Risk Management Maximalism w/ 0xWenMoon (Umami Finance)

**Speaker A:** Hello, and welcome back to the Strange Water podcast. Thank you so much for joining us. I'm your host, Rex. Today's episode is with one of Defi's pseudo anonymous builders, Wen Moon. Throughout this episode, you'll hear the deep admiration and respect I have for Wen Moon. So I won't belabor the point here. Here's all I'll say. When I joined Umami Finance for a brief stint at the end of 2022, it was specifically to get the opportunity to work with Wen. This conversation is with one of Defi's best Treasury managers, and I say that with some confidence as the former treasury manager for Anheuser Busch's $20 billion north. When I see Wen in action, I not only see the same core principles that make international finance operate, I see someone who understands Defi more intuitively than anyone I know. Before we begin, as you will hear from Wen himself, the most critical part of being successful is understanding risk. And crypto is an inherently risky business. Please do not take financial advice from this or any other podcast. Ethereum and decentralized finance will change the world, but you can easily lose all of your money in the process. All right, let's get started. Wen Moon, welcome to the podcast. **Speaker B:** Good to be here. **Speaker A:** Good. Awesome. Well, first and most important question. Are you a boy or are you a girl? **Speaker B:** Guys, everyone, this is a voice changer. Guys, I'm. I promise I'm a cute anime girl. Okay? **Speaker A:** Voice GPT. **Speaker B:** Yes, exactly. **Speaker A:** On a more serious note, like when you and I have been friends for, let's say, a long time in crypto time. **Speaker B:** Yeah. **Speaker A:** So before, just, like, kind of jumping into what's going on now and what's relevant now, would you give the audience. And give myself. So a little bit about what. How you even got here, what drew you to the space and. Yeah. How did you go from, like a normie to when Moon. **Speaker B:** Yeah, sure. So I think I have a really different experience to get into the space compared to everybody else because I hear, like, a lot of people getting in through poker or because, you know, they got in for this reason or that reason. But I got in, like, I started off with a finance and economics background. Right. I consider myself an economist, and that kind of propels into everything that I do in every. Every way that I kind of look at the markets and crypto markets especially. Especially, like, behavioral economics, trying to understand how sentiment changes, you know, for specific coins and how that affects the markets or whatever. But I kind of got in late 2020. So actually, just after what Everybody calls Defi summer, right? And I guess now nobody really talks about it anymore because, you know, the defi lifespan is like one year pretty much, so I'm considered boomer. But, you know, I actually got into it because a friend of mine was making a project in Defi and I was like, you know, this is really cute. That's so cute of you. And then he kind of just told me, you know, we're going to do this thing called an airdrop. And he tried to explain to me an airdrop. And I was like, free money. You know, that doesn't make any sense, right? Like, coming from my background, I was like, if somebody tells you that's free money, it's a lie. And so just because it was my friend, I was like, okay, I'll kind of, I'll join the discord. I'll. I'll hype up the community a little bit, but whatever. And then, you know, a couple months down the line, I think at the peak that that airdrop was worth like six figures. And I was, I was completely blown away, number one, that that could ever happen. And number two, why did I not create like 100 different alt accounts to define that airdrop? And yeah, I mean, that kind of led me, I mean, looking at that and seeing something that, you know, shouldn't exist, actually existing kind of threw me into this world. And I was just fascinated. I guess the main two things was, number one, really, that in this space, kind of the thing that blew me away was any of the quote unquote industry leaders, you could pretty much just at least at that time. And I would say even now you can just DM them on Discord or DM them on Telegram, DM them on Twitter and they will reply, right? In what other industry can you, can you say something like that? Right? And so it was just a, A just perfect to kind of learn from these guys, ask them questions or, or even if I had had like questions of why did they do something like this and, and why not some other way? And even, you know, sometimes giving, giving them some thoughts that they, they've never really thought about. So, you know, that kind of. I did that for a while, going around from project to project, and then my friend Romy, who works at Abra. **Speaker A:** Wait, so when before you continue, like something I always like, want to talk to people about is when you saw this space, you at least gave it the time of day and you didn't write it off as like, oh, it's crypto. It's where scams Go to thrive. And it's this degenerate place for gambling and crimes and that kind of thing. First question is, do you find that your friends that haven't been crypto pilled or some are the strongest anti crypto people, you know, which is the case for me. And two, what do you think kind of separates the people that are willing to jump over the chasm? **Speaker B:** Yeah, absolutely. Right. So I mean, I think to be honest, and I see this in everybody, including myself, who is in crypto, there's like an innate, innate wanting or yearning inside of them that they all want to have. They all wanted crypto. You know, this is, this is always something that, that they wanted in their back of the minds and they're so like happy to kind of, to kind of see this and, and have something that can rival the traditional financial system, something that can rival, you know, money and the US dollar and everything that is corrupt in this world or whatever it is. But you know, the traditional, I guess, you know, the layman doesn't think that way obviously. And, and you know, if you want my honest thing, and maybe it's not right, but when, when people ask me what I do, I don't even tell them that. I don't even tell them I'm crypto. I just say I, I work in finance or I work in tech and, and then just like, because sometimes, you know, the, the, the conversation, the can of worms that you open from that is just like something that you don't really want to deal with at the time. So you just like, okay, you know what, forget it. It's kind of like, I kind of see it as, you know, when YouTubers, YouTubers or Twitch streamers kind of first started popping off. None of them like to say that's what they did because it wasn't really a career or whatever. Right. So yeah, it's kind of, that's kind of how it is. **Speaker A:** Yeah. No, man, I definitely hear you. And like, what I like to, how I like to phrase it is like you don't get in this space without something happened to you, where the system that like you were taught was fair and good and like what we're all supposed to believe in just like really betrayed you in some way. And you know, I do think that like that's what it takes to find yourself comfortable outside of like the global financial system. But it's, you know, we all are like misfits in our own way. And I think that might be like the difference between like people who get washed out in cycles and not exactly. **Speaker B:** Yeah, I think you put it perfectly. I think we're all misfits. **Speaker A:** Yeah. Okay, cool. So sorry I interrupted you. So you like got involved just from like Defi Summer. Just like basically like the magic of airdrops and like the good side of airdrops. And then I think you were saying that you moved over to Abra, is that correct? **Speaker B:** Yeah. So I have a good friend Romy and he was in the project Abra at the time and he kind of introduced me to them. I, as soon as I saw Abra, it was something like crazy to me. I actually like kind of learned about Maker after learning about Abra. Right. It's, you know, it's kind of a little bit of a jumble and everything. But you know, Abra and Maker are very similar. And looking at what this was, right? Like you minting and, and I mean the congressman even, even said it, right. Like even quoted it. Minting this magic Internet money out of thin air, that was something incredible. And, and, and so we kind of, I kind of helped them out for a while and I think that was. I started even one, one year, one and a half years even ago and, and stayed there and, and we did, we did a ton of crazy things and I think, you know, if anybody, if anybody remembers Abra, it was. And still to this day it has like some sort of infamous history. I mean we were, we did the, we did, you know, the DJ box, which everybody remembers and now it's like the one year anniversary from Luna and Dokon and everything collapsing. So yeah, that was always fun. And I think being in this industry I faced like a ton of these. I think everybody has faced a ton of these kind of one in a once in a lifetime generational events, right? And yeah, that's kind of from there, I think. Yeah, I was obviously interested in the treasury that Abra kind of started to culminate and how. The most interesting thing to me was really like something that you don't get is Abra was a product that was created and how could they use their treasury on their own platform? They've already made this thing which is like a spaceship, right. And they are using it with their own treasury now and they have this protocol owned firms proposal. And I think something like that has always been really interesting to me. Like how can we build something that is actually useful? And that's kind of been my thesis going into like even Umami, right. So I joined Umami now a year ago to like very almost a year ago. And when, when, when I joined the, the idea was we want to, we want to make defi products or these vault products that Treasuries can use. Right. Because the, the, the, the very first vault that we have, hopefully launching soon or maybe by the time this is out, already launched, will be the GLP vault product. And that, that is essentially something that, a strategy that we've been running with the treasury for many months already. Right. We've been, we've had our GLP position, we've held that, hedged that GLP position and you know, we, we kind of want to offer that to other daos, market this to other daos and other Treasuries as a way to kind of keep your exposure in the asset that you want and at the same time and what is like above the market rate yield and. Yeah, just simple as that. **Speaker A:** Yeah. No, and obviously like we're going to get to Umami because like both that's where you're at and it's like where so much of our history comes together. But before we get there, like, can you talk about like when you entered Abra? And for those of you that aren't following, we're talking about abracadabra or magic Internet money. But what, when you joined Abra, like, what type of work were you doing? And like, you know, I just so vividly remember this time that you're talking about, which was, you know, like Q1 of last year. And for me I was experiencing what you're talking about in terms of like realizing the value and the importance of treasury management around ohm. Right. Like the original om, which was like, we've raised all this money now, like, is it just supposed to sit here or what do we do with it? And then, and you know, so like that's when the conversation started about like, what, what does treasury management look like and what do daos look like, at least in my head. And so can you just talk to me about like, what that experience was like? And like, what about treasury management, like, really got you going because like, I got to tell you man, there's not a lot of treasury managers out there. **Speaker B:** Yeah, actually this is a really great question. Right? So back, back in those days, I think the, the main purpose of the treasury was kind of that the CVX flywheel and the CRV flywheel. And the reason for that was obviously incentivizing liquidity on curve. And so that kind of the two kind of became analogous. Right. So we were trying to figure out ways into order to build a flywheel up and in Those days that meant, you know, how can we accumulate cvx? What is the best way to use any rewards that we have in like a positive some way? Which has always been something that, you know, I've wanted to keep from those days. Right. Like instead of, instead of taking tokens and just dumping them. Like for example, with Umami we just got the Arbitrum airdrop, right? And we're starting to see, I think some Treasuries just kind of dump those tokens. But maybe there's like more positive sums things that you can do with those kind of tokens. And so with everything from that, you know, I guess it kind of shifted because at the end of the day, you know, I think a lot of these things are more crypto first kind of things. You can't take, you can't take somebody from Tradfi and explain, I mean how, how many hours would it take to get somebody from Tradfi and explain to them the CVX flywheel that everybody was doing back in the days. Right. They would, they just wouldn't understand. And, and yeah, so doing that and, and working towards building that liquidity base. I think liquidity has always been one of the biggest problems in Defi and something that everyone's trying to solve and even I'm trying to solve with some of even our advisor projects. How can we get options to help us incentivize liquidity? How can we do this or that? All of these things come together, you know what I mean? **Speaker A:** Yeah, for sure. So we'll pause the conversation about effective treasury management after we get through your story. So you're at Abra, you realize like your passion and like what is like interesting to you is in treasury like real treasury management allocation and like being on the ball and like in emergencies and that kind of stuff. And so you find your way over to Umami which for those of you who aren't following along when, correct me if I'm wrong, but at the time Umami as a project literally just was a Treasury. **Speaker B:** So at that time like I joined Mummy, I guess halfway through its lifetime. And it started off as an own fork, right? So yeah, exactly. Like all own forks started off as Ponzis and then they became like these massive giant funds of these Treasuries and they're still to this day actually some of the ohm forks from those days are some of the largest Treasuries that we have. And so yeah, that's where it was when I joined and that's what I guess my main thing was Right, Yeah. **Speaker A:** And so okay, so you join Umami and it's a Treasury, right. That may or may not be allocated. And even if it is like it's probably not done sophisticatedly. And then when I show up probably in late May or early June of last year is we've already kind of established that we know that the vaults are like the product that Umami is going to like focus around. And so can you talk a little bit about like and I guess like the, the prologue or sorry the epilogue to that story is like once Umami figured it out, the entire industry realized like the only thing worth building is GLP vaults. And we've seen just like a Cambrian explosion of GLP vaults that you know, some are good, some are bad. Like all of them are not as sophisticated as what you're building today. But even going back to like the less sophisticated version from May of last year, can you talk a little bit about how you and like the team together like identified GMX as this platform and as this like engine that would like really come to define the entire category during this bear market? **Speaker B:** Well, I think so actually when I got there I'm just kind of reminded now the, the first GMX vaults were already kind of in construction. Right. But yeah, I mean it really has been like a GMX explosion and the reason is quite simple, right. I think GMX did what is like maybe you can see in hindsight as a quite simple idea, but they executed it perfectly. Right? They, they had that an easy to understand LP and very user friendly and degen friendly I should say, platform to kind of leverage and then earn fees from. Right. So it really was I guess the, the first, maybe not the first that invented the term, but at least one of the first projects that was producing a ton of yield dice. I remember some days it was producing more than the Ethereum transaction fees or something. It was an obvious. If you're trying to extract value, which is one of the things that any vault builder is basically trying to do, it was one of the primary spots that you were looking at obviously to try and extract that value from. **Speaker A:** Yeah, no, and again like especially in retrospect, like it, it's just, it's so painfully obvious that like it kind of even hurts to be having this conversation. And I, I just kudos to like you and the team for you know, being able to take an idea and like meme it into like the economic engine that's keeping all of our eth like above, you know, 1500 or whatever. But, but the, I think So I think speaking of the vaults and like the V1 version of the vaults, like one of the, like it, it sounds like glamorous to be a Treasury manager, right? Like you're dep. Like you are in charge of all this capital and you can put it in all these exciting things and generate real yield. But the flip side of that is like you're taking an incredible amount of risk on behalf of the protocol. Right. **Speaker B:** And obviously like the protocol is taking a lot of risk at the same time. Right. So we've seen some treasury managers or just, you know, not even treasury managers, just Treasuries being managed by projects and then, you know, they're just completely losing value. And I guess sometimes it flies under the radar, sometimes it doesn't. You know what I mean? **Speaker A:** Yeah. I mean depending on how it's happening, if it doesn't like manifest in the numbers in a specific way, like people seem to not notice or you know, it just. Yeah. So anyway, I bring it up to like kind of draw the conversation towards like what is it like to be a Treasury manager during like as you said, like these existential crises that we apparently are supposed to experience once in a lifetime, but get them quarterly. And like how do you deal with everything from like being responsible for capital that's like during the Terra meltdown to like building products that are supposed to like safely custody these, these products that aren't like performing the way you thought? Like what is it like to be a Treasury manager in the like the meltdown moments? **Speaker B:** That's, that's a great question. Right. And I think, like, to be honest with you, the, like in those situations there isn't really much of a job like the actual job is before that. Right. Making sure that, I mean, I mean if I were to be 100% here, the real job is the risk management. Right. So in order to have your treasury and make sure that you are able to pay your devs and you're able to keep the project going, you want to make sure that whatever you have your treasury in or however you're holding your treasury and even things like, even things really basic like opsec, how is the multi sig being held and stuff like that? All those things are incredibly important and all of those things, if you do right, are able to prevent 99% of any of these kind of things affecting you. And so if we take FTX for example, I think we saw some projects, not all, and not even a vast majority, but some projects kind of had their treasury on FTX for whatever reason and maybe they were actually like more centralized treasury, right. They, they weren't held by token holders or whatever, but you know, they were still the, the, the form that OPEX was coming for for those specific teams. They were held on ftx and you know, for whatever reason they, they had a 100% faith in FTX and, and you know, they forgot the, the age old, the age old lesson in crypto, which is not your keys, not your crypto. Right. So, and I mean if you're falling victim to them, I think in a lot of these cases you're not going to really make it very far. Right. And so my philosophy has always been in order to preserve this, I mean obviously it kind of depends on whatever the protocol, the specific protocol is trying to do. Right. If you're trying to chase yield with your treasury more than chasing sustainability, then sure you're going to be facing these kind of problems where you're going to have to be up at night trying to take your money out of anchor or trying to take your money out of FTX and trying to be the first one out the door. But you know, my philosophy is just completely avoid those situations as much as possible and you know, you won't have to actually be on those at those times, just completely freaking out. You know what I mean? **Speaker A:** Yeah. I think what you're saying is that like if your treasury manager is freaking out when the market's freaking out, like you, it's already too late and you've lost. **Speaker B:** Yeah, yeah. I think that the job was the job, the real job was much, much earlier than that. **Speaker A:** Yeah, yeah, I was in like the planning and the strategy and like foreseeing these events and like anybody can move funds around on chain. That's not what's important. **Speaker B:** Yeah. And I think, I think, you know, nobody can foresee these events and I don't, I don't, I'm not even saying that I, and it's just, you know, there are no, I couldn't foresee FTX blowing up, but I can foresee some sort of, you know, some drawbacks to having your all of your OPEX Runway on a centralized entity. Right. If that centralized entity goes down for whatever reason, even if it is FTX and even if you do trust them, then, then that will be bad. But it's kind of the same in my opinion as, you know, if I gave the multi tig one of one access to just one person, then sure, I could trust them, you know, as much as I want. But at the end of the day There is that risk factor that you're kind of introducing, and you want to mitigate as many of those risk factors and just make them as low as possible. Right? **Speaker A:** Yeah. No, yeah. And I think, yeah, I mean, I think like, for better, for worse, like, this industry, like, puts you through the crucible and like, builds us into stronger versions of ourselves. Like, I don't know, for, for, in this context, we're talking about like, treasury management and like, they put you through the lessons and you learn the lessons or you don't, but, like, if you survive, like, you just grow more resilient, you know? And I think, like, I guess what I'm trying to say is like, the, the beautiful thing about this space and experiencing all these crises is that, like, we are learning what to do and what not to do. **Speaker B:** Absolutely. Right. And I think that applies to everybody. Right. Just any average defi user, any average. Anyone who's holding crypto. Right. Everyone knows that the coins can go down like 90%. Right. But if you're shocked when they do, you've already made that mistake. And I think everybody who's still here has learned that lesson. Right. Because we've seen, we've seen some people just some builders, some users just completely leave during the bear markets and it is usually what happens. But if you're still here at this time, I think you've already learned that lesson. **Speaker A:** Yeah. So picking up on that and kind of the lessons that we learned in the, I don't know, treasury managers, it turns us into, at a high level. What do you think makes a good treasury manager? And choose to answer this sequentially or in parallel. But like, how is that different from what makes like a good personal investor? **Speaker B:** I think so. So really it's all about portfolio management. Right. In both cases. And a good, a good trader, like, let's say. I think you mean trader. Right. When you, when you say what you say by like a passing. **Speaker A:** I think, I think trading is interesting too. But I just, like, I can think of myself as Rex Dao, right. And I'm managing my treasury, or I can think of myself as just like I own a bunch of eth. Right. And so when you think of like managing your personal stack versus like acting as a Treasury manager, what are the things that you think, like, are the same skills, and what do you think are, like, as important to think about differently? **Speaker B:** So I think for someone on their own personal portfolio versus, like a Treasury, the treasury has maybe some operational expenses or this and that that they have to kind of take care of and I would hope maybe you have a different risk preference than the treasury. And it all really comes down to what every personal and every dao feels about those specific things. Right? So let's say your, you are extremely risk adverse or you are extremely, extremely risk friendly and you really think that ether is going to go up to the moon. That is not, you know what, what. Maybe I have the exact same view and I, and I do actually have the same view, but that, that doesn't come into play when you're kind of talking about these things because like the, the, the goal for, for I guess a Treasury, at least UAMI treasury, the way it doing maybe not every treasury depending on the size, but is, is kind of that capital preservation. And I think everyone here, at least personally is, is here to try and make it right or whatever it is. And so we have, we have our thesis and we can kind of act on that. But you know, as a Treasury manager you don't just have the, you know, your own, you know, if you lose, if you lose your money because eth goes down, that's on you. Right. And you can kind of say that. But, but you know, as a Treasury manager, you're kind of doing this for not just yourself. You know what I mean? It's, it's, it's like a bigger, bigger play that you're making. So you need to be, you need to be more careful and you need to take your biases, it's more important to take your biases away and everything that kind of revolves around that. **Speaker A:** Yeah, that makes sense. And it's like the kind of thing where it's like, I don't want to make any assumptions about you when, but like if you are like doing really well and don't have any kids and like, you know, you might be willing to like eat at 80% loss on your portfolio, but if your coworker like needs to feed his family tomorrow, like that's just like not a risk that is acceptable to him. And like that's I guess what it means to be like part of a community and part a Treasury manager that is like owned collectively. **Speaker B:** Exactly right. So every, everybody has their own risk preference. I know people who do have kids and they're still in crypto and, and even I'm kind of saying they're like, well, if I had, if I had kids and if I had all these things to worry about, then maybe, maybe I would change the way that I kind of view a lot of these stuff. But right now I'm, I'm Willing to take that bet on ETH or whatever it is. And even if it does go down 80, I'm completely fine. And, yeah, I think that's, like, the. **Speaker A:** Hardest part about this industry on a personal or professional level, is that, like, the numbers are so wild and so large and move so quick that it's, like, really easy to lose yourself and, like, get emotional about it. **Speaker B:** And I think for, like, a personal trader or, like a personal. If you're trying to allocate your own capital, I think that's the most important lesson that you can learn. Right. Just to make sure that you're not sweeping in with those tides of, you know, I'm seeing these big numbers and I'm internalizing this, and then I lose this. And I. And then I've kind of like. I think I talked about this in one of my tweets, and I think Degen Spartan as well, he puts this much better than I could ever put it. But a lot of the times, these things kind of have a psychological toll on the way that you kind of act. And 99% of the time, if you can. If you can just be the exact same trader, but just take those. Whatever it is that is making you feel that psychological, you know, warping out, you're going to be a better trader, because those things that are making you feel that way are what is leading you 99% of the time to make every single one of your bad decisions. Right. You can. I'm sure you've seen it yourself, and everybody who's watching is probably thinking the same. Right. You know, how many times has it been where, like, a coin goes up, like, 10x and you think, well, I can, like, look how rich I am, and I'm such a great trader and this and that and this and that. But, you know, the goal is kind of taking that out of your psychological mindset so that you can kind of look at things objectively. **Speaker A:** Yeah. I mean, how common of an experience for everyone? Is it like, the first time you trade perps and, like, suddenly just get, like, liquidated out of nowhere? Your first reaction is, double or nothing. I can win it back. **Speaker B:** I remember back in the Abra days, I remember opening up the discord, man, people used to blame us for getting liquidated. It was a crazy time. **Speaker A:** Yeah. Well, I definitely. Remind me, if I forget, I want to circle back to what it's like to be a Treasury manager in this kind. Like, the good part about this industry is that you can get. You're so exposed to, like, the leaders and you can get in contact with like Sam Kazemian to like Do Kwon. Like, you know, you can get in contact with these people whether or not they should be in contact with. But like, on the flip side, like, what that means is these people have contact with you and like, you know, let me put it this way, like the treasury manager at JP Morgan, like doesn't have to like explain why, you know, like he made a hedge position against like this asset that like everyone else is like super exuberant about. And so I said let's talk about it later, but I've already introduced it enough, let's talk about it now. Like, what is that like to be a Treasury manager and like be accountable in a way that like just doesn't exist in like corporate America or UK or really anywhere else. **Speaker B:** Yes, that's a great question. Right. So I mean, I think some of the time you can say that, you know, if, if you're getting called out on discord or whatever for whatever you're doing, probably you're making a bad decision. Right. If everybody is against it. And I think we, we see that today. I mean, I know I'm probably dating the podcast, but with, I think I'm. **Speaker A:** Gonna send this out tomorrow. So let's, let's, we can go super topical. **Speaker B:** Okay. Okay. So Aragon, I mean, you know, if everybody like in their comments and screaming at them for what they're doing with their treasury, it's because, you know, that isn't what you're supposed to do. Right. **Speaker A:** But, and sorry, just for the audience, TLDR Aragon decided that what they called like risk free raiders or something were buying up the tokens in order to make a governance vote in which would, which basically like the centralized foundation didn't like. And so citing fiduciary responsibility, they have taken the assets out of the DAO to, to fund a grant program. **Speaker B:** Yeah, exactly. And I think, I think things like that in one way, obviously it can increase stress. Like, it's probably more stressful and whatever, but you know, like at the end of the day it's always going to be stressful. Even if, even if it's just your, like the guy above you screaming his head off at you because you made the same bad trade or if it's a discord guy. But at least with this base, in those situations there's number one, more transparency. Right. Where else can you see this kind of thing get called out on Twitter so immediately? Right. And number two, just it, it kind of holds you accountable. Right. I mean I guess, you know, we're seeing these grifters who really don't care, but the idea is at least that, you know, if you're gonna get called out on Twitter and you're gonna face all this public backlash, then hopefully that will stop you from making idiotic decisions. Right. **Speaker A:** I think, like, the old adage of, like, sunlight is the best disinfectant or something to that effect. Right? Where, like, transparency is, like, ultimately good for everyone is, like, 100% true. And, like, you really need to believe that to believe in Ethereum. Exactly, man. Like, that you're being a token holder, man. I'm asking the treasury manager, like, how does it feel? Like, I'm sure it sucks, right? **Speaker B:** No, no, honestly, like, it 99% of the time, it adds a level of accountability that, like, you're always thinking with every trade, right? What will the discord think? Or whatever it is. And that prevents you from making those decisions. But I will be honest. The community is incredibly. At least the one that we've cultivated is incredibly generous and kind of listens to why one certain strategy is better than another or is willing to have those kind of discussions. But I've seen. I've seen some communities that, you know, it. It would probably. I would probably tear my hair out if I was. If I was part of them, you know, and I probably wouldn't take the job in that case. **Speaker A:** Yeah, yeah, yeah. So I don't. I. I, like, I'm trying to figure out how to ask this question that does not ask you to, like, name any names or, like, call anyone out. But, like, I am really curious to, like, kind of tease apart, like, what makes a Treasury that's well managed versus one that's not. And so, like, again, without naming any names or making yourself uncomfortable, like, when you see, like, an unsophisticated or poorly managed treasury out there, like, what. What are the hallmark signs that you. **Speaker B:** For you, the number one. Like, I can. I can really boil this all down to one thing, and it's improper risk management. Right? It's. I see. I see these kind of treasuries who are like, yo, there's this opportunity that's earning me 2% yield on this new deck that has upgradable contracts and I haven't done the proper due diligence. And you're just sitting there like, are you. Are you for real? And then, like, you know, a week later when it. When it gets hacked and. And they've lost that, you're kind of. This is kind of. What did you Kind of expect. Right. That, that, that is in my opinion, and, and we've seen it maybe a couple times, but really, if you, if you, if you see, you know, that, that sort of thing happening, it's, it's probably something to stay away from. You know, you, you really want to make sure that you're doing, you're doing the proper due diligence like risk pricing. And, and keep in mind, I even, I say risk pricing is incredibly difficult in, in defi. So I'm not, I'm not really asking anyone to, you know, give me, give me exact numbers of what they think risk is. But like, at the end of the day, you've got to make sure that, number one, are you, how much capital are you putting at risk? Right. And I think a lot of the time you see just these protocols concentrating so much capital into these strategies and then, you know, even if they get wrecked, even if they don't, right. Like, I think this is the important bit. It's not really about the, the result. It's about you shouldn't, they probably should not have done that. And I was not pro. That was improper risk management to place a trade that was like so high capital and they could have lost half of their treasury if the contracts were upgraded and whatever. And you know, a lot of the time I like to talk to these, these teams and see, you know, what due diligence did they do. And all the time, you know, I get the right answer. I get, oh, okay, I didn't even think about that. And they've got their devs even looking at the smart contracts. And I think this is actually a really great point. Is that the great thing that I can do that probably an individual trader can't do is that I can ask my devs, right? If I see a new protocol and I want to allocate some capital to it, or if I want to announce a new partnership with a new protocol, I can ask my devs. Can you quickly just have a look at their contracts and tell me if, you know, they look good and, you know, audit or not? Because I don't know how everybody stands on audits, but I'm sort of on the fence about them. I think a lot of the time they are rubber stamps like Certik, depending on the auditor, obviously something like Halborn or Zokyo. Those are very good auditors. But, you know, it's one of those things that when you get an expert looking at the contracts can make you feel much better. You know what I mean? **Speaker A:** Yeah, for sure. Yeah, And I mean, again, I think we can have a conversation another time about the auditing industry, but, like, there is absolutely objectively no question that, like, peer review is good and, like, the. The only way really, to move things forward and. Yeah, man, just like, on your overall point about sizing risk, I mean, the one that, like, really clicked shit in for me was the, like, do you remember when 3ac was, like, really getting blown up? And, like, the chart that was, like, really, really making the rounds was like, the economics of a carry trade. And it was essentially like this, like, slow, or we'll do it backwards. It's like slow increasing, line up and then drop down. **Speaker B:** Yeah, yeah. **Speaker A:** And like, for me, that is. I don't know. I mean, like, that. Where all of our brains are weird and work in different ways. But, like, that, for me, like, clicked together. What. What it really means to, like, understand risk, you know? And I think that, yeah, again, for better, for worse, like, when you and I talk all the time offline about how, like, it doesn't matter what happened, the fact that it happened is good because it is something you can learn from. So, like, none of this feels good. But, like, the nice part about being in crypto is, like, if you stick around, you learn how to do all this stuff because you have to. **Speaker B:** Yeah, yeah. And I think that. I think that's an excellent point. Right? So that. That chart, especially of the. The carry trade on. And I think the One that blew 3ac up was obviously UST and Anchor, but you could see. You could see that trade. And even I was obviously assessing it, and I. And I never played a part in it because the. The truth was. And I. The crazy thing to me actually was, you know, some of the guys who were doing this trade that I was talking to, some of the quote unquote smart guys were basically saying, like, I know, I know USC can blow up, right? I was like, telling them, you know, this is a. I was trying to tell them in the contracts, right? Like, this is an algorithm stablecoin, Buy the contracts, trying to teach them this stuff. And they were like, no, I understand. Yeah, I'll get out before everybody else. And so it's just, you know, if you start to go down that kind of path, obviously you've already gone too far, right? And I think that applies to both. Like, if you're. If you're trying to. We're kind of talking about, like, earning yield in defi. But the same works for any shitcoin, right? So everyone's buying these shitcoins and everyone's saying, you know, I'm going to get out first. And you don't really know how big the door is and how can you actually say that you're going to be out first? Right. That's like a whole other can of worms. But at the end of the day, all that meant was no way. The risk of this algorithmic stablecoin that was completely unbacked at the time that we were looking at. Of course, I guess I'm back to 1, 2% or whatever with that reserve fund, which didn't really do anything. But that, that whole thing, no way, you know, the, the risk of that was way over 20%, right. So when I saw that, I was like, no way I'm taking this. And you know, that's, that's kind of how you have to look at these things. And I think, I think a lot of the time these kind of funds fall into kind of what is it where, you know, you do something good and you think that you're so smart, right? Like they self confirmation diaspora and they were just, just falling into the trap and pricing everything. Okay, this is, fuck this, let's up the leverage, right? Why is there not 3000x leverage on this strategy and whatever and then, and then blowing up and you know, you're kind of sitting there like, yeah, this is the tail risk. What did you expect? Right? **Speaker A:** Yeah. What you're saying just reminds me of like my biggest takeaway in terms of like my personal, like growth and development from the SBF saga was like, if you ever find yourself the main character, like it's the beginning of the end, right? Like you are in a very dangerous position. And I think that, you know, that's like reflected in all these guys that we're talking about. But it's like really just the reason it's a dangerous thing is because, like, you lose the ability to size risk in any like, appropriate way. **Speaker B:** Yeah. And I think, I mean, the thing about these main characters is already another can of worms, right? I mean, I think you can the popular picture, right, with, with all of these guys who have all been main characters at one point, and then like, how many of them are basically gone, right? How many of them have been wiped out? How many of them are no longer here, whatever it is. And it's just crazy, right? **Speaker A:** Yeah, well, it's even crazier for like, I'm pretty sure I'm a much more recent. No, no. You said you joined in 2020. I joined in 2021. So not that long after You. But, like, I was around when Sifu showed back up, and I had to spend, like, the first two days of that figuring out why it even mattered. You know, like, like our. We have like, these villains that go to nothing and then they, like, reappear and I just. Man, it's wild. **Speaker B:** That's crazy. **Speaker A:** Well, yeah. Yeah. So anyway, back to. Back to, like, treasury management and the conversation at hand. So, like, one of the things that I, like, really always, like, loved and respected about you is that, like, you're like a great treasury manager in that you're able to like, figure out the appropriate amount of assets and where they belong in chain and that kind of stuff. But, like, I've never seen someone use, like, the work that needs to be done in order to keep an organization moving, to, like, to grow the business and like, do such business development and grow the network in, like, a way that you do. And so, you know, you're giving me. **Speaker B:** Way too much credit. **Speaker A:** Nah, man. Like, I. I love that you're young and humble and, like, don't ever become the main character, but, like, nah, man, like, you are, like, you're like, very well respected and known and like, like, you're very much part of this, like, a core part of this ecosystem. And part of that is because, like, you're able to, like, take a real treasury and like, use that to open the door to, like, talk to people and then, like, get everybody on board with like, you know, rowing to like, a new positive sum target. And so, like, one, I just, like, I want you to know that that's what me and like, the rest of the industry thinks about you. But two, like, can you talk about, like, how. How that kind of work happens? And, and like, I'm pretty sure that's what you love about treasury management. No? **Speaker B:** Yeah. So, I mean, I, like, I completely appreciate your comments. Right. Of course. I can't. I can't accept any of that. But, like, yeah, you're right. At the end of the day, this. This actually is one of the greatest points. I mean, I just. Yesterday I was talking to this fund and I was kind of telling them about the strategy and. And they had actually been running a similar strategy and I had been running a similar strategy with the trade, and we were kind of talking about, you know, how they're running the strategy and why. Exactly what we're doing is, is. Is with the vaults, is. Is so unique and whatever. And then, you know, they kind of understand and they kind of get it from that point of view, and it really Helps in those situations, of course. And, and yeah, so for sure, like, it kind of opens doors in bd, right? **Speaker A:** Okay. Yeah. Like, obviously business development, like it. I look at it in two different modes, right? Like, there's business development for people who understand, like the game that we're playing, basically, like other people who are already degens or other crypto protocols. And then there's like business development for people who are like completely outside of this. Right. And like, usually what that means in this context is like helping people get comfortable with your product so that they're willing to like, put capital in it, but just like kind of in general, without any like, specific conversation that I'm referring to. How do you like, communicate these types of projects to people that aren't like, necessarily comfortable with like, just some of like the baseline knowledge that we have? **Speaker B:** Okay, so I think that's a great question. And it's actually probably easier for us than many other protocols just because what we are kind of doing is kind of easily translatable. I can kind of explain GMX to these guys. Maybe they are not used to this kind of exact payoff, but they definitely can understand, you know, there is actually one singular counterparty and you know, that's earning all the funding. And essentially what we're doing on the other side is, is like that funding rate arbitrage, right? Except that we're also taking the trader P and L risk or soon hopefully we'll be releasing the trader P and L hedge risk, which will just be funding rate arbitrage, right? So when I explain it and when I'm kind of like taking these, you know, the defi quote unquote terms like impermanent loss, and I'm, and I'm translating it into something that these guys know, like gamma or whatever, then they can kind of understand and then they can kind of get on that level because, you know, they're not going to take the time to learn the terminology. So if I can translate it for them, that's. That's how they are like, oh, okay, I got it, I got it. Boom. That's it. You know, we're on the same page. And that's kind of how it goes. **Speaker A:** And then just like this is coming from my like, specific knowledge of, I guess like an ancillary part of how the GLP vault works. But like, part of that is like you're buying insurance, right? Or at least at one point you were buying insurance. And I guess like that to me is like a vertical in defi. That's like super, super interesting because, like, to people outside of this world, it's like, oh, I understand insurance, it is the backstop. But to people within defi, it's like, that might be the most sketch thing because, like, we don't actually think that it can kind of, like, do what it needs to do. And so I just, like, wonder, do you ever find these moments where the defi understanding and the tradfi understanding are so separate that you really need to do some work to bridge that gap? **Speaker B:** I've always. The good thing I think about the way that I kind of understand because especially back in the bull run days, it was a situation where nearly every day a new innovative protocol was coming out, and it was like a race to kind of either ape in as quickly as possible or like me trying to, like, read the docs and understand what is going on. But the. Exactly. So these things are kind of completely out of the realm of what anybody understands at one point. But you're trying to understand it from. In anyone learning something new, you're trying to understand it from what you know. And thankfully, I come from that same side as these funds or these investors that are. They know those terminology, and I know them too. And translating it is kind of how I learned these new protocols off the start. Right. I think obviously there are some that are completely out of this world and maybe lost causes in terms of trying to explain, okay, how does an ohm fork work to. To a. To an institutional client. But, you know, at the end of the day, I think there is always some sort of parallel that you can kind of draw. Right? Like, it's kind of explaining something new to someone. Right? Like, if. If you've never tasted this. This food before, but you know what? Like, two foods. Like, it tastes like, I can say, oh, it tastes like this. It tastes like that. **Speaker A:** It's like chicken. **Speaker B:** Yeah, exactly. So it's kind of. It's kind of explaining it in those. In those terms, and that's what is, like, needed to make that click for these guys. **Speaker A:** All right, so for all of you main characters out there, like, just take a lesson from Wen Moon Mastercraft where he's telling you that the reason he's never run into this problem is because he's so damn good at translating between us with brain worms and the Trad 5 brain worms. But he says it in a magical way. So again, when you deserve all the praise you get, and, man, you're. You're like the real deal for treasury management and just a man. I'm proud to know you so like just want to like move the conversation on and talk about Arbitrum in our last few minutes here. Again, like I said, we'll release this very quick so that it's relevant. But like the thing that I've been tracking over like the last week or two is this new decks on Arbitrum Kronos which like in the first day got 160 million TVL. I think it's up to 230 now. And like when I look at that and I look at Arbitrum, I think like on the one hand that's good and I like activity and I like that people seem to be using this. But on the other hand, like there is. That just like does not pass the smell test to me, you know, And I just. There's literally, actually, literally no one more plugged into like Liquidity on Arbitrum than when Moon. So do you just have any thoughts or insight onto what is going on and what does this mean for the stability in the future of Arbitrum? **Speaker B:** Yeah, so with Arbitrum, obviously for the past few months we've seen a boost in, I mean we've seen an absolute skyrocket in their TVL Right. Because activity on Arbitrum is growing. And I think even, even right now, there's never been a time to jump from Mainnet to Arbitrum, like a better time with, with the Mainnet fees just skyrocketing. Right. And, and because of all of these shitcoins and for some reason none of them are on Arbitrum, but I'm totally happy with that. But yeah, so we have like this Liquidity kind of engine churning because of Arbitrum having lower fees. The, the now the liquidity injection into all of these daos thanks to the Arbitrum airdrop and now this like new decks pops up. But like, here is the thing I, I think we used to see, we used to see this sort of thing a lot back in the days when I used to start, when I kind of started out where like these Dexes would pop up out of nowhere and gain even like upwards of a billion tvl. And like you kind of sit there and you kind of wonder where the hell is TVL coming from? A lot of the time it came from like these insiders that were just coming in to farm these rewards or whatever it was or for whatever reason kind of like push the, push this decks up the TVL rankings. So that could definitely be part of what's going on here. You know, we haven't really seen that in a long time. But definitely like, I mean, who's heard of this Dex before? It kind of popped up. I didn't hear about it. So like you kind of suspect where do these guys kind of find out of this Dex from? I've looked at the liquidity. It's actually mostly non native tokens. So I was going to say maybe it's their own token that they're kind of putting in LP pools but it isn't really the case. It's like EthUSD. So I do think we could do a little bit of wallet tracking and see there. But in terms of is it healthy for the ecosystem? I think at the end of the day, if these protocols are there because this whale is doing something malicious or whatever, I don't think it really affects the chain. Thankfully we know who the real Dex players are on Arbitrum. That's Camelot, that's GMX and so forth. And they're doing what they're doing and they're still churning out and their tvl if you look at the TVL that's still growing and it's all the numbers are all looking good and those are the ones that we want to be watching. And I'm watching and everything's still looking good. You know what I mean? **Speaker A:** Yeah. I mean I think if you were to like my kind of naive or my first impression response to this is like this just seems like not great and I would never touch kronos with a 10 foot stick and like, just like what, what is happening here? But like I am very much reminded of the, was it the Stargate launch on layer which was like the first layer 0 application that got like so much TVL so fast. And I think there was something about Almeida and like the coin and some like bid or whatever just. And I just like remember walking away from that being like I don't really know what's going on here but like there's danger around this protocol. And now we're like a year later and like I don't feel like that anymore. **Speaker B:** Yeah, yeah. So I think, I think you know, as long as everybody kind of respects their own, that, that own feeling like, I mean Stargate was a legit protocol but if you're sitting there and you're feeling, feeling that thing then I, I would say, you know, if you're, if, if your, if your gut is telling you to stay away, then stay away because you know you can't, you're not going to be able to lose money in a, in A rug if you never touch the protocol. Right. Even if it is a rug. And like, the most important thing is, is for you as a user to, to just preserve capital and to make sure that you are like, surviving in this ecosystem. So if you see this like new protocol pop up with 100 million TVL and you think it's fishy, that's probably a good enough reason for you to stay away. And, and if you are really interested, then you know the, the best thing to do is to do your own research. Right. It's as always. And if you can, then maybe even get your devs to look into the smart contracts like I do. **Speaker A:** Yeah, yeah, yeah. And you know, I am frustrated by do your own research in general because like, quite frankly, most people aren't capable of doing the research. But you know, I think if you're not capable of it too, you have to ask yourself serious questions of what you're even doing here. And you know, I said this on the Leviathan stream a couple of days ago when we were talking about meme coins, but like, if you ever find yourself like making decisions because you missed the boat on ether on the last meme coin or whatever, and you need those kind of like, you know, multiple like 100 or thousand x returns like that, that is how you get rugged and like how you get taken advantage of and like how bad things happen. So I think when to your point, just like your gut's there, listen to it. **Speaker B:** Absolutely. Yeah. It all comes down. It all comes back to that psychological thing. Right. If you're feeling that fomo, that's probably a good enough reason for you to stay away, no? **Speaker A:** Yeah, man, for sure, for sure. **Speaker B:** All right. **Speaker A:** When? Well, we've been at it for an hour now. I don't want to take up any more of your time. So first of all, just thank you so much. I really appreciate the time and the support and just, man, the friendship. So thank you. And before we go, can we. Where can the people find you? **Speaker B:** Well, you can. I, I, I like to post a little bit on Twitter, so you can follow me there. **Speaker A:** Yeah, great. 0x1 moon. **Speaker B:** Yeah. **Speaker A:** No H. **Speaker B:** And, and yeah, thanks a lot for having me on. **Speaker A:** Yeah, man. No, no, it was a pleasure and talk soon, man. I, I'll catch you on Discord. **Speaker B:** See Sam.