Aptos Bull vs Bear, SBF Regulation & Modular Blockchains | Roundup

Transcript

the fact that filecoin and all these projects survived was because they had a huge War chest to fund development and attract developers and look at matters right I tend to my estimation is that a lot of the really smart developers are very risk-averse and they you know would you rather go to a project that is very well capitalized and has backing from you know well reputable VCS or would you rather go to a project that doesn't have enough Runway and I think that it's a very clear answer all right welcome everybody thanks for jumping out coming on the show we have a very special guest here that a lot of you may know but may not know directly and this is Garrett who's on the team and he is the brains behind this operation he puts these incredible notes

uh leak without like with a ton of Alpha and we've been lucky to have Garrett for a while now um and this is the first episode he comes on so he'll be doing most of the talking here because he's done incredible research and a lot of the Hot Topics we're going to talk about here uh but without further Ado Garrett welcome to the show yeah thanks for having me on um taking over for Jason slowly he doesn't know that but um that's the goal here so I'm rising up in the ranks slowly and then what is it now slowly gradually and then suddenly and then suddenly yeah that is the goal um but yeah thanks for having me on the show I think before we jump in I want to do a shout out I'm on the production team over here and we are hiring a new editor

so if you have a portfolio and a resume shoot it over to my Twitter I'm going to put a link to that and the show notes and uh funny enough that's actually how I got this job so I think it was probably eight months back I heard Santi talking about this producer role and I love the show is always top three for me even before I knew anything about blockworks as a company and I jumped in so somehow I got this job from a podcast and now I'm on it nice we've come full circle so yeah everyone this is a great opportunity we're going to continue to do this through Bull and Bear markets um and we're really excited there's a lot of cooking so yeah if you're if this is this is calling you please apply yeah definitely well Santi I think we ought

to just go ahead and jump into it let's do it some big news this week I want to start with Aptos which Aptos has been around I think people been talking about for a few months but really came onto the scene then this Monday when they launched their main net Aptos is a new L1 chain it's marketing about 160 000 TPS which is extremely high and a new level new high level programming language called move and that's probably one of the main attributes that people really talk about and the interesting thing about Aptos it's coming from the DM team that was over at Facebook and now you have Aptos and also sui so this went to mainnet Monday but there was a little bit of drama behind it which I just want to touch on because this was all over Twitter so initially a few

exchanges said that they were going to list the APT which is the Aptos token but there was no economics on it so it's like what's the fully diluted value what's the supply but the Aptos team did shortly release that after you just had the little frenzy on Twitter then there were a few complaints about the token distribution so the big thing with Aptos to some degree it's out of San Francisco I believe and it has a big DC backing I mean it's backed by a16z multi-coin purify FTX like very respected firms in the space and the allocation that they showed on this economics page was 51 of the tokens were allocated to community wow 32.5 percent were going to to investors but right now 51 that was going to the community is actually owned by Aptos so then you had more people pressing back on this it was a little

bit of a hard launch for that day at least if you're on crypto Twitter but later that night Aptos actually came out and they announced a 20 million apt token airdrop to users who participated in the test net so they are going to have an airdrop going on and the one last thing that people are talking about were with the tokenomics is that everybody that had tokens and the investors are on the team they were going to be locked but locked and locked tokens could be sticked in the token contract so those people would get rewards those inflationary Awards and would be able to sell those immediately so that was just some of the drama people are pushing back on this I think it's fair to say there's no perfect token drop air drop like economics we're all we're all just learning here so it

is interesting to watch though there's a little bit of pushback as well like a zapdo centralized it's just like Solana but it has 101 validators that are permissioned and you know it goes on and on but what I want to talk about is I actually think after this has a lot of cool technology behind it I think the move the programming language is fascinating it's supposed to be a lot more uh developer friendly et cetera so Santi at a high level I'm just curious what you think about the launch or you know what you know about the project yeah definitely in full disclosure I was an investor in the round that uh my former firm parify and a bunch of other firms participated in and I think for me the thesis um when I first connected with Mo and the rest of the team was you know this

is a team that's been working on as you mentioned uh at Facebook Libra um and unfortunately that initiative got shelved you know put on freeze for a number of reasons I think most controversially you know what it was just too muddled with Facebook and that Narrative of Facebook having a lot of control and a lot of you know um information about users and especially in Europe on base like I feel like Facebook is has not been you know it's been in the news not for the right reasons and so I think the whole Libra movement I think had a lot of traction I was very supportive of it I think it was a lot of interesting things and the team behind it I think was very credible

super smart and so you're you're getting for me it was getting that which I wanted to see launch and and fully developed and what ended up becoming optos so that was my thesis and I think perhaps different from other we had a great episode earlier um with the cosmos team and I asked him hey how do you guys think about business development how do you think about winning over you know corporations and you know Enterprises and at some point this asset class is going to grow to a point where you're going to attract those players and I know I know like a lot of people are skeptical because in 2017 a lot of you know public companies were out saying they're in crypto and it was just being a marketing kind of thing but I think it's credible and I think the optos theme has a very strong

ecosystem in its short existence if you look at a lot of the projects building on Aptos and I think that speaks to like the initial traction that Libra got it got a lot of interest from you know folks like PayPal and Uber and a bunch of other companies and and I'm I'm glad to see that because you know I don't think my view is I don't think this is mutually exclusive I don't think the success of Aptos diminishes the success of perhaps other chains I've always believed in multi-chained world and I'm excited to see perhaps more corporations and other businesses kind of launch and and perhaps you're more inclined to do that in Aptos than you know Cosmos for instance and so I think it's a win for the space

um and as a side note the last thing I'll say is there was an interesting tweet from Anatoly the founder of Solana saying hey congrats guys you know this is just a start and you know I don't I think he meant that in you know in good faith and it's good to see that kind of uh ethos in the community yep yeah I 100 agree with that I want to say that Libra launched or they or they announced it in 2019 which I think is pretty interesting because that was during the bear market right and uh that really was a pretty big movement for crypto because I think when Facebook Gets behind that you had a lot of talent that probably thought about coming to the space that said like look there's this giant Corporation behind it let's do it and now you see Facebook getting or yeah Facebook

getting behind or meta that's the word I was looking for uh meta now getting behind the metaverse and you have a lot of pushback from there too but that's another company coming in same company saying like look we think this might be the future and I think that'll attract a lot of talent so I think that is really big um you kind of agree with that absolutely look you we can criticize meta Facebook all you want but they've done one thing very right which has they've been early to certain Trends if you look at all their Acquisitions they acquired Instagram for 1 billion that ended up being um a huge success amazing they acquired WhatsApp which is second like WeChat like the most pervasive like chat and in the world and so huge win for them they've acquired Oculus obviously around this VR play which has been slower to

like I don't think we've you know the verdict is out there yet they're spending a lot of resources on on the metaverse and so I think that that's very encouraging for validation of the space of the metaverse of AR AI which we'll talk about later but I think generally like these are buzzwords which I hate but I do think that Facebook has been early historically on predicting Trends and and where you users are going to really spend a lot of their time on and so um yeah it's good to see Aptos as you know a team to Branch off of that and the brains behind it I think uh are now continuing to build into space which is is a very positive development yeah 100 agree so just on Aptos I want to take control here and give the Bull and Bear

case from my high level perspective and I talk with the blockworks research team they're guys you've got to follow extremely smart and I've run this by some of them they haven't all approved so I'm no professional here but okay my bold case for Aptos is the move programming languages which essentially is going to have lower barriers to entry for new deaths is at least what I hear I'm not a developer myself but it's more simple syntax and the big point to me is solidity evm is in control right now it's really the shelling point for developers in the web3 community but you do have other things like rust which I believe that's Solana and a few other ecosystems then go which you have in Cosmos but if you really want to get crypto to be a big industry we need web 2 devs to come over and for them to come

over you probably need languages that are more familiar to them and move is potentially that and from what I've heard also it could have better tooling like if you don't have tooling for a programming language I know it's pretty much useless because devops and tooling is huge and you also want it to be safe so like you hear about re-entrancy which in the evm and solidity and I think these new languages like rust and move are trying to get around that now it'll be curious to see whether people are just willing to pick up solidity or if this is going to slowly be adopted over time and if it is who knows like you're going to have application specific change you're gonna have Roll-Ups and these languages could also be implemented there and I think that's one thing you get a lot of hate on Aptos

from some of the ethereum and other communities but like crypto is all about testing Innovation pushing the limits so if anything I think you should kind of just Applause that um also strong Talent team from DM we just talked about that with Facebook um Silicon Valley pool so this is kind of based out of San Francisco they have a lot of big VC investors and I think that's a big deal not only through you were talking about business development earlier it's about getting new Talent it's about Partnerships like if we want to move eventually SAS products on chain having that pool and having those relationships I think is a really big deal we see that with polygon polygon does have great Tech and they're continuing to come out with new tech but their biggest thing is business development uh and the last one I have

here is just High throughput use cases which you do hear from Solana and maybe this is a little bit more centralized or at least now um but there's this quote from Michelle that that came on the podcast she works at Sequoia just a few weeks ago and I love it people have a Lust For unfettered decentralization and it's saying in not every case you need that and I think that's part of the Bold case here is it's high throughput you can have composability now I think that's a pretty good selling point but let's just get to a quick bear case so it is relatively currently centralized from what I can tell there's 101 permission valid errors uh you have apt which is the token now if this is deemed to be rather centralized or that I get a security like what's the question there

um why not build on a database if this is something that is controlled by a few parties that could essentially say stop the chain now you have these questions everywhere in crypto this is not particular to Aptos you do have a spectrum um one thing is VC funds like you know when I'm thinking about this I said why why continue to invest in L1 tokens or really just these projects in general through the bear market and I think one thing that's good to remember is these VCS raised a ton of funds oh a ton of capital over the last year several months I think it was a16z just came out with a this probably six months ago 4.5 billion dollar crypto fund so the amount of money they have to deploy is insane and I think at one point people could argue that leads to Bubbles and projects

that shouldn't be fun to get funded but out of that maybe it's five maybe some percent are gonna actually come out on the other side and the last thing that I would say as a bear case is l1s and settlement layers and I think it's really confusing because now we have L1 l2s l3s application specific chains like it doesn't stop but l1s and settlement layers are really about the community uh there's basically a cult we see that with Bitcoin we see that ethereum we see that with other ecosystems will that continue to be a thing I'm not really sure it's really definitely a niche you know Community right now we're less than a trillion dollars so we're less than Facebook but that's a really big deal so I guess the question is is that Community going to matter and can these different chains like Aptos that

relatively new build up these communities that others have and I'm just curious do you do you have any thoughts I know I just threw a lot out there but something that sticks out to you Santi I think those are great points um like I'm obviously I'm an investor so I'm bullish on the project and you know uh but I do think that your arguments and and the criticisms around kind of the launch and the degree of centralization and uh are fair um I I guess one one observation that I'll have is I know and I and I was critical about this like in the in the past cycle which is why do projects like you remember like file coin Divinity yeah like they raised like massive billion dollar rounds right I think it was like close to a billion

or like hundreds of millions of dollars I think um and you fast forward to like now when you say gosh like you know in many ways like the fact that filecoin and all these projects survive was because they had a huge War chest to fund development and attract developers and look at matters right I tend to my estimation is that a lot of the really smart developers are very risk-averse and they you know would you rather go to a project that is very well capitalized and has backing from you know well reputable VCS or would you rather go to a project that doesn't have enough Runway and I think it's a very clear answer right um and so you know in many ways every your question around why do we

need another L1 I tend to think that we're very early still um so the exploration in this L1 design space I think is still positive now a lot of critic a lot of people might be critical then say gosh why don't we just focus all our resources on l2s because ethereum's already one mind share developer mind share just focus on l2s and I just think that like to your point the developer ecosystem is is large and growing but it's not like Mutual exclusive it's not detracting I think Solana really showed us that with you know rust programming language it is attractive and I was talking to the Solana um kind of community and BD team there shout out to Ben and other folks doing good work they're like a lot of the

developers are not coming over from ethereum it's just new developers and I think that's positive for this space if you if you have a really easy to understand and program programming language then um you know who knows I think Aptos is going to continue to expand the developer Community here and I think that's positive um so those are kind of my thoughts um I think it's it's a world capitalized project I think you're going to need a lot of resources to attract projects and developers to come and build on your chain I think they're already early indications they're doing a really good job there but it's it's going to require more capital and incentives right um around the centralization point look I mean I think there's could criticisms on any chain right there's I ascribed it what Michelle said there's no kind of

perfect like end state of decentralization I think we're going to have more regulatory Clarity in the next six 12 months if something is a security or whatever this new paradigm is of web 3 security whatever that new term is I think it's just going to require a very clear set of information disclosures that any public company does and I think a lot of these companies would be surprised but I think they're already there um a lot of this stuff is programmed on chain like you look at the Smart contract you can read the number of tokens the inflation schedule a lot of these things right you know the wallets of certain the team and I think those are the things that build to Market Integrity which is very important for from a regulatory standpoint and

consumer protection as well uh we'll talk about later in the episode about FTX and and Sam's view on regulation which I think is important of of perhaps exchange as being The Gatekeepers of doing the due diligence doing whenever you're going to list for instance AP apt will you the team needs to produce and furnish all this information right and so kind of in many ways the exchanges become the Edgar SCC of this industry uh but I'll stop there because I'm going to touch that later so anyways that's my ramble yeah not every level there's a great points on it I and I do agree that this is what I liked about Solano and this is also what I like about move is when you get those developers in the ecosystem that it's a new language new VM they're more likely to stick around because you're not just having someone

jump between the evm so they chain so I think that's so huge and there's this quote from this and that's like the past podcast where it's when I'm when I'm looking at Solana and I'm looking at Aptos and then ethereum or you're comparing to get something like Avalanche and all a fan of all those projects but it's like the guy said I don't want to be a 10 times better Apple so like comparing Apple to Apple I want to be like a banana and make you it's the whole point of this is not a comparison of choice and I think that's a big deal from an investment perspective and also when you're attracting Talent over so it's not just comparing like look this spec is slightly better than that one we already know how hard that is when you just select a laptop like it took me like an

hour to even think between the two Max um so I I do really like this thing where it's it's not a comparison it's a choice um anyways yeah I think we can move on from that and you you touched on Sam Bateman freed who has been involved with policy with regulation a lot lately I think he's probably putting 50 plus of his time in there I I mean man it's crazy I think he he probably works 24 hours in a day SBF used to be the white knighted industry right when you had these different C5 front are falling falling over and he came in and kind of saved the day now the question is like did he do that for the industry do you do it for profit the other day I don't think it really matters but I want to talk about a few of the main points that

came out of this document that he posted which I'll include in the show notes and one of them is that he thinks that everything should be utilized around a blacklist so or sorry yeah utilize block lists and Blacklist as opposed to whitelists where you need explicit permission to transact so with a white list I would say okay I have a protocol to be able to use that you have to be pre-approved so by default you can't use that project he's basically saying instead of that you should just have Blacklist War at first everybody can go in they can interact with these protocols do transactions but then you would have like essentially a blacklist is like an ovac list um one of the next things is which had a lot of controversy is registering front ends potentially as more of like a broker dealer where they are doing the

kyc so the smart contract code and everything in the background is still permissionless but you're gonna have these front ends which I think this gets talked about a lot we've talked about this before Santi on the podcast a lot of people think that defy permission D5 is going to be a big deal now I think it's fair to point out that you can have a front-end that is decentralized and there's projects that are working on that so it doesn't mean that those won't exist but I think to be able to grow in the United States and be accepted and have Regulatory Compliance I think SPF is just trying to say like look these front ends are going to have to do kyc now I don't really know how that works with something like uniswap Etc and I might I'd love to hear actually you know

what I'd just love to hear your feedback on that what do you think about that um no I totally agree with you uh they're I think during the tornado cash in uh situation we learned it is possible for front ends to actually take action and either do kyc well they're not doing kyc now but they are blocking certain IP addresses or plugins from wallets if they're in this like sanctioned list um and I think uh look I'm not a lawyer but every lawyer that I've talked to I think kind of believes that like that the smart contract all that is permissionless it's decentralized the front ends are the ones that need to be regulated um and and I think uh the question is do you need to do that or do you just really need to police the

on-ramps like the coinbase's FTX of the world because you know once you they should be doing kyc AML and then once if you're doing that correctly then everything that happens in D5 in theory has been kyc'd AML and then you can use tools like chain analysis and a few others to like determine if there's some sort of try try to do some obfuscation of that or not in compliance but um I'm not sure I guess like it is possible to do kycaml as a front end um whoever's hosting that can do that uh like if you want to sign a transaction then perhaps you need there's like a flow that you can embed there in order

to sign in the same way that you go to openc right and you design and attest to certain things right that you're like the owner of the wallet or whatever then I guess you can you can have like a proof that is generated and I think there's like a few I remember seeing there's a few companies that are trying to do like an nft that has been that represents your up-to-date kycml accreditation status whatever um and I think that's uh it was funded by variant I forget the name but anyways uh something like that like if you have that set nft in your wallet then that allows you to access all these front-ends and that's I think the way you practically like implement it yeah I think that's really interesting you know I saw one of the

points on here that stuck out to me because over the last few weeks we've had a lot of hacks right and that's probably bringing regulation and even more into the spotlight but uh SPF had this line where it's talking about on-chain list of hackers who violate a five five Norm as it calls it which limits the payout from hacks to the lesser of five percent of the Hacked amount or five million and it just it was a little bit funny to me because I don't know what other industry you talk about like creating a norm for hackers um I'm sure like I know whitelist hackers in that whole industry is huge but I did think that's interesting that we have started this but it's also interesting the fact that we've already kind of seen this play out it's like the hackers keep a time at 10

um you know prize and then they give the rest back to the protocol I did think that it's called out specifically here and I I mean I'm curious your thoughts on that but also it does lead into like Insurance a little bit to some degree as well because I feel like if this is going to be approved and we want to have consumer protections Etc I feel like insurance will be a bigger and bigger thing which is already talked about already worked on but you just don't see it I I don't actually use insurance at all I think you've probably mentioned you have Santi is that right you've used Insurance I've used Nexus um okay yeah but it's it's very Bare Bones it's not comprehensive enough it's not at the wallet level either it's at the protocol level gotcha and you carrot if you're you want to insure your entire wallet

right and so it's obviously very uh complex to do that so there hasn't been really a very comprehensive solution around that um yeah hacks like there's a munify which is pretty interesting but I guess it puts in a question we'll talk about in in the news but most recently the mango hack uh I mean if it passed I think it passed right he's taking 40 close to 50 percent of all the funds that were uh ex you know he doesn't like to use the word exploited yeah yeah whatever anyways exploited which uh yeah is a lot yeah oh 100 fair enough it'll be interesting to see that play out that's uh yeah the whole debate whether that's

an exploit or whether that's a hack is an interesting one and you know I'll sing about this later so I just want to get this thought out and this really goes back to Aptos and now talking about this and we're doing all these tests with regulation and hackers and uh one thing about crypto that I think will stick around no matter where the industry goes is just the amount of learnings that people are taking away and by that I mean I think the younger generation is just more financial illiterate but because of crypto and I know I am I took Finance in college and afterwards but I didn't really care about it or find it that exciting until I got into this space and you start learning about token economics you even learn about how to build a protocol and business development and you start

caring about like um the basics of Roi and Etc and I think that's going to be really huge and a big takeaway I think crypto is going to stick around but I think it's even more important and I think this is something that really could be promoted in schools and even at the regulatory level is that this is really making people Financial literate because people are excited about learning about finance and crypto for the first time and I think that's really cool absolutely yeah all right good news on SBF um we're glad we covered that it'll be interesting to see how that plays out and um you know he's a really influential person in the space so he has a lot to say but you know everything's not going to fall back on him so yeah I think uh the last point I'll mention here is

um my intuition is that SPF is perhaps the closest most active when it comes to interacting with Regulators um maybe second or or close to with like folks like coinbase I felt like Regulators continuously go to exchanges first for guidance and uh to talk about these things and so um the fact that he's being more vocal as of late I think is indicative of um which for anyone interested should go listen to the podcast with Rebecca and Jake and Jake mentions this look it's uh it feels like there is going to be greater Clarity and um in the next three to six months um which I just think is positive whatever that is it's still positive

because it's better to know what the rules are or at least the proposals are than to be kind of operating in the dark and so especially around this security you know um question so um yeah I I I'm actually a bit surprised that um he was so forward in saying that it's going to be their legal team that does the analysis to determine the how we test um and and like pull from relevant cases and guidance uh and then what that actually means for existing tokens that they've already listed and if they're going to do that retroactively or for new listings it's kind of a little bit of a TBD um but uh yeah it'll be interesting to see how how they follow kind of their

own policy internal policies to navigate the regulatory landscape I remember Jake like you just said he pointed out that he thinks by the end of 2022 we're gonna have some very material proposals come out that might essentially seem bearish at the beginning and many of those that are I think overly bearish will be fought against luckily in crypto we do have a lot of people working on the policy side but like you said a lot of that's going to bring Clarity to the space and just to make like a real world comparison of needing Clarity is like in our business we're talking about over the last few months you don't know what's going in the market it's you know hits the peak in November then it you know bottoms out and then it comes up a little bit and it's really hard to want just to budget to operate in that type

of environment but now that we've kind of settled in here we know where the market is we have these signs of what's to come it's a lot easier as a company to like plan what you want to do with marketing with sales and expanding and and I think that's very similar to here like these new projects that especially Talent OR businesses that want to get into crypto they need Clarity absolutely like like I'll just say a couple things one Eric Peters in the episode said the reason why they haven't touched D5 and other applications Beyond Bitcoin ethereum or tokens is because they have they perceive this risks to be kind of intolerable for them at least so you have Clarity then it opens up how many other players like that want to get involved but haven't for that reason so that's a positive um the second one is you know people say

oh the minute you you talk about it being a security it places an uh a lot of burden on the token issuer to then have you know to register to do all these things yes it is expensive but you gotta consider a lot in my estimation at least like a 10 to 20 of all funds raised in this asset class in crypto are going towards in some way shape or form trying to navigate the regulatory landscape via lawyer fees consultants and a bunch of others and the reality is you end up in a place where you don't even have Clarity so I think the point that I just highlighted here on in this document that I totally agree with SPF and I'll read it is ideally we'll end up in a place as an industry where being a

security Is Not a Bad Thing uh where there are clear processes for registering digital asset Securities which protect consumers while allowing for Innovation I do think that that is the case at this point uncertainty has a cost that we don't talk about a lot but it is high and in all the projects that I've invested in it is at least 10 to 20 of all funds raised initially go towards trying to get some clarity here and the time and resources and just the anxiety and the fear that is it's not very conducive in Innovation so uh at this point if it is a security then give us the Frameworks and I think the SEC if I'm reading kind of between the lines they created a

transparency kind of department for token issuers for them to submit information I don't know there's transparency information department and I think that to me feels like this is where it's going and if you're a tokenisher you're just going to have to submit certain standard documentation and and I think that's that's good for Market integrity and consumer protection yeah I think that's great because my last comment on that I was talking to Mike the other co-founder of blockworks today and you know whether something is security or not what's the purpose of dials et cetera there's all these questions and and part of it is is the innovation in the space and people you know are a little bit worried about regulation coming in and really just bringing us back to where we are today but I think what's cool about crypto is that it has almost taken the not the

polar opposite but from what traditional businesses are we go with Dallas it's like what is Dallas it's decentralized like what is the security well we have this new thing that's like equity and debt combined and we're not even exactly sure like is the security is it not but I think the point is as regulation comes in yes like we're on a spectrum it might bring us a little bit closer to where we are today but hopefully like the efficiencies and also the Innovations Etc of crypto and the transparency like really come out and that proves the product so I'm excited about that absolutely cool let's uh let's jump to um what Hayden Adams if you know swap pointed out so binance recently delegated 13.2 million uni tokens to one wallet so these are uni tokens that are with the exchange uh with binance that they're using to then vote on different

protocols so binance is now the second largest delegate behind a16z with 5.9 the voting power um and you know unit swap is a major player in the ecosystem they're probably like the number one blue chip at the moment and they do more than 60 of daily Dex volumes so one of the questions that appears here and this is what Hayden was pointing out he's like look it's great that we have more governance participation but should these token voting rights belong to binance or the users who own the tokens and Santi I'm just going to leave you with that well yeah I mean it's easy said that it was it was not intentional but it is a risk right uh it's also um yeah I don't have more to add here other than you know obviously there are other exchanges that have a huge concentration

of tokens um and so if you combine that voting power with the complacency of a lot of smaller players or just funds in the space that are not voting that's kind of the things you need to be focused on which is hey maybe you know five percent of Delegation doesn't seem like a lot but if you look at the participation in the governance parameters a lot of times all you need is like two three or five percent of all the votes being casted for something to pass and so five percent ends up being a big deal and so these are the things that uh you got to think about so yeah it's um it's fairly controversial I've said this I think we're entering a

time where I think we'll going to see more governance attacks and more uh more contentious kind of governance um issues and uh I think it's important to pay attention to the space if you're a team out there really think critically of how can governance be exploited and I think that should always be the operating assumption um and I think the maker team has done a lot of thought into that so has the Ave team the ability to borrow tokens if you're if if say for instance a lot of uni is in uh in compound or Ave for for you know an attacker might be able to borrow a

lot of that and then have in you know a high degree of voting power and so anyways these are things that just because something hasn't happened doesn't mean it won't and I think in crypto you ought to assume that if it can happen it will happen it's just a matter of time and if the if the economic uh payout is there and I think you're already starting to see these governance attacks um like mango for instance um was pretty interesting yeah this governance attacks can be extremely interesting it's something that popped up to me when I was looking at Aptos and they talk about in their economics document how the fees and I think also some of the rewards are gonna they can be voted on and changed through on-chain voting and I don't know if that's implemented today if it will be in the

future and and that's something that polka dot really like focused on was that the fact that they'd have on-chain voting and at some at some point you could say like okay you have this new code repository everyone agrees they vote on chain and it's say automatically implemented um that would be one example but it does bring questions of just you know if it's an L1 versus an application versus a lending product like how should that work do you always want for example ethereum it does not have on-chain voting it's all done off chain which you could say probably is less clear and less transparent that you maybe are less vulnerable to attacks so anyways I think that'll be something interesting to watch going forward and I think the other thing that stands out to me for this which uh Dan Smith one of our analysts pointed out is you know maybe

eventually these centralized exchanges they build some type of portal that makes it really easy to do this voting or at least to delegate because we all know there's a lot of voter apathy like I absolutely love Apple products but I do not want to vote on any decisions that they make um but I do think you should have a choice so I think that's something to watch before the other thing that I think we're perhaps a threat going forward as we get more clarity on these Securities things is governance tokens and I think governance tokens have been a design that perhaps has come out of this uncertainty on the regulatory standpoint because you don't want to intimate that a token has any other function it's just kind of like a valueless token but you can have governance Powers the by the

way confers some economic value right if you look at traditional markets proxy voting is a huge industry your vote has power and has value but nonetheless you know there's there's I think we've been in this governance token era and largely because of like or in large part because of Regulation but say that in a world where you have this Clarity on the regulatory side then I think can we perhaps experiment with less governance um and I think it was hasu or some other folks that fall into this Camp which have advocated for like governance minimized protocols and

tokens or just protocols and and the tokens shouldn't necessarily have a lot of governance power um and that really it should be the team that kind of to your point like you're not like you don't have a sway over how the you know iPhone the next iPhone is going to be manufactured it's going to be manufactured with foxcom or in India like no right you have Choice which you mentioned earlier which I think is a key Hallmark of crypto which is there's all there's greater consumer choice of moving chains protocols if you don't agree with a particular decision from a team then you are free to go elsewhere in a click of a button um and so I I think that perhaps this whole how we think about governance

and the role of the community in governance I think is going to be perhaps rethought in a very interesting way once we have some clarity and um and it puts into question the role of governance tokens and just tokens to be clear I believe that there is always going to be some criteria that the community and and everyone has stakeholder in the system has and they should be able to express that via some sort of voting scheme right and I think tokens really map out you know while map out like participation and interest and stake in a particular protocol and that that relationship between a token holder and

their ability to influence decisions I think is is powerful and I think will will always exist it's just a matter of really kind of thinking about the it's really the degree and the scope of that that I'm kind of putting in a question yeah I mean those are great points I think hatsu has a line probably botching in a bit so sorry hatsu that it's Dows and and voters and users should have basically a say on processes so how a process is set but not on the actual decisions themselves so one scale of one's not so you're going to have constant decisions and that's not something you can constantly get votes for but the process of how that decision gets made like what are the three steps has to go through so you have checks and balances that is that something unscalable so I really have that like

that line I really liked again your point on Switching costs and one of the big points of crypto is you're supposed to have really low switching costs which I'm a huge college football fan so this made me think I'm from Arkansas uh go go pigs but this reminded me of the top quarterbacks in college football because when you go to a team and say they recruit another player below you you don't have a choice you don't have a choice to go to another school um and it's a big issue and now these quarterbacks I think any player can switch schools one time and you're actually seeing a lot of other schools do better because of this because no longer do you have five starting NFL quarterbacks on the Alabama roster they can actually make a change and I think switching costs is going to be huge in

crypto and it's really huge in every industry for not just Innovation um but to have a good user experience absolutely yeah so I think one more thing I want to touch on is Celestia and data availability if you've heard that term I'll try to make this not boring but I'm going to have to nerd out for a second so Celestia just came out yesterday with I believe it was a 55 million dollar fundraise which during a bear Market I think is pretty impressive and I think you're gonna hear a lot more about Celestia you've probably already heard about modular versus monolithic blockchains and as an example of Monolithic would be something like the ethereum L1 today or something like Solana so if you break down what a

blockchain does it does about three things does consensus which is the ordering and transactions it says execution so it's actually the processing of those transactions settlement which is more or less dispute resolution and also good for bridging and then you have data availability so this is the information related to those transactions so with monolithic Chains It's like one chain does all four of those then you have modular blockchains which is a little bit more of plug and play so you might specialize in execution and somebody that specializes in execution would be a roll-up for example they still put their data and information on dl1 blockchain so breaking blockchains like into their atomic units the specialization I mean you see this all the time with teams do you want one person that's kind of decent at everything or do you hire a special different people for their

certain specialization so what I want to focus on is a little bit of data availability because that is what Celestia does at least today there are data availability data layer Network and let me give you a little background so full nodes have to download all transactions today to ensure that a block is both valid and that it's available so that places High requirements on nodes and you often hear about this with like ethereum you can only have blocks that are so big because they want to keep it decentralized because the the higher the requirements like the stronger computer the more power you have to have call data is a big part of this so this is just information related to those transactions and today like for rollers for example the data is the most costly component so the question is do roles fix this data ability problem and the

point is no so if with optimistic Roll-Ups their security mechanism is fraud proofs which is like a seven day period that once these transactions are posted to L1 anybody can come in and say like hey this transaction was not valid but if the data was not made available which is this data availability piece you can't actually prove that something's invalid because you don't even know what that something is so then you often hear people talk about ZK Roll-Ups which you have validity proofs now with validity proofs you can actually know that all those transactions that were in that block are valid because that's the whole point of the zero knowledge proofs but the problem is if you don't actually have the data that was within that block it essentially freezes the blockchain because you can't know the state of the accounts and if you don't know the state

of accounts you can't do for example sending funds somewhere else you can actually move the chain forward and there's two things that blockchain should really do it's to make sure that everything's valid and also censorship resistance and if you can't make a transaction you really lose that show so I've been learning a bit about this and I asked like well do storage providers solve this like file coin or airweave which we talked about Falcon air earlier and uh answer is no so the storage Network like filecoin it's once you have data you know and you don't want it to disappear you put it on something like filecoin but if the data is not available in the first place it doesn't matter and that's that's the whole point of this data availability so today with Solutions like Roll-Ups they just post all their data on ethereum but you could

have something like Celestia where instead of posting that data on ethereum L1 itself you have the choice to post it on something like Celestia and at the end of the day this is all about modular blockchains basically like how scalable can we make this can we specialize um and ethereum does have things on the roadmap to try to address some of these features but it's not there today and I just went through all that but my main point is I think this modular like blockchain Paradigm and specialization is going to be a bigger and bigger topic and that's something we talked about with Aptos as well and you never know like you might end up being a rollout for an app chain and focus on one specific thing so I'm pretty excited to see that going forward and our blockworks research guys did talk about a new project recently called

the eigen layer which I think's a sweet name sounds like House of dragons type name Santi do you watch House of dragons uh I've watched not all of it but not all of it man I don't I don't I don't miss an episode it's it's my favorite thing today so um but Pollyanna for example Who I Really respect in space extremely smart uh he's talked about eigenlayer is one of the top data availability Solutions in the space but what's really cool about igon layer is that it adds a new utility function to eth so essentially what it does is it lets e-stakers restack their eth into an ethereum smart contract to secure other new projects that need security like middleware such as oracles or Bridges because when you have a new Oracle system like I know chain Lee but there's plenty out there you have to have

security right which means you need um staking you need to get the value of your chain high enough that people can't disrupt it or you have collusion and essentially this allows ethereum stakers to then restate which adds a little bit of additional slashing risk but what it does add is you get yield from these projects not only do you get the eat staking yield but you're going to get this additional revenue on top of the that and the seggers get to pick the project so you're not just going to pick a project that you think like look I don't think this is value there's a lot of risk here and the big point of this is one is exciting using eth so basically because you have this new Revenue stream you're potentially growing the value of each and the higher East goes the more security there is and

the more projects it can potentially support and this kind of supports the fat e thesis which is something Westy one of our block research block Works research team members talks about so Santi I have like two questions for you here one this all revolves around infrastructure and crypto like they're using this to provide security to infrastructure so one I'm just curious do you invest in that space and I assume you're still a believer of the fat eth thesis that it's going to accrue a lot of this monetary value um so I do certainly invest in infrastructure um if I were I was looking back around all my investments um I guess in space and I tend to invest more in infrastructure doing like uh bear markets or downturns because it

it's a time where you it's things are slower and you can reflect on what really what were the things that we need to patch on um as you stress test the network and you know with nfts and gaming it became very clear where those gaps were um and so I invested in in Aptos invested in arbitrime invested in squirrel and a bunch of other kind of infrastructure providers um and so yeah definitely I I think we're we're probably second inning of infrastructure development if at best I think it's still very early and we need to build certain parts of the stack um and as ethereum transitions to or has transition to prove a stake I think there's a whole set of considerations

now that you start thinking about okay well what is this data available what is you know how do we look at and monitor the state of the chain and the validators and their uptime and and relayers and all this stuff and so I think it's a very interesting time to invest in infrastructure and at least 20 30 of my investments have been in infrastructure related projects picks and shovels maybe I'm a big fan myself right if you can if you can pick the picks and shovels you don't have to get the right project I think I'm a little bit better at that and that's kind of like the L1 thesis right too to some degree it's a little bit of an index which you could say is their infrastructure yeah by the way this eigen is it me or as you were reading this thread which is great from Westie

it reminded me a lot of the cosmos episode um on how they were thinking about shared security um and in the relationship between atoms and staked atoms and kind of the the chain thesis it feels a lot like eigen is like bringing on that type of functionality uh to ethereum but that was just my yeah that's what I picked up too we might we might have to get Wesley on some time to actually um describe that for us but yeah I do think you can see this in different ecosystems and I think we talk about this in our episode with Cosmos it's like yes Adam and I say Adam sorry guys Cosmos and ethereum started on different sizes Spectrum but they are now basically learning from each other and

more likely to meet semi in the Middle with some of their own like specialized and cultures and communities yeah yeah okay so one thing that's been in the news that I'm actually absolutely fascinated with which I think we talk about probably every other episode recently because it's all over in the news it's just artificial intelligence AI so you had gbt3 with text Dolly with photos uh I don't know the names but there's like full video projects now you can just type in text and I'll make a video then I think we talked about the Steve Jobs and Joe Rogan interview which is absolutely nuts so if you haven't heard about this they essentially put all this data in all Steve Jobs interviews and they put it next to all of Joe Rogan's interviews and then they combined them and they have a real conversation as if it happened today and

it's it's absolutely not it kind of it feels like we're not gonna be oh I'm not a podcaster yet but it feels like we're not gonna have podcasters in the future but what I think is really interesting too is like the intersection with crypto and um to me I I know this has been a thing for a while but I think we're going to see more and more um crypto companies that maybe maybe they don't work out maybe they pivot which is not a bad thing you see that in VC all the time they're gonna pivot and say no we're not we're not crypto company we are an AI company that leverages crypto and I have to bet that Adam Newman is making his way to the space because he he knows how to Arbitrage these markets I I think it's going to continue to be

one it's fascinating what's going on um I think this idea of a Turing test is what you know for anyone out there that's not familiar it's it's sort of this when you ask a series of questions to respondents and you know if you can't determine if something is like if the responder's human or like if you can't discern between whether human or Not Human if it passes that test then that's I think like one of the key Hallmarks of like what is like true intelligence I think that's really fascinating that like for instance now there's been AI generated art that has won awards of like the best kind of like just Design Awards and so there's other projects like in the space like Hume for instance that is creating

like uh you know music by avatars and it's not human um and so I think that's pretty interesting of like how do we it doesn't matter that a human has created something um from like a value perspective uh the other perhaps more important thing is you have to think about the Integrity of the data and the availability of data right blockchains are data rich and they provide very interesting properties of of Integrity of said data and the problem is when you try to train certain AI models for instance on credit scoring systems there's been a fair amount of controversy around that because all the historical data has human bias in it if you look at the loan

approval ratings well they skew certain demographics mostly white males and and if you use that data set to then train the model well guess what the model is going to just act in a very consistent similar way as humans which have a bias right and and that poses a really interesting question which is the the quality and the Integrity of the data that you're using to train the model is important and I think over time that's really perhaps the most exciting thing about blockchains which is they're producing in increasingly so the streams of data that are you know pretty interesting to use and then analyze and train certain models so that's that's to me really exciting because anytime

someone talks about AI I always say hey how are you going to get this data like for clinical trials for the specific in healthcare there's like these data silos that are very hard to navigate right so I think that that uh that's the the challenge here and the opportunity as it relates to crypto and that's the link um there's a really good so I've read a lot on the subject and I I won't digress further but I always want to give a book recommendation in every episode and there's um Ray Kurzweil and he has a few books on on the matter I think he's he's a chief Innovation officer I think of Google or at some point was he talks about the singularity

and kind of super intelligence um and the book that I'm talking about here is so he has a singularity is near that's really good but the one that I really like is how to design a brain I think I've actually read the simulators near you're making me feel smart today Santiago well here you go see we should have you on in every episode forget Yana you've been replaced I appreciate that the the one I'm talking about is how to create a mind the secret of human thought revealed and the reason why I think if you're like new to this space and you want to kind of venture in I think it's really interesting because

studying AI I think has allowed us to really ask ourselves how do you define consciousness how do you define intelligence um and I think this book is really interesting because it puts that front and center and you always want to approach I always want to approach things from like the why like first principles is like why does this really kind of matter in the same way of like why do people really spend time like Elon Musk trying to go to Mars or the moon or space exploration when we have so many problems in the real world and here on Earth and the reason is a lot of the Innovation that has been applicable to solving real world problems has come out of research at Nasa and thinking about space exploration and the sustainability of like the like the you know like shuttles and and I think a lot

of it's interesting because um I think at bet at worst we're going to end up learning a lot about what human intelligence really is um and at best we create systems and designs that have like a leap like a leapfrog Improvement to a lot of processes so I'm glad you brought this subject up because it's it's really fast fascinating and even though it's been really hyped I think it's very real um oh oh and the last I guess the second book If You're Gonna read how to create um how to create a mind there's um what's this guy's name he's Chinese he was like Lee I forget his name sounds like you're

pretty deep in the space Auntie no no I actually have a book right behind me but um I'm not gonna do it now we'll link it up to the show notes but he was like kaifully or something he was like the chief Innovation officer um and let AI at Apple I think in anyways in China but anyways he's now at Stanford very smart guy just came out with another book um but his first one is fascinating so we'll link it up in the show notes apologies for not you know I'm blanking here definitely definitely I I should probably cut it there but I have to add in because I was getting ready for the section of the books that we're reading so I'm reading a book I'm reading a book that is not as intellectually simulating but it's called it's called story worthy um and it's this guy who tells stories

basically I think for for a living and one of the main points that I got away from this is every night he writes down one story that happened to him throughout the day so it's like what is something that happened to you happened to you that day that hasn't happened in the past and write it down just describe it in like three sentences and then put the date he does that every single day he calls it his forever homework and I think the coolest part of it I just started this is that it makes you notice the little things that happen to you every day it's like you become more present to a degree because you're actually looking for that like I used to ride a little bit before this job and it made me always say like what's something interesting that happened I want to pick

this up and you actually start noticing things more and that I think that's already happened with me here now my stories I wrote down I would never tell because they're not entertaining but anyways I think it's a cool practice that like people should you know think about doing because it's definitely been good for me yeah funny bring I haven't done long form writing in a while I guess since I I did a lot of it in the last bear Market um and maybe I should start writing now that we're in a bear but I definitely agree with you um and I've tweeted about this a lot which is I feel that we've gone into like very high frequency like informal means of communication and like everyone always wants it it's easy to suggest having a call um or texting but sometimes like it's really nice and refreshing to like just

write and whether you're going to publish or not I like publishing because it it's like a reminder I'm publicly staking something and I can look back on it and that really kind of helped me think about investing Frameworks I I mostly was writing about like mistakes that I've done in investing which are a ton but that helped me learn a lot about like just like sitting down and organizing my thoughts I think is super helpful like writing is is some is it a skill that is very valuable to organize and crystallize your thinking but anyways this is the book hi it's Kai Fu Lee ai20 41. it's a big book um yeah it's it's it's good but the best the book that I'm referring to

is actually this it's called AI superpowers and that was his first book um and it's fascinating so yeah everyone this would be the second book that I well Kai Fu Lee is the guy that I would follow and look at his videos because if you want to learn more about AI he's one of the I think the the more like the just Geniuses out there very cool thanks thanks for that well Santi I had a great time doing this today thanks for letting me come on yeah maybe next week we talk about AI replacing robots replacing humans but I think that's pretty far out Garrett I think you're gonna replace Heather me or or Jason but nonetheless it's been a pleasure I think you should come on on the episode um uh more often because I really enjoyed this and and you're the brains

behind this operation so thanks for coming on definitely well unless I get kicked out I think I'm taking over next week too so everybody get excited um I'm excited for it myself so anyways enjoy it we'll see everybody next week yep thanks everyone have a good one yep bye [Applause] [Music]