BBW22 - Day 2 - On the Brink

[Music] we're really excited to be here we'll start the Pod I guess in a couple minutes but um just quick introduction Nick and I run an early stage Venture fund called castleisland Ventures uh based in Boston we invest primarily in companies in the blockchain infrastructure space we started this podcast kind of as a joke in 2018 when we left Fidelity to start the fund and it was kind of just an excuse to speak to interesting entrepreneurs every week and then we started this Friday version where we just talked about everything that happened in the world of blockchain that week so that's what you'll hear in a few minutes here just a rundown of what happened this week in the blockchain space what deals got funded there's some regulatory news so we'll go until Ian puts his hand up and gives us like the 10 minute warning then we'll open up for a couple questions to end out the podcast does that sound good Perfect all right well yeah this is actually our first ever live podcast taping so it's exciting it is exciting yeah are we actually live uh are we recording over there on the audio side thumbs up to start all right it looks like we're recording okay great all right well here's how we go uh welcome to on the brink I'm Matt Walsh and I'm Nick Carter and we're live we are recording this in Quincy Massachusetts for Boston blockchain week uh Ian came and John from uh cubic are hosting us we're excited to do it live we're doing it live yeah thank you for uh for having us um there's like a gigantic storm going on outside so if if you guys hear rain that's because there's like a basically some sort of monsoon Happening Here in Boston it's true in Boston blockchain week is happening in Quincy because Elizabeth Warren and Stephen Lynch are so hostile to the industry they had to go south they chased us out of town okay and um so Ian is trying to save us and by having this in Quincy so we thank him I think Quincy will be the the blockchain mecca of this part of the world going forward that's right so um I think we're going to do the podcast as usual and then we're also going to have questions at the end yep we're all right so let's dig in um so let's start out with some deals of the week uh first one up is in our portfolio actually I always love it when there's a Castle Island deal so yellow card which is an African crypto exchange they have raised 40 million dollars in a series B round it was led by polychain we participated third prime a number of others congrats to the yellow card team next up we have sardine a financial fraud prevention platform there is 52 million from visa and consensus sardine is a is a good name that's not my name of the week but that's a that's a good name next one up is integral this is a creator of a real-time Finance and Accounting tool they've raised 8.5 million dollars this week from Electric Capital a lot Gill and Balaji next up uh Maple Finance the well-known D5 protocol has launched a pool a 300 million dollar lending fund with Icebreaker Finance focusing on bitcoin miners so this is a defy lending protocol lending to real world uh public businesses in the Bitcoin mining space those Bitcoin miners have just gotten hammered on the public markets it's interesting to see new capital being made available to that sector there's a lot of pain in the Bitcoin mining space right now and they've the Bitcoin miners get userious rates uh on in the credit market so this is actually a welcome development for uh Bitcoin miners that definitely need to lower their cost of capital next one up is Trace I think that's how you say that one that's a provider of data Lakes for web 3 companies they raised 7.6 million from F2 mantis and new form Capital then we have Satchel which is a web 3 compliance business they raised 5 million from Brand Foundry Ventures and others big one this week from massari this is Ryan selkis's company a crypto analytics business they've raised 35 million it was reportedly at a 300 million dollar evaluation being led by Brevin Howard digital uh with participation from Morgan Creek Samsung FTX and others congrats to the massari team yeah huge congrats to sulcus and the team over there a stalwart business and uh in the crypto industry and uh you know I think really aiming ultimately to be a disclosure platform for crypto assets when and if that becomes something that the SEC asks of the industry I just hope that celkis is able to sell Masari or take it public pretty quickly because the presidential election is coming up and we got to get him involved I think that's his future the champion of he's definitely not been a secret about his political Ambitions yeah that's for sure next up we have Vulcan forged a play to earn gaming platform they raised 8 million from skybridge capital and others that's my that's my name of the week were you a stark Star Trek guy no I never watched it Vulcan that's a Star Trek reference uh next one up is spot this is a metaverse startup they target remote workforces and they've they've raised 5.5 million from freestyle and liquid two Ventures then we have the Mortal game an nft based chess platform and Marketplace that's the most creative business model of the week I think they raised 15 million from TCG Cassis Greenfield one and Kraken did you see that chess Scandal this week I saw some news about it but I didn't understand it the guy who was like the number one ranked um and there's all these rumors that he's cheating but people don't know how he's cheating because there's the view that his opponent was using like an AI model to play chess with is there's some conspiracy around how the cheating was done but it was uh it's unclear that there was no walkie-talkie or anything so they don't quite know what happened but a lot of things going on in that chess space I'm sure blockchain will solve all that I mean I think we are at the point where the best human players are not even remotely skilled enough to challenge the best chess algorithm it's definitely past the humans by yeah next one up is hyperlane this is a blockchain interoperability platform they raised 18.5 million it was led by variant participation from Galaxy coin fund Circle figment block Damon Kraken and nfx and last deal of the week immuneify a crypto security platform they raised 24 million from framework Electric Capital North Island Ventures and third prime busy busy deal week so the macro might not be good but the early stage financing Market is still on fire in the blockchain space at least completely yeah I mean uh that's as busy as I've seen it all right so a lot of news happened this week why don't we start with some regulatory news a lot of stuff going on with the SEC so the SEC has reached it well I guess they're suing in bellina for a 35 million dollar um settlement so to get this right I guess they reached a 35 million settlement with an Ico project called sparkster and they've charged in bolina uh who's kind of this notorious crypto influencer who is pumping icos back in the day and they've charged him with failing to disclose the compensation that he received for pumping these tokens uh not really a surprising one to me yeah so I actually wasn't familiar with sparkster apparently that was a 30 million dollar Ico in 2018 but uh so Ian bellina had this prop project I guess what was it called token metrics he I think it was called token metrics he had these leaderboards yeah and he would rank icos according to their you know whatever investability and one of them was sparkster in fact sparkster got like the best grade and the the best is that the SEC filing actually has a screenshot of this Ian's opinion number one sparkster Hall of Fame Ico this is a Hall of Fame Ico there's a bunch of All-Stars and some starters some substitutes but this one was the best Ico of all time on his platform so basically the SEC settled with sparkster and then they sued Ian bellina claiming that he was pumping an unregistered security but he did not settle right I I have no idea I mean this is the guy I remember he was doing the live stream and he said he was being hacked in real time and all of his money went away or something right there's a lot of shenanigans with this guy um definitely not someone that we should be rallying around and saying that the SEC should go softer here I mean this is some of the worst behavior in the industry yeah I mean you know like we can be critical of the SEC while also admitting that some of these blatant violations are bad you know this list man do you remember some of these virtue poker Eden chain cork chain Sovereign yeah autonomy oh man the The Internet of Things Ico there's so many of these that bring back memories yeah bad times I think the only one of these projects that's still around is telegram albeit in a different form now and yeah it was forked off so uh metronome that was a Jeff garzick special Ico a lot of ugliness here in the uh in the case against bellina the SEC had an interesting um they had an interesting passage on standing because the SEC said that because um a large fraction of ethereum users are in the U.

S that the U.S has jurisdiction over the ethereum network I saw that and that doesn't make any sense to me and I don't know why they wouldn't have just said hey we have standing in this case because Ian bullying is two feet we're on the ground the United States while he was scamming people yeah why did they have to do this incredibly creative interpretation of where the blockchain is instead of identifying where the individual yeah that committed fraud was which makes no sense to me so does that mean that everything that happens on a blockchain is the blockchain is present in the United States of America I suppose so right I mean there's AWS is pervasive so I guess everything is in the U.S I mean if Ian bellino wins the case because this is a terrible argument I actually wouldn't be surprised I I would think that with this case you could just go down the list of everything that he's done and just bring additional cases I wouldn't be very bullish I would not be taking the odds on him I guess investment but there's there's other SEC news this Ripple case what's going on here so Ripple xrp the token has been on a tear recently they're being sued by the SEC uh the allegation is that they did billions of dollars in sales to basically retail investors of what the SEC thinks was an unregistered security this case has been going on for I think two years now but and so now the price of xrp is like a prediction Market on whether Ripple will win this case or not if you think Ripple will win the case presumably by the token and ripple has actually had a couple key wins in the lawsuit so the judge allowed this Amicus brief to be filed that was favorable to Ripple they did some other incomprehensible legal thing that I don't understand and basically it appears the Ripple investors think Ripple is going to win this case against the SEC which in my opinion is the most important not that I'm very sympathetic to Ripple but I think it's the number one most important lawsuit happening in the crypto space I I guess I mean I've always thought that xrp was a security so I'd be kind of surprised if they win this but the price of Ripple is actually going up right now so maybe the market knows something yeah and uh Brad garlinghouse gave a talk yesterday at the massari mainnet competing conference over there in New York two best friends right there selkis and garlinghouse so there's apparently you know they seem kind of I don't know I guess the mood out of the Ripple Camp is uh is ex you know is positive optimistic so stay tuned um another big story that happened this week was Winter mute so winter mute is one of the largest crypto Market making firms in the industry uh they were hacked this week it was on their defy wallets so they were hacked to the tune of 160 million dollars as of the time of this recording they've sent a message to the hacker and offered a 10 bounty to classify the attacker as a white hat and not go after them um thus far no response they haven't gotten the money back it looks like this was a um a brute force on the vanity addresses is that your take uh not a Brute Force but the vanity generator that they used was compromised it used bad entropy so um the story is kind of crazy the reason that they used a vanity address which just means uh you know like an ethereum address that has some identifying features in it in this case add a lot of zeros they did that because it was more efficient from a gas perspective to do transactions with an address that has lots of zeros in it interesting so they didn't normally you do a vanity address because you want to identify yourself to a counterparty when you're receiving a transaction and you know they can know by looking at the address oh this is like Matt's address or whatever so some people do it for that reason wintermute did it for the reason that ethereum has a weird Quirk where it's cheaper to transact on chain if there's a ton of zeros in the address I had no idea and so the the problem was they generated you can generate vanity addresses just by repeatedly generating public keys and getting one you know you do a trillions of times and you get one that kind of looks like what you want um and they just used a bad buggy generator to do this and it cost them 160 million dollars it's crazy I will say this the founder and CEO evgeny has handled this situation about is uh classfully as you can um I think he comes out of this looking really good for the way he's been publicly messaging and disclosing uh the equity on the balance sheet and what they can make good on to their lenders which is everything um so I thought he's handled it really well it's a terrible situation obviously yeah it also speaks to the success of that organization that they can apparently absorb 160 million dollar loss and still be solvent and functional it looks like it was their own proprietary Capital that was basically hacked here people want to know why Citadel is entering this space right now it's because a crypto Market maker can lose 160 million dollars and shrug it off there's a lot of money to be made in crypto Market making completely um there was some other uh political news uh or about one of these pending lawsuits another very important crypto lawsuit is custodia which is the bank well it's attempting to be a bank I guess under the special special purpose depository institution license in Wyoming which is um you know a new piece of legislation we was introduced a couple years ago they applied for their master account of the Federal Reserve uh after 19 months of waiting typically the FED is meant to give you an answer within a year after 19 months they sued the FED saying that this is you know they're being stonewalled basically and um that case is still ongoing a bunch of members of the Senate Banking Committee including Cynthia Lamas have now filed um an amicus brief uh so they're urging the Wyoming Court to dismiss the fed's motion to dismiss so we're trying to we're trying to dismiss the motion to dismiss the case so basically retain the case double negative it's kind of crazy so the FED just won't give them access to Fed wires what this amounts do so they got proved in Wyoming to have a bank that is very friendly to crypto and the FED is just saying well you can't move dollars through our pipes yeah the FED uh even though legally from a statutory perspective the legal interpretation has always been that if someone successfully applies to a master account and uh they get it and in this case they um did it under the the charter which is just very much the law in Wyoming you have to give the decision within 12 months and the FED hasn't given a decision one way or the other so basically they're you know very hostile to crypto and they are bending or breaking the law and not approving or denying this application so I've been thinking about we need to be a little bit more specific from what we want from these politicians um there's a there's two representatives in Massachusetts local government that propose a Workforce bill that I thought was really positive Representatives Cutler and garebedian uh to train people to be blockchain Engineers I think that's great at a federal level I think what we need is an act of Congress on two key things one would be uh defy just decentralized Financial Services in my view is that it just needs to be dead simple and it needs to say the cftc has oversight over D5 go figure it out and we need the SEC out of that the other thing I think we very clearly need is just Clarity on whether or not some of these things are securities or not and so I think the easiest way to do that would just be to say hey SEC you have six months to put the Safe Harbor proposal Hester versus Safe Harbor proposal into action which will give token projects two years to come into compliance whether they're Securities or not with a disclosure regime so I think those two things really open up the industry to a lot of pools of capital that are just waiting on the sidelines right now yeah and uh if you aren't you know maybe a vision of what future legislation could look like in the U.S at the federal level I would look at what is happening in Europe right now so just this week um the EU has finalized their text for their crypto regulations the bill is called Micah Mica and they finally firmed up the text although it's an evolving process and it's pretty interesting honestly Europe uh well now after this goes into effect have far more regulatory Clarity on the topic of crypto it's not necessarily Clarity you want you know they're clarifying that they don't like a lot of crypto to be clear but so there's some very interesting regulations in there the first one is they don't want dollar based stable coins circulating in Europe so what do they want Euro stable coins yeah so you know that kind of answers the mystery of why Circle usdc has issued a Euro stable coin above a certain threshold of usage dollar stable coins in Europe would effectively be prohibited people don't want regular Euros why do they want Euros on a blockchain yeah I mean like inflation rate in Europe is shocking yeah you probably want to hold dollars even if you're a European transaction I think I'd rather hold one of those Ian bellina icos than a Euro so you're going to be forced to hold Euros um assuming they get their way cryptos it platforms are going to have to make disclosures to their clients so exchanges uh well first of all if you're issuing a token you have to make a set of disclosures so this is very much a disclosure based regime if you run an exchange and you know you list Bitcoin for instance there is no individual that can make a disclosure on behalf of Bitcoin then right the exchanges have to then make those disclosures on behalf of the crypto assets okay if they list uh decentralized crypto assets and so basically it's all about consumer protection the Europeans want regular crypto retail buyers to be getting information regarding the assets they're buying whether it's from the projects directly or from the exchanges that are listing them that actually seems pretty sensible that seems pretty sensible to me I mean you'd want to have a disclosure regime around when early investors are rolling off what the supply schedule looks like that all seems very common sense actually yeah and uh the interesting thing is this law treats nfts as just a broader part of the crypto market so they don't have any special carve outs or nfts a lot of people think nfts aren't subject to Securities Law they can't be Securities because they're not you know necessarily fungible the EU says well actually you know that's nonsense these kind of look like Securities and we're pretty much going to treat them identically to other crypto tokens I think they probably a point there that'll that'll be interesting there'll be a lot of uh back and forth on that part so the other um piece of this law is stable coin issuers are going to have to retain a capital buffer whether or not they are algorithmic stable coins or fully asset-backed stable coins so basically algorithmic stable coins are out yeah it doesn't surprise me I mean that was the biggest debacle in the crypto markets of the last year and Regulators hate them unsurprisingly there's a new law being proposed in the United States that if you issue an algorithmic stable coin you go to jail for five years if you see that I don't know if it has any chance of passing but uh might not be the worst idea yeah I mean I I I'm not surprised The Regulators are incredibly hostile to these things I mean the amount of retail individuals that lost money on Terra or the secondary Fallout is astronomical it's incredible um so some Personnel news this week so Kraken founder and CEO Jesse Powell is stepping down and uh Dave Ripley the Chief Operating Officer is taking his place what a hell of a run huh Jesse Powell just built one of the great franchises and looks like he's stepping down to spend more of his time focusing on policy which I think would be great for the industry to have him more engaged Ripley's a killer Ripley's a great choice to replace him so congrats to Jesse on an amazing run yeah I mean Kraken was founded in 2011. and it really was one of those original crypto exchanges along with bitstamp I think it was founded even before coinbase now they had a tough ride they were almost out of business and then I would think the ethereum Ico kind of saved them is that right in terms of the trading volleys from from ethereum uh now of course they're doing really well uh but yeah amazing run from one of the stalwart CEOs in the industry speaking of um I guess some people would call them a stalwart CEO I've got my issues microstrategy and Michael Saylor the bind some more Bitcoin they bought six million dollars worth of bitcoin on Tuesday I hate how this is always a story it's like Michael Sayler dribs and drabs a few more Bitcoins um this guy's not doing anything other than buying Bitcoin by the way he buys Bitcoin he tweets about it he's never once invested in a Bitcoin infrastructure company that we know of that we know of if I was a shareholder of microstrategy which I would never be because it's just a Bitcoin tracking stock I I'd really question what do you what's the strategy here I mean shouldn't you be investing around the edges of Bitcoin into companies that actually make Bitcoin more usable and bring more users in and you know I don't know if this tweeting strategy is really the best thing for shareholders I think there's a school of thought in the Bitcoin industry that the success of Bitcoin is just preordained so it's like uh Bitcoin Calvinism you know so like why even bother building any infrastructure for Bitcoin and make it more usable or you know side chains or anything because Bitcoin is just guaranteed to take over from a monetary perspective I I really think sailor probably subscribed so that's cool thought it's like a Bitcoin madrasa just brainwashing I don't really get that yeah and you know it's nihilistic I mean like Bitcoin is code written by human beings and the code sometimes has bugs in it and you know it relies on a whole financial infrastructure um I yeah just buying Bitcoin alone is not enough in my opinion so um the other story I want to uh quickly hit on is NASDAQ has come out this week and they said that they're launching a digital assets business it will start with crypto custody um it looks like it will also involve uh exchanging uh the assets unclear if that's a central limit order book or if they're just running an OTC brokerage service on top of their custody platform they're starting with Bitcoin and ethereum no one really talked about that this week but seems pretty bullish to me yeah definitely um I mean it's interesting seeing the trend of this broader sell-off in crypto markets versus the real institutionalization I feel like it's we say this every single week but BlackRock is now in crypto in earnest rumors are the Fidelity is finally turning on spot uh trading at least for maybe Bitcoin now stock is in Franklin Templeton is jumping into The Fray bny melon is now acting more aggressively you know like half of Wall Street is now pursuing active crypto products it's you know it's I would say it's quite different from even a year or 18 months ago Jimmy Diamond very much not in though he had some great comments uh around a range of issues yesterday when he was testifying but he said that he thinks that decentralized cryptocurrencies or Ponzi schemes yeah decentralized Ponzi yeah um which is funny because Jamie dimon he you know fluctuates because sometimes he'll say really hostile things then he'll walk it back a little bit but then now he's walking back his prior walk back and now he's fully against crypto again I mean here's a team that's working on bitcoin custody and he's saying these things it's like how are these people still working there yeah I mean JPM has been active in the crypto space for five years it's it's incredible I mean so why if you think it's a Ponzi scheme why are you offering it to your customers okay today in Real World Adoption news uh helium now has struck a deal the helium Network which is a decentralized network for basically telecoms based on this crypto protocol so you get paid to put a little helium router in your home has signed a deal with T-Mobile are there any helium miners in the crowd you run into people all the time that are mining helium well I mean it was a great business to be in for a long time so basically um the helium network doesn't cover the whole us not even close um at least for 5G and so now they are patching in to the T-Mobile network and uh through their forces combined you'll be able to get I Marlos doesn't have good coverage where I live so I hope that this improves it well you clearly are going to need to put a healing router in your home I you can't buy one they're like sold out it's crazy yeah it's the supply chain issues well all right so uh why don't we open it up to some questions from the audience and we'll riff a little bit and I think we'll just repeat the question so that it gets it into the final um transcript here uh my name is Michael uh thank you for your presentation love listening to you guys just um wondering if this SEC lawsuit might be some long-winded effort to figure out a new testing system to discover or determine whether or not crypto assets may or may not be Securities it's just baffling why it's taking so long and there's been a lot of obfuscation uh are around it and I'm just wondering if that might be part of the agenda so the question is around the sec's posture and whether or not this is part of a broader strategy to classify uh Securities I my view on this is that the SEC is going to regulate through enforcement until further notice they believe that the Howie test is ultimately how you would determine whether or not something is a security and Gensler believes that everything is a security besides Bitcoin is my view um I don't believe that that is ultimately going to be where we're going to land as an industry but I think it will take an act of Congress to come in and say put the Safe Harbor or something like it in in process now to be clear the SEC could run wild for the next five years just on the crazy icos and scams that happened in 2017 and 18.

so you expect to see a lot more of this I would say but what we really need to know is what is uniswap what is compound what are some of these public goods that are out there that a lot of people are using that to a lot of people in the industry don't look like security we need to get clarity on those getting Clarity on whether or not some iot coin that was issued by a company that was failing in 2017 like everyone knows that those are scams yeah I'll just add that um you know according to gensler's interpretation it's very black and white he you know he likes to say the crypto industry wants clarification but we you know we the crypto industry don't need clarification uh the rules are pretty uh you know clear according to the SEC it's just that we don't like the rules um which I I disagree with but um you know I think if you look at the substance of what crypto assets are you know it's fundamentally a different thing from like Equity basically and um if you look at the Spirit of Securities laws um you know why do they exist it's because investors deserve to know what they're investing in and management teams have to be honest about the nature of the company and the cash flows and the governance and so on so clearly we need something like that for tokens given the many tokens look to be more corporate you know not everything is fully decentralized and that's fine um and that doesn't exist that you know the Securities apparatus doesn't pertain well to the like crypto industry so and you know a new um you know interpretation of the disclosure rule that's fit for purpose is definitely warranted um but the SEC can't just Define that on their own they probably do need Congress we need legislation for that is this Congress going to come up with that definitely not there uh don't have the really the desire or you know the political Capital to do something tricky like that so maybe be the next one but yeah you know basically under the the current situation we're not going to reinterpret Securities laws and we're going to be in the still made against the SEC I mean you know the interesting thing is the crypto industry can still win uh legal battles against the SEC and I think they probably will do so but uh ultimately it's going to require you know basically new legislation to be written yep right here hi hi my name is Amy Cowan with Maven chain and I wanted to thank you your newsletters on Fridays I read them Faithfully um but my question would be Beyond D5 what application do you think shows the most promise that will actually add value to people's lives so uh the question for our listeners is beyond D5 what applications the crypto show the most promise to me the very obvious one is simply just stable coins I know that's not very exciting but for folks in Emerging Markets where there's you know enormously High inflation and the banks aren't trustworthy getting access to US Dollars and being able to exit the local Financial system is really critical and I think you'll see a lot of that we're actually seeing it in in countries with sort of you know political instability you see stable coin usage pick up um so that's like the equivalent of being able to get access to U.S bank account which was a luxury good for non-americans for a long time and now anybody can do that um so that's one very addressable thing beyond that I would say actually the nft Space is really interesting right now uh you're seeing you know this isn't something that's going to like save anyone's life but um you're seeing the emergence of physical nfts which is basically um you know merchandise products luxury goods Collectibles which come embedded with chips which are linked to an end of T that means that that and you know Adidas Nike Gucci Dolce Gabbana Prada they're all doing this so it's very active in the luxury space and this means that those products can now be traded on a peer-to-peer basis and the authenticity of the product is totally knowable and guaranteed so it gives you strong anti-counterfeiting properties um and it you know it's a way to demonstrate your ownership of the product digitally as well as in the physical world so um that's actually kind of exciting I would say even though the nft sector overall is selling off and and uh you know the nft markets are down we're seeing Real World Adoption by you know major brands of nfts but with much more utility so that's that'll be my answer yeah I was going to say the physical nft space as well there's a few Boston companies that are working in that space end state is one another one is dust identity that's doing some interesting stuff I think the bigger kind of more academic uh things that excite me the most are just the breakthroughs in privacy Technologies and so I think the blockchain Space is really on The Cutting Edge of zero knowledge systems and things like that and so if you look at it through the lens of where will this have the most impact on the 20-year time Horizon I think it's just Financial privacy and giving people more uh discretion over the types of transactions they want to make hey my name is Chris uh thank you very much I enjoyed listening to you to both of you uh if you had to pick one horse uh whether it was the Trad Phi uh adopting um or adapting into uh into into uh you know eventually what becomes uh you know D5 or if it's the or if it's the D5 community that exists today which horse would you back in terms of uh you know in terms of venture and and and finding success uh going forward that's a really good question so the question is around uh Trad five versus D5 and basically what are you the most bullish on um we we invest in both so we're playing it both ways I guess I would say it's very clear that in the near term traditional financial services are coming to the blockchain space in a very meaningful way around things like custody and trade execution and so it's really just responding to customer demand to want to hold Bitcoin with the Bank of New York melon or want to hold it with a Fidelity it's hard to imagine that that's going to quiet down at any time I would say the more exciting projects are definitely on the D5 space in terms of just net new Financial products and bringing Financial Services to people that historically have not had access to them there are way more regulatory considerations on that side though so from a risk perspective I think there's a lot more risk of things being deemed to be Securities obviously we've talked about winter mute and the hack this week and so it's sort of the wild west on the D5 side but probably pound for pound and where we're seeing the most interesting startups I yeah I I think the question was uh about whether Trad Phi can actually embrace defy um and um I you know I think there's no lack of willingness you know we certainly talk to these investment Banks and they're very interested in getting deployed on public blockchains and maybe deploying client assets into D5 but they are unwilling or unable to do it in this country because it's basically Bank regulators uh the OCC being really one of the the main ones uh tell them not to do it so there's no law that says um you know a large Investment Bank can't touch um you know G5 they can't put assets into uniswap or compounds but they get informal guidance from their Regulators saying don't do it and uh they're all pretty frustrated so they're all you know getting into crypto dipping their toes in their investing in crypto firms they're building you know centralized approaches to touching crypto but they're not really deploying fully into it because it's still considered far too risky from a regulatory standpoint and I don't see that changing immediately um so I would say you know the interesting developments I'm seeing are more from the D5 side in terms of trying to appeal to Legacy Finance the way they're doing that is they're building permissioning back into defy so that you can know who your counterparties are in a pool you can know what the nature of the liquidity is and you can have like institutional pools of capital in D5 so yeah from from my perspective the bet is more on the defy side the web 3 native side being able to actually institutionalize and put a few more guard rails around defy about to follow up to that question uh if you were a venture company and you were looking for Capital would you and you had the opportunity to partner with you were looking for strategic and you had the opportunity to partner with the Strategic from tradfi or strategic from uh from D5 uh you know more of a Nation uh player who would you who would you uh partner with so the question is on uh as a venture back company would you put strategic capital on the cop table from the D5 or the Legacy space I think it's still worth it um you know raising from traditional financial institutions we certainly see a lot of that that's one place where they haven't been shy and uh that you know that tends to be worth a lot as a financial services company I would say I would say both I uh I think that you've seen successful stories from both sides um I think some of these large D5 projects are investing in uh venture-backed startups that are building in their ecosystem um there's Capital being deployed there and then on the traditional Financial Services side obviously there's distribution there at large scale and so I don't see a downside of exploring both last question last question thank you guys for taking time um on the topic of Bitcoin scaling what does the state of scaling Solutions look like today and then maybe as an add-on to that how does that your assessment of that compare to what you would have thought would have happened two or three years ago yeah so the question is um you know what's the state of Bitcoin scaling and how does it matter our expectations um yeah I you know probably I would say it's much less well developed than I would have thought um you know four or five years ago I thought that we would have a really robust ecosystem of side chains um you know most of the side chain development is happening well they're mostly called Roll-Ups now they're mostly happening on other blockchains and um there's very few that are deployed in production on bitcoin I think one of the things that I hear from developers is Bitcoin doesn't support um a ZK roll-up for instance it doesn't have the right kind of op codes such that you could build a roll-up on top of Bitcoin um lightning is obviously a great Network that's getting mature and more robust but I actually don't see lightning as a scaling solution I don't think it um I think it Services one you know pretty narrow kind of use case which you know it does very well but it's not to me a generalized scaling solution uh so overall I would say I'm disappointed the pace if you look at Bitcoin itself we've had one update to the core protocol in five years and that gave us Top Root and Top Root adoption is less than one percent of all Bitcoin transactions so the pace of development on the base layer is very slow and I think what does need to be built into the base layer would be more suitability to build side chain products on top of Bitcoin if you look at liquid that was one of the most popular projects or you know one of the most touted side chains that has very little adoption unfortunately so I would say where I see promise is actually in rendering Bitcoin portable to other blockchains such that you can take advantage of the local scaling Solutions and that was what I would encourage builders in the space to do create better ways to make Bitcoin portable such that you can use it on ethereum Solana and any of the l2s on those systems I think that's how we're going to get this convergence of being able to take advantage of Technology on other blockchains because Bitcoin itself is not going to change very much well I think we're getting uh rained on here so why don't we bring it to a close thanks to Ian and John cubic team and thanks for all all you for coming [Applause] [Music] thank you