#540: Chad Barraford on Cross-Chain Swaps

Chad Barraford is a software engineer and the Technical Lead for THORchain. In this conversation, we discuss THORchain, how it works, why cross-chain swaps are important, how ShapeShift adopted the system, and what the impact on DeFi will be. ======================= Circle is a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce and financial applications worldwide. Circle is also a principal developer of USD Coin (USDC), the fastest growing, fully reserved and regulated dollar stablecoin in the world. The free Circle Account and suite of platform API services bridge the gap between traditional payments and crypto for trading, DeFi, and NFT marketplaces. Create seamless, user-friendly, mainstream customer experiences with crypto-native infrastructure under the hood with Circle. Learn more at circle.com ======================= Exodus is an absolute game changer in the crypto wallet space, and we’ve teamed up to offer an exclusive discount for you, as listeners of the podcast. Sign up for Exodus today using my promo code Exodus.com/pomp. This is a no brainer for both newcomers and crypto heavyweights - go sign up today. ======================= With 10M+ users, Crypto.com is the easiest place to buy, and sell 100+ cryptocurrencies. The Crypto.com Visa Card gives you up to 8% back instantly, and 100% back on Spotify and Netflix. Also, Crypto.com lets you earn up to 8.5% p.a. on BTC, and 14% p.a. on stablecoins. Get $25 when you download the Crypto.com App with code "pomp". Download the App now: https://crypto.onelink.me/J9Lg/pomppodcast2021 ======================= Did you know only 1% of day traders actually turn a profit? So why are so many of us mistaking picking stocks for serious investing? You can’t control the markets, but you can control your risks. So how do billionaire investors control their risk? They invest in blue-chip art. If that sounds unusual to you, you’re not alone. But the ultra-wealthy have been investing in art for centuries. And since 2000, art has outperformed the S&P by an incredible 180%. Just a few years ago, a single work sold for $450 million! Imagine... Being able to invest in the very same paintings as millionaires and billionaires, at a fraction of the cost. Masterworks.io is an exclusive platform that makes it as easy as trading stocks online. And the best part is: you don’t need to know anything about art. Their experts will create a custom portfolio to meet your investment needs. With Masterworks.io you don’t have to choose between big risks and big returns. Sign up today, select PODCAST and you can skip the 70,000 waitlist to get first dibs. Just go to www.masterworks.io and select PODCAST. =======================

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

• 0:00Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Chad Baroford is a software engineer and technical lead for ThorChain. In this conversation, we discuss ThorChain, how it works, why cross-chain swaps are important, how Shapeshift adopted the system, and what the impact on DeFi will be. I really enjoyed this conversation, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is Circle. They're a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce, and financial applications worldwide. Circle's

• 0:43Anthony Pompliano?

  a principal developer of USD Coin, or USDC. It's the fastest-growing, regulated, fully-reserved dollar stablecoin in the world. They've got more than $13 billion in market cap, and they're adding nearly $300 million in net new digital dollars every week. You can get a free Circle account and their suite of platform API services that bridge the gap between traditional payments and crypto for trading DeFi and NFT marketplaces at circle.com. I recently had Jeremy, the CEO, on the podcast. He did an excellent job, very clear that they've got product-market fit and growing quickly. Go check him out at circle.com. Next up is Exodus, who is leading the world out of the traditional financial system by

• 1:25Anthony Pompliano?

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• 2:10Anthony Pompliano?

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• 2:50Anthony Pompliano?

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• 3:31Anthony Pompliano?

  market. Masterworks.io lets you invest in paintings by artists like Banksy, Kauz, and Warhol at a fraction of the entry price. From 1995 to 2020, contemporary art prices outperformed the S&P 500 by 172%, had a lower loss rate than gold, and only virtually no correlation to equities. Head on over to masterworks.io and skip the 15,000-person waitlist today with promo code POMP. Masterworks.io, skip the waitlist, use promo code POMP. Go check them out at masterworks.io. Alright, let's get in this episode with Chad. I hope you enjoyed this one.

• 4:08Speaker 01

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

• 4:33Anthony Pompliano?

  Alright guys, bang, bang. I've got Chad here with me. Thank you so much for doing this.

• 4:37Speaker 02

  Yeah, thanks for having me.

• 4:39Anthony Pompliano?

  Absolutely. So you were the technical lead for Thor Chain. Let's just jump right in. What is the problem that Thor Chain is trying to solve?

• 4:47Speaker 02

  I think the problem that Fortune is trying to solve is that it's kind of funny this this this ecosystem has built this decentralized idea of not requiring any centralized entity to to be able to to conduct. But yet we require such as any to conduct ourselves from, you know, Bitcoin to Ethereum or Ethereum to Bitcoin Cash or whatever it might be. We we go through some centralized entity with the Binance or Kraken or Coinbase or whatever. Uh, but I mean, much better, I think, from from almost every perspective. If we can move through one chain to another chain without being censored, without being KYC, without being asking for permission. In fact, when you want to say you want to send some Bitcoin and and and transfer it into Ethereum on the other side.

• 5:30Speaker 02

  The only actual requirement of Thor Chain is that you can make a Bitcoin signature. That's literally the only thing. You don't have to do anything else. You don't have to download this thing. You have to sign this thing. You don't have to do anything else. Just can you make a Bitcoin signature? You can. You got it.

• 5:44Anthony Pompliano?

  So when you think through um kind of both problems, right? Because I think one of this is a centralized entity, meaning uh the platforms. Uh, and then the second thing is what I'll just call kind of a common unit of account, right? So you're selling Bitcoin to go to a stablecoin and then you're buying Ethereum um a- as an example. Uh, let's start with the centralized entity. What are the big problems there uh as to why uh people should not uh want to or or uh or or should be looking for decentralized solutions?

• 6:14Speaker 02

  Uh, that's a great question, and I don't even know where to start because there's so many places I could talk about, to be honest. So you could talk about the whole black box element to it, not really knowing how much they have, how much do they, are they actually solvent? Are they not solvent? Uh, you could talk about the complexities of it takes weeks to sign up for one of these things, which is ludicrous. My my uh father-in-law just signed up for one of these services, I'm not gonna name which one. And he bought some Ethereum and said like, oh, you can't take this off the system, off the network for nine days. He was like, wait, well, I why can't I get my own Ethereum? I just bought it. Why can't I take it off to my? Wallet and it's just like, wait, what is this? What are we doing here? This just makes no sense whatsoever. Uh, not to mention the exchange have been hacked more than one time, we'll say.

• 6:58Speaker 02

  Uh, it's just, it's been a calamity almost from the beginning, starting from Mt. Gox and we're still reliant on these systems. And I don't think anybody just like loves them in a sense. Everybody's like, we use them because it's the thing we have to use now. But like, I think we're all looking for a system that's more instantaneous, that's more readily available, that's. You can just use it right on your wallet if you want to use it. It's just that simple.

• 7:21Anthony Pompliano?

  Yeah. And so then when you think about the unit of account, right? That idea that you've got to go from Bitcoin uh into a stablecoin as an example, uh before you buy another asset. Uh, what, what's the issue there? Is it just an efficiency thing? Is there a cost uh element to it? How do you think about that?

• 7:36Speaker 02

  Well, it's not just, I mean, efficiency is one part of it, right? Uh, it is, it takes more time. If you want to swap from Bitcoin to Ethereum, it actually takes more time to do that on. Some senseless exchange than it would on, on Thorchain, for example. But like, the problem is that you're giving somebody else your Bitcoin, which is theirs at that point. And they're giving you like an IOU that you're kind of holding on to because you want to hold on to their IOU for whatever reason. And then you're going through a process and then there, and there you are to swap from that to this, to this. Paying fees along the way and then at some point in the future, requesting your Ethereum out, whatever that might be. Uh, this is not a system that makes sense in the greater scheme of like how crypto works or how crypto was born out of.

• 8:18Speaker 02

  It's like, I want 100% accountability. I want to be able to 100% verify that everything is legitimate. Everything's like real. And that's true with Fortune. You can actually look at the wallets, know exactly how much money it has, how much it claims to have and see they're always the same. Like, that's a really important concept that, that we just don't have in a cross-chain perspective. We have it within like. You know, DEXs within Ethereum, like that worked extremely well, right? It was a great uh platforms. We're missing that core component, like, let's move Bitcoin to Ethereum, to Litecoin, to Binance, to whatever else. There's no, there's no uh, it's complete neutrality. The network doesn't really care. It's completely agnostic about what chain or asset you're talking about. It's just, we're going to treat everybody identically the same.

• 9:00Anthony Pompliano?

  For sure. When somebody asks you, what is Thorchain? How do you describe it?

• 9:05Speaker 02

  Well, the most like simple and succinct way of describing Thorchain is that it's like a like a cross chaining as well, right? That's like the simplest way you can put it. That's kind of oversimplification in many respects. Uh, in a larger sense, I see it as uh the highways between blockchains, right? Because every blockchain today is a completely separated island onto itself and has very little relationship or connection to any other blockchain in the world for the most part. And so Thorchain is creating decentralized uh highways that you move from blockchain A to blockchain B. And it can theoretically connect with any blockchain, not only in any blockchain, but any layer one or layer two solution theoretically. It can do pretty much anything you wanted with it.

• 9:46Anthony Pompliano?

  And so when you talk about these highways, really what's happening here is it allows you for uh the ability to swap uh directly Bitcoin for Ethereum, right? So one, you don't have to use a centralized entity uh in terms of uh those exchanges we talked about. But also two is I don't have to sell an asset into that common user of account. I can literally do an asset swap uh between these various blockchains. And so how does that technically work? Like, what are you guys doing under the hood to make this uh possible?

• 10:16Speaker 02

  Yeah, sure. So effectively, the Thorchain network has a whole host of different like uh Bitcoin wallets that it kind of manages, if you want to call it that. And so whenever you send in a Bitcoin transaction into the Bitcoin wallet that's managed by the network, all the different validators have their own copy of the Bitcoin full node they're running individually. And they're all looking at the Bitcoin blockchain. They're all saying, okay, I saw POM send one Bitcoin into, you know, our uh Asgard vault address on the 4 Chain network. And this is how much it was, and this is all the details. And then once a super majority of the nodes kind of all agree on each other, like, oh, we all saw the same thing. POM sent one Bitcoin to us and he sent uh an operator or like a memo

• 10:59Speaker 02

  with the intention of like, I want to swap Bitcoin for Ethereum or for USDT or for whatever else. And so that they all kind of make that like the consensus that that transaction actually occurred. And then the network says, okay, POM tennis one Bitcoin, he wants to get some Ethereum out. We do a calculation of how much Ethereum that would be on the the continuous liquidity pools of the network. And then it sends out that Ethereum to whatever ETH address that you requested it on. Uh, you know, O X something, something, something, something, something, right?

• 11:31Anthony Pompliano?

  And so is this all being built by a single team? Is this a distributed thing where there's just a bunch of kind of teams working on open source software? Like, how exactly was this originally built? And then how are you guys pushing forward? You know, and kind of continued to improve or innovate around this?

• 11:48Speaker 02

  Yeah, I mean, it started with an initial team for sure. It's very small team. I think it's only like nine-ish people, 10-ish people on that matter. But it's very quickly grew much beyond that. And so there's actually like well over a dozen different teams building different aspects of the ecosystem. In fact, like more of the treasury that the team has is being spent to fund like other projects and other groups of people to build block explorers and to build dashboards and UIs and, you know, data science and now analytics about this, that and the other thing, whatever it might be. So the vast majority of that funds are actually going out to other people or other teams other than the team that they originated from.

• 12:32Anthony Pompliano?

  And so when you think about why this is better, we talked a little bit about the lack of centralization. We talked a little bit about the lack of need for that coming unit of account. What else is better about this, right? Is this something that it's such a superior product that everyone's going to go and adopt it? Is this going to coexist with existing models? Just talk a little bit about how you see the advantages of Thor Chain with some of the other players in the space.

• 12:58Speaker 02

  Yeah, I mean, I think one of the big things here that is quite innovative is that that the Thor Chain network allows people to earn yield on whatever assets they hold, right? So you can earn yield, you can supply Bitcoin to the network, just Bitcoin by itself, supply Bitcoin to the network. And then you can earn yield on that Bitcoin and then come back later and pull out more Bitcoin than you put in the system.

• 13:22Anthony Pompliano?

  How does that work?

• 13:23Speaker 02

  Well, it's effectively when you put just Bitcoin into, let's say, the Bitcoin pool on on Thorchain. Every time somebody swaps in and out of Bitcoin, go in one direction or the other. A little bit of the fee is kind of left behind in the pool and you're effectively buying a percentage of that pool when you put your Bitcoin into it's like, oh, I'm going to take on since 10% of the pool is is my Bitcoin, so to speak. I own 10% of the pool. So whenever there's a swap of like $100 fee came through, let's just say for random 10% of the $100 is mine and I made $10 in in value from that. And my case of the in Bitcoin. And so you can actually like put in a bunch Bitcoin and then come back later and have more Bitcoin than you had before. And that's just not just Bitcoin. That can be Ethereum, that can be Litecoin, that can be Tether, Ripple, I mean, whatever it is, your your kind of cup of tea.

• 14:08Speaker 02

  It doesn't really matter. And that's that's a first in this industry.

• 14:11Anthony Pompliano?

  And what is the average yield right now across those assets? Are we talking about like 1% or 2% or are we talking about like 50%?

• 14:19Speaker 02

  It's certainly closer to 50%. You can look at the data. It's freely available. Anybody can check and verify. You're welcome to.

• 14:28Speaker 02

  It ranges from some assets, some pools are much higher, like I've seen some that are like 100 and something 20% or something like this. That's not typical, but it can happen. And the majority are going to be around 30, 40, maybe 50%.

• 14:42Anthony Pompliano?

  Got it. And I'm assuming that that's a function of how much is in the pool and then how popular the swaps are, right? So if you have very few people have contributed to a pool and it's a very popular kind of asset to swap in and out of, then obviously that would lead to a higher you know, kind of yield. And then the idea would be that's an incentive for more and more people to join that pool, provide more liquidity and therefore that return that gets commoditized down over time.

• 15:05Speaker 02

  Right, right. Even even the the amount of fee that you pay when you make a swap through a Thorchain pool is actually based upon the depth of the pool and the size of your trade. So if you're doing like if the pool is like, you know, 100 units and you're doing a 50 unit trade, so to speak, that was like a massive, you know, you're going to pay a huge slip fee in that scenario. But So for smaller cap pools, they're going to have a lower depth to it. So people are going to pay more on the swaps and they do that. We already see that happening over the last 10 months of economic activity. People are willing to pay higher amounts of fees for, you know, this smaller cap pool. I mean, it's how the economics are actually functioning today. But for pools like, you know, the Bitcoin pool or the Ethereum pool, which can be a lot deeper,

• 15:48Speaker 02

  the fees that people will pay will be far less than you would see on, like, say, like a Uniswap.

• 15:53Anthony Pompliano?

  Yeah. And when you think of Uniswap as kind of a, the market leader, let's say, for decentralized exchanges, do you view them as just kind of another player in the crypto ecosystem? Do you view them as, you know, quote, quote, competition? Are people making a direct choice between do I go and actually trade this asset on Uniswap versus use Thor Chain? Just how do you see the relationship there?

• 16:15Speaker 02

  Yeah, it's a good question. So we're all fans of Uniswap. They really do some really great stuff over there for sure. I don't see them as direct competition per se. For, for one, I see Thor Chain as being more of a short tail asset than a long tail asset, meaning that you're not going to have every asset across the entire crypto space on Thor Chain. You're going to have the most economically significant ones. And if you want some sort of small cap illiquid edge coin, you can probably do that on Uniswap or Thushy Swap or one of these guys. The difference is that Thor Chain, whenever it manages a new asset, it has additional cost to the network. Whereas with Uniswap, it doesn't have significantly more cost in there. So they can have as many assets as they want on that smart contract and

• 16:59Speaker 02

  it just, its scale is just fine. Whereas Thor Chain has more and more cost for every asset that you add. You have to sign transactions and all these things that just kind of increase the amount of load on the network from that. So you're not going to see a bazillion assets on Thor Chain, but even with the five chains that are currently supported now, it's already supporting like, you know, Ninety-two percent of the entire, you know, cryptocurrency, you know, industry, right? So it's already, I mean, even right now, the multi-chain CAS that we launched a few days ago, a week ago, is already has more access to more funds than like Uniswap or Solus swap because you have like Bitcoin, which is like the biggest, most important thing that like has to be supported,

• 17:41Speaker 02

  but it has been largely forgotten and just like left out for whatever reasons. And this is the first time like Bitcoins being like brought into the fold of like, okay Bitcoiners, you actually have access to real DeFi with layer one real Bitcoin. No pegged assets, no wrap, any of that stuff, like legitimately layer one Bitcoin.

• 18:00Anthony Pompliano?

  Yeah. When you think about the recent Shapeshift announcement, that was really fascinating to me. So Eric Voorhees, it sounds like they decided to take the Thor chain kind of technology and infrastructure, and that's now what is powering their exchange. So in effect, what they've done is they've basically put a front end on top of Thor chain, and that's where their users are going and using that. One, is that correct? And then two, talk a little bit about kind of the importance of somebody like Shapeshift adopting this.

• 18:33Speaker 02

  Yeah, sure. I mean, Shapeshift is like one of the oldest and most respected, you know, cross-chain, you know, swaps like in the industry, at least in my opinion, that's true. And like, and they've done an excellent job over the last, you know, few years. And their original vision was to be able to facilitate trades or swaps without using, requiring KYC. And unfortunately, that didn't work out so well because the technology wasn't there at the time and they got, you know, pressure from regulators to start doing KYC and all these things. We know the story. And so Unfortsing came around and effectively was kind of fulfilling the original vision of Shapeshift. They like saw that and they were like, oh, this is something we have to get on board with. And so now they have the ability to be able to swap between chains without requiring KYC at all.

• 19:19Speaker 02

  And if they want to, they they not doing this yet, but they might do it in the future. They can actually have Thorchain charge a fee on their behalf back to them. They want to using affiliate fees. So you can actually actually like create wallets that have interface with Thorchain to do some swap, whatever. And you can actually the wallet manufacturers can make money by integrating with Thorchain by using affiliate fees. Like, you know, one basis point or 10 basis points or whatever the wallet wants to charge per swap.

• 19:43Anthony Pompliano?

  Yeah, what's really fascinating is basically because you've built that piece of infrastructure, you now can have these front ends plug into the system, right? And those front ends have a way to monetize, but also they're essentially bringing you customers. So doing customer acquisition, they're bringing you liquidity. And so it's a really fascinating model. And ultimately goes back to this thesis of like open systems are going to beat the closed systems. Right?

• 20:07Speaker 02

  Yeah, absolutely.

• 20:08Anthony Pompliano?

  Naturally, you you guys have built this open system that anyone can plug into.

• 20:12Speaker 02

  Yeah, it's an open protocol, right? No one controls the gates. It's they're wide open for anybody who wants to use them. If Shapetip wants to integrate with them, more power to them. If Trust Wallet or Exodus or CoinDesk, Coinbase, excuse me, if they want to integrate, hey, go at it. You know, it's a freely available network for anybody to use, however they see fit. That's how it should be.

• 20:35Anthony Pompliano?

  Yeah, absolutely. We talked a little bit about various ways people can participate. So they can go ahead and they could swap assets using Thorchain. They can provide assets to the liquidity pools. Another element is they can basically provide a node. And I think that you guys have a very unique kind of mechanism around the nodes and they can be swapped out with each other. And just talk a little bit about what that means for somebody to participate as a node and then how that entire system works.

• 21:02Speaker 02

  Yeah, yeah. So in order to participate with the node, you have a there's a capitalistic kind of race, so to speak, to who gets. Add it into the system. So you can, you can walk up and say, hey, I'm ready to become a node. And then network will say, okay, we see you there. But every time it churns, which happens every three days or so, uh, the network will say, all right, who are the most valuable people to churn in relative to the highest bond, right? So right now on, on, on single chain chaos net, that's about, uh, about 13 million dollars like in room that you have to have in order to become a validator on, on the network. Not because like that's, that we as a team that said, that's just literally what the capitalistic markets dictate.

• 21:43Speaker 02

  That it, that you make so much revenue running a node that it's worthwhile to spend 13 million dollars buying enough room to run, to run one. That's literally what the, like the capitalistic markets dictate. Uh, and so the network is designed that every three days it churns and, and some people get kicked out and some people get pulled in. And that's to ensure that everybody gets kicked out at some point in time. Everything is up. There's a continuous churn happening and nobody, there's nobody that stays in there forever. Uh, and at over time, uh, every time the network turns, all the funds need to be migrated. Cause every time the network turns, new threshold signature like vaults are created and the old ones are being retired. So all the Bitcoin and all the finance and all the, all the assets have to be migrated programmatically

• 22:28Speaker 02

  to the new vault and it happens just every three days. And it proves that the network actually has access to all these funds, right? Like if, if nobody signed transactions, maybe you lost the keys. We, we've seen this where like, you know, certain exchanges, you know, the head hodgel got arrested and then like all the funds were locked up and you're like, well, I guess you have it, but you can't sign anything. So do you really have it? Do you know what I mean? And so like Thor chain proves that every three days by moving every coin, every Satoshi, every, every asset across to a new vault, every three days, just a proof that has access to every single asset that it holds.

• 23:05Anthony Pompliano?

  I love it. Uh, you mentioned rune, uh, which is the token within the Thor chain system. Describe why you need that.

• 23:13Speaker 02

  Yeah, you actually require room. Like, it's kind of, it's counterintuitive to some degree, but I'll explain why. Like, if you had used something that wasn't room, like, let's say you use Bitcoin as the base asset of the network, which from a technological perspective is a little bit impractical due to the slow block times, but it is feasible, it is possible. But the problem with that is if you secure the assets with an external asset like Bitcoin or Ethereum or Tether or whatever, the economic incentives are incorrect in the network and then somebody will attack the network and steal all the funds and make a huge monoprot. Right? So say like, for, for, for, with kind of game theory this out. Say there's like seventy-five million dollars of bond that the validators are running with,

• 23:56Speaker 02

  and then the pools have about thirty million dollars of, of assets, right? Uh, and say we're doing Bitcoin first, so it's like seventy-five million dollars of Bitcoin and then uh, twenty-five million dollars, oh, sorry, fifteen million dollars of Bitcoin and fifteen million dollars of other various assets, so. Because every pool is comprised of Bitcoin and something else in this scenario. So if I were to get enough Bitcoin to cyber attack the network and get like a super majority, so say I need, I bought fifty million dollars of Bitcoin to attack the side of it, out of the seventy-five million that are used. I can go ahead and take ownership of everything and have complete access to everything and do whatever the hell I want because I have a super majority of notes, right? I can do the hell I want to do. So I can go ahead and seal the seventy-five million, including the fifty million that I put from the beginning,

• 24:40Speaker 02

  plus the thirty million over here, so that's a hundred and five million dollars. So I spent fifty million dollars to steal a hundred and five million dollars worth of assets. I'm great, I'm doing, I'm on cloud nine. I just double my money, I scam the hell out of this network, I stole all the money, I'm like, great. You know, right? But if it was runes, very different. It's actually a very different behavior. So if it's seventy-five million dollars of the rune and then fifteen million dollars of rune here and the fifty million dollars of Bitcoin, Ethereum and various other assets. And say I spent fifty million dollars of rune to cyber attack the network, so in the end, I have this thirty-five million rune here, the fifteen million rune, that's about ninety million dollars, and then I have fifteen million dollars of various assets. But that ninety million dollars I spent that I have a rune is worth nothing because the value of runes is, is, is

• 25:22Speaker 02

  derive from the value of the network and the network's hacked and all the funds are gone. Who the hell is going to want to buy room? Nobody. It destroys the capitalistic system like of that token instantaneously. So I spent fifty million dollars to get ninety million dollars a room. Then all that goes to zero and I actually walk away with all the Bitcoin and Ethereum and everything else, which was fifteen million dollars. So great. I spent fifty million dollars to steal fifteen million dollars. I just lost thirty five million dollars in that in that transaction. You literally cannot secure these assets with another asset like as great as Bitcoin is, I'm not even shitting on Bitcoin right now. Bitcoin's amazing, but you cannot use it for this app, this application purpose. You have to have a token that's

• 26:05Speaker 02

  that its value solely derived from the value of the network itself.

• 26:10Anthony Pompliano?

  Do token holders get a percentage of those transaction fees in the liquidity pool as well? Or does all of those transaction fees go into the liquidity pool and for whoever's participating?

• 26:20Speaker 02

  That's actually a really great question. So anytime the system makes income, right? Other than it's black rewards, other than LP, you know, swapping all this kind of thing downstream, we're talking about lending and borrowing to increase revenue for the network. But anytime that happens, that is a considered be a system income. And that gets divvied up between the liquidity providers and the node operators in a way relative to the the difference between the Bitcoin, the ruin on one side and the ruin on the other. The network is has a what's called an incentive pendulum to say that, okay, if it's even what it's supposed to be, which is one, two thirds on the node side and one third on the pool side.

• 27:03Speaker 02

  They'll get a fifty fifty split between the two of them. But if they get at the bond gets too high and it's like it's over bonded. Then the bonders make less money and more money goes to the liquidity providers on this side. So that incentivizes people to pump more money on this side or take money out of this side and move into this side to go back to that kind of equal like equilateral like pendulum swing of the middle to ensure that. So everybody profits from the system, no matter what role you're taking into it and it ensures everybody profits in an equal way. Relative to the economics of the situation at that moment.

• 27:36Anthony Pompliano?

  And is it possible for somebody to own Rune without participating in the liquidity pool or being a node operator?

• 27:46Speaker 02

  Correct. Yeah, you can hodl it in your wallet if you really want to, you know, more power to you. I think, but I think most people aren't going to do that because you can just turn it into, instead of just being dead capitalist, sitting in a wallet, not really doing much for you, why not make it work for you and actually generate a yield from that? If you want to do that, have at it, you know, go nuts. If you don't, hold in your wallet, that's fine too, up to you.

• 28:10Anthony Pompliano?

  Yeah. What's been the biggest surprise for you working on this?

• 28:14Speaker 02

  Oh, the biggest surprise?

• 28:17Speaker 02

  This thing, it just felt like this thing blew up so fast, so quick. Like when I first started working on the project in mid 2019, you know, committing the first lines of code and everything like, even at that time, we knew that this was something interesting, something special, but you just can't fathom like how far we will go. Like it's almost ridiculous. Like I remember we were like just joking around like, like imagine if Rune hit like 10 cents, like would that be like insane? And now it's at like $15 or whatever the hell the price is right now. Like it was just like, it was to see it kind of go from that kind of initial vision that the team had and then grow into this like gargantuan thing that actually launched and actually supports cross-chain swaps

• 29:01Speaker 02

  just in a way that's permissionless and such as the censorship resistant is absolutely remarkable. I could not have, you know, I can't get over it.

• 29:12Anthony Pompliano?

  I love it. What's the impact on decentralized finance, regardless of where it happens? Bitcoin, Ethereum, whatever, when you have this kind of cross-chain swap, does that just provide a foundation for more faster and kind of better innovation and adoption? Or how do you think about that?

• 29:31Speaker 02

  Yeah, like up until this point Ethereum has been kind of a DeFi king, right? Like that's pretty inarguable in a sense. And that's largely because

• 29:42Speaker 02

  Ethereum's programming language was much more flexible and powerful than Bitcoin. Bitcoins was like very kind of weak, not much you can really do for the most part. And then Ethereum came along and said, hey, you can do some really, you know, you have a turning complete language called solidity and you can do all these kind of interesting things, which is great. But, once you have something like a Thor chain that's written on top of the Cosmos network, you have a much more powerful and much more flexible system that you can build and construct. You literally cannot build Thor chain on top of the Ethereum system. It just like fundamentally just won't even come out the door, right?

• 30:14Anthony Pompliano?

  Why not?

• 30:14Speaker 02

  And so, well, because you need value, your own, the security of your own network to secure external assets. You can't rely on Ethereum security to secure an unknown amount of assets on Bitcoin and Litecoin and all these other things. You need validator nodes, your own validator nodes that are incentivized to be observing transactions on Bitcoin, in Ethereum, and all these other blockchains in order to make that viable or possible. Furthermore, like even, you know, Ethereum transaction, its cost is like goes up remarkably high, the more complicated a computation is, or the more data intensive it is. And that's

• 30:54Speaker 02

  not going to be economically feasible on Ethereum. You have to do it on your own kind of native sovereign chain, which is what Thor chain is. I think that Ethereum will still have a place in the future, but any DeFi application that wants to be worth its salt will have to support the entirety of the crypto sphere, not just the Ethereum people, or these people over here. But just say, you can walk up with your Bitcoin, with your this, with your that, or whatever, and you get treated with the same exact access as anybody else. So Thor chain has access to like over $2 trillion with the liquidity around like the crypto sphere. And, you know, Uniswap has access to like, I think it's like $450 billion to

• 31:36Speaker 02

  do all the ERC20s and Ethereum together. That's like, you know, a sliver relative to what Thor chain has access to. So the liquidity will end up being on a chain like Thor chain, for sure, because that's where you can actually swap from one place to another in a way that actually makes like real sense.

• 31:52Anthony Pompliano?

  Yeah, it's fascinating. Before I let you go, I've got three questions that ask everyone, that you let ask me one to finish up. First is, what is the most important book that you've ever read?

• 32:03Speaker 02

  Uh, most important book I ever read is a, is a, it's a boring thing. It's a coding book, but I'm not gonna say it because that's gonna be too boring for people. I think more, a more fun answer is, um, uh, Neil deGrasse Tyson wrote up a book called, uh, Astrophysics for People in a Hurry. It's a great book. Uh, it really gives you a great understanding of astrophysics if you're, if you're interested in that, like I am.

• 32:25Anthony Pompliano?

  Second question comes from our friends over at Eight Sleep. Uh, I used to sleep like five or six hours and then I got this, uh, thermo-regulated bed. Basically, I make it super cold and sleep like a baby now and have become a full convert to the, the sleep religion. Uh, what's your sleep schedule like? Do you sleep a lot? And how's that changed over time?

• 32:44Speaker 02

  Well, we just launched Mollet Chain a week ago, so it's not, it's not quite like well-rested. I'll say that. And also, as I mentioned, my wife is about to give birth in like a week, literally. So I'm sure my sleep is gonna be even worse, you know, in the coming few months after, uh, my baby girl gets here. Uh, that's gonna be, you know, a venture onto its own for sure.

• 33:05Anthony Pompliano?

  That's, those are two acceptable answers as to why to not get some sleep.

• 33:11Anthony Pompliano?

  Uh, last question for you, then you get to ask me one, is aliens. Are you a believer or non-believer?

• 33:17Speaker 02

  Oh, uh, well, I definitely believe for sure. I mean, if you think about it, like, what are the most, uh, common elements in the universe? The most like plentiful elements? It's helium, uh, in this water, helium, hydrogen, uh, oxygen, carbon, and nitrogen. Those are the most pop, most common in that order, most common elements in the universe. What are the most common elements in the human body, right? Or this life itself? Well, hydrogen? Hmm, what is interesting? Not helium. Helium is a noble gas, doesn't comply with anything. So it's like a, a block you can't build anything with. But oxygen, nitrogen, carbon, all these things. We are comprised of the same things, of the most plentiful resource on the entire universe.

• 34:01Speaker 02

  So it makes no sense if we were the only ones, right? Even even carbon, carbon, we are carbon based because you can make more molecules of carbon than you can with every other element combined. It's extraordinarily powerful molecule, which is why we're made of it. And it's also five times more common than another element like silicon, just conceptually assessing similarity to it. So are they, are we around other aliens? Absolutely sure. I mean, if you're gonna make the statement, if you can make the reverse statement. So I'm gonna go a little tangent here. But if you're gonna make the reverse statement that we are the only thing in the universe, then you have to come up with a reason of how, what infinitesimally small thing that happened to us on this little blue, a pale blue dot, as Carl Sagan once called it.

• 34:46Speaker 02

  And that'd be, that's a hard, like, that's a hard idea. Like, nobody has actually yet come up with an idea of how that was feasible. Especially when you consider that, like, there are more stars in the universe than there are grains of sand on the entire planet Earth. So you, it had to be so rare that you had to win the lottery every day for a few years sequentially. That's how like rare it would be that we survived and we are the ones that existed. Nobody else existed in the entire universe. I have a hard time believing that. It makes much, much more logical sense that the most abundant resource created more of us, more like carbon-based life forms than this infinitesimally small thing we're talking about, where this one little pale blue dot got something for some reason. It makes no sense to me.

• 35:32Anthony Pompliano?

  I think that may be one of the best answers we've ever had. That was awesome.

• 35:36Speaker 02

  I'm sorry, but I went a little bit of a science rant there. I'm a little bit of a nerd, my, my dillough, but.

• 35:41Anthony Pompliano?

  What one question do you have for me to, to wrap us up?

• 35:45Speaker 02

  My question for you is like, what are your feelings on tribalism? Like, people are, you have some, you know, Bitcoin maxies, ETH maxies, even Rune maxies. Like, how do you feel? Is this a good thing for the space? Is it a bad thing in the space? Are we heading in the right direction or the wrong direction? Like, how do you feel about that?

• 36:02Anthony Pompliano?

  I don't think the world's binary, so I don't think that it's all good or all bad. I actually think the truth's somewhere in between. When you think about the good sides of it, there's definitely, you know, like kind of the hardcore Bitcoin argument would be like, oh, it's the immune system. Right? It's the people who don't take anyone else's shit and they kind of, you know, really adhere to truth and kind of keep people focused and all of that. So there's definitely truth in that. The bad side is you can turn away people who may actually be, you know, genuine actors and interested. And I always say that you can, you can be a maximalist without being an asshole as well, right? Like that is a possible thing to do.

• 36:43Speaker 02

  What did you say?

• 36:45Anthony Pompliano?

  And that is across the spectrum, right? I think that like every single community, every single tribe has extremes to it. And also people who are more centrist, right? It's basically just like politics, right? You can have multiple political parties and then you'll have the extremists in every political party and then you'll have people who are more centrist in those political parties. And so I think that just, we all have to realize that like, in many cases, we all actually have the same goal or the same finish line in mind. It's simply that the path to get there, sometimes there's disagreement and sometimes it's actually just people want to work on different things. They're interested in different things and that's all okay.

• 37:22Speaker 02

  Yeah, no, that's a great answer. It's a great answer.

• 37:25Anthony Pompliano?

  Yeah. Where, where can we send people to find you on the internet or find more about Thor Chain?

• 37:30Speaker 02

  Well, don't find me. I'm not, I'm not that important, but you can find Thor Chain at, at Thor Chain. There's lots of people you can follow within the community, like Bitcoin Sage and Miho Brains and all these great people that are in this community. You can go ahead and follow them. Don't follow me. I'm useless.

• 37:46Anthony Pompliano?

  Is there a website where people can go as well?

• 37:50Speaker 02

  Absolutely. Yeah. Thorchain.org is one of our sites. You can check it out, read the docs. There's some great explainers on rebas as well. If you want to get to the nitty gritty of it all, it is a very complicated system. It does take a while to learn. It takes a while to learn Bitcoin and its true form release. So I encourage people to look and to read to understand. The more you read about it, the more you realize that something really significantly happening here.

• 38:13Anthony Pompliano?

  Yeah. Awesome, man. Well, listen, thank you so much for taking the time to do this. It's very cool to see people adopting something that you guys have built. So we'll have to do it again in the future.

• 38:23Speaker 02

  Yeah, thanks for having me. Appreciate it.