Kain Warwick - Crypto Derivatives Are The Future of DeFi & The Blockchain

Full transcript: Kain Warwick on London Real

2:23 This is London Real. I am Brian Rose. My guest today is Kain Warwick, the entrepreneur, DeFi pioneer and blockchain developer.

2:40 In 2016 you founded Synthetix, a decentralized synthetic asset issuance protocol that allows users to gain exposure to stocks, indices, currencies, precious metals and other assets in the form of ERC-20 tokens. To date, Synthetix has processed billions of dollars in trading volume and has a current total value locked of over 700 million dollars. Before this, you founded several startups including Blueshift, Australia’s largest cryptocurrency payment gateway.

3:05 You are considered a DeFi OG and called the father of modern agriculture, in a reference to the yield farming boom of 2020. You also feature as number 33 in Cointelegraph’s most important people in blockchain. Kain, welcome to London Real. Thanks so much for having me. Hey, great to have you here, and excited to go deep on DeFi and all things Synthetix today.

3:27 I wanted to start with a quote I heard from you recently, when I think you said that the DeGov is probably more important than the DeFi part of Synthetix, or will be over the long term, and I was wondering if you could talk about the transition. You went from, say, a foundation to a DAO, and your thoughts on maybe how other companies should kind of embrace this. We had your brother Kieran on Friday and he was talking about, you know, this concept of a DAO, and I know you both are entrepreneurs, like hardcore startup guys from the past.

3:55 Just wondering about how your thoughts have gone through on this and how this transition’s been. Yeah, it’s something that I think has been an interesting process for me as a founder because, you know, as a founder you feel like you, you know, rightly or wrongly I think, are in this like privileged position to like make all these decisions and, you know, control things and push things and drive things, and you know, a lot of it comes with this kind of founder mythos of like, you know, working hard and grinding and, you know, hustling and all that stuff. And then you hit DeFi and you, you know, hit decentralized systems and you realize that, you know, open governance and transparency and, you know, this kind of all this stuff is very antithetical to a closed, centralized, hierarchical organization, is actually extremely powerful, and so you have to get your head around that and adjust your worldview.

4:46 And I think that my perspective, you know, going into DeFi, going into startups, was very much about you know, openness, transparency and fairness in markets and all of the stuff, but when you have to live it on a day-to-day basis and actually, you know, cede control to a community, it can be challenging sometimes, but I think the results sort of speak for themselves, that you end up in a better place. You end up making better decisions, you know, when you do it in an open and transparent way with a community as opposed to, you know, in a closed, opaque fashion. Yeah, I’ve had this conversation with many people on the show, and I think Stani Kulechov was here and we were talking about even VC in general, how it’s almost, by definition, almost Web 2.0.

5:27 That’s like, let’s put the investments in, let’s make most of the money. And yet now you’re trying to transition, obviously all the companies you founded in the past, they wouldn’t exist without a founder vision and that hard work, but then you want to kind of then pass it over to this community, then takes the ball. It’s such a different way of thinking, even that we’ve been thinking about capitalism and startups for hundreds or even thousands of years.

5:50 It must be strange, you know, to make that transition, and also I guess you need a single person and a vision to actually start something, or maybe that’s changed. I think that hasn’t necessarily changed. I think that, you know, the idea of taking some concept or some market opportunity and someone or a small group of people getting together to kind of take on that market opportunity hasn’t really changed. I think you do need that kind of core. What maybe has changed, as we’ve got better tools over the last few years in particular, is how those people take it to market, right?

6:28 How those, that small group of people, goes out and says, okay, how are we going to fund this? What does capital formation look like? How do we make decisions? You know, I think what we’re getting to is this idea of like a very short pre-DAO phase where a few people are trying to work out, is this even a good thing for us to put my time and effort into? They get to some conclusion whether, you know, if they say yes, this is actually a market opportunity, let’s go and take it on, and then they form a DAO and they go out to the market and say, hey, you know, we need to fund this DAO and we want to start coordinating and interest in governance and, you know, kind of tackling this challenge, but you do need kind of that initial early group of people to make a decision to go after something.

7:13 Right, and previously, kind of in the ICO days of, you know, ’16, ’17, ’18, and where again I think, you know, you originally got a lot of your funding, it was this foundation model and then the foundation would kind of allocate, I guess, capital to a blockchain or whatever you might call it, and that was the model originally, but now you think that that’s no longer the right model, it should kind of transition right into DAO. I wonder if you could talk about what we learned from that era. Obviously I think a bunch of protocols are still in that old era, and yeah, your thoughts on how they make that transition.

7:48 I think the major one that was probably the longest holdout was MakerDAO, you know, the irony being that, you know, they’ve got DAO in the name and they were probably, you know, one of the protocols that was like most recognized as a DAO, and they had DAO-like elements but they also had this, you know, foundation model, and they had entities that existed. I think in the last year they’ve really made a decision to kind of lean into this momentum towards, you know, DAO-only governance models, where you remove all of the, you know, traditional structures and, you know, entities and legal jurisdictions and all that sort of stuff, which is interesting because only, you know, a few years before that they were actually headed in a direction that was quite different, where they were looking at, you know, getting regulated and getting licenses and various other things.

8:34 So I think they still have a bit of a hybrid model where they want to allow the DAO, this pure kind of approach, to interface with existing entities that might be regulated or licensed or whatever, but the core of Maker I think is transitioning to a pure DAO, and they were kind of last holdout, but there was a period you know, in 2018 where this was absolutely not clear that, you know, becoming a pure DAO was the right approach, right? And Synthetix was one of the early kind of, I guess, projects to really drive towards this, and yeah, we shut down all of our entities in 2020. You know, that was kind of it.

9:12 June 2020 was when all the entities were wound up, and then at that point it was pure governance, you know, token holders coordinating to solve this problem. So it’s been a couple years now of experimentation and iteration around governance, and it’s definitely not perfect, but I think we are iterating towards something that is stable and can be a really good coordination mechanism for people to come together and solve our problems. And for anybody that’s kind of new to this terminology, how would you explain to…

9:37 I always say my mom is the best example, she’s 78, she lives in San Diego, by the way, she has MetaMask wallet, she’s got stablecoin, just for the record, and she likes it, she owns real estate so she owning these assets is not a big stretch, but how do you explain, say, what a foundation is and then a DAO, even to define it, like how are they core differently? How do you explain that to like the public? Yeah, so I think a foundation typically is a not-for-profit, so the idea is that, you know, it’s not a for-profit entity, it’s not trying to generate revenue.

10:08 Obviously needs to pay its costs, you know, and it may have employees and it may, you know, have it may incur expenses, but it is a traditional legal entity that, you know, is domiciled somewhere. Oftentimes it’s Switzerland, sometimes it’s Singapore, in our case it was Australia, but you set up this entity and that is kind of the primary coordination mechanism for all of the decisions to be made and how things are kind of, you know, organized. Essentially with the DAO you don’t have that traditional legal entity, so you don’t have people that are in control, you don’t have directors, you don’t have the traditional governance that you would have with a normal legal entity.

10:49 What you have is token holders coming together to make decisions, and there’s a whole bunch of ways that you can make those decisions. You know, they range from direct voting on every single proposal to delegation of some kind, where token holders delegate their voting power but every proposal is still voted on by delegates, to council style models like Synthetix, where you vote in a group of people, those people, you know, might be eight people for example, who make all the decisions, but all of the coordination on all of the processes are underpinned by this token. It is the primary coordination mechanism and there’s no reliance on traditional legal structures.

11:28 You can’t go to a court of law and say, you know, this council member did something bad. You have to go to token holders and say, hey, you know, we need to remove this person, they’re a bad actor. So it is a very different model. Ultimately you’re still doing a similar thing, you’re still trying to get a group of people together to, you know, provide a service or, you know, to create some novel system or whatever it is, it’s just about how you go about making decisions and who has control and how those decisions are made.

11:56 A fascinating idea, because it’s almost like a social construct, like how do we as people govern ourselves. I said I spent seven months, don’t ask me why, running to be the next mayor of London. I just was looking around at 2020 and some of the madness in the city and I thought we can do a better job. So my first foray into politics, and I was an independent candidate, and I just got to see what it was like, I guess, trying to get someone’s vote at the end of the day.

12:22 And when it came down to it, the very last day, it was May 6, was the election last year. I realized there were two very strong brands out there in this country, they’re called Labour and Conservative. In America they’re called Democrat, Republican. At the end of the day, even though we thought we had the best ideas out there, people ended up voting the people into place that they had a brand or they had a narrative or their parents voted for. So it’s interesting when I first started looking at DeFi and the blockchain and what happened in the DeFi summer and Compound and all the governance issues, I looked at it and thought, wow, I just came from a place in politics where, you know, it’s almost just as crazy as the world of marketing or crypto, there’s all these weird human habits in there.

13:03 And yeah, I was just wondering, do you ever look at politics and voting and see how that also might apply to DAO governance, and do you see things you want to avoid or things you want to adopt or things you’ve even experienced over the last couple years in doing it? Yeah, so I think, you know, there’s thousands of years of governance theory, right, and, you know, the philosophy of governance and, you know, philosophy of human coordination, and then, you know, very esoteric rabbit holes you can go down, like voting theory, right. I like choice theory, and how do people make decisions and how do you ensure, you know, arrive at the optimal decision given, you know, people have different preferences that you’re trying to, you know, balance, right?

13:44 And ultimately all of these systems have trade-offs, right? One thing I think that’s quite interesting though is we’ve never really had good systems for doing this in a sort of a wide scale way, right, a distributed way. You know, most voting systems rely on some kind of meatspace system of, you know, you go and, you know, obviously we’re getting digital voting systems and that’s getting better, but, you know, oftentimes there’s Sybil resistance built in, so you still want people turning up at a specific place, a polling booth or whatever it is, right?

14:18 And so there’s all of these restrictions that we have that exist that are kind of baked in these legacy systems, right? And one of the nice things when you have like a new enabling technology like the internet or mobile phones or now, you know, crypto and decentralized consensus, is that you can really kind of challenge some of the assumptions that are baked into these systems and say, wait a second, do we really need this? Is this actually the optimal thing to have?

14:44 And what if we removed it, what does it look like? And so I think that we’re in the process of starting to ask those questions, it’s still very early. But, you know, the idea that, you know, things like email and websites and all of the stuff that emerged from web 1.0 you know, changed how people communicated and how people, you know, got information, and all of these things that were very, you know, a huge shift for society, I think the same thing’s going to play out with crypto.

15:10 It’s just that we’re, you know, the flat part of the curve right now, we haven’t even started to really, you know, see what the impact is going to be. You have tons of room for innovation. I remember meeting some people in London and they’re like, yeah, I really want to vote for you, Brian, where do I go? And then they realized they had to register six weeks before with their local council, with the form they send in the mail, with the utility bill, and now they can’t vote.

15:32 And again, you know, I’m not a conspiracy theorist but it puts all of that Sybil resistance. Yeah, right, like it’s all about, like, you know, it’s all about ensuring that someone, we have much better ways of ensuring that someone is, you know, eligible to vote in crypto systems, right? Like within Synthetix, if you are a staker, we can verify that you are staking, we can verify your address, we don’t need to verify you have an identity, we just verify that you are a staker who’s participating in the network, and you can vote anonymously because we know that that voting power is going to be exercised.

16:05 And so, you know, there’s the Sybil resistance of so much of voting processes, and overheads I think in traditional election systems is about Sybil resistance and ensuring that, you know, votes are fair. We can do away with a lot of that overhead in crypto systems. Yeah, I really think that’s interesting. Do you think, just as an aside, this will ever find its way into, you know, democracy and voting actually for political issues? Yeah, absolutely.

16:33 You know, I think there’s no question that when you look at existing systems, legacy systems, you know, and then you overlay crypto and you overlay the ability for, you know, people all over the world to kind of get together and coordinate, that is going to be a much more efficient process, right? And so that’s going to challenge a legacy system that is being done in a much less efficient way. You know, and I think we’ve seen this play out over the last, you know, 20 years with the internet, right?

16:59 Anything that was reliant on meat space coordination has kind of been overwhelmed for good or ill, you know, by web-based internet-based systems. Yeah, it will be interesting to see how it plays out. We thought with all of our social channels, and then a lot of people couldn’t actually move around, we thought we could get those messages and people would make that kind of independent vote, but I think we still have a little ways to go, and see how that plays out.

17:25 Just wondering if you have any big learnings because you’ve been doing this longer than most, you know, from the governance standpoint, learnings or things to pass on, you know, to other foundations looking to make that transition as far as what works, what doesn’t work, whether that’s voting frequency or issues or council numbers, because you’re literally learning on the ground. Yeah, I think, you know, maybe even to use this example that you’ve given of, you know, your run for mayor of London, right, one thing that I think we’ve found is that crypto people are very much single issue voters, right? Like they are really concerned about the impact that regulation and, you know, legislation is going to have on crypto and crypto adoption, and so we’ve seen people pop up who are actually trying to kind of hack the existing legacy systems and you know, turn up and say, you know, I will run on a platform of, you know, pro-crypto or you know, crypto support or whatever.

18:24 And, you know, we have a situation now where crypto people have a lot of wealth, right, so they have money to donate towards these things, and also they are very good at coordinating. You’ve self-selected for people who are extremely good at coordinating but you’ve also self-selected for some interesting things like adversarial thinking, and so one thing that I think that we found with our voting systems and governance processes is that any system that you devise will be attacked, right? People, you know, if it’s valuable people will try and attack it, and so I think that the way that we’ve built our governance process has been very slow iterative steps, because if you make large wholesale changes you open yourself up to unintended consequences.

19:04 And so I think that you know, within crypto we have a group of people that are very aware of, you know, how governance happens and your why and all the right, you know, decisions that they want to see made, and they’re willing to kind of put the time and effort in to ensure that those things happen, both in crypto within the protocols that they care about but also increasingly in the real world as well, which is exciting. Yeah, super exciting. And for you, you’ve found that the best way that you’ve optimized is to have your token holders vote for council members who then make the majority of decisions, as opposed to, I know, like in California, where I was originally from, it had like Proposition 13, Proposition this, where a lot of times the public would vote on whether there should be a property tax increase or the public would vote and, not say the bad thing, but sometimes it can get very granular.

19:52 The House of Commons is near here and I’m sure my representative is voting all the time. There’s like a fine line, right, between getting the public involved in every decision and then having an elected representative that’s maybe in there too long. What’s been that optimum for you, for you guys? So I think we have three-month epochs, right, as opposed to, say, in the US where, you know, people have been there for, you know, hundreds of years in some cases I think, right?

20:17 And so, you know, we kind of force turnover, right, and we force, you know, people to be re-elected regularly, which I think helps with accountability, which is another thing where, you know, you can’t have a vote in the US every three months, right? Like the amount of overhead and cost, you know, cost hundreds of millions of dollars to run an election. You can’t just, you have to, like, four years or, you know, two years depending on whether you’re talking about, you know, Congress or whatever, is like the minimum amount of time that you can do, because if you did it any less it would just be prohibitively expensive.

20:52 If you challenge that assumption, and you know that this is the case for a lot of, you know, in Australia I think it’s three years is the average time or whatever, right? If you challenge that assumption and say, well, hang on a second, like what is the, ignoring cost, right, ignoring the overheads of voting, like how long should we let people stay in governance, right? Maybe three months is too short, but we’ve been pushing the boundaries of these things to see, you know, maybe it’s six months, right?

21:14 And if you ignore costs and you ignore voting overhead, you know, you can elect people for a smaller term and then force more accountability, because you only had six months of decisions to make and people can look at that you know, history of six months and say, well, wait a second, the three biggest things that happened, I can now kind of pay attention and be like, wait, the person that I voted for didn’t actually vote, you know, in alignment with what I was, you know, wanting to see, and I’ll vote for someone else next time who, you know, actually is going to be more aligned with me. So I think those are just some really simple examples of ways that you can kind of improve governance processes by just having better technology and, you know, having, you know, more efficiency in the system.

21:53 And then you personally, as a former semi-benevolent dictator of the Synthetix protocol, now moving to, I guess, a token holder that votes on the DAO, how does that change what you’re involved with? Do you, obviously I guess if you still have tokens you get to vote these people into place, but yeah, as a Munch if you step aside, do you find you’re talking to the community more, are you listening more, how has that changed? So when we first initiated the council, I was politely told not to run for a council.

22:24 You know, there was a sense that I had enough kind of social power within the system that, you know, it was not optimal for me to be on the council as well. So I think there were maybe two or three epochs, about nine months, where it didn’t run, and then we kind of realized after about nine months that there was a bit of a disconnect between the contributors who were building the protocol and the community and the people who are governing it, and that we needed someone to kind of be a conduit for communication between those two groups. And given that I had historically been that person, I decided to run for council.

23:01 I think I ran for council now maybe about a year ago, so I’ve been on the council for about a year. I was just re-elected, so hopefully I didn’t. The interesting thing is actually don’t revoke for myself, I vote for other people, because the optimal situation if I think I’m going to voted in is actually to vote for someone who I think will agree with me, and then I’ve got two people on the council who, so there’s some interesting like game theory about, you know, how you vote and what have you within Synthetix system, but the end result is that I’m one of eight people on the council and regularly I’m on the wrong side of votes where I say, you know, I don’t think this is a good idea and it gets voted in anyway.

23:37 That’s fascinating. Now when I ran to be mayor I had a big bus called a battle bus and I drove it around, I went 5,000 miles in the city of London, I went to every borough twice, I put out videos about my policies, I tried to do live meetups but they closed most of them down. What else did I, I didn’t get invited to debates by the BBC even though I was number two in the bookies. How does my campaign look like different than, say, one of yours or maybe the future of DAOs where people run for council, because maybe that’s obviously overdoing it in a system of country politics, but I guess there has to be some type of expression of vision and campaigning of some sort, right?

24:16 Yeah, absolutely. So, you know, we see people, recently we doubled the stipends that we pay, right, because we found that we weren’t getting as many candidates as we wanted, right? And so a member of one of the councils now makes around about 150 to 200,000 USD a year, so it’s a meaningful amount of money. They got paid in tokens and, you know, depending on the price of the token on any given day, I think the average is around about 200 grand, so it’s not an insignificant amount of money.

24:47 And so I think what that’s done is created a lot more pressure for, you know, really credible candidates to step up and run for these councils, because we have several, we’ve got you know, Treasury Council that manages the treasury, we’ve got a Grants Council that manages public goods, we’ve got the Spartan Council, information managers, protocol decisions, so we need credible people and qualified people in all of these roles. The interesting thing is that this last election was probably the most contentious and contested and we actually had really close vote and people were really, you know, kind of campaigning and trying to get voted on, and, you know, I think that was due to the fact that like the kind of reward had been doubled and people saw it as a very, you know, good position to be in if they could get elected to one of these councils.

25:31 And so yeah, I think we will see, you know, as the value of participating in governance in these decentralized organizations increases, you know, we will see more and more people stepping up and, you know, getting more sophisticated and professional about how they communicate their policies and positions and, you know, governance style. The interesting thing is that all of this is done with a Discord, so no, thankfully no one has to, you know, run around the countryside in a bus. Not yet, they can, they can literally, you know, not yet, not yet, not yet.

26:05 You know, you just go into Discord and you talk to people in Discord and, you know, we have voice channels where there are, you know, debates and things like that that happen, but it’s all done, you know, kind of through this Discord process as opposed to in real life. That’s fascinating, Kain, did you ever think you’d be in politics? I know, right? Yeah, honestly, like I think when I was elected to the council the first time, a couple of my friends were like, well, this is kind of inevitable that you’re gonna end up here on some level.

26:33 So yeah, it’s fascinating, I’m just having flashbacks to our campaign because what we did is we targeted like YouTubers in London. We had nine million citizens in London and we found we could probably access six million of them via YouTube, and obviously we’ve had a YouTube channel for 10 years, we had two million subscribers, and so we would pump in my campaign videos to targeted audiences, and just so they would become aware of us and get them onto the website. And so be very interesting to see how this plays out in blockchain governance.

27:03 When I first started looking at this space I thought, wow, it’s, I’m kind of curious, did you run on a, all right, did you run a pro-crypto campaign at all, was, you know, was that campaign you know, I, so just quick, quick history, it was April 2020 when I was in the studio broadcasting live on YouTube. It was the second largest live stream broadcast in the world, we had 65,000 concurrent viewers, the largest was Trump’s coronavirus briefing that night, and about an hour after my episode YouTube deleted and banned that episode, so we went into this really public fight for freedom of speech, digital freedom of speech, as I was banned by Dropbox and PayPal and all these other things for having conversations in this studio about what was happening at the time, let me just say that.

27:52 So we got into a real digital freedom of speech battle, and towards the end of that year I thought, I’m having conversations about freedom of speech and lockdown and the mayor of this city doesn’t do anything about it, so that’s why we ran. It wasn’t until the end of that election that I decided to go kind of deeper and back into crypto and DeFi, even though we’ve been talking to Andreas and Max. If I had been a little bit deeper into crypto at the time I’m sure it would have been part of that message, and I’m sure what we did in 2020 is we created our own platform called the Digital Freedom Platform, and we got us the streaming, one of the streamers from the Super Bowl, and we streamed our own video because YouTube wouldn’t do it, but again we had to crowdfund that because I wasn’t that in touch with crypto.

28:34 Could we have done it in May 2020? Possibly, you probably could have, but I wasn’t as in touch with this community. So great questions, Kain. If I ran now, well, obviously crypto would be a huge part of the platform, not sure that I will, it would be powerful, it would be very powerful I would imagine. I mean, we’re, you know, you’ve seen this happen, you know, with pro-crypto candidates in Miami and in, you know, New York.

29:00 I think it’s becoming a very powerful, you know, plank in a platform, very much so. And again, I spent 15 years in the banking industry and I saw all the nonsense that goes on there, and when I saw DeFi summer it reminded me what I was doing as a fixed income derivatives trader in New York in the 90s, except, Kain, I had to have a bank with 20,000 employees with a balance sheet and a direct line at the Fed in order to offer these products. So it was us and Goldman and JP Morgan and a few others that could even create these synthetic products and offer them to our customers, you know, as derivatives.

29:34 When I saw DeFi summer I was like, wow, now potentially you know, anybody in the world can start doing this stuff, and that’s when my mind was really opened because I got to see from the inside what things I don’t like about central banking. So yeah, good advice, please don’t twist my arm to go into politics again because it’s a pretty, it’s pretty nasty business I’m sure. You, yeah, really fascinating talking to you about what this governance is like because this is, I guess, going to be the future of running in these blockchain protocols.

30:06 I think the DAOs also aren’t necessarily even legal entities, which also maybe gets around a lot of these problems that people are finding with where it is and who is taxed and who’s the head of it and are they in the Bahamas or the US. I mean you see everything eventually going to that DAO and it being a part of way of governing all tokenized protocols, all blockchain protocols. Yeah, so I think, you know, it’s a very interesting question and I think it goes back to kind of an earlier point that I made around, if you have a more efficient system it tends to replace the older legacy systems, right?

30:43 Now that, you know, takes different amounts of time depending on how entrenched those systems are, and I think corporate governance and, you know, limited liability corporations and, you know, the typical structures you have in you know, markets today are very entrenched, and so I think it’s unlikely that those systems are going to be replaced, you know, in a short amount of time. I think it will take time, but I do believe that for a lot of the things that we’re trying to do in the world, the coordination that we’re trying to achieve, that DAOs are actually a more optimal way of achieving that, right? So I think it’s actually less about crypto governance, I think crypto governance makes sense, you know, DAOs are very aligned, the bigger question to me is when do you know we see traditional corporations being replaced with DAOs and being out-competed by DAOs and DAOs, you know, starting to really make inroads in large scale important structures within society.

31:38 I think that will happen but again, you know, it might take five to ten years before we sort of see that emerge. Yeah, yeah, I’ve seen probably closer to 10, but it’d be interesting to imagine if, you know, Amazon shareholders, you know, actually controlled that company. I guess technically they’re supposed to, right, technically the shareholders are supposed to elect the board which is supposed to make the decision to like the CEO, but obviously most people agree that it probably doesn’t necessarily work that way.

32:06 But as far as crypto companies, some have been maybe slower to adopt this DAO model and some faster than others, and maybe before we talk about examples, if we do, you know, DeFi, which is something that you spent many, many years on, does proper DeFi ultimately have to come from a DAO, like without that type of governance will you not get, you know, the right decisions for decentralized finance, or do you think they’re slightly separated? I look, I think, you know, a corporation, a centralized entity can still coordinate very well, right? So there’s nothing stopping a corporation from releasing a DeFi protocol, having it be totally centralized, having them make all the decisions.

32:48 You lose some of the power I think and you lose some of the magic obviously, which is, you know, people needing to then trust that entity to continue operating it, but you can still get some benefits I think, right? So like a hybrid, very corporatized, hierarchical structure that is purely making all the decisions for a DeFi protocol could work, right? And we’ve seen examples of that where, like, for example, Compound Labs was in complete control of the Compound protocol for a very long time, all the decisions were made by Compound until they released that governance token and then handed over control to the community, and, you know, used a form of delegated democracy and delegated decision making to start, you know, allowing people to, you know, have a say in how the protocol is going to be run.

33:31 So I think that you can transition, but you can imagine, you know, scenarios where you don’t need to do that transition, you just have a centralized entity that makes all the decisions and, you know, eventually you assume it will be out- competed by a DAO, but it’s not necessarily the case. I think that the bigger question is why are we not seeing more DAO experimentation, and I think there’s a couple of things that are hindering that. One is we still don’t have very good tools for DAOs.

33:59 Most of the protocols that are very deep down this DAO pathway are building their own bespoke solutions to manage it, so, you know, we’ve seen Balancer release Snapshot, we’ve seen you know, Yearn release Coordinape, we’ve seen, you know, Compound release Compound governance module, almost everyone is kind of rolling their own governance structures and we haven’t seen too many like pure governance projects. Aragon is probably one of the oldest projects on Ethereum but unfortunately this didn’t really work, right? It was supposed to be this governance, this generalized governance system, and ironically somewhat the protocol governance actually collapsed on itself and turned into this very acrimonious split and shut down in the protocol itself, so there’s maybe a lesson in there somewhere, I don’t know.

34:49 But I think, you know, ultimately we are getting to a point now where we’re seeing much better tooling emerge, and as that tooling gets better we will see people be able to experiment faster, be more efficient in how they roll out these experiments and iterate and test, and we’re going to see some incredible governance experimentation over the next like couple of years I think. Could this be your next project, to create that also one size fits all governance, turn your foundation into a DAO with this system, or maybe this, I don’t know, maybe it’s a bridge, I don’t know, is that something you might work on or do you think someone will work on? So funnily enough we actually have an internal project right now called the v3GM, which is basically our, the Synthetix version three governance module, and the v3GM is exactly that.

35:36 It will eventually be spun out, like we have spun out other sub-DAOs out of Synthetix, so dHEDGE and Kwenta and some other projects have been spun out of Synthetix governance. The v3 GM will also be spun out and it’s being designed as a generalized governance system with all the lessons we’ve learned through Synthetix governance. So absolutely, which is I think at the beginning you asked me, you know, whether governance is maybe going to be more important in the Synthetix legacy than even, you know, a derivatives platform.

36:05 I think governance is very clearly more important than derivatives, as much as you and I might like derivatives and I think they’re very interesting. I think governance is a much more powerful tool than derivatives, and so I do think if the v3GM is successful, the fact that the v3GM emerged out of Synthetix may be a much larger part of this, the Synthetix legacy, than even the actual project itself and the product that it’s produced. Yeah, this is so exciting, I’m so glad we’re having this conversation because I haven’t had it before.

36:36 I’ve had people talking about moving to DAOs and the Hedera Hashgraph, you know, Binance is moving to a DAO, and I’ve talked about their own resistance, their internal resistance of going from a headstrong entrepreneur into the system where they’re no longer in control, but I’ve never talked about, you know, someone who’s done it on the ground and then potentially having something that can be spun out and plugged into other protocols so they can make that transition to DAO. And I agree with you, as much as I love derivatives, governance is probably one order or two orders of magnitude more important because it’s how the decisions are made, let alone the instruments, right? So I agree.

37:13 Agreed, and as humans that’ll be something we always struggle with, to make decisions. People talk about the community being so important in crypto and that’s true, but what is a community? It’s community, people that share ideas and then ultimately do something about them, which I guess community maybe is governance. Maybe that’s a whole other social conversation to have. I want to talk about some of the details of Synthetix for sure and any other governance thoughts.

37:37 I want to talk about state of DeFi, just curious if you can spend a couple minutes on where we’re at. We’re almost two years now since DeFi summer, you know, anniversary. You obviously were in this space before that as well. What is the state of the union of DeFi? So I think if we kind of slice up the Ethereum story into a couple of segments, right, we’ve got the sort of ICO boom, right, where really the main activity that was happening was capital formation, right?

38:11 You know, this capital raising, it’s very speculative idea, you know, a lot of people raising money for things that they’re going to do later, right? That kind of lasted from 2016 to 2018. There were some things that happened but the vast majority of the activity was ICOs, right? Then after that you had this 2018 to 2019 period where we were in a bear market, and as we got to the latter stages of 2018 everyone was looking around and realized, wait a second, the only ICOs that are kind of left, are the only things that, you know, people funded that are still kind of building, or almost the only thing that’s left, are these weird decentralized financial structures and protocols, and so out of that was born the term DeFi, and almost all of the things that were happening, all the, you know, experimentation and excitement that came was the, you know, this decentralized finance movement, right?

39:02 And, you know, so you had Maker and Compound and Uniswap and Curve and Synthetix and all of these cool things, cool experiments, but they’re all very financial in nature, and then you get to DeFi summer, right, and basically what happened is that DeFi made a victim of Ethereum, you know, its success, right? It turned this amazing story into actually, you know, a huge problem because the network is not ready to scale, and all of a sudden you had, you know, hundreds of millions of dollars worth of financial activity embedded on chain, connected to each other, and anytime there was large volatility in the market there was just this flood of transactions, arbitrage transactions and automated transactions that were happening with all these different positions, and, you know, lending protocols and liquidations and, you know, AMMs and, you know, all crazy stuff, right, which was amazing.

39:53 This is exactly what we’ve been talking about, you know, Ethereum could support, but it actually buckled under the load, in a way, you know, similar but probably worse than it did when CryptoKitties, you know, had a blip in late 2017, as one of the only non-ICO things that was going on, and brought the network to its knees. DeFi kind of brought the network grinding to a halt over the course of like six months. The problem was that we had had three years to scale and we hadn’t managed it, and so all of a sudden there was an opportunity for some of these alternative chains to spin up their own nascent DeFi ecosystems and say, hey, you know, come over here, we’re faster, better, cheaper, whatever, whatever the the argument was, and so Solana and Avalanche and Binance Smart Chain and, you know, a number of other alternative L1s emerged, and at that point the original DeFi project started to kind of fade in significance and less people were paying attention.

40:51 You then had this emergence of DeFi 2.0 on Ethereum which kind of brought attention back for a little while, but ultimately I think we lost a lot of new users who never, you know, used the Ethereum ecosystem because when they turned up to crypto they were, you know, on Solana from day one or Avalanche from day one, right, and never did a transaction on Ethereum at all. To 2022 and we finally scaled, so, you know, whatever however many years late you want to call it, seven years too late, three years too late for you, whatever the number of years is, we were too late, but we eventually got there, and now we have multiple scaling solutions, we have StarkWare, we have Arbitrum, we have Optimism, and we’re finally able to build a much more robust DeFi infrastructure on these layer twos.

41:34 And I think we’re starting to see all of the amazing engineers stayed and kept building throughout this period but they just couldn’t build and couldn’t, you know, really do the things they wanted to do because we couldn’t scale. I think we’re going to see this re-emergence of Ethereum as the dominant smart contract platform over the next couple of years as we really scale and bring, you know, all of the stuff back onto Ethereum, you know, via layer twos, and so that I think is going to be the next chapter, but, you know, it’s been a winding path to kind of get there, unfortunately it’s taking a lot longer than we would have liked. Yeah, that’s a great assessment of what’s happened in history.

42:09 I mean, again, I’ve been teaching in my DeFi Academy now almost for a full year and I have about over a thousand students now, 50 countries, and they go through a four-week program and quite frankly, Kain, I just, I force them to do the things they normally would not do because it’s uncomfortable, so they do basic wallet setups but then they go ahead and do their first trade on Uniswap, they do a yield farming trade, they do a liquidity pool trade, and they just get them to do it in small size so they know what it’s like, they experience it, and they realize, oh wow, this is an option, and we just kind of get them into DeFi. Biggest complaint as you can imagine is the gas fees. I always tell them their tuition fees, so pay them because you’re learning something, and you spend more at the pub on Friday night than you do on the gas fee, and you’ll learn so much more with one transaction, and guess what, help is on this way, either ETH 2.0 or we’re calling it now just whatever, Ethereum evolving, layer ones, layer twos, help is on the way, but I’d rather you get a trade done in a DeFi sense than say, oh, I can get the same thing on Coinbase or something, you know, so I try to get them into the mindset, but yeah, it’s been a big sticking point.

43:11 It’s the biggest complaint I get every day. I obviously tell them it’s tuition and we’re going to move forward, but yeah, we’re constantly having that discussion here about Ethereum. I guess you’re an Ethereum maximalist, I haven’t really had one on my show so it’s good that you’re talking about these things. Would you call yourself that? Yeah, definitely.

43:28 Would you call yourself that? Oh yeah, for sure, 100%. You know, I’ve debated Kyle Samani, I’ve debated, you know, SBF, I’ve debated many people on Twitter, and, you know, I think we found ourselves in a very unfortunate position within the Ethereum community where we were a bit complacent. Also we were tackling a very hard problem, you know, we’re trying to solve this problem in the right way, you know, in a long-term way, and not, you know, create more problems down the road, and that’s hard.

44:02 You know, I think Vitalik posted something a couple months ago, slide from like an old deck in 2015 where, you know, he’s talking about proof of stake would be out in like six to 12 months or something like that, right? Estimation in software development is much harder than we think. But the thing that I’ve been sort of repeating is this L22 meme, right, which is that we’re actually finally there. We have workable layer twos, the dYdX is on StarkWare, it works, it’s it’s a viable system, you know, we’ve got Arbitrum, we’ve got Optimism, so we have scaling solutions now.

44:36 Okay, so it’s happening, and will there be ETH staking by ’23 or do you think the ETH network will be fast enough, or we need a lot of these layer twos to make it all happen? I think today we have the ability to scale via layer twos right now. Like we can handle all of the existing within the ecosystem very, very easily. The challenge has been getting people confident enough in the security of these layer twos to get, you know, real size moved over from layer one, right?

45:11 If you’re an ETH whale or you know, a large yield farmer and you’ve got, you know, tens of millions of dollars worth of crypto on L1, you know, it’s a hard sell to convince you to move all of that. Not that hard, you just need the right incentives, but it’s still at the moment, let’s get you to move all of that to StarkWare, right? You might not feel 100% comfortable moving into that network, whereas you do feel comfortable in that one, and for you gas fees are not that big a deal, so until we can convince all of the people who have large size who, you know, are providing the most liquidity, the layer twos are not going to be as efficient as L1s are, but I think we’re starting to win the argument.

45:49 We’re seeing people move across and start to really, you know, bring size across. And what have you learned from the layer ones like AVAX, I had both John Wu and Emin here on the show, and the Solana and, you know, a couple other layer ones? You know, what have you learned from them, will they also host DeFi or a percentage of DeFi in the future, will they be a part of this ecosystem, they taught us anything good or bad as they’ve developed over the last 12 months?

46:18 I think the thing that has surprised a lot of people in the Ethereum community is there are now genuine organic separate distinct communities on these networks, the DeFi, NFTs, everything, right? You know, we had a window of opportunity where if we had scaled I think that wouldn’t have happened, it would have been very, very difficult. For, you know, we had many years of EOS and, you know, even Binance, people forget, BSC was operating with empty blocks for like over a year, right?

46:48 No one deployed anything on there, didn’t make sense to, why would you bother, right? And then all of a sudden, you know, when the delta between gas on BSC and Ethereum is, you know, two orders of magnitude, well, hang on a second, maybe I will deploy my smart contract over there instead of on L1. And so I think that the lesson was that we unfortunately were a little bit too late, but the reality is that, you know, the situation, I think as much as we can bring some of that activity back, there are people in those ecosystems that I think are there to stay, and I think that you will have distinct L1s with distinct ecosystems and distinct users, maybe there’ll be some bridging and people moving across and using different systems, but it’s going to take a long time for us to really win a lot of those users back, if we ever can.

47:34 And you mentioned bridging, will there ever be bridging solutions where people can just pop from AVAX to Ethereum to Solana, or is that a little bit of a, you know, utopian dream of the future, or they’ll always kind of be separate? Yeah, I think the challenge with bridges is you get complexity, right, which increases risk, so you get cool features alongside complexity or you get simplicity, and then you introduce a lot of trust in the form of multi-sigs, right? So the very simple bridge design which is just, you know, me running a multi-sig with you and we just decide, you know, when the funds are moved across, right, but that places a lot of trust in the two of us, and if we have bad opsec or we’re bad actors or whatever then, you know, all funds are at risk that are on the other chain.

48:21 I think we will get better bridge designs that can be more simple without increasing, you know, a lot of complexity and without introducing a lot of trust, but it’s going to take time. It was, to be honest, like not even an area that I think a lot of people were focused on. You know, it takes time, by the time there’s a market opportunity, by the time we identify a problem, a lot of people have done a lot of dumb things, and so, you know, within DeFi, like people will just roll their own solutions, so just build their own bridge, will they just deploy multi-sigs, so they’re like, I need to solve this problem today and I don’t care how I solve it, and a lot of users don’t care either, and then you, you know, have a 600 million dollar bridge hack.

48:59 And so I think that, you know, we are now seeing people really identify that this is a huge problem, and so there’s a lot of brain power being focused on this bridge issue, and so I think we will see better bridges emerge, but good, you know, design and good R&D takes time. Yeah, the good news is there’s a ton of brain power and a ton, and there’s trillions of future value to get this right, so, you know, one thing I’ve been pleasantly surprised with, Kain, is when I interview all these L1 heads, and I’ve had almost all of them on, is that it’s nice to know there’s a ton of brain power pushing forward with solutions on speed and things to optimize this network. That’s the good news, not to mention the layer twos, and we’ve had Polygon on and Immutable X guys on and all that.

49:43 So yeah, I would, that’s why I tell my students, I said don’t worry, there’s tons of brain power on this solution, so the future, so that’s a lot of a lot of money on the line, right? And there wasn’t back in ’18, ’19, or ’18, ’19, people were licking their wounds. I had Tarun from Gauntlet on, who I know you’re on the stage with in London, it took in 2049, and he said, he said, Brian, back in ’18 you know, people still thought what I was doing was a scam, you know, it wasn’t even considered credible let alone, you know, profitable, and now it’s quite the opposite.

50:16 Agreed, agreed. I want to jump, it’s really changed. Yeah, I mean you’ve seen that change massively. Thoughts on what it’s like from ’18 to ’22? I mean, ’22 now people are leaving, you know, the Googles and the Facebooks and everything to come in, in ’18, like you said, it was all this was a scam.

50:33 Does it blow your mind how quickly that’s changed? So, you know, if we assume that this is another bull cycle, right, and, you know, there’s some interesting alternative theories about, you know, the super cycle and we’ve broken out of this boom- bust cycle or whatever, right, but, you know, if we assume that this is another cycle and there will be some kind of boom and some kind of bust and a bit of, you know, the irrational exuberance will go out of the market, this will be, you know, I guess I think it’s the fourth or fifth, it’s my third, you know, so I saw 2013, 2014, the hangover there, and I was building through 2014, 2015 into 2016, then saw the ICO boom obviously, and, you know, the bear market through 2018, 2019, now, you know, we’ve seen this bull market.

51:21 I think the big difference is that the period where the world was paying attention in those previous two cycles, at least that I was watching, was very small, like the window was like in some cases, you know, maybe a couple months, right, like that late 2017 to early 2018 period. We went from not many people paying attention to a ton of people paying attention over the course of like weeks, right, but then by the time they were, the thing blown up, right, and it just wasn’t enough time to build credibility or, you know, get people excited. I think the difference over the last couple of years has been this steady grind up and if you’re someone who’s in a Web2, you know, business, you’re working as like, you know, an eight-year product manager or whatever at Facebook or something like that, and you’re looking at what’s happening in crypto and 18 months later this thing is still going and people are still building and it’s still exciting, that’s enough time for you to really start considering your life choices and being like, wait a second, am I in the wrong place?

52:19 Three weeks is not enough time, you know, three weeks and you turn around and it’s gone and you’re like, oh, that was crazy, right? 18 months, two years, you know, this kind of process of grinding up keeps going, I think we’ll see a lot of people that are in legacy finance, legacy fintech, legacy tech and Web2 really start to consider whether or not this is something they want to transition into. We’re already seeing it but I think that wave just gets bigger and bigger and bigger.

52:45 Yeah, I totally agree with that. I want to jump into Synthetix because I’m a huge derivatives fan, as you probably know from my background, and when I saw what you were doing, Synthetix, when I, you know, kind of jumped back into this market a year ago I was like, wow, you know, this is exciting, this vision of having these synthetic products on a blockchain, kind of over-collateralized to where people can, I think, create what they want and provide a supply and demand of synthetic assets. I want to get into your vision.

53:12 I just want to say that back to quickly my background, I mean I started Wall Street 1993, I was at a company called Bankers Trust, which was known for quite innovative derivative products, we didn’t have the blue blood history of a Goldman Sachs but we had a balance sheet and we had a bunch of smart people, and I remember being given the phone my first day on the trading desk and saying, this is the Board of Trade, here’s the Mercantile Exchange, you’re running a fixed floating swap book, go, and I was like, don’t you know, I’m 22 years old, I was just like, it was crazy. So we had a lot of responsibility and one of the books I worked on was called the constant maturity treasury desk, and a quick background, my job was to simulate the yield of a five-year treasury security or a 10-year treasury security or a two-year treasury security, even though they issue quarterly and they decay over time, but I had certain companies, mortgage companies etc., that wanted to track that yield, so I would literally offer a synthetic instrument called a five-year CMT, so the yield of a five-year treasury 10 years from now I would guarantee, and you could buy options and floors and caps on that, so my whole brain was geared around how can I hedge the risk and simulate this by owning 10-year bonds, 30-year bonds, putting them on the repo market, owning swap rates, and I would run this book and there were options on that.

54:26 So I guess I’ve been in synthetics since I was young, and so when I saw what you were doing I thought it was exciting. Maybe you can tell me what that vision was for Synthetix and what it is to people that don’t understand even what a synthetic is, and then I know you guys just announced some exciting new futures contracts, so wherever you want to jump in. Yeah, yeah sure. So I think the thing that you will obviously recognize about market structure is that if you want a synthetic instrument there needs to be some counterparty to, you know, that instrument, right?

54:59 Like if you’re going to construct some exotic derivative you need to find someone that you can sell the underlying to or hedge it with or whatever, right? And so in Synthetix what we actually are, what Synthetix really is a bunch of people who deposit collateral into a contract and then take the opposite position to all of these synthetic assets that are issued within the network. Now that’s kind of a crazy idea, but that’s essentially, you know, what it enables, right, is that anyone can turn up and they can swap any one of these synthetics from one to the other.

55:32 You can go from euro to Bitcoin to Ether to gold, right, and the people on the other side are just hedging the net exposure, right? And so, you know, as I’m sure, again, you’re very aware, if you have a whole bunch of people making small trades the net exposure doesn’t change that much, right? Like it might shift over time but, you know, you can kind of open up a hedge position and manage it and monitor it, and, you know, as long as the overall pool doesn’t shift too much, you know, you can kind of make small adjustments on a daily basis or a weekly basis, whatever, to hedge your exposure to as a counterparty to all these trades that are going on, right?

56:10 Meanwhile everyone who’s getting access to this system is paying you fees for providing that service, right? Now the difference is with Synthetix is that there isn’t a central counterparty or clearinghouse that’s sitting there and, you know, being the other side of these trades, right, and going out to market and paychecking. Anyone can turn on, anyone can try to put collateral in and anyone can get exposure, anyone can generate fees from providing collateral, and so you have this very much more efficient, transparent system where you can kind of see what’s going on with it within it and see, you know, how the system is kind of operating.

56:44 And so the downside to that is there are some inputs to this process, so you need oracles to provide prices for the synthetics. There are other ways that you can do this and in the next version of Synthetix that we’re working on, called Synthetix v3, we will have more exotic derivatives, so right now we’re kind of limited to very liquid markets, you know, gold, silver, large cap equities, things like that. In the next version we will have the ability for anyone to kind of permissionlessly issue a derivative provided they’re willing to be the counterparty to it.

57:19 So let’s say you’re a wheat trader, right, and you think that, you know, for some reason people are going to want 25x leverage exposure on chain to wheat futures, you can go and start your own pool and basically act as the individual counterparty to that, right, and then go and hedge it, you know, wherever you’re hedging it, right. And so this is going to be a much more interesting platform. I think you’ll have a lot more assets on there and, you know, the advantage you have is that as a trader who wants to trade, you know, 25x leverage wheat futures, you just need an internet connection and an Ethereum wallet, you don’t need to, you know, go and post collateral, whatever, all of the collateralization and all the counterparty management and all of the regulations around how you manage those kind of parties and transactions and margining, and it’s all done with smart contracts, so you get rid of, you know, all of the kind of underlying infrastructure that you have in existing exchanges, which, you know, that’s kind of the vision for DeFi, right, that’s, you know, same thing for lending, same thing for market making, exchanging, etc.

58:30 We’re just doing it for synthetics and for synthetic derivatives. That’s super exciting. And so right now if you go on the platform, like you said, you can see kind of like gold and silver and dollars and pounds, stock indices, maybe individual shares like Tesla share maybe, or that’s going to be in the future where there’ll be all sorts of different derivatives. So we actually had, we had equities for a while on our L1. The issue was that the cost of operating oracles and the efficiency of the oracles and a lot of these assets was really not ideal all now on, right, and also we’re limited in being able to provide leverage on L2.

59:10 On Optimism we can provide leverage and we can have much more efficient, lower latency oracles, and so I think that what we are now seeing is, you know, finally, it’s taken a while for us to get here but we’ve gone from, you know, three assets that we were supporting on L2 to, you know, expanding it to probably five or ten, maybe even 20 over the next few months, now that we’ve kind of really got some momentum and L2’s working. We’ve got up to 10x leverage, hopefully we’ll have, you know, maybe even up to 25x leverage over the next few months, you know, and we’re just rolling out new features constantly because we’ve really got a platform now in Optimism that is scalable and kind of works for us, and most of the activity that was happening previously on Ethereum L1 has been deprecated, so we’ve removed a lot of those legacy assets and we’re shifting all the trading over to L2.

59:58 Wow, is this why your token has been in the news lately and been up, because people see a lot of potential in the future, or yeah, is it always hard to say why it’s up or down? Look, it’s not, you know, you never know with crypto. I think information flow is very slow because oftentimes people look at, you know, price action and they go, oh, what’s that thing that happened yesterday? Very rarely, in my experience as a crypto trader, is that it’s probably something that happened six months ago the people finally started paying attention to.

1:00:28 But I do think that we had been promising synthetic futures, right, perpetual futures, BitMEX-style perpetual futures, for years, in the same way that, you know, Vitalik had been promising ETH2 for years. You know, I’ve been promising futures for a very long time and I think a lot of people got to the point where they’re like, this is never gonna happen, it’s the same way that people said, you know, ETH2 will never happen, right, it’s just not possible. And then all of a sudden it was launched and people like, whoa, actually they’ve delivered this thing finally, and it’s not perfect but it exists, which is very different to the situation we were in six months ago where it was still not clear if I’m gonna deliver this thing.

1:01:02 Yeah, it’s super exciting, well congratulations on that. You know, I just had Chris Giancarlo in my studio last week, who was chairman of the CFTC for four years, also known as Crypto Dad now because I think they called him that when he went in front of Congress, and fascinating discussion with him, Kain, and I’ll send you a link of the episode because it was really interesting because he talked about how is the CFTC very different than the SEC. You know, the SEC was always this organization that was, you know, protecting the mom and pop from another Great Depression, you know, from another stock market sell-off and from bad actors, whereas the CFTC was there to obviously actually to innovate new instruments to create liquidity, and they were responsible for the interest rate futures, the bond futures, all the things I used to trade on Wall Street.

1:01:44 I think back in ’76 when the CFTC was created, so they were known as an innovator. He was part of the Bitcoin future innovation and his point was like, Brian, we enable the contract and then if the liquidity is there, great, then it’s obviously a win. We provide the collateral just like you said, and they provide the oracle, don’t they, that’s what I learned when I started trading futures on the exchange, it traded, my Eurodollar futures would settle against Libor on that day.

1:02:08 Little did I know later that some of my friends in the City of London would try to play with Libor back in the day, fudging Libor. Yeah, we didn’t think you played with Libor back in the day, but it needed an oracle and then the Mercantile Exchange was responsible for collateral, so again they would check it out every day and make sure and liquidate positions and do that, and those were the two things they needed, that and innovation, right, so people could stick the contracts out. I guess you’re trying to take, you know, the innovation out of it and just saying, okay, let the market bring to us what they want and obviously if they want to create something and there’s a counterparty then why not, and you can take out that one layer where you would need like a CFTC chairman to say, okay, let’s go with the Bitcoin futures, which they ended up doing, and you’re like, let the market decide.

1:02:52 So it’s fascinating, you’re almost kind of doing what the CFTC was doing but now in a blockchain Web 3.0 world. I don’t know, is that analogy right, I’m just piecing together on the fly. I think it’s very close to accurate, right, and I think the primary thing that’s happening right now is that the systems that we have, right, this, you know, these smart contract systems that we have and all the tools that we built over the last five years or so are open by default, and so one of the challenges that you have when you’re constructing a financial something that’s closed by default is you need people overseeing it to make sure that everyone in the system is, you know, doing what they’re supposed to be doing and abiding by the rules.

1:03:37 When you have a smart contract platform you don’t need to worry is someone abiding by the rules, you know, short of bugs and hacks, you can’t not abide by the rules, right, the rules are coded in smart contracts, and so that anything that is enabled by the smart contracts is enforceable by the smart contracts, and so that just removes huge overheads, right? like, and, you know, anyone can turn up and say, actually, I’m going to construct this novel derivative and I’m going to write a contract and I’m going to deploy it, I’m going to hook it into Synthetix and I’m going to suck the liquidity out of Synthetix and I’m going to create this weird instrument. Lyra is a great example.

1:04:06 Lyra uses Synthetix liquidity to basically hedge options and provide an options AMM that gives people vanilla options on chain for the first time with like a lot of liquidity and a lot of market depth, in a way that just no one’s really been able to solve, and they don’t have to ask permission, they just turn up and they plug their things in. Even if we didn’t want them to do it we can’t really stop them, right? And so, you know, this innovation that happens, happens because you have this open by default the system, where you don’t need to come and ask the existing market participant or a regulator or, you know, someone permission to do something, anyone can come and do anything they want.

1:04:45 It’s so exciting, and like you said, with the open protocol, you know, it ends up not being in your control and maybe that’s how we’re going to get to the liquidity faster, and it’s going to innovate so fast, isn’t it? Based on that I mentioned oracle, and maybe we should just talk about that because when you create a synthetic that settlement price becomes really important, and I think people that don’t understand a synthetic or derivative might need to just be educated on that, and how do you decide what the price of the instrument is on that date when you have to make a settlement? I guess for most people they would just say, oh, everyone knows the price of Bitcoin or everyone knows price of this, but the exact price at the exact time is important.

1:05:21 Can that be manipulated? And in the future I’m guessing on Synthetix the, you know, the weather in the Bahamas will be a derivative and, you know, the number of spacecraft on Mars will be a derivative, like there’s so many different things that you need in a reliable oracle for, so maybe speak on that and what do you think the future of that will be? So, you know, we partnered early with Chainlink, who provide all of our oracles. We ran our own infrastructure and our own oracles for a long time, it was a very painful period in the project’s history, and then thankfully we came across the solution in Chainlink that was much more robust, and, you know, robust across many different dimensions, across, you know, infrastructure, opsec, you know, security, you know, all of the different things that you need to be able to rely on an oracle as you start to have, you know, significant value underpinned by those oracles.

1:06:16 And so, you know, thankfully we’ve been running the Chainlink now for about three years, and, you know, it’s a process obviously, you need to go and ensure that there is a liquid market and the data is available and you can pull that data, you know, out of some existing system to create a derivative of it, a tokenized version of it, but, you know, this system works really well, it’s very, very scalable, particularly now as we’re on Optimism. I think the only thing that we want to be able to do to really expand the number of assets that are available is to kind of reduce some of the overhead around, you know, generating these oracles and requirements of counterparties, etc. But essentially we want to get to a point where anything that Chainlink, you know, any piece of data, any piece of information that Chainlink can pull out of the real world, we can create a derivative against it.

1:07:10 Exciting. And you guys just launched a futures contract as well, can you just speak a little bit about that and maybe some of the derivatives you see coming forward? Yeah, so what’s interesting about the futures product versus our spot product is our spot product is kind of an uncapped, unleveraged instrument, there’s no cost to hold it, there’s no carry cost, so, you know, you can sit there and hold a ton of Bitcoin and basically you just force everyone within the network to hedge that exposure.

1:07:40 With perpetual futures we have much more control, much more granular control, we can control open interest, we can control the skew, we can control the funding rate that you pay to hold these positions, and so that alone has already allowed us to go a little bit deeper into some more interesting assets, so for example there was a proposal to add ApeCoin futures. You know, where we wouldn’t be able to support that as a spot instrument, we can support it as a futures product with 10x leverage, and so there’s things like that that are already starting to emerge from the launch of these futures, which is just a much more sophisticated derivative than asphalt spot remember that we’ve had for the last like three or four years. Wow, that’s exciting, and it’s a perpetual future, for people that don’t necessarily understand what that means, how do you explain that to people?

1:08:30 You know, you can own the ApeCoin or you can come on here and get a perp future and get that 10x leverage. Again, how do you explain that to my mom? So I think, you know, futures contracts have been around for a long time, right, the idea is that you basically have, you know, two counterparties that want to bet on the future price of the thing, right, and they agree on some date in the future where they’ll come back together and, you know, whatever the price of that thing is, that’s, you know, that’s what the trade will occur at, right?

1:08:59 And so the interesting thing about setting up a futures system is if you are someone who is a producer of something, let’s say, you know, you’re producing cotton or something like that, right, and you want to sell a future so you can hedge your exposure, you’re fine with the idea that you deliver cotton and, you know, in three months or whatever, right, because you have, you’re producing cotton and you’re trying to hedge, you know, your exposure to cotton price volatility, right, that’s fine. If you’re a pure speculator you don’t want to deliver cotton and you don’t want to take delivery of cotton, you just want to speculate on the price, right, and so futures instrument’s really cool, the only problem is you need to call constantly be buying one future and selling another as they expire, because futures only really work.

1:09:44 BitMEX had this amazing idea of what if we made them non-expiring, right, and so they constructed this novel instrument that doesn’t expire and has a funding rate, it has some other properties that allow it to track the actual price of the underlying assets, and that just means you can hold the position open as long as you want, that’s effectively, and you don’t need to worry about expiries, you don’t need to worry about complexity of rolling contracts and all that kind of stuff that you would in a traditional futures market. And so, you know, we’ve basically replicated that futures model in our synthetic futures. Wow, super exciting, so that’s all launching soon, it’ll just give you lots more liquidity, lots more leverage for anyone wanting to use Synthetix things.

1:10:24 Exactly, exactly, and a lot more trading volume, we’ve already seen trading volume go up significantly since the launch. And for people, just while we’re on it right now, that want to experience Synthetix, the best way to go into synthetix.io and to start looking at some of those products, and then I, I’d obviously, I’ve seen it bounces up to Kwenta as well depending on what product, but what’s the best way to start looking at everything you offer and to jump in, you can plug in with a hot wallet, is that right? Yeah, that’s correct, yeah, so you can go to synthetix.io and there’s links out to various different platforms and interfaces that you can use.

1:10:58 Kwenta is the primary one for futures although we are seeing additional interfaces pop up now, you know, now that we’ve got this, you know, kind of underlying protocol that we’ve released, other people are building interfaces, which is, again, part of the permissionless nature and open nature of DeFi, right, anyone can build an interface, if they think they can come up with a better design they can, you know, go and hack it together as a little project and release it. That’s fascinating, so that’s not part of Synthetix per se, it’s just someone who’s plugged into the protocol and just, exactly, that’s fascinating. And you said you’ve spun out like sub-DAOs and stuff, there are parts of the Synthetix originally that have now been spun out to separate protocols?

1:11:39 Yeah, yep, so Kwenta is a good example of this. So what we found is that Synthetix, you know, is very good at producing small contracts, it’s very good at governing those small contracts, but there are a lot of things that are required in order for that process to run smoothly, there’s a lot of overhead, and so one of the things that we were finding was not happening is that the interfaces were not getting a level of attention that they needed, and so we actually decided to take X exchange rebrand and spin it out as its own separate project with its own token, its own community, and allow that interface to basically connect to Synthetix but not be owned by Synthetix, and that separation of Kwenta out into its own product, its own project, has been very successful.

1:12:25 Okay, good, I can’t wait, I’m gonna go in and get involved in some ApeCoin futures, gotta get involved there I guess. Look, just want to get, exactly, exactly. I want to get a couple other thoughts for you here just before we wrap up. You know, I went to a conference the other day and it was a big question of when will institutions be involved in these DeFi protocols, and it’s a very general question, but I sent out a couple DMs to like Stani and Alex Mashinsky and Celsius and a bunch of other people we’ve had on the show and, what do you say, and Kain, it kind of separated into two camps.

1:12:57 One of them was like the Stani camp who said, you know, you make, give the liquidity and the institutions will come. Mashinsky says provide the KYC and the AML and the clean money and then they’ll come, and the next two guys said that too, and then some other DeFi protocols said that. First of all, do you think it’s that black and white, what do you think is the future of institutions adopting in these markets, and is that important to how we evolve in the next say 24 months?

1:13:22 I think if you have a highly regulated licensed entity that exists within the traditional finance system, it is still difficult for them to understand the risks of interacting with DeFi, even for a very simple and straightforward and low risk product like, are they right, generating yield on Aave for, you know, a regulated bank, I think it’s something that is just not possible today, right, in almost any jurisdiction. You know, banks, entities in traditional finance, probably the most regulated entities, and it’s just, I don’t think it’s a thing that can happen right now. You know, you see some experimentation, a little you know, dabbling, but I don’t think KYC or AML or anything like that is even going to solve that problem for them.

1:14:12 I think it’s a deeper problem which comes down to having a framework under which traditional finance and traditional regulatory structures and, you know, legislative systems can work out what DeFi is and how these regulated and licensed entities are going to be allowed to interact with it, and I think that that’s a conversation that’s happened in Australia right now, I’m part of that conversation, it’s happening with regulators, that’s happening with legislators and politicians as we try and navigate this pathway, but until we have some level of certainty and until traditional finance can work out what DeFi is and how to kind of categorize it, I don’t think that, you know, it’s simple answers like AML/KYC or, you know, or other things are really going to solve it, unfortunately.

1:15:03 So I think there’s a deeper, a deeper problem that needs to be addressed first before we can really see engagement. That said, that’s the end state, right, of like banks being able to, you know, interact, a hedge fund, you know, very obviously can interact with DeFi and they do, very, you know, so if there’s a continual, I think that you’re seeing some institutional investment and participation, but I think when we get to a point when any institution or any licensed, you know, financial intermediary or participant in TradFi is able to interact with DeFi because it’s an understood process of how you do that, that’s when you know we kind of reach the end game, and I think we’re not there yet. Do I can say regulation-wise, what are you seeing in Australia, what are your thoughts on what we’re seeing in the States?

1:15:49 I guess the latest is the president is appointing a council and then now it seems like a bunch of entities kind of want to be involved, obviously there’s very state and local jurisdictions and it’s hard to tell what’s happening. What do you see? I think there’s a couple things, one is tax policy, right, it’s very clear that tax policy is lagging behind in most jurisdictions. You know, unless you go to Singapore or a place where, you know, they have like a zero tax regime on crypto, I think working out how tax policy interfaces with crypto is a hard problem.

1:16:21 I think there’s, you know, there are solutions there but we’re going to need to work hard over the next couple years to kind of get there and work that away for the average person who’s interacting with DeFi to be able to be compliant in the tax perspective. So I think that’s one conversation that’s happening, and then I think there’s another conversation about pure DAOs and where they fit into regulatory regimes, right. If you have no legal entity, if you’re this extra-jurisdictional magical software package that is, you know, coordinating people all over the world, like how does a, you know, some jurisdiction work out what you are, right, that’s a very difficult question to answer.

1:16:59 I think we’ve seen, you know, things like the Wyoming experiment, we’re seeing sandboxes and things like that, I don’t know if they necessarily get it right. I think there’s still an open question of, you know, how to create a framework that accommodates a pure DAO that doesn’t break some of the magic of DAOs, and I don’t think anyone’s there yet. We’re having this conversation in Australia, I don’t know if we’ll get there, I hope that maybe we can, but whoever gets it right, whichever jurisdiction gets it right and becomes a safe haven that can provide some level of certainty for DAOs that are existing, and you know DAO treasuries are, I don’t even know what the number is now, 50 billion dollars or something like that, it’s a very large prize for whoever can solve this problem, and work out a way to domicile DAOs without, you know, again breaking the DAO model.

1:17:46 I think it’s going to be a very, very good place. Yeah, you’re an angel investor and have been for quite a long time. How do you evaluate, you know, protocols, and have they changed in the past few years, and you know, there’s probably a lot of people now seeing pitch decks on their email inboxes, and just advice you have to anybody who wants to angel invest? I think the challenge right now in the crypto ecosystem is there’s so much capital around that, you know, it’s created an environment where it’s very founder friendly, it’s very hard to get allocations, very hard to get, you know, into rounds, and, you know, you end up with a situation where oftentimes if you can get into a deal it might obviously you necessarily want to get into, so it creates some perverse incentive there.

1:18:39 That said, you know, when I speak to founders I look for, you know, people with high conviction. You know, I try and identify people that have really, you know, thought about the problem they’re trying to solve, maybe, you know, they don’t have all the answers about the solution but they’ve, you know, thought deeply about the problem they’re trying to solve and they’re high conviction about their ability to solve it, even if they’re wrong, right. I think higher conviction is a very powerful thing.

1:19:03 You know, it’s okay to change your mind and, you know, pivot and find different solutions as long as you, you know, really stay true to the course of trying to solve the problem regardless of how you solve it. And like you said, there’s a lot of capital out there and it’s hard to get into some rounds, so you sometimes have to take a break and give it a pause. Do you see that slowing down or is it probably gonna get even more so skewed towards the founders having those choices?

1:19:30 I think it’s ebbed and float, there’s no question. Over the last year, you know, there’s been quarters where there’s been significant shifts towards founders, where everyone’s just, you know, spraying and praying into almost any deal, and then I think, you know, as we’ve had a couple quarters where the price action’s been you know, a lot of exuberant, you know, people pull back a little bit, and that’s where it’s, you know, ironically a little bit easier to get into deals, and, you know, if you have high conviction and are willing to write checks in those times, that’s when you get into some really good deals and, you know, make connections with good founders. So I think it’s about just timing things and you know, making sure that you are really, you know, doing as much diligence as you can, but it’s a hard thing to do at the moment because if you take too much time, you know, the round will be closed before you’ve been, you know, had a chance to kind of do a lot of DD.

1:20:22 So a fascinating space from an investing perspective. We have two investments in London Real Ventures and honestly I thought I knew about finance until you get into crypto finance and it happens at the speed of light with completely different instruments, completely different protocols, it’s been a real education process but also super exciting too, and maybe the new normal, you know. So it’s been very interesting. Speaking of conviction, I had your brother Kieran on last week talking about Illuvium, it’s been, he’s got a lot of conviction, that maybe runs in the family from what I hear.

1:20:54 What are your thoughts on what he’s built? I know you were early on giving him advice when he was trying to do DeFi protocols and you were saying, nope, that’s not good enough, nope, that’s not good enough, so you probably take credit for a lot of where he’s gone. What’s it been like to watch him create that and to watch that happen and to be involved or to advise or not advise? So I, you know, we’ve always been a gaming family, we, you know, we played games growing up and so that was something that I think they definitely had a bias towards, both Kieran and Aaron, and so when he approached me, you know, I said look, he was running a startup and I said I want you to get back into DeFi.

1:21:33 You know, he’d been an early investor in Ethereum and, you know, it had been trading and participating in crypto, had worked with me at Blueshift and then had gone out and gone into this social food space and I’d been doing that for, you know, a few years, and I said, look, I really think we’re starting to get into like an environment where, you know, you need to re-look at crypto, and so, you know, I gave him some funds and said go out there and, you know, start trading and start participating again. Look at PewDiePie, he went way deep down the rabbit hole, even to places that I’ve never even seen, some dark, dark places in the Dubai ecosystem, and, you know, he came back and he said, look, I’ve got, you know, some cool ideas, and I said, no, no, don’t love it, you know, whatever.

1:22:12 And then he pitched me this idea for, like, a game pie, you know, project, right, like to build a game that had DeFi components to it, and I was like, okay, you know, I like games, I like DeFi, I see with the incentive structures could be applied to that. I still wasn’t 100% convinced, to be honest, but I think that was actually a good thing because I think he actually saw this GameFi you know, trend way earlier than I did. I wasn’t paying as much attention to it, I wasn’t, I hadn’t really focused on NFTs at that point, and so NFTs and the conversion of, you know, and tradable assets and digital scarcity and all that stuff, he really saw that much earlier than I did.

1:22:54 Luckily enough he had high enough conviction that I was like, all right, I think you found the thing, you seem to have found the thing that, you know, is gonna work for you, and so yeah, that was the start of Illuvium. Yeah, it’s exciting, and like that was kind of two years ago before that whole GameFi thing and had popped off, and yeah, it’s incredible to see like how fast that went and, yeah, some great direction on pointing them in that way, and it’s been amazing to see what he’s created. What do you make of Australia as far as now, you know, with a lot of success stories and where they are in startups and blockchain, and we had obviously Kieran on recently, we had Robbie from Immutable X a couple weeks ago, which is now the third largest tech company in Australia or something crazy, at least that was the headline.

1:23:38 You know, it’s really impressive what’s happening down there, was that always the case, do you think it’s Australia’s catching up in the startup scene? Strangely enough, a big part of my Academy is Australian, like 20%, as you guys punch way above your weight, also viewers of our program have always been heavy in Australia, just new ideas, what is the state of kind of a startup there? So when I moved back to Australia in 2009 the startup ecosystem was not amazing, to put it frankly, and I think there were a number of issues.

1:24:11 One, you didn’t have a lot of successful founders coming out of tech who stayed in the ecosystem. A lot of people, you know, were kind of forcing this mindset of like go to New York, go to, you know, SF or go to the Valley or whatever if you really want to be successful. So there’s a bit of a brain drain I think throughout like the late 90s and early 2000s. By the time we got to 2009 there just weren’t a lot of examples of successful founders, and I think if you don’t have successful founders in an ecosystem reinvesting and angel investing and advising and doing all that stuff, it’s really hard for an ecosystem to kind of reach critical mass.

1:24:47 You also had the issue of a lot of the investors in the space, you know, who called themselves VCs were not necessarily, you know, as high risk as you need to be for early stage growth. There were a couple good VCs out there but a lot of the capital was more like private equity and was looking for, you know, deals that were later stage and, you know, lower risk and what have you, and so I think that was put a damper as well. You know, there wasn’t as much risk capital to be deployed.

1:25:19 As we got into this crypto boom that shifted a little bit I think. We also had a number of successes in the traditional space, we did see, you know, things like Atlassian and, you know, over the last 10 years there’s been a number of successes, but crypto really leveled the playing field because all of a sudden you could go out in Australia and raise from anywhere in the world, and so I think we saw a bunch of projects do that and a bunch of companies do that, like Immutable, and, you know, it’s allowed people to stay here where we have amazing talent and build amazing companies with a lot of capital, you know, and access to capital, and now it’s almost become a me, right, where, you know, the combination of like a very permissive sort of regulatory environment, access to capital, you know, high education, you know, not being super risk-averse, I think we’ve got a really good combination, and so, you know, when I see a deal in Australia I’m usually excited about it, not because it’s an Australian deal necessarily but because, you know, I see a lot of really good foundations coming out of here.

1:26:19 Yeah, no, that’s really exciting. Again, I did a tech show here called Silicon Reel from like ’14 to ’16 in London and we saw a lot of the London talent relocate, they all go to the Valley when their idea got kind of big because they’d go there to become unicorns because it wasn’t happening here, but I don’t think that happens anymore. And with Australia, again, you guys have always been forward thinking about, you know, mindset, physicality, bodies, all this other stuff, and doesn’t surprise me when I see entrepreneurs and I speak to people like Robbie and your brother and you, and I’m just like, okay, you got all that, you know, forward-thinking, risk prone, novel thinking values that seem to come from down there and now with capital and the blockchain, yeah, looks like you guys are just getting warmed up.

1:27:06 I just wanted to finish, I know you wrote this book called Bending Metal that talks a little bit about AI in the future, and, you know, I’ll be honest, Kain, I had a couple dark moments on the show when I talked to either Arthur Breitman at Tezos and I was talking to Jeff Booth who wrote the book about deflation and we spin off into the AI world, it can get a little weird. You know, when you talk about a DAO in a weird way that’s not AI, but it’s a weird way of, there’s an entity in the future that won’t have regulation, and of course humans will control it. Is this something you spend your waking hours thinking about, is it something we need to talk about and be aware of, or is it just something that we need to just be a part of?

1:27:45 Yeah, I, you know, that I wrote that book as a fiction book as a response to some of the you know, the books that I was reading about, you know, the challenges of AI, you know, superintelligence is probably one of the primary ones, and I have been someone who’s followed AI research since like the late 90s, right, it’s been something that’s really interested me, and I think as the concern has kind of built and as AI has become, you know, much, much more powerful, right, things like DeepMind, you know, yeah, we saw the Blue beat, you know, Kasparov in whatever it was like 1998 or something like that, which I think was pretty, pretty big, but now like, you know, you’ve got to something I’m running on your iPhone that can, you know, crush around faster easily, right, and I just think we’ve seen, you know, then Go and then, you know, things like StarCraft and, you know, we’re starting to see AI really, really you know, go into areas that people thought were either not possible at all, would never be tackled, or you know, would be 50 years in the future, and the acceleration of technology is this very scary thing, right, so this idea of like the singularity, of, you know, this point that we’re rushing towards that past which, you know, you really can’t work out what the world will look like, is something that I think, you know, at times I spent a lot of time thinking about, at times I kind of push it to the back of my mind and try and get on with, you know, day-to-day life, but there’s no question that is something that I think we’re gonna have to grapple with over the next, you know,

1:29:22 10 to 20 years. And the AI sort of not skeptics, in the sense of, you know, they’re not skeptical of AI and its power, they’re actually skeptical of the impact that AI might have, I think those people are raising very, very valid concerns that we need to think about. The interesting thing, having been in crypto for a long time and seeing how difficult coordination is, I worry that we may not have it in us to coordinate our way out of this problem and that it may just, you know, kind of steamroll us without us even being able to figure out a solution around it, which is a little bit concerning, and I think crypto is kind of, if anything, there might be something in it that gives us the tools to coordinate our way out of it, but it also has shown me how hard coordination is even when you have great tools, so it’s something that I worry about for sure.

1:30:19 Yeah, I think we should definitely be talking about this more. I was joking to one of my colleagues here that the problem with AI is that, you know, when something does happen you’ll hear about it on a Friday and then everything will be over about a Sunday, right? The infrastructure. Exactly, it’s maybe, maybe Friday afternoon. Yeah, exactly, you cannot even take that long, like 30 minutes later, what are we gonna do, what’s too late, it’s already iterated, gone exponential.

1:30:43 And yeah, it’s something that I hope we talk about more. Just want to finish game, what do you do in five years from now if everything goes the way you want it to? Five years from now are you spending your time touring in a band, are you a council at Synthetix, are you doing gaming stuff, or a combination of all the three? What do you think is it, well, what would be your favorite, you know, 2027 outcome? I think five years from now governance is still a problem, and I think that there will be specific problems then, it’s like Synthetix governance and some of the other ecosystem projects that I participate in and some of the projects that I’ve helped, you know, fund or advised or whatever.

1:31:25 So I think the specifics of governance of individual projects is a problem that doesn’t disappear in the next five years, in fact it might even become more important how we govern them and working through those governance challenges. And then I think there’s a general governance question, right, about like how do we build the right tools to enable governance in the future. That problem is 100% not solved in five years, that’s going to be a conversation that’s still developing, and so I think that, you know, this fixation that I’ve had over the last year or so with governance, it’s probably something that just takes up more and more of my time, particularly as Synthetix gets better at delivering the product vision.

1:32:04 I think there are other people out there who can do a better job of delivering the product vision of Synthetix than I can, but I think that, you know, the amount of time that I’ve spent thinking about governance of my life, you know, the last probably 30 years or so, you know, I’m uniquely positioned to kind of navigate some of these challenges and hope to continue to have input into the process. All right, so your life’s work will be governance, it’ll be on your headstone maybe. I think I think so, I think so, yeah, I think we’re, it’s certainly, in five years’ time I’m still very deep down that government’s travel, I don’t see how that isn’t what plays out.

1:32:39 Yeah, now that’s super exciting. Like I said, when I first came back into the space a year ago I could not see it from the lens of just running to be mayor of London and just got a, whatever, an education in politics and I thought, wow, crypto’s one part tech, one part marketing, one part politics, but again in the last year I haven’t seen the governance be such an issue on these protocols but I haven’t seen underneath, but obviously going forward you said it’s more important than any of these smaller topics like derivatives, it’s everything. So I think it’s such an exciting space and I’m glad you’re on the case.

1:33:13 Just any final thoughts, Kain, for people here, especially people here that are maybe newish to the crypto and DeFi space, or just things they should be thinking about for the next couple years, or yeah, just any final thoughts? For me are, you know, Ethereum is finally scaling, right, and, you know, despite what people may have said or what you’ve heard or what you’ve read or seen on crypto Twitter or where or some, you know, influencer or whatever, Ethereum is now scaling, and so if you are someone who hasn’t participated in the Ethereum ecosystem and it’s, you know, and hesitant too because of gas costs or whatever, you can now go to Optimism, you can go to Arbitrum, you can go to StarkWare and you can actually use these platforms and it’s not prohibitively expensive.

1:33:58 And so like you say to, you know, your DeFi Academy, the only way to learn this is to go and get your hands dirty and start playing around with these things and, you know, do transactions and experiment. So, you know, I would really encourage people to actually take the time to learn how to test out layer twos and see where scaling is happening on Ethereum because it’s finally here and it’s going to enable a new wave of innovation that is going to dwarf DeFi summer. Love that, and if you’re from my DeFi Academy watching this right now, just like I said, it was great to hear Kain say that, keep moving forward with the syllabus, and yeah, I learned those protocols on each, which is great.

1:34:35 As far as Synthetix, congrats on the success and this new futures contracts and all these exciting developments. It’s synthetix.io, that’s with an X at the end, .io, and I’m a big fan of derivative instruments and the futures, and one of the parts of my Academy is I try to explain to people that derivatives aren’t bad, bad risk management is bad, and derivatives didn’t cause the financial crisis, poor risk management caused the financial crisis. So I try to get my students comfortable with derivatives, even comfortable buying a call option on Ethereum just so they can watch it expire on small size and realize it’s not some piece of nuclear toxic waste, it’s just something that changes the risk profile.

1:35:14 And so yeah, I appreciate what you’re doing there, and again it looks like a more epic version of maybe what was done in Chicago, you know, 30, 40 years ago. So yeah, great stuff, Kain, really appreciate everything you contributed here. Follow this man on Twitter, he’s got the CryptoPunk ID, we’ll talk about that in a future episode, and yeah, next time come to London, we’ll do this properly. Amazing. Thank you so much.

1:35:36 Thanks for having me. All right, thanks, Kain, appreciate that. Stay with me here, we’ll just wrap up. Thanks, everybody, we’ll see you next time on London Real. Take care.

1:35:41 Bye.