Crypto's End Game: Coinbase vs the SEC | Roundup

Transcript

yeah the timeline for crypto just keeps getting more and more surreal like every time we say wow it's uh you know you will look back and like it was crazy and then it's like oh no wait it's crazier and so I'm just gonna stop saying it because I guess we should expect the totally unexpected but very exciting times um right sir indeed indeed I will I will say it's not just crypto though it is uh the entire Financial system it is crazy time so but anyways it's good to have you back I know you uh took a couple little time off uh sounds like it was a good trip good to have you back obviously you've been following a lot of what's been happening

and yeah there's just a lot to cover yeah I really hope people aren't watching on YouTube I feel like I'm looking real pasty white coming out of the winter you uh clearly got some some sun looking pretty tan these days uh this is not a good contrast going on here we need a little like uh the video editors need to uh it's it's really the life issue you know but um housekeeping to cover um one is block Works um three housekeeping things one is for people who listen to bell curve we just announced that uh next season's gonna be on Mev and that haasu is uh uh from flashbots is going to co-host that um so

really excited about that the second piece of housekeeping is that we announced um that digital asset Summit which is our buttoned up kind of institutional conference that we've been hosting for four years now in both New York and London uh we are moving it to Washington DC for 2024 uh 2024 DC huge year politically but also just um we believe that DC is now the most important city in the world when it comes to crypto and that the decisions made in DC with Regulators lobbyists and politicians is um at least short term gonna really impact the direction of crypto so which which obviously we're going to talk a lot about on this episode so we're moving digital asset Summit to DC and partnering with the folks at the

blockchain association Jake and Kristen and uh and the team over there um and then the third piece of housekeeping is that blockworks announced a grants aggregator yesterday um or earlier this week yeah so we're calling it Grant Farm uh yield farming in the bowl Grant farming in the bear uh and if you'll we we have 310 different Grant programs listed and 125 different active rfps so if you are look if you or your company is looking to go pick off grants or rfps or bug bounties we should have everything listed there but if you don't see something uh if your protocol or your team or your Dow is not listed the grants are not listed there just uh hit me up uh DM me on Twitter and we can

get those out of ASAP so does the blockworks housekeeping for you that's uh well that's really exciting the grand stuff for sure yeah yeah we're we're pumped about it uh we're pumped about deaths too moving to DC so yeah I mean I mean there's just so much happening uh I would I would agree that uh DC has become increasingly important and they've they've Ratched like they certainly I keep thinking about that episode we recorded with Jake and Rebecca last year uh I was thinking October or September and he said yeah like we can expect a lot of more kind of enforcement actions and and Regulatory activity and you know here we are and you know fast forward it seems like every other week it's they've

just been really increasing the the activity so maybe we just like tick through all of them and then and then yeah there are three big ones from this week there's coinbase uh coinbase and coinbase is obviously the biggest then then Sushi and then uh Justin Sun um why don't we start with coinbase so basically the um I'm gonna read Paul um uh what's his last name the chief legal officer uh Paul Grewal uh the chief legal officer at coinbase I'm going to read some of his tweet he posted a nice Twitter thread um basically coinbase just received Wells notice for for the uh from the SEC and for uh people who aren't familiar with Wells notices they they specifically are not a huge deal but they usually precede an enforcement

action and specifically this enforcement action it seems like is going to uh is going to be around the SEC targeting coinbases uh both spot Market regarding some of the coin uh tokens they're listing their staking Service uh and potentially their their wallet and coinbase Prime so it's pretty big enforcement action that they think is coming down the pike um let me read you some important things that I that stood out to me from the blog post and from Paul's tweet one is that over the past nine months coinbase met with the SEC more than 30 times for the uh people trying to do some public Mental Math here that is three times a month more than three times a month

that is almost every single week coinbase has been meeting with the SEC sharing details of their business to try to build this path together towards uh registration and Regulation and what Paul said is that um during the the past several months the SEC has basically given coinbase zero feedback on what to change and how to register and that instead today they received Wells notice and the backstory here is that when coinbase filed to go public in uh 2021 the SEC uh I don't know if you ever actually read the SEC but it was so freaking detailed into coinbase with the S1 you mean excuse me yeah the S1 it was so freaking um detailed on their entire business and

I went I went back and kind of skimmed it and they had 57 different references to staking and details on their asset listing process uh process and so the SEC reads the S1 approves them to go public knowing all those details now they have changed their mind basically on what is allowed and instead of having a conversation with coinbase they basically just regulated by enforcement action and um so what what Paul and the team did over there is that last July almost 12 months ago they filed a petition with the SEC calling for more regulatory Clarity um which I think has kind of become the consensus in crypto which is that we used to not want regulation now it's like okay just just give us regulation but just like just give us a framework

here just give us some other way that that sentiment and approach has been going on for the last like six years yeah just just give us some became fundamentally important and there was more something more than Bitcoin people yeah just went to the SEC in in different approaches and and styles and said can we just get like I've been in that position and right it's not it's not coming right well I remember do you remember Jake Clayton obviously so so uh Clayton was not super friendly on crypto but he was at least always willing to take a meeting and always willing to have a conversation and to work with folks and to give them feedback and under Gensler the SEC is basically just stonewalled these companies and uh and and now the

strategy we talked about this one uh Rebecca and Kristen were on the podcast the strategy is just like stay as far away as possible coinbase has taken a different approach and it's like look we'll power through it got a lot of money behind us good policy and legal team we're gonna go meet with them and that has completely uh I think the SEC it's fair to say kind of backstab them and the reason this is so crazy is that you know coinbase is a licensed and regulated crypto business in a bunch of you know First World countries like Australia and Germany and Singapore and Ireland and they're even regulated by other U.S federal Regulators right they have a DCM and a dco license from the uh cftc and many other U.S state Regulators

uh who give out money transmitter licenses the the SEC I think has basically gone Rogue here and they Remain the sole outlier here uh so that that's my that's my like high level overview on what's happening in like a couple of my thoughts but I'd be curious to get your take on this I'll go back to so there was an enforcement action similar to Kraken and they settled on their staking program there was an important distinction I think where the the same like the coinbase folks come out and came out and said our staking program is structured very differently and this is why it's compliant whereas Kraken was paying not based on like algorithmic like Network inflation and and staking rewards it was more at their discretion

and that was I think the issue with the Kraken staking program coinbase on the other hand and my understanding is they just they're just flowing through whatever is being paid out by a particular blockchain so if you're staking your CB you know eth then the reward itself is based on the staking emissions like the rewards that are being emitted by the blockchain and and then of course they're taking some sort of fee for providing that service um and I think that's very different um and so it's just interesting because then that no longer seems to be the case and so I would be really curious to understand then what is the issue with coinbase's earned program um is it all of just full on all the

staking kind of earned programs or the particular blockchain particular specific token itself or the um that has been problematic um and yeah the second one is kind of the registry like the listing process which I mean they seem to think that it hasn't changed since they ipo'd and then the question is which Assets in particular uh are problematic or is it all of them or just I mean it gets to the broader question of you know which has been the in the past like they they just go after certain tokens that they deem to be Securities but they do it in a sort of a way which is very specific um so yeah a lot to impact um I really like the thread that uh Brian Armstrong

came out saying like said Hey listen we will fight this um he made a great analogy said it it sounds like you know um you know the rules like we were clear to do this in April 2021 and then the the referee just came back and said oh no we're going to change the actual ruling here on the field which is like really um I can appreciate why it's really frustrating and so I mean I tend to view this as there are three I think really important regulatory kind of processes going on in the US one of them of course is now coinbase the second one is the grayscale um the grayscale one like kind of like the I think they're there's a lot of things going on there but a part of it

is like you know approving an ETF um and so I guess those two are really important for crypto because they will hopefully provide just more clarity um and I think if you just look at how the judges have been responding in the grayscale case it's really been kind of more favoring like grayscale I would say and and like toning down the the like the SEC is kind of you know what they are actually entitled to kind of regulate and go after and so look I mean I I think it's very early to say if that's going to be the case here but I certainly think one coinbase has a lot of resources to fight

this and they want to do that and second I think it just brings more awareness into space and I think we'll also shout light on broader sentiment which is the SEC as a reminder for folks doesn't have the ability to like Implement like policy you can regulate through like these enforcement actions but that doesn't mean that that's not the rule of law I mean it's it sets a precedent for sure but it's not like rule making that's up to Congress and so Brian of course also said Hey listen it's really important as you said uh of how we elect and you know uh congressmen and and other elected officials and I think that's going to be a big part of the next election cycle in the U.S yeah here's here's um I think one of the most important things

to know about this is that Paul and Brian in the whole coinbase team I mean first off pretty remarkable response from a publicly traded company to come out against the SEC like this like first off just you know kind of air collapse for them right now um the coinbase lawsuit is going to take forever there are going to be facts if there are facts to fight over which coinbase will find facts to fight over uh it will go to an appeal and uh Gary's gonna be gone in two years Max like if you talk to people on the hill if you talk to people in DC he is one of the most detested people in in DC right now I don't think he actually cares about regulating

coinbase I don't think compliance of coinbase and like regulation here is the goal I think the only thing I think the goal for Gary right now is is pure chaos I think his goal the like lawsuit itself is the goal compliance and regulation of coinbase is not the goal the goal is to distract And Delay long enough to throw all of crypto kind of to basically throw it off uh and and I think that's why I think that's important to recognize here with Justin ceremony like I said three I said mention two the other one is uh the Ripple case xrp which is probably going on for years so in summary coinbase grayscale plus Ripple three independent cases I think well my hope is expedite regulatory Clarity in the US which we haven't had

um but you're right I mean there are some conspiracy theories going on around like is this just a broader kind of full-on attack on crypto when you then you know layer on top of what has happened to signature and silvergate and the manner in which that has happened and then you know the usdc situation and then my understanding is a kraken also is in a bit of a tight spot here because I think ACH withdrawals and deposits just are no longer enabled and I think a lot of basically they're going after the on-ramps for crypto and if you shut that down then it becomes really problematic to get exposure to the space and you know it really hinders the space from a growth perspective yeah I uh you know I

want to put on my I just I just fully agree with you I don't want to put on my tinfoil hat too much here but it's very interesting that this is coming at the same time as kind of the um what's the right way to put this like not not the collapse of the financial system but like svb and signature and all like the uh First Republic and all and and the banking system having its biggest catastrophe since uh since 2008 the if you want to put on the tinfoil hat you say that here here's here's the take the regional Banks and uh the two biggest risks to centralize financial control and cbdc implementation in the United States are Regional Banks and crypto and if Regional Banks and crypto won't back down and aren't naturally

dying out you have to systematically eliminate both of those and um that would be my tinfoil take of like the goal here is financial control and better surveillance and cbdc implementation which is which feels inevitable at this point and uh there are two things standing in the way uh for for not to happen and it's uh crypto and Regional Banks and um when you think about Gary and it's like when something like this is happening it's like what is his motive here Gary wants to take yellen's job right Gary wants to be in that Treasurer seat and um that would be a role that like directly looks over Financial control and cbdc

implementation and um I think you might be trying to make his potent his potential job in two years from now easier so that's fine well um well I don't want to get too far deep down the rabbit hole but there is this thing that I want to make people aware of which is executive order 6102 there was enacted April 5th 1933 by um Franklin D Roosevelt and that basically prohibited anyone from holding coin from holding uh gold and and so of course there are some folks that are looking at that and saying are they actually at some point going to ban

owning crypto in the U.S it's happened before with gold and it's not crazy to think that it will happen again with crypto at some point and we're like what does that actually mean and I don't know what the probability of that happening is but it's certainly like autism Capital um discount on Twitter you said there's there's then I would agree with this take which is there's absolute non-zero chance that the US federal government comes for personal crypto asset seizure at some point for American citizens and just today again uh the SEC um I'm kind of like processing all this live the SEC um has like a general resources website link and it they issued a press release today saying you know again continue to exercise caution for crypto assets it's

sort of an investor alert so um this white house that is such [ __ ] that is Bitcoin is up 45 since the banking system had biggest collapse in in in 15 years uh uh yeah I look I mean look at that I operated there's all these great memes which is like the White House also had a report on it like earlier this week so of course like okay did you read the White House report I mean it's like do they actually understand the space like they they were like there's a great chart saying like which which derivatives platforms and like these are like half of them like are obviously like not legit so let me read these let me read these for anyone who didn't read the White House report the top 10 crypto derivatives platforms according to the US government

BTC ex binance btcc here's the fourth one deep coin I went to deepcoin's website on my phone it didn't work on mobile the website didn't work on mobile bingx it's a bit to get okay X by bit m-e-x-c those are real bitmart like they don't they they have no clue they're so far off from knowing what these what the uh what this industry looks like it's um yeah it's uh it's pretty wild to see yeah I mean I have a lot of thoughts around what's happening recently like I want to zoom out this

like I don't want to go too much deep into what has happened in the svb and some of the regional Banks and but I mean it I'd be remiss not to like think about like okay there's clearly something going on with a lot of banks and more and more people waking up this idea of okay what actually happens when you deposit your money in a bank and very quickly trust can degrade in this environment where the world is Uber connected and information moves really fast and so these backgrounds happen now I'm not saying that all regional acts are are exposed like Silicon Valley or First Republic but I mean a lot of it is just social consensus right and it's consensus can tilt really quickly you sat on Wall Street beds you saw it now

with you know uh you know a Silicon Valley Bank or like basically like I think 35 of their depositor base like we wanted to withdraw on a particular day like like no single bank is like structurally engineered to like process that right and so yeah you like as a generation like you're waking up this idea of like okay well you kind of do value a lot of the core principles of crypto and you're right I mean I think you look at that and you you have a lot of really important certainties when you're interacting crypto that just you don't have in the traditional system and more and more people waking up to that yeah and so like I I always like during this period which I think is

actually unprecedented like I think we'll look back in this moment and say this was this was like a very important perhaps we're seeing another 2008 event unfolding in real time and I I sort of feel that um but I was reminded during this period of like when I first discovered crypto it just sort of think through different scenarios and say okay and what what does the world look like when Bitcoin becomes like a global Reserve asset like what does it actually mean and in one version it's really kind of more Rosy which is you know it becomes like uh you know things become denominated in Bitcoin and becomes such an important thing that like every country kind of adopts it

but it's the more likely scenario is like it's not an easy transition and you can understand why like people that control the money printing don't like that um and the the second observation that I want to just to get your take on is so like if you think like Regional banks have a problem like fundamentally the problem is like this duration mismatch right like you're holding these securities um you know to maturity but like if you get withdrawals you have to sell them and if you're selling zero percent like bonds for there's like a very simplistic rule of thumb which is for every Inc like one percent increase in rates like there's like some like like basically if you need to sell it like the discount on that is is like similar and of course like all these banks are

holding zero percent treasuries treasuries are now three or four percent and so if they need to sell those treasuries that they bottle you know let a year ago at zero percent that creates a big gap the regional landscale built up by the US government what happens to all the central banks that are holding a lot of these treasuries at zero percent they also have liabilities and pensions to fulfill they also by the way they unlike Regional banks that got bailed out they can't be bailed out and they can't print money as easily without consequences here's what happens to them if you're a central Banker in some sort of country and you're holding a lot of these treasuries aren't you thinking about Bitcoin right now okay lot to break down there um sorry A lot of them is an Empire sir

yeah I think there's a lot of thoughts in my mind every mystery yeah clearly you had uh yeah good good uh good little trip a lot of time to think huh um think here okay here's uh the transition to bitcoin as a global Reserve currency there is no scenario in this world where that is a smooth transition the US dollar is the global Reserve currency uh there's no we've I don't think I mean we've never had the global Reserve currency experience colossal inflation or hyperinflation or whatever it may be and to people who say that that is not coming I'm not trying to fear Monger or whatever and I'm sure people saw that

like saw the Balaji bet um it's starting to feel like that at some point the us is going to have to choose between keeping its banking system and keeping the US dollar uh from Runaway inflation those are like the two I don't think you like fast forward like I don't think it's the Balaji 90 days thing um but I think it's like at some point whether it's a year from now or two years from now or three years from now the us is going to have to make a really conscious decision between do you save the banking system or do you save do you save the US dollar and the and 10 times out of ten they'll they'll uh I think they'll choose the banking system um and so then it's like okay what does that do for the US dollar it gives it

kind of this runaway inflation and we've never seen a world where the global Reserve currency I don't think we have maybe maybe we have goes through this goes through this extreme inflation yeah so I don't think I don't think it needs to transition but one last point just to your thing about these sovereigns in these central banks holding treasuries that is the Bold case for Bitcoin here you have let's like 2012 to 2013 cycle was driven by Libertarians and technologists 2016 to 2017 was retail flooding in 2020 to 2021 was institutional money High net worth money trying to get in trying to basically find upside in this colossal like you know covid world where money was being

printed 2024 to 2025 could be driven by sovereigns in this race for defensive positioning against uh a world where the global Reserve currency is inflating away so I've I've really gone full tinfoil had on this no no I mean is it because I fundamentally think that like I don't think we're crazy in thinking that um I just I just have this feeling that an intuition that these are really unprecedented times like probably more so than 2008 because a lot of what happened in 2008 you just didn't have a system an alternative system now you do and the world has become more connected

and it just poses the question of like if 2008 would have happened and you had it crypto around what would have happened then and there now the financial systems feels increasingly fragile in other ways than it was in 2008 now you do have an alternative system and so yeah I mean it's going to be really interesting to observe that I probably will forecast or predict a few things regulator activity is going to continue to increase like if you didn't think that adoption of crypto is going to happen without regulator really ramping up their efforts to stop this then just look at what happened in China over the last 10 years like they've been trying to bank

Bitcoin and crypto forever because you know it allows citizens to kind of like for Capital to flee a country that fundamentally has tried to stop that and so you know that's problematic right um when most Chinese like Nationals can only buy real estate and government bonds and now all of a sudden they can buy some like you know crypto then that's really problematic for them because they can't control that yeah and you know anyways that's just one example the other one is like I would encourage people to understand what has happened to Bitcoin in moments where like there's been banking crises like Cyprus experience Bank Run and then Bitcoin really gained a lot of adoption there and so

yeah to say the least like I've been warming up the Bitcoin quite a quite a bit especially not only because of macro uh and not just Bitcoin for that matter but like Bitcoin uh at one point I just didn't own any now I I definitely do um and I think a lot of that is also we had maneeb coming on it's been very encouraging to see kind of the sentiment shift and the developer Community it seems like Bitcoin to like make it to utilize kind of this like untapped like a lot of liquidity and capital that's kind of stuck there and do something more than that that's number one number two is obviously like all the stuff that's going on like if if there is a version where there's Mass adoption it's probably gonna happen first with Bitcoin and then flow into other kind of

projects like of course release continue to be really encouraged by ethereum and some of the other like projects um you know and use cases but but yeah like at a fundamental level like I think Bitcoin really takes off first I think that um I want to dig into that into just like your Bitcoin positioning for a second but um Bitcoin gets Mass adoption if we are forced to adopt crypto in a way that is in a in a way that isn't like a pretty way I'd say ethereum gets Mass adoption if we are able to adopt crypto in a way that is like good for the world I'd say

things getting revealed apps getting built that are really friendly and like easy to consume and just better products that's the path for ethereum to get adopted the path for Bitcoin to get adopted is I'd call it forced adoption is when people are looking for a way to opt out of the financial system and store their Capital uh in a digital bank that doesn't have any any collateral risk then bit Bitcoin gets adopted yeah yeah so let me let me ask you so you rotated out of uh do you rotate out of some alts or out of some eat into cash out of some cash yeah and what percent is of your what's your like eth to bitcoin ratio right now ID 20.

still continue to be heavily like I'm counting Ethan eth well actually pure Ethan Bitcoin it's like probably 70 30 if I encount other projects that are like part of the ethereum network then it's higher obviously uh but from a pure comparison probably I mean it's still heavily skewed towards eat and is there anything that could make you go into allocate even more to bitcoin I just want to try time the way that I rotate out of cache I I program like I've always the kind of approaches as like I want to accumulate over time and like cost average my way in so I'm doing more of that yeah with pure cash

that's been like sitting there in a bank account so yeah it's pretty interesting like if if you would have like dolls like there was some stat that I that someone in a group like kind of posted if you like cost average or like dc8 in like dollar cost average into Bitcoin since it hit like its peak of 61 200 or something since that moment of time to now you're basically in profit um I fundamentally think that that's like again none of this advice but for me it's it's difficult to time these markets and entry points but I just generally think that like when sentiment's very sour and like these kind of things are happening like it's just for me it's a better way to like not try to time the market and just kind of build a position um based on certain parameters yeah um

and so that's kind of how I'm approaching it so I don't want to like buy all at once um but I am looking to answer your question concretely I'm looking to increase that ratio more towards Bitcoin and that's not to say that I'm like selling ethereum to buy Bitcoin it's more so I'm like rotating cash into Bitcoin yeah let me ask you this it feels pretty clear that any American crypto investor should actively distrust this Administration um and that the uh the risk of holding your crypto on a in a custody exchange is it's getting to be a little bit scary um what are your thoughts on holding holding crypto in inside of even one of the tier one exchanges right now just too too risky to do as an American or

you think it's fun we have to count their balance that are they going to properly set up their keys and manage like security right you know I I continually believe that the US is a country where the system and the judicial system you have to have faith in the courts you just kind of have to if not then like I don't know it's difficult to like operate but I I do have faith and this is why I go back to this example of it's been very interesting to observe how a judge responds and reacts to the case where the SEC is kind of one end of the spectrum really aggressive maybe overstepping and then the judge kind of tones it back and says wait a minute let's actually look at the rule making

and and the what the ssc's allowed to do or not allowed to do and let's objectively talk about this which I want to give the the U.S legal system an opportunity to respond to what is to your England felt like a bully in the space that just wants to cut this and not give any guidance and go after certain companies Comey is meeting them three times a week and then just like that feels like a bit of bullying I want to understand how the courts interpret that and any kind of illegal judicial like response to that I think is going to be fundamentally important for me to form a full opinion on how this will kind of play out real

life yeah so so that's it um and so I don't know how long that's going to take by the way but encouraged by like like I'm not a like Ripple some people are now like the enemy of your enemies like my friend and so like look I think Ripple has a lot of resources it's been fighting a battle for years now so these things are going to take unfortunately more time but there's a few of them that I think will bring and shed more clarity um I am investing in I will I'm today I I committed to investing in another wallet which is really kind of like um I can't talk a lot about it well at some point uh because I want to talk to

the team if they allow me to do that but it's really leveraging account obstruction a lot of like really cool principles that make it easier and more intuitive for people to and also secure for people to like self-custody their own assets so thematically we talked about wallets here with Xiao and if you I think wallets are going to be very very important account abstractions comes at a fundamentally important time where people should be more and more thinking about self-custody yeah I don't want to say take your coins off exchanges now I'll balance that comment by saying I've been really impressed with coinbase full disclosure I have a position coinbase but I just think that it's been refreshing to not only

like understand the road map and the their willingness to like really just push the space forward and and as someone that has been in the space like I want to support them right and I fundamentally also think that it's a name that I track a lot to understand what the broader sentiment is yeah in and look you look at coinbase and people don't understand their business they don't understand the roadmap their vision and I think it's uh it doesn't get enough credibility from like Wall Street and crypto natives right it's sort of like really impressive to them because it is probably like a really kind of shitty position to be in right you're not in either camp and you always get [ __ ] from

both camps but we're even more impressive they continue to put on a really good cool stuff yeah though I I do think that as coinbase has Embrace this more like on-chain mentality um I think I I'd be hard-pressed to find people in crypto who are not behind behind coinbase right now and if and if you're not behind coinbase's Vision right now I'm not sure you're what you really do in crypto right now um yeah I mean coinbase is on the front lines I think the most important thing that you brought up this onto was um you have trust in the U.S legal system and I think that's an important reminder that um ultimately coinbase is ready to fight here and they're in a really strong condition to do this and it's a reminder that the SEC does not make the law yes

it makes allegations which ultimately get tested in court and oftentimes as we're potentially seeing with grayscale the SEC is wrong right we talked about this on the Roundup a couple weeks ago the SEC got picked apart by grayscale uh by grayscale attorneys in the Appellate panel in the DC circuit and you you can bet that coinbase is ready to do the same in the coming months and and it'll probably honestly Take Years the coming years and uh between grayscale and coinbase these two firm yeah and ripple but whatever you think of those firms like whether you like them or not they are now the the someone posted this on Twitter like the torch bearers of stopping the death of crypto in the US and I don't think that is overstated so

yeah like look if you're a politician in the U.S and you're running for public office I think next cycle I wonder I'm not in I'm I'm not I can't vote in the US but like I think this crypto is going to become a topic of conversation more important than before which is an obvious take but more so like I I'm maybe asking you and I wonder what our listeners think they're based in the US like how important do you think crypto is going to be in the next election cycle um interesting you say that I've had been some in San Francisco and have just had a lot of meetings with folks in San Francisco and topic of conversation in

nearly every meeting is 20 24 elections um it will be I don't think it'll be a big topic of conversation it won't be a top-down thing it's not like you you have you know Trump and DeSantis and Nikki Haley and Biden getting up there and like talking about crypto that much I don't think that's going to be a thing what I do think will be a thing is like where crypto money flows and who which candidates that they support and there is one candidate that basically the entire industry has pooled their money together and is pushing forward right now and um because they are because we because people think that they will be pro-crypto so

yeah yeah I would think so um it's just fundamentally like just I want to really emphasize this point like I think that good governments are ones that have really robust system where not a single person or entity can at will change core principles and rules and I think that sometimes can be lost when you see all this noise and so I you have to have faith in that if that's not the case and change the system but the US I think has a really good like three-prong system of checks and balances and when one comes up really one is skewed you're sort of banking on

at the end of the day there's a legal interpretation of what you know certain people can and can't do and like also like I just like would love like to understand like you always want to go to First principles like what is the harm that is being done here you know there's been a lot of harm done because there hasn't been an ETF approval you know like look at the discount of gbtc it's been like seven what is it seven billion dollars of like that Gap like that that's a lot like what at this point like it's a trillion dollar asset class it has a ton of innovation and human capital behind it like

come on guys like what's the end goal here consumer protection fine no one Inc most people in crypto are not only the scammers they want everyone in crypto can agree that we yes we want Fair transparent markets yes we want information disclosures that everyone's on the same foot because that then increases the likelihood of other Market participants to enter crypto and it should be a fair market like we all agree that it's a transparent system God damn it not everyone can read a smart contract but that's okay like all of this information is in the public record by default it is a system that is built because it's transparent how is that how did that narrative all of a sudden become this space needs to be is super bad and

stay away from it like I don't know like we're going to look back on this and say okay it was very clear why people didn't want this to gain adoption but it's sort of like if you what's the end State it's there's this notion of a fear Victory like you win but you lose so much do you really want like all like this this Innovation Capital will not go away like I think it's captivated the imagination of developers and people and I just spent the last week with uh admittedly people that either don't like crypto or don't know much about it more older people and the way that I've been explaining it to more folks and I tweeted about this

study which is I'm not asking you to believe in any coin so like before we like they ask you like oh you're in crypto it's like oh you know like you know they either come up with some weird thing like I love cardano would you like it which is like surprisingly like a lot of people that I meet I was like I love card I need like uh every everywhere everywhere exactly and the other one is like oh you know like FTX I want to scrap me like listen let's not even talk about price let's just agree on the reason of existence of the space can we agree that before crypto you couldn't have digital property and immutability like those two properties are really fundamentally what makes crypto crypto special because it you talk to anyone out there they're The Collector or they're a lawyer or they're

a real estate investor or an artist you're like okay wouldn't it be nice to now have the enforceability of of something digital which everything now is mostly digital property records there's a lot of art that's digital you know information propagated in a digital manner what it wouldn't be nice to have a seal of approval that says this happened and there's a record of that of time and space and you can't change that and no one can change that men a lot of people say well in the U.S like we trust our local office like you know there's like an you know there's a public record I'm like fine if you're not in the US and in other countries then this is really valuable but even in the US having that redundancy it's almost like an insurance policy you

bought a property you have a deed you have a land title you own that but it's also a digital record and anyone like and it's it's no one can modify that and oh by the way the court can also recognize that record in a digital context which cannot be tampered with now you tell me that you don't think that that's a killer use case you probably don't know anything about business and how the world works and then you then understand and then the the question is oh yeah like I believe in big blockchain but not crypto I'm like that's like that's like Advanced crypto for dummies which is like you can't have the coordination and all the funky cryptography happen without a token but you never want to say that to people they'll kind of slowly understand that once they start using it so you

just say okay okay fine let's just just go use crypto and then come back and like tell me like you know what I mean but like it's a bit of a rant but that's been my Approach now to a lot of people and I bring this up because how do we how do we like gain approval of people and how do we onboard people and I think fundamentally that's been a problem of crypto that's like a marketing problem that we have there's no coordinated narrative on it unfortunately there's a lot of focus on price but I think if we just tone it back and say okay like let's just understand how in your daily life this could actually be super helpful everyone everyone can agree on I think that digital property and immutability Core Concepts and then you're saying which chain actually can provide that

security and then you and then I think that's kind of the flow um and that I think should be more and more emphasized in the public discourse when we talk about why this space shouldn't be try to be killed and so anyways I don't know what you think about that but I'll stop talking that was a good rat I'm telling you man I I I there's a lot that I've been thinking about here's what I'd say um crypto still this is a is it is gbt it's general purpose technology that presents this like immense potential but also has new challenges and it um whenever you have that it's really

important for policy makers and regulators and politicians not to play venture capitalist and not to try to guess which technology is going to be valuable and which isn't um and to remain uh like musically keep Tech neutrality as a core principle of good policy for for as long as humanly possible and um you know you have a whole industry of VCS like picking winners and losers is hard enough for the professionals it's a it's a really dangerous game when government should should get out of it and I don't know if you've ever have you ever heard of minitel yeah do you know Minotaur here's a fun little history thing Minotaur was um this video tax online service that was accessible through through phone lines it was probably the world's most successful online service prior to the

prior to the World Wide Web it was uh invented in France and um the in the internet's early days the the French uh government or France had a state-run it was a state-run service called minitel and it offered news directories and e-commerce the one thing that they got wrong is they said that they didn't need to adopt the internet they said that Minotaur was sufficient in that no new infrastructure was needed well you can I you can assume you can guess what happened to minute Health there's no Min and tell anymore we shut down because they didn't adopt the internet um and I don't know like that's just a familiar like you just think about that in replacement I would like the

financial system right now absolutely it's a familiar story so yeah I mean it's so crazy to think that like everyone now uses the internet and it's a core piece of their flow and like okay guys 2002 so the consensus was this is worthless technology and should go away because it created all this financial speculation and bubble that hurt a lot of people in 99 and so you know go away like go look at interviews of Bill Gates in the Today Show and I you know uh and then the same company then dismissed smartphones and so I think fundamentally it is really hard to predict the future there's a very

very few people that can like they saw smartphones and the idea of what that would unlock and create new kind of opportunities and so like I just go back this idea like there's really smart people in this space and like you should never kind of bet against human creativity and Innovation and like certainly not in an open source context like Matt this is like I think also something that is should be more and more appreciated like all of this is happening in an open most of it is happening in an open source environment and that fundamentally like expedites how we innovate by trial and error and people building kind of on the work of others and like that's that's here to stay and it

needs to happen without going too much into technicals but it it is also uniquely enabled by crypto because the problem with open source in web 2 is that it's really hard to agree on contributions and sustain like the sustainability of the contributions like look at Wikipedia it's open source there's all these mods like correct information Wikipedia is interesting analogy because it's gone from being outlawed your professors wouldn't allow it it was like you had to use Microsoft like in Carta or Encyclopedia Britannica which is really expensive and was updated once a year and now Wikipedia is like de facto like the source of truth if you

will why because it's it's in the open and people can contest certain pieces of information it's being updated very frequently and Carter doesn't exist anymore no one's ever buying Britannica Encyclopedia Britannic anymore um well I loved I couldn't my parents like never want to buy it to me so it's pretty expensive but anyways um so this is why like I bought the Wikipedia nft if you remember and then contributed to the pleaserdale what do you think we pay for that like we bought it for a million bucks yeah so um so anyways I think by the way Wikipedia Mike and I both uh whenever Wikipedia has um though like at the top like contribute contribute

always contribute yeah well you do but that's not very that's a great point because I wanted to bring that up very few people do that like they're constantly asking people for donations it's a very unsustainable I use Wikipedia like daily yeah there's always a disconnect with certain people rabbit holes there's always a fundamental disconnect with really powerful technology because sometimes it provides so much value but doesn't monetize enough and that is I think the problem with a lot of Open Source stuff like Wikipedia crypto on the other hand says no wait a minute we have a token and that token is going to represent a lot of the contributions now not everyone's a contributor to ethereum but if you think about the people that earn ethereum minors and these people that are providing security were stakers I'd say that provide security to the network that then allows that to be the

fundamental premise by which people want to build on top of ethereum like then then you don't have that problem of constantly asking for donations it's the token itself represents this balance in the market that says it's valuable and you're contributing that you are earning each or you're paying for eth if you want to consume these open resources available to anyone they come at a cost and from an economic perspective that's like fundamentally a really powerful concept because then you really can build on the like open source systems that we talk about in a prior episode as well of like this like fallacy of what is it like the common common goods are problematic and I think a token kind of really solves that from a

coordination standpoint at the end of the day all this is a coordination problem where people sometimes get a lot of value but you can't coordinate and you can agree upon how much you should pay for that water a park you name it right and so you have taxation systems these networks have taxation systems whether it's you're consuming gas or paying an eth um and so anyways it really creates a very sustainable I think more harmonious like system where contributors are being being rewarded and it sets you up for a long-term viability where you can have these systems actually Thrive without like an enforcement a central government like saying no you got to pay taxes so anyways like um yeah I think it's these are the times just to kind of round out this out because there's other stuff we need to

cover but these are the moments where you really reflect on why I'm actually here yeah why did this actually matter and I think like if you've been around I gotta say if you've been around for last year you're like an OG OG pick whatever nft badge we're gonna have to Mint for all the people that have been through because it's what's happened in the last year I think it's been probably like compressed like equally as important as what happened in the last like 10 years in crypto history I don't want diminish what has happened before but it certainly just felt like you know it's been a lot yeah should we move on

yeah let's move on my like I'm starting to get tired and this has been a monologue I apologize folks hey everyone quick break from Empire to tell you about another blockworks Channel that I know you're gonna love I've been in crypto full time for five years and have always struggled with one thing which is keeping up with the next big Trend as soon as I wrap my head around MVB we're on to aptunes as soon as I wrap my head around naptrans we're on to liquid staking derivatives I'm sure you've been there lockworks research has solved that problem for me our team puts research data governance proposal updates models and more into one really easy to use platform so I can

always stay ahead of the curb if I don't understand something for example like the platform I can search for an L1 I can search for a protocol pull up the platform with blockworksresearch.com I searched the term there's always an amazing amount of insight and a really consumable way uh right now you can subscribe to the platform it's 2500 bucks a year or 900 bucks a quarter hopefully you can uh make more than 208 dollars a month by using the platform and you can't probably in the wrong business but if you're not ready to subscribe to the platform today you can subscribe to the research team's free newsletter you can follow their Twitter handles today links in the show notes trust me once you do that you're going to want to subscribe to the platform if you are already to subscribe right now I got you guys with a little hookup Empire

listeners get a 10 discount for the first 50 people who use the code Empire 10 got you back check out the links in the description to find out more now let's get back to the show all right can you see this all right as of Thursday 1 pm Eastern we are looking at a uh so the airdrop just went live today we're looking at a uh 13.76 billion dollar fully diluted valuation total airdrop current values sitting at 1.75 billion uh the latest price update coming from I think probably from

different dexes is uh a buck 38. how many holders do we have we have a hundred and eighty two thousand people have claimed have claimed the airdrop um who's holding this stuff arbitrum holders the Dow is the biggest okay so it's all the Dows uh by dance it looks like these are just where's where the tokens being held um 474 million claim tokens 40 of the tokens have claimed already um interesting yeah the spin and the total amount like if if um eligible while it's like 600 and like close to seven hundred thousand yeah

it's a big it's a big number yep yeah no it's meaning are you biased because I'm an early investor yeah hmm any takes on what what this does or like thoughts on air like let's not talk uh let's not talk about the price but any thoughts on um this airdrop actually feels different than other airdrops I would I wouldn't put this and the blur airdrop in a different bucket of air drops um and what I mean by that is I think that the well only time will tell but I think that the users that started using blur and started using really GMX kind of like farming

for the arbitrum airdrop I think those users will actually stick around unlike all path airdrops um where you kind of farm you get the token you dump the token you move on to another product yeah I actually think that uh the products are starting to get good enough in crypto where these airdrops are like maybe a viable marketing strategy again I mean they are yeah no they are but like it used to be you get the users but you don't retain any of the users I think that GMX people started using GMX and they're like holy [ __ ] this is actually a great platform I'm gonna stick around that that I mean that's what you're banking on and the fact that like if you look at the arbitrary ecosystem like there's some I would characterize the first version of airdrops was like okay

we'll give you some free stuff there's not much to do here but come and claim it now like there's a lot going on in the orbital ecosystem right and there's a lot of apps like gmatics and others that people use and discover and they stick around right it's not all users and partly like just having I mean I'm closer to the Arboretum team I know how thoughtful they were in in trying to parse through and Target these wallets make them unique so there was like I think like they identified more than like 280 000 like same person like Wallace multiple us correspond to the same person and so yeah like they were close to nansen and I think they were just very

methodical and if you look at the way that they rolled out their test net way back when they were very thoughtful and not rushing it and where other projects tend to rush like arbitrim has just been focusing first on let's actually build security and have a stable Network and like I appreciate like the Network's pretty congestion now or down like okay like but still they've been um they've been just thoughtful around it and it was good to see that right it certainly hasn't feel rushed uh but you know there was a time I think the time has come uh for a number of reasons so people should go listen to the arbitrum episode the drop last week uh the reason for the stoken and to like bring on you

know create this sort of council and centralize the sequence there's a number of reasons why right and so it just uh there's a natural time and a place to have a token yeah yeah it's a big part of that kind of distribution strategy yeah I mean if you look at active addresses by Chain uh arbitrary optimism or basically mirroring each other and now it's uh I mean arbitrum is just 10x well it was impressive was that arborism had a comparable level of activity without a token and I think that fundamentally speaks to the value proposition of that Network and the activity that's going on there and the services and apps that are available there now you could argue like okay there was a time where the people intimated okay there's going to be a token at some point but I think a lot of it was

organic not all but it was just like very opportunistic people time will tell of course and we'll have to look at the retention of that airdrop yeah um let's talk about uh someone's got to correct me someone's got to DM me after this I don't know if it's Euler should be a nasty post on YouTube but yeah no I think it's like that I think it's like a meme of people mispronouncing this I'm going to call it Euler and someone can tell me why I'm wrong but um have you been following this hack yeah yeah so all right I'm going to try to give an overview on this Euler hack um and then everyone can correct me and tell me why why I just um don't have a big enough brain to understand this but okay so

Euler got hacked um on Tuesday the developments are on the the Euler Finance exploit took this kind of unexpected twist I think you could call it after the Ronin exploiter people remember there's this big Ronin hack the Ronin exploiter sent to eth to the oiler hacker with an on-chain note that you could read on etherskin to decrypt an encrypted message and if you looked at the GitHub repository Linked In the message it contained a security vulnerability which suggests that the Ronin hacker was attempting to then fish the oiler hacker because of the Euler Explorer signed the message with the package their private key could have been encrypted the oiler team responded to the oiler hacker with a message

advising them to be very careful using the encryption tool so now you've got the Euler team well Loyola team gets hacked by the oiler hacker but the oiler team's kind of advising the hacker like hey don't open that it looks suspicious the hacker has been in and the reason that they kind of suggested they do that is because the hackers got all their money and the hacker had previously been in talks with Euler through these on-chain messages discussing the return of I think it was like 90 of the funds which is like roughly 190 million dollars worth of crypto so the tldr's Euler hacker gets like 200 million bucks from oil or from oil or Finance then the Ronin hacker messages the oiler hacker trying to fish them trying to get them to uh to basically send them send send them the Hacked

money the Euler team sees that and they're like hey hacker be careful out there because we need to get that money back um so it's kind of unclear like whether these messages between the two hackers were part of an actual attempt to steal funds or if it was kind of just like two parties putting on a show um though and then last week the the oiler hacker sent 100 eth to the Ronin hackers wallet which created confusion over potential links between them and then the wildest thing is uh people have been speculating that the Ronin hacker is allegedly Lazarus Group which at this point I think we've got enough for a movie um but this is the running hacker I think um

that's been the Lazarus stuff is a pretty well known I think that was crazy was everything seemed to be okay until For No Good Reason apparently the Euler hacker or Euler hackers in 100 East to the Ronin hacker wallet so I was like okay wait a minute that doesn't make any sense in this plot so so like so it puts Euler or Euler hacker uh hacked you Oiler for the hacker hacked Oiler for 200 million hacker then sent 100 each to lavaris basically Euler the the same guy like it's like uh it's like it's crazy that there's no reason why they would send 100 to someone that like

tried to like have them download a secure like a package that would have compromised and at the assigned something with it that would have drained their wallet like it's like uh that doesn't make any sense no so anyways yeah uh yeah it's pretty crazy so not first screenplay um no definitely you've been following the D5 llama drama I don't want to say that because it rolls off the tongue well do you buy lava drama you know yeah that's that's a good one I have been following it are you close with that that too no I just know a few people there but I'm talk to them while all this has been going on um basically you have uh so Charlie basically created D5 llama

and funded it and stuff like that and uh and then Xerox ngmi came onto the scene joins the team or co-founded it or whatever has less Equity than Charlie funded it less than Charlie is like what I'm what I'm hearing from folks uh but he's kind of much more public-facing and um I mean when you think of defy law and you think of like Xerox and GMI having built most of it even though that's real that's you know he maybe he didn't do as much in the early days now he's done a lot more and so Charlie was like all right guys we got we gotta monetize this thing let's do a token and do and uh and Xerox ngmi was like we're not doing a token and now you have you had These two factions of the company it'd be like if you know Mike Mike was like we're

launching a block Works token and he posted that publicly on Twitter and then I posted no we're not launching a blockworks token and then if you're an employee you have to be like am I on Mike's side or am I on Jason's side and uh you know some of the people like the person who ran the Twitter account was like yeah token side and then the person who ran the telegram account was like no token side and um and there's a bunch of drama and uh but now it seems like it's been uh it's been resolved saying that um the fork had been so so what they did is they forked ngmi forked the code created a new thing called lamify but it looks like that Fork's been canceled and the website is going to continue to work on a single domain um but I think it's just a reminder of

the lack of clarity in terms of who owns what in crypto and uh the idea of shared ownership of a project doesn't always elegantly map onto real world like ownership of things I'm not sure I mean it goes back to the prior point that I was making around why a token kind of fundamentally yeah serves as a coordination mechanism now there could always be disagreements above like in this case the equity would have to map out certain tokens right yeah because then the team would take a certain percentage of usually how this works is the team would take certain percentage of the total token right and then that would be distributed to all the contributors I.E employees of this company um which is fundamentally the core disagreement here between Xerox and GMI

and Charlie so they should just go and have a coffee talk about ownership and then you know they're the good sake of the space continue to provide a good service the D5 limit those so a couple beers or maybe just give straight to the vodka and uh well yeah it's always it's always a point of contention like this is not a crypto problem this is the stuff startup problem yeah exactly um that's all the oh oh Sushi obviously well we will touch on sushi too much because we just did that whole okay I want to make is they similar to my understanding unit swap's also gotten this kind of subpoena and a lot of other G5 projects have in this case uh it was I

think the entity that was set up in the U.S just once the this um the MasterChef now which is based in the US they created a company and so they got subpoenaed and they try to set up a legal defense Fund in the order of 3 million with a contingency of another million to you know basically kind of go through this process um and so interesting kind of governance discussions around that uh some projects did reach out to me and say hey what does that actually mean for if you have liquidity and Sushi if you're using Sushi like what could happen and I said well my understanding is that one is a subpoena so it's a request for information um and it's to the core contributors not like the smart contracts are

deployed like you know like like a tornado like smart contract deploys smart contract now if it's immutable or not that's important things that probably we should understand is what what can like the upgradability of these contracts should be a problem liquidity can they freeze that liquidity can they stop that liquidity like uscc can right and so I encourage these teams say hey have your engineers actually look at the code once you're an LP or you're especially if you're if you're an LP in some of these pools then does the team have any ability to upgrade a contract to freeze those funds or can they not and I think that's a more important question right yeah um yeah and it goes for uniswap as well now

I'm not a developer I I can read contracts but not to this level of like sophistication but it would be good to know you know not just for sushi but for uniswap and other protocols right um so my understanding is that um I'm trying to think about uh Sushi is not the only one who who has got this and that there are going to be many more of these in that in the coming maybe even weeks but definitely months um uh there are a couple like when you get one of these I don't know if this is the case in sushi but I know another team that um we'll we'll probably make it public soon that um they're being asked to hand over all of their like every telegram message the founders ever send every email the founders ever

send every slack message anyone that the companies ever sent and it's a yeah it's um yeah just yeah probably around there with the SEC but I think Voorhees that there's I think Voorhees had a really good take on this which is because it's shapeshift basically decentralized the com not basically shapeshift decentral had a centralized Company decentralized the company lost 99 of the users because because of it but in order to keep operating uh in a way that Eric felt was uh along the ethos of how they wanted to operate he did it and his tweet nailed it he said Sushi created a legal entity in order to reduce liability but then that entity and that individual Jared associated with it got subpoenaed he said PSA

Public Service Announcement if there is an entity it is not a dow don't let lawyers talk into incorporation unless you want to be in it unless you want to be a corporation um and I think we're going to see a couple more of these coming soon yeah I mean there's a lot also going out after Tara yeah right oh uh do you see doe doe just got arrested yeah I guess that's a good way to end this like yeah apparently Dell got arrested in Montenegro yeah uh haven't been like I've seen some reports but uh hasn't hit mainstream Media or the police hasn't come out they don't poll saying confirmed yet and this is Thursday so yeah oh also there's rumors that he was there like he was in Serbia and I

guess yeah and it was close to Serbia and so yeah the SEC also sued Justin Sutton for the unregistered offering and sale um and token trading trading unlawful touting of crypto Securities and some celebrities settled already this is like Akon and Lindsay Lohan and a few others that out yeah oh I think Jake Paul yeah Jake Paul too a lot they've settled because they were being compensated and didn't disclose it so yeah so um what's the lawsuit for Justin say are the lawsuit alleged that son sold billions of Tron and BTS BTT Securities and failed to register with the SEC and uh he's accused of fraudulently

manipulating the secondary market for Tron through extensive watch trading you through employees and whatnot yeah did he also loses diplomatic status with one of these Caribbean islands yeah I think so yeah um yeah interesting cool man feels like a good place to end I think so I think we covered in most of it like we we didn't talk on macro but you know we did talk about the regional Banks and how that implicates implications crypto coinbase sushi arbitrum yeah I think it's been great man any any parting thoughts or good boats or movies exciting episodes coming up yeah we do have exciting episodes coming

up I'll plug that um we've Kane we've came from synthetics coming on on uh on Monday I'm to talk about that the uh the resurgences of synthetics is uh is fun uh big yeah that's gonna be really cool because Kane has so much and I mean he's an old-timer he's yeah he's seen a lot yeah uh we have a big conversation with uh Amy and Andrew uh that had the the two uh crypto leads of Morgan Stanley um uh both to like two of my favorite people in in the space and they're very crypto native um inside and they're both inside of Morgan Stanley so that'll be a fun conversation yeah um yeah good stuff going up good great stuff coming up yeah um

this place feels a good place to end thanks everyone for listening appreciate uh you uh bearing through all my Rants and it's great to be back so we'll be back here next week see you on Monday all right [Music] thank you