#396: Matt Leising on the Story of Ethereum and the $55 Million Heist that Almost Destroyed It All

Matt Leising is a Los Angeles-based reporter with Bloomberg News covering the derivatives markets. He moved to Los Angeles from New York as part of Bloomberg's West Coast expansion. In this conversation, we discuss Bitcoin, Ethereum, the DAO, crypto Twitter's understanding of finance, and Matt's new book "Out of the Ether." ============================== Crypto.com is the only all-in-one platform that allows you to BUY / SELL / STORE / EARN / LOAN / INVEST crypto all from one place. Join over 1 million users currently using the Crypto.com app. Download and earn $50 USD using my code ‘pomp2020’, or use the link https://platinum.crypto.com/r/pomp2020 when you sign up for one of their metal cards today. ============================== Coinbase Wallets are adding support for .crypto and .zil domains through their partnership with Unstoppable Domains. Unstoppable Domains provides an all-in-one solution for blockchain domains. You can send money using these new domains instead of long Bitcoin wallet addresses, while also storing your domain in Coinbase's collectibles section. Go to unstoppabledomains.com in the dapp browser to register and manage your domains. ============================== Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

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

• 0:00Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Matt Lyson is a Los Angeles-based reporter with Bloomberg News covering the derivatives market. He moved to Los Angeles from New York as part of Bloomberg's West Coast expansion. In this conversation, we discuss Bitcoin, Ethereum, the Dow, crypto Twitter's understanding of finance, and Matt's new book, Out of the Ether. I highly suggest reading the book, so go pick it up today at Amazon and everywhere else books are sold. Before we get into this episode, I want to quickly talk about our sponsors. First up is Crypto.com. They're an all-in-one platform that allows you to buy, sell, store, earn, loan, or invest crypto all from one place.

• 0:45Anthony Pompliano?

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• 1:25Anthony Pompliano?

  That .crypto is a new type of URL that specifically comes from Unstoppable Domains. You can go to unstoppabledomains.com in your DApp browser to register and manage your own domains. So just like you have a domain for the regular internet, once you buy it, you own it and no one else can get it, the same thing here. Coinbase Wallets are adding support for .crypto and .zill domains through their partnership with Unstoppable Domains. It's an all-in-one solution for blockchain domains, and it also allows you to send money to these domains. So now I don't have to send the long string of letters and numbers to somebody if I want them to send me Bitcoin. Instead, I can just send pomp.crypto.

• 2:05Anthony Pompliano?

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• 2:17Anthony Pompliano?

  Lastly, don't forget that I write a daily letter to over 75,000 investors about business, technology and finance. I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com. Go check out crypto.com, unstoppabledomains.com and pompletter.com. All right, let's get into this episode with Matt. I hope you guys enjoyed this one.

• 2:42Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 3:08Anthony Pompliano?

  All right, guys. Bang, bang. I've got Matt here. Super excited about this. Thank you so much for doing this, sir.

• 3:14Speaker 02

  You're welcome. Thank you for having me. It's an honor.

• 3:16Anthony Pompliano?

  For sure. Let's just jump right into your background and how you kind of first came across crypto. But what did you do before you had ever heard about Bitcoin or cryptocurrencies?

• 3:29Speaker 02

  Yeah, sure. So I've been a reporter at Bloomberg News since 2004. That's when I moved to New York City from California, got a job there, eventually kind of started reporting about market structure issues and like in the derivatives world and the bond market. And that's like how things work or don't work. When the financial crisis happened, the swaps market had a big role to play there. It was unregulated. It was this crazy wild west. So I jumped into that and followed the Dodd-Frank law through Congress and then through when the CFTC started putting all those new regulations into place. I also was following the fixed

• 4:12Speaker 02

  income market, like treasuries trading, one of the biggest markets in the world, which is, you know, I don't know if a lot of your readers or listeners know that it's basically unregulated. It's just kind of another wild west. It's just the sovereign debt of the United States. And so... I had heard about Bitcoin, I think around 2013 or 14, and dismissed it. I didn't get it. I think, you know, it just didn't make sense to me. And I regret that, you know. But when, in about 2015 or so, I understood what made Bitcoin possible was blockchain technology. I quickly realized that that had the potential to change everything that I wrote about.

• 4:53Speaker 02

  So I went to my editor and I said, hey, you know, I want to make blockchain a part of my beat. And he's like, cool, what's blockchain? And so, you know, there was a nothing, I was one of the first people at Bloomberg to get in on that. And so I started following it and it really is like, for me, it's been where finance and blockchain or distributed ledger meet. So one of the first stories I did was about Blythe Masters, who was a big person at JP Morgan. She helped invent the credit default swap and then went to be CEO of Digital Asset Holdings. Then the next year, the Dow came around and I started getting, you know, more interested in Ethereum

• 5:36Speaker 02

  and continued to write about how crypto and blockchain could change finance. And then I didn't write about the Dow as it was happening. But later that year, my editor came to me and said, hey, we're doing a heist issue for the magazine. Do you know of any good heists? And I said, oh, yeah, the Dow, you know, this would be, this is going to be a story for you. And so I got to dig into that. I got to know everybody, a lot of the people, anyway, involved. And so I did that story. I had the most fun I'd ever had, reporting and writing. And I was able to luckily take that magazine story and say, all right, this is a really dramatic episode in this history, early history of Ethereum.

• 6:20Speaker 02

  What if I strung this out over a book and a round of this story told people about Vitalik and told people about Joe Lubin and Gavin Wood and, you know, all the guys at Slocet who created the Dow? And so that was the idea. And luckily I got to, you know, I got somebody to go along with me. And here we are with the book that's coming out here in the next week or so.

• 6:45Anthony Pompliano?

  Absolutely. So that book is called Out of the Ether and I've had the pleasure of reading some of it beforehand. And what's really fascinating to me is you kind of almost go back and forth between this like macro view of Ethereum, the community, kind of some of the potential, and then this one event, right, where you're able to kind of go deep on the DAO itself. Talk through a little bit about just like the process of, you know, kind of understanding what happened and the process of tracking some of these people down and kind of their openness and willingness to talk to you versus maybe some that didn't. Like, just what was the process of getting the information to write the book?

• 7:27Speaker 02

  Yeah, that's a great question. And I liked, I liked structuring that way to get like to have some tension throughout the whole book. So you want to keep reading and figure out what like, am I going to find this person or people? So, as I said, I knew a lot. So first of all, there was, there's several different group of hackers. Like, there was the bad guy who attacked the DAO on Friday, June 17, 2016, stole $55 million over the course of that day. That kind of led to a group of good guy hackers who started calling themselves the Robin Hood Group. They got together and started like, figure, trying to figure out, hey, can we figure out who this person is? Can we figure out

• 8:09Speaker 02

  how they did it? And we need to do something here to, you know, basically save the rest of the money in the DAO because there was still, you know, around $200 million of Ether in the DAO. So I got to know those guys well in 2017 when I wrote the magazine story. And through that reporting, I kept hearing whispers of like, yeah, we think the person who attacked the DAO was there in Switzerland. But they would never tell me more than that. They were...

• 8:38Speaker 02

  It was pretty much not, it was about, it was like rumor level material, right? So these guys didn't want to give me a name, but that's what I always kept hearing. So when it came time to report the book, I went back and I dug in on that. And I was able to, to get some names and I connected with people who I didn't connect with in 2017. So my sources were better. Also, the blockchain forensics that you could do in 2019, when I was writing and reporting the book, are much better than they were back in 2016, when people were looking into who might have attacked the DAO. So all those things came together to, to give me a much better chance of finding somebody and finding leads.

• 9:21Speaker 02

  The second and really important thing here is that Friday attack was not the only attack on the DAO. There was a second one, and there were in fact many other little ones. But the second one was on Tuesday, so it was four days later. And it's the second biggest attack and it ended up stealing about three and a half million dollars worth of Ether. This is the attack that like Robinhood group guys were all ready to go, but they didn't know if they were going to be like breaking the law, if they hacked the DAO and stole all the rest of the Ether to, to, you know, protect it. Like they didn't know if people would believe them, that they were going to give it back. So they were like on the fence, but then on Tuesday, the second attack happens and they're like, okay, screw it. We've got to go and get the rest of the Ether in there or else it's going to get stolen again.

• 10:06Speaker 02

  So this second attack, in my opinion, was a copycat. It was a lot sloppier than the Friday attack and they left some trails. And I was able to pick up on those trails and eventually connect that attack to a withdrawal at Poloniex. And I was luckily, I had a source who was able to tell me which account that was at Polo that made the Bitcoin withdrawals that if you followed the blockchain, went to fund that second attack on Tuesday.

• 10:40Anthony Pompliano?

  Got it. And so when you get that kind of person identified, what do you do in terms of, is that just the end of the trail? Or are you able to do anything with that information?

• 10:51Speaker 02

  No. So I had, in the book, there's two examples of this. The first is these people in Switzerland. And so that's who I originally thought were responsible. So what you do as a reporter, now I've got a name, I get in touch with that person and say, hey, I'm writing a book about the early history of Ethereum. I'd love to come talk to you. I'm gonna be in Zurich, you know, let's meet up. And so that's what I did in Switzerland. And I sat down with this man, who I chronicle this in an early part of the book, and we had this long discussion about the DAO. And then it turned out afterward, I learned that he had nothing to do with it because the

• 11:32Speaker 02

  information I had been given was wrong. And that goes back to how the blockchain forensics in 2016 were much less developed than in 2019. So some sources who were helping me now had a much better picture in 2019. And they said, oh crap, that guy in Zurich, he's not the right guy. So, but we do think here is a guy in Tokyo, and you should go talk to him. So on the second lead, I did the same thing. I got in touch with this person and I said, hey, I'm writing a book. You were active in Ethereum in Japan, and I'd love to come talk to you. I'm gonna be in Tokyo.

• 12:12Speaker 02

  Because you have to sit down with these people. If you call them up on the phone and start asking them if they attacked the DAO, they're gonna hang up on you. So the trick is to just kind of, you know, you don't lie or anything, but you just say, hey, I'd like to talk to you about your experiences in this community. And so that's what I did in both cases. In the case of the guy in Tokyo, you know, I think he is, he is involved in that attack. His account was used. And, you know, your listeners can check out the book where I get into a lot more detail about this, where he says, in a nutshell, other people had access to his Polo account, and he thinks that they might have been able to pull off this second attack. And I left it at that because

• 12:58Speaker 02

  that's all I could do as a reporter, you know, I don't have a subpoena, I'm not the FBI, and I just want to give it straight to people and they can make up their own mind about it.

• 13:06Anthony Pompliano?

  Yeah, and what's so interesting about this is obviously if these were kind of traditional finance crimes, right, in terms of just with a bank or whatever, these people would be caught immediately arrested and be pretty open and shut. Do you feel like there was kind of different handling, whether it was by the media, by law enforcement, or maybe even the community, given that this all happened in kind of a Wild West time for crypto?

• 13:32Speaker 02

  Yeah, that's a great point. You know, I know people for a fact went to the FBI and talked to different agents. The Justice Department was involved, who would, you know, they're the prosecutor. So if the FBI wants to bring a case, the DOJ would prosecute it. I spoke to a former DOJ prosecutor. The feeling is that there was, there were definitely people in the United States who were harmed by the Dow theft, but that jurisdiction would have been a nightmare because it was global. And it was, it was a really, from a law enforcement point of view, a really tough case to, first of all, explain to people, and then to try

• 14:16Speaker 02

  it, you know, because let's not forget, through the actions of the Ethereum community, they did the hard fork and everybody got their money back, you know, everybody who had money stolen from the Dow got it back. Not only that, they got Ethereum Classic on top of it. So if you have money in the Dow, at the end of the day, in like, late 2016, you were in a better financial position than you were earlier in the year there. So, and then lastly, regulators and law enforcement, I think, were just starting to get into how to go after people in this world in 2016. If you know about like Russell Brick and, you know, Silk

• 14:58Speaker 02

  Road, you know, that, if you remember, the amazing part of that story was that the FBI had to catch him with his laptop open, right? And then they were able to link him and his keys to all the stuff that he'd been doing on the Bitcoin network with Silk Road. So it's like, it's, that like takes red handed to a whole new level. And here, you know, you have this like, global, you know, we still don't know who the people are. They covered their tracks really well for the big Friday attack. And so- You know, I think if it happened today, I think it would be a much different response. But back then, like you said, it was a wild west and regulators and law enforcement were only really starting to understand what they needed to do to go after people like the...

• 15:42Anthony Pompliano?

  Yeah, and talk maybe a little bit about kind of, you're talking to many of these people after this has all happened, right? And so they're kind of able to live through it, think about, okay, here was the situation, and really formulate opinions in hindsight. What were most of these people's thoughts on this? Was this just, oh yeah, that was the Dow hack and like, no big deal because we basically found a solution? Or were the people still upset and worried about it and kind of felt like it had been unaddressed and maybe that was the wrong way to handle it?

• 16:17Speaker 02

  Yeah, I mean, it's a mix, right? You don't have like one community in this space, as you well know. There are definitely people who want to just leave it in the past, you know, that they lived through it and don't want to really revisit it. Other people, when I talk to them, still get like visibly excited, like this was one of the most amazing things that they'd ever been through. And you just have to start asking about it and they just like, their face lights up and they start speaking louder and cussing more and, you know. So I think, you know, and then I think a lot of people feel like, you know, this person or people who did this, you know, they're not, they're like, they weren't nice, they were malicious, you know, they wanted to steal from this community.

• 17:02Speaker 02

  I guess I've heard this from several people that, you know, they could have just like given the money back and said, hey, I proved a point, you know, or something like that. They didn't want to do that. And so I think in some ways, there's a lot of hard feelings still about that. And I think like, some of the people who helped me in 2019 did so, I think, because they wanted to know more about this, you know, they were, they were, they sort of liked it that I was willing to dig into this again and go, not only just like, if you give me a name, I'm going to go to Switzerland or I'm going to go to Japan and I'm going to talk to this person and I'm going to try to figure it out. You know, that's, that's a reporter's job.

• 17:46Speaker 02

  And so I think that they appreciated that I was willing to, you know, do that.

• 17:52Anthony Pompliano?

  And obviously Ethereum, you mentioned earlier, has this like potential impact on market structure in the legacy finance world. Just talk through, you're writing a book about it, right? During that process, you obviously learn more and more and you learn who the players are and kind of almost get this like crash course, if you will, on the technology, on the people, on specific events. After all of that, like, how do you think about the potential impact on market structure? Is this something where you're kind of more convinced it's going to happen, maybe less convinced? Like, just where do you kind of come out on the legacy financial world and the blockchain world intersecting?

• 18:34Speaker 02

  Yeah, I think I'm only getting more convinced that it's going to lead to something, and it has already led to something. You know, and what it does, as we're seeing, there's, there's some cycles going on here. The ICO boom in 2017 was crazy for the asset prices that went up so high. But what that proved to people was here's a new way to raise capital for your project. You don't need a bank. You don't need a VC. You can go directly to users and ask them to invest. Well, there was a ton of scams. That's a brand new funding model, which is fantastic. We're in the DeFi craze right now, which is another kind of

• 19:16Speaker 02

  building block. It's about loaning and collateralizing and earning interest. And, you know, those are all like mainstays of finance, and yet they're being done in a permissionless peer-to-peer environment. And so that's, you know, two years, three years later. So I think we're seeing that like these building blocks are being put in place and they're being battle tested. And there have been mistakes like the Dow and like Yam and other things. But when the dust settles, there is now a new component to this entire ecosystem that is only going to get built upon. So that's what I find fascinating. And I think

• 19:55Speaker 02

  You're seeing more and more mainstream adoption. You're seeing places like Reddit, you know, come to Ethereum. You're seeing the financial world come to Ethereum. And I think just the smart contract construct that Vitalik created is something that, once you get it, is really appealing to a lot of different people in a lot of different industries.

• 20:18Anthony Pompliano?

  Yeah, and it feels like a lot of this has been driven by kind of financial market outsiders, right? So it tends to be younger people. They tend to be much more technical than they kind of finance understanding. Is that still persistent today? Like, you spend a lot of your time looking at the traditional financial markets, a lot of players and employees at these large banks or large financial services companies. What's their kind of awareness of all this happening? Is there interest? Like, what's the kind of incumbent view of what's happening right now?

• 20:54Speaker 02

  I think it varies by bank, and it varies by institution, for sure. On Wall Street, you know, you've got JP Morgan is probably, you know, going the furthest here with, you know, they were in it from the beginning, or very close to the beginning with Ethereum. They just sold Quorum to ConsenSys. They're still working on JPM Coin. They still have this inter-bank network that is, you know, an alternative correspondent banking system that uses digital currency. You've got companies like Fidelity with Abby Johnson, who, you know, she's mining Bitcoin, and they're going all in. I was told that the view of digital currencies

• 21:37Speaker 02

  and crypto at Fidelity is like a 20-year game, you know? That's how they're seeing this. Then you've got other banks and other financial institutions that still are writing it off and don't think it's going to ever amount to anything. I think what's being built is an alternative system. I don't think that we're talking about a replacement here, but it's giving people who want an alternative to the traditional financial system or talk about the inner, the world wide web in web 3.0, you know, an alternative to having your data mined and sold and your searches being, you know, following you for months when you go about your business on the web.

• 22:21Speaker 02

  So, you know, I think that that's what's, that's what's happening. And it's going to take something big for, you know, traditional finance to, to catch up, I think. And I don't think that's out of the ordinary. I think that's what often happens, that secondary movers are often more powerful than primary movers.

• 22:42Anthony Pompliano?

  Yeah, and it also feels like there's a mismatch or an outgunning of resources, right? In terms of the, the big banks can just throw so much money and resources. Some will argue that's a good thing. Actually, some would even argue that's a bad thing, right? Because they kind of just trip over their own feet. So it's a talk a little bit, you know, is it a competition, right? Is this kind of the decentralized, permissionless, kind of challenger type ecosystem up against these big banks? Or do you think this ends up being much more collaborative over time?

• 23:14Speaker 02

  I think it'll, I think both. I think, you know, I think you've seen a bit of a brain drain from Wall Street. A lot of people have left to go to crypto. You've certainly seen a lot of traders leave to just trade the assets because there's so much volatility and so much opportunity to make money. You're not seeing that really in the financial markets right now, the traditional ones, anyway. And, but you've had firms like, like Ernst & Young, their head of blockchain is 100% on building on the public Ethereum blockchain. Like, that's what they're telling their clients you should be doing. He thinks, you know, they think it's safer than like private chains or distributed ledgers.

• 23:57Speaker 02

  And he thinks that, you know, this is the way it's all going. So, again, I think it's going to, you're going to have separate things that grow up side by side. And then maybe there'll be some merging and whatnot, but. I don't think Bitcoin is going to replace the dollar, you know, as the world's reserve currency. I think that much more likely that the US is going to issue digital dollars and that's gonna, I mean, imagine what that does now to the ecosystem where a stable coin isn't necessary any longer. So, you know, I, that's the way I see it. And, you know, I don't think JP Morgan is doing what it's doing because it's afraid it's going to have its lunch eaten,

• 24:42Speaker 02

  you know, by these people. I think that they see a real business opportunity, a way to save money and a way to make money. That's, that's all that Wall Street cares about. And when you, when they see that, and especially when somebody proves it out for them, then everybody else is going to jump right in there and do the same thing.

• 25:00Anthony Pompliano?

  Yeah, it's, it's very, very interesting to see. There's multiple people in the, in kind of legacy financial world who they themselves personally are a little bit older, or they've just been around a long time, and they kind of have one view. And then now their kids are actually becoming old enough to start to enter the world themselves. So we've seen this in the gold community, we've seen this through some of the, you know, very prominent bankers, where basically their kids are into the crypto stuff and they may not be. And so it, it almost is, you know, funny to watch just the, the demographic shift or the generational difference between people.

• 25:35Speaker 02

  That, um, Ray Dalio, who just said that recently, that he was trying to get his son to buy gold and his son was like, no, I'm buying Bitcoin.

• 25:42Anthony Pompliano?

  There's a bunch of them. So my understanding, I think, is Jamie Dimon, Ray Dalio, Peter Schiff. Like, there, there's a bunch of these people who, just naturally, right? If you take kind of digitally native, younger people and you say, hey, where are you going to invest? You know, I, I joke all the time about like this like millennial portfolio that we all, you know, kind of turned into a meme. So it's like you have Tesla, you've got Bitcoin, you know, you're doing it on Robin Hood, whatever. But like as the wealth shift happens, like that kind of becomes a reality, right? If that's people's preference, like, I don't know if that ever gets reversed. So, and anything in terms of as you were writing the book that kind of struck you in terms of the way that the people you were interviewing and speaking with invested

• 26:25Anthony Pompliano?

  that seem different than maybe the, the sources you have that come from more traditional Wall Street backgrounds?

• 26:31Speaker 02

  Yeah, I think what I love about crypto is that, and Ethereum especially, I think there's a real streak of idealism. You know, a lot of these guys truly believe that they're changing the world. And I think that appeals to me as a reporter, because every reporter has to have a bit of idealism in them to do this job, because you have to think that you're going to, you know, be changing the world or helping people by what you're doing. And then we often turn very cynical, because it's, I think it's a mechanism to kind of hide that idealism. But I have that. And I recognize that in a lot of the people that I spoke to, like in the co-founders group that created Ethereum, and in the broader

• 27:14Speaker 02

  world, about, you know, they're in it to try to make, not everybody, I don't want to say that, but there is a good, significant chunk of people who really do want to make the better, the world better. And you don't find that in finance. You don't, you don't go to Goldman Sachs to make the world better. And so that's, that's a big difference. And I think, you know, it can lead to naivety, but I also think that the, one of the strongest things Ethereum has going for it is the community it's built up around the developers and the supporters and people who are all necessary to make this ecosystem vibrant. And I think

• 27:59Speaker 02

  if you talk about somebody coming in, another blockchain coming in and displacing Ethereum, you've got to get around the really real issue that all of those developers and people in the community have spent years of their lives dedicated to it. And it's a, you know, it's something that they truly believe in. So I find that really interesting.

• 28:17Anthony Pompliano?

  What was the biggest surprise for you as you wrote the book in terms of maybe something you didn't expect, or that you found out and was surprising?

• 28:27Speaker 02

  There was a lot.

• 28:30Speaker 02

  I think getting to know Vitalik Peterin was a lot of fun. I mean, I wouldn't say I know him well, but I spent a good amount of time with him. He shared personal emails with me. His dad shared with me this amazing document called Encyclopedia Bunnies that he wrote when he was seven years old, like 20-page Word document, all about rabbits and bunnies and how fast they are and how many man and girl bunnies are there. And it's just like, it was this window into his mind as a seven-year-old. We all know he's brilliant, but like, he's also really whimsical and funny, and he's incredibly well-rounded. I interviewed a bunch of his high school teachers, and, you know, he was, he was reading

• 29:15Speaker 02

  the Iliad in Latin, you know, and, or in, starting in Greek, and, and doing stuff that, like, you know, most high school students never dream of. And, and yet, you know, so, I hope readers agree that, like, I was able to, I think, get a nice rounded portrait of him as a human being, rather than as this kind of programming whiz kid who created Ethereum when he was 19. And I think, quickly, the other thing that surprised me was how Ethereum succeeded almost in spite of itself, because the management that Vitalik had around him from the very beginning was just a shitshow, you know, like, people, there were egos and clashes from the very beginning.

• 29:59Speaker 02

  Six months into the project, people were fired, there was some reshuffling, then, a few months later, people were also let go. They tried to bring in a professional board of directors and an executive director who were at each other's throats within, you know, days. The board was fired, and, and yet, through all of that, like, people kept building, you know, and the idea was there, and it was sound, and it was fleshed out enough where, I guess they could just kind of block out that noise and keep going, and, you know, eventually release Ethereum. So, I mean, if you, if you had seen this management track record of any other company, you would just be like, how in the hell did you actually create a product and deliver it, you know?

• 30:45Anthony Pompliano?

  I love that. In terms of what we spent most of our time talking today is kind of the new world. You also, though, as a reporter, spent a lot of time writing about kind of the old world or the legacy world. We have just lived through some of the most incredible market volatility and kind of market gyrations that many people have lived through. Talk just your general sense of like what's happened from a macro environment standpoint, kind of how we've seen this play out, whether it's repo market type stuff all the way through to stuff that we've seen in response to the Federal Reserve actions over the last couple of months.

• 31:24Speaker 02

  Yeah, it's been wild. And I think the first thing that comes to mind is, you know, we are living through a zero rate interest rate environment for far longer than has ever been tried before. And it's, it's, so we're in uncharted territory there. And I think you're seeing the knock on effect, you know, in all sorts of markets in like, you know, you've got high yield bonds that are trading sort of now where corporate bonds used to trade and corporate bonds are like where you might be used to get a certificate of deposit, you know, kind of return. Everybody's just been pouring everything they have into the stock market because I think they feel like that's the only place that's that's

• 32:07Speaker 02

  moving. You've seen things like oil crashing negative for the first time, which, you know, is a possibility. It's just that I think nobody ever thought it would happen. And then it happened in an afternoon and everybody was just, you know, it was sort of like another thing to be dumbfounded about. We saw some crazy moves in the treasury market in March. So to me, it just feels like it's really, really fragile right now. And there's

• 32:40Speaker 02

  My sense, and I don't really have much to go on, is that just the liquidity in all these different markets is about this deep, you know, and it can disappear at any moment. And people really don't know what to do with their money. You know, you can't earn a safe return in almost anything right now. So I think, I think the Fed made a giant mistake years ago when it didn't just rip the bandaid off and start raising rates. It would have, to me, shown that they were confident in the economy, you know, that we can raise rates, you know, in a methodical way back to three, four, five percent because we think, you know, that would have said to the market, we think the US economy can withstand that.

• 33:25Speaker 02

  They never did, and they never did, and they never did. And then I think it became too late. And so I feel like, you know, from a late, I mean, I don't know much more than you, even though I work at Bloomberg, you know, it just feels like the central monetary policy went off the rails a long time ago and nobody had the forethought to just put it back on track.

• 33:48Anthony Pompliano?

  Matt, you sound like a Bitcoiner saying all that. I mean, I couldn't agree with you more, right? It just feels like we're almost addicted to the manipulation, right? And so how you get off now, you know, is up for debate, but I don't think that-

• 34:06Speaker 02

  And it's another mystery, right? Like, how can the Fed or the Treasury be printing so much money and inflation just doesn't budge? It's, I think, like, untried territory. That doesn't make much sense to me, and I don't think it makes a lot of sense to many people. So the only thing that there is to do is to pour your money into the stock market, and that's what we've seen. I mean, the market where it is right now, with the general unemployment level and the fact that people are not really going out in this country still, is, to me, shocking. Like, I cannot believe we're up and back above the all-time high we reached in March. That's just, that's a big red flag.

• 34:51Anthony Pompliano?

  Yeah, it is. It is quite shocking and it sounds like you're kind of of the belief that a lot of this is driven by that market intervention. And we kind of don't know where we would be if we didn't have the intervention. But we kind of know where where we've gotten with it, right? It's kind of this weird thing of I think a lot of people are kind of looking at it saying like, this probably isn't a good thing, just given where we are and kind of the inflated asset prices, given that the market reality or economic reality. But on the same, you know, side, like, we don't know where we would have been if there hadn't been the intervention, right? And so it's kind of hard to judge right decision or wrong decision because you're just missing data almost.

• 35:26Speaker 02

  Yeah, absolutely. I mean, it summed up perfectly in the cliche of, you know, don't fight the Fed.

• 35:33Anthony Pompliano?

  That is becoming truer and truer than it ever has been. That is for sure. Help me understand in terms of where we go from here. So you are a reporter at Bloomberg. You kind of covered the traditional markets and then you had what I'll call kind of an early entry into Bitcoin, Ethereum blockchain. But as that becomes bigger and bigger story in finance, do you see your role kind of taking on just more and more of the blockchain? Do you kind of continue to balance it? And maybe not specifically just you, but just the media in general, kind of where they find the balance between like this new world and the existing world? How do you think through that?

• 36:16Speaker 02

  I think, yeah, for myself, first of all, I'm definitely going to continue doing what I'm doing because I think, you know, it, the, the two worlds are coming together more and more. And I don't see many signs of that stopping. So that's going to be my role at Bloomberg.

• 36:34Speaker 02

  I think, I think that other traditional media that I'm thinking of, you know, I think I've pulled back a little bit from covering the markets and I, or the technology. And I think they might kind of regret that because I think there will be a point here where there is more of a coming together and things, you know, maybe it's Web 3.0 that is, is starting to be more widely available. Maybe it's, you know, I don't really know, to be honest, but I. Funny story that you're asking about like writing the book. When I first got my contract,

• 37:17Speaker 02

  it was serious bear market. You know, think nothing was happening. The, um, the, and I, I wondered, I was like, God, okay. I want, I wonder if Ethereum is going to survive. You know, this is like early 2019. And I'm like, I, I, the only thing that cheered me up is like, okay, this, this period I want to write about happened. It is history. So that's fine. You know, let's write about it. And no matter what happens with Ethereum, it's a period worth writing about and, and the story worth telling. And then, you know, as 2019 progressed and then, you know, it, everything started turning up and, and, and things seemed a lot more positive. And now we're, I think in this secondary up cycle here with DeFi that we saw back with the ICO boom. So

• 38:01Speaker 02

  I, I feel better about that. But, um, you know, it, it is a boom and bust cycle. And I think a lot of financial innovation goes through this. Um, so, you know, like the credit default swap market, that was great for people at the beginning, um, because you don't have a way to short bonds, you know, like that's, that's, you can't really hedge your risk in a bond trade. So that was fantastic for people. And then of course, it went completely off the rails and, and we saw what happened with, you know, how a bunch of CDS can be turned into a CDO and, and all of that, that, that almost brought down the global financial system. So I, I think there's going to be a boom and bust. And I think that traditional media need to pay attention to it and, and I hope they do.

• 38:47Anthony Pompliano?

  It, it feels like, uh, you're right in that, um, based on each publication, some are doubling down and some are pulling back. And, and I tend to obviously agree with you that, uh, those that are doubling down and still kind of covering it will, uh, will reap the rewards, uh, you know, when, when the, those worlds merge and the, and the line gets gray or if you will, right?

• 39:08Speaker 02

  Yeah, yeah, I think so. As soon as, I know you've been writing or talking about NFTs lately and that's another interesting issue here, um, because.

• 39:19Speaker 02

  You know, people like to laugh about CryptoKitties from a couple of years ago, but what they really did was prove that a digital item could be scarce. And that's the only way you do that is with blockchain. And so, you know, you think about what Napster did to the music industry. You know, my, once I upload Metallica's CD, I can send that to a million people. And that, it's not scarce. But if you link a digital good to a blockchain, now you can prove that it's a one of a hundred set. And so people like in the, in the high fashion world like Gucci and Prada, they want to explore this technology to how their customers be able to verify that, no, this is really a Prada bag, you know, I didn't buy this on the street in New York City.

• 40:03Speaker 02

  It is worth $20,000. And so you've got that aspect to it. And then like digital art and digital commerce being scarce, I think is, that's kind of this, it's these unknowns that are so fascinating that, what develops from, you know, something that Metallica and other people did five, four or five years ago, here we are now. That's what I find really intellectually stimulating is just the way that new people coming into it, like take the technology and do what they want with it. And now we've got a whole new kind of asset class or a whole new possibility.

• 40:39Anthony Pompliano?

  Yeah, to me, it's, if you can get the provable scarcity, right? This digital scarcity, which it seems like, you know, we've got now, you're going to recreate everything that's scarce in the physical world in some form or fashion is naturally going to migrate to this digital world. And it really comes down to one's a story and one's just math or provable, right? Cause the, the story of like that, you know, that high end bag or a piece of gold or a piece of art, we have to trust the story, right? And sure, there's people who try to do things around authenticity and really making sure and as best they can. But there's nothing like being able to just prove the scarcity

• 41:25Anthony Pompliano?

  and allow anyone to verify it. And I tend to think that that is a kind of a mental paradigm shift, if you will. But when, when people kind of switch over and say, oh, wow, this is the innovation, then it becomes pretty amazing to kind of see what, you know, I personally think is going to happen over the coming years.

• 41:43Speaker 02

  Yeah, it's absolutely a kind of a lightbulb moment for people. They need to have that. And then I think a whole new Vista opens up for what is possible.

• 41:54Anthony Pompliano?

  For sure. Before we go to wrap up, I always ask the same two questions to everyone and then you'll get to ask me one to finish. The first is just, what is the most important book that you've ever read? And for you, you can't cheat and say your own. So you've got to pick another book, but what's the most important book that you've ever read?

• 42:11Speaker 02

  Wow, that is a good question.

• 42:16Speaker 02

  I'm gonna, I'm a huge fiction guy and I think I'm gonna say it was a book by Don DeLillo called,

• 42:25Speaker 02

  oh geez, you're making me space on the name.

• 42:31Anthony Pompliano?

  What's it about?

• 42:34Speaker 02

  It's about an airborne toxic event and it's, it's a wonderful novel. It just kind of opened up my eyes about what can be done with writing and how good he is. So I can't believe I can't remember the name right now.

• 42:49Anthony Pompliano?

  We'll find it at some point. What, did you feel at any point that when you were writing the Ethereum book that you were writing fiction almost?

• 43:00Speaker 02

  It felt like that. I mean, honestly, like some of the details in there and it's almost beyond like science fiction, you know, like you wouldn't necessarily believe that this is like if it's just, it's wacky. Once you get into the details of like the hard fork and Ethereum classic and all that stuff, it's just, it's just, it really was, I felt incredibly lucky to have that this story before me where I got to stick to the facts, but it just seemed just like insane.

• 43:30Anthony Pompliano?

  That's awesome. The book doesn't happen to be a book called White Noise, does it?

• 43:34Speaker 02

  Thank you. Yeah.

• 43:36Anthony Pompliano?

  That's, that's my expert Google skills real quick there.

• 43:41Anthony Pompliano?

  Second question is somewhat fiction related, which is aliens, believer or non-believer in aliens?

• 43:50Speaker 02

  My dad was a rocket scientist for JPL for his entire career. He designed the propulsion system for Voyager one and two, which is the only manmade object that's ever gone out of the solar system. So I'm definitely a believer in aliens. I think if you look at the math, the number, we don't even, I mean, what do we know about the universe? It's nothing. So yeah, there's just no way that we're alone.

• 44:18Anthony Pompliano?

  That is incredible. What, I mean, what was the dinner table conversation when your father's doing that on a daily basis?

• 44:25Speaker 02

  It wasn't so much dinner, but like he would give me rides to school in the morning and you'd have this like threaded hose pipe, you know, on the bottom like on the car seat. And I'd be like playing with it. And you know, that was like part of his work of like designing, you know, this amazing propulsion system that was going to send this thing, you know, all the way out to the end of the solar system. So yeah, it was crazy.

• 44:50Anthony Pompliano?

  That's insane. All right, you could ask me one question to, to wrap this up. What, what one question do you have for me?

• 44:56Speaker 02

  Okay, is a hot dog a sandwich?

• 45:00Anthony Pompliano?

  Ooh, that's a really good question. Is a hot dog a sandwich? Uh, I'm going to go with no because the bread's connected.

• 45:08Speaker 02

  All right.

• 45:09Anthony Pompliano?

  What, what do you think?

• 45:11Speaker 02

  I agree. I think, I think it's, I think it's totally different. So you should see online, man, the people go for hours on this one.

• 45:18Anthony Pompliano?

  Oh, really?

• 45:21Anthony Pompliano?

  So I think I've told the story before on the podcast, but you'll find it's funny. Uh, my wife, uh, who used to work at Fortune, uh, comes from Bulgaria when she's like eight, nine years old, moves to Atlanta and you know, Bulgaria has basically Eastern European food, right? So kind of just your classic, uh, diet. And she gets here, uh, she told me a story that she goes to school and one of the first days she's there, they go to the cafeteria and they give her a corn dog. And her first reaction was like, what the hell are they doing with a, uh, a hot dog on a stick with bread around it, right? And, and you just think like from an American's perspective, like, oh yeah, that is kind of weird. I guess if you've never seen that before. So, you know, a, a hot dog isn't nearly as weird, but definitely the corn dog.

• 46:02Anthony Pompliano?

  I always think of that story as just like, what are the other things that people could come to America are just like, what are you guys?

• 46:07Speaker 02

  Has she ever had peanut butter and jelly?

• 46:09Anthony Pompliano?

  I don't know if she had ever had one before.

• 46:11Speaker 02

  I was one when I was I was traveling, traveling through rural Poland once and met some people on a train. And my wife and I, we had peanut butter and jelly sandwiches and they looked at us like we were absolutely insane. And we said, no, try it. And they like, they took it and they took like the tiniest little bite you've ever seen.

• 46:28Anthony Pompliano?

  And what they just, they had never seen it before. So they just scared.

• 46:31Speaker 02

  And they thought it sounded disgusting and just didn't understand it. And I was trying to tell them like, no, like this is like what American kids grow up eating. It's PB and J, man.

• 46:40Anthony Pompliano?

  That that is so that McDonald's, I think, are like the staples in every American household now.

• 46:45Speaker 02

  Yeah.

• 46:46Anthony Pompliano?

  Listen, Matt, thank you so much for doing this. Where can people find you on the internet and and also find the book?

• 46:51Speaker 02

  Yeah, you search my name in Bloomberg News, I'll come up. I'm on Twitter, just at Matt Leising. The book is out of the ether. You can find it at Amazon or Wiley, my publisher.

• 47:04Speaker 02

  And yeah, I'm all over the interwebs.

• 47:07Anthony Pompliano?

  Listen, my friend, you did a fantastic job with the book and I think people are really going to enjoy this. So highly recommend everyone to go check out that book. And I'll have to do this again in the future.

• 47:17Speaker 02

  Awesome. Thank you, Paul.