30 - Synthetix To Billions | Kain Warwick

Episode: #30 September 14, 2020 ----- Tools from our sponsors to go bankless: 🌐 UNSTOPPABLE DOMAINS https://bankless.cc/unstoppable - GET A HUMAN READABLE CRYPTO DOMAIN https://bankless.cc/unstoppable 🌈 ZAPPER - ULTIMATE HUB FOR DEFI http://bankless.cc/zapper - ZAP INTO DEFI 💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith 💸 AMPLFORTH - MONETARY EXPERIMENT FOR BASE MONEY https://bankless.cc/AMPL-MINE ---- Synthetix to Billions | Kain Warwick Kain Warwick is the founder of the Synthetix Platform, a protocol for generating and trading synthetic digital assets. Kain himself is known for leaning towards crypto-anarchist side of the political spectrum How did this come about? How has this impacted the building of Synthetix? Synthetix itself has stood resilient against the 2018/19 bear market. Why? What was the unique advantage of Synthetix vs other 2017 ICO platforms? What's next for Synthetix now that gas fees are 200+ gwei? WE COVER: 1) Kain's political stance 2) How this reflected in Synthetix 3) Motivation and Grit around building and producing 4) Growing Community and Culture during a bear market 5) Degen Spartan, and 6 dolla SNX 6) Introducing the SIP process 7) Introducing Yield Farming 8) Recursive upside/downside to SNX + ETH collateral in Synthetix 9) L2 scaling with Optimism 10) Bull market predictions ------ FURTHER RESOURCES: Synthetix & Optimism: https://medium.com/ethereum-optimism/synthetix-exchange-meets-the-ovm-2de3a572d6df Rate the Podcast 5 Stars ----- Subscribe to podcast on iTunes https://podcasts.apple.com/us/podcast/bankless/id1499409058 | Spotify https://open.spotify.com/show/41TNnXSv5ExcQSzEGLlGhy | YouTube https://www.youtube.com/c/bankless | RSS Feed http://podcast.banklesshq.com/ Leave a review on iTunes https://podcasts.apple.com/us/podcast/bankless/id1499409058 Share the episode with someone you know! ----- Don't stop at the podcast! Subscribe to the Bankless newsletter program http://bankless.substack.com/ Watch Bankless shows and tutorials on YouTube https://www.youtube.com/c/bankless Visit official Bankless website http://banklesshq.com/ for resources Follow Bankless on Twitter https://twitter.com/BanklessHQ Follow Ryan on Twitter https://twitter.com/ryansadams Follow David on Twitter https://twitter.com/TrustlessState ----- Not financial or tax advice. This podcast is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Do your own research.

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

• 0:13Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. David, what an epic interview with Kane, man. It was great.

• 0:35David Hoffman?

  Yeah, I really think that these, this DeFi founders series that we're doing, that we started with Stani with our last episode, and this episode with Kane, and then I really think that these episodes are really going to be a fantastic snapshot of the pre-bowl market before, before like all this explosion of innovation and development happens, which, you know, I'm crossing my fingers does happen, right? And so what we're trying to do with these episodes is we are both trying to focus in on the founders of these specific protocols, the actual individuals themselves, you know, Stani, Kane, Sergey, Hugh, and focus in on exactly what about them created these protocols,

• 1:16David Hoffman?

  but then also simultaneously create like a canonical, what is AVE, what is Synthetix, what is Chainlink episode at the same time? And also create a snapshot for where these protocols are when the start of the bull market really got roaring, right? So that's what these episodes are about, and that's what this episode with Kane of Synthetix is all about. Kane himself is a really interesting figure, and he's done a ton of podcasts, right? So, but the reason why we wanted to get him specifically on is really get the background on Kane himself, right? Because Kane is a pretty interesting guy. He's a crypto anarchist, and crypto anarchists are super interesting. And so we get into that conversation, which I've never seen Kane talk about before.

• 2:00David Hoffman?

  And so that was kind of my big, big highlight of this episode is kind of seeing how Kane thinks in the world, and how that, how he thinks, and how that got related into this Synthetix protocol. Ryan, what did you take away from this episode?

• 2:12Ryan Sean Adams?

  Yeah, I think the the patterns and the archetypes of these crypto native founders are basically, they're really setting the playbook for how other DeFi protocols are going to be formed in the future. Right? So you see, you see these protocols like constantly learning from each other on, you know, how to, how to build a community, how to, um, you know, create your incentives. In our episode with Stani last week, he talked about how his Avanomics, the Avanomics of the Ave Protocol, basically inspired by a whole slew of other DeFi protocols. So what we're really seeing is this entire ecosystem leveling up together. And some of these protocols, quite honestly, they're experimenting, they're flying by the seat of their pants.

• 2:57Ryan Sean Adams?

  But when something works, when they iterate and something works, then that ripples across the entire ecosystem and it becomes like a, a pattern, a best practice for DeFi protocols moving forward. So I think these episodes are key if you're looking for what those patterns are. So you can identify the next Synthetix, you can identify the next Ave, you can identify the next crypto native founder and front run the opportunity, as we always say here. This is also awesome because we got a chance to hear about Synthetix roadmap. And toward the end, Kane really spelled out what is happening next in three areas. Then he sort of added a fourth and, uh, I don't know, left me very bullish on DeFi,

• 3:42Ryan Sean Adams?

  left me particularly bullish on ETH, uh, which, uh, I'm usually trending in that direction anyway, but also bullish on, on what Synthetix has planned. So it's a great episode to get up to speed on everything Synthetix. We, we start with the, the basics of what it is, but then we get down to sort of the, the, the depth and the meat of what it can be in the future. And, uh, yeah, fantastic listening.

• 4:06David Hoffman?

  So far, we're two for two on both of these DeFi founders, leaving us with a particularly bullish sentiment at the end of their podcast. The, the flow through this podcast was, was pretty good. So we, like I said, we start with talking about Kane and his specific politics and personality. How that related to Synthetix. Then we talk about, you know, the brutal bear market and growing community during that bear market. And then we talk about rising the ranks of DeFi, using the conviction and the strength of the community. And really, what was the recipe that Synthetix created that ultimately created their success? And then, as we said, we go into the roadmap for Synthetix and future predictions. The episode speaks with itself. We don't need a

• 4:48David Hoffman?

  long intro. So I think, Ryan, we're just gonna go ahead and get right into the podcast. But first, we're gonna talk about our sponsors. One of the tools I've started to use recently is Zapper. For those of you that were part of the 2017 bull market, it was characterized by just opening up Blockfolio and refreshing it over and over and over again. And also, anytime you ever made a trade, you would have to go into Blockfolio and manually input that trade information to make sure that your portfolio that you think that you have matches what you actually have. With Zapper, you don't have to do any of that anymore, because all you have to do is, Zapper is input your Ethereum addresses, and then Zapper will give you a really elegant report as to where all your money is. So there

• 5:29David Hoffman?

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• 6:09David Hoffman?

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• 6:35Ryan Sean Adams?

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• 7:19Ryan Sean Adams?

  even dot ZIL domain name addresses at their Unstoppable Domains manager. Websites have domain names, dot com, dot org. Your bankless bank account on Ethereum should have a domain name too. So go to unstoppabledomains.com, register a domain name for your Ethereum address now. Unstoppabledomains.com. All right, let's get into the interview with Kane.

• 7:47Ryan Sean Adams?

  Bankless Nation, we are so excited to have Kane Warwick from Synthetix on our show. He describes himself as the formerly semi benevolent dictator of the Synthetix Foundation, but now he's currently aspiring Synthetix DAO super delegate. Kane is really the founding father of DeFi liquidity mining and all of the things that that we're seeing going on in the space today. Kane, it's great to have you. We're super excited about this. How are you doing, sir?

• 8:15Speaker 02

  Yeah, yeah, thanks for having me, guys. I really appreciate it.

• 8:19Ryan Sean Adams?

  All right, so first question, as one of the founding fathers of all of this DeFi liquidity mining, has it gone too far? Do you have any regrets about starting this whole kind of trend?

• 8:29David Hoffman?

  Kane, what have you done?

• 8:31Ryan Sean Adams?

  Yeah.

• 8:31Speaker 02

  I know. You know, it's, it's actually, it's so funny. I, I woke up this morning and the first message that I, I saw was from a guy in Discord and he was like, "Do you ever think like, what have I done here?" That was literally the first message that, that I saw and I was like, "What's gone wrong?" I was like, "What's happening?" I like immediately went like, looked at like Sushi and saw the migration happen. So, um, you know, I think, uh, I think at times, you know, i- it has gotten a little, uh, a little crazy. Um, but you know, I've always been a, a big advocate for, you know, experimentation. And, and so I think that this idea of like distilling some of these incentives and, and really kind of testing the edges of them is, you know, not necessarily the worst thing.

• 9:15Ryan Sean Adams?

  So you like experimentation is what you're saying?

• 9:17Speaker 02

  Yeah. Yeah. I think it's, I think it's good. I think it's net positive in the end.

• 9:21David Hoffman?

  So Kane, you've gone on a bajillion podcasts and so there, there's plenty of, of podcasts that are just like, "All right, what's synthetics?" But I, of all the podcasts I've heard with, with you Kane, I've, I've yet to hear one that talks about your personal politics or your personal attitudes about life. And from what I've listened to, I've gotten a gist that you're kind of a crypto anarchist. Uh, if, is that right? And can you elaborate on that?

• 9:46Speaker 02

  Yeah. So, so you know, I definitely, uh, have like a, an anarchist bent, right? And, and you know, it comes from, uh, I guess like this, you know, anti-authoritarian, uh, viewpoint of, you know, uh, power structures need to be justified. And, and you know, anything, uh, you know, any power structure, any sort of hierarchy or, or, you know, authority that can't, uh, be legitimized, you know, should be torn down. Um, and you know, I think that, that's kind of the, the sort of core of my, uh, my worldview from a political standpoint.

• 10:20Ryan Sean Adams?

  So anti-authoritarian then, like, has it always been that way Kane? Or is this sort of a, an awakening at some point in your life?

• 10:27Speaker 02

  No, I think it's always it's always been that way. Um, you know, uh, probably, you know, coming from uh my upbringing, I guess, right? Like, um, you know, I uh, my dad was a professional tennis player. So he was um, you know, pretty intense person, um, is a pretty intense person. And, you know, definitely, uh, our, our family was, uh, was, you know, I've got three younger brothers, so there's, you know, four, four boys competing all the time. So I, you know, we always had this, uh, this, you know, really intense, highly competitive environment in, in my, uh, house. And so I think, uh, you know, at some point, uh, kind of challenging that and, and sort

• 11:09Speaker 02

  of questioning, you know, uh, authority just became ingrained in me.

• 11:13David Hoffman?

  When did, and when did you get into crypto? And would you say that all of those same values came before crypto or kind of after crypto and crypto helped instantiate them?

• 11:24Speaker 02

  Definitely before, you know, I, I was kind of, you know, someone that would read uh, things like Chomsky and, and, you know, a, a bunch of different uh, sort of political uh, viewpoints, you know, in my kind of, uh, late teens and, and early twenties. Um, and, you know, just really had a, a strong, uh, kind of view that the status quo was, was not quite adequate and, you know, that there were a lot of issues in, in the status quo in terms of, you know, how, uh, how governance worked, et cetera. And so I think that when I, when I first saw uh, Bitcoin, you know, to be honest, I, I didn't really get it. I, I read uh, the Slashdot Red that I think a lot of people read, um, you know, in like 2011.

• 12:05Speaker 02

  Um, and, you know, coming from a payments background and, and a retail background, um, you know, it just didn't quite sync with me. It was probably a couple of years later before I, I really, um, you know, saw the value from like a political perspective rather than just as a, a payment mechanism.

• 12:24David Hoffman?

  Being a crypto anarchist of sorts, what is your hope for how crypto platforms, crypto, crypto protocols, how they help organize people? Like, what, what is the futuristic sci-fi version of crypto that you see in your head?

• 12:39Speaker 02

  Well, you know, this is, this is part of the reason why I've been so bullish on tokens for, for such a long time, right? You know, even through, through the bear market where, you know, tokens were seen as, um, you know, this, uh, this terrible kind of black mark, right, on, on, you know, people who had done ICOs and that sort of thing. And the reason behind that is that I believe that, you know, they're such a powerful coordination mechanism. And that, you know, if you set up a, a system of rules that is, is very clear, um, and you're open and anyone can participate, that, you know, having a token that kind of, uh, unites, uh, that rule set is, is a really powerful way of, of driving behavior. And so, you know,

• 13:21Speaker 02

  the idea that you can create these coordination games and, you know, provide services without needing some sort of like top-down, you know, hierarchy or, or, you know, structure, I think is, is really exciting. And we're starting to see that, you know, and, and obviously the first, uh, kind of wave of this is very financial in nature. Um, but I think there is the possibility to extend it, you know, further than that and, and really, you know, kind of open it up and, and have these sort of self-governing, uh, you know, uh, systems that, that don't require a central authority to, to mediate them.

• 13:54David Hoffman?

  How is this reflected in this Synthetix protocol, right? Because all crypto protocols have values baked into them to some degree. So how would you say that these values have been worked into Synthetix?

• 14:06Speaker 02

  I, I think it kind of comes from our, our community, um, you know, where I've been a, a participant in the community from day one, you know, even when there were only maybe 10 of us that actually cared about the, you know, the project, right? Um, and, and so, you know, my, my view has always been engage with the community as a community member, um, you know, and even though I do occupy a privileged position as the founder, I've really tried to, you know, not exercise that power and not, you know, not leverage it. Um, and, you know, just to, to try and, uh, you know, advocate for whatever position I'm advocating, um, you know, on its merits, right? Rather than, you know, relying on some kind of authority.

• 14:49Speaker 02

  And so I I think that there the people who participate in our community and and who've been kind of attracted to that have a very similar viewpoint, right? Like, they believe that, you know, the the kind of argument should be won on on its own merits and that anyone can participate. And that's another reason why I think, you know, we haven't gone down the the sort of on-chain governance path, right? We've we've kind of stuck with this idea of, um, you know, rough consensus and and letting debate kind of, you know, live in the community and to decide things.

• 15:24Ryan Sean Adams?

  So, Gane, something else I I actually just learned today is you wrote a novel, right?

• 15:31Speaker 02

  I did, I did, somewhat stupidly.

• 15:38Ryan Sean Adams?

  It's never a bad decision to write a book, Gane, so.

• 15:40Speaker 02

  Yeah, you know, it was it it was one of those things where like,

• 15:46Speaker 02

  I I read a lot, right? You know, I I read a lot. I read a lot of nonfiction and a lot of science fiction and and, you know, fantasy and stuff. And I was reading a Nick Bostrom book about AI. And there was this example.

• 16:03Ryan Sean Adams?

  Is this superintelligence?

• 16:05Speaker 02

  Superintelligence, yeah, yeah, superintelligence. So, and, you know, he he gets to the point about like the the paperclip generating, you know, optimizer, right? That like is is optimizing for, you know, generating as many paperclips as as possible. And I I, you know, was reading it at night, fell asleep and and kind of, you know, it was really stuck with me. And then the next morning, I kind of had this idea for like a short story that kind of extended that that, you know, thought experiment. And so I started writing it and, you know, throughout the rest of the day, like, I, you know, put down like, I don't know, eight thousand words or something like that. Like, it just it was kind of like flowing out. And so then I was like, oh, maybe this is a bit bigger than a short story. And I'd never written anything longer than a short story before.

• 16:48Speaker 02

  And that was a huge mistake because the amount of pain and suffering that you go through in the editing process, I just was not prepared for it. So it ended up taking me like almost eighteen months to finish it because I went through like, you know, five different revisions and really changed a bunch of stuff. So I'm a bit of a perfectionist, which is which is why start starting to write a novel was maybe not the best the best plan, given that it was a side project.

• 17:13Ryan Sean Adams?

  Well, good for you for sticking with it. But like, so I I've read that book too, Superintelligence. I think Elon Musk was talking about it for a while and just it kind of tuned me into it. And I gotta say, that book somewhat haunted me, right? Because you're part of the thesis is that basically AI is inevitable. And quite possibly, an evil AI is the out is the end outcome of all of this. And, you know, Nick's kind of cautioned us is we should be preparing for that now. In fact, I think he he works as an ethicist to like come up with protocols to rein in the the future AI that's coming.

• 17:54Ryan Sean Adams?

  I I almost wonder, so Peter Thiel, I think, has has kind of painted this contrast, where he talks about AI being almost an authoritarian type of technology versus crypto blockchain being a a more classically liberal type of technology, an anti-authoritarian technology. And I I'm wondering if that kind of fed into your interest in that that book, Superintelligence, and the novel itself, this this whole kind of anti-authoritarian, like, I guess, path that you've been on your entire life, it seems. Did that feed into it?

• 18:29Speaker 02

  Well, you know, so I definitely had the naive view of of AI, right? Up to that point, and and, you know, I I definitely spent a lot of time, you know, reading about, you know, general artificial intelligence and, you know, for for years, right? Like, tons of books, you know. And I think reading Bostrom's book, it was haunting. It was. It was really scary. Like, he really painted a picture of, you know, this alternative approach. And, you know, I think I I'm fairly optimistic about the potential for technological progress. But that that definitely was an eye-opening. Kind of experience reading it.

• 19:11Ryan Sean Adams?

  And what I remember in reading it was how fast it could happen, like in a blink of an eye, right? So it gets to human IQ, you know, 100 IQ, 120 IQ, right? And then a week later, it could be well beyond humans' capabilities to even rein it in.

• 19:24Speaker 02

  Yeah, exactly. And that was part of, you know, writing the novel, I think, originally, the short story was like, just a way for me to kind of, you know, take this very sort of troubling alternative viewpoint that I hadn't really, you know, considered previously and process it, you know, as a way of kind of processing it. And then obviously it took on a lot of its own and took a lot longer than I would have liked. But, you know, I think it was, it was very helpful for me to kind of incorporate that into my worldview. But I do think it's a little bit, you know, like, I don't know, you know, the heat death of the universe or something like that. It's like a thing that you know is true, but you kind of have to just, you know, continue operating.

• 20:06Ryan Sean Adams?

  Yeah.

• 20:07Speaker 02

  Yeah, exactly. Like, if we sat around all day, like, worried about, like, you know, this idea of like an AGI emerging, you know, in 10 seconds, you know, the world being over, you know, maybe, maybe that's too pessimistic, right? Maybe we should be trying harder to prevent it. But I kind of feel like it's either inevitable or it's not. And, you know, the hope is that we have some benevolent AGI rather than, you know, something that is malicious.

• 20:33Ryan Sean Adams?

  And I, I do think, at least for me, right? So AI could grow very powerful. We're already seeing it today in centralized companies like Google and, you know, Baidu and all of these, all these companies. But crypto is almost like a little bit of the antidote to that, right? It's, it restores some balance in the universe. It restores some self-sovereignty for the individual. And we're starting with money systems, but there could be other systems. So I find personally, like, after reading, you know, some of Nick's work and other things, it's just like, that's, that's kind of the, the side I want to be on. At least right now, is, is like more the decentralization side of things. That's helping to restore a little bit of the balance of, you know, what centralized.

• 21:18David Hoffman?

  AI could could eventually become. But yeah, anyway.

• 21:22Speaker 02

  Yeah, agreed. And you know, I think I think there's like the the the risk is really in opacity. Right. And this is where, you know, crypto is so powerful, right? Like when the rule system that you're operating under is opaque and you can't, you know, understand what the the implications are, you know, it's impossible to kind of see the the rules. That's where, you know, power can really aggregate and and become abusive. I think when everyone's operating, you know, on the same rule set and the rules are very clear. At least you have that, you know, advantage where you understand how everyone else is playing. So I think that that is something that I see in in crypto is, you know, a very powerful driver for, you know, maybe the potential for more fair outcomes, you know, in in these systems.

• 22:08David Hoffman?

  So Kane, you you wrote this novel out of just pure inspiration and motivation, which, you know, is is something in of itself, like a a high effort activity, right? And then ever in doing some research for this podcast, I I went to the Synthetics slash Haven blog, which started in September of 2017. And you've been just pumping out blog posts after blog posts ever since then, right? And then and then not to mention just being the leader for this crazy awesome DeFi protocol. Where does this motivation come from? Like, where do you get the energy and meaning behind what you are doing? So that when you wake up in the morning, you're ready to go and and build something like, what what motivates you to do? Yeah, what motivates you?

• 22:54Speaker 02

  One of my favorite books to to stay on the the book thread is The Hard Thing About Hard Things by Ben Horowitz. And and I think, you know, he talks about the idea that like hard things are the reward in themselves, right? Just doing something that's really challenging. And I think that, you know, there's there's definitely certain people who have, you know, a mindset. I think I fall into this category of, you know, it's just fun to do difficult things for, you know, it's its own reward. And so, you know, I think I'm I'm a little bit crazy like that, where, you know, I I have this kind of perfectionistic streak and and feel, you know, really driven to be challenged.

• 23:34Speaker 02

  And, you know, if I'm if I'm not challenged, then I get bored really quickly. And so, you know, waking up at the moment and just. Being, you know, kind of inundated with like the the DeFi fire hose, it's, you know, it's definitely confronting and I think everyone's feeling that. But, you know, there is an aspect of like trying to kind of synthesize it all and you pull it all together into some coherent view, you know, is really fun at the same time, right? So, you know, you got to be having some fun, but, you know, it's definitely, it's definitely challenging. I've been doing startups for a long time and, you know, there there are days where you kind of wake up and you're like, it's been 20 years of startup life and, you know, you feel a little bit burnt out.

• 24:16Speaker 02

  But I think it's it's fun enough to kind of keep going, you know, at the moment.

• 24:21David Hoffman?

  And so what's the goal? Like when you are, when you do decide to wake up and and decide that, you know, no longer is startup life fit for you and instead walking in the mountains is now fit for you. Like what what do you have hoped to achieve? Like, what are you trying to change the world to to be like? Or what's your trying, what's the mark that you're trying to leave upon the world?

• 24:43Speaker 02

  You know, I think I have a very strong sort of streak of like trying to achieve fairness and and trying to achieve equitable outcomes. You know, I feel very strongly about that. I think that, you know, arbitrary, and this comes back again to like anti authoritarian, you know, viewpoints, right? Like the the idea that someone can exercise arbitrary power over someone else, I find to be really abhorrent. And so, you know, to build a system or, you know, to contribute to systems being built where that, you know, is is limited and the ability for people to to abuse power is limited. I think, you know, even if it's not necessarily, you know, synthetics being a world changing thing,

• 25:26Speaker 02

  just contributing to, you know, crypto and DeFi, I think is is something that, you know, keeps me motivated and and, you know, I'm hopeful that we can kind of continue experimenting and and, you know, add to this, you know, body of knowledge about how you coordinate behavior and and, you know, achieve things like that without necessarily, you know.

• 25:51Speaker 02

  Looking for some specific outcome, right? You know, I don't, I don't think it really matters what the outcome is as long as, you know, we're kind of building up this, this, you know, new kind of technology and new way of coordinating people.

• 26:07David Hoffman?

  So we're in the middle of our DeFi Founder Series here on Bankless and we started with Stani from AVE last week. We're now here with Kane from Synthetix. And one of the questions that we're asking everyone came from our episode with Vance Spencer of Framework, which was also kind of like the VC start to this whole thing. And one of the concepts that he talked about was when he is looking for, you know, DeFi founders and then also DeFi protocols to like invest in or you put their skin in the game into. They, they said they frequently ask the question for, for protocols that are looking to hand over governance over the protocol to the community. The question is, are you really about that life? Because that's a different lifestyle.

• 26:47David Hoffman?

  That's a different choice than running a C corp with, you know, a board of directors and publicly owned company, right? It's a different, it's a different goal. And so, so Kane, why are you about that life? Like what, what about you is particularly suited to building this community owned and operated protocol?

• 27:05Speaker 02

  I've always, I've always, you know, in all the startups that I've run, you know, some of my friends and people that are close to me have always kind of pointed out that, you know, one of the common threads with all of them is that there, you know, tends to be a community that kind of coalesces around them, that gets really passionate about it and really cares about it. And I think, you know, part of that is the, this kind of process of engagement, right? Of, you know, genuinely engaging with people and wanting them to contribute. And I think a lot of people will pay lip service to that process, right? But really they do want to retain power and they want to retain some sense of control.

• 27:45Speaker 02

  But, you know, I genuinely do want to engage and kind of hand over control as much as possible, you know, to this, this protocol.

• 27:57Speaker 02

  Like it's it's

• 27:58Ryan Sean Adams?

  You you want to be the the super delegate instead of the benevolent dictator, right? That's what it says.

• 28:03Speaker 02

  A hundred percent. Exactly. Exactly. And, you know, even though we don't have super delegates yet, you know, when we do, um, you know, my my genuine hope is that people, uh, you know, think that I'm a viable candidate for that role. And, you know, we might end up in a situation where we have, you know, seven, uh, people that are super delegates that are, you know, sort of responsible for, um, you know, helping to kind of direct the the next, um, you know, phase of the the project. Um, and, you know, obviously I want to be a part of that, right? But I also want to to have earned it rather than, you know, be kind of grandfathered in because I, you know, happen to be here at the beginning.

• 28:43Ryan Sean Adams?

  You want to be a voice in the protocol, not the voice in the synthetics protocol in time, over time?

• 28:49Speaker 02

  Absolutely. And, you know, this is already happening, right? Like, people do not listen to me. If you go in and, like, honestly, if you go in and and look at Discord, right, like, I'm constantly advocating for things, and they're like, no, not, we're just not doing that. We don't, we don't think you're right on this. So it's

• 29:05Ryan Sean Adams?

  So you're already getting overruled, then, on on things?

• 29:09Speaker 02

  Oh, all the time.

• 29:10Ryan Sean Adams?

  Are there times where the

• 29:11Speaker 02

  I mean, even in the last

• 29:12Ryan Sean Adams?

  Are there times where you're like, oh, you know, the community is right about that, and I was actually wrong, and it led to a better decision? And I guess, you know, the opposite. Do you feel like sometimes the community's made bad decisions?

• 29:24Speaker 02

  You know, I think in the in the early days, everyone was very passionate. Everyone felt, you know, very, uh, very strongly about, you know, the direction that things should be be going in. But it was also very cohesive, right? Like, we all were really bought into what we were trying to do. Um, and so, you know, we would have debates and disagreements, but, you know, generally it was about, like, how do we achieve something? And I think what's kind of shifted as the community has grown is it's less debates about how do we achieve something? But, you know, sometimes even like, what are we trying to achieve? Which I think is an important thing. But, you know, even, uh, you know, recently, uh, probably, I I think the biggest one, and I've talked about this before, is the monetary policy change, right? You know, when we changed the

• 30:07Speaker 02

  The inflation schedule, there was a community member, Delta Tiger, who was advocating for it. And I said, no, this is a bad idea. Like, we don't want to go down that path. We want to have like a coherent monetary policy. And he advocated for it, pushed it through, and it was definitely a good change. Like, that was a really positive change.

• 30:26Ryan Sean Adams?

  This was basically the decision, right? I guess I introduced you as kind of the father of, founding father of DeFi liquidity mining, right? But the original design for Synthetix was more like Bitcoin, right? Where it would be some kind of fixed cap and there wouldn't be a change to issuance policy. It was very kind of regimented, right? That was the prevailing thought at the time. So you're saying like, this whole shift to liquidity mining wasn't even your idea. It came from the community?

• 30:56Speaker 02

  That's true. So, you know, I basically said, you know, I had this idea when, I think this is going back to like 2018, right? So I think it was around DevCon, so like, you know, maybe October or whatever of 2018. And we were clearly not getting traction, right? Like, we weren't getting people to, you know, stake. We're having trouble with engagement. And I started talking about this idea of changing the monetary policy and, you know, essentially

• 31:32Speaker 02

  shifting to, you know, something more like a halving, right? Like to introduce inflation and we would have this halving process. And so that initial process of changing the monetary policy to reward stakers was pushed through by me. But the stupid part of that was this halving component, right? Of like each year I would halve. It just created like unnecessary risk. And basically, six months later, someone came in and said, that's a really dumb idea. And I said, no, it's not. And then everyone actually said, yeah, no, it is a dumb idea. We should change it. And they did.

• 32:03Ryan Sean Adams?

  All right. So for folks who have not heard about Synthetix, we want this to be kind of a canonical episode about Synthetix in the future. Could you just do a quick, explain it like I'm five of the protocol? What does it do? And what problem is it solving, Kane?

• 32:22Speaker 02

  So basically, what it allows you to do is hold a token that gives you exposure to any asset that the protocol supports on Ethereum. So you know, on Ethereum, you want price exposure to Bitcoin. You want to be able to hold a token that will, you know, move like a Bitcoin. And so what the protocol allows you to do is hold that token. It uses Oracles to essentially, you know, lock the token to that price. And it's, you know, effectively the same as holding Bitcoin, right? With obviously some different properties. And the same thing goes for, you know, other assets like gold, silver. You know, you can hold an ounce of gold that's tokenized.

• 33:06Speaker 02

  And you're able to get your price exposure the same way as if you were, you know, holding a, you know, one ounce gold bar.

• 33:13Ryan Sean Adams?

  These things are called synthetics, right? That's what a synthetic is. It's essentially a, um, a kind of a price tracker for all of these assets. Though it's not the actual asset itself that's getting traded around. It's just kind of the price representation of that asset.

• 33:28David Hoffman?

  And importantly, it's supposed to be redeemable for an equal amount of that asset in real life. Although it is not a claim on the real life asset. It should be able to be redeemable for the same amount of value of that real asset.

• 33:44Speaker 02

  Correct, yeah. So you know, there's, there's no, you can't, you know, front up and convert one token, you know, uh, one XAU, S XAU token for, um, gold. But, uh, you know, in theory, you should be able to convert that into, you know, the right amount of dollars to go and buy a gold bar.

• 34:03David Hoffman?

  And buy an equivalent amount, right? And so how do, explain how the Oracles get integrated in synthetics and what the Oracles do.

• 34:10Speaker 02

  So, uh, we made a decision about 18 months ago to work with Chainlink, um, to implement, uh, their Oracle system. Um, and we've worked really closely with them since to get this done. And, you know, very excitingly, finally, we've made the transition. So we've moved all of our Oracles over to Chainlink. And you know, it essentially allows us to to kind of hand over the complexity of managing this oracle network to, you know, people that that's all they do. And so we can, you know, focus on on the the things that, you know, makes sense for us to focus on and and kind of outsource this this price feed component. So, you know, it's a big deal.

• 34:50Speaker 02

  It's also very helpful for decentralization because, you know, previously, we were running an internal oracle that, you know, was, again, very opaque. People didn't know what the rules were. You know, it wasn't clear where the price feeds were coming, etc. So we've now moved away from that, and I think it's made the protocol much more open and decentralized subsequently.

• 35:12David Hoffman?

  And oracles are crucial for synthetics, right? Because all of the synthetic assets available in the synthetic marketplace, they need to be, they need to know what the price of their real world correlate is, right? So if you buy a a tokenized, a synthetic asset of one ounce of gold, what the oracle does is it takes outside world data of the real world gold price from some source, and the chain link oracle reports that to the synthetic marketplace to tell the synthetic marketplace to price all of the synthetic gold tokens appropriately, tell them what price it should be. And then we can copy and paste the same model for all possible, you know, assets, right? Like the S M P five

• 35:55David Hoffman?

  hundred, or the Tesla stock, or Apple stock, or, you know, maybe something even crazier like the the population of a country. Like, so long as it can be like reported by chain link, it can be turned into a synthetic asset on synthetics, correct?

• 36:12Speaker 02

  That's correct. Exactly. Yeah. As long as there's enough liquidity in the the external market as well. So we don't, we don't want the, you know, the market to be manipulatable.

• 36:23David Hoffman?

  Of course, of course. And so how does the SNX asset come into play here? Where does the SNX asset get involved?

• 36:29Speaker 02

  So it's essentially the collateral token for the network. So it's this coordination point to get everyone to come together and operate within this rule set. So if you're holding SNX, you stake SNX and you're able to issue debt, which tracks these price articles. And the fees that accrue from people exchanging different synthetic assets between each other. So if someone goes from synthetic Bitcoin to synthetic gold, they pay a fee. All of those fees go into a pool. And the SNX stakers who have been collateralizing the network

• 37:12Speaker 02

  get their pro-rata share of those fees each week.

• 37:18David Hoffman?

  And so this is how synthetic assets come into existence, right? Like, we don't just get to start with all these assets. They need to be created somehow. And so what someone does is they take the SNX token, say they take $1,000 of the SNX token, and then they deposit it into Synthetix in a comparable way that they deposit Ether to Maker Dow or something. And then they have some amount of credit based on their deposits. And that credit can be turned into a synthetic asset by choosing which oracle to make that credit turn into an asset buy, right? And so if you have like $200 worth of credit by your SNX deposits,

• 38:00David Hoffman?

  you can turn that into $200 worth of synthetic gold or synthetic Tesla. Is all that correct?

• 38:06Speaker 02

  That's right. That's exactly right.

• 38:07David Hoffman?

  But that's not the only thing that SNX does. Because the other half of SNX is governance over Synthetix, the protocol, right? So it's this dual collateral token for the SNX marketplace and the governance token over how the SNX marketplace works. How has that relationship between this dual purpose of Synthetix, how has that relationship been absorbed and understood by the community? Like, how are people thinking about this dual relationship?

• 38:37Speaker 02

  So you know, at the moment, the the S and X token uh does not give you governance rights. So you know, the the governance process that we use is very similar to Ethereum, right? You know, it's not a a direct uh token vote, you know, based on how much ether you have, right? Uh that feeds into the the E I P process. And and we have a similar approach where, you know, we've got a community, they're all token holders. Uh but you know, your ability to uh kind of advocate for a specific change or you know, for something you want to see in the protocol is not limited to your token holding. You know, it's it's actually your reputation within the community that is what really drives, you know, your your ability to kind of uh make changes and propose modifications.

• 39:23Speaker 02

  And I think that, you know, that's something that uh maybe is is a little bit different to some of the protocols that we've seen recently where, you know, they are using direct on-chain uh governance. And, you know, I've got some some serious concerns about uh, you know, the the implications of that. I think eventually we will get to a point where, um, you know, we have this delegated, you know, voting process and and people can delegate towards uh specific, um, you know, people who are um looking to kind of join uh this governing council essentially. Uh but at the moment, uh, the process is is very, you know, rough. It's it's a rough consensus process and we need to get to a point where consensus is really strong uh in the community before we make any changes.

• 40:07Speaker 02

  And there's a risk of that as well, obviously, which is, you know, ossification like like we've seen in Bitcoin, where it becomes really hard to change things. And I think this is where, you know, eventually we will get to a breakpoint where it becomes too hard to change things through rough consensus and we actually need to move to some form of on-chain governance. But we've been taking that very, very slowly for, you know, through the kind of reasons that I stated there.

• 40:31David Hoffman?

  Yeah, okay, pardon me for the mistake. The dual, the duality of the synthetic token model I should have been referring to was the fact that the SNX token does have rights over the cash flow over the protocol, right? And so the SNX token is both the collateral for generating assets and then also the asset that is, has a claim on the cash flow of the system. And so if people will remember about a year ago and around then, I was kind of known, loosely known as generally an SNX asset skeptic because of this self-recursion, right? Like the, the asset, the token, the quote unquote equity over the protocol is also

• 41:14David Hoffman?

  the collateral of the protocol, which to me, I kind of saw that as like a dangerous feedback loop. But I kind of now consider that, I kind of think that that attitude came out of like a bear market attitude, like a pessimistic attitude, because there's also nothing more like awesome in the world of crypto than feedback loops, right? Self recursive feedback loops. And, you know, let it be known that Ether and Ethereum and Proof of Stake operates in the same sort of feedback loop. So now in my mind, in my 2020 mind, I'm now actually like relatively bullish on just the feedback loop between SNX, the asset being both the collateral for synthetic assets

• 41:53David Hoffman?

  while, and also generating, collecting the fees from the, the synthetics marketplace. And so has there been any community discussion or community like, understanding about the duality of the, both the cash flow slash collateral model of the synthetic asset?

• 42:12Speaker 02

  There, there has, and you know, this is something that we, we talk about, you know, a lot, but I think to be fair to maybe, you know, 2019, David, you know, the, the reality is that we are still limited, right? Like, you know, the, the using SNX as the only collateral is somewhat limiting. And so, you know, we're pushing ahead very, very aggressively to add Ether as a collateral to borrow. Not just synthetic ether, which is, you know, the current ability that you have, but to actually be able to borrow SUSD as well. Because, you know, in in the current environment in a bull market, you know, there's a lot of demand for decentralized stablecoins, both, you know, DAI and SUSD.

• 42:56Speaker 02

  And so we need to have a lever to to kind of, you know, extend the supply and and, you know, that's something that we're we're working on really closely. So I think some of your concerns are still very valid, right? And and we still have to solve some of these issues. So I don't think it's necessarily a solved, a solved problem. But to to go back to the question around like cash flow. I think, you know, it it's funny, right? Because in 2018, you know, 2019, the skepticism around tokens was, you know, at its peak, right? And my view was always that if you wanted a token to have value, it had to to, you know, accrue some cash flow, right? Like, it wasn't going to accrue value just from being a payment token

• 43:40Speaker 02

  that, you know, was was kind of operating in this walled garden. I, you know, I was always pretty skeptical of of that idea. And so I think that, you know, the the thing that limited people from approaching things this way was like a regulatory fear, right? They were worried about, you know, looking like a security, et cetera. And so I think, you know, one of the things that Synthetix has contributed, you know, hopefully, is to reduce that fear and for people to to realize that, you know, a passive cash flow asset is a security. But a token that's like this coordination mechanism that allows you to participate in an ecosystem and do work and receive fees for it is something else entirely, right?

• 44:22Speaker 02

  It's it's obviously not, you know, the exact definition of a security. And so I think that one of the things that we've really contributed is is, you know, to push that, you know, to open up the the Overton window on token design and and, you know, make people more comfortable with the idea of, you know, these cash flow generating tokens.

• 44:41Ryan Sean Adams?

  You had a fantastic thread on the Overton window of, you know, capital and how there's a range of new options that DeFi founders should consider. Definitely want to talk about that in a little bit. But but is this what you just described? Is that essentially the upside thesis for SNX? That a ton of cash would be generated basically by the Synthetix Protocol? And that would have a value accrual mechanism that feeds back into SNX? Is that the gist of the upside thesis?

• 45:12Speaker 02

  That's it. Yeah, exactly. You know, that's that's the idea that, you know, if we all come together and create this service that allows people to have price exposure to, you know, almost any asset on Ethereum, that there'll be a lot of demand for that. And that demand will, you know, result in in a lot of, you know, free cash flow that flows through the network and ultimately to token.

• 45:33Ryan Sean Adams?

  We were talking to Stani about this, about, you know, what you mentioned to Kane, about the 2018, 2019, where everyone was bearish, right? So 2019, January 2019, David, or January 2019, Ryan could have purchased SNX for four cents. Not to make you feel bad, David, but like, right now, it's $5. So we had some opportunity costs there, and so did everyone. But like, I guess, to be fair, it felt very much felt like at that time that, you know, DeFi was dead, that kind of Ethereum was maybe, I don't know, just barely hanging on, that tokens, all tokens were futility tokens.

• 46:15Ryan Sean Adams?

  None of them could deliver any any value. And now here we are, right now, and SNX is like 12,000% up in price. Like, market cap of 2.5 million to like 500 million, right? And like, little over a year later, like, absolutely insane. I think our conversation with Vance from from Framework sort of illustrated the power of a contrarian bet in DeFi in 2018 and 2019. But how did how did that feel for you on your side, right? So you're you're more than kind of an investor, obviously, in SNX, because you're actually investing your life in the Protocol, and you're investing your your team time and that sort of thing.

• 46:57Ryan Sean Adams?

  You mentioned Ben's book, The Hard Thing About Hard Things. I remember this always stuck out with me. He talked about startups having this WFIO moment, this like, we're F it's over movement, before they kind of come out on the other side. Did you ever have a moment like that, where you thought Synthetix is never going to work? Or even before, Haven is never going to work?

• 47:19Speaker 02

  Yeah, I mean, you know, in late twenty eighteen, uh, mid to late twenty eighteen, you know, regulated stablecoins, uh, a combination of regulated stablecoins and DAI really had marginalized the the utility of the protocol. Um, and so, you know, we were in the situation where we had to make a decision to either pivot, um, you know, or just keep driving off a cliff. Um, and, you know, we we're definitely in a a bad place, I think, at the end of twenty eighteen, early twenty nineteen, where, you know, okay, we had enough runway to kind of keep going, but clearly not enough to be able to take on Circle, right? You know, or, uh, you know,

• 47:59Speaker 02

  Paxos, or, um, you know, uh, you know, any of these these regulated stablecoins that we're we're starting to see pop up. And so, you know, we we just basically decided to to double down and, you know, uh, accelerate the movement to this multi currency system. Um, and that's where we started to see some product market fit. So, you know, uh, I think that was that was probably the moment, the late twenty eighteen moment where, you know, we decided to just throw it all, uh, you know, and just kind of a bit of a hail Mary and, you know, change the monetary policy, you know, the pivot, the rebrand, all of it. And, you know, I think we're, uh, we're pretty lucky, uh, in in a number of ways that, you know, we just happened to kind of, uh, you know, hit that that inflection point in DeFi around

• 48:44Speaker 02

  about the same time. Uh, but, you know, there was a part of me that, you know, always thought that this was pretty inevitable, right? You know, I I was very, very, uh, convicted that, you know, what we were doing made sense and that it was necessary and that, you know, there would that it would work in in spite of the skepticism, right? And skepticism was totally reasonable, you know. I think, uh, you know, we had a a number of debates on on Twitter and in various places, um, you know, back then and and, you know, there are people like Tao and, you know, who are still skeptical about, you know, can this work? Um, but I I think, you know, my view was, uh, was that, you know, I I really believe that the mechanism, uh, would be successful. And and so, you know,

• 49:29Speaker 02

  The vindication of kind of seeing the market respond. And you know, we're not there yet, right? Like, we're not at a point where the cash flow from, you know, providing this this service, this decentralized service is sufficient to to kind of, you know, keep the network going in perpetuity. But I think we're getting closer and we're starting to see that, you know, there is genuine demand for it, which is which is really

• 49:51Ryan Sean Adams?

  And you had to have that conviction in 2018 to continue to work on what you were working on in in 2019. I like at the time, like you mentioned it, USDC and even Tether, these centralized stablecoins were basically dominating, right? So it was very hard to be in the decentralized stablecoin business. But another element that was very difficult was there was no like onboarding of liquidity into DeFi at all. Like, it was all through the centralized exchanges. And where were they going to route you? Well, they're going to list Tether, they're going to list USDC as the trading pairs. And it almost seemed like to me, this kind of inflection point that that you

• 50:33Ryan Sean Adams?

  mentioned for for DeFi, kind of occurred as an ecosystem of money Legos, right? Like, it seemed to me that Uniswap really started to feel fuel a lot of the liquidity for this space. And that created almost a feedback loop for Synthetix to become more successful and increase its volume. Did you feel that? Did you feel like the space was kind of, you know, growing together? And that some of these other money Legos almost snapped into into place to make Synthetix much more feasible?

• 51:09Speaker 02

  Absolutely. You know, Uniswap was a big deal. But I think, you know, we really can't overlook the fact that it was Maker and Dye, which facilitated this. You know, if there's if there's no Dye, I don't think any of this happens. Right? So, you know, Dye kind of enabled, you know, things like Compound to really, you know, have this like symbiotic relationship, right? And and I think, you know, even Protocol and Dharma and like, you know, all of these things, uh, the, the ability to, you know, kind of believe that this is, was workable. I think a lot of that came from Maker. And so, you know,

• 51:49Speaker 02

  it's, it, uh, I, I think it's, it's something that maybe, you know, it's kind of overlooked these days. You know, people look at Compound and, you know, they'll watch the Compound token. It's like this kind of, you know, moment, but I think you have to go way, way further back, right? To like late 2017 and, and the launch of DAI. That was the, the genesis of the

• 52:07Ryan Sean Adams?

  Do you still feel that cohesion in DeFi that like the ecosystem is all, we're, you know, we're all kind of in it, uh, together?

• 52:16Speaker 02

  I mean, look, it's gotten a lot noisier, right? You know, uh, back, I think it was, you know, just before DevCon, right? Like that was the first DeFi conference and there were maybe 50 people in the room. Um, you know, and it, funnily enough though, even then, there was definitely a little bit of like, uh, you know, tension, right? Um, you know, not everyone was necessarily friendly. There were, there was, uh, you know, a bit of competition. And I, I think also, you know, we were definitely not in a mindset of abundance back then, right? It was a very much a scarcity mindset and, um, you know, and a little bit zero sum. And I think, I think that improved, you know, through 2019 as, as things started to kind of, uh, heat up a little bit. Um,

• 52:58Speaker 02

  so I think that, you know, people are probably a lot more friendly these days than, than they maybe were even back then, uh, at times. Um, but, you know, it's much noisier and, and there's a lot of crazy stuff going on. So, you know, we don't have the same level of connectivity, uh, you know, with, with some of the projects, just because it's, it's really hard with everything going on to, to stay connected.

• 53:22Ryan Sean Adams?

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• 53:31Ryan Sean Adams?

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• 54:12Ryan Sean Adams?

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• 54:35David Hoffman?

  Ample4th is a new base money experiment on Ethereum. Many people have heard of this new rebasing mechanism and Ample4th was the protocol to first introduce that into the Ethereum space. Ample4th is very comparable to Bitcoin in the sense that it has a non-dilutive supply. However, there's one thing about it that's inverse with Bitcoin. Whereas Bitcoin has a completely inflexible supply, meaning any demand for BTC the asset is therefore reflected in the price. And Ample4th is the inverse of that, where Ample4th is pegged to $20.19 and any demand for the Ample4th token is reflected in the supply of the asset, not the price of the asset.

• 55:19David Hoffman?

  So the Ample4th token tracks $20.19 slowly over time. So it should never be too far away from $20.19. And in order to achieve that goal, it adds or burns Ample4th token supply so that the market generally prices it around the value of a $20.19.

• 55:38David Hoffman?

  It is definitely not a stablecoin because the volatility of the value that you hold will fluctuate up and down wildly, but the token itself is supposed to track a dollar. Pretty interesting experiment. There's been a lot of spinoffs using this rebasing mechanism. They also have this liquidity mining program where you can supply Ampleforth and Ether tokens to the Uniswap pool and you'll be able to get an extra dividend of Ampleforth tokens from the Ampleforth Geyser. So check them out at ampleforth.org and see if this is an experiment you want to partake in. I think the best piece of Alpha that I think everyone knows about nowadays is that community is everything, right? And Synthetix is known for having one of the earliest and

• 56:22David Hoffman?

  most, the strongest communities in the space that we can really think of. And anytime some community generates this bottom up, like their own sort of mascots or icon, then that's something to pay attention to. And like the Synthetic Spartans came really, really early. Was there any one particular moment that more or less like triggered the Spartan meme or the instantiation of the protocol or the of the community around Synthetix's protocol? Or was it more of just a grassroots kind of bottom up type of thing where people just for some, somebody coined the term and then it just grew from there? How did, how did the Synthetic Spartan meme come about?

• 57:04Speaker 02

  Well, I think it kind of came from G, right? You know, that was his avatar. You know, so DJ and Spartan, right? You know, his avatar in Discord was, you know, the, one of the Spartans. And so, you know, when people started to feel that this community was really, you know, cohesive and, you know, starting to solidify, and they started looking around for, you know, what, he was one of the people that really drove it, you know, and kind of gave this identity of, you know, we don't give a fuck, we're just gonna, you know, keep. Pushing here and it doesn't matter if people don't believe in us, it doesn't matter if you know

• 57:46Speaker 02

  they're skeptical. We we know what we're doing and we've got a vision of where we want to go and we're just going to keep pushing through. And so I think that that was where it kind of that was the genesis.

• 57:57Ryan Sean Adams?

  And DJ and Spartan for folks that aren't like on Twitter all the time, like many, probably all of us here are, he's a pseudo anonymous Twitter account, right, that tweets about lots of things in DeFi, but was an early believer, particularly during the bear market, in what Synthetix was was doing. And I like the Spartans analogy because there weren't a lot of you guys back then. You know, there's the 300, the mighty 300 against.

• 58:24Speaker 02

  It was less than 300.

• 58:26Ryan Sean Adams?

  Yeah, it was against all of the forces that that were kind of opposing it. And yeah, it's it's fantastic that in crypto, you're able to, I mean, we talked about Chainlink God recently in our episode with Vance, but crypto is able to attract these pseudo anonymous, yet incentivized, very strong and very captivating and very, I guess, formative, community members. It's like, I have you seen that anywhere else? Like you were involved in developing, building communities before, but is that something unique to crypto in your mind?

• 59:04Speaker 02

  I really think it is. And maybe it's also unique to like this time on the internet and you're that people can really, you know, kind of create a persona. You know, I think there's been communities, you know, like IRC, you know, things like that, where, you know, people didn't necessarily identify with their, you know, their their real world persona. But I think the the kind of cut through and an amount of impact that someone can have on crypto Twitter as an anonymous account is is much, much more powerful than anywhere I've ever seen it.

• 59:46David Hoffman?

  Kane, can you compare and contrast what the community's energy was like before and after the introduction of the SIP process? And maybe, maybe there wasn't any one formalized beginning of the SIP process, but I'm going to go ahead and guess that, you know, at some point, there was this team-led protocol changes, and then now it seems to be that there's this community-led protocol changes. During that pivot between the pre, the team governance to the community governance, how can you kind of compare and contrast the, the community energy and, you know, self-actualization around the stewardship of the protocol?

• 1:00:29Speaker 02

  I think the most tangible, immediate thing that happened when we introduced SIPs was it forced the team at the time to be more transparent. You know, it put a check on our power, right? Like, we weren't able to just arbitrarily do things. We had to actually go through the process ourselves. And it was something that I really strongly enforced, you know, in the team, right? That we couldn't just pay lip service to this. We were responsible for advocating for the positions, and, you know, we would assign someone within the team to be the champion of that SIP, to go out to the community and get it through. And I think that that mindset then kind of, you know, went through the team and then,

• 1:01:14Speaker 02

  you know, kind of further out into the community where they, all of a sudden, again, it wasn't just paying lip service to this idea of decentralized governance. It was, you know, we were embodying it, and we were, you know, actually, you know, forcing ourselves to participate in the process. And, you know, if we got it wrong and the community said no, then they said no. And it happened multiple times, you know, where there are things that, before the SIPs, we would have just done it and then told them afterwards. And then all of a sudden, we had to tell them ahead of time, and they had the ability to say, "Actually, no, you're not doing this. We don't want it."

• 1:01:46David Hoffman?

  And maybe if you could take a moment and define SIP and also where it came from, which are the EIPs, and then maybe also comment on how, and something like an SIP would enable community engagement.

• 1:02:03Speaker 02

  Yeah, so you know, it's basically this idea of a formalized document that, that you know,

• 1:02:12Speaker 02

  allows people to see what an improvement proposal is going to do, right? So you know, there's a structure about here's why we think we should do it. Here's exactly what's going to happen. Here's the intent behind it. And it puts, you know, it puts a lot of structure around any change to the protocol. So, you know, everyone can can feel engaged with it. And one of the early ones that was rejected was this, this proposal that I wrote to allow people to migrate their escrowed SNX tokens from one account to another. So the issue was that, you know, we, one of the unintended consequences of the staking rewards being locked for a year was that if you started staking with multiple different accounts,

• 1:02:57Speaker 02

  you could end up with this situation where you had to like maintain these accounts forever. Right? And, you know, if you abandoned one of them, you, there was a huge opportunity cost. So I proposed this idea of allowing people to consolidate their escrowed tokens into a single account. And people said, no, we don't like that idea. We're worried that it's going to create like a secondary market for escrow tokens. And, you know, all kinds of unintended consequences, you know? And it was funny because that proposal that, you know, I obviously there was, I had a lot invested interest in getting it over the line because, you know, I had a number of accounts that, you know, test accounts and things like that, that I was maintaining. And they basically said, bad luck. Sorry, you're not doing it. And it still hasn't happened to this day.

• 1:03:41David Hoffman?

  So, and just to define S I P, it stands for Synthetic Improvement Proposal. And so this comes out of, you know, E I Ps, which are Ethereum Improvement Proposals, which came out of B I Ps or Bips, which are Bitcoin Improvement Proposals. So there's, there's just this common, you know, something I P, which is how generally protocols and maker has the same thing where they have maker improvement proposals. So this is a common theme throughout crypto. So when, when S I Ps kind of just became a thing. In the Synthetics Protocol and also in the Synthetics Discord, how did that change the team's relationship with the community? So now, all of a sudden, the community realizes that it has your voice. It has power.

• 1:04:24David Hoffman?

  It has a way to voice their wants and desires and then try and generate some sort of rough consensus about what the community wants. And then they realize that they can get the team to change things in the ways that they want. So how did this kind of change the team's relationship with your guys' community? So is the community now steering the ship, would you say? Or who steers the synthetic ship?

• 1:04:53Speaker 02

  I think the biggest immediate impact that it had was to reduce this kind of voting block of the team. Because now, all of a sudden, there were people who now are contributors that we have that are funded via the Synthetics DAO, but were at that time funded by the Synthetics Foundation. It was this idea that, oh, there's the team and the team thinks this. And then there's the community and the community thinks this. But actually, what it did, which was one of the most meaningful impacts, I think, was to kind of break that up. And you would actually have people on the team who were like, well, I think this is a good idea. And then other people who didn't.

• 1:05:36Speaker 02

  And they would actually be in the community, participating and kind of advocating for their view. And it really had this impact of kind of flattening. Already, we didn't have much of a hierarchy, but it allowed for someone in the team to disagree with me, for example, on a specific point, and rally the community and get it over the line. Rather than needing to kind of all of us agree and present a united front. It really changed it to we're all members of the community. And even if we are funded by the foundation, we still have the responsibility to participate in this governance process the same way that any other token holder does.

• 1:06:16David Hoffman?

  And because of the community being given a voice, did you see more community members enter the community? Did you see that community grow after that?

• 1:06:26Speaker 02

  I think what happened is as new people found out about the project and kind of, you know, joined the community, they really felt this like palpable sense of there's something different going on here. You know, for people who've been in crypto for a long time, you know, communities are sometimes very shallow, right? You know, it's just a bunch of people that are holding the same bag, right? But I think in synthetics at that time, and you know, even today, but you know, very specifically at that time, if you turned up in the Discord, you're like, holy shit, there's something going on here. Like, people are very passionate about this. And I think for, you know, people with the right mindset who genuinely, you know, wanted to kind of participate in a protocol and have an impact, it was really attractive. And they often stay.

• 1:07:11Ryan Sean Adams?

  Every protocol should go through a bear market, right? Like, that's where the community is forged, in the trenches. It's not in this bull market, like, you know, 10x run-up stuff. That's not where you build like the core folks. It's those that stick with you during the bear.

• 1:07:26Speaker 02

  Yeah, exactly.

• 1:07:28David Hoffman?

  So, next step in the story of the synthetic Spartan, like, community growth story, was the ability to leverage SNX as like this engagement tool, where, you know, you would purchase SNX, and then you would stake SNX to access the inflationary rewards. And we were talking about this earlier, when we were talking about how the community kind of rallied up to say that Cane's four-year halving model was stupid, and there should be a more smooth, smooth halving model. And again, this was, this was a community getting a voice to rally for something that, and advocate for something that they wanted in their protocol that they

• 1:08:09David Hoffman?

  used. But then the inflation rewards are, it was a whole new, a whole new thing. And it started to create this feedback loop. Can you talk about how the inflation rewards impacted the growth of the community as well?

• 1:08:22Speaker 02

  So yeah, I think, you know, if you go back to 2016, 2017, this idea of artificial scarcity, right? You know, there's only X million or X thousand or X billion tokens, right? And therefore, you know, if people want to use them to pay for something, you know, in some system, and there's only so many of them, then the price will go up, right? Which, like, looking back on it, is just like idiocy, right? Like, it's so obviously dumb, right? But we were all, you know, drinking the Kool-Aid and, you know, I think we, we kind of thought this might play out, right? But the, the thing that was missing was, you know, rewarding people for engagement, right? And I think that that, you know, when I, when I kind of looked at why the engagement

• 1:09:06Speaker 02

  was low and took a step back and really, you know, took a longer view, the thing that was obvious to me was, you know, back in the day, if you were going to spend, you know, I think the first time I set up a Bitcoin miner in like 2012, it took me like an entire weekend. I spent like 48 hours, didn't sleep, like, you know, sitting on forums, like, reading different things, going through, you know, hardware config issues, et cetera, till I get this Bitcoin miner set up. And the reason why I did it was, A, I was interested, but B, I wanted to mine Bitcoin. I, you know, thought it would be cool, and if I could mine some Bitcoin, that would be amazing, right? And I think that that was the thing that was missing from all of these artificial scarcity tokens, right? It was, okay, we're gonna send all the tokens out,

• 1:09:50Speaker 02

  everyone's gonna hold the tokens, and then we're going to ask them to do something, but there was no way of the protocol actually rewarding them. And so the change to the monetary policy to add this inflationary component and reward people who were participating was the, you know, that was the thing that kind of kicked off this, uh, this cycle and really drove adoption and engagement.

• 1:10:11Ryan Sean Adams?

  So it seems like the thing maybe we thought was the secret sauce of Bitcoin and part of the secret sauce, this artificial scarcity and doing that in a token, was less important than the other element of the secret sauce, which was like, uh, community network participation, right? That's, I feel like, what you unlocked with S and X.

• 1:10:29Speaker 02

  Absolutely. And you know, we've seen it now play out multiple times subsequently. You know, things like YFI and YAM and you know, where people are doing something that the protocol wants and earning tokens from that. And it's incredibly powerful, you know, driver behavior.

• 1:10:50David Hoffman?

  Okay, so the high level roadmap so far during the Synthetix 2018 bear market is that, you know, the, the, the community is kind of spun up. It's pretty, it's pretty thin, like it's less than 300, but 300 Spartans regardless. And then the SIP process gets integrated, the community gets a voice. And then there is the inflation rewards that's built into that. So from, if you're on the inside, what you are seeing is that the team is starting to listen to the community and the community is starting to like grow a spine, grow a voice. And then also what the community wants does end up, actually end up getting built. And then not only that, but also you are able to get access upside, upside exposure

• 1:11:34David Hoffman?

  to the growth of Synthetix through the inflation rewards, meaning not, not only is the team executing to the will of the community, but also the community is getting engagement rewards, right? So you're able to stake SNX and get inflation rewards. And then we're also going to talk about the, the farming rewards of Uniswap and, and S, the ETH, S, ETH pair on Uniswap. But this is where we start to get this feedback loop where after these things happen, and especially with the inflation rewards, there starts to be the price increase of Synthetix, right? And that's where I think Synthetix first got on like a lot of people's radar when Synthetix first broke a dollar. And then I saw Dgen

• 1:12:18David Hoffman?

  Spartan on Twitter saying like, Synthetix is going to $6. And like my bear market pessimistic mentality is like, no, no way, dude. Six dollars, that's not happening. And you know, not too long ago, Synthetix was, the token was at $7.5 a couple of months, a couple of weeks ago. And so At this point, we're starting to see this feedback loop where the price goes up and then more community gets created because more people are fundamentally interested in number go up, right? And so number goes up, people go into the Discord, they get engaged with the community, they've accessed the SNX staking rewards, and then price goes up further, right? And to me, this is the story of the Synthetix bear market turning into a bull market.

• 1:13:03David Hoffman?

  And in my mind, Synthetix, the Synthetix platform, along with AVE and perhaps along with Chainlink 2, are the direct creators of this bull market at large, right? And perhaps even a little bit more credit to Synthetix, and maybe even you specifically, Kane, because you are the "father of modern agriculture," because Synthetix created the whole concept of yield farming, right? So can you talk about how the community was able to access further rewards, SNX-denominated rewards, both through staking but also through providing liquidity to Uniswap? And then maybe tie that into how that's linked into the farms that we see nowadays?

• 1:13:48Speaker 02

  Yeah, so all of the things that you described there are the elements that I think are necessary but not sufficient, right? Like, strong community, this inflationary reward, your feedback loop, etc. But I think it was still really critical that there was some belief that we're building something that was going to be useful, right? You know, if we hadn't have had this idea that we're building this derivatives platform, you know, after we pivoted away from the payment network, and you know, like, it's funny because we've now come back to the point where SUSD is becoming quite useful and people are using it, it's gaining traction.

• 1:14:33Speaker 02

  But, you know, we've thrown out the idea of transfer fees and transaction fees, etc., and now go into this exchange fee. But I think we needed to have that core belief that we're building a protocol. Was going to have utility, right? And you know, that that was really important to to kind of get people as they came into the community to kind of, you know, to engage. I think if there had been nothing there, except for these feedback loops, it would have it would have kind of petered out. But once we realized that, you know, we had this this kind of S and X, you know, we had this inflation that we could direct at anything.

• 1:15:12Speaker 02

  Right? So we could direct it at, you know, our own protocol, but we could actually direct it at other things that were somewhat ancillary to, you know, to the protocol that we also needed, like liquid on ramps. And and what was really interesting is, you know, we went through multiple iterations, different people proposing things. G was one of them. And you know, Arthur and I actually were on the other side, as as often happens, you know, I was on the dumb side of the table. And and, you know, we're like, oh, I don't know if it's a great idea, you know, it was still like, I still have a bit of Bitcoin maxi in me, right? Where I'm like, oh, I don't really like the idea of changing the monetary policy. I feel like we should be careful about that, etc. And, you know, it's taken a while to kind of beat that out of me, but I think the market finally has.

• 1:15:57Speaker 02

  But, you know, we we got to this point where we're like, we need a liquid on ramp. And we have UniSwap now. UniSwap is amazing. You know, we were one of the early projects that I think really saw the utility in UniSwap. And we said, okay, let's try it. You know, we finally got to a point where the community was comfortable with like, okay, let's take an ETH, S ETH pair, right? Where there's no impermanent loss, you know, let's let's direct some inflation at it. And, you know, we went from nothing to, you know, at one point, I think, the equivalent of like eighty five thousand ETH in UniSwap.

• 1:16:33Ryan Sean Adams?

  My god.

• 1:16:34Speaker 02

  Right? Which was incredible for UniSwap, incredible for us. People were looking at us going like, what is happening here? You know, what's like, how is this even, you know, this was pre the the total value locked, you know, crazy metrics that we're we're seeing these days. You know, the idea that you could lock up eighty five thousand ETH, you know, over the course of like a month was pretty insane and and no one predicted.

• 1:16:56Ryan Sean Adams?

  I was just personally, I was just surprised all this stuff worked. Like, it was like, wow, it's working.

• 1:17:04Speaker 02

  Yeah, yeah, absolutely, absolutely. It was, it was very, it was eye opening, I think, for a lot of people, you know, we'd had this belief that you could get behavior to kind of happen. Um, and, you know, previously it was only sort of happening internally in this, this kind of self referential feedback loop, as, as you sort of said. But all of a sudden, we're like, this is real. There's, you know, forty five thousand ETH in there and forty five thousand, uh, synthetic ETH. Like, this is a real thing. Like ETH is money. This is real. Like, people are putting real value into Uniswap and, you know, into this liquid on-ramp to get access to S and X and, and, you know, get access to this reward.

• 1:17:42Speaker 02

  Um, which I think, you know, that was really kind of the, the, uh, you know, the crossing the chasm moment where people were like, okay, this, this works.

• 1:17:52David Hoffman?

  And so to me, the last cherry on top for like this bull market story and how synthetics fits into, uh, into Ethereum is, but in, the integration with Uniswap is hugely important because everyone loves Uniswap, right? But you guys also started to leverage Chainlink, right? And Chainlink has its own extremely, uh, robust community as well. And you guys really, really needed a solution like Chainlink to exist in order to produce all your synthetic assets. And so now, like, the, uh, from what I'm guessing, I was, I was not in the Chainlink community in the, in the bear market, nor was I in the synthetics community in the bear market. But I'm going to go ahead and guess that when the integration between synthetics and Chainlink, you know, was announced and then was actually manifested,

• 1:18:36David Hoffman?

  that there was some sort of melding of the communities, right? And so not only are protocols on Ethereum composable, but their communities are also composable as well. So can you, was there any sort of, um, signal as a result of the integration between the, the protocols, between the two communities?

• 1:18:52Speaker 02

  I, I think so. And, and, you know, for the Chainlink community, uh, it was a very similar situation to, to the synthetics community, right? There was a lot of belief. They, you know, they believed in the value prop of what Chainlink was building. Uh, you know, they believed in, in the approach that was being taken and they, they believed in the utility that it would bring to the ecosystem, right? But Belief is, you know, only gets you so far, right? They needed it to actually manifest in, you know, someone putting their hand up and saying, yes, we want to consume this protocol. You know, this is something that we really see as beneficial. And I think Synthetix was probably the first, you know, protocol to really kind of go all in and say like, we're going, you know, we're doing chain link. This is it. We're going to, you know, deprecate our,

• 1:19:38Speaker 02

  external, you know, sorry, our internal oracle and move to this external oracle. And I think that that was, you know, huge validation for the community, right? The chain link community that like this thing that they'd been saying was going to happen all of a sudden. You know, this was the first example of it. And then, you know, you had a bunch of other, other, you know, projects then, you know, kind of come along. But I'm, I'm pretty confident that we were one of the first to sort of go out there and say, this is the right solution. We've vetted everything, you know, we're really happy with not just the, the solution as it stood then, but our confidence in Chainlink's ability to, you know, augment and improve the solution over time to get it to a point where we really, you know, thought it was going to be a, a long-term solution for, for Synthetix.

• 1:20:21David Hoffman?

  So, okay, so now here's where we are. All right, so in 2020, yield farming is, is now a thing, thanks to the creation of agriculture. So, thank you, Kane. We, the Synthetix community is, is a community that, you know, other protocols would die for. The Synthetix protocol is also integrated into other protocols like Chainlink, like Uniswap. And then, like, and, and more, maybe more passively into protocols like Yam and Sushi. And so it's getting its own integration and it's kind of organically. And, and the, the SIP process is alive and well and, and things are good and from, at least from my perspective of Synthetix. So where are we going next, Kane? What, what's next for Synthetix? What's next on the roadmap?

• 1:21:03Speaker 02

  So, you know, there's, there's still kind of three broad pillars, right? That, that, you know, are not quite there. You know, we're, we're seeing decent volume, decent exchange volume, but you know, it can, it can grow much further, right? You know, we've seen.

• 1:21:22Speaker 02

  Uniswap curve, you know, a lot of these AMMs generating incredible volumes, you know, volumes that are outside what I think a lot of us believe could happen this year. Right. And so I think that, you know, that's something that we just need to nail. And we're working on a number of things to make that happen. But then we've also got this other issue of, you know, supply constraints. Right. So we need to get enough supply out there, which is, uh, which is ensuring that, you know, we've got a collateral, um, that, you know, it's robust and, and people can, you know, lock even issue, uh, S U S D. And then the final component is, you know, gas costs and latency and, you know, throughput. Like we need to get onto, uh, L two. We need a scalability solution.

• 1:22:05Speaker 02

  And so we're working with the optimism team, uh, and, you know, that's, that's moving along really well. And I think we're, we're kind of getting to a point where, um, you know, that's, that's going to be something that, uh, is, is going to be the, the next kind of big phase shift for the, the project. And, and, you know, get us to be able to scale up to, you know, tens of thousands of years.

• 1:22:27Ryan Sean Adams?

  Okay. So we've got three things. We've got volume, supply and gas costs. Can we talk about each of those? So on the volume side of things, you guys today just announced a Synthetix volume program. Is that important? Can you tell us about that, Kim?

• 1:22:40Speaker 02

  It, it is. And, you know, the reason, the reason why it's important and we wanted to kind of help to bootstrap, uh, this process is that, you know, Synthetix is a protocol. And at the moment, you know, it's fully vertically integrated and, you know, we have to build the protocol itself. You know, we have to, uh, build, you know, all of the components all the way through to the DAP layer. Right. But eventually we want to get to a point where, you know, we believe that there are people out there who can build much better DAPs, um, better wallets, better integrations, and can just consume the protocol, uh, and abstract away all the complexity for their users. Right. And so this is our way of kind of starting that process and bootstrapping it by essentially,

• 1:23:21Speaker 02

  you know, funding, uh, this, this rebate for people who directly integrate Synthetix. Because we believe that, you know, it'll be a net positive for their users, uh, over time, but we need to kind of kickstart that. And so, you know, this is a big deal. It's something we've been planning for probably about six months. And, you know, it's something that we think, uh, we can get, you know, maybe 10 or 15 different integrators to, to, you know, jump onto in the next couple of months during the trial.

• 1:23:46Ryan Sean Adams?

  Alright, so that sounds huge. And on the supply question, I guess, you mentioned ETH collateral. So last I had looked at that, there was kind of an initial amount, a capped amount of ETH collateral that was going to be let in the protocol, maybe already has been. Can you give us an update on the status of ETH collateral? So there's some in there now, is that correct? And then how are you looking to expand that?

• 1:24:13Speaker 02

  There is. The limiting factor, though, is less the supply cap right now and more the fact that you can only borrow synthetic ETH against your ETH, right? So what it effectively means is that someone who wants to lock ETH and be able to do yield farming or trade or whatever, kind of has to short ETH, which is obviously not ideal. So the next phase, which is hopefully three or four weeks away, is the ability, like you can in Maker, to lock ETH and borrow SUSD the same way that you can lock ETH and borrow DAI. And so that will significantly expand the supply of SUSD.

• 1:24:52Ryan Sean Adams?

  And will there be a cap on that, the amount of ETH?

• 1:24:54Speaker 02

  There will be initially, yeah. Probably be about 5,000 ETH, I think initially. But like Maker will increase the debt ceiling and allow that to kind of grow over time as we get confidence that liquidations are working and everything's working smoothly.

• 1:25:11Ryan Sean Adams?

  Okay, so that's going to be for SUSD, right? So SUSD is almost, would you say it's like a DAI alternative? Like, one thing that I think the bankless space has been really clamoring for is a very bankless stablecoin, the most decentralized stablecoins. There's tons of stablecoins in the space right now. Very few of them are decentralized. Maybe DAI can kind of hold that title, although it's starting to incorporate some more centralized assets as well. What's the vision for SUSD so far? What's kind of governance thinking? Is it going to be a more decentralized alternative?

• 1:25:45Speaker 02

  Potentially, but you know, I think that what people are demanding in the market is a kind of low governance, low complexity ETH-backed stablecoin. And I think we will see that. I think people will will build that. The the big question, right, is not, you know, will they build it? But can you actually bootstrap it? Right? And so, you know, the thing that that I think MioMaker did incredibly well was, you know, to to kind of bootstrap this initial liquidity, right? And I've said this on Twitter, that it's incredibly hard to do that. I think people, you know, massively underestimate the amount of effort and and, you know, belief that was required to kind of bootstrap the the initial DIA supply. And so, you know, I I do think

• 1:26:29Speaker 02

  that we, you know, we will be an alternative stablecoin, but there is a lot of complexity in the synthetics ecosystem that, you know, maybe won't satisfy everyone. They might want something a little a little simpler and and less complex.

• 1:26:45Ryan Sean Adams?

  So what is the incentive for someone to deposit ETH to mint some SUSD then?

• 1:26:51Speaker 02

  Well, arbitrage profit for one, you know, so if we're trading above the peg, being able to, you know, sell and and capture that premium is the first thing. The second thing is, you know, SUSD is used in a lot of yield farming systems. You know, you can go and deposit it into Curve, to farm Curve, Balancer, et cetera. And and oftentimes, the yield that's paid on SUSD is much higher than on ETH. So it kind of makes sense to lock your ETH up, get SUSD and use that rather than just depositing your ETH directly.

• 1:27:26Ryan Sean Adams?

  But access to ETH overall as collateral, just on the supply topic some more, you know, we've written pieces on Bankless about this concept of economic bandwidth, right? Where, you know, the the chain Ethereum in particular needs to have assets that are highly valuable and highly liquid in order to provide bandwidth for the entire DeFi financial system that's built on top. The the thesis in Bankless is that, like, synthetics has A limited amount of economic bandwidth, right, right now? So let's say the market cap of S and X is 500 million. That means you can create like, you know, some proportion of 500 million in synthetics on top.

• 1:28:11Ryan Sean Adams?

  But once you start introducing other economic bandwidth sources, like potentially ETH, then you can start to create a lot more supply. Is that, does that theory resonate with you? Is that kind of a, an important aspect when you think about supply? And when you think about collateral, just collecting all of this, all of these economic bandwidth sources from Ethereum?

• 1:28:31Speaker 02

  It is, you know, one thing though, that I think is really critical that, you know, we've, we've kind of, as a community, sort of, you know, leaned into this idea that we only want to use permissionless collateral, right? We don't want to go down the path of using, you know, centralized stable points, et cetera, as collateral. So, you know, being able to expand the, the supply of S U S D on, you know, on the back of ETH and maybe potentially, you know, with some tokenized BTC representations that are permissionless, which, you know, we still need to kind of let them play out a little bit, I think, before we'll get comfortable enough to, to use that. But, you know, the, the ability to expand the S U S D supply,

• 1:29:15Speaker 02

  which is now, you know, sitting at around 100 million, which is kind of crazy, right? Like, I'm sure you guys remember when DAI hit 100 million, it was this huge deal, right? And, you know, S U S D just quietly hit 100 million, you know, a month or so ago, and it was.

• 1:29:30Ryan Sean Adams?

  Wow, I didn't even know that.

• 1:29:31Speaker 02

  Yeah, it was just like.

• 1:29:32Ryan Sean Adams?

  I was not tracking.

• 1:29:33Speaker 02

  Yeah, but it's like, we didn't even notice it, right? Like, it was just like, we're like, we're like, oh, wow, yeah, it's 100 million, right? Like, it's just, you know, the way that the block is going. But the ability to expand S U S D out to like 500 million or a billion just requires ETH, right? Like, that's, it's just critical to the functioning of the system. So it's always been something that we've, we've considered. And it was just about trying to find the right way to do it without undermining, and this is really critical, without undermining the utility of S and X within the system. You know, S and X is still the backstop of the system. It's still the, the thing that, you know, accrues all the fees. So, you know, there needs to be the right incentives for people to, to use ETH as collateral, but not undermine the incentives to use S and X.

• 1:30:18David Hoffman?

  And a quick definition for our listeners. So when you say permissioned assets, you specifically mentioned ETH and you mentioned possibly some future version of a tokenized Bitcoin. But apart from that, are there other permissioned assets on Ethereum? And like, why isn't something like USDC, the stablecoin, not a permissionless asset?

• 1:30:39Speaker 02

  I mean, you've got essentially a custodian that's managing the funds, right? That's managing the fiat that's in a bank account somewhere. And then, you know, issuing essentially an IOU against it, right? So, you know, that's, that's a very different type of asset to something like ETH, right? So, you know, I think maybe we could consider, you know, like Maker using tokens on Ethereum. But even that is, you know, is, it brings its own issues, right? So I think for the time being, you know, it will be ETH and then maybe adding, you know, some, some tokenized BTC.

• 1:31:20Speaker 02

  But to get the, the next step of adding ERC20 tokens as collateral, I think would be a, a stretch for the community, but we'll see.

• 1:31:29David Hoffman?

  So when you say that you'll be able to mint SUSD via your ETH, we, listeners, and correct me if I'm wrong, but listeners should also just be hearing that because you can just swap SUSD for any other synthetic asset, that you'll be able to maximally leverage your Ether deposits to create any sort of synthetic asset. It just starts with SUSD first, right? SUSD is like the default. It's like the water. And it's the, it's the substrate for going into any other synthetic asset. So, you know, maybe SUSD isn't really interesting to people because, you know, dollars aren't interesting to us because we're in crypto. But it's just like, it's the substrate token to get into every other synthetic asset, right? That's, this is all true?

• 1:32:13Speaker 02

  Absolutely. And, you know, you can go SUSD into SD5, for example, which is, you know, a basket of all the different DeFi tokens on Ethereum. So, you know, there's, there's a number that you can go into gold, for example, right? So if you want to, you know, lock your ETH and get some exposure to gold. But I think for for most people who just want this price exposure, probably the safest thing is, you know, take some of your stable coins, for example, and just buy S U S D and then convert it rather than necessarily locking, you know, ETH and buying gold. But, you know, we'll see. It's going to be interesting to see how that plays out and how much demand there is for for people to add supply and just participate that way, or if they actually genuinely want to lock ETH and start trading.

• 1:32:57Ryan Sean Adams?

  Yeah, as we said before, I mean, I think ETH's economic bandwidth, trustless economic bandwidth, or permissionless is the word you used, is definitely a bull case and a, you know, tailwind for ETH price. But we will see how that pans out and look forward to you guys doing more with it and adding more with it. So we talked volume, we talked supply. The third area, which I think is really interesting, is gas cost optimization, right? So we've been living in a gas price are down as we talk, as we're recording this. But, you know, I mean, it could be back up to 400 next week. Who knows? In one of our conversations, Kane, you had talked about the the work that you're doing on rollups with O V M and with the

• 1:33:40Ryan Sean Adams?

  optimism team is like we had, we talked about, well, kind of the main chain is like Manhattan, right? And this O V M solution, rollup solution as a layer two chain that you're building is is almost like a Brooklyn, right? Where it's going to have more space, the real estate's going to be a little bit cheaper, and it's going to have more room for low cost transactions, essentially. So I'm curious to hear your progress on on that. And how are you planning to make Brooklyn a place that other protocols want to live and users want to come to?

• 1:34:16Speaker 02

  So funnily enough, I think we've gone a little bit over time, which is totally fine. But I'm was supposed to be on a call with the optimism team, which I told them a few minutes ago that I wouldn't be able to make.

• 1:34:31Ryan Sean Adams?

  Wow, that's a little bit funny.

• 1:34:33Speaker 02

  Yeah, yeah, I know. No, no, that's okay. It's totally fine. Yeah. We'll message them and apologize. Yeah, we have a weekly catch up that we do that was like right after this, but you know, obviously we're having a good time here. So I just told them I'll catch up with them later. But you know, Tell them you'll show them on the pod. Exactly. Right. So I typically do. And so, so, you know, I think the heavy lifting of this is obviously on the optimism team, right? You know, they're the ones who are building the solution. You know, we are, we are kind of advocates for that solution and that specific, you know, chain for a couple of reasons.

• 1:35:14Speaker 02

  One, you know, they're building something that is going to be sort of, you know, optimized for getting people onto it as easily as possible. So, you know, with the most minimal changes to contracts and, you know, ideally they'll just be able to deploy their existing main contract straight onto, onto L two. And that's important for composability because if we want, you know, all of the fun that we're having now to continue, you know, in an L two environment, we need those contracts to all be running on the same, you know, optimistic roll up. And so, you know, they're, they're working with a number of teams, but you know, one of my, you know, main, main jobs at the moment is like going out and talking to other projects and kind of, you know,

• 1:35:57Speaker 02

  advocating for them coming along and, and, you know, participating in this, this optimistic roll up chain that, you know, the, the OVM supports. And so, you know, that's, that's something that is coming really soon. And I think it's going to be a huge bonus, particularly for smaller SNX takers. So, you know, we've got this very problematic issue right now, which is that gas costs are so high. And, you know, the, the transaction complexity on synthetics is so high that people are priced out. You know, they actually can't even participate unless they've got, you know, a couple of thousand SNX, for example, you know, which is maybe $10,000.

• 1:36:37Speaker 02

  So there's a whole range of people that, you know, are just unable to participate in, in the system right now, which is really problematic. So this, this first phase of the, the OVM migration is going to directly address that and, and really be targeting the people who've been kind of left out. You know, for the last month or so with these high gas prices and, and trying to, you know, Make it a little bit easier for them to participate and reduce some of the costs that they've been experiencing.

• 1:37:08Ryan Sean Adams?

  We were talking with Stani in the previous episode and he said that if somebody builds a great Brooklyn, you know, Ave will be like first to try to get in there. Have you been coordinating with any of the other DeFi protocols toward this or is it mainly a synthetics initiative?

• 1:37:27Speaker 02

  No, no, I've definitely been, you know, I speak to Stani a couple of times a week. You know, so I've, I've been advocating for this, you know, with most of the DeFi projects out there that, you know, that we've talked to. And obviously, you know, the optimism team are working on that as well. But it's one thing for, you know, the, the project itself to say, hey, come and, you know, play in this, you know, this place that we built. It's another thing for, you know, a project to say, hey, like we've done our DD, we're really comfortable. This is the right approach and we're going all in on it. So I think that that that carries a lot of weight. And so I'm, I'm very hopeful that, you know, we'll be able to have some of the, the critical money Legos, you know, on this optimistic

• 1:38:10Speaker 02

  roll up shard very, very quickly.

• 1:38:13Ryan Sean Adams?

  Very cool. Very quickly. Any timeline on that? Just curious.

• 1:38:18Speaker 02

  I mean, look, you know, the optimism team have said mainnet by the end of the year. I think we'll have some interesting progress even before that, you know, specific synthetics progress to, to, you know, as I said, alleviate some of the, the gas price issues. So, you know, it's going to be a phased approach, but we're working really hard. We're trying to get this done ASAP to, to get, you know, a kind of pseudo mainnet stood up to, to kind of help with the, the gas costs for stakers.

• 1:38:46Ryan Sean Adams?

  Well, well, well, that sounds fantastic. I'm really looking forward to that. Lower gas prices. One other topic, I guess on roadmap is how the whole synthetic space is shaping up. So there's this idea that a decentralized BitMEX might, might come about and synthetics is certainly part of that story. But there are some other protocols as well that have maybe some different trade offs. So of course there's Maker. Which is, you know, produces dye, which is a synthetic in itself. But then more recently, there are protocols like the UMA protocol. And there's of course DYDX that takes a more order book based approach. And then there's newer protocols like the perpetual protocol. Just curious, high level, what are synthetics' advantages?

• 1:39:31Ryan Sean Adams?

  Or maybe some of the trade offs relative to those other initiatives?

• 1:39:37Speaker 02

  So I think the the main trade off with something like UMA is that, you know, we don't have the ability to issue the exotic assets that they do, right? You know, because they have this kind of priceless oracle approach. They don't rely on a liquid market externally to pull a price feed in from. So, you know, they can do, they can do all kinds of weird exotic instruments, which I think is really cool. But the flip side of that is that, you know, each of those instruments or your assets needs to bootstrap its own liquidity. You know, as we've kind of seen with their early experimentation, that can be somewhat challenging sometimes.

• 1:40:20Speaker 02

  So, you know, getting liquidity in this environment right now is really, really hard, right? Like, you know, whatever liquidity premium you've been able to kind of accrue is a huge advantage. And, you know, obviously we've seen things like, you know, the vampire mining from Sushi to Uniswap, which is, which is a whole other topic that, you know, we could spend a long time talking about. But, you know, liquidity modes are still, I think, a big deal. And so, you know, for us, the fact that we've got, you know, a hundred million dollars worth of SUSD and I think, you know, a hundred and thirty million in cents is a big advantage that we've got.

• 1:41:01Ryan Sean Adams?

  Do you think like designs like DYDX also suffer from that? Like lack of, or the liquidity challenge as well? But essentially, when you're doing something in synthetics, you already have this nice pool of collateral. You kind of bet against the house, right? And that's, that can be advantage for liquidity.

• 1:41:18Speaker 02

  Absolutely, you know, it definitely creates, it creates, you know, a lot of, a lot of advantages. And you're one of the things that it will enable, which we've talked about a little bit is this idea of tokenized bridges between pools like Curve, right? So you know Curve is this AMM that is really amazing at allowing you to convert different assets that track the same price. So you know, USDC, USDT, DAI, SUSD, et cetera. And then you know, tokenized Bitcoin and you know, tokenized gold. But it requires that, you know, all of those assets track the same price within the same pool and it's hard to bridge the liquidity across.

• 1:41:59Speaker 02

  But what Synthetix is potentially going to be able to do is be the bridge between two different Curve pools. So you can imagine a Curve pool that had, you know, ETH and SE, and then a Curve pool that had, you know, SBTC, TBTC, renBTC and wrapped BTC. You'd be able to go ETH into wrapped BTC via this tokenized bridge in these Curve pools. And you know, I'm very confident in the next couple of months, we'll see, you know, ETH to wrap BTC transactions in the, you know, millions of dollars on chain.

• 1:42:31David Hoffman?

  Kane, I want to turn the conversation to regulatory compliance because, you know, we kind of, there's always kind of this, this monster in the back of crypto where with, which is like the nation state, right? This thing that is inherently, generally it has an adversarial stance to probably some of the shenanigans that's going on in this space. And so how does, how do you guys as, you know, the centralized Synthetix team think about compliance? And like, what would happen if some regulatory three-letter agency came in and said like, all right, you guys need to implement like KYC? If that happened, what, what would be the next steps for the Synthetix team?

• 1:43:09Speaker 02

  So I think this is, this is kind of a critical point and maybe, you know, the, the other pillar that, that we didn't talk about amongst those three, which is just generally decentralization and decentralized governance and getting to a point where, you know, the protocol is sufficiently decentralized that a regulator would look at it. And say, well, this is something that, you know, we can't actually capture. We can't shut down. Um, you know, it's similar to, to, you know, where, uh, I think, you know, the, the Ethereum, uh, protocol got to. Right. And, you know, where the SEC said, well, it's sufficiently decentralized that, you know, we don't believe it's a security. We don't believe that it's within, you know, our kind of, uh, purview to, to regulate this thing. Uh, maybe it's someone else's, but, you know, we're not going to step in.

• 1:43:53Speaker 02

  And I think that that was, uh, you know, a, a very calculated decision on the basis that you couldn't really regulate Ethereum. Right. It was genuinely, uh, sufficiently decentralized. You know, you couldn't just go and round up Vitalik and ask him to, you know, turn off the master node, right? That wasn't a thing. Um, and so, you know, I think that, I think that, uh, we are getting to a point now where, for example, you know, if you said to me, shut it down, I actually can't. You know, like, I don't have any power that would allow me to, uh, to shut down the protocol. You know, the articles are, are now decentralized. Um, you know, governance is decentralized. Uh, we've got three different DAOs that control protocol upgrades and distribution of funds, et cetera.

• 1:44:38Speaker 02

  Um, and, you know, there's no single party within, uh, within the protocol that has, uh, a level of control that could actually stop it. And I think that that's something that's only really happened in the last, you know, three months where we've gone to that point.

• 1:44:50David Hoffman?

  So I want to drive this home for listeners because I think there's a lot of people that haven't, uh, totally appreciated how bullish, specifically synthetics i- is for synthetics to be completely decentralized. And, and how bullish it is for the rest of DeFi, right? Because coming, coming out of Realty and what is, what is going to be coming out of Realty is the Realty asset, which is, uh, an aggregate token that has the value of all of the real estate of the Realty platform, like underlying the asset, including the rental income, right? It's, it's, it's all of Realty tokenized into a single token. And that token is unfortunately going to be whitelisted because that's how security tokens work.

• 1:45:29David Hoffman?

  Like Realty is an American company, uh, and therefore it, it answers to the SEC and, and no one in Realty has any interest in, you know, going against the, the regulation. of the SEC. However, what can happen when this asset is created is that synthetics can just make a synthetic realty asset, which is then therefore completely permissionless and then has all the robustness of the decentralization of synthetics. Right? And so any sort of token that comes to Ethereum that is KYC'd and permissioned can have its decentralized permissionless counterpart on synthetics. Kane, have you thought about this, this potential world?

• 1:46:08Speaker 02

  We have, and, and you know, obviously there's lots of discussions around, uh, you know, which assets we should support and, you know, ensuring that there's enough liquidity for them, et cetera. Um, and, and so I think, you know, the only constraint for us is really liquidity in the, the sort of primary market that the asset trades, right? Um, but you know, it's interesting to think about, uh, assets that are also on Ethereum, for which, you know, we can, we can kind of directly pull a price feed, right? That there's already an existing price feed. Um, and so something like, uh, you know, realty, I think is a, a good candidate to create like a permissionless version, a little bit how, you know, people have made like wrapped nexus mutual to avoid the, the KYC and, and allow it to be sort of, you know, openly tradable.

• 1:46:52Speaker 02

  So I think that that's something that is going to emerge over time where, you know, you see these, uh, permissionless variants of, uh, of security tokens and various things. But then, you know, the same thing goes for like synthetic Tesla, right? You know, synthetic Tesla share, uh, that, you know, is, is totally open and permissionless and, you know, can be purchased by anyone, anywhere in the world, as long as they've got, you know, an, an internet connection.

• 1:47:17Ryan Sean Adams?

  So we, we talked about, um, playbooks for capital formation really quick, uh, Kane, as we, as we start to wrap up here. You mentioned the overton window has expanded, which means there's basically more possibilities for crypto native, DeFi native founders to essentially raise capital. And you put out this excellent tweet thread that we can link to in the show notes that sort of talks about some of those things. Are, are you starting to see that manifest now? Or like, what advice, I guess, would you give a crypto native DeFi protocol founder like yourself on just capital formation?

• 1:47:52Speaker 02

  Yeah, I, you know, one of the nice things about getting, you know, out of crypto winter and maybe crypto spring or, you know, whatever, maybe started to kind of head into a bull market is that the, the ability to raise capital and the power kind of shifts into the, back into the hands of founders, right? You know, we've gone from a situation where, you know, six months ago, 12 months ago, it was almost impossible to raise capital to a situation now where, you know, founders and project teams can dictate, you know, terms, which is good. Um, it's good in the sense that, you know, it allows for people to do the things they want to do rather than being forced into, you know, specific things.

• 1:48:36Speaker 02

  And so I think the ability to, you know, raise money directly into a DAO, uh, which was probably going to be almost impossible, you know, six months ago is now very possible. We're seeing a lot of that. And so, you know, the ability to, to avoid the need for a foundation and, you know, having all of this infrastructure around a project is, is good. The flip side of that is, it means, you know, less sort of protections for, uh, you know, investors and participants in protocols, which is going to lead to, you know, losses and scams and things like that. Uh, but I think, you know, it's a, it's a double edged sword. And so, you know, you'll see, uh, protocols that will do the right thing and, and projects that will do the right thing and be far, far better for it, for being able to kind of dictate terms and, and launch in the way that they want to.

• 1:49:21Speaker 02

  Um, and then, you know, you'll see some, some losses and inefficiency on the other side of it.

• 1:49:27Ryan Sean Adams?

  All right. So, uh, a crypto native founders, going crypto native in capital formation is, uh, sounds like that's the way to go. All right. So just cause it's fun, just cause we're in a bull market, just a final question for you, Kane. Price predictions, my friend. So ETH price, end of this year, so December 2020, what do you say? And then in three years, what do you say? And how about the same for total locked value in DeFi?

• 1:49:56Speaker 02

  So I think that there's a very decent chance that E will be back over 1,000 by the end of the year, you know, depending on the macro conditions that we're in. In three years' time, hard to say, you know, that's probably too far out for me to even, you know, try and make a prediction, just because of the way crypto cycles work. But, you know, I certainly hope that we'll get to a point where, you know, if E 2.0 is launched, the price will be, you know, far higher than it is today in three years. And then, you know, total value locked, it wouldn't surprise me at all, you know, over

• 1:50:37Speaker 02

  the next 12 months to see, you know, 50 billion in total value locked or more.

• 1:50:42Ryan Sean Adams?

  There you go. That is bullish. And Kane, it's been a pleasure. When we talked about particularly the Synthetix roadmap, the future of volume, supply, gas costs, and increasing decentralization, that's a very bullish roadmap, sir. And the Bankless Nation is looking to you guys and the Synthetix governance to pull it off. Very excited about all of that. Kane, thanks for joining us today.

• 1:51:07Speaker 02

  Thanks. Yeah, it was a lot of fun. Really appreciate it.

• 1:51:10Ryan Sean Adams?

  Awesome. All right, Bankless Nation, some action items for you guys. We've included a link to the new volume incentive program that we mentioned on the show, also a link to Kane's thread that we mentioned. You should also get involved in Synthetix governance. There's a link to that as well. Getting involved in these protocols is the way you learn about them. That's the Bankless way for sure. We also have included a tactic from Bankless on how to use Synthetix. So if you're just warming up to it, if it's just your first time, you can check that out as well. Finally, we are looking for your five-star reviews on Apple iTunes. David, we're at 154. So we want to get to 200. We want to get to 300. We want to get to 500. We want a bull run.

• 1:51:55David Hoffman?

  We need to break Ether price, right?

• 1:51:57Ryan Sean Adams?

  Yes.

• 1:51:58David Hoffman?

  This is how it works, right? We are going to get the Bankless podcast to the top of the iTunes chart as this bull Market continues and we need your help to do so, right? We are now in the top 100 of the iTunes investing and finance categories for podcasts. And I totally think that in one, two years, we're going to be in the top 10. But we need your help to get there. So if you could go to wherever you listen to your podcasts and give us those five star reviews. So we can spread the bankless nation across the world. We would really appreciate it.

• 1:52:30Ryan Sean Adams?

  All right, let's do it, guys. Risks and disclaimers. ETH is risky. So is S and X. Crypto is risky in general. So is DeFi. You could lose what you put in. So be careful out there, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.