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Tokenomics Evaluation w/ @Xerberus_io
Recorded: July 15, 2025 Duration: 1:27:18Space Recording
Short Summary
In a recent discussion, crypto experts explored the future of tokenomics, emphasizing the importance of innovative incentive systems and the potential for growth in decentralized finance. They highlighted the risks associated with companies like MicroStrategy, while advocating for a regulatory-free environment to foster the strongest DeFi protocols.
Full Transcription
Thank you. Thank you. Thank you. Thank you. Hey guys, seeing everyone filter in. Thanks for joining. We're excited for this space
today. Got Cerberus up on stage. And curious, Simon, are you behind the Cerberus account
right now? Or should we be waiting for Simon's main account?
No, it's me. It's Simon. I always come in with the serverless account. It's just easier when I can't.
Yeah, I do the same. Mostly because the logistics of the reverb from multiple accounts joining and things it's annoying so I just set up Nate on my you
know my my main account as a speaker and then speak through token dynamics so
cool well if we have you here we can probably get started pretty shortly and
yeah do you want to wait for another couple people to filter in or you want
to get started I think I'll we can have a bit of a bunter because just before a joint is a call somebody asked me to ask you about a certain ecc 2023
project uh very naughty name i know who that was and i know what you're talking about yeah greatest shit of all time
yeah it's quite interesting right when you think a lot about tokens there are a lot of good shit
coin ideas if you it's quite dangerous to think too much about that because at one point you just
want to build one of them to see uh it works. Yeah, that's funny.
The first idea I ever had about tokenomics or how to prove out this concept was,
I was like, what if I got a total shitcoin and proved that I could accrue value to it?
It was in the Bitcoin cash ecosystem and didn't end up doing very much.
But I got this idea for a token
named Jennifer. And it was just like a bunch of, like the memes were just all these famous
Jennifers. And I was like, oh, we can do this. And then you burn it with this address and you
stake it and all that stuff. And it's just a bunch of flywheels. But this was back in like 2019 or so before anybody was really
talking about what makes a token valuable besides me.
And I honestly don't know if anyone else was writing about this back then.
Chris Bernisky maybe in 2017.
Vasily Suminoff might have been writing about tokenomics and demand side tokenomics back
in 2019, but there weren't too many people doing
that. But that was kind of the first token idea that I ever ran with, again, siloed to the Bitcoin
cash ecosystem. So we all know how that went. But yeah, man, excited to talk with you more about like demand side tokenomics and token
evaluation today. I guess it'd be good to, we could start off recapping like how we, I could
just introduce you as how I know you guys. And then we go from there. But yeah, I mean, so Cerberus, you guys are doing token evaluation on chain in the Cardano ecosystem.
And you do a handful of things, right?
You guys are doing risk modeling and financial valuation and kind of all things related to the financial or economic side of blockchain projects and tokens in the Cardano ecosystem and expanding
a little bit further than that.
I don't know how much to say or not say, but yeah, maybe you can give an intro and build
on top of that.
That's a very kind intro.
Exactly like you said.
So we are originally, we are kind of incepted and born um
inside the cardano ecosystem and we also bring some values from there so we were always very
research driven which is also why we we chose card out in the beginning for for its research
focus and we we spent about three years just writing papers and trying things out and and
really and you know this very well when
you when you look into tokenomics when you look into tokenomics you get an unease after a time
because you think about all the amazing things that one could build and you realize that what
we could build with tokenomics and what is being built uh currently in token. It's like there's a huge gap between our potential and our realization.
And so we just spend a few, like literally just to understand what a token is.
And it's not that trivial because a token can be so many different things.
And I think one of our earliest and I think most forming insights was that certain tokens,
like ETH, is a network, right?
And it sounds almost like a tautology, but you often have people trying to make a token like ETH
or any other small contract blockchain token like ADA, a network token, into a stock, right?
That was the whole thing with the SAC.
And sometimes i still
see it often that it creeps back in where people like to kind of value it a bit like a stock and i
i just don't i just think it's the wrong way to think about it i think it's fundamentally
um not the right way to think about this particular type of asset there are tokens which
are much more like stocks right but like this this kind of uh uneasy feeling really got us going to say okay can we
create something for true crypto assets and by two crypto assets we we think about all of these
things where risk is usually you know people just don't like to think about it like i think it's
quite telling it's so few people to token risk while a lot of people are trying to do defile
risk which always confuses me as i think ifFi risk is somewhat in the end just token risk.
So, I mean, there's other risk factors as well, but it's a significant one.
And so we really focus on that.
And I think since especially in the next month, we will go fully cross train.
So we just see so many interesting ideas and interesting tokenomics all around the space and want to look at all of them. So we just hit the point of greediness when it comes to data. We just want to have all of it
and look at everything. And yeah, I think that's where we're at. I rambled a bit,
but I think it was a good summary. No, that's great. Yeah, I love some of the
points that you made and I feel like we'll have some interesting tangents to go on. I know we will.
One of those, I like your
point that all of DeFi risk is just token risk. It's like layered token risk. It's dominoes that
are stacked up in exactly the right order that they can all be pushed and collapse.
And people don't really think about that, but that is part of token economics or tokenomics.
But that is part of token economics or tokenomics.
Like that's part of the discipline is identifying those token price dependencies and quantifying that.
So you guys have more of a research background, like you said.
And from what I've seen, it's like a heavy data science emphasis and background on your team.
science emphasis and background on your team. I've seen some of the dashboards and things that
you guys are building to evaluate tokens. And you do it really, really quantitatively,
like you're very data focused. So what are those things that you look at when you are evaluating
tokens? Like how you mentioned that ETH is a network token.
I could see a few different branches of where we could go here, but I think we'll get to
all of them.
So maybe a better way to start this would be, what are the types of tokens that you
identify?
Like what are those distinctions between different kinds of tokens, network tokens, stock sort
of tokens?
What other things do you see?
It is such a trivial question, and it's so impossibly hard to answer it.
So we thought a long time about how to categorize these tokens.
And you hear me struggling, right?
It is really not trivial to create a framework
that really fits everything perfectly, right?
So in the end, what we did, we developed our own framework,
and then we saw another framework being launched from A16Z
that was very, very similar.
I think the framework still had some issues,
but ultimately what we went for is a very similar separation.
And what the A16Z guys basically saw is they also identified the network token as an individual asset.
And I think that is, to me, that is the most important one because in a way,
the network token is the true cryptocurrency.
The network token, in a way, is the true cryptocurrency, right? The network token in a way is the true innovation of crypto, right?
Like putting a stock on a blockchain, you know, it's just a different, you know,
database for that stock, right?
But the stock was already on a database.
So it's not really something new.
It's just, okay, we use an old concept on a new infrastructure,
but the infrastructure is the real innovation.
Then secondarily, there are the company-backed tokens, which the company-backed tokens are
the biggest issue that we have in crypto.
For one, it's the most common type of token.
So that would be the typical DAP token, for example, for Uniswap or MinSwap in the Cardinal
ecosystem.
Any of these DEX tokens where you have a...
So it might change now with the Uni app.
So I'm currently talking about Uniswap, how it was, not the new Uni blockchain in the image,
because now you could make the case as a network token, but just Uniswap, how it was.
You have a DAP that's an exchange that is objectively a product, right?
There's some sort of corporation or an organization updating this product and, you know,
or an organization updating this product and you know working with clients and customer demands
working with clients and customer demands.
and this system depending not not depends on the different exchanges right it might not even be
open source right so it's closed source so it what you what you're buying right is then often said
it's governance and then there's somewhere the hint towards potentially a fee switch and this
really triggered some of the excesses of the
Security Exchange Commission, right? Like the idea that, well, that sounds a lot like a stock,
right? That sounds a lot like equity, right? Of governance rights, profit participation,
that someone needs to maintain this thing. So I put some trust down, right? So the company-backed
tokens are often the big issue when it comes to regulation.
It seems very clear that network tokens are fine at this point, as long as, you know, it's really a network.
And then you have all of these smaller categories.
And these smaller categories, to me, they become at one point very difficult to distinguish.
But I would say network token and company-backed token make the majority of all tokens.
So this is really, and company-back backed token is the largest part of this majority.
Then you have the meme coins or culture coins, how you can call them, which are kind of an oddity.
I'm never 100% sure.
I flip-flop on my opinion on meme coins and culture coins.
in what way? I'm curious
In what way?
I'm curious.
how do you go back and forth?
How do you go back and forth?
so I'm really
I'm split solely because on one
side I do have to see and we all
see it right that most meme coins are
just consensual Ponzi schemes right
it's a zero sum game right everybody talks
about making money with meme coins
if you understand how liquidity will work
there's no money created it's redistributed
100 people go in the room, each has a dollar.
And at the end, one person goes out with $80.
And most of the person, people go out with $0.
So the idea that people make money in meme coins is a bit like, no, not really.
You're just taking money from other traders.
It's a PVP game in the end.
But then on the other hand, I do think, and a lot of people will hate
me saying that, that there is a lot of
similarities between something like Bitcoin and
MemeCoin.
We just agree that
the meme of Bitcoin is more serious than the
meme of Doge. The meme of Bitcoin is
hard money. That's the idea that we
associate with it. But there's no reason
why Bitcoin should carry the idea other than we
choose to do so. So it's really a psychological effect. But you could make the case now and now get very
philosophical that in a way, any currency is a meme coin, right? Like when you imagine back in,
I don't know, the 15th century, like the Lord in some jurisdiction, just mint his own tokens,
puts his own face on it, right? And says, this is my currency, right, in a way,
he also just made it up, right, like, he just chooses it, and we associate it with him, right,
memecoin is a lot about associations, right, there's nothing else to it, but the connection,
the psychological connection you make to that particular currency, and I hold Bitcoin, and I'm
very happy to hold Bitcoin, and I think it is the money of the future, but I also agree that what makes Bitcoin the money of the future
is not Bitcoin blockchain.
It is the fact that we think it is, right?
It is self-fulfilling prophecy.
So it could have been any other token.
You see what I mean?
I'm getting angry DMs on Bitcoin boxes in a moment.
Yeah, I think it's funny.
You're like disclaiming these as like people are going to disagree.
I see that people are going to disagree. And I also wholeheartedly agree with everything that
you said. So for what it's worth, I like that idea of like Bitcoin is a meme coin. I mean,
I've been shouting that from the rooftops for the last eight years now since Bitcoin cash worked. And that is what it is.
I sort of mostly believe in the meme. But in a way, all standalone currencies are kind of like
that. And I've still been thinking of Bitcoin as a currency when I was in early stages in Bitcoin since 2013. I was
like, yeah, this is the currency of the future. At that point, Microsoft had already accepted it
as a form of payment, and they later took it down when the CIA and whatever other black ops government agencies subverted BTC got in.
But we all had the idea that coins currency and it was bootstrapped by a meme, but it
was also kind of bootstrapped because it was a currency-like tool to transfer value.
So I'm coming at this from the lens of our token evaluation framework.
Mechanisms can be identified as either currency-like, commodity-like, or equity-like.
And so Bitcoin was used as a remittance system. And that can be valued similarly to with the same equations as a currency can be valued in TradFi. But I agree with you, Bitcoin is a meme coin. And I guess I might also say that there's,
as far as culture coins, like there's this, NFTs might fall into the same category as
meme coins in that you can signal your allegiance and association with the social group.
Like I have a m'lady as a profile picture because I want to signal that I believe in generally the things that m'ladies stand for, the good, the bad and the ugly.
And, you know, I guess even that signal itself is sort of empty.
We could go on forever about the mimetics of Miladies.
It's the funniest thing.
It's my favorite part of crypto, honestly,
is the toxicity and the adversarial groupthink mentality
mentality that this community of DGENs creates. But yeah, that might be like another analog of
that this community of DGENs creates.
the culture coin idea. So I see how you would make that distinction around coins as having
a particular kind of value, because there is a value to social signaling and allegiance to a
group and beyond just like the Ponzi mechanic that underlies many of these meme coins,
where I would say the difference between a quote-unquote legitimate community or just community quote-unquote
and a Ponzi scheme is in the sincerity of the belief of the members
in their allegiance to that group.
So I totally agree with you that there's some legitimate value there.
The insane challenge here is,
and I think crypto sometimes does it,
and this is also why sometimes certain TradFi members that I've met
really, really have a hard time to just get ahead of on crypto values that it has.
Because when you talk about Bitcoin, which is still the most important coin, right, or the NFT collections like Miles Lady, you now have to have a financial construct who entirely depends on psychology.
financial construct who entirely depends on psychology right and finance is traditionally
so beautiful clean right like you have income and you have expenses and you have balance sheets and
they make so much effort into right you cannot um on your balance sheet right you cannot easily
um put an ip or something right you have to really okay how much money have you spent and that's what
you can capitalize on and goodwill only when you sell the company, et cetera, et cetera. So we put so much effort into getting rid of psychology and finance, right?
And then you stumble into Bitcoin as like massively valuable.
Okay, why?
Oh, because we like the coin.
You know what I mean?
It's just that this is why you get this angry reaction sometimes from, I think, TradFi
guys because it's just so against their way of thinking, right?
And I think we ourselves have to think a bit
better about it because if we now create networks,
right, these are living organisms quite literally
because they're driven by humans,
you know, and they kind of give
value, especially when we
make a quick thing in here, but one
thing that we notice, for example, when we look at network
is that the metrics
that we have called assertivityivity which is how many connections are
within the network so if there are more connections between different nodes the network is more dense
right and and what it kind of gives you is a way of looking at liveliness so for example bad neem
coins have very low assertivity because everybody just trades with the decks right almost look like
starfishes, right?
Everybody has just one counterparty, which is the DEX.
Versus when you have a network like Bitcoin, right?
I might send my family relatives in another country, I might send them Bitcoin, right?
So you have all of these in-between connections, which is basically it's human relationships
that are now materialized on chain. And so when we look at this factor, right, that factor alone, you know, it's human relationships that are now materialized on chain and so when we look
at this factor right that factor alone you know it's more valuable just the network itself tends
to be more valuable if there are more connections in between so now what we're capturing is this
living organism right and that gives the network value right it's more people are in this network
it's more people have social relationships within the network as more powerful it is so
there's a direct correlation between the you know the living part here and the financial
party and it's hard to separate them so i i do you agree with me or do you think i'm going to
i've made a mistake in my mental model here Thank you. Thank you. And I'm sorry I probably interrupt you right now but I think one of us has rucked so I
cannot hear you.
I'm not sure if the audience can you give me quickly hands on can you give me a quick hand sign? Can you hear me? I think Nate might have rocked maybe jump in and out of the space and co-host then you
can come back.
Okay.
Comments are coming in.
Okay, okay.
So let's see, or jump on the Nate profile picture.
It's too bad because I would have loved to hear the answer.
Nate, you gotta repeat her once you come back.
Ah, you're back Nate.
I gotta tweet angrily at Elon. I think, uh, you know, the strategy said the tokens protocol is the value of the function in the protocols.
And the values we care are five minutes versus, um,
on some code and code tokens versus PPP.
The new ones are just, it's here it's, um,
people are,
the trends,
the trends,
the effects,
the value, and the results and it's a dream. It's a dream, and it's a dream. It's a dream, and it's a dream.
It's a dream, and it's a dream.
It's a dream, and it's a dream.
It's a dream, and it's a dream.
It's a dream, and it's a dream.
It's a dream, and it's a dream.
It's a dream, and it's a dream.
It's a dream, and it's a dream.
It's a dream, and it's a dream.
It's a dream, and it's a dream.
It's a dream, and it's a dream. It's a dream, and it's really bad. I'm not sure what it is. I'm not sure what it is.
I'm not sure what it is.
I'm not sure what it is.
I'm not sure what it is.
I'm not sure what it is.
I'm not sure what it is.
I'm not sure what it is.
I'm not sure what it is.
I'm not sure what it is.
I'm not sure what it is.
I'm not sure what it is. I'm not sure what it is. your audio quality is still very bad we couldn't hear it it sounds very muffled and we're starting noise in between
so maybe try it again to come with a better mic.
It's crazy how spaces still have this problem.
Come again? you
maybe text it here on telegram just in case
Okay, let me let me make sure that Nate knows that he's coming back now then we can pick up where we left.
But Elon, Elon, you gotta fix this.
It's very nice that I have now
a beautiful attractive woman in my Glock app.
I do appreciate that, but the spaces would also be nice.
Let's see if he comes back. He's probably getting a new device. Other than that, I hope you enjoy the market at the moment.
I think we could see another nice pop soon after this retraction that is now coming in.
But it looks all very bullish.
Also if somebody wants to come up in the meantime, happy to take somebody else up with a strong
opinion about tokens and tokenomics and demand side tokenomics.
Yanite, I see you unmuted yourself, but I couldn't hear anything on the token dynamics.
Okay.
I guess we will have a second round on this base. On another day where the tech goats are easier with us.
Let's see if he still comes through. I mean I accepted you as the speaker you can talk now.
Hello there, how's it going?
Nice to have your voice up here.
Lovely to be here indeed.
So I guess we're just gonna keep the space busy until Nate gets his new device on I guess.
You're my savior at this moment.
I'm pretty sure it comes back any moment, you know how it is.
So you wanna tell the other side of the the the the story with the ecc coin from 2023 oh no no no that's that that that's the thing for
nate i guess that's the thing for nate to do it yeah he has the honors it was a group effort for
sure maybe t the when he comes back. Yeah. Yeah.
Absolutely.
Have you tried out the new Grok app already?
Have you tried out the cat lady?
No, not yet, actually.
You should look into it.
It's actually quite shocking.
I did it yesterday night.
I was playing.
I saw it was my Grok app, and I had to...
It's quite shocking, man.
It's really... It's like you get a feeling of we all cook, man.
Like it's shockingly good, the way that the conversation flows and the way that she reacts and how unhinged that thing is
and telling you nice things is unbelievable.
I think we cooked.
That's good stuff.
Absolutely. cooked that's good stuff absolutely
all right so what's your favorite type of token i mean uh i'm not married to your chain or token it's just all about utility and function at this point whatever works i guess
um guys i think I'm back.
Yes, you managed.
I'm sorry.
It took a little bit.
We were on such a fucking roll.
We were going to get that steam back,
but I'm sorry to have that
major technical hiccup.
You know how it happens.
Cool.
Simon, does it make sense to pick up where we left off?
Yes.
Go straight for it.
Okay, cool.
So I was really excited getting into this
because we were talking about the network effect
and how that can be quantified by Metcalfe's law
as the square of the number
of participants in a network is proportional to the value of the network. So Facebook with
a billion users is far more valuable than Facebook with five users. And that's because
there are not just a billion connections in that version of Facebook, they're a billion squared
because everybody can potentially connect with everybody.
And so in the same way as a network gets more interlaced, it becomes more valuable. And that
speaks to the positive sum nature of tokens, which are truly valuable. And so I wanted to segue a
little bit into how truly valuable tokens are distinct and distinguished and how you identify
a truly fundamentally valuable token from a pvp meme coin token where there's like um you know
zero-sum interaction between participants where they're all trying to rug each other for the same
trying to rug each other for the same five dollars of liquidity yes oh i love this question it's
five dollars of liquidity
actually quite funny that i'm in the train because we we recently also talked about one metrics
it's not true for all tokens but it should be true for a bunch of them which is that money
if you think about money right when you measure an economy you measure the velocity of
money right because if you imagine the token and it's true for most of the tokens if your token is
only being bought and then it lies in a wallet you know maybe it's in a liquidity pool but there's no
flow there's no consistent flow um in the economy right it's like a dab water right like it's like
i don't know if you were a child and your dad or your uncle took you fishing, right?
You know, number one rule is you never put a fish into a lake without moving water because it will die in there.
And in a way, like token economies are the very same, right?
If you're in a lake of dead water, then the only hope that you have is, you know, that the new water comes in by, you know, by rain or some other function, a.k.a. people buying the token.
in by you know by rain or some other function aka people buying the token but when you have a setup
and i like to take ethereum here's an example where you have the natural demand because the
network resources are needed right there is a whole bunch of circulation and demand for ethereum
which is just because people need to make transactions literally i think we have all
been there that we quickly jumped to an exchange because we had a wallet with tokens on that didn't
have ease and we're quickly going back to cracking or calling based of i think you know a hundred dollars of ease just to fund the
wallet of gas fees or a bit more just so that we can move things on the chain right and then you
have uh the water is installed right there's a flow there's a constant demand for these tokens
to be used as in consumed to run the network and i think that is really the number one like if you
find a token that has a genuine i know the word is used in a different context but circulating
circular economy by where you see money moving around i think the number one indicator that
you have a real network here not just speculation what do you agree on that yeah of course yeah no
i i do and i would say i would actually maybe think of it
a little more uh fundamentally like the the thing that that network is doing is valuable and so that
is like a necessary but not sufficient precursor to a valuable token because we see we do see
networks where there are valuable protocols and valuable networks, but the token is actually not used or is not demanded by the users to use that network.
So Uni token is my favorite example.
And it's kind of a tough example to use to most people because they're like, well, Uni is really valuable.
Well, Uni is mimetically valuable because people think it will be maybe valuable
someday in the future.
Spoiler alert, it's not.
And they're not going to accrue the value to that token
that they say they will with a V switch or whatever.
And I've written about this extensively.
So I would say the first layer is,
does the protocol create value?
And the second layer is,
does the token accrue any of the value that the protocol is creating through the necessary use of it or claims to revenues or some other function that it could hold? Like we talked about, it could be a currency sort of token.
It could be maybe a commodity.
I was talking with a really cool game dev today who's building a thing called Dust. It's like on-chain Minecraft where the server can't rug because the server is on the blockchain and the physics of the game are hard-coded into the smart contract.
It's valuable. It's arbitrageable value that gives you a fixed amount of whatever the resource is.
So if it's wood, they have a really funny thing where there's a certain type of tree called the Sakura tree.
And there's an old game they developed in Autonomous Worlds called Biomes.
And they memed this specific type of tree into the de facto currency because you could build more beautiful houses
out of it. And it became valuable. And so that's a commodity type of token that has real utility
in this game. And you can get one door. One door is one piece of wood or whatever. So that's a
commodity-like token. Or it's an equity-like where it buys back, there's like buyback and burns,
or there's dividends that are paid out. And so those tokens can be fundamentally valuable in
that way, because they're used in a way that accrues some of the network value that is created
to the token as a, as a, like a byproduct or like in a necessary way from the
use of the token in the protocol i love it i want to echo this and actually give a quick plug for
zerbrus it is very useful in this context so in a way there's three elements you can see right number
one is is the token circulating right is there something where there's some sort of circulating mechanism then is the circulating mechanism around available
resource which could be block space for whatever purpose and then at last is the token which is
circulating connected in any meaningful way to the value that is being created through the consumption
or provision of said resource.
If all three are true, then you probably have a good token. And just as a
side plug, you can see when you go on Xerbrose, under every token, under
utility, whether that token is connected, provides the exposure to the value
creation of the protocol. And of course, as you know, this is not true for many, many tokens, right?
It is like, I would say the majority is not true.
And sometimes they are also very,
it almost makes me sometimes angry when I see this,
where it seems like it is connected
to the volume of the platform or something.
But when you really look into it, it's kind of not.
Or it's, yeah, there's some issues here.
So if the value creation
of the platform benefits token holders and where these rewards are coming from either from
consumption via resource or treasury resources you can find this on zerbra so it's literally
written there there's a question and then it gives you the answer to the question for any of the
tokens just as a
side plug so if you're interested in that also for you Nate you can literally
it's perfectly listed all its servers at the moment we probably will also do
something to capture the circulating economy but yeah no I think this is
really the three core things circulating valuable resource and then
participation in these rewards and you mentioned that you were a vocal critic of the unit token.
And also wondering myself, what we'll see in the near future in this regard, because
we hate to say it, right?
Like, and it's almost maybe a thing that we're not allowed to say in crypto, right?
But there's a reason why stocks were regulated in the first
part, right? Like when you create a token network like Bitcoin, it's entirely open source, right?
If you have the node, you know, in theory, you could fork it, right? If you want to have that
IPO, you have your own network, right? But of course, we benefit from all being in the same
network, which is why Bitcoin is so sticky. But if you now have a real company, right, that produces a product and raises funds,
you know, maybe there should be more compliance because we have in this space an issue with,
you know, I don't mean like sometimes it's confused, right,
rugs and projects that go bankrupt and I think you have to separate them
because even the best, most effort, most, you know, intense teams can, you know, have just bad luck, right, and miss the market or something like that.
But there is a real problem of people, and we know that because we do a lot of research,
and I just need to look at my client list, right, of people who were victimized by fraudulent schemes,
where people were just promising certain things, never was the intention to receive it back, right?
And have to have some sort of,
and I don't want that the government regulates us,
but there needs to be some sort of oversight
on these company-backed tokens
more than you would need to have it
on a functioning network token.
But again, I don't know where we're going there.
Yeah, go for it.
No, I can tie that in.
Yeah, for sure.
I feel the same.
I agree that we shouldn't have government regulating this space. I think the government regulation is incompatible with the essence of DeFi and anything built on a blockchain because governments are trusted third parties.
And so to appoint courts would be to reintroduce trusted third parties into the ecosystem that's designed entirely to function without them. And that's the promise of De as the kind of thing you're doing at Cerberus,
which is curating like a consumer reports for tokens where you're saying, hey, guys,
these are the characteristics that you should look for in a good token. And these are the ones that
you should look for in a rug. So you can identify these things more easily. And I have, you know,
I think there are other, there is also economic enforcement that is a part of blockchains, right?
Like Ethereum has proof of stake consensus with slashing.
And so the potential for economic consequences is the thing that guarantees honest behavior.
And so I would see a combination of what you're doing with the curation of good lists of tokens and the criteria there as a supplement to the economic enforcement of blockchains. only go so far and they don't extend yet. We don't have mechanisms yet that I've seen
that extend to company structures besides proof of stake, which ends up looking a lot like
shareholder agreements, but less efficient for these equity-like tokens that people are talking
about now as bringing equities on chain through like on chain companies or things
like that. I think we're a ways away from on chain companies. Because people often and I'm
rambling a bit here now, but people are people often forget that TradFi and stocks work because
there are these regulators who enforce real penalties on people who don't
act honestly in that ecosystem and we can't just put equities on chain without some form of
regulation quote unquote or like penalty enforcement um but i agree with you in that
those should not be enforced by
governments because then we become the exact thing that we sought to escape
yeah I have to talk to build on your ramble here and also ramble a bit I
know I probably make the scope a bit large so we'll never touch all of the
things that I mentioned but I think you... We'll do a second space. Yeah, we have to do a second space of this one.
I think that in the ideal world,
in a perfect world,
I think we could have stocks
easily on-chain
if everything else would also be on-chain,
if all the entire bank accounts,
if the identity of all the shareholders,
if the entire supply chain would be on-chain.
If you imagine it, it could almost be a bit of a dystopia, but you can literally just
see on chain the inventory a certain company has.
A whole bunch of reasons why companies don't want that.
But again, it's a utopian world that I'm painting.
I think at that moment, it would be possible.
But the question is, we are not there yet.
We are far from it.
Currently, most of the DeFi, right, at all, like we are still in,
we owe very little external value.
We create internally a lot of value, right,
like by leveraging our own tokens and doing this and that and putting more money into the system.
And the question is really like how do we build the first bridges, right,
to go there.
And I do think sometimes
people say oh crypto has no mass adoption i disagree to this especially when it comes to
remittances when you look at uh you just need to know where you look i've been in i've been
myself in person in nigeria on the market and i've seen cash being traded against bitcoin beside a
a chicken chicken trade a chicken desk where they're selling chickens. I saw it in my own eyes.
It is happening and it's happening globally.
But we need to create these systems where we allow things to easy onboard
and come into our world.
And as more and more things, as crypto eats the world,
as everything becomes a non-chain entity,
these things will become much easier.
But I completely agree.
I think short term, there? There's not real value in
putting stuff. It's just limited value. Let me put it like this, of just getting a stock on chain.
And therefore, I'm much more bullish. I see why a lot of people are bullish on real world assets,
because it seems to be the shortcut to get a real economy into it. But honestly, I'm much more
bullish on proof of stake networks that do other things than validating transactions.
In a way, Zerbrus itself is, I call them esoteric blockchains.
I have not seen somebody else providing a word.
Nate, if you know a better word for this than esoteric blockchains, I immediately would adopt it.
It's just a word that I've made up myself for blockchains that validate other things than transactions.
I would say another one would be BitTensor with the new machine learning subnets, right?
They validate the correctness of machine learning.
And I wonder if that is not the better way actually to grow.
Because when you think about a proof of stake network, what it solves is a coordination problem.
And coordination problems are a bit, you know, when you don't understand what it is, then it seems a bit weird.
But when you really understand what it is, what is the coordination problem?
The coordination problem is, OK, if you have all participants and they would, you know, be aligned in their actions, they would have a better outcome.
But because they're not aligned, they get the worst outcome or a suboptimal outcome.
a suboptimal outcome so but when you look at mankind right now if you look just switch your
tv or tv on on go on youtube and and and doom scroll on x right you will be confronted with
a huge amount of issues that we have whether it be climate change or i don't know if you believe in
climate change whatever right like the big issues of our time and i often feel they're all coordination
problems right what we need we need better
mechanisms to coordinate society right and there is where we go straight back to the government
because that was traditionally the purpose of government but now we live in these super states
right whether it's the united states or the european union and nobody knows who's governing
them I couldn't tell you when I'm in a particular place in Europe who's responsible for that place.
It's these layers of organizations which are hyper inefficient.
And I just wonder if maybe instead of focusing too much on real-world assets
and putting a stock on a blockchain on a platform
where you cannot log in without a KYC,
if it would not just be easier to say,
hey, guys, we just focus on these assets where we can solve coordination problems like Bitensor does, like Filecoin does, like Xerbris does.
And if that should not be our meta, at least for the next cycle.
Do you see what I mean?
Yes, this is mind blowing.
That is such an incredible perspective and distinction. And actually, the way I would describe it is that most blockchains solve coordination problems,
but you're solving a more fundamental problem, which is collective sensemaking and truth.
And so in a way, you're describing networks that allow people to find consensus, but about the
nature of reality and data. And this is solving solving the Oracle problem, right? The idea of Oracle Summit and talked about how the Oracle
problem is actually about getting data from networks or databases with different security
assumptions, namely economic security assumptions, to interoperate with each other. So the idea is
how much trust can you put in a particular
piece of data? And that is like the, that is the essence of economic security. And we call this
metric crypto economic authority, but you're kind of, you're doing that with Cerberus and you
described like other esoteric blockchains are doing this because they are trying to get people to trust in and agree on
the veracity, like the truth of a particular piece of data. Am I describing the same thing?
Like, is this making sense to you? Totally, totally. And I was just making me a note that
after DM you, I think we should maybe write a blog article about this to put this all down because I'm so glad to find another person who also sees that because, you know, again, I do think that the POS, right, the proof of stake system is but I genuinely feel that a proof of stake algorithm is the big innovation. And, you know, you could do so much with proof of stake. Like I published
this crazy article about stake everywhere, where I just painted a future in which, imagine you go
into and you book an airline flight. And if you have been in Cannes, and everybody of you in the
audience who have been in Cannes for ECC this year and got rocked by the airlines will immediately emphasize this example, even though I've wrote it long before.
Imagine you book an airline flight and the airline needs to put up a stake towards that flight.
And that stake is basically your insurance.
If the flight gets delayed, if something happens, if it crashes down, a certain percentage of the stake gets slashed and you're being paid out immediately.
This creates two things.
So first of all, you as a user know exactly how confident the airline is
with facilitating these flights, right?
Also, you can make that choice, right,
if let's say I have two flights which are kind of like identical,
but I know the other airline has put up twice as much stake for that flight,
and I know I would rather choose that because I know if something goes bad with up twice as much stake for that flight.
And I know I would rather choose that because I know if something goes bad with that flight, they will be hurt more.
And you have now the system whereby the people who always are on time and do their flights correctly keep their stake.
They never get slashed, so they have much less kind of staking cost because they don't have to refill it. And you could now extend that whereby the airline itself has an agreement with the port provider.
It also has a stake.
And now what you create is this.
It's almost like cannibalizing insurances, but instead of post-effect, you basically get clarity before the fact.
And it's a smart contract.
You don't have to argue about it.
Because, for example, I got an easy jet flight out from that was canceled
from come back to London and they canceled it wrote me okay we can't help
you with accommodation we can't help you you know like thank you for playing no
refunds basically and I could have got against it right I could have sat down
right in my name email and give me my money back whatever but I say most people don't do it because it's just like yeah you know like now i have to
go through it and go you know write one month back and forth email for like 80 quid i don't you know
it's like it just feels such a waste of time and when i know it's a smart contract there's a
defined parameter if it's five minutes late i get one percent back from my my price if it's five minutes late, I get 1% back from my prize. If it's 20 minutes late, I get 2%, right?
I get the exact defined parameters.
And I think this is just one example, right?
How much easier and better we could make the world
and how much more transparent if we would just deploy this.
I don't know if you-
Beautiful.
Yeah.
Yeah, definitely.
I wanna speak briefly because I know we have so many people in the audience.
I want to speak briefly about the proof of work point. So many people in the audience from Cardano,
which is like proof of work maxi and I think more aligned with the Bitcoin cypherpunk ethos.
And those people, I think mistakenly cling to proof of work. Proof of work was a great distribution mechanism that enabled proof of stake to be launched fairly because people had a way to enter the network without having to purchase from a centralized group that would be liable for issuing a token.
So proof of work has many, many limitations that make it notged to other networks. double spend becomes very profitable at a small amount of USDT, Tether, that is hosted on chain.
This is one of the reasons that Tether switched from being based on Bitcoin to being based on
Ethereum and Tron and these other networks, is because those networks have a degree of economic
security, this amount of value that is put up at stake to prevent people from double
spending, to solve the double spending problem, which is what Bitcoin fundamentally solved.
And so with economic security, I would say that tie in here to the easy jet scenario is
there are also sort of, there are some, we can loop this around to value accrual as well.
There are some double-edged swords that come up when you introduce a token centrally to a protocol.
Some of those come from the token price dependencies and the susceptibility to manipulation.
The idea that the collateral assets in the proof of stake protocol might be very volatile and also manipulable
because they're not all fully reserved or there's not as much liquidity as there needs to be to prevent drastic price changes or whatever.
So it's susceptible to manipulation at the app layer.
But I guess where I was going with this was, to tie it back
to the EasyJet example, what you end up with in any kind of insurance protocol or prediction market
or esoteric network, where the data is the thing that you're coordinating on, you have this sort of
moral hazard or like economic security vulnerability where the data is only as
trustworthy as it is profitable to falsify. And so this manifests in the easy jet problem as
your incentives to actually delay the flights. Like if you could buy enough tickets and then somehow force the flights
to be canceled, you might be able to profit from that kind of system because of these economic
misalignments or incentive misalignments that we call economic vulnerabilities.
misalignments or like incentive misalignments that we call economic vulnerabilities.
So I'll put that out there to sort of frame economic security.
And then maybe we can talk about that for a bit if you have time.
Yeah, definitely.
I just pushed my next meeting because I don't want to enter space right now.
Let's go for another half an hour or so if you have the time as well.
So yeah, I completely agree.
I was quickly distracted.
So if I do not match your point perfectly, just tell me where I missed it. I agree we have to be
extremely careful when we deploy economic, like these networks, right? Because once they deploy
it, right, you could end up very easily in an exploit scenario. And I think we have seen this so many times already. Right. If you deploy a system and they have the leak in your game theory
and somebody can just min max it out, right, you're gone.
On the other hand, if you get a network that is reliable, right,
then I think proof of stake networks, when you look at Ethereum,
pretty stable. And by the way, Cardano is also a proof-of-stake network.
You mentioned earlier a proof-of-work, just for factual correctness.
It is actually a proof-of-stake network, Honduras, Bors, Consensus.
They're fairly stable.
At least until now, there was no major destruction of a POS system.
At least not that I'm aware of.
If you know, Nate, let me know.
When we design these systems, we have to design them in security.
But once we have the economic security guaranteed, right,
it also means we have a lot of money into the system, right?
And when you imagine the stake ultimately being something of an economic security,
right, you can build infinitely amount, like so many other products on top of it,
and you would have directly on chain so to stick to the easyjet example if now the easyjet puts up stake they
could probably go into another protocol and ensure that stake and now we on in our crypto ecosystem
now could trade risk derivatives completely permissionless right from the other chain
um on easyjet flux right which i i can imagine I would see so many DGens
building bots for that, you know, like where you try to get some news and then, you know,
immediately buy or sell certain risk assets. And I think we could completely like optimize this
market to a degree that the trade flight can just dream of. But we've got to get these values into
the into the blockchain. And I think right now, I think it's a've got to get these values into the into the blockchain and i think right
now i think it's a better approach to make these esoteric networks than you know just to you know
try to get the insurance papers from jet easy jet and tokenize them you know i think yeah the first
approach is much better definitely i i mean i think the approach is to prove these kinds of
systems out on chain with on on-chain created value,
like value that is created natively on a network.
You see that with, again, going back to the on-chain gaming of autonomous worlds.
That is value that is subjectively created that did not exist before it was created.
So it's brand new utility.
There's this new game that people like playing
that is unruggable Minecraft
that people will pay to play.
They'll pay thousands of dollars in gas fees
or they'll pay thousands of dollars
to obtain very valuable items.
And then that is real new value that is created
or could be the value of private payments or private DeFi. Could be the value of gambling on meme coins even. There is some quantifiable value that people will ascribe to the ability to get rugged, clearly. And so there is, even if that's a crude example, there is some value
created by these networks. And I think we can prove what we are doing in DeFi is proving that
these economic systems work. My only concern about, one of my concerns about tokenomics and
economic security is whether all of those stacked dependencies,
those derivatives that you cited that are possible to create where people are trading
risk with each other, if those, I don't know how high the Jenga tower can be stacked before
someone finds a profitable way to pull the bottom block and rug the whole thing.
finds a profitable way to pull the bottom block and rug the whole thing. And so that's what I
would say is like my concern about the, I have a concern about the limitations of derivatives
on top of derivatives on blockchains, because the difference between crypto and TradFi is the
openness of the information.
And what we've seen is where there are profitable economic vulnerabilities, they will be taken
advantage of by people like A.V. Eisenberg or on the other side of it, the white hats
like us at Token Dynamics, where we do economic audits of protocols to identify and realign
the incentives of those moral hazards, those economic vulnerabilities.
So I'm not sure, and I'm curious about your take on whether a system of open finance can
fundamentally work with those derivative contracts and all of these insurance protocols being built
on top of real, even if the revenue underlying it is real, if those things can
be built out as robustly as they are in TradFi.
Not that TradFi is perfect, right?
Because 2008 crises apparently happen every 10 years.
Yeah, I think this is an extremely interesting question because there's a level of complexity
that we reach, right?
Like what you're describing is what I would call systemic risk.
And we in crypto, we have a whole long story about systemic risk.
If the people remember the lunar crash that then took down the C5 guys and then the three-hour capital,
you very quickly end up in a situation where people realize,
okay, it is actually all connected.
And now all of these dominoes keep falling.
But I would say, I would keep it with the Elon argument of self-driving cars.
I do think that TradFi is always worse on this.
Because when you look into TradFi, all the products that I built,
they are as autistic as anybody else
building these products, right?
And they are also quite reckless
and they have the additional problem
that they do not have visibility, right?
When you think about 2008
and when you watch the famous movie, The Big Short,
I think they did a very good job on this, right?
How clueless the bankers actually were on the top
or in the middle management
of what they were actually selling, right?
Because there was no visibility. So I think the visibility has both a huge what they were actually selling, right? Because there was no visibility.
So I think the visibility has both a huge advantage and it's just disadvantage, right?
The advantage is that inefficiencies and exploits are seen, but then again, that's a disadvantage.
And I would almost say, I mean, it's a very, I know it sounds very inhumane, the argument,
but I think it's the only argument that one can do is in the end if if such
an exploit is found it makes the system more healthy right it you know like the bust and the
boom and bust cycle ultimately a story of human overconfidence could build quick right get it out
ship ship ship and then the realization okay how that didn't work and how it now it collapses again
but in a way it's healthy right it's overgrow and then um compression again you
see the same in nature right when you look at biological development you always have it that
as long an organism is alive it's more sophisticated individual organisms become right
like generalists die out and highly specialized animals come then you have a natural catastrophe
like the comet is coming down and then you you see okay it's completely reduced and only the few generalized animals
survived and we're still around and after that you come in a phase of you
have a lot of generalized animals right and when you look in the market in
crises it's very very similar right whereby you have the highly
sophisticated actors who are most likely to die off in such an instance because
they're so vulnerable to very specific things in the ecosystem.
I know that was a very abstract point.
No, that's really good.
In your analogy, the sophisticated animals would be the derivatives of derivatives, protocols and users.
And because they're teetering on like three or four layers of economic dependencies that can be rugged by a little bit
of volatility at the base layer. Whereas the sturdy protocols, those that are more robust,
that are resilient, that don't have outside dependencies, those are going to persist.
And so we end up with, and furthermore, those that don't have technical exploits available
or economic exploits available are going to persist longer.
And so what DeFi ends up being longer term is the most robust possible system because
of this natural selection, this effect that is very similar to evolution in its process
and brutality for that matter. To your point, it's like most people
don't like this idea because they're like, oh no, innocent people will get hurt. It's like, well,
yeah, but to your previous point, innocent people get hurt in TradFi and probably worse because
these things are obfuscated in TradFi. So I love that approach and that analogy or that way of thinking
of like, yeah, it's not perfect and these are the vulnerabilities and they're public, but what's the
alternative? The alternative is this opaque system that is proven to bail over and over again. And so
we're building this new thing over here with a different set of principles that align much more with evolution and nature which has proven to be the best system for evolving complex and robust
systems, protocols. Animals, humans are these complex systems that are on the one hand
like fragile but on the other hand very adapt. And that's what makes them robust.
Yeah. And I think this is the key thing.
Why is it why why crypto is so robust?
You know, because we do not have the government bailouts, right?
If there's a system collapsing, right, we would take the collapse.
Right.
I often think if the Obama administration would have not
saved the banks in 2008, I think short term the fallout would have been much greater.
But I have a hunch that we might have seen much more innovation in the frontier of finance and
crypto and probably we would have been 10 times further
than we are right now in our development and adoption.
It is truly the bans on life support
and the globalized financial system that exists right now
that in a way, right, like we play a game
that is unfair, direct against us, right?
Because the banks, if they have a critical economic failure in their system right they just um externalize it on everybody else and get free
printed money well then you know luna just collapsed and everybody who hold luna all the
equivalent of the stockholders of the bank yet they paid the price for their for they put it
for their false judgment in the end right like? Like for them believing into a system that after all was not secure.
And the security issues were known, right?
Like it is not that these things were unknowable.
There were people pointing out that Luna is probably not safe
and there were people early on pointing out that maybe it's not good
to give credits to people who can't pay them back, right?
So these things were known.
And I think the people who did not do the research should ultimately carry the price for it, not everybody else.
So since we played against a player who has God mode, who does not need to pay his own builds,
it's almost an unfair fight. But I think ultimately that will, you know, this pain that we take and every four years when the cycle ends is exactly what makes us strong
because we have repeatedly every four years,
we have basically evolution and overdrive, right?
Like who can survive this?
Who can survive this?
And so only the strongest protocols survive.
And I think that's what you see, right?
Like the innovation pressure and the survival pressure is so high
and banks just don't have it, right?
Like, you know, I saw it in another tweet once, right?
Like the biggest innovation of finance was the credit card.
You know, like it is not much innovation.
Why should you?
Like if you have a business, if you have a license, right?
It's really about getting a license as a competitive advantage.
So in a way, it's an enormous market distortion
that we all pay the price for.
So I think we have to see the collapses, and we have to see the system become bankrupt because that cleans up our organism.
It's like when you get a disease, you have fever.
What does your body do when you have fever?
It cleans itself.
Yeah, and you're exactly right.
Down to the timing of everything, with every four years, that is actually where we see protocols being exposed
is that the confirmation of the bear market cycle. So the economic vulnerabilities in particular
appear and cause protocols to collapse every four years. 2022, around when Terra collapsed,
there were a handful of economic vulnerabilities that are caused by the extreme volatility and the systemic risks that are all inter-networks in these DeFi protocols.
And those are the times that the insecure protocols tend to be flushed out, is in times of extreme change, extreme volatility.
It's the same in nature over the hundreds of millions of years
of evolution that you described earlier. So it's the same effect in DeFi, just being
concentrated into four years. And we don't have to wait for every macro cycle. We have our own
in crypto. And those are slowly, the through that the best protocols are emerging.
And that is what will be characterized as DeFi in 100 years.
Like if you think about you project into the future, like what protocols will still exist?
It will be those that adapted or were adaptable.
And the you know, there are ways to do that. There are many ways to do that,
a few different approaches, right? There's the spray and pray approach of like, try every
configuration of parameters in your Liquity fork until you find one that works or in your Rye fork
until you find one that works, where Rye is like a free-floating, sort of non-pegged
stablecoin, and people are trying collateralized by gold and collateralized by Ethereum or
collateralized by a basket of assets. And the approach there is let a thousand flowers bloom
and see which ones stick around. The other approaches are constantly update your protocol through
multi-sig and a consensus of retards in the DAO who say we should do this thing over that.
That is obviously centralized to the bunch of retards that are running these things. So we
firmly disagree with that design philosophy at Token Dynamics because
DGENs shouldn't be in charge of your protocol changes or risk parameters. And then there's
the third approach that I like the most, which is immutability, but with either configurable
front-end parameters for the users to choose their risk tolerance or their particular way of using your
protocol. Like Morpho has configurable markets where people can launch markets and curate them.
And, you know, you push those kinds of things onto the user, that's a way to be adaptable.
Or you could approach it like Ajna or like Hoyu protocol, or some of these others that have novel Oracle list lending protocols that are
self-referential, circular, insular in themselves, no outside dependencies. They don't have like
Chainlink oracles feeding centralized data reports in. They don't have governance to update
parameters. And so that's another approach. But all of these to a degree are valid in that
the most adaptable or the ones that will exist in 100 years will be a product of natural selection
and all of these experiments will play out. And then DeFi will just be the set of things that still exist. And so that's what I
love about DeFi the most is like, it is this beautiful hydra that will just never be able
to be shut down because of the economic incentives and because of the harnessing of this natural
selection. And so my like firm philosophy for the last several years that I've been pushing
out that I think you would agree with is that the strongest possible version of DeFi will emerge
from the absence of regulation. And maybe we'll talk about the current regulation and start to
wrap things up based on that. But yeah, that's just, you know, that's this code is law
idea. And that whole philosophy is encapsulated by this idea of natural selection.
I love what you just said. Oh, man, this is literally a sentence I want to put on a sticker
and give out for the next conference. The strongest DeFi will only emerge in the absence of regulation.
And I think I resonate so strongly with this statement that I would say it's almost the
foundation of what we do at Zerberus, right?
The idea that, okay, if we don't clean up our house or ourselves, the regulator will
in the end have no other option than to get in.
And we are right now fairly blessed that it seems that at least in the US, there's no
desire to regulate us in the moment and that things just keep going with business as usual.
And maybe that keeps on going for a while,
but I think at one point,
we got to clean it up ourselves,
at least, at the very least,
out of compassion to everybody else in this community,
knowing that, you know,
that people get hurt from bad experiments
and also out of self-serving interest, right?
There's more money, you know, is avoided to be invested in scams, it goes back to good projects which then again
feed that loop of getting stronger and better over time. So I think this is the key, right?
We gotta build protocols, we gotta step up our voices to steer the ship in the right direction.
But as you want to wrap up the space, I have a very dangerous question
for you. I'm not sure if you want to answer it, but I bet the audience would love to know it.
If you look at this cycle right now, which one, do you already see the protocol whose implosion
maybe could end this cycle? Or is it too early? Or do you have any candidate that you would say that you're worried about this cycle?
Micro strategy.
I'm glad you asked.
So I was going to say the,
I was actually thinking of this
and then I lost the thought
and then your question reminded me.
So one of your earlier points was that,
you know, these protocols will blow up at the, we were talking about how protocols
blow up at the confirmation of the bear market with extreme volatility from that drop. We're
sometimes around the peak. Anytime there's extreme volatility in DeFi, we see the cracks start to
shake the foundation. And so I see micro strategy as, what I was going to say is,
it's been at least comforting to me to see DeFi learning from its mistakes. But what we're seeing
now is the group of people who didn't learn from DeFi's mistakes because they weren't around last
cycle are setting up to be the victims of this cycle in MicroStrategy and similar on-chain or
off-chain Bitcoin treasury companies. They're running a similar playbook to what Luna did
in that their protocols, quote unquote, their businesses are Ponzi's. They require the continued participation of new entrants and the continued
number go up phenomenon to sustain themselves. And so unfortunately for that group of people,
they are going to get screwed because they didn't learn from the last cycle that
we all had.
And so I hope there are not that many people buying MicroStrategy or like any of the, particularly
the, I guess the bonds, but also the stock.
It's all kind of tied together.
But to answer your question, yeah, I think the Bitcoin treasury
companies are going to be the thing that are most likely to blow up the cycle. I thought
it was going to be restaking, but Eigenlayer pivoted and nobody really found a good use
for restaking, thankfully. So the blow up won't be on chain as much this time. I think
it's going to be in Bitcoin treasury companies.
That's quite interesting.
I think that this is indeed a risk factor.
I also sometimes worry about a micro strategy.
And you know, it's dangerous to play with leverage.
I think it was a hedge fund manager who told me, you know,
the three things that break people me, you know, the three things that, you know, break people are, you know,
like what is liquor, leverage, and I think it's third L one,
I forgot the other one, but I clearly remember leverage.
Yeah, I think it's ladies, ladies, liquor, ladies, liquor, and leverage.
Yeah, it's my favorite, favorite, favorite fund manager.
Actually, Charlie Munger is the person who probably most, I don't know about most deeply
inspired me to work on incentives, but is the justification that I use for focusing so much
on incentives. Because he said something like, show me the incentive, I will show you the outcome.
Because incentives are what precipitate actions. And that is such a powerful mindset to have to carry through in protocol design, in your daily life, just in anything.
It is such a powerful vantage point through which to view the world.
So I love that quote as well.
It's really good.
Yeah, definitely good advice.
Don't use leverage. even Vitalik said that this out Vitalik said at one point don't use
more than 3x leverage there's never a reason unless you have an edge or are a
total degenerate gambler but yeah I love that Where would all the yield come from if people wouldn't leverage for 50x?
It's true. It's true. It's true.
No, I think that's a good, you know, we can look to the future, like where will the yield come from?
I would ask, like, where do you see the yield coming from?
Or like, where do you see the value being created to tie it to our earlier topics of conversation?
Where do you see the crypto space moving and creating truly positive sum value in the next five to ten years?
I think this is what we have to write a blog article about this.
Let's do it about what we think should be the meta for the next cycle.
I think this cycle has its own meta.
It's real-world assets and gambling.
But I think, and then the meme coins, of course, are gambling.
But I think that the real value that we can add,
and now I bind it back to later ladies, liquor, and leverage,
and what I talked about earlier about the
the esoteric blockchains right i think what we can do better than anyone else in the entire world
is we can design incentive systems right that's all that we do that's the core what the token is
or it should be should be um so i i think that's really what we have to do we have to build
incentive systems right we have to build incentive systems, right? We have
to build incentive systems for the real world that is through different oracles built in a way that
it is secure and that we can rely on it like the EasyJet example with the Proof-of-Stake system.
And I think thereby we pull in the real value. So I think we should create values by creating
esoteric blockchains that manage incentives for real world systems
and then take whatever, you know, slashing mechanics, risk mechanics we get into our
system via that and create yield based on that.
I think that's really, that's for me, I think.
And again, I have never, I always look for more people who see it similar than me and
who maybe can create better works than I have with esoteric blockchain and to get it out there because I do see it right I do see people building it but I see very little
conversation between these different parties about what they're doing and that that is I think if we
if we can get that one going right if we maybe write an article and get some people excited about
it maybe we can this can become a meta for the next cycle. Because I really think that's the solution.
And I will not change my opinion until I face better facts.
But to me, that's it.
That's the key.
I love it.
Yeah, that's very, very similar.
I'm very aligned with that vision and have a lot of thoughts on this.
There's a particular category of technologies that we'll probably talk about in the back channels and on our next space that we do on tokenomics and value
creation, value accrual, and incentive systems that I think is going to bring the bulk of capital
into crypto, like the most that we've ever seen, and probably be responsible for the next cycle. And it's just
getting started now. But it involves real world systems and creating actual value in the real
world and solving those coordination problems out there while using blockchains as rails in a
censorship resistant and truly cypherpunk way that doesn't compromise the security assumptions of the data that is
flowing on chain in the way that RWAs do. You know, RWAs are a lazy attempt to try to get
more capital into crypto. And we have much better schemes that are going to make the real world
interoperable with blockchains and allow us to scale and solve more coordination problems.
I'm going to tweet that statement. Real world SZRWA is our lazy attempt to get capital into our system.
I love it. I love it. And I totally agree. I do agree. That was an amazing space. Again, guys,
sorry that we rocked in the middle. Probably we repost some quotes from the space on our account
and maybe Token Dynamics does it as well.
And I'm very sure we'll have another space.
And I will damn go there.
Yeah, we're going to do another one of these.
That's going to be exciting.
I'm looking forward to doing that.
We have so much that we could riff on.
And it was just such a pleasure talking with you
about these concepts that even a lot of them
I hadn't put words to that you already have. And so thank you for taking the time and doing this. I think the
audience really thoroughly enjoyed this minus the rug. But thank you to all of you who stayed around
through the technical difficulties. We hope it was worth it and we're looking forward to the next one.
Looking forward to the next one.
Simon, I'll catch you later, man.
We'll close it there.
Thank you, guys.
Have a great rest of your day,
and looking forward to the next space.
