1 00:00:10,720 --> 00:00:14,600 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,680 --> 00:00:18,360 Speaker 1: I'm Joe Wish and I'm Tracy Allaway. So, Tracy, we 3 00:00:18,480 --> 00:00:23,400 Speaker 1: are here at the Milk and Institute conference in Beverly Hills. 4 00:00:23,720 --> 00:00:26,600 Speaker 1: I know it's very fancy, it's very how's it been 5 00:00:26,640 --> 00:00:29,200 Speaker 1: going for you so far? It's been fun. I I 6 00:00:29,320 --> 00:00:33,080 Speaker 1: talked a lot about Credit. I watched your panel about crypto, 7 00:00:33,280 --> 00:00:35,400 Speaker 1: and I have to say there were definitely more people 8 00:00:35,440 --> 00:00:37,720 Speaker 1: at the crypto panel than there were the Credit panel, 9 00:00:38,479 --> 00:00:43,199 Speaker 1: and also every panel that I've seen that's not about crypto. 10 00:00:43,440 --> 00:00:47,040 Speaker 1: Someone asked a question, what's your opinion about crypto? Like everyone, 11 00:00:47,280 --> 00:00:48,839 Speaker 1: no matter what, people are just like want to know. 12 00:00:49,040 --> 00:00:52,280 Speaker 1: Someone from the audience submitted a question about how crypto 13 00:00:52,320 --> 00:00:58,240 Speaker 1: would impact inflows into investment grade and you know, interesting thought, Well, 14 00:00:58,280 --> 00:01:00,360 Speaker 1: it's crypto is one of those things too where I, 15 00:01:01,320 --> 00:01:04,680 Speaker 1: regardless of everyone gets an opinion on it, regardless of 16 00:01:04,720 --> 00:01:06,679 Speaker 1: everyone wants to know everyone's take, even if it's not. 17 00:01:06,880 --> 00:01:09,880 Speaker 1: So this is very true. But I'm very excited because 18 00:01:09,920 --> 00:01:12,959 Speaker 1: today we're gonna be speaking to someone who knows a 19 00:01:13,040 --> 00:01:16,440 Speaker 1: lot about crypto now just a tourist, and I think 20 00:01:16,440 --> 00:01:19,960 Speaker 1: a topic that we haven't really talked about that much. 21 00:01:20,800 --> 00:01:25,399 Speaker 1: Is um blockchain architecture and design, and you know, all 22 00:01:25,440 --> 00:01:28,319 Speaker 1: of these panels like everyone's talking to is like they're 23 00:01:28,360 --> 00:01:30,640 Speaker 1: super like fanciful. It's like, I'm just gonna create this 24 00:01:30,680 --> 00:01:34,600 Speaker 1: world like openness and transparency and it's gonna cut out 25 00:01:34,600 --> 00:01:37,319 Speaker 1: all the fees and it's gonna be so great, which 26 00:01:37,360 --> 00:01:39,520 Speaker 1: is really weird because when I think of block change, 27 00:01:39,600 --> 00:01:42,520 Speaker 1: I think of high fees in low settlement or long 28 00:01:42,560 --> 00:01:46,440 Speaker 1: settlement times and basically like all kinds of interesting tradeoffs 29 00:01:46,880 --> 00:01:50,320 Speaker 1: and many things that are worse than the existing financial system. 30 00:01:50,360 --> 00:01:52,400 Speaker 1: So I feel like people are jumping over some like 31 00:01:52,440 --> 00:01:55,720 Speaker 1: basic architectural points in this whole conversation. Right. The other 32 00:01:55,720 --> 00:01:58,160 Speaker 1: thing that gets me, especially at conferences like this, is 33 00:01:58,200 --> 00:02:00,720 Speaker 1: everyone wants to talk about crypto. Everyone seems to have 34 00:02:00,760 --> 00:02:03,200 Speaker 1: an opinion about it. But I have my doubts about 35 00:02:03,200 --> 00:02:06,640 Speaker 1: whether people actually understand the underlying technology and whether or 36 00:02:06,640 --> 00:02:10,000 Speaker 1: not they're differentiating between different blockchains and things like that. 37 00:02:10,200 --> 00:02:13,400 Speaker 1: I think people might understand the basics like proof of 38 00:02:13,440 --> 00:02:16,839 Speaker 1: state versus proof of work, layer two versus layer one 39 00:02:17,040 --> 00:02:21,760 Speaker 1: or whatever, but like within those technology buckets, I don't 40 00:02:21,800 --> 00:02:25,079 Speaker 1: think people are really thinking about the nuance. No, it's 41 00:02:25,120 --> 00:02:27,400 Speaker 1: a lot of like it's all just gonna be really good, 42 00:02:27,440 --> 00:02:31,600 Speaker 1: and it's gonna be really great for financial clues, inclusion 43 00:02:31,720 --> 00:02:34,560 Speaker 1: and democracy and all that stuff. So anyway, let's have 44 00:02:34,600 --> 00:02:37,200 Speaker 1: a real conversation about how these chains work and what 45 00:02:37,280 --> 00:02:38,680 Speaker 1: you can do with them. Let's do it, all right, 46 00:02:38,760 --> 00:02:42,200 Speaker 1: I'm really excited. Our guest knows a lot about this stuff. 47 00:02:42,240 --> 00:02:44,880 Speaker 1: We're gonna be speaking with Arthur Brightman. He is the 48 00:02:44,919 --> 00:02:48,800 Speaker 1: founder and creator of the Tesso's blockchain project, one of 49 00:02:48,840 --> 00:02:53,160 Speaker 1: the sort of original projects that thought about smart contracting 50 00:02:53,480 --> 00:02:56,680 Speaker 1: and malleability in a way that you know, much more 51 00:02:56,680 --> 00:02:59,200 Speaker 1: advanced than are seemingly more advanced than what you can 52 00:02:59,200 --> 00:03:02,080 Speaker 1: do on say coin. So we're gonna talk about what 53 00:03:02,160 --> 00:03:04,160 Speaker 1: you could do with the chance. So Arthur, thank you 54 00:03:04,200 --> 00:03:06,720 Speaker 1: so much for coming on odd lot, and thank you 55 00:03:06,760 --> 00:03:09,800 Speaker 1: for having me. You know, we've been interacting on Twitter 56 00:03:09,919 --> 00:03:12,519 Speaker 1: for years and years, so I'm excited. I'm excited that 57 00:03:12,560 --> 00:03:17,200 Speaker 1: you're here. Yeah, meets too. So you know, like when 58 00:03:17,240 --> 00:03:18,799 Speaker 1: you what do you think when you hear all these 59 00:03:18,840 --> 00:03:20,960 Speaker 1: people at these conferences and you're here too, and they're like, Oh, 60 00:03:20,960 --> 00:03:24,080 Speaker 1: it's gonna like be really cheap. It's gonna lower the 61 00:03:24,120 --> 00:03:30,000 Speaker 1: fees for everything. It's gonna be super fast, transparency, financial inclusion, 62 00:03:30,280 --> 00:03:33,560 Speaker 1: it's gonna save democracy, it's gonna save the planet, etcetera. 63 00:03:33,680 --> 00:03:36,680 Speaker 1: Like what goes through your mind. I mean, I think 64 00:03:36,720 --> 00:03:38,600 Speaker 1: some of it is true and some of some of 65 00:03:38,640 --> 00:03:41,200 Speaker 1: some of these it's false. In terms of reducing the 66 00:03:41,280 --> 00:03:44,880 Speaker 1: fees compared to UH traditional financial infrastructure, I actually think, 67 00:03:44,920 --> 00:03:46,880 Speaker 1: you know, this is one of the real ones that's 68 00:03:47,320 --> 00:03:49,960 Speaker 1: that we can actually do this. Yes, we can lower 69 00:03:50,000 --> 00:03:54,240 Speaker 1: the entry costs for UH creating financial products or financial systems, 70 00:03:54,720 --> 00:03:56,880 Speaker 1: make it a little more innovative, and and developed these 71 00:03:56,880 --> 00:03:59,240 Speaker 1: things much faster than they have in the past. I 72 00:03:59,280 --> 00:04:03,080 Speaker 1: do believe that at UM you can remove all of intermediaries, 73 00:04:03,360 --> 00:04:06,000 Speaker 1: and a lot of the friction in the financial system 74 00:04:06,040 --> 00:04:08,000 Speaker 1: comes from the fact that you need to rely on 75 00:04:08,120 --> 00:04:12,200 Speaker 1: trusted intermediaries UM. As an intermediary, you have oftentimes a 76 00:04:12,200 --> 00:04:16,200 Speaker 1: big opportunity for fraud UM and monitoring that fraud has 77 00:04:16,720 --> 00:04:20,279 Speaker 1: a lot of costs minutry. Also, you have to deal 78 00:04:20,320 --> 00:04:22,120 Speaker 1: with only a few people who are going to be trusted. 79 00:04:22,800 --> 00:04:24,440 Speaker 1: If you can get rid of that, you can actually 80 00:04:24,440 --> 00:04:27,520 Speaker 1: generally reduce costs. So I I do believe this part 81 00:04:27,560 --> 00:04:29,359 Speaker 1: of the story. I don't know that it's going to 82 00:04:29,400 --> 00:04:32,000 Speaker 1: save the planets, and and and do all these grand 83 00:04:32,120 --> 00:04:34,720 Speaker 1: use saying I have a story I have about this 84 00:04:34,839 --> 00:04:38,920 Speaker 1: is I once give I talk at a you know, 85 00:04:39,000 --> 00:04:42,599 Speaker 1: some sort of dead like events, and it was about 86 00:04:42,640 --> 00:04:45,080 Speaker 1: the promises of aluction. And I give an example for 87 00:04:46,080 --> 00:04:48,960 Speaker 1: some of the over hyped ideas that I said, Well, imagine, 88 00:04:49,320 --> 00:04:52,920 Speaker 1: for example, that's we're gonna put you know, plastic bags 89 00:04:52,960 --> 00:04:55,760 Speaker 1: are killing turtles. But the problem is we don't know 90 00:04:55,760 --> 00:04:58,520 Speaker 1: where they came from. If we could identify who leaves 91 00:04:58,520 --> 00:05:01,159 Speaker 1: a plastic bag, you know, it's solve the problem. So 92 00:05:01,240 --> 00:05:03,679 Speaker 1: let's put the plastic blag and obloction in, we'll save turtles. 93 00:05:03,839 --> 00:05:05,760 Speaker 1: And I give that as the example of like some 94 00:05:05,839 --> 00:05:08,400 Speaker 1: of the nonsense you can see, And someone pitched me 95 00:05:08,480 --> 00:05:15,400 Speaker 1: that exact idea. That's amazing. Um, just going to fees though, 96 00:05:15,440 --> 00:05:18,359 Speaker 1: I mean a very cynical person would say that the 97 00:05:18,360 --> 00:05:22,080 Speaker 1: fees exist because yes, there are underlying costs like fraud 98 00:05:22,240 --> 00:05:24,480 Speaker 1: and k y C and m L and stuff like that. 99 00:05:24,839 --> 00:05:27,719 Speaker 1: But if you're being very pessimistic about the whole thing, 100 00:05:27,760 --> 00:05:32,920 Speaker 1: you would also say that financial intermediaries traditional financial intermediaries, 101 00:05:33,080 --> 00:05:35,560 Speaker 1: they like to make money. Uh, and a lot of 102 00:05:35,600 --> 00:05:39,680 Speaker 1: those fees are opportunistic. So I guess my question is, like, 103 00:05:40,040 --> 00:05:44,200 Speaker 1: do those fees actually exist because of what the intermediaries 104 00:05:44,200 --> 00:05:46,000 Speaker 1: are doing and the cost or because of the way 105 00:05:46,040 --> 00:05:48,120 Speaker 1: the system works? And how do we make sure that 106 00:05:48,160 --> 00:05:52,080 Speaker 1: in crypto we don't end up with centralized intermediaries that 107 00:05:52,120 --> 00:05:54,440 Speaker 1: are going to charge big fees anyway. I mean, you know, 108 00:05:54,520 --> 00:05:56,520 Speaker 1: I think everyone who's in business likes to make more 109 00:05:56,640 --> 00:05:59,080 Speaker 1: more profit than likes to charge more fees. And people 110 00:05:59,120 --> 00:06:00,920 Speaker 1: are going to charge what amount of physics can get 111 00:06:00,920 --> 00:06:04,440 Speaker 1: away with in general, so at some point there's competitive 112 00:06:04,440 --> 00:06:08,480 Speaker 1: pressure rights, and in finance it's to that. Sometimes a 113 00:06:08,520 --> 00:06:10,839 Speaker 1: lot of the competitive pressure is not is not presents. 114 00:06:10,839 --> 00:06:14,760 Speaker 1: You'll have people pay you know, one percent commission on 115 00:06:14,800 --> 00:06:17,039 Speaker 1: a trade because they're doing it through a private bank 116 00:06:17,080 --> 00:06:18,719 Speaker 1: and you know, the trust of the private bank and 117 00:06:18,880 --> 00:06:21,279 Speaker 1: do good execution and on and so forth and have nonsense. 118 00:06:21,320 --> 00:06:23,760 Speaker 1: It doesn't cost that to execute a trade none at all. 119 00:06:24,520 --> 00:06:26,840 Speaker 1: But the reason that they're doing it is because, well 120 00:06:26,920 --> 00:06:29,599 Speaker 1: they feel that they need a trust of this very 121 00:06:29,600 --> 00:06:33,720 Speaker 1: prestigious intermediary. If you remove that need, if you remove 122 00:06:34,720 --> 00:06:36,840 Speaker 1: if you remove that the notion of trust. I think 123 00:06:36,839 --> 00:06:39,960 Speaker 1: you get something that's more competitive because you know, if 124 00:06:39,960 --> 00:06:42,839 Speaker 1: the thing is is going to work, regardless of who 125 00:06:42,839 --> 00:06:46,080 Speaker 1: you routed through, interriputation doesn't matter all that all that much. 126 00:06:46,640 --> 00:06:49,080 Speaker 1: It limits the ability of for intermediate is to charge 127 00:06:49,120 --> 00:06:51,839 Speaker 1: our fees. Now some people will try, of course, especially 128 00:06:51,920 --> 00:06:53,520 Speaker 1: I would say there's a there's gonna be a college 129 00:06:53,520 --> 00:06:57,039 Speaker 1: industry of there already is um in crypto of people 130 00:06:57,080 --> 00:06:59,279 Speaker 1: who want to do the most, more traditional investors, and 131 00:06:59,279 --> 00:07:01,160 Speaker 1: who really shows them that? No, no, no no, it's all 132 00:07:01,160 --> 00:07:03,400 Speaker 1: going to be fine. I mean we see it. You know, 133 00:07:03,440 --> 00:07:05,320 Speaker 1: you have you could buy you could buy bitcoin and 134 00:07:05,360 --> 00:07:07,280 Speaker 1: even hold it with a custodian if you're worried about 135 00:07:07,279 --> 00:07:11,360 Speaker 1: self custody risk. Right. But nonetheless you'll find funds which 136 00:07:11,440 --> 00:07:14,240 Speaker 1: charged you, uh, you know, management fees for for for 137 00:07:14,280 --> 00:07:17,160 Speaker 1: holding this. So there's there's some people are always gonna 138 00:07:17,200 --> 00:07:19,560 Speaker 1: want that, but it's still it's it's putting some pressure 139 00:07:19,560 --> 00:07:22,680 Speaker 1: down on costs. Can you talk a little bit about 140 00:07:22,720 --> 00:07:25,640 Speaker 1: your background and the founding of tests, because you're a 141 00:07:25,680 --> 00:07:28,600 Speaker 1: trader at Goldman Sex, right, and so what do you 142 00:07:28,600 --> 00:07:33,200 Speaker 1: what did you do? What was your position in traditional finance? Originally, 143 00:07:33,280 --> 00:07:37,480 Speaker 1: And what did you see early on UH that you 144 00:07:37,640 --> 00:07:39,680 Speaker 1: thought it was like an opportunity to port some of 145 00:07:39,720 --> 00:07:43,800 Speaker 1: these ideas, or the opportunity you saw in creating your 146 00:07:43,840 --> 00:07:47,280 Speaker 1: own chain. Well, my background is in computer science and statistics, 147 00:07:47,600 --> 00:07:49,800 Speaker 1: and my first jobs I was working on as a 148 00:07:49,880 --> 00:07:53,040 Speaker 1: quant So I started out in stary school arbitrage, and 149 00:07:53,080 --> 00:07:55,240 Speaker 1: then I moved to UH in Southern nine A. I 150 00:07:55,240 --> 00:07:57,120 Speaker 1: moved to Goldman to do high you can see trading. 151 00:07:57,680 --> 00:08:00,400 Speaker 1: I worked on et F market making, natural guest market making, 152 00:08:00,440 --> 00:08:03,800 Speaker 1: also word that Morgan Stanley and a few other places 153 00:08:03,800 --> 00:08:07,680 Speaker 1: on this on these topics. I've also done some robotics 154 00:08:07,840 --> 00:08:10,760 Speaker 1: after that, but it's quite quite different. The thing that 155 00:08:10,840 --> 00:08:13,440 Speaker 1: attracted me to UH two group of currencies. It wasn't 156 00:08:13,440 --> 00:08:15,240 Speaker 1: the intersection of a lot of centers of interest that 157 00:08:15,280 --> 00:08:17,600 Speaker 1: I had. I have been interested in the theory of 158 00:08:17,600 --> 00:08:20,560 Speaker 1: money in banking for a long time, so you know, 159 00:08:20,600 --> 00:08:23,520 Speaker 1: how does moniorize what makes good money, what makes bad money? 160 00:08:23,520 --> 00:08:25,800 Speaker 1: And I remember, in a way before bin cooin, you're 161 00:08:25,800 --> 00:08:28,800 Speaker 1: convincing myself that the best, the best money possible is 162 00:08:28,840 --> 00:08:31,240 Speaker 1: backed by nothing. Right if you use gold, for example, 163 00:08:31,760 --> 00:08:34,640 Speaker 1: there's a problem with the fact that if you know, 164 00:08:34,640 --> 00:08:36,720 Speaker 1: if the ment for gold increases, you get more mining, 165 00:08:36,800 --> 00:08:39,120 Speaker 1: and so you know that's a waste, you know, because 166 00:08:39,160 --> 00:08:41,240 Speaker 1: gold is used as a monetary instruments, you know, and 167 00:08:41,240 --> 00:08:43,120 Speaker 1: in an ideal world we would have mind all the 168 00:08:43,160 --> 00:08:46,280 Speaker 1: gold and increase them in. Doesn't create stimmen for all 169 00:08:46,400 --> 00:08:48,040 Speaker 1: all this because it doesn't serve a purpose to have 170 00:08:48,080 --> 00:08:51,160 Speaker 1: more gold once you have a given supply. And I 171 00:08:51,160 --> 00:08:53,240 Speaker 1: guess we could argue that having a city in the 172 00:08:53,800 --> 00:08:56,800 Speaker 1: in the monetary supply can have some some value, but 173 00:08:56,840 --> 00:08:59,480 Speaker 1: it's I didn't see that way, and um when so 174 00:08:59,520 --> 00:09:02,400 Speaker 1: when group has come around, I know this this bad 175 00:09:02,440 --> 00:09:04,360 Speaker 1: criticism around it. So people always say like, oh, it's 176 00:09:04,360 --> 00:09:06,079 Speaker 1: back by nothing, and I'm like, no, that's great, that 177 00:09:06,240 --> 00:09:09,480 Speaker 1: is what you want with the currency. I was interested 178 00:09:09,480 --> 00:09:11,720 Speaker 1: in the cryptographic aspect because I also had, you know, 179 00:09:11,760 --> 00:09:14,040 Speaker 1: I have a made medical background. It was interested in photography. 180 00:09:14,920 --> 00:09:18,840 Speaker 1: The individual sovereignty aspect was also something that appealed to 181 00:09:18,840 --> 00:09:22,440 Speaker 1: me from a political standpoints, so I really it really 182 00:09:22,440 --> 00:09:25,920 Speaker 1: attracted me early on. So you were one of the 183 00:09:26,000 --> 00:09:29,120 Speaker 1: first ones to move from proof of work to proof 184 00:09:29,120 --> 00:09:32,280 Speaker 1: of steak? Is that right? Or we never used proof 185 00:09:32,280 --> 00:09:35,080 Speaker 1: of work? Sorry, I mean you were one of the 186 00:09:35,080 --> 00:09:38,800 Speaker 1: first to like actually do proof of steak. What was it, Like, 187 00:09:38,840 --> 00:09:42,080 Speaker 1: what was the opportunity there, and like why did you 188 00:09:42,120 --> 00:09:47,000 Speaker 1: immediately latch onto that versus proof of work. I got 189 00:09:47,040 --> 00:09:49,120 Speaker 1: interested in doing taste was because of my interesting proof 190 00:09:49,120 --> 00:09:52,440 Speaker 1: of steak um. Around Stan's thirteen. There were a lot 191 00:09:52,440 --> 00:09:55,480 Speaker 1: of innovation in this space around U proof of steak, 192 00:09:55,920 --> 00:09:59,400 Speaker 1: smart contracts, privacy people were coming up with. It was 193 00:09:59,440 --> 00:10:02,600 Speaker 1: an explosion of research and innovation around the around the space. 194 00:10:03,120 --> 00:10:05,160 Speaker 1: And one thing, and it's early in the bitcoin culture, 195 00:10:05,240 --> 00:10:07,160 Speaker 1: is that there was not a whole lot of appetite 196 00:10:07,760 --> 00:10:10,880 Speaker 1: in trying to integrate any of this, any of this 197 00:10:11,000 --> 00:10:13,360 Speaker 1: upgrading biguine. It's sort of a point of pride for 198 00:10:13,520 --> 00:10:17,520 Speaker 1: the right, like that it's so it's the code is 199 00:10:17,559 --> 00:10:21,080 Speaker 1: so assified, or that it's so hard. There's a big 200 00:10:21,880 --> 00:10:23,520 Speaker 1: part of it is pride, but I also think part 201 00:10:23,520 --> 00:10:27,160 Speaker 1: of it is uh sour grapes. You know. For a while, 202 00:10:27,240 --> 00:10:29,880 Speaker 1: the narrative was very different. For a while was people 203 00:10:29,960 --> 00:10:32,360 Speaker 1: admit concircles who were saying, you know, what's all these 204 00:10:32,360 --> 00:10:35,240 Speaker 1: alcoins as you laboratories are going to find the ideas 205 00:10:35,480 --> 00:10:38,080 Speaker 1: and we can always integrate the ladies into bitcoin and 206 00:10:38,120 --> 00:10:41,160 Speaker 1: we moved from that to, oh, all those ideas are bad, 207 00:10:41,920 --> 00:10:44,000 Speaker 1: and now you know we we couldn't we couldn't benefit 208 00:10:44,000 --> 00:10:45,520 Speaker 1: from any of them bitcoin, which I think is a 209 00:10:45,559 --> 00:10:47,600 Speaker 1: little sad because a lot of these ideas are good 210 00:10:47,640 --> 00:10:50,280 Speaker 1: and important and have hound product market fit. This is 211 00:10:50,280 --> 00:10:53,720 Speaker 1: one of the ironies of bitcoin. I think it's technology 212 00:10:53,800 --> 00:10:56,280 Speaker 1: is going to save us in many ways, but also 213 00:10:56,360 --> 00:10:59,560 Speaker 1: we don't want the technology to advance too much because 214 00:10:59,640 --> 00:11:02,000 Speaker 1: we like it the way it is, or we can't 215 00:11:02,000 --> 00:11:04,520 Speaker 1: actually do it. And then I understand the perspective. I 216 00:11:04,520 --> 00:11:07,880 Speaker 1: think from the bigcoins perspective, there's a big risk if 217 00:11:07,920 --> 00:11:11,320 Speaker 1: you if you let people change the ledger. That's the 218 00:11:11,400 --> 00:11:14,479 Speaker 1: changes that you end up having are not merely technological 219 00:11:14,480 --> 00:11:18,080 Speaker 1: improvements but actually change um the nature of bitcoin, and 220 00:11:18,080 --> 00:11:22,319 Speaker 1: it change its economic properties. So I think what bitcoiners, 221 00:11:22,360 --> 00:11:23,880 Speaker 1: all of these coinners feel is that if they open 222 00:11:23,920 --> 00:11:26,200 Speaker 1: the door to technological changes, they're also going to open 223 00:11:26,240 --> 00:11:29,960 Speaker 1: the door to social control of the economic properties a bitcoin, 224 00:11:30,040 --> 00:11:32,880 Speaker 1: which is something that's they absolutely do not want. So 225 00:11:32,920 --> 00:11:34,720 Speaker 1: in some sense they felt like they had to shut 226 00:11:34,720 --> 00:11:37,839 Speaker 1: the door completely on almost completely on changes in to 227 00:11:37,880 --> 00:11:40,840 Speaker 1: preserve the economic properties. Let's talk a little bit about 228 00:11:41,280 --> 00:11:44,959 Speaker 1: what you see happening on chain. We had a recent 229 00:11:45,760 --> 00:11:50,599 Speaker 1: episode of the podcast with another person who wanted E 230 00:11:50,720 --> 00:11:53,600 Speaker 1: t F market Making or e t F trading, Sam 231 00:11:53,640 --> 00:11:56,840 Speaker 1: Bankman Free, and he was asked to describe yield firming, 232 00:11:57,600 --> 00:11:59,400 Speaker 1: and we thought we were going to get this sort 233 00:11:59,440 --> 00:12:03,320 Speaker 1: of very complicated answer about I don't know something. But 234 00:12:03,360 --> 00:12:07,280 Speaker 1: it turns out in his characterization yield firming is you 235 00:12:07,800 --> 00:12:09,880 Speaker 1: they they'll pay you to put money in a box, 236 00:12:09,920 --> 00:12:11,560 Speaker 1: and if you put money in a box before other 237 00:12:11,600 --> 00:12:13,440 Speaker 1: people put money in the box, then you have a 238 00:12:13,440 --> 00:12:16,360 Speaker 1: bigger part of the box. And it kind of sounded 239 00:12:16,360 --> 00:12:17,880 Speaker 1: into a lot of people now that are different from 240 00:12:17,920 --> 00:12:20,240 Speaker 1: a pot this game. What did you think about that? 241 00:12:20,480 --> 00:12:23,839 Speaker 1: Is that a fair characterization of yield firming? I think 242 00:12:23,840 --> 00:12:26,920 Speaker 1: it's a it's a fair conquisation of the way it's practiced. Uh, 243 00:12:26,960 --> 00:12:31,040 Speaker 1: you know, if you wait buy volume or or by prominence, 244 00:12:31,080 --> 00:12:33,800 Speaker 1: then yes, it's a fair calacterization. I wouldn't throw the 245 00:12:33,800 --> 00:12:36,079 Speaker 1: baby with the bast water. I think there's something there, 246 00:12:36,520 --> 00:12:38,840 Speaker 1: you know. The more generous way of looking at it is, 247 00:12:39,440 --> 00:12:41,520 Speaker 1: let's say you want to you want to launch a token, 248 00:12:41,600 --> 00:12:43,040 Speaker 1: you want to suit it in someone you want to 249 00:12:43,040 --> 00:12:45,560 Speaker 1: get some liquidity, so you use part of your token 250 00:12:45,600 --> 00:12:48,240 Speaker 1: supply as a way, we need to incentivize people for 251 00:12:48,640 --> 00:12:51,439 Speaker 1: providing liquidity for it. Uh. And you could see you 252 00:12:51,600 --> 00:12:53,200 Speaker 1: could see a company doing this. You could do this 253 00:12:53,200 --> 00:12:55,600 Speaker 1: with equities. You could say, look, I have some equity, 254 00:12:56,080 --> 00:12:58,719 Speaker 1: my business will bit more appealing to investors. Is a 255 00:12:58,720 --> 00:13:02,400 Speaker 1: liquidity around around this equity, so I could set away 256 00:13:02,440 --> 00:13:04,160 Speaker 1: you know, I could set aside some equity and and 257 00:13:04,160 --> 00:13:07,480 Speaker 1: and incentivized my investors to pride equity. The issue with 258 00:13:07,600 --> 00:13:09,240 Speaker 1: that that it seems to me, and I think we 259 00:13:09,360 --> 00:13:13,320 Speaker 1: have seen this in crypto, is that once the equity 260 00:13:13,440 --> 00:13:18,400 Speaker 1: is distributed, if your model inherently is about I guess 261 00:13:18,440 --> 00:13:21,319 Speaker 1: paying for customers in the form of equity, then once 262 00:13:21,360 --> 00:13:23,800 Speaker 1: all the equity is distributed, do you really have good 263 00:13:23,840 --> 00:13:26,160 Speaker 1: customers or do you just have a base of people 264 00:13:26,160 --> 00:13:28,520 Speaker 1: who are going to now go find the next company 265 00:13:28,559 --> 00:13:31,320 Speaker 1: giving out equity for liquidity. And when I look at 266 00:13:31,400 --> 00:13:34,000 Speaker 1: like crypto, you know, I look at all these like 267 00:13:34,040 --> 00:13:37,720 Speaker 1: DE five protocols that were huge in the summer and 268 00:13:37,800 --> 00:13:40,600 Speaker 1: now they're like charts are way down, and I kind 269 00:13:40,600 --> 00:13:43,640 Speaker 1: of get the impression that the game is, yes, you 270 00:13:43,679 --> 00:13:47,120 Speaker 1: find the company or the protocol giving out government to token. 271 00:13:47,160 --> 00:13:49,920 Speaker 1: This is what they're called equity, and then at some 272 00:13:49,960 --> 00:13:52,520 Speaker 1: point the equity runs out and rather than's sticking around, 273 00:13:52,800 --> 00:13:56,800 Speaker 1: you just go find the next thing. Yeah, I yeah, 274 00:13:56,840 --> 00:13:59,439 Speaker 1: I don't disagree with that. There's a lot of uh uh, 275 00:13:59,440 --> 00:14:02,319 Speaker 1: it's it's very secular. The way frees it sometimes is 276 00:14:02,360 --> 00:14:04,160 Speaker 1: that you see a lot of innovation in DeFi from 277 00:14:04,160 --> 00:14:07,360 Speaker 1: a technological perspective or even from a financial engineering perspective. 278 00:14:08,200 --> 00:14:10,840 Speaker 1: But the point of DeFi cannot just be the trade 279 00:14:10,880 --> 00:14:13,240 Speaker 1: DeFi tokens, and right now that is mostly the point 280 00:14:13,240 --> 00:14:16,520 Speaker 1: of DeFi. So you need to I think you need 281 00:14:16,520 --> 00:14:19,880 Speaker 1: to encourage to some actually you know, I really use 282 00:14:19,960 --> 00:14:24,760 Speaker 1: keys and where real demand comes from. So historically Testos 283 00:14:24,800 --> 00:14:28,160 Speaker 1: has avoided DeFi, right, you haven't been that involved in 284 00:14:28,160 --> 00:14:31,200 Speaker 1: it in the way that say Ethereum has. But I 285 00:14:31,240 --> 00:14:34,720 Speaker 1: think you started something last year called liquidity baking, Is 286 00:14:34,760 --> 00:14:37,800 Speaker 1: that right? Yeah? Absolutely? Can you explain that, like, how 287 00:14:37,840 --> 00:14:42,560 Speaker 1: is that different to the other bad yield farming all 288 00:14:42,600 --> 00:14:45,680 Speaker 1: the way down type DeFi? Of course, So first of all, 289 00:14:45,720 --> 00:14:49,200 Speaker 1: I would challenge the fact that has is cute. You 290 00:14:49,440 --> 00:14:52,160 Speaker 1: defy the way it is is not sentient. It's a 291 00:14:52,240 --> 00:14:55,040 Speaker 1: it's it's a project, and they are defied protocols running 292 00:14:55,040 --> 00:15:01,120 Speaker 1: on the DIES foundation helps UH in general the growth 293 00:15:01,120 --> 00:15:03,400 Speaker 1: of the eatiscal system. We distribute grants and we've given 294 00:15:03,440 --> 00:15:05,360 Speaker 1: some grants to some defied projects, so there's no one 295 00:15:05,920 --> 00:15:08,600 Speaker 1: there's no animosity or anything against the DeFi I think 296 00:15:08,640 --> 00:15:11,400 Speaker 1: it has had a little distraction on Tails and on 297 00:15:11,480 --> 00:15:14,840 Speaker 1: other chains for a variety of reasons. But yes, so 298 00:15:14,920 --> 00:15:19,600 Speaker 1: liquidity making is interesting. It's um It was a modification 299 00:15:19,600 --> 00:15:23,800 Speaker 1: of the protocol itself, so at the protocol level, um 300 00:15:23,880 --> 00:15:26,680 Speaker 1: in amendment was passed and ratified and voted on by 301 00:15:26,720 --> 00:15:31,040 Speaker 1: the by the valuers of the network. That would take 302 00:15:31,560 --> 00:15:33,880 Speaker 1: a small fraction of the very small fraction of the 303 00:15:34,440 --> 00:15:38,479 Speaker 1: to cornsmitted on every block and then use that deposited 304 00:15:38,480 --> 00:15:43,160 Speaker 1: into a pool to incentivise liquidity provision between Bitcoin and tests. 305 00:15:43,640 --> 00:15:45,040 Speaker 1: So the idea is that you have a little more 306 00:15:45,080 --> 00:15:47,280 Speaker 1: inflation in your protocol. I think it comes down to 307 00:15:47,320 --> 00:15:50,280 Speaker 1: about zero points three percent per year, So you know, 308 00:15:50,280 --> 00:15:53,200 Speaker 1: it's not it's it's not very very meaningful for you know, 309 00:15:53,280 --> 00:15:57,160 Speaker 1: something that has a daily standard reviation of lack about 310 00:15:57,160 --> 00:15:59,640 Speaker 1: five percent. You know a few so it's always percent 311 00:15:59,680 --> 00:16:02,920 Speaker 1: per year. But it sent advised people to be willing 312 00:16:02,920 --> 00:16:05,760 Speaker 1: to provide liquidity between bitcoin and and the point is that, 313 00:16:06,200 --> 00:16:08,920 Speaker 1: first of all, these are not gigantity yield. The point 314 00:16:08,960 --> 00:16:12,080 Speaker 1: is not to try to attract people with giant into yields, 315 00:16:12,320 --> 00:16:14,800 Speaker 1: or the point is not to try to strap something 316 00:16:15,160 --> 00:16:17,520 Speaker 1: something new. It's just it's a cost. You be a 317 00:16:17,600 --> 00:16:19,280 Speaker 1: very small cost in terms of inflation, and you get 318 00:16:19,320 --> 00:16:21,880 Speaker 1: something in return, which is the provision. I want to 319 00:16:21,880 --> 00:16:25,160 Speaker 1: go back to the box for a second, because in theory, 320 00:16:25,600 --> 00:16:28,080 Speaker 1: the box could become a bank. Right, so in theory 321 00:16:28,240 --> 00:16:30,400 Speaker 1: we could all put money into the box, we get 322 00:16:30,400 --> 00:16:33,480 Speaker 1: some equity, and then in theory it could start I 323 00:16:33,480 --> 00:16:36,960 Speaker 1: don't know, making loans or doing something with economic purpose, 324 00:16:37,400 --> 00:16:41,360 Speaker 1: something that actually creates value, such that defy is not 325 00:16:41,520 --> 00:16:43,920 Speaker 1: just trading of defy token. Right. This is like the 326 00:16:44,040 --> 00:16:46,760 Speaker 1: spack argument. Right, you're sort of putting money in a 327 00:16:46,800 --> 00:16:50,800 Speaker 1: box that might put something maybe, but is anything becoming there? 328 00:16:51,160 --> 00:16:53,480 Speaker 1: I mean, I haven't we have the famous scriptos back. 329 00:16:53,520 --> 00:16:55,920 Speaker 1: You physically have something that's nonsense, you get a high valuation, 330 00:16:55,960 --> 00:16:59,240 Speaker 1: and then you turn that into actually making Yes, some 331 00:16:59,240 --> 00:17:01,440 Speaker 1: some people attempt that. I don't know that anyone has really, 332 00:17:01,960 --> 00:17:04,600 Speaker 1: really really succeeded that pulling out the cryptos back so far. 333 00:17:05,320 --> 00:17:08,480 Speaker 1: But it was an interesting certainly, like people pointing at 334 00:17:09,080 --> 00:17:12,000 Speaker 1: project like changing for example, Yeah, you know, started out 335 00:17:13,040 --> 00:17:15,040 Speaker 1: a little you know, not not not very coherent, and 336 00:17:15,000 --> 00:17:17,400 Speaker 1: then started you know, hiring serious academic and like doing 337 00:17:17,440 --> 00:17:20,560 Speaker 1: really serious working in photography for this um. So you know, 338 00:17:20,600 --> 00:17:22,480 Speaker 1: it remains to be seen whether or not that that's 339 00:17:22,480 --> 00:17:27,439 Speaker 1: pulled off. But for me, it's more about it's not 340 00:17:27,440 --> 00:17:29,399 Speaker 1: about how serious you are, it's more about you do 341 00:17:29,760 --> 00:17:31,560 Speaker 1: at the end of the day. You know, it's about 342 00:17:31,600 --> 00:17:34,679 Speaker 1: value creation, like what value are you creating? And it 343 00:17:34,760 --> 00:17:37,360 Speaker 1: can't be completely internal. Another way to think about it 344 00:17:37,400 --> 00:17:40,919 Speaker 1: is sometimes they obviously a small town and I'm thinking 345 00:17:41,280 --> 00:17:42,960 Speaker 1: what are the exports of this down? Right? So you 346 00:17:43,000 --> 00:17:45,840 Speaker 1: have economic activity, you have restaurants, but the restaurants is 347 00:17:45,880 --> 00:17:48,000 Speaker 1: for the people who work here, so they have to 348 00:17:48,000 --> 00:17:49,359 Speaker 1: work on something. So at the end of the day, 349 00:17:49,359 --> 00:17:50,720 Speaker 1: you know, what do what do you export? What does 350 00:17:50,760 --> 00:17:53,320 Speaker 1: defy export? Yeah, it's a good question, right, you know 351 00:17:53,359 --> 00:17:55,399 Speaker 1: what what what are you doing? Are you because if 352 00:17:55,400 --> 00:17:59,760 Speaker 1: you're looking at there's there's a cynical view of financial 353 00:17:59,800 --> 00:18:03,159 Speaker 1: mark gets that's I really, I really reject, which is 354 00:18:03,160 --> 00:18:04,800 Speaker 1: the ideas that all the financial market is just a 355 00:18:04,880 --> 00:18:07,520 Speaker 1: trying because you know, everything is zero. Some it's very 356 00:18:07,920 --> 00:18:10,760 Speaker 1: popular view, but I don't. You know, financial markets are 357 00:18:10,840 --> 00:18:14,679 Speaker 1: very important because um they help get liquidity. Uh you know, 358 00:18:14,760 --> 00:18:18,000 Speaker 1: signal market gets get liquidity and it helps capital formation 359 00:18:18,040 --> 00:18:21,080 Speaker 1: for companies and companies actually build things, right, So there's 360 00:18:21,119 --> 00:18:25,280 Speaker 1: generally value in financial marketed to help companies that do 361 00:18:25,440 --> 00:18:29,840 Speaker 1: things and build things. And unless you're actually doing this 362 00:18:29,960 --> 00:18:33,359 Speaker 1: in some ways, uh, we defy, it's it's going to 363 00:18:33,440 --> 00:18:51,000 Speaker 1: remain incestuous and it's going to remin circular. Since since 364 00:18:51,040 --> 00:18:53,040 Speaker 1: you said this, since you're not a fan of DeFi 365 00:18:53,200 --> 00:18:56,080 Speaker 1: for the sake of defy, can I broaden this out 366 00:18:56,359 --> 00:19:00,320 Speaker 1: massively and ask what is the use case of block chain? 367 00:19:00,520 --> 00:19:04,000 Speaker 1: And we ask this all the time, and you know, 368 00:19:04,119 --> 00:19:07,800 Speaker 1: yesterday Joe was on a panel with Alcoran and they 369 00:19:07,800 --> 00:19:12,840 Speaker 1: announced a big partnership with FIFA, and Joe asked the 370 00:19:12,840 --> 00:19:14,639 Speaker 1: FIFA president, well, what are you guys going to be 371 00:19:14,680 --> 00:19:18,159 Speaker 1: doing in this new partnership and he basically said, we 372 00:19:18,160 --> 00:19:20,160 Speaker 1: don't really know. We have a bunch of ideas. We're 373 00:19:20,160 --> 00:19:21,879 Speaker 1: just really into crypto and we want to be a 374 00:19:21,920 --> 00:19:25,280 Speaker 1: modern company, and we hear so many of these partnerships, 375 00:19:25,280 --> 00:19:28,520 Speaker 1: and I feel like it's still kind of unclear what 376 00:19:28,560 --> 00:19:31,359 Speaker 1: it is that you can do with a blockchain like 377 00:19:31,440 --> 00:19:37,600 Speaker 1: tessos versus traditional technology or financial architecture. Yeah. Absolutely, so 378 00:19:38,880 --> 00:19:41,280 Speaker 1: I think for me that the basics, the most basic 379 00:19:41,400 --> 00:19:44,240 Speaker 1: use case and maybe the most important one is a 380 00:19:44,240 --> 00:19:48,119 Speaker 1: censorship resistant store of value, like being able to store 381 00:19:48,119 --> 00:19:51,480 Speaker 1: wells in ways that isn't anyone's liability, because if you 382 00:19:51,520 --> 00:19:53,199 Speaker 1: think about it, if you have a bank account, that's 383 00:19:53,200 --> 00:19:55,879 Speaker 1: still the banks liability. If you have a brokerage account, 384 00:19:55,920 --> 00:19:57,800 Speaker 1: you probably don't even own, you know, their shares in name, 385 00:19:57,800 --> 00:19:59,880 Speaker 1: and even if you did on the shares, it's still 386 00:19:59,880 --> 00:20:02,639 Speaker 1: the company's liability rights by a bit of the company 387 00:20:02,680 --> 00:20:05,760 Speaker 1: to you. There's very very few assets which are not 388 00:20:05,800 --> 00:20:07,800 Speaker 1: someone else's liability. You have really estate, but it's not 389 00:20:07,840 --> 00:20:11,520 Speaker 1: easily portable. Um, you could own precious smetals, but again, 390 00:20:11,560 --> 00:20:14,560 Speaker 1: you know, as bare assets, they're kind of complicated. So 391 00:20:14,600 --> 00:20:16,560 Speaker 1: it's unique in his respect. It's a bare asset that 392 00:20:16,600 --> 00:20:19,240 Speaker 1: you can transact with across the world. So that second 393 00:20:19,280 --> 00:20:22,560 Speaker 1: use case, making very easy cross border payments, very cheap 394 00:20:22,560 --> 00:20:26,119 Speaker 1: corsebolder payments without intermediaries. UM. And I think you know, 395 00:20:26,160 --> 00:20:29,679 Speaker 1: if you live in a in a reasonably free country, 396 00:20:29,680 --> 00:20:31,320 Speaker 1: it might not seem like a like a big deal. 397 00:20:31,359 --> 00:20:34,520 Speaker 1: But as soon as repressions starts started turning on, you're 398 00:20:34,600 --> 00:20:38,560 Speaker 1: pretty glad that you have a sensory resistant store of value. UM. 399 00:20:38,640 --> 00:20:42,520 Speaker 1: That's view points often gets a little derided because people 400 00:20:42,560 --> 00:20:44,840 Speaker 1: will point at people holding Bitcoin or all these other 401 00:20:44,840 --> 00:20:46,439 Speaker 1: coup of currencies and say, well, look at you know, 402 00:20:46,440 --> 00:20:48,320 Speaker 1: look at them, you know, holding bitcoded exchenders. They're not 403 00:20:48,359 --> 00:20:50,719 Speaker 1: concerned with that. Well maybe they're not, but maybe they 404 00:20:50,760 --> 00:20:52,679 Speaker 1: think that other people are going to be concerned with that. 405 00:20:52,880 --> 00:20:55,520 Speaker 1: And they helped set a price for the for the 406 00:20:55,520 --> 00:20:57,840 Speaker 1: store of value. So I don't you know, it's it's 407 00:20:57,920 --> 00:21:00,080 Speaker 1: basically easier using the store of value or speculating the 408 00:21:00,080 --> 00:21:01,680 Speaker 1: fact that people are going to use the store of value. 409 00:21:01,720 --> 00:21:04,600 Speaker 1: And I think that's completely fine. So here's my other 410 00:21:04,720 --> 00:21:08,200 Speaker 1: very broad question, which is do people actually care about 411 00:21:08,200 --> 00:21:13,200 Speaker 1: decentralization in crypto? And then secondly, how do you measure decentralization? 412 00:21:13,480 --> 00:21:17,200 Speaker 1: And again I asked the question because this happened again 413 00:21:17,200 --> 00:21:19,720 Speaker 1: at Milkin, but Cathy would from ARC was talking about 414 00:21:19,760 --> 00:21:21,840 Speaker 1: the new thing they're working on, is some sort of 415 00:21:21,880 --> 00:21:26,920 Speaker 1: systematized way or systematic way to actually measure decentralization in crypto, 416 00:21:27,080 --> 00:21:30,160 Speaker 1: So how do you actually do it? And doesn't matter? 417 00:21:31,520 --> 00:21:34,639 Speaker 1: So if you're looking today at the behavior of of 418 00:21:34,880 --> 00:21:38,199 Speaker 1: you know, price setters in markets, whoever is, you know, 419 00:21:38,720 --> 00:21:42,240 Speaker 1: the marginal buyer forocurrency does not care about decentralization, right, 420 00:21:42,320 --> 00:21:45,119 Speaker 1: That's the next thing that's been pretty clear. But I 421 00:21:45,600 --> 00:21:48,399 Speaker 1: believe that for these systems to present some values, they 422 00:21:48,400 --> 00:21:51,479 Speaker 1: need to be decentralized, otherwise they'll be able outcompeted. You know, 423 00:21:51,840 --> 00:21:54,439 Speaker 1: if you have some use case for your blockchain, you 424 00:21:54,480 --> 00:21:56,720 Speaker 1: have to ask yourself, you know, what do I do that? 425 00:21:57,040 --> 00:21:59,480 Speaker 1: I'm only with you guys kind onto better as the service, 426 00:22:00,000 --> 00:22:02,280 Speaker 1: And I think the answer to that often time is 427 00:22:02,320 --> 00:22:04,520 Speaker 1: going to lying in the centralization. So there's been a 428 00:22:04,560 --> 00:22:06,520 Speaker 1: d coupling in the sense that people don't care. But 429 00:22:06,640 --> 00:22:08,080 Speaker 1: at the end of the day, when the rubber hits 430 00:22:08,080 --> 00:22:11,840 Speaker 1: the road, um, the centralization doesn't matter. But I think 431 00:22:11,840 --> 00:22:17,520 Speaker 1: who'nt need to see more cases of bloctions being insufficiently 432 00:22:17,560 --> 00:22:20,920 Speaker 1: decentralized and running into trouble for people to start caring. 433 00:22:21,080 --> 00:22:24,200 Speaker 1: How do you measure it? The centralization. Yeah, there's many 434 00:22:24,200 --> 00:22:27,200 Speaker 1: ways to think about it. You can have the would 435 00:22:27,200 --> 00:22:29,640 Speaker 1: say digity decentralization, where like, well, you know there's no 436 00:22:29,680 --> 00:22:32,240 Speaker 1: no single parties in charge UM, but then the fact 437 00:22:32,240 --> 00:22:33,880 Speaker 1: of the centralization is like not only is that true, 438 00:22:33,880 --> 00:22:36,520 Speaker 1: but on top of that, you know no part no 439 00:22:36,680 --> 00:22:39,480 Speaker 1: party is too prominent or has too much of a 440 00:22:40,000 --> 00:22:42,560 Speaker 1: of an impact on the network UM. And then you 441 00:22:42,560 --> 00:22:44,520 Speaker 1: could be looking at it in terms of the most 442 00:22:44,600 --> 00:22:46,879 Speaker 1: narrow sense would be the consensus algorithm. You know, who 443 00:22:46,960 --> 00:22:49,880 Speaker 1: can attack the integrity of the chain, But it could 444 00:22:49,920 --> 00:22:52,040 Speaker 1: also be you know who has influenced in this worry 445 00:22:52,080 --> 00:22:56,440 Speaker 1: who can who has the cloud to h serious hard 446 00:22:56,440 --> 00:22:58,960 Speaker 1: works for example UM, And it could be who is 447 00:22:59,200 --> 00:23:02,320 Speaker 1: who is building infrastructure that's critical for for this So 448 00:23:03,080 --> 00:23:06,199 Speaker 1: you have many many degrees of of that. So just 449 00:23:06,280 --> 00:23:09,160 Speaker 1: on this topic, I mean, there do seem to be 450 00:23:09,160 --> 00:23:14,560 Speaker 1: benefits and drawbacks to decentralization. And we've seen for instance 451 00:23:14,680 --> 00:23:19,160 Speaker 1: with Ethereum. Ethereum has a figurehead in the form of Butteran, 452 00:23:19,280 --> 00:23:22,359 Speaker 1: and they have been able to do some stuff relatively 453 00:23:22,400 --> 00:23:26,720 Speaker 1: quickly that probably a truly decentralized protocol would have difficulty doing. 454 00:23:27,040 --> 00:23:30,720 Speaker 1: And I think Tesso's has a unique governing structure where 455 00:23:30,720 --> 00:23:34,359 Speaker 1: you are quite decentralized from what I understand, So has 456 00:23:34,400 --> 00:23:36,400 Speaker 1: that been like how do you feel about that? Has 457 00:23:36,440 --> 00:23:38,560 Speaker 1: that been a drawback or is that a big benefit 458 00:23:38,600 --> 00:23:42,440 Speaker 1: of the protocol And how do you weigh those two things? Well, 459 00:23:42,480 --> 00:23:45,000 Speaker 1: I think in general, decentralization is a cost right that 460 00:23:45,160 --> 00:23:47,479 Speaker 1: you have, and there's benefits susciated to that cost right. 461 00:23:47,480 --> 00:23:49,439 Speaker 1: So I think it's it's worth spaying. But it's it 462 00:23:49,480 --> 00:23:51,560 Speaker 1: feels almost like an insurance premium, you know, right, you 463 00:23:52,119 --> 00:23:54,040 Speaker 1: busy insurance and months after amounts and you say what 464 00:23:54,040 --> 00:23:55,879 Speaker 1: am I paying this insurance? And then you have a 465 00:23:55,880 --> 00:23:58,280 Speaker 1: fire and you're glad you paid for the insurance. So 466 00:23:58,320 --> 00:23:59,600 Speaker 1: it's it's very easy to see the cost of the 467 00:23:59,680 --> 00:24:02,439 Speaker 1: central station, and the benefits are are not always as 468 00:24:02,880 --> 00:24:06,160 Speaker 1: obvious immediately. In terms of testos, we have a governance 469 00:24:06,160 --> 00:24:09,879 Speaker 1: procedure that's allows four upgrades to the chain, so anyone 470 00:24:09,920 --> 00:24:13,080 Speaker 1: can propose an a great one tests chain and it's 471 00:24:13,080 --> 00:24:14,639 Speaker 1: set to a vote in names of vote passes and 472 00:24:14,640 --> 00:24:17,000 Speaker 1: it's a very conservative vote happens overse three months, but 473 00:24:17,040 --> 00:24:20,159 Speaker 1: if the vote passes, the upgrade is adopted. There's a 474 00:24:20,200 --> 00:24:23,840 Speaker 1: side effect though, because in order to have a mechanism 475 00:24:23,920 --> 00:24:27,560 Speaker 1: that completely atomittate upgrades through voting, a lot of engineering 476 00:24:27,600 --> 00:24:30,480 Speaker 1: work from the from the very beginning, went into making 477 00:24:30,480 --> 00:24:33,159 Speaker 1: easier upgrades, and just as a side effect of that, 478 00:24:33,160 --> 00:24:36,159 Speaker 1: that's that's a benefit, you know, unrelated to the decentralization. 479 00:24:36,240 --> 00:24:38,960 Speaker 1: It's just the fact that it's really easy to to 480 00:24:38,960 --> 00:24:41,399 Speaker 1: to do hot swaps of the protocol has let us 481 00:24:41,640 --> 00:24:45,119 Speaker 1: U upgrade faster. We've had about nine upgrades in the 482 00:24:45,160 --> 00:24:47,440 Speaker 1: best three years, and we have a tense upgrade being 483 00:24:47,520 --> 00:24:50,560 Speaker 1: puted on right now. I want to go back to 484 00:24:50,880 --> 00:24:55,240 Speaker 1: Tracy's question about use cases, because Okay, store value, I 485 00:24:55,320 --> 00:25:00,080 Speaker 1: get it, cross border payment or payment, I get it it. 486 00:25:00,160 --> 00:25:03,400 Speaker 1: On the other hand, like I kind of think bitcoin 487 00:25:03,520 --> 00:25:06,679 Speaker 1: just solved those problems and so or to some extent, 488 00:25:07,119 --> 00:25:10,240 Speaker 1: And so when I think about like a smart contracting platform, 489 00:25:10,280 --> 00:25:12,440 Speaker 1: and when I'm here at Milkin and everyone is talking 490 00:25:12,440 --> 00:25:16,159 Speaker 1: about we're gonna be trading real estate on the blockchain 491 00:25:16,400 --> 00:25:21,000 Speaker 1: or virtual worlds and you know, virtual land and where 492 00:25:21,080 --> 00:25:24,240 Speaker 1: like you know, your cartoon ape can live or whatever, 493 00:25:24,600 --> 00:25:27,840 Speaker 1: I want to push further on, like what can we 494 00:25:27,880 --> 00:25:30,320 Speaker 1: do with a blockchain that we can't do with a 495 00:25:30,359 --> 00:25:34,119 Speaker 1: traditional database, and what that's gonna look like and what 496 00:25:34,119 --> 00:25:37,080 Speaker 1: what applications are gonna take off it actually change society 497 00:25:37,200 --> 00:25:39,320 Speaker 1: or as you put it. And I really like the phrase, 498 00:25:39,359 --> 00:25:40,679 Speaker 1: and I'm gonna steal it from now. And there's like 499 00:25:41,000 --> 00:25:45,679 Speaker 1: the block what are the blockchains exports going to be? Yeah? Um, 500 00:25:45,720 --> 00:25:48,680 Speaker 1: and I think you know it's the most natural that 501 00:25:48,760 --> 00:25:52,560 Speaker 1: the highest impendence match is total value and then we 502 00:25:52,680 --> 00:25:54,200 Speaker 1: go down from there. But it's there just still a 503 00:25:54,200 --> 00:25:59,399 Speaker 1: lot of value that's present. So we you know, we did. Uh, 504 00:25:59,400 --> 00:26:02,159 Speaker 1: there was a friend umber of security token offering and 505 00:26:02,359 --> 00:26:03,800 Speaker 1: on it was bloction and a lot a lot of 506 00:26:03,800 --> 00:26:06,199 Speaker 1: them have come from the rested world and they were 507 00:26:06,240 --> 00:26:08,280 Speaker 1: people of the world real estate work. There were a 508 00:26:08,280 --> 00:26:10,440 Speaker 1: lot of people took anything real estate on on blockchains 509 00:26:10,520 --> 00:26:13,320 Speaker 1: and they weren't doing it. You know, it was not 510 00:26:13,359 --> 00:26:15,600 Speaker 1: an innovation nowative banks saying like, oh we gotta do 511 00:26:15,680 --> 00:26:17,879 Speaker 1: something with blockshain. You know, they came from people who 512 00:26:17,920 --> 00:26:19,640 Speaker 1: actually had the need and actually had the use case 513 00:26:19,680 --> 00:26:22,520 Speaker 1: and this all the value and I don't think it's 514 00:26:22,560 --> 00:26:25,439 Speaker 1: impossible for a centralized system to um to do this. 515 00:26:26,600 --> 00:26:32,240 Speaker 1: But having a system that secure, that's automated. That's global. 516 00:26:32,600 --> 00:26:35,720 Speaker 1: I think the global aspect the fact that it's it 517 00:26:35,880 --> 00:26:38,119 Speaker 1: just works and you have this entire infrastructure around it. 518 00:26:38,200 --> 00:26:41,639 Speaker 1: You have wallets, you have custodiuns um think of it 519 00:26:43,280 --> 00:26:45,560 Speaker 1: some sort of layers that plugs in into a large 520 00:26:45,640 --> 00:26:49,439 Speaker 1: ecosystem m that supports it, that lowers your costs. So 521 00:26:49,560 --> 00:26:52,840 Speaker 1: there's value here. It doesn't come straight from the incentralization. 522 00:26:52,880 --> 00:26:55,240 Speaker 1: I think it comes from the network effect of having 523 00:26:55,240 --> 00:26:58,560 Speaker 1: a ginering platform where you can build all sorts of things. 524 00:26:58,600 --> 00:27:01,040 Speaker 1: So I have a dumb question, and I think I've 525 00:27:01,080 --> 00:27:03,919 Speaker 1: asked this before, which probably makes it extra dumb. But 526 00:27:04,000 --> 00:27:07,560 Speaker 1: when you actually tokenize something like real estate or you know, 527 00:27:07,600 --> 00:27:10,960 Speaker 1: a JPEG that becomes an n f T, what exactly 528 00:27:11,960 --> 00:27:15,000 Speaker 1: are like, what are you buying? Because my understanding is 529 00:27:15,000 --> 00:27:18,040 Speaker 1: you're basically buying a database entry, and then there has 530 00:27:18,080 --> 00:27:21,480 Speaker 1: to be some external body like an open sea that 531 00:27:21,560 --> 00:27:23,960 Speaker 1: points you in the direction of it. And also just 532 00:27:24,000 --> 00:27:27,240 Speaker 1: to add on to it, in theory, there needs to 533 00:27:27,240 --> 00:27:30,280 Speaker 1: be some legal legal recourse right such that the owner 534 00:27:30,400 --> 00:27:34,040 Speaker 1: of that token actually is entitled to the cash flows 535 00:27:34,080 --> 00:27:35,960 Speaker 1: of the property, whether that's in the rent or in 536 00:27:36,000 --> 00:27:38,399 Speaker 1: the sale of it. That as opposed to whoever it 537 00:27:38,520 --> 00:27:40,280 Speaker 1: just happens to be there. It takes the month. Yeah, 538 00:27:40,480 --> 00:27:44,800 Speaker 1: there's a lot of arguments in around this space that 539 00:27:44,960 --> 00:27:47,320 Speaker 1: and I've been guilty of that. That's if you follow 540 00:27:47,359 --> 00:27:50,119 Speaker 1: the argument, you you will reach very strong conclusions. And 541 00:27:50,160 --> 00:27:52,359 Speaker 1: there is there's always some subtleties, see like oh, this 542 00:27:52,440 --> 00:27:54,560 Speaker 1: could be centralized and therefore is there's no value and 543 00:27:55,160 --> 00:27:57,960 Speaker 1: so for example, the legal resource is a really good example. Um. 544 00:27:58,000 --> 00:28:01,679 Speaker 1: Sometimes you'll hear, Look, there's no in having tokenize real 545 00:28:01,760 --> 00:28:04,200 Speaker 1: estate on the chain because at the end of the day, 546 00:28:04,359 --> 00:28:05,720 Speaker 1: you're not going to be able to you know, if 547 00:28:05,720 --> 00:28:07,399 Speaker 1: you want to a certain rights, you'll have to go 548 00:28:07,520 --> 00:28:09,240 Speaker 1: to the course you'll have to go to like whoever 549 00:28:09,320 --> 00:28:12,200 Speaker 1: is issue is, they can refuse to honor it. So 550 00:28:12,280 --> 00:28:14,679 Speaker 1: all the security of the blockchain is for not and 551 00:28:14,720 --> 00:28:16,960 Speaker 1: I think that's, um, that's taking the argument a way 552 00:28:17,000 --> 00:28:19,240 Speaker 1: too far. You know, that's the saying that possession is 553 00:28:19,400 --> 00:28:22,760 Speaker 1: nine tenths of the law, and in some sense smart 554 00:28:22,760 --> 00:28:27,240 Speaker 1: contracts is automated possession. So sure you could have legal challenges, 555 00:28:27,280 --> 00:28:28,840 Speaker 1: you can have all of all sort of things, but 556 00:28:28,880 --> 00:28:31,280 Speaker 1: it reverse the burden. I think it's an example who 557 00:28:31,280 --> 00:28:34,160 Speaker 1: says that smart contracts reverse the burden of the lawsuit. 558 00:28:34,800 --> 00:28:37,880 Speaker 1: And that's really interesting because you know you'll get transferred 559 00:28:37,880 --> 00:28:40,400 Speaker 1: the title of something. You can start doing things because hey, 560 00:28:40,440 --> 00:28:43,280 Speaker 1: you know it works with lending protocol. It's integrated and everything. 561 00:28:43,640 --> 00:28:46,360 Speaker 1: And if people somehow saying that you know, you're not 562 00:28:46,480 --> 00:28:48,360 Speaker 1: entitled to it, they have to sue you, and they 563 00:28:48,400 --> 00:28:50,960 Speaker 1: have to to claim it back, as opposed to you 564 00:28:51,160 --> 00:28:54,000 Speaker 1: saying like, hey, I need this so And you see 565 00:28:54,000 --> 00:28:56,760 Speaker 1: this in theternational financial system in the form of scrow. Right, 566 00:28:56,960 --> 00:28:59,280 Speaker 1: if you have a small party dealing with a large 567 00:28:59,280 --> 00:29:01,080 Speaker 1: party and it's a look, if you don't pay us, 568 00:29:01,120 --> 00:29:02,760 Speaker 1: there's no way we're gonna be able to sue you. Right, 569 00:29:03,080 --> 00:29:05,200 Speaker 1: So you use Scrow for that. And I like to 570 00:29:05,240 --> 00:29:08,400 Speaker 1: think of smart contracts as automated is grow Escrow exists 571 00:29:08,440 --> 00:29:12,040 Speaker 1: because the two parties don't trust each other. So the 572 00:29:12,120 --> 00:29:15,480 Speaker 1: solution that you're creating is basically trying to fix that 573 00:29:15,520 --> 00:29:19,120 Speaker 1: trust problem. But I guess, like I guess, my question 574 00:29:19,880 --> 00:29:23,240 Speaker 1: is it goes back to that what are you buying aspects? 575 00:29:23,360 --> 00:29:26,960 Speaker 1: So I buy tokenized real estate, I still have to 576 00:29:27,080 --> 00:29:31,520 Speaker 1: trust the person who's selling it to me, because there 577 00:29:31,560 --> 00:29:34,520 Speaker 1: still has to be an entry somewhere or there still 578 00:29:34,520 --> 00:29:36,880 Speaker 1: has to be a centralized party that's telling me that 579 00:29:36,960 --> 00:29:41,480 Speaker 1: this database entry points to that thing over there. Absolutely, 580 00:29:41,520 --> 00:29:43,560 Speaker 1: but I still say you trust them with less than 581 00:29:43,600 --> 00:29:47,400 Speaker 1: if you were just signing documents. It's a matter of degrees. Absolutely, 582 00:29:48,240 --> 00:29:51,480 Speaker 1: And in some sense with the jap eggs and the arts, 583 00:29:51,720 --> 00:29:54,640 Speaker 1: I think it's it's more trustless in some sense with 584 00:29:54,720 --> 00:29:57,240 Speaker 1: it because there's no there's nothing tangible, right, It's not 585 00:29:57,320 --> 00:30:00,560 Speaker 1: like somehow they can say no, you don't own that. 586 00:30:01,160 --> 00:30:03,640 Speaker 1: You don't know that saying, because what you're buying is 587 00:30:03,680 --> 00:30:05,440 Speaker 1: a I think if you buy a piece of art, 588 00:30:05,520 --> 00:30:07,280 Speaker 1: for example, and you know, just to be sure. A 589 00:30:07,280 --> 00:30:09,000 Speaker 1: lot of people buying jim Pegs are just buying it 590 00:30:09,040 --> 00:30:10,880 Speaker 1: because they see it to go up and they say like, 591 00:30:10,920 --> 00:30:12,360 Speaker 1: I'll buy it and I'll say it tomorrow. There's a 592 00:30:12,400 --> 00:30:14,680 Speaker 1: lot of gambling associated with it, right, But there's also 593 00:30:14,720 --> 00:30:18,880 Speaker 1: a genuine art community. Uh, there's not generally digital artists 594 00:30:18,920 --> 00:30:22,720 Speaker 1: who are minting digital art and selling it. And the 595 00:30:22,800 --> 00:30:24,840 Speaker 1: argument that like the most here it's like okay, so 596 00:30:24,920 --> 00:30:26,960 Speaker 1: digital artists are saying, and that's not going to go away. 597 00:30:27,160 --> 00:30:29,760 Speaker 1: People want to collect it. People always want to collect arts. 598 00:30:29,800 --> 00:30:33,640 Speaker 1: So what's the alternative. You know, before before that people 599 00:30:33,640 --> 00:30:36,000 Speaker 1: would collect digital art and it would receive a paper 600 00:30:36,040 --> 00:30:38,880 Speaker 1: certificate saying you own you know, you you own this piece. 601 00:30:39,640 --> 00:30:41,600 Speaker 1: You're not going to put it on some corporate database. 602 00:30:41,680 --> 00:30:43,960 Speaker 1: You want something that's that's going to be here for 603 00:30:43,960 --> 00:30:45,440 Speaker 1: the long run. You want something that gives you some 604 00:30:45,440 --> 00:30:47,720 Speaker 1: meaningful form of ownership. So the best slubstrate for that 605 00:30:47,800 --> 00:30:49,360 Speaker 1: is a portrack. So I do think there's a really 606 00:30:49,400 --> 00:31:07,760 Speaker 1: good impendence match for art, digital arts and potact. Let's 607 00:31:07,800 --> 00:31:10,200 Speaker 1: talk a little bit more about what the future looks like. 608 00:31:10,320 --> 00:31:14,400 Speaker 1: And you know, Tesso's is an Ethereum competitor and a 609 00:31:14,400 --> 00:31:15,840 Speaker 1: lot of the things that you can do a test 610 00:31:15,920 --> 00:31:19,200 Speaker 1: as you could do on Ethereum and presumably on Salana 611 00:31:19,360 --> 00:31:22,400 Speaker 1: and Avalanche and the finance chain and all these and 612 00:31:22,600 --> 00:31:26,600 Speaker 1: algorand etcetera. Is your viewer. There's a question that I 613 00:31:26,680 --> 00:31:30,600 Speaker 1: was wondering, like in your vision, is there one chain 614 00:31:30,720 --> 00:31:33,440 Speaker 1: that wins out? You know, is it? I mean, you 615 00:31:33,440 --> 00:31:36,560 Speaker 1: would want it to be Tessos, but are we going 616 00:31:36,640 --> 00:31:39,240 Speaker 1: towards one chain that's the winner or is it, as 617 00:31:39,240 --> 00:31:42,840 Speaker 1: they say, a multi chain world. So again to my points, 618 00:31:42,920 --> 00:31:45,040 Speaker 1: is there is ABSOLUTEI arguments where you can say, well, 619 00:31:45,080 --> 00:31:47,680 Speaker 1: you know there's network effect in having one chain. Um 620 00:31:47,760 --> 00:31:50,120 Speaker 1: there's and you know, like you have more security, you 621 00:31:50,120 --> 00:31:53,920 Speaker 1: have more assets, more compossibility, so one chain wins all uh, 622 00:31:53,920 --> 00:31:57,000 Speaker 1: and there's the midst tools is absolutely argument away. Like 623 00:31:57,040 --> 00:31:59,479 Speaker 1: to think about it is um as you know, if 624 00:31:59,520 --> 00:32:02,760 Speaker 1: you have als in a h A in a solution 625 00:32:02,800 --> 00:32:05,400 Speaker 1: and then new let it crystallize. If you criticalize very 626 00:32:05,440 --> 00:32:09,880 Speaker 1: very quickly, you get something like like glass supercalize very 627 00:32:09,880 --> 00:32:12,200 Speaker 1: slowly you get a few big crystals. So the lowest 628 00:32:12,240 --> 00:32:15,400 Speaker 1: energy state is just like one big single crystal. But 629 00:32:15,480 --> 00:32:17,400 Speaker 1: you're not going to get to the lowest energy states 630 00:32:17,720 --> 00:32:19,600 Speaker 1: because at some point you'll have things that crystalize. So 631 00:32:19,840 --> 00:32:21,560 Speaker 1: what it means is that yes, we haven't one touch 632 00:32:22,200 --> 00:32:25,520 Speaker 1: multilze in the world, but the applications on the change 633 00:32:25,560 --> 00:32:28,320 Speaker 1: will say because they have their own network effects. So 634 00:32:28,360 --> 00:32:31,040 Speaker 1: I don't think we're going to have change that specialize 635 00:32:31,160 --> 00:32:34,920 Speaker 1: on a use case. In a technical technical sense, there's 636 00:32:34,960 --> 00:32:37,720 Speaker 1: no way you can meaningfully say, oh, this chain is 637 00:32:37,760 --> 00:32:40,600 Speaker 1: the best technologically speaking for sports, and this change is 638 00:32:40,600 --> 00:32:43,800 Speaker 1: the best technologically speaking for finance. The designs are largely 639 00:32:43,840 --> 00:32:47,920 Speaker 1: going to converse to converge. However, if you have a 640 00:32:47,960 --> 00:32:50,360 Speaker 1: lot of really really popular applications which are talking to 641 00:32:50,400 --> 00:32:52,360 Speaker 1: each other and form their own ecosystem on a chain, 642 00:32:52,800 --> 00:32:55,040 Speaker 1: they're not necessarily all going to mike greater way from 643 00:32:55,040 --> 00:32:58,240 Speaker 1: one chain to another just because they can get you know, 644 00:32:58,280 --> 00:33:01,120 Speaker 1: epstin and more security in doing so. Can you can 645 00:33:01,160 --> 00:33:04,200 Speaker 1: you talk a little bit more about that interoperability point, 646 00:33:04,320 --> 00:33:08,280 Speaker 1: Why is it so technologically difficult? You know, give us 647 00:33:08,320 --> 00:33:11,480 Speaker 1: a really easy to understand explanation of why it's so 648 00:33:11,560 --> 00:33:16,480 Speaker 1: technologically difficult to make the chains work together. The main 649 00:33:16,560 --> 00:33:19,120 Speaker 1: chain that a block chain does is maintain consensus. Right, 650 00:33:19,160 --> 00:33:22,000 Speaker 1: That's a hard problem that they that they solve. And 651 00:33:22,040 --> 00:33:24,800 Speaker 1: if you want to have two chains communicate with each other's, 652 00:33:24,840 --> 00:33:26,800 Speaker 1: they need to be in consensus with each other. I mean, 653 00:33:27,240 --> 00:33:29,920 Speaker 1: each chain needs to know what states the other one 654 00:33:29,960 --> 00:33:32,640 Speaker 1: is in. But at this point, if to to to 655 00:33:32,800 --> 00:33:34,600 Speaker 1: have them been consensus with each other, you would need 656 00:33:34,640 --> 00:33:36,800 Speaker 1: to have all the valuers of one chain, the all 657 00:33:36,840 --> 00:33:38,800 Speaker 1: the valuers on the other chain, and some and by 658 00:33:38,840 --> 00:33:42,240 Speaker 1: the time you've done that, you've essentially emerged the two chains. 659 00:33:42,280 --> 00:33:45,280 Speaker 1: So fundamentally, bridges that supports state from one chain to 660 00:33:45,320 --> 00:33:50,000 Speaker 1: another are hard you are um either increasing the competitional 661 00:33:50,120 --> 00:33:54,120 Speaker 1: cost on your network or you're losing security properties. And 662 00:33:54,160 --> 00:33:57,000 Speaker 1: we have some of the big hacks, and we haven't 663 00:33:57,040 --> 00:33:59,280 Speaker 1: I don't think we've talked about it on the show before, 664 00:33:59,280 --> 00:34:01,680 Speaker 1: but some of the big acts that people hear about 665 00:34:01,720 --> 00:34:04,920 Speaker 1: in crypto lately have been on these bridges, right, yeah, 666 00:34:05,000 --> 00:34:06,600 Speaker 1: So can you talk a little bit about like what's 667 00:34:06,640 --> 00:34:09,680 Speaker 1: going on, how are they, why are they, why is 668 00:34:09,760 --> 00:34:14,840 Speaker 1: security inherently difficult? And what have exploiters discovered about the 669 00:34:14,880 --> 00:34:19,440 Speaker 1: weaknesses inherent in these bridges. So, first of all, the 670 00:34:19,480 --> 00:34:22,160 Speaker 1: bridges are big honeypots because in general, the way a 671 00:34:22,160 --> 00:34:25,319 Speaker 1: bridge work is you're gonna put all your assets on 672 00:34:25,360 --> 00:34:28,759 Speaker 1: a chain in one needle pots and then you're going 673 00:34:28,840 --> 00:34:31,839 Speaker 1: to mince a representation of those assets on the other chain. 674 00:34:32,200 --> 00:34:34,319 Speaker 1: So you have a big pot of money that's sitting there. 675 00:34:34,320 --> 00:34:36,720 Speaker 1: So first of all, you're a very good to target 676 00:34:36,800 --> 00:34:40,759 Speaker 1: for us. So I lock up, say ten million dollars 677 00:34:41,280 --> 00:34:46,640 Speaker 1: worth of value on Ethereum, and then I meant ten 678 00:34:46,719 --> 00:34:51,160 Speaker 1: million dollars on Tesso's that represents a claim to that 679 00:34:51,200 --> 00:34:53,680 Speaker 1: ten million one, that's right. So that's a lot of money, 680 00:34:53,680 --> 00:34:56,040 Speaker 1: all right. So that's a honeypot, but keep going. Yeah, 681 00:34:56,080 --> 00:34:57,799 Speaker 1: but that's the first saying. It's like, you know what 682 00:34:57,800 --> 00:35:01,680 Speaker 1: what what motivate security attacks is is money. And the 683 00:35:01,719 --> 00:35:04,080 Speaker 1: second thing is so it depends not every bridge is 684 00:35:04,120 --> 00:35:07,000 Speaker 1: created equal, and then some bridges of were more way 685 00:35:07,040 --> 00:35:08,960 Speaker 1: more secure design if you look at you know, the 686 00:35:09,080 --> 00:35:11,600 Speaker 1: entire costmos ecosystem is built is built around the idea 687 00:35:11,600 --> 00:35:14,640 Speaker 1: of having these bridges light client bridges between chain. Now 688 00:35:14,680 --> 00:35:19,400 Speaker 1: that's more secure than other approaches, but the a typical approaches, 689 00:35:19,440 --> 00:35:21,200 Speaker 1: you can't have a set of Steiners. So a lot 690 00:35:21,200 --> 00:35:23,080 Speaker 1: of people said of people who are going to monitor 691 00:35:23,160 --> 00:35:25,879 Speaker 1: bus chains are going to see what happens, and then 692 00:35:25,880 --> 00:35:28,360 Speaker 1: they will sign messages saying like yep, I got deposit 693 00:35:28,400 --> 00:35:30,360 Speaker 1: on this chain, and you notify the other chain that 694 00:35:30,360 --> 00:35:33,799 Speaker 1: the pus it happens, and vice versa. But those signatures 695 00:35:33,960 --> 00:35:36,840 Speaker 1: have the power to take away the funds because they 696 00:35:36,840 --> 00:35:39,360 Speaker 1: could pretend that the deposits happened that never happened, or 697 00:35:39,360 --> 00:35:42,520 Speaker 1: that a withdrawal happened that never happened. They need to 698 00:35:42,640 --> 00:35:44,040 Speaker 1: so they need to be in concerns. They need to 699 00:35:44,040 --> 00:35:46,240 Speaker 1: follow the two chains. But there's a lot of attacks 700 00:35:46,239 --> 00:35:48,200 Speaker 1: you could do. First of all, you know if you 701 00:35:48,280 --> 00:35:51,480 Speaker 1: have I don't know um the polygon for example, So 702 00:35:51,560 --> 00:35:53,960 Speaker 1: Polygon is, uh it's an l one chain that markets 703 00:35:54,000 --> 00:35:56,640 Speaker 1: itself as an alto chain on on on a serrium. 704 00:35:56,680 --> 00:36:00,600 Speaker 1: They have five billions. Explain that just quick diver what 705 00:36:00,640 --> 00:36:02,279 Speaker 1: do you mean it's an l one change in. Yeah, 706 00:36:02,280 --> 00:36:05,400 Speaker 1: so is an l one network. And the proof is 707 00:36:05,440 --> 00:36:07,680 Speaker 1: that they are actually investing in the two solutions. You know, 708 00:36:07,719 --> 00:36:10,120 Speaker 1: if you're an alter, you don't invest in healthy solutions 709 00:36:10,200 --> 00:36:13,239 Speaker 1: for for scaling yourself. But it's part of a lot 710 00:36:13,239 --> 00:36:15,839 Speaker 1: of their marketing. Initially was like no, no, no bill 711 00:36:15,880 --> 00:36:18,480 Speaker 1: and Polygon is just like billing on etherium because we're 712 00:36:18,520 --> 00:36:22,080 Speaker 1: all part of scaling ethereum. But their incentive or at 713 00:36:22,080 --> 00:36:25,120 Speaker 1: odz without of the asyrannical system keep going. It's been 714 00:36:25,160 --> 00:36:27,120 Speaker 1: a good growth hack to to to say like no, no no, 715 00:36:27,239 --> 00:36:31,960 Speaker 1: we're complimentary to asyrium, but everyone's computing and uh so 716 00:36:32,480 --> 00:36:34,799 Speaker 1: the Polygon contract has is a five out of eight 717 00:36:34,920 --> 00:36:37,480 Speaker 1: multi sig and it has like a few billions of 718 00:36:37,600 --> 00:36:39,840 Speaker 1: value like if you're if you're holding a signature and 719 00:36:40,239 --> 00:36:44,040 Speaker 1: so there's eight people. Yeah, and in theory to access 720 00:36:44,120 --> 00:36:46,319 Speaker 1: those billions, you just need to get five of them. 721 00:36:46,400 --> 00:36:51,040 Speaker 1: That's right, Okay, just just high stakes. Yeah, yeah, and 722 00:36:51,200 --> 00:36:53,799 Speaker 1: uh so yeah, it's it's it's it's high. Second, you're 723 00:36:53,800 --> 00:36:55,400 Speaker 1: not where you could put the signature. You're not going 724 00:36:55,440 --> 00:36:58,160 Speaker 1: to put it in your apartments. You know, you need 725 00:36:58,200 --> 00:36:59,839 Speaker 1: to be acceptable to access it, so you can't even 726 00:36:59,840 --> 00:37:01,680 Speaker 1: put it in the Bengal So you need some sort 727 00:37:01,680 --> 00:37:03,719 Speaker 1: of probably some data center. But even if you have 728 00:37:03,719 --> 00:37:05,160 Speaker 1: a data center, now you have to sing a black 729 00:37:05,160 --> 00:37:09,520 Speaker 1: well who has access to it. You know, when there's billions, 730 00:37:10,560 --> 00:37:13,040 Speaker 1: if your attack is worth billions a budget that you 731 00:37:13,080 --> 00:37:15,360 Speaker 1: have for actually tricking e sais, I mean you have 732 00:37:15,400 --> 00:37:17,520 Speaker 1: people being kidnapped for example, there's a there's a lot 733 00:37:17,560 --> 00:37:20,640 Speaker 1: of I mean for billions of dollars. It's not you know, 734 00:37:20,680 --> 00:37:22,600 Speaker 1: it's not impossible. People have been kidnap for a lot 735 00:37:22,680 --> 00:37:25,839 Speaker 1: less than that, So that's you know, there's a lot 736 00:37:25,840 --> 00:37:29,440 Speaker 1: of there's a lot of risk associated with running a bridge. 737 00:37:29,480 --> 00:37:32,560 Speaker 1: If you look at Accine Infinity for example, so they're 738 00:37:32,600 --> 00:37:35,560 Speaker 1: not on ethereum, they're running a clonavicorium and there's a bridge, 739 00:37:35,960 --> 00:37:38,640 Speaker 1: and they were hacks for like a dohndred million or 740 00:37:38,640 --> 00:37:40,480 Speaker 1: something like that, And it's easy to look at this 741 00:37:40,560 --> 00:37:42,080 Speaker 1: and say like, ah ha ha, you know, silly and 742 00:37:42,200 --> 00:37:45,719 Speaker 1: fty games they got, they're probably sloppy with security. And 743 00:37:45,960 --> 00:37:48,440 Speaker 1: I have no idea. I have no idea what's you know, 744 00:37:48,440 --> 00:37:50,000 Speaker 1: what's backing it. But I've seen a bunch of people 745 00:37:50,000 --> 00:37:51,960 Speaker 1: say like, apparently the evidence points that, you know them 746 00:37:52,000 --> 00:37:55,000 Speaker 1: being like North Korea, because you know, for a six 747 00:37:55,040 --> 00:37:56,719 Speaker 1: hundred million for North Korea, that's a lot, that's a 748 00:37:56,760 --> 00:38:00,759 Speaker 1: lot of that's meaningful money. But if your adversaries or 749 00:38:00,840 --> 00:38:04,000 Speaker 1: nation states, that puts the you know, that puts the security, 750 00:38:04,000 --> 00:38:06,520 Speaker 1: and you don't really have the security problem. The way 751 00:38:06,560 --> 00:38:09,080 Speaker 1: that bloctions are designed like that, the security works a 752 00:38:09,080 --> 00:38:11,440 Speaker 1: lot a lot better. You know, everyone's responsible for their 753 00:38:11,440 --> 00:38:14,080 Speaker 1: own safety. You don't have this giant an epot of 754 00:38:14,160 --> 00:38:16,520 Speaker 1: all the funds of the one bridge we're try in 755 00:38:16,560 --> 00:38:19,480 Speaker 1: the same place. This actually reminds me of something that 756 00:38:19,520 --> 00:38:20,920 Speaker 1: I want to ask you, and it gets back to 757 00:38:20,960 --> 00:38:27,160 Speaker 1: the multi chain versus absolutist argument or tension. And I 758 00:38:27,160 --> 00:38:29,520 Speaker 1: guess Tesso's has been around for a long time, and 759 00:38:29,560 --> 00:38:31,680 Speaker 1: you know you've been doing this for a while. You people, 760 00:38:31,719 --> 00:38:33,440 Speaker 1: you're well known in the industry. You've talked to a 761 00:38:33,480 --> 00:38:36,319 Speaker 1: bunch of people, you have different partnerships. What is it 762 00:38:36,400 --> 00:38:40,319 Speaker 1: like actually going out and selling the technology to a 763 00:38:40,440 --> 00:38:44,759 Speaker 1: company or convincing some sort of entity to use it, 764 00:38:44,880 --> 00:38:49,160 Speaker 1: Like what is that I guess endeavor like and how 765 00:38:49,160 --> 00:38:54,439 Speaker 1: do you compete against something like Ethereum or Salona or whatever. Yeah, 766 00:38:54,480 --> 00:38:56,799 Speaker 1: so you know, in general, it's I don't go around 767 00:38:56,800 --> 00:38:58,879 Speaker 1: to companies who have no interest in using block chains 768 00:38:58,880 --> 00:39:01,080 Speaker 1: and salem like you should be using you should be 769 00:39:01,080 --> 00:39:03,400 Speaker 1: because in general there's some existing interests. I'm sure some 770 00:39:03,440 --> 00:39:06,440 Speaker 1: blockchains do that. I mean, there's probably a few of 771 00:39:06,480 --> 00:39:09,839 Speaker 1: them at this conference. Yes, it's it's it's it's it's 772 00:39:09,880 --> 00:39:12,040 Speaker 1: it's quite possible. But you know, by a large people 773 00:39:12,040 --> 00:39:14,560 Speaker 1: are you know, even every large institution has at least 774 00:39:14,560 --> 00:39:17,759 Speaker 1: you know, every bank since to sell in certain has 775 00:39:17,840 --> 00:39:20,280 Speaker 1: like an innovation center that actually wants to do something important. 776 00:39:20,280 --> 00:39:22,160 Speaker 1: So there's already you know, like at least some easting 777 00:39:22,200 --> 00:39:25,719 Speaker 1: interests and some ideas of doing something. So it's more 778 00:39:25,719 --> 00:39:27,360 Speaker 1: about like, you know, why should we use what you 779 00:39:27,560 --> 00:39:29,319 Speaker 1: what should the use testos as opposed to any other 780 00:39:29,560 --> 00:39:31,279 Speaker 1: any other blockchain, And then you know, we rely on 781 00:39:32,000 --> 00:39:34,880 Speaker 1: some of the good attributes of testos, which is a 782 00:39:35,120 --> 00:39:38,640 Speaker 1: very stronger centralization, um the fact that we have a 783 00:39:38,640 --> 00:39:41,560 Speaker 1: really good software stack for building take your application, it's 784 00:39:41,600 --> 00:39:44,319 Speaker 1: I think a lot easier to verify the security of 785 00:39:44,640 --> 00:39:48,280 Speaker 1: contracts written on and on contracts that that use solidity, 786 00:39:49,040 --> 00:39:52,120 Speaker 1: good developer community. Sometimes it can just be handolding. Sometimes 787 00:39:52,160 --> 00:39:54,000 Speaker 1: people say, you know what, I've tried to build on 788 00:39:54,000 --> 00:39:56,560 Speaker 1: this chain and I couldn't find any help. And being 789 00:39:56,600 --> 00:40:00,480 Speaker 1: able to go to these people and provide technological expertise 790 00:40:00,520 --> 00:40:02,480 Speaker 1: makes some big difference. And I want to get your 791 00:40:02,520 --> 00:40:06,760 Speaker 1: take on another big thing that's going on in crypto 792 00:40:06,880 --> 00:40:09,760 Speaker 1: right now that's attracting all kinds of controversy and medium 793 00:40:09,840 --> 00:40:15,400 Speaker 1: posts and tweets, and that is the chain Luna and 794 00:40:15,719 --> 00:40:18,360 Speaker 1: is like this, So the deal is in my understanding. 795 00:40:18,360 --> 00:40:21,239 Speaker 1: Maybe you'll you'll explain it better. But there's a chain 796 00:40:21,320 --> 00:40:24,440 Speaker 1: called Luna and they have a stable coin called ust 797 00:40:25,480 --> 00:40:30,480 Speaker 1: and they've you can get on USC if you buy 798 00:40:30,520 --> 00:40:33,000 Speaker 1: this coin and then like stake it, and people are 799 00:40:33,040 --> 00:40:35,560 Speaker 1: making tons of money and it's going up. And then 800 00:40:35,640 --> 00:40:38,160 Speaker 1: also I think the Luna Foundation is buying a bunch 801 00:40:38,160 --> 00:40:41,080 Speaker 1: of bitcoin, like billions of dollars worth to build this 802 00:40:41,160 --> 00:40:43,279 Speaker 1: war chest to hold the peg of the stable coin 803 00:40:43,280 --> 00:40:46,000 Speaker 1: because to hold a stable coins peg. There's a lot 804 00:40:46,040 --> 00:40:49,120 Speaker 1: of interest in stable coin architecture and design. And some 805 00:40:49,160 --> 00:40:51,239 Speaker 1: people think like this is like gonna blow up. And 806 00:40:51,280 --> 00:40:53,160 Speaker 1: someone once told me it's like all the stuff that 807 00:40:53,200 --> 00:40:55,319 Speaker 1: you're worried about with tether, you should be looking at 808 00:40:55,600 --> 00:40:58,360 Speaker 1: Luna and other people like super bullish on it. What 809 00:40:58,480 --> 00:41:00,840 Speaker 1: is your reader the situation? I see more talk about 810 00:41:00,840 --> 00:41:03,359 Speaker 1: this story than a lot of other things right now. Yeah, 811 00:41:03,560 --> 00:41:06,680 Speaker 1: I have, you know, I have my My theory is 812 00:41:06,719 --> 00:41:09,440 Speaker 1: no convertibility, no parody. So you cannot if you cannot 813 00:41:09,440 --> 00:41:13,440 Speaker 1: convert your assets from from your dollar civil coin into dollars, 814 00:41:13,440 --> 00:41:15,879 Speaker 1: you're not gonna have any form of parody. And it's 815 00:41:15,920 --> 00:41:17,880 Speaker 1: it's such a powerful law. I mean even you know 816 00:41:17,920 --> 00:41:21,120 Speaker 1: you saw it in equities. The classical example is um 817 00:41:22,239 --> 00:41:27,359 Speaker 1: Shell Royal Dutch where after where after a merger they 818 00:41:27,360 --> 00:41:30,960 Speaker 1: had shares treading on in Amsterdam and chares ring in London, 819 00:41:31,200 --> 00:41:34,080 Speaker 1: and there's the same equity. They give the shareholders exactly 820 00:41:34,200 --> 00:41:36,200 Speaker 1: the same rights, and one treaded you know, for for 821 00:41:36,320 --> 00:41:39,839 Speaker 1: years at like a discount to the other, and and 822 00:41:39,840 --> 00:41:41,760 Speaker 1: and there's the same instrument. But because you cannot convert 823 00:41:41,800 --> 00:41:44,480 Speaker 1: one into the other. So if you don't have, if 824 00:41:44,760 --> 00:41:46,880 Speaker 1: you cannot just hope that people are gonna be rational, 825 00:41:46,920 --> 00:41:48,640 Speaker 1: you need arbit chargers to be able to come in 826 00:41:48,600 --> 00:41:51,960 Speaker 1: and easy arbitrage. So with a lot of fractionalized with 827 00:41:52,000 --> 00:41:54,760 Speaker 1: a lot of like fractionally backstable coins, the arby chargers 828 00:41:54,760 --> 00:41:58,280 Speaker 1: can do that to some extent. But the system realizes 829 00:41:58,400 --> 00:42:01,399 Speaker 1: on constant growth in the number of people who wanted 830 00:42:01,400 --> 00:42:03,600 Speaker 1: to hold a coin. And if you don't have this growth, 831 00:42:03,640 --> 00:42:04,840 Speaker 1: and if you have, you know, as soon as you 832 00:42:04,880 --> 00:42:08,480 Speaker 1: use through contraction and people start asking for redemption, then 833 00:42:08,600 --> 00:42:12,400 Speaker 1: the system collapses. So that's you know, how business, for example, 834 00:42:12,440 --> 00:42:15,080 Speaker 1: it's built, and that's how or wanted to be built. 835 00:42:15,640 --> 00:42:19,400 Speaker 1: Luna is a little different. Um. What they're doing essentially 836 00:42:19,400 --> 00:42:20,800 Speaker 1: is they're saying, okay, so we have an idea of 837 00:42:20,840 --> 00:42:24,040 Speaker 1: the price of Luna in unst dollars, and so anyone 838 00:42:24,040 --> 00:42:28,279 Speaker 1: who comes in can issue some against you can burn 839 00:42:28,320 --> 00:42:30,560 Speaker 1: some Lunine, issue some some some us T or do 840 00:42:30,640 --> 00:42:33,960 Speaker 1: the opposite, and we're gonna pay because oh that's great, 841 00:42:34,000 --> 00:42:36,000 Speaker 1: you know it will it's it's a growth, it's a 842 00:42:36,040 --> 00:42:38,560 Speaker 1: way to grow. The difficulty with that is there's no 843 00:42:38,680 --> 00:42:42,680 Speaker 1: limits to how much USD can be UH can be created, 844 00:42:43,120 --> 00:42:45,719 Speaker 1: and the lunit holders are actually paying for the twenty 845 00:42:45,719 --> 00:42:47,680 Speaker 1: percent are coming from from somewhere. Now. They're happy to 846 00:42:47,760 --> 00:42:50,120 Speaker 1: do it because they're saying, well, you know, the growth 847 00:42:50,239 --> 00:42:53,640 Speaker 1: and the demand in the civil coin creates visibility for 848 00:42:53,680 --> 00:42:56,799 Speaker 1: the ecosystem, it creates hype, and it creates market care. 849 00:42:56,880 --> 00:43:00,400 Speaker 1: But there's limitations to u to how that works. What 850 00:43:00,560 --> 00:43:03,239 Speaker 1: they don't do. What you need to do is you 851 00:43:03,400 --> 00:43:05,800 Speaker 1: need to be able to set the interest rate in 852 00:43:05,800 --> 00:43:08,880 Speaker 1: the way that's going to balance the supply and itsupper 853 00:43:08,880 --> 00:43:11,920 Speaker 1: stoually be determined by what's backing it and the demand, 854 00:43:11,960 --> 00:43:13,440 Speaker 1: which is, you know, how many people actually want to 855 00:43:13,480 --> 00:43:15,800 Speaker 1: hold this stable coin and they don't have a mechanism 856 00:43:15,920 --> 00:43:19,359 Speaker 1: like like this. And instead of building this mechanism, because 857 00:43:19,360 --> 00:43:20,920 Speaker 1: you could do that, you could you could do something 858 00:43:21,000 --> 00:43:23,879 Speaker 1: where you say, look, we want to have no more 859 00:43:23,960 --> 00:43:27,640 Speaker 1: than of the market gap of them not being into 860 00:43:27,800 --> 00:43:30,960 Speaker 1: ust and if we have more than thirty percents, and well, 861 00:43:31,200 --> 00:43:34,279 Speaker 1: well we'll lowers interest rates, including you know, potentially going 862 00:43:34,640 --> 00:43:37,439 Speaker 1: negative and if we have less, well so that there's 863 00:43:37,480 --> 00:43:38,880 Speaker 1: making them that work instead of that they're going and 864 00:43:38,880 --> 00:43:41,600 Speaker 1: so we're gonna buy bitcoin which is, you know, if 865 00:43:41,640 --> 00:43:44,239 Speaker 1: you want to have also some centralized ownership and going 866 00:43:44,320 --> 00:43:48,439 Speaker 1: by you know, go and go and buy some of dollars, 867 00:43:48,480 --> 00:43:50,920 Speaker 1: Like why would you nationel for doing what do they 868 00:43:51,000 --> 00:43:54,200 Speaker 1: say is the rationals headlines? Well, it was the biggest 869 00:43:54,239 --> 00:43:56,360 Speaker 1: holder of the biggest holder of point. How cool is that? 870 00:43:56,920 --> 00:43:58,360 Speaker 1: Or potentially is the idea is that? Well maybe we 871 00:43:58,400 --> 00:44:03,680 Speaker 1: could appreciates and and and and it helps us backing problem. Yeah, um, 872 00:44:03,840 --> 00:44:08,399 Speaker 1: since you mentioned arbitrage there, I was wondering, given your 873 00:44:08,480 --> 00:44:11,800 Speaker 1: E t F market making background, do you see a 874 00:44:11,880 --> 00:44:14,920 Speaker 1: lot of parallels between the world of crypto and UM 875 00:44:15,480 --> 00:44:19,440 Speaker 1: and E t F trading, UM c F trading, not 876 00:44:20,160 --> 00:44:22,480 Speaker 1: not just per se right, not directly, but just having 877 00:44:22,520 --> 00:44:25,080 Speaker 1: in general financial background. I think he's helpful when looking 878 00:44:25,080 --> 00:44:26,920 Speaker 1: at a lot of the five protocols and understanding how 879 00:44:27,000 --> 00:44:31,360 Speaker 1: they how they work or don't work. I have a question, 880 00:44:31,480 --> 00:44:33,839 Speaker 1: and again it's sort of about these parallels. So one, 881 00:44:34,640 --> 00:44:41,560 Speaker 1: people got hyped up about blockchains early when the robin 882 00:44:41,640 --> 00:44:44,439 Speaker 1: Hood stuff was going on, and people started learning about 883 00:44:44,440 --> 00:44:46,759 Speaker 1: payment for order flow, and they like, oh, you're giving 884 00:44:46,840 --> 00:44:49,200 Speaker 1: a penny or a million of a penny on every trade. 885 00:44:49,480 --> 00:44:52,640 Speaker 1: Some high frequency trader jumping ahead of you and so forth. 886 00:44:53,120 --> 00:44:56,719 Speaker 1: But crypto or block chains themselves and ethereum and other 887 00:44:56,800 --> 00:45:01,360 Speaker 1: smart contracting platforms have this concept of MTV and minor 888 00:45:01,440 --> 00:45:04,240 Speaker 1: extractable value. And if I want to place a trade, 889 00:45:04,560 --> 00:45:06,520 Speaker 1: you know, blocks only happen every once in a while, 890 00:45:06,640 --> 00:45:08,960 Speaker 1: and in theory, that trade goes out there and everyone 891 00:45:09,000 --> 00:45:12,000 Speaker 1: can see it, and a minor can jump ahead of 892 00:45:12,360 --> 00:45:14,560 Speaker 1: can I think is how it works? Essentially jump ahead 893 00:45:14,560 --> 00:45:17,040 Speaker 1: of me and get a better price on that execution 894 00:45:17,200 --> 00:45:18,400 Speaker 1: and then sell it back to me and I get 895 00:45:18,440 --> 00:45:21,360 Speaker 1: a worse execution. How big of a problem is this? 896 00:45:21,480 --> 00:45:24,160 Speaker 1: Can you like talk like and how does it work 897 00:45:24,200 --> 00:45:28,600 Speaker 1: on tesso's And what are the sort of like things 898 00:45:28,719 --> 00:45:32,360 Speaker 1: that people should understand about, you know, the power that 899 00:45:32,560 --> 00:45:35,879 Speaker 1: miners have or the you know what how MTV comes 900 00:45:35,920 --> 00:45:38,520 Speaker 1: out of the system. Well, that's a big guy, that's 901 00:45:38,760 --> 00:45:40,600 Speaker 1: that's I know. It's like, these are the things that 902 00:45:40,680 --> 00:45:43,360 Speaker 1: we haven't really talked about before, and you're gonna explaining 903 00:45:43,400 --> 00:45:44,840 Speaker 1: these things. So I figured I would just give you 904 00:45:44,880 --> 00:45:46,759 Speaker 1: a bit have you to hide to hide to dive 905 00:45:46,800 --> 00:45:49,160 Speaker 1: into it. So the first thing to understand is that 906 00:45:49,480 --> 00:45:52,680 Speaker 1: order flu is not funcible rights order flow, that comes 907 00:45:52,719 --> 00:45:54,799 Speaker 1: from retail trading. Is not the same thing as order 908 00:45:54,840 --> 00:45:58,120 Speaker 1: flu that comes from Goldman Sachs. So that comes from 909 00:45:58,200 --> 00:46:00,400 Speaker 1: a fun manager. You know, if I come to you 910 00:46:00,520 --> 00:46:02,960 Speaker 1: and I say, hey, you know I want to buy this, uh, 911 00:46:03,280 --> 00:46:05,120 Speaker 1: this equity from you this year is from you make 912 00:46:05,160 --> 00:46:08,239 Speaker 1: sure sure you know? Or maybe maybe not, but if 913 00:46:08,280 --> 00:46:10,080 Speaker 1: if if common sucks come to you and say, hey, 914 00:46:10,480 --> 00:46:12,080 Speaker 1: don't you want to buy this from us? So this 915 00:46:12,239 --> 00:46:14,920 Speaker 1: is like retail flow is much more desirable because we're 916 00:46:14,960 --> 00:46:16,960 Speaker 1: all down. It's not even that it's umb, it's like 917 00:46:17,040 --> 00:46:19,080 Speaker 1: it's just not informed. You're you're buying. You know you're 918 00:46:19,120 --> 00:46:22,480 Speaker 1: buying it because either maybe you're gambling or because you're saying, 919 00:46:22,520 --> 00:46:23,719 Speaker 1: like I like this talk, I want to buy it 920 00:46:23,760 --> 00:46:25,600 Speaker 1: for retirement and so and so forth. This is not 921 00:46:25,800 --> 00:46:28,600 Speaker 1: like you have just received some informations for a wire 922 00:46:28,680 --> 00:46:30,759 Speaker 1: about something and you've done all of that and now 923 00:46:30,840 --> 00:46:33,360 Speaker 1: you know that the execution is going the press can 924 00:46:33,520 --> 00:46:36,719 Speaker 1: go down. So it's quite different. And once, once upon 925 00:46:36,760 --> 00:46:39,000 Speaker 1: a time, um, you didn't have to mix all the 926 00:46:39,040 --> 00:46:41,279 Speaker 1: other flu together. So if you were a big fund 927 00:46:41,320 --> 00:46:43,719 Speaker 1: manager and you have this large SMP fund and you 928 00:46:43,760 --> 00:46:46,200 Speaker 1: need to rebalance and you talk to another big fund 929 00:46:46,239 --> 00:46:49,000 Speaker 1: manager and they need to rebalance, and then you strike 930 00:46:49,040 --> 00:46:51,239 Speaker 1: a deal because you know that the other person is 931 00:46:51,280 --> 00:46:53,560 Speaker 1: not trying to screw you, right, so they're just trying 932 00:46:53,600 --> 00:46:55,920 Speaker 1: to just trying to solve a mutual problem. Yes, and 933 00:46:56,080 --> 00:46:58,480 Speaker 1: also you're going to do repeat business with them. That's 934 00:46:58,560 --> 00:47:00,719 Speaker 1: quite important. And that's you know that happened upstairs and 935 00:47:00,960 --> 00:47:03,719 Speaker 1: icy uh. And then at some point he looks at 936 00:47:03,760 --> 00:47:05,480 Speaker 1: this and say, well, you know, we see all these 937 00:47:05,520 --> 00:47:08,560 Speaker 1: big trades happening, and they're very advantagerous. But the reasons 938 00:47:08,960 --> 00:47:11,759 Speaker 1: and MS right, this is regulars. Yeah, the retail guy 939 00:47:11,840 --> 00:47:13,760 Speaker 1: doesn't get access to that. So we're gonna put everything 940 00:47:14,200 --> 00:47:18,440 Speaker 1: on the electronic exchange and brookers will have to route 941 00:47:18,520 --> 00:47:21,560 Speaker 1: to whichever exchange has the best, you know, the NBBO, 942 00:47:21,640 --> 00:47:24,960 Speaker 1: the best beg an Ask and a lot of instrumental investors. 943 00:47:25,000 --> 00:47:26,600 Speaker 1: When they start doing that, they had no idea how 944 00:47:26,640 --> 00:47:28,279 Speaker 1: to do it. So now they start showing these big 945 00:47:28,400 --> 00:47:30,719 Speaker 1: orders or even you know, if they chop them up, 946 00:47:30,719 --> 00:47:33,040 Speaker 1: they don't do it in they don't really do it 947 00:47:33,080 --> 00:47:34,880 Speaker 1: in a way that hides the amount of volume that 948 00:47:34,920 --> 00:47:37,600 Speaker 1: they want to do, and they get eaten by hYP 949 00:47:37,680 --> 00:47:40,920 Speaker 1: you cant traders who appear as a college industry as 950 00:47:40,960 --> 00:47:43,719 Speaker 1: soon as the reaguims is past, and so a lot 951 00:47:43,760 --> 00:47:48,200 Speaker 1: of a lot of these big cell side people get 952 00:47:48,280 --> 00:47:50,600 Speaker 1: very very upset at it. And if you read Flashboys, 953 00:47:50,640 --> 00:47:53,520 Speaker 1: it's very one sided book that looks only about the 954 00:47:53,600 --> 00:47:56,120 Speaker 1: cell side, doesn't introduce a single person on the actricancy trading. 955 00:47:56,560 --> 00:47:59,440 Speaker 1: I remember there's this crazy bit in Flashboys where he 956 00:47:59,560 --> 00:48:01,760 Speaker 1: was talking he was about to do like a retail 957 00:48:01,800 --> 00:48:04,919 Speaker 1: trade and he was about to click like order or buy, 958 00:48:05,200 --> 00:48:07,840 Speaker 1: and then he saw the price move on his screen 959 00:48:08,000 --> 00:48:10,880 Speaker 1: and he was convinced that it was because you know, 960 00:48:10,960 --> 00:48:15,040 Speaker 1: Goldman Sachs was front running his his like tiny retail 961 00:48:15,120 --> 00:48:17,440 Speaker 1: trade and bizarre because it's also presented I think like 962 00:48:17,520 --> 00:48:19,480 Speaker 1: in South and ten and is like, oh, I'm uncovering 963 00:48:19,600 --> 00:48:22,640 Speaker 1: this big secret, and I'm like, I started working in 964 00:48:22,719 --> 00:48:24,880 Speaker 1: Goldman sections and nine because people were talking about this 965 00:48:24,920 --> 00:48:27,800 Speaker 1: on TV and I saw it was cool. So you know, 966 00:48:27,840 --> 00:48:30,480 Speaker 1: it wasn't CNBC. It's not like they were encovering a 967 00:48:30,520 --> 00:48:33,440 Speaker 1: big conspiracy um. And you know, people adapted, of course, 968 00:48:33,440 --> 00:48:36,200 Speaker 1: so they started using execution brokers where you know they 969 00:48:36,239 --> 00:48:37,920 Speaker 1: will say no, well well we'll take your order, chop 970 00:48:38,000 --> 00:48:39,400 Speaker 1: it up and then put it on put it on 971 00:48:39,480 --> 00:48:42,320 Speaker 1: the exchange. But so now as a result, what happens 972 00:48:42,480 --> 00:48:44,800 Speaker 1: is um you get interrantiational flow. So you get this 973 00:48:44,880 --> 00:48:48,400 Speaker 1: retail flow. And if you send a retail flow to 974 00:48:48,440 --> 00:48:50,080 Speaker 1: the exchange, the retail is going to get a worse 975 00:48:50,120 --> 00:48:52,000 Speaker 1: price because the exchange doesn't know in this thing. The 976 00:48:52,040 --> 00:48:53,759 Speaker 1: exchange says, whoa wa, wait a second, we don't know 977 00:48:53,800 --> 00:48:55,440 Speaker 1: who you are. You could be retailed, you could be 978 00:48:55,480 --> 00:48:58,120 Speaker 1: a hedge fund. We're gonna be giving you wide quotes 979 00:48:58,200 --> 00:49:00,560 Speaker 1: because we don't know whereas as a brooker, you know, 980 00:49:00,960 --> 00:49:04,279 Speaker 1: the order fluid is not is not toxic. That's a 981 00:49:04,280 --> 00:49:06,640 Speaker 1: word that's used for like informal flow. It's it's not 982 00:49:06,719 --> 00:49:08,480 Speaker 1: informal to flow. So you can give it a better price. 983 00:49:08,680 --> 00:49:10,400 Speaker 1: So you're gonna imagine in generally you're gonna give you 984 00:49:10,440 --> 00:49:12,000 Speaker 1: a better price in the envideo, which you're a lot. 985 00:49:12,160 --> 00:49:13,640 Speaker 1: You know you're a lot too. You know. To do that, 986 00:49:13,680 --> 00:49:16,120 Speaker 1: you're going to report the trade to the exchange and 987 00:49:16,200 --> 00:49:18,320 Speaker 1: that it's or you're going to give the customers n 988 00:49:18,360 --> 00:49:20,719 Speaker 1: b b oh. But actually you internalize it for something better, 989 00:49:21,080 --> 00:49:23,480 Speaker 1: so the customer feels like, oh, I haven't paid anything. 990 00:49:23,600 --> 00:49:26,279 Speaker 1: You know, but actually you've made money because you can 991 00:49:26,400 --> 00:49:29,440 Speaker 1: quote tighter on your interniz flow than you could on 992 00:49:29,520 --> 00:49:32,719 Speaker 1: the exchange. So retail really went out out of this, 993 00:49:32,840 --> 00:49:34,879 Speaker 1: like the small retail guy who's like just spuying single 994 00:49:34,960 --> 00:49:38,000 Speaker 1: in stocks markets much more liquid for that. I would 995 00:49:38,040 --> 00:49:41,520 Speaker 1: say the losers out of this have been logtituational traders 996 00:49:41,560 --> 00:49:45,200 Speaker 1: who now have to eisier use execution brookers or dark pools. 997 00:49:45,920 --> 00:49:50,879 Speaker 1: So here's a very broad question based on that very 998 00:49:50,960 --> 00:49:54,800 Speaker 1: long and detailed answer. But what is crypto trading like 999 00:49:55,360 --> 00:49:59,120 Speaker 1: behind the scenes of exchanges? Like how transparent is it? 1000 00:49:59,239 --> 00:50:01,920 Speaker 1: And what sort of execution are people getting? Right and 1001 00:50:02,000 --> 00:50:04,719 Speaker 1: all the MTV aspects, So it's like what are what 1002 00:50:04,840 --> 00:50:07,160 Speaker 1: are the equivalent like how big are some of these? 1003 00:50:08,000 --> 00:50:10,120 Speaker 1: So the according to MTV is is putting your giant 1004 00:50:10,200 --> 00:50:12,080 Speaker 1: order on the exchange and everyone knows what you know 1005 00:50:12,160 --> 00:50:14,920 Speaker 1: you're about to do, uh, and so people can get 1006 00:50:15,239 --> 00:50:17,400 Speaker 1: you know, people can get ahead of you. The difference 1007 00:50:17,480 --> 00:50:19,360 Speaker 1: is that if I put a giant order with my broker, 1008 00:50:19,400 --> 00:50:21,120 Speaker 1: at the very least the broker has if you sharing 1009 00:50:21,160 --> 00:50:24,400 Speaker 1: responsibility towards me you know, I mean his client, and 1010 00:50:24,480 --> 00:50:27,040 Speaker 1: so they have to do things a certain way. Whereas 1011 00:50:27,320 --> 00:50:30,000 Speaker 1: I don't have any fidishary relationship with a minor. Now 1012 00:50:30,080 --> 00:50:32,640 Speaker 1: there's nothing stopping people from building these relationships. You know, 1013 00:50:33,080 --> 00:50:35,080 Speaker 1: as a trader, you could go to a block producers 1014 00:50:35,120 --> 00:50:37,520 Speaker 1: and say, I want you to promise me that when 1015 00:50:37,560 --> 00:50:39,760 Speaker 1: I send you an order, you're never going to include 1016 00:50:39,760 --> 00:50:41,200 Speaker 1: you're never going to show it to anyone else, and 1017 00:50:41,239 --> 00:50:43,479 Speaker 1: you're going to before like you could do that, which 1018 00:50:43,600 --> 00:50:48,040 Speaker 1: people don't do it. Do you think that's gonna happen? No? No, 1019 00:50:48,360 --> 00:50:49,920 Speaker 1: I think what's gonna happen is people are going to 1020 00:50:50,000 --> 00:50:52,920 Speaker 1: build better protocols which are going to remove some of 1021 00:50:53,040 --> 00:50:57,400 Speaker 1: the some of the extractable value. Do you think regulation 1022 00:50:57,480 --> 00:50:59,919 Speaker 1: will come to the space, like will well the SEC, 1023 00:51:00,120 --> 00:51:04,440 Speaker 1: for instance, get interested in best execution for for retail 1024 00:51:04,440 --> 00:51:07,879 Speaker 1: traders in crypto? So I I don't retalily. I think 1025 00:51:07,920 --> 00:51:12,279 Speaker 1: it's possible because people have made ATV into some sort 1026 00:51:12,320 --> 00:51:15,160 Speaker 1: of moral issue, which I think is dangerous. Uh. You 1027 00:51:15,239 --> 00:51:18,000 Speaker 1: know the words saying like all the miners are exploiting people, 1028 00:51:18,440 --> 00:51:21,839 Speaker 1: they're taking advantage and so and so forth. One thing 1029 00:51:21,880 --> 00:51:23,400 Speaker 1: that I think would be more helpful to frame you 1030 00:51:23,560 --> 00:51:25,040 Speaker 1: us And again I said, it's like, if you want 1031 00:51:25,080 --> 00:51:27,000 Speaker 1: a fid sue response. You know, if you want toure 1032 00:51:27,000 --> 00:51:30,160 Speaker 1: relationship with your miners, you should ask for it. What 1033 00:51:30,280 --> 00:51:32,000 Speaker 1: I would worry about is the regulation that says that 1034 00:51:32,080 --> 00:51:35,160 Speaker 1: by default, as a miner, you have a responsibility with people, 1035 00:51:35,200 --> 00:51:37,000 Speaker 1: which I don't think you should have. What about if 1036 00:51:37,040 --> 00:51:41,080 Speaker 1: I have a fiduciary responsibility with a brokerage that, for instance, 1037 00:51:41,200 --> 00:51:43,799 Speaker 1: is providing me crypto exposure through my four oh one 1038 00:51:43,880 --> 00:51:46,560 Speaker 1: k as I think someone is doing now I forgot 1039 00:51:46,600 --> 00:51:48,360 Speaker 1: the name, but you know various people are starting to 1040 00:51:48,400 --> 00:51:50,719 Speaker 1: do this in a sort of more regulated way. How 1041 00:51:50,800 --> 00:51:54,279 Speaker 1: does that fit into the execution? Well, in that case, 1042 00:51:54,360 --> 00:51:56,080 Speaker 1: of course, you know, the brokers should not like favor 1043 00:51:56,120 --> 00:51:59,080 Speaker 1: another client ors themselves, you know, in doing the transaction now, 1044 00:51:59,200 --> 00:52:01,000 Speaker 1: but if they if I is it trade? And just 1045 00:52:01,120 --> 00:52:03,239 Speaker 1: to be clear, this happens for on chain trading when 1046 00:52:03,280 --> 00:52:05,760 Speaker 1: you use the fire protocols. It's not it's not directly 1047 00:52:05,800 --> 00:52:10,040 Speaker 1: an issue is trading on centralized exchanges. I think you know, 1048 00:52:10,080 --> 00:52:11,719 Speaker 1: at first of all, a lot of it comes from 1049 00:52:12,160 --> 00:52:14,640 Speaker 1: the latency of change. The more latency you have, the 1050 00:52:14,719 --> 00:52:16,960 Speaker 1: more mtvs are is going to um um. It's going 1051 00:52:17,040 --> 00:52:20,279 Speaker 1: to be because of quotes are not adjusted in real time, 1052 00:52:20,360 --> 00:52:22,759 Speaker 1: So it's partly a fraction of that and the way 1053 00:52:22,800 --> 00:52:24,480 Speaker 1: in which protocols have been designed. If you are an 1054 00:52:24,480 --> 00:52:27,920 Speaker 1: assistant where you can't address quotes really rapidly, you need 1055 00:52:27,960 --> 00:52:32,160 Speaker 1: to build batch transaction mechanisms and is it harder to program? 1056 00:52:32,400 --> 00:52:34,359 Speaker 1: But once you have this, you can reduce the MTV 1057 00:52:34,520 --> 00:52:37,080 Speaker 1: on on its change a lot, and I think we'll 1058 00:52:37,080 --> 00:52:40,000 Speaker 1: see that happen. So just going back to the turtles 1059 00:52:40,440 --> 00:52:44,040 Speaker 1: at the beginning of this discussion and plastic bags on 1060 00:52:44,160 --> 00:52:46,960 Speaker 1: the block chain, I was I was packing up my 1061 00:52:47,000 --> 00:52:48,800 Speaker 1: apartment in Hong Kong a few months ago, and I 1062 00:52:48,920 --> 00:52:51,799 Speaker 1: noticed that a bottle of balsamic vinegar that I had 1063 00:52:51,840 --> 00:52:55,120 Speaker 1: that I never used was it was on the blockchain? Right, 1064 00:52:55,239 --> 00:52:59,200 Speaker 1: you could trace it to test its validity, And big 1065 00:52:59,320 --> 00:53:04,680 Speaker 1: existential question here, but it is the future just everything 1066 00:53:04,920 --> 00:53:07,800 Speaker 1: on the blockchain, And how do you differentiate between the 1067 00:53:07,920 --> 00:53:11,400 Speaker 1: importance of having something like plastic bags being tracked and 1068 00:53:11,520 --> 00:53:15,440 Speaker 1: traceable versus having something like a store of value that 1069 00:53:15,560 --> 00:53:18,800 Speaker 1: people are using up to hedge against inflation or for 1070 00:53:18,920 --> 00:53:21,320 Speaker 1: whatever reason. Well, I think there's more value in the 1071 00:53:21,360 --> 00:53:23,960 Speaker 1: store of value aspects than the supplication applications. A lot 1072 00:53:23,960 --> 00:53:26,359 Speaker 1: of the supplication applications we see on bloctions honestly are 1073 00:53:26,760 --> 00:53:29,200 Speaker 1: stone soup. You know you'll see IBM go to these 1074 00:53:29,440 --> 00:53:32,360 Speaker 1: people and put everything on a bloction. But if you 1075 00:53:32,440 --> 00:53:35,279 Speaker 1: digitalize your entire chain rights where you have, you know, 1076 00:53:35,440 --> 00:53:37,080 Speaker 1: like you can scan your codes and do all of 1077 00:53:37,160 --> 00:53:39,200 Speaker 1: this and put it in a system and then you 1078 00:53:39,280 --> 00:53:41,800 Speaker 1: know like you've you've solved your problem, and then you 1079 00:53:41,880 --> 00:53:43,360 Speaker 1: put it on the bloction, you know, why not, But 1080 00:53:43,440 --> 00:53:46,600 Speaker 1: that's not really what's driving the value. I believe this 1081 00:53:46,760 --> 00:53:51,400 Speaker 1: value in digizing and having um photographic signature on supply chains. Absolutely. 1082 00:53:52,120 --> 00:53:54,680 Speaker 1: I don't think the bloction adds a hot to to this. 1083 00:53:55,440 --> 00:53:58,440 Speaker 1: All right, Well, uh, the brightman of tess, thank you 1084 00:53:58,600 --> 00:54:00,560 Speaker 1: so much. There's a great conversation. And I feel like 1085 00:54:01,320 --> 00:54:04,440 Speaker 1: the U we have really good conversations with, like the 1086 00:54:04,719 --> 00:54:07,520 Speaker 1: people who did some actually did some time in the 1087 00:54:07,560 --> 00:54:10,040 Speaker 1: trad fi trading world. That seems to be like the 1088 00:54:10,120 --> 00:54:12,560 Speaker 1: sweet spot for people who can explain things. So thanks 1089 00:54:12,600 --> 00:54:14,279 Speaker 1: for coming on odd locks than thank you for having me. 1090 00:54:14,560 --> 00:54:29,640 Speaker 1: Thanks so much for a thing that was great. I 1091 00:54:29,680 --> 00:54:31,960 Speaker 1: guess I said that at the end there. But I 1092 00:54:32,080 --> 00:54:36,000 Speaker 1: do feel like the best explanations and conversations we have 1093 00:54:36,120 --> 00:54:39,200 Speaker 1: on this space are often with someone who did some 1094 00:54:39,640 --> 00:54:43,120 Speaker 1: time trading and some legacy institution and can sort of 1095 00:54:43,200 --> 00:54:45,200 Speaker 1: I guess I would say, like translate some of these 1096 00:54:45,280 --> 00:54:48,279 Speaker 1: ideas back and forth. But I also feel like there's 1097 00:54:48,320 --> 00:54:50,800 Speaker 1: a tendency in crypto for people to talk about like 1098 00:54:51,080 --> 00:54:53,839 Speaker 1: all these issues are brand new, when in fact they 1099 00:54:53,920 --> 00:54:58,320 Speaker 1: have been you know, very diligently thought out many years 1100 00:54:58,480 --> 00:55:01,680 Speaker 1: before by traditional finance whole institutions, and there's a reason why, 1101 00:55:02,000 --> 00:55:04,000 Speaker 1: you know, they do it a certain way. But execution, 1102 00:55:04,040 --> 00:55:06,080 Speaker 1: for instance, is something that's been top of mind for 1103 00:55:06,120 --> 00:55:09,120 Speaker 1: a lot of people for decades. I still think people 1104 00:55:09,160 --> 00:55:11,600 Speaker 1: should just chill out. It's like it's depending or it's 1105 00:55:11,600 --> 00:55:13,200 Speaker 1: like it's just a fraction of a panel, that's the 1106 00:55:13,200 --> 00:55:15,640 Speaker 1: big deal. Um. The other thing that I liked from 1107 00:55:15,680 --> 00:55:19,520 Speaker 1: that conversation was the description of defy. You know, the 1108 00:55:19,600 --> 00:55:21,839 Speaker 1: question of what is the export here? And we've talked 1109 00:55:21,840 --> 00:55:24,279 Speaker 1: about it before, but like, what exactly are we doing 1110 00:55:24,360 --> 00:55:26,880 Speaker 1: other than dealing and more del Well, you used to 1111 00:55:27,000 --> 00:55:28,960 Speaker 1: make fun of me because early on and some of 1112 00:55:29,040 --> 00:55:32,600 Speaker 1: our first defied conversations, I would like, well, the whaling expedition, 1113 00:55:32,760 --> 00:55:34,400 Speaker 1: and it's like I would never make fun of it 1114 00:55:34,480 --> 00:55:37,960 Speaker 1: is the protocol. Actually, you know, it's like vc I 1115 00:55:38,040 --> 00:55:41,320 Speaker 1: got its roots kind of in funding whaling expeditions. I 1116 00:55:41,480 --> 00:55:43,680 Speaker 1: never made fun of you. I just questioned why you 1117 00:55:43,760 --> 00:55:47,359 Speaker 1: were obsessed with whaling expeditions all of a sudden. Fair enough, 1118 00:55:48,000 --> 00:55:50,360 Speaker 1: but anyway, like that is like you know, it is 1119 00:55:50,400 --> 00:55:54,080 Speaker 1: other pointed out, like it's not that exciting if it's 1120 00:55:54,120 --> 00:55:58,080 Speaker 1: just tokens, trading tokens, trading tokens and more tokens, or 1121 00:55:58,160 --> 00:56:02,440 Speaker 1: it's not that world changing or boxes but tokens token 1122 00:56:02,520 --> 00:56:05,279 Speaker 1: I's boxes. Yeah, all right, shall we leave it there. 1123 00:56:05,400 --> 00:56:07,840 Speaker 1: Let's leave it there. This has been another episode of 1124 00:56:07,960 --> 00:56:10,560 Speaker 1: the All Thoughts podcast. I'm Tracy Alloway. You can follow 1125 00:56:10,640 --> 00:56:13,200 Speaker 1: me on Twitter at Tracy Alloway and I'm Joe wi 1126 00:56:13,239 --> 00:56:15,960 Speaker 1: Isn't Though. You can follow me on Twitter at the Stalwart. 1127 00:56:16,280 --> 00:56:19,200 Speaker 1: Follow our guest on Twitter, Arthur Brightman. He's at Arthur B. 1128 00:56:19,680 --> 00:56:23,440 Speaker 1: Follow our producer Carmen Rodriguez at Carmen Arman. Follow the 1129 00:56:23,440 --> 00:56:27,239 Speaker 1: Bloomberg head of podcast, Francesco Leave at Francesca Today, and 1130 00:56:27,440 --> 00:56:29,840 Speaker 1: check out all of our podcast at Bloomberg Onto the 1131 00:56:29,920 --> 00:56:32,480 Speaker 1: handle at podcasts. Thanks for listening.