#567: Barney Mannerings on Decentralized Derivatives

Barney Mannerings is founder of Vega Protocol, an innovative decentralised derivatives trading and settlement network. He previously created Pik, a web/mobile first payments company building a better deal for digital content creators and consumers. In this conversation, we discuss decentralized finance, non-custodial exchanges, liquidity, decentralized derivatives, layer 1 vs layer 2, and Vega Protocol. ======================= Revolut is a finance app in the US and UK, that say they're the simplest way to access crypto. Sign up today at Revolut.com/pomp and make 3 card transactions to get $15, which you can exchange for any tokens Revolut supports. As usual, when you move your money from fiat to crypto your capital is at risk. See T&C's for details. Revolut is a financial technology company. Banking services provided by Metropolitan Commercial Bank, Member FDIC. Cryptocurrency services provided directly by Paxos Trust Company, LLC. ======================= Cosmos is building the Internet of Blockchains, marking a new era of interoperability, scalability, and usability. The free flow of assets and data between blockchains with bridges to Ethereum and Bitcoin will unleash the potential of DeFi, NFTs, and much more. Dive into Cosmos at cosmos.network/pomp ======================= Remote makes it easy for companies of all sizes to employ global full-time employees and contractors. We take care of international payroll, benefits, taxes and local compliance, so you can focus on growing your business. You can get 50% off Remote's full suite of global employment solutions for your first employee for three months. Just visit remote.com/pomp and use promo code "POMP"

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. Now let's kick this thing off. Barney Mannerings is founder of Vega Protocol, an innovative decentralized derivatives trading and settlement network. He previously created a web and mobile-first payments company, building a better deal for digital content creators and consumers. In this conversation, we discuss decentralized finance, non-custodial exchanges, liquidity, decentralized derivatives, layer one versus layer two, and the Vega Protocol. I really enjoyed this conversation with Barney, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up are my friends over at Remote. When you

• 0:44Anthony Pompliano?

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• 1:29Anthony Pompliano?

  Again, remote.com/pomp and enter promo code POMP to get started. Next up is Revolut. Back to the basics for a second. I've partnered with Revolut, a finance app in the US and the UK that say they're the simplest way to access crypto. They're putting their money where their mouth is, too. You can sign up and make three card transactions and get $15. Yep, that's right, 15 bucks. What can you do with the $15? You can exchange for Bitcoin or any of the other tokens Revolut supports. Yep, they are crypto-enabled. These guys have made it easier to get some skin in the game. As usual, when you move your money from fiat to crypto, your capital is

• 2:10Anthony Pompliano?

  At risk sign up now through revolut.com slash pomp to get a $15 reward and put them to the test. Head on over to revolut.com slash pomp to get the reward and put them to the test. You can see terms and conditions for details. Revolut's a financial technology company. Banking services are provided by Metropolitan Commercial Bank, a member of the FDIC, and the cryptocurrency services are provided directly by Paxos Trust Company. Last but not least is Cosmos. Cosmos is building the internet of blockchains, marking a new era for interoperability, scalability, and usability. The free flow of assets and data between blockchains with bridges to Ethereum and Bitcoin will unleash

• 2:55Anthony Pompliano?

  the potential of DeFi, NFTs, and much, much more. You can dive into Cosmos today at cosmos.network/pomp. Again, cosmos.network/pomp. Go check them out and let me know what you think. All right, let's get into this episode with Barney. I hope you enjoy this one.

• 3:12Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:40Anthony Pompliano?

  All right, guys. Bang, bang. I've got Barney here with me. Thank you so much for doing this, sir. Thanks for having me. Absolutely. Let's just jump right into it. You've been working on decentralized derivatives. Before we understand what that is and why it's important, maybe we can just start out with decentralized finance in general. How do you evaluate the space? Why is this important?

• 4:02Speaker 02

  Yeah, so the way I think about this, you know, I got interested in the whole space, you know, back when Bitcoin was kind of pretty new. And then I got sort of excited again when Ethereum came out and particularly the idea of creating tokens and sort of decentralizing the financial system and the movement of value. And I spent most of my career working in, you know, kind of traditional finance. And one of the things you learn in that is that, you know, controlling the money itself is like, you know, a tiny percentage of actually the day to day use of finance. And so in order to actually sort of take control of finance, decentralize it, allow for innovation and freedom, you really need to decentralize the financial products and trading that people do. And you need to make those things non custodial as well. So really, I see DeFi

• 4:43Speaker 02

  as kind of absolutely necessary for Bitcoin and cryptocurrency in general to be successful.

• 4:49Anthony Pompliano?

  And so when you think about that today, how far into that journey are we? Are we still just starting? Have we made considerable progress? Are we at the finish line?

• 4:58Speaker 02

  We're far from the finish line. I think, I think we've made considerable progress. Like, I mean, I think it's amazing to see the innovation and the pace of innovation and also the amount of money, because that really brings people building and investing into the DeFi space. So I think we've made really considerable progress, especially the last couple of years. Maybe after a few false starts around the time of EtherDota and the first DEXs, but I think we've made really good progress. We're seeing great stuff. But I also think there's a long way to go. Like, if you, if you look at the, the scale of trading, the speed of trading, the low cost of trading actually on the, you know, the big centralized platforms, the stock exchanges and the FX markets and stuff like that, you know, we're a long way to go before we can actually rival that with the technology. But I firmly believe we can get that.

• 5:41Anthony Pompliano?

  And so when you think about how far we've come, I think that there's a number of kind of improvements that you've identified in terms of DeFi in general still needs to work on to kind of get to that next level. What are some of those improvements that are top of mind?

• 5:55Speaker 02

  Yeah, so probably like, you know, some of the biggest ones right now are, you know, obviously the fees are a problem because if you're looking at Ethereum fees right now and you look at the volume of trading, not just, you know, people compare to Visa, but Visa is actually a tiny fraction of the volume of orders and trades in the financial world. And there's no way at the moment that we can do that at all, let alone at a reasonable fee, where traditional finance is doing it really cheaply. So that scaling is, is one aspect. And, you know, there are some, there are some answers there that are showing promise. And then the other big one for me is probably around, well, you know, fairness. And that's where you have the MEV and the front running and things like that. Because if someone else is sort of adversarially able to take value from you every time you venture into DeFi, unless you're super careful, then that just makes it really difficult to get involved

• 6:39Speaker 02

  and it removes some of the freedom you have. Probably the final one is risk. Like, you know, at the moment, there are a lot of implicit risks because we have a lot of code that's been written, not, not battle tested. And we don't see, you know, we don't actually see how things connect together yet. So those are probably, probably the three biggest.

• 6:54Anthony Pompliano?

  And one of the aspects of decentralized finance that I think most people immediately think is the decentralized element of it. But there's also this element of non custodial exchanges, non custodial lending. Maybe we can start there with the non custodial exchange. And you can kind of talk through, it's like, why is that important? And then how exactly do these work? So for somebody who's not super technical, that wants to understand how a non custodial exchange, just how would you describe that?

• 7:23Speaker 02

  Yeah. So, you know, I guess the, the simple, high level description of a non custodial exchange is that in, in the traditional world, and most of the time, if you're doing something with money, you know, that some product that someone's offering, then, or something that someone's built, you're giving them the money and letting them do that, you know? And if you go take out a product with a bank, you give the bank your money and you trust them, or maybe you trust your government's insurance scheme that compensates you if the bank goes bankrupt. But you're trusting someone to look after your money and not to lose it all. And, you know, that sort of works for large companies and for small amounts of money. If you're a consumer putting your money in a bank and the government's going to guarantee that, maybe you trust that, but maybe in some Countries you don't.

• 8:06Speaker 02

  The advantage that decentralization gives us, and it doesn't always give us this by default, because you can design decentralized systems that are also custodial. But if you design the systems the right way, the advantage is that you can have people design, if you will, products that are kind of built, you know, code, which lets you have access to that financial functionality without needing to give your money to someone else, so that, you know, if someone has reviewed the code, if you take on that product, if you start using this system, then you don't have to trust this person not to lose your money. And it's kind of the same with, you know, whether you leave your Bitcoin on an exchange or whether you leave it on a cold wallet or a ledger or something like that. And I think, you know, partly it's sort of

• 8:50Speaker 02

  the way of this space and the ideology and the reason we do a lot of these things is to grant ourselves those freedoms and control over our money and our future. But also it enables a lot of innovation, because it means that smaller players can create things without you worrying they might disappear if something is non-custodial.

• 9:09Anthony Pompliano?

  And so when you think about these non-custodial exchanges starting, there's a lot of benefits, right, which you just described and kind of a lot of things that prevent them from doing bad stuff. But one of the challenges to getting started is around liquidity. And how do they basically get folks to provide liquidity on an exchange or for lending? What's the state of liquidity in DeFi? And then what are maybe the tactics people are using that work to kind of bootstrap liquidity versus the tactics that maybe people thought worked, but actually have proven not to be as effective?

• 9:41Speaker 02

  Yeah, so it's a great question about liquidity there. And I think it's one of the things that people don't necessarily appreciate is that in traditional finance, actually, there's a role that the exchanges and, you know, the service providers have, even though they're sort of centralized entities and we all sort of think, oh, centralized is bad. They actually carry out that role, you know, they make a lot of profit, but they use some of that profit to go and find liquidity and to do deals and to take on the risk of there being a lack of liquidity. And, you know, some of the early mistakes were simply to ignore that role and think centralized bad, but not replace it with anything. People have got a little bit better now, so they've worked out that actually, you know, trading creates value and some of that value needs to go to attract liquidity. But we're also, you know, there's a couple of things going on that mean that, you know, we're doing things that might not be sustainable.

• 10:26Speaker 02

  And, you know, the first one of those is you've got a lot of investment money and a lot of token issuance. You know, things are going up, everyone's. You know, the the price is going up because everyone has a huge speculative view of the future, which means that you can issue tokens and give them to liquidity providers. Eventually, that won't be sustainable. This stuff becomes infrastructure. You've got to make it happen really cheaply and it's got to be really efficient. So, you know, that kind of VC money and just token issuance forever just to pay for liquidity is gonna it's gonna dry up at some point. And that relates to the other problem, which I think we still have, is the the capital efficiency of liquidity. And, you know, right now, the the people offering it are in a kind of nice position, if you like. A lot of people kind of hodling their hodling their coins and they don't have that much to do. So they're just kind of like, I want some yield.

• 11:10Speaker 02

  So it doesn't really matter. Like, if you, you know, when you look at, and I think, you know, even Uniswap acknowledged this with their V3 announcement, when you look at the percentage of the funds in a pool that are actually supporting prices that have any realistic chance of happening, it's like a really small percentage because most of the funds support the rest of the curve, which are very far away from the price. So if you think about that from an efficiency point of view, the amount of capital you need stuck in that pool to provide the liquidity for the prices that are happening is much, much higher compared to what it would be on an order book based exchange, for instance, where you're really supporting the bids and offers right around the price. And so as people get, as there's more competition, both in terms of decentralized exchanges, but also with other ways to earn yield and other things to do with your money, people are going to start to get really picky about this because if the VCs aren't throwing money

• 11:55Speaker 02

  at them and they can get that revenue and that yield more efficiently somewhere else, then, you know, it's hard to argue why they're going to put the liquidity somewhere. So I think we're going to have a sort of arms race in terms of efficiency and yield you can get. And we've already seen it sort of starting with the yield farming and the automated balancing and and everything going on. But I think that's going to heat up massively once we get to kind of like the scaling solutions and the faster, more efficient trading networks. Because at the moment, everyone's super constrained by Ethereum and it's kind of, you know, it's block time and the simplicity of the algorithms you can do. So you can't, there's not that much room for innovation. But I think that's going to change massively. And so we're going to see a big race for efficient liquidity.

• 12:35Anthony Pompliano?

  And what do you think is kind of the end game there? Does this become so turnkey that people know how to elicit liquidity? Folks understand how to kind of yield farm or move liquidity around? That eventually this can all be automated? And it just is like an automated finance system? And there won't have to be all this human decision making and choice? Or will there always be some new way, some new mechanism? And people are really going to have to pay attention to become experts in this?

• 13:03Speaker 02

  So I think it's a bit of a bit actually. So I think there will always be room for people coming up with algorithms and improving them. You know, to offer better liquidity or more efficiency in a certain place. And, and that's never going to be always one, one size fits all. You know, even if you're just talking about simple AMMs, different curves work better for stable coins than for volatile coins, for instance. And so, you know, even in that case, you might, you're going to have tweaks and new algorithms and improvements all the time. But equally, I think there's a lot of room for people to get passive income and there's a lot of room for automation. So, you know, actually either giving your, giving your money to a DAO and effectively having them invested in liquidity, or having algorithmic allocation. The other thing I think is really interesting is turning liquidity into a market itself and making it tradable.

• 13:44Speaker 02

  So, you know, what's better than automation by an algorithm is automation by a market quite often. You know, markets are fantastic resource allocators. And so, once we kind of have a standardized way to value liquidity across disparate assets. So you can kind of see what's the value of a unit of liquidity on market A and on market B and on platform C. Then you start to get to a point where you actually, you're automatically allocating liquidity in the same way that you're allocating resources in markets. And then it becomes super efficient.

• 14:12Anthony Pompliano?

  And so when you think about liquidity, when it comes to derivatives, maybe let's talk a little bit about kind of the current state of derivatives before you guys come along. Just how do these work? How decentralized are they? And what's like the pros and cons of all of the new derivative kind of mechanisms that are being built in DeFi?

• 14:32Speaker 02

  Yeah, so right now derivatives between C-Fi and DeFi are really, really different. You know, on the centralized side, you can take so much leverage that it's bad for you. You know, you can take 100x leverage on Bitmex or wherever and be wrecked before you finish clicking the button. Or you can go on to one of the platforms like Synthetix and pay 2, 3, 4, 5, 6, 7 times more than the notional value of your position. Yes, you go from 100x leverage to minus 7x, you know, it's 1 over 7x, you know, you actually get negative, less than 1 leverage. So really, the difference between the two right now is really huge. And it's huge because of the risk of liquidations and closeouts.

• 15:15Speaker 02

  It's huge because of the risk management and the algorithms needed to do those kind of things. And it's also huge because of the liquidity point as well. You know, you mentioned sort of liquidity on derivatives and it's a bit different to liquidity on spot markets. On a spot market, once the trade is done, everyone's happy, you know. So Uniswap is, despite being a little less efficient maybe than a very liquid order book in many cases, Uniswap is very similar to a spot exchange because you can make a trade as long as you're happy with the price, it's done. The thing about that is it doesn't take any effort to provide the liquidity because the trade's done once it's done. With derivatives, once you take on a trade, you've got a position and that derivative has a lifetime and it matures or settles eventually, or in a perp's case, it never settles.

• 15:58Speaker 02

  And so if you as a liquidity provider, or if the pool ends up with a position and that position is highly leveraged, you as a liquidity provider or the pool can go bankrupt. And so, you know, there are a number of solutions in AMMs to kind of allocating these things and allowing a pool to take an inventory position. There's obviously the traditional solution of active management of those things. There are some interesting new work and combinations and, you know, actually, we've been looking at similarly, you know, how to do hybrid order books with both AMMs and order books and how to work out the kind of, you know, that liquidity story for derivatives.

• 16:30Anthony Pompliano?

  And so then when you think about the decentralized derivatives and you start to kind of push further into what you guys are actually building, what are the things that you look and you say, okay, this is what we're building and this is why it's better, or this is why it's an improvement on the legacy kind of mechanisms that have been built?

• 16:49Speaker 02

  Yeah, so, you know, obviously liquidity is one part of that. We have a pretty sophisticated liquidity algorithm and one of the things we look at with that is incentivizing liquidity in the right way. And, you know, the way I sort of look at this is you should be incentivized to provide liquidity that's valuable to the market, which in general means liquidity that trades, because if it doesn't, it's not that valuable. You should also be incentivized to take risks. So if you create a new market and make it available to people, the protocol ought to reward you for doing that if you took a risk and if you maybe, you know, maybe you put money up in time and that market might not succeed, and it ought to reward you much more than someone who finds a really liquid BTC USD market and thinks, hey, I'm going to provide a little, you know, a little percent of extra

• 17:33Speaker 02

  liquidity to that market. And so, you know, you need to reward the early risk takers and you need to reward the people who create the most trading value. So that's one area we look at. Another area we look at is around performance. You know, we think that the kind of the block time that you see on Ethereum, but also the constraints of, you know, the actual complexity of contracts that you can have are quite limiting even for spot markets, but the derivatives, we think they are, you know, just a real problem. And then, you know, we thought it was essential to eradicate like MEV and front running from blockchain-based decentralized trading.

• 18:06Anthony Pompliano?

  And when you start to think about the types of people who use your protocol and your decentralized derivatives versus some of the other types of derivatives available, are they the exact same types of folks? Or do you tend to kind of incentivize or collect a different group of people?

• 18:24Speaker 02

  I think in the long run, you know, everyone's going after the same groups of people, but I think the design decisions and the order you build things will affect sort of who's interested in it right now, you know. So when we first launching, we're in a testnet right now, when we first launch a mainnet, I expect, you know, the people will, people involved in that will be the people who are most interested in perhaps relatively slightly less product innovation in terms of some of the, some of the funky stuff that's going on in Ethereum DeFi, but they're interested in getting some of those, you know, measurable quality improvements. Perhaps they're interested in making some of their, you know, centralized trading, non-custodial, and taking the risk of the centralized exchanges out of there. But in, you know, in the long term, we want to actually enable even faster

• 19:07Speaker 02

  iteration. But I think ultimately, everyone's going after the same stuff, but those choices we make will impact who uses it first, I guess.

• 19:15Anthony Pompliano?

  Yeah. And when you think about the actual technical architecture, are you a layer one, a layer two, a little bit of both? Like, how do you just kind of think about that?

• 19:25Speaker 02

  Yeah, a little bit of both is the answer. And, you know, the way, the way that we think about that is, firstly, we're not trying to take over the world, you know, we're not attempting to say, in order to use our system, you've got to move all of DeFi to our system and you've got to use, issue your tokens on our system and do everything else. What we actually have sort of said is, we really love DeFi, we want to integrate with it. And we want you to be able to use other DeFi protocols on Ethereum and on Terra and on Polkadot and wherever, as well as using what we're building. And so we don't actually have issuance of tokens on the Vega platform at all. What we actually have instead is bridges. And so the first bridges to Ethereum, it's very much like using something like Uniswap, you kind of, you know, pops MetaMask,

• 20:08Speaker 02

  decide how many to deposit, authorize the transaction. And then, you know, once a number of confirmations are through, the Vega network recognizes your balance and you can trade that E S C twenty on Vega. So, you know, we really see ourselves as this kind of, in that sense, we're a derivative scaling layer two, you know, for Ethereum and other networks. But the network we're building in order to do that and to do that in a secure way and to be a non-custodial network is also a kind of a layer one. It's a proof of stake network.

• 20:35Anthony Pompliano?

  Do you think more people are going to have to do this? Or is this something that's unique to you guys?

• 20:40Speaker 02

  Yeah, I mean, I think people will. I think, I think Compound recently announced that they're kind of building their own chain. You know, and I suspect the reasons are fairly similar. And I think, you know, one way to look at this is like, when you look at traditional finance, you know, people build websites using like WordPress or whatever, Ruby on Rails. People in exchanges don't build exchanges in WordPress or Ruby on Rails, right? They, they build them fully optimized for being centralized exchanges because there's so much money moving around that even a small optimization is highly valuable. And this is going to be the same, you know, when you've got a low-key use case with not that much use or not that much value moving around, you know, solidity and a standardized network and scaling layer and features is going to be great. But when you have as much money as there is in global finance moving around and as much security at stake.

• 21:25Speaker 02

  And everything else, you know, the advantage of optimizing and building a sort of application specific layer that's really optimized for that application and that can iterate faster at being good at that application. That advantage just starts to to come home. So I think I think you'll see this in in a number of areas where there's a clear demonstrated value. I think you'll see people start to specialize and build, you know, really optimize things once we see that the value is there.

• 21:50Anthony Pompliano?

  And then how do you think about regulations around decentralized derivatives? Is it just, hey, we take the existing regulations and we just apply them here? Is that possible? Could there still be the same level of enforcement and understanding? Or do we need some type of new rules or an evolution or improvement of the rules?

• 22:07Speaker 02

  Yeah, it's a good question and it's a really hard one because I think sometimes the the existing regulations are extremely unclear or not worded in a way that they can easily be applied like. You have regulations that assume that there is someone in control of a trading platform. And in fact, you know, in these cases, there is no platform. There are people connecting to a network, trading with each other. So you have some issues with how how things are written and and you have that kind of compounded by the fact that a lot of the regulators are you know, reluctant to actually issue issue full detailed guidance or update regulations. And so I do think ultimately new rules or improvements to rules or clarity will be beneficial. But I also think you can get quite a long way applying the rules you have, albeit in a slightly different way. And what I mean is, you know, if if something is non custodial, if something is decentralized, if something is censorship resistant,

• 22:52Speaker 02

  what you have to do is you have to regulate the users of the of the system and you know, the the New York Stock Exchange or the London Stock Exchange, they don't do that really. They they and they do, but they they rely on the platform as an enforcer. They kind of go and ask the platform to do a bunch of things before they let someone trade there. That doesn't really work in this sort of decentralized world. And so you actually have to regulate the people using it. And you know, I think people will build a lot of tools for this and and in general, people should want to do this. You know, most people early on in crypto, maybe thought that they weren't going to do their taxes. And then once once the rules are released and they realize they all kind of got two years down the road and realized they had a horrible headache because they'd been sort of, you know, just using crypto without thinking about this and then and went back and went through everything and and worked it out. And I think.

• 23:35Speaker 02

  The same will happen here and people will build tools and people will build on chain systems to enable people to ensure compliance. But you can you can sort of do that in a way where it's kind of like the system's decentralized. You choose to obey the rules like the speed limit, right? The sign comes up and says, you've got to do sixty miles an hour or less and you you decide whether you obey that. But that's what you have to do and your car's speedo helps you to know if you are. And I think I think that's where we'll end up. You know, you can obey whatever rules of whatever country you're in if you need to, but it's going to have to be your responsibility because you're the only person who controls your keys and your account. And you're the only person who even knows what country you're in and so which rules they are.

• 24:10Anthony Pompliano?

  Do you think that that poses a problem from like an enforcement standpoint for governments? Because they may not even know who you are, where you are, or whether you're following the rules?

• 24:20Speaker 02

  Yeah, I mean, I think there's there's definitely challenges in this, right? Like, you know, there's obviously for businesses, I think it's easier because most businesses, you know, they're gonna they're gonna file their taxes, they're gonna get audited and they're gonna be pretty clear that they want to follow the rules. So for businesses and I think governments are going to have a relatively easy ride because, you know, ultimately, the business is not going to be risking being shut down in pretty much all cases. And if it is, it's sort of perhaps behaving illicitly. Anyway, I think where the government start to start to find things are sort of trouble is it kind of increases the size of the black market or the gray market of kind of the area where individuals particularly are able to do things and, you know, kind of ignore the rules like people who take cash for doing building work and stuff, you know, and they kind of just don't pay tax and try and get away with it for a bunch of stuff

• 25:05Speaker 02

  in some cases. And I think, you know, that's the risk that for the enforcement perspective is that you have a bunch of people to whom there's basically no cost to deciding which rules to obey and which to ignore if they're kind of individuals. And so, you know, that's and that's not an easy one to to get around. And, you know, there's a there's a large part of me which kind of says, well, maybe that maybe there are some things that the government want to regulate that that people don't feel they should or have a right to, you know, I kind of kind of it's like, yeah, do the government have a right to wander into your house every so often and check that you're not breaking any laws in there? No. And so, you know, this kind of surveillance by default to kind of shut off, shut off rulebaking before it happens is something governments have got used to, but it's not something that I think is is universally

• 25:49Speaker 02

  supported by people, particularly in this space. So it is going to present them a challenge to work out how they deal with that and what the alternative is.

• 25:57Anthony Pompliano?

  Last question I have for you before we get into the rapid fire is if we fast forward 10 or 20 years, do we have 100% in derivatives globally being actually executed and kind of entered into and settled in a decentralized manner? Is it 50% of the market? Is it 5%? Just how do you think about 10 to 20 years out from a market share standpoint? And then what is the path for us to get to that point?

• 26:25Speaker 02

  Yeah, so I think there's two bits of this. There's the underlying assets. And I think, I think once it comes, you know, think about email versus like faxes and letters. Once it comes and everyone has it, moving money around using blockchains is going to be so obviously better that even if they're done on centralized exchange, even if the New York Stock Exchange or CME do their derivatives still on a centralized exchange, I think the assets are going to become more and more blockchain based. And I could easily see very high penetration in like 15, 20 years' time. As for how much of the actual derivatives are on fully decentralized and non-consular systems, I think that'll probably be less. And in many cases, and particularly for established markets, there's not a particularly huge imperative to move. They're quite cheap and

• 27:08Speaker 02

  they're quite efficient unless you're locked out of that market because it doesn't operate in your jurisdiction, or unless you're trying to innovate and create new markets that don't exist or new products. So I think what we'll see is kind of, you know, the market that's there will stay there as taxis versus Uber. The taxis are there not realizing Uber created a whole new market by making it cheaper, more accessible, and actually grew the pie. So I think what happens is we grow the pie, and a huge portion of that growth happens over in decentralized world. Some things move over, or some markets become more global because we're able to decentralize them. But in reality, there's a huge amount of momentum behind the centralized markets. So I think there's going to be centralized alternatives, at least for the major markets for a good long time.

• 27:49Anthony Pompliano?

  Yeah, it's absolutely fascinating. Is there anything that you've learned in terms of the last couple of years that has really surprised you that you didn't expect as you've been building

• 28:00Speaker 02

  Yeah, what surprised me, how long Ethereum 2 took?

• 28:06Speaker 02

  No, I mean, you know, it's been quite interesting watching the last year or so, like, you know, the number of things sort of that maybe happened in 2017 that you sort of see echoing and some of those things happening similarly again and some of the stuff that goes on. I guess that slightly surprised me. I thought things would be different and they are definitely different, but you know, I've seen some of the same stuff.

• 28:27Speaker 02

  The other thing I think that surprised me is the willingness people have to experiment with their money and to to put their money and their crypto assets towards effectively towards these experiments where they could lose it all to help move things forward and, you know, to bet on bet on things going well. And you know, that when we started Vega, we really sort of expected to have to do a lot more to prove it worked and a lot more, you know, of that groundwork to get money in. And actually, what's happened in DeFi in the last couple of years is people have shown a, you know, voracious appetite to come in and and just start trading these things and using them and evaluating them in production. I think that's that's really cool because it means we can move really fast and develop new stuff.

• 29:10Anthony Pompliano?

  When we go to end, I always ask everyone the same three questions and then you'll get to ask me one question at the end. The first question is just, what's the most important book that you've ever read?

• 29:20Speaker 02

  Important book I've ever read? That is a, the one I always quote is The Hitchhiker's Guide to the Galaxy. So I'm gonna have to go with that one.

• 29:31Anthony Pompliano?

  Why that one?

• 29:32Speaker 02

  I, I think, I mean, I found it incredibly incredibly fun and it made me start to think about things in a very different way. The other book, which I'm gonna gonna name here is perhaps more important directly, sort of relevant, is things like Snow Crash and some of the kind of, you know, William Gibson and another cyberpunk, because I tend to think those kind of sci fi things in general and The Hitchhiker's Guide to the Galaxy 2, they kind of teach you things about the future. They teach you the ways things could be and ways things might happen and ways people might interact. And I find that really helpful and really helps me sort of design new things.

• 30:08Anthony Pompliano?

  I love that answer. Second question comes from our friends over at Eight Sleep. They've got this thermo regulated bed that essentially allows you to turn it really hot, really cold. I sleep on it super cold. Used to only sleep like five or six hours. Now I sleep eight or nine. Absolutely life changing. What's your sleep schedule and how has that changed over the years?

• 30:28Speaker 02

  Um, yeah, so I try to get a decent amount of sleep when I can. It doesn't always work, but I tend to think sleep is good. One of the things when I sort of started working, you know, not exactly for myself, but you know, starting companies and working with teams where I have more flexibility was to kind of try and institute a schedule where it was rare to wake up to an alarm. So, you know, if you can kind of get your sleep schedule working, so you kind of got a, you know, you've got an alarm of last resort, but actually you're going to wake up naturally with the sun or whatever, I find it much better relaxation. And yeah, I also like a super cold bed.

• 31:01Anthony Pompliano?

  That's the best way to be. Last question that you get asked me, one is aliens. Are you a believer or a non-believer?

• 31:08Speaker 02

  Yeah, I mean, I certainly believe there's life out there. I don't know whether it's intelligent and I'm really unsure that it's visited us, but I certainly believe there's more life forms than just on this planet in the universe.

• 31:20Anthony Pompliano?

  I tend to agree. Do you think we'll get to them or we'll contact them?

• 31:24Speaker 02

  I don't know, not in my lifetime, I suspect.

• 31:28Anthony Pompliano?

  I am right there with you. I think that they're probably out there, but probably too far away. What a little one question.

• 31:34Speaker 02

  Find out they're there. Like, yeah, to work that out.

• 31:37Anthony Pompliano?

  That'd be, that'd be pretty incredible. What, uh, what's the one question you have for me to finish up?

• 31:42Speaker 02

  Question I have for you.

• 31:45Speaker 02

  You know, I guess what's the, um, you know, of all of the kind of, all of the kind of sort of ideologies and reasons, you know, why we're in this space and why we're doing, you know, what we're doing at Vega and other people doing it. What's the one that resonates the most with you and why?

• 31:59Anthony Pompliano?

  I think it's just giving power back to people, right? Just returning kind of freedom and power back to the everyday person. And I'm not one of these folks who I would put in like the anarchist category of like with to take down the entire system and completely build from scratch. I think that there is a way to acknowledge in a very rational and optimistic way. Some of the legacy system can be valuable and can actually provide incredible benefit to people, both organizations and individuals. At the same time, there's a lot that needs to change and be improved, frankly. It's not just change for changes. It's actually about improvement and creating human progress and being able to increase human productivity and happiness.

• 32:44Anthony Pompliano?

  And so I think that's probably the thing of just a philosophical belief that we can use technology to return power, control, freedom, and ultimately happiness back to people and do so in a very nonviolent way, right? Historically, for that to happen, you'd have to have some sort of violent conflict between warring nation states or communities. In this case, you're able to do it in a very kind of passive way. So I think that's actually a really interesting kind of development through all of this and one that just resonates.

• 33:19Speaker 02

  Awesome. Couldn't agree more.

• 33:21Anthony Pompliano?

  Where can we send people to find you on the internet or find more about what you guys are building?

• 33:24Speaker 02

  Yeah, you can find more at Vega dot X Y Z or Twitter has at Vega Protocol.

• 33:33Anthony Pompliano?

  Awesome. Barney, listen, thank you so much for doing this. I think it's fascinating to learn more about kind of decentralized derivatives for everyone who listened to learn more as well and what to do again in the future.

• 33:43Speaker 02

  Brilliant. Great to be on. Thanks for having me.