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- [00:01]
A
Bitcoin shattered its 200 week floor closing. The worst week since FTX. Absolutely absurd. But as you know, I find talking about price often far less interesting than talking about the fundamentals and what's being built underneath. And there are some amazing products and developments that are happening today. To talk about that, I have my friend Austin Federa. We're going to dive into the markets, everything that they're building over at Double Zero and more.
- [00:28]
B
Let's go, let's go, Let's do.
- [00:45]
A
What is up everybody. Happy Wednesday and welcome to the show. I am currently in anonymous city created on a screen but it looks nice, looks nice. Austin's gone for extreme anonymity. White wall. We have no idea where you are. You're in the vault. I like it. I don't know what city this is, but I like it. Bombing. Yeah, I'm in New York. Well, there you go, man. It's funny because the last time I think I saw you in person was probably in Paris, which was a while ago. Yeah, party under a bridge that.
- [01:18]
B
Oh, that was a good one. Yeah, the Quinde's one, right? Yeah, yeah.
- [01:21]
A
Now you can't go to Paris anymore because if you're in crypto, sadly it's kind of a crazy story. Okay, so listen, you know, we can start by I guess just talking briefly about where the market is. I actually kind of find it crazy when I saw the data that we are in fact at the worst point arguably since ftx or that we had the worst week because it just doesn't to me, maybe I've just mature, but it doesn't feel like the same level of doom and gloom that we had back then. I mean we've had like this existential. It's all over. Maybe they're gonn, you know, regulate or legislate us out of existence. I don't feel like that anymore.
- [01:59]
B
Yeah. You know, it's interesting, I think part of why FTX felt so hard, not just because I was working for the Solana foundation at the time, but because it felt so uncorrelated to the rest of the market. It was, it was truly a crypto crash outside of any sort of external factors in it. And I think what feels maybe different now is like again my, my pet theory here is that the giant sucking sound we hear from equities markets and crypto Markets is the two largest IPOs in recent memory and maybe human history. Right. We have SpaceX, we have anthropic
- [02:35]
A
like yesterday.
- [02:36]
B
Yeah, yeah, right. OpenAI's got this whole like foundation thing they're working on to try and make the for profit company actually like a thing they can ipo and you know, it's just like the cost of capital has gone up. I was talking to some bond folks and they were talking about how like US Treasuries might go up. Not because people don't want US Treasuries, but they would much rather have AI debt, which is like such a weird, interesting. I think this is the first time in human history that we've seen a debt instrument of a private lender be more preferable to a debt instrument of a sovereign government outside of like lending to like, you know, Elon Musk personally or something like that. It's very interesting. Yeah.
- [03:15]
A
I mean, where do you put STRC in that conversation?
- [03:18]
B
Oh, I had someone describe this to me as it's a Ponzi, but it's a good Ponzi. And I was like, man, come on. Like, I mean, I mean two months
- [03:28]
A
ago, but I mean, structurally preferred have existed forever and I guess I don't think that's unique to them. If that's your view on strc. I think it's just the view on preferred.
- [03:37]
B
Right, yes, yes.
- [03:39]
A
I agree with you on the sucking sound though. I think that it's, you know, I mean, that's actually the narrative that Saylor gave last week for bitcoin going down. I'm not saying that bitcoin went down specifically last week because of these IPOs, but I do think that's been a part of the general downward trend. We're just not the cool kids in the room anymore, you know, and like, when you have this much liquidity that's going to be needed to pour into these very popular things, people are going to start selling things. And crypto, Crypto always seems to be the tip of the spear for things that get sold off at least slightly, you know, in advance of a big event.
- [04:13]
B
Yeah. But we've also got like, you know, Palantirs at like a local minimum as well. Like it is stuff that's more, I would say, broader spectrum and companies that, you know, there's no reason from an AI perspective, Palantir should be a risky stock to own or something like that. I think it's, it's just this. We're an interesting moment in the market where it feels like no one knows where to put any capital and they're just waiting to feel what happens with SpaceX and anthropic.
- [04:43]
A
Yeah, I think that's true. I mean, I think I saw today that SpaceX is 4x over subscribed or something. Meanwhile, you can already trade it on hyper liquid anyways, right?
- [04:55]
B
Sort of. You can trade something that someone under the hood claims is probably SpaceX stock. This is what's great about perps though, right?
- [05:03]
A
I've literally heard of it. Like you have no stock, you have no actual cash.
- [05:06]
B
Yeah, I was talking to a very smart trader who works in perps now and he was saying that all the focus on RWAs for the most part is misplaced and that what people actually just want is exposure to the underlying asset. And perps are an incredible tool for that because you have no custody risk with a perpetual. You don't have this like, okay, there's this tokenized SpaceX stock, but it's actually shares of four layers deep of an SPV that's owned by some guy in Dubai that is anyone really going to be able to sue if those shares don't come due? Whereas perp, it's just, you know, it's a synthetic product.
- [05:44]
A
Yeah, I agree. I mean, listen, so let's talk about what you guys are doing because I think it speaks to this, right? I'm assuming so maybe you can just give the TLDR on Double Zero. I mean I. We've had you on since you were at Double Zero, but most times I had you on. You were leading the Solana Foundation. Yes, totally.
- [06:03]
B
So Double Zero is an attempt to rebuild the Internet from first principles. That's our high level pitch for what this thing is. What that actually means in practice is it's a global fiber network that spans about 70 different cities at this point. This is faster than the public Internet and it uses technologies that are not available on the public Internet but have been used in traditional finance for decades at this point, like multicast and dedicated routing. And so we've taken this and sort of you can think about this as like there's multiple layers of what Double Zero is. It's base layer. It's this global, permissionless, high performance network that exceeds the speed of the public Internet. But just like the SVM is not particularly useful without applications that run on top of it, we have developed a bunch of products that run on top of the Double Zero network and other folks are doing the same. The most interesting one right now is 00 edge. And edge is a high performance, high speed data feed product for this whole class of new financial markets and so on. Solana, this is a shred distribution service of all of the little parts that go up and make a block. So this is very useful for market makers and traders, but we're bringing the same technology to other domains too, whether that is Perps, Dexs and Perps Markets, prediction markets. You can see the world of, you know, Kalshi and Polymarket getting much more interesting right now as they both begin to launch Perps products and Hyperliquid now begins to launch a prediction market product. The more venues we have trading these things that get more faster, the arbitrage opportunities increase. The importance of being able to read information from multiple places in the world goes up. And that's one of the main propositions of double Zero edge is it's just faster access to data to inform better trading and market making.
- [07:51]
A
So I remember the old days of high frequency trading on Wall street being built. And I had read a story at some point, and this is way, when it was way outside my wheelhouse that like, you know, all these companies were moving to data centers or something in Jersey, they off the trading floor. But they were spending tens of millions of dollars to lay fiber under the Hudson river that would be milliseconds faster than their competitors. And no part of my brain could understand why you would allocate that much capital just to be literally, I mean, it was split seconds at the time faster than a competitor. Like, what can you do with a tenth of a second that's worth spending tens of millions of dollars on?
- [08:30]
B
Okay, so let's go through like the classic like, you know, econ freshman dorm thought experiment, which is, how much better would you be at trading if you knew tomorrow's close today, just that one point of information moment in time. What does the market close at 24 hours from now? You would be able to outperform the market by astronomical amounts. Now we don't have time machines. We can't actually look into the future. But the best thing we can do is we can get data about what just happened and consume it and take actions on it faster than anyone else. And so because we can't actually look into the future yet, instead what we do is you try and be slightly faster than your competitor. And so a tenth of a second in high frequency trading is an eternity. If you could produce a tenth of a second advantage over your competitor, you would get a $50 million bonus. It is that dramatic that a tenth of a tenth of a second now is like that. You know, you pick your pick your industry, but it's like you're tenfolding over the highest improvement. People are like spending millions and millions of dollars a year at these companies. To get fractions of a nanosecond performance increases right now. And this goes down all the way to the exchange. Like one of the things people don't realize is when you're dealing with these small amounts of timescales, the length of cable coming out of your computer matters. So there's a whole testing regime at like NYSE and NASDAQ to make sure that the cables plugged into each trading server are the same length. Because if yours is 4 inches shorter than mine, the time it takes light or electricity to move over that cable is actually meaningful. Like, we are at like such high frontiers of financial engineering and technical engineering that these tiny little fractions of a second matter.
- [10:23]
A
Okay, so how does that then play into the. I guess we have this kind of convergence as you alluded to.
- [10:30]
B
Right.
- [10:31]
A
You know, everything is becoming an everything market. So by the way, which is why I think altcoins have died for so long here. You know, when you can gamble at everything everywhere, all the time on any app. And so, you know, as you alluded to, like hyper liquid is now kind of coming out with what they would call a better prediction market.
- [10:47]
B
Right.
- [10:47]
A
Or they're settled in a different way than the other ones are where there's been conflict. But you also see Kalshi, I think did a billion dollars in bitcoin perps in like the first week before bringing it to the public. So obviously the prediction market users have a thirst for this. So how does all of that play into sort of the centralized entities versus the decentralized entities versus everybody who's trying to do all of these things at once?
- [11:11]
B
Yeah, so something weird happened between like 2000, you know, the 2000s, when we started to see traditional finance, computerizing, trading and matching engines moving from, you know, things that were human activities into things that are computer driven and algorithmic activities. For some reason, all this generation of new finance, the majority of it runs in the cloud. And the cloud actually is a very bad environment for high performance finance because all the abstraction that the cloud gives you that makes it really easy to develop like web scale applications, actually makes it really hard to do things like data distribution, time alignment, all these other types of things. And so whether you're looking at Binance or Hyperliquid or, or Polymarket or Kalshi, these things that are run in the cloud today, it's actually hard to access the market data. For all of the faults of traditional finance. They've built an incredibly robust regime about moving data for pricing around markets. And that's just not There today when it comes to crypto and new finance, and that's where we see a ton of opportunity for Double Zero, is to plug in and be that data transport layer that's a neutral open access protocol. The same way that building your own data center and making sure every cable was exactly the same length. That was like the thing in traditional finance that allowed computerized trading to really take off and for, for users, in this case, users being, you know, hedge funds and trading firms to have confidence in the market that there wasn't someone getting an advantage over them because they understood the technical infrastructure side of the market. Double Zero. We're really trying to fit into that same paradigm, except for this whole new generation of finance, which is run on a totally different stack, to get to decentralization.
- [12:57]
A
Yeah, that's what's going to give me a question about the decentralization. I remember, you know, I had a friend who I didn't even know was crypto native, and I went to his office one time years ago, and he was like, I'm running these bobcat things for the helium network, you know, and like we're, we're building a descent. That was the first time I found out about Helium, and it was from a non crypto person. And I had been deep in the weeds. It was like, yeah, I'm getting paid to, you know, be a part of, you know, this phone service that is decentralized and is run by. I mean, is this conceptually, I'm not saying conceptually similar to that, but is this a decentralized network run by individuals who participate in this network in that same kind of manner?
- [13:35]
B
It's not really individuals, but it is still decentralized. I mean, you know, contributing fiber to the Double Zero network, you know, getting access to these fiber links can be, you know, $10,000 a month. It's not something that sort of the average person's just got putting a little,
- [13:49]
A
A little router on my roof.
- [13:50]
B
Yeah, yeah, exactly right. But, you know, it's. The helium example is really funny because I was running helium infrastructure back in 2019 and 2020, and even in a network like that, speed really matters. So at the time, I was living in Williamsburg in Brooklyn, and my apartment was kind of right on the east river and I had an antenna set up in my window. But I realized that, like, I was not getting credit for everything. I should be because the miners themselves were very slow. Like they just had little Raspberry PIs and they were just not very compute intensive. So I hooked up to An Amazon instance and I was just streaming data from the antenna directly up to the Amazon instance and suddenly I was front running everybody else in New York. I was getting credit for witnessing everything. I was earning 2000 HNT a day sometimes as opposed to like the normal two that you get. And so that's kind of like this is the whole ethos of how data feeds and trading works is like in if you can get your data so you can take actions on it. In this case, my miner literally just reporting, hey, I saw this thing, you can get outsized rewards simply by being faster. And so for us, the whole point of decentralization for the Double Zero network is transparency and it's the ability of a user to deploy the network where they need to. So if you're running a traditional network system, let's say you're using Google Cloud or something and you're like, I really need a drop in Lubbock, Texas because for whatever reason we're doing a bunch of trading there. It's really important for whatever we're doing. You can't just call up Google and be like, hey, can you put some fiber in Lubbock, Texas? But on Double Zero you can actually go out, you can get that fiber yourself and you can contribute it into the network and the network will automatically extend into these new fiber links that are brought to it. And so we're bridging this like the. There's this gap that's always existed between what traders want to do and what the infrastructure is capable of doing. And they're two separate groups. a big trading firm, there's a whole infrastructure team that builds a network just for the quants and trading team to be able to get work done. That works great if you're a Citadel or a Jump, if you're a 20 person trading firm, you don't have that network team on demand. And so part of the whole thing of Double Zero is decentralization. Yes, it's good for blockchains, yes, it's good for all these other properties we know and love about decentralization, but it's really about people being able to bring the network into the areas that they would like to trade on.
- [16:14]
A
Yeah. So the next I think natural question, one that may be interesting, more broadly nonspecific to Double Zero, is how does this fall into all of that? So Anthropics, Claude, Fable 5 and Mythos 5 launch what to know? Well, I know that the world's going to end and we're all going to get exploited by tomorrow. So I know that Fable 5i plugged in and I was like, what's the weather? And it's like you've used your entire usage for the day, which was cool. And I have max plan. So God knows I think I'm even seeing it in the comments. Ask him about agents, how this is going to impact AI agents and I guess how broadly this will sort of impact with the new tools that are coming.
- [16:59]
B
Yeah, so I would say first off, we've done a lot of work to make the 00 network very accessible and programmable by agents. And so you can think about this as like downstream of one of these main goals of ours. So one of the things that is unfortunately true today is connectivity is actually an incredibly opaque and locked up market. You would think that there's like a website I can go to and just buy private data transport from point A to point B. There's not. It takes three to six months to get these circuits provisioned. You'd be like, oh, I've rented fiber, that's great, I'm done. Nope, you've got to now rent cross connects, you've got to rent servers in data centers. It's like a very hard process. And so one of the main things with us is, is we want agents to be able to come to the Double Zero network and just buy, you know, custom multicast groups and transit and access. And so we've done a bunch of work to make that happen. I think there's two things when we're looking at kind of this advent of like, you know, superhuman level AI, whether even if it's just focused on cybersecurity or more broadly into the future. The first is that I think it's on its surface, bearish for software because now we're going to see basically an AI can do software better than anyone else. The thing AI still cannot do is things in the physical world very well. It's quite bad at doing things in the physical world. And yes, there's a lot of cool robotic startups that are starting to do that, but we're not really there yet. And so I also think that the principles behind DEFI are going to become even more valuable in the future due to AI. And what I mean by this is right now we view the fact that everything's verifiable and on chain as a risk. Mythos is so good. It can crack, you know, it can find a vulnerability in zcash, it can find a vulnerability in all these other types of systems. That's totally true. But defense and offense are always an asymmetric game. And eventually defense will get much better, which is what we saw. You know, we all have read stories about kids in the 80s hacking into the Pentagon with, you know, a whistle from a cereal box. And it's like, yeah, we solved that problem pretty quickly. We're going to solve this Mythose security problem pretty quickly. And then the question becomes, what is the AI better at? Is it better at cracking code that's been audited by other AIs or is it better at social engineering? Is it better at pretending to be you and calling your broker at JPMorgan Chase and getting them to do something that they shouldn't do? I actually think AI is going to be much more effective at hacking humans than it is hacking code is in the near future. And so the self custody defi forward model, you know, right now maybe it's a little rough after we're seeing all these hacks come out, but I would, I would not bet against it long term. I think we're going to see most traditional systems built much more similar to that in the future than we do today. Because the humans are the biggest vulnerability in an end state of AI.
- [19:47]
A
Yeah, I mean, humans are just terrible at things. Turns out. I mean, Bill. Yeah, I had Bill Barheit, the CEO of Abron yesterday and he was basically saying that we have a wild disconnect between the perception of Defi from retail because of all the hacks and all those things, and the amount of actual institutional adoption that we're seeing of Defi Tools and Rails. They're so interested in it because Yield matters. Right. I agree with you. I think that the humans are going to be the big problem and that most of this will be solved by the. I mean, I do default to your setting as well, which is like human black hat versus human white hat. How is that different than AI black hat versus AI white hat? Right. Everybody has the same tools. You're just evolving the tools.
- [20:31]
B
Yes. I do think also, you know, I'm doing something I haven't done in years, which is going to institutional finance conferences. Right. Because of what Double the area 00 is now building in. And they love crypto. It is. I've never seen more interest and excitement from like bankers suits, traditional finance people. Like they're very, very, very interested in what's going on and they're building stuff for it. You wouldn't know it's a bear market talking to them.
- [21:02]
A
Yeah, I mean, that's the point. I think that that not only carries through Defi. But I think even through like perception of these tokens, you know, Bitcoin, ETFs, all the things, they're just getting their feet wet and see lower prices and opportunity while, you know, our community seems to just be desperate, fearful and miserable.
- [21:21]
B
Yeah. I will also say if this is truly like the bear market, it's pretty good. Bear.
- [21:27]
A
Yeah. If this is it. Yeah, yeah. If we get bitcoin goes to like 25,000, I think, you know, then people buy that. That's certainly not my, my base case at all. Does anything happening on the legislative or regulatory front meaningfully impact what you're building or are you just watching it closely generally because you think it might meaningfully impact the industry?
- [21:51]
B
So we are in sort of a special spot because we got a no action letter from the SEC prior to launch. So we've just, we've been blessed as a commodity as the token is used and so we've been in a very good place for a while from that. The stuff I think is more interesting is actually the letter that Kalshee got about a week or two ago which is sort of starting to outline a framework for how you can have a compliant perps Dex in the United States. That's very interesting. Obviously there's a lot of VPN power users nowadays, but institutions are generally not as risk tolerant as individuals. So that'll be very interesting to see. You know, stuff like clarity is helpful. I think it's not an. If we don't get clarity, it's not like the industry is going to fail. I think it's helpful. The thing that I am very focused on and sort of worried about is we've had this sort of like, oh, don't worry, we've got till 2028 to get this stuff passed. We don't. We have till the midterms maybe, right July 4th.
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A
Yes.
- [22:52]
B
Yeah, it's very, very limited amount of time to actually get regulatory change through because all the awesome stuff we've seen from executive orders, they're executive orders, they're worth the paper. They're written on. Like they can be undone instantly by another president coming in. All of the change at the SEC and cftc, well, it's all awesome. It's policy change, it's not legal change. And so a new policy could move in a different direction. So I would say that regulate, like the success of regulation is definitely not priced in at the moment. I think the risk of regulation not happening though is probably pretty accurately priced into right now.
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A
Yeah, I've had it at like 5% chance. I know prediction markets are more optimistic and certainly anyone close to it have great news worthy statements about how we're much closer. Yeah. Yes.
- [23:44]
B
The people who get paid to tell you it's almost passed are telling you it's almost passed.
- [23:48]
A
Funny how that works. Yeah, that works.
- [23:51]
B
I mean, just one more check to our nonprofit and clarity will be passed.
- [23:56]
A
And as far as, I mean, obviously you've been very close to Solana for years here. I know we only had a couple more minutes, but how do you now just generally view the layer one battles and the layer two battles and how things are likely to shake out? Because it seems like that's a never ending narrative.
- [24:16]
B
Yeah, it's a rough time for pretty much every protocol out there. Because the narrative failed, Right? Ethereum's narrative failed first that L2s were additive to Ethereum, that they were somehow going to increase the price and add value. Solana's revenue numbers are quite far down. Right. We've seen Rev really drop while the usefulness of the chain still remains quite high. I think Solana has some of the highest spot volumes of any centralized exchange or decentralized exchange at this point. Which is, which is very, very cool to see. But development's going slow, right? Like Alpenglow is supposed to be out by now. The new consensus system as well as, you know, all the Constellation stuff and MCP was all supposed to be out by now. And it's not, it's not there yet. And so I think a lot of that depends on will these new technologies ship. How successful is Solana getting the perps market back? You know, really what Hyperliquid showed is, you know, and everyone always knew this, they just executed on it so well, is if you build a really great trading venue, people will trade on it. And Hyper Liquid is a great trading venue. Like from a, from a, from a blockchain perspective, like, okay, maybe there's, there's some work to do on the actual blockchain of it, but as a trading venue, it's exactly what people want. It's a better trading experience than Binance. It's better than any centralized exchange and it still has a lot of properties of decentralized systems that we like. It's much more akin to like what Polymarket is doing or something like that. And that's fine.
- [25:47]
A
Right?
- [25:48]
B
I think for the longest time this industry confused decentralization as a regulatory shield with decentralization as a mandatory product feature. And the sort of idea that in order to be considered decentralized you need 10,000 validators running in shoeboxes, in people's closets. There's a lot of reasons you want that, but none of them are around making it an attractive trading venue for users. All that's about long term stability and security and all these other types of things, which are very important. But I think a lot of networks are kind of in the mid curve right now of like, they're not a zcash, they're not a bitcoin. They're also not as good a trading venue as something like a hyper liquid. So that being said, there's a lot of cool stuff happening on Monad. I think there's everyone who has ever said there's no more room for a new L1 has been proven wrong by a new success. Yeah,
- [26:47]
A
it's always, I joke about this and we'll go right after this. But there's always the inevitable question that you get if you're a crypto guy is like, what's going to be the big thing that's about to move? And it's always something that hasn't been invented yet.
- [27:01]
B
It's sort of like, do we really need another AI company? Yeah. 100%, absolutely.
- [27:07]
A
Yeah. I wasn't even aware that Monad was doing so well, but it's interesting because I see Hyper Liquid did well and now I get the pitches. It's like we're building the hyper liquid of Solana, we're building the hyper liquid of Eth, we're building the hyper liquid of Monad. And you're like, we've already got hyper liquid. That's the. Like. It seems like the mistakes of all of the past is like once you see something successful, everyone tries to do it on every chain.
- [27:28]
B
Yes, yes. And the problem many people make is they pick a chain where nothing's fundamentally happening. Like, being the jito of a chain with no activity is not a good proposition. Being the jito of a chain with a lot of activity, awesome proposition.
- [27:44]
A
Yeah. Everyone doesn't need everything. Austin, man, thank you so much for your time. I really appreciate it. And we'll do this again, hopefully very soon. Everyone else, obviously you'll see me at noon on the Daily Wolf on Yahoo. That's all I got. Thanks, man.
- [27:56]
B
Thanks.
- [27:57]
A
Have a good one, guys.
- [27:59]
B
Let's go. Let's do.