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Speaker 1: Welcome to Strictly Business Varieties, weekly podcasts featuring conversations with

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Speaker 1: industry leaders about the business of media and entertainment. I'm

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Speaker 1: Cynthia Lyttleton, co editor in chief of Variety. This episode

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Speaker 1: is a departure from our usual format of diving into

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Speaker 1: industry issues. I'm extremely late to the party, but in

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Speaker 1: the past year or so, I've been trying to come

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Speaker 1: to an understanding of cryptocurrencies. It's not easy, and I'm

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Speaker 1: not too proud to say that I still don't understand

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Speaker 1: how you create intrinsic value by having computers crunch through

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Speaker 1: very difficult math problems. But let's set that aside. As

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Speaker 1: I learned more about blockchain, it occurred to me that

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Speaker 1: technology built around transparency might one day be the antidote

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Speaker 1: to Hollywood accounting problems. Hollywood deal making has historically been

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Speaker 1: built around properties that kick off royalties and profit participation

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Speaker 1: payments for decades to come in success. Could blockchain and

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Speaker 1: its decentralized approach to banking be useful for situations like movies,

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Speaker 1: TV shows, music, and Broadway shows where a number of

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Speaker 1: participants might have small stake in the profits of a

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Speaker 1: property Over time To answer these questions and more. I

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Speaker 1: look for experts who bring different opinions to the microphone.

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Speaker 1: We start with Tarun Chitra, founder and CEO of research

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Speaker 1: and investment advisory firm Gauntlet. Chitra is also the co

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Speaker 1: host of the podcast The Chopping Block, which is my

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Speaker 1: favorite podcast for trying to decipher what's happening in this

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Speaker 1: digital arena. After Chitra, we get a much different perspective

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Speaker 1: on DeFi or the decentralized finance boom, from Lee Reiners,

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Speaker 1: a professor at Duke University who studies financial regulation. Reiners

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Speaker 1: has become a leading voice of skeptics who question whether

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Speaker 1: there are genuine use cases for crypto beyond some of

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Speaker 1: the nefarious things that it's become associated with, like ransomware attack.

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Speaker 1: All of this heady stuff is coming right up after

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Speaker 1: this break, and we're back with conversations on crypto, starting

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Speaker 1: with Tarun Chittra, founder and CEO of research and advisory

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Speaker 1: firm Gauntlet. Tarun Chiitra, founder and CEO of Gauntlet and

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Speaker 1: a research and investment advisory firm that works in the

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Speaker 1: crypto space. Thank you so much for joining me today.

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Speaker 2: Great to be here. Thanks for having me.

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Speaker 3: I came across Tarun and his work in my interest,

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Speaker 3: my sort of burgeoning interest and just trying to understand

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Speaker 3: what was going on with crypto, what did all this

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Speaker 3: stuff mean?

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Speaker 1: I did not like so many of it. I had

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Speaker 1: no idea. I had no idea what people were talking about.

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Speaker 1: I barely, you know, could define what crypto was down

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Speaker 1: the rabbit hole of reading in podcasts, many many podcasts,

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Speaker 1: and the one that I just fell for from pretty

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Speaker 1: much from first listen is called the Chopping Block, and

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Speaker 1: it's four guys. Tarun is one of them, and they

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Speaker 1: just get they're very active in crypto, they're investors, they're

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Speaker 1: in the space, they're clearly in the trenches, and they're

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Speaker 1: smart and they're funny.

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Speaker 4: Some of the fun is listening. It's almost a puzzle.

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Speaker 1: I listen and I'm trying to you know, I hear

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Speaker 1: the terms and then I try to back out and

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Speaker 1: fit and figure it out.

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Speaker 4: But I really enjoy. But what I really what.

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Speaker 1: In all seriousness, you four do really well is tackle big,

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Speaker 1: big concepts, and you use plain language, and you in

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Speaker 1: the way that four guys talking poor friends talking to

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Speaker 1: each other can kind of really get to the heart

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Speaker 1: of something you explain really complicated things in very plain language.

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Speaker 4: And you also, I really.

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Speaker 1: Feel like you pull no punches in terms of whether

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Speaker 1: it's people in the world, in the crypto world, and

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Speaker 1: there's there's no shortage of drama and headlines and litigation

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Speaker 1: around a lot of those folks. But what are the

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Speaker 1: benefits of the DeFi the decentralized finance offered by crypto

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Speaker 1: and blockchain technologies to markets, to markets like the Hollywood

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Speaker 1: content business, which does have its own unique sort of

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Speaker 1: characteristics of how profits are made and how they're dispensed

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Speaker 1: over a long period. But let's just start with the

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Speaker 1: sense of like the appeal of DeFi.

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Speaker 2: One framing that I like to have around DeFi is,

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Speaker 2: anytime you use a fintech apps, they use Venmo, or

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Speaker 2: use PayPal or zell or something like that, Right, you're

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Speaker 2: generally using things that are not real dollars. They're actually

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Speaker 2: synthetic claims on real dollars. So you only get those

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Speaker 2: real dollars when you say, hey, I'm with drawing to

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Speaker 2: my bank account. Right, But yet you generally treat those

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Speaker 2: synthetic claims to dollars as effectively a dollar. Right, So

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Speaker 2: if I have twenty dollars in my Venmo count I'll

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Speaker 2: send you ten dollars. We both technically have two claims.

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Speaker 2: You know, there's an IOU from Venmo that owes me

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Speaker 2: ten and IOU that owes you ten, whereas it started

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Speaker 2: with an IOU that only owed me twenty. And so

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Speaker 2: this idea that people have gotten so comfortable with not

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Speaker 2: holding real cash and holding these kind of synthetic claims

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Speaker 2: everything from credit cards to Apple pay. It's sort of

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Speaker 2: been a thing that's sort of, i would say, from

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Speaker 2: the nineteen eighties onwards, been a big change in how

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Speaker 2: people deal with money. On the other hand, it's actually

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Speaker 2: one thing that is kind of crazy is that you

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Speaker 2: can't really program things you do with that money. You

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Speaker 2: can't really do risk seeking transactions with that type of money. So,

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Speaker 2: for instance, I can't use Venmo to pull together money

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Speaker 2: from multiple people to like buy real estate or to

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Speaker 2: invest in a company. I would have to go through

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Speaker 2: the normal banking system, go through the normal legal system, right.

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Speaker 2: And one of the reasons for this is that it's

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Speaker 2: very hard to guarantee in a sort of in a

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Speaker 2: lot of ways, the effective sort of property rights of

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Speaker 2: a dollar in different environments, so that IOU that I

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Speaker 2: have in Venmo is different than the IOU that I

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Speaker 2: have at Zell, which is different than the IOU I

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Speaker 2: have when I go into my Robinhood account. And this

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Speaker 2: idea that you have this these different IOUs that are

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Speaker 2: not interoperable is effectively one of the reasons it's very

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Speaker 2: hard to do sort of risk seeking transactions with those

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Speaker 2: those claims on dollars. In crypto people, the number one

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Speaker 2: product that has usage is what's called a stable coin.

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Speaker 2: Stable Coins are these IOU style representations of dollars. So

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Speaker 2: you know, you have a wallet, you might have one

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Speaker 2: hundred stable coins in it, or you might have a

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Speaker 2: thousand sable coins in it. And the difference is those

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Speaker 2: dollars can be used on any application of blockchain. It's

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Speaker 2: as if, you know, you could just send money from

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Speaker 2: Venmo to Zelle. It's as if you and I could

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Speaker 2: both create a new Venmo account called real estate Purchase account,

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Speaker 2: and we both send money to it, and then we

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Speaker 2: both can invest with it. But we both have to sign.

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Speaker 2: We all have to sign a transaction says hey, will

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Speaker 2: we approve this transaction.

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Speaker 4: And we both have rights to do this, and and we.

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Speaker 2: Both have rights, and we have some way of codifying

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Speaker 2: the contractual obligations and liabilities of those pool ed assets.

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Speaker 2: So fundamentally DeFi exists to service stable coins and also

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Speaker 2: native kind of crypto finance. But I think the part

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Speaker 2: that you know, I think excited people and also led

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Speaker 2: to it growing dramatically is effectively the idea that people

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Speaker 2: could do these kind of risk seeking transactions with dollars

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Speaker 2: and have use them in many apps. There's no kind

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Speaker 2: of restriction on them. For people out there side of

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Speaker 2: the US who want to have dollars or want to

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Speaker 2: have access to dollar dollarized banking systems, this became a

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Speaker 2: really big thing, especially in twenty twenty one and today

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Speaker 2: and places like Turkey and Argentina. The main thing about

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Speaker 2: DeFi is that when you have this notion of permissionlessness,

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Speaker 2: where you know, anyone can build a smart contract that

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Speaker 2: allows you to pull together assets to facilitate a trade,

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Speaker 2: or to lend out those dollars someone else for a yield.

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Speaker 2: Those types of contracts, they have slightly different properties than

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Speaker 2: normal finance. One thing that's sort of endemic or hidden

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Speaker 2: the normal finance is that you know when there is

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Speaker 2: a trusted third party, you make a lot of you

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Speaker 2: can make a lot of particular assumptions about how.

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Speaker 1: The city that's what you mean like Wells Fargas Bank

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Speaker 1: and trusted third party being an old fashioned financial.

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Speaker 2: Institute, or like a broker like Robinhood or something, you know,

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Speaker 2: like I was like you know, tdum error Trade. I'm

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Speaker 2: also including kind of like doc brokers and I'm lumping

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Speaker 2: them all together.

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Speaker 4: For an extension of big big banking.

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Speaker 2: Right, Yeah, is that there's a lot of constraints. So

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Speaker 2: I'll give you just a sort of simple example that

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Speaker 2: hopefully all straight why designing these smart contracts is harder,

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Speaker 2: and why the understanding the risk in these contracts is harder,

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Speaker 2: and this you know, sort of why my company exists.

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Speaker 2: But one of the reasons I I'm going to do

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Speaker 2: this is so you can see that, you know, in

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Speaker 2: order to make these kind of like permissionless dollars that

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Speaker 2: anyone could build apps to that can can immediately you know,

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Speaker 2: transfer balances and pool together assets and take risk on.

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Speaker 2: The benefits of it are high, but also the development

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Speaker 2: costs is high relative to something that's using the existing

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Speaker 2: banking system. So imagine that you have you're a seller

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Speaker 2: of an item. And let's say you have a famous

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Speaker 2: artwork and you're running an auction and it's an in

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Speaker 2: person auction, so you know, we go to the town hall,

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Speaker 2: I'm on the stand, are paddles, we have our paddles,

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Speaker 2: and like you know, the seller is doing the you know,

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Speaker 2: one dollar, one dollar, two dollars, two dollars, you know,

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Speaker 2: a sending price English auction. One assumption you make in

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Speaker 2: that scenario is that the seller is also not a buyer,

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Speaker 2: because well, the seller is not you know, they can't

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Speaker 2: be in two places at once. They're not cloning themselves

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Speaker 2: and also bidding in their auction, right, But in the

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Speaker 2: permissionless online world, that's very different. The seller could very

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Speaker 2: easily make clones of themselves and be buyers in there

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Speaker 2: an auction. Now you might say, why would the seller

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Speaker 2: want to do that? Exactly, they want they want to

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Speaker 2: push up the price so that other people have to

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Speaker 2: bid higher than what their true value is. And in

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Speaker 2: a permissionless world, you have to assume that that's true

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Speaker 2: by default. Right, when you do an auction with the

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Speaker 2: trust the third party, you usually assume, hey, they're not

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Speaker 2: going to do X. And if there's any evidence, then

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Speaker 2: I go sue.

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Speaker 4: Them, right, so you have toil and write.

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Speaker 2: Well, there's still fees here. It's just more that they're

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Speaker 2: not as adversarial the sense of you assume that if

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Speaker 2: they did some malicious thing, you would be able to

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Speaker 2: sue them or prove it in some way and then

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Speaker 2: use the legal system as a way of enforcing your rights.

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Speaker 4: Right.

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Speaker 2: But this in the online world, that's not true. And

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Speaker 2: so this has also been not true even at large

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Speaker 2: big tech companies. So you know in Googles online ad auctions,

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Speaker 2: the DOJ. One of the strongest cases the DOJ has

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Speaker 2: against Google is actually that Google purposely spoofed in their

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Speaker 2: own auctions, like acted as a bidder to push up prices,

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Speaker 2: exactly as I was describing. And so there is a

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Speaker 2: sense in which when you design these systems such that

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Speaker 2: I can have the digital IOU dollars move around everywhere,

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Speaker 2: I need to design them with the assumption that because

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Speaker 2: there's no trust at third party, people can be colluding arbitrarily,

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Speaker 2: and someone who's selling me something might also be trying

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Speaker 2: to be manipulating the auction, and so this type of

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Speaker 2: stuff is you need to actually build these systems such

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Speaker 2: that they the profitability of doing such things is actually low,

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Speaker 2: not just hey, I'm going to hope it works because

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Speaker 2: I can sue them. Right, those are two different standards.

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Speaker 2: One is actually much more. You know, you're trying to

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Speaker 2: mathematically ensure they bring not profitable.

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Speaker 1: And they all know lawsuits are a terrible way to

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Speaker 1: enforce law.

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Speaker 4: They're just you know, wasteful.

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Speaker 1: And horrible and only you know, only the wrong, only

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Speaker 1: the wrong people prosper.

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Speaker 5: Right, Yeah, for sure.

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Speaker 2: And so I think I think like there's a sense

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Speaker 2: in which these crypto applications and define particular are built

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Speaker 2: around building basic primitives that you would find in banking

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Speaker 2: and finance, but in such a way that they're resistant

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Speaker 2: to this type of collusion. And so it's it's a

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Speaker 2: lot harder to build those systems there. They have to

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Speaker 2: be resistant to much different types of adversaries, and they

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Speaker 2: you know, if they break or they get hacked, then

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Speaker 2: the money is sort of all gone. It's not like

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Speaker 2: it's not like a bank where there's a legal system.

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Speaker 2: On the other hand, because of that, it's very easy

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Speaker 2: once they do work for people around the world to

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Speaker 2: use these things easily, and so the reason people are

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Speaker 2: excited about it is like it basically unbundles a lot

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Speaker 2: of banking services and makes it easy to use. You

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Speaker 2: can kind of think of DeFi as sort of user

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Speaker 2: generated finance, and the same way that a lot of

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Speaker 2: social networks are sort of deal with user generated content,

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Speaker 2: like users making podcasts, users making videos. There's a sense

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Speaker 2: in which finance has never really had user users could

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Speaker 2: never really generate products, right, It's not like traders who

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Speaker 2: are trading on the stock market that the same can

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Speaker 2: like create a new financial instrument. But if you look

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Speaker 2: at crypto, like if you look especially if you look

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Speaker 2: at meme coins, people are creating and destroying assets all

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Speaker 2: the time, right.

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Speaker 1: And so there's people like me with meme coins and

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Speaker 1: those coins. I mean all that, you know, these things

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Speaker 1: that come out of thin air. I just it's as

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Speaker 1: hard as I fry, like how does this thing have

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Speaker 1: value beyond a bunch of people's snarking about it on

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Speaker 1: on X nowadays.

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Speaker 4: But you know.

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Speaker 1: That's why there's just a leap that the a leap

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Speaker 1: there that you know. But then then I guess in

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Speaker 1: that sense, it does become like a security or or

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Speaker 1: a collectible. You know, it's that Jimmy Hendricks poster that

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Speaker 1: is going to you know, gain in value in age

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Speaker 1: because somebody, some other huge fan is going to want

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Speaker 1: it someday framed on their wall.

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Speaker 4: Is that Is that a reasonable way to think about it?

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Speaker 4: Or am I totally off?

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Speaker 5: Yeah?

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Speaker 2: I think that's certainly one way if you're going to

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Speaker 2: I think like people, you know, if you I think

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Speaker 2: it's better to actually make a bit of a connection

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Speaker 2: more to like traditional tech companies to Facebook and Google.

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Speaker 2: From my perspective, they are derivatives exchanges, whether they want

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Speaker 2: to say that they are or not. I mean, obviously

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Speaker 2: legally it helps them to not be, but in some

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Speaker 2: ways they are creating and destroying derivative assets on demand.

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Speaker 2: So let's say an advertiser says, hey, I want to

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Speaker 2: target women in New York who are between twenty and

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Speaker 2: thirty who live in a particular neighborhood. Suppose no one

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Speaker 2: goes on to Facebook who matches that criteria, Well, then

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Speaker 2: the advertisers' dollars don't get spent, and you can almost

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Speaker 2: think of it like an option, Like the advertiser bought

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Speaker 2: the option for the right to sell to add to

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Speaker 2: those that demographic. On the other hand when those users

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Speaker 2: go on the network. You could effectively think of Facebook

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Speaker 2: as exercising the option on behalf of the advertiser and

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Speaker 2: creating a new financial product, which is the ad impression

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Speaker 2: that they made on demand to a particular set of users,

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Speaker 2: and then they destroyed when those users are not present.

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Speaker 2: And in that sense, you can almost view this idea

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Speaker 2: that there exists financial assets that are created and destroyed

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Speaker 2: on demand in turn response to events and just in

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Speaker 2: time as sort of something that is is true, very

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Speaker 2: true to like Internet native assets versus not Internet native assets.

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Speaker 2: And I think this idea that we have things that

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Speaker 2: can be kind of created on demand and then sold

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Speaker 2: that are like sort of these sort of more complex

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Speaker 2: financial assets that is something that we all live with

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Speaker 2: and breathe with every day on the Internet, but we

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Speaker 2: don't it's not transparent to us. And I think in

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Speaker 2: the crypto world that's actually quite the opposite. It is

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Speaker 2: like it's very clear that that's what exists versus kind

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Speaker 2: of you know, what you see in normal stuff. So

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Speaker 2: you know, the reason I bring this up is like,

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Speaker 2: you know, you're mentioning the thing. It's like the Jimi

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Speaker 2: Hendrix album that maybe I bought early. Well, the ad

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Speaker 2: impression is the same thing. It's not actually clear it

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Speaker 2: has any value, but the advertiser is paying a premium

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Speaker 2: for the right to sell to that demographic if they exist.

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Speaker 1: Right, And going back to you know, they're like, there's

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Speaker 1: definitely precedent for the you know, if you can bring

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Speaker 1: me there's very time sensitive advertisers, car advertisers, movie studio advertisers.

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Speaker 1: I will pay you a lot of money for an

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Speaker 1: advertising for an audience over these two weekends, and if

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Speaker 1: you don't deliver, you owe me money. So there's real

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Speaker 1: precedent for that kind of an agreement in a business transaction.

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Speaker 1: That's interesting.

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Speaker 2: Yeah, And I think all that you're having with cryptos

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Speaker 2: like people being able to do that in a sort

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Speaker 2: of permissionless way, like I can create you know. The

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Speaker 2: difference in the Facebook case is Facebook controls the entire

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Speaker 2: creation of these financial assets, right, an advertiser can request something,

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Speaker 2: but like unless Facebook actually does the exercising of like

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Speaker 2: delivering the ads, so the user then, like you, it's

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Speaker 2: never really happening. And crypto the point is that the

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Speaker 2: blockchain can do that execution for you without needing kind

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Speaker 2: of the central party in the middle, and I sort

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Speaker 2: of think that's that's one of these things where, yes,

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Speaker 2: these things, it's like they might not have initial intrinsic value,

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Speaker 2: but their attention to commy type of things, where like

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Speaker 2: there is a particular time and place where they might

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Speaker 2: suddenly be valuable in the same way that the Jimmy

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Speaker 2: Hendrix album probably was peak value twenty years ago and

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Speaker 2: maybe it's flat or down a little bit now.

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Speaker 1: It has occurred to me that entertainment is a business

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Speaker 1: where you have a lot for the creative community. You

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Speaker 1: have a lot of people, you have a lot of

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Speaker 1: properties that can generate significant revenue and profits, especially over time.

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Speaker 1: You have a lot of profit participation deals, and sometimes

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Speaker 1: you can have a number of people that have small

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Speaker 1: stakes in something that will kick off meaningful revenue over

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Speaker 1: a long period of you know, thirty forty fifty years

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Speaker 1: if you're lucky. And now I mean in the world

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Speaker 1: of IP it's you know, just preasure prove time, so.

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Speaker 4: You have long tail, long payoff periods.

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Speaker 1: And it occurred to me that oh and sorry, and

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Speaker 1: then of course the history of Hollywood accounting people fighting

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Speaker 1: over wait a minute, it made this much, but you

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Speaker 1: took you took that much off the top, you padded

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Speaker 1: it all these fighting over Hollywood accounting. Wouldn't in the

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Speaker 1: twenty first century, in the modern era, wouldn't blockchain something

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Speaker 1: that is theoretically not theoretically, but you know, something that

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Speaker 1: is open, available for all to see, can't be can't

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Speaker 1: be jimmied with, but actually can only be. You know,

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Speaker 1: it's supposed to keep everybody honest and all the transactions

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Speaker 1: are supposed to be fairly recorded and you know, there

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Speaker 1: for all to see. So wouldn't that in a way

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Speaker 1: be a good way to handle something like that? Or

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Speaker 1: am I once again? Am I just completely off? Does

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Speaker 1: that make any sense?

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Speaker 2: Yeah? So, I mean this gets back to this type

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Speaker 2: of thing I was talking about before, which is like

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Speaker 2: the current fintech application stack, like the ven Mozelle, Revolute whatever.

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Speaker 2: If we're really, really, really really squinting, they are lipstick

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Speaker 2: on a pig. They are front ends that are built

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Speaker 2: around the existing bank system.

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Speaker 5: Right.

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Speaker 2: They make it a lot easier to use, to make

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Speaker 2: the front ends more intuitive. They hide a lot of

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Speaker 2: the fact that banks are running nineteen sixties servers still

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Speaker 2: in some cases. But their lipstick on a pig. They

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Speaker 2: don't control their own destiny in the sense that they

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Speaker 2: can't do risk activities. They can't do the type of

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Speaker 2: thing you're talking about where people are pulling together money

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Speaker 2: and investing in an endeavor without a bank being involved

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Speaker 2: and syndicating it. And this gets back to this idea

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Speaker 2: that in DeFi, where I can program these kind of

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Speaker 2: risk seeking activities where people can pull together assets and

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Speaker 2: use them in certain ways, that sort of being able

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Speaker 2: to do that without a bank, and I can write

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Speaker 2: my own code that gives the covenants for the law

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Speaker 2: and the contracts implied. That is this idea of being

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Speaker 2: user generated and finance like I actually like that's a

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Speaker 2: better way of thinking of DeFi than the name decentrazed finance,

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Speaker 2: which is you can create whatever you want and you

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Speaker 2: can do these risks seeking things, and you don't need

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Speaker 2: a bank to be the custody of your funds and

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Speaker 2: custody of the funds. You can have this kind of

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Speaker 2: smart contract manage these IOUs and it's transparent to people.

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Speaker 2: And so I think the hardest part for using a

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Speaker 2: lot of this stuff for non Internet native and non

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Speaker 2: digital the digital assets is you have what's called the

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Speaker 2: oracle problem. If someone needs to convey what is happening

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Speaker 2: off chain to the smart contract, right, someone needs to say, hey,

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Speaker 2: we produce this movie, and we got five hundred dollars

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Speaker 2: of revenue, so here's you know, I make a.

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Speaker 1: For you, and twenty five dollars for the director, twenty

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Speaker 1: five dollars for the star.

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Speaker 4: That kind of thing.

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Speaker 2: But in an adversarial environment, like the person who receives

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Speaker 2: the five hundred dollars might report only four hundred and

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Speaker 2: ninety five to the contract and keep an extra five

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Speaker 2: for themselves. Right, So there's this. For offline things, you

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Speaker 2: have to have some way of you know, the blockchain,

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Speaker 2: and like computers in general have no way of verifying

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Speaker 2: this offline thing actually took place, right, And in the

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Speaker 2: normal world we also don't have a way of verifying it.

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Speaker 2: We have a way of suing people afterwards if we

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Speaker 2: think that.

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Speaker 4: It happens, and then the courts.

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Speaker 2: The courts are exactly right like and there's a sense

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Speaker 2: in which that is oftentimes the biggest thing. Whereas for

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Speaker 2: digital native assets things online already, it's very easy for

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Speaker 2: them to prove that they got cash flow in a

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Speaker 2: certain way. So one type of thing that's very similar

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Speaker 2: to this. That's sort of similar to what you're talking about.

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Speaker 2: That I've seen some people start to try to do

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Speaker 2: is lending online lending to people who are creators. So

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Speaker 2: people say, who are like YouTube creators who based on

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Speaker 2: their statistics sense, based on like you can you can pop,

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Speaker 2: you can anyone can go to YouTube and verify. You

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Speaker 2: know you're trusting Google, but like at some point, like well,

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Speaker 2: they're the ones hosting it, so there's there's no real

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Speaker 2: incentive initially for them to lie. You can go look

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Speaker 2: at how many followers someone has. You can go look

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Speaker 2: at how many likes, and many people can submit that

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Speaker 2: to a smart contract, and like if everyone submits roughly

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Speaker 2: the same answer, the contract can say, Okay, this person

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Speaker 2: has ten thousand followers and their videos get one hundred

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Speaker 2: k views a day, and currently there's some price that

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Speaker 2: Google is paying per view on average, and so we

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Speaker 2: expect that this creator will actually.

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Speaker 4: Have a predictable cash flows.

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Speaker 2: And you can lend against that.

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Speaker 1: Hold on to your bitcoin. We'll be right back after

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Speaker 1: this shortbreak, and we're back with new perspective on the

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Speaker 1: crypto market from Duke University professor Lee Reiners. Professor Lee

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Speaker 1: Reiners of Duke University. Thank you so much for joining

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Speaker 1: me today.

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Speaker 5: It's great to be with you.

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Speaker 4: Tell me what sparked.

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Speaker 1: Your interest in crypto and why have you been so

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Speaker 1: willing to be out there and be a voice of

438
00:23:50,000 --> 00:23:54,400
Speaker 1: skepticism as to the real world use case for this

439
00:23:54,760 --> 00:23:57,480
Speaker 1: most cutting edge technology.

440
00:23:57,800 --> 00:24:00,960
Speaker 5: Yeah, I think, you know, my interest was sparked like

441
00:24:01,000 --> 00:24:03,359
Speaker 5: so many folks interests, which was just you know, I

442
00:24:03,400 --> 00:24:05,520
Speaker 5: was just curious, right, you know, I was beginning to

443
00:24:05,920 --> 00:24:09,159
Speaker 5: hear and read about, you know, this new form of

444
00:24:09,320 --> 00:24:13,479
Speaker 5: digital money that was independent of the government and the

445
00:24:13,520 --> 00:24:15,679
Speaker 5: central bank, and it was peer to peer, and it

446
00:24:15,720 --> 00:24:18,080
Speaker 5: was going to you know, disrupt the banks and you know,

447
00:24:18,119 --> 00:24:20,399
Speaker 5: didn't rely on intermediaries, and so you know, I just

448
00:24:20,440 --> 00:24:23,680
Speaker 5: started to dive in and learn what I could. You know,

449
00:24:23,680 --> 00:24:25,359
Speaker 5: at the time, I was actually working at the federalis

450
00:24:25,480 --> 00:24:28,199
Speaker 5: or a Bank of New York, you know, so I was

451
00:24:28,240 --> 00:24:33,520
Speaker 5: a examiner of large financial institutions, and so I kind

452
00:24:33,560 --> 00:24:36,879
Speaker 5: of you know, shared some of the early crypto communities

453
00:24:36,920 --> 00:24:42,879
Speaker 5: skepticism of the legacy financial system. Right. And if you

454
00:24:42,920 --> 00:24:46,919
Speaker 5: actually go back to you know, the Bitcoin White Paper,

455
00:24:46,960 --> 00:24:49,480
Speaker 5: which is what launched us, you know, all this cryptocurrency

456
00:24:49,480 --> 00:24:51,560
Speaker 5: stuff we're talking about today. You know, that was Halloween

457
00:24:51,600 --> 00:24:55,480
Speaker 5: two thousand and eight. The first bitcoin transaction occurred in

458
00:24:55,520 --> 00:24:58,159
Speaker 5: January two thousand and nine, and that first transaction actually

459
00:24:58,160 --> 00:25:01,479
Speaker 5: created a reference to a headline from the Times of

460
00:25:01,520 --> 00:25:06,240
Speaker 5: London about bank bailouts in the UK. So, you know,

461
00:25:06,280 --> 00:25:08,359
Speaker 5: from the kind of very beginning, I sort of thought

462
00:25:08,400 --> 00:25:12,320
Speaker 5: that I was kind of ideologically aligned with this community, right,

463
00:25:12,359 --> 00:25:14,240
Speaker 5: I mean, a bank examiner is not a job you

464
00:25:14,280 --> 00:25:16,320
Speaker 5: go into if you think, you know, Wall Street is

465
00:25:16,320 --> 00:25:19,679
Speaker 5: the greatest thing since slice spread, right, So that was

466
00:25:19,720 --> 00:25:23,760
Speaker 5: kind of my my initial foray. Then about seven years ago,

467
00:25:23,800 --> 00:25:27,439
Speaker 5: I came to Duke and I started teaching classes on

468
00:25:27,520 --> 00:25:30,439
Speaker 5: you know, financial regulation, regulatory policy, and so I just

469
00:25:30,440 --> 00:25:33,359
Speaker 5: started to think about, you know, how does cryptocurrency fit

470
00:25:33,800 --> 00:25:39,120
Speaker 5: or not fit within existing regulatory frameworks and how should

471
00:25:39,720 --> 00:25:44,119
Speaker 5: financial policy makers and regulators adjust. And so I was

472
00:25:44,119 --> 00:25:47,400
Speaker 5: starting to write about crypto, you know, back in twenty seventeen,

473
00:25:47,480 --> 00:25:49,639
Speaker 5: twenty eighteen. I mean, it's an attorney ago and I

474
00:25:49,720 --> 00:25:53,240
Speaker 5: like the joke Cynthia that crypto years are like dog years, right, right,

475
00:25:53,320 --> 00:25:56,919
Speaker 5: So it's been a it's been a long time. You know,

476
00:25:57,280 --> 00:25:59,560
Speaker 5: I never would have thought that the industry would have

477
00:25:59,560 --> 00:26:02,879
Speaker 5: gotten to point in size and scale and notoriety and

478
00:26:02,960 --> 00:26:05,840
Speaker 5: you name it, and you know, the industry and the

479
00:26:05,880 --> 00:26:08,600
Speaker 5: assets to five predictions from the very beginning. So you know,

480
00:26:08,640 --> 00:26:10,840
Speaker 5: I can guarantee you whatever predictions I make today with

481
00:26:10,960 --> 00:26:13,960
Speaker 5: you are probably going to be wrong, just like most

482
00:26:14,000 --> 00:26:17,160
Speaker 5: everyone's predictions about crypto have been wrong from the very beginning.

483
00:26:17,560 --> 00:26:21,000
Speaker 5: But you know, I started to get concern. I guess

484
00:26:21,000 --> 00:26:26,160
Speaker 5: as time went by and some of the proposed benefits

485
00:26:26,160 --> 00:26:30,200
Speaker 5: of crypto really didn't materialize, and we're starting to see

486
00:26:30,880 --> 00:26:34,320
Speaker 5: the harms, right, very real and tangible harms, And that

487
00:26:34,720 --> 00:26:38,200
Speaker 5: really hit home for me, I would say, in twenty

488
00:26:38,280 --> 00:26:44,160
Speaker 5: twenty one. And if folks remember the Colonial pipeline, heck, right,

489
00:26:44,280 --> 00:26:46,359
Speaker 5: and you know that was a big deal. Obviously it's

490
00:26:46,359 --> 00:26:50,600
Speaker 5: a big deal of nationwide, but especially here on the

491
00:26:50,640 --> 00:26:54,399
Speaker 5: East Coast and the Southeast, because you were seeing you know,

492
00:26:54,480 --> 00:26:57,159
Speaker 5: gas shortages, right, I mean you would drive by a

493
00:26:57,200 --> 00:26:59,359
Speaker 5: gas station and it was closed, or you know if

494
00:26:59,359 --> 00:27:01,320
Speaker 5: they did have gas, like a long line. You know,

495
00:27:01,359 --> 00:27:04,119
Speaker 5: these are scenes that you know, most Americans haven't seen

496
00:27:04,240 --> 00:27:06,280
Speaker 5: since you know, the air of oil embargo in the

497
00:27:06,640 --> 00:27:07,840
Speaker 5: late seventies, right.

498
00:27:07,640 --> 00:27:09,919
Speaker 4: Since I was about ten years old. So yeah, that's right.

499
00:27:09,960 --> 00:27:12,080
Speaker 5: I'm not going to date anyone here, but I will.

500
00:27:12,200 --> 00:27:15,919
Speaker 5: But you volunteered, so, you know, and and and the

501
00:27:15,960 --> 00:27:21,560
Speaker 5: reality is is that, you know, ransomware is fueled by cryptocurrency. Now,

502
00:27:21,560 --> 00:27:24,320
Speaker 5: it's true that ransomware does predate crypto, but you weren't

503
00:27:24,359 --> 00:27:26,800
Speaker 5: reading about it on the front page of the New

504
00:27:26,880 --> 00:27:30,119
Speaker 5: York Times in the Wall Street Journal. And the fact

505
00:27:30,240 --> 00:27:34,359
Speaker 5: is is that every single, every single ransomware attack, the

506
00:27:34,400 --> 00:27:39,159
Speaker 5: attackers demand payment in cryptocurrency, right, And so I started

507
00:27:39,160 --> 00:27:41,000
Speaker 5: and you know, this actually hit home for me because

508
00:27:41,040 --> 00:27:43,679
Speaker 5: my wife and I had been on vacation when the

509
00:27:43,960 --> 00:27:47,919
Speaker 5: when the hack occurred. We came back and we couldn't

510
00:27:47,960 --> 00:27:51,359
Speaker 5: get an uber or a lyft from the airport home

511
00:27:51,840 --> 00:27:54,080
Speaker 5: because they couldn't get gas, so no one was driving,

512
00:27:54,760 --> 00:27:56,800
Speaker 5: so we were essentially straight at the airport. And then

513
00:27:56,840 --> 00:27:58,440
Speaker 5: I will, you know, so then you know, my brain

514
00:27:58,520 --> 00:28:01,199
Speaker 5: just started chirting, and then I just, you know, I

515
00:28:01,640 --> 00:28:03,240
Speaker 5: and at that point, obviously I've been you know, thinking

516
00:28:03,240 --> 00:28:06,080
Speaker 5: about you know, these issues and crypto for a few years,

517
00:28:06,080 --> 00:28:08,600
Speaker 5: and I just kind of came to the realization that,

518
00:28:08,720 --> 00:28:11,640
Speaker 5: you know, this is doing more harm to our society

519
00:28:12,320 --> 00:28:14,600
Speaker 5: than good. And frankly, it's kind of hard to see

520
00:28:14,640 --> 00:28:19,520
Speaker 5: what good has you know, matriculated at this point because

521
00:28:19,720 --> 00:28:21,840
Speaker 5: you know, again going back to two thousand and eight, right,

522
00:28:22,840 --> 00:28:27,640
Speaker 5: you know, this technology is not new, right, I mean,

523
00:28:27,680 --> 00:28:32,800
Speaker 5: this is sixteen years at this point, and technology tends

524
00:28:32,800 --> 00:28:34,359
Speaker 5: to prove itself pretty quickly.

525
00:28:34,440 --> 00:28:34,600
Speaker 1: Right.

526
00:28:34,640 --> 00:28:38,000
Speaker 5: So, by way of comparison, the iPhone was two thousand

527
00:28:38,040 --> 00:28:40,520
Speaker 5: and seven, I think anyone who sort of held an

528
00:28:40,520 --> 00:28:42,480
Speaker 5: iPhone or a smartphone in their hand for the first

529
00:28:42,560 --> 00:28:46,920
Speaker 5: time fundamentally understood that this was a transformative technology. Right.

530
00:28:47,720 --> 00:28:50,720
Speaker 5: But here we are sixteen years later and we still

531
00:28:50,720 --> 00:28:54,719
Speaker 5: haven't seen crypto or blockchains killer use case. So you

532
00:28:54,760 --> 00:28:56,840
Speaker 5: just kind of have to ask yourself, if it hasn't

533
00:28:56,880 --> 00:28:59,960
Speaker 5: happened yet, when will it happen. But in the meantime,

534
00:29:00,560 --> 00:29:04,000
Speaker 5: we've seen all sorts of frauds that you've mentioned in

535
00:29:04,040 --> 00:29:06,600
Speaker 5: your intro there. You know, we've seen the rise of

536
00:29:06,680 --> 00:29:10,800
Speaker 5: ransomware attacks, We've seen crypto being used to fund terrorism

537
00:29:11,360 --> 00:29:15,320
Speaker 5: and bypass US sanctions, right, And so I could go on,

538
00:29:15,360 --> 00:29:18,120
Speaker 5: I mean there's there's more. There's you know, scammed involving

539
00:29:18,160 --> 00:29:21,960
Speaker 5: you know, pig butchering, right, you know, romance scams that

540
00:29:21,960 --> 00:29:24,520
Speaker 5: that rely on on cryptos. So I think if you

541
00:29:24,560 --> 00:29:28,680
Speaker 5: just took a step back from an objective perspective, it's

542
00:29:28,720 --> 00:29:34,920
Speaker 5: pretty clear to me that the harms vastly outweigh the benefits.

543
00:29:34,960 --> 00:29:36,720
Speaker 5: And then I think, you know, the challenge then is

544
00:29:37,080 --> 00:29:39,480
Speaker 5: coming across back to the East Coast and DC is well,

545
00:29:39,480 --> 00:29:41,640
Speaker 5: what do you do about it from a regulatary standpoint?

546
00:29:41,800 --> 00:29:45,840
Speaker 5: Right And you know, we don't have the most functional

547
00:29:45,840 --> 00:29:48,600
Speaker 5: Congress right now, that's putting it mildly. You know, we're

548
00:29:48,600 --> 00:29:51,640
Speaker 5: heading into an election season now, cryptos sort of not

549
00:29:52,480 --> 00:29:56,960
Speaker 5: top priority for most politicians right now. So you know,

550
00:29:57,000 --> 00:29:59,120
Speaker 5: I think the status quo from a regulatory standpoint is

551
00:29:59,160 --> 00:30:02,560
Speaker 5: going to prevail. And you know, I think we can

552
00:30:02,680 --> 00:30:06,560
Speaker 5: continue to see you know, average folks get harmed by

553
00:30:06,560 --> 00:30:08,800
Speaker 5: crypto just as they have been for the past, you know,

554
00:30:08,880 --> 00:30:09,800
Speaker 5: sixteen years.

555
00:30:10,240 --> 00:30:15,000
Speaker 1: What's the calculation that says that computers crunching those numbers

556
00:30:15,040 --> 00:30:19,680
Speaker 1: down to infinitesimal degrees creates a value.

557
00:30:19,640 --> 00:30:23,040
Speaker 5: Well, you know, values in the eye of the beholder, Cynthia, Right, yeah,

558
00:30:23,760 --> 00:30:26,080
Speaker 5: you know, and you've you've touched on a few important things.

559
00:30:26,120 --> 00:30:28,560
Speaker 5: I think one is just you know, kind of bitcoin mining,

560
00:30:28,600 --> 00:30:30,720
Speaker 5: and maybe it's worth just explaining for folks kind of

561
00:30:30,720 --> 00:30:32,440
Speaker 5: what's happening there, what's going.

562
00:30:32,280 --> 00:30:34,400
Speaker 4: On, because including your host here.

563
00:30:34,680 --> 00:30:38,200
Speaker 5: That's that's right, you know, and I'm not going to

564
00:30:38,240 --> 00:30:39,960
Speaker 5: disagree that it's wasteful. I mean, at the end of

565
00:30:40,000 --> 00:30:43,320
Speaker 5: the day, you know, you have, as you mentioned, you know,

566
00:30:43,520 --> 00:30:45,800
Speaker 5: millions of computers at this point in time, and when

567
00:30:45,800 --> 00:30:48,720
Speaker 5: you think of, you know, a bitcoin mining facility, just

568
00:30:48,760 --> 00:30:51,880
Speaker 5: picturing your head like, uh, you know, an AWS server

569
00:30:52,040 --> 00:30:54,560
Speaker 5: farm or a Google data center or something like that, right,

570
00:30:54,600 --> 00:30:56,760
Speaker 5: I mean, that's what we're talking about at this point.

571
00:30:56,880 --> 00:30:58,560
Speaker 4: Top of computing power.

572
00:30:58,640 --> 00:31:00,840
Speaker 5: Yeah, lots and lots of computing. And it's evolved over

573
00:31:00,880 --> 00:31:03,600
Speaker 5: time obviously, is Bitcoin has become more popular and the

574
00:31:03,640 --> 00:31:06,400
Speaker 5: price has risen. You know, that has incentivized you know,

575
00:31:06,720 --> 00:31:09,280
Speaker 5: larger and more sophisticated players. I mean in the early days,

576
00:31:09,320 --> 00:31:12,680
Speaker 5: you know, you could run you know, a mining node

577
00:31:12,760 --> 00:31:16,360
Speaker 5: on your laptop, right, but those days are long gone.

578
00:31:17,000 --> 00:31:20,440
Speaker 5: So you know the by design, right, So what is

579
00:31:20,600 --> 00:31:24,360
Speaker 5: so bitcoin runs on the blockchain, right, that's the underlying technology,

580
00:31:24,680 --> 00:31:29,680
Speaker 5: right that underpins bitcoin, and a blockchain is just a database,

581
00:31:29,720 --> 00:31:34,280
Speaker 5: but it's a distributed database where everyone who runs that

582
00:31:34,520 --> 00:31:38,720
Speaker 5: you know, blockchain software has the exact same copy of

583
00:31:38,840 --> 00:31:42,320
Speaker 5: the ledger, and they all agree on the contents of

584
00:31:42,320 --> 00:31:45,520
Speaker 5: that ledger and the latest batch of transactions that should

585
00:31:45,520 --> 00:31:47,640
Speaker 5: be added to that ledger. But they don't know one another.

586
00:31:47,760 --> 00:31:50,880
Speaker 5: So how do you get all these people to agree

587
00:31:51,160 --> 00:31:55,320
Speaker 5: on the canonical truth when they don't know nor do

588
00:31:55,400 --> 00:31:58,920
Speaker 5: they have any reason to trust one another. And that's

589
00:31:58,960 --> 00:32:01,800
Speaker 5: what mining is all about. Mining is just all about

590
00:32:02,480 --> 00:32:06,520
Speaker 5: updating the ledger with the most recent batch or block

591
00:32:07,400 --> 00:32:12,080
Speaker 5: of transactions. And so how does that happen, Well, it

592
00:32:12,200 --> 00:32:18,240
Speaker 5: happens by essentially guessing or solving a very computationally intensive

593
00:32:18,560 --> 00:32:23,360
Speaker 5: math problem. And if you're able to do that, and

594
00:32:23,440 --> 00:32:26,120
Speaker 5: so to guess correctly just requires a tremendous amount of

595
00:32:26,160 --> 00:32:31,080
Speaker 5: computing power, right, which takes energy. Okay, if you're able

596
00:32:31,160 --> 00:32:35,920
Speaker 5: to do that, then that miner wins the right in

597
00:32:36,040 --> 00:32:39,880
Speaker 5: essence to post the most recent batch of transactions to

598
00:32:39,960 --> 00:32:43,320
Speaker 5: the blockchain. It broadcasts that to the entire network, and

599
00:32:43,360 --> 00:32:47,120
Speaker 5: everyone agrees because everyone can see that this minor incurred

600
00:32:47,280 --> 00:32:50,360
Speaker 5: the cost right that they solve this puzzle. So the

601
00:32:50,360 --> 00:32:54,240
Speaker 5: puzzle is basically just a cost okay that's imposed on

602
00:32:54,320 --> 00:32:57,040
Speaker 5: mine because if you didn't have a cost, then any

603
00:32:57,080 --> 00:32:59,560
Speaker 5: bad actor could just hijack this network if they had

604
00:32:59,640 --> 00:33:02,960
Speaker 5: enough futing power. Right, So you need to have a

605
00:33:03,120 --> 00:33:08,360
Speaker 5: cost in order to incentivize you know, ethical behavior. But

606
00:33:08,400 --> 00:33:09,840
Speaker 5: of course no one's going to do it if all

607
00:33:09,880 --> 00:33:11,600
Speaker 5: there is is a cost. So they need a reward

608
00:33:11,640 --> 00:33:14,200
Speaker 5: as well. So there's a block reward, So if you're

609
00:33:14,240 --> 00:33:17,480
Speaker 5: successful in solving this puzzle, then you get a certain

610
00:33:17,520 --> 00:33:21,600
Speaker 5: amount of new bitcoin. And actually that amount that block

611
00:33:21,680 --> 00:33:24,720
Speaker 5: reward has every couple of years, and in fact we're

612
00:33:24,760 --> 00:33:28,600
Speaker 5: approaching the next having. And there's also things like transaction fee.

613
00:33:28,680 --> 00:33:30,760
Speaker 5: So if I wanted to send you a bitcoin, you know,

614
00:33:30,880 --> 00:33:33,600
Speaker 5: I could add a transaction fee that would go to

615
00:33:33,640 --> 00:33:36,720
Speaker 5: the minor in that transaction. That would sort of incentivize

616
00:33:36,720 --> 00:33:39,360
Speaker 5: the minor to include, you know, my transaction in the

617
00:33:39,360 --> 00:33:42,680
Speaker 5: most recent block. So that's what mining is really all about.

618
00:33:42,720 --> 00:33:46,120
Speaker 5: It's about imposing a cost and then having a reward, right,

619
00:33:46,600 --> 00:33:48,880
Speaker 5: And there's different ways. There's less energy intensive ways. So

620
00:33:48,960 --> 00:33:51,800
Speaker 5: the second most pipular cryptocurrency, Ethereum, a few years ago,

621
00:33:51,880 --> 00:33:57,479
Speaker 5: switched from the very energy intensive proof of work mining process,

622
00:33:57,480 --> 00:33:59,440
Speaker 5: which is what bitcoin us, right, the work being you

623
00:33:59,480 --> 00:34:03,560
Speaker 5: solve that that puzzled to proof of steak, where in essence,

624
00:34:04,160 --> 00:34:07,440
Speaker 5: you have to kind of risk a certain amount of ether,

625
00:34:07,640 --> 00:34:11,080
Speaker 5: which is the native cryptocurrency for ethereum, and sort of

626
00:34:11,080 --> 00:34:13,440
Speaker 5: the more you risk, or the more you stake, the

627
00:34:13,480 --> 00:34:17,040
Speaker 5: more likely you are to be able to update that blockchain.

628
00:34:17,520 --> 00:34:21,399
Speaker 5: So that's the mining. But again to your question, how

629
00:34:21,400 --> 00:34:23,759
Speaker 5: does that translate into actual value? And this is to

630
00:34:23,840 --> 00:34:27,760
Speaker 5: me a conundrum that has yet to be satisfactorily answered

631
00:34:27,800 --> 00:34:32,640
Speaker 5: by anyone. That's sort of pro crypto, right, which is

632
00:34:32,680 --> 00:34:36,640
Speaker 5: like again valuation, Okay, so what is it? I mean,

633
00:34:36,840 --> 00:34:41,399
Speaker 5: stocks and bonds, traditional financial instruments have sort of established

634
00:34:41,640 --> 00:34:44,960
Speaker 5: valuation methodologies, right, You look at the current market price

635
00:34:45,600 --> 00:34:48,239
Speaker 5: and then use an investor make it determination is it

636
00:34:48,280 --> 00:34:52,320
Speaker 5: overvalued or undervalued? Now, again, there are models and methods

637
00:34:52,640 --> 00:34:57,640
Speaker 5: that help you make that determination, notably discounted cash flow analysis,

638
00:34:57,880 --> 00:35:00,239
Speaker 5: right and not to get too wonky and financi on

639
00:35:00,280 --> 00:35:04,960
Speaker 5: an entertainment podcast, right, but you know companies generate cash flows, right,

640
00:35:05,320 --> 00:35:07,440
Speaker 5: and they will generate them in the future, and then

641
00:35:07,440 --> 00:35:09,799
Speaker 5: an investor can sort of discount that future stream of

642
00:35:09,800 --> 00:35:12,800
Speaker 5: cash flows to a value today. Right. Well, of course,

643
00:35:12,800 --> 00:35:17,760
Speaker 5: with crypto, there's no cash flows, right, there's nothing to discount. Okay,

644
00:35:17,760 --> 00:35:20,520
Speaker 5: So maybe we can think of crypto from a valuation

645
00:35:20,680 --> 00:35:23,799
Speaker 5: standpoint as akin to other types of currencies, right, like

646
00:35:23,800 --> 00:35:26,440
Speaker 5: the dollar or the euro. How are they valua, Well,

647
00:35:26,440 --> 00:35:29,120
Speaker 5: they're valued relative to one another. Right, There's a dollar

648
00:35:29,160 --> 00:35:31,719
Speaker 5: euro exchange rate, you know, a dollar yea in exchange rate,

649
00:35:32,120 --> 00:35:34,000
Speaker 5: and those exchange rates are going to be based off

650
00:35:34,040 --> 00:35:37,120
Speaker 5: a number of different you know, factors like GDP growth

651
00:35:37,120 --> 00:35:40,040
Speaker 5: in the two countries, inflation rates in the two countries,

652
00:35:40,120 --> 00:35:42,839
Speaker 5: interest rates in the two countries. Again, concepts that do

653
00:35:42,920 --> 00:35:49,080
Speaker 5: not apply in the cryptocurrency context. So where does that

654
00:35:49,200 --> 00:35:52,440
Speaker 5: leave you? I mean to me, it's an asset that

655
00:35:52,480 --> 00:35:57,080
Speaker 5: from the beginning has traded entirely on sentiment, right, And

656
00:35:57,120 --> 00:35:59,480
Speaker 5: you see this clearly when you know, a few years

657
00:35:59,520 --> 00:36:02,440
Speaker 5: ago Elon Musk would you know, send out a tweet

658
00:36:02,480 --> 00:36:04,640
Speaker 5: about doage coin and the price that dotagecoin would jump,

659
00:36:04,680 --> 00:36:06,800
Speaker 5: or he'd say something bad about dotagecoin or bitcoin and

660
00:36:06,840 --> 00:36:09,520
Speaker 5: the price would go down. Right, It's an acid that

661
00:36:09,600 --> 00:36:16,560
Speaker 5: trades entirely on sentiment and narrative, and that narrative has

662
00:36:16,680 --> 00:36:22,080
Speaker 5: evolved over time. So for the longest time, the narrative

663
00:36:22,200 --> 00:36:27,279
Speaker 5: was that Bitcoin, in particular was digital gold because per

664
00:36:27,480 --> 00:36:31,040
Speaker 5: the code Bitcoin source code, there's only going to be

665
00:36:31,080 --> 00:36:34,520
Speaker 5: twenty one million bitcoins ever created, right, that can't change, right,

666
00:36:34,560 --> 00:36:36,520
Speaker 5: that's in the code. And so there's a fixed apply,

667
00:36:36,719 --> 00:36:39,680
Speaker 5: just like there's a fixed supply of gold. And just

668
00:36:39,760 --> 00:36:44,400
Speaker 5: like gold is a hedge against inflation, and you know,

669
00:36:44,520 --> 00:36:49,919
Speaker 5: the market the sign markets, so too could is bitcoin? Right, Well,

670
00:36:49,960 --> 00:36:53,880
Speaker 5: that narrative was shattered back, you know, beginning in the

671
00:36:53,920 --> 00:36:58,279
Speaker 5: fall of twenty twenty one, when inflation started to go up, right,

672
00:36:58,320 --> 00:37:00,400
Speaker 5: and we've all lived through the horrible flare of the

673
00:37:00,400 --> 00:37:05,440
Speaker 5: past couple of years, and bitcoin and crypto prices, you know, tanked. Okay,

674
00:37:05,520 --> 00:37:09,080
Speaker 5: so it's obviously not an inflation hedge when inflation's going

675
00:37:09,160 --> 00:37:12,360
Speaker 5: up and bitcoin's going down. I just haven't seen anything

676
00:37:12,840 --> 00:37:16,200
Speaker 5: with rigor that would suggest, you know, you can say, okay,

677
00:37:16,200 --> 00:37:19,000
Speaker 5: crypto or bitcoin at fifty thousand dollars is over valued

678
00:37:19,080 --> 00:37:22,200
Speaker 5: or undervalue. It's just entirely subjective and you know, based

679
00:37:22,239 --> 00:37:23,160
Speaker 5: on sentiment.

680
00:37:23,239 --> 00:37:26,920
Speaker 1: How liquid is it like if you I mean, obviously

681
00:37:26,920 --> 00:37:29,759
Speaker 1: in the throes of a crisis, anything, you know, any bank,

682
00:37:29,800 --> 00:37:32,000
Speaker 1: any security is going to have problems. But just on

683
00:37:32,040 --> 00:37:36,080
Speaker 1: a typical typical Tuesday, is it? You know?

684
00:37:36,200 --> 00:37:38,120
Speaker 4: Are you? And forget again?

685
00:37:38,239 --> 00:37:41,040
Speaker 1: Forgive I'm betraying my ignorance here, but I appreciate you

686
00:37:41,120 --> 00:37:43,759
Speaker 1: teaching me on the air here on any given day,

687
00:37:43,760 --> 00:37:46,600
Speaker 1: if you wanted to sell ten or one hundred is

688
00:37:46,600 --> 00:37:49,279
Speaker 1: it a like you know, if anybody wanted to sell

689
00:37:49,280 --> 00:37:51,400
Speaker 1: ten shares of Disney stock or one hundred shares of

690
00:37:51,440 --> 00:37:54,080
Speaker 1: Disney stock, you could do that in a split second

691
00:37:54,560 --> 00:37:57,680
Speaker 1: online and be you know, if you depending on what

692
00:37:57,920 --> 00:38:00,200
Speaker 1: time and where you bet, you would you know what

693
00:38:00,239 --> 00:38:02,399
Speaker 1: you were going to get, and you can you could

694
00:38:02,440 --> 00:38:03,479
Speaker 1: make the decision am.

695
00:38:03,400 --> 00:38:05,960
Speaker 4: I going to hold it a couple more weeks? Months, years?

696
00:38:06,320 --> 00:38:08,520
Speaker 4: Kind of thing? How do you do that? With crypto?

697
00:38:08,920 --> 00:38:12,440
Speaker 5: It's not very liquid, you know? And of course you know,

698
00:38:12,560 --> 00:38:15,120
Speaker 5: just like stocks, you know, there's gonna be some cryptocurrencies

699
00:38:15,160 --> 00:38:17,040
Speaker 5: that are more liquid than others, right, so you know

700
00:38:17,120 --> 00:38:20,759
Speaker 5: Bitcoin is going to be like the most liquid, but

701
00:38:20,800 --> 00:38:22,799
Speaker 5: it's still not very liquid, right, I mean, and we've

702
00:38:22,840 --> 00:38:27,160
Speaker 5: seen numerous instances where you know, there's been a large

703
00:38:27,200 --> 00:38:30,719
Speaker 5: trade that's moved the price, you know, one way or

704
00:38:30,960 --> 00:38:34,359
Speaker 5: the other. Uh. And of course it doesn't help in

705
00:38:34,360 --> 00:38:37,799
Speaker 5: this context that you know, the blockchain is sort of

706
00:38:37,800 --> 00:38:40,440
Speaker 5: fully transparent, right that you can, you know, everyone can

707
00:38:40,520 --> 00:38:45,320
Speaker 5: see every single transaction that's ever occurred on the bitcoin blockchain,

708
00:38:46,719 --> 00:38:48,399
Speaker 5: you know, which means that people can kind of pick

709
00:38:48,480 --> 00:38:51,560
Speaker 5: up quickly if they're selling pressure or on the you know,

710
00:38:51,960 --> 00:38:54,799
Speaker 5: or buying pressure. Although you know, even with that has

711
00:38:54,840 --> 00:38:58,200
Speaker 5: to be caveatic because you know, most trades in crypto

712
00:38:58,360 --> 00:39:02,799
Speaker 5: are done via centralizing changes, right allah ft X, and

713
00:39:02,920 --> 00:39:07,360
Speaker 5: those they dearly departed, right, Yeah, they finally decided that

714
00:39:07,400 --> 00:39:08,759
Speaker 5: they weren't going to bring you know, they weren't going

715
00:39:08,800 --> 00:39:11,560
Speaker 5: to revive FTX two point zero. So it's it's now

716
00:39:11,600 --> 00:39:13,560
Speaker 5: a it's now a liquidation.

717
00:39:13,680 --> 00:39:13,880
Speaker 4: You know.

718
00:39:14,040 --> 00:39:16,520
Speaker 5: So those trades, like you know, so the average person

719
00:39:16,560 --> 00:39:19,120
Speaker 5: you're buying and selling you know, bitcoin, they're doing it

720
00:39:19,120 --> 00:39:22,759
Speaker 5: through a centralized exchange, right. Obviously not FTX anymore, you know.

721
00:39:22,880 --> 00:39:24,759
Speaker 5: But let's just say Coinbase, right, they're the biggest in

722
00:39:24,800 --> 00:39:27,759
Speaker 5: the in the US. Uh. Well, when you trade via

723
00:39:27,800 --> 00:39:31,600
Speaker 5: coin Base, there's never actually a transaction that occurs on

724
00:39:31,640 --> 00:39:36,000
Speaker 5: the blockchain, right Uh. Instead, what's happening is that Coinbase

725
00:39:36,120 --> 00:39:38,880
Speaker 5: has a database, just like every financial like regulator, financial

726
00:39:38,920 --> 00:39:43,080
Speaker 5: institution has a database that tracks debits and credits, right that. Okay,

727
00:39:43,160 --> 00:39:47,799
Speaker 5: you know Lee has you know, x bitcoin. You know,

728
00:39:47,880 --> 00:39:51,040
Speaker 5: Cynthia has you know, y amount of bitcoin. Let's say

729
00:39:51,080 --> 00:39:54,000
Speaker 5: I buy, you sell, and they're just going to reflect

730
00:39:54,000 --> 00:39:57,600
Speaker 5: that on their own internal database. Right, that's how the

731
00:39:57,640 --> 00:40:02,240
Speaker 5: transaction occurs. Now, there should be you know, coinbase should

732
00:40:02,280 --> 00:40:07,360
Speaker 5: have a blockchain address with sufficient amount of bitcoin held

733
00:40:07,360 --> 00:40:10,480
Speaker 5: at that address to cover all of the bitcoin that

734
00:40:10,520 --> 00:40:15,759
Speaker 5: their customer, that their internal database say belongs to their customer. Right,

735
00:40:15,800 --> 00:40:20,719
Speaker 5: But our transaction never actually occurs on the bitcoin blockchain,

736
00:40:20,760 --> 00:40:23,839
Speaker 5: and so you know, so there's just limited liquidity at

737
00:40:23,880 --> 00:40:27,080
Speaker 5: even you know, in exchange like coinbase, So if you

738
00:40:27,120 --> 00:40:30,160
Speaker 5: wanted to get rid of a large position, it's going

739
00:40:30,200 --> 00:40:32,120
Speaker 5: to be very hard to do that. It's one of

740
00:40:32,160 --> 00:40:36,440
Speaker 5: the great ironies of crypto, and there are several, you know,

741
00:40:36,480 --> 00:40:41,040
Speaker 5: but for a technology premise on you know, disintermediation and

742
00:40:41,160 --> 00:40:43,880
Speaker 5: peer to peer payments, when you look at the industry,

743
00:40:44,520 --> 00:40:49,719
Speaker 5: it is littered with intermediaries. Right. That's again how most

744
00:40:49,800 --> 00:40:56,160
Speaker 5: people access crypto is through centralized intermediaries. But these intermediaries,

745
00:40:56,360 --> 00:41:00,880
Speaker 5: unlike banks and you know, stock exchange is and you know,

746
00:41:00,960 --> 00:41:04,480
Speaker 5: retail brokerages, they're not regulated again as many people have

747
00:41:04,480 --> 00:41:05,479
Speaker 5: found out the hard way.

748
00:41:08,000 --> 00:41:11,800
Speaker 1: Well, I hope you found those perspectives enlightening. In truth,

749
00:41:11,840 --> 00:41:14,840
Speaker 1: I think the answer to my fundamental question about blockchain

750
00:41:14,840 --> 00:41:18,160
Speaker 1: in Hollywood is not yet, but it's always good to

751
00:41:18,200 --> 00:41:21,200
Speaker 1: ask a lot of questions. Thank you for listening. Be

752
00:41:21,320 --> 00:41:23,840
Speaker 1: sure to leave us a review at Apple Podcasts or

753
00:41:23,880 --> 00:41:27,799
Speaker 1: Amazon Music. We love to hear from listeners. Please go

754
00:41:27,840 --> 00:41:30,080
Speaker 1: to Variety dot com and sign up for the free

755
00:41:30,480 --> 00:41:34,440
Speaker 1: weekly Strictly Business newsletter, and don't forget to tune in

756
00:41:34,480 --> 00:41:37,960
Speaker 1: next week for another episode of Strictly Business