SBF Saves CeFi | DeFi Yields Crash | Voyager, BlockFi & 3AC | Solend | Worst Case Scenario

Transcript

this episode is brought to you by bitmex the og crypto exchange that is back and better than ever you'll hear more about bitmex later in the show we've never seen crypto in a recession and in a global macro downturn i mean go back and listen to that episode chow absolutely nails it and he says what you could be seeing is not this like 18 month bear market you could be looking at a four or a five or a six year bear market and that in my mind would be the worst thing to ever happen to crypto [Applause] all right all right all right all right through the bear market we persist we have another episode of empire another weekly roundup it is our duty to bring you the facts cut through the rumors cut through the

speculation uh and hopefully cheer you up through the uh 20k bitcoin and 1k eth that we are seeing today so santi how we doing my friend gm jason doing great how are you good good good you like my new digs uh we got a new office actually yeah that's great yeah it's really slowly but surely setting up the podcast studio here so any uh any new yorkers come through i'll be in new york uh in august so you know oh yeah there you go what's uh what's happening in new york in august i just want to see your face in real life there you go there you go you uh you skipped the smart move skipping the nft nyc mania here's where we're at right now santi bitcoin and eth dropped below 20k and 1k last saturday um when we're recording

this i think bitcoin's around like 21k he said like 1.1 eth has fallen below the market cap of wells fargo which was uh i shed a little tier for that one coinbase is trading around a 12 billion dollar market cap down 80 percent uk just printed this massive inflation print of 9 which is a 40-year high powell told congress on wednesday that the fed is strongly committed on inflation notes that the recession is a possibility and that this and that a soft landing is going to be difficult with events unfolding across the world war in ukraine russia china having some difficulties right now famine impending how are you feeling today you know i'm feeling um

i'm feeling very much alive like your senses get heightened at least mine um during this environment um you obviously do a lot of reflection of things you could have done better things that you didn't miss things that you missed things you have done right and not so right um it's a time of reflection like you always reflect as an investor but you're also looking forward uh i think there's a lot of things to be excited about and i know people always criticize me because i'm always excited and optimistic and an optimist i love technology so it's hard for me not to be excited about crypto and now there's a lot of reasons to be excited but there's also a lot of reasons to it's like that scene in the big short right where you know unemployment like the guys are like celebrating and brad

pitt who plays a great role says star wars them down and says hey listen guys for every one percent of unemployment x amount of people die and and i think you know there's pain out there for sure not just a crypto and i think that that's the only thing that's kind of weighing down on me but i always feel like technology is what makes the world better and i do believe that we're investing in the most exciting one of the most exciting sectors of technology one of which i'm recording tomorrow which is applying crypto incentives to fix a lot of problems in healthcare and i think that's what's exciting about all this stuff so yeah yeah make sense by the way i won't be on that episode with you um the healthcare episode i am i feel like the crypto and like blockchain for healthcare is one of the

things that you hear when you get into the space and it's like very overused very overhyped and it's one of those things that people it's almost the cliche like apply blockchain to everything it's like blockchain for supply chains blockchain for healthcare so i'm excited for you to ask this guy the hard questions and to figure out why this actually matters but are there you talk about reflections are there any um reflections that you've had that that have anything that's become like abundantly clear to you now that you've had a little more time to settle in or or any assumptions that you've questioned that you're that you're almost rethinking or or you're not at that stage yet i'll just highlight one that i didn't mention in the prior episode which is this notion that defy in your you have the impression that this is a transparent system

but the thing that you sometimes at least for me that i've been thinking more about is you don't have a it's more transparent but you don't have as clear of a picture most importantly in this case is the three-hour situation which you see a lot of the on-chain activity you understand how these protocols work but what's a little bit behind the scenes is the level of connectivity that a lot of players in the space have with each other and how these things can very quickly kind of unwind in a very unorganized manner and also the level of activity that happens behind the scenes is something that you know i don't know

how like like i guess like in these information networks and flows like you you want to perhaps like said differently more people come out now and say oh i knew about that i knew that doe was doing x i knew that three hours guys were doing what i knew that celsius was doing set and so i'm left wondering like if true then as an industry then perhaps it's like we should do more self-policing right i've always said that the biggest risk is self-sabotage and now it's sort of like too little too late guys like if you knew that there was perhaps you could have been a little bit more to the people that knew then i'm left wondering like why i wasn't brought to light

earlier and what we could have done as an industry to kind of mitigate what is not like too big to fail i don't think three hours is too big to fail again d5 absorbs and works and doesn't need to get bailed out for the most part so but yeah that's the only thing that i've been like questioning a lot of my assumptions because you always hear me talk about this is a very transparent system much more much better than traditional finance but it's not perfectly transparent and there's still a lot of risks that are lurking behind the scenes or risks that we don't understand because with composability there's challenges there even though there's a lot of really nice things about it yeah yeah here's some uh here's some reflections that i've had

and just have been thinking about um one is that crypto is anti-fragile i think we're at the place where crypto's anti-fragile every project except for bitcoin and eth is fragile right so the industry as a whole is is anti-fragile i think every single project and every company and every token is still very fragile and that's that's this the past couple weeks have really shown me that um i think bigger industry equals more funding equals bigger consequences right we haven't seen the the amount of money that we're talking about here i still haven't figured out three errors is exact amount of how big they were 18 billion it sounds like um has been tossed around ust at its peak was 19

billion luna was like 40 billion these are numbers that are the size of like lehman and enron and bear stearns right so like the consequences now are just so so so big um another thing is probably we should always support founders and investors who push the edge of innovation uh everything in crypto is just a dream at one point right but when a founder or an investor becomes aggressive at any sort of pushback about their project or or at their investments it's probably a good time to be cautious um and on that note i think it's just important not to punish people who call out risks in the systems uh oftentimes in bull market you end up the people who call at risk get punished right they get almost they get

hammered on twitter and it creates this incentive system not to actually call out risks in the system and i think we need to do a better job at accepting folks who call it the risks um and and the last thing that's just become abundantly clear to me and i'm sure there will be more things is the most there's there's one thing that matters in the bear market it's surviving right do whatever it takes to survive and and with that i think it's it's maybe a good transition into into talking about the markets and talking about what's happening this week and revisit some things that that we talked about last week and so here's what i'd like to do with this and you tell me if you want to go somewhere else i want to revisit what we talked about last week three arrows celsius and a brief comment on steath

right just quick updates on where those things are at and then i want to get into some of the contagion so how's that sound to you yeah that's great three arrows um i think we were too sympathetic on three hours last week actually i think i was pretty sympathetic i think you were pretty sympathetic i was you know very hopeful that they get through it i'm still hopeful that they get through it but what's come out in the last several days is that they were taking portfolio company money uh some of their portfolio companies and just honestly most companies in crypto a lot of companies in crypto were giving three arrows their money uh and even funds i heard about funds who had raised in uscc and they wanted to earn eight percent on that usdc so they were giving it to three arrows and three hours is

basically just ghosted everybody it seems like um and when you're taking when you're investing in companies those companies are giving you their capital back to earn interest on it and then you don't give those those companies their money back like that is uh that i don't have much sympathy for that and so i don't i know it's the system right everyone gave them money for the interest they use that money to make big bets in return three arrows would give them eight percent on their eight percent apy three arrows their bets go belly up everyone who gave them the money doesn't get their money back i know that's the system i know that's the model but i gotta say every from everything that's uh unfolded over the last couple of weeks i think uh last couple of days i think

have a little less sympathy but you tell me if i'm being too hard here no look i mean i think um you're right i i wasn't aware of a lot of these practices and as they come to light then you change your perception right i think in the first episode we were operating under a lot of rumors um you know one thing is at least from my vantage point a lot of people ask me how much do you know like how close were you with these guys i'm like actually probably the least out of any other investor out there especially remarkable considering how big they were they had some connectivity to some portfolio companies um but it was always i never really interacted much other than zoo reaching out occasionally on twitter dming me like what do you think about the market here that was really it

um and so you're right look at me you think it's i look at that and a lot of founders have come out and said that it sucks [Music] and um you know i don't think we've seen the full extent of the the damage that and the kind of exposure it seems like a lot of folks had pretty much anyone that is was big and crypto has some exposure to that meaning service providers like lenders uh voyager a lot of these will talk about in the episode but like voyager and uh and block fight and genesis like a lot of people in like dare a bit um and so yeah

it almost feels like i would characterize terra like the demise of tara was like i think like three hours is like long-term capital management and i think it's funny because not funny because we hinted at this and the tara when we recorded the episode of tara when it was going down um and so it's a lehman and long-term capital management i think are the two analogies that i'll make here and it's um yeah it's pretty wild a lot of these things that have come to light um co-founder kyle davies or davis uh told the wall street journal on friday that the firm has hired legal and financial advisors to help work out a solution uh for both their lenders and their investors so as that story unfolds we'll keep you guys posted on that

um celsius not too much of an update here they've actually started repaying a decent bid of their loans um 10 million repayment to compound finance on monday uh they paid another 54 million and died to their vault with oasis protocol last week their token actually popped like five or 10x uh on i think it's probably due to a short squeeze um but also maybe due to a little bit of news on the repayment uh on their repayment positions i think they're still in a precarious position they seem to kind of be ghosting most of the industry but uh you know i think they're kind of cranking behind the scenes seems like they're in a precarious position we don't really know their full on chain in off chain positions so there's not too much of an update on celsius except that

uh it seems like spf and ftx probably won't come in to uh bail them out um but yeah i think it seems like they're working hard to to to get the money back to their customers behind the scenes yeah definitely um steve quick update on steath and then i want to get into some of this contagion because that's where i think the interesting stuff lies steath is trading it's still around 95 cents on the dollar uh and then the discount on grayscale btc and eth products are at their largest discount ever around 30 percent so just keep coming out of it today today i think it had one of the highest volume days um and it has narrowed a bit to uh negative 27.

on the great scale discount okay the grayscale discount but still i mean yeah um all right let's talk about contagion uh specifically contagion into c5 one of my talking about reflections and learnings one of my biggest takeaways so far has been a lot of the contagion has been actually in c5 right not in d5 you look at it like compound and ave they seem to be doing completely fine which goes to show the power of some of these transparent fully on-chain systems but you look at some of these c5 folks and they're struggling so the first one i want to call out is voyager voyager for those who don't know is a c5 platform uh trading platform just an investment platform retail app they do lending

borrowing they provide users with like eight percent interest it was it came out this week that void they're also a publicly traded company um which is i think is important to note note they trade under the ticker vyg vf voyager reported around two billion dollars of loan exposure across seven different counterparties this week one of those counterparties was three arrows they had about six hundred and uh a six hundred billion dollar loan out to three arrows um that it seems like three arrows is uh failing and three hours is failing to repay the loan right it's i think over 15 000 bitcoin they had lent out to three arrows about 350 million dollars in usd uh uscc

and uh failure to repay that loan by june 26 uh june 27th constitutes uh a default right voyager stock dropped 50 after the announcement um so i'll just pause so i'll i'll pause there i think what we're starting to see is and we'll get to block fine a second as well another company that maybe had some some contagion from this but it's really interesting to see some of these smaller maybe retail apps like a voyager really struggling from from some of this fallout to three from uh from 3ac yeah i mean i think the across the board is is not proper risk management um like you know uh again what we discussed in last episode was issues that really get you into trouble

as a mismatch of assets and liabilities uh we're also taking too much risk and people not understanding that which brings me to one of the perhaps the most interesting observations that i've had that i'm seeing this week is the the yields and defy are lower than treasuries and bonds but particularly treasuries and it's it's kind of crazy to see that um you know said differently like there's no reason why you'd want to hold cash stable coins in most e5 protocols that are paying you less than the 10-year treasury now there's a couple of reasons why that is but on at a very high level there's more risk

in d5 than a treasury right and so uh at least today and so the risk should always the yield should always be higher now what why isn't it i think there's a couple of theories one of course is duration like uh you know you could these these yields um like i guess like the the most clear explanation i have is a lot of people sitting on stables there is a lot of supply of stables in these money markets like avian compound and so based on how the yields are priced like if most people are sending out stables then you're not going to get paid much on that but they haven't taken the money out of the system waiting to kind of buy back at some

point which is interesting right in the prior cycle you didn't have this phenomenon like stable coins now encompass more than 20 of the entire market cap that's pretty high and so yeah i think there's still a lot of funds out there that de-risks sufficiently uh have now realized that but they're patient they haven't kind of bought back into the market and they're just kind of parking these stables in in some of the d5 1.0 protocols and it will bid at some point but not yet and so that's something that i'm closely monitoring um like these default yields of simple deposits like there's certainly vaults out there that might earn you a little bit more but even your vaults are pretty that are taking much more risk uh or um

relatively more risk um are not paying you that much yeah how bad is that for d5 like what is the secondary impact of the fact that you know defy you used to come into d5 because you could get these crazy interest rates what happens when the interest rates in traditional capital markets are actually higher than d5 i think it's a really good question because a lot of the criticism that i've heard from people over time is the only reason why you want to use d5 is because interests are and you get paid crazy amounts of apy to take on crazy risk and it's a lot of speculation and like i sympathize with that view i think i think look it it it would be dumb to not take factor that in there's a subset of there's a part of the reason why d5 is compelling is you can

historically run you know a pretty interesting a pretty attractive rate um with stable coins but that doesn't obliviate the need for d5 like meaning like even if yields were much lower and i've said this historically d5 is pretty interesting because you're just doing things much faster um like in the sense that you know when you want to buy a house you can use your like the idea of you taking out a loan within seconds without any exchange of information other than the one that you've already provided to your exchange or whenever you're doing the off-boarding um

from crypto fiat is pretty remarkable and so you're removing a lot of the costs that historically have been like traditionally existing in the normal flow of getting a loan and so some of those cost savings like are pretty interesting like that flow that efficiency gain makes d5 very compelling so the point i'm trying to make is like d5 it doesn't live and die on on on rates on on yields being much higher it just works faster better cheaper um a lot of those three components are in different points right uh relative to your existing solutions like we're not at a point like there's still some friction there's still some

challenges for a lot of people to use crypto i understand that but over time crypto ultimately d5 becomes kind of the operating standard the rails for finance where jpmorgan goldman banks just use it to transact it's like and so like that's just where we're going empire is brought to you by bitmex with the launch of their spot exchange bitmex is running an insane promo right now we wanted to give you the inside scoop here's the deal for the next two months users who trade 250 worth of crypto on bitmex's spot exchange will be entered into their million dollar giveaway prizes range from thousands of dollars all the way up

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you've got these defy as the back end then he basically had these c5 providers who sat on top of d5 the user had no idea they were actually interacting with d5 in the same way that the user doesn't really understand that they're operating with like smtp when they use gmail right does this shift your mindset does this seeing the contagion that we see with like block fi and celsius and uh voyager and all these c5 platforms does that shift how you and but the d5 platforms the compounds the aves et cetera are doing actually quite well right now does that shift how you view how this entire space plays out on the margin yeah i think there's as you said earlier i think there was a

subset of participants that were playing this interest rate are and capturing that yield and yield farming strategies a lot of what you're seeing now is uh this recursive leverage that existed in d5 is is largely unwinding pretty quickly um three hours going down celsius um a lot of that was just recursive leverage on chain and that is being completely wiped now and in many ways i think historically a lot of the vanity metrics in this space has been tbl total value log which is the amount of money that is deposited in a particular protocol and i think it's just the equivalent of eyeballs for the internet and before the dot com crash like it's kind of an irrelevant metric in many ways

um and so yeah i do think it impacts um at least like i think a lot of people pointed at tbl and said wow d5 is working look at that it's massive like look at tvl growth and now you're you're kind of going backwards and saying what is actually the true metrics that matter is it users is it a number of applications like what is the more important metric for d5 uh is it the the time saved uh of getting a loan um you know and so in many ways it's it's good in the sense that it forces us to be

focusing on both protocols investors users on you know why are you actually using this technology versus you know some other narrative or reason that may not be as important or matter in the long term and uh you know ultimately that's kind of how i look at it it's not positive um that we're that we're reshifting our focus to what is truly value driver d5 and of course like we can talk about that all day long because more recently i've heard a lot of people be put into question a lot of investors in the space it like why like just give me like some really good use cases for this technology and

mark anderson took a stab at it and other folks i've taken taking a stab at it some more convincing than others but you know now is a time where a lot of traditional vcs and other people commentators are putting us trying to box us in and saying like all right guys enough of this ponzionomics enough for this casino what are you actually building here it's a fair question right and i think one that a lot of people need to reflect on builders investors users um but i i again in short i continue to believe there are very compelling reasons why this technology is going to take over many not all or replace everything but

very concretely like there are reasons why you wanna you wanna use this technology and it's almost like difficult for me to envision a world in 10 years it doesn't operate on crypto rails or uses a lot of this technology or creators use nfts to interact with their audience like it's difficult for me to envision that maybe that's going to be my biggest pitfall here because i'm too kind of like immersed in this that i don't contemplate the reasons why this would totally fail which is possible but i don't think it's about i don't think it's about envisioning if this would completely fail like i don't think i don't think it's even worth having that conversation because i don't

i just that doesn't feel possible to me once new technology is out of the bag it becomes impossible to put it back in the bag the more important question in my mind is how long does this bear market last and then i actually really i know it's not about prices but it really is about prices it really is an important thing because prices draft option and i remember ciao ciao came on the episode remember like uh september october november of last year everyone's talking about actually suzu was like pushing the super cycle and like is this the super cycle and chao came on the episode and he's like look everyone's so focused on the super cycle what we might not be thinking about right now is the first ever prolonged bear market and to chow's point from you know from

alliance dow he he absolutely nailed this he said look if we if the if the global markets shift we've never seen crypto in a recession and in a global macro downturn i mean go back and listen to that episode chow absolutely nails it and he says what you could be seeing is not this like 18 month bear market you could be looking at a four or a five or a six year bear market and that in my mind would be the worst thing to ever happen to crypto yeah i i agree with xiao and his assessment which is why i'm on the fence and cautious right now uh on deploying um because yeah it feels feels like you don't want to be front running the fed there's no reason to you're not getting paid enough on the risk

like the symmetry like the risk reward i think is is totally lopsided and right now you know if the fed at some point backs down and the market stabilizes you're going to have plenty of time to scale in to the things that you like so i'm you know just kind of i don't see any particular reason to um to scaling in size yet yeah um but yeah like um [Music] let me ask you a question like you are more from your clients you get to interact with people that perhaps are on the fence about crypto but want to learn about it and they subscribe and they you know turn to you for quality insights and information and news

like you what do you see in 2018 and perhaps what are you seeing now in terms of the interest of corporations other investors people that are not in crypto like i'm curious does that grow because of negative news and bear markets like what happens in bear markets like are people like more interested to read about this stuff or less interested in it from an engagement standpoint yeah i mean we have a crazy amount of data on like where the interest comes from and and times here's what here's what really happens in times of volatility interest spikes so volatility to the upside or volatility to the downside or in bull markets so every bull market there's a massive amount of interest

uh both in like media companies and information but also like new people are signing up and things like that there's also a massive amount of interest when there's volatility to the downside the time that folks when things really quiet down is what i mentioned in that big twitter thread i did stage three when there's no volatility and there's just price con consolidation and there's not this three arrows news and like there's not the lenders facing insolvencies when it's just boring right that's when the information that's when that's when people really lose interest in the space so let's um i want to get back to some of the stuff one thing i want to get your take on so the other lender that was had some issues though they uh they're i mean they seem to be coming through it

just fine also just full transparency one of my favorite companies in the space is is block fire right like they are there are rumors that they were facing some liquidity issues had some issues recouping all their loans maybe one of their large loans was was through three arrows i think they someone said they had to liquidate their loan to uh to three arrows that went through they would do staff by 20 they were rumored to be raising a down round i'm not sure if that actually went through on tuesday announced that they locked in a 250 million dollar revolving line of credit from ftx uh one thing we didn't mention is uh voyager also secured a 500 million dollar loan from alameda um uh alex voyager was already an alameda portfolio company just before the line

of credit announcement it was announced that alameda had acquired an additional 14.9 million shares of voyager which increases their total ownership to 11.5 right so now uh sbf's trading firm alameda owns 11.5 of voyager they've got this 250 million revolving line of credit from uh to block fi what are your what's your thought on sbf coming in and scooping basically scooping up all these uh you know lend and borrow platforms i think svf at some point acquires some of these if not all um like i wouldn't be surprised if ftx acquires block fine uh at some point

uh or or some of these other assets um he's in a position of strength you can do that the criticisms i've heard and i don't have a i'm kind of a partial here or neutral is should he be bailing them out but look sam is smart i think uh this is not your government bailout of a bear of a financial institution this is uh someone that probably has a very clear agenda of what he wants to potentially have option value to you know acquire these assets and so uh he's been very public about he wants to be the biggest most important uh company in crypto and so does is put them in a position to at some point have more clarity and visibility into their balance sheet and

and you know make an acquisition at some point probably and so i wouldn't be surprised if at some point this happens like i'm not like 100 sure of this i don't have i haven't looked at the numbers or i haven't cited books but i do think a lot of these players you may be giving them too much credit here but i do think they're in perhaps more precarious position that you may think like low risk management has been pretty bad for these organizations underwriting a lot of risk especially on this great skill trade um and second as it straight down to a discount and second of that like i was looking back to rates the on-chain rates the the spread between d5 and c5

rates is telling right because block fine and celsius are still somehow telling you that they're going to give you like six percent on each bitcoin and stables and like i'm just wondering like where's that coming from like yeah that's just not sustainable that's coming from vc that's being subsidized by vcs in the case of block fine in the case of celsius they were taking crazy risk um yield farming and so again uh that that's just not sustainable and so that's just a lot of cash is being burned yeah no i mean don't get it twisted every lender in crypt lenders have been hit the hardest c5 lenders have been hit the hardest every single lender was either

insolvent or nearly insolvent over the last two weeks every single one um and here's my take sam spf ftx alameda they are crypto's white knight right now they are absolute heroes they're the goats of this bear market so far they are completely saving the day right this is i know you know people in crypto love the free markets let the bad companies die this this would be catastrophic risk to the system if these lenders went under um these lenders have millions and millions and millions of users right this would be the final you know straw that broke the camel's back for regulators if these folks did go under sbf is completely saving the day this is

buffett in 2011 with bank of america right b of a in 2008 was at the epicenter of the financial crisis uh their stock dropped to like two bucks if you remember people questioned whether the company could avoid bankruptcy did they need to get nationalized people were saying and they actually pulled out of the financial crisis but then the eurozone debt crisis happened in 2011 got you know tanked the company all the way back down to like four or five bucks a share and at the time the ceo of bank of america brian moynihan he was insisting that the bank had plenty of capital that they didn't need any help uh but sure enough uh they needed they ended up taking uh berkshire's money right and buffett's money uh boosted investor sentiment

boosted the stock price um padded the banks cast cash position um and i think he put in like five billion dollars and uh got like five billion dollars of preferred bank of america stock redeemable at a five percent premium that paid a five percent annual dividend um and i think he also got like 700 million warrants um uh to buy arab warrants by 700 million shares of bank of america common stock right at seven bucks anytime in the next 10 years this is like one of the trades of the decade by buffett and um i think that's what's happening with sbf right now folk people will look back in three years and be like you remember that time in june of 2022 when he came in saved all the lenders and scooped up the

entire space so and i think he's i think it's amazing what he's doing i mean we'll see if it's i think it'll be a really smart financial assist uh move and i think it'll be i think it's completely saving the industry right now yeah i think the last note on c5 and then let's move into some of that solo and stuff because i think it's pretty interesting in bancor is uh traditional capital markets is basically uh a cascading chain of money moving from one person to another adding or taking away small bits of interest right so that that and what what ended up happening that frustrated so many folks is that when you get to the end user when i've got my wells fargo account i'm left with zero interest we've recreated that system in a way in crypto right what ended up happening

is the user puts in money to uh to celsius celsius gives that money to three arrows three arrows puts that money then into a d5 platform the d5 platform is liquidity farming to dr right and you've got this you so we've we've recreated a very similar uh system and i think it's just very important to understand if folks have capital deployed right now really really really think about where that yield and its offering yield really really really think about where that yield is coming from let's talk governance let's talk centralization in d5 um uh seoul and let's talk about soul and first soul end is a london borrow protocol on solana they've got about 250 mil of t of tvl they had about a billion of tvl at their peak what happened this week and i don't fully know the

situation too well but so correct me if i'm wrong you had uh a whale on soland who had deposited seoul borrowed usdc and usdt uh and that that that position was converging apart upon a partial liquidation after solana's price crashed the whale had i think had about a hundred million of stables against 170 million worth of soul which represented 95 percent of soul lens solana deposits 95 of salonist deposits 88 of usdc borrows users began to pull out their their stable their usdc usdt drove the utilization up to 100 meaning a bunch of users couldn't withdraw funds solana's price kept dropping to like 20 bucks the

whale's account uh and the wales account could have been liquidated so there was a vote right on sunday the developers spun up this emergency dow submitted their first governance proposal uh to basically say that they wanted to partially liquidate the wales account whose collateral was at risk of liquidation by kind of approximating some percentage and 97 of the voters voted yes right but over 90 of the votes came from this one anonymous whale account um so yeah there was this like massive community backlash the team held and passed another quick vote on monday morning to invalidate the previous vote they changed the voting time from six hours which they said was too quick to 24 hours

um what are your thoughts on uh on this whole soul end of aquaman yeah uh it's pretty crazy um yeah obviously i mean that's not decentralized in any way shape or form um you know yeah i understand why they kind of the rationale to do it like i think like you couldn't absorb that liquidation but um yeah obviously a lot to learn from which is should a couple of questions is should there be a one of a one-to-one vote uh like wait to vote or should there be more kind of like mechanisms like quadratic voting or some other type of voting mechanism that kind of ameliorates this this concentration among certain large

holders um should the team be voting should there be delegation rights and powers and how do you prevent a lot of these governance attacks right um this can happen also in a bull market you know i mean like it's pretty wild like i mean do you feel then comfortable putting your money in a platform that can essentially seize your assets like i'm sorry i'd rather keep my baggage i could rather keep my money in jp morgan um and so yeah i think there's a lot to learn about um really just going back to the drawing board and saying what is actually defy and what is not d5 right and and that this to me feels like we were

talking about this earlier in a prior episode which is how do you where do you draw a line between defy not defend and do you regulate something like celsius or something like abe there's a big distinction between those two and the biggest distinction is the upgradeability of contracts and how you can upgrade a contract and what you can actually do to upgrade a contract and what are the parameters that that contract allows whoever is the operator or the team behind the project they should never be able to like do this stuff you know like they shouldn't uh no matter what it should always be kind of hard line i don't know if you disagree here but to me this feels like no no i think i mean i think it draws the bit the big question that comes to my mind is does

the app layer or the base layer need to be decentralized right after what's happened with um like bancor this week and what happened with soland and we saw the juno whale right like a month ago the community voted to take back 100 million worth of tokens that the whale had basically gained from these airdrops you kind of start seeing that a lot of these quote unquote d5 platforms aren't actually as decentralized as you may have thought so it just makes me think like should these d5 apps should they just be honest and say that they're centralized um and you let the base layer be decentralized um but maybe it's like we went a little too far on the decentralization or maybe this is just me being in a bear market doing what you

always do to bear more kids saying uh you need to go back to centralization right equity over tokens companies over taos that might just be me yeah i mean look i guess like out the truth always is more you are more articulate when money's on the line so let me ask a question would you deposit your money there now no okay there you go no would you deposit your money or compound i would i would and i do yeah i would i would use the i still i still would use the blue chip d5 i put but i still i think of them them is almost like protocols now instead of plot instead of apps and that's probably the wrong way to look at it but like

uh they've just be are not maybe not protocols maybe that's the wrong way to put it but like utilities of the industry they're they like the con they're like the con ed of uh they're like the con ed or the pg e of the industry it's just like they provide a service that everybody uses are they the sexiest thing in the world no but um yeah they're providing this utility so yeah so i'm gonna say the other two things to keep an eye on right now that i wish we could have gotten to we won't get to them we'll talk about them next week is keep an eye on bitcoin miners right now um usually what happens is price goes down miners go offline difficulty adjusts now because they have access to credit they can operate at a loss from for longer the miners don't go offline difficulty

stays where it was so now those miners are losing money faster than they other would it wise would have been and the lenders whose the collateral they have is are these asics they don't actually want to repo the a6 so anyways that's one thing i want to talk about next week and then i'm keeping an eye on uh dydx um decentralized exchange for perps they announced that they're moving from starkware uh to over to their own cosmos app chain which is really really interesting probably not a great look for l2s so i want to talk about that next week um and then the uniswap genie acquisition uh uniswap labs announced tuesday it acquired nft marketplace aggregator genie um so i want to start talking about like what is your bet on aggregation protocols versus individual apps from

like a value capture standpoint so yeah to the listener i wish we could have gotten to all this this week but the team will be mad at me if i don't if i don't get all this all hands on for an extra special one next week uh just to make up for that exactly exactly so santi it's always it's always a pleasure always a pleasure guys uh thanks for tuning in if there's any feedback please let us know we're here to help you weather through the storm and uh you know offer insights from a lot of people i'm recording a really killer episode tomorrow and we'll be back next week as well so as always drop us a line or anything if you want us to cover anything in particular and we'll see you next time thanks for joining see you next week folks [Music]

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