Episode 25

Self-Amending Blockchains: Arthur Breitman on Tezos Governance Innovation and Crypto Treasury Strategies

In this episode of Unblock'd, host Dr. Jemma Green speaks with Arthur Breitman, founder of Tezos, about revolutionary blockchain governance and the future of self-amending protocols.

Episode Highlights:

  • Arthur's vision for Tezos as the world's first self-amending blockchain that upgrades itself based on token holder decisions
  • How Tezos eliminates hard forks through formal on-chain governance mechanisms
  • The genesis of Tezos as the original proof of stake blockchain with advanced smart contract programming languages
  • The thriving art ecosystem on Tezos including platforms like objkt.com and Hic et Nunc
  • Generative art communities and why visual artists choose Tezos for their work
  • The upcoming AAA game Reaper Actual and EVM compatibility through Etherlink
  • Arthur's perspective on Bitcoin treasury companies and the risks of leveraged crypto holdings
  • The future of blockchain governance and scaling solutions
  • How technical innovation is addressing information inequality and individual sovereignty

Connect with Arthur Breitman:

Connect with Tezos:

UnBlock'd podcast with Dr. Jemma Green

For more information on Dr. Jemma Green

Visit: https://www.powerledger.io/

Or connect on LinkedIn: https://www.linkedin.com/in/jemmagreen/

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Produced by: Podcasts Done For You

View this episode on YouTube @PodcastsDoneForYou_clients


#Unblockd #Tezos #BlockchainGovernance #SelfAmending #ProofOfStake #CryptoArt #GenerativeArt #DeFi #BlockchainInnovation #CryptoTreasury

Transcript
Anthony Perl:

Self amending Blockchains Arthur Breitman on

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Tezos Governance Innovation.

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In this episode, Dr.

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Jemma Green sits down with Arthur

Breitman, founder of Tezos, who's

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revolutionizing blockchain governance

through self amending architecture,

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Arthur shares how Tezos eliminates

hard forks through on chain Go.

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Pioneered energy efficient proof of stake

consensus, and became the unexpected

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home for generative art and AA gaming.

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From governance mechanisms to

scaling solutions, they explore

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how technical innovation is

reshaping the blockchain landscape.

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I'm your co-host Anthony Perl, and whether

you're an investor or a startup looking

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for insights, it's time to get unblocked.

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Jemma: Welcome to Unblocked Arthur.

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It's lovely to have the

co-founder of Tezos Foundation.

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Join us today on unblocked.

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Arthur: Thank you for having me.

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Jemma: All right.

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I'd like to start at the beginning.

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, Tezos has been around since 2014,

so you are definitely in the OG

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category as a pioneer in this space.

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I'd love if you could just tell us about

what is Tezos and what was it envisaged

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as originally, and what is it today?

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Arthur: Right.

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So Tezos is a unique blockchain in that

it is to the excel of my analogy, only

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blockchain that actually upgrades itself.

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On the fly based on the

decision of the token holders.

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So if you hold a test token, you can

create blocks and you can participate

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in the governance of the chain.

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Now, you know, back in 2014 there were a

lot of discussions around what should be

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the governance model of the blockchain,

and some people insisted that they should

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have none, that they should be setting the

stone and that nothing should ever happen.

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But I think that was myopic because

we've seen 10 years of innovation.

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Proof of stake has been a fantastic

innovation, smart contracts,

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privacy, all of these innovations.

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Were still nascent at the time,

and there's still more to come.

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And at the same time, other

people said, well, you know, you

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don't really need governance.

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All you need is forking because

the developers can just tell

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everyone, here's a new version.

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Now, the problem is that if the

developers can tell everyone, here's

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a new version, you don't really

have any mutable system, do you?

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You just add the mercy of

what the developers want.

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And Tezos has a formal governance system.

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It's also the original

proof of stake blockchain.

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They were trained that.

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Use a form of staking in the past,

but this was the first one where

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actually coins were at stake.

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Like if you misbehave, you would

actually lose your coin in the

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mechanism known as slashing Pioneer.

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Also advanced programming languages for

smart contracts that a lot of people.

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To use formal methods more effectively in

order to prove the security of contracts.

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So it's innovative in a lot of areas, and

as of late, I would say in the past two

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years, the main focus of the development

of the chain has been around scaling.

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So it's a blockchain that's

home to many applications,

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particularly in the art space.

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We have a striving art community.

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There's of course games, there's

of course defi, but all of these.

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Have been popular in part because

Tedo has been able to maintain very

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cheap transaction fees, some of the

cheapest out there, and that has

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been through a relentless commitment

to scaling over time and providing

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more and more capacity for usage.

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Jemma: Great.

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Um, you mentioned like a few use cases

here, art being a, like a significant one.

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Could you tell us a little bit about

the kind of art projects and ecosystems

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related to art that are on Tezos?

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Arthur: Sure.

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So I, I would say as a genesis of

art, and Tezos really starts with a

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marketplace called Ed No, here and

Now, which attracted a lot of artists,

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especially a lot of generative artists,

artists creating art pieces from code.

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And this community really grew.

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And then we saw a lot of

other projects pop on.

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There was ethics s, there's

of course object.com,

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which is a leading.

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Platform for minting

and selling nfcs on ti.

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We also have AK swap, so Teya,

I'm gonna forget some because

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it's a big ecosystem of this.

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Largely visual artists and generative

artists have found their home on ti.

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Jemma: And you mentioned

Defi as well, and gaming.

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Could you tell us a little

bit about the kinds of things

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happening in those regards as well?

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Arthur: Yeah, so we have an

exciting upcoming game on Tezos,

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for instance, called Reaper Actual

and it's AAA game, and it's coming

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to a rollout on top of Tezos.

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So.

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I'm getting into the technical

detail here, but one of the latest

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development is that Tezos, you know,

has a compatibility now with EVM.

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As you may know, there's a lot of

chains out there who took the EVM

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model from Ethereum and ated it, and

that allows developers to develop

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for the EVM without necessarily

committing to the choice of one chain

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and then making that trust later.

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And in that case, so that

compatibility layer is known as eLink.

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So any application that's developed for

the Ethereum world, you know, whether you

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do a bit for Polygon, bay, sirium, all

of this strain, you can now now run it on

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Tezo J filling and RIP actual, which is.

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Coming in a few months is one of those,

so exciting game in a generated universe.

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Jemma: Nice.

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I mean, crypto is like

constantly in a battle between

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decentralization and efficiency.

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Where do you think Tesla sits

on that spectrum, especially as

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projects such as, say, Solana

and others, push high throughput.

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Arthur: Yeah, I don't think

there's actually big trade off

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between, I would say throughputs

and security and decentralization.

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I think for a while it was not known how

to design the systems and so people would

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have the trade off, but facing think very

and large, the trade off no longer exists.

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You know, if you want to get technical,

once you have a technology like Rollups,

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these, a Zika rollup or validity

rollup, which I propose as a scaling

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solution in 2017, or optimistic rollup.

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He marries that with the

availability sampling.

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So I'm getting in the weeds here,

but the point is, um, sorry,

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Jemma: actually hear what you said.

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Could you just say the word again?

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Oh,

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Arthur: sorry.

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Data availability sampling.

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Jemma: Oh, got it.

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Uhhuh,

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Arthur: I'm getting in the weeds here.

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The point is, I would say around 2021,

around 20 20, 20 21, there was a solution

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that was known that would lethins scale.

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So I don't think it's at

odds with decentralization.

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Now, I'm not sure with Solan, with the

people behind salon are thinking because.

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You know, it's not very coherent.

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Like they have this proof of history,

which doesn't really do anything.

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And then they have this idea that

the ledger is secure so long as

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there's a copy somewhere, it's

not intellectually consistent.

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It's kind of nonsense, which doesn't

mean that the chain doesn't work.

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Right.

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But I, I don't think they have a grand

theory of how it is any of this works.

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But, you know, I think they're

very focused on performance

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and it really decentralization

as a, as a secondary aspect.

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You know, it's not, it's not an approach

that I particularly like, but I, I am

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more shocked by the lack of intellectual

rigor than a he by the centralization.

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If they wanna be centralized, so be it.

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But don't go out and say that

proof of history is, is a thing

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that's useful for your consensus.

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That's ridiculous.

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Jemma: Got it.

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So for projects that are considering

like a protocol and maybe, you know,

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there's obviously Ethereum as well,

what would you say is the kind of

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compelling USP for projects to choose kes?

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Arthur: It's a lot of things.

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Out of it is community.

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We have a great community

of, you know, I mentioned of

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artists, but also of developers.

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It's a good I ethos.

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I think there are people who are

allergic to bullshit and it's

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one of the IDOs outta the chain.

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And if you're allergic to bullshit,

I think you find a good home here.

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There's also organizations

within ecosystem which are

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happy to support new projects.

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Of organizations such as Early Tech and

London, such as the Tezos Foundation

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in Switzerland, Tizi APAC in Asia.

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And so one good example

for example is, uh, Sony.

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So Sony is a project that's Sony Slink.

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They are at the

intersection of AI and art.

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They are a, you know, a deep end

platform for artists who want to use

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image models, remix them in fun ways or

like provide compute for the network.

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And you know, so came in via One is that

I think they were attracted to community

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of artists that was existing on Tezo.

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And two, there was also the

connection with CZ apac.

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So it's a holistic, so I would say

it's, uh, for holistic reasons.

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There's also the fact that,

you know, it's a serious place.

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Is secure or the chain has run, you know,

ly without interruption since:

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And you know, the future is assured

in a sense that it's always upgraded.

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It's always been at the

forefront of technology.

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And so you're not going somewhere

that going to disappear or there's

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going to be a flash in the pan.

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It's not a sexy s but it also know

that it's not riding like a hype crest.

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Jemma: Got it.

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I mean, to press a bit further on

that, you could say like Ethereum

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has some of those characteristics.

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What would be the difference?

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Is it speed that you would

say, or like what would be the

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differentiating factor between

choosing it like Ethereum or Tezos?

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Arthur: I would say ES speed

transaction costs, transaction

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costs are much higher on Ethereum.

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Ethereum has not really

progressed on a technical roadmap.

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I think a lot of it has been outsourced

to Rollups, but all the rollups that you

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have on Ethereum contrast it to the one on

or custodial, and that's a big difference.

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So if you're using base, if you're

using arbitrary, if you're using all

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these roll-ups, there's a set of key.

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That can steal all your assets.

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Coinbase has complete control of base.

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There is no difference between

a Defi deck running on base

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and the order book at Coinbase.

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It is a hundred percent under

the control of Coinbase.

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Anthony Perl: Yes,

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Arthur: and I think it gives Rollups

a bad name, but that's not the

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case for the Rollups San Tezos,

which are actually decentralized.

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You know, there's nothing inherently

centralized about the rollup technology.

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It's just that the people who

have built it, you know, as.

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As this kind of infographic ventures

on Ethereum have done it in a way

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that's been completely centralized.

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You know, I also think that they're

responding to the market, which

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doesn't really care that much about

decentralization of, uh, it's not

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everyone, but I think by and large,

like where the money is, is not

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necessarily in decentralization.

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Uh, and also people don't know.

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I think a lot of people assume that when

they're billing on base, they're billing

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on chain and not on a database that's a

hundred percent controlled by Coinbase.

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Jemma: Yeah, like it's a private

consortium, not even consortium,

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it's just a private chain.

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Arthur: I mean, rather than Ethereum.

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But the point is, if you have, you

know, if Coinbase has a key that can

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completely alter the chain, you know,

the set of the chain, I guess, you know,

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it's better than a private database

in the sense that you are at least,

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you know, it's temporary evident.

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It's not temporary proof.

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Mm-hmm.

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Yeah.

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It's like if do something everyone

will see, but which is, you know,

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virtual already improvement,

but they can still do something.

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Jemma: I see your point from what

you've just said there, it sounds

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like another point, which is that

people within the Tesla's ecosystem

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also have a, a good sense of humor.

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Arthur: I hope so.

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I hope so.

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I, I try to.

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Jakob: I wanna kind of piggyback on what

you said about being allergic to bullshit.

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I would say that tezos really rarely

chases these short-lived crypto metals.

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Let's say for example, the revenue

metal that everyone is chasing right

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now, is that restraint driven more

by your long-term thesis for Tezos,

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or is it because of a skepticism that

most metas are just cyclical noise?

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Arthur: I mean.

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The revenue thing is, is a lot

less bullshit than most of them.

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Right?

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You know, if indeed your chain, you

know, if you need a lot of tokens end up

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being burned because you have a constant

demand for, you know, you have constant

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demand for the tokens because people

want to transaction in those and burn.

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That is a very, very valid model.

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It's one of the most valid

that exist out there.

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It's stronger than just being

a, you know, a store of value.

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So I do think store of

value is meaningful.

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Strongly, the maintenance of payment,

the problem with it, because I think

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it's going to be very difficult for

change to raise significant revenue.

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And the reason behind this is

that, as I was saying earlier,

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I think scaling is solved.

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It's a solved problem.

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It's, it's not necessarily like

we don't have systems that.

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Perfectly scaled right now in terms of

engineering, I would say as an academic

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problem, it's solved as an implementation

problem is still work to be done.

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But imagine now that all the

blockchains scale and uh, you have

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abandoned block space, you have

abandoned transaction capacity.

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People can do a million

transaction per second everywhere.

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Where does the revenue come from?

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I mean, people might make transaction,

but the clearing price for transaction

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is gonna be zero if you have a, you

know, if, if you go by an auction

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mechanism or such, because I don't

think we are in a world where the

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demand for blockchain block space is

going to exceed what can be provided.

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I think we reached that world when

if they're, you know, back in:

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serum was doing loss of revenue

because hey, they were doing like.

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A handful of transactions per second,

and those were very important.

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Now Solana with much higher transaction

throughput, I still managed to

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like make a lot of revenue for the

transaction, which is quite impressive.

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The question is like, how sensitive

are people to transactions?

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And you can imagine something where

you have chains that have transaction

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fees, which are not zero, but which

are low enough that people don't care.

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High enough, there's enough

volume that they make money.

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So I think it's still possible to

have revenue, but it's a tough one.

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It's also interesting to

look at the funnel of value.

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So imagine someone who's doing a swap

on a blockchain, and let's say they're

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doing it on some random EPML too.

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So there might be a fraction of a cent

in Burns tokens as transaction fee.

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And then you know, the defi

protocols they're using.

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Maybe it's, you know.

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Keeping like 10 basis points, five

basis points in some form for the swap.

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That's already way more than the thing.

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And then, you know, they happen to

be using meta mask to do it, which

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charge them 75 basis points, and

they're lazy and they don't care.

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So.

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I think the value is going to be captured

by the players who have distribution

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channels, which are gonna be wallets

and exchanges are going to be able to

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extract a lot of values, especially

if they can abstract the backend.

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You know, if you often hear,

sometimes people say like, especially

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like people who like myself had.

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Field blockchain say like, oh,

the future is, you don't even

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know you're using a blockchain.

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It's, you know, completely underneath.

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And that may be true, but it is not a

desirable future for people building

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blockchains because they want to have

brands, they want their chains to work.

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They have like the strong network effects

to work as strong distribution channels.

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And it behind the scene, everyone is

just using application and they have

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no idea what blockchain they're using.

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Then those applications are gonna

be the one pig, the transaction fee.

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Right.

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If the future is like.

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Use some kind of broker and the broker

uses a blockchain under the hood.

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If they can switch from, you know,

making billions of transactions and

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they switch from a place that gives

them like 1 cent per transaction to

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like a fractional cent per transaction,

they're gonna go to the other one.

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So you have a race to zero.

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So the revenue thing, I would say

it's not impossible, but it is iffy,

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but it's certainly a better meta that

would say than memes or, or others.

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Jakob: And if you talk metas are always

kind of also questioning sometimes

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beliefs that you stand for, that you have.

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When you originally came up with

the Tezos protocol, is there any

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belief that has changed recently

where you're like, okay, maybe I

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was on the wrong track Back in 2014?

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Arthur: Yeah, I think in 2014, I mean.

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In 20 14, 1, there's a few, well,

more than a few mistakes that I made,

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but the main thing that was wrong

about was the importance of scaling.

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Essentially, I thought that most

scaling would be done via channels,

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so things like lightning and others.

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I thought that the primary use

case was being digital gold.

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In a way that thing that's more

defensible than the revenue meta.

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I saw the way news case was being digital

gold and as such, you don't really need

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a lot of transaction, a lot of capacity.

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It's nice to have smart contracts.

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And so I didn't focus on true

word or compute very early on.

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In fact, even the early languages in

Tezos, they're made for saying like,

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Hey, you know, you're gonna have a

very, very secure language for doing

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channels, for doing multisig, this

type of thing, but not necessarily for.

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Building very complex application

that run directly on chain, and

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that was rid of it later on.

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That was one mistake.

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I mean, it is, and it isn't because

in a way, I, I still feel like the,

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the narrative that's the safest is

digital goal for Bitcoin out there.

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I don't think that Bitcoin is inevitable.

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It definitely is in a better

position to today compared to

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others than it was in 20 14, 20 12.

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In 2017, we got very close to flip

of Bitcoin via Ethereum, and I

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think they would have had massive

consequences in people's psyche.

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And I think it can still happen between

like a large, I'm not saying, I don't

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know if it'll be Ethereum or something

else, but it is possible and I think

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they would shake a lot of confidence

in the assets if it does happen.

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And I don't think the, uh, dominance

of Bitcoin is completely set in stone,

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although it is safer today, much

safer today than it was a decade ago.

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What else did I miss?

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I wish I had stumbled on the,

the rollup design earlier on.

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I think there was something

very, very strong here.

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I had some ideas around validated

rollup, but I was missing aspects

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of data availability of the other

thing that was very surprising.

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So Tezos has a smart contract language.

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Again, that's very focused on security

because my thinking was you're gonna

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have these small contracts that controls

hundreds of millions of dollars, billions

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of dollars, and so it's gonna be very,

very valuable to make them secure.

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You know, the systems that

are there are insecure.

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It was correct that small contracts

written in EVM, whatever, were going

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to secure hundreds of millions of

dollars, and that they would be

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insecure and that they would be hacked.

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What I did not see that people

would not care, like by and large

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people do not care about security.

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You know, like wormhole

exploited for 600 million.

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All of these, all of these constant

and constant exploit, and yet the

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market does not want security.

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And I have one theory for that.

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The theory is like if your main use case

is someone buying a token and saying,

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oh, I have 1% chance that this token is

gonna a hundred x and I'm buying a lot,

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your ticket is, that's your main use case.

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If you tell that person, well,

you know, you don't really have

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a 1% chance of your a hundred x.

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It's actually like 1% minus the 0.01%

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because there's also a small,

the contract is gonna be hacked.

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They're risk seeking.

355

:

They don't care.

356

:

In their mind, their money's already

gone, you know, in, in some sense.

357

:

So the demand security, I think,

will come with more like less

358

:

gambling focused applications.

359

:

And right now, you know, the most

profitable things out there are

360

:

bitcoin trading or perpetrating.

361

:

And all, all of these have to do

with like massive them on the risk.

362

:

And I think the corporates care

more about security, but it's

363

:

still been a very cap in the space.

364

:

So, yeah, I was wrong about

the importance of security.

365

:

I don't think I was wrong about the

way to achieve it, but I was wrong

366

:

about the importance of security.

367

:

People care far more about developer

experience than in do security like

368

:

far, far more, and I was wrong about

the importance of scaling earlier on.

369

:

Great.

370

:

Anthony Perl: Yeah.

371

:

Can I jump in and ask you something

about that you were talking about a

372

:

little bit earlier on as in regards to

community, and I'm just fascinated by

373

:

how important community is being for

you and how much you've fostered that

374

:

and that gives you a bit of an edge.

375

:

Arthur: Yeah.

376

:

But I would say every blockchain

fosters its community.

377

:

And so, you know, as a bigger,

stronger, more vocal community,

378

:

oftentimes the better.

379

:

And it's the way I

described the currencies.

380

:

Sometimes it, it's, they're not exactly,

you know, they're, they're ledgers, but

381

:

they're, they're a bit more than ledgers.

382

:

The closest thing to think of

them is as online communities.

383

:

And even sometimes, you know, when,

you know, trying to, like, looking

384

:

for executives to hire and such.

385

:

You talk to recruiters and they imagine

like, oh, you know, you're in a blockchain

386

:

space, so let me find you some people with

experience in FinTech, and it's like on

387

:

a day-to-day basis, it looks a lot more

like, again, online C management or sports

388

:

club management than it does FinTech.

389

:

Anthony Perl: Interesting.

390

:

So do you think that it's an important

way to help, you know, growing ideas

391

:

and things, is that, is it important

to maintain it and foster that?

392

:

Arthur: Absolutely.

393

:

You want a very strong user

community and you want a very

394

:

strong developer community.

395

:

'cause what a lot of people

did and are still doing is

396

:

platform plays for blockchains.

397

:

The idea being that build your

application on a chain, because we have

398

:

all these users, all this community

who wants to use your application and

399

:

vice versa, come and use application

on that chain because we have all

400

:

these cool applications for you to use.

401

:

Now I think that's threatened by

the fact that a lot of applications

402

:

are multi chain and the fact that

wallets are going to abstract that.

403

:

And so in some sense, you know,

people are still users of blockchain.

404

:

They seem like there's some

people out there who say like,

405

:

I like using, you know, Tezos.

406

:

I like using near, I like using

that blockchain in particular.

407

:

And there's a bit of a

loyalty towards block share.

408

:

There's a bit of convenience, but

more and more people are gonna see

409

:

themselves as users of wallets.

410

:

I use this wallet and then, you

know, behind the, the wallet has

411

:

a swap function that's integrated.

412

:

It routes through all the different

chains, find the best liquidity and

413

:

that compresses the margin of anything

that's underneath it in the stack.

414

:

Jemma: Arthur, I wanna just delve a bit

further in your kind of retrospective of

415

:

your thesis and your time in blockchain.

416

:

When you wrote the white paper for

Teslas back in:

417

:

are there things that you would've

wanted to be articulated differently?

418

:

Arthur: So the white paper

was written by l Goodman.

419

:

Uh,

420

:

Jemma: ah,

421

:

Arthur: I know.

422

:

In

423

:

Jemma: terms of insights,

do you have any in terms of

424

:

Arthur: insights?

425

:

Oh, I mean, you know, yeah,

but you know, hindsight is 20.

426

:

Jemma: When I said you, I meant as in as,

427

:

Arthur: yeah.

428

:

Yeah.

429

:

I mean, hindsight, hindsight is 2020.

430

:

Like, what do I wish were in

the, there's a white paper.

431

:

I, I can give you a cheeky answer.

432

:

Yeah, I could say actually like,

Hey, you can have very powerful AI

433

:

systems by using transformers and

deriving scaling load by training

434

:

them on very large amount of data.

435

:

And then you can use RL on.

436

:

On, uh, mass problems to get them to be

reasoners via chain of self reasoning.

437

:

I'm, I'm kidding.

438

:

Uh, you could cram like the past

10 years of innovation in there

439

:

and say they were there now.

440

:

Sorry, I'm, I'm just being cheeky

and, and literal what could have

441

:

plausibly been there and wasn't there.

442

:

Jemma: Yeah, I think that's, yeah.

443

:

Look, and I, I do like the

humorous response as well.

444

:

Arthur: Yeah.

445

:

What could have philosophy beary scale?

446

:

I would say like, I think roll up

style scaling could have been, uh.

447

:

Jakob: I may continue with because scaling

is obviously such a big topic and I

448

:

think a lot of the current brain power

is focused on Ether Link within Tezos.

449

:

I noticed that for Ether Link,

there seems to be a much stronger

450

:

focus on Defi and growing out

the Defi ecosystem, as was the.

451

:

Case for Tezos in general.

452

:

Defi being like one of these areas

where, where I would say critics would

453

:

argue Tezos has never really taken off.

454

:

Yeah.

455

:

Is that something that you think

you would've focused on earlier?

456

:

If you could go back in time?

457

:

So

458

:

Arthur: just to finish my answer to

the first question in a white paper,

459

:

and I'll address the Defi question.

460

:

So white paper, I think scaling.

461

:

Scaling and a bit more privacy.

462

:

We, we do mention privacy in a paper, but.

463

:

Scaling would've been a good one to

tackle on and one that could have

464

:

plausibly been been there, like focus

on a pure consensus and staking layer.

465

:

And then later on, bolt on a really high

efficiency design, which is the design

466

:

we're using for Tezos X at the moment.

467

:

Defi, see, defi didn't really

take off on Tezos in:

468

:

there's a story behind that.

469

:

So.

470

:

I did think that Defi was quite important.

471

:

We had a rocky start.

472

:

There were organizations involved

in trying to grow to this protocol,

473

:

as you know, even starting in 2018.

474

:

But I had a bit of a distant relationship

with them, and so I tried to import

475

:

some momentum, but in a lot of cases

I was unsuccessful in imparting that

476

:

momentum and imparting that urgency.

477

:

So I became aware of uni swab

when the paper came out and

478

:

you know, I come from, um.

479

:

Market making background and I thought,

Hey, this is simple to implement.

480

:

We should get this on Tezos.

481

:

I communicated that and somehow it

turned into a ridiculous year and

482

:

a half long million dollar cost.

483

:

Von Dole Bun Doggle, and you know that,

so we were late with that and that

484

:

was a coherent strategy around, around

Defi, but it didn't really pan out.

485

:

Then 2021 comes around the corner

and then we have the, the most

486

:

aggressive administration in the

United States against crypto.

487

:

And the interesting is like a

lot of people are focused on.

488

:

Securities law around

everything that has with crypto.

489

:

And there were theories being put

forward by the SEC theories, which,

490

:

you know, have not panned out in

courts because they've lost a lot.

491

:

And now, which I think are being

clarified with Syn Clarity Act in

492

:

the us, but there's more to it.

493

:

You know, you're pulling a lot of

money without KYC in Identifi pool.

494

:

So they were also, I would say,

threats from Vincent, threats

495

:

from OFAC around, around Defi.

496

:

It was not a given that Defi was

going to survive this administration.

497

:

There were certainly a lot of risks.

498

:

So the Tezos Foundation did sponsor

some Defi projects to go on Tezos, but

499

:

you know, for example, we didn't try to

launch in-house defy protocols there.

500

:

There was no desire, for

example, to provide liquidity

501

:

inside of Defi protocols.

502

:

So I would say there was an approach

that was quite pre given the onslaught

503

:

that was happening in the United States.

504

:

And the other thing is like,

I saw it at the time that.

505

:

Defi was gonna be worn

by a centralized system.

506

:

Right.

507

:

And I'm very surprised that

Binance Smart Chain did not win

508

:

Defi, for instance, because they

had a few things going with them.

509

:

One, you know, they had enough

performance and low fees, so

510

:

people might care about that.

511

:

They had centralization, but by and

large people who are using Defi,

512

:

you know, they care if it works, but

they're in a transaction for a minute.

513

:

They're not billing something

that's supposed to like last.

514

:

10, 20 years.

515

:

If you're minting, a piece of arts

centralization is super important.

516

:

You want your arts to be there

for the next 10, 20 years.

517

:

You want it to be creatively

neutral, all of that.

518

:

If what you're looking is a cheaper way

to trade your Bitcoin for ETH, or you

519

:

know, your test for USD or whatever.

520

:

You don't really care what it's in

relation, it needs to work in the

521

:

next half hour, but it doesn't ruin.

522

:

So like decentralization was

not a, uh, a huge factor for it.

523

:

A bit different in lending than

trading cost was quite important.

524

:

And then not only did Biden's have,

you know, a fast system, they also

525

:

had all their distribution channels.

526

:

They basically, like anyone who's

interested in treating tokens was, you

527

:

know, had a Biden's account in some way.

528

:

And so they had all these distribution.

529

:

They could wrap every asset,

so like every asset out there

530

:

could be wrapped on their chain.

531

:

They still didn't win defi.

532

:

I find that very, very surprising.

533

:

I also saw, you know, there was a

lot of very unsuccessful attempt

534

:

to foster defi in other ecosystems.

535

:

I saw a lot of foundations spend hundreds

and hundreds of millions of dollars

536

:

bribe being liquidity to come in.

537

:

And as soon as they end, as

soon as they stopped doing

538

:

that, the liquidity dried out.

539

:

The only chain that pulled it

off was to some extent, polygon.

540

:

Polygon managed to retain

a lot of liquidity after.

541

:

I think avalanche kept some,

but it's been very hit and miss.

542

:

Like it completely fell for a Goran,

for example, lost ton of its defi

543

:

after they stopped paying for it.

544

:

It was also very commodity.

545

:

Like there was not a whole

lot of innovation in Defi.

546

:

People had Dexus and then people had

lending and different permutation on that.

547

:

But it wasn't exactly, you know, once you

have these, what else do you, do you want?

548

:

So the way I'm thinking

here, I also think that.

549

:

So, you know, there's a lot more

defi today on, on this, especially

550

:

via Isci Link because Isci Link

has very low latency, which I

551

:

think is important for Defi.

552

:

It's very easy to take existing code

bases for a VM and Nonfamily selling.

553

:

So I think today is selling

Link has a modest but.

554

:

Reasonable TVL, which is

like around like 50 million.

555

:

What I'm excited about is using the

primitives built in Defi for doing

556

:

something that's a bit less circular.

557

:

Because if all you do in Defi

is straight other Defi tokens,

558

:

you know, what is it for?

559

:

Finance has to finance something,

and so today in Defi entails you

560

:

can actually trade things like

uranium, like physical uranium.

561

:

I find that exciting.

562

:

Jemma: I mean, there's so

many things to touch upon from

563

:

what you said there, Arthur.

564

:

Maybe I'll just circle back.

565

:

It sounds like you are perplexed

about what had some defi protocols

566

:

maintain the liquidity and volumes

once they stopped using your term,

567

:

bribing the market for liquidity.

568

:

Yeah.

569

:

Anthony was pointing to before about

the community and the ecosystem, or have

570

:

you not figured out what it was that

differentiated these things ultimately?

571

:

Arthur: Well, liquidity is

more mercenary right than this.

572

:

Especially, you know, especially

as it professionalizes.

573

:

And so, you know, if you're

counting on community for

574

:

liquidity, it is gonna be tough.

575

:

Like it, it doesn't have as

much intangibles and even today.

576

:

So what was the goal of these things?

577

:

People thought like, well, we'll

pay for a lot of liquidity.

578

:

Because we'll have a lot of liquidity.

579

:

We'll get a lot of trading volume.

580

:

The trading volume will pay fees,

and then once liquidity stops being

581

:

subsidized, because all those fees are

being paid, liquidity will stay there.

582

:

So they'll have liquidity because it's

trading volumes, and they'll be trading

583

:

volumes because there's liquidity.

584

:

So essentially you've

created a network effect.

585

:

People just use that chain because it's a

network effect that doesn't work so well.

586

:

Once you have liquidity aggregators, you

know, people can go to jumper and choose.

587

:

Wherever there's liquidity.

588

:

Well, you know, maybe sometimes you'll

be routers who actually like John

589

:

post's bad example, because it doesn't,

it doesn't spread your trader across

590

:

multiple pools as far as I know.

591

:

Once you have aggregators that go and get

liquidity wherever it is, then in some

592

:

sense the network effect gets diluted

because anywhere where there's a little

593

:

bit of liquidity is going to be hit.

594

:

It's kind of like, you know, in the US on

stock exchanges, you have bragging MS and

595

:

like any order has to be routed to like

wherever the liquidity is the cheapest.

596

:

And so like it's a way for, even if you're

a small exchange, as long as you have some

597

:

liquidities, there's a big order like.

598

:

A big part of it is going to be

executed on a big exchange, but a

599

:

small part of it might be executed on

a small exchange and you get the same

600

:

phenomenon and so you can actually like

progressively cheap at the network effect.

601

:

So I don't know how valuable this

strategy is again, because the question

602

:

is, are people, users of your chain?

603

:

Are people, users of your defi protocol?

604

:

Are people, are users of the wallets?

605

:

Are people are users

of like a D aggregator?

606

:

You know, it all ended

up being commodified.

607

:

Jemma: Interesting.

608

:

So if you don't think transaction

fees are gonna be, because there's,

609

:

you know, so much gap between

availability and demand Yeah.

610

:

That it's not gonna be a material

source of income for the protocols.

611

:

Where do you think the business model

and the commercial models actually lie?

612

:

Arthur: So, first of all, I'm not sure

about this, you know, so I'm not gonna

613

:

say like, oh, there's no point in, uh, in

trying, I, you know, I remain skeptical.

614

:

But that being said, I have the,

let's call it the spaghetti theory of.

615

:

Of KPIs, which is that revenue is

an interesting Ty to pull on because

616

:

if you pull on this, Ty I sink,

you get the whole mill behind it.

617

:

And so even if somehow revenue is not

the thing that makes you economically

618

:

viable, it's a great thing to maximize

because it's an indication that people

619

:

are willing to pay to use your chain.

620

:

It's a very hard to fake signal, like

you don't even fake it to yourself.

621

:

If a lot of people are paying a

lot of money to use your chain,

622

:

you must be doing something right.

623

:

And regardless of what.

624

:

The model is, it's a healthy thing

if a lot of people are paying lot

625

:

of money to use your share, like

you build something useful and.

626

:

I would say like regardless of the

business model, the conversion of property

627

:

is like chains, which are very useful to a

lot of people probably are able to capture

628

:

more value than that chain, that errands.

629

:

And so it's a really interesting metric

I think to focus on and maximize, even

630

:

if the economics is not necessarily like

token burn, represent token demand, it

631

:

could be something completely different.

632

:

Maybe even types of rent.

633

:

Maybe there's a store of value aspect

and the store of value is reinforced.

634

:

You know, when the brand is better known.

635

:

And the way for the brand to be known

is for a lot of people to use a system.

636

:

So.

637

:

I still think it's a very

good thing to focus on.

638

:

Jemma: Got it.

639

:

You're a bit critical of meme coins.

640

:

My question about this is I've

heard people that are in the

641

:

protocols are big on memes.

642

:

See that a little bit as a

test net for defi at scale.

643

:

You know, where if blockchain is

programmable money, then traditional

644

:

trad FI systems could migrate onto

blockchain and what memes are is a test

645

:

net for this infrastructure at scale.

646

:

What's your view on that kind of thesis?

647

:

I

648

:

Arthur: mean, people have

said this about defi before.

649

:

Meme coins were a big thing, right?

650

:

People have said like, oh, you

know, isn't defi interesting?

651

:

Because it's a test run for being

able to, you know, to be used for

652

:

real things and real application.

653

:

And it's like, all right, so, you know,

what's stopping anyone for doing this?

654

:

I mean, it's good.

655

:

Like, look, don't get me wrong.

656

:

If tomorrow I can wave a wand and

there's, you know, a, a trillion dollar

657

:

of Bitcoins being traded on Tezos,

spending millions of dollars in fees

658

:

every day and doing that, I'm all for it.

659

:

Like, I, I will wave that wand any day.

660

:

Uh, you know, there's no sour grapes here.

661

:

I don't wanna say like, oh,

I don't have vena, therefore,

662

:

but I think it will abate.

663

:

Like, what at a issue is, is

people who wanna make it more

664

:

than it is in some sense.

665

:

Like, MCO is the future.

666

:

Wimco is this, you know, it's like,

it's a new way to build communities.

667

:

Like that is our bullshit.

668

:

It's a gambling product.

669

:

And if people say like, look, qui

are a very popular gambling product

670

:

and all of people are willing to

spend a lot of money for it, and

671

:

blockchains are a good product to power

this new type of gambling product.

672

:

Why not?

673

:

It's not a gambling I

objects to, it's a pretense.

674

:

Jemma: Got it.

675

:

Arthur: Where do

676

:

Anthony Perl: you see the future

in terms of how you would ideally,

677

:

like what you've created to be used?

678

:

What's the big idea that

hasn't come out yet?

679

:

Arthur: I would say the uranium that

we've tokenized with, uh, urinate io.

680

:

It's close to the type of thing

that I really wanted to do.

681

:

You know, you have some

futuristic commodity.

682

:

I mean, it's not futuristic because

nuclear power plants have been

683

:

there for more than a half century.

684

:

But if fu it feels futuristic now because

they haven't been built for a long time

685

:

and now they're really built again.

686

:

And so if you can power the future

and you know, like bring markets which

687

:

are non-existent like the European

market is, OTCs is not like a liquid

688

:

market for retail and small size.

689

:

And we're actually like bringing

this for the first time.

690

:

So if you can create.

691

:

Important markets, make them happen.

692

:

I think that's, uh,

that's super important.

693

:

But, you know, the thing that got, you

know, that really got me interested in

694

:

doing this in the first place, like the,

I said the, the mission aspect of it

695

:

is essentially like taking some power

away from mission states and putting

696

:

them in the hands of individuals.

697

:

So I think financial surveillance

and financial controls are a big

698

:

problem that is going to grow.

699

:

I think a lot of the fiscal discipline

in governments has come only.

700

:

From the difficulty of doing

global financial tracking, tracking

701

:

every single transaction, and with

technology, the difficulty goes down.

702

:

So day after day becomes easier and

easier for governments to track everyone

703

:

to control everything that they do.

704

:

And I would say historically,

there's two things that

705

:

prevents governments to do this.

706

:

One is popular pressure,

perhaps democracy.

707

:

Perhaps if you do bad

things, you can put it out.

708

:

So like I would say, governance

is one thing that pushes

709

:

against government or abuse.

710

:

Or whatever, you know, like

system of democracy you have.

711

:

And the other thing that pushes

against it is practicality, right?

712

:

So, you know, there's a lot of

laws that the government could

713

:

pass, but they don't pass them

because it would not be practical.

714

:

Right?

715

:

You know, if the government

tomorrow says like it's illegal

716

:

to smoke in your own home.

717

:

Very difficult to enforce.

718

:

They can't go into everyone's home if

tomorrow they had technology, which

719

:

magically let them know everyone smoking

a cigarette anywhere at any time on earth.

720

:

Then easier to enforce

and we are not ready.

721

:

Like the technology is making

it easier and easier to pass.

722

:

Stupid and stupid laws and the governance

institutions to push against bad

723

:

government policies are insufficient.

724

:

And so any technology that I would

say restore some sovereignty and

725

:

restore some control in the hand of

individuals is quite important to me.

726

:

Jakob: I kinda wanna follow up on the

uranium example because many would

727

:

argue that Bitcoin still is kind

of like a digital gold alternative.

728

:

And you've obviously been, uh, quoted

a few times for saying that people will

729

:

treat it as funny internet money as soon

as kind of the market gets under pressure.

730

:

How do you make sure that an asset like

digital uranium has kind of these long

731

:

term fundamental buyers and doesn't

fall into the same trap that maybe

732

:

something like Bitcoin will have?

733

:

Arthur: Yeah, so I had a long

interview where I talk about

734

:

the funny internet money aspect.

735

:

It's a long balanced interview

where I present different aspects.

736

:

There's some s quo here.

737

:

I still agree with the quo.

738

:

What I talked about in this

interview, just to be clear, was

739

:

situations like they were asking

like, are there institutions buying?

740

:

Are the retail.

741

:

And it was like, I don't know,

you should ask this to Coinbase.

742

:

Ask this to OTC desk.

743

:

I'm not a Bitcoin seller, so

I don't know who's buying.

744

:

And then they were saying like, or our

digital assets, treasury companies,

745

:

evident of institutions buying.

746

:

And it was like, no,

because it's not like.

747

:

Some companies are saying like,

oh my goodness, as part of

748

:

strategy for the company, we're

gonna build a Bitcoin treasury.

749

:

No, they're vehicles for retail.

750

:

So like they're a wrapper, they kind of

like, they're a wrapper for retail buying.

751

:

So no, deities are not evidence of that.

752

:

And when we're talking about the COVID,

you know, like Good crisis happened

753

:

and talked about the COVID crisis.

754

:

So you know, during COVID

when everyone now has to get

755

:

confined and like lose their job.

756

:

I would say the first thing that

they did was sell their Bitcoin.

757

:

They sell what they perceive as fun

internet money because they need to

758

:

pay their rent and their rent is dollar

denominated and on Bitcoin denominated.

759

:

So, and there's still this

risk on aspect to Bitcoin.

760

:

It's definitely not the

only source of buyers.

761

:

I think they are more fundamental

buyers who are buying it as

762

:

a macro hedge, especially now

that the dollar is under attack.

763

:

So there's a real demand here, but

that doesn't mean that there isn't

764

:

this like from internet demand.

765

:

So the people.

766

:

Hold Bitcoin for vastly different reasons.

767

:

And there's still quite a bit contingent

of people who hold it because it's

768

:

like, it's an asset that goes up and

the minute it stuffs going up, they'll

769

:

say, my goodness, my analysis was wrong.

770

:

It was convinced it was

an asset that goes up.

771

:

It is actually an asset that intrinsically

does not go up and I shall sell it.

772

:

So you still have this kind of

momentum trading that's very prevalent.

773

:

Now, onto your question,

uranium, I mean, you know.

774

:

Uranium is like a fundamental demand for

uranium, which is nuclear power plants,

775

:

and everyone's building new nuclear power

plants, changing the regulations to a lot

776

:

of the building of nuclear power plants.

777

:

Again, I think the forecast for

the demand of energy coming out

778

:

of a data center is enormous.

779

:

There's a need, a lot, lots of

capacity, and I think most of it

780

:

is gonna be solar and nuclear.

781

:

And solar is fantastic.

782

:

Like the, the cost of scaling

solar is very, very cheap and

783

:

you can scale it right away.

784

:

So if you are in a situation where

you have massive growth and super high

785

:

interest rate, because it's a massive

growth, if there's a lot of value in

786

:

having your accuracy today as opposed

to building a power plant and you know,

787

:

nuclear power plant and having it in

five or or 10 years, nonetheless, you

788

:

still have storage issues with solar,

that batteries remain quite expensive.

789

:

And so there's still a big

place for nuclear in the future.

790

:

Jakob: But then just to kind of reiterate

from what I understand, it's just because

791

:

you have these people that treat an asset

that way, doesn't mean the underlying

792

:

asset is in any essence an asset.

793

:

You shouldn't take seats.

794

:

No, of course.

795

:

'cause from what I understand,

you obviously respect Bitcoin

796

:

a lot for what it is as well.

797

:

Arthur: Yeah, absolutely.

798

:

And it is a validation is one of

the largest holder of Bitcoin.

799

:

So proof is in the pudding.

800

:

But again, things are not defined

by how people feel about them.

801

:

So, actually, you know what I

said that, and then Bitcoin is

802

:

actually inter subjective assets.

803

:

So may lemme take something back.

804

:

Things are somewhat defined by, by

by, by how people think about them.

805

:

But there's enough people who think

about Bitcoin as more than fun internet

806

:

money to make it more than fun.

807

:

Internet money.

808

:

Jemma: Yeah.

809

:

I mean, if equity markets come off,

then I think that, you know, you

810

:

do see Bitcoin prices and crypto

in general take a haircut, but.

811

:

Different about paying your rent with

Bitcoin to perhaps selling a piece of

812

:

property, you know, is the liquidity

piece, or even accessing your pension

813

:

fund that might be invested in, you know,

debt instruments and equity instruments.

814

:

It might not be as liquid or

easy, it might be penalties and

815

:

fees from selling these assets.

816

:

So I think the liquidity piece is

another reason, uh, that Bitcoin

817

:

might be sold down as opposed to it's

the perception of its value per se.

818

:

Arthur: Liquid.

819

:

I mean, there's quite a bit of liquidity.

820

:

The question is like, are there

people who are fundamental buyers of

821

:

Bitcoin who are waiting for a doubt

or momentum to buy, to catch it?

822

:

Because Bitcoin has had this cycle.

823

:

I think we'll see.

824

:

I think we'll see more.

825

:

I think if Bitcoin takes 20, 30%, you know

you're gonna see a lot of retail sailing.

826

:

The question is like, are there

people on the sideline right now who

827

:

are saying, like, are there central

banks who have decided, you know what?

828

:

As a central bank, we wanna buy

Bitcoin, but we're not gonna buy it now.

829

:

We're gonna wait for an

crisis of confidence.

830

:

And then COVID as buyers, like if you have

these people, you'll start smoothing out.

831

:

Essentially like arbitrage these type of

things in the same way that in a stock

832

:

market, you know when a stock stops being

sexy, maybe you have their higher hadaway

833

:

come in and say, wait a second, there's a

great deal on this stock and I have a 20,

834

:

30 year horizon, and so I'm gonna buy it.

835

:

So the question is like, are there

parties like this for Bitcoin?

836

:

Probably.

837

:

But I don't necessarily know who

they are because again, I don't

838

:

run a Bitcoin selling business.

839

:

Jemma: I mean, you, you come from a

markets background and so you would

840

:

have presumably seen people deliberately

pushing down the price of a stock or

841

:

trying to take out people that can

only hold out like options, positions

842

:

to a certain level to bring the price

down, push them out of the market,

843

:

and then buy up at a cheaper price.

844

:

Arthur: I seen that actually, never.

845

:

No, never.

846

:

Jemma: I mean, I, I think that that,

I mean, that's fairly prevalent, I

847

:

would say, in, especially with some

of the, you know, the people that take

848

:

options positions very publicly or

leverage positions very publicly on

849

:

Twitter, you know, trying to gamble

on the price of Bitcoin or whatever.

850

:

There would be people that would

wanna push the price out, take

851

:

them out, and then buy, buy up

the Bitcoin at a cheaper price.

852

:

I imagine that this is,

853

:

Arthur: it's possible, the thing with

this, with all of these like strategies

854

:

is that they're all arbitrable.

855

:

You know, anything where you feel like,

oh, I'm gonna do this, and then that,

856

:

you know, you name any strategy like

this and I can find, if you're doing

857

:

anything that's not like buying base.

858

:

If you're trying to move

the price, essentially.

859

:

Like if you're trying to say like,

I'm gonna buy and my buying will have

860

:

an impact on the price, yada yada.

861

:

Then in all these cases, there's a

condo strategy that should negate

862

:

the effect of what you're doing.

863

:

And that condo strategy would be

saying like, well, whenever I see

864

:

this happening, I'm gonna sell.

865

:

Because you know, there's like someone

creating temporary market impact.

866

:

So if you can predict when people are

creating this impact, then you should

867

:

be providing liquidity in this period

of time, and you'll make a lot of money.

868

:

Jemma: Yeah.

869

:

You know, it's kind

870

:

Arthur: of when people were saying

like, oh look, you remember the bart,

871

:

this is like from 2017, where Bitcoin

would go like, like, uh, Bart Simpson.

872

:

I mean, there was a real phenomenon.

873

:

Like you saw them, you don't

see them as much today.

874

:

That's arbitrage about, like, you know,

if you sing, this is actually happening.

875

:

You can absolutely detect a bar,

you know, like bar shortage and then

876

:

buy back at the end of the bart.

877

:

And you know, the reason it

doesn't happen sometimes is that.

878

:

Because there's not enough like

maturity in the markets that you have

879

:

all these infrastructure in place.

880

:

Like if you have enough people

who are good enough at doing

881

:

stud arb, those things go away.

882

:

Jemma: Yeah.

883

:

A temporary

884

:

Arthur: And usually, you know, like it,

it's not very like, like the closest

885

:

thing I can think of to what you described

with the, the Jane Street strategy with

886

:

the options in India recently, which

has this weird property where like

887

:

the more mon capital you put in the

strategy, the more money you are making.

888

:

So sometimes you just have like

bad market design, but even

889

:

then what should happen is like.

890

:

Basically the other side should go out.

891

:

You know, one, one thing I learned

in finance early on is, you know, if

892

:

you have a strategy and you think the

strategy is making money and you have

893

:

like found a way to like automatically

make money on the markets, ask

894

:

yourself like, who's this stupid buyer?

895

:

Or who's this stupid seller?

896

:

You know, if you're like, oh, I

can buy this thing and make money.

897

:

Well, who's this stupid seller?

898

:

Like you have to have, overall, I would

say financial markets are positive.

899

:

Some, right?

900

:

You, especially if you provide.

901

:

Capital to, uh, businesses, and

then they can do economic activity.

902

:

And so overall, it, it climbs, but

anything that essentially beats

903

:

holding indices to some extent is

gonna be like the song to some extent.

904

:

You're gonna take the value from

someone if you have found a systematic

905

:

way to do this and you keep doing it

over and over and over, like they're

906

:

gonna stop selling to you or, or

they're gonna go out of the markets.

907

:

Jemma: Yeah, indeed.

908

:

What about digital asset

treasury companies?

909

:

What's your view on these?

910

:

Arthur: Well, this is something I thought

about like way back when the, when the

911

:

SEC would not approve an ETF, my thinking

was like, well, you know, if you're

912

:

a staking company and just hone your

treasury, it's not, you're not a fund.

913

:

You're not holding a security.

914

:

You're not a fund.

915

:

But def facto, you would have

something that would be very close to

916

:

ETF because even though you wouldn't

have patient and redemptions, you

917

:

could still manage it by doing at

the market offering and buy backs.

918

:

Didn't wanna do it because again, when

you had an administration intent on

919

:

destroying the whole industry, you don't

wanna be the clever person in the room.

920

:

'cause it's like, ah ha, ha.

921

:

Actually I found a way to get

into TF then you just like put

922

:

a giant target on your back.

923

:

So I started thinking about it again in

November last year, but my idea was like.

924

:

I was wrong, but that I, I thought that

people wanted these vehicles because they

925

:

were like, oh, it's a nice way to get

exposure to the crypto market because

926

:

you might get access, you might get

exposure to a token, and then you might

927

:

get exposure to like, maybe multiple

tokens and like a stacking activity.

928

:

And it's kind of like

better in a box, right?

929

:

You want to, all the crypto

market, you don't know what to buy.

930

:

So you know, buy this company.

931

:

And it's kind of like, has a

diversified set of activity and it will

932

:

represent broadly the crypto market.

933

:

I thought this would be interesting

doing some marketing research.

934

:

This is not what people are thinking.

935

:

This is not what people

want as a single coin.

936

:

DAT has been far more popular than the

other ones, and people have been focused

937

:

on the metric, which is crypto per

share, so it does not seem to stem from.

938

:

People's, I would say desire

to, like for convenience.

939

:

I think it stems from a delusion

that they are necessarily beating

940

:

the assets because saying like, oh,

you know, you have a company, it's

941

:

gonna be better than the assets, and

all the premiums have been absolutely

942

:

ridiculous and completely unjustified.

943

:

I also think it comes

from desire for lever.

944

:

Sometimes they joke that the main

product of crypto is volatility,

945

:

and if the SEC really wanted to

destroy crypto, what it should have

946

:

done is give everyone a hundred x

leverage in their directee accounts.

947

:

That's what people want.

948

:

They want volatility.

949

:

They want volatile stock.

950

:

They want volatile assets.

951

:

And you know, that explains a lot,

that explains why crypto is popular.

952

:

That explains why perps

are even more popular.

953

:

People want leverage.

954

:

People want volatility.

955

:

And so in some sense, when those

companies, uh, raise money with

956

:

convertible debt, they build in leverage.

957

:

So it's a way for people who

don't necessarily have access to

958

:

leverage to get built in leverage.

959

:

And it's also, I would say like.

960

:

Now, I mean, you know, like you, you

take Michael Sailor, he is full of shit.

961

:

So like there's a lot of people who

I think buy his stuff because they're

962

:

generally convinced that, you know,

he has a magic way of making money.

963

:

Now, this is not to cast a stone on

any digital asset treasury company.

964

:

I think there's a very

reasonable case for doing one.

965

:

I think there's good businesses

and you know, essentially it's

966

:

kind of like having a gold mine.

967

:

And you want, you know, you

have a gold mine and you say,

968

:

well, I have a gold mine.

969

:

I'm gonna list it.

970

:

I'm not gonna hedge the gold because

people might want experience to gold.

971

:

So in the same way, you know,

you have a like completely normal

972

:

business, which is like being a value.

973

:

It's a sticker and validator and you say,

I don't have to hedge my, my coin through.

974

:

That's fine, but that's not gonna deliver

on people's expectation that somehow.

975

:

These businesses should be commanding

like a hundred percent premium

976

:

for their talents in deciding

when to buy and when to sell.

977

:

Jemma: Yeah.

978

:

In terms of the leverage piece, I mean, if

you are buying into one of these debts and

979

:

you're not like an initial, like pre IPO

holder, the leverage is already priced in.

980

:

Like you are actually buying something

perhaps at 2, 3, 4 times the underlying

981

:

assets that sit in the company.

982

:

Arthur: That's not necessarily leverage,

that's just you overpaying sometimes.

983

:

Yeah.

984

:

The, the leverage comes from ation,

comes from them buying, getting the debt.

985

:

Jemma: Yeah.

986

:

Arthur: But people like the premium,

people say that, oh, the premium is good.

987

:

Look, it has such a premium.

988

:

That's great.

989

:

Mean is forced even more than it's forced,

even more than the Bitcoin because it's

990

:

has premium U Bitcoin is more valuable

in there and that's, that's crazy.

991

:

But we've seen some now like trade

below, so I think the J Lubin

992

:

East one was below M Now recently.

993

:

Now the big question, there's

a big governance question is

994

:

like, let's say you're j Lubin.

995

:

You hold a lot of ether and there's a

bunch of ether in that company and now

996

:

the company starts trading below its MN.

997

:

Do you want a company to sell

the E and buy back share?

998

:

Not necessarily.

999

:

Keep it in there.

:

00:47:50,679 --> 00:47:55,899

You know, I, and I could, I see we

could get a redux of GBTC where GBTC

:

00:47:55,899 --> 00:47:59,499

was trading far, far below na nav

and they had no interest in, they

:

00:47:59,499 --> 00:48:03,009

were collecting fees and then no

interest in, uh, lowering redemptions.

:

00:48:03,309 --> 00:48:05,769

I think it was also like trying to like.

:

00:48:05,995 --> 00:48:09,205

If it was a bit of a game of

chicken with the SEC in, in trying

:

00:48:09,205 --> 00:48:10,674

to get like a proof for an ETF.

:

00:48:10,975 --> 00:48:12,625

So it's not exactly the same dynamic.

:

00:48:13,015 --> 00:48:16,825

But I wonder, and also I think there's

limitations in companies ability to

:

00:48:16,825 --> 00:48:18,475

do buybacks on the US stock exchange.

:

00:48:18,475 --> 00:48:21,805

It's, you can still do quite a

bit, but are they going to sell

:

00:48:21,805 --> 00:48:22,765

their assets and do buybacks?

:

00:48:22,765 --> 00:48:23,815

What will happen now?

:

00:48:23,815 --> 00:48:25,944

Interestingly, the

leverage that they have.

:

00:48:26,619 --> 00:48:27,939

It caps them on both sides.

:

00:48:27,999 --> 00:48:28,239

Right.

:

00:48:28,239 --> 00:48:31,779

So it caps them on the downside in

a sense that if the assets, if the

:

00:48:31,779 --> 00:48:35,529

value of the assets starts falling

too much, they get margin calls from

:

00:48:35,529 --> 00:48:39,129

their, from their debt or, or they

might not be able to service the debt

:

00:48:39,159 --> 00:48:40,419

and that, that becomes a big problem.

:

00:48:41,019 --> 00:48:44,529

If, however, it gets too high,

then the debt gets converted.

:

00:48:44,529 --> 00:48:47,469

So you're clipping the downside and you're

basically have, you're selling calls.

:

00:48:47,469 --> 00:48:48,459

Mm-hmm.

:

00:48:48,835 --> 00:48:50,694

You're selling calls and you're

selling puts at the same time.

:

00:48:51,115 --> 00:48:54,835

So there's a cascade where somehow

the assets grow, the shares get

:

00:48:54,835 --> 00:48:57,325

diluted, and all of a sudden

people are like, wait a second.

:

00:48:57,325 --> 00:48:59,035

You know, like, you know this.

:

00:48:59,439 --> 00:49:02,199

Crypto doubled and

underlying vehicles didn't.

:

00:49:02,349 --> 00:49:02,979

What happened?

:

00:49:03,399 --> 00:49:04,509

When did it get clipped like this?

:

00:49:04,509 --> 00:49:07,119

And then people start selling and

so you have it like this cycles.

:

00:49:07,119 --> 00:49:08,859

I don't know exactly how it will end.

:

00:49:09,279 --> 00:49:10,569

I think it will end poorly.

:

00:49:10,839 --> 00:49:13,479

I think some will survive because again,

like I said, I don't think there's

:

00:49:13,479 --> 00:49:16,779

anything wrong with having businesses

which have large crypto treasuries and

:

00:49:16,779 --> 00:49:20,319

are focused on doing things, but a lot

of these are going to end up washed with

:

00:49:20,319 --> 00:49:24,219

the tide because if it starts turning

sour, people are might not go and

:

00:49:24,219 --> 00:49:26,559

say like, oh, this DAT is a good one.

:

00:49:26,559 --> 00:49:27,519

This DT is a bad one.

:

00:49:28,524 --> 00:49:31,404

Some people will, and they will make a lot

of money because they'll be able to like,

:

00:49:32,064 --> 00:49:33,535

you know, tell the witch from the chef.

:

00:49:33,984 --> 00:49:37,464

But it's, it's setting, you

know, if, if setting up to be the

:

00:49:37,464 --> 00:49:39,444

next catalyst for a down cycle.

:

00:49:40,404 --> 00:49:40,915

Jemma: Interesting.

:

00:49:40,915 --> 00:49:41,424

Thank you.

:

00:49:42,174 --> 00:49:44,694

Arthur, what's your

favorite song at the moment?

:

00:49:45,625 --> 00:49:47,154

Arthur: My favorite song at the moment?

:

00:49:47,185 --> 00:49:47,904

Oh, I have a bunch.

:

00:49:48,265 --> 00:49:48,685

Let's see.

:

00:49:48,685 --> 00:49:48,895

You can

:

00:49:48,895 --> 00:49:50,154

Jemma: share more than one if you'd like.

:

00:49:53,455 --> 00:49:56,154

Arthur: It's a Barak piece from, or.

:

00:49:58,089 --> 00:49:59,020

I like classical singing.

:

00:50:00,549 --> 00:50:00,970

Jemma: Amazing.

:

00:50:00,970 --> 00:50:01,569

Thank you.

:

00:50:01,960 --> 00:50:05,410

I, I'm sure I can speak on behalf

of Jacob and Anthony and say we've

:

00:50:05,410 --> 00:50:07,629

really enjoyed this conversation.

:

00:50:07,690 --> 00:50:12,009

Just to summarize some of the takeaways

and things that we've discussed, we

:

00:50:12,009 --> 00:50:17,589

talked about abstracting blockchains

that you are allergic to bs some of the

:

00:50:17,589 --> 00:50:20,980

things that you were wrong about in the

past, such as the importance of scaling.

:

00:50:22,194 --> 00:50:26,004

You are not sure that the dominance

of Bitcoin is completely set in stone

:

00:50:26,785 --> 00:50:27,924

Arthur: much more so than 10 years ago.

:

00:50:28,225 --> 00:50:30,895

But thanks for still people

over, over submitted.

:

00:50:31,495 --> 00:50:33,504

Jemma: Yeah, I appreciate

you nuancing that further.

:

00:50:33,654 --> 00:50:34,254

Thank you.

:

00:50:35,095 --> 00:50:40,645

Arthur: My, my, by the way, OD

is not from, or say it's from and

:

00:50:40,645 --> 00:50:42,475

Elena now that it matters, but,

:

00:50:42,654 --> 00:50:45,325

Jemma: oh, well it does matter

'cause I will look it up afterwards

:

00:50:45,325 --> 00:50:46,495

and listen to it and say thank you.

:

00:50:46,524 --> 00:50:46,555

Okay.

:

00:50:48,099 --> 00:50:52,119

And that you wish you'd stumbled

up on the rollup design earlier?

:

00:50:52,479 --> 00:50:52,899

Arthur: Yes.

:

00:50:53,259 --> 00:50:57,859

Jemma: That markets don't necessarily

want security and you know.

:

00:50:58,419 --> 00:51:00,819

If the lottery ticket is the

main use case, they don't

:

00:51:00,819 --> 00:51:03,039

necessarily care about security.

:

00:51:03,609 --> 00:51:07,359

You invented a new word on this

podcast called a Bon Dole, which

:

00:51:07,359 --> 00:51:11,709

was borrowed from boondoggle, and I

learned also about spaghetti theory.

:

00:51:11,709 --> 00:51:14,169

If you pull on spaghetti,

you might get the whole mule.

:

00:51:14,535 --> 00:51:15,044

Arthur: Exactly.

:

00:51:15,345 --> 00:51:15,615

Jemma: Yeah.

:

00:51:15,734 --> 00:51:17,805

So yeah, I really appreciate

your time, Arthur.

:

00:51:17,805 --> 00:51:18,854

It's great conversation.

:

00:51:18,854 --> 00:51:20,084

Thank you so much for joining us.

:

00:51:20,504 --> 00:51:20,774

Arthur: Thanks for

:

00:51:20,774 --> 00:51:21,104

Anthony Perl: having me.

:

00:51:24,524 --> 00:51:26,504

That's all for this episode of Unblocked.

:

00:51:26,564 --> 00:51:29,714

Please check out the show notes

for information on Power Ledger

:

00:51:29,894 --> 00:51:31,664

and other contact information.

:

00:51:31,845 --> 00:51:33,240

We welcome your comments and.

:

00:51:33,944 --> 00:51:36,944

And please hit subscribe

wherever you are listening.

:

00:51:37,035 --> 00:51:39,944

This podcast was produced

by podcast Done for You.

:

00:51:40,004 --> 00:51:43,484

We look forward to your

company next time on Unblocked.

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Making sense of tech and money with Dr Jemma Green

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