The Chopping Block: Bitget's 387 Million Dollar Hack, Kalshi's Cooked Perps Volume, and Agentic Bank Runs

0:00Oh North Korea isn't here, we're gonna shut this off. 387 million... Taronis that's 10th most famous Delaware resident. Consensus is a big boy. I never swear on the job. Hey, this looks cooked. Agentech bank runs. Your estate is paying for dialogue. Homoachonomicus is a bad baby. Not a dividend. It's a tale of two-quons. Now, your losses are on someone else's balance. Generally speaking, air drops are kind of pointless anyways. I made trading firms who were very involved. I like that heat of the ultimate. DeFi protocols are the antidote to this problem. Hello, everybody. Welcome to Shopping Block. Every couple weeks, four of us get together and give the industry insider's perspective on the crypto topics of the day. Click intros. First, you got Taroon, the Gigabrain, and Grandpa of Gauntlet. Yo. Then we've got Robert, CryptoConsour, and Zarr of SuperState. Good morning, everybody. I am a seed that had hype man. A dragonfly. We're early stage investors in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life advice, leacy shopping block that XYZ from our disclosures.

1:00So we are together here in Amsterdam in studio. And you know, usually try to make sure we have four people on the show. But we have this very interesting, futuristic, self-served podcaster. It's an automated robot booth. Yeah, it's quite awesome. Very nice. This is how AI is going to get all our information from us. They're going to make into the pod. Yeah, I'm talking. Yeah, like that smart. Well, but it's also like, look, I mean, the jobs have already been displaced. There we are. And we're going to talk to, well, we did talk to one human. But technically, we wouldn't have to talk to a human. It could have been a humanoid robot, like functionally, like one day. That one day, one day. And so we're here in Amsterdam. It's been an interesting week in crypto markets. And it's unfortunately been a week of multiple hacks. So let's talk about the big one, bitgett, in which, you know, caveat we are investors. Bitgett is one of the biggest exchanges in the world. Top five in any given day with respect to derivatives volumes. They got hacked about $387 million that was hacked from Bitgett, very likely attributable to the Lazarus group,

2:02which is a part of North Korea. Bitgett, it seems to have mostly affected their hot wallets, slash warm wallets. There was some kind of infrastructure linked hack. The details aren't fully clear yet. But they stole a bunch of different assets out of these hot wallets. Now, Bitgett, thankfully, they are very profitable company. They're quite solvent. They had $460 million set aside in a insurance fund, slash user protection fund. So that was enough to fully pay out all the claims. They've already begun with draws. And so people are starting to get their money out. So thankfully, it's not a contagion. Everything's okay. The amount of money is a lot less than the amount of profit they made last year. So they're in good shape and the industry is solid. However, it's brought up a lot of conversations about money laundering. And specifically because the DPRK, which of course took control of these funds and then had to try to get them out, used a bunch of different strategies to try to move these assets into assets that couldn't be frozen. So the first thing they did of course was move the stable coins out of stables

3:03and try to move everything they could onto Ethereum such that it couldn't be interdicted by freezes and so on. But the other thing they did is they ended up using Thorchan. So not the first time they have used Thorchan. Correct. Thorchan appears prominently in many of these hacks and Thorchan of course is a cross chain spot trading protocol and it allows you to trade. Let's say you're sitting in a protocol like for example, Arbitrum that we've Arbitrum has been known to freeze itself when they're asked to tact. I think Tay, friend of the show, she made the joke that the DPRK moved faster to get out of Arbitrum than they did to get out of USTC because USTC in front of the DPRK. It takes USTC at least six hours. Yeah, it takes a while. They generally need like a court order or law enforcement approved instructions to freeze something whereas Arbitrum obviously froze a hack in the past. Not to say they would freeze for this, but there was some fear from the DPRK presumably that like, oh, Arbitrum has done this before and we need to get access off Arbitrum as fast as possible.

4:06So the criticism has been of Thorchan that Thorchan basically allows anybody to move any money and Thorchan volume spikes anytime there's a massive hack like this. And so many people pointing fingers at them and saying, hey, there's a little bit of a decentralization theater going on in Thorchan in doing this. The other player is near, we're investors and holders of near. So are robot ventures. Okay, yeah. And near also has this thing called near intense which is a cross-chain trading protocol in principle similar intent-based trading to what Thorchan does. However, near has a protocol called Shield which sits at the validator layer which basically looks for anomalies as well as looking for reports of hacks and kind of channel assist type signals and so on. And will refuse to trade with people or sometimes even stop people who are demonstrated to be high risk and therefore, near does not want to facilitate that kind of activity. And they ended up freezing, I think 500K worth of assets as well as refusing to trade with, I think,

5:09over 100 million that was trying to get routed through near intense. So the conversation that is arisen is, is this decentralized, is this good, is this bad, is Thorchan liable, is near not like, how do we think about this? And I'm sure you guys have seen some of these conversations. How do you guys react to the cross-chain movement story here? Well, I think the interesting thing for Thorchan is when they got hacked they shut down. I think for like a month. Yeah, it's sort of like a, but to their credit, I mean, they are realistically, if they had more validators it would actually be very hard to shut down. They just like have had some historical hacks that have made people lose confidence and they've kind of have such a small validator set that it's not that hard to revert. I think the near model is probably the best model of like balancing being as, you know, more decentralized but providing some censorship when it's assets

6:12that there's kind of a valid reason for stopping. And I don't, I think there's obviously everyone in crypto, if you've been around for long enough, you're 10 years ago, you're like, I want everything always fully decentralized. And over time you realize there's some trade off for that. And I think the main thing as long as there exists alternatives where you could use the decentralized thing but maybe you have to pay a worse cost, like worse liquidity, it's hard to move larger size, whatever. That seems to be the trade off people have been kind of as the anti-North Korea kind of thing. And that's sort of what you kind of could argue, you basically see with near versus Dorechane where it Dorechane is just like a bit of a free for all. I think if Dorechane was credibly decentralized and neutral and didn't just like shut down last time, it would make more sense. But their history is not exactly favorable. Yeah. Sorry about that. My mental framing is that you can have the two extremes

7:12and you should have the two extremes and nothing in the middle. Namely, you should have completely neutral censorship-resistant infrastructure that is completely blind to what's happening on top of that. In the same way that the internet itself doesn't control the packets that are sent over it. It doesn't censor them. I think that's a great place to potentially be. I also think the other end of the spectrum is something that there is the ability to censor transactions very deliberately, you're actively trying to scan a blacklist, you're actively trying to prevent fraud, laundering, everything bad. I think the middle ground doesn't work and isn't nobody's favorite. And so I think you're seeing this in policy arguments. I think you're seeing this, you know. Which is what's the middle ground? Well, the middle ground are things where it's like, I don't know, we could shut down, we could revoke it. But there's an active decision that like, there's not necessarily even a policy force. Like, door chain probably exists in the middle.

8:14They did shut down previously. They're not shutting down here. It's actually a decision. But it's a big thing, they shut down when they got hacked. Yes. So, you know, this is like, you know, it's a bad money flowing to the other side. No, but I think that's his point. His point is like, if you're really decentralized, A, you can't shut down. You can't shut down. So there's no shutting down in response hack. And then, I mean, okay, I think this is a little bit, simplified, right? Like, yeah, I am deliberately simplifying for a philosophical discussion. Sure, sure. But I think, well, look, we can ground the discussion in like the realities of what we know now, it's like to run a network, which is that, okay, the validator's sitting at discord, or they monitor a Twitter channel or whatever, right? I would say the theorem is on the end of, it can't shut down. It doesn't shut down. There's no, if there was this activity occurring on the L1 itself, there's no conversation to be had about like who slash what, slash how to shut down the network. I mean, why did they use tornado on the theorem, right? Like, there's a real, for sure. Yeah, so there's a practical, there's sort of impracticalities

9:15of like, hey, we're not going to be able to shut down. I think for most networks besides the theory of it, a shutting down is obviously not normal behavior. And like in the case of Thoracane, something was so, I don't know what the details were, but it was so fundamentally broken that they had to bring the whole thing down. Unless you use arbitrum as a very similar example. A arbitrum just a few months ago, there was a similar issue, right? Yeah. Stolen funds, arbitrum said, hey, we haven't done this before. We are going to seize those stolen funds. The network itself took those transactions, put it into the governance bucket or whatever it was. Yeah. As you think that is the middle ground. Yes. And that should not be happening. Correct. That middle ground is when a couple of humans are saying, like, should we do this? Should we not? Well, the community think, right? How will people react? They balance the moral trade off-sevent and they like pick an outcome. Either you should, I don't think you should be picking at all. Either you shouldn't be able to pick or you should be always picking for prevention. Okay, interesting. I think I, okay, so I think near is actually in that middle

10:20ground. The one end is not near. The one end is the centralised exchange. The centralised exchange, you know who everybody is. Everything kind of, everybody can exit the exchange at your discretion. Every withdrawal is subject to your approval and there is no self-custody, right? That is centralised exchange land. And we kind of know what guarantees are to be expected when you use a centralised exchange. Other side is uniswap. There is no universe in which uniswap can decide, oh, North Korea isn't here. We're going to shut this off. Correct. That is literally not even possible. Completely, no. That is on the, there's no discretion. There's no discretion, right? Exactly. So I think everything that we're talking about is somewhere in the middle and there are different points on the middle, you know, okay, near and maybe is here and the third change, maybe is over here. And my claim is that if you're going to be in the middle, you should do so in a way that basically picks a set of values that are positive for the industry. And on some level, like it is useful to pick values that are potentially even distinct from what other people are choosing, right? It's a little bit like, you know, we think of states as laboratories of democracy.

11:22They can all do different things and people can decide where to go. In the same way, you know, near might make different decisions than some other protocol that decides to be a little more aggressive or a little bit less aggressive. And that ultimately, it does create choice among users of like which kind of protocols do you want to use in support? That said, obviously, it's going to be true that North Korea is going to choose the most permissible protocol at any given time. Always. Pretty much. Yeah, that subject to liquidity and the ability to actually move the money there. So I see both sides, like I do think, look, if you're going to say that something like near, because many people took this tack, is to say, why isn't near like Uniswap? Near should just be, look, if you're not going to be a central exchange, just be Uniswap and close your eyes and never look at anything. And my view is like, look, we, the enforcement of property rights is not just to say that every state transition is valid. That is one form of property rights that you can guarantee is that everything that's a valid state transition,

12:22I'm going to allow it to pass, right? That's sort of the most basic form of property rights, which is state shows up, you have this purse, therefore it's yours, right? Okay. Another form of property rights is to actually look at what happened and have police show up and interview you and say, hey, who is, did you steal that purse from that woman? If so, like you don't get to keep that purse, that is a fuller conception of property rights, right? And so I think any robust conception of property rights that that does not belong to North Korea, even if it's a valid state transition, it doesn't belong to you. And there are times when it's very easy to adjudicate, using anomaly detection and AI, to be able to say, hey, that was sitting in this protocol 10 minutes ago, and now it's all living on your balance, you should be able to detect that programmatically, without having to say code is law, this is not an EVM state transition that we approve of. And I think you can do that in a way that is genuinely neutral and programmatic in the sense that we think blockchain is supposed to be. Yeah, so I think one kind of complication here in your mental model for property rights is,

13:22one of the reasons people really use near-intenses the cross-chain aspect, right? And in the cross-chain world, you inherently are taking two different systems of record that have two different notions of what property rights in the analogy are. Yeah. And so inevitably, you have the discretion of having some number of operators. It's not like fully anonymous in the same way when you have to do this translation between those two. And so I think that's why we only see this debate. You don't see it within a chain as much of a debate, right? It's like there, it's just kind of like, okay, I used Uniswap, I swapped from USDC to Ether, then I'm the attacker holding a bunch of Ether, but hey, are the Ether LPs responsible? No, because like they facilitate a transaction that they have no control over by being in the pool. Whereas in the cross-chain thing, it's like a lot more, it's a lot different, right? Intense have a solver, there's an RFQ, there's someone who's full-filling. And so there's a lot more learning of a message. Yeah, yeah, yeah, there's like more. Based on some parameters and algorithm.

14:24And somehow that is the, there's something about that line that's like very where it feels like that, where you draw that line is like where all the fights are. Yeah, yeah. Agreed. And like, I agree with you, if near intense or all on one chain, this wouldn't be a discussion, because obviously it would be so simple that, there would be no room for any kind of arbitrary injection of black listing or whatever anomaly detection or something. But to take your analogy further, I think a funny version of the world would be, you know, a lot of countries have allow you to import property rights from other countries or other parts of the world, but only in a limited way in like free ports or these places that you don't get taxed or they don't recognize or care what is in the property. And there's some sense in which it would be interesting if like encrypted, there's some notion of like, opt in or opt out to those rights and you have to pay more, but you get better liquidity for giving you guarantees. But I think that's his heaps point, which is, have a spectrum of control versus lack of control.

15:28And so that either you or theoretically, the user would price them differently. Yeah, exactly. Yeah, so even the case of arbitrage from, I'm actually very supportive of arbitrage from having done the arbitrary state transition, quote unquote, like, well, it wasn't arbitrary. Sure. Sure. And the community was as well. And I think if arbitrage had done that in 2023, the response from the community would have been much more hostile. Totally, totally. And like the values of cryptography have clearly changed. That's true. I had 22. 23 post-FTAx people would have been like a little, you know what I mean? Like, I feel like maybe. But like the whole idea of like, okay, all these blockchains are laboratories of democracy. They each have different expectations and rules. And I think a lot of people will choose like, you know what? If something catastrophic happens on arbitrage, I want to be on the L2 that will do something about it. And the L2 that won't do something about it is demonstrated that they won't do something about it. I don't want to be there. So it's a little bit also like, look, you know, when the Fed bails out the banking system,

16:28it's like, okay, people look at it as a moral hazard, this and that blah, blah, blah. But a lot of people say, well, look, I want to be in a country that bails out the property, you know, the bank says opposed to the country that doesn't bail out the banks. Because those people live in countries with the failed financial system, and that's really bad. So I think we will see more of this over time is that people will start to choose chains based on their commitment to different kinds of property rights relative to just, we always follow the longest chain rule. By that logic, though, though, do you think that users and people will accrete to the chains with the strongest property rights, the strongest probability of a rollback, a fix, a seizing of the Lazarus assets, whatever. Not always. I mean, it's a little bit like, look, you know, I'm not saying you have Delaware as having this very robust, predictable kind of set of laws. And then they decided they hated a lung musk and then they shot themselves in the foot by violating their standards and going into different direction. And now all the corporations are abandoning Delaware.

17:29Sorry, I'm sorry. There's a lot of, they're going to Texas. Okay, it's okay. You know, my state is famous for other things. Like Hunter Biden's. Yeah. Yeah. Sure. You're like a lot of great experts. Toronto is the 10th most famous Delaware resident. Yeah. Wait, where are we getting that? No, no, I don't actually even know who famous Delawareans are. You're the 10th most like Biden's family, really. The Biden family. Hunter Hunter is the guy to be number two now. Yeah. Okay, interesting. Well, okay. So one thing I do think is like, you know, as we start getting more, you know, the privacy stuff, I think you're seeing a lot more to another aspect of near intense that Thorstein didn't have at all. It was the shielded pool aspect of like being able to do transfers of children pools. I think Thorstein was trying to, but it somehow it I've never seen any volume on their. So joy. But the private, there's sort of a question. This is sort of maybe a, again, more of philosophical question. But like, I have different countries of different property rights. And so maybe I have like the Switzerland that gives me the private

18:31banking, but won't bail me out. And then I have the US, which not private, but I get bailed out, not private meeting like the government sees every transaction over $10,000. They see, you know, like KYC every right, you know, right? Yeah. And those two worlds interfacing, right, have always in the human world had tons of problems, like, right? Of like, and so inherently it seems like you have to have that happen there. But the real question to me is like the blockchain world should be all about because it's open. The key thing is like open market. So anyone can join and leave. There should be like a pricing difference that is like a premium that you pay for one side or the other, which is gets this point of like, will everyone go to the one that gets bailed out or will everyone go to the one that has some other property but they might not, they get hacked. It's private funds you're done, right? Like, like a lot of the Zcash incidents in the past have sort of had that flavor. So I'm just sort of curious how you think, what do you think? Why have we not priced that?

19:32Because it hasn't really been priced as like a fear factor, except in this like Arbitrum cases like a very exceptional thing. But if I look at governments around the world, deposit bank deposits implicitly price in this premium for like different places. So how, when do you think that will ever happen here? Yes, I think it's a very complex calculus. Okay. So, you know, his seed was originally laid out, not in terms of like a blockchain network, but in terms of like decks to sex, right? Like uniswap to coin basis, kind of the spectrum, which is, I think, totally correct from like a trading perspective. I think it's also like Ethereum to, I don't know, what's the most centralized chain we can take off? Do you want to? But let's not, you know, let's not make enemies. Let's not make enemies. But Ethereum to the most centralized chain that's the most easily rolled back, right? Yeah. So you can go too far, right? I think a lot of consumers are angry at coin base because they're like, oh, you're overly protective and censoring transactions and like my account got frozen when I never should have.

20:32And you can go too far in the protection. Like you can become like patronizing in this. Yeah, paternalistic state. paternalistic like centralized system, right? That's what people hate about the existing banking system, right? And so I don't think the optimal point on the curve is like all the way towards protection. I think it's probably like I'm making up a number of 80% of the way there. And maybe the optimal state for the user is one in which it's not a KYC chain, right? It's low friction, but very high protection. But I would argue that the only way a user can realize that optimal point is actually keeping their money on all the different chains and like rebalancing to stick to it. No way. That maximizes the risk that you get screwed. But I think the property rights thing is like each chain has their own rule on that. So if you wanted to really have your most likely to lose money if you have money on every chain. And that's true. And I do think users have like a non utility or nonlinear utility function of like ever

21:36losing any money is like extremely stressed. So once you've been rugged, then this gets back to this question of like what's the pricing premium you should expect? I think there is already an implicit pricing premium in that like if you have money on some like Janky S kind of long tail chain, there's less liquidity. It's harder to move your money out. Bridging takes longer. That is a cost that is not doesn't show up in your defy llama or in your or not your sure sure. Sure. But being the new carlidonia of L2 is not exactly like even at the top tier like let's talk the Z cash versus arbitrum versus a theorem. Those are all established ecosystems. They have economies. They have GDPs effectively. You know, they're not like Z cash isn't real. I mean, because he catches a you know, UTXO coin like it's obviously not going to be an like you're not going to have to storage on the cash. You're getting paid for providing liquidity to people who are using the shielded pool. That is a form of economic activity there, right? Effectively. Sure.

22:36But how are you going to get the apples apples of like the sort of. Well, not the Swiss bank. That's your Swiss Switzerland, right? Like imagine there was like no other economy. Well, you have to take the same asset. So take USTC USTC sitting on arbitrum versus sitting on, you know, some privacy preserving protocol like some Aztec type thing versus sitting on a theory. Yeah, maybe we could if Aztec, which I know they just relaunched their whole things of that would probably be the real gun to grill gun. Real gun, right? There's not that much of a premium. So I will say one thing about ETH there is a premium, right? We're like ETH that's been within X hops of tornado cash. I think this is wrong. I think this is a wrong analysis. I think there is a premium and you would realize the premium if you actually tried to sell in the moment, right? It's a little bit like how you, you know, you hold bonds and you're kind of like, oh, well, I'm going to mark this to par price because like that's what, whatever. I'm allowed to do that for my regulators. But if you try to sell it, you're not going to get par, right? In the same way, if you have to be some pretty funky bonds. Yes. Well, this was what happened with treasuries, right? No, I mean, the treasure market is so deep and liquid.

23:37No, no, no, no, no. I was thinking about what the banks when SVB, when SVB, what was it? What's the term? That was a different problem. The problem was they bought all of these bonds that were held at cost. Yes. And they were allowed to hold them at cost, even though the market price was like 90. Exactly. Exactly. That's my point. My point is that if you were distressed and you had to sell a bunch of USTC sitting in rail gun, you would not get par. My point is more actually just like, if you look at the premiums right now, like the differences, they're not that big relative to the real world. As they shouldn't be because they're arbitrageable within like an out. If USDC was 101 on any of these chains, that would be arbitrage in like two seconds. No, but we know there's sometimes the shielded USTC does have the have a much higher premium because like not there's not much. Otherwise, anyone is going to go just like mint USDC. Yeah, you can arbitrage this stuff too fast. No, no, but why? But the shielded one everyone has knows they take this risk because like, do you remember USDC froze some some. Oh, that's right.

24:37Yeah, that's what I'm saying. Like if you look, try to analyze this. There's something fundamentally different about crypto premiums for this. And like, I think that's the thing that, but okay, die does not trade at a premium to USDC. That is a sensor resistance sensor. Well, sometimes it doesn't hacks actually because the hacker is exit to die. So it, I mean, you're just not going to be able to sustainably see that much of a price differential given how fast it doesn't use to mint through the facility and get one. But you know, they didn't buy it on a deck. I'm trying to remember what hack it was. We went up to like 125 because like the hacker attack was a long time ago. It was a long time ago. A really? Yeah, yeah. 25. That's crazy. Yeah, but it was like a very 10 minute. Yeah, but it was like, it was like only because of this one person took the entire stack went immediately meant to die. But the reason I'm bringing this up is somehow this gets to this philosophical question. Robert's talking about this being a very binary thing. There's no premium.

25:38You can't price this difference. But then in practice, you observe people pricing it as a premium, but then they're also not differentiating it as a premium as much as in tradify. And the question is, if all these tradify assets are coming to crypto, I have the same tokenized stock on. Imagine there was like a shielded one like rail gun tokenized stock, you know, normal eat tokenized stock, arbitrarment tokenized stock, based tokenized stock, right? They all kind of have slightly different. Do you think that you get this like large spread in premiums like the way you do with an ADR and the underlying or do you think it actually? No, it should be a small spread. The spread you'll see different conversions. I think it would be convenience. Mainly can be how easy as versus security. Correct. I think you see that. And that's one of the reasons why an ADR is better than the offshore original stock is because it's so much easier to trade. Right. But the difference also like if you actually had more different ADR trades, it's such a crazy premium. Oh yeah, yeah.

26:38Kind of. Or just like the DRAM ETF. Yeah. Right. The convenience layer of letting more people access it, more people are bid or at least more dollars more dollars scarcity for there's like a fixed supply that is not expanding in response. So I think the one interesting thing is like people should actually study these premium encryption and try to imply whether implicitly the market is voting on this spectrum thing or binary thing because I think the data actually might you might you might have had enough of these attacks now to actually separate what people actually view these things as like right infer which one of the two world's. Well, okay, interesting. Let's take the other hack that happened this week actually just happened for recently with that apparently consensus was hacked in their staking no their validator. So this was on Ethereum consensus. I don't know exactly how much stake they manage, but it's fairly significant. There was something like 5% of LIDO is delegated to consensus validators. So they massively, they basically all at once exited their stake and are rotating the key.

27:39So there's a lot of ETH now exiting in the execute didn't really seem to have that dramatic effect despite the surface area potentially. Of course, that's because if you run a validator, you can't actually do that much like it still the money. Yeah, they don't own the money. The money is delegated to them. So they're sort of pointing their lasers at this guy is going to validate for me. But the end assets that go that are pointed at the validator owned by users. So those users didn't have the keys compromised. Consensus had their validator compromised. So apparently they were able to scoop up supposedly it was just like less than an ETH of unclaimed rewards that were sitting in the verisader. Yeah, but because the reward because the validators were offline, there's potentially I don't understand if this is correct, but supposedly there's up to like 200. And ETH in total that is in foregone rewards that otherwise might, you know, consensus might have made how they not have to exit all the stake. That's of course across a lot of ETH that's pointed at them. So I mean, it's basically like either you view this opportunity cost or implicitly like

28:40getting slashed. Right. If you're like, I think it's opportunity cost. I think it's like your yield is zero for a little while. Yeah, but you can also lose your principle. Yeah, yeah, that's true. Right. Sleshing like nobody's lost their principle here. No one's lost their principle, but I think like to the end user who's like, I was thinking of this asset. I thought it was a three point. Well, the whole risk free rate conversation has reared a suddenly had I think in that like, you know, the last time this happened, I think it was kiln, which was a very small niche player. It was like a decentralized kind of thing. Consensus is one of the biggest validators, right? This is in Fira that, you know, actually, I think during the kiln, the kiln was a very large portion of Slewana at that time. That was that right? Yeah, it was like three or four percent. So, so I think that one was more complicated because I think on East, maybe they're not as big, but the other networks there. Yeah, but like, you know, consensus is a big boy. Yeah. So them getting compromised. And again, you didn't lose principle. There was no double signing or anything that would cause slashing. But does this impune the concept of a risk free rate? Yes. Yes. Of course it does.

29:40Okay, tell us. Only because consensus is probably the most well known name, not for staking, but within the Ethereum ecosystem, right? I think to your point about the rewards disappear for even a temporary amount of time, right? I think we think of staking as the risk free rate, but it's really the best possible rate, not the worst possible rate or the lowest volatility rate, but the added volatility correct. This adds volatility to it. And it adds, I think, a risk premium in general, knowing that there are extra surface areas of risk. I think causing to question, is this risk free? As it's we're not stolen, right? But I think the validator as a piece of the risk surface area hasn't fully been explored. I think people have aggressively explored bridges and, you know, smart contract risk and all of that. I think this is one of the first, you know, major validator risks, but I don't think

30:42for Ethereum. For other networks have had other networks have had way more issues. Yeah. But, you know, I do think it calls into question, what is riskless? We don't know if, hey, is the 10 year US Treasury bond right now riskless? No, they're CDS trades on the US, right? That's not zero, right? So like, what did they trade at right now? I haven't looked in 10 years. I'd actually, I'll pull this up while you guys talk. Okay. It's not. I mean, the real question to me is like, this reminds me of like in 2021, there were like a ton of relatively large, relative to like the Mint and Burn fee for tether spikes in tether price mainly because of like the USD price and they created this weird arbitrage where like tether would go beyond, would stay on arbitrage for a while because you were getting slightly better carry in USD and at that time, people were treating them at par. And so there was, there were all these people, I remember these like, tradify people who was like, this is their first time ever getting into crypto and they were like buying USD

31:45as if it was like $1 always. And they were just like, oh, like, can I just buy some CDS on tether deep peg so that like my USD is covered. And like, there was a time where people were really interested. People were shorting tethered. Like a lot of time. Yeah, exactly. Exactly. I mean, it was a slow widower. But the question is, what will that happen here? Okay. So I have looked this up while you guys were discussing it. So the SSA, CDS is 35 basis points. So the true risk free rate, if you actually wanted to ensure a treasury, is 35 basis points less than you're getting on treasuries or t-bills, right? How much was lost here actually in basis? If we knew the amount that consensus, we could take the 200 divided by their total stacking together, get it in line. Probably a lot less than 35 basis points. Yeah. A whole lot less. Yeah. Like way less. So, but you know, that's because we also presume that the risk free rate doesn't have any risk in staking. I think if you mentally had 35 basis points of required return, what do you get? You probably get less people staking. We definitely get less people looping. The looping would go down quite a bit with that.

32:46Yeah. I mean, but this wouldn't even, this one blot, someone who's looping would then blow them out, but they would definitely be. If you lost all of your rewards for a year, it would. Yeah. Sure. Sure. If you lost all of your rewards for a month, it might be on the other side. Or at least you would just lower your leverage ratio. Yeah. Yeah. Yeah. Yeah. And since it's had this issue, there's some, I don't know how long exactly this is going to take for them to rotate. Let's say. Right. I think the, I think the unstaking is like four days and then restaking takes a while. Yeah. And turning staking takes longer. No, there's seven days or something. I don't know exactly. But it's slightly different for the LSTs because the LSTs guarantee you some immediate time that they manage the. So I think like that. The LST is the right mental model, which is that look, if you're staking, there's this happen to one staking provider, right? And they have, I don't know, let's say 5% I don't know if that's exactly right, but let's say 5%. So that means that like as a, you're a staker on Ethereum, you should assume that like once every four years, maybe there will be one incident.

33:47The frontier models, I think are going to expose a lot more risks. You think right? It's going to go up. I think we've had roughly zero risks and now we're in the nonzero territory. So I wouldn't say it's once every four years. I would almost say it's, let's remove three years ago. Okay. Actually, it is easy. This happened almost exactly four years to the merge. We're within like a couple of weeks of the 2022. That's four year cycle. Yeah. That's four years. Four years. Four years. Maybe it's. Wow. Yeah. But even so, okay, say that it's this year, right? Okay. So this year, you have a 5% chance of having your awards kicked out for let's say a a week or a couple of weeks, right? If you basically multiply that by 5%, like that's actually not a material effect in the rustic. But I think you have to anticipate a worse outcome. I think you have to anticipate there's a 0.1% chance that like a validator could somehow lose assets or be slashed maliciously on purpose by an attack or even if you are double double signing. Nips, right? Like two weeks. Let's just say it's like two week.

34:48I was rounding up to two weeks. Four that five percent for the five percent. Yeah. It's like one steps for the whole state. Yeah. Exactly. That's nothing. I think it is. You just said one bit. Yeah. Multiplying the two together. Yeah. You think one bit is not that crazy? It's not that crazy. Yeah. Yeah. But a whole lot less than the 35 basis points of CDS on the US government. Exactly. Exactly. Now, I mean, to be clear, like if this is something that was relatively mild, obviously a lot worse things would happen. Like if there is actual slashing, somebody takes control over a cluster and then starts double signing, then you could get slashed. How would you settle a CDS on this? Because you can settle it on a Ethereum. How would you settle? How would you get on? How would you settle a fictional Ethereum state CDS? Yeah. Like OTC, the contract, whatever, fine. This is not by this. I'm kind of imagining of two. Well, it wouldn't be a credit. It wouldn't be a credit to fall swap. I think you just have a total return swap on the staking. Oh, okay. Then it's very easy. It's trivial to settle. Yeah, that's fair.

35:48But it would be kind of funny if you had two POS chains. Imagine like all the Solano, one of the restettled on the E-V. You could have a slashing CDS. Yeah, that one, people who have done that, that exists. But slashing is easier because it's like verify, you can verify in the chain later. Here you might not be able to verify this claiming thing in the chain because it's like done on the validator set and then pass it. The easiest way to hedge this would be a total return swap where it doesn't even matter. You don't have to even observe the cash flows. You just pass them forward. Honestly, consensus should just start offering. And then, and then, and then, and then, and then, and then, and then, and then, and then, pay back, pay back the off by selling. I agree. By the way, I know we're joking about this, but I actually want to drill in for a second. I actually agree with you that a staking provider could offer effectively a fixed staking yield that's below the current yield and them, tricking up risk and ensuring it. Yeah, yeah, yeah. Right? And consensus has enough resources that they could offer that with confidence and they could say, hey, we will pay 3% no matter what.

36:49I am pretty sure that a lot of these dads have staking insurance. But I sort of assume they're staking insurance is not from the provider because they assume that it's from, yeah, it's exactly. Yeah, I forget. I know that at least one startup has told me that they're trying to offer this. I guess realm. Realm offers this like defiant insurance for loopers. So like I'm, if they're already doing that, I don't see why they wouldn't do it. Somebody's probably doing something, but like doesn't coin base have staking insurance? Next week on the chopping. We're talking about. We will have more data. We will know what we're talking about. Yeah, yeah, yeah. They do have the omnibus loids policy, but I thought that was only for custody. I don't know if that even corporate is staking. These are all good questions where we should get guests. Yeah, let's get it. Let's get it. Next week on the chopping. Okay. Okay. But it is kind of fun to think about because I think people for a while, everyone is like, no, no, no, no, this could never happen. And I think AI has like changed people's. No, I think people are underpricing. Okay. If you had to finger in the wind, guess what the true relative to the US now, we have

37:52the US as a marker. I mean, it's like one basis point lower bound. Where do you, we're in between one and 35 places or you could work. Staking risk. Are we talking specifically about Ethereum validation only? Okay. Let's do it. Ethereum and Salana. Just so we'd together idea of the spread. I think Ethereum validation, I would put it probably at about five basis points. Okay. I have no idea how to read this feels like a very Robert question. No, no, no. But at least think relative to the US. Let's think about the US. Way lower than the US. Way lower than the US. Yeah, yeah, yeah. Because one is a cryptographic open source system. Yes. That like, yeah, like we don't really know all the risks and like a frontier model is going to know it better than we will. But like also if there's like a catastrophic bug, Ethereum would roll back. You know, if like two thirds of the state got slashed. Totally. Like random thing that someone found in like some code obscure code path. We got to get Lubin on. Yeah. We got to tell us one thing. Yeah. I like if we were just saying that Ethereum is the L1.

38:54Yeah. Like the we I mean, it's very clear the constituents of Ethereum, who matter the most are validators. Like Ethereum cares a lot about stickers. Yeah. Like abnormally high about stickers, relative to even users even. So if there was something that went totally wrong that was clearly not user's fault, they would roll back and fix it. Well, here's where I agree and disagree. I think they care about validation and stickers the most because they care the most about transaction, finality and security. Like that is the root, right? It's not are the Ethereum's stickers making money? It's our transaction secure. I think if transactions were corrupted. You think if transactions were not corrupted, but a bunch of people got slashed, they wouldn't do anything. I think that's how I'm in agreeing. You are agreeing with me that they would do something. No, that they wouldn't. Oh, I think they would. I think they absolutely would just to protect stickers from an unfair slashing event. I don't know. I mean, if it was an opportunity cost staking event, I don't think they would. I think if it was like slashing loss, it was a loss of principle.

39:58If it was significant loss of principle, then yes. Yeah. I think they would totally roll it back. And like you can very likely roll it back just on the beacon chain without affecting transactions happening on, you know, without affecting the state. I think if the state was corrupted in any way, the odds of some sort of. All I will say is this is all a great reason that that EIP should not have gotten in that which got removed today. I did officially officially the inflation. Well, actually, so speaking of things being removed, Tritian Gears a little bit. There was a big story about Colchie, friend of the show. We love Colchie. Tom's best friend. Tom is a good friend of Colchie as we all know. Tom's like here. At least we're reducing the amount of swearing. That's I never swear on the job. That's what we did established that data science proves it. Yes, very cool. Okay. So story about Colchie. So Colchie, they offer a purpose product. They were one of the first to get approved by the CFTC. I can't do it for them. They were the right. They were the first. So they used that position of privilege. Yeah.

40:58So crypto all star named ICO beast was tweeting about Colchie and how amazing their volumes are in their market share is. And this artistic Swiss quant named Benny replied to him in a fairly impressive description. That's right. I'm not a beauty man on him. That is in his profile. But do you also personally believe that he's an autistic Swiss quant? I would believe it. I would believe it. I mean, I also think well, let me finish. Let me let me give the frame. Do you think autism is now just like aspirational? I think there's an aspirational that that was what I was. That's true. That's true. That's true. He replied to ICO be saying, oh, you can't believe that's real, right? And then I see obese was like, oh, of course it's why are you crying? You little bitch. Like come on. What's the matter? What you just a little hate? Yeah, exactly. And Benny was like, look, if you really want to come out of me like this, I'm really, you don't think that we know that this is fake. And ICO beast was like, yeah, whatever. And so he was like, all right, you know what? I'm dropping something. Everyone's standby.

41:58And so we dropped this gigantic thread where he basically demonstrated that Colchie was massively inflating their perps volume, which I think to anybody who's been looking at the perps on Colchie is not that big of a surprise given they have three million of open interest and hundreds of millions of dollars of volume any given day. Also, it's not totally public, right? Isn't it like private beta still? Is it? I forgot. I don't know if that changed in that. But I don't think that's true. I don't think that's true. At least it's on the front page of Colchie's certainly go there if you're using it. But even when it was private beta, the numbers looked even weird. Right, right, right. So Benny not only showed that information, but also showed that basically there were incentives for some market makers to be able to basically wash trade and directly accuse them of wash trading, but the effect of equivalent to wash trading in order to make money. They create incentives such that the market makers were incentivized. Yes. We'll be following their incentives to wash trade. And then second showed that there was lots of $5,500 that were getting traded repeatedly back and forth all day long, visible in the public order books of Colchie's perps volumes.

43:02This led to a very dramatic pile on. I think the entire internet got incensed about this whole, you know, kind of autistic guy showing up this $40 billion dollar company. This led eventually to them walking it back. I see a piece of apologizing publicly. It's like, hey, I may have come in a little hot. Wait, wait, wait, wait. The I see a beast apology and the retorts were 100% written by Colchie's GC. Oh, 100%. Like there was no, like you look at the like word choice. Like the jump in the. Yeah, all of a sudden he comes back wearing a suit, you know, sort of, yeah, exactly with a bunch of what's it called? No, it was it was like, it had phrases like I may have mis-spoken. Yeah. My personal opinion, where it's like previously was like, fuck you, you idiot. Yeah, exactly. Well, this all this drama ended with the CFTC announcing, or not announcing, sorry, with it being reported by the Wall Street Journal, this whole drama, then the Wall Street Journal reported that CFTC was investigating Colchie and some of their volume claims.

44:05And then lastly, I think it was yesterday that Colchie announced that they were ending their liquidity incentives program around all of this involved, which presumably should lead to an end of this behavior and maybe not as much volume happening on Colchie perps. The first thing I would like to say though is that exchanges in general, derivatives exchanges and equity exchanges, right, are not far into the concept of having market maker incentives, right? When you look at Colchie's trad-fi competitors, they all very formally have these structures to incentivize market makers. They have rebates, right? Rebates are a diet in the wool part of traditional exchanges. They are not on their own bat in any sense of the word. I think the question is how did Colchie's go so horribly awry? Yeah. Because this is not new. They didn't invent rebates, right? Every exchange has rebates to incentivize market makers to provide liquidity. Colchie's somehow jumped the shark.

45:07So I didn't really read theirs, but I have no clue how they actually did it. But one place in traditional derivatives, like CME derivatives, where it can go wrong, is when it's like, usually they try to do some type of like pro-rata incentive. So it's based on like percentage of volume that you did within some interval. So the fixed pie and like you did 20%, you get 20% of that fixed pie. If the market's not competitive and there's only like one or two people, they effectively can implicitly collude to try to like maximize their... Each get 50%. Yeah, exactly. And so in Colchie's case, I could imagine that they just copied some CME thing. But the CME thing is because it's so much more competitive where there's like always hundreds, thousands potentially of market makers. I think that is a very charitable reading. I'm just saying, I'm just saying that's like the most... If I were to give them the most... Oh, we didn't know we were doing this. That's the only way I could see it. So candidly, I don't really fault Colchie that much for just being like, okay, let's

46:09like throw some incentives on this thing. We have a lot of money. Let's just like try to win the market. That said, I think they obviously knew that these numbers were implausible. How could they not? You're right. I think... And most of you... Never grew up on a they had would have been like, hey, this looks cooked. Yeah. We have three million of open interest and 500 million of volume. There's nobody trading here except market makers. No, correct. I'm sorry, everyone inside that company. Right. And so it's always a spectrum. It's always a spectrum. Coinbase International, very famously also has a lot of volume relative to very small amount of open interest, which tells you that it's a lot of market maker incentives and not a lot of organic activity. This is the oldest thing in the book. We saw this a lot with perp dexas that were just farming incentives. We understand this in crypto. But the question is, okay, when do you decide we are over incentivizing a market that has no demand? And basically we are giving the market a false illusion of traction where we don't have it. And second, are you advertising that publicly as a way of trying to get people excited

47:12about fundraising or whatever your next round or blah, blah, blah. Fundraising fund. Yes. So that is where this steps out of, okay, this is fair. This is just like part of how market market to get off the ground. 100%. It's like, okay, we feel three million of open interest. Do you need this much incentives? And if not, are you scaling it in such a way to create a false impression of usage? Again, I haven't dug into the exact incentive structure to ruin his not either. My like two second read and I should have prepared more for this show by going into it a little bit. But my read of it was that it was just a basis point rebate or that base one, whatever. It was like, it was a rebate on each dollar of volume, right? Yeah. Knowing that takeer side and all of that was like a positive fee, right? But also they don't split it. Like if you don't like make people compete for the rebate, you get fixed rebate. So then then you just get the crypto, the like, correct, crypto normal watch. No, correct. But I don't think it was like a fixed dollar rebate for the market. It was a, it should have been out. So I believe the structure was that certain makers were getting point three bips on

48:16making and takers would pay point three bips. Yeah, it should have been like, straight with net to zero, but certain market makers were earning equity based on how much volume they were doing. And that was probably the incentive. Okay. So it wasn't the portrayed fee. It was probably basically the per trade fee would allow you to net to get a sort of paid anything for that liquidity. They, yeah. In parallel, we're paying an equity for bringing volume to the exchange. Correct. And so basically you have some market makers crossing each other, kind of doing these nonsense. That's what the trade is. Right. Exactly. And the thing is like, look, call sheet obviously has an equity probably looks closer to Teroons fixed value. Yeah, exactly. Exactly. Right. If they said, hey, we're going to give half a percent of the equity in call sheet. Exactly. And that equity would be way more. This is where most of the perptx farming that's gone wrong has happened where like they give the same thing. Same thing. They give their token. Yeah. Exactly. Exactly. And so like, I think the, the other thing too is like almost certainly call sheet has a tection for like, oh, there's a bunch of five thousand dollar lots that are exact the same size that are going every day. Any anomaly detection protocol.

49:17I can't see that. That's not that they didn't all know. Like it should have been impossible. Anyone inside the company with any access to the data, any internal dashboard would have. I mean, another interesting thing was just sort of like, because I guess the vitriol was so high, there was also a lot of analysis of some of the prediction markets where there were market maker incentives like the long tail ones that like they lose to polymarket like the political ones and whatever. And there was also some weird stuff, although it's like a little bit hard like the perps one is like more just blatantly obvious. In the prediction mark one, you have to be a little more careful because like, well, if I hold the thing to maturity, the real payoff is one minus something. So if they're oscillating between 80 cents and 20 cents, then maybe there, there's like some economic reason like they're quoting our own resolution. But, but there was also some stuff in the prediction market side that looked very soft as well. Yeah. I mean, look, there's always going to be some weird stuff going on. And like I don't think it's the job of an exchange to parse every single example, right?

50:21Obviously. If you're regulated exchange, it is your job. Well, no, you're never going to get fraud or bad. No, you're never going to get it to zero, but it is your liability, right? No, like a decentralized exchange. Yeah, of course, of course. And there's some understanding from regulators that like some stuff is going to get through. You make a best effort. Yeah, but not something that's not liable. 98% of your volume is fake. Like, and so, you know, they're defense, they publish a blog post before they cancel the program. And in their blog post, they said, this is not fake because people are actually taking. And if these guys, like these guys are losing money doing this, but it's genuine activity because they're losing money. And somebody else is making money in that person. They are saying to users that are each making and losing the same 55. Obviously, they don't disclose exactly how all this. I know. Yeah, that's so farcical. I mean, I mean, I don't know. That's obviously their defense. We don't have the data to be able to parse it, but the CFTC almost certainly will. Well, what's the guy's name? Mibo Bino, what the analyst, the autistic one? Oh, Benny.

51:21Benny. Benny has the autistic one. I mean, it is, it is in his bio. It is in his bio. It is credit to him. If Benny has the data, we all have the data. Yeah, I will say how have no fury like an autistic scorned Twitter should post her? Well, I also do think Colchee's marketing of it was a little like, I feel like I was like looking at it. I was constantly getting sponsored tweets that were like, Colchee's hit $X billion of volume. I'm like, if you did that, they would have to pay to advertise. Well, no, no, no, they're clearly getting that volume. I mean, that's true. It is weird to know why are they like, yeah, yeah. That was the part where I was like, something is weird about it. Yeah, actually, I didn't even look at it, but the sponsored ads from these like, Colchee influencers, I, they were like paid ads as like, something is weird about it. Well, I think they were just trying to position it as a mainstream competitor to all of the other exchanges, right? Because I do think. But when their volume is higher than these established exchanges, but their OI is 100.

52:23Well, no, but they weren't advertising perps, right? They were advertising the volume on the core exchange. No, no, no, but they were actually advertising the, oh, the Bitcoin perp that we have has like, their average of the perps. Yeah, yeah. It was like mentioned in, and I was always like, why are you advertising? Like, shouldn't this product's funded self? Like, why do you need to, if it's really has that much volume in OI, people come. Well, I mean, they will be IPOing supposedly next year. So or targeting IPO anyway. And so maybe it's pre-marketing. Yeah, but it's, it's like, if you think about exchanges, they don't have to advertise their volume. They advertise like, oh, our fees went down. Yeah, fees were down. But like something, something is weird to add to the game. You want to play to advertising for volume. Like, yeah, yeah, yeah. That's the thing I don't get. That is a little, that is a lot if they're interacting with them. Okay, so last story that we want to cover, there was a post, putting a slide by Apollo, that showed that Apollo believes that it may be true very soon that Muse style or Hermes Asian style agents may start to cause agent bank runs.

53:26So agent bank runs, of course, implying that, well, two things, I think there was a little bit overloaded term, but one version of agent bank run. All you have to say is Dorsen's lock that had economists at Apollo, a very good marketer. Okay, well, that's number one thing I took the marketing of that. Beautiful. Okay, so let me just write what an agent bank run is. The assumption is that, okay, a lot of people are sitting with their cash in JP Morgan savings account or something, which means they're getting paid basis points, even though right now the risk for grades or they're going to pay it effectively zero. You know what I get paid on my JP Morgan deposit account? It's an individual that I've had with them for 20 years. What's that? One basis point. You pay one on savings, savings account, checking on checking on savings. It's like 20 bits or something. Okay, but why the fuck do I have to separate them? No, I mean, that's like such a, that's an antiquated thing. Boomer question. No, so like I think, so the idea of an agent bank run is two things, I think, which are overloaded together. One is that your agent, you know, your muse or Hermes Asian, whatever, it will switch you to, you know, with puts into treasuries and it will basically remove all the cash sitting

54:30in your sweep account. If you're sitting in like, you know, fidelity or, you know, it's too difficult. You're as a human to move money out of checking into T bills. Yeah. Or back again, when you need to pay your credit card bill or whatever, it'd take too many hours of your day. An agent can super optimize, optimize the way you're laziness. Right. No one has business business model. Nobody should have money in a checking account anymore. The one base point you're earning is insufficient. Right. AI agents will optimize your life and your portfolio. Yes. So the second aspect though of the agent bank run is like, actually, because that's not a bank run, that's just like, okay, well, now they need to balance to a better product. Yeah. Well, yeah, well, that too, but also like, okay, if there is a bank run being experienced by JP Morgan, they just need to raise their rates and they'll keep the money. Yes. That's just, okay, higher cost of capital, lower return on equity. Thanks. I think all of this is just like, basically, they're learning about defile because it's like, oh, someone changed the fucking rate in a lending protocol by 10 basis points.

55:34All the loopers like exited from one protocol moved to this one. It's the same thing. We've already, crypto is actually already are used to this. People moving between exchanges, same thing. I think it's just more the trad fight people are just like not are afraid. For consumers and consumers. Even consumers, some of the new defile wallets will like auto loop between protocol and you don't even like touch it. But I mean, I mean, for the finance world with respect to consumers has always assumed sticky deposits and basically non-responsiveness to work with. The entire product is built on the laziness of consumers. The reason why rates are zero is because they have actual hard evidence that their depositors will not leave. It is too burdensome, right? This was I think, I mean, I worked at a bank in 2007 when like it all just fell off the cliff and rates went to zero, Zerp for the first time in history, right? The first time in history of rates went to zero. The entire conversation was centered around what is the consumer response when rates rebound.

56:38And inside the banking system, nobody knew what the stickiness of deposits looked like and the oligopolist competition of banks to change the deposit rates looked like when rates rebounded. And guess what happened? We had never in the history of the world had zero percent interest rates went to zero and on the deposit side, they never went back up again. They never bounced back up. And I think everybody was surprised by just how sticky deposits were, right? We've seen this recently in the clarity act with all these banks arguing that like stable coins are going to make everyone leave their banks. They're not like banks have been paying zero. Yeah, like why isn't Mercury making everyone leave their bank? Yeah, correct. Or column or dot dot, right? Yeah. Right. So the sensationalist part of this research piece that I like is the idea that yes, consumers are incredibly lazy. They won't do this on their own. That is true. The entire profitability of the banking sector and the net interest margin is based off of this reality, right?

57:39Fed's raising rates amazing. They are like profit margins just went up because they're not passing that through on the deposit side, right? As the side benefit liability side isn't hurt by this. I do think it's true that humans are lazy, right? And I do think that agents will solve this for people. The thing that I'm not worried about from this agentic bank run is that this will be gradual, right? Like the speed at which your average American is going to be handing over their like portfolio and banking information to their agent to say like, please handle this for me is going to be much slower than people anticipate. I think the average 50 year old in America is terrifying. I actually think another reason that's gradual is all this, these trillions of dollars that are going into estates from like boomers to their kids. That money will just be like flowing incrementally and like, okay, yes, the kids might be more tech savvy and go do this type of stuff, but the retirees are not really what what

58:43what's going to be it's going to be gradual. I think everyone's going to have a huge amount of time to react with just it's not going to look like a bank run, which implies sudden, right? This is going to be a very gradual tectonic shift. Well, here's about our as well. So I recently got set up with like if you take you know, column or mercury, all of these or Arabore for that matter, all these new generation banks, they have MCP hooks, they have APIs, you can literally connect them up to your agent and give like very fine grain permissioning. JPMorgan is going to fight that to the end of their days because they know exactly what it's going to tell. Which means that like they thought plaid right, which was read only for like 10 years totally totally. Oh, you can't even get read only access to your account. Totally. So I think it wasn't Amazon that blocked Muse. Yeah. From being able to buy on Amazon. So like, I think you're going to see this Amazon is incentivized from used to be shops, shopping. No, no, no, absolutely not. Absolutely not because Amazon makes most of their money from advertising.

59:44Yeah. They're not most, but a large. I think it's most. No, no, I think it's most most of margin. Oh, most of it. Yeah, margin. I think I wrote revenue is not it's like super, super low margin when that's not as familiar with Amazon. Yeah, exactly. So like Amazon, I mean, you go to Amazon, you search for anything on Amazon. The first fucking 16 things are our sponsor. I don't shop on Amazon. So I don't know. Okay. Well, I'll tell you, there are first 16 here are sponsored links. There's an auction going on for the thing that you're searching for. They're no longer a search engine. They're purely as ad words for products. It's ad words for products. And as a result, the positioning is how they make all their money from the merchant. To be fair, this is true for like all these things. Door dash, insert card, Uber Eats. Like they all are doing a lot of them all have the same. Yeah, but it's nowhere near the same as Amazon. Right. They're sort of in a business. That's why door dash. Amazon's business model breaks. Door dash is not. But this is why door dash is like pivoting. We're going to be like agent friendly, whatever. Right, which tells you the opposite. Is that like the advertising is a small part of their business fulfillment? We're writing. They $12 every month. Yeah, exactly. They have significant search charges that they throw on top of these things. Whereas Amazon has the opposite.

1:00:45Amazon is like dirt cheap. It's like, we'll get this to you tomorrow morning. You know, everything is going to be free and bundled with prime. And the way they make that work is they're charging the merchants via placement in the search results, which is a beautiful business model. So I will tell you one thing. Tell us. The only task I've really done in Muse because I felt more confident about giving it some account information is to basically go through all of my historical health insurance co-pays and figure out if like there are ever any doctors or dentists. Because like if you have the account information to my insurance company, the only thing you can really do is file claims. You can't really like get money out of them directly, right? So it's like, all right, let's give it some health insurance and see if it can find out if I had any doctors or dentists overcharged me and I didn't pay attention. And look, I found like almost like $1,700 of like overcharges over 10 years of charges

1:01:45of where like the dentist would something I was supposed to be zero co-pay they charge me and stuff. Are you getting the actual money back? So then I just told the agent go find all the claims. Right. But $200 bucks back so far. Really? Yeah. Amazing. I think no, but again, insurance is a lazy business like this like it has a similar. I think that I was at a dinner a few nights ago with a bunch like hedge fund people and they were all talking about their like short basket of the companies that rely on consumer laziness and you know, knowing that like Muse will start canceling subscriptions that are hard to cancel and all of that that are just like sticky and like people are lazy about like you're I'm serious. AOL is still a business. I mean, now that's private or whatever, but like people still have AOL subscriptions from 1994. What? Oh, yeah. What is the product now? I mean, it's like paying certain thing. Your estate is paying for a dialogue. Yeah. No, I mean, there's so many legacy payments that are like still wired up today.

1:02:45Yeah, that makes sense. Well, the thing I was going to say was that I do think we will also see actual agentic bank runs in the sense of like SVB style bank runs where if you remember SVB, it was like all are going to just look like the crypto things. I think you've already, if you know all the seven crypto that's happened, you're kind of going to be like, Oh, trad five is just learning this five years later with less cybersecurity, with less security, but the difference. Yeah, they're going to be like, Oh, there's a new yield farming thing. Everyone, the hot ball of money, I guess this is like, if you assume that the agent thing takes off and everyone in America is using it. Yeah. It becomes the hot ball. Yeah. Yeah. Instead of like a $10 billion hot ball of money, it's a $3 trillion hot ball of money that just moves around. But not just that. I think the other thing about agents that is different is that agents are not very diverse relative to each other compared to humans. So you're telling me you're telling me yield farmers were very diverse in their strategies. Well, I think there are a lot of crowding. Well, but I mean, you look at a lot of these protocols and like there's a bunch of money that is still sitting there. Yes. That's just like, did these guys not get the memo?

1:03:47They're like, this thing got hacked. I think you're also underswing. There's so many people who are playing people lose their keys. Sure, sure, sure. Last night, some people and I were like looking at old protocols to look at this and somebody discovered that compound V1 still has millions of dollars in it. Yeah. There's always stuff like in a protocol that had a protocol that added to peak was like $30 million at TBL, which is clearly the lost keys. Yeah. No, it's typically obviously there's going to be some stranded money and so on and whatnot. But I do think like the ways in which humans, you know, SVB was weird because it happened so fast and it was one subculture that coordinated around, oh, hey, you know, kind of a bad, whatever, earnings call or whatever it was. So like, let's all get out of this thing. And that cascaded really quickly. It seems like AI's will do that even faster. And even a small risk of like, oh, well, maybe there's a one. But again, that yield farmers, crypto, crypto is the same thing.

1:04:49All the yield farmers are basically already doing agents. There's manual rules of a stage. Right, right, right. Yeah. Yeah. So like, I think you have been someone tweets about it. People take off like, I think, yeah, not in the banking system. That's my point. I think consumers do. I think this is why understanding the crypto market, especially when people are down on it is actually very useful because all these AI things just basically make everything look like the rationality assumption suddenly got a lot better. The crypto, the economic is is back. Yeah. It was back. Okay, beautiful. All right, I think that is it on time we got to get going. But thank you, everybody. I hope you're all safe and sound out there. We'll be back next week. See you all.