70 - Facing the Frontier | Jim Bianco

Jim Bianco is a seasoned investor, market commentator, and President of Bianco Research. With a sharp view of the past, present, and future, Jim comes on the podcast to discuss crypto from a variety of angles. Inflation, Wall Street, Defi, Regulation, and How to Invest. This is a good one. ------ 🎙️ EXCLUSIVE EPISODE DEBRIEF : https://shows.banklesshq.com/p/exclusive-debrief-facing-the-frontier 🎖 CLAIM YOUR BADGE: https://newsletter.banklesshq.com/p/-guide-2-using-the-bankless-badge ------ BANKLESS SPONSOR TOOLS: 💰 GEMINI | FIAT & CRYPTO EXCHANGE https://bankless.cc/go-gemini 🔀 BALANCER | EXCHANGE & POOL ASSETS https://bankless.cc/balancer 👻 AAVE | LEND & BORROW ASSETS https://bankless.cc/aave 🦄 UNISWAP | DECENTRALIZED FUNDING http://bankless.cc/uniswap ------ Topics Covered: 0:00 Intro 5:00 Jim Bianco 7:20 Speculation & Sideways 13:08 Speed Running Everything 17:08 How to Play this Game 20:05 Big Picture Macro View 25:30 Inflation 30:52 Rationing & Reopening 35:47 Crypto Colliding With Macro 44:00 Hayden Adams Tweet 48:03 A Broken System 58:50 Defi Eating the World 1:02:55 Jim Using DeFi 1:06:25 Taking The Leap 1:11:00 The Bill Ford 1:16:10 Wall Street Adopting 1:22:31 Wall Street and DeFi 1:30:00 Regulation 1:37:41 Possible Outcomes 1:43:05 Putting Your Foot Down 1:46:15 Grounded Experience 1:51:15 Closing & Disclaimers ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:08Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front-run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. David, Wall Street meets DeFi. What's this episode about?

• 0:28David Hoffman?

  Jim Bianco, one of my newest favorite boomers in the Bankless program. He just drops so much knowledge and energy on this podcast, and I was having, I was very reminiscent of our episode with Mark Cuban. And I think the through line between both Mark Cuban and Jim Bianco here is that there are these, there are these guys that keep themselves up to date, no matter what. Age doesn't matter. They keep themselves up to speed. They innovate, they tinker, they get their hands dirty, and they come out with very unique perspectives as a result of that getting into the weeds. So Jim Bianco, head of Jim Bianco Research, he's on CNBC a lot, a big macro commentator, and has opinions

• 1:12David Hoffman?

  about DeFi, Wall Street, banks, and regulation, and how these things all intersect. And I think, I think my favorite part of this podcast was towards the beginning, where just Jim just goes off on the federal banking system and how absolutely terrible it is with some really awesome metaphors, going all the way back into the 1800s. So just dropped a bunch of knowledge, and then we also just go through other topics, such as, you know, what's it going to take to get Wall Street on board? Are they going to fight us? Are they going to adopt us? Is there a brain drain coming? What Jim likes to do in DeFi? And the regulation that is or is not coming, a really, just a wide-ranging conversation that, that Jim just really is an expert on in every step of the way.

• 1:58Ryan Sean Adams?

  Yeah, Bankless listener, prepare yourself. Some fire was dropped on this episode. Absolutely. By Jim Bianco. You know, it's really cool to me, David, is these are the kind of conversations I love is because I feel like we can learn so much from these conversations. And the reason is because, you know, it's kind of this cross section of domains that Jim understands, right? So like, he can talk DeFi the way we can talk DeFi because he's used it and he knows about it. But he also has these domains that we're completely unfamiliar with, like kind of the the whole macro side and how the Fed interacts. He was a market veteran already by the time the dot com boom was happening. He's seen this kind of market psychology play out time after time.

• 2:44Ryan Sean Adams?

  And he, we can pull lessons from those other domains that we're not as familiar with and apply them to crypto. That's why these types of conversations are our goal to me, and I think will be of interest to you, the listener. Guys, I think Wall Street is going to play in the DeFi game. I think they're they're slow in coming, but they're starting to understand what this is all about. And people like Jim Bianco are kind of showing the way it's he ends this with talking about education, the value of education. And I think that's a that that's how we get more people into the space is is through education, learning about these systems, learning through using these systems.

• 3:25David Hoffman?

  I definitely feel more educated after talking to Jim Bianco and also the section on inflation and like consumer demand and job wages. And just a lack, a lack of goods in this economy is really impacting the way our society, at least inside of America, is really organizing around labor, capital and goods. I thought that was a really interesting section. Basically, this whole podcast was full of information. I had a great time with Jim Bianco. So guys, I think we should go ahead and get right into the episode. But first, let's talk about some of these fantastic sponsors that make this show possible. Bankless is proud to be supported by Uniswap. Uniswap is a new paradigm in asset exchange infrastructure.

• 4:09David Hoffman?

  Instead of a cumbersome order book system where trades are matched with other humans, Uniswap is an autonomous piece of software on Ethereum, which is what Ryan and I call a money robot. No human counterparties or centralized intermediaries, just autonomous code on Ethereum. Input the token you want to sell and receive the token you want to buy. Something brand new in the Uniswap ecosystem is the Uniswap Grants Program is now accepting applications for grants. We have been saying this for a while and we'll say it again. DAOs have money and they are in need of labor. If you think that you have something to contribute to the Uniswap DAO, apply for a grant to Uniswap. Just look at the size of the Uniswap treasury. It's almost $3 billion. This mountain of capital is looking for labor.

• 4:53David Hoffman?

  Do you have something of value to contribute to the Uniswap DAO? No matter how big or small your idea is, you can apply for a UniGrant at unigrants.org and help steer Uniswap in the direction that you think it should go. That's exactly what we did to get Uniswap to be a sponsor for Bankless and you can do the same for your project. Thank you, Uniswap, for sponsoring Bankless. Aave is a borrowing and lending protocol on Ethereum and just recently released Aave version 2, which has a ton of cool new features that makes using Aave even more powerful. With Aave, you can leverage the full power of DeFi money Legos, yield and composability all in one application. On Aave, there are a ton of assets that you can deposit in order to gain yield

• 5:37David Hoffman?

  and all of those same assets can also be borrowed from the protocol if you have deposited collateral. Here you can see me getting a 200 USDC loan against my portfolio of a number of different DeFi tokens and ETH. I'll choose a variable interest rate because it's a lower rate than the stable interest rate option, but I could choose the stable interest rate option if I wanted to lock that interest rate in permanently. One of Aave's V2 features is the ability to swap collateral without having to withdraw your assets, trade them on Uniswap and then deposit them back into Aave. Aave does all of this for you, all in one seamless Transaction. So you don't have to repay loans in order to change the collateral you have backing them. Check out the power of AVE at AVE.com. That's A-A-V-E.com.

• 6:21Ryan Sean Adams?

  Bankless Nation, we are super excited to introduce Jim Bianco to you. He is the president and a macro strategist at Bianco Research. He's a veteran of the dot com era. We're sure to talk about that. He's an expert in the global economy, macro stuff, financial markets as well. His bio says he's unencumbered by the biases of traditional Wall Street research. I love the sound of that. Maybe that's why he discovered DeFi before the rest of them. Here's what's also super interesting about Jim. He actually came to crypto, not by way of Bitcoin, like a lot of us, but by way of DeFi. At least that's how he fell down the crypto rabbit hole, as I understand it. So we've got so much to learn from Jim.

• 7:00Ryan Sean Adams?

  Want to get the Wall Street experience from a finance guy who's gone crypto native. Jim Bianco, welcome to Bankless. It's great to have you.

• 7:08Speaker 02

  Thanks for having me, guys. Big fan.

• 7:11Ryan Sean Adams?

  Well, we're a big fan too, and we'll talk about how our paths crossed too. It's like, you know, partially some tweets. You're very active on Twitter, which I love. But let's, let's start with this because we want to learn a few lessons from history from you, Jim. You've been in the financial markets a while and we always look historically at various parallels. I think the first parallel we want to look at is you were around, you were a veteran of the dot com boom bust. So you've seen market transformations before and we want to look at this through the lens of market psychology to understand really what we can learn. With the internet, we saw, we saw markets trying to price in this unknown tech, right? Like dot coms, how big is this thing going to be?

• 7:54Ryan Sean Adams?

  We often make parallels between crypto to the internet. Can you tell us what the learning lessons are? So what is it like to watch humanity grapple with the collision between some financial market and nascent technology? What can we learn here?

• 8:09Speaker 02

  Yeah, well, first of all, I was actually employed during the eighty-seven stock market crash. So I go back that far as well, too. So I was an aged veteran by the time we got to the dot-com crash of 2000. When you get new technology, you usually have two things going on at once. And this will sound familiar for the DeFi world. You've got the advocates that are saying, we are building something new, something real, something that is going to be lasting, and it's very exciting. And then you drop the whole chunk casino on top of it. You've got this wild speculation on whether or not the B2B stocks are going to go up, or the retailers are going to go up, or Pets.com is going to do this. And they don't care about what the long term is.

• 8:53Speaker 02

  I just want to make sure that this damn stock doubles before Friday is all that they care about. And the two kind of become oil and water because the people that are trying to build something real get really mad at those that are just wildly speculating with this stuff. And the people that are wildly speculating get mad at the people that are building something real. I'm here to get rich, get out of my way. You know, and so you've got a little bit of that. That's what you had in 2000. Sound familiar? Oh, my God, it sounds so familiar. Yeah, a little bit of what you've got going now. But that's the way new technologies always evolve is that you get the pioneers that believe that they're building something real. And then you get the wild speculation as well, too.

• 9:36Speaker 02

  You had the same thing, you know, you had the same thing when we went west. You know, everybody left under the arch in St. Louis, and they went west. And some of them were saying, we're going to build a new country. And the other ones were, I'm just getting Oklahoma to get my land rush. And that's all I care about and stuff like that. So you had the same type of thing happen there. But what I think you saw in May that I saw that was reminiscent of maybe even the eighty-seven crash in 2000 is you get a dominant player in the market. Now, in the DeFi world, that dominant player in May was the Dogecoin hundred-to-one levered hot-money crowd that was running all this stuff up and down all over the place. The market was ripe for correction.

• 10:19Speaker 02

  Then along came, over the bridge at the right time, was Elon Musk making noise about that, you know, it's all dirty, it's all field like coal and it's all dirty. And the market crashed. And if you looked at some of the protocols and some of the centralized exchanges, you had a massive liquidation out of a lot of those levered players. Now, this is very reminiscent of what we saw with a lot of those speculators in the first part of 2000 during the dot com crash. You blew them out. I remember watching, you know, on the make or burn site, watching just all of the, all the, all the accounts coming up that you could buy the collateral on. I mean, it was almost too many to keep in, watching hundreds of thousands of them on the centralized exchanges in the futures markets were blown out.

• 11:03Speaker 02

  You wiped out a class of trader in that market. That's why I think this market has been consolidated. The way you would reestablish another bull market, kind of like 2000 to 2002 in the, in the dot com one, is you have to bring in another type of player and then eventually you'll drag in that hot money one more time. The hot money's not gonna get you to 65,000 on Bitcoin, it's not gonna get you to 2,500 on ETH, it's gonna be a different player. Who is that different player? Well, your guess is as good as mine, but if I had to guess, that different player that you want to bring in is gonna be, as I heard a description out of Miami, is the old guys wearing golf shirts and blazers, basically the TradFi guys.

• 11:48Speaker 02

  They're gonna kind of come into this market and go, I believe, I believe, I believe. And then, once the market starts catching wind, then here comes all the 100 to 1 levered guys and here comes the next Dogecoin, whatever it happens to be, and that speculation will reemerge as well. So, what I think you're gonna see, if this pattern holds out, is, I like to say, a lot of people in the TradFi market like to say, market will move to the level of most confusion or most frustration, and what is that? Sideways for a lot longer than we think. It's not gonna plunge and prove some people right, it's not gonna soar and prove other people right, it's gonna do nothing and frustrate the hell out of everybody, because we're waiting For another crowd to kind of take the mantle.

• 12:32Speaker 02

  The long-term hodlers are there, they're not going to buy again. The short-term guys have been burned, they're not ready to jump in until an established uptrend has been is underway. So we need somebody else to come in and get the ball rolling and they will, they will. It will just take, I think, a lot more time than people think. So I wouldn't be surprised if in the fall and the winter, we're sitting around and we're looking at 2,400 ETH and we're looking at 40,000 Bitcoin and everybody's mad because it's not going down, it's not going up. It's just frustrating, everybody were waiting and it never seems to happen.

• 13:09David Hoffman?

  Jim, how do you feel about the velocity of the timelines of these things? The the dot com bubble, that was a year-long bubble and it didn't immediately just pop. And in the crypto world, we we like to illustrate our industry as like really speedrunning a lot of history of of money and finance. Does that also mean we're kind of speedrunning the the whole market psychology like cycle as well? Because the the whole run-up from, you know, Bitcoin and Ether up to where the it's highs where it was right before the crash and then the crash and now the the stabilization. How does that the timeline, the speed of the timeline kind of compare and contrast to what you've previously experienced in your histories?

• 13:52Speaker 02

  Oh, there's no doubt that the crypto timeline is at breakneck speed right now. And that and that the speed that everything is unfolding with has been much faster. I mean, the dot com thing, you could argue that the dot com bubble or the dot com mania really started with Apple in 1983. And that it really started going by 95. It was December of 96 that Alan Greenspan, the Federal Reserve Chairman, gave a famous speech where he talked about irrational exuberance. And that was an indication that in December of 96, a lot of people thought that tech stocks were getting overdone. They didn't peak until March of 2000. So you still had three and a half more years of those stocks going.

• 14:36Speaker 02

  In the crypto world, that's three and a half months, not three and a half years. So everything moves a lot faster in the in the crypto world. Take Apple as an example. I've used it an overlay on speculation with Bitcoin. Bitcoin has had seven corrections of seventy percent or more and a couple of ninety percent corrections, especially if you go back to two thousand thirteen after Mt. Gox and some of those others. Those were some vicious corrections that they that it had in its price. From nineteen eighty-three to two thousand three, Apple stock was unchanged. And by nineteen ninety-seven, there was actually talk about them going bankrupt. And it had multiple seventy, eighty percent corrections on weight. That was twenty years that it took. In crypto land, we're talking about four, five years.

• 15:18Speaker 02

  So everything moves a lot faster in this space. And it might be because of it, the nature of the decentralized world, that things can evolve a lot faster, too. You know, let's back up eighteen months. Where was DeFi eighteen months ago before DeFi summer? And where is it now? It's incredible the amount of adoption and, you know, the the technology has moved in such a massive way in such a short period of time. So the investment cycles and the speculation cycles are going to be much shorter, too.

• 15:54Ryan Sean Adams?

  Jim, we're getting a lot of insight from this and in in how these markets kind of repeat over and over again, because it all seems to be market psychology, part of the adoption curve, right? When a new technology is born. So he gives a few insights. One is there's these long-term holder investors who evangelize and believe in the future. Probably a lot of the crypto natives listening to bankless. Then there are these short-term speculators. Every market cycle has these two groups. Then you said what you need in order to restore after kind of a a crash is a new crop of buyers. Maybe these are the the the people in the Blazers. We want to talk about the people in the Blazers in a little bit. But it also seems like these things repeat in in these fractal type patterns, right?

• 16:33Ryan Sean Adams?

  You know, some people said twenty seventeen and twenty eighteen, like that was our cryptos.com bubble. And now we hear here we are again with another run-up and kind of a crash. So it's not going to play out exactly like the dot-com bubble, which kind of took years to get back to. I don't know how long it took Amazon to get back to all time high from like 2000, maybe like seven, eight years, something to that effect.

• 16:57Speaker 02

  No, actually nine years.

• 16:58Ryan Sean Adams?

  Nine years. So it took a while and this is maybe happening again and again. But I want to ask the question before we leave this section on market psychology to you, which is like, so how should a savvy investor play these markets then? What's, what are the secrets? What are the keys? What have you gleaned over time as you've observed these, this sort of psychology play out?

• 17:22Speaker 02

  So by asking how a savvy investor is going to play this market,

• 17:28Speaker 02

  I, I assume we're talking about somebody in this space you would refer to more as a hodler. You know, that they believe in the space long-term and they think that things are going to go and things are going to become much, you know, grow much more and become much more exciting and, and adoption rates are going to go up. And I think what you want to do is you want to show some degree of patience in terms of where you invest. You want to be expecting the types of things that we saw in May, or even the types of things that we saw in 2018 as well, too, that, that, that will happen along the way.

• 18:06Speaker 02

  You know, like I said, if you are, you know, it's easy now to see what transformational company that Apple is in 2021. But in 2003, after 20 years of sideways action and a bunch of 70% corrections, it was easy to see why Apple was destined to be a bankrupt company, you know, back then as well, too. It takes some time for this adoption curves to work, play out. Now, if you're asking me about, you know, speculators and how should speculators do it? There was a 1978 movie called Deer Hunter and one of the highlights of that movie is very, Robert De Niro was in it and one of the highlights of the movie was he was a Vietnam veteran. He went back to Vietnam and he got himself involved in Russian roulette games where they would basically get paid a lot of money

• 18:50Speaker 02

  to actually hold an actual gun to their head and see if they, see who blew their brains out first.

• 18:54Ryan Sean Adams?

  Nice.

• 18:55Speaker 02

  Go play Russian roulette if you want to play, if you want to be a speculator in this market, because eventually the bullet's going to be in the chamber for you. And you just have to understand that if you're going to play with lots of leverage in short term on these markets, that is a very, very difficult thing. Every, every speculator that I've met that has been successful, I'll just say this, it's their full-time job. They spend every waking minute of doing that. If you're part-time and you just want to chase memes and stuff, you're destined to wind up wiping yourself out. If you want to make it your full-time and only activity of your life to chase memes and you've got some talent for it, yeah, you could do it. But there's very, very few people that can actually wind up doing this. It's, I'm not saying it's impossible.

• 19:38Speaker 02

  It's just like, I'm not saying it's impossible to be 300 hitter. It's just that there's not very many of them that can actually pull it off.

• 19:45Ryan Sean Adams?

  This is why we talk to people on the Bankless Program. It's like, like use DeFi, pursue it, like figure this market out. But if you want to sleep at night, buy ETH, buy Bitcoin, buy the DeFi pulse index, and then sleep well at night. It doesn't have to be that hard. And people make it hard, I think, when they, when they chase narratives, chase trends and chase memes. But let's talk a little bit more about macro markets now. So I think a second lesson, maybe you could teach us from history as crypto natives in history, is about macro and how it impacts these markets, right? And so like, put your macro cap on for us and tell us what is going on in macro?

• 20:28Ryan Sean Adams?

  I think people listening to this heard about 5% inflation in May. What does that mean? What are the long-term COVID impacts on markets? What's going on with all of this money printing we keep here about? Tell us the story around macro.

• 20:41Speaker 02

  Well, the story about money printing is the story about the Federal Reserve and the, the federal government through all of its stimulus programs. As I've referred to it as mailing money. They mailed a $1,200 check to everybody and above, below certain income thresholds in April of last year that

• 21:02Ryan Sean Adams?

  Airdrops, right?

• 21:03Speaker 02

  Yeah, yeah, airdrops, exactly. And, and they got really fancy with some of those checks because they were direct deposit some accounts and all and stuff. And then there was a $600 one in In December and then there was the $1,400 check in March as well too. And what happened with a lot of that money is it found its way into traditional brokerage accounts. Robinhood being the, the, the, kind of the, the poster child for them putting it in. That's a, that's a form of savings. They just put it into their savings account. Their savings account just happened to be, uh, you know, a, a Robinhood account and they just wound up buying, you know, the ARC Innovation Fund with a lot of their money as well too.

• 21:44Speaker 02

  And they, they chased it. So it really did underpin the market as well too. Along the way, the savings rate in the United States skyrocketed to levels that we never thought were possible. For, for a, a, a benchmark in 2005, before the housing bust, the savings rate was 2%. Now, what is that? That means the total amount of money you make, less what you spend, you had 2% left over. And that's extraordinarily low. Why? Cause everybody owned a house. Everybody owned the stock market and it always went up. That was my savings. So I could spend my whole paycheck. Then we had the housing crash in 2008. We had the stock market fall 50% as well too.

• 22:26Speaker 02

  And the savings rates went to about 6% or 7% because now I can't, I can't trust my house. I can't trust the stock market as much. This is circa 2010 to 2013 as well. Well, once we got all this mailed money to everybody, the savings rate went to 27%. And so a number that was far and away the highest that we've ever seen. People are stuffed to the gills with money that was mailed to them. They're spending it. They're buying stuff. They're now, now you can walk into a store without a mask. And I was like, oh, now I could get on an airplane and go somewhere. Interesting thing about airline travel, uh, just to give you an idea of where the country is. If you look at the official TSA statistics about, we're about 80% of the way back on airline travel.

• 23:10Speaker 02

  We're, we're flying 80% of the level we did pre pandemic. But the airlines will tell you that leisure travel is at an all time high. Business tra- business travel is half of what it used to be because I have no, I would love to go to New York on business, but nobody's in their office. So there's no reason for me to get on a plane to go to New York, but I'm traveling with my family more than I've ever have. And a lot of people are because they've got the time to do it as well. So. What's been fostering all this money is this spurt of inflation. We have inflation in this country. That's not an opinion. That's a fact. The opinion is, how long will it last? And the Fed likes to use the phrase transitory,

• 23:54Speaker 02

  meaning that it will go away fairly soon. And they're using as an, as their,

• 24:02Speaker 02

  they're, they're saying because the bond market is not shooting up in yields, it's confirming their belief. Well, we'll see, you know, where that winds up going. I happen to be a little bit more pessimistic that the inflation rates that we're seeing are going to be a lot more permanent than the Fed thinks that they're going to be, than a lot of Wall Street thinks that they're going to be. And I also fear that if we see the economy stumble a little bit, they've already got their built in answer. Well, we'll just mail more money is what we'll wind up doing. We'll just print up more money and we'll mail it to, to everybody and that will just foster this problem that we have over and over again. And I'm sure that the libertarians that are in the crypto universe are loving what I'm saying here and like, yes, that's why

• 24:47Speaker 02

  the crypto space is taking off because we don't have these kind of shenanigans and bad policies that seem to be going on along the way. So yeah, I think the real story in the, in, in the economy is the story of inflation. We have it. We have it because we've, we've stuffed everybody full of money. The, the, the hope is it's transitory. It will go away fairly soon, like by the end of the year. But there's some like me, Paul Tudor Jones, Jamie Dimon, just to throw out a couple of names, just the last 24 hours that have come out and said, I'm not so sure that this inflation rate, this high inflation levels are going to go away. And we'll have to see what the second half of the year brings.

• 25:29Ryan Sean Adams?

  Okay. Well, let's talk about that just really quick because I think inflation is possibly the big story now. And like, I think folks in crypto will argue, we saw asset price inflation over the last 12 years unparalleled, but now we're seeing it reflected in the way the government measures inflation, which is primarily CPI, but a lot of people, I think a lot of people listening to this. I've never grown up at a time where inflation was higher than 5% for instance, for a sustained period of time, certainly not like very few people have seen double digit. Don't remember like the 1970s when the country saw that. What does the world look like when you have sustained high inflation?

• 26:12Speaker 02

  Usually, yeah, usually what is also part and parcel with an inflation rate is shortages. And that's what drives prices higher in the seventies. I was around to remember it and you've probably seen the black and white images, no gas, gas lines. We constantly had shortages of gasoline. 2021, we've constantly got shortages of pretty much everything.

• 26:36Ryan Sean Adams?

  Like commodity shortages?

• 26:38Speaker 02

  No, I'm talking about finished goods.

• 26:40Ryan Sean Adams?

  Okay.

• 26:40Speaker 02

  Like if you, if you go to a store and you want to buy adorable good, you want to buy a refrigerator, a stove, a washing machine. And you'll go into Menards or Home Depot and they'll say, it's on sale, look at this price, we'll beat out of the competitors. And you go, great, I'll take that dishwasher. Okay, good, we'll, we'll, we'll, we'll pencil you in for an October delivery. October, I want it like tomorrow, I don't want it in October. What we've been doing, what we do when we have high prices, or what we do when we have high demand, excuse me, is we've got one of two options. We can either raise prices or we can ration products. And what we're doing now and what we did a lot in the seventies is rationing products as well, too.

• 27:22Speaker 02

  You've probably seen it, I live in downtown Chicago and I've seen some, some of the restaurants in my neighborhood that say, close today, couldn't get enough people to work.

• 27:31Ryan Sean Adams?

  Yeah.

• 27:31Speaker 02

  You know, not enough, not enough busboys in which they're rationing labor, just pay them more money and they'll show up. Well, I don't want to pay them more money. Okay, so you're just rationing your labor is what you're doing. So you see a lot of rationing is what you see when you start getting high inflation and you're beginning to see that at the finished goods level. If you've, if anybody, anybody owns a home and would, would really appreciate what I'm about to say, you can't get anything. You can't get anything from two by fours. Dishwashers, God, if something breaks in my house, it's the frustrating thing is to find the replacement part as well, too. It's always the aisle at Home Depot never has the part that I need to fix when something breaks.

• 28:11Speaker 02

  It seems like, or maybe I'm just having a bad streak, but the data does support that idea that there's a lot of rationing. So that's what you're going to have to get used to, whether it's rationing your restaurants or rationing the products you like. Or maybe even because of the demand for leisure travel, rationing out those airplane seats. So that you can go to Florida in the winter because everybody else wants to go to Florida in the winter as well, too.

• 28:35Ryan Sean Adams?

  Wow, that is so strange. We like, we haven't really lived through that. And like, what, really quick, though, Jim, because I'm so curious, what happens to assets in this scenario? Like, what, how does the investor prepare for this kind of inflation?

• 28:46Speaker 02

  Well, the first thing you gotta keep in mind is there's two broad categories of assets. There's equities and there's fixed income. Let's take the second one, fixed income. If you're going to buy a bond that's going to give you a certain level of returns every year, your fixed income. And the prices of stuff rises, then the value of your bond market, the value of that fixed income is going to depreciate. Bond prices are going to fall and interest rates are going to rise. And as interest rates rise, the cost of borrowing, whether it's a mortgage or a business loan, is going to go up. And it's going to start to impair the economy. And then that will eventually impair the stock market. That's not happening now because one, interest rates aren't really going up yet.

• 29:29Speaker 02

  Two, the inflation thing is only months old. It's not many years old at this point. And three, there's a widespread belief that these markets aren't real anyway. That the Federal Reserve could come in and wave a wand and fix it all and it will. And their, their, their mandate is to make sure that my stock portfolio always goes up. So there's this, this, this zeal to take risk in the market because you, you don't have to worry about some kind of a downside to that spec. I think that's a little bit misplaced. I think we're giving the Fed a lot more credit than they, than, than they deserve. In terms of being able to hold markets up either through yield curve control or any of that.

• 30:08Speaker 02

  Other stuff yield curve control in other countries like in Japan and stuff has shown a very spotty track record it actually working. To the degree that they want, we tried it in the 50s in the US and it didn't work under the name of um Operation Twist as well too. So I think we we we we give the Fed too much credit, but the point is here is that if you get those rising prices and you wind up having the bond market start to suffer and that's the cost of capital, it will eventually filter through to everything else. But that's not the case right now. The case right now is everything's okay. You know, Jay's got our back at the Fed and he'll print enough money that uh you know, everything keeps going up. And that's exactly what's been happening at least at least this year.

• 30:52David Hoffman?

  Jim, I want to get your perspective as to how all of that interacts and collides with the crypto markets. But but before we get there, I want to tie off the conversation about shortages because I'm curious as to where these shortages are actually come from. Yeah, or where are they coming from? Are they are they a result of just a lack of production because people have been quarantined at home during COVID? Or is it more specifically a phenomenon as a result of financial markets? And us not really being able to allocate capital appropriately doing due to the distorted nature of the markets? Why? Why do these shortages exist?

• 31:26Speaker 02

  Well, I have an outside the box view. You know, a traditional economist will tell you that there is a there is a breakdown in the supply chain. Is what they will tell you that we are not making stuff as fast as we used to. And I've pushed back on that and I said, no, we are making stuff as fast as we used to. And if you look at container rates, you know, to put a container on a ship out of China to send to the port of Los Angeles. Or if you look at railroad rates, how much does it cost to put a a container on a rail car? And you know, ship it across the country. So rates are skyrocketing right now. And the reason is we are demanding stuff. We've you know, the misallocation of capital is if you mail people a bunch of money,

• 32:09Speaker 02

  eventually they're going to want to buy stuff with it. And eventually they're going to all buy kind of the same things. And we're not going to have enough of it. And that's where the shortages are coming from. So what I'm saying is. I think the problem is the supply chain is running fine. It just can't keep up with the demand that everybody wants of everything. And we've been satisfying that by saying you'll get it in October. And eventually, people are going to say, but if I give you extra, will you give it to me now? And that's how you wind up with inflation, higher prices. And I think that that price, that process, excuse me, is now beginning where we're starting to see prices start to go up. No more so than in wages. We're finally starting to see companies

• 32:49Speaker 02

  start to realize that the reason that you don't have enough employees is because you are not paying them enough. There was a story from last week. There was a job fair by a bunch of restaurants in St. Louis. And they had 100 openings. And they held a job fair, all these restaurants, 12 people showed up. You know, the answer is, you're not paying them enough. That's why they're not showing up. Raise your wages and they'll show up. And I think companies are finally starting to get that. And we're starting to see wages go up. All that filters into is inflation.

• 33:23David Hoffman?

  Yeah, that really seems to be the through line. It's not because people are stuck at home quarantining. That phase is perhaps behind us. It's really a question of there's so much money in the economy right now that it's really distorting how people choose to engage in the world. Jim, we got a report not too long ago that there was 5% annualized inflation at the end of May. How does that number land with you? And where do you see that number going over the next year?

• 33:53Speaker 02

  Well, keep in mind that that 5% annualized rate is what there's a term that economists use called the base effect, because you're comparing the data that we have so far is through April. May's numbers will be out shortly. April of last year, April last year was the height of the shutdown. So you're comparing the absolute bottom of last year to the current level. So you've got that big number. So over the next several months, that 5% number should moderate a little bit. But if you look at the last three months. And that and the annualized rate that prices have gone up over the last three months is 8%.

• 34:33Speaker 02

  It's been booming. That's a 40-year high that those are now economists will dismiss that as that's the reopening. Because 90 days ago, we were still wearing masks and we were still under restrictions and now we're reopening. Yes, and that number will come down a little bit too. But here's the thing. I suspect through the rest of the summer, those inflation numbers will come down. And those that think inflation is transitory, say, see, I told you they were going to come down. But I would argue, yeah, and watch where they bottom out, maybe with still a four handle on them. And that's a very high inflation rate with a four handle. It might not be five, it might not be eight, but it might be high threes to four. And why is that a high inflation rate? Compare it to the bond market. A 150, a one and a half percent yield in the bond market.

• 35:16Speaker 02

  I put my money in a bond investment. I get one and a half percent. But everything's 4% more expensive in a year. That's a bad deal is what that is. And people will start selling bonds if that perception comes in and interest rates will go up. And then when the interest rates go up, the cost of capital goes up. Eventually, if they get high enough, maybe over 2% on the 10-year note. I think the stock market starts getting a little weak-kneed, but we're not there now. We're at 150. So the stock market seems to be fine for the moment.

• 35:47David Hoffman?

  Let's introduce the crypto variable into this conversation with the conversation of, you know, money printing, inflation, changes in labor and just reorienting of, you know, the economy. When we add in the conversation of crypto, how does crypto collide with this conversation? Where does crypto come in? How does it fit into the conversation?

• 36:07Speaker 02

  Well, I, you know, it fits in the conversation a couple of ways. I mean, the Bitcoin side of it is they're talking about sound money, a store of value. I think a lot of people are comfortable with that idea, especially.

• 36:22Speaker 02

  I know a lot of people make this comparison that the younger crowd likes crypto more than the older crowd. I'm going to say that that's the wrong causation. I think the causation is how invested are you in the TradFi system? Look, if you are a partner at Goldman Sachs, even if you're 28 years old and you're a partner at Goldman Sachs, you think traditional finance is the greatest damn thing you've ever seen in your life and you don't want anything to change on it. But if you're 28 years old and you've got $4,000 in a Robinhood account and you look at crypto, you have a much different view of it. So it's really about how far away

• 37:04Speaker 02

  do you get from the TradFi system as to your view. So those that are more out of the system tend to look at things like Bitcoin and maybe DeFi a lot more positively than those in the TradFi system. And I think it really comes down to with the TradFi system, the basic problem it has is permission. You need permission to do everything in the TradFi system. So that 28 year old, I don't think there are any 28 year old partners at Goldman, but there's young partners at Goldman. They have opportunities to invest in certain VC funds and certain other investments rest of the world can't touch. You know, and I used to, as an aside, I used to get very angry when people used to say, oh, look at this book, invest like Warren Buffett. I was like, I wish I

• 37:48Speaker 02

  could invest like Warren Buffett. He's presented with ideas and investment opportunities that no one would ever give me because he's Warren Buffett. He gets the special permission. I don't get the special permission as well too. So I think that the crypto universe is more democratized. People like it because it gives them the opportunities. It gives them the opportunities for big gains that only the certain few accredited investors is the word we like to use that are allowed in the TradFi world.

• 38:22David Hoffman?

  Jim, in DeFi, we are seeing some pretty awesome interest rates on stable coins, right? They fluctuate because it's DeFi, but you know, typically, they've been holding above 10% and 12%. And sometimes they sustained numbers as high as 16 to 20%. And now, to some degree, a lot of this is subsidized by token issuance from protocols. And perhaps there's a lot more risk when we start yield farming stable coins in DeFi. But it's all dollar-denominated, you know, yield in DeFi, which is in stark contrast to the very low rates that bonds are offering right now. How do you explain this discrepancy between the yields in DeFi and the yields in the bond market? And does the inflation conversation have anything to do with this?

• 39:06Speaker 02

  Well, a lot of the bond, a lot of the TradFi bond market is manipulated and it's set by the, you know, the Federal Reserve. The Federal Reserve sets short-term interest rates and there's a lot of, and they, and they buy $120 billion a month of bonds. It's a trillion and a half a year, all the way out to curve, all the way out to the 30-year bond as well. So what you see in the, in the TradFi world is an administered rate. And a lot of people have argued that that administered rate has been artificially low. And even some Fed officials will admit that as well, too. By the way, the best Fed officials to listen to are the ones that recently leave the Fed. Then they tell you what they really think, instead of just reading talking points.

• 39:47David Hoffman?

  Oh, wow. So who, who are those folks now?

• 39:49Speaker 02

  Dan Turillo has done some really good stuff. He left the Fed in 2017. And by the way, when he left the Fed in 2017, now remember, this is before the pandemic. He gave a speech at Brookings and he said, you know, the dirty little secret in the Fed is they don't have a working model for what causes inflation. They really don't understand it. And, and to my response is, that's fine, it's a complicated subject, but you hold yourself out as pretending that you've got all the answers. And he's trying to say that they really don't have all the answers. You would never get that when you're actually still getting a paycheck from the Fed. But once you leave the Fed, you can get a lot of interesting kind of, those kind of comments from Federal Reserve officials as well, too.

• 40:31Speaker 02

  But to your question about stable coins, I think that what you're seeing in the crypto world is pure supply and demand. Is that it's set by smart contract. It is not administered by somebody giving permission for a certain level of interest rates at this level or that level. And not only do you see much higher interest rates, but you see a lot more volatility in interest rates. If there's anything that's similar to that in the traditional financial world, if you looked at interest rates in the 18th century, in the 19th century, and yeah, I have looked at them, I studied them, they were just as volatile and you saw that kind of movement around the agricultural cycle too, that you know, if you tried to borrow money and

• 41:13Speaker 02

  if you tried to borrow money in the spring, when all the farmers were borrowing money to plant, it was very, very high. It might be in the high teens. If you tried to borrow money in the fall, when the farmers were paying back their loans, you know, the rates might be one or 2% wash, rinse and repeat for the next year as well. So we've seen this in the, in the past, when it was more of a free market that was setting rates that you'd see these kind of volatility in interest rates.

• 41:37David Hoffman?

  Hey guys, I hope you're enjoying the episode with Jim thus far. Right after the break, we bring up the Hayden Adams tweet that Jim made that got him on our radar and actually onto this podcast, which overall just leads us into a conversation of how DeFi is eating the banks, which then leads us into a conversation and Jim goes off on one of the best rants I've ever heard on the Bankless Podcast about how nothing has really fundamentally changed about banks over the last hundred years. And it was just really enjoyable to, to really hear the passion that Jim has and his vitriol for just the antiquated permission banking system. Really enjoyed that part. And then we asked the question, will Wall Street adopt or resist DeFi? And we talk about the different paths that different firms in Wall Street

• 42:22David Hoffman?

  have laid out in front of them. And then Jim finishes off with sharing his biggest fears about the future possible regulation that could come to our industry and what we can do about that. Jim was really a fantastic guest. Again, like I said in the intro, one of my favorite boomers to come on to the Bankless Podcast. Jim, thanks for, thanks for sharing. All of your insights with us, but first, before we go into the second half of this show, we have to take a moment to talk about some of these fantastic sponsors that make this show possible. Balancer is DeFi's most powerful automated market maker. Typical AMMs just have two tokens inside of one liquidity pool, which can lead to fractured liquidity across the many pairs in DeFi. With Balancer, you can access the full power of multiple tokens inside of one single AMM, which unlocks an entirely new playing field of possibility.

• 43:07David Hoffman?

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• 43:51David Hoffman?

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• 44:35David Hoffman?

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• 45:21David Hoffman?

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• 45:24Ryan Sean Adams?

  Jim, since we're getting into DeFi, so like I think we concluded with some fantastic lessons about market psychology, boom, boom, bust and dot coms and how we can apply that here and also how macro applies to crypto. So thanks for schooling us, Jim. This has been absolutely fantastic information so far.

• 45:45Ryan Sean Adams?

  And I could kind of see why you have a reputation for being kind of a contrarian and a different thinker on some of these subjects. Like one of the framings you just illustrated, even when we're thinking about crypto and DeFi, that I think is new for me or helpful for me. It's not so much, you said, older generations versus generations. It's really a matter of incumbents versus outsiders, right? And so the people who are attracted to DeFi are these kind of contrarian outsiders who don't have ties into the banks. It's kind of like bankers versus crypto natives. And the bankers will probably be slow to realize these things. Why? Because they're getting disrupted by them. Well, let's talk about banks for a minute because this is actually how, you know, you've been on our radar for a while, Jim.

• 46:30Ryan Sean Adams?

  It's like your Twitter and good comments. I'd heard a lot about you. But I think this tweet really sealed the deal for David and I. We're like, oh, my God, we got to get Jim on the show because this is a picture of Hayden Adams. We talked about in one of our weekly rollups. I think this was featured in like the Wall Street Journal. Yep. And it's just hilarious because if you can't see this on YouTube, we've got the screen up, but it's just a picture of Hayden Adams, creator of Uniswap, of course. He's been on the podcast before and he's in this like. Crazy outsider, not in a suit and tie, crazy outsider looking unicorn t-shirt, right? He's just kind of like appearing from behind the bushes. And you said, bankers, meet your worst nightmare. This is Hayden Adams, and he's coming to destroy your effing

• 47:14Ryan Sean Adams?

  bank. He did not ask for permission. He's built it. And two years later, he's threatening your bank. I love the like, choice use of hyperbole there. He's like, but like, there is truth to that message. And that like, here's a guy who created some code, helped create some code. And we had somebody on the podcast recently, I think it was Spencer Noon, who said, the value of each line of code in Uniswap is about $18 million. So he creates some code, very small team. And now he is disrupting major trading venues, right? Starting with crypto trading venues. But how, how soon until that leaks into the NASDAQ, New York Stock Exchange? So anyway, that's what put you on this radar. And we're

• 47:56Ryan Sean Adams?

  like, we have to have Jim on the podcast to talk about DeFi, which is possibly banks' worst nightmare. But can you talk to us? Because you've been in the belly of the beast? What is wrong about the current, like, what is so bad about the current banking system and financial system that needs to be disrupted?

• 48:13Speaker 02

  Well, first, can I, can I give a shout out to Hayden Adams? Man, you are my hero. I think what you've done has been nothing short of phenomenal. And by the way, I was talking to a reporter from a German magazine. And they're now thinking that Siemens laid you off, and then you created Uniswap. That might go down as one of the worst business decisions in German business history, letting you go like that. As far, because eventually, Uniswap's probably be worth more than Siemens. You know, within like, four or five years after that happened. So I'm just a gigantic fan of what you've done. And just keep going

• 48:51Speaker 02

  and keep, keep disrupting the business. Let me talk about banks. And let me not get pissed off here when I start talking about banks.

• 49:01Ryan Sean Adams?

  Let me stop.

• 49:02Speaker 02

  Or get pissed off.

• 49:03Ryan Sean Adams?

  This is the right place to be pissed.

• 49:05Speaker 02

  In 1871.

• 49:08Speaker 02

  Western Union invented the wire transfer in 1871. And if you wanted to send $300 to somebody, say, in San Francisco, it would cost you 3%. And back in 1871, they had to put 300 damn dollars in a pouch on a horse and somebody had to ride it to San Francisco. It cost you 3% to send money in 1871. In 2021, to do a bank, it took two to four days. In 2021, to do a bank transfer, a bank, I'm sorry, a wire transfer, not a bank transfer, it costs 3% and takes two days. Not one damn thing has changed in 150 years when it comes to the banking system. Nothing has changed.

• 49:52Speaker 02

  When you look at remittances across the world, there are over a billion migrant workers right now around the world. They are working in some of the worst conditions ever, either out in the sun or in terrible mines or in awful factory conditions to make some money to send back to their families. The average remittance is about 10 to 15%. They work one month a year to basically pay the bank. And it's $500 billion of remittances a year that they're paying the banks for to just send their money back to their family. We could give them a month of their life back or we could give their families 13 months of pay for 12 months of work

• 50:38Speaker 02

  by disrupting these terrible payment rail systems that we have right now. They are broken. They are highly regressive. They create inequality and they create a lot of problems. That's why you have 1.7 billion people unbanked around the world and you have tens of millions of people underbanked in the United States as well, too. They've had 150 years to fix this system. The Federal Reserve has been running the payment rails of the United States for 107 years and it still takes two days to send money using the Federal Reserve's payment system. "Oh, but don't worry, we got Fed Now coming."

• 51:18Speaker 02

  Hundred and seven years later and we might get to real time payments by 2025 is what their is what their hope is. Uh for the moment, so let's start with this is a terrible system that is slow. Ineffective, expensive, and it falls right down on the poor. Now, whenever I say this, people are like, oh, I don't know what you're talking about Venmo. I could send Venmo people money in a second. Yeah. Cause you're rich. You have a bank account. You have enough money in the bank. That they've already ripped your eyeballs off six ways to Sunday with fees that they give you this free little app either Venmo. Or Zelle and that you could send money to the other people that you're having dinner at.

• 52:01Speaker 02

  Uh within one second, but boy, you've paid for that. You've paid for that in a big way before you get to that point. But I, as I said, if you want to pay thirty bucks to the to the guy that uh fifth the dinner bill. Go down the street to a bank you have no relationship with. And say, I have thirty dollars here. I would like to send it to Ryan. Let's see what they charge you for and let's see how long it takes you to send that money. That's the problem with the banking system right now is that it has been slow and incumbent and a lot of the regulators. Are at the fault of it. They've been very, very slow to actually fix this system. Within that system, there's this mentality.

• 52:44Speaker 02

  Of a permission system and I'll give you an example from this week. I think this is going on is a tremendous mistake. Goldman Sachs has got all of their employees back at work full time, starting last Monday, two days ago. JP Morgan, either next week or the week after is going to have all their employees back full time. Why is their point? Why is there this zeal by a lot of big bankers to get everybody's got to get back in the damn office? Ten hours a day, five days a week. Cause their job is to give everybody permission. And they take that job very, very seriously. And we don't want to be giving permission to everybody over Zoom in our underwear. We want to show that we are serious about giving permission.

• 53:28Speaker 02

  And we want everybody back in the office. And why is that going to be such a tremendous mistake? Because what the pandemic gave to the big banks is a gift. It forced them to decentralize, send everybody at home. Let everybody work at home and guess what? They had record profits and it worked. And in that world, they could see, we don't need to have this iron control over everything that we think we need. Nah, they didn't decide that. They decided that they had to go back to 2019 as fast as possible. And get everybody back in the office. So what they've shown me is not only don't they understand? The absolute inequality of the current system, especially remittances.

• 54:12Speaker 02

  They really don't get decentralization because you already were decentralized because you sent everybody home. And now you're forcing them back into that big building in Manhattan to centralize them all over again. So when DeFi comes and it keeps coming, I'm going to keep remembering this and I'm going to keep saying. They just don't get it at its core. If they can't even let their employees work at home a couple of days a week. Or trust their employees to do the job that they were paid to do, whether it's at home or in the office down the hall from me. They're never going to get a permissionless decentralized system as well too. So let's start with, other than that, I have no opinion about the banking system.

• 54:56Speaker 02

  As far as that, it is, it is terribly broken in a lot of those regards. Now you bring in DeFi. And DeFi is looking to fix a lot of those problems. Stable coins is a potential payment rail. You know, on the collateralized lending side with, with a lot of the lenders as far, uh, protocols as well too. When it comes to Wall Street, again. Wall Street is, you know, with their, with their order book system. Again, a very capital intensive permission system that only certain people can do certain things with. To replace that with the constant product automatic market maker. That these are revolutionary.

• 55:38Speaker 02

  changes that on Wall Street not only don't they some let me back up a year ago they were dismissed out of hand that this is just bullshit by a bunch of kids that doesn't mean anything today they're not sure what to make of it and they're they're they're hoping that they're saying yeah it seems okay but our system is still better is is is is where they are but they are coming along a year ago no one in the TradFi system was asking me about DeFi today I'm doing eight to 10 meetings

• 56:17Speaker 02

  a week with TradFi customers to discuss DeFi and basically they want to know what it is and how it works and the biggest thing you guys will love this the biggest thing that they seem to fall on I hear this over and over again it's okay I opened the Coinbase account I bought some ETH where's this DeFi thing and I was like have you ever thought about moving your money on to like Dharma or MetaMask onto a wallet what's a wallet?

• 56:43David Hoffman?

  What's the DeFi app I need to download?

• 56:45Speaker 02

  Yeah exactly exactly where's the DeFi where's the DeFi link on my Coinbase website you know that you know and so that's like the shocking part about it as well too and then when you tell them that they have to go do that they get a little bit apprehensive and by the way

• 57:02David Hoffman?

  Right.

• 57:04Speaker 02

  their their pension is a little bit well placed the UX experience is terrible with DeFi and there's no better experience than Lex Friedman's podcast with Vitalik a couple of weeks ago he was talking about when he got the Shiba coins put into his account and he went to Target he bought a laptop and he and he called his family to get his private key so he could transfer them into a different account and he said he was stressed and he had to write a JavaScript program you know in order to get it right.

• 57:34David Hoffman?

  That's Vitalik guys.

• 57:35Speaker 02

  Yeah I was like this is the V God his his fingers all tight about sending money to a different account.

• 57:42David Hoffman?

  Granted Vitalik's moving a billion dollars.

• 57:47Speaker 02

  Yes, but it shouldn't be, it shouldn't be that stressful and experience to move any kind of money. I mean, to this day, whenever I move money, I always start by paying two gas fees. I move $10. Okay, it worked. And then I move the rest because, because of the nature of the system. So if you really want to get this, really want to get the Blazer guys into this business, the UX experience has got to get better. That is, is, it's, you know, that it's one thing to say that there's no permission. If you lose your seed phrase, you're done. I get that. But it's a whole nother thing that, oh, if you made a mistake and you didn't do the memo line right, your money just disappears. It's just gone and there's no one to call and ask, sorry, try again.

• 58:28Speaker 02

  And stuff. That's, that's very, very disquieting for a lot of people. I understand. It will get better. It will get better. But right now, that is the biggest hurdle that they face. What's this electronic wallet thing? You know, and stuff like that.

• 58:42Ryan Sean Adams?

  Jim Bianco here, just spitting fire, like as he's talking about the banks, like hot content, Jim. Like, okay, so he, he, here's what we're talking about here. You laid it out. I've never heard anyone lay it out this way. It's super interesting. It's basically since 1871, the cost of a wire transfer hasn't changed, right? So like, we live in a world, we were talking about inflation earlier, but the, the gift to humanity, the, the thing that causes us to progress is actually technology. Technology is a deflationary force. That's how we have a better quality of life as, as a human species. And it's so interesting to me because software has eaten entire industries, but it hasn't yet touched the banking industry, has it?

• 59:25Ryan Sean Adams?

  As evidenced by the fact that 1871 to now, a wire transfer really hasn't changed. It costs the same, takes the same amount of time. Moore's law hasn't even affected it. And I think what you're saying here, Jim, is because it's, it's basically been, been siphoned off. Like, technology hasn't been able to impact banking, the entire industry, until crypto. It's been permissioned. It's been sort of, you know, super tightly regulated. It hasn't been open to any of the innovation that we've seen the internet bring. And is that the difference? Is that what's changing with DeFi? Like, so the basic thesis, as Andreessen Horowitz might say, is this is just software eating banking? Is that what you subscribe to? Is that what we're talking about here?

• 1:00:10Speaker 02

  Yes, yes, there's two, there's two industries right now that haven't seen the big, you know, software eating them up, and that is financial services and healthcare. And what they both have in common is they're heavily, heavily regulated and heavily permissioned. And it's impossible to break through with those until you get to what DeFi is, is in a decentralized, permissionless world, which is why, like I said, I'm a fan of your, your, your podcasts. And boy, the, the center of, in my mind, the center of this conversation is decentralization. Is that, you know, I don't think this industry can go forward unless it is, becomes truly decentralized and permissionless.

• 1:00:53Speaker 02

  As an example, stable coins have become the bedrock of this industry. I think stable coins are going to become the massive use case that are going to bring DeFi to the real world. That I can envision a day where people are using stable coins, they are already in Asia to some extent.

• 1:01:13Speaker 02

  That they are, they're paying for everything from trade finance to a drink at Starbucks. And then DeFi will just verge into service all of these stable coins. But when your two largest stable coins are centralized in Tether and in Circle, and DAI has got half of its reserves in Tether and in Circle, this is the wrong business model for these stable coins. They have to go fully decentralized, permissionless, outside of the reach of, of the permissioned world. There's a story today, the day we're talking, Bloomberg has a story that regulators are alarmed about that stable coins are over a hundred billion in value

• 1:01:56Speaker 02

  and that they don't have any backed insurance like FDIC behind them or anything else. Well, first of all, neither does the dollar. You know, that's a money market fund that's supposed to have backed insurance or a bank account. These are not bank accounts, these are mediums of exchange. So they fundamentally are, they're confusing the, the two together. But more to the point, what they're also saying to us is because of the centralized natures of Tether and Circle.

• 1:02:25Speaker 02

  We can, we can do something in that space and we could really, for lack of a better way, we could really fuck with these stablecoins in a lot of ways. And so what we really need is a decentralized, permissionless, stablecoin. DAI is it, but it can't be if it keeps using tether and circle as its reserves. It's got to move beyond that in order to become truly outside of the reach. That's when you're going to get the software eating the financial services world, when it becomes outside of its reach.

• 1:02:55David Hoffman?

  So Jim, I just want to ask, what is your favorite DeFi app? What's it like to be Jim using DeFi? What's a, what's a day in the life of Jim as a DeFi user?

• 1:03:06Speaker 02

  Um, probably Uniswap. I love, I love the, um, the way that you could trade on Uniswap. Uh, I've become a big fan of the business model of the automatic market maker. Um, right now I could see a lot of applications for it, much beyond where we're going elsewhere. Look, what is there? If I read, you guys can update me on it's like 72,000 liquidity pools on Uniswap or some crazy number like that. You could never in an order book world, get 72,000 actively traded markets like you can, um, with the automatic market maker that you can in Uniswap. It, it

• 1:03:44Speaker 02

  is a revolutionary, uh, it is a revolutionary, um, idea. It is a revolutionary concept. And by the way, speaking of revolutions, I want to throw out another thing too. Uh, there are certain people in life that are so far ahead of everybody else that they become, you know, it takes the world a generation or two to understand what they were doing. Shakespeare, you know, Da Vinci, maybe Newton, Vitalik's in that category right now because I think, you know, when he developed the white paper for Ethereum, what was he still in high school or just months out of high school? You know, he come up with the concept.

• 1:04:22Ryan Sean Adams?

  Yeah.

• 1:04:22Speaker 02

  Yeah. It was freshman year. It was his freshman year. Theo paid him a lot of money to develop it or something like that. And then, you know, the white papers, the ideas on stable coins and quadratic voting and the ideas on the automatic market maker from his Reddit post and stuff like that. You know, it's going to take the rest of humanity, a generation or two, like Einstein, to basically grasp what he's doing. And that is truly unbelievable, what has been happening as long as it stays decentralized. If it ever becomes centralized and they keep putting centralization on it, then somebody can take it over and somebody can run it and somebody can give permission. And then all these ideas go away.

• 1:05:06Speaker 02

  So I really think the industry really needs to really think about decentralization first, second, third and fourth. But the fact that the stable coins aren't decentralized, nobody seems to be bothered by it. And throw out another one too. Michael Saylor suggesting a miners council? Boy, what a terrible idea a miners council is. Does that mean then I have to join a miners council to be a miner? Does that mean I need permission from the miners council in order to mine Bitcoin? I mean, it is just antithetical to everything it stands for. But yet, people like him keep coming back to these decentralized mentalities. It's going to take the world a while to break at that.

• 1:05:48Ryan Sean Adams?

  So I want to ask Jim, so, by the way, totally agree with you on decentralization, right? Right. The hence, hence the title of this whole movement that that we're in, which is bankless, right? Let's make this as bankless as possible. And if, you know, Tether is still a banked product at the end of the day, it's just an ERC wrapped banked product. So we do want store of values and monetary units that are as bankless as possible. Like, I want to get back to like, what's good, but also what still sucks about DeFi, right? So you're commenting about the, like, people in suits and blazers coming to you and saying, hey, Jim, I bought some ETH, but like, where's this DeFi thing? I want to ask you, like, what is it like from your perspective?

• 1:06:29Ryan Sean Adams?

  How hard is it to move from the Coinbase world, let's say, which is the step that I feel like a lot of people are in right now, to the DeFi world? And like, so, because we've been doing this for a while, sometimes we forget what it feels like to do the first time. The very first time you send a transaction, you're like, oh shit, did that, like, did I do that right?

• 1:06:53Speaker 02

  Oh, it's not there yet. Oh, no.

• 1:06:55Ryan Sean Adams?

  Yeah. It's like, so, so, uh, yeah, tell us about that, Barry, because like, we know parts of it still suck. And by the way, I'll just caveat that this by saying like, even though it still sucks now, it is so much better than it was a year ago. And it's infinitely better than it was three years ago. And we're seeing like this massive like progress in user experience. But how hard is it still for the guy in a blazer who's in Coinbase to get to DeFi? What's your experience been with that?

• 1:07:24Speaker 02

  Well, so keep in mind that the guy in the blazer is also a metaphor for, for, for the moment, the people that have all the money, right?

• 1:07:31Ryan Sean Adams?

  Yes.

• 1:07:32Speaker 02

  As well, too. And the guy in the blazer thinks that, now, I'm talking about people in their 50s and 60s, you know? And as you get younger, you get more adept with technology. The guy in the blazer is very happy because he's on the cutting edge because he does a group text with his children, you know? And he thinks that that's high technology for him, you know? And that he was able to open his Coinbase account without asking one of his kids for help. Man, I'm really going along here and I'm really getting this because in their world, their world is about making decisions and giving permission. And everybody else executes everything under them.

• 1:08:14Speaker 02

  And in this world, they have to kind of learn to do it themselves a little bit because the whole idea about DeFi isn't, you know, that, uh, I want, you know, you open up an account for me and you go figure out what my seed phrase is and stuff like that. It kind of defeats the purpose when you start, when you start bringing in people, uh, because you don't want to do it. Which is why you see the exploding popularity.

• 1:08:39Speaker 02

  of like institutional service by Coinbase, I guess, Ave starting kind of a permission insta- or a centralized, excuse me, institutional service as well, too. They're very, uh, they're, they're not ready to make that leap and do it on their own. They definitely want somebody's hand held, to hold their hand as they go through in this system. So, yes, it is way better. I started trading in this stuff in 2017. Um, as you know, just the magic being of Bitcoin going up and down and stuff like that. That's where I began with it, but then really fell in love with it when I started to understand DeFi. Uh, you know, around 2019 and then the summer of, uh, DeFi summer last year as well, too.

• 1:09:21Speaker 02

  But to get them to that point where they can shed themselves of that centralization, I think is going to take a much better user experience and it's going to be necessary. Because if all we're going to hope for with DeFi is that the Coinbase institutional business is going to explode orders and orders of magnitude over because they're going to do it for everybody. We're not going to get to that decentralized world that we're, we're going to want because there's going to be some level of decentralization or some level of regulation that is going to be stuck on top of this, uh, on top of this DeFi world as well, too. So, yeah, it is, it is kind of a harrowing experience and some of them that have done it feel better for doing it.

• 1:10:05Speaker 02

  But that's the first thing they say to me, man, why does it have to be this hard? I have said to them, you should have seen it a couple of years ago.

• 1:10:11Ryan Sean Adams?

  Yeah, I, I totally agree with you, right? And yet, at the same time, you're here, you're doing it. Mark Cuban is out here, he's doing it, like he's taking it. It's like learning solidity. So, here's the other thing I would say.

• 1:10:25Speaker 02

  When's Jamie Dimon going to do it?

• 1:10:28Ryan Sean Adams?

  Right, but like, part of it is, part of it is, don't you think? They just haven't spent the time to figure it out, right? So like, it does require a time investment. It can't, at this stage, it can be learned. But like, I remember the early days of the internet. You know, you had the, the clunk, you had the modem and even personal computers were difficult to use, right? But like, you had, like, it took, it took some time to figure out the internet. I feel like that's kind of where we are. So like, no matter what age you are, I wonder if you agree with this. Like, no matter what your technical experience, what age you are, you can figure it out if you're willing to invest the time. We have Bill Ford, who listens to the Bankless Podcast, remember the Shout out Bill Ford. Shout out Bill Ford, he pings us on Twitter all the time.

• 1:11:11Ryan Sean Adams?

  Bill Ford is 77 and he is opening Uniswap pools. He is a liquidity provider. He is like on the journey with us, Jim. So, yeah, what do you think about that? What, what, what would you say to the, to that comment?

• 1:11:25Speaker 02

  One of the things that you see with people that get older and up to even in the TradFi world, a lot of stuff has been trade, you know, the way that the business is run, bond trading is run, stock trading is run. It's very, is, is changed a lot in the last 15 years. And a lot of these older people tend to play, beat the clock in their head. I'm 62.

• 1:11:50Speaker 02

  It seems like a lot of work to learn this stuff. You know what? I'll bet I could keep juggling these plates for another three, four more years. I'll take my gold watch and then the guy's 45 behind me. It's his problem to learn it, not mine. And I'll be, and I'll ride off into retirement. And my answer to them is always the same. This stuff comes on you a lot faster than you think. And it, and it comes on a lot stronger than you think. And I understand that, I've heard people, I've heard people say that exact phrase to me that, you know, I, I don't have the, the patience to learn it. I could milk this for another three, four more years and then I'm done anyway. It's a terrible attitude to have because it sounds like you're uninterested in everything in the world. But unfortunately, that there are people that get to that stage as well too. So the Bill Fords of the world, yeah, that's great.

• 1:12:35Speaker 02

  You know, that you want to keep reinventing yourself and you want to keep learning and you want to keep pushing boundaries. Keep you young forever is what, is what that will wind up doing. But unfortunately, there's a lot of people that are just not ready to go there. And again, what is the other thing that makes them not want to go there? They're probably at the top of the heap of the TradFi world. And they're making very good coin in the TradFi world and it's suiting them just fine. And why do I need to learn what my replacement is going to be? I really don't want it to work in the first place, you know? So there's a little bit of that as well, too.

• 1:13:11David Hoffman?

  So a thought experiment, let's some of some of these people that we're talking to, the people in the Blazers, the people who, you know, are approaching the end of their career, but perhaps they're still like financially minded and still kind of want to know what's up with the world of finance. Some some portion of these people are going to open up a MetaMask wallet, open up a ledger, you know, trade on UnSwap. Many won't. What is the incentive for the people who do make it over the hurdle? Are they coming into DeFi to get yield on stablecoins? Because that's what interests them. Are they coming in because they like DeFi tokens as perhaps a new frontier of capital assets?

• 1:13:49David Hoffman?

  What's going to be the incentive that actually does convince some of these older generations, Blazer, Blazer folk to actually come in and play around in this industry?

• 1:13:57Speaker 02

  I I've what I've said to them is when you come into this industry and you start learning about this industry, you're going to see a lot of similarities to the TradFi world that you've been dealing with for 25 years and 30 years, and you will instantly have a leg up on everybody, you know, the constant product model or the V3, you know, liquidity curves. That's mortgage convexity. If you're a mortgage trader, in you will, you will instantly get that. Wow, I know what this is. I deal with this all the time in the mortgage market, finding the optimal point on the curve with negative convexity and stuff. So a lot of this stuff is not necessarily new to you. It's just being presented

• 1:14:42Speaker 02

  in a different way. The borrowing and lending facilities, if you've got any banking experience, when you go to an AVE or a compound, you're going to inherently understand. What they're doing. Now you may not understand about the exact protocol and about how you transfer the money in and all that and what you do with your wrapped coin. With your C die or A die and what you how you do with that, but you'll get that real fast because you understand the concepts of what's going on because The concepts are the same between TradFi and DeFi as well too. So it's not New to the extent that we've developed whole new Ways of doing the basics of borrowing and lending. They're still the same, but we're just doing them in a different way.

• 1:15:28Speaker 02

  So yeah, you could you've got something up on on say, maybe the programmer that gets it. Oh, I get how to do this stuff. I get how to transfer my money. But they may not understand the concepts as much as you do. So you do bring something to the table if you want to invest the effort in doing it. And you're right, a lot do. And unfortunately, there's some that just, you know, won't or don't. And you know who those are because they've dismissed it as a bunch of people trading useless magic beans. Because that's usually their their their their self defense mechanism to say that's why I don't need to. Yeah, their cognitive dissonance, that's what I was looking for, that they don't need to. They don't need to invest any time or effort in any of this stuff.

• 1:16:10David Hoffman?

  So instead of, you know, talking about the individual and why the individual might come over and play around in DeFi, let's zoom out and talk about Wall Street as a whole. Do you see Wall Street adopting DeFi and trying to innovate or resisting DeFi? Or is there and is there going to be a, you know, big brain drain out of Wall Street? Or are we is Wall Street going to actually try and like turn the ship? What do you see as like the more likely outcomes? And how do you parse these things apart?

• 1:16:36Speaker 02

  I'm going to be a little bit pessimistic and say that Wall Street is going to fight this all the way down the line until it's forced to accept it. And I'll come back to something I said earlier. I think. The thing that can make everything go is stable coins. In that if you get stable coins to the point where they really start to take off in in in Asia, they are. You know, looking at the stablecoin index and reading some stuff from Glassnost, my understanding is that stablecoins turnover is about 150 a day or 150 billion a day. It's about two thirds of all of the volume because half of it is it's usually a pair with another coin as well too. But about a quarter of that is wallet to wallet transfers.

• 1:17:20Speaker 02

  And what you're seeing more and more, especially out of Asia is, and this is an exact example that it was presented to me, is a Vietnamese manufacturer owes an Indonesian supplier $50 million for raw materials at the end of the month. Well, they could use the Vietnamese bank and the Indonesian bank and report to both governments and get feed, feed, feed, feed, feed along the way and tax, tax, tax along the way. Or I can open up a wallet, you can open up a wallet and I'll send you 50 million to Tether and we're done with this transaction in five minutes. If for a couple of dollars as well too. As that becomes more and more accepted around the world, Wall Street's going to have no choice but to basically be dragged into this as well. Because as that becomes more and more accepted,

• 1:18:05Speaker 02

  the the lending and borrowing and the automatic market maker, they're they're going to be the servicing for for the the basis of the stablecoins because the stablecoins will be the basis for the real world application first. Second of all, when it comes to regulation, yeah, there's a lot of regulation that needs to be sorted out. But I think we all look at what I read gets gets me disappointed because they're all looking at it the wrong way. You know, we got to stop the drug dealers, you know, the the old tropes from five years ago and stuff like that. But better regulation or better ideas is how about legal recognition for a DAO other than the state of Wyoming? You know, so that you can have DAOs do a lot more.

• 1:18:48Speaker 02

  My understanding, you guys correct me if I'm wrong on this, is one of the reasons Visa is doing a deal with Circle is because it's It's a legally recognized corporate organization that it can have a deal with. It was afraid of the tether reserves. But it can, would it ever try and do something like that with Maker? Well, a DAO is not legally recognized. So I don't know how they can do a deal with that, other than the state of Wyoming, but that's not enough. So if you were to do that, how about an explanation of what is a security and what is a token? And why doesn't the SEC define the two as two separate things?

• 1:19:28Speaker 02

  Instead of not saying anything, so we could selectively beat token holders over the head when we want to, when it suits our purpose. How about giving us a definition of that as well, too? You know, so how about crimes for rug pulls? You know, to disincentivize that. See, the problem with all of this is if you start doing that, you know, give definition for DAOs and what tokens are and have specific crimes for rug pulls, then you're starting to acknowledge acceptance of it. You know, and that we're trying to help it move forward. I'm just not so sure a lot of the regulators are ready to go that way. And that's why it bothers me. I'm in the camp.

• 1:20:12Speaker 02

  They can't stop it in the long run. But boy, they can make it miserable in the medium term before we get to the long run. And I would like to see more Hester Pierce's of the world thinking about, how can we help this industry grow? Instead of how do we protect ourselves from it?

• 1:20:27Ryan Sean Adams?

  I was just gonna ask you about Hester Pierce. If you've caught some of her interviews, she did one on the Bankless podcast not long ago. It did give me a glimmer of hope that there are at least, you know, some regulators, some in government, who really want to foster this industry. And I think we've got a lot more to talk about on the regulation front. We want to kind of get your thoughts on that, particularly how Wall Street and regulators interact together. You know, does Wall Street always get its way? But let's park that for a minute. Want to continue talking about this discussion on what does Wall Street think about DeFi? You use this phrase a couple of times. Wall Street thinking about crypto as like useless magic beans.

• 1:21:09Ryan Sean Adams?

  Which is interesting because that is kind of a framework for Bitcoin. If you don't believe it is a store of value, new monetary phenomenon. If you don't believe in kind of the meme-backed nature of this. Strange internet currency, then yeah, it's just a useless magic bean. But we've had some folks on like Matt Hogan, I don't know if you know who that is from from Bitwise, say things like, yeah, Wall Street and institutional investors, they don't understand, some of them don't understand new monetary phenomenons like Bitcoin, but they do understand DeFi tokens. Why? Because these are capital assets that they can model, the way they model equities, net present value, future cash flows. What's the growth, growth of this thing going to look like?

• 1:21:54Ryan Sean Adams?

  Like, back to the, what we were talking about with Uniswap is, my God, what a, what a tech success story. Right? Kid, like first software project, like the Mark Zuckerberg story, I guess, just decentralized. Creates this protocol, a few hundred lines of code. Now it's doing hundreds of millions a month in volume. It's got the biggest liquidity pool of any decentralized market in the world. It's competing against Coinbase. Like, what a story. Don't you want to own the capital asset behind that story? And so you're talking about like Wall Street adoption. Wall Street likes to make money, right, Jim? Like, I've heard that about them, and there's money in these DeFi capital assets.

• 1:22:40Ryan Sean Adams?

  Talk, talk to us about that. Do you think DeFi tokens are actually an easier pitch than an asset like Bitcoin?

• 1:22:48Speaker 02

  Yeah, they are an easier pitch because they do understand them. And a quick word about those, we're, just so you know where I'm at. I, I think that Bitcoin and DeFi are two sides of the same coin. The biggest, the best thing that's happened to Bitcoin is DeFi. And the, and the thing that has helped DeFi go is that Bitcoin existed in the first place. They need each other. That's the way I look at it. That's why I have no patience for the maximalist argument. You know, that, you know, the day that everything but Bitcoin goes to zero, I'll, I'll, I'll buy your Bitcoins off you for 10 bucks apiece because that's about what they'll be worth at that point. They, you want to know what's going to get Bitcoin a half a million dollars? Eat the 10,000 plus.

• 1:23:33Speaker 02

  I mean, it's it's those two things are, I mean, I believe the flipping will happen too. But those two things are not unrelated to each other. I don't understand this argument that we have to war with the other side of the crypto universe. You're worrying with the tradFi guys is really what you're worrying with. You're worrying with the regulators. But yeah, to your question, they they they they understand. They understand the tokens because it's so similar to what they've seen in this space. And ultimately, I'm in the Jeff Dorman camp, right? That I could see a day in the future where a company's capital structure is not just stocks and bonds, but it's a whole variation of tokens as well, too. Tokens that represent assets or future liabilities or intellectual property

• 1:24:19Speaker 02

  or or anything a a a along the way that they could uh fee generated income and anything else. A trillion dollars a year of M and A is done on Wall Street. Why is a trillion dollars of M and A done on Wall Street? Because the traditional model of stocks and bonds is inefficient. And companies and and M and A mergers and VC firms will come in and they'll buy these companies because they think that they can unlock value because of the inefficiencies of the current system. And again, the problem is, is that the people that tend to buy these companies who are private, you and I can't invest in these in these private equity firms because we're not accredited investors and we don't know who they are.

• 1:25:01Speaker 02

  And we don't have the high dollar amount, the minimums that we can invest in as well, too. But you break that down into a token world and then all of a sudden, anybody can start to start looking at that value as well, too. And I'm going to channel my inner Jeff Dorman again, the the token world can open up whole new possibilities to a lot of other companies. Metcalfe's law with network effects. It works with Tesla. It works with Apple. Why? Because who owns an Apple product or who owns a Tesla? Probably people that also own those stocks as well, too. Now go look at Dollar Tree or go look at McDonald's.

• 1:25:46Speaker 02

  How many of their customers actually own their stocks? Very, very few.

• 1:25:53Speaker 02

  But if you introduce the token that represented some kind of value that was cheap and maybe gave you a break on a meal at McDonald's and you bought this token and you got some, some, you know, 10% or 15% off on a meal, I'm making this up as I go along, and you participated in the success of McDonald's and its price went up, the token price went up. You've, you've become an advocate for those firm, just like the great thing that Tesla had is what does somebody who pays a hundred and fifty thousand dollars for a Tesla probably also have the stock and that they run around and tell everybody how great the company is because they benefit if the stock goes up. Boy, would McDonald's love to have that relationship

• 1:26:35Speaker 02

  too. They can't with the current equity system. It's shut out too many of those people that typically eat at McDonald's, but a token world could open it up to them. So there's a lot that can be done with tokens that, you know, we're just scratching the surface on and Wall Street is starting to pick up on this. If you talk to a lot of Wall Streeters, you know, about investing in DeFi, you'll hear a phrase picks and shovels, picks and shovels, that they all want to invest in the picks and shovels, right? They all want to be in the chart or they want to be in chain link or they want to be in some other thing that, you know, ren or some other thing that is, is, is working on interoperability or something along those lines. And that's great. And that's great. And that's necessary.

• 1:27:18Speaker 02

  But why not move beyond that a little bit? And they're not quite ready to go there. But if we could get a definition of what a token is and open up all of the use cases for tokens beyond what we've got now, you could definitely see a lot of more forward thinking Wall Streeters start looking at these tremendous opportunities that tokens can bring to the capital structure of a firm or to a network effect to a company like a McDonald's or a Dollar Tree that can't get a network effect between its customers and its shareholders right now. So a lot that can be done in this space and we're just beginning with it.

• 1:27:53Ryan Sean Adams?

  So Jim, this is kind of the hope, right? So like David and I can't go on CNBC, but you can. Like, we consider you a part of Wall Street, as it were, right? Kind of a bridge, right? Jeff Dorman's another who's a bridge. Matt Hogan from Bitwise, tons of these bridges are being built to educate Wall Street on what these tokens can do. And the hope really is that there's enough wins for large corporations, for Wall Street, for even incumbents that are willing to kind of move first, that that that can fuel crypto adoption. Now, I want to pick up this thread because I think it's related. Yeah, go ahead.

• 1:28:28Speaker 02

  Can I just say, just say a quick word. The problem with CNBC or Bloomberg TV is they've had me on. And it's like, we got this. Yeah, yeah, because the question is, so Bitcoin broke 40,000, is it going to 50,000? Or is it going to go to 30,000, you know? And they just want to talk about the horse race and where, yeah, they want to talk about the horse race and where the coin's going to go next. And when you try and bring in, you know, start talking about DeFi. In fact, one interview I was on and I was trying to bring up DeFi, the guy cut me off and he goes, do you think Dogecoin is going to go to a dollar?

• 1:29:01Speaker 02

  That's all they want to talk about. So it's going to take a while, it's going to take a while for them to get there as well, too.

• 1:29:07Ryan Sean Adams?

  And maybe, maybe new media sources will arise. What do you think about that, David, in their stead? Anyway.

• 1:29:13Speaker 02

  So new media sources have arise because the thing about it is, I'll say this quietly because, you know, just between you and me.

• 1:29:20Ryan Sean Adams?

  Whisper.

• 1:29:21Speaker 02

  Look at the, yeah, look at their ratings. I bet this podcast is beating a lot of the TV shows that you're talking about right now.

• 1:29:27Ryan Sean Adams?

  What do you think about that, David?

• 1:29:28Speaker 02

  Yeah, I think, you know, because their ratings are not quite as what you think they are right now. Now, they, you know, the problem with the CNBCs and the Bloombergs and the Fox businesses of the world is they're the the economic equivalent of the Weather Channel, right? Everybody watches them when there's a hurricane, you know? So when the markets, when the markets blew up last year, everybody was tuned in. But when the markets could quiet like they are now, you don't want to know.

• 1:29:52Ryan Sean Adams?

  Nothing to talk about because they're not talking about long-term things. They're not talking about fundamentals. That's what we do every week here on Bankless.

• 1:29:57Speaker 02

  Right, right.

• 1:29:59Ryan Sean Adams?

  So, so let's say there are enough wins for Wall Street and some of the incumbents to get on board. Because as I said, there could be some wins here.

• 1:30:09Ryan Sean Adams?

  Like, can we talk about, let's pick up that thread on regulation for a minute? Because want to understand really how that works. So i- i- in your experience, I think a lot of crypto people tend to think of the big banks and existing government regulators as not one in the same, but tied together. And I want to ask you if that assumption is is actually true. So like, whether Wall Street is pro crypto or not, and maybe they're kind of neutral, they're uncertain about it at this phase, let's characterize them as that. If they got on board with crypto, does Wall Street get what Wall Street wants? If if big bankers and Wall Street, there are enough wins here.

• 1:30:50Ryan Sean Adams?

  Are are these the movers and shakers who actually are able to go to regulators? And make things happen? Is that how this game is played, Jim? What have you seen in your experience?

• 1:31:01Speaker 02

  There is, you know, the phrase is there is a lot of regulatory capture in in this business. And regulatory capture in English means that, you know, I I work at the Fed. And then when I decide to leave the Fed, I usually go to work for Wall Street. And so no one that is a reg, and I'm talking about in the regulatory capacity. No one wants to crap on Wall Street because it's a potential future employer. You know, and the same thing happens, you know, with the SEC. You know, if I'm an SEC guy and I want, you know, there's a, there's a nice plus general counsel's job waiting for me at some bank or some brokerage firm. So yeah, you know, you want to, you want to ferret out the bad actors, but you don't want

• 1:31:42Speaker 02

  to get too, you don't want to get too tough on on Wall Street as well, too. I mean, GameStop is is is is a good example of that. We still have to talk about, you know, protecting everybody from Robinhood, but not about the decision to make to stop trading, you know, stop trading GameStop on the Thursday that everything was going crazy and who did that benefit? And what was the purpose of that? So there is that regulatory capture. There's no doubt about that. And then on the regulator side. Dan Berkowitz, who's a CFTC Commissioner, gave what I thought was a terrible speech like two weeks ago, and basically was saying that DeFi is illegal according to the Commodity

• 1:32:25Speaker 02

  Exchange Authority Act, and that maybe we should be thinking about shutting it all down, because their their existence is I've got these laws, and I'm supposed to follow these laws, and it's given me a good career, and this is my reason for being, is to make sure that Wall Street follows all these laws, and you guys over here in the DeFi world, you're not following the laws. Well, they're innovating. No, no, no, no. It says on page four that this is the way it's supposed to work, and it doesn't look like you're following page four over there, so we gotta shut you down. That seems to be a-

• 1:32:59David Hoffman?

  You haven't read page four.

• 1:33:00Speaker 02

  Yeah, that that seems to be a big mentality that you've got out of someone. Like I said, you've got the Hester Pierces, Gary Genslers should know this, but what I'm afraid of is they are two voices that might argue for it behind the scenes, but you have to convince the Jay Powells and the Janet Yellens of the world that this is the way that they want to go, and by their public speeches, they don't seem to be ready to go there as well too. So, this is going to be the problem with regulation. You know, you've heard this, I've heard Jamie Dimon say this too. You know, I'll summarize what he said. Me, JP Morgan, I got 30,000 pages of regulations I have to adhere to every day. Go hand those 30,000

• 1:33:42Speaker 02

  pages to Hayden and tell him it's his problem now too. He's got to follow the same 30,000 pages that I have to follow. And that's, that's the way that they want to hopefully shut it down, is they want to say, you have to follow the same rules that we have to follow. And I'll give you a great example of that. So, the Fed has its payment, you know, the Fed has its payment rails. Kraken Bank, Kraken Bank, which is a subsidiary of the Kraken Exchange, wants access to the Fed's payment rails. What they want to be able to do is transfer crypto, I'm sorry, transfer fiat. They don't want to do maturity transformation, they don't want to hand out loans, they don't want to give you a free toaster if you open an account, they just want to be able to use the Fed's payment

• 1:34:27Speaker 02

  rails narrowly to transfer money. It's out for review, and all of the banks have come back with their comments to the Fed, basically saying- They have to adhere to every one of those 30,000 pages of regulations like we do, even though they're just doing this one tiny little thing. They just want to be able to transfer money using the Fed's payment rails. That's the way that their mentality is that they use regulation as a moat. They use it as a moat to keep everybody out. And that's why I come back to what I was saying before. Without decentralization, you're not going anywhere and you have to get decentralized as fast as you can. So that they can't reach you. And a final thought on this.

• 1:35:11Speaker 02

  I still think that when it comes to DeFi and it comes to what you're seeing in the crypto world. The US and the world is fairly behind everybody else. Especially in Asia and especially in the developed and in the third world. They're ahead of us as well too. If you look at what's going on in India with the payment rails that they've got in India. They've got now, I think it's called UCP, a system where you can use, you can pay now with a fingerprint or a retinal scan. So if you go to a store, you can actually put your finger on the little device and pay. You don't even need your phone anymore. They're way ahead of us and it's instantaneous payments as well too.

• 1:35:55Speaker 02

  There's over a billion electronic wallets in the third world. Connected to shaky SeFi, you know, shaky SeFi institutions. Or in Kenya, M-Pesa is a gigantic success story. It is a, it is a peer-to-peer, phone-to-phone money transfer system. There are subsistent farmers that live in mud huts in Kenya. That are basically when they're out, maybe even behind an oxen and they need to pay for stuff. They're, they're sending the money with their phone to somebody else in another town to get something to their phone. Hell, they're ahead of, they're ahead of all the bros in midtown Manhattan paying for their lattes at this point.

• 1:36:41Speaker 02

  The rest of the world is way ahead of us. They're just waiting for this, they, they got the apps, they got the phones. They know how to use it. They are, and they're moving forward with it. And if we're gonna slam down on everybody in the US and the EU is gonna follow us and slam down on everybody else. As I'd like to say, the new financial world is gonna be developed in one of two ways. With us or without us? And if we're gonna over-regulate this and keep mumbling about drug dealers and ransom and that we have to shut all this stuff down, then the rest of the world will just do it without us. And we'll be in a much worse position than if they do it with us.

• 1:37:22Speaker 02

  So that's why I think we're at an important crossroad when it comes to regulation again. I don't think they could shut it down with regulation, but don't underestimate how awful they could make it with regulation before we escape the clutches of the regulatory reach and get to a truly decentralized world.

• 1:37:42Ryan Sean Adams?

  Yeah, I look, I agree with these takes, Jim, and like it reflects something that like Mark Cuban's been talking about too. Another DeFi user is basically like his worry is the US will get left behind if it imposes restrict. Because it's not like you're gonna actually shut DeFi down. You're just going to make it difficult for the next Uniswap to rise within your borders, right? And so like, you could lose, the next Wall Street might be on Ethereum and like distributing a different, different country. And Wall Street becomes irrelevant in that situation. I want to ask you this, Jim. So like, how do you feel like, what's your gut take on how this is going to shake out?

• 1:38:23Ryan Sean Adams?

  So one possible scenario is at some point, you know, government called regulators like kind of final boss. Final boss raises its head and says, uh, uh, uh, here's what you need to do.

• 1:38:35Ryan Sean Adams?

  And then like innovation floods outside of the US, for instance, to other geographies where it's less restrictive. And then the US kind of cools down on that. Do you think that will play out? Or do you think that there's a chance, I'm, we're just looking for a chance. I tweeted this out the other day. Is there anybody in, in Congress who's actually used DeFi before? Is there a chance that we get more Hester Pierce's who are actually open to this innovation? And they leave the US open to the possibility and to the blossoming of DeFi within its borders? What's your gut on how this is gonna play out here?

• 1:39:13Speaker 02

  I think it's gonna, in the, in the long run, it's gonna play out as a win. In the short run, let's talk about what we're trying to say straight up. Uh, money is a public good. We're trying to turn it into a private good. Uh, we're trying to get away from government control of money. Boy, that's a very, very powerful thing. You know, the government control of money, which is why the only crowd that I detest more than the maximalist crowd is the crowd on Twitter that keeps, you know, you know, kinda taunting me. Oh, they're gonna shut it down and you're gonna feel like an idiot once they've shut it all down. And I've said, I call them the Stockholm syndrome crowd. That, you know, you've, you've been, you know, the Stockholm syndrome is, is that

• 1:39:57Speaker 02

  you've been a hostage for so long, you've now taken sympathy with your captors and you're now actively rooting for your captors to win. You know, and I was like, you know, well, Wall Street, you know, they'll shut this down and Wall Street will continue. And I was like, and that makes your life better? How is what I've always, as I've always said, because the current financial system is improving what? Well, if you're at the top of the heap, it improves it quite a bit. But for everybody else, it really doesn't. So I think that there's gonna be some kind of a pushback on this. Because what you're gonna hear, what they're hearing from the big financial firms, I think is, we can't compete like this. Because you've strangled us with all this regulation. And so the answer is that the Wall Street firms are gonna say,

• 1:40:42Speaker 02

  get rid of this regulation and let me compete with them. They're gonna say, go strangle them too. Is basically what they're gonna do. Make it a fair and even playing field. That's what that means. That means bury them with regulations. Make sure that the Uniswap trust needs to hire 500 lawyers in order to basically operate every day, uh, as well too. That's what they're gonna try and do. And it's up to this space to be put in a position where they can't do it. Uh, as well, I've heard some outrageous things that, that regulators are, are thinking about. I don't know if you guys have heard this too, but they're now talking about this idea about liability for the creators of.

• 1:41:23Speaker 02

  Smart contracts. So if somebody uses Uniswap for an illegal transaction, I guess they're going to arrest Hayden. Is what they're suggesting or some something like that. Now, these are fringe elements within the, you know, within the anti. DeFi or anti crypto world among regulators, but this is the kind of things that they're thinking about. And so. Yeah, it's going to be a bumpy road, but what else is new in the DeFi world? It's already been a bumpy road. To get to this point, but really hopefully where it will go is let's use the Uber model. And what I mean by the Uber model is, okay, so the ride shares came up and everybody loved it.

• 1:42:09Speaker 02

  And everybody was on the right chairs and then the city councils and the mayor said, ah, ah, ah, ah. We have got to deal with these with these taxi companies that they've got these exclusive rights. We got to shut down the right chairs and the constituents said, no, we like this. Don't touch it.

• 1:42:27David Hoffman?

  That's why they asked for permission.

• 1:42:29Speaker 02

  Right. The UX has got to get better. You got to get more people on this system. So when they push back with the regulations, everybody says, no, you leave it alone. I like it the way it is. Uh, as well, and you've got to get that. You've got to get people into this space. A lot more. When you get to that critical mass, then it will be like, you know, like the Ubers of the world that. Lots of mayors wanted to shut it down. Lots of mayors were getting campaign contributions from taxi companies. But they they politically couldn't because it became too popular. It's what you got to get to the DeFi space. I think it will get there. It will get there, but it's still not there yet.

• 1:43:06Ryan Sean Adams?

  Guys, what Jim is saying is a billion or bust. That's, that's why in the mission we're on with respect to education is like, we need a billion people on the DeFi journey in, in order to turn the tide here.

• 1:43:18David Hoffman?

  That's also been like what. That's also been one of the, the, the side goals of a bankless is and also why we call it the bankless nation because one day. Like there's going to be a call to arms because we are going to need the, the, the bankless nation to, to rise up and, and put a, a foot down and say like, no, no, no, no. Like this is our industry, like we, we regulate ourselves here.

• 1:43:40Speaker 02

  I was gonna say, isn't there a couple of improvement proposals among some of the protocols to band together to create like an education fund or an education group? Basically to send to Washington to kind of walk the halls of Congress to kind of teach them what this space is about. I think that's great. You know, they're not advocating for regulate, if I understand it correctly, you guys correct me, they're not advocating for regulation or anything else, but they just, the next time somebody in Washington just starts mumbling that only drug dealers use crypto, that somebody should be in their office the next day to say, let me explain this to you. Let me understand, there's this thing, you know, EtherScan, and it isn't as dark as you think it is, and there's a lot of other things about this space

• 1:44:24Speaker 02

  that you're getting misinformation about. That would be great, because they gotta be careful. Look at the poker industry, right? The poker, when online poker became popular 10 years ago, everybody was doing it, the government decided that they didn't like it, but the poker, the poker sites, a guy who works with me was big on the poker sites, he would say, I would be getting a check for my withdrawals from a different foreign bank every month, because the poker guys thought that they were brilliant, that they kept jumping one step ahead of the regulators. Then they realized that whatever made everything dull was NetTeller, which was like their version of Coinbase. They just shut that down, and they ended the poker business as well too. My point is, to take that hard-nosed

• 1:45:05Speaker 02

  libertarian attitude, yeah, I get it that it's intellectually satisfying to do that, but do you also want to win? And you gotta work within the system that we have as well too. And that education idea is a great idea to work within, look, this is the deck we have, that's the TradFi world that we have, the regulatory world we have. And we could argue, and I have, that it's broken. Okay, but the answer is not that we're just going to completely dynamite it and pretend that it doesn't exist. We gotta work with it to solve, to change it into what we want it to be. And if we fight it, we might wind up, and I don't think we are, but we might wind up like the, like the, like the online poker

• 1:45:47Speaker 02

  guys were 10 years ago. They'll just slam that sucker down, and that's the end of everything. And if you had money in a poker account, it was gone, tough, at that point.

• 1:45:57David Hoffman?

  Yeah, and shout out to the Coin Center guys who are really the people that are working with congressmen to really illuminate the positives of this industry and make sure that disinformation stops sooner rather than later. That's definitely, definitely our spearhead of, for the industry with, with regards to regulators. Jim, as, as we come to a close here, you've been a, a journeyman of many, many market cycles and many, many different markets. And the average listener of the Bankless Podcast is, you know, Gen X, Zoomer, younger folk, perhaps their first entrance really into finance. I know crypto is, was my first entrance into finance.

• 1:46:34David Hoffman?

  And in, in the crypto world, we tend to get really caught up in the short term, right? We focus on the next two to six months. But as someone who's played in the markets for decades, what advice do you have for people who, you know, just haven't experienced as much as you've, as you've had in, in different financial markets? How, how can people just, you know, keep grounded? And what advice do you have for people playing in, in these markets in the long term?

• 1:46:58Speaker 02

  You know, I think that what they need to understand is, first of all, education, education, education. Why are you doing what you're doing? What do you think you're going to get out of it? Even if it is that you're chasing some hot meme coin or something like that. Okay. Well, what's it going to take for your hot meme coin to fall out of favor? Because they always do, it seems like, at some point or another. Do you really understand some of the things that you're saying? Yesterday, Kim Kardashian was tweeting about Ethereum Max burned 400 trillion coins or something like that. And we were laughing. Does she know that Ethereum Max is not Ethereum? And does she understand what's burning 400 trillion coins actually means?

• 1:47:42David Hoffman?

  I don't think so.

• 1:47:43Speaker 02

  Yeah, exactly. So, so just don't repeat these things that you hear other people say, but fully understand what, what you're doing. Expect a lot of volatility in new technologies. Whether it was, you know, the, the digging of the canals in the early 19th century, you know, to the internet, to what we're doing in crypto now, there is always wild booms and busts along the way. And there's always going to be some dark days. And I'll give you one quick example. Let's say it was 1999 and I came to you and I said, e-commerce is going to be the biggest thing you've ever seen. And he said, okay, great. What are the two big plays? Pets.com and Amazon.

• 1:48:27Speaker 02

  By late 2001, pets.com went bankrupt and you lost 100% of your money. Amazon's stock went from $100 to 6. And you lost 94% of your money in the other one. You would have said in late 01, "Well, I guess that e-commerce thing busted and it's not going to really work." Well, then Amazon went from 6 to 3,300 after that. And we all know what happened to e-commerce later. And by the way, we now have Chewy, which is what pets.com was trying to be for years earlier. So the other thing to keep in mind is that there is the concept that we've got this DeFi crypto world that's going to grow and grow and grow. And then we've got the protocols because people said to me, "Wow, if it's so easy, everybody's going to make money." It's like, "Well, hold on a minute here."

• 1:49:11Speaker 02

  You might think that, I might think that DeFi is going to be the biggest thing going. But I bought a bunch of pets.com and I bought a bunch of protocols that went to zero. Because I think the majority of the protocols go to zero. But the ones that don't redefine everything. That's easy to say. It's very hard to do. Yes, Uniswap looks like it's going to be one of the redefining protocols of our lifetime. So did Yahoo. And then Google came along after that. I'm not saying there's going to be son of Uniswap that's going to be better, but I don't know that there won't be either. So keep an open mind about this stuff and don't get married to these ideas

• 1:49:53Speaker 02

  that, you know, that this coin or that coin or, you know, Matic is going to change the world and that it's, that there's no scenario where it would never not change the world. There will be someday as well too. There always is. So I mean, that's kind of the best thing I could say is that, or as an old mentor of mine said, when it comes to investing, you always want to be a renter, not an owner. A renter means you want to, you'll be willing to get out of the position when things change because they change and you're willing to get in the position when things change and make it more attractive as well too. And yes, you could be a renter over a longer period of time, not just a short-term speculator. But yeah, I believe in the DeFi space. I do think that a lot of the protocols will go away. Everybody thinks that.

• 1:50:38Speaker 02

  And I do think it's going to be a lot harder to pick those protocols that are going to be the giants in 10 years than it does like now. Because a lot of those protocols that are being the giants in 10 years might not exist today. They might still be to come as well too, because it's very, very early days.

• 1:50:55David Hoffman?

  Jim, let's let's see the shirt. We haven't gotten a good look at the shirt yet.

• 1:51:01David Hoffman?

  Classic. All right. For the podcast listeners, it's the classic evolution of man. And we go also simultaneously from seashells to gold to coins to credit cards to Bitcoin. Thanks for wearing the shirt. That's an awesome shirt. I need to get one of those.

• 1:51:15Speaker 02

  Yeah, thank you.

• 1:51:16Ryan Sean Adams?

  Jim, it's been fantastic to have you. Thanks so much for joining us on Bankless.

• 1:51:21Speaker 02

  I enjoyed it. Thanks, guys.

• 1:51:22Ryan Sean Adams?

  Guys, so many good lessons there in this conversation with Jim Bianco. I was reminded as Jim was talking about Amazon and losing 94% of its value. That's exactly what ETH lost from the top in 2018 to the bottom somewhere 2019, 2020, 95% of its value, 1400 all the way to 80. We are here, of course, because we believe in this bankless movement over the long run. It sounds like we are gaining allies as we go. Jim is one of those. Maybe Wall Street is coming next. Some action items for you. Follow Jim on Twitter at Bianco Research.

• 1:52:05Ryan Sean Adams?

  Great Twitter account and he drops insights like the kind he dropped in this podcast on the regular. Also, David, how are we doing on those five star reviews, my friend? We, I think we need some more because we could always use some more, but what's the status?

• 1:52:22David Hoffman?

  Yeah, well, Jim says that more people listen to Bankless than some of the TV finance news shows that that are out there. And I think we should double down on that. And if we could get Bankless to the top of the iTunes Business and Investing Charts, that's how we would get that done. Maybe we, maybe we'll be hosting the the future of finance commentators like Jim Bianco here, but only if we get those five star reviews. So if you could give us those five star reviews, wherever you listen to podcasts, we would greatly appreciate it.

• 1:52:48Ryan Sean Adams?

  There you go, guys. Bankless, not Bloomberg. Risks and disclaimers, of course. Bitcoin is risky. ETH is risky. DeFi is risky. Everything in this space should have caution tape because it's risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.

• 1:53:07David Hoffman?

  Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcasts, and community as a Bankless Premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis, our alpha leaks, and exclusive content, and even the Bankless token for airdrops, raffles, and unlocks. If you're interested in crypto, the Bankless community is where you want to be. Click the link in the description to become a Bankless Premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders, Ask Me Anythings, and weekly rollups where we summarize the week in crypto and other

• 1:53:52David Hoffman?

  fantastic content. Thanks everyone for watching and being on the journey as we build out the Bankless Nation.