Building a Decentralized Banking Institution w/ Sam Kazemian (Frax Finance)

**Speaker A:** Hello and welcome back to the Strange Water podcast. I'm proud to say that we've made it to the 20th episode and we've got something worthy of such a nice round number. Today's guest is Sam Kazemian, founder of FRAX Finance. For the uninitiated, FRAX was founded in December 2020 and issues the Frax stablecoin. During last run's bull phase, FRAX grew to just under $3 billion, and even in this sideways, market has maintained a circulating supply in the high nine. Though the protocol launched just as a stablecoin today, it is an incredibly complex organism that offers a wide range of products, including the flagship stablecoin, an ETH staking product, a Dex a lending protocol, and as will be revealed in this episode, a Defi native Bond product. Over the next 80 minutes, you are going to hear one of the best conversations I've had all year. Instead of outlining this discussion here beforehand, I'll let this one play out naturally. But whether you're looking for a discussion of the evolution of FRAX v1 to v3, or hearing me tell Sam Kazemian, if I were you, I would just throw away the stablecoin part of your protocol, I know you're going to enjoy this episode. One more thing before we begin. Please do not take financial advice from this or any other podcast. Ethereum will change the world one day, but you can easily lose all of your money between now and then. All right, time to start the show. Sam, thank you so much for joining me on the Strange Water podcast. **Speaker B:** It's good to be here, man. **Speaker A:** So I'm so excited to have you, like, especially in this moment in like, the, the, the literal, like, waves that have been Created by Frax v3. So we'll spend a lot of time talking about that, but I'm a huge believer in layer zero. I'm a huge believer in, like, understanding what brought all of us to the world computer. So before we get to anything going on in FRAX World, can you just, like, inform me, inform the audience of, like, who are you? Like, who were you before you found crypto? I think you're pretty early into Doge. And like, what helped you understand that this was not just like, a mechanism for buying drugs? Like, this was something worth, like, dedicating your career to? **Speaker B:** Yeah, definitely. So I've, I've been in crypto since I was a student at UCLA and like, since like 2013, 2014, just a pretty long time ago. Some people call me like, Jurassic or like, like prehistoric, but I originally just got into it because I thought it was pretty interesting and cool. Not because I thought it was profitable or anything, because it really wasn't. I actually got into mining as just kind of a hobby. It wasn't something that was like a huge business or something. It was like a hobby. I was studying neuroscience and philosophy at ucla. So one thing people might not know about me is I really like the intersection of like mind and computer, like cognitive science, brain, computer interfaces, AI which now is really interesting. But I actually picked my majors in college because of that interest and I wanted to either get into like neurology and medicine or computer science. But I self taught myself coding and that kind of stuff. I've never actually taken a formal computer science class or have a computer science degree. I taught myself coding and, and stuff. **Speaker A:** And so why did you teach yourself coding? **Speaker B:** I just like to build stuff like websites and then back then actually I had to really figure out kind of the hardware software aspect of mining. I had all these GPU rigs and I had to like jerry rig different like power supply units to different parts of motherboards and I had to teach myself both just the hardware stuff and also basically back then you actually like run your own like miner Cuda miner. Back then you had to actually configure it to your exact GPU specs and everything. It was just, it was just fun. And so after, after college I founded my first startup back then was called Everpedia. It was like a decentralized encyclopedia and it was kind of supposed to be like a successor to Wikipedia and it was named after everything encyclopedia. So everypedia. And we actually raised VC funding and there's actually a token called the IQ token that is kind of powering it. You stake it and you can edit and stu and actually recently it's actually doing really well and the, the team that runs in my former colleagues and stuff, they rebuilt it on EVM software. So it's actually. It used to be not on Ethereum blockchain, it used to be on EOS actually. And so they rebuilt it with EVM and it's actually rebranded to IQ.wiki which is a different platform but same ethos. It's actually really cool, it works really well. You know you could check it out. But then the real time that I started working on FRAX was in late 2019. **Speaker A:** Let's pause before we get to Frax. So one I just wanted to kind of like share with you like what you say that you got into programming just because it was fun Like, I got into programming because my friend forced me to take Intro to Computer Science and it was like the first time in my life I ever like, looked forward to doing homework. So like, I totally understand like that ethos that like, this wasn't about like something like, like passionate or huge. It was like, cool. And so again, like, I think we can all answer this in one question here, but what? Like, I remember that time, like I was somewhat exposed to crypto. Like, what I remember of dogecoin was like, what the fuck just happened? That like a Jamaican bobslee sled team is like in the Olympics with a dog on it. **Speaker B:** Yeah. And don't forget the Doge car. **Speaker C:** Right. **Speaker B:** Josh Wise and the Doge car. I donated to that. Yeah, all that stuff, man. **Speaker A:** Awesome. And so like, when I saw that stuff, like, again, I didn't believe in crypto until 2021. Like, what did you see that not only was like, this is a cool project, but also like that like Wikipedia needed to leverage this. Like, what was special that you saw back in 2014? **Speaker B:** Yeah, that's a really deep question because so much has changed since 2014 and so much actually hasn't and has proven to be true. So there's, there's two things. So, so much that has changed. Let's start with that first. Back then actually everyone thought like cryptocurrencies, these like fixed supply scarce assets would actually be used as currency. Like things would actually be priced in these things. So for, for a lot of people that have been in the space for a while, like you people listening and stuff, I think a lot of people rem when people actually thought you'd go and buy your coffee and it was going to be like 001. Yeah. And yeah. And even during the ICO era, people still thought there's going to be like dental coin, dentists will use this fixed supply asset or some. Something. And that seems absolutely silly now. **Speaker C:** Right. **Speaker B:** And it just, it seems nonsensical. But back then, even before Ethereum and the ICO boom and stuff, these, these scarce digital coins seem like they'd be currency. And actually I believed it for a while and stuff. But then if you remember, the very first kind of slogan for Ethereum was the World Computer. When Vitalik and them started kind of talking about Ethereum, it looked a lot different, but also again, not too different than what's going on right now. It's gone through a little bit of rebranding. They don't refer to it as the world computer anymore. But I still remember getting all of the original Ethereum newsletter postings, all of the people talking about Ethereum back then, like colored coin was kind of a big thing. There was actually like what were precursor ICOs on, on, like on. On Counterparty and colored coin and stuff like the original storage ico. I don't know if people even know what storage is anymore, but you know, like decentralized storage, which I think filecoin kind of tried to be the successor to that, but that was on Counterparty. I don't even know if anyone kind of listening how many people will end up remembering that. And like a lot of this stuff looked different, but a lot of it looked still in terms of ethos the same. And so the stuff that looks different is that I just don't think cryptocurrencies are going to be used as currencies. I think stablecoins will. And so that's what changed my worldview slowly and got me really into stablecoins. I thought the cryptocurrencies, it's kind of a misnomer. They're good investments that, you know, you can speculate in them. You know, it's like digital gold and these kinds of things. And again, bitcoin wasn't always called digital gold. People thought it would be used as a currency and then it got rebranded kind of as, as in people's psyche, right in the collective consciousness as digital gold. I thought that these things would be really cool currencies and you know, you can just mine them and, and without any central authority and stuff. And I didn't actually even think that they, these things would make you like rich. That's the thing. We were just, it was just fun. It was just something that you could do. Um, it was, it was fun learning how to set up all these things and was a very pure ethos because there wasn't money to make. There wasn't like you could like start your own really coin that easily or anything. And, and there just wasn't that much like liquidity. You could like mine. And then there was like two or three exchanges and there was, there were just like multipools and stuff where you could just point your hash power and the, the, the mining operator, the actual entity would pick the most profitable coin for, for you to mine for the whole day for the pool and then they would convert it to bitcoin. It was just like fun, simple games. It was simpler time. And then as my beliefs kind of changed about what the currency is going to be in the emerging digital economy, that's why I Got interested in stablecoins and that that's kind of how I, I actually today, you know, like fast forwarding a little bit. I like to call myself a stablecoin maximalist. It's kind of just a moniker, like a meme that I made up myself, but it actually kind of encompasses my view of just how I kind of got to where I am in crypto. **Speaker A:** Yeah. So that's super interesting. I think, like, to distill down what you were saying is that like Everpedia during the Everpedia days, like, really wasn't about like, how can we change how knowledge is shared and create incentives and all this stuff. Like, it was just kind of a fun project that was using this new technology and then through all of these like narrative changes and like things that happened, which by the way, is like a whole separate podcast on like the power of like calling it the world computer, the power of calling it digital gold, like, whatever. Right. But like through that process, you realize that you were never there because you thought this stuff was money. And like, as you realize like, well, it's not actually even money, but there is an opportunity to bring money on. Like, that's when you really started to like, shift away from like, I'm in this for the fun and then shift into like, I'm in this to change the world. **Speaker B:** Yeah, I think that that's a, that's a really good point to make. And like, I, I say that, you know, stablecoins are a multi trillion dollar, you know, category in crypto. And I don't just say that because I think a lot of entrepreneurs like to say, oh, the total addressable market of my area is like the total observable universe. It's like literally every single thing. **Speaker C:** Right. **Speaker B:** And that's kind of what an entrepreneur has to do to kind of like sell their thing. But I actually just believe that with. For stablecoins specifically. And it's not because I do it. It's actually like, exactly like you said. I got into it because I thought about it, not the other way around. It's not that I happen to be in stablecoins. I just say that they're just this massive, this massive total addressable market. And I just, I think that it's as big as essentially the Treasury Mark Tradfi, treasury market and bank certificate of deposit market, like combined, which is in the trillions. **Speaker A:** Yeah, I think we can just like kind of put the total addressable market stuff. We'll leave that for the VC talk. But let's talk about like the moment. The moment where you realize, like, I need to build a stable coin. And so this must be 2018, 2019. I think at that time we have Tether. We already realized that they might be like the shadiest motherfuckers in our industry or not. **Speaker B:** I don't think we realized that yet. Or at least I didn't. Maybe I wasn't smart enough or anything. **Speaker C:** Right? Yeah. **Speaker B:** Because there was only Tether back then. And like MakerDAO had. Had just came out. I actually remember talking to a lot of the team at ETH Waterloo. I believe it was late 20. I want to say 18 or it's so long ago I barely even remember, but I still remember reading the purple paper. I'm not sure if people even remember that. **Speaker A:** Honestly. I'm kind of sick of different colored papers now. I feel like there's a new one every day. But so what's the moment? Like you're in. Like you believe in Everpedia enough that like you're calling yourself a founder, you're going to build this whatever. And then like, what's the moment where you're like, oh, God, I need to build a stablecoin. **Speaker B:** Yeah, well, the, the main thing was that I actually thought that stablecoins are as important as Bitcoin and Ethereum. So think about Ethereum back then was just blowing up. It was on a tear. **Speaker C:** Right. **Speaker B:** It was basically like as important of an innovation as Bitcoin itself. I mean, arguably it is. Right. Still. And I was just thinking, okay, what else is as important as Bitcoin and Ethereum? I still believe that's why I call myself a stablecoin maximalist, is that it's stablecoins. And back then, to take you back to like 20, 18, 19 and like 20, the idea of this kind of algorithmic stablecoin, this like perfect incarnation of a. Of a stable coin. This, this was pre Terra. This was pre Basis. If you remember the first basis, they like, they had raised like 130 million or something. They never launched it due to regulatory concerns and stuff. But Basis was a stablecoin that had a triple token design, a bond token, a share token, and then the, the stablecoin. And it was like the share token is loosely. The original Signer shares white paper, which actually the frac shares as a. As a homage is named after Signer Shares, the governance token. So you could kind of see the evolutionary lineage. **Speaker C:** Right? **Speaker B:** And so the idea of this perfect being, this like kind of immaculate conception of this perfect stablecoin, that's decentralized scalable and just is able to basically live the same as like the bitcoin ethos. Totally non custodial. But is price stable is what got me to start working on that problem. **Speaker C:** Right. **Speaker B:** And back then everyone's idea was still totally like pure. People thought, well MakerDAO is going to be like that or like basis is going to be like that. We thought, you know, FRAX is the one that's going to be like that when we started working on it. And so our original view was like what will that immaculate conception of a stablecoin look like? And believe it or not, even though it's changed a lot, everything has changed, the industry's changed. Huge stablecoin implosions to huge stablecoin growth, all of this stuff. I actually do think for real that like Frax V3, something that we're working on and towards is going to be as close to as possible to that immaculate conception. But I obviously no longer think that there's just this perfect kind of form, this, you know, I think people call it and I started calling it the Stablecoin Trilemma which is kind of taken from Vitalik's blockchain scaling Trilemma. I don't think that's totally solvable. There's obviously trade offs. But I think the closest thing to the immaculate conception is kind of hopefully what we're going to Launch with Frax V3. **Speaker A:** Yeah. Awesome man. So can you like help us understand back in 2019, let's say when the idea is coming together, like look, let's take us all back to 2019, right? There's tether, Dai is just coming together and Sam Kazemian is sitting in one corner of the world, Do Kwon is sitting in one quarter of the world. Whatever. We'll just use you two, right? And like you could have in that moment done a Do Kwon like model that was like incredibly reflexive, incredibly, I don't know, dangerous. Right? And like you didn't. And like we can talk about the history. I don't think it's been over talked about. But can you just like help me understand like what was FRAX in the beginning? Like what did it mean for like the FRAX true ethos design? And then like how you know, talking through Frax version 1 and then Frax version 2, like how has that evolved? You know? And then we'll talk to like the next section of this talk will be what are the gaps to get to the true ideal and how does Frax V3 get there? But can you take us back to the genesis and help me understand from your perspective, like what is the true ethos of frax? **Speaker B:** Yeah, and that's a very well asked question, basically because again, when we tried to design Frax V1, our whole point and our whole motivation was like, why isn't there an algorithmic stablecoin? And this was again like you said before the Terra implosion, this is 2019, right. This is before Terra even launched. This is after basis design was released, but they didn't even launch. **Speaker C:** Right. **Speaker B:** And the whole premise with frax v1 actually people mistakenly say, oh, FRAX is an algorithmic stablecoin and therefore it's like scam or it's not going to work or whatever, it's going to lose PEG and stuff. But our premise was actually the same thing. It was that algorithmic stablecoins don't work. You need collateral, but you need it to look like fractional reserve banking. So, so the, the, the name FRAX is a portmanteau of fractional algorithmic which basically we said algorithmic stablecoins are basically like stablecoins without a balance sheet. **Speaker C:** Right. **Speaker B:** You don't have banks without a balance sheet. You don't have. That doesn't work. **Speaker C:** Right. **Speaker B:** And you have fractional reserve banks. In traditional finance, every bank is basically fractional reserve unless it's like a narrow bank. And a lot of countries don't allow that. Even like the Fed doesn't like including ours. Yeah. Which is like again, it's a discussion for another podcast. But so we thought, okay, what's the best of all worlds where you have great PEG performance and you have scalability? Again, that immaculate conception of like decentralization, scalability and tight peg, that's the stablecoin trilemma. If you look at the, there's like this triangle, right? And you get to pick two basically, right? The very tight peg decentralization, right? Like decentralized collateral essentially and scalability like the money supplies elastic. So if there's a lot of money in demand, it can expand easily and it can contract easily. **Speaker C:** Right. **Speaker B:** We thought that the Frax V1 was the answer to that. Frax never lost Peg. The only time actually ironically, that FRAX has ever, ever, ever lost PEG was like a 48 hour period when USDC just a couple months ago lost its PEG due to traditional banking crisis, the Silicon VAL rally, you know, banking crisis and stuff. **Speaker A:** And I think it's pretty reasonable to say that FRAX never lost peg. Like when you're only backing is USDC And USDC goes down like well, you didn't lose peg. **Speaker B:** Yeah. And so. Okay, so let me get there. Right, so the idea with FRAX was that you basically have hard assets. So for us it was USDC and eventually it kind of transitioned to curve LP tokens that are like a mixture of USDC and tether and like you know, high grade stable coins or whatever is high grade enough DAI TE or usdc. **Speaker C:** Right. **Speaker B:** And some algorithmic portion that's basically backed by the governance token fxs. **Speaker C:** Right. **Speaker B:** And like you said, FRAX never lost peg. But the criticism right, the counter thing is well obviously if it has a bunch of stable assets that are high grade like USDC and it can be swapped on chain, it has on chain protocol control liquidity, it's just backed by USDC or whatever stablecoins. It's essentially a wrapping of a bunch of stable coins and like a variable amount of a volatile token, its own token. **Speaker C:** Right. **Speaker B:** And what's interesting is first of all, that's correct, that's correct criticism Frax v1 well taken. Second of all, it did work, it never lost Peg. But two, I think our premise was right and fully algorithmic stablecoin or predominantly algorithmic one like Terra just was never going to work. And this was an assumption we made before Terra. **Speaker C:** Right. **Speaker B:** And I think what's, what's sad is that I think Terra also realized that that was doomed and they were trying to become more like frax. Yes, exactly. They were trying to become like FRAX before it was too late. But it was too late. There was just too much supply backed by basically nothing. **Speaker C:** Right. **Speaker B:** And so that was Frax v1. Okay, so you asked the question. So here's Frax v1, Frax v2. We designed these smart contracts called AMOS which are called algorithmic market operation contracts which basically code bunch of smart contracts that do certain kinds of of market operations over over again just provide liquidity on curve or take it out if the pool is imbalanced to keep the PEG tight or also this is actually before maker designed their D3M we thought of actually why don't we just mint FRAC stablecoins directly into safe lending markets like aave. When AAVE listed us, we had a lending amo which periodically mints fracs directly into AAVE or removes the FRAX directly from aave. And we were actually like first in coming up with this and doing this and then maker design their D3M Dai direct deposit module which is the same thing. **Speaker C:** Right. **Speaker B:** The maker was like well you could just Mint stablecoin directly into lending markets because that's all lending markets are. They're a bunch of CDP positions. **Speaker C:** Right. **Speaker B:** And so we actually came up with a lot of this stuff and that worked really well too. FRAX never lost PEG and it was starting to change a little bit. As you correctly said, the v1 1 narrative was well, you're just wrapped USDC and stuff slowly. We, we were not right. Like we're. Some of it was backed by over collateralized loans, some of it was backed by protocol owned liquidity which was still wrapped, you know, USDC and Curve LP tokens. And we're starting to come up with really kind of novel and interesting market operations while being one of the highest performant like pegs, tightest pegs to a dollar. So that was Frax V2. **Speaker A:** So before we move on to Frax V3, like I only because I know we're about to go like, let me give you some very specific types of criticism on like what FRAX built up into this moment, which is like the entire premise is like predicated on like Curve is no risk. Right. Like that essentially like you can use this like beautiful mechanism to run all of these like interesting things for the FRAX protocol and not really need to worry about what happens if this falls out from under you. Right. And I think that was like a really, really solid assumption for actually probably through today, like into the future probably. **Speaker B:** Until five days ago. **Speaker A:** Yeah. No, but look like the way that things are playing out and we'll know a lot more by the time this airs next Thursday. Right, but like so yeah, for the record, this is being filmed on August 4th. Right. So like it's, I think it's over 50% not financial advice that like Curve makes it through this, like no problems. Right. Except for Michael's personal net worth and like just some like big questions about who are the stakeholders in Curve and like how aligned are they with the process. So anyway, I guess like before five days ago and after five days ago, like how do you think about like how much of what you're building with FRAX is predicated on the other protocols that you're choosing to partner with. Like for example, are you worried that when you are minting fracs directly into aave, that is creating a supply that doesn't live within the space that you control? **Speaker B:** Yeah, and again, brilliant questions because that is exactly what we think about a lot. And so for Frax v3, we're actually simplifying a lot of this stuff and we're trying to Essentially find the elegance and simplicity by making it more simple and more robust by making it not as complicated and assets dispersed everywhere. Because you're totally right, that is actually one of the concerns that as more and more places, you know, AMO contracts, algorithmic market operation contracts do different stuff everywhere, right? If something happens happen somewhere or if there's 30 curve pools, right, and then a specific subtype of curve pool, four of them have issues, right? And then they're emptied out. Well, that sucks, right? Even though thankfully that didn't happen at all to any of the FRAX pools in the curve exploit. I think it might be better to call it the Viper exploit technically. But. But then, yeah, exactly. As you're saying, we're actually. This has been our roadmap for a long time in that you know better than everyone, right? We have frax lend, frax swap and we have an expanding essentially ecosystem this, this kind of. These frax tentacles, so, so to speak, right? That kind of go everywhere that are AKA and our control or technically an FXS token holders control in our, the, the protocol control. And we don't have to rely on anyone else or any other outside security of any other protocol. I like to call it, when I talk to the team, the other core devs, I like to call it controlling our own destiny, right? Instead of hoping that for example AAVE or compound lists FRACs and has the right collateral factor or they do it on a timely manner, or what if they have more risky assets than even we like? Or what if they don't have enough? We just innovate on building the best lending system, the most unique lending system, and tailored to stablecoins, not tailored to general lending, tailored to running a stablecoin. Which goes back to my stablecoin maximalist ethos, which is all of these, like these lending markets, these AMMs, these bridges. We can actually get into all of this if there's time. Probably maybe a different episode, but they're all different ways of servicing stablecoins. And so that's actually my stablecoin maximalist view. And so with Frax v3 we're trying to bring that all under one elegant roof and not make it extremely complicated. We're asking what's the minimum requirement for a stablecoin to be this close to that immaculate conception of solving as many of the stablecoin trilem, a peg, tightness, decentralization and scalability. **Speaker C:** Right. **Speaker B:** So that's basically there. So for V3 it'll be simpler. **Speaker A:** Got it. That. Great answer, and I'm sorry I keep like stopping you from moving forward, but before I let you go into V3, like the question I have to ask and you can only ask it to frax. And again to be clear, this is to frax, not to Sam Kazemian, but to do the events of the last five days like make you look at the treasury and the strategic assets that have been acquired by FRAX in a different way at all. And like, specifically I'm thinking about like Convex vlc, the Curve and vcrv. **Speaker B:** Not to be honest, not a lot differently. I think obviously things will be a little more painful than before they get better. But I think you know this and I think a lot of people listening know this, but I personally am kind of a big advocate of the VE token model and that gets a lot of people angry. I know there's a lot of people that don't like the VE token model and there's a lot of people that think it means stuff that it doesn't mean. So like, I'm not saying I, I love every aspect of it. But for example, FRAX was basically the second major token to have vex. So one of the things you can, the main thing you can actually with FXS inside of the protocol is stake it as vefxs, which is that system where you pick up to four years and you get to vote in governance and get some of the yield of protocol revenue and etc. I think that, yeah, people will be scared to put stuff back into Curve and things will be chaotic for a while, but I think the fundamentals are still there. So I don't feel, I don't feel particularly bad. In fact, I feel pretty good in the long term. **Speaker A:** Awesome. Yeah. And no asked and answered. And I think the only pushback I ever have against any VE systems is like, put in a rage, quit. The protocol wins, the users win, everyone wins. But otherwise. **Speaker B:** Yeah, well, I actually have a question I'd love to pose to you. The VE system, and I don't mean to derail and just go into talking about tokenomics, but just maybe for a few minutes, like it's all voluntary, right? And so, so like it's not like, you know, the way that I think about the VE system is that there's no on chain way for communities to signal in a trustless manner, hey, I am aligned with this, with this protocol for one month, for five months, for two years, for four years. And here's how much money I've put in to be aligned with its growth for four years, for two years. And you know, you get to pick voluntarily, right? And, and so that's, that is an important market ability. Like, again, blockchains are about coordination, right? And there, there is no way for anyone to coordinate other than through some vague VE system. Like, there's, there's like the balancer flavor of it. You have to kind of stake some ether with the token. And then there's the raw VE system like FX and crv, right? And I just feel like, you know, stuff like Unity or like, or like comp or like mkr, right? Which is you can just hold its spot or you could sell it. **Speaker C:** Right. **Speaker B:** I just, I just think that that view, the orthodox view of like the OG DeFi protocols, where there's this view of like, if you need a token for your like, project to work, you're like, a project is a Ponzi or a scam or something. But L1 blockchains can have a token because they need the token to work. But that's not a scam. But if you build like a, a system of smart contracts that have staking and locking and like voluntary coordination, then it's a scam. Or like, then your product is not good enough. You have to always be giving away free money. I think that that's just like, I think that's just misguided. I'm not saying that there isn't a way to have bad VE tokenomics, just like unsustainable stuff. I'm not saying like, you can't, you can't over emit stuff or, or anything like that, but without the ability of a, of a bunch of people to coordinate on chain and say, I have like a million dollars of this governance token. I'm in it for four years. And so like, you know, I. Sure, I get the fees for four years. And I'm like paying attention to the fact that I've staked for four years, I'm going to vote, I'm in IT and stuff. And you can actually see that with how much people are building and talking about curve. We're talking about curve. Like, right? Like everyone, everyone is talking about curve. You can then judge the, the product and the tokenomics slightly separately. You can say, well, you know, curves, like AMM is like losing to Uniswap V3. Or like, maybe it's like this, or there's a bunch of people that have opinions of like, well, Uniswap is more gas efficient, it's more capital efficient, it's more this and that. Fair, Fair enough. You can analyze the product in Isolation and the, and the tokenomics in isolation. And for the tokenomics, like we're talking about the curve tokenomics, not the uni tokenomics. Which proves the point, right? In fact, if you like uni V3 in every way more than curve, I actually think that the right objective view would be to wish that uni had ve uni and so like Uniswap had this system and there's obviously like projects that are trying to build it slightly independently. I think there's like, bunny, right? There's that thing. But my whole, my whole spiel here is that I'm a ve tokenomic person. That doesn't mean every single project that does that, that thing I think is just greater or something like that. But I think people that just immediately think they know that the tokenomics are just terrible and it's always a scam. Yet as time goes on, everyone continues to build and the tokenomics actually give value because it coordinates a large number of people and projects together. I think the empirical evidence shows that their worldview is not correct. That's just my opinion. **Speaker A:** So, like, I think, like, on a practical level, like, remember, we're in crypto world, so like, four years for us is like legitimately like 40 years for like a tradfi decision, right? And like, it's super easy for me today to be like, I love Apple, I'm going to commit dollars to Apple for 40 years. But, like, forget what Apple does. Like, my life's going to change. Like, I might need money, I might go gamble the rest on shitcoin, like, you know, and so like, I just. The reality is, is people are stupid and they can't look that far forward. And I think that, like, if you just like, like, look, man, like, I probably would have locked my curve if I had gotten like a good aloe, like day one, but now we're three years later and like, I see how big the loans the founders are taking and I see that, like, when there's an existential hack, it's all about, like, getting into bed with like, some like, pretty weird characters, you know? Like, I. I don't think that, like, we philosophically should be saying, like, sucks to suck, you know? And so that's why I'm a fan of the rage quit option. It's like, you get out, the protocol gets to keep part of your promise. **Speaker B:** And so, so, so is there a. Is there a protocol that very closely matches with your view? Because it sounds like, if I understand you correctly, you like the VE crv. So there's just one big thing that's missing and you really want to like the VE token system. Again, if I misunderstanding, you'd say something, but it's just missing this one big thing which is just this thing where if you made a mistake, there's some algorithm or constant for like if I. **Speaker A:** Need to pay for like my grandparents, like surgery, you know. Yeah, like, like just shit happens, you know, And I think, I don't even think the VE token system is wrong today. I'm just saying, like, if I was. **Speaker B:** What do you think is a protocol that has near perfect, as good as possible tokenomics? Like what, what? **Speaker A:** Flashbots. **Speaker B:** Flashbots and. And how. So for people listening and me as well, I. I don't actually know the exact specific. **Speaker A:** They don't have a token. **Speaker B:** Ah, so you're like the orthodox view. **Speaker A:** Okay, I think there should be one token. **Speaker B:** There we go. You've said it. And, and I, you know, I, I love differing views, but obviously we're. And where we can have great discussion and stuff. I, I think that view is, is respectable. I don't think it's the correct view. **Speaker A:** Well, sorry. Okay, to be clear, what does a token mean? Like there should be stablecoins. **Speaker B:** Yeah, no, no, I mean, I mean like, like, like government. Yeah. And basically. Or even, I don't know if you want to think utility token. Basically. My, my view is. My view is that the. So it sounds like you're like an orthodox token or like an orthodox crypto person. Which means like you think that an L1 blockchain is the only kind of legitimate mechanism that should have some kind of incentivization of like, of a scarce digital asset. **Speaker C:** Right. **Speaker B:** Like to make it work like essentially like a coordination mechanism. **Speaker C:** Right. **Speaker B:** Like you're, you're of the belief that if you design smart contracts or any kind of service either within the blockchain or flashbots is technically like slightly out of it in the mempool and stuff. But. Yeah, or like just smart contracts or something. You're of the view that if a token. **Speaker C:** Right. **Speaker B:** Something of value is. Is needed to kind of make it work, it's not probably a good product. Would that be correct? **Speaker A:** I, like, I actually think that I'm like the least orthodox crypto person because I'm like the most like, like tradfi. Maxi person. Like I, you know. **Speaker B:** Okay, that might have just been my label. Orthodox to me means like the original, like the uni guys, the maker guys, the compound guys. Orthodox. I kind of view it as, I'm a, as a philosophy major. So I like to view things in terms of like beliefs like orthodox Christianity, orthodox metaphysics and like, like Neoplatonists. **Speaker A:** I mean maybe you know what, I just. My last episode was with Hudson Jameson, one of like the etho GS and he agreed with me. So maybe I would agree with like Hayden and team. But look like I think that they're orthodox. Purpose. Yeah, fine, fair enough. Like, I think the purpose of what we're doing here has nothing to do with finance. I think that like Bitcoin, like the zero to one innovation was like, okay, we have now created a permissionless, trustless computing space. Now it fucking sucks. All we can do is like do plus and minus. But like that's the innovation. And then like all this politics like ossification, digital gold, like fucking bullshit. They kicked Vitalik out. Vitalik creates Ethereum. Like that's the promise. I really believe like Bitcoin is just like a Ponzi bullshit, like whatever. I think that like almost everything else is like, I think the purpose of what we're all doing here is Ethereum. And like the point is, is that Ethereum provides the background layer. It is part of the Internet. It is the part of the Internet that allows us to express property. And so like those are my first principles. I don't think that the purpose of what we're doing here has anything to do with like finance or money. And I think that because of American capitalism, which is global capitalism, because like we all do want to get rich like because of like so many reasons we've been sucked into it. But like I, I think that like what a token, not What a non L1 crypto economic token and what a non stablecoin is, is a illegal security that we are printing money out of nothing so that we can hand it off to each other so that we can get people to do risky things that they shouldn't be doing. **Speaker B:** But ETH is not a security in your view? **Speaker A:** No. Well, maybe it is. I don't care. I just don't, I don't care about this like security, not security thing. I just do think that like not going to pick on anyone in this call. Right? But like I do think that the ALCX token is the only reason it has any value is because we're treating it like a stock. **Speaker B:** Yeah, fair enough. And I think that that's, that's a reasonable view. I think first of all, I actually agree totally in terms of what you think the view and the value of Ethereum is. In fact, that's actually Why I became enamored with it in terms of the original world computer when Vitalik was. **Speaker A:** I know they shouldn't drop it. **Speaker B:** Yeah, they shouldn't have. But. But hopefully it'll make a comeback. Hopefully, you know, but, but I think now, you know, the, the DA layer of everything kind of, which sounds too nerdy. It doesn't really probably make sense for anyone outside crypto, but especially since we're. **Speaker A:** Doing state expiry or I mean transaction expiry. **Speaker B:** Yeah, yeah. **Speaker A:** No man. And so look like I think that the purpose of Ethereum is to create this like substrate layer. And I'm not saying that Defi is like a, a joke that's going to go away forever. I think that Defi is just like one tiny corner of this. In the same way that like computers are so much bigger than TradFi, like, but the way that we think about Ethereum and about Crypto is that it's just for finance. And like that's kind of where I like get, I get so like find myself bashing my head against the echo chamber that like we currently find ourselves in. **Speaker B:** This is what I was saying at the beginning when we started talking, which I said a lot of stuff at the early times when I got into crypto was different but a lot of it was also the same because a lot of it in the early stages, actually Vitalik and the original guys, Joe Lubin and the original video, they're actually talking about a lot of this stuff that wasn't financial. They were also talking about financial. But a lot of stuff that wasn't financial, that's finally happening. And so you're totally right in the sense that finally like seven, eight, nine years after all of this stuff was like envisioned. Some of the non financial stuff is happening, some of the stuff that they thought would take off also never did. Prediction markets I think have been the biggest dud. That sort of. **Speaker A:** Yeah, I feel like I could bet a lot of money on prediction markets today. **Speaker B:** Can you? Like, I mean there's no huge prediction market on Ethereum. I guess there's the poly market stuff. **Speaker C:** Right. **Speaker B:** But there's not that many. **Speaker A:** I don't, honestly, I'm not a gambler, so, you know, I don't know. **Speaker B:** Yeah, but I mean one of the main things just like a lot of this stuff was non financial and then some of the financial stuff didn't work out. **Speaker C:** Right. **Speaker B:** So. So you're totally right. There's a lot of stuff that's right on that wasn't financial, that's finally Taking off. And I guess technically Everpedia also was a non is IQ Wiki. The new name is his Non financial Use case. Right? **Speaker A:** Yeah, no, exactly, exactly. And I'm not going to derail talking about IQ Wiki. There's just too much to talk about. But I think, look, I will just show my cards and tell you where I want to get with the last five to ten minutes of this conversation is to try to convince the founder of FRAX Finance that the actual product is not the stablecoin has nothing to do with $anything. Like the magic that you guys have created was like you should a stablecoin. You learn how to master the curve game. You learn how to master building out these like really impressive things. But the game, you've heard me say this privately. The game is in FRAX E and the game is invalidators and the game is in like Ethereum. So we won't talk about that yet. Let's go through Frax v3. So why don't you just kind of like save us some time and just tell us what is it? What is it so far that you've released for sure. **Speaker B:** First thing, I'll just say as an aside, obviously we think FRAX ETH is a huge, huge part of what we're building. That's why it's like grown so big. So I totally agree in some of that aspect. As a stablecoin maximalist, I obviously have to say I also spend most of my time thinking about stablecoins. So Frax v3. And also this is probably one of the first times I'm talking about some of these things. So the alpha towards the end will be kind of pretty interesting. **Speaker C:** Right? **Speaker B:** It's a. It's a four pronged design. And what that means is actually the FRAX logo has. Has these spikes on it. It's actually the trivia is that it's like actually a ASCII character for the general currency sign. So something people didn't know. And so there's four prongs to the Frax v3 strategy. One is the BAM, which we're working on, which is the collateralization and lending method for allowing Frax V3 to be backed by decentralized crypto assets that can't have bad debt and doesn't need oracles. It's actually a very unique system. I've talked about it briefly. So this part is. Is not completely new here, but that will be essentially our like CDP engine, so to speak. And it's totally different. It's not like a MakerDAO CDP. It's something that Defi has like never seen before. So that's prong one. **Speaker A:** Like when this is deployed, is the BAM replacing fraxland or supplementing fraxland? **Speaker B:** Supplementing fraxland. We're not just shutting down fraxland and actually you'll see. So when I go through the remaining three prongs. All right, I'm just going to shut up. Yeah, no, you ask great questions. I mean perfect prong number two is frax Gov. So one of the main things that has both been criticism of both Frax ether and frax the $pex stablecoin is that it relies on the MSIG having certain administration permissions on some of the smart contracts. Essentially to be clear, the trust model Currently pre Frax v3 is that the MSIG signers which are a lot of the core team are not malicious. **Speaker C:** Right. **Speaker B:** The MSIG not being malicious is the trust model pre Frax V3. So the second prong is deploying the system with frax Gov, which is our fully on chain governance system. Every single permission, every single action has to happen must happen on chain with the approval or the non veto of VEFXS voters. The votes happen on chain. There is no snapshot votes. The snapshot votes are just social signaling for something that's going to be loaded on chain. So that's the second prong fully decentralized. Go ahead. **Speaker A:** No, and we don't need to. Instead of like using the remaining time to like really dig into that, I'll just point everyone in the direction of. I think you or someone from your team did like a two hour flywheel deep dive on like what frax Gov is. **Speaker B:** So I think it was John from our core dev team who's the FRAX Gov lead. That's a very good episode actually. **Speaker A:** Yeah, yeah, perfect. So I will link that. If you want to learn more about frax Gov, go for that. But what's number three? **Speaker B:** Number three is slimming down the amos. This is the least interesting part. But this already answered right? This is we're still keeping fraxland and some of the curve and uniswap ammos but with different newer strategies which makes it much more robust. Number four is fxbs. These are called FRAX bonds. Haven't talked about this with anywhere else. The the way that these work is they're totally autonomous bonds. We think of them as what kind of basis was like trying to do with their basis bonds system but something that will actually work because the time is now right to actually have a actual algorithmic bond system. The way it works is that there's just a factory on chain. Again, this is all on chain. These aren't real world bonds or anything. These are decentralized. What happens is governance decides some amount of cap or bond FXP tokens to sell. There's only four series of them. They each mature on January 1st of every year. So 2024-2025-2026-2027 and they're auctioned off in a GDA gas efficient on chain auction. And so we've worked on the auction system and everything and people buy them and they have the onchain guarantee when they actually buy the fxb. One FRAX stablecoin is minted into the frax bond tokens address and it will automatically always be converted to one frac stablecoin at the maturity date. It's kind of like Treasuries that have to be repaid, right? Because the US government can mint dollars. These FXPs are debt denominated in fracs and they will be repaid on the date in frac stablecoins. The question is, will the frac stablecoins be collateralized enough to remain at peg, right? That's the main question, right? And so the final part of this is the fxbs power the real world asset engine of the FRAX protocol because you have a list of maturities that you know, everyone knows, without permission, without an MSIG trust or anything, will actually mature into frac stablecoins. And so you can actually have a yield curve on chain. You know that 1 year, 2 year, 3 year, 4 year, they will yield for example 5%, 6%, 8%, 10%, there's a yield curve you can actually, if you're investor of decentralized bonds, FXPs, you can actually buy these things, right? And the FRAX protocol knows what it actually has to make in terms of yield from either real world assets on chain through either curve farming, whatever, lending or something and any other system to actually repay them. And what's unique about this system is that it doesn't actually require you to in any way manage duration risk because you know exactly what the duration risk is. You just have to hit the yield benchmarks on each of the bond series. And so if you for example, as, as like as a VFXS governance voters know that a let's say two year US treasury bill yields 6%, right? In TradFi you can have a governance vote that sells 2 year FXBs up to 6%, as many people as want to buy them they can buy them for 94.94 frax. They're guaranteed to get one frax in two years. They're guaranteed. It's in the smart contract. There's no admin function. It's actually swappable. It's almost like an amm. You could swap the FXB on maturity date, then the FRAX protocol has to go and swap out the for treasury bills from the funds that it raised from selling the fxb. So this engine coupled with the bam, which is the over collateralized engine that can actually take basically long term long tail volatile crypto assets will basically be the heart of Frax V3. And it sounds simple, it's just like okay, two things and like a governance module. But like I said the idea here is elegance and simplicity. It has a real world asset engine, it has a long tail, no oracle needed, no governance needed. Decentralized lending engine in the BAM and has a liquidity engine. The BAM is it stands for Borrow amm and so I've talked about that before too. So hopefully that entire thing is, is what I call the final stablecoin in terms of a dollar peg stablecoin. And so that's it. **Speaker A:** Dude, incredible. All right, you just threw down so much stuff there. Let me like try to make sure that I like hit all the main points. Okay, so first I'm just going to put the Borrow AMM completely to the side and just say like borrow lending. Like we all know how that works. Black box, right? So on the bond side like first let me just be clear with like what you're saying how it works. So I as a user will go put my like I'll buy my FRAX bond and then are you saying that immediately the second I take a FRAX bond out of the protocol, the FRAX protocol is already minting the payout into like an escrow smart contract. Or are you saying that I just know that by reading the code that that will happen. **Speaker B:** I mean both of those are economically the same thing but yeah, it will actually physically mint the FRAX into the contract and you will see it's there for you to redeem with no like admin feature to like freeze the smart contractors. Like you will get out the same way when you hold a U.S. treasury bill, you know that the Fed will print dollars to repay you, right? It's the same idea. **Speaker A:** Yeah. And look like without getting into like the theoretics between like what, what is money and what makes a dollar, like the biggest difference between the FRAX and the dollar is that like, nobody is enforcing that. You use frax at the point of a gun. Right. And so like, that's like the government. **Speaker B:** Yeah, well, yeah, one thing I, I want to, this is a normative economic claim. And I, and I don't again, want to derail stuff. But, but the bonds, the debt is denominated in fracs. So it, by definition, like, normatively, economically, like the bonds can never default because you're guaranteed to get repaid in fracs. You're not guaranteed the frax will remain at peg. **Speaker C:** Right. **Speaker B:** Hopefully it does. Right. Just like how you hope that the dollar, when you get the bond like the T bill repaid, inflation isn't 500% and the piece of paper is literally worthless. **Speaker C:** Right. **Speaker B:** I always like to compare the dollar as the dollar is a stable coin. Its peg is the CPI plus 2% target. Like that is the dollar's peg. And so when, when that's off, like it has been for the, for the past like 18 months, it's technically like the dollar stablecoin is off peg. **Speaker C:** Right. **Speaker B:** If, if, if inflation's 8%, the dollar is basically a stablecoin, that's 6% off peg. Right, but, but anyway, so you're totally right that no one needs to use frax, right? **Speaker A:** No, no, sorry. You just anticipated where I was going with this in that, like, so what I was trying to build up to is essentially like, I take, I buy the frax bond and then that day you're putting the frax aside to say like in a year, two years, three years, four years, like, this is the frax right here that will be released. And then like, essentially as exactly, you're saying, like, the US Government doesn't need to worry about, like, well, what's the value of that dollar going to be in 1, 2, 3, 4 years? Like, it's going to be a dollar and we're going to ask for our things and you have to worry about that. But what you're saying, so, so I. **Speaker B:** Mean, we have to make sure it's at peg, right? The commitment, the expectation that frax is at PEG is kind of the same commitment that people are hoping hyperinflation doesn't happen. **Speaker C:** Right. **Speaker A:** So, so the idea here is that if you just took my proceeds and like, didn't do any of them and do anything with them in one year, like, you would basically be printing up new fracs to like, make my yield, but you're not doing nothing with them. Like, the goal is like, because you know the duration and you know exactly the percentage that you need to pay out, you know, like I need to make at least this much frame real yield or the it's going to be reflected in the peg. **Speaker B:** That is exactly correct and that's exactly what will power the FRAX real world asset engine because you know the duration and the amount. There's only two ways to make sure the whole thing continues to function. **Speaker C:** Right. **Speaker B:** One is to exactly as you said, make sure that you're getting as much yield so that the amount you're borrowing matches the amount you're earning. Or number two, which I wouldn't recommend, which is not what we're going to do at frax, but it's what the US government does, which is print new debts to pay off the old debt. So the other way to make sure FRAX would remain at PEG technically is when the new FXB, when the old FX becomes due right at January 1st of like 2024. There is a, there's a FXB January 1st, 2025 that intakes a bunch of fracs to repay the new fracs. That's going to enter supply, which is what the U.S. government does. Its tax revenue is not enough to it deficit spends. **Speaker C:** Right. **Speaker B:** It has a big deficit. That's the other way which we're not going to aim for, but that's technically the other option. **Speaker A:** Yeah, and again, look, things are totally different when you're a sovereign and like you're the sovereign of the global financial system. But we don't need to get into that. So the reason I just like went through such painstaking efforts to like really understand how this system works is because look man, like the big pushback, whenever anybody says like oh we're going to do essentially T bills on chain, right? Or you're, you're being more broad, you're saying real world assets but like it's that the, what the government wants is like for only like registered Americans who have like you know, been accredited and whatever gone through this process to have access to T bills. And like there's just like we can be as clever as we want, we can use computer science. But like at the end of the day like if you're just buying a T bill and then projecting out that like that revenue, you're essentially taking a government security and then turning it into your own security. Can you talk through how like the construction that you just described, plus like what is happening on the RWA side like really approaches this from a like completely new angle that like makes that old argument just like not relevant. **Speaker B:** Yeah, and that's again It's a great question. I'm not sure if you're going to be satisfied with this answer but in earnest and I truly believe this, this isn't just like an answer I'm just throwing out on, on on air but all of this stuff is, it is explanations, right? Like the, like whether something is a security is not. It's. It's a social construct. **Speaker C:** Right. **Speaker B:** And the thing is I actually don't think the structure that we're doing it is anything like the tokenized T bill projects that are actually doing tokenized T bills. For one, like I just told you, these FXBs are the debt is denominated in fracs. No one is actually holding tokenized versions of treasury bills. Only the, the FRAX protocol has certain off chain relationships. **Speaker C:** Right. **Speaker B:** Today we announced one with finras PBC which is an internal project that we're actually doing but we can sign up with other custodians. I think maker is doing it with like block tower or something like that. There's obviously many solutions but our design is I think genuinely again normatively different. It's not just like you said. I mean the pessimistic view is it is just you know, making up different words and like. But you're at the crux of it. You're just figuring out some kind of regulatory arbitrage or something like that. I actually genuinely don't believe it because I think the design is different. If we allowed people to redeem for T bills, if we guaranteed your entire to the yield of the. You're not, you're interacting with a decentralized stablecoin protocol. When you buy the fxb, you're guaranteed to get FRAX tokens. It's a different token back. That's the only debt you're entitled to. There's absolutely no kind of downstream expectation. Obviously maybe there's an argument for it but normatively like economically the debt is in frax you're going to get repaid frax how much that frax will be worth. I mean you can make many, many orders of magnitude of downstream arguments while the FRAX will probably be worth something assuming there's some T bill somewhere that some custodian might have yield that might give it back to the protocol that might collateralize the frac stablecoin so it doesn't, you know, break peg fair. But I actually think that compared to like you're saying all the, you know, T bill projects, literally T bill projects, right. That is totally different. At least that that's what I think. **Speaker A:** I Guess with like kind of final question here before we just wrap up is like how are you talking to the bank about this? Like look like with, with T bills like there has to be like somebody old, right? That is like physically just taking, you know, taking custody like doing all the paperwork, that kind of stuff. **Speaker B:** Stuff doing compliance, transparency reports. Like you're saying the, the adult stuff in the back of the. **Speaker A:** Yeah, like how do you explain to them that like you want them to hold these T bills on behalf of a protocol that ha. That is owned by this frax Gov module that has the alpha and the omega and there's the like how, how, how. **Speaker B:** I will tell you that, that it's taken many months to get someone to a group again like you're saying group of adults to be satisfied to give it a try in the orders of eight and nine figures. So at least to start. But I think to put it shortly and bluntly, I guess the same way that Blocktower is down for the how question. Right. With maker and stuff a lot of time and compliance. But a lot of this stuff again is new. I, that's why I kind of genuinely, I respect your view of you know, maybe this is all just computer science lingo and it is just T bills but maybe it's really not genuinely this stuff is new and really there isn't actually clear obvious. So some people think it's obvious but then some people don't. So by definition there's clearly not obvious consensus when you look at the whole set. **Speaker C:** Right. **Speaker B:** So I think it is different. **Speaker C:** Right. **Speaker B:** And so there isn't precedent. So you have to get people that are willing to trailblaze in, in this area. **Speaker C:** Right. **Speaker B:** And so like for example Blocktower and, and monitor Anchorage. Exactly. All, all of them. There's already, there's already crypto friendly banks that are trying to fill the void that Silvergate and Signature bank left and we're, we're working with one of them. And then we're also actually believe it or not, I, I, I can't say the name publicly because like you know banks are super sensitive and, and all this like stuff. But there's like a top five bank that's like slowly, like you said, it's very, very slowly warming up to giving it a try. And obviously it depends on the macro regulatory aspects of it. But you might be surprised. **Speaker A:** No, I mean look, I just to be clear like I am not here saying like this is all bullshit. Like we're just using computer science word. Like I'm trying to represent a like Push basically, like the entire conversation around the T Bill projects. I think, like, what I said about 20 minutes ago about how I want to convince you, like, FRAC should drop the stablecoin and go entirely to eth has nothing to do with any of this, like, like regulatory stuff and like, risks that FRAX is taking with Gary or like that you personally are taking with Gary. Like, for me, it's entirely that, like, I'm just going to, like, we have not talked about this. I have no inside information. I'm going to guess the top five bank you're talking to is JP Morgan, and if it's not them, it's the other four. Because I know for a fact all of them are working on crypto projects, right? Like J.P. morgan's openly told. **Speaker B:** I can't confirm or deny, but I can say you're a good guesser. But I can't confirm or deny. **Speaker A:** But like JP Morgan, first it was Quorum, now it's Onyx. And like, I guess, like, my, my thought to you of like, get out of stablecoins, go to ETH is because I know for a fact that Papa Jamie and all of his little people that want to be him are like, chomping at the bit to get into crypto. And the second that they have like the legal rails to get in, like, I fully believe that, like, JP Morgan is just going to say, like, oh, yeah, we'll just, just issue our stablecoin. We'll provide. **Speaker B:** You were seeing that with the etf, right? You're at least seeing that with the. **Speaker A:** Bitcoin ETF curve versus Uniswap. Let's get into our whole defi debate about which is best in tokenomics. JP Morgan, they're just going to be like, oh, we'll let you do swaps for free because will you like the data flow? My thesis is that this entire game just like, completely changes. Like, we're farts in the wind of these people. I was 24 when they put me in charge of $20 billion of cash flow at one company. Like, that's how seriously they take our amount of money. And so, like, I mean, we're fish. **Speaker B:** We're small fish. **Speaker A:** Yeah, man, we're nothing. We're nothing. And we're. We're computer scientists, right? Like, we're building these technologies that like, JP Morgan can use to change the world. And what's cool about Ethereum is that for the first time in human history, you and me can own an upside in the technology as it changes the world. This is HTTP but you and I get paid 0.1111 cents every time someone types it in. **Speaker B:** I mean that. I think a lot of what you said is a good point. I guess the main thing is, why do you think JP Morgan won't try to displace Ethereum? Is it just that Ethereum is too decentralized, People don't want it. But then to use, like, JP Morgan chain, but they'll use JP Morgan swap, or JP Morgan DeFi, or JP Morgan stablecoin, or. You get what I'm saying, right? You're saying Ethereum is amazing and we get to change the world with that, but everything else, they're just going to use Papa Jamie's thing. So I'm actually kind of curious and I don't want to derail that. **Speaker A:** No, no. Awesome, man. I love the. I love it. But like today, right now, Onyx, the JP Morgan chain, private EVM chain, is already doing billions of dollars of repo transactions every single day. Like, we don't talk about that in our little corner of Defi. But like, like, this is already happening. And like, I fully believe, like, come on, turn on CNN or Fox News or whatever. Like, I fully believe that our government is capable of doing something as stupid as, like, making it illegal to run Ethereum software in your home. Like, like you and me, we might need to be talking about real estate in Dubai and Singapore in a couple, like, months, right? Like, that's totally, totally possible. But, like, I'm willing to do it because, like, I fully believe that in 10 years, America will be rolling back all of their, like, stupid regulations and trying to catch back up. We've been through this before. Like, none of this shit is new. We had a bunch of different private Internets, aol, like online, like, all this stuff. And like, like the, this network technology, like, works. It's. What's that? It's like one plus one equals three. Like, the more people that participate, the more powerful it is. And like, any question in my mind that we've talked about this before, like, I've been to Iran, I was there in that, like, three months that Americans were allowed to go. Like, my fiance is Russian. Like, any doubts in my mind that, like, Ethereum is not inevitable because America just, just isn't the king of the world. Like, was washed away when America just went into the central bank and took $600 billion of Russia's central reserves. Like, that's not acceptable. And like, people will be looking for different options. And I just believe that, like, Ethereum is inevitable. **Speaker B:** Well, that's well said. I think I would agree with that. But in an optimistic, from kind of an optimist view, I. I like. You know, I was born in Iran and Iranian American, but. **Speaker A:** Sorry, I didn't want to out you. **Speaker B:** No, no, I mean, it's, it's a. I genuinely think America is the greatest country in the world. And the reason for that is that they have almost always, and dare I say literally every time, been on the right side of every single financial, technological, transportation and energy innovation since their inception, from railroads to oil discovery to airplanes and air travel to the Internet. And we'll see with crypto. But I think that what you're saying is maybe they screw it up and then 10 years later they'll be like, oh, crap, we screwed up and it's inevitable, or something. But I think that America is almost always on the right side of history, whether it's because of its separation of powers, the way that it has a civically engaged population and just a very individualistic and innovative society and people. But I just think that that applies to not just embracing Ethereum, but decentralized finance, decentralized stable tokens, stable coins, and these kinds of things. It doesn't just start and end at Ethereum. But I agree with you about the Ethereum part and I actually agree with you from an optimistic standpoint. A lot of people come at it from this view that America did this to Russia or it sanctioned Iran or everyone's trying to de dollarize because the US is using the dollar as kind of like a political weapon. And these kinds of things that can all be true at the same time as the US is the most innovative and free country in the entire world and it doesn't screw itself in terms of being on the right side of every kind of technological innovation. And I think maybe I'm too naive, maybe I'm too hopeful. Honestly, the past few months I've doubted that a little bit with what's going on with the SEC and stuff, but. But I've started to have even more hope and reassure myself the past few weeks that my initial view about being very proud to be American and very proud to be on the kind of right side of history is correct. We'll see. Right? We'll see history. It's coming whether you like it or not. So we'll see what happens, right? **Speaker A:** Yeah. No, I'm so confident that we agree with each other because I find that we're like kind of like debating around, like, look, man, like what my response to what you're saying is like, oh, dude, I'm super optimistic too. I just was like, trying to make the point that Ethereum is inevitable, you know, and, and look, I think, I basically think that if somebody writes about it in the news or crypto, Twitter, if you take the opposite take, like, you're probably right. And I think that like, if you just get off the Internet, like, this is like the most exciting time to be in crypto, like, at least since I've been in it. And so I just like, I think, like, I very much believe that the point of this is to have like property on the Internet and then everything flows from that. And so like, what. I'm not here to tell you that like, Sam Kazemian is wrong. And like, don't do something like, dude, like, the point of Ethereum is like, everyone can do whatever they want. And like, that's the beauty of it. I just really encourage you to continue on the Ethereum side of it and not on the finance money side of it, because I think the finance money side, you're literally up against the most richest, powerful man and institution that's ever walked this planet. And on the computer science side, yeah, Vitalik's ahead of you, but I don't know how many other people are. **Speaker B:** Well, I am as Ethereum aligned as probably anyone can get. And so that's why everything we do is Ethereum first and totally see eye to eye with you on the vision that Ethereum basically makes digital property possible. Like you said, Bitcoin was the most simplest. It was just numbers. And Ethereum is basically the, the open slate, the blank slate of digital property on the entire Internet. So I mean, I totally agree with that. And I think, I don't know, I think Vitalik is probably ahead of me by a long shot. So I'm pretty confident in that. **Speaker A:** I think even if that's true, the distance between you and Vitalik is fucking tiny when you look at the entire globe, like, compared to, let's say, like the distance between you and the top five banks and the entire globe. **Speaker B:** I think you're giving me too much technical credit. And Vitalik not enough. Fair enough. **Speaker A:** I'm just saying, like, like we. **Speaker B:** I just know how to code stuff. **Speaker A:** That's exactly the point. That's exactly the point. And like, the message that I want to like, leave the audience with is that like, this is what it means to be on the bleeding edge. It's like some unemployed jackass that used to work at a beer company and like, like some like, prodigy who like, invented, like, three companies, like, can contribute in a way that is, like, shaping the future of, like, not just our industry, but the entire world. And so, like, you and I can have, like, debates on, like, with your billion dollar protocol, like, which opportunities should be your primary one. But, like, that's not the point. The point is, like, what it means to be here is, like, Sam Kazemian, Rex Kirschner, Vitalik, Buterin, like, fucking nobody. Nobody. Crypto Anon. Like, we all have the opportunity to contribute and, like, that's what's special about being here. **Speaker B:** And that. That's really well said and that. That's totally true. **Speaker A:** Sorry. Phew. Graceful. Back out of, like, the humble game between you and Vitalik. So. Phew. All right. Anyways, Sam, thank you so much for the time. I can't even express how much. How awesome this was and how much it means to me. Before I let you go, just, just people know how to find you, but any socials or anything you want to shout out? **Speaker B:** I'm always on Twitter and Telegram24.7 unless I'm sleeping, but I'm always there, really available. And it's always a pleasure, Rex, to talk to you, have the. The coolest conversations and hopefully we could do it again. **Speaker A:** I hope so. And yeah, man, I just. Good luck on Frax V3 and V4 and taking over the world. **Speaker B:** Thank you.