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PBA Special: Regulations, Risks and Real Talk
Recorded: April 8, 2025 Duration: 0:49:34Space Recording
Short Summary
Web3 is witnessing transformative trends as projects navigate legal complexities, innovate tokenomics, and establish decentralized governance. The Polkadot token launch exemplifies a successful model for compliance and community engagement, while partnerships in gaming highlight the sector's growth potential.
Full Transcription
about legal and regulatory issues generally for any kind of project. Whether
it's blockchain or not, there are certain things that always come up that you
always need to consider. But they have a twist as always in the Web3 world. So
what about privacy? Insurance, how does that work?
It has been very difficult in the past for Web3 projects to even get insurance.
To DAO or not to DAO, that is the question.
We talked a little bit about this yesterday in another session, which is a decentralized
autonomous organization will bring up certain issues from a legal perspective
that you don't see with other types of communities coming together.
And it also makes it interesting sometimes for the real world
to interact with the Web3 world.
Other things we think about, copy left versus copyright.
And this goes down to questions about just some of the fundamental principles we think about
when coding, actually, when developing software in Web3,
because there is an open source ethos there, again, that is not
necessarily prevalent in other industries. Tokens. This is actually an old meme
that we've had. This is not the first time Angie and I have done this
presentation together, by the way. So this is actually a meme from about two
years ago, but we've kept it in because it seems
even more appropriate these days.
And that is to think about tokens
and how those are being used in different ways
throughout the world.
And I think we can all agree since January of this year,
we've seen maybe some meme coins we didn't expect to see
and also stable coins we did not expect to see.
And then I find your lack of jurisdiction disturbing.
That I think is something that you hear regulators say quite a bit when looking at Web3 projects and trying to understand how is jurisdiction established.
So these are some of the concepts that we are going to bring forward during this presentation.
And we always put on our explorer hats, right?
We definitely think of ourselves in Web3 as exploring a new frontier of law and regulation.
And that's actually what drew it to me, drew me to this industry many years ago now.
And Web3, you know, this is, we won't go through this in detail, but this was on the Polkadot
Wiki when I first joined. And I think it's a wonderful summary of some of, again, those
fundamental philosophies that underpin what we're doing and what we're
striving to put in place, not only from a legal and regulatory perspective, but in everything
that we do, particularly within Polkadot. But this is really from a Web3 perspective.
Angie, do you want to?
I mean, this was one of the quotes at Dakota that really struck me and Chrissy.
We decided to put it up because Gav drew this on a piece of toilet paper and then went up to present it.
And it was so moving because it just encapsulates, I think, the ethos of Web3 and specifically of Polkadot in terms
of the purity that we approach everything and the idea that we look for discovery and
we look for discovery through others' eyes to really see the truth of what is happening
here.
And then this is my personal meme that I've added, which is, you know,
this is what I like to think I look like going into Web3 and dealing with the legal issues.
That's what I feel like now, three years later. And I'm sure there are other Web3 lawyers, regulators, and just general people watching the market who probably feel similarly.
It's important to laugh.
Now, we've been through some of these dry topics.
Maybe your eyes are starting to glaze over.
So we thought, let's contextualize.
And this is something that we tell founders all the time.
And I think this is where, I mean, Angie is a founder herself, an entrepreneur.
I'm helping guide founders a lot of times within the Polkadot ecosystem to encourage
them that when they set up their projects initially, that it's done in such a way that
they're anticipating issues that might come down the road.
So if you get ahead of these legal and regulatory points, if you're being careful, if you're being compliant,
if you're raising issues where maybe you can't be compliant because there's nothing analogous, right?
You can't get that functional equivalency or regulatory equivalency that Primavera was referring to yesterday,
that you're bringing these issues up with the relevant counterparties
so you can problem solve together.
So, you know, this is part of adulting, as we all know,
and it's not always fun, but it's important to get right.
So a way to help founders in particular, again, contextualize what they need to do, we decided
that we would equate it to something similar to a healthy diet that you would employ on
a day-to-day basis when you're thinking about what you actually put into your body.
So you need a healthy diet, although I mean, I know there's some debate on this at the
moment within the scientific community, but let's go with this because I think a lot of people think about how they eat this way.
So your decisions matter what you eat, basically, and you need to be mindful.
And things like your gender, your age, your height, your weight, your ethnicity, whether you're active or sedentary, your goals, all of these things
are what we as individuals would take into account when we come up with a healthy diet
for ourselves and how we live our lives. Similarly, when you're putting together a healthy diet
for your company, focusing on legal and regulatory issues, you need to think about, let's call
them the five food groups, right? Similar to what we had before, which is dairy, vegetables,
fruits, grains, and protein, we now have structural regulatory staffing, intellectual property,
and data. And this is how we tell founders to think about legal and regulatory issues when they're setting up their companies.
Similar to the questions that we asked to put together your healthy eating plan,
there are questions that you need to look at when you're putting together a plan for a business.
Or if you're looking at this from a legal regulatory policymaker perspective. I think these are important to think about and the context of the individuals who you want to encourage to
be entrepreneurial, to build in your jurisdiction, to employ people where you
are based. These are the things they should be thinking about as well because
these are pretty essential. I won't go through all of these in detail but you can see like you know what is your purpose, where
are you going to be located, you know where are you going to have bricks and
mortar or are you not going to have bricks and mortar, are you going to have
consultants or employees, you know who are you trying to serve, what is your use
case and how, how will you do it? How will you pay people?
Is it going to be on-chain, off-chain? These are all things that, you know, really practical stuff,
which might not be fun to answer always, but are very important.
So we tried to put together, underneath, again, those five groups, some of the things that come up in Web 3
that people need to consider. So structural as you'll see we've talked
about companies and dows tax obviously under regulatory very important to think
about that in the context of marketing and communication which Angie is going
to give us some really good case studies about coming up also horizon scanning
and that's absolutely essential in the web 3 space to know what's happening around the world from
a regulatory perspective. Staffing in the web 3 world there are a lot of digital
nomads and people have a lot of flexibility. Also it's a remote first
environment and so how do we engage people in order to deliver the work that
they need to deliver for us?
How do they use AI?
Intellectual property we've talked about.
Trademark obviously comes up quite a bit.
Domain names.
And then data.
That is obviously a very important point, whether you're talking about privacy or privacy,
depending upon our audience, or non-disclosure
agreements, zero knowledge proof. There are a number of things. We were talking
about tornado cash yesterday. There are again some real-life examples that if
you know the legal and regulatory landscape when you're setting up your
project, again you can address particular
concerns that might come up early and you can work with policymakers to put in
place things that make sense. So you know we're all building something incredible
together. I always like to say it's not just the developers although they are
obviously very important and it is their intellectual property but as people who incredible together. I always like to say it's not just the developers, although they are obviously
very important and it is their intellectual property, but as people who are interested in
policy making in the legal and regulatory environment, we're building as well. And again,
that's what attracted me to this industry in the first place, is the ability to be able to build
something new and exciting that it's a new digital world. And again, I mean, we've
talked about Daphne, she's here. It's the world we're building for her and I never
want to lose sight of that. So we've taken you through the legal and
regulatory diet and you might be glazing over again. So I'm gonna turn it over to
Andy to take us through some real-life examples of what we've
experienced. Okay great thank you so much Chrissy. A lot of what we, Chrissy and I
talk about is making these kind of checklists so that developers can
develop, focus on building, and also have these things in the back of your mind.
So I'll just take you through the token launch because I think it's a
great story and it's part of the Polkadot history that's important, I think, for people to understand.
So we went through a three-year process with the U.S. Securities and Exchange Commission, the SEC, in the U.S.
In the fall of 2019, the SEC said, come in and talk to us. And at the time, I remember we thought everyone would rush in
to talk to the SEC because, you know, I have, as I mentioned earlier, 20-year background in
traditional finance, and I have worked in capital markets and taking companies public. And typically
when the SEC says, come in and talk to us, everyone rushes to get in line. It turns out we were really the only ones that rushed in to get in line.
So, you know, and there was some controversy even a year and a half ago
as to whether or not this, you know, form at the SEC was real.
And it's actually real.
There's just a little tiny form on the website.
They said, fill out the form, and we filled it out.
And about a week later, we were in D.C.
I'll give you the conclusion first, and then we'll go through the steps.
But the conclusion was that we put out a, we published a statement in November, November 9th of 2022,
which said that we had achieved something that no other blockchain network had achieved,
which is that the Polkadot native digital asset,
the DOT token, had morphed and it was no longer a security,
it was simply software.
So I'll go through what happened here.
So call out Benjamin Franklin here,
by failing to prepare, you're preparing to fail. Most token launches did not have six
months of preparation. We took this very seriously. The founders, the Web3 Foundation management,
parity management, it was an all hands onck community. We really took it seriously.
And we, six months later, started the process on May 26, 2020 with the proof of authority.
And that was when users came and claimed their tokens. And we did something that no one else
had done prior to this, which was we matched identities and made sure that
the original purchasers of the private token. So this is very typical, and you probably have heard
of this. There are purchasers in the private market before the token starts trading. So we
made sure that the purchasers in the private market were the same purchasers we were delivering the DOT token to.
So once we had that established and all of the participants had claimed their tokens, the decentralized treasury was established.
That was a groundbreaking moment, according to the SEC. When we presented the decentralized treasury to the SEC,
they said no one has ever done anything like this.
A truly decentralized treasury in which the,
because there were already DAOs at the time.
In fact, the Dow report had already come out
and said that the Dow token in the Dow report was a security.
And that's because there were a small number of people
who were managing the token,
almost like managing a bank account.
Whereas in Polkadot's case,
the Web3 Foundation turned the token over to the Treasury
so that the community could manage that token.
So it was a truly decentralized DAO,
which still exists today.
And the pseudo key was removed in
July 2020. And that's considered the moment of decentralization from a regulatory perspective.
Then we did a Regulation S offering, which is, you know, Regulation S, when you hear Regulation D,
Regulation S, these are exemptions from registration, which means that if you file
an exemption from registration, so a Regulation D exemption or Regulation S exemption, that means
that you're exempt from registering what you have as a security. However, you are also admitting
that it is a security. A Regulation S needs to go through the SEC.
We had to meet with the SEC, negotiate, put together an offering memorandum, just like,
you know, an offering memorandum would have existed in traditional finance. So this was
the first of its kind. And to our knowledge, there has never been another Regulation S since.
our knowledge, there has never been another Regulation S since. The key component to Regulation
S is that it has to happen outside the United States. And we took, you know, great pains to
make sure that all of the recipients of the token were outside the U.S. and that communications
were not made in public places like Twitter because all
public, all social media is considered in the US because it's publicly available. So I'll go into
that in a minute. But then August 18th, 2020, the DOT was delivered as a security. This was also a
first in the market. We delivered it as a security
because when it was issued in the private markets, it was issued as a security. And there was an
interpretation and guidance that we had from the SEC that if you issue a token in private markets,
when you deliver it in public markets, it's still a security.
It's still a security until it is fully decentralized. And if you think about
decentralization and you think about a project, a developer, let's say one of you starts a project,
it's you, it's maybe a few other developers. It's, you know, a handful of people typically that can control the project, right?
So the goal in decentralization is to expand that control beyond the founders.
And so it's logical that when a token is launched and it's a small group of people who control it, it's still a security.
small group of people who control it, it's still a security. It hasn't decentralized.
It hasn't decentralized.
So the reason it took until November of 2022 to announce that DOT was no longer a security is
because it took that long to make sure that the DOT token was fully decentralized and to make sure
that things like the affiliates rule were not broken. So if you think about parity,
Web3 Foundation, maybe some of the founders, the holdings of all of those entities and the
agreements between them had to be separated enough that they weren't considered control
entities where one controlled the other. and this was a common enterprise.
So we went through, you know, in painstaking detail, every single point in the white paper.
We put it in a checklist that was three pages long and we went through and made sure every
single thing in the white paper was delivered. And in November 2022, which was a three-year
anniversary actually, that's when we decided that DOT was no longer security.
Now, I want to go back to the Regulation S because this is something that you'll hear people say that they did Regulation S-like or they did a launch that was, you know, like one outside the U.S.
But this is the only one we know of that actually happened.
There was only one launch message, which came from GAV, and this was it.
And if you were, we used geofencing.
We had KYC AML in place.
We had locks on the dot, a 60-day lock, which we negotiated with the SEC.
We had internal controls.
We had internal controls.
We had staff training.
We treated this like a public offering that would happen in traditional markets because we wanted to be as conservative as possible.
The reason was not to be a hero on the regulatory side.
It wasn't to break ground, any kind of ground.
We were thinking that everybody was going to do this.
It was just to get the technology out there. The technology was so important that Gav and the founders felt
we will do anything to make sure that we check these boxes so that we can get this technology
out there and so it will be long lasting and resilient. We didn't do any AMAs. We didn't do
any tweets, no retweets, no panels, no press interviews, no responses to press, no other public communications.
There was nothing.
There was one article speculating that Polkadot had launched, and that was it.
So just, you know, one thing when you're, you know, you're in the market and you hear things about Polkadot, you might hear some venture capital firms say things like,
we don't really hear much about Polkadot.
Or is Polkadot, what's really happening with Polkadot?
I hear that in the U.S.
A lot of this stems back to that Regulation S when U.S. investors were excluded. And that is, you know, that was maybe a consequence,
unintended consequence. Not sure, but that's part of it. Our response to this is always follow the
developers. So the reason I'm here right now and took, you know, time out from my busy, busy, busy life in dot play to come to Switzerland is because follow
the developers has always been our mantra in investing. Follow the developers is the reason
I got involved in Polkadot in 2019 after meeting Gav and understanding all the great care that was
going into creating the most resilient technology network,
five years later, my conviction is even higher. So follow the developers, follow the applications,
and decentralization is king. So Gavin recently said on X something about dinos, and I wanted to
make sure people know that. I said, watch out for dinosaurs. They're not really dinosaurs. Dinos are decentralized in name only. So many networks out
there have blockchains that are out there publicly actually kind of throw out a name.
They're probably, it's probably a decentralized and name-only network. But they only have a few people controlling it. If only a few people
control a network, it's not decentralized. It's kind of like a company.
So, oh, the top of this got cut off. But anyway, just on decentralization, this is
also really important. The Nakamoto Efficient just came out and this is the
the number of entities that would need to be hacked to, is there any way you can pull that down? It doesn't matter. The number of entities that would need to be compromised to take down a network. Polkadot, 172, these numbers came out a few days ago. And then you can see the others.
And then you can see the others.
And, you know, I think that this is really, really important.
Ethereum, Bitcoin, Polkadot are really in a class of their own.
There are, of course, stable coins, which are in a different class.
But so far from what we've seen, it's really just these three.
And if you look at these numbers, the Nakamoto coefficient, higher the better, obviously.
It's pretty incredible how Polkadot stands out.
And this was part of the reason the SEC was so comfortable with our process.
So a lot of people say, why didn't you get a no action letter?
The no action letter from the SEC says this is not a security.
Gary Gensler came in, and this is what Chrissy and I love to say.
I think you came up with this quote.
It wasn't personal.
It was just politics.
And politics takes over, and our sense at the time was,
and that you were pretty involved in that,
we were trying to figure out what is happening here.
Yeah.
And you might want to comment on that because it was just.
Well, it's definitely part of the reason why I joined again Polka Dot was because of this careful approach to these regulatory questions, the resiliency of the technology.
And it was so frustrating to be in a position where all these boxes had been ticked.
Everything had been done the right way, right?
In a way that we could all get behind
from a philosophical perspective,
but also like an ethical perspective.
And I am qualified by the New York bar
and I take these things seriously.
And politics obviously intrudes, right?
It's just part of our world and it goes to show you how things can change very, very quickly.
They change then very quickly with a no action letter not coming for reasons that will be lost in time probably.
And now things have changed remarkably since January 20th with
a number of executive orders. Now I think we all know that geopolitics currently are overtaking
the U.S.'s stated regulatory approach and agenda as it relates to digital assets. I think every country in the world right now is considering the T word
and that is impacting everything that we do, but that doesn't mean that innovation is off the agenda
for the U.S. It still is very much there and actually so many countries around the world
since January 20th and since this material change in approach that we see from the U.S. are reconsidering their regulatory stance towards digital assets. Parity legal team goes live for 30 minutes, and we provide something on X with Jay's help,
the Kooza's help, called Regulatory Rewind. We are on our 10th edition that's now live on X,
and what we do is we take a quick canter around the globe, and we talk about all the regulatory changes that are upcoming and that the developer community should be aware of.
And we have been very, very busy this year, as you can imagine.
30 minutes has not been long enough to talk about all the jurisdictional changes that are happening around the world in light of this very material change that we see in the U.S.
And we don't expect that pace of change to ease up.
And so we expect the regulatory rewinds to continue, and we hope to see positive, more positive developments.
But again, geopolitics, it's not personal to the digital assets industry or innovation this time. It's a geopolitical discussion of tariffs, which may cause a pause.
Okay, so I think it's important to look at what the SEC did say and did not say.
So there wasn't a no action letter.
However, what they did say was 68 other tokens were securities.
What they did not say, DOT was the only non-stablecoin token outside of these at least 50 top tokens that was not named a security by the SEC.
We do not believe this was a mistake and
we believe that we have common understanding even currently today with
the SEC. Absolutely. So regulatory communications say within parity or when we're talking about other projects within the ecosystem that we talk in, not only from a regulatory perspective in order to manage some of those issues,
but obviously from what Angie was talking about from the very beginning.
The technology is so important that that is what we should be majoring on in all of our communications,
no matter who they are with, but particularly
with regulators. So we also need to be careful in terms of again thinking of that functional
equivalency and regulatory equivalency. What we choose to say is equivalent. So the dot token. The dot token is a utility token. You can
do lots of different things with it. You can vote with it. You can actually, you
know, hold it and never vote with it if you don't want to. It can also be used to
stake and you get rewards for staking because staking actually helps
preserve the security of the technology. And in some cases you could look at those
rewards you get for being involved in staking as a yield from the token. But
that's not actually right. That is not the equivalency
point that you want to be drawing. What you want to see is that by your participation
in the technology, by your belief in the technology, that when you actually lock up your tokens
for a period of time, you will be getting a reward for your involvement in securing the
technology.
Now, we can go into staking in another conversation.
There are plenty of videos about that, but I think the thing to take away from this discussion
is that when finding those equivalent terms, be careful, make sure it makes sense.
Also, there could be interpretation or translation points
that really need to be considered
when you are talking about technological terms
in different languages.
And you wanna always make sure, I think,
and this is something we were very, very careful about,
is cutting from the comms, I want to always make sure, I think, and this is something we were very, very careful about,
is cutting from the comms terms which might feel easy but actually aren't accurate and can give a very, very erroneous view of what you're trying to achieve with the technology.
So even down to, like, just even emojis that we use, right?
Especially in the Web3 world, obviously memes are a big way of communicating.
People are communicating on X a lot.
You put acronyms in, emojis, but even those emojis we're mindful of,
what we're including and what we advise people to include in their communications.
So, again, it's that level of being careful.
Now, Angela, do we want this sentence because we wanted to get to that crisp delivery of what is actually happening here.
Because a lot of people were saying yield and it's, you know, historical, you know, annual return was 16 percent.
And we were like, oh, that sounds like investing.
No, no, no, no.
Staking DOT natively provides the function of securing the network.
So always start with a function.
It provides the function of securing the network,
and it allows you to collect DOT tokens for your help.
So the idea is that you are actually working for the network
and securing the network, and you should get paid for that.
Not, I'm investing money and I'm getting a 16% APY.
And that, again, is, I think, an important philosophical point.
And it's about the involvement of individuals with the technology as well.
Everybody has a stake.
Everybody has a purpose.
It's not just something that happens to you.
You are involved with it.
So gaming.
Now, this is Angela's baby, and I'll turn it back to her.
Okay, so I'll go through.
This is a case study.
Hopefully you all can come at 530 because I'll go deeper into gaming, into dot play.
But just to give a quick case study and why decentralization matters and why regulatory
issues matter in gaming, if you go back to Axie Infinity, I don't know who is it. Are people who
are familiar? You're familiar, I'm sure, yeah, with Axie. So Axie was the most popular NFT game
in the first wave. I, as an investor, faced a lot of grief for not getting involved in Axie Infinity.
And I just couldn't, there were certain aspects of it that were difficult for me to get my head around.
And one of them was decentralization, which ended up taking down the network.
Now, this at the time was the largest hack in history, 622 million.
...the largest hack in history, 622 million.
Unfortunately, North Korea's Lazarus Group, same group as Bybit,
same group that has hacked about $6 billion, was responsible for this.
But the interesting thing here on decentralization and why it's so important
is that the attackers only had to compromise for a 51% attack five out of nine validators.
Four of the five were controlled by one company. So to me, that's not decentralized. That's just a company. So Mythical is a company
that we invested on in early. It was really the only company in Web3 that we felt had this similar to Polkadot's founders, this passion and ethos
of decentralization and truly giving back democratizing value to the players.
So just to give a couple of things here, they did, from a regulatory perspective,
launch their DAO before the token launched. That's really important because that plays into the decentralization
story. Decentralize the DAO and then launch the token so that the token is in many, many
holders' hands. There's a 20% rule of thumb in the affiliate rule. If you have less than 20% ownership, then you're not an affiliate,
or if multiple entities have less than 20%. So the goal really was to build the mythos chain
on a highly secure infrastructure that would allow them to sleep at night knowing the technology
worked and knowing that it was resilient and allow them to focus on games. It's really hard to create video games.
And the founders here came from Call of Duty and Electronic Arts and Wizards of the Coast. I mean,
some really, really big gaming projects. And they knew gaming, but they didn't know blockchain.
And they chose Polkadot. So this at the time was definitely the biggest application in gaming with 7 million people playing NFL Rivals the first game.
But clearly now, by the end of this year, they're adding another nine games.
So we're really pretty excited about this.
John Linden is the CEO. He ran Call of Duty. Probably people know Call of Duty.
And he said this, I need to worry about my clients
and my potential clients and the players. I can't lose sleep at night over whether or not a blockchain
is secure, scalable, and truly decentralized. And he's said since then that Polkadot was really the
only option in the end. And there were many years where he was evaluating and his team were evaluating
all the different blockchains.
So it's a pretty big statement from somebody who is so established in the gaming market.
So coming up soon, I just want to give a couple of highlights.
Pudgy Party is coming out.
Why does Web3 matter for this?
Does anybody know StumbleGuys, the game?
So StumbleGuys has garnered over 400 million players.
So this is a huge game in Web 2.
Tournaments are driving a lot of the activity.
The concept of, you know, the behavior of trading is important,
but the concept of ownership is missing.
And so what Web 3 in Pudgy Party,
we think, can bring, because these games are in the same genre and look a lot alike,
what Pudgy Party can bring is this idea that we will have ownership and we'll take engagement
and tournaments and true ownership to a new level and provenance. And this is where I think,
a new level and provenance. And this is where I think just to, why do people, why do people care
again about gaming? And I think at least living in London during COVID and during lockdown and
having small children who the only way that they could interact with their classmates and friends was to be on roadblocks or, you know, to interact in the virtual rooms that were established by their schools.
And this was for a year and a half, pretty intense.
There was a time where you couldn't even leave your house for longer than 30 minutes in a day, right? And so this generation, particularly it's Gen Alpha, but the end of
Gen Z as well, they are so comfortable with a digital identity, with avatars, with skins,
with the concept of digital twins. And I mean, Angie, you have some great examples of like your
daughter having certain things and they're online. It's like they view the world differently.
They interact the world with the world differently.
And part of that is a function of what they lived through
when they were 3, 4, 5, 6, 7, 8, 9, 10,
quite formative years of their lives.
And they only had that virtual outlet.
So again, we have this generation coming up. This is really important
part of their lives. And of course, you don't want it to be the only part of their lives.
However, they connect and we should connect with them as well.
100%. I used to joke that my daughter, she was, I guess, eight at the time, but I would be on a
Zoom at my stand-up desk and she would walk around the other side of the desk behind my laptop screen and grab my thumb while I was on a call and
peek around the corner of my laptop and say, just five more Robux. I just want five more.
So yeah, this was social media in the day, and it still is. Okay, so FIFA Rivals, real quick, go through this.
This is coming this summer.
This is going to be a massive game.
I said that the NFL Rivals game had 7 million wallets connected,
which was by far the biggest application that we'd seen in gaming and Web3 across any chain.
If you look at the comparison of when Electronic Arts had FIFA Mobile relative to Electronic Arts Madden, which is their NFL game, it was 20 times the size.
I think nobody in this room is going to be surprised by that. A lot of Americans are surprised by the fact that it's 20 times the size.
But the interesting thing about FIFA rivals is it could be more than 20 times this size because
when you look at FIFA mobile and the electronic arts version, which people all over the world
played that game, but only a very small percentage of the players got involved in the in-app purchases
or the economy. In Web3, we are seeing completely different behavior.
People are loving the idea of getting involved in the economy.
And Mythical is really leading the charge on this
because they're putting mechanics in so that under the hood,
blockchain is working, Polkadot is working, Polkadot is securing the network.
You know, for players, they're just playing games.
They're just having fun.
And they're seeing new mechanics that they haven't seen before. And this one is really,
really important. This was a breakthrough in video games that we haven't seen, and it happened
with Mythical. So this behavior is very typical for gaming. I have three items. You have one item.
I'm going to show my three on the screen. You show your three on the screen, we're going to swap these items.
Mythical figured out a way that they could do this in a decentralized way where authenticity
and provenance can be proven.
This increased activity by 20% when they rolled it out.
We haven't seen that in gaming.
Gaming has been flatlining for the last several years, so this was a big, big deal. The other thing, going back to what Chrissy said about
talk about the tech, not the token, if you're launching an application in a
consumer-facing technology, talk about the brand, talk about the games. You never,
you don't hear Mythical pitching the value of the myth token in the same way that you wouldn't hear the CEO of PayPal pitching the value of PYPL.
So it's the brand and the games are what is important.
And so as a result, you know, it continues to win awards, but this one is one that they're pretty proud of and we're all pretty proud of in Polkadot.
And I'm going to turn it over to you, Chrissy, to bring us home.
So we wanted to give you some of these real-life case studies.
I mean, from a policymaker's perspective, really the use cases for blockchain are unlimited, right?
It could be used for supply chains. It could be used for supply chains.
It could be used for ethical commodities.
I think that's a really important area.
Voting, obviously.
I mean, we could keep on going through any number of examples
where blockchain provides the truth, really. It's verifiable. You can't change it.
One of the places that it's coming up quite a bit is with AI, right? So AI and blockchain,
the new power couple is a tagline you might see. And that's because blockchain theoretically could provide
the guardrails to deal with copyright issues, IP issues, any number of issues.
Also you know AI can get a form of amnesia or dementia as they call it
because it becomes like a self-fulfilling prophecy, right? And, you know, it's the same information in,
bad stuff in, bad stuff out.
You can't verify it.
And all of these things are being discussed.
And I wouldn't say that there is a killer app
or killer use case right now related to AI and blockchain,
but certainly lots of people are talking about it, looking into it.
And these are examples which, if we had more time, we could go through in more detail.
Because I think also issues come up when you start to think about, from a policy maker's perspective in particular, what is available to the public?
What is open source?
What do people have access to
in terms of the underlying technology?
Again, there's many people in Web3
who believe that everything should be open source,
everything should be available.
But then you start to see disagreements.
And a great example of a disagreement Everything should be available. But then you start to see disagreements.
And a great example of a disagreement is the OpenAI Elon Musk discussion.
And Elon Musk helped set up OpenAI as an open source platform, right?
And it has now been taken to something that is closed, away from those open source beginnings.
And that is one of the disagreeing points that you see, or points of disagreement I should say,
between Sam Altman and Elon Musk. And that's actually really important from a public policy perspective, because that's all
about a company making profit. And how is that going to be taxed? Do you want these AI models
to be purely profit driven? Or do you want them to be accessible to everyone? Do you want to know
what the learning models are that are being used in order to produce the data? Do you want to have
any kind of oversight over these things? And we're getting into a slightly different area which again
it's not necessarily covered by this presentation,
but the key is good regulation. And the key, I think, for regulators is to take the time,
like y'all are doing, to understand the technology, to meet with people who are building the
technology, to understand both how it can benefit governing, but also can benefit the people who you are
governing themselves, right? So it can go both ways. And then also the society that you are
working towards in this new digital world, because some of these points can have such
far-reaching consequences. Before you finish, I want to add one example of this,
which is in gaming, you know, one of the,
as people care more and more about the digital assets
that they're purchasing in these, you know,
metaverse spaces like you're building,
I feel like there's a, you know,
there is a concern around authenticity.
AI pours gasoline on that fire.
We are going to see an explosion of inauthenticity.
And from a regulatory perspective, I think you're starting to hear people in gaming and
entertainment who care about IP rights talk about this idea of, do we need some sort of technology
that allows us to click in to find out if this is actually authentic, to find out what the provenance is. What technology could we possibly use? Hmm, blockchain could be
the one. So that's, you know, a hot topic right now. Very hot. And I think taking
the time to get down to that fundamental level is essential. And it's essential for also us within the industry to
make sure that we are talking about it in a really accessible way, which is something that we're
working on and would love your feedback on how we can do that better, what venues we should be doing
those in, and how we should be discussing it with people. Because the onus is also on us to make this relatable,
to help flesh out the use cases.
Because in the end what we want to give people is certainty and that certainty in all aspects
of our lives.
But if you look at this purely from an economic perspective, those jurisdictions that provide
certainty to builders will attract those builders to their jurisdictions.
That will then, again, bring jobs for people in that jurisdiction.
Because what is very difficult right now is if you are putting together a building, like you're building your budget,
Like you're building your budget and you're trying to assign to those five categories that I introduced just a dollar figure or a pound figure or, you know, whatever currency you're thinking about.
Because that's what you need as a business owner, as a founder.
You need to have a budget and you need to assign a value there.
How do you assign a value to that if you don't know what your tax rate is going to be?
If you don't know how much it's going to cost to comply with whatever law might be in place,
when you don't know how much it's going to cost to set up a company,
you're going to go to the places who provide you with that certainty.
Because, hey, maybe the tax rate is 30%,
but at least that's better than not knowing what it is at all, right?
It might be high, but at least you can build that into your budget.
So there's some practicalities there that drive adoption, that drive business.
And in the end, what we're trying to promote, again,
is the technology, not the token, and truth.
And I think that's what Polkadot is about.
And we want to see good regulation.
And there are a lot of different ways we can do that.
And we want to work with y'all to make sure that that happens.
And we can do that in these ways.
And we try to keep up as much as we can.
So that is our presentation for the day, unless Angie wants to bring up anything else.
Nope, I think that wraps it up.
