WEBVTT - Is There a Hollywood Use Case for Crypto and Blockchain Tech? 0:00:07.240 --> 0:00:11.840 Welcome to Strictly Business Varieties, weekly podcasts featuring conversations with 0:00:11.960 --> 0:00:15.960 industry leaders about the business of media and entertainment. I'm 0:00:16.000 --> 0:00:20.320 Cynthia Lyttleton, co editor in chief of Variety. This episode 0:00:20.360 --> 0:00:23.160 is a departure from our usual format of diving into 0:00:23.200 --> 0:00:26.920 industry issues. I'm extremely late to the party, but in 0:00:26.960 --> 0:00:29.120 the past year or so, I've been trying to come 0:00:29.160 --> 0:00:33.600 to an understanding of cryptocurrencies. It's not easy, and I'm 0:00:33.640 --> 0:00:36.239 not too proud to say that I still don't understand 0:00:36.280 --> 0:00:40.040 how you create intrinsic value by having computers crunch through 0:00:40.159 --> 0:00:43.959 very difficult math problems. But let's set that aside. As 0:00:44.000 --> 0:00:46.879 I learned more about blockchain, it occurred to me that 0:00:46.960 --> 0:00:51.360 technology built around transparency might one day be the antidote 0:00:51.400 --> 0:00:56.000 to Hollywood accounting problems. Hollywood deal making has historically been 0:00:56.040 --> 0:01:00.920 built around properties that kick off royalties and profit participation 0:01:01.040 --> 0:01:05.880 payments for decades to come in success. Could blockchain and 0:01:05.959 --> 0:01:10.840 its decentralized approach to banking be useful for situations like movies, 0:01:10.920 --> 0:01:14.000 TV shows, music, and Broadway shows where a number of 0:01:14.040 --> 0:01:17.840 participants might have small stake in the profits of a 0:01:17.880 --> 0:01:21.319 property Over time To answer these questions and more. I 0:01:21.360 --> 0:01:24.520 look for experts who bring different opinions to the microphone. 0:01:24.880 --> 0:01:28.560 We start with Tarun Chitra, founder and CEO of research 0:01:28.600 --> 0:01:32.600 and investment advisory firm Gauntlet. Chitra is also the co 0:01:32.680 --> 0:01:35.360 host of the podcast The Chopping Block, which is my 0:01:35.520 --> 0:01:38.679 favorite podcast for trying to decipher what's happening in this 0:01:38.800 --> 0:01:42.880 digital arena. After Chitra, we get a much different perspective 0:01:43.120 --> 0:01:47.720 on DeFi or the decentralized finance boom, from Lee Reiners, 0:01:48.240 --> 0:01:52.520 a professor at Duke University who studies financial regulation. Reiners 0:01:52.560 --> 0:01:55.400 has become a leading voice of skeptics who question whether 0:01:55.440 --> 0:01:58.760 there are genuine use cases for crypto beyond some of 0:01:58.760 --> 0:02:02.840 the nefarious things that it's become associated with, like ransomware attack. 0:02:04.240 --> 0:02:07.200 All of this heady stuff is coming right up after 0:02:07.240 --> 0:02:20.440 this break, and we're back with conversations on crypto, starting 0:02:20.480 --> 0:02:24.200 with Tarun Chittra, founder and CEO of research and advisory 0:02:24.240 --> 0:02:30.240 firm Gauntlet. Tarun Chiitra, founder and CEO of Gauntlet and 0:02:30.680 --> 0:02:33.760 a research and investment advisory firm that works in the 0:02:33.800 --> 0:02:36.800 crypto space. Thank you so much for joining me today. 0:02:37.160 --> 0:02:38.720 Great to be here. Thanks for having me. 0:02:38.919 --> 0:02:44.640 I came across Tarun and his work in my interest, 0:02:44.720 --> 0:02:47.639 my sort of burgeoning interest and just trying to understand 0:02:47.720 --> 0:02:50.520 what was going on with crypto, what did all this 0:02:50.560 --> 0:02:51.119 stuff mean? 0:02:51.240 --> 0:02:53.160 I did not like so many of it. I had 0:02:53.360 --> 0:02:56.920 no idea. I had no idea what people were talking about. 0:02:56.919 --> 0:03:00.320 I barely, you know, could define what crypto was down 0:03:00.360 --> 0:03:04.720 the rabbit hole of reading in podcasts, many many podcasts, 0:03:04.760 --> 0:03:07.600 and the one that I just fell for from pretty 0:03:07.639 --> 0:03:11.560 much from first listen is called the Chopping Block, and 0:03:11.840 --> 0:03:14.760 it's four guys. Tarun is one of them, and they 0:03:14.880 --> 0:03:18.760 just get they're very active in crypto, they're investors, they're 0:03:18.760 --> 0:03:22.320 in the space, they're clearly in the trenches, and they're 0:03:22.320 --> 0:03:23.520 smart and they're funny. 0:03:24.120 --> 0:03:26.280 Some of the fun is listening. It's almost a puzzle. 0:03:26.400 --> 0:03:27.960 I listen and I'm trying to you know, I hear 0:03:28.000 --> 0:03:29.680 the terms and then I try to back out and 0:03:29.680 --> 0:03:31.079 fit and figure it out. 0:03:31.080 --> 0:03:33.240 But I really enjoy. But what I really what. 0:03:33.440 --> 0:03:38.280 In all seriousness, you four do really well is tackle big, 0:03:38.480 --> 0:03:41.760 big concepts, and you use plain language, and you in 0:03:42.120 --> 0:03:45.320 the way that four guys talking poor friends talking to 0:03:45.400 --> 0:03:47.360 each other can kind of really get to the heart 0:03:47.400 --> 0:03:51.760 of something you explain really complicated things in very plain language. 0:03:51.800 --> 0:03:53.320 And you also, I really. 0:03:53.040 --> 0:03:55.880 Feel like you pull no punches in terms of whether 0:03:55.920 --> 0:03:58.080 it's people in the world, in the crypto world, and 0:03:58.120 --> 0:04:02.000 there's there's no shortage of drama and headlines and litigation 0:04:02.880 --> 0:04:05.240 around a lot of those folks. But what are the 0:04:05.280 --> 0:04:10.760 benefits of the DeFi the decentralized finance offered by crypto 0:04:10.800 --> 0:04:16.280 and blockchain technologies to markets, to markets like the Hollywood 0:04:16.320 --> 0:04:19.160 content business, which does have its own unique sort of 0:04:19.320 --> 0:04:22.440 characteristics of how profits are made and how they're dispensed 0:04:22.480 --> 0:04:24.400 over a long period. But let's just start with the 0:04:24.480 --> 0:04:27.520 sense of like the appeal of DeFi. 0:04:28.360 --> 0:04:31.400 One framing that I like to have around DeFi is, 0:04:32.200 --> 0:04:36.920 anytime you use a fintech apps, they use Venmo, or 0:04:37.120 --> 0:04:40.200 use PayPal or zell or something like that, Right, you're 0:04:40.400 --> 0:04:44.440 generally using things that are not real dollars. They're actually 0:04:45.120 --> 0:04:48.480 synthetic claims on real dollars. So you only get those 0:04:48.480 --> 0:04:50.400 real dollars when you say, hey, I'm with drawing to 0:04:50.440 --> 0:04:54.080 my bank account. Right, But yet you generally treat those 0:04:54.480 --> 0:04:57.560 synthetic claims to dollars as effectively a dollar. Right, So 0:04:58.080 --> 0:05:00.800 if I have twenty dollars in my Venmo count I'll 0:05:00.839 --> 0:05:04.520 send you ten dollars. We both technically have two claims. 0:05:04.640 --> 0:05:06.920 You know, there's an IOU from Venmo that owes me 0:05:07.800 --> 0:05:11.120 ten and IOU that owes you ten, whereas it started 0:05:11.120 --> 0:05:13.880 with an IOU that only owed me twenty. And so 0:05:13.960 --> 0:05:19.080 this idea that people have gotten so comfortable with not 0:05:19.440 --> 0:05:23.039 holding real cash and holding these kind of synthetic claims 0:05:23.400 --> 0:05:27.760 everything from credit cards to Apple pay. It's sort of 0:05:27.800 --> 0:05:29.200 been a thing that's sort of, i would say, from 0:05:29.200 --> 0:05:32.680 the nineteen eighties onwards, been a big change in how 0:05:32.839 --> 0:05:36.760 people deal with money. On the other hand, it's actually 0:05:37.000 --> 0:05:40.160 one thing that is kind of crazy is that you 0:05:40.200 --> 0:05:44.080 can't really program things you do with that money. You 0:05:44.120 --> 0:05:48.680 can't really do risk seeking transactions with that type of money. So, 0:05:49.040 --> 0:05:52.599 for instance, I can't use Venmo to pull together money 0:05:52.600 --> 0:05:56.600 from multiple people to like buy real estate or to 0:05:56.640 --> 0:05:59.320 invest in a company. I would have to go through 0:05:59.360 --> 0:06:02.880 the normal banking system, go through the normal legal system, right. 0:06:03.279 --> 0:06:05.640 And one of the reasons for this is that it's 0:06:05.760 --> 0:06:10.480 very hard to guarantee in a sort of in a 0:06:10.480 --> 0:06:14.120 lot of ways, the effective sort of property rights of 0:06:14.160 --> 0:06:17.400 a dollar in different environments, so that IOU that I 0:06:17.440 --> 0:06:20.520 have in Venmo is different than the IOU that I 0:06:20.600 --> 0:06:24.440 have at Zell, which is different than the IOU I 0:06:24.520 --> 0:06:27.400 have when I go into my Robinhood account. And this 0:06:27.520 --> 0:06:30.640 idea that you have this these different IOUs that are 0:06:30.640 --> 0:06:34.320 not interoperable is effectively one of the reasons it's very 0:06:34.360 --> 0:06:37.920 hard to do sort of risk seeking transactions with those 0:06:38.360 --> 0:06:42.040 those claims on dollars. In crypto people, the number one 0:06:42.040 --> 0:06:45.919 product that has usage is what's called a stable coin. 0:06:46.480 --> 0:06:50.880 Stable Coins are these IOU style representations of dollars. So 0:06:50.960 --> 0:06:53.320 you know, you have a wallet, you might have one 0:06:53.400 --> 0:06:54.960 hundred stable coins in it, or you might have a 0:06:55.040 --> 0:06:58.559 thousand sable coins in it. And the difference is those 0:06:58.640 --> 0:07:01.840 dollars can be used on any application of blockchain. It's 0:07:01.880 --> 0:07:04.320 as if, you know, you could just send money from 0:07:04.400 --> 0:07:07.360 Venmo to Zelle. It's as if you and I could 0:07:07.400 --> 0:07:12.280 both create a new Venmo account called real estate Purchase account, 0:07:12.400 --> 0:07:14.600 and we both send money to it, and then we 0:07:14.640 --> 0:07:17.559 both can invest with it. But we both have to sign. 0:07:18.520 --> 0:07:20.560 We all have to sign a transaction says hey, will 0:07:20.560 --> 0:07:22.560 we approve this transaction. 0:07:22.240 --> 0:07:24.960 And we both have rights to do this, and and we. 0:07:24.920 --> 0:07:27.200 Both have rights, and we have some way of codifying 0:07:27.240 --> 0:07:32.840 the contractual obligations and liabilities of those pool ed assets. 0:07:33.600 --> 0:07:40.559 So fundamentally DeFi exists to service stable coins and also 0:07:40.680 --> 0:07:43.160 native kind of crypto finance. But I think the part 0:07:43.200 --> 0:07:46.360 that you know, I think excited people and also led 0:07:46.360 --> 0:07:51.080 to it growing dramatically is effectively the idea that people 0:07:51.200 --> 0:07:55.040 could do these kind of risk seeking transactions with dollars 0:07:55.080 --> 0:07:57.880 and have use them in many apps. There's no kind 0:07:57.920 --> 0:08:00.280 of restriction on them. For people out there side of 0:08:00.320 --> 0:08:03.560 the US who want to have dollars or want to 0:08:03.600 --> 0:08:07.360 have access to dollar dollarized banking systems, this became a 0:08:07.360 --> 0:08:10.600 really big thing, especially in twenty twenty one and today 0:08:10.640 --> 0:08:14.520 and places like Turkey and Argentina. The main thing about 0:08:14.600 --> 0:08:18.000 DeFi is that when you have this notion of permissionlessness, 0:08:18.000 --> 0:08:20.840 where you know, anyone can build a smart contract that 0:08:20.880 --> 0:08:24.680 allows you to pull together assets to facilitate a trade, 0:08:24.800 --> 0:08:28.520 or to lend out those dollars someone else for a yield. 0:08:28.600 --> 0:08:33.440 Those types of contracts, they have slightly different properties than 0:08:33.520 --> 0:08:36.920 normal finance. One thing that's sort of endemic or hidden 0:08:36.960 --> 0:08:39.440 the normal finance is that you know when there is 0:08:39.480 --> 0:08:41.800 a trusted third party, you make a lot of you 0:08:41.800 --> 0:08:45.200 can make a lot of particular assumptions about how. 0:08:45.440 --> 0:08:48.880 The city that's what you mean like Wells Fargas Bank 0:08:48.920 --> 0:08:51.960 and trusted third party being an old fashioned financial. 0:08:51.480 --> 0:08:55.360 Institute, or like a broker like Robinhood or something, you know, 0:08:55.440 --> 0:08:58.360 like I was like you know, tdum error Trade. I'm 0:08:58.360 --> 0:09:02.600 also including kind of like doc brokers and I'm lumping 0:09:02.600 --> 0:09:03.480 them all together. 0:09:03.200 --> 0:09:05.480 For an extension of big big banking. 0:09:05.760 --> 0:09:09.040 Right, Yeah, is that there's a lot of constraints. So 0:09:09.520 --> 0:09:11.800 I'll give you just a sort of simple example that 0:09:11.840 --> 0:09:15.679 hopefully all straight why designing these smart contracts is harder, 0:09:15.760 --> 0:09:19.160 and why the understanding the risk in these contracts is harder, 0:09:19.160 --> 0:09:21.720 and this you know, sort of why my company exists. 0:09:22.160 --> 0:09:25.000 But one of the reasons I I'm going to do 0:09:25.040 --> 0:09:26.960 this is so you can see that, you know, in 0:09:27.080 --> 0:09:29.520 order to make these kind of like permissionless dollars that 0:09:29.559 --> 0:09:32.880 anyone could build apps to that can can immediately you know, 0:09:33.080 --> 0:09:36.000 transfer balances and pool together assets and take risk on. 0:09:37.080 --> 0:09:40.600 The benefits of it are high, but also the development 0:09:40.640 --> 0:09:43.840 costs is high relative to something that's using the existing 0:09:43.880 --> 0:09:48.680 banking system. So imagine that you have you're a seller 0:09:48.920 --> 0:09:52.079 of an item. And let's say you have a famous 0:09:52.200 --> 0:09:56.040 artwork and you're running an auction and it's an in 0:09:56.080 --> 0:09:59.520 person auction, so you know, we go to the town hall, 0:10:00.200 --> 0:10:03.120 I'm on the stand, are paddles, we have our paddles, 0:10:03.120 --> 0:10:05.760 and like you know, the seller is doing the you know, 0:10:05.880 --> 0:10:08.199 one dollar, one dollar, two dollars, two dollars, you know, 0:10:09.040 --> 0:10:12.600 a sending price English auction. One assumption you make in 0:10:12.640 --> 0:10:16.120 that scenario is that the seller is also not a buyer, 0:10:16.559 --> 0:10:20.160 because well, the seller is not you know, they can't 0:10:20.160 --> 0:10:22.800 be in two places at once. They're not cloning themselves 0:10:22.840 --> 0:10:24.760 and also bidding in their auction, right, But in the 0:10:24.760 --> 0:10:27.800 permissionless online world, that's very different. The seller could very 0:10:27.800 --> 0:10:31.959 easily make clones of themselves and be buyers in there 0:10:31.960 --> 0:10:34.199 an auction. Now you might say, why would the seller 0:10:34.280 --> 0:10:36.599 want to do that? Exactly, they want they want to 0:10:36.600 --> 0:10:38.200 push up the price so that other people have to 0:10:38.200 --> 0:10:42.400 bid higher than what their true value is. And in 0:10:42.440 --> 0:10:45.240 a permissionless world, you have to assume that that's true 0:10:45.240 --> 0:10:47.520 by default. Right, when you do an auction with the 0:10:47.520 --> 0:10:50.120 trust the third party, you usually assume, hey, they're not 0:10:50.160 --> 0:10:52.560 going to do X. And if there's any evidence, then 0:10:52.600 --> 0:10:53.440 I go sue. 0:10:53.200 --> 0:10:56.280 Them, right, so you have toil and write. 0:10:56.440 --> 0:10:58.640 Well, there's still fees here. It's just more that they're 0:10:58.679 --> 0:11:02.280 not as adversarial the sense of you assume that if 0:11:02.320 --> 0:11:05.280 they did some malicious thing, you would be able to 0:11:05.320 --> 0:11:08.040 sue them or prove it in some way and then 0:11:08.160 --> 0:11:11.440 use the legal system as a way of enforcing your rights. 0:11:11.679 --> 0:11:11.839 Right. 0:11:12.200 --> 0:11:14.959 But this in the online world, that's not true. And 0:11:15.000 --> 0:11:18.880 so this has also been not true even at large 0:11:18.920 --> 0:11:21.880 big tech companies. So you know in Googles online ad auctions, 0:11:22.320 --> 0:11:25.440 the DOJ. One of the strongest cases the DOJ has 0:11:25.480 --> 0:11:29.360 against Google is actually that Google purposely spoofed in their 0:11:29.360 --> 0:11:32.079 own auctions, like acted as a bidder to push up prices, 0:11:32.960 --> 0:11:36.000 exactly as I was describing. And so there is a 0:11:36.080 --> 0:11:39.920 sense in which when you design these systems such that 0:11:40.080 --> 0:11:43.520 I can have the digital IOU dollars move around everywhere, 0:11:43.880 --> 0:11:46.839 I need to design them with the assumption that because 0:11:46.840 --> 0:11:50.200 there's no trust at third party, people can be colluding arbitrarily, 0:11:50.600 --> 0:11:52.840 and someone who's selling me something might also be trying 0:11:52.880 --> 0:11:56.960 to be manipulating the auction, and so this type of 0:11:57.000 --> 0:12:00.240 stuff is you need to actually build these systems such 0:12:00.240 --> 0:12:05.240 that they the profitability of doing such things is actually low, 0:12:06.120 --> 0:12:09.000 not just hey, I'm going to hope it works because 0:12:09.000 --> 0:12:11.640 I can sue them. Right, those are two different standards. 0:12:11.679 --> 0:12:14.440 One is actually much more. You know, you're trying to 0:12:14.480 --> 0:12:17.360 mathematically ensure they bring not profitable. 0:12:17.120 --> 0:12:19.880 And they all know lawsuits are a terrible way to 0:12:20.000 --> 0:12:20.680 enforce law. 0:12:20.720 --> 0:12:22.679 They're just you know, wasteful. 0:12:22.280 --> 0:12:26.319 And horrible and only you know, only the wrong, only 0:12:26.320 --> 0:12:27.959 the wrong people prosper. 0:12:27.679 --> 0:12:29.520 Right, Yeah, for sure. 0:12:29.559 --> 0:12:32.920 And so I think I think like there's a sense 0:12:32.960 --> 0:12:36.280 in which these crypto applications and define particular are built 0:12:36.280 --> 0:12:39.480 around building basic primitives that you would find in banking 0:12:39.600 --> 0:12:42.480 and finance, but in such a way that they're resistant 0:12:42.520 --> 0:12:45.040 to this type of collusion. And so it's it's a 0:12:45.040 --> 0:12:47.240 lot harder to build those systems there. They have to 0:12:47.280 --> 0:12:51.440 be resistant to much different types of adversaries, and they 0:12:51.520 --> 0:12:54.160 you know, if they break or they get hacked, then 0:12:54.720 --> 0:12:56.280 the money is sort of all gone. It's not like 0:12:56.320 --> 0:12:58.520 it's not like a bank where there's a legal system. 0:12:58.679 --> 0:13:01.200 On the other hand, because of that, it's very easy 0:13:01.360 --> 0:13:04.240 once they do work for people around the world to 0:13:04.320 --> 0:13:08.080 use these things easily, and so the reason people are 0:13:08.120 --> 0:13:10.640 excited about it is like it basically unbundles a lot 0:13:10.720 --> 0:13:14.560 of banking services and makes it easy to use. You 0:13:14.600 --> 0:13:17.480 can kind of think of DeFi as sort of user 0:13:17.559 --> 0:13:19.559 generated finance, and the same way that a lot of 0:13:19.640 --> 0:13:23.320 social networks are sort of deal with user generated content, 0:13:23.400 --> 0:13:28.600 like users making podcasts, users making videos. There's a sense 0:13:28.600 --> 0:13:31.400 in which finance has never really had user users could 0:13:31.440 --> 0:13:35.160 never really generate products, right, It's not like traders who 0:13:35.200 --> 0:13:37.199 are trading on the stock market that the same can 0:13:37.240 --> 0:13:39.640 like create a new financial instrument. But if you look 0:13:39.679 --> 0:13:42.040 at crypto, like if you look especially if you look 0:13:42.080 --> 0:13:44.960 at meme coins, people are creating and destroying assets all 0:13:45.000 --> 0:13:46.240 the time, right. 0:13:46.120 --> 0:13:49.040 And so there's people like me with meme coins and 0:13:49.080 --> 0:13:51.959 those coins. I mean all that, you know, these things 0:13:51.960 --> 0:13:54.880 that come out of thin air. I just it's as 0:13:54.920 --> 0:13:57.640 hard as I fry, like how does this thing have 0:13:57.880 --> 0:14:01.800 value beyond a bunch of people's snarking about it on 0:14:01.800 --> 0:14:04.160 on X nowadays. 0:14:04.200 --> 0:14:05.280 But you know. 0:14:05.600 --> 0:14:08.440 That's why there's just a leap that the a leap 0:14:08.559 --> 0:14:10.960 there that you know. But then then I guess in 0:14:10.960 --> 0:14:13.920 that sense, it does become like a security or or 0:14:13.920 --> 0:14:17.200 a collectible. You know, it's that Jimmy Hendricks poster that 0:14:17.320 --> 0:14:20.760 is going to you know, gain in value in age 0:14:20.880 --> 0:14:24.160 because somebody, some other huge fan is going to want 0:14:24.160 --> 0:14:25.880 it someday framed on their wall. 0:14:26.000 --> 0:14:28.920 Is that Is that a reasonable way to think about it? 0:14:28.960 --> 0:14:29.920 Or am I totally off? 0:14:30.440 --> 0:14:31.560 Yeah? 0:14:31.880 --> 0:14:33.640 I think that's certainly one way if you're going to 0:14:33.800 --> 0:14:38.160 I think like people, you know, if you I think 0:14:38.200 --> 0:14:41.000 it's better to actually make a bit of a connection 0:14:41.160 --> 0:14:44.640 more to like traditional tech companies to Facebook and Google. 0:14:45.360 --> 0:14:51.760 From my perspective, they are derivatives exchanges, whether they want 0:14:51.800 --> 0:14:53.800 to say that they are or not. I mean, obviously 0:14:53.880 --> 0:14:56.840 legally it helps them to not be, but in some 0:14:56.920 --> 0:15:00.800 ways they are creating and destroying derivative assets on demand. 0:15:00.880 --> 0:15:04.120 So let's say an advertiser says, hey, I want to 0:15:04.200 --> 0:15:08.000 target women in New York who are between twenty and 0:15:08.080 --> 0:15:11.560 thirty who live in a particular neighborhood. Suppose no one 0:15:11.640 --> 0:15:15.320 goes on to Facebook who matches that criteria, Well, then 0:15:15.360 --> 0:15:19.800 the advertisers' dollars don't get spent, and you can almost 0:15:19.840 --> 0:15:22.000 think of it like an option, Like the advertiser bought 0:15:22.040 --> 0:15:25.440 the option for the right to sell to add to 0:15:25.440 --> 0:15:28.640 those that demographic. On the other hand when those users 0:15:28.840 --> 0:15:31.880 go on the network. You could effectively think of Facebook 0:15:31.920 --> 0:15:36.760 as exercising the option on behalf of the advertiser and 0:15:37.160 --> 0:15:40.320 creating a new financial product, which is the ad impression 0:15:40.560 --> 0:15:44.200 that they made on demand to a particular set of users, 0:15:44.200 --> 0:15:46.920 and then they destroyed when those users are not present. 0:15:47.400 --> 0:15:52.040 And in that sense, you can almost view this idea 0:15:52.120 --> 0:15:57.040 that there exists financial assets that are created and destroyed 0:15:57.080 --> 0:15:59.680 on demand in turn response to events and just in 0:15:59.720 --> 0:16:02.640 time as sort of something that is is true, very 0:16:02.680 --> 0:16:07.600 true to like Internet native assets versus not Internet native assets. 0:16:08.400 --> 0:16:10.800 And I think this idea that we have things that 0:16:10.840 --> 0:16:14.120 can be kind of created on demand and then sold 0:16:14.560 --> 0:16:17.240 that are like sort of these sort of more complex 0:16:17.240 --> 0:16:21.080 financial assets that is something that we all live with 0:16:21.200 --> 0:16:23.200 and breathe with every day on the Internet, but we 0:16:23.280 --> 0:16:25.240 don't it's not transparent to us. And I think in 0:16:25.640 --> 0:16:27.880 the crypto world that's actually quite the opposite. It is 0:16:27.960 --> 0:16:31.680 like it's very clear that that's what exists versus kind 0:16:31.680 --> 0:16:36.480 of you know, what you see in normal stuff. So 0:16:36.840 --> 0:16:38.720 you know, the reason I bring this up is like, 0:16:38.920 --> 0:16:40.680 you know, you're mentioning the thing. It's like the Jimi 0:16:40.720 --> 0:16:44.160 Hendrix album that maybe I bought early. Well, the ad 0:16:44.160 --> 0:16:46.040 impression is the same thing. It's not actually clear it 0:16:46.040 --> 0:16:49.920 has any value, but the advertiser is paying a premium 0:16:50.000 --> 0:16:53.600 for the right to sell to that demographic if they exist. 0:16:53.440 --> 0:16:57.280 Right, And going back to you know, they're like, there's 0:16:57.320 --> 0:17:00.600 definitely precedent for the you know, if you can bring 0:17:00.640 --> 0:17:05.800 me there's very time sensitive advertisers, car advertisers, movie studio advertisers. 0:17:05.840 --> 0:17:07.159 I will pay you a lot of money for an 0:17:07.200 --> 0:17:10.720 advertising for an audience over these two weekends, and if 0:17:10.720 --> 0:17:13.520 you don't deliver, you owe me money. So there's real 0:17:13.600 --> 0:17:17.680 precedent for that kind of an agreement in a business transaction. 0:17:17.760 --> 0:17:18.360 That's interesting. 0:17:18.800 --> 0:17:22.600 Yeah, And I think all that you're having with cryptos 0:17:22.680 --> 0:17:25.200 like people being able to do that in a sort 0:17:25.240 --> 0:17:27.520 of permissionless way, like I can create you know. The 0:17:27.560 --> 0:17:30.320 difference in the Facebook case is Facebook controls the entire 0:17:30.880 --> 0:17:35.520 creation of these financial assets, right, an advertiser can request something, 0:17:35.560 --> 0:17:38.359 but like unless Facebook actually does the exercising of like 0:17:38.400 --> 0:17:41.200 delivering the ads, so the user then, like you, it's 0:17:41.200 --> 0:17:43.919 never really happening. And crypto the point is that the 0:17:43.920 --> 0:17:47.040 blockchain can do that execution for you without needing kind 0:17:47.040 --> 0:17:50.440 of the central party in the middle, and I sort 0:17:50.480 --> 0:17:53.879 of think that's that's one of these things where, yes, 0:17:53.960 --> 0:17:57.160 these things, it's like they might not have initial intrinsic value, 0:17:57.640 --> 0:18:00.359 but their attention to commy type of things, where like 0:18:00.400 --> 0:18:02.960 there is a particular time and place where they might 0:18:03.000 --> 0:18:05.920 suddenly be valuable in the same way that the Jimmy 0:18:05.920 --> 0:18:09.320 Hendrix album probably was peak value twenty years ago and 0:18:09.640 --> 0:18:11.560 maybe it's flat or down a little bit now. 0:18:12.240 --> 0:18:15.399 It has occurred to me that entertainment is a business 0:18:15.480 --> 0:18:18.280 where you have a lot for the creative community. You 0:18:18.359 --> 0:18:19.960 have a lot of people, you have a lot of 0:18:20.160 --> 0:18:25.720 properties that can generate significant revenue and profits, especially over time. 0:18:25.760 --> 0:18:28.840 You have a lot of profit participation deals, and sometimes 0:18:29.040 --> 0:18:30.960 you can have a number of people that have small 0:18:31.000 --> 0:18:35.000 stakes in something that will kick off meaningful revenue over 0:18:35.040 --> 0:18:37.400 a long period of you know, thirty forty fifty years 0:18:37.440 --> 0:18:39.640 if you're lucky. And now I mean in the world 0:18:39.640 --> 0:18:43.840 of IP it's you know, just preasure prove time, so. 0:18:43.800 --> 0:18:46.520 You have long tail, long payoff periods. 0:18:46.560 --> 0:18:48.960 And it occurred to me that oh and sorry, and 0:18:49.000 --> 0:18:52.760 then of course the history of Hollywood accounting people fighting 0:18:52.800 --> 0:18:54.960 over wait a minute, it made this much, but you 0:18:55.080 --> 0:18:58.120 took you took that much off the top, you padded 0:18:58.160 --> 0:19:02.639 it all these fighting over Hollywood accounting. Wouldn't in the 0:19:03.240 --> 0:19:06.199 twenty first century, in the modern era, wouldn't blockchain something 0:19:06.240 --> 0:19:10.280 that is theoretically not theoretically, but you know, something that 0:19:10.480 --> 0:19:15.639 is open, available for all to see, can't be can't 0:19:15.680 --> 0:19:18.480 be jimmied with, but actually can only be. You know, 0:19:18.960 --> 0:19:21.719 it's supposed to keep everybody honest and all the transactions 0:19:21.720 --> 0:19:26.879 are supposed to be fairly recorded and you know, there 0:19:26.960 --> 0:19:29.600 for all to see. So wouldn't that in a way 0:19:29.760 --> 0:19:33.119 be a good way to handle something like that? Or 0:19:33.160 --> 0:19:35.800 am I once again? Am I just completely off? Does 0:19:35.800 --> 0:19:36.680 that make any sense? 0:19:37.680 --> 0:19:40.080 Yeah? So, I mean this gets back to this type 0:19:40.080 --> 0:19:41.560 of thing I was talking about before, which is like 0:19:41.880 --> 0:19:46.840 the current fintech application stack, like the ven Mozelle, Revolute whatever. 0:19:48.040 --> 0:19:51.800 If we're really, really, really really squinting, they are lipstick 0:19:51.840 --> 0:19:54.600 on a pig. They are front ends that are built 0:19:54.640 --> 0:19:56.080 around the existing bank system. 0:19:56.160 --> 0:19:56.320 Right. 0:19:56.560 --> 0:19:59.919 They make it a lot easier to use, to make 0:20:00.040 --> 0:20:02.960 the front ends more intuitive. They hide a lot of 0:20:03.000 --> 0:20:06.720 the fact that banks are running nineteen sixties servers still 0:20:06.760 --> 0:20:09.720 in some cases. But their lipstick on a pig. They 0:20:09.880 --> 0:20:13.120 don't control their own destiny in the sense that they 0:20:13.280 --> 0:20:17.200 can't do risk activities. They can't do the type of 0:20:17.240 --> 0:20:19.320 thing you're talking about where people are pulling together money 0:20:19.359 --> 0:20:23.080 and investing in an endeavor without a bank being involved 0:20:23.400 --> 0:20:27.200 and syndicating it. And this gets back to this idea 0:20:27.240 --> 0:20:30.000 that in DeFi, where I can program these kind of 0:20:30.240 --> 0:20:33.280 risk seeking activities where people can pull together assets and 0:20:33.400 --> 0:20:36.400 use them in certain ways, that sort of being able 0:20:36.400 --> 0:20:38.320 to do that without a bank, and I can write 0:20:38.359 --> 0:20:41.320 my own code that gives the covenants for the law 0:20:41.359 --> 0:20:45.000 and the contracts implied. That is this idea of being 0:20:45.080 --> 0:20:47.159 user generated and finance like I actually like that's a 0:20:47.160 --> 0:20:50.280 better way of thinking of DeFi than the name decentrazed finance, 0:20:50.280 --> 0:20:53.320 which is you can create whatever you want and you 0:20:53.359 --> 0:20:56.000 can do these risks seeking things, and you don't need 0:20:56.040 --> 0:20:58.879 a bank to be the custody of your funds and 0:20:58.960 --> 0:21:01.119 custody of the funds. You can have this kind of 0:21:01.480 --> 0:21:05.399 smart contract manage these IOUs and it's transparent to people. 0:21:06.080 --> 0:21:08.480 And so I think the hardest part for using a 0:21:08.520 --> 0:21:11.800 lot of this stuff for non Internet native and non 0:21:11.840 --> 0:21:14.840 digital the digital assets is you have what's called the 0:21:14.880 --> 0:21:18.280 oracle problem. If someone needs to convey what is happening 0:21:18.400 --> 0:21:21.600 off chain to the smart contract, right, someone needs to say, hey, 0:21:22.000 --> 0:21:26.520 we produce this movie, and we got five hundred dollars 0:21:26.520 --> 0:21:30.360 of revenue, so here's you know, I make a. 0:21:30.040 --> 0:21:33.040 For you, and twenty five dollars for the director, twenty 0:21:33.040 --> 0:21:34.080 five dollars for the star. 0:21:34.320 --> 0:21:34.880 That kind of thing. 0:21:34.920 --> 0:21:38.439 But in an adversarial environment, like the person who receives 0:21:38.480 --> 0:21:40.720 the five hundred dollars might report only four hundred and 0:21:40.760 --> 0:21:43.400 ninety five to the contract and keep an extra five 0:21:43.440 --> 0:21:46.800 for themselves. Right, So there's this. For offline things, you 0:21:46.840 --> 0:21:50.480 have to have some way of you know, the blockchain, 0:21:50.560 --> 0:21:53.320 and like computers in general have no way of verifying 0:21:53.359 --> 0:21:58.080 this offline thing actually took place, right, And in the 0:21:58.119 --> 0:22:00.960