Recording:

Transcript

Thank you so much for joining us. Of course. Thanks for having me. No, no, thank you. Thanks to both of you. I am extremely, extremely excited about this. Twitter spaces because you're both. I've gotten to know you separately in separate two separate interactions. But I think I mean, you are both very thoughtful people and you're deeply interested in, I would say, money at the molecular level, and therefore you are interested in algorithmic currencies.

And we are right now at a really interesting juncture in in defi where the collapse of their aluna is resulted in calls from many thought leaders, including vitalik, to say all experimentation on under collateralized or credit based stable to just stop because you know they can hurt a lot of people. At the same time, I find myself in the gap that says we're on to something.

There's something really big happening here. We can find levels of capital efficiency we've previously never seen, and there's no scientific reason like a gravitational constant or some law of thermodynamics that says, you know, this can't be done. And that's something I heard John briefly talk about in his interview with Laura Shinn. And I really like the way he framed it and that made me think, you know, it could be a really fun discussion to have with both John and Publius.

Now, I know both of you well, how about I don't think you guys have spoken to each other, so. That's correct. Just to me, I'll just request maybe John give an intro. I know John, for you, privacy is a key thing to talk about because of Aztec. So give us an intro, John. Tell us a bit about yourself and then, you know, Publius will do the same and then we'll get into it.

Yeah. Great to meet you all. And great to meet you. Publius, I have to ask, is the name from the The Federalist, the pseudonymous name that the Federalists used to write about the US Constitution. Exactly right, sir. Exactly right. So we're kind of aligned on these principles of of freedom and self sovereignty. So I'm I'm John Woo, head of growth at Aztec, which is a privacy first XLK roll up on Ethereum.

I grew up in the travel universe. I was a consultant. I worked for a large private equity firm. I went to Harvard Business School. Not the the typical profile of somebody who is in crypto these days. So kind of grew up as a suit, but I discovered crypto really formally like early last year, and my entry point was uniswap v2.

I was like, Wow, these permissionless marketplaces that don't have intermediaries are kind of crazy. And, you know, then it just went from there. I had spent a brief stint at Uniswap itself and then realized that the Capes were going to transform the space and spent some time getting to know some of the ZEEK teams and ultimately settled that asset where we're building the privacy infrastructure for the next cycle.

And yeah, thrilled to be here. Thanks for having me. Awesome. Thank you. Publius, please Intro. How is your brother? That is awesome stuff and I tend to agree that we're highly aligned on financial freedom and the importance of it and also on how privacy complements that. So very nice to be chatting today. The maybe not even compliments, but how privacy is fundamental to it.

The what? What are we doing here? So Publius, there's three of us or three people behind the pseudonym. I'm one of them. We met at the University of Chicago where we were studying economics and computer science, uh, individually in some capacity. And between the three of us have kind of a, a diverse set of technical and economics interests, but at a high level, just speaking on myself have always been highly interested in economic systems and felt that economics are really the core driver behind behavior.

And in 2017, I had an internship, uh, after my freshman year of college trading affects global macro, and it just so happened that my first day on the job was the same day as the firm's newly hired crypto guy, and two weeks later he pulled me into crypto to come work with him and one of my favorite stories to tell is that that evening I got dinner with a very good friend of mine and I.

I was fucking livid. Like, I can't believe I have to now go work on fake internet money. I have my dream internship now. What is this nonsense? And within 48 or 72 hours, I had like a eureka type of realization of this. This technology is going to be fundamental for the rest of my life and presumably a significant period of time beyond that.

And it was it was immediately evident how this technology would facilitate an ownership based economy as opposed to a rent based economy. And that was something that was particularly compelling to me as the 19 year old growing up in a world that seemed particularly unaffordable. And youth transaction fees are one obvious answer. But the other answer that we came to was the high carrying costs of stablecoins where in practice, if you have to pay ten, 12, 14% a year to borrow a stablecoin to make a market, or even if you own those assets, there's an opportunity cost where you could just one that out for that amount.

The concept is it's very hard to compete with traditional markets, compete with Vegas, with sports betting, for example, it's too expensive. So in addition to just blockchain transaction fees, the carrying costs of stablecoins were to us a major thing holding back not just decentralized prediction markets, but it's very obvious to see how high carrying costs hold back adoption of lots of different technology, or make it impractical to use.

And so then the question becomes, well, why are there such high carrying costs for stable? And just to interrupting here, for those who don't know if you can just want to define guiding costs, I don't think it's obvious to everyone. Oh, sure. So carrying costs can be thought of as the cost to hold a position. So in practice, every stablecoin either has an implicit or an explicit carrying cost, or both, sometimes in the form of either a fee for holding the stablecoin that is explicitly enforced or an implicit cost in the sense of if you're holding a stablecoin and not doing something productive with it, whereas you could just lend it out and collect passive

interest, there's an opportunity cost there as well. And so people have to use their stablecoins for things that they expect will return them on a risk adjusted basis more than whatever that risk free or close to risk free rate of return is for lending out your assets on or compound, for example. And so the question then becomes, well, what can you do with your stablecoins that's more more higher expected value than ten, 12, 14% a year?

It's highly limited. And so the question then we were asking ourselves is what is the nature of these carrying costs? Why is it that stablecoins are so expensive to borrow on chain? Another way to think of it is why is it that despite the borrowing costs often often being incredibly inexpensive in the grand scheme of things, at least until recently, why is it that borrowing dollars on trains is so expensive?

And the answer that we came to was a supply shortage where even though the various Stablecoin implementations had strong peg maintenance models to a large extent, where by their price was at a dollar, the supply and demand imbalance that existed in the market manifested itself in high borrowing costs and those high borrowing cost again was what we thought was holding back the adoption of lots of this technology.

And so the starting point, just to state it again is that our opinion is that the carrying cost imposed by collateral requirements, the requirement to lock up some collateral in some form that's just there to create the stablecoin the opportunity cost associated with that action was largely holding back the adoption of Defi. And so that's, as you were putting it, from more of a macro perspective, drawn of what is the the attraction of a decentralized, stable, credit based currency.

And there's a lot of attraction there. But why we were compelled to start working on it was more of a practical issue of all of this cool tap we we want to see adopted seems to be actively being held back by these carrying costs. And from our perspective, the only way to remove those carrying costs is to remove the collateral requirements.

Or at least that's how it appears to us at the moment. And so thus begins the question and I'm sure we'll get into it in depth of can you actually solve is this a solvable problem? And I would actually push back on something that you said at the beginning ask me, which was that there is no gravitational constant or law of thermodynamics here that prevents this from being the case.

I actually disagree. The fact that there is a difference between an on chain stablecoin and a the value that it's supposed to represent. If you don't have collateral 100% collateral and convertibility that you trust. So if you have no collateral behind it, I would make the argument that it's basically impossible to actually have the value of the stablecoin be the same as the value of the the value that it's pegged to.

I think that is technically impossible. And that is in fact one of the main tradeoffs that Bienstock makes, where it doesn't try to maintain a hard peg in any capacity. And it's very comfortable with the price of a being oscillating above and below the peg with unknown volatility. And so I would just push back on the problem, and it is a very hard problem to solve The true theoretical, you have a perfectly stable artificial asset that's pegged to something else that that probably isn't possible to do.

Instead, what might be possible is to create a value, a token that oscillates above and below a value, and the incentives of the protocol create this oscillation and this expectation that any time the price is too high, it will at some point oscillate back to the peg and below. And any time it's too low, the price will once again oscillate back above the peg.

And these oscillations above and below the peg are ultimately where people can derive confidence to sell high and buy low and profit from participation in the peg maintenance. But the fact that you have this true separation between the stable asset and the value that it's paid to make it, we would make the argument impossible that you're always going to have this 1 to 1.

There is some trade off here. And so then the question becomes what are acceptable tradeoffs? Awesome. No, thanks for clarifying that. I mean, I think meaning I was kind of getting at was that that, you know, at least in finance and economics, I've not seen like the, you know, the same kind of laws that you find in hard sciences.

But yeah, I totally get I totally get your point. And we are going with that and I'm looking forward to getting a bit deeper into it. I think one thing I'm assuming, John, you're not that familiar, but you know, even wouldn't think the one there's one very interesting overlap do with being and privacy and that this that's that's that some decisions that these guys took around the launch which is that you know it was it was truly a fair launch like there was there were there was no external capital.

They just literally, you know, let out the program into the wild. And I don't know I don't know how familiar you are, John, with that history. And I'm just I just want to make sure you have some context before we start diving in. So do share how much you've studied this before this conversation. Yeah, I think I'm pretty up to date on how the protocol mechanism works, but did not study the fair launch.

So yeah, happy to hear how that went. And maybe for audience members who aren't familiar either. Yeah, I, I mean, you can maybe talk about it, you know, but, but I mean for me that the reason I'm bringing it up is, you know, there's, you know, I think I think there's I think that I think both topics, you know, I think, you know, I mean, privacy, it's almost like, you know, it's going to be really hard to have privacy without without algorithmic guarantees on.

I think you're leaving out the punch line to ask me, which is that until the attack a month ago, we were totally anonymous and. Right, Right. Yes, please. No, you you please tell us the right punch lines at the right order and then we can kind of get into you know, the the the overlap between the two topics, privacy and algorithmic currencies, fun stuff.

So the the the punch line, as we were alluding to, was that we deployed Bienstock in August of 2021 as cold turkey is as humanly possible. So we deployed the software. There was no pre minor pre-sale or pre-launch or team allocation or anything of the sort. The first 100 beans, the stablecoin were minted when the protocol was deployed and then the protocol started to function as normal and early participation in the system was the way that anyone that worked on the project in any capacity from the from us to the people that designed the beta logo, everyone still had to buy into the system.

There was no team allocation whatsoever. And then the other point was that we did this totally anonymously. So there's a couple of different reasons behind that. The main one of which is we do want and do think that it's possible for Beanstalk to become a global issuer of money over time. And we really don't want to be at the at the head of that.

We don't want to be the leaders of of that system. And we really do believe in decentralization and permissionless business and don't want to feel like to some extent, the expectation of having someone who's a leader, even if they have no control, is not is not optimal for a money system. So we we've tried and since the attack we did feel compelled to dox ourselves because a lot of people thought we were involved in the attack and wanted to make it clear that we were not.

But generally the the concept is we we don't view ourselves as anything other than the people that deployed the protocol and made it and are now active participants in the community. And while we are now docked and I'm not talking through a voice modifier anymore, the we continue to operate through our pseudonym because the goal is for at some point have to still disappear and we don't want to have this role in perpetuity.

So recognize it's still early and there's still a community forming and people look look for guidance, particularly in tenuous situations. But generally we don't we don't we think that there's elegance in the separation from ourselves and the student pseudonym through which we communicate because we don't really want to, you know, we don't want to be leaders of the system in the long run.

We want the system to speak for itself. John, when you tweeted about an ICO, tweeted for the spaces, you talked you touched upon some of the overlaps between algorithmic currencies like this and privacy. And I know that you've been deep with Aztec for almost a year now, or maybe less than a year. Tell me a bit about what you meant and elaborate a bit on that, on that code tweet that you did for the starting of the session.

Yeah, I think I'm in the beginning of kind of thinking about this paradigm because to be quite honest, we've all been trained on a public blockchain paradigm, and so it's almost hard for anyone who's been in crypto for any amount of time to consider the role that private state can play right in smart contract design, but something to offer.

And maybe this is more of a brainstorm with you and Publius is this notion that, like you can still write a deterministic contract that has private functions or variables, or even for the whole contract to be to be private. Now, why is this like valuable people immediately kind of like push back people immediately. They kind of they kind of push back because they're like, well, why would you want to obscure anything?

It isn't full transparency. The goal and I think that's true in a public state paradigm, but I think there's many examples in the real world where all you need to know is have faith that the process is working effectively. You don't actually need to have full transparency. And there's many, many examples of this, right? You know, private contracts are like a really good example where you can there's an element of trust there.

But like you trust that the two people have agreed to a process that works efficiently and you don't necessarily need to know the details. You just know that the two parties are acting in a way that's, you know, conforming to expectations. Well, I think the cool thing about KPIs and like on chain privacy is this notion that you can create a contract that's deterministic, that is provable mathematically.

It's basically impossible for anyone to cheat as long as the contract is written effectively. And of course the cryptography works and is audited correctly. But at the same time, you don't necessarily have to reveal the current system state. And this sounds really scary to people, really scary to people. And I'm not saying that this is definitely something that has to happen going forward, but you can imagine a world in which, for instance, you know, there's something about the system state that is obscured, and I'm not exactly sure how that would work with Bienstock.

My understanding of the system, for instance, is that it's very important to know where you are in line in terms of like the seniority of your credit position. And it's of course, very important for everyone to know where the protocol sits in terms of the peg. But I think this is just we're in such early innings thinking about private state and how it can inform game and mechanism design that it's worth considering.

Like is there something that can be obscured while, you know, one one thing that comes to my mind and and that's there was a there was a really great discussion that both the Publius that in terms of just, you know, their dissection of what happened with data and, you know, I mean, I'll I'll ask you to summarize it as well.

My takeaway was that, like, you know, when that that going to the collateral part was it was less problematic because it's one that was a bit of an acknowledgment that, you know, the system wasn't as as robust. And then the second thing was that the moment market players figured out some of these parameters, there's a way to start exploiting them because you kind of know exactly where the weakest link could be.

And in the same discussion, you know, there was there was also quite a bit of talk about this convert feature. And if you're John, if you're not familiar, there's a and there's a feature that got launched in the Beanstalk protocol that allows the bean holders to go in and out of an LP position and so the big point is that, you know, unlike a lot of other protocols, there's a whole lot of people that that are being holders who are involved in doing bank maintenance.

Now, some of those actions, you know, if made private, I think could be interesting. I don't know. But I'd also then now Chip the same conversation to probably as public as I'd ask you to do two things. One, explain the convert a little bit, you know, and then talk about is that is it would there be a benefit to, you know, have greater privacy in terms of, you know, who's in terms of convert in and out of liquidity pools?

Well, the the the high level answer is there's a ton of value in introducing privacy to most systems, but certainly in stock, which will answer your second question in longer form in a second. But to talk about convert, so the beanstalk Dow, the silo, uses the stock system to attract long term depositors and stock is the governance token.

The incentive structure of the stock system is that you receive stock when you deposit beans or LP tokens that are whitelisted into the silo and then you receive more stock over time linearly. And so there's an opportunity cost when you withdraw from the silo because you have to forfeit all of your stock. So if you're going to withdraw and come back, there's opportunity cost in the form of all of that grown stock, that extra stock you've received for the time that you've already spent in the silo.

And so the originally, when being stock launched, there was a weird tension between the being seigniorage that was paid to silo members and this auto compounding and their desire to sell the beans, but their lack of desire to withdraw from the silo, have a withdrawal, freeze, forfeit their stock and then sell into LP, add the LP and then deposit.

And so in short, what convert allows for silo members to do is when the price of a bean is too high to convert, they're deposited beans in the silo to deposit the LP tokens, and when the price is too low to convert their deposits and LP tokens to deposited beans and in practice this facilitates a couple of different things.

The most important of which I would argue, as you highlighted, is that the bean silo members themselves, the depositors themselves are the ones that are participating in peg maintenance and profit maximizing behavior involves actively participating in PEG maintenance, which anyone can participate in through the generalized convert. Now the other piece of it is the volatility and stability through convert is greatly decreased because when the price is too high, if you convert beans to LP tokens, whereas you were before 100% beans, now you're 5050, let's call it a roughly so 5050 beans and eat.

You've not sold some of your beans into a theory that sell pressure and then vice versa. When you convert your LP tokens back to deposit in beans, you're buying beans in practice or creating demand or removing supply. Depends how you want to think about it. But the concept is that what convert allows is in a stock efficient way, minimizing the opportunity cost of leaving the system altogether.

The depositors in the system can participate in peg maintenance directly, and that's separate from the overall lending mechanism, which is the main driver of long term instability. Convert can be thought of more as a response to short term instability. And why is converts so important? Well, if you look at the history of being stock prior to and after convert launched, the main difference is that liquidity relative to the bean supply started to increase.

And so it's about the liquidity didn't scale together. You had all this demand for USD, but the liquidity for USD didn't scale in BIENSTOCK It's the opposite. And if you look in the dashboard, there's a liquidity to being supply ratio. You can see that particularly more recently as stock was starting to grow and demonstrate product market fit through convert, all of that being seen here, it was being converted into liquidity and therefore the bean supply was growing slower than liquidity was and the liquidity ratio increased.

So as being stock was growing, it was actually becoming healthier. And that's why convert. It's so powerful. So now to answer your second question, ask me about zero knowledge converts or where else it might fit in the ecosystem. It's kind of infinite, right? Ultimately, there's a lot of different actions that participants within bean stock can do, whether it's convert, whether it's selling, whether it's selling your pods on the secondary pod marketplace, whether it's transferring your deposited assets, there's a bunch of different behavior that can be done.

There's a significant benefit in introducing privacy to be in stock and potentially as much of being stock as possible. And it's funny, John, you say it's scary. I don't know what's scary about it. So it's just exciting as far as I'm concerned. John, thoughts. I mean, I know this is a you know, I mean, to the extent they the different pieces that you've seen, where do you see or I mean, are there other benefits?

You see, I just leaning into the brainstorming that you started on, you know, elements of privacy and things I'm thinking about like, you know, when boards are sold on the marketplace or you know, the when a convert is exercised, I mean, are there actions? So what I'm kind of getting at is like, see, you know, what's been impressive to me about being?

Is that it? Well, it was it's the longest running algorithmic guarantee or the longest running credit based stablecoin. It ran for over 6000 hours. It crossed the 1 billion mark over 4600 times, which is six times greater than ESD in. You know, it it survived. It survived multiple bank runs. And one of the unique features in in Beanstalk is that, you know, as if a bank then starts from any bank then starts, it kind of opens opens up rewards as opposed to clamping down on rewards, which is something I've seen in AUM, too.

And that's kind of a cool feature. But there are a number of actions that players end up taking, both in both the lenders of the protocol and the liquidity providers of the protocol in that. John, do you see an area where that seems promising to you from a zero knowledge proof or a privacy perspective that, you know, could be explored further?

Yeah, I think I think, you know, just maybe this is a little bit more general, but thinking about collateral positions for a protocol in total, there's like a whole topography, you know, to take a protocol like maker or something like that where there are all of these collateralized lending positions. And it's not clear to me entirely what the benefit is of exposing every single person's position.

And so there is like just on the core level, just there's value to consumer discretionary, right? Just like just there's that's just like layer zero of like wide privacy is helpful or important, but there's this other component of like potentially, you know, obscuring the health position of each individual position while also knowing that positions like again, just sticking to the maker case like can be liquidated effectively and efficiently.

And that is being done in a deterministic manner and exposing like the total health of the protocol without having to like expose the underlying topography, because that way you can have big whales kind of like traverse the topography, blow through people, stops like that kind of idea. And so this is where I'm going to have to lean on you guys a little bit, where I'm a little bit less familiar with how positions in in being stock get paid back or how you know, what the lifecycle essentially of the of lending to the protocol.

So yeah maybe but yeah I mean look I mean you know at a broad, broad level like you know there's, I mean the way the protocol, I mean high level functionality is that, you know, if the price would been above a dollar, the protocol means more being to push the price down. If the price is below download it, it needs to be done, something to push the price up.

But now within that, the way the binding works is through through lending. And the way this lending were lending is when you lend a dollar to a beanstalk, it is subject to an interest rate. But this interest rate is paid out only when supply increases on a first in first out basis. So that's the debt side of the equation.

And the liquidity side of the equation is that you can oh, and before I close, the debt side of the equation is such that this debt is liquid. You've gone to redeem it from the protocol, but you can sell it to the secondary marketplace, which is also something that the protocol created. On the flip side, you've got the ability to deposit in the silo, which is a fully liquid position, and this position pays you a share of future rates.

So just borrow at a very high level. The way bean works is that you know that there are two players, the lenders and the liquidity providers in the silo. They share supply growth 5050 whenever supply grows. And I mean going forward after the boundaries, it's going to be one third, one third, one third. So that those are the I would say the the rough players.

And you know what they do in my mind. I mean, I also need to learn more about the zero knowledge groups and privacy off the top of my head. I cannot I don't see a you know, I don't have an immediate answer either. But the thing that, you know, kind of I would say where my head got a bit well, a couple ideas that come to mind are So when you lend to Beanstalk you receive pods.

Pods are the dead assets. Now pods are first in, first out, they're nonfungible and they're they're represented within the beanstalk state. They're not external. And so in theory you could facilitate the let the lending of of beans to be in stock in exchange for pods and then the sale or transfer of pods on the secondary market through beanstalk without any need to verify who you're receiving the pods from or who you're purchasing them from on the market.

It's just that the state of being stock and store whether or not the pods that are being attempted to be bought or sold or transferred are valid or not. So that's one example where on the lending side you can introduce privacy sort of across the board because you don't need any you don't need anyone that's participating to to, to trust anything other than that the state is valid.

And if we go back to John's point on private state, as long as you're comfortable with the assumption around a private state, then that shouldn't be a problem. But would that be beneficial as in like it does? That is that would that is it a net benefit to that to the protocol if that existed like good good knowledge of who is selling boards be gamed to exploiter.

I would make the argument and I could be wrong here that one of the main things that could create some sort of attack would be a deep understanding of all of the participants in the system and their exposure. And so more opacity into who who has what position is likely to create a more difficult environment to create some sort of artificial bank run percent.

So hard to think of it as a negative, right? You can you can consider a public state as being like, incredibly beneficial to sophisticated adversaries. Right? It's public state is really, really bad for naive users. Like incredibly bad because naive users don't have the scale or sophistication to understand, you know, the full topography of, you know, potentially let's use, you know, Luna used as an example, right, of like exactly how much liquidity it's going to take to like de Peg.

Now, this, you know, less transparency, more opacity doesn't harm the naive user. It just potentially defang the sophisticated user. Now, the sophisticated user has a much harder time traversing the topography because they don't really know where the positions are. They're not they're not really sure, like, you know, how how senior a certain position is or again, in the maker case, like where the you know, where the health ratio or collateral ratios of each individual position are set.

Yeah. No, that makes sense. I mean and that would be something very great need to explore. So changing gears now, we're at this interesting point where, you know, when I started the discussion right like this, there's lots of calls and even at least on my Twitter, demand is just, you know, invariably I don't into tweets where people are saying these things should stop guys.

And what I want to talk next about is, you know, how do we keep that? Because, you know, it does feel a bit like we're playing with radioactive elements a little bit like. But, you know, I want to talk to you guys about, you know, what what steps can be done such that experimentation continues, like acquisition of reliable knowledge continues.

But, you know, we do it without widespread harm. And it's a very wide question. I mean, I don't have answers on, you know, their tings thoughts that are like rough around, you know, they're in the rough framework I'm thinking about. It's around disclosures, it's around education, it's around, you know, maybe some limits would love to would love to hear from both of you, maybe starting with you, John.

You know what? As as people who are interested in this topic, what can we do to ensure that the learning continues, the progress continues, but you know, the harm or the spillovers that happen that they are controlled or minimized to the best extent possible? Yeah. So I've really been beating this drum since the U.S. failure, and I said it on Laura Shin, and I've said it elsewhere, which is we really need norms of disclosure.

And I think people are really averse to this idea because they're like, smells like regulation to me. And I don't necessarily think self-policing is a bad thing. Number one, I think it makes the case that everyone in the industry is being responsible and on the same page. I think it weeds out bad actors because instantly, if you create a norm of disclosure and people don't disclose, that should raise a red flag.

And and finally, I think people deeply misunderstand the administrative state. And this is maybe something that should be taken offline and maybe Publius, as given his seeming knowledge of, you know, federalism in the United States. And I could host another class on this. I think the attack on the FCC isn't necessarily a good right. I think people misunderstand the point of regulators and like regulators are.

Yes, they definitely bring enforcement for sure. But by far what they're trying to do is just create standardization like all they're trying to do is if you're a security, just do a thing where you register and you have to do these standard reports. Now, there's a gigantic amount of friction involved with that. And I think it's inarguable that a large portion of the value that we derive from crypto is by regulatory arbitrage, like those same that same overhead doesn't apply to our space.

But and I think there's a really strong argument that I've heard regulators specifically I have friends at the FCC, please don't kill me that they have raised is this leads to something called the Lemon problem. If you don't have reliable disclosure, if you are just subjecting yourself to like tons of go to zero scams and rugs, well, that's going to be a barrier for capital onboarding.

We all know this. You know, just from an anecdotal perspective, you talk to your aunt at Thanksgiving and you try to show her on crypto and she's like, Why would I do that? I've known so many friends who've lost their money or they've been hacked. The Lemon problem is something we should absolutely attack. If we ever want crypto to gain mass adoption.

And so to my mind, the most important thing is to have a standard norm for disclosure. And for me it can be as simple as, you know, everyone's read or I'm just assuming many of you have read, you know, a 10-K filing from the SEC from like a public securities filing and the ten cages has management discussion of risks and analysis.

Right. Is just to say, here's the way our business works and here are the underlying risks. And here is the situation where here's the failure mode, where if you make an investment in one of the tokens, whether they are a stablecoin or whether it's a governance token or whether it's utility token, here is the circumstance under which it can go to zero and like to me that's the bare minimum that we need as an industry to, number one, enforce our legitimacy and to to protect users.

Love that. Very nice. Publish your thoughts on the same question. How do we ensure that and particularly I think for us as well as the community, as we enter the next phase of the boundaries and continue, you know, charting out the spot, you know, to do our part to to ensure that we can keep learning, keep experimenting without people getting hurt.

Well, there's there's a couple of things to be said here. And I think the most important point is the nuanced one, which is when experimenting, people get hurt. And so it can't be a question of how to prevent people from getting hurt. It's a question of how do you prevent people from getting hurt badly. Right. And so people should never put more money in that they can afford to lose.

People should understand what the risks are. As we were discussing and in crypto, the risks are almost always 100% of your assets can be lost in a very short period of time. And people need to understand that. However, and this is a big however, one of the core principles of permissionless technology is that anyone can use it and that there are no rules that, oh, you don't qualify, you don't have the education, you're not smart enough to use it, and therefore you don't have access to this technology.

And that's where there's a real friction between making sure that this technology is not just being stock, but technology in general. Is it accessible as possible with recognizing when you give people tools that they don't necessarily understand power tools, people can get really hurt. And so at the of the day, education seems to be the only the only solution.

And it's an imperfect solution because education is a slow, long process that takes everyone to go on their own individual education process. You can't learn for other people. And therefore, as a community, one of the things that we've always taken great pride in is how much discourse and dialog and explanation and questions happen within the beanstalk community and then the Beanstalk discord.

And that's to us a strong indication that there is this type of education and organic education happening. And to that point as well, there is a risk section of the of the beanstalk. White And I don't know how many other white papers have a risk section, but we felt it was very important to include in the beanstalk white paper some outline.

Okay, here are all the potential things that can go wrong because there's lots of them. And at the end of the we have to go back to though, the core assumption that people are best suited to make their own decisions and people taking away access to things is almost never the right the right response. So maybe you just talk a little bit on the lemon problem that this can put a bad taste in people's mouth or turn them away, you know, and unfortunately, I don't really think that's the right framework to think of when there's when there's innovation happening.

Like the the concept is that as new technology is built, there's going to be a lot of failure, a lot of failure. And so the concept that the failure is sufficient problem to prevent the innovation from happening, that's that's you know, I don't think that's a fair analysis of the situation. So instead, it's impossible to deny there's lots of people losing lots of money in things that don't do well.

I terror, even if they were doing well for a very long period of time. At the end of the day, the real question is how can you how can you move, move forward, not just individually, but how can we collectively move forward And really like your concept of some sort of standard disclosures that people voluntarily opt into, We think how could anyone be against that, you know, other than it looks like regulation?

It's not regulation, it's self-imposed. So there's there's something to be said for perhaps we should work together, John, on figuring out what those disclosures or standards should be. And Beanstalk can be an early participant in those disclosures. Hundred percent. Yeah, I totally agree with everything you said. Maybe I'll just add one tiny little thing, which is another reason that first of all, I definitely think we should self-police and and have norms of disclosure, but this might be unpopular.

I'm also pro affirmative regulation. And what I mean by that is the FCC getting its stuff together and making some guidelines. The threat of regulation, the ambiguity of regulation, of course, of course, not knowing is scarier than knowing exactly one operate. If we don't know. Agreed. Agreed with both what you said. And you know, I mean I frankly would very much down to, you know, just taking a crack frankly like just write a document for like a few disclosure samples for a few protocols that we do understand.

Well, but I want to I want to come back to education for a minute, because one thing that's unique that I you know, granted, I'm new to crypto, like about about a year and not even a year and I think June will be a full year into this into space. The classes that the beanstalk runs is quite unique.

It's happens every week and it literally is just, it feels a bit like university which is pretty cool. I've not been in university now for 20 years now, so that's a like that's just kind of nice to be in there. I want to hear more from you probably is like, was that always the intent from the get go to do these classes?

How did classes start and what your learning in terms of, you know, I mean, I don't have data to prove this claim, but I feel like as far as if I think about, you know, proportion of users who have a total understanding of the protocol, its mechanics and its risks as a percentage, or if this was measured in percentage terms, I think Beanstalk would be would be quite high.

And that's because of the use of just just this relentless effort, week after week after week to do this or week after week to do these classes. What was the thinking when you guys started and what's been your learning that you can share with everyone else who's thinking about education as a key? I would say area of focus to to make these efforts more scalable and safer.

So when we originally deployed Bienstock, we, we started building out a network in a community from zero, like literally zero through this with a student. We didn't even tell our friends unless they had worked on Beanstalk. We didn't tell them. And so the concept was how do you now go about creating not just people that want to participate in the protocol, but people that are and understand the protocol?

And originally the first community forum was on Telegram. We kind of pursued the Telegram group because that was how ESD worked. Largely, there was a telegram group and so we started there and there was high. We would send paragraphs and paragraphs, essays to this telegram chat, but it was hard to find the messages. It was hard for new people to go find the old messages.

And more than that, the telegram setting just wasn't the best for discourse. Now we were still in Telegram until the the pump and dump happened in September, whereby the price went up to $4 and down to $0.24. And a couple of things happened at that point. One, people were pretty like the the people in the telegram group started to blow up the numbers and the telegram group started to blow up and the content started to go down.

And there was this whole new class of users that came into the protocol. And a lot of them quickly left that didn't understand the protocol. And it was very clear that the telegram setting wasn't working. So we having no idea what we're doing in terms of like a social community formation standpoint took, as has been the case since we launched, took a lot of advice from the community, even though at that day it was a pretty small community.

People were saying, if you want to build a genuine, open, honest community, you got to go to Discord. So I'd never been on discord, but we got on discord. We made a Beanstalk Discord and, you know, people started participating in the Discord. But the problem was we shifted from Telegram to Discord, which made the dialog a little bit better, but the price was still $0.24, $0.30, $0.40, and people didn't understand the mechanism.

People had no idea of why. Why didn't it go to zero? Why can we expect it to go back to one? Why, if I'm learning to the protocol, am I going to expect to get paid? There's a lot of uncertainty and in short, given the fact that there was a higher time pressure since the price was well below a dollar to educate people quickly on why they should participate in beans stock going forward, the thought was we got to get we got to get out there in front of an audience and thus began the quest for a voice modifier.

So it took us like three days to figure out how to get the tech ready to to modify our voice and go live. But then we had our first class with the community, and I think there was only like ten people there. Maybe then we started having them weekly. The next one, there was maybe 15 people and 20 people.

And since then we've grown to a steady stable of every class has at least 50 people or so. They run at least an hour. Any and all questions about the protocol are answered and a lot of them are repeatable. A lot of them are also new questions. And in general, those classes have had a very strong effect on creating a very highly educated community base.

And now even though those those classes are really only one week since the attack, they've been happening a little bit more. Then the real positive feedback loop comes from those 50 people that were in class are then in the discord over the next week repeating it, re explaining things, the value of going through the effort of typing things out and explaining it to others, I think we all know has a very strong effect on people's deep understanding of things.

And so this very organic community has formed through verbal dialog on classes where people come up and ask their questions and write in their questions and then thereafter kind of all in a Socratic way, working together to figure out this make sense. What about this? Important questions are raised Being stark has been changed through on chain governance like 15, 16, 17 times prior to the attack.

And the concept of the vast majority of those changes were, if not directly from community questions. What about this? What about this community? Suggestions What if we did this? Any of those changes only happened after significant discussion with the community at the time. And so it's hard to it's hard to understate how much since we started this. The value of an organic, highly educated community has played into the success of Beanstalk so far.

Well, no, I, I mean, I, I can attest as a community member, someone, you know, I mean, I miss them. A voice modifier, by the way, I there was an element of mysteriousness about the character Publius that's kind of not gone away now. No, I kind of know you. It's it's it's it's nice to but I do miss the voice modify it.

But the other thing I'll just say is that, you know, and this is something that has kind of sort of troubled me a bit about crypto as well, like and, you know, it takes a while to understand these protocols. Like, I mean, I had to read your white paper like 14 times to get, you know, granted, it takes me a while to like, start comprehending things, but we're on version like 17 or something.

ASCII So you're, you know, do I know I yeah but I give it to you. But, but what I'm getting at is like, I mean for me the thing that has, you know, bothered me a bit since being in crypto for a year is just how quickly people decide that. Like, okay, yes, I'm going to go. And you're like, Wait, no.

I mean, how do you make up your mind so quickly about who is? And there's this whole concept of people first, then do due diligence later with, you know, I guess I mean, it is powerful, but so long as you know, it's not done with amounts that can hurt. And I think that's like because I mean, that's one thing I'll add that I think that Biden has done a terrific job with the reminders that this is an experiment.

It's an experiment. It's an experiment. I also think it's an innovative effect over the glasses. But I think like I think I think the reminders around, you know, hey, yeah, don't put more than what you can lose. I think those are I think those are really important because, I mean, they're, you know, it's you know, it's maybe it's like a bad marketing and I haven't really seen a bear market in crypto.

You have connected with a number of folks I got to know virtually. And you know, who shared like the scale of their losses as a percentage of what they had. And I'm like, I don't know. I mean, that's that's crazy stuff, what you're doing. And I mean, obviously don't want to play mom and start policing people around, but just thinking that, you know, as a community, like I think we've done great on the education on that in mind as an experiment, perhaps like the reminders on, you know, just guys, be careful and, you know, don't blow it.

But we're approaching the hour and I want to be respectful of time. It is a work day. I.