129 - Why the Crypto Critics Are Wrong | Matthew Green

Matthew Green is an Associate Professor of Computer Science at John Hopkins University, where he teaches courses, cryptography, distributed computing systems, blockchains, and cryptocurrency. He also helped create Zerocash, one of the first privacy cryptocurrency experiments, and ultimately influenced the Zcash protocol. He recently wrote an article titled, “In Defense of Crypto(Currency)”, in response to an open letter to Congress, signed by a large group of technologists, denouncing the entire premise of cryptocurrency and urging congress to strongly regulate the space. In this episode, Matthew talks about his article, how crypto can do better as an industry, and why to be optimistic about the future of crypto. ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ Topics Covered: 0:00 Intro 6:34 Letter to Congress 12:27 Matthew’s Background 15:45 Why Write This Letter 19:03 Crypto Haters 24:14 What to do About Scams 28:45 Regulation 32:28 Addressing Concrete Objections 35:36 PoW Climate Issue 38:06 Blockchains Transfer Reversal 45:50 Crypto Doesn’t Scale Claim 50:42 Privacy Claims 1:02:43 Annoying Hype 1:05:50 Doing Better as an Industry 1:10:25 Matthew’s Favorite Project 1:14:58 Why Be Optimistic About Crypto 1:17:13 Closing & Disclaimers ------ Resources: Matthew Green https://twitter.com/matthew_d_green Letter to Congress https://concerned.tech/ In Defense of Crypto(Currency) https://blog.cryptographyengineering.com/2022/06/09/in-defense-of-cryptocurrency/ ----- 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.

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

• 0:00Speaker 00

  There are technical experts who are saying things like, you know, should blockchains be regulated? Should cryptocurrency be regulated? That's one question. And there's another question, which is, does this technology have applications? And when a bunch of people I respect technically say, no, it does not, that's where I get off. And that's, that's what's so troubling about this letter to me.

• 0:21Ryan 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. Guys, we have a fantastic episode on why the crypto critics are wrong. This is in response to a letter that was recently written to Congress, titled "A Letter in Support of Responsible Fintech Policy", and this was a blistering letter written by over 1,500 tech experts critiquing crypto. We brought on Matt Green to talk about this letter and his response to that. Matthew Green is a cryptographer. He's an associate professor at Hopkins. So we talk about that letter, the response, we talk about four common objections

• 1:07Ryan Sean Adams?

  from crypto and how to respond to those objections from those outside crypto, that is, and then what crypto natives should actually do when criticisms like these arise, how to react to them. This is overall a really great conversation with a cryptographer, someone who's deep on the crypto side, but also sees kind of the regular, everyday side of things and interacts with regulators all of the time. We also discussed privacy a little bit, which is one of my favorite topics. David, what were your thoughts going into this episode?

• 1:35David Hoffman?

  I think Matthew is so perfectly positioned to span these two communities, where he is teaching not just cryptography and distributed systems, but straight up like blockchain and cryptocurrency courses at John Hopkins. So like, the guy, the guy can speak our language. He can speak crypto native, but he's also in academia. He's like shoulder to shoulder with like all the other academics out there, who, you know, which are shoulder to shoulder with, you know, regulators and other technologists. And so he's really spanning these two industries very, very well. And so he's not so far down the crypto native hole. Where we would call him a Dgen. I would not call him a Dgen at all. He's very, you know, he's very academic. But and he's also so far on like the academic side where like the people

• 2:19David Hoffman?

  that wrote this scathing review of cryptocurrency, he knows these people. He has relationships with these people. And so he has a unique perspective to bring to this table as to why like, why 1500 leaders, technology leaders, signed on to this like scathing anti crypto letter to Congress, saying to regulate the hell out of our industry. And so he gets us, he allows us to get into the shoes of those people, while also getting into the shoes of somebody who understands cryptography, works on the Zcash protocol, and knows like many, many people in our industry as well. And so it was just like a nice breath of fresh air than just like, you know, your typical crypto, crypto native person who's

• 3:02David Hoffman?

  like as far down the rabbit hole, Ryan, as you and I, as you and I, to give it to like, get us to step back and be like, all right, here's what your industry looks like from the outside, but not just like your basic, just, you know, your basic normie take of how like, everyone thinks that the crypto is going to scam them out of their private keys, for example.

• 3:18Ryan Sean Adams?

  Yeah, I think he's a good, good person to respond to the critics in this way, because if someone like you or I responded, they'd be like, oh, my God, well, these guys have a podcast, they're crypto, like evangelists, you can't listen to anything that the Andrew Ryan said.

• 3:32David Hoffman?

  Crypto punk in his background.

• 3:34Ryan Sean Adams?

  Yeah, exactly. Loses all credibility, but Matthew Green is very credible, and he brings a, you know, a steel man approach to their arguments as well. So that's the conversation we get into today, a really awesome conversation. Also, we now have video of Bankless Podcasts in Spotify. So previously, video was only available on YouTube. Now they are available on Spotify as well. So if you want to go check out Bankless videos on Spotify, go to Spotify, search Bankless, and you can view them there. Before we get to the chat with Matthew Green, we want to tell you about these awesome tools to help you go Bankless from our sponsors. Bankless Nation, we are super excited to introduce you to our next guest, first time on Bankless, Matthew.

• 4:20Ryan Sean Adams?

  Matthew Green, he's an associate professor of computer science at Johns Hopkins, where he's taught courses on cryptography, distributed computing systems, even blockchains and cryptocurrency. This is one of the people who helped create Zero Cash, which was very influential in the Zcash protocol. He's been involved in that project at times as well. So he definitely cares a lot about privacy preserving systems, digital money, all of these things. The reason we're having him on is because he wrote a brilliant response to an article that was put in front of Congress called "In Defense of Cryptocurrency." That is the article he wrote. The letter, which we're going to kind of start with, was a letter in support of responsible fintech policy.

• 5:05Ryan Sean Adams?

  This is a letter from many in the fintech space, in the technology space, even the cryptography space, deriding crypto. And so Matthew put together a response to that. We're going to get all into that and why he feels the need to defend crypto. Matthew Green, how are you doing today?

• 5:23Speaker 00

  I'm great. Thanks for having me on.

• 5:25Ryan Sean Adams?

  It's really great to have you on, Matt. We've been wanting to chat with you at some point in time. You know, I think what I want to do is start by reading a few sections from this letter, this letter in support of responsible fintech policy, just to ground everyone. Does that sound like an okay place to start?

• 5:43Speaker 00

  It's a great, it's a great letter to read from, by all means.

• 5:49Ryan Sean Adams?

  All right, so this was a letter that was put, you know, put forward to Congress, I believe, by some technical experts, cryptographers, others in the community. Matt can give us some more insight into who these individuals are. American citizens, though, with concerns. And they put this in front of Chuck Schumer, Mitch McConnell, Nancy Pelosi, that, you know, basically all the figures in Congress. And it starts in this way. "Dear U.S. Congressional Leadership Committee Chairs and Ranking Members, We are 1,500 computer scientists, software engineers, and technologists who have spent decades working in these fields, producing innovative and effective products..." For a variety of applications in fields of database technology,

• 6:33Ryan Sean Adams?

  open source software, cryptography and financial technology applications. Today, we write to you urging you to take a critical skeptical approach toward industry claims that crypto assets, sometimes called cryptocurrencies, crypto tokens or Web 3, are an innovative technology that is unreservedly good. We urge you to resist pressure from digital asset industry financiers, lobbyists and boosters to create a regulatory safe haven for these risky flawed and unproven digital financial instruments and to instead take an approach that protects the public interests and ensures technologies deployed in genuine service to the needs of ordinary citizens. It goes on.

• 7:18Ryan Sean Adams?

  "We strongly disagree with the narrative, peddled by those with a financial stake in the crypto asset industry, that these technologies represent a positive financial innovation and are in any way suited to solving the financial problems facing ordinary Americans." "Not all innovation is unquietly good. Not everything that we can build should be built. The history of technologies full of dead ends, false starts and wrong turns, append-only digital ledgers are not a new innovation. They have been known and used since the 1980s for rather limited functions." "As software engineers and technologists with deep experience in our fields, we dispute the claims made in recent years about the novelty and potential of blockchain technology." I'm not going to read the entire letter.

• 8:03Ryan Sean Adams?

  Just suffice it to say, it goes on to this effect, a few maybe paragraphs I'll jump in on. "We implore you to take a truly responsible approach to technology innovation and ensure that individuals in the US and elsewhere are not left vulnerable to predatory finance fraud and economic systemic economic risk in the name of technological potential, which does not exist. Given these vast externalities, together with the at best still ambiguous and at worst nonexistent uses of blockchain, we recommend that the committee look beyond the hype and bluster of the crypto industry and to..." Understand not only its inherent flaws and extraordinary defects,

• 8:44Ryan Sean Adams?

  but also the litany of technological fallacies it is built on. It implores, it ends by imploring Congress to please act to protect investors and the global financial marketplace. Matt, can you give us some context for this letter? So who is writing this letter? And what do you think their intents are?

• 9:06Speaker 00

  So this letter is, it's written by a bunch of people I really respect. That's what makes it so hard for me, right? So Bruce Schneider is a pretty famous, well-regarded cryptographer. You know, Nick Weaver is a colleague of mine. I don't agree with a lot of his positions. Steven Deal, clearly he's a pretty vocal person out on the, out on the internet. Don't know him as well, has his feelings about blockchains and cryptocurrency in general. But you know, there are a lot of people who feel this way. So, so let me try to tell you what makes me so frustrated about these folks. You know, they're, they're saying two things at once. And I may be getting ahead of what you wanted to ask me, but you know, there are technical experts who are saying things like, you know, should blockchains be regulated? Should cryptocurrency be regulated? That's one question. And there's another question, which is, does this technology have applications?

• 9:50Speaker 00

  And when a bunch of people I respect technically say, no, it does not. That's where I get off. And that's, that's what's so troubling about this letter to me. But yeah, it's a group of people who really have the credentials, you know, to make people listen to them. And that's, that's really the problem with this letter.

• 10:07Ryan Sean Adams?

  So Matt, I'm curious if you could give us some context for yourself too. So you mentioned that you have a history in, in the crypto industry, but you're not actually part of the crypto industry. I mean, you're still at Hopkins and you've been very critical of crypto at various points in time. Give us some context for some of your more critical positions you've, you've taken in crypto and just your general posture. Cause you know, people that are listening to this podcast are probably like, well, you know, David and Ryan, surprise, surprise. They're upset about a crypto critical letter, but these guys are industry advocates. They're very excited about the technology. They're clearly very biased. Give us some context on who you are and you know, your relationship to this industry.

• 10:49Speaker 00

  So I'm a computer science professor. I work in cryptography. I work in zero knowledge and privacy preserving protocols. And so that's how I kind of entered. And just before I tell you all the things that make me mad about crypto, let me tell you the things I like about crypto. So I've worked in this area. I've worked in cryptography since the early 2000s. And I've thought a lot about payments, because payments, I think, are one of the most important things that, you know, human beings do. They transfer value to one another. And we have these amazing cryptographic protocols to do this. We've had them since the 1980s, to allow people to pay merchants privately, to basically get us the privacy features of cash back, you know, undo some of the damage that kind of the surveillance of credit cards, the way that we've turned our

• 11:33Speaker 00

  entire financial system into an opticon. We could undo that. And I've watched consistently, I watched over about half my career, as all of those attempts to build better payment systems failed. And they failed for the simple reason that if you want to deploy privacy in a payment system, you want to do anything controversial, you have to ask permission to a bank. And the banks say no. And the banks control the payment industry, and the regulators control the banks, or vice versa. It's not totally clear. And so when Bitcoin came along, what was exciting to me about that technology is that, all of a sudden, it broke that, you know, that prohibition. You now had the ability to start trying new experiments in a way that you could not do before 2008. And that's what excites me about it. Now, that does not mean I'm on board with every single thing

• 12:17Speaker 00

  that's happening in cryptocurrency. To be honest, I'm not even that on board with Bitcoin. I think that, you know, the price volatility in Bitcoin is all over the map. I'm not a huge fan of the Bitcoin. I think Bitcoin itself, the community, has kind of an anti-technology attitude, which I'm not in favor of. I mean, they're allowed to do what they want. It's totally fine by me. But there are a lot of things that I'm not crazy about. And there's a lot of just plain centralized behavior, where people are building essentially centralized scams, and calling them cryptocurrencies, calling them decentralized, and just kind of stealing money from folks. And I could give you 100 examples. I think in the blog post I wrote, I did give about a dozen. And come on, we all saw, you know, UST, the Terra, stablecoin, and Luna, what happened recently. It's really

• 13:02Speaker 00

  easy to steal money from people in an under-unregulated environment.

• 13:07Speaker 00

  That's not good. We don't want that. At the same time, that doesn't mean we want to live in the world before 2008 where a bank was the person you had to ask permission, you know, to, to do any kind of experimentation. There's a middle ground. I'm all in favor of the middle ground. But this letter that you just read from, it's not the middle ground. It's something else.

• 13:26David Hoffman?

  I think, uh, one thing I want to glean from your perspective, Matt, is, of course, there are so many parts about the crypto industry that are completely indefensible. And this letter definitely taps into them, uh, and just, uh, talks about how Congress needs to regulate this industry based on how there are so many indefensible parts of the crypto industry. And maybe that's something that people like Ryan and I need to put more emphasis on is that while we see the best in crypto, the best in crypto is really drowned out by the, the mountain of just the worst of crypto. And so sometimes maybe we don't, uh, talk about that perhaps sufficiently to answer to many of the critiques in this letter. However, at the same time, so many of these, uh, statements in this

• 14:09David Hoffman?

  letter are just so broad sweeping and lack the imagination that like Ryan and I have. And as somebody who is in, in these circles, you, you talked about how these are your peers who put these, and when I read this letter, it felt like kind of emotional, like this was coming from a place of these people are in their feels when they penned this late letter. And I'm wondering if you could help us get in the perspective of the circles of people that signed on, that wrote this letter and signed off on this letter. Like what, where are they coming from? Why do they have, why do they take time out of their day to put this letter together and sign off on it?

• 14:44Speaker 00

  Yeah. Good question. It's a really good question. Why is that? Um, you know, it's easy to get polarized, right? You get into a, a, a position where you're watching everybody else go crazy over something and you don't see the benefit and you don't see why this is valuable. And with crypto, It is easy to feel that way, right? Like, we're not, you know, we're not Facebook, right? I'm not saying Facebook is good, but we're not seeing the adoption that, say, a Facebook got. Uh, not, not sure that's a good thing or a bad thing. It's just, you know, we are still seeking our first killer applications in crypto, and that's fine, right? Like, the internet didn't find its first killer applications until thirty years after the ARPANET was invented. It takes time to find these things. But, look, you're a technologist. You see a lot of things happening, a lot of money being lost.

• 15:27Speaker 00

  You see, you know, uh, carbon dioxide being pumped into the atmosphere. You see scams. You see all sorts of things happening, and you can start to be frustrated. And you see so much enthusiasm, you don't understand. You can start to react negatively. And I guess that maybe what I'm trying to say here is that there is a lot of enthusiasm, right? I know your audience is enthusiastic about these technologies, and you're enthusiastic about these technologies. But enthusiasm begets negativity. If people are not part of that enthusiasm, they can become emotionally, uh, reactive in the opposite way, especially when they don't see the benefits. And I see a lot of emotional reactivity. And let me focus on one person in particular. So Bruce Schneider is a person I talk with a lot. We see eye to eye on many, many different things.

• 16:10Speaker 00

  He's, you know, a very smart person, technical engineer. And, you know, he quite rightly says, you know, I don't see the application here. People aren't using this. That people are using traditional payment systems. Why do we need crypto? And I have to say to him, look, these things are coming. Trust me. Trust me, they're coming, and it's gonna make a big difference. But I can't prove that, right? I have a belief. I have this kind of, you know, internal belief based on my experience, this is gonna happen. He has a different one. Nobody can win that argument. There are just people who have different beliefs. And so, in so much as you have one belief, other people are gonna have a different one.

• 16:44David Hoffman?

  Inside the crypto industry, we tend to stratify into tribes. Like, people tend to fall into camps. Uh, there's like the Bitcoiner camp, there's the Ethereum camp. Like, every single chain kind of has its own camp. Then there are tokens that have their own camps. It's all very tribal on the inside of the crypto industry. And I'm wondering, there also seems to be this, like, tribe of crypto outsiders that definitely don't like cryptocurrency, and they are kind of like the crypto haters. Would you agree with this, like, illustration of there's like this external tribe? That's their common denominator is that they just hate on crypto? And how, how much would you agree with that? This is that, that we are talking about that group right now?

• 17:25Speaker 00

  Have you ever spent time on Twitter where you actually express a no coiner kind of sentiment? And you say crypto sucks? And have you ever watched what happens to your replies? I mean, look, it doesn't take too much of that to become someone who hates crypto. And even if you started out with just some mild opinions, you're gonna, you're gonna get polarized. Because that's the way it is. People feel very strongly. People feel too strongly. Right? Look, these technologies important, they're gonna go somewhere. That doesn't mean, you know, any specific community is gonna win. But everyone wants their community to win. And, you know, like, it drives some negativity. There's nothing wrong with that. I understand how people get feelings. Feelings are fine. Where I get off is I'm a computer science professor. I'm a researcher. And when people say things that are false, scientifically unsupportable,

• 18:10Speaker 00

  that causes me a lot of heartburn. And that, that I think is where this letter went. I could have agreed or ignored a different letter, but this letter went to a place that didn't have the evidence behind it. And that, that bothers me.

• 18:21Ryan Sean Adams?

  What always strikes me, Matthew, is just, I'm kind of like, you know, a certain group will believe in crypto, invest in crypto, whether capital, time, whatever the investment is. Another group will, will not, decide not to. Why can't that other group just ignore it then? We'll see what happens. I mean, maybe, maybe Bruce and company, maybe they're right. Maybe we're right. But like, time will ultimately be the, you know, arbitrator of who's on the, like, you know, whether the use cases are coming or not. So what I, what I guess I don't understand, Matt, is like, kind of the, the need to, I guess it feels like a little bit of gatekeeping. It's just like going to Congress, sending them a letter,

• 19:06Ryan Sean Adams?

  and saying that the technology is worthless and cannot be used for any practical purpose. That it's a solution in search of a problem. The certainty of that, just when I put on even my investor cap is like, I'm not certain of anything. Like, I, I, I'm not certain of, to that level of anything in life, that would cause me to like, be so certain that crypto is a bad idea, that I need to push this in front. Where's this confidence coming from? Or where's this like? Vitriol coming from, and can you explain that aspect of it? Because I understand the tribal, the tribalism piece of it, but there's always, to me, it's just like, oh, if you don't like it, don't ignore it. You don't like NFTs, don't buy a JPEG. It's easy to ignore.

• 19:50Ryan Sean Adams?

  Do you think there's actually maybe some concern here that, I mean, putting it in its best light, that the authors of this, this letter have for retail investors who are getting kind of sucked into the scams? Because if so, that is one small area where I actually, I share their concern, and there could be some things that we do.

• 20:09Speaker 00

  I agree with everything you said, except for the small part, right? It's big. It's a lot of money, a lot of people who are, you know, frankly, kind of idiots for getting into these scams in the first place, but you know, like, people are idiots. That's the fact of life, right? A lot of people are losing a lot of money. That's why, you know, the market cap of the entire industry in like 2016 was what fraction of the market cap, you know, at the peak of this all time high, right? It was, this has become a huge industry. Huge amounts of stuff are happening. You go to the movie theaters and you're going to see Matt Damon. I think that, by the way, the Matt Damon thing was a really big mistake, and I wish that, I wish that commercial had never been made. But you know, like, it's hard for me to go and see Matt Damon shilling, you know, FTX

• 20:52Speaker 00

  or whatever it is, crypto.com, and tell people that crypto is no big deal. Because we hit the point where, yeah, it is a big deal, and we also hit the point where a lot of people lost a lot of money. If it had just stayed amongst us, you know, people who know a lot about crypto and are willing to, you know, make bets, it would have been fine. So I have to put on my devil's advocate cap and say, they are right that the scams are getting out of control, and we should all be worried about that, because it is going to rebound even on legitimate projects. And the second thing I would say, and I hate to say this, you know, because I know it will offend people, but like, proof of work and the carbon dioxide output is a problem, right? Everyone recognizes that. Some people say, oh, Bitcoin's actually using renewable energy. I'm very skeptical of that claim, but regardless, like, we should not have this problem.

• 21:36Speaker 00

  If we could eliminate that problem, I would say 50% of the grounds people have to be angry at cryptocurrency in general would disappear. But we haven't eliminated it, right? So people are looking at this. It's, you know, some shocking amount. It's like the entire country of Finland's worth of carbon being emitted to secure one cryptocurrency network. It's not good. We should fix it.

• 21:54David Hoffman?

  And I think there's something that's actually an aspect that basically everyone other than the Bitcoin community inside of the world of crypto would definitely align with. However, this is part goes back to like the whole tribal side of things. Some tribes get really, really loud and really, really defensive and they can represent a larger force than what they actually actually have behind the scenes. Matt, you talked about like all the scams in crypto and I want to get your take on this because there's certainly a bunch of scams in crypto and they come in all sorts of flavors. They come in like fake wallets that like you spin up a wallet and then you send your money there and it drains all your money. That's a scam. That's the only scam that I've ever fallen victim to in the world of crypto. There are like rug pulls for tokens like, oh, we're

• 22:37David Hoffman?

  gonna make a token, it's gonna go up in price and then the founders just leave and it goes to zero. Like I could go on. There's a bunch of different flavors of scams. But the my explanation for why crypto is so scammy is that it's kind of like a logical byproduct of something that has real fundamental value at the very foundation, right? There wouldn't be scams if there wasn't a there there. And so I'm wondering how you're using that kind of frame of reference, like how we as an industry should think about these scams, what we should do about this this knowledge that like, well, if there's scams are here, then we're on to something and we know there's something significant here, but like that's not gonna like land well on the ears of crypto critics. Like, how would you navigate this thing?

• 23:19Speaker 00

  Okay, so the first thing I would say is, look, we are, you know, you could talk about all these tribes, but right, 99% of the world is outside of all these tribes. They are sitting on the sidelines. And so the battle right now is not about who wins in this 1% that's fighting, which includes the, you know, anti-blockchain folks as well as all the pro crypto folks. It's the other 99%. And I have to tell you, like, giving the anti-crypto folks the weapons to make inroads on that 99% is extremely stupid. Like all these scams, we should care about them as much as the regulators and all the politicians care about them because the battle for that 99% is what is actually gonna define the future value of cryptocurrency, not whatever we've done in the past. So, okay, great. With all that said, the, you know, the biggest thing is, look, we...

• 24:04Speaker 00

  What are you gonna do about the scams? The scams are, they do indicate that there's value here, right? Like watching, okay, there are two things about cryptocurrency that amaze me. The first is that it works, right? Like literally that we've, we've solved this incredibly hard problem of building networks that you can trust. You know, some of the networks aren't even that good, right? Like some of the networks don't even have that many validators and they're not like heavily secured and yet they still don't get broken. It's really, really impressive technologically. That's a huge thing that people are not valuing enough. The second is that, you know, people, human beings have this desperate need and want to transfer value. That is a thing. Transfer value is almost the wrong word, right? Like there is this natural human desire, like, you know, what is that Maslow's hierarchy of needs? We want to give people five bucks for a cup of coffee. It is a thing we need.

• 24:50Speaker 00

  And, you know, we also want to invest. We want to move money around. We want to make money. Money is just this incredibly powerful thing and has this deep hold in our psyche. And for years, we've had these machines in front of us that can do it, that can transfer money, that can make new kinds of money, that can do all these things. And we told people, no, you can't do that. I mean, there were companies that tried, like Liberty Reserve and eGold. They had their doors kicked down by federal agents. And we've tried to regulate all of that human need out of existence. And the problem is that our regulators were so captured by the idea of stopping it entirely that when people found a workaround to the regulations, they figured out how to build decentralized networks that were hard to regulate. All of a sudden, our regulators just threw up their hands in despair and they walked

• 25:31Speaker 00

  away and they can't distinguish between somebody who's starting some new decentralized reasonable project versus someone who's building a complete centralized scam. And I don't want to use the word scam too much, but there have been a lot of what we're seeing right now is these centralized lending platforms failing. And I'm not here, I've never used Celsius. I don't know if it was good or bad or scam, but I sure think it should not have collapsed, right? And it was fundamentally just a traditional centralized lending platform that had some crypto hooks. And regulators were nowhere to be seen. And is that cryptocurrency's fault or is that regulators failing to, you know, kind of do their jobs? I feel like regulators have no idea what they're doing and they do need guidance to figure out how to regulate intelligently. So I agree with all those parts of the letter.

• 26:16Speaker 00

  The problem is they're not getting good guidance. They're getting, they're getting the wrong guidance. They're being told, shut it all down. There's no shutting it down. It's too late to shut it all down, and it would be stupid if you tried.

• 26:25Ryan Sean Adams?

  Matt, this is what I struggle with so much is like, at some level is like, the letter that these individuals wrote should have been coming from people in the crypto industry, if that makes sense. It's like, there is an element of what you're saying where, oh, we should be the ones to write to Congress and be like, hey, you know, all of these things that don't represent the fundamental freedoms of this industry and don't represent what we're trying to do here? Like, here they are, and by the way, we don't support them, they're not reflective of crypto, and here are some ideas on what you guys could do about them. Come, please help. I would love to maybe write a letter like this. But, but the problem here, Matthew, is like, I feel like what will happen is

• 27:10Ryan Sean Adams?

  because there's such a delta between some governments and Congress even, and the crypto industry, and that like, there's just this massive knowledge gap, but there's also like an intention gap, okay? I don't know if we go and invite Gary Gensler in, if he's gonna be like, yeah, and by the way, ETH is a security, so you can't have none of that. Oh, and this Uniswap thing, we're shutting that down, because you can't trade outside of an ATS.

• 27:36Speaker 00

  Don't touch that.

• 27:37Ryan Sean Adams?

  Like, don't touch that. Oh, and this DeFi stuff? Oh, it's the same as Celsius in BlockFi, and the transparency that you say is all on-chain, we don't buy any of that, so you can't do any of it. So like, we go and we invite them in.

• 27:47Speaker 00

  Every miner is a money transmitter.

• 27:48Ryan Sean Adams?

  And it feels like we're, yes, it feels like we're inviting like the fox in the hen house. And so I don't even know what to do about this, other than just like, you know, what we are doing, which is educate people, advocate, build from the bottom up, help that 99% who don't understand crypto, become 98%, 97%, whittle that down, and hope the industry builds some use cases that actually convince everyone in government the way the internet convinced people. So, that's my hope, but what do you say about this?

• 28:21Speaker 00

  So my dark theory of this is, you know, which is a little paranoid and will probably make people mad in the regulatory world, is that, you know, really what we're seeing is what happens when you have a captured regulatory industry, right? What this is all about is who are the regulators serving? And I think the regulators for the last 10 years have been very happy serving the banking and the sort of traditional finance and brokerage industries. And, you know, they learned how to do that. They learned how to do that so well that when people figured out how to route around them, they had no idea, no idea how to kind of do their jobs in a, in a world where they couldn't just sort of say, oh, you know, we're going to put that all in the same number of people. And you're right, though, like going to the regulators, there's a, there is some kind of learning process they have to do where they realize through painful experimentation

• 29:05Speaker 00

  that you can't just ban things, that you can't just will, you know, new technologies away, that you have to adapt to new technologies and, or people will find ways to route around you. And that learning process hasn't happened. We're in the process. It's probably a five to 10 year, 15 year process where regulators try really stupid things. They fail and then maybe for lucky, they learn, maybe there's another way to do this. Right now they're sort of in this place and I think this letter reflected where they're thinking, people are thinking, you know what, we can go to Congress and say blockchains have no purpose, ban them and it'll work. Like, but that's not, that's over, right? We're not going back to 2007. That world is gone. So you either learn how to do this intelligently in a world where this stuff exists now, or

• 29:50Speaker 00

  you're going to end up with a million Celsius and a million, million terras. And there's just, there's, there's, there's a new thing that's going to happen. And unfortunately, regulators, as much as I love some particular regulators, they're not the kind of people who can drive this innovation and I guess it has to come from you.

• 30:08Ryan Sean Adams?

  It's, it's going to take us all to be sure and it's going to be a messy process, I believe. And we're not all going to get it right, but yeah, I do have hope. And I guess maybe going back to kind of the, the education side of it. So another thing that you expressed, I think, very well in, in your article is just addressing some common objections. And I want to maybe spend some time doing that right now. As much as go send this episode to a friend, bankless listeners. If you're hearing this and somebody has some concrete objections, maybe some objections that we're about to go through, they can listen to this section and hear what the crypto industry, what people like Matthew would say about some of these objections.

• 30:49Ryan Sean Adams?

  But also, this can kind of arm you to have a response when you're asked questions from your family members at the next, you know, meeting of friends and the subject of crypto comes up because right now, of course, we're in a bear market. And so no matter what happens in crypto, everyone's going to have a negative view on it and probably a biased negative view if they're outside of the space. But let's go through some of these objections. I want to start with the first one that we hear so often. And you actually alluded to that, hey, there's some merit in this objection, but not quite as stated, and that is cryptocurrency is terrible for the environment. Proof of work is going to kill us all and therefore all crypto is, you know, bad for the environment.

• 31:34Ryan Sean Adams?

  And this is a something that we should ethically stop. Can you react to that objection? What would you say about that when you're asked?

• 31:41Speaker 00

  Okay, so first of all, I really do think this, you know, climate change is real. We are heading towards a bad place, a really bad place. And if you disagree with that, I don't care. That's just a fact. And at the end of the day, the idea that we have to burn as much money, as much carbon as, you know, an entire country to achieve about seven transactions per second, or whatever the Bitcoin transaction rate is globally, that's just not workable. It's not going to work. And we have technologies that can do better than this, right? We have proof of state technologies which are now operating and coming online. We have other technologies that are that are better. We even have things like, you know, Chia has this proof of storage or proof of time and space, I think they call it, you know, it still burns through hard drives.

• 32:24Speaker 00

  I'm not crazy about it, but you know, some smart people are thinking about this. And, you know, like this is something that if you go out to the world and you tell them like, hey, this isn't a problem. You've already lost, right? You have to start by saying this is a problem. And then, once you admit it's a problem, you have to tell people what your plan is. Because if your plan is, don't worry, all these people out in the world are going to stop burning coal to mine Bitcoins, you've got a problem. So I can't, I can't really tell you what to say. Like, I, I just feel like this is where the source of a huge amount of negativity comes from. And when you've got these people out there who are your adversaries, and they're trying to convince the world that your technology sucks, that you are a problem in the universe, don't give them weapons to do it. Like, you know, you don't have to go solve these problems yourself.

• 33:08Speaker 00

  I'm not asking you to go out and stop the carbon emissions, but don't defend it. Because you've, you're just, you're just putting yourself in a terrible place.

• 33:16David Hoffman?

  I'm wondering to what degree that, this is certainly the weak point of the industry, like, the reliance on proof of work, which is something that I just do not ever see Bitcoin as a, as a culture or community ever moving away from. Bitcoin will probably be proof of work until it stops working. Like, but also Bitcoin is increasingly a smaller and smaller and smaller part of this whole industry as a whole. Yet it becomes this whole, like, anti crypto because it's going to burn down the planet. Critique of crypto seems to be getting larger and larger and larger. And I'm wondering if it's fair to call this just like an unfair, like smear of the whole entire industry using this, like, much more smaller part of it. Like, it's, it's a weak point because,

• 33:59David Hoffman?

  you know, people feel really strongly about the climate, as they should. And they're using this to like, to, you know, defame the whole rest of the industry. And it's a little bit of a malicious critique. While it is a valid critique, it's also kind of blown out of proportion. How would you feel about that?

• 34:15Speaker 00

  I see a lot of people who, they hear the word crypto, even when we're talking about a proof of stake system, and they say, oh, it's bad for the planet. And, you know, you see these arguments happen, right? Where someone says, oh, crypto, bad for the planet. Someone says, oh, that's a proof of stake network. They're not burning any carbon or significant. And then the person is so attached to their position that they say, well, you know, how many, even so, like, it must be doing something really bad. And, you know, that, that is a thing that happens. People get very attached to that position. Or they switch to, it's all scams. And, you know, once people get into a position like- That you're a human, right? We we stay in our position. We will fight even if we have to change our change the actual details of our position. We're not we're not switching it. Anyway, regarding proof of work, my feeling is right now that the only way out is through, that if we just let this technology develop,

• 34:59Speaker 00

  like we are so close to fixing this problem just through, you know, the deployment of better technologies, that if we just let that play out, it will get better. And, you know, the in the interim, mostly we just have to buy the time to do that. The thing that actually terrifies me is Congress or somebody says, hey, we're going to ban cryptocurrencies. And in a world where you ban cryptocurrencies, you know what happens? Like proof of proof of work may be the most robust solution in the world where governments are actually trying to shut down cryptocurrencies. We might inadvertently build a world where the only thing you can ever deploy is proof of work. And I'm actually very scared of that. Like, let people advance. Let's let projects launch and try new things. Because if you go after them, we're going to end up, it's going to be like prohibition. We're going to be stuck with

• 35:44Speaker 00

  the worst possible outcome.

• 35:46David Hoffman?

  Moving on to the second objection that you put in your letter, you said, public blockchains, you know, objection number two, public blockchains can never support banking features like transaction reversal. And I want to go back to the letter and just read the sentence that that came from there. Blockchain technology cannot and will not have transaction reversal or data privacy mechanisms because they are antithetical to its base design. Financial technologies that serve the public must always have mechanisms for fraud mitigation and always and allow a human in the loop to reverse transactions. Blockchains permits neither. I hear your your exasperated sigh. What are your thoughts when when you hear the sentence out of this letter?

• 36:25Speaker 00

  I mean, like, this is just like apples and pears, right? Like, this is, these are two different concepts. The blockchain is and should be immutable, right? We record transactions on a blockchain. It's hard to change those transactions. But that's got nothing to do with transaction reversibility, right? If you're if you're a banker in a traditional bank, let's say you go back to the 1920s. And he's writing down on a paper ledger with a pen that you did some transaction. And your banker decides the transaction was a mistake and wants to reverse it. They don't need to erase the pen. It has nothing to do with the pen and the paper. It has everything to do with the fact that you've got the capability to reverse transactions. And you could build that into blockchain based systems too. In fact, and you know, one of the things I point out in the blog post, blog post is that

• 37:07Speaker 00

  some of the recent backed stable coins like USDC and Paxos Dollar and BUSD. These have transaction freeze and burn capabilities built into them. Because they're regulated, governments said, we need you to put those into the smart contracts that drive those systems. And yeah, the underlying Ethereum blockchain, it's irreversible, it's immutable. But the smart contracts running on top of it, the drive USDC, they can do all sorts of things that Ethereum doesn't, you know, the actual ETH currency can't do. And one of those is, you know, freeze transactions and reverse them. And you know, the, the idea that like, we have to have human beings in every single modern banking system is absurd, right? Today, if you send a wire transfer, there's no human being in the loop on every single one of those.

• 37:50Speaker 00

  If you send a Zelle, I mean, Zells aren't even reversible, right? Zelle, if you, if I send you 50 bucks by Zelle, there's a very limited chance I'm going to get someone to reverse that. And mostly that's because it's automated. So this entire, every aspect, I mean, it's like, it's wrong, but it's like fractally wrong. Like it's so wrong that it's hard to explain how many different ways that statement is wrong. It's technically wrong, it's, it's, it's business wise wrong. And it's, anyway, I'm, I'm very exasperated by that particular one, even though it seems like a small claim in the letter. It just, it's the claim that kind of shows that people don't know what's happening.

• 38:24David Hoffman?

  Do you think that this is just really coming from a place of not understanding the technology where once we have blockchains and immutability, like people aren't used to immutability in this new level, like the, we, the crypto as an industry changed the definition of what immutability means. We had never had this level of immutability before. All of a sudden, like, we have to like reconsider what it actually means to be immutable. And I'm wondering if you just think that this, this, what they're using here is they are just using a misunderstanding of this new word of immutable, which like the crypto industry has kind of redefined.

• 39:03Speaker 00

  So I think we've always had immutability. I mean, cash, the entire financial system that we live in was built on cash and other kinds of immutable assets. They weren't ledgers, right? But if I give you 100 bucks or a chunk of gold, I can't undo that just because I want to, unless you're willing to help me or I'm gonna go rob you. So like, the entire financial system we live with was built on immutable assets at some layer. But okay, that's a dumb technical point. But here's the real thing. Like, I think a lot of people, I learned this myself recently. I've spent a lot of time working with DeFi and smart contract protocols, and kind of learning about the space and who's doing what. And, you know, I'm a computer scientist. I thought I was pretty well-versed. I've taught classes on blockchain and cryptocurrency.

• 39:45Speaker 00

  But my knowledge kind of was a little out of date. I hadn't really been following what's going on with the DeFi community and all the different tech that people are using. And when I caught up with it, I was, I realized, like, hey, you know, I'm living in the past. This is not how things work anymore. Things are moving so quickly in this community that you can lose track. So somebody who was very familiar with the basics of blockchains in 2015 would think, oh, Bitcoin, Ethereum, immutable, you can't reverse transactions. Therefore, I'll write this letter. And the result would be that. But this is not true anymore, right? Like, we're way past that. We're technologically, that's like talking about the internet in 1990. And, you know, it's 2010. Things are different now. And you have to be very, very closely, this is actually one of the problems with being anti-crypto. If you're anti-crypto,

• 40:29Speaker 00

  you're not using crypto. You can't criticize something you don't understand. And you have to understand it well to actually do a good job criticizing it. This is the problem with this letter.

• 40:37Ryan Sean Adams?

  Absolutely. Well said. And retrospectively, with statements like this, it's hard to imagine they found 1,500 tech experts who were willing to sign this, actually. Particularly that blockchain irreversibility, you know, piece was astounding to me as well. But how about this objection? This is an objection from all of the expensive gas fees and transaction fees that people in crypto have been paying, which is cryptocurrency doesn't scale. And we saw this in the letter. Or, you know, the corollary of that is the fees are too damn high, like transaction fees will never work because it's too expensive. What do you say about this?

• 41:19Speaker 00

  I worked at AT&T Labs in the year 2000. I was gonna put this in the blog post. I I worked there. This is ancient for you, but like for me, it was when I was, you know, just coming out of college. It was my first job and they were excited about wireless mobile phones like this is before mobile phone. I mean, we had, we had mobile phones before data, mobile phones and smartphones were a thing years before. And my first mobile data connection was fourteen thousand four hundred bits per second. It was fourteen point four K and I think I checked my five G cell phone recently and it was fifty million bits per second. And so back then I was working at AT&T Labs and these, these folks were visionaries. And they were talking about video streaming. They were talking about two-way video streaming like FaceTime things.

• 42:04Speaker 00

  Twenty years before this, you know, came to exist. They were talking about things like Periscope. And they were older folks. And so I was just this kid and I thought, you're nuts. Like this thing does fourteen thousand four hundred bits per second. If I'm lucky, there's no chance I'm gonna do two-way video streaming or something like TikTok. That does not, that's not possible. And they just looked at me and said, you know, like, look, we've been doing this. We're thirty years into our career. We know one thing, which is that when it comes to technology, you know, if, if your claim is that such and such a thing can't happen because the technology isn't going to improve to the point where, you know, the, the bandwidth is gonna be better. Like, forget it. You're not making a viable claim. We, we just know this. And now I sit here with my five G cell phone and of course, all that stuff has happened. It happened super fast.

• 42:47Speaker 00

  So when somebody comes to me and says, you know, Bitcoin's slow, I'm like, yeah, of course it is. It was made in two thousand seven. It was the first cryptocurrency network. They say Ethereum's slow. I'm like, yeah, of course it was. It was made in two thousand fourteen. It was, you know, the same design as Bitcoin. But now we're seeing networks that can do, you know, thousands of transactions, tens, thousands, a hundred thousand. We're gonna see the same kind of exponential scaling in terms of these, these systems. It's, that is the one argument that, you know, frustrates me the most. Of course, of course, things are gonna get better. That's just what we do. We're engineers. We make things better. And, you know, object to all the Celsius's and all the rug pulls you want, but don't object to technologists doing technology things because you're, you're always gonna be wrong if you bet against them.

• 43:26David Hoffman?

  So for all the critiques that I hear in this letter and just around the crypto industry, like we've gone through like crypto is terrible for the environment. We should probably address that one head on. Public blockchains can never support banking features like transaction reversal. Like, we can answer that when the time comes. Like, regulation, we need to address that head on. Of all critiques, though, the whole like crypto doesn't scale critique, I feel like this one's like safe to ignore because eventually it will just be true and then that critique will just be eliminated and we don't have to fight this fight. Would you agree with that, Matt?

• 43:56Speaker 00

  Absolutely. It's going to be faster than you could possibly imagine. I mean, I would say five years. I mean, we're in this amazing place right now. I can't stress how amazing this place is we're in. We are about to get very scalable chains. They're all coming online right now. We have backed and regulated stable coins, which I know that a lot of crypto people don't like, but I think that is kind of the missing ingredient for all, a lot of these financial applications that folks say don't exist. We have, you know, privacy layers and zero knowledge coming and all sorts of things. All of these pieces are somewhere between five and six, five and seven years away from gelling. And at that point, this technology is going to eat the traditional financial system. It might take 15 years for it to happen, but it's going to do

• 44:40Speaker 00

  to the traditional financial system what the internet did to the long-distance companies. And I think that a lot of people kind of know this, but they're just not, you know, it doesn't really mean very much. And by the way, when I say eat the financial system, I'm not saying we're all going to be spending Bitcoin. I mean that, you know, maybe you're still using Venmo. It's just that underneath the hood, in some way, you don't even see Venmo is transferring and settling money on a public blockchain. And that's going to happen because why would you spend, you know, why would you use technology from the 1970s when we have reliable technology from 2022 that's instantaneous and cheap? And, you know, what that means for cryptocurrency, like floating cryptocurrencies, like Ethereum, like ETH and Bitcoin, I don't know.

• 45:20Speaker 00

  But you know, they'll have a place too.

• 45:22Ryan Sean Adams?

  What's always funny to me is when when critics like those in this letter say cryptocurrency doesn't scale, and then same breath, they also say cryptocurrency has no use case. It's like, you gotta pick one, guys, right? It's like, because people are using it, and that's why that's why it's not scaling, right? It's like, we can't be, it's not scaling because there's too much demand, and also, no one uses it, it has no use case. So I really feel like you have to pick one side of that argument, but often, that is not done. The last objection here, which I feel like is is pretty near and dear to your heart, in the cryptography space, Matthew, is this charge that there is no privacy on the blockchains. That's one side of it. The other side of it is sometimes people say, there's too much privacy on the

• 46:06Ryan Sean Adams?

  blockchain, and we need our AML KYC. What do you do with this objection?

• 46:12Speaker 00

  Look, I, I, God, I have, I have so many thoughts about AML KYC. And I should say, by the way, I am working on a startup, right now. This is my full disclosure that, you know, is working on how do we do this regulatory compliance stuff. This is why I said this in the post, but I should say this to you here, too. This is why I care so much about this, right? I am actually kind of working for, you know, regulatory folks, or at least I'm trying to, you know, I'm not sure the regulators are totally on our side either. But, you know, I care about this. I think people are gonna have to solve this problem for cryptocurrencies to go mainstream. And so this is an ingredient I think that is worth building. Okay, good. So what do we do about that? Well, look, you know, the hardest

• 46:53Speaker 00

  problem in privacy is making things private, right? We built Zcash, and Zcash was designed to be as private as possible. You know, and similarly, Monero and other currencies, they don't make allowances for regulatory compliance. They're just private. They try to be private. So what do you say about that? Well, is that bad? No. I mean, look, the hard problem is being private. If you want to make things less private, once you've achieved 100% privacy, going to, you know, privacy with limitations is super easy. Going to privacy where I'm private from everybody, but-

• 47:25Ryan Sean Adams?

  In the same way that, once you go full privacy, you can start to have less privacy, once you go full immutability, you can also have less immutability. But you gotta go all the way first.

• 47:34Speaker 00

  Yeah, building things that are hard to do is hard. That's a really stupid thing to say, but it's like a trivial thing, right? Privacy, hard. Immutable, hard. Trustless networks, hard. Making systems that add trust to a trustless network is as simple as like, hey, whose public key am I going to assign to be the trusted person? Making things that are less private is as simple as, hey, what data do I want to drop out of, you know, just put it in plain text? These are easy problems. And so, look, what's going to happen? My suspicion is we're going to see privacy layers built, and those privacy layers are going to have some regulatory compliance capability. And, you know, maybe you'll have to KYC to use them. And that's fine. That's the future. Like, somebody has to build those. They haven't built them. Somebody's going to build those things.

• 48:17Speaker 00

  And, you know, like, what's the objection here? Like, that, you know, it hasn't been built yet. It hasn't been built yet is not an objection. It's not an objection to the extent that this letter wants it to be. This letter is saying there will never be any use for this technology. That's not true.

• 48:31Ryan Sean Adams?

  Matthew, I'm curious your take on this and the privacy side of things. One weird, I guess, starting point I see when people are arguing against the ability to have the privacy in crypto is they seem to assume that in this transition that we're all making as a society and as humanity, from analog to digital, that that transition requires us to actually lose our privacy. And what I feel like the crypto industry is saying is like, no, we're just trying to preserve, you know, that thing that we had for hundreds of years called cash, where you just gave money to appear individually, and they received it, and they didn't need your name and your address and your citizenship and a photo ID.

• 49:15Ryan Sean Adams?

  Remember that thing and how that didn't collapse society? We're just trying to preserve that in the digital world. Would that be okay? Is that too much to ask? And like, they don't pitch it as that. They act as if having some base layer of assumed privacy is going to cause the end of civilization and let all the terrorists and child pornographers win. Can you talk about, like, that base supposition of privacy on chain? Like, how do you feel about that? And, you know, do you even go back to like, kind of question the whole starting point for the argument that we shouldn't have these things in the digital world?

• 49:55Speaker 00

  I went back to, I was recently giving a talk to a crypto conference on the history of payment technology and how blockchains kind of came out of that. And one of the things I did is I read a bunch of stuff from the 90s and the 80s, talking about, you know, this was the dawn of the era when people are moving to debit cards and cash was really king, like back in the 80s, 90s, people used it everywhere. People were moving to debit cards and more credit cards and online stuff. And it's amazing how much of that debate that was happening, like among serious people, not among like cipher punks and like crazy crypto people who didn't exist, right, was about this problem, was about the idea that, wait a second, if we deploy debit cards everywhere, what's going to happen to our privacy? And people, serious people like presidents, you know, congresspeople,

• 50:40Speaker 00

  they took it seriously and they were afraid of it. That whole aspect of the debate has vanished, right? You talk to somebody in this debate in, you know, 2022, there's a position which is that maximum surveillance is the default. And therefore, we must stick with the current default. And I think that that kind of goes to, there's an Overton window that is defined by what we currently do. And in the 1980s, it was cash. So we just said, that was fine. The world isn't ending. Like you said, it's fine. Let's build systems that work like cash. And today, the Overton window says, anybody with a national security letter, or maybe just the credit cards can access all my transactions and extract to mark data mine that information. So let's build systems that look like that. It's really hard to move people away from what they see as the current standard. And, you

• 51:24Speaker 00

  know, sometimes to move people back to that world, you have to do some things that, you know, force them to grapple with the privacy implications. I think that is something we have to do.

• 51:34David Hoffman?

  Right. And it just, I'm reminded of how, like, as a child of the internet, the data, the world of data is something that I grew up with. And that was just became the status quo in my brain. And like, these things, like money, money phenomenon, money technology, doesn't change very often. And like, for a good reason, like money, the money that we use shouldn't be changing, ideally, in an ideal world, ever, or hopefully longer than multiple generations. But if you, if you money, the form of money changes. And like inside of one generation is because like things are chaotic and bad. And so it's useful that the form of money is relatively stable. And at the same time, like, you know, grown up with like, watching my mom write like checks at the, at the grocery store,

• 52:19David Hoffman?

  turned into credit cards, like going up on the internet, just like my mind is like, I'm a child of data. There's a data all around me. I give away my data for free because that's the paradigm I grew up in. I don't really know anything else. And so like convincing people like, like, it feels like a very much like Plato's allegory of the cave. Like, we're all stuck in the cave and the cave is this paradigm that we just give away our data. And like waking people up to this like new world where there's shining light outside. It's like, oh, here's the world of you actually get to choose what data you disclose is like mind breaking for so many people. Have you just had any like tricks or like just like communication tricks that you have for like helping people wake up to the world outside of the cave?

• 53:03Speaker 00

  I spent a lot of my time when I'm not doing cryptocurrency. I spent a lot of my time working on end to end encryption, things like Signal and WhatsApp, you know, like encrypted messaging. And mostly trying to convince government regulators not to ban it, which they, they really wanted to for a while. And, um, you know, the thing I learned from that is that the thing I've learned is that people love it, right? People love it. Even people who are the most boring people, you know, your suburban neighbors who have nothing. Well, maybe have nothing interesting that the government would care about. They just think it's great that they can talk to their husband or wife or whatever, or kids on a channel that isn't possibly surveilled and is secure. Maybe they care about hackers more than they care about like the NSA, but they care a lot.

• 53:45Speaker 00

  And, um, you know, the thing about it is like, it's not hard to convince people that privacy is good. It is not hard to convince them of that. And, um, do I have any tricks for that? Well, like. I don't know. I mean, it just it's really it's it's really just it's not so much trick. It's kind of combating the idea, the only countervailing force is the idea that the world will end, that you know, you will be unsafe if privacy isn't if if privacy is allowed. And the problem with that is that, you know, it's very hard to convince people that the world won't end if you do a thing.

• 54:22Speaker 00

  You know, you can tell them in the eighties, the world didn't end, but they didn't live in the eighties. So I I don't have any tricks. I don't have any tricks, but I will say one last thing since I'm I'm kind of going off here, which is that the the winning recipe here is not to ask people to change their lives. Right? I know a lot of people who tell me like I I have Amazon Alexas in my house. And everyone gives me crap about it because I'm a computer security researcher and privacy researcher. And like Amazon Alexa is poison and they're right, like they're absolutely right. But I do this because if you live in a log cabin in the woods, you've already lost. If you tell people they have to give up technology that they enjoy and they like in order to feel secure, you've lost. The goal here is to make things that are as easy to use as the non-private version.

• 55:03Speaker 00

  And then, you know, make sure that when it comes to those other systems that you push very hard and you use them yourself and you make sure that you're not just, you know, opting out of the rest of the world that normal people live in. You have to live in the same world that other people live in and then try to make things better.

• 55:18David Hoffman?

  That is an angle that I definitely appreciate by some of my favorite builders in this space is that they see the values and the principles that are built into cryptography. And they understand that the only way to scale these values is to by scaling the UX. Right? At the end of the day, like it just fundamentally, like all other previous products of the world has to be a better product than the alternative. And it's definitely hard mode to like get cryptography to be a better UX. But also, at the end of the day, some of the things that you get out of cryptography are just useful products. And it's just a matter of problem solving the way around. And it's like the the favorite builders in this space, they see this vision. They see this future regardless of how many years away it is.

• 56:03Ryan Sean Adams?

  Well, a good example of this too, David, and we've been talking, you've been talking so much, Matthew, about Celsius, for example, and the block five. And I think a lot of the reason people didn't use some of the more, the DeFi tools that were totally transparent and offered similar levels of yield is because they were nervous about taking custody of their own keys, right?

• 56:24Speaker 00

  Yeah.

• 56:25Ryan Sean Adams?

  And you kind of understand, because the UX is pretty tricky, right? And like, you gotta memorize these, you know, 12 seed words, or these 24 seed words. And so they went and they defaulted to, okay, well, I'll just put it in Celsius. It's just, it's just easier. I don't have to think about it. And now, they can't withdraw their funds. If they had kept their keys, if they had kept their crypto, then they wouldn't have that problem right now. They would still be in complete custody. It'd be the fully bankless solution. But they didn't go down that route, because it was harder. And I think that gets at the heart of what you're saying.

• 57:00Speaker 00

  I think one of the hardest problems in, you know, our field right now is key management. How do you keep your keys? How do you deal with the fact that people lose their phones? How do you deal with this and make them feel comfortable with it? And the only thing I would say to that is that we are slowly solving that problem. And we're doing that, you know, like, for example, Apple has been deploying systems, WhatsApp has been deploying systems that use hardware in data centers to fix this. We can fix this problem, but yeah, we're not there yet. I mean, writing down, you know, 12 words or 24 words is a pain. And then where do you put it? Like, what do you do? You know, it's, it's rough. I have $300 in a, I shouldn't even say this. I have $300 in a MetaMask browser wallet right now. I didn't even bother to write down the seed

• 57:44Speaker 00

  phrase. Like, I guess, you know, that money could get lost if I dropped my computer, and I will feel really dumb about it. But it happens.

• 57:50David Hoffman?

  Parts of, one of the reasons why, like, people like me, and Ryan, and others in the crypto space are so optimistic about the future of crypto, is that we fundamentally, fundamentally believe that eventually cryptography will be able to produce a better UX than all previous products that the world has ever produced, which is a very grandiose statement, which is kind of where I'm going with this next question. We're like, for, for like, private Key management, we have solutions like account abstraction. And you know, for proof of work removal, we have proof of stake. For scaling, we have layer twos. We even have layer threes. We've got Valydiums. We have all of these like complicated names and complicated like technology solutions that are known quantities importantly, like we know these things exist. They're not theoretical. They are products being implemented.

• 58:35David Hoffman?

  But it's not like these products being implemented just like become live and fix everything on day one. It takes one to three to 10 years for these things to like really get built out. And part of like the core, the core, most inner like circle of crypto are these people that like see the 10, 10 plus year vision, like the 50 year vision. Sometimes even like the multi generational vision of what happens when you have a crypto enabled society. And like that like utopia that we can all like dream up as visionaries that are keeping us like why we wake up in the morning. But like, the problem is like that daydream is so far away. And also for like explaining crypto to the average person, like they're not getting on board with this daydream.

• 59:16David Hoffman?

  You need to understand what the hell a Valydium is. You need to understand what account abstraction is. And like, in order to explain those things, you have to explain like 17 other things. And so that starts to be this like dividing line between like the crypto natives and the normies of the world, the not what we call normies, which is also a conversation to talk about, like these labels that we give people. But it's from their perspective, we're just like pushing daydreamy vaporware. And it's a big hype fest. And so like Matthew, coming, coming from the external perspective, I want to ask you like, what's the most like annoying hype we push? Like, what, what should we like really like tamp the brakes on and kind of keep that just to ourselves before it's ready?

• 59:56Speaker 00

  Yeah, I, okay. So let me just say like, one of the things that drives me nuts is when people say things like your keys. You know, your currency, right? Like, yeah, fine. It's true, right? If you own the keys, you own the currency, you control it. And I really like that aspect of crypto, but you got to get rid of the word keys. You've got to tell people there's no secret key. You've got to get rid of that and hide that from people and make it transparent. Because nobody needs to know there's TCP. Nobody needs to know there's HTTP or HTTPS underneath Facebook is irrelevant to their lives. And you have to make sure those concepts, the thing that you know, these are not hype things. I'm not really answering your question well. The idea that I need to send, if I want to send you some currency, I need to get your OX, you know, Ethereum address or your Bitcoin address. Horrible. Like, these are not hype things. They're, they're perfectly workable things that need to go away.

• 1:00:41Ryan Sean Adams?

  So what do you think is something, Matthew, that we could be doing better as an industry? In terms of how we talk about this to those outside the industry? It's Congress, critics, you know, everyone, we're just talking about the subject of sometimes we're guilty of overhyping things, hyping things too soon. But like David and I would say, we can't help it because we're so freaking excited. Like this stuff's going to change the world. This is like an internet level, you know, movement. We're just not saying it's, it's just not going to happen overnight. What advice do you have, people, given that you've straddled the side of being on the outside looking into crypto, but you've also been in the industry? How can we better communicate this?

• 1:01:22Speaker 00

  I would, I would say there's three different answers to this. One is, you know, stop talking your book. When people look at you and they think you're talking your book, uh, you know, that you're, you're, you're just shilling this particular currency or whatever. They don't take you seriously. So, so say things that make it clear that you actually care about the issue. And it's not just you saying like, this is my, my particular financial interest. I happen to think that whatever is best for my particular financial interest is best for the country. That's not going to make you credible. So if that's true, maybe it is honestly true, but try, try to think a little harder. The second thing I would say is like, put yourself in the regulator's shoes. You're Congress, right? What do you care about? You want to have some innovation in the financial services industry. That's fine.

• 1:02:04Speaker 00

  You do care a lot about those moms and pops who are getting caught in the Celsius's and in the terras and the other rug pulls. You care a lot about them. You want to do something. Come up with answers, like there have to be some answers, like clear, public answers. And I'm not saying answers of the forum, don't do this, but answers of the forum. If I were you, I would do this. And then the third thing, which I think is super important is DeFi in particular, I'm thinking DeFi, maybe it's the whole industry, needs to think harder about how it can police itself. And by policing, I have one, let me give you one very specific example. I was talking a few weeks ago to a person who's pretty high up in the national security establishment in the US government.

• 1:02:46Speaker 00

  And they were asking a whole bunch of very influential crypto folks in DeFi mostly. How do we regulate you? And you know, what are we going to do? And one of their big concerns was not about like crypto scams. It was about North Korea stealing money from DeFi, poorly secured DeFi bridges or bridges and DeFi projects. Like the two of two multi sigs, uh, you know, like the rainbow, uh, bridge and the one that happened recently, just tons of money, like hundreds of millions of dollars.

• 1:03:15Speaker 00

  And, you know, their point was pretty valid, which is like, it's not the US government's job to defend you, but also we can't tolerate a billion dollars going to North Korea because they're going to use it to build, you know, hydrogen bombs. And I would really like to see the DeFi industry in particular, come up with an answer to that question, an answer that's compatible with their values. An answer that's not like regulate us out of existence, but also isn't do nothing. I think that it's perfectly for, for what amounts to pocket change. That industry could come up with some way to like get ahead of the attackers, find the vulnerable places and get there, you know, and fix them. And I'm not just talking about fix their own systems, right? Like, of course,

• 1:03:59Speaker 00

  the wealthy DeFi projects and the wealthy C5 projects can fix their own systems. I'm talking about going out and defending the ones who are stupid, who happen to have $200 million that's about to get stolen. And I would like to see some of that kind of self policing. I know everybody in the space is a libertarian. And but, you know, like they think that it's, you know, they're not even libertarians. They're more like anarchists, like let this problem solve itself. But like libertarianism doesn't mean do nothing while the world burns. It means sometimes self organize and, you know, self police, fix these problems ourselves so that governments don't have to step in. And I don't see a lot of that plausible self regulation, self organizing happening. So if anyone knows a way to do it, do it like that's the key.

• 1:04:42Ryan Sean Adams?

  That's a great point, especially in that, the white, white hat hacker sort of motif. I think we could definitely do better. Better with that and it create a better incentive program. Did not think about the, the collateral national security damage that, that happens when a rogue nation state actually steals the funds. That's a very interesting. Interesting line of conversation for sure. But Matt, this has been so much fun and so helpful. And I just want to say thank you for writing that post in response to that letter. We need your voice. We need people in the crypto community. We need their voice to help push back against some of these ideas. But also to do so in a way that's, you know, humble and kind of admits where the critics have a point.

• 1:05:26Ryan Sean Adams?

  This is very important too. So we're not just talking our bags and talking our book, but we're kind of standing up for these core principles. I want to maybe end with with this question to you. And you know, you take this as a summary or take this as kind of like an encapsulating question for the entire conversation we've just had. But how do you summarize things for you yourself? Why is crypto worth defending in your mind?

• 1:05:53Speaker 00

  I think I was hoping you were going to ask me, what is my favorite thing that has happened? What is my favorite project in this community, which maybe is close enough to your question.

• 1:06:01Ryan Sean Adams?

  Your favorite token.

• 1:06:02Speaker 00

  And then I will answer your question.

• 1:06:03Ryan Sean Adams?

  Answer that too. Answer that too. Get us both.

• 1:06:05Speaker 00

  It's Iota. No, it's not literally Iota. I will tell you. I will tell you which project, and this is going to sound really stupid and everyone's going to think I'm an ass for saying this. But my favorite project is DM, Libra DM, Facebook's internal token project. And I know that sounds ridiculous. It's not literally my favorite project. I had nothing to do with it. I never, I don't even know if there was no like token. But I'll tell you this, like, that was the one project where I saw real companies come together and say, you know what? This technology is going to revolutionize a huge part of our industry. And they did it and they built it. And, you know, I think there are a million things that are stupid, like Facebook having access to all my financial transactions.

• 1:06:47Speaker 00

  Horrifying. You know, Facebook being in control of the banking system, horrifying. But what was impressive about that project is they made a bet and a lot of other people made a bet too, that said, this technology is going to replace everything else. And really interestingly, when you look at the critics of that project, their objections were not, this is stupid. This is going to fail. This blockchain based system is not needed. Their criticisms were if this project goes forward, Facebook's going to take over the world. And it's very weird. It's very weird for me to hear regulatory folks, including the folks in this letter, saying things like blockchain has no applications in a world where Facebook's DM

• 1:07:27Speaker 00

  project was killed because folks were scared of it. And I think that is the strongest indication that this technology has legs, even though it's not like a crypto native thing. And again, like I said, not defending it to want it. But like, that is, that is, to me, the biggest indication that, that, that, that things, this technology is going to kind of devour everything. And

• 1:07:49Ryan Sean Adams?

  By the way, Matthew, isn't that, isn't that another example of a time where the crypto industry kind of went to Congress and said, hey, can we have permission to go do this? It's like Zuckerberg and the Libra team. And then they were like, hell, no, you can't do that. Sorry, shut down your project. Right? So this is what I'm saying is like, it's very hard to engage in Congress and the government when you're not sure exactly how like this letter could have come from us, but the all the times we've asked for permission, it's always a no. So why would we ever do this?

• 1:08:19Speaker 00

  I agree. I agree. But you know, you've got to have both sides, right? You've got to have the people who are building things and doing things. And you've got to have the people who are, you know, after the fact, going to Congress and saying, look, you screwed up. You banned DM. And the result was you got $60 billion in stable coins on chain anyway. And now they're running on public chains, which you have even less control over. Like, don't do that again. And there have to be smart voices who are able to take, you know, there has to be both sides. There has to be the carrot and the stick. And, you know, the stick can be just building stuff that Congress can't regulate. But the carrot has to be people explaining to Congress why their regulation isn't making any sense. And so, you know, there is benefit to writing those letters if you write them.

• 1:08:59Ryan Sean Adams?

  If we said that to Congress, Congress, though, just to push back on that a little bit, like, you, I mean, you alluded to it. If Facebook controlled the financial system, that would be absolutely horrifying. And so the fact that so many public, so many stable coins ended up on public ledgers in my mind is like, yes, huge win. And so like, isn't that like the good thing? Isn't that the good outcome?

• 1:09:20Speaker 00

  It's the good outcome, maybe, except, you know, like, okay, so I think what you're saying is, yes, if regulators go in and they kill some projects and we still get the end result that, you know, that that project was pushing towards, is it a good thing? Yes, I mean, sure, it's good. I think that's because, you know, there is definitely a pressure towards a particular outcome, and that's going to happen anyway, but it's not good, right? Regulators could have been going after the scams, and instead they poured their effort into going after Libra and DM, or what Libra slash DM, whatever they were. That's just a bad use of resources. How many people got scammed from perfectly recognizable scams as a result of regulators looking the wrong way? And I think that's a bad outcome.

• 1:10:04David Hoffman?

  Matthew, as you express this technology to the rest of the world, how do you express your optimism to like the world of the skeptics and the naysayers? Like, obviously, you see the potential in applying cryptography at scale in crypto economic ways. In what ways you say to these naysayers, like, hey, here's the good out of this technology? How do you say these things?

• 1:10:30Speaker 00

  So I would say that, you know, the two things that everybody agrees on is we do not like the banks. We do not like the banking industry all that much, and we certainly, you know, we don't think about the payment industry. They're just part of the banking industry. But the thing that I like to try to convince people of, I never succeed, is that every working poor person, every poor person in my city of Baltimore, of which there are many, when they go to the supermarket, every time they buy a banana, they're paying 3% of the dollar they spend on that banana in, you know, payment fees. And those payment fees are ending up in my wallet, because I'm a, you know, affluent consumer who has one of those credit cards that gives you points back. And so they're paying those prices, those prices, my rewards are baked into the price that they're paying, even if they're paying cash. And that 3%, you know, Baltimore's sales tax rate

• 1:11:14Speaker 00

  is 6%. The entire state of Maryland and Baltimore City are basically collecting only twice as much money as, you know, their credit cards are collecting. And I would like to live in a world where that isn't the case. I think that would unlock a lot of money for people. I think that would unlock a lot of possibility. It's not a compelling point, you know, because people look at a number like 3%, they think, what's the big deal? But it's a huge deal. It is a huge deal. We could do so much more for society if that 3% was going towards our infrastructure or just going back to people. And I would like to live in a world where these kind of cartels don't control everything. I would like to live in a world where you don't have to pay 10% for your student loans. I would like to live in a world where, you know, cash-backed loans didn't have a 5% or 4%

• 1:11:57Speaker 00

  interest rate because that makes no sense. Why would you pay a 4% interest rate on a cash-backed loan? That's crazy. Yet that's what the banks are charging right now. And that's just inefficiency that could easily be swept away by by properly functioning competitors. And, you know, maybe it's not the top of mind for people. People have other problems, but the world would be better if we could fix some of these problems.

• 1:12:19Ryan Sean Adams?

  Well, we certainly agree with you, Matthew. And well said, we will end it there. Thank you so much for joining us on Bankless today.

• 1:12:26Speaker 00

  All right. Thank you.

• 1:12:27Ryan Sean Adams?

  Bankless listeners, a couple of action items for you. So first, the letter to Congress that we were reading earlier, we'll include a link to that in the show notes. The title of it is Letter in Support of Responsible Fintech Policy. You can read that at the source. We'll also include a link to Matthew's blog post where he goes through his objections to this letter and some of the content that we just discussed on Bankless today. As always, guys, risks and disclaimers wouldn't be a Bankless show unless I let you know that crypto is risky. So is Bitcoin, so is ETH. All of it is. You could definitely lose what you put in, but we're 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.

• 1:13:07David 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, podcast, 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

• 1:13:50David Hoffman?

  we summarize the week in crypto and other fantastic content. Thanks, everyone, for watching and being on the journey as we build out the Bankless nation.