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Leviathan Livestream: @noahseidman on the Voter Escrow Partnership
Recorded: April 4, 2025 Duration: 1:41:07Space Recording
Short Summary
On April 4th, 2025, a lively discussion unfolded around the evolving landscape of crypto regulations, innovative partnerships, and the potential for growth in the DeFi space. Key topics included the implications of tax season for crypto investors, the strategic collaboration within the Curve Finance community, and the emerging trends in governance structures that could reshape the industry.
Full Transcription
GMGM fam, today is Friday, April 4th, 2025, the first day of the rest of our lives.
And I hope for your sake, it's your best one yet.
We're going to have a lot of fun because it's almost tax day here in America.
So we got someone who might be arguably masquerading as your tax advisor.
Is that fair to say, Noah?
I'm more of a legal investigator.
Tax is for accounting. And there's two considerations, accounting and law.
And to be clear, you're not a lawyer and you're not an accountant, correct?
Correct. I'm an autodidact, which means I have a capacity to teach myself.
So just getting out of the way that nothing on here is financial advice, of course.
Reasonable.
All right.
Well, before we get started, we're going to quickly plug the winner of last week's QR code, which was not, in fact, Curve Finance, but just a Curve fan.
Curve doesn't pay for marketing, but a fan was willing to spend some squid out of their own pocket.
So take a look and click that QR code to see some of the cool stuff that's been going on with Curve Lama Land redesign. And if you're interested in this QR code, the auction for obtaining this QR code is going to be happening and possibly even expiring
while we're on stream here. So head over to leviathannews.xyz. We will be checking out
updates as that rolls in, but it looks like it could be, sometimes you get some fierce bidding
about half an hour from now.
This one might expire for a bargain,
less than 20 bucks for an amazing QR code.
All right, with that out of the way,
we would like to bring it to you, Mr.
Do you go by Mr., Sir, Captain?
How was the proper title?
I enjoy the captain.
All right, Captain.
Noah's fine.
But good morning.
Taxes are quite a contentious topic.
Obviously, that's a great starter.
What does that mean for a person like me?
That means over the last years, I've done things, managed investments, considered accounting. But over the last three years in particular, I started to question what's the relationship with accounting and law.
What's the relationship with accounting and law?
So trying to keep things simple is the premise of anything that I'm trying to say right now.
So primarily accountants are not lawyers.
And accountants are trained based on IRS rules.
Treasury has the Code of Federal Regulations, which is the much-touted 50-bajillion-word set of documents that they publish, which is basically the interpretation of IRC code.
follow IRS memorandums, chief legal counsel memorandums, which is all interpretation,
which is all reasonable because everyone is capable, or at least persons that want to,
are capable of interpreting the law as written by Congress.
So some years ago, that dawned on me.
Ah, all right.
What are the words? What are the laws? And it's very simple.
Like, use Google, IRC, whatever you want. I mean, really the basis of what's most interesting is
like 61 gross income or 7701 is applicable specifically in the context of what we're discussing today. So there's a lot of definitions in the law,
but the point is words matter.
Semantics matter.
The definition of words.
Like this page right here is just one page of so many in IRC code,
which is published by Congress.
And that is such a powerful thing. So many folks
will glance over and be like, what does it mean? And I'm the
type of guy that's like, all right, fine. What does it mean?
What is the choice of the word and that's intent? Definitions
are very clear, very unambiguous, and very substantive when used as justification or argument, inargument.
So to top it all off, not only do we have the IRC code written by Congress,
we have common law. And common law is basically look up Justia could, that's just one of the websites, there's countless sources of case precedent. Now, these precedents are stronger or strongest when they come from
the Supreme Court, but they're also meaningful when they come from inferior courts. But when
you draw on case precedents from the Supreme Court, that's by definition the law of the land.
That's common law.
That's what has been judged and ruled historically as what is reasonable.
And reasonableness is a core of everything that we understand about just our way of life, and especially how courts interpret law now here's the takeaway and then
i'll i'll let you uh set up where you how you want to take this um i am much more moved by the irc the words as written by congress and the interpretation of precedence the judges
interpretations of the law than that of an agency the irs is an agency and by functional definition
it's a collections agency which is fine that's not a derogatory statement it's an
acknowledgement of reality and they have a capacity to look at the exact same laws that i do
and the exact same court precedents that i do and they are absolutely in their right to interpret things in their favor.
But equally, I am absolutely in my right to interpret things in my favor.
And by definition, that is exactly what the judiciary branch of the United States government is for,
to take different interpretations and produce rulings judgments to create new precedents
right and i feel like uh we got the oh shoot didn't come in and just in time for that moving uh
finale but we got to be now the american flag background rocking here because you're
getting back to constitutional principles so we're going to have a constitutional convention here via live stream.
So like before we get started, I just want to like nail a few of the specifics.
So just to be clear, like this is just a discussion in the Curve governance channel.
I haven't yet seen a formal vote for this.
And in fact, if there were to be a vote, there would be no code change anyway.
So it doesn't.
Okay.
So we're still very much
still in the discussion phase so no one's late to the discussion um although we probably want to get
it wrapped up more or less by tax day um because my my thinking is uh correct me if i'm wrong about
this because you're you know you're the autodidact here i could actually potentially just print off a
copy of the like this nominee agreement and include it in my
taxes as justification for whatever, like basically say, here's my interpretation, here's the precedent.
And then the way that the law works is that the IRS is a civil agency. So if it disagreed with
my interpretation, it would have to take me to court to prove it. But because I had actually
included my documentation, like I would very clearly be in that category of tax avoidance as opposed to tax fraud. Tax fraud being
a crime, tax avoidance being a patriotic duty. Is that correct? That is absolutely correct.
So Form 8275 and subversions of 8275 is for disclosing a tax position, which basically means I read the law. This is what
I understand. So you can include statements, but I've found it interesting to reference
external links. And it turns out just throw like a bitly of a Google doc. And that provides very
easy access to a document instead of trying to finagle how to incorporate
40 pages into Form 8275.
We are in 2025, so explain in a couple of sentences because yada, yada, yada refer to
this document.
And the more documents you have, the more argument and interpretation you have,
the more substantial your argument is, the more reasonable it is. And that's okay. So it's not
just court. They don't just take you to court. This is about a conversation, just exactly the
same thing that I wanted to have on the Curve Governance Forum. This is my interpretation. I am presenting to you my returns.
Feel welcome to ask questions.
Feel welcome to pass it by legal counsel.
Let's talk and identify what is reasonable,
what is the most reasonable way to proceed.
All right.
Now, okay, let's now unpack some of the like nitty gritty of the
proposal here. So specifically what you're trying to do is my interpretation of this, because one of
the, like, I'm sure you are aware of this as a person who like is very smart and capable of
generating long form content is when you post long form content, like 99% of people will go,
oh, that's nice. And then about 1% bookmark it and say, okay,
I'll read this later. And that's fine because that's the smart 1%. But even of that 1%, maybe
1% actually does take the time to go and read it later. But I'm that 1%. I have printed this out.
I have made some notes. But I'm not smart enough to pretend to know what's going on.
I've made some notes, but I'm not smart enough to pretend to know what's going on.
So here's my interpretation of this.
You're taking the fee distributor contract and essentially within this presenting your
reasoning that this fee distributor contract is this legal title, which officially classifies
as a nominee.
Is that correct?
Oh, broadly, that is a reasonable statement.
And nominee, could you explain what you mean by nominee?
So a nominee, we go to 1988 in the Bollinger case,
which basically establishes three criteria that is required of a nominee.
So a nominee does not hold title. It holds title for not like a beneficiary, if you want to compare it to another structure,
other structures, but it holds property or money for someone else. So technically it never holds anything there's no titles in crypto so the
concept is it already has nominee interest because of the inherent nature of smart contracts
and i go through a lot of um documentation uh that says like a smart contract is an independent entity
that has a formal charter or articles of formation.
And that, by definition, is the code of the contract.
So I interpret DeFi the way folks have not
granularly deconstructed DeFi.
These are discrete entities.
And traditionally, maybe you could think of them
as like independent corporations or sole proprietorships,
but they have literally in articles of formation.
There is nothing inherent.
This is a great argument.
There is nothing inherent to a blockchain
that couples contracts together.
If anything, at worst case, nothing inherent to a blockchain that couples contracts together if anything they're at
worst case subsidiaries interacting with one another but they're not related whatsoever
they're just completely decoupled uh this androgynous type of entity unto itself
right now okay so one of the interesting things I've noticed lately is that, of course, the
regulation, the whole regulatory environment has been moving in favor of crypto in a lot
of ways, right?
Like you've seen like the, all these like enforcement actions being tossed out.
But one that notably doesn't seem to have been tossed out is the entirety of the tornado cash case, right? And the reason I bring this up is because there
was a lot of concern when essentially a smart contract address got added to, and I'm not a
lawyer, of course, so I might be getting the exact term wrong, but it was like the smart contract
address itself was subject to sanctions, which was arguably also
like a novel legal interpretation of a smart contract, similar to how you're doing it. And
it seems like they're still proceeding in some form with the case against Roman storm, which
leads me to believe that they might actually want to try and like establish or push this precedent
that a smart contract is, you know, maybe not like, like, like to try and expand the classification of what could be
applied to a smart contract. But if so, would that go in violation of the way that you're
trying to interpret a smart contract here? As of currently, no. They have to define it.
And the only place for it to be defined is by Congress. And with regard to tax treatment, that goes in IRC code.
Just like we looked at 7708 as a definitions page, they could define it. And as of current,
the definition of a partnership, 7701, is applicable. It's pretty obvious uh a2 I can't read it it's
a little blurry but basically a syndicate group or pool it's kind of unambiguously applicable
so which is fascinating because um this is Congress this has nothing to do with the IRS. So by definition,
by Congress, so many folks in crypto are engaged in partnerships. Now, that's a separate conversation,
tax treatment or collections from an IRS perspective. And that would lead into a
separate conversation. But from a a congressional standpoint folks are engaging in
partnership activity right which is you know i think you probably even like get constitutional
because we got our constitution background and point out that like assemblage is freedom of
assemblage is right there in the first amendment so you actually have a pretty strong constitutional
case so this brings us to this larger document,
which is the voter escrow partnership. And this is almost more like a manifesto,
perhaps than anything else. But this one's meaty. This is a lot going on in there.
But essentially, it's the presentation of everything you've talked about so far? Is that like fair to say? Like the basis and justification for what this concept of like
this fee, why you can establish this fee distributor contract as a nominee?
Yes. And that is, so there's three steps or three core things that the memorandum is intent to prove more towards the top of the document
um so the nominees the third of the it's kind of like the conclusion of all right let's establish
what the hell is going on here there's the structure and the relationship of partners
versus a partnership and let's prove well like let's read it. Prove that the voter escrow
partnership achieves the qualifications of a partnership independent of formal compliance
with IRS reporting expectations, which we literally just did. IRS 7701, according to
Congress, this is a partnership that has nothing to do with tax reporting obligations.
It's just a definition.
So a good part of the memorandum proves that.
Prove there's no partnership dominion over property or money.
And dominion is Glenshaw Glass, which is basically the foundation of tax compliance by the IRS,
a gross income. And Dominion is the key word and clearly realized is, quote unquote,
one of the most important phrases in that case. And we granularly deconstruct
what the heck's going on in DeFi with regard to Dominion.
And that's a powerful thing because people see these claim buttons and they see property
flowing back and forth between contracts.
But what is Dominion and how is that foundational component of tax law applied to what the hell
is going on here?
So that's point number two.
And we can break this all down and go through the document and whatnot.
But point number three is where the nominee interest comes in.
We want to prove that escrow distributions from basically, in curved terms, the fee distributor
contract to partners, which is basically press claim, no matter how acquired, property in
the fee distributor contract, because the IRS clearly states that all virtual currency,
they use the term virtual currency, all crypto is property.
And barring a definition page 7701 by Congress, that is the status quo.
This is property.
So there's considerations if it was money,
but in other case, it's not money.
So no matter how the fee distributor contract acquires property
with its inherent nominee interest characteristics,
the treatment of that property is governed by Commissioner versus Bollinger in
1988. That's exactly what the case discusses. Okay. So then so much of this focuses on dominion.
And just to be clear, as a U.S. who like voluntarily pays his taxes every year um and full compliance with
the law um which is you know see see patriotic we got that um and you know if you're just joining
now none of us are offering financial or tax advice we're just interested in the subject because we're
about to get blasted in about 11 days on taxes um the dominion um refers to essentially when you have provable control over the crypto
and thus in like the net effect of this is if your manifesto is adopted this means that when
i claim rewards that's when the i assume a tax burden is that correct you skip step two to go
to step three. Okay.
I know, I know, but I got to file my taxes.
The deadline's looming.
Well, first we have to prove a couple of things.
It's pretty easy to prove it's a partnership.
That's just by definition.
So the vote does nothing.
It doesn't declare it's a partnership and declare that, all right, we're going to
comply with IRS rules regarding partnership filing requirements. What we're stating or
what the memorandum states is it is reasonable that partnership laws as written by Congress are applicable to what is going on here with these parties involved in a
syndicate or a group. Now, if partnership laws are applicable, and this is really where the
memorandum started in my mind, I'm like, oh shit, so what are the laws? Now, a partnership is not taxed.
It is a pass-through entity.
So partners are individually taxed based on distributions from the partnership,
basically their prorata share or whatever the agreement is.
And in the instance of curve, it's based on relative governance power.
So that's what the partnership distribution is.
Now, here's the kicker.
What is the income of the partnership?
What is the dominion of the partnership?
Clearly, nothing's realized
because there's no money involved to a degree.
So that's like Eisner v. McComber
and that type of conversation.
But the dominion is what's critical
from an IRC-61 standpoint.
The partnership, these group of partners that deposit CRV into the CRV,
have technologically verifiable no dominion over any of the property
in any of the contracts nor the escrow contract. Clearly, these are peer-to-peer interactions
where it is technologically provable that a third party is engaging with another third party,
or basically an NPC, a non-playable character, a contract. So there's no person involved.
So there's no person involved. There's no entity to represent the partnership. There's no product or service offered by the partnership because there's no products, meaning you're not acquiring natural resources and doing manufacturing and selling a product and doing accounts receivables. So that doesn't exist.
manufacturing and selling a product and doing accounts receivables. So that doesn't exist.
So is it a service? That's an interesting conversation. But then we come back to these
discrete entities and the nature of a smart contract and the concept that the code of the
contract is probably reasonable to be argued to be articles of inception as a discrete entity because nothing
ties contracts together from a blockchain technological standpoint. So refocusing,
does the partnership produce income if there's no product or service, considering that breakdown of
everything I just said? So if there's no
income to the partnership and partnerships are passed through, there's no income to partners.
That does not invalidate what we prove in the first step, that it is a partnership.
What we're now doing is proving that the partnership does not
produce any income from any products or services offered by the partnership. So that brings in like
IRC 701, 702, and 703. So there's no taxable income, but there's still distributions.
So we want to talk about the fee distributor contract, which has inherent nominee interest.
And I mean, technically, you know, 731 can be talked about, IRC 731.
But the fee distributor contract is not really a distribution of property owned by the partnership or contributed by partners to the partnership.
And that's what 731 would be discussing.
So in the memorandum, I break all this down.
731 is not applicable also because it has nominee interest.
Or we're arguing and frankly proving that the fee distributed contract inherently has nominee interest. It doesn't report to anybody. It's an independent entity that follows its rules
no matter what anyone else wants. It has immutable code. It may read information from outside of its entity, but nothing outside of it can affect it
or invade it or take dominion of the property contained within it. None of the partners can
say, all right, let's do a vote and take some of that money and do something discretionary.
So there's no capacity to invade and take dominion.
So that sets up basically the conversation
for proving that a nomin...
That leads into the conversation of how distributions are made
from a escrow that has nominee interest.
Okay.
So there's definitely a lot going on there.
And I want to just take a second to recognize the question from the chat because we're live streaming.
So while the 600 of you who are watching this are like uh listening
you can pop your questions onto x or youtube and we'll go ahead and answer them for you so it's a
great time to uh it would be a great time to like uh ping us with questions arrow is asking you know
two questions one um where would one start when it comes to basically like trying to like understand
this material um and two would be, where would one start
when relaying this to our tax guy to implement for this past year? So two considerations, there's law
and accounting. All right. So every accountant is rightfully worried about liability. So this is
a novel interpretation. And they're like like uh okay this is a partnership that's
not filing a 1065 and issuing k-1s all right what the hell do i do with it and unfortunately um
i've seen accountants that say that breaks the irs system all right what does that have to do
with me we're talking about congress the ir IRS is just an agency and they are responsible wants to understand the laws written by Congress and execute accordingly, which is probably going to be far and few between.
There's not going to be many of them.
But from a law perspective, I think any lawyer should be interested in this kind of document. This is a very granular breakdown of the law as written with full semantic evaluation. The definition of words are all considered this is an extremely granular document.
I don't have recommendations for how people could or could or may want to proceed.
Obviously, from my perspective, I understand this document.
Therefore, I have a capacity to represent or express what the hell is going on.
So it's just like we're having with this conversation.
So in some regards, from a legal perspective all right
you guys want to talk about this you want me hey irs let's have a legal conversation or in a court
i'm not familiar with the quorum i probably rightfully uh outsource that responsibility
to a third-party attorney but i surely have a capacity to explain
this document's content and what it means and the implications of it i don't i i can't in in good
faith offer any recommendations for anyone everyone has to proceed on their what serves their best interest. But for myself, yeah.
If we submit this with our taxes and we get audited,
will you commit to doing a live stream with the auditors,
like prosecutors that come after us to have the debate on a podcast like this?
Well, I could talk on behalf of this memorandum. I know what you're saying
is tongue in cheek. This is not something that could help everyone. What this document is,
is a legal analysis that's pretty robust, that cites precedents that go back to the early 1900s and draws on established law from Congress to draw conclusions and interpret the law as written.
That's what it is.
All right.
Another good question coming in the chat.
This is pretty relevant. Since the entire rest of the world has basically been walled off from America thanks to tariffs, does this matter to any of our listeners outside the United States? to look up the laws as written by their respective government and understand them and apply them and interpret them.
That's really what it means for outside the U.S.
And that's what I would like to do.
As you brought up the First Amendment,
people have their individual rights under the Constitution of the United States to express
themselves and speak freely and produce argument and interpret laws. And I guess, you know,
a good takeaway from a lot of the conversation is a lot of behavior is based on fear.
Not really one to be afraid of a conversation, especially after doing research and exercising due diligence, because then you have your tools.
You have an understanding about what the hell you're talking about.
Well, I think the fear comes in the fact that if the IRS is having a conversation with you, it could end up in court.
And the U.S. government does pretty good at, it could end up in court. And the US government
does pretty good at winning their court cases in federal court. Well, that's a fear. What's
pertinent is whether it's in court, you don't end up in court right away. First off, you're having
a conversation with inspectors. You're having a conversation with, or the inspectors are dropping
off documentation and justification to their attorneys. And they're doing a conversation with, or the inspectors are dropping off documentation and justification to their attorneys.
And they're doing a full legal analysis because from an IRS perspective, they're doing a cost benefit analysis.
You know, how much potential tax revenue we can make versus how much we have to spend on lawyers to actually bring this to court.
That's exactly what happened with the Jared case, in my opinion.
That's just implicit, not explicit.
Do you remember Jared and Tezos?
And he got a tax refund for his staking.
Oh, okay.
I thought you were talking about Jared from Subway.
And I was like, that's a completely different legal case.
That was last year.
Jared was staking Tezos and he paid taxes on it.
And then he filed for a tax refund and the IRS issued him
a refund. So he received Tezos from staking that wasn't taxed. Now, obviously it's all implicit.
There was no judgment in the case because the IRS refunded the money. One of two things really
happened. The IRS said, I don't want to make precedent
because this is a contentious topic. We're dealing with property. We're dealing with
staking, but this isn't like chopping down wood in a forest. This is digital. So they
didn't want to make precedent. That's one potential takeaway. Or the other one was
they were dealing with a $4,000 tax refund. And they're like, this is going to take us
200 grand to try this case, cost-benefit analysis,
give them the refund.
In any case, that should express a decent reality.
It's not so simple as how people think.
There's the cost-benefit analysis consideration that they certainly make, and there's the
that they certainly make and there's the precedent consideration they certainly make
precedent consideration they certainly make.
and in the press in consideration of the precedent angle it's exactly why i wrote this document
they there's some serious precedent that's applicable to defy
based on my knowledge i've never seen anything this. I've never seen someone look at the IRC code,
find relevant court cases relative to DeFi,
and do thorough, robust, granular interpretation
of what the hell is going on.
Yeah, it makes sense.
Makes sense.
Now, just the funny thing about the tax code is it's so complicated that if the pro want to build that case, like they can mine through thousands of pages of tax code and I'm sure construct an equally elegant like counter case. So you did address that in the document. You do address some like your thoughts as to like how people might counter this. But first, I just like because i haven't followed as close maybe you
can help me is this the most recent guidance the irs has issued this was from april 2024 and in it
they mention uh specifically this clause that i wanted to ask you about and this is just for when
you're supposed to just check yes as to like did i receive um payment or proper like uh like did i
did do i hold did i hold crypto during the year? But they specifically,
let me zoom in a bit here. They specifically mentioned that you received new digital assets
resulting from mining, staking, or similar activities, which I think is similar to that
Jared case you're mentioning. And this should mean like receiving income from the fee distributor,
right? Like this is what they're talking about here. yeah so in law you have to be very specific when to check yes check yes period that's it
there's no scope there's no other consideration involved you are correct but there you can't draw anything else from it so a distribution from the fee
distributor contract aligns with that particular bullet therefore check yes
nope mute it and that's the only guidance they've issued on this subject.
There's there other things that there's more.
Oh yeah, I have in my other documents.
This is, this is a relatively short document.
Yeah, this one I understood and I, I clicked yes.
I clicked yes, but I think I got this answer right.
I think I got this answer right. I think I got this answer right.
Oh, yeah.
But I was referring to the memorandum.
That 39-page memorandum is relatively short compared to other stuff I've written.
Oh, yes.
Oh, I believe it.
Let's get back into your memorandum here specifically.
Let's get back into your memorandum here specifically.
So you frequently throughout this memorandum, you mentioned the Loper-Bright decision.
And I'm curious about this because my understanding is that the elimination of Chevron deference might affect that.
Okay. So part of why I started doing this years ago, when I heard of the Loper-Bride case,
I was like, oh my God, this is exactly why I started doing what I started doing.
And Loper, when I heard of Loper-Bride, I was like, wow. So interpretation, we're talking about
literally all the IRS memorandums, including the document you were just looking at, including every document that the Trump administration basically told the IRS to, all right, let's stop and redo it.
It's all interpretation.
So, for instance, my memorandum is from a court perspective, a judicial perspective, not from an accounting perspective, nor the IRS perspective.
judicial perspective, not from an accounting perspective, nor the IRS perspective,
which means in a court setting, the IRS could argue, yeah, but we've done this,
or this is the history of the way people have reported, or X, Y, and Z. And from a defense
perspective, you're like, all right, Pearl Opa-Bright, reference statute, reference the IRC code. Where are you acquiring this authority to do this? And that elimination
of agency deference means the court has to ground itself in the law as written. And that's called
de novo, the words of the law as written, which basically puts us all on the same footing.
which basically puts us all on the same footing.
And that's remarkable from an autodidact's perspective.
They're looking at words.
I'm looking at words.
We're the same.
And what do we do?
We construct sentences.
We construct arguments.
We draw on the laws as written, and we draw
on case precedents called common law. And we build strength to argument.
Okay. And then let's get to the reaction from the community here. So you give the good TLDR, the steps that would be mandated by this.
And mostly you got a comment from one good dude, thinks it's good.
LlamaRisk, to their credit, they are super good with legal stuff.
like super good with legal stuff.
And they've written a bunch of really in-depth legal documents.
And they've written a bunch of like really in-depth legal documents.
They had some questions about this and you did reply to them.
So you could of course track people to reply here,
but like the basic like questions they have is like,
first of all,
how do you envisage formalizing the agreement in a manner that ensures is
both validly executed and legally enforceable.
They also wanted an explanation about how the voter escrow arrangement is being treated
as a partnership for U.S. tax purposes.
You already addressed that in pretty substantial detail.
But basically, yeah, Lama Risk raised a bunch of questions, and you answered them in text.
But why don't you also go ahead and summarize that response for people who are listening here.
So the fee distributor contract, the Estro contract that distributes what is quote unquote fees, there's an interesting section of the memorandum discussing that, inherently possesses the characteristics of nominee interest or that it was inherently assigned or inherently has
nominee interest. It is a discrete entity, unable to be affected by any third party. It's unable to
be affected by the partnership. It cannot be invaded. There's no potential for anyone to
claim dominion over the property contained within other than as defined by the Articles of Inception, the Contract's Code.
And that is tamper-proof.
So let's go back.
Let me ground my thought process in the first part
of the Lombard risk.
Oh, yeah.
Let me get that back up there.
I don't know if you could see that well enough.
Oh, formalization.
Yeah, so how do you... So technically, this is...
Why did I propose this?
Because I wanted other folks to be constructive.
I wanted folks to talk about this.
There is absolutely no need whatsoever
for this governance
vote to pass, in my opinion, based on my reading of the laws as written. It inherently possesses
nominee interest. But for instance, if there's a governance vote, which has its assigned vote,
that is a point of reference. It doesn't add to the strength of argument or any argument that's
presented in the memorandum. It's just in addition to basically stating that, all right, everyone's
like, we've read this, this is quite interesting, and we agree or we understand that this memorandum describes the fee
distributed contract has characteristics of nominee
interest.
So it's an acknowledgment vote.
It doesn't signify anything other than a memorialization,
maybe.
So that's how it's already enforced.
So in the meat space, you would need partners to all agree,
and then they would need to create a third-party entity,
incorporation, or however they want to structure it.
And they would need all this documentation for enforcement
and compliance and how to prove that it has nominee interest.
But that is literally what the contract's code of the fee distributor contract does and prove.
It's already there.
Got it.
Okay. Good answer. Good answer. Let's get to the counter argument section in which you will try to steel man the opponent's case against the voter escrow partnership, just because I think it's, you know, it adds to the credibility of the document to actually like to try and formalize the case against it and argue against it shows
Okay.
Good answer.
Good answer.
that you have been thinking through things.
So why don't you walk?
Go ahead.
These are nice counter arguments and rebuttals.
I attack this from many angles.
And I think there's four counter arguments and rebuttals that are literally like 15 pages in length, more or less.
So how do you attack it?
Okay.
IRS is like, it's not a partnership.
All right.
Look up IRC 7701.
That's in brief.
But there's obviously from a documentation standpoint, a whole entire argument that could be presented and thus the rebuttals to the counter arguments.
Now, then they could also argue like, all right, it's a partnership.
So why aren't you filing a 1065?
Well, because it's software.
But we prove that it's a partnership.
So we have no capacity to file a 1065. And then the framing of that standpoint is,
all right, what are we supposed to do? And that's from like a consumer of the IRS's perspective.
Hey, IRS, this is a partnership. You want a 1065. It can't be filed. What's the answer?
want a 1065 it can't be filed what's the answer what do you do it's not and that's what um um
loper bright discusses it's not for them to define what to do it's for congress to define what to do
it's not the mandate of irs to write the law it's the mandate of congress to write the law
and i find that an interesting angle.
So part of the last counterargument is they may want you to pay taxes,
but that's not something for them to decide.
That's for Congress to decide.
And all their job is to interpret the words and the law as written
de novo by Congress. Their want is not part of the equation. And frankly, since Lover Bright,
their interpretation is not up to them. Their interpretation is up to a judge,
or the interpretation is up to a judge.
Now, a potential other counterargument that I don't think you addressed in here is that you still are saying that when you receive the rewards, that is what Count says.
When I, as a taxpayer, get dominion over the funds and thus would assume a tax burden.
when I, as a taxpayer, get dominion over the funds
and thus would assume a tax burden.
But a counter argument might be like,
if I really hate paying taxes,
I would prefer to have a interpretation of this
where even when I claim the rewards,
I don't get dominion of it.
And that's like, you're giving me more of a tax burden
than if I had a more creative legal argument
that would say like,
maybe I don't get custody of the funds
until they're in a centralized exchange.
Anything in blockchain land,
it's kind of like metaverse.
It's not real.
This is the whole point of nominee interest.
And this is why the Bollinger case
is so exciting.
And this is why it's so hard to understand
the goddamn Code of Federal Regulations
and how Treasury interprets the word of Congress.
The Bollinger case has a very simple outcome and a very simple constraint.
basis.
Basis.
Property enters an escrow contract
with nominee interest and all that is set up
in the memorandum. What is the basis?
And there is a counter argument and there's also sections that discuss
what is the basis. So
the basis in the Bollinger case is preserved between escrow
and the partner. So we've already identified and clarified why partnership does not produce
income because there's absolutely no capacity for the partnership to exercise Dominion these are third-party peer-to-peer interactions that result in the escrow of property
in DeFi they use so yeah there's a good section at the end of um uh the escrow contract section. Where is it? Escrow contract. Though this escrow property
might superficially resemble fees, it is not a fee generated by the partnership.
Because it's so simple. What is a fee? A fee is a manifestation of a product or a service.
It's a payment. So it can't be a fee, because the partnership is incapable
of offering a product or a service. So basically, you have what results is the escrowing of property
that's a manifestation of third-party persons engaging peer-to-peer with one another,
which isn't a fee of the partnership people are doing stuff with each other in
discrete immutable entities that have their own articles of inception unto themselves this really
brings up the nature of what the hell is going on here it's what no one has done before i so it
has done before i so it it's not a fee so what it's the escrowing of property by two people we
have no idea who they are and they're doing some shit and property gets escrowed by the rules of
the contracts that they're engaging with that the partnership has no dominion over. So the basis of the property that enters those contracts
is arguably the fair market value at the time of contribution.
Now that presents a complexity
because we have no way to track that as partners.
We don't know when, I mean,
obviously if there was DeFi tools created,
we could track fair market value on escrow contract deposit.
I think technically it's possible, but I have an entire counter argument and an entire section that discusses that.
speaking, I cite case precedence that discusses why and how it is most reasonable that the fair
market value upon distribution from the escrow contract is basically all you're going to get
about basis. It's the only way to track a factual, actual value with accuracy.
So basically, to summarize then, because the properties of how the smart contract operates,
there's no basis and thus no capital gains tax triggered, even when you're claiming rewards
claiming rewards from the fee distributor. Is that fair?
from the fee distributor.
Is that fair?
If $1,000 of Bitcoin is escrowed, the basis is $1,000 fair market value by contribution.
So let's say there's zero volatility and the escrow contract distributes $1,000 worth of Bitcoin.
The basis carries over. The partner receives $1,000 in Bitcoin at $1,000 of basis.
And that is what I kind of jumped to conclusion with.
That's why I was trying to focus on nominee interest rules with the proposal, because that's the craziest takeaway that I could possibly have
based on the Bollinger case. Basis preservation involves a distribution from an escrow contract
with nominee interest preserving basis. So there's IRC 1001.
If you receive $1,000 worth of Bitcoin at a basis of $1,000, all right, fine.
It goes up to $2,000.
You owe capital gains tax on the delta, $1,000.
But that's after the fact.
What happens if you take that $1,000 in Bitcoin from a claim button and you immediately convert
it to stablecoins? There's no change in basis you receive a thousand dollars worth of
bitcoin at one thousand dollars basis you convert it to 995 dollars worth of stable coins so
technically it's a five dollar capital loss there's no capital gains on receiving that property.
And then we can talk about like constructive receipts.
So there's an entire section about constructive receipts and how that's clarified.
It's not income to the partner because they're following partnership law.
they're following partnership law.
The income allocated to the partner
is a manifestation of the income
that the partnership generates.
And we have proven that the partnership
cannot generate income.
So if the partner is receiving $1,000 in Bitcoin
that has a basis of $1,000,
there's no capital gains,
and there's no income attributable to the partner because the partnership is technologically provable incapable of realizing
realizing glenshaw glass and taking dominion over fees or producing any fees and there's no income either. So basically, that is the takeaway of the framing
or the net result of the memorandum.
That claim button isn't what people think it is.
And there's 40 pages that break down what no one has looked into.
Okay.
And just so there's some people joining just now,
like the TLDR of all this is that if you like want to like advance this
interpretation that essentially when you hit the claim button,
it's not quite as, you know,
It's not quite as cut and dry as, there's many possible interpretations.
it's not quite as cut and dry as there's many possible interpretations.
What has proceeded for the past 50 minutes or so is a very detailed explanation of the basis of this argument.
So again, we're not lawyers, we're not accountants, but you could present this to your lawyers, to your accountants, and for example, like try and cobble together a case for how you could do your taxes.
That's part of the conclusion.
I mean, this is really just an exercise.
I get excited because, you know, this is, for me, it's a learning experience.
I'm like, holy shit.
This is what it says?
This is how it works?
This is the law? it's provable and that and you know
really at the end after writing this entire document you get you come back to the three
things you want to prove and maybe at the end of our conversation we we say we have proven that
it's a partnership really damn clearly and that has nothing to do with the declaration of a partnership
at all there's nothing to do with filing 1065s or issuing k-1s at all according to congress
and there's no capacity to offer a product or service therefore there's no capacity for the
partnership to generate income and we have proven that escrow distributions, no matter how
acquired, which is a very key takeaway from the Bollinger case, the Bollinger case never, ever,
ever talks about how property got into the nominee interest account. They only discuss
the relationship between the nominee interest account and the recipient. And the whole case concludes preservation of basis.
So it doesn't matter who put property into the escrow account. So we proved the three things.
You receive, you press claim, you receive property, it retained basis. What else is there to argue?
Very cool.
Now, the other argument that some people have advanced is that the IRS is itself going to be in disarray because of budget cuts and because of tariffs and everything.
So they might not, like, who knows if they'll even have time to, like, deal with anything.
Plus, it's, like, a friendlier administration.
So, like, they might be looking to, like, at some point even issue counter guidance on this, right?
And they're welcome to.
Half of my conclusion is, all right, I'm going to file 8275.
I'm happy to talk about this.
I'm more than happy for Congress to write some laws.
And then you adapt.
You adjust.
You read the law as written. And you're like, all right, great. If you have to change
something, you change something. So instead of approaching this type of topic with fear, I'm more
like, let's have a conversation. What is actually going on? And that was, that's always, I'm sure a
lot of people feel that way. They're like, all right, nobody's looking into this. Who's looking into this?
Where are the accountants that are on my side?
Where are the lawyers that are on my side?
And I couldn't find anyone.
I guarantee even if I spent hundreds of thousands of dollars,
they wouldn't be able to see what I saw when reading these words
to construct a memorandum like this.
So we come back to the old parable.
If you want something done right, do it yourself.
Yeah, very, very good point.
I tried to get our legal squid, Alex, on the show to discuss, and maybe we'll be able
Gus, and maybe we'll be able to get him back in the week or two or something like that.
to get him back in the week or two or something like that.
He's on vacation.
He's on vacation. So he wasn't ducking out of fear of not having a good case or whatever.
But I would be curious to know if you have shopped this around, because I'm not a lawyer,
right? Have you shopped it around to lawyers? Have you shopped it around to accountants? What
do they say? I've tried to. I have an accountant and he's like, holy crap, I can't believe what you do
with your documents. My accountant's jaw is constantly on the floor. I have 120 pages
worth of documents for different things. And he's like, I don't know what's going on in your brain.
Are you paying him per hour oh he's expensive
he must be happy when he gets one of these like all right i'll read through this but it's gonna
cost uh it's gonna cost a dollar or like whatever like an hour per page i was i don't know i spent
like 30 40 000 on uh on lawyers and accountants probably in the last two years. Anyway, here's an interesting statement.
So I presented this argument in memorandum form
totaling about 40 pages.
That does not warrant a knee-jerk reaction saying,
I don't like this.
I don't agree with this.
I don't like this. I don't agree with this. I don't understand it. This warrants,
okay, you're saying this. What about this IRC code? What about this clause? What about this language? What about this court case? That's the only reasonable way to respond to this document. And it is certainly
not the case, oh, it breaks what the IRS does. No, this has nothing to do with what the IRS does.
This is a document that is for a court using court precedents and the words of the law as written by Congress.
So accountants are very quick to say, I don't know what to do, or I can't file this because
they have a liability. They have risk. They have their own risk. They don't want to take
responsibility for someone doing this because then someone who's not prepared to defend
themselves is like, all right, you got me into trouble.
So they can't proceed with something like this.
So that's why it comes back to what Ero said.
There's no practical way for me to say anything about what to do with accountants.
It's an individual relationship between you and another person.
And nobody wants to take responsibility for someone else.
So the only reason I have written a document like this is because I take responsibility for myself.
I do what others don't.
And I learn.
And I have no inhibition.
In some regard, no fear.
I mean, obviously, at some point, I'll have fear.
All humans do.
But I certainly don't fear words.
And I don't fear a conversation using words.
All right.
As for other people who gave feedback, so first of all, almost half the people out there
almost half the people out there said they read it, which is pretty good.
said they read it, which is pretty good.
Maybe they were lying, because I know my teacher often asked if I read the book, and I'd said,
of course, of course I read the book. Then the feedback, though, on Twitter, or X now,
was rather, I guess, tepid, let's say. You got accused of being an AI, which might be a good
accusation. It means you think like an AI.
Martin said that he wasn't sure why it's needed.
He just tells his government, I got this amount of Curve USD as dividend, and they're okay with that.
No, I think he's not US.
I think he's Switzerland, so it's different.
Lex Node hasn't read it.
Hopefully, we can get Lex Node to read it.
That would be really cool and have him on the show to discuss.
But, you know, what was your uh response in you know you rewrote it out but like go ahead and
verbally like uh respond to some of the feedback here fit he said it was ai but i just had a
conversation an hour-long conversation about it so that brings up philosophical questions
conversation about it. So that brings up philosophical questions. What is language?
What is, yeah.
I think what's neat is, I think we need to take your writing and feed it into and train
an LLM based on you. Because I think you would be a great candidate to have your own AI built.
It would be way better than 99% of the AI agents out there.
It would be completely deficient of me to not utilize AI for what it is capable of.
But clearly, in my capacity to articulate in the way I speak, these words in this document are a
manifestation of everything that I am. Whether explicitly each individual word is written by me or an argument is presented
as constructed from an llm and then i modify the language to express myself or i modify and correct
it to best express the argument these are all my words well llms are good but um you know
how working out with the llms like it could not come up with something like this. Like this is clearly like clearly like there's a stage of creative reasoning that LLMs do
not yet possess.
So I reading through it is pretty clear to me that this is not the byproduct of an LLM.
Although, of course, yeah, I'm sure you're able to supplement some sections and probably
you I would guess you used it for the counter argument section.
No, I use LLM significantly, but there is.
So the first days, so this is obviously two weeks in the making, but I have years that I've been writing legal documents.
And I'm quite proud of where this document is.
The flow of the sections, how you introduce a concept.
For instance, the first section talking about traditional partnerships, that't exist and I'm like all right so I have this flow of sections and now I should
add more content introduce context and I add additional sections so this is a constructive
process where this is certainly not the original form of the document.
And it's certainly not the original progression of sections.
And there's no answer to how to build documents in their perfect form when you start.
It's an iteration process, just like with software.
But the flow of these sections are quite interesting because it builds from context into what is blockchain.
And frankly, I start with the three things I want to prove.
And the only way I didn't know those three things at the beginning, I've only realized those three things probably in the last couple of days after writing the entire document.
But that belongs in a section very early in this document.
You go through what a smart contract is. You go through downstream contracts. that belongs in a section very early in this document.
You go through what a smart contract is, you go through downstream contracts,
you go through the relationship between contracts,
you go through the notion of an escrow contract,
then you introduce inherent nominee interest.
Then you go through IRC 701 to 703, 731,
and you talk about, all right, great, basis,
basis preservation, you bring in the court cases,
you bring in the most cases, you bring in
the most important Glenshaw glass.
And over time, these documents, or you know, that my process, the documents iterate, and
strengthen and are better organized to clearly express the economic reality of what is going on these are very key words
reasonableness economic reality what is property versus what is money is like
one of the most important things to discuss when talking about irc code from congress
they are not the same eisner v mcber, you have to realize property for it to become money.
Property isn't inherently money.
It's property.
And this comes back to constitutional property rights type stuff.
And by the way, we were joined by our co-host, Sam.
Sam, welcome.
You have missed a very interesting hour because I don't know if you have, are you
among the 50% or so of people who have read the voter escrow partnership manifesto?
I, this is my like first time glancing through, but it looks really interesting. I'm, I'm like
tearing it apart at the moment, but I think that just stay off like the top level stuff that I'm looking at, like it seems that this is
something that would like drastically change the understanding of how these VE partnerships work
and how they're characterized under the law. It looks pretty cool.
You know, I didn't know where this memorandum was going to head.
You know, I didn't know, I didn't know where this memorandum was going to head.
I had something, an idea in my mind, and I had no idea that like under corporate law,
there's three types of laws that are very important to understand.
You got personal law, you got corporate law, and you got trust law.
They're completely distinct in many regards.
Now, I understand a lot of trust law.
I know nothing about corporate law. So a lot
of what I understand from trust law is kind of how I started thinking about this from an individual
law perspective. And I had no idea how this was going to turn out. Now, interestingly, in Discord,
some initial conclusions from other folks in the relevant channels, because that it's not going to work.
It's not going to produce the conclusion you want.
And that was actually before I read the court's case, Bollinger case, regarding nominee interest.
And then I'm like, what is this nominee interest?
Oh, my God, that's exactly what's going on here.
oh my God, that's exactly what's going on here.
And we could technologically prove that it possesses this property,
this legal property inherently.
And I was like, all of a sudden, what was a roadblock is no longer blocked.
And this is probably about like two weeks ago at this point.
And that allowed significant progress to
be made on the coherence of argument and the document cool so um since sam hasn't read it
i'll give him a like a chance to like skim through and see if he has any questions but uh
like uh you know if you have like any kind of final thoughts you want to give on this document
um before if you have time it'd be interesting to get your perspective on some of the other aspects of the markets, because we live in interesting times, which is a curse.
I got it.
I do have a question about it.
Now that it's written, how do you build political support for it?
What's the plan to go out and lobby this into reality?
No, that's what's exciting.
You don't need political support.
You don't even need the governance vote on curve to pass.
This is an interpretation of what currently exists
independent of any action that anyone else can take.
This is reading the words written by Congress in law
and interpreting common law, the history of judicial judgments, and describing the economic reality of what is commonly referred to as DeFi.
refer to as DeFi. People have been engaging in DeFi and taking the guidance of accountants that
are trained to do X, Y, and Z based on X, Y, and Z rules. The accountants haven't read the IRC
in entirety. The accountants are not lawyers. And why would a lawyer look into this? I guess my two senses, at minimum, nobody has looked into the law as written. And this document is an expression of that fundamental reality.
that's awesome i'd love to see uh if you could build some political support around this this
seems like one of the kind of reactions to uh like the broker law that they're trying to pass
or some of the other minutia that the irs has levied against crypto tokens and protocols and partnerships. Well, the irony is that this is partnership law,
and none of the IRS memorandums talk about partnership law regarding crypto.
So this supersedes all IRS memorandums,
because this is established law.
This isn't new interpretations,
or rather, frankly, it is a new interpretation,
but it's an interpretation of already existing law.
And that was what I wanted to do.
I wanted to apply the law to DeFi,
not wait for guidance by the IRS
because the IRS surely has issued no guidance
regarding partnerships.
And clearly,
that's something in the back of our minds. We've been engaging in voter escrow and this concept
of governance. All right, fine, great. What laws are applicable? And that's somewhat how this type
of piece emerged. Oh, shit. That's a partnership.
You know, and it's really telling because I was reading this post by, let's see,
Paradigm came out and kind of like put out their general perspective on what the market structure for crypto should be coming into 2025. I saw this put out by the VP of regulatory affairs, Justin
Slaughter over at Paradigm. And I thought it was really interesting. So maybe I can just bring that
up real fast. We can like roll through that. And then you can talk about that in the context of
this. Let me just find that as I'm scrolling down. Essentially like we're going to get a stable coin bill this year
right and then we're probably going to get a market structure bill at some point and once
we have those two things it's going to like drastically clean up everything um
so i'm i'm really excited that we're going to get these things.
Oh, yeah.
Here we go. I found it. Okay, so let me just run through this
because I thought it was a really interesting doc because
you know, paradigm does carry a lot of weight comes to this
and credibility. And we'll just run through their term sheet, right?
So we can go through this one by one.
So crypto assets are native digital assets
that are imbued with property rights, right?
Number two is-
Good statement.
Yeah.
Property rights.
Property rights.
Distributed ledger technology means a ledger shared
across distributed nodes within a network
synchronized between the nodes that is publicly accessible and is appended to via some kind of
cryptographic consensus. It's pretty straightforward. Here's a good one. Smart contracts are computer
code deployed to distributed DLT that execute instructions based on occurrence or non-occurrence
condition. You realize that's a key of this memorandum. These are discrete entities that have articles
of inception, which are literally their code. Yeah. I think the next one is interesting because
crypto assets are commodities, except for those that have forms or aspects of security,
which are also in decentralized ledger. And this commodity part,
I think is the most interesting because, you know, we did not see a lot of any CTFC
action in the previous four years. We had the UKIDAO case, we had the open case,
and those two things were heavily partisan, arguably, extremely draconian as coming down on both open and also Ukidao,
especially open. Ukidao got a short end of the stick. But one thing that I remember from the
Ukidao case that I wanted to bring up, because you are talking about partnerships, is that they
were able to get a summary judgment against UkDAO because nobody showed up in court.
They claimed that they were a,
what's it called, unincorporated partnership
and that anybody who had ever voted with the token
in governance was like legally liable at that point
for anything that the UKDAO had ever done.
Yep.
Yeah.
And so like, how does that fit into your partnership
because i know that's one of the things that we talked to like i've i've talked about at length
with alex kolobitski or um our form or like former squid legal uh legal person in residence
or squid in residence um like how would this type of partnership protect the members of the partnership
from outside litigation?
Well, this is where immutability changes the equation.
They probably took the position that persons not only in the DAO,
but they were looking at it from the perspective
of centralized people in an office making choices and decisions, calling themselves a DAO.
In the realm, especially, this is why I only posted the Curb Finance, and I haven't really
thought about application to other voter escrow systems. Care finance contracts are immutable.
It's a past tense.
These are established deployed entities post fact.
There's no person that is even capable of changing the code of these contracts.
So that is very personal in the UKDAO consideration. Ongoing development
of separate contracts. They are a partner themselves, maybe a recipient from the fee
distributor contract. That is completely new work. And there's nothing that ties these
contracts together to form an entity. Yeah. I wonder if there's something that Open, like specifically Open can go back and appeal in
their case.
Maybe I think they already accepted the enforcement action.
So maybe there's not.
But now that we have like rulings on the Uniswap contracts plus tornado cash and essentially
saying that immutable smart contracts are like excluded from the law. They're just code. You cannot put
them under ownership of anyone. And that's what number six gets into here, which is a decentralized
crypto asset exchange, which in this case would be Curve, is public and permissionless, right?
And has no person or group of persons that can control, block, or approve the transactions on
the exchange. And then that last one, non-custodial in nature. And all of this, and I think yours goes in line
with this as well too, is that this is going to push everything into the CTFC at some point.
Like the DEXs just kind of get like pushed off into their own, like they exist, they're these
partnerships, if you want to call it. I think it's probably like a really nice way of um describing
them as its own entity like crypto general crypto partnership or something um but uh
listen there's laws for commodities and there's laws for securities there's laws for property
there's laws for money what's pertinent is the letter of the law. And it's not the case,
what I described in the memorandum
is a partnership.
Probably the most accurate takeaway
is that the economic reality
of what's going on
means partnership laws are applicable.
So there's a difference in statements there.
Yeah.
Yeah.
I think the general consensus that we're going to get to in this cycle is that
like DEXs or these VE partnerships, if they are not custodial in nature,
they should have their own exclusions that prevent them from having to be registered or
excluded from certain types of litigation or enforcement actions as well too.
They're going to have to reconcile. Okay, great. It's pretty ambiguous that this is a partnership
that cannot file forms. So reconcile that. That's not for the IRS to reconcile. It's for Congress to reconcile.
It's like, what do you do? We need a definition of behavior.
Right. Right. I'm excited. We're going to get so much, like so many, so many rules and laws
coming out this year. It's just going to juice it all up. And especially for a protocol like
Curve or Uniswap or like any of the major DEXs is going to have like extreme clarity to operate under US law.
That's growth. And that's just certainly exciting from a technology standpoint and certainly from an investing standpoint.
And clearly we could talk about the market collapsing today.
Can I ask a question about one of your, you got a lot of bangers, and I'm surprised this one didn't take off.
Everyone else is either taking a wait-and-see attitude or panicking, and you're euphoric.
Oh, completely euphoric right now.
I've been waiting years for this to explain, there's three steps that lead to us experiencing what we know is inevitable.
First is dollar down. Second is the bond market getting bid with the treasury market, long-end
duration. The third is the volatility of those treasuries collapsing. DXY down, 10-year plus yields down, move down.
You get those three conditions, it's game on.
That's what Arthur Hayes argued as well, right?
We all argue the same thing.
We all use different words, and everyone argues that everyone's saying something different.
I say that literally, I say the same thing as Raul. I say the same thing as Raul I say the same thing as Arthur I say
we're all saying the same exact thing even Mike how liquidity okay so how do you get liquidity
bond market volatility collapse move collapses and there you go the global of a health factor
goes through the roof so that's a decent analogy the global of ave health factor which basically means you want your collateral to appreciate and so here two seconds so let's say you got 10 grand worth of ethereum on ave and it has um
you know infinite health factor uh but then you're 10 grand and you don't want to take any um uh debt
because ethereum's going between 4 000 and 1800 five times a week that's basically your
move indicator through the roof the volatility is through the roof and you don't trust it
so what happens if your ten thousand dollars becomes thirty thousand dollars and the volatility
just basically sits there week over week after week for like two months straight
you're going to borrow some capital.
So when you apply that to the global financial system,
you're talking trillions of dollars.
Of new credit?
Credit, which is the dollar.
The dollar is credit. It plays into basically what is the actual structure of a dollar,
which is a conversation unto itself.
Yeah.
What is the 10 you're at today?
Probably close to four in chain.
Yesterday was getting close to four.
Holy shit.
Wow.
It broke four.
Yeah.
Three.
That's a three eight.
Wow.
Well,
look at the dollar accomplished partially because look at the dollar,
the volatility on the DXY is absolutely insane.
I mean, it is historic volatility.
Okay, this is constructive yet precarious territory from a DXY perspective.
We did not breach the 50 SMA in the monthly, and we are not holding the 200 SMA in the weekly.
This is the first breach.
Yesterday was the first breach of the 200 sma in the weekly we this is the first breach yesterday was the first
breach of the 200 sma in the weekly in any meaningful way since june of 2020.
oh yeah i mean that's already done the candle's already there it's wicked
but that is the last time we were in a dollar position comparable to what we experienced yesterday
last time we were in a dollar position
comparable to what we
experienced yesterday.
So there's
your time.
Yeah, I got
MAs up and whatnot, but
it's the story of
moving averages. A lot of folks don't like them.
Levels they look at, and I agree.
a moving average is quite significant. It's because that's
consensus. So what's your like bellwether chart that you're going to be watching the 10 year or
the trifecta. So obviously the dollars across currency pair. But how do you look at all charts at once i don't have time i
got shit i gotta do so dxy dxy 10-year move those are the three charts and i don't even have to look
at bitcoin i could tell you what bitcoin's doing based on those three charts
so i've i actually haven't been looking at the charts at all. So I'm kind of curious to hear your guys' thoughts.
I have seen some people mentioning that they've seen that crypto has been holding up relatively well compared to all the other assets.
Is that true?
Oh, yeah.
Okay.
Unintigrously.
So, I mean, I can't help but vaguely like optimistic about everything that's happening.
Because like, you know, I'm so tuned out to market volatility at this point.
But whenever I see like massive market volatility, I just assume there's a massive wealth transfer from someone to someone.
And it actually seems like if crypto is shaking out on top, then I'm on like potentially the receiving end of that.
I'm the beneficial end of that, right?
It seems like there's a massive wealth transfer going on
to us in crypto, which is kind of cool.
As you're well aware, it's a very complicated story,
which I handle on my stream.
What the hell is going on?
But frankly, NASDAQ down 1,000 points
and the DXY back up at 102,028 is quite extraordinary to see.
Right now, the dollar has got everyone shaken.
The story isn't tariffs.
The story is what tariffs do to cross-currency flows, the flow of capital between countries.
And this plays into policy because of GDP requirements to service outstanding liabilities,
debt servicing requirements.
Frankly, the fact that the dollar is doing this
and the move is back at 112,
I'm surprised that Bitcoin is doing what it's doing.
And that is basically how you started the thought.
It is fantastic, astounding that it's at 83.
We were just at the ETF and it was 47 and it crashed to 40.
That's crazy that it's at 83.
You know, I had come into like the past couple of years
watching a couple of really interesting market analysts that I like.
And one of the things that they
consistently said over and over and over was that the market valuations had never been higher.
P's had never been higher. The price that you were paying for risk assets, especially the S&P
and NASDAQ and everything had never been higher. Everything was just at like stock valuations were at like extreme,
extreme levels.
And maybe this is the reset, right?
Where, you know,
in order to bring stocks and other things back into line,
this is the sell-off that needs to happen.
Part of the equation, strong words, reset um overvalued look nasdaq
and asmp those are etfs basically 500 and whatever particular nasdaq you're looking at
maybe it's the 100 or whatever but so they're irrelevant you want signal through noise you look
at the russell 2000 or the Wilshire 5000.
So frankly, as much as we're seeing a thousand points down on NASDAQ today,
following what the hell happened yesterday and the day before,
the fact that the Russell 2000 is down 10 points, 5.25% following yesterday, we got some signal.
Right now, there's capital outflow from the United States.
And that is further supported by the dollar's move.
Dollar goes down.
It's going to force the unwinding of the Japanese carry trade.
It's going to force capital outflows from the United States,
outside of the United States.
And that's consistent with the more traditional conversation
about emerging market cycles,
which we haven't had in a long time.
And dare we look at the six-month chart of the DXY,
that presents my overarching thesis.
Yeah.
I always go back to this chart,
which is an inflation-adjusted S&P 500 chart.
And you see that there are periods where we have sustained growth,
but then there's also like decades where we have no growth at all.
And potentially, you know, we've been in one of those since like 2008,
like arguably that like we've been in a secular bear market during that entire
time period. And maybe this is just one of the final or continuation of sell-offs or one of the final sell-offs in order to clear out that bad hangover that we still have.
Because I still think that a lot of the issues that we're going through now are just still knock-on effects from 2008.
Of course.
And you know, we didn't solve anything back then and we're paying the price for it now.
Oh, we have to refinance $7 trillion this year.
And now Besson's trying to get interest rates down so he could actually afford to refinance
Um, you know, NASDAQ is just noise.
It's overinflated, uh, boomer meme coin. It's over inflated uh boomer meme coin it's just it's
boomer meme coins same with the smp because they they it's an etf means they could finagle the
balance and that's why we've talked about the max seven for so long so seeing nasdaq down a thousand
points s p down almost five percent 265 like all right whoopie do show me the russell 2000 all
right there's your signal um because
that's the broad stock market or maybe at least look at what an rsp equal weight s&p 500 equal
weight not just the shit that's gone up and they've rebalanced to the favor the stuff that's
gone up so their etf goes up these prices are all noise um which is why really the dollar
the move in the 10 years the inspection and cross-border flows the dollar has dollars have
flowed into the united states over the last years just they've flown them in hand over fist
digitally obviously at some point cycles will cycle it's a fundamental characteristic
of nature at some point the dollars need to flow out of the US dollar comes down as the is the the
foremost leading indicator of dollars flowing outside the US now what's fascinating is how
does the dollar go down it can't it can't go down by itself so what I'm
curious what I think about and I don't draw a conclusion on it's all speculative how are they
making the dollar go down can't go down by itself there's too much debt out there
yep China owes India India is China India is india is russia russia is india india is south america
india owes south africa india is australia australia owes
india but take that spider's web and make it the most complicated spider's web you could possibly
imagine and all of them owe each other dollars as interest on that debt. And there's this Brent Johnson territory.
How do they get the dollars to pay the interest on their debt?
And what happens when the dollar comes down? Then the whole equation changes, and that's why
it becomes cheaper to get dollars. So all of a sudden, their economies boom,
and you get the emerging market cycle. Because capital flows from underperformance to outperformance as foreign currency gets stronger
or purchasing power prices go up they get inflation and equities go up so if nasdaq is
down a thousand points and some you know some index in ind India is up 2000%, you get your FOMO and you get your capital outflow.
Because when you apply that type of story to the entire system and that things don't happen quickly,
they take periods of time. Capital flew into the United States, it'll flow back out over years,
two, three, four, five years. So you look at the the six month on the dxy
it screams 10 15 years of lower high lower low are really due for the dollar in order to bring
the entire global system into equilibrium it's a fun one on the six month nope no
No psychopath looks at the six months on the DXY.
psychopath looks at the six months on the dxy yep i do
Yep, I do.
You're talking about like this one?
Yeah.
That's what I'm talking about.
1970s.
Okay.
This is my broad thesis.
Over the next 15 years, we hit that lower trend line.
We are over, this is like Yellowstone.
We are overdue for an eruption.
We are overdue for a downward leg in the dollar.
It has been a dollar bull market since 2008.
All of the crypto bull markets that people refer to occurred in a dollar bull market since 2008. All of the crypto bull markets that people refer to occurred in a dollar
bull market. Dare we talk about what happens in a dollar bear market, which we've never experienced?
Yeah, I've never experienced it. What should I, as a casual crypto user, expect?
Well, generally speaking, to use hyperbobole that's by definition the super cycle
where the entire market produces higher lows and higher highs over the next 10 to 15 years
um albeit the scary or crazy thing is we've already been producing higher lows and higher
highs so we're talking about even higher lows and higher highs dollar down makes foreign currency more valuable there's infinitely more foreign currency than
dollars because they can print their foreign currency so as the dollar gets weaker they
have more purchasing power and by they i mean the rest of the world which means their number goes up
and then i remind folks that
crypto is not a united states market crypto is an emerging market as i define it accessible to all
markets of no market it's not like new york stock exchange it's in new york you don't need an
intermediary or a broker to engage with crypto but you do and you need dollars to engage with the new york stock
market you can engage directly with crypto from any denomination you just need counterparties
and that's exactly what defy offers the capacity for third parties to engage with one another
vis-a-vis the contracts that we've talked about and that we know all too well
vis-a-vis the contracts that we've talked about and that we know all too well
all right uh one last thing then we get out of here unless you have something else
garrett no i'm good it's been a fantastic conversation
what about i'm going to bring up the uh the most hated chart in crypto um this one doesn't
actually go on the six months we'll do this one on the one year um or the five year for this one
uh but hated chart just down only at this point well my two senses from my my personal investing perspective which i offer on my stream
it's irrelevant it's noise i don't treat ethereum as an investment nor do i treat a bitcoin as an
investment the cash so if you have a portfolio i bifurcate my portfolio between cash and investments. Consistent with Vanguard, my investments must produce cash flow.
So cash isn't cash flow. Cash is cash, which means it's suitable for payment purposes.
All right, fine. Bitcoin's more volatile than dollars, but folks forget that dollars are
volatile. So stablecoins might be fixed at the unit of one. But as we look at the DXY,
that value of one varies
significantly over time so the cash position of the portfolio is stable coins of bitcoin for myself
everything else is investments that must have rule number three you pay me that's the core
criteria for an investment in captain's book so i don't i don't look at ethereum as an investment
investment in the captain's book so I don't I don't look at a theorem as an investment so with
regard so what's the use of aetherium I need a theorem to engage in transactions I needed to to
um to pay for transactions so my two cents is what's the future of aetherium
fat protocol thesis at some point I expect expect these entities, quote unquote, businesses on Ethereum to be more
valuable than Ethereum. One last thing. And that's, maybe you can talk about being a top 10
squid holder before we get out of here. It's not an investment.
It's a holding position for the future of news and content distribution and everything else that Garrett has packed up in his big brain of his.
Oh, it's an honor.
It's stunning.
I love what you guys.
I have been with you guys since the first days and it has been such an
incredible journey so i would i wouldn't put it in the cash position so there's obviously an
additional uh position that's collectibles and that's a very popular position that people take
part in not clearly not an nft but the point is there's substance and meaning and sentiment associated with it.
And that means something.
It's not something I really entertain much from an NFT perspective, but it certainly is there.
I know other folks talk about it all the time.
Like Raul talks about his NFTs and art and then folks like that.
Other folks, a DC investor, he loves his NFTs.
So that is just something I don't think about a lot, but it is important.
Sentiment, what is meaningful?
So Squid is meaningful in that regard.
Amazing.
Yeah, it's been really a blast having you around.
And, you know, we've been at this, it's hard to believe, over two years now. And it's been really a blast having you around and you know we've been at this uh it's hard to
believe over two years now uh and it's almost three almost three and it's entirely like because
of like part-time efforts and we feel like you know we've never even really given it our full
steam ahead go um but once we do like we think that we could get some pretty powerful stuff
because we got amazing stuff um just kind of like getting this loose confederation
of random people who like are news junkies
and follow crypto 24 seven together.
So I'm excited to see where Squid goes this year.
It's already, we got some big plans, let me just say.
My general expectation is the market,
everyone, everyone is under appreciating
where the markets are heading.
And history, so like lendiness, the longer technology exists, the longer it's likely to exist.
The longer a news source or an organization is in existence, the stronger it gets over time.
Here's some of the original guys that have discussed these topics.
That is going to be
extraordinarily interesting as this market heads to its destination right so does that mean that
i should buy stock in msnbc and cnn they've been around a lot longer than us those are meme coins
i literally in conclusion chase stock is a meme coin You're not getting cash flow from mortgages.
You're not getting cash flow from international investments.
You're getting a dividend, which is a bunch of people sitting in a boardroom saying,
here, peasant, shut up.
Here's a couple of pennies on your stock.
That's not an investment.
That's a meme coin.
All right, fine.
Maybe REITs and other stuff more aligned,
but there's nothing like immutable smart contracts that are just
programmatically designed to exist and distribute everything.
Changes the equation.
With not many interest, of course.
Excellent. Yeah. Everyone, if you, everyone, if you're in that half
that has not gotten a chance to read
through the Voter Escrow Partnership,
highly recommended.
It's a good long read,
so it's perfect for a weekend.
So given that we're coming up on the weekend,
last full weekend,
no, two weekends before tax day.
So perfectly timely.
All right, Sam, any final parting thoughts?
I just have one last like tweet. This is my final tweet before we get out of here. Actually,
this is hilarious. Absolutely. Here we have Palo Andrino standing in front of the Wall Street Bull.
I saw this.
I love this tweet.
He's right.
Public.
It's already public.
It already exists.
This whole notion of I got to fit in.
I got to fit myself into the mold of established frameworks and established systems.
I love this tweet.
All right.
I'll let you take it out, Garrett.
Just got nothing to say, but Squids, thanks for joining us.
It's been fantastic getting to chat with you as always.
It has been a live stream for Friday, April 4th,
and we will see you all next time.
Peace.
