Eric Saraniecki on Why Institutional Blockchains Will Eat Global Finance

Transcript

All righty, guys. We're back here. We've got Eric Sarinki in the office in the nest in the tokenization tower. Uh we're going to be talking about the rise of institutional blockchains Canton. It's going to get fiery. It's going to get spicy. Eric, you're the first ever guest on the show. >> Truly honored >> in the office. You're live on air now. Welcome to the welcome to the tokenization tower. >> Thank you very much for having me. This is exciting. >> Yeah, >> absolutely, man. Uh it's been a long time coming. Uh but we're excited to have you. uh and you guys are doing some great work in the space. So, we're we're excited to chat. Maybe you could just tell us a little bit about yourself.

First off, uh you know, what is some of your background and and uh generally how you ended up uh with Canton Network? >> Yeah, sure. So, um uh I'm one of the co-founders of Digital Asset. I've been doing this 12 years. Prior to that, I spent about a decade at DRW. I got to join DRW super early, like down in the pits, paper sheets, fist fights, sort of a thing. Uh I was like that uh University of Chicago football fraternity guy. So, I could do math in my head, but I can get in a fist fight at the same time. It was kind of like right place in time for me to go into the pits. Uh, and I've been in Bitcoin since 2010, and I helped start Cumberland with one of the original pizza transaction guys.

>> So, just kind of like, you know, I I I've been lucky enough to have a, you know, a group around me of people that have been super early into the space and I just, you know, kind of been very very active in it. Um, and we had kind of a dual mandate in Cumberland, which was market make and provide liquidity, which would bring more institutional demand, but also invest in the things that we thought was missing or build the company if it didn't exist. And really, that was the origin story of digital asset was we were looking for things that were really going to bring institutions into the space to adopt and use these ecosystems, not just speculate on them. And we didn't really see anything that was taking that seriously. And that that goes all the way back to late 2013, early 2014. Formally incorporated DA in

14 and left uh uh DRW for that not that long after. >> So, how did you find Bitcoin early on? >> Yeah, I've been asked this a few times and like my my actual memories are a little bit later than when I actually got started. You know, like I I will jokingly say something like, "Oh, well, you could buy drugs with it online." But the Silk Road was 2011, >> right? >> But uh I'm trying to remember where I got in a little bit earlier. I think it just had to do with some like very early street transactions and kind of doing cash swaps for bitcoin. I, you know, stopped doing that once I saw the source of some of these bitcoins, but you know, just uh uh I think it had a lot to do with that peer group that I had at DRW

and some of the people that were very early. It was just kind of in the zeitgeist somehow over there. >> Yeah. >> Yeah. Yeah. >> So, on our first episode uh here in the nest, it was yesterday. It was just Rob and I and we were talking a lot about how uh there's a regime shift ongoing in the space. Uh right, we we are seeing the rise of the professional. We're seeing the the institutions come on board. We're seeing just this general uh shift in terms of token structures, equity structures, um how people are positioning their brands, all of that.

uh Canson has obviously been you know it's been at least three years that you guys have have been creating this this uh entity and this blockchain. You guys have seen this coming. What is this regime shift from your perspective? How would you describe this kind of maturation and growing up phase that that the industry is currently in? What's going to be gone? What's here to stay? Like what are we gonna you know what are our dos and don'ts? >> Yeah. Okay. Well, I mean, not not to disagree with my gracious host to begin with, but uh I don't really agree with the sea shift. I mean, I think that it's more kind of a a growing awareness more than a than a shift.

>> Like going back to the Cumberland days when we started this thing, you know, the Cumberland thing, I didn't start anything else. The you know, >> those are institutions. Those are really big firms. The people that are trained this for size are really big firms. You look at what Binance and Coinbase and OKX have become. They are huge firms. These are institutions by every definition of the word. And you know, so if if you know, if I agreed with the premise, what I would say is that that the children grew up and became really valuable. Uh but I think that it's always been the undercurrent from the beginning. I've personally rejected the sort of it's peer-to-peer, censorship resistant decentralization disintermediation. And that narrative has never resonated with me probably to my own financial detriment because I've

never been as sort of like yeah psychologically committed to this like these other ecosystems. Uh and I've spent you know 12 years you know along with many other people building digital asset in Canton. So like that's really where my my passion focus has been most of that time. But I I think it's more the space has been very young. I won't use like negative words like juvenile or [ __ ] childish, but it has been for a very long time and they're getting kind of squeezed out by well the next era of evolution is much larger scale and that is driven by different participants generally speaking and they have a different set of requirements and so just kind of everybody waking up to that and even if it's yourself I mean think

about it if you're a Bitcoin OG and you're getting you know threatened of being kidnapped in Paris right now like it's a very visceral real moment of something that you've probably thought about a lot but suddenly became very real and that's partially driven by the global awareness. I mean look out your window, everybody here knows what Bitcoin is now. So like that sort of general global awareness, people understanding how they can start to attack it, what it means for individuals, all that sort of stuff is kind of coming together at the same time. So I think it's mostly just everybody waking up to what they already knew. And so you're saying the institutions were kind of already here.

uh everyone's sort of waking up to that. Uh you see Bitcoin as sort of just another asset class. >> Um nothing like uh truly groundbreaking in a certain sense. Nothing it is, you know, re it it's groundbreaking in the sense that uh you know you have this distributed ledger technology, maybe that's a bit more groundbreaking, but as an asset class, it's an alternative currency. We have gold, right? We have we have these sorts of things. What what is the mandate that you set out for digital asset and Canton given the thesis that you already explained, right? we kind of have this opportunity to uh work through the emergence of this new asset class with new technology.

What was the value that you saw it could provide early on? Uh and and how did you set out to to support that with Canton? >> I mean I I sometimes say this is like we're the last industry where when I click the button in my phone it doesn't actually happen. >> Yeah. I I think about every other thing in the past decade that has completely changed around, you know, the phone in my pocket. >> Yet somehow finance still >> and and that's true whether you're trading, you're moving money. Like the front end of everything has moved unbelievably fast, but the back end hasn't budged an inch. And you know, there's a lot of entrenched reasons for that, but it's always been trying to close that gap >> because sometimes it does actually happen for you when you click the

button, but the way that that happened is someone used their balance sheet or someone plugged a hole with risk capital or someone is extending some credit at the last mile to make that happen. And so it's it's not that these experiences aren't creatable, but they're not really scalable. And when you like zoom out, it's almost mind-blowing how much capital sits in the system to just kind of hedge these risks. >> And I always think about the latency of the system and the capital that sits there as being attacks on humanity. >> And it's not really accreative to anybody. There isn't anyone like absolutely printing money because of these latencies. Like generally, if you're one of these intermediaries, it's your balance sheet that you're putting up front to kind of help facilitate

this. So, it's not really to a lot of people's benefit that it's happening. It is a general tax and that's what kind of sets the scene that it's actually possible to fix the problem because you're not fighting against a lot of entrenched interests. >> You have other incentive and cold start problems, but you don't really have like activist people against it. >> Like sometimes in health care space, we spend a lot of time looking at the healthcare space early on. Often the entity that has the capital to fix the problem benefits from the problem and so it's just there it's like a non-starter. But in capital markets, generally speaking, the problems in this system are that we already live in a distributed ledger, but our protocol for consistency is reconciliation.

>> And we have an opportunity to upgrade that into something that's actually a real-time reconciliation system. >> Yeah. And I that's part of why I think we feel like this technology is inevitable. uh not the asset class but the technology itself is sort of a net net positive win-win for everyone that tends to adopt it and more so as more people adopt it as network effect liquidity start to build on these networks. Do you would you agree with that sentiment? Do you think that it's essentially a no-brainer tokenization digital assets lower settlement times greater understanding of where the risk lies at any given point? uh ultimately this is a bene beneficiary bene fact benefit to all of the institutions that tend to adopt this technology.

>> I would have agreed with you five years ago but I think that uh you know again I'm we've been in this 12 years. This is probably my third or fourth sort of corporate blockchain cycle that I've lived through and they've all failed. You know, to be clear, we are definitively not one. But, you know, I've seen a number of, you know, these these corporate blockchain cycles come and go. And for me, what I find so compelling about all these public networks, to be spicy, the tech is often really quite poor. >> I mean, maybe not the actual implementation, but like the design.

We're going to be the network for the world, but we're one we're one singleton vertically constrained system. Like, it's just kind of like very naive. Um, but the tokconomics are really interesting because you have these cold start problems in any network that you like, can you name the first 10 apps that came into the internet? You know, there there are only first mover disadvantages in some of these networks. If you're going to be the adopter, you're going to be the builder. You're dealing with the worst version of the tech. You're dealing with an ecosystem that doesn't have users yet. You don't have the asset you want to interact with yet. Like so creating a financial layer of first mover advantages where technologically there are only disadvantages >> I think is something that you really have to embrace and it was something

that we did quite thoughtfully as part of the canton network like it was just tech for a long time to make sure we really ironed out like can the tech meet the actual requirements of the users >> are there no obvious reasons to veto this or prevent us from using it or you know like all that sort of stuff. So just when there's not a lot at stake other than kind of a pure tech vendor system like really iron that design out. Yeah. >> And that was the first you know five to seven years of our of our lives. But then you know for more than the past three years probably the better part of the last four and change has really been about designing the tokconomics and refining the tokconomics. And that's where I think that the combination of the two is what will win. One without

the other I don't think has much of a place. And it's easy to just say it's just the tech. But, you know, to be quite empathetic to these institutions, if I am someone that runs a business at a large institution, I'm getting P&L and paid annually and if I have to make a three or a fouryear sort of tech bet, that's hard to do without something like it just I'm going to take on cost and I'm going to take on risk to eventually remove cost and risk is a very difficult calculus given the incentive structures inside the institution. So you have to kind of recognize that and meet that where it is and create an incentive structure that matches their incentive structure and aligned incentives is at so many layers of the stack. It's not

just you know like hype where we burn all the fees or like encant we burn all the fees. It's not just at that layer. You have to think about well who's getting them? Where is it being distributed? Who's earning it? What can they do with it? There's so many elements to it and and we learn more every single day. >> Yeah. Yeah. I mean it seems so right. you guys are collaborating with, you know, JP Morgan, DTCC, a lot of these institutional folks at scale and this is aligned with this kind of ongoing current gap in sentiment, right? Where you've got these kind of crypto Twitter token bare market ongoing where there's this, you know, on the on the other side, you've got this kind of institutional scale tokenization, stable coins, everyone's running a PC for a blockchain or some sort of application.

You guys seem to actually have the same positioning right now from a brand perspective. It seems like institutions love you guys. JP Morgan, DTCC on the validator side, on the uh on on on that kind of side. And then on the retail sentiment side, people on on on Twitter and across kind of conversations, they're like, "Is Kant a blockchain? What is it? It's private. It's a black box. You have no idea what it even is. You know, who's running this thing? Is there any censorship resistance?" And so, you've got this really interesting place to be. What do you have to say to that? Like >> you earlier said that Canton is not a corporate chain. You've gone through >> but that is for sure what what they would kind of what do you have to say to the

position of Canton with regards to this kind of gap in sentiment at large in the industry? Why does why does crypto Twitter hate you guys? >> Uh I mean look I I'll give you a good faith answer but let me give you a shitty spicy answer first. It's because they're looking in the mirror and they realize the emperor has no [ __ ] clothes. >> Okay? you know, they're they're holding something that they can't actually explain the path to delivering the vision that they've been sold. >> And it's a scary thing to do. Like, it's it's tough to put your own money, your own personality, your own identity into something, which is what these communities have all been great at. It's like sucking up all this sentiment and interest and, you know, gee, whatever you're on, you know, like screaming it every morning on Twitter. Like, that

that's that's an incredible thing, but then at some point there's got to be some substance there, right? And a lot of these things don't really have substance. You know, there there's so little creativity or iteration over the original idea. Even even, which I think has produced an outrageously different outcome to Bitcoin, the design decisions are almost identical. >> Yeah. >> Almost identical. And I lived through that period. So the way I tell it is not necessarily the way that they felt it or they they believe it or any of that sort of stuff. But from my perspective as a very early Bitcoiner, a Bitcoin maxi, it was always Bitcoin plus smart contracts.

And it was proof of work. And it was like we're going to have sound money but with programmability. They found product market fit in a very different zone. They found it in DeFi. >> Yeah. >> But then none of their incentives, none of their design, none of their structure, none of how they think about the network, none of that is built for DeFi. And then downstream of ETH, it's well, how can we compete over consensus mechanism because it was slow and expensive for a short period of time. There is so little experimentation outside of it. I'm so like pumped. I know you guys are hype boys, but I [ __ ] love hype. I think hype is great because it's like, >> hey, bass is completely centralized, so why can't we do the same thing and like just kind of but actually provide value and focus on value and drop some of this

religiousness and like so so it's it's just it's so interesting to me that >> where people apply their religious filter. Yep. >> And it's very clearly being applied to us where it isn't being applied in other ecosystems or maybe you've lived through it a little bit more directly in the hype world where it was probably being religiously hit over the head too for a while until the value was so overwhelmingly obvious that they couldn't ignore it any longer. And I think that the the things that will stand the test of time and already have are the things that are pragmatic and deliver value to the user, which is not a I don't think that's a hot take at all. Yeah, >> like why why does almost everybody access the network through Binance and OKX and Coinbase or Fireblocks or you

know MetaMask? I mean these are all directly intermediated experiences through an institution. Why why do they dominate? Because they provide real value to the user and like they do every day. They get better at those things every single day. >> Yeah. you know, so I just I I get it. Like there's this kind of I'm holding a bag on something that I don't know how to justify why it should be worth more. >> Yeah. >> And that game is kind of shifting very quickly under people's feet. And you know, we may or may not stand the test of time, but you know, I believe that we have a very differentiated and thoughtful alternative to what you might already have in your bag. Yeah, I mean we were talking about the evolution of of kind of the structure of tokens as of

this new administration post Hyperl obviously we love that but um you know we were talking about how the how the pendulum has shifted so far into the direct calculation of what your revenue is right now and and doing PTE ratios and really a lot of like very shortterm oriented financial modeling whereas in the past what we've been sold by influencers or institutions or anyone with a platform is this metaf's law rule of network effects on L1's and how blockchains have this kind of special property where uh you know you're able to scale based on the number of users this should imp you know create more transaction fees build a more resilient kind of uh overall blockchain that is

worth a lot the pendulum has shifted so far away from that away from any optimism in this kind of bearish phase towards this like what's your what's your 24-hour uh you know fees and revenue on DeFi Llama, what does that look like? And then how can we kind of like make a valuation uh game based on that? And so I you know I kind of think the pendulum will kind of shift back towards more somewhere in the middle where like revenue is welcomed but also we're understanding that we're very early in kind of like this liquid venture type of investing. So to put you on the spot a bit here, Canton Network I think is trading around three to four billion in that kind of range. Um five and a half >> five and a half. Thanks thanks for correcting me. Um why is Canton worth

five and a half billion? >> I know it's like really [ __ ] low right now. It's crazy. >> Okay. >> Um >> yo, >> you don't think so? I mean come I mean look at look at the multiples on fees that some of these other ecosystems are getting. >> Yeah. >> Okay. Let me let me build a let me build a story from like this. >> I love the [ __ ] No, no, please. >> So So um you know I I don't know that the pendulum is going to swing back all that much because you have an audience coming in that's just a lot more thoughtful and they're going to make longer term decisions. Like the idea of just kind of these waves of retail coming in and out and letting people out of their liquidity, they've been taught the lesson too many times that that's not

going to work out for them. Yeah. >> Right. So, I think that what you're similar to your liquid venture statement, you know, imagine if you're going and raising money in the valley, you have to make like a credible business argument, even if it's early. Here's what I do. Here's the problem that I solve. Here's I'm going to capture some portion of that value that I solve. And you're going to get graded on every round through some progression of those metrics. And they may evolve, but >> there the metrics get harder and harder as you go up the value chain, right? They don't they don't get easier. So, I don't I don't really anticipate that if we think that the the value of these worlds are going to expand, whether because they're facilitating higher value things or because the tokens themselves are more valuable, that you

won't be held to a higher standard as we go. So, I actually think it's more likely that the pendulum hasn't swung far enough honestly. >> Uh I like it. >> And then, you know, in terms of like how did we do this? I mean, we launched, you know, foundation in the US, Peak Gendler, Hunting Heads, digital asset, headquartered in New York City. Uh, we have publicly traded financial institutions that were part of the launch. Um, they had never held crypto before. It's on their balance sheet. You know, we wanted that like we wanted to be an ecosystem that that was eligible for people. And one of the things that we said is, well, can I do like a discounted cash flow analysis on the value of the token? like how what would I have to design to make that possible?

And I think that being able to be able to map how what happens in the ecosystem directly translates into value of the token. If you don't have a really strong story about that, then I don't think you really have a story at all. So I actually think that the pendulum hasn't gone far enough. Um and then you know in that regard you know there are two things that we really focus on in the network when we think about the success of the ecosystem and we are not a company. It's not centralized. It's not run by a couple entities. It is truly a decentralized ecosystem. But if you were to think about it like you would a publicly traded company.

>> Yeah. >> You would kind of care about roughly two things. You would care about revenues, topline revenues, and that they're growing, right? So for us, that's burn in the network. Fees, every dollar of fees is burned. So that's a onetoone relationship. That's automatic. That's in the protocol. There's no discretion. Every single time someone uses the the network and it has fees, those fees are burned. So that is like a a bakedin sort of thing. So we're always trying to grow fees or burn period. And then just like any other company, you would say, well, what's the quality of this revenue? You know, are you you know, does it have positive margins? Do you have high churn? You know, there there are many different ways to think about the quality of revenue, but one of the ones that we're really focused on are like the durability of the things that are

driving the fees, right? If you to pick two extremes, if one is memecoin trading, which we expect to come and go with fads and, you know, be hotter than [ __ ] and then disappear at some point in time, that's not very durable, right? We don't really know what the long-term, you know, high water sustained mark of activity. And that is on the complete opposite end of the spectrum. Payroll is insanely durable. Maybe there are more companies, maybe there are more employees or less. But that [ __ ] happens without failure, right? Bank financing happens without failure. Repo happens without failure because that's part of that bank financing. So, we are trying to be as deep into that inelastic side of the curve or that durable side of the

curve as we can be. Are we 100% there? No, we're not. We're still, you know, somewhere in between the two. But that is our constant drive and focus is to push the quality of that burn as far to the right in that spectrum as possible. The reason is that you should get better multiples on fees the further into the durability side of the the curve that you are. Right. And right now when you look at these other ecosystems, they are getting insane multiples on fees. >> Y >> that don't even translate to value to the token holder. >> Call them out who >> I'm not gonna [ __ ] call them out. >> I'm not gonna name the names >> because they don't have burn mechanics.

>> Yeah. that are, you know, you're you're double dipping. Validators get the emissions and the fees. That's double dipping. That's a classic example of a Bitcoin design decision that leaked into the other ecosystems that doesn't belong. >> Yeah. >> Right. If I have permanent emissions and I have fees that go to the validators, that's double dipping. >> Well, then you you just can't count the validator emissions as any sort of protocol revenue. That's just not that's just inflation. >> No, no, I understand. But I just mean part of the speedrun to zero fees on a lot of these networks is that there's no structural reason for the fees to exist.

Like if you got rid of fees in one of these top 10 networks that don't have burn, the validators are still going to be there. >> And are the fees that are generated on Canton's network, is it primarily paying like the equivalent of a gas fee trying to get uh settlement onto a shared block space or is it something that's a little bit different because you guys are coordinating transactions amongst institutions with durable? >> It's any updates. any update on the chain generates fees and we've set the price pretty high. It's expensive right now honestly because I think that this like speedun to negative you know fees is nuts. I think that it's not really thinking about the long term. Um but one really important thing about the fees in the network is that they are not paid to the validators right

>> they are paid to the app that you're interacting with. It's kind of like interchange. So, you know, if if the minimum fee in the network were a high number and your use case meant that that was an untenable thing, well, the app that you're using could choose to pass through its revenues to offset some of your costs, right? Like, think about the way Interchange works. You use your credit card generates a lot of fees. You're getting points or cash back and that's a very competitive market as people think about how to play with that margin or customer acquisition cost and how to balance their their margins versus CAC, right? So um the fees in the network go to the apps in the network which is a fundamental I think mistake of the other ecosystems.

>> All the other uh incentives are primarily going for the validators to upkeep the network but so so then >> it's overweight >> right >> it's overweight >> and and we've had some of our most viral moments on this show talking about how uh staking rewards are are over inflated uh overpaying for security. there is some sort of minimal viable uh what is that incentive in the Canton network to incentivize validators to participate? >> Yeah, maybe talk to secure the kind of termination of that program with the validators upcoming I believe the end of the month or >> Yeah. So the original design of the network is that the only sort of like permanent emissions that go for not really doing anything other than providing infrastructure goes to what's called the super validators. All the

validator in the app rewards are earned pro rata to your activity in the network. >> But because we did a completely fair launch, we did zero tokens at the beginning. No premine, no pre-sale, nobody had anything. If your rewards are generated based on using the network, you're not listed anywhere yet because I couldn't go give 5% of the float to an exchange to get listed and I can't buy them on the market. Like how do I use the thing? So we had a bootstrapping issue and so into all the validators we added an omissions element to it to help this initial sort of bootstrapping.

>> Yep. >> And it was the remainder of if there is activity rewards if there's anything left proud to distribute that to the infrastructure that exists. >> So the effect it was effectively like a block reward similar to Bitcoin. >> That's right. And when listing happened and there was sufficient distribution of inventory into the market, so people could buy it on just about any major exchange on Earth and there was a broad distribution of it already. There's no need to continue to just distribute >> the block rewards. >> The block rewards significant distribution >> and especially since there's already this other reward mechanism designed in there which is all around activity in the network, right? So if you're an active validator in the network, you're making significant, you know, returns from a from a rewards perspective. Uh

but there was no need to have this incremental block reward. So that's that's what's been phased out. Yeah. >> So we're just going to the original white back to the original white paper structure of all this stuff. Like I said, we've learned through, you know, hard lessons learned. There's not a lot of people that have gone down the path that we have. Yeah. And so we've bumped into some realities along the way that the thing I'm most proud about our community is that it is insanely proactive about making changes and we have a so the foundation is like an open governance thing. Anybody on earth can join it. If you guys wanted to join the foundation, I would love to have you.

>> There you go. >> You honestly can join. Uh it's structured the same way that like the Linux foundation is. So there's a membership fee, but you guys are less than a few thousand people. So your membership fee would be very reasonable. >> There you go. And you can then participate weekly. There is a technops call. There are marketing calls. There's a tokconomics review there. You know, there's so many things in the tok in the weekly tokconomics meeting. We sometimes have 150 organizations show up. >> Wow. >> I don't I can't remember the last time we had less than 100 >> that was there. And it is a lively active conversation. We cover a lot of ground. We discuss a lot of contentious things and you know then we actively vote on these things and and make adjustments as we go. Um, and I think

that that's a very important part of a lively thriving ecosystem is that you can see we intended a we got Z, should we try something different? And I think that if you don't acknowledge that it is a bit of a living organism and that you don't have the right machinery in place to adjust that organism in a fair truly like open way across a bunch of different participants, then it's it's very hard very hard to actually accomplish your goals. So I was going to ask a question if you would expect some validators to drop off since that subsidy is no longer being but I'd imagine that you know over a hundred people you know join these calls these you know 100 plus organizations joining >> you're comfortable with you know the

amount that is going to continue and the people that are going to drop off every you know if I remember correctly I think this got approved before the end of the year and I think we're two of three step downs into the process so far We still have a waiting list in excess of a thousand validators to join the network. Very cool. Um, and when I say waiting list, like a lot of people maybe just to touch on one like fairly fun thing for people. Oh, it's a permission bl. It's not. >> It's just rate limited, you know, like we're just trying to do responsible growth.

>> It's there's no no one's getting KYC. No one's getting put through the ringer. No, like it's just okay. You you fill out a form online, you get prioritized against anyone else. >> You know how you get to the top of the list, you're on test net, you're ready to go. >> Yeah. That's like the number one criteria. Is your note actually running? You know what you're doing. You're ready to go. You have something to do. Cool. You're on the top of the list. Like it's it's not it's not really very scientific, right? You know, >> and and it it it speaks to the amount of fees that you guys have flowing through the network now that people aren't going to drop off and they're no longer getting the subsidies. It means that you guys are generating significant fees to incentivize validators to continue joining the list. one of the primary

sources of fees that I I'd imagine you mentioned earlier the repo market you guys are doing there's some varying numbers here but as of December 2025 $384 billion per day uh maybe more or less now but on the scale of hundreds of billions of dollars per day via this partnership with Broadidge this distributed ledger repo program yeah um what is >> you know $384 billion per day what does that roughly equate to in terms of fees and generally I'd love to understand more about how you've been able to bootstrap this repo program via >> canon like maybe just give us a bit of education on what's happening first you're you're not going to expect this answer

>> okay >> zero >> zero fees >> zero fees >> so it is not currently doing anything through the mainet it will okay but they've been in production for >> probably going on six years >> um and you know one of the cool things about Canton is that it's this unlimited horizontal scale availability ecosystem and what's different about Canton versus you know we've seen a few iterations of that in the past again I'm not going to pick on anyone because I think that conceptually they're all very very in the right direction but execution they didn't hit it the big delta is that we have global composability across all these subnets so no bridging right like think about your experience on the internet I've got one browser I hit n websites

>> right that's really the way that can works I don't need a node for that subnet I don't need a wallet that works with that subnet I have a wallet bullet. I hit n apps in the ecosystem. If I want to compose a bond at Goldman into a repo transaction at Broadbridgeidge, I can do that. That happens over the global synchronizer. Those things are coming. So, we're hitting these fees before we've even put these large scale institutional things in some attach rate over the global synchronizer. The thing that will draw that into composing over the global synchronizer is the cash lag. So, today the cash lag on on that whole use case goes fed offchain. So it's it's the security, it's the workflow, it's the prep, it's all that sort of stuff has material benefits for people before we even include the cash leg to it.

>> When you say goes fed, you mean like the money >> wire transfer. >> Okay. So that's all that's happening. Yeah. >> But a lot of the operations is taking place onchain. >> Trade confirms, the scheduling, the the the asset itself, right? the settlement of the asset itself, all of that that is all on chain, but the cash leg is still going Fedwire. >> Okay, >> because >> okay, >> stables today, they're we're just starting to get guidance that you can use them in capital markets context without massive balance sheet hits, but it wasn't true for a long time.

>> Right. >> Right. And and so even even then after that guidance, I think there'll still be some blockers to it. But that's why I'm so excited about stuff like JPCoin and all that stuff going live because I think that's where you'll start to really see intraday repo, weekend repo, and I don't know if you've been following all the pilots we've been doing, but doing a repo on a Saturday morning for two hours >> is going to be incredible. The amount of adoption we're going to get for that sort of >> Could you tell us like what are some of the knock-on effects of that? We've talked high level about how this, you know, lower settlement times you, you know, lower uh custody risk, counterparty risk. Ultimately that's you know money saved money earned greater liquidity you can move this money faster higher capital velocity like

>> specifically around like reserve management right and like the change in the structure that these firms are going to have to undergo as a result like what does that actually >> what kind of value does that unlock >> I'll give you I'll give you a few examples and I'll try to kind of jump on both sides of the aisle. So let's start with I think your audience is probably a little bit more cryptonative. So, you know, I don't know that a lot of people realize this, but you can't at scale create or redeem USDC off hours outside of Fedwire hours. We used to be able to, but with the death of I can't remember if it was Signet or or Silvergate, I can't remember which one was the real backbone to a lot of this, >> but the the creation redemption of USDC on a Saturday at scale, unless you

co-bank with them, is very very very difficult. Now, um, what that means is if you're a large liquidity provider or a venue, you know, like an exchange, you have to carry what you guess your liabilities or working capital needs are going to be every day after the Fed closes and every weekend. >> I don't know if you guys remember, but Trumpcoin went nuts off Fedwire hours and the market literally didn't have enough stable coin liquidity to trade it. There's like a really great article, I forget where it was published, but I think Galaxy was lending billions of dollars of stable coins.

>> No way. >> To liquidity providers because they happened to have had the excess, >> you know, in that off hours and they were delivering them to people to be able to do it. So, this is material. It might be a half yard or a yard, 500 million to a billion dollars every night, every weekend. In the best case scenario, you didn't need that much and you lose some interest. The worst case scenario is you miss the trade because you don't have enough working capital, right? The returns on missing on trades are way better than the interest on a risk-free bond, right? So the so the worst case scenario is you need the money, you can't mint the money, >> right? But once you have an 24 by7 repo facility, I can sit in a treasury 100% of the time and I can deliver it to the

issuer at any size and get stables minted from scratch, use them and return them and pay for six hours of interest if that's how long I needed the working capital for. >> Right? And that that's true in crypto markets, that's true in capital markets. Um, you know, if you're talking about payments use cases, do you know how much preunding in the world is just kind of pre-placed into different locations? >> That was going to be my question is is so teams are or treasuries are overcompensating with how much cash they might need over the weekend because they know that they can't get it.

>> Every form of business does this. You do this in your personal life. >> Why isn't every single penny of your PA invested 100% of the time >> into Canton? Well, because you know maybe you're gonna go out at night and you need some cash. Well, you can't draw off your money market, right? And you're not going to pay the >> 42 and a.5% entrance charge to borrow cash against your credit card or whatever it is. >> Right. >> Right. So like you don't you sit overallocated into cash at all times but if you could guarantee that I'm in a risk-free overnight rate >> and at any time I could materialize that into the form of cash that I need.

>> Correct. >> Because it might be a deposit, it might be a credit card payment, it might be cash, it might be a stable coin. So it's really any form of cash that you need. >> Then that becomes >> like a very interesting optimization to do. And you know, for you know, for us, maybe that's not going to make like, you know, the difference between a two-bedroom and a three-bedroom apartment for us, but for a international corporate that's doing this in, you know, 152 jurisdictions around the world, this is a material number. Yeah. So, Eric, this is a good kind of segue into let's just talk about the size of this operation here. So if Canson is to uh succeed in its vision and mission, I think uh the repo market is doing 10 to 10 to 12 trillion dollars

uh a day uh in total. Um so that's one market. Um but just give a give us a sense of how big this like the broad tam of something like Canton really is like um you know let's let's think about the repo market the uh kind of treasury market uh the equities market financing payroll durable >> like how big are we talking here as far as like we're just scratching the surface of bringing this this type of activity on chain um and then maybe just walk us through like what you see as the evolution of making that slowly chipping away at those percentiles.

>> I I I think that the number that I would say is like a ludicrous number, right? And and an argument I've been making with a lot of the you mentioned DeFi Lama before, but with these types of institutions is that the way they've structured their reporting is it's all like knives out like, "Oh, I'm doing better than you." Instead of like arms together, how much of the world's GDP have we rotated on chain? And I think it should be a joint mission for everybody to be rotating as much of the world's GDP on chain as we possibly can. And so right now it's measured in probably sub basis points of the world GDP that's online. And we should be in the percentage points in the next, you know, couple two to three years. That would be an astronomical change to the world if

we manage to pull that off. I don't think you'll ever get to 100%. just as like I don't even think we have really 100% of finance on the internet today, you know? So, I I'm not sure that that number is ever going to be bigger than 15 20%. But even if you got to 2% it would make a material difference in the world. Um and then you know to your question about like what's the path um you know when you have a TAM that's that big the biggest problem is that you start to lose some focus. You could kind of go after anything and everything and then accomplish nothing whatsoever. And so for us, you know, I try to keep this as tight as possible in our goto market motion. In every market, I want four things plus one. So the the four things

are I want the short duration government bonds in every location. I want the commercial bank deposits in every location. I want the stable coins in every location. And I want the repo and spot g bond markets. and not just individually but all of them working together seamlessly so that I could go in and out of any one of those things as a lending transaction or a spot transaction at any time of the day. >> Now if I have that in two jurisdictions I now have a very interesting international settlement market. I could do a US government versus guilt settlement at scale because the bond markets are very deep.

>> And if that happened to have been part of an FX settlement, someone could go into a commercial bank deposit. if it happened to be part of, you know, permissionless payment, someone could go into a stable coin, like whatever that may be. I think you start to completely rewire the international capital market system with those four things. >> In addition, I think you also want the equities markets because it's just an obvious sort of where are people directing a lot of their money >> uh part of the equation, but it's not necessarily an enabler of the other four like those other four build upon each other. Y >> so equities is still incredibly important because it's a massive sort of wealth draw but it's not the same as the other but the equities market has very very similar characteristics the lending market's very important not just the

spot market you know the creation redemption market for when you talk about like ETFs or baskets or structured products so it has almost the exact same dynamics u and they all play off of each other in very interesting ways but it's it's not necessarily the same sort of like international commerce enabler that getting the cash movement around the world, correct? Would kind of do. So, largely bonds and cash of, you know, kind of every form in their fungeability and then the most obvious asset class that you would, you know, go in and out of with that cash. >> What What does the fee landscape look like? uh when you're primarily dealing with some of these, you know, cash cash assets uh or bonds, um these are doing tremendous amounts of volume on uh on a

very frequent basis, but they're uh accustomed to relatively low fees. >> Who who are I might be getting that Yeah. So I Well, let me just I guess I'll I'll frame it in terms of a question like what is the current landscape of fees? What what are they accustomed to charging now and paying now? I guess is is the right question and then where can that go with Canton? >> I mean things are calculated in basis points generally speaking >> in finance right I mean it's it's very rare with thea with the exceptions of like swift infrastructure or you know sometimes in the exchanges trade infrastructure that you're paying like a flat rate a message.

>> Got it >> right. But generally speaking the moment you get off the infrastructure you're in VIPS land. >> Yeah. >> Right. So I think that really where Canton stands as a direct alternative is to the existing messaging infrastructure that we have that plums all these things together and you know there there I think the long-term opportunity is for us to figure out sort of unit economic um uh exchanges for like like if you think about the current price to use Canton network think of it as like the peak variable rate and we'll figure out ways to do kind of like unit economics in exchange for removing variance.

>> Yeah. Um I I would anticipate we'll figure stuff out along those lines. We we're having a bunch of conversations, but it's too early to like say that we know exactly how that's going to work. >> Yeah, Eric, as we kind of come to a close here, just speaking to the Canton community at large, um token holders, uh the validator network, the team, the the ecosystem, what what's next? What is the you know we we just talked about what that kind of cracking down on bips by bips to get the 10 15 20% of assets onchain in those four categories that's going to take obviously a while this year 2026 you know first half of the year what are we looking at what >> first half of the year in the United States we will have all four

>> boom all four in production uh and the second half of the year we will have them in various ious forms and at greater fidelities of production. >> This stuff is happening right now. >> Beauty. >> Um, Eric, my last question for you is, you know, Canton wants a fair launch. Uh, like what how do you p how are you personally like I'm sure you have a bag, right? You must I actually don't. >> So, like how do you >> any Cton tokens? >> All the Canon coins that I have I've purchased on the open market. Got it. Right. Okay. >> I mean, all the you've purchased are on the are on the open market.

>> I've heard this from other content Canton members. I have equity in digital asset. I'm a founder of digital asset. Digital asset has tokens, but it's a part of DA's balance sheet. It's not like it's in my wallet. Right. Okay. >> Right. I I have the same claim to that that I would any cash or distributions that the company would make to all shareholders and any Canton coin. And I I know this to be true for every other employee of digital asset, they've purchased on the market. >> There you go. I mean, I I I've got an open plea out to people in the ecosystem to build me agentic T-wap bots so that I could just buy every like 30 seconds for the next 100 days, you know, stuff like that. Like I because I I really don't ever want to get caught in a situation

where it's like >> I'm working with so many companies to help them go live. What's insider information? Like it just it's terrifying to me. Of course. >> So just okay, how do I take all decision- making out of it? just do a massive long-term constant continuous T-wap. You know, that sort of stuff is kind of where my my personal interest is on this. And uh and yeah, absolutely. I'm moving my balance sheeting into it. And I also we're doing everything I can for me to get paid on chain, for me to rotate all of my investments on chain, all the things that I automatically do with all my cash directing on chain.

Anything that's like in any way comparable to the dividends that I get, I am the first in line to participate. Um, so yeah, I mean we're we're trying to do everything that we can to, you know, eat our own dog food. >> Practice what you preach. Eric, thanks so much for coming on, man. First guest in awesome. >> Live from the nest studio. Yes. Um,