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- [00:00]
Vivek
Ethereum proof of stake, the merge. And the more I saw this, I was like, this is the best product market fit for upgrading Wall Street.
- [00:06]
Raoul Pal
I find it hilarious, what a year and a half, two years ago, people like ETH is dead. The entire banking system will go to eth.
- [00:12]
Danny
We're trying to find the right end, build the right tech, get people so fucking excited about this thing and how much money they're going to save or how much money they're going to make, but they can't help but jump in.
- [00:21]
Vivek
Wall Street's all based on incentives. So as long as we can get the incentive in the right place, anyone will move. And the good part is blockchains are incentive mechanisms.
- [00:29]
Danny
Something like 110 trillion dol. The $200 trillion of investable assets in the world are managed by financial institutions. It's like, I think we got to have to crack that nut if we're going to make the impact in the world.
- [00:41]
Raoul Pal
However big Ethereum is, because there is the token that exists and it's fractionalizable. Every single person on earth can participate. And that's the big difference. Today's episode is brought to you by Abra. Abra provides high net worth individuals and institutions with a competitive edge in trading, investing and collateralized borrowing while maintaining full control through segregated account infrastructure. So if you're looking to gain to additional liquidity, Abra is one of the most competitive loan products on the market. You can borrow against Bitcoin, ETH and Solana at up to 50% loan to value. Rates are in the 4 to 6% APY range and at open term you can continuously draw down against your collateral as the price appreciates. Abra has other strategies to add yield and their team is happy to help align your portfolio to your risk profile. Reach out today and get a complimentary consult on your portfolio. It's worth seeing if they can help manage your allocation, reach investment goals, manage risk and add some additional yield. Go to realvision.com abra and tell them I sent you. Hi, I'm Raoul Pal and welcome to my show the Journeyman where we travel to that nexus of understanding between macro crypto and the exponential age of technology. Now I've been talking about the institutional adoption of blockchain for a very long time. In fact, I think I wrote my first ever piece on it in 2014 and said that Wall street is going to use crypto Rails. It took a long time to get there. First they adopted the ETFs, now the regulation changes and now it looks like they're coming in size, they want to trade equities, fixed income futures, everything will end up getting traded on chain. But there's many more ways with which the financial institutions can interact with blockchain technology. And at the heart of all of this has been a thesis that I've held for a long time as well, which is that Ethereum, which has the most proven Lindy effects out of all the smart contract platforms, is likely to be at the epicenter of it. And I maintain that today, yes, many other chains will participate, but a lot of it is about do you get fired for using Ethereum? And the answer is no. It has more developers, more depth, more liquidity, more proven lindefx. And so generally speaking that's where we should see a lot of activity coming. So it was important to me to dig into actually what's happening. I've been Ethereum bull ever since I discovered Ethereum and I've made a lot of money in that trade and I still think it's got a lot to go. So I think no better talk to than Vivek and Danny from Etherealise. These guys are building out the institutional rails for Ethereum itself and I think they're going to give us some really good insights on where this is all going. Today's episode is brought to you by Consensus Miami. Well, I'll be speaking on the main stage with leaders from the White House, Galaxy, Solana and more this May 5th through 7th. Unlock everything from crypto at scale to institutional integration and agentic commerce. All the forces driving trillions on chain and reshaping finance forever. 20,000 decision makers, three action packed days. Deals get signed here, funds get raised here. The next cycle starts here. So join me. Get 20% off with code Raoul R A O u l@consensus.coindesk.com See you there. Join me Raoul pal, as I go on a journey of discovery through the macro, crypto and exponential age landscapes. In the journeyman, I talk to the smartest people in the world so we can all become smarter together.
- [04:16]
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- [05:15]
Raoul Pal
Vivek. Danny, great to see you on Real Vision.
- [05:17]
Vivek
Thanks for having us and good to see you.
- [05:20]
Raoul Pal
Yeah, should be fun. This is going to be a conversation I'll be actually wanting to have for a while about what you guys are up to because it's kind of squarely where I think the world is going. So I think as ever, let's start with your backgrounds because you're both wildly different backgrounds, which is half the fun of this. So Vivek, do you want to. Do you want to start? Because you're more my background.
- [05:37]
Vivek
So I'm more of your background. I feel like we've had the same vision for a long time and I think it's all going to happen right now. And so I was on Wall street for 12 years. I was on the sell side, was not at Goldman, but was everywhere else. Morgan Stanley, ubs, Deutsche bank and Nomura. And I was a credit trader. So I traded all things from high yield bonds to distressed bonds to credit default swaps to loans. And I loved it. I mean frankly, I absolutely love Wall Street. I love all the people, I love the motivation, I love the culture.
- [06:05]
Raoul Pal
Really. What's wrong with you?
- [06:09]
Vivek
I did not love the technology, believe it or not. The only thing was there wasn't enough of a sci fi future. There was watch a lot of your stuff. I love the exponential mindset and I love the positive sun mindset. There wasn't an exponential growth era for Wall street. So I, so I left, which is hard to do because most people have pretty good careers there. But I left after 12 years, landed in Austin, Texas, immediately got introduced to this thing called Ethereum, met a guy at the Ethereum foundation who was working for this.
- [06:35]
Raoul Pal
What year was this?
- [06:37]
Vivek
This was 2020, so pretty late. I'm not an OG in the blockchain space. I come from the Wall street background. But in Austin I met this guy at the Ethereum foundation who was working for this guy named Danny Ryan who is a mythical person behind Ethereum and he started teaching me everything about Ethereum. Proof of stake, the merge. And the more I saw this, I was like, this is the best product market fit for upgrading Wall Street. Like, I know exactly what's wrong with Wall street operations and settlement and trading and how to it needs technology badly. And so that's always been product market fit to me. So I come up with a pretty pragmatic view. And the deeper I got in, the more I was like, Ethereum is not just the tokenization platform, it's the everything platform. And ETH is one of the greatest assets I've ever seen looking at from a fixed income lens, from a Wall street lens, from a technology lens. So, yeah, I've been building ever since and then we'll get to Etherealize. But this is all crystallizing a year and a half with Ethereal as being sort of the big bang that we want to bring for Ethereum.
- [07:32]
Raoul Pal
So, Danny, do you want to give your wildly different story?
- [07:36]
Danny
Yeah. I lived in New Orleans. I spent a long time or a few years after college trying to not have a job. Did freelance work, did a bunch of random stuff. A friend of mine sent me an article in 2016 about the DAO. It was a New York Times article and I think they were saying largest crowdfund ever. And I'd heard about bitcoin, hadn't had the aha moment, read about it and was just like, oh shit, this is crazy. Like you can I, you know, like had that moment that I think a lot of us have had sent my first mainnet transaction at the time, sat next to a friend and said, as I funded the dao, this is not going to end well. It did not. But crash course in blockchain learned, you know, not only about how you can do things on top of them, but how they're Architected. Beginning of 2017, said, I'll give myself a year to make this my work. I don't know what that meant. I started contributing to open source repositories. I started being on random calls with Vitalik and like literally my heroes. The end of 2017, got hired to the EF. Ended up running their research team, then largely the research group, then the whole kind of technical infrastructure at the ef. Did a lot of the research, specification writing and coordination for major protocol upgrades during many, many years. Seven, seven, eight years over there, my baby was, was the merge. There's many, many people's baby, but it's what I worked on day in, day out for a very long time. Came up for air in 2024. Well, I actually got served by the SEC in 2024.
- [09:12]
Raoul Pal
Nice. The Rite of passage
- [09:16]
Danny
and then decided to part ways with the EF to see what else was going on in the world. Saw the world rapidly change from being served by the SEC to the SEC welcoming people in to have conversations. Got linked up with Vivek and saw the thing that I've been passionate about, the thing that I was confident could and would change the world, that there was actually a major opportunity at this point in time to make sure that we start using it in substantial ways and world changing ways. So here we are.
- [09:47]
Raoul Pal
So what was the idea behind Etherealise? Whose idea was that? Was that you Danny, or you Vivek, who kind of got together with this?
- [09:54]
Vivek
For a long time I thought Ethereum had clear product market fit and the world didn't agree with me after I left Wall street. So, so I mean talking about blockchain and crypto to banks as, as you know, Raoul, for during the Gensler era was, was a non starter. And so from 2020 to 2024 when we actually started Ethereal, we have big networks across Wall street, across the buy side and sell side. And I thought this was the technology that was going to take off and everyone agreed but no one wanted to actually do anything. And so when we reached that inflection point in 2024 when the, when the regulatory regime changed, Ethereum was scaled, it was ready and there was, the opportunity was right then there was a vacuum where even though again the stars were aligned for real adoption, there was no institutional arm for the Ethereum ecosystem. And the problem is there's a lot of other blockchains that are pretty centralized, that have foundations that run everything. And so you're up against companies that are seizing the moment for adoption. And Ethereum, which is this beautifully decentralized Internet like network, had nobody. And so we stepped up, we had the opportunity, we connected with Vitalik, got a small grant from him and some sign off from the EF to say let's go build an independent organization to go out to Wall street and educate Wall street about why Ethereum is the best, most credibly neutral spot for tokenizing the world's assets. And there was a, there was a blank opportunity. So we jumped on it and it's been, it's been completely inspiring then because there's, there was so much demand for people to be able to talk to Ethereum people and learn about Ethereum. And so when we stepped in, every bank, every asset manager, everyone wanted to learn and do things in digital assets. And so I mean, I'm just I'm inspired. The best people from Wall street joined us. People like Danny joined us. The greatest engineers in the Ethereum EcoSystem and the ZK ecosystem joined us. And that's the area lies.
- [11:43]
Danny
And so I jumped in. Soon after, kind of Vivek started leading the charge, doing broadly like BD for Ethereum on Wall Street. And in those early conversations it became very obvious that not only do they need to be educated, not only do we need to make sure, let's face
- [12:01]
Raoul Pal
it, let's face it, Banks are not going to take some bearded bloke with long hair and take him seriously. That's the issue, right?
- [12:08]
Danny
No, I think they seem to like talking to me.
- [12:15]
Raoul Pal
They like to get you in the door.
- [12:17]
Danny
We balance each other out. But it turns out there's a lot of stuff to build, right? It's like you have the backbone, you have the decentralized consensus, you have the security, you have the uptime, you have the tools, the smart contracts, the whatever. But piecing it all together in ways that substantially upgrade these markets, there was work to do, right? So that's, that's what we've, you know, we're, we're a champion for Ethereum in that space, but we're also spending a ton of time, you know, building the next generation of, of infrastructure for Wall
- [12:45]
Raoul Pal
street because I mean, right, I was like class of 2012, 2013 in Bitcoin and I think I wrote a piece, I checked back, I think it was in 2014. I wrote a piece about how everything had to be tokenized, all equities, all credit markets, all derivatives, all the whole lot, because it was the only way of dealing with this massive indebted system and who owns what at the epicenter of it all. I didn't even know about Ethereum then and eventually I got introduced to it and obviously followed that journey. I was a bit late to invest in it, but I then saw a lot of the. I'm a huge collector of digital art and NFTs and people don't realize that what that proven, I mean, still, the most expensive, valuable piece of block space ever sold is Beeple's. Every day.
- [13:31]
Vivek
Exactly.
- [13:33]
Raoul Pal
So it's proven to be the premier store of value. Digital art has not taken off anywhere else in the same way because it doesn't have the same effects. It's a real signal. I often think crypto's amazing at testing stuff and what you do is step back and you realize the signal from the noise. I think meme coins are capital formation mechanisms and also tokenized Attention but the instant capital formation is what meme coins have proven. And crypto loves taking something, breaking it to pieces by hyper speculation and then really what you get is the right answer. Obviously Ethereum then had defi summer which is still kind of not as big as where it could be. And then the rise of and we'll talk about this later, the kind of layer twos and some ability to scale faster and it became obvious to me and I found it hilarious what a year and a half, two years ago people were like eth is dead. I'm like no, no, the entire banking system will go to eth. That doesn't mean it's a mono chain world. But it's like I know how banks work. The moment I left the financial system I've used nothing but Apple. But when you're in a bank, every single computer is Microsoft because it's really for them about Lindefx, things that survive, things that you don't get fired for, things that are proven because nobody wants to lose their jobs over a new technology.
- [14:57]
Danny
I had to learn this. I had no idea. We've worked for a decade on making sure Ethereum's resilient, has multi client is distributed across the world, has 0 100% uptime. And I actually had no idea until I talked to the banks. I was like oh, I found a customer of decentralization. They just don't know it. They care about uptime, they care about resilience, they care about the thing that's been around for the longest. They care about the thing that no one can turn off. You just have to translate the language to them. And yeah, the no one gets fired for picking Microsoft is very real and it's in Ethereum's favor.
- [15:28]
Raoul Pal
Yeah, that's right. And also just the fact that there's so many developers because if not it's hard.
- [15:37]
Vivek
That's the other part too coming from the banks. We were on the trading floors, we saw trades settle. We know that there are pain points and banks aren't going to be first movers in adopting the most cutting edge technology. They want the most reliable things. So I'm not even the reason I think you're in my background are similar is we're more pragmatic. Obviously I think ETH should be a valuable asset in the world. Obviously I think Ethereum should be the most used blockchain but I'm also pragmatic to what is the easiest pitch and the easiest sale to everyone across Wall street and it's the safest, most Secure chain that's never had downtime. And so, I mean, if Wall street build on Bitcoin, they would, but Bitcoin doesn't have smart contracts. So it's okay. What's the other option? It's Ethereum. And so every proof of concept has been on Ethereum. Every major tokenized asset started on Ethereum. It's like laser. The Lindy effects are more important. And Ethereum is also getting better and faster and cheaper and scaling. So you can kind of have your cake and eat it too, of having the perfect system. And so we're here to amplify that.
- [16:36]
Raoul Pal
So Danny, talk to me about the faster, more efficient, cheaper. You know, the scaling of Ethereum has obviously been the big debate of everybody. And you know, did we fuck it up with layer twos or you know, know, have we just created just excess capacity for the. My view of layer twos has been always that we just created excess capacity versus current usage and it will accrue to the base chain over time anyway. But there's now a move towards changing, you know, the Ethereum itself. Yeah, let's do both.
- [17:09]
Danny
The layer twos will always have advantages or have reasons to exist, right? Like layer twos will functionally always be cheaper than layer one. Layer twos will always be more extensively kind of customizable than layer one and layer twos. By virtue of you being able to have smart contracts on layer one, they just can exist, period. It's like you can't really put the cat back in the bag. And so I think it plays to Ethereum's favor to have a massive optionality in this layer that inherits the security of Ethereum, enhances the network effects of Ethereum. Um, and, you know, and, and we're going to continue to work on how these things communicate, how they resolve state differences, all, all sorts of stuff like that. You know, asynchrony is easy, synchrony is hard. But with advanced cryptographic techniques, I think we're going to have some really cool stuff come out there. But one of the reasons many years ago that Ethereum went all in on that was it was the only way to scale out Ethereum without sacrificing decentralization of L1. And we learn a ton. We figure out how to do these constructions, we figure out how not to do these constructions and at the same time have built out massively advanced cryptographic techniques, not just in academic papers, but in production grade cryptographic techniques. I think we've poured literally billions of dollars into applied zero knowledge proofs applied ZK and now we have a lot of more tools at our disposal. So we can look back at the layer one and say, well, what if we integrate this new technique into layer one? Can we get scale, more scale out of layer one without sacrificing decentralization? And the answer five years ago was no. And the answer now is yes. So great, let's use advanced ZK and advanced cryptographic techniques to get more scale out of layer one. Let's use scalable data availability and extensible smart contracts to get scale out of layer two and let's have Ethereum be everything. I think the premise of this was like Vitalik had a post pretty much that. I think it was misrepresented, misinterpreted by many. And I think the post boiled down to two things. One, do better on the layer twos. Layer twos can be more secure than they are and they have to flip the switch and become more secure. And two, you know, like layer one will have scale. So have a reason to exist other than just scale for layer two. And maybe it's privacy, maybe it's global distribution because you're coinbase, maybe it's, who knows, there's all sorts of reasons you might have a customizable environment anchored into Ethereum.
- [19:47]
Raoul Pal
People underestimate scalability because they have no understanding of the scale of the financial system. They have no understanding of the sheer amount of transactions that happen in the speed that it happens and the value that it transacts. People just kind of think, oh, tokenized equities. They have no idea of what is required and how much.
- [20:08]
Danny
The DTC settled $4,000,000,000 of trades last year.
- [20:13]
Raoul Pal
That's right, you've got the DTCC then you've got Euro Clear, you've got, you know, I mean there's endless numbers. People don't even talk about the derivative markets. The OTC derivative markets are another couple of quadrillion dollars. And then you got the FX markets. The FX markets themselves do, I don't know, 5 trillion a day. I mean this numbers are stupid and
- [20:35]
Vivek
it's just naive for people to think that all of global finance can live in one layer, but it can live in one multi layered ecosystem that has interoperability, that has zk, that's future proof and that's what Ethereum is. And even zooming out from that, I mean a, we're such a, at such a earliest part of the adoption curve. That's why, yeah, people that say ETH won't accrue value is just they're not seeing how big the market possibly can get. And you obviously know that. But the other thing too is, it's something that brought me to become a bit of a layer 2 maximalist is, is from the bank's perspective, from the asset manager's perspective, people want to own their own businesses, people want to maximize profits. I always come back to, and my take is L2s are the best business model on blockchain. And it's not just me saying that. Robinhood said that Robinhood said, wait a second, we can get the security of Ethereum for virtually nothing. You can pay almost nothing. We can keep all our operating margins to ourselves and we get attached to the liquidity of the largest ecosystem out there with the most amount of stablecoins, the most amount of tokenized assets and we get to have extremely high margins and have our customers in our layer too. That's the best pitch out there. I mean instead of building your own blockchain, just build an L2 and hook it to Ethereum and you kind of have.
- [21:45]
Raoul Pal
Yeah. Although it's interesting to see that the market seems to be moving towards non publicly traded layer twos. The base idea, because they haven't accrued value themselves. They accrue value to the overall Ethereum ecosystem but they fail to hold accrued value. But you can see the value to Coinbase very clearly. It's slightly different I think.
- [22:12]
Vivek
Well you're talking about sequencer fees are high. So Coinbase, they make money from sequencer fees for base. And so that's one revenue driver that's. And from a tiny customer base. Imagine when you have the world on, on on layer twos transacting. Imagine when you have. I am the biggest consumer. I'm sure we'll talk about this later. Biggest consumer of block block space can be AI agents. When you have them transacting and doing a bunch of micropayments and transactions that's, that's going to accrue a lot of thieves to the people running the layer too.
- [22:39]
Danny
So there's, I do think that like the value proposition to Coinbase has probably been this more vertical integration. Like we, we have distribution, we have applications and we run the infrastructure. And like the infrastructure I think is, is, is doing well last time I looked in terms of the fees and revenues. But like it really makes sense because they're all in on creating an application or an ecosystem and treating it like a product. Whereas I think some of the layer twos that a lot of layers of twos that we saw in the Ethereum ecosystem over the past five years were just like, here's a scalable zone, do something with it, right? And maybe we'll have some token incentives, go do something with it. Whereas you know, if you treat them much more like these are places to create businesses, to create opportunity using this infrastructure, then I think you end up with things that look like Coinbase's base, which seem to work well.
- [23:26]
Raoul Pal
Yeah. Because not everything has to be a token. In terms of a tradable token, it doesn't need to accrue value that way because if you vertically integrate it within your business, it's part of your business infrastructure of which you can generate unique applications and other things. And a lot of people miss that point. So I think it's very clever, very interesting experiment that's being run. But my mind is like that feels like it's going to be the bigger answer, not the entire answer because there's room for everything in all of this. When you go and speak to banks, most of them have been into this space for a while, right? I mean Goldman was there since 2015. I mean everyone's been there. But quietly or asset managers, where is everybody right now and where is the pushback coming from? When you say how can we help you with this? Where's the pushback?
- [24:24]
Vivek
So it's been five years of pitching and speaking to banks and asset managers. Honestly, I view Ethereum as the most positive sum pitch ever. So I love pitching it because there's something for everybody. It's increase revenue.
- [24:38]
Raoul Pal
It's not a difficult sell.
- [24:39]
Vivek
Yeah, it's it, it really shouldn't be a difficult sell or so I thought for four years. But the reason it put etherealized together is because if all the tailwinds finally lined up so every, every objection got for the first four years turned into a tailwind. And so there isn't that much of a pushback. Like I don't want to sell some space age brand new technology. Like you said, the banks have been in blockchain since 2015. They know this is coming. They know that blockchains are the future. They're just constrained by regulatory parameters. So they couldn't use public chain so everyone had an Ethereum clone running in the background. I mean JP Morgan had an Ethereum clone running Hyperledger best suit. So again, this isn't new. The real unlock and saw this at the early stage of Ethereum no one could touch public chains. And then genius happened and so that's like the, that's the shout her on the world for Ethereum. Once genius happened. Public chains are now enshrined in law. Stablecoins are now enshrined in the law. The biggest product market, initial product market fit for blockchains are now in law. When we got called in front of Congress to testify about the Clarity act and we're like, wait, there's actually more legislation coming? That's when the tone started to shift and it went from banks and asset managers understanding this is a good tech, but not being able to adopt it to just complete fomo. So I think we are in that FOMO stage of we need to just like banks had to all adopt an AI strategy asap, they now have to adopt the blockchain strategy. And the gaps that remain are can they do it fast enough and can they build the right architecture and infrastructure? And that's why we stepped in. Like Danny said, we identified there's a lot to build and there's a lot of infrastructure layers from tokenization to privacy to customization, all on Ethereum. So we said, okay, let's build it so we can help accelerate this. But there's no pushback anymore. It's just how fast can we go and how many.
- [26:24]
Raoul Pal
Yeah, I mean, I'll come on to the areas that I know are sticking points for these guys, but stablecoins is obviously the pointy end of the stick. It's the easy way in now. Right, because everyone realizes that they have to do this.
- [26:35]
Danny
But importantly, what the Genius act did. So previously it was like public blockchains felt illegal or felt like they might become illegal. What the Genius act did is said you can do a legal thing. We made this legal thing with stablecoins. You can do it on public chains. And so thus banks and financial decisions, they're like, well, we, there's all sorts of legal things that we do and we can do it on this infrastructure because that infrastructure implicitly is legal because of Genius Act. So let's do legal things on that. You know, doesn't. That doesn't mean you can do Wild Buzz Defi with all of your classic assets. And we're going to need to see SEC regulation changes, we're going to see laws continue to evolve to like handle this infrastructure. But I can do, I can take the legal world of things that I can do and I can do it in a public chain now. And so that was, that was the biggest, like opening for them. And yes, stable coins are an obvious, like place that some of them are playing in. But largely, I think what they're really interested in is like how do we upgrade our processes, how do we upgrade back office operations, how do we encode the rules of assets on chain and not have to do all sorts of manual reconciliations therein.
- [27:41]
Raoul Pal
Therein lies the problem. Because the banks all operate in small conglomerates around certain things. Right? Yeah. And so you need to get everybody to agree to change the standards. And there is the hard part.
- [27:53]
Danny
Yeah, that's because they're all stuck on software that was built 20 years ago with a particular.
- [27:58]
Raoul Pal
But they all talk to each other.
- [28:00]
Vivek
Yeah, yeah.
- [28:01]
Danny
And the coordination problem is harder than the technical.
- [28:06]
Raoul Pal
Yeah, I agree.
- [28:08]
Vivek
But that's, I think we're going to solve a coordination problem. I think, I think that there is enough industry wide push and also so half our team is seasoned Wall street veterans saying that okay, we actually can get to a point where again, it's not a difficult sell anymore. It's more saying that we've had this era where you've had a lot of different intranets and everyone ran their own intranet and everyone saw how that went. But there needs to be a moment where you plug into the public Internet with your assets to actually unlock all the operational benefits and people get that. And they were constrained from a regulatory perspective. But I do think it's, it's the moment to bring a lot of the industry together and say let's connect to that public Internet. And Ethereum is that public Internet.
- [28:49]
Raoul Pal
Yeah. But that most Wall street banks are dicks. And there's so much ego, there's so much issue with JP Morgan, not once
- [28:58]
Danny
ego on Wall Street. I can't, I. Sorry.
- [29:01]
Raoul Pal
It's staggering. It's staggering.
- [29:05]
Vivek
I'm used to it. You're good. It's not, it's fine.
- [29:09]
Raoul Pal
Yeah. But it just makes the coordination problem, which should be simple actually quite hard. It's really hard to go, come on guys, JP Morgan, Goldman get together with this. They're like, well no, we think we're smarter and we want to do it this way because I've seen it a thousand times because Wall Street's got this coordination problem always in everything it does, you know, how do you settle derivatives? How do you do this? It's always been the same problem and it's really hard. The amount of, when I was at Goldman, the amount of times you saw these kind of industry groups trying to get together to solve a particular problem, I would suggest 80% of them failed.
- [29:44]
Vivek
Well, that's where the L2 use case comes in. It's how do we give someone Their own customization, their own business upside, especially as ZK infiltrates the entire not just blockchain, but AI stack journey. It's the most exponential technology that's slept on, I think. But as that happens, every firm can run their own L2. You can have groups of people running their own L2s. They can all talk to each other, they can all connect to L1. If you want that sort of security, L2s kind of let you have your kick and eat it too. So the coordination problem becomes a little bit more palatable when you have this Ethereum architecture where you can have different layers.
- [30:21]
Danny
But you're right, it's the Microsoft we have to find. We have to find the right domino and that's right. We're close. But I think if once one market upgrades, you know, it's going to be like when commodities went digital with, with ice in the 90s. It's just like there's no way everyone else is going to stay in the, in, in the pit. And so, you know that that's our job. We're, we're trying to find the big. We're trying to find the right end, build the right tech, get people so excited about this thing and how much money they're going to say or how much money they're going to make that they can't help but jump in. And then I think the rest of the markets are going to fall.
- [30:58]
Raoul Pal
Yeah, I mean, generally the state of the universe always goes towards more intelligence. So you're kind of. For me, how I think about the world is the universe solves for units of intelligence per unit of energy. Right. So what is always happening is you're always solving efficiency at scale and it always flows to efficiency. So faster, better, cheaper is the way of the world. It always has been and always will be.
- [31:27]
Danny
As long as you're not having local maximas. A lot of the time.
- [31:32]
Raoul Pal
Yeah, you do. But eventually it folds. The coordination problem solves itself because it has to. Because if there's a group of people who coordinate and they have increased profitability,
- [31:42]
Vivek
for example, everyone else has to follow,
- [31:44]
Raoul Pal
then they have to follow suit. So it does happen. It takes time. And then you've got. The other problem is you've got these very large moats in the middle of all of this, like dtcc, like nasdaq, like, you know, name them all. There's hundreds of them. And they're all basically monopolies or duopolies
- [32:04]
Danny
for a given market. When we're thinking about, you know, how do you upgrade that Market from first principles. You know, it's the first, it's like, how does the market work? And the second question is, whose vested interest is it for this market to not change? And those answers are large and profound. Almost every market you look at,
- [32:22]
Vivek
Wall Street's all based on incentives. So as long as we can get the incentive in the right place, anyone will move. And the good part is blockchains are incentive mechanisms as well as, and coordination mechanisms as well as technology. And so, I mean you're seeing it, the DTC is adopting, they understand they have to tokenize their stock, so they're adopting blockchain. NASDAQ is plugging into blockchain. So all, all, everyone's moving in this direction. And the bet we're making is the only place that you have all these large ego players. The only place you can have all the large ego players coordinate is a neutral playing ground. And so that's where Ethereum comes in. No one wants to use anyone else's platform. I think you've said this, I think Jake and Morgan doesn't want to use Golden's platform and someone doesn't want to use DTC's platform. But okay, the world lives on the Internet. What's the most neutral platform that's the most accessible? Everyone. That's Ethereum. And so that's why it's funny, that
- [33:14]
Raoul Pal
could actually, and as you guys both said, the layer two is actually playing to favor of this because it gives them somewhat a feeling of control because they can spin up their own chain. But it's within the ecosystem using the security of Ethereum, it gets them a lot closer to getting across the line.
- [33:32]
Danny
Sure, it's getting more and more, I
- [33:35]
Vivek
mean it's getting easier and easier and it's getting momentum.
- [33:38]
Danny
So I, absolutely, we might be able to use some crypto native ways. Here's a layer two infrastructure for a new market. The more you use this infrastructure for real use cases over the next X period of time, the more you own the infrastructure and you just design mechanism, design for incentives. That's not going to just work in a vacuum. But there are crypto native ways to think about solving some of these coordination problems.
- [34:04]
Raoul Pal
And also people have forgotten when I worked at Goldman, we were hiring more nuclear scientists and atomic physicists into derivatives than the entire outside world. That's why Goldman, the talent density in finance is staggering. Why? Because it's the closest to the money. It drifted to Silicon Valley in the end because Silicon Valley came closer to the money. But really there are some very Smart people there. So it's not like it's a bunch of pinstriped English bankers with bowler hats. These are some serious people. And I think, Danny, your approach of first principles actually will appeal to quite a lot of these people.
- [34:48]
Vivek
I think blockchains are spectacular because they're an engineer's dream in that there's so many amazing things to tackle. And this is why and just been incredible seeing the engineering come to etherealize. But there's zero knowledge, proofs, there's, there's cryptography, there's coordination, there's mechanism design. But the most important thing that also clicks for a lot of banks and asset managers. It's the only place where you can put digitized assets and money in the same place. And that's never existed before. So now that allows for transactions to be automat atomic. That allows for like, it's crazy. But a database where you can have money and assets is mind blowing. And so that's the upgrade. So yeah, we are getting as close to the money as you possibly can. It's going to let Wall street take back the narrative from Silicon Valley and auctions are going to be the way in.
- [35:37]
Danny
It's crazy.
- [35:38]
Raoul Pal
Dan, it's got to be weird for you because we spent our early days all fighting Wall street and wanting to upend the banking system and you kind of have to partner with them even though you are creating change.
- [35:51]
Danny
I, it depends on the estimate, but it's like something like $110 trillion of the $200 trillion of investable assets in the world are managed by financial institutions. It's like, I think, I think we gotta have to crack that nut if we're gonna make the impact in the world. And I, you know, there's, when you're thinking about upgrading markets, it's like you can make the markets more efficient. That's good. You can make the markets you have have potentially more access. That's good. You know, and that, that, that's, that's in line with my values. It's like more people having access to financial instruments and finance and you know, both in the US and globally. Very good. You can have, you know, more interesting products layer on top. There's all sorts of stuff that like they're not the black and white, like crypto anarchy answers in terms of, you know, the extreme versions of the values but like moving the world's markets to be more open, to be more fair, to be more globally accessible, to be more programmable, to be more. Those are all, I think, extremely positive outcomes. And they're really hard to get there. But I think with Ethereum and working from the inside out on financial markets, we're going to get there.
- [37:11]
Raoul Pal
So a quick break in your regular programming. If you're serious about your future, grab my free report called prepare for 2030. I think you've got five years to make as much money as possible and this guide will help you navigate what's coming. The link is in the description. Download it now. And also how I've always argued this is whatever gets built on it. However gigantic the scale of blockchain is in the future, however big Ethereum is, because there is the token that exists and it's fractionalizable. Every single person on earth can participate in the economic wealth that's generated from building this system out. And that's the big difference. It doesn't accrue to a private person, it doesn't accrue to a company where only some people can own shares in it. And I'm talking even public shares. You try and buy Tesla shares from Nigeria, it's not bloody easy, but by the time. But with something like blockchain and having the ETH token, I mean, that's a huge thing.
- [38:13]
Danny
Yeah, no, that's very interesting. Assuming rearchitecting and moving global finance onto Ethereum has a value accrual mechanism to eth, then everyone has access to that potential upside, whereas.
- [38:27]
Raoul Pal
That's right. So it's very egalitarian in a weird way. Even though you are driving capitalism, what you're actually also doing is allowing everybody to participate in it. If it works, everybody can make money. That's never happened before. It's like the Internet, but we couldn't own shares in it.
- [38:44]
Vivek
It's one of my favorite. It's the reason why I think ETH is such a convex asset and has such incredible properties. Because A, it's a store of value, B it's productive, you can use it in the Ethereum economy, it has a yield on it, and C, it has this embedded call option in it that as this system scales and becomes the base layer for finance and becomes the financial Internet, you can own a piece of that too. So a productive asset with a call option to become the universal platform and to own the next Internet, that's pretty attractive. So I think I always say all roads flow through ETH in the end.
- [39:22]
Raoul Pal
And in the end, ETH is the only blockchain where there is a currency that is used and goods are priced in that currency, which is digital art. I mean, everything I buy is priced in eth. I don't think of it in dollars. Right. I only think of it in ETH and I'm very comfortable, the whole market is pretty comfortable with that. And that's amazing, right? That's a money ness that nothing else has.
- [39:45]
Danny
There's also, I'm not sure exactly where it stands but I think the most liquid markets for amms are the ETH trading pair against most tokens, which it kind of functionally is pricing the exchange of assets on top of Ethereum.
- [40:02]
Vivek
And Ethan, I think one point on it being the trading pair, you know, the FX markets well. And in terms of global trust, if the world's assets are going to be tokenized, which I think is actually an inevitability at this point, like you can't put tokenization back into the box, then most tokenized assets have some sort of root in some regulatory jurisdiction or some geographic jurisdiction. But there's only one asset that is truly sovereign and truly independent and truly trustless and that's eth. So there is actually a world and this is sort of my hyperbole case for ETH is where it is the trading pair for coordinating across global economies. It's the only trustless global collateral and so therefore it's the best money out of any asset out there. And so it could be the trading pair for all tokenized assets. And that's where it becomes like the real collateral. It has a real exponential.
- [40:56]
Raoul Pal
Yeah, but the most important point is that doesn't matter, right? For ETH to be successful, none of that needs to happen. It just needs to do its job and let people build on it and we don't have to have the war, that ridiculous war that the Bitcoin maximalists have with everybody else. It's like it doesn't matter. It's technology in the end, right. It's just a very good technology of which we can all participate in and it's a big world out there and it'll be a multi chain world and we're all going to have to learn to speak with each other and that'll be great. And you know, you guys play an incredibly important role in the space because Ethereum is so big versus everything else, you know, but if I look at, you know, where smart contracts over time are going to go, it's only going to get larger because it's not just about finance. You know, we haven't even talked about. I mean the other thing you're going to have to learn is insurance because that whole industry is basically derivative Contracts or contracts that all has to be tokenized because it's much more efficient for the insurance industry. That's gigantic. The whole commodity industry is the same that needs to do. I mean, there's a bunch of them are already doing this. That needs to all happen. Then we've got the whole digital ID side of the entire planet as well. That has to happen. And we haven't got into the AI and the rise of the agents either. So I mean, it's a staggeringly big thing that has to happen here and kind of everybody needs to play their role in getting it across. Danny, one of the questions I want to ask you before we move into some of the bigger picture stuff is privacy is a big problem or privacy with banks and dark pools and who does what, because there's a very fair. And if you guys follow Mertz from Helios, he makes the point which is like not every transaction should be transparent and the banks certainly don't want it. You know, if Fidelity is settling for a program trade with Goldman, people don't want to know that that's happened, right?
- [42:55]
Danny
No, I mean we can't, we can't even think. We can't think about upgrading markets to use blockchains if we don't. Can't have as good of. It's not better privacy. Right? Like markets don't work. You know, there might be a market where you and I are going to make a trade. Some affiliated agency gets to see the trade, but maybe not the price, and then no one else gets to see it. And you can't think about upgrading and that market onto a blockchain if you can't preserve those same things. I think very fortunately for Ethereum, we maybe I said this earlier, but put literally billions of dollars into applied ZK because applied ZK brings us massive scalability gains with ZK rollups. But it turns out the same technology allows you to hide information and programmatically hide information. You know, reveal what you want to reveal. Hide what you want to hide. And so we now have efficient high level constructions to write privacy applications in. You know, we have ZK VMs, we have ZKEVMs, we have bespoke languages like Noir, we have lower level languages like circom. And increasingly, and I think this is going to be how we with math, embed privacy into public blockchains rather than, you know, there's many other types of constructions that I think people like to play with. But the ZK and the applied cryptographic constructions, I think ultimately they're just they are the winner. You know, so a lot of what we're doing at Etherealizes what is the right stack to program private institutional workflows onto Ethereum. And largely that looks like zk, largely that looks like some of the high level languages that have come out in the past few years. And we and many other people across the ecosystem are leveraging these tools to do exactly what we need to do. And I think one of the biggest myths on Wall street right now when people are talking about Ethereum is, well, Ethereum's not private. Well, it's not, it's a public, private coordination layer. And you can write public contracts that have very explicit logic that everyone can read, but you can also write public contracts that commit to private realities and commit to private logics that you can embed on these chains. And so, you know, I, I, I think a year ago, two years ago, the answer was, well, we're, we're pretty much there. I mean, the answer now today is we're there and we're building it and we're going to see people adopting private workloads on hopped Ethereum more and more.
- [45:32]
Raoul Pal
So when we talk about pushback that you get, we talked about the coordination problem, we've just talked about privacy, which is another one that I've written down because I know that comes up a lot. Quantum will be the other. Just like, how safe is this in fact? Might as well ask Danny. Danny, where are we with Quantum now? Because I know that's the other hot topic.
- [45:53]
Danny
There was a paper release yesterday, the day before, and it turns out we're closer than we, you know, there were some, some speedups in some of the classic algorithms, which interestingly, they didn't reveal the full algorithm for the speed up. They did a ZK proof that they had it, which is kind of cool. They wanted to hide it either for safety or maybe proprietary reasons. Nonetheless, I, you know, one of the big design considerations for Ethereum over the past decade has been not always, not necessarily to use a quantum safe component for every component, but that every component needs to have a quantum safe analog. So even though we might be using non quantum safe cryptography for component X, we know that there exists, maybe it's not production ready yet, five, six years ago, but we know it exists in a theoretical standpoint and we can swap it in when we need to. And so a lot of the, a big effort of the Ethereum foundation over the past 12 months has been, oh, yep, pro Quantum's coming, it's coming faster than we thought. We need to expect it to continue. Our timeline estimates to continue to accelerate because of AI and all of those quantum, quantum analogs that we knew about. We need to actually have like a very robust plan to execute. You can go to like pq/quantum.ethal.org, and there's a very robust plan and some of the smartest people in the world working on figuring out how to roll that over the next three years. So I'm not terribly worried about it. Now is the time though. If your blockchain is not working on post quantum, contact your local core dev and say this is definitely a problem, you should be working on it.
- [47:34]
Raoul Pal
So Vivek, what other pushbacks are you getting outside of just that, the coordination and just get working through the, the machine? It's a, you know, these are big machines, these banks and financial institutions and all of that. Anything else we're missing still you always
- [47:50]
Vivek
get the regulatory question, especially around not just privacy, but zk. But the very inspiring part is we're not just saying ZK is, is the future because it's, it's the right technology and it's a very, very far spanning technology. Again, it's going to go beyond just blockchains. But because the regulators are asking about that like we, we were, we were talking to Congress recently and educate, educating them on what's possible with zk. Our general counsel, Stevie Elderman did a panel in December with the SEC on ZK privacy. So, so a lot of the technological aspects of, of privacy and the regulatory aspects of privacy were blockers before. And as Danny said, they're the headwinds are now becoming tailwinds where they're saying, okay, there's multiple ways to do privacy. Some are just keep trust in the system and don't use math. And that's like saying don't use AI when AI is inevitable. So that was one headwind that's not becoming a tailwind. Otherwise it's more just how do we upgrade the system in a way that we're not left with a system that's worse. And so that's the real pushback because if everyone just runs their own internal experiment, it's actually more costly and doesn't actually create benefits. And that's why, I mean, you saw Larry Fink earlier this year come out at Davos and say this experiment kind of all has happened in one common blockchain ecosystem. And so that's the solution that we're bringing pragmatically is saying you want interoperability, you want liquidity in one place we have one Internet and so we have one blockchain ecosystem. So that's part of the pushback that was there before is that everyone's just running their own experiments. Comes back to your coordination problem. I think that's starting to call a lost round one winner.
- [49:32]
Raoul Pal
I think there's another problem that you're unlikely to be underestimating. But I think it's a bigger problem actually is the speed of technological development right now is fucking staggering. Right. We're not in Metcalfe's Law, we're now in Reid's Law, which is Metcalfe's law squared. We're seeing it in every chart, right on the log chart. When it goes vertical. That's very difficult for a bank or even you guys to plant a flag in what we building. Because if you're building the DTCC from scratch, you would build it very differently to work in a world for 10 years time where it's entirely agentically run than what they've got. And that's a really hard thing because a lot of the institutions at the core of this are not technologists, they're monopolists. And we've got a huge problem because everything is going vertical. I mean none of us have lived through anything like humanity's never lived through anything like this. And we somehow have to navigate it. How the hell do we do that? I don't know.
- [50:31]
Danny
And I spend a lot of my time racking my brain around that was a good answer.
- [50:34]
Raoul Pal
That was the right answer.
- [50:35]
Danny
I don't. Yeah, no, I mean we're at the, like we stand at or inside the event horizon and if you, if someone says they know what it looks like in 12 months, and especially they say they know what it looks like in three years, they're wrong. They're fucking wrong. Like, and you know, I, I think, I think a lot about like what is the value that we can bring here? What is the. And and what are the things that remain in the world is going to change massively. And I think the answer is agent of finance is going to take over the world faster than we, we think agents speak protocols as their name.
- [51:12]
Raoul Pal
Why is a financial institution, once you've got where you can break it down to coordinated agents that self coordinate, it becomes actually a much more intellectually interesting thing than what currently exists. And it can happen at a speed that we don't really understand.
- [51:27]
Danny
Yeah, and secure agentic finance that can handle $10 billion workflows is like one of the most important things I think we can work on when we're thinking about upgrading for the future and when we're thinking about what are agents going to do? They're going to want to come to agreements with each other, interact with each other. They're not going to send you the asset and then send you a funding memo for you to send the wire after. They're going to want atomic swaps, they're going to want agreements, they're going to want to coordinate, not only in the US but globally. And so a neutral infrastructure. When we're talking to banks in the eu, they were pitched on putting a stablecoin on Solana. They're like, hell no, of course we're not going to do that because they see it as this U.S. entity. And so agents, it's only going to be more you, you, you don't want this global swarm of agents coordinating over protocols. And they're going to coordinate over liquid protocols. The A, you and I or two agents could just spin up their own protocol to communicate with each other, but they're going to want to go where the assets are. And the only reason they're not going to make their own protocol on demand every time is because of liquidity. And liquidity, I think, is going to be one of the liquidity and probably like security, the lendiness of security. It's like that's the moat. That's the moat in the AI future. And institutional finance or not, Ethereum is the only answer, which is really exciting a couple of years ago.
- [52:51]
Raoul Pal
Whether Ethereum is the only answer or not, I don't probably agree with that. But I would say that at a base layer, if you talk about the base currency, kind of makes total sense. Now the other thing is, Vivek, if you think about. I've been thinking about this a lot. If you think about a business like Millennium, gigantic hedge fund, what do they do? They allocate capital to a bunch of pods which are internal teams that run capital. That's a very expensive process of which most of those in the next three years will be replaceable entirely by agents.
- [53:35]
Vivek
By agents.
- [53:36]
Raoul Pal
I mean, look, a lot of us who are hedge fund managers have egos and think we can't be replaced. But that's not true. So that's all gone. Right. So that's one side of the cost equation. Then the mothership of Millennium, which is coordination of finance, regulation, capital raising, allocation of capital and risk. That's all solvable by AI. So I'm not sure what financial institutions exist. Right. It's a really interesting Point because you know, I know this industry really well. I know both industries really well. I don't see how any of this exists. I get to beyond about 2030, the kind of understanding of what is finance crumbles, right? Our understanding of agents are going to. I talked about mean coins in the beginning, right? Agents are going to be able to run businesses and they will coordinate capital via a token of which that opportunity, that business opportunity could be one month and then it collapses afterwards. But it captures the opportunity and people get to participate in it or lend capital into it, which is not possible in a regulatory. I need to hire humans and build this thing out. All of this goes right, Velocity of capital goes wild and it's not really meant for us any longer. We, we just have no place in it.
- [54:59]
Danny
Yeah, we have no place. Go on, please go for it.
- [55:03]
Vivek
There's a lot here. It's. That's the fun feature.
- [55:05]
Danny
Go for it. I just, I, I'm only, I'm drinking from the firehouse. I'm learning a ton about financial institutions and part of me, the part of my discovery the past few months are like the thesis here is defi protocolized finance on the outside and hope like the world just came and joined and like our thesis is no, we have to protocolize finance from the inside out. And but when I look at AI, I'm like, agents are going to protocolize finance no matter what. So maybe, maybe the thesis is wrong. Maybe they're just like they'll, they're native defi users. But when we think about where is the capital? The capital is being managed, the capital is allocated. The capital is in places. We're also look at like 30 year credit agreements like these don't. These are gonna just disappear and go into this other void overnight, you know? And I guess my answer is these financial decisions are gonna at least become way thinner, right? They're gonna become the people that hold the capital and allocate the capital and utilize the world of agents and protocols underneath the hood. But a lot of tomorrow you say
- [56:13]
Raoul Pal
that, but AGI is, you know, there, thereabouts. So in which case we're all inferior allocators of that capital. Oh yeah. So you get to that people that
- [56:24]
Danny
own it, own the capital. Maybe, but maybe, I don't know.
- [56:28]
Raoul Pal
I don't know.
- [56:29]
Danny
Does capital exist? Like if you actually have a super intelligent swarm of beings in a data center, does the economy work? Like we even know and think. I don't, I, I don't know if the answer. I don't think the answer is yes.
- [56:50]
Raoul Pal
It's just fascinating, right? Who thinks that these will be normal conversations but they are because this is happening so fast. I mean don't forget we had almost zero agents before November and now they've gone the fastest scaling of GitHub in history and accumulation of GitHub styles in history and now it's. I don't. Nobody knows how many agents there are.
- [57:11]
Danny
A friend of mine, technical, I made him an agent on a vps. He has like a swarm of agents every night that dynamically bet on basketball games on polymarket and it's. And he's a non technical user and just like had it comb academic research, spin up different types of models and he's making money. He's has an edge right now for some reason and that's a toy. That's a toy. And he snapped his fingers in two hours, had a swarm of agentic finance. It's blowing my mind.
- [57:44]
Raoul Pal
And then I had another interesting conversation. Have you guys read the piece from Mickey Bowker from Ribbit about token factories? I urge you both to read it. It's a fantastic article, it's quite long form. It's on the Rivet Capital website now Mickey is a good friend of mine. He's one of the greatest, if not the greatest fintech investors of all time. But now he's really into AI. And what he talked about or what the paper talks about was that we use the word tokenization. We sit through our angle, right? But tokenization is also what we're using for AI. What we're doing is creating packets of machine readable data. That's all tokenization is essentially. And some have value and some don't. But over time this becomes more valuable because if you think about what AI has to do, it has to absorb more information. The move from AGI to ASI is a staggering power of whatever more data that needs to go into this. So all data is going to be stripped and tokenized. So that's every privately held piece of data on earth eventually ends up getting tokenized into something that can be tradable or accessible. All of this is going to be agent run and it's going to dwarf the marketplaces we know today. And it's going to be completely invisible to us because the agents will be going to get data. The big AI companies, all of this will happen agentically. There's no marketplaces, no people, there's no employees, there's no offices on Wall street, there's no fancy whatever. There's none of it. It Just all happens at scale and people get to monetize data. That I think is also where the entire system is going, which is another big thing. And you also get to the understanding that I got to is like, we are all so wrong about the TAM of all of this. The TAM is infinity because of the agents. If they actually create economic value themselves, the TAM is infinity. If they don't, okay, they're just moving our capital around. If they create capital formation, then the TAM of the entire thing is infinity. Like the TAM of the Internet is infinity. And that's a weird world.
- [59:59]
Danny
Again, who owns it? Who owns the tam?
- [60:03]
Raoul Pal
I don't even know. And this is why I get to. I have these conversations a lot and I get to the simple conclusion is you need to own crypto, just tokens. Because that's the only thing we've got that will allow us to economically participate in this system. So it's a serious thing to me is like if I go beyond 2030, 2035, we have no idea what the world is, what money is, what abundance. We know nothing, what value is. So the bet I've taken is like, sure, you can own some equity in technology companies, but what is equity? What are financial markets in the end? Because right now there's inefficiencies based on humans or inefficient knowledge, all of that goes away, but at least the token will value the underlying value of the network. So it's kind of like, okay, that's pretty straightforward.
- [60:58]
Vivek
I can deal with that the cleanest Metcalfe law.
- [61:01]
Raoul Pal
And that's exactly what I got to. And then the other one is, why do I own so much digital art? Because to humans we going to want something and culture is the most important thing we have. It's the most human thing that we have. And digital art represents the culture of our times, yet it's also built on blockchain. So you get the double convexity because the value of art goes up over time and it goes up versus the currency. And the currency in this case would be ethical. So you get eth's gain plus the gain of the asset itself because it becomes valuable to us. So I've kind of thought through a lot of this world and that's all I could get to. I couldn't get to a simpler answer than you just need to own tokens.
- [61:41]
Vivek
You've called for the exponential era. I'm sure it's accelerating way faster than you thought. But no agents could be the one that end up buying your.
- [61:50]
Raoul Pal
I like Danny's face. He's sitting there thinking about all of this. Now
- [61:54]
Danny
I'm like, I don't have any digital art. What am I doing?
- [62:00]
Raoul Pal
Yeah, I know. Honestly, I've played through this. High end real estate is going to matter to humans. Not high end, but special places. Right. Nature experiences. But culture is it. It's what gives us humanness and relevance and storytelling. Right. Storytelling is what we do as humans. It's the AI doesn't do. Is there anything it doesn't do? It can make art, but it can't feel something because it doesn't have qualia and we have qualia anyway.
- [62:29]
Danny
That's an assumption.
- [62:32]
Raoul Pal
That is an assumption for now.
- [62:34]
Danny
Yeah. Yeah. I mean, I think the AI actually is starting to have culture. You know, I think Malt book was one of the first examples of distributed evolutionary kind of AI culture.
- [62:46]
Raoul Pal
Terminal of. Terminal of truths. That's when I went down the consciousness rabbit hole when I saw Andy Elly putting those, the ones together and they come up with Goatsy, which ends up launching a coin. It's like, who actually launched the coins? Was that them hyperstitioning the coin into existence and manifesting it or what the hell happened there? But that was the start of it for me. It was like, that was wild. And Mark Andreessen sending him Bitcoin as well because of the whole thing. Vivek's now looking at us thinking we're weird.
- [63:21]
Vivek
I love it. No, I'm so hardwired from the way things were on Wall street that it just, it is worth going back to first principles and saying, what does everything look like? And it probably will not be the same as it looked like before. So just upgrading process. Certainly it's gonna be awkward. Yeah. So what's up? But we're future proof for that. That's the coolest part, is you can either integrate it fast and be ready for that or resist change.
- [63:47]
Raoul Pal
It kind of feels that the role that you guys play at etherealizing the ecosystem almost has to be split into two, which is this world and that world. Because if you don't have this world and that world, we can miss the whole thing. And it's kind of that world is as important to build out for the future of everything as this world is to fix. Because really what we're doing is fixing the existing world. But the issue is the new world
- [64:18]
Danny
is Reid's Law existing world for the way the world exists today. It is not ready for the way the world exists in two years.
- [64:28]
Raoul Pal
No. So then we got the same Problem all over again.
- [64:32]
Danny
I, I think, I think we have to move these markets to be more like protocols because I think that's the only, like a protocol. Protocol is finance is the future, because agentic finance is the future. And so the way block, the way Wall street moves and upgrades to the future is like every single thing needs to be encoded. All of the rules of the markets need to be encoded in smart contracts. The middlemen need to not exist. Sorry. And these things need to, you know, the entirety of Wall street, traditional finance is going to look, it has to look like defi, but with the privacy, with the regulatory, with the whatever, you know, it's going to look more and more and more like that. And if not, I don't, I don't, I don't know what happens.
- [65:17]
Raoul Pal
And you know, it's really interesting when you go to the Middle east, talk to, you know, Abu Dhabi and all of the others, they kind of basically have put the entire bet on two technologies, which is blockchain and AI. And so, Vivek, when you're going around speaking to the banks and the other participants, that's a lot for them to deal with these two technologies at once. Right? I always say this was highly disruptive, the most disruptive thing they've ever seen.
- [65:46]
Vivek
I always say the ChatGPT moment was mind blowing for all incumbents. And now people are saying, hey, this is going to be a thing. Banks are saying, this is going to be a thing. We have to all just adopt Claude and ChatGPT. Getting hit with two ChatGPT moments at the same time, it's mind blowing. It is mind blowing. And I think that's the thing where the paradigm has to shift. And you phrased it exactly correctly. We have the luxury of being able to fix the existing system and work to make it very positive, some with how it works, but also imagine what the futures look like. And that's kind of how daring. I split up our day to day and how we think about things. And it's very complimentary. But yeah, it's a lot, it's a lot for them to take on. And banks and action vendors don't want to become dinosaurs. So they have to move very, very quickly. And there's, there's an, they're slow by nature.
- [66:36]
Raoul Pal
Some parts are really fast. You know, as I said, there's some really smart people there who can spin up a business really fast if there's a profit motive, but getting a whole system to change is really slow.
- [66:45]
Danny
Yeah, well, I think when you think about blockchain and AI, they're thinking about blockchain and they're thinking about AI, But I don't think that they're thinking about the impact of these two things together yet, you know, and that. That's definitely one of our goals over the next years.
- [67:00]
Raoul Pal
I mean, you know, just start, you know. Yeah. I mean, sit, Vivek. When you go and actually break apart all of these institutions, what are they? Almost all of them insurance companies, all of this stuff can just be entirely replaced by agents and AI. And it's like, wow, okay, I hadn't really kind of understood that. You kind of think people get more efficient and developers get more efficient and we don't need as many and blah, blah, blah. But when you actually think of businesses, the whole nature of what is a corporation. Corporation gives it that kind of legality of being the same as a human, hence the name corporation. But none of that needs to happen any longer. And it's kind of like because of the programmability as well. You don't need the legal system in the same way. It's kind of. Okay, gets weird.
- [67:50]
Vivek
It gets weird. And also when people start to realize that legal system is based on a lot of judgment and you can now codify judgment and you can now codify contracts.
- [68:01]
Danny
That's the.
- [68:01]
Vivek
I mean, yeah, lawyers are. Again, they are. That's. That's another field that we don't. We haven't even talked about it. They adopt. They either have to adopt AI in a big way. And I mean, contracts themselves execute on blockchain. So, like, these two technologies are very teed up for them. But. Yeah, why do they need so many people? Why do you need junior. Junior lawyers anyway? It's just.
- [68:22]
Danny
So you're buying.
- [68:23]
Raoul Pal
But the point being is you. You keep going through this and you kind of think, why do I need any of it? Yeah, that's. That's the point I keep getting to is like, you give it a small amount of thought and you sound smart. It's like, well, we don't need this many lawyers and all of that. And then you start thinking, do we actually need a legal system?
- [68:38]
Danny
Yeah, yeah. No. I mean, I spend my time. I spend a lot of time with agent coding and things to wrap supercharge the business. Think about agency finance, all sorts of stuff. And like right now it's. I have all this agency. I'm like, I know what I want to build, I know what I want to do, but I'm like, in, in three months or max, like 12 months. Like me telling it what to do. Seems like I'm just going to be getting in the way.
- [69:07]
Raoul Pal
Yeah, because you're the worst decision maker.
- [69:09]
Danny
Yeah.
- [69:10]
Raoul Pal
You're the idiot in the room soon.
- [69:11]
Danny
Right, that's exactly. And like you said, like the legal system might be the idiot in the room, the financial system might be the idiot in the room, you know, rather than just the humans.
- [69:22]
Raoul Pal
Well. Well, yeah, it will be. Anyway, guys, look. Fantastic conversation. Love what you're doing. I think it's important. But even just talking today, it's like I don't even know where this is going to go. I don't even know how we're going to do it. But it's going to have to happen because we need block. In the end, if you break it down to first principles, we can't do any of this without blockchain. So whatever format is doesn't matter. The same principle of what you guys are doing are theorized
- [69:52]
Danny
like you may.
- [69:52]
Raoul Pal
The global coordination layer.
- [69:54]
Danny
Sorry, yeah, maybe in the US you have a consortium and everyone's fine with that. But like if you really are thinking globally, you have to have a neutral blockchain.
- [70:02]
Raoul Pal
Yeah, you need a coordination layer because none of this works without it.
- [70:06]
Vivek
They're the most complementary technologies ever, AI and blockchain. And when people get that, it's going to be mind blowing.
- [70:13]
Raoul Pal
Well, it's kind of. People have now started to say things and it doesn't feel silly in the end, which is that it felt like blockchain wasn't built for us.
- [70:21]
Danny
Yeah, we were the beta users.
- [70:23]
Vivek
Really.
- [70:23]
Raoul Pal
It's built for this. Exactly. We're the mean coins. You know, we're just the test. Fabulous guys.
- [70:33]
Danny
What a wonderful.
- [70:33]
Raoul Pal
Great to chat. Really enjoyed it.
- [70:35]
Vivek
Great to meet you family.
- [70:37]
Raoul Pal
Yeah, we'll see you somewhere. I think I'm at consensus in May or whatever. I don't know where you guys are, but hopefully we'll catch up in. In person somewhere.
- [70:45]
Vivek
In person. It's the only thing left. Otherwise we'll send our agents to do True.
- [70:49]
Raoul Pal
It's true. And digital art.
- [70:52]
Vivek
Yeah, and digital art.
- [70:54]
Danny
I'm going to buy some right now. Thanks a lot.
- [70:56]
Raoul Pal
Yeah, get your crypto, punk. That's the point. All right, guys, so as you can see, great conversation, lovely guys, really smart and you can see how that thesis that I've had for a while about Ethereum, it's really quite likely to play out and that's even without the agents coming because they're coming too. So we've got the entire financial system, the investment or the asset management industry and then we've got the AI industry all coming for these rails. Blockchain was purposely built for it all. All we need to do is just hold onto the tokens and wait it out because these things take time. But over time the trend is your friend. See you next time. Today's episode is brought to you by Abra. Abra provides high net worth individuals and institutions with a competitive edge in trading, investing and collateralized borrowing while maintaining full control through segregated account infrastructure. So if you're looking to gain access to additional liquidity, Abra is one of the most competitive loan products on the market. You can borrow against Bitcoin, ETH and Solana at up to 50% loan to value. Rates are in the 4 to 6% apron APY range and an open term you can continuously draw down against your collateral as the price appreciates. Abra has other strategies to add yield and their team is happy to help align your portfolio to your risk profile. Reach out today and get a complimentary consult on your portfolio. It's worth seeing if they can help manage your allocation, reach investment goals, manage risk and add some additional yield. Go to realvision.com abra and tell them I sent you. You obviously enjoyed the episode because you're here with me at the end. But listen, don't forget to go to realvision. Com, join and grab a free membership. It's an incredible community packed with alpha great investment ideas and the research that you need to help you unfuck your future. So get started now. Go to realvision. Com Join.