Why’s Everyone So Bearish, Robinhood's AI Agent and SoFi's Stablecoin Launch

Hinzugefügt: 2026-05-31

[00:00:00]Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Block Works. Our hosts, guests, and the Block Works team may hold positions in the companies, funds, or projects discussed.

[00:00:26]Oh, you don't like to see that. [music] What's up, folks? Welcome back to Empire. I clicked record and my metam mask popped up. You don't love that.

[00:00:34][laughter] >> Jeez.

[00:00:36]>> You don't love that. Oh my god, it keeps popping up. What's going on? That's that's dangerous. Rob Santi, what's up?

[00:00:43]How you guys doing? What's up, guys?

[00:00:46]>> You know, loving uh loving life. Short week this week.

[00:00:50]>> We uh we will we will be optimistic. We should have a barometer of like how best p you know like ultra fear or uh or or euphoria timeline's bleak guys. I I'm just gonna ask the question um is this better or worse than like 2018? Because I I saw a really interesting tweet about this like someone said this is actually this is probably worse than other cycles most recently like when you had f like FTX blow up and Luna blow up and Celsius some of the Trafi like you just could pinpoint like okay there's like a very clear like thing that is is the reason why like prices are down or not moving and now it's like quite the opposite like you have Tatfly continues to be really bullish on this I I think maybe marginally less so I'd actually be curious Rob I know you were in DC so maybe we could just start there like what are you guys seeing in terms of like the conversation with the people that have been the more the most bullish this cycle have been like non-crypto natives um is that true like marginally less so is it just sell in May go away people are thinking about the summer like what's going on >> we got like six starting questions you know tied into one there >> yeah you know I like these bundle questions man you know I'm terrible at like single questions That's why we were so happy to have you come back, Yano, after your break was because we needed a moderator. We needed somebody to >> like, is this cycle worse than the last two cycles? What's going on in DC? What are we doing with the market? Do we sell in May and go away? Rob, hit us with the answer.

[00:02:27]>> Hit us with ma'am. Listen, man. Like, people have their attention span of 30 seconds. I just want to tell them what's on my mind.

[00:02:34]>> Before we talk about DC, let let's try to answer that question. I would say this is a much better cycle than 2018, 2019 because I remember sitting with Mike getting beers after work one day and talking about what we would do if all of crypto failed and I said I would go get a job at Uber and Mike said he would go get a job at Netflix. Like we were we were talking about what we would do if the whole entire industry didn't exist. I think the question on people's mind today is what will we do if the tokens don't go up again? But there's no question that you can build incredible startups and incredible companies in this industry and the value there will acrew somewhere. It might maybe it's look maybe it's not to the tokens maybe it's to the equity and that's the question on people's mind today. It's not will will block will open public blockchains work like the thesis that you know I think I have is that and you know I guess maybe you guys do too is that all capital markets move on chain stocks, bonds, currencies, commodities.

[00:03:33]I also believe in tokens, you know, all moves on chain. That thesis has been validated more than ever in the last two years. The idea now is will value acrue to these things called tokens or are we just going back to equity? And that's very different than what it looked like in 2018. I don't know, you know, Rob, if you would agree or disagree with that.

[00:03:53]>> Yeah, I mean, totally. By the way, I was just just looking it up. I think Uber was worth um 28 billion in 2018. It's worth 143 today. So, you would have got a nice little nice little return there.

[00:04:03]>> That's the train. That's the trade.

[00:04:06]>> Sounds like you're uh sounds like you're doing okay. Um, yeah. Listen, I I I agree with you 100%. 2018, it was much harder in my mind to take like the rational position that all of these like ICOs were real companies that were building real things that were going to, you know, upend traditional capital markets and payments. It was fun, you know, before uh the downturn anyways.

[00:04:32]And it was, you know, a really kind of still niche and weird industry where you could find like pockets of, you know, people who are really dreaming about what the future would look like. And in many ways today, you know, it is still a lot of dreamers who are saying, okay, well, capital markets and payments are going to come on chain and we're just going to get tokenized everything. But that feels far closer than you know any of the things that we used to talk about before. It feels like something that we're getting a lot of, you know, institutions who are telling us, hey, that is actually happening. We're getting a lot of people put their weight behind it, a lot of money going into it.

[00:05:10]And so I I 100% agree that from a industry perspective of adoption of blockchains themselves, absolutely, we're in a far far better place than we've ever been. Now I think the problem is a lot of those people that were here in 2018 that is not what they cared about and those are not the things that they um are you know have exposure to you know those are not the things that they've you know invested in. And so, you know, a lot of people in the industry, I think, feel like they're getting left behind right now, but because of the fracturing that's happened and that's hard for people and and I think that's a lot of the reason for, you know, this, you know, timeline that feels very bearish at a time when, you know, payments continue to grow and tokenized assets continue to grow and adoption and just, you know, to Zant's point, we'll talk about it later, I was in DC yesterday and just the uh amount of education that has happened in DC and the amount that people are paying attention in DC is just, you know, incredibly bullish in my mind.

[00:06:13]I I think there's a I actually disagree that I think there's a higher probability now that crypto just what's worse than being dead is being irrelevant and there's a very credible like particular from my standpoint like where we've gone and looked at like probably 30 different sectors at this point many of which came coming in we would have thought hey you know could stable coins actually be pretty interesting for this business and we come out of that and we just don't feel like stable coins serve a purpose and it's not necessarily a technology problem. Like I think stable coins tokenizing a dollar and being like I'm not disagreeing that a transparent financial system is is is useful and valuable, but what I have found is like not just tied to crypto, but like convincing different stakeholders to use a stable coin is a different different conversation that I perhaps didn't appreciate as much. And there are certain business models that pushing a stable coin to it won't necessarily like make that business more efficient. But where I'm coming at it just from just doing this in many different sectors is I think crypto is sort of like the it's a it's a strictly like very narrow use cases. Like gambling is one that I'd just I don't think anyone here can disagree. just it's just you know allows people that in certain places of the world they can't easily access the stock market well you know that's interesting right and I think there's always going to be like some stable coins that are going to sit on chain because they can't offramp and so you can build nice businesses around that and the third probably is just catering to people that like would rather get paid faster and or get paid in dollars those are like the three buckets everything else Oh, let me hold on.

[00:08:09]>> Hold on. Let me let me take let me take let me take. So, >> um there's two buckets there. Okay. Um gambling is the thing that ripped the hardest because what crypto does is it unlocks value to be moved around the world seamlessly. So, in the same way that okay, what did the internet do? It let information flow seamlessly. Where was information siloed? Pornography. So, what rips the hardest when the internet gets created? porn, right? What rips the hardest when crypto lets value flow?

[00:08:39]Gambling. So gambling is Yeah. What you know did rip the most? Um I think Santi you are struggling from a I know you put on this we you talked about this publicly I think so I think it's fine to share this. I know you put on a um you know big trade in you know some of these memory things like SanDisk and Micron. I think you are struggling from a um I said this is a easier this is a better bare market. I think it is harder psychologically because there is another asset class that is rip your face off trading trading like crypto tokens used to. So >> I like I'm not coming at it from that. I my reasoning is just actually from going in and assessing like I'm actually quite bearish from companies. super bearish now. And and this is we've talked to pretty much like a very large representative set of private companies and >> you're talking to unsophisticated small companies who are not the actual people.

[00:09:38]>> Not small at all.

[00:09:39]>> No, no, no, no. So you're No, you're totally missing the point here, right?

[00:09:42]And I think this is the point that people miss in in stable coins all the time, right? is you, you know, I got, you know, I had this like Twitter exchange yesterday with a guy from Brookings Institute who like didn't even know that there was stable coins being settled directly with Visa and it's talking about how like oh like stable coins like you know aren't used for payments, right? And there's a um I think an education issue at most actual companies who do payments. Uh but like I am talking to a company right now that is doing a uh basically doing a ARP bill pay process uh sort of like you know think about like ramp plus like bill.com in one growing 40% month overmonth doing over almost no 80 90 million of of run rate revenue today who uh is serving some of the biggest corporates uh in the world and they're mostly Latin America uh but you know think about like you know big large corporates in Latin America and uh the entirety of the infrastructure of that business is built on top of stable coins. Nobody knows.

[00:10:43]They are customers do not know. But the business has been able to grow its capabilities. It's been able to uh bring its cost down. It's been able to um grow margins. It's been able to go into more markets because of the fact that it's using stable coins. Rain is going to have another 20% growth month. They announced a deal yesterday with [ __ ] which is a global uh basically like a global marketplace right the uh the amount of stable coins that are being directly settled with Visa is doubling every few months right like the amount of companies that are coming out and saying hey we're using this is just it's picking up a tremendous amount of steam so announced their stable coin yesterday right and so I I think what people miss is that because of the fact that stable coins are not like a people think oh like it has to be a peer-to-p peer transfer because there was a lot of education problem, right? It doesn't have to be a peer-to-p peer transfer.

[00:11:33]What it is doing is enabling a brand new settlement layer. And this is why Jack Chong from Airwall, who was like, you know, the biggest like anti-stable coin person on Twitter for a little bit is now tweeting about, you know, maybe putting uh building his own layer one, right? Because like they see on a crossber uh at least for the cross border payments a huge huge reason for this to exist to rebuild.

[00:11:57]>> Not to disagree with any of that. As I said earlier, like I think like certain payouts like if you're [ __ ] like creator payouts make sense like certain there are nice what my point is like nuance it's like it's not say like I'm not by any way suggesting that sins are not useful. I'm just saying they're what I think the nuance is how big and how concentrated like I'm actually more bullish coming out of like tether being continue to be like a regulatory arb particularly for remittances because you know if you're a regulated uh so like tether continues to be a really good business hyperlquid continues to be a good business but it's much narrower than I think what people are historically coming in like if you've been in crypto for many years you're sort of expecting this like vast transformation of and I just don't think it's going to be the case. Like I continue to be very bullish but much more concentrated and focused on like probably like less than five names in crypto.

[00:12:51]>> I I so that that I do agree with and Rob might disagree but I I think in 2018 the reason that was a fun bare market for some for I mean it was very hard in some in some ways but you know Santi I think you remember this well is like we thought the whole world would be cryptoified. It was like every game would become a crypto game and every you know the next Uber was going to be start as a crypto you know with crypto incentives and uh that looks like you're right it's it's not going to play out but I think what we got wrong is that global capital markets are you know we were all very young and many people did not come from finance global capital markets are so much bigger than anyone realizes like so so so orders of magnitude bigger that if all we do is move global capital markets onto public blockchain games. It's an insane opportunity >> even if you stop there. Like I mean there's nothing again I think we shy away from like this is gambling. Like gambling is a massive industry and by the way I think we talked about this like for many many time you remember that pod with Melton which is like I agree with or take like everything is just going to hyper financialize and so the TAM just continues to grow because you you're turning online like people that historically have only been able to invest in real estate or government bonds in their particular country. Now, anyone with an internet connection can go long hip 3 market on SpaceX preipo like that that that TAM is I think perhaps or to your point I agree like grossly underestimating how big that's going to be but it's very concentrated I think like again continue to be bullish like some like Hyperliquid or and Tether less so some of the other stuff that we expect.

[00:14:35]This is a different point I think because I think you made one point like in the beginning which was like oh like I'm kind of like bearish on like whatever capital markets coming on chain and like stable coins and I think it's like very narrow and then you kind of made a point was like there's only like five companies or protocols that I care about and I think those are different points because there's there's a value acrruel debate that we can absolutely have right and who wins in these markets and I think that's a completely fair debate but I mean NY just announced that they're launching tokenized RWA synthetics uh and markets with uh with OKX, right?

[00:15:08]You I guarantee you that and and I know this for a fact that we're going to at some point get perpetuals um guidance from, you know, the CFTC here in the US, right? Like the and the expectation is that that will include tokenized synthetics and things that are actually settling on chain, right? And if that happens and we start to see a an an expansion of capital markets, an expansion of operating hours and trading hours, an expansion of um especially exporting capital markets globally, exporting the US dollar globally, th those markets will also need to be settled in stable coins and then we're talking about you know a bunch of you know software companies that I mean like Gramp is talking about going global with stable coins, right? And so if it's a settlement layer that is that is you know what is being um upended is the settlement layer and we just have brand new settlement layers that are all happening on chain I I think it is shortsighted to say well over time that doesn't acrue value to other things in the ecosystem now I think in the near term one that's a huge market two there will be a ton of value that's built uh doing that and ton of value that acrews to maybe only a handful of names >> with with stable coin transfers What's that?

[00:16:21]>> Ju just stable coin transfers you think is like a massive market because that that in my mind is just like pretty much at cost. You're not making that much money with stable coin transfer.

[00:16:30]>> Well, it's a scale game for sure.

[00:16:32]>> We talked about tempo like tempo is like not going to be that make that much money just stable coin transfers.

[00:16:37]>> Well, I think the thing to think about with stable coin transfers is uh you know not to similar to way you think about like fintech more broadly, right?

[00:16:42]And so like Stripe started out as a you know, essentially just a gateway that connected these you know e-commerce businesses and uh and the banks essentially right and now what is striped today their you know their credit and their accounting and their their you know uh a bunch of their virtual accounts and you know cards and you know etc etc etc right um and I think if you look at the history of fintech people have taken these wedge products and they built you know very big businesses around them that you know acrew value in a bunch of different ways the company I was talking about earlier um in Latin in America. They started out as sort of just like a payments transfer business uh thing, but now they're then they started winning customers and they started upselling customers and increasing margins um on this like expense management software that they have. And so I think if you uh if you take these like wedge products of just having better transfers and better settlement, you can build really big businesses on top of that as the world gets bigger and more value gets accured.

[00:17:46]So, I I think it's a just a shortterm um and we're seeing this some of our our companies and I think it's just sort of a short-term versus a long-term perspective here and and I get it like you're more of a a trader than I am.

[00:17:57]>> Not really. I mean, not not really. I mean, I think coming into crypto as an investor, you have to eventually be a trader and manage risk because it's liquid venture. But, okay, like honest question. when we talk a lot about tokenization and all these corporates like doing stuff.

[00:18:12]I had this discussion earlier on with my team which is like what is like the best concrete tangible application of stable coins uh on a on a real business and and and then what is like on the on the RWA side like yeah like there's there's investments and there's headlines and whatnot but like what's like the what's a case study that you show a regulator or you know your skeptic cryp like non-crypto I mean, when I tell people about the rain story, ears perk up every time. They're very interested in what's happening there because cloud economics have been a topic in DC for a long time and it's been topic of regulators globally.

[00:18:56]You've seen it in uh in Europe. the ability to go do crossber issuance with cards and then settle still same day and eventually real time with Visa, not having to do it inside an issuer bank or you can do it with a local issuer bank uh and a crossber um basically a crossber bin uh and do those two things together but you can improve economics and you can settle more real time uh on the issuer side like people are like oh that's super interesting like and then there when the wheels start turning around okay what does that mean for the businesses that I can build and how can I monetize my consumers and give less economics back to like a bank, right?

[00:19:34]Then when you start to think about, okay, well, the more people that are existing in this type of of ecosystem and they and they maybe they have stable coins, but they don't know they have stable coins, it looks like US dollars.

[00:19:46]uh on you know the acquiring side, the merchant side, you start to see a world where you can grow alternative networks, you can grow alternative businesses, you can add more economics both merchant and to the um uh and to the end customer.

[00:20:00]And so when I talk about, you know, like when I talk about RAIN to um to the regulators, they they're very very interested. When I talk about Rain to the, you know, any of these like large corporates, whether they're tech companies or um financial services companies, their their mind is blown because it's a completely different way to think about how to do global payments from different jurisdictions uh and in different um currencies. And so I think it's a I mean I I am obviously very bullish. Um I think I've said this before, Rain is the biggest investment we've ever made as a firm. Uh and so, you know, I take that with a with a grain of salt. But the reason I am bullish is because of the fact that I have these discussions with everybody around whether from regulators to large corporates to global crossber payments companies and I talk about the enablement that we're seeing and everybody goes oh holy [ __ ] right uh and I get it like I'm a payments nerd and like you know that's less exciting for in if you're you know punting uh you whatever purpose on hyperlquid but um I have an expectation that there is going to be global banks in a way that there has uh basically global banks that serve SMBs and retail consumers far better than have existed ever and it's going to happen because of stable coins.

[00:21:25]>> Yeah. Know I don't know if you want to respond to that.

[00:21:29]>> No, I don't. I I I mean I agree with Rob. I I I agree with Rob. like I I everything he said I agree with. I think the problem is um you know maybe that thesis is a little boring, right? If you're not a payments and banking investor. So you know the the industry is changing. It's changing. So I mean okay let let's move on to a different topic. Um but maybe you know just that point I think that actually brings it all the way full circle which is that I think a lot of the you know timeline right now and the bearishness is because it is boring and it is doesn't necessarily acrue value to the tokens that people want to see go up in the things that retail is interested in.

[00:22:07]>> Oh hip is like hyper liquid is pretty interesting like very exciting people.

[00:22:13]>> I agree. Okay so let's let's start hyper liquid. There was something that happened this week which is um liquid. I don't know if either of you guys are investors liquid trading they launched this thing called co-invest which is um it's an integration that lets users trade hyperlquid per directly inside of chat and claude. It's legal in all 50 US states via CFTC no action relief and it's um yeah it's very interesting. So what's also happening right now is I think Robin Hood just announced publicly but ba basically every single brokerage um and exchange right now is working on AI agents. So, uh, Robin Hood announced this week as well, their AI agent. It allows you to basically launch an agent to trade on on their platform, right?

[00:22:55]You, you know, you set it, you forget it, you watch your portfolio move. Um, it can make you money, it can lose you money. You kind of tell it what you want. Like, I want risk on. I'm very bullish memory stocks. Like, I want to lever up. I, you know, I I want I want to be safe. And it'll actually put all the trades in for you. My question to you guys is where do you think money uh how much does Claude and chat actually gobble up here? Like you know if you think if you think back 15 years like I don't think anyone was able to predict how much social media gobbled up. They gobbled up all the media companies, right? So, and you know that that it was very tough to predict that there's a there's an idea here that chat and claude could actually gobble up all of the fintech platforms and like will we have SoFi in 10 years? Will we have Robin Hood in 10 years? Or do you just bank or do you just have all your money with, you know, claude and chat? So, I don't know if you guys have thought through that, but yeah, this AI agent thing made me made me think about that.

[00:23:53]>> Well, historically there's been phases of bundling and unbundling with software. um particularly like you there's a phase of bundling and then and then and then unbundling um it's a good question. I haven't thought about it deeply but um I think more and more people are using claude and chat and then there's all these rappers built on top autopilot uh they're all like AI like using AI to serve the consumer better. One of the things I've appreciated is people don't like to think about money in the sense of like they don't constantly think about switching bank accounts. And I think the trust piece is something that technology doesn't overnight change for a big part of the market. In the same way that like Robin Hood is still a very small fraction of the overall population in the US and it's kind of a sticky customer base. it doesn't leave Schwab and you know Bank of America Maril Lynch and maybe on the renewal like boomers you know inheriting money to younger generations is is is the bull case to suggest that but I don't know um um I don't know if it's going to fully happen there hasn't been like historical precedent to suggest that like it's the super app of super apps I mean maybe cacao and you know we chat is like the thing that gives me probably confidence that maybe there's more bundling than unbundling here.

[00:25:20]But like maybe anecdotally, would you do it?

[00:25:26]>> No, I wouldn't. No, I mean I would use >> security just I I don't know. I just feel like I I don't I don't want I don't want the app where I look for him. It's the same reason I said I think I said this on the podcast a couple weeks ago that I don't want to trade through through Twitter.

[00:25:44]Like I don't open Twitter and think about wanting to move money around.

[00:25:49]>> Church and state.

[00:25:50]>> Yeah, church and state. That's how I think about it. But I but I could be I could also see myself being completely wrong here.

[00:25:55]>> I mean, I think younger generations have a very different relationship with money. Like they don't understand what a bank account is. Like they they're all like fully digitally native and uh but yeah. Yeah.

[00:26:10]I I just uh a couple things. So, um I I I uh the liquid guys, you know, obviously came out and said, "Hey, well, this is no action letter." And so, because there's this no action letter for a different company, um you know, we're able to do this as well. Um good luck. Uh >> yeah, God speed. I was thinking the same thing. It's like, yeah, >> yeah. Yeah. And and and and having had um you know, and having spent time with the regulators, uh you know, and and and knowing other stuff that's going on, I you know, good luck. But regardless of that, um, listen, I I think the Robin Hood thing is really interesting because instead of them building their own like basically their own agent and saying, "Hey, like use our agent to do this thing," they're saying, "Hey, like bring your open claw, bring your uh Hermes agent, you know, bring you know what, you know, your your anthropic manage agent, plug it in, and we'll give it sort of a siloed wallet and or a siloed account and you know kind of you know you can pre-spending limits and you can kind of work with it and see what happens and if you lose money you lose money but like this is you know you're agent you can do your own agentic trading uh and training on this thing and I think it's pretty clear to me that like that that will exist. I think that's, you know, I had already heard of I was talking actually to the CEO of one of the large crypto exchanges maybe this is probably three months ago or so who was telling me that he was already doing that uh the same exact thing actually in some of the his accounts personally and so he had he had taken a open claw uh agent and he had tra trained it on a bunch of like historical trading data and then had like given it their own accounts on his exchange. Um uh though to his credit he told me that uh I think he they were losing a bunch of money. So but you know that's that's obviously something that's gonna happen. And so I think that that's super interesting. I don't actually think people are going to like go through a front end and use a bunch of natural language to do um a lot of trading and that's I think those are kind of two different points. So is there like retail trading through like a front end using natural language and then is there a lot of like you know quoteunquote agentic or you know a IML powered uh trading that happens on exchange that I think is inevitable right there's like no doubt we've been moving towards system systematic trading you know more and more over the years as ML has grown um there's no reason to think that that'll stop and I expect that it's gone from institutional now into it'll go into more retail but I I don't expect that like there'll be a lot of natural natural language or at least not through other frontends. Maybe it's I'll go to Robin Hood and then on Robin Hood I'll say hey listen like can you buy me a you know this per or this option or whatever and they'll they'll do it but I think people will still want their finance to exist in in finance or fintech app and they'll want you know anthropic and and uh and open AI to exist elsewhere. So, I don't know. I we we've looked at a lot of there's also been a lot of uh startups that have, you know, kind of tried to attack this like natural language um you know, trading thing and opportunity when they do the kind of smart routing or whatever. And maybe it's just early, but they the products are pretty terrible at the moment.

[00:29:31]I think the this goes back to like I think like there were the the the tracker like the robo advisor right that they would follow 13F filings and like copy like you know exportfolio.

[00:29:43]The argument I think is like agents will be able to do that more efficiently in DeFi, right? in Hyperlquid plugin directly like and and in real time automated like you know I go back to that example of like you know war in Iran broke out on the weekend your agent spun up reads that on the news then goes directly to Hyperlid lungs oil and and it just I I think the business there is an interesting business opportunity to be made around setting the right guard rails in place to make sure that your agent is like I I think you know people will not do this on their own. And I think they will buy a product that they have really good confidence around okay this is like secure it's a good setup like there there's different parameter rules that in the same way that when you set up a brokerage account or like a you know they'll ask you what's your risk profile and you know how comfortable are you with X or Y um I think we'll see a bunch of those businesses how enduring and durable TBD because I think Enthropic and Open AI have just a nature of just crushing whatever gets traction um but isn't isn't anthropic uh really hiring these two guys are hiring like um consultants and private equity guys and more industry specific people which I think just is sort of like reading between the lines like are they going to want to build like specific businesses around that.

[00:30:57]>> Um >> yeah I mean they just acquired a consulting firm basically that was doing like you know integration work for for AI. I I I think I mean these are all I think Yano's question was different which was like okay well is fintech for retail going to get displaced by you know kind of open AI and and chat GBT I think that's one thing and maybe open a chat and and chat GBT and anthropic will launch their own you know call it fintex or or whatever I I don't think the opportunity set they they do still continue to have a um just trade-offs that they have to make in terms of like what is the best ROI on their time and their compute really and like I think the enterprise application side right now it's just so big that like for a while we will see them focus on that opportunity. Um but the uh yeah but but I I don't disagree with you that like they're obviously going to get into more infrastructure for for trading and you're going to see all of the systematic trading shops you know integrate new models and you know do some of their own training etc. I mean, think back 30 years ago, right?

[00:32:00]Like if everyone's using a Bloomberg terminal to find information so they can make better trades, one day Bloomberg wakes up and goes, why don't we just let people trade through the platform? So, I think eventually I think eventually you could see that. Now, the interesting thing will be will they acquire B banking license and do it do it in a traditional way or do they do it in a you know, do they integrate wallets and stable coins and you know, you know, hyperlquid builder codes or whatever it looks like. So, um, speaking of other cool DeFi stuff, Morpho launched, um, uh, mid, uh, their midnight white paper.

[00:32:29]So, I don't know if you guys saw this, but it was a non-custodial protocol for fixed rate fixedterm credit markets.

[00:32:35]Santi, I'm sure you've invested in about 17 of these things already. Um, but, uh, you know, I remember actually doing a whole ep curve uh, with Mike on why we need fixed rate lending, fixed rate lend borrow in, uh, in DeFi. This was in 2023. Um, >> you guys did an entire season on fixed rate.

[00:32:57]>> We did a whole season on on on interest rates in in crypto and you know interest rates. We did interest rate swaps. The market was about $700 for this at the time. Uh, >> so that podcast no longer exists because that that podcast bored the [ __ ] out of people.

[00:33:13]>> We had we had to pivot the direction a little bit. Yeah. [laughter] >> What so what are they doing now and what's different? Okay, let me let me maybe tee it up. So, fixed rates are this missing primit. Okay, fixed rates in capital markets exist um and they allow for a bunch of things. Fixed rates in DeFi um do not really exist yet. And so if you look at like you know a compound or like even Morpho Blue today the the rates are tied directly to pool utilization, right? And so what happens is if you have like inflow or outflow that spikes that changes the borrowing cost. And so if you're a borrower you're faced with you know what's called interest rate risk. You never really know your true all-in cost over time.

[00:33:56]And so uh the result of this is you know there's a lot of like whale borrowing or retail borrowing or trader borrowing.

[00:34:03]But if you're anyone else like you're a business it's actually quite hard to plan anything long term. And so you end up not just not taking out the loan um or your cost is too high because you have to cover um you know that interest rate risk. So fixed rates remove that risk entirely and it allows borrowers to lock in an exact cost for a defined term. And the lenders get guaranteed terms without having to kind of babysit their utilization. So if this doesn't make sense or if this is like why does this matter? Um you know many people listening to the podcast have probably dealt with this. It's called a 30-year 30-year mortgage, right? 30-year mortgages are a floating a floating rate and then they use interest rate swaps to basically fix to fix your mortgage rate and that allows you to have a fixed rate or businesses borrowing. You know, Blockworks, if we were borrowing, we would not take a floating loan because it would be too risky for Blockworks.

[00:34:55]But if we could take an onchain, if we could take a a fixed loan, that would, you know, that would allow our CFO and our finance team to actually plan this out. So, where this gets really interesting when it's in DeFi is there are finally protocols making real revenue. And so, imagine your unis swap.

[00:35:10]I don't know unis swap's revenue off the top of my head. I'll make it up. $100 million. So, imagine unis swap is making $und00 million. If they want to take they're they're now a small business or startup making $100 million. They should be able to take a loan out. But if it's a a floating loan, it's very hard to actually do that and plan for that. If it's a fixed loan, you kind of unlock like real business and corporate borrowing. So you unlock fixed rate mortgages, business and corporate borrowing, institutional and RWA lending. So look, this has been tried many many many times and many times it's failed. The the demand side probably wasn't there. Um but I you know this could be the time when that actually changes and this works. So I'd love I'd love to hear I mean Santi I'm I was kind of joking but I I I would guess you've invested in many of these >> a lot of them and I think none of them really kind of worked. I I to tell you the truth I don't have a full postmortem. I'll have to refresh my notes but you are right on the piece of it is very hard to borrow very like if you were to take a loan on maker for instance or sky you're subject to governance risk right I think the if you look at the rates like the the governance maker sky fix like sets the benchmark the equivalent of so okay that has like moved dramatically in a span of like couple months which is the equivalent of like you know the Fed like hiking rates like from 5% to 15%. That's just becomes like really difficult. Uh and I think a lot of institutions have have shied away from even crypto protocols doing just shied away from like borrowing on chain for this reason. Um, so like I think I think like mortgages in the US are kind of like the best product like fixed 30 fixed year like 30-year fixed is like an amazing product that doesn't exist anywhere else in the world. And anyone that like took advantage of that when rates were zero is like sitting pretty. But if you go to Europe like you don't have that. So you have then you have to think about like other ways to to like hedge your risk.

[00:37:12]And so there's swaps, right, for this reason, right? And so you can if you're a business and you have swaps to manage your exposure, but it's been it's been tough to do on on chain like so there was also like interest rate swaps and that that have been tried. I think yield tried to do this but none of them really got off the ground. I I don't have a good answer as to why all of them like didn't really gain traction. Rob, did you guys invest in any of this stuff?

[00:37:36]This is like 2018 20 2020 era. [sighs] >> I have to think back. Um, off the top of my head, I don't think so.

[00:37:50]But there was, you know, we definitely did a lot of, you know, like calling it smaller checks in that, you know, 2019, 2020 era, um, of which I probably not remembering all of them, but definitely nothing in the last four or five years, uh, that has been notable. Um and so I you know I can't think back you know we're we're also you know at times we've owned a uh we were not VC investors but at times we've owned a um you know we're not investors in Morpho. I I do think you know this is important and I I I think obviously fixed rate is is going to be good for if it can work is going to be good for DeFi ecosystem. I also think there's just like a broader point here around the fact that Morpho is you know really really focused on how to get integrated into all of these fintexs globally and all of these you know different financial services firms and obviously as you know call it more tokenization happens and capital markets come on chain uh to go back to where we started the firm uh this this podcast we you know fixed rate needs to be part of that there needs to be the capability to do that uh onchain so I I don't it's positive Dave, I don't have a ton more to say about it other than >> I quickly refresh my memory courtesy to our uh my robot here um my quant. So the reason why it had been tough historically is there was no universal benchmark rate and people would try to do this with like the ETH staking yield as like the central bank and then maker and then it was like a and then compound but like there's not like a universal like benchmark like the US treasury. Um and so that became difficult. The other thing is I think the capital markets on chain have been extremely short extremely shortdated like short duration right these are like short duration treasuries there hasn't and I I think this is something that I'm excited about which is bringing quality credit on chain and if you bring quality credit on chain I think you fix this issue because if you're trying to do it with like yield farming and looping strategies like all of that is incredibly short so there's no real need for fixed like you're not buying a house for 30 years like you want to live there for the rest of your life. Now, when you this is, you know, obviously I'm biased because that's an opportunity that I'm aggressively going towards the interesting um talking about the framework guys that I think they should come on and talk about what is going on with better. this is like a mortgage originator and I think they tapped Sky for a pretty sizable facility and I don't know the particulars of how that agreement was structured but when I pinged them I was like hey was this like a bespoke like brokered like structured deal where like maker guarantees a rate because I said what happens if like sky governance just like decides on a whim to change rates from like 3% to 10 like better is at that point is like pretty exposed he didn't tell me but I would love to know how those agreements I I think if you're the CFO, the treasurer, the CFO of Better, you probably would have wanted like a a strong guarantee that there's like a cap to the rate. Um, but it's >> tell you that that tells you. So, >> there you go. But I I think it's in summary, I think short duration has been the name of the game on chain. Um, and there's no reference rate and there's no quality.

[00:41:05]But if we fix that then you you you do create a really nice business out of it.

[00:41:09]>> I think the way that I think the way the morpho is doing it is um I have to I I haven't actually read the white paper. I was just reading some tweets is um every market has a single fixed maturity date like let's call it 3 months from now and then instead of uh lending USDC and earning uh the uh interest you buy what are called credit units and then instead of borrowing USDC and paying variable interest you sell debt units. And so at maturity like let's call it three months one credit unit is redeemable for exactly one token of like USDC and so there's no uh the fixed rate is locked at the moment of trade.

[00:41:44]>> So this is Pendle.

[00:41:45]>> Yeah it's Pendle >> Pendle. Exactly.

[00:41:48]>> Yeah. But but they go out to maximum a year. It's it's not like a five 10 year.

[00:41:54]>> Yeah. Well, and and to be fair to um to Pendle, I mean that's another one where um we you know that business I think started if I remember right as you know sort of this kind of grander vision around you know what could happen around all these different markets for like offchain you know hedging and you know etc. and and it ended up growing a lot because of what we were talking about earlier is the yield farming in Athena basically. You know, Athena was by far and away the biggest um u biggest exposure there for a while and then now and then we had all these sort of these call it you know interest stable coins and tokens etc. Um, and so I I think that some of this topic or this conversation goes back to what do we think people will be doing on chain and will it continue to be sort of this you know uh to your Santi keeps saying gambling but trading and you know you know yield farming etc or will there be kind of more regular way economic activity that's coming on chain and people want to use that these onchain primitives to to manage risk.

[00:42:58]>> Yeah. Yeah. Like I yeah what what's different this time around is like there's very little like yield farming which is super short like block centric like like like to the minute. Um the other interesting I'm curious Rob or Yano in your conversations like is is the reason why there hasn't been fixed rate beyond yield farming short duration stuff like no reference rate whatever we're investors in notional the other protocol element finance like there's just literate graveyard out there but um smart contract risk like you don't want to necessarily like is the reason why everything's short duration like around this nervousness in the market around like smart contract risk I I mean I don't think that's the reason uh initially. There's just there's some conversation around like what does the curve look like in the demand and like pricing. Um but I you know this actually kind of maybe goes into a different topic about how concerned everybody is right now about DeFi and smart contract risk. But, you know, that's not something that I think was nearly on top of everybody's mind uh in the way it is today anyways until until the last few months. Uh because, you know, if you go back a year from from now, you know, still none of these things had worked, but still a bunch of people have tried to make them work and it was still a topic of conversation. I mean, Yano had a full podcast about it. Uh crazy. And uh and you know, it wasn't it wasn't smart contract risk that was the was was the concern. But you got you got to pull up the the the tweet that I retweeted from the founder of Open Sephilin. Do you guys see this?

[00:44:34]>> Yeah, but does he's not the f He was the founder of Open Zeppelin in 20 He left in 2019.

[00:44:39]>> Yeah, but like these are smart guys.

[00:44:41]Like I mean they're they're they're on top like you know I Anyways, he he basically said >> I I I think it's a look >> he said he said nothing in DeFi safe.

[00:44:53]>> Nothing in DeFi safe. is like I've advised family, friends, myself included, like to put zero capital on chain at the moment. Actually, it didn't say at the moment, it just said full stop. Um, interesting. I I've privately now continued to talk to credit funds like other folks that I've been historically like very much active in DeFi and there's a very noticeable like what's a what's a stable coins on a right now?

[00:45:17]Like is the kelp situation like resolved? I'm throwing a bunch of questions here, but they're all related to the same thing.

[00:45:24]Kelp kelp is not fully resolved but but mostly resolved it. Yeah, making progress.

[00:45:29]>> It's definitely not resolved from there's all this like legal stuff happening in the background. Yeah, >> but uh I mean everyone on a was made whole basically. So >> from the users perspective it is solved solved.

[00:45:39]>> Yeah, I was just going to say I think there is this point though around you know everything in DeFi being unsafe. Uh and we we kind of had this discussion right after Kelp on this pod.

[00:45:50]A lot of people kind of snapped back at him and were like, "Oh, you know, we're more battle tested than ever." And and we again had this discussion, but you know, most of the hacks, almost all of them are not smart contract hacks.

[00:46:01]They're actually, you know, they have something to do with a vulnerability through, you know, a specific user, a key holder, you know, a signer, etc. But I I would say that the there's this this thing happening where it's like okay well it's not smart contract hacks it's not the software itself and you can improve the software with AI in the same way that AI can go and find vulnerabilities in the software. there's a probably this point in time where again the attackers have a a kind of a foothold because they're while everyone is rewriting code or making code more robust they're they're able to go and and attack you they only have to find one vulnerability but I I still continue to think that the biggest problem is OBSAC it is people specifically being um you know having their their security parameter get uh infiltrated and not through smart contracts And I think that is primarily but but what is happening now is like once people's in your security parameter the ability to then go and do the things they need to do to find the vulnerability to then find the way that they can extract capital uh is happening faster than ever. And that is specifically AI related. And so I I do think that we're going to continue to see more hacks and across not just crypto but all software globally uh for a period of time and then eventually hacks will basically go away altogether but it just takes time to rewrite code.

[00:47:31]>> Yeah. The issue I agree that that like you you're going to have a tumultuous period where you catch up, but the problem is like the lack of reversibility in in on chain makes it much more hard.

[00:47:45]So, so I think this is maybe the more my my perspective was like wait it out, right? I mean wait it out for six months. You know, you don't want to be there when when this happens. you're better off being in a position where like hey look one thing I will say is like not every protocol not every smart contract is created equal right but but yeah the social engineering stuff is tough right because most of these pro protocols are upgradable there's admin keys rightfully so like you want to have that but it it's it's quite tough um I think it was a C that com like have endpoint security make sure that you're monitoring your stuff if this happens because you might be infiltrated right now you don't know, but they're they're just lurking there in the background and they'll hit you in six month. No, I'm ser like this is what like drift happened six months.

[00:48:31]>> Um, and if you're using cloud code and you're like, you know, don't have separate devices, at least have something that is constantly monitoring your device to see if there's anything running in the background that shouldn't be running. Like, it is it is table stakes. It literally costs 100 bucks a month in the enterprise solution like Crowd Strike or whatever. Get on it and like have peace of mind. Seriously, like there's really no excuse if you're in this industry because it's it's you're also putting a lot of other people at risk. Like have a safety word, you know, with people to prove humanity. But it the the tricky part is like when you think about the OBSC, like if if you're like vibe coding, there's there's a higher surface area of just being hit. And so that's that's what makes it all the more problematic, you know.

[00:49:15]>> Yeah. Maybe last topic here before we wrap. Rob, you were just in DC. Uh Santi touched on this at the beginning, but would love to get Yeah. any takeaways from just the DC trip.

[00:49:25]>> Yeah. And so usually when I'm in DC, I see some combination of um you know uh members of of the House or um Congress people generally or or their their staffs and then you know also regulators which which is again what I did yesterday. I I think there's a couple of topics. So one is clarity and the bullishness around clarity is is pretty positive. And so, you know, when I had been in DC last, I could you could definitely feel the bullishness among the the Republican side of the hill and you could definitely feel the bullishness among, you know, maybe a few of the very, you know, big crypto supporters in the on the Dem side, but you're now starting to see, I think, a little bit more bullishness as well in in the um people who maybe weren't, you know, haven't put a bunch of their weight behind clarity.

[00:50:20]or genius before there's a I think an expectation that we get a vote you know maybe July the industry keeps saying like oh June I don't I think that's too quick uh the floor vote there'll be a couple of things that are top of mind you know one of them is the American the ABA that the bankers are uh continuing to fight against this bill even though Tillis took it out of the banking committee we'll continue to see them lobby hard against uh the bill there's you know people talked about there's ethics language uh that the Democrats are going to require from um to put into this bill around the ability to profit off of you know crypto and crypto businesses that you know the the White House is going to have to get comfortable with.

[00:51:04]I think those are probably the the major two things still there is going to be a lot of debate on the floor. Typically the banking committee and the a committee would come together and they would reconcile before it went to the floor but there's been some holdups in a and so you're basically just going to get the banking version and you're uh before you know a is able to reconcile as well and so there there's also a lot of conversation right now around there's this thing called BRCA in the clarity act which is basically gives developer protections for just developing you know open source code that maybe ends up getting used for nefarious reasons. But, you know, this is just open source code that allows you to swap or send or lend, etc. And I I think there's a there's carves out for okay, well, you know, you're not a money transmitter. Um, and you're if you're a validator or if you're just a front end or if you're just a smart contract and you know, if any of those things if you create any of those things, you have developer protections because of it. And I I think there's going to continue to be debate around that um as well and the exact language, but that all seems solvable to me. And so I actually think you know in the past when poly market showed that clarity was 50 55% chance and I was saying oh that's too high um I now think that the the likelihood is higher than 55. So I actually think this is now underpricing uh it a little bit and so I I think that's that's exciting. Um and then there's I could talk about some stuff on the regular side but I'll stop there on on clarity.

[00:52:37]>> Nice. That's great to hear. 55% under price.

[00:52:39]>> Yeah. We we the lowest was like 30 36 or so. Now it's up to 56. So encouraging there.

[00:52:46]>> Uh >> what about on the regulatory side, bro?

[00:52:48]>> Yeah, on the regulatory side, listen, I think there's there's a lot coming. You know, Chair Celic from the CFTC talked specifically uh in March about guidance related to PERPS. Um you know, I still everyone I think in DC still expects there to be, you know, per guidance. Uh and I I still continue to expect that to be constructive around you know how certain types of businesses can you know theoretically have like offshore and onshore entities the way poly market does today and like how they can you know fragment liquidity and do business in a regulated manner and a non-regulated manner and so I think that is um I think that's going to be super interesting uh and I expect both per and prediction markets to continue to dominate uh a lot of the conversation on on the regulatory side that today the you know I think it's a lot of like you know pers for 247 markets but I expect that not you know in the near term but in the medium to long-term to also go to okay well how should we be thinking about pers for real world assets and for and and eventually you know those markets also becoming 247 on the spot side and so I listen it's all very positive uh in my mind to exactly the way we started this podcast a lot of positive things are happening and Yet, you know, the price action hasn't made people as excited as you you'd think they'd be.

[00:54:09]>> 15 years, man. 15 years. That's what the NASDAQ took to recover from alltime highs. We can't we can't end this podcast, Jens, without we're going to end it on a high note with content. But Sailor, we got to talk about Sailor this week before we drop. You know, he he he probably had one of the most epic tweets that one I saw circling around, which was like, "This week, we're not buying Bitcoin, we're buying bonds." Uh and then and then you saw massive like billion dollar trade of IBIT uh one or two days ago. Uh what's going on in Bitcoin land? We don't typically t talk too much about Bitcoin, but you know, Bitcoin carries a lot of weight. What what what to read there?

[00:54:50]>> I have not been following Sailorland actually. I uh well actually say he he wants to do a podcast. So we will um we'll have I think we'll we'll go straight to the man. We'll get Sailor on the show.

[00:55:01]>> Yeah. Yeah, I mean I do think listen I clearly a lot of the conversation you heard or at least I heard you know for for a long time was oh like Sailor just going to keep buying forever and he's going to continue to use Stretch to be able to take you know buy and accumulate more Bitcoin and you know Sailor's taking us to 200 grand and like you know um it was almost you know people basically Bitcoin Jesus uh to a lot of people and so when he turns around he's like actually like I'm I'm gonna sell Bitcoin to go and you know buy bonds Um, you know, I think that shook the market a little bit. I don't >> Yeah, a little bit.

[00:55:38]>> It's like Jesus saying you can't walk on water, man. You know, [laughter] >> it's a pretty big detraction from the gospel.

[00:55:45]>> If you go I mean, you go to their website right now, they have all their data on their dashboard. Um, and they they took their uh US dollar dividend coverage down to six months. And so, like, are they going to have to sell more Bitcoin to do that? like it seems likely.

[00:56:02]>> I keep coming back to all financial engineering whether it's a DAT or any eventually blows up or unwinds and and usually doesn't unwind easily. I I will credit like what Micro Strategy's done, but I've always said it like if you want if you want to have exposure to Bitcoin, just buy the goddamn thing by I bit at least. But clever financial engineering whether it's this or that or the nav always compresses and financial engineering usually just does not persist forever. So >> strategy nav is at 1.2 now.

[00:56:39]>> Yeah.

[00:56:39]>> Yeah. I mean you how um speaking of nav should we talk about robo strategy?

[00:56:49]What a what an interesting one that one is.

[00:56:52]>> Well, what's the what's the Nav uh what's a premium to NAV there?

[00:56:58]>> Uh it's like I think it's like close to 4x at the moment.

[00:57:01]>> 4x. Yeah.

[00:57:02]>> Yeah.

[00:57:03]>> I think it's and I think it's maybe even higher than that when you account for um the 25% dilution that that the uh advisory team made there. So >> yeah, again this is this is a bit different in the s it doesn't justify the the the premium to nav but these are all private marks and people there's it goes back to like there's been just so much wealth creation in the private markets that people you know want to have exposure to venture deals and this vehicle attempts to do that for robotics which is you know hot trade but yeah I mean I haven't seen a reasonable compelling argument as to why nav should be there. Um, yeah. Again, I think this was something you flagged in last podcast, Rob, which is you're better off buying like a synthetic. Like someone should just create a synthetic on like Appronic or Figure or pick pick whatever robotics private company or any private company that you like and just someone creates like a synthetic on that and just tracks like latest recorded trade or something like that. You'd have to trust whoever is doing that and pricing that. But that to me feels like it's just a better way to get exposure to things in the private markets. And the good thing is crypto is really good at finding liquidity for a tail end of assets. So, you know, synthetic is in my opinion just better for this type of stuff.

[00:58:22]>> Yeah. Content of the week. What do we got? Santi, kick us off.

[00:58:27]>> No, man. I can't go first. I've been talking too much. What do you think about that, >> Rob?

[00:58:34]>> All right. I mean for content of the week uh I think so last week I talked about Obsession uh which is the movie like that um was made for and I think I flagged it.

[00:58:45]>> So since you mentioned that I saw I see it everywhere now. It's all over the Yeah. It's everywhere. Yeah.

[00:58:50]>> Yeah. Yeah. So, the movie was the movie is really good and it's this kind of this trend that's happening in horror right now where people are going from like YouTube creators to getting their own um their own full features and it was made for a million bucks and it's going to do over $100 million. Uh which is amazing. Um we've got to get maybe we need a Empire pod entirely about movie financing. So, let's think about that one next.

[00:59:11]>> Bring it on chain folks.

[00:59:14]There is someone on well there's some like through republic um but they uh uh another one in literally the same same exact YouTube creator to full feature uh called backrooms uh came out last week uh also awesome. So I'm just telling people horror we're having a horror renaissance right now. It's great time.

[00:59:34]See the movies and you know make money.

[00:59:36]>> Horror. Oh, I thought we were talking about crypto. There's plenty of horror there [laughter] too. Um wait Rob. Okay.

[00:59:41]I don't have a content of the week. I just want to ask did you guys see devil wear where's Prada >> the second one? Yeah, I did see I I I I talked about it on this pod.

[00:59:49]>> Oh yeah, you went and you know you did your whole routine and God of Scotch or is it good? Uh, you know, it was like a lot of these like nostalgic remakes that happened like, you know, a decade plus later, which is that they hit like a bunch of the, you know, they hit a bunch of the main themes so that you get you feel good about like, you know, what happened before and you're kind of seeing the same things, but there's no real new character development or, you know, etc. So, it's pretty pretty surface level, but I enjoyed myself. Uh, I saw it on a Friday night um with uh with my wife and um had two old fashions and you know, what's what's Rotten Tomato there? Like is it like 48? Is it?

[01:00:26]>> Oh, let's see. I'm not a big Rotten Tomatoes guy because the problem with Rotten Tomatoes is it people just say like yay or nay and so like like everyone can say like oh that was mediocre and I have 100%. You know uh and so I you really got to get on um I'm blaming on the name of the app right now but there's this really good app where people actually review all of their movies um that uh I'll I'll get you the name of it. So >> yeah.

[01:00:50]Yo, what's your content of the week, man? Will Will our producer letter boxed >> letter box shout out.

[01:00:58]>> I was like I know the app. Yeah, let's go.

[01:01:00]>> Best contribution to this pod. Will you take [laughter] >> out I have a letter box too. I should have known but I um I'm I'm not a good if anyone finds me. You can see all my reviews. So see what I really like.

[01:01:12]>> Letter box baby. Um yeah mine is I'm watching the show on the on the Murdoch family uh on Robert Murdoch and the Murdoch family on Netflix. Very interesting. Media mogul Titan. It's good.

[01:01:25]Yeah. All right, folks. Appreciate you guys listening. We got a good episode coming out on Monday. Sorry we missed this week debating going back and forth debating this, you know, new update to Empire, you know, with the guests, mostly in person, high quality, over quantity. But, you know, we don't want to be skipping episodes, too. So, yeah.

[01:01:41]Sorry for missing this week. We got a good one coming out on Monday. So, we'll see you then.

[01:01:45]>> Who Who's What's the episode on?

[01:01:47]>> Tease it, baby. You got to force people to open the app. Listen. No, it's with uh the Electric Capital guys. A Vitrol and uh I think Avichel is bringing a special guest on too. One of his partners.

[01:01:56]>> Cool.

[01:01:57]>> Awesome, guys. All right. Well, have a good weekend. Thanks for coming.

[01:02:00]>> All right, folks. Have a good weekend.