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Thank you to Foundation Devices for being a sponsor of this podcast.

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When it comes to beautiful air gapped open source Bitcoin hardware wallets, this is a

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fantastic team to check out.

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Foundation Devices.

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Because I've come to realize it's not just about the hardware.

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The hardware can look great.

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It can be open source, it can be secure, but you also have to know the ethos of the team

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behind it because they're the ones who are going to offer you firmware upgrades.

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They're the ones who can change the functionality of your device.

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You can have a hardware wallet that does exactly what you need, but if the team starts to develop

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in a direction you don't like, like some would say Trezor and Ledger have started to do

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over the past year or two, it's not easy to make a change.

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But the team at Foundation, they'll tell you right to your face, they're focused on more

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than just your Bitcoin.

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They're focused on your sovereignty and your freedom.

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And that's why I support them and I appreciate them supporting me with this podcast.

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You can check out Foundation and their passport Bitcoin wallet at foundationdevices.com.

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On this episode, I speak with Gabriel Shapiro, who's the general counsel of Delphi Labs.

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And he's a member of the Lexpunk Army, which is a really cool open source legal resource

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for DAOs and other crypto projects.

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We get into a lot of different topics around crypto ethics, regulations, it gets spicy

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as usual.

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Let's get right to it.

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Mr. Gabriel Shapiro, lawyer extraordinaire, crypto lawyer extraordinaire.

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Good to see you.

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Do I need that qualifier?

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I mean, you are a lawyer, you're a real lawyer.

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I am a real lawyer.

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Before I did crypto law stuff, I was actually one of the top mergers and acquisitions, younger

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mergers and acquisitions attorneys in the United States.

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So yeah, I'd like to think that the qualifier isn't necessary, but I do pretty much do

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exclusively crypto law stuff these days.

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You know, something I think about a lot when we're having chats is like how you define

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your approach to this stuff, because like my approach is kind of looking at worst case

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scenarios and trying to think through how the legal system or the government could eventually

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turn around and abuse this to ruin our lives.

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You know, I call it adversarial thinking, other people call it nonsense, but or tinfoil

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hat, whatever.

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So like, how do you as an attorney in the space, how do you approach this stuff versus

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the way that I do?

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Well, I think that perspective is definitely part of the one part of the perspective I

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bring to bear.

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And a really big influence on me getting into this stuff was the show Mr. Robot.

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When I was working on M&A deals, I would constantly have Mr. Robot playing in the background.

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And yeah, just kind of, you know, I just kind of got more and more hyped on that.

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And the one of the famous scenes from that show is where the CEO of Evil Corp has a meeting

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with I believe it's the Treasury Secretary in the show, the US Treasury Secretary.

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And he basically says, look, Evil Corp has its own new cryptocurrency, Ecoin, and you

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need to support this and basically make this almost like the official cryptocurrency of

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the United States, kind of like what we now call a CBDC, which there wasn't really a

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term for back then.

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And in exchange for this, I'm going to give you all kinds of backdoors into the coin and

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tracking surveillance powers and freezing powers, etc.

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And you need to do this.

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Otherwise China will beat us with Bitcoin.

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And I think that that was a very prescient scene quite some time ago where the potential

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for this tech to be used for evil through sort of like public-private partnerships was

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acknowledged.

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And so I take that pretty seriously.

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I think though, the other thing I would say though about my approach that may be a little

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different from yours is I think your approach is very sort of user facing, right?

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Because you are a user and probably most of your audience is users.

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And I am paid to represent the interests almost exclusively of developers in the space.

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I don't really represent VCs.

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I don't really represent centralized exchanges.

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I basically just almost exclusively represent DeFi developers.

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And so I also, you know, probably my predominant interest in my actual work is protecting them.

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And sometimes those two constituencies, users and developers, can be at odds or can be somewhat

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zero sum, right?

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There might be certain ways of configuring things that are better for the legal protection

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of developers or the asset protection of developers and that are worse for users.

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And so, you know, I try to keep user interests in mind, but if I'm being paid for legal advice

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by a client, then obviously the client has to come first and most of those clients are

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devs.

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Yeah.

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Yeah.

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You hit on something really important there that drives me crazy.

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Like the transparency of lawyers in the space is lacking when it comes to incentives.

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And like you just hit the nail on the head with regard to the fact that lawyers, almost

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all the lawyers in this space are getting paid by either a developer community or a

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company or a VC or somebody who's not a retail user, right?

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Somebody who wants to profit off of a retail user.

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So I'm so glad you brought that up because it's like, there's obviously situations where

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like A16Z's incentives in this space are going to come into conflict with mine or another

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user because if they didn't, then they wouldn't be making any money, but they're actually

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funding huge swaths of the lawyers that are out there, the lawyers, the lobbyists, the

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whoever else they're sending to Washington DC to work with Congress, right?

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And regulators to develop laws.

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And that's been a big beef of mine is that, tell me what you think, but it seems like

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almost all the people who are in DC pushing for regulation and for laws and saying they're

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fighting on behalf of users are absolutely compromised by the money that they're making

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from the people who want to profit off of us.

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And in turn, they're passing that compromise along to the lawmakers and the laws that are

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being pumped out are not there to protect our privacy or our liberty.

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They're there to ensure that there's an industry that these massive VCs can play in for the

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next 50 years and not worry about somebody else coming in and innovating away from that

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industry.

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It seems like they just want to protect themselves at this point.

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Am I way off track or am I close?

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Yeah, I mean, I certainly think that that's a risk and that's certainly a very large part

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of their motivations.

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I mean, every human being has, I think, kind of like mixed motivations for most of the

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things that they do.

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And a guy like probably Mark Andreessen, who's like sitting at the top of A16Z, he's already

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rich and whether you agree with his politics or not, you could tell that a lot of his motivation

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is probably at this point more in shaping the world in a certain way, and that he does

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kind of believe in open software in a sense.

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But he doesn't make all the decisions.

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He has probably a large pyramid under him of people who think about things different

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ways, have different incentives.

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And overall, their job is to manage other people's money and their duties are to manage

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other people's money and to make them a profit.

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And that definitely has to shape things.

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And it has to shape things, I think you're right, somewhat adversarially to the user

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base because they're trying to find ways to extract rent, in a sense, maybe a better

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rent extraction proposition than TradFi has, but still a rent extraction proposition.

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And that may mean that the potential solutions that don't have that element are underweighted

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or underrepresented, both in the sort of project funding area, in terms of what gets funded,

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and in terms of what gets represented in the political dialogue.

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Yeah, I guess for me, it's like, okay, I'm in this space for very specific reasons, because

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I want to increase my liberty, I want to increase my self sovereignty, I want to stay private

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with my finances.

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I want the government's hand out of my wallet as much as possible.

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Then you look at blockchain association, they're like a leading trade association for the quote

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blockchain industry.

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And they're heavily funded by VCs and by their member companies.

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And they're sending people to DC to work with lawmakers.

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So their members are like, they're all companies, right?

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They're all companies that are primarily, I would say, funded by Silicon Valley, by

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16Z and Paradigm, et cetera, et cetera.

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So they don't give a crap about my liberty.

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They don't care about my self sovereignty or my privacy.

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They only care about that stuff as far as, what's the point?

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How far can they compromise on those things and still keep me and others as believers?

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But they're not there to maximize my privacy, obviously.

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So there is no real voice of the individual in this stuff.

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There's nobody in DC that's representing the reason I am.

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That I certainly agree with.

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Yeah, I certainly agree that there should be a voice for users.

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And I think this applies not just to the political process, but to example, to chain governance

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as well, right?

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And protocol governance.

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That user voice just is not coordinated like the other voices are.

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And basically the only vehicle for it is crypto Twitter, right?

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Just people griping on crypto Twitter.

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I do think that has probably more of an impact than you might sometimes think or in the most

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pessimistic moments.

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Because I've definitely talked to congressional staffers and other people who are active on

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this stuff in the Hill.

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And they actually emphasize that the lawmakers and their staff are watching crypto Twitter

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for reactions.

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Sometimes that might mean that if crypto Twitter is reacting very positively to something,

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then if it's Elizabeth Warren's office, they're going to use that, they're going to wave that

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around as evidence that it's too good for crypto, whatever is being proposed, right?

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And on the other hand, if the reaction is negative, then the people who are more pro

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crypto like maybe McHenry's office will use that reaction as evidence that if the proposal

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is adopted, everyone will just leave the US and the problem won't be solved.

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So it does come in, the mob, so to speak, does come in through that route.

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But it would be far better if it were more organized and users had representatives directly

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talking to staffers and that sort of thing.

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Yeah.

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But how does that even happen in a space like this?

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First of all, we're all such nerds and anti-social freaks that we can barely even pull anything

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together half the time.

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But is there a parallel for this situation in another industry?

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I think about that a lot.

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Has there been, like when the internet was coming together, was there a similar thing?

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I don't think there was because people weren't even able to organize really.

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They didn't have the internet to do that with because it was just being born.

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So the similar thing in that context was the cypherpunks, right?

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It was guys like Nick Szabo and all these guys who, but at the time they had no money,

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right?

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They just represented the pure interests of software.

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And now it's a very strange dynamic where people who may enter this space for idealistic

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reasons very quickly get very rich and they all turn into VCs, right?

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And so the lines blur very rapidly, unfortunately.

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It just seems like the system's not set up for this kind of input.

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It's like, okay, we can come together, we can go testify in front of Congress, we can

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form organizations, try to raise money, blah, blah, blah.

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But at the end of the day, Congress is bought and paid for, unfortunately, and that money

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is coming from the companies, the corporations.

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And this is a byproduct of living under this sort of pseudo capitalist system that we're

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under.

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And I was just like, there's representative, I forget what state he's from, but Tom Emmer,

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who in the US Congress, and he's pretty base thinker, he seems to get it, he seems to understand

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the challenges that the space is facing.

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And he's now written a new bill that basically gives blockchain apps, they call it, I believe,

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a safe harbor as long as they're non-custodial, right?

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That's basically what the bill said.

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It's like, if they're non-custodial, they don't have to be treated as money transmitters.

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But I'm looking at that, and obviously, I right away, I'm asking questions like, okay,

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well, if there's a multi-sig, is it custodial?

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Yeah, what does custodial mean exactly?

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So I'm looking at that, and so I'm thinking to myself, all right, how did this bill get

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written?

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What happened here?

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He obviously wrote it and proposed it along with whoever co-sponsored it and whatever,

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but he had meetings.

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He had meetings not with users in this space necessarily, but with these trade associations

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and with these crypto lobbyists and with these people who I've been saying for years, and

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you know too, they thrive on obfuscating the reality of what's going on.

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So is somebody like him already compromised?

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Is he really looking out for my liberty, my freedom, or is he just working with these

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paid-off lawyers to put together corporate-friendly legislation that's ultimately going to potentially

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hurt my freedom?

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Yeah, and the honest answer is, I don't know, right?

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I think it's very hard to determine these things.

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I would like to think that it may be at best mixed motives, right?

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Like he's kind of gotten red-pilled on crypto and legitimately likes it and thinks that

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it's freedom-preserving tech and that that's good for the country and that's certainly

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part of why he's pushing for this.

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But then obviously, he must also have industry donors.

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In that particular case, I just don't know if someone pushed for that and if he understands

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the sort of downsides of that, right?

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Because there's a certain narrative around this tech around like, oh, it's trustless,

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it's immutable, et cetera.

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If you haven't gone deep into the architecture of the different protocols and how the market

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works and how the ecosystem works, you're not on crypto Twitter every day, you're not

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sifting through technical documentation, et cetera, then you might not realize all the

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holes that exist in that narrative, right?

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And so he may just not know those holes.

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He may just know the narrative, right?

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And I think that probably is the case for a lot of these politicians.

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From what I've seen, obviously, we kind of have the opposite problem with regulators,

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right?

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Where they at this point, they heard the narrative, they kept investigating closely, they saw

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a lot of holes in the narrative, and now they've kind of veered to the opposite extreme, which

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is just disregarding the narrative completely and the truth is somewhere in the middle.

229
00:17:38,480 --> 00:17:43,800
But yeah, our political situation is not ideal, that's for sure.

230
00:17:43,800 --> 00:17:44,800
Yeah.

231
00:17:44,800 --> 00:17:45,800
No, that's a good point.

232
00:17:45,800 --> 00:17:51,400
I didn't even think about it that way that like, you got Congress who's kind of, these

233
00:17:51,400 --> 00:17:59,520
lawmakers over here trying to respect things that are almost mythical at this point and

234
00:17:59,520 --> 00:18:04,400
don't really exist beyond Bitcoin as far as like, the trust minimization and stuff like

235
00:18:04,400 --> 00:18:05,400
that.

236
00:18:05,400 --> 00:18:09,440
Like, by the way, that bill, if anybody wants to look it up is blockchain regulatory certainty

237
00:18:09,440 --> 00:18:12,360
act.

238
00:18:12,360 --> 00:18:14,880
That's from Tom Emmer of Minnesota.

239
00:18:14,880 --> 00:18:21,720
Then you got the regulators who are unelected, appointed, work at the pleasure of the president

240
00:18:21,720 --> 00:18:27,640
for the most part, who are, they just look at it like it's black and white, like there's

241
00:18:27,640 --> 00:18:33,880
nothing beyond what's on paper and how current law may apply to it, right?

242
00:18:33,880 --> 00:18:34,880
Or not even law.

243
00:18:34,880 --> 00:18:39,940
Well, I guess it is law, but I mean, the regulations that they basically arbitrarily develop.

244
00:18:39,940 --> 00:18:44,740
So it's interesting because they don't care about getting elected.

245
00:18:44,740 --> 00:18:47,000
They don't care about getting reelected, right?

246
00:18:47,000 --> 00:18:48,960
Because they're not elected in the first place.

247
00:18:48,960 --> 00:18:54,260
On the other hand, the people that care about being reelected and actually work allegedly

248
00:18:54,260 --> 00:18:58,040
for the people are out there.

249
00:18:58,040 --> 00:19:02,720
So maybe that is a sign that they are having more conversations with regular people.

250
00:19:02,720 --> 00:19:06,640
Regulators are not talking to regular people ever for any reason, unless they're suing

251
00:19:06,640 --> 00:19:07,640
them.

252
00:19:07,640 --> 00:19:08,640
Right?

253
00:19:08,640 --> 00:19:15,360
So it is an interesting way to look at it and the difference between Congress and regulators

254
00:19:15,360 --> 00:19:18,360
like the SEC.

255
00:19:18,360 --> 00:19:20,760
You mentioned CBDC.

256
00:19:20,760 --> 00:19:29,200
Where do you, do you think that this is an inevitable outcome, like this full surveillance

257
00:19:29,200 --> 00:19:35,960
tyrannical CBDC, or do you think that there's still hope that it can be like privacy preserving

258
00:19:35,960 --> 00:19:37,520
or anything like that?

259
00:19:37,520 --> 00:19:42,840
I think there's hope because a lot of powerful politicians are against it, at least in the

260
00:19:42,840 --> 00:19:43,840
US.

261
00:19:43,840 --> 00:19:44,840
Right?

262
00:19:44,840 --> 00:19:46,160
And I think for good reason, right?

263
00:19:46,160 --> 00:19:51,000
Because they realize, hey, we're in power right now, but we might not be in power next

264
00:19:51,000 --> 00:19:54,120
term and what are our opponents going to do with this?

265
00:19:54,120 --> 00:19:58,720
And is it going to enable them to kind of entrench themselves in power forever?

266
00:19:58,720 --> 00:20:02,960
You know, if they can, if the government can decide what you're allowed and not allowed

267
00:20:02,960 --> 00:20:04,760
to donate your money to, right?

268
00:20:04,760 --> 00:20:09,720
And they can enforce that programmatically, that's a pretty bad thing, right?

269
00:20:09,720 --> 00:20:12,160
For whoever is not currently in power.

270
00:20:12,160 --> 00:20:13,160
Right?

271
00:20:13,160 --> 00:20:15,880
So, you know, I think there is a lot of pushback on that.

272
00:20:15,880 --> 00:20:22,040
I personally think, I mean, I also think crypto is maybe like a little bit too close minded

273
00:20:22,040 --> 00:20:25,440
to CBDCs in a certain sense.

274
00:20:25,440 --> 00:20:31,900
Because if there could be like an actually decentralized autonomous CBDC, right?

275
00:20:31,900 --> 00:20:34,840
And I realize that that's not what anyone is currently proposing.

276
00:20:34,840 --> 00:20:37,880
They're proposing very centralized things like Ecoin, right?

277
00:20:37,880 --> 00:20:42,440
Where the government has a back door and they can freeze people's money and reverse transactions

278
00:20:42,440 --> 00:20:43,840
and all that stuff.

279
00:20:43,840 --> 00:20:47,840
But if you kind of like just forgot about all that for a second and thought about the

280
00:20:47,840 --> 00:20:54,640
idea of an actually decentralized autonomous trust minimized government CBDC, right?

281
00:20:54,640 --> 00:21:00,480
I mean, in a certain sense, that would be way more efficient than like Circle, right?

282
00:21:00,480 --> 00:21:05,000
Because there's not someone like extracting rent from it.

283
00:21:05,000 --> 00:21:07,520
The coin is directly the dollar, right?

284
00:21:07,520 --> 00:21:12,880
So you don't have the counterparty risk and you don't need these like expensive auditors

285
00:21:12,880 --> 00:21:18,720
and disclosures, you know, and proofs of solvency and all these things to get at what's backing

286
00:21:18,720 --> 00:21:23,800
it because like literally the token would be fiat, right?

287
00:21:23,800 --> 00:21:28,400
And so, you know, in a certain sense, I think that would be like the optimal outcome.

288
00:21:28,400 --> 00:21:31,520
But it's just like no one is currently proposing that.

289
00:21:31,520 --> 00:21:37,960
And so CBDCs have become equated to like evil Ecoin type of things, which is accurate to

290
00:21:37,960 --> 00:21:39,300
what's being proposed.

291
00:21:39,300 --> 00:21:43,120
And so there's the proponents of it on the one hand and the opponents of it on the other.

292
00:21:43,120 --> 00:21:47,360
And yeah, I would put myself into the opponent category in that sense.

293
00:21:47,360 --> 00:21:54,060
So what you're talking about, I mean, it sounds impossible to achieve with today's the way

294
00:21:54,060 --> 00:21:55,640
that governments operate, right?

295
00:21:55,640 --> 00:22:04,000
But you're talking about basically cash, you know, but blockchain cash, right?

296
00:22:04,000 --> 00:22:08,080
But this government could obviously control supply somehow.

297
00:22:08,080 --> 00:22:09,080
Right.

298
00:22:09,080 --> 00:22:13,600
Yeah, it would still have the same rules about, you know, sort of, you know, the ability to

299
00:22:13,600 --> 00:22:18,680
mint new money, you know, whatever economics are currently used.

300
00:22:18,680 --> 00:22:23,400
But the, you know, someone holding that cash, right, the cash would be recognized as legal

301
00:22:23,400 --> 00:22:28,360
tender, you know, and there would be no ability for the government to just freeze it, take

302
00:22:28,360 --> 00:22:32,160
it away, you know, reverse transactions in it, etc.

303
00:22:32,160 --> 00:22:35,340
To me, that would be the most efficient, you know, optimal outcome, right?

304
00:22:35,340 --> 00:22:36,720
But we're very far from that.

305
00:22:36,720 --> 00:22:41,960
Yeah, I mean, to me, the real problem is that even if we develop this system and we convince

306
00:22:41,960 --> 00:22:48,280
government to do this, that the ability is still there to change it, right?

307
00:22:48,280 --> 00:22:53,200
And the ability is still there for a new government to come in and say, you know what?

308
00:22:53,200 --> 00:22:55,960
Let's add some censorship in here.

309
00:22:55,960 --> 00:22:58,200
Let's find ways to screw with this.

310
00:22:58,200 --> 00:22:59,200
And yeah, this is true.

311
00:22:59,200 --> 00:23:00,200
And they could always change.

312
00:23:00,200 --> 00:23:04,400
They could also always, you know, they could pass a new law that doesn't recognize it as

313
00:23:04,400 --> 00:23:10,520
legal tender or only recognizes like the new centralized fork of it as legal tender, right?

314
00:23:10,520 --> 00:23:12,920
You know, there's always things that can happen.

315
00:23:12,920 --> 00:23:13,920
Yeah.

316
00:23:13,920 --> 00:23:14,920
Yeah.

317
00:23:14,920 --> 00:23:20,600
I mean, and that's goes back to the whole adversarial thinking way of looking at something

318
00:23:20,600 --> 00:23:27,040
like that, where once that technology is out of the box, it's been developed for years,

319
00:23:27,040 --> 00:23:33,640
like it is being right now in DeFi, and it's out of the box, you can't put it back in the

320
00:23:33,640 --> 00:23:37,160
box and somebody's going to come along and use it.

321
00:23:37,160 --> 00:23:40,280
You know, you can equate it to like a nuclear weapon, you know?

322
00:23:40,280 --> 00:23:42,600
It's like, it's always there.

323
00:23:42,600 --> 00:23:43,680
You can't get rid of it.

324
00:23:43,680 --> 00:23:51,080
And so you, you know, the reason the world is still existing right now is because the

325
00:23:51,080 --> 00:23:55,120
people in charge of the nukes have decided it should continue to exist.

326
00:23:55,120 --> 00:23:59,960
Like, it's not like they can't blow the world up right now.

327
00:23:59,960 --> 00:24:02,600
It's like they're just choosing not to.

328
00:24:02,600 --> 00:24:06,760
And you know, their finger could be on the button and you could do nothing about it.

329
00:24:06,760 --> 00:24:11,160
So it's the same thing with this kind of stuff, where if the tech is there and they understand

330
00:24:11,160 --> 00:24:13,280
how to use it, they're going to use it.

331
00:24:13,280 --> 00:24:15,520
Just look at what's happened with the internet.

332
00:24:15,520 --> 00:24:21,800
Like 30 years ago, the US government knew nothing about the internet.

333
00:24:21,800 --> 00:24:27,560
You know, they had no idea how they could utilize it to censor or to, or that they would

334
00:24:27,560 --> 00:24:28,960
even need to, you know?

335
00:24:28,960 --> 00:24:31,840
And then as time goes on, they figure things out.

336
00:24:31,840 --> 00:24:36,240
They get smarter people that, you know, now there's people that grew up with the internet

337
00:24:36,240 --> 00:24:37,880
that are Congress people, right?

338
00:24:37,880 --> 00:24:41,120
And like they fully were immersed and they understand it.

339
00:24:41,120 --> 00:24:46,120
And there's absolutely no reason to think the same thing won't happen with this tech.

340
00:24:46,120 --> 00:24:50,720
You know, even if they do launch a privacy preserving CBDC, how long is that going to

341
00:24:50,720 --> 00:24:51,720
last?

342
00:24:51,720 --> 00:24:52,720
10 years?

343
00:24:52,720 --> 00:24:53,720
And then it's going to be used.

344
00:24:53,720 --> 00:24:55,000
Or I'll tell you how long it'll last.

345
00:24:55,000 --> 00:25:00,920
It'll last until the next terrorist attack or until the next, you know, lockdown or whatever

346
00:25:00,920 --> 00:25:02,720
the emergency is.

347
00:25:02,720 --> 00:25:05,760
And then they grab more power and then they abuse it.

348
00:25:05,760 --> 00:25:09,080
So there's always the risk of abatement switch as well, right?

349
00:25:09,080 --> 00:25:15,680
They could initially present some privacy preserving, you know, trust minimized thing.

350
00:25:15,680 --> 00:25:19,920
And then like once it's widespread, you know, upgrade it to not have those features anymore.

351
00:25:19,920 --> 00:25:21,400
Yeah, I get the risks.

352
00:25:21,400 --> 00:25:22,400
Yeah.

353
00:25:22,400 --> 00:25:23,600
So that's what I try to tell people on DeFi.

354
00:25:23,600 --> 00:25:29,240
It's like they're building these, these weapons.

355
00:25:29,240 --> 00:25:30,240
That's how I look at it.

356
00:25:30,240 --> 00:25:35,760
I think that, I think that the stuff that's being built right now is exactly this.

357
00:25:35,760 --> 00:25:43,120
It is these weapons that are going to be used to, to suppress freedom eventually, you know,

358
00:25:43,120 --> 00:25:47,400
and it's not unique to tech innovation, right?

359
00:25:47,400 --> 00:25:52,840
It's like every form of technology has been used for good and for bad, but not every form

360
00:25:52,840 --> 00:26:03,840
of technology has been capable of, of micromanaging our lives into oblivion the way that this

361
00:26:03,840 --> 00:26:07,840
technology is capable of doing.

362
00:26:07,840 --> 00:26:10,920
So like I throw those ideas out there all the time.

363
00:26:10,920 --> 00:26:16,160
People, people object and they say, I'm going too far, but like, do you see what I'm saying

364
00:26:16,160 --> 00:26:19,560
as far as the future, what the future may hold?

365
00:26:19,560 --> 00:26:20,560
Yeah, absolutely.

366
00:26:20,560 --> 00:26:24,520
I mean, I think we've both like tweeted about this a lot and yeah, I mean, I pretty much

367
00:26:24,520 --> 00:26:25,520
agree, right?

368
00:26:25,520 --> 00:26:29,880
It's, you know, when you, when you, especially once you start combining this with like digital

369
00:26:29,880 --> 00:26:35,560
ID, right, and it's all on chain, it's going to get like very, very tricky, very fast.

370
00:26:35,560 --> 00:26:43,080
And a lot of the, you know, I've seen a lot of ideas for kind of like increasing the relationship

371
00:26:43,080 --> 00:26:48,960
of crypto to the social layer, you know, that, that honestly looks something like, you know,

372
00:26:48,960 --> 00:26:51,720
like, like Chinese social scoring, right?

373
00:26:51,720 --> 00:26:56,120
You know, and I think that once you have these kind of on chain identities and, and once

374
00:26:56,120 --> 00:27:02,160
they become, you know, some combination of commercially and politically important, you

375
00:27:02,160 --> 00:27:05,560
know, then, then people can really start doing a lot with that, right?

376
00:27:05,560 --> 00:27:08,240
And a lot of it will be, some of it could be good.

377
00:27:08,240 --> 00:27:10,000
Some of it could be very, very bad.

378
00:27:10,000 --> 00:27:11,000
Yeah.

379
00:27:11,000 --> 00:27:12,000
Yeah.

380
00:27:12,000 --> 00:27:18,520
This, this whole like world coin thing has made me realize more than ever that, um, cause,

381
00:27:18,520 --> 00:27:22,600
cause they're pushing it as privacy preserving, right?

382
00:27:22,600 --> 00:27:24,640
They say, okay, you don't have to give your name.

383
00:27:24,640 --> 00:27:27,160
You don't have to give your social security number.

384
00:27:27,160 --> 00:27:31,320
You just get your iris scanned and then that generates a unique code.

385
00:27:31,320 --> 00:27:33,240
We're not even saving your iris scan, right?

386
00:27:33,240 --> 00:27:40,020
We're just saving the unique code, uh, that is, is basically generated from your iris

387
00:27:40,020 --> 00:27:41,020
scan.

388
00:27:41,020 --> 00:27:46,760
So, um, it's completely private because all you're left with is this code that then you

389
00:27:46,760 --> 00:27:48,960
can use to prove that you're a person.

390
00:27:48,960 --> 00:27:53,400
You can go around and scan it and do whatever ultimately is going to be done with it.

391
00:27:53,400 --> 00:27:54,960
Yeah.

392
00:27:54,960 --> 00:28:00,920
But the way that I'm looking at this now is what they're working on and what a lot of

393
00:28:00,920 --> 00:28:06,840
these decentralized identity folks are working on is they want to replace the old school

394
00:28:06,840 --> 00:28:07,840
way of identification.

395
00:28:07,840 --> 00:28:13,440
And the old school identification is basically these random words, which are like your name,

396
00:28:13,440 --> 00:28:14,440
right?

397
00:28:14,440 --> 00:28:19,280
Which are just totally random arbitrary letters and, and these random numbers that are, you

398
00:28:19,280 --> 00:28:24,120
know, your national ID or social security number, whatever, like they're separate from

399
00:28:24,120 --> 00:28:25,120
your body.

400
00:28:25,120 --> 00:28:28,760
They can be spoofed and faked and it's not reliable.

401
00:28:28,760 --> 00:28:36,520
They want to replace that form of ID with these biometrics and these scientific markers

402
00:28:36,520 --> 00:28:44,400
that are built into your body that are impossible to a certain extent to replace or to get rid

403
00:28:44,400 --> 00:28:48,640
of like your fingerprints or your iris scan or, you know, who knows what else they're

404
00:28:48,640 --> 00:28:50,760
going to come up with.

405
00:28:50,760 --> 00:28:53,680
And that's the new identity.

406
00:28:53,680 --> 00:28:59,320
So that's the identity that is going to be associated with your bank account.

407
00:28:59,320 --> 00:29:02,960
That's the identity that's going to be associated with your, your medical history and on your

408
00:29:02,960 --> 00:29:05,360
driving record and all these different things.

409
00:29:05,360 --> 00:29:07,360
They won't need your name anymore.

410
00:29:07,360 --> 00:29:13,320
They won't need your social security number anymore because they have the core essence

411
00:29:13,320 --> 00:29:15,680
of who you are.

412
00:29:15,680 --> 00:29:21,880
So when you present yourself at the doctor's office and get your jab, they scan your iris.

413
00:29:21,880 --> 00:29:26,400
They don't even need to know your name because then when you go to the grocery store, store,

414
00:29:26,400 --> 00:29:29,440
they scan your iris again and they know if you were jabbed, they don't care that you're

415
00:29:29,440 --> 00:29:30,480
Gabriel.

416
00:29:30,480 --> 00:29:33,800
They don't care where you live or what state you're from or where, you know, all they care

417
00:29:33,800 --> 00:29:36,720
about is does this iris scan have a jab associated?

418
00:29:36,720 --> 00:29:39,960
And if it doesn't, we're not going to let you in.

419
00:29:39,960 --> 00:29:42,200
And to me it's like becoming so obvious.

420
00:29:42,200 --> 00:29:46,320
So when they say it's privacy preserving, it's almost a lie.

421
00:29:46,320 --> 00:29:47,320
It's almost like a scam.

422
00:29:47,320 --> 00:29:48,320
Oh, for sure.

423
00:29:48,320 --> 00:29:49,320
Just to get people to, to, to.

424
00:29:49,320 --> 00:29:50,320
Yeah, absolutely.

425
00:29:50,320 --> 00:29:51,320
Am I off the rails or what?

426
00:29:51,320 --> 00:29:52,320
No, no, of course.

427
00:29:52,320 --> 00:29:59,800
I mean, it's only privacy preserving if like somehow the different people, the different

428
00:29:59,800 --> 00:30:08,160
databases that correlate other information to these iris hashes don't, don't ever connect

429
00:30:08,160 --> 00:30:09,160
with each other.

430
00:30:09,160 --> 00:30:11,400
And of course we know that that's not going to be the case, right?

431
00:30:11,400 --> 00:30:14,280
Iris sharing is massively abundant.

432
00:30:14,280 --> 00:30:16,560
It's a huge industry, right?

433
00:30:16,560 --> 00:30:19,680
And this will, this will just become part of that, obviously, right?

434
00:30:19,680 --> 00:30:24,240
And so, yeah, if they know your iris hash, yes, they will also be able to know your name,

435
00:30:24,240 --> 00:30:25,240
of course.

436
00:30:25,240 --> 00:30:27,640
They'll be able to know everything about you, right?

437
00:30:27,640 --> 00:30:34,160
It's just, you know, and of course it's also not true that this information can't be spoofed,

438
00:30:34,160 --> 00:30:35,160
right?

439
00:30:35,160 --> 00:30:40,560
Because let's just say you need your, you need to do your iris scan to confirm your

440
00:30:40,560 --> 00:30:44,280
identity before using some particular websites, right?

441
00:30:44,280 --> 00:30:46,040
You log into your bank, right?

442
00:30:46,040 --> 00:30:50,480
And every time they make you do an iris scan through some pre-approved equipment that you

443
00:30:50,480 --> 00:30:56,000
keep in your house and, you know, you send that hash and they confirm that the hash matches,

444
00:30:56,000 --> 00:30:57,000
et cetera.

445
00:30:57,000 --> 00:30:58,280
Well, I mean, everything can be hacked, right?

446
00:30:58,280 --> 00:31:03,320
So someone's going to hack that device and be able to spoof the data, right?

447
00:31:03,320 --> 00:31:07,460
You know, just feed it, you know, just do a man in the middle attack and if you already

448
00:31:07,460 --> 00:31:09,500
know what the hash is supposed to be, right?

449
00:31:09,500 --> 00:31:13,080
You could just feed it that hash without having the corresponding iris, et cetera.

450
00:31:13,080 --> 00:31:18,480
So it's, you know, it's more and more data gathering on pretext that don't really make

451
00:31:18,480 --> 00:31:24,360
sense in terms of the narratives presented, but that do make sense for the people who

452
00:31:24,360 --> 00:31:28,360
are gathering this data because, you know, they will amass more power and money from

453
00:31:28,360 --> 00:31:29,360
it.

454
00:31:29,360 --> 00:31:30,360
Yeah.

455
00:31:30,360 --> 00:31:31,360
Yeah.

456
00:31:31,360 --> 00:31:32,360
I see what you're saying.

457
00:31:32,360 --> 00:31:37,160
I just think that even without the name, even without any other identifying information,

458
00:31:37,160 --> 00:31:46,560
we're being reduced to just, I want to say numbers, but it's beyond that, right?

459
00:31:46,560 --> 00:31:50,400
Because it's just like a meat bag.

460
00:31:50,400 --> 00:31:51,400
Matter.

461
00:31:51,400 --> 00:31:52,400
Yeah.

462
00:31:52,400 --> 00:31:56,160
We're reduced to just like pure configurations of organic matter.

463
00:31:56,160 --> 00:31:57,160
Yes.

464
00:31:57,160 --> 00:31:58,160
Right.

465
00:31:58,160 --> 00:31:59,160
Right.

466
00:31:59,160 --> 00:32:00,660
And there's no laws.

467
00:32:00,660 --> 00:32:04,400
There's no protections.

468
00:32:04,400 --> 00:32:07,680
And you know, like I'm, I consider myself a libertarian.

469
00:32:07,680 --> 00:32:11,800
Like I'm not out there looking for laws.

470
00:32:11,800 --> 00:32:16,160
But the more that this happens, the more I see these, these lines of people waiting to

471
00:32:16,160 --> 00:32:19,840
get their iris scan in exchange for like $35 or whatever it is.

472
00:32:19,840 --> 00:32:20,840
It's crazy.

473
00:32:20,840 --> 00:32:21,840
Yeah.

474
00:32:21,840 --> 00:32:24,840
And you start to realize like most people just are never going to get it, you know?

475
00:32:24,840 --> 00:32:29,040
And so it's almost like what's left, you know?

476
00:32:29,040 --> 00:32:33,080
I mean, during COVID it was clear like tyranny, the majority was real.

477
00:32:33,080 --> 00:32:35,200
It was almost inescapable.

478
00:32:35,200 --> 00:32:41,000
I had to move to get out of a state that, that basically people wanted to lock you out

479
00:32:41,000 --> 00:32:44,000
of a hospital if you didn't get jabbed.

480
00:32:44,000 --> 00:32:47,680
So like, you know, God forbid you have a heart attack and you go to the ER and they won't

481
00:32:47,680 --> 00:32:52,960
let you in unless you, you are, you know, coerced into this treatment.

482
00:32:52,960 --> 00:32:53,960
That's right.

483
00:32:53,960 --> 00:33:00,080
So yeah, if you, if you have not, if you have not worshiped the orb for your mandatory 30

484
00:33:00,080 --> 00:33:02,200
seconds, you were not allowed medical treatment.

485
00:33:02,200 --> 00:33:03,840
I mean, this is just the way it has to be.

486
00:33:03,840 --> 00:33:04,840
Right.

487
00:33:04,840 --> 00:33:05,840
That's the thing.

488
00:33:05,840 --> 00:33:06,840
Wait till the government buys into this idea.

489
00:33:06,840 --> 00:33:10,880
I mean, it's, that's all it takes.

490
00:33:10,880 --> 00:33:17,520
But anyway, what, what do you think the long-term, you know, for DeFi, like, what do you think

491
00:33:17,520 --> 00:33:21,520
that the actual vision is?

492
00:33:21,520 --> 00:33:28,720
Where do you think it goes if not to this sort of CBDC driven economy?

493
00:33:28,720 --> 00:33:31,320
Where else can it possibly head?

494
00:33:31,320 --> 00:33:38,240
Well, I think, I mean, there have always been those who have said that this is, this is

495
00:33:38,240 --> 00:33:42,600
going to be like, like a dual or maybe like, like triple market.

496
00:33:42,600 --> 00:33:43,600
Right.

497
00:33:43,600 --> 00:33:48,000
There's going to be like, there's going to be a sort of TradFi version.

498
00:33:48,000 --> 00:33:50,240
There's going to be CDFi, right.

499
00:33:50,240 --> 00:33:56,880
Where where some of these mechanisms are used, but fully KYC, fully, you know, regulated,

500
00:33:56,880 --> 00:33:58,560
compliant, blah, blah, blah.

501
00:33:58,560 --> 00:33:59,560
Right.

502
00:33:59,560 --> 00:34:05,360
There's going to be sort of like a pure black market where, you know, there's no KYC, there's

503
00:34:05,360 --> 00:34:06,360
no compliance.

504
00:34:06,360 --> 00:34:11,520
You know, the, the people who are involved are sort of like quasi criminals, but they're,

505
00:34:11,520 --> 00:34:13,760
they're good at hiding for the most part.

506
00:34:13,760 --> 00:34:15,600
And then there's going to be something in the middle.

507
00:34:15,600 --> 00:34:16,600
Right.

508
00:34:16,600 --> 00:34:21,000
Because the, the ability to keep these two markets completely apart, of course, that

509
00:34:21,000 --> 00:34:22,000
never works.

510
00:34:22,000 --> 00:34:23,000
There's always some leakage.

511
00:34:23,000 --> 00:34:24,000
Right.

512
00:34:24,000 --> 00:34:26,080
And so that, that forms the gray.

513
00:34:26,080 --> 00:34:32,120
And that could be the case, although personally, because I think that the whole, this tech

514
00:34:32,120 --> 00:34:37,320
is actually very inefficient from every kind of common sense perspective.

515
00:34:37,320 --> 00:34:42,400
The only thing that, that it's really, the only reason why it's good is if you kind of

516
00:34:42,400 --> 00:34:48,240
want the trust minimization and don't want to go through intermediaries, institutions,

517
00:34:48,240 --> 00:34:51,880
don't want to face censorship by the government, et cetera.

518
00:34:51,880 --> 00:34:58,400
I just have never been very confident that that TradFi version of it will really emerge

519
00:34:58,400 --> 00:35:00,840
or be useful.

520
00:35:00,840 --> 00:35:01,880
But it, but it's a question.

521
00:35:01,880 --> 00:35:03,880
Many people think that it will.

522
00:35:03,880 --> 00:35:04,880
Right.

523
00:35:04,880 --> 00:35:10,480
And, and so, you know, but, but, but I think you, you kind of either think it's going to

524
00:35:10,480 --> 00:35:15,600
be black market, gray market forever, you know, or you believe in kind of this tripartite

525
00:35:15,600 --> 00:35:16,600
structure.

526
00:35:16,600 --> 00:35:21,920
I also think that, you know, it's a cat and mouse game, the whole, the whole way the regulatory

527
00:35:21,920 --> 00:35:26,480
landscape is evolving and, and also how we think about the technology is evolving.

528
00:35:26,480 --> 00:35:27,480
Right.

529
00:35:27,480 --> 00:35:28,480
Like we just had this curve hack.

530
00:35:28,480 --> 00:35:29,480
Right.

531
00:35:29,480 --> 00:35:32,040
And, you know, personally, I think you're this way as well.

532
00:35:32,040 --> 00:35:37,080
You know, I've kind of like largely been an immutability maxi in the space.

533
00:35:37,080 --> 00:35:38,080
Right.

534
00:35:38,080 --> 00:35:42,880
And like when people say, like I've often heard people say, or like one of the value

535
00:35:42,880 --> 00:35:48,360
propositions of EOS, for example, if you remember that was that there would be these, these

536
00:35:48,360 --> 00:35:51,840
arbitrators and that the transactions would be reversible.

537
00:35:51,840 --> 00:35:55,800
This is also something that was like advertised by polka dot a lot because they had sort of

538
00:35:55,800 --> 00:36:00,680
suffered a large hack early on and lost a lot of money, you know, and so they saw the

539
00:36:00,680 --> 00:36:03,320
value of reversibility.

540
00:36:03,320 --> 00:36:08,900
I think like full reversibility, you know, is going too far in the wrong direction.

541
00:36:08,900 --> 00:36:12,600
But then also you look at something like the curve hack where this is a battle tested

542
00:36:12,600 --> 00:36:13,600
protocol.

543
00:36:13,600 --> 00:36:16,400
It has some of the absolutely stellar devs involved, right.

544
00:36:16,400 --> 00:36:21,080
Using best practices, heavily audited, lasted a long time without an attack.

545
00:36:21,080 --> 00:36:22,080
Right.

546
00:36:22,080 --> 00:36:27,600
And then all of a sudden this like extremely subtle compiler vulnerability is exposed and

547
00:36:27,600 --> 00:36:35,080
exploited and you realize it's just very hard to maybe the tradeoffs are not worth it.

548
00:36:35,080 --> 00:36:36,080
Right.

549
00:36:36,080 --> 00:36:40,240
Like maybe the costs of immutability like really do outweigh the benefits.

550
00:36:40,240 --> 00:36:46,040
And so, you know, from that point of view, I think we may evolve into much more complex

551
00:36:46,040 --> 00:36:53,240
and nuanced structures where there are some social controls over these protocols, but

552
00:36:53,240 --> 00:36:58,760
those social controls are themselves like sort of unusual in that it's not like a banking

553
00:36:58,760 --> 00:37:04,120
style arrangement where a bank just decides things and has omnipotence, but rather it's

554
00:37:04,120 --> 00:37:09,440
these smaller, more nimble organizations like an emergency multi-sig, you know, and maybe

555
00:37:09,440 --> 00:37:11,880
you wrap that in some sort of entity.

556
00:37:11,880 --> 00:37:17,160
And they have certain things they can do with the system, but it's fairly constrained,

557
00:37:17,160 --> 00:37:18,160
right.

558
00:37:18,160 --> 00:37:22,680
Like they can freeze a pool and put it into withdrawal only mode, but they can't upgrade

559
00:37:22,680 --> 00:37:27,440
the pool to new code and they can't themselves withdraw the money, etc.

560
00:37:27,440 --> 00:37:28,640
Right.

561
00:37:28,640 --> 00:37:32,800
Or they can stop it for some period of time, but then, you know, the full DAO has an override

562
00:37:32,800 --> 00:37:37,840
or like automatically after some period of time, you know, the pool becomes unfrozen.

563
00:37:37,840 --> 00:37:44,120
I'm very interested in this design space and I think it's under explored and could kind

564
00:37:44,120 --> 00:37:49,600
of like simultaneously address a lot of the regulatory and legal issues while also addressing

565
00:37:49,600 --> 00:37:54,360
some of the failures of the tech and the failures of the governance that have occurred.

566
00:37:54,360 --> 00:37:55,800
So I haven't completely given up hope yet.

567
00:37:55,800 --> 00:38:02,560
I think there kind of could be like a new wave of designs that's a little bit less like

568
00:38:02,560 --> 00:38:08,440
stability purist while also retaining a lot of the trust minimization, but we have to

569
00:38:08,440 --> 00:38:10,080
see where it goes, I guess.

570
00:38:10,080 --> 00:38:11,080
Yeah.

571
00:38:11,080 --> 00:38:17,920
I think the real trick is really going to be how do you do that stuff and get it to

572
00:38:17,920 --> 00:38:23,060
a place where it can't be compromised when it inevitably comes out under the scrutiny

573
00:38:23,060 --> 00:38:25,920
of a regulator or a government, right.

574
00:38:25,920 --> 00:38:32,240
And that's my biggest concern with a lot of these DeFi apps and protocols that even the

575
00:38:32,240 --> 00:38:38,080
ones that are run by DAOs, you know, in that as soon as they face any pressure, they have

576
00:38:38,080 --> 00:38:45,000
the ability to make changes that will sort of reverse a lot of that, you know, and like

577
00:38:45,000 --> 00:38:53,360
the worst case of this is chain link for me because chain link is completely, at least

578
00:38:53,360 --> 00:38:57,880
the Oracle system that they're using right now to run DeFi is completely compromisable

579
00:38:57,880 --> 00:38:58,880
by this multi-SIG.

580
00:38:58,880 --> 00:39:04,760
It's a four of nine multi-SIG with unknown signers.

581
00:39:04,760 --> 00:39:12,160
And we don't have any idea if they've ever been contacted by law enforcement or government

582
00:39:12,160 --> 00:39:15,660
or regulator or compromise in any way.

583
00:39:15,660 --> 00:39:19,380
We have no idea what their intentions are, what they're willing to do.

584
00:39:19,380 --> 00:39:23,760
We have no idea even really if DeFi matters to chain link.

585
00:39:23,760 --> 00:39:29,920
Like chain link in my opinion is using DeFi as like sort of a testing ground as an incubator

586
00:39:29,920 --> 00:39:34,520
for what they really want to do, which is far beyond just DeFi.

587
00:39:34,520 --> 00:39:42,880
You know, they want to be a source of truth for all markets, which, you know, as a business,

588
00:39:42,880 --> 00:39:43,880
it's interesting.

589
00:39:43,880 --> 00:39:53,480
It's, you know, it's poised to be very important in this space and beyond over the next few

590
00:39:53,480 --> 00:39:56,000
decades if they succeed.

591
00:39:56,000 --> 00:40:00,440
But when you just look at DeFi and you look at the control they have over it, how is that

592
00:40:00,440 --> 00:40:07,560
even like, why do I like when I bring this up, why is everybody so it's almost like the

593
00:40:07,560 --> 00:40:11,120
one thing that nobody wants to really look at because they know it's why.

594
00:40:11,120 --> 00:40:12,120
Well, I know why.

595
00:40:12,120 --> 00:40:13,120
I know why it is.

596
00:40:13,120 --> 00:40:18,400
And I think it's a deep problem with the space that I've really kind of been focused on in

597
00:40:18,400 --> 00:40:25,720
the last six months in sort of like my spare time research development, which is there's

598
00:40:25,720 --> 00:40:31,000
a tendency in the space where like the code is good, the code is trustless, right?

599
00:40:31,000 --> 00:40:34,400
And then anything that can't be put into the code, fuck it, right?

600
00:40:34,400 --> 00:40:38,080
It's just because like it's not the expertise of the people, right?

601
00:40:38,080 --> 00:40:41,560
Like so they could set up this whole DAO and they like invent these interesting governance

602
00:40:41,560 --> 00:40:46,760
structures, but they don't know like traditional just purely legally socially defined governance

603
00:40:46,760 --> 00:40:47,760
structures.

604
00:40:47,760 --> 00:40:50,160
And so they don't even try and they don't even care.

605
00:40:50,160 --> 00:40:54,240
They don't even realize that trust minimization is possible on that layer, right?

606
00:40:54,240 --> 00:40:56,160
Or trust reduction possible on that layer.

607
00:40:56,160 --> 00:40:57,340
And so they just don't do it at all.

608
00:40:57,340 --> 00:41:02,960
So like for the chain link multisig, for example, again, no, I personally, I'm not, I don't

609
00:41:02,960 --> 00:41:08,360
like omnipotent multisigs under any circumstances, but let's just say, you know, for the sake

610
00:41:08,360 --> 00:41:12,860
of argument, I could think of ways to make it better, right?

611
00:41:12,860 --> 00:41:14,000
Even while it's omnipotent.

612
00:41:14,000 --> 00:41:20,040
Like for example, you know, if that multisig was wrapped in a special purpose, like judgment

613
00:41:20,040 --> 00:41:26,280
remote entity in a specific jurisdiction, that entity had specific rules about how it's

614
00:41:26,280 --> 00:41:29,320
going to respond to subpoenas.

615
00:41:29,320 --> 00:41:35,640
When the sig can use its powers, can it, you know, like specific defined terms, like what

616
00:41:35,640 --> 00:41:40,400
is a security emergency and what rules do you need to follow before making a change

617
00:41:40,400 --> 00:41:43,400
based on a security emergency, et cetera.

618
00:41:43,400 --> 00:41:50,480
And all that, although that information was published and the, you know, the, there was

619
00:41:50,480 --> 00:41:56,200
some sort of third party verification that at least the different multisig holders are

620
00:41:56,200 --> 00:42:01,200
actually different people and that the keys were generated in a secure way, et cetera,

621
00:42:01,200 --> 00:42:02,200
right?

622
00:42:02,200 --> 00:42:06,120
You know, we can imagine these things and although the thing would still have power

623
00:42:06,120 --> 00:42:10,800
and that would still be problematic, it would be less problematic, right?

624
00:42:10,800 --> 00:42:12,520
The effects would be more predictable.

625
00:42:12,520 --> 00:42:17,600
There would be a way to hold the people accountable potentially for doing something wrong for

626
00:42:17,600 --> 00:42:18,880
breaking the rules.

627
00:42:18,880 --> 00:42:25,360
Like the, like the DeFi protocols or the users of the DeFi protocols could be made like third

628
00:42:25,360 --> 00:42:33,160
party beneficiaries of some specific subset of the rules in the entity's bylaws, right?

629
00:42:33,160 --> 00:42:34,160
And things like that.

630
00:42:34,160 --> 00:42:35,640
And that's what I call Borg, right?

631
00:42:35,640 --> 00:42:38,600
A cybernetic enhanced organization.

632
00:42:38,600 --> 00:42:43,920
And I think that there is, you know, yes, I prefer a situation where we just don't need

633
00:42:43,920 --> 00:42:47,760
to worry about social slash legal rules, but it seems we're very far from that.

634
00:42:47,760 --> 00:42:52,440
And so if people are going to have some of these powers and rely on these social arrangements,

635
00:42:52,440 --> 00:42:54,620
let's at least make them good the best we can, right?

636
00:42:54,620 --> 00:42:59,800
Which does utilize legal tech rather than, you know, purely smart contract tech.

637
00:42:59,800 --> 00:43:01,000
Yeah.

638
00:43:01,000 --> 00:43:05,440
I guess the thing with them specifically with Chainlink is that they have, they don't have

639
00:43:05,440 --> 00:43:07,160
an incentive to do that.

640
00:43:07,160 --> 00:43:16,160
You know, they don't, I guess when you compare it to something in DeFi, like, like compound

641
00:43:16,160 --> 00:43:22,840
or something like that, you know, where Silicon Valley, they're trying to create this new

642
00:43:22,840 --> 00:43:28,160
product space where, you know, it's this sort of trust minimized lending, whatever, you

643
00:43:28,160 --> 00:43:29,160
know?

644
00:43:29,160 --> 00:43:32,880
And so they had an incentive once their admin key was exposed there, they had an incentive

645
00:43:32,880 --> 00:43:39,400
to decentralize it and to move to DAO governance, token governance, because they wanted to outrun

646
00:43:39,400 --> 00:43:40,400
the regulators.

647
00:43:40,400 --> 00:43:46,120
Like that, that's the whole reason that admin keys were getting burned and that these projects

648
00:43:46,120 --> 00:43:50,280
were moving to token governance and air dropping tokens and stuff like that.

649
00:43:50,280 --> 00:43:54,280
You know, so they had that incentive because they wanted to create this new product.

650
00:43:54,280 --> 00:44:00,720
On the other hand, you got Chainlink who, and nobody cares that they have a multi SIG,

651
00:44:00,720 --> 00:44:02,120
they're running DeFi anyway.

652
00:44:02,120 --> 00:44:04,240
DeFi would collapse without them.

653
00:44:04,240 --> 00:44:07,720
There are zero developers that are complaining about it.

654
00:44:07,720 --> 00:44:11,680
There's zero users other than me that are complaining about, okay, there's a few, but,

655
00:44:11,680 --> 00:44:17,320
you know, and so, and plus on top of that, Chainlink wants to be regulated.

656
00:44:17,320 --> 00:44:23,360
They are aligned with like the vision of the World Economic Forum and this whole like singularity

657
00:44:23,360 --> 00:44:25,060
of government around the world.

658
00:44:25,060 --> 00:44:26,560
They are aligned with that.

659
00:44:26,560 --> 00:44:30,520
So they don't have an incentive to give up that control.

660
00:44:30,520 --> 00:44:34,320
They only have incentive to grow that control.

661
00:44:34,320 --> 00:44:38,160
You know, so I don't have any hope that they would ever adopt any of those really, really

662
00:44:38,160 --> 00:44:41,360
smart and prudent things that you're suggesting.

663
00:44:41,360 --> 00:44:42,840
Yeah, maybe.

664
00:44:42,840 --> 00:44:51,840
Yeah, I mean, I do agree the incentive is not super strong right now, but I also think

665
00:44:51,840 --> 00:44:56,960
that that's not going to last forever, right?

666
00:44:56,960 --> 00:45:02,380
Like think about something, and a lot of it may be legal pressure, like think about something

667
00:45:02,380 --> 00:45:13,360
like the EU recently passed this like very comprehensive law about data sharing arrangements

668
00:45:13,360 --> 00:45:20,440
and it even got some attention in the crypto world, albeit I think it was a little bit

669
00:45:20,440 --> 00:45:24,680
misleading attention because it mentioned smart contracts and said that they had to

670
00:45:24,680 --> 00:45:27,440
be reversible.

671
00:45:27,440 --> 00:45:34,320
But this is a law about the handling of data, the sharing of data, etc.

672
00:45:34,320 --> 00:45:37,720
And that is what Chainlink does.

673
00:45:37,720 --> 00:45:40,560
So there may eventually be some regulatory pressure on that.

674
00:45:40,560 --> 00:45:46,080
I agree that it's more indirect currently than kind of like these financial regulatory

675
00:45:46,080 --> 00:45:52,200
concerns that the people involved with like a protocol like Compound might be faced with

676
00:45:52,200 --> 00:45:54,640
and might be faced much more imminently with.

677
00:45:54,640 --> 00:45:56,560
But I think there'll be some incentives.

678
00:45:56,560 --> 00:45:59,680
And I think there are also other incentives, right?

679
00:45:59,680 --> 00:46:03,680
Like if something is wrong with the oracle, I think at some point there will be a class

680
00:46:03,680 --> 00:46:06,080
action against Chainlink, right?

681
00:46:06,080 --> 00:46:12,860
For on the theory of providing bad technology or bad information, making the wrong choices

682
00:46:12,860 --> 00:46:15,680
about how to weight the different information, right?

683
00:46:15,680 --> 00:46:18,440
And that that caused someone financial injury.

684
00:46:18,440 --> 00:46:23,560
And so at a minimum, the people on the multisig would at least want limited liability, you

685
00:46:23,560 --> 00:46:27,080
know, which would mean they want to wrap it in some sort of entity, whether they go the

686
00:46:27,080 --> 00:46:30,720
further step of making that entity kind of like transparent and accountable.

687
00:46:30,720 --> 00:46:31,760
Yeah, you're right there.

688
00:46:31,760 --> 00:46:34,360
There may be less of an incentive to do that.

689
00:46:34,360 --> 00:46:38,560
But yeah, it's it'll be interesting to see how it evolves.

690
00:46:38,560 --> 00:46:39,560
Yeah.

691
00:46:39,560 --> 00:46:40,560
Yeah.

692
00:46:40,560 --> 00:46:49,440
What do you think about what was going on with Richard Hart and Hex and all that?

693
00:46:49,440 --> 00:46:50,440
Yeah.

694
00:46:50,440 --> 00:46:55,600
So I have somewhat of like my take on this might be contrary and both to the SEC and

695
00:46:55,600 --> 00:47:01,800
to the crypto community, because I think I think a lot of people at least out of the

696
00:47:01,800 --> 00:47:06,840
gate were sort of like, oh, this lawsuit is way overdue, you know, and we're kind of taking

697
00:47:06,840 --> 00:47:14,720
the SEC side, which I can understand because the project is I would describe it as a non

698
00:47:14,720 --> 00:47:18,680
fraudulent crypto economic Ponzi game.

699
00:47:18,680 --> 00:47:23,760
At least the original version of Hex, putting aside the pulse chain stuff, I would describe

700
00:47:23,760 --> 00:47:24,760
that way, right?

701
00:47:24,760 --> 00:47:31,080
Because it was essentially it's an immutable smart contract on Ethereum.

702
00:47:31,080 --> 00:47:37,160
It was kind of marketed as like a block chain certificate of deposit.

703
00:47:37,160 --> 00:47:43,880
But really all it is, it's just a token that you can stake to get more of that same token.

704
00:47:43,880 --> 00:47:45,160
Right.

705
00:47:45,160 --> 00:47:51,200
And it's just sort of like there's no there there.

706
00:47:51,200 --> 00:47:56,640
There's really it's just a silly kind of Ponzi game where maybe if you're like really smart

707
00:47:56,640 --> 00:48:01,720
about thinking about how all the different players are incentivized in this, you could

708
00:48:01,720 --> 00:48:05,000
play it the right way and make a lot of money.

709
00:48:05,000 --> 00:48:07,960
But you could also easily lose money if you make the wrong calculation.

710
00:48:07,960 --> 00:48:14,320
And it even had these weird embedded rules around like there was a certain whale penalty.

711
00:48:14,320 --> 00:48:16,720
It's been a long time since I looked at this.

712
00:48:16,720 --> 00:48:20,680
But there were just these kind of like crazy rules embedded in the smart contract.

713
00:48:20,680 --> 00:48:23,600
And it's just like a game where it's very transparent.

714
00:48:23,600 --> 00:48:27,200
All the rules are literally on chain in the form of this code.

715
00:48:27,200 --> 00:48:29,040
And there's really nothing else to it.

716
00:48:29,040 --> 00:48:30,720
And a lot of people got their Hex for free.

717
00:48:30,720 --> 00:48:31,720
Right.

718
00:48:31,720 --> 00:48:38,920
Because there was this ability to if you had Bitcoin at a certain snapshot point, then

719
00:48:38,920 --> 00:48:42,560
you would be credited with Hex on Ethereum or you could claim it.

720
00:48:42,560 --> 00:48:43,620
Right.

721
00:48:43,620 --> 00:48:51,360
And so to me, I just don't really consider that a security.

722
00:48:51,360 --> 00:48:52,360
Right.

723
00:48:52,360 --> 00:48:56,280
He didn't promise that he did sell some.

724
00:48:56,280 --> 00:49:01,040
So that is like the potential opening for the SEC is that he did sell a bunch of Hex

725
00:49:01,040 --> 00:49:03,000
for ETH.

726
00:49:03,000 --> 00:49:09,720
But there was no at the time, I think he was pretty disciplined in the sense that he wasn't

727
00:49:09,720 --> 00:49:15,960
saying he was going to take that ETH and build something further for Hex.

728
00:49:15,960 --> 00:49:16,960
Right.

729
00:49:16,960 --> 00:49:19,200
It was already complete.

730
00:49:19,200 --> 00:49:26,600
And so I think from a securities law point of view, the SEC's case, at least on Hex

731
00:49:26,600 --> 00:49:29,680
itself, is not exactly a slam dunk.

732
00:49:29,680 --> 00:49:34,640
There is this I've had discussions with the SEC staff long ago at this point, because

733
00:49:34,640 --> 00:49:43,920
I kind of gave up at a certain juncture, where I asked them about the sort of fully immutable

734
00:49:43,920 --> 00:49:49,280
contracts that give economics to tokens.

735
00:49:49,280 --> 00:49:50,280
Right.

736
00:49:50,280 --> 00:49:52,080
But they're complete on day one.

737
00:49:52,080 --> 00:49:59,760
Not only are there no promises of future building, but actually no future building occurs.

738
00:49:59,760 --> 00:50:00,760
Right.

739
00:50:00,760 --> 00:50:04,560
So I've posited that scenario to SEC staff.

740
00:50:04,560 --> 00:50:08,760
And the only thing they were able to come up with on sort of the side of that being

741
00:50:08,760 --> 00:50:15,840
a security was this set of cases concerning what are called viaticals, which are fractional

742
00:50:15,840 --> 00:50:18,960
interests in life insurance policies.

743
00:50:18,960 --> 00:50:24,320
And there is a circuit split about whether and when these are securities.

744
00:50:24,320 --> 00:50:30,200
With the, I believe it's the, I'm not even going to say what circuit it is.

745
00:50:30,200 --> 00:50:42,160
One of the circuits developed a view that the pre-purchase entrepreneurial efforts of

746
00:50:42,160 --> 00:50:50,520
the people who sort of designed the economics of the viaticals contract were enough to make

747
00:50:50,520 --> 00:50:56,240
it a security under the Howey test, even though there was no promise of future efforts.

748
00:50:56,240 --> 00:50:57,240
Right.

749
00:50:57,240 --> 00:51:03,320
And then another circuit found the opposite view that under Howey, someone must be investing

750
00:51:03,320 --> 00:51:07,160
with an expectation of future efforts.

751
00:51:07,160 --> 00:51:14,520
And the only thing that the SEC staff was able to come up with for these sort of immutable

752
00:51:14,520 --> 00:51:19,960
contracts that are already done at the point that a sale is made and no future efforts

753
00:51:19,960 --> 00:51:27,840
are made is the idea of leaning on these viaticals cases that count pre-purchase entrepreneurial

754
00:51:27,840 --> 00:51:28,840
efforts.

755
00:51:28,840 --> 00:51:30,880
So it's somewhat doubtful.

756
00:51:30,880 --> 00:51:32,840
The law is somewhat doubtful on this point.

757
00:51:32,840 --> 00:51:36,760
It's a bit of a stretch, I guess.

758
00:51:36,760 --> 00:51:40,840
And that would really be their only argument, I think, under the Howey test.

759
00:51:40,840 --> 00:51:45,900
Now, it is a little bit complicated in this case because after the Hex thing, he started

760
00:51:45,900 --> 00:51:50,200
doing this pulse chain stuff, right, where suddenly he did promise to build something.

761
00:51:50,200 --> 00:51:51,200
Right.

762
00:51:51,200 --> 00:51:54,840
He promised to build a new chain, a fork of Ethereum, and it would be better in all these

763
00:51:54,840 --> 00:51:57,340
various ways.

764
00:51:57,340 --> 00:52:06,540
So it's possible that once he started making those promises, that that could turn Hex,

765
00:52:06,540 --> 00:52:11,060
that could create an investment contract scheme related to Hex.

766
00:52:11,060 --> 00:52:19,640
It's also possible that because there was what he called the sacrifice for people to

767
00:52:19,640 --> 00:52:29,940
get tokens on that chain, which was basically donating other tokens to like a life extension

768
00:52:29,940 --> 00:52:33,720
nonprofit that Richard Hart likes.

769
00:52:33,720 --> 00:52:37,720
The SEC is trying to say that that was an investment of capital.

770
00:52:37,720 --> 00:52:41,540
And I think that's doubtful as well, right, because there was no it's not like this was

771
00:52:41,540 --> 00:52:48,160
going to like a labs company for pulse chain where they were going to use these fundraisers

772
00:52:48,160 --> 00:52:50,680
to build the chain or something or improve it.

773
00:52:50,680 --> 00:52:54,080
Instead, it was going to this life extension research charity.

774
00:52:54,080 --> 00:52:56,860
So I don't think that's a Howey transaction either.

775
00:52:56,860 --> 00:53:01,720
So Richard Hart may have done some very bad things in connection with Hex.

776
00:53:01,720 --> 00:53:06,660
There are accusations of wash trading, which may be fraudulent, some type of wire fraud

777
00:53:06,660 --> 00:53:13,140
or some type of other market manipulation or something, even if the securities laws

778
00:53:13,140 --> 00:53:14,360
don't cover this.

779
00:53:14,360 --> 00:53:17,140
But I'm kind of doubtful on the securities laws covering this.

780
00:53:17,140 --> 00:53:23,540
And I actually think his defense is on the fact on the pure facts is stronger than Ripple's

781
00:53:23,540 --> 00:53:24,620
was.

782
00:53:24,620 --> 00:53:26,980
So it'll be interesting to see how it plays out.

783
00:53:26,980 --> 00:53:29,460
But I don't think it's a slam dunk for the SEC.

784
00:53:29,460 --> 00:53:30,460
Yeah.

785
00:53:30,460 --> 00:53:37,540
And that's a great explanation and overview, and I tend to agree with a lot of it.

786
00:53:37,540 --> 00:53:46,540
I think for the most part that this was it's more akin to a cult than an investment scheme

787
00:53:46,540 --> 00:53:47,540
in my opinion.

788
00:53:47,540 --> 00:53:54,860
And I think that the fact that you were right, like it was it's an immutable smart contract

789
00:53:54,860 --> 00:53:57,140
at least Hex like the whole pulse chain thing.

790
00:53:57,140 --> 00:53:58,140
I don't know.

791
00:53:58,140 --> 00:53:59,140
Different story.

792
00:53:59,140 --> 00:54:04,580
I mean, that might be where he really screwed up because Hex was immutable and he was able

793
00:54:04,580 --> 00:54:11,260
to go around and sort of trash projects that were using multi-sigs for governance and required

794
00:54:11,260 --> 00:54:13,460
trust in developers and stuff like that.

795
00:54:13,460 --> 00:54:16,780
But then pulse chain came along.

796
00:54:16,780 --> 00:54:25,300
And next thing you know, that was completely controlled by a admin key, an EOA admin key

797
00:54:25,300 --> 00:54:26,300
that he held.

798
00:54:26,300 --> 00:54:28,460
I believe he admitted to that.

799
00:54:28,460 --> 00:54:36,860
There was another EOA Ethereum address that custody billions of dollars for the bridge.

800
00:54:36,860 --> 00:54:39,460
And I believe he had control of that too.

801
00:54:39,460 --> 00:54:48,340
So once that new layer two was launched, sort of just threw away all of the stuff that he

802
00:54:48,340 --> 00:54:54,140
was saying before and just went full on like scam as far as like whether or not.

803
00:54:54,140 --> 00:54:58,960
And then when you confronted Hex users with this information, the only thing you would

804
00:54:58,960 --> 00:55:00,980
ever get is, oh, we trust him.

805
00:55:00,980 --> 00:55:01,980
We trust him.

806
00:55:01,980 --> 00:55:02,980
We trust him.

807
00:55:02,980 --> 00:55:09,860
I don't think there was like any Hex users that got into this whole thing without understanding

808
00:55:09,860 --> 00:55:13,540
that they had to trust him with their money.

809
00:55:13,540 --> 00:55:20,140
Like I think that ultimately, yeah, they understood that Hex was not upgradable and stuff, but

810
00:55:20,140 --> 00:55:25,260
they also understood that the market ceased to exist the day, the minute that Richard

811
00:55:25,260 --> 00:55:31,140
Hart decides it should cease to exist because they knew he held a lot of it, if not most

812
00:55:31,140 --> 00:55:32,940
of it.

813
00:55:32,940 --> 00:55:35,380
They knew that he was controlling the markets.

814
00:55:35,380 --> 00:55:41,980
They knew that he had ways to manipulate prices and they counted on him for that.

815
00:55:41,980 --> 00:55:46,460
And then they had this whole marketing machine where they would try to bring in new people.

816
00:55:46,460 --> 00:55:49,900
So to a certain extent, there was a little bit of a pyramid thing going on, but more

817
00:55:49,900 --> 00:55:54,300
than anything, it was a cult in my opinion.

818
00:55:54,300 --> 00:56:02,660
And some of the, this stuff gets very, very subtle because clearly he had many statements,

819
00:56:02,660 --> 00:56:06,420
predictions that the token would go up in value.

820
00:56:06,420 --> 00:56:13,500
But in theory, for securities law purposes, the reason why it's going up in value has

821
00:56:13,500 --> 00:56:19,340
to be associated with the reasonable expectation of his efforts.

822
00:56:19,340 --> 00:56:24,380
Which means I think, which I believe means, although this could be another subtle point,

823
00:56:24,380 --> 00:56:25,820
affirmative efforts, right?

824
00:56:25,820 --> 00:56:27,100
Not merely negative efforts.

825
00:56:27,100 --> 00:56:31,460
So yes, he could destroy it by selling all his Hex, right?

826
00:56:31,460 --> 00:56:32,760
He could tank it.

827
00:56:32,760 --> 00:56:34,140
But is that enough?

828
00:56:34,140 --> 00:56:37,300
Is that the kind of trust that's targeted by the securities laws?

829
00:56:37,300 --> 00:56:38,300
I'm not so sure.

830
00:56:38,300 --> 00:56:42,200
I think the kind of trust that's targeted by securities laws is where you really promise

831
00:56:42,200 --> 00:56:44,300
to do something, right?

832
00:56:44,300 --> 00:56:45,300
Directly or indirectly, right?

833
00:56:45,300 --> 00:56:51,900
Oh, I'm going to build a lot of, like if he had said, yeah, I'm going to be reaching out

834
00:56:51,900 --> 00:56:58,820
to all sorts of commercial partners and getting them to engage in deals with my company that

835
00:56:58,820 --> 00:57:02,020
will use Hex as part of the products, right?

836
00:57:02,020 --> 00:57:03,860
That's basically what Ripple did, right?

837
00:57:03,860 --> 00:57:07,340
And that I think, that I get as being covered by the securities laws.

838
00:57:07,340 --> 00:57:10,180
But this, I don't know.

839
00:57:10,180 --> 00:57:11,340
I don't know.

840
00:57:11,340 --> 00:57:16,740
It was just kind of a machine where you could play this kind of weird game.

841
00:57:16,740 --> 00:57:19,900
And I think a lot of the marketing was probably decentralized as well, right?

842
00:57:19,900 --> 00:57:24,620
As you say, just people who are fanboys of Richard Hart and the project and hoping to

843
00:57:24,620 --> 00:57:25,620
get rich from it.

844
00:57:25,620 --> 00:57:29,460
And then they start to contribute their own efforts to get others in, right?

845
00:57:29,460 --> 00:57:32,940
And there's some very, very interesting case law.

846
00:57:32,940 --> 00:57:39,340
There's even an entire, there's even one or more entire law firm boutiques that specialize

847
00:57:39,340 --> 00:57:47,940
in structuring like pyramidal marketing schemes so that they're not security schemes.

848
00:57:47,940 --> 00:57:53,960
So there's a lot of law around this and it's not as clearly stacked in the SEC's favor

849
00:57:53,960 --> 00:57:57,580
as you might think, but it'll certainly be an interesting case.

850
00:57:57,580 --> 00:57:58,580
Yeah.

851
00:57:58,580 --> 00:58:04,980
And the thing with him is he's so, how do you put it?

852
00:58:04,980 --> 00:58:09,240
I mean, he's very well-spoken on the issue.

853
00:58:09,240 --> 00:58:18,460
He seems to know exactly, like he knew where this was going.

854
00:58:18,460 --> 00:58:20,420
He's been saying this for a long time.

855
00:58:20,420 --> 00:58:27,020
He just had a documentary made about him.

856
00:58:27,020 --> 00:58:34,320
He goes to Louis Vuitton and Versace and these stores has a camera crew following him, says

857
00:58:34,320 --> 00:58:37,020
in there he's spending his ex money.

858
00:58:37,020 --> 00:58:38,020
Right.

859
00:58:38,020 --> 00:58:46,300
And that's another weird thing about the SEC's case because this was not just a section five

860
00:58:46,300 --> 00:58:47,860
registration violation case.

861
00:58:47,860 --> 00:58:49,260
They're alleging fraud.

862
00:58:49,260 --> 00:58:58,180
And one of the frauds they allege is that people didn't know that he was using money

863
00:58:58,180 --> 00:59:02,860
he made from Hex for all these lavish purchases and instead that they somehow thought he was

864
00:59:02,860 --> 00:59:05,900
using the money to build more stuff for Hex.

865
00:59:05,900 --> 00:59:08,540
And I just don't think that that's factually accurate.

866
00:59:08,540 --> 00:59:10,300
And I think he'll have a lot of evidence he could bring.

867
00:59:10,300 --> 00:59:13,300
There's a movie for Christ's sake.

868
00:59:13,300 --> 00:59:14,300
Exactly.

869
00:59:14,300 --> 00:59:17,660
And they could look on Twitter on all the responses when he posted shopping at Louis

870
00:59:17,660 --> 00:59:21,980
Vuitton and everyone literally talking about him using the Hex money for that.

871
00:59:21,980 --> 00:59:24,540
So I just don't know who drafts these complaints sometimes.

872
00:59:24,540 --> 00:59:32,140
This is by far the worst, sloppiest crypto complaint and most inaccurate that I've seen

873
00:59:32,140 --> 00:59:33,620
from the SEC so far.

874
00:59:33,620 --> 00:59:37,900
Yeah, it gets to a point where you ask, who are they trying to protect here?

875
00:59:37,900 --> 00:59:45,860
Are there really Hex buyers or investors, whatever you want to call them, that were

876
00:59:45,860 --> 00:59:48,740
hurt, that didn't have the information here?

877
00:59:48,740 --> 00:59:55,780
Because the one thing that he did right was he was completely transparent about what was

878
00:59:55,780 --> 00:59:56,780
going on.

879
00:59:56,780 --> 01:00:00,180
He was getting rich off the back of these people.

880
01:00:00,180 --> 01:00:03,260
And he told them that over and over and over.

881
01:00:03,260 --> 01:00:04,780
I'm not saying that's right.

882
01:00:04,780 --> 01:00:11,260
I'm saying what's the role of government when people are so stupid that they sit there and

883
01:00:11,260 --> 01:00:15,660
they continue to funnel money to him so that he can keep on doing that.

884
01:00:15,660 --> 01:00:23,660
It's almost like when you got these girls on TikTok, and guys keep sending them money

885
01:00:23,660 --> 01:00:28,540
and they're just out there buying Mercedes and they're buying expensive stuff.

886
01:00:28,540 --> 01:00:31,300
And then these guys just keep sending the money.

887
01:00:31,300 --> 01:00:33,380
It's kind of like the same thing, isn't it?

888
01:00:33,380 --> 01:00:34,380
In a way.

889
01:00:34,380 --> 01:00:35,380
Yeah.

890
01:00:35,380 --> 01:00:36,380
And look, it may be a scam.

891
01:00:36,380 --> 01:00:38,900
It may be fraud, but I don't think it's securities fraud.

892
01:00:38,900 --> 01:00:39,900
Right.

893
01:00:39,900 --> 01:00:40,900
Yeah.

894
01:00:40,900 --> 01:00:41,900
Right.

895
01:00:41,900 --> 01:00:42,900
I agree with you there.

896
01:00:42,900 --> 01:00:44,380
But I still, I'm not, yeah.

897
01:00:44,380 --> 01:00:46,780
Is it fraud if he's just being honest?

898
01:00:46,780 --> 01:00:47,780
I don't know.

899
01:00:47,780 --> 01:00:53,860
Well, I think the one credible fraud allegation I see here, and I'd heard this long before

900
01:00:53,860 --> 01:01:01,660
the SEC sued, I know someone who he's known as the deer in crypto circles.

901
01:01:01,660 --> 01:01:07,580
And he had done quite a bit of research into Richard Hart's wallets around the time of

902
01:01:07,580 --> 01:01:09,020
the original Hex launch.

903
01:01:09,020 --> 01:01:14,700
And I think there's a reasonable case you can make as to funds recycling, kind of like

904
01:01:14,700 --> 01:01:21,620
in EOS as well, although the SEC didn't bring a fraud claim there, where they recycled funds

905
01:01:21,620 --> 01:01:28,140
to make it look like there was a lot more interest and money behind this than there

906
01:01:28,140 --> 01:01:29,940
actually was.

907
01:01:29,940 --> 01:01:33,140
And so if that is true, that may well be fraud.

908
01:01:33,140 --> 01:01:34,140
Right.

909
01:01:34,140 --> 01:01:39,220
He may have been doing fraud by virtue of on-chain transactions and knowing that people

910
01:01:39,220 --> 01:01:44,860
would take those on-chain transactions as a certain signal of public interest in the

911
01:01:44,860 --> 01:01:47,940
project and that they would rely on that.

912
01:01:47,940 --> 01:01:52,420
And that could be like a wire fraud claim or some sort of commodities manipulation claim.

913
01:01:52,420 --> 01:01:55,340
I don't think it's a securities law claim for what it's worth.

914
01:01:55,340 --> 01:01:56,340
Yeah.

915
01:01:56,340 --> 01:01:58,660
It'd be so interesting to see how this plays out.

916
01:01:58,660 --> 01:01:59,660
Yeah.

917
01:01:59,660 --> 01:02:03,460
Part of me just thinks there's somebody at the SEC that just was watching him make this

918
01:02:03,460 --> 01:02:07,260
movie, watching him make videos, calling out the SEC.

919
01:02:07,260 --> 01:02:08,420
He's doing all this stuff over there.

920
01:02:08,420 --> 01:02:12,880
He does a live stream every day or whatever he does, where it's just like he's calling

921
01:02:12,880 --> 01:02:13,880
out the government.

922
01:02:13,880 --> 01:02:18,820
I mean, and he always wanted this type of attention at the end of the day, but he's

923
01:02:18,820 --> 01:02:20,180
a little psychotic, I think.

924
01:02:20,180 --> 01:02:22,980
I think he's crazy in a way.

925
01:02:22,980 --> 01:02:24,780
He knew exactly how this was coming.

926
01:02:24,780 --> 01:02:31,600
To me, it appears like this is the final scene of his movie and he knew it was about to happen,

927
01:02:31,600 --> 01:02:35,700
so that's why he's already got this production crew surrounding him and everything.

928
01:02:35,700 --> 01:02:37,340
He wanted this.

929
01:02:37,340 --> 01:02:44,340
And this is somehow, for him, he thinks this is somehow a wise business move.

930
01:02:44,340 --> 01:02:46,340
It's his magnum opus, right?

931
01:02:46,340 --> 01:02:47,340
Yeah.

932
01:02:47,340 --> 01:02:50,100
Before this, he was the spam king.

933
01:02:50,100 --> 01:02:53,820
I don't know how much you've looked into his background with this whole thing where he

934
01:02:53,820 --> 01:02:59,540
went to Panama and got ripped off from all his spam money, supposedly.

935
01:02:59,540 --> 01:03:06,860
But I think that was a very similar type of thing and he got very savvy at operating in

936
01:03:06,860 --> 01:03:10,580
a gray market, so to speak, and maximizing that.

937
01:03:10,580 --> 01:03:15,220
He probably repeated much of the same playbook here with crypto.

938
01:03:15,220 --> 01:03:18,460
Man, what is this space we're in, dude?

939
01:03:18,460 --> 01:03:20,820
It's so crazy.

940
01:03:20,820 --> 01:03:25,860
We're coming up on time, but before I let you go, I wanted to get your take on this

941
01:03:25,860 --> 01:03:35,060
whole curve situation and with Igorov, the founder, highly respected developer in the

942
01:03:35,060 --> 01:03:36,060
space.

943
01:03:36,060 --> 01:03:41,060
But it's like, I mean, so curve gets hacked for what it's worth.

944
01:03:41,060 --> 01:03:44,700
Certain pools get hacked.

945
01:03:44,700 --> 01:03:49,740
And next thing you know, he obviously had millions and millions, if not billions of

946
01:03:49,740 --> 01:03:56,620
dollars worth of CRV token, which he didn't sell, but he drops it in Aave and takes out

947
01:03:56,620 --> 01:04:04,340
huge loans of stable coins, I believe, which he uses to buy these mansions that are worth

948
01:04:04,340 --> 01:04:09,620
hundreds of millions of dollars, which is crazy in and of itself to me.

949
01:04:09,620 --> 01:04:13,140
I mean, we've seen it in DeFi happen a few times.

950
01:04:13,140 --> 01:04:15,940
But next thing you know, there's a curve hack.

951
01:04:15,940 --> 01:04:19,020
He's getting liquidated all over the place.

952
01:04:19,020 --> 01:04:28,380
And now there's worry that this liquidation, it could end up devastating a lot of the DeFi

953
01:04:28,380 --> 01:04:29,380
markets.

954
01:04:29,380 --> 01:04:32,420
But how much have you been following this?

955
01:04:32,420 --> 01:04:36,900
So yeah, so I'll say in advance, I have somewhat of a conflict of interest as I'm pretty friendly

956
01:04:36,900 --> 01:04:37,900
with the curve guys.

957
01:04:37,900 --> 01:04:39,940
And I'm also on the curve.

958
01:04:39,940 --> 01:04:44,940
They call it the emergency DAO, but it's really an emergency multi-sig.

959
01:04:44,940 --> 01:04:48,340
So the answer is I've been following quite closely.

960
01:04:48,340 --> 01:04:52,660
There is a little bit of inaccuracy in what you just said, I think, in that he has not

961
01:04:52,660 --> 01:04:55,620
actually been liquidated yet.

962
01:04:55,620 --> 01:05:00,380
And just to make clear on the timing of things, it's not like he took out these positions

963
01:05:00,380 --> 01:05:02,780
after this hacker in connection with this hack.

964
01:05:02,780 --> 01:05:07,260
They've been there a long time and Aave governance has kind of been increasingly concerned with

965
01:05:07,260 --> 01:05:09,420
them for a long time.

966
01:05:09,420 --> 01:05:11,580
But yes, you're exactly right.

967
01:05:11,580 --> 01:05:19,120
Instead of selling his founder curve, or a bunch of it, instead he pledged it as collateral

968
01:05:19,120 --> 01:05:25,420
into Aave, both Aave v2, that's where the biggest position is, and Aave v3, that's where

969
01:05:25,420 --> 01:05:31,780
a much smaller position is, and used that to borrow stablecoins and spent the stablecoins

970
01:05:31,780 --> 01:05:38,980
on stuff presumably, including possibly a mansion.

971
01:05:38,980 --> 01:05:47,580
And the issue, of course, is that the token is like, I mean, it's not the most illiquid

972
01:05:47,580 --> 01:05:48,580
token in the world.

973
01:05:48,580 --> 01:05:52,820
It's not like, I don't think it's at the level of like what Mango was during the Mango

974
01:05:52,820 --> 01:05:57,180
hack, but it's not liquid on the scale of like Ether BTC.

975
01:05:57,180 --> 01:06:05,060
And so there's so much of this collateral in Aave v2 at this point that if the price,

976
01:06:05,060 --> 01:06:10,460
if his health factor does drop sufficiently and a liquidation needs to be triggered, it's

977
01:06:10,460 --> 01:06:14,660
not a liquidation that's actually going to be taken up.

978
01:06:14,660 --> 01:06:18,820
No one is going to be able, no one is going to be buying that amount of curve at that

979
01:06:18,820 --> 01:06:19,820
price.

980
01:06:19,820 --> 01:06:21,780
And so Aave will incur bad debt.

981
01:06:21,780 --> 01:06:26,500
And then he has similar positions in other credit protocols.

982
01:06:26,500 --> 01:06:32,580
And he's borrowing stables on those to pay down the Aave debt and keep that one from

983
01:06:32,580 --> 01:06:34,700
being liquidated.

984
01:06:34,700 --> 01:06:38,020
So it is a bit of a messy situation.

985
01:06:38,020 --> 01:06:45,060
But I mean, it highlights one of the key differences between DeFi and TradFi, which is that in

986
01:06:45,060 --> 01:06:51,980
TradFi, if you borrow money, that is actually a debt agreement or a loan agreement.

987
01:06:51,980 --> 01:06:55,500
You are making a promise to repay the money typically.

988
01:06:55,500 --> 01:07:03,620
And you may pledge some collateral toward that, but that collateral is, that's not

989
01:07:03,620 --> 01:07:06,620
the only recourse that the borrower has.

990
01:07:06,620 --> 01:07:09,580
The borrower can take your collateral, sell it.

991
01:07:09,580 --> 01:07:12,660
And if that's not sufficient to cover the debt, they can keep suing you.

992
01:07:12,660 --> 01:07:16,300
You made a promise to repay that full amount plus interest.

993
01:07:16,300 --> 01:07:18,700
And this is just not the case in DeFi, right?

994
01:07:18,700 --> 01:07:25,020
In DeFi, you pledge your collateral and that is the sole and only recourse that the protocol

995
01:07:25,020 --> 01:07:29,100
has to get paid the borrowed stablecoins back, right?

996
01:07:29,100 --> 01:07:32,840
If that turns out not to be enough, if people don't want to buy that collateral or they

997
01:07:32,840 --> 01:07:36,420
only want to buy it at a much lower price, that's it.

998
01:07:36,420 --> 01:07:37,820
You can't go sue him.

999
01:07:37,820 --> 01:07:42,300
I don't think, no one has tried it yet, but I think it would lose.

1000
01:07:42,300 --> 01:07:43,780
Because it's not a debt agreement.

1001
01:07:43,780 --> 01:07:46,380
He didn't make a promise to repay that amount, right?

1002
01:07:46,380 --> 01:07:49,700
You can sue him though, and you can try.

1003
01:07:49,700 --> 01:07:51,300
This may happen at some point.

1004
01:07:51,300 --> 01:07:53,180
This literally may happen at some point, right?

1005
01:07:53,180 --> 01:07:55,820
And it'll be a very interesting case if it does.

1006
01:07:55,820 --> 01:07:56,820
There's zero doubt.

1007
01:07:56,820 --> 01:08:01,340
If that, in my opinion, and I'm not saying it's right or wrong, I'm saying that they

1008
01:08:01,340 --> 01:08:02,340
can.

1009
01:08:02,340 --> 01:08:07,100
And that's part of my issue with a lot of this DeFi stuff is like, yeah, whenever shit

1010
01:08:07,100 --> 01:08:13,660
hits the fan, whether it's a Dow or just a development team or whatever, once they realize

1011
01:08:13,660 --> 01:08:19,100
they're screwed, then they turn to the legal system and they try everything that they can.

1012
01:08:19,100 --> 01:08:22,260
They hire lawyers and they do whatever they can possibly can do.

1013
01:08:22,260 --> 01:08:27,740
So if Aave or Frac or whoever it is out there is getting screwed and there's humans behind

1014
01:08:27,740 --> 01:08:33,420
it who are worried that they're going to lose their life's work or their life savings, they're

1015
01:08:33,420 --> 01:08:38,420
going to hire some lawyers and they're going to go for it.

1016
01:08:38,420 --> 01:08:39,420
And then what?

1017
01:08:39,420 --> 01:08:42,700
Then you get lawyers involved, you get courts involved, you get regulators involved, you

1018
01:08:42,700 --> 01:08:45,220
get Congress involved, you get who knows what.

1019
01:08:45,220 --> 01:08:46,820
Next thing you know, you have a bunch of laws.

1020
01:08:46,820 --> 01:08:49,220
This is why I have a lot of job and career security.

1021
01:08:49,220 --> 01:08:50,220
Right, right.

1022
01:08:50,220 --> 01:08:51,220
But yes.

1023
01:08:51,220 --> 01:08:57,580
But it's like it's impossible to avoid once you get down that road and next thing you

1024
01:08:57,580 --> 01:08:59,820
know you're dealing...

1025
01:08:59,820 --> 01:09:06,420
The way I look at government and crypto is like if there's even the tiniest crack, the

1026
01:09:06,420 --> 01:09:09,660
government's like an ooze, like a blob, like a...

1027
01:09:09,660 --> 01:09:11,140
What do you call it?

1028
01:09:11,140 --> 01:09:19,460
It's like this oozing oil or blobby grease that just can get into any crack that it can

1029
01:09:19,460 --> 01:09:20,460
find.

1030
01:09:20,460 --> 01:09:21,460
Right.

1031
01:09:21,460 --> 01:09:23,980
And in DeFi, there's not just cracks, there's craters.

1032
01:09:23,980 --> 01:09:28,100
There's these huge crevices that just lets the government ooze in.

1033
01:09:28,100 --> 01:09:30,020
Once it's in there, it never leaves.

1034
01:09:30,020 --> 01:09:31,380
Right, it never leaves.

1035
01:09:31,380 --> 01:09:36,980
And you look at something like Bitcoin and it's debatable.

1036
01:09:36,980 --> 01:09:41,460
I mean some say there's zero cracks, some say okay, maybe there's some opportunities,

1037
01:09:41,460 --> 01:09:44,620
but it's a much different situation.

1038
01:09:44,620 --> 01:09:49,220
If government can get in, it's at the very surface level versus something like DeFi where

1039
01:09:49,220 --> 01:09:52,460
government can get straight to the heart of it.

1040
01:09:52,460 --> 01:09:57,980
And something like Aave, which is DAO driven, has a development team, it has more power

1041
01:09:57,980 --> 01:10:03,300
than they advertise, is completely reliant on Chainlink for its price data.

1042
01:10:03,300 --> 01:10:05,340
So Chainlink basically...

1043
01:10:05,340 --> 01:10:09,160
Aave operates because Chainlink allows it to.

1044
01:10:09,160 --> 01:10:12,100
And so there's all these different ways for a court...

1045
01:10:12,100 --> 01:10:14,740
And we've seen court orders over the past year, right?

1046
01:10:14,740 --> 01:10:15,740
Right, Oasis.

1047
01:10:15,740 --> 01:10:16,740
Yeah.

1048
01:10:16,740 --> 01:10:21,740
Yeah, where they order a DeFi project to use their multi-sig to attack a wallet or to drain

1049
01:10:21,740 --> 01:10:26,940
a balance or to do whatever they had to do and actually hack their own code in order

1050
01:10:26,940 --> 01:10:28,260
to fix things.

1051
01:10:28,260 --> 01:10:35,700
So if there's a way to keep that Aave position, for instance, from just completely causing

1052
01:10:35,700 --> 01:10:41,240
billions of dollars to get lost, they'll probably find a way to do it.

1053
01:10:41,240 --> 01:10:45,400
And none of those people who are not losing their money are going to complain about it.

1054
01:10:45,400 --> 01:10:47,700
And regulators would probably applaud it.

1055
01:10:47,700 --> 01:10:51,180
And if it's driven by a court, the court would obviously be in favor of it.

1056
01:10:51,180 --> 01:10:54,420
And the only people who would be complaining are people like you and me who are like, well,

1057
01:10:54,420 --> 01:10:55,420
what are we doing here?

1058
01:10:55,420 --> 01:10:57,560
There's no integrity with any of this.

1059
01:10:57,560 --> 01:10:59,060
But to me, it's inevitable.

1060
01:10:59,060 --> 01:11:00,060
It's definitely...

1061
01:11:00,060 --> 01:11:01,060
And possibly Mitch, right?

1062
01:11:01,060 --> 01:11:02,060
Possibly he would complain, right?

1063
01:11:02,060 --> 01:11:06,780
Because he would say, the rules have been changed on me, right?

1064
01:11:06,780 --> 01:11:08,220
But yes.

1065
01:11:08,220 --> 01:11:11,140
And there was already a threat of that even before this incident, right?

1066
01:11:11,140 --> 01:11:13,980
Because I think it is gauntlet.

1067
01:11:13,980 --> 01:11:17,060
Yeah, it was gauntlet.

1068
01:11:17,060 --> 01:11:24,620
Before all this, I think when the health factor was at like 6.1, they posted a governance

1069
01:11:24,620 --> 01:11:31,100
proposal, expressing concern and suggesting some pretty surprising remedies that I didn't

1070
01:11:31,100 --> 01:11:32,460
even know were possible.

1071
01:11:32,460 --> 01:11:35,500
I can't remember exactly what they are right now.

1072
01:11:35,500 --> 01:11:42,380
But I was surprised that it was even possible for them to start doing a graceful liquidation

1073
01:11:42,380 --> 01:11:48,980
now or you know what I mean, or prevent his ability to further top it up with more collateral.

1074
01:11:48,980 --> 01:11:51,140
That shows quite a bit of flexibility over the protocol.

1075
01:11:51,140 --> 01:11:57,840
But anyway, yeah, the rule...

1076
01:11:57,840 --> 01:12:02,460
There's currently more flexibility to change the rules in most of these systems than people

1077
01:12:02,460 --> 01:12:03,460
realize.

1078
01:12:03,460 --> 01:12:08,040
And wherever there is flexibility, courts may order changes.

1079
01:12:08,040 --> 01:12:09,400
And yeah, it can become a huge mess.

1080
01:12:09,400 --> 01:12:17,340
So this is why I actually think we need borgs and we may even need something like our own

1081
01:12:17,340 --> 01:12:20,380
legal system within crypto, right?

1082
01:12:20,380 --> 01:12:26,860
Because there are going to be these disputes about what are legitimate changes, what are

1083
01:12:26,860 --> 01:12:28,860
not legitimate changes.

1084
01:12:28,860 --> 01:12:34,660
And if we don't internalize a dispute resolution system within crypto, then it is just going

1085
01:12:34,660 --> 01:12:37,580
to revert to traditional governmental systems.

1086
01:12:37,580 --> 01:12:39,860
And they don't really get crypto or like it.

1087
01:12:39,860 --> 01:12:44,540
And so most of their remedies will probably be pretty bad for crypto.

1088
01:12:44,540 --> 01:12:47,620
And I would hate to see that.

1089
01:12:47,620 --> 01:12:48,620
Interesting man.

1090
01:12:48,620 --> 01:12:52,420
Although do legal systems even work without threat of violence?

1091
01:12:52,420 --> 01:12:54,900
That's a whole separate conversation, I guess.

1092
01:12:54,900 --> 01:12:59,220
Some violence can be, I think, like slashing.

1093
01:12:59,220 --> 01:13:02,700
Like a lot of people have talked about social slashing, right?

1094
01:13:02,700 --> 01:13:06,860
And I think that is crypto's version of violence, right?

1095
01:13:06,860 --> 01:13:08,940
The Dow fork is crypto's version of violence.

1096
01:13:08,940 --> 01:13:10,860
And so something can be done with that.

1097
01:13:10,860 --> 01:13:15,900
But what's currently done with it is like pretty illegitimate, right?

1098
01:13:15,900 --> 01:13:20,380
I would describe it as like kangaroo courts where like there's no precedent, there's no

1099
01:13:20,380 --> 01:13:21,380
real rules.

1100
01:13:21,380 --> 01:13:24,540
You just get a bunch of people together and they just like decide what they want to do

1101
01:13:24,540 --> 01:13:25,540
at that moment.

1102
01:13:25,540 --> 01:13:27,580
And it's almost like a might makes right thing.

1103
01:13:27,580 --> 01:13:31,820
That's not going to be a very good long term social solution.

1104
01:13:31,820 --> 01:13:35,620
All of this stuff makes me appreciate Bitcoin so much more.

1105
01:13:35,620 --> 01:13:36,620
It has flaws.

1106
01:13:36,620 --> 01:13:37,620
It has weaknesses.

1107
01:13:37,620 --> 01:13:49,060
But I mean, the programmability and the Turing completeness on Ethereum has led to me something

1108
01:13:49,060 --> 01:13:55,420
that's just, it's a mutation of anything that anybody thought it would ultimately be.

1109
01:13:55,420 --> 01:13:59,420
I just think that we took a wrong turn somewhere.

1110
01:13:59,420 --> 01:14:01,460
I know for you it's more work, which is great, man.

1111
01:14:01,460 --> 01:14:05,980
Hey, I hope you're racking up those hours.

1112
01:14:05,980 --> 01:14:06,980
It's a fun time.

1113
01:14:06,980 --> 01:14:07,980
I enjoy the space.

1114
01:14:07,980 --> 01:14:10,980
Well, thanks for hanging out with me, man.

1115
01:14:10,980 --> 01:14:11,980
Yeah, man.

1116
01:14:11,980 --> 01:14:12,980
Good times.

1117
01:14:12,980 --> 01:14:13,980
Anytime.

1118
01:14:13,980 --> 01:14:36,980
Thanks for having me.