Compound Finance Governance, Strategic Bitcoin Reserves, & BitClout's Legal Woes- The Chopping Block - Ep. 682
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I think it's it's always good to to have a pessimistic view on governance because people love hating on collective decision making. It's like very easy thing, hate on. But I I think the optimistic views that there's a lot of innovation in these types, ways and cyp, the only place icc in the world that bothers experimenting with us, the rest of the world is instead fighting over her, whether Nicholas rig the election or not, not as a tail to on.

Now your losses are on someone else.

Generally speaking.

airdrops s kind of points in the firms .

of d five protocols .

are the entity to this problem.

Hello, everybody welcoming the chopping block over a couple weeks, four years, get together and give the industry inside a respective on the criticism s of the day. So quick controls for tom to defy mavor and master .

means hello everyone.

We've got Robert the carpet on the sour and are of superstate G.

M. everybody.

And we've got to ruin the bigger brain and grand pub A.

A. Don't let you happy to be back in a while.

And finally, I see ve had been a drag fly. So we're early stage investors and cyp deal, but I want to copy out that nothing we say here is an investment advice, legal advice or even life advice policy chopping block that X, Y, Z for more disclosures. All right.

So it's been a little bit um we've been kind of and on for last few weeks just you know a lot of us have been quite busy crip. The world has been equivalent y as as the world of politics. So let's check back in with our friends buying for the White house over twenty twenty four and he turns out there very recently we had a blockbuster appearance by trump as well as R F K.

That you know the guy is uniting as an independent um for the upcoming election and everybody now seems to be making speeches about the idea of the united states buying a strategic bitcoin reserve. So now what is the strategic biton reserve? I don't quite know what is strategic about the rateable c bicton reserve, but what is contemplated and this was given first by speech by trump and they also echoed by another speech by rf k, as well as a bill that was proposed by senator sentience mis.

Is the universe government basically going in and buying a bunch of biton on the open market until they have a big piles of bitcoin numbers have been floated? Arf case of four million bitcoin out of the twenty one million, which is a massive amount and a luma proposed five percent of the total bitcoin supply. Trump, I don't know just I don't know if he said anything, if I think you just need to IT and he .

just said those selling, he's like A A C that I could sell the big OK.

So basically the bit is on the baLance, eat IT just doesn't get sold. I guess that's because then we sees from when the silk road and where that .

which comes as this week, they started moving some of the sock road point selling IT. So I know international schedule a funny time ing.

right? Okay, so boys, is this, is this finally IT? If we hit the point of institution al adaption, 那 就是 谓。

yes, this what we en, I don't think anyone a few years ago have been visited a fifty fifty probability based on a coin flip of election, which is going to be a very tight election. A coin flip that the largest economy in the world would declare that bitcoin is strategically important to the baLance sheet of the largest economy on earth, and that you must respect the asset. I mean, that's like the biggest sovereign doping as possible.

The U. S. Is without question at the top of stack.

And so you know that would be the largest doman of the U. S. Actually implement such a thing. I think many other countries would follow um not in any particular order or time frame, but he would give a massive amount of legitimacy to the asset as a global asset.

Um I don't think yo bitcoin is necessarily ease strategic asset in the way that oil is a strategic asset where IT must be stockpiled so that your country can physically go to war or your its transportation. Um I see IT as a financial asset and countries do make financial investments all the time. Central banks have a diverse ray of policies on what access they put onto the balancing treasuries do as well.

I mean, you know making financial investment is not new goal has always been a financial investment for economic security. Um so I I think it's a little bit of a misnomer. We are marketing to call like a strategic reserve um because .

make when do you release the strategic reserves right?

correct. So I think that's a little bit awkward. Um but you know as a bitcoin holder, most people who listeners are living in hope some way. The idea of the us. Government becoming a bitcoin holder and our purchaser is so I grew .

with you in the long run, you know, if you can get other government. So obviously, if if trump is elected, he is not proposing that the use government becomes a martial bier of bitcoin, but rather that IT just doesn't sell the bitcoin that are currently owns. Maybe that is the gateway drug to getting more bitcoin at some point or diverse flying a bit in.

But at least for the moment, IT seems like markets are they reacted a little bit to trump kind of kind build a red meat. But they didn't wasn't like all my god, there was now fifteen percent chance that bitcoin is going on the baLance sheet. Of like every southern in the world um I I kind of see IT more as like the gateway drug thing is that it's legitimation.

Um at the same time, of course many, many people around the world see this as like kind of ridiculous and like, okay, well, first, how how much ability to trump have unilaterally to create a strategy on reserve like maybe it's like, okay, you can you get treasury to like not sell their bitcoin I guess you know treasury under control of the executive but can you do nothing more than that really? Um I that I just don't know um but you know if you look at like what since illness mous is proposing uh which I believe is proposing that the fed do this right to buy four percent of the bitcoin supply that was like five percent of big supply. That is absolutely insane but is potentially possible if the stuff that trump is that there has been read in the your time and so on about trump considering some kind of take over the fed in principle would be possible, I think insane and I think very likely that he would even do IT because, you know, whatever is are elected.

So what is he care now? Um but that would be absolutely earth shatter ing. Relative to OK, they don't sell the bitcoin and we call that .

is a big on reserve. Yeah it's also interesting because you know these strategic patrol um reserve was created to active congress. IT was essentially U S. Policy to stock pile oil. You know it's a question for the policy. People listen to show about whether you know the executive branch do something CDMA um or you know he would have to convince lawmakers to you know make IT A U S policy to stock pile. They are coin in some way um but you know for a comparison sake you know the strategic petroleum reserve was created by congress yeah I mean .

it's the power of the purse is controlled by congress, right? So they can't spend net new money to go by stuff and just put IT on the government baLanced without congress pretty much for sure right? You can maybe dig around some weird executive .

order to somewhere. Yes, you know like the federal federal reserve able to put new Better without x of .

federal reserve is but that's not under control of the executive branch, right? So the executive branch explicit controlled treasury. So treasury ah like it's not independent, right?

Although I will say and like i'm not saying this is likely, but you know during covered when there is a crazy all the crazy like central bank buying a very possible asset, there is a lot court nation between the central bank and the executive orders is a kind of do with that type of stuff. So in the situation where they're both aligned, I feel like they can help each other do that. Now, of course, you need, you need a crisis. Yeah, I feel like you need a crisis for that. But like you know, I think trump, trump doesn't let .

crisis go to waste. IT seems so far.

but what .

kind of .

crisis .

would make?

That was also a great time to have done that.

to buy the point.

Well, I mean, a few of countries increasing the golders earth during that time, I don't see why they not necessarily consider IT, especially if their art have I think it's it's like a zero one thing like when they start they can stop. It's like even IT just strike .

me as um is is kind of like um school elections and you one cana promises a chocolate note from the water phones and it's free recess and it's like you are kind of making up plans and libraries like try to like out out quite each other. But I think the other parts of trump speech where actually kind of more interesting and I feels somebody is somebody well, informers is of feeding in cro policy. I need you talk about like firing gary gangbanger and commuting rosses sentence and he said you ending Operation to a point two point of which is like nick Carter whole thing so it's very kind of crypto o chip coated um and that thing was actually more than to me that not just oh I said bitcoin and people cheer and uh comes up and you that's all of the speech but it's like, okay, may you take a little bit more and you wants to have the good policy .

there's kind of a funny, like I am the toshi type of thing happening here. We're like at least three different people have told me that they or their boss is the one who told him to this, had him this and that's like funny like everyone wants to take credit for doing IT. So like I find out also kind of this like very funny thing.

of course they do like this is the transformation of you know a major party candidate into being pro script. You know how could you not want to take credit for that? If you are.

it's just funny, like there is like attack everyone. The saying I did .

totally, but is now officially a part of the republican party platform to be procured out.

So yeah that that has been a real a real transformation. So increasingly know along the same weekend. So obviously there is uh, bitcoin is gigantic.

Bitcoin covers and national. Well, where two presidential candidates attended, they were supposed to be a third, which was coming herri. So common heroes, of course, is now the presumptive democratic omy.

And commonly hera supposedly was in talks with the um the the big conference organza to also appear at the bit in conference but ended up deciding against ultimately attending um but so IT sounded like from the noises that I am hearing from some of the folks who are more politically active in the us. 对 uh， the koala team is interested in critter. They're trying to rap their head around IT.

They're trying to get more input from the industry to say, hey, what's going on here that seems really important in IT. Seems like so far, our policy stance has maybe been not constructive. We want to we want to hear from you guys and we want to get an idea of what we can be doing differently.

But there 说 IT sounds like they're still undecided um but they're open to conversation and they're willing to like you know take meetings in a way that the bind administration was just really not open to。 Um so that also seems good that both parties seem to be moving toward something closer, the middle ground. But republicans, could you have fully embraced .

the critical platform at this point? IT IT IT paints me to say this as someone who's born and delaware and hate california, uh, but you know, I would obviously think the california democrat is much more precious than i'm from dollar. And I might be an answer, might be the most crypto people from dollar possible.

everyone else is not.

can make IT I you .

know anyone also from deliver so .

you are going to win I mean, yeah, the first person I ever met from dollars and so I say.

wow, didn't know they allowed non White .

people and everywhere that you funny because the third most popular religion common IT has it's like, yeah there are all doing for the tax saving tax money .

original where um they have a fake backdrop and they're like pretending that this is a different states and they is a delaware and they go like delaware okay not sure what we're doing here right next day you know today yeah .

the incorporate delaware.

They move on delaware also has a great uh slight tangent uh sm and that he has one the shortest st amounts of federal in stay highway but IT has the highest toll to number of miles. You drive ratio it's only like fifteen or twenty miles, but the toes like six box like .

you go that thank you for the delivery trivia that keeps all our viewers tuned.

There should be a requiring .

segment. I think, yes, we would run .

out very quickly. It's kind of the view. okay. Um right, right, right. So let's move on. Uh so very interesting week um this week in anche governance and this is what I think is is is got a few um so twist and turns in the story. So let me let me set this up so compound, of course, uh governance protocol, some of the people on the show may have some prior infiltration with compound. So IT is the ending protocol.

IT is a sunshine, is lily decentralized so IT is governed, rely through anche votes of people who owned the cop token so there is a uh gentlemen by the name of humpy who uh turned out uh over the last the previous weekend voted on a proposal that was going to allocate five hundred thousand comp which is worth at that time about twenty five million dollars from the protocol treasury to a new yellow ring protocol that was designed by this group called the golden boys and this group the golden boys was going to stable wrapped comp token called gold comp which would do some kind of mining yellow thing. Don't quite told understand what what the idea was um and so originally they made this proposal would like I think a hundred thousand comp and IT was defeated in governance and they came back a few weeks later and then made another proposal in which they fixed the amount of time that they were requesting. And this proposal, I guess IT IT uh went to a vote over the weekend and people in governance just kind didn't see IT didn't get out of voting on IT.

There's just the alarm and get raised and this proposal passed uh and this proposal passed in large part due to a large amount of comp that was purchased on the open market person ably by humpy in between the time of the first proposal, the second proposal. Now this guy humpy, uh is not a is not the first radio, okay? So humpy has a history of going after double governance and pushing them as IT could activist investor uh for his own or you know his or their personal game.

Uh first was baLancer in twenty twenty two where happy corner, like the cream west pool and then used a his betokened to get a bunch of emissions to the cream weth pool and then thought with there was like a deton at some point and IT was like a whole thing uh and then did the same thing most recently was sushi swap in twenty twenty four. Um and so it's basically like a kind of known actor in activist government stuff. So uh there was there was a bit of people on twitter being like, oh my god, how could this happen ah there was this you know kind of thing that just went on and nobody paid attention.

And now you know all this company is owned by the golden boys. Well so in the and there was some kind of uh let's a midnight uh negotiating with humpy uh and know a broad community backlash and they decided instead to withdraw process the proposal which is artist ast governance uh the proposal was withdrawn and cancelled and replaced by a new proposal which is basically um everybody's happy now um we're doing some kind of compound staking and thirty percent of token reserves go to take competitors. So no no now we are saying and no more golden boys involved this and everybody kind of counts IT as as a win so IT seems like I as well whatever was whatever bad thing people thought was going happened has not happened um but it's cause a lot of concern ation and a lot of activists are a lot of discussion about one the role of activist investors in house to the role of active governance and whether this is an endymion against deals or whether there's wrong with our government to something like this could happen in an og dew such as compound uh and and what IT means for thinking about going forward. So lets go on the horn and takes people's perspectives on this whole compound governance episode but I kicked off i'll kick IT off .

you and full this closure. I've been quite removed from the project for over year. Um so most of my views are just as an outsider um but is also someone that was not involved early on in helping to design the governance system that has become an understandable so you know as background for folks the compound governance uh contracts and frameworks are the most widely used in crypto today um the you know copy paste repeatedly opens up and has standardized them and it's basically a library that you know a huge number projects are using for on chain governance.

I mean this is done because the contracts are relatively simple, easy understand, easy to reason through and they don't have like complex promotes. This really comes down to, you know, one token can be delegated, whoever you know is interested to vote that tok. And it's one vote, one open as so it's a very simple system, is easily understand.

And when IT was designed originally, you know, IT was done not knowing what to expect um because you know governance on chain a was incredibly there was very few working examples at that time to use a prior r um since early twenty two, twenty twenty eight, early twenty twenty in a lot of ways huge advances. It's been four and a half years since the system is designed in on chain government. And so you know my first thought is, you know this is only the oldest on chain governance systems that exist like so many improvements have been designed in a year since this was almost like chapter one or chapter 4， one and a half of unchaining.

Again, what do you think has done Better in hunting government since like .

the yeah there's a few things. One is, you know i'd like some of the models out there that have time based voting actually like curves, governance contracts in a lot ways. I like that the longer you commit to being a stay, color the morning or vote uh counts, so to speak.

Um I think that actually prevents you certain types of negative behavior. I like systems that do have some like external safeguards in place. You know the compound government system is very few, like checks and baLances. And inter media was designed that way, you know, deliberately. But there's a very few things that allow people to cancel proposals.

No, that on these were first created the idea that like you know multi say was going have to approve reach you know governance proposal seems crazy now it's was the norm where it's like go a trusted council, you know can prevent bad actors from being involved in the protocol. Well at the time, you know from the crypto you know philosophy that was concerned, right? And so there's very few safe are to very few checks and baLances is not allow account solor whatever the council proposals or screen name or center them is really a censorship.

You know was censorship not allowing process to the creative proposals? And so you know this is always a theoretical um possibility that somebody would just become an extremely large stay holder and you know pushed through their well, right. It's hard to say you know in this particular situation like you know, is the system working as an hand? I don't know. I mean this most widely debated things on scripter um but you know you it's interesting that someone they will accumulate, just like so much of a governance vote, very quietly and very directed and really putting a major system like this test in one of the first time that way the june I know gotta .

has been very deeply involved in compound governance and you guys were also participant in the other party to know exactly what the role was have gone let but gone let was like sort of in the government's forums advocating for the eventual resolution that uh humpy or humpy emissary proposed to bring the whole thing to arrest with this new sticking proposal um so I am sure there things you can say can say whatever. But I give us what is your take on this whole drama and yeah how did .

you guys view so I would say, uh, if this wasn't uh a thing out of nowhere um there had been two prior attempts um and um you know I think in all these attempts um we had spent all of time trying to explain to voters you know what this proposal was trying to do and claim to do and try to encourage people to participate. Um I think we are able on the first vote um to coral sufficient support.

I think the there is sort of a combination of factors that LED to the second one. First, obviously the increase in size. Um certainly helped.

Second um a lot of the largest holders are still U S funds. And U S. Funds are extremely afraid due to some regulatory actions have taken place against dose to vote in now governance foods. And so you know I think you're in this very weird predicament where to reach corum, it's extremely hard to do IT without one of the U S. Funds who owns x percent and you know sufficient to have the the zero who doesn't really want to take over, but they're afraid of their own liability.

Um and so they are more vote and so then IT becomes a kind of uh cowling work of trying to get the the group of active participant uh uh you know as a of maybe not disclaimer disclosure but its just like you know we made like the most proposals in the last few years, like making proposals like weekly ever over the week. So I think we are quite deep in the weeds there. And I think we've definitely observed this chilling effect from each of the uh, actions against doves were like fund slowly stop voting.

And I think if funds on a large percent of the but then don't vote IT actually makes this makes them acceptable to this. So you know, I can understand the funds perspective. There's a kind of you know unbounded legal liability thing in participating.

On the other hand, is an attack successful and know there's fund is lost by users and some indirect way, then the funds are also probably liable to other types of losses. So uh, it's kind of a weird situation and I would partially blame the regulatory uncertainty for U. S.

And ties. So does I have A U. S. Participants are very different than those that don't have many U. S. participants.

So no matter what happens.

I I mean, I I think I think it's partially on their salt. I also think it's the fact that these funds are own these stakes. And you know IT haven't quite figured out the correct way to to to participate in these networks. Where is like you know much more foreign participant deals have much higher participation rates. So I would say that uh I said the second thing is um and this is something we spell on time trying to advocate for, but sometimes it's a little hard that governments, which is if you add is earning a lot of fees or has a lot of a crude fees.

Uh, you know I think those fees should be either delivered to the suppliers, the participants in the protocol where they should be used as insurance or something, but they should just kind of collect and not get used in some way, right? And I think in this case, there were a quite a large amount of crude fees, which made IT a sort of natural reason for someone to to want to to do this. Now, other landing protocols, other perpetual hercules have adv switches.

And again, this gets back to the U. S. entity.

Thing were like, you look at the a sop, the switch thing. IT was U. S. fun. Large U. S.

Funds who sort of blocked the vote even though like most was very pro turning on the face watch. So there's some combination of large U S. Funds and gangster er, who I think are in a lot with the culprits of this. I do think there is value though that in you know again, like people bringing this types of attention, I think it's just sometimes have had been done ooma did carefully Reginae but you script or so I think you are always dealing with time.

You take yeah I think .

come classic like people want to have the cake I needed to where they you know don't like the dead weight on governance of these large funds who might not want to go for various reasons but then um you know obviously they also don't like idea that hey you know one large actor can basically you know a dictate uh yeah the the direction, the per call and so it's it's not like, you know you you close when I am and you see happy and you close your I and reason and you in some ways it's like that is the nature of on chain. You accepted voting in these ways as property to you know deter, mitigate bad actors but IT is ultimately like kind of a IT IT comes with the territory um I think kind of that the worker analysts been more delegation delegation university blockchain clubs um university of delegation to paid delegates um and I don't quite know kind of how that system is working.

I ve been in some because of them in some house um in the very viBrant and proposals, good treasury management and then in other is that just feels like um you everyone is a sleep at the wheel and you this is sort of a very agreed example of somebody who you know maybe have the intentions can try to know the people for the the door for but I have these minor examples uh people have talked about, hey, like this is a particulate budget for this picture item or you know some contractor is building the doll, you know, hundreds of thousands of million, the dollars, a very simple work. And I think that stuff probably goes on more frequently. But that doesn't get the attention, that news, the computers.

Well, I think I think yeah, I think of a day downs that earn fees that don't redistribute the fees to different stakeholder as will always be kind of face this type of dia. I think the if I look at something that worked out there was a real hostile takeover. That was much crazier. I think it's just like this because he was kind of one of the more is much more well known was yeah kind of find this .

fan but so IT seems like the the views here are are between the Robert kind of pointing out, okay, you know, governance has grown up and this is kind of a very this is sort of a more primitive governance system that could probably improve some from some mechanism improvements to room. I think kind of saying like, well, you know, if you keep a bunch of access on the baLanced, you're a honeypot. You're going to track this kind of behavior that's no good people should pay more attention and time saying, well, you know, whatever it's well west like I also .

do place some of the blame on the U. S. funds.

Yes, yes, yes yes. And I think that is that is definite absolutely right. And you full disclosure dragon flies into western comb and we own some comb. We do not vote and in that vote we should know the vote was going on. There was a weekend um which is obviously lammies use but is true um but also to your point to uh you know we try not to vote directly on things because of the exact same reason that you mentioned which is that you know there's been case law within the U S.

That uh claims that when you know uh h funds participate in out so remember very famously the UK d case um which in which judge actually is not actually against this is like some disc judge who said that if you voted your tokens you are you know basic liable for the actions of the double and what eventually that says I mean maybe there's some rush out to that to that theory but of course what IT incentivises is don't vote if you don't a liability and that has created this really liberum where uh the overwhelming incentive for um for investors, whether the retail investors or international investors, don't vote your tokens if you don't want to take on liability for what happens afterwards. And of course nobody wants liability for what happens afterwards when some crazy guy creates vote about gold coin, you know golden boys, whatever the health is going on. Um and I get the interesting thing I think is is few people that I should also know that we are very small investors in comparison are not even like the top twenty the orders to come.

So relative to some of the other funds that people were yelling at, um you know I I think we're we're pretty diminish wealth to those guys. But uh the but but the general point I think is is correct. And I don't know what is a good answer to that besides just more delegation and paying delegates, right? I think the answer is that you need to make sure that there is a healthy ecosystem of delegates that you are big players like ourselves or other investors can delegate to and that they're compensated for doing good work.

Um and I think also to to Robert s point, this is a nowadays of best practice to have a some kind of council of trusted community members that can just whole sale do things but can at least veto uh bad actions right the reality is that in corporate law and we sometimes analogize dose to corporations in a kind of loose way uh in corporate law, uh you cannot just pass anything that you want that you know goes through single vote, right? There are certain things that are not a loud, such as something that, for example, benefit certain people in the classroom, shareholder over others you are not allow to do that. You can't say no well, uh, we are the prefer shareholders and the common sense the holders are earn as much so we are going to vote.

The prefer shareholders like get of giant dividend that the common doesn't get right can do that uh because obviously, that would incentivise essentially kind of corporate rating or stripping or tunneling, uh, which is basically, you know you buy a company and you strip out the assets and sell IT or give IT to certain people over others, right? If you if you do that basically in just go as tom said, just read the pee bank um but dogs don't have this mechanism by default. There is no way programmatically to say this is unfair to a certain class of token holders you know um such as this proposal for the golden boys like IT actually pretty unclear what the golden boys are going to do once they had this gold comp thing right like they they are claimed and not sensibly in the governance form they were like, no, no, no.

We have really genuine reasons to believe that what we're doing is for the good of the protocol. And for all I know, maybe they did have genuinely honest incentives that maybe just look kind of wear on paper, but maybe they were really trying to do the right thing. And there is where does um at the end the day, the cleanest way to avoid that is to to say, look, whenever is your proposing has to has to be able to get by a council and that council is you know, it's not it's not illiterate, competent but I can at least say in the worst case, hey, your job is to stop weird stuff from happening in the worst case that somebody doesn't up getting the fifty one percent of of governance votes um and IT ultimate mostly is a disincentive to even try, right? It's not that there's a bunch of proposals going through any these downs of people trying to vote themselves all, all the money in the ww.

but just the case does that has happened but is very rare.

right? My point is that that's very rare.

There's really like take all the money has happened like being stock was of there was a voting contract and somebody want to vote and took all of the assets backing the being soccer yeah whatever yeah yeah yeah yeah.

So to be obvious, ly, that has happened before. But these things are rare. If you have this kind of veto mechanism, IT basically becomes just not even worth trying, you know. So um IT doesn't like it's a teacher moment prety fy.

And for governance generally, I don't know if if if IT like I think there there's been a lot of sentiment lately of like the governance kind of sucks and like maybe we should just move away. We should just move to the governance light systems or just like embrace the multiple you know and you say like bucket, right? Like if if it's going to be multiple ages, just make multiple s all the way down. And then what's what's your what's your view on the people who sort of anti double governance?

I mean, I think dolls can work if they have active in in general. I think it's like active teams and founding teams. This seems quite crucial to their success.

Um just mainly because it's like the vote distribution is not IT is it's like hard to to take pure community members and I get the vote distribution to be real, you know sufficient for for such that I think there is some version of the world. I think in sona, there's a lot of examples of people trying to do more wilder governance mechanisms. Um actually, I think I would actually put so on as much further out.

I saw a lot of people talking about how dool token in voting will solve everything, and I don't know about that. We've seen just as many problems with the dull token votes. And like I said that .

to me as problems have seen with dual token loads, well, O P or lido.

yeah no, I do actually find it's just O P. I mean, I think the way they like grand distribution work done, stuff was like quite unfavorable. There's can't like you know they have like an anti know they had some sort of, I would say, liability you know, had the type of stuff tom was talking about were like people found ways to to abuse the system is sort of like a very IT actually makes the dual token thing I think actually makes a more pic as to when such a thing is happening versus the single token. So I I am not so that I I think the the experiments are far more interesting, to be totally honest, because people are trying few tarka again there in governance, people are trying a .

who is trying few turkey drift .

drift governance drift doing few turkey .

yeah on governance yeah we didn't they just launch the prediction markets like a week ago yeah yeah but .

there they're their dog footing their i'm telling you like like I think people in the area and don't spend enough time looking at the stuff because I think it's worth looking at because IT IT is a huge community people. It's like definitely the second biggest by number of people and they are doing interesting things there to uh, I think like their governance contracts look very different than multi I sig and governance are more integrated.

Um I think like know if I look at you know to say if it's sort of more isolated from say, something like compact gergen and you have to gleed them together in the right. The way the sonic code looks is is quite, quite a bit more integrated. So I think I guess my lunch er shorts like I think people in the serum on altus have been taking more aggressive steps than applications on on governance.

And I think we will see if the fruits of that hopefully. But I I I think there are people still doing experiments. I don't think there is a reason to be totally negative IT just feels like, no, it's like saying I hate politics because like everything sucks.

But then what's the next best alternative? Is like equally bad, right? So I I I think if you take a slightly more optimistic for you, there are people still innovating governance. They're just not where you think they are. And I think it's it's really worth really worth making sure those experiments happen.

The abilities a founder comes to you, they're building a brand new defy protocol, and they say, okay, what is the best practice today on governance? What should I be doing and when should I be doing? IT.

yeah, I mean, at a really high level, you know, in general, my view is you generally be governed in place once the system is relatively harden on its own and doesn't need constant government, right?

Because, you know, the ability of pre governance to make changes, to edit, update to you, modify to tweet, is vastly superior to that of a decent first right now, like you probably cannot find an example of a decent sized community that's like quick in addition and effective decision right like is very um and so governance is almost an end of a process, is not the begin right. And I think like one of the biggest mistakes I see is like people start off and their like day zero. There's governance sometimes even before there's a protocol, right? It's like people are putting governance way too early in our process, not where I believe belongs, which is at the end.

Um and so I I think is the first like major mistake um. The second, now I do think that you know so much as changes of the last four years with governance. H, I think a lot of the you know physical ical perspectives that people have have followed.

I think at this point, you know good governance is you know limited in how much you want or should have a very broad community making decisions. I think it's great for certain decisions ratifying something new. Um deciding you know a vers b like a crowd is very good at cat.

You know a very large dispersed community like is not efficient at you know modifying the risk of a protocol or not efficient had you know calibrating you know a lever, right? And so you know I think at this point, protocols should be designed. And this is both governance like and governance complex.

But you know to have specialist in place, it's like, okay, you know this specific team, whether to multiple g or you know some custody and whatever, has powers to change x this other thing has powers to change. Why this other thing has powers to change c and not okay to broad communicate does everything at all times for all of you, like that's incredibly difficult. It's almost like you know committee of occasion of control um I think a lot of wasted that natively and procles right like the only time you need like very broad open holder governance is for major decision.

And and and I will say there is a move in newer d five protocols in the theory um and a little been slain A I think this is more of an alteration to having these kind of like layer um protocols where each layer sort of govern differently and some layers will be governed by a smaller group in one person. Some layers are governed by the overall down, like things like morpho mellow tea.

And then they have no competition between the different layers, like you might have multiple participants who offer a different for each layer. And I think we're gonna start seeing innovation of that form, which is bore like you I think doug governors and twenty twenty was like, here is an arbitrary function that you can execute on the state owned by the governance contract and people vote on. Right now.

It's much more like here's access controls. Here's certain types of user as certain types of groups. And I think in twenty twenty one, in the euphoria, there are a lot of people who are trying to build tools for dollars around this kind of very basic primitive of like we have a function that can be executed on the dose state and people vote on whether function gets executed or not.

And I think the tooling was sort of IT your kind of in a rock and hard place because it's like very hard to to build that off such a basic primitive where's what we're seeing now of like these like layers, each having A A more well defined scope of what types of functions can be executed, when can they be executed, what level of granular do you need? Those are those are are actually providing a lot more efficiency. So I think we you know I think it's it's always good to to have a pessimistic view on governance because people love hating on collective decision making.

It's like very the very easy thing hate on. But I I think the optimistic views that there's a lot of innovation, these to in bees type of ways, no cyp to the only place I see in the world that bothers experimenting with us. The rest of the world is instead fighting of her, whether Nicholas as moderate in greg the election or not, right?

Well, I love seeing these examples of convergent evolution. And I feel like in dose, I was reading a little bit about the history of the S. C.

C. In the independent agencies that arose in in the U. S. And these agencies. But these independent agencies were were the part of the reason why they're independent IT means that they're not under the executive branch formally. The president can t fire the head of the S C C persae unless is for cause like they have have done something wrong um be part of the reason for that is that they were originally understood to be delegations by congress right the ideas that okay, congress as parliament, it's kind of too hard for the big you know group of like two hundred people to agree on you know complex questions.

They can't they can't decide on every little thing and so they're supposed to delegate the authority to like a smaller group of people who are outside the remit of the executive branch but have almost like executive like authority um to make rules and you know that's supposed to what the S C. Is doing is making rules which what when things we're complaining about that nothing rules about cpt to but um that concept feels very similar. Wait, what we're now arriving at first.

Yeah, yeah. Don't don't have every little decision go through all of congress, right? That's crazy. That's like a massively terrible way to make decisions is like a gigantic V G board. They were all you know pulling around collectively on every little decision. Um we need some degree of delegation, some degree of specialization, some degree of like you know let there be grandstanding and you know big arguments over big political questions of the day that really do required group input but otherwise like yes, let's agree to specialize and delegate effectively .

yeah at the end of day, I still think there's just a lot more transparency and what is happening even when you have the specialization, which is a which I think is clear difference between between this hun, I I think people just don't like like you, especially people who are like you're traders with enrapt and like or pure like. Only think of the financial aspects of these are not how the code looks and like what actually goes on under the covers and you know they they have a kind of like k like everything should be as fast as me being able to make a dex trade, right? And like, yes, that's just not that is not the way of deal networks like you know how much how you how you cut .

IT well and and it's also like .

eclipse filled with a lot like X T twenty year olds who like I feel like i've never had interpersonal conflict in their life and then turn out to have very crazy interpersonal conflict. And you know in their first ever encounter with IT.

there's also fifteen, eighty five .

year. You can is there no eighty five year old computer users?

As far as I know, I think there are .

so sure they're out there. I'm sure they're out there. It's hard to that from .

maine even being able to like, you know, when you buy a hard or wallet name to retype you are it's like, he's like, he's like he's gone.

You know that cessions .

ly friendly I will I feel that I can barely.

I can barely do.

i'm sure. Yeah I I when I mean, I mean real launching like your self custody with her. I O K fine. You are doing IT through point there thirty five years, i'm sure.

Yeah yeah OK alright. Well, um let's switch gears a little bit. There's one more story that I want to get to that a little bit more somber um so there is a story that broke today that h the S C C as well as A D O J unveiled complaints against the founder of bit cloud.

Not at all. Not is so big cloud. Um so I I should cover out that not I think is somebody who I precision all four of us no not and i've no not for many, many years. We were not investors in the cloud but we were investors into basis, which was the previous project that he ran that he shut down in twenty eighteen many, many, many years ago.

Um so not he is the founder he was originally the founder basis, which was the original the original implementation of senior shares, which was a stable coin that kind of luna like I mean, luna is not really a perfect energy for IT, but is these were loosely adjacent til luna yeah is luna like never ended launching because they thought that regulatory IT could make up but they raised over one hundred thirty million um for that token but then gave all the money back then uh not an emerge many years later to build. And they call big cloud, which you can think of roughly as a predecessor to france tech. So IT was a social social y APP were warned the first really big social y apps.

They raise something like forty million, thirty thirty million from a six in six koa. A number of other funds that invested uh and they basically allowed you to speculate on the demand for social token corresponding to somebody on twitter so you could buy ellon token in. You could buy hasard purse token in and as we later learned, that apparently pissed some people love um and so made a lot of people mad in the way they went out, went about what they were doing with the cloud.

Um but the the charges that have now been filed against, uh for for for a couple things specifically if they did so, first of all, not a through bit light which later rebrand the disease. If if you don't know the name backlight, you might know the name they were they were charged with one having raised two hundred fifty seven million dollars, which they claimed was purely going to be held on chain. So there was basically like a bonding curve where you could buy the cloud on chain using bitcoin and the wallet that you were sending this into a supposedly a decentralized wallet owned by the network.

Out something something something um this not not to be true IT was actually not to od unilateral rol over this wallet and he was taking money out of this wallet uh in controverted to what he was telling to investors as well as to the investment public uh that he was taking this money in spending IT on influences uh personal expenses. He gave us some money to his family um he parents rented a mansion in beverly hills um as well as um using IT to just paid developers and do kind Normal a kind of things that one does win one lunch is a critter project. Um and so he apparently all source of stuff that they found in messages that he said of two investors based deny that he was doing this and then you know when they go through all the money they found yes in fact he was doing this.

He was just arrested yesterday in california and these shorts were were unveiled today. So um you to get responses from people because I mean, I think this is one that you know although I am not close close with not her. He literally one of the I think I met him the very first year that I came in the cypher and he sort of been in circles that I think many of us know very well, being in part of the new york critism uh new organ and then L A critical um security get responses to this um. To run I know I know that you know not very well.

I guess I met him in only thirteen because I 不是 thirteen .

yeah I do sure yeah um .

and although he was only there for a month and he like left， so I was never really sure what the what happened but um yeah he um he went the math and scientists call that a lot of people and you a one two and you know I think he is a very he's one a few people I met at that time who is a good developer but also just like a good show man, salesman and so is kind of natural he ended up uh, in this van. I think he obviously was very aggressive with the protocol was launched to think a lot of people were are unhappy about the lack twitter likes this was automatically copied and stuff um I think the allegations in the uh filing by the D O G N S C C seem very different than what I had portrait that and you know I think he must have pitched all of us on investing and knowing here invested and despite knowing him and I had something was very weird about the pitch also was very like aggressive is like closing this closing yeah um but you know I think yes it's it's the action that the like raising money and sending money to his family members that kind of the more egregious, surprising thing I guess um I rest that raise that much money. The other weird thing is, is a lot of the money was just held in like a the coin wallet that probably was control by one person because I was like a maybe I I actually forget if he was a multi sagar rather is even just like a single address um never really understood why I needed its own chain in ways but yeah you know people do things you know you don't expect from the outside that's like kind of my that might take away after eight hours of thinking about after reading the D O J filling.

Yeah I read through everything this morning and like I I think the the first crypto event I ever went to, like the first real decorate event, was this icy three bookshop in cornell. And that was the first man note that was right after he just published the base coin White paper. I remember he just raised the seat round from the wall and a bunch of other folks. And that was when I first met him and seemed like an impressive guy and I was very smart and I remember he was trying to hire me to join base coin and he he was like always he's very aggressive.

He's kind of a very charismatic guy um and I I didn't want to join in my body, evan, at the time he also I was being very aggressive, rude to join pacemen and he is very close friends with another and and I at the time I I was just very convinced base in in work right that the mechanism was broken and that this thing would eventually break little. I know that I would mattering a lot more minute years down the road, but but I know he was always kind of in in the loops who sort of in these circles of people who are just kind of early encrypt and very very um don't know connected silk body types. And you know again, like he obvious ly has not.

These are the allegations made by the D, O, J and by the S C C. He has not, uh, obvious ly had the opportunity to uh make his counter allegations. But these allegations also seem pretty strong. And they also these are also things that I was to hearing privately that some of the investors who are in the cloud who were very unhappy with the way that he was treating the the reserves, the money that was raised and and IT was also very clear, like what he was doing, look based like an ico, which I think at this point everybody knows is illegal to just brace money from retail and say, well, you know, buy the big light token and you know, on and this sedona person like that was very clearly at the very best playing extremely familiar with how these things are understood to be done. So um I don't know on some level IT kind of didn't surprise me that we got here. I'm kind of like, okay, this guy is kind of cutting way to many corners not to catch up with him, especially with how many people were initially pissed off my big cloud and then you do this like ico like thing and then like I hear, the money is not like being used in a way that is totally um in line with what he said he was going to do, but it's it's just really sad sy should like this right? Because I mean not or by all indications, extremely smart, very talented guy so it's kind of why why would you fuck do this is so stupid?

The one thing i'll say is I actually thought the way he handled basis was quite ethical. And I say that is a total outside IT was involved in the year of the in the closing of IT.

But I actually thought IT was remarkable at the time as one that was like things that left an impression on me as an entrepreneur, is that he raised one of the largest sums of money in crypt to history for a project, realized that wouldn't work, and then return all the number of customers. Most people would not do that. Most people a would hive t find something.

How to do with that? Grow crazy parties for, like, you know, one hundred years, whatever, right? And so IT always like sad with me that he, as I think the first start up of his career, raised such a monster amount of couple.

Never turn that, you know, burn through like a one or two percent of the know whatever people got ninety percent of that whatever IT looks like. I would thought that was remarkable. And so you I you know passed on what's now just so big cloud, whatever. You know, boy, I don't think the you know project could go off the rails or when they wind up in that direction. And big outdid um after watching how he handle basis, I know basis actually handled very well like he was extremely respectable in my I was and so you know I was I was looking a little bit back you know in the early days of big cloud when I was like the things gyp founder finds nervous or different but for me IT was like how they're managing pride key security .

center yeah I think the tax base private key stuff was IT .

was like horrifying to me as a founder where the way you interact with, you know, big cloud was the most happ hazard approach to like asset security and fund security on behalf of like pretty detailed users which was like, you know we like class google make like a text based password for you and like uploaded to your google like I was horrified um and I was like, oh my god like the biggest corners of a cut in ways like no crypto founders be cutting corners like a crypt o founders not be jeopardizing user assets like so reasoning so early and you know I think you ve learned from either response in the feedback.

G was pretty quiet. And like you think at some point that changed you know that the security mechanisms. But you know there was the second thing you know out out yeah I think .

this is rather the same. And anyone made all of us that looked at so there were like so many no yellow flags that just seemed very SaaS. Like even this bonding of thing that is commodation checks, just you chuck bitcoin and like the nodes for network were like close source for the longest time. And you know why is IT this thing? And and even even the platform itself, as you mentioned again, for you having this like a token issues platform using celebrities lector ces without the motions. So like I think there there are so many um things about this that they just look these flag, which is but really most of us were not uh the basis of the of the complaint they were mentioned and if there were more um you know sort of as as ubi tors, really he was about this sort of this representation to investor is a this preparation of funds and like that is, well, you know don't break the law or you're breaking the law kind of things and so I think you do out in court if you know do so specially lize or like um hey you you are able to sell you you on must coin if you know you're not the one I mean IT but like know the other stuff like it's like obviously you can do that um so um I was a surprising to um see everything that change today. Yeah I mean.

look every start up like you know it's hard to get everything right you know and actually start to be a few resource and you just get economica run at IT and do your best um and people will usually assume a good faith you know but like you're lucky with money, like there is just so raiser than in a marginal area and if you are appropriating money that is not supposed to be yours and you're spending in on stuff like that should will come back at you so doesn't matter you're start up or building our company um just like don't even think about doing anything like that no matter what size you are and no matter what industry in.

So crypto is no exception to that. And you know at the time, I was generally surprised. I mean, it's been like four years or something since big cloud launched. So IT took a while for this to eventually come back around um but he did and eventually beg. As from reading .

both cases, do you think IT was like an investor who was pushing kind clearly the new yeah so somebody who invest three million so anybody wants to .

work backers from the captain and figure out this is match I yeah no idea IT also IT also could .

not be invest on that could just be .

the disciplines investor or we don't actually know IT was pretty AR as that they sapeur um the records of nutter and they have like almost everything I need to see all the messages. So they they seem to have done a very, very good job constructing the time line. So um if if you're a token founder and this is scaring you, good like this, if you're fucking with other people's money that is scary shit, you should take a very serious ly um and to to underscore this as much as we possibly can, absolutely no room for anything like that in this industry, aren't any industry. So well, we'll see where this ends up um but for now obviously um we will be we see how this in in many other cases that are working with the courts play out though this is a rap on the some summer note um till next time they .

are very co.