What DeFi Get’s Wrong About RWAs | Robert Leshner

Transcript

[Music] all right everyone we've got Rob leschner from compound who I think needs uh no introduction Rob welcome to uh Empire my friend yeah excited to be on the show today yeah man you're going by Rob or Robert these days you know I think I've always gone by Robert but you know some friends call me Rob sometimes so over over some beers it's Rob yeah all right all right so I I get I get the moral of the story call you Robert today so anyways Robert we uh we wanted to have you on the podcast because uh you sent out this tweet which said make no mistake uh the government wants to kill one of the most important and Innovative Innovative segments of the US economy which is crypto we're coming on the back and that tweet kind of comes on the back of signature closing SEC forcing Kraken

to shut down staking um what else happened coinbase as Well's notice uh cftc food binance uh it appears that operation choke point 2.0 is is here so I think we just want to kick off this conversation and and get your take on on the backstory of this tweet and how you're feeling about things right now yeah and it's a great question so that tweet was really an acknowledgment of what most of us in the industry are seeing and experiencing and you know um which is you know operation choke point 2.0 um you know there's at this point it's almost you know not a controversial you know um statement that there is a coordinated effort to debank the crypto industry

um through you know um not entirely you know normal policy means or legislative means behind the scenes in a way that is not normal um very similar to how operation choke point 1.0 tried to debank a legal industry um in a you know um inappropriate approach and we're seeing that right now with crypto um you know you mentioned both you know silvergate and Signature Bank you know these were the two primary us on and off ramps between the banking system and crypto both of these went from you know functional to non-existent in

an incredibly short amount of time following statements by um you know banking industry Regulators to the banks by legislators like Elizabeth Warren publicly and by a number of you know uh actors in the ecosystem that were you know somewhat excited for these Banks to fail and for their activities with crypto to no longer be functional um you know besides all the things that have already been written you know great examples of this or that you know even post failure you know the entire banking apparatuses um of silvergate outside of crypto are functioning normally um it's uh sorry signature signature was

sold to another bank and all of their customers with the exception of crypto customers are up and running all of the crypto customers were debanked in that process both the Signet payment system and the crypto balances were not restored and the bank having gone through you know a cell transition from being one that served crypto companies to one that does not serve crypto companies silvergate likewise is a hundred percent offline for crypto companies the Silver Gate exchange Network and all financial services that they were providing are gone and at this point there's almost no you know mainstream supported uh

infrastructure for you know legal institutions that interact with crypto to interact with banking system most of the uh economy has shifted over to cross river bank which is just a single Bank of not considerable size which in has become essentially the loan bridge between Banking and crypto organizations but you know pretty much the map was wiped clean you know in an incredibly short amount of time due to government action um in an unanticipated way so you know my tweet is really just an acknowledgment that there's an effort to de-bank crypto and it's been unfortunately incredibly effective this episode of Empire is brought to you

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uh is an interesting word were you expecting this at all and if you were expecting it like how long did you know kind of feel like this was coming in and if not um yeah it's interesting this kind of took Everyone by surprise so much well this took Everyone by surprise because in a lot of ways this was like an extra judicial you know process you know this didn't come through the legislative process where you know people had a chance to form policy this didn't even come through like administrative policy this came through you know behind the scenes actions that were taken in a short amount of time and so I don't think anyone had the ability to anticipate that crypto would be debanked so quickly and so effectively you know

there was a lot of you know fear following the collapse of FTX that there would be you know strong actions taken against the industry as a response but I don't think that most individuals within the industry anticipated that you know the attacking of script would be so widespread and so rapid yeah have you got any sense of um like the why behind this I mean anyone's guess is as good as mine I don't have any you know you don't want to uh you don't want to put on your tinfoil hat with me and uh and start to uh get into some of the theories well I mean I think the simplest theory is that you know following the collapse of FTX

this provided you know a justification that people that were already biased against crypto had and this gave them the justification that they were looking for um you know simply put I I think it made you know the timing easier um to attack crypto and so you know why you know do people want to shut down a legitimate industry it's hard to say you know there's a lot of aspects of crypto that are you know extremely positive and I think in the long term best interest of regulators of policy makers of our economy and of you know all financial markets and so you know it just in my

opinion it was just like you know um coincidental timing but I think it's a reaction more than anything to FTX yeah how has this impacted uh your guys's product strategy at compound because I because I I mean we were following the um the compound treasury launch pretty closely and like the build out of that I'm just curious how you think about those kind of products in the wake of like a US regulatory Crackdown yeah so com compound treasury you know was envisioned as this bridge for institutions to access defy going through um a compliant you know Central counterparty and having a middle layer between institutions and device so you know this has been you know announced

elsewhere so it's not like breaking news but you know at compound Labs we have been in the process of shutting down compound treasury um you know it's a function of multiple things one the business climate has shifted um the idea of using a you know middle layer between you and a smart contract doesn't look as appealing as it did before the collapse of FTX you know there was a time when institutions wanted to interact through a counterparty but I think now everyone is unbelievably you know skittish about custody of you know their assets and like having any layers that are unnecessary um make less sense today you know and so it's really a market reaction more than

anything else um but you know we we are you know shuttering um the compound treasury product which you know is a small amount of collateral damage and just a very meaningful shift in Market structure but it's really just a result of Institutions and their preferences changing in the wake of massive exchange failures remember the D5 mullet fintech in the front defying the back I I you make me think that that might have been the wrong thesis here actually well I think long term the D5 mullet might be like a really strong thesis which is you know you're gonna have you know transparent autonomous protocols on the bottom and institutions that are like business

forward and serious on top but really the question is what's in the middle and how does that work and you know long term I do think the D5 mullet is going to win it's going to be a viable Theory and you know it's we're just going to have to as a society like figure out how to deliver the benefits of defy to a wider more institutional audience yeah it's also just a tough business the aggregator business model is also just a tough business model um it provides a lot of value to users like if you think about the Dex aggregators really a lot of value to users but just a kind of crappy business model yeah it's one of the things we found I mean it was not you know it was not um a successful business you know but that's also just a function of you know

the macro interest rate environment so one of the really big trends that's happened over the last year is interest rates in travify have eclipsed interest rates and D5 and you know one of the symptoms of that are you know Banks like svb blowing up that just you know took too much interest rate risk but the other is that you don't have people trying to grab defy interest rates as much as they were before they're much more willing to say let me grab those t-bells as opposed to grabbing defy interest rates and so that that's really the other macro shift it's when you combine you know these two things like

extremely skittish and less trusting of any counterparty even you know ones that are as credible as you can get you know confound treasury was rated by you know s p Global rating agency it was like designed to be you know as good of a counterparty as you could have plus this macro shift you know it means that middle layers between institutions and D5 are just kind of have to rethink how they go about things yeah been thinking a lot about that like what polls basically what pulled people into D5 was I mean kind of in part you guys kicking it off with like kicking off D5 summer and then people kind of came for the token incentives and and kind of the games almost you could say and they

stayed for the yield what do you think pulls people back into defy and then what is that the same thing that gets them to stick well this is a long-term statement this is not like a short-term statement like I only really think about like you know things in the five year tenure sense the things that are going to pull people back into defy um I actually think of the virtues of D5 that are being you know brought to the surface by All of This calamity so the virtues of D5 are that you're not gonna be you don't have you know this opacity which has led to a lot of problems right um that's the first major thing that's going to pull people back to defy and the second is going to be the Automation

and the composability of D5 this is like it's gonna go full circle and these are like really OG statements but the things are going to pull people back to defy are the benefits of self-custody right you're not going to have to trust in exchange to be lying to you or not or telling the truth about how many assets they hold you know FTX you know such like this glaring example of like you really can't trust what they say right versus D5 where it's you can validate yourself or pretty much any like you know trained person on their own can validate you know the balances of a D5 system or the health of the defy system in real time like compare those two things it's like take the reward for it or validate it yourself if you don't

have to be afraid that you're being lied to it's an incredibly powerful thing and so I think like Defy is you know Superior to C5 there okay the second thing that's going to pull people back is automation you know this is you know a cost argument but defy Works 24 7 autonomously with no real managers or upkeep compare that to a C5 anything you know long term I think like autonomous smart contracts just on their own are going to be seen as just like a much better tool for implementing financial markets than how financial markets and products are implemented

today you know it costs literally nothing for the smart contract behind uniswap or maker Dow or compound or whatever to operate it's truly unfathomably awesome and that autonomous nature of it you know is a huge magnet for developers and markets over time um you know just the amount of effort that has to go into maintaining Legacy markets from reconciliation to like accounting to like you know all of these things it's just like horrendous so like automation is going to be a second thing that just pulls people back over time and we might see it in interesting ways like you know I can imagine like you

know a distant future you know people you know will choose to you know purchase an asset you know in defy over the other one because just like the upkeep is less um operation and the last thing I think is going to pull people back in the defense composability right when and there's like a network effect to composability that you don't often get in traditional markets so you know if you're a customer of you know E-Trade what's happening at Fidelity doesn't really matter to you or it doesn't really benefit you but when you're in D5 what's happening at you know uniswap benefits from like the changes that are happening in maker now or benefits from the changes happening right yeah or benefits from you know everything else that's getting built

because it's all interoperable in a way that you know C5 and traffic are like completely siled like you know if you have a balance at coinbase it really doesn't matter what Gemini is doing because you can't use them together but you know when you have your own balance in defy you benefit from all improvements to the different you know applications platforms you know in parallel and so that's a really powerful feature that you know is kind of like this hidden Tailwind behind everything that I just think develops a network effect that gets better over time and So eventually you know people are gonna be you know coming back to defy in full

force it's not about games it's not about you know whatever like you know momentary thing like the virtues of it are so strong that eventually Defy is going to win and I think that all of the Calamity of late is just reinforcing of that fact it makes me more confident about the virtues of D5 let me ask you this then do you um there's kind of like two views for like Mass crypto adoption right now there's I'd call them like the Bitcoin route and the eighth route the E throughout is that you are spot on composability um uh faster cheaper uh composable systems will eventually build better products and yeah we're in a bear Market but eventually D5 is just a 10x better

product than traditional Capital markets and that pulls people into the system and voila we've built l3s on l2s on on Ethan like boom amazing system um that's what I'd call almost like the eighth view um and like the view of I think a lot of people right now then there's the view that's maybe come to the to the front in like the last 30 days is which is the Bitcoin view which has kind of been quieter the last couple years which is hey maybe we the system is actually kind of falling apart a little bit and um we do need a way to store Capital in like uh places where collateral there isn't collateral risk and um I think we kind of all saw that the virtue of Bitcoin in

the last couple of weeks as people were trying to move Capital outside of the traditional uh Financial system so I'm curious like do you think it's are you like all eggs in one basket it's going to be eat you're not worried about the system breaking you just think better products will be billed you're like all eggs in the Bitcoin basket or like a little bit of both these days yeah I I would say I'm like you know 90 you know 10 on this where you know I think in terms of a technology I think you know the ability to build transparent autonomous composable Financial systems is more powerful than the ability to have a censorship resistant financial

asset you know long term I think having a censorship persistent financial asset is awesome it's so important it's like you know the proof that creates everything else but you know long term you know it's relatively arbitrary you know that Bitcoin will have value relative to everything else on Earth you know I personally don't own any gold okay not because you know I don't think gold is cool but like I don't own any gold but because it doesn't really do anything it mostly just sits there and you know it's not that useful of an accident I would much rather own a

company or shares of companies than Road wood gold um and I think of Bitcoin the same way you know if you need something that you know is you know truly just a financial asset that doesn't do anything Bitcoin is great and it's properties as that are great but I don't think you know having another you know just like financial asset is as important as the technology that proves out the program ad programmability and transparency and autonomy of a whole new generation of Finance which long term I think is going to be more valuable and more important yeah yeah I would tend to agree with you there um I have a couple more questions on the

regulatory side of things and then I want to get your uh thoughts on on some other stuff um I guess just like as a founder and as a builder of a protocol when you see the the US kind of cracking down on this do you and then you see you know Circle looking to get regulated in France and I think it was Gemini this week was announcing they're going to potentially launch derivatives in Europe and coinbase is leaning heavier into their European business like how do you think about kind of weighing the pros and cons of of operating this protocol that clearly the the most powerful three-letter agencies in the US are not uh fans of these days and and how do you think about like like is it is it even worth it to build in the states right now well my advice to you know most Founders

now when they ask my opinion is you know if they have the opportunity to build offshore you know I encourage them to do so you know at this point the majority of my time has been at robot Ventures as an investor right um talking to Founders and you know this is building offshore Robert does that mean like you are living offshore does that mean your customer base you are only targeting folks outside the U.S like what is that actually entail yeah I mean it's all of the above um you know the best case scenario for Founders building new things right now unfortunately this is a massive you know unfortunately like I wish the reality was the opposite but you know right now if Founders have the opportunity to live abroad and build abroad and organize

their companies abroad they should um simply because the US is unfortunately incredibly hostile to Innovation within the crypto sphere right now um no matter how well-intentioned organizations are no matter how hard they try to comply it really doesn't matter um when you look at Circle and coinbase and you know Gemini and all of these institutions that have hung their hat on compliance you know for years they've been in the crosshairs that should be all the evidence that people need to know that like there's an easier path right now like the best intentioned

are being targeted um it's not you know the frauds and you know the scams and you know the truly like male intentions operators in the ecosystem it's the best intentions most compliant organizations that are being targeted which you know is generally not how the rule of law works or should work but it's the reality and so you know I think most Innovation is going to start occurring offshore um it's clearly detrimental to the long-term interests of the United States it's unfortunate I wish this wasn't the case but like most Founders now are just reconsidering where they build from

because the US is incredibly hostile and a lot of other countries are becoming more and more embracing of innovation and I think like the tables have turned and that the benefits of U.S markets aren't necessarily worth it anymore to a lot of new Founders yeah what what about what about existing Founders I guess what about yourself I mean how long have you been you've been running compound well I don't run compounds or when did you start I don't know that how I'm supposed to say it but like when did you kick it off yeah so I founded compound labs in 2017 which is a really long time ago at this point and the world was very different in 2017.

um you know if I had to you know start from the beginning I don't you know I think I would take my own advice and probably locate offshore yeah would you are there other things that you would have changed like would you have not launched a token or would you have done it differently I guess what what would you change now with you know obviously the the inside of hindsight well I think you know the compound protocol is actually like a really successful example of how to build a system that's not controlled by you know a centralizing agent um you know and all of this was developed in the open as sort of a Playbook example for Society at large of

how a protocol can get created and you know hand it off control to uh um a community in a really strong way you know following you know what we knew um you know I I don't think there's that much I would do differently because I can't go back in time I can't go back to 2017 like you know I can only give advice to builders you know in the ecosystem in 2023 um as they think about these things yeah have you thought about um so you've been uh so kicks kicked off uh compound labs in 2017 advice to new Founders is to start like kind of start offshore spending more and more time at robot robot Ventures which by the way I heard some numbers I heard uh you and Turner

having a quite a good couple of years at robot so hats off to you and um uh like have you thought about when when it's time to pass the reins at at uh at compound labs well I'm not even sure what you're referring to um but you know I I'm sure we're gonna you know especially as we start to shutter The Compound treasury product rethink you know what what opportunities there are for institutional products in the space you know at this point compound Labs has been focused just truly on institutional products um and so you know we're probably going to be rethinking what that means but I think in some sense I'm going to continue to operate and invest and spend my time in the crypto ecosystem you know I don't really see myself you know stepping down or leaving the industry

you're not you're not going to go work on AI Robert I am not going to go work on AI I'm trying to do a little bit of gpt4 um haven't used you know Dali yet but like you know I'm not the best query you know right yeah you know I am uh so I met with the world coin folks last week and I'm trying to uh decide whether or not I think that is like a wild invasion of privacy or whether or not I think that once uh gbt3 can or gbt like five or six rolls out ability to like do things online for you whether worldcoin like saves us from a from that kind of world so yeah I think the true measure is actually going to be when like Chad GPT is like actually funny because like right now you can tell like it's like

just a really bad AI when you ask it to like write a joke or like be funny in any way it's just like it's so shockingly not funny and it just hasn't figured that out at all and like I you know I think it passes the Turing test when it can like tell a joke like yeah absolutely like be funny yeah well I think it's tough to tell a joke in text you need like a voice almost or maybe you just needed to create incredible memes so but it's funny I was showing my I was back in San Francisco I was showing my parents uh gbt4 and my mom remarks she goes you're using please and thank you all the time I was like oh man I didn't even realize I was doing that yeah you got to say please and thank you to the robot

overlords you know you do you do exactly so all right man I wanna I wanna shift gears a little bit and um get your take on um actually this is kind of like same gear but like real world asset stuff and um so coinbase just put out this piece on like flat coins real world uh I spend a lot of time inside of maker and we talk a lot about um about real world assets I'm just curious about your like overarching view on like whether or not it makes sense to pull off-chain assets on chain um yeah I'm curious to get your take on that the answer is yes I mean I I personally think that pulling off-chain assets on chain is the superior approach to pulling on-chain assets off chain and you know you

mentioned makers I'll give you a great example so you know maker Dow is actually getting quite good right now at taking assets from on-chain to off chain they're taking die yeah off chain when they let like you know institutional counterparties borrow die directly from maker and are getting good at taking stable coins which serve as collateral off chain to invest in assets off chain so makerdale is doing one approach which is called take things from unchain off chain pretty well so they're like building their like muscles around like moving assets off the blockchain I actually think that's the wrong approach long term I'm actually

way more excited about the inverse of that which is taking assets from off chain on chain so like how do we get you know all of the assets that exist around the world to be represented on chain like when all of these assets from like stocks to bonds to Commodities to real estate to Art like when all of these assets are represented on chain they're all going to be more useful they're all going to be more programmable they're all going to be more composable and like that's what's going to usher in you know a Utopia of blockchain so to speak um but until then you know I I think a lot of what's happening is the opposite which is assets are going from the blockchain to the off chain

um which is the wrong direction yeah yeah um yeah it's like moving uh like internet native news like onto print it's like that's probably not the exactly it's like starting a newspaper to write about crypto it's like why yeah yeah exactly um so who who had the magazine wasn't it Bitcoin mag had a had a nice little magazine that's true that's true but that was early days yeah yeah exactly all right quick break from the show there is this kind of overused cliche saying in crypto but it's true bear markets for building and everyone tells you that never knows it what people don't know is that if you're building apps in crypto and building apps in web 3 without using quick node you are building on hard mode so quick note is

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build on synthetics pop into their Discord server reach out to the team directly make sure to tell them that Empire and Santi and Yano sent you again synthetics.io4ps you can also hop into the Discord server and reach out to the team directly any like updated thoughts on like stable coins now that we're on the other side of this kind of bull market and like deep in this bear like thoughts on stable coins what the future Stables could could look like yeah it's a great question so you know the most interesting event in my mind um was you know two weeks ago or so when usdc depegged um you know I actually thought that this reaffirmed the value of stable coins um and the risks really well in like a

very concise argument which is all of the money behind USD coin was there um you know they had 3.3 billion at uh svb which temporarily on the weekend of svb's demise nobody knew if it would be there come Monday but USD Quinn I'm gonna paraphrase the numbers you know there was 46 billion dollars of USD coin and 46 billion dollars of assets backing it and even though it was like you know so obvious that like this was a one to one dollar Peg stablecoin the market price didn't reflect that you know the nav of one USD coin stayed at a dollar

but the secondary market for USD coin went down to 88 cents on one wild tumultuous weekend and the the reassuring thing is the fact that like when everyone sort of came to their senses you know it was obvious there was still a dollar backing each USD coin and they were convertible one to one with dollars and the whole system worked exactly as advertised and obviously USD could be worth a dollar but as it depegged it just showed that there was like an irrationality that was present in the market where I feel bad for everyone who sold USD 2088 cents because they lost a lot of value

um but like they sold it because of like an uncertainty and I think that actually creates a really strong you know road map for stable coins and how they're going to work in the future which is the collateral behind them shouldn't have to operate just on banking hours right the failure of USD coin for that one fateful weekend was because you couldn't actually mint and redeem it over the weekend because the traditional banking system doesn't work on weekends that's the crazy thing and the crazy opportunity if USD coin was mental and redeemable during the weekend you know on crypto hours which is 24 7.

there never would have been an imbalance in the first place and I actually think that like you know there's a lot of ways which the financial infrastructure can upgrade over time but the most important one is just the concept of weeking out weekend hours like Finance doesn't operate two out of seven days per week and you know 16 out of 24 hours per day like that's the crazy thing to me like Finance only operates one of the big issues with svb is just that they close down at 4 pm so people couldn't get their wires out like that was one of the one of the core issues here right svb closed down 4pm so what are you going to do and like stable Queens even when they're one to

one backed aren't one-to-one redeemable and USB coin wasn't one-to-one redeemable for two days and many hours from Friday you know 4 P.M to Monday when everything opened back up again and so you know the stable coin is still beholden to the Legacy Financial system and I think that creates the opportunity even from one to one value-backed stable coins to improve um you know I I leave it to you know the thinkers over at Center which sponsors USD coin but this is a huge opportunity um that I think is going to be solved over the next couple years yeah well I mean so uh so coinbase launch base

um and they just put out kind of a call to action like ideas for Builders I think they called it or requests for Builders and um one of the ideas was for what they called Flat coins which is basically uh decentralized Stables that essentially track the rate of inflation um and I guess you can kind of get this in like the bond world like an inflation tracking Bond or something like that but their their idea would be like you'd have an entirely crypto native stable coin that tracks the rate of inflation um and um I'm just yeah I want to get your take on this or like maybe other Staples out there that aren't usdc like what uh What fracks uh like ample worth I haven't looked at ample worth in a while but like some of these I'm just curious to get your take on

decentralized Stables right now yeah so this is a really fun you know question because a decentralized stable coin that doesn't rely on one-to-one backing but relies on over collateralization like maker down like you know some types of stable coins yeah um can use anything as its Target pack so when you think of the stablecoin die it doesn't have to Target one US dollar it could Target 1.1 US Dollars it could Target 1.03 US Dollars it could Target one ether of what it's worth um the only thing that's required is that there's more collateral backing it then the value of the stable coins that are represented so it doesn't have to use

you know a target of one USD it could use one Euro as the target you can easily make a euro overcloud a lot of stablecoin it's decentralized you can really make an over collateralized out you know algorithmic stable coin you know using any Target you want and so you know I really think what you know Base by coinbase is asking for is if they're gonna have a decentralized stable coin on that chain Why Pay get to the dollar at all why not take it to something you know non-dollar right people have talked about pegging a stablecoin to like a basket of currencies kind of like you know special drawing rights or like you know a broad basket

you can pay it to anything and so I actually think it's a cool idea to take it to an inflation index I think the downside is going to be that like consumers aren't gonna like get it so to speak you know if you have like one you know we'll call them Empire you know and Empire is a stable coin that like you know is pegged to some inflation basket you know each Empire is going to be worth you know less overtime or like even if you do the inverse of it for its Peg like yeah it could be worth more of our time it's gonna be worth like 1.1 dollars it's like as a user it gets a little confusing and it's less usable than a stable coin like if you have a you know an Empire Buck that's worth 1.2

dollars like it's hard to basically think that would never that would never take off until or unless you had a world where something like the US dollar was experienced experiencing hyperinflation yeah and like in that world the world where apology wins and like right yeah that's a fun world and like to be honest like no you know I'll just Retreat to a a cave and like not worry about myself I'll join you I'll join you yeah I'm also not sure people are in that world are like moving their Capital into like this kind of like load low market cap like inflation hedge stable coin that's run by some like a bunch of protocol devs that kind of feels unlikely to me so

um other things Robert I want to get your take on app chain thesis um we talked about this several months ago when you were on the Pod but I want to get your kind of like updated take on the app chain thesis um you guys if I remember correctly had these had a plan to launch compound change uh uh compound chain on what was it called back on substrate or the polkadon SDK yes part of polka dot yeah and I'm just curious to get your like so I think Cosmos like really hit a narrative sick like six or seven months ago uh kind of fault a lot of people were thinking about following a dydx's uh footsteps then you've kind of had the like the L2 narrative on eth has really taken off you had like coinbase launch base on on the op stack then you have

like arbitrum doing a lot of having a lot of conversations about l3s like what is your updated framework around how you think about options yeah it's a great question um I think an app train as an idea is incredibly valuable if you need incredibly specialized performance that you can't get from deploying on a main chain for some reason if you're trying to do one thing you know a lot of times per second and actually makes a total sense um some of the best app chains you know so far historically you know have been you know either things with low usage or you know special deployments of things

like dydx you know using starkware where you've gotten a lot of transactional throughput that like would have been horrible on an L1 um I don't think there's that many applications that have the usage to warrant and application specific chain or deployment frankly and the ones that do are well served by having an app chain and the way I think about it is an app chain is like a semi-quasy composability with other things in crypto you know if something's on its own chain the only composability you get is like via exchanges that sit above everything for you to be able to move assets from like one chain to another or bridges that are built between one blockchain another

it's like really you know quite clunky to have any sort of like even value transport between blockchains you're generally they're using exchanges or Bridges which create new assets um and app chain is like similar in that like the composability is not great if you look at any of the cosmos app chains right they're all useful they're actually it's a great platform for app chains like they actually all work it's kind of amazing um you know a lot of people have been able to use Cosmos to launch a chain to do their thing and they've had a lot of success with that way more than in my opinion substrate and polka dot has

but even within that like the user experience and the composability between applications is like it's rough you know if you've ever used Cosmos it's not easy or intuitive to like move assets and value between their ecosystem like you know chains they all kind of feel orphaned even though they're not it's just like it's a really complex user experience that I don't think fits for a mainstream population like if you're extremely technically sophisticated and like you're a real djend like you navigate that stuff but most of my friends are not going to be navigating like yeah chance so I mean I like if a protocol gets big enough like

maybe use um use unisplot for example like unit swap probably like leaks some value through Mev and like they need like there's there's probably some reasons why they would go build their own chain which I don't know if you ever read like Dan elliser's piece on this um but like someone like uniswab who's gotten that big does it ever make sense for them to launch a uniswap chain I mean either they at some point you know will have a chain which then like people are going to have to very deliberately move their assets to unit swap chain in order to trade on the uniswap system or they're going to have to you know figure out Mev in some other way but like you know Mev is the core enemy of uniswap you know I tried to trade

on your swap like a few months ago and I'd forgotten about Mev and I just submitted a transaction I was like oh well like I sort of like you know really lowered the you know percent slippage tolerance because I got ripped up by Mev like yeah yeah but you've got to imagine like like so do you think that that is behind the uniswap wallet thesis like where basically where would where do you think Mev will end up accruing yeah it's a great question I mean I think long and Mev is so complicated but I think long term Mev is a dead weight loss and it's going to get cut out through technology like it's a function of right now blockchains being a really bad platform frankly to trade on because

you're basically telegraphing what you're going to do to everyone even if it's like you know is most transactions are telegraphed to everybody you know you can obviously send it directly to a mining pool and all these things but like that ux is not yeah for the majority of usage and so it's just not a good platform to combine trading and broadcasting information hmm yeah by the way Mev plug for anyone who's listening and who likes podcast we have another podcast called bell curve we're hosting with that hasu I don't know if you know if you're if you know the flashbots team Robert yeah a whole a whole season on Mev with uh my co-founder Mike and hasu which is uh pretty interesting um yeah I believe they have some really

cool ideas on how to like take all the Mev and redistribute it until right you know say like okay it's a reality that like you're broadcasting information but how do we offset that in other ways and like spread out the Mev and like do all these other economic things to change the system yeah well maybe that's a nice pivot into value accrual and just like how you think about this which is kind of a related question like do you think value ends up getting accrued let's see let's keep with this uniswap example like does value get accrued to the uniswap Token uh and and or basically the unisaw protocol the unit swap like mobile app essentially or their app or like uniswap Labs which is like the Builder on top of all of this stuff or

whatever they're calling it these days yeah that's a tough question I mean right now I would say you know at this moment there's really only two things that are accruing value there's the miners slash Mev which is capturing value from users right and the users who benefit from this thing existing and are like hey I had no ability to swap XYZ token like this thing is cool it's not listed on some exchange I love uniswap or they're like I want to trade ether and stable coins all day and there's somewhat low slippage and like I can do it in my pajamas and like that's awesome um I I really see all of the value right now just for like users and people

taking value from the users I don't really see any value temporarily and like this could change over years going to the protocol or going to the labs or going anywhere um yeah you know the primary benefit is that this awesome protocol exists and it has tons of users and the users use it because it makes their lives better and the miners and Mev Searchers you know make their money off of those users and like that's the ecosystem yeah do you think there's any chance uh Unison turns on the fee switch you know I don't follow um unit swap governance too closely you know I I've been delegated some uni tokens and I vote when there's like really important proposals or continuous

months um so I don't pay too much attention on a daily basis at all but you know last I saw on their forums there was like some debate over whether or not there should be a fee switch and the last I saw it was like why would we experiment with the most important pools like why wouldn't we want to like experiment with the least important pools and fees because like what if we wreck you know the most right right because like the The Proposal was like Implement fees on USD coin ether like the big boy you know yeah we'll see I feel like there's no especially with this regulatory uh I mean tying it back to the beginning of the conversation I feel like there's no even if it makes sense for the protocol and for everybody involved there's no way they do it in this market so I don't

know I'm not a lawyer and I'm not part of that um all right let's uh let's start to wrap this up about like just thinking about the future a little bit Robert when you so like you obviously spend a lot of time on the investing side at robot Ventures there were a couple other things that coinbase had like a request to build one was the flat coins uh the the three other was on-chain reputation on chain limit order books um and and safer defy as they called it I'm curious what you think I don't know if any of those would fall into this answer but like curious what you think are like the missing the missing protocols or the missing things right now in D5 yeah it's interesting because all of these things have been tried at some point in one way or another on

ethereum on Solana on Avalanche like none of these things are radical ideas like frankly um and I think the more important question is like why haven't any of these like actually really worked or taken off or like where have they worked and taken off so reputation is a really really tough one that you know frankly is like you know probably best used for like actually extending credit to somebody yeah right that's like the primary use case is like oh you know Robert is good I can lend him 10 USD coin hooray like I know you know he has some reputation on chain if he steals the 10 USD coin no one should lend to him again it's like it's

primarily a thing tied most closely to like unsecured credit um and I think the market for unsecured credit and D5 has like kind of imploded over the last year or so like a lot of the like projects that were like exploring this like Maple and others had a really tough time because it turns out all the biggest players borrowing unsecured in the ecosystem were bad Alameda was bad right 3ac was bad it was like all the people that were borrowing using their name were not people you want to lend money to and so I think like even the idea of unsecured credit is like taking a hit and taking a back seat and like has decreased like the relevance of reputation at least for now like I don't really see a

reputation-based system needing to exist or working for some time I don't think it's necessarily even a priority like even if you had an incredible reputation system like so what what are you going to use it for like so frankly like I'm kind of bearish on reputation um when it comes to limit orders you know this is also complicated like the earliest versions of zero X had limit orders um current versions of one inch and matcha do have limit orders but they only get filled when like there's enough Mev for someone to fill it basically like limit orders do exist right now and like they're not even bad so to speak You're basically just like putting it out there and waiting

for there to be enough Mev for a Searcher to include it and take your profit from you um but they work like you know I know matcha and one inch and like all of those things are functional and uniswap sort of quasi-vaguely functions as a limit order trading venue today so range orders on uniswap give an individual the ability to say you know I'm willing to sell this at a price that's higher than it is today or I'm willing to buy it at a price that's lower than it is today and not do anything until it gets to that price and so when you squint there's already in uniswap limit orders um they're just not called that I mean people whether they're individuals or

trading firms actually do have the ability to use it like limit orders in a lot of ways and so limit orders exist I think Solana has had a lot more success than ethereum just in terms of its you know data structures for implementing limit orders the limit order books on Solano were honestly quite usable when I looked at them compared to ethereum but you know we'll see if anyone actually implements limit orders you know on that chain um you know the biggest problem historically with limit orders was it costs the transaction to cancel them like you literally have to submit an on-chain transaction yep to save remove this limit order whether it's like

a matcha or one inch or uniswap like range order like you literally have to do a gassy transaction to cancel and so the primary question is if it's on base and you know to roll up and transactions cost a hundredth as much as they do on ethereum do people care and will they pay that one cent or is it still too expensive from a cost or user experience perspective to be submitting transactions every time you want to cancel an order one of the best things about centralized exchanges is you you can make 100 orders and cancel 100 orders like instantly like you're not like submitting transactions and waiting for them to be mined like you know API based systems that are like high throughput

are like so much better for like orders and limit orders and canceling them than a blockchain instance so I'm a little bit bearish on that RFP as well um and what was the third one what was the third one uh safer safer D5 which I didn't let's see I don't know what that means personally uh self-service security testing tools auditing Services throughout prevention circuit breakers incident response systems I mean you guys have had a couple like hand all hands on deck scenarios in the last couple of years like any learnings from those like things that could have been built or not really um it's a great question I mean you know there's constantly you know

upgrades to like how Society at large thinks about like security and best practices you know um you know within the compound ecosystem one of the harder things was that it became a distributed you know team and process and you know ecosystem um before you know other projects like it's actually harder if you've like moved to like full-on distributed governance yeah like flat out like when it's still just like one team with ad Nikes like it's so much easier to manage security than when it's like there isn't a team right you just jump on a call and you say shut it down and we'll pick it back up in 10 minutes like when it's centralized it's so much

easier to do security than when it's distributed and so you know we've definitely gotten to see a lot I definitely think there's like room for everyone to develop better tooling but I'd have to really dig into that RFP to understand exactly what their ideas are it sounds like it's just like we want ideas to make everything better and safer which is cool like all right so if you're not if you're not stoked about any of those coinbase rfps is there anything that you're like oh my God like give put a great founder in this company in front of me and I'm funding them 10 times out of ten oh all the time I mean you know when you're investing at the early stage and robot Ventures invest you know or tries to invest as early as possible we're really just betting on people right right mostly because ideas change

and like in a rapidly evolving ecosystem like crypto like what was a good idea three months ago might not work once you try it or doesn't make sense three months into the future like uh who did I just see pivoted um a privacy L1 to Espresso if you I don't know if you guys did the espresso but like I feel like that's a good example like that yeah now now they realize like the the way Roll-Ups need to decentralize is uh is like one of the key foundational building blocks right now and like they've pivoted away from their their privacy L1 into into helping to build that and that's the that's the example which is like you know Founders who understand these systems and like the ecosystem and like

what they're trying to do are comfortable being flexible and like skating to where the puck is going and making changes and like rethinking and reevaluating their assumptions and like that's exactly the type of Founders that we like to back where it's like hey you know we want to support you not the idea the idea can change like you should feel empowered to figure out what's going to work and add value and like be useful and like don't feel like you have to like do the idea that we funded yeah like just you know people just go be useful yeah exactly yeah yeah man um well it's been great this is a fun fun conversation um anything else kind of big things investing landscape thinking about the next bull market next

cycle compound like really anything that's that's on your mind that we haven't covered yeah I think you know I I don't really think about bull markets and bear markets and all of that you know I would just say that you know we're at a really interesting juncture where you know my biggest hope is that a year from now there's actually legislation in America that like begins to set some of the rules you know for crypto like we still have really not had any crypto legislation period full stop and it's still the only legislative we have is like non-existent it's just regulation by enforcement like the number one hope for the industry is that there's some legislation that like helps outline how crypto is

intended or should exist in the US because right now it's just still a complete absence and a complete void of legislation yeah when you when you had when you went to DC and when you've gone to DC and you've had conversations with be it policy makers Regulators politicians lobbyists whoever may be do you feel that they have a sense like an understanding of like what the compound protocol is or right over their head yeah I think you know a lot of legislators and policymakers and Regulators are still you know relatively early in understanding all of these things because the industry is so wide I mean there's like literally like even the word defy includes what I would call D5 protocols and also things that I would

say are like absolutely not D5 protocols right like including like actual just like Ponzi schemes right it's like even the basic things like you know what are the words like there's so many things that go into them and you know these large Umbrellas of like activities and so you know I've always just tried to like focus on explaining in educating just you know what are the virtues of like why I think Defy is like powerful and good for society and makes a better world and you know try to also explain like why some things like aren't D5 but like it's still like an educational phase for the most part and like what's cool is like everyone's sort of waking

up to the fact that like this is totally new and you know they want to learn about it and there's a lot of excitement to like understand what's happening in this Market that's made the news mostly for bad reasons mostly for FTX and 3ac and Celsius and Genesis and all of the firms that have like imploded in like terrifying ways and so like the challenge that I find is just like trying to educate and say like okay you've heard about it from all the bad things but like so why are people in the industry excited and like what are the good things and like how do they lead to a like a more efficient and transparent and like more autonomous Financial system and like why is that

good and I think there's a lot of excitement for that once you start to explain it yeah well said man it's a good place to end it appreciate you coming on as always this is fine yeah this was we'll do it again sometime [Music]