WEBVTT - Arthur Breitman on the Biggest Problems in Blockchain Design 0:00:10.720 --> 0:00:14.600 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.680 --> 0:00:18.360 I'm Joe Wish and I'm Tracy Allaway. So, Tracy, we 0:00:18.480 --> 0:00:23.400 are here at the Milk and Institute conference in Beverly Hills. 0:00:23.720 --> 0:00:26.600 I know it's very fancy, it's very how's it been 0:00:26.640 --> 0:00:29.200 going for you so far? It's been fun. I I 0:00:29.320 --> 0:00:33.080 talked a lot about Credit. I watched your panel about crypto, 0:00:33.280 --> 0:00:35.400 and I have to say there were definitely more people 0:00:35.440 --> 0:00:37.720 at the crypto panel than there were the Credit panel, 0:00:38.479 --> 0:00:43.199 and also every panel that I've seen that's not about crypto. 0:00:43.440 --> 0:00:47.040 Someone asked a question, what's your opinion about crypto? Like everyone, 0:00:47.280 --> 0:00:48.839 no matter what, people are just like want to know. 0:00:49.040 --> 0:00:52.280 Someone from the audience submitted a question about how crypto 0:00:52.320 --> 0:00:58.240 would impact inflows into investment grade and you know, interesting thought, Well, 0:00:58.280 --> 0:01:00.360 it's crypto is one of those things too where I, 0:01:01.320 --> 0:01:04.680 regardless of everyone gets an opinion on it, regardless of 0:01:04.720 --> 0:01:06.679 everyone wants to know everyone's take, even if it's not. 0:01:06.880 --> 0:01:09.880 So this is very true. But I'm very excited because 0:01:09.920 --> 0:01:12.959 today we're gonna be speaking to someone who knows a 0:01:13.040 --> 0:01:16.440 lot about crypto now just a tourist, and I think 0:01:16.440 --> 0:01:19.960 a topic that we haven't really talked about that much. 0:01:20.800 --> 0:01:25.399 Is um blockchain architecture and design, and you know, all 0:01:25.440 --> 0:01:28.319 of these panels like everyone's talking to is like they're 0:01:28.360 --> 0:01:30.640 super like fanciful. It's like, I'm just gonna create this 0:01:30.680 --> 0:01:34.600 world like openness and transparency and it's gonna cut out 0:01:34.600 --> 0:01:37.319 all the fees and it's gonna be so great, which 0:01:37.360 --> 0:01:39.520 is really weird because when I think of block change, 0:01:39.600 --> 0:01:42.520 I think of high fees in low settlement or long 0:01:42.560 --> 0:01:46.440 settlement times and basically like all kinds of interesting tradeoffs 0:01:46.880 --> 0:01:50.320 and many things that are worse than the existing financial system. 0:01:50.360 --> 0:01:52.400 So I feel like people are jumping over some like 0:01:52.440 --> 0:01:55.720 basic architectural points in this whole conversation. Right. The other 0:01:55.720 --> 0:01:58.160 thing that gets me, especially at conferences like this, is 0:01:58.200 --> 0:02:00.720 everyone wants to talk about crypto. Everyone seems to have 0:02:00.760 --> 0:02:03.200 an opinion about it. But I have my doubts about 0:02:03.200 --> 0:02:06.640 whether people actually understand the underlying technology and whether or 0:02:06.640 --> 0:02:10.000 not they're differentiating between different blockchains and things like that. 0:02:10.200 --> 0:02:13.400 I think people might understand the basics like proof of 0:02:13.440 --> 0:02:16.839 state versus proof of work, layer two versus layer one 0:02:17.040 --> 0:02:21.760 or whatever, but like within those technology buckets, I don't 0:02:21.800 --> 0:02:25.079 think people are really thinking about the nuance. No, it's 0:02:25.120 --> 0:02:27.400 a lot of like it's all just gonna be really good, 0:02:27.440 --> 0:02:31.600 and it's gonna be really great for financial clues, inclusion 0:02:31.720 --> 0:02:34.560 and democracy and all that stuff. So anyway, let's have 0:02:34.600 --> 0:02:37.200 a real conversation about how these chains work and what 0:02:37.280 --> 0:02:38.680 you can do with them. Let's do it, all right, 0:02:38.760 --> 0:02:42.200 I'm really excited. Our guest knows a lot about this stuff. 0:02:42.240 --> 0:02:44.880 We're gonna be speaking with Arthur Brightman. He is the 0:02:44.919 --> 0:02:48.800 founder and creator of the Tesso's blockchain project, one of 0:02:48.840 --> 0:02:53.160 the sort of original projects that thought about smart contracting 0:02:53.480 --> 0:02:56.680 and malleability in a way that you know, much more 0:02:56.680 --> 0:02:59.200 advanced than are seemingly more advanced than what you can 0:02:59.200 --> 0:03:02.080 do on say coin. So we're gonna talk about what 0:03:02.160 --> 0:03:04.160 you could do with the chance. So Arthur, thank you 0:03:04.200 --> 0:03:06.720 so much for coming on odd lot, and thank you 0:03:06.760 --> 0:03:09.800 for having me. You know, we've been interacting on Twitter 0:03:09.919 --> 0:03:12.519 for years and years, so I'm excited. I'm excited that 0:03:12.560 --> 0:03:17.200 you're here. Yeah, meets too. So you know, like when 0:03:17.240 --> 0:03:18.799 you what do you think when you hear all these 0:03:18.840 --> 0:03:20.960 people at these conferences and you're here too, and they're like, Oh, 0:03:20.960 --> 0:03:24.080 it's gonna like be really cheap. It's gonna lower the 0:03:24.120 --> 0:03:30.000 fees for everything. It's gonna be super fast, transparency, financial inclusion, 0:03:30.280 --> 0:03:33.560 it's gonna save democracy, it's gonna save the planet, etcetera. 0:03:33.680 --> 0:03:36.680 Like what goes through your mind. I mean, I think 0:03:36.720 --> 0:03:38.600 some of it is true and some of some of 0:03:38.640 --> 0:03:41.200 some of these it's false. In terms of reducing the 0:03:41.280 --> 0:03:44.880 fees compared to UH traditional financial infrastructure, I actually think, 0:03:44.920 --> 0:03:46.880 you know, this is one of the real ones that's 0:03:47.320 --> 0:03:49.960 that we can actually do this. Yes, we can lower 0:03:50.000 --> 0:03:54.240 the entry costs for UH creating financial products or financial systems, 0:03:54.720 --> 0:03:56.880 make it a little more innovative, and and developed these 0:03:56.880 --> 0:03:59.240 things much faster than they have in the past. I 0:03:59.280 --> 0:04:03.080 do believe that at UM you can remove all of intermediaries, 0:04:03.360 --> 0:04:06.000 and a lot of the friction in the financial system 0:04:06.040 --> 0:04:08.000 comes from the fact that you need to rely on 0:04:08.120 --> 0:04:12.200 trusted intermediaries UM. As an intermediary, you have oftentimes a 0:04:12.200 --> 0:04:16.200 big opportunity for fraud UM and monitoring that fraud has 0:04:16.720 --> 0:04:20.279 a lot of costs minutry. Also, you have to deal 0:04:20.320 --> 0:04:22.120 with only a few people who are going to be trusted. 0:04:22.800 --> 0:04:24.440 If you can get rid of that, you can actually 0:04:24.440 --> 0:04:27.520 generally reduce costs. So I I do believe this part 0:04:27.560 --> 0:04:29.359 of the story. I don't know that it's going to 0:04:29.400 --> 0:04:32.000 save the planets, and and and do all these grand 0:04:32.120 --> 0:04:34.720 use saying I have a story I have about this 0:04:34.839 --> 0:04:38.920 is I once give I talk at a you know, 0:04:39.000 --> 0:04:42.599 some sort of dead like events, and it was about 0:04:42.640 --> 0:04:45.080 the promises of aluction. And I give an example for 0:04:46.080 --> 0:04:48.960 some of the over hyped ideas that I said, Well, imagine, 0:04:49.320 --> 0:04:52.920 for example, that's we're gonna put you know, plastic bags 0:04:52.960 --> 0:04:55.760 are killing turtles. But the problem is we don't know 0:04:55.760 --> 0:04:58.520 where they came from. If we could identify who leaves 0:04:58.520 --> 0:05:01.159 a plastic bag, you know, it's solve the problem. So 0:05:01.240 --> 0:05:03.679 let's put the plastic blag and obloction in, we'll save turtles. 0:05:03.839 --> 0:05:05.760 And I give that as the example of like some 0:05:05.839 --> 0:05:08.400 of the nonsense you can see, And someone pitched me 0:05:08.480 --> 0:05:15.400 that exact idea. That's amazing. Um, just going to fees though, 0:05:15.440 --> 0:05:18.359 I mean a very cynical person would say that the 0:05:18.360 --> 0:05:22.080 fees exist because yes, there are underlying costs like fraud 0:05:22.240 --> 0:05:24.480 and k y C and m L and stuff like that. 0:05:24.839 --> 0:05:27.719 But if you're being very pessimistic about the whole thing, 0:05:27.760 --> 0:05:32.920 you would also say that financial intermediaries traditional financial intermediaries, 0:05:33.080 --> 0:05:35.560 they like to make money. Uh, and a lot of 0:05:35.600 --> 0:05:39.680 those fees are opportunistic. So I guess my question is, like, 0:05:40.040 --> 0:05:44.200 do those fees actually exist because of what the intermediaries 0:05:44.200 --> 0:05:46.000 are doing and the cost or because of the way 0:05:46.040 --> 0:05:48.120 the system works? And how do we make sure that 0:05:48.160 --> 0:05:52.080 in crypto we don't end up with centralized intermediaries that 0:05:52.120 --> 0:05:54.440 are going to charge big fees anyway. I mean, you know, 0:05:54.520 --> 0:05:56.520 I think everyone who's in business likes to make more 0:05:56.640 --> 0:05:59.080 more profit than likes to charge more fees. And people 0:05:59.120 --> 0:06:00.920 are going to charge what amount of physics can get 0:06:00.920 --> 0:06:04.440 away with in general, so at some point there's competitive 0:06:04.440 --> 0:06:08.480 pressure rights, and in finance it's to that. Sometimes a 0:06:08.520 --> 0:06:10.839 lot of the competitive pressure is not is not presents. 0:06:10.839 --> 0:06:14.760 You'll have people pay you know, one percent commission on 0:06:14.800 --> 0:06:17.039 a trade because they're doing it through a private bank 0:06:17.080 --> 0:06:18.719 and you know, the trust of the private bank and 0:06:18.880 --> 0:06:21.279 do good execution and on and so forth and have nonsense. 0:06:21.320 --> 0:06:23.760 It doesn't cost that to execute a trade none at all. 0:06:24.520 --> 0:06:26.840 But the reason that they're doing it is because, well 0:06:26.920 --> 0:06:29.599 they feel that they need a trust of this very 0:06:29.600 --> 0:06:33.720 prestigious intermediary. If you remove that need, if you remove 0:06:34.720 --> 0:06:36.840 if you remove that the notion of trust. I think 0:06:36.839 --> 0:06:39.960 you get something that's more competitive because you know, if 0:06:39.960 --> 0:06:42.839 the thing is is going to work, regardless of who 0:06:42.839 --> 0:06:46.080 you routed through, interriputation doesn't matter all that all that much. 0:06:46.640 --> 0:06:49.080 It limits the ability of for intermediate is to charge 0:06:49.120 --> 0:06:51.839 our fees. Now some people will try, of course, especially 0:06:51.920 --> 0:06:53.520 I would say there's a there's gonna be a college 0:06:53.520 --> 0:06:57.039 industry of there already is um in crypto of people 0:06:57.080 --> 0:06:59.279 who want to do the most, more traditional investors, and 0:06:59.279 --> 0:07:01.160 who really shows them that? No, no, no no, it's all 0:07:01.160 --> 0:07:03.400 going to be fine. I mean we see it. You know, 0:07:03.440 --> 0:07:05.320 you have you could buy you could buy bitcoin and 0:07:05.360 --> 0:07:07.280 even hold it with a custodian if you're worried about 0:07:07.279 --> 0:07:11.360 self custody risk. Right. But nonetheless you'll find funds which 0:07:11.440 --> 0:07:14.240 charged you, uh, you know, management fees for for for 0:07:14.280 --> 0:07:17.160 holding this. So there's there's some people are always gonna 0:07:17.200 --> 0:07:19.560 want that, but it's still it's it's putting some pressure 0:07:19.560 --> 0:07:22.680 down on costs. Can you talk a little bit about 0:07:22.720 --> 0:07:25.640 your background and the founding of tests, because you're a 0:07:25.680 --> 0:07:28.600 trader at Goldman Sex, right, and so what do you 0:07:28.600 --> 0:07:33.200 what did you do? What was your position in traditional finance? Originally, 0:07:33.280 --> 0:07:37.480 And what did you see early on UH that you 0:07:37.640 --> 0:07:39.680 thought it was like an opportunity to port some of 0:07:39.720 --> 0:07:43.800 these ideas, or the opportunity you saw in creating your 0:07:43.840 --> 0:07:47.280 own chain. Well, my background is in computer science and statistics, 0:07:47.600 --> 0:07:49.800 and my first jobs I was working on as a 0:07:49.880 --> 0:07:53.040 quant So I started out in stary school arbitrage, and 0:07:53.080 --> 0:07:55.240 then I moved to UH in Southern nine A. I 0:07:55.240 --> 0:07:57.120 moved to Goldman to do high you can see trading. 0:07:57.680 --> 0:08:00.400 I worked on et F market making, natural guest market making, 0:08:00.440 --> 0:08:03.800 also word that Morgan Stanley and a few other places 0:08:03.800 --> 0:08:07.680 on this on these topics. I've also done some robotics 0:08:07.840 --> 0:08:10.760 after that, but it's quite quite different. The thing that 0:08:10.840 --> 0:08:13.440 attracted me to UH two group of currencies. It wasn't 0:08:13.440 --> 0:08:15.240 the intersection of a lot of centers of interest that 0:08:15.280 --> 0:08:17.600 I had. I have been interested in the theory of 0:08:17.600 --> 0:08:20.560 money in banking for a long time, so you know, 0:08:20.600 --> 0:08:23.520 how does moniorize what makes good money, what makes bad money? 0:08:23.520 --> 0:08:25.800 And I remember, in a way before bin cooin, you're 0:08:25.800 --> 0:08:28.800 convincing myself that the best, the best money possible is 0:08:28.840 --> 0:08:31.240 backed by nothing. Right if you use gold, for example, 0:08:31.760 --> 0:08:34.640 there's a problem with the fact that if you know, 0:08:34.640 --> 0:08:36.720 if the ment for gold increases, you get more mining, 0:08:36.800 --> 0:08:39.120 and so you know that's a waste, you know, because 0:08:39.160 --> 0:08:41.240 gold is used as a monetary instruments, you know, and 0:08:41.240 --> 0:08:43.120 in an ideal world we would have mind all the 0:08:43.160 --> 0:08:46.280 gold and increase them in. Doesn't create stimmen for all 0:08:46.400 --> 0:08:48.040 all this because it doesn't serve a purpose to have 0:08:48.080 --> 0:08:51.160 more gold once you have a given supply. And I 0:08:51.160 --> 0:08:53.240 guess we could argue that having a city in the 0:08:53.800 --> 0:08:56.800 in the monetary supply can have some some value, but 0:08:56.840 --> 0:08:59.480 it's I didn't see that way, and um when so 0:08:59.520 --> 0:09:02.400 when group has come around, I know this this bad 0:09:02.440 --> 0:09:04.360 criticism around it. So people always say like, oh, it's 0:09:04.360 --> 0:09:06.079 back by nothing, and I'm like, no, that's great, that 0:09:06.240 --> 0:09:09.480 is what you want with the currency. I was interested 0:09:09.480 --> 0:09:11.720 in the cryptographic aspect because I also had, you know, 0:09:11.760 --> 0:09:14.040 I have a made medical background. It was interested in photography. 0:09:14.920 --> 0:09:18.840 The individual sovereignty aspect was also something that appealed to 0:09:18.840 --> 0:09:22.440 me from a political standpoints, so I really it really 0:09:22.440 --> 0:09:25.920 attracted me early on. So you were one of the 0:09:26.000 --> 0:09:29.120 first ones to move from proof of work to proof 0:09:29.120 --> 0:09:32.280 of steak? Is that right? Or we never used proof 0:09:32.280 --> 0:09:35.080 of work? Sorry, I mean you were one of the 0:09:35.080 --> 0:09:38.800 first to like actually do proof of steak. What was it, Like, 0:09:38.840 --> 0:09:42.080 what was the opportunity there, and like why did you 0:09:42.120 --> 0:09:47.000 immediately latch onto that versus proof of work. I got 0:09:47.040 --> 0:09:49.120 interested in doing taste was because of my interesting proof 0:09:49.120 --> 0:09:52.440 of steak um. Around Stan's thirteen. There were a lot 0:09:52.440 --> 0:09:55.480 of innovation in this space around U proof of steak, 0:09:55.920 --> 0:09:59.400 smart contracts, privacy people were coming up with. It was 0:09:59.440 --> 0:10:02.600 an explosion of research and innovation around the around the space. 0:10:03.120 --> 0:10:05.160 And one thing, and it's early in the bitcoin culture, 0:10:05.240 --> 0:10:07.160 is that there was not a whole lot of appetite 0:10:07.760 --> 0:10:10.880 in trying to integrate any of this, any of this 0:10:11.000 --> 0:10:13.360 upgrading biguine. It's sort of a point of pride for 0:10:13.520 --> 0:10:17.520 the right, like that it's so it's the code is 0:10:17.559 --> 0:10:21.080 so assified, or that it's so hard. There's a big 0:10:21.880 --> 0:10:23.520 part of it is pride, but I also think part 0:10:23.520 --> 0:10:27.160 of it is uh sour grapes. You know. For a while, 0:10:27.240 --> 0:10:29.880 the narrative was very different. For a while was people 0:10:29.960 --> 0:10:32.360 admit concircles who were saying, you know, what's all these 0:10:32.360 --> 0:10:35.240 alcoins as you laboratories are going to find the ideas 0:10:35.480 --> 0:10:38.080 and we can always integrate the ladies into bitcoin and 0:10:38.120 --> 0:10:41.160 we moved from that to, oh, all those ideas are bad, 0:10:41.920 --> 0:10:44.000 and now you know we we couldn't we couldn't benefit 0:10:44.000 --> 0:10:45.520 from any of them bitcoin, which I think is a 0:10:45.559 --> 0:10:47.600 little sad because a lot of these ideas are good 0:10:47.640 --> 0:10:50.280 and important and have hound product market fit. This is 0:10:50.280 --> 0:10:53.720 one of the ironies of bitcoin. I think it's technology 0:10:53.800 --> 0:10:56.280 is going to save us in many ways, but also 0:10:56.360 --> 0:10:59.560 we don't want the technology to advance too much because 0:10:59.640 --> 0:11:02.000 we like it the way it is, or we can't 0:11:02.000 --> 0:11:04.520 actually do it. And then I understand the perspective. I 0:11:04.520 --> 0:11:07.880 think from the bigcoins perspective, there's a big risk if 0:11:07.920 --> 0:11:11.320 you if you let people change the ledger. That's the 0:11:11.400 --> 0:11:14.479 changes that you end up having are not merely technological 0:11:14.480 --> 0:11:18.080 improvements but actually change um the nature of bitcoin, and 0:11:18.080 --> 0:11:22.319 it change its economic properties. So I think what bitcoiners, 0:11:22.360 --> 0:11:23.880 all of these coinners feel is that if they open 0:11:23.920 --> 0:11:26.200 the door to technological changes, they're also going to open 0:11:26.240 --> 0:11:29.960 the door to social control of the economic properties a bitcoin, 0:11:30.040 --> 0:11:32.880 which is something that's they absolutely do not want. So 0:11:32.920 --> 0:11:34.720 in some sense they felt like they had to shut 0:11:34.720 --> 0:11:37.839 the door completely on almost completely on changes in to 0:11:37.880 --> 0:11:40.840 preserve the economic properties. Let's talk a little bit about 0:11:41.280 --> 0:11:44.959 what you see happening on chain. We had a recent 0:11:45.760 --> 0:11:50.599 episode of the podcast with another person who wanted E 0:11:50.720 --> 0:11:53.600 t F market Making or e t F trading, Sam 0:11:53.640 --> 0:11:56.840 Bankman Free, and he was asked to describe yield firming, 0:11:57.600 --> 0:11:59.400 and we thought we were going to get this sort 0:11:59.440 --> 0:12:03.320 of very complicated answer about I don't know something. But 0:12:03.360 --> 0:12:07.280 it turns out in his characterization yield firming is you 0:12:07.800 --> 0:12:09.880 they they'll pay you to put money in a box, 0:12:09.920 --> 0:12:11.560 and if you put money in a box before other 0:12:11.600 --> 0:12:13.440 people put money in the box, then you have a 0:12:13.440 --> 0:12:16.360 bigger part of the box. And it kind of sounded 0:12:16.360 --> 0:12:17.880 into a lot of people now that are different from 0:12:17.920 --> 0:12:20.240 a pot this game. What did you think about that? 0:12:20.480 --> 0:12:23.839 Is that a fair characterization of yield firming? I think 0:12:23.840 --> 0:12:26.920 it's a it's a fair conquisation of the way it's practiced. Uh, 0:12:26.960 --> 0:12:31.040 you know, if you wait buy volume or or by prominence, 0:12:31.080 --> 0:12:33.800 then yes, it's a fair calacterization. I wouldn't throw the 0:12:33.800 --> 0:12:36.079 baby with the bast water. I think there's something there, 0:12:36.520 --> 0:12:38.840 you know. The more generous way of looking at it is, 0:12:39.440 --> 0:12:41.520 let's say you want to you want to launch a token, 0:12:41.600 --> 0:12:43.040 you want to suit it in someone you want to 0:12:43.040 --> 0:12:45.560 get some liquidity, so you use part of your token 0:12:45.600 --> 0:12:48.240 supply as a way, we need to incentivize people for 0:12:48.640 --> 0:12:51.439 providing liquidity for it. Uh. And you could see you 0:12:51.600 --> 0:12:53.200 could see a company doing this. You could do this 0:12:53.200 --> 0:12:55.600 with equities. You could say, look, I have some equity, 0:12:56.080 --> 0:12:58.719 my business will bit more appealing to investors. Is a 0:12:58.720 --> 0:13:02.400 liquidity around around this equity, so I could set away 0:13:02.440 --> 0:13:04.160 you know, I could set aside some equity and and 0:13:04.160 --> 0:13:07.480 and incentivized my investors to pride equity. The issue with 0:13:07.600 --> 0:13:09.240 that that it seems to me, and I think we 0:13:09.360 --> 0:13:13.320 have seen this in crypto, is that once the equity 0:13:13.440 --> 0:13:18.400 is distributed, if your model inherently is about I guess 0:13:18.440 --> 0:13:21.319 paying for customers in the form of equity, then once 0:13:21.360 --> 0:13:23.800 all the equity is distributed, do you really have good 0:13:23.840 --> 0:13:26.160 customers or do you just have a base of people 0:13:26.160 --> 0:13:28.520 who are going to now go find the next company 0:13:28.559 --> 0:13:31.320 giving out equity for liquidity. And when I look at 0:13:31.400 --> 0:13:34.000 like crypto, you know, I look at all these like 0:13:34.040 --> 0:13:37.720 DE five protocols that were huge in the summer and 0:13:37.800 --> 0:13:40.600 now they're like charts are way down, and I kind 0:13:40.600 --> 0:13:43.640 of get the impression that the game is, yes, you 0:13:43.679 --> 0:13:47.120 find the company or the protocol giving out government to token. 0:13:47.160 --> 0:13:49.920 This is what they're called equity, and then at some 0:13:49.960 --> 0:13:52.520 point the equity runs out and rather than's sticking around, 0:13:52.800 --> 0:13:56.800 you just go find the next thing. Yeah, I yeah, 0:13:56.840 --> 0:13:59.439 I don't disagree with that. There's a lot of uh uh, 0:13:59.440 --> 0:14:02.319 it's it's very secular. The way frees it sometimes is 0:14:02.360 --> 0:14:04.160 that you see a lot of innovation in DeFi from 0:14:04.160 --> 0:14:07.360 a technological perspective or even from a financial engineering perspective. 0:14:08.200 --> 0:14:10.840 But the point of DeFi cannot just be the trade 0:14:10.880 --> 0:14:13.240 DeFi tokens, and right now that is mostly the point 0:14:13.240 --> 0:14:16.520 of DeFi. So you need to I think you need 0:14:16.520 --> 0:14:19.880 to encourage to some actually you know, I really use 0:14:19.960 --> 0:14:24.760 keys and where real demand comes from. So historically Testos 0:14:24.800 --> 0:14:28.160 has avoided DeFi, right, you haven't been that involved in 0:14:28.160 --> 0:14:31.200 it in the way that say Ethereum has. But I 0:14:31.240 --> 0:14:34.720 think you started something last year called liquidity baking, Is 0:14:34.760 --> 0:14:37.800 that right? Yeah? Absolutely? Can you explain that, like, how 0:14:37.840 --> 0:14:42.560 is that different to the other bad yield farming all 0:14:42.600 --> 0:14:45.680 the way down type DeFi? Of course, So first of all, 0:14:45.720 --> 0:14:49.200 I would challenge the fact that has is cute. You 0:14:49.440 --> 0:14:52.160 defy the way it is is not sentient. It's a 0:14:52.240 --> 0:14:55.040 it's it's a project, and they are defied protocols running 0:14:55.040 --> 0:15:01.120 on the DIES foundation helps UH in general the growth 0:15:01.120 --> 0:15:03.400 of the eatiscal system. We distribute grants and we've given 0:15:03.440 --> 0:15:05.360 some grants to some defied projects, so there's no one 0:15:05.920 --> 0:15:08.600 there's no animosity or anything against the DeFi I think 0:15:08.640 --> 0:15:11.400 it has had a little distraction on Tails and on 0:15:11.480 --> 0:15:14.840 other chains for a variety of reasons. But yes, so 0:15:14.920 --> 0:15:19.600 liquidity making is interesting. It's um It was a modification 0:15:19.600 --> 0:15:23.800 of the protocol itself, so at the protocol level, um 0:15:23.880 --> 0:15:26.680 in amendment was passed and ratified and voted on by 0:15:26.720 --> 0:15:31.040 the by the valuers of the network. That would take 0:15:31.560 --> 0:15:33.880 a small fraction of the very small fraction of the 0:15:34.440 --> 0:15:38.479 to cornsmitted on every block and then use that deposited 0:15:38.480 --> 0:15:43.160 into a pool to incentivise liquidity provision between Bitcoin and tests. 0:15:43.640 --> 0:15:45.040 So the idea is that you have a little more 0:15:45.080 --> 0:15:47.280 inflation in your protocol. I think it comes down to 0:15:47.320 --> 0:15:50.280 about zero points three percent per year, So you know, 0:15:50.280 --> 0:15:53.200 it's not it's it's not very very meaningful for you know, 0:15:53.280 --> 0:15:57.160 something that has a daily standard reviation of lack about 0:15:57.160 --> 0:15:59.640 five percent. You know a few so it's always percent 0:15:59.680 --> 0:16:02.920 per year. But it sent advised people to be willing 0:16:02.920 --> 0:16:05.760 to provide liquidity between bitcoin and and the point is that, 0:16:06.200 --> 0:16:08.920 first of all, these are not gigantity yield. The point 0:16:08.960 --> 0:16:12.080 is not to try to attract people with giant into yields, 0:16:12.320 --> 0:16:14.800 or the point is not to try to strap something 0:16:15.160 --> 0:16:17.520 something new. It's just it's a cost. You be a 0:16:17.600 --> 0:16:19.280 very small cost in terms of inflation, and you get 0:16:19.320 --> 0:16:21.880 something in return, which is the provision. I want to 0:16:21.880 --> 0:16:25.160 go back to the box for a second, because in theory, 0:16:25.600 --> 0:16:28.080 the box could become a bank. Right, so in theory 0:16:28.240 --> 0:16:30.400 we could all put money into the box, we get 0:16:30.400 --> 0:16:33.480 some equity, and then in theory it could start I 0:16:33.480 --> 0:16:36.960 don't know, making loans or doing something with economic purpose, 0:16:37.400 --> 0:16:41.360 something that actually creates value, such that defy is not 0:16:41.520 --> 0:16:43.920 just trading of defy token. Right. This is like the 0:16:44.040 --> 0:16:46.760 spack argument. Right, you're sort of putting money in a 0:16:46.800 --> 0:16:50.800 box that might put something maybe, but is anything becoming there? 0:16:51.160 --> 0:16:53.480 I mean, I haven't we have the famous scriptos back. 0:16:53.520 --> 0:16:55.920 You physically have something that's nonsense, you get a high valuation, 0:16:55.960 --> 0:16:59.240 and then you turn that into actually making Yes, some 0:16:59.240 --> 0:17:01.440 some people attempt that. I don't know that anyone has really, 0:17:01.960 --> 0:17:04.600 really really succeeded that pulling out the cryptos back so far. 0:17:05.320 --> 0:17:08.480 But it was an interesting certainly, like people pointing at 0:17:09.080 --> 0:17:12.000 project like changing for example, Yeah, you know, started out 0:17:13.040 --> 0:17:15.040 a little you know, not not not very coherent, and 0:17:15.000 --> 0:17:17.400 then started you know, hiring serious academic and like doing 0:17:17.440 --> 0:17:20.560 really serious working in photography for this um. So you know, 0:17:20.600 --> 0:17:22.480 it remains to be seen whether or not that that's 0:17:22.480 --> 0:17:27.439 pulled off. But for me, it's more about it's not 0:17:27.440 --> 0:17:29.399 about how serious you are, it's more about you do 0:17:29.760 --> 0:17:31.560 at the end of the day. You know, it's about 0:17:31.600 --> 0:17:34.679 value creation, like what value are you creating? And it 0:17:34.760 --> 0:17:37.360 can't be completely internal. Another way to think about it 0:17:37.400 --> 0:17:40.919 is sometimes they obviously a small town and I'm thinking 0:17:41.280 --> 0:17:42.960 what are the exports of this down? Right? So you 0:17:43.000 --> 0:17:45.840 have economic activity, you have restaurants, but the restaurants is 0:17:45.880 --> 0:17:48.000 for the people who work here, so they have to 0:17:48.000 --> 0:17:49.359 work on something. So at the end of the day, 0:17:49.359 --> 0:17:50.720 you know, what do what do you export? What does 0:17:50.760 --> 0:17:53.320 defy export? Yeah, it's a good question, right, you know 0:17:53.359 --> 0:17:55.399 what what what are you doing? Are you because if 0:17:55.400 --> 0:17:59.760 you're looking at there's there's a cynical view of financial 0:17:59.800 --> 0:18:03.159 mark gets that's I really, I really reject, which is 0:18:03.160 --> 0:18:04.800 the ideas that all the financial market is just a 0:18:04.880 --> 0:18:07.520 trying because you know, everything is zero. Some it's very 0:18:07.920 --> 0:18:10.760 popular view, but I don't. You know, financial markets are 0:18:10.840 --> 0:18:14.679 very important because um they help get liquidity. Uh you know, 0:18:14.760 --> 0:18:18.000 signal market gets get liquidity and it helps capital formation 0:18:18.040 --> 0:18:21.080 for companies and companies actually build things, right, So there's 0:18:21.119 --> 0:18:25.280 generally value in financial marketed to help companies that do 0:18:25.440 --> 0:18:29.840 things and build things. And unless you're actually doing this 0:18:29.960 --> 0:18:33.359 in some ways, uh, we defy, it's it's going to 0:18:33.440 --> 0:18:51.000 remain incestuous and it's going to remin circular. Since since 0:18:51.040 --> 0:18:53.040 you said this, since you're not a fan of DeFi 0:18:53.200 --> 0:18:56.080 for the sake of defy, can I broaden this out 0:18:56.359 --> 0:19:00.320 massively and ask what is the use case of block chain? 0:19:00.520 --> 0:19:04.000 And we ask this all the time, and you know, 0:19:04.119 --> 0:19:07.800 yesterday Joe was on a panel with Alcoran and they 0:19:07.800 --> 0:19:12.840 announced a big partnership with FIFA, and Joe asked the 0:19:12.840 --> 0:19:14.639 FIFA president, well, what are you guys going to be 0:19:14.680 --> 0:19:18.159 doing in this new partnership and he basically said, we 0:19:18.160 --> 0:19:20.160 don't really know. We have a bunch of ideas. We're 0:19:20.160 --> 0:19:21.879 just really into crypto and we want to be a 0:19:21.920 --> 0:19:25.280 modern company, and we hear so many of these partnerships, 0:19:25.280 --> 0:19:28.520 and I feel like it's still kind of unclear what 0:19:28.560 --> 0:19:31.359 it is that you can do with a blockchain like 0:19:31.440 --> 0:19:37.600 tessos versus traditional technology or financial architecture. Yeah. Absolutely, so 0:19:38.880 --> 0:19:41.280 I think for me that the basics, the most basic 0:19:41.400 --> 0:19:44.240 use case and maybe the most important one is a 0:19:44.240 --> 0:19:48.119 censorship resistant store of value, like being able to store 0:19:48.119 --> 0:19:51.480 wells in ways that isn't anyone's liability, because if you 0:19:51.520 --> 0:19:53.199 think about it, if you have a bank account, that's 0:19:53.200 --> 0:19:55.879 still the banks liability. If you have a brokerage account, 0:19:55.920 --> 0:19:57.800 you probably don't even own, you know, their shares in name, 0:19:57.800 --> 0:19:59.880 and even if you did on the shares, it's still 0:19:59.880 --> 0:20:02.639 the company's liability rights by a bit of the company 0:20:02.680 --> 0:20:05.760 to you. There's very very few assets which are not 0:20:05.800 --> 0:20:07.800 someone else's liability. You have really estate, but it's not 0:20:07.840 --> 0:20:11.520 easily portable. Um, you could own precious smetals, but again, 0:20:11.560 --> 0:20:14.560 you know, as bare assets, they're kind of complicated. So 0:20:14.600 --> 0:20:16.560 it's unique in his respect. It's a bare asset that 0:20:16.600 --> 0:20:19.240 you can transact with across the world. So that second 0:20:19.280 --> 0:20:22.560 use case, making very easy cross border payments, very cheap 0:20:22.560 --> 0:20:26.119 corsebolder payments without intermediaries. UM. And I think you know, 0:20:26.160 --> 0:20:29.679 if you live in a in a reasonably free country, 0:20:29.680 --> 0:20:31.320 it might not seem like a like a big deal. 0:20:31.359 --> 0:20:34.520 But as soon as repressions starts started turning on, you're 0:20:34.600 --> 0:20:38.560 pretty glad that you have a sensory resistant store of value. UM. 0:20:38.640 --> 0:20:42.520 That's view points often gets a little derided because people 0:20:42.560 --> 0:20:44.840 will point at people holding Bitcoin or all these other 0:20:44.840 --> 0:20:46.439