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- [00:00]
A
Okay, let's try again. Carlo, can you hear me?
- [00:03]
B
Yes. Apparently the anti gluten army got us the anti gluten.
- [00:09]
A
Or the bank lobby decided to stop you from talking. Although I think that, that before you go into what you were saying, one thing that I mentioned on macro Monday this morning is it is the fact that the banking lobby has started to realize that no clarity means genius is bad for banks, means there's a lot of money behind getting clarity done now. And I don't think that's priced into the market. I think people don't understand that the crypto industry probably doesn't give a crap that much because at least for the next two and a half years, they have what they need. That there are lots of builders out there, there's lots of M and A and the legacy financial industry, and the banks need clarity more. And I think that that matters. So people's, you know, we're all, you know, everyone's worried about the ethics stuff. I mean, frankly, this should, the ethics stuff should be obvious, right? And it, but it shouldn't be limited to the administration, it should be Congress as well, et cetera. I mean, there should be ethics rules with regard to trading of any asset, whether crypto or stocks. Right. There should be rules related to family members doing things, you know, whether NGOs or corporations or crypto. The fact trying to get an ethics provision that's crypto only just targeting Trump, that's never going to pass. And I don't think the banking lobby is going to be very happy if in fact, that, that, that that's why this bill dies. But we'll see. I mean, I guess we'll get to, we're going to find out about it anyway. Carlo, you were saying?
- [01:44]
C
Yeah.
- [01:44]
B
So I tend to agree with you. I actually mentioned in this article that I posted in the Nest and I talked about it on my show, stablecoin Solution show on Friday that honestly, I think it's, there's a part of me that thinks it's probably best for Brian Armstrong and for Coinbase that clarity doesn't pass under the current defi. I should say under the current stablecoin yield configuration that they've written up because it closes their loophole. It, it forces them to have to end their arrangement with Circle, and they make a lot of money on that arrangement. And you can see that they're pivoting. I mean, they're going more into prediction markets right now and they're litigating cases in the prediction market arena because I think they're preparing for the, the rewards flywheel that they've enjoyed totally drying up. Now again I've talked and I've been pretty vocal about the fact that I think banks have won the battle.
- [02:48]
A
Can I ask a question? I'm sorry, but you said something that, that, that why would Coinbase's, you know, equity based, you know, profit split with Circle if, if yield is banned, that means stablecoin issuers get to keep all the money. Right. So why does that hurt Coinbase? I, I, there must be something I missed. Is it, you don't think that they have a mechanistic way of making their agree work?
- [03:11]
B
Well, I think the, the what's baked into their mechanism is the fact that they can offer consumers an incentive to hold USDC on Coinbase. And that passive holding of USDC on Coinbase is what I think their arrangement with Circle hinges on.
- [03:28]
A
So if there's no longer, is that, is that true? Is there a contractual requirement?
- [03:32]
B
I think, I think there is a, I think there is an arrangement because they, they have enjoyed a long standing relationship with USDC in which they prominently offer this reward. And yeah, USDC gets to maintain the yield, they get to make that treasury yield, but they also pay a lot of money to Coinbase in order to keep that arrangement going because it incentivizes people to hold USDC on Coinbase. If that disappears, then there's not a whole lot of incentive to hold passive. So they've got to get creative now. I think they're going to get creative because I think one of the biggest problems with this bill is the fact that it's been left intentionally vague about what constitutes economically or functionally equivalent to getting paid interest on the bank.
- [04:20]
D
Yeah, Carlo, tell me what stops Coinbase initially from saying move your USDC from this wallet to this other wallet. That's your rewards activity. You're holding it in this wallet for reward.
- [04:32]
B
Bingo. Exactly.
- [04:33]
D
They'll be, I mean it's like, it's so vague that, okay, just say you have to open some other account and put, and hold your coins there and yield. Right. So they're going to be litigating this indefinitely. It's so dumb.
- [04:46]
B
That's absolutely what I talked about in the piece I put in the nest. There is, there is no end to this. In fact, it's just getting started and if it passes. And again the big if is the, is the ethics clause which a lot of Dems are lined up against right now. And the Trump family has not helped that cause with what they've been doing with crypto. I think if this passes, Coinbase will find a workaround, Everyone will find a workaround. It's just going to be a matter of playing in the fringes and litigating it. So this is nothing new to the crypto sector. They know how to play this game.
- [05:19]
A
Yeah, I mean I think at this point we've been talking about clarity for so long that I think people have forgotten what it actually, what actually matters with it and what doesn't. With the CFTC and SEC working together to try to come up with rules, is it preparing for is the fact that clarity will stop. Future actions of regulation by enforcement may be the only real thing that matters because the specifics of whether or not the SEC or CFTC have jurisdiction, that's actually not going to matter nearly as much. What does matter is creating the long term safety that you're not going to get enforcement actions against you when there are no rules. That's by far the biggest thing. And the other big thing here, which is on the negative side, is what does it do in the language to defi and there's a lot in defi that my personal prediction is they're going to screw anything that creates competition for the banks. You know, they're going to try to do their best. So with hope is that they don't have anything in the law that is a poison pill and I haven't seen and it depends on the markup and we'll see what that goes. But other than that, I think that it unleashes M and A and I think that that there's a bunch of other things that might happen. But the real question is something that Scott pointed out in a tweet last week. And I'm curious what you guys think about this, which is it seems like more, more of the large institutions are moving toward public blockchains than their own. And I think that makes sense for a zillion reasons. But I also think that people do not understand that the reason they're doing that is because public blockchains are cheaper for them. Meaning it's expensive to build a blockchain. There's liability if you build your own blockchain and if it's a public blockchain that's been battle tested, there's significantly less liability and less expense. But of course that means that the public blockchain itself operating it has to stay cheap, meaning that people who are expecting massive increases in the market cap of a lot of the tokens that underlie these things are delusional So I mean, I'm curious. I mean that's the kind of thing that usually fires people up. And I don't see a hand. Nobody cares.
- [07:36]
B
You mean you made the case for Ethereum? I mean, that's exactly why so much of traditional finance looks to Ethereum. Because it's, it's safe, it's battle tested. And say what you want about all the recent defi exploits that we've experienced, nothing has actually attacked the Ethereum mainnet and succeeded in a substantial way.
- [07:57]
A
Yep, that's true. I mean, you could make the same argument about some of the other big ones. I mean, Solana in particular, there are others. But the truth is that we're in a world where crypto valuations are going to have to start mattering at some point and you know, a lot of the, a lot of the trash is going to get taken out I think as this stuff moves forward. But that's the real legacy of, of the Clarity act. And I don't think people are ready for that. I don't think that the market is priced rationally right now. Okay, I finally triggered. William, I've been trying, so go for it.
- [08:34]
E
Well, yeah, I mean, what you said, I agree with you, David. And the difference is between seeing blockchain as a public infrastructure as something that you hang on to like the Internet, versus seeing it as a fast database or database with different controls. And there are two views to what's going on today. And I am more of the belief that you have to say, see the blockchain as this public infrastructure capabilities kind of thing that we didn't have before. It's more, it's closer to an Internet than it is to a database.
- [09:20]
A
Well, but think about it. I mean, I've made the point many times, many times that if there was such a thing as crypto when Linus Torvald created Unix or Linux and they, and there was a native token involved to use Linux, you know, what would its value have been? Now the question is, is would Linux work with the need to use a native token? And the answer of course is no. But you have to, you know, kind of think about it that way. But that really is the question, right? You know, it's like what's the need for? There are a lot of networks out there that the token is superfluous. That's not true. You know, it's, it's not superfluous. But you know, Ethereum, it's for gas, you know, etc. But just think, but think it through. That's really the question, right?
- [10:06]
E
Well, I said no, I would, I would. It's not Linux, it's more like the Internet. The question is it would be as if, if TCP IP had a token. That is more the analogy, but go with that, William.
- [10:23]
C
There were plenty of networks that charged money to use. How did they do against TCP ip, which was free.
- [10:32]
E
Yeah, but then, no, what I'm talking about here is how do you value. We're talking about valuations. So how do you value the Internet? You value the Internet based on the value that it creates outside of it itself. So there's been studies. This is not something that's new. There's been studies from MIT and others that have valued the Internet specifically based on the companies that were enabled by the Internet. Based on the Internet's economic contribution to GDP. There are numbers that say that the Internet is 15% of the GDP, more or less and so on and so on. I wrote a big report, 30, 40 pages about this in December using the Internet as the analogy and using Ethereum as a parallel from an infrastructure point of view. And the sum of it is that infrastructure is going to create more value than it captures. That is something that is lost on many people. The companies that the Internet has enabled, the worth of these companies are multiples more than the Internet itself. That's why I don't get offended if you tell me that some of the companies that will be enabled by Ethereum will. Will be greater than the value of Ethereum itself. I'm not offended by that. Somebody said the stablecoins market cap might exceed Ethereum. That's fine. It means that Ethereum is creating more value than it captures. And in the long term it continues to accrue value for itself while at the same time enabling other things around it to also capture more value. More of the value capture is at the higher levels, at the applications level, at the higher levels of the stack. Amazon is an application and so on. Facebook is an application. The base layers are there to enable the capture of that value. That's it.
- [12:37]
B
It's essentially becoming a utility.
- [12:39]
E
Exactly, yes.
- [12:41]
A
I mean, that's the thing. The reason that I. Look, I'm going to pick on the XRP arming now because this has literally been my thesis from the beginning. Not that that there's no utility, not that there's no value, but people who do not understand that it has to be the case. It's what you just said is not only a possibility. It has to be the case that the companies that use These utilities will have 90 to, you know, 99, maybe more percent of the value will accrue to the companies using it as opposed to the actual token underlying it. And that's because they'll switch away from any token that takes more than that. Right. You know, it's always going to be the case. This is 100% certain. And so I don't understand why people think of it any other way. Now that said, if you build a network that everyone buys into and believes in it and they get ownership rights and they get, you know, and they get, you know, economics. Okay, well, we can evaluate that. But the notion that a generic layer one is going to end up with more than 1% of the value that is created by it, I mean, I think that's crazy, right? I mean, I think that's what you're saying, isn't it William?
- [13:56]
E
Well, I'm not sure what the number, if it's 1% or, or not.
- [13:59]
A
Yeah, we could debate your number.
- [14:01]
E
You're right, it's a percentage, but it's not an insignificant percentage. And what you said is, is that there's just something that's. I agree. Which is if a network is supposed to be a public infrastructure, but if they are taking more fees than they should, then you got to question their role in it. That's why I'm not a proponent of looking at fees as the only and the most major factor. Like some analysts want you to believe that discounted cash flow is the right measure for valuing blockchain networks because fees are important. The argument here is that TCP IP fees, it will be like comparing, like valuing the Internet based on TCP IP fees. It's not the case. TCP IP fees are just there to allow the data to go back and forth so that it's not zero, but it's not a lot. It's something that is reasonable. And that's why blockchains should not be extracting more than they should be enabling the value creation. And there has to be a balance. I think in the long term investors will, will gravitate when they see a good balance between value capture and, and value creation.
- [15:27]
A
Yeah, I think that's right. And, and you know, my hyperbolic statements are meant mostly to trigger people anyway. Tover you have your hand up, I'm triggered.
- [15:36]
C
It's important to understand that the price of something in a market is not its marginal value to, or its value to the consumers, but it's competitively priced position based on its marginal value of production, marginal cost of production. And if there's someone in the market who can produce something cheaper than you are pricing it at, the market will buy their, you know, and they're prepared to sell it at their marginal cost of production or darn near close to it, then they will win in market share. And this is the dilemma in saying well like on an Ethereum like network there can be a trillion, a hundred trillion dollars worth of value created. So Ethereum should be able to capture 1% or 3% or 2 and a half like whatever the thing is it's well what does it cost for a clone of it to exist and charge $1 billion for the same functionality? And there is no, there is nothing because these things essentially cost nothing to run or produce.
- [16:43]
A
That's not strictly true. That's not strictly true.
- [16:45]
C
I mean the marginal cost of running software isn't.
- [16:49]
A
Well yeah, but you guys are missing you, you look having spent way too much of my life inside large corporations, that's not the way they think, it's not the way they work. You know, liability matters, battle tested matters. You know, it, it investment matters. I mean, you know they're gonna, the ones who pick public blockchains or other blockchains, I, I, I guarantee you dollars to donuts they're gonna own part of it one way or another. So as if like for example, but,
- [17:17]
C
but the example you used is I think an excellent one of Linux. Linux continues to be free. Even Red Hat Linux owned by IBM continues to be free. What you pay for is for the experts who know how to work. That's right, who know how to run it. And so it's a professional services business, not a software for sale business. And I think that like why, I don't, don't just think it, it's like this is what's if and when these things catch on for major consumer or industrial applications the owners of the applications and the stakeholders of the applications are not going to want to be bound by having to pay undue an exceedingly high gas fees for CPU operations that are, that are generally free.
- [18:15]
B
Especially now with AI agentic transactions becoming the new trend because the AI agents are going to pick the fastest, cheapest chains and that's going to bring it with zero coin.
- [18:27]
C
So that's the thing. If your token is gas is gas, it's not like oh, the demand for more gas increases the value of gas at the end of the day because the supply of an alternative form of gas which is just CPUs plugged into electricity elsewhere with no greater or Lesser efficiency than yours prevents you from extracting too much margin. So anyhow, it's, it's, it's just basic competitive dynamics and I, I think it's largely what you're saying. David, you're more optimistic about gaps in the theory than I am. But it's, we're. If you're paying someone for the privilege, like a, a huge premium for the privilege of executing instructions on a cpu, you're not smart, right? So that's, you're not being economically rational and that's what it all comes down to. When these things charge for gas and expect their tokens to be wor worth tons of money based off of.
- [19:26]
A
Well, yes and no. I mean, I don't want to put words in Wood Williams mouth but you know, look, we've seen it with stablecoins, right? I mean it's not like as much of a question, you know, we saw how much migrated to Tron and Tron's, you know, market cap is much smaller than a lot of the, than a lot of the other ones. And you know, we've, we've seen it all. So yeah, applications, that's true but there are other networks in crypto and there's other ways. The other thing that we talk about with Linux that's interesting is open source development. Why do people volunteer their time to develop on open source? I mean I always made the point, eight years ago I made the point when I first got it started in this industry was that the real potential is to be able to incentivize open source developers and create better networks and better technology. So there has to be, you know, there's both of those things goes in. I mean there's probably a number of startups out there that are still using, you know, still have a native token. I always thought that tokens were overblown and that 95% of them were will disappear if not more and that the equity in the actual underlying startups are going to what's going to matter? But there will be some tokens that are going to have significant, you know, significant and you know, they're effectively going to look like shadow equity at some point, you know, pass through of revenue, et cetera. You know, Gaurav, I know you're up here. This is what you do for a living. You know, what do you think about this? Have you been listening?
- [20:51]
F
Which part of do I do this for the living? There's so many topics covered given the keyword evaluation. Yeah, yeah.
- [21:01]
A
You know, a notion that more companies are picking public blockchains which was always a fear that people would say, oh, they're going to build their own.
- [21:10]
F
I heard that. Yeah, I heard that. Like I, I was, I was trying to pick up on the chance of like something that we've never discussed and probably even you're not aware. But like before crypto, my 12 years history of crypto, for the last 18 years I've been a technology investor and technology based incubator. So we have been supplying softwares and extensively using public and open source, also proprietary software. So that, so I relate to the example made by Tamar, but. And so I definitely relate with the point of practical value usage. But you know, would you mind if I digress a little bit to the new use cases, especially the ones that I found in my last two days of wandering around the startup circles, blockchain startup circles of Dubai, Abu Dhabi, New York and now Miami. The new trend of AI application where software is worth nothing. I mean software coding is, is absolutely zero. A lot of early, you know, smaller blockchains are starting to move their revenue agenda to the revenue of supplying blockchain, sorry, software services built on blockchain. Now I know that sounds a bit hilarious because blockchain has very little to do with the complete software stack. But you know, blockchains are so desperate to report revenue, especially those who have raised hundreds of million, hundreds of millions, that even this revenue simply taken on stable coins against an invoice seems to be, you know, a big, big contribution to the ecosystem as they would like to show it. Make sense or you know, should I, should I elaborate?
- [23:03]
A
Well, I mean it does make sense. I mean I think that, you know, being that crypto town hall, the real question is, is it feels like the industry is at a pivotal point in terms of how it's going to grow. And so what you're talking about is one of the very important growth factors like how do startups and how do things migrate to be able to compete for investor attention in a world where we have so many zombie assets out there.
- [23:29]
F
Yeah, but also, I mean, one example that's important to understand against Linux is like Linux did not raise tens of millions in ico, right? And so they don't have this innate responsibility of producing commercial value, cash, commercial value to their users, while blockchain has. So blockchain will always incline towards more financial use cases and desperate attempts like these to produce value and revenue, even if it's like not technically trackable. It's not technically the ideal use case of a blockchain infrastructure, but still, we will always have this desperation to create revenue.
- [24:15]
A
Well, it's true.
- [24:16]
F
And has the volition.
- [24:17]
A
Yeah, hey, to.
- [24:19]
C
And I'll just jump in again. With the exception of Bitcoin. With the exception of Bitcoin. Right.
- [24:26]
F
Yeah, but that's not smart money. You're not building a lot of defi on that.
- [24:29]
A
Right.
- [24:30]
F
Like if I turn on my, you know, if I wear my Bitcoin maxi hat, then everything beyond bitcoin, blockchain and beyond is a shitcoin. And so no layers, no smartness, nothing. No smart contract. And in that case, of course you're right, but then there's no defi, no valuation.
- [24:48]
A
But how stupid is it? I mean, I'd like to offend as many people as possible. How stupid is it that there are people out there who think that there's one asset, like the one ring that we have to throw, throw into Mount Doom or whatever. You know, it just doesn't make any sense. I'm sorry, to be a bitcoin maxi in the sense of saying there could be no assets, like saying there should be no other companies out there now.
- [25:13]
F
Yeah, it's like, no, no further innovation after one.
- [25:16]
A
Right.
- [25:16]
F
It's, it's this many times. It's like anti innovation maxi.
- [25:20]
A
By that definition, at least. I've never heard you say that. So anyway, Tomer, I interrupted you, so go ahead.
- [25:26]
C
No, I mean, I, I think the distinction is the business model of all. We're trying to figure out what, what is Bitcoin and what is crypto. And there's enough distinctions that you can see, like Bitcoin didn't have an ico, it doesn't have a fiduciary responsibility, it doesn't have employees, it doesn't have a foundation, yada yada. So it's different than all these other things. And I guess what we're trying to understand is the implications, first of all, understanding the implications of what it means for Bitcoin to be positioned and work and valuable as money that can't be, that has, that has no issuer, that can't be printed, that, you know, that is, has many of the characteristics of gold that can't be banned, that can't be stopped, yada, yada yada. So there's, there's a valuation approach to saying, well, what's, what's money that's better than the money that we have worth, Is it worth more than all the money that we have? How long does it take to achieve that? Those are the kind of questions you ask around Bitcoin around crypto. The questions we're asking ourselves are is it like a database or is it like TCP ip or is it like an application layer or is it like an open source operating system? And when we look at the world at all those different things, we see that they have given time to mature, achieved different kinds of value, right? Like so you, you could say that Linux is incredibly value providing but not value extractive, not value capturing. You could say the same thing about TCP ip, right? Nobody pays to use tcpip, it's free, which is what gives it value to open source developers and other developers to build upon. So if you owned some, have some intellectual property in TCP ip, you'd be able to walk around with your head held high, say look at all the value I provide to the world, but you wouldn't be wearing Gucci outfit because you'd have no value capture capability. And there's that gap between value capture and value creation. I'm not saying there's no need for any thing on computers or the Internet besides Bitcoin. I think Bitcoin is going to capture value attached to the use case of building a monetary network that is better than any other kind of money than we've ever known and probably will continue to be so for a long time. And I look at all the crypto coins and I say these things are, are trapped inside a low value capture, high competition, low marginal cost to produce market. And so I'd be very careful about a, having high expectations of the tokens having significant value over a long, long period of time. Especially when the dust settles and people realize competition moves applications from token to token when there's value to be extracted and the token costs money. So anyhow, that's my best quick attempt. It's already long to explain the difference.
- [28:30]
A
Yeah, I mean I always look at it as. You can't compare an asset that started its life as an asset that is, you know, that is provably scarce, et cetera, et cetera, with tokens that started their lives and really should be as platforms or services that people would pay for and want ownership of. Those are two very, very different things. Anyway, William, your hand is up. I assume you care about this.
- [29:00]
E
Yeah, yeah. I wanted to make a correction when I think Tomer said that the TCP IP is free. Tcpip, I mean it's free in the sense that it's accessibly free, it's open, but it's not free because we have to pay for it. When you pay your Internet service provider. Part of that money goes to support the hardware, the routers, and the physical infrastructure fibers and so on that implement the TCP IP stack. So it's not entirely correct to say that TCP IP is free,
- [29:33]
C
but it is, it is, because the router companies don't pay anything to the TCP IP Foundation. TCPIP is free. They're, you know, bringing it to life. Costs different suppliers money. But that's, that's different from tcpip. Like again, if you own the TCPIP token, the router companies don't owe you anything. The ISPs don't owe you anything. The people using the Internet don't owe you anything. Because the thing is correct, that's fine.
- [30:00]
E
But there's monetization in the, in the layers above it. Again, I wrote about this in the, in the report I the layers above it. The analogy is like a club. A club, good. So when you pay your tcpip, it's like you're a member of a club. You pay a fee to get Internet service. A part of that fee goes to pay for the hardware. But you're right, TCP IP is not charging it. Same way with Ethereum. Ethereum, the foundation does not charge anybody to use Ethereum. It's when you use it, when you use the actual network, the application that uses it, and the layers above it that pay a little bit at a time. The second thing is that you said, like, what is it? Is it a database? Is it this or that? It doesn't matter. It's all of the above and that part of the complexity and understanding it. The Internet, you ask the Internet, you ask anybody, what is the Internet for you? And some people will say, well, for me it's publishing. Some others will say it's E commerce. Some others will say it's social. Some others will say it's a communication platform for not only videos. So it's multimedia and it's multifaceted. And that's why it took a while for everybody to understand the Internet back in 95. We take it for granted. And it's taking a while for everybody to understand the blockchain because it's more than one thing. It's multiple things. And those blockchains that are very multifaceted are the ones that are going to stay the longest. And they are the ones that are going to be with us for a long time because they are going to do multiple things. They are not one. Trick ponies. So there's a differentiation when, when a blockchain wants to maximize profits. It is in a different league than when you compare it to Bitcoin or Ethereum that do not want to maximize profit. They want to maximize reach. They want to maximize multiplicity of use cases. They want to maximize having a lot of people use it for whatever they want to use it for. So it's two different things.
- [32:07]
F
Also, I think a better comparison. Just one second, quickly, can I make
- [32:12]
C
one, One quick point?
- [32:13]
F
Okay, sure.
- [32:13]
C
Can I make a quick point? Garb, the way that I'm framing this discussion and sometimes, you know, people are talking past each other is like, from a competitive strategy point of view, like thinking about Harvard Business School, Michael Porter, that kind of. That kind of thing. And where you have. Where you have competitors and there's the intensity of competition that's driven by the barriers to entry, the ease of substitutions and things of that nature. And, and this is where the problem to me comes in and why I try to compare it, compare it to other specific industries, because in those other specific industries, we can see where value was achieved by either the ability to create a moat or no value was created by the inability to create a moat. And I think this is part of the challenge, right? Like, the reason I point out that Bitcoin is different from all these things is because it is. And when you're talking about things that are all different, but all similar to one another in these blockchains with a fiduciary responsibility or a token that needs to accrue value, you have to study it from a competitive strategy lens because they're all competing with one another for value capture, network capture, the attempt to build a network effect. And we're watching it happen in real time. So I don't want my comments to be. Well, this is fait accompli. It's obvious that there's no value in any of these things. But what we're seeing in the history, in the brief history of the competition. I'm sorry, I'm taking longer than I meant to Garve, is that the competitive intensity is high and the barriers to entry are low, and that's bad for the valuation of these things in the long term. And I'll stop myself there.
- [33:49]
A
Well, before Gaurav, I want to unleash. But the one thing I'll say is, remember, you don't need to have one trick ponies. I mean, there is a need for specialization in a lot of different use cases. So I think that to. To say that there can only be one is. Is silly. I think that's your point G. Right.
- [34:09]
F
I simply meant maybe we go back to the same. Yeah, can you hear me?
- [34:14]
A
Yeah, we hear you. Hello?
- [34:15]
C
Yeah, we hear, we hear you.
- [34:16]
A
Go.
- [34:18]
F
Yes, sorry, I'm. I'm checking into the hotel. First time in Miami since you're not
- [34:22]
C
sure if I hear you. Let me go on a long time. No, go ahead.
- [34:28]
A
You checking in in Miami Beach. Welcome if you are.
- [34:31]
F
Yes, yes, yes, exactly. First time in life. So the humanity exactly is as Maya City. The point is, if we go back to the histories of both things, I think we're not too far away from the argument that Bitcoin being an open source and Wes non value creating for itself or non value extracting as Thomas said, created or found the protocol like blockchain or the technology like blockchain similar to TCIP and arpanet. The first Internet, it was non value extracting. It was just a means to connect computers. I happen to be a telecom engineer by qualification and my first businesses. And then so Bitcoin did the same as TCP IP did, but then obviously and they were all founded for the same reason of collaboration. But then as Internet stands today, there are many value extracting again using your technology. Telecom companies, router creators, users, name it whatever you may, but they're all value extracting profitable or profit making companies. And similarly on the top of that blockchain technology we have, or we ought to have innovation that takes this technology forward like telecom and will create more value, you know, and hence we have all these modern blockchains that are faster, sometimes cheaper and they have their different modes like every other Internet company. Right. Does that make sense?
- [35:59]
C
Yeah, it takes me, it takes me to a slightly different avenue, which is what. What I think maybe to William's earlier point, which is what applications that exist in the world already or that need to be solved for but don't exist. Do blockchains enable? And mostly it's permissionless databases. It's like databases with less permissioning. But, but we have a problem in that many of these blockchains are permissioned, they have master keys, they're hard to, they're. They lack the decentralization. Like what the why, why Satoshi invented the blockchain for Bitcoin was to have a permissionless database for its, for its ledger that nobody could stop anybody else from participating or transact or transacting on it. When we talk about these other things and like when we enter the conversation, well, we want government approval, we want government blessing. Because without the government blessing and the accompanying restrictions that it offers. We can't break through the market. Then we're saying we're competing with database because we're reintroducing permissioning from the government into. Into the thing. So I think it's a big picture question that really, you know, that blockchains that are permissionless and truly decentralized and offer different applications than bitcoin are interesting and intriguing blockchains that bend the knee to the state to say, tell us what we're allowed to do and what we're not allowed to do and when we must intervene and freeze people's assets and seize people's assets and block them from using it. Don't introduce any new functionality that we don't already have fast and cheap in databases. So that that becomes my secondary question around where the value creation actually lies. So I'm walking uphill, so I'm out of breath.
- [37:49]
A
You're obviously not in Miami. We don't have hills here. William, is that a legacy hand or a new one?
- [37:58]
E
No, that's an old one. I'm not.
- [38:02]
A
I will say this, Homer. I think that a lot of people, it's amazing how years of watching this stuff has distracted people from a lot of the original thought processes of what could be new businesses or new opportunities that blockchains enable. It's not just a database, although obviously a publicly verifiable database where you don't have to trust. I mean, to go back to Mark Yusko's comment about, you know, bitcoin on an asset basis, but crypto in general, which is technology of truth versus trust, does matter. I mean, things like defi and the ability to open up markets to competition through a technology that is publicly verifiable is a non trivial innovation. It really is. And I don't think.
- [38:46]
C
Well, Dave. But David, there's two counterfactuals to that. If I can't run the database myself and verify it myself because it's too big, I'd lose some element of that. And if the government can like, and if I can look up publicly and it says, Dave has a million dollars worth of this token and the government can say, no, Dave does not. And then the database is updated automatically to reflect that Dave does not. Or the foundation says, no, Dave does not because we were pressured and no, Dave does not, then that utility of public access, of public transparency disappears. It's permissionless and immutability.
- [39:22]
A
There is no way what you're saying is something very basic. And I don't think that either Gaurav or I would disagree with it. What you're saying is that utility that gets around what governments actually want is just not going to happen. Right. You know, it's going to be. It just. That doesn't work. I mean you can't. You could look at the AML anti money laundering regime and anyone who actually looks at it understands something very basic, which is that it sucks and it's not done what it's supposed to do. It's been very expensive and it's failed. But you can say that as much as you want, but there's no way the government's going to let it go because they think it's important. Right, but there are lots of use cases that don't run afoul of what the government wants. I'll give an example. Just a simple one. Stock loan. One of the reasons that the stock loan industry in the United States is, has been dominated by the same players for a very long time. They're the big prime brokers. And it all started in the back office. And it's because the system is a closed loop that owners of stocks as well as borrowers of stocks pay this enormous toll to this oligopoly. Well, if you tokenize equities and you do so in an intelligent way, you all of a sudden can open up that business to where it will be freely competitive, in which case that it will become significantly better for borrowers and lenders both. That's just one example. Now how they will do it or not, we'll see. But there are lots of those examples too. That's all I was trying to say. Does that make sense? Tomer, do you see what I'm saying? Because. But I agree with you.
- [41:00]
C
I get all of this stuff. Let me offer another thought experiment that just occurred to me. If Heather was dollars that couldn't be seized or frozen by the government, the value of a tether would actually be worth more than a dollar.
- [41:15]
F
Right?
- [41:16]
C
But. But it isn't. It's worth. It's worth a dollar. There's no. The tether network isn't creating marginal value for the unit for the token holders because of any magic that blockchain brings to it. Because blockchain's magic is prevented from being able to be brought to it for it to exist. Which is a. Which is a mirror image of the scenario you just described. But it really concretely points out that these tokens aren't able to generate utility like value, aren't able to capture value even for the token holders in some of these cases above and beyond what's going on. Tether's like the best business in the world because the US government prints money and pays interest interest on it. But I think that there's something to be said for the thought experiment.
- [42:02]
A
No, I think you're right. I mean I think that's very, very clear. The use case for Tether is there's two right people who want use it as a gateway to buying assets, not just crypto anymore because you can do a lot more with it now. Hyper liquid trading virtually everything but to buy assets and to buy crypto. And the other is to get money out of and to use dollars outside of the United States in current countries where you have depreciating currencies that are significantly worse and that has created an enormous profit business model that you're right. But at the same time if you ask yourself now I don't know if they're going to win, I don't know if it's crap, whatever, you know. But like if you look at zcash's, you know, it's basically more or less doubled since I went to Italy or give or take, that's its use case is okay, so you know, do people want to have something that gives them freedom from the government? It's value there. Now whether or not that will work or not, or if it's over value, I, I don't want to get into that. But your point is true. There is a value to being able to operate under the radar, you know, and it's not as pernicious as people say. I mean if you go to it like I was just in Italy for two weeks. The big, the difference in Italy and the UK the single biggest difference other than the food and it's beautiful etc is virtually everybody wants you to pay in cash and there's ATMs every half a block. Now why do they want you to pay in cash? We don't think guess about it. You know why? Because they want to avoid, they say they want to avoid the MasterCard and visa processing fees. And I'm sure that's part of it. And I'm sure there's another part of it which is, you know, tax avoidance, et cetera, underground economy. But it's in, it's ingrained in the Italians. It's always been that way. I mean I used to trade Italian stocks in the 90s and they estimated at that time half their economy was off the books. You know, it, it, this is something that will always continue. So you know, all these use cases
- [43:53]
F
are real Dave, Dave. But, but to directly address what Tomer is saying, I think there's a, there's a catch in the understanding. He said if, if the value of USDT relies or lies within, in the framework of it being not being able to, you know, let's say, controlled by the, by the government, the value of it should grow. Well, the problem is there's a difference in perspective of the product. The product is pegged to USDT and it's meant to be pegged to that value. And so that value does not grow. But hey, it's a multi hundred billion dollar company. Where did that value come from? That value came from its innate nature. And the one that you're talking about, Tomer, that value came from the fact that people are able to move it faster than money, faster than the usual dollars, and then also the fact that it can be used for different utilities like Defi, where the usual dollar can't be.
- [44:54]
C
William, the important thing to the conversation, I think. Oh, sorry, can you guys hear me?
- [45:01]
F
Yeah, yeah, that's, that's got it.
- [45:04]
C
Just. Oh, sorry, that was Gaurav. I think that this thing, the non
- [45:09]
F
finance, walking in the wind, the finance guy that gives you, you arguments of a non finance guy.
- [45:14]
C
Okay. The distinction here is tether, and I think this is really germane to the question of do blockchain tokens have value? Tether was able to not pay any premiums to any of the networks that it operates on and to switch from one network to another to another to avoid having to pay high gas fees. Right. It's, it's a demonstration of that low, low moat of switching costs that the various blockchains have. Tether is issued on lots of blockchains, could be issued on even more blockchains. And they're issued, you know, where there's demand. But where there's demand is where the fees to transact are absolutely the lowest. So, you know, it kind of, it proves the point that the applications that capture profitable value will manage their costs and one way to manage costs in the blockchain ecosystem, because these things are all substitutable for one another, or enough of them are substitutable for one another that the ones that don't have the business will lower their price to get the business or market dynamics will lower the marginal cost of gas on them to lower the price. And that's where the applications that are value extracting will move because they have the capital to figure out how to move and build the infrastructure to be able to switch from one Token to another to keep their own profits as high as possible.
- [46:39]
A
Yeah.
- [46:40]
C
Is it, does that make sense?
- [46:41]
A
Well, I mean as I said, I've been making that point for you know, a couple years now and pissing off like the XRP army guys, you know, constantly on this. It's like if you have a token who its entire claim to fame is it's better, faster, cheaper and you're saying it's going to go up by a factor of 10,000% which will make it no longer cheaper. Well, it's not going to happen. Right. It's self limiting. Doesn't mean it can't go up, it just means it can't go up anything close to what, what they claim it's going to go up. And that's the thing about a lot of, a lot of this.
- [47:09]
F
Dave, I'm sorry to interrupt you. Why not? I am fundamentally against this argument if, if anything right now is working. You know, in crypto it's stablecoin and the stablecoin rails, the recent acquisition of BBNK by MasterCard for a couple of billions and bridge by stripe and so on and so forth. Yeah, that's all simply better, faster, cheaper, nothing else. It's just better, faster, cheaper. It is a huge use case and it's a trillion dollar use case already.
- [47:38]
A
Who disagrees?
- [47:39]
F
I don't disagree.
- [47:40]
A
I just disagree that there could be token that supports those better, faster, cheaper becoming so pricey that it's no longer better, faster, cheaper. Right. You know, people will move. I mean it's like there's a reason that Tron at one point it may still be, I don't know, I haven't checked. Was the, let's see, what was it? Yeah. So Ethereum has the largest amount but there was a point where Tron had a bigger footprint than Ethereum. Ethereum got relatively cheaper in terms of what is it. But you go up and down the leaderboard. If Ethereum got so expensive and the gas fees got so big, people would move because it's really easy to switch the stablecoin use case. There are other use cases that might develop that are not quite so easy to switch, but that one is very, very easy. And you're right, cheaper is going to matter. Now does that mean that it's going to limit Ethereum's price rise from 2,300 to 4,000? No, because that's pennies. That's not going to matter. Does it mean ethereum going to 23,000 though a 10x might not, you know, might cost it. Well, unless Gas fees come down 90%. Yeah, it will limit it. Right? That's the point. The point is the substitution effects are very real in a lot of these commoditized use cases. It always has been. It's true in every single business and every single vertical. I think that's what Tomer is saying. Am I encapsulating your argument correctly, Tomer?
- [49:08]
C
Absolutely, 100%. I'd love to whip out Michael Porter's competitive strategy book and give a one and a half hour lecture on it.
- [49:16]
B
Look, I don't need a one and
- [49:17]
A
a half hour lecture. I mean, I spent, you know, the better part of 30 some odd years in large companies, and I know exactly how they think and I know they will pay a premium for safety. There was a point in time, it's kind of quaint to think about it, where the statement was, you'll never get fired for using IBM and technology. I mean, I haven't heard IBM and technology, except for in certain things, whatever. But that used to be the thing. And that's why you had these monster mainframes that you used, even though companies that went away from IBM mainframes back as recently as the late 90s, out competed the big Wall street firms who are building technology on these monster $5 million basic CPUs, but it was because they paid extra for it. So there is some amount where it's not quite purely price, but price does matter. Gaurav, I now see you as listener and I also see your hand up. So I don't know what's going on with the space. Can you talk?
- [50:22]
C
Looks like it may be time to wrap up.
- [50:25]
A
Yeah, I think we're at time anyway, so given the fact that we already crashed once today, I don't want to try to start inviting people. It'll probably just crash the space. So in any case, we'll be back again, I guess, Wednesday morning. And, you know, stay safe out there. It's a interesting market and we'll see. Those of you who are in Miami, I haven't decided. I have to do jury duty tomorrow, but Wednesday and Thursday I'll be hanging around, so we'll see if I get to meet any of you guys in person. Dave, what'd you say?
- [50:58]
C
Okay.
- [50:59]
A
Yeah, fine. Yeah. Well, yeah, I'm trying to be back in Miami, not. Not Italy, but yeah. Any final thoughts, David, since I see you just jumped up here.
- [51:08]
G
I got dropped early on and then only came back late, so I missed the gist of the conversation. But, you know, certainly clarity. Act looking like it's going to pass to be a favorable lift and Ken Wash coming in as chair and despite what oil's doing is probably going to lead to lower interest rates at some point.
- [51:27]
A
Yeah. Well, yeah, that's I think that's true. But we will get back to that on Wednesday. But for now, take care everyone. We will see you on Wednesday at 10:15aM Take care of.