The $200M KelpDAO Hack, DeFi's Trust Crisis & Bitcoin's Return - Robert Leshner

Threadguy sits down with Compound founder Robert Leshner, the OG DeFi builder who was literally in the group chat where the word DeFi was coined back in 2018. Leshner walks through the Compound exploit lore, why he left to build Superstate, and where he lands on Hyperliquid's RWA perps. He gets into how every product gets a Napster era before grandma uses it, the $200M KelpDAO hack that scared TradFi institutions into calling him within 12 hours, why the token-equity overhang traces back to the Gensler reign of terror, and his optimistic wrap on crypto's next 12 months.

Transcript

SPEAKER_01 0:00

Yo, yo, yo. Yo.

unknown 0:02

Mr.

SPEAKER_01 0:02

Robert Leschner. Welcome to the stream, man. How are you?

SPEAKER_00 0:05

Mr. Thread Guy, I am doing well.

SPEAKER_01 0:07

Dude, I'm excited to have you. I'm a uh, you know what's funny is I'm a um I wanted I listened to you with Haseeb on the traveling block, but I don't know that much about your lore. And so I just hear your like modern takes. And so I was doing some prep and I listened to the Up Only episode, which was like a high stakes one because you were like 15 hours out of this exploit in one of the compound contracts. And yeah, dude, that was a wild list. I thought you handled it really well for what it's worth. That was like five years ago.

SPEAKER_00 0:36

But yeah, that was that was like ancient history when it comes to DeFi. DeFi has had like 10 lives since then.

SPEAKER_01 0:42

Yeah, 10 lives. I mean, and then what April was like the worst month for exploits ever. It's like something's over. Some things don't change, right?

SPEAKER_00 0:49

Yeah, I mean, it's funny, like DeFi is constantly going through this ebb and flow of being resilient, battle tested, and more trustworthy than C Fi, right? To it being, you know, fragile and unpredictable and less trusted than C Fi. And, you know, it's this constant ebb and flow that's been happening pretty much all the way back to like 2018, 2017, really. And it never ends, you know, like in 12 months, we'll be like, nope DeFi is like so much safer than anything else. Like, that's what you have to use.

SPEAKER_01 1:23

The thing that was so crazy about it to me was that you were just I'm not a technical at all, but you were discussing the the bug, and that it was there was this exploit because there was like a greater than sign was missing and or equals to. And it's like that specific. It has you know, thousands like hundreds millions of dollars are getting airdropped to somebody because there's like one character in a contract that was overlooked.

SPEAKER_00 1:47

Yeah, and just to break it down for the people listening that like don't know what we're talking about, real quick, you know, it was like 2020, 2021, maybe might have been 2020. Yeah. Uh maybe 21. Um, but basically there was an upgrade of the compound protocol that you know somebody in the community had written. Like one of the early things about compound as a protocol was that like the actual development of it was sort of like out crowdsourced, right? Where it was like, hey, anyone can like add on to this thing, which is very different than how like most teams are like building DeFi protocols today. I think a lot of people have learned from this. But it was distributed development, which is like hard to like QA, right? Even with auditors involved. Um, and there was an upgrade, everyone reviewed it, it looked good, you know, it passed, it was implemented, and there was like this like incredibly hard-to-find bug that started like basically like miscalculating how many like reward tokens people were gonna receive. And so like most people like got zero, and like some people randomly just got like buckets of tokens. And you know, it was patched, you know, as quick as it could be, but like for like days it was like spitting out all of these tokens, and things were going crazy. And this was like the human era of like DeFi security, right? Like back in the day, you know, we didn't have AI, like you literally had many different teams of people like analyzing smart contracts and reading through them and like hypothesizing the risks and hypothesizing the attack vectors, and like it was very different than now, where I think we're entering like a very automated era of like attack and defense.

SPEAKER_01 3:31

Thank you for the explanation. And I didn't give you a chance to do this. Can you give us like a quick lower intro into uh who you are and then we could talk about some of the fun stuff you do now?

SPEAKER_00 3:39

Yeah, so people in crypto generally know me for like one of four things. Um, the first is in 2017 I began work on the compound protocol. This is before DeFi was a phrase. I was actually in the group chat when we came up with the word DeFi. Um that's no, yes, swear to God. Who came up with the word DeFi? It was actually Brendan, one of the founders of Dharma Protocol, which was like a 2018-era early DeFi protocol. Fact. And somebody he just ripped DeFi, and everybody was like, Yes. He was like, We need to come up with a name for what like all of these, like what we now call DeFi founders are building. He was like open to suggestions, people were like tossing ideas out there. There was some bad names. It was like OpenFi. It was like there was like some like weird ones, and like a couple people latched onto DeFi and they were like, Yeah, DeFi, like that's the name. Like, and like ever since this was like 2018.

SPEAKER_01 4:32

That's all I've never that's incredible.

SPEAKER_00 4:34

Yeah. So people know me as like one of the first people to like explore what we now call DeFi. Um, I built compound. Second, some people know me from Robot Ventures. It's an early stage venture capital fund that's been active in this space since 2018. Um, we do lots of like pre-seed investments. Oftentimes it's like a founder's very first check because you know, we just like founders, we're not, you know, oh, you gotta show like tons of traction. We bet on people. Um, third, people might know me from the chopping block. It's a podcast that I host in the space. And fourth, I'm the founder of Superstate in 2023. Um, I left Compound to start Superstate. What we do is we tokenize assets, we bring them on chain. And the sort of catalyst of that was, you know, as a DeFi founder, I looked around DeFi and I was like, hey, the ceiling on how big this stuff can get is actually limited. Because the only assets that we're putting into DeFi are like the same assets we've always been putting into them. It's like other protocols, governance tokens, it's you know, it's like crypto native things that's like an enclosed ecosystem. And my theory was like to really build this up and to like grow as a space, we needed like trillions of dollars of assets on chain.

SPEAKER_02 5:46

Yeah.

SPEAKER_00 5:47

Otherwise, it could like never really take off. And so left compound founded Superstate, and for the last three years, I've been, you know, trying to tokenize assets and bring them on chain to make them usable in DeFi.

SPEAKER_01 5:59

I want to talk about Superstate uh and let you talk about it a little bit. I w I think we did an interview with New York Stock Exchange, maybe it was a good one. Um, but I want to ask, like, you know, I've crypto's been pretty boring for the last six months and some change, exciting couple days here, which we talk about, but I've been trading commodities and AI stocks on hyperliquid. And I'm curious, like, do you feel like what Unit Trade XYZ Hyperliquid is doing has like vamped what you're trying to do at Superstate?

SPEAKER_00 6:29

You know, yes and no, right? So it's proving out a market, which is like people want to trade anything at like three in the morning, right? Like that is like clearly the future. That's clearly what everybody wants. That's clearly where it's going, right? I think people have wanted that for like 50 years, it just has never really been possible, right? People want to speculate and hedge on everything at all times, right? Like, that is a very pure demand that people have, right? There's going to be a lot of flavors of that. Like the first versions of this are, you know, with basically unregulated derivatives that are like not KYC days that like anyone can access. There's like really good qualities of that. Um, I think there's a market for that. I think there will always be a market for that. People also want, you know, what I will call like regulated compliant versions of that, right? Almost every single product starts off with like the Napster era, where it's like, you know, hey, like go totally wild, right? Like, and like that proves everything out, right? It proves the user experience, it proves the demand, it proves like roughly how it's supposed to work. Like almost everything starts off with like a wild west to it. And like eventually, you know, everything winds up with like what I'll call like like the buttoned-up versions of it, where after we prove out why it's so awesome, we get the things that like grandma uses, right? Like from like a risk perspective, from a UX perspective, from you know, a credibility perspective, like we almost always get the sort of like you know, mature version of something in the end that like actually like claims the whole market. And I think like trading, we'll call it RWAs or like real world assets or securities or whatever you want to call it, like you will be trading all of that stuff at two in the morning, seven days a week, you know, in your pajamas, right? Just like you already were proving out that you could do that today as a society. I just think that the version of that that most people are gonna use in 10 years is not gonna be the you know, self-custody, like clicking from your wallet, you know, like in a censorship resistant, yeah, yeah, yeah, yeah, no KYC thing. It's probably gonna be the thing that's offered to you, you know, realistically by like, you know, a Coinbase or like a JP Morgan or a whatever. Like both will exist, right? Like neither's going away, but I think we're gonna trend more and more, just like almost every innovation in history. Like, we're gonna trend from the YOLO era of it to the hyper-scaled era of it that like 99% of the world feels comfortable using. The early adopters are like, yeah, I will do like I will jump through crazy hoops, like I will like figure out how to use this brand new system. 99% of the world doesn't think like that. And so, you know, I remember like in the early days of DeFi, like there was no institutions, there was no like, you know, like it was like the early adopters of it were the craziest people on earth. Like the people that were like, I trust the smart contract, it's not yeah, it's not done, right? Like the people that were willing to like use a smart contract with their money for the first time, that was a different breed, you know, and now everyone's like sort of comfortable with it, and like it gets packaged into way more usable form factors.

SPEAKER_01 10:08

I I have a bunch of but I want to ask this first because I just thought of it. Like when you look at where we are in 2026 from where you were in 2018, 2017, 16, group chat coined the word DeFi. Are you like how satisfied are you with how DeFi has evolved? Expect is it beaten expectations, underperformed?

SPEAKER_00 10:30

Yeah, the answer is yes. Um sick. That's my take. Yeah, like here's my take from about eight years of DeFi, right? And this goes to my earlier point, which is like people's opinions of it ebb and flow, right? In 2020, sorry, I'll start up from the beginning. Like 2018, no one trusted it. Okay, like when we launched this, when like you know, certain protocols were first launched, like nobody would wanted to like interact with the smart contracts. It was considered a little bit crazy, right? Like you had some like really early adopters of compound v1 and uniswap v1 and like curve and like all these things, but like these were the crazy people, and everybody trusted a centralized thing more, they all trusted Coinbase more, yeah, right? By the time 2020 came around, people were like, DeFi hasn't had any issues, really. It has like started to scale, and by this point, it was sort of like max experimentation. Like I would like I would say DeFi summer, like 2020 and like 2021 was in some ways like a local maxima and like a global, very good mark for DeFi, in that like nothing had really gone wrong, like for the most part. Like there were some rugs, you know, some bad things that happened, right? But for the most part, people saw how like resilient it was, and people were trying new things all the time. It was like nonstop people like launching protocols that no one had ever seen before, where it was like massive experimentation and like really a lot of confidence that it can work, and so you know, everyone's optimism for TFI was just like through the roof, like through the roof. Then everything C Fi collapsed. I mean, like Terra blew up, and then it took down Three Arrow's Capital, and then it took down Celsius, and it took down BlockFi, and it took down Genesis, and it took down FTX, and it took down like all these other things, right? And people were like, C Fi is a scam. Like, you can't trust anyone who like holds your money for you. The only thing you can trust is a smart contract, and that was a really interesting era. It's like bear market 2022, 2023, where nobody wanted to trust a centralized thing. And like, I think DeFi in its like creativity was almost at an all-time low. People weren't like trying new things, but everyone knew that smart contracts could work at scale for creating a financial product and a financial market. And you know, for better or for worse, like the post-Trump election era, it's like the comeback of C Fi. I mean, like, C Fi is on a revenge sort.

SPEAKER_01 13:07

Yeah.

SPEAKER_00 13:08

Right. Like C Fi has been coming for the market like uh unbelievably aggressively for you know about 16 months now. And I think in some ways, like, especially with the vulnerabilities that have been happening, I think like DeFi the ratio of like optimism for DeFi relative to C Fi is almost at an all-time low. Like since I've been around. Like, you know, the momentum that the C Fi guys have is really high, and like the sort of angst around DeFi is really high too. Really high. Really high. And like I think DeFi will come back, like, because at the end of the day, we're going to enter in an era where like a new protocol written with the tailwind of AI that's like as secure as it can get against any possible threat. Like, we're gonna have like ultimately scalable, ultimately resilient protocols, which is what people want in the first place. I just think DeFi is at a slight disadvantage right now because all of these contracts were written in like 2018, 2019, 2020, 21, 22, 23, 24, 25. And now you have like mythos that's like, oh, I found a thing that's like.

SPEAKER_01 14:15

Well, you don't even know what it is, really, right? It's like it could, you know. Yeah.

SPEAKER_00 14:19

Yeah. Like the ability to find vulnerabilities now is like higher than it's ever been. And like the developers haven't caught up yet, but they will catch up. They will catch it. And like eventually, we're gonna have like this wave of like, you know, I don't want to call it like 3.0, you know, because like it's weird to like create versions of DeFi, but like we will have a wave of DeFi probably in like a couple years. We're like, yeah, you can build a global system that's always on, that always works, that's like super safe, that you can't steal from, you can't tamper. Like, it's a really good backbone to do stuff.

SPEAKER_01 14:52

But you know, I think like it's gonna take a while. You know, the 23 era was nuts because I mean, you also didn't like SVB happened as well. 22 banks were going down, banks. It wasn't just crypto exchanges, it was like banks were getting run. Everything was going down, and there was, I mean, I just remember people were like, if you keep money on, you know, if you keep a thousand dollars on Coinbase, you're a retard. Like it was like no one knew anything about anything, like it was uh I've forgotten about SVB happening. That was like it was you couldn't trust anything, yeah.

SPEAKER_00 15:26

Like USD coin hit 85 cents or something like that.

SPEAKER_01 15:30

I sold U USDC when it hit like 90 cents. I didn't know because I didn't know what it was, I didn't know what I held, and I'm like, what the fuck?

SPEAKER_00 15:39

Um yeah, that's crazy.

SPEAKER_01 15:40

You know, I want to ask you this like going back to some of the super state hyper liquid stuff, is like, okay, uh, you know, I think a lot of the speculators are sick of hearing every VC come on the mic and be like, you know, we're bullish on crypto, but like just tokenized stocks and stable coins. But on the other hand, we, you know, the the the with the product that hyperliquid and tradex with Z has offered is like incredible. And to be able to trade like commodities and to be able to trade, you know, these stocks and and you know, Korean stocks, hopefully, it's it's wild the amount of liquidity you could tap into. My question for you, and you could get a little bit technical on this, is like if I'm long hints on a perps position on hyperliquid, what am I actually trading and what do they as an exchange actually hold? Versus if I were to buy like him stock from Superstate, assuming you know, hypothetically, if you guys had had tokenized it, yeah, it's a great question.

SPEAKER_00 16:36

So, you know, you're you're really asking the difference between like what happens between like essentially like on-chain derivatives versus like stocks in the traditional system, right? Because like you can make a derivative on anything, right? And like crypto has done an amazing job in creating perps and creating derivatives in uh honestly like a better form factor, yeah, than all of TradFi had ever invented prior to this. Like perps honestly are better than like monthly and quarterly features that like expire and go away. By like a lot, yeah. By like a lot, like perps are just a genuine innovation that came from crypto. Like, you know, kudos to like BitMEX for like pioneering that many years ago. Yeah, but perps are just derivatives, right? And in a derivative transaction, you know, it's essentially zero sum. Okay, so for every dollar that thread guy makes, I or someone else is losing a dollar, right? And you're basically either directly interacting with someone else on the other side of a trade or with multiple people through some like, you know, pooling mechanism. But you're basically creating a market where for everyone that's long, someone else is short.

unknown 17:48

Yes.

SPEAKER_00 17:48

And when there's more people that want to go long than want to go short, like you have to like figure out a way to balance this and like perps use like an interest rate to like attract the other side of the market, right? But it's basically like a wager between two sides, right? Someone's gonna make money and someone's gonna lose money, right? With a stock, it's naturally net long versus with perps, it's like they net out and it sums to zero, and like the expected value of everybody collectively is zero. One side's gonna win, one side's gonna lose. Yes. With a stock, the stock itself, there's more shares of it than zero, right? And the underlying stock of it, it's kind of like a naturally net long position. Like you own a share of a company, right? It might be a bad company and the people that own the shares of it, it goes down, but you're essentially, you know, not betting against a counterparty, you're literally betting against nobody besides, you know, like your opportunity cost, right? It's like a natural long product versus a product with like EV0.

SPEAKER_02 18:56

Yeah.

SPEAKER_00 18:57

And so, you know, there's no funding cost when you own a stock. Like you like can hold it for 50 years. Yes. And you're like, I own a stock, like that's it. Versus with like perps or derivatives, it's like, you know, you can't really do that. And so the easiest way to think about it is, you know, if there's a stock token, there's a lot of different versions of stock tokens. You know, we're still in like an era of like great experimentation. The approach that superstate takes is like when it's a token, you're on like the company's books and records. Like you can like call up the CFO and be like, hey, am I a shareholder? And they're like, Yes, like Yoho ThreadGuy, you are on the company's records, you're a shareholder. Like, have you gotten our like annual statements?

SPEAKER_02 19:38

Yeah.

SPEAKER_00 19:38

Um, there's other tokens where you can't really do that, and there's like a couple layers of like SPVs, so to speak, in the middle between you and the company, but like you indirectly own the company's shares through like other tokenized approaches. But when you hold like a stock token, in general, you're long the company stock. And so either you like bought it directly or someone else bought it on your behalf and is custodying it and then minted a token against it. But in general, stock tokens are like you're just like long the company, and there is no other side to it. Like no one's gonna lose if your thing goes up.

SPEAKER_01 20:12

Got it. Thank you. And so to follow up on that, it's like it feels like everyone everywhere is talking about on on-chain capital market, it's gonna eat everything, tokenize everything, black rock, every major financial institution talking about this, but it's still I mean, it's niche, it's very niche. It's just like a bunch of VCs and maybe like bleeding edge traders that are at all exposed to this. Like, why and what does the trajectory from here look like? And maybe like how does it impact like us?

SPEAKER_00 20:43

Yeah, I mean, it is niche, right? I think every new technology wave starts off niche, right? Like, you know, DeFi started off niche. Like, I mean, listen, like, you know, if back in the day, I would like try to explain, like, yeah, we're gonna use smart contracts on a blockchain to like build a financial marketplace. And people like looked at me like I was an insane person, yeah. Right. And the people that were like reading white papers and like commenting on like Reddit threads for this stuff, it was like really niche, right? It was a couple VCs and a couple crazy people, right? And now everyone knows it, right? The internet when it came out, I had a crazy uncle who was like, Oh, like have you heard about this like World Wide Web thing? And I was like, you know, I was a kid, but I was like, What are you talking about? You know, like it was niche until it became like huge, right? Like everything starts off niche. Like the people that are excited about this niche right now, because yeah, like it is like a bunch of VCs, and like I mean, if you're if you're a nerd for financial infrastructure, like, yeah, that's niche, right? But like the reason why people get excited about it is because it sort of illuminates what the world's going to be. In the same way that like the people that were using DeFi were like, yeah, like you're gonna be able to like do stuff on a blockchain, like whenever you feel like it. Like they sort of saw this future. The future that people see with this tokenization thing. Is solving a bunch of problems that people kind of right now have, which is you know, if you've ever tried to like transfer an asset like that's not a crypto token to somebody else, it's like running into a brick wall. It is like so try transferring like stock to somebody, like that's not a token, right? Like you can't do it, like you think you own these assets, and like you sort of do, but like you can't like do anything with it, right? And so, like, you know, your assets don't feel like they're your own, right? You feel like you have the economic right to them, you know. But if you want to like move from one broker to the other, it's like kind of shitty, right? So that's one of the things that people see. They also see this thing where they're like, well, crypto works 24-7. Like, why can't everything work 24-7? Like, why don't my stocks work? And like, yeah, TradFi is like slowly like chipping away at this and making everything work a little bit more 20 24-7, not weekends, but like everything's getting towards more always on, but like it's still a far stretch away from the way that like hyperliquid works, you know, or like anything on chain. People are like, this is the future. Like, how do we apply this to all of the assets? And lastly, there's this like element of innovation that just like does not exist in TradFi that's like never really existed to do anything. It's like negotiating with all of these different partners and like signing these extremely long contracts, and like you know, only being able to do these like small tweaks to like make something like a little bit different, versus in crypto, it's like major tweaks, like go wild, like you know, add whatever programmability you want, like invent something totally new, like it's incredible. And so, you know, people see tokenization as like solving all these things where you're like, yeah, let's just like turn stocks and bonds into tokens, and then it's like it's always on. You can move them to whoever you want, whenever you want, they're really yours. And if you want to build new stuff with them, like the assets become building blocks that anyone can go out and build a killer app for. Like, you haven't really been able to build any killer apps with stocks in like 150 years, yeah. Because like you're not allowed to even like really program them. Like the amount of like new things you can do with them. The biggest innovation of 50 years was Robinhood, which is like setting fees to zero, right? Like, you like no one has ever really been able to like experiment with like stocks and assets as the sort of building block. And so tokenization is gonna let anybody listening to this podcast say, like, you know what, I'm gonna be like an asset hacker and build a totally new way of interacting with these things.

SPEAKER_01 24:38

That is man, it's just like it's it's it's it's a refreshing take. Tell me, uh, on the other contrary, what incentive like why would NVIDIA want their shares tokenized or these like major public companies?

SPEAKER_00 24:51

Yeah, I mean, at the end of the day, a company doesn't really care about like the plumbing of these markets, right? Like the only thing the company cares about is like, can more people buy my stock? Like, that's a good thing. Like, every company wants more bid for their stock.

SPEAKER_01 25:09

Yeah, right.

SPEAKER_00 25:09

Every company wants more, you know, stock price. Because like at the end of the day, the higher the stock price, the lower their cost of capital. It just means they can raise more money or like they can borrow more and they can do all these amazing things. They can go out and buy more companies. Like, every company is publicly traded once their stock price is higher, and the more people that can buy it, the more tailwind there is to it. So, like, they don't care about how it all works. They don't like honestly, you call a CFO or a CEO, like they have no idea how the stock market works.

SPEAKER_02 25:36

No clue, yeah.

SPEAKER_00 25:37

Besides, like, we're publicly traded, that is good.

SPEAKER_01 25:40

So, who are you PvP here? Is it the brokerages?

SPEAKER_00 25:45

Yeah, it's interesting because all of this stuff is gonna like upgrade in parallel, right? So, like brokerages are gonna upgrade, you know, like the exchanges are gonna upgrade, the custodians are gonna upgrade, like everything is gonna move to slowly, you know, towards full tokenization. Yeah, but it's just like everyone's sort of like competing to like get us there.

SPEAKER_01 26:06

Got it. So it isn't even like you winning doesn't mean like Schwab loses, they just get better, actually.

SPEAKER_00 26:13

Yeah, I mean like theoretically with tokenized stocks, like Schwab could be like, you know, withdraw stock to your wallet or withdraw stock to Coinbase or like you know, all these other features, or you know, withdraw stock to your you know, AI agent, or like deposit stock from your AI agent. Like by tokenizing it, you like turn on like a huge aperture of creative new product ideas that like just don't exist. That was so Schwab might be like incredibly excited.

SPEAKER_01 26:45

That uh really good pitch for it, dude. Let me ask you this outside of tokenized stocks and stable coins, is there anything in crypto you're excited about?

SPEAKER_00 26:55

Man, I have tunnel vision. So this is like part of the problem with me, is like you know, I like latch onto something, it's all I think about for like five years, and then I'll get like super excited about something else, right? But like I have like years left on tokenization because like we're still like pretty early in the journey.

SPEAKER_01 27:14

That's fair though. I mean, that's how you how you have to be to win really hard, right? Full tunnel vision. And so do you find yourself like I mean you're working on something really cool. Have do you find yourself, you know, 1010 happens? Are you depressed about crypto and upset about the state of the industry? Like, do you find yourself in these doom or spirals?

SPEAKER_00 27:34

You know, 1010 was like a non-event for me personally. Like, I like didn't have any market like positions on like you know, like I'm not like on it on a daily basis, I'm not really trading. Yeah, yeah, yeah. You know, like I'm in a couple group chats where like people were like a hundred percent demoralized on 1010 and like it felt really bad because like all my friends were like, what happened? Like this sucks, right? Yeah, but like I personally like like didn't really notice 1010. The after effects of it were like pretty negative, like like the attitude like got like a little bit more sour, like every week for like three months. Yeah, it got really angry, yeah. It got really angry, like, but like I almost like didn't even notice 1010 happen. The thing that you know I did notice honestly was like the kelpdown one. Like the kelpdown one, and like there have been so many hacks in April. Okay, like April was such a like hacky month, but like Kelpdow, I was like, this is going to leave like a bruise on like the face of DeFi for like a while. I was like, institutions are gonna be scared, regulators are gonna be scared. I was like, this is a little bit demoralizing because like so much of the vision that I have at Superstate is like bringing stuff on chain so that it can DeFi. It's not like tokenize something so that like I can shave 12 cents off of some trad fi business, right? Which, like, yeah, that's a benefit of tokenization, but my whole like vision for this is like so that you can bring it on-chain into a DeFi protocol and it can do DeFi stuff.

SPEAKER_02 29:06

DeFi shit.

SPEAKER_00 29:06

And honestly, like within 12 hours, you know, I was hearing from like institutions who are like this DeFi thing, like, are you sure about this? Like, really? You're getting phone calls? Yeah. Whoa. We had like a lot of questions like, like, what does this mean? Like, what's this mean for DeFi? And I was like, okay, this is an event that like I am like saddened about, like, at a very So what do you tell them when they call you? Yeah, I mean, what you can tell them is that like uh fundamentally uh this doesn't like uh lessen the value proposition of DeFi, right? I think the reason why everyone's so demoralized is that like this was you know, one of these like it makes me to the like the front page of Bloomberg events where it's like millions of tokens created out of thin air and like biggest DeFi protocols in existence get exploited because of it due to a bug in one system that became a bug in another system that became a bug in a different system. Like it didn't look like it was like a single weakness, it looked like 15 weaknesses, like all at once. You had all these vaults blowing up. It was like it like the reason why it was so painful is it didn't feel like a single failure, it felt like 15 failures, and like 15 failures all at the same time feels like an indictment of the whole approach and interconnectedness, and like the interconnectedness is the value proposition, it's also like the noose in some ways, but like it's the biggest advantage to I see what you're saying, yeah. And so the attitude from like external, like when I was talking to like public companies, we're talking to like you know, investment bankers, their view is like, oh, this interconnectedness doesn't work, like it's bad. Like, yeah, there's interconnectedness in like TradFi, but like everything is siloed in like its own little way, right? And like the interconnectedness is like all the stocks drop at the same time, you know, not like oh, a failure in one silo destroys every other silo. Like, yeah, there's like collateral damage when like you know the great financial crisis happens and it dominates a bit, but like it just like blew a lot of credibility. I I think like in a way that it shouldn't for anyone in the know, right? But like for anyone who was like looking at this from the TradFi side, they were like, Oh, DeFi, like I'll take a look at it in like another couple days. Yeah, we'll come back. And it like reset the clock of like serious like institutional credibility that I think we were building towards. And that credibility will come back. Like, trust me, like promise you, yeah, like it is a fact, like in like 18 months, everyone's gonna forget this, and everyone's gonna be like, DeFi is rock solid. Like, how do we build on top of this? Were you in the war room when this kelp doll uh? No, I I haven't been in a war room in a while. Like, I I was probably in like 40 war rooms between 2018 and 2021, 22. I mean, I was in a lot of war rooms.

SPEAKER_01 32:04

Wait, what was the craziest one before I cut back to Ave?

SPEAKER_00 32:07

Ooh, okay. I mean, there was a few like crazy give me like one crazy one. Um Yams. Have you heard about Yams? No, I don't even know what that is. All right, Yams was like back back in like DeFi Summary called them food farms, a lot of tokens that were like associated with foods, like sushi kind of like kicked it off. If you if you've heard of sushi. Okay, yeah, yeah. Um Yams was like an algorithmic stable coin, kind of like Terra Luna slash UST, okay. But it was like an algorithmic stable coin, okay, and they accidentally bricked their governance contract. So they you like governance proposals couldn't take effect.

SPEAKER_01 32:49

Okay.

SPEAKER_00 32:49

And this was like a new protocol that everyone in DeFi was like farming. Like it was worth like what's that? How uh what do you think it was worth? Oh, at the peak, I mean, probably like four or five hundred million dollars. Okay, okay, okay, okay. But like everybody was farming this token and they bricked the governance contracts and it went to zero, you know? And it was really a sad war room.

SPEAKER_02 33:16

Whoa.

SPEAKER_00 33:17

Because like everyone tried to save it, but like no one could get there in time.

SPEAKER_01 33:20

And so what's going on in this war room? Like, how many people are in there? And like, are you on the phone?

SPEAKER_00 33:24

It's just messages, like I mean, that one I believe it was like a Discord call with like, you know, 20 people, you know, and everyone was like, you know, it was just it was a bad one. Because like most things don't like truly go to zero when there's like a bug. Yes. Yeah, like you know, they're like, oh, oops, like we like broke something, like it's horrible.

SPEAKER_01 33:47

Wick it down and bring it back in a couple weeks.

SPEAKER_00 33:49

But like an algorithmic stable coin, like literally goes from like confidence to like zero. So that one that one sucked. Were you in a were you in a uh Terra Luna war room? You know, there was a lot of like different little ones on the side of it. Like, I was not in like the like you know, dok one like war room. The main one. Like I was in like ones that were like, hey, how's this gonna affect DeFi? Right? Like I was in like what's the collateral damage of this gonna be kind of war rooms. Got it. Did you is this gonna blow up? Yeah, did you know it was gonna blow up? Um, I didn't know it was gonna blow up. I mean, I thought it was a bubble, right? Like, I I literally knew unintelligent people off of Wall Street that were like quitting their jobs to like launch like funds specifically that just bought UST that were like, I found a foolproof way to make 19%, you know, kind of thing. That like you had like investment bankers like quitting their jobs and starting like terra funds. Like, that's how I knew I'm like, this is like literally not sustainable. They're like pulling the yield out of thin air, like this cannot like last forever.

SPEAKER_01 35:00

That's insane. What an era. Uh, I was like so young, like infinite in that era, so I wasn't like fully aware what was going on.

SPEAKER_00 35:06

There were signs. They will say there were signs. There were signs. Like there were signs. Things cannot, like, every bubble pops. Like, you know, some people are good at spotting bubbles, like, certain bubbles are obvious when you're like, this is too crazy, like, this is not like how can this last? Like, how can you like make a living packaging UST and selling it as a hedge fund? Like, specifically, you know, like when it gets that big, you're like, okay, this has to break at some point. And like, I didn't know when it was gonna break. Like, I wasn't like, oh, well, if you look at like the flows and the things, I was like, it's too safe. Like, but it was like, this is getting too crazy.

SPEAKER_01 35:41

Okay, before I get back to Aave, uh, what do you think of stretch?

SPEAKER_00 35:46

I mean, it is a distant cousin of Luna UST. I think it's a lot safer for a lot of reasons. Like, a lot, a lot, a lot safer, but it rhymes. Like the actual model of it, it rhymes with it. How but I think it has to get like literally like eight times bigger before it becomes a problem.

SPEAKER_01 36:09

See, this is the scariest part about it is everyone's like, it'll be a problem, but like 18 months from now we'll deal with it.

SPEAKER_00 36:16

Yeah, yeah, like yeah. I also think like I think Sailor and the team there is actually smart enough though to prevent it from becoming a problem. Because like this is the thing. Like, you're like, yeah, if we like draw this line and it goes up forever, like, and Bitcoin doesn't go up in the same way, like it can become a problem. But like I think they can like sort of self-regulate because they're intelligent people, like at least they've shown like an ingenuity to get to this point. Like everyone has counted them out and said they would have blown up like so many times, right? I also think they're smart enough not to let it get out of control, right? If it were to like become a parabola and they issue like you know 200 billion dollars of preferred, it will become an out of control problem.

unknown 37:01

Damn.

SPEAKER_00 37:02

Right? But I think they're smart enough to like know exactly how far to push it.

SPEAKER_01 37:06

Yeah, I hope.

SPEAKER_00 37:07

Like, that's a smart team.

SPEAKER_01 37:08

That's a smart team. It is, it's it has to be, right? To get to have gotten this far.

SPEAKER_00 37:11

Um correct. That's a smart team. It's easy as an outsider to be like, oh, they're gonna blow up. And it's like fine, like you've so many people have said that.

SPEAKER_01 37:19

Yeah, that's fair. Okay, so then bringing it back to current day is uh what I mean, what the fuck happened with Ave? And and what it you know, everyone's calling you, their timelines got pushed back 18 months. Are you doomer about what actually happened that they kelped out Ave layer zero situation?

SPEAKER_00 37:36

I it's funny because like every single hack slash problem slash exploit on a long enough time frame is a good thing. And the reason why I say it's a good thing is because everybody learns from it. Yeah, and like that specific problem people don't repeat, right? Like, do you know how many people are gonna tolerate like one-of-one bridge signing processes ever again? Yeah, yeah, yeah, yeah, yeah. Like everyone's gonna like know to design around that and like not tolerate it, not allow it. And like, yeah, I'm sure like some like new shitty tiny bridge provider will get started and they start off with doing this like one-of-one stuff, you know. But as a society, like we've learned that lesson, and like it's a little bit ingrained in everybody. Like, have you seen an algorithmic stable coin since era? No, you haven't. Like, everyone learned that lesson. And like we're all smart enough now to not do it again. And so every flaw, I do think people learn from. And it's like one less thing that can go wrong, and over a long enough time frame, I think we like work all of these like issues out of the system. There's new ones, like people come up with like new ways to be an idiot, yeah. Like for sure. But you know, we don't see too much repeating of the same stupidity, and so this is one everyone's gonna learn from. You know, I think it's gonna harden borrowing protocols like Ave and Compound and any others that exist out there. I think everyone's gonna be like, whoa, it turns out that like a collateral asset can go to zero in like a millisecond, you know? Like we built our models to assume that they can't chop around and go down and it's a function of the market, not like the asset got hacked, right? So I think like the risk parameters of DeFi will improve where it's like, oh, maybe like the supply caps like grow over time, and if something like that happens again, there's no actual loss, right? Like there's a lot of lessons that are gonna be formed, and I think there's gonna be a lot of benefits from this. Not not immediately, it takes a while, but like the next version of the protocols that comes out is all gonna like be built with these lessons.

SPEAKER_01 39:40

One more follow-up on that is like uh to add to the problems of crypto is you know, there was this Ave Dow LLC, kind of like the foundation labs problem where we have this like, I don't know, uh I think pretty significant overhang in a lot of altcoins. Like, what exactly do you hold? Hyperliquid, you're you know, they buy back 100% of the revenue with the token. So, okay, fine, we'll take that, but pump fun, it's like, I don't know what what do I hold? It doesn't apply the same across all assets. How does that resolve? And how big of an issue do you think it is?

SPEAKER_00 40:10

So I think it's a problem. Um, I think one of the reasons why this is a problem fundamentally is most of these projects were built in the Gary Gensler era when there was a huge amount of ambiguity around how things are supposed to work, how do you structure like the entities to like not create securities and like do all these things, right? And so the way almost everyone went about this was like you had like a foundation and you had like a development company, labs company, and you had like a protocol, and you had all these things with different like expectations to them. You know, humans have had 10,000 years to figure out how to like organize themselves and like build like enterprises, and simplicity has been kind of the virtue that's always held, right? Like, you don't need like three competing entities for something, yeah, right? Like there should be like one, right? And so I think anytime where there's multiple entities, it's a problem. Like, it's a natural question to be like, so like, why is there a labs company that's like making money and why is there a protocol and like it's making money and like a token and like who gets what and who decides? That's like a conflict of interest, and like anytime something is successful, these conflicts of interest will come to the fore. It also happens when like things are smaller and less successful, but nothing big and successful can have this like innate question about how it even works, and like who benefits and how and why, and who makes decisions and how and why. And so, you know, I think over time we're gonna see less of this. I think like most things, you know, probably should start off with a company because that's the easiest way to raise money. Like ICOs have always been a tough way to raise money. Like it's very hard to crowdfund and basically be public before you've built something. Like that sucks. Right? Like, I think the way everything should get built is like you raise money from like private markets where everyone's like really like buttoned up and like they expect losses and things not to work out, and you raise money from a small number of extremely sophisticated investors, and then eventually you've built the thing, and it's time to go crypto public or you know, have a traded asset. And I think when that happens, right, that's a great time to transition away from like we have a company still, and we might make money at the expense of a protocol, or vice versa. There's a conflict of interest, or we're building it, and we're also gonna ask for tokens, or we're gonna be involved in some way. Like, I think that's when it's time to transition. And so, like, in my mind, like, yes, it totally makes sense for things to start off with private companies. It's the best way to raise money, it's the cleanest way to raise money. I don't think that's how things should end up, right? Like, Bitcoin doesn't have a private company, right? Yeah, like Bitcoin, yeah, technically had a foundation, but like it doesn't do anything, you know. You know, so starting point companies, ending point, if there's a token, it should just be a token. Like there should be nobody competing with that token, especially nobody who's like super privileged and built the thing in the first place.

SPEAKER_01 43:17

Like that's a sick take. Um, dude, you have a lot of sick takes, man. I I I appreciate you coming on. Also, uh, you you haven't been on the pod in a couple weeks, have you?

SPEAKER_00 43:26

No. Um you know what? This is actually not public knowledge, but I'll leak a little bit of alpha right here.

SPEAKER_01 43:32

Okay, okay, thank you.

SPEAKER_00 43:33

So, Superstate has been recording a podcast. We haven't dropped any of the episodes yet. And so for the last couple weeks on the chopping block, I've been taking like a sabbatical because I don't have the brain space to be like recording two podcasts at once. Too much. Too much. And so I'm taking a sabbatical while we record all the episodes of the Superstate podcast.

SPEAKER_01 43:52

Nice, dude. I'm I'm ex I You're a sick. Listen, I uh I appreciate you coming. I'm excited to listen to that. Give us like a uh I don't know. Give us like an optimistic rap for where crypto over the next uh six months, year plus, well, a lot of this stuff is in transition. Like where uh what can we look forward to?

SPEAKER_00 44:11

Yeah. Um here's here's the things that I look forward to because they're gonna happen. And when they happen, I think it's gonna be exciting. Okay. One, we're gonna have an improved regulatory position in the US. Yes. Because I think it's medium-likely that we pass clarity. There's always a lot of risks to it. It's not a done deal. You know, I would put it at 50-50, even though polymarket probably has a little bit higher. But clarity passing is a big deal. Like it is a big deal for the space. It is a big deal for everyone to get involved with it. In the same way that like literally every like tradfy institution was waiting for the genius act before they got excited about stable coins, even though they could have been excited about stable coins before Genius, right? Genius came out and like everyone. Good take. We're in we're in stables now, yeah. Right? Like, they need that external validation that it's okay. Yes, because there's some very conservative people. Clarity passes, and like, yeah, like there's technically nothing stopping any organization from getting involved in crypto. But like clarity passes, and like no one is gonna hesitate to touch tokens, no one is gonna hesitate to touch like tokenized anything, like ICOs, wallets, like whatever you name it, like it's gonna be like socially acceptable. And so you're gonna see like, yes, like more competition and whatever from like existing industry, but you're gonna have this like huge groundswell of activity, and that's a good thing. Like clarity is gonna be awesome if it passes. So that's the first one. Second, I mean, the SEC is constantly working towards more guidance in parallel to clarity to unlock things like you know, tokenized securities trading and like how tokenized assets are supposed to work. This these are topics not covered in clarity, and as a you know, country, we're still waiting for additional guidance, but you know, it it's very clear to me that they're working on additional guidance to create a pathway for builders. So I think we're gonna see additional progress out of the SEC, which is something to be excited about. I think, you know, at any given moment, I think the narrative behind Bitcoin is gonna like flip from one of like a little bit of apathy to like mania again. And like there's always so many like irons in the fire, and like it takes like one day for this to like switch on again. But you know, I think at any point, like you could see something that just like switches on the narrative of Bitcoin as a neutral store of value. Yeah, I think it could come from the US and like a strategic reserve. I think it could come from a foreign country. I think there's a lot of irons in the fire, but like I'm always prepared, like left field, like on a single day. Like it's just like we switch on the Bitcoin, yeah, like we're we're so back thing. And I think there's a pretty high chance that within the next 12 months, like we get that sort of like green light from somewhere. It's always hard to say where, but like Bitcoin is so back, right? It has like survived the worst levels of apathy possible, and we're grinding back, like it could be a so back moment at any time, and it's like risk on, and that will drag everything with it, right? And lastly, like people are still building sick products, right? They are, and you know, over the last year, I've seen a lot of really cool things launch. We're seeing a lot of innovation, and you know, the narrative of crypto itself changes pretty frequently. Like, you know, out of nowhere we went through like the NFT era, right? Like we've gone through like the perps era, like we've gone through the altcoin era, like what people are spending their time on is always evolving, yeah, right? Like, and it always surprises people. No one ever anticipates they're like, this is what everyone's gonna be like talking about, you know. And there's enough experiments going on that like before you know it, like mainstream everybody's gonna be talking about this new thing that's happening.

SPEAKER_01 48:19

That was fucking beautiful. Robert Lasher, you're a movie, dude. I'm I'm I'm happy you uh it's funny, you're responding my DM from like eight months ago. Um you know what?

SPEAKER_00 48:28

I only check my DMs like every eight months.

SPEAKER_01 48:29

Yeah, I look forward to our next one in 2020 uh seven, but dude, you're a must be seven. Thanks for coming on, man. I I really appreciate the time I'm rooting for you, man.

SPEAKER_00 48:38

Yeah, appreciate it.