The Digital Future Is Here (Adapt Or Die)

Summary

Manny, 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

00:00

🤓 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.

05:00

😮‍💨 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.

10:01

📈 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.

15:01

😎 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.

20:02

🏦 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.

25:04

🚀 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.

30:05

⚖️ 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.

35:05

🏭 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.

40:07

🔁 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.

45:08

🌱 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.

Keywords

💡cryptocurrency

Cryptocurrency refers to digital currencies that use cryptography and distributed ledgers like blockchain to secure and verify transactions. The video discusses the rise of cryptocurrencies like Bitcoin over the last 15 years as part of the digital future and disruptive monetary technologies.

💡defi

Decentralized finance (DeFi) refers to financial applications and services that operate on public blockchains without centralized intermediaries. The video describes DeFi concepts like smart contracts and how they enable peer-to-peer financial activities.

💡stablecoins

Stablecoins are cryptocurrencies designed to have minimal price volatility. As the video explains, they can facilitate payments and transactions in the crypto ecosystem unlike the high volatility of coins like Bitcoin.

💡yield

Yield refers to the interest or profits earned on investments. The video discusses the concept of on-chain yield, with assets like liquid staking tokens, as an emerging sustainable backbone for DeFi protocols.

💡liquidity

Liquidity refers to the ease with which an asset can be converted into cash. The video emphasizes the importance of generating liquidity for economic and financial activity throughout history.

💡risk transfer

Risk transfer means shifting risk associated with an investment to another party, often for a fee. The speaker suggests on-chain risk transfer mechanisms still need to be developed within DeFi.

💡credible commitment

Credible commitment refers to a government's ability to reliably honor its debt obligations. The video traces how this concept was key to British debt instruments becoming foundational global financial assets.

💡unbundling

Unbundling means separating services that were traditionally jointly provided. The video proposes unbundling aspects of banking so payments don't have to flow through lending conduits.

💡sustainability

Sustainability refers to the capacity to endure over time. The video suggests sustainable DeFi requires moving beyond speculation to yield-generating assets.

💡evolution

Evolution represents gradual adaptation over time. The speaker closes by framing innovation cycles as an evolutionary process rather than something to fear.

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