SEC vs Crypto, Uniswap v4 Predictions & Lido Vampire Attacks | Roundup

Transcript

all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-hosts today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with uh nothing in the episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode thanks all right everyone welcome back to another Roundup of bell curve we got Michael's one and two Advanced piano Alice welcome what's up thank you sir good to be here been a slow week slow slow week in crypto land busy for DC

Vance I think we owe you a congratulations congratulations in order yeah we got the shout out from VCS congratulating themselves um I'm a two-time I'm a two-time [Laughter] voracious reader true I have your readings good going Vance I mean I bought I bought it I bought one other book and I thought it was a normal book it's a [ __ ] textbook it's like a thousand pages that just showed up with that I was like I can't read this this is too far was it the dalio the new world order book no it's that it's it's

uh it's a hundred years of investment returns it's called the Triumph of Optimus it's got like all these Char it's it's a lot maybe it's too much but I'm gonna start digging into it at some point did you learn that uh every every hedge fund if you've given long enough time eventually blows up yeah that that is that is pretty undeniable that and like being bullish is usually you know a winning strategy like I think those are kind of the two lessons especially if you if you read like The the long dated takes on finance like the price of time or uh you know uh Triumph of the Optimus I agree with that I think even I've heard even like Stan druckenmiller who I think he said he makes his money in a bearish way but most of the people even

like the famous macro Bears out there made their money on Longs uh shorts yeah I mean I don't think I've known anybody in crypto who's made a career off of shorting I know a lot of people who've been completely destroyed by that so you know have anecdotes there as well yeah all right you want to get into the stories of the week here so obviously I guess the caveat here would be that bees have already been sort of talked to death so I want to spend a relatively limited amount of time on them but the SEC has come came after both finance and coinbase this week the tldr is that the allegations against Finance were I would say much more serious than than coinbase so non-exhaustive list for binance was that so binance

bam management bam trading and CZ were all personally named as defendants in the suit uh the allegations are that Finance spam trading sold unregistered Securities binance co-mingled customer funds well call back to SPF uh Finance operated as an unregistered exchange there was watch trading on binance us finance and CZ solicited U.S customers uh and a whole bunch of other things coin coinbase is what's much more I would say it's completely different actually and their allegation is that uh coinbase operated as an unregistered broker there were Securities unregistered Securities on that exchange the one that stood out there was Solana and Matic but there were others listed

like cardano filecoin sand uh and then they specifically targeted their staking program as well so there's a lot that's been said about this already but curious just what sort of takeaways you guys had from the week frankly it's not a super differentiated perspective but as it relates to both of these lawsuits I think one of the things that we should keep in context is what's going on with whatever is happening with ripple and that started in December of 2020. it's now June of 2023 and there isn't resolution on that there's been intermediate decisions and intermediate kind of things that have been admissible

things that have been dismissed but this is going to take years to play out for both of these situations and in the meantime coinbase came out and said we're not shutting down our staking program we're not delisting assets we don't list registered security unregistered securities we are compliant uh we were compliant when we went public all this stuff is going to come up to a fight and it's either going to happen in the court or frankly it's also going to happen potentially in Congress and there's going to be new laws new rules created in the meantime so yeah not a hugely differentiated approach um I think on the finance front Ally like everybody was wondering where Catherine Coley was we now know

uh it seems like Brooks and Coley have been have been uh you know sharing sharing information um and you would also kind of assume you know with the level of the allegations that are happening in the binance suit um I wouldn't be surprised if there's something from the doj at some point um just because you know it looks and feels a lot like the SPF uh FCS Alameda stuff not saying that you know a suit means that they're guilty in any way shape or form all that stuff has to get adjudicated but um it just feels like that's the direction that things are moving from Finance yeah honestly I don't really have that much to add there either I think yeah I

don't think it's widely I mean the market like there were two things that were interesting uh again slow result and the SEC they're obviously trying to paint finances like FTX 2.0 but if you look at the outflows of of binance here you can pull the chart here like it was pretty this is usual like normal day you know here it's it's right I think it's nice you got this out of the way also yeah like this this is like you know you had the wells known as hangover coinbase for like six months Finance has been four years of waiting you know I remember tether in the last bear Market that like kind of resolving was one of the points where things got a little bit more optimistic but you know there's no Alpha in my opinion and like worrying about this regulatory stuff like it's either you know like a full

cycle away so like the next bear Market is like when this might resolve but ahead of that to Michael's Point there's like legislation there's court cases there's so many different things that could supersede this that you know who who really cares in our in my opinion about this probably just like traditional media newslets that are trying to make a narrative out of it yeah I also think social media mainstream media man you know yeah I actually think there was a bit of a market signal which was you know it's not like prices really reacted super negatively to this especially post the coinbase news they actually rebounded and generally I view it as a positive sign when there's really bad news but prices don't put in a new low so I

thought that that is actually kind of a silver lining yeah I mean for for all of the uh for all like the media consternation from the mainstream eth is up like just about as much as Nvidia this year and Nvidia is the best performing asset the s p so like there's kind of uh I get this feeling that like perception is like more it's just like a bit more Doomer than reality at the moment it's good to kind of just like take a step back and look at the prices and and just see that it hasn't moved yeah it's kind of like you know in scary movies when you have the whole like two thirds of the movie where you're chasing around and you're trying to figure out what the monster is and like the monsters coming to get you but then you finally see the

monster and you're like ah that's just animatronics it is interesting if you think about like how risk-averse coinbase used to be like I forget if back in the day we were waiting for them to list eth because they're like just like Bitcoin and Litecoin for a while they only had like three assets like they were super careful like there wasn't a listing framework it was just like you know there were two assets and now it's the total different way and they're not really as scared seemingly of the SEC anymore yeah I think that was sort of an internal fight between Balaji was a coinbase at the time he was their CTO and there was someone else who had more of a Trad five background yeah I don't I don't remember that being a a regulatory

reason for them I think that was just like are we Trading Bitcoin only or adding stuff is May of 2017 or no it's 2016 that they added to eat it was when they acquired uh gdax right right no man did they acquire that are they are they they rebranded they rebranded coinbase exchange to to the global digital asset exchange GDX yeah and then well I think they had uh their UI was basically like a basic Swap and then they added gdax for professional Traders because that was a that was I believe that was sort of like a Fred or some uh desired goal um because he wanted it to be for more like a trading experience yeah I have a question for you guys

um they're coming out like all the C5 exchangers are getting getting attacked right now it makes you think about uh like just the role okay so basically like uh there are three groups in traditional markets that perform different actions right you have the exchange which is like brings together the buyers and sellers and like is the marketplace for the buyers and sellers uh then you have the broker dealers who represent the customer and like bring the trades from the customer to The Exchange and then you have the Clearinghouse which settles the trades and sometimes the custodian as well um in D5 this would in like C5 right now there's like this kind of weird co-mingling of like there's no broker dealer because like the user has their assets on coinbase then like the settlement is like some sometimes with

coinbase but sometimes just on on L1 like on eth uh it just makes me think about like what is the role of C5 in the next Market is this just a stopping point on the way to the inevitable like let's let's translate that to defy exchange uniswap broker metamask clearing agency ethereum um and it just makes me think of like see like what what is the role of C5 not in like the next year or two but in like five to ten years from now there's a there's a bunch of interesting stuff that's being a bunch of startups that have recently gotten funded that are probably going to be in Market in you know six or twelve months and um you know the things that we see that are going to kind of like take advantage of this change in Market structure are

bilateral trading desks they're based in New York kind of to replace the Genesis of the world that that no longer exists places like beruda you know places um that have access to the CME and recently the CME has been seeing like a ton of new volume so like there is interest from the traditional institutions and they're starting to trade there a bit more in size um and then there's things like payment order flow which frankly like work in an abstraction level closer to retail those aren't really like institutional funds trading um that's more so just like servicing the order flow from those wallets but like those are those are coming kind of like just like different participants lit markets you know uh people with different structures as regard with relating to things like custody and how

you trade at a you know a separated custody account that's also coming there's like a lot of really interesting things that are being shipped right now and on the other side you have probably a lot of market makers that are also getting bootstrapped and those are going to start replacing like the James streets and the uh the jumps of the world as they pull back so like it does feel like there is this healthy rotating of the Guard but also like new technology stepping in to fill the market structure gaps and then you also have just like D5 running you know alongside that and and getting a different part of the market so I think it's all um pretty positive I think the things that could change are if there's legislation and that you know literally changes the market structure that creates a lot of like very interesting

new firms that makes ETFs possible like places like bitwise probably get you know share from that so there's a lot of just different Tailwinds um that the space is riding at the moment I feel like we're pretty positive on it Michael yeah I mean I was going to jump in on the last point there uh and say the same thing which is I think actually you know in the eyes of what has been happening in DC or New York wherever these lawsuits are or these suits are being uh founded the the biggest thing that happened this week was the market structure proposal um and I think you know it's it the the quick tldr is it provides a lot of black and white playbook for how things like stablecoin should work for

how registrations should work for token projects how something goes from a security to a sufficiently decentralized commodity and that market structure will fundamentally change the way that defy interacts in the current status where if you're an Insider you know a founder or an investor in a protocol versus a user you're going to have different designation of the tokens for the first 12 months you're not going to be able to sell them if you're an Insider you have to disclose all the Holdings it'll eventually transition to something that's sufficiently decentralized that will move from trading those assets from an ATS to a cftc registered and uh compliant exchange like the the market structure is going to get a lot more complicated as regulation starts to to

come to the Forefront but I do think it's going to look and feel a lot similar for end users it's just going to be the the venues of where things trade when is going to change pretty pretty fundamentally it's not really just going to be like the exchanges unit swap it's going to be yeah sure maybe eventually you know swap can be in exchange but for the first 12 months it's going to be one exchange and then after that it's gonna be a different one and if you're based in the US it's gonna be something else so maybe it's the wallets in the broker dealer you know designation here that has to figure that part out and you know route accordingly and manage the customer relationship accordingly and be registered accordingly but there's a lot of movement in in a very positive direction that that we think about

I'm also curious what do people think uh there was a you just want P4 teaser this week or maybe like Easter egg what do people think they ship payment order flow um probably like a Suave competitor I don't know something I think like that there's a there's a budding debate in the Mev World between sort of application specific order flow auctions versus more generalized sort of flow options like a Suave and I think uniswap probably takes some kind of stab at that yeah what do you think what do you think that's I think like the amm market is is probably uh good enough you know like I don't see another

innovation in that space really like getting them from zero to one in terms of just more market share or just growing the pie overall I think their problem historically is they've been hamstrung by like having to vote through these deployments on these different chains and it probably works if you can have something that is functional at a level of abstraction over everything so you can kind of you know service order flow on any chain on you know any type of block space that exists so that would definitely be a departure in terms of you know u-swap is so simple and that's kind of like where its beauty comes from and why it has a lot of usership but maybe they kind of take a step in a more aggressive Direction um with something that's that's a bit

further out there and plays at a different level of abstraction I think there are sort of two Trends in amm design that are diverging around maybe uniswap versus something like curve that I think is interesting and it kind of has to do with their assumptions around supply side and liquidity like uni like this the jump from V2 to V3 was kind of based on the assumption that you would have more sophisticated market makers like it's much harder to be an LP on V3 than it was on V2 and we've talked about this on previous shows I don't have great evidence around this but from what I've kind of heard it's it's very concentrated in terms of who provides liquidity on V3 so I would bet you that their design sort of capitalizes on that uh in V4 and there's some sort of OFA

like order flow auction type thing so you can give a better experience for users the curve is almost taking the opposite approach they're sort of banking they have um they've made it easier for retail to be LPS on the new design of their exchange and they're sort of lowering their fees and they're trying to subsidize that with fees from their stable coin so it's kind of two very different designs I'm interested to see how it plays out frankly yeah that last Playbook you described is only possible in Switzerland like you know new swap's not issuing a stable coin that they can you know do different things with the fees with their design space is a lot more concentrated do you think that's a benefit or or a an obstacle

I I think like the benefits of having a bit more expansive of a Playbook where you can do different things with the fees you can make it more reflexive have blown people up and so like there's there's drawbacks to that that aren't like immediately apparent but you know I think you know if you asked Hayden would he like a bit more design space to work with you'd probably say yes it's just a matter of like to take that and then light yourself on fire you know it is interesting like you could probably draw that analogy across a couple of different examples in crypto some the C5 space there's like the binance versus the coinbase approach then there's kind of like Ave versus compound and then maybe curb versus uniswap and I agree with you I think it's sort of like we'll see which one of

those strategies ultimately ends up I actually think the Ave versus compound is is pretty interesting I think a lot of people have sort of slapped on the new upgrade to to compound in general I know people really like obey is great they ship a lot of stuff but they have very different strategies and it seems like compounds is more like people want to borrow and lend stable coins so let's make it as capital efficient as possible to bar on land Stables whereas Ave is like you should be able to supply uh collateral and borrow end with with anything that you want and so far that's been the winning strategy but I'm not sure it's going to be into the future I would also say I don't think you can't necessarily say that everything is Apples to Apples um in the sense that you know there are

different markets between swapping spot assets borrowing spot assets and exchanging and doing derivatives and all that um you know and these are companies and uh I it was just announced today but like lens you know is something that they're working on in Ave it's sort of like you know there's just a bunch of things that are going on inside of all of that that dictate a lot of the direction of where those things go so it's not like we're going to take this strategy and we're going to go full bore into this Direction versus you know that strategy in that direction hmm I'm stoked for all these stable coins to get to uh escape the lawsuit though I I saw this position on uh D5 Moon the Twitter account uh retweeted it where

someone had taken I think it was like seven steath and looped it with curve until they had 35. Steve like this in my mind this is where like some of the credit is going to come from for the next run you know like just we still haven't seen any recovery of the uh dollar lending markets in crypto but these seem to be the next best thing I completely agree with that I think like one of the like we've talked about it on the show but one thing at least I didn't understand in the last bull market was where leverage was getting introduced which was via grayscale just didn't get that sort of loop between the Arbitrage that was being run yeah true yeah but yes yeah true that

was like a big that was a big part of it um and probably there's some sort of combination of like an eigenlayer rehypothecation plus like the you know uh liquid staking tokens reaching escape velocity which is probably good that probably ends injects a little healthy Leverage I mean you can kind of already start to see it people looping these things chasing yields there's probably Market fit for that for better or worse I'm just trying to find this chart on uh the growth of some of this stuff I'm gonna send this to you this is this is one of the more

interesting charts that I saw over the past yeah I think this is definitely block Works analyst source your army of of uh Insurance um but like this is super interesting if you want to throw it up in this yeah yeah I got it but this is a chart of wrapped eth versus lsts and I didn't know that rap teeth was was this prevalent but like at one point almost seven percent of the supply of each was in wrapped wrapped teeth and and you just see like you know like that Kink from seven percent down to three percent traced with the Kink up on the lsts

like there's three percent more of Youth just sitting on chain that will probably stake at some point and it'll probably be lsgs as well the the key Point here is that we wrap teeth is what was technically used for most of defy because you had to wrap it to be able to put it into smart contracts to be able to you know use this collateral or whatever it may be so it's basically like defy 1.0 versus what each problem say is D5 2.0 all right say that again Michael say that last sentence again D5 1.0 would be wrapped eth on this chart D5 now would be lsds yeah yeah I agree I mean it seems pretty obvious at

this point lsds are just going to continue to grow as a replacement to to eat and wheat yeah yeah I don't know sort of like okay here's an asset that you can use I feel like we've already talked about this a little bit but I'm curious if you both do do you think we'll see I mean we talked about this last time a little bit will we see a hard Capper like some sort of tax proposed on lydo's market share well we see it this year no not this year that's like a multi-year conversation there's there's no taxes or heart apps or gates in the protocol right now I think that would require like you you also risk splitting the community frankly like if if one of the lsts has 20 million each and people are

like all right we're gonna hard cap it like do does that Community just take it lying down probably not you know it kind of reminds me of like the uh the Bitcoin chain Wars back in the day like it's an argument over basically the same thing which is like the economics of the protocol gonna be a pretty interesting Q3 Q4 for eth you have uh what's the next upgrade called Cancun I think in Cancun you've uh yeah p4844 proto-dink sharding reducing L2 fees by a lot you have uh like steath flipping with yep I think you're going to see a lot of that I mean the short term the 4844 I like I think it's very exciting um it'll definitely decrease the l2's

fees but like yesterday Bedrock decreased optimism speeds by like 90 in and of itself it's not like that was any change to like the L1 or the L1 asset or the L2 asset itself it's just like a bit cheaper to transact an optimism I think people are going to obviously enjoy that and use Bedrock to create their own l2s but like I don't really see that as being super super you know big news I don't know Michael if you agree with me or not well Bedrock was big not because of like Reddit cut gas by 40 or something cut the deposit confirmation Times by 90 but I think the real like second order uh implication there is that it kind of opens the gates for coinbase's base to launch right yeah weren't they waiting for this right yes

this is this is the first op stack enablement feature the stuff and frankly is like kind of the medium term like 18 to 36 months roadmap of like do we actually get dank sharding on L1 what does that look like does the EF just like call it a day after the Roll-Ups have scaled to like you know who knows how many transactions per second but I think that's going to be a very interesting debate within the community the the other thing just this context here I I pulled up ultrasound money there over the last 30 days 137 000 eighth that were burned Arboretum was three 3200 of that optimism was 1400. so you know we're not talking about like layer twos being a full

feature or like a full burn component of yeah they're like one and two percent respectively and so I think generally you know we don't need lower gas costs right now on those l2s because they're not they're not being utilized to the full stem and once that starts happening you know applications start developing where you actually start cramming those things full of transactions that's when we can start talking about you know the need for proto-dane charting do you have any sense there was something maybe kind of interesting this week or maybe not particularly interesting but I don't know if you guys saw something called Aerodrome happen but um velodrome is I think it's the largest app on Optimus and optimism

exchange it's a it's a fork of solidly um with a couple that was the Andre Crone exchange that they're used kind of it was kind of the original ve 33 and there are some improvements it's actually you know from what I understand velodrum's actually doing pretty well so then Aerodrome announced that they want to be the liquidity Hub on base I'm a little bit unclear what the relationship is in between Aerodrome and velodrome but there is going to be an airdrop of air drum tokens and they're going to people who staked uh ve Velo holders like 40 of the token Supply are going to be Bellow holders um it generated some Lively debate

internally like I think you could probably make the case like why this is just another deployment on a second chain like why would you want to do that I also think it's probably worth noting that there haven't been a ton of really successful deployments from like main chain on layer twos and maybe the a sort of new but related team with a token is a good strategy um I don't know I don't know if you guys saw it but I thought it was kind of an interesting tactic I mean it just like speaks to the Dynamics of these l2s and courage it's like you launch a new L2 there's going to be a project that Launches on you gives away tokens bootstraps CVL bootstraps fees they pay it to eat you know they post the call data like I can kind of see this trend persisting over

many many many different l2s not just bass I think this is like interesting Belgium has definitely proven out that like there is a market for new Challengers two incumbents on these different l2s and like to tie it back to our unit swap conversation I feel like that's probably what they're that's what I would be thinking about it's like what's the growth factor right now it's probably like lsts on L1 and then just like a proliferation of native assets on l2s that look and feel a lot like your money makers on L1 like just meme coins new projects you know random stuff like that I think you kind of want to be across those if you're going to be serious about competing and the two joking model kind of seems a little silly to me um you should probably try to do it with one but I think the old drum has the

right kind of like strategic mindset of just going after every single chain that launches and trying to make it you know the canonical liquidity provider the empire squid approach yep yep it's interesting that no one's tried that on Lido yet like I still think you know someone will will probably try and and I guess they just haven't been successful so far but just that approaches how would you say that that would work just go after see holders and wrap Steve holders yeah you offer them tokens like the LLC Farms have definitely gotten temporary tvl but you know you'd basically uh you know spit out tokens try to basically Force exit the steath somehow and restake it to your own validators

bootstrap your own validator set the problem is this this all takes a long time especially at scale and your token price is going to drop before you probably get to escape velocity um that would be my guess at least I do think that there's an element of maybe not dropping tokens specifically to vampire attack as a competitor to Lido but I I do see there being a lot of movement in the direction of like we were talking about with that Crossing chart adding steath and rhaps teeth into the collateral set or into the capabilities of other protocols and I think that's in the pickup and you know whether or not you're getting token incentives from participating with that as an asset I think that's going to be the equivalent of okay great you want to trade perps like we've got a derivatives

exchange and you can use it at rhaps teeth as collateral it's gonna be hard to get collateral recognized you know if you got like a new LST I definitely wouldn't act in uh in any just like of the canonical protocols yeah I think they all know two that are supported by maker are rhaps teeth and Rocket Eve yeah um I guess so the the if you're if you're a Lido I guess there are like a couple things that you can do you can make uh Steve more give it more utility um or you could try to juice the yields and then I guess using the yield is more in the there are more implications for restaking there because I'm sure there'll be some sort of race for like

other liquid staking providers to have their validator set restake onto other weird chains and sort of juice the yields that way so that's another sort of like a you know a yield competition I feel like that's another way that you could attack Lido as well that only works if you think the restaking players have like a very high fdp coming out of the gate like it I think we have evidence to suggest that your average new LST is going to have very little success in Vampire attacking Lido but like if the restaking play is valued at like 10 billion and you have like a billion of incentives for a year to give out you could probably take a better run at it but I still don't think you'd be

very successful honestly because at the end of the day the thing that you're restaking on like you need to get fees towards that you need to bootstrap developer usage on that like that that's not exactly straightforward you're basically just like another L1 or L2 yeah well there could be I mean I don't think any of this would happen with eigenlayer anyway because eigenlayer is only approved uh our eth and steath initially so I think you'll be very choosy but who's to say in the next bull market there wouldn't be you know some competitor eigen layer that I mean that's how it works I had some newfangled thing I don't know what it'll be now but they'll yeah always it goes buying uh Prime trust you see that didn't bitco get hacked Once Upon a

Time did they oh yeah they go I feel like bitco's pretty yeah I don't know about that all right bitfinex got hacked and their their money was a pickup flood Monger over here very different story a little funster multiple fuds no I mean bitco did sell to Galaxy but then that deal got walked back for 1.2 billion it's a huge evidence man I feel like Galaxy dodged a bullet on that one and I think the we were trying to it was that it was the it was In the Heat of

the Prime bro we're all gonna build a prime brokerage conversation you know Falcon X was ripping coinbase acquired to go me like everyone wanted to be the prime broker and uh Galaxy scooped him up as well that's too much money too much money too much for sure it depends on the financial is a big deal but that was bull market so you can assume that the valuation was inflated the tinfoil hat perspective is that that was going to be the way that Galaxy went public on the NASDAQ because right now they trade on the TSX they can't come public in the United States because yeah you know basically Investment Company issues and if you have a big enough business that's driving enough revenue from you know a business versus investment

returns you can actually become not an investment company he's also moving people out of the U.S I just saw a report on that he's uh moving the moving to folks like Singapore or something let's talk about that let's talk about the Exodus to Asia um I had dinner with uh I thought I thought we're calling it that's that's the title of this podcast everyone's leaving everyone's out everyone's out no I did have dinner with uh founder of this crypto company said 20 of their business six months ago I was coming from Asia and now it's 70 which like is a very Stark difference in a very short amount of time um I'm curious just how you guys were seeing that like are your companies that

you're talk like companies that you've invested in are they trying to do more business in Asia is this some overhyped thing is this like what are you guys seeing all the games are targeting yeah you know East Asia southeast Asia like those are kind of the most ripe markets for for at least the games specifically the defy and the trading feels like it's it's kind of like the the UK Singapore Hong Kong Toronto to a lesser extent but like all the VCS are still in the US and it feels like all the media is still in the US and it feels like all the kind of you know very startup B Founders that you get from the tech ecosystem which you know frankly just tend to be the best ones are still in the US so

it's probably a bit more more skewed towards Asia at the moment but I do think that's also a preview of like if if any of these games hit the industry is going to be mostly in Asia like I think that could happen it isn't happening at the moment but I don't think the Exodus from the US is the right way to phrase it it's just like the Asian market is growing like keep in mind they did not get caught up in Celsius block fi FTX you know like they were the government right or wrong saved them from that just by not allowing them to access it so they have a bit friendly of a perspective on the industry than than otherwise equivalently just imagine what it's like and I was having a call with one of our portfolio companies this morning based in Brazil and their perspective is like

listen 80 of the market is Finance in Asia it's probably the exact same like this is all of the stuff that they missed also paired with we have the biggest you know exchange on the planet which is a distribution funnel for any anything that you know people are launching they also have you know a wildly fanatic games Community as Vance was talking to I think Asia is going to be kind of the the temporary heart and center of this for for a bit uh but going back to it as soon as regulation becomes clear like uh whether it's this bill whether it's something else like there's going to be movements in the next year or two to make this stuff real like that Center is going to gravitate right back to the US

because it's going to be instead of you know unregulated D5 it's going to be regulated totally blessed and people are going to move in yeah like you think about it this way if you're an entrepreneur and you have an option to do a token or equity and both are fully regulated and you won't get in trouble for doing one versus the other nine times out of ten you'll probably do the token like I I do think that will will be like the new paradigm and if you're an investor you probably want to sign a token warrant for every single investment that you do if that really happens and that's like a really different frame of mind for a lot of people and probably changes the VC landscape Downstream is the result like a lot of people have to register as rias but yeah maybe it does gravitate towards

Asia in the interim but I feel like once The Regulators are able to put this behind them and and I do think the SPF trial is also part of that we can there's just things like emotionally I feel like people still need to to put behind them basically October 2nd that's going to be a dumpster I'm sure every day the coverage is just going to be like insane as the evidence piles up it's gonna be done I mean it's supposed to be done by the end of the year by by Thanksgiving yep well look the great uh great Thanksgiving with the fam it sounds like [Laughter] we got him

all right I will say someone put this pretty well it's like the flip side uh that I was talking to this week the flip side of the US taking forever to make decisions is that it also provides kind of more sound ground as opposed to a regime which is really top down and they can change their mind basically on a whim so you know someone you like right now everyone's really excited about the UAE right but let's just say for hypothetical sake FTX it happened there they couldn't change these laws overnight you know and sunset in the whole industry and it's just not you know if you have a really long-term mindset and you're trying to build a generational business it's just harder to do on that that type of footing than it is in the US I would say in addition to that it a number of other

jurisdictions are waiting to take their cue from U.S opinions yeah like I was once again was talking to the portfolio company in Brazil and you know they were surprised they were they wanted to talk all about you know the different suits that were going on um but they were they were surprised because they hadn't heard that much about the market structure bill and it's like okay and they're intrinsically tied in with a number of you know regulators and governmental bodies in in Brazil they want to move forward but if there's something on the table that the us is going to pick up and move forward with like they're going to follow suit exactly if you're still in position in the U.S and your business is doing well and the regulation happens like it's going to be

night and day you know because there's not a lot of people who will just like frankly still be there at that point you know even if it's in like six months or 12 months I do think it's just going to be game changing for the whole industry yeah yeah how worried are you guys short-term about some of the subpoenas that seem to be going out to protocols not worried not worried not really that's you know that's been going on for years yeah that's not a not a new phenomenon yeah yeah what what advice I mean I don't know we I think a little while ago talked about like sort of sentiment and um it's an overused analogy but this does feel at least to me a lot like 2019 kind of and I feel like there's a big sentiment difference in between even

when FTX and everything is like exploding and people are really worried at least they're sort of an active energy there right like you're sort of keyed in and paying attention whereas I do feel like the aftermath of that tends to be a little bit more depressing actually uh because that's when apathy really sets in and you know what you the your first instinct to say is that oh all that stuff is behind us now everything's gonna turn around but then there's like a lag before it actually does turn around and I think that can actually be the most mentally challenging for a lot of people especially very execution-oriented Builders um what do you guys think about just like sentiment generally do you talk to a lot of your Founders that are struggling with this like how long do you think this goes on and I don't know

what advice do you give them I think uh you you can on the negative side like you can really take the the hole as deep as you want like you can you can go to the Earth's crust like just thinking about you know is the industry [ __ ] like does this protocol work you know is my team the right team am I wasting my time all of that it really is kind of like you can choose your own adventure and that leads you only to One path which is just like failure giving up but I I do think if you take a step back like objectively a lot of the stuff that's happening is like a positive backdrop and you know when things are bad you just gotta put one foot in front of the other I think there's really no like you can't wake up happy one day you

just gotta keep going uh you know maybe that's not like the most comforting advice but like good advice no I have yeah there's nothing else you can do always and the alternative is just like the Doom Loop it doesn't really work that well it doesn't help the the best Founders don't have those types of points that's operations or perspectives and I would say honestly most of the conversations that we have with portfolio Founders is like here's all the news that's happening like how do you reevaluate how do you readjust you know do you want to change strategy like I know your head's down building right now but like maybe pop up and like

touch some grass or like actually get outside and see what's going on to assess where things could be going and make sure that you're on the right path there like that's our job is to see the tea leaves or hear you know different disparate information put things together and just say hey like here's where we think things are going you know use this information as you want it's it's really not like the founder therapy of like what do we do every day when we show up to work also we I think it's like two days away from being the the four year anniversary of starting framework like we started in the summer of 2019 and if this if this is summer 2019 like this is the best time to be doing exactly what we're doing yeah I think the other thing is like you have

to believe that you're building a big business like you have to there's there's Milestones that you can put in the ground that are irrefutable can you get to 50 to 100 million of ARR that's kind of like the minimum for like a venture outcome for you to make a lot of money and I think a lot of people you know frankly have like the small Market problem right now where it's like you know you're a business that's selling to a business that's facilitating like retail flow or you know nft sales or like you know there's just not many things that you can sell software to and I think those people are having a bit harder of a time just understanding the reality of like if this if your startup is going to succeed you need 10 000 others to like use and buy their product and right now

there just aren't 10 000 startups willing to do that but the people who are closer to the metal either building new markets um you know closer to the fundamentals in places like D5 or building for just gigantic markets like games those are the people who have a lot of reasons for optimism and it's kind of just on them like like you like I do believe most of those people can really build things that are important it's just a matter of of having the tenacity to do it you guys want to talk about chain link a little bit they've had some they've had a big big news week oh boy [Laughter] ah chain link the Marines baby give us this is our growth strategy we

need the Marines to jump off they're powerful force I wouldn't play with them no man they were also born in their Market um yeah chain link had some announcements of some Partnerships this week I I think the funny part is when at least we got started with chain link which was in 2017 when they launched literally the rumor of the first partnership that they were going to announce was Swift and it was like chain link and Sergey are working with swift behind the scenes and it was always the rumor of Swift and when switch when they didn't announce that you know Swift is switching to chain link and it's gonna run on chain well this weekend [Laughter] for years like just little photos and

like we do we watch like we would dial into like the Swift yearly conference which is like totally it's like such like banking dribble so dry and like getting through hours five minutes of Sergey but you know the madman he pulled it off early at least you know proven concept like you know step in the right direction but it is good to see so good yeah it's hot Sergey and Azeroth there are rumors I like all the like sir yeah is Sergey Satoshi like he owns smartcontract.com in like 2009 like a day after the white paper went live like all the things wow you've gone deep on your Sergey Lord

chain link is my yeah well we won't get into it um the guy next to me when I first big guy next to me in 2017 was when crypto was ripping when I pre-block Works was a was a big uh chain link bag holder so I would uh Paul his name was Mike thank you owe that guy thank you thank you I'm like that will Arrangements yeah yeah um what is chain Link's business because they have like 400 or 500 or 600 employees or something like what how do they make money like what is their revenue models like what are their products uh well it's changing I think historically it started off with price feeds and all the defy applications that needed decentralized price feeds

um you know basically every single D5 protocol at this point uh would pay to use those price feeds and that was something that was sort of negotiated or talked about and and you know sometimes it was paid by the Dow sometimes it was a service fee I don't actually have very much contest as to how that was constructed I think where they're moving in general is to ccip which is cross chain uh communication information protocol um I'd probably butchering that but uh what you think of that is like a cross chain you know messaging protocol where you can actually have you know no Bridges and decentralized Trust for uh those different node operators on those

different chains and that gets cured by the token you know it's paid for by the users and it would be something that flows to The Operators of those nodes like an L1 basically yeah got it I think the chain link dream on L1 is is actually gonna happen that was at least like the smart con takes of laughter and if you think about it like they probably have some of the most amount of developers building on them of any L1 in general just by virtue of the price feeds yeah I mean they definitely have the most tvl that's supported by a protocol other than ethereum is it public how much revenue they do no we don't have no idea either yeah yeah I think generally you'll be able to see everything on chain with

ccip I would assume because it's all neon chain um the stuff that happens that isn't that and historical products no idea the other stuff that they do which I think is kind of undernoticed is um random number generator which is what powers most of the play to earn gaming so whenever like it's actually kind of a hard math problem to prove that something was a random number especially with the computer of ethereum and you have to be able to have that for it to be a fair game um and so that's that's one of the things that you know they're obviously power in D5 but they're also powering a ton of games hmm that's interesting can you explain that I I'm not fully following what is

that why yeah so like in if you're programming and you have like a math function that gives you a random number it's actually just like we're going to choose one between 0 and 100 and set DVD to that percentage to a certain decimal point well it's actually not mathematically random there there is some bias in that and for you to do a fully random uh calculation it has to be something that requires off chain compute and that's what their off-chain compute enables and then brings it back onto it gotcha interesting yeah it's cool they've got a lot of different things like that that have traction it doesn't it's not like outside the realm of possibility to see this is now one do you do you guys see a little while ago I think it was Dan

elitzer who wrote this big long threat about what makes up a crypto primitive and sort of advocated for not using Oracles in D5 Primitives I would be curious what you guys think about that I feel like that would lead to multiple financial disasters almost immediately like the on-chain oracles have caused more problems than the offshade oracles just empirically over the past few years uh also uh well generally I would say that sounds like a great research project but not something that's real yeah like Uma I remember back in the day tried to build bitmax with no oracles like it was it was an interesting idea

but like mostly a science project like these are really interesting designs they're just the consumers make it makes it very hard for them to use and also um there's huge accents if you get a bad Oracle on chain because it's just super volatile right and the prices are by definition stale if all the discovery happens onset drives it changes it's like uh I remember when otter was going to be the Oracle solution for for all of crypto and it was like a 14-day contestant period and you had to get a certain number of votes to be able to enable Quorum and then people would vote on whether the outcome was correct or not it's like come on people just want to know if it was heads or tails I feel like decentralized prediction markets was like white whale things in

crypto that like every three years only Market does okay I think but only when there's like the once in four years presidential elections yeah what do you think about different like a decks like what about something like a uniswap or like that which wouldn't depend on a depend on a price Oracle but you know they basically depend on arbitragers to move the price back in line I think generally like the the one thing that is becoming more apparent and actually Kane from synthetics had an interesting post on this recently which is basically their trials and tribulations of having a a pull versus a push uh Oracle solution the reality is

that having multiple solutions for different use types and user user types is probably the best solution for most of these protocols 99 of the time it's gonna be used one way but if you're going to use the product in that way or this other way it's probably something that would be better suited for something easier all I need I gotta run all right fellas recall it all right later guys