Self-Repaying Loans and the Fight for Crypto's Soul w/ Scoopy Trooples

I spoke to Scoopy Trooples, the pseudonymous co-founder of Alchemix, about self-repaying loans, the wreckage of DeFi scams, and what ethical crypto finance could actually look like.

We dig into how Alchemix works, allowing your debt pays itself off over time and what's new in V3. We also get into the broader rot in the space: meme coin pump-and-dumps, celebrity rug pulls, prediction market gambling, and how DeFi summer's promise curdled into financial nihilism. Scoopy is one of the rare crypto founders willing to say the quiet part loud,  that most of what gets built in this space is zero-sum at best and predatory at worst, and has been trying to build something different since day one.

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Transcript

SPEAKER_01 0:00

How is this any better than the banking system? How is this any better than a casino? In fact, it's probably worse. The banking system itself extracts over like$10 trillion a year globally and it goes into the pockets of a very few amount of people. Like for every winner, there was 50 losers, if not more. And now when you ask people, you know, who are not like as knee deep in everything as we are, what they think about crypto, and the first word out of their mouth is it's a scam. Well over a million dollars now on audits, which is very painful to do. But at the same time, what's more painful is the protocol getting wrecked and people losing money and maybe taking their lives. Like I'd rather go bankrupt trying to make it secure than launch something that's unsafe. We need to have a way for people to say, no, I'm reclaiming my sovereignty.

SPEAKER_00 0:54

This episode is sponsored by NIM, the world's most private VPN that protects your internet traffic and metadata. Unlike traditional VPNs, NIM uses a decentralized mixnet to scramble your internet data, hiding who you're talking to, when, and how often. You can switch between full mixnet mode for maximum anonymity or a faster VPN mode for everyday use. Pay in crypto or fiat, and even your payment stays anonymous thanks to ZK-powered anonymous credentials. Take back control of your online life at NIM.com. Sign up today using the code BlockchainSocialist and get an extra month for free. Hi everyone, you're listening to the Blockchain Socialist Podcast. I'm Josh, and for today's guests, I have Scoopy Truples. You may have seen him on the internet over Twitter. They are anonymous, so I can't show their face. But you may know them as the co-founder of Alchemix, which is a really interesting DeFi protocol that I think is interesting and like useful to go into and dig into what they've been building and what there be what they'll be coming out in their V3. But also because Scooby Triples is one of those rare breeds of crypto people who is a founder but isn't a chud. Isn't like didn't fall into the trap of many, many other crypto founders and tends to be a little bit more vocal against the right-wing shift, I guess, in the crypto space over the years, or at least the the open embrazenness in the in the crypto world when it comes to right-wing politics. So thought it'd be great to have a conversation with him. So hey Scoopy, how you doing? Yeah, would love if you can give maybe like a more proper intro and tell us more about Alchemix as a start.

SPEAKER_01 2:33

Yeah, thanks for having me on. I'm Scoopy. I've been in the crypto space since 2016 when I originally went down the Bitcoin rabbit hole, which was kind of, you know, a very eye-opening thing for me at the time because I became disillusioned with the kind of financial system after the great financial crisis in 2008. And I kind of just at the time felt powerless against our banker overlords who own and control everything. And then when I read the the Bitcoin white paper and I started learning about it more and more and more, I was like, oh shit, like this has a lot of potential to change the world and it's an exit. So sign me up. And that naturally led me to Ethereum and you know, decentralized applications. And I started experimenting with them in 2017 and 2018. I'd say the the ones I really enjoyed the most were shamefully admitting this, but they were Ponzies. One of them was something called proof of weak hands, which is essentially a bonding curve contract. But like if you had the bonding curve token, there was a tax buying and selling, and that would go to people who had the bonding curve token. So it had like a kind of like this kind of communal and socialistic aspect to it that really drew you know me to it. And then there was this FOMO 3D that was affiliated with that same project that had it was like it was a blockchain lottery with Ponzi elements as well. And while I did enjoy those, I it did leave a little sour taste in my mouth because I knew that these were zero-sum games and that for every win I had, you know, that somebody else had to lose for it. And that just didn't like sit quite right with me. And so, like after that period, a few of the guys that were in that Discord, we kind of created a little friend group amongst each other, and they ended up becoming the co-founders of Alchemics with me. And one of our kind of ideas that we had was we wanted to make something that was more positive, some that didn't screw people over, that you know, you know, would lead to better outcomes without destroying lives. And that was kind of the original inspiration for alchemics. And we had like a eureka moment during the the craze of DeFi summer, and we saw all these crazy yields, and we thought, what can we do with these yields? And you know, uh, as we were iterating on lots of different ideas, we all kind of converged on what became alchemics and the concept of self-repaying loans. And so, yeah, that's how we got started.

SPEAKER_00 5:19

Um repaying loans, that sounds impossible. What do you mean? Maybe like I would love to know, yeah, maybe just for for the audience who doesn't know how it works, maybe it'd be good to explain.

SPEAKER_01 5:30

Yeah, so like in in Ethereum DeFi, like basically there was all these different like ways that you could earn yield. And then some of that would be, you know, maybe borrowing dye from MakerDAO at like 1% interest, then supplying on compound for in earning four or five percent interest. So you could ARB that that rate right there, or becoming an LP on Uniswap, or supplying like liquidity to things like Ave or Compound. And these things started like really taking off. And then URN and these yield aggregators came along and they just packaged that into a token itself. So they abstracted away all of the processes on the back end and then just presented you with, hey, put your money in here, you get this token, and now this token's earning yield. And so what we did is we took these yield tokens and we made them as collateral for our system. And I, as far as I know, we were the first to do such a thing. Now it's kind of commonplace. But where we differ from a lot of the other implementations is that we do like kind to like kind. So you put in uh stablecoin and you can borrow a stablecoin synthetic, or you put in ETH and you can borrow an ETH synthetic. And one advantage of this is that it's very price insensitive. So it doesn't matter if the underlying stablecoin DPEGs or if ETH tanks or moons in value, because the synthetic tracks, the collateral, we have a liquidation-free system as a result. And the way the system works from there is that anytime the system detects that the yield tokens have accrued value, if it's sufficient value enough to run these processes economically, then what we do is a yield harvest. So we'll do a small liquidation of that collateral that has appreciated, and then use that slice to repay a slice of your debt. And thus it is self-repaying loan. So you put in, let's say, you know, a thousand dollars, you you borrow maybe a hundred bucks, and then your yield or your collateral earns like ten bucks, it'll reduce your debt by 10 as well when that happens. So, you know, with enough time and patience, it will repay all of your debt over time, and you don't have your we don't charge interest on the loans either.

SPEAKER_00 7:57

So it's basically like you put down, you put, for example, if you just put if you put in you want to borrow 50 bucks, you put down a hundred bucks, you can borrow 50 out of that. And then over time, that hundred bucks is earning yield to pay off the fifty bucks. So it's effectively like getting an injection of liquidity earlier in time, and then later in time, whenever that loan is paid off, you'll have access to you know the full hundred dollars that you put down collateral.

SPEAKER_01 8:26

Yeah, one of our early marketing taglines was get your future yield now. So yes.

SPEAKER_00 8:33

Right.

SPEAKER_01 8:33

Yeah. So in that regard, that was it was kind of like a time arbitrage. And you know, I think when we first designed the system, we we designed it, you know, while there was a ground surge in interest in crypto, there's uh DeFi somewhere, we were in a bull market where the interest was very intense, almost sort of like the interest in AI is now. And like we we had made some naive assumptions because we were building in a bull market, and we thought that since everything was working so well that it wasn't because of any external factors, but because we were geniuses who designed this beautiful, elegant system. But then FTX and Terra Luna and all the stuff went down, and the real bear market came in, and then we realized some of the mechanisms we designed are incomplete. They're they're not sufficient enough to do that. And it's really put like a kind of a ceiling on how much we can scale because we also naively launched a token, you know, in the era of valueless governance tokens inspired by Andre Kranier and things like that, and in the era of yield farming. And we're we're working on correcting that too. That that's actually very far along in the pipeline and how we're going to address that and improve the tokenomic situation for the token. But first things first is like our V3 system, which is coming soon, very soon, is spent the greater part of the last year in audit as we are extremely cautious about security and we want to make sure that we keep our track record of our protocol not being exploited and losing user funds. I know that like when when you know exploits happen, that if the losses are significant enough, it can actually lead to you know people committing suicide. And I just I don't think I can live if you know something I created caused someone to kill themselves. So like I really take it seriously. And as somebody who also wants to use the systems that I've created, I also want to, you know, not get wiped out as well. So that's kind of why it's taking so long for it to get through, is that we just want to make sure like it is rock solid, it's airtight, like nothing can, you know, put that it can be reliable infrastructure indefinitely.

SPEAKER_00 10:54

Right, right, right. Yeah, yeah. I think I think one of the things that's that's interesting for me is like that you guys have a very uh conservative approach when it comes to and you know, in a in a field that is filled with you know, a lot of gambling, a lot of like very high risk, high-leverage type of financial products on on DeFi. You guys tend to take a much more conservative approach and that has paid out in the sense of not, as far as I know, yeah, you know, not not getting hacked or losing any user funds, so which is a difficult thing to do. Not many protocols can say that. So congrats on that.

SPEAKER_01 11:26

We've taken some lumps here and there, just for full disclosure. Like we had a liquidity pool in curve, and there was a re-entrancy vulnerability at the compiler level, and that led to a huge loss. And we were able to get the majority of the funds back from it from the hacker. Like everything he stole, we already got back, but like when they drained the pool, they they only drained the ETH, and there was like zero ETH and like like a few thousand alleys in the pool, and then arbitrage bots immediately just scooped it up for like free at the same block as as it happened. And like Coinbase got a 500 ETH MEV bounty for processing that block as well, that they didn't ever give back to us, and uh, they said they never would either. So good job, Coinbase. Soon, yeah. I think they could have afforded it, yeah. Yeah, whatever. I guess that's in the past, but like that was like the major thing that that's ever happened to us. And you know, we together with uh curve and the funds that we rescued, we tried to make the LPs who were affected as whole as possible. I think we covered about 80, 85 percent of the losses that happened with our LPs. So they didn't totally get wiped out by that. So, you know, myself included, because I was in there.

SPEAKER_00 12:46

Fair enough. I'm curious to hear if you have any like, you know, the whole the whole point of alchemics is self-repaying loans and kind of playing this time arbitrage, I guess you could you can think of it as. For I guess a lot of people who are not maybe as like financially savvy, they may not really fully understand like why you would do that and why is that different than um yeah, I think like one of one of the things that I think a lot of people forget, you know, that a lot of rich people have a lot of debt, for example. They have like they take on a lot of debt as a way to like, I mean, one is like tax advantageous, but also it's like uh it can be seen as like an inefficient use of of funds in some way or of like assets. But I'm curious if you if you have any any stories of what what are some like interesting things you've seen people do with with alchemics using the you know using this this time financial arbitrage.

SPEAKER_01 13:38

So in v1 and v2, I can talk about some of the real world use cases people have used it so far. So early on, there was a guy who had you know more than double the money that he needed to buy a car. And so what he did, so let's say that car was 40 or$20,000, right? He and he had$40,000 cash on hand. He could have spent that$20,000 cash on hand and just paid for the car outright and then had$20,000 left over that he could, you know, put in like a you know, some type of savings, like, you know, vehicle to earn interest on and stuff like that. But instead, what he did is he put the the$40,000 alchemics and then borrowed$20,000 and then paid for the car using that borrowed money. Now, this borrowed money had no interest on it, and the collateral at the same time, the full$40,000 was earning yield in DeFi. So instead of having a collateral or like a basis of$20,000 to earn from which to earn, he has a basis of$40,000 with which to earn. And then that$40,000 is now servicing his debt. So all the interest from that is servicing his debt. So it's a way for you to yes get a time arbitrage for your money. And so you can preserve the kind of advantages of having a larger capital base versus you know direct cash spending and then losing that advantage. So there's a guy who did that with a car, there's a guy who did that with a boat, a guy who did that with his grad school tuition, a guy who did that for the hospital bills for his newborn daughter. And then one I want to really highlight even more than any of them is this kind of crypto media and event planning organization. They're called Rare Evo. And they originally were like a Cardano initiative, and they've branched out beyond that. And they do Ethereum, they do other things in the ecosystem, and they put on conferences and they do event planning, and they've planned our events for the last few years because one of the guys on their team is a diehard alchemics fan, and he has stuffed their entire treasury into the Al ETH side of Alchemics. And whenever they need to, you know, borrow things, like finance stuff for that, they just borrow what they need and they keep their collateral basis, you know, their principal basis the same and have that service the debt over time. And he said that's helped them really extend their runway. You know, it's it's not like you know, Ponzi yield, we're getting, you know, three, four percent, you know, on your E that's you know, either urine, vesper, or LSTs right now that you can choose from. And the yields have compressed pretty low for them. But at the same time, you know, that three percent, you know, if you have like a million bucks in the treasury, that that's 30 grand. That that might be an event right there that you get to do for free every year because of this system. And you know, it adds up over time. And so, you know, I think that that's one I'm really proud of, and are you know, just very loyal and and always like kind of communicating with us, and and people make fun of the guy, his name's Rand because all he does is talk about alchemics. But you know, you know, I'm happy he does, and I'm happy that his org is also getting value out of it. Other ways people can use it is like in the V1 and V2 system, is that we had like a 50% LTV, so you put in 100, you can borrow 50. And so you could do is you could take that 50, buy more collateral, put that back in the system, then borrow more, and loop that and and get kind of like a 2x leverage of your yield in the system that way. And so some people have used that to enhance base yields or multiply them. And I think that's a really good segue for for V3 because like uh it kind of enhances that much more.

SPEAKER_00 17:24

No, I think that's interesting to mention. I think basically the deal that you're making with Alchemic seems to me it's you you're paying in time more or less for this liquidity. So I guess the question for me, I'm not actually not fully sure, is can a user, whenever they take out a loan, are they locked into that loan? Can they can they drop it? And would they would there be some sort of penalty for not waiting the full like amount of time or something for it to be naturally paid off?

SPEAKER_01 17:53

No, not at all. They can repay their debt at any time. The debt is denominated in the the synthetic, so they can get the synthetic off the market, buy it up and repay their debt, or they can use their collateral to repay their debt. And those are both uh we call that self-liquidation. And so there's no penalty in doing that at all. So it actually helps the system because the the price of liquidity is not free. So having people be able to service that creates also another arbitrage opportunity. So if like a synthetic pay drops, they can buy the debt for cheaper than they sold it for and then repay at a discount. So there's advantages to you know doing that.

SPEAKER_00 18:35

Right, right. And so with the V3, is there anything new that people would be able to do with the new system?

SPEAKER_01 18:42

So glad you asked. Oh, yeah. So I think I need to talk about the big limitation of V2 and why we are building V3, is that the PEG stability mechanism for V1 and V2 was that the yield that was liquidated to pay off people's debt would go into this contract called the transmuter. And so what you could do is you could put in L USD or Al ETH into the transmuter, and then slowly over time, it would convert it to the underlying asset. So you could put it in like the DI transmitter, the USDC, the USDT, and the FRACS one. And over time, the yield from those vaults would essentially convert that asset back to the original collateral. And the big problem with this is that the yield, you know, is a highly variable rate. You know, one week it could be 10%, the next week it could be 5%. So we didn't have predictable flows. But also since the the only flows were from yield, and yield takes a long time to kind of accrue and you know, for it to process, it's not this immediate like get rich quick type of thing, is that sometimes the the amount of funds that were flowing into the transmuter were not enough to service any market contraction that needed to happen to protect the peg. So, with that in mind, we have designed V3 with a new mechanism that allows for fixed period redemptions. So when you get to the site, you'll see, okay, redemptions are going to take three months right now. Okay. So, and in effect, what this does is it creates a fixed yield primitive with LCEMX V3. So let's say LUSD is 99 cents and it's a three-month redemption. So you're getting that you know, one cent arbitrage every three months. And if you annualize that, that would be like a 4% fixed yield. And the lower the the pet gets, the more attractive and the bigger this this fixed yield becomes. And so the demand for the token goes up, which and becomes a self-stabilizing system on its own. And we have one of the levers we have to kind of influence this in the protocol is by being able to adjust the redemption time. So if we're finding three months is too long, the peg is is drifting too far with that. Okay, we can ratchet it down to two months. So in that scenario I just described before, that 4% would become a six percent, you know, because of like, you know, how it arbitrages. And if we go down to, you know, one month, that we find that two months is too too long. One month would then turn that rate into 12%. So we do have some very powerful levers to influence the the crypto economic systems of it. And on the flip side of this, we have to find some way to guarantee these funds by that date. And the only way to really do this is through redemption mechanisms. So what'll happen is as these these red transmuter positions, these redemption positions start maturing over time, it earmarks a part of your debt that will be. Essentially, you know, reserved for future redemption. It converts your debt into a different type of debt. And so it's this kind of positional decay, but of your debt. And then when the redemption is called, it will then, you know, for however much that one is that that one redemption is proportional to your share of the earmarked debt, it will then take a part of your collateral and then repay the same amount of debt at the same time. So it can transfer that collateral to the person who's doing this redemption arbitrage. And the cool thing about this is that there's again another time game, a temporal game being played here, is that because we have these gradual redemptions that happen, but they're being earmarked for later. It's not like as they're being mature, the funds are flowing directly over to the redemption module. It's just keeping track of how much needs to go over there and what everybody's share of that is. So you get to earn on your full collateral in the meantime as that is happening. And your collateral in V3 actually accrues in compounds, whereas in V2 it doesn't. So there are, you know, some certain advantages for this. And I think this balances the system more because in V2, in V1, LPs, like liquidity providers and DEXs, were often taking on a lot of peg risk. And so, like, and also later borrowers, when the peg was lower, it was less attractive to come in. And so, like, it didn't balance the system between all the participants, but this new system does, because if the peg does drift so much, the LP is going to be like, okay, I can just withdraw these assets and then redeem them one-to-one, erasing all of my impermanent loss. So they can feel comfortable. And even DPEGs can become opportunities for them because the the nature of these LP tokens are is it's kind of like a ratio between tokens, and that that determines like the price of each asset in the pair. And so if you withdraw on a DPEG, you'll have a lot more LUSD or LETH as a result of it. And so you can actually profit from them as well. So it creates a good environment for LPs to feel comfortable, you know, participating in the system. And for future participants, the peg will recover through these mechanisms, creating very good opportunities for them to get into the system and borrow and get the full value of their synthetics when they borrow them.

SPEAKER_00 24:36

I see. So it's kind of like a it's more, am I understanding correctly, that it's kind of more of an improvement in efficiency around the use of capital, especially for liquidity providers. Like I wonder if there is a way that you can interpret what you said for the less financially savvy into like what that would mean for someone in the same way that like Alchemix is used for, you know, people trying to pay, you know, buying a car without necessarily needing to take out being more efficient with their money, I guess, and not having to take out the same type of loan.

SPEAKER_01 25:06

Yeah. So there's like two main use cases for this. One is that, yeah, you can do the time arbitrage, you can essentially, you know, earn on your collateral while, you know, spending at the same time. So you can save and spend. Imagine it's like a like a high interest savings account married with a credit card, but that credit card has zero percent interest on the debt that you borrow. So it's a really good deal. And so, in that sense, uh, you know, and it's automated as well. You don't have to do anything to surface your debt, it'll just take care of itself over time. Of course, you can go in manually if you want to. But the efficiency gains of this and the pegmat stability mechanisms that we have have also allowed us to increase the LTV from 50% to 90%. And so just like you could before in V2, at 50% loop it to get close to 2x, you know, you know, you know, leverage on your yield with 90% LTV, that can asymptotically get close to 10x leverage on your yield. So you can multiply your yield that you get in DeFi. So if you see a 5% rate on alchemics, you can multiply that to 30, 40, 45%. Now, you you will take some losses on slippage as you do these loops. If it's like at 99 cents, right, that's like 1% upfront interest rate that you're essentially paying on it. But even then, like you don't have to worry about the long-term interest that accrues to the account. So what I'm excited about is like somebody comes in and they don't have to be a whale to benefit from the system. Let's say you you have$10,000 and you want to start saving and accruing value and you're saving up for a house or whatever, your retirement, anything. You take your$10,000 and instead of just earning 5% on$10,000, you could loop it. You maybe let's say 5x, and now your principal base is$50,000. So it's almost like you're earning 25% on your original$10,000 deposit. And I think that makes it very accessible to, you know, you know, medium-size, you know, savers and investors as well. Whereas before, due to gas prices and some of the inefficiencies of V2, this kind of use it as a as a yield or you know, device or savings device was made more sense to whales, especially when you factor in transaction costs on DeFi. So I think that this new system is is made for both the little guy and the big guy this time around.

SPEAKER_00 27:44

Nice. That's interesting to hear. I think it's, you know, for me it's interesting just because I've been more and more thinking about the question of financing. And as much as that is like uh maybe uh a strange thing for a socialist to be into, I do think that understanding financing and what are the options out there to some capacities very important. Even if you have with the with the very little capital that we have on this side of the political spectrum, I think it's important to yeah, think about how to use it best and efficiently because you don't have necessarily the same amount of resources as the other side does to yeah, to to to fuck shit up.

SPEAKER_01 28:23

You just have financial independence and be a parasite for the rest of your life, yeah, type of thing like that. But like I think that this is like a like kind of ideologically, like like they're you know, the banking system itself, you know, extracts over like 10 trillion dollars a year globally from the world.

SPEAKER_00 28:42

Yeah.

SPEAKER_01 28:42

And it goes into the pockets of a very few amount of people. And it it's this perpetual thing that will never shrink and it's only going to grow and become a bigger albatross on society. And I feel like like this new model that we're creating kind of democratizes that superpower that only the the few elite had. And it kind of gives it to everyone. And it says, hey, the yield is yours, like we're not charging you interest. You know, you don't have this, this, this, you know, this mind-sucking demon always requiring you to work harder and harder and harder to harvest your energy and your soul from you. And it's sort of saying, like, the yield is yours, it was always yours, and we're just giving you teal tools to realize that. And like that's like where I'm at, like, you know, spiritually and ideologically, when it comes to, you know, like trying to build cool things in DeFi is like, how can I make things that change structures for the better? And you know, like that was originally what we came with, uh started alchemics, and I think we've refined it to the point where it's ready for the world. I think this system is scalable and we think it can make an impact, you know, for for everybody.

SPEAKER_00 30:05

Yeah. I mean, I yeah, I mean, this is like also a big reason why I do the things with Red Cooperative that I do. Definitely, I think there is something worth pursuing and trying to take the take the things and the infrastructure that is already here, that's already there, that is already being taken advantage of by by big banks in in one way or another, and try to reverse the kind of power dynamics and relationships that that yeah, that that that the the traditional financial system were kind of like forced into. But I'm curious, you know, because you're you're quite vocal on on social media about kind of like your your disdain for a lot of the more more negative aspects of the crypto world, which has been, you know, uh there's been a lot and it's been kind of like a a rough ride, I think, for for a lot of us who decided to stick around. Um I'm just curious if you want to provide any like reflections on the last few years of crypto from DeFi summer to now. Like, where did it start going wrong? Or was it always, I mean, for you, was it was there always something wrong like since the beginning? Did things just get kind of like magnified worse because of one thing or another? I mean, definitely Trump's campaign and the election just kind of like broke everyone's brain and just kind of like I don't know, people they chose, they chose short-term gain over, I don't know, common sense, I guess.

unknown 31:31

Yeah.

SPEAKER_00 31:32

Here's what you think.

SPEAKER_01 31:33

Honestly, I think a lot of things started to kind of go wrong, you know, towards the tail end of DeFi summer. It wasn't just a few blue trip protocols with limited kind of bootstrapping programs, but it then became this food token Ponzi banana bonanza, where you know, like people were just forking protocols left and right, lazily attaching a new token to them, having, you know, extremely attractive yield farming terms, you know, for for LPs and stuff like that. And it kind of ponsified a lot of the stuff or the attention went away from the protocols and more towards the tokens. And then, you know, once the liquidity dried up after, you know, FTX and Luna and Three Arrows Capital, all the blowups that happened, you know, Celsius and everything like that. And, you know, there wasn't enough funds to go around to support these tokens and everything like that. Like it left a really sour taste in a lot of people's mouths, you know. And when you add NFTs and to the mix and to the stupidity that was going on with hundred thousand dollar JPEGs on the internet, really bad art, and and like there's a whole mess of problems with that, I think, too. And I think it led to this sense of financial nihilism is that this space, in order to succeed, you have to basically take money from someone else. And this, I think, culminated in pump.fun and the meme coin kind of craze that happened over the past few years, where you know, the the most successful people on that platform would launch, you know, dozens of tokens a day and pump and dump them. And there were cabals who would coordinate for pump and dumps and run it up really high, and then just send that thing down and just destroy so many people and so many lives in the process. Like for every you know, winner, there was 50 losers, if not more. And you know, now when you know you ask people, you know, who are not like as knee deep in everything as we are, what they think about crypto, and the first word out of their mouth is it's a scam. And I think that's really, really sad that the the well has been poisoned this bad. And I think, you know, I've been uh a meme coin hater since day one, back even when they were primarily on Ethereum, and you actually had to have dev skills to make them. And I think it just got it got worse and worse. We saw influencers like Ansem, and then they brought in celebrities. And what do the celebrities do? They scammed people like relentlessly, and you know, and then Jesse from Bass is coined, you know, and tried to copy the scam over there and was just completely tone deaf that people were getting, you know, fatigue over all this stuff while they were making this this huge crypto social push. And I just think like this this model that it has to be a Ponzi bonding curve in order to monetize content is just so hilariously misguided and very cynical how they went about everything and how they tried to make it into this positive, oh rah-rah, we're we're coining things. This is the new version of content going forward. But all it did is just, you know, hurt people financially to the benefit of a very few. And it's just like, how is this any better than the banking system? How is this any better than a casino? In fact, it's probably worse. Actually, much, much worse. And, you know, I think, you know, the the space is leaning into like the hyper-gambling degeneracy, you know, with 100x leverage perps, with you know, these these prediction markets that are, you know, they they'll they'll they'll try to, you know, rationalize why it's not gambling, you know, the sophists they are, but they it at the end of the day, it it's gambling. Why else would you have sports outcomes on there? That's like the most popular form of gambling, right? Like, and that's their biggest market is betting on sports games. It just shifts the model from the house versus everybody to PvP model, you know, and that's really the only difference. And I think information markets can have value, but I don't think there's any value in speculating on who's gonna win a sporting event. It's it's you know, it's it's the carnival, it's the circus, you know, it's it's not it's not anything that's really that important. It's just entertainment. And I think speculating on entertainment is just like silly as far as like it being presented as an information market. I think they should just be honest and be like, yeah, it's sports betting. And then I'd be like, okay, it's sports betting. Yeah, okay. It should be illegal or at least be regulated more than it is, but you know, be honest with yourselves, guys. Come on.

SPEAKER_00 36:36

Yeah, I mean, there's one thing kind of like in all of this that I wonder if part of part of the problem was like there's no one, there's no singular person or entity to to blame, of course, but there is something to say for the I mean, definitely the people are to blame for it in in many respects who who engage in the scams or who promote the scams. But I wonder if there's anything because one of the things that like all these tokens are just there's nothing backing them in a lot of cases. Like the tokens are just they're they're purely speculative. There's no there's no versus like in the stock market or like the in Chat Fi, at least they have assets that are building something or that are like backed by real assets that exist in the world, but crypto hasn't yet. I mean, everyone's been trying for real assets for a long time and they exist to some degree. Like some tokenized stocks, there's whatever tokenized bonds in in in some corners, but they're not super popular. The thing that became like the thing that I wonder is whether the regulatory ecosystem kind of didn't really promote things that would have been productive in the first place. And so then you're only left the only thing you can do is just the corner of things that are just like purely virtual, purely abstracted, purely just like play things, because then you're not encroaching in the territory of traditional finance.

SPEAKER_01 37:55

Well, I mean, like I'm a big believer in in cryptocurrencies, like the crypto networks. Like I think, you know, when like you know, like with Metcalf's law and stuff like that, like these networks have value, but that that's for the native tokens of the networks themselves. Like, I think Bitcoin has value, even though it's not backed by anything. You know, money is a construct anyway, for the most part. And if, you know, it has really good properties as far as known supply, it has, you know, permissionless, you know, neutrality and rails. So anybody can send to anybody else without censorship. And same thing with Ethereum, and they extend that with, you know, the ability to make apps on it. And I think all these things are are very valuable. And and I think the market is also, you know, like actually cares about decentralization, you know, because that that's the number one and number two asset in in the world or in the crypto space, are arguably the most decentralized, you know, projects in the space as well. So I I think like there is value in cryptocurrencies, but the problem is, is these, like we're you're alluding to earlier, these tokens that that don't have any backing. They're just purely speculative plays. And then I think in the middle, we have protocol tokens, which a lot of them are kind of like almost like early stage startups where they might not be revenue positive or maybe not revenue positive enough to do revenue sharing just quite yet. And I think it this is the kind of growing up period for a lot of these, you know, crypto like that protocols in in trying to address the these concerns around their tokenomics and you know, find sustainable business models that don't really solely rely on token emissions, but through actual sustainable businesses. And that's something that you know we're we're highly aware of on our end. I realize that I'm a hypocrite to some extent, as well as this. We have done like buybacks for our token over time, and I know like you know, MakerDAO does the same thing and various other protocols do the same thing, but that's not exactly the same thing as revenue share. And so like we are really working hard on creating a new system that kind of learns lessons from both the Ethereum 2 staking system as well as the vesting escrow system that that Curve Finance innovated on a number of years back and trying to find something that's better. And like one of my employees, I don't know if you know him on Twitter, is a block enthusiast. He's a bit of a mad scientist of sorts, and that's what I love about him. He thinks very out of the box, and he's the one who's come up with a system, he's calling it vesting queue, so VQ. And so it addresses both yield delusion when people pile into something, but also you know, the amount of time it takes to get out, your commitment to the system. And so it's a queue getting in and out, and then once you're in that and you're vested into the queue or into the system, you kind of have like these kind of senatorial powers of governance and a share of revenue. But the really, really, really cool thing, and this allows, you know, for governance disputes to be really elegantly handled, is that these this queuing system is recursive. So sub-DAOs can permissionlessly spawn from it, and they'll start having revenue streams directed to them for their initiatives. So, you know, if Aave had this system, maybe ACI and you know Allah Labs wouldn't have defected from Ave because there could have been room for disagreement between them while still staying under the Aave umbrella. And there we're gonna be releasing a lot of research stuff. This is gonna be completely copyleft, open source stuff that we want to give as a gift to the world. It'll be out later this year. It's it's approaching audit at this point, but we're not sure how long that's gonna take. Of course, it's always uh impossible to give accurate timelines if you're trying to do it securely in the space. But and and part of this VQ system are revenue streams. Like we could have a sub-dow for Al USD, a subdown for Al ETH, or a sub-dowl for any new product that we want to launch or any other sub-dowl initiative. And then the revenue that those sub DAOs generate will then go to the people who have vested into those sub-dows. So there's like multiple revenue streams, there's you know, there's lots of really cool properties about this, and it gives people signal, it gives people agency, and all the stuff is gonna be fully on chain once it's all ready. So we're we're really excited for that stuff. And we think that definitely a prerequisite for this working is, you know, a protocol that has revenue, but there's a lot of them out there that do. And so, you know, like I think it's we're gonna mature, you know, there needs to be growing pains. Some people need to get wiped out. It's very unfortunate that we saw Balancer essentially throwing a towel earlier today. And that really hurts me because I love those guys, and you know, I think they're one of the most cracked and talented and innovative teams in DeFi. And I know that they're gonna be doing the the people who are part of balancer labs are gonna go on to do amazing things in the future as well. So but I think, yeah, you know, it's a time of soul searching. That's what bear markets are for. It's for building, it's for realizing the error of our ways and trying to correct them moving forward.

SPEAKER_00 43:45

Yeah, for sure. I definitely agree. Soul searching is definitely needed in the has been needed for a long time in the crypto space. And that's kind of been, yeah. I mean, lately I've been, you know, I spoke to, for example, I'll have the the episode will come out today, but you know, spoke to someone like Nader Daphne. Abbott, who was, you know, pretty well known in the crypto space, did a lot of really cool things around DevRel for the crypto space, but he left. And like a lot of the reasons for why he left was just because of like how exhausting it can be in the crypto space, the amount of like reward that so many scammers get, like, you know, why be in a space that is that is doing this? But recently, you know, we're talking about this off the before we were recording, but recently Ethereum released their Ethereum Manifesto, where they tried to put down some, I guess, some values for the Ethereum space that they expect. I guess it was kind of a little bit more directed towards people specifically within the Ethereum Foundation. But yeah, I think it's it's Vitalic's another attempt at trying to spread some of his ideas, specifically this one of crops, which, if I remember correctly, censorship resistance, open source, privacy, and security. But yeah, I'm curious for you how you because one of the things that you're definitely known for is I'm definitely more of a more of an Ethereum guy. I think you've made that clear. You've described Ethereum as kind of one of the only serious chains or the only chain really worth building serious applications on and calling others, you know, DGen traps and corporate facades. I somewhat agree. Yeah, I guess for you, what makes Ethereum kind of irreplaceable in your eyes, and how do you respond, you know, to the rest of the you know, crypto founder cohort who who chooses to build on other chains or to build across different chains or whatever else?

SPEAKER_01 45:32

Well, it's a multi-part question here. So I'm gonna take on crops first. And I I think it's it's a good goal and and everything like that. But at the same time, I think that if you are super rigid with your thinking and there's no room for flexibility and understanding other perspectives, then it becomes problematic. So you know, if you have people who are harassing a project because they slap a BSL license on their code, I I think that that's a little bit too extreme. It doesn't take into any of the reasons of why they might consider a PSL in the first place. So if we look at the context of you know how things have gone down, is that you know, everything was like prior to DeFi Summer and throughout, most of it was open source. And you know, and basically what happens is you you make this protocol and you open source it, and then you have all these people, these opportunities who just fork it, attach a token to it, and then use it for exit liquidity, essentially. And you know, but if you look at any L2 or Alt L1, it's just a bunch of these copycats with teams that don't have the technical uh expertise to really handle the operation of the protocol. They don't have that deeper knowledge, and they're more prone to exploits. Even the earnest teams, they're more prone to exploits. There's like several, you know, compound forks that have just blown up spectacularly because the people operating them didn't had no idea what they were doing, had no business running it because they didn't have that expertise. You have a million Uniswap clones, you know, with sushi swap vampire attack being the original sin of that. And like, so you just go around and you just see a bunch of the same things, but crappier versions with teams that are not as committed as the original teams that that originally developed them. And it in a lot of ways it's quite injurious to the the protocol or the teams that developed them in the first place because they can be vampired and it steals their liquidity, and they have these Ponzi schemes to to vampire away users and stuff like that. And they don't give back, they don't develop and then send downstream to the mother protocol, they don't profit share, they don't do anything like that back to it. So it's like a very abusive relationship. And in that regard, I think you know, protecting your IP can can make a lot of sense because if you are the one who can grant the license to other people because you have a BSL, then you can make sure whoever's forking you is aligned, that they might come to an agreement about you know sharing things because they have this advantage of not having any of the cost of RD and audits and everything like that that the original protocol did. Like for Alchemics V3, we've spent over three million dollars on RD for it between developer salaries and audits. It's it's not cheap. We've really like, you know, we've used a lot of our runway trying to really make this good and and spending like well over a million dollars now on audits, which is very painful to do. But at the same time, what's more painful is the protocol getting wrecked and people losing money and maybe taking their lives. Like, so I don't want that on my conscience. So like I'd rather go bankrupt trying to make it secure than launch something that's unsafe. And and for that reason, we are having a two-year exclusive like BSL license. Well, we'll have like a friendly fork framework. So if anybody wants to fork us, they you know, there's some very basic things, like boilerplate things they could agree to and just get the license automatically, or they can work with us and negotiate something that works between both of the teams. We'll be super flexible about it as long as we like the other people and we think that they're trustworthy and their intentions are good, you know, we're more than welcome to be flexible with them. But like I've caught some flack and some pot shots from from some of the, you know, more, you know, extreme zealots uh in the space about that. And I don't want to hear any of that because it's like, what have you launched? Are you running a business? Are you supporting this, you know, the livelihoods of you know, a dozen or more people? No, okay, then like please, like you have no grounds to criticize. And I think like when when people are so dogmatic about it and there's no room for any understanding or nuance, that's the danger of such mandates, like the EF put out, because there are those who are just like so hardcore, whatever Vitalic says, there's just aye, captain, without thinking twice. And I think that's kind of like antithetical to the ethos of Ethereum as this open ecosystem, anyway. And I understand this is more directed towards the EF and you know, stuff like that. I'm choosing to view it as kind of like a spiritual recommitment to our values. And I I agree with a lot of it, but I just think that there needs to be some room for nuance and for people not to be, you know, extremists about it.

SPEAKER_00 50:56

Yeah, I think what's really peculiar about it, it's like I don't disagree with definitely a lot of the principles around crops. I definitely hear you on the open source stuff, and I I tend to agree. I think I don't know if you've ever heard of copy far left, which is another it's an open source-ish license where instead you're you're only allowed to fork it if you are like a cooperative or you know a nonprofit, or like you or if you are a business, then you're required to pay basically the you're required to contribute to the original creators of the of the IP. But which I think is like totally fair to me. I think there's this is the kind of like this naive open source culture that is actually been part of the problem in in cryptos is my view. But yeah, if you look at the manifesto, it's very I don't know. I mean, that's I think the thing that like really irks me the most is how clearly inspired by like malady stuff. Like as at least as far as graphic design, I think the graphic design just really, really turns me off, which is maybe like you know, not looking at the content enough, but I think it says something about when they were making it and also the yeah, like you said, the kind of almost like religious nature. But I think it's it's like the it says like seppuku open source license or something like that, or you don't do open source, you have to commit seppuku or whatever. Like I guess like it's part like I understand it's like partially, I assume partially in jest, right? Like you can't be fucking serious about this, but also makes it very it's hard to take seriously, is my feeling. That like if I took this manifesto and I tried to show anybody else outside of the crypto space, they're gonna laugh. They're gonna be like, what the fuck is this? I think they're not like would not be able to take it seriously because of like how they're presenting it. So the presentation I think is like was a was a bad call, even though I think many of the many of the values in there are are interesting. I think there's a lot of nuance in how they presented it in the and you know, contextually. But yeah, I think the biggest thing for me is like, I don't know, I I really don't understand the why there are people in the Ethereum Foundation who are into the Milady stuff. But yeah, neither here nor there. I have an episode already there.

SPEAKER_01 53:02

Gonna catch so much flack. Yes, yes. I I mean I I go back and forth on you know, love and hate Malady, honestly. Like in in some ways, like I I'm down with it, and like I I like how like subversive it is, but then some of the crowd it attracts are like really like Nazi adjacent or fascist adjacent, and you know, even like you know, the the leader of Malady Charlotte Fang is like admitted to working for for Palantir, which is like I think highly problematic because they're I think they're like one of the most evil organizations in the entire world. So it's like is that where you guys are spiritually trying to align? Really, maybe rethink that a little bit. And it's not all Maladies, there's a like a lot of my friends in the crypto space, you know, rock a malady profile, and they're they're very nice and very good people who are not fascists at all. If anything, they're very left-leaning. But um, at the same time, it's like, you know, I always like to say to my children, like, look around at your friends. This is your future, right? And, you know, so choose your friends wisely. And, you know, in a spiritual level, like Indra's web, it's like, you know, this this giant spider's web, and at every single intersection, there's like a you know, a gem with those facets that then reflect all the other gems in the tapestry. And so, like, we're a piece of everyone else who's around us. And if we're associating with people that have such ties, then we can't help but be associated with them by others, and also probably influenced by some of their uh their less than ideal ideologies. And so I think, you know, for that to be like this core Ethereum cypherpunk, you know, ethos is malady, it's like maybe we should rethink that a little bit or refine it or or distance a little bit from it, like because it it's not all there's a lot of bad that I think is associated with it as well. So I'll I'll just leave it there. And if I say much more, I'm gonna be brigaded by a bunch of malades next time I make a tweet.

SPEAKER_00 55:16

So I mean, I've been burgaded before, it was okay. I was fine. The thing is that when I because I did an episode a couple years ago where a friend of mine kind of infiltrated the group in a in a sense, joined the Malades and was in on the inside and went to the parties and did all this stuff and just like revealed a lot of information about it. It was really funny because then the the Milady people had they all listened to the to the podcast episode, you know, on a Twitter space, and they were all like, Yeah, that's true, but fuck them. Ah they couldn't deny anything that he said and like about how how weird and like fucked it is. But and then I had and then I had a bunch of people who were in Malay's who were like trying to feed me information on stuff.

SPEAKER_01 55:57

So I've been to a couple of the Malady parties, and there's always some weird vibe that did not agree with me at all. And I was like, I I gotta get out of here.

SPEAKER_00 56:08

Like yeah. And just like yeah, you know, the the party that they did for the for Trump one that were that they sponsored, the the thing with clavicular. Like I hate that I know this, you know. A few weeks ago, whatever. Hurting my brain. But before we go, I mean, we don't need to go too far deep into that. I think it would be actually more interesting, you know, for kind of like to end it off. I'm curious from your perspective, you know, what are the things that you would like to see for DeFi in the future in the next 10 years? Like, what do you think? What do you think that looks like in your, you know, the optimal vision for you?

SPEAKER_01 56:49

Well, I want to see really is you know, people being true to like crypto native applications and building an on-chain economy. I think inviting PradFi into Ethereum is a kind of a double-edged sword, where, you know, as it's not just stable coins are added to the system, it's more like they supplant the crypto native assets that are already there. So we see this already with stable coins centralized stable coins kind of dominating versus decentralized stable coins, and then people preferring to hold and trade with stable coins instead of crypto native assets, thus reducing demand and the network effects for those crypto native assets, especially in a proof-of-stake system. It's kind of self-referential in a way, in that, like you, you know, you need to have the the token, the network token have value for the network to have security. And Ethereum at$30 does not work. I'm sorry, but it does not. So I I think, you know, like people committing to that and not taking shortcuts, not taking these C DeFi shortcuts where they just have a a few dudes on a multi-sig or an MPC server running everything instead of actually like on-chain code. And we saw with Resolve just a couple days ago another example of one of these kind of C DeFi platforms, which really did a good job of fooling people into thinking it was actual TFI, like blowing up because whether it was an inside job or not, the the key got leaked and it was used to exploit the protocol. It was just one EOA that got leaked and compromised, like not even a no-susave three of five. And I think people taking these shortcuts to to chase narratives, and then this whole like, you know, everything needs to be a stable coin, you know, and and this this kind of push for genius acts, you know, regulated stable coins. I feel like it's going to push crypto native assets out of the way. And Wall Street will start to cannibalize and absorb, you know, cryp, you know, crypto networks. And if they end up getting enough influence, they will be able to determine for choice rules. And we already have this problem with the USDC and Tether to an extent. And the more entrenched they get, the harder it will be to actually control the network, and then they'll gain more influence, especially if the Ethereum Foundation subtracts itself over time. Then other groups will then have influence over future I EIPs, and there won't be, you know, the the EAF mandate and tallica and the true cypherpunks out there to safeguard things and they'll take shortcuts and they'll they'll do bad stuff like that. And and I think like even with our RWAs, like you said, like there's some bonds and things like that, but the stuff that they're throwing on chain are like junk bonds, stuff that's gonna hurt people and likely go bust. So I think you know, we have to be cautious with how we integrate with you know TradFi. I don't think we can outright, you know, kick them out. You know, Ethereum's an open neutral platform, and that's impossible. But at the same time, I think we should be skeptical and not openly embrace it and do it the right way and make sure that it doesn't corrupt our values in the process. And for the people who are building on-chain apps, like really like try to have a reason for them to be web three instead of web two, like, you know, really embody the the good properties of you know, of what blockchains can can give, especially this kind of openness, censorship resistance qualities where they're P2P and owned by a network of people instead of centralized party. I think if we stay true to that, as our blockchains are getting more scalable, more economically viable, you know, for applications to run on them, then you know, it's just a matter of time before someone cracks it and we hit critical mass, and we have decentralized versions of the things that we use today. You know, especially with the walls closing in around privacy. You know, they want to make you KYC for every single platform now. That's the big push. Even at the OS level, they're trying to do this. And I think that we need to have, you know, sanctuary technology. We need to have a way for people to say, no, I'm reclaiming my sovereignty. I am not going to subject my myself to the surveillance state and give up my human rights. And I think that, like, you know, that's the part of the Ethereum mandate that resonates with me the most is, you know, we we have this opportunity, we're at a critical juncture to really, you know, change the direction of civilization. And I know that sounds like a really big, grandiose thing to say, but I really think that we are an important player in this game of civilization, and that you know, we have the power to do tremendous good and bad. And so I would rather we, you know, are on the side of good and for the people and for democracy and democratization and empowerment of the masses and not just the few. So that's where I'm at.

SPEAKER_00 1:02:18

I think that was a great place to end it. Scoopy, thanks for coming on and sharing, sharing your thoughts, sharing what you're doing with Alchemics and your vision for DeFi. I really appreciate you being a voice amongst the sea of chuds that are many crypto founders. And thanks for coming on.

unknown 1:02:35

All right.

SPEAKER_01 1:02:36

Thank you for having me on, Josh. It was a fun chat, man. So, and good luck to you with bread and you know, all of your initiatives, and I'll be sure to give your book a read soon.

SPEAKER_00 1:02:46

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