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CRYPTO 101
Ep. 702 The Hidden Friction Keeping Traditional Markets from Going Fully Digital with Yuval Rooz
00:47:28
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- [00:00]
Podcast Announcer
Welcome to the Crypto 101 podcast presented by Gemini, your bridge to the future of money.
- [00:15]
Bryce Paul
All right, everybody, welcome back to another episode of the Crypto 101 podcast. I'm your host, Bryce Paul. Very excited for today's episode. I'm joined by the co founder and CEO of Digital Asset, which is the company behind the creation of the Canton Network, Yuval Ruse. Yuval, welcome to the show and how are you doing?
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Yuval Ruse
It's great to be here, Bryce.
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Bryce Paul
Yeah, no, we're going to have a lot of fun. We're going to dive into to all the exciting things that you've been working on for a very long time, which just seemed to be boiling up quite of a lot of excitement over the course of the past few months. But before we dive into Canton Network and everything you've been building, let's just get the audience acquainted with a little bit of who you are, who they're listening to right now. What were you doing before you got into building blockchain and crypto related projects?
- [01:05]
Yuval Ruse
Sure. So quickly. My background is studied electrical engineering and math and from there I started my career at Citadel, the hedge fund. Worked there for a bit of time and from there I moved to digital to DRW where I was a trader and also help start their venture army. When I started the venture arm is when DRW started looking into crypto. That was kind of in the years of 2012-14. And then I left DRW, which by the way owns Cumberland Mining, which is one of the largest market makers in the space. I left to start Digital Asset.
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Bryce Paul
Awesome. And I mean Digital Asset, it's a great name. You guys must have been early because now, I mean, that's the name of the whole sector.
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Podcast Announcer
Right.
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Bryce Paul
It's like, you know, owning a company and it's called stocks and bonds or something. So tell me about that digital asset. What's going on there?
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Yuval Ruse
Yeah, I think tried to remember if we paid $5,000 or $10,000 for the URL back at that time.
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Bryce Paul
Greatest ROI trade in crypto history.
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Yuval Ruse
Well, with today's markets. Yeah, potentially. I think that when we started, and this is related to what we've been doing in Canton, the assumption and the thesis. And with today's New York Stock Exchange making an announcement which I'm sure we'll talk about, our view was that everything will become a digital asset. What drew us into the space was bitcoin. But our view was that every asset in the world, and not just stocks and bonds, but market data and other instruments that today we don't necessarily think about them as assets will become a digital asset that will live natively on chain. So we thought it would be good to call the company that. Problem is, when you try to optimize your SEO and your company's name is, as you said, the industry, it actually becomes pretty challenging.
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Bryce Paul
And it's, it's a great jumping off point for us because I think a lot of listeners, they think, okay, digital assets, you know, we've heard of that, but we don't really understand fully what a digital asset really is because, you know, you log into your brokerage account through your computer, you trade the S and P or you trade a stock and you think, well, that's a digital asset. Right? But there's, you know, the opposite of digital would be analog. And so there's a lot of analog things going on behind the creation and the trading and the settlement of that. Would you kind of give us a crypto, one on one overview of, you know, kind of what is the world that we're coming from, basically?
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Yuval Ruse
Sure, sure. And I try and I try and every time I try to find, you know, better and simpler examples. But, but let's, let's, let's start with saying that, you know, I'll take a very simple example. Imagine your, your significant other is heading home, and, you know, you're sitting at home watching Netflix, and you know, she tells you, I'm heading to a very important event tonight, I would really need my dress to go from the washer to the dryer. And you respond, no worries, honey, I got it. And she comes back home and of course, what do you do? You're still watching Netflix, right? You didn't totally space.
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Bryce Paul
I'm so sorry.
- [04:39]
Yuval Ruse
Exactly. And then the process of reconciliation starts, right? You know, that very simple example is how financial services work today. We send a lot of messages to one another. All of these messages get acknowledged, right? There's even a record of those messages. The reality is that we have no control or say over what the other party is doing on the other side. And as a result of that, even today, when we think about the US Equity market being very efficient, the most advanced market in the world, as a result of that, we have a lot of these types of reconciliation, like the example I just described, there's a lot of trade breaks. And as a result of that, beyond the fact that there is quite a lot of costs associated with running these markets, there's quite a lot of friction. So a lot of times we will talk about T +1 settlement things like that. And to be honest, when you start going to other asset classes, it gets worse and worse and worse. Process of reconciliation. And Bryce, as you said, kind of like this analog intervention becomes even more tax, tax heavy to the point that there are loans that take over a month to settle, annuities will take two months to settle. Like there's real, real consequences. It takes about a month to process a dividend and just maybe just to make it just very simple to the, to the, to the actual consumer. Well, if it took about a month for your dividend to settle, it means that for a month you're not sitting on cash that you are entitled to. And although these numbers are small, when you think about it in the context of the industry, maybe small from a, from a very, you know, simple kind of consumer person. When you start thinking about the numbers in aggregate or even for some of the largest participants, these numbers matter. I mean, in today's interest rate, if you sit on a million dollars for a month, that is not a small amount of money. So the consequence of this, as you said, I really like how you said it, this analog processes that still exist, there's quite a lot of friction in the system. And that friction leads to certain things that you would love to be able to do. Now if you contrast that with what is a digital asset. A digital asset is, and I immediately start saying that it's an asset that exists on a blockchain, but let's try to leave blockchain away. It's really an asset that was born fully digital, has only digital representation and sits on rails where reconciliation is not needed. Right, like that to us is what a digital asset is.
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Yuval Ruse
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- [10:08]
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Bryce Paul
I'm curious and this wasn't in any of the outline or prep notes. So feel free to skip this question. But I'm just curious about like, you know, you being at drw, being at Citadel. Do you have any, like, fun stories that might have reflected some of this friction or some of this, like, oh my gosh, I can't believe the analog world works this way that might have accumulated or led towards the, the creation of digital asset.
- [11:20]
Yuval Ruse
Yeah, I mean, when you, when you, when you sit down and actually are involved in trading all day. So I was doing, I was making markets in ETFs and a lot of the trade is putting ETFs against their underlying basket. And every day you have to borrow securities. When you actually start looking at some of the rates that you're paying for these funding activities, and you start kind of like digging deep. Why are you paying for those funding? Or why? And what are the mechanics? And why does it take certain things, the time that it takes them to settle? You definitely ask yourself, is there a better mechanism to do that? I would say that when I was trading, I wasn't necessarily thinking about what I know today, but it definitely triggered these questions. Now as I started learning more and more about Bitcoin and then thinking about can you actually bring that kind of user experience or management of, you know, financial ledgers to the tradfi world where I was coming from, then my eyes opened and those opportunities became really, you know, very, very clear. I mean, if you just think about, you know, you take that user experience in defi of lending and you say, everybody owns their own assets. I can pledge my equities wherever I want based on whoever is going to pay me the most for my equity to borrow it. I can tell you that some initial analysis of the financial outcome that that means and not just for institutional players. I mean, today when you think about just a consumer that is holding their securities at a brokerage, when they actually allow their securities to be lent out, they don't really see any financial return for that. So I actually think that the deeper I went, the more excited I got about the opportunity.
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Bryce Paul
I love it. And then from there, digital asset was really responsible for the creation of Canton Network. And I want to do a deep dive with you. And I'm curious just at the outset, is there any relation to the naming from like the Swiss canton states and stuff like that? Or, you know, because everybody thinks, you know, Swiss cantons, like these, you know, federations and stuff, and everybody wants the Swiss banking system. And did that kind of come to bear on the name it?
- [14:04]
Yuval Ruse
Yeah, it is. So our tech team, first of all, is out of Switzerland. But it's also that the design of Canton is very much aligned with, I guess, the architecture of the country. And maybe just to explain what I mean by that, when you look at most crypto protocols, they're very homogeneous, meaning the protocol has a privacy model that is kind of set within the protocol. There's one way. There's one way to do things. There's a lot of.
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Bryce Paul
For like all the users, they're all kind of like the same class, essentially.
- [14:44]
Yuval Ruse
They're the same class. You either kind of build on the chain and you accept that there is no privacy, or you build on the chain and privacy is done in a very specific way. And our view is that protocols should be very thin and let the application actually dictate its properties. And if you just look at one very good example of probably the most successful, not probably the Internet, the most successful public network, which is the Internet, you know, we can have websites like Chase.com which probably will have the most kind of stringent, you know, requirements alongside with some very shady websites. And they all can coexist on the same Internet. And then there's going to be all shades of gray in the middle, right? You can go from the most strict to the most permissionless website, but they both coexist on the Internet. So first of all, our view was that applications are not homogeneous in nature and they will have. You have to give the creators of those applications the freedom to kind of dictate whether they are permissioned, they are permissionless. Do they have privacy? Do they not have privacy? And again, all the shades of gray in the middle, right? Can they have permissioning on certain things, like how you go. If we choose, again, Chase.com, when you go to the landing page, they have their mortgage rates, they have the types of products that they offer. You might see some information about the stock market. But the second you want to open a checking account, well, you need to be permissioned, right? And again, that's just because of that is the business that they're in. So when you think about the Canton design in Switzerland, right, Different cantons have their own tax rates. They even spell canton differently. If you're in the German side, it's with a K. If you're in the French side, it's with a C. They have all kinds of rules, and it's not just taxes, it's all kinds of other rules. Yet when you take a train or drive between the cantons, you're not Going like, wow, I'm switching from one country to another. No, you're still under one country. So what we wanted to do is we wanted to create a user experience of being in one network, but have an architecture underneath the hood that can serve many different types of builders.
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Bryce Paul
I love it. And it really does enable this like institutional grade infrastructure for all sorts of different financial, you know, institutions basically to come on. And I know that I've seen lots of investments from BNY Mellon and I Capital and NASDAQ and S and P and the dtcc. And so how, like, you know, how are they, you know, I guess some of those names or just in general, how are they using Canton Network? Plus, there's been, you know, I think I saw trillions of dollars of settlement on the platform. How are they using it?
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Yuval Ruse
Sure. So if we can just start, I think, I think that those names are extremely important. But I do want for the listeners to understand one thing. I think that, you know, one of the things that was very attractive to me about crypto is that what crypto allow is for the end user and any person on a piece of an infrastructure that today you wouldn't be allowed to do. Right. And I think that that's, you know, have been for a very long time the promise of crypto. Unfortunately, in most cases, with, with an exception of maybe a few examples, those have been empty promises. But first of all, I think it's an important thing to say that, you know, everybody can own a piece of Canton. And. Although having those names is critical, it is critical because of what I'm about to explain. Right. So when we started talking about, well, what is the goal of Canton? The goal of Canton was to bring financial markets natively on chain. And the reason why we want to do that is again, I gave this example of, I don't know, let's imagine, Bryce, that you have in whatever is your broker dealer, $100,000 worth of Apple stock and now you want to renovate your house and you need $20,000 today for someone with that kind of a balance, you can't really go and pledge your equities as collateral against the loan. You just can't do that. You can probably sell, pay taxes on it, wait for it to settle, and then use that money. But there is no good ways. You can maybe go to your bank. In some cases a bank will give a personal loan, but those things are not trivial yet when you think about crypto, I can pledge my assets in real time into AAVE and get USDC against it. So I think that directionally that's kind of the North Star is like how do we enable markets on chain? The reason why those names then become important is because that's where the assets live today. Whether we like it or not, it's just a reality. You mentioned BNY Mellon. I can't remember. The number is staggering. I can't remember if it's like $17 trillion. Can't remember how many assets they custody. A lot. Exactly. A lot would be a good, a good way to describe a metric crap ton. Yeah. When you look at NASDAQ in terms of depth of liquidity, there is no comparison. It's really, it's nice and nasdaq. So the reason we went after those players to begin with is because we wanted first of all to bring the most highest quality of assets to the network. We wanted to have the depth of liquidity. And you know, that's not where we stop. We also then wanted to engage with crypto native firms because they have experience. Once you have these type of assets, like we gave this example with aave, how do you build, how do you build financial products that can benefit the end user? So that's why those partnerships are important. But it's not just to satisfy, oh, let's just take Wall street and bring them on chain. It's really trying to make sure that, that we can, as a result of them joining, offer better products to the end consumer. And my team just sent me the information. BNY have $60 trillion assets under custody.
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Bryce Paul
Whoa, that is wild.
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Yuval Ruse
That's a lot. So sorry for this long intro to answer your question. So what these partners are doing is they are in many cases bringing assets. So bny, for example, announced tokenized deposits. So that's bringing cash, cash accounts on chain, which is, you know, similar, not identical to announcement we did with JP Morgan Broadridge have onboarded to the chain Treasuries to enable secured lending against Treasuries, which is called repo. You know, there's the announcement with the DTCC on U.S. treasuries and you know, DTCC also received a no action on US equities. But you know, we have partners that are bringing mortgages, life insurance, annuities, commodities, equities, fixed income, private equity, private credit, different types of assets. And then we work also with the defi players. Okay, well if you had these assets, what kind of cool applications can you offer the consumers as a result of it?
- [23:09]
Bryce Paul
No, that's awesome. Incredible stuff. And I guess, you know, would the vision be that alongside, you know, just to take chase.com for example, alongside chase.com, where you still do your, you know, banking applications and so on and so forth, that they could also have some kind of application on the Canton network that could help their consumer? Or is it that eventually Chase.com will be replaced entirely by, you know, their application on Canton?
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Yuval Ruse
I wish, I wish I could say yes to that. But it's early days. I mean, I think that at the moment what these institutional players are doing is they're launching these products and no different than the Internet in the early days and cloud and now AI. What they are doing is they are learning what is the best way to offer these products. So I'll say again, I wish that Chase.com will run natively on Canton, but I don't think we're anywhere close. But in theory, it could work. Right now the focus is how do we offer product that have an incremental value to the client, but also opens the door for business opportunities that were not available. So very similarly speaking, you know, Broadridge is doing, is doing repo, which is traditionally a US treasury kind of product, but tomorrow you could also offer secured lending against other tokenized assets that exist on Canton. So that's just kind of early days. I would say that most cases in crypto today, people are trying to find product market fit on a very kind of narrow kind of corridor of a use case and then build from there and expand into other areas. I love it.
- [25:04]
Bryce Paul
Well, I've gotten some questions in the past about sort of the. Like, there's a website called RWA XYZ which kind of tracks a lot of the total value locked of different networks and platforms and stuff. And they have this delineation between asset Type with distributed RWAs and representative RWAs and so distributed, meaning that the RWA tokens are using the blockchain as a distribution layer and allows folks to subscribe, hold and manage assets directly in their wallets. And the represented tokens are allowing the blockchain to be used as a record keeping layer, a reconciliation layer. How do you sort of delineate in your mind, like Canton's, Canton's, you know, use cases there, Are they all distributed? Are they all represented? Or is it kind of a mishmash of both?
- [25:58]
Yuval Ruse
First of all, I have to agree with that delineation. So sure, okay, sure. Yeah. And by the way, you know, the, the folks at RWA are very good friends and supporters and we like them, but they have to kind of manage their ecosystem and as a result of that, have created that delineation, which I have to say I don't necessarily agree with. Okay, perfect. And I'll explain why. To be honest, at the end of the day, the value of assets to be. The question is, is the blockchain being used to record who owns these assets and is the record of truth for these assets? And the case is in Canton? It is yes for that. And that is the case in both distributed versus represented. And I think that when you look, if I wanted to be an anti kind of some of these RWAs, in many cases, you would see that the big or lion's share in many cases of these RWAs are really foundations that have set on a large sum of treasury that really bought some of these RWAs to have a very nice PR with the asset manager that issued those RWAs. Did we actually bring in any efficiency to the asset class? Is there any utility being driven from an RWA being on a blockchain? My view is no. And the problem is, are we going to now get into that nuance? There are RWAs that have to be KYC'd before they can offer these RWAs for people to buy. You can't just buy them in a permissionless manner. Should we get into the nuance of saying, well, now we need to make a distinction and slice and dice and give all of the nuance? I think the answer is no. I think that the value of this technology was to bring capital markets on chain and allow that to solve problems that today you couldn't. And I think that that's what Broadridge has done. The ledger is the record of truth for these repo transactions. And the reality is that if you want to trade repo with Broadridge counterparties, you have to be very specific type of participants. Banks buy side firms and that's it. You can't just everybody join it. So, you know, from my perspective, you're going to see many types of use cases. I specifically don't find this delineation to be adding any value or actually making any delineation that that tells you that one is better than the other.
- [28:51]
Bryce Paul
I love it. No, that's, that's exactly sort of the, the insight that we're looking for. And here's another one that maybe you don't agree with or maybe you do, or maybe you never heard this, but I've seen a lot of chatter. You know, we spent a lot of time on X and stuff, people calling CC or the, the Canton Token the new XRP killer. And I just, I don't know if that's like a fair sort of statement or I'm sure you're, you know, on good terms with everybody over at the Ripple Labs. But how do you kind of compare and contrast the Canton network to something like Ripple?
- [29:27]
Yuval Ruse
First of all, I would say that Canton is the killer of nothing. Canton has a very specific mission which is to bring capital markets on chain. Of course, that mission gets represented in many cases. I mean, Ethereum would say that that's what they're doing. Right. You know, maybe Vitalik will disagree with them. As we've seen some from some recent posts, I think that the reality is that all of us are trying to solve this problem. Ripple have been very focused on payments and whether people will agree or disagree. I think they have done a great job building a really good brand and you know, we will see. I think that there's, you know, they just apply to be a bank. There's a lot of things that they can do. And to be honest, I would, I would, I wouldn't be surprised if you saw Canton and Ripple or Even other, other L1s collaborate and how do we make this industry bigger and more successful by actually focusing on each other's strengths. So, you know, I do see those comments. I find them entertaining to read. We did not, I will tell you, there is no internal presentation or any kind of document, a digital asset that talks about us being the killer of anything. To the best of my knowledge, there are definitely presentations that will talk about different approaches that we have taken compared to others and why we think our approach is better for the specific problem that we're trying to solve. And I think again, that is a very. Let me just take an example. Shielded transactions on zcash. Incredible technology. We can discuss the merits of the use case, but it has a use case that is not the use case that we're trying to solve. We think that shielded transaction will not be relevant in tradfi, will not be compatible with regulation. So are we the zcash killer because we are focusing on privacy as well? No, absolutely not. We're trying to solve a very different problem.
- [31:58]
Bryce Paul
No, that makes a ton of sense.
- [31:59]
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Bryce Paul
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Yuval Ruse
Yeah, so I think that we're seeing that, you know, NASDAQ, NYSE, BNY, CME, everybody's talking about 24. 7. I like to remind people that I think the opportunity is way bigger than 24. 7 trading. Again, it's the ability to move our asset. Frictionless. 24. 7 one of the things that you need in order to trade is to be able to move assets in real time. So if we traded something over the weekend, we need to be able to settle it over the weekend. It's really the enablement of 24. 7 that is the big opportunity here. If I can trade with you, Bryce, peer to peer 24. 7. It means that tomorrow you could offer me a loan against my stocks. It means that tomorrow if you Wanted to give me a credit line. You could do that against my stock. It's actually, I think all of the other products, beyond just trading that become exciting. And I think that it's great to see nyse, NASDAQ and all of those participants really kind of leaning in which we've been hoping would happen for the last 11 years.
- [35:30]
Bryce Paul
The bank, the bank of Bryce. That kind of has a nice ring to it.
- [35:33]
Yuval Ruse
Exactly.
- [35:34]
Bryce Paul
The bank of Bryce on Canton. There's a lot of, you know, kind of shifting gears, but I do want to get to the Canton token here to round out the conversation. But before I get there, I want to again kind of have another high level discussion point on the Clarity Act. And I don't know if you are close to those conversations or what your viewpoint is, but I'd love to just kind of get your high level view on, you know, what is the latest, where is this headed? Is it going to become enshrined into law this year? Are you bullish on it? Bearish. Like what's your high level view on, on Clarity Act?
- [36:11]
Yuval Ruse
I try not to make predictions on things that I really have no control over. I think. How about that? I think we will know very soon if it will pass.
- [36:24]
Bryce Paul
The ball is starting to break one.
- [36:26]
Yuval Ruse
Way I think, I think we will know within the next month if it's going to be enshrined in law. What is important is that, you know, so, so maybe not, not what is important but you know, in my opinion it would have been amazing if we had the Clarity Act. And again, I think, I think that for, for, for, for maybe a different reason. I think that you know, at least talking from, from, from my point of view and thinking about Canton, when we built Canton, we, we never thought like we need to have the law change or regulation change to allow, allow customers to, to bring markets on chain. The problem is that as a result of different versions of this technology and different things that have happened, it almost created this perception that the law does not enable blockchain based financial services to exist. I actually think it does allow today. The reality is that now when you think about large scale institutional players, they're kind of like well, we need clarity. We need you to actually say that that's true. And I think that that's why it's so important that it's enshrined in law. Because when you look at what happened in the previous administration, a lot of things that were allowed by law to take place where were chased down by regulators. If you are heavily regulated Institutional player. You just don't take those risks. Right. You're just very risk averse. And that's why even though, you know, we had like, what we've done with Broadridge has started during the previous administration, a lot of things we've done started during the previous administration. But everything, every small move that a client wanted to do, they would have to go to the regulator. And I can tell you that multiple times I talked to clients and they said, well, the waiting list to get a meeting with the regulator to discuss what we want to do with you is about six to nine months. Inherently, that kills innovation. Even if no one is there saying, look, we never told you you cannot do it inherently. That kind of friction, this is what they call operation choke point. They never said no, but they made it so hard that they've effectively choked the industry. Right. So that's why I think that the Clarity act is extremely important because I think there are still a lot of organizations that are waiting for it that could be very critical for the acceleration of adoption. Would not go in as hard as they should just because they don't have that clarity.
- [39:32]
Bryce Paul
No, I'm super, super optimistic on it. And yeah, I mean, it seems like there's been a big whipsaw in the odds ever since Brian Armstrong kind of came out and said that because the banks aren't going to give up any of their yield to stable coins, that he was going to fight it. And so, yeah, we'll see. Like you said, we're not going to speculate on passage of something that we have no control over. But it's something that I want all of our listeners to, to definitely stay tuned about because I'm sure next week or the week after we'll have some special episodes talking about Clarity Act. But Yuval, while we have you, I want to make sure that, you know, we have a full understanding of, of the tokenomics and the design and I guess primarily the thought behind the CC token, both how you think about it and how sort of the, the broader world of investors should be sort of thinking about it. What's the CC token?
- [40:27]
Yuval Ruse
Sure, at the end of the day it's a utility token. And if we take a step back, most of these networks, like I said, have pitched a similar story with the exception of Bitcoin and meme coins, which is they are going to become the platform for the next generation of financial services. And if that is the case, my view is that you should be measured based on how successful you are at doing that. You know, at the end of the day kind of also looking at companies like if I am, if I am a company that says I'm in the cloud business, what are you going to measure me on a quarterly basis? How much use in the cloud? Yeah, how much cloud did you sell? Who's using it? Is it sticky? Is it repeatable? Do you have, you know, issues, technical issues, like what is your global distribution? Right. Like those are the things that in crypto. No, I mean there are chains that are like still top 20 that nothing happens on them.
- [41:43]
Bryce Paul
Complete ghost chains, complete vaporware.
- [41:45]
Yuval Ruse
But you know, they've created a very, very dedicated community that is just not selling. So the price just kind of stayed there.
- [41:55]
Bryce Paul
The sunk cost fallacy has a quite cognitive bias on humans.
- [42:00]
Yuval Ruse
Yeah. And you know, it's great for the founders of those chains. I think that it still falls short of helping us as an industry. Had to, you know, the direction or the, the promised land that we have all kind of told, you know, these very dedicated retail investors. So you know, for us that was one element of the design. The other thing, the other thing is when you think about the creation of the Internet. So in the early days of the Internet it were the infrastructure companies that were the hottest thing in the scene. Like companies like Cisco, you need to have, you know, routers, switches, those type of things to make the Internet a thing. So you know, they were, they were extremely in high demand. I'm pretty sure that if you ask 20 something year old today, they might not even know what Cisco is. And you would know TikTok, you would know ChatGPT, you would know Cursor, you would know Google, you would know Instagram. And that makes sense. They are the ones that bring people to actually use the Internet. They own the customers. When you think of crypto networks, the infrastructure providers today still are the ones that earn all of the rewards from the network. So when you think about like the sequencer fees or validator fees, they're all owned by the infrastructure providers. Now do they, do they go to conferences? Maybe, but probably not. Do they think of new business models? No, it's not part of their job. Do they do marketing to attract new clients? No, not their job. Yet they take all of their rewards. And our view was that that is a very poor design because how are you going to have users? Or that the builders stay loyal to the network that you have created. And you can imagine yourself if you think of networks like Visa and MasterCard, imagine that, that MasterCard or Visa, I can't remember, went to Chase United, which is probably one of the most successful credit cards out there, and said, you guys are doing a great job, but we're going to stop paying you an interchange from the network. They will never use that credit card network ever again. But in crypto, somehow that's fine. And I actually think it's not fine. I think that some of the bad things about crypto happened as a result of that. You become, as an app or a defi protocol, very successful. You start making a lot of money and then you ask yourself, well, EVM is so easy to replicate. Why don't I just launch my own L2 with a centralized sequencer? From a customer's perspective, nothing probably have changed. They get the same product, same offering, but now the defi protocol, or whoever created that app owns 100% of the sequencer fees. That's a very rational business decision to make, especially with how easy it is to do it. For us, what we wanted to do is we wanted to have economics on the network that align with those that bring value to the network. We haven't solved it perfectly. Right. And there's some changes happening with the economics of the network, but at a high level, that is how it's happening. Right. Like if you bring traffic and volume to the network, we want you to be compensated for that. And it's not that the infrastructure providers are not important at all. They are actually very important. But again, kind of similar to today's Internet design. They are commoditized offerings. They need to have a positive profit margin, but they're definitely not earning most of the economics of Canton.
- [46:21]
Bryce Paul
Awesome. And as far as I'm aware, there. There was no pre mine. Correct. Like, and I think some of the early investors in digital asset didn't just get a whole bunch of token warrants and like, you know, be able to dump the supply. It feels like, you know, some stuff about the. The genesis of the token made it more attractive to the market at large.
- [46:46]
Yuval Ruse
Yeah. So again, if. If you go back to the problem that we're trying to solve, it's how do we bring some large institutional players to be comfortable running their business on chain? I think that a pre mine would have not landed very well. Right. So we did a fair launch. As you stated, the team, myself and my co founders did not get any token grants. Our token exposure comes from our equity holdings in our company. And you know, to us, that was an important component. The other component that is very important is that, you know, Canton is not a proof of stake. We have governance of the Protocol is by what we call the super validators. You can't buy yourself into a super validator. Super validators are only companies that add value to the network. To us, that is a much safer way to govern a network. And I say safer because, you know, I don't want to, I don't want to. This is not me poo pooing and proof of stake. But I do have a question of what happens when the TVL, meaning you have RWAs on a proof of stake network that are worth 100x the network itself.
- [48:06]
Bryce Paul
Right.
- [48:06]
Yuval Ruse
Security issue, maybe. How does proof of stake work anymore? Because the whole goal of proof of stake was it's not economical for you to buy yourself into a 51% chance attack because it would be not very commercial of you to do that. But if now suddenly the Network is worth $100 billion and the RWA on it is worth $100 trillion, well, maybe it is worth disrupting that network. Right. So for us, the governance of the network is disconnected from the financial ownership of that network. Awesome.
- [48:46]
Bryce Paul
Well, hey, Yuval, before we let you go, one thing that we like to ask guests that come on the show. We want to know what other crypto companies are out there that you think are really making a big impact in the space.
- [48:59]
Yuval Ruse
Sure. Maybe this will catch people a bit surprised. I said already on Bankless that I have a lot of admiration for Vitalik for his honesty around the directions. But so we'll give. I have two people and I think it's related to what we talked about. Building utility and actually driving usage. One is the head of the foundation at Solana Lily and Mike Cagney, who created Figure. I think that these are two individuals that have shown that good execution and actually driving activity really results in success. And I think we need more people like that in this industry.
- [49:48]
Bryce Paul
I agree. Yeah. I saw Mike Cagney give a presentation back in Austin. I think it was at like the RWA summit. And I was blown away with just everything he had to say. And it was funny. I think I even got. I got a letter in the mail one time from Figure about blockchain based HELOCs, the home equity lines of credit. And then I saw him in person. So I went up to him, I was like, hey, I got one of your letters in the mail one time. He's like, oh, is it for the heloc? I was like, yeah, on provenance. And so I thought that was pretty cool. Yeah, I'm very impressed with him. And of course, Solana, we love everything that Solana foundation is doing. So those are some great call outs, man. Yuval, this has been very enlightening and we greatly appreciate your time. But before I let you go, I just want to sort of ask, is there anything that we didn't touch on, anything that, you know, we should kind of elaborate on more that you think would serve the good citizens of Crypt Nation? Or should we, should we break?
- [50:50]
Yuval Ruse
No, I think, listen, I think, I think at a high level this was very good overview. Our view is eventually utility wins, right? Like eventually the laws of physics will win and whoever brought actual utility to their network will win long term. Love it.
- [51:13]
Bryce Paul
And that's what you're doing. And we're going to be here cheering you on and spreading the good word and hopefully having you back on at some point again in the future or other folks from your team to dive into different, you know, niches within the Canton Network. But until then, I hope that you enjoyed and I hope everybody listening at home also enjoyed. Where can people find out more? Where would you like to direct all of our listeners to go to next?
- [51:38]
Yuval Ruse
Sure. On X it's a Canton network or our website, digitalasset.com you can also go to the foundation website, but those are probably two places and you can just follow me and it's, it's just evolvers.
- [51:53]
Bryce Paul
Beautiful. Well, Yuval, thank you so much for joining us and we wish you a great rest of your start to the new year, I guess, and we hope that we'll see you soon.
- [52:02]
Yuval Ruse
Great. Thanks a lot. Take care.
- [52:17]
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