Has your founder journey panned out as you imagined when you started Digital Asset?

Absolutely not.

Like I said, I think, first of all, you know, I, I heard, uh, I promised the person that I will never name because it was a, an event, uh, that you couldn't attribute.

It was at the Fed in DC, and one of the digital asset, uh, guys from a very prominent bank said, "You know, we would've had 30 Internets now if the Internet came with a token." What I haven't appreciated is how challenging it would be to kind of, like, build something while you have 1,000 same things all claiming to do the same thing, even though a lot are doing very different things.

And then, you know, now you're like, it's not only like you need to build technology and prove the technology works, you also need to kind of, like, substantiate your technology in the marketing side.

Mm.

There's no decentralization there, and everybody celebrates it, right? The two largest, um, uh, earners in the crypto industry are the two stablecoin providers, Circle and Tether, and that's actually a good thing.

It's not a bad thing.

So how are they able to make more money?

So we're working with a client around treasury management.

And if we actually execute it properly, the goal is to get to a place where the client doesn't really have to change the core of their business.

They don't really have to change significantly the way that they conduct their business.

But because digital assets can settle, move real time 24 seven all over the world, they can earn much better yield on their balance sheet.

And we're talking about a significant improvement, meaningful numbers.

And that is a global company.

Both of these instruments are essential for it to have a meaningful improvement on the bottom line.

So then why don't you just define what a super validator is and give some examples of the different types of institutions that are in that group, and then explain why it's invite-only to be a super validator.

So, um, I'll start with the end, which is not invite-only.

Um, the mo- the model of how do you become a super validator has a process no different than any other chain.

On Ethereum, you have to stake 32 Eth.

On certain chains, you have to stake even more.

On certain chains, you can't even become, uh, part of the sequencer.

Most L2s, you have a centralized sequencer.

But in Canton, you only depend on them, because in, in, in Canton there is no way to enforce, uh, uh, the rules by consensus, by the entire network the way Bitcoin and Ethereum does.

First of all, when I go to DeFi Llama, why would it not be on there? What would be the

reason? Don't know, to be honest.

I don't have an answer.

Even in the XYZ example, I saw your interesting intro, this whole represented versus distributed.

Listen, I think that this industry, as every industry, has people that have ideas of what it should represent.

We've seen the whole discussion about the Ethereum Foundation in the last few days.

We have different approaches, Tempo launching saying that it's permissionless and now people are showing that you need to be permissioned to be a validator.

That's what we think it is.

Why is that a good idea for everyday investors?

Well, I mean, leverage, generally speaking, is associated with, uh, bad or potentially risky.

Again, I go back to the example, if you take a mortgage against your house, um, you are leveraging the place that you live in.

You could lose that if you don't pay back the loan.

And it's really a question of what kind of leverage you take, for what reason do you take it, right? If you're just-- if you're just taking crazy leverage to get even more exposure to the market, well, just be aware, back to our points about how to think about risk.

Well, if that thing goes against you, you could lose all of your wealth very quickly, and as long as you understand the outcomes and you're a professional about it, then, you know, hedge funds do go to higher leverage and, you know, face outcomes.

The question is, if you wanted to use fifty percent of your portfolio against a house, and you could meet those payments, that could just be another asset class where you might get a better lending rate, right? Because a house is not as efficient or not as liquid as equity market, that might-- someone that actually might lend you for buying a house at a much better rate than what a bank would give you, for example, against the deed of your house, which might not be very easy to liquidate.

Check it out for yourself at alpha-sense.com/howIinvest.

Yeah, what's the take there?

So first of all, just to your previous question, my view is that, and whether it's a good thing for the incumbents or not, I think that one of the things that scared regulators is that the industry started saying, this is permissionless, you don't need any intermediaries and no rules.

To be honest, when we built Canton, we didn't build it for the Clarity Act or for the Genius Act.

I think that building a business where you're relying on the law changing is not a good business model.

Personally, maybe Nick as an investor will say that that's not true, but my personal view was if we need the regulation to change to make what we're doing successful, then we're in a bad position.

That being said, I think that the posture of the administration, even pre-Genius Act, already allowed a lot of incumbents and regulated entities to actually do things on Canton more publicly because they knew that the regulator is not just going to go after them because they're using blockchain.

And I think prior to this administration, I think that that was a lot of the concern.

That sounds fine to me today, but what about in the next few years? It feels like a really big missed opportunity.

Like, all of a sudden, everybody is talking about privacy again.

Yes.

Well, I mean...

I mean, just put institutional adoption for a second on the side.

I mean, even when you look at crypto, I mean, do we have, what is the X handle? Whale watchers, right? You know, immediately when you move your crypto assets, people front run you because if you send assets into an exchange, the assumption is that you're about to liquidate the asset.

So, you know, if it's if it's MEV being able to front run transactions because you can see everything that is happening, there's there's just so many, in my opinion, derivatives of the lack of privacy that are not good.

not just for an institution, but also for individuals.

But I think to have that level of privacy, does that mean giving up a certain level of decentralization that it has to be like a company that you're sort of working with?

Like, why is this something that you think is so important?

I think I share a lot of times the stat that I don't think people appreciate.

Only about 15% of eligible collateral ends up being used.

And it's not because people don't want to use more collateral.

It's because moving collateral in an efficient and cheap to deliver is not very possible today.

And I think that that's really... one of the biggest opportunities with this technology.

So I do believe that collateral management, whether it's into clearing houses, but even just as you think about global banks thinking about how to manage their balance sheet more efficiently, is probably one of the biggest low hanging fruits opportunities out there today.

Is there a way that I can provide recognition of those using my FBOT framework? that's another key aspect too.

sorry to be predictable.

No, no, no. It's great.

It's great.

It's actually good.

So we run today 10% of the US repo market on Canton.

So one of our clients, Broadbridge, build a repo application that process over $400 billion of US Treasury repos every day.

To us, that's not a small feat.

Right.

Why did you guys decide to build your own Rails? Like at what point did you say, let's go build our own Rails instead of, you know, we could just use Ethereum or we could use, I mean, you guys were around in 2020, like they're all the chains like Avalanche and Solana, like why not just use one of those chains?

My view is, and on a recent panel, I was asked if I could go back and change time, what would have been one of the changes that I would recommend to the industry? And it was what we've wrote in 2016, which until suddenly it's in the last few months, it's became popular.

I think that what this industry have missed big time is that in order to make Bitcoin work... which is a censorship resistance that doesn't have a centralized issuer, you have pseudo-anonymous kind of privacy, meaning you get to see everyone's account balances, but you don't supposedly know who they are.

In many cases, most people know most of the wallet addresses and who they belong to, but let's just assume that you don't.

When you start thinking about real world assets and how businesses conduct themselves, to us, privacy is like a must have.

And this is not just an institutional regulated thing.

If you regulate it, you have legal requirements to protect your client information and activity.

Like, tell me why your approach to privacy is the best approach.

Play bold, win big.

Let me actually go to the next layer of consensus, and then we'll come back.

Then there's a second layer of consensus, which we're saying, if you are the stakeholder of the transaction, it's really the end parties that need to agree on the business logic.

Meaning if I want to process a stable coin transaction and I have a sender or receiver sending a coin to one another, Most people that hold the coin don't really need to know that that transaction took place.

They don't care about that, right? It's not relevant to them, it doesn't have an impact.

What they wanna know is that they have consensus between them and the issuer.

So in that case of the transaction, there will be consensus that this is a valid transaction between the issuer of the stable coin, the sender and the receiver.

LoneStarCasino.com

listen, I think that just

payments, generally speaking, over the last few years have been a very hot opportunity.

And I just don't think that there's anything different.

I think that to me, with the Genius Act coming together, you have something that we haven't had before, which is now again, a stable coin could be viewed, is going to be legal tender, which is a game changer.

Because until now, it wasn't.

And again, if you think about as a crypto participant, you're willing to accept that risk.

If you are, again, like a Fortune 100 company, you might say like, yeah, I'm willing maybe to take some risk, but I'm not willing to kind of like in a wholesale manner move all of my payments activity into something that is not legal tender, where now it could be.

What do you think that does ultimately?