The Clarity Act, State of Crypto VC & LayerZero Launches Zero | Weekly Roundup

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I think we have all sorts of enemies. Like I don't think it's over. And so just because we don't have Gary Gunar coming for us, we should still be banding together as an industry. I think the important thing as an industry is to make sure we know what our principles are, we know what we care about, what we came here to build, and that we can stay really true to it. And then I think when you're looking at the bill and making sure that it's, you know, livable is will it let us do what we came here to do. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the

Block Works team may hold positions in the companies, funds or projects discussed. Welcome back everyone. We uh have a special guest, a repeat guest, Rebecca uh is coming on. There is a ton of stuff to talk about regulatory regulation. So, uh we'll cover that in the you know, but but anyways, thanks for coming on, Rebecca. It's a real treat. >> Yeah, thanks for having me. Santi, you're really in founder mode here. You got a like a half painted wall in the back. You're It seems like you're like in a warehouse. >> Yeah, there's a lot of echo. We have like basically rental furniture, but uh anyway, yeah, the market's tough. What can I say? You know, I'm not going to spend a full I'm not going to paint the wall entirely.

>> This is how much he could afford before the market crashed of the painting. >> No, we can afford you. You know, this would have sold like a rare NFT back in the day for, you know, couple hundred thousand bucks. So, take a screenshot and sell it in three years time when NFTs are back. >> This is how I found out Santi put all of his seed round into Bitcoin back in uh you know, a year ago when it was 120K. To be to be to be fair, I did call you one day and I said, "Hey, let's uh let's short circle and you're like, "Oh boy, I've I've it would have been a great trade, but nonetheless, we're not in the business of shorting. Let's let's talk regulation." Rob, you're in DC. Rebecca, you spend half of your time in DC.

>> Not half, but I I come when I'm called on these days. There's a lot of people in DC now. Uh, I think Rob being there is actually like an important thing to think about because I think we're closer to the finish line than ever. It doesn't mean we'll necessarily get it across the line, but um I meant to check the poly market before I got on about do you guys know on like market structure passing. >> I think it's like 55% right now. >> So I was going to say I think I'm at I personally am at 45% which I think is high. It's probably the highest I've been on market structure passing. And I think it, you know, every day is a a roller coaster on the crypto policy side of things. And they say in DC there's no bill until there's actually a bill,

right? Like a bill fails four times or something before it actually passes. Um, but you know, we've seen crypto market structure uh die many deaths. It's more like a cat. I think like it has nine lives instead of four. Um, and I will tell you, notwithstanding the fact that the markup was off at banking in January, people are back at the table, negotiations are still going on, staffers are working harder than ever, industry is working harder than ever. Um I think that things are moving forward and I think that uh there's an appetite both from industry and from policy makers uh to get this across the line and you know have some commentary on that but I can also sort of walk through

what's happening on the banking side and what's happening on the A side. >> Rebecca I'd love to hear so I'm here all day for meetings somewhat around this around some other broader you know regulatory issues as well. Um, and you know, we talked about this, I think last week, maybe it was a little bit the week before, about how, you know, the the markup had come out of the banking committee and seemed like we were moving towards a markup in the ad committee and then there was the Brian tweet and that seemed to throw everything a little bit uh into uh into disarray for a little bit and everybody kind of retrenched. Um, I I'd love to hear your conversation or your thought process around like what has transpired over the last couple weeks because I think from from my perspective it feels like there hasn't

actually been a ton of movement uh in that period of time since the banking committee markup came out and I'm a little concerned about the timing of if we don't get this done in the next eight weeks then does this just kind of get punted um for or you know the other priorities take hold. Uh and then also um you know what you think we as an industry could be doing maybe better than we've done uh to try to get this where we we want it to be because it seems like we're a lot more relative to genius as an industry we're just a lot more disagregated there seems like we're a lot less you know focused as an industry on getting you know something across the finish line.

>> Yeah. Uh okay I'll try to remember all different parts of that question. That was a that was a very big multi-part question. So the first thing is yeah so right after the banking markup uh was off and didn't happen I think everybody tried to get some sleep for a little bit both on the uh staffer side and on the industry side and I think uh then you saw the yield uh meeting two weeks ago and then earlier this week. So that has sort of started re restarted things in the background on the other issues too. And I think there is a general thought process that if the deadline for a yield agreement is end of February that industry and members need to be in agreement on all other parts of the banking side of the bill by then too.

And then there's a hope to your point about the next eight weeks that there's a markup sometime in March to try to get this out of banking and then onto the Senate floor. And I will say like you don't see the Senate staffers, you see a lot from the senators themselves, but they are working tirelessly. And I'll get more into industry at the end. But there are a lot of people in industry who are working tirelessly too. And having been through all five times we've tried market structure. Um I can say it is exhausting. Uh, and it's also emotionally exhausting because there are, like you're saying, Rob, like these fits and starts and you have to think about like what can we live with and you also have to put it in the context of

other large financial legislation like DoddFrank and things like that. Like none of these bills are perfect. And so I do think for as an industry, we need to think about what can we live with versus is this bill perfect because we're not going to get it to be perfect. And I think we can agree the industry itself hasn't been perfect and hasn't worked perfectly over the last you know however many years 13 years so maybe more. So we should uh not let the perfect be the enemy of the good for sure. The a side we did see the markup. It was very partisan. It made itself the the a markup made it out of committee um but in a partisan way 12 to 11 that is still being worked on too for some final

tweaks as well. Um, and I think we're going to see that progress too. I think there has been progress on yield. There are a lot of rumors that there is close to maybe agreement on yield and maybe there's some deals around yield versus tableabling other topics and the like so that we can actually move this forward in a productive way both from the congressional industry and white house because the white house says things they care about too. So, you know, I'm going to put I probably poly market's a little higher than I am, but they're usually right. So, uh I would say this is the closest we've been though to seeing something that could pass.

>> What did you make of the um so there was the meeting yesterday, I believe, uh or maybe it was two days ago at the White House. Yeah, Tuesday at the White House around trying to come to some sort of agreement with yield. There was some representatives from the banks themselves. There was representatives from the industry around this kind of new language that would help us, you know, solve this idea that there maybe some prohibition of stable coin issuers giving yield back to uh back to the end customers um through, you know, kind of those those intermediaries. And that language that came out in I think it was kind of a memo that the White House put out afterwards was actually more restrictive than the original language that Coinbase did not like that was in the banking committee markup. and uh and

used words like you can't give yield for even the use of stable coins which uh or purchase of stable coins which in my mind is akin to saying you can't give cash back for swiping a credit card right um and it strikes me that that language is pretty problematic for the industry. So what did you you make of that and what that means for getting to some you know sort of middle ground? You know, I think of all of these negotiations. I I was a litigator back in my former life and I had to negotiate settlements. And I think of this as very much like you're going to pull back to one side or the other to try to get to a place where everyone can live. Whenever I was explaining to clients what settlement means, it means what I said before, whatever you can live with. It's

not like anybody leaves a settlement perfectly happy. Um, but I do think that there is something to be said about happiness for getting something that we can live with. it won't be perfect across the line. And um without going into too many of like the details of what the language said in the memo, it wasn't like no yield ever. It was just I think the banks are really concerned about the holding piece of it because it >> but the new language so that's what's in the in the banking committee markup. But the new language out of the memo on Tuesday was also no not even for using stable coins.

>> Yes. But that's to your point on like more like swiping credit cards. I but that doesn't it doesn't talk about like marketing rewards things like that. Um so I don't know I mean there there's industry in the room who cares like we we know that like Paxos was in the room Coinbase was in the room those types of players are in the room who have a big stake in this. So uh I think the White House is super motivated to get this across the line. You saw um Secretary Bessant come out earlier this week really trying to push this very very hard. So there's a I've never seen such a push from the administration itself to try to get this across the line. So I am hopeful that there will be negotiation

that everyone can live with. I think the other thing to remember is after the banking markup got pulled, you saw so many people come out in favor of the bill and trying to push it forward. So I don't know where the everyone's going to net out on this, but I think there's a lot of motivation to try to get this done even from the industry side. >> Okay. Yeah. I'm hopeful that the language that came out Tuesday was a little posturing so that we go with the idea that oh, we go back to the other language that originally that Brian uh in Coinbase said that they didn't support because because I think that uh using language like you can't even give yield for for the use or the purchase of stable coins. Um essentially probably carves into like the loyalty business

for most fintex today. It would make it really hard for fintex to even adopt some sort of like stable coinbased loyalty program. So, um, at least that's that's that's my perspective. But I >> I don't know if there was enough definition around use though, not to over lawyer, >> but then you leave but then you leave it up to the SEC or the CFTC to decide like what the rulem is around >> I think you actually leave it up more to Treasury or the OC. >> Yeah, I guess I guess that's right. Do you leave it up to Treasury or the OC on the rulem side? But um I think you'd rather have more you'd rather have the definition of more defined in law or I mean you tell me you're you're the expert. So yes, in some way yes, I'll say two things. There

are rulemakings across all of the parts of the bill that everyone should be really mindful about. Um there is a lot of highlevel uh guidance or structure and then everything is reduced to guidance or rulemaking. Um I think on the token side uh in title one of the banking draft a lot is left to the SEC in terms of defining control uh defining uh entrepreneurial and managial managerial efforts things like that and then we see a lot in title three on DeFi that is left for treasury to define a lot. So you have to think both what do we want for this bill and there is a lot of rule making here and will the rulem be able to get done in this

administration or are we going to have to see it in the next. So you want enough scaffolding and structure in this bill to protect the things you care about like you talked about. Um but I think we're going to see a lot in rulemaking and people are punting so that we can get something across the line. But there will be a lot that remains to be seen. In positive news though, if we cannot get to a definition on use, you will spend a lot more time in DC advocating for what use means. Uh, and look, the thing I think people forget in this country is that we we're you're in DC. You are literally going to talk to people on the hill and in the agencies and say what you care about and people will listen to you. and that and

I will tell you crypto has had so much access in terms of um the staffers, the me members of Congress um to really push for what they want and so that's pretty unique. You just don't get that in other countries and this industry has gotten probably more than other industries have for sure. >> I was going to ask you like is the industry being too greedy? Like let's not forget that we we're in a very hostile environment and now we're have a seat at the table. And it's it's I understand why the backlash to Coinbase for instance.

It's like hey guys we opened the door you came in here have a seat at the table and now you're acting like a you know you're being pretty selfish. Uh like is the industry being too greedy and are we at risk of like shutting the door for what is a win? It's not a perfect win, but at least it's it's a good win to then set the foundation because we don't know what kind of regulatory environment we're going to be in four years or three years time from now. >> Yeah, I think Rob's point is a really important one about the rule making.

Like, is there enough in these bills that we can live with? And then look, the rule making process is uh nasty, brutish, and long, not nasty, brutish, and short. and it gives everybody another bite at the apple to help shape where things go. So you have to look at what's in the text. Is the text itself too restrictive? You know, the use thing is is an issue, Rob, but if it is reduced to rulem, that might be something we can live with and uh you know, figure out what's next. I I don't I don't know if I'd say the industry is being too greedy. I understand people have thought about that and talked about that in the past, but I I think the other part of it is I don't know any

other industry who went through what this industry has gone through. Not the past four years, but the past six if we're really being honest. Things started um I I would say getting pretty rough two years before uh Gensler came in even on ICOs understandably. Um but we saw things like Ether Delta precede Gensler. Um it gave more more guidance than it did like true smackdowns and you know true regulation by enforcement. But this industry has gone through so much more. I don't even know if we understand the full promise of what this industry can bring forward because of how hard the last six years have been. And so I think we should fight for everything we want in these bills.

>> Fair enough. What are the major wins in the bill in your opinion? like if if it passes in its current form, >> um I think we'll have a framework for issuing tokens in the US. Uh one thing people are not talking about that everyone should keep in mind is we're going to need a corollary tax bill which people are working on behind the scenes. That's sort of coming up uh to be able to issue tokens in the US. So we're going to need that to help us. But I think issuing tokens in the US is going to be something we'll see again. Um so that's a big win. I there's a provision in title three that if we can make a couple tweaks to it will allow financial institutions to plug into permissionless DeFi by using a risk framework. That is

a huge deal for me. I know we saw the Black Rockck Uniswap uh integration yesterday, but that's permissioned, right? Very cool. Obviously, everyone understands that DeFi tech is great for rails, but permissionless DeFi is really we've seen gated DeFi in before. Santi and I when I was at a uh we saw an attempt at sort of permission DeFi and the gatekeepers make it hard to really bring the promise of DeFi forward. So I think if we can get FIS to be able to plug in to DeFi that's a huge win. I think acknowledgement of self-custody is a really big win. Um there's a provision called uh the BRCA. um the regulatory the blockchain regulatory certainty act which is in title six of banking which

says that non-custodial software developers are not money transmitters. So that goes to the question that we've seen in the Roman ca in the Roman storm case and in the um the samurai case and stuff like that. So there are some winds in there. They're buried and they're not as big and splashy as yield or tokenization of real world assets but they're in there. Can you um go ahead? >> I was just going to ask you going back to the yield piece. I know it's broad and intentionally broad. If you were to wave a wand and write it in the way that you could, how would you, you know, control F replace paste your definition?

>> Well, we we just wouldn't we just wouldn't address the Genius Act, right? Like this is a whole different bill and we're trying to rewrite the Genius Act like that. I mean, I think that would be everybody's >> Does it go back to the state versus federal? Because didn't the genius had give? >> No. No. I mean, I think I I think Rob is kind of right. That's in an ideal perfect world that you wouldn't be rewriting genius. I will say there are so many cooks in the kitchen on this that I generally try to stay in my lane and not opine. I mean, I care about yield because I think it's an important and stable coins are an important part of um the ecosystem, especially the DeFi ecosystem, but there are a lot of players who are making edits and thinking hard about yield. And I really

do hope we get to a good place on that because I think, you know, everybody stable coins are important and Rob talks about this all the time from the fintech perspective and changing how we do payments and stuff like that, but it's also really important to keep DeFi alive in a really important way and to continue to have ongoing stability in DeFi. So we need to make sure that stable coins are protected in all the ways for all different parts of the ecosystem. >> So that's yield and that's you know dominated the first 15 20 minutes of this podcast and I think that's dominated most of the time on the hill right now around around the bill but there are some other things that people care about and some things that people see as problematic and you a little bit about the winds. Can you maybe just for

the audience talk a little bit about what those few other kind of major points of contention still are? The biggest after yield there was this question around tokenization of securities which was section 505 in the banking draft that came out in January. People were really worried that that provision which was by the way put in very much at the last minute. Um and people had not seen it uh at least extensively before it came out. So it was a surprise uh an Easter egg as they say. Um but uh that seemed to people a lot of people read the provision differently that seemed to curtail the SEC's ability to allow tokenized securities to uh take many different forms and be uh marketed in many

different ways. Some people are like this is just a restatement of the SEC's authority. Uh, as a lawyer, I don't love restating. Like, if you're using words, you should use them to mean something. And so, if you're going to add it to a bill, I take it to mean something. Um, we didn't get to see any colloquy on the floor or any discussion about what members thought it meant. So, we don't have sort of legislative history around that. But, if you're going to include something in a bill, you think it means something. So I think we need to make sure that section 505 on this tokenization of securities does not cretail the SEC's ability to allow for tokenized securities to come out. I think the other piece that is problematic or that there's problematic is too strong a word that there's still negotiation over is title three which

deals with the elicit finance and DeFi. So 301 talks about controlling software developers. So if you have control over a uh over a smart contract protocol uh where are your regulatory obligations? I think that this piece is will allow Treasury to make a lot of rules around what control means. I uh I think that is going to require a lot a lot of work if this passes and how to think about um rule making around that. Uh section 302 in the D5 bill has questions around what we do for frontends and sanctions control and whether the it gives Treasury the ability to impose KYC on

DeFi front ends which you know is another hot topic. Uh we want to make sure that the financial institutions can plug into permissionless DeFi in a way that's not too ownorous on them. Um and we want to make sure that self-hosted wallets and financial institutions can work together like financial institutions can give access or interact with people's self-hosted wallets. So that's where section three is. Um and section one there are some pieces is really about uh issuing uh tokens in the United States and there are questions there around this definition of common control because this as I said for title 3 there's this idea of control that goes throughout and look in the industry we've gone from something like UNIV v2

or even tornado which has no admin key totally permissionless can never be changed fully immutable to lots of different permutations of what DeFi looks like. Some of it looks like onchain finance and there is a there's a really clear control and some of it is this hybrid where somebody holds an admin key, they're never going to use it. And so we do really need to have something there that's consistent that does not turn software developers into financial institutions subject to the bank secrecy act. That is the most most important thing we need to be doing in this bill in addition to all the other things we talked about too. Rob and I were at the CNBC event in New York earlier this week and um we saw Jan Carlo I think the former CFTC chairman and the current chairman >> he was talking about obviously the Howie

test uh is something that the industry's talked about a lot um my understanding is that some you know this bill would kind of replace that in some way and and there's this maturity test um can you talk about that like what does that mean for crypto projects that have always been thinking about this day and night about this Howie test. Everyone in the industry, it's a person. >> Yeah, I don't. Yeah, you're still going to be up thinking about the Howie test, but it's just going to be like I don't remember it like section 105 in the banking bill. Um, so the maturity test was in the house version of this in fit.

There is a different question. Uh, it's much more around control in the Senate bill. Um, and there is rulemaking from the SEC around this question of entrepreneurial and managerial managerial efforts like when you can graduate out of uh being doing disclosures and things like that with the SEC and so if the bill passes you're not going to have an answer day one like oh I know I'm done. >> Um and so uh are moving in the >> are we moving in the positive direction or or not really.

>> Yeah, I think so. Um, I mean, as I said, I think being able to issue tokens out of the US is good. The real question is how fast can the SEC get rulemaking done around this entrepreneurial and managerial efforts? So, you have a view on how it works. Um, you know, we have uh decades of case law around what that means. And I don't know if you guys remember this, but like back in 2018, 2019, what the SEC then had as Finnhub, which was where you would go in and talk about your crypto projects, and then you get a subpoena right after. Um but uh back then they put out sort of guidance around what entrepreneurial and managerial efforts look like and it was like 80 factors right 78 factors something crazy so I think rulemaking is

going to be really hard around that so I don't think we're going to stop our sleepless nights around the how test >> yeah uh I get asked the question a lot when I'm talking to normal businesses like can they use stable today they hear about these things like contested in TV and there it leaves uncert certainty in their mind. It's like, can I actually use a stable coin? Can I not? Regardless of whether the bill passes today or not or like, you know, this year or not, like are businesses okay to use stable coins in in their current form if you go through a Stripe or, you know, USDC?

>> Sorry, I I did hear everything you said, but my computer I have many tabs open. It's my fault. Um, of course you can use stable coins. Uh, I think Stripe is using stable coins. you know, they have privy and bridge and all of those things that stable coins are very integr integrated into. So, I don't think there's a problem using like using stable coins for payments as Rob said, but there are the other permutations around them and obviously we're in the midst of figuring out what to do about yields. But yeah, I mean >> I mean a lot of the a lot of the activity has been on the B2B payment side. So like a lot of the growth has come from that. So whether that again that's just a point that I think people need to hear like there's these issues around the edges that are being debated

that affect certain stakeholders but businesses are using stable coins today and whether this bill passes or not that trend is going to continue to grow. Uh I think Robbie had a pretty aggressive prediction which would be to you know go into 10 what is it 10 trillion um or 100 >> well I said on the crypto credit card side we're going to get hundred billion dollars worth of settlement with Visa but that's really still relatively small for for Visa but I I I don't think um I we need to remind everybody how bullish I am on stable coins. So uh I think that's uh that's clear. Um no but I I listen I think on the on the stable coin side the one thing we have seen and you know obviously in the portfolio right now is there's definitely a lot of the tooling is kind of catching up to the

volume right so the okay well how do I make sure that I'm doing the right transaction monitoring how do I make sure that I'm doing I understand like where if I have nested or not nested flow and like how I you know who how do I make sure that I know who that end customer is and you know what types of checks am I doing how do I pass along the right type of information that type of tooling right that you see in like traditional payment uh and banking ecosystems is catching up a little bit to a growth that had kind kind of got in front of it. And so I think that's a topic for a lot of people, but um that that's a problem for the service providers. It's less of a problem for the businesses and and the businesses are all, you know, they should be using

stable coins. It's better, it's cheaper, like go use stable coins. >> And notwithstanding the um notwithstanding the negotiations over yield that are going on right now, banks are getting ready to issue their own stable coins. I'm sure Rob hears about this much more than I do, but like they are all staffed up. They are getting it ready. Banks that you didn't even think would be issuing stable coins are going to be issuing. What that means and how that looks and how they can be used is a whole different question. But uh the banks are getting ready for stable coins too. >> Every every bank is going to have a stable coin. everyone and all the banks, all the asset managers, we have Fidelity launch theirs, all the fintexs, we have CLOUSD like and I think I said at the beginning of the year we'll have at

least 50 financial institutions or fintexs uh launched on stablecoin this year and that might be undershooting. >> I agree actually. >> Coinbase cryptobacked loans powered by Morpho empower users to borrow up to $5 million using Bitcoin or $1 million using ETH as collateral. Loans originate in seconds with no additional credit checks and competitive rates typically between 4 to 8%. Use USDC for down payments, debt refinancing, unexpected bills, and more. Repayment anytime with no fixed deadlines. Over $1 billion in loans have been opened through Coinbase to date. With the Coinbase app, you can manage cryptobacked loans with ease. To

learn more, click the link in the show notes. As always, investments in blockchain technology involve risk, terms, and conditions apply. The Blockworks Digital Asset Summit is back in New York March 24th through 26th. We'll have top speakers from leading asset managers, financial institutions, DeFi protocols, crypto companies, and policy makers all under one roof. Think Black Rockck, Coinbase, Robin Hood, and more. Follow the link in today's show notes to buy tickets and make sure to use code Empire 200 for $200 off at checkout.

>> Maybe you So Santi and I or Santi mentioned the CNBC event that we were at uh earlier this week. Um the other thing that uh chairman Mike Zelig at the CFTC talked about uh which he then launched a podcast I saw this morning on on lots u talking about is prediction markets and that's been I think that's near and dear to all three of our hearts on this uh it is >> on this pod and so I'd love to hear you talk a little bit about that and kind of >> I would say just how vocal uh chairman Celic has been about it and um asserting you know the CFTC's right to regulate these markets and you know what you think that means and um I I think some historical historically that feels also very um important to me and kind of the point we're in.

>> Yeah. >> So the other thing maybe you guys talked about this last week but because I don't remember the exact timing but you know uh Chair League also rolled back the event contract rule which sort of shut down or really made it very difficult for prediction markets to operate in the US the way they are. And uh I think that you're going to see that um there is going to be a big turf war between the states and the CFTC themselves. So in the crypto.com versus Nevada case, uh the CFTC actually filed an amicus brief. Um interestingly, it was filed by former Cher and Carlos firm Wilkkey. Um and he and Cheryl are very close and worked together when they were at Wilkkey. Um but I think that we're going to see a lot of interesting things in the US for

prediction markets. I think that chair Celig as you said is I mean bullish he probably wouldn't use that word but really making sure that the CFTC can assert its jurisdiction but I think that the the craziest or the hardest line is going to be on the sports markets on these prediction markets uh versus all the other financial markets I don't think anybody really cares about right like oh uh is you know what's the percentage of market structure going to pass like the states aren't that worried about that but they are worried about these sports markets So I think some narrow stuff there.

>> It does strike me though when you listen to to Cher talk about it and if you listen to the odds podcast and first thing I did this morning when I woke up I woke up and I was like I can't wait to hear the CFTC chair talk about prediction markets. Yeah. >> Um and he he's he does not make that distinction like his perspective very much is that like these are markets. These are markets that have specific technical ways of which they need to be regulated and the regulator should be us because we regulate markets. there was no, you know, he he he he talks about this analogy to the 1930s when um people used to gamble on like commodities and there was all there was like this kind of like business side and the and you had you know the the Chicago Mercile

Exchange where like you know professionals were um hedging out risk and and using these financial markets and commodities for really professional reasons. And then there was like bucket shops that were also where people were gambling on commodities. And and he really analogizes it to that which is that these are markets. These are markets of which we should be the regulator of. And it doesn't matter if they're if it's sports or it's politics or it's anything else. >> I think that's right. And if you think about how prediction markets work versus these gambling markets, they are set up really differently. We were explaining this to our children who now are really interested in prediction markets because kids like like they've seen ads all over the place for it. um and that the way that you know gambling lines and stuff are set up versus the way these

prediction markets actually function are very different technically. So I understand why he's going to why Ters Eagle is going to make those distinction between sports markets and prediction markets versus not. And he also took some uh he also took down I don't remember the exact details around it something around the sports uh the sports market guidance that had come out from the CFTC previously. So he is definitely going all in on it. But I'm saying I think we're going to see the states and the CFTC go headto-head over these sports markets. >> Do you think we end up in the Supreme Court?

>> Yeah, I think so. I think everybody, all the prediction market, you know, all the prediction markets are in these fights with various different states. You saw poly markets to Massachusetts earlier this week. Um, and we just talked about the Crypto.com Nevada case and we know Coinbase is fighting a lot of these. Um, so the real question is like who gets to the Supreme Court first? Do do you have a prediction there and what do you think is best worst for the industry etc? Do do you have any thoughts on >> in terms of going to the Supreme Court? >> Yep. For which case? >> Um we have we have a while to go. Uh and the states are coming out different ways, right? We've seen some states allow these prediction markets to continue operating and other states not.

So it's inevitable like when you have these state-by-state conflicts, it's almost inevitable that it goes to the Supreme Court. I mean, I think this is a pretty good Supreme Court in terms of the composition for it to go to um in terms of free markets. And the other thing that's really important to think about that we haven't talked about for a long time, but everybody was really spun up about it was this Loperbrite case which says that came out last term, maybe two terms ago. Everything blends together in crypto time wise, but uh which really g said you know the agencies um should not be overstepping and things like that. And so if prediction markets are, which by the way, event contracts are regulated under the Commodity Exchange Act. Um if this seems like it will fall within the

CFTC's jurisdiction, I think that um since it's really statutoily based, the Supreme Court may come out and say like, "Yeah, they're not overreaching. They're just asserting their jurisdiction." >> So Rebecca, you know, I'm going to ask this, but let's invert. Let's go in three years time. And what kills us? you you want to go where things can kill you and then work backwards from there and then inform what you do today. Um, so Rob's in DC. You got to give him instructions >> to make sure that he tells all these people that he's meeting with the right things even though he's, you know, he has a list of things, but but what can kill?

>> Rob knows what to say. He's not worried about it. I mean, I think a lot of what we I mean, he knows what to say on the yield side for sure, so he doesn't need my instructions there. And I think I'd said a lot for you know when you're meeting senators on the hill um it you know there are a few things that they know and I think distinguishing between software developers who have control and software developers who don't. Uh and not having criminal liability where there are software developers who don't have control is a really important piece of this. Um, I think the interesting part about a lot of, uh, I guess senators who have sort of are coming to this late and wanting to

be really involved is they've been playing catch-up on the tech. And so they're doing a good job. Their staffers are really digging in, but hearing the same message about how the tech works over and over is really important, especially from new voices. Like I know Rob has been in DC, but you're not you're luckily not one of those people that they have to hear from all the time. And so I think >> want to be I absolutely want to be. >> So Rob will be a breath of fresh air. Um and I think hearing the same message from somebody credible like Rob um who mostly has really been focused on the stable coin side and also doesn't go so so far outside of his um lane will be helpful to the industry.

It's interesting because I um some of these people at least one of the people I'm seeing today you know I've uh met many times over the last couple of years and uh the conversation I'm having now around DeFi developer protections right and around stable coin yield are basically the exact same conversation I've been having with many of the same people for a year and a half at a minimum right and so it's these things take a long time and they have to be there's a lot of interested parties is there's a lot of people there's a lot of nuance in like specific language as we talked about earlier and so um it's not it's not as if this is new it's just about you know getting the to something that everybody can live with and I guess the the nature

of a good deal is maybe everyone's a little unhappy with uh and um but with very very specific language and down to you know the word choice that we were talking about before with with the word usage >> yeah sometimes we're in the midst right now of negotiating the difference between 'the' and a you know uncert certain things and what what's the difference and does it do we need it and are we going to have to do rule making on something like that down the line? um who's the enemy of crypto now because you know in the prior administration we got to wonder where the push back comes from right I think before it was very clear who that was and today it's less clear there's push back whether it's traditional financial institutions or

just certain parts of the population that look at prediction markets and say that's gambling and that doesn't produce anything useful for the economy and crypto, they don't believe the story about the technology being useful about stable coins reducing costs and this real-time money concept. And it's hard because money is something that people don't want to talk about um and is I think crypto is very much in your face like you have to just see the moneyiness of it and sometimes it's just looks and feels a lot like prediction markets and that's the headline. But um it's tough.

I I guess uh if if you're a congressman, if you're a senator, are they getting calls from their constituent base saying, "Hey, hey, you got to you got to block this because crypto is is is not producing anything useful for the economy and my kids are gambling all day and this is not good." Like you got to you got to stop this. Like who who in the in the US remains out there in or they're saying or I mean I'm surely there is an enemy out there that doesn't like it. And the same with the we didn't like go Uber. >> I don't think that anybody's being shy about not liking crypto. Honestly, I think it's pretty public and pretty out there. I think the I think we have the administration and the agencies, right?

So, two branches of government seemingly are innovation friendly now in a way that they haven't been before. But I think we have all sorts of enemies. Like I don't think it's over. And so just because we don't have Gary Gunar coming for us, we should still be banding together as an industry, like you can see um SPFMA, the Securities Industry Association, filed a um deck with the SEC two weeks ago maybe, and it's public because it's on the crypto task force website. And you can see that they want wallets to be regulated like brokers, and they don't want traditional uh assets being able to be traded through permissionless DeFi. And like everybody's pretty public about uh not

not wanting crypto in many ways. Like the banks on yield. Like we have plenty of enemies. And so I think the important thing as an industry is to make sure we know what our principles are. We know what we care about, what we came here to build, and that we can stay really true to it. And then I think when you're looking at the bill and making sure that it's, you know, livable is will it let us do what we came here to do. >> Gun to your head. You have to yay or nay this bill in its current form without any tweaks. Would you take it? Yes or no?

>> Oh, Santi, I told you I wasn't even going to do this one. >> We can edit, but you know, uh put you on the spot. But >> look, I will say there's a lot of work be I'm not even I'm a lawyer, so I'm just dodging the question. I'm going to answer it as I want to. Um um uh but I I I think market I think we really need to be very thoughtful and serious about getting this bill passed. There's a lot of work being done behind the scenes to be making these one two-word tweaks that will make a change. And I commend everybody who is getting less sleep than I am making sure these kinds of things happen. and in DC more than Rob and I are uh sort of camped out there trying

to get this across the line. So I give people a lot of credit and I think we really need to be thoughtful about what we can live with because look yes I think all of us have been through bare markets and they always feel terrible always. I don't know why, no matter how many times you've been through, but I think that there's something to be said for um given where the industry has built itself to in the midst of immense pressure against us, um we need to have something that acknowledges that this industry can continue to build in a way that makes sense in this country.

>> My main takeaway from this conversation, Rebecca, has been that um when your kids become entrepreneurs, they're going to build in production markets. And so you should send them my way and get a little bit little little bit of seed. >> I will. I will. I will. >> Before we came on this podcast, Rebecca was saying that um her she got some Nintendo fake uh or Nintendo fraud spend. I can't wait for them to you know to at least say prediction markets. Uh you know your kids gambling prediction. >> They are super into prediction markets actually. Like >> yeah they are uh they think it's really interesting. And >> so, so last question for me is like that from a negotiation standpoint, this is this great class I took at Harvard, which is like uh the best alternative to a negotiated agreement, your BATNA, which is, you know, what is the point

where you're willing to walk away and not take the deal in front of you and you always got to understand what that is, whether you're negotiating, you know, your salary or whatever. Um, as an industry like what are should we be prepared for that? what that is like look we already have the genius act which is just pretty good for stable coins at least is there a point by which just walk away >> I don't think we're at the I think given the work going on we're not at the walk away point I just want everyone to acknowledge Santi's humble brag about this class I took at Harvard >> no no no listen there's no there's no no reason I took is it's it's a book getting to yes by Roger I think getting to yes I don't write with it I mean I

didn't go to Harvard I went to the school I thought you saying I took this class at Harvard. >> No, I was I was I was going there at night because I went to BEu on the other side of the river on the Charles River, but they offered this course. >> Um the book is getting to Yes, everyone should go read it or prompted an LLM. He negotiated the Israeli Palestinian conflict and he actually gave the course so for 2,000 bucks you can go and actually learn from him. That's why Rob where I negotiated my terms understands that those $2,000 that I invested back in college really paid off for for the terms of my life. I like how Santi immediately slipped from from oh Harvard too. Like actually it's a bootstrap story. I was going to be you and I was walking across the bridge to go to

>> Rob. Did you did you not look at my I was the janitor at night, you know? >> Yeah. Half Goodwill Hunting about me. >> Half half Goodwill Hunting half like looked at my LinkedIn profile. I went I went to Harvard but it's like I took a class in Harvard. >> Rob, did you do background checks on me? >> Gosh. Yeah, of course we did. You know, you know we did. You know we did. We always did background checks. >> Uh all right. What's the ultimate question? >> Well, the ultimate go is like do you walk away? Do you accept that you've made progress on the genius um side of stable coins? Is that a win? And then like is there a point where you walk away from the bill and it's current for >> as an industry?

>> I mean sure there are certain red lines that I think the industry has and they're being really clear about them. There are some yield red lines. There are some DeFi red lines or developer protection red lines. There are some token red lines, but there's like one or two uh on each, probably one, and they're pretty clear about them. And I'll say the industry is pretty banded together on what the red lines are. So hopefully we'll be able to stay true, not cross those red lines, and put something together that we can live with.

How does this all before we let you go, how does this all make you feel like from going eight years like what is it six years ago in the in the hostile you know administration to today for someone that is just coming into the industry fresh and hasn't really appreciated what was going on back then like >> I'm here and I'm not leaving. I don't care what happens. So uh I yeah I'm never leaving. I don't know if there's anything more exciting, more interesting to work on. Um, you know, hardest legal issues, but also like hardest operational issues of just building these new systems in different ways and moving everything that we've built to date forward in a meaningful way. So,

um, market structure is hard. I've been through a lot of the cycles. Um, I'm grateful, like I was saying before, that I've had the opportunity to weigh in and use uh some of my experiences being inside companies to really impart information that hopefully makes it into legislation. That's a privilege beyond anything I think I could have ever imagined in my career. So, I feel lucky that I've got to be part of the process on market structure. I hope we see something really good. And I'll say the other thing I think about a lot is like back in the day when we started market structure it was like me and a few other people and a couple trade like a a trade not even multiple trades and now there is such a flood of people who are all

coming together to um you know say what the red lines are advocate in a real way. I mean that Rob doesn't go down a lot and he's there and understands the importance of it like that's really amazing to have think thought about being 10 or 15 of us in a room to now being on calls where there are 50 60 polic you know crypto policy people or government relations people that's pretty amazing >> is it well coordinated because what I'd heard when I was going down there we were this proof ofstake alliance when we were talking about like what proof of state network was coming around and but you had you had people from different parts of the crypto corners And what I heard from some of the staffers, it's very confusing because you have one

company come in and advocate for one thing and then you have another company with other interests come in and advocate which I guess is I'm not sure if the oil lobby operates in this way or the you know Trafi lobby operates in this way but in crypto you have different factions with different interests. Has that have we made progress there where like we are front? >> Yeah, for the most part I mean look when you're in a negotiation I'm sure you learned this at Harvard the PE people people may fold at different times like especially when there are multiple parties involved you do worry like oh will someone put x interest above y and say okay fine we'll cross that red line as long as we get what we want so I think there's always concern about that but the coordination is has gotten a lot a lot better um there are

these industry calls where everybody's sort of talking about status um people try to be pretty transparent with each other it's not a perfect system by any means but I think especially since we have these two, you know, uh, complimentary pieces of the bill out there that people can really weigh in on, there's a lot of work coordinating and trying to have, you know, a more unified voice. I I'll be a little less um I think diplomatic than than Rebecca, but um my impression at least and I'm not in the conversation as much as as she is. But something that has happened which is typical of a maturing industry is that we we've kind of all coalesed together and you know entrenched when it felt like the industry was under attack

and now all of a sudden like not everyone's interests are aligned in the same way and so there is a lot more breaking out in factions of like what matters to us and are we willing to trade something for something else and is is someone else not willing to make that trade. Now that's normal and that's expected. That should be happening in the industry. Not not every bank cares about the same thing, right? But um I think it had done a little bit more sharp elbowy uh in the last year than it was before that. >> We should have created a Dow. >> We should have created a Dow to coordinate, you know, as an industry.

>> No. As somebody who was around when we were uh ideating Dows, no. Um I I don't disagree with Rob. That's what I was sort of saying is like you don't know when somebody is going to fold in certain ways. Um, but I do think everybody knows, you know, or where people's lines are and are at least trying to coordinate behind the scenes on on some of that. But yeah, of course, I mean, I think banks are are less sharp elbowy, but they've also been around for a long time, so they're all just trying to entrench what they all have. >> Well, now now they're united against one common enemy, which is stable coins. So, you know.

>> Yeah. Yeah. So to round out the this been great just to get everyone up to speed for uh anyone listening uh developer investor. Is there anything they could be doing to um >> yeah that's what I was going to say. I I don't uh I don't think people are getting calls like from their Congress people like from their constituents being like we hate crypto. maybe here and there, but not as widely. But they're not getting calls from their constituents saying, "We care about crypto. This is important." And yes, we have fair shake and all the packs and all the political money coming in. And so that helps on influence, but I've been saying this for five years, six years at least. Call your representatives, tell them you care.

Figure out if you want to go down. There are lots of people who can help you. If you're a developer, call the DeFi Education Fund with a blockchain association or something like that. um if you want to go down and try to have some meetings like Rob is doing. Um but at least pick up the phone and call, send an email, that's really really important and I've been hearing that for years, which is the industry says they care, but I'm not getting calls from my constituents. So I think that's the that's sort of the easiest thing you can do today. >> All right. Give your m your multip access to your phone and access to a bunch of other phones. Get them to call regularly. Spam the lines. You heard it from Rebecca. That's all we got to do.

>> Okay, >> that's great. I'm disclaiming multiple. Um, well, thanks for having me, guys. I appreciate it. >> No, this is a great discussion, Rick. I appreciate you hopping on and uh we'll have to come, you know, we'll have to have you back talking about how this evolves. Hopefully, it passes. >> Yeah. I I mean, I'm hopeful we see something next month that we can have another conversation about. Um, good luck today, Rob. Let me know how it goes. >> All right. >> We'll be tracking the prediction market to see if it ticks up based on what Rob >> Yeah, right after Rob. We should be doing that all day. Keep us keep us Let us know when you're done on the hill.

>> Awesome, Rebecca. Thank you. >> Bye, guys. >> Rob, does that does that, you know, give you more confidence walking into the room or I mean, you were well prepared before but >> listen, I'm I'm ready that we you got a whole team around this today. you know, we um I think we all understand kind of what's at stake and what's important and there's a few kind of main issues and so um you know, I think it's a privilege to be able to engage with representatives and with regulators and I think the fact that we've been given this privilege as an industry uh after what was years of uh people just actually actively not only um attacking the industry, but then we're also refusing to engage on you

know like why are things the way they are and how do we potentially regulate these that that's more frustrating than anything because you you see this attack happening and yet people won't even hear you out right and so we've now got the opportunity to you know engage with the highest levels of government and that's that's a real privilege and you know I'm excited to be here >> well actually I did learn this in the negotiation class by the way which is the worst is dealing with an irrational party that does not want to engage just goes radio silent and I think that's where we were before I remember projects reaching out wanting clarity not even an acknowledgement not even an open or and a false pretense of we have this task force come in and you'd get subpoenaed right after. Like it was it was I I just

hope that I mean I I I think it's progress and progress is progress and it's never like I don't think there's ever been a bill that has been perfect. Not in crypto, not anywhere else. So I think at some point you just have to accept that as a foundation and build off of. Um very good man. So that's on the regulatory stuff. I mean that it's been sort of a quiet week. Um, we recorded last week with Jaws with markets just kind of as we were recording I think Bitcoin hit 60K. Jaws did say on the pot that he would be buying at 60K. He texted me after he said there you go.

>> Yeah. We got to 61 and then we immediately bought back up to 65 and then we got back to like 7071 and now today we're >> 66 or so. >> Yeah. 67 68. any updates on, you know, we were talking about this before recording, but you know, fairly muted on fundraising, new projects, um, anything interesting on your radar? >> It's been pretty So, so it's I was actually talking about this with um, a couple other people this week because VC is actually pretty busy still, but the nature of how VC has gotten busy is very different. So the amount of like really cryptonative like token projects that are raising right now uh is very small on a relative basis. The amount of

things that are getting funded there at any real size is very small on a relative basis. But the amount of um money that's being thrown at stable coin banking prediction market you know CFI tokenization type projects is really really just tremendous right now. And so it's quite quite busy in those uh parts of the market. And so I mean if you look at um you know the January fundraising uh you know there was a lot of money actually put to work in January but you know it's like the $250 million into RAIN the $75 million into mesh. It's the uh there was $20 million put into quantum compute business. there was um a bunch of money put into these kind of

like less crypto native type projects and you're just not seeing uh a lot of I mean Superstate another one there was 82 or $85 million put into Superstate and but there's been less money um put into uh everybody that's being announced into these crypto native projects and so that's that's been really interesting and really surprising. It's been I think we're in a bit of a lull right now, but that that kind of makes sense because you know the announcements for fundraisers usually happen sometime really no earlier than 3 to four weeks after the fundraises actually happen and oftentimes longer than that. And so now we're in the like oh well like post Christmas lull, right? Like everything that got that got announced in the first three or four weeks of January, all of that would have gotten done pre

Christmas. Um and so we're kind of in that Christmas l right now, but that's not surprising and I think we'll see see more to come in the next month. a new rounds falling apart. >> We're not there yet, right? I mean, it's not that bad. >> No, I mean, there's definitely been some conversation around repricing some stuff. Uh, we don't typically do that. Like, listen, venture capitalists are long or supposed to be long-term investors where, you know, five, seven, 10 year, you know, type outcomes and and views. And so like if you're sitting here and saying okay like the market just you know crashed 20% so I need a 20% discount on this thing that I priced you know uh three weeks ago that's I think bad faith in most cases because uh

you you should have done the right work on TAM >> you either believe it's uh 10x or not and so you know of course everyone price but yeah >> well and and you know this but we're definitely never the cheapest capital we always are a little bit more valuation sensitive than uh most of our competitors and but that also that but but I have the same exact viewpoint on how I price things in good markets than bad. So um so in good markets that's you know uh it's tougher for me from a competitive standpoint but you know it's about thinking backwards from where I think this industry will be and this company will be in 10 years.

>> Yeah. Yeah. Yeah. No, I I agree with that. I think as a founder also in in raging bull markets I see a lot of founders make a mistake of taking the highest valuation. Sometimes that comes with structure which is not reported in the headline and then then comes bite you can come and bite you in the ass. But also you know there's there's a point by which you you have a fair deal that has the party that is coming into the cap table excited to do work not just tick topping you know paying a ton. You see a lot of companies in particular in crypto where you have a token now like a lot of the employee options are issued at that valuation you know just it's not necessarily the most wise thing to do to take the highest valuation um there is a point by which it should be

fair you got people excited to get into the cap table >> I I would go so far as to say uh and I'm obviously biased but it is never the right thing to do to just solve for valuation >> I didn't I I did not take the highest term sheet for what it's worth. >> I I appreciate that. Uh and but we hear that all the time. I I think it's very seldom that we are the highest term sheet, but sometimes we match in certain types of competitive rounds, but you know, it's it's not about it's also for me it's not about like winning, right? Like I don't want to um you know, just be lower because I can be lower. I want to get to fair value that makes sense for everybody. But uh it's really for you at least I mean your perspective

here but what I tell founders is it's about having the right sparring partner. It's about having the right thought partner. Somebody who will pick up the phone any time of day. It's about having a firm who can support you day in and day out on everything from hiring to just like you know the doldrums of being a founder because you know what being an entrepreneur is hard and like some of there's like this cool like sexy stuff that people see and then everything in between is just hard and you need people there to to to help you with that and and to be you know good partners along the along the way. >> Yes sir. It's not easy. Uh it's uh but uh I I am curious um beyond uh I mean you guys how do you think about the venture

landscape in crypto? I know we talked about it a bit but I think it's relevant in the sense of uh like seems to be consolidating quite a bit uh especially funds that can do like early stage but also later stage stuff. Is that is there going to be a gap? Is is that going to be absorbed by more traditional fintech players? Uh, you know, folks like Sequoia or folks like, you know, um, Excel or GA or some of these other firms or, you know, I'm I'm curious how you think about the landscape evolving.

I think the venture landscape and this is true of both crypto venture and non-crypto venture but you either need to be a platform or you need to be a a specialist niche small fund right and the reality is is like if you're a you know middle of the road or like middlesize generalist you don't have the resources to compete and you don't have you likely do not have the um deal flow and the kind of reputation and brand to compete with the platforms because the platforms are now doing everything, you know, and this is true of us. We do everything from seed, you know, through series C now for first check, right? And um we have the ability to, you know, we see most of the seed deals as well. The only times we don't see the seed deal is

when there's a um a a very specific, you know, fund who's really good at a certain part of the market or has really deep in a certain part of the market who is there first because they're so hyperfocused on that. You know, we had the EV3 guys on earlier and you know, I it's it's definitely true that I've never seen a deepin deal before or very seldomly seen a deep deal before they are because that is what they are so good at, right? But um if you're a middle of the road generalist investor today, like you're probably not going to exist in 10 years. And this is true of crypto VCs and it's true of of regular VCs. happening at Lightseed and Sequoia and uh you know General not general but general catalyst and um you know all these guys as well as you mentioned inre

raised $15 billion worth of new funds and you see in Dre do the earliest of stages and then they're putting checks in at $10 billion valuations $50 billion valuations right and it's just um it's it's also really hard for people to compete with a lot of these more capital intensive businesses when you say hey listen I will give you $3 million in lead your seed round and you know what there might be another $50 million behind that if you continue to grow and do well and you don't have to go and do this whole beauty contest again. >> Yeah, Sequo has been doing that for a long time. >> Yeah. And it's I mean we've done that now in um in Poly Market and Rain and a few others and um you you kind of see that with um uh you know it's if you can

look at the companies that are already in the portfolio and then re-underwrite them and continue to put more money in as it's working that's always way easier and always more preferred versus having to go and you know find a new entrepreneur to back. >> Yeah. Yeah. Yeah. Um I know we're on the hour mark. Um, we'll say there's a couple interesting things this week that I think we just fire off quickly before we drop. Um, the first one is layer zero. Um, they I think came out with a pretty pretty amazing announcement on on their new they basically engineered a new consensus out, you know, uh, mechanism that um, you know, they shared it with me back in in January, early January, and I was blown away. I mean, yes, I'm an investor, but I I've always felt that the team is one of the, if not

the sharpest technical team in crypto, and they delivered what I thought was a pretty amazing uh breakthrough. Uh curious from your standpoint, uh if you if you saw that, what you think of that, and you know, of course, you guys are invested in a bunch of other, you know, layer ones. So, >> yeah, it's interesting. So, you know, Brian's awesome. They've they're they are a beating machine. um you know they're launching this thing at a time when you know I think the general perspective of you know general purpose blockchains is probably at its like all-time low at a time when monad you know launched a few weeks ago and you know I think I think monad is probably the most innovation we've seen at the L1 uh and in a long time um and you know

they're uh still working through you know getting the right applications up and um and working through getting you know um usage there the layers your guys did lot did uh talk about a lot of launch partners that would be there from day one and there's a lot of logos but I think as you and I both know uh logos there's been a lot of logos at a lot of times in crypto and we have no idea what that actually means over time and so I think it's going to be really interesting to see um how they actually compete one thing I think that was quite interesting to me which I think kind of highlights where we are at in crypto is a lot of those logos were tradi firms uh you ICE and um I think there was yeah there's a bunch of people and and there

was I think um a woman who works at Franklin Templeton was going to sit on the board and you know it it felt a lot like a like a canton event in in a lot of ways right and ways they talked about their partners um and so I I I think it's very clear that there's a a lot of coalescing right now around these you know traditional finance use cases on blockchains and everybody's moving towards those directions. And so it's it's a question about how everybody competes for for that pie, right? Because right now, you know, as much as Ethereum is hated and the L2 space is hated, Ethereum is winning that market, right? Um and uh and so I'm I'll be interested to see um how how they compete with, you know, kind of all all

the others that are launching. >> We're going to have them on next week. I was obviously at their event and I I think it's worth them coming on because um technically I think it's a pretty amazing breakthrough. Um, you know, I remember coming into the space and zero knowledge proofs is one of those things that really captivate your imagination when you think, okay, wow, like it it's uh and and I think they the the question that I that I have is um I think as a space we've continuously like make innovations on the you know supporting a demand use case like from a supply standpoint there's ample supply and we've continued to make engineering upgrades that allow us whether it's

monat or whether it's layer 2s or whether it's narl1 um or parallelism like all of these things have allowed us to you know make pretty big breakthroughs on the infrastructure >> my question to them was as much as like I'm very excited from a wow holy like this actually you could see a wave where like you can allow for different you know what Chris Dixon would say non-skeorphic use cases of crypto you know like like you know let's you know uh uh high frequency trading and all that stuff, right? But um I was like the the perhaps cynical argument that would be like hey we haven't just really solved for the demand side like we we have the ability to bring on uh more and more users more and more applications

that don't have like that much of an intensive blockchain footprint. >> And so you wonder like hey with L2s today like you know you could you could bring on another 100 million users and and still not like hit the limitations of the current infrastructure. Um, I guess that that shouldn't ever stop you from like innovating on on the on the infrastructure side, but um it's uh it's one of those things where I felt there's a way ahead of its time. Uh I think and and and in many ways like may maybe that is like you know Citadel building on on top is is going to be a killer application and um maybe they they just credibly couldn't build that in an L2 uh for a variety of reasons.

Well, I mean, it's also just true that, you know, we we don't talk about it anymore, but like ZKYNC has actually done quite a bit of really interesting work on zero knowledge proofs as well. They have a sort of um you know, an institutional use case side chain that they've been pushing for a little bit. Starkware. Um I actually just saw Ellie uh earlier this week and they're launching some pretty interesting new he's calling them threads which are kind of you know kind of um their own execution environments that are you know uh that then they use ek proves to prove back to you know call it the the main chain. Um and so there's a lot of interesting work being done there.

Obviously, you know, I I I'm not I haven't been super deep yet on what uh on the actual technical infrastructure of this jolts that they're talking about with with layer zero, but I'll be interested to hear hear them talk about it next next week. >> A lot of the conversation has been well like if we solve these, >> you know, these problems around um uh you know, just having to to uh have a open fully lit market on every single transaction, then we'll see all of these people come in and all this demand come in. That to me has generally been um the wrong way to think about startups. Uh and you know you usually want to identify the customer first, listen to what their their use case is, understand that they actually are looking for that

that you know type of product and then you know you build for them. This type you know maybe layer zero has done that and and they you know they believe that all these guys are like this is what they've been waiting for. I I think the evidence shows me that that it's not necessarily true. But I strongly believe that global finance is moving non-chain. I strongly believe that um this is just is more of a matter of time from a board perspective, a comfort perspective, a regulatory perspective than it has been an infrastructure perspective. And so I think you know these guys will be a really good competitor in that space.

And clearly they've gotten a lot of people around the table. Um but but it doesn't strike me that like just them launching that is the unlock that the that gets everybody on chain. >> Fair enough. Go to market's hard, man. Uh >> it's it's really hard. A distri I mean execution and distribution is the moat now when you you know you or I could, you know, theoretically build our whole own like a instance, you know, from scratch. And I've never I've written like five lines of code my whole life. >> Man, I can tell you uh we launch a new website. I built like fully in prototyping to production in like 48 hours. What could have probably taken us like hundreds and hundreds of thousands of dollars and months. I did it all myself. I'm not a developer. It it is I'm bl I'm truly blown away. Um we will

not make this an AI pod, but I do think it it's just pretty remarkable what you're able to do. does maybe a last question before we drop is like does that are you seeing that either through your portfolio companies or just uh on on the early stages where founders just say listen I actually don't need any capital and I don't need to build a big team I just like prototype this put it in production we always hear things of like hey seed rounds like you don't need to raise that much money uh that was true 10 years ago it is obviously that curve is continued to decline um there's reasons why like you would want to take institutional money. I kind of went through that calculus myself and it wasn't about I'm getting just this money in the bank.

It's the other quote intangibles or not intangibles like hard value ads. Uh but are you seeing this dynamic play out more um as of late with AI where like seed rounds the valuations are going up but you don't need to raise that much capital or that just is not >> we're not because the reality is is the the software layer is is just not getting funded as much right so I mean crypto already kind of did that right which is that uh we have it's completely open source and so the amount of uh engineers that you need are is less than if to build Salesforce right? And build a um you know kind of this this recordkeeping you know type of of application um and now it's okay well we

have a shared ledger and it's completely open source and so you know to build a DeFi application even though it's you know perpetuals are very complicated uh and it takes time we better off with you know 10 to 15 people than we are you know where Salesforce would have hundreds of people um and now all of a sudden well it's okay well you know now we need maybe even less people but there's you know there is some kind of like diminishing returns on that right that said I I think the what everyone's realizing right now is there's only a few modes because of because of this fact right like software engineers are becoming completely commoditized and so the the moes are no longer engineering the moes are capital the modes are execution and reach the modes are you know call it being more in

hardware being kind of closer to the bare metal compute right and so those are all things that like actually need a lot of money. And so we're actually seeing like round sizes um in some cases getting bigger. Uh but what we're seeing in the portfolio currently, a lot of our older companies that are maybe just, you know, relatively straight software is, you know, they would have originally said, "Hey, we need to hire more people as we want to scale and they're just not hiring more people." But the the seed round stage is not um that that's not happening. And then we're just seeing a lot more people spend a lot more money on like go to market. So, and a lot more money on um you know the salespeople.

>> Yeah. Yeah, definitely. Um anything else on the news front um before we of course top it out for the content of the week? >> Slow week. I think that's really it, right? You know, markets have been bad since we since we recorded this a week ago and there's been a lot of regulatory conversation. Uh layer zero was clearly the you know, the big the big thing on the week. We also had the Mega ETH um uh launch. There's a Mega E podcast coming out early next week to talk about that. I think, you know, that's exciting. That's been a long time coming. Um, obviously very early days there. There wasn't a lot of applications live on day one and so we'll have to see how that uh how that evolves. Um, and that's kind of it for the week.

>> Yeah, that was actually a really good I I think it's going to go live next week, but I asked him I said, "Look, gloves off, guys. I'm going to master I'm going to ask hard questions around state of L2's like your trade-offs, your decisions." One of the more interesting questions that I asked them was like do you feel like because everything talks about theorem alignment and I said guys and and it's a it's a synergistic relationship between L2s and LS the centerpiece of the the center of the conversation was like Vitalik's post around L2s and and the future of that relationship between the L1 and the L2s and look Vitalik is an investor in mega so it was just a really interesting conversation around that point specifically and how they envision them existing coexisting with Ethereum um it touched on a lot of the things that I've discuss with your

partner Azib around is security priced correctly, are we taxing L2s correctly? And so it was just a really interesting conversation. Uh no perfect answers to this debate, but nonetheless, I think it it was a good conversation. So tune in to that. So what's the content of the week? >> Well, I'm going to I I'm going to probably recommend what I talked about earlier, which was the OddLocks podcast with Mike Celig. So if you care about uh if you care about prediction markets at all and you care about the future of prediction markets um that was it's a very very important uh podcast and I said this >> was that was that horror was was that a >> I would call it a thriller so for me as

an investor uh in poly market um and but he's really good and and I think I think it is actually very historically significant for you know people who are nerds about this stuff. Um, and then the other thing I would recommend is the Torish had uh had Elon on for like two and a half hours uh late last week and really good podcast on all things AI space um you know batteries uh all that type of stuff. So, uh, Jorish is a I always find his podcasts, I mean, they're not super accessible, but they because everyone's just like so deep in, um, you know, the topics that they're talking about, but, uh, really really good podcast for anybody cares about those spaces.

>> Yeah. Yeah. Yeah. So, I, um, I got recommended this by someone I met last week and it's the trying to pull in here. It's a wreath lectures. Um, and so there's BBC kind of wreath lectures which are really good. Um, and there's this Dutch historian that talks about the moral revolution. Um, and talks he's he's actually like very much like accepting that he's a lite and he's like the way we've gone about technology is pretty bad and it's relevant for AI.

I think he recorded a few years ago about Dutch historian and he says like we should glorify like a strong moral compass and like make a very conscious decision around standing for morality and all this stuff and uh it was really good. Uh I enjoyed it. Um we'll link in the show notes but it's on it's on Spotify. It's called the wreath lectures. Um and and I think it's it's relevant for this entire conversation about AI you know technology and what we prioritize and what we don't. >> Cool. >> Yeah. All right. Well, Rob, >> bring bring it home on I'm gonna be watching the goddamn prediction market.

You bring it home and if that doesn't go up above, I think it's sitting at 52%. Right now, >> all right, we'll see. >> So, people, it's coming down while we're recording. People, you know, it's leaking that I'm coming here and and people are selling. >> Seems to be a common occurrence every time we record. But anyways, good luck today. Uh, and we'll talk about it next week. Uh, but yeah, put up the good fight. >> Awesome. Thanks, Auntie. >> Thanks, everyone. Have a good weekend. Hey, >> bye.