The Clarity Act, State of Crypto VC & LayerZero Launches Zero | Weekly Roundup

I think we have all sorts of enemies. Like, I don't think it's over. And so just because we don't have Gary Gensler coming for us, we should still be banding together as an industry. I think the important thing as an industry is to make sure we know what our principles are, we know what we care about, what we came here to build, and that we can stay really true to it. And that, I think, when you're looking at the bill and making sure that it's, you know, livable, is will it let us do what we came here to do?

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Welcome back, everyone. We have a special guest, a repeat guest. Rebecca is coming on. There is a ton of stuff to talk about regulatory regulation. So, uh, we'll cover that in the, you know, uh, but, but anyways, thanks for coming on, Rebecca. It's a real treat.

Yeah, thanks for having me.

Santi, you're really in founder mode here. You got a, like, a half-painted wall in the back. You're, it seems like you're, like, in a warehouse.

Yeah, there's a lot of echo. We have, like, basically rental furniture. But, uh, anyway, yeah, the market's tough. What can I say? You know, I'm not going to spend full. I'm not going to paint the wall entirely.

This is how much he could afford before the market crashed of the painting.

No, we can afford, you know, this would have sold like a rare NFT back in the day for, you know, a couple hundred thousand bucks. So take a screenshot and sell it in 3 years' time when NFTs are back around.

This is how I found out Santi put all of his seed round into Bitcoin back in, uh, you know, a year ago when it was $120K.

To be, to be, to be fair, I did call you one day and I said, hey, let's, uh, let's short Circle, and you're like, oh boy, I've, I've, I've— it would have been a great trade, but nonetheless, we're not in the business of shorting. Let's, let's talk regulation. Rob, you're in DC. Rebecca, you spend half of your time in DC.

Not half, but I, I come when I'm called on these days. There's a lot of people in DC now. Uh, I think Rob being there is actually like an important thing to think about because I think we're closer to the finish line than ever. It doesn't mean we'll necessarily get it across the line, but Um, I meant to check the PolyMarket before I got on about, do you guys know, um, like market structure passing?

I think it's like 55% right now.

So I was going to say, I think I'm at, I personally am at 45%, which I think is high. It's probably the highest I've been on market structure passing. And I think it, you know, every day is a rollercoaster on the crypto policy side of things. And they say in DC, there's no bill until there's actually a bill, right? Like a bill fails 4 times or something before it actually passes. Um, but you know, we've seen crypto market structure, uh, die many deaths. It's more like a cat, I think, like it has 9 lives instead of 4. Um, and I will tell you, notwithstanding the fact that the markup was off in banking in January, people are back at the table. Negotiations are still going on. Staffers are working harder than ever. Industry is working harder than ever. Um, I think that things are moving forward. And I think that there's an appetite both from industry and from policymakers to get this across the line. And, you know, have some commentary on that, but I can also sort of walk through what's happening on the banking side and what's happening on the ag side.

Rebecca, I'd love to hear. So I'm here all day for meetings somewhat around this, around some other broader, you know, regulatory issues as well. And, you know, we talked about this, I think last week, maybe it was a little bit the week before, about how, you know, the market would come out of the banking Banking Committee, and it seemed like we were moving towards a markup in the Ag Committee. And then there was the Brian tweet, and that seemed to throw everything a little bit, uh, into, uh, the disarray for a little bit, and everybody kind of retrenched. Um, I'd love to hear your conversation or your thought process around, like, what has transpired over the last couple weeks, because I think from, from my perspective, it feels like there hasn't actually been a ton of movement, uh, in that period of time since the Banking Committee markup came out. And I'm a little concerned about the timing of if we don't get this done in the next 8 weeks, then does this just kind of get punted, um, for, or, you know, the other priorities take hold, uh, and then also, um, you know, what you think we as an industry could be doing maybe better than we've done, uh, to try to get this where we, we want it to be. Because it seems like we're a lot more, relative to Genius, as an industry, we're just a lot more disaggregated. There seems like we're a lot less focused as an industry on getting something across the finish line?

Yeah. Okay, I'll try to remember all different parts of that question. That was a very big multi-part question. So the first thing is, yeah, so right after the banking markup was off and didn't happen, I think everybody tried to get some sleep for a little bit, both on the staffer side and on the industry side. And I think then you saw the yield meeting 2 weeks ago and then earlier this week. So that has sort of started, restarted things in the background on the other issues too. And I think there is a general thought process that if the deadline for a yield agreement is end of February, that industry and members need to be in agreement on all other parts of the banking side of the bill by then too. And then there's a hope, to your point about the next 8 weeks, that there's a markup sometime in March to try to get this out of banking and then onto the Senate floor. Floor. And I will say, like, you don't see the Senate staffers. You see a lot from the senators themselves, but they are working tirelessly. And I'll get more into industry at the end, but there are a lot of people in industry who are working tirelessly too. And having been through all 5 times we've tried market structure, um, I can say it is exhausting, uh, and it's also emotionally exhausting because there are, like you're saying, Rob, like these bits and starts, and you have to think about like, what can we live with? And you also have to put it in the context of other large financial legislation like Dodd-Frank and things like that. Like, none of these bills are perfect. And so I do think as an industry, we need to think about what can we live with versus is this bill perfect, because we're not going to get it to be perfect. And I think we can agree the industry itself hasn't been perfect and hasn't worked perfectly over the last, you know, however many years, 13 years, so maybe more. So we should, uh, not let the perfect be the enemy of the good, for sure. The ag side, we did see the markup. It was very partisan. It made itself— the, the ag markup made it out of committee, um, but in a partisan way, 12 to 11. That is still being worked on too for some final tweaks as well. Um, and I think we're gonna see that progress too. I think there has been progress on yield. There are a lot of rumors that there is close to maybe agreement on yield, and maybe there's some deals around yield versus tabling other topics and the like so that we can actually move this forward in a productive way, both from the congressional, industry, and White House, because the White House has things they care about too. So, you know, I'm going to put it— I— Polly Market's a little higher than I am, but they're usually right. So, uh, I would say this is the closest we've been though to seeing something that could pass.

But what did you make of the, um, so there was the meeting yesterday, I believe, uh, or maybe it was 2 days ago at the White House. Yeah, Tuesday at the White House around trying to come to some sort of agreement with yield. There were some representatives from the banks themselves, there was representatives from the industry around this kind of new language that would help us, you know, solve this idea that there may be some prohibition of stablecoin issuers giving yield back to, uh, back to the end customers, um, through, you know, kind of those intermediaries. And that language that came out in, um, I think it was kind of a memo that the White House put out afterwards, was actually more restrictive than the original language that Coinbase did not like that was in the Banking Committee markup. And, uh, and used words like you can't give yield for even the use of stablecoins. Which, uh, or purchase of stablecoins, which in my mind is akin to saying you can't give cash back for swiping a credit card, right? Um, and it strikes me that that language is pretty problematic for the industry. So what did you make of that and what that means for getting to some, you know, sort of middle ground?

You know, I think of all of these negotiations— I was a litigator back in my former life and I had to negotiate settlements, and I think of this as very much like you're going to pull back to one side or the other to try to get to a place where everyone can live. Whenever I was explaining to clients what settlement means. It means what I said before, whatever you can live with. It's not like anybody leaves a settlement perfectly happy. Um, but I do think that there is something to be said about happiness for getting something that we can live with. It won't be perfect across the line. And, um, without going into too many of like the details of what the language said in the memo, it wasn't like no yield ever. It was just, I think the banks are really concerned about the holding piece of it, 'cause it—

But the new language, so that's what's in the banking committee markup, but the new language out of the memo on Tuesday was also not even for using stablecoins.

Yes, but that's to your point on like more like swiping credit cards, but that doesn't, it doesn't talk about like marketing, rewards, things like that. So I don't know, I mean, there's industry in the room who cares. Like we know that like Paxos was in the room, Coinbase was in the room, those types of players are in the room who have a big stake in this. So I think the White House is super motivated to get this across the line. You saw Secretary Bessant come out earlier this week really trying to push this very, very hard. So there's a— I've never seen such a push from the administration itself to try to get this across the line. So I am hopeful that there will be negotiation that everyone can live with. I think the other thing to remember is after the banking markup got pulled, you saw so many people come out in favor of the bill and trying to push it forward. So I don't know where the— everyone's gonna net out on this, but I think there's a lot of motivation to try to get this done, even from the industry side.

Okay. Yeah, I'm hopeful that the language that came out Tuesday was a little posturing so that we go with the idea that, oh, we go back to the other language that originally that Brian, uh, and Coinbase said that they didn't support, because, because I think that using language like you can't even give yield for, for the use or the purchase of stablecoins, um, essentially probably carves into like the loyalty business for most fintechs today. It would make it really hard for fintechs to even adopt some sort of like stablecoin-based loyalty programs. So, um, at least that's, that's, that's my perspective.

But I don't know if there was enough definition around use though, not to over-lawyer this.

But then you leave it up to the SEC or the CFTC to decide like what the rulemaking is around.

I think you actually leave it up more to Treasury or the OCC.

Yeah, I guess, I guess that's right. You leave it up to Treasury there to see on the rulemaking side. But, um, well, I think you'd rather have more— you'd rather have the definition of more defined in law, really. Or, I mean, you tell me, you're, you're the expert.

So yes, in some way, yes. I'll say two things. There are rulemakings across all of the parts of the bill that everyone should be really mindful about. Um, there is a lot of high-level, uh, guidance or structure, and then everything is reduced to guidance or rulemaking. Um, I think on the token side Uh, in Title I of the banking draft, a lot is left to the SEC in terms of defining control, uh, defining, uh, entrepreneurial and managerial, managerial efforts, things like that. And then we see a lot in Title III on DeFi that is left for Treasury to define a lot. So you have to think both what do we want for this bill? And there is a lot of rulemaking here. And will the rulemaking be able to get done in this administration or are we going to have to see it in the next? So you want enough scaffolding and structure in this bill to protect the things you care about, like you talked about. Um, but I think we're going to see a lot in rulemaking, and people are punting so that we can get something across the line. But there will be a lot that remains to be seen. In positive news though, if we cannot get to a definition on use, you will spend a lot more time in DC advocating for what use means. Uh, and look, the thing I think people forget in this country is that we were— you're in DC, you are literally going to talk to people on the Hill and in the agencies and say what you care about, and people will listen to you. And that— and I will tell you, crypto has had so much access in terms of, um, the staffers, the members of Congress, um, to really push for what they want. And so that's pretty unique. You just don't get that in other countries. And this industry has gotten probably more than other industries have, for sure.

I was going to ask you, Rebecca, like, is the industry being too greedy? Like, let's not forget that we were in a very hostile environment and now we have a seat at the table. And it's, it's, I understand why the backlash to Coinbase, for instance, it's like, hey guys, we opened the door, you came in here, have a seat at the table, and now you're acting like a, you know, you're being pretty selfish. Uh, like Is the industry being too greedy and are we at risk of like shutting the door for what is a win? It's not a perfect win, but at least it's, it's a good win to then set the foundation because we don't know what kind of regulatory environment we're going to be in 4 years or 3 years' time from now.

Yeah, I think Rob's point is a really important one about the rulemaking. Like, is there enough in these bills that we can live with? And then, look, the rulemaking process is nasty, brutish, and long, not nasty, brutish, and short. And it gives everybody another bite at the apple to help shape where things go. So you have to look at what's in the text. Is the text itself too restrictive? You know, the use thing is, is an issue, Rob, but if it is reduced to rulemaking, that might be something we can live with. And, uh, you know. Figure out what's next. I don't, I don't know if I'd say the industry is being too greedy. I understand people have thought about that and talked about that in the past, but I think the other part of it is I don't know any other industry who went through what this industry has gone through, not the past 4 years, but the past 6, if we're really being honest. Things started, um, I, I would say getting pretty rough 2 years before, uh, Gensler came in, even on ICOs, understandably. Um, but we saw things like EtherDelta proceed Gensler, um, it gave more, more guidance than it did like true smackdowns and, you know, true regulation by enforcement. But this industry has gone through so much more. I don't even know if we understand the full promise of what this industry can bring forward because of how hard the last 6 years have been. And so I think we should fight for everything we want in these bills.

Fair enough. What are the major wins in the bill, in your opinion? Like if it passes in its current form.

Um, I think we'll have a framework for issuing tokens in the US. Uh, one thing people are not talking about that everyone should keep in mind is we're going to need a corollary tax bill, which people are working on behind the scenes. That's sort of coming up, uh, to be able to issue tokens in the US. So we're going to need that to help us. But I think issuing tokens in the US is going to be something we'll see again. Um, so that's a big win. I, there's a provision in Title III that if we can make a couple of tweaks to it, will allow financial institutions to plug into permissionless DeFi by using a risk framework. That is a huge deal for me. I know we saw the BlackRock Uniswap, uh, integration yesterday, but that's permissioned, right? Very cool. Obviously everyone understands that DeFi tech is great for rails, but permissionless DeFi is really— we've seen gated DeFi before. Santi and I When I was at Aave, we saw an attempt at sort of permissioned DeFi, and the gatekeepers make it hard to really bring the promise of DeFi forward. So I think if we can get FIs to be able to plug in to DeFi, that's a huge win. I think acknowledgment of self-custody is a really big win. There's a provision called the BRCA, the regulatory— the Blockchain Regulatory Certainty Act, which is in Title 6 of banking, which says that non-custodial software developers are not money transmitters. So that goes to the question that we've seen in the Roman case, in the Roman Storm case, and in the, um, the Samurai case and stuff like that. So there are some wins in there. They're buried and they're not as big and splashy as yield or tokenization of real-world assets, but they're in there.

Can you, um, Yeah, sorry, go ahead, Asante.

I was just going to ask you, going back to the yield piece, I know it's broad and intentionally broad. If you were to wave a wand and write it in the way that you could, how would you, you know, Ctrl+F, replace, paste your definition?

Well, we just wouldn't, we just wouldn't address the Genius Act, right? Like, this is a wholly different bill and we're trying to rewrite the Genius Act. Like, that, I mean, I think that would be everybody's—

does it go back to the state versus federal? Because didn't the Genius Act Give.

No, no. I mean, I think, I think Rob is kind of right. That's in an ideal, perfect world that you wouldn't be rewriting Genius. I will say there are so many cooks in the kitchen on this that I generally try to stay in my lane and not opine. I mean, I care about yield because I think it's an important— and stablecoins are an important part of the ecosystem, especially the DeFi ecosystem. But there are a lot of players who are making edits and thinking hard about yield. And I really do hope we get to a good place on that because I think, you know, everybody— stablecoins are important, and Rob talks about this all the time from the fintech perspective and changing how we do payments and stuff like that. But it's also really important to keep DeFi alive in a really important way and to continue to have ongoing stability in DeFi. So we need to make sure that stablecoins are protected in all the ways for all different parts of the ecosystem.

So that's yield, and that's, you know, dominated the first 15-20 minutes of this podcast. And I think that's dominated most of the time on the Hill right now around, around the bill. But there are some other things that people care about and some things that people say is problematic. And you talk a little bit about the wins. Can you maybe just for the audience talk a little bit about what those few other kind of major points of contention still are?

The biggest, after yield, there was this question around tokenization of securities, which was Section 505 in the banking draft that came out in January. People were really worried that that provision, which was by the way put in very much at the last minute, um, and people had not seen it, uh, at least extensively before it came out. So it was a surprise, uh, an Easter egg, as they say. Um, but, uh, that seemed to— at people, a lot of people read the provision differently. That seemed to curtail the SEC's ability to allow tokenized securities to take many different forms and be marketed in many different ways. Some people are like, this is just a restatement of the SEC's authority. Uh, as a lawyer, I don't love restate it. Like, if you're using words, you should use them to mean something. And so if you're going to add it to a bill, I take it to mean something. Um, we didn't get to see any colloquy on the floor or any discussion about what members thought it meant, so we don't have sort of legislative history around that. But if you're going to include something in the bill, you think it means something. So I think we need to make sure that Section 505 on this tokenization of securities does not curtail the SEC's ability to allow for tokenized securities to come out. I think the other piece that is problematic, or that there's— problematic's too strong a word— that there's still negotiation over is Title III, which deals with the illicit finance and DeFi. So 301 talks about controlling software developers. So if you have control over a, uh, over a smart contract protocol, uh, where are your regulatory obligations? I think that this piece is will allow Treasury to make a lot of rules around what control means. I, I think that is going to require a lot, a lot of work if this passes and how to think about rulemaking around that. Section 302 in the DeFi bill has questions around what we do for front ends and sanctions control and whether that it gives Treasury the ability to impose KYC on DeFi front ends. Which, you know, is another hot topic. Uh, we want to make sure that the financial institutions can plug into permissionless DeFi in a way that's not too onerous on them. Um, and we want to make sure that self-hosted wallets and financial institutions can work together, like financial institutions can give access or interact with people's self-hosted wallets. So that's where Section 3 is. Um, and Section 1, there are some pieces— is really about, uh, issuing, uh, tokens in the United States. and there are questions there around this definition of common control because this, as I said, for Title III, there's this idea of control that goes throughout. And look, in the industry, we've gone from something like UniV2 or even Tornado, which has no admin key, totally permissionless, can never be changed, fully immutable, to lots of different permutations of what DeFi looks like. Some of it looks like on-chain finance, and there is a, there is a really clear control, and some of it is this hybrid where Somebody holds an admin key, they're never going to use it. And so we do really need to have something there that's consistent, that does not turn software developers into financial institutions subject to the Bank Secrecy Act. That is the most, most important thing we need to be doing in this bill, in addition to all the other things we talked about too.

Rob and I were at the CNBC event in New York earlier this week, and, um, we saw Giancarlo, I think the former CFTC chairman and the current chairman. He was talking about, obviously, The Howey test is something that the industry's talked about a lot. My understanding is that some, you know, this bill would kind of replace that in some way. And there's this maturity test. Can you talk about that? Like, what does that mean for crypto projects that have always been thinking about this day and night, about this Howey test, everyone in the industry? So first of all—

Yeah, I don't— Yeah, you're still going to be up thinking about the Howey Test, but it's just going to be like, I don't remember it, like Section 105 in the banking bill. So the maturity test was in the House version of this in FIT. There is a different question. It's much more around control in the Senate bill. And there is rulemaking from the SEC around this question of entrepreneurial managerial efforts, like when you can graduate out of be doing disclosures and things like that with the SEC. And so if the bill passes, you're not going to have an answer day one, like, oh, I know I'm done.

Um, and so, uh, are we moving in the positive direction or, or not really?

Okay. Yeah, I think so. Um, I mean, as I said, I think being able to issue tokens out of the US is good. The real question is how fast can the SEC get rulemaking done around this entrepreneurial and managerial efforts so you have a view on how it works. Um, you know, we have, uh, decades of case law around what that means. And I don't know if you guys remember this, but like back in 2018, 2019, what the SEC then had as FinHub, which was where you would go in and talk about your crypto projects and then you'd get a subpoena right after. Um, but, uh, back then they put out sort of guidance around what entrepreneurial managerial efforts look like, and it was like 80 factors. Right? 78 factors, something crazy. So I think rulemaking's going to be really hard around that. So I don't think we're going to stop our sleepless nights around the Howey Test.

Yeah. I get asked the question a lot when I'm talking to normal businesses, like, can they use stablecoins today? They hear about these things like contested in TV and they're, it leaves uncertainty in their mind. It's like, can I actually use a stablecoin? Can I not? Regardless of whether the bill passes today or not, or like, you know, this year or not, like, are businesses okay to use stablecoins in their current form if you go through a Stripe or, you know, USDC?

Sorry, I did hear everything you said, but my computer, I have many tabs open, it's my fault. Of course you can use stablecoins. I think Stripe is using stablecoins, you know, they have Privy and Bridge and all of those things that stablecoins are very integrated into. So, I don't think it's a problem using, like, using stablecoins for payments, as Rob said, but there are the other permutations around them. And obviously we're in the midst of figuring out what to do about yields.

But yeah, I mean, I mean, a lot of the, a lot of the activity has been on the B2B payment side. So like a lot of the growth has come from that. So whether the— again, that's just the point that I think people need to hear. Like there's these issues around the edges that are being debated that affect certain stakeholders, But businesses are using stablecoins today, and whether this bill passes or not, that trend is going to continue to grow. I think Robbie had a pretty aggressive prediction, which would be to go into 10— was it $10 trillion or $100?

Well, I said on the crypto credit card side, we're going to get $100 billion worth of settlement with Visa, but that's really still relatively small for Visa. But I don't think— I know we need to remind everybody how bullish I am on stablecoins. So I think that's clear. Um, no, but I, I listen, I think on the, on the stablecoin side, the one thing we have seen, and you know, I obviously didn't, the portfolio right now is there's definitely a lot of the tooling is kind of catching up to the volume, right? So the, okay, well, how do I make sure that I'm doing the right transaction monitoring? How do I make sure that I'm doing, I understand like where if I have nested or not nested flow and like how I, you know, who, how do I make sure that I know who that end customer is? And you know, what types of checks am I doing? How do I pass along the right type of information? That type of tooling. Right, that you see in like traditional payment, uh, and banking ecosystems is catching up a little bit to a growth that kind of got in front of it. And so I think that's a topic for a lot of people, but, um, that's a problem for the service providers. That's less of a problem for the businesses. And, and the businesses are all, you know, they should be using stablecoins. It's better, it's cheaper. Like, go use stablecoins.

And notwithstanding the, um, notwithstanding the negotiations over yield that are going on right now, banks are getting ready to issue their own stablecoins. I'm sure Rob hears about this much more than I do, but like They are all staffed up. They are getting it ready. Banks that you didn't even think would be issuing stablecoins are going to be issuing. What that means and how that looks and how they can be used is a whole different question. But, uh, the banks are getting ready for stablecoins too.

Every, every bank is going to have a stablecoin. Everyone. And all the banks, all the asset managers— we had Fidelity launch theirs— all the fintechs with Klarna USD. Like, I'm— I think I said at the beginning of the year we'll have at least 50 financial institutions or fintechs, uh, launched on stablecoin this year, and that might be undershooting it.

I agree, actually.

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Okay, maybe— so Santi and I, or Santi mentioned the CNBC event that we were at, uh, earlier this week. Um, the other thing that, uh, Chairman Mike Zelig at the CFTC talked about, uh, which he then launched a podcast I saw this morning on Odd Lots, um, talking about is prediction markets. And that's been— I think that's near and dear to all three of our hearts on this, uh, it is on this pod. And so I'd love to hear you talk a little bit about that and kind of, I would say, just how vocal, uh, Chairman Zelig has been about it and, um, asserting, you know, the CFTC's right to regulate these markets and, you know, what you think that means and Um, I think some historical— historically that feels also very, um, important to me and kind of the point time we're in.

Yeah. So the other thing, maybe you guys talked about this last week, but because I don't remember the exact timing, but you know, uh, tier C league also rolled back the event contract rule, which sort of shut down or really made it very difficult for prediction markets to operate in the US the way they are. And, uh, I think that you're going to see that. Um, there is going to be a big turf war between the states and the CFTC themselves. So in the Crypto.com versus Nevada case, uh, the CFTC actually filed an amicus brief. Interestingly, it was filed by former Chair Giancarlo's firm Wilkie, um, and he and Chair Szilagyi are very close and worked together when they were at Wilkie. Um, but I think that we're gonna see a lot of interesting things in the US for prediction markets. I think that Chair Selig, as you said, is, I mean, bullish. He probably wouldn't use that word, but really making sure that the CFTC can assert its jurisdiction. But I think that the craziest or the hardest line is going to be on the sports markets, on these prediction markets versus all the other financial markets. I don't think anybody really cares about, right? Like, oh, is, you know, what's the percentage of market structure going to pass? Like the states aren't that worried about that. They are worried about these sports markets. So I think we're going to see some narrow stuff there.

It does strike me though, when you listen to Chair Saylor talk about it, and if you listen to the Odd Lots podcast, and first thing I did this morning when I woke up, I woke up and I was like, I can't wait to hear the CFTC chair talk about prediction markets. Um, and, uh, he, he's, he does not make that distinction. Like his perspective very much is that like, these are markets, these are markets that have specific. Technical ways of which they need to be regulated, and the regulator should be us because we regulate markets. There's no— you know, he, he talks about this analogy to the 1930s when people used to gamble on like commodities, and there was all— there was like this kind of like business side, and you had, you know, the Chicago Mercantile Exchange where like, you know, professionals were hedging out risk and using these financial markets and commodities for really professional reasons. And then there was like bucket shops that were also where people were gambling on commodities. And, and he really analogizes it to that, which is that these are markets, these are markets of which we should be the regulator of. And it doesn't matter if they're— if it's sports or it's politics or it's anything else.

I think that's right. And if you think about how prediction markets work versus these gambling markets, they are set up really differently. We were explaining this to our children, who now are really interested in prediction markets, because kids, like, like, they've seen ads all over the place for it. Um, and that the way that, you know, gambling lines and stuff are set up versus the way these prediction markets actually function are very different technically. So I understand why he's gonna— why Chair Ziegler is gonna make those distinctions between sports markets and prediction markets versus not. And he also took some, uh, he also took down— I don't remember the exact details around it— something around the sports, uh, the sports market guidance that had come out from the CFTC previously. So he is definitely going all in on it. But I'm saying I think we're going to see this states and the CFTC go head-to-head over these sports markets.

Do you think we end up in the Supreme Court?

Yeah, I think so. I think everybody, all the prediction market, you know, all the prediction markets are in these fights with various different states. You saw Polymarket sue Massachusetts earlier this week, um, and we just talked about the Crypto.com Nevada case, and we know Coinbase is fighting a lot of these. Um, so the real question is like, who gets to the Supreme Court first?

Do you have a prediction there? And what do you think is best, worst for industry, etc.? Do you have any thoughts in terms of going to the Supreme Court? Yep. For which case?

Um, we have, we have a while to go, uh, and the states are coming out different ways, right? We've seen some states allow these prediction markets to continue operating and other states not. So it's inevitable, like when you have these state-by-state conflicts, it's almost inevitable that it goes to the Supreme Court. I mean, I think this is a pretty good Supreme Court in terms of the composition for it to go to, um, in terms of free markets. And the other thing that's really important to think about that we haven't talked about for a long time, but everybody was really spun up about it, was this Loper Bright case, which says that— came out last term, maybe two terms ago, everything blends together in crypto time-wise— but, uh, which really said, you know, the agencies should not be overstepping and things like that. And so if prediction markets are, which by the way, event contracts are regulated under the Commodity Exchange Act, if this seems like it will fall within the CFTC's jurisdiction, I think that, since it's really statutorily based, the Supreme Court may come out and say like, yeah, they're not overreaching, they're just asserting their jurisdiction.

So Rebecca, you know, I'm going to ask this, but let's invert. Let's go in 3 years' time and what kills us. You want to go where things can kill you and then work backwards from there and then inform what you do today. So Rob's in DC, you got to give him instructions to make sure that he tells all these people that he's meeting with the right things, even though he's, you know, he has a list of things, but what can kill us?

Rob knows what to say.

No, I know, I know.

I'm not worried about it. I mean, I think a lot of what we, I mean, he knows what to say on the yield side for sure. So he doesn't need my instructions there. And I think I'd said a lot for, you know, when you're meeting senators on the Hill, um, it, you know, there are a few things that they know. And I think distinguishing between software developers who have control and software developers who don't, uh, and not having criminal liability where there are software developers who don't have control is a really important piece of this. I'm, I think the interesting part about a lot of, I guess, senators who are coming to this late and wanting to be really involved is they've been playing catch-up on the tech. And so they're doing a good job, their staffers are really digging in, but hearing the same message about how the tech works over and over is really important, especially from new voices. I know Rob has been in DC, but you're luckily not one of those people that they have to hear from all the time. Great.

I don't wanna be. Absolutely.

So Rob will be a breath of fresh air. Um, and I think hearing the same message from somebody credible like Rob, um, who mostly has really been focused on the stablecoin side and also doesn't go so, so far outside of his, um, lane, will be helpful to the industry.

It's interesting because I, um, some of these people, at least one of the people I'm seeing today, you know, I've met many times over the last couple of years. And, uh, the conversation I'm having now around DeFi developer protections, right, and around stablecoin yield are basically the exact same conversation I've been having with many of the same people for a year and a half at a minimum, right? And so it's— these things take a long time and they have to be— there's a lot of interested parties, there's a lot of people, there's a lot of nuance in like specific language as we talked about earlier. And so Um, it's not, it's not as if this is new. It's just about, you know, getting the— to something that everybody can live with. And I guess the, the nature of a good deal is maybe everyone's a little unhappy with, uh, and, um, but with very, very specific language and down to, you know, the word choice that we were talking about before with the word usage.

Yeah, sometimes we're in the midst right now of negotiating the difference between the and a, you know, uncertain things and what What's the difference? And does it— do we need it? And are we going to have to do rulemaking on something like that down the line?

Um, who's the enemy of crypto now? Because, you know, in the prior administration, we got to wonder where the pushback comes from, right? I think before it was very clear who that was, and today it's less clear. There's pushback, whether it's traditional financial institutions or just certain parts of the population that look at prediction markets and say, that's gambling and that doesn't produce anything useful for the economy. And crypto, they don't believe the story about the technology being useful, about stablecoins reducing costs and this real-time money concept. And it's hard because money is something that people don't want to talk about. And is, I think crypto is very much in your face. Like you have to, to see the moneyness of it. And sometimes it's just, looks and feels a lot like prediction markets, and that's the headline. But, um, it's tough, I guess, uh, if, if you're a congressman, if you're a senator, are they getting calls from their constituent base saying, hey, hey, you gotta, you gotta block this because crypto is, is, is not producing anything useful for the economy, and my kids are gambling all day, and this is not good, like, you gotta, you gotta stop this? Like, who, who in the, in the US remains out there, or they're saying, or I mean, I'm surely there is an enemy out there that doesn't like it in the same way that we didn't like, you know, Uber.

I don't think that anybody's being shy about not liking crypto, honestly. I think it's pretty public and pretty out there. I think the, I think we have the administration and the agencies, right? So two branches of government seemingly are innovation friendly now in a way that they haven't been before. But I think we have all sorts of enemies. Like, I don't think it's over. And so just because we don't have Gary Gensler coming for us, we should still be banding together as an industry. Like, you can see, um, SIFMA, the Securities Industry Association, filed a, um, deck with the SEC 2 weeks ago maybe. And it's public because it's on the Crypto Task Force website. And you can see that they want wallets to be regulated like brokers, and they don't want traditional, uh, assets being able to be traded through permissionless DeFi. And like, everybody's pretty public about, uh, not, not wanting crypto in many ways. Like, the banks on yield, like, we have plenty of enemies. And so I think the important thing as an industry is to make sure we know what our principles are, we know what we care about, what we came here to build, and that we can stay really true to it. And that, I think, when you're looking at the bill and making sure that it's, you know, livable is will it let us do what we came here to do?

Gun to your head, you have to yay or nay this bill in its current form without any tweaks. Would you take it, yes or no?

Oh, Santi, I told you I wasn't even gonna do this.

We can edit, but you know, uh, sorry to put you on the spot, but look, I will say there's a lot of work.

I'm not even— I'm a lawyer, so I'm just dodging the question. I'm going to answer it as I want to. Um, uh, but I, I think, Mark, I think we really need to be very thoughtful and serious about getting this bill passed. There's a lot of work being done behind the scenes to be making these one-two-word tweaks that will make a change, and I commend everybody who is getting less sleep than I am making sure these kinds of things happen and in DC more than Rob and I are, uh, sort of camped out there trying to get this across the line. So I give people a lot of credit, and I think we really need to be thoughtful about what we can live with. Because look, yes, I think all of us have been through bear markets. They always feel terrible, always. I don't know why, no matter how many times you've been through. But I think that there's something to be said for, um, given where the industry has built itself to In the midst of immense pressure against us, um, we need to have something that acknowledges that this industry can continue to build in a way that makes sense in this country.

My main takeaway from this conversation, Rebecca, has been that, um, when your kids become entrepreneurs, they're going to build in protection markets. And so you should send them my way and get a little bit, a little, a little bit of seed.

I will, I will, I will.

Before we came on the spot, Rebecca was saying that, um, her— she got some Nintendo fake, uh, Nintendo fraud. It's been— I can't wait for them to, you know, to at least say prediction markets, uh, you know, your kids.

Yeah, they are super into prediction markets actually. Like, yeah, they are, uh, they think it's really interesting.

And so, uh, last question for me is like that from a negotiation standpoint, this is this great class I took at Harvard, which is like, uh, the best alternative to a negotiated agreement, your BATNA, which is You know, what is the point where you're willing to walk away and not take the deal in front of you? And you always got to understand what that is, whether you're negotiating, you know, your salary or whatever. As an industry, like, what are— should we be prepared for that? What that is like, look, we already have the Genius Act, which is just pretty good for stablecoins at least. Is there a point by which just walk away?

I don't think we're at the— I think given the work going on, we're not at the walkaway point. I just want everyone to acknowledge Santi's humble brag about this class I took at Harvard.

No, no, no, no, listen, there's no— there's no— no, no, the reason I took it, it's a book, Getting to Yes by Roger, I think Getting to Yes. I don't brag with it. I mean, I didn't go to Harvard. I went to the school.

Oh, I thought you were saying I took this class at Harvard.

No, I was going there at night because I went to BU on the other side. Of the river and the Charles River, but they offered this course. Uh, the book is Getting to Yes. Everyone should go read it or prompted to know that he negotiated the Israeli-Palestinian conflict and he actually gave the course. So for $2,000, you can go and actually learn from him. That's why Rob, where I negotiated my terms, understands that those $2,000 that I invested back in college really paid off for the terms of my life.

I like how Santi immediately slipped from, from, oh, Harvard to like, actually it's a bootstrap story. I was going to be you and I was walking across the bridge. To go to Harvard.

Rob, did you, did you not look at my LinkedIn?

Sneak in, and I was the janitor at night, you know?

Yeah, again, half Good Will Hunting.

It was actually about me.

Half Good Will Hunting, half like looked at my LinkedIn profile. I went to Harvard, but it's like, I took a class at Harvard. Rob, did you do background checks on me?

Gosh, yeah. Of course we did. You know, you know we did. You know we did. We always did background checks. Who wins?

Uh, oh, what's the ultimate question?

Well, the ultimate question is like, do you walk away? Do you accept that you've made progress on the Genius, um, side of stablecoins? That's a win. And then like, is there a point where you walk away from the Binance Curve form as an industry?

I mean, sure, there are certain red lines that I think the industry has, and they're being really clear about them. There are some yield red lines, there are some DeFi red lines or developer protection red lines. There are some token red lines, but there's like one or two, uh, on each, probably one, and they're pretty clear about them. And I'll say the industry is pretty banded together on what the red lines are. So hopefully we'll be able to stay true, not cross those red lines, and put something together that we can live with.

How does this all— before we let you go, how does this all make you feel? Like from going 8 years, like what is it, 6 years ago in the, in the Hostel, uh, you know, administration to today, for someone that is just coming into the industry fresh and hasn't really appreciated what was going on back then, like I'm here and I'm not leaving.

I don't care what happens. So, uh, I, yeah, I'm never leaving. I don't know if there's anything more exciting, more interesting to work on. Um, hardest legal issues, but also like hardest operational issues of just building these new systems in different ways and moving everything that we've built to date forward in a meaningful way. So, um, market structure is hard. I've been through a lot of the cycles. Um, I'm grateful, like I was saying before, that I've had the opportunity to weigh in and use, uh, some of my experiences being inside companies to really impart information that hopefully makes it into legislation, that's a privilege beyond anything I think I could have ever imagined in my career. So I feel lucky that I've got to be part of the process on market structure. I hope we see something really good. And I'll say the other thing I think about a lot is like back in the day when we started market structure, it was like me and a few other people and a couple trade, like a trade, not even multiple trades. And now there is such a flood of people. Who are all coming together to, you know, say what the red lines are, advocate in a real way. I mean, that Rob doesn't go down a lot and he's there and understands the importance of it. Like, that's really amazing to have thought about being 10 or 15 of us in a room to now being on calls where there are 50, 60 policy, you know, crypto policy people or government relations people. That's pretty amazing.

Is it well coordinated? Because what I'd heard when I was going down there, we were this Proof of Stake Alliance and we were talking about like what Proof of Stake network was coming around. But you had people from different parts of the crypto corners. And what I heard from some of the staffers, it's very confusing because you have one company come in and advocate for one thing and then you have another company with other interests come in and advocate, which I guess is, I'm not sure if the oil lobby operates in this way or the, you know, trad fi lobby operates in this way, but in crypto you have different factions with different interests. Has that— have we made progress there where like we are united front?

Yeah, for the most part. I mean, look, when you're in a negotiation, I'm sure you learned this at Harvard, the people, people may fold at different times. Like especially when there are multiple parties involved, you do worry like, oh, will someone put X interest above Y and say, okay, fine, we'll cross that red line as long as we get what we want. So I think there's always concern about that, but the Coordination has gotten a lot, a lot better. There are these industry calls where everybody's sort of talking about status. People try to be pretty transparent with each other. It's not a perfect system by any means, but I think especially since we have these two complementary pieces of the bill out there that people can really weigh in on, there's a lot of work coordinating and trying to have a more unified voice.

I'll be a little less, um, I think diplomatic than Rebecca, but, um, my impression at least, and I'm not in the conversation as much as she is, but something that has happened, which is typical of a maturing industry, is that we, we kind of all coalesced together and, you know, entrenched when it felt like the industry was under attack. And now all of a sudden, like, not everyone's interests are aligned in the same way. And so there is a lot more breaking out in factions of like, what matters to us? And are we willing to trade something for something else? And is, is someone else not willing to make that trade? Now that's normal and that's expected. That should be happening in industry. Not, not every bank cares about the same thing, right? But, um, it, I think it had gotten a little bit more sharp elbowy, uh, in the last year than it was before that.

We should have created a DAO. We should have created a DAO to coordinate, you know, as an industry.

No.

As somebody who was around when we were ideating DAOs, no. I don't disagree with Rob. That's what I was sort of saying is like, you don't know when somebody is going to fold in certain ways. But I do think everybody knows, you know, or where people's lines are and are at least trying to coordinate behind the scenes on, on some of that. But yeah, of course. I mean, I think banks are, are less sharp elbowy, but they've also been around for a long time. So they're all just trying to entrench what they all have.

Well, now, now, now they're united against one common enemy, which is they stablecoins. So, you know, yeah, yeah. So to round out the— this has been great, just get everyone up to speed. For, uh, anyone listening, uh, developer, investor, is there anything they could be doing to, um—

yeah, so that's what I was gonna say. I, I don't, uh, I don't think people are getting calls like from their congresspeople, like from their constituents being like, we hate crypto. Maybe here and there, but not as widely. But they're not getting calls from their constituents saying, we care about crypto, this is important. And yes, we have Fair Shake and all the PACs and all the political money coming in, and so that helps on influence. But I've been saying this for 5 years, 6 years at least: call your representatives, tell them you care, figure out if you want to go down. There are lots of people who can help you. If you're a developer, call the DeFi Education Fund or the Blockchain Association or something like that. Um, if you want to go down and try to have some meetings like Rob is doing, but at least pick up the phone and call, send an email. That's really, really important. And I've been hearing that for years, which is the industry says they care, but I'm not getting calls from my constituents. So I think that's the, that's sort of the easiest thing you can do today.

All right, give your multibot, your multibot access to your phone and access to a bunch of other phones. Get them to call regularly, spam the lines. You heard it from Rebecca. That's all we got to do.

That's great.

I'm disclaiming multiple Um, well, thanks for having me, guys. I appreciate it.

No, this is a great discussion. I appreciate you hopping on, and, uh, we'll have to come, uh, you know, we'll have to have you back talking about how this evolves. Hopefully it passes.

Yeah, I, I mean, I'm hopeful we see something next month that we can have another conversation about. Um, good luck today, Rob. Let me know how it goes.

All right, we'll be tracking the prediction market to see if Ticks up based on what Rob said.

Yeah, right after Rob. We should be doing that all day. Keep us, keep us, let us know when you're done on the Hill.

Awesome, Rebecca. Thank you.

Bye guys.

Thank you, Rebecca.

Rob, does that, does that, you know, give you more confidence walking into the room or, I mean, you were well prepared before, but listen, I'm, I'm ready.

That we, you got a whole team around this today, you know, we, um, I think we all understand kind of what's at stake and what's important, and there's a few kind of main issues. And so, um, you know, I think it's a privilege to be able to engage with representatives and with regulators. And I think the fact that we've been given this privilege as an industry, uh, after what was years of, uh, people just actually actively not only, um, attacking the industry, but then we're also refusing to engage on, you know, like, why are things the way they are and how do we to actually regulate these. That, that's more frustrating than anything because you, you see this attack happening and yet people won't even hear you out, right? And so we've now got the opportunity to, you know, engage with the highest levels of government, and that's, that's a real privilege. And, you know, I'm excited to be here.

Well, actually, I did learn this in the negotiation class, by the way, which is the worst is dealing with an irrational party that does not want to engage, just goes radio silent. And I think that's what we were before. I remember projects reaching out, wanting clarity, not even an acknowledgement, not even an open door, and a false pretense of we have this task force come in and you'd get subpoenaed right after. Like it was, it was, I just hope that, I mean, I, I think it's progress and progress is progress and it's never like, I don't think there's ever been a bill that has been perfect, not in crypto, not anywhere else. So I think at some point you just have to accept that as a foundation and build off of. Very good, man. So that's on the regulatory stuff. I mean, it's been sort of a quiet week. We recorded last week with Josh and markets just kind of, as we were recording, I think Bitcoin hit $60K. Josh did say in the pod that he would be buying at $60K. He texted me after, he said, there you go.

We got to $61K and then we immediately bought back up to $65K and then we got back to like $70K, $71K and now today we're $68K or so. Yeah, 67, 68.

Any updates on, you know, we were talking about this before recording, but, you know, fairly muted on fundraising, new projects, um, anything interesting on your radar?

It's been pretty— so, so it's— I was actually talking about this with, um, a couple other people this week because VC is actually pretty busy still, but the nature of how VC has gotten busy is very different. So The amount of like really crypto-native, like token projects that are raising right now, uh, is very small on a relative basis. The amount of things that are getting funded there at any real size is very small on a relative basis. But the amount of, um, money that's being thrown at stablecoin banking prediction market, you know, CeFi tokenization type projects is really, really just tremendous right now. Uh, so it's quite, quite busy in those, uh, parts of the market. And so, I mean, if you look at Um, you know, the January fundraising, uh, you know, there was a lot of money actually put to work in January, but, you know, it's like the $250 million into Rain, the $75 million into Mesh. It's the, uh, there's $20 million put into quantum compute business. There was, um, a bunch of money put into these kind of like less crypto-native type projects, and you're just not seeing, uh, a lot of— I mean, Superstate, another one, there was $82 or $85 million put into Superstate. And, but there's been less money, um, put into, uh, or at least being announced into these crypto-native projects. And so that's, that's been really interesting and really surprising. It's been, I think we're in a bit of a lull right now, but that kind of makes sense because, you know, the announcements for fundraisers usually happen sometime really no earlier than 3 to 4 weeks after the fundraisers actually happen, and oftentimes longer than that. And so now we're in the like, oh well, like post-Christmas lull.

Right?

Like everything that got, that got announced in the first 3 or 4 weeks of January, all of that would have gotten done pre-Christmas. Um, and so we're kind of in that Christmas lull right now, but that's not surprising. And I think we'll see, see more to come in the next month.

A new round's falling apart. We're not there yet, right? I mean, it's not that bad.

No, I mean, there's definitely been some conversation around repricing some stuff. Uh, we don't typically do that, like Listen, venture capitalists are long-term— are supposed to be long-term investors where, you know, 5, 7, 10-year, you know, type outcomes and views. And so like, if you're sitting here and saying, okay, like the market just, you know, crashed 20%, so I need a 20% discount on this thing that I priced, you know, uh, 3 weeks ago, that's, I think, bad faith in most cases because, uh, you, or you should have done the right work on TAM.

You either believe it's a 10x or not. And so, you know, of course, yeah, the price, but yeah.

Well, and you know this, but we're definitely never the cheapest capital. We always are a little bit more valuation sensitive than, uh, most of our competitors. And but that also— that— but I have the same exact viewpoint on how I price things in good market than bad. So, um, so in good markets, that's, you know, uh, it's tougher for me from a competitive standpoint. But, you know, it's about thinking backwards from where I think this industry will be and this company will be in 10 years.

Yeah, yeah, yeah. No, I agree with that. I think as a founder also, in, in raging bull markets, I see a lot of founders make a mistake of taking the highest valuation. Sometimes that comes with structure, which is not reported in the headline, then comes by, you know, can come and bite you in the ass. But also, you know, there's, there's a point by which you have a fair deal that has the party that is coming into the cap table excited to do work, not just tick-tocking, you know, paying a ton. You see a lot of companies in particular in crypto where you have a token out, like a lot of the employee options are issued at that valuation. You know, it just, it's not necessarily the most wise thing to do to take the highest valuation. There is a point by which it should be fair. You just got people excited to get into the cap table.

I would go so far as to say, and I'm obviously biased, But it is never the right thing to do to just solve for valuation.

I didn't— I did not take the highest term sheet, for what it's worth.

I appreciate that. And but we hear that all the time. I think it's very seldom that we are the highest term sheet. Sometimes we match in certain types of competitive rounds. But, you know, it's, it's not about— it's also for me, it's not about like winning, right? Like, I don't want to, you know, just be lower because I can be lower. I want to get to fair value that makes sense for everybody. But it's really for you, at least, I mean, it's in your perspective here. But what I tell founders is it's about having the right sparring partner. It's about having the right thought partner. Somebody will pick up the phone any time of day. It's about having a firm who can support you day in and day out on everything from hiring to just like, you know, the doldrums of being a founder. Because you know what? Being an entrepreneur is hard. And like some of— there's like this cool, like sexy stuff that people see and then everything in between. It's just hard and you need people there to help you with that and to be, you know, good partners along the way.

Yes, sir. It's not easy. It's— but I am curious beyond— I mean, you guys, how do you think about the venture landscape in crypto? I know we talked about it a bit, but I think it's relevant in the sense of like seems to be consolidating quite a bit, especially funds that can do like early stage, but also later stage stuff. Is that, is there going to be a gap? Is that going to be absorbed by more traditional fintech players? You know, folks like Sequoia or folks like, you know, Excel or GA or some of these other firms or, you know, I'm I'm curious how you think about the landscape evolving.

I think the venture landscape, and this is true of both crypto venture and non-crypto venture, but you either need to be a platform or you need to be a, a specialist niche small fund, right? And the reality is, is like if you're a, you know, middle of the road or like middle-sized generalist, you don't have the resources to compete and you don't have, you likely do not have the deal flow and the kind of reputation and brand to compete with the platforms because the platforms are now doing everything, you know, and this is true of us, we do everything from seed, you know, through Series C now for first check, right? And, um, we have the ability to, you know, we see most of the seed deals as well. The only times we don't see the seed deal is when there's a, um, a very specific fund who's really good at a certain part of the market or has really deep deal flow in a certain part of the market who is there first because they're so hyper-focused on that. You know, we had the EV3 guys on earlier and, you know, I— it's, it's definitely true that I've never seen a deep-end deal before, or very seldomly seen a deep-end deal before they are, because that is what they are so good at, right? But, um, if you're a middle-of-the-road generalist investor today, like, you're probably not going to exist in 10 years. And this is true of crypto VCs, and it's true of regular VCs. It's happening at Lightspeed and Sequoia and, uh, you know, General— uh, not General, but General Catalyst. And, um, you know, all these guys as well. As you mentioned, Andreessen raised $15 billion worth of new funds, and you see Andreessen do the earliest of stages, and then they're putting checks in at $10 billion valuations, at $50 billion valuations, right? And it's just, um, it's, it's also really hard for people to compete with a lot of these more capital-intensive businesses. When you say, hey, listen, I will give you $3 million in later seed round, and you know what, there might be another $50 million behind that if you continue to grow and do well, and you don't have to go and do this whole beauty contest again.

Yeah, Sequoia's been doing that for a long time.

Yep. And it's— I mean, I— we've done that now in, um, in Polymarket and Rain and a few others. And, um, you, you kind of see that with, um, uh, you know, it's— if you can look at the companies that are already in the portfolio And then re-underwrite them and continue to put more money in as it's working. That's always way easier and always more preferred versus having to go and, you know, find a new entrepreneur to back.

Yeah, yeah, yeah. Um, I know we're on the hour mark. Um, we'll say there's a couple of interesting things this week that I think we just fire off quickly before we drop. Um, the first one is LayerZero. Um, they, I think, came out with a pretty, pretty amazing announcement on, on their new They basically engineered a new consensus, you know, uh, mechanism that, um, you know, they shared with me back in January, early January, and I was blown away. I mean, yes, I'm an investor, but I've always felt that the team is one of the, if not the sharpest technical team in crypto, and they delivered what I thought was a pretty amazing breakthrough. Uh, curious from your standpoint, uh, if you saw that, what you think of that, and You know, of course you guys are investors in a bunch of other, you know, layer ones.

So yeah, it's interesting. So, you know, Brian's awesome. They've, they're, they are a beating machine. Um, you know, they're launching this thing at a time when, you know, I think the general perspective of, you know, general purpose blockchains is probably at its like all-time low. Actually at a time when Monad, you know, launched a few weeks ago and You know, I think, I think Monad is probably the most innovation we've seen at the L1, uh, and in a long time. Um, and you know, they're, uh, still working through, you know, getting the right applications up and, um, and working through getting, you know, um, usage there. The layers you guys did, did, uh, talk about a lot of launch partners that would be there from day one, and there's a lot of logos, but I think as you and I both know logos. There's been a lot of logos at a lot of times in crypto, and we have no idea what that actually means over time. And so I think it's going to be really interesting to see how they actually compete. One thing I think that was quite interesting to me, which I think kind of highlights where we are at in crypto, is a lot of those logos were TradFi firms, you know, ICE, and I think there was— yeah, there's a bunch of people. And, and there was, I think, A woman who works at Franklin Templeton was gonna sit on the board and, you know, it, it felt a lot like a, like a Canton event in, in a lot of ways, right? And the list of the ways they talked about their partners. Um, and so I, I, I think it's very clear that there's a, a lot of coalescing right now around these, you know, traditional finance use cases on blockchains and everybody's moving towards those directions. And so it's, it's a question about how everybody competes for, for that pie.

Right?

Because right now, you know, as much as Ethereum is hated and the L2 space is hated, Ethereum is winning that market. Right? And so I would be interested to see how they compete with, you know, kind of all the others that are launching.

We're going to have them on next week. I was obviously at their event and I think it's worth them coming on because technically I think it's a pretty amazing breakthrough. You know, I remember coming into the space and Zero-knowledge proofs is one of those things that really captivate your imagination when you think, okay, wow, like it's, and I think they, the question that I have is, I think as a space we've continuously like make innovations on the, you know, supporting a demand use case, like from a supply standpoint, there's ample supply. And we've continued to make engineering upgrades that allow us, whether it's Monad or whether it's Layer 2s or whether it's an Ethereum L1 or parallelism, like all of these things have allowed us to make pretty big breakthroughs on the infrastructure. My question to them was, as much as, like, I'm very excited from a, wow, holy shit, like this actually, you could see a wave where like you can allow for different, what Chris Dixon would say, non-schemorphic use cases, of crypto, you know, like, like, you know, let's, you know, uh, uh, high frequency trading and all that stuff. Right. But, um, I was like the, the perhaps cynical argument that I would be like, hey, we haven't just really solved for the demand side. Like we, we have the ability to bring on, uh, more and more users, more and more applications that don't have like that much of an intensive blockchain footprint. And so you wonder like, hey, with L2s today, like you know, you could bring on another 100 million users and still not like hit the limitations of the current infrastructure. I guess that shouldn't ever stop you from like innovating on the infrastructure side, but it's one of those things where I felt it was way ahead of its time, I think. And in many ways, like maybe that is like, you know, Citadel building on top is going to be a killer application. Application and maybe they, you just credibly couldn't build out an L2 for a variety of reasons.

Well, I mean, it's also just true that, you know, we, we don't talk about it anymore, but like ZKSync has actually done quite a bit of really interesting work on zero-knowledge proofs as well. They have a sort of, you know, an institutional use case sidechain that they've been pushing for a little bit. StarkWare, I actually just saw Ellie earlier this week and They're launching some pretty interesting new, he's calling them threads, which are kind of, you know, kind of their own execution environments that are, you know, that then they use ZK proofs to prove back to, you know, call it the main chain. And so there's a lot of interesting work being done there. Obviously, you know, I, I'm not, I haven't been super deep yet on what, on the actual technical infrastructure of this Jolts that they're talking about with, with Layer 0, but I'll be interested to hear, hear them talk about it next, next week. A lot of the conversation has been, well, like, if we solve these, you know, these problems around, um, uh, you know, just having to, to have an open, fully lit market on every single transaction, then we'll see all of these people come in and all this demand come in. That to me has generally been, um, the wrong way to think about startups. Uh, and you know, you usually want to identify the customer first, listen to what their use case is, understand that they actually are looking for that, that, you know, type of product, and then, you know, you build for them. This type, you know, maybe LayerZero has done that, and they, you know, they believe that all these guys are like, this is what they've been waiting for. I think the evidence shows me that that's not necessarily true, but I strongly believe that global finance is moving on-chain. I strongly believe that, um, this is just— is more of a matter of time from, uh, board perspective, a comfort perspective, a regulatory perspective, and it has been an infrastructure perspective. And so I think, you know, these guys will be a really good competitor in that space, and clearly they've gotten a lot of people around the table. Um, but, but it doesn't strike me that like just them launching that is the unlock that, that gets everybody on-chain.

Fair enough. Go-to-market's hard, man.

Uh, it's really hard. I mean, execution and distribution is the moat now when you, you know, You or I could theoretically build our whole own like Aave instance, you know, from scratch. And I've never, I've written like 5 lines of code my whole life.

Man, I can tell you, we launched a new website. I built like fully prototyping to production, like 48 hours, which could have probably taken us like hundreds and hundreds of thousands of dollars and months. I did it all myself. I'm not a developer. It is, I'm truly blown away. We will not make this an AI pod, but I do think it's just pretty remarkable what you're able to do. Maybe a last question before we drop is like, does that, are you seeing that either through your portfolio companies or just on the early stages where founders just say, listen, I actually don't need any capital and I don't need to build a big team. I just like prototype this, put it in production. We always hear things of like, hey, SeedRound's like, you don't need to raise that much money. That was true 10 years ago. It is obviously that curve has continued to decline. There's reasons why like you would want to take institutional money. I kind of went through that calculus myself and it wasn't about I'm getting just this money in the bank. It's the other quote intangibles or not intangibles like hard value adds. But are you seeing this dynamic play out more as of late with AI where like seed rounds the valuations are going up, but you don't need to raise that much capital, or that just, this is not—

or not, because the reality is, is the, the software layer is, is just not getting funded as much, right? So I mean, crypto already kind of did that, right? Which is that, uh, we have, it's completely open source, and so the amount of, uh, engineers that you need are, is less than if to build Salesforce, right? And build, uh, um, uh, you know, kind of this this record keeping, you know, type of, of application. Um, and now it's okay, well, we have a shared ledger and it's completely open source. And so, you know, to build a DeFi application, even though it's, you know, perpetuals are very complicated, uh, and it takes time, we better off with, you know, 10 to 15 people than we are, you know, where Salesforce would have hundreds of people. Um, and now all of a sudden, well, it's okay, well, you know, now we need maybe even less people, but there's, You know, there is some kind of like diminishing returns on that, right? Uh, that said, I, I think the, what everyone's realizing right now is there's only a few moats because of, because of this fact, right? Like software engineers are becoming completely commoditized. And so the, the moats are no longer engineering. The moats are capital. The moats are execution and reach. The moats are, you know, call it being more in hardware, being kind of closer to the bare metal compute, right? And so. Those are all things that like actually need a lot of money. And so we're actually seeing like round sizes, um, in some cases getting bigger. Uh, but what we're seeing in the portfolio currently, a lot of our older companies that are maybe just, you know, relatively straight software is, you know, they would have originally said, hey, we need to hire more people as we want to scale. Uh, and they're just not hiring more people, but the seed round stage is not, um, that, that's not happening. And then we're just seeing a lot more people spend a lot more money on like go-to-market. So, and a lot more money on, um, you know, the salespeople.

Yeah. Yeah, definitely. Um, anything else on the news front? Um, before we of course top it off with the content of the week.

Slow week. I think that's really it, right? You know, markets have been bad since we, since we recorded this a week ago and there's been a lot of regulatory conversation. Uh, LayerZero is clearly the, You know, the big, the bigger thing on the week, we also had the MegaETH launch. There's a MegaETH podcast coming out early next week to talk about that. I think, you know, that's exciting. That's been a long time coming. Obviously very early days there. There wasn't a lot of applications live on day one. And so we'll have to see how that evolves. And that's kind of it for the week.

Yeah, that was actually a really good— I think it's going to go live next week, but I asked him, I said, look, gloves off, guys. I'm an investor, but I'm going to ask hard questions around the state of L2s, like your trade-offs, your decisions. One of the more interesting questions that I asked them was like, do you feel like, because everything talks about Ethereum alignment. And I said, guys, and it's a synergistic relationship between L2s and L1s. The centerpiece of the conversation was like Vitalik's post around L2s and the future of that relationship between the L1 and the L2s. And look, Vitalik is an investor in MegaETH. So it was just a really interesting conversation around that point specifically and how they envision them existing, coexisting with Ethereum. It touched on a lot of the things that I've discussed with your partner Hasib around is security priced correctly? Are we taxing L2s correctly? And so it was just a really interesting conversation. No perfect answers to this debate, but nonetheless, I think it was a good conversation. So tune into that. So what's the content of the week?

Well, I'm going to, I'm going to probably recommend what I talked about earlier, which was the Odd Locks podcast with Mike Selig. So if you care about, uh, if you care about prediction markets at all and you care about the future prediction markets, um, that was— it's a very, very important, uh, podcast. And I said this—

was that, was that horror? Was, was that a—

I would call it a thriller. So for me as an investor, uh, in Polymarket, um, and— but he's really good. And I think, I think it is actually very historically significant for, you know, people who are nerds about this stuff. Um, and then the other thing I would recommend is the Jorkish had, uh, had Elon on for like 2 and a half hours, uh, late last week. And really good podcast on all things AI, space, um, you know, batteries, uh, all that type of stuff. So, uh, Jorkish is a— I always find his podcasts, I mean, they're not super accessible, but they— because everyone's just like so deep in, um, you know, the topics that they're talking about. But, uh, really, really good podcast for anybody who cares about those spaces.

Yeah.

Yeah. Yeah. So I, I got recommended this by someone I met last week and it's the, trying to pull them here. It's a Reith Lectures. And so there's BBC kind of Reith Lectures, which are really good. And there's this Dutch historian that talks about the moral revolution. And talks, he's actually like very much like accepting that he's a Luddite and he's like the way we've gone about technology is pretty bad and it's relevant for AI. I think he recorded a few years ago, but Dutch historian, he says like we should glorify like a strong moral compass and like make a very conscious decision around standing for morality and all this stuff. And it was really good. I enjoyed it. We'll link in the show notes, but it's on Spotify. It's called the Reeth Lectures. And I think it's relevant for this entire conversation about AI, you know, technology and what we prioritize and what we don't. Cool. Yeah. All right. Well, Rob, bring it home. I'm going to be watching the goddamn prediction market. You bring it home. And if that doesn't go up above, I think it's sitting at 52% right now.

So, all right.

We'll see.

It's coming down while we're recording. People, you know, it's leaking that I'm coming here and people are Selling seems to be a common occurrence every time we record.

But anyways, good luck today, uh, and we'll talk about it next week. Uh, but yeah, put up a good fight.

Awesome.

Thanks, everyone. Have a good weekend.