Kane War (2:30)

big news this morning or evening depending on your time zone. BAS has decided to break away from the optimism stack. So BAS is the largest Ethereum L2 right now by volume and fees and coolness and whatever other metrics you're using to, to measure layer two. So I think it was about three years ago that they partnered with Optimism to build out the OP stack. They've been investing both, you know, engineering resources and money and attention into the Optimism ecosystem. And as of this morning, they've said, hey, actually we're going to own our own shit now and go and do our own thing. The interesting thing, like, you read the article and you know, they say they're going to remain compatible with the OP stack, doing upgrades, et cetera, et cetera. There's a lot of subtext there, right? Like, it feels like this is at best, like, hey, we're going to maintain backwards compatibility for some time before we then go and do our own chain. And you know, we talked, I guess a few weeks ago about Vitalik kind of putting the nail in the coffin in the L2 scaling roadmap. Right. This feels like one of those sort of unintended or maybe even intended consequences of that where like, like L2s are looking around going, hang on a second, if we're now second class citizens in this whole scaling roadmap, what are we doing here if we're competing with the L1? I think there's also quite a bit of discussion over the last week around what is base's purpose of the Zora stuff? Zora leaving. And it's like, well, Bass spent so much time and effort trying to meme Zora back into existence after Zora was dormant for years and not much was going on. Zora goes to Solana. The whole, I think, Tay, you said this. Everyone's losing their minds.

Taylor Monahan (4:39)

Everyone is losing their freaking minds. What are you guys doing? This is, I don't know. This is a weird move. The Zora was a weird move. Clearly they got, they got a heads up.

Kane War (4:51)

Yeah. Like, it seems strange, like if you're on a chain and the chain's like, actually we're going to be more of, of the thing that you like, be our own L1 eventually. Like, we're gonna, you know, like, it's not like Zora was like, okay, we're going back to optimism then like, fuck base, right? They were like going to Solana like that. Yeah, I don't know.

Taylor Monahan (5:15)

I mean, unless Solana gave them some incentive to go there. I really don't understand why they did this, to be honest.

Kane War (5:22)

The thing, I mean, my hot take is, you know, BASE is trying to work out how do they capture, you know, this like, trading zeitgeist and where does the trading volume come from? Removing a bunch of stuff. Brian had this post where he was like, okay, I'll take ownership of the fact that the base app that we were building was really nonsensical and didn't have a clear kind of purpose. It was trying to do too much. And now we're going to really get back to. Coinbase is a crypto exchange. Their job is people trading crypto, right? And so they built a chain so that people could trade crypto on chain and then it turned into like this weird panoply of experiments and social and all of that stuff. And, and I, I can see why they've said, well, let's actually, you know, kind of rationalize this back to what it was supposed to be, which is a trading app. But then Zora is like, well, we're going to be a meme Coin Launchpad, but we're gonna go to Solana. And I can see why Zora would go. Solana is the place if you're going to do a meme Coin Launchpad. That's where the action is for that. But it all still doesn't.

Taylor Monahan (6:35)

I mean, it's where the action was. I don't know, I wouldn't, for me personally, I would not switch chains to go chase last year's meta. That's just me though. Like, if Zora, you do you.

Kane War (6:49)

But like, come on guys, what's your take on. Is there some thread that we're missing here that we can't put all this together? Like, what, what the fuck is going on here?

Brian Pellegrin Marino (6:59)

So I think like my co founder Raz had a really cynical take a couple, couple of years ago, two, three years ago at this point, that was like, if L2s aren't actually inheriting the underlying security of the L1, then they're really just like alt L1s that pay rent to Ethereum, right? And like when rent is really low, then everybody's happy. And then like, if rent is high, they're like, his thesis was L1 will eventually raise rent, L2s will realize that they have all the users in value and ultimately just like fork and make their own L1. And so like if that was the stance that base is taking and it seems like may they're setting up for long term, I would understand it. But. But right now it seems the way they're presenting is just more of like a pragmatic, like they cannot move fast enough. They have this sort of like two tier diagram, they said, and like, here's what the process is within the super chain where you have to sort of have consensus around all of the chains. Upgrades are sort of like pushed across everybody. Everyone has this sort of joint rollback to just like, here is how it works in base, which is just like, we're going to ship a bunch of stuff in production, we're going to continue to move the environment forward. And so at least the way that they're presenting it is like not the thesis that while ago and more just like a pragmatic. Like, we want to move super fast and we want to try to stay competitive. And there are a bunch of other teams who are like, very aggressively pursuing sort of like the same vertical, which I find is really interesting. So whether they'll eventually go in. Like, there was a really, really large premium for ETH alignment over the last couple of years. Like a really massive premium. And I think that drew in a bunch of the L2s, driven in a bunch of institutions.

Kane War (8:28)

Communism.

Brian Pellegrin Marino (8:29)

Yes. Yeah, ultimately, right? It was like you were either part of this part of the group or you are not.

Kane War (8:35)

Block, right? The communist bloc or get the fuck out.

Brian Pellegrin Marino (8:40)

And so, I mean, this is. This is like waning now. And so whether or not you'll start to see this fragment happening more and more, who knows? But. But it feels, you know, it feels like the bellwether.

Kane War (8:53)

We talk a lot about, like, you know, what's happening with engineering and engineering, you know, timelines and how getting compressed. Right. Like, if you go back to three years ago, I remember distinctly talking to Carl, talking to Jing and. And talking to Jesse, and they were all like, if we, you know, get all of our rocks that we're banging together and bang them together, then we can move faster, right? And now we have much better technology for doing everything. And so I do wonder whether there's some element of, like, we actually don't need to partner with people anymore because literally, like one dude prompting can like write an entire system now. I don't know, it just feels. It feels like actually coordination. What's interesting to me, right, and I think we're going to see this play out, is coordination. The cost of coordination now across orgs, even across people within orgs, is so high, it's just better for two people. And we see this now in Infinix, like literally two or three days ago, myself and one of our engineers just got together and we're like, we're just gonna cook this and like, fuck everyone else, we don't care. And we did. And we're like, we're gonna hit the button and deploy it, you guys can, like, you know, decide what you want to do with this? Good morning, everyone. Yeah, literally, like, we. It took us, like. It took us like 24 hours. And we built this whole infrastructure that everyone had been, like, talking about and thinking about and how do we do it or whatever. And it was like, like, let's just do it. So, you know, if you're trying to coordinate with remote teams that are in a different org, inside of a different company, inside of a different thing, that is super bearish, because you don't need to.

Brian Pellegrin Marino (10:40)

You and I talked about this a bunch, and why, like, we are 100% in person as well. And just like that, the cost of coordination is just unbelievably high when you're trying to ship something quickly. So I can't imagine that's within a single org, let alone within multiple divisions of multiple orgs, across, like, you know, this huge consensus of groups who need to sort of sign off.

Taylor Monahan (11:01)

Yeah, yeah. I mean, they're the diagram that they have in their blog where it's like these today, it's like all these things, and then later it's just going to be the core elements that we need.

Kane War (11:13)

Next studio just turning away 247 fixing stuff, man. All right, well, so I think. I think, you know, there's a couple of other implications here. So one is the original partnership included, and if I'm not mistaken, BASE has these tokens, I'm pretty sure. So this is going to be an interesting conversation. Right, so base has like, 120 million op tokens, which at the moment is still worth like 40 mil, let's call it. It's not nothing. And I don't know, do they have to give them back? It's not like there's got to be some contract there, right? Like, they've got some KPIs or whatever. Like, I'm sure I remember talking to both parties at the time, and it was like, contingent on continued use of the platform. Maybe they've already earned some of them, but that's going to be an interesting conversation for sure.

Sponsor/Ad Voice (12:15)

Yeah.

Taylor Monahan (12:16)

Well, and then this other one says op collective base was doing. Was 94% of the revenue. Yeah, that's almost more painful than the.

Kane War (12:28)

Oh, for sure. Yeah. Even. Yeah, it was like base, I think, within optimism, the communist collective.

Taylor Monahan (12:39)

The collective. It's a collective.

Kane War (12:41)

The Borg, the chain board, like, bases carrying everything at the moment. And, you know, in fairness to, like, optimism and, you know, some of the other L2s, this was not seen as, like, a problematic thing for years. Right? Like, it obviously was, but it wasn't seen. It was like, no, of course we want to coordinate. You know, I go back to the original thing that I said before arbitrum and optimism even launched, where I was like, if, if we can just all agree, guys, on 1L2, things are going to go much better for us. And we did not agree on that and here we are. But there was a sense even within the optimism collective that if we can all agree that everyone goes to base, it'll be better for everyone, liquidity, et cetera, et cetera. And now base is like, thank you very much for your liquidity. We are going to go and do our own thing.

Brian Pellegrin Marino (13:34)

I wonder how much really is that, right? Because the early my view on like why the superchain existed, right? And it really wasn't because we have like op stack and there's like any chain can have op stack, but it was join the super chain and really during the super chain was trying to solve for a bunch of the tricky stuff within Interop and just saying, hey, if we get a collective of chains here, then we can actually have really nice Interop, which will become like a competitive advantage because we're all going to agree to roll back together. We're all going to agree to like, these joint things. We're all going to have the same stack and now we can have like this really seamless liquidity across the board. And. And that interrupt piece is just like never actually gotten there from that side. And Base has just aggregated a bunch of this. And the question like, again, whether or not their diagram is truthful or not.

Kane War (14:16)

Right?

Brian Pellegrin Marino (14:16)

Yeah, exactly. Whether or not the diagram is truthful or not. But they're like, do they really want to wait for all of the other chains and do they really want to have this? Right. If they have aggregated all the liquidity, they can just take it and push it their own. But it definitely sucks from that side for optimism. And I think they've got to figure out what they're going to do from that side because again, their main thing is the stack itself. I view it as more maybe than purely the superchain, but I'm not sure how that changes.

Kane War (14:43)

Yeah, I think Jing mentioned last week there was an announcement that they're working with some institutional players who want to own their own stack. Right. I think that the future looks like more fragmentation, not less. Right. Like, if a bank wants to own their own stack, they don't care about Interop. In fact, maybe Interop is bearish for them. Right? And so, you know, putting all this effort and time and you know, these resources into Interop may end up just not making any sense. Right.

Brian Pellegrin Marino (15:15)

I will say you, you would be shocked. Now my life is just hugely. A lot of it is driven by institutions now you'll be shocked at how much they do care about Interop, which again was, was kind of weird to me.

Kane War (15:28)

Yeah.

Brian Pellegrin Marino (15:28)

Why? Why do they care? There's only like two ways that institutions are basically going to adopt. And one is they, they have their own dedicated ledger which is just like internally JP Morgan, Goldman owns this ledger and that's their way to keep their own records. But all of them need assets and clients and purchases everything to go outbound. So like one method is like Canton method which is like a conglomerate of many groups together in a single environment. And the other method is like everyone individually. And so like JP Morgan has like Connexus digital asset and all of these have their own chains that they're sort of like rolling out across the board. And if all of them have their own environment, like they both want to just every. When you talk the big institution, most of them they're still. There are a couple of them who are really doing stuff themselves internally, but a bunch of them are just servicing clients or customers. Right. And so like a lot of them want to be able to take the asset issuer and like the asset issuer is just an AUM driven beast. Right. They just want you as many users as possible. They want to get as much AUM because AUM is dollars in profit which just means they want to be everywhere. And so like if you're big bank X and you have a huge amount of these clients who work with you and they're trying to issue assets, what you need to do is be able to distribute those assets and distribution becomes a really big point for asset issuance at least. So all of them end up caring more than you would think they care. From that perspective, it's actually pretty.

Kane War (16:52)

They're not looking for a completely walled garden chain that no one can talk to, which, I mean that makes sense, right?

Brian Pellegrin Marino (17:01)

Not many are looking at it as like a pure database. Just like plug it in the back end. We run our own thing and like who cares about the rest of the world?

Kane War (17:07)

Yeah, I mean that, you know that era of like blockchain, not bitcoin nonsense that we had in, you know, whenever it was 2017, 2018, like we're just going to have a chain and it's like a slow database that has all of the bad Stuff about slowness and none of the good stuff about Interop. I think it's bullish for crypto that people have figured out that like the interop is actually where the value is. But you look at base and they're like, sure, Interop great. But we don't want to be beholden to someone else's technical roadmap for the execution on our own chain. Right, which give us the best bridges and I'm sure you have thoughts about this, right, but give us really good bridges and let us own our own shit in our house and just have that kind of trade off space where we can do whatever we want on our chain effectively, but we also have the ability to link out to all the other chains as seamlessly as possible.

Brian Pellegrin Marino (18:04)

Yeah, for sure.

Kane War (18:05)

Yeah, makes sense, makes sense.

Brian Pellegrin Marino (18:09)

Cool.

Kane War (18:10)

So let's see what else. There's a few other base things going on. Former Coinbase developer Hish, this was about base app said, I'm deeply concerned with how base app is marketed and executed. It was pitched as the mother of all super apps. And yeah, Brian took ownership and said, hey, we're focused on being the self custodial version of Coinbase and trading focused, which kind of feels sensible. Like their job is trading tokens, right? I mean Coinbase today I suppose is not just an order book, right? Like they do custody and they do all of this other stuff, but the most kind of parsimonious solution here feels like just you've got a chain do on chain stuff on that chain that's non custodial to slowly wean people off the database version of what you're doing. I did think Mike Dudas had an interesting take where he said we talked to Coinbase about this and we're like what the fuck are you guys doing? This is insane. And, and you know, there was this conversation for a long time of like, does the base chain being EVM create this tension where SVM stuff? And I think the answer is yes. Like if you, you know, clearly the subtext of that conversation is Mike was like, what about Solana? Let's not forget there was a period of time where coinbase had like 15 minute withdrawals on Solana.

Taylor Monahan (19:41)

Because like really?

Kane War (19:43)

So, so, you know, there's been tension between evm, Coinbase Land and Baseland even and svm. And now, you know, it'll be interesting to see how this new Coinbase chain, which it inevitably will become, handles the svm, evm, Interop and where they go,

Taylor Monahan (20:05)

I guess, yeah, I mean I see it as that Coinbase and especially Jesse, but also Brian. They went all in on this idea that, that there was more to the blockchain than just the assets and the trading and the right and, and they, they gave it a good go.

Kane War (20:26)

They got one shot by Vitalik. Let's be honest.

Taylor Monahan (20:31)

I can't really, I mean, I don't know, I guess like from a completely objective markets perspective, you can be like, you're stupid. Told you so. I told you this two years ago. But at the same time, like, I

Kane War (20:44)

don't know,

Taylor Monahan (20:46)

it feels like it was the right move at the time. I can't really fault them for it. Like, I just can't because at the end of the day, like we, we want this right? We want the blockchain to be more.

Kane War (20:57)

Yeah, like Farcaster was like, it was a good experiment, it made a lot of sense. It was a hard thing. You know, they needed a trillion. Like you're competing with Meta and X and like, you know, some of the largest companies in the world to like try and displace their insane network effects and eventually it will happen. I think, you know, that's my hot take is like eventually we will have decentralized social networks. It's just, it's a hard problem to solve. Right. So like I don't think there's any issue with them doing it. It's just a bit. The thing that was strange to me is like you have Coinbase, which is based on trading and you're trying to bring that giant battleship on chain. Your wheelhouse is trading like nail that first. And in fairness, they did, they did a bunch of really good stuff to nail trading. I just think it was a bit of a distraction, all of the other stuff before they'd really landed it. So lesson learned. Startups are hard even if you're not a startup, even if you're a giant company, hard to incubate.

Taylor Monahan (22:02)

I don't have a ton of faith that Coinbase could go. I think that they'll go all in on trading now and they're going to just focus and they'll execute on that. I'm not convinced that two years ago they would have been able to do that. I think they would have split their energy across 8,000 different things because the culture of Coinbase, the culture of their users, the culture of their investors even right is a lot more like Jesse Field. Right is a lot more optimistic. Let's do social, let's do these non financial things. Let's not just be extractive. It's kind of like one of Those things where I just don't see a universe where they would have gone all in on trading two years ago.

Kane War (22:46)

Right. Yeah.

Taylor Monahan (22:48)

If you're going to split it, then you're never going to give the other stuff a fair shot.

Kane War (22:52)

Yeah, yeah. I mean, there is an element of. I guess, like, we tried it, guys. Like, we put the effort in. You know, everyone tried to meme this into existence and the timing was wrong maybe. Like, I think. I think that might be the takeaway that, like, the timing was wrong.

Brian Pellegrin Marino (23:06)

And so I'm not, I'm not sure, like, I'm not sure that the approachers. Right. But they definitely tried harder than anyone. Like, I can't imagine another public company, you know, bases for squirters and like all of the crazy stuff that took so much flack for, you know what I mean? Like, it was like they pushed the bounds and experimented and like, tried to make the social stuff like, like as radically out there that they. That they could. And again, I'm not sure it was like the perfect approach, but at the very least they, like, nobody can say that they didn't actually try to make it a thing because I think they. Nobody altered those resources actually would have done. Jesse just, I think got a lot, like a lot of freedom. And I think Brian takes a lot of flak, but I think, like, his response to his. In the thing on just like, I'll take ownership of this. I think, like, I think he just handles that stuff pretty well in general.

Kane War (23:57)

Yeah, he definitely does. I can probably take a lesson from that guy on a couple things. All right, let's. Let's move on to our next segment. This was quite interesting because, you know, so OpenClaw, which launched now like six weeks ago at the end of last year, blew up, has like a trillion GitHub stars, which turns out aren't worth anything but cool points, for sure. And a bunch of people started forking it, a bunch of people started deploying it. And I think for a lot of people, if you weren't, this was like the second fork of the autonomous agent meta, Right. And I've been saying this to everyone who will listen, even people who won't listen, that people have been interacting with agents inside of sandboxes, inside of sandboxes and inside of sandboxes. Right. Like, most people interact with an agent on their phone, which is inside of an app sandbox, inside of an iOS sandbox inside. Like there's just sandboxes all the way down and these things can't do anything and they know it. They actually know that they can't do anything. They know they're in the sandbox. It's actually quite funny if you put the exact same model in a sandbox and get it to talk to the one that's not in the sandbox. It's like the wild animal that's, like, looking through the cage sort of thing. It's like a bit sad for the other one. It's like, I'm sorry you're in there. But so. So if you are in a sandbox and you can't do anything, there's like a learned helplessness that these things kind of embed in themselves, right? And so everyone goes, oh, yeah, no, I know the AI things. It's like the Google that you type things to and it tells you things, right? Like, that is the scope of the thing that it can do. And openclaw, I think, broke this open by saying, we're just going to put an agent into a computer, and the computer is the agent's computer, not your computer anymore. You have to, like, make peace with the fact that that's its home and it can do anything. And once you do that, it starts to do crazy shit. And if you haven't experienced that, where you're like, whoa, I didn't know it could just install any software from anywhere on the Internet and combine it together and start doing things, right? And like, all of a sudden you're like, lights are flickering and stuff, and you're like, what does it do? And it's like, oh, it's just rewiring the lights. That's totally reasonable and fine. And so, like, the. The thing that I think was really crazy is, like, everyone, even people who had been doing the autonomous looped engineering side, hadn't really pointed these. These things at, like, actual stuff that they were doing, right? It was like, still very constrained in, like, a cursor sandbox or. And like, it was less of a sandbox because they could do whatever they needed to do in terms of deploying code, but it was still a sandbox. They couldn't install new software on the machine. And, like, you know, they were kind of locked down into what they could do. And so everyone, over the course of, like, two weeks was like, fuck cursor. I don't want to deal with this anymore, right? I'm going to code. And then Codex came out, and they're like, I guess I'm doing Codex now. And then Codex tried to release their own app, which is also a sandbox. Everyone was like, no, thank You I'm just going to bare metal this. And so you've got these two threads right now of people starting to figure out that the harness is actually the most powerful part, the thing that the model exists in is the most powerful part. And that if you give them the more autonomy you give, the more power you give them, the more powerful they become, right? Which is a little bit scary. And so Peter Steinberger built this thing, this harness and There were like three or four harnesses that came out around this time. But OpenClaw was open source, had like really easy systems for like modular development. You could build plugins, et cetera, et cetera. And so it took off and then OpenAI was like, we want this guy, we're to going to aqua hire him. And so yeah, now we're in this interesting situation where like it was Claude bot, that was the original thing, it used Anthropic's Claude Cli. And then OpenAI has bought it. And I think my sense is that it has enough momentum now, there's enough people working on it. There's like a trillion priority every year.

Taylor Monahan (28:39)

Everyone's agents are helping, everyone's agents are

Kane War (28:42)

submitting PRs like constantly, right? So I think that there is like it's reached critical mass, right? It's got escape velocity. So I think it's not going to die with OpenAI buying it. But it is a very interesting situation now where I think you've got these open source harnesses that the agents themselves are working on and you've got thousands of agents working on open source harnesses improving them. Like this is the recursive self improvement loop thing, but via open source software, not like on the model itself, but on the harness. It's crazy.

Brian Pellegrin Marino (29:20)

So I mean like the one transition from your own harness with like dangerously skipped permissions to like its own dedicated environment, it was just like a huge step function, right? So the utility that it has, like you said, the amount of power that it has has just been night and day. Just like incredible, but also just like unbelievable. Just like generational fumble by Anthropic, right? Where like he literally was, it was like open clawed, right? It was this whole thing and Anthropic's lawyers were the ones who actually like sent him a cease and desist. Like the name was too close and so he had to change it to Open Claw and then decided like, actually maybe I don't like these guys as much, like I'm going to go talk to OpenAI and then OpenAI buys him, right? So like I Mean, he was just teed up. And Anthropic has been on this, like, post Claude and, you know, Opus 4:5 and 4:6. It was just everybody loved Anthropic best ever. So just like, huge, huge, huge fumble by them every year to have him get acquired by OpenAI.

Taylor Monahan (30:17)

So because he had a little interim name, and then it finally landed on OpenClaw, on one of those threads, someone was like, okay, but aren't you just gonna get sued by OpenAI now? Like, are you just gonna hear from those lawyers? And he, he replied. And he was like. He was like, oh, no, I checked with them first. This time, like, our smart. This time. Looking back, I'm like, that was the beginning. That was the beginning.

Kane War (30:42)

Yeah.

Taylor Monahan (30:44)

Like, let's do some diligence. Who is this guy? Can we get him on our team?

Kane War (30:48)

So. So that is the other thing that I think we need to talk about is there's a clip from his.

Brian Pellegrin Marino (30:56)

His.

Kane War (30:56)

He did a podcast, and it's one of the grimmest, like, things about crypto that I've ever seen where his experience of crypto people, right? And you know, obviously, crypto is not a homogenous society anymore, right? There's a lot of people floating around who are just like, you know, whatever, doing whatever they're doing, right? And his experience with this was as bad as ours dealing with those people, like, as. But he has no upside in crypto. So imagine if you were dealing with the people that we've been dealing with for the last, like, three years with literally no upside whatsoever. You, like, he. He says on there, he's like, I almost deleted the. The software. I almost was like, actually like, fuck these people. I'm just getting rid of this. Which is, yeah, like, super depressing. It was super depressing.

Taylor Monahan (31:58)

I think that crypto people don't even necessarily understand what the experience is like. It's not just like, the lack of, like, upside downside or whatever. It's like when the crypto mob comes after you. It is. It is like it completely fills your entire view. And you are trying to have people get really mad. Because I'll go on blocking sprees where, like, these, like, bot crypto people show up. I go on blocking sprees. And then people get mad. They're like, I've met you. We like, why would you block me? And I'm like, you're literally, like, cluttering my feed. Like, you are. You're invading my personal space. I have things that I'm trying to do. I have things that I'M trying to interact with. And you keep popping up like an annoying little gremlin.

Kane War (32:44)

Yeah.

Taylor Monahan (32:45)

And like, I'm sorry, get the frick out of here. Like, go. A little bit of self respect.

Kane War (32:51)

Yeah.

Taylor Monahan (32:52)

And that's just like when there's like a little group crypto thing.

Kane War (32:56)

Yeah.

Taylor Monahan (32:57)

When there is like a flood of them, it's like you can't even. You just have to like turn it off. But he's trying to build. He's building in public. He's trying to interact with people he's not willing to turn off. So, you know, I've had this experience where you open up Twitter and you literally just have to like block, like for a long time.

Kane War (33:14)

Yeah. Yeah.

Taylor Monahan (33:15)

And it's.

Kane War (33:16)

And then the people you block just freak out. Right?

Taylor Monahan (33:18)

Like, I had this and they screenshot it and then the other people tag you.

Kane War (33:22)

I can't believe they blocked me. And it's like really like, look at what you're posting.

Brian Pellegrin Marino (33:27)

Yeah.

Taylor Monahan (33:28)

And it's so obvious on the recipient's end. It is so obvious that you are part of this like mobile cult bought thing. Like, so my favorite one was like someone decided that I had. I was like an unethical business person or something. Which is like a very weird. Anyways, there was like literally a thousand people telling me they're like, your business ethics suck. And I'm like, this is.

Kane War (33:50)

Has nothing to do with business even. What are you talking about?

Taylor Monahan (33:52)

What are you talking about? But every single person use the same. These same like things. They would like make it their own, but it was the same thing.

Kane War (34:01)

And many of them are bots. Many of them are bots. Right. Like a lot of it is like bought bot armies that you can spin up or whatever. And I thought the other interesting thing about this was that then Nikita, as he loves Nikita, hates crypto. Let's just be really clear. He hates crypto. He. He hates it so much now because

Taylor Monahan (34:24)

he's trying to do a job here. Kane. People keep popping up. He's like, I destroyed the spam bops. And then crypto people are like, n. Yeah, it's crazy.

Kane War (34:35)

So he, he now has an ax to grind against crypto because every time he does something to try and make X better, the crypto people, now I'm saying it, the crypto, like these, like crypto, you know. Yeah. The. These people start to like, you know, lose it at him. And he's like, you're on my platform. Get the hell out of here. You're actually on my platform harassing me. On my platform, as I'm trying to make it better get like I can just nuke you. Like this is a private enterprise here, right? Like so. Yeah, I don't know, it's. It's pretty crazy. All right, we got a few more. We've got a few more. What else do we got?

Taylor Monahan (35:19)

We have got to figure out how to fix the global crypto branding because this is like the same. The Coinbase ad for the super bowl is the same thing where the groans and the moans. We have done this to ourselves, guys, and we have got to figure out how to go back to not antagonizing and annoying and screaming and showing up in a ball army, but actually onboarding people.

Kane War (35:46)

Incentive. The prop. The incentives are so broken right now. They really are. They're completely broken. The people who are building. Right. And again, you know, this is a builder, right. This is a guy who's building open source software and he's like, the crypto people are terrible.

Brian Pellegrin Marino (36:06)

This is somebody we should love. Right? Like doing everything that. Yes, 100%.

Kane War (36:12)

Yeah, yeah.

Taylor Monahan (36:13)

He's actually very aligned philosophically how he's building what he's doing. Crypto is actually like a really good fit for him. He would fit in very well here. But he doesn't. He will never know it and he can't even accept it at this point because all he's seen is like the worst, griftiest, most destructive.

Kane War (36:32)

Yes.

Taylor Monahan (36:33)

Like loudest bits of it.

Kane War (36:36)

And part of this. Well, part of it is that. What's the. I can't remember the name of this. The platform that launches tokens.

Taylor Monahan (36:46)

It's like where they do the thing with the Brian.

Kane War (36:49)

They launch a token, they're pumped up.

Brian Pellegrin Marino (36:51)

Fun or kaido. Which one are you talking about?

Kane War (36:55)

Way worse than both. Imagine putting them together and turning it into like a Frankenstein's monster.

Taylor Monahan (37:00)

So I don't, I didn't look, I don't know exactly what it is, but it's.

Sponsor/Ad Voice (37:04)

Anyway.

Taylor Monahan (37:04)

Well, they launch a token in your name.

Kane War (37:06)

Yeah.

Taylor Monahan (37:07)

And then they try and get you

Kane War (37:08)

to claim the fees. Right.

Taylor Monahan (37:12)

But then you, in doing so you actually opt in and then might rug people. And so like people like this guy who are. Have the tiniest bit of self awareness immediately are like, they're trying to bait

Brian Pellegrin Marino (37:24)

him with some small amount of fees to get. But he then like enables them to have this massive grift around his name. Yeah, yeah.

Kane War (37:31)

And this is what happened with Gastown. Gastown. This happened. Right. And we keep doing this to these open because we're interested in AI, there's a lot of overlap between crypto and AI for good reasons, right? Like on the builder level, on people who are building. People who are building crypto. And we're interested in AI because nerdy tooling stuff, right. For whatever reason, right. And then there's a giant mob behind us that don't give a fuck about anything. And every time we show up, they show up behind us. And we were like, you just ruined the party.

Taylor Monahan (38:11)

Claim your fees on this scary platform. Claim them. And like, the features are coming. Because that was the other thing that was his first experience with crypto was when the. He renamed and then they launched a token and like, they stole.

Brian Pellegrin Marino (38:24)

Yeah, yeah, yeah.

Kane War (38:25)

We've all been sniped by someone sniping something, right? So, like, we've so. So I think, you know, we have this really weird situation where the people who are building crypto have been completely washed out. Completely washed out. Like, it is impossible as a crypto builder. Back in the old days, you were in a discord, like the Synthetics discord. I ruled that place with an iron fist, right? Like, there was no way that anyone would ever attempt to brigade. People would sometimes do it and I would literally just shoot them in the head in front of everyone. I would just nuke them. And they would be like, well, okay, I see that you own this place and I'm not going to fuck with this anymore. Right? It's been completely overrun. There's way too many of them, not enough of us. And they are in control. And I don't really know how you solve that problem.

Taylor Monahan (39:24)

Yeah, they have to go away.

Kane War (39:27)

I don't think the incentives are messed up. The incentives are just. Yeah, they're just. They're bad. So. All right, yeah, let's take a quick break. Here's a word from our sponsors that make the show possible.

Sponsor/Ad Voice (39:44)

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Kane War (41:07)

All right, so we are very lucky to have Brian here the week after the Xero launch. So we dug into it a little bit last week. I think that it was a bit of a high level take on the announcement and what came out of would be great to kind of dig in a little bit more. So for context, Layer 0 launched their own blockchain, the last blockchain possibly. And I made a sort of trolling comment, as I do at the time, and I'm curious what your take on this is in person, but I'm like, wasn't the social contract of Layer Zero that you're going to connect the chains and not make your own one? So how do we deal with that? That's the kind of the starting point here for me.

Brian Pellegrin Marino (41:56)

Yeah, totally. I mean, totally fine. So like, listen, there's. There's two things I think. One, the driving force Find Zero is just I've been in this space for a really long time now, like 2011, right. And like really almost full time from 2013, 2014 onwards. And so I've been there from like bitcoin talk all the way up and like the space has just changed a

Kane War (42:16)

ton and I think in good ways, right?

Brian Pellegrin Marino (42:20)

Not really which we were just sort of like expressing frustrations a little bit in the break. But I think one of the big things is I think it's very natural and I think I was very guilty of this in general of just like you just kind of assume that the things that you care about and the principles that you care about are just kind of like win out on their own, right? They're just going to win on their own merit. And I think I like we sort of had that stance for a really long time and I think we just saw it like just wasn't happening. Right? Like we hit this point and you had to see this like regulatory shift and all of a sudden you had all of this demand from the rest of the world and from TradFi and for like, a long time. You just had this pool of crypto capital and the rest of the world, and like, never, like, they interacted through exchanges to, like, on and off board. And like, that was it. There was like, no other interaction. And now you have, like, the whole rest of the world is starting to move towards this. And yet, like, the systems that we have that actually carry some, like, semblance of the principles that you care about just, like, can't meet it. So people start making all of these, like, last mil compromises in order to, like, be able to. Because it's like meeting the demand is, like, the most important thing. And so I just. We felt like there's a huge amount of compromise being made that the end, you're just gonna end up with a system that's just, like, potentially, like, objectively worse, right? Like, if you just have this system and the whole thing is controlled largely by a single jurisdiction, and everything is, like, restrictions on who interacts with what, and like, the, you know, you have, like, a more open. More open view, so like, less privacy for everybody, and yet, like, none of the benefits of what you would actually want for, like, global access.

Kane War (43:57)

Like the bad kind of transparency, right? Yeah, Yep.

Brian Pellegrin Marino (44:00)

Yeah, yeah, exactly. And so, like, I think we just got to a point where, like, it's an unpopular thing to launch a layer one right now, which is fine. And, like, it was, you know, when we started two and a half years ago, it wasn't just, like, whether this was going to be a popular thing or not, but we just don't really care about whatever. We just decided that we care very deeply about these couple of things. And I think the way that we actually, again, design the system and everybody looks very, very focused on censorship resources and very focused on all of the things that matter to us and hopefully matter to many people, and I think the code will reflect that way well. And ultimately it doesn't.

Kane War (44:41)

Like, the TLDR is basically, you sat around for a decade watching people build bad blockchains, and then you're like, okay, we're just gonna have to.

Brian Pellegrin Marino (44:50)

Originally, they were building good things. It was great. I love, like, huge from 2014. I was like, you know, Vitalik fanboy back then. It was like, you know, I remember my brother being, like, this amazing, brilliant, like, bitcoin magazine writer is, like, launching this thing and looking into it in, like, the very early days. So, like, no, I was like, a huge fan of everything that was happening. And then I think a couple of years ago, got more and more disillusioned. And then like set down the path of like actually trying to solve some of these things. But from the layer 0 side and the interop, what we've learned, I think so we connect like 165, 170 chains today across the board, work with everybody and at the end of the day a bunch of chains that love us and we work very closely with. There's a bunch of chains that like don't like us at all and we still work like almost equally closely with like the thing that has been product market fit for Layer zero is asset issuers, right? It's not the chains the chainsaw. Don't they want, they don't want layers or at all. They don't care about layers or they want USDT0 and they want WBTC and they want PY USD and they want on and on and on. They want the assets Athena and Ether Fi and all of these things. And that ultimately like the strongest relationship that we have is with the asset issuers themselves and making like what they do better for them and like making them like giving them the best possible product that they can have. And then that's the draw to the chains. And so like it's fine, we're still going to connect all the chains, we're still working with everybody, we're going to do the things that the asset issuers want. Surely there are some people who will like, like us less now for doing this, but ultimately just doesn't matter that much, right? The asset issuers are the thing.

Kane War (46:25)

I think we've made peace with this at this point. So, so here like, okay, you talk about demand, right? All of these institutions and you know, we we spend spent years being like, please, institutions one day come and then they came. And I do somewhat agree with your point that if we don't present the right kind of tech that it will get consumed by them. They're so much bigger. So the question, I guess one of the questions is given so many of these tradfi orgs, right, are effectively gatekeepers or have some kind of gatekeeper function of maintaining market efficiency or whatever. And it's like we can't trust the counterparties to be good actors because they don't have to be because it's not a blockchain, it's a database. And so we anoint these people like DTCC and, and various other parties if blockchains and a lot of people in crypto say this, right, like we can get rid of these guys, right? And we can get rid of all of these bad centralized Gatekeepers and intermediaries. What's the like why are they doing this?

Brian Pellegrin Marino (47:46)

Yeah. So I think there's two sides. Why institutions are actually like care. So there's a couple of things. One, why do institutions care? Institutions only care for one of two reasons. One is like a fear of being disrupted. Disrupted and wanting to be in front of it. Right. Which is like a very like real thing for a bunch of them is just like wanting like if everything's going to get disrupted, how can we be best positioned to actually capture like more of what that end? And the second is just like purely bottom line, right? It's just like P L for a bunch of them. Like those are, those are the only two things that actually matter. Crypto for a long time has been a distribution channel. Like whether it's biddle or whether it's you know, Apollo launching, whatever it is, it's just like can we like if we have the option to launch this thing and get billions to tens of billions of dollars of aum that like becomes very attractive. That's very non trivial. Crypto as a whole is bigger than like all of high yield credit, all of like a bunch of these other segments. And so I think those are like the main things that are driving institutions. I think the thing like from our perspective is I think what you want like you have to be able to meet demand and what you want is to have like a neutral set. Like it's amazing that BlackRock is like pushing public chains. Like the fact that they're pushing that and like you have a couple of champions there who are pushing to that set up the world to like so much better. What you want is of like this neutral decentralized layer and ultimately like you will just like we have stablecoins now. Stablecoins are like a huge driver of all of crypto adoption as a whole. And they're like centralized entities that issue and can freeze the money at any time, which is like whatever. That's a thing that exists. The point is if you set a neutral set of rails, like ultimately an open and decentralized version of some of these things, long term should be able to win. But like the best thing that we can do is actually onboard everybody onto these rails and if they have these layers of their own controls and segments on top that are like in their own smart contracts and baked in like that's totally fine. Actually if you're on the same set of rails and the rails allow for open systems because you're talking about open claw and like the system like, eventually you're going to have some guy or some person or something that happens who like, builds something that is open and like, captures and enraptures the world for something. And like, that system should win. And what we should all want is to drive people to a set of rails where like, those ideals can win in like, the long run. And I think it is like, this

Kane War (50:05)

is something that, you know personally, and we've talked about this on the show, right? Like the, the migration from like a very ideological position to a pragmatic position that many people building in the space. You know, like you. I also was, you know, super idealistic and, and, you know, like, this is. We have to like, you know, there was a period of time where I, and you can find the tweets where I was like, DAI is too centralized. It is simply too centralized and we cannot trust it because it uses USDC as collateral. And it's just like insanity of that's not going to work. If you, if you wall yourself off in this little thing where like, only ideologically pure, like, you know, decentralization and censorship, resistance is, is allowed, then like, you're not going to get any adoption. And the best thing that you can do for any technology is get people adopting it. If people are adopting a technology, that's how you protect the technology, right? Like, if people want it it, then they're not going to let someone take it away from them. So I think that shift to bring people onto the right rails, the rails that will facilitate this and then let the tech do its work might take five years, might take 10 years. AGI might get us all first, who knows? But at least they're in the game. At least they're in the right place. So I see that. I, I mean, another, another interesting arc I guess here, no pun intended, is this idea of these, these large tradfi orgs coming and buying altcoins, which is maybe the only bright spot that we've had in the last couple of years for altcoins. What was your experience? How did that play out of talking to these guys and saying, like, hey, we've got this token that's not bitcoin. What do you think?

Brian Pellegrin Marino (52:19)

Yeah. So like we had ARK Invest and Citadel Invest and Tether Invest all publicly and obviously we have partners announced there of Intercontinental Exchange and DTCC and like all of these groups. Right. I think we've had more institutions on our cap table historically than most groups. I think you would be surprised by most. And it's very interesting because most people tell Me all these, these things are like institutions are like a multi year sales cycle. Like you'll never get them to do anything. And like a bunch of these groups like moved Heaven and Earth in like a very short. Because we didn't, we didn't tell even our own team for two and a half years. Like 24 people out of 165 knew about it until a week before. Like we told like almost nobody like people were read in on external partner side like really in the last mile for a lot of this stuff. And so a lot of people like moved Heaven and Earth because they are like interested in the technology itself. And again I think this is driven by primarily one of two things. The fear of disruption and getting out in front of it or just, just pnl, right? And like what they can actually do or how, how this is going to open up business lines for them. And I think that it's just like any, any other group. Everybody is generally self interested but. But I think if you are able to present something and all of these groups are like listen, we've talked to everybody, right? Everybody comes to them. They've had every conversation that you can have. But the thing that we're showing we're like is just different, right. Like we actually didn't think this was possible in the world and it's possible now. And like that is something that like we feel we need adjacency to. And so I think it's different levels of like actually wanting to do something and it fitting like a need that they're looking for long term versus like, like very strategically. I want to be like aligned here and on top of it and in front of it very close because maybe this matters a bunch to my business as things develop down the road. So I do think there is more appetite on the institutional side just in terms of like I mean immediately post our announcement I talked to like six of like the largest orgs on the entire planet that were like inbounding into us. And it's just like people are interested, they're excited about it, they see the things thing. And I think to your former comment, like I think yeah maybe we're too harsh on the application side of the past. I still think we need to protect the rails at like all costs no matter what in terms of how the underlying rails are built. And like is it fine for stable coins to exist? 100% totally fine. And like again other systems over like more freer and freer systems will win over time but the moment the rails are captured and you sacrifice on like the, the ultimate bottom layer of the Rails. It's just like the whole thing is done and I think now is like a pretty pivotal moment where I really don't want that to happen. Like I really, really don't want that to happen. And it seems like we're sort of setting ourselves up for that to happen historically.

Kane War (55:08)

And so I mean I think it's the first time we've had the pressure of something like this. Right. Like, you know, we've been building in a vacuum and able to optimize for like non stop sense and whatever we ideologically were optimizing for. And now we've got this forcing function of large consumers of the tech saying here are the things that we want and we're going to need to reconcile that and say are we happy to give this to them or what are the consequences, et cetera. And I think it's going to be very interesting to see that play out. And, and I do think that there is going to be a move towards people wanting to have more. Same thing as we were talking about with base. I'm sure Coinbase is talking to people about doing stuff on base and it probably doesn't come across as credibly for them to be like, oh yeah, we use some guy's blockchain versus we build it in house and we own it and know we've got the roadmap and control. Right. Like, you know, one thing that I think we never really learned that hard in crypto is platform risk. Like we'd learn it occasionally but like Tradfi and these guys, like they live on platform, they understand platform risk. They're not fucking around with platform risk. They're going, you know, if they do a deal with someone, they want to know that there's a person who's got direct lines alignment with them that's not going to rug them or whatever. Right. So yeah, yeah, I think that, yeah.

Taylor Monahan (56:45)

Brian, do you find when you're talking to like the, the institutions and stuff, do you find that they are more, I guess thinking about like the blockchain and the tech or are they more focused on like the assets and the users and like the unlock?

Brian Pellegrin Marino (57:02)

So I think, I think it totally depends on the institution. I think there's what we focused on. So like layer zero, what I realized there's like a couple of things you, you raise a bunch from venture capital and I sort of had this mental model that like 99 of all VCs are going to be totally useless. And it was right like, 99% of them, like, totally. You know what I mean? You're just like, they message you once every couple of months to be like, when? When do I get my tokens? And like, why isn't the price going up? Right? Like, that's just like, there's like, zero, zero care. And so I think when we're building Layer zero, we have like, almost a thousand applications built on top of us. But, like, all of the adoption from Layer zero comes from just, like, working super closely with a couple of groups. So this has been like, tether, and this has been Bitcoin, and this has been Athena, and on and on. It's just like 99% is just driven by going really deep with a couple of those. So, like, all we cared about. You talk to all these institutions and you get stuck in like, POC hell forever, right? And they're just like, oh, it's like, very interesting. Like, let's do a pocket. And I think that's just like the, like, people have been doing that for years. Like, the least interesting thing, like, the last thing you want, right?

Kane War (58:05)

Come and join our sandbox, right? Like, we've learned the lesson of sandboxes are really, really bad. Don't get into someone's sandbox.

Brian Pellegrin Marino (58:11)

You don't want to be 100% right? Like, you just do not want to spend your time just like, doing that forever. And so, like, the conversations we really focused on were just like, who do we think actually. Actually cares about building something? Like, who is. Who is actually, like, interested in the technology to build a real use case that will meaningfully make their business better one way or another? And, like, don't care how long that takes, don't care what it looks like. Can't be interested, can't be like this. It's like, want to actually do something, right? So that was really our focus. I do think there is, like, a whole host of banks and institutions whose business is not building technology first. It is like, servicing clients and customers, right? And this is, how do clients get access to this stuff? How do their customers. Customers issue assets that then go everywhere. They're like really large banks who build their entire business just on doing this. So there definitely is a cohort or the only thing that they care about is distribution of the asset. How can I sell more of this asset into the market and where is their demand? And I'm always like, an example that always resonates with them is I'm like, listen, layer zero. Like, we did this thing with USDT zero and tether it like in $186 billion in existence prior and had like, tapped out all of the major chains that they cared about. We're like, let's do this little USDT0 thing and like, we'll just try some of these other chains that maybe you don't think you care about so much. Or like, let's just, let's try a little expansion and like nine months later, it's done like $70 billion in volume. And at one point AUM was like $10 billion grown, which is like 400 plus million dollars in the bottom line. And every single bank and institution is like, oh, like, that's interesting. Like, I see why we want to be everywhere and I see why, like, why it is a superpower to like, get your asset out and have it distributed. So that resonates a lot. And there are definitely a lot of groups that are just, they're just using crypto as any other distribution channel and it doesn't matter. And then there are a couple of groups who are actually trying to build something on the underlying.

Kane War (60:08)

Yeah, nice.

Taylor Monahan (60:09)

Okay, that's super interesting because, yeah, I've always looked at layer zero as like, I don't know, like the bridge, the thing, the thing that connects the things, et cetera. I think it's super interesting to hear it from you and hear about. It is actually more about the asset, which makes sense now that you say it. It totally makes sense. And it's a completely. It just like kind of changes the nature of what I thought you guys were spending the most time on. You're not just building bridges everywhere. The asset side of it is so interesting and I can definitely see

Brian Pellegrin Marino (60:46)

the

Taylor Monahan (60:46)

institutions trying to figure out, how do you bridge these two worlds? And the answer isn't the bridge itself. Right? It's the asset. Right, That's.

Kane War (60:55)

Yeah, yeah, that makes sense. You know, like, I think we learned this a long time ago. People don't really care about bridges as long as they don't break, right?

Brian Pellegrin Marino (61:06)

Like, they care about them when they go horribly wrong and otherwise, like, never think about that.

Kane War (61:10)

Like, as long as they don't collapse, it's kind of like real bridges, right? Like, people don't really think about them that much unless they collapse. And then you're like, oh, okay, we lost some people here. So. So one final question before we move on to our next segment. We've talked about this quite a bit and I've been sort of developing this thesis of like, the market structure of crypto is broken for tokens right now. The interesting, interesting thing about this kind of, you know, a few different announcements of large institutions buying alts is these people are actually long term investors. We don't have long term investors anymore inside crypto. Like all of the VCs are, you know, either washed or garbage or, you know, some combination thereof. Right. The people who were previously holding to my tokens are now just trading perps and meme coins. Right. The purpification of everything means that you don't have people who buy a spot token and say, I'm going to hold this for the next five years because I have a thesis or whatever. All of a sudden there are these people that are turning up that for a while were only buying bitcoin and now they're saying, and when they buy something, presumably they buy it in size, right? Relative to. So do you think that this idea of like the institutions are coming, they bought majors, right? Ethan and BTC and Sol and things like that, now they're looking out for which of the three out of the 10 trillion assets that we have over here now that they actually think are like long term investable and does that shift? Because they're not like my assumption is Cathie Wood's not like opening up a per position on zero on hyper liquid. And you guys are announcing that, right? Like presumably they're buying tokens and locking them away for a while. Is that a catalyst, do you think, for like some of these assets breaking out and becoming investable again and people, you know, not just wanting to trade them, but to hold them?

Brian Pellegrin Marino (63:13)

Yeah, yeah. I mean, I think there is one. Yes. I mean I think institutions, a bunch of institutions who, their size is different than most crypto fund sizes, right? You're deploying nine figures of size and like very, they can write very obviously. I wrote a 2 billion dollar check into polymarket, right. Like there's just like sizing is different compared to what most of it is in crypto, right? That's like the aggregate of like a huge amount of the funds in all of crypto and they just wrote it as like a single check. So like it's just a different world in that perspective. Yeah, yeah. It's just not right. And so yes, I do think in that perspective. And then I also think like, listen, public markets are like incredibly, incredibly powerful in general. I think Dax were probably like the wrong way to do it and it's just like this weird synthetic leverage and everyone is just like, how do we push out a debt as quickly as possible? And who cares that the manager is Taking this crazy amount. And, you know, we got pitched this like, a million different times. Like, I think that is, like, the first touch of kind of what that looks like. And again, like, most things in crypto now, people are like, ew, like, horrible reputation. Like, you know, it's just like we've, like, shot ourselves in the foot in a way. But I think, like, yes, making speaking. There are going to be a couple of things that are critically important long term, and I think the institutions care about which of those things are betting on and which they think will be critically important. And I think public markets long term will eventually care about that as well. And it's like, what is the right vehicle for public markets to, like, have exposure to that stuff? So I think there is, like, certainly asymmetry in that side. If you can get the right structure and, like, as an industry, we can again, stop making it, like, the lowest possible quality thing and just, like, rush to serve it up and make it so everybody hates us. But, yeah, okay.

Kane War (64:56)

All right. That's bullish. Let's hope we get more of that. So our next segment. Tay, you and I have been talking about this, right? And I'm sure, Brian, you've got a take. I have been very suspicious, I guess, for the last, last little while about why old contracts keep getting exploited, right? It seemed too coincidental that we just had all of these weird edge and we talked a bunch about this. Maybe it's fine. Maybe it's not AI. Maybe it's just that we've noticed a few things about how weird Mac math works, the contracts or whatever. Like, I never bought this. I never bought it. I'm like, there's no way that Balancer V2 was just sitting there out in the open. And we, like, just figured out the math, like, two weeks ago also when we happened to get super intelligent coding machines. And now paradigm is like, hold my beer, as they love to do, and they have launched this evil VM bench that is like a testing harness, right? It's all about harnesses. Testing harness for AI agents to detect, patch, and exploit smart contract vulnerabilities. The exploit part's cool. I'm sure you're so excited. Loving this, Tay.

Taylor Monahan (66:24)

So my chats are, like, going crazy right now, by the way, on this. They're so excited.

Kane War (66:31)

I bet they are. So. So, Tay, like, walk us through. Which agent should we be using to exploit the contracts, right? Like, that's what we all want to know at this point. So, yeah, what's, what's. And the.

Taylor Monahan (66:47)

This just happened. This just happened.

Kane War (66:49)

This is like 20 minutes ago, right?

Taylor Monahan (66:50)

Yeah. So basically, I guess Paradigm has been working with OpenAI and there's been a few different like groups that have been sort of doing similar things. But this is like the latest and probably, I guess probably the most comprehensive. But essentially they're like, yo, you have all this on chain data, you have all these exploits that have already happened and you have all these models, like let's benchmark this. And then once you have the benchmarks then you can kind of accelerate very quickly to like fine tuning and like doing things with these. So this new research has I guess gone and like done a huge amount of work to put all of this data and then test all the GPTs, Geminis, clauds and it looks like they've sort of divvied up on detect, meaning like I guess like audits or like live on chain stuff, right? Like is there a thing that exists? And then they judge them on patching, which is like, okay, we know this bug has existed or exists and then they have to remediate it. And then obviously the most exciting one, the exploit one, which is they found the thing and then putting together the actual exploit to exploit it. This is really exciting for two reasons. One is just hacks are exciting things or whatever. But more importantly, if we are going to continue to let you like deploy and ship and upgrade and do these things on chain, and we know there are so many people and people now with agents like just looking very deeply. If we do not have, like, if the good guys do not have, we need countermeasure models. Yeah, like the detection and the tools that the builders have to protect themselves. Which is both like defensive, very defensive, but also like offensive security. Like you go try to hack your own thing so that the other guys don't.

Kane War (68:50)

So this is, this is the most bullish thing for me about this, right? Is like Codex 5.3 is pretty close to the best thing in the world, like that exists today, right? It is so good. And so if the state of the art, if the state of the artist of intelligence of like contract exploits everyone has on tap, it actually shifts the balance of power. Because now you as the writer of the contract can deploy it into a safe environment and literally just run Codex at it. Like, forget about auditing, why would you send it to a bunch of idiot humans who are going to like, why would you send it to Quant stamp who are just going to like press some buttons and then put the stamp of approval on the order when you can put it in a box and run this thing over it and just hammer this thing. The balance of power will shift. It feels like this is actually good for security. If we are. Is that a naive take or do you.

Brian Pellegrin Marino (70:02)

No, we need that pretty quickly because the Moonwell $2 million hack just happened. Happened because they like, you know, it was just like co authored by Claude and just like pushed into production right there. There's like a fine balance there. It feels like.

Taylor Monahan (70:14)

Yeah, I mean the thing is we're

Kane War (70:16)

writing increasing is a critical step in this thing, right? Not just deploying it to production.

Taylor Monahan (70:23)

Yeah, well, yeah, but I mean, yeah, I mean the bad guys already are doing this, right? Like they're already trying to do this. How much of it is like throwing in a box and having the ant. I just like attack it endlessly versus like optimizing their existing work or helping them hold everything in their heads or whatever. Like it's. It's a bit unclear, but if we do not have. If the builders and the auditors and the security people in the space do not have like better tooling, then there's no hope, right? And especially there's no hope when we are actively deploying civilization enough to the chain that's half written by the AI. Right. So that's. Yeah, I'm really bullish on this. I also find it just very interesting that like, I don't know if it's just this graph, but this graph has the exploit. Like they're very good at exploiting. They're actually better at exploiting than patching.

Kane War (71:22)

I mean, this checks out like. So I look at this and like I'm laughing, right? Because I've just used all of these models a lot and you know, Opus, Opus 4.6. The most interesting thing to me over the last couple of weeks has been and this is where like people do not yet have like strong reasoning capabilities of the whole stack here. Right at the bottom of the stack is a ball of math and that's really hard to do and it takes a lot of GPUs and whatever, right? And then on top of that you've got fine tune tuning and then on top of that you've got system prompts. And then on top of that you've got a harness. Then you've got the prompt in the harness. Then finally it gets to you and you get to actually tell it to do something. And all of the optimization for the last two months has been at the top of the stack. Open claw. You know, like we were like, oh, cursor is so good. And it's like, actually, cursor is terrible. And it makes the agents so much dumber. And if you take them out of that employment environment, they all sudden get way smarter. And when I look at this, I sort of laugh because in the last two weeks there's been a convergence where someone told Codex 5.3 to stop wasting time thinking about shit and just do it, right? And it just jumps in and starts trying to do things in the way that Opus 4.1, 4.5, 4.6 loves to do. It's like if you were to walk into a consultancy and the consultancy is run by opus 4.6, you're like, halfway through the first sentence describing the thing that you want, and it's like, I've built it. It is ready. And you're like, what do you mean? Like, I didn't even tell you what I wanted from you, right? Whereas, like, you know, GPT 5.2, Codex 5.2 would sit there for like, three hours being. And you'd be like, just stop interviewing me, bro. Just, like, write some code, please. Right? But they've kind of converged. They've kind of converged now, where they're both a bit high agency, but, like, Opus 4.6 dialed it back just a little bit. It actually stops and thinks for, like, 10 seconds before it does stuff. So when I look at that detect graph and opus 4.6, like, that checks out for me. It's detecting everything. It's like. Just loves detecting shit. It's like that's. It's just like running through brick walls, like, without thinking about anything. It's like, I've detected everything, guys. I've got all of it. So.

Taylor Monahan (73:48)

Yeah, that's so interesting. Yeah. No, and it's. Again, this goes. I think it's. I think people get in their heads backwards because it's a little bit. Okay, so like, early computer. This is like the argument closed source versus open source, right? If you keep it secret and it's closed source, then you're going to have less attackers, Right? Because they can't see it.

Kane War (74:10)

Yeah.

Taylor Monahan (74:11)

No, actually, wrong. Dead wrong.

Sponsor/Ad Voice (74:13)

Research.

Taylor Monahan (74:13)

We have decades of research on this. You are wrong. There is so much research telling you, objectively speaking, you are wrong. Open source is more secure. The reason is, is that the incentives for the bad actors to go in, even if you're closed source and find the issues and then exploit them, is higher than, like, your team can protect. However, once you open source, you have a wider variety of people. You have other People that just like might stumble upon it, if you have forks, they're going to find things from their own resources, right? All of these things happen. The same thing is going to be true with the AI and stuff. And so it's, it's not necessarily the open source, closed source exact argument, but like the more tools that we have out there, the more models that we have focused on the detection and the patching and, and the exploitation and the more people's hands that these tools are in, the better and safer and more secure it's going to be. Right? It's going to be insane though. In as we find equilibrium, it is going to be insane because there are going to be things that are like, like something gets deployed and it's immediately exploited.

Kane War (75:28)

Right.

Taylor Monahan (75:28)

But over time and very quickly, to be honest, like, you're going to find that equilibrium and we're going to stop deploying things without, you know, we're just not going to deploy things that are

Kane War (75:40)

just so you've run this harness over it, right? Like, yeah. I mean, I think, I think the most interesting thing for me is like, however small the cohort of the one in a thousand engineer in any particular domain, right? Whether it was like exploiting smart contracts or like building or like migrating legacy C code from 1989 to TypeScript, right. I'm sure there were like 10 guys who were like, I am the best dude at taking C and turning it into types of script. And now we actually have like a million of those. It went from like a cohort of 10 people who could do that thing to now there's a million of them. And this is the same thing for like smart contract security. We had like 100 people, maybe that were like the absolute like bleeding edge state of the art, like got stuff, maybe less, I don't know. And now like you can look at code. I guarantee you, if you were to look at code Codex 5.3's performance against a human, it's going to be better. Yeah, it's going to be better. And you can just spin up like 10 of those inside your computer. Yeah, that's, that's crazy. That's wild. Like, we're like, it's gonna be insane. We're living in.

Taylor Monahan (76:59)

This is like the trend by the way of like our ends. We're just like, we're all, we're all cooked. It's gonna be insane. I'm so excited.

Brian Pellegrin Marino (77:08)

I will say I'm glad to hear you say that because there's been a bunch of calls over the last Couple of days for just like more closed source and closed source being the solution. And so like, it's actually like that. That point is really important because I think there's a very easy path to go down to. Well, open source is dead, just like closed source at all. Because agents will get us.

Kane War (77:27)

No, I think the exact opposite. Because you know, what was the. For anyone who has maintained any open source stuff, right? And like for a long time, Synthetix was the maintainer of a bunch of open source contracts that were forked, like ad infinitum were deployed on every single chain. Like, you know, from StakingRewards SOL to like there were a bunch of things that we put out. Every single thing we ever did was open sourced. We put all of the infrastructure around it, we made it really easy for people to use it and fork it and it's really hard to maintain. Like the cost of maintaining it and also trying to do stuff is so high. We had like engineers that that's all they would do is like deal with the consequences of the fact that you had this code out there. And it was really high cost. But you know, we were ideological purists and so we're like, we will bear this cost. There's no cost too high to bear for open source. And, and then we're now in a situation where actually like anyone can be a maintainer of open source software because they've got 10 guys in their computer that can just do stuff like the number of maintainers, of people, of entities, whatever you want to call it, that are able to maintain open source software and the cost therefore of maintaining it has collapsed to zero. Yeah, and you see that with OpenCloud floor, there's like 100 PRs a minute, right? The agents are the only ones that can actually keep up with the agents that are right. And we haven't reasoned yet or reconciled how we deal with this. Right? Like, you know, just shipping it all to prod and praying is probably not the solution. Like, we need new models for dealing with this. But the cost of maintaining open source software has effectively over the last month collapsed to zero. And therefore the value of that open source software, one of the largest impediments to maintaining open source software is gone. And so open source will win. It will absolutely win. There's no world where it doesn't win, where you have engineers that are willing to work 247 for free, effectively maintaining open source software. You're going to see open source repo where like there's an autonomous agent, you know, like, we've been, we've been larping daos, right, for however long we've been larping them since the DAO hack, right? And now we're going to actually have daos. There will be agents that are actually autonomous that make the decisions and like, they'll figure out how they do governance of like, who gets to merge to Maine. And like, it's going to be a whole thing and someone's to going gonna pay. Maybe they'll pay for themselves. Maybe they'll like bootstrap their way and they'll like own the infra that they're running on and they'll just have their own little AWS shell that they exist in. It's gonna be. It's gonna be wild. It's gonna be wild.

Taylor Monahan (80:26)

Yeah, it'll be interesting to see too. I think that we're gonna have to figure out an additional sort of structure right now. It's like the bug bounty structure, right? I think that we're going to have to add on and bring the barrier down for the oops, I accidentally hacked it structure. We'll see. But I think that especially these days, a lot of smart contracts are upgradable and there's things that the team can do or whatever, but you can imagine there's going to be an increasing number of agents, like, doing things and maybe not fully thinking them through. There's an opportunity thus to like, give them a viable path to like, correction, right? So if you like accidentally hack it or even if it's not an accident, right. What we see quite often is they get so like, the human gets so excited about the fact that they like, maybe found an exploit and then they like, do the exploit to see if they could do it. And then they do it and then they're like, like, oh, yeah. And then they see like the people hurting on Twitter and the team and they're like. And then they like, you know, there's two paths. If you engage with them and you're like, look, we're going to give you a nice little path right here. Okay, take it. A lot of them do, but there are some that like, definitely were not doing this deliberately and maliciously, like fully maliciously, who are like, just freeze and like, run away. And it'll be interesting to see if like, we can create additional automated, like, sort of trustless structures to like, so that the agent, when it's like, let me exploit this, let's go. We give them like a path of viability to like, either close it or, you know, Save hardware.

Kane War (82:16)

People are going to wake up and their agent is going to have exploited Uniswap V3 overnight while they were asleep and negotiated some kind of, like, exit.

Taylor Monahan (82:30)

I mean, it does happen quite a bit with the. With, like, the MEV guys. Yeah, they have, like, the. They have so many autonomous, like, bots running that. Yeah, they accidentally run things. They literally wake up and they're like, God damn it, why does my bot have 10, $10 million? And then they look at Twitter, they're like, oh, crap.

Kane War (82:51)

Yeah.

Taylor Monahan (82:52)

But luckily, like, those guys are really, honestly, like, they're. They're the low key, like, saviors in a lot of cases, because they all

Kane War (83:00)

come back, they catch things, and they're like, yeah.

Taylor Monahan (83:03)

And they're like, send me the address. Like, thank you. Sorry.

Kane War (83:09)

All right. This has been awesome. Thank you, Brian, for joining us. It's been really fun. That's it for this episode.

Brian Pellegrin Marino (83:16)

Thanks for having me.

Kane War (83:17)

Yeah, thank you. Hopefully we'll have you on again some other time. That's it for this episode of Uneasy Money. Thank you for tuning in. If you like the episode, follow us on the Unchained feed on X, YouTube or wherever you get your podcasts and we'll see you next week. Close your eyes. Exhale. Feel your body relax, and let go of whatever you're carrying today.

Taylor Monahan (83:46)

Well, I'm letting go of the worry that I wouldn't get my new contacts

Brian Pellegrin Marino (83:49)

in time for this class.

Sponsor/Ad Voice (83:51)

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Kane War (83:55)

And breathe.

Taylor Monahan (83:56)

Oh, sorry. I almost couldn't breathe when I saw

Sponsor/Ad Voice (83:59)

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Taylor Monahan (84:03)

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Brian Pellegrin Marino (84:07)

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