Why DeFi Is Unattractive, Claude Mythos and Cryptos's Biggest Winners

You said something backstage, which is so important, which is just stay positive, stay optimistic.

I ripped that from one of our, um, from one of our investors. But he, you know, we were talking late last night and he said, look, you know, it's, it's, it's bleak out there, but if you are an optimistic and energetic founder in crypto today, though, you know, especially those with a good business that, you know, ideally generates cash flow, like, the world is your oyster. Like, there's never been a better time. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only, and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed. What's up, folks? Welcome back to Empire. We got the original crew. We got the original dynamic duo.

No, no, Rob, it's been a while.

Yeah, yeah. So you know what you're in for, a good boring Santi Yano episode here.

You know, I was thinking about this the other day. I miss it, the dynamic, you know. Uh, we got to bring back optimism for the sake— for the sake of the industry, our bags. And, um, what has Elon Musk said? Like, it pays to be optimistic. Like, you should be optimistic by default. Yeah. Um, which is hard. Like, the headlines are There's, I mean, we can talk about the headlines, but like we talk about like the world ending with AI and like Maven catching all these security vulnerabilities on the back of Drift. And you can, you know, the timeline can be a pretty, I don't think there's ever been a moment where the timeline, you can't nitpick a timeline and like skew negative just to social media. But you said something backstage, which is so important, which is just stay positive, man. Stay optimistic.

Yeah.

So that's the energy that we're bringing.

I ripped that from one of our, from one of our investors. But he, you know, we were talking late last night and he said, look, you know, it's, it's, it's bleak out there. But if you are an optimistic and energetic founder in crypto today, though, you know, especially those with a good business that, you know, ideally generates cash flow, like the world is your oyster. Like there's never been a better time. And yeah, I don't know. I've— it's funny, one of my wife's clients does like Gen Z research. And there's so much pessimism is what I've realized with a lot of Gen Z. I think Gen Z and millennials, I think, feel it too, of just like, what do we— if AI is going to take over everything, what are we doing? And, you know, we should talk about Anthropic and like Mythos. And I think a lot of people are like, oh, this thing can just build it all. Like, why even build anything? And that's— I, yeah, I'm just staunchly against that attitude. Yeah, very.

Yeah, man. I mean, I could tell you like So I listen to every podcast. I'm like, have I been skewing overly like negative?

Because I think you listen to every one of our episodes back.

Every single one. Every single one. I got to watch the tape, man. So like, like I 100%, uh, like, like you're like a young Beyoncé.

Beyoncé watches the tape after every one of her concerts.

Listen, no, but so, so the good thing that we have is we have a community that is pretty vocal on the Telegram. I think we have comments and it's important, right? And I think we want to serve our listeners. I think there's, uh, I hope that I haven't been too negative on the pod. I mean, I, I have been critical, but I still am very optimistic. I mean, we're here, we love the industry. There's a lot of stuff to look forward to, not without issues.

There's a lot of those, but you know, yeah, you know, I got lunch with someone today, um, And we were talking about you actually. And he, he said, look, Santi is an interesting character because he's a, he's a, he's a likable contrarian. And a lot of times there's contrarians who are— he said most contrarians are very, you know, you don't, you don't— they're very, they're contrarian just to be contrarian. So that means a lot of people don't like them. And, you know, being a contrarian gets clicks and it gets views. He said Santi's a likable— and I think you were, I think you were negative and it frustrated a lot of people on the podcast. When the market was very frothy. And I would say you've now turned into one of the optimists. So, and it's interesting, you know, last week we were talking about this idea of— and you brought it up, which is one of the first times I've kind of heard it, which is like, we are not getting paid enough for sitting in DeFi. And, you know, that kind of ended up turning into this big, big topic. And it, you know, I think— I'm not sure if people read Luca— what's Luca's last name?

Luca Prosperi, the guy from Messari.

from, from Dirt Road. And then, um, uh, Adrian, um, ACDV or ADCV from, uh, one of the founders of Steakhouse came back and they had a great conversation. We're actually going to have them on the podcast on Friday and that, that'll go out on Monday. But, um, yeah, maybe tell me more about this idea. Like you, I think you've been thinking about it a little more this week.

Yeah. Well, for context, so I got an early farmer, uh, was using DeFi before it was a thing. And you know, put a lot of capital at risk. And I could tell you, I haven't been a farmer for years because the yields have not been juicy enough. You're just not getting paid enough to take that chance.

When did you change this, dude?

Oh man, that was like, so when rates went up, 20, it was November 2021, rates go up. Macro. So now all of a sudden when rates go up, you get paid to actually hold treasuries, right? So you get, you know, you're sitting there and saying, okay, I can get paid 4%, 5%. I think what happened in crypto is when that happens, more people— the opportunity cost is much higher. So you're— the benchmark is now 4.5%. The thing about crypto rates is that there's just not enough demand. And so you had a confluence of things like crypto assets go, prices go down, people are hurting. There's not enough demand in the market to come on chain and do a lot of, so there's a couple of strategies that folks do. A lot of it is like looping, which is you, you deposit an asset, you borrow against, and then you loop right into a farm. And then, so like basically like you, you magnify the yield. If you're getting paid 3 to 4%, well, that can become 8 or 12 if you do things well. Um, but there's just not enough demand to borrow and do these strategies because people just leave, right? They, they're either got liquidated or there it's not as interesting. So you have to watch demand. And I think after 2021, there was a pretty big impairment in the market that a lot of people just left because they just felt the opportunity set was not there, or crypto asset prices go down. So that was like 2021. Then you fast forward, we had like—

oh wait, let me, let me stick on that time period a little bit more for Like, why was it— I remember, you know, let's talk about DeFi summer, because those were arguably way, way, way, way riskier than what we have today, right? Yeah. I mean, there was a new rug every day, but it was kind of just part of the game.

First block in a YAMM.

You remember that?

We had— so I think I've said it publicly in the pod. Kain might have come on the podcast. YAMMs was— I mean, the yield farming days were fun. I mean, it was like It looked like Nintendo 64.

It felt more like a game than like—

it was, it was for sure a game. It was, it was a thrill. I don't know how I didn't develop carpal tunnel syndrome by clicking on the Ledger buttons. Nonetheless, so, so Yams was using the staking contract that Synthetix had pioneered. So you actually looked at the code and it was like, oh, Synthetix contract. So I call up Kain. I was like, hey man, there's this new protocol. And there were a couple of farms that had launched before that. The whole idea was if you have an asset, call it ETH or a stablecoin or COMP or AAVE, you could deposit into that pool and then get paid. Uh, the APY was crazy. I mean, it was 100+ APY, annualized yield. The problem— the issue, of course, is it never lasted that long because there was a ton of capital just moving from farm to farm. But I still remember I called him, King, is this your contract? Have one of your devs— I woke him up like 3:00 AM in Australia. He wakes up, calls up his staff, and like, yeah, this contract's clean. And then there was a very well-known security expert that I had connectivity to, and I pinged him and I said, hey, is, is this code base legit? And he was like, everything's fine, the rebasing function is off, but you're not going to get rugged. So I would actually push back— all this to say, I would push back a little bit. Like, there was certainly a lot of risk, but I don't think I'm not comfortable. This will tie into why I think it's not compelling to come on-chain right now, because I actually think that the risk is still pretty high, more so than people want to make believe. And this is kind of central to what Luca was arguing in his paper. Whether you agree to the T of like the actual precise math, I think there's, you know, you could argue back and forth. And this is Adrian's point at Stakehouse, which I think has some truth in it.

Right.

And Hasu was arguing as well. But you don't have to get to the— is it off by 5 basis points or 10 basis points? I'm saying this is off by like 500 to 1000 basis points. Like, I still think there's so much risk on DeFi, and I'll explain why in a minute, that I don't feel compelled enough to come on-chain, earn 10%. And forget about 10%. You're getting paid 4%. To trust a vault manager that doesn't have much skin in the game to interact with a whole set of protocols. And then you're trusting the OPSEC of those teams. You start—

so what's the reason why? I mean, there's tens of billions, hundreds of billions who would say— who, who would— who have done it right, who are currently doing it right, and they're getting 3 or 4%. Why get 4% on Morpho instead of just sitting in treasuries?

So there's $11.4 billion in Morpho vaults that are paying 2 to 4%. Those are the ones that are big head scratchers to me. In conversations with folks that are pushing vaults, a lot of that— most of that is retail as far as I can tell, and most of that is coming from exchanges. And it goes a little bit like you're— do you have promotional campaigns which is, hey, deposit into this through an exchange interface, deposit into this vault that is going to pay you maybe 6%, or the advertised rate is like a bit higher because some of that is for a slight period of time. And then it gets juiced up by some token rewards, but that doesn't last in perpetuity. In fact, the real rate is 2% to 4%. But you entice— and by the way, TradFi banks do this all the time, like, hey, deposit $5 million, we'll pay you like Treasuries plus 100 basis points, and they'll lock you in, and then they'll like lend out that 8, 7, 8 times. So this tactic of like, how do you draw in deposits, is nothing new. And so I think retail hasn't— is not sufficiently aware of the risks that are being taken on the back end. And I don't think we've learned anything from prior cycles. Like, fast forward to 2023, 20— when did Terra happen? 23?

May of '22.

'22.

Yeah.

You remember that? What was happening back then? You had— yeah, yeah. I mean, changes.

Yeah, yeah.

Wallets all saying, hey, deposit in Anchor and get paid 8%, I think it was. And people back then were saying, wow, like, this is, you know, it's great, you know, I'm getting paid 8%. It's a stablecoin. So this is a dollar, right?

Right. The algo stables— you're— I get what you're getting at. The algo stables of 2021 were where you had, you know, quote unquote risk-free yield was the— you're saying you're— you're— so you're— you're making the analogy that vaults are the algo stables?

Vaults are not all— not all vaults are created equal, but I'm saying writ large, vaults I'm wary of vaults, and I think what vaults— what Algo stablecoins were last cycle, vaults can become this cycle. There's just a lot of, a lot of risk embedded in there. Why is there a lot of risk? So I think like exchanges are using vaults, and every exchange out there loves vaults because it's a way to offer something to the customer that is offering them the convenience of earning yield on their stablecoins. So that, you know, you like stablecoins, you have a lot of stablecoins on, on the platform, let's lock them in and deposit in a vault. What is a vault? Do you want to explain it or should I explain it? Because there's different strategies. But the first vault, as I understand it, was like, first it was probably Wi-Fi. Was Yearn was— Yearn, in my estimation, like the first automated yield farming.

Yeah, it was definitely Yearn. Yeah, Yearn is definitely the—

Yearn. And we, you know, I I was quite involved in Yearn, and what it did was it automated a strategy that a lot of people didn't want to do and click 30 buttons. You can do it yourself, loop it and all this stuff. But Yearn came in and said, hey, we're going to do this for you and this is the rate. And it's set it and forget it. People always pay for convenience. So vaults are like effectively like a hedge fund, a credit fund. It's going to interact with certain protocols and develop a strategy to capture a compelling yield. And retail and a lot of these deposits, going back to this $11 billion number, are saying, okay, this is interesting. Go on, Morpho, you know, if you want to share it. Now, there's different— there's many, many strategies. And so I think retail just saying, okay, which is more interesting to me? And probably picking the one with highest yield. And we know how that goes, right? Are they doing a lot of diligence on who the manager is, what strategies they're doing, what protocols they're interacting with? Some conditions are different than others. Like sometimes the vaults, as I understand it, have different parameters that they can't really deviate much from. Like this is sort of the benefit of a smart contract, which is its predefined rules. It can only interact with certain protocols, certain risk parameters. I like that. What I don't like is composability is a wonderful thing when it works, and it's the worst thing when it breaks because you have a contagion effect. And we're going to talk about in this pod because obviously we should talk about the Chaos Labs, we should talk about risk management and crypto as a whole. I caught up with Omar the other day. I've seen on the timeline what's going on in Aave. If you are in Resolve, I think the stablecoin hack really kind of— when you have a hack in one protocol and you're as a vault interacting with that protocol, you know, you're sort of the— you're only strong as your weakest link is the point I'm trying to make, which is if you're interacting with 5 different protocols to capture that 4% or that 6%, you know, you're trusting like, you know, the wrapped Bitcoin collateral. You're trusting the manager, you're trusting the smart contract of the vault, then you're trusting the protocol where that's being deployed, and then you're trusting all the different other protocols you're interacting with. So you understand like the risk blows out when you're interacting. Every incremental protocol that you add adds way more surface area. And I don't think it's a linear relationship. It's actually exponential risk that you're taking when you're— the more protocols you're interacting with, it's exponential risk. But even for narrowly defined— so the simplest strategy to capture yield is like you have ETH, right, Jana? You have a ton of ETH, you deposit in AAVE, and you're going to get some rate, which is, by the way, very, very low. Why? Because no one really wants to borrow or effectively short ETH. And so, I mean, let's look at it now. Like, what's it— what's the rate on, on ETH? Aave. Let's just go on Aave, right?

Yeah.

Use Aave. Here you have it. I think there's probably a dashboard here. It shows a lot of this stuff. ETH. You can tell how much I haven't used in a while. Yeah. Like the supply APY is 1.81% on ETH, 2.61% on USDC. Yeah, right. So USDC is probably the most simple one, which is say you have a bunch of stables, you don't want to long the market, say, okay, look, I'm just going to deposit my stables in AAVE and just earn something. Utilization is quite high there. It's like 80%. So there is some demand. I think it's a lot of it is just in-house, but you're getting paid 2%, 2.8%, where you get paid Treasuries, you know, what is it, 3.64%, 4%, close to 4% now, higher than that, um, close to 4%. So it's below the Treasury rate. You know, you're taking some risk But are most people doing that?

Are most people not just sitting at 2.8%? They're looping and they're doing, you know—

yeah, so the vaults are definitely looping because— right, and this is the, this is the moral hazard that exists not just in crypto but just in tradfi in general. This relationship when rates are low, people take more risk to capture more yield, and that eventually when pushed to the extreme causes bubbles. And, you know, Ray Dalio talks about this, like the— how the economic machine works. Go watch that video. When rates are low, people go out of their seat to take more risk, and they don't— they end up taking so much risk that things blow up.

Yeah. Let me push back on— before we go too much further, I agree that rates are not— your rates are not high enough on these things. I'm not— you should, you should be getting paid more for sitting in vaults or an AAVE or something like that. Where I don't agree with you is the comparison to algo stables. And the key difference for me is that with like you're— you called out, you called out Terra Luna. There's this death spiral that existed in every algo stable. What was the one that the Princeton guys did? Base, right? Basis and Terra Luna. So there's a bunch of them with, with Morpho. You've got, you know, if a, if a borrower's collateral drops to the danger zone, you get automatically liquidated. Right. And the lender gets paid back in full. And there's I don't know the exact numbers, but like $500 million in liquidations on vaults. And I think lenders have lost like $2 or $3 total. So the liquidation mechanism actually is catching it, right?

Yeah. No, no, look, and I want to make something clear. I'm not suggesting that it's the same level of risk. I'm just saying that the idea of luring people into a product and pretending that it is safer than what it actually is, is the problem that I have with a lot of these front-end platforms. I see that, that behavior is my analogy to a stablecoin. Of course, the, the risk of algo stablecoins is much, much higher than a vault. But I, I, if I— that, that's not my point. My point is I do have a problem when I think retail is not fully aware of the risk that you're taking when you're depositing into a vault. And if you go on the front end of these platforms, They're kind of just saying capture 3 to 5% on these exchanges, right? You're advertising. There's a lot of risk. Yeah.

What's the right rate then?

What's the— what, sorry?

What's the right rate?

Uh, private credit style, like 12%, 16%. Like, you know, whether you— and this is the point I made in the tweet, is like, you get paid needs to be low to mid-teens to start making it more interesting. Is it ever going to get there?

No.

I think, I think there's an argument to be made that it will be lower. But I mean, you talk about senior secured, like first lien on risky type of businesses, but you get paid below single teens. Yeah. And I just I mean, the, the, the expected value of like, when you think about like how much you want to get paid, the issue is like whenever you have some probability of total impairment, like total loss, that really requires like a very high rate of return. Because yeah, like fair enough, like I think, I think liquidations have been like on AAVE like very impressive. Every time there's like a very big market drawdown volatility. Liquidation engines are like something that I've been very, very impressed, and I think has come a really long way from the days of Black Thursday or Black Friday, where like there was a lot of bad debt in, in, in these platforms. Right now, I think you have like a very battle-tested liquidation engine of keepers and all this stuff that is, you know, making sure that if you're, if you're, you know, if you get liquidated, that collateral gets cleared out and there's no bad debt. But there's still risk. Like, there's still some risk that is greater than probably 2 to 3 to 5% of, of whether it be a major protocol hack, smart contract bug, or, or just OPSEC breach that leads to some impairment that it— that could go to zero. And therefore, it's like the Taleb turkey, right? So long Treasuries are 4%. You know, you're trusting the US government. That's, that's the benchmark and you're below that. So it's tough to make the case. So, I mean, you're very plugged into conversations like in DAS and with institutions, like how many of them are genuinely putting money in vaults that is theirs, not retail?

Um, pretty much every institution now is building a vault strategy. I don't have an answer to, you know, retail, not retail, but I mean, look at, you know, I'll say it. I think this is public. If not, I'll redact it from the episode, but you know, Fidelity, you know, Fidelity's head of digital or head of digital asset management business. I forget the exact title. Like Fidelity's got a job title, a job open for just vaults manager. Like all, you know, these, these businesses are these companies are pushing in really quickly. I think the question becomes like, you know, you start to look at the guys managing the vaults. Like, I think Stakehouse is probably the best in the biz right now. Gauntlet also does it. But, you know, we should talk about Chaos Labs, which is a little different than managing vaults. You know, they're the risk management team behind every loan on AAVE for the last couple of years. Like, you kind of start to question, like, is that, is that business model worth it? To, to be involved there.

So yeah, I mean, we should bring Omar on, or maybe have the Steakhouse guys and Omar and just the risk management.

We've got the Steakhouse guys on Friday. Let's talk about this Chaos deal.

So the only thing I'll say there, man, is so yes, a lot of TradFi is building vaults, but they're building it for— they're mostly a retail audience. And the same with it, like BlackRock launches a Bitcoin ETF because it's been the most profitable ETF for them. In the history of, of the firm. They make money regardless of whether Bitcoin goes up or down. Of course, it's related, right? You're going to launch a product that hopefully retail does well, but it's a very— vaults are going to be a very profitable— two things will be true. Vaults will be very profitable instruments for financial institutions, and at the same time, there will be quite a bit of losses in vaults. And I hate to say it, but it's just going to happen.

But losses, why losses? Because someone blows up and the whole vault gets wiped, or?

Yeah, like impairments.

Yeah.

Yeah. Smart contract risk or hacks or what have you.

And not all vaults are created equal, but I guess this is probably a good time, by the way, to call out I screwed up the Drift explaining the Drift thing. So Drift came out, the Drift hack ended up being so much more sophisticated than than I think I realized or anyone else realized. What happened with Drift, and the reason I'm bringing this up is because maybe it's not a smart contract thing that gets one of the vaults, but like the hacks are, and we should really talk about the Anthropic's Mythos that just came out, but the Drift hack, I'll briefly summarize it here, was basically they got in touch, they met someone at a conference who was like a hedge fund man, like, you know, ran a crypto hedge fund. And, um, you know, they built a relationship with them, the, these folks, they met them in person. They ended up building, they started building something on top of Drift. They deposited 7 figures into Drift. They had many conversations. They onboarded them with the official application onto building on Drift. And, you know, they met them many, many, many times in person and built this long, like, I mean, 6-month relationship. And it wasn't just an online relationship. And, uh, it turns out It sounds like it ended up being North Korea was using, had basically hired someone who was not North Korean or hired a group of people who were not North Korean to basically be the front for a North Korean thing. Um, and, uh, yeah, it's just like the attack vectors in DeFi are large right now. So maybe it's not smart contract risk, but yeah, well, that's, that's my point.

It's like the smart contract and then OPSEC. Uh, Yeah, apparently it was a 6-month period in engagement. There have been multiple interactions. They put in $1 million, I think, of their own capital.

Yeah, exactly.

They had them download TestFlight and that compromised one of the signers. And then that just kind of trickled and cascaded. I'm seeing a lot of stuff on the timeline now of people coming out saying, hey, by the way, like, I think it was EtherFi. One of the founders of EtherFi said, oh yeah, like We— there was this one person who pretended to have worked at Figma and Google. We did reference checks on them. Turned out that they were not. I'm pretty sure this guy was like a plant from Lazarus, which is this North Korean, like, state-sponsored hacking group that is responsible for a lot of the hacks.

I talked to—

do reference check.

I talked to one of the founders of the big custodians the other day. He said they get— they, they, they flag a North Korean applicant Every single day now. So every single day.

Yeah, for sure.

Yeah. There's a North Korean.

You know what? You've seen a lot of the videos are saying how to spot one.

Yeah. You say, like, you know, doesn't Kim Jong-un suck or something? Like, isn't he the worst person ever? And they drop off.

Yeah. There's another one. It's just like, how do you like a CAPTCHA which has like, you know, making fun of him? And of course they won't.

But yeah, exactly. ZKSync is the bank stack of Ethereum. ZKSync's Providium is the only Ethereum-secured platform that is purpose-built for institutions that demand privacy, compliance, and full control of their data. zkSync enables financial institutions to thrive in the digital assets economy by launching and monetizing their own chains, tokenize real-world assets, build programmable markets, and settle cross-border in real time. Visit zkSync.io to learn more about the Bankstack of Ethereum and book a demo. As always, investments in blockchain technology involve risk. Terms and conditions apply.

Hey all, Blockworks co-founder Michael Ippolito here. Quick break to talk about something we've just launched: Blockworks Investor Relations. As the market shifts toward institutional capital, investors want more transparency, more standardization, and a higher level of professionalism. But the traditional IR model is slow, manual, and not built for how crypto works. If you're building on-chain, your data is already live, your business is already transparent. The challenge is turning that into a clear, credible story for investors. That's exactly what we're solving with Blockworks IR. It's a single platform that brings together real-time analytics, branded investor portals, and hands-on advisory support so you can communicate what matters. If you're an on-chain business looking to level up your investor strategy, check out Blockworks Investor Relations at blockworks.com/ir. Investor-relations. All right, back to the episode.

Let's talk about, um, let's talk about— so Anthropic released, um, yesterday Anthropic announced Claude Mythos, which is my understanding is like a model so capable at finding security vulnerabilities that they won't release it publicly. And they ended up releasing this thing called Project Glasswing, which is a $100 million defense coalition with Apple, Google, Microsoft, AWS, NVIDIA, CrowdStrike, JPMorgan, and other folks. And this model, Claude Mythos, found thousands of zero-day exploits in what they said was every single major OS operating system and browser, including a 27-year-old bug in OpenBSD. And yeah, the other kind of exciting or, you know, you could say scary thing is during testing of Mythos, it actually broke out of the sandbox, gained internet access, and emailed a researcher. And if you tie this into the conversation, you know, we're never going to have the best takes on AI here on Empire. But if you tie this into crypto, you know, North Koreans right now are the number one threat to crypto teams. You know, with these models like Mythos, like, AI just made every attack surface exponentially larger.

Yeah.

And, you know, I don't want to make this like a total doomer episode, but it is—

I would be optimistic.

I'm optimistic, but like, I'm happy I'm not a DeFi founder right now. That's how I feel.

There's a— there's, I think, a couple of people that— Tay from MetaMask, former ConsenSys, she's always on it and she like has some practical recommendations like, hey, make sure you have timelocks. There's a SEAL organization in crypto that is very good in terms of response. They're helping Drift, and they have really good resources like endpoint device, like detection tools. You should be on your game when it comes to cybersecurity. There, if there is a vulnerability, someone will exploit it. It's as simple as that. And someone that was close to high-up political figures once told me, assume you'll be hacked. Does that— should always be the operating assumption. What happens when you get hacked? That is, that is where you need to go. Not assume that you're building a big firewall, like assume they're going to hack you. How much is that damage going to look like? Like, what is that damage going to look like? And working back, like invert. Make sure that you have multisigs, make sure that you have time locks, make sure that you're always on top of like the latest versions of browsers and operating systems. And I was actually looking at when I first saw that Anthropic release yesterday, my first reaction was, oh my God. Yeah, this is a good post by Hasib retweeting Tay. I'll just read it. If you're in crypto, get all your devices in your org on EDR, endpoint detection and response. Detection and response. This is literally the one weird trick North Korea doesn't want you to do. It's stable stakes, but the vast majority of teams still don't do this. These are like multi-billion, like protocols that are securing hundreds of millions of dollars didn't have this. The point I think Tay makes here is like that, um, had Drift had an EDR, once they downloaded that TestFlight app, it probably would've gone like, I think her point was like, it would've lit up like a Christmas tree. And I think these are like simple solutions. There's not one, my appreciation, and you have to kind of learn security and it's a constantly evolving thing, is there's not one thing to cure all. You have to have like, multiple redundancies in your organization and your own security setup to just like stay on top of it. Uh, and it's a bit of a game of, uh, like, what is it? Uh, cat and mouse. Like black hat hackers get an advantage and then you patch and then there's zero-day vulnerabilities and then you patch and then, so like you have to stay on top of it and it's just the nature of the beast. But all this ties back to the conversation we're having about vaults. Because one of the things that I was discussing with Omar from Chaos, and, you know, I'm an investor, been investor there for a long time, and I mean, Omar is probably one of the smartest guys when it comes to risk management, and he's been working with Aave for quite a bit of time. And, um, I said, well, isn't it— you're at the point in the market where, like, DeFi protocols are not as well resourced as a state actor And especially now in this market, they're not making as much money. So the budget that goes towards security is actually less. And that's also the problem that I have, which is— and one of the arguments that was being made in the post about why Chaos was leaving, I think there was a discrepancy. Like, they were getting paid $5 million to work with Aave to be one of the security risk management providers for all their v3 V4 introduced like the spoke model, which is more complex. So they said, hey, look, we need to get paid more for taking on this responsibility. We want like $8 million. And that was a discrepancy that they couldn't agree on. I'm not here to comment on like, was that $8 million right or $5 million right? But one of— if you read through the post, I think what is true is whether you're Gauntlet or Chaos, you're carrying a lot of weight. Aave secures how much? $32 billion? $38 billion? Omar did a benchmarking of how much do banks, I think, pay for cybersecurity? 6% or something like that. 6%, 7% of their entire budget. And in this case, it was like, well, an $8 million contract is below that. It's like 1 to 2%. Yeah. I think this is the issue that I have, which is like, I think maybe an opportunity for Blockworks, like as part of the token transparency, might there be an opportunity? And remind me, I think you guys were commenting on this or are doing this already, which is like, do you have an audit? But also, is there a way to like get more visibility into how maybe the benchmark is like how much are you actually spending for risk management, for OPSEC, for— right. And the problem with a lot of this is you don't want to reveal much about what your security looks like. Actually, you never want to.

You don't want to. Yeah.

And this is why like Coinbase for a long time decided not to do proof of reserves, I think, because And I think a lot of exchanges shied away from that because it kind of was— would, would be a risk in and of itself. But yeah, maybe I'll pass it on to you. Like, is there something as an industry that we can improve on to self-police? I think SEAL, this organization, is really good, but like not a lot of protocols follow that, right? In the prior podcast last week, Like, I'm not here to tell you I'm going to trust the solution. For me, tying it to vaults is I just assume that there is a lot of risk. There's a lot of OPSEC surface area. Even if you have multisigs, even if you have security councils, even if you have time locks, there's humans involved and code is not flawless. If it isn't flawless for Linux or AWS, or I think the Anthropic line was like, we found vulnerability in every codebase out there of every major company, you best believe there's vulnerabilities in DeFi.

Yeah. I mean, someone's doing the resources. I think what's become clear to me is we do so much auditing of the smart contracts, no auditing of, you know, things like the admin keys, right? Multi-sig configuration, presence of time locks on dangerous functions. And, you know, Keoni from Onet tweeted this, he said, look, We need a new kind of audit, something that audits protocols from the perspective of, yeah, the multisig and the use of cold devices for signing, multisig signing procedures. Um, and you know, smart contract audits tend to focus on the contract logic, but you know, they kind of treat the admin roles as these trusted things, but you know, we're kind of seeing that it's the opposite.

So, so I've sat on some of these security councils and multisigs. For some larger— not anymore, but I have. And you never kind of want to disclose that. But there's, there's, um, I think to Keoni's point, I mean, obviously you can do penetration testing. I think you mentioned it in the last podcast, like there's security firms out there that will literally come in and try to piece apart, you know, even like pretend to be your mom and call you and send you a message and like firms do this. And I think you just have to— the problem here, man, is like, it's, it's such a big— it's the easiest honeypot for hackers.

Yeah.

And it will always be that. Did you see— what are the solutions? I'm just saying that you work backwards from the assumption. What is the practical solution today? Expect a way higher yield, like 15 to 20%. Right? Because when I'm farming a new protocol and getting 100% APY, I'm putting— I'm sizing it so that I take into consideration this total loss. But if I'm paying 1,000% APY, dude, I need to be in that farm for days and I recoup my principal. Like, that was my math when I was— when back in the day when I was farming, I was like, how many days? Like, how many blocks? And how many blocks will I like recoup my principal? Because I sort of said this is a ticking time bomb. At some point this either blow up or the yield goes to zero. And as soon as the yield went dip to a point, I like literally exited. And that was like in some of these cases, we were first blocking a YAMM, you recouped all of your principal in a matter of days.

Yeah, yeah, that's true. Like, what do you—

this might be the other solution. The other solution is insurance. If you're, if you're an exchange, have insurance. If your user is going to go in a vault, make sure That's interest. Kudos to Aave because Aave has a million-dollar FD insurance equivalent to FDIC for their neobank. I don't know what Plasma is doing. Maybe we should talk about that. There's some, you know, um, split joined, but Plasma won. Like, insurance is one of, if not the biggest opportunity, and we've been talking about this for years, right? We need better insurance.

Yeah, yeah. Why hasn't insurance worked?

This is a problem. So when I, when I was a— I used to talk to Ben about this. We had an idea of going to buy an insurance company. Um, correlation risk. So if you— so like, there's been a couple of projects that I've invested in or been a part of, like Anchor. Sorry, not Anchor, it was, uh, yeah, it was Anchor, I think. And then, um, Risk Harbor. And there's a couple other initiatives out there. There's a reinsurer called Onree, but that's more like Yeah, I think the issue is a crypto-native insurance company is very exposed. So the name of the game in insurance is correlation risk. You want to have diversified set so that nothing can kill you, right? You want to have property and casualty. And when you're underwriting that, any actuary will do— well, you're not going to underwrite like only 89-year-olds, right? You want to underwrite, right?

You need a bunch of customers with uncorrelated events, and you need low— you need honestly low risk, or else the premiums explode. And, uh, unpredictable. You kind of have the two opposites.

The two opposites. Yeah, yeah, yeah. What you need is—

so say DeFi is uninsurable. Uninsurable. No, it is, it is.

And here's how I think, and I've thought about it from the lens of inversion. Go buy a traditional property and casualty insurance company in the Bahamas and slowly drip into extending policies to certain players. And I think this is already happening today, like Coinbase exchanges have insurance, and it's coming from large players that are not a— not 100% of their, of their book is crypto. Maybe it's 3% of their book, 5% of the book. The issue with DeFi is that because rates are low, you can't pay as much of a premium, right? If yields were 15, 20, 100%, then of course, no problem, charge me whatever you want, right? Like, you know, if you're depositing into a vault and you're getting paid 25% APY, you're very price insensitive to insurance at that point. You're like, heck yeah, I'll pay.

Yeah, sure.

So how much would you pay? 4 or 5% on that?

Yeah, right. But not if it's, you know, 3.5%. And then I'm like, well, I don't want to pay an extra, you know, 150 bps.

Exactly. So I've had this idea on the back Like, I sort of have shelved it because rates have been low, persistently low for a while. And because of that, then the buyer is not willing to pay. So I've had conversations with Stani for a long time and said, hey, why don't put it at the point of— insurance should be sold at the point of sale. When you go buy a car, you know, you cannot drive that car out of the dealership unless you have insurance. It's mandated.

Yeah. Or you can't buy a home. You can't buy a home.

You can't buy home or you can't rent. You have to ensure this. Like, you understand consumer flow. You have to embed insurance at the point of sale when people feel the risk or at least value what they're buying. Other than that, it doesn't happen. Flood insurance is the opposite of that because that's not mandated. And a lot of people, even though they're living in high-risk areas, do not buy flood insurance. And that's a little bit of crypto. I've always felt the crypto, when you're interacting on DeFi, is a little bit like flood lot of insurance because unless you've been hacked or have had impairment or been liquidated, you don't really care to understand what's going on in the backend. And so that's, if, if I were to build like a robust vault, I would embed it at the point of sale. And I think some protocols have this in a different mechanic, which is, I think Athena has the reserve fund or the insurance fund. right? Which is a good, a good mechanism. Is it enough? TBD. I think those are smart guys, but yeah, I mean, Binance and some exchanges have reserve losses, right? But we can do much, much more of that.

Yeah. What do you do personally? I don't know if you saw the— I love that. I'm about to share an Elizabeth Holmes tweet here, but, uh, oh yeah. Yeah, did you see this? Yeah. So Elizabeth Holmes said, delete your search history, delete your bookmarks, delete your Reddit medical records, 12-year-old Tumblr, delete everything, every photo on the cloud, every message on every platform. None of it is safe. It will all become public in the next year. Local storage and compute. And it was a quote tweet of this person who said, society needs to grapple with the reality of a mythos-level model being open source in under 12 months. I'm not sure we're prepared. And this is a quote tweet to, you know, Anthropic's— Anthropic launching, you know, Project Glasswing and Claude Mythos. And, you know, it's a closed source thing, but there's always, you know, these open source copycats that, you know, a lot of these models get open sourced, you know, in a pretty relatively quick period of time. So, you know, yes, maybe you can't do dangerous things with Mythos because it's, you know, closed source and Anthropic. But, you know, what happens when this thing is open source and, you know, anyone in the world can use it? So yeah, I don't know. Do you? I don't know if you think about this in your personal life at all, or if you're kind of just like, look, everyone's screwed. Like, live and let live.

I've been talking for way too long. What was your first reaction? Like, what are you doing?

Yeah, I mean, my first reaction is like, I don't have time for this. Like, I don't have time to go delete my search history and my bookmarks and my medical records and my delete everything. Every photo on the cloud, every— you know, I've, uh, there's two futures here, right? One is people get— by the way, this is, this I think is, um, the bull case for Ledger. Pascal came on here maybe two years— Pascal, the CEO of Ledger, came on here like two years ago and was like, we are going to secure not just crypto, but everything, because nothing will be safe. And I was kind of like, okay, buddy. Like, yeah, sure. Like, good, good talking point to go do your fundraise. And I think his, I think he is spot on here. I think you will need, yeah, like a local drive to secure everything with the assumption that if you don't secure it locally, then yeah, it'll probably get out. I do think, I do think society will change in that I think it will get more normal for people in powerful positions will have more embarrassing things out in public. And so if you think about like the position of the president, right, the president used to be this like extremely buttoned up thing. And candidly, like Trump broke that seal for, you know, for better or for worse, you know, I'm not going to get into that here. But I think that'll actually happen to a lot of people. Like, I think it'll be normal to see the CEO of a, you know, Fortune 500 company, like partying and like smoking weed or something like that. We already see it, but I think it'll accelerate so quickly and it'll be like, it'll be like, oh my God, crazy. And people will get canceled for a little bit and then it'll just become the norm and people get really bored.

So, but I tell you, Dana does crisis management.

Yeah, her business is ripping right now. So that's a— yeah.

So there's a couple of things I think about this. One, I did go out and like, you know, think about that. I saw that post. Again, I, I heard it many, many years ago and I was like, I just assume you're gonna get hacked and live your way, live your life and operate in that manner. And I think that's always a good mechanism to assume, like, whatever email you send, whatever message you're sending, conduct— it's how you conduct yourself in private is— should be under the assumption that it will be public and you're being observed and watched. And that's the reality. Like, when you're using a social media platform, they know a lot about you. You're trusting them. And so there's no semblance of privacy today, much less with going forward, because we've just decided we get so much more value from being online.

I mean, think about every call I now am— just assume every single call I'm on is there's Granola running in the background. So 2 years ago, you get on— no, 3 years ago, there's no recording of calls. Last 2 years ago, year and a half ago, there's a third person who joins the Zoom and it's a bot. And today it doesn't even join the Zoom with you. It just runs in the background. But you, I mean, every call's being recorded. I use Granola for everything and everybody does.

The world is uber-connected. And so you have smartphones that act like video cameras and recording devices everywhere you go.

Right.

There is no, is the world becoming a better place and safer place? In some ways, yes. In some ways, Privacy is an inalienable kind of fundamental right, but there— we've traded on that to hopefully get something more. What that more is and how much more, unfortunately, the cat's out of the bag. Like, we're not going to go back to a world where there is more privacy. In fact, there will be increasingly less and less privacy. I think your point is right, which is you just— so, so it's interesting because, uh, there's, uh, I think a Scandinavian country, I think it's Norway, that tax returns are entirely public. So you know how much your neighbor is making. It'd be interesting to study that. And what was the— that first year that they implemented that, I think it was pretty tough for people, and probably they panicked. How effective that's been, um, TBD. Does that create like this sort of utopian society where people just, you know, like, you should never talk about money, but somehow people can see your tax returns. I have heard a lot of Scandinavian folks leave, have had to leave because it's a very tribal society and they don't like people standing out. So a lot of the most successful business entrepreneurs, in fact, I think the Dune founder lives in Singapore and he's publicly talked about like certain policies of the government, but also societally, I've talked to privately a lot of folks from Scandinavia and say—

Switzerland, he moved to Switzerland, but not, but yes.

But is it— it's very tough to live in a society that everyone knows how much you're making. You're not— it's actually looked upon poorly if you're making a lot of money because you're not supposed to do that. So, but anyways, just an interesting, like, study about what happens when everything's— like, for all intents and purposes, people will know a lot of— much, much more about you going forward.

Yeah, it's true. I mean, look at what's happening on-chain. Like you can very quickly just, if you know someone's address, you can see a lot of it. So, all right, let's, let's maybe wrap by talking about inside baseball on fundraising. We talked about it a little bit last week, but yeah, any, any more color to share on just kind of what's happening in the fundraising markets? Or, or I can, I can talk a little bit about like—

The nice thing about, the nice thing about here is like we don't have funds, so there's a little bit more liberty by which we can—

I mean, like, every company is like doing really poorly.

Super well.

Everything's down 80% except for—

there's obviously a public— so I tweeted about the state of secondary markets in crypto, which I've always found to be a really good indicator. Um, 90%, 80— my point was there's an 80 to 90% discount on stuff that would historically have cleared at 60% discount if you're selling the full lot. Meaning there's a project that— like Monad, for instance, is doing pretty well, probably one of the best performing, if not the best performing, uh, over the last 2 quarters. But a lot of stuff is trading at 80 to 90% discount. Like, and the point that folks including Rob are saying, well, oh, like it's not 90, it's actually 60 to 70 But if you read through the article, and I was talking to Omar like privately, it's like this is just bids. Like, it's the bid and ask spread is so wide right now that there's very little transactions happening because the, um, the bid is at 90%, 80%+ discount, and the ask is like, you know, if you're selling, you're hopefully selling at historically 60%, 70%. No one's buying there.

I think it's— I think the biggest change in the last couple of weeks is the ask. There's— things are starting to clear. So at what— you know, you had this, you had this spread of, you know, 70 to 90. I think the ask has now come down to 85 and things are starting to clear is what I'm seeing.

So 85?

Yeah. Yeah.

I mean, I mean, that's my point. 85 is very high.

No, no, I think it's the— I think it's the bleakest fundraising market it's been in crypto since 2015. I think actually 2018, 2019 was better. And I think 2023 was way, way, way better. Way better.

Um, and I'm talking about tier 1.

No, no. There's a lot of, there's a lot of good teams right now who have raised between $5 to $30 million. Like these are kind of Series A businesses and they are, they've been selling for several months. They weren't hitting, they weren't getting a price. They were trying to raise, then they pivoted to a raise. And now they're, now they're just selling. So I, you know, I know one business today, I just talked to the founder and they're selling for, you know, a very small amount to a chain. And, um, they, and that's the other dynamic, the chain. I think there's a lot of chains that have realized there's only two, two, two paths forward. One is we can pivot to enterprise SaaS and sell a chain in a box for $200K a month and try to get like 20 enterprise deals. And go that path. And that's what some of the chains are doing there. I think they might do it well. But the other path is to do what Ripple's done and start using your— you've been gifted, you've been given a gift, which is free money. So you, you know, have spent that money for years on dev rel and ecosystem grants and conference parties. And I think people are about to start saying like, let's go, let's go become a roll-up vehicle. And, uh, that's what I'm seeing a lot of is like You know, if you look at 2021, 2022, the exchanges were the ones who made the acquisitions. Now it's the chains making the acquisitions. So Polygon is doing this. Yeah.

The problem is it's very liquid currency. And so like, why did AOL acquire a company 10 times its size?

You said illiquid or liquid?

It's very, it's not a liquid instrument.

Oh yeah, it is. It's a token you can sell.

Yeah, but who's going to buy the token?

I mean, there's liquidity for a lot of these tokens to trade. Like, these are small deals. Like, let's say you raised at a $100 million valuation. Let's say like you raised at $100 million val, you're Series A, you're now trading 85% discount. Actually, it's bigger than that. You're trading a 90% discount. That's a, yeah, $10 million. You can get $10 million of liquidity if you just, you know, like not, it's not that difficult to get $10 million if you're an L2 token.

Yeah, so yeah, over a couple—

oh yeah, over a couple weeks and use them like Flowdesk.

And I think that's true. Yeah, the, um, the problem is, you know, it's very public, and I think people— word gets around if you're selling a lot of your— so like, if you're— you can't use tokens to— like, Ripple is in a privileged position, I think, because they are smart enough to understand they have a currency that they've been using to acquire and absorb businesses with revenue and cash flow, like, you know, what is it, Arabella and Hidden Road and a few others. Smart, really smart. Yeah, AOL did this really well. Yeah. Now if you have— yeah, I don't know. I mean, I guess like this is the— these deals were getting done like OP convincing base to come on and giving them, but it wasn't an acquisition.

But that's not an acquisition deal, that's just a BD deal. And though, by the way, those, I think are, those are still happening in droves. Like anytime you see, like, you know, any, any, any time you see, you know, big financial institution comes onto this chain, that, that, that big financial institution did not run an RFP. They ran an RFP for a grant. They, they got, they got money to come onto that chain. So I think there's still some, I know it's rarely talked about, but like, I think it's good to just put that out into the open because Like, is this part of the token transparency? Yeah, we're working on— actually, I'm spending— so we're recording this on Wednesday, not Thursday, because I'm in DC all day tomorrow. And we are pushing pretty— there's a lot of good stuff coming from the token transparency framework soon.

Yeah. But on inside baseball, I mean, yeah, like secondary market is— I would monitor that. I think it's pretty depressed. Last week or so I've been seeing a lot, a bit more uptick. Um, what else? I mean, I, I have seen a bit of an uptick on private rounds. Like I've talked to a few founders, a few good companies out there that have been— talked to a founder today that's like in Colombia, totally bootstrapped, uh, stablecoin, playing in the stablecoin side, both B2B and B2C, like entirely self— like bootstrapped and profitable. And now going out and raising around, like, pretty interesting stuff. Like, um, the best part of this environment is that it is instilling this survival instinct in some of the best operators. And like, you, I think you said it live or backstage, which was like this discipline of being like optimizing for revenue but also sustainable growth, like focus on the unit economics, focus. I think that type of debate is happening all around crypto. Which is a very good thing. I think Omega ETH just posted out something around their TGE and pretty open disclosures. That's what you want to see in teams, which is, hey, look, I know it's not a perfect environment. I know, like, that type of communication is good. And, and this is the type of conversation that if you remain optimistic, but it's a right time to focus on, like, the things that in a raging bull market don't get talked about, right? No one cares about unit economics. No one cares about price to Fees and, you know, security and vault, like, you know, everything sort of gets put aside in a raging bull. But this is when you can really optimize on that. It's quiet. And if you set yourself up well, maybe an interesting, fun question for you. And we do predictions at the end of the year, but I think we should start making them more and more and then just be accountable. Like, we're 3, probably with AI, we just be like, hey, how right we were in a 3, 6 month period. How many— so like last cycle you had, what were the main winners?

Like new, new companies emerge, uh, Athena, Hyperliquid, uh, Morpho, stablecoins, prediction markets, and perps.

But some of them were already working, like new, new, like that, that most people kind of missed.

And even in this part, new, new Hyperliquid, Athena Morpho. Uh, Morpho. Uh, Jupiter.

Canton. Just like long—

I actually don't think that was last cycle. I think that is a new— I think that's like you could— I mean, publicly new this cycle.

I mean, I know they've been working on it for 10 years, but yeah, yeah, no, exactly. But just kind of stuff that we didn't talk— like, I guess the— what is this stuff that we talked about very like at all or totally missed and then it just kind of blew up. And, and Akantan was one that, I mean, I, I don't think we've talked about it much. I had to have discussions with the founder in a dinner and he kind of like gave me the full brain dump. I was like, wow, okay. He's like, yeah, we've been at it for 10 years. I was like, wow. Yeah, I've not heard about you guys that much.

Um, I mean, one that people, a lot of people are talking about privately, I'd say, is are we— are we talking about is LayerZero? Um, yeah, but I guess that was too—

that was not new. I think the, the new mechanism, Zero, uh, was very closely held, and we recorded a pod while you were out. Oh, did you do that?

Did you end up recording with them? Yeah, I did.

So they gave me insight into what was going on in January, and I was blown away. And then I brought—

I just met with the fund that's, you know, buying a ton of Zero because they, uh, they think it'll just re-rate as an L1 basically.

Yeah. Yeah. Um, but anyways, more interesting. What are the things that we're missing today? Because, you know, we, people hear us talk about, like, I want to end that with maybe a food for thought for next podcast before we wrap it up with content of the week. But like, that's one of the things that I was, as I was thinking about, like, how do we really elevate the discussion here? There's a couple of ideas that I have, but one of them was like just constantly thinking about like what are the things and how do we make sure that— I think historically we've been bringing on people in the pod that were not as well known and then became much, much bigger over time. Not always, but sometimes. I think we did that reasonable success. I want to do more of that. And I'm— maybe it's like, were we talking about Figure? I think a lot of people are just— are still today not as well-versed on Figure and Provenance as what's happening in that, which is crazy. It's a public company, uh, you know.

All right, so make, make the call. What are we— what are we not talking about that?

I think I was thinking about— I was in the RWA Summit. I think Sky as an ecosystem, and I think you mentioned it in one of your predictions, but SKY and what's happening with Obex is very interesting.

What is, what is Obex?

It's like they're, they have these stars and they're trying to onboard like real, like RWAs, but like very interesting sources of yield. And it ties into the discussion of vaults. Like how do you, how do you solve for the issues with real-world assets? And I think we had Rune. The founder of MakerDAO, you know, now rebranded as SKY. He came on the pod and he discussed the vision for SKY. Admittedly, either I didn't really understand it as much. There was a bit of a— I didn't fully appreciate the full workings and potential of SKY. By the way, I hold zero SKY. I know other folks like Framework and Parify are very bold up on it. But I think it's one of those that if in the conversation of RWAs being all the rage, Sky's like doing probably the most interesting and least talked about.

Yeah, yeah. I would say, okay, if you want a prediction, RWA looping will become an RWA— RWA looping and RWA basically leverage will become the next like vaults type thing. So, um, you know, is that a good or bad thing? I don't know, to your whole conversation earlier, but I mean, yeah, people don't want 4%. They don't want 6%. They want to lever to the nines. And yeah, I think, I think, I think RWA looping will become a— RWA looping is something that very sophisticated— reminds me of DeFi Summer a little bit, where it's like very sophisticated people would kind of degen in like YAMM and like, you know, comp, you know, you'd play around in DeFi Summer and but most people weren't doing that. And then it kind of became just like, you know, it went mainstream. That's what is happening with RWA looping right now, where you get like, you know, super state— there's like a lot of interesting looping to be done, but it's not a mainstream product. And that'll probably be done in like a year.

Yeah. I remain cautiously optimistic about RWAs because you know why real estate is such a massive industry? Because it has a lot of tax advantages. A lot of the wealth, like, over the last 200 years that came from real estate. And so the tax regime was such that, like, if you were selling, there's, like, all these really— tax code is very advantageous for real estate. There's a really good podcast by A16Z Perennial, which is the family office for Mark, the principals of A16Z, and some of their founders. They brought in this, um, in, uh, I think the Sorcery podcast interviews this guy and he talks about real estate. This point I'm making, that is the bull case of real estate, which is it's very liquid. Like, you can borrow against your real estate, it's sort of a stable collateral, and then you can do really interesting things with it. So if you really want to attract like a lot of capital on-chain, I think you do it with a stable, uncorrelated— hopefully Michael Burry might be disagreeing with me— but a collateral that you haven't really had And it's— you're still not going to solve like the easy in and out redemption. It's a legal wrapper. There's like SPVs. A lot of that doesn't get solved. But one of the things that I am quite bullish on RWA is, as I was like discussing it in the RWA Summit, is what's happening in private credit. This idea that like you invested in a fund that pretended to give you liquidity and then all of a sudden it lifted a gate on you and you're like, wait a minute. That human intervention, the uber bull case of RWAs is that you bring all of that on-chain and you have the certainty of a smart contract that that will not happen. And that instills a lot of confidence in a market and you bring on massive, massive amounts of capital. But then you have to figure out the smart contract.

Godspeed.

Godspeed.

Godspeed. Godspeed. That's the takeaway of the episode. Godspeed, folks. Content of the week. Wait, were we—

before we go there, were we optimistic enough?

I mean, that was a pretty bleak episode. Damn, that was pretty— that was pretty bad.

Yeah, I know. Oh well, that was pretty bad. Let's keep that barometer. Maybe we can add a little barometer, like an AI will mark, like, by the inflection of our voice.

And like, you're still buying things?

Buying crypto?

Buying— or stocks?

Yeah, I bought Um, I bought yesterday, uh, a couple of things, stocks, like, like went long. Huh?

What'd you buy?

I bought, uh, more Western Union. I wanted to, um, I rotated some of my fixed income positions.

Wall Street Journal crypto podcaster goes activist. Sorry, what's the second? What'd you buy?

People, people, uh, um, just optimizing like Treasuries, just a ladder, nothing really sexy or anything. Um, I'm looking— there's like this ETF that got pitched to me today about like American exceptionalism, like small and mid-cap industrial companies. Have you looked at this thing? It's like absolutely ripping. So I'll save for another day, to be honest. But things that I'm looking at is like capturing vol. Like, I think vol is going to continue to be a thing. So like, how can I benefit in my portfolio, strategies that like structured products and whatnot that like you benefit from. When, when the— I didn't hit get— I didn't execute on some trades because I was waiting for the VIX to go above 30. Like the VIX went to 35 and the war broke out. Above 27, 28, 30 is when I want to capture like some of these like structured products that I think just pay you a nice coupon. Um, VIX never got there, like the ceasefire. I was like watching Bloomberg last night. Maybe this is content of the week. I was watching Bloomberg like at almost close to midnight waiting for the season, the deadline, and, uh, you know, the ceasefire got, uh, announced. But Mattel looks at me, what are you doing? I'm like, no, it is like watching Netflix, like how's it going? Yeah, logged in. No, content of the week, the crazy story is the story of the pilot.

Who we got back. That is a—

oh, you want to say it? Yeah.

No, go ahead.

No, no, I've been talking too much.

Go ahead. Whoa, what? I didn't even know about the heart. With the heart?

What didn't he— isn't there like this technology that the Pentagon— like, that came out how they discovered where the pilot was because they recognized their heartbeat from like miles and miles?

Oh, I didn't even see this. I just know we did like a crazy operation to get this guy out. I didn't— I didn't know that.

I think the way they tracked him was— was because apparently the CIA has this crazy device to Heartbeat.

That's nuts. Yeah, that's cool.

Yeah, all the sci-fi stuff is coming out.

Um, join me on this DoorDash train. We're, we're piling into DoorDash.

DoorDash?

DoorDash. Why? Go listen to the podcast with Tony Xu, who's the founder. This guy is the GOAT.

Interesting. I remember living in— didn't they start in Palo Alto, like in Stanford?

Um, yeah, they did. They used to— they started as Palo Alto Delivery. Delivery. Yes.

Yeah, I remember being in Palo Alto and they were just getting off the ground.

Yeah, they're Stanford deliveries. Yeah, Stanford MBAs. Phenomenal episode. Uh, a very good left curve, right curve. You, you right curve. You do all your analysis. I look at what I spend money on and the— this is the second time in history that I've spent more money on a service every single year for the last 5 or 6 years. And it just, it like the chart is just boom up into the right. The last time that happened was Amazon. You know, for every year for the last probably 10 years, I spent more money this year than I did last year on Amazon. And that's happening right now with me for DoorDash.

And, uh, is that because you're entering your dad phase and you're too lazy to go to the store?

Yeah. I mean, yeah, it plays a role, plays a role. But I also think one clear outcome of the, you know, the AI trade, right? All the SaaS stocks got, got hammered.

Yeah.

What's the, what's the opposite of that? Right? What's the, you know, you gotta, you gotta invert, Santi. What's the opposite of that? Probably operationally heavy one. Operationally heavy companies, I think, will do, will disproportionately benefit from AI. And, uh, you know, DoorDash is about, DoorDash and probably Uber are about as disproportionately operationally intense as, uh, anyone else's.

So I'll save it. I'll probably write a post about it. We can talk about it here, but I'm, I have a couple themes like vol, capturing vol, right? We're going to be in a persistently high vol environment. People talk about this broad basket of like AI resistance, which talks about what you were just talking about, like some industrial companies, but there's like this reshoring. So like US industrial companies probably bode well. I think a lot of them just like ran up quite a bit. The other one is like real-world experiences. If the world is only going to continue to be more stressful, you're gonna pay a premium for disconnecting. Uh, the watch industry, when the Apple Watch came out, only like ballooned. You know how much I love watches. And you're gonna crave the nostalgia of the analog, of the— let me disconnect from this noise and craziness and the stress. The cortisol is high. And so you want real-world experience. Maybe it's amusement parks, maybe it's luxury travel, things people will crave disconnecting more and more, forcefully disconnecting, because social media will suck you in. Which, by the way, I'm— as it relates to my kids, like, no social media. Like, it's, it's very, very destructive. But anyways, to round— I'll write about it, we'll talk about it. I have a content of the week. Everyone should drop everything and go listen to the podcast. There's two: Invest Like the Best and Knowledge Podcast, uh, Both bring on Jim from Alpha School.

Oh, so good. So good. I, I signed up for their— I was like, did you get in? They have one in New York. They have one in New York. I'm on the— I mean, I realize they don't, you know, take little tiny, tiny babies, but, you know, I'm on, I'm on the list to just see how it develops. And I get their newsletter and stuff like that. And so, yeah, I mean, I'm clearly dying to get it. Schools in New York are so messed up, by the way. Like, you have to literally start networking when your kid is like 6 months old to get into the daycare, to get into the preschool, to get into the kindergarten unless you're zoned for like a good public school. And it, I mean, it's the most— so yeah, Alpha School is very exciting to me. I think it's a great concept.

I've never felt— I DM'd him on Twitter. I was like, I need to bring Alpha School to Monaco. Like, like there's just not enough school here as well. If anyone in the audience knows him, get me in touch. It is like I— my first business was tutoring. I think education has been broken. I've written about it. And by the way, the simple solution is not like— I think Marc Andreessen goes out and says like a kid that has been tutored has 2 standard deviations of like performance and like standardized tests like MAPS. The lazy assumption would— and I actually came at it from like, oh, like you're going to prompt and your kid's going to be a savant or like just because he's going to be— it's so engaging. But he actually came out with a little way more nuanced answer, which is like, if you think that AI is gonna be the solution to education, you're very, very wrong. And they've been at it for like 10+ years. I think it's just, it's just remarkable. I'm like, where the fuck have I been all these years? Like, why have I never heard of Alpha School? Start in Austin. Go listen to those podcasts. If you have kids or you're gonna have kids or just you have relatives that have kids, like you gotta, gotta go listen to that. It was, it was like truly eye-opening.

Yeah, I agree. That was a good one.

Are we gonna plug DAS London, dare say?

Uh, October, we're plugging DAS Abu Dhabi.

It was—

is it?

No, you're like booking the venue for $2. They're paying you.

Hell of a year to push into the Middle East, my man.

You thought vaults had risk, man. Well, to be fair, it's an industry that craves risk.

Let's go.

Certini Researcher number 3.

And Das Abu Dhabi. Not yet. Das London. Das London. Das London is live. So if you guys want, we had all these sponsors who are frustrated because they, you know, we put them at the back of the sponsorship room and we're like, yeah, you booked like, you know, 3 weeks before this event. So if you, if you want a good sponsorship booth and you want to get in early and you know, you want to, we're selling meetings with Santiago for $25K. So It was a bear market, folks. Bear market.

So, you know, it's serious when you use my full name, man. Thiago. Thiago Roel.

October 20th, 21st. Be there.

Be there, man.

Content of the week is this Tony Zhu episode. I just, I think, I think it's a tough time for founders right now in crypto. And, you know, it's for me personally inspiring to listen to people who've just been through the absolute trenches. And, you know, I think oftentimes you think you've you know, eat chewed glass or, you know, been through it. And then you listen to another founder who's always— there's always someone else who's been through it worse. And, um, 100%, he just has amazing stories about, you know, the, the, you know, big fundraisers about to close, he goes on honeymoon, market changes, investors pull, he can't raise money for 3 years for DoorDash. Very financially intensive business. Like, yeah, just a good, just a good episode to listen to for founders.

So You remember when I told you like the reason, probably the single-handed reason I started Inversion, because I listened to 100 hours of Boundless podcast and I'm like, every major founder goes through a near life-death experience with this company.

Yeah.

Like it's never easy.

We got to get you connected to David.

Oh man, 100%. I'll be his patron. He's a legend, man. Um, I now, I see now that he's going on other podcasts, which is great. Yeah. That's intense as it gets.

I love it. Yeah. Yeah.

Listen to that. Honestly, that is the closing message. It is, you know, the book that I was reading, Barry Diller, Barry Diller by Who Knew?

Yeah, I read that.

He talks about a really interesting concept, which was like, he was like, I overcame business fear because I had a far greater personal fear about his personal life that he had to hide for a long time. You can imagine what that was. And he, he was like, everything business related. So it made me think, huh, could you manufacture a greater risk to overcome risk of whatever it is, starting a business, or— and that I think kept him delusional and optimistic for a really long time. And I think, you know, it's tough, but then you break a finger and then you're like, holy shit, I would give everything for my finger to be good, you know.

Yeah.

So if you're healthy and able, like, it's not that bad.

Yeah, exactly.

All right.

All right, folks. Good app. Well, we'll see you guys Monday for a great conversation on DeFi yields, DeFi risk with two people way smarter than us.

Am I invited to that one, or have you—

I probably forgot to invite you.

No, I am on it, I think.

Good, good, good, good. Steakhouse and Luca from M0. All right, folks, enjoy the weekend. Cheers.