SotN #32: Does DeFi Fix This? Cameron & Tyler Winklevoss (GME, Gamestop, Robinhood, Melvin Capital)

🚀 SUBSCRIBE TO NEWSLETTER: http://bankless.substack.com/​ http://bankless.substack.com/%E2%80%8B ✊ STARTING GUIDE BANKLESS: https://bit.ly/37Q17uI​ https://bit.ly/37Q17uI%E2%80%8B 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/​ 👕 BUY BANKLESS TEE: https://merch.banklesshq.com/​ https://merch.banklesshq.com/%E2%80%8B ----- 💪BECOME A BANKLESS PREMIUM MEMBER: http://bankless.cc/membership​ http://bankless.cc/membership%E2%80%8B ----- GO BANKLESS WITH THESE SPONSOR TOOLS: ⭐️ AAVE - BORROW OR LEND YOUR ASSETS https://bankless.cc/aave​ https://bankless.cc/aave%E2%80%8B 🚀 GEMINI - MOST TRUSTED EXCHANGE AND ONRAMP https://bankless.cc/go-gemini​ https://bankless.cc/go-gemini%E2%80%8B 💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith​ https://bankless.cc/monolith%E2%80%8B 📈 KWENTA - DERIVATIVES TRADING WITH INFINITE LIQUIDITY https://bankless.cc/kwenta​ https://bankless.cc/kwenta%E2%80%8B ------ SotN32: Does DeFi Fix This? Cameron & Tyler Winklevoss ($GME Gamestop Short-Squeeze, Robinhood, Melvin Capital) We bring Tyler & Cameron Winklevoss, founders of the Gemini Exchange and crypto-visionaries, to the Bankless State of the Nation. We do a deep dive into the market craze of the Gamestop ($GME) Short-Squeeze, r/Wallstreetbets, and what it means for the DeFi space. Topics Covered: -r/WallStreetBets -Robinhood Retail vs. Institutional Elite -Media & The Establishment -Is Traditional Finance Broken? -DeFi's Big Moment -Gemini Updates Cameron & Tyler Winklevoss had a heated appearance on CNBC last week to discuss the events of the Gamestop Short-Squeeze in the context of populism, the inequity of the current financial establishment, and cryptocurrency. Their argument centers on the relationship between censorship and centralization –problems that don't exist in the crypto landscape. The $GME craze has been the epicenter of a growing protest against the institutional elite – this protest inherently calls for decentralization and distributed power. DeFi fixes this. Brokerages like Robinhood having the power to limit trading based on a phone call is a war cry to adopt permissionless transacting. Cameron describes how this is an example of the people becoming disillusioned to the monopoly of modern money. The media establishment has vastly underestimated and vilified these "internet amateurs." The Winklevi discuss how a money-making opportunity turned into a movement demanding institutional change, flaming the fires of broken trust after events like the '08 collapse. Public forums like Twitter and Reddit have become powerful tools to organize the masses, and the sentiments seen here reflect cryptocurrency's value propositions. The big question remaining is how these events and arguments can serve as a rallying point for DeFi adoption. Cameron & Tyler are optimistic about DeFi's solutions to increasingly relevant and urgent problems in our current system. ------ Relevant Links: Tyler Winklevoss on Twitter https://twitter.com/tyler​ https://twitter.com/tyler%E2%80%8B Cameron Winklevoss on Twitter https://twitter.com/cameron​ https://twitter.com/cameron%E2%80%8B Gemini Exchange https://bankless.cc/go-gemini​ https://bankless.cc/go-gemini%E2%80%8B ------ Don't stop at the video! Subscribe to the Bankless newsletter program http://bankless.substack.com/​ http://bankless.substack.com/%E2%80%8B Visit the official Bankless website http://banklesshq.com/​ http://banklesshq.com/%E2%80%8B Follow Bankless on Twitter https://twitter.com/BanklessHQ​ https://twitter.com/BanklessHQ%E2%80%8B Follow Ryan on Twitter https://twitter.com/ryansadams​ https://twitter.com/ryansadams%E2%80%8B Follow David on Twitter https://twitter.com/TrustlessState​ https://twitter.com/TrustlessState%E2%80%8B ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case.

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

• 0:07Ryan Sean Adams?

  Hey guys, welcome to State of the Nation. David, we are at episode number 32. How are you doing today, David?

• 0:13David Hoffman?

  Absolutely fantastic. So much is happening. Every single week, it seems like it's just a new week of even more stuff. And last week was no exception. And it looks like this week it's going to be even more crazy.

• 0:23Ryan Sean Adams?

  David, we just had the Winklevoss twins on, and we are about to get to that conversation with them. They were on CNBC last week. I had to actually get a free trial of CNBC to see that full interview, but it was straight fire. They were dropping crypto truth bombs on the CNBC reporters. And I'm not sure if they knew what to make of them. This is going to be like the, this is kind of the crypto native sequel to that interview. We're talking about, of course, GameStop and everything that happened as a result of the GameStop news and the price action.

• 0:59David Hoffman?

  Yeah, GameStop is of course one part story about a, it's a financial story, but it really, it's much more than that. It's a, it's a cultural story as well. It's a populist story. There's a stories, there's topics of censorship and deplatforming to be had. The legacy markets are showing to be disenfranchising to people, the people, the masses, whereas, you know, DeFi and crypto is supposed to be this inside out, every equal playing fields platform. And I think people are coming to terms with that. And, and I think what I see Cameron and Tyler trying to do is trying to promote that. We see Elon Musk coming to and adding Bitcoin into his bio. Everyone is, you know, rumoring about what is Elon Musk up to. There's really so many different stories to be told here. So we got the Winklevoss on to help

• 1:44David Hoffman?

  us tell those stories because, you know, they have one foot in the legacy world and one foot in crypto. And they do a both a great job just being on platforms like CNBC, and then also like Bankless.

• 1:55Ryan Sean Adams?

  Yeah, absolutely. And a quick disclaimer, Gemini is a sponsor of the show. And of course, the Winklevoss twins co-founded Gemini. That is not the reason we had them on the show. We brought them on the show because they are dropping straight fire about this GameStop issue. If this is your first day of the nation, we do it every Tuesday. Generally, it is streamed live at about 2 o'clock Eastern on Tuesdays. It comes out on the podcast the next day. We've got some other things going on in the Bankless Nation as well. A Jeremy Alair podcast, he of course, is the founder of Circle, and they are behind the USDC Stablecoin. Really interesting conversation there. And then we had Brian, and then we had Brent Johnson,

• 2:36Ryan Sean Adams?

  talk about the crypto milkshake theory, the dollar milkshake theory, rather, and then we ask his thoughts on crypto. That's coming up next week. So lots of hot content in store for you. But David, we want to get to the interview fast today. But before we do, I want to ask you the question I always ask you at the front of these episodes. What is the state of the nation this week, my friend?

• 2:57David Hoffman?

  The state of the nation is assembling. We are assembling.

• 3:01Ryan Sean Adams?

  Okay.

• 3:02David Hoffman?

  So here's how I got this to this one. We have, first off, the Wall Street Bets subreddit, which is like the focal point of this entire story, grew by like, you know, 6x or 10x or something in size, like people just flocked into that, into that subreddit. Then, then we have, you know, plenty of people talking about how this, this is a bull case for specifically Ethereum, specifically DeFi. We have Soulja Boy coming in and minting NFTs. We have Elon talking even more about Bitcoin, talking, putting Bitcoin into his bio. It really seems to be that it's very wide, diverse set parts of the world are all coming together to like, kind of focus in on crypto. I don't think the Wall Street Bets subreddit really is kind

• 3:45David Hoffman?

  of privy to the crypto conversation so early. They're still focused on shorting or buying GME to the moon. But I think once all the dust settles, people are going to really understand that, like, the reason why there's censorship, the reason why there's, you know, discrepancies between how retail and hedge funds are treated as financial players in markets, is because that these markets are inherently unfair and unbiased. And the only way to get out and from under the, the influence and oppression of these poorly structured markets is through DeFi. And I think that these people are all assembling under this DeFi banner.

• 4:22Ryan Sean Adams?

  Well, assembling is interesting where it reminds me of like that scene at the end of Endgame where it's like Thanos and then it starts with just like Captain America and then suddenly the other Marvel superheroes beam in, you see Black Panther and Spider-Man and all of the rest. And it's like the established traditional financial system is kind of like Thanos and it's this diverse group from Reddit online communities to retail, even politicians are joining the fray against kind of what's going on in the traditional financial system and the perceived unfairness that is happening. So David, that is definitely the topic for today's State of the Nation and we're going to get right into that with Cameron and Tyler

• 5:06Ryan Sean Adams?

  Winklevoss in just a minute. But before we do, we want to tell you about our fantastic sponsors who made this episode possible.

• 5:15David Hoffman?

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• 5:58David Hoffman?

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• 6:33David Hoffman?

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• 7:51David Hoffman?

  All right, Bankless Nation, welcome to another State of the Nation. We have Tyler and Cameron Winklevoss here. They are the founders of Gemini Exchange. You know them as crypto advocates. They are crypto visionaries for sure. They were also involved in one of those social network projects back in the day, but that is way less important than what we're talking about today, which is crypto. Cameron, Tyler, welcome back to Bankless, guys.

• 8:16Speaker 02

  Thanks for having us. Yeah, thank you, guys.

• 8:19David Hoffman?

  Well, the timing is, I think, particularly appropriate because I feel like the conversation that we're about to have has just hit Main Street in a way that it never has. I just watched the interview that you guys did with CNBC last week. It was like I had to sign up for the free trial because they pay well. That I'm going to have to cancel that later, but I was laughing the entire time.

• 8:42Ryan Sean Adams?

  Because you guys were just spitting fire. I don't think that the interviewers knew exactly what to do with it as you were pushing back against this establishment narrative. And they kept focusing on the game stock, uh, stock itself, the game stop, uh, stock itself. But is this more than about GameStop share price? What is this whole thing really about?

• 9:07Speaker 02

  Yeah, I think it's so much more than just a stock. I really think it's ultimately about censorship. And, uh, people controlling people, right? The establishment kind of controlling. And I think this is kind of where, um, one of the interviewers kind of, uh, got very defensive when I sort of, when I suggested that like, A, people have been told like, you can't go outside, you can't go run your small business. And now they're being told you can't trade. Um, and you know, I think people are just being tired of being told like, you know, you have permission to do this. You don't have permission to do that.

• 9:47Speaker 02

  And the power is, is held by a very few hands, whether it's a very few governors, whether it's, uh, the Robin Hood trading app and the few people, the big customers, like a citadel leaning on them. Um, people are sort of tired of being told what to do. Um, and I think it's a huge catalyst and eye opener for, um, DeFi, Ethereum, Bitcoin, because, uh, they are permissionless and no one can make a phone call. No one can lean on the CEO of Ethereum or Bitcoin because there's no such thing. Um, so it is open. It's permissionless. It's credibly neutral. Um, so all of these things that we keep seeing happening,

• 10:31Speaker 02

  um, uh, you know, are, are not, are not like the deplatforming, um, and stuff can't happen there. So I think people are just, um, they're exhausted. They're tired. They're fed up. They're, they're fighting back. Um, and I think it's a great catalyst for, um, you know, DeFi, Ethereum and ultimately crypto. Yeah, I think I think that's right. I mean, at its core, it's much bigger than a stock or a ticker. It's really a protest and it's a lot of individual traders who historically have been sort of derided and spoken down to, whether it's unsophisticated or quote retail or day traders or hobbyists or what have you.

• 11:15Speaker 02

  And quite frankly, the irony of this particular situation is that they're the ones that played the better poker hand. They saw this potential gamma squeeze sitting out there in plain sight. It was an airtight theory. Melvin Capital, the hedge fund that got run over and lost something like 53% in the month of January, the majority of which was a result of the game time gamma squeeze, was asleep at the wheel and or didn't sort of probabilistically take into account the chance that a lot of individuals on a Reddit, a subreddit board would coordinate a gamma squeeze.

• 12:00Speaker 02

  But it was sort of sitting out there in plain sight and very clear what was going to happen with a smaller cap stock that was heavily shorted. And to be clear, it's not like Melvin Capital was short selling or hedging a position. The, the, I think that GameStop was something like a 50% more short than outstanding float of shares. So this was a really predatory type trade that was, the, the, the only goal was to completely drive GameStop into the ground. It wasn't to sort of hedge risk. It was to just decimate this company that's already sort of a sitting duck in the middle of a pandemic,

• 12:44Speaker 02

  probably hasn't been able to operate many of their stores for, for months or the foot traffic has been very limited. I think they employ something like 15,000 people. So this was, this was a direct attack to, to, to pile drive a company. And Wall Street Bets crowd saw that behavior and took the other side and, and won. And, and that's, you know, that's obviously the battleground, but it's way more than that. And I think that Tyler's, you know, earlier, earlier comments, this is about people saying, look, we're fed up. And tired of needing permission to move our money, to spend our money, to use our money.

• 13:26Speaker 02

  And that's really the ethos of sort of DeFi and permissionless finance at its core. And I think, you know, there is a modern money monopoly. And it's been in place for for a hundred plus years. And I think that's what's so fascinating about DeFi is is the permissionless nature. And so as we sort of saw this this playing out, I think it is a huge sort of advertisement for DeFi. And when we first got into Bitcoin in 2012, I remember the Cyprus bail in in 2013. And it was this moment where basically the banks in Cyprus became insolvent.

• 14:08Speaker 02

  And instead of doing a bailout, they did a bail in where they took a haircut of any depositor. Who had above a hundred thousand euros, you just lost all of your money. So let's say you had a million euros, nine hundred thousand of your euros just got taken by the government called a bail in. And that was a huge catalyst that sort of, I don't think many people saw. But Bitcoin had its a really big bull run or run at that point. Because people saw firsthand what was possible and and realized that their money isn't safe.

• 14:47Speaker 02

  And I think the last, you know, the in the US executive order, the, I forget what number it is that FDR did in the in the 30s that basically confiscated, you know, gold holdings among citizens. The problem is that we have amnesia and people sort of forget. You go to Wikipedia, you can dig these things up. And if you look at like the Bitcoin subreddit, it it sort of floats around. But nobody, you know, really remembers that or was around back then. So it takes these these moments like the GameStop moment, the Robin Hood, where they they literally shut off one side of the market. I mean, if that's not manipulation.

• 15:29Speaker 02

  And I don't know what it is and and the the excuse that hey, we needed to post more collateral at our clearinghouse. Fine, then just do fully capitalized trades or fully funded, you know, shut off the margin piece or shut off both sides. Imagine, you know, in the Super Bowl, which is going to happen, I think in a week or so. If for one quarter, you know, one team said, hey, you can only play defense. You can't score. All you can do is prevent, you know, Tom Brady from scoring over the next quarter. That's what happened on Friday and and people are just outraged by that. And I think that there needs to be a lot more answers, but but really the answer is DeFi.

• 16:14Speaker 02

  At the end of the day, you can go in and try and re-architect the existing system. Work with that establishment, work with the suits, or you can say, wait a second, we can just build all of this in a better way, permissionless over in DeFi. Let's get to work.

• 16:31Ryan Sean Adams?

  Well said. The these are all topics we're going to dive into during during our time with you guys. We're definitely talk about the systemic risk, definitely talk about whether this is DeFi's moment in mainstream and how DeFi can solve these problems. You know, maybe the first thing to touch on, though, I was very struck in the CNBC interview that the establishment really doesn't understand this Wall Street Bets online community. They just dismiss them as amateurs, as greedy speculators. They said-

• 16:59David Hoffman?

  Barbarians. They've been called barbarians before.

• 17:02Ryan Sean Adams?

  So this is-

• 17:02David Hoffman?

  Day trading barbarians.

• 17:03Ryan Sean Adams?

  And and there's almost like this patronizing aspect when you keep here repeated on mainstream finance media. This will all end in tears, right?

• 17:13Speaker 02

  Yeah.

• 17:14Ryan Sean Adams?

  Like as as if-

• 17:15Speaker 02

  And it has for Melvin Capital.

• 17:17Ryan Sean Adams?

  Well, okay, so like, what what doesn't mainstream media and the establishment finance understand about these Wall Street Bets style online communities?

• 17:28Speaker 02

  So, look, I think you're absolutely right. We've been gaslit by the establishment and the centralized media complex.

• 17:38Speaker 02

  The way that they described these investors, as you said, as amateurs, rookies. But they're the ones who actually acted like the pros. And Melvins, the guys who acted like the amateur rookies, right? They didn't understand the gamma squeeze as much as these rookie guys. Also, look at the rhetoric of how they described the behavior of the investing. It's very pejorative. They attacked the stock. They raided this company. When they talk about hedge funds actually attacking stocks and raiding companies, they use euphemisms like going short, betting against.

• 18:18Speaker 02

  So we're so, we've been so conditioned to think the opposite of what was actually true. So I think that's a huge problem and we all fall victim to it. We've all been like indoctrinated, but like it's actually opposite day. What they're saying about the Wall Street bets crowd is actually what they should be saying about the hedge fund crowd and vice versa. The other thing is that like when you look at the way the system's set up in terms of like financial sophistication, the proxies that the SEC rules use price out the little guy.

• 18:58Speaker 02

  And we know from our experiences in crypto that money is not a great indication of sophistication. I guarantee you the Wall Street bets crowd understands cryptography, hash functions, how to assess an investment in crypto a thousand times better than the folks at Melvin Capital or Citron Research or Point 72. I wouldn't be surprised if they don't even know how to work a computer in those hedge funds, right? They're like just not tech shops. And the Wall Street bets crowd are probably like e-gamers, super fluent with computers, their whole lives, engineers, kind of coders. And so like you'd wanna, if you wanted to like bet behind someone in crypto or whatever,

• 19:43Speaker 02

  you would do them, yet because of the rules, they're priced out. Of all of these great opportunities. So retail never gets to look at Uber. Um, or Facebook as it's private because you have to be accredited. To get into the funds that get into these companies. So by the time they get it. It's dumped onto them um after the IPO. So the whole system is right. I mean, that's just one example. Of the little guy like demographically getting priced out. Because they're not sophisticated because of the size of their their wallet. And and they never have the opportunity to increase the size of their wallet because they can't. They don't have the permission to invest. So it perpetuates. The little guy staying the little guy and the big guy is getting all the opportunities first.

• 20:28Speaker 02

  So it's total bullshit. And people are waking up to it. And as soon as the little guy starts. Winning. Um, they change the goalposts. Or they call timeout, we need a break. You know, rain delay or something. Um, I've never seen. Uh, a hedge fund stopped. In the middle of making too much money. Oh, that hedge fund is just running away with it like George Soros is making too much money breaking the pound. Let's stop him. Um, let's deplatform them from a Bloomberg terminal. You know, like they deplatform the Wall Street Bets community from um from Reddit. From Discord. You know, because of they weaponized the community guidelines. You know, they took some screenshots or something.

• 21:12Speaker 02

  And said, oh, this is, you know, whatever. Um, I don't see any of the way we've been the the the the Wall Street Bets community has been treated. I've never seen that ever happen to an institution. Um, a hedge fund or any any suit. And I think that is what's so outrageous. And we still don't know what happened. No one's satisfied with the answer. I've asked like all the people I can think of to ask people in crypto, people in capital markets. Um, people who just should know and nobody knows and how and like it's a week later. So, um, you know.

• 21:48Speaker 02

  Anyway, um, yeah. Yeah, and I would just add, um, by the way, I don't think they got deplatformed from Reddit. Um, I think that might have been, uh, the channel went private, but, but Discord definitely pulled the plug. Or the cord, if you will, uh, pun intended. And, um, I'm sure there's a lot of other folks trying to figure out how to, how to unplug these guys as well. I also kind of, um, the paternalistic sort of, uh, terminology, like we're, we're, we're settling this to protect like the, um, traders and things like that. And, and you see a lot of the talking heads, they get up and they're like, well,

• 22:27Speaker 02

  there's going to be tears at the end of this and bag holders and, and who's to say that, you know, the Wall Street Bets folks aren't sending a message and are fine parting ways with their capital and incinerating it in the process. Um, I know that I've personally given to a lot of GoFundMe pages to help support restaurants and businesses during the pandemic. I don't expect to see that money again. Um, and, and it was a donation, right? And I'm just trying to support. So who's to say these folks aren't, who actually walk into GameStop and are customers, aren't trying to support a business, um, so that a predatory capital like doesn't try and drive it into the ground, um, and create a self fulfilling prophecy.

• 23:12Speaker 02

  How do we know that they're totally, we don't know that, you know, we're making the assumption that they aren't totally fine. Um, you know, just supporting, um, Right. It, it, it could be their version of a GoFundMe page for GameStop. And like I was saying earlier, um, many of them might even be employees of GameStop that have been furloughed during the pandemic because GameStop can't open as a business and it's a sitting duck. And then, so they're trying, they're sitting at home, they're trying to trade, you know, and save the company maybe they work for or patronize and actually shop at. And they're told you can't do that. So it's like, how do you, how do you win? You know, and I think that is like the fever pitch.

• 23:57Speaker 02

  That's the outrage and the public support is so unanimously in favor of Wall Street bets. Except for, except for over at CNBC. And the only reason that is because they, they lionize and idolize the, in a celeb- celeb- celebration of, um, if that's even a word, of these hedge fund managers, because the hedge funds pay their advertising. The hedge funds butter their bread. Um, and that's why, you know, when they invite them on, they, they're like talking up to them. They're looking up to them and they're, they're celebrating them despite the fact that they've never innovated in their life. They never created anything. Uh, and these are the same folks that almost killed Tesla.

• 24:43Speaker 02

  Right? They almost like put the nail in the coffin for Elon Musk, the greatest entrepreneur of our generation. He's trying to save our planet with sustainable energy. He's trying to get humanity to Mars and these folks almost got him. They, they are parasites. They, they do, they provide very, very little service. It's highly questionable. Um, you know, the fact that you could short, um, you know, more than the float, more than there are shares of a company is completely toxic, completely destructive. Um, and the only reason at CNBC that to support it is because these folks pay their bills.

• 25:25Speaker 02

  They, you know, and, and that's the issue. And that's, I think, what you saw when that, when John Thorpe, the, the interviewer went off the rails. Um, you know, he was getting so defensive because, uh, I was striking a nerve, you know? Like it's sort of like-

• 25:43Ryan Sean Adams?

  Tyler, he was, he used this term. He said that, uh, you were like almost fomenting populism. Wait, wait, is that fomenting populism, what you're saying here?

• 25:54Speaker 02

  I, I think everything, I, I think was a fact. I mean, if facts are populism, then, then I guess so, but, um, you know, populism, again, it's like, it feels- Outrage.

• 26:09Speaker 02

  I was gonna say like, but that alone feels like um uh talking down to people. You know, it's like, oh, you're the little guy, you're the individuals, you don't know any better. Let us tell you how to think. Let us tell you how to uh think about a stock and invest your money. Let me tell you what's good with, good for you. And people are tired of that, you know, and nobody does this better than Hollywood celebrities. They talk down to people, they tell them how they should think, what they should believe in. Um, and that's why I love when Ricky Gervais hosts the Globes, because he just calls an honor. He's just like, all right, like, take your award, thank your God, thank your agent, and fuck off.

• 26:53Speaker 02

  Like, that was one of his jokes. And it's like, it's so true. Everybody's sitting at home, like, yes, like, okay, stop talking down to us. Um, and that's why, um, you know, the UFC ratings, um, you know, when Meryl Streep gets up there and is sort of like, you know, it's called the arts, it's not called martial arts. UFC has like 10 times more ratings than the Golden Globes or the Oscars because of the, the arrogance and sort of the hubris. And people are just tired of it, you know?

• 27:21David Hoffman?

  I think it's a worthy conversation to talk about how much this became about something else other than the money. And it immediately became about a message or a movement more than it was about, you know, some Wall Street betters, uh, you know, making a bunch of money, right? The, the, I've been following the Wall Street Bets Forum this weekend and there's so many like memes and just like, you know, cultural tidbits that came out of that community. That was all about, you know, uh, of, of course, like talking about like not selling in diamond hands. Um, and diamond hands is a, is like a meme that they've generated for people that don't sell the stock, because if people don't sell the stock, then Melvin Capital continues to like burn money.

• 28:01David Hoffman?

  But like, uh, much of the conversation around people who had bought GME, bought stock and became very wealthy, turned to not being about the money, but instead being about the message, right? Many, many uh people I saw were posting screenshots of them turning like $10,000 into like a million. Ten million, like some crazy amounts of numbers. And they would make one of my, one of the, the famous, one of my favorite memes out of that space was like this cartoon drawing of this girlfriend begging her boyfriend to sell so they can be millionaires. But then the, the boyfriend is like, no, it's about the message at this point. No, it's, it's about like, it's about sending Melvin Capital into it, into the ground. Why do you guys think that this is turned in such a, in such a

• 28:45David Hoffman?

  because we also talk about the, the oh eight financial crisis. People talk about this is like just getting back for the oh eight crisis. Why do you guys think that people were so prepared to turn this into a cultural message over a money making opportunity?

• 28:59Speaker 02

  Well, I think it's probably a lot related to the sort of the trust that's been broken. And, and we saw it, you know, in the financial crisis. A lot of risk taking by banks and then those same people who sort of perpetuated this crisis got bailouts and, and help from the government for the most part. And nothing's really changed. And I think now sort of there's this tool where people can actually sort of get together and, and send a message. And I think the pandemic obviously like exacerbates everything because tensions are on, you know, increased and we see a lot of small businesses getting decimated. You see sort of technology companies

• 29:44Speaker 02

  accruing a ton of, you know, value over the same period of time. So there's this like tale of two cities.

• 29:52Speaker 02

  And, and I think that, um, you know, it's just, it's just sort of the litter, the, the latest manifestation of, of sort of discontent and protest. And I think that now, uh, you know, there, there's places where you can protest. I think Bitcoin is, is a protest. If you don't like what's happening with the Fed, if you don't like what the government's doing, then don't buy bonds, don't hold dollars, go into Bitcoin or go into Ethereum. And Ethereum is, you know, DeFi is literally re-architecting. Major financial services, it's obviously pretty nascent and new, but it can't be underestimated

• 30:33Speaker 02

  or stated enough how powerful this is that you can go into DeFi post collateral and get a loan permissionlessly. And there's no sort of credit check, they're not going to look at who you are. And and look at, you know, all of the things that a bank might find and try and block you from getting that loan. And I think that that is huge. And so now sort of technology, I guess, is sort of meeting protest, if you will, in the sense that in 2008, you know, Occupy Wall Street was sort of the protest against the financial crisis. There wasn't a Bitcoin. Bitcoin, from what we can tell and what we've read, came about through the backdrop and you, the financial crisis.

• 31:18Speaker 02

  If you look at the Genesis block in 2009, it talks about, you know, Chancellor on the brink, second bailout. It's clearly making a reference to to the the crisis. And so now Bitcoin exists, so we can go into things like Bitcoin or Ethereum to protest before you really couldn't. And your hands were tied and you could pretty much march, you know, but you couldn't actually vote with your capital. You could really only vote with your feet or protest and kind of do it in that in that sort of neat space forum. Now we can just do it really, really easily with our wallets.

• 32:00David Hoffman?

  One thing I want to ask is, is there's, we still haven't finished this story, right? The Wall Street Bets, Robinhood, Melvin Capital story still playing out. Yet there are, there's more and more talk about how like perhaps this, it wasn't, you know, a phone call from Melvin Capital to like the CEO of Robinhood to tell them to halt trading, but it was instead about Robinhood's perhaps like insolvency and able to pay massive amounts of capital that they weren't expecting to pay. And so perhaps, perhaps, we don't know where this story is still unfolding. But there were perhaps more legitimate reasons as to why Robinhood halted halted the buying, yet not the selling of stocks, specifically of the GME stock.

• 32:42David Hoffman?

  But to me, that just brings up an even bigger question is like, why, why do we have, why, why does one if one hedge fund and their over levered short position against GameStop? Why does that having systemic risks in the, the economy like what's you guys' takeaway message from there that like? We actually have to start to tinker with like our ability to make and make buys and sells. Or else if we don't, we'll collapse the economy. What does that tell you about the state of things that we are in?

• 33:11Speaker 02

  Well, I think the, the truth is we, we probably don't know. And we're still kind of learning as, as things unfold here. Why that message, uh, which I think was delivered by Robin Hood's, uh, CEO on Clubhouse. At 10, uh, 10 PM Pacific, so 1 AM Eastern on a, on a Sunday or Monday morning. Why it took days to sort of get that clarification out?

• 33:40Speaker 02

  You know, at the worst, it's just a horrible management of a crisis that literally impacts. Almost all of your users, um, you know, could you have, uh, I think the trading was halted on Thursday morning of last week. So why not at 8 AM say, hey, guys, look, um, we've got this issue. We've got to post more collateral. And, and these are the steps we're doing, and these are why we're doing it. None of that was made clear for days, um, which is, which is definitely a head scratcher, um, on one level. I, I think the, the other point is. It also doesn't, it, it also doesn't explain. Like you halting the entire stock, right? Halting only one side. And it doesn't explain why they couldn't just halt margin.

• 34:26Speaker 02

  And make it full reserve. Cause there's no capital issues with the full reserve trade in the settlement.

• 34:34Speaker 02

  But, and, and I was just going to add the, the, the other issues like, you know. There, who, you know, certain groups can lean on certain groups and there, there's like indirection. And so maybe we will, we will never really know what, what the, what the, the true story is. But I think it goes back to the, the inherent problems with centralized system. It only takes one or two phone calls to sort of put pressure. On a certain group who then leans on another person that then says, hey, oh, by the way, we need. Three billion dollars worth of collateral like, you know, surprise at three thirty a.m., you know, on the night before a market open, you're not going to see.

• 35:17Speaker 02

  And Cameron, just to, just to break that down, so like, they probably only clear through one organization, right? So all it takes is a few, like the head, like, I don't believe that Citadel called them directly, right? They're too smart for that. They and others would call the clearing organization, be like, lean on these guys. And because they have literally one clearing organization, they, they, they have no choice, you know, to, but to listen. So the equivalent would be like a hedge fund calling the blockchain or the miners and be like, don't push these transactions through or stop the blockchain. We can't clear the Bitcoin transaction to Ethereum transactions. That's what happened.

• 36:02Speaker 02

  In the name of risk and consumer protection, of course. Yeah, and, and disorderly markets, which mean, which is code for markets we can't control or markets that are moving in a way that we, that are, that are not beneficial to us. But like, that's what happened, right? It's, and, and that's the thing is like, when you think of the blockchain, that could never happen. That's the beauty of it. And that is the vulnerability that this saga has laid bare with respect to centralized finance. A few people make the decisions. It's the same thing with centralized media. A very few people control the media. I was having lunch with a friend and he was like,

• 36:46Speaker 02

  yeah, the media basically reports to three people, Rupert Murdoch, Sulzberger at the Times and Jeff Bezos at the Post. So three people have tremendous influence, right? And finance is no different.

• 37:00Speaker 02

  Like the banks, even if you if you read the chapter in Bitcoin Billionaires where we go around and we're trying to place the shards in different security deposit boxes around the banks. We actually had to like be very careful and low key about our identity. Um, because as soon as um, someone, and this happened a few times, they're like, oh, Lincoln Boss Twins. They'd Google us, they'd see we're involved in crypto or Bitcoin. And they would, um, even though they're not allowed to do this, they would come up with reasons. They're not allowed to ask you, what are you putting in a security deposit box? They're not say like, is that a shard to a Bitcoin private key? Um, they're not allowed to ask you like what you're putting in there.

• 37:41Speaker 02

  Um, but they would just mysteriously come with a reason why the box was no longer available. Or why we had to close a box that we had already opened. Because, um, and some of these were regional banks. But all of the banks, um, because the banks are too big to fail, they really kind of like report up to obviously the Fed. But a few of the bulge back at banks have all the power and position. And Bitcoin companies, um, and crypto companies, when Bitcoin became crypto with Ethereum in 2013. Always got our bank account shut down. It is still, um, a big deal for Gemini, which is a New York Trust company that's regulated. To win a bank relationship and open a bank account.

• 38:25Speaker 02

  Every time we do that, it's like a big deal because we don't have that many. Um, and and historically, um, that's been, you know, what what is? For any startup to open a corporate bank account to receive fiat is pretty trivial. Um, but that's like a huge thing if you're in the cannabis industry. Or are in are in the crypto industry. And so as soon as you start seeing that and realizing that like a few people say like thumbs up, thumbs down on you. And it's the same thing with loans, right? Like, um. I'm privileged enough to get a bank account anytime I want to qualify for a mortgage

• 39:05Speaker 02

  or whatever. That is not the case for most people in this country, definitely not in the world. And the stories are horrible, right? About people getting discriminated against for so many reasons, the color of your skin, you know, whatever. And that's the beauty of DeFi is the code doesn't discriminate, the smart contracts don't discriminate, they will take your money. If you send the right amount of ether into Aave or whatever, you know, MakerDAO, like, no, there's no person being like, you qualify, we're going to an investment committee. And that's what people are waking up to, is that like, you can actually get access to credit, like, these basic financial services that make

• 39:48Speaker 02

  or break whether or not you can create wealth for yourself and your family, generational wealth for yourself or your family. And if you can't get a basic loan to start a business, or mortgage on your house, or even a place to store your money, or access to getting your money into like, the financial markets, which is, for most people, is very hard, then you don't even stand a chance, you know?

• 40:16David Hoffman?

  If you want to live a bankless life, you need to get a Monolith DeFi Visa Card. Monolith is a one-two punch of both an Ethereum smart contract wallet and an accompanying Visa card that lets you spend the money that you have in your Ethereum wallet everywhere where Visa is accepted. When you swipe your Monolith Visa Card at the grocery store or at a restaurant, it actually makes a transaction on the Ethereum blockchain that spends some of the money you hold in your Monolith wallet. It's insanely cool and it's one of the best tools out there for living a bankless but still normal life. Monolith also offers on-ramp services for getting your fiat money into the world of DeFi. So it's trivial to top up your Monolith card if you ever need to, and your deposited money

• 40:59David Hoffman?

  goes straight into your non-custodial wallet. So your money is never held by a centralized intermediary. Because Monolith is native Ethereum infrastructure, the money you hold in your Monolith wallet still has the power of DeFi behind it. Swapping assets on Uniswap or earning yield in DeFi is at your fingertips. Go to monolith.xyz and sign up to get your Monolith Visa Card today.

• 41:25David Hoffman?

  Aave is a borrowing and lending protocol on Ethereum, and just recently released Aave version 2, which has a ton of cool new features that makes using Aave even more powerful. With Aave, you can leverage the full power of DeFi, MoneyLegos, Yield, and Composability all in one application. On Aave, there are a ton of assets that you can deposit in order to gain yield, and all of those same assets can also be borrowed from the protocol if you have deposited collateral. Here you can see me getting a 200 USDC loan against my portfolio of a number of different DeFi tokens and ETH. I'll choose a variable interest rate, because it's a lower rate than the stable interest rate option, but I could choose the stable interest rate option if I wanted to lock that interest rate in permanently.

• 42:10David Hoffman?

  One of Aave's V2 features is the ability to swap collateral without having to withdraw your assets, trade them on Uniswap, and then deposit them back into Aave. Aave does all of this for you, all in one seamless transaction, so you don't have to repay loans in order to change the collateral you have backing them. Check out the power of Aave at ave.com. That's A-A-V-E dot com.

• 42:32Ryan Sean Adams?

  You know what's so interesting about this and what you guys are saying? Because we absolutely want to get to decentralized finances being part of the solution here. But it is just the, I guess, the way fintech in particular, platforms like Robinhood have been positioned to us and positioned to you, like the millennial generation, or you know, Gen X, or even Gen Z. Democratizing finance was really how Robinhood has positioned itself, giving everybody the ability to go buy and sell a stock. But we found out last week that that's really a lie. This is not democratizing finance. This is putting lipstick on a pig of an otherwise broken financial system

• 43:16Ryan Sean Adams?

  that's not credibly neutral, that's tilted in favor of the big interests and the hedge funds, and that is not democratic, is not for the people, is completely a permission system. Can you talk about that a little bit more? About, I guess, maybe the lie or the untruth of the current apps that we use today and the current financial system that we use today?

• 43:43Speaker 02

  Go ahead, Garen. That's definitely like the the rub, right? Is that it's one thing if a if a place says, look, we're we're just a brokerage house and we're going to let you trade here. But it's really all of the marketing and the diff between reality and what they're actually doing. I think is what really is is bothersome. So when they say, hey, we're we're a free app. Trading's free, it's actually not free. And and when whenever you say an app is free, really what that means is that you are the product. The user is the product and the and the true.

• 44:23David Hoffman?

  I think you guys have some experience with that, right? You guys would know, certainly.

• 44:28Speaker 02

  The true customer of Robinhood is Citadel, who buys all of the order flow and trade data of the users who trade on Robinhood. It's the same way social media works is it's free. The users are actually the product. They create all this value, share all this personal data information. That information is then taken and sold to the advertisers, who are the true customers of that platform. And that is really the key, one of the key distinctions. It's not about the people. It's about the customer, in the case of Robinhood, Citadel, in the case of social media, the advertisers. And I think that is one of the sort of the big realizations.

• 45:12Speaker 02

  And and what is also kind of fascinating is Citadel in 2004 wrote a letter to the SEC urging them to ban the practice of of payment for order flow. Basically saying, look, we think this is anti-competitive. We think it's a huge conflict of interest between the broker and the customer. We don't think it does right by the customer, the the user of the platform. And then, of course, you fast forward today and Citadel buys all the order flow from Robinhood. And and so.

• 45:46David Hoffman?

  There's a bit of go into more detail as to why that is disadvantageous for the users. Like, why, why is, how are the users actually being leveraged as a product in that scenario?

• 45:57Speaker 02

  So I I'll tell you, okay, so and Cameron, correct me if you you disagree, but payment for order flow. So at Robinhood, the users are not trading against each other.

• 46:10Speaker 02

  Right, their counterparty is actually one counterparty, it's Citadel. Robinhood doesn't charge any fees to you because they, you directly. But you, you pay, you get the price that Citadel provides you. So Citadel pays Robinhood a tremendous amount of money to interact with their customers. And they give their customers, Citadel turns around and gives the Robinhood customers a very bad price. So the diff of what Citadel pays Robinhood. And the way they make up for it and more is they just give you a poor price.

• 46:52Speaker 02

  When you're a buyer, it's a higher price than it should be. When you're a seller, it's a lower price than it should be. And Robinhood just a month ago settled charges with the SEC. That they misled customers and then actually customers were not getting. The national best bid offer, best price. Which is a regulation that is required for broker dealers to provide for their customers. So they were getting below. The, the reg NMS standard of what the price should have been from Citadel.

• 47:25Ryan Sean Adams?

  So, so they were allowing that, they allow the funds to front run retail, basically is what you're saying.

• 47:30Speaker 02

  Well, that's, that's the other issue. Is it not only does Citadel give you a crappy price? To make a ton of money on the spread of what the price actually is, right? They, they just take that thing. They have all of this information, and I had to look at this a little bit closer. To front run all of the order flow, all of the information. So whatever's happening over Robinhood, all of a sudden informs them. What's happening everywhere else in the market and they trade against that. So there's tremendous unfair advantages. For Citadel, they're just, there's like, if the price, if the stock is, let's say 10 bucks. And you're trying to buy, they give it to you for 12.

• 48:12Speaker 02

  Right, so you buy two bucks higher, but then they know that you're a buyer in the market. They know how many buyers, because there's all those people, like, they know how many buyers, how many sellers. And they can react to that at another exchange or with another brokerage house. And so this is just like highly controversial, and even Citadel itself thought so in 2004. We found a letter that is posted on the SEC website. I tweeted this morning.

• 48:42Speaker 02

  It's, it's like eight pages where they go in depth in how this is controversial, unfair to the customer in 2004. And now they're, they're, they engage in this controversial behavior that even they themselves was, said it was controversial. That's exactly what they do today, because it's so gosh darn profitable. But going, going back to, just sort of going back to the mission statement and, and the marketing of Robinhood. I mean, even the name Robinhood, right? Condes, you know, it hearkens back to the fairy tale of, you know, stealing from the rich to give the poor.

• 49:26Speaker 02

  And that's, you know, they're, they're doing the exact opposite, or democratized trading, anything but. Let the people trade, except for when GameStop moves too, too much. And, and basically, that is, I think, also, like, i- i- it's not fintech. It's really, it's fin marketing. It's centralized finance with a different paint job. There's no new engine, there's no better chassis. It is literally a brokerage house that is master marketing and really bullshitting. And, and they've been called out, and as Tyler mentioned, there, there's, there's an SEC enforcement.

• 50:12Speaker 02

  And, and we'll see sort of what happens in this latest episode, but it's just over and over breaches of trust. Oh, hey, we got caught red-handed. We're really not about the customer. We're about ourselves and building up this, this, you know, business to then sell order flow to Citadel. And, and the list sort of goes on and on. And, and it's really, at the end of the day, centralized finance with, with better marketing and, and a,

• 50:40Speaker 02

  You know, better paint job. It should be called the Sheriff of Nottingham. Yeah. Um, and this is one of my, my issues with a lot of Silicon Valley companies is, is, or like the style of Silicon Valley companies is like heavy marketing, right? Heavy growth and kind of mis- misleading marketing, you know? I don't think people are feeling, I believe other brokerage houses did halt some of the trading too, and maybe did the same thing as Robinhood. Um, but like they weren't out there saying commission free trading. We're all about the little guy. This isn't about the rich getting richer, um, you know, and, and so the, the double speak and

• 51:21Speaker 02

  hypocrisy, um, is a big part of it. But the other issue here is that like these companies, Citadel included and Robinhood have been fined at least multiple times, but the fines are always worth it for them.

• 51:37Ryan Sean Adams?

  It's a slap on the wrist.

• 51:38Speaker 02

  Right. Yeah, it's like a speeding ticket to a billionaire. Um, nobody goes to jail. The fines are like a small rounding error to the profits they make. So any rational economic actor, if they don't, if they're unscrupulous and don't have ethics, will happily take that trade. And, and that's what people are also realizing is that like the, the penalties aren't large enough. Nobody's going to jail. Oh, eight crisis was traded by the bankers. The bankers, uh, always land on their feet because the bankers are the owners of the Fed, right? The Fed's like a hybrid,

• 52:17Speaker 02

  public, um, private situation, right? The Board of Governors is, I believe it's a, you know, government appointee, but the banks are the stakeholders in the Fed. And you guys have talked about this before, the cancel on effect. You know, the money comes to them first. Um, they dump it into asset prices. They quickly move it around. Um, and, and, and then by the time it works its way through the economy to everybody else, the Wall Street Bets crowd. They've had to suffer through and endure higher prices. Um, and so it, it perpetuates the inequality. It's, it's inflation for all, um, but purchasing power for a few.

• 52:58Speaker 02

  You know, the, the classic, um, uh, you know, the other recent example i- is WeWork, right? It, it's sort of masqueraded as a technology company, even though shared coworking space has been around since Regis created it. I think in the seventies, the, it was obviously much more modernized. At the end of the day though, it was just, um, coworking space. And, you know, that has all this ethos about community and, and we, the people or whatnot. And then of course you find out the CEO was self-dealing and basically leasing buildings to himself. Um, he trademarked the name we for, you know, and then sold it back to WeWork for six or seven million dollars.

• 53:43Speaker 02

  Uh, he eventually like stepped off that when he was called out right before the IPO. And at the end of the day, it, it was sort of, um, a lot of smoke and mirrors. And the person, the people that got hammered on that w- would be like sort of the employee equity holders. Who got, um, smushed down when the company has to refinance. The VCs will do probably fine, um, and, and they'll be okay. But you have all these employees that put, you know, all this time into this company. And, and just the diff between what you say and what you do, which is obviously the definition of integrity. In a lot of these companies is, is quite large, really large.

• 54:23Speaker 02

  And I think that's ultimately why people get so frustrated and outraged by it. Um, and, and I think that, um, I guess this is sort of another strength of DeFi and crypto is that there aren't mouthpieces. Satoshi, not knowing who Satoshi is, is such a strength and we're seeing that day by day. Satoshi will not be going on CNBC. And if Vitalik, you know, decided to retire and go to the Bahamas tomorrow, Ethereum will be just fine and DeFi will be just fine. And that is such a big strength and even in the early days, we sort of felt that.

• 55:09Speaker 02

  But then these things happen and you realize that how kind of critical that is. There isn't a person or a figurehead that can become politicized or sort of deplatformed or censored. It's just not possible. And that is going to be a theme we're going to see more and more of. And it's what makes DeFi so darn exciting.

• 55:35Ryan Sean Adams?

  Okay, well, we're going to get into DeFi. Just a quick PSA for Bankless listeners. Guys, don't buy crypto on Robinhood. All right, just don't. If you don't have the ability to withdraw your crypto to an Ethereum address or a Bitcoin address, you don't own it. They can delist trading on your crypto, just like they delisted buying or selling GameStop stock. So don't do that. Go to a real exchange. Guys, let's talk about this in your CNBC interview. I don't think the interviewers knew what to make of this, but you said that the energy from this Wall Street Bets thing was going to be pulled into DeFi. You called this the beginning of the end of centralized finance. You said things like on Ethereum, that would never happen.

• 56:19Ryan Sean Adams?

  I loved like the reaction from the host when you said things like that. But let's talk about this. Is this going to be a big moment for DeFi? Does DeFi fix this and will crypto absorb some of the energy of this movement? How does it play out in your minds?

• 56:37Speaker 02

  Yeah, I mean, it was definitely a GameStop is, I think, a threshold moment. And I don't know, like DeFi. You know, it's still a fight on sort of the turf of the original, the establishment. And ultimately, rather than sort of running uphill against the establishment, I think a lot of people, that energy pours into DeFi. Where, where it's sort of, doesn't so much as fix it, but it's no longer a problem, right? There is no establishment to deal with or centralized counterparties and things like that. And I think it is a very, it's where it's all going. I mean, DeFi is sort of the, the end game and it's where it sort of stops.

• 57:20Speaker 02

  And I think a lot of this energy pours in there because of this, and there's going to be more and more examples along the way. But I think this is definitely one of those moments where, where people are understanding. Just like when you see the money printing, at some point, you know, your, a lot of people are going to step back and say, what is these dollars actually worth? And I think people are realizing that, wait, I don't really have full control over the equities in my brokerage account. I, I actually don't really own these things. I mean, I do technically, but it can be the, the, the. Has dependencies.

• 57:59Speaker 02

  Carpet, yeah, the, the carpet can be pulled and stuff like that. So I, I do think that this is, this has turned on a lot of light bulbs for people. With respect to DeFi.

• 58:12Speaker 02

  Yeah. And one thing, so I've gotten DM from people, questions.

• 58:19Speaker 02

  You know, how do I move my crypto out of Robinhood? Is there any way to move it without selling it? And the answer is no, as you pointed out, which is super scary because, you know, it's stuck. And you have to convert it to cash. That's actually a taxable event. So if you have, let's say if you have. Bitcoin at Gemini and it goes up, you know, 10 times or something. And you want to move it to Coinbase, you can do that without having to sell into into Fiat. And you don't and you don't have to pay taxes. If you had to sell that into cash, that conversion moment, you'd have to pay taxes on those gains.

• 59:02Speaker 02

  Then rebuy back Bitcoin, move it, wire the cash out of Robinhood. And then rebuy Bitcoin on Gemini or Coinbase. So again, it's it's a terrible experience for the user. It's it's literally everything they market is the opposite. I was reading Mark Cuban's tweet the other day.

• 59:23Speaker 02

  About how the all the margin fees that Robinhood gets for you when you lend a stock goes to them. So there's actually like they're they're like a terrible brokerage house and the deal is terrible for people. It's just snazzy marketing and the power of a simple, easy to use user interface. And user experience, but like everything else is like completely against the little guy. So that's just another another there's when people start to look under the hood. They're just sort of horrified at how.

• 1:00:06Speaker 02

  How used and abused they have been by by Robinhood and even even down the fact that like they thought they were buying crypto. When in reality, when when, you know, they they weren't. And when they tried to leave Robinhood, they, you know, it's like they they were stuck in jail. And they had to like break out of jail. And so it's these walled closed gardens. You know, the deplatforming of Discord, deplatforming.

• 1:00:38Speaker 02

  Was a big scandalous news story, you know, a couple of weeks ago. And now it's sort of like business as usual, like when shit goes bad, like, you know, the establishment just turns around and deplatforms you. Privacy was like this. Hot button issue, right with Facebook came to Whitaker.

• 1:00:57Speaker 02

  And then like all of a sudden deplatforming is just like um table stakes. Um when things don't go the way for um these companies or the establishment or whatever. And it's a really dangerous slippery slope. I saw a friend talking about um like the parlor deplatforming, right?

• 1:01:20Speaker 02

  And a lot of people, most people are for um the Wall Street Bets crowd. And are upset that they would get the platform maybe from Discord. But that's exactly what happened to Parler, you know, and they were for it over there and now they're not for it here. And I don't know the details, right, of what happened, but I have heard that like as much of the the violence or some of the Capitol Hill stuff um that I completely disagree with, like violence is horrible, should be condemned on any level.

• 1:01:55Speaker 02

  But that was organized as much or more on Facebook and Twitter as it was in Parler.

• 1:02:01Speaker 02

  So there's sort of a double standard, there's sort of hypocrisy and when it suits you over here, that's okay, but you got to be careful because that can also be used in another situation where it doesn't suit you. And so I guess it's just a slippery slope and I think people are also wising up to that and sort of the precedent.

• 1:02:24Speaker 02

  And of course, like you can't make, you can't make the call to Ethereum, you can't make the call to Bitcoin, so that's the power of it and this is really waking people up.

• 1:02:34David Hoffman?

  I want to ask a kind of a general directional question because I I have uh just, there's a bunch of different things that we can, that we've talked about and then we can talk about. And one of the, one of the things I want to get to is like we all talk about, you know, Ethereum fixes this, DeFi fixes this. But you can't actually buy GameStop on Ethereum, right? And actually, interestingly, the Wall Street Bets subreddit is actually relatively anti crypto. Uh we we made a post in there asking if any. Community members wanted to come chit chat on Bankless and our post got removed because we used the word Ethereum. And, and like I said, like you actually can't buy, you can't buy stocks on Ethereum. That's not what Ethereum does. It's something else.

• 1:03:13David Hoffman?

  Yet, at the same time, we have people like Soulja Boy minting NFTs on Ethereum and we have Elon Musk with Bitcoin in his, in his Twitter, Twitter bio. So like, things definitely seem to be moving, yet also it seems, things also seem to be just kind of going in a totally different direction. How do you guys, and I guess this is more of a 2021, what do you guys see coming question? How do you guys see these different, you know, dynamics coming where some people are adopting Ethereum? Ethereum, but is it, it also isn't ready to support like the massive amounts of trading activity that one would expect out of like some, some, you know, a hedge fund and Wall Street bets. Like where, where are you guys seeing all these people? Come into Ethereum, come into DeFi, come into Bitcoin, yet also not really

• 1:03:58David Hoffman?

  be like having the tools to mimic their legacy markets experience?

• 1:04:04Speaker 02

  Well, I think, um, I think that there's definitely synthetic stocks already on Ethereum in some form or capacity.

• 1:04:12David Hoffman?

  And I would A handful, yeah.

• 1:04:14Speaker 02

  I would imagine that that is going to only increase quite a bit. And, and obviously the, the sort of

• 1:04:23Speaker 02

  DeFi is in this, this, um, sort of, um, position where you're going to get more in centralized finance in terms of like, you know, ability to trade. There's, it's, it's an easier user experience today, right? You have to be kind of motivated to get into DeFi and access these newer projects and things like that. But that will change dramatically. The same way the internet, connecting the internet in the nineties was a much different prospect and experience than it is today. So the on-ramps are going to become easier, better UIs and eventually be on par, if not better. So it's, it's, it's a very sort of new technology and space that I think

• 1:05:05Speaker 02

  that is part of it. So it's not going to happen overnight and there's still going to be people who focus on ease of use. And say, you know, I'm willing to deal with that and take the risks of a centralized platform. And I can just live with the fact. You're going to see many, many people that will be in that camp at least today. But eventually it'll all move for the same reason. You know, a lot of people were totally fine with AOL being their internet experience for, for many, many years. And, and quite frankly, some people still use AOL email. But eventually it became really clear that the open internet, at least at that time period, was 10x better.

• 1:05:45Speaker 02

  And that Google offered a much better search engine and that Gmail is a much better mail client. And, and so forth. And so it, it, it won't happen overnight, but it's going to happen quicker than people probably think. And then look, some people, um, I think in the Wall Street bets crowd are, are really focused on sticking it to the establishment on their turf. The establishment isn't in, it isn't in DeFi, so you can't really do that. Though potentially a synthetic eventually is going to be linked to the underlying in, in C5. So, so there may be some interesting dynamics there.

• 1:06:26Speaker 02

  But if your goal is to stick it to the man, um, in, in C5, then that's going to be where you're going to play. But I think that the majority of people really want better tools. They want permissionless finance ultimately. And that's the direction they want to go in, right? You can, you can sort of protest and keep like marching on C5. Or you can just go build the next frontier. And say, look, we're just going to reimagine this whole space. And I think that's where ultimately the motivation of, of most people are. They're just going to say, this is just better. We're not going to worry about this old dinosaur. We're not going to try and re-renovate AOL.

• 1:07:10Speaker 02

  We're just, we're just going to go over here and build on this, this new frontier. So I think that's where it goes. That's, that's the end game. But I think in the, in the near term, there's going to be a lot of. Turf wars and and we're seeing that with silver right now. And so, you know, there's some people who say, look, like, not so fast, like, let's finish the GameStop protests, so to speak. And so there's this division in the community on on what the right time is and where the focal point is. What what fascinates me about the silver squeeze or the potential is is, you know, it's unclear who's on like the the short side of silver and who the the losers are there.

• 1:07:55Speaker 02

  I think likely there's precious metal deaths at banks that are probably short silver. And and there's other people that we probably don't know about. And I'm sure there's people, hedge funds that are long silver and would benefit on a silver squeeze. But all of that said, it's unclear necessarily. And it probably there will never be like a clear winner or loser. But what's fascinating is that there's likely there's a hypothesis that there's much more paper claims to silver than actual underlying physical silver. And nobody really knows who has what or what claims are, you know, to silver. And it's incredibly opaque.

• 1:08:40Speaker 02

  And and so even if a a small percentage of people start buying physical silver and or paper and they force delivery where people have to actually come up with the physical silver. It could be really, really dramatic. And we're going to learn just how real the market is.

• 1:09:05Speaker 02

  And and what's kind of mind blowing, so I think if there is a squeeze, then the next step will be to turn to the gold market and say, how real is this? You know, how much paper versus physical underlying is there? And And Cameron, isn't it like, one of the important things to explain is that a lot of people might buy like a silver futures or a gold futures. And they don't actually take delivery in the underlying asset. They take delivery in cash or they keep rolling it. So if if a bunch of people say, hey, I'm actually going to buy this paper silver paper.

• 1:09:45Speaker 02

  And I'm going to take delivery of the silver, then people have to find the silver and actually deliver it. And deliver the asset and cough it up. And there could be, they, there could, they could fall short of it. If there's more paper than there is actually silver in the world or gold in the world, then people will be sitting there waiting for the delivery and it won't happen. Right. And, and so testing the hypothesis of like, how much paper is out there versus the physical underlying, I think is fascinating. And if it does happen there, I think the next stop is gold. And then, um, that gets, has huge ramifications because any country that is sort of de-dollarized

• 1:10:29Speaker 02

  and heavy on gold or central banks that have big gold holdings, um, they could be in trouble, right? If, if it's proven that there's way more paper and nobody really knows. And so then it ultimately goes to, to, to crypto because blockchains actually fix this. Bitcoin fixes this. Ethereum fixes this.

• 1:10:51David Hoffman?

  This is just a story of insolvency left and right. It's like, does, does Melvin Capital, you know, are, are they able to come up with enough GME shares to cover their shorts? Like, no, because there's a hundred and forty percent short interest. Now, is there enough silver in the world to cover all of these paper contracts for silver? Perhaps not. Um, what I'm seeing thus left and right is like, there are so, there's so much financial engineering and so many contracts that need to be fulfilled on top of the underlying that there's, there's a quote unquote run on the bank or instead it's a quote unquote run on GME or a run on silver or a run on gold. It's, the, the patterns here are fascinating to me.

• 1:11:34Speaker 02

  Right. And, and everyone looks at crypto and says, that's not real money. That's not real. Like when the, the centralized system is completely mythology and illusion, nobody actually knows. And we might actually find out like, yeah, do the, do the assets and the liabilities match up? With silver or gold or GME, we know that like GME is, yeah, the fact that you can short more than there are shares is such a farce, but that's like the real financial respectable world in crypto. Like, we know the float of Bitcoin, you know, like, there's no more, no less, and everyone can point to the blockchain, or everyone can point to the Ethereum blockchain and see what ether is

• 1:12:17Speaker 02

  there. And like, when you send an ether, it actually settles on the atomistic level. Like, I actually get it. There's never a question in my mind. That's, that's the power that people are, are, are, are understanding right now.

• 1:12:31Ryan Sean Adams?

  And, and with, with open finance, of course, all of this is out in the open. It's completely transparent to everybody. What, what, what strikes me about this whole thing and what, what you're saying is basically, so if, if folks weren't totally following what Cameron and Tyler were talking about is this Wall Street Bets crowd is essentially going to the, the next asset that it thinks is underpriced, or that there might be some, you know, hedge fund shenanigans going on and taking that out and it doesn't have to be silver. Yeah, this is a very healthy market forces thing. And you'd think that the capitalists at CNBC would be all for market forces correcting the market and bringing more integrity to these markets because that's what the Wall Street Bets crowd is, is trying to figure out. And look, they'll be successful if they find there's some

• 1:13:14Ryan Sean Adams?

  shenanigans going on. They might move from silver to gold and then eventually find their way to crypto. So here's the interesting thing to me is if I am in traditional finance, I'm part of the establishment, I am a hedge fund, I might be shaking in my boots. Like, I might be like, reevaluating all of my positions. And I might be logging on to Wall Street Bets and trying to figure out what this Reddit crowd is going to come pounce on next, because I could be the recipient of some of that energy. And if I've got some, like, bad positions outstanding, if I have some skeletons in the closet, I'm shaking in my boots right now because I don't know if they're coming after me next, which is actually pretty healthy, I think. This is restoring some sanity to the markets, quite possibly.

• 1:13:59Speaker 02

  Yeah, I mean, it's it's it's like a penetration test. They're like stress testing the system and and like they're like the ultimate auditor. Um, and I think that the the the um, the movement into Dogecoin is really fascinating. Is I see I see it more as a as a protest. It's like as much of a protest as like um Satoshi creating Bitcoin in a way in the in the backdrop in the wake of the 2008 uh crisis. It's like, we're gonna build this other system. And um going to Doge is like, you know what, like, we're tired of people telling us what money is.

• 1:14:40Speaker 02

  We're tired of the the modern money monopoly and you being like, you can trade here or you must use this currency. And the people are saying, we determine what the currency is. If we think it's cigarettes or stones or shells or Dogecoin, well, then it is. You know, and it's it's kind of goes to the the Austrian Chicago school of thought of like money being emergent and what what uh you know, free market forces, not coercive like fiat currency. And um emerging based on what the people all agree and say it is. Um, and and it's sort of like a reaction to like, you tell us you can't trade. You tell us we have to do this.

• 1:15:25Speaker 02

  No, no, no, like, we make we make our own rules. And there is like, and and you see it everywhere. It's sort of like people are realizing like, wait, I don't have to sit in New York, LA, or San Francisco until I retire to move to somewhere else. I can actually work remote. I have autonomy, I have sovereignty. Um, you know, like, we're learning so much about like our freedoms and our independence. You know, whether it's like working remote or like what money might be. And people are just reacting, and I think it's all related.

• 1:16:01Speaker 02

  Yep, no, that's, that's, those are all, I, I, I agree with all those points. And I think that, you know, fiat money has, has a tremendous

• 1:16:13Speaker 02

  sort of tailwind from the legal protections and requirements and obligations to pay your taxes in US dollars. As a merchant to accept US dollars.

• 1:16:25Speaker 02

  Crypto has none of that. And so it's, it's truly emergent. There's no government authority saying you must or you need to use this. In fact, a lot of them are saying the exact opposite, like be careful, watch out, don't do this. It's scary. And it's truly emergent and organic money in that respect. And I think that that is, is really fascinating and, and money is ultimately in the eye of the beholder. And, and so if people determine that Dogecoin is, is money, I guess it's money, you know, if they believe it. If enough people believe it and are willing to accept it and use it, then it's, then it's money. And, and that's one of the hardest things I think people have with,

• 1:17:11Speaker 02

  you know, crypto, Bitcoin, Ether is like understanding where, where's the value? How, how do you value this thing or intrinsic value? That's like another great sort of classic traditional finance buzzword to, to try and like value something or, or discredit, you know, there, but there's no, there's no intrinsic value in, in Bitcoin or Ethereum, really? There's no cash flow. Um, there's no cash flow. And, and, and I think all of that is sort of being dispelled quickly in short order, but it is, it is really interesting. And, and, and the Wall Street Bets, um, those message boards, I think grew by six million people in the past week alone. It's pretty, pretty staggering.

• 1:17:55Speaker 02

  And I guarantee you, uh, some of those people are, are definitely hedge fund suits and people. Who are going in there and say, okay, what what is going on here? And and incorporating it into their risk models and say, hey, wait a second. We we better not, you know, over short.

• 1:18:12Speaker 02

  A stock because, you know, we we could, you know, get on these guys radars. I mean, it's one thing to to sort of hedge and and, you know, have a point of view. It's another to sort of go fifty percent over the float. And and that's that's the predatory, you know, element that that Melvin engaged in that that everybody got so so worked up about.

• 1:18:36Ryan Sean Adams?

  Guys, David has called this event the starting pistol for what could be next with decentralized finance. The people are certainly waking up. I don't think your message is is populist. I think the Cantillon effect, the money printing. I think that the banning GameStop from Robin from Robinhood, that fuels populism. I think the people want these outlets and they shouldn't be deplatformed from their social media channels or from their financial system. Guys, I don't think this is the first time that we're going to have you on in 2021 because hopefully you'll come back because there's just so much going on. It has been an absolute pleasure to have you. You want to end with this. I know Gemini is rolling out some cool things.

• 1:19:18Ryan Sean Adams?

  David and I are on the waiting list for a new Gemini credit card. Can you talk about what you have in the works with 2021? And when David and I can can look forward to getting that credit card in our wallets?

• 1:19:31Speaker 02

  Sure, yeah. We're really excited about that. And I think that it really struck a chord. I mean, we can sort of tell from from kind of the activity on Twitter or the DMs I'm getting or even just text messages from friends. People seem to be really excited about this idea of being able to earn crypto when when you spend your your US dollars and really it's almost like a transfer, right? And and investing while you spend. And it's it's a behavior that we all have, right? We're all used to swiping our cards or Apple paying into. Or Google Pay or what have you. So there's like no change of behavior.

• 1:20:14Speaker 02

  And it's a really easy way to start stacking SATS. And and and and or whatever crypto, whether it's Ethereum or that Gemini supports. So it was really interesting and we think this is this this could be very much like a mainstream. Moment, a way to onboard a lot more people. And kind of demystify and and sort of, I think one of the biggest questions we so. A huge misconception is people don't understand that you can buy a fraction. Of these coins. That's still people don't understand. It's not.

• 1:20:49David Hoffman?

  That's how early we are. That's crazy.

• 1:20:52Speaker 02

  Yeah. So it's like Berkshire Hathaway. When people see the Class A, they're like, I can't buy four hundred thousand. Dollars worth of one share at Berkshire. And I think a lot of people still literally see thirty thousand. Bitcoins say, I'll never own a Bitcoin. I guess I'm going to go elsewhere or Ethereum at. You know, fourteen hundred dollars. I can't afford that. And the truth is, as we know, you can buy a fraction, right? So it allows people to sort of get in with little bites. And I think that that's really helpful. And then the other question people have is like, well, when do I buy? Is it going to retrace? Is it going up, down, whatever? Of course, you know, it's it's. Impossible to time these things, even if you're professional and this is all you do all day long.

• 1:21:37Speaker 02

  So it takes away that question and it just becomes like. A a reoccurring buy order, really. And I think those two things are really powerful and they're captured with the credit card. Moment. And and so, yeah, we we're looking forward to launching it soon.

• 1:21:59David Hoffman?

  Well, I think my favorite feature about this is that it is selling dollars for, I mean, for me, for buying Ether, right? Whenever I swipe that, whenever I swipe that credit card. Dollars or I'm selling dollars and I'm and buying Ether. So I'm demonetizing the dollar. And I'm monetizing the Ether by putting the Ether onto my personal balance sheet. I think that's a great feature. I'm looking forward to swiping that Gemini credit card.

• 1:22:21Speaker 02

  Yeah. And and the the cool thing about that is that it's a three percent, up to three percent back, right? So you could get Ether. So you go to Best Buy, you get a flat screen TV or something. But I think three percent of Ether long term could easily be worth more than the TV itself in Fiat. So you're getting rid of your your cash is trash. You're investing in your future, your financial, you know, independence. And and that like, you know, little bit of ether actually has a chance to appreciate to being worth more than the purchase itself. As opposed to getting airline miles, which just encourage you to well, hard to travel right now, but encourage you to spend, go somewhere and spend more.

• 1:23:05David Hoffman?

  Or these gimmicky. They're super inflationary.

• 1:23:09Speaker 02

  I mean, in in or these gimmicky points were like, it's so black box, like, what's the market cap, they're centrally controlled. Amex can just print more. It's the same issue with like the silver market. You know, we don't really know how much there's there are. So these these things, you know, it's it's like it's like GameStop. You can short more than actually exist. Or how many points are there? What are they worth? What's the exchange rate? It's a total joke and it's not, you know, super productive for the consumer, but actually turning, transforming spending into investing in your future is so much more constructive.

• 1:23:44Ryan Sean Adams?

  Absolutely. Well, guys, if you've gotten one thing out of this, it's definitely to stay tuned to what's coming with this GameStop thing. This is definitely the the starting pistol. And also, if you're using a fintech type of platform, beware of deplatforming. Get going with some crypto native exchanges and crypto native tools. Move your funds. Don't buy crypto in in places like Robinhood where you don't actually own it. Guys, thanks so much for joining us on Bankless and and sharing this story. We are looking forward to seeing how 2021 develops.

• 1:24:23Speaker 02

  Thanks so much for having us. Thanks for having us, guys. Appreciate the conversation.

• 1:24:27Ryan Sean Adams?

  Absolutely. Guys, risks and disclaimers, of course. Crypto is risky, so is DeFi. The assets we talked about are risky. You could lose what you put in. So is traditional finance, though. It has some censorship risks as well that crypto doesn't have, but we are headed west. This is the frontier. It's not for everyone, but thanks for joining us on Bankless.