's a 289 00:14:09,480 --> 00:14:12,320 Speaker 1: website maker burn dot com which will tell you, you know, 290 00:14:12,360 --> 00:14:14,319 Speaker 1: how much cash flow is basically being given back to 291 00:14:14,440 --> 00:14:16,880 Speaker 1: end care holders, uh, you know, every single year, and 292 00:14:16,960 --> 00:14:18,559 Speaker 1: it's it's pretty insane. I think the last time I 293 00:14:18,679 --> 00:14:20,760 Speaker 1: checked it was maybe a hundred million dollars or two 294 00:14:20,760 --> 00:14:23,320 Speaker 1: and a million dollars that is bought off the market 295 00:14:23,440 --> 00:14:25,840 Speaker 1: and basically given back to end care holders. So they're 296 00:14:25,880 --> 00:14:28,440 Speaker 1: a good example of one of the few protocols that 297 00:14:28,520 --> 00:14:30,320 Speaker 1: it actually has those sort of cash flows turned on. 298 00:14:30,400 --> 00:14:32,840 Speaker 1: But certainly to your point, there's a lot of speculation 299 00:14:32,920 --> 00:14:35,240 Speaker 1: right now around m hey, when our fees going to 300 00:14:35,240 --> 00:14:36,920 Speaker 1: be turned on, if they're gonna be turned down at all. 301 00:14:37,440 --> 00:14:39,320 Speaker 1: I think there's a counter argument to which is, hey, 302 00:14:39,360 --> 00:14:41,520 Speaker 1: these are all very nascent protocols, right you don't really 303 00:14:41,560 --> 00:14:43,480 Speaker 1: don't want to be charging fees right now. You want 304 00:14:43,480 --> 00:14:46,080 Speaker 1: to be incentivizing growth. It's sort of like, uh, you know, 305 00:14:46,160 --> 00:14:48,520 Speaker 1: if you're an early stage startup, you don't want to 306 00:14:48,600 --> 00:14:51,200 Speaker 1: charge full fee. You don't want to you know, um 307 00:14:51,200 --> 00:14:53,440 Speaker 1: sort of be maximizing revenue. You want to be maximizing 308 00:14:53,480 --> 00:14:55,160 Speaker 1: growth and think about how to sort of turn on 309 00:14:55,200 --> 00:15:13,000 Speaker 1: revenue down the road. So the equity question kind of 310 00:15:13,000 --> 00:15:16,520 Speaker 1: reminds me of one of the bigger issues hovering over 311 00:15:16,560 --> 00:15:19,280 Speaker 1: the entire space, which is I mean, defy in my 312 00:15:19,320 --> 00:15:22,840 Speaker 1: mind is kind of like fintech on steroids. And I 313 00:15:22,920 --> 00:15:24,680 Speaker 1: used to cover fintech. I used to cover peer to 314 00:15:24,760 --> 00:15:28,080 Speaker 1: peer lending, and a lot of the use case for 315 00:15:28,560 --> 00:15:31,840 Speaker 1: that new industry was this idea of we're going to 316 00:15:31,920 --> 00:15:34,040 Speaker 1: cut out the middleman and we're going to directly connect 317 00:15:34,080 --> 00:15:36,800 Speaker 1: lenders with borrowers, and we have all this new, cool 318 00:15:36,920 --> 00:15:39,480 Speaker 1: technology that's going to allow us to do it. I'm 319 00:15:39,520 --> 00:15:42,120 Speaker 1: not saying it's a one for one analogy, but a 320 00:15:42,160 --> 00:15:44,960 Speaker 1: lot of the conversation around DeFi reminds me of that. 321 00:15:45,080 --> 00:15:49,120 Speaker 1: So my question is how much of defy is about 322 00:15:49,160 --> 00:15:52,560 Speaker 1: the technology versus how much of it is about doing 323 00:15:52,600 --> 00:15:58,040 Speaker 1: something outside the existing financial system and existing regulation. I 324 00:15:58,080 --> 00:16:00,320 Speaker 1: guess a shorter way of putting it is like, how 325 00:16:00,400 --> 00:16:03,520 Speaker 1: much of this is regulatory arbitrage and giving people exposure 326 00:16:03,560 --> 00:16:07,200 Speaker 1: to financial assets that would be more difficult or more 327 00:16:07,200 --> 00:16:10,760 Speaker 1: expensive for them to get in a in the traditional 328 00:16:10,800 --> 00:16:15,560 Speaker 1: financial system. Yeah, that's another great question, and I think 329 00:16:15,600 --> 00:16:19,200 Speaker 1: it's frankly a large part of the appeal of defied. 330 00:16:19,920 --> 00:16:22,760 Speaker 1: I would say, you know, regulatory arbitrage. I think at 331 00:16:23,120 --> 00:16:25,600 Speaker 1: face value, maybe sounds like a bad word, but when 332 00:16:25,600 --> 00:16:27,560 Speaker 1: you look at something like Uber, or you're looking at 333 00:16:27,560 --> 00:16:31,200 Speaker 1: something like Airbnb, where you know regulations were um, you know, 334 00:16:31,200 --> 00:16:33,880 Speaker 1: probably overly arduous and probably you know, hampering the growth 335 00:16:33,880 --> 00:16:36,600 Speaker 1: of this market. I think it's interesting about DEFY. There's 336 00:16:36,600 --> 00:16:40,720 Speaker 1: a couple of main components, right, one being the permissionless access. 337 00:16:40,760 --> 00:16:43,320 Speaker 1: So anyone around the world can go and use these 338 00:16:43,320 --> 00:16:46,200 Speaker 1: different protocols any time of day, um, any time at night, 339 00:16:46,240 --> 00:16:49,440 Speaker 1: anytime anywhere, who you are, you can go and and trade, 340 00:16:49,520 --> 00:16:52,200 Speaker 1: you can go and borrow. That's a pretty powerful, I 341 00:16:52,240 --> 00:16:54,400 Speaker 1: think concept that you don't have to be living in 342 00:16:54,440 --> 00:16:56,320 Speaker 1: a particular area. You don't have to be, you know, 343 00:16:56,360 --> 00:16:58,320 Speaker 1: of a certain status or be able to post particular 344 00:16:58,520 --> 00:17:00,840 Speaker 1: collateral order use any these things, and so you have 345 00:17:00,880 --> 00:17:03,520 Speaker 1: this truly sort of global market from day one. The 346 00:17:03,560 --> 00:17:05,560 Speaker 1: other as is maybe you were sort of leading to 347 00:17:05,720 --> 00:17:07,520 Speaker 1: is sort of permission list to build on top of. 348 00:17:07,600 --> 00:17:09,680 Speaker 1: And that's where I think this whole thing gets really exciting. 349 00:17:09,720 --> 00:17:11,840 Speaker 1: Where I don't think he incorporated. I don't have to 350 00:17:11,880 --> 00:17:14,520 Speaker 1: live in a particular locale, I don't have to beat 351 00:17:14,520 --> 00:17:17,359 Speaker 1: certain requirements. As long as I can write software, I 352 00:17:17,400 --> 00:17:20,159 Speaker 1: can go and experiment. And I think that sort of 353 00:17:20,160 --> 00:17:22,680 Speaker 1: permission list innovation is sort of what made the Internet 354 00:17:22,920 --> 00:17:24,679 Speaker 1: what it is. Where I don't have to go and 355 00:17:24,720 --> 00:17:27,119 Speaker 1: you know, apply to the SEC for the license to 356 00:17:27,560 --> 00:17:30,040 Speaker 1: you know, broadcast and you know, buy all this equipment 357 00:17:30,119 --> 00:17:32,199 Speaker 1: to you know, sort of a television station. I can 358 00:17:32,240 --> 00:17:34,359 Speaker 1: just go and take my camera and start posting it 359 00:17:34,400 --> 00:17:36,360 Speaker 1: to YouTube. And that's where you sort of get this 360 00:17:36,359 --> 00:17:39,640 Speaker 1: this consumer surplus where you know, these entrepreneurs all around 361 00:17:39,640 --> 00:17:43,480 Speaker 1: the world are constantly devising new, better financial services and 362 00:17:43,720 --> 00:17:45,800 Speaker 1: they have a very low bar in order actually deploy 363 00:17:45,880 --> 00:17:48,720 Speaker 1: them and make them accessible to anyone around the world. 364 00:17:48,840 --> 00:17:51,439 Speaker 1: So you have not only sort of permission less access, 365 00:17:51,480 --> 00:17:54,639 Speaker 1: but you also have permission's access for builders who can 366 00:17:54,680 --> 00:17:56,399 Speaker 1: again just use this thing as long as they can 367 00:17:56,480 --> 00:17:59,480 Speaker 1: naturally write software. And the third thing that think makes 368 00:17:59,480 --> 00:18:02,679 Speaker 1: it interesting is sort of transparency around it. You know, 369 00:18:02,680 --> 00:18:05,000 Speaker 1: people sort of against site sort of dozen eight, where 370 00:18:05,480 --> 00:18:07,080 Speaker 1: you know, you had all this sort of crazy debt, 371 00:18:07,119 --> 00:18:09,159 Speaker 1: all these you know, crazy derivatives that we're piling up, 372 00:18:09,160 --> 00:18:11,400 Speaker 1: and you know, sort of after the crash, we started 373 00:18:11,520 --> 00:18:14,080 Speaker 1: saw that many different parts of the US financial system 374 00:18:14,080 --> 00:18:16,439 Speaker 1: were levered like three point five to one and that 375 00:18:16,520 --> 00:18:18,680 Speaker 1: wasn't really revealed to us until after the crash because 376 00:18:18,680 --> 00:18:20,280 Speaker 1: there was not really a lot of transparency. It was 377 00:18:20,320 --> 00:18:22,920 Speaker 1: just chechnically wasn't really possible to see all the different 378 00:18:22,960 --> 00:18:26,600 Speaker 1: instruments in all different ways people were positioned with Defy, 379 00:18:26,640 --> 00:18:28,080 Speaker 1: you know, as I was sort of alluding to early 380 00:18:28,160 --> 00:18:30,919 Speaker 1: with Maker. You can go to any of these websites 381 00:18:31,000 --> 00:18:33,680 Speaker 1: right now. You can look at the Ethereum blockchain itself 382 00:18:33,680 --> 00:18:35,959 Speaker 1: and pull the data and can see exactly how much 383 00:18:35,960 --> 00:18:37,840 Speaker 1: did his issue. You can see exactly, you know, the 384 00:18:37,840 --> 00:18:40,240 Speaker 1: credit balance of every account Um. You can see the 385 00:18:40,280 --> 00:18:42,359 Speaker 1: revenues of Maker. You can see who's going to you know, 386 00:18:42,400 --> 00:18:44,879 Speaker 1: get paid, who's going to get liquidated, etcetera. And so 387 00:18:44,960 --> 00:18:48,280 Speaker 1: this thing is a percent transparent and a hunder percent oudiable, 388 00:18:48,560 --> 00:18:51,399 Speaker 1: and that just princess this huge sort of step function 389 00:18:51,520 --> 00:18:54,400 Speaker 1: leap over what is possible today where you can have 390 00:18:54,480 --> 00:18:56,280 Speaker 1: people that you know, maybe make an a t I 391 00:18:57,160 --> 00:18:59,560 Speaker 1: that is up or available some of the time, and 392 00:18:59,600 --> 00:19:01,720 Speaker 1: you sort of to trust that the data is available, 393 00:19:01,960 --> 00:19:03,959 Speaker 1: but sort of that the core base layer is not 394 00:19:04,119 --> 00:19:06,560 Speaker 1: auditable and it's not transparent the same way Um it 395 00:19:06,680 --> 00:19:08,399 Speaker 1: is with a lot of the product products that are 396 00:19:08,400 --> 00:19:11,560 Speaker 1: being built in Ethereum are in the Ethereum Defy ecosystem. 397 00:19:11,640 --> 00:19:13,680 Speaker 1: So those are sort of how I think about you know, 398 00:19:13,680 --> 00:19:16,240 Speaker 1: a lot of value props of Defy. The fourth obviously 399 00:19:16,280 --> 00:19:18,480 Speaker 1: being and sort of the you know, direct analogy to 400 00:19:18,520 --> 00:19:22,320 Speaker 1: fintech is programmability. The difference you know, being with with 401 00:19:22,400 --> 00:19:24,280 Speaker 1: defy is I don't have to rely on our particular 402 00:19:24,280 --> 00:19:27,760 Speaker 1: company to grant me API access to you know, be 403 00:19:27,920 --> 00:19:31,000 Speaker 1: be available when I'm available, to have particular up time 404 00:19:31,520 --> 00:19:34,560 Speaker 1: to do whatever is I needed to do. The API 405 00:19:34,680 --> 00:19:36,880 Speaker 1: is sort of embedded into the into the contract, into 406 00:19:36,920 --> 00:19:39,439 Speaker 1: the product itself. So as long as you know the 407 00:19:39,480 --> 00:19:42,800 Speaker 1: Ethereum blockchain is running, which it almost always is, you 408 00:19:42,840 --> 00:19:44,600 Speaker 1: can go and call into any of these contracts as 409 00:19:44,760 --> 00:19:47,199 Speaker 1: as a as a as a programmer and actually go 410 00:19:47,359 --> 00:19:50,560 Speaker 1: and build new applications. And so you know, those are 411 00:19:50,560 --> 00:19:52,240 Speaker 1: sort of a few of the core value props when 412 00:19:52,240 --> 00:19:54,399 Speaker 1: we think about defy, and certainly there's a lot of 413 00:19:54,400 --> 00:19:56,680 Speaker 1: overlap with with fintech, but there's a lot of things 414 00:19:56,680 --> 00:19:59,320 Speaker 1: that are new and sort of expand the market beyond 415 00:19:59,400 --> 00:20:02,200 Speaker 1: what you know, something like a stripe could do, for example. 416 00:20:02,560 --> 00:20:05,040 Speaker 1: So pretty soon I want to get to the question of, 417 00:20:05,080 --> 00:20:08,920 Speaker 1: like what are these tools being used for besides say speculation, 418 00:20:09,000 --> 00:20:11,480 Speaker 1: because you know, you mentioned maker and I could post 419 00:20:11,480 --> 00:20:14,640 Speaker 1: collateral and get die. But my impression is probably most 420 00:20:14,680 --> 00:20:17,240 Speaker 1: people do that, just use that money to buy more 421 00:20:17,280 --> 00:20:20,920 Speaker 1: coins as opposed to anything resembling business. But before we 422 00:20:20,960 --> 00:20:23,399 Speaker 1: get to that, I like, here's another question I have. 423 00:20:23,480 --> 00:20:25,320 Speaker 1: So we'll get there. But here's another question I have. 424 00:20:25,920 --> 00:20:30,200 Speaker 1: Can you explain impermanent loss? Because I've like I had 425 00:20:30,240 --> 00:20:33,560 Speaker 1: this after like people have done threads and explained like 426 00:20:33,920 --> 00:20:38,000 Speaker 1: you know, the unit swap liquidity providers, and it's like, oh, 427 00:20:38,320 --> 00:20:41,440 Speaker 1: just can you explain what that's all about? Yeah? Yeah, 428 00:20:41,560 --> 00:20:45,119 Speaker 1: So I permanent loss refers to this future of this 429 00:20:45,200 --> 00:20:48,320 Speaker 1: byproduct of UM what are called automated market makers, and 430 00:20:48,400 --> 00:20:52,359 Speaker 1: so automated market makers are smart contracts that perform the 431 00:20:52,400 --> 00:20:55,960 Speaker 1: function of a normal market maker on a normal order 432 00:20:56,000 --> 00:20:59,080 Speaker 1: book based exchange. So you know, normally, let's say you 433 00:20:59,119 --> 00:21:02,320 Speaker 1: want to go and I don't know, trade Apple stock 434 00:21:02,640 --> 00:21:05,760 Speaker 1: right on on the exchange of your choice. Maybe you 435 00:21:05,760 --> 00:21:07,240 Speaker 1: want to buy a certain price, you want to sell 436 00:21:07,280 --> 00:21:09,399 Speaker 1: at a certain price. You have a market maker who's 437 00:21:09,440 --> 00:21:12,360 Speaker 1: holding inventory that is quoting you on both sides right there, 438 00:21:12,480 --> 00:21:14,960 Speaker 1: posting orders to buy, the posting orders to sell, to 439 00:21:15,119 --> 00:21:17,680 Speaker 1: provide liquidity to this market so that if anyone wants 440 00:21:17,720 --> 00:21:20,080 Speaker 1: to show up, they can buy or sell Apple stock 441 00:21:20,119 --> 00:21:22,439 Speaker 1: at a reasonable price. UM. Now the same sort of 442 00:21:22,440 --> 00:21:25,200 Speaker 1: market makers exist in crypto, where you go on coin 443 00:21:25,240 --> 00:21:27,879 Speaker 1: base and you have market makers holding bitcoin inventory as 444 00:21:27,880 --> 00:21:30,720 Speaker 1: dollar inventory, and they're sort of posting these orders to 445 00:21:30,760 --> 00:21:33,239 Speaker 1: make sure that there's sufficient liquidity in the markets. An 446 00:21:33,440 --> 00:21:37,000 Speaker 1: m M basically replaces that function with a formula. Sort of. 447 00:21:37,000 --> 00:21:38,720 Speaker 1: The most popular style to MM is what we call 448 00:21:38,760 --> 00:21:41,760 Speaker 1: a constant product and M, meaning instead of asking a 449 00:21:41,760 --> 00:21:43,800 Speaker 1: market maker, hey, you know what kind of quote can 450 00:21:43,840 --> 00:21:45,680 Speaker 1: you give me if I want to buy or sell 451 00:21:45,880 --> 00:21:49,320 Speaker 1: hundred shares of apple, the answer is whatever, the formula 452 00:21:49,400 --> 00:21:51,560 Speaker 1: sort of spits out, and so that's the quote that 453 00:21:51,560 --> 00:21:54,200 Speaker 1: you're going to get. And the way this works again 454 00:21:54,280 --> 00:21:57,280 Speaker 1: in a constant product sense is, let's go with another simple, 455 00:21:57,320 --> 00:22:00,399 Speaker 1: really simple example. Let's say I want to a market 456 00:22:00,400 --> 00:22:06,120 Speaker 1: aker for USDC market I can go, I can take 457 00:22:06,160 --> 00:22:09,119 Speaker 1: some eth. I can take some USDC equal proportions and 458 00:22:09,200 --> 00:22:12,119 Speaker 1: deposit it into a smart contract like unit swap, and 459 00:22:12,160 --> 00:22:14,359 Speaker 1: now anybody can buy or sell against me. Right, this 460 00:22:14,640 --> 00:22:17,679 Speaker 1: smart contract is taking my assets, and now they're basically 461 00:22:17,680 --> 00:22:20,360 Speaker 1: acting as the marketingker're acting as as the quote provider, 462 00:22:20,600 --> 00:22:23,199 Speaker 1: and anybody can buy or sell any amount of asset 463 00:22:23,280 --> 00:22:25,320 Speaker 1: through the smart contract any time they want, and the 464 00:22:25,320 --> 00:22:27,600 Speaker 1: smart contract will give them a quote. So in this 465 00:22:27,720 --> 00:22:30,960 Speaker 1: really simple example, um that. Again, the constant product formula 466 00:22:31,160 --> 00:22:34,199 Speaker 1: is um x times y equals k UM. So in 467 00:22:34,240 --> 00:22:37,360 Speaker 1: this example, let's say I put in ten and ten 468 00:22:37,480 --> 00:22:40,960 Speaker 1: USDC assuming E is one dollar, so ten times ten 469 00:22:41,119 --> 00:22:44,119 Speaker 1: is a hundred. So no matter what sort of amount 470 00:22:44,119 --> 00:22:46,320 Speaker 1: that you want to buy, at the end, there the 471 00:22:46,440 --> 00:22:49,040 Speaker 1: amount of ether left in the smart contract times the 472 00:22:49,080 --> 00:22:51,119 Speaker 1: amount of USDC left in the smart contract has to 473 00:22:51,200 --> 00:22:54,440 Speaker 1: equal a hundred. So now the question is, you know, again, 474 00:22:54,520 --> 00:22:56,040 Speaker 1: let's say I want to go and let's say I 475 00:22:56,080 --> 00:22:58,600 Speaker 1: want to buy five Ether. I'm a new person. I 476 00:22:58,640 --> 00:23:00,840 Speaker 1: want to buy five ether from the smart con tracked. Well, 477 00:23:01,080 --> 00:23:02,720 Speaker 1: so at the end of this transaction, there's gonna be 478 00:23:02,720 --> 00:23:05,080 Speaker 1: five e F left, but five times something has to 479 00:23:05,119 --> 00:23:08,200 Speaker 1: equal a hundred, so there's gonna be USDC left. So 480 00:23:08,600 --> 00:23:10,719 Speaker 1: there's twenty U s dc. So let's say there's ten 481 00:23:10,800 --> 00:23:13,880 Speaker 1: U s dc five, So my quote is basically two 482 00:23:14,000 --> 00:23:16,760 Speaker 1: U s DC per. So this thing is basically able 483 00:23:16,800 --> 00:23:18,639 Speaker 1: to offer you a quote for any amount of asset 484 00:23:18,640 --> 00:23:20,280 Speaker 1: that you want to buy yoursell through a smart contract. 485 00:23:20,600 --> 00:23:23,200 Speaker 1: Now the problem is, again, let's say you're that LP. 486 00:23:23,359 --> 00:23:26,760 Speaker 1: You're the person who put in ten and ten USDC. Well, 487 00:23:26,920 --> 00:23:29,280 Speaker 1: now you've suddenly sold a bunch of eth, as eth 488 00:23:29,320 --> 00:23:32,280 Speaker 1: has presumably gone up in market, and so you're worse 489 00:23:32,320 --> 00:23:34,399 Speaker 1: off than if you had just held EATH and USDC. 490 00:23:34,880 --> 00:23:38,320 Speaker 1: You have five, you have twenty U s DC. That's 491 00:23:38,359 --> 00:23:40,719 Speaker 1: only thirty dollars. You would have had forty dollars if 492 00:23:40,720 --> 00:23:43,359 Speaker 1: you had just stayed in. Permanent loss refers to this 493 00:23:43,440 --> 00:23:46,439 Speaker 1: concept that in a concept product market maker, as the 494 00:23:46,480 --> 00:23:50,560 Speaker 1: market moves, you will have you know, less busy, less assets, 495 00:23:50,640 --> 00:23:52,800 Speaker 1: less money than if you just held on those assets, 496 00:23:53,000 --> 00:23:55,119 Speaker 1: um and not put them into this smart contract. They 497 00:23:55,200 --> 00:23:58,679 Speaker 1: self permanent. Yes, so here here's the caveat right, this 498 00:23:58,680 --> 00:24:01,600 Speaker 1: would normally be an absolute a terrible value proposition, right 499 00:24:02,200 --> 00:24:03,840 Speaker 1: you would you lose money as soon as you start 500 00:24:03,880 --> 00:24:06,360 Speaker 1: to put assets into this smart contract. The way am 501 00:24:06,480 --> 00:24:08,720 Speaker 1: ms make up for this is by charging fees. So 502 00:24:09,200 --> 00:24:12,200 Speaker 1: Unit Swap for example, charges thirty bits on every trade. 503 00:24:12,760 --> 00:24:16,160 Speaker 1: And the idea is that with enough volume that those 504 00:24:16,240 --> 00:24:18,640 Speaker 1: fees will begin to make up for any of any 505 00:24:18,680 --> 00:24:21,240 Speaker 1: of that permanent loss. And additionally, you know you sort 506 00:24:21,240 --> 00:24:24,000 Speaker 1: of want uh what we call mean reverting assets, so 507 00:24:24,400 --> 00:24:26,800 Speaker 1: you actually want a lot of volatility because that's gonna 508 00:24:26,840 --> 00:24:28,760 Speaker 1: encourage people to trade, that's gonna allow you to your 509 00:24:28,840 --> 00:24:31,119 Speaker 1: crew fees. But ultimately, at the at the end of 510 00:24:31,119 --> 00:24:33,240 Speaker 1: the day, UM, you want those assets to sort of 511 00:24:33,280 --> 00:24:34,920 Speaker 1: return to the ratio that they were when you put 512 00:24:34,920 --> 00:24:36,840 Speaker 1: them in initially, UM, And that's how you sort of 513 00:24:37,160 --> 00:24:39,560 Speaker 1: avoid impermented loss. But to your point, UM, if those 514 00:24:39,600 --> 00:24:42,400 Speaker 1: assets never returned to that initial ratio, So let's say 515 00:24:42,440 --> 00:24:46,080 Speaker 1: you become a liquidity provider for ether beneath is ten 516 00:24:46,119 --> 00:24:48,960 Speaker 1: dollars and he goes up to a thousand dollars, it 517 00:24:49,000 --> 00:24:50,560 Speaker 1: is probably not going to go back to a hundred dollars. 518 00:24:50,600 --> 00:24:52,520 Speaker 1: You've you've you've probably would have been better off just 519 00:24:52,520 --> 00:24:55,119 Speaker 1: just holding onto that ether instead of putting into a 520 00:24:55,160 --> 00:24:58,320 Speaker 1: smart contract. But with enough volume, you can in theory 521 00:24:58,359 --> 00:25:00,679 Speaker 1: make enough on fees or to common for that for 522 00:25:00,760 --> 00:25:03,720 Speaker 1: that loss. So at a very high level, that's sort 523 00:25:03,720 --> 00:25:05,960 Speaker 1: of how the whole m m impermitted lass sort of 524 00:25:05,960 --> 00:25:08,159 Speaker 1: the thing works is you're sort of banking that's going 525 00:25:08,240 --> 00:25:10,159 Speaker 1: to be enough volume, so you're gonna be able to 526 00:25:10,119 --> 00:25:12,080 Speaker 1: crue enough fees in order to offset sort of the 527 00:25:12,160 --> 00:25:16,119 Speaker 1: drift and asset prices. Okay, I have a question, um, 528 00:25:16,160 --> 00:25:18,440 Speaker 1: and it sort of feeds into where we want to 529 00:25:18,480 --> 00:25:21,280 Speaker 1: go next, which is the real world applications and what 530 00:25:21,280 --> 00:25:24,920 Speaker 1: people are actually doing in this space. But it feels 531 00:25:25,040 --> 00:25:29,440 Speaker 1: like there is a huge obstacle to Defy going mainstream, 532 00:25:29,520 --> 00:25:33,200 Speaker 1: just in the fact that it seems very, very complicated. 533 00:25:33,320 --> 00:25:37,560 Speaker 1: So what you were just discussing about impermanent loss. Um, 534 00:25:37,640 --> 00:25:40,280 Speaker 1: it feels like I am going to have to go 535 00:25:40,359 --> 00:25:43,439 Speaker 1: back and really listen to that conversation a couple of 536 00:25:43,440 --> 00:25:46,480 Speaker 1: times in order to wrap my head around it. How 537 00:25:46,560 --> 00:25:49,879 Speaker 1: difficult is it going to be for these types of 538 00:25:49,960 --> 00:25:53,560 Speaker 1: concepts and this type of space to actually go mainstream 539 00:25:53,600 --> 00:25:56,280 Speaker 1: and attract a lot of people if you're asking them 540 00:25:56,480 --> 00:26:00,800 Speaker 1: to participate with a level of understand ending that like 541 00:26:01,400 --> 00:26:04,560 Speaker 1: I would say, borders sort of on obsessive, like just 542 00:26:04,600 --> 00:26:07,119 Speaker 1: listening to people who come on to all Blots before, 543 00:26:07,200 --> 00:26:09,520 Speaker 1: like the yield Farming episode. These are people who are 544 00:26:09,640 --> 00:26:14,440 Speaker 1: intensely into the space. How are you going to attract 545 00:26:14,480 --> 00:26:19,720 Speaker 1: people who are slightly outside of it? Yeah? I think 546 00:26:20,200 --> 00:26:23,440 Speaker 1: right now, there's definitely a huge sort of pro sumer 547 00:26:23,720 --> 00:26:26,960 Speaker 1: power user and element to defy where there are people 548 00:26:26,960 --> 00:26:29,560 Speaker 1: who sort of live and breathe this stuff, and you know, 549 00:26:29,560 --> 00:26:31,879 Speaker 1: they sort of biased towards being active with it, right, 550 00:26:31,920 --> 00:26:34,560 Speaker 1: Like I like attending my yield farms, and I like 551 00:26:34,600 --> 00:26:36,520 Speaker 1: sort of playing around with new stuff. And for the 552 00:26:36,520 --> 00:26:39,000 Speaker 1: majority of people when they think about you know, financial services, 553 00:26:39,000 --> 00:26:41,159 Speaker 1: that's not what they want, right They want to you know, 554 00:26:41,240 --> 00:26:43,320 Speaker 1: by by S and P and put it in there 555 00:26:43,320 --> 00:26:45,280 Speaker 1: for O, n K and and not really really think 556 00:26:45,280 --> 00:26:48,200 Speaker 1: about it. And so I think the answers comes from from, 557 00:26:48,480 --> 00:26:51,399 Speaker 1: you know, a couple different advantage points. One is just 558 00:26:51,440 --> 00:26:53,879 Speaker 1: from a sort of offerings perspective. I think they are 559 00:26:53,880 --> 00:26:56,439 Speaker 1: could be more and more abstractions built on many of 560 00:26:56,480 --> 00:26:59,359 Speaker 1: these protocols such that the end user doesn't really end 561 00:26:59,400 --> 00:27:01,919 Speaker 1: up thinking this kind of thing. And the impermanent loss example, 562 00:27:02,320 --> 00:27:05,800 Speaker 1: you can sell off some of that yield to to 563 00:27:05,960 --> 00:27:07,880 Speaker 1: pay for, you know, any impermanent loss that you might 564 00:27:07,960 --> 00:27:10,879 Speaker 1: you might experience, or you might buy put some calls 565 00:27:10,920 --> 00:27:13,080 Speaker 1: so that you know, you can sort of hedge out 566 00:27:13,119 --> 00:27:15,720 Speaker 1: some of that volatility that you're exposed to. Ultimately that 567 00:27:15,720 --> 00:27:18,679 Speaker 1: can be you know, bundled inside of a structured product 568 00:27:18,680 --> 00:27:20,640 Speaker 1: and sort of give into an end user. And so 569 00:27:20,960 --> 00:27:22,520 Speaker 1: I'm not thinking about you know, sort of what's in 570 00:27:22,560 --> 00:27:25,120 Speaker 1: this basket of goods that then I'm buying. I just know, hey, 571 00:27:25,240 --> 00:27:27,639 Speaker 1: I want to know, earn some yield on asset x 572 00:27:27,760 --> 00:27:29,199 Speaker 1: y z, and then maybe this is a good way 573 00:27:29,240 --> 00:27:31,320 Speaker 1: to do it. I think actually the stable coin market 574 00:27:31,320 --> 00:27:34,600 Speaker 1: is a great example where you know, cryptocurrency users are 575 00:27:34,640 --> 00:27:37,240 Speaker 1: willing to pay you a large amount of interest in 576 00:27:37,320 --> 00:27:39,000 Speaker 1: order to get leverage on some of these assets. Right 577 00:27:39,040 --> 00:27:41,200 Speaker 1: like you know, um to the futures markets often hit 578 00:27:41,480 --> 00:27:45,600 Speaker 1: three annualized or even lending markets hit hr in order 579 00:27:45,600 --> 00:27:48,000 Speaker 1: to borrow stable coins to to get leverage on some 580 00:27:48,040 --> 00:27:50,800 Speaker 1: of these assets. But you know, if you're not a 581 00:27:50,800 --> 00:27:53,800 Speaker 1: tryptop person, if you just want to you know, uh, 582 00:27:53,840 --> 00:27:55,520 Speaker 1: sort of earn some interest on some cash that you're 583 00:27:55,520 --> 00:27:58,040 Speaker 1: he laying around, you can go to you know, services 584 00:27:58,080 --> 00:28:01,040 Speaker 1: like coin base or block by, and you know, they 585 00:28:01,080 --> 00:28:03,400 Speaker 1: will take your USDC and they will lend it out 586 00:28:03,440 --> 00:28:05,159 Speaker 1: for you and you don't have to think about, you know, 587 00:28:05,160 --> 00:28:07,240 Speaker 1: anything that's sort of going on under the hood. I 588 00:28:07,240 --> 00:28:09,680 Speaker 1: think actually a great example of this is in China 589 00:28:10,000 --> 00:28:12,200 Speaker 1: there's a company called Matrix Suport which actually want to 590 00:28:12,200 --> 00:28:15,359 Speaker 1: portfolio companies and they've sort of pioneered this swortter we 591 00:28:15,480 --> 00:28:18,439 Speaker 1: called c D five. So it's half centralized, half decentralized, 592 00:28:18,480 --> 00:28:22,400 Speaker 1: where it's a custodial service. You know, they own your bitcoin, 593 00:28:22,440 --> 00:28:24,240 Speaker 1: they own your USDC, they sort of take care of 594 00:28:24,240 --> 00:28:26,439 Speaker 1: it for you. You can't lose it. But under the 595 00:28:26,480 --> 00:28:28,760 Speaker 1: hood they'll go out and they'll yield form for you. 596 00:28:28,800 --> 00:28:31,880 Speaker 1: So they'll go put your USDC into compound, they'll take 597 00:28:31,880 --> 00:28:34,159 Speaker 1: that comp they'll sell it for more u SCC, and 598 00:28:34,200 --> 00:28:35,480 Speaker 1: then they'll go get to give it back to you 599 00:28:35,480 --> 00:28:36,800 Speaker 1: at the end of the day. So from an end 600 00:28:36,880 --> 00:28:40,600 Speaker 1: user perspective, you don't sort of see what's actually you know, happening. 601 00:28:40,840 --> 00:28:42,440 Speaker 1: You sort of think about, you know, the yield that 602 00:28:42,520 --> 00:28:45,120 Speaker 1: that's that you're getting. And so for a lot of users, 603 00:28:45,160 --> 00:28:46,760 Speaker 1: I suspect that's going to be the way they're going 604 00:28:46,800 --> 00:28:49,000 Speaker 1: to use defied much in the same way. You know, 605 00:28:49,040 --> 00:28:51,920 Speaker 1: most people they don't think about trading bonds or you know, 606 00:28:51,960 --> 00:28:55,200 Speaker 1: selling your complicated drivetives. They just think about putting money 607 00:28:55,200 --> 00:28:57,000 Speaker 1: in the bank account, and you know, the bank sort 608 00:28:57,040 --> 00:28:59,400 Speaker 1: of handles how to get actually interest on it. So 609 00:28:59,800 --> 00:29:02,160 Speaker 1: I would say there's still a good amount of abstraction 610 00:29:02,280 --> 00:29:04,680 Speaker 1: that for meaning to to make this stuff really palable. 611 00:29:04,680 --> 00:29:07,120 Speaker 1: To to end users, not even talking about a lot 612 00:29:07,160 --> 00:29:09,400 Speaker 1: of the transaction costs and all of the scalability issues. 613 00:29:09,480 --> 00:29:11,200 Speaker 1: But I just like that's going to be a large 614 00:29:11,240 --> 00:29:13,320 Speaker 1: part of the way people actually get exposure to this thing. 615 00:29:14,520 --> 00:29:16,560 Speaker 1: Just on that note, we sort of touched on this before, 616 00:29:16,840 --> 00:29:19,920 Speaker 1: um with the fintech angle. But if it's going to 617 00:29:20,000 --> 00:29:22,200 Speaker 1: be similar to putting your money in a bank and 618 00:29:22,240 --> 00:29:25,520 Speaker 1: just sort of trusting the process, isn't that where you 619 00:29:25,600 --> 00:29:28,840 Speaker 1: kind of need regulation or at least you need to 620 00:29:29,080 --> 00:29:32,680 Speaker 1: have some sort of faith in the middleman or the 621 00:29:32,720 --> 00:29:36,320 Speaker 1: process that's doing this for you. So I guess I'm 622 00:29:36,360 --> 00:29:39,200 Speaker 1: just curious, like how you swear like people not necessarily 623 00:29:39,280 --> 00:29:42,520 Speaker 1: understanding all the details of the process, but also having 624 00:29:42,600 --> 00:29:47,320 Speaker 1: faith in a decentralized process or method of doing this. 625 00:29:48,520 --> 00:29:52,240 Speaker 1: I think it's about having exposure and having the ability 626 00:29:52,360 --> 00:29:54,960 Speaker 1: to sort of go down to the middle and get 627 00:29:54,960 --> 00:29:57,080 Speaker 1: access to it or audit it or do whatever you want. 628 00:29:57,480 --> 00:29:59,440 Speaker 1: But there's always going to be people who are not 629 00:29:59,440 --> 00:30:01,080 Speaker 1: gonna want to be their own bank. I always hated 630 00:30:01,120 --> 00:30:02,920 Speaker 1: that that slogan that I think a lot of crypto 631 00:30:02,920 --> 00:30:05,800 Speaker 1: people push because it's just not something that is appealing 632 00:30:05,920 --> 00:30:07,960 Speaker 1: or feasible for a lot of people. I think of 633 00:30:08,000 --> 00:30:10,840 Speaker 1: it a little bit sort of like email, where most 634 00:30:10,840 --> 00:30:14,760 Speaker 1: people don't run their own email server. Most people don't 635 00:30:14,800 --> 00:30:17,560 Speaker 1: have their own email client. They use a hosted service 636 00:30:17,640 --> 00:30:20,360 Speaker 1: like Gmail, and Gmail sort of runs the email server 637 00:30:20,440 --> 00:30:22,880 Speaker 1: for them. But email itself is still an open protocol. 638 00:30:22,920 --> 00:30:26,000 Speaker 1: Anyone can go and run their own email server and 639 00:30:26,040 --> 00:30:27,480 Speaker 1: I can go send you an email, You can go 640 00:30:27,560 --> 00:30:30,240 Speaker 1: send me an email. That open protocol is always available 641 00:30:30,280 --> 00:30:32,360 Speaker 1: to us if you want to use it. But of course, 642 00:30:32,400 --> 00:30:34,320 Speaker 1: for convenience sake, a lot of people are gonna end 643 00:30:34,400 --> 00:30:35,720 Speaker 1: up using, you know, a lot of these sort of 644 00:30:35,760 --> 00:30:37,760 Speaker 1: hosted services at the end of the day. So the 645 00:30:37,800 --> 00:30:40,320 Speaker 1: beauty is you have this sort of global permission list 646 00:30:41,400 --> 00:30:45,160 Speaker 1: seven auditable um um settlement layer that anybody can tap into, 647 00:30:45,240 --> 00:30:47,880 Speaker 1: and again that allows sort of permission permission list innovation. 648 00:30:48,240 --> 00:30:50,440 Speaker 1: But you can still have these really nice financial services 649 00:30:50,440 --> 00:30:52,400 Speaker 1: that sit on top of it that you know, give 650 00:30:52,600 --> 00:30:54,520 Speaker 1: people a really simple yield that's when they get access 651 00:30:54,560 --> 00:30:57,000 Speaker 1: to or you know, really let them let them really easily, 652 00:30:57,280 --> 00:30:59,200 Speaker 1: you know, borrow money if that's what they want. Um. 653 00:30:59,240 --> 00:31:01,400 Speaker 1: The two don't ness searily have to stay in conflict. 654 00:31:15,800 --> 00:31:18,960 Speaker 1: So you brought up something, and actually it's come up 655 00:31:18,960 --> 00:31:21,600 Speaker 1: a couple of times that have been maybe very curious about. 656 00:31:21,640 --> 00:31:24,040 Speaker 1: So it's like, if I look on coin get go 657 00:31:24,360 --> 00:31:28,240 Speaker 1: the top volume pair pairs traded on unit spop right now, 658 00:31:28,600 --> 00:31:34,200 Speaker 1: it looks like fifty over is the U s DC pair, 659 00:31:34,920 --> 00:31:39,920 Speaker 1: another five percent is the tether pair, another four percent 660 00:31:40,040 --> 00:31:43,320 Speaker 1: is actually the U s DC tether pair. A lot 661 00:31:43,360 --> 00:31:47,920 Speaker 1: of this so called defy is built on centralized um 662 00:31:48,040 --> 00:31:50,680 Speaker 1: stable coins. So this is literally like a token that 663 00:31:50,760 --> 00:31:54,560 Speaker 1: in theory we were told is represented by a dollar's 664 00:31:54,600 --> 00:31:57,640 Speaker 1: worth of dollar denominated assets held at a bank somewhere. 665 00:31:58,240 --> 00:32:01,120 Speaker 1: And then there is a decentralized able coin called die 666 00:32:01,160 --> 00:32:05,440 Speaker 1: which is backed by crypto assets, except from my understanding 667 00:32:05,480 --> 00:32:08,960 Speaker 1: even that is significantly as one of the backing assets 668 00:32:09,280 --> 00:32:13,160 Speaker 1: us DC. So how much is this whole thing still 669 00:32:13,200 --> 00:32:17,800 Speaker 1: like sort of like built on a highly centralized regulated 670 00:32:17,840 --> 00:32:23,280 Speaker 1: asset that also could be significantly regulated further. Yeah, the 671 00:32:23,560 --> 00:32:26,760 Speaker 1: stable coin risk is a real one, you know, maybe 672 00:32:26,760 --> 00:32:28,840 Speaker 1: for for listeners who aren't to wear a stable coin 673 00:32:28,960 --> 00:32:32,120 Speaker 1: such as USCC, which I realize I've been referencing quite frequently. 674 00:32:32,560 --> 00:32:36,400 Speaker 1: It's a token that lives on ethereums as well as 675 00:32:36,440 --> 00:32:38,960 Speaker 1: a few other blockchains that is backed one to one 676 00:32:39,120 --> 00:32:41,200 Speaker 1: by dollars that are in a you know, audited US 677 00:32:41,240 --> 00:32:44,760 Speaker 1: bank account. So one dollar comes in, one USDC is minted, 678 00:32:45,080 --> 00:32:48,040 Speaker 1: and simultaneously you can then go and redeem that USDC 679 00:32:48,240 --> 00:32:51,160 Speaker 1: so you can, um, you know, give centers, need the 680 00:32:51,200 --> 00:32:54,360 Speaker 1: name of the company given the USDC and they'll redeem it. 681 00:32:54,400 --> 00:32:56,240 Speaker 1: And and why are you you know, US dollars to 682 00:32:56,280 --> 00:32:58,760 Speaker 1: the bank account that you want. So really really simple, 683 00:32:58,960 --> 00:33:01,640 Speaker 1: you know, one to one back. Now, the problem is 684 00:33:02,680 --> 00:33:04,440 Speaker 1: this is sort of you know a little bit of 685 00:33:04,560 --> 00:33:07,160 Speaker 1: a golden age of of this is sort of pure 686 00:33:07,520 --> 00:33:10,200 Speaker 1: regulatory arbitrage right where um, if I want to go 687 00:33:10,360 --> 00:33:13,280 Speaker 1: and you know, send a million dollars to you Joe, 688 00:33:13,520 --> 00:33:18,000 Speaker 1: you know, throw a wire or to paypaler or whatever, yeah, 689 00:33:18,280 --> 00:33:20,600 Speaker 1: we'll lose that up. You know, I have to go 690 00:33:20,680 --> 00:33:22,680 Speaker 1: through m K, I C A, m L. We have 691 00:33:22,760 --> 00:33:25,680 Speaker 1: to be using you know, um, everyone who's who's in 692 00:33:25,680 --> 00:33:28,040 Speaker 1: the sort of the middle party is being MSB. There's 693 00:33:28,040 --> 00:33:30,440 Speaker 1: a lot of regulation in between to make sure maybe 694 00:33:30,440 --> 00:33:33,840 Speaker 1: bad actors can't use this with USDC. Once it's minted, 695 00:33:34,280 --> 00:33:35,800 Speaker 1: I can go and send it to you, you know, 696 00:33:35,800 --> 00:33:38,960 Speaker 1: on chain it's pseudonymous um, you're just one address. I'm 697 00:33:39,000 --> 00:33:41,280 Speaker 1: one address, and really the only the k I c 698 00:33:41,400 --> 00:33:44,240 Speaker 1: aml apart takes place off chain. Sou if you want 699 00:33:44,240 --> 00:33:46,080 Speaker 1: to go take that million dollars and you want to 700 00:33:46,080 --> 00:33:48,200 Speaker 1: then want to go but redeem it, then you have 701 00:33:48,240 --> 00:33:50,240 Speaker 1: to do ky C. But in the interim, you know, 702 00:33:50,280 --> 00:33:52,720 Speaker 1: it's all sort of being transferred on chain. There's always 703 00:33:52,720 --> 00:33:55,800 Speaker 1: this risk that and we see this occasionally where you know, 704 00:33:55,920 --> 00:33:58,880 Speaker 1: USDC and and TELL both have the ability to to 705 00:33:58,960 --> 00:34:02,120 Speaker 1: blacklist and freeze as so if they determine that you know, 706 00:34:02,160 --> 00:34:04,440 Speaker 1: these funds were sees as part of a hack, or 707 00:34:04,520 --> 00:34:07,760 Speaker 1: maybe they're being used for money laundering or funding terrorism. 708 00:34:07,760 --> 00:34:10,400 Speaker 1: Granted this is a very very very small percentage of 709 00:34:10,440 --> 00:34:12,759 Speaker 1: all the sort of activity that's happening, they can say, hey, 710 00:34:12,760 --> 00:34:16,640 Speaker 1: actually these tokens are frozen, they're not redeemable anymore. We're 711 00:34:16,640 --> 00:34:18,759 Speaker 1: going to you know, it would be like you know, 712 00:34:18,920 --> 00:34:21,480 Speaker 1: you your bank account is pros and sort of functioning 713 00:34:21,520 --> 00:34:24,200 Speaker 1: the same thing. And so there's always this risk that hey, 714 00:34:24,239 --> 00:34:27,800 Speaker 1: that might happen into Maker or compound or unit spop 715 00:34:27,880 --> 00:34:30,440 Speaker 1: or any of these services where they're sort of reliant 716 00:34:30,440 --> 00:34:32,440 Speaker 1: on a stable coin right now. Over time I think 717 00:34:32,440 --> 00:34:35,160 Speaker 1: sensible regulation will come around. Hey, how are these thing 718 00:34:35,200 --> 00:34:37,840 Speaker 1: is actually going to interact with the traditional and financial system. 719 00:34:37,880 --> 00:34:39,600 Speaker 1: I certainly don't think it's going to be, you know, 720 00:34:39,640 --> 00:34:44,080 Speaker 1: everyone needing constant, unchain financial surveillance all the time. But 721 00:34:44,160 --> 00:34:46,000 Speaker 1: in the interim it is sort of this this weird 722 00:34:46,040 --> 00:34:48,160 Speaker 1: place where there's always a little bit of risk that 723 00:34:48,160 --> 00:34:50,359 Speaker 1: that something like that might happen. I think to your 724 00:34:50,400 --> 00:34:53,120 Speaker 1: point that sort of speaks the need for something like Die, 725 00:34:53,160 --> 00:34:57,160 Speaker 1: which right now is has a percentage of it's of 726 00:34:57,200 --> 00:35:00,759 Speaker 1: its backing in USDC for the purpose of of stabilizing 727 00:35:00,760 --> 00:35:03,680 Speaker 1: it um. So certainly they could get rid of USDC tomorrow, 728 00:35:04,000 --> 00:35:07,120 Speaker 1: but basically die with trade above a peg because people 729 00:35:07,120 --> 00:35:11,160 Speaker 1: like to take that USDC and quickly arbitrazed Die by 730 00:35:11,280 --> 00:35:13,359 Speaker 1: minting it when it's above the peg and selling it 731 00:35:13,400 --> 00:35:16,040 Speaker 1: and sort of capturing that spread. So it's sort of 732 00:35:15,719 --> 00:35:17,799 Speaker 1: at this trade off for it. You can have that 733 00:35:17,800 --> 00:35:20,160 Speaker 1: that stability, you can have that, or you can have 734 00:35:20,280 --> 00:35:23,279 Speaker 1: that decentralized stable coin. But if you want to be 735 00:35:23,440 --> 00:35:26,480 Speaker 1: perfectly stable, if you want to be really not volatile, 736 00:35:26,719 --> 00:35:28,120 Speaker 1: there's a little bit of a crut right now. We're 737 00:35:28,160 --> 00:35:30,719 Speaker 1: sort of depending on USDC. I think most of these 738 00:35:30,760 --> 00:35:33,919 Speaker 1: teams have plans to gradually wean off of these these 739 00:35:34,040 --> 00:35:36,680 Speaker 1: centralized stable coins. Is they see these same sort of risks, 740 00:35:36,920 --> 00:35:38,759 Speaker 1: But you're right that right now it is a risk 741 00:35:38,760 --> 00:35:42,080 Speaker 1: in the in the in the ecosystem. So this reminds 742 00:35:42,080 --> 00:35:45,360 Speaker 1: me of something else I've been wondering. But to what 743 00:35:45,520 --> 00:35:51,680 Speaker 1: extent is Bitcoin collateralizing a lot of these defy um 744 00:35:51,719 --> 00:35:55,760 Speaker 1: operations or trades or industries through the stable coin channel, 745 00:35:55,800 --> 00:35:59,120 Speaker 1: And like, if that's actually happening, does that mean that 746 00:35:59,239 --> 00:36:03,080 Speaker 1: crypto because defy seems to be such a dynamic space, 747 00:36:03,239 --> 00:36:06,680 Speaker 1: does that mean that defy like is eventually going to 748 00:36:07,120 --> 00:36:10,440 Speaker 1: have to outgrow Bitcoin? Or I guess another way of 749 00:36:10,440 --> 00:36:13,319 Speaker 1: saying it is like, by definition, you can't have a 750 00:36:13,400 --> 00:36:17,920 Speaker 1: finite pool of collateral in the form of bitcoin um 751 00:36:17,960 --> 00:36:22,600 Speaker 1: that's being used in a system that's growing exponentially. Does 752 00:36:22,600 --> 00:36:25,480 Speaker 1: that make sense? That does make sense? I mean, I 753 00:36:25,520 --> 00:36:28,320 Speaker 1: think the way I sort of think about purposes or 754 00:36:28,360 --> 00:36:31,160 Speaker 1: sort of don't. I've been discussing what for sort of 755 00:36:31,160 --> 00:36:34,400 Speaker 1: three main buckets, one of them just being financial services 756 00:36:34,560 --> 00:36:37,440 Speaker 1: for crypto assets. So by and large, a lot of 757 00:36:37,440 --> 00:36:39,520 Speaker 1: the services that you see and defy today are for 758 00:36:39,760 --> 00:36:43,160 Speaker 1: ether so people hold they need liquidity against it, they 759 00:36:43,200 --> 00:36:46,040 Speaker 1: want to trade it, they want to borrow it, whatever. 760 00:36:46,680 --> 00:36:49,000 Speaker 1: All these sorts of different services allow you to do that. 761 00:36:49,040 --> 00:36:51,439 Speaker 1: And there's even more sophisticated derivatives now where I can 762 00:36:51,880 --> 00:36:55,040 Speaker 1: buy and sell decentrilized options against my ether um and 763 00:36:55,040 --> 00:36:56,520 Speaker 1: and I can really do anything I would do on 764 00:36:56,560 --> 00:36:59,480 Speaker 1: a normal exchange, but do it and defy. And increasingly 765 00:36:59,520 --> 00:37:01,319 Speaker 1: this has happened with bitcoin as well as mean maybe 766 00:37:01,320 --> 00:37:04,680 Speaker 1: you alluded to where there are tokens such as wrapped bitcoin, 767 00:37:04,760 --> 00:37:07,400 Speaker 1: which is sort of like USDC for bitcoin, where custodian 768 00:37:07,719 --> 00:37:10,840 Speaker 1: holds onto your bitcoin and midst w BTC on ethereum. 769 00:37:10,880 --> 00:37:12,560 Speaker 1: And now you know, sort of going back to that 770 00:37:12,600 --> 00:37:15,719 Speaker 1: initial Bitcoin defied dream, I can put my bitcoin as 771 00:37:15,719 --> 00:37:17,680 Speaker 1: collateral and I can borrow against it, or I can 772 00:37:18,280 --> 00:37:20,239 Speaker 1: trade my bitcoin for ether, or trade my bitcoin for 773 00:37:20,400 --> 00:37:23,080 Speaker 1: USDC or vice versa. I would say that's actually a 774 00:37:23,080 --> 00:37:25,920 Speaker 1: small percentage of what's happening in defied today. Most of 775 00:37:25,920 --> 00:37:27,880 Speaker 1: it is sort of around ether and other sort of 776 00:37:28,120 --> 00:37:31,640 Speaker 1: definative assets, but certainly for people who want Bitcoin exposure, 777 00:37:31,680 --> 00:37:33,319 Speaker 1: it's a great way to sort of get access to 778 00:37:33,360 --> 00:37:36,520 Speaker 1: these again sort of permission lists financial services that in 779 00:37:36,560 --> 00:37:39,840 Speaker 1: many ways are superior just not accessible to you know, 780 00:37:39,880 --> 00:37:41,439 Speaker 1: many of the people who are using them. I think, 781 00:37:41,800 --> 00:37:43,880 Speaker 1: you know a great example of sort of this permission 782 00:37:43,880 --> 00:37:46,600 Speaker 1: lists innovation. Um, there's this service that that we recently 783 00:37:46,600 --> 00:37:49,319 Speaker 1: back called ribbon Ribbon. You know, one popular way people 784 00:37:49,320 --> 00:37:53,239 Speaker 1: get yielled is they sell covered calls. Right, so I 785 00:37:53,520 --> 00:37:55,719 Speaker 1: have some bitcoin, I ask some either I want to 786 00:37:55,760 --> 00:37:57,440 Speaker 1: stack more bitcoin, I want to stack more ether. I 787 00:37:57,480 --> 00:37:59,880 Speaker 1: sort of care about accumulating when you sell these like 788 00:38:00,040 --> 00:38:02,360 Speaker 1: out of the money covered calls. In theory, they're not 789 00:38:02,400 --> 00:38:04,200 Speaker 1: gonna expire in the money, and so you've got to 790 00:38:04,200 --> 00:38:06,120 Speaker 1: collect the premium and and just sort of kept keep 791 00:38:06,120 --> 00:38:09,200 Speaker 1: collecting more you collecting more bitcoin. Ribbon. You know, this 792 00:38:09,239 --> 00:38:11,200 Speaker 1: is this is a service that isn't really accessible to 793 00:38:11,200 --> 00:38:13,239 Speaker 1: many people in the US. It's if you do want 794 00:38:13,280 --> 00:38:15,080 Speaker 1: to do it, you need to sort of post ten 795 00:38:15,360 --> 00:38:17,919 Speaker 1: dollars in collateral. Um you go through all these different 796 00:38:17,960 --> 00:38:19,960 Speaker 1: types of you know, hoops and actually get access to 797 00:38:20,040 --> 00:38:23,080 Speaker 1: this thing Ribbon. You can go. It's it's all on chain, 798 00:38:23,200 --> 00:38:26,239 Speaker 1: it's all trustless, it's all decentralized. Anyway, who go and 799 00:38:26,239 --> 00:38:29,440 Speaker 1: and get access to this sort of sophisticated structured product 800 00:38:29,640 --> 00:38:32,160 Speaker 1: without having to go through middleman and without having to uh, 801 00:38:32,200 --> 00:38:34,600 Speaker 1: you know, sort of sort of subject themselves to financial surveillance, 802 00:38:34,640 --> 00:38:37,200 Speaker 1: which I think is actually a huge plus. I think, 803 00:38:37,520 --> 00:38:39,520 Speaker 1: going back to initial question, these are all sort of 804 00:38:39,560 --> 00:38:42,840 Speaker 1: just different types of financial services for crypto assets. The 805 00:38:42,880 --> 00:38:44,440 Speaker 1: big sort of question is how do you sort of 806 00:38:44,440 --> 00:38:45,880 Speaker 1: break out of this realm, right like, how do you 807 00:38:45,880 --> 00:38:48,480 Speaker 1: get out of just lending to Ether, just letting the bitcoin? 808 00:38:48,520 --> 00:38:49,920 Speaker 1: And I would say that there's a couple of different 809 00:38:49,960 --> 00:38:52,840 Speaker 1: different ways I personally want to think about it. One 810 00:38:53,000 --> 00:38:55,080 Speaker 1: is is sort of through this realm of synthetic assets, 811 00:38:55,440 --> 00:38:57,640 Speaker 1: where you know, there's I would say Die is a 812 00:38:57,680 --> 00:39:00,479 Speaker 1: great example. Die is a synthetic version of US dollar. 813 00:39:00,880 --> 00:39:03,480 Speaker 1: But there's many protocols that use that same mechanism of 814 00:39:03,520 --> 00:39:06,480 Speaker 1: posting collateral and then minting debt and and you sort 815 00:39:06,520 --> 00:39:08,080 Speaker 1: of using what we call an oracle in order to 816 00:39:08,160 --> 00:39:11,040 Speaker 1: keep it in pegg with some target price feed. But 817 00:39:11,120 --> 00:39:13,600 Speaker 1: for other types of assets. So you can go on 818 00:39:13,600 --> 00:39:16,680 Speaker 1: on defied today and you can go and buy synthetic Tesla, 819 00:39:17,040 --> 00:39:21,240 Speaker 1: you know, synthetic apple Um, synthetic you know game stop stock, 820 00:39:21,640 --> 00:39:23,320 Speaker 1: anything really um and it doesn't even have to be 821 00:39:23,360 --> 00:39:25,720 Speaker 1: a real world asset. It can be the synthetic price 822 00:39:25,760 --> 00:39:28,359 Speaker 1: of the median you know, housing sale in the San 823 00:39:28,400 --> 00:39:30,920 Speaker 1: Francisco Bay area, or it can be you know, a 824 00:39:30,960 --> 00:39:34,239 Speaker 1: synthetic a number of barrels of oils that are going 825 00:39:34,280 --> 00:39:36,399 Speaker 1: to be you know, shipped across the specific this week 826 00:39:36,480 --> 00:39:38,560 Speaker 1: or whatever it is. You can go and create these 827 00:39:38,719 --> 00:39:42,480 Speaker 1: really novel financial products again without having to apply it, 828 00:39:42,520 --> 00:39:44,640 Speaker 1: without having to jump through a lot of the arduous 829 00:39:44,640 --> 00:39:47,360 Speaker 1: hoops that are normally required. That I think is a 830 00:39:47,400 --> 00:39:50,719 Speaker 1: really burgeoning area of innovation within defied where I can 831 00:39:50,760 --> 00:39:52,839 Speaker 1: go and you know, sort of get access to these 832 00:39:52,840 --> 00:39:55,240 Speaker 1: products wherever I'm around the world. And and we already 833 00:39:55,239 --> 00:39:57,319 Speaker 1: see companies that are you know, trying to do this, 834 00:39:57,360 --> 00:39:59,440 Speaker 1: and and we see see a lot of limitations with 835 00:40:00,120 --> 00:40:03,239 Speaker 1: you know, traditional brokerages for example, around you know, geographical 836 00:40:03,280 --> 00:40:05,719 Speaker 1: restrictions or you know trading restrictions. As we sort of 837 00:40:05,719 --> 00:40:08,040 Speaker 1: stat with the whole again, you know, Robin Hood, um 838 00:40:08,320 --> 00:40:11,719 Speaker 1: gmy thing, these services you can't be stopped. As soon 839 00:40:11,760 --> 00:40:14,919 Speaker 1: as this sort of synthetic gimme gets minted, anyone around 840 00:40:14,960 --> 00:40:17,120 Speaker 1: the world can go buy and sell it seven wherever 841 00:40:17,160 --> 00:40:19,319 Speaker 1: they are so there's there's actually room, I think, to 842 00:40:19,400 --> 00:40:22,000 Speaker 1: sort of grow a lot of the financial services that 843 00:40:22,040 --> 00:40:24,279 Speaker 1: are becoming very popular, you know in the U S 844 00:40:24,320 --> 00:40:27,439 Speaker 1: and Europe, but have this sort of truly global seven 845 00:40:27,680 --> 00:40:30,600 Speaker 1: version of them that is, you know, in many ways superior. 846 00:40:31,120 --> 00:40:34,319 Speaker 1: I think synthetic assets. Obviously, you know you're still sort 847 00:40:34,320 --> 00:40:36,920 Speaker 1: of looking at ways to sort of expand the existing 848 00:40:36,920 --> 00:40:39,279 Speaker 1: financial system. Right these are just sort of extensions of 849 00:40:39,440 --> 00:40:42,319 Speaker 1: the equities markets. I think the really cool thing is, 850 00:40:42,560 --> 00:40:44,680 Speaker 1: you know, sort of what we call real world assets. 851 00:40:44,760 --> 00:40:47,400 Speaker 1: So how do I go and get a mortgage from 852 00:40:47,400 --> 00:40:50,400 Speaker 1: my house from Maker? How do I go and you know, 853 00:40:50,480 --> 00:40:53,480 Speaker 1: trade early equity for my company on unit swap? How 854 00:40:53,480 --> 00:40:55,000 Speaker 1: do how do I go? And it actually like bridge 855 00:40:55,040 --> 00:40:57,000 Speaker 1: these things to the real world. And I would say 856 00:40:57,040 --> 00:41:00,080 Speaker 1: that is probably the most nascent area within Defied. This 857 00:41:00,400 --> 00:41:02,880 Speaker 1: last month, Maker I think sort of broke new ground 858 00:41:02,920 --> 00:41:07,319 Speaker 1: where they are taking shipping invoices and using those as 859 00:41:07,360 --> 00:41:09,960 Speaker 1: collateral and Maker and so Maker basically becomes this this 860 00:41:10,080 --> 00:41:13,760 Speaker 1: invoice factoring facility where if I'm trying to get liquidity 861 00:41:13,800 --> 00:41:16,759 Speaker 1: for you know, assetding debt from this invoice, I can go, 862 00:41:16,880 --> 00:41:19,480 Speaker 1: I can work with a partner, I can create a 863 00:41:19,520 --> 00:41:23,040 Speaker 1: token for this for this asset again in a very regulated, 864 00:41:23,080 --> 00:41:26,240 Speaker 1: legally compliant way, I can put that token inside of Maker, 865 00:41:26,320 --> 00:41:28,400 Speaker 1: and now I can die, and I can convert that 866 00:41:28,480 --> 00:41:30,799 Speaker 1: die against Pegg one to one with dollars. I can 867 00:41:30,840 --> 00:41:33,360 Speaker 1: go convert that die to USD, send it to my 868 00:41:33,400 --> 00:41:36,440 Speaker 1: bank account, and suddenly a Maker is undercutting you know, 869 00:41:36,480 --> 00:41:40,399 Speaker 1: all these other existing invoice factoring services by let's say 870 00:41:40,440 --> 00:41:43,400 Speaker 1: three or four x. And so because there's no middlemen, 871 00:41:43,440 --> 00:41:45,640 Speaker 1: because there's no employees, because there's not a lot of 872 00:41:45,640 --> 00:41:48,399 Speaker 1: this operational overhead, it's just a smart contract. You don't 873 00:41:48,440 --> 00:41:51,400 Speaker 1: need sort of these these huge bodies employees that you know, 874 00:41:51,440 --> 00:41:53,719 Speaker 1: someone like a neo bank, my employee, I just need 875 00:41:53,719 --> 00:41:56,440 Speaker 1: to go and tokenize this asset, putting the DeFi and 876 00:41:56,560 --> 00:41:59,279 Speaker 1: start barring against it. So this is starting to happen, 877 00:41:59,320 --> 00:42:01,919 Speaker 1: but I expect we accelerating the next year or two. 878 00:42:02,320 --> 00:42:05,840 Speaker 1: Someone in that example whether and I'm aware of like 879 00:42:05,880 --> 00:42:08,760 Speaker 1: a few different entities that are trying to but someone 880 00:42:08,800 --> 00:42:11,279 Speaker 1: in this examples sort of like needs to be like 881 00:42:11,760 --> 00:42:13,760 Speaker 1: I don't know, I guess I occupy the meat space 882 00:42:13,800 --> 00:42:16,440 Speaker 1: like if the if the ship or the you know, 883 00:42:16,680 --> 00:42:20,440 Speaker 1: the shipping invoys. There's like someone has to like okay, 884 00:42:20,480 --> 00:42:22,440 Speaker 1: you're like have you have to deliver the goods or 885 00:42:22,480 --> 00:42:24,359 Speaker 1: something like someone sort of has to be the real 886 00:42:24,360 --> 00:42:27,120 Speaker 1: world proxy like take the ship or to court if 887 00:42:27,120 --> 00:42:29,440 Speaker 1: they would show up with the goods or something like that. Right, Like, 888 00:42:30,239 --> 00:42:31,880 Speaker 1: there's sort of like there's a lot of like the 889 00:42:31,880 --> 00:42:35,360 Speaker 1: connective tissue between the chain or between just the protocol 890 00:42:35,880 --> 00:42:37,960 Speaker 1: and the sort of real world assets. Like there's no 891 00:42:38,040 --> 00:42:40,040 Speaker 1: real way to like avoid the fact that like some 892 00:42:40,120 --> 00:42:42,880 Speaker 1: sort of like human at leasta now some sort of 893 00:42:42,880 --> 00:42:45,160 Speaker 1: like human has to be there to like sue a delinquent, 894 00:42:45,440 --> 00:42:47,000 Speaker 1: you know, someone who doesn't show up with the goods 895 00:42:47,080 --> 00:42:50,359 Speaker 1: or whatever it is. Yeah, that that is true. Um, 896 00:42:50,400 --> 00:42:53,040 Speaker 1: They're they're that whole sort of you know tokenization process 897 00:42:53,080 --> 00:42:55,799 Speaker 1: that I mentioned, you know, is somewhat human intensive, but 898 00:42:55,880 --> 00:42:58,320 Speaker 1: I think over time that will come down and become 899 00:42:58,320 --> 00:43:00,799 Speaker 1: more automated. You know. Another interesting thing that we see 900 00:43:00,800 --> 00:43:03,680 Speaker 1: happening in Defy is is sort of like capital formation 901 00:43:03,880 --> 00:43:06,920 Speaker 1: Defy the Princess. You're it's really low barried entry where um, 902 00:43:06,960 --> 00:43:09,719 Speaker 1: if I want to go and raise funds to um, 903 00:43:09,760 --> 00:43:11,920 Speaker 1: you know, donate money to a cause or purchase an 904 00:43:11,920 --> 00:43:15,160 Speaker 1: asset or start a company or whatever. I can go 905 00:43:15,280 --> 00:43:18,080 Speaker 1: and you know, potentially pool funds with other people inside 906 00:43:18,080 --> 00:43:20,120 Speaker 1: of Defied, give them sort of a pro rade of 907 00:43:20,160 --> 00:43:21,640 Speaker 1: share in it, and then we can go and I'll 908 00:43:21,680 --> 00:43:23,560 Speaker 1: take our money and go to you know, whatever it 909 00:43:23,600 --> 00:43:25,880 Speaker 1: is that we actually want to do. And so you know, 910 00:43:25,880 --> 00:43:27,879 Speaker 1: we sort of saw this this deliberate of an idea 911 00:43:27,920 --> 00:43:29,879 Speaker 1: I think in the initial sort of i O wave 912 00:43:30,080 --> 00:43:32,880 Speaker 1: in seventeen and obviously I think that was very you know, 913 00:43:32,920 --> 00:43:35,440 Speaker 1: sort of poorly executed. But the idea that you don't 914 00:43:35,480 --> 00:43:38,160 Speaker 1: have to go through trational fundraising means, especially if you 915 00:43:38,160 --> 00:43:40,280 Speaker 1: don't have access to those, in order to get access 916 00:43:40,280 --> 00:43:43,600 Speaker 1: to capital um and then be able to have sort 917 00:43:43,640 --> 00:43:45,719 Speaker 1: of this you know, pseudocap table um. I think it 918 00:43:45,800 --> 00:43:47,399 Speaker 1: is really powerful and it is starting to come back 919 00:43:47,440 --> 00:43:50,359 Speaker 1: through the rise of a lot of these taws. So 920 00:43:51,080 --> 00:43:54,480 Speaker 1: if you were going to describe Defy to someone who 921 00:43:54,560 --> 00:43:58,040 Speaker 1: had absolutely no knowledge of the space, but your ambition 922 00:43:58,200 --> 00:44:00,319 Speaker 1: was to get them very very excited about out it 923 00:44:00,400 --> 00:44:03,720 Speaker 1: and about how, you know, how much this could improve 924 00:44:03,840 --> 00:44:06,880 Speaker 1: or change the world, what would be the project or 925 00:44:06,920 --> 00:44:10,360 Speaker 1: the function that you would point to. I mean, I 926 00:44:10,360 --> 00:44:12,440 Speaker 1: think I tend to fall back on these sort of 927 00:44:12,440 --> 00:44:15,960 Speaker 1: old reliables. I think Maker is really just incredible system, 928 00:44:16,000 --> 00:44:18,400 Speaker 1: not only because it's it's sort of demonstrates the power 929 00:44:18,400 --> 00:44:21,920 Speaker 1: of decentralized lending, where again, anybody can show up with collateral, 930 00:44:22,040 --> 00:44:24,400 Speaker 1: borrow you know, any time of day, they can repay 931 00:44:24,440 --> 00:44:26,360 Speaker 1: any time they want, etcetera. And the whole thing is 932 00:44:26,400 --> 00:44:29,480 Speaker 1: sort of self sustaining, there's no company. But also to 933 00:44:29,560 --> 00:44:31,440 Speaker 1: use it produces this very useful asset at the end 934 00:44:31,440 --> 00:44:33,440 Speaker 1: of the day, which is die people. I think you 935 00:44:33,600 --> 00:44:35,640 Speaker 1: inherently sort of get the value of a dollar, the 936 00:44:35,680 --> 00:44:38,600 Speaker 1: ability to send these dollars back and forth on on 937 00:44:38,680 --> 00:44:42,080 Speaker 1: a blockchain. We often use stable coins for for funding, 938 00:44:42,080 --> 00:44:44,879 Speaker 1: where you know, a team maybe isn't incorporated yet, or 939 00:44:44,960 --> 00:44:47,640 Speaker 1: maybe they don't have a bank account yet. We can 940 00:44:47,640 --> 00:44:50,040 Speaker 1: just send them stable coins ditrectly to their theory and wallet, 941 00:44:50,120 --> 00:44:51,960 Speaker 1: and then they can go and pay their employees who 942 00:44:51,960 --> 00:44:54,000 Speaker 1: are sort of distributed across the world to do a 943 00:44:54,000 --> 00:44:57,480 Speaker 1: little test transaction first. Like when you do that, you 944 00:44:57,520 --> 00:44:59,600 Speaker 1: never you never grow out of that. Unfortunately, always get 945 00:44:59,600 --> 00:45:03,920 Speaker 1: a little ish, but yes, you know, just superior to 946 00:45:04,040 --> 00:45:06,680 Speaker 1: trying to send international wire uh, you know, waiting five 947 00:45:06,719 --> 00:45:09,160 Speaker 1: business days you know, praying that you typed in the 948 00:45:09,200 --> 00:45:12,560 Speaker 1: correspondent bank you number correctly. A stable coin such as 949 00:45:12,600 --> 00:45:14,360 Speaker 1: die is able to do that just instantly, and I 950 00:45:14,400 --> 00:45:17,839 Speaker 1: think that's really powerful. I think really the answer, you know, 951 00:45:18,040 --> 00:45:19,920 Speaker 1: and sort of the most distinct, you know, maybe a 952 00:45:19,960 --> 00:45:22,719 Speaker 1: little glib answer, is that it's going to do for 953 00:45:22,840 --> 00:45:27,520 Speaker 1: finance with the Internet for information, where instead of being siloed, 954 00:45:27,560 --> 00:45:32,080 Speaker 1: instead of being opaque, instead of being limited access, it's permissionless, 955 00:45:32,080 --> 00:45:35,200 Speaker 1: transparent access to anyone around the world wants it. And 956 00:45:35,239 --> 00:45:37,440 Speaker 1: I think what we've seen is entrepreneurs will take that 957 00:45:37,880 --> 00:45:40,239 Speaker 1: and they will develop novel products that we couldn't even 958 00:45:40,320 --> 00:45:42,759 Speaker 1: imagine right now and probably won't can't imagine right now, 959 00:45:43,000 --> 00:45:45,440 Speaker 1: that will create this this massive sort of consumer surplus. 960 00:45:45,560 --> 00:45:49,920 Speaker 1: So so my last question is, I mean I go 961 00:45:50,000 --> 00:45:53,920 Speaker 1: to like Una Swab, it looks like an unregistered stock market. 962 00:45:54,000 --> 00:45:56,759 Speaker 1: I could see like mirrored Apple and mirror Tesla. Those 963 00:45:56,800 --> 00:46:00,160 Speaker 1: look like synthetic derivatives. I mean, they're basically described this 964 00:46:00,320 --> 00:46:03,000 Speaker 1: such anyone can buy them without any sort of like 965 00:46:03,040 --> 00:46:06,279 Speaker 1: obvious like registration. There's no account or anything like that. 966 00:46:06,800 --> 00:46:09,759 Speaker 1: Capital formation. The I c O s sort of like 967 00:46:09,800 --> 00:46:12,120 Speaker 1: we're basically just I p O S. But without all 968 00:46:12,160 --> 00:46:16,200 Speaker 1: of the regulation, why is this not just all you know, 969 00:46:16,280 --> 00:46:19,399 Speaker 1: even if in theory it's more transparent stable like sort 970 00:46:19,440 --> 00:46:23,319 Speaker 1: of a flagrant violation of existing securities laws. And do 971 00:46:23,360 --> 00:46:26,680 Speaker 1: you think about like that risk frankly as a as 972 00:46:26,680 --> 00:46:30,600 Speaker 1: you're investing, It's definitely something that we think about. I 973 00:46:30,600 --> 00:46:34,080 Speaker 1: think one interesting thing about about Dragonfly is that our 974 00:46:34,120 --> 00:46:36,000 Speaker 1: team is sort of split between Asian and the US, 975 00:46:36,080 --> 00:46:38,920 Speaker 1: and so I think we talked about things you're very 976 00:46:38,960 --> 00:46:41,840 Speaker 1: freely this very much US focused view. But you know, 977 00:46:41,880 --> 00:46:45,520 Speaker 1: increasingly a large part of exchange volumes up until very recently, 978 00:46:45,600 --> 00:46:48,000 Speaker 1: large part of mining volumes, and increasingly large number of 979 00:46:48,080 --> 00:46:50,840 Speaker 1: defight users are coming from Asia, They're coming from Japan, 980 00:46:50,960 --> 00:46:52,880 Speaker 1: or they're they're they're coming from China, they're coming from Japan, 981 00:46:53,080 --> 00:46:55,480 Speaker 1: coming from Asian more broadly, and so what we see 982 00:46:55,600 --> 00:46:58,040 Speaker 1: is sort of a lot of global talent around the 983 00:46:58,040 --> 00:46:59,880 Speaker 1: world that might not live in the US, might not 984 00:46:59,880 --> 00:47:02,400 Speaker 1: be American, and UM might not sort of be UM 985 00:47:02,400 --> 00:47:04,400 Speaker 1: I think, relying on a lot of the same issues 986 00:47:04,440 --> 00:47:07,040 Speaker 1: that that you see in in U S jurisdictions. I 987 00:47:07,040 --> 00:47:09,040 Speaker 1: think to your earlier point, what we see with with 988 00:47:09,120 --> 00:47:11,480 Speaker 1: defile lot and why we sort of emphasize this decentrized 989 00:47:11,520 --> 00:47:14,239 Speaker 1: element is most of what we've seen today is is 990 00:47:14,280 --> 00:47:17,799 Speaker 1: really covered under under free speech where users you know, 991 00:47:17,840 --> 00:47:20,960 Speaker 1: for example, the developers of unit swap, they've written this software, 992 00:47:21,160 --> 00:47:24,160 Speaker 1: they've deployed it, but they're not taking fees, they don't 993 00:47:24,200 --> 00:47:27,160 Speaker 1: have you know, customer rights, they're not executing trades. Certainly 994 00:47:27,160 --> 00:47:29,480 Speaker 1: they'reun this front end, but it's just a website, right, 995 00:47:29,520 --> 00:47:31,840 Speaker 1: it's not actually doing anything. You can go on the 996 00:47:31,880 --> 00:47:34,240 Speaker 1: ethery and blockchain and make the same sort of trades 997 00:47:34,360 --> 00:47:36,200 Speaker 1: or you know, become a liquid in provider or whatever. 998 00:47:36,600 --> 00:47:39,600 Speaker 1: Because the software is permissionless, because it sort of runs 999 00:47:40,239 --> 00:47:42,839 Speaker 1: without you know, a middleman requiring to run it. It's 1000 00:47:42,880 --> 00:47:45,120 Speaker 1: it's sort of like like BitTorrent, where BitTorrent can be 1001 00:47:45,200 --> 00:47:47,719 Speaker 1: used for legitimate purposes, but obviously people can use it 1002 00:47:47,760 --> 00:47:50,120 Speaker 1: for relicious purposes as well, but that doesn't make the 1003 00:47:50,160 --> 00:47:53,200 Speaker 1: creators a bit torrent liable for those malicious purposes. So 1004 00:47:53,600 --> 00:47:56,160 Speaker 1: Defy I think has created a lot of again sort 1005 00:47:56,160 --> 00:47:58,279 Speaker 1: of consumer syrplus it's made a lot of that's in 1006 00:47:58,320 --> 00:48:00,960 Speaker 1: my life easier, just you know, going over the wiring 1007 00:48:01,000 --> 00:48:03,319 Speaker 1: stable point thing that I mentioned just a few minutes ago, 1008 00:48:03,600 --> 00:48:06,160 Speaker 1: but that doesn't mean that, and certainly everything not within 1009 00:48:06,160 --> 00:48:09,040 Speaker 1: it is not super palatable, but then doesn't mean, you know, 1010 00:48:09,040 --> 00:48:10,600 Speaker 1: you just have to sort of throw the baby out 1011 00:48:10,600 --> 00:48:12,719 Speaker 1: with the bath water. I think the other elements sort 1012 00:48:12,719 --> 00:48:14,879 Speaker 1: of that you mentioned around securities laws is certainly something 1013 00:48:14,880 --> 00:48:16,879 Speaker 1: that we consider, but I think that really relates more 1014 00:48:16,920 --> 00:48:19,719 Speaker 1: to sort of token issuements and not every protocol, not 1015 00:48:19,800 --> 00:48:22,040 Speaker 1: everything that comes out is going to issue a token. 1016 00:48:22,080 --> 00:48:24,359 Speaker 1: You can just create software and have people use it. 1017 00:48:24,640 --> 00:48:27,319 Speaker 1: UM and that you know it is is perfectly fine. 1018 00:48:27,320 --> 00:48:29,680 Speaker 1: That's sort of sort of covered under the existing understanding 1019 00:48:29,680 --> 00:48:34,239 Speaker 1: of the law. Tom, So great to have you on 1020 00:48:34,440 --> 00:48:37,200 Speaker 1: odd lots UM. I feel like that lived up to 1021 00:48:37,239 --> 00:48:39,160 Speaker 1: the hype that you are going to be able to 1022 00:48:39,640 --> 00:48:42,200 Speaker 1: explain these things in a very clear way, and I 1023 00:48:42,200 --> 00:48:45,479 Speaker 1: feel a lot smarter. Well, I really appreciate it. Thanks 1024 00:48:45,480 --> 00:49:03,880 Speaker 1: for having me, Thanks Tom, That was great. Thanks Tom, Tracy. 1025 00:49:03,920 --> 00:49:06,200 Speaker 1: I have an idea for a DeFi project that we 1026 00:49:06,200 --> 00:49:11,600 Speaker 1: should do. Okay, I kind of I like the idea 1027 00:49:11,640 --> 00:49:14,120 Speaker 1: of tending my own yield farm, but I have a 1028 00:49:14,120 --> 00:49:17,120 Speaker 1: feeling it's probably very different to uh, the you call 1029 00:49:17,239 --> 00:49:19,560 Speaker 1: it UM vision that I have of that, but go 1030 00:49:19,640 --> 00:49:21,840 Speaker 1: on so you definitely, like Tomas said, you could like 1031 00:49:22,000 --> 00:49:26,600 Speaker 1: create any sort of like synthetic sort of like asset 1032 00:49:26,680 --> 00:49:29,000 Speaker 1: that's tied to something in the real world or sort 1033 00:49:29,000 --> 00:49:32,000 Speaker 1: of like you know, tied to some price. We should 1034 00:49:32,200 --> 00:49:37,319 Speaker 1: um create token ized onion futures because that's like the 1035 00:49:37,360 --> 00:49:39,520 Speaker 1: one thing that you know, there's a law like there 1036 00:49:39,520 --> 00:49:42,600 Speaker 1: can't be onion futures, but in defy, I don't see 1037 00:49:42,640 --> 00:49:47,800 Speaker 1: anything stopping us from like creating a decentralized onion futures 1038 00:49:47,840 --> 00:49:49,960 Speaker 1: market that just like goes based on like you know, 1039 00:49:50,280 --> 00:49:55,080 Speaker 1: supermarket onion prices. I'm sorry why onions specifically, there's a 1040 00:49:55,160 --> 00:49:57,520 Speaker 1: law that says there's no onion futures in America. You 1041 00:49:57,560 --> 00:49:59,759 Speaker 1: didn't know that, No, I didn't. I'm over here in 1042 00:49:59,800 --> 00:50:02,520 Speaker 1: a Onions are a pretty big part of the economy. 1043 00:50:02,560 --> 00:50:05,480 Speaker 1: I think they've been fairly financialized. But maybe there was 1044 00:50:05,560 --> 00:50:08,240 Speaker 1: some law like a hundred years ago that said onions 1045 00:50:08,440 --> 00:50:10,600 Speaker 1: there could never be an onion futures market in the 1046 00:50:10,680 --> 00:50:14,160 Speaker 1: United States. Okay, let's let's do it, the Great onion Futures. 1047 00:50:14,840 --> 00:50:16,600 Speaker 1: I'm surprised you didn't know that then. See, I thought 1048 00:50:16,600 --> 00:50:18,200 Speaker 1: that would be like a little. I thought that would 1049 00:50:18,200 --> 00:50:20,040 Speaker 1: be like a tracy trivia that you would know about. 1050 00:50:20,080 --> 00:50:21,719 Speaker 1: I had no idea, but I have a feeling I'm 1051 00:50:21,760 --> 00:50:24,640 Speaker 1: about to go down like a massive research hole and 1052 00:50:24,719 --> 00:50:27,120 Speaker 1: learn about it. Let's do it, Yeah, let's do it. 1053 00:50:27,160 --> 00:50:29,279 Speaker 1: But it's seriously. I did think Tom was great, and 1054 00:50:29,320 --> 00:50:31,320 Speaker 1: I do think that he lived up to the hype 1055 00:50:31,360 --> 00:50:34,279 Speaker 1: in certain terms of like the clarity of explaining how 1056 00:50:34,320 --> 00:50:36,959 Speaker 1: all these things work. Um, I agree. I was also, 1057 00:50:37,719 --> 00:50:42,600 Speaker 1: you know, on the regulatory arbitrage issue, there is a 1058 00:50:42,640 --> 00:50:45,799 Speaker 1: tendency to think that regulatory arbitrage is a bad thing, 1059 00:50:45,840 --> 00:50:48,680 Speaker 1: particularly in finance, where rules tend to exist so that 1060 00:50:48,719 --> 00:50:52,000 Speaker 1: you know, there isn't money laundering or people aren't losing 1061 00:50:52,040 --> 00:50:56,279 Speaker 1: all their money. His vision or his summation of regulatory 1062 00:50:56,360 --> 00:50:59,440 Speaker 1: arbitrage as a way of generating more change in the 1063 00:50:59,480 --> 00:51:02,560 Speaker 1: financial system, similar to you know what happened with the 1064 00:51:02,640 --> 00:51:05,279 Speaker 1: internet and the idea that everyone can broadcast things like that. 1065 00:51:06,239 --> 00:51:10,160 Speaker 1: It's very alluring. I think there are still questions around it, 1066 00:51:10,880 --> 00:51:13,319 Speaker 1: but I can see like what he's getting at, and 1067 00:51:13,320 --> 00:51:15,160 Speaker 1: I can see why a lot of defied people are 1068 00:51:15,280 --> 00:51:20,520 Speaker 1: very excited about using this process regulatory arbitrage to affect 1069 00:51:20,680 --> 00:51:24,360 Speaker 1: change in the traditional financial system. Yeah, well, you know 1070 00:51:24,400 --> 00:51:26,239 Speaker 1: what I was thinking, like, and I get that. I 1071 00:51:26,280 --> 00:51:28,640 Speaker 1: think it's interesting. And he made a comparison to Uber 1072 00:51:28,680 --> 00:51:32,160 Speaker 1: and Airbnb, who is sort of like changed regulations. Like 1073 00:51:32,719 --> 00:51:35,800 Speaker 1: Uber was going up against taxi companies, and frankly, I 1074 00:51:35,840 --> 00:51:38,719 Speaker 1: don't think the taxi drivers have ever had, you know, 1075 00:51:38,719 --> 00:51:41,680 Speaker 1: in most places, all that much political power is sort 1076 00:51:41,719 --> 00:51:45,640 Speaker 1: of like going up against like highly regulated entities that 1077 00:51:45,800 --> 00:51:49,719 Speaker 1: in some sense like make regulation and lobbying like a 1078 00:51:49,800 --> 00:51:52,800 Speaker 1: huge part of their core business model. I don't think 1079 00:51:53,280 --> 00:51:55,239 Speaker 1: is going to be as easy as sort of like 1080 00:51:55,560 --> 00:51:59,080 Speaker 1: Uber basically rolled rolling the taxi industry and all these 1081 00:51:59,120 --> 00:52:02,400 Speaker 1: cities no ins so much more sensitive industry, given that 1082 00:52:02,440 --> 00:52:05,239 Speaker 1: you're dealing with money. But I think it's gonna be 1083 00:52:05,280 --> 00:52:09,719 Speaker 1: really hard. Well, yeah, I definitely wanted to watch them. Absolutely. 1084 00:52:10,000 --> 00:52:11,880 Speaker 1: Shall we leave it there. I'm keen to go start 1085 00:52:11,880 --> 00:52:16,200 Speaker 1: reading about onion futures, So yeah, go read about that. Okay. 1086 00:52:16,640 --> 00:52:19,280 Speaker 1: This has been another episode of the Odd Lots podcast. 1087 00:52:19,320 --> 00:52:21,759 Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at 1088 00:52:21,800 --> 00:52:24,359 Speaker 1: Tracy Alloway and I'm Joe Why Isn't All. You can 1089 00:52:24,400 --> 00:52:27,600 Speaker 1: follow me on Twitter at the Stalwart Follow our guest 1090 00:52:27,680 --> 00:52:31,680 Speaker 1: on Twitter. Tom Schmidt is at Tom H Schmidt. Follow 1091 00:52:31,719 --> 00:52:35,720 Speaker 1: our producer Laura Carlson. She's at Laura M. Carlson. Follow 1092 00:52:35,760 --> 00:52:39,320 Speaker 1: the Bloomberg head of podcast, Francesco Levy at Francesco Today, 1093 00:52:39,760 --> 00:52:42,719 Speaker 1: and check out all of our podcast at Bloomberg under 1094 00:52:42,760 --> 00:53:10,800 Speaker 1: the handle at podcasts. Thanks for listening year to