Dan Doney, CEO of Securrency: National Security Debate - Bitcoin vs. The Dollar

Dan Doney is the CEO of Securrency, a financial markets infrastructure technology company focused on enhancing capital formation and stimulating global liquidity. In this conversation, Dan and Anthony discuss his time working as the Chief Innovation Officer of the Defense Intelligence Agency, how innovation works in the CIA and NSA, why a focus on innovation inside large organizations is important, what he’s building with Securrency, and why capital formation and global liquidity is important to improve via a blockchain. ETORO-----This episode of Off the Chain is sponsored by eToro, the smartest crypto trading platform, and one of the largest in the world. Join 11 million other traders and create an account at etoro.com/pomp and build your crypto portfolio the smart way. -----If you enjoyed this episode and want to stay updated on everything Bitcoin, blockchain, and crypto. Check out Off the Chain newsletter by visiting offthechain.substack.com and join 35,000+ other investors currently subscribed to my daily investor letter.

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 Off the Chain, simply the best podcast in crypto. Let's kick this thing off. Dan Donnie is the CEO of Securrency, a financial markets infrastructure technology company focused on enhancing capital formation and stimulating global liquidity. In this conversation, we discuss Dan's time working as the Chief Innovation Officer of the Defense Intelligence Agency, how innovation works in the CIA and NSA, why a focus on innovation inside larger organizations is important, what he is building with Securrency, and why capital formation and global liquidity is important to improve via blockchain. I really enjoyed this conversation. Before we get into it, though, I want to talk about

• 0:42Anthony Pompliano?

  the two sponsors for this episode. The first sponsor, me. I need your guys' help. I need you guys to head on over to YouTube, search Anthony Pompliano, scroll down, click on the channel, and subscribe. My goal for 2020 is to reach 100,000 subscribers on YouTube, and you're going to be the people who help me do it. So head on over to YouTube and subscribe to the channel where you can view all of the videos on YouTube of these interviews. Also, head over to offthechainmerchandise.com. That's right, we got fresh gear. Go to offthechainmerchandise.com and you can buy t-shirts, hats, mugs, cellphone carriers, all kinds of cool stuff. Offthechainmerchandise.com. Now, the other sponsor, who's not me this

• 1:24Anthony Pompliano?

  time, is Etoro. Etoro's been killing it. They started out offering stocks, commodities, traditional currencies, and cryptocurrencies to users around the world, but last year, they hopped on over the pond and came to the US and got started by offering cryptocurrency trading. It's not just a crypto exchange, though. Many of you already know, they've got social trading and copy trading. Social trading is the ability to go to any asset, whether it's a stock, Bitcoin, or something else, and you can see what thousands of people are talking about around that asset. They're sharing information, charts, graphs, and opinions about the asset, its price movements, and future outlook. But then if you find somebody on the platform that you really like, think is smart, or has a great trading background, you can hit a button that says "Copy Trader," and now all of a sudden, your portfolio will mirror theirs. If they buy an asset, you buy one.

• 2:10Anthony Pompliano?

  Buy the asset. If they sell the asset, you sell the asset. If they buy back the asset, you buy back the asset. Your portfolio mirrors theirs through copy trade. So it's pretty cool to see a crypto exchange that has both social trading and copy trading all in one location. Etoro is now up and running in the US and continues to grow at an incredible rate. They're so impressive that I even invested. Here's a little known secret. Etoro is larger than Robinhood. Just don't tell anyone in the US. They don't like to hear it. So head on over to etoro.com and sign up for an account. Let me know what you think about their social trading and copy trading. When you hit etoro.com, let them know I sent you. Feel free to tag them on social media and me and let them know that I'm the one who sent you. They really hate when you do that. So check out etoro.com, check out off the chain merchandise.com and check out YouTube to go subscribe to the

• 2:55Anthony Pompliano?

  new off the chain channel there as well. I hope that you enjoyed this episode with Dan. I really took a liking to him and enjoyed recording it. So let's get into it.

• 3:05Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pom 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 Pom as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 3:31Anthony Pompliano?

  Bang, bang. I'm here with Dan. We got a whole bunch of stuff to cover. I'm super excited about this because you've got a very different past, I think, than most people who come on the show in the defense world, intelligence world, and then now you're working on tokenization and compliance tools. So a whole gamut of things, but thanks so much for coming and doing this.

• 3:50Speaker 02

  Thanks, Pom. Really looking forward to it.

• 3:52Anthony Pompliano?

  We're recording this on a nice cold day in New York City, so we're warm now inside.

• 3:57Speaker 02

  And I forgot my jacket of all things. I had to suffer through the streets out there.

• 4:03Anthony Pompliano?

  Yeah, it's cold, but it could be worse, right? Um, let's start from the very beginning. Where, uh, where'd you grow up and kinda how did you get into the defense and intelligence stuff?

• 4:13Speaker 02

  So I, I'm a farm boy from western Pennsylvania.

• 4:16Anthony Pompliano?

  Okay, what part?

• 4:17Speaker 02

  Near Pittsburgh, Greensburg.

• 4:20Anthony Pompliano?

  Okay, I don't know. When I, uh, when I got deployed to Iraq, I was there with a bunch of guys from western Pennsylvania, uh, but more like Brookville and all that stuff.

• 4:29Speaker 02

  Yeah, Yinzers for the folks at home who, uh, are tracking.

• 4:32Anthony Pompliano?

  We, we don't even need to go into that.

• 4:35Speaker 02

  So I, I started coding as a, uh, as a 10-year-old. Um, built cattle auction programs as a teenager. Went off, um, didn't really frankly know a whole lot about what was going on in the world as, uh, I was in a closed-in backwoods, uh, tiny town, Turkey Town's actually the name of my hometown.

• 4:57Anthony Pompliano?

  Turkey Town?

• 4:58Speaker 02

  Turkey Town, Pennsylvania. We got, uh,

• 5:00Anthony Pompliano?

  Only in Pennsylvania?

• 5:01Speaker 02

  Yeah, more, more cows than people. Um, I, uh, my older brother went off to the Naval Academy and I saw him come back from, from there, a different man and, uh,

• 5:12Anthony Pompliano?

  Positive or negative?

• 5:13Speaker 02

  Uh, completely positive. I mean, he left as a boy, came back as a man and, uh, that made an impression on me. So that was the path I chose. Went into the Naval Academy, um, was fortunate enough to go to MIT for grad school, straight out, and spent, um, several years on a sub, couple of years teaching at the academy and then got out in 2000, just before 9/11.

• 5:35Anthony Pompliano?

  Got it. Um, and when you got out, what was the, uh, the thought process of what you wanted to do?

• 5:40Speaker 02

  Started having kids and, uh, so it was, it was time to hop out. So I actually went to work for a startup. This is, uh, very formative for me. Um, the name of the company was Virtual Logic and it was built around a concept of a virtual company, where you have a shell at the top of just administrative systems, things that you need to, to function as an employee, but underneath that was a bunch of entrepreneurs. And so they were really creating conditions where you would go and and eat your own. And so as you came into this, you're really being mentored by entrepreneurs. Um, in the DC area, it was one of the fastest growing companies in uh in DC. Purchased by a big company, I won't say who. Um, and they completely obliterated the entrepreneurial spirit and a number of us.

• 6:25Anthony Pompliano?

  Decided to leave.

• 6:27Speaker 02

  Nine eleven hit, um, I had been doing AI research, starting my my grad thesis was uh AI control of the nuclear reactor. At MIT, so I'd been working in AI, uh, was recruited to NSA and worked there for almost a decade in artificial intelligence.

• 6:44Anthony Pompliano?

  So we got to talk about nuclear reactors because I had uh Mark Schneider come on the podcast, um, who uh spent 20 years in the Navy. Um, and uh worked in a number of the nuclear uh energy and and kind of power uh aspects of the Navy. And um, I was shocked at just how obvious it is that nuclear power is important. Right? And and kind of the, I understand there's a bunch of controversy around it to some degree. But uh, what is AI controlled nuclear power?

• 7:11Speaker 02

  Yeah, so um, obviously, safety is a is a huge thing. And um, so mechanisms to allow you to detect when things are going wrong early. Um, AI is a really great tool, even in the early nineties, to be able to pick up early signs of problems that are coming.

• 7:29Anthony Pompliano?

  And this is uh things like there's problems within the facility? Or there's problems external to the facility that may start to uh inhibit what we're trying to do at the facility?

• 7:39Speaker 02

  Really all the above, but um specifically in in this case, detecting anomalies in the reactor. Problems with pumps, among other things, early signs of uh boiling, among other things that that shouldn't happen. And so having effective tools to combine all the information to be able to make a decision faster, obviously, is is important.

• 8:01Anthony Pompliano?

  Got it.

• 8:01Speaker 02

  The irony, you know, people have seen the movie Chernobyl. That's even in the early 90s, the kinds of technologies that were being produced for nuclear energy of self-safe reactors that could not, even if someone was malicious, explode, cause damage, were produced.

• 8:21Anthony Pompliano?

  Yeah.

• 8:22Speaker 02

  You just couldn't get them to market because there was so much fear around the industry. So the irony is, the reactors that stayed around were ones that were using older technologies that weren't better.

• 8:31Anthony Pompliano?

  Yeah.

• 8:32Speaker 02

  And obviously, the way the Russians built their reactors was not safe.

• 8:36Anthony Pompliano?

  Yeah. It's just fascinating to me. My favorite part of the conversation with Mark was that they put the rods in a pool, and it just sits in the pool for 10 years. I was like, man, this is like a homemade, you know, science experiment that actually works, right? But it was very clear, I think, just the complexity, right, involved in this, and it becomes very obvious that machines are probably going to be better at doing it. I would have thought in the future, but it sounds like even in the 90s, the machines were actually better at it than humans.

• 9:04Speaker 02

  Well, so it's one thing to do a research thesis at MIT, it's another thing to have it in a production reactor.

• 9:12Anthony Pompliano?

  Yeah, for sure.

• 9:13Speaker 02

  Yeah.

• 9:14Anthony Pompliano?

  So, all right, so you go, you join the NSA first, then you spend time at Department of Homeland Security, and then you spend time at the Defense Intelligence Agency. So for those at home, I'm going to use acronyms. So NSA is the National Security Agency, DHS is the Department of Homeland Security, and then DIA is the Department of Intelligence Agency. I feel like I've got my alphabet soup down for the day. What'd you do at the NSA?

• 9:40Speaker 02

  I was part of what was originally known as ARDA, the Advanced Research Development Activity there.

• 9:47Anthony Pompliano?

  Okay.

• 9:48Speaker 02

  It later became IARPA, as it merged with CIA's research arm. And so I spent that decade in ARDA and then IARPA.

• 9:58Anthony Pompliano?

  Okay.

• 9:59Speaker 02

  My focus was AI. So I was there, the early programs, one called Novel Intelligence for Massive Data. Another one that I worked with was Acquaint, Advanced Question Answering for Intelligence.

• 10:11Anthony Pompliano?

  Okay.

• 10:12Speaker 02

  So, those programs were, Acquaint, for example, was about teaching machines to answer questions. And the intent was analytic questions. I worked with the founders of IBM's Watson capabilities, so the capabilities that competed on Jeopardy actually started in that early work in the early 2000s.

• 10:31Anthony Pompliano?

  And so you guys are looking at this as, we think that this is possible, so let's go find today's technologies and try to build the capabilities to ask a machine a question, have it answer, etc. Or are you kind of reverse engineering, or how does that work? Because I think the defense organizations and kind of community has done a great job of driving research and development over the years and then commercializing the technology. How does that kind of come together as you're there working on it?

• 10:59Speaker 02

  Yeah, so in advanced research activities, you're really looking at the time horizon 10, 20 years out.

• 11:05Anthony Pompliano?

  Okay.

• 11:05Speaker 02

  So, again, at the time, working quantum computing, among other things. And the roots of AI, and specifically, the focus there was on natural language processing. And really building the foundation, and why does the intelligence community care? Why does DOD care? It's about decision advantage. So, the impacts of failed intelligence decisions are obvious. 9/11 was failed intelligence.

• 11:35Speaker 02

  So, we need decision advantage. We need it on the battlefield. So, throughout history, battles are won based on decision advantage. So, the question is, how can you get better information than the adversary? How can you make decisions faster and better than the adversary? And that involves processing information faster. In finance, it's known as alpha. And so, it's the same basic mechanism. So, our focus first is, how can you process a large amount of prose in order to help an analyst get effectively a bionic knowledge worker? Allowing a person to reach out further into the information space. And my specific focus was on, how do you blend human intuition and machine speed in the space? And we did a lot of work there.

• 12:20Anthony Pompliano?

  So, one of the things that I want to clarify, because... I feel really strongly about a part of this work and then the other part I think is less controversial. There's the front end of like what data do we have, right? Which is all of the collection and surveillance and all that kind of stuff. And I think I don't want to have that conversation today because I think that part of the conversation, one is controversial, two, it's a really, really nuanced conversation that would take hours for us to go through. What I really want to focus on is kind of where you had an expertise and a lot of experience, which is there's data that's provided to you, right? And it's how do we analyze the data that we have regardless of whether we should have it, not have it, is it's from citizens, militaries, you know, adversaries, whatever. You're really focused

• 13:03Anthony Pompliano?

  on, okay, we have this data. How do we look at this data and analyze it for insights? And then also to make decisions from it. But that's a pretty wide open kind of, you know, white space. Like, like, how do you start to, to look at that and say, this is the areas we want to focus on, or start building it?

• 13:20Speaker 02

  Yeah, well, look, the fundamental challenge is this. So, search engines that people know are really about how does a person find the information that they need? Well, in a massive amount of data, it's actually the opposite question that's important. How does the data find the person who needs it? So, that comes down to valuing information. Obviously, there's a massive amount of information. What do I need to know right now? And the metrics for the, at the very end of my research, one of the things that we discovered that was profound, still profound, is that value of information matters to folks. It's relative. So, a piece of information that's relative to me and what I do is different. So, there's

• 14:00Speaker 02

  no universal sense of value. But it came down to four fundamental parameters or dimensions. Obviously, relevance matters. Things that are relevant to you are different than me. And if I'm getting a bunch of information not relevant to you, that's, that's not useful. But it's profoundly important to get novel data. That is data that you haven't, something you didn't know before.

• 14:22Anthony Pompliano?

  Okay.

• 14:22Speaker 02

  Well, here's what was profound about that. Search engines, Google's PageRank algorithm, among others, really drive popularity. Popularity and novelty are almost the inverse of each other. So, in other words, if you're a knowledge, an expert in a field, getting a feed of what's popular for folks is actually giving you stuff you already know. That's not useful. So, the very algorithms that drive more towards centrality are not useful in terms of delivering valuable information. You need novelty. And mathematically, it's a much harder problem.

• 14:54Anthony Pompliano?

  And novelty meaning, so if you take that search algorithm, the things that show up on the first page are the most popular pieces of information. It's the most discovered, kind of the most widely accepted as fact or truth, et cetera. Novelty would be, what's the thing on the 472nd page of the Google search results? So, it's related, it's just either not very well-integrated into that, that kind of web of information on the first page, or also hasn't been as discovered or as popular, et cetera.

• 15:22Speaker 02

  Yeah, so mathematically, what's hard about it is exactly that. So, novelty is what is not known.

• 15:27Anthony Pompliano?

  Okay.

• 15:28Speaker 02

  And so, by, almost by the essence of it, it's, if you were just to use an information theoretic approach and put your finger right in the center of what, facts about something, those will be the, what is well-known.

• 15:40Anthony Pompliano?

  Yep.

• 15:41Speaker 02

  So, the important and hard problem is how you get to what is new, not close to the center, but related to the center. And so, there's some hard challenges associated with doing that. By the way, search engines don't do this well.

• 15:55Anthony Pompliano?

  Yeah, and actually, they're built to do the opposite, right? Like, they, they don't want to surface the novel information at the forefront of the results, because that is unlikely to be what the majority of people are looking for.

• 16:10Speaker 02

  That's right. So, the, this opened up an interesting line of research, but then I was off to DHS to do other things, of how do you actually get valuable things that you don't know that you need?

• 16:20Anthony Pompliano?

  So, what was the work there?

• 16:22Speaker 02

  DHS, I, I went to work in the Enterprise Service Delivery Office, and I'd been a coder and really an algorithm developer since, um, early on, and since I was a kid. There, I learned to develop enterprise systems.

• 16:35Anthony Pompliano?

  Okay.

• 16:35Speaker 02

  And, um, the DHS was made up, post 9/11, of 14 different components that came together.

• 16:44Speaker 02

  That's a train wreck. If you ever had government agencies try to work together or components, especially when they're brought together, it's hard to work in that setting. And creating systems that could work in a coalition environment where people have different authority, competing interests, is a hard challenge. It turns out to be central to the financial system. So I really learned some key skills there. I happened to work on a very important project that led to some of the things that we did later.

• 17:11Anthony Pompliano?

  Okay. What was that project?

• 17:13Speaker 02

  Called Self-Check. So I was the lead architect on the system. It was a front to eVerify. So many people know eVerify is a mechanism to determine if one's eligible to work here in the States. It was full of errors. And the government had spent a lot and what that means on the ground, if it's giving the wrong information, is someone who's actually eligible to work is not able to work. That's a problem. And so Congress knew it. They spent a lot of money trying to fix it. And the team came up with a novel approach to go after this, which is let people check their own government-held privacy data. Now, and make sure it's right. And if there's an error, then allow the person to raise a flag and then the government to go about fixing it. What that requires is,

• 17:57Speaker 02

  if I'm going to check what the government knows about me from a privacy perspective, it better be me who's checking on my data and you, you know, I shouldn't be able to see yours and vice versa. So that came down to identity proofing. Who, how do you know that someone is who they say they are? And that piece, when we combined that on the backend engine of eVerify, we created a system that was very effective.

• 18:17Anthony Pompliano?

  What were the ways that you could verify?

• 18:19Speaker 02

  So first, what do you know? Other biometrics, other components. Now, oftentimes, the very people we were trying to verify were folks who weren't here in the States for long. So they're here eligible.

• 18:33Anthony Pompliano?

  Like a visa or something?

• 18:34Speaker 02

  Right. So you may not have a whole lot of data, but you can look through records, ask questions. The mechanisms that you detect

• 18:42Speaker 02

  You get to a high level of certainty that they are who they say they are, have continued to evolve even since that time.

• 18:48Anthony Pompliano?

  Got it.

• 18:49Speaker 02

  But there's a lot of tools now and there's a lot of players in the financial services space who have worked on or are working on effective identity proofing models, but it's an important problem for the financial services space in general. And the problem that we find fascinating now is not just can we verify you are who you say you are, but how do we verify that you're permitted to perform a function?

• 19:11Anthony Pompliano?

  Yeah.

• 19:12Speaker 02

  And we'll get into that.

• 19:13Anthony Pompliano?

  Yeah, for sure. And so you spent time at DHS, did a whole bunch of work there, you guess won some awards and things like that, but then you end up at the DIA. And the DIA is, it's fascinating to me because most people know of the CIA, right, the Central Intelligence Agency. The Defense Intelligence Agency is much less known, but equally as cool in my opinion. So kind of, one, just give us a description of what the DIA is and then kind of some of the work you did there.

• 19:37Speaker 02

  Yeah, Hollywood doesn't favor DIA. If you've seen the movie American Sniper, they're actually mentioned in there and we all thought that was cool. But yeah, so the Defense Intelligence Agency has a specific mission of serving the warfighter. So the Central Intelligence Agency is for really national security, but it's important that someone who's out in the field is getting the information they need to.

• 19:57Anthony Pompliano?

  I always thought of a CIA as more diplomatic and kind of quote, quote, spy and you know, all that kind of stuff, whereas the DIA is much more ingrained in the military and those soldiers, airmen, etc.

• 20:10Speaker 02

  That's right. So it's a different delivery target. You're actually trying to get your information to folks out at the.

• 20:16Anthony Pompliano?

  Different customer.

• 20:17Speaker 02

  Better way of saying it. That's right. So in the, in, in performing that mission, there I've really got, my role was Chief Innovation Officer. So to be clear, I don't have the cool stories that some folks have of, you know, when they're up, that you have, you know, really out there on the edge. Mine was really, how does an agency, a government agency, get the best things that emerge into the hands of the people who need it? And this is a fascinating challenge. It's actually really critical challenge for banks. Because banks are really struggling with this right now. They know they need to reform. How do they get the best stuff? And oftentimes, in government settings, folks think advanced research is the answer.

• 21:01Speaker 02

  You know, that's where the kind of community that I came from. We go, figure out a hard problem, we'll go and solve it. It's almost the wrong approach to innovation. So, I was gonna break down two problems. I used to joke, if you think R and D and innovation are the same thing, you don't do either one well. R and D is about knowing that there's a hard problem, and going, really breaking down that hard problem, really over years, like building a quantum computer, and then solving that hard problem. Innovation is, you don't know the problem, but there's a lot of cool solutions out there. Great things are happening in Silicon Valley. How do we get to use those? That's very much, there's a great quote from Joey Ito, who's really one of the fathers of innovation.

• 21:44Speaker 02

  "If you want to be innovative, lower the cost of failure." So, that's fundamentally it. R and D programs, by their structure, they're long-term, big plans, they're expensive. Internal blockchain R and D efforts at a bank can be quite expensive. The real answer is to, as quickly as possible, try the new things that are emerging outside. And building the techniques that allow you to quickly sift through those and deliver them into mission settings. That requires an integration framework. So what you'll see about our technology approach is we've made blockchain very easy to integrate into enterprises. So banks can get access to the great technologies. Part of, you know, you got some great, cool night vision technology

• 22:28Speaker 02

  developed somewhere, maybe even overseas. How do you get it in the hands of the warfighter when it has to interact with all of the other systems that they work with? Well, it's important to have quick integration frameworks to make that possible. And these were the kinds of challenges I honed my skills there.

• 22:44Anthony Pompliano?

  Got it. And so, what were some of the things that you guys worked on while at DIA? Because we were talking beforehand, some of them I expected, and some of them I did not expect.

• 22:54Speaker 02

  Yeah, look, so the emergence of quantum computing, the, as it became practical, advanced cyber attack, defense techniques, just cool technologies across the board, mostly about information processing, and this cool technology called blockchain. You know, this was obviously of interest. And I'll tell you, the interest in 2012 was tracing what was happening in the blockchain space.

• 23:19Anthony Pompliano?

  So this is crazy, because you are not the first to tell me either on the podcast or off, kind of after recordings, of somebody who worked in the defense, law enforcement, regulation, you know, sectors, that 2012 is actually the year, multiple times as has been mentioned, where government agencies realized, this is real, we need to pay attention, and started working on some aspect of Bitcoin, blockchain, etc. For you guys, it sounds like you guys were in 2012 already realizing, hey, there's transactions occurring here, there's this immutable ledger, we don't actually understand who these people are that are transacting, how do we take the identity work and overlay it with transactions and

• 24:04Anthony Pompliano?

  start figuring this out, right? What was the, the goal? Or why did you guys think that was important work to focus on?

• 24:10Speaker 02

  Well, I'll tell you, so I'll give you exactly the moment. So I did my first Bitcoin transaction, I was out at the Aspen Institutes, I'm getting, it's like, wow, this was, this is amazing, really cool. And, you know, then our interest was chain analysis. So it's really figuring out the intent behind a transaction. Why? Did someone just move this money? And so you look across it, and patterns just stick out immediately as to what they are. And whenever you see this pattern, you see ransomware, when you see that pattern, you see trafficking or laundering, etc. Sticks out. So there, you know, obviously that matters. And so then, the intelligence community doesn't care about who Satoshi is. It doesn't care.

• 24:51Speaker 02

  It does care about, you know, when the North Koreans are using it to, to, to attack our private sector components, and then laundering the money out. So they, they care about that.

• 25:01Anthony Pompliano?

  And attack in that situation is they're basically hacking some sort of

• 25:05Speaker 02

  The Sony hack is, but others, you know, so they break into people's wallets.

• 25:09Anthony Pompliano?

  Remind me what happened with the Sony hack?

• 25:14Speaker 02

  Let's see what the timeframe was. It's probably 2015, 2016. The North Koreans came after Sony. Sony put out a movie that made fun of the North Korean leader. And so, North Korea came after them.

• 25:28Anthony Pompliano?

  Poked the bear there.

• 25:29Speaker 02

  Poked the bear. And basically broke into all of Sony's systems. And then took their intellectual property, their private emails, splayed it all over the place.

• 25:39Anthony Pompliano?

  Basically, just trying to embarrass Sony.

• 25:41Speaker 02

  Embarrass them, and they did. But not only embarrassed them, but tactically hurt them. Their movie scripts, all of the things that were coming out, suddenly splayed out there on the internet. So they successfully carried out a cyber attack there. Now, they do other things as well. There's many folks, I'm sure, probably in the space, who are attacked. I've had folks come after me, nation-states who do, in this space. So it's a distinct threat. They steal, they launder. But the thing that really made it apparent to me that there was an important need to regulate in this industry, was when you saw the nexus between Bitcoin transactions at the time and human trafficking.

• 26:25Speaker 02

  So you could see the linkages in terms of how these things were being used to move human beings. And the bottom line, no matter how you come down on this in terms of the community, is governments have a responsibility to protect their people. This is a thing that societies cannot accept. So the need to intervene, as there's many anonymity advocates for anonymity, you can't have it. Anytime you have anonymous transactions, you can have private transactions, and we work our tail off for privacy. But anonymity can't stand in a setting like this, because all through human history, when you've allowed for anonymous financial transactions, what follows is untoward. The kind of things that governments have to step in.

• 27:08Anthony Pompliano?

  So, two questions. One, cash is anonymous transactions, for the most part. How does the defense sector kind of...

• 27:18Anthony Pompliano?

  Go to sleep at night, okay with physical cash versus anything that's, you know, using a keyboard?

• 27:24Speaker 02

  Well, look, so first, lots more bad things happen with the US dollar than with Bitcoin. So, you know, I'm not a purist in this, but, um, so if I give you $20 right now, people would know because they're watching, but if we did it out on the streets, no one would know that I just did that. So you're right, I can do an anonymous transaction with cash. I can move, I can give you a hundred dollars, I can give you a million dollars and you'll see that leave the bank and someone's going to say, where'd that go, um, as, as part of this. But what I can't do practically is carry a million dollars worth of cash to Iran. Um, now, it can be done, uh, to be sure, but there are laws against moving more than 10,000, or at least you must report when you move more than $10,000 across borders.

• 28:10Speaker 02

  It can be seized, so there's significant risks associated with it and it's precisely for this region. So cash can't move anonymously anywhere in the world efficiently.

• 28:21Anthony Pompliano?

  Yeah, so, but breaking that down, I think it's important, uh, you can do it, it's just much more difficult because when you got to carry the physical cash too, there's a bunch of checks that are, uh, kind of invoked, um, and it literally involves the physical movement of things, right, whether it's people, planes, cash, etc.

• 28:40Speaker 02

  You, you can't do it legally without government oversight and if you do it illegally, there's risk. I can send, um, $10 million, $100 million of Bitcoin, if I had it, I wish I did, you know, to, to someone in Iran and within a few minutes, they could, could use it. And so that's the point, or I could send it to a, a human trafficker in, in Thailand. And that, that's the thing where a government has to care about that, they have to care. So this is a big thing with stablecoins that we are intent on doing regulated stablecoins and we have the tools to do regulated stablecoins. There's this feeling sort of in the industry, well, it's a managed stablecoin. That should be enough. In other words, it can go wherever it wants to go, and it's only when it crosses into the financial sector that it matters. That's not true.

• 29:25Speaker 02

  It can't be true. I mean, it is true now, only because it's happening at small scales. But FinCEN's already said, you know, look, at a certain scale, we're stepping in here.

• 29:35Anthony Pompliano?

  And so how do you think about the trade-off between the privacy and kind of the individual rights versus what, I'll describe it from the extreme more as a mental exercise, but like the surveillance state, right? Hey, the man, the government is watching and preventing me from doing things, et cetera, versus I have privacy and my individual rights that are, you know, kind of inherent in the American democracy.

• 30:04Speaker 02

  Yeah, so privacy is a fundamental right. It absolutely is, and it must be respected. It's an important thing that even in the intelligence community, folks are taught, there's an executive order called 12333. The three-letter agencies that we've talked about actually are not permitted to survey US persons without a direct warrant. And this is actually taught, trained, inculcated. It's a serious thing. So privacy matters, you know, even in places where people don't expect that it matters. But it especially matters to us in this business. I'm not affiliated with the US government anymore. It's not my job, but I am intent on doing private transactions. You will see Bitcoin-like transactions go away because they're not private. They're pseudonymous, sure enough.

• 30:49Speaker 02

  They're not private. The very things that I was telling you about, anyone can look in on the ledger and see what's moving around, means that's not a private transaction. Through zero knowledge proof, there's a better way. Those transactions can be obfuscated, such that only those with a need to know will know. And the next part of that then is, how do you know who has a need to know? We'll go into that here in a little bit. But then what's really cool about the blockchain, that same immutable ledger that allows you to see To verify that a transaction took place also allows you to verify who looked at this data. So if someone's looking at data for an unauthorized region, reason, it becomes a matter of the record because you can actually protect that data on blockchain itself.

• 31:33Speaker 02

  So now you have a trace of every time someone has done something, looked at something that they should have or shouldn't have seen and under what authority they looked at it. That gives, that should give a lot of comfort to folks who now currently have their data looked at by who knows whom in, in ways that they aren't aware of.

• 31:53Anthony Pompliano?

  Yeah.

• 31:54Speaker 02

  So we believe in self sovereign identity in, in a concept which allows you to protect your own privacy data. Now, what's cool about the blockchain generally is you can obfuscate. So you can take and tie behind the scenes, a person's privacy data from just a, a unique identifier. And even there, that the unique identifier can be obfuscated. It's important for compliance reasons that that's tied to an attribute. So you, you spoke about a great interview with Rong Chen and you pulled out your, your ID and you say, look, most people could just care, had someone verified that this is me? Then they don't, you know, as I show them my driver's license, they're getting a whole lot of information they really don't need.

• 32:37Speaker 02

  In fact, for most financial transactions, like for example, I'm transacting in a Reg D token, there's only a small number of attributes that you need to know and those attributes are not privacy indicating. So I'm a US person, that's necessary in this transaction to know that, but there's a lot of US persons. Uh, I'm a credit investor, there's lots of accredited investors. I'm not a principal in the company, um, in some company and you know, those things can be known without having to give up the PII.

• 33:06Anthony Pompliano?

  Yeah. So basically there's a privacy in the aggregation and anonymization of your details, right? Basically I can, I can describe you without saying who you are and because that description could be many, many people, it's really hard for me to pinpoint that it's you selling me an asset versus somebody else.

• 33:25Speaker 02

  The only person, the only thing that a regulator or frankly, anyone engaged in a transaction really cares about is this person a legitimate, is this a legitimate transaction? And so that's what needs to be known. There's ways you can verify these things. But there's a underneath that is a really important role that we find to be central. And we call this a verification agent. So if somebody KY sees me, does know your customer check on me. How do I know that the person who did that check is in fact legitimate? Because you end up with a race to the bottom problem. If you, anyone can apply that attribute. Well, the financial system has rules for that. It's requires you to be a regulated financial institution with a compliance function to be able to verify a person.

• 34:09Speaker 02

  But there's other attributes that matter for securities transactions. And it's not just accredited investor, which is what most of the security token offerings in the space, think that's all you really need to know. You need a lot more than that. But once you know those things and they're verified by an entity who's authorized to do so, you don't need anymore. All other compliance functions can happen automatically in a decentralized way. That's radically different than the way the financial system works today. And so it's once you get that foundation, built on identity and then layered on top of that compliance, you can do international commerce in a way that is better than the existing financial system. That completely gives the regulators assurance that only legitimate things are happening at practically no cost.

• 34:54Speaker 02

  That revolutionizes all of finance, everything we know about finance.

• 34:58Anthony Pompliano?

  And so I guess as part of this, before we go talk about security, one last question about the DIA, NSA, DHS, etc. One of the things that I found fascinating in some of my other conversations is that some of these government organizations were finding ways to acquire Bitcoin for either investigations, research, etc. It was pretty bureaucratic, I think, at that time. And people didn't understand what are we buying? You know, are we basically just lighting our money on fire or whatever? So there was mining in some of these organizations, etc. During your time, were you guys buying Bitcoin? Were you using it to kind of send around and analyze how money moved? Like, how were you guys actually doing some of this?

• 35:41Anthony Pompliano?

  And not so much in a like, Academic versus practical way, but just more of like when you, when you step in in 2012, it's not like today where there's all this information available, or you can just Google around, you can learn a lot. I think a lot of people were kind of, hey, we gotta learn by doing things, right? So kind of like, what was that like?

• 35:59Speaker 02

  Yeah, so look, I can't speak for all of government, all of research, or even in a particular agency where a lot of things are going on. What, our particular cut on this was just looking at the blockchain itself. So you didn't even have to have Bitcoin to do, to analyze the transactions that were taking place on Bitcoin. But, I mean, this may, may or may not be surprising, there was a lot of seized Bitcoin.

• 36:19Anthony Pompliano?

  Of course.

• 36:20Speaker 02

  Take down Silk Road, that's a lot of Bitcoin. So, the government had a lot of Bitcoin, and the government, we'll leave it at that.

• 36:31Anthony Pompliano?

  I, I could probably say more than you can. My understanding is that there's certain organizations that, when they seize Bitcoin, they turn around, they auction it off. And there's other organizations that, when they seize Bitcoin, they hold on to it. And I'm sure that could be used for a whole bunch of different things. Alright, so you leave when? You leave DIA what year?

• 36:52Speaker 02

  2015.

• 36:53Anthony Pompliano?

  2015. And kind of how do we go from 2015 to the start of security?

• 36:57Speaker 02

  I founded Security in 2015, and it was really on-

• 37:00Anthony Pompliano?

  You wasted no time.

• 37:01Speaker 02

  I don't know. So it was really on this, on this concept. So we saw that you layer identity, and then later we found out compliance on top of blockchain. You have the perfect financial institution. But the other observation was, there was a lack of stable value in the space. So, I couldn't invest my kid's college education in Bitcoin, which I had, but, you know, it's just not a reliable investment thesis. And so, there needed to be a reliable investment thesis. And so, we saw the opportunity. It started with commercial real estate income streams, to bundle those streams into dividend paying currencies. There was no such thing as a security token at the time, the concept had not been developed. But that's what, that's

• 37:42Speaker 02

  what we were looking at, is these new kinds of dividend paying instruments. We, we saw that they would have the benefit of a security and a currency, and that's where the name Security came from.

• 37:52Anthony Pompliano?

  Okay.

• 37:53Speaker 02

  So, we founded under that name in 2015. And then we couldn't deny that there were securities. They were, of course, there were securities. That was the name of our company was that there were securities. So we had to build out the compliance layer to make it safe to transact in these instruments. So I thought, given how quickly we were able to tokenize things like income streams, I thought it'd take us about six months to build out the compliance tools. I was off by about four years. There was a lot of work to really build the foundation to be able to take securities regulations from Singapore, from the UK, from the UAE. Since a security token can go anywhere, you have to respect all of those laws. To make it possible to build a framework that could,

• 38:38Speaker 02

  that was flexible and where the laws could change, and that was not tied to a specific ledger, that took a while. So we went about building that somewhat quietly as we sensed that we were on to something that was a lot bigger than what most folks saw in the space. It was also a topic that no one really cared about then. And we talked to VCs about compliance in the blockchain space. Many of them were just getting familiar with blockchain generally, but they certainly didn't see any reason for compliance before 2017. So we stayed very low profile during that time as we built out the tools. So the other early observation that we made is interoperability matters.

• 39:20Speaker 02

  So we're ledger agnostic and again, the interview you had with Ron Chen, where he basically said, there can't be one ledger. There won't be one ledger. If there's ever one ledger, it means the end of innovation. And so it's right to teach, treat ledgers as something like a database technology as a practical matter. Just, let's just say you're WisdomTree and you issue your ETF fund on Ethereum. The last thing you'd You'd hate if 10 years from now, you're stuck in a ledger which is no longer used because it's outdated, something better's come along, etc. So from the very get-go, you want to be ledger-agnostic. And so we recognize the importance of that approach.

• 40:02Speaker 02

  And it built tools that actually allows security tokens to move between ledgers. The user can really decide, based on the characteristics they want from a ledger, where they want it to go.

• 40:11Anthony Pompliano?

  Got it. And so what have you guys built today? Right, because I think you guys have kind of, obviously been at this a long time, built a whole bunch of different things. And you're taking kind of a unique approach to how do you digitize or tokenize assets? Most people are going and finding illiquid assets that, you know, currently aren't available on liquid markets. You guys are kind of doing the opposite.

• 40:34Speaker 02

  Yeah, yeah. So the, it's good observation. The centerpiece of all of our system starts with the Compliance Where Token framework. It's not a protocol, it's a framework where, as a first principle, you do compliance. That framework, it gets layered into different ledgers. So we're, we can be private permission ledgers, public ledgers. We happen to believe strongly that public ledgers are the right way to go, but we're, we don't really care. You lay the framework in, and the compliance tools follow. And what that means is, you have a mechanism by which you can create any token, attach a set of, a policy to it, and the token then knows what it's allowed to do, and will only allow itself to engage in transactions between known and qualified participants.

• 41:16Speaker 02

  This can be whether the value is a security, the value is a piece of data. The rules are very flexible, they can be designed, and it's a special-purpose language around compliance. The policies are portable. So you build it, you show it to the regulator, regulator says, "Yep, that matches my rules." You test it, and then you use it over and over again as a practical matter. So that was the starting point on this, is you have to have tokens that follow the rules, and it matters not just the rules in the US, but anywhere. On top of that, we've got an interoperability framework. And so what our target always was institutional investors. So the thinking that you tokenize a piece of real estate or a piece of art,

• 41:57Speaker 02

  that you're going to suddenly get liquidity. If you don't have a liquid investment thesis, you're not going to have liquidity. So in other words, if I can't, if I can't know if that piece of real estate is in good standing without looking at it, there needs to be proper disclosures associated with it. And if I'm not in a market, if I'm in a walled garden, you know, the natural access to a whole bunch of investors is not going to be there. So you need to be outside a walled garden. That means the token should be able to go anywhere, so long as it follows the rules. And what you want is a liquid investment thesis. Well, what are the most liquid instruments on the planet? Exchange traded funds. So they have a strong pricing functions. And so as we interacted with Wisdom Tree, middle of the year last

• 42:40Speaker 02

  year, they were seeing their industry radically changing. And so they, the exchange traded fund displaced and disrupted the mutual fund. They sense that their industry is going to be transformed by what comes next, the blockchain enabled fund. And so they were looking for solutions really to move into this new space, but they couldn't compromise on compliance. Institutional players can't. So when we came together, we saw an opportunity to really solve a big problem in the blockchain space.

• 43:10Anthony Pompliano?

  Got it. And so walk us through today, you've got Wisdom Tree is now an investor. You guys have the ability to, what's fascinating to me is you're digitizing or tokenizing already liquid funds. The ETFs are trading on the New York Stock Exchange, NASDAQ, wherever. You're actually tokenizing those same ETFs. And so now there is a ability to go on a regulated crypto exchange and buy a token, just like you can go on a regulated traditional exchange and buy an ETF share. It's the same asset, right? It's just in two different technology form factors. Why do that? Right? Why create the tokenized format of something that's already liquid in a public market?

• 43:49Speaker 02

  Yeah, perfect. So look, the fundamental benefits of blockchain to the traditional ETF space. So just to be clear, Some folks are working on creating exchange traded funds of crypto assets. So traditionally traded shares, non-traditional assets.

• 44:07Anthony Pompliano?

  So the Bitcoin ETF is what you're talking about.

• 44:09Speaker 02

  Yeah.

• 44:10Anthony Pompliano?

  Winklevoss Twins, Bitwise, VanEck, all these folks who have filed for, I want an ETF that allows somebody to buy a traditional share on the New York Stock Exchange or NASDAQ that gives them access to Bitcoin.

• 44:24Speaker 02

  Yeah, the exposure to Bitcoin.

• 44:25Anthony Pompliano?

  Yep.

• 44:25Speaker 02

  This is not that. This is the opposite of that. It's a tokenized share of a traditional asset, treasury, gold, S and P 500, behind the scenes. So what's the advantage to them? Their shares are already liquid. Why do they need tokenization? Two fundamental advantages. First is the cost function. So blockchain allows for automation of the back office functions associated with these assets. Their industry is already under cost pressure to, you know, as the margins are going down. You can obliterate the cost structures. You can effectively automate all of fund management through smart contracts. So it drives the cost of executing a fund to zero. That benefits, of course, investors within the space.

• 45:09Speaker 02

  Second key benefit in the long run is greater distribution, actually in the short run, greater distribution. So they produce a fund. It trades here in the U.S. on, let's say, the New York Stock Exchange. They're getting access to a large pool of U.S. investors at the retail and institutional level. It's a little hard, anyway, to get access to those exposures in Japan and Singapore, et cetera. They'd like to be able to go big in all markets at one time. Greater distribution, which leads to greater size portfolios, so that you could, a investor in the UAE, could get easy access and exposure to U.S. Treasuries.

• 45:49Speaker 02

  US investors could get easy exposure to European treasuries or to European stock exchange, etc. You want that, and that requires you to have instruments. Traditional financial instruments don't cross borders easily. Tokens that know the rules of all the borders actually can, and that's a new kind of market.

• 46:10Anthony Pompliano?

  Yeah, and I guess part of this is it's an access play, right? To me, the part that gets misunderstood or isn't widely talked about is there's a lot of people in the world who can't buy an asset on the New York Stock Exchange or on the NASDAQ. And to people here in the United States, they think that's a ridiculous idea. But to the people who don't have access because they don't have a US bank account, they don't have a brokerage account, right? They don't meet certain capital requirements, etc. They don't have access, and therefore, that ultimately leads to a huge component of income inequality.

• 46:47Speaker 02

  And exploitation. So just as an example of exactly that point, so look, just boiling down, fundamental benefits of blockchain, consensus immutability is central. The distributed authority is central and accessibility is central. All of these things are critically important. Like you said, accessibility is really important. Early on in our project, 2016, we worked through MIT connections with a company to do securitized loans in developing world farm settings. These people don't have access to low-cost capital.

• 47:25Speaker 02

  The kind of exploitation that occurs in settings, they were paying roughly 200% interest on their loans in those settings because they didn't have access to capital in the way that we know it. There's terrible exploitation and terrible stories of what happened to those people before we were able to introduce low-cost capital in those settings. It is a human tragedy, frankly, that there isn't accessibility there.

• 47:54Speaker 02

  It also is an investor benefit. So let's not kid ourselves. Institutional investors really benefit from having diverse

• 48:03Speaker 02

  investment opportunities at global scale. So being able to get access to the growth in real estate in Eastern Europe. That's a great exposure to get when Western economies slow down, etc. They don't currently have practical and liquid access to those things. And so through accessibility, you can really change that.

• 48:23Anthony Pompliano?

  Yeah. And to me, you start out with the already accessible assets to some portion of the population and just expand that population percentage, right? So let's say 70% of the world has access to buying on the New York Stock Exchange. If you can expand that to 100 or 99 or whatever the number is, that's actually much easier than saying, let's go find an asset that only 2% have exposure to, and let's bring that to 50%.

• 48:47Speaker 02

  Yeah, Pomp, look, so this is a big, big point right now. So the kinds of assets that are in the security token space are generally limited to accredited investors. It's a very small pool. WisdomTree's offerings are publicly traded, exchange-traded funds. You obliterate that small circle of folks who can actually enter the blockchain space with these new kinds of instruments. They're not so limited. So we can access pools of folks and give them high-quality, investment-grade instruments in the blockchain space that folks didn't previously have access to. That's a big story just by itself.

• 49:19Anthony Pompliano?

  And so give us an example of one of the funds that you guys are doing this with, and we can kind of talk through how that works.

• 49:24Speaker 02

  Yeah. That's a piece for you to ask WisdomTree.

• 49:29Anthony Pompliano?

  WisdomTree is going to be quiet right now. Okay.

• 49:32Speaker 02

  Yeah, so if you're listening on their interviews, they have a number of marquee funds, right? So among the most liquid gold funds, among the most liquid treasury funds, you can get exposures to foreign currencies, etc. These are great starting points. I have, let me show you this interesting problem. All financial transactions are really movement of value between three dimensions: liquidity, yield or return, and stability. So when I take money out of the bank to get cash, that cash is depreciating. I'm moving from yield to convenience, utility. So that's a fourth dimension that tokenization brings in, which is utility.

• 50:16Speaker 02

  Within the blockchain space, the volatility is because you don't have a stable asset to allow you to pivot between those dimensions, you haven't been able to form efficient markets here. Within the the security space, there is no such thing as utility. I can't take my shares of Apple and use them in transactions. I have to cash them in for dollars and use them. In this new world, you can. So suddenly, you're opening up a new dimension for folks to move between. What does that mean? The concept of a traditional savings account, where you put your money at rest in a very low yield instrument, suddenly goes away when you can put it into a higher yield treasury components, or even more, looking at securitization or other yield or return.

• 51:00Speaker 02

  And then when you want to use it, you can convert it to cash to make, to conduct a payment, really instantaneously. So those things really transform the way that securities behave.

• 51:11Anthony Pompliano?

  Yeah. What is the biggest obstacle for you guys? Is it on the compliance side, or is it something else?

• 51:20Speaker 02

  It's probably institutional adoption generally. We've been friends with regulators from the beginning. Friends is not the right term. We've been focused on relationships with regulators from the beginning. One thing we haven't talked about is we're overseas in, we have a fair-sized office in the UAE, in Abu Dhabi.

• 51:40Anthony Pompliano?

  Why?

• 51:41Speaker 02

  We went there because that, we cared about liquidity. That's a region characterized by lack of liquidity. They have massive real estate funds, massive energy funds, et cetera, that need liquidity. So we decided that was the market for us to attack, to go into, and we found that it was heaven for us. The sovereigns there recognize that they need, they're very interested in blockchain. They need to pivot their economies from oil-based economies to new type models. The regulators know that the sovereigns want to get into this market in a big way, so they want to do it the right way. So we entered the market with compliance tools and really got moved front of line.

• 52:26Speaker 02

  So we could work directly with the regulators there. So regulators hasn't been a challenge for us, working with them. We would go daily with regulators to really work out the kinks. So when we first talked to the SEC... It was pleasant, you know, it's rare that you leave a meeting and the regulator's smiling and you're smiling. It was a, these were good constructive meetings. We're actually developing a pilot with regulators to show how you can move value across borders and respect various jurisdictional regulations. It's really institutional adoption, and again, institutions have a lot to lose within this space. We are institution-friendly, built for integration with institutions, but they just don't move

• 53:11Speaker 02

  aggressively into the space. Balance sheet matters in finance is another key problem. Balance, how much cash you have in the bank determines how easy you can be sued, and how easy you can be sued determines how safe you are for folks to, to enter this space. Startups by their nature don't have balance sheet. So it's hard to get into these big settings without a big institutional partner, but they're frankly, in their own way, in many cases, we were fortunate enough to find Wisdom Tree. And they just had a brilliant vision for the future, and so now we've got the best of both worlds.

• 53:47Anthony Pompliano?

  For sure. And so as you think through working with Wisdom Tree, et cetera, after you go through ETFs and kind of do that work, what's the next type of assets that you guys would focus on?

• 53:58Speaker 02

  Yeah, so again, for all of these things to work, for things to be convenient, you need stability, and so ETFs had to be the starting point on this. But as you move out from there, there's really no limit in terms of core functions. When you can automate compliance, a lot of things fall into place. So whether it's just straight payments, remittances, trade finance, you know, again, our core competency is in securitization, so that is taking then and creating funds out of normally illiquid things. Trade finance is a great example of this. Lending generally through blockchain, you know, DeFi is a real movement. You can do self-processing loans, and then you can pull those loans and trade those,

• 54:42Speaker 02

  driving down the cost of finance generally.

• 54:45Anthony Pompliano?

  Got it. Before I finish up, I always do rapid-fire questions. What do you think the most important company in crypto other than your own is?

• 54:53Speaker 02

  Microsoft.

• 54:55Anthony Pompliano?

  Why?

• 54:55Speaker 02

  Yeah.

• 54:55Anthony Pompliano?

  That's not an answer I was expecting.

• 54:57Speaker 02

  I knew I could fool you with one. So, and actually, let me give a little shout out to Amazon as well because they're really in the same camp. Because here's, here's the bottom line. In finance, it, all businesses are now tech businesses in the end. And as they boil down, they boil down to infrastructure plays. We see, Microsoft's done great work in the infrastructure. As an example, look what Amazon has done to FedEx. And, and what's, what's happening there. So the banking system, the real threat to them is the Amazon Microsofts of the world as a practical matter. We've recognized that and we built a layer on top of their infrastructure services, which actually makes it effectively bank ready. But that's where the, the play ends.

• 55:43Speaker 02

  In, in, in the end is those guys own the real stuff. And it's not, I'm not just saying that name because I recognize that. They're doing real things in this space. Blockchain is just like, just like Oracle was, relational databases were. It is an infrastructure technology.

• 56:01Anthony Pompliano?

  Absolutely.

• 56:01Speaker 02

  And so that they, no one can do it better than those two guys at scale.

• 56:07Anthony Pompliano?

  I got a great, I got a great FedEx story for you. Earlier this week, some tax was due on January 15th for lots of Americans. And so I had to go mail mine in and there's a FedEx store on the corner. And so I walk in and I had, basically I had a couple of different envelopes that I had to send. I had one envelope, but I needed two others. And so I said to the guy at FedEx, I said, you have envelopes? He goes, we do. I said, all right, can you help me mail this? And he looks at the first envelope I'd already filled out. He goes, oh, we can't send anything to P O boxes. I said, what? And I never thought of, well, it's a post office box, right? And he goes, yeah, we, we're not allowed to do that. I said, okay, that's fine. I said, well, can I get the envelopes for you? And then I'll go over to the post office across the street. He goes, well, here's the problem is if you get a FedEx envelope, they won't take it at the post office.

• 56:52Anthony Pompliano?

  And I'm sitting there just like, in what world does the sideload systems not work? Right? And this is coming from somebody who I don't mail things all the time, right? So I just figured. It was like technology, like everything's interoperable. But even the mail system between a private company and kind of the public post office completely siloed and doesn't kind of coexist, which was, or they coexist, but doesn't interoperate, which was pretty surprising.

• 57:18Speaker 02

  How much worse is the financial sector, though, in the bottom line, in terms of the fragment? Yeah, right.

• 57:22Anthony Pompliano?

  At least now you can use your ATM, your ATM card at other people's ATMs, right? Which is like groundbreaking. Yeah. All right. So what, what do you, if you could choose any regulation to change or law, what would you change or improve?

• 57:41Speaker 02

  Yeah. So, look, the first going imposition is, laws are actually pretty good. So there's, you know, thinking in the blockchain space that, you know, these are antiquated. They're actually there for a reason and they've stood the test of time. However, the credit investor rule as it stands can be changed. It is very important, it always will be important for securities regulators to protect the public from people who would prey on it. The ICO debacle is really an example of this. However, it shouldn't be based on net wealth only. The reason for the law was in the 1930s, after the crash, people from New York City went and started preying on people's pension funds in the Midwest. They were taking their life savings.

• 58:25Speaker 02

  What really matters is how much of your life savings you're putting at risk. So if I go and put $2,000 or $4,000 in an investment, it shouldn't really matter. If I'm putting $100,000 in an investment, then it should matter, you know, whether I'm qualified.

• 58:41Anthony Pompliano?

  It's like a percentage of your net worth type requirement.

• 58:43Speaker 02

  Yeah. So, look, the UK has laws similar to this. It's really below a certain threshold. You can do whatever you want, as long as you don't exceed that threshold. That's, and the reason why that's so important for the national economy, and Chairman Clayton recognizes this, is more and more, things are leaving the public markets into the private markets.

• 59:02Anthony Pompliano?

  Of course.

• 59:02Speaker 02

  And so that, what that means is the rich are getting richer because they're the only ones who have access to these investment opportunities. So the SEC knows it needs to change. Change will happen, I think.

• 59:12Anthony Pompliano?

  Yeah, I agree. Most important book you've ever read?

• 59:15Speaker 02

  The Bible is

• 59:18Anthony Pompliano?

  I'm shocked that's not the more popular answer. I think a lot of people think it and they're scared to say it.

• 59:23Speaker 02

  Yeah, look, so, you know, there's good principles to live by there. What I've found is when I, when I follow those rules of do unto others as you would have them do unto you, it leads to peace. And peace with my wife, peace with my kids, peace with the people around me, so.

• 59:40Anthony Pompliano?

  Yeah, I'm about to get married. I'm learning quickly.

• 59:45Anthony Pompliano?

  Planet's probably listening to this and she's like, I'm gonna, I'm gonna screw his day up if he fucks around. Aliens, believe them, not believe them, real, not real, seen one before.

• 59:56Speaker 02

  Seen one before, no, it's so, better not be real. Here, here's, here's why. I don't know if you've ever seen the, there's a great piece came out in 1998 from MIT called The Great Filter.

• 1:00:10Anthony Pompliano?

  I have not, no.

• 1:00:12Speaker 02

  Definitely check it out. Here's, here's the basic theory and I think this is pretty much an axiom. That if, if, we've not seen direct evidence of extraterrestrial life. Right now, I think we can all agree that that's true, not repeatable evidence. And we should have, based on, on this. Life propagates, it does so aggressively. We've already seen in a short period of time since the beginning of flight,

• 1:00:41Speaker 02

  that we've left our solar system. So we're able to move out. And in 1940, a guy, his name is von Neumann,

• 1:00:50Speaker 02

  posited something called a von Neumann probe. It's basically this, it's, it's sort of the same thing that, that bacteria does in terms of the way it goes out. Build a probe that goes and replicates and builds another probe and goes. And you can propagate then effectively at the speed of transmission, which will become something close to the speed of light.

• 1:01:11Speaker 02

  The Milky Way is about 13 billion years old. Earth is about 4 billion years old. In 100 years, we've seen this kind of movement. So there is a great, the fact that we've not encountered another civilization. In 1,000 years, we will probably have moved to other planets. And from there, be moving, and von Neumann, almost at the point of life, speed of light, across the galaxy.

• 1:01:37Anthony Pompliano?

  1,000 years, I think that we will be on at least one other planet, if not more than one.

• 1:01:41Speaker 02

  Oh, much, and as soon as you get on to one, through this effect, you will go everywhere. And again, it's, we already know how to do it at a speed that's dramatic. So there's an important question that's raised by the great filter. Is if, if that's true for sentient life, if you're capable of moving that fast, and we have every reason to believe that you are, one of two things happens, this must be true. One is, getting to sentient life must be so hard, that there's a filter prior to this, and they posit a number of different points, that actually is harder than we think for it to occur in the process of evolution. Or sentient life destroys itself before it propagates. I think we have some evidence that we can do that to ourselves.

• 1:02:25Speaker 02

  And so, as a matter of principle, something about sentient life causes it to be self-destructive. And so, one of those two things are true. So if in fact, there are aliens at some level on this, what that means is, what lies ahead for us, based on the probabilities, is that we're going to destroy ourselves. Read the paper, it's so profoundly important.

• 1:02:47Anthony Pompliano?

  MIT, 1998, The Great Filter.

• 1:02:49Speaker 02

  The Great Filter, you can, you can Google it.

• 1:02:51Anthony Pompliano?

  I'm gonna literally read it later today.

• 1:02:53Speaker 02

  Check it out.

• 1:02:55Anthony Pompliano?

  I, uh, you're touching on a point of, uh, whether, if aliens exist, do we actually want them to discover us, or do we want to make sure that we discover them? Right? And, and the whole idea is, uh, anytime that, uh, humans have invaded other human populations, uh, usually turns out much better for the people invading than the people being invaded. Uh, and so if you think of that in terms of humans versus aliens, uh, it's unlikely that we want to be discovered, and it is much more likely that we want to do the discovery.

• 1:03:24Speaker 02

  Well, look, so again, life propagates. So, at all forms, in every form, it... Grows into its environment. And so it's, it might be true that that's not always true. But we have every reason, everything that we've ever seen shows that that's true. One or the other, in the event that we encounter someone else, is going to propagate.

• 1:03:46Anthony Pompliano?

  It's crazy. What question you have for me to finish up before I go crawl in the corner and feel like I am the smallest thing in the universe?

• 1:03:55Speaker 02

  Dang, so what would you tell 16 year old you?

• 1:04:00Anthony Pompliano?

  16 year old?

• 1:04:02Speaker 02

  What, what lesson would you pass on and say, hey, don't do this?

• 1:04:06Anthony Pompliano?

  It wouldn't be not to do things. It would be a couple, I'm gonna cheese, not gonna be just one thing.

• 1:04:14Anthony Pompliano?

  I think that over time, I've learned certain things that at 16 would be much more valuable. The first being, like, swing for bigger opportunities, right? When I, that's a whole story before, but when I moved to Silicon Valley in 2014, went and met with the only guy that I knew that lived out there, Scott Ben Smith, was running a company called Wonderful Media, and I asked him, what's the best advice you have for me? He said, there's two things. One, keep your personal burn rate as low as possible, because it'll allow you to take on opportunities that if you have a high burn, you know, personal expense rate, you just can't do, right? So you gotta go take a job that doesn't pay a lot, but could be a big opportunity. Second is you'll be much more rewarded for taking big opportunities and failing than you will be for having small success.

• 1:05:00Anthony Pompliano?

  And I think that, you know, another data point on that, Steve Schwarzman in his recent book, Whatever It Takes, he talks about it's just as hard to do the big thing as it is the small things, you might as well go do the big thing. So I think that's kind of a reoccurring theme. The second is, I over time realized, but did not when I was 16 years old, like you become the five people you hang out with. And so, I, you know,

• 1:05:24Speaker 02

  Pick wisely.

• 1:05:25Anthony Pompliano?

  Have had very, very great friends along the way. But I think that as you start to understand, you can have friends and then you can have people that are those five people you spend the most time with, you kind of just level up a little bit. I think that's helpful. And then the third thing is this weird thing that I think you can't tell a 16 year old because 16 year old won't believe it. But it's just do you like just be happy. Who the fuck cares what anybody else says or does?

• 1:05:52Speaker 02

  No doubt.

• 1:05:53Anthony Pompliano?

  And I forget the quote and who says it, but it's something like, you know, you spend your 20s like thinking everyone is talking about you. You spend your 30s, 40s, 50s, whatever it is. And then it's like, and then you spend your 60s realizing no one was ever paying attention.

• 1:06:05Speaker 02

  Right?

• 1:06:06Anthony Pompliano?

  Like whatever that quote is, it just always sticks in my head is just like, no, literally, nobody fucking cares. And the people who think that they care are actually probably just jealous.

• 1:06:15Speaker 02

  This was actually a trick question because I got teenagers, Pop.

• 1:06:18Anthony Pompliano?

  Oh, great.

• 1:06:19Speaker 02

  So you just, you took my job. Good job as a father.

• 1:06:22Anthony Pompliano?

  What do you tell them?

• 1:06:24Speaker 02

  Make their bed, get the bed on time, don't play video games. So not nearly as useful.

• 1:06:29Anthony Pompliano?

  Okay, so, so we only got a minute or two here, but one of the questions I have for you is how do you, how do you handle them now saying, but I could be a multimillionaire, professional athlete playing video games? Because that'd be the first thing I would say, right? My, my father told me the same thing. Stop playing the fucking video games. Go outside, you know, read, do all the things that a parent would say. There was nobody that we could point to be like, well, that guy's a multimillion, you know, dollar professional esports player. But now there's a number of them.

• 1:06:57Speaker 02

  Yeah, yeah. So it's the danger because every one of them thinks they can be.

• 1:07:01Anthony Pompliano?

  Of course.

• 1:07:02Speaker 02

  And it's the same thing as why can't they be a multimillion dollar quarterback in the NFL? Because it's, there are only a couple people who can do that.

• 1:07:09Anthony Pompliano?

  Yep.

• 1:07:09Speaker 02

  So, you know, that's the bottom line on it. And other than that, it's a lark. You got to recognize that that competes with your ability to be productive in other areas. And it's, everything's work, life balance in, in all of this. But if you can't keep it at work, life balance, and because you have this dream, it's dangerous.

• 1:07:30Anthony Pompliano?

  Yeah. The, the one thing you said, make your bed. The other thing that I think a lot about is,

• 1:07:38Anthony Pompliano?

  Every person that has attained some level of quote-unquote "success" that I've talked with, and I ask them, "What was the secret?" Majority of them will say some version of persistence, like showing up every day, etc. And the whole making your bed is a perfect example of just like, there's things that you gotta do every day, right? And if you can learn that habit, it's pretty powerful.

• 1:07:58Speaker 02

  In every, and I learned this way too late. Discipline in every aspect of what you do, you know, that daily commitment to doing the right thing is this, you will never go far if you do that from success. You'll always be moving on the path.

• 1:08:15Anthony Pompliano?

  I think it is, we'll end on this, but I think it's Jaco Willink, who says, "Discipline equals freedom," right? People think that the discipline is a bad thing, but actually, they realize, once you have the discipline, you're able to accomplish things. When you accomplish things, it equals freedom. So, transitive property, which I tend to use as an excuse all the time. All right, listen, thank you so much for doing this. I really appreciate it, and we'll have to do it again.

• 1:08:39Speaker 02

  Thanks, Pop.

• 1:08:40Anthony Pompliano?

  Hey, everyone, Pop here. If you liked this episode of Off the Chain and want to help us take crypto to the top of the Apple, Spotify, and other podcast charts, please do us a favor and rate, review, and subscribe. To review, simply go to the Off the Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening, and see you next time on Off the Chain.