Crypto's Next Big Thing: How Bitcoin and Meme Coins Disrupt and Define New Financial Landscapes with Omid Malekan

[00:00:06] [SPEAKER_02]: Oh my gosh, so many things going on with Bitcoin. Let me just summarize it. I mean, obviously, Gary Gensler resigning. That's huge for Bitcoin. He was the head of the SEC. This is the whole regulatory cloud that's been over all things crypto is now gone. Another catalyst is Bitcoin might be used for the US Strategic Reserves. And particularly if the US starts buying Bitcoin, which Senator Carol Loomis has proposed in a bill, that would be a good deal.

[00:00:36] [SPEAKER_02]: I mean, Bitcoin is going to a million. I'm not even being too hyperbolic here. And, you know, finally, companies are starting to buy crypto. That's a huge catalyst. And tokenization. If you don't know what that is, Omid and I, Omid Malekan and I talk a little bit about it in this podcast. But in general, Omid Malekan, who used to run crypto at Citibank, and he's involved in all things crypto. You could check him out on Twitter, Malekan OMS, M-A-L-E-K-A-N.

[00:01:06] [SPEAKER_02]: And he's written a bunch of books on crypto. He's a crypto. He's really one of the smartest people I know in the crypto world. He's one of those people who's just very thoughtful, very smart, very quiet, very serious. And I always like catching up with him every few months or so and learning where he sees the world of crypto right now. And so here he is, Omid Malekan.

[00:01:31] [SPEAKER_01]: Omid Malekan. This isn't your average business podcast, and he's not your average host. This is the James Altucher Show.

[00:01:52] [SPEAKER_02]: I mean, I feel like it's the dream to make a meme coin, have it go up to be worth billions of dollars, and then you just cash out for like 500 million, and you did no work, created no value to society, and you're just, you know, forever wealthy.

[00:02:08] [SPEAKER_02]: And that's happened. The scary thing is that's happened to many people.

[00:02:12] [SPEAKER_00]: As a former, I don't know if you still are a stand-up comedian, I feel like you would appreciate it.

[00:02:19] [SPEAKER_00]: If you come up with a joke that gains worldwide recognition, shouldn't you get paid for that?

[00:02:26] [SPEAKER_02]: That is probably the funniest joke of all that I've heard.

[00:02:30] [SPEAKER_02]: So that's the thing is, you know, people keep asking, like, what do you think of blah, blah, blah, cats eat dogs coin or whatever?

[00:02:40] [SPEAKER_02]: And I'm like, they all are going to zero.

[00:02:43] [SPEAKER_02]: Like there's no value.

[00:02:44] [SPEAKER_02]: And yet, of course, I'm also wrong at the same time because people speculate.

[00:02:49] [SPEAKER_02]: It's like gambling.

[00:02:50] [SPEAKER_02]: People speculate so much on these things that some value is created.

[00:02:54] [SPEAKER_00]: Yes. I mean, I just put up a big, a long essay, which is the length of it is maybe a joke itself, trying to steel man my skepticism of meme coins by defending them.

[00:03:06] [SPEAKER_00]: And I did realize some interesting things.

[00:03:10] [SPEAKER_00]: Like historically, a lot of things start out as a joke and then end up becoming really significant and important.

[00:03:20] [SPEAKER_00]: This is particularly true in the art world where a lot of what we today consider to be like, oh, this is an amazing genius work of art was just at the time 50, 100 years ago, the artist trolling.

[00:03:32] [SPEAKER_00]: Yeah.

[00:03:33] [SPEAKER_00]: Duchamp's toilet.

[00:03:34] [SPEAKER_00]: Yes.

[00:03:34] [SPEAKER_02]: That's his example.

[00:03:35] [SPEAKER_00]: Exactly.

[00:03:35] [SPEAKER_00]: That is the, I put up the picture of the urinal with that blog post.

[00:03:39] [SPEAKER_00]: Even like, you know, Don Quixote was meant as pure satire of the most popular form of fiction writing at the time.

[00:03:47] [SPEAKER_00]: And now it's understood to be like the birth of the modern novel.

[00:03:53] [SPEAKER_00]: And even the internet, you remember like originally when we all went online, it was all memes and eBowms world and things that are stupid.

[00:04:02] [SPEAKER_00]: So there is some utility to, I guess, whenever there's a major change coming to first starting out with jokes and trolling.

[00:04:14] [SPEAKER_00]: And I guess with meme coins, I think they're a joke against two things.

[00:04:21] [SPEAKER_00]: One, the seriousness of the rest of crypto.

[00:04:24] [SPEAKER_00]: Or, you know, the people like the Bitcoin maxis, or I'm sure the kind of people who send you hate mail because you wrote or didn't write about some coin.

[00:04:33] [SPEAKER_02]: Yeah, the founder of Dogecoin once sent me hate mail, which is ironic.

[00:04:36] [SPEAKER_02]: Like, what did you do to upset the founder of Dogecoin?

[00:04:41] [SPEAKER_02]: This is like in 2017 when I was legitimately offering a course teaching people like Main Street America about crypto.

[00:04:50] [SPEAKER_02]: And of course, the marketing company was doing very aggressive ads.

[00:04:54] [SPEAKER_02]: So everyone hated me in the crypto world.

[00:04:56] [SPEAKER_02]: So this guy like was like trashing me on Twitter.

[00:05:01] [SPEAKER_02]: So I said, if you really have a problem with me, here's my phone number.

[00:05:05] [SPEAKER_02]: And whatever his name is, Jackson something, he called me.

[00:05:08] [SPEAKER_02]: And we talked for like half hour or an hour.

[00:05:11] [SPEAKER_02]: It's at two in the morning on a Saturday night.

[00:05:13] [SPEAKER_02]: I was getting so frustrated.

[00:05:15] [SPEAKER_02]: All these people just not like they claim to care about crypto.

[00:05:20] [SPEAKER_02]: But I was the one actually educating people about crypto.

[00:05:23] [SPEAKER_02]: And so this guy called me and I explained what I was doing.

[00:05:25] [SPEAKER_02]: And he actually even tweeted his credit.

[00:05:27] [SPEAKER_02]: Like, look, I see what he's doing.

[00:05:29] [SPEAKER_02]: The marketing is aggressive, but he's legit.

[00:05:32] [SPEAKER_02]: And so on.

[00:05:34] [SPEAKER_00]: Okay, well, there you go.

[00:05:36] [SPEAKER_00]: So that's the process, right?

[00:05:37] [SPEAKER_00]: What begins as a joke then ends up becoming really serious and institutionalized.

[00:05:42] [SPEAKER_00]: And I think there actually meme coins will have a problem.

[00:05:48] [SPEAKER_00]: Because, you know, once a joke goes mainstream, it's no longer funny.

[00:05:51] [SPEAKER_00]: And at that point, I don't know if they can sustain the current values that some of them have attained.

[00:05:58] [SPEAKER_02]: But then again, like meme coins like that one, it's just a fork of Litecoin, right?

[00:06:03] [SPEAKER_02]: So it's a legit coin.

[00:06:05] [SPEAKER_02]: It's just, you know, everybody's acting like, oh, it's going to be the payments currency for Twitter.

[00:06:12] [SPEAKER_02]: And the Department of Governmental Efficiency is named after it.

[00:06:16] [SPEAKER_02]: So they're taking it.

[00:06:18] [SPEAKER_02]: Who knows?

[00:06:19] [SPEAKER_02]: Maybe they should take it seriously.

[00:06:20] [SPEAKER_02]: I don't know.

[00:06:22] [SPEAKER_00]: What happened in the last year was interesting, which is that the reason meme coins really took off was as a form of protest against how other crypto projects, like non-meme projects that were supposedly doing something important, how they raised money and were launched.

[00:06:39] [SPEAKER_00]: Which was actually very much a reflection of the toxic regulatory environment in the U.S. under the Biden administration, where like the way non-meme crypto projects would raise money is they would be forced to limit themselves to VCs and affluent people.

[00:06:58] [SPEAKER_00]: And then the token would launch years later with elevated valuation and the public could finally purchase it, at which point the VCs and insiders would proceed to dump all of their coins and the coin would end up going down 90%.

[00:07:16] [SPEAKER_00]: And this really burned a lot of people.

[00:07:19] [SPEAKER_00]: So meme coins then became crypto's internal form of economic nihilism, where people were like, I'm not buying your supposed wonderful L1 or DeFi token or something because it's really just a pump and dump scheme, regardless of the technology.

[00:07:38] [SPEAKER_00]: I'm instead going to buy a meme coin, probably on Solana, but on other chains too.

[00:07:44] [SPEAKER_00]: That's just a joke.

[00:07:46] [SPEAKER_00]: And it's a quote unquote fair launch where it launches on an application like Pump.Fun.

[00:07:51] [SPEAKER_00]: And Pump.Fun actually does it in a way where like the insiders can't do anything shady.

[00:07:56] [SPEAKER_00]: They have to buy the coin in the open market like everybody else.

[00:07:59] [SPEAKER_00]: And it's egalitarian.

[00:08:00] [SPEAKER_00]: Like anybody could have bought dog with hat.

[00:08:03] [SPEAKER_00]: I don't know if that was actually a pump dot, but whatever.

[00:08:06] [SPEAKER_00]: Peanut the squirrel.

[00:08:06] [SPEAKER_00]: Anybody could have bought it when it first came out at a fraction of a penny and wrote it all the way up.

[00:08:13] [SPEAKER_00]: So ironically, shortly before the election, I wrote a tweet where I speculated that if Trump and the Republicans win, then it would be bad for meme coins.

[00:08:26] [SPEAKER_00]: Because regulatory clarity in the U.S. would mean that we could return to ICOs, that some of the more successful projects could turn on fee switches and start actually like giving dividends and buybacks.

[00:08:43] [SPEAKER_00]: And the kind of stuff that everybody stopped doing because they were terrified the SEC would come after them.

[00:08:47] [SPEAKER_00]: And that tweet went viral.

[00:08:49] [SPEAKER_00]: And I guess it's one of my most read tweets.

[00:08:51] [SPEAKER_00]: People got very upset by it.

[00:08:54] [SPEAKER_00]: Then the election happened.

[00:08:56] [SPEAKER_00]: And I must admit that to date, I have been wrong.

[00:09:00] [SPEAKER_00]: But it's only been like two weeks.

[00:09:01] [SPEAKER_02]: Yeah, but I think in the long run and I guess now it sounds like where the old people say, don't.

[00:09:10] [SPEAKER_02]: This internet thing is going nowhere.

[00:09:13] [SPEAKER_02]: But like, the thing is, you're right.

[00:09:18] [SPEAKER_02]: The regulatory landscape is going to clear and people are going to want to do legit.

[00:09:24] [SPEAKER_02]: There's so much to do in the crypto world.

[00:09:27] [SPEAKER_02]: And now they're going to finally be able to start doing it.

[00:09:30] [SPEAKER_02]: And the meme coin is just going to be like some sideshow.

[00:09:33] [SPEAKER_02]: It's a freak show of crypto.

[00:09:35] [SPEAKER_00]: Yes.

[00:09:36] [SPEAKER_00]: I actually just placed a bet a couple of days ago with a prominent crypto VC, Mike Dudas, that I think a year after the election, meme coins as a percentage of overall crypto market cap will be lower than what they were this year.

[00:09:51] [SPEAKER_00]: Just because I think Bitcoin is going to keep rising.

[00:09:54] [SPEAKER_00]: And I think other projects are going to appreciate because they can do the things that you couldn't do in the last four years.

[00:10:02] [SPEAKER_02]: Let's talk about that because I have my own opinions on what trends are going to be huge over the next few years.

[00:10:09] [SPEAKER_02]: But we know several things.

[00:10:13] [SPEAKER_02]: We know that Gensler is one day or the other is no longer going to be at the SEC because of Trump being elected.

[00:10:21] [SPEAKER_02]: And that's going to clear the regulatory landscape for who knows what, but a lot of things are going to happen.

[00:10:27] [SPEAKER_02]: We also know it's going to be acceptable for the U.S. to hold Bitcoin in the strategic reserves.

[00:10:33] [SPEAKER_02]: And we also know, we saw yesterday an announcement from Goldman Sachs that they're going to start focusing on the tokenization of real-world assets.

[00:10:41] [SPEAKER_02]: We know BlackRock's been focusing on that.

[00:10:44] [SPEAKER_02]: So the two prestigious banks slash money management firms on the planet are focusing on what people don't realize is a quadrillion dollar thing.

[00:10:53] [SPEAKER_02]: Like there's the world of financial assets is over a quadrillion dollars.

[00:10:58] [SPEAKER_02]: It's bigger than the world of currencies.

[00:11:00] [SPEAKER_02]: So this is going to suddenly be a thing.

[00:11:02] [SPEAKER_02]: So what's your take on what's next?

[00:11:07] [SPEAKER_02]: What are the catalysts?

[00:11:08] [SPEAKER_02]: And so on.

[00:11:10] [SPEAKER_02]: By the way, how's it going?

[00:11:11] [SPEAKER_02]: How's life?

[00:11:12] [SPEAKER_00]: Good to see you.

[00:11:13] [SPEAKER_00]: But what's next is hopefully crypto companies can finally get bank accounts in America again.

[00:11:19] [SPEAKER_00]: People outside of crypto probably don't know the insane extent to which the Biden administration tried to kill the American industry.

[00:11:28] [SPEAKER_00]: And I say this as a not very partisan or political person, but I anticipate having seen from the inside that there's going to be some scandals because some of the things that they did were very shameful, if not actually illegal.

[00:11:44] [SPEAKER_00]: Like what?

[00:11:44] [SPEAKER_00]: But like they the regional banking crisis started with the federal government trying to drive out crypto out of America.

[00:11:54] [SPEAKER_00]: You could say it might have happened anyway because of the duration mismatch issues and shrinking deposits with Fed rate hikes.

[00:12:02] [SPEAKER_00]: But it literally began because federal banking regulators decided that they wanted to kill Silvergate Bank and drive crypto deposits out of other regional banks.

[00:12:15] [SPEAKER_00]: And we're starting to see evidence of this now.

[00:12:18] [SPEAKER_00]: There was also a de facto ban on crypto deposits being more than 15 percent of the deposits, which was problematic for a lot of the regional banks because it's just not worth taking.

[00:12:32] [SPEAKER_00]: It's not worth going through the trouble of accepting crypto deposits if you have limits like that.

[00:12:36] [SPEAKER_02]: Well, I don't understand.

[00:12:38] [SPEAKER_02]: Like right now, banks accept dollars, right?

[00:12:41] [SPEAKER_02]: I can't open my bank account, I don't think, and put a bunch of yen in it, can I?

[00:12:46] [SPEAKER_00]: Well, some banks might.

[00:12:47] [SPEAKER_00]: But what I'm saying is like if you were a crypto project, a crypto startup, even like a crypto venture capital firm, a crypto hedge fund, stable coin issuer, all of these things.

[00:12:59] [SPEAKER_00]: And you went in the last year and change and you went to a bank in America.

[00:13:06] [SPEAKER_00]: You know, banks, banking is a very weird industry where they have full permission to discriminate against their customers.

[00:13:15] [SPEAKER_00]: In fact, they're supposed to legally and they often do.

[00:13:17] [SPEAKER_00]: So what happened to literally friends of mine and people within the industries are like, I can't get a bank account.

[00:13:23] [SPEAKER_00]: They would go to a bank and say, starting a crypto fund, need to put dollars somewhere to invest in companies.

[00:13:30] [SPEAKER_00]: The bank is, to be clear, the bank is not touching Bitcoin or any other crypto coins.

[00:13:37] [SPEAKER_00]: The bank is literally doing what banks do for God knows how many different commercial clients in the U.S.

[00:13:44] [SPEAKER_00]: But banks do assess whether every specific customer is worth whatever risk they think it entailed.

[00:13:53] [SPEAKER_00]: And the situation got so bad that a lot of banks were like, if you do anything with crypto, I just don't want you as a customer.

[00:14:01] [SPEAKER_02]: And so what if I say to the bank, I'm just starting a hedge fund?

[00:14:03] [SPEAKER_02]: Why do I have to tell them I'm doing a crypto hedge fund?

[00:14:06] [SPEAKER_00]: I mean, you could, but then there are questions as to whether you're disclosing as much information as you're supposed to.

[00:14:13] [SPEAKER_00]: People did do stuff like that.

[00:14:15] [SPEAKER_00]: People did do things like just reveal as little as possible.

[00:14:21] [SPEAKER_02]: I didn't know you have to tell the bank your whole story to get a bank account.

[00:14:24] [SPEAKER_00]: Oh, yeah.

[00:14:25] [SPEAKER_00]: Don't get me started on that.

[00:14:26] [SPEAKER_00]: Like everything that the rest of society is trying to do, which is to preserve privacy and eliminate discrimination of any kind.

[00:14:37] [SPEAKER_00]: Increasingly in the developed world, well, actually everywhere, banks are supposed to go in the opposite direction.

[00:14:43] [SPEAKER_00]: Like one of the, and this is part of the reason why people like me believe in crypto, because crypto doesn't work that way.

[00:14:50] [SPEAKER_00]: But one of the meeting assignments I give my students is this New York Times article from last year that the headline goes,

[00:14:59] [SPEAKER_00]: banks are increasingly firing their own customers without telling them why.

[00:15:05] [SPEAKER_02]: Oh, that's happened to me before, actually.

[00:15:07] [SPEAKER_00]: Yeah, which is like, can you imagine if supermarkets started doing that?

[00:15:12] [SPEAKER_00]: Like random people that would be like, you're not allowed to buy avocados here.

[00:15:16] [SPEAKER_00]: And then, of course, when we collected the data, we realized that only certain kinds of people, certain demographics are the ones that are not allowed to buy avocados.

[00:15:26] [SPEAKER_00]: Like there would be a scandal.

[00:15:28] [SPEAKER_00]: But the government forces banks to act that way.

[00:15:32] [SPEAKER_00]: And banks actually like acting that way on average because all of these regulatory requirements are a good moat.

[00:15:42] [SPEAKER_02]: Yeah.

[00:15:45] [SPEAKER_02]: So what's next?

[00:15:46] [SPEAKER_02]: What do you think?

[00:15:47] [SPEAKER_02]: The dust is going to clear.

[00:15:50] [SPEAKER_02]: Trump's going to, you know, Gensler's going to go away.

[00:15:52] [SPEAKER_02]: The SEC is going to be more pro-crypto.

[00:15:55] [SPEAKER_02]: America's going to be more pro-crypto.

[00:15:57] [SPEAKER_02]: There's the basics of if America starts actually buying crypto for its strategic reserves, that's an enormous buying pressure on a relatively small market.

[00:16:06] [SPEAKER_02]: So that drives prices up.

[00:16:07] [SPEAKER_02]: But what do you think is going to happen?

[00:16:08] [SPEAKER_00]: First of all, the day Gensler actually resigns, we're all going to hold hands and sing Hava Nagila because it's hard to imagine somebody just uniquely that toxic.

[00:16:18] [SPEAKER_00]: And what made him...

[00:16:20] [SPEAKER_00]: For years.

[00:16:21] [SPEAKER_00]: For years.

[00:16:21] [SPEAKER_02]: You don't realize, like, it's not like it's running up now in anticipation of Gensler going.

[00:16:28] [SPEAKER_02]: Like, it's running up because it would have been these prices years ago.

[00:16:33] [SPEAKER_00]: That is a fantastic point.

[00:16:35] [SPEAKER_00]: That, like, it's really just, I think somebody else said, like, it's like the boot is coming off the neck of an industry.

[00:16:43] [SPEAKER_00]: And what Gensler did is just, to me, particularly nefarious and shameful because he knows better.

[00:16:50] [SPEAKER_00]: We know he knows better.

[00:16:52] [SPEAKER_00]: We know he actually understands blockchain.

[00:16:53] [SPEAKER_00]: We know when he taught at MIT, he, when I interacted with him personally, he espoused on the benefits of tokens and decentralized finance.

[00:17:02] [SPEAKER_00]: But it turns out he's the kind of person whose integrity is for rent.

[00:17:05] [SPEAKER_00]: And he sold it to whatever political powers told him to be anti-crypto.

[00:17:10] [SPEAKER_00]: But anyway, on the strategic reserve, I'm actually skeptical.

[00:17:15] [SPEAKER_00]: First of all, I don't think the U.S. should have a strategic reserve of Bitcoin.

[00:17:18] [SPEAKER_00]: I think the U.S. should just create an environment where the Bitcoin industry thrives and individuals have the freedom to accumulate it however they want.

[00:17:28] [SPEAKER_00]: But they'll probably stop selling the billions of dollars worth of Bitcoin that they still have that have been seized in various criminal proceedings.

[00:17:36] [SPEAKER_00]: So that's something.

[00:17:38] [SPEAKER_02]: That's the only thing Trump has actually said is that he wouldn't buy for the strategic reserve, but he would keep the Bitcoins they have for the strategic reserve.

[00:17:47] [SPEAKER_00]: Right. And also, this is over my head, but my understanding is this is the kind of thing that would require congressional approval.

[00:17:55] [SPEAKER_00]: And then if you open the door to a strategic Bitcoin reserve, then it raises questions about a lot of other things that maybe should or shouldn't be in the reserve.

[00:18:02] [SPEAKER_00]: But the things that I think will be very impactful is that stablecoins have really established themselves as being one of the killer products of crypto.

[00:18:14] [SPEAKER_00]: There's a ton of demand for them.

[00:18:16] [SPEAKER_00]: I think there's actually insatiable demand globally.

[00:18:19] [SPEAKER_00]: And they're good for the U.S. because they extend the reach of the U.S. dollar and create demand for U.S. treasuries at a time where we're going to need to issue more and more of them.

[00:18:29] [SPEAKER_00]: So there's optimism that we'll get a stablecoin bill in the next year.

[00:18:36] [SPEAKER_00]: And once they become regulated, then they can really take off because you could imagine many of the world's biggest fintechs, tech companies, consumer brands saying that, hey, we can incorporate some kind of a dollar into whatever we're doing.

[00:18:56] [SPEAKER_02]: Take a quick break.

[00:18:57] [SPEAKER_02]: If you like this episode, I'd really, really appreciate it.

[00:19:00] [SPEAKER_02]: It means so much to me.

[00:19:01] [SPEAKER_02]: Please share it with your friends and subscribe to the podcast.

[00:19:04] [SPEAKER_02]: Email me at altitra at gmail.com and tell me why you subscribed.

[00:19:09] [SPEAKER_02]: Thanks.

[00:19:19] [SPEAKER_02]: So stablecoins are basically crypto that always have the value of the dollar.

[00:19:23] [SPEAKER_02]: So it's like the crypto version of the $1 bill.

[00:19:26] [SPEAKER_02]: And what are they used for?

[00:19:28] [SPEAKER_02]: Why is there demand for stablecoins?

[00:19:32] [SPEAKER_00]: Originally, they were created to just because of the specific needs of people who traded and invested in crypto and because it was hard for crypto companies even like 10 years ago to get a bank account.

[00:19:45] [SPEAKER_00]: But where they have found a lot of traction so far is by providing access to the U.S. dollar to people who would otherwise not have them.

[00:19:56] [SPEAKER_00]: We take this for granted in the West, but there are a lot of people in a lot of countries whose domestic currency is prone to terrible inflation and monetization.

[00:20:08] [SPEAKER_00]: In all of those countries, the elites, like the rich and connected, had always had access to hard currency and foreign currency.

[00:20:17] [SPEAKER_00]: Like, you know, literally people in Latin America, the wealthy ones just have bank accounts in Miami.

[00:20:23] [SPEAKER_00]: But ordinary people have to either rely on like physical $100 bills or just suffer the inflation.

[00:20:31] [SPEAKER_00]: What makes stablecoins really powerful is that anyone that just has a smartphone could now get access to a digital dollar whose design is actually literally no different than how a Venmo works.

[00:20:44] [SPEAKER_00]: You just have an issuer who promises to back each stablecoin with some kind of an off-chain reserve, most likely to U.S. Treasuries.

[00:20:56] [SPEAKER_00]: But they've really been growing in places like South America and Southeast Asia, Turkey.

[00:21:07] [SPEAKER_00]: And this is despite the fact that they've sort of been in a gray market.

[00:21:13] [SPEAKER_00]: But there's optimism that there will now be bipartisan legislation in the U.S.

[00:21:20] [SPEAKER_00]: that just describes basics like licensing, how the stablecoin issuer has to keep the reserve, etc.,

[00:21:26] [SPEAKER_00]: at which point they could really be used for anything.

[00:21:30] [SPEAKER_00]: And I just, to me, a dollar on a blockchain is superior than a dollar in a bank account.

[00:21:36] [SPEAKER_00]: All else being equal.

[00:21:38] [SPEAKER_00]: So I think in time, stablecoins will completely disrupt how we do payments and savings.

[00:21:45] [SPEAKER_02]: Right, because let's take the Swift wiring system.

[00:21:49] [SPEAKER_02]: So if you're in, I don't know, Europe, and you want to go from euros,

[00:21:55] [SPEAKER_02]: I want to send you euros, I still have to go through the Swift wiring system,

[00:22:01] [SPEAKER_02]: which goes through all these banks and there's all these fees,

[00:22:03] [SPEAKER_02]: as opposed to me going on my crypto wallet.

[00:22:06] [SPEAKER_02]: I have some Ethereum.

[00:22:08] [SPEAKER_02]: I still want to send you dollars.

[00:22:10] [SPEAKER_02]: I'll just switch it to Tether or some stablecoin dollar,

[00:22:14] [SPEAKER_02]: send it to you in seconds for almost, you know,

[00:22:17] [SPEAKER_02]: one thousandth the fee price that the Swift wiring system charges and it's done.

[00:22:21] [SPEAKER_02]: And it's not like this mysterious thing like, oh, your dollars will settle in like three days.

[00:22:26] [SPEAKER_02]: And in the meantime, where are the dollars?

[00:22:30] [SPEAKER_02]: Like if I wire you money and they always say like,

[00:22:33] [SPEAKER_02]: the money's gone from your bank, but I call you up.

[00:22:36] [SPEAKER_02]: It's not in your bank account yet.

[00:22:37] [SPEAKER_02]: Where is the money?

[00:22:38] [SPEAKER_02]: Who has it?

[00:22:40] [SPEAKER_00]: The money is in the possession of a series of intermediaries

[00:22:44] [SPEAKER_00]: whose business model very much depends on this delay.

[00:22:47] [SPEAKER_00]: Because if you send me a wire...

[00:22:49] [SPEAKER_02]: Right, because they get like a day of interest.

[00:22:50] [SPEAKER_00]: Yeah, but if you get a day of interest over like a trillion dollars for a whole year,

[00:22:56] [SPEAKER_00]: that's a really profitable business.

[00:22:59] [SPEAKER_02]: Yeah, I want to be in that business.

[00:23:01] [SPEAKER_02]: It's a great business.

[00:23:01] [SPEAKER_00]: Yeah, which is why whenever like the big banks say something about how they really believe in technology

[00:23:08] [SPEAKER_00]: and investing in speeding up payments, I'm like, no, you don't.

[00:23:12] [SPEAKER_00]: That's literally like eliminating one of your best business models.

[00:23:17] [SPEAKER_00]: So I think, you know, Jeff Bezos has that saying that, what is it?

[00:23:23] [SPEAKER_00]: Your profit margin is my opportunity.

[00:23:26] [SPEAKER_00]: The current revenues of the payments industry globally, which includes like banks and credit card companies,

[00:23:33] [SPEAKER_00]: is like $3 trillion a year.

[00:23:36] [SPEAKER_00]: So there's a $3 trillion a year opportunity for entrepreneurs to use stablecoins to disrupt that.

[00:23:44] [SPEAKER_00]: And depending on how the regulations go, stablecoins could even offer other interesting features.

[00:23:49] [SPEAKER_00]: Like there are stablecoins now that pass almost all of the interest that the issuer earns

[00:23:57] [SPEAKER_00]: by doing things like holding treasury.

[00:23:59] [SPEAKER_00]: So what we call the float, they pass it on to the user.

[00:24:03] [SPEAKER_00]: So imagine a world where you're holding a stablecoin right now.

[00:24:05] [SPEAKER_00]: You're making like 4% interest on it.

[00:24:08] [SPEAKER_00]: And then you could instantly send it to me for a fraction of a cent.

[00:24:12] [SPEAKER_00]: And then instantly I'm now making 4% on it.

[00:24:16] [SPEAKER_02]: And the stablecoins, how do they make money?

[00:24:19] [SPEAKER_00]: So right now, the biggest ones don't pass on the interest.

[00:24:23] [SPEAKER_00]: And you mentioned Tether.

[00:24:25] [SPEAKER_00]: Tether is now one of the most profitable companies on the planet.

[00:24:29] [SPEAKER_00]: It makes something like $5 billion a year and it has 200 employees.

[00:24:35] [SPEAKER_00]: But competition, because blockchains are decentralized, so it's actually a lot easier for someone to launch a stablecoin than it is a bank.

[00:24:45] [SPEAKER_00]: Competition is showing up in the form of people who share most of it.

[00:24:48] [SPEAKER_00]: So it's a good question.

[00:24:51] [SPEAKER_00]: One argument is that stablecoins will be so big that even if you only keep a fraction of the interest income,

[00:24:57] [SPEAKER_00]: you still have a nice profitable business.

[00:24:59] [SPEAKER_00]: And my suspicion is that more and more companies will view a stablecoin as a loss leader that they will offer in exchange for your using some other service.

[00:25:14] [SPEAKER_00]: So I could literally foresee a future where Apple and Instagram integrate, if the regulations allow it,

[00:25:24] [SPEAKER_00]: they'll integrate a stablecoin where they're going to pass on most of the interest income to their users,

[00:25:30] [SPEAKER_00]: but they think it's worth doing because it keeps you hooked into their ecosystem.

[00:25:38] [SPEAKER_02]: Yeah.

[00:25:38] [SPEAKER_02]: Also, you can see something that could work like a consumption tax.

[00:25:41] [SPEAKER_02]: So the stablecoin is equal for everything except maybe when you want to convert it to Bitcoin, then we charge a small fee or whatever.

[00:25:51] [SPEAKER_00]: Oh, yeah.

[00:25:51] [SPEAKER_00]: That's a great point.

[00:25:52] [SPEAKER_00]: Yeah.

[00:25:52] [SPEAKER_00]: Sure.

[00:25:53] [SPEAKER_00]: And there are actually like – there are a lot of the crypto wallets that are free to use right now.

[00:25:59] [SPEAKER_00]: Their business model is if you just want to instantly convert from one coin to another,

[00:26:04] [SPEAKER_00]: you could do it through their back end and then they charge a fee on that.

[00:26:08] [SPEAKER_00]: And then there are stablecoins that charge fees for minting and redemption.

[00:26:14] [SPEAKER_00]: The whole point though is that these decentralized blockchain networks make it very easy for anybody to do this.

[00:26:24] [SPEAKER_00]: So there's going to be a ton of competition, which is, to quote our once and future president,

[00:26:31] [SPEAKER_00]: is going to be a beautiful thing because finance does not have a lot of competition.

[00:26:36] [SPEAKER_02]: And so this is the point really is that – so people always argue like, well, why do I need crypto at all?

[00:26:42] [SPEAKER_02]: Why don't I just keep my dollars as dollars?

[00:26:45] [SPEAKER_02]: And I don't know what this blockchain stuff is all about and Bitcoin is just ones and zeros.

[00:26:51] [SPEAKER_02]: But you're making the point that, hey, as a society, by just keeping our dollars as dollars in the traditional banking system,

[00:26:59] [SPEAKER_02]: it's costing us $3 trillion a year.

[00:27:02] [SPEAKER_02]: So here's a new system to organize the economy, which gives us $3 trillion a year into the economy.

[00:27:11] [SPEAKER_00]: Yeah, that $3 trillion is actually a tax.

[00:27:14] [SPEAKER_00]: And if you subscribe to the theory that eventually we'll have a fully cashless society, I think it's kind of absurd.

[00:27:23] [SPEAKER_00]: And I have this debate with people who say, well, we don't need blockchain.

[00:27:26] [SPEAKER_00]: We have Visa and MasterCard and JP Morgan.

[00:27:28] [SPEAKER_00]: And I say, okay, so what you're describing to me is a future economy where literally every single thing

[00:27:35] [SPEAKER_00]: that every person does involves paying like 1% to 2% to five companies.

[00:27:42] [SPEAKER_02]: It's so funny that people don't realize that.

[00:27:44] [SPEAKER_02]: Like, let's say I'm just hypothetically making up numbers.

[00:27:46] [SPEAKER_02]: Let's say you make $100,000.

[00:27:49] [SPEAKER_02]: And we all use credit cards to buy everything.

[00:27:53] [SPEAKER_02]: So as soon as you make your $100,000, you're instantly saying, I'm going to give some random companies $2,000 to $3,000

[00:28:01] [SPEAKER_02]: in order to spend this $100,000.

[00:28:04] [SPEAKER_02]: I'm forgetting about taxes and all that.

[00:28:07] [SPEAKER_00]: And I say it's even more stark than that.

[00:28:09] [SPEAKER_00]: Let's say you're a small business, like you have, I don't know, a food truck or something.

[00:28:13] [SPEAKER_00]: And you're making $100,000 a year.

[00:28:17] [SPEAKER_00]: And you accept credit cards, which in the US is like 2% to 3% fees.

[00:28:22] [SPEAKER_00]: But it's not that it's 2% to 3% coming out of 100%.

[00:28:25] [SPEAKER_00]: Those are your revenues.

[00:28:26] [SPEAKER_00]: So maybe your actual gross margins on the food truck are 20%.

[00:28:33] [SPEAKER_00]: So you're making $20,000 a year.

[00:28:36] [SPEAKER_00]: And then you're like, oh, but I'm going to give $3,000 of that to JP Morgan for doing nothing other than issuing a credit card.

[00:28:44] [SPEAKER_00]: I hate to become like moralistic on this because ultimately business is business.

[00:28:49] [SPEAKER_00]: But that to me is an absurd and indefensible way to run an economy.

[00:28:56] [SPEAKER_00]: And there are a lot of interesting questions as to why it is that way.

[00:29:00] [SPEAKER_00]: But nevertheless, one of the reasons is that the big financial firms previously owned the networks.

[00:29:10] [SPEAKER_00]: So credit card companies own networks.

[00:29:12] [SPEAKER_00]: Banks have their own payment infrastructure.

[00:29:14] [SPEAKER_00]: But we're now entering a world where we have public infrastructure in the form of a blockchain that could be used as a network for anything, including sending dollars.

[00:29:21] [SPEAKER_02]: Right.

[00:29:22] [SPEAKER_02]: And the financial system, okay, so now they have competition.

[00:29:26] [SPEAKER_02]: So you can ask, will they make things better?

[00:29:30] [SPEAKER_02]: Will they try to make things better?

[00:29:31] [SPEAKER_02]: And I mean, look, the Swift wiring system has been around since the early 70s.

[00:29:35] [SPEAKER_02]: So that's 50 years.

[00:29:37] [SPEAKER_02]: It's not like they've made much of an effort to improve things over time.

[00:29:42] [SPEAKER_02]: And like banks just make things harder and harder.

[00:29:44] [SPEAKER_02]: Like it's getting more difficult than ever to do any kind of transactions with the bank.

[00:29:48] [SPEAKER_00]: Yeah.

[00:29:48] [SPEAKER_00]: I mean, if you, there's no competition in banking and the big banks only get bigger and then like they screw up and get bailed out.

[00:29:56] [SPEAKER_00]: So they have negative incentives to change anything.

[00:29:59] [SPEAKER_00]: And I, you even mentioned Goldman Sachs.

[00:30:02] [SPEAKER_00]: I am deeply skeptical that anything what, you know, in Wall Street, there's the buy side and the sell side.

[00:30:10] [SPEAKER_02]: Yeah.

[00:30:11] [SPEAKER_02]: Let's describe that.

[00:30:12] [SPEAKER_02]: Like the buy, the buy side or describe it.

[00:30:15] [SPEAKER_00]: The buy side tends to be institutions that are deploying their own capital.

[00:30:21] [SPEAKER_00]: So if you think about like a pension fund, an insurance company.

[00:30:24] [SPEAKER_00]: Mutual fund.

[00:30:25] [SPEAKER_00]: Mutual fund.

[00:30:27] [SPEAKER_00]: Even like private equity funds.

[00:30:30] [SPEAKER_00]: The sell side tends to be the service providers.

[00:30:35] [SPEAKER_00]: Like big banks and brokers who cater to them.

[00:30:39] [SPEAKER_00]: So, you know, Goldman Sachs.

[00:30:40] [SPEAKER_00]: Now it's, it's become blurred now, obviously, because everybody does a little bit of everything.

[00:30:44] [SPEAKER_00]: But like a Goldman Sachs is a lot more on the sell side, even though they have an asset management business.

[00:30:49] [SPEAKER_00]: And a BlackRock is on the buy side, even though they might have certain brokerage like offerings.

[00:30:55] [SPEAKER_00]: I have this provocative thesis that I need to hash out more.

[00:30:58] [SPEAKER_00]: But I think crypto will mean the end of the sell side as we know it.

[00:31:03] [SPEAKER_02]: I think, I think, okay, this is so interesting because this goes along with other things I've been thinking.

[00:31:10] [SPEAKER_02]: And this is almost like a little bit of an aside from crypto, although it's related.

[00:31:14] [SPEAKER_02]: But the sell side's kind of been disappearing since 2000, since the internet boom.

[00:31:20] [SPEAKER_02]: Because back then you had, you had the Goldman Sachs, Morgan Stanley, you know, the big three banks.

[00:31:26] [SPEAKER_02]: But then there were a lot of good mid-sized banks that dealt with mid-sized companies or smaller companies.

[00:31:34] [SPEAKER_02]: And they were, they were decent.

[00:31:35] [SPEAKER_02]: I don't want to say any of these companies were, you know, great all-American companies.

[00:31:39] [SPEAKER_02]: But they were, they were decent.

[00:31:40] [SPEAKER_02]: They provided services for small companies.

[00:31:42] [SPEAKER_02]: That whole middle layer disappeared.

[00:31:45] [SPEAKER_02]: And you were just left with basically the Goldman Sachs in their ilk and really crappy small banks that were just schlocky doing illegal stuff on small companies.

[00:31:57] [SPEAKER_02]: And, and I feel like banking has disappeared for small companies, which is why a lot of decent small companies, unless you're a trillion dollars, don't want to IPO.

[00:32:05] [SPEAKER_02]: And I think what's been replacing them over time has been, you know, kind of reggae, crowdfunding, newsletters that provide better analysis than, you know, a stock analyst.

[00:32:21] [SPEAKER_02]: Like the idea that, oh, we're going to take a company public and then write an article analyzing this company is so stupid.

[00:32:29] [SPEAKER_02]: Like, of course they're going to, they're not going to be, they're not going to be biased.

[00:32:32] [SPEAKER_02]: Of course they're going to be biased.

[00:32:33] [SPEAKER_02]: Like they're not, oh, we just brought this company public.

[00:32:35] [SPEAKER_02]: You should sell it right away.

[00:32:36] [SPEAKER_02]: It sucks.

[00:32:37] [SPEAKER_02]: They're not going to tell you that.

[00:32:39] [SPEAKER_02]: They're never going to be honest with you.

[00:32:41] [SPEAKER_02]: Like, like, but now you have, you know, newsletters and independent sources of financial information.

[00:32:47] [SPEAKER_02]: And I'm not talking about the wall street journal, which is also owned by the banks.

[00:32:50] [SPEAKER_02]: That's that's the people that they get all their revenues from advertising from the banks.

[00:32:54] [SPEAKER_02]: So, uh, you have independent newsletters that have no, I don't have this bias.

[00:33:00] [SPEAKER_02]: And, and meanwhile, those newsletters could, could are working with, let's say reggae platforms or crowdfunding platforms or other things.

[00:33:07] [SPEAKER_02]: And then there's kind of an underground banking system happening.

[00:33:11] [SPEAKER_00]: Yeah.

[00:33:11] [SPEAKER_00]: And, and actually it's much more advanced, uh, outside the U S than in the U S because, uh, unfortunately here are, uh, financial regulators think that it's kind of their job to like preserve the too big to fail institutions.

[00:33:25] [SPEAKER_00]: And they've even been trying to do this to stable coins.

[00:33:28] [SPEAKER_00]: Like the fed has come out and said, like stable coins have to get banking licenses and be regulated by us and blah, blah, blah.

[00:33:35] [SPEAKER_00]: Even though, um, there are state financial regulators like the New York one that have done good work on this topic.

[00:33:43] [SPEAKER_00]: And they started regulating stable coin issuers years ago and are much more sophisticated than the fed on this topic.

[00:33:49] [SPEAKER_00]: But the fed wants everything to be like five too big to fail institutions that the fed then totally controls.

[00:33:58] [SPEAKER_00]: But to your point, so the internet eliminated a lot of information asymmetries, because we all know that was the other thing that made like the sell side super profitable back in the day is that they controlled the flow of information.

[00:34:10] [SPEAKER_00]: And it also, and it also in some ways made access asymmetries go away.

[00:34:16] [SPEAKER_00]: But I think crypto will just blow the access thing completely out of the water.

[00:34:21] [SPEAKER_00]: And we'll live in a world where like anybody could issue a token or even start a decentralized finance protocol that does anything.

[00:34:31] [SPEAKER_00]: And that's going to be highly disruptive.

[00:34:34] [SPEAKER_00]: And while I wish them luck in trying, I am deeply, deeply, deeply skeptical that some of these super entrenched financial institutions like the too big to fail banks will be able to adapt.

[00:35:04] [SPEAKER_02]: Yeah, and let's get into some specific, like, I want to know which cryptos you think are going to be used and used to the multi-billion or trillion dollar level over the next few years.

[00:35:19] [SPEAKER_02]: Like, let's take Ethereum.

[00:35:20] [SPEAKER_02]: People are still arguing Bitcoin, Ethereum, but now they're also arguing Ethereum, Solana.

[00:35:24] [SPEAKER_02]: Like, and just to describe, Bitcoin kind of, whether it is or not, sort of says, hey, we're a currency, we're a store of value, whatever that is, and so on.

[00:35:38] [SPEAKER_02]: But Ethereum is sort of like, we're saying, we're a programming language.

[00:35:42] [SPEAKER_02]: There's going to be, as you've been describing, Oma, there's going to be this whole financial infrastructure that's going to be rebuilt.

[00:35:48] [SPEAKER_02]: The way it's rebuilt is through a, quote unquote, programming language like Ethereum, which also is a cryptocurrency, which is sometimes confusing to people.

[00:35:58] [SPEAKER_02]: But what's your take on this, these, you know, layer ones, layer twos, whatever?

[00:36:05] [SPEAKER_00]: So with the usual caveat that this is not investment advice, I think Bitcoin has clearly established itself as what I consider a form of monetary insurance.

[00:36:16] [SPEAKER_00]: And people focus too much on the fact that it has limited inflation and they make these poor analogies to gold and call it digital gold.

[00:36:26] [SPEAKER_00]: I think Bitcoin is far more sophisticated at that.

[00:36:30] [SPEAKER_00]: Like, Bitcoin is, because of the way the infrastructure works, the kind of money that you want to have at least some of when the other kinds of money are not working.

[00:36:41] [SPEAKER_00]: And not working doesn't just mean, oh, there's high inflation.

[00:36:43] [SPEAKER_00]: It could literally mean that, like, the government or a bank is not letting you access the traditional fiat money.

[00:36:50] [SPEAKER_00]: So I think that's very important.

[00:36:53] [SPEAKER_00]: It's world changing.

[00:36:55] [SPEAKER_00]: Everybody will want a little bit of it.

[00:36:57] [SPEAKER_00]: By everyone, I mean governments, corporations, individuals, investors, whatever.

[00:37:01] [SPEAKER_00]: But then it's not actually that exciting in some ways because there's not much else you can do with it.

[00:37:06] [SPEAKER_00]: Like, insurance is awesome, but it's not exciting.

[00:37:09] [SPEAKER_00]: It's actually a trillion dollar industry in the U.S. that employs, like, a lot of people and is some notable percentage of GDP.

[00:37:18] [SPEAKER_00]: But nobody grows up being like, when I grow up, I want to work in insurance.

[00:37:22] [SPEAKER_00]: Except for Warren Buffett.

[00:37:24] [SPEAKER_00]: Yeah, but that's because he uses the insurance business to have, like, free cash flow to finance his other investments, right?

[00:37:31] [SPEAKER_02]: Well, he does the same thing the banks do.

[00:37:34] [SPEAKER_02]: Like, sure, you had an accident.

[00:37:35] [SPEAKER_02]: We'll send you money tomorrow or maybe the day after tomorrow.

[00:37:40] [SPEAKER_02]: Like, he wants that extra day of interest.

[00:37:42] [SPEAKER_02]: That's his whole business.

[00:37:43] [SPEAKER_02]: It's the float business.

[00:37:44] [SPEAKER_00]: God bless him.

[00:37:46] [SPEAKER_00]: Anyway, so beyond that, I think smart contract platforms like Ethereum and Solana are just a lot more exciting because this is like a blank design space now.

[00:37:55] [SPEAKER_00]: And they have these very unique features, like the fact that they run around the clock.

[00:38:03] [SPEAKER_00]: Almost nothing in the financial system runs around the clock.

[00:38:06] [SPEAKER_00]: They are global.

[00:38:08] [SPEAKER_00]: Almost nothing in the financial system is global.

[00:38:11] [SPEAKER_00]: They're what we call censorship resistant, which means anybody can access them.

[00:38:16] [SPEAKER_00]: The financial industry, as I said earlier, is like the opposite of that.

[00:38:20] [SPEAKER_00]: They are made up term by me, omni asset, which means like you could have a dollar and an ETH and a meme coin.

[00:38:29] [SPEAKER_00]: And the deed to your house and shares of stock in Apple all live on the same infrastructure, which is actually earth shattering because in traditional finance, literally nothing works that way.

[00:38:46] [SPEAKER_00]: Dollars and euros and property deeds and equities and that every single one of these assets has its own infrastructure, its own network that it lives inside of them.

[00:38:58] [SPEAKER_00]: And that's problematic for a lot of reasons.

[00:39:01] [SPEAKER_00]: It's very inefficient.

[00:39:02] [SPEAKER_00]: It's very expensive.

[00:39:04] [SPEAKER_00]: It's very dangerous because what ends up happening is that when you're trying to move from one to the other, you have to go through one of these financial intermediaries.

[00:39:14] [SPEAKER_00]: And then they become too big to fail.

[00:39:16] [SPEAKER_00]: This is actually one of the untold stories of the 2008 financial crisis, why the bailouts were so aggressive, where the powers that be literally felt, you know, like their entire countries that are going to become inaccessible to other countries financially if this particular bank is allowed to fail.

[00:39:35] [SPEAKER_00]: But with an Ethereum or Solana, you could put everything in one place, which is, by the way, how the internet works, right?

[00:39:42] [SPEAKER_00]: Like it's all data is in one network.

[00:39:45] [SPEAKER_02]: This is such a great point because the fact that all of these assets, like you say, shares of McDonald's, the deed to your house, a dollar, a Bitcoin, you know, shares in a piece of art.

[00:40:02] [SPEAKER_02]: But the fact that they could all live on one or an insurance contract, the fact that they could all live on one platform is, I think, the most important concept of it's going to be the story of crypto in the next one to five years.

[00:40:17] [SPEAKER_02]: Because this leads to tokenization, which I think is going to completely take over the entire world.

[00:40:22] [SPEAKER_00]: Agreed. And this is actually a point that I find common cause with, with a lot of people who are financial experts, but say they're not too excited by whatever Bitcoin represents.

[00:40:34] [SPEAKER_00]: When I tell them about the potential of tokenization of every asset on one platform and how you can use smart contracts to create these cryptographic guarantees that like, if I'm buying ETH with a stable coin, the smart contract effectively guarantees that I only, I only send my stable coin if I also get the ETH.

[00:41:02] [SPEAKER_00]: This is like one of the toughest problems in economics, you know, settlement risk, finance nerds, you can look up Herstat risk.

[00:41:10] [SPEAKER_00]: And the fact that we can now do this trivially on a blockchain with even a decentralized finance protocol like a Uniswap is a huge thing.

[00:41:20] [SPEAKER_00]: So I think going back to your original question, other than stable coins, another very exciting thing with regulatory clarity is that the decentralized finance ecosystem,

[00:41:33] [SPEAKER_00]: is really going to be allowed to flourish.

[00:41:35] [SPEAKER_00]: And for those who don't know, there are already some very interesting things going on in DeFi, like Uniswap, which is one of the biggest decentralized exchanges earlier this year, past the point of having done over $2 trillion of volume in its history, which sounds interesting.

[00:41:57] [SPEAKER_00]: But to me, what's even more interesting is that there's something like 100,000 or more than 100,000 different markets in Uniswap trading pairs of what you can buy and sell.

[00:42:07] [SPEAKER_00]: I don't know, it's probably bigger than all of the world's equity exchanges combined, possibly.

[00:42:13] [SPEAKER_00]: Then you have these decentralized lending solutions where some people deposit tokens to earn interest and other people borrow them.

[00:42:22] [SPEAKER_00]: A few of them are already massive.

[00:42:25] [SPEAKER_00]: They have balance sheets in the billions of dollars, and they make revenues in the tens, if not hundreds of millions of dollars.

[00:42:34] [SPEAKER_00]: So I think with regulatory clarity, they're going to grow, and they're going to increasingly include all sorts of other assets, like the tokenized assets that you're referring to.

[00:42:48] [SPEAKER_00]: And that's all happening in the long run.

[00:42:52] [SPEAKER_00]: Right now, there's a gazillion blockchains because everybody wants to get rich.

[00:42:56] [SPEAKER_00]: I think in the long run, there's going to be a lot of consolidation.

[00:43:00] [SPEAKER_00]: I think Ethereum is here to stay.

[00:43:03] [SPEAKER_00]: I think Solana is here to stay.

[00:43:05] [SPEAKER_00]: Then there's an interesting debate to be had about the philosophical differences between how they work, which we can get into if you like.

[00:43:14] [SPEAKER_00]: But then I think every other layer one smart contract blockchain that's being launched right now, it's too late.

[00:43:24] [SPEAKER_02]: Yeah, and there's a lot too, right?

[00:43:26] [SPEAKER_02]: And you see, though, there's some success from things like Polygon and Hedera.

[00:43:32] [SPEAKER_02]: Some are currencies and games.

[00:43:34] [SPEAKER_02]: I don't know for sure.

[00:43:36] [SPEAKER_02]: Wasn't Polygon behind Polymarket and powering that?

[00:43:40] [SPEAKER_00]: Polygon is where Polymarket lives.

[00:43:43] [SPEAKER_00]: Polygon is also what we call an Ethereum sidechain.

[00:43:48] [SPEAKER_00]: It was sort of like an independent blockchain that somewhat tied its security to Ethereum.

[00:43:51] [SPEAKER_00]: But it's now migrating to being an Ethereum layer two.

[00:43:57] [SPEAKER_00]: And this goes back to that philosophical divide that I was pointing to.

[00:44:03] [SPEAKER_00]: Because the one thing everybody in crypto agrees on is that there's not nearly enough capacity right now

[00:44:09] [SPEAKER_00]: for all of the future stablecoins, tokenization, DeFi, NFTs, decision markets, whatever people want to do on-chain.

[00:44:17] [SPEAKER_00]: So then the interesting debate is how do you scale a blockchain?

[00:44:23] [SPEAKER_00]: The Solana approach is we just have to make the one blockchain better and faster all the time.

[00:44:31] [SPEAKER_00]: I don't think that's going to work.

[00:44:33] [SPEAKER_00]: The Ethereum approach is we become more of a tiered system where we have these layer twos and layer threes that derive some or most of their security from Ethereum,

[00:44:45] [SPEAKER_00]: but then can offer far more capacity and transaction fees with trade-offs.

[00:44:50] [SPEAKER_02]: So what do you mean, like around a specific use case?

[00:44:53] [SPEAKER_02]: I think there's a lot of confusion, layer two, layer three, what these things are.

[00:44:57] [SPEAKER_02]: And again, what's the difference between Solana and Ethereum?

[00:45:00] [SPEAKER_00]: So it is very confusing.

[00:45:01] [SPEAKER_00]: And it's also very fragmented, which is a very legitimate critique of this approach to making blockchains cheaper and faster.

[00:45:12] [SPEAKER_00]: So the appeal of something like Solana today is everything is on one blockchain.

[00:45:17] [SPEAKER_00]: You can use one wallet, one token, and then you can have Sol, you can have stablecoins, you can have memecoins in the future.

[00:45:25] [SPEAKER_00]: We'll have tokenized real estate, whatever you want.

[00:45:28] [SPEAKER_00]: One blockchain, one network, one everything.

[00:45:31] [SPEAKER_00]: So on the surface, that's very appealing for its simplicity, both narrative-wise and in terms of the user experience.

[00:45:40] [SPEAKER_00]: I think the problem with it is that there's no way in hell a single blockchain could ever keep up with the demand as more and more activity and assets go on chain.

[00:45:52] [SPEAKER_00]: And what will end up happening is in order to try to accommodate it, you'll have to make so many sacrifices that you just won't be decentralized anymore,

[00:46:01] [SPEAKER_00]: which is kind of like the whole point of all of this.

[00:46:05] [SPEAKER_02]: So you're saying like with Ethereum, there's Ethereum, but then someone wants to make their own blockchain,

[00:46:10] [SPEAKER_02]: make their own kind of software changes to the blockchain.

[00:46:13] [SPEAKER_02]: They can base it on Ethereum and Ethereum will work on them, but they kind of evolve into their own thing.

[00:46:21] [SPEAKER_00]: Yeah, let's use a specific example.

[00:46:23] [SPEAKER_00]: So Coinbase has its own Ethereum layer 2 called Base.

[00:46:28] [SPEAKER_00]: It derives a lot of the security that Ethereum provides, but not all of it.

[00:46:39] [SPEAKER_00]: And it's not as decentralized because Coinbase has say on how it runs.

[00:46:45] [SPEAKER_00]: Technologically, it currently happens to be the same, like it uses the same Ethereum virtual machine and programming language and smart contracts.

[00:46:52] [SPEAKER_00]: It doesn't have to.

[00:46:55] [SPEAKER_00]: So what I think the reason why ultimately I think the layer 2, layer 3 approach, as confusing and fragmenting as it is,

[00:47:04] [SPEAKER_00]: is the only way forward is because two things.

[00:47:09] [SPEAKER_00]: One, if we ask the question like what is the valuable thing that a blockchain provides,

[00:47:15] [SPEAKER_00]: and then we oversimplify and say security.

[00:47:17] [SPEAKER_00]: I want to send money to you.

[00:47:19] [SPEAKER_00]: We want that to be a secure, irreversible, instant transaction.

[00:47:26] [SPEAKER_00]: The problem with the Solana approach is it basically wants to give the same amount of security to everything

[00:47:33] [SPEAKER_00]: because it's all going to be on one network.

[00:47:35] [SPEAKER_00]: So in the future state, a billion dollar payment on Solana and a 10 cent payment on Solana

[00:47:43] [SPEAKER_00]: will get the same exact amount of security.

[00:47:45] [SPEAKER_00]: I think that's very economically inefficient.

[00:47:48] [SPEAKER_00]: It's convenient.

[00:47:50] [SPEAKER_00]: I mean, like it'd be great if we could always send everything to each other through the post office for 50 cents,

[00:47:56] [SPEAKER_00]: regardless of whether it was like a postcard or if I'm, I don't know, mailing you a $10 million painting.

[00:48:03] [SPEAKER_00]: But like in practice, when you've got to send someone a $10 million painting,

[00:48:07] [SPEAKER_00]: you're going to hire an armored car and dudes with guns.

[00:48:10] [SPEAKER_00]: If you're sending them a postcard, 50 cents at the post office.

[00:48:13] [SPEAKER_00]: It's not the most secure or reliable, but who cares?

[00:48:16] [SPEAKER_00]: So on Ethereum, I think in the future we'll have layer twos that specialize in like,

[00:48:21] [SPEAKER_00]: hey, you can use us to do the 10 cent thing.

[00:48:24] [SPEAKER_00]: It's not as secure, but who cares?

[00:48:26] [SPEAKER_00]: It's a 10 cent thing.

[00:48:27] [SPEAKER_00]: It's fast and cheap and reliable.

[00:48:29] [SPEAKER_00]: You can use the layer one to do the billion dollar thing.

[00:48:34] [SPEAKER_00]: And so I think from a security decentralization perspective, that's just more efficient.

[00:48:41] [SPEAKER_02]: And so if you're using like, let's say the base blockchain, which again is sort of literally based on Ethereum,

[00:48:49] [SPEAKER_02]: does Ethereum benefit?

[00:48:51] [SPEAKER_02]: Like does one have to, every time you're buying like the arrow token, which works on top of base,

[00:48:55] [SPEAKER_02]: are you, is Ethereum baked into that?

[00:48:58] [SPEAKER_00]: Yes.

[00:48:59] [SPEAKER_00]: This is the part of the point of contention though, which is that Ethereum will never benefit as much

[00:49:06] [SPEAKER_00]: if something happens on a base as if it happened on the layer one.

[00:49:10] [SPEAKER_00]: Of course, I don't know about this arrow token, but most of the activity that's happening on base

[00:49:14] [SPEAKER_00]: couldn't happen on the layer one anyway, because it's too slow and fees are too high.

[00:49:19] [SPEAKER_00]: But as Coinbase runs this layer two, there's literally a smart contract on Ethereum that enables it.

[00:49:30] [SPEAKER_00]: And if people want to send, like if I have ETH and I want to send it to base, I'm going to bridge it

[00:49:35] [SPEAKER_00]: through the layer one.

[00:49:36] [SPEAKER_00]: But then Coinbase has to both write these, I'm oversimplifying it, but they have to write

[00:49:42] [SPEAKER_00]: cryptographic proofs.

[00:49:43] [SPEAKER_00]: Like what's basically happening is in any given second, a bunch of transactions happen on base.

[00:49:50] [SPEAKER_00]: And then every 12 seconds, Coinbase condenses them, summarizes them, and like writes proofs

[00:49:57] [SPEAKER_00]: that all this happened on the layer one.

[00:50:00] [SPEAKER_00]: This is what links them together.

[00:50:02] [SPEAKER_00]: So, and Coinbase has to pay for that.

[00:50:04] [SPEAKER_00]: Every layer two.

[00:50:05] [SPEAKER_02]: So they send the transaction ultimately to the Ethereum blockchain?

[00:50:08] [SPEAKER_00]: They sent sort of like a summary and a proof of it.

[00:50:10] Okay.

[00:50:12] [SPEAKER_02]: So it stays, so some record of it is on the Ethereum blockchain.

[00:50:15] [SPEAKER_00]: Yes.

[00:50:17] [SPEAKER_00]: And importantly, one of the biggest roles that the Ethereum blockchain provides, once these

[00:50:24] [SPEAKER_00]: layer twos are a bit more mature, will be that if at any point you're unhappy with what's

[00:50:28] [SPEAKER_00]: happening on the layer two, maybe it's down.

[00:50:32] [SPEAKER_00]: Maybe whoever's updating it decides to do something bad.

[00:50:37] [SPEAKER_00]: Maybe you're being cheated, whatever.

[00:50:39] [SPEAKER_00]: You can always leave and go to the layer one.

[00:50:41] [SPEAKER_00]: So the layer one serves as a very important escape hatch, which you hope to never use,

[00:50:46] [SPEAKER_00]: but it's going to keep all of these different layer two operators honest.

[00:50:51] [SPEAKER_00]: And that's the direction that things are headed in.

[00:50:55] [SPEAKER_02]: Ironically.

[00:50:56] [SPEAKER_02]: So like Polymarket, the betting market built on top of Polygon, but ultimately Ethereum is

[00:51:03] [SPEAKER_02]: underneath Polygon, right?

[00:51:05] [SPEAKER_00]: Let's say eventually it will be.

[00:51:08] [SPEAKER_00]: I don't want to bother the listeners with the nuances of what's happening, but eventually

[00:51:11] [SPEAKER_00]: it's like you're going to use Polymarket on a Polygon layer two.

[00:51:16] [SPEAKER_00]: And what gives you confidence that the Polygon layer two is going to do right by you are the

[00:51:25] [SPEAKER_00]: ways that it tethers itself to Ethereum.

[00:51:27] [SPEAKER_00]: I see.

[00:51:28] [SPEAKER_00]: That's very interesting.

[00:51:29] [SPEAKER_02]: And so, so again, so you see Bitcoin sticking around, obviously you see Ethereum sticking around.

[00:51:37] [SPEAKER_02]: Well, what do you see exciting among the smaller tokens out there?

[00:51:42] [SPEAKER_00]: Well, what's the market right now is excited about meme coins and because it's excited about

[00:51:47] [SPEAKER_00]: meme coins, it's very excited about Solana because many, most of the high flying ones are

[00:51:53] [SPEAKER_00]: on Solana and Solana's economics currently are through the roof in terms of fee generation

[00:51:58] [SPEAKER_00]: and whatnot.

[00:52:01] [SPEAKER_00]: The beyond that and stable coins, I think there are many different crypto projects whose

[00:52:13] [SPEAKER_00]: token could be returning more value to the token holder.

[00:52:17] [SPEAKER_00]: So Uniswap is a perfect example.

[00:52:19] [SPEAKER_00]: And full disclosure, I own some of its uni.

[00:52:21] [SPEAKER_00]: Uniswap has a governance token where you can vote on important updates and developments on

[00:52:28] [SPEAKER_00]: how the protocol, the exchange is run.

[00:52:31] [SPEAKER_00]: And in the smart contract for Uniswap is a switch where the people who hold that token

[00:52:38] [SPEAKER_00]: could vote to earn a little bit of the economics of it.

[00:52:42] [SPEAKER_00]: So usually in Uniswap, you have traders paying fees to liquidity providers, but they're like

[00:52:49] [SPEAKER_00]: the market makers.

[00:52:51] [SPEAKER_00]: But there's a switch that says, hey, a little bit of that will go to these people who are

[00:52:55] [SPEAKER_00]: helping run the thing because we have to compensate them for making good decisions.

[00:52:59] [SPEAKER_00]: That switch has not been turned down for fear of what would happen if it was under a Gensler

[00:53:06] [SPEAKER_00]: SEC.

[00:53:08] [SPEAKER_00]: In fact, Uniswap is being investigated anyway, which is ironic.

[00:53:12] [SPEAKER_00]: So there are many projects like that where in a situation where in America we have more

[00:53:18] [SPEAKER_00]: regulatory clarity and you don't think the government's going to raid the founder's home

[00:53:24] [SPEAKER_00]: at six in the morning like they just did with the founder of Polymarket actually,

[00:53:28] [SPEAKER_00]: just for like the community voting to hit a fee switch.

[00:53:34] [SPEAKER_00]: So if that happens, I think...

[00:53:37] [SPEAKER_02]: Did he get in trouble or anything, by the way?

[00:53:38] [SPEAKER_02]: The Polymarket guy, like was there any reason why they investigated him?

[00:53:42] [SPEAKER_00]: We don't know.

[00:53:44] [SPEAKER_00]: The speculation is that Polymarket made a settlement with federal regulators a couple of years ago

[00:53:51] [SPEAKER_00]: that they would block U.S.-based users.

[00:53:57] [SPEAKER_00]: This is the great irony of like how terrible the regulatory situation in America has been

[00:54:02] [SPEAKER_00]: where like the biggest impact of it is that there are really cool things that Americans can't use,

[00:54:09] [SPEAKER_00]: even if they're founded by Americans.

[00:54:12] [SPEAKER_00]: And then also, as I was saying with like the fee switch, it's like, oh, and someone's going to make

[00:54:16] [SPEAKER_00]: a lot of money from this.

[00:54:17] [SPEAKER_00]: But the U.S. government just made sure that Americans can't.

[00:54:21] [SPEAKER_00]: Tether is the perfect example of this, by the way.

[00:54:23] [SPEAKER_00]: Quick segue.

[00:54:25] [SPEAKER_00]: The U.S. government...

[00:54:26] [SPEAKER_00]: There was a competitor to Tether that was issued by a New York-based company,

[00:54:31] [SPEAKER_00]: regulated by the New York regulator, that was taking significant market share from Tether.

[00:54:36] [SPEAKER_00]: And that meant that the income from that stablecoin was in America.

[00:54:40] [SPEAKER_00]: It was going to American employees, American shareholders, paying American taxes.

[00:54:45] [SPEAKER_00]: And then the U.S. government decided to kill it.

[00:54:47] [SPEAKER_00]: So all of that market share went to Tether.

[00:54:50] [SPEAKER_00]: So it's like, oh, even though all of the income for stablecoins come from the U.S. government

[00:54:56] [SPEAKER_00]: in the form of treasuries, we just made sure none of it goes to Americans.

[00:54:59] [SPEAKER_00]: We'd rather foreigners get it who don't pay American taxes.

[00:55:02] [SPEAKER_00]: Anyway, rant over.

[00:55:04] [SPEAKER_00]: With Polymarket, the speculation is that they did not do enough to ban Americans from using it,

[00:55:14] [SPEAKER_00]: which is hard to do in crypto because we don't have what we call KYC.

[00:55:18] [SPEAKER_00]: It's not like a bank where you give them your name and address.

[00:55:20] [SPEAKER_00]: It's all based on wallets.

[00:55:22] [SPEAKER_00]: People use VPNs, blah, blah, blah.

[00:55:25] [SPEAKER_00]: I will just note that a couple of weeks before the Polymarket founders' home was raided by the FBI at 6 a.m.,

[00:55:35] [SPEAKER_00]: the U.S. government settled with TD Bank for allowing endless billions of money laundering for many years.

[00:55:44] [SPEAKER_00]: And yet not a single bank executive's home was raided.

[00:55:48] [SPEAKER_00]: Of course not.

[00:55:48] [SPEAKER_00]: So make sure that you will.

[00:55:49] [SPEAKER_00]: Of course not.

[00:55:50] [SPEAKER_00]: Yeah.

[00:56:07] [SPEAKER_02]: You know, I'm always curious about like you have all these blockchains out there,

[00:56:12] [SPEAKER_02]: and then there are kind of like these tokens that are almost like picks and shovels.

[00:56:17] [SPEAKER_02]: They facilitate extra activity among the blockchain.

[00:56:20] [SPEAKER_02]: So like, for instance, take Chainlink, which takes, you know, outside blockchain information

[00:56:28] [SPEAKER_02]: and brings it into the blockchain in ways that are, I guess, confirmed or verified.

[00:56:32] [SPEAKER_02]: So this is useful for unlocking insurance contracts, for instance, and other things.

[00:56:37] [SPEAKER_02]: What is, are these just good ideas or are they things that are going to actually be used

[00:56:43] [SPEAKER_02]: and make money and be a part of the financial infrastructure?

[00:56:48] [SPEAKER_00]: All of it.

[00:56:49] [SPEAKER_00]: It's just the hard part now, James, is this being brand new primitives and new ways of doing finance.

[00:56:57] [SPEAKER_00]: We don't know what's going to work ahead of time.

[00:57:01] [SPEAKER_00]: So it's always very tempting.

[00:57:03] [SPEAKER_00]: There have been so many crypto projects that have completely crashed and burned.

[00:57:09] [SPEAKER_00]: Right.

[00:57:09] [SPEAKER_00]: And good ideas.

[00:57:11] [SPEAKER_00]: Yeah.

[00:57:11] [SPEAKER_00]: I mean, even the interesting thing about Polymarket is that there were multiple attempts in the

[00:57:17] [SPEAKER_00]: last five years to do blockchain based decision markets.

[00:57:20] [SPEAKER_00]: And a few of them raised a lot of money and they just never worked.

[00:57:25] [SPEAKER_00]: But it would have been a mistake at that time to turn around and be like, oh, well, decision

[00:57:29] [SPEAKER_00]: markets using blockchain are a bad idea.

[00:57:32] [SPEAKER_00]: It's just you have to go through that process of exploration and experimentation to see what

[00:57:38] [SPEAKER_00]: works and what doesn't.

[00:57:40] [SPEAKER_00]: Unfortunately, in recent years, that process has been thwarted by the regulatory situation.

[00:57:45] [SPEAKER_00]: But now that we can look forward to that being resolved.

[00:57:50] [SPEAKER_00]: And actually, by the way, a lot of people like me want regulation.

[00:57:53] [SPEAKER_00]: We want good regulation that prevents scams and fraud.

[00:57:58] [SPEAKER_00]: Right.

[00:57:58] [SPEAKER_00]: Of course.

[00:57:59] [SPEAKER_00]: So when that happens, I think.

[00:58:03] [SPEAKER_00]: One, there's going to be a lot more experimentation of new and different things.

[00:58:08] [SPEAKER_00]: And then we'll see.

[00:58:11] [SPEAKER_00]: I have been chronically wrong in my many years in crypto about how long things will take to

[00:58:21] [SPEAKER_00]: actually reach a point of mainstream adoption.

[00:58:25] [SPEAKER_00]: So even with stable coins, whose volumes are significant.

[00:58:30] [SPEAKER_00]: If you asked me five years ago, I would have told you that they would have been a lot more

[00:58:34] [SPEAKER_00]: impactful for day-to-day payments than they are.

[00:58:38] [SPEAKER_00]: So I'm trying to refrain from saying that like, oh, by next year or two years from now, this or that

[00:58:43] [SPEAKER_00]: will happen.

[00:58:44] [SPEAKER_00]: But I am hopeful that we're going to see more and more breakout successes.

[00:58:51] [SPEAKER_02]: And how do you see tokenization playing out?

[00:58:54] [SPEAKER_02]: What do you think are going to be kind of the killer apps that make tokenization a thing?

[00:59:00] [SPEAKER_00]: So what's funny about tokenization is I think back to when you and I were working together.

[00:59:04] [SPEAKER_00]: And you remember back then, like electronification was a controversial thing.

[00:59:11] [SPEAKER_00]: Like you'd get into debates with people where the markets are going to be all electronic or not.

[00:59:15] [SPEAKER_00]: Right.

[00:59:16] [SPEAKER_00]: Right.

[00:59:17] [SPEAKER_00]: And now like everything's electronic and we don't call that electronic markets anymore.

[00:59:21] [SPEAKER_00]: We just call them markets.

[00:59:22] [SPEAKER_03]: Right.

[00:59:23] [SPEAKER_00]: So when people ask me like, what do you think is the future of asset tokenization?

[00:59:26] [SPEAKER_00]: I say, well, I think in the future all assets will be tokenized, at which point we'll just

[00:59:30] [SPEAKER_00]: call them assets.

[00:59:31] [SPEAKER_00]: Right.

[00:59:32] [SPEAKER_00]: It's just they now use new infrastructure.

[00:59:35] [SPEAKER_00]: There will be new assets that didn't exist before.

[00:59:38] [SPEAKER_00]: Like obviously Bitcoin and ETH and solar are that.

[00:59:41] [SPEAKER_02]: Well, what do you think of like things like, will tokenization create new markets?

[00:59:45] [SPEAKER_02]: So for instance, I can take 10% of my house, turn them into tokens and start selling them

[00:59:51] [SPEAKER_02]: on DeFi exchanges.

[00:59:52] [SPEAKER_02]: And there could be a whole business of, you know, home real estate exchange.

[00:59:57] [SPEAKER_00]: Ah, well, going back to the evolution of my thinking.

[01:00:01] [SPEAKER_00]: Five years ago, I would have told you that's a great idea and likely to happen sooner.

[01:00:07] [SPEAKER_00]: Now I think it might be a bad idea.

[01:00:10] [SPEAKER_00]: But even if it's a good idea, it'll be like one of the last things to happen.

[01:00:13] [SPEAKER_00]: Because the classic mistake I made was to look at like how the world is today and to just

[01:00:23] [SPEAKER_00]: project them forward.

[01:00:25] [SPEAKER_00]: So a common thing a lot of people with tokenization would talk about is like, oh, there are a lot

[01:00:29] [SPEAKER_00]: of illiquid assets.

[01:00:31] [SPEAKER_00]: If we tokenize them, they'll be liquid.

[01:00:34] [SPEAKER_00]: Real estate, private equity, LPs, so forth and so on.

[01:00:40] [SPEAKER_00]: Lots of people have tried that.

[01:00:42] [SPEAKER_00]: None of it has really gained adoption.

[01:00:44] [SPEAKER_00]: Could be because it's too early.

[01:00:46] [SPEAKER_00]: But maybe there's a reason why these things are illiquid.

[01:00:49] [SPEAKER_00]: Like maybe you don't want there to be a market where the value of your house is fluctuating

[01:00:56] [SPEAKER_00]: on a daily basis.

[01:00:57] [SPEAKER_02]: I see.

[01:00:58] [SPEAKER_02]: But meanwhile, like the things that are already popular asset classes, those are the most

[01:01:04] [SPEAKER_02]: likely candidates for tokenization.

[01:01:06] [SPEAKER_02]: Like for instance, Larry Finkett, BlackRock has tokenized $10 billion worth of treasury

[01:01:10] [SPEAKER_02]: bills this year.

[01:01:10] [SPEAKER_02]: Boom.

[01:01:11] [SPEAKER_00]: Exactly.

[01:01:12] [SPEAKER_00]: And this is the epiphany I had like in the last year was, ironically, if you said where

[01:01:18] [SPEAKER_00]: has tokenization taken off, it was with stable coins.

[01:01:22] [SPEAKER_00]: And it's ironic because the dollar is like the most liquid thing on the planet.

[01:01:26] [SPEAKER_00]: The dollar does not have a liquidity problem.

[01:01:28] [SPEAKER_00]: But stable coins gain traction because they extended access to this very liquid thing.

[01:01:35] [SPEAKER_00]: And same thing now we're seeing with BlackRock's doing, Franklin Templeton, these different

[01:01:40] [SPEAKER_00]: like tokenized treasury funds.

[01:01:41] [SPEAKER_00]: It's like the US treasury bond is one of the most liquid things on earth.

[01:01:45] [SPEAKER_00]: But it's just that like not everyone has access to them for a hundred bucks.

[01:01:49] [SPEAKER_00]: Right.

[01:01:51] [SPEAKER_02]: That's the whole thing.

[01:01:52] [SPEAKER_02]: Like I don't even know how to buy a treasury bill really.

[01:01:54] [SPEAKER_02]: Like, but it seems like tokenization.

[01:01:57] [SPEAKER_02]: Oh, I could buy, you know, these things that yield, you know, 5% and they act like treasury

[01:02:03] [SPEAKER_02]: bills.

[01:02:04] [SPEAKER_02]: And I don't have to call some weird broker to get them and pay some enormous, you know,

[01:02:10] [SPEAKER_02]: enormous fee.

[01:02:11] [SPEAKER_02]: This is great.

[01:02:13] [SPEAKER_00]: Yeah.

[01:02:13] [SPEAKER_00]: So I think we're going to see more of that.

[01:02:14] [SPEAKER_00]: I'm actually curious to see what, you know, there's already over a billion dollars in tokenized

[01:02:18] [SPEAKER_00]: gold.

[01:02:19] [SPEAKER_00]: Um, so why would I buy tokenized gold when I can buy like a gold ETF?

[01:02:24] [SPEAKER_00]: Because you're somebody who can buy the gold ETF.

[01:02:28] [SPEAKER_00]: Like, like who?

[01:02:29] [SPEAKER_00]: Like most people on the planet.

[01:02:30] [SPEAKER_00]: Yeah.

[01:02:31] [SPEAKER_00]: All right.

[01:02:31] [SPEAKER_00]: Good point.

[01:02:32] [SPEAKER_00]: This is to get back to what you and I take for granted.

[01:02:34] [SPEAKER_00]: Yes.

[01:02:34] [SPEAKER_00]: I actually owned a gold ETF in my brokerage account, but the average person does not have

[01:02:40] [SPEAKER_00]: access to a US brokerage account that they can own a gold ETF.

[01:02:44] [SPEAKER_00]: And not only that, you can trade it 24 seven, 24 hours a day, seven days a week.

[01:02:48] [SPEAKER_00]: You can trade it 24 seven.

[01:02:50] [SPEAKER_00]: And as these decentralized finance solutions grow, you can integrate it in a way that like,

[01:02:58] [SPEAKER_00]: what if today you want to, you know, gold has been very strong lately, made an all time

[01:03:04] [SPEAKER_00]: high now that long ago.

[01:03:05] [SPEAKER_00]: You want to keep your gold, but you want to borrow some dollars against it.

[01:03:09] [SPEAKER_00]: Uh, and then you want to use the results to invest in ETH.

[01:03:13] [SPEAKER_00]: I don't know if you can do it right now, but soon enough, you'll literally be able to

[01:03:16] [SPEAKER_00]: do that with one click in a DeFi protocol where like, I can't even, I don't even know

[01:03:20] [SPEAKER_00]: what the process would be in traditional finance.

[01:03:23] [SPEAKER_00]: And of course I'm not the target market for this.

[01:03:27] [SPEAKER_00]: Neither are you.

[01:03:28] [SPEAKER_00]: It's really like there are hedge funds that do things like I own a lot of gold.

[01:03:31] [SPEAKER_00]: I want to lever up and diversify by investing in a cryptocurrency.

[01:03:37] [SPEAKER_00]: The ability to do this all in one infrastructure and pool liquidity, um, is going to be huge,

[01:03:44] [SPEAKER_00]: particularly again, I hate to be a broken record today.

[01:03:49] [SPEAKER_00]: Even if that was an option on a blockchain, you would not have 99% of hedge funds want

[01:03:54] [SPEAKER_00]: to do it because of the regulatory uncertainty.

[01:03:57] [SPEAKER_00]: If you have regulatory clarity, um, then they're like, oh, okay, I can do this.

[01:04:02] [SPEAKER_00]: And then they will also have more and more of the kinds of service providers.

[01:04:06] [SPEAKER_00]: I'm talking about like custodians and research firms and even brokers who they prefer to work

[01:04:12] [SPEAKER_00]: with, um, who are going to help them do that.

[01:04:16] [SPEAKER_02]: Yeah.

[01:04:17] [SPEAKER_02]: It's interesting.

[01:04:18] [SPEAKER_02]: So, so just really short term now.

[01:04:21] [SPEAKER_02]: Okay.

[01:04:22] [SPEAKER_02]: We know Trump's getting inaugurated, presumably January 20th.

[01:04:26] [SPEAKER_02]: Gensler's leaving.

[01:04:26] [SPEAKER_02]: We don't know when, but some point soon.

[01:04:30] [SPEAKER_02]: And there is going to be a little bit more freedom and sense of exuberance among people

[01:04:35] [SPEAKER_02]: working on crypto projects and companies.

[01:04:37] [SPEAKER_02]: What are some very short term, like where do you see Bitcoin going?

[01:04:40] [SPEAKER_02]: Where do you see Ethereum?

[01:04:41] [SPEAKER_02]: Are there any other tokens that really fascinate you?

[01:04:44] [SPEAKER_02]: What are some short term things you see happening?

[01:04:47] [SPEAKER_00]: I'm not good at this.

[01:04:49] [SPEAKER_00]: Um, so I can tell you what I personally own now is that, um, I, there's some coins that

[01:04:55] [SPEAKER_00]: I like that have not rallied as much as Bitcoin has, for example, and ETH is one of them.

[01:05:01] [SPEAKER_00]: Um, so in, in recent months I've actually been selling some of my Bitcoin as it's gone higher

[01:05:06] [SPEAKER_00]: to buy more ETH.

[01:05:08] [SPEAKER_00]: Um, yeah, ironically, I, as much as I criticize him, I, when it comes to my crypto investments,

[01:05:15] [SPEAKER_00]: I take almost like a Warren Buffett type of approach, which is that I look for margin of safety.

[01:05:21] [SPEAKER_00]: Is that what he calls it?

[01:05:22] [SPEAKER_00]: Yeah.

[01:05:22] [SPEAKER_00]: You literally wrote the book on this.

[01:05:23] [SPEAKER_00]: Yeah.

[01:05:24] [SPEAKER_00]: Um, so I want things that have product market fit traction and positive economics.

[01:05:29] [SPEAKER_00]: And ETH actually has like positive real yields because you could stake it and has very low inflation.

[01:05:34] [SPEAKER_00]: Um, and then I also, what is that?

[01:05:37] [SPEAKER_00]: His other line, which is be greedy when other people are fearful and fearful when other people agree.

[01:05:42] [SPEAKER_00]: Like I would be fearful right now if I held meme coins or even Bitcoin and soul,

[01:05:48] [SPEAKER_00]: cause they've had a big run, but I want to be greedy.

[01:05:51] [SPEAKER_00]: There's some things that people just hate and don't want to own even within crypto.

[01:05:56] [SPEAKER_02]: Um, so you always have to make sure it's useful.

[01:06:00] [SPEAKER_02]: So like, uh, let's say McDonald's stock crashes for whatever reason,

[01:06:04] [SPEAKER_02]: cause the market's crashing.

[01:06:06] [SPEAKER_02]: So McDonald's crashes, but we know the same number of people are going to eat at McDonald's

[01:06:09] [SPEAKER_02]: tomorrow as today.

[01:06:11] [SPEAKER_02]: So that's where you could be greedy when everyone else is fearful.

[01:06:14] [SPEAKER_02]: But like, for instance, if some, like, let's say I'm just going to pick a random coin, like

[01:06:19] [SPEAKER_02]: the graph GRT.

[01:06:21] [SPEAKER_02]: If that tanks, it could be because maybe no one's using it.

[01:06:24] [SPEAKER_00]: Yeah.

[01:06:25] [SPEAKER_00]: Um, and the other piece of advice I would give is it's very tempting with crypto when it's

[01:06:32] [SPEAKER_00]: like, oh, every week there's some new coin that goes up 2X, 5X, 10X to fall into this

[01:06:36] [SPEAKER_00]: trap of trying to chase the next hot thing.

[01:06:39] [SPEAKER_00]: And I've fallen into that trap at some points over the years myself.

[01:06:42] [SPEAKER_00]: Yeah.

[01:06:43] [SPEAKER_00]: Um, don't unless you're actually a professional trader.

[01:06:48] [SPEAKER_00]: If you're a professional trader, day trader, hedge fund manager, whatever, then that's your

[01:06:52] [SPEAKER_00]: job.

[01:06:52] [SPEAKER_00]: God bless.

[01:06:53] [SPEAKER_00]: Good luck to you.

[01:06:53] [SPEAKER_00]: You don't care what I say.

[01:06:54] [SPEAKER_00]: But if you're just an individual trying to invest, that is a very dangerous game to play.

[01:07:01] [SPEAKER_00]: And I've known many people, some of them my friends, who were amazingly good at it until

[01:07:08] [SPEAKER_00]: the day they lost it all.

[01:07:10] [SPEAKER_02]: Yeah.

[01:07:10] [SPEAKER_02]: Yeah.

[01:07:11] [SPEAKER_02]: We both know it a lot.

[01:07:12] [SPEAKER_02]: That was the, we used to see that every day in our business.

[01:07:16] [SPEAKER_00]: Yeah.

[01:07:16] [SPEAKER_00]: But in crypto, it's just, it's uniquely destructive because you could literally like, it's not

[01:07:22] [SPEAKER_00]: just that you could buy a meme coin today that's worth 10 times as much a month from now.

[01:07:26] [SPEAKER_00]: It's that, you know, three people who did that already.

[01:07:29] [SPEAKER_00]: And now you have FOMO and you're like, I want to be rich like they are.

[01:07:32] [SPEAKER_00]: And they're telling you what the next hot thing is.

[01:07:35] [SPEAKER_02]: No, I, I, I agree.

[01:07:37] [SPEAKER_02]: The, the, I think one thing I do as due diligence is let's say someone tells me, oh, this is XYZ

[01:07:43] [SPEAKER_02]: as a coin that is a blockchain.

[01:07:46] [SPEAKER_02]: That's going to help major companies track logistics and supply chain and so on.

[01:07:50] [SPEAKER_02]: I have to actually see that it's actually being used by real people and real companies.

[01:07:56] [SPEAKER_02]: And there are good developers and there's, there's a reason why big companies are using

[01:08:01] [SPEAKER_02]: it and, and, and so on.

[01:08:03] [SPEAKER_02]: And it's still, it's difficult to understand the economics of like, why should one should

[01:08:07] [SPEAKER_02]: buy the token?

[01:08:08] [SPEAKER_02]: But you know, that's like a starting point.

[01:08:11] [SPEAKER_00]: Yeah.

[01:08:12] [SPEAKER_00]: And, and, and I will, as a final word, like we are on the frontier here and there are a

[01:08:17] [SPEAKER_00]: lot of unknowns.

[01:08:18] [SPEAKER_00]: So one of the reasons why Solana has been, the sole token has performed better than ETH

[01:08:25] [SPEAKER_00]: is because a lot of people are increasingly confident that Solana's approach to scaling is better.

[01:08:31] [SPEAKER_00]: Um, I disagree, but I could be wrong.

[01:08:34] [SPEAKER_02]: What about Ethereum's upgrades that they have planned though?

[01:08:36] [SPEAKER_02]: Won't that solve a lot of the scalability and, and, you know, all of these issues that

[01:08:40] [SPEAKER_02]: Solana supposedly solves?

[01:08:43] [SPEAKER_00]: Yeah.

[01:08:44] [SPEAKER_00]: Upgrades on Ethereum.

[01:08:45] [SPEAKER_00]: And then as, as the rollups get more sophisticated and people build better kinds of interoperability,

[01:08:51] [SPEAKER_00]: I also think, I think the other thing that will be very transformative for Ethereum is

[01:08:55] [SPEAKER_00]: that, so the, the, the other flaw with the single chain approach is you go in on a single

[01:09:02] [SPEAKER_00]: idea and a single tech stack.

[01:09:04] [SPEAKER_00]: Like this is our programming language.

[01:09:06] [SPEAKER_00]: Here's how we're going to do things.

[01:09:07] [SPEAKER_00]: The nice thing about rollups is anybody can do anything.

[01:09:09] [SPEAKER_00]: So there's going to be like a lot of crazy rollups that are very, very different from

[01:09:14] [SPEAKER_00]: Ethereum itself.

[01:09:14] [SPEAKER_00]: Uh, I also think I have a hunch, um, that you're going to, in the next year, you're

[01:09:22] [SPEAKER_00]: going to see a lot of established companies and brands and businesses launch their own

[01:09:28] [SPEAKER_00]: rollups and L2s.

[01:09:29] [SPEAKER_00]: You know, obviously every crypto company is going to do it because Coinbase is making a

[01:09:33] [SPEAKER_00]: killing off of base.

[01:09:34] [SPEAKER_00]: But I think you're going to see tech firms and fintechs and consumer apps.

[01:09:39] [SPEAKER_00]: And I, I have no insider knowledge on any of this, but like I could see a future where

[01:09:44] [SPEAKER_00]: Facebook decides to launch an L2 for WhatsApp and maybe integrates a stable coin into it.

[01:09:50] [SPEAKER_00]: So it'll be like Libra 2.0.

[01:09:52] [SPEAKER_00]: Um, I could see a future where Disney decides to do its own L2.

[01:09:57] [SPEAKER_00]: And what would they do with such an L2?

[01:10:00] [SPEAKER_00]: Talk to them, uh, for WhatsApp.

[01:10:02] [SPEAKER_00]: Uh, you know, the original dream of Libra was to re, uh, replicate how things work in

[01:10:09] [SPEAKER_00]: Asia where you have these super apps that began as chat apps, but turn into finance apps

[01:10:14] [SPEAKER_00]: for payments, for investing and everything.

[01:10:17] [SPEAKER_00]: Well, one way to do that is to launch an L2.

[01:10:19] [SPEAKER_00]: And then you like partner with a stable coin issuer.

[01:10:22] [SPEAKER_00]: And now like everybody who uses WhatsApp could one click, create a wallet, get dollars, send

[01:10:28] [SPEAKER_00]: dollars to anybody else.

[01:10:29] [SPEAKER_00]: They do this, they chat with, uh, but then you can go to merchants and be like, Hey, you

[01:10:34] [SPEAKER_00]: can issue tokenized rewards on the WhatsApp L2.

[01:10:39] [SPEAKER_00]: And, and the key thing here, um, is I think for crypto to go mainstream for consumer applications,

[01:10:47] [SPEAKER_00]: most of the crypto stuff has to be abstracted away.

[01:10:49] [SPEAKER_00]: Yes.

[01:10:50] [SPEAKER_00]: I agree.

[01:10:50] [SPEAKER_00]: So all these, the key phrases, seed phrases, paying gas fees per transactions.

[01:10:57] [SPEAKER_00]: Facebook has the wherewithal to say, you know what?

[01:10:59] [SPEAKER_00]: Use WhatsApp.

[01:11:00] [SPEAKER_00]: There's an L2 on the backend.

[01:11:02] [SPEAKER_00]: You will pay no fees.

[01:11:03] [SPEAKER_00]: You don't have to back up your private key.

[01:11:06] [SPEAKER_00]: We'll take care of that for you.

[01:11:08] [SPEAKER_00]: So the consumer experience will actually be a lot more like a web two experience, but you

[01:11:13] [SPEAKER_00]: get to do all these cool web three type of things.

[01:11:16] [SPEAKER_02]: I mean, don't you think Elon Musk is planning to do this with X?

[01:11:18] [SPEAKER_02]: Like he's already hinted that he wants to do this.

[01:11:21] [SPEAKER_00]: Yeah.

[01:11:21] [SPEAKER_00]: I mean, he might, I don't know.

[01:11:23] [SPEAKER_00]: He might decide to do his own blockchain.

[01:11:26] [SPEAKER_00]: Who knows?

[01:11:26] [SPEAKER_00]: But I think the, the simplest thing going forward will be, Hey, you don't literally roll up

[01:11:31] [SPEAKER_00]: as a service companies or layer two as a service companies on your thing where you push a button

[01:11:35] [SPEAKER_00]: and you get your own layer two, and then you can go on down and menu.

[01:11:39] [SPEAKER_00]: I want it to be like this.

[01:11:41] [SPEAKER_00]: I want the virtual machine to be like this.

[01:11:43] [SPEAKER_00]: The programming language to be that the fees to be yada, yada, yada.

[01:11:47] [SPEAKER_00]: So I think the ease of doing that and the fact that you could tell your users, look,

[01:11:52] [SPEAKER_00]: we're inheriting Ethereum security.

[01:11:54] [SPEAKER_00]: This isn't just a blockchain that me as X or Facebook or Disney gets to decide everything.

[01:12:04] [SPEAKER_00]: It is tethered to this global decentralized network in ways that's going to force me to

[01:12:08] [SPEAKER_00]: be honest and could have certain kinds of interoperability with the Disney one or the

[01:12:14] [SPEAKER_00]: BlackRock one or the Coinbase one.

[01:12:17] [SPEAKER_00]: I think the value prop of that is going to be very irresistible.

[01:12:21] [SPEAKER_00]: And if I'm right, there's this thing people say in crypto is like, well, how do we onboard

[01:12:26] [SPEAKER_00]: the next billion users?

[01:12:28] [SPEAKER_00]: If I'm right, Facebook will onboard the next billion users.

[01:12:33] [SPEAKER_02]: Yeah, I think that's very interesting.

[01:12:34] [SPEAKER_02]: I think this is going to be true.

[01:12:35] [SPEAKER_02]: And then what coins will benefit from that or they just completely create their own coins

[01:12:39] [SPEAKER_02]: just using blockchain technology?

[01:12:41] [SPEAKER_00]: Or not.

[01:12:42] [SPEAKER_00]: Base doesn't have a coin.

[01:12:44] [SPEAKER_00]: Coinbase just literally Coinbase charges some minimal fees for people who use base and then

[01:12:51] [SPEAKER_00]: pays something to post on Ethereum.

[01:12:54] [SPEAKER_00]: And the difference at this moment in time is very profitable.

[01:12:58] [SPEAKER_00]: So it's possible some of these will never have a coin.

[01:13:01] [SPEAKER_00]: The main reason people want a coin is to get rich.

[01:13:04] [SPEAKER_00]: Sadly, there are very legitimate reasons like Bitcoin, Ethereum, Solana, DeFi projects cannot

[01:13:09] [SPEAKER_00]: exist without a coin.

[01:13:11] [SPEAKER_00]: But you could have a roll up that doesn't have a coin on day one for sure.

[01:13:14] [SPEAKER_00]: But think about this.

[01:13:16] [SPEAKER_00]: Here's my pitch.

[01:13:17] [SPEAKER_00]: If there's anybody from Facebook meta listening, here's what you should do.

[01:13:21] [SPEAKER_00]: First, you launch an L2 that you run.

[01:13:25] [SPEAKER_00]: Then you go and post...

[01:13:27] [SPEAKER_02]: Like a base or like your own blockchain.

[01:13:29] [SPEAKER_00]: Yeah, yeah.

[01:13:30] [SPEAKER_00]: But it's an Ethereum roll up called Meta or WhatsApp, whatever you want, Insta, whatever

[01:13:35] [SPEAKER_00]: you want to call it.

[01:13:36] [SPEAKER_00]: Then you partner with different stablecoin issuers that they'll be the exclusive stablecoin to

[01:13:45] [SPEAKER_00]: your 2 billion, 3 billion users.

[01:13:47] [SPEAKER_00]: You make a deal with them that they give you a percentage of the interest income or all

[01:13:53] [SPEAKER_00]: of it or whatever you want.

[01:13:54] [SPEAKER_00]: Let me give them a billion customers.

[01:13:55] [SPEAKER_00]: You have a lot of negotiating power.

[01:13:58] [SPEAKER_00]: You use the income from that to have stacked away any blockchain fees, gas fees, whatever.

[01:14:03] [SPEAKER_00]: So your users can make free transactions all day long.

[01:14:07] [SPEAKER_00]: And then you build from there.

[01:14:10] [SPEAKER_00]: Yeah.

[01:14:11] [SPEAKER_00]: So who benefits from that?

[01:14:12] [SPEAKER_00]: The users benefit.

[01:14:14] [SPEAKER_00]: The businesses benefit.

[01:14:14] [SPEAKER_00]: If you're a merchant, that's going to issue.

[01:14:17] [SPEAKER_00]: Except going back to the beginning of our conversation, if you're a merchant, you tell people, hey,

[01:14:22] [SPEAKER_00]: pay me via WhatsApp stablecoins and I'll give you a 1% discount because you're saving me credit

[01:14:26] [SPEAKER_00]: card fees.

[01:14:28] [SPEAKER_02]: I'm surprised rewards programs have not taken hold a little more.

[01:14:34] [SPEAKER_02]: Like frequent flyer miles that are fungible.

[01:14:37] [SPEAKER_02]: It seems like that would be a huge use case for crypto.

[01:14:40] [SPEAKER_02]: And I'm surprised that hasn't happened yet.

[01:14:42] [SPEAKER_00]: Yeah, I think the me too.

[01:14:44] [SPEAKER_00]: But the problem with rewards might be like the airlines don't want them to be fungible.

[01:14:50] [SPEAKER_00]: I get it.

[01:14:51] [SPEAKER_00]: Right.

[01:14:52] [SPEAKER_00]: Right.

[01:14:53] [SPEAKER_00]: So this is always like there are many things I've been on here before.

[01:14:56] [SPEAKER_00]: We've talked about ticketing on the blockchain and how it makes so, so much sense.

[01:15:01] [SPEAKER_00]: But of course, like Ticketmaster and StubHub don't want that to happen.

[01:15:04] [SPEAKER_00]: And they kind of corner the market right now.

[01:15:06] [SPEAKER_00]: So those things are going to take time.

[01:15:11] [SPEAKER_00]: So Ticketmaster could do an Ethereum layer too.

[01:15:15] [SPEAKER_00]: And that way they're like, oh, we'll still keep dominant market share while still doing

[01:15:18] [SPEAKER_00]: NFT tickets.

[01:15:19] [SPEAKER_02]: Yeah.

[01:15:19] [SPEAKER_02]: It seems like the more open a market is in this sense, the more the first players will

[01:15:24] [SPEAKER_02]: benefit.

[01:15:25] [SPEAKER_02]: And that's what they've got to realize is kind of take that leap.

[01:15:28] [SPEAKER_00]: Yeah.

[01:15:29] [SPEAKER_00]: And for now, it's going to be like with stable coins.

[01:15:32] [SPEAKER_00]: It's sort of like the long tail of people who just have no option, who gains adoption first,

[01:15:38] [SPEAKER_00]: as opposed to the people that have a very popular option, but there might be something more

[01:15:42] [SPEAKER_00]: efficient.

[01:15:43] [SPEAKER_02]: Seems like it would be very attractive in that sense.

[01:15:46] [SPEAKER_02]: If you assume your market is the 6 billion people who live outside the US, then tokenize,

[01:15:54] [SPEAKER_02]: let's say the NASDAQ 100 stocks.

[01:15:57] [SPEAKER_02]: And yeah, don't trade them if you're a US citizen, like that will not be regulated.

[01:16:02] [SPEAKER_02]: But here it is for everybody else who want to benefit on American innovation and the wealth

[01:16:07] [SPEAKER_02]: in America.

[01:16:08] [SPEAKER_02]: You could now, if you're from Malaysia, buy Facebook stock or Nvidia stock through this

[01:16:14] [SPEAKER_02]: tokenized environment.

[01:16:16] [SPEAKER_02]: Yeah, I'm with you.

[01:16:17] [SPEAKER_00]: I'm actually very curious to see if maybe beyond dollars and treasuries, that becomes the

[01:16:22] [SPEAKER_00]: next big breakout tokenized asset.

[01:16:24] [SPEAKER_02]: I mean, there's tokens like SNX and UMA that initially wanted to do that.

[01:16:28] [SPEAKER_02]: Now they're on to other projects, but they were attractive tokens that people were thinking

[01:16:32] [SPEAKER_02]: would do that, but they didn't do it.

[01:16:35] [SPEAKER_00]: Right.

[01:16:36] [SPEAKER_00]: And there are some exchanges that on the exchange you have tokenized.

[01:16:42] [SPEAKER_00]: But look, maybe Robinhood does this.

[01:16:44] [SPEAKER_00]: I'm pretty sure something, the Robinhoods of the world will all eventually do their own

[01:16:49] [SPEAKER_00]: L2s.

[01:16:49] [SPEAKER_00]: And maybe one of the things that Robinhood offers on its L2 is like tokenized version

[01:16:54] [SPEAKER_00]: of some of the stocks that trade on its platform.

[01:16:56] [SPEAKER_00]: Again, need regulatory clarity to do that, but optimistic will get it.

[01:17:03] [SPEAKER_02]: So, Omid, I always appreciate when you come on.

[01:17:05] [SPEAKER_02]: You're always so thoughtful and intelligent about all these issues.

[01:17:09] [SPEAKER_02]: Have you lost any friends since the election?

[01:17:16] [SPEAKER_00]: Not that I can think of, but I am, I'm blessed.

[01:17:21] [SPEAKER_00]: Well, I have a lot of people have in my life have a lot of different opinions on a lot of

[01:17:28] [SPEAKER_00]: other things, but because I'm generally not judgmental, then they don't hold disagreement

[01:17:33] [SPEAKER_00]: against me.

[01:17:35] [SPEAKER_00]: Why?

[01:17:35] [SPEAKER_00]: Have you?

[01:17:36] [SPEAKER_02]: Uh, no, because I also have been, you know, on this podcast, I have Democrats, I have Republicans,

[01:17:44] [SPEAKER_02]: you know, I try to give a home for all issues.

[01:17:49] [SPEAKER_02]: And I think just common sense.

[01:17:51] [SPEAKER_02]: Sure.

[01:17:52] [SPEAKER_02]: I believe in a lot of the policies that Donald Trump is saying.

[01:17:55] [SPEAKER_02]: I probably believed in fewer policies that Kamala Harris was saying, but I still believe

[01:17:59] [SPEAKER_02]: in some of them.

[01:18:00] [SPEAKER_02]: Um, and I don't believe there should be, it should be person driven and it should be more

[01:18:05] [SPEAKER_02]: policy driven, but then people go crazy.

[01:18:08] [SPEAKER_02]: Even then, like, you know, you have to agree with a hundred percent of what's on one menu,

[01:18:12] [SPEAKER_02]: a hundred percent what's on another.

[01:18:13] [SPEAKER_02]: And I don't give those people the gratification of telling them which menu I prefer.

[01:18:19] [SPEAKER_02]: So.

[01:18:21] [SPEAKER_00]: I'm going to have to use that.

[01:18:23] [SPEAKER_00]: Um, yes.

[01:18:25] [SPEAKER_00]: Well, the one thing I was very excited about the election was, um, I don't know if you've

[01:18:29] [SPEAKER_00]: talked about us on the podcast, but the validation of decision markets like poly market.

[01:18:34] [SPEAKER_02]: No.

[01:18:35] [SPEAKER_02]: And I wish I, I mean, I've spoken about it a little bit.

[01:18:37] [SPEAKER_02]: I, but I was fascinated.

[01:18:39] [SPEAKER_02]: Like I've been a fan of predict.

[01:18:40] [SPEAKER_02]: I've had the predicted guys on this podcast before.

[01:18:43] [SPEAKER_02]: And I've been fascinated by prediction markets since the beginning.

[01:18:46] [SPEAKER_02]: It's a viable financial asset class.

[01:18:50] [SPEAKER_02]: People say, oh no, it's gambling.

[01:18:51] [SPEAKER_02]: Guess what?

[01:18:52] [SPEAKER_02]: So is the stock market is a hundred percent gambling.

[01:18:55] [SPEAKER_02]: You know, you think about stocks.

[01:18:57] [SPEAKER_02]: The value of a stock is supposed to equal the value of all of the, you know, discounted

[01:19:02] [SPEAKER_02]: cash flows you will receive personally from that company during its lifetime.

[01:19:06] [SPEAKER_02]: Guess what?

[01:19:07] [SPEAKER_02]: 99% of companies do not give a dividend.

[01:19:10] [SPEAKER_02]: So that makes it all gambling.

[01:19:13] [SPEAKER_00]: Yeah.

[01:19:13] [SPEAKER_02]: And there's always no real financial value of any company that doesn't give a dividend,

[01:19:17] [SPEAKER_02]: which is almost all of them.

[01:19:18] [SPEAKER_00]: And there's a joke that people on like Twitter have all the time.

[01:19:21] [SPEAKER_00]: They're like, oh, this stock fell 20% today.

[01:19:24] [SPEAKER_00]: I can't believe the discounted cash flow fluctuates so much in a single day.

[01:19:30] [SPEAKER_00]: Yeah.

[01:19:30] [SPEAKER_00]: But the other, I mean, sports betting, sports betting is the most massive decision market.

[01:19:35] [SPEAKER_00]: It's just those, it's not as consequential.

[01:19:36] [SPEAKER_00]: It's just pure entertainment.

[01:19:38] [SPEAKER_00]: But there is a strong economics argument that the signaling you get from decision markets are very valuable.

[01:19:46] [SPEAKER_00]: Like if you were a business in America, even a crypto business or a financial business,

[01:19:52] [SPEAKER_00]: you really cared a month ago as to who you thought would win the election.

[01:19:57] [SPEAKER_00]: And you might have actually made decisions as a leader based on your expectation of which party will win.

[01:20:03] [SPEAKER_00]: And so decision markets gave you some information.

[01:20:07] [SPEAKER_00]: And then the hope is if they get big and liquid enough that you can literally hedge.

[01:20:13] [SPEAKER_02]: Like, you know, the question is, there's got to be enough volume in there that it's not spurious.

[01:20:20] [SPEAKER_02]: So for instance, there was all these theories that maybe the election markets were being manipulated.

[01:20:25] [SPEAKER_02]: And that might be true.

[01:20:26] [SPEAKER_02]: I don't know.

[01:20:29] [SPEAKER_02]: But at some point, if they're not, if the volume is great enough and they're not being manipulated,

[01:20:35] [SPEAKER_02]: then I think you can, like for instance, let's say there's a decision market or a betting market on the weather.

[01:20:41] [SPEAKER_02]: You want to know what the weather is going to be next week because you're planning something.

[01:20:46] [SPEAKER_02]: And like you say, it could be insurance against that.

[01:20:48] [SPEAKER_02]: I think if that's liquid enough and then there's scientists betting or people who are meteorologists betting,

[01:20:53] [SPEAKER_02]: then okay, that gives me more information than just simply watching the weather channel.

[01:20:59] [SPEAKER_02]: And because why would someone manipulate?

[01:21:01] [SPEAKER_02]: Oh, we're going to make it rain next week.

[01:21:03] [SPEAKER_02]: Like there's no point.

[01:21:05] [SPEAKER_02]: I think that could be very interesting.

[01:21:07] [SPEAKER_00]: Yeah.

[01:21:07] [SPEAKER_00]: Or as my Columbia colleague Rajiv said, he was actually one of the foremost experts as an economist on this topic.

[01:21:14] [SPEAKER_00]: As he always argues, like if you're worried about manipulation, then you shouldn't want to restrict decision markets.

[01:21:21] [SPEAKER_00]: You should want more of them and for them to be much bigger because then it just becomes that much harder to manipulate them.

[01:21:27] [SPEAKER_02]: Exactly.

[01:21:28] [SPEAKER_02]: Like this is the whole thing with insider trading.

[01:21:30] [SPEAKER_02]: There's a, there's a re just from a market theory standpoint, there's a very reasonable argument.

[01:21:36] [SPEAKER_02]: You want inside information.

[01:21:38] [SPEAKER_02]: So this way, the price of an entity really does reflect all the information that exists about that entity, as opposed to some people having it who are probably illegally trading anyway.

[01:21:50] [SPEAKER_02]: And then suddenly it goes from five to 10 the day it's acquired or whatever.

[01:21:54] [SPEAKER_00]: Yeah.

[01:21:55] [SPEAKER_00]: And that's even more true for prediction markets because the outcomes are, and whatever odds they indicate are more consequential.

[01:22:04] [SPEAKER_00]: So like right now there are prediction markets on various cabinet appointees for Trump.

[01:22:11] [SPEAKER_00]: And I would almost expect that there is inside information, that there is an aide or someone who like, it's like, oh, he's leaning towards this person or that person.

[01:22:19] [SPEAKER_00]: I'm going to go on Polymarket or Kashi or whatever, place a bet.

[01:22:22] [SPEAKER_00]: But if you're the kind of person who actually, for whatever reason, really cares and has something invested in which cabinet members he picks, you want that insider to go place that quote unquote unfair bet.

[01:22:34] [SPEAKER_00]: Right.

[01:22:35] [SPEAKER_00]: Because it makes the signaling more accurate.

[01:22:38] [SPEAKER_00]: And by the way, again, like sports betting, this is established, happens all the time.

[01:22:43] [SPEAKER_02]: Right.

[01:22:44] [SPEAKER_02]: For every market, even the stock market, you, as you, as the common citizen wants all the information possible in the market.

[01:22:51] [SPEAKER_02]: You don't want anything hidden.

[01:22:52] [SPEAKER_02]: Which is why insider trading is such a weird law.

[01:22:56] [SPEAKER_02]: It's like, oh, you have to specifically hide some information from Main Street America.

[01:23:01] [SPEAKER_00]: Yeah.

[01:23:01] [SPEAKER_00]: And look, I'm sympathetic to the argument that it's unfair.

[01:23:06] [SPEAKER_00]: But then even then it gets weird.

[01:23:08] [SPEAKER_00]: Like I think our mutual former mentor friend, Victor, would talk about this.

[01:23:13] [SPEAKER_00]: Isn't it weird that if you're just a random investor and you get some insider info on a company and you invest in the market, you could go to jail.

[01:23:22] [SPEAKER_00]: But if you're a random reporter and you get insider info and you break the news, then like you get a prize and then you get promoted and make more money.

[01:23:32] [SPEAKER_00]: And ultimately, is that fair that you had access to insider?

[01:23:36] [SPEAKER_00]: So I don't know.

[01:23:37] [SPEAKER_00]: This is sort of above my pay grade.

[01:23:41] [SPEAKER_02]: Yeah.

[01:23:42] [SPEAKER_02]: It's beyond everyone's, which is why there's no cohesive argument on it.

[01:23:47] [SPEAKER_02]: And what else are you doing?

[01:23:48] [SPEAKER_02]: So you're teaching at Columbia.

[01:23:49] [SPEAKER_02]: What else are you working on?

[01:23:50] [SPEAKER_00]: I'm teaching and I do my usual kinds of consulting and thought leadership.

[01:23:55] [SPEAKER_00]: I'm actually, personally, one thing I'm excited for is in the last few years, a lot of the consulting work that I've done has been on policy matters and legal matters just because of how fraught the situation was.

[01:24:09] [SPEAKER_00]: Really looking forward to moving on from that.

[01:24:12] [SPEAKER_00]: It was important work.

[01:24:15] [SPEAKER_00]: And at the end of the day, I got bills to pay.

[01:24:17] [SPEAKER_00]: So if somebody wanted to hire me to consult on some potential legislation or lobbying, great.

[01:24:23] [SPEAKER_00]: But it's like that's not intellectually fulfilling for me.

[01:24:28] [SPEAKER_02]: But I wish they would use you for like, let's say, the Trump administration.

[01:24:32] [SPEAKER_02]: That could be fulfilling because you see that the policies actually happen.

[01:24:35] [SPEAKER_00]: Oh, well, yeah.

[01:24:38] [SPEAKER_00]: I guess I don't know if I want to go into politics.

[01:24:39] [SPEAKER_00]: But I'm very happy to advise the people that are making the decisions.

[01:24:47] [SPEAKER_00]: But I think if we're both right and there's just going to be more and more adoption and established firms entering crypto and doing different things, then I think I know I can be valuable for companies to try to figure out what to do, how to do it, how to communicate what they're trying to do.

[01:25:07] [SPEAKER_00]: Educate executives, so forth and so on.

[01:25:10] [SPEAKER_02]: This is going to be a key thing because I think this is the transformation that has to happen in society.

[01:25:15] [SPEAKER_02]: Like it has to be easier.

[01:25:18] [SPEAKER_02]: And, you know, that will happen over these next four years.

[01:25:21] [SPEAKER_02]: So we'll see.

[01:25:23] [SPEAKER_02]: But, Oman, once again, thank you so much.

[01:25:26] [SPEAKER_02]: As usual, you're always welcome back anytime to talk crypto or anything else, really.

[01:25:32] [SPEAKER_02]: Come on.

[01:25:32] [SPEAKER_02]: We should have you on.

[01:25:33] [SPEAKER_02]: You know, I had this Iranian guy on the other day.

[01:25:35] [SPEAKER_02]: Not an Iranian guy, but an Iran policy guy.

[01:25:37] [SPEAKER_02]: Should have had you on for that one since you're from Iran.

[01:25:42] [SPEAKER_00]: Well, thank you.

[01:25:42] [SPEAKER_00]: I don't know if I actually have any expertise there that's valuable.

[01:25:45] [SPEAKER_00]: It doesn't matter.

[01:25:46] [SPEAKER_00]: No one's an expert.

[01:25:49] [SPEAKER_02]: Oh, but now I'm anti-expert.

[01:25:51] [SPEAKER_02]: Now when I say that, it makes me anti-expert, which makes me a right-wing Republican.

[01:25:54] [SPEAKER_02]: Right.

[01:25:55] [SPEAKER_00]: You are MAGA now.

[01:25:57] [SPEAKER_00]: I just outed myself somehow.

[01:25:59] [SPEAKER_00]: You will be appointed to the Trump administration.

[01:26:04] [SPEAKER_00]: Well, if you were to be appointed to something, what would you want to be appointed to?

[01:26:07] [SPEAKER_00]: Oh, God.

[01:26:10] [SPEAKER_00]: I don't.

[01:26:11] [SPEAKER_00]: I think something, I guess, like regulatory related that would affect crypto.

[01:26:17] [SPEAKER_02]: See, that's a very smart thing.

[01:26:20] [SPEAKER_02]: I heard about a guy who was debating between being like, they offered, they said you could

[01:26:27] [SPEAKER_02]: either be the ambassador to Monaco or the secretary of blah, blah, blah.

[01:26:32] [SPEAKER_02]: Like I won't say what it was.

[01:26:33] [SPEAKER_02]: And I would automatically, without even thinking, ambassador to Monaco.

[01:26:38] [SPEAKER_02]: This guy's like, no, I want to do effect change.

[01:26:41] [SPEAKER_02]: And he's going to become like the secretary of blah, blah, blah.

[01:26:44] [SPEAKER_02]: And that seems like horrible to me.

[01:26:47] [SPEAKER_02]: Like I'd rather just be, then for the rest of your life, you're called Mr. Ambassador.

[01:26:51] [SPEAKER_02]: It's like, I'd much rather be that.

[01:26:54] [SPEAKER_00]: I also would much rather you become the ambassador to Monaco because then I will come and visit

[01:27:00] [SPEAKER_00]: you and you'll give me the tour.

[01:27:03] [SPEAKER_00]: But I don't, I think for the same reason that I never want to work for a big company,

[01:27:09] [SPEAKER_00]: I don't want to work in government either.

[01:27:11] [SPEAKER_00]: I like to have like freedom and not deal with bureaucracy.

[01:27:14] [SPEAKER_02]: Yeah.

[01:27:14] [SPEAKER_00]: It's awful.

[01:27:16] [SPEAKER_00]: All right, Omin.

[01:27:17] [SPEAKER_02]: Thanks so much.

[01:27:17] [SPEAKER_02]: We'll talk to you soon.

[01:27:18] [SPEAKER_02]: Bye-bye.