Charlie (3:11)

I'm so happy that Justin sun is fighting versus the Trump family. Like these are the two biggest scamming families. This two biggest scamming dynasties of all time in crypto going head to head and they're finally taking the gloves off and it's, oh man, it's so good.

Colin (3:33)

Yeah. And you gotta, you almost gotta respect in some ways how quickly the Trumps caught up with someone who's been around as long as Justin Sun. I mean, I believe he really got started in like 2016, 2017 with Tron during that ICO boom. Anyway, we'll start with the source here. This is a story that really starts back in February. But a lot of the information was not leaked out, or rather wasn't snuffed, sniffed out until last week. And I'm reading the headline here from CoinDesk. Trump's World Liberty Financial uses 5 billion WLFI to borrow 75 million from a platform its advisors co founded. So I'll try to be quick with this and then we'll get over to Justin Sun's tweet. What essentially happens here is the World Liberty Finance treasury deposited 14 million USD 1, which is a stable coin, its own dollar peg stablecoin for the World Liberty Financial ecosystem into Dolomite, which is a DeFi platform, as CoinDesk just reminded us in the headline, which was actually founded by co founded by one of World Liberty Financial's advisors and it borrowed 11.4 million USDC against this deposited into Coinbase Prime. Now it would do this a few more times, eventually borrowing up to $75 million from this stablecoin lending pool, using billions of its World Liberty Financial token to collateralize that loan. Now why does this matter at all outside of the connection between the World Liberty Financial advisor and the Dolomite platform? Well, part of the reason is because after the treasury, after World Liberty Financial dipped its hands into this lending pool and they ended up actually maxing out the utilization rate of this pool, meaning they withdrew so much liquidity from it, so much stablecoin liquidity, that other depositors couldn't actually redeem their deposits. They could not get back the money that they had been yield farming through this pool. So it locked out all of these other users from being able to deposit from this stablecoin pool. Now, there was a headline that dropped, I believe this morning, where I think it said something like, the World Liberty Financials paid back like 22 million, roughly some 20 million of this outstanding position. But basically the idea here being that World Liberty Financial took a loan from a stablecoin lending pool that is tied to one of its advisors from another defi protocol called Dolomite, and then that locked users out of being able to actually use that pool. We don't know what World Liberty Financial is using the money for. Again, it sent, I believe, the majority 40 million of the 75 million that it borrowed to Coinbase Prime. So who knows what it's doing there. But Justin sun wasted no time throwing invective at the World Liberty Financial team for this decision. And a little context here, because Justin sun was one of World Liberty Financial's first and most ardent supporters. I mean, what can you say, Charlie? He just really believed in the project. He saw the potential to attach his wagon to the Trump horse and make himself even richer than he already is.

Charlie (6:44)

Look, as Justin sun as a guy who you just know, at some point in his future he's going to need a presidential pardon. Please, that is a joke. Please, Justin, don't eviscerate me as a guy who probably is going to need a presidential part of the future. He's got to play his cards. Now's the time to play him. Throw down that money, get in the good, you know, on the good side. But it doesn't look like anymore. Sounds like he's miffed.

Colin (7:11)

He is a little bit miffed. And you know, some of that support. When World Liberty Financial launched, I believe what it was the summer of 2024, it was in the lead up to the election, it was in this, this kind of election.

Charlie (7:22)

It was before the election. We literally thought it was like fake. We thought it was a. Yeah, because like, oh, why would they do this? It's like a terrible decision going into a very contested election. But nope, it was real.

Colin (7:32)

And just to rewind to that moment for a second, you had World Liberty Financial and then you had the Trump of Melania coins launch the days, the day before the day of the inauguration. And so you just, you know, he was really speed running the crypto grifting up into the point of the election in a way that was really kind of brazen. But anyway, Justin ended up buying $30 million worth of World Liberty 5 because the launch was pretty lackluster. I mean, you're looking at a platform Honestly, that seemed at least to me, like six years too late, seven years too late, like something that you would have expected to see in 2017 or maybe the DeFi summer of 2020. So it just seemed like an idea as time had completely passed, but they launched it anyway. And anyway, Justin sun put $30 million into it. And he says here in this tweet, quote, I've always been an ardent supporter of President Trump and his crypto friendly policy. As an earlier supporter who invested heavily in World Liberty Financial, I did so because I believed in the vision of that was presented to the public. A decentralized finance platform that would promote financial freedom, remove intermediaries and bring the benefits of DEFI to mainstream Americans. I'm sure that's exactly why he invested in it. What was never disclosed to me or any investor. And this is interesting because this was not in the reporting. This is Justin alleging. This is that World Liberty embedded a backdoor blacklisting function in the smart contract used to deploy World Liberty Finance tokens. This function gives the company unilateral power to freeze, restrict and effectively confiscate the product property. Right. Any token holder, without notice or without cause, opposite of centuries and blah, blah, blah. He goes on, basically says that he's distancing himself from the project. Said that they're farming World Liberty Financial, you know, holders like an ATM and the Trump administrator, or not, I shouldn't say the Trump administration. Weird Freudian slip that I'll unpack here in a second. But World Liberty Financial as threatening legal action against Justin sun after he accused this project of having these kind of secret deals, you know, engaging in all kinds of nefarious crypto chicanery. And so they're threatening to sue him. And I just wanted to pull up the tweet because I think this tweet is. And this is where that slip came from. The tweet says, quote, does anyone still believe Justin Sun?

Charlie (9:50)

This is from the official World Liberty fight.

Zach McCorny (9:52)

This is.

Charlie (9:52)

This is.

Colin (9:53)

Yeah, thank you. This is from the World Liberty Financial account.

Charlie (9:55)

Official WLFI account. If we don't know who's typing the words, but it's someone on the.

Colin (10:03)

Yeah, yeah. And they say Justin's favorite move is playing the victim while making basic allegations to cover up his own misconduct. Same playbook, different target. Target war. Liberty Finance isn't the first. We have the contracts, we have evidence, we have the truth. See you in court, pal. That reads like a staffer wrote it. Do you know what? Like this reads like someone who is used to the swamp and used to the kind of language they use to frame things and is comfortable with media framing and agenda setting. That's what this reads like to me. Like, when I read it, I was like, I think I've seen similarly toned and similarly structured tweets from different congressional members on Twitter before. And so obviously I can't prove that there's no hard evidence. But when you look at this defi, you know, I struggle to even call it defi. When you look at this crypto project and you see the links with the Trump family and then you see something like this, it's like they know how to play ball in a certain way. You know what I mean? And you do. I do really wonder. It's like what agency or what intern is running this Twitter account for this. And the last thing I'll say on this before I toss it to you, Charlie, for some color and some second takes. You know, I couldn't find any evidence online of any. Any sort of back doors with Tron or any instances in which, you know, they. They played around with user funds using things that they might not disclose. But hearing Justin sun be absolutely shocked that World Liberty Financial isn't sufficiently decentralized and having this kind of, you know, moral outrage at that is really rich considering, you know, Tron is one of the most centralized blockchains you can find, right?

Charlie (11:41)

Colin, what are you talking about? There's multiple Tron validators who are all not Justin sun in different hats. Okay. Um, there's. There's a bunch of takes, I guess. Like, first of all, you know, just that that World Liberty fi tweet, clap back to Justin Suntron at the end, says, see you in court, pal. Can we, like, take a moment, take a breath and, like, think about the irony of. Of branding something as defi or decentralized and, and, and, you know, lauding the blockchain and saying. And then the real, the real enforcement of. Of, like, authority and truth is going to be an American court system. I mean, yes, it's Obviously like a USA Centric DeFi project, but, like, while defi is ultimately enforced in local and local juris, you know, jurisdictions and like, regional courts, to me that just means that Defi fails to actually execute what its goal is. Now, maybe someday that won't be the case. Maybe there. And there have been, you know, examples to the contrary. So the next take is it's just in the war, in the world, in a time when, like, anything you post on the Internet, like, is there forever, Especially if you're A major public figure like anyone in the Trump family. It seems crazy to me that you can just think you're going to delete history that's that's been well recorded and documented. For example, this post, while is a bit conspiratorial, does describe and summarize what has happened with public association with the World Liberty Financial Project. First of all, this little under the radar. A few weeks ago, Eric Trump started deleting crypto tweets, especially ones containing comments about World Liberty fight. This didn't make much news. We thought about reporting on it. I was like, oh, we don't really know anything. What are we going to do? Obviously things like crypto's a wash. They're like, maybe there's going to be associated with it. But now we've got the World Liberty fi controversy. So the World Liberty Financial website has had three different versions of who's officially associated with the project and this tweet documents it. So when the World Liberty Financial pre sale happened, I believe right before the presidential election, all of the Trump family members were co founders. We have literally a meet our team page screenshot. This is true. I verified it with Donald Eric, Donald Jr. Barron, the four Trump alpha males all listed as co founders at the time. Then after the presale they were demoted to just web three ambassadors and Donald J. Trump remained chief crypto advocate. So you get. And then the co founders were moved to other people in the team. So then after their latest borrowing scam quote, the entire team member page has been removed. So, so there's no team members and there is now a little asterisk at the bottom in plain text saying Donald Trump and his family are not directly involved in management of World Liberty Financial. So like they were originally co founders, then just Web3Ambassador, which is just a code name for a person who dm's me on discord with useless collaboration opportunities. And now they're not active managing, in fact trying to disassociate. So you got to love the grip. Mind you, it has been not even a year and a half. It's been not even two years, not even a year and a half since Trump ascended to the throne of the world. So he so like, you know, these boys have Max extracted, they're disaffiliating at the bottom. Things are collapsing around them. I would say overall a successful defi project because that's the whole.

Colin (16:02)

It's just missing the rug which maybe, maybe this is the quasi or the proto rug that we're the last ones

Charlie (16:09)

they're just going to delete the Twitter account and never talk about it.

Colin (16:12)

I just went on their website. You can't even find a team member page now.

Charlie (16:16)

Yeah.

Colin (16:17)

And so when you go to the about us, there's no team members listed. Also imagine, you know, could you imagine the, the conversations, you know, maybe Trump or one of the Trumps had with the family lawyers where it's like, you're doing what now? Okay, no, no, you got to get off the site. You got to get off the site. And then Trump's like, okay, no defi. But meme coin.

Charlie (16:37)

Yeah.

Colin (16:37)

You know, and then, well, well, can

Charlie (16:40)

Melania like take over? And it's that meme from Arrested Development of like a husband and wife can't be convicted of the same crime. I mean that's, that's what this whole thing has felt like. That's what the, his and hers meme coin presidential meme coins felt like. It's crazy because everybody knew the playbook in crypto, man. Like we've seen this 200 times. This is a page out of like 2017-2021. And yeah, you know what it also

Colin (17:14)

reminds me of and you can see this in multiple different corners of American society from welfare and Medicaid fraud, right. With the budding hospice scandal in California and the one that preceded it with the daycare scandal in Minnesota. But what this reminds me of with the Trump family is this kind of strip mining, just kind of tearing you, extracting any value you can as the American empire is in decline. I think back to when Matt Taibbi, you know, a journalist who is polarizing figure to some extent, but back in 2008 and nine in 2010 when he was at Rolling Stone, he reported on a lot of the bullshit that was going on with the subprime mortgages and with the housing bubble and the financial crisis that was precipitated from all of these horrible mortgage backed securities, the were poorly rated and some of the lending practices from the banks. But he was reporting on the Soviet Union during its collapse and he talked about how when the Soviet Union was collapsing, you had all these interest groups and vested interests who had access to certain industry within the Soviet Union, just basically selling it piecemeal to whoever was the highest bidder. And that's how the oligarch class got started in Russia as we know it today. And there's almost like this element in American society right now where people are just, it's like you got swindle what you can swindle while it's still There. And that's, you know, I gotta say, a lot of the crypto, a lot of the crypto dealings that we've seen from the current administration remind me of that. But we won't go too far into politics in today's show.

Charlie (18:55)

We've gotten very far into politics. We did a, we did a ripcord. Get us out here. Let's go to the next best thing,

Colin (19:00)

which is business news now. Well, a little, a little palate cleanser. And this just dropped I believe this morning. BlackRock is launching its Bitcoin Income ETF under the ticker BITA. What this is is it sells call options on BlackRock's treasure chove of 50 billion plus Bitcoin for its IBIT fund to generate yield from Bitcoin's volatility. So these income and yield generating ETFs that are based on an underlying asset are somewhat common. They're pretty common with volatile assets because it's a way to harvest the volatility. So you'll see them with oil is quite common. There's also one for the S&P 500 which is very popular. It yields about 5 to 7%. But that being said, stocks and oil are volatile, how should we say, in the analog sense, in the pre crypto sense to where they're volatile for traditional market instruments. But bitcoin is taking that and pumping it full of peptides, right? And then giving it, which is in

Charlie (20:07)

these days by the way.

Colin (20:10)

We can say that now, but so bitcoin's volatility will be obviously by far and away much more extreme than these, other than these other products. And in a quote tweet to this, Alex Bloom of two Prime, CEO of two prime, whom we had on the show, I believe about actually a month ago today was talking about how if you wanted to increase your bitcoin denominated position, if you wanted to increase how much bitcoin you actually own, something like this would be a terrible way to do that. And the reason that Alex is saying that, he wrote an article for Forbes that I used to prep for this show. And essentially what he says in that is this is kind of like picking up pennies in front of a steamroller. That, you know, that classic analogy. The reason being is, you know, you will get your receive income from this if you, if you buy the fund, you will get dollar denominated yield from it depending on how well the call options pan out. So for those of you who might be a little bit shaky on the options landscape, a call option is an option to purchase a asset at a pre, at a predefined price within the contract within a certain timeframe. And a put is the option to sell that option at a specific.

Charlie (21:31)

While you go long, you think it's going to go up. Put, you go short, you think it's going down.

Colin (21:35)

Thank you, Charlie. And so for this strategy, for something really volatile like bitcoin, Alex basically makes the point. Yeah, like let's say you are going to buy into this. What you're essentially going to get then is you are going to get a little bit of yield. But any sort of extreme move in bitcoin's price to the up or the downside could potentially completely wipe out all of your gains. So here's one example. Let's say that you're selling a covered call for one bitcoin at 50k. You sell a call at 50, bitcoins at 50k, you sell a call for 50 at 55,000. That's 10% out of the money because it's 10% increase from the price of bitcoin. When you're selling the call to the call strike price, you collect $1,000 premium. Because if someone's buying a call from you, they pay you for the option, they pay you for the optionality to then buy that bitcoin at that price. So maybe you're making like $1,000 premium for this, you're feeling pretty good. Well then bitcoin moves up to 80k, let's say over the course of a few days or a week, which has happened. I mean, a move from 50 to 80k is not out of the realm of possibilities with bitcoin within a very short time frame. So you have to sell the Bitcoin at 55,000 because of the call option that you wrote. So you just made $1,000 under this scenario, but then you lost out on $30,000 of gain in bitcoin because you had to sell it at 55 when it's actually trading at 80. And the same holds true on the downside. Let's say you sell a put for like 40k. Bitcoin, Bitcoin is at 44,000. That's 10% out of the money as well. You collect a premium, bitcoin crashes to 16,000. This is an example drawing from the last bear market, or I guess the second to last bear market, depending on if you count our current market as a bear, then you're obligated to buy that at 40,000. And you basically just made a massive, you had a massive unrealized loss in that bitcoin. Because bitcoin's trading at 16,000, you had to buy it at 40. So on the extreme ends of market volatility for a strategy like this, you might make a little bit of money, but you'll be absolutely wiped out in BTC terms if you see some extreme volatility. And so Alex says something like this is probably, he postulates that the reason we're seeing this now is that this was a structure for something like this was probably in the works shortly after the Bitcoin ETF launched and they were drawing on historical data from 2020 through 2024, where Bitcoin's volatility was pretty muted, right? I mean, bitcoin had a slow grind up from its bottom in 2022, in November of 16k up to like 40k. And then the ETF got announced in January 2024 and then it popped up to 60. But between for most of 2023, it was pretty tame, bitcoin's volatility and there weren't extreme moves in one direction or the other. So then that obviously raises the question, who is this for then? And the obvious answer is it's for your boomers. It's boomer fi. It's for people who might want a little more of a little more risky exposure to bitcoin and get some yield on that exposure, but who are not going to stack bitcoin like some laser eyed zealot, which we love. We love all of our laser eyed zealots. We used to be one in fact, but those kind of people. This is not built for that. This is not built for your stacking maxi. This is not built for someone who's going to take self custody of their coins. Maybe if they want to augment their exposure to bitcoin and augment their upside. Kind of like we've seen with guys who want to play stretch with strategy, right? When this strategy works, you will be gaining yield, right? You will end up generating income from it. But the question then becomes when volatility really returns, how are you going to fare? And in bitcoin terms, you will almost certainly lose out if you see big moves to the upside or downside.

Charlie (25:28)

Maybe you think bitcoin is not going to be as volatile in the future, in which case the boomers are right and they get one over on us yet another time. Because those dang boomers, they keep having their last laugh. We're like 10 last laughs into their economic superiority over, over our subservient generations. Okay, enough about that. We have our guest on next. We got Zach McCorny of Galaxy Digital. But right before that, we're going to get a word from our sponsor, CleanSpark.

Colin (26:00)

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Charlie (26:30)

all right, we have our guest of the day, Zach McCorny. I'm going to bring him on up here. Welcome, Zach, to Blockspace.

Zach McCorny (26:40)

Hey guys, what's going on?

Charlie (26:41)

Nothing much. We're on live. It's a Monday. We're coming up to your neck of the woods this week up there in New York City. But you put out a very, very interesting write up for Galaxy Digital as you often do. This one caught my eye. I read through the whole thing on AI agents and how they. Well, everybody's talking about how they're big on blockchains. The reality is that there's a lot more friction. Explain to me some of the ways blockchains that you describe. Blockchains are built for humans and not AI agents today.

Zach McCorny (27:17)

Yeah, I mean the agents narrative is obviously huge. And when I started to look into it, I realized that the majority of it was people essentially giving their agent access to a wallet to go buy things on like Amazon. It was like agentic commerce, which I think is like fascinating and will grow into a big market, but it's not something that I was overly interested in. So I was like, how do I give my agent a bunch of money to go trade, defi, find the best yields and so on. And what I quickly realized is that they just totally lack the context of what's happening on chain. And then the next step is like, well, how do you give them that context? And that was when I kind of realized that we are pretty far away from having like purely autonomous, fully discretionary agents running around on chain, finding the best yield, trading and doing all that stuff. And I kind of broke the friction down into three sections, like discovery. So how does it actually find the opportunity or find the contract to go act on control plane friction, which is mostly an issue of like, authenticity of the contract, making sure you're not depositing into a honey pot and then actually going and getting the data. So it really comes down to those three things, like one, how does it find a contract? Two, how does it make sure that it's authentic and real and not like a honey pot or malicious contract. And then how do you actually get the data to tell the contract what you want to do? And yeah, I think that's like high level, like the three issues. And when you think about how much humans play a role in doing all that, like curating allow lists and whitelists for what token is real, what contract is real, building all the adapters to the contract interfaces to make sure that the algorithm or the agent is aware of it all. But yeah, the high level take is just humans have a massive role in blockchain action even when it's algorithmic and machine driven, whether we like it or not. And how we bridge that divide I think is still an open question but will be super valuable when we eventually figure it out.

Colin (29:22)

I want you to unpack what you mean by context there and I think you kind of explained it. They might lack context for what's a scam and what isn't, but is that basically you're saying they can't discern what might actually be worth putting money into and which defi trades are worth making.

Zach McCorny (29:39)

Well that's like an element of it, right? Like how does it find like high EV opportunities? But it's mostly understanding like what contract is real. Like somebody can fork an AAVE contract, it looks identical to the real AAVE contract, but how does it know that it's the actual one is really the primary issue there.

Charlie (30:00)

So you know, I think a lot of folks imagine that agents are basically just like really high functioning super fast humans with access to infinite more information. But yet it's not really what we see currently on chain, really just the available frontier models. Because I was looking into this because you described say the discovery and trust friction which is the real AAVE contract. I think about it because a lot of the ability to discern what is the true and real contract comes from almost social and web of trust dimensions which I don't think are loaded into aged context is maybe is like one of the barriers that we just don't have great registries and context to give these agents or is there something additional different that's going on that's making these things that's making agents harder to use. Blockchains.

Zach McCorny (31:01)

Yeah, I mean registries I think is like a place where people are starting but again like it requires a human in the loop and that's not totally scalable in a fully permissionless world where anybody can go press a couple buttons and launch a contract. I think on ethereum it's like EIP8004, they're doing like an agents registry to say like this agent has this reputation and it's good, or this one has a reputation but it's bad, don't use it. I haven't come across anything that's doing the same for contracts and tokens. And when we look at what exists today with whitelists and registries for official token lists on Uniswap or Jupiter, there's a human on the back end submitting a PR to Jupyter that says, this is my token. Here is the Twitter page and all the followers and we're the team and we disclose who we are. That just doesn't work or scale in a world where you have a million agents running around doing things on a permissionless ledger. But that's ultimately probably where this has to end up. It's a very difficult problem to solve, at least in a scalable way. For now, you can have curated lists that you build up over time and maybe eventually they get big. But in a world where you can launch an infinite number of contracts or tokens in a day, how do you make it so that you can get them all into a registry and score them and whatnot? So yeah, it's really like a human in the loop scalability issue on that front.

Charlie (32:26)

So we'll get into what you think is the direction that the ecosystem should go, but I want to look at where it currently is and there's everybody in their dog has pivoted from crypto to AI. And if you're in crypto, you're pivoting to like AI as it relates to crypto. You know, people are trying to build AI agents to do things on blockchains. What are most teams building right now? And are they building the right things?

Zach McCorny (32:53)

Yeah, I mean, I feel like as of right now the primary focus is on agentic commerce and using stablecoins to buy consumer products. Like Circle actually released a cool product where you can. It's like a ChatGPT style interface where you give it access to your wallet and you can go shop on Amazon or whatever store and it just streams the stable coins to the vendor over like X402. That's kind of the low hanging fruit in my opinion. It's not the wrong thing to be working on, but it's just a low hanging fruit sort of easier issue to solve. And then in terms of the defi stuff, it's still just so young and so new. Like openclaw was really the thing that kind of sparked the whole Like I'm going to give my agent a wallet and some money and then the traders got their hands on it and people are using it. But what it mostly looks like today is just like human curated sets of contracts, mostly over like one or two applications and then they just have like fixed parameters for it to go trade on. So from my view it still kind of looks like the old school like algo trading style stuff versus purely agentic workflows where it's like okay, the agent is reasoning, it's finding the best opportunity and then it's going and doing it. It's still just kind of acting over fixed curated sets of tokens and contracts and applications.

Charlie (34:11)

So barring, and then I'll ask you about fundamental architectural overhaul, but given the current landscape of blockchains and you mainly focused on Ethereum or Defi style blockchains, given the current landscape of them, is this an infrastructure problem that needs to be solved? Are we back to the infrastructure play? Like, you know, is this, is this solved or improved significantly by a bunch of really good savvy MCP servers? Or does do we have to re architect everything?

Zach McCorny (34:48)

No, I mean we've been talking about like possible solutions here on the desk and it seems like the, the middleware layer is probably the most rational place to start. Like it doesn't require like overhauling what Ethereum or Solana or any of these chains actually look like. But I could totally see a world where people start building chains that are built with autonomous agent consumption in mind first versus the human based stuff that we've seen up to this point because we had no other choice. But yeah, I could totally see a world where we have chains that are standardized just for agents.

Charlie (35:23)

What might that look like? I don't know. I have no idea what that would even look like.

Zach McCorny (35:28)

Yeah, I mean I think like one interesting place for it to all start would be like standardized contract interfaces. Like if you build a lending app, the lending contract interface looks the same across the board and like that obviously comes with limitations because you can have like special features that are different from another app. Like so by default the interface has to look different. But like standardizing data retrieval and like data structure across the board just makes it easier for agents to interpret a lot of this stuff. Like the example I used was comparing like AAVE and Compound and like the difference in the data retrieval paths to get the same information from both. AAVE is pretty clean. You could go do 2, 3 RPC calls to get all the information you need, whereas with Compound you need to do like triple the number of RPC calls, the names for everything. It's like supply rate versus variable supply apy like the agent needs to be able to reason over that and kind of connect the dots between it all. So some kind of standardized data output data structure I think can go a long way but getting there can be tough and introduce a number of limitations

Charlie (36:36)

which is interesting because a standardized output is kind of what an MCP server is. But you just enshrine that into the architecture of the blockchain itself. So about just fundamental blockchain architecture, you're a write up was mainly focusing on defi. Most defi happens on Ethereum or EVM chains or Solana and not as much on UTXO based change. But I don't even know if you're ready for this question but Bitcoin's UTXO based, it's not account based at least functionally. Do you think that these different blockchain designs, statefulness or not, do you think that there is a structural difference between how agents will use and view these chains? I invite you to pontificate on this.

Zach McCorny (37:30)

Yeah, it's actually an interesting question. I haven't given it much thought. I mean defi chains are interesting because there's like financial primitives built on top of them where you can have asset management, trading and all that stuff. For UTXO based it's mostly payment stuff but where my brain kind of default to just kind of given my line of work is like it would be great to have an agent who can track all the UTXO flows. I've spent a good amount of time doing like investigative work into people trying to like obfuscate like their bitcoin and hide their, their trail and it actually would be great to have an agent that can figure all that stuff out. But yeah, I just find defi to be a more interesting place for this stuff to happen just because you can actually do things. There's financial primitives and yeah it's just like utility based at its core.

Charlie (38:20)

So my last question for you is a curveball. What's one of the most interesting AI things happening on blockchains in your view right now? There's a million people who are always feeling like their own thing. But what's the thing that's interested you the most in this category?

Zach McCorny (38:38)

Yeah, I mean I'm a data engineer and data scientist so I, I just find the, the data curation layer of all this stuff to be super interesting. Like one requires a lot of different ways of going about like, oh, I need to go get like the stake to fina rate and then compare it to like the USDC borrow rate. And then when like we never really had a reason to bring all this stuff together in the first place. So like the most interesting thing in that I've seen is like the real unification of all the defi data into one like standardized output that's just kind of coming from like a nerd snipe data background. But for, it feels like for the first time I've been building like a lot of like unified databases across applications and concepts and you can actually draw like very interesting lines in the sand through all of this stuff. And I think it's going to just create a more sort I'm looking for like economically efficient and we're going to have a bunch of new primitives and trade ideas come out of all this stuff. But yeah, I think the data side of it is the most fun and exciting at the moment.

Charlie (39:41)

Well, I really appreciate you diving into this because everyone is saying, oh, AI agents are going to change everything. Oh my, it totally changes blockchains. And I think you brought a healthy dose of realism about the friction that currently exists. Zach, thank you so much. I'll link the report in the show notes afterwards and I hope to see you in New York very soon.

Zach McCorny (40:05)

So I appreciate you guys having me on.

Colin (40:09)

Thank you, Zach. Yeah, it really kind of does throw cold water on the idea that you can just get rich by sicing an AI agent on the world of defi and crypto. Your best bet is probably finding an account that appears to be a political insider on polymarket and just copy pasting all of their trades. That actually might be one of the only decent strategies right now with AI agents with regards to training.

Charlie (40:36)

Yeah, I'm a believer that there's still a lot of alpha on Polymarket. Those are the only real money that I've had that I've confirmed that people made. But again, this is a new and emerging topic. I am one person with one information feed that I can condense. So enough about that. I'm going to tap you in Colin, to do the ad read from our friends at Luxor.

Colin (40:59)

Yes, quick ad read before our next story. This episode is brought to you by Luxor's Commander Bitcoin Miner management software built for enterprise operations. Commander gives you real time fleet monitoring, bulk remote commands across your fleet. And intelligent Miner, which is an automated profitability engine that runs every five minutes and adjusts power settings to live hash rate and energy markets. Ercot Back tests show over 10% more profitability with Intelligent Miner versus Binary Mining. If you're interested in Commander. If you want to juice that revenue, it is $100 per megawatt or 25 basis points per 25 basis point pool fee adder, which is roughly half the price of competitors. And there's a 60 day free trial. So if you'd like to get started, get that free trial running, get go to Luxor Tech. Forward slash Commander. That's L U x o r.t e c H, forward slash, C O M M A N D E R. And with that, Charlie, let's go ahead and see what the folks at Circle are doing. A little update on the stablecoin wars. We have a press release from the Circle team here that reads when open systems are tested, accountability, rule of law and the work ahead. So this is a probably, you know, I would say longer than maybe it needs to be Screech, not that long. But it is an update from the chief Strategy Officer and head of global policy and operations at Circle, Dante Desperet. Dispart, disparate. I'm sorry Dante, I'm butchering your name. But it's in response to pressure for circle to freeze $270 million worth of funds tied to the Drift Protocol hack. Now, we covered this Drift Protocol hack on the show a while back. One of the more interesting and also very troubling instances of a defi hack, because it wasn't a hack in the way that you're thinking of, I think, or when most people think of defi hacks, usually someone's exploiting a vulnerability and a smart contract of really clever technical workaround just from reviewing the code. But the Drift hack was socially engineered to where these hackers that have ties to North Korea's Lazarus Group more or less befriended the Drift team, or befriended maybe is not the right word. They established a business relationship with them, said they were very interested in using the protocol. You know, was working close with them to write up all of these proprietary, you know, code bases for how they would trade on Drift. And they ended up sneaking a Trojan horse into the Drift protocol and stealing $270 million worth of funds. Now, Circle is being asked to freeze those funds because some of them were usdc and they are saying here that the power to freeze is not the power to police, quote. Let me be clear about something that is frequently misunderstood. When Circle freezes usdc, it does not. It is not because we have decided unilaterally or arbitrarily that someone's asset should be taken from them. It is because the law requires us to act. So Circle is basically saying here that they refuse to freeze these funds because they have not had a court order or a law enforcement request from law enforcement to freeze these funds. Now when I read this I was really curious because this is, I would say one of the more notable double edged swords for stablecoin platforms. They are extremely centralized. There's a central issuer who is in charge of redeeming and issuing new stablecoins and as a result we've seen a lot in the past specifically from tether of funds being frozen in the wake of a hack or some sort of even not even hacks in the case of an unknown vulnerability causing an accidental loss of funds. We've seen Tether specifically time and time again respond to these misfortunes by freezing funds or rolling back the chain to make sure that they can make users whole. Circle does not have the same approach. So I got curious and I needed, I wanted to dig up instances of when Circle has frozen funds. And if there is this clear distinction between we won't do it with law enforcement, we will only do it when law enforcement asks us to or a court order or government versus just if someone was hacked, oopsie, see you later. There's nothing we can do with that. And the relationship holds up. Circle almost always only freezes funds when asked by officials and even then sometimes they don't. The first time they 20 when they froze approximately 100,000 USDC belonging to one wallet address based on a law enforcement request in 2022 following the US Treasury OFAC sanctions against tornado cash. Circle blacklisted associated wallet addresses freezing at least 75,000 in USDC in October of 2022 in the Mango markets exploit. You know you can kind of just pick from the cornucopia of DEFI exploits at this point. You could probably just pick a random name of a fruit or some Pick

Charlie (46:01)

a fruit, pick a food and, and, and yeah, pick a food and see how much money's been stolen from

Colin (46:09)

the mango market exploit for 57.5 million was routed through a Circle address on Salana and never frozen on chain. There was no court order or no request from law enforcement during the Nomad bridge hack, approximately 45 million USDC sat in exploiter wallets for 30 to 45 minutes without Circle blacklisting. The list goes on and on and on. And there's even a scenario in which in this year, in 2026 or sorry, this was last year, oh no, this was this year. There they have received a court order from a victim of a $3 million hack to freeze funds. The funds were moved just hours before the court order was granted. And despite requests to freeze from law enforcement, Circle didn't do it. So maybe that was just small potatoes. They're kind of picking and choosing what they want to do, but this one kind of takes the cake. And Zach XBT Crypto, Twitter's favorite sleuth, really took them to task on this one. This happened last month and this year Circle froze the USDC balances of 16 unrelated business wallets simultaneously tied to the sealed US civil case and tied to a sealed US civil case in the Southern District of New York. The frozen wallets included crypto exchanges, online casinos, forex brokers, payment processors, and even the Dfinity foundation bridge contract. Those were erroneously frozen. Those weren't even the ones that they were supposed to. So they ended up freezing the wrong wallets in an effort to stamp out some illicit activity and illicit fund moving. So all that said, Circle does not have a good track record with freezing funds that are tied to exploits in some cases even when law enforcement officials ask them to. And I won't go over all the examples, but go ahead and just go to your, your, you know, your AI du jour, your favorite AI cloud or ChatGPT and ask for known freezing events from Tether. It's a pretty extensive list, longer than Circle and most of the time it's in response to a hack and Tether just freezes it, which again, double edged sword. Some people don't like that. They think that you shouldn't do that. You know, this is a huge debate I think within the realm of blockchain architecture and decentralization, whether or not you should punish hackers for exploiting something that the developers missed, even if it's stealing people's funds. But the fact of the matter is Tether does it much more than Circle. Very interesting dynamic.

Charlie (48:35)

Yeah, you said it. But I'll Reese, I'll just, I'll reiterate is that it is ironic that Tether, the comparatively gray market or historically gray market stablecoin is the one to take the most black and white approach, proactive black and white approach to users and their token issued. Whereas Circle, the one which a lot of people like, oh, it's the Fed Coin. Oh, it's the new, you know, what do you call it? Cbdc? Yeah, it. That's the one which is the one dragging their feet the most. It's kind of wild and it does make sense, I guess, that Circle, because they're trying to be extremely buttoned up, that they're only going to listen to, I guess, you know, judicial orders and regulatory sanctions. But it's weird that in practice Circle has been the freedom stablecoin compared to Tether. There's another dimension to this because I learned a little bit more about the process for freezing these tokens. Again, this is what I've learned by querying my AI agents because I'm curious how they do it beyond just, oh, they just press a button. So Tether actually in most of their contracts, depending on the blockchain, has specific tools allowing them to freeze wallet addresses. I think Circle can do that as well. But then Tether goes further than that and they have the ability to actually destroy those tokens, burn, seize tokens, reissue clean versions of those tokens. Whereas that's not necessarily the case for Circle USDC on most of their chains. So Tether has more of these tools built into the contract that Tether launches two issued stablecoins. And I know you gave the numbers for like Tether does more freezing and seizure, but for the one line or multiple set, Tether's cumulative freezing and seizure has been about 30 times that of Circle's total seized assets. Now if we normalize for like size of the token, Maybe it's only 3 or 4x because tether's a few multiples bigger than Circle. But there's some interesting, like, you know, there's some interesting color to this story. It just cracks me up though that you had a couple days and a quarter billion dollars flowing through the regulated US Stablecoin that went to North Korea. It's just kind of wild because it's weird to say that out loud, you know, and it's.

Colin (51:23)

I think that's a really good, it's a, it's a good dichotomy to really highlight because you'd think that like you said Circle would be the one who would immediately freeze as the.

Charlie (51:36)

Like that, like that should be an issue. Like maybe it was, maybe it was a different hack and it's not clearly associated with Laz's group or a North Korean hacking group.

Colin (51:43)

But like this was so, you know, 270 million. It's a big payday. And you would think that the more regulated and the stable coin that has always advertised itself as being the American stablecoin, being the US stablecoin, the one that actually has the blessing of the overlords on Capitol Hill, that they don't do this. And I Have to wonder, and I'll leave it at this, unless you have closing thoughts, I have to wonder what kind of signal this sends to projects and to companies in Bitcoin and in crypto. Because if you're looking at the way tether responds to threats versus Circle, you might think twice about prioritizing Circle's stablecoin and their infrastructure over tethers because you won't have any recourse. Right. I mean, that's part of the benefit of the stablecoins or ostensibly should be, is they're more akin to banks in the sense that they do have the ability. They're narrowback transactions, which is, you know, not on. I mean, I'm not going to say it's common for the $200 million wire to be rolled back, but credit card fraud, all of these things at a much smaller scale, these kind of backstops exist in the traditional financial system. So you'd expect a stablecoin issuer to maybe offer a little more protection. And so if I were a founder, I wonder if that would factor into whether or not I choose to. You're probably going to support both, but which one are you going to prioritize a relationship with?

Charlie (53:10)

But yeah, I mean, my last word is as much as I do not want money to go to North Korea, I do generally err on the side of I want blockchains to operate as freedom and permissionlessly as possible. So, like, you know, I'm not getting too ruffled. Do personally ruffled that you had some, you know, one of these stable coins was a little slow to act because if they're slow to act on that big state actor, they may be slow to act on other people who I think it's less clear. They're like active risk and hostility to the United States. So enough about that before we get canceled.

Colin (53:54)

Got to before we get canceled.

Charlie (53:57)

Yeah, not. Not by people, but not by people,

Colin (54:00)

but by strange entities. Anyway, we have one more story, a little dose of Hopium.

Charlie (54:07)

Very quick before we go.

Colin (54:08)

But before we get to that, a quick word from Lygos. Hedge funds are getting liquidated. Is your Bitcoin safe? It's not just Bitcoin's price drying up. Hedge funds, big whales. Lending desks are reeling after the October 10th and February 5th liquidation events. Counterparty risk is rampant. So it's more important than ever to understand who controls your Bitcoin. And with Lygos, that is always you. Don't be the next FTX, Celsius or BlockFi victim if you're working with another loan provider. Do yourself a favor before it's too late and move over to Lygos. They are our preferred Bitcoin lending provider here at Blockspace. They use Bitcoin native smart contracts to make sure that you are always in control of your keys and that you are have dominion over your stack and no one else. With Lygos you always know where your Bitcoin is. Hold your keys with no wrapping, no bridging, no rehypothecation and get competitive rates for as low as 10% APR. Go to Lygos Dot Finance to learn more. And with that Charlie we will leave our listeners with a dash of Hopium with a report from Coinshares that came out today that said 1.1 billion in digital asset flows came into the market last week for the highest level since January. So Coinshares does these weekly updates on flows to bitcoin and crypto ETFs. They look at the European as well as the US market for this. So it gives a pretty holistic picture. And there were 1.1 billion in inflows last week. Bitcoin led with 871 million in inflows. The US market accounted for 95% of all of this movement, contributing 1.06 billion to the total overall figure theorem. Always in second place came in with 196.5 million inflows. So if you were looking for a reason to be a little bit bullish as we go into the week, if you are hoping that that Iran ceasefire sticks and that we've seen the peak of that conflict, who knows, maybe some folks out there in the markets are betting on it. It's nice to see some flows. Again, a lot of people curious as to whether or not we've really seen the bottom in 60k. Whether or not that was true capitulation and whether or not the weekends have been flushed out, I am personally not convinced. But we will see what happens over the next few months as we continue trudging our way through what is panning out to be a pretty, pretty interesting 2026.

Charlie (56:34)

And with that we are taking a block space live stream break until next Monday because the whole team's flying out to New York City for our conference this Thursday. There's like maybe a few GA tickets left if you really want one. You can DM me and I'll send you a Bitcoin invoice or you go through our website op nxt.devopnext.dev we are live streaming the talks on the main stage on Thursday from 9am Eastern to about 4pm Eastern, so make sure to tune in. That's me, A banger. We have like all the who's who of everybody. And if you want the definitive talks on Quantum, they'll be happening in New York at the Time center this Thursday, April 16th, so make sure to put that on your watch list. Otherwise, this is a podcast. Make sure to like and subscribe wherever you listen to podcasts and check out Our Newsletter Newsletter blogspacemedia.com I'm Charlie, this is Colin and we will see you next week.