The Convo: Overlooked Projects and Navigating Nuance in Crypto

Transcript

if you're a JPEG collection and your price just collapsed 99% you know like you know bu a deal someo like you know good luck this is why I think again Nuance I am highly skeptical of artists moving into this direction without being very thoughtful and music royalties on chain like all of that I want to believe it I just think it's it's challenging this episode is brought to you by toku if you are planning to launch a token already have a live token are granting employees their contractors vesting token Awards or just trying to figure out how to take care of taxable token events for your team from easy to use token Grant award templates through tracking vesting to managing tax withholdings make it simple today with

toku welcome back everyone we ended the last uh pod you have Tommy and Ryan again yet again two of my favorite people in the space and we ended the last series pod talking about things that overlooked in a bare market and and we were talking about investing right in certain I mean we could continue on that track here there's just so many things that you know we've we've gone through we've invested a number of categories we've gone through multiple Cycles the industry looks very different but yet the same in many ways so anyways um I guess in that vein uh you know we don't want to go too deep on current events obviously the front and center is FTX there's a lot of things that have come to light that I think a lot of the

industry got right at the time things were going down there's a lot of speculation we can go into that uh we can talk about um a lot of the different counterparties of course with all this there's fud that comes up right there's fud around tether and the you know FTX was very involved in tether and minting um usdt um and so of course there's some takes that are good there's other takes that are just you know spreading fod so I'll kick it off to you Ryan I mean maybe along this kind of thread of things that are overlooked one of the things that we talk about a lot is fud it could be paralyzing but it is also really important to like call out and be you know surface the truth and when you

see it so anyways uh we we were talking about binance we were talking about tether there's the FTX stuff I know you wanted to talk about this so I'll pass it on to you yeah I mean you know one of the things that is definitely overlooked in in the spaces and we've seen this and we we we're all paying the bill is the collateral damage of Bad actors and you know the solution over time is to lift up some of the citizen journalism that calls out uh things that like don't quite add up you know um uh Jesse from Kraken this past week uh you know went on record stating that it was very

obvious to them that just like the 2 plus two equals for math did not add up with respect to FTX and and they knew because they knew their own business that that there was something to miss Brian Armstrong has said the same that he kind of like knew ftxs volumes and because of that their expenses like there there was something very clearly uh a miss and I think hopefully as we move forward we we pay attention and and people are willing to do the call outs like it's kind of tough to put yourself out there and and like call out a powerful organization that could potentially be operating correctly could potentially not be operating correctly you know this part we have we've

discussed what are the implications of of whether binance is is is doing some things incorrectly with respect to their chain or with respect to their exchange um a lot of people have uh have questions about uh about tether um and and this is an interesting thing because yes you need to call out the organizations that are potentially doing incorrect things but then there is a Nuance that I think needs to Prevail so for example I have a lot of questions about binance and I'm very concerned I I you know I'm not touching anything binance this moment tether on the other hand I you know I've sat with Paulo I I know this organization to just be one of

the best companies in crypto it's certainly one of the most profitable companies in crypto and my own analysis of it is that most of the fud is being driven from um you know competitors that wish they had such an amazing business right like T throws off three to five billion dollars free cash flow every single year um it is an extraordinary business and a lot of people you know wish they had W wish they had that and and so that causes the like oh the you know are they collateralized are they not you know the reality is that they're collateralized with with offchain assets fully and then they're even more collateralized probably close to 180

200% collateralized when you add in um their Bitcoin position and their crypto position so I actually look at it as a very very der risked organization that's different than FTX that's different than binance and and we have to have that nuance and understanding that like not all big uh offchain organizations in the space are are bad but when we do see something that we that we uh you know are concerned about that we investigate it further and you know I did that with tether and I came out the other side being like actually you know what this is a really great business and they've done a great job um so yeah I don't know what do you guys

think yeah I mean one of the crazy things is like it it kind of comes down to memory like we have Mount gaau and yet fast forward 9 10 years and we have FTX and nobody really cares about proof of reserves right like it's like we learn the lesson and then we forget about it and then we have to learn the lesson all over again so I don't know what like changes this time around that you know we're not going to have to learn this lesson again in five years that's a really good question I think I do want to make a distinction back to your point Ryan on Nuance Mount GA was an issue where my understanding was that they had a bug in the system where they didn't catch the like the withdrawal

math just wasn't adding up the people running mount gaw You could argue were incompetent but I don't think they were doing things in a fraudulent manner whereas FTX was just everything that has come out to light is fraudulent they were taking customer assets and then using them for other purposes political donations investments in things like anthropic that may or may not pen out and make us all whole but still that that's that's fraud um and so it's very big important distinction the question is and I think it's a right one and a good one Tommy which is there's probably another FTX out there maybe not to that level of magnitude but fraud is fraud and it

still hurts people um you could argue that some of the hacks on chain of of protocols were those inside jobs or were they not like this re-entrancy attacks in the code at this point if you're a project and you have like a re-entrancy like vulnerability in your code based that's just like negligent borderline fraudulent to the point that I'm going to be suspicious that it's an inside job because it is you know it's at this point like there are no excuses if you have this type of stuff um and so Ryan I want to go back to something you said which is really interesting you mentioned like now of course after things after the Domino's fall a lot of people come out and say we

told you so we knew something was wrong but how vocal were these people like how vocal was Jesse or Brian um publicly or maybe they went to regulators and they didn't want to listen because FTX was the charm and was the best and had all the you know checked all the boxes for I'm just kind of curious how all that unfolded you're right I mean I think privately a lot of us were having this conversation but none of us really were were saying it publicly because at the time Sam had a you know an incredible amount of political power and like we're all just trying to make our way in the world and

and and nobody needs to to procure unnecessary fights right and and so for for another CEO of an exchange to uh to call out a different CEO like imagine like Brian Armstrong calling out Jesse or or vice versa so like there's sort of a decorum of respect that that I think most Executives confer to other Executives in the space that unless you have real evidence um you could be slapped with a you know with a a slander liable suit and that and that's going to be a distraction nobody wants that um but I mean like I we I had

conversations with you know with you guys uh talking about how things didn't quite add up with with FDX at that time um but we were not you're correct and that we were not explicit enough um and there weren't enough people uh really calling it out um I give them a pass because I understand they're just trying to learn their own business but we clearly need to get beyond that and we need to to like we need to self-regulate as an or as a industry otherwise the regulation that we're going to be subject to is going to be uh I think far worse in in the end and so hopefully hopefully

people have more courage next time around and we catch it earlier and we call it out earlier yeah uh Tommy I want to go back to you on things that Overlook Beyond kind of fud but what is interesting Ryan to your point is during the uh testimony of Caroline she mentioned one of the um priorities of Sam was to put Regulators onto binance and I think that might have been the Catalyst for Cy to say not only were they looking at the flow right that Alam was transferring into the into binance to AR some tokens but they were huge holders of ftt and at some point they probably caught wind of this and they said enough is enough right you just uh and that was kind of really the trigger um I think Sam did a huge damage in the industry I mean I was uh he was very

vocal of defi critical of D5 naturally right he was against transparency and I think we're at a very interesting Crux here I hope that uh even with this whole like Israel Palestine situation people saying oh look at Hamas you know they've received crypto and you know sener Warren is being very very critical of crypto whereas the reality is Hamas even told their donors like guys stop sending Bitcoin it's it's transparent and you're going to put a Target on your back and then their their donations really cliffed off crypto um but it is really important to to to be nuanced uh and just to understand like we should be asking all of these organizations like hey proof of reserves like just procure them there's really no um there's no excuse at this point uh Tommy and I you

and I both investors in this company called test machine I just saw the demo like there should be and it's like a company's like building a detection solution to like in real time like basically it's an like a a model that has been trained to detect certain vulnerabilities in the code um and I think something like that is is a fantastic thing because clearly audits are not enough Audits and bounties also not enough so what else can we do I think we as investors can say hey if I'm G to invest in your company then you need to have these things you need to have obviously Audits and bounties but also use Solutions out there to prevent uh you know attacks to close in on the surface area or the potential

surface area and to like mitigate like exploits and bugs I think that's really when when the investors really I think the best investors can really say hey we're going to do this deal but you need to do X and Y constantly because things can't break do you think that one of the Overlook things in the space today because of of what's happened with vulnerabilities in in defi as well as the hacks and lack of proof of reserves on chain is this kind of SAS era where like you know fire blocks has come out of nowhere and is now I think one of the top 10 highest valued companies in the space you guys just mentioned that uh this new service that comes up we use hibernative

we use in fact we use for our yielding we use close to a dozen different services that have different sort of like alerts and um and checkpoints against code and things like that to automate our our due diligence on on pools and on on projects do you think like are we seeing the emergence of the SAS era in crypto yeah I mean just a couple things I mean to go back to Santiago's point I I do think it is on us to like help allocate and secure crypto for the for the future right like two checks that we're really excited about is one is what Santiago mentioned test machine is an AI model

built by ex DARPA guys really smart guys and instead of waiting six months for an audit a developer plugs in their GitHub code automatically gets an audit automatically gets fixes right that's helping fix the onchain world the other thing we did recently was Heights Labs right which is an automated automatic evidence graph following a hacker and the flow funds you could hand this to a government official and get a subpoena or a warrant you know ASAP instead of having to go through this manual process uh with the larger competitors we all know so I don't know I think it is on us to help you know do that and look there are opportunities to make money there right and then on the flip side we need to protect the the centralized World more right like I think we all have a lot of trust in Kraken in coinbase but

again we can't just totally trust them because they're the comparison right we need to push for proof reserves and we got to you know we have to until we get it yeah Switching gears but staying on on FTX you know a lot of capital allocators had some exposure to it either capital in FTX or or uh you know portfolio projects that had Treasury and and FTX um how are you guys looking at the situation of the otc's you know with anthropic now there's been like some excitement around recovery um if you look at the history of the space uh recovery from bankruptcies a very long protracted

process um the current OTC is about 38 to 40 cents you know do you take that and hope for 150% return profile in e over the next two to three years expecting that the actual payout of FTX will be two to three years down the road or uh or are or do you stay patient and and now you're an indirect owner of anthropic uh hoping for that to have a hundred billion doll payout and then you get made whole it's it's kind of wild how anthropic came out of left field to make FTX people whole but um outside the point I'll uh I'll take one side here I would rather take the 40 or 50 cents uh

put it in liquid crypto and and hopefully ride that up and the reason is uh maybe a bit different than the money I just wouldn't want to mentally have to wake up every day for the next two or three years wondering what my payout is going to be it would just kill my energy and mental state I think San Santiago what's your what's your take on that well it depends on the kind of person and investor you are right because you know sometimes it it's like it's like if you have a locked position in a vacuum you say oh God yeah I would have just rode that until uh you know eth and sold at 3,800 like Mark the top really like some people are just not um

are not good at managing their portfolio um I go back to look I mean I think these claims traded at the lowest point at 8 cents on the dollar uh right like a couple of weeks or a month into the collapse of FTX a lot of people picked them up um uh you have to be wondering I mean there there I think there's a lot of interest from sophisticated players that are like you know Savvy in terms of litigation Finance as a category uh or even distress hedge funds out there that are saying hey 40 cents on the dollar they're looking at the book they're looking at the Investments they feel fairly comfortable so it depends on the type of investor that you are um I would say I would side with Tommy here I know we're

supposed to like disagree but I I would also take it because I have more confidence in my ability to outperform and manage kind of my own Capital versus what worries me here the most is the people that always win in this process is the lawyers I mean they are charging an arm and a leg it's just it's just to your point Ryan I mean if this process drags out years uh there's going to be a material um kind of net payout I say net because gross would be like you know net like after expenses which are really mounting and I do worry about that I do think that it's not as simple math as oh

look entropic's bed 100 billion oh great we're made whole I think it's going to get more and more complicated um although there's fair amount of um depends on what you have too right I mean I don't recall but I mean I think it people as as part of filing your claim you obviously have to kind of agree with the amounts and stuff but there's also I guess there just the hack that happened right as the collapse was unfolding like I'm not confident lawyers understand Key Management better than uh people that have been in the space for longer right uh if you I just don't I think there's gaps there I worry about that of their ability to really custody

these assets put them in a safe spot so for all of those kind of structural reasons I'd rather take the money now yeah I think you guys hit the nail on the head and the two items that a if you're a capital allocator you need to to remember and prioritize your mind space and and like you know focusing on that and B as much as FTX was an all-time grift the unwind is going to be just like an absolute Fiesta of grift and these lawyers are just skinning the thing they have no have no incentive to push this forward and if we look yeah we we need to Backle offer

conferences and crypto lawyers have been the most profitable highest Roi Enterprises in the industry unless you're like a SE etherum like you wouldn't have outperformed these folks yeah uh good so other things that you guys are seeing uh under the radar in this bare Market you know what are some things that you're you're excited about that people are not paying enough attention to um I mean one thing that I don't have fully fledged out thoughts on but I'm struggling with is is chains backing projects on chains outside of ethereum and all the ZK evvms VMS built on top

around it salana and Cosmos like I'm really struggling to back projects outside of that world because like as you guys know like bare market sucks excitement and capital isn't here users aren't really here obviously we're investing a ways out but having to take like normal Venture risk and then having to take like you know TBD platform risk on top of that on a alt L1 or an L2 is just sorry and Al L one it just gets really hard um and we are seeing a lot of deals on other ecosystems because they all have giant ecosystem funds they're all backing these projects so they come across as legit and they are

they have great Founders and stuff but I don't know it just gets hard to get excited about it maybe it's a basic take but yeah you know my my former uh Partners over the web3 foundation particularly par just announced a major round of layoffs and I think that that is mostly in recognition of a there too much centralization in building out most of these chains like if your team is the only one building out apps and infrastructure and wallets and Integrations and things like that you know you got to probably look yourself in the mirror and ask if if you've got organic Community I think in in the case

of polka dot they do have organic Community but the question is you know will these will these projects that have an order of magnitude less a developer and and like Community interest have survivability right I think we all have confidence in eth you know it's hit escape velocity it's hit Network effects on developer my chair then from there it kind of like falls off really really quickly um I've mentioned to you guys before that we did a a piece of analysis a few weeks ago that compared uh sort of the three generations that

we've seen of blockchain so or of smart contract scripting platforms so gen one ethereum gen two the kind of like eth Killers sort of cardano Salon polka dot definity um these guys of like the 2017 2018 era and then gen 3 which is like Celestia you know fuel Wormhole and the the zkm uh layer twos that are kind of like 2020 and Beyond Bond projects and what we've what we observed is that after 180-day sort of like honeymoon period the gen two projects underperform eth over time to a man not a single one that perform to eth beyond the 180 day Mark

and then that now we're seeing the Gen 3 pop up and we're seeing continued erosion in those gen two alternative layer ones in favor of these things that that integrate with ethereum natively so the layer twos and then these these new layer ones that come out of the box like with apps with privacy with integration with ethereum and those are ultimately acre value to ethereum while extracting value from the generation two and we're seeing this kind of like slow drip and decline from in in value and Community from from Gen 2 blockchains and that's not a a judgment on quality of of of these these gen two block than many of

them may come back like the salon or polon dot but at the same time the vast majority are on a slow march to death um that's that's very clear um yeah the the other thing too is like I know it's early stages for so like you're an app developer right and you have to figure out where you want to launch a project right so obviously you want money you want users you want liquidity y y y and there might be technical reasons why you want to launch your own chain right so you potentially launch on Cosmos right and people knock Cosmos but it has some of you know it houses some of the largest names we know right like thorchain for cross chain swaps dydx aosh I can go on and on right like these are projects that had real

technical reasons to need customizations in their chain and their life the issue though for the alt chains is the reason to launch there is starting to decrease because now you can launch or soon you can launch a rollup and post data to igen or Celestia and have the customizability you want with the fast speeds and low fees so the reasons to launch on alt L1 are now going to go down now let's fast forward a year or two instead of doing a roll up and rolling down to igen or Celestia now you launch on a ZK evm or ZK VM and you get the magic of you know never having to do a fraud proof ever and um having the speed and low cost you need so I don't know the Arc of technology for me is very much bearish that altel one

cycle to your Point Ry I mean I I generally agree with you guys and I made this mistake because I've invested in a lot of these right over the like filecoin Brian both you and I were early investors there uh looked at the Infinity uh you know uh have invested in a number of others why because as one a hedge to ethereum I generally think we're still very very early two I also believe that it will be a multi-chain world and one of the things that probably doesn't get talked about enough is is the connectivity between chains one of the more probably underrated things Tommy had a great threat about this Cosmos which is one of the more underrated ecosystems I think has great fantastic Tech like IBC took a while to launch it was hugely delayed

but in spite of all the cluster that happened within um tender as an organization they they eventually shipped it and um I remember talking to Zaki and Jack um because you know they're continue to develop and and my question them was hey could IB at some point like connect to ethereum in the same way that it connects like um different par chains or not par of chains uh but different like Cosmos chains he's like absolutely like we're working on that uh and it could be and so my my my view here is at the end of the day I think we're incredibly early still um now if you ask me what I've done yeah most of my investments are in ethereum because that's today the Mind share the both

developer and the attention from the retail if you want to call that or institutional is on ethereum and salon on the margin and everything else from that is just drops off dramatically but I think the in a fast forward to five years from now people will not care where these things settle ultimately they'll care about the result um and I do think you know I think it's too early for me to have in like absolute certainty which I never have on anything but I do think it's still worthwhile to pay attention to things that are happening uh particularly in Cosmos particularly also in l2s but um one of the other things that has brought was brought to my

attention during um uh the blockworks conference permissionless was filecoin uh as as a chain that has probably most people are not paying attention to but they're building some I mean they have some fascinating like proof of rep replicability proof of retrievability they they Pioneer some really interesting stuff um and and so I do Wonder a lot of these call it left for dead chains have continued to develop have continued to make progress and are not on the Limelight but they're very well capitalized and they have some really smart people working there so in a world of Open Source the question to you both is should we be paying more

attention to stuff like filecoin or you know Cosmos um I'm just kind of curious how you think about that um yeah I mean definitely interested I the file coin side did come up a lot at that conference I wish there was like a track or a panel to to figure out who was building on that but Ryan I know you probably have better thoughts here yeah I mean the first thing that I I observe about filecoin is that the protocol Labs team is the most Talent dense team in the entire space it is is extraordinary it is just like like such high intellectual horsepower top to bottom in that in that

group and just you know remembering that they've built a number of protocols that are all very useful in the space lid PTP and and ipfs which stores most of the decentralized nfts in the space um you know filecoin is an incentivization layer on that I think you'll see you'll see more interesting protocols come out of protocol Labs that share resources over time and really compelling ways whether that be like internet service or electricity or or who knows what else so I personally would never bet against that team because it's just you know

it's just an extraordinary group um with respect to to to filecoin in particular you know I've been writing checks in the file coin ecosystem obviously since day one just wrote another one to glyph um a few weeks ago which offers a yielding on your your file coin which is particularly useful for me and that's what I like to invest in when I like when I'm using something and as a user I find it useful and then I you know then I write a check um there you know there seems to be this uptick that's happened in the last like not even six months but kind of four

months of people coming back to filecoin like there was you know there is some hype uh around other storage layers in the space and I think that that has mostly proven to be you know not real and and people are are waking up to the fact that most of the ecosystem uses some form of protocol Labs protocol and thusly there will be value that will acre uh in the protocol Labs like broad ecosystem whether that be specifically filecoin or you know a range of different different things who knows uh I just think it's smart for Capital allocators to have some exposure

there and the only way that you can get exposure is file coin at this point and so you should have some some exposure to that because never bet gets juet you know Juan has the technical Talent of italic but is also like a rockstar full toolbox CEO it's he's you know um he he is a unique talent and and that permeates into his entire organization and I'm uh you know again I I would never bet against him this episode is brought to you by toku toku makes implementing Global token compensation and incentive Awards simple with toku you get unmatched tax

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regulators and governments toku makes this simple for leading teams across the space protocol Labs dydx Foundation Mina Foundation hadera nosis safe getcoin and a lot more reach out to toku at tok.com Empire or click the link in the description yeah actually Tommy I want to ask you this question like because this is perhaps is one thing that gets overlooked which is what part of the stack is like not decentralized and storage of course is hugely important overlooked I think like nftd collectors probably don't even care to think about where the the storage itself of the file of said jpeg resides and a lot of it is

in a centralized party AWS server and is that truly decentralized there are multiple parts of the stack that when people talk about decentralization they just think of it as one kind of one thing uh but as we know there are different pieces of the stack whether it's your stable coin of flavor well that's not very decentralized but hey are you willing to accept that as long as you know the risks and that's okay but there are to me the thesis back then when I wrote the check to protocol labs and today still is well yeah storage is a critical infrastructure layer in the web 3 stack that needs to be decentralized you need to keep the storage or have the ability to keep it provably safe

decentralized distributed and decentralized two different concepts but you need to have both I think I'm curious like if you think there are certain parts of the stack that are like overlooked when you think about hey we we're not really paying much attention here but we probably should we we should spend more time I know there's this broad kind of outcry in the industry that we've spent too far too many dollars on infrastructure and not enough on consumer applications I generally think that's true but again the the the key word of the episode is Nuance there are parts of infrastructure layers that have been neglected maybe because they're really tough they will take

longer I'm curious if you agree disagree with that and if you guys have invested in particular parts of the stack um yeah I think it's a good question I mean not to take your question a different way but I think the thing that I would love to see in crypto is a website where you input your end product an nft or brand blockfi or whatever you want and it shows you where you can get rugged right like just front and center this is where I can get rugged like it's an nft Creator up dating the the metadata and linking somewhere else it's blockfi sending all of my assets to FTX um you

know somewhere where I can figure out you know this is the risk I'm taking by using this L2 is that there's a centralized sequencer run by a team that's nobody really met them or knows who they are and they're not going to include your transaction and you're screwed like something like that that you can visualize and feel I think would be really helpful next Bull Run when people are just kind of aping into flashing lights in un audited contracts um yeah I'm not sure if that answers your question but yeah yeah I think that would be hugely valuable go ahead Ryan yeah I think we could have more decentralized networks for sharing different types of resources so like you know helium took a swing at at internet

service provision and that was an like early experiment and I think you know we could have more of those uh I think we could have some experiments around around electricity around it driving networks like a decentralized uber like there there are other resources Beyond Financial transactions and smart contract uh execution steps that could occupy block space and um and that would be like that would be a intellectually compelling to to to test and be probably valuable over time like one of of those one of those resource categories probably gets traction and and probably disrupts the the the traditional

business model of that industry um you know we need more things like filecoin that are are using decentralized networks to share an important resource Ryan what's your so that brings up like a a curious point right like the idea with helium the idea with filecoin the idea with like the dpin networks and all this stuff is to move from centralized providers to decentralized Providers right and generally that means going from like these large data centers that are built ridiculously with retractable roofs and redundant power and backup generators and all this crazy Tech to you know running your you know

your latent Hardware on your Mac or your phone or stuff like that like it like is that your thesis is that like that transition will happen because it's cheaper or more scalable or more secure or like do you view a hybrid model or yeah do you about like that shift if if we if we go back to like what our original thesis was around filecoin and and Saab I imagine you shared this at that time is that like what is the marginal cost of the unused um file storage space on your server or your desktop or your laptop it's zero so if I get anything for that it's like actually more efficient use of

my capital and I used to use this example of well you know you may make like kind of tens of dollars per month or per quarter um for renting out your your storage space on your on your computer and that doesn't move the needle for for you and I but that may enable a kid in India to buy a computer and finance it by renting out the storage space over time time and so like for that person it's incredible at naler and that's why you know that's why this idea that the crowd could outperform data centers over time it made sense and you know very frankly today we observe

that the cost of storing on filecoin or on ipfs is cheaper than than AWS so like the supply side has worked out unfortunately the demand side has not worked out and you know you can make the the the easy out like well the UI isn't there and well the awareness isn't there and well you know this and that the other thing people don't want to buy a crypto token to pay for this and that doesn't make sense um but I don't think those are actually the reason I don't have a like you know a silver bullet answer of why we haven't solved the demand side but I do have faith that the

demand side will come because the supply side is cheaper it's cheaper to store on ipfs with filecoin than it is in AWS and that will one day find product Market fit I think it would be I 100% agree with what you just said Ryan I think it would be much more difficult situation if the demand side was not if the supply side was not there um and my thinking going in and I think one of the mistakes a lot of people have done on these decentralized file storage systems call it filecoin um you know ipfs or R weave is assuming that all storage is going to go on a decentralized fashion and that's just not correct I think it is a matter of how much do you value

redundancy in your storage layer meaning it is complimentary to your storage certain critical Mission critical pieces of data parts of the web archiving the web are are Merit having this added layer of decentralized storage purely for retrievability purposes not everything right but if you have a very secure thing well yeah you would want to and not only just use filecoin ipfs but also pay because there's different tiers of storage that you can have in the system um you could pay more to have sharted and you know across different

nodes um and and have higher degree of confidence in the retrievability of said files and so I think that flexibility is really um is going to over time be highly valuable to some some players right yeah um and I think that's overlooked um I think the the complexity and the tech behind like the proof of retrievability um is and I think this retrievability and there's another proof here of uh Rec I said it earlier but anyways proof proof of replication proof of replication and retrievability are two different and proof of retrieval yeah so one is like you can produce this and

then the other one is like the speed and latency at which you do so yeah which those two things are really novel and I think not fully appreciated and will end up being useful as you said to other different protocols uh in use cases so um yeah I think I think it's uh it's it's Mission critical the challenge always is is the price fair and uh you know how do you value something like filecoin one of the interesting projects is sort of like the mining of filecoin which is a huge thing and like being able to like sell the future mining rewards and whatnot so anyways there's a lot of uh interesting things happening in that ecosystem I don't f it enough one I mean Ryan wrote up helium before and that was the project that I first

started mining like early on in crypto right and the the interesting thing is we're talking about how we have Supply and we don't have demand but the the uh the the crazy part is like historically the wireless companies like Verizon T-Mobile AT&T whatever Sprint like they always had this really long battle with the cable companies because the cable companies provided internet to your house and they were never able to break into Wireless and the Wireless Guys provide a wireless we're never able to break into Wireline so the whole idea that helium comes along and basically they say hey look you're going to resell your cable your Wireline connection to your house and compete with the wireless

companies is an idea that's like breaking Decades of Industry locking for like hundred billion dollar companies right like it's a really interesting point but I mean obviously eventually these peline companies are going to wake up and be like look you're reselling your internet pay us and I think they'll work something out but it's just an interesting point on demand and those that's $5 a month to to join that wireless it's definitely cheaper what is your take on where helium is I haven't been tracking it as closely as I used to but the the things that irked me were the the token econ side like never made sense to me like the idea of multiple tokens that wrap up to the main helium token like the econ flows just didn't make sense to me and

if you run the math it gets difficult um but that being said like on the flip side they are one of the most successful projects to ever touch the user right like they've put a million iot nodes in homes like now they're doing 5G and they're disrupting the entire Telco Wireline competition segment right the the biggest risk in my opinion is that the Wireline companies you know the guys that you pay for your internet service to your house come along and they say look you know you're breaking your contract by reselling your internet we're not okay with it or they can say look this is finally a way we compete with the wireless companies give us half your earnings and we're okay with it right something like that I don't know

how it's gonna play out but do you think do you think a starlink just completely disrupts them together with the wireless companies and it's just like yeah that is that is a big point because they just no no not at all that's that's a real risk yeah for sure um yeah the other question that I have there is can any project have traction after going 98% Peak to trough right like when you when you write down 98% or more of of Community Capital like how do you how do you recover that Community you just said filecoin sir filecoin did that and here

we are file coin at one point was like one filecoin at one point was like I I keep saying this like up to like 75% of the world's GDP when it like launched there's still interest there's still interest and you just said something interesting on the on the on the uh supply side if you have something that wasn't like if you're not making anything on that excess storage you're willing to take like rationally game theoretic Game Theory would say you're willing to take up to one cent or whatever right because it's better than getting nothing I think it's same true not for all ecosystems like if you're a JPEG collection and your price just collapsed 99% you know like you know buy aigo like

you know good luck this is why I think again Nuance I am highly skeptical of artists moving into this direction without being very thoughtful and music royalties on chain like all of that I want to believe it I just think it's it's challenging because like even frch like the minute you introduce a financial incentive to something that people aren't used to or weren't expecting or would do it purely because of Goodwill I think it really psychologically tampers with that and Studies have shown time and time again like like there's times where people do things out of the good nness of their heart like charity the minute you start

compensating people for charity it's like wait wait a minute like no like you shouldn't touch certain things but if you have excess storage yeah sure I'll take a scent uh excess broadband sure as long as you know AT&T doesn't come knocking on my door and if they do well okay slap me on the wrist the same with that Airbnb is kind of like treaded this kind of fine line with regulators and condo boards and all this stuff um so I think it depends um I think it really depends on on on the type of project that you are one example here you guys might remember um probably more than I do but like Jensen aosh a bunch of players are doing you know use your compute your gpus to train these models or for model inference which is

different from training right it's like calling the models why did a gollem never take off do you guys remember that one oh yeah yeah there's some wallets that I have all these like maid safe and gollem and R we can go down this list but it's curious though because it's like a decade before it it was useful right like yeah I mean I think uh in the case of Gollum [Music] um my my understanding is that like the actual tool was just not useful right like the like to do the rendering uh on Gollum was sort of decoupled from the

token and then again there's an example where enough people got burned that a community like exited left and also the team migrated on to do worldcoin right like a lot of the go team is now um the leadership team at worldcoin and um and and this sort of cuts to to how much a Founder group defines the success of a project over time you know Tommy you and I have talked about founder likeability on on your pod before and and how how that can affect project but also like founder Ence right when you get a Founder who

starts doing Venture allocations and and you know running fund and doing other projects and things like that like it's going to have an effect on on the project and I think gem was one of those things where they needed the technology to evolve a little bit they could probably execute it better today than they they did at that time and uh and then it just lost momentum because the community lost interest however that's one of those interesting things that we should maybe double click on which is massive treasury still sitting around you know people have these tokens the treasury is worth more than the fully diluted market cap of the tokens why isn't there an activist investor trying

to hold people feet to the fire and get them to unwind these enormous treasuries you know you get the same thing with tezos is I think like 10 cents off its crowdfund price and like when is there a point where you're like hey guys that's $600 million that you got sitting in Switzerland maybe just redistri Diversified their treasury fairly well before the crash I think for sure they raised y uh but like today you know like if there's all that money you know is there an argument to to unwind it and redistribute the way that digix Dow did back in the day or um or is that just like locked up capital and that's you know uh a trust fund for

these these Founders for R I think uh on that point of self- policing like there's two things that come to mind one I think there ought to be a role for uh more activism in the space I'm I think done in a good way I think there's been attempts of doing this uh that have backfired um I think also the industry sometimes is really soft when it comes to really portraying VCS and anyone that tries to like you know challenge a team a founder of saying oh you guys are VC's you know like vilifying the VC Community which I think is widely overblown and I think the VC Community time and time

again really steps in as in moments during bare markets of critical funding needs like there's a time in a place and not all VCS are created equal I agree with that but I think there is there is a lot of value in having a VC involved um and I think there ought to be more activism the the other one quite frankly Ryan structurally like you know you talk about tasers a lot of these are receipts when you invested in this crowd sale all you got was a thank you card saying hey thank you for sending us uh you know a dollar that's it so from a legal recourse perspective there isn't much and again

this goes back to imagine a world where all these icos happened where you had regulatory Clarity where there was a proper guide guine maybe crowdfunding mechanism rules guidelines where there could be an unwind mechanism maybe triggered by a smart contract executed by certain parameters butal has introduced certain block posts and ideas around you know even the Dow right was it sort of like the way you go about funding in an Ideal World if you could like wave a wand you could say like the same way that b biotech goes to these kind of Milestone driven funding and if you don't deliver anything you kind of like you know you're return Capital like that could be semi-automated you could have a council

that is overseen by community members and and you know the there could be much more structured but because we've had to kind of operate and tread the needle with whatever your top law firm of choic is telling you to do and the way to structure these things unfortunately it opens a vector for the Bad actors to exploit that uncertainty and that is I think the point that like Regulators need to understand if you don't have Clarity there's going to be someone that's going to exploit that and it's and and that's the problem FDX they exploited this regulatory jurisdictional thing where they said okay we're going to skirt and circumvent the us and we're going to go through these kind of different

jurisdictions and lo and behold this what happens whereas the us-based exchanges haven't right Kraken and coinbase the other thing too though is like it's just like the worst and most perverse incentives like if you're a founder and you really don't want to work go to a tezos raise a bunch of money from their ecosystem fund and Coast like why not right the sell to them is they need developers and projects that and you know you can actually deliver maybe maybe not I'm calling out tesos but like you could extend this to a lot of other ecosystems and you get a paycheck I guess we could all feel good that they sponsor Manchester United and you know it's we could all get Manchester United shirs that would be nice but not even that I was a tesos pull in the past so like you

know I I get it so so so is I you know and although Sanji you you hit you kind of hit the nail and the head on with respect to jurisdictions and I know that the three of us sit in different jurisdictions for different reasons you know whether us uh uh Europe you know Switzerland which I don't consider to be Europe or you know I'm I'm here here in Cayman today and it's interesting that um different projects and different funds come to this realization uh you know like we've been we've been in Cayman for for a long time

now and we feel like we're entrenching here and I also feel that like the act of coming here which is the exception rather than the rule our business partners always tell us that that uh we're one of the only groups that comes down and does board and does strategic stuff and like you know tries to have presence really here is actually a really healthy process that allows our partners to understand us better and understand our business better and also the like ceremonial Act of like going through it is is really healthy for decision- making and and just for focus in the um uh in the organization but uh you know we do have this concept in crypto that I think will

broaden to the world over time of jurisdictional competition where you could very quickly go to the jurisdiction that you you find uh most attractive and it's never a one- siiz fits all although I do note that in today's environment correct me if I'm wrong but I would guess that like somewhere in the range of 75 to 80% of projects are finding their way here to Cayman or BPI these days would you guys agree with that can you can you like fast forward that for us like what does that look like 10 20 years out like everyone's a nomad go to the jurisdiction you want like countries don't exist yeah yeah well the way the way that we the way

that we look at it you know we get a lot of people like crypto natives reach out to me because because of of our our setup and as like hey I want to go through this like tax optimization project and jurisdictional competition and moving into the ideal location I'm thinking about Portugal I'm thinking about Switzerland I'm thinking about where you know where should I go and the decision Tree on it kind of starts out as like are you American or not and then if you're not it's like okay do you want to live in the place and have do you want to have presence like do you do you want to be a digital Nomad you know do you accept some taxes or does have to be zero and like the decision kind of goes

on there and then if it's American it's mostly like well you're and the most you can really do is is kind of do the Puerto Rico thing but by the way Puerto Rico requires 183 days you better like surfing you better like that lifestyle or you can limit state tax you know by going to to to Texas or to to um to Florida or or yeah or some some other places and um you know and my and then you get a lot of Americans saying okay I want to renounce and I want to move on and I like like and I'm going to completely optimize so like does Portugal make sense for me I often say no because you should look for a

jurisdiction that where the tax like the tax benefits or tax zero is culturally ingrained into the fabric of the society so like Cayman but Cayman is politically impossible for cayman to ever impose taxes it is totally unacceptable among Swiss Society to impose cab gains taxes or or or you know change the tax code Portugal is a is a a socialist country that made an experiment on a golden visa and like one change in the government could completely up at that no it already did no it already did they they peeled it back they were they started to

peel back two years ago and I said this is the time to short real estate prices in Lisbon and there was to your point Ryan it was just felt like they were going to rug you at some point uh Spain has these twoe three year four year but it's it's a novelty it's not as you say the reason of existence for some of these jurisdictions yeah for sure whereas others like they have benefited through so many generations and seen the benefits of of tax optimization almost like meditation where like it takes you a while to realize the benefits and then and then you're bought in it takes a a country a couple of successive generations to realize that oh actually like giving on

the tax on like cap gains tax especially means that you get more High net worth individuals in the door means that you get a lot more other benefits and because of that we're bought in and we'll never change it and there's only a few places around the world where that's really culturally ingrained and then the place operates reasonably well so like sure you can get zero taxes in in Panama but like to do banking you're going to be put in a red channel in banking because of the whole Panama papers thing and to do business is difficult so it's like you're just doing a different tax or like you could go to Luxembourg or lichenstein find you have no no taxes but you get death by a thousand paper

cuts on administrative fees and banking fees because the royal families own the banks and they charge you bips in and out for banking transactions and like wow that's just that's just a tax dressed up in a different in different clothing right yeah um so there's never as in economics there's no such thing as a free launch there is always a tradeoff now I do think that like it depends there's two things here that maybe we can double click on is one is if you're in crypto the regulatory environment is probably Paramount secondary is the tax component as a project as a foundation the there is a very clear divide and sort of bipolarity in the

world that is increasingly kind of becoming more and more like that that divide is growing it may compress and and and revert but generally speaking like you you are seeing um uh places and jurisdictions like United Arab Emirates I Dubai Singapore Hong Kong uh the UK uh the European Union as a whole just being more Pro in Pro crypto more welcoming of of of the industry um and other jurisdictions particular in the US is just hostile it's and maybe uncertain like I I think the courts have given us a glimpse of Hope in what could be um a path forward

where the rule of law and like the intent and a path forward I think increasing The Regulators understand that but right now like most of the projects that you're funding they're not in the US yeah just not a couple a couple points there that also just to add on like recent events like Celestia aggressively excluded the US like in a like you can't access that air drop if you're in the US right they did a really good job that means that Builders outside of the us are going to have Capital to build and the the best projects built on Celestia will probably not be in the US right dydx aggressively blocking the US right enan layer allowing people to allowing middleware to access nodes and the nodes can choose

and Market themselves as Geographic not in the US right so they'll start to they'll start to earn a premium because they're not worried about um you know being in the US and their projects getting shut down by the government right I spoke to one of the largest market makers this week too not a single node collocated in the US right like so I yeah I agree like I I agree with you guys like Ryan you're right like it has to be like jurisdictionally built into their culture and San dieago you're right too like it it just makes sense and it's hard to build here I mean I think over time like your point Ryan around Capital formation will I think look vastly different in a world where internet like in a world of Internet money uh and I

think we've increasingly gone in that direction like I just think uh like my vision like when you first discovered Bitcoin it was like huh this you know extreme scenario this separates money and state that probably faces a big resistance in a better version it just keeps governments in check because there is a neutral layer money that exists and so you can't all of a sudden print without serious repercussions even though you are the top three kind of Reserve Assets in the world because now there is an alternative and that alone brings more responsibility to A system that has gone far irresponsible

for too long unchecked yeah it it for me the the draw originally of Bitcoin is my frustration today which is also I think going to be the solution in the long term which was I got attracted to bitcoin because of its potentiality for for crowdfunding I was you know I was a vet capitalist specifically in crowdfunding and I thought that crowdfunding was one of the most interesting things that that we've that we've ever seen um and you know obviously poly chain uh dominate the sort of the Ico era and in crypto we were really excited about this idea of of crowdfunding and I think that there will be a new like crowdfunding or new

Ico era once we get like the regulatory Clarity in the US that will dwarf the previous Ico era and like maybe if the only use case of crypto is crowdfunding I don't care that's already worth trillions of dollars that's a great use case and we don't need to do anything else we don't need to like have storage or isps or energy or anything like that if we can just do rapid Capital formation among people who want to try and experiment together and that should be allowed and so I like I find that to be the the greatest point of frustration for me in the space today like everyone's like oh there's no use case

of crypto and I was I'm like no there actually was a really cool use case it's just kind of not allowed temporarily but truth will prevail and and and I think that will be uh I I think we'll get to a point where we can do this rapid Capital formation freely among people who want to to to try these experiments among each other what do you say to people that say wait a minute a lot of people got burned a lot of people didn't know what they were investing in like would you say on one side total libertarian hey it's their money they already paid taxes on it let them do whatever the hell they want to on other side it's like no wait let's allow yeah let's allow that but with the right disclosures information you know the you know registration if you will

but that costs that's Administration that's you know whatever yeah I think like the right the right the coherent regulation will be one that is um is not patronizing so it's not like we're trying to protect you from this free internet money that could be worth one cent or 10 cents but it's free anyway uh but at the same time like reasonable so so for example like disclosures should be necessary what we just talked about before for that if a project doesn't hit Milestones they redistribute the capital rather than just keep it as a trust fund for the founders those things should be implemented like there's a really simple straightforward path towards a a a

mature regulation that treats people like adults because guess what if you're going to put your money into highly risky things like you're an adult that's fine you should do that the same way that like if you're an adult you can Skydive and that has risk um and I feel like it's not that difficult it has been made difficult because of the like political process and the you know kind of alternative or ulterior motives that are at play in the especially in the US political process but what are what are your thoughts how do we come out with the solution here I think we push our solutions for next episode but I think that there's a lot to talk about on the capital formation side and also not to cherry pick ianl or Ryan but the idea that any middleware

provider can now access the capital AKA security through validators by marketing to them is a form of potentially indirect crowdfunding right they get the security they need without having to you know go out to talk to investors but a rapid fire question in closing guys the our crypto Twitter timeline is probably the most bearish as I've ever seen it is that a counter indicator for you or not Santiago are you on the For You tab or following again Nuance Nuance genten big Ryan I will give you credit here I really like this word nuance I will stop saying it because people are G

to kill me in the the comments it's Nuance potentially I think I've done a really good job of curating and unfollowing and following the right people I do agree with you it is it does feel uh like look there's a lot of stuff happening in the world um I think emotions are high it gets conflated crypto Twitter is this really vocal like the people that are in crypto Twitter I think tend to be curious and want to vocalize and talk about a lot of things there's like the the trial going on there's the whole Israel um war going on like there's always the macro commentary uh there's the hacks that are going on so I think a lot of it is look social media platforms tend to skew negative

it's people that there's this idea of a vocal minority that I'm highly cognizant of whatever you see in Dow forums and especially in Twitter comments like if people take the time to do this like they want a vent I think as a world as a society we it's very woke and so that's why you have the Anon culture because people at the end of the day want to vocalize they want to vent and and they want to do that in a maybe a pseudo Anonymous orous sanago it's a good answer but you're giving me the lawyer it's a rapid fire look I I am bullish I I it doesn't compute in my thinking it just doesn't like I think it's a counter indicator I think it's a good time to allocate purely because the number it's it's a matter of price

things have been left for dead Ryan you're up Sano I'm with you I'm I'm I'm a buyer here but uh you know Ryan so very quickly rapid fire cuz we got to wrap it up and kly just construction or our office is wrapping us up um um yeah I mean I I do think that we're going to look back on this as as the bottom of the trough uh whether it's now plus 6 months or whether it's it whether this is like you know the the absolute trough trough um this is a great time to be accumulating high quality assets because this space matters and there are use cases that matter in the space and that that in the

end will prevail so got a picture of this Tommy I'm no I'm going to ask you a fire question here uh around allocation allocating as famously was said by one of the Witnesses in the FTX case um do you know the distinction between solvency and liquidity and are you allocating that's a good one we'll cover it next episode all right [Music] denn