The Digital Future Is Here (Adapt Or Die)
Summary
TLDRManny, a crypto expert, discusses the history and evolution of money and finance to provide perspective on cryptocurrencies. He explains how stablecoins facilitate payments, Bitcoin acts like digital gold, and DeFi introduces efficiencies like social media did for information. The conversation explores the disruptive tech cycle crypto is undergoing, the purposes yield-bearing assets serve, historical parallels like 17th century government bonds, and speculation around future developments like risk transfer mechanisms. Overall, despite volatility and speculation, Manny sees an elegant evolution underway, centered on more sustainable liquidity and unbundling functions compared to traditional finance.
Takeaways
- 😊 Manny has been involved in cryptocurrency and digital projects for most of his career so far
- 📈 There are 3 main types of 'crypto': stablecoins for payments, Bitcoin as digital gold, and decentralized finance (DeFi) for efficiency
- 🎓 A lack of financial and historical literacy in crypto is being addressed by people like Manny and conferences like ETHDenver
- 💡 The evolution of government debt over centuries shows parallels to potential pathways for crypto assets like liquid staking tokens
- 🔀 Intermediaries still provide value, but crypto allows direct peer-to-peer financial activity via well-structured code and protocols
- 💰 Stablecoins facilitate payments and liquidity by tokenizing other assets like fiat currency or crypto collateral
- ⚖️ Regulations often follow from organic necessity and attempts to reduce instability, but can also increase fragmentation
- 🌱 On-chain yield via liquid staking is emerging as a sustainable base layer for building DeFi projects and meeting liquidity needs
- 😎 Crypto innovation combines visionary ethos from the West with practical experience from emerging markets and philosophical thought
- 💫 Diversity and experimentation of new crypto financial structures, followed by selection of the fittest, drives evolution and progress
Q & A
What is Manny's background and how did he get involved in cryptocurrency?
-Manny studied philosophy and mathematics before switching to financial history. He first learned about Bitcoin in 2013-2014 but didn't buy any on the advice of a mentor. He got more involved in 2016-2017 during the crypto bull market, advising projects on the nature of money. In 2020 he realized decentralized finance actually worked and started focusing on stablecoins and yield-bearing assets.
How does Manny explain the different types of 'crypto' and their functions?
-According to Manny there are 3 main types of 'crypto': 1) Stablecoins for settling payments 2) Bitcoin as digital gold 3) Decentralized finance technologies generating efficiencies in the financial system.
What is the purpose of stablecoins and how do they work?
-The purpose of stablecoins is to provide digital liquidity for settling payments and transactions. They help overcome the volatility of coins like Bitcoin. Some work by collateralizing other crypto assets, while others like Tether collateralize real-world assets like dollars in a bank account.
How does the historical evolution of government debt relate to crypto yield assets?
-Manny sees liquid staking tokens, which provide yield for securing blockchain networks, as similar to historical government bonds. They could evolve to become a foundational crypto asset class like government debt did over centuries by providing steady yield and collateral.
What does Manny foresee as the next innovations in decentralized finance?
-Manny believes innovations around hedging on-chain risk, upgrading protocols to be compatible with yield-bearing assets, and sustainable liquidity solutions like fixed-rate stablecoins will drive the next wave of DeFi adoption.
How could future DeFi protocols impact banks and financial intermediaries?
-Manny thinks DeFi will 'unbundle' banks by separating payments from lending. Yield-bearing assets could back liquidity and payments while other protocols focus purely on risk assessment and intermediation.
What did Manny learn from the financial/monetary innovation conference?
-A key insight was that innovations get repeatedly reinvented over time and space until the most fit versions reproduce. He sees crypto as restarting these evolutionary cycles of diversity and selection for finance.
How does Manny's background in financial history inform his work in crypto?
-His studies help him identify repeating patterns and place innovations like stablecoins and yield assets in historical context. This guides his thinking on productive new designs aligned with human financial needs.
Why does Manny criticize most economic and crypto modelling as too narrow?
-He sees academic economics and much crypto modelling as excessively mathematical and detached from reality. A richer, more humanistic understanding of institutions and incentives is needed.
How can history help make crypto less abstract and scary for outsiders?
-Historical analogies show that many issues crypto faces now (volatile assets, risky ventures) occurred before. This demystifies the space and shows current challenges as surmountable.
Outlines
🤓 Intro to speaker's background and interest in crypto/digital money
The speaker introduces the guest speaker, Manny Rincon-Cruz, who has been involved with cryptocurrency and digital projects for most of his career. Manny provides some background, sharing that he currently runs a liquidity clearinghouse protocol and a financial history research group looking at historical perspectives on digital money.
😮💨 Explaining decentralized finance (DeFi) and smart contracts
Manny explains decentralized finance (DeFi) as financial activity programmed on a "world computer" allowing peer-to-peer transactions without intermediaries. He describes smart contracts as a set of mathematical rules that structure code to facilitate peer-to-peer finance. Manny notes intermediaries pose risks like information leaks, but some financial activities may need risk absorption.
📈 Bitcoin compared to stablecoins - different crypto functions
The speaker and Manny compare Bitcoin having a digital gold function to stablecoins facilitating payments and settling transactions. Manny categorizes crypto into Bitcoin for store of value, stablecoins for payments, and DeFi for efficiency improvements in finance.
😎 Bullish macro outlook boosting Bitcoin price
Given expansionary fiscal/monetary policy, Manny is bullish on Bitcoin capturing the macro impulse of increased government spending and debt monetization. He plans a 30% Bitcoin allocation in his portfolio.
🏦 Explaining purpose and mechanics of stablecoins
Manny explains stablecoins' purpose as a liquidity medium for efficiently settling payments. He outlines three historical methods for creating liquidity: minting outside money like Bitcoin, variable funding like collateralized loans, and fixed funding like bonds. Major stablecoins use variable funding, while Manny is working on fixed rate funded stablecoin designs.
🚀 Evolution of government debt as a key financial asset
Manny summarizes the multi-century evolution of government debt evolving into the foundation of finance, allowing massive wartime spending thanks to steady yields and credible commitment provided by bonds like British Consol bonds introduced in 1751.
⚖️ Comparing liquid staking tokens to the rise of government debt
Manny sees liquid staking tokens like those on Ethereum as similar to the rise of government debt as a core financial asset class. As liquid staking rises to 60%+ of DeFi value locked, the steady yield it provides can enable sustainable DeFi growth.
🏭 Next step is better risk transfer and yield compatibility
The next steps Manny sees in DeFi evolution are better mechanisms for on-chain risk transfer between parties and updating DeFi infrastructure like AMMs and lending to be natively compatible with yielding assets.
🔁 Separating payments from lending in future crypto 'banks'
Manny believes future crypto "banks" will separate payments from lending functions. Payment-focused stablecoin protocols will handle transactions while lending focuses on risk intermediation, instead of the bundled model of traditional banks.
🌱 Crypto restarting evolution and innovation in finance
Manny concludes that crypto has restarted an evolutionary cycle of recurrent financial innovation through divergence and selection, after decades of stagnation from high government intervention post-WWII.
Mindmap
Keywords
💡cryptocurrency
💡defi
💡stablecoins
💡yield
💡liquidity
💡risk transfer
💡credible commitment
💡unbundling
💡sustainability
💡evolution
Highlights
Cryptocurrencies and digital currencies have become more tangible and omnipresent over the past 15 years.
Defi allows peer-to-peer financial activity through smart contracts instead of intermediaries.
Stablecoins facilitate payments and transactions. Bitcoin acts more like digital gold for storing value.
History shows disruptive technologies like crypto follow predictable adoption patterns over time.
The mix of idealists, realists, engineers, philosophers, and historians working on crypto is potent.
On-chain yield is emerging as the foundation for sustainable crypto financial structures.
Mainstream crypto protocols need upgrading to properly handle yield-bearing assets.
New peer-to-peer protocols for risk transfer and stablecoins are next key pieces.
Banks will likely unbundle into separate stablecoin payment networks and true lending.
Government debt evolved into a core financial asset over centuries through credibility and liquidity.
Liquid staking tokens are emerging as crypto's version of low-risk government debt.
Crypto represents another cycle of financial evolution through variation and selection.
Key innovations solve existing problems then attract capital to build on top.
Fixed yield facilitates sustainable crypto economic structures unlike speculative trading.
Understanding history helps identify recurring patterns applicable to crypto adoption.
Transcripts
everyone my age and that's I'm getting
up there remembers hearing about the
digital future well the truth is we've
been living in the digital future for
pretty much our entire lives whether we
realize it or not but now it's become
more omnipresent it's become more of a
tangible part of our lives and it's not
it's not um an accident that the digital
Future Has seemingly touched the
monetary system maybe last because money
is a funny thing it's all about faith
and trust and it's all about feeling
comfortable with it and so a radical
shift or what may appear to be a radical
shift in monetary mechanics how it all
fits together how it all works that's
something that you have to take very
seriously and of course a big part of
that has been cryptocurrencies and the
rise of digital currencies over the last
15 years really since Bitcoin launched
and so here at eural University is part
of our ongoing efforts to really
illuminate these monetary topics we
don't always want to look behind we
don't always want to look at what the
euro dollar system was and what it
already did we really want to look ahead
especially as we have all these
disruptive Technologies and all of these
opportunities that are really coming up
but we but in order to to really take
advantage of those and really uh
understand them we need to talk to
people who are doing this people who are
inside the space who are living and
breathing that digital future and I have
someone just for that his name is Manny
rck rinken Cruz and Manny you've been in
cryptocurrency digital projects for
basically your whole career so far right
yeah I mean you're involved in a whole
bunch of stuff so why don't you give us
a little bit of background about your
experience in the space yeah of course
um so I'm currently the founder of I
guess two my the two things that take up
most of my time uh one is uh a group of
protocols under the name Buttonwood uh
so we run a liquidity Clearing House
house protocol uh that just basically
serves as a liquidation pool for yield
bearing assets uh and then the other
thing that I do uh it's funny that you
mentioned about not looking to the Past
um I'm trained as a financial historian
I started out as a mathematician uh or I
guess in philosophy doing set theory I I
then went over to history what is it
about the philosophy people that want to
to finance and money well to be fair I
wanted to be an economist and then I
think after attending some economics
classes I realized it was a very sterile
kind of narrow-minded field in terms of
the questions that were going to drive
most of the research and I lost most of
the spark and interest and so it was
really in my senior year of college I
signed up for a course uh called
International Financial no international
monetary history and it was co-taught by
Neil Ferguson and Charles Mayer and you
know both of them are Titans in their
field and I think within that day I just
knew that that's what I wanted to do
that was it so so you a rated home at
euro dollar University I I am uh so I
you know I I did uh I I I dropped out of
a financial history PhD my my specialty
was the history of um Chinese Central
Banking oh wow um but uh I actually do
work now with uh Neil Ferguson we do we
have something called Four Winds
research um our tagline is actually
historical perspectives on the future of
digital money so there you go yeah I
think that's really the that's really
you do have to understand the past in
order to understand where everything's
going in the future so it's great to be
grounded in the past and let you know
history
yeah so I've been thinking about these
questions of money for a while I mean I
think Bitcoin really came into my
Consciousness must have been 2013
2014 um and then uh one of my mentors
she's a constitutional uh law professor
at Harvard Law she talked me out of
buying it so I regret that uh which is
why I then had to work for the next 10
years uh but had I ignored her yeah I'd
been a different place um so it really
began there thinking about Bitcoin as
money so I really thought about the
nature of money so I think when the bull
market came in 2016 2017 and everyone
was asking what is money I had been
thinking about that question now for a
long time uh which is how I got involved
with a number of projects so I'm an
adviser to block tower Capital to ample
forth I guess Eco now diad so a couple
other projects um so I've been thinking
a lot about the nature of money and then
it was really in 2020 I had a shift um
because that's when I realized that defi
worked so decentralized Finance actually
worked in smart contract s do in fact do
what they're supposed to do and um I
started thinking about crypto as really
two things kind of this Bitcoin store
value thing uh that looks a lot like
digital gold and then all these other
technologies that look a lot more like
the web to Boom of the 1990s and the
outcomes of that I think are going to be
felt through massive new efficiencies in
the financial system so I'm still trying
to Grapple with all that uh and still
looking back to history you know 500
years so let's let's unpack a little bit
of this people who aren't for familiar
with some of the things you just said
like defi smart contracts give us a
little bit of background in that just in
very simple terms so we can yeah get a
sense of it centralized Finance or
traditional Finance Trad trafi as call
we're not that cool though uh trafi has
something called an intermediary so in
the United States Financial activity
itself is not regulated you and I can
trade whatever we want it's being an
intermediary that's regulated so
uh for example if uh I wanted to sell
some stock right I go to a stock
exchange I give it to a broker he will
then find a party to then buy it from me
he's intermediating that transaction so
you have two parties and someone in the
middle decentralized Finance basically
says financial activity can be
programmed in this computer this world
computer Let's ignore how it works for
now on on that computer as a
peer-to-peer activity so it's a set of
rules they're uh basically constrained
by the mathematics of the code but it's
peer-to-peer in the same way that we can
communicate with encrypted messages
right that nobody else can read and
that's just the outcome of how that code
is structured uh people had this idea
that if you structure the code properly
you can do peer-to-peer Financial
activity so it goes from being this kind
of trust-based problem an Institutional
problem to an engineering problem
because now we just have to figure out
the right sequence of equations and
that's really what smart contracts are
about are making sure that we we we have
the common language and protocols and
terminology and everything else work out
ahead of time exactly I actually hate
the term smart contracts cuz everyone's
like oh well you know you still need
lawyers I'm like shut up that's not what
it's about it's about peer-to-peer
Financial activity and being comfortable
with the fact that you can communicate
with somebody you don't otherwise know
yeah which is always I mean that's where
intermediation come let's let's detour a
little bit into history that's that's
the that was the purpose of the
intermediaries to overcome information
asymmetry I know something about the
person on the other side of the trade so
you don't need to know exactly
everything about them I'll Stand in the
middle yeah which given the restraints
of the time that made sense but if you
and I can talk directly and cut that
person out there's a whole bunch of
unlocked future there yeah I think so I
mean well so I've been I mean we we'll
detour later into this question um I I
am not entirely sure that so
intermediation poses certain types of
risks right you have to trust the
institution that's intermediating uh you
have to trust that they're not leak
information that they're not are adverse
players in the market against you with
information that they have about you
this is a problem with the big Banks
right because they see you trading on
one side and then they know everything
their hedge fund is trading against you
on the other side um but I think there's
there's some things that are probably
irreducible risks for certain types of
financial activity and somebody stands
in the middle not necessarily
intermediating but absorbing the risk
for whatever is happening between us um
this is kind of one of the things I've
been thinking about the the The
Perennial question of payments so this
it's it's like somebody has to absorb
that shock in the middle and if that
person goes under then the transaction
doesn't go through so um but yeah
intermediation trying to get rid of it
the well the other side of that there is
values in intermediation given the
circumstances it's not it's not
inherently evil or inherently bad it has
absolutely been abused and then some but
that's true of any kind of human system
yeah but intermediation a function I
think don't you believe that maybe that
will survive in some other form even in
a decentralized format yeah absolutely I
think it's survives um I wrote a thing
it might have been two three years now
no it must yeah early 2022 I think I
wrote an essay called is crypto ready
for its vulker shock or are you ready
for a crypto vulker shock so I was
predicting higher rates and they should
sell everything so I did sell everything
I think in February of
2022 uh went did you buy it back though
no yes I'm always slow to go risk on so
I I I I I I did go a little bit risk on
last fall uh but then you know the
market caught me sitting 70% in Stables
this this year so right missed on a lot
well let's talk about that too the
stable coins versus say Bitcoin there's
a big big big difference there they have
very different functions let's let's
break that down a little bit right right
so well actually so maybe this is just
to Circle back really quickly to this
this framework um
so your stable coins are providing I
think kind of this this payments digital
currency this is that is true digital
currency right it's things that you use
to intermediate payments right or to
settle payments between
individuals um I was then looking at
gold as sorry as gold as an analogy for
Bitcoin right and so the main critique
that people have about about Bitcoin is
that it's not stable in value unlike say
a stable fir um and they compare you
know you hear the economy saying how
there you compare this to Gold so if you
look at gold during the 70s and 80s it
looks a lot like Bitcoin it goes up 400%
and then it falls 80% um so it behaves a
lot like Bitcoin in terms of its price
behavior and it's basically responding
to monetary policy to monetary and
fiscal policy right and so the vcar
shock just causes this collapse of like
80% I think over two years in the price
so gold behaves like this Bitcoin
behaves like this so that's one thing
that's crypto so now we have two things
that are crypto right
stable coins Bitcoin the third thing
that is crypto and it's confusing for
everyone because they all are called
crypto the third thing is uh what I call
Defi and so the the model that I use to
think about defi is uh another thing
that I've been researching a lot in the
past few years which is uh the nature of
social media so if you think about a
newspaper versus Facebook right a
newspaper is an intermediary for certain
types of information you have to submit
an article it's it's curated it's
permissioned um and they take a big cut
right it's all this advertising Revenue
us to go through newspapers uh Facebook
on the other hand is permission list you
upload whatever user content you do they
have a very effective um onboarding
platform for advertisers they don't even
know what ads they're running on their
platform and so they sucked out all the
ad dollars from the traditional
ecosystem uh and it's far more efficient
right they're per worker they make so
much more money I think for advertisers
you know it's less expensive you're not
paying $1,000 for an ad in a local
newspaper whom no one might ever see um
so that's what happened there and I was
doing a comparison between unisoft and
coinbase and at that point I think
unisoft had 20 employees or something
like that coinbase
had th000 2,000 um coinbase I think that
year had made like two billion something
in fees uh and Unis swap I think had
made zero in fees but potentially could
have made maybe you know like 50 million
or something but they were doing about
uh on ethereum itself they were doing
about the same amount of volume and so I
thought to myself well isn't this funny
you know it's it's it's such a APT
parallel right unisoft is permission
list it's an online kind of defi
exchange anyone can list any pair of
assets on there to trade you can trade
without having to register or anything
so it looks a lot more like Facebook uh
and I think at that point in time they
had 3,400 pairs of assets coinbase had
84 or something like that um I don't
remember my own essays um but you know
it's they they're different by orders
two orders of magnitude both in terms of
the cost and in terms of their reach and
so to me it was like I was thinking this
is sort of an aha moment yeah I was like
these are basically like dot stocks and
they also of course go down when the
interest rates go up but the winning
move was to buy a bunch of stuff in you
know 2001 2002 2003 before the market
turned around after all the ShakeOut was
done right exactly so there was a lot
there was a lot of nonsense in the 90s I
remember this because that's when I
moved to the US and my dad worked in in
in Tech um pets.com all this other stuff
hey I was I was right there I was in
financial services yeah and then you
know there's a blowoff top and then it
just all goes down um but yeah so you
know there's three things called crypto
you have your stable coins for settling
payments you have Bitcoin which is
digital gold and you have these very you
know efficiency generating Technologies
called defi um but it's confusing
because they're all the same thing yeah
they're called the same thing but they
have very different functions but
exactly you just made a point here I
think that we really want to emphasize
is that we've been through this before
oh yeah th this is nothing new
disruptive disruptive technology follows
a pretty deterministic pattern right we
just we just hit on the big part of it
right you have this initial phase a new
technology comes out everybody's like
wow I can see this is going to work yeah
then it everybody rushes in a whole
bunch of capital gets deployed and it
attracts a whole ton of stupid ideas yes
and it takes a big process to work
through that clean out the losers but
then the survivors those are the ones as
you were just saying those are the ones
you want to look to and aren't we seeing
something similar to that happening in
well crypto the entire yeah I it's so
hard to escape the cage of her own
language uh I try I try but it's just
it's
impossible um well that's that let me
lead you into a second question are we
seeing this disrup disruptive technology
cycle in crypto or is there three
different Cycles there three Cycles one
for you know the Bitcoin types one for
stable coins and one for Defi and are
they
synchronized I think they're somewhat
synchronized which
is ah strange
um so I was thinking about this question
because I was trying to decide my own
portfolio allocation I think I'm going
to go 30% Bitcoin oh really 30% yeah uh
I think Bitcoin as I mentioned before it
just captures the macro impulse it
captures macro signals about the fact
that the Biden government is spending so
much money through its inflation
reduction act um we're probably going to
juice the numbers before the election
you know there's all this stuff in the
water that you know is coming um we're
not getting spending under control and
we're monetizing the debt so I think
Bitcoin is a perfect asset to capture
that
[Music]
um as I said before I with my financial
history background I I kind of started
writing and designing stable coins in 20
20 so I am bullish on that as a builder
right so that's what I'm working on yeah
that's not a price thing that's about a
functionality exactly and so the it it
links to the price in the sense that
um the defi
functionality let me think about it this
way you can think of defi chains right
so the blockchains on which all these
contracts run as their own little
economies their own little countries and
so the economic activity there
requires natively generate liquidity to
really ramp up and so this is kind of
that Central problem of history is how
do you generate liquidity for financial
activity for for financial and economic
activity really um and so they're Linked
In this way
because the people that are most likely
to put money into defi are also like me
most likely to have money Bitcoin so the
the Cycles get synchronized in this way
and I think the stable coin piece is
really the the the bit that allows the
defi cycle to run really well I don't
think it's as important for Bitcoin
almost sounds like there's the equity
for uh defi comes from
Bitcoin that might be a little bit too
too stretching the analogy a little bit
too much but I mean that's kind of the
idea yeah so if if if the crypto cycle
is generated by Bitcoin then it has all
of these spin-off benefits and they
really are benefits that could uh
synchronize cycle but also create all of
these additional opportunities yeah I
mean that's one way to think about it as
the equity of
defi there's another analogy it's not
mine it's actually meils um where um by
the way he hadn't seen the Citadel memes
yet and yet what he told me I think
aligned with it perfectly so he thinks
of major Bitcoin holders as kind of your
aristocratic medieval families that are
land owners and so they they end up with
all this wealth but it's locked in the
land and so when the financial and
Commercial Revolution
happen after the Renaissance and early
modern era how do you mobilize that
right you have to finalize it otherwise
you can't do anything with it and so you
know it's the Citadel meme right so
people that bought earlier at the top
the rest of us are the peasants at the
bottom but we have a chance in this go
back up yeah exactly yeah where we say
hey look you don't know what to do with
all your wealth that's locked in Bitcoin
why don't you uh let me borrow some of
that so I think that's what's what
that's what's happening so let's Circle
back to stable coins okay stable coins
have a specific purpose they have a role
in this crypto space or this crypto um
uh what do we call E
ecosystem really that's what it is let's
talk about stable coins because I think
most people may not understand their
purpose or how they actually work and we
don't need to get into the details of
how they work but it is I think really
important to understand what their
purpose is in one respect they came out
of that volatility from Bitcoin yeah to
fill a role that Bitcoin really wasn't
yeah yeah
um it's funny you asked is I've been
trying to explain stable coins I think
for the past two days to people so I I
have a following framework I'm going to
test it on your viewers this would be
awesome so if you look throughout
history there's three ways really I
think of creating liquidity and
liquidity is just a medium for settling
payments right right it's doing so
fluidly and efficiently exactly and so
sometimes it's invisible sometimes it's
just you know me debiting your deposit
account um or you know something equally
immaterial as that um but the first way
is I would call it uh minting so it's
the creation of what we call outside
money I think in in certain terms which
is money that is not redeemable in
anything else it's not a claim against
anything it's just it's a goldcoin what
is a gold coin it's a gold coin it's a
zero liability exactly so what is a
Bitcoin it's just a Bitcoin right and so
that kind of money is volatile in its
own ways but that's one way of making
money there's two other ways of making
money um and they require making inside
money so inside money is your classic
kind of Bank Ledger kind of approach I'm
sure your viewers are familiar with oh
yeah Ledger we know about ledgers yeah
you know about ledgers you know about
inside and outside money um so inside
money really is uh it's it's created in
pair so you have an asset and you have a
liability and in the end it all Nets out
to zero so you know if uh you know the
bank of you know we bank with Eco and
we're sending transactions you and me
and other people at at the end of a
cycle people uh you know the bank will
net out the transactions right and they
mostly all net out to zero right so is
it real money I mean it is true
liquidity it did facilitate exchange um
but it's not outside money because it
settles out to zero so there's two ways
of making money in that way one is what
I call variable funding uh your viewers
might not as margin leverage through
like brokerages um historically was
known as like Merchant credit uh you
know in firm lending where you're
basically watching you know I look at
your assets you show me your books and
you say man I need $500 million I look
at your books and you say okay he has a
billion in Securities and say I'll lend
you 500 million for two days okay fine
at whatever 5% that's kind of variable
funding and then fix rate funding which
we now know primarily as bonds but also
includes mortgages and things of that
sort so stable coins are actually in the
last two categories um most of your big
stable coins like maker liqui and
whatever are basically margin Lending
collateral uh stable coins um so you
know I I deposit some crypto asset and
then I borrow against it and I call it a
stable coin but really it all settles
out to zero if you you see what I mean
it's not real money right in sorry it's
not it's not outside money it's not
outside money money definitely real
money though yeah it's inside money but
it's not outside money uh and then what
I'm working on is designing obviously a
stable coin that uses uh fix funding
kind of a fix funding model to create a
much more stable kind of uh stable coin
that can then circulate more broadly and
scale up further so that's how I would
think about stable coins um tether and
usdc are definitely in the first
category why because they're just
wrapping true outside money they're just
wrapping dollars in a bank account right
which are backed by the full faith of
the United States federal government
found out as we found out I mean um
someone was saying like who was it I
think it was Athena was claiming that
you don't want a stable coin
collateralized by dollars in a bank
account I said are you crazy the US will
ba bail out all its banks it's like it's
you know it's it's backed by the most
powerful Empire in the history of the
world of course I'm gonna pick that coin
you know over the others so yeah there's
a history behind that too because you
know a lot of this comes down to and
every monetary topic comes down to trust
and faith yeah and that's really kind of
the situation we find ourselves and why
I I started out with the analogy I did
because for most people who are not
inside this business as you are a lot of
this looks scary looks hella scary I
mean it's like you hear scams you hear
uh people losing money these volatile
Cycles oh my God the volatility and
price for most people don't who not
really close to the uh what's what's
actually happening the lack of
information is a pro is prohibitive yeah
makes it very difficult to make informed
decisions about this and I think that's
one of the reasons why we want to really
we want to get into these details and
really understand the history and
understand that this is just natural
behavior yeah U and there's a purpose
behind both the reason we got here and
where we're actually going right so are
there any other historical analogies
that you could think of that would be
useful in understanding the transition
so many this is this is sort of a loaded
softball question here well before we
before I answer that question I was
going to say um the confusion and I
guess fear around participating in this
ecosystem is one of the reasons I
appreciate kind of what you do um the
United St I guess modern Western Society
has has such a low level of financial
literacy oh yeah unbelievable the things
that are happening in defi should not be
that difficult to understand um but even
the people building in the space coming
with such low levels of financial
literacy that they build really dumb
things like basis cash was built by
someone who just took like you know
economics 101 at Princeton and now
thought that they they knew how to solve
all you know the world's monetary
problems it's they don't even understand
how the banking system works how money
Works uh I think your average person
knows a little bit less the people that
I found to be quite Savvy about this
funny enough
are people of my background that come
from like third world countries because
we have to deal with unstable financial
institutions all the time it's a actual
fact fact life yeah yeah yeah so we know
what we're doing we're like okay the
money's not going to be 100% you know
what doesn't work yeah yeah it's like
your promise return so what's the cat
where's the risk you know there's no
reward without risk so um I see this as
well as in in in Asia the way people
think about preserving wealth and all
these other things throughout families
that's where you see just that's where
you see a lot of this digital currency
crypto stuff is Asia Emerging Market
Focus because they have the immediate
problem yeah and you're right most
Americans Western people they don't
really think about those which really
funny is it's that you need the Western
ethos it's really the American ethos of
open- source software to drive this
where we're saying we'll build this
stuff and we won't intermediate we won't
collect the rents in the middle right
that's insane to Europe to a European or
an Asian kind of Innovator um but you
need their sensibilities to really prune
out all the bad ideas I think that
accumulate from the American kind of Na
there's also another part of that too is
uh we've been talking about this during
the conference by the way I didn't say
so but we're actually in Denver at the
eth Denver conference was one of reason
I want to come here to talk with people
like yourself yeah and uh get a real
good sense about what's actually
happening here one of the things that
we've been talking about is
underappreciated aspect of the the the
internationalization of the dollar is
the respect for privacy and contracts
which is something you can't um um you
can't really overstate especially given
the Alternatives where some of that
stuff is Le less certain and less ideal
yeah where you you're not you enter into
a business arrangement with a
counterparty you're not actually sure if
they're going to live up to the terms
and there's no means to intermediate and
settle it and so one of the things that
I've noticed is that you're right
there's this the interest in
cryptocurrency in using it comes from
places where it needs to be used but the
the people who are building it tend to
be here in America e and we're dressed
up in unicorn onesies you know and
dancing around that's part of with with
pink Bon bonss yeah so it's a it's a I
think it's a very potent when you have
kind of the the idealists and the
realists I think working on the same
stuff isn't that the best yeah because
then you have you're drawing from the
best of both pools and you do need both
you need both sides of it yeah well I
would argue if you just studied history
you would know what to do a true
historian you just look like it's a
cheat you know man that's another thing
I've noticed too is that it's it
historians philosophers and it's
Engineers yeah that is an awesome mix
because you need the engineers because
they they know how to build things but
you also need the Phil philosophers and
the historians because they can look
back and say okay we understand what it
is we need to build yeah you need both
of those put together so I think one of
the most positive aspects that I've seen
just coming here as well as just you
know investigating space is how much
interest there is among these various
groups of people which means once you
get a critical mass and you have a large
enough pool of people to draw from
inevitably the magic happens yeah I mean
I'll be not to shill my own book but one
of the for me I I eventually did leave
Academia but a lot of it was I struggled
within academic history which has turned
into kind of you know ident it's
basically I would call it glorify
journalism through the identity lens I
think that's kind of what they focus on
and uh you know I'm trying to understand
the nature of money and finance and so
on so I was struggling to get traction
because those are just not fashionable
things and yet anytime I talk to Crypt
Builder it's like things that are
obvious to me to them are like such
valuable pieces of knowledge and I
thought to myself you know what here are
people that appreciate kind of the work
that I do and the the insights that they
might derive from it you know I can't
possibly build all the ideas that I have
so I'm more than happy to share them and
you know hopefully people take my angel
checks to then build it but you know
it's it's just it's a fantastic mix I
think um there's a lack of historical
awareness and knowledge I think within
our field um and
that's not anyone's fault I think that's
a failure of our education system
broadly speaking uh failure of Academia
and kind of its
publishing uh kind of biases I think
both in books uh which publish very
boring books and then articles which are
unintelligible jargon um so you know
it's it's it's one of the things that
I'm trying to rectify it's obviously one
of the things that Neil tries to rectify
all the time as well we need we need
historical update um you know literacy
not just about financial literacy but
also iCal litery because a lot of the
stuff um and you you see this all the
time this the the problems that the
crypto space is working through people
have worked through already yeah it's
not NE it's not exactly a road map but
there's a lot of hard lessons that have
already been learned that um that could
be like useful and helpful in a lot of
different ways yeah I think that's right
I can tell you about what I talked about
yesterday which basically we need to get
into that so um um I think it was
posision as the counterweight for all
the people that were Shilling or sorry
not Shilling for all the people that
were advocating selling and advertising
advertising real world assets on chain
right especially treasuries which I know
you've probably talked about a lot um
and so I went up there and what was the
title of my talk I think I changed it
last minute it was the future of
crypto's yield a history of government
debt in liquid sing and so what I tried
to do in that presentation was do a
brief comparison between two things so
um you know what are going to be crypto
treasuries so what are treasuries really
and so and I mean here treasuries not as
the actual instrument today but really
as Government debt as this foundational
piece of all systemically important
financial institutions so that was the
history of 400 years that was
compressing into this presentation and
then I was trying to figure out which
asset in crypto actually fits that
pattern the most and so the history of
government debt right so it used to be
that government debt was not your
risk-free asset it did not give you your
risk-free rate rate it was the riskiest
thing you could do wor because in fact
the King was never going to pay you back
and if you protested you were going to
die you had no means of arbitration
exactly so if you look at uh you know
rates over time they declined
precipitously after the 1600s as people
realized how to issue credible debt so
the first step of kind of this evolution
of government debt as the central asset
of the financial system is credible
commitment
um begins in
1688 with the Glorious Revolution in
England and the kind of the
Constitutional Innovation there of
separating kind of the powers into
legislative judicial and executive I
promise this is not a Putin likee
interview where I go on for 40 minutes
about history since since medieval
England actually I think people people
would like that yeah so I have a meme
about that I actually did put text of my
talking that mean but so you begin in
1688 the king gets overthrown and then
monarchy gets reinstated and you now
have Parliament with the taxation power
right uh basically controlling the
issuance of debt to fund the uh the
expenses of the king's household and the
King's government that's when the bank
of England gets created to basically um
you know sell and the the basically the
the government and then you know repay
it um so that's Innovation number one
the second step in this is in the 1720s
which is with the Boom in um exchanges
Securities exchanges and that's because
you have the south sea bubble and the
Mississippi bubble uh Equity is getting
invented there's a massive bubble Newton
loses a third of his wealth because you
know the smartest man alive on the
planet cannot resist aping in at the top
with his friends so you know human
nature so much just is human nature you
can be as smart as you are and you'll
will still lose money in the market um
so you know everyone that's lost money
you should feel a little bit better
um but what's interesting is so the
French shut down their financial markets
because a lot too many Aristocrats were
involved too many people were pissed off
so everything got shut down you can't
even really do credit intermediation
anymore in in the you know with through
kind of local small
entities the Brits passed something
called the bubble act and so you're not
supposed to issue stock anymore and this
is in place for a hundred years so only
two companies get a royal Charter to
this but that's not what actually
happens so there's like hundreds of
companies that issue stock and they
continue trading on this uh exchange uh
so if this sounds a little bit familiar
like unregistered Securities tokens outs
outside the official trading on Unis
swap trading Unis swap I mean this is
literally what I'm thinking you're not
supposed to do it but no one's really
going to shut it down because there's
kind of a legal gray area and but also
because there is a use it's not just
happening in a vacuum so yes I know so
the first use case was in fact spec
population but that only lasts for a few
years right and then you have kind of
this slow period that in this case lasts
100 years um and what's really great
about it is you have all these Merchant
families and Traders like building up
expertise on like how do I make a market
how should I manage risk right this is
like vital human knowledge that needs to
be built up over a hundred years um the
third Innovation is actually what I call
kind of steady yield so you're a little
bit right that it starts to serve a
purpose um so you're trading all these
stocks whatever they're speculative they
whatever they're based on these risky
Ventures the government starts trying to
sell Bonds on the exchanges so they
experiment with a variety of different
Bond types they have like Lottery bonds
I mean your traditional fixed rate bonds
um a bunch of other strange things um
that don't exist anymore and then they
chance upon something called the
Consolidated annuity in 1751 and it's
it's a piece of paper they're all
fungible so even if you issue them later
years later they're all basically the
same because they all yield 3% per year
that's it so you buy this thing so that
was the magic number so you you yeah you
you buy this thing pay your 10 pound
sterling and every year you go collect
your 3% yield um this turns out to be an
incredibly powerful instrument right one
because unlike modern bonds today your
liquidity can actually exist on a
two-sided exchange right that's live
your liquidity is all concentrated in a
single
Market uh and two because of the cred
credible commitment that I just
discussed earlier you actually know that
you'll get paid your 3% um and so it's
it's it's a such a smooth wonderful
thing that gets invented there um and
this plays a big role during the wars
against Napoleon because as I just said
the French shut down all their financial
markets so Napoleon finances his Wars
through things that some people might
find admirable taxation direct Taxation
and uh pillaging and looting your
neighbors yeah so he does run a balanced
budget but it's not out of choice it's
because uh nobody wants to buy French
debt because you'll get paid back in
worthless stuff or a gun shov in your
face yeah yeah so the British on the
other hand um and I shared a graph
yesterday are able to run these massive
budget
deficits uh because one all the displace
princes Bishops Merchants from
Continental Europe send all their money
and capital to London and they're
investing in what they're investing in
consoles yielding 3% a year so this
really cool new asset Financial
instrument just balloons in size it
becomes massive because it just absorbs
all these inflows and the government
needs to do all these expenditures
they're funding not only their own Navy
and their own Army they're using their
their bond sales to then get gold that
then gets distributed out to their
allies on the continent because these
are the people actually fighting and
dying against Napoleon um by the way
this is how the rosals make all their
money so it's not through the
speculation in the bond market it's
actually the mirror side of government
debt issuance is the actual distribution
of hard currency in the Battle Zone and
that's what they managed they managed
the remittance networks and they charge
the fees on that and that's how they get
rich and those are the
intermediaries exactly we always need
intermedi because at the end of it you
do need someone to physically carry the
gold back out you need to find literal
intermediation literally you need to go
through Enemy Lines um so you know
people complain about them having made
all that money but nobody else was
stepping up to do this because you would
in fact get killed it was actually not
risk-free um so you see this happening
and at the end of the war you know you
could say 1815 but really happens like
in the mid 18 1844 I guess when the bank
of England gets it's kind of new is
rights and all that stuff um that's when
government debt really becomes
a really important collateral for a new
class of things like Banks right because
now they have all these assets insurance
companies all these other things um and
that's really the beginning of it all I
I think that's actually the original sin
when we real when people say that the
Central Bank should be the lender of
Last Resort I think that's a massive
mistake when I was younger I used to
believe that now realized I've realized
that that has led it to the inexorable R
of government intervention but that's
really the Innovation that's the history
of government government debt I was
thinking about what instrument kind of
mimics this or Parallels this history of
the evolution of government debt as a
foundational financial asset and it
wasn't tokenized treasuries it was
Liquid staking tokens so okay you got to
explain that a little bit better oh dang
it yeah uh so liquid staking is uh I
would see it as um participating in
securing the blockchain so if you have
some eth you lock it up in particular
way and you use that eth to then secure
all the transactions that go through the
network and in return the eth network
will give you 3% back eth over a year so
again I thought it it kind of sounds
familiar I know I when I I when I
thought about it like is it really 3%
because that's oddly familiar that seems
to be the rate it's not two it's not one
it's not five I don't know what it is
just right because it's not too high
because then it becomes prohibitive and
it's not too low because it's not enough
of a return to engage in it so maybe
there's some you know some yeah some
underlying Humanity there that return I
think it might be a human psychology
kind of yeah Universal so do you see the
same type of development pathway um in I
mean that was an extended a long period
of time because that's I mean human
history pretty slow at that particular
time in progress was is there a is there
a similar pathway in cryptocurrency and
are you seeing that actually happen so
that's that's the real question I I did
so um so for example pool side is as I
mentioned this specialized liquidity
pool for yield bearing assets um when we
when I came up with this idea in 2020
early 2021 there were no yield bearing
assets on right everything was just a
fixed token there were no rebasing
assets that represent the yield either
um so I added up kind of all the
categories of yield bearing assets so
liquid staking tokens that we just
described your lend lending positions on
lending markets because you know you're
lending out dollars and you're getting
paid back in dollars a certain interest
rate that's really a yield bearing
position um you're rebasing currencies
and you know flat coins that adjust with
inflation and then the last one was
token as real world assets so I added up
um all the value locked in these
protocols since
2021 and um what I saw was that yield
bearing assets are now like 70 or 80% of
all decentralized Finance value locked
in any type of protocol so it's now the
dominant asset class so the future
that's that's a pretty quick trans
Evolution transition is and I was saying
this is why I was saying you know the
future of defi is in fact yield it's
yield-based and so but when you break it
down um you know rebasing currencies are
basically invisible in this graph um I
was surprised to discover that real
world assets for all the hype that they
get and all the institutional attention
that they get where else so basically
insignificant I think I haven't updated
the number since the end of last year uh
but back then it was maybe between half
to a billion out of a total tvl in defi
of 50 something so it's like very very
small wow um The Lending positions kind
of the lending Market assets had shrunk
down considerably they used to be the
bulk of kind of defi activity now they
relatively small but liquid staking on
its own is over 60% of d tvl right now
so it is already the largest it's the
largest merging as the the big um the
big base yeah and so this go they
basically start at 0 1% in 2021 and now
are at 60 something probably higher now
with liquid reaking uh which is a
rehypothecation means of doing that
which you know it's kind of Novel and
this is where but that all serious this
is where people okay they're like okay I
get I get kind of the Baseline I get the
idea I get the pathway here but how do
how some of that stuff works and how it
actually gets put together yeah even the
termin terminology and jargon are are
somewhat uh yeah difficult to overcome
which is why I think it's helpful to go
back through the historical example and
say people struggled with the same
things every time this happened a
console what's that yeah you know that
was there was a time when nobody knew
what that actually was except for those
people who actually were involved in it
exactly and nobody really knew where
things were going um I I think in this
case you can cheat a little bit like I
said uh but even this caught me by
surprise because the transition was so
quick right right two years not 150 two
years two years is nothing on on a time
scale of the evolutions and the radical
changes we're talking about that's
nothing and so there's a moment in time
between when this asset emerges as you
know with its steady yield it I think of
it as the the base of the food chain
right so it's just kind of like the
Plankton at the bottom that 3% will feed
all the more complicated organisms that
are built on top um once that is
invented and then from when that food
chain actually gets built that's when
you see massive inflows right in the in
the British case it was during the
massive world war against Napoleonic
France I I was not entirely sure what
was going to drive all the big inflows
this cycle I mean we'll we'll see um but
I think probably liquid staking gets
much larger and then building protocols
that are
uh natively compatible with yield and
the way that yield gets generated on
chain are going to be huge and I think
the there's one of the things that I you
know I love this conference I love eth
number but eth people are tend to be
pretty dogmatic sometimes so they're
anti- rebasing and they were anti- yield
really uh so most of the original
Protocols are not compatible with yield
bearing assets so people just lose money
they lose their yield um I think you're
going to see a new generation of
protocols built around the yield itself
so okay that's interesting too that you
know you there are there pockets of
people who have their own personal Dogma
their own personal views and it's tough
to get them to but then again I mean
that's again human nature but what I
really wanted to ask what really talking
about was I think what's positive about
all that is that what you're describing
is the processes that lead to
sustainability the pathway forward is
that there is a
sustainable capability that's going on
right now we're talking that makes this
more than just a flash in a pan yes we
have we have the disruptive technology
have all the flashes and bells and
whistles and all that stuff but in the
at the end of the day this is the stuff
that needs to happen exactly we can't
live in the Mississippi and south sea
bubble era forever issuing pointless
stocks and then hoping that somebody
buys them at a higher price the next
Dogecoin right exactly so uh I think the
invention of onchain yield by the way we
got Neil and I got a lot of flag from
Brad long for making this analogy
because he's like well the yield is you
know in dollar terms it fluctuates I'm
like well yeah of course but if you
bought you know Japanese bonds yielding
Yen then the yield is also volatile in
dollar terms right so in its own native
terms it's it is in fact a fixed 3%
yield I think that feeds that allows you
to then build sustainable structures on
top right because it's no longer just
trying to issue a token and cycle it
back out which is always inherently
unstable and that's that's the
foundation of sand and I think there is
a perception that's all that there is
here yeah and I think that's one of the
things I want to correct in talking to
people like yourself you're actually
doing that thing which is the thing that
needs to happen that leads to the to the
next stage yeah so can we talk a little
bit about what you maybe what do you see
is the next stage here so if we're if
we're getting this we're getting the
yield based Securities that's coming in
that's becoming more and more of a
stable proposition yeah in your analogy
that's the we're taking things seriously
we're creating credible underlying
assets and uh things way to do things so
what's what's the next step o that's a
hard one it is and I I did that you know
it's intention I figured if I'm gonna
ask that of somebody I'm gonna ask it
for you from you so ah so there's a
couple things that I'm thinking about so
there I think there's this question of
um hedging risk and hedging doesn't
actually mean canceling it out it
actually means defining it with Hedges
like you do with land and then selling
it you know transfer so risk transfer on
chain I think is still in its infancy I
think the only thing people know how to
do now is split the yield from its base
token oh but you know we need to learn
other ways of um doing risk transfers on
chain I think that's one um I don't want
to call it Insurance because that's not
what this is it's it's something
slightly different insurance is kind of
a narrow piece of that
um so that's I think what comes next I
think a lot of the existing defi
infrastructure needs to get revamped to
be yield compatible um so you know I've
been pushing rebasing for a long time as
a way of better representing the yield
information for a token rather than
having to Ping an oracle it's in the
token itself um so I think a lot of
infrastructure gets revamped I think
your amm your your automated market
makers your lending platforms uh all of
them have to get revamped to accommodate
yield that's probably the second big
thing and then the third big thing is
really this liquidity question that we
started with so how do you create
onchain liquidity in a sustainable way
and I think the big unlock there will be
in fact kind of these fixed funding
designs for stable coins right which
will be probably collateralized now with
these yield bearing assets before it was
a little wishy-washy it was like put in
some eth you borrow against that it's
clearly speculative here you could say
well you know the protocol is collecting
the yield that accumulates so the buffer
there to protect the inside money
against well I don't believe in on
demand redemptions this is a topic for
another day but you know the the the
buffer there for volatility will grow
over time this looks a little bit like a
bank it does but it shouldn't be because
it's going to be peer-to-peer um so who
are the bankers right um so I think
you're basically an ability these Banks
you build up uh kind of a but these are
not Banks as they're they're described
traditionally they have a a specific
function that is I mean it's almost
necessary function but it's it's not
like we're we're going well so there's a
myth about Banks if I can do 30 second
detour so Economist will tell you that
Banks do maturity transformation right I
get your your short-term deposits and
then I do the long-term investment and I
take the risk in the middle that's
[ __ ] frankly so I I was compiling
all the information on bank failures and
Bank runs in the US since 1920 I'll send
you some very cool graphs but anyways
the cost of backstopping the financial
system has grown exponentially over time
in inflation adjusted terms which is
insane right if regulations worked it
would be the opposite so clearly what
we're doing doesn't work um but I was
looking at the composition of Bank
assets uh because now I can look at it
um it's like 55 or 60% of it is just
hyper liquid Securities like treasuries
and then what is it 20% is commercial
real estate lending and 20% is something
else but most what banks really are
they're they're baskets they're balloons
of liquid government debt and then you
just run payments through it and that
justifies their existence yeah but you
can they they've turned that into a
special privilege in a pedestal exactly
but I think crypto is going to or sorry
defi is going to unbundle you do it too
I do it all the time I mean you know
this is why we say historical
perspectives on the future of digital
money it's like we're it's not crypto I
don't know what nfts are don't talk to
me about that uh I don't own an ape but
Banks today will be unbundled I think by
this new technology right because you
have the lending the true intermediation
piece that needs to be carved out in its
own thing it does why are we running
payments through this mixed thing right
we really just need to be running
payments through the yield bearing you
know basket of Securities here because
it it serves a purpose I have come to
accept you kind of do need kind of this
it's kind of elegant it's there is a I
mean it's not perfect but it works yeah
so I think stable coin protocols in the
future will be one half of the bank
they'll be the part that handles the
payments and settles it through this
stable basket of assets the other half
of the bank that does the true lending
and has to do the risk taking actually
has to think about risk yeah I have no
idea how that will be done on chain that
seems really hard people have been
trying through under collateralized
lending it's not under collateralized
noral It's Always collateralized by
Future cash flows uh but you need to
think about that and I think the mistake
that we've done here is because of the
way that the government back stop with
industry works is you have Force these
two things that really should be
separate and I think they will be
unbundled so that's kind of what I see
in the future yeah I don't think some of
that is I don't think it's necessarily
government I think it was necessity of
the limitations ofch technology and
everything else and it sort of just grew
organically and I think the regulations
kind of came in afterwards and said how
do we try to make this less prone to uh
flights of risk at these particular
points in time and um but that I mean
that's I think one of the promises for
crypto space is to be able to find a
more elegant solution to do the same
function without all of the baggage
comes with it and there's more
efficiency potential there as well as um
just
maybe hopefully less prone to volatility
and um Super Bubble type of behavior I'm
a little bit worried about that but I
that's the opportunity though it's
because we're you're basically it's not
necessarily A blank canvas but there
there's as you're saying there's
definitely different ways to do this
yeah yeah I still think it's primarily
legislation since no there I'll
recommend a book to you by um a friend
of mine who is now the chief of us at
xon mobile it's called legislating
instability uh it's Tyler Goodspeed and
so it's uh look at the bank of ir uh
failure I think in the Scottish PR
banking era but you know Adam Smith was
writing at that point saying you know
all these small banks are they should be
regulated out or whatever these laws had
already passed he had been advocating it
because all his friends were running
Banks too the large Banks so uh We've
definitely made Banks more fragile over
time through legislation and then their
own fragility then demands that we
intervene to save them which just it
sets up this very vicious cycle and so
then they get very big and very
important and now we can't let them go
under right and well because we I think
it's because they have we have the
payment system running through as you
were pointing out that's that's the
piece where you say oh okay now we
really have to protect them and that was
separate that out and suddenly they're
not so special right well I mean we did
bail uh broker dealers during 2008 but
those those are the real secrets of
intermediation for the US govern the
payment rails for the years yeah the
payment
rails so yeah yeah so okay let's let's
wrap this up because Fant we could be
here forever talking about some of this
stuff but I think what from my own
perspective coming here is sort of an
outsider interested Observer or what do
they what do they call it crypto
adjacent crypto adjacent is that there
is a lot of good stuff here yeah there
is a lot of smart people yourself
included a lot of people who are doing
lots of different things and have made
substantial and tangible progress
already which means that this is not
something that it's not a flash in the
pan it's not maybe what most people have
in in their mind you know it's FTX it's
you know all the crap crap that goes on
it isn't many ways the same disruptive
technological cycle but un but it in a
monetary setting which makes it maybe a
little bit more scary a little bit more
dangerous yeah but when you have this I
think critical mass coming together it
actually makes it more of a optimistic
future than it is something to be afraid
of right I I think that's true um I'll
close with this um Neil and I hosted a
conference at Stanford's Hoover
institution last year on the history of
Financial and monetary Innovation you
should have been there you would have
loved that I love that I'm sorry I
didn't invite
you it got lost in the mail that happed
Nick Carter told me the same thing he's
like why didn't you send me an invite I
was like I didn't think you would want
to come turns that everybody wanted to
come um that's International money is a
new sexy exactly um and so it was a very
was a great conference because I got to
invite people whose work had impacted me
since I was a graduate student and so we
looked at things from Asia you know
Europe the Americas you know the whistle
Bank uh
cryptocurrency uh you know the history
of the corporation so there were two
insights here um I'll I'll leave you
with one that I think is the the big one
um Evolution really is the right model
to think about what's happening here so
all these papers were on such different
topics and yet the theme that came up
was that that I saw was that almost
everything gets independently reinvented
over and over again but in different
forms right the corporation gets
invented at least 20 different times
throughout Europe in very different
forms we only remember one because we
think that's the descendant the the
ancestor recurrent form of limited
liability but it turns out there were
other ways of organizing kind of
property that had permanent Capital that
lasted through time um the big perennial
question as I said earlier was payments
and so you see all these different
institutional constellations around this
problem of payments across space and
time and so you have kind of diversion
and then conversion Evolution so if you
think of it in that way it's not so
scary it's like we do this all the time
it's just that the last few hundred
years years since the postwar era or
last less than 100 years since the post
well since World War
II innovation has really slowed down I
think governments have become so
interventionist afterwards we've really
interfered with this beautiful machine
that generates diversity and then
selection and then reproduction of the
successful things and I think in some
ways crypto in its three forms all its
forms I think has restarted that cycle
of History it's gotten time move in
again I think in terms of Finance yeah
and I think that's incredibly beautiful
and hopeful really yeah given where we
are Manny I cannot thank you enough for
coming in and taking the time I really
appreciate all your insights and
everything so thank you very much for
joining me it's been a pleasure thank
you so much
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