Freedom Money Ep12

Today on the podcast, we have Danny, uh, here from Danny Carpio. Am I saying that right?

Yeah, that's right.

Apologies, should have practiced that beforehand. Welcome to the podcast, Danny.

Hey, great to be here. Thank you for having me.

Um, where I like to get started is, uh, your journey to Bitcoin and cryptocurrency more generally.

Yeah, so I came— I started initially skeptical, and so, um, I did understand conceptually the store of value concept. Let's just go into like that 2016, 2017. I followed it, but I wasn't really a participant. I was more skeptical and cynical of it. The— I was more into like traditional investments, so cloud investments, you know, equities. What really attracted—

what was the skepticism?

I think there was an ignorance that I thought was intelligence. Sort of, right? So in hindsight, it really was that I was ignorant, but I thought I was being smart about my assessment of what was going on. And so that's just the cycle of learning. And so I was just wrong, um, about what it was and unwilling to explore it. And so I would chalk it up primarily to ignorance, um, and overconfidence, um, in my conclusions. But fortunately, I did stay wrong. And so I did, um, jump in more deeply without skepticism into the broader blockchain as infrastructure and a digital ownership primitive layer on top of the public internet, full-heartedly because of Chainlink. So Chainlink is an oracle, a decentralized oracle network that primarily works with Ethereum. And but what it served for me was a document-based and a cache of knowledge about what blockchains are actually capable of doing for people, uh, and for institutions, for society more broadly, as far as why they matter to, um, individuals, you know, um, especially with respect to, uh, the 2008 crisis. And so I do, uh, one thing I did, I wasn't skeptical of was that, um, I agreed with the general Cypher punk view about the system, so to speak, right? That sounds, you know, without being cliché, I watching the banks get bailed out and basically steal people's homes because of these fraudulent loans and no, with no recourse for the individual, that certainly rubbed me the wrong way. And, um, and so I have always been aligned with that ethos and infrastructure that democratizes access to information and, uh, capability to create value and capture it without being extracted from through systemic structures that are in place for other people. And so, um, the, uh, Chainlink just opened my eyes to this could be part of that. And so I jumped in and I learned everything I could about smart contracts, self-sovereignty, how it works. And of course, you don't realize the gaps between the theory and it working until you actually jump into the sandbox. And so I jumped in, um, to the blockchain infrastructure side of things basically full-time in about 2021 when, uh, through Web3 Gaming. And so I got my, uh, I got an opportunity not being a developer to jump in and build in a decentralized environment operationally, um, because I did watch DeFi and the DAOs and I followed those. I, I had an emphasis of constitutional law structure, research, academic background. And so I was very fascinated by how people were interacting with governance, having studied and researched comparative constitutions. And so, but I was unable to like participate. I didn't know how to code anything, or, and that wasn't my background. But once it started moving up stack into consumer-facing applications through gaming, I took the first opportunity that made a ton of sense and fortunately had good timing. We ended up raising just over $15 million with Ready Player DAO, me and my core team. I stayed on the core team there for the better part of 2 and a half years, give or take. Fuzzy math. I always joke that like 2 years of crypto is like 10 normal years, normal people years. It was a long time.

I didn't have any gray hair before. I don't know.

Yeah, no, but so that the further down you get into what it takes to actually bring the promise of blockchains to, um, the people, the more difficult it got. Honestly, the coordinating humans challenge of on top of blockchains is really, um, is really difficult. Uh, that's the reality of it. Uh, I ended up, uh, in order to be able to function, uh, at all operationally, I had to spin up a separate sort of consulting network of networks that takes the principles of incentive structures but loosely applies them to how a highly curated group of highly competent professionals wants to work. And we emphasize maximizing return on time and positive sum interactions with each other. And so Think3 was born out of necessity to aggregate talent that could actually operate very efficiently that is also crypto native. And that, that allowed me to create a value structure for my team with the promise that we don't have to do anything. We only do things that we all want to do, and it's got to be— we have to create more value for each other than we get anywhere else. And that's the core principle. And so we did that, um, and that worked out really well for recruiting securities experts, tax experts and go-to-market experts. And we ended up getting to partner with one of the largest crypto funds called 1KX and MetaCartel Ventures, which was the first venture DAO. And we together wrote a white paper and raised $10.5 million for Hydra Ventures to incubate DeFi-driven venture DAOs. And I can't say that they're not funds, their member-managed capital, uh, how would my partner— their member-managed capital coordinating vehicles.

Wow.

But we did that. Yeah, it was a lot of fun. Um, but that's to say that, uh, it worked out really good. We got to build in the sandbox an incentive structure. We, um, ended up with a very good stake. We, uh, we built what would appear from the outside to be the first tokenized fund of funds approach. For deploying capital into, uh, the, uh, the ecosystem. I think one of the best freedom components of, uh, that cryptocurrency and blockchains offer is the ability to bootstrap yourself with merit and labor and the market. And so, uh, I've done that several times, and so I've seen it happen, but it is also incredibly challenging, right? And so, um, that's the long story long. I think I'm gonna just drone on— I'll drone on about this. I'm gonna just stop there. HydroVenture has wound down. I have— we ended up with really great case studies. My team is fully on board with how we approach, and other folks really like this approach to it. And we are on our next— we're building on top of that. We are compounding on top of our learnings and our models.

Amazing. I mean, the journey, like, you know, it sounds like it's almost a 10-year journey now. And it, you know, I'll say it's similar to my journey in terms of kind of thoughts. I think I'm a bit earlier in the journey, but it's really about seeing the value of the technology and it kind of, you know, when you get it, you get it. And then you've gone on this journey and just built these incredible things, you know, in the space as you go. For me, I came from the market side and what told me that you know, after years and years and years of ignoring it, uh, was the price. The price is the signal. It's giving you the information to do that. And it's a reflection of the technology. I'm curious, you know, if there were specific things in the technology that were different than things you had seen before in, you know, whatever traditional world that you were interacting with and you know what that opportunity was.

So the idea that a third party cannot take something from you is, uh, is more powerful than I think people fully imagine. My background in con law, people spent almost all of their time trying to make sure that doesn't happen. People still are doing that. It's just we have foundations where we have sort of softly agreed there are puts and takes to things, um, and we have— I am not like I think the American banking and legal system is not perfect. It's far from it. But it's a modern marvel of human organization that has persisted multigenerationally and that has enabled a massive unlock. And so I think the immutability and the capability to be able to build self-sovereign scaled systems, right, not just one-off, but being able to operate at scale with this immutable technology and digital ownership primitives is the evolution that is not be like overstated the impact. We don't fully understand the impact this will have. And an example, without being hyperbolic, an example is a case I read about the impact of immutable ledgers on the full foundation that governments have to subpoena. And so a lot of bases for subpoenaing and controlling financial information is that we already cede certain information to third parties, and so that we inherently already give up certain privacy rights. Now, the long and short of it, you know, uh, this is not something I'm writing a research paper— I don't want to be quoted on it. That's just a theme to explain what I'm saying, is that what happens when that goes away. Um, there's good and bad consequences, but certainly a big win for privacy and property rights and, uh, forcing the government to re-engineer a constitutional means to take what are necessary government functions like subpoenaing things. And so it's very disruptive.

Yeah, there's— I'm Canadian, um, and For me, the trucker protest, when the government of Canada just started seizing bank accounts, that was kind of a wake-up call for this, you know, uh, key, uh, feature of Bitcoin where it's self-sovereign. And, you know, you kind of understand what that means on an individual level where I can keep my own stuff, but when society and institutions start interacting in that world And what—

in which world?

In our world, or just in potentially a sovereign world, you know, with these tools, how does that, you know, kind of go beyond the individual level into, uh, you know, some of the things you're talking about, real world?

So I'm gonna take you on a journey here with me. Uh, this is very theoretical. I love the topic. This is a great question. I think that they are not going to be able to effectively do it. I think we have to reimagine institutional participation in society and scaled organizations' disproportionate impact on everything. And the reason I say that is because the AI acceleration and the collapse of the cost curve which, um, Glee is letting anyone build a scaled competitor to any institution right away. Information costs are down, everything's down. Anyone can basically do what most institutions have built moats around, you know, absent like, of course, um, you know, big logistics and things. Those things are still very defensible and probably will be for the most part, but people like Shopify have disrupted those in certain areas. But for the most part, I think that individuals are able to spin up agile enterprise scalable products, services, and technology much faster, and they can build, ship, and kill or scale faster. And I, I think that the dominant way of scaling will be small, agile networked individuals. I call it the composable operator. I think we are moving into a new paradigm where those institutions will die and be reborn through networked infrastructures that scales to replace their functions. Their functions, they served necessary functions, which is why they won. The optimizations they had because of their scale, it is not even that they are not optimal, it is that they are suboptimal relative to other options that we each have individually. That a network of very competent individuals with good ideas can go out and beat basically anyone, I think. And we're just scratching the surface. So I think AI with— and the reason I took it there is I think these things go together. I think the capability to have digital ownership and self-sovereignty with blockchains and the collapse of the cost curve and capability augmentation from AI, those to me are inseparable, to answer your question, from my view.

I mean, it sounds like a whole change in the structure of organizations. So does this kind of feed in or have ramifications for DAOs, for governance, for compliance, for entity formation and how people are going to operate?

So this, this is unpopular, but like anyone who has ever been in the DAO, like it's— they're like horrible to like work in. They are just a functional mess with, uh, it's almost like people have forgotten that we learned all of these things already. And that we optimize because, uh, that doesn't work effectively. But it's an act of love to build them because just like we had to bootstrap the ecosystems with capital, right? There's a reason that we've had sort of, uh, stalwarts like Bitcoin, then shitcoins, then a bunch of like stuff collapses, but ultimately the capital base is bootstrapped higher. And then we've seen, um, innovation and bootstrap And so I— like, the past experiments with DAOs and organizational structures, while not working from my perspective— I think they don't work, and I would never recommend anyone do them, to be honest, um, in this— in currently constructed— maybe someday. But the value was not that, is that they were not failures, is that they had to bootstrap these concepts and people had to throw their hats in the ring to try to do things. And so it's been a beautiful experience. I've really enjoyed it. But, uh, it's got to look totally different than whatever DAOs were, whatever people thought they were, organizing that we have seen. Aside from protocol governance, I suppose, you know, where it is really just fully code native, anything that requires human operational components, we haven't solved that at all.

There's a lot of problems to solve.

Yes.

I mean, I guess it's the evolution, like everything continues to go So, you know, in running my business, I feel like it's a stool and you're, you know, dealing with, you know, compliance one day, tech, you know, hour to hour tech.

Yeah.

So for you, what are the challenges you see? Like, what are the challenges you run into on a daily basis? And I'll say, I'll give you this question, but I'll also say like half the guests on this podcast when we're building in the Bitcoin or crypto space, it's often regulatory challenges.

Yes. Yeah. So I— is a primary challenge. Um, look, I think everyone is— that wants to build with blockchains has to deal with the uncomfortable reality that the— all risk-adjusted building. There is no risk-free, this is the way. And so, um, the industry by and large, is designed around not availing itself to the United States regulatory regime, basically. So everything that people have been doing, for the most part, has been offshore certain components, try to keep teams from being too connected to them, and come together like a Frankenstein of regulatory arbitrage, for the most part, in a risk-adjusted way. Is what it has been. What's really interesting right now is that, um, and I was just talking about this with my buddies, um, is my buddies that are way smarter than me, by the way. Like, I don't— this is not— this is, uh, I have teams that I rely on, and, you know, my securities folks, my tax partnerships folks, um, but my, uh, view on this is that it's very interesting to see how I think the next phase of the regulatory approach is how do we get access to the American— it's like an unwinding to the American justice system. Everyone, everyone's going to want to come back, which is how it should be. I think, uh, we're— I'm like, we're going to see a big unlock in clear regulatory frameworks that, um, de-risk innovation, uh, matched with financial incentives to build here so that, uh, the United States can effectively marshal in free markets utilizing emerging technologies that are disruptive like blockchains.

Yeah, I mean, it definitely looks like the administration is favorable towards the technology. And, you know, I think interesting aspect of the administration is that they didn't have access to the traditional financial system previously, and, and once kind of adopted to you know, Bitcoin cryptocurrency, that, you know, the ability to pay somebody quickly 24/7, and, you know, it's kind of like a Blockbuster Netflix moment. And, and you're not— it's a one-way door. You're not going to go back.

Yeah, yeah. You know, you know what, I just— I'm sorry to interrupt you, but you just— I'll hear your thought on something that is sort of like the tribalism, uh, like, as I say this, I know that there are people who will just grill me as like a boomer, as like someone who's like— it, it— there's no nuance in, in some of these discussions about the benefits and drawbacks of having a positive regulatory environment and, uh, sort of necessary negotiations with the system that we are currently factually involved in, right? Um, they— there's this disconnect, right, in the tribalism, especially in like these older legacy communities like Bitcoin and like Ethereum. Where being excited that the government wants to regulate it is viewed as a negative signal, right? Without understanding that you can be excited about that and also maintain your skepticism that the people doing it are not actually looking after you, right? There's a ton of pork. You got to be mindful of it, but that you got to come out with something better. I'm curious about your perspective on sort of anything I just said about the tribalism or like having, like being able to segment those two concepts and have a cohesive viewpoint.

Yeah, I, I mean, to me, a lot of the issues that cryptocurrency solves, it's a real question of centralization versus decentralization. And so, you know, I see it in my business, and, you know, so I have a company and it's a Bitcoin service provider, and we're based in El Salvador, and we're there, you know, because it's a receptive regime Bitcoin has been legal tender. They're promoting building in the space. And, you know, before I get to El Salvador, I'll just talk a bit about, you know, we have an app. It's available in the App Store and Google Play. But sometimes, you know, there's questions about the app and whether it's an exchange or a wallet or what exactly is going on. We're going to suspend it. So the regulator isn't even, you know, the regulator is Google and Apple as far as, you know, de facto, uh, power goes. And then, you know, in, in terms of smaller countries are waiting for some leadership from the United States in terms of what, you know, we can apply to the rest of the world. I don't think smaller countries are going to go out and lead in terms of regulation. But then, uh, you know, as somebody who is in Central America, has a company in El Salvador, you know, you realize, uh, you know, I left Canada because they were freezing bank accounts, and then you're kind of beholden to the same power structure, and you believe in the power structure and that it's headed in the right direction. But, you know, it, it's still, you know, it's centralization, even from El Salvador. And I love El Salvador, right? But I'm kind of cautious about the whole framework because I, I see it as more of a technology that is there to benefit everybody in the world without borders. And to me, that's just kind of, you know, really obvious that here we have the capability to do something to benefit everybody. It may not benefit the government.

Yeah, no, 100%. Yeah, I love that. And because like this of the platform distribution and, uh, capacity to abuse power is one of those things sort of that we addressed a little bit I think conceptually on, um, that we're— I think we're at the beginning of unwind of those. Um, and the— and I say that with like optimism, the practical reality that there are— I have a lot of concerns about that because, um, there are a lot of bad things that people try to do. Like people try to publish, you know, child pornography. People, you know, there are horrible, horrible things that people try to do that, um, I think are good reasons to have choke points. And I think most of us agree that, that there's no place for certain types of content at reach of children, right? Um, that's, that's my view. I, I think most of them would agree with that. Yeah, okay, yeah, exactly.

But, but it's permitted conduct kind of across everything, I think.

Yes.

Agrees you can't go out and stab somebody. And totally, and we need these rules, and I kind of agree with that, although, you know, I'm, uh, you know, but how we re—

how we dose, right? And how we do them in good faith without, um, overreach. Um, you know, there are, uh, we have a bloated system that has a lot of abusive power, and it's slow, and, uh, and it's, it's got perverse incentives. It's just got ugly belly. Top to bottom, in the corporate side and in the government side. Um, and the being able to effectively have conversations to pull out the things that we already agree on, right? Uh, while understanding that, uh, there are these principles like in common law about, um, let's just call it centralization, right? But the federal government centralization, their capacity to, uh, regulate in the narrowest possible way as to certain things. And I think that's what's been lost is Well, it's finding as we build new systems and dismantle distribution infrastructure that is centralized corporate distribution platforms, and we can with digital ownership primitives go anywhere we want, have our data, we cannot— resistance breaches communication. I believe that we will get there sooner rather than later now because of that AI blockchain merger, um, that, uh, like Toby Loebke says, it's like arming the rebels. Like, in reality, the individuals are going to be— we're not going to have to answer to them. And that will create a whole host of problems we've already solved, but those solutions are being abused every day. And so it's good and it's going to be challenging.

So yeah, I mean, the change is coming. So what's next in the space, Danny? And, and saying this in terms of like, what do people not see? What are people not seeing coming that you see?

Oh wow, that's a good question. I don't, I don't want to speak to what I don't see. I, um, I am a network builder, man. I'll tell you what, I, I realized long ago that my best skill making other people better. And so, uh, I wouldn't profess to know anything that other people don't know just on my own. I do think that because of how I work I have a lot of perspective, um, on, uh, on, uh, on things. A very multidisciplinary view base that is, is unique because I spend a lot of time enabling other people to succeed, and then I built systems of success around those systems. Help people win, then win yourself. Maximize return on time for them. That's a winning strategy for me. Sometimes it's very hard, but it, you know, it pays dividends in the long, long term. And so that's the caveat. I think things are going to get really crazy and that I think crypto is not going to be how it was. It's, it's going to be necessary for a gigantic scale. Just bottom line, flat out. And it's going to be necessary for any disruptions that happen that will happen. Due to the debt crises, you know, um, any black swans, black, you know, war. Like, there's just so many things going on. I don't know that people, that people are fully appreciating that, um, how many things are changing at once that they've been building on top of that they deemed reliable. And so I guess to the highest order answer to your question is that I am concerned but hopeful that people will adapt and emerge successfully better from what is about to be a highly disruptive societal moment that a lot of scripts that people have in their mind about what is reliable and what is risky. I think what people think is reliable and risky at mass scale at the human level is wrong. I think they're wrong now. And I think it's sort of like the frog boiling in water. I don't think enough people are really fully— heads are rolling, it's happening fast. I don't think people are fully equipped, you know, and so I think what's coming is blockchains and AI helping people through that. Yeah, I guess. Does that answer your question? That's sort of—

no, it does. It answers it really well. Uh, any, any last advice for builders adapting to this environment?

That's— yeah, it's good. This is going to sound cliché, but I think You know, some things just are forever true. I think you just got to build. You got to build. You got to go fast. Um, and you can't be anchored to what worked, right? Uh, I think the most successful people are ones who— it's funny, I have like ADD, right? The people with ADD are born for this moment because we've been living with noise. We've been— so it's going to be the noisiest human environment that has ever existed. Um, and, uh, there are a lot of people who are going to be taking on side quests that feel productive, and they're not going to realize until it's too late. So what I would— what I think is, um, have a lot of checkpoints for what you're doing and look back and make sure that you are not just copying something that has worked in the past, because those things are not going to work in, uh, in substance. But the principles that they solved for, um, will work because those principles are the same. And so I think being able to unpack principles that the prior systems, uh, were designed to solve and bringing those into your toolset and then being able to navigate a lot of noise in a diligent, borderline paranoid intellectual way, always questioning yourself in a healthy way. I think that that's going to be required and those people are going to be very successful.

Amazing. Well, Danny, I really appreciate your time. This has been incredibly helpful in a very interesting and changing landscape. Where, where can I send people if they want more information?

They can check out, they can find me on LinkedIn, Daniel Carpio. You can find me on Twitter. We're launching out of Think3 a new brand called Augmented Things. So that's @AugmentedThings. It's still loading. We are in the process of launching a series of networked products on the back of our case studies for how people can plug into networked systems together in a positive some way. So Think3 is a non-instructive distribution layer. For highly competent people, basically. And so Augmented Things is an expression of that on the back of finding product-market fit. So Augmented Things on Twitter and Dan— Danny Carpio on LinkedIn.

I will check it out. I appreciate the time, and we'll be in touch and do it again soon.

I'd love that.

Thank you.