#003 Meld CEO in Twitter space with Mario Nawfal
Mario: Hey, Brian, let me know when you can hear me.
Brian: Yeah, I can hear you. Yes.
Mario: So I actually crashed at the worst time because you’re talking about gaming web three gaming, which is honestly the thing I’m most excited about. AI started take the shine away from it, I think is way underrated in terms of users and use cases. Way underrated. It makes the most sense.
Brian: I don’t think it takes the shine away because I was looking at a tool just recently and imagine this with AI now, for game developers, it actually democratizes game creation because, as you know, making a game is super expensive. With AI now, I can draw a level like a five year old would just drawing with my finger in the air, kind of very sloppy. Draw a window, draw a door here, draw the pathway, et cetera. And the AI can then just fill it in and create the level just like that. So it’s actually going to make it so we’re going to see probably a lot more games on the market very soon.
Mario: Will it make the experience more interesting, though?
Brian: I think it can, because the player agency that I was just getting into with interactivity with the game you can actually customize your experience to an infinite level with games with AI, so you could talk to and it could learn about you and create the game in a way that you, Mario, would be interested in based on your online profile.
Mario: Ran I’ve never heard you talk about gaming. Does it fit the criteria? If you look at the questions you sent and I’ve got them written down. So is there a network effect? Yes, I think gaming and network effects makes that’s probably the easiest argument to make. Does it have a community where a game is all about building a community? Does it have real users? Obviously. Otherwise why would anyone be on a game unless it’s played to earn, unless they’re to make money, which is not sustainable. Is it decentralized? I think the concept of decentralized gaming will take time to be completely decentralized, but at least is there a path towards decentralization? Generally? Games do have that. Will they survive regulation? Again, that’s not my area of expertise, but if I had to guess I’d say it should.
Ran: Generally, if they really are decentralized, then probably they’ve got a higher chance of surviving regulation if they’re not decentralized. If they’re centralized companies that have tokens instead of equity, then we can see what the future brings.
Mario: When you talk about generating monetization, I think monetization and gaming is again, an easier argument to make. So I would say gaming fits all your entire criteria. I never hear you talk about it.
Ran: Yes. No, I’m a big fan, as I said to yesterday, I’m a very big fan of gaming, but I’m not a big fan of individual games. Why? Because I think one in 1000 games will actually become successful.
Mario: You can make that argument about anything.
Ran: Exactly. Which is why, instead of investing in the actual project, I’ll invest in the protocols, I’ll invest in the exchanges, or I’ll invest because I think that trying to choose a winning game, it’s much easier to pick a studio where I know a studio in its lifetime will make ten games. Then all of a sudden, I’ve got a one in ten chance of actually capitalizing on it. So, for me, when I look at a game, I very rarely invest in games now, but if you come to me with a gaming studio with smart people and say, look, we’re looking to build play to earn gaming or NFT gaming or whatever else, generally, I’ll take a very serious look at that.
Mario: All right, cool. I’m just pinning all the tweets. By the way, tell your boyfriend is sending me your tweets about the five coins that survived multiple cycles. You got BTC, XRP, Litecoin, Doge and ETH. And then it’s got a link to your YouTube video. So that’s for anyone listening. I’ve pinned I’ll say your Cohost, but I’ve pinned all the tweets at the top. So we got a few tweets there. The first two is if you want to sponsor the show, come on as a sponsor. And I’ll talk about Today’s sponsor or work with incubator. There’s an email in the Pin tweets above. That’s the best way to contact us. You can also DM us as well. Me and Ran and the team will attend to it on Twitter. But preferable is to just hit us up via email. Who’s our sponsor? You don’t know, Meld? You didn’t look into them? I did. That’s pretty cheesy. I think I’m an investor. I haven’t had time to check. I’m almost certain we invested. I’ll have to check with the team, but they’re really cool.
Ran: Yeah, I’ve been speaking to them. I had actually a chat to them today. The concept that they’re doing is I think what they are is a regulated bank in Lithuania, but it’s a noncustodial bank. So you hold your money in your own noncustodial wallet, but you get banking services through a regulated bank. It sounds to me like it’s the best of both worlds, because you’ve got a regulated bank on the one side, but you never give them custody of your assets. You’ve always got custody of your assets because they link in through a crypto wallet. To me, it sounds like a groundbreaking concept. Actually, I asked a lot of tough questions because I wanted to make sure that this thing could actually work. And it’s actually quite interesting. It’s not functional yet, so people can only sign up for the waiting list, which is I signed up for the waiting list, because I want to just be one of the first people that actually test it. And you can get an AirDrop as well. But the concept of a bank that is completely decentralized, where you have custody of your own assets, it’s a use case that makes sense. And I think they’ve got their own layer one as well, no? Yeah, they’ve got a layer one, which is an avalanche subnet, which is I also questioned the guys as to why they needed to have their own layer one. They explained it to me, I think it’s very good project I’ve got myself on the waitlist.
Mario: We’re going to be asking them a few questions. One of them is, I want to understand the concept of having a layer one focus on DeFi or when you have a purpose specific layer one and what advantages it has. So that’s probably the first question that came to mind, but for anyone that wants to check him out, it’s a Pin Tweet above. The name is Meld. M-E-L-D. Definitely check him out. But let’s go back to the point, is that we’ve talked about web three gaming. Brian, I do want to go to we’ve got Hani and Josh here as well. Guys, I’ll go to you, Josh. First. What are some other narratives that are interesting to you? Gaming is one and that’s somewhere I’m deploying a lot of capital. AI is an easy one, so I want you to avoid it because it’s too easy. What else comes to mind? Are layer one still something worth exploring or has that ship sailed? Is too many big guys and it’s too difficult for layer ones to make it? For new layer ones to make it?
Josh: Yeah, it’s a great question. I mean, I’m just looking back at something I read earlier this week, which was a research piece from Finance and Credit to Binance. They’ve got a pretty decent research arm and in this paper that they released, they were asking institutional investors, where are you going to be putting your money over the next year? So, dollar for dollar, where are you going to be putting your money? And over 50% of them said that they’re going to be putting money into infrastructure and that was overlayer ones, overlayer twos, over DeFi, over gaming. But then they drilled into more specifics and they said that over 50% of them were looking at wallet and custody innovation as a particular niche to investing. And then following that the next biggest niche was 25% of them were looking at zero knowledge in some capacity, acid as an area of investment for them. And so I would make big bets on those areas. I may be biased because we are very much in the infrastructure, wallet and custody game, but if you boil down to everything that’s gone wrong in the space over the last however many years, but particularly in this year, it’s all come down to the problem of trust. And so anyone that’s building anything that is removing trust from that conundrum so you don’t have to trust the service provider, you don’t have to trust the application to do what it says you’re doing, you don’t need to trust the yield generating app that says it’s doing X, when in fact it’s lending your funds out to Y. Any application that is removing trust and building-in security I think is a really, really solid bet to make. And we’ve seen the practical complications and implications of getting trust wrong this year. And whether it’s FTX, whether it’s Celsius, there’s just so many examples of lack of transparency, too much trust being put into service providers, and so anyone building something that is trying to solve that problem, I think it’s a really solid bet to be making if you’re seeing that kind of product sweep being built at this specific time in the market.
Mario: So you’re going back to kind of the foundation of what made crypto interesting, blockchain solves the Byzantine generals problem and that’s something that we’ve kind of forgotten about this solution, but looking at a criteria that you’d follow to be able to determine which projects are worth paying attention to. Is there anything specific that Ran mentioned that he missed or anything that he mentioned that you disagree with?
Josh: You know what, Ran and I were in Texas a couple of months ago, and this is kind of the stuff that we spoke about when we were speaking primarily about what we’re doing at Credo, right, which is building on chain trustless infrastructure. And all of the trust points that Ran is talking about here. All of the things that are important are, I think, are absolutely spot on. And we talk a lot about community, but in reality, what we’re talking about is users. Is there a use case for this thing, and will the use case scale? And if it does scale, does the benefit of the additional usage accrue to the token? And can it actually be decentralized as a use case over the long term? So at the risk of agreeing too much with Ran, I think his points are really spot on because people are looking for they’re looking past the buzzwords. They’re looking past people pretending to be decentralized that actually aren’t. They’re looking past projects that just raise a token for the sake of raising a token. Does the token value to your product? Does it do something that you couldn’t do if you didn’t have that token? And so I think really those categories that Ran outlined are pretty much spot on in many respects. But I very much would also overlay some particular kind of themes or verticals in the crypto space, whether it’s infrastructure or zero knowledge as particular directional areas of investment, because that’s where the future is being built.
Ran: I think that every investor is going to come in and it’s going to look for the verticals that interest them. And you mentioned some very good verticals. I don’t know if you mentioned it was a survey or whatever it was, but I imagine that where you got that information from was from a survey of institutional investors. Because what it sounded like is that it was institutional investors trying to solve the problems that they face or that they experience when entering our industry. Right? I think that ultimately every investor is going to come in with their thesis. Some investors are going to come in with the institutional thesis, like you mentioned. Some are going to come in with a gaming thesis. Some are going to come in with an entertainment thesis. Some are going to come in because they just want better money. Regardless of what they’re coming in for. I think that the questions remain the same. Does it have network effect? Does it have a real community? Does it have real users using the protocol for what it’s designed to do? Is it going to be decentralized or is it already really decentralized? Will it survive the regulators?
Mario: Ran, there’s one point you’re all ignoring and Hany, you guys build a lot of products that have real use cases. Is the regulatory aspect of it with Gensler doing what he’s doing with the SEC’s initial ambiguity and now their aggressive nature of what is considered a security, how can a project determine or how can an investor determine if a project ticks the regulatory box?
Ran: Well, they can do the best that they can. Now obviously one of my thesis for the end of the cycle is that Gary Gensler’s out at some point. But regardless, you got to look at the token that you bought and be quite critical and say, you know what, if it’s decentralized, the SEC is going to have a harder time to attack it. If it’s proof of work and it doesn’t have yield staking yield, the SEC is going to have a harder time attacking it. If it didn’t do an ICO, the SEC is going to or an IDO, then the SEC is going to have a harder time attacking it. There’s no perfect project, but you got to ask yourself a question. Sorry, there is a perfect project. It’s called bitcoin. The second one is ethereum. But you got to ask yourself a question and say, look, am I reasonably comfortable that my token can survive a regulatory attack? Now, I know that 80% of the tokens that I invested in in this last bull market are not going to survive. A real regulatory attack, and that’s why I sold them.
Mario: Hany, I see you on mute. Jump in, man.
Hany: I think it’s a very wild world. So for background, we have products all over the place. We have them from in Australia and the Middle East and Europe. We’re obviously working on products in the United States. And regulators are different. The US is such a public process, which is very unlike most regulators in the world. All of these ETF applications have gates that are public. The public gets to comment, and so the normal public average investors get to see the regulatory process much more in detail in America than elsewhere. But I can tell you that behind the scenes, it’s all the same. It has taken a very, very long time for numerous regulators to get across the line. I remember certain regulators, China being the very big example of this, where they were incredibly negative a couple of years ago. Now they’ve turned. Britain — the UK with the FCA seems to be doing the same thing. And so you’re not going to, especially with a global product, really be able to tick all the boxes in all of the jurisdictions. And that’s okay. I think it takes some time to get there. One of the things that we think a lot about is there are different products that are appropriate for different kinds of customers. So we’re the largest issuer of Crypto ETFs globally. But something that people don’t know is that we also do tokens, because at the end of the day, we don’t think people wake up in the morning and want to buy a DeFi index ETF. They want to buy exposure to decentralized finance, but perhaps that’s better available to you through a Salana program, or your Phantom, or an ERC 20 token in your MetaMask, or an ETF, in ETN and ETP, et cetera. And so. Given given that, I think it’s best to just take a step back and think about these products more in terms of accessibility on a region by region basis can sometimes lend itself to different product forms, and so not everyone needs an ETF. Some people would rather have a token. And on the regulatory front, it’s constantly moving, constantly in change in the US. And elsewhere, and we see a lot of those kinds of updates happening behind the scenes more.
Mario: Hani and by the way, Scott, just to ask you a question on who the hell is Paddy? Paddy is Ran’s researcher. I know he doesn’t have a profile picture that you approve of, Scott, but this is how he got on stage.
Ran: You want to hear a very cool story?
Mario: I like how when Ran wants to say something, he’ll repeat it until you give him the chance. Like you want to hear. You want to hear? You want to hear? You want to hear? He wouldn’t stop.
Ran: I’m going to mute everyone’s mic soon. Here we go. Mute everyone. There we go.
Mario: You can’t mute me, bro, by the way, but go ahead.
Ran: I used to look at Paddy pirate tweets and think to myself, wow, this guy is so smart. And I used to tell my team, please invite him to our research group. Let’s hire the guy. Let’s get him into our research group. And the whole team kept it completely quiet from me that Paddy is Paddy, right? Because obviously his real name is not Paddy. If you mean him, he looks like anything but some kind of Irish Paddy. And one day, one of the guys walked in and whispered at me. I said, you know that Paddy is that guy sitting in the office. I’m like bullshit. How can he be so smart on Twitter and so dumb in the office?
Paddy: Ouch.
Ran: I’m kidding. I’m kidding. I didn’t say that. I was being funny. No, he’s very smart, very smart. But the irony is that I was trying so hard to get him to come to come work for us because his tweets are so bloody good. It turns out he’s sitting in the office next to me. He is actually one of our researchers. He just didn’t want us to know what the account was. Well, I just followed your pirate out. I followed your pirate.
Mario: I followed him before because I follow all the speakers we invite. But I just unfollowed him just now. Paddy, just a question for you, and I’m going to go back to Hani question for you is different narratives. You’re Ran’s Researcher, which already kind of discredits a lot of what you’re saying, but I’ll give you the benefit of the doubt. What are some narratives you’re interested in now? Something we talked about yesterday. And if you’re the guy behind Paddy, go ahead, bro, give your speech.
Paddy: I’ll tell you, my favorite narrative is the Dex narrative. I think it ticks. A lot of the boxes that Ran’s been speaking about, in particular the Making Money box. Obviously, many of these DEXes are generating huge fees. I have a tradFi background, so when I look at investing in tokens, I think of it as if I’m investing in a business. So the most important thing for me is, do they generate revenue? Are they generating fees? And I think the Dex narrative is being underlooked a bit. There’s a lot of Dex tokens on the market that are very undervalued if you compare the fees that they’re generating to their FTVs. I wrote a tweet on that today. I also think it’s an interesting one for the regulation box because obviously we’re seeing these centralized exchanges like BuyBit Kucoin last week come out, and they’re coming out with stricter KYC policies. And I believe that this will lead to a lot of crypto traders moving to these DEXes.
Mario: But Paddy, we don’t have enough DEXes. One thing that Ran didn’t add is that how red or blue is the ocean? And I was asking Hany. I’m like, hey, I think it was Hani or Josh. Like, layer one is already a lot out there. It’s just really difficult for layer one to come in now versus six years ago. Can’t a similar argument be made for DEXes?
Paddy: I think so. Definitely. What I think, though, is that is a lot of opportunity. It may not be long term, maybe not like in a five year outlook, but certainly leading into the next bull market. I mean, your GMX is your gains as a protocol.
Ran: Can I add something here? Yeah, let me add something here. I think that by nature, crypto is made to be traded. So if you think about generally what we’re talking about here is we’re talking about different types of currencies. Every one of these crypto is actually a different type of currencies. Now, ultimately, I think the trading use case in crypto is always going to be there because it’s just the trading of different types of currency. So I think at its core, you need the chains, but then the layer above that is the trading. Because ultimately, that’s what we do all day in crypto. It’s not only speculating, it’s actually even when you think about use cases, you’re trading one token for another token, you need a layer two tokens, you’ll trade a layer one token for it, et cetera. So I don’t think that that use case is ever going away. Which is why my portfolio now is very heavily weighted. Because of Paddy to the DEXes.
Paddy: Correct.
Hany: I love the Dex argument. I love, love the Dex arguments. And you see, it because the problem isn’t just with Buybit, or Binance.
Mario: Just for the audience, dex is a decentralized exchange. So Binance is centralized and you’ve got something like Uniswap is a decentralized version of Binance. Go ahead, Hani.
Ran: If Dex is a decentralized exchange, tell me about CEX. What’s a centralized exchange?
Josh: Well, guys, what about a hybrid exchange? And I’m not going to hijack it right now, but I’ve got a slightly contrarian view in the long term on what exchanges will look like. I totally agree with you guys that in the medium term, DEXes are the hot area. People love to trade, they want to trade in permissionless ways. But there is a new future emerging and that is a hybrid exchange. And I’m happy to talk about that in a second.
Hani: I think it will take time to get there. If you open the Uniswap app on your phone, it looks and feels almost like a wallet. So a lot of the talks on infrastructure investments and wallets and things like that, Dexas are really an interesting position right now. In addition to that Binance, Coinbase, other big, big exchanges are getting attacked and we’re seeing a lot of that volume start flowing over to DEXes. And I agree completely. I think they’re undervalued. I think people don’t realize just how much traffic and how much use and how much revenues all of the DEXes are doing. But from an accessibility perspective, they’re available to anyone with a mobile phone, anyone with an internet connection anywhere in the world. And that’s a very, very powerful thing. The one thing that I think we sort of touched but didn’t cover because I think it’s a deeper problem. I’m a big fan of all the different layer ones and what they’re capable of doing. I’m a big fan of everything else. One of the major issues that we have yet to solve that causes an intense amount of friction against growth in the space is the fact that every single blockchain that we have, every single product that we have, is a completely different ecosystem. They do not speak to each other in very easy ways. Bridging is incredibly difficult, it’s prone to hacks. And when we throw out bitcoin ethereum solana avalanche, that’s four different systems that actually completely live in silos on a pragmatic basis because again — bridges are difficult. People have trust issues with these kind of things, et cetera. And I think that’s one of the biggest problems when everyone has a MetaMask wallet but MetaMask only exists for the ethereum ecosystem versus everything else.
Ran: Hani, I agree with you, and I think I would have shared the same thesis as you, but have you ever used Layer Zero and Stargate? Have you ever used the layer zero product? Call just to be clear, I’m not invested in Layer Zero. I do hold some tokens in Stargate because I believe in the thesis. But I think Stargate changes the game. And I’ll tell you why I think Stargate changes the game.
Hani: So can I say one caveat and. Then I will let go. I’m a degen myself. I’m very, very comfortable with all of this. I deal with a lot of normal regular users where oftentimes we are their first introduction to crypto. So when I say a lot of what I say, I’m talking about an average person because that’s actually what we need. My thesis is and what I spend every day thinking about is how do we get crypto to a billion users? And so there’s a lot of the usability things that I think about and we’re absolutely not there yet. I think we get there with raft assets. I think we get there with better UI and UX. And that’s where I’m coming from. Not me personally or my personal views or what I do.
Ran: I think that there’s three phases to this revolution. So I’m going to agree with you that we’re nowhere near the ability for the regular user to use protocols like Uniswap or Stargate or even MetaMask. You tell a normal user to use MetaMask, it’s like, what are you talking about? It’s crazy. Even what I consider sophisticated users can’t use MetaMask. I think that this revolution happens in three phases. First one is centralization. I think that’s where we are today, that is just getting used to the idea of crypto assets and getting people to migrate from the traditional financial system onto a Binance, Kraken, Coinbase, whatever it is. The next phase is getting semi decentralized. And I think someone here, I don’t know who it was, I was interjecting, but he said it’s a hybrid world. That was Josh. And then very much in the future, I think what happens is we land up going to a decentralized world. Now, I think that we have a long time, a lot of building left to do before we get the totally decentralized world. I think that Credo is a great example of that. Like Credo’s buildings, stuff. I don’t know how far they’re on the roadmap, so please forgive me if I say it wrong, but when their stuff is ready, it brings everything that we get in the centralized world to the decentralized world and as easy to use. I don’t know how far they can comment about it. I’m just saying I think the revolution happens in three phases and even though we’ve been here for, give or take twelve years or eleven years, however long you want to say I think only now we’re really starting to build at a fast enough rate for adoption. And there’s a long way left to go before we can actually get adoption of decentralized protocols. You need a PhD to be able to use some of these decentralized protocols. And the problem is that if you make a mistake, you lose too much money. So, yeah, that’s the problem.
Scott: Ran, I was going to say go ahead. Sorry. I was going to say, for me, even personally, I’m pretty far down this rabbit hole. I’ve never touched 99% of this stuff because even for me, I just don’t feel like it’s ready and I’m disinterested. So if I don’t care about Layer Zero and Stargate, which I’ve literally never heard of Stargate, no offense, then that’s a pretty good sign of what? The mainstream, probably. And back to the decentralized exchange conversation. I think that a lot of value will go to DEXes, as you said, and a lot of volume. But that doesn’t mean that they’re investable. And I’m not saying that they’re not. But the tokenomics have to be perfect for actual value to accrue to the tokens and for you to want to hold those tokens as an investment, which goes back to your point that 99% of this market, as you know, I believe, and you do too. You said they’re currencies. I would say it’s just a bunch of casino chips. And we’re hoping that a lot of people still want to come to the casino. And so I think that DEXes will grow in volume, but that doesn’t mean that there’s money to be made investing in them. That’s the challenge.
Hany: I disagree with that. I disagree with that completely. I think if you believe that, then you must also believe that Coinbase and Binance are not good revenue generating companies. If you don’t think investing in the centralized exchanges is a good money making investment, then the same would try translate to DEXes.
Scott: But Hany, do you view Coinbase stock as a good corollary from BNB Token? Investable? No, because BNB is a good corollary to Binance, plus Ethereum, plus a bunch of other things. I don’t think they’re the same thing at all.
Ran: Come on, guys. It’s twelve minutes past. Just until 14 minutes past. Whatever the hour is, wherever you are, can we just for two minutes, just be really honest with ourselves? Crypto is a casino. 100% stock markets are a casino. There’s no difference between Draft Kings or I don’t know who the big casino company, Caesars Palace and the Nasdaq, other than what they get you to believe that you’re playing. There’s no difference. Come on. It’s all casinos. Are you going to tell me that people invest in companies because they think they’re going to make a PE of 100? It’s a casino.
Hany: I deal with a lot of family offices and institutional investors who aren’t looking to gamble, who are actually holding some of these tokens for the long term. And they do a lot of research. They’re not touching 99.99% of it.
Mario: Yeah, hedging is not gambling. So preservation of wealth is very different to creation of wealth.
Hany: But mostly a casino is very different from all a casino. Look at stable coins. Look at the functions that they actually serve. Look at what people are actually doing with this.
Ran: All the exchanges are casinos. They allow us to take bets on certain things. What’s the difference between an exchange and a casino?
Hany: Again — if it’s a casino, then Schwab is a casino as well and Interactive Brokers and Fidelity are casinos as well, then that’s a different definition of casino. Because what ends up happening is, no, not everyone is losing the money. The house does not make money off of you. There’s very different things here where I absolutely am not gambling when I’m buying bitcoin on coinbase. I’m making something that I believe in for the long term and I’m comfortable holding that.
Scott: Yeah, I’m not disagreeing with you. I’m just saying, I mean, listen, if we’ve seen massive volume spike, let’s say theoretically on uniswap, in theory, uniswap token should go up as a function of that business improving, but uniswap goes down as a function of the entire crypto market dropping, which does happen with stocks as well. It can be a baby with the bathwater situation, but I’m just saying that depending on how these tokens are structured and what the supply is and such, I believe a decentralized exchange could do exceptionally well while its token could still trend down indefinitely.
Mario: I want to touch on the hybrid exchange and before that, I just want to remind the audience as well, MELD, the founders are about to come up on stage. I’ve pinned their tweet. So they’re Lithuanian bankers and said, but they’re not just a pure bank. We’re talking about the hybrid model. So they’re a bank with self custody as well. They’ve got their own at layer one. They’ve got their own wallet as well. So the founder of the CEO will be coming up on stage, shortly. I’ve pinned their tweet, check them out. It’s Meld Finance. And then if you want to similar to Meld, if you want to come on the show and chat to us or work with our incubator. So come on as a sponsor or as a client, check the pinned tweets for the email or just DMs to come up on stage. But Josh, since we’re talking about hybrids, the concept of hybrid protocols tell us what a hybrid exchange is.
Josh: Absolutely. I think for a long time we’ve looked at venues or exchanges as binary, right? You’re either a centralized exchange or a decentralized exchange. And what we’ve done and when I say we, we are accredited, we’re the incubators and builders of Ankex. And Ankex is a fully hybrid, non custodial derivatives exchange. What that means in practice is that we get the best of both worlds, you get the high volume.
Mario: I want to take a step back without getting a bit deep. So when you talk about something being hybrid and getting the best of both worlds, is that just more of a step towards decentralization? So we live in a centralized world. Blockchain introduces the concept of decentralization, and hybrid is pure — it’s another way of saying — transitioning. So anything that when you say hybrid in web three, it just means it’s centralized, but it’s slowly decentralizing. Is that a fair way of explaining whatever hybrid project or hybrid protocol is?
Josh: Sometimes, but in the case of an exchange, no. So the hybrid in essence of it is essential. Why is that? Why would we want a centralized order book and all of the exchange infrastructure to be centralized? Because it is low, latency, it is easy to trade against, it can be co-located. So simply put, you can have professional traders with the best infrastructure trading at speed and at scale. That’s what you get from a centralized exchange stack but this is the important part. Why is it hybrid if you make the entire thing noncustodial, if you say you can connect your crypto wallet to it, you never have to your assets on the exchange and get worried about what they’re doing with them. That piece can be decentralized. So all the settlement, all of the custody, all of the collateral management can take place on chain.
Mario: The example I gave of Meld being a centralized bank with self custody, would you consider that to be a hybrid model?
Josh: Absolutely. Yeah. So if you’re leveraging some centralized solution or service that Meld would be providing, but you’re able to access it with your wallet, that’s, again, the theme of the best of both worlds, something centralized can be accessed through a decentralized piece of infrastructure, i.e. your wallet. And that, I think, is going to be the future for a long time for many use cases, because not everything can be decentralized, right? Some services create enormous benefits for users when they are provided as a service to end users. And that could be the banking model that Meld have, the noncustodial derivatives model that Ankex has. So this hybrid model is, at the end of the day, it’s a big benefit to users and it may in some business cases, like exchanges or banking. Having this hybrid model is just the reality of the nature of the service that they can provide.
Scott: Yeah. Josh, real quick, Mario, we’re talking about this as a theoretical first of all, this exists. A lot of people don’t realize EDX Markets, which is the much discussed exchange presented by Schwab, Fidelity and Citadel, is noncustodial wallet. It effectively is this and that’s what’s coming from Wall Street. They’re not custodying assets. It’s noncustodial.
Mario: Well, Ken, we’re talking about Meld and we’re talking about you and the concept of hybrid models. We’d love to get your force on what’s been discussed so far before we dig into Meld.
Ken: Sure. I mean, I think certain parts of hybrid models are important, but I think that if you come from the DeFi space, if you come from crypto, then certain parts of that should have a line in the sand. So the noncustodial part should be a line in the sand. You might want to be able to connect your wallet to something and be able to sort of transact or get some sort of benefit out of being centralized for speed. But you always want to maintain custody of your asset as much as is humanly possible. So handing off that custody, I think, is where the line should be drawn in regards to allowing other entities or other protocols to handle your assets.
Mario: Ken, look, you’re going to like this. It’s going to be a very simple question because I fucking hate DeFi. Why? Because I just don’t understand. It’s not an area I’m very passionate about, unlike Scott. Scott, for some reason really enjoys it. But Ran seems to be a big fan of you guys. And I was just looking at your website, I was trying to understand what Meld is. If anyone in the audience, just go to Meld.fi or just check the Pin Tweet above their sponsor for today. And first, I think I don’t know if we invested or not. I have a company called IBC, so you can tell me maybe afterwards if we invested because I have a really strong feeling we did.
Ken: No, you didn’t.
Mario: Okay. There you go. So I’m wrong. All right, so I’m just having a look what you guys do, and I know that you guys raised a lot of money. So congratulations. And essentially the elevator pitch that Ran said it’s a bank with self custody as well as a built in DeFi protocol. I added the second part in is that a good elevator pitch?
Ken: That’s one perspective. That’s the kind of DeFi or the TradFi perspective that you would see into it. Meld started out as a lending and borrowing protocol where we wanted to make it so that you could take your assets, lock them up into a smart contract, stay noncustodial, and then borrow Fiat against it, as opposed to borrowing crypto against it, right? Today you can go into AAVE, you can take your asset, you can borrow a stable coin against it, take it into Coinbase, and then take that out into your bank account. You can do that. Good luck in trying to explain that that’s actually debt to the IRS. It’s not going to happen. So what we’re trying to do is we’re trying to make all of that a fluid process where you keep all the DeFi side. So you can lock your asset up into a smart contract. You can get some liquidity out of your asset in a safe, safe way, and then you’re able to bring it onto the banking side. We started out lending and borrowing, but we saw that none of the fiat providers would touch us because we were a DeFi protocol and we were focused on noncustodial and decentralized. So we had to follow the path to get our own electronic money license to be able to achieve this. And it also helps in the sense that when you go through this process, you then have your money in the banking system and life is just a whole lot easier when you want to move stuff around. When you’re already in the banking system, going from bank account to bank account, it’s easier. So our starting point was DeFi, then we moved into the fiat side of things. But if you’re interested in the fiat side as your gateway into the crypto world, then it would work like that but we started from crypto and then moved into finance or TradFi.
Mario: I know Ran and Scott will probably jump in, so I want to ask my second question relatively quickly. One of the points that Ran mentioned was surviving regulation. And that’s something that’s a lot higher on any investors criteria after what we saw in the last couple of weeks. How are you guys surviving regulation, or how will you survive regulation?
Ken: So, there’s two ways you can approach regulation. You can approach it from a legal opinion, or you can approach it from legal precedence. And legal opinion is a legal battle. Legal precedence gives you a bit better sort of foothold. And so we wanted to go through the process, and we started in Europe because we were able to move into an electronic money license. And it followed our set of values because it’s kind of noncustodial. And we went with the way of having an existing license, has legal precedent for doing this. So, the license that we’re operating on is a license that currently does this, and the Central bank is familiar with it. They know that it’s happening, they’re comfortable with the activities, they’re comfortable with how it’s being operated today. We wanted to start from this legal precedence perspective. Outside of that, I mean, when you’re talking about the US, the US is a completely different animal. I think that the SEC and treasury are on a war path, and I think that if you want to go up against them, then you better have some insanely deep pockets. Though right now, we’re not offering. We’re not planning on offering in the US. The rest of the world is ready to jump in front of the US for this stuff.
Mario: Okay, so you talk about the Use case of self custody is a really easy one to explain now, especially what we saw with banks in the last few months. But how do you explain to the average Joe, if they’re looking at Meld now, what are things they could do today just for the average user? What are things they could do today that they could relate to?
Ken: Meld solves a major problem for people that have crypto currently. So it’s not solving a problem for people that are not using crypto. What we provide is we provide, one, the ability for you to get liquidity out of your assets into the real world, and two, we provide predictable, cheap method of moving your assets between crypto and fiat. So we charge a half a percent for all crypto to Fiat.
Mario: How does that compare to other exchanges?
Ken: I think it’s similar to some other exchanges like Binance and Coinbase, because they’re actually padding the actual spot price as opposed to getting the best spot price and then putting a specific transaction on top of it. If you’re talking about something like Moon Pay, then we’re like 4% cheaper.
Mario: Holy shit. Okay. Yeah, continue.
Ken: So, the point here is that noncustodial, it’s imperative. You have to control your own assets, your coins, your keys. We wanted to follow this thesis, started it back two years ago, and it’s been proven. Because of the FTX…
Mario: I want to take RAN’s six simple questions when looking at a project. Let’s play the game now.
Ken: Sounds good.
Mario: So first one is, is there a network effect? Is that something that would apply with Meld? Because you’ve ticked the box, which I think is more the most important one. You’ve ticked the box of having real users. In terms of having a community. I looked at your socials. You’ve ticked that box and you’re working on it as well. The decentralized box, I would say you kind of tick the box in terms of being a hybrid model where self custody is the concept decentralization. You’ve got your own layer one. So you’ve ticked that decentralized box generating fees, you’ve ticked that box as well. That’s an easy one to explain. So the one that I would ask you for and I’ll give you the mic is are you building somehow building a network effect within Meld.
Ran: Before your answers? I mean, the question is whether we’re talking about investing in the product or using the product. Now, in this case, I’m not going to comment.
Mario: This is a question for as an investor. I’m the investor. But if it’s using the product yeah. You don’t want to comment, man. You don’t want the SEC to reach you in South Africa. So, Ken, this is for me. I’m in Dubai. I’m chill. So in terms of is there a network effect, please go ahead.
Ken: Yeah. So the network effect is effectively threefold. I can talk about two of them. First is we are lending and borrowing protocol to start with. So we are a liquidity we’re a liquidity pool infrastructure provider similar to Compound and AAVE. So the network effect happens through the lending and borrowing process where you have three actors, right? You have people that are supplying, you have people that are borrowing and you have people that are liquidating. There is the opportunity. Everybody makes money along the way. And our job is to harmonize the network and harmonize the protocol. The second is when you have your own blockchain and you can do a very, very low cost set of transactions, you can provide other types of services and other types of features. We want to be able to provide staking and be able to provide ways of yielding. I know some people have a problem with yielding these days in the US. Because they’ve been burnt so many times, but I think yielding is a key component to what we’re talking about. Both yielding now in traditional L1, things like Ethereum, Avalanche, et cetera, and also secondary structured products, things like this. More sophisticated instruments for people that are much more sort of, much less risk averse. So this ability for you to be able to invest in these different types of assets and at the same time have the basic components of being able to sort of lend, borrow, transact, this is the network effect, this ability for you to be able to transact cheaply between different people and be able to lend and borrow between different people.
Mario: And then the question I have next is something I read, and that’s more of a compliment to you guys, man. Are you the largest avalanche subnet right now?
Ken: By validator count, correct, we are.
Mario: Oh, shit.
Ken: Decentralization is super important.
Mario: Decentralization good for you, bro. All right, well, you double tick that box. And then the other thing about one thing I want to ask you about is that about the AirDrop that you guys announced. I’m looking out in your Twitter and I think it’s the today. Let me see the date. Yeah, you’ve been asked yesterday. Do you want to tell us about the AirDrop that you have? Yeah.
Ken: So, this is in combination to getting the word out. We want to make sure that everybody knows about the Meld neobank. We want to get as many early access sign ups as we possibly can. So as part of that, we decided to do Meld AirDrop. We’re making it possible for people that are going to sign up for the bank getting early access, that will give you a boost in regards to getting assets, getting Meld Tokens in the AirDrop, doing on chain activities, doing social activities, all of these will give you boosts in regards to getting Meld from the AirDrop. And if this sort of spills over into getting more customers for the bank, that’s the sort of important thing, like I was saying earlier, there’s a network effect here. If you have a bank account, you have the debit card and you’re using it, other people are going to see that, they’re going to know that and they’re going to be able to sign up as well.
Mario: Let me ask something — Ran, you said at the beginning of the show that you spoke to Meld and you’re a big fan of the project. You went on their waiting list as well but you can’t use the product yet. You’ve just got a waiting list and ask Ken when the product will be ready. What do you like most about Meld?
Ran: Well, again I say I’m not around the token. I have no views. I haven’t researched the token. I don’t even know what the Token does. But in terms of the concept of having a noncustodial wallet linked to a regulated bank account where I can start doing Fiat banking using proceeds from my noncustodial wallet, that for me, is a game changer. Just think about being able to transact as freely with your crypto as you can transact with your Fiat without actually knowing the difference.
Ken: Imagine being able to just take whatever Fiat you have, quickly move it into stable coins, have it generate a yield while you’re not using it, and then when you need it, you can move it back into Fiat.
Mario: When is your product going to be ready? And then I’m going to ask you a selfish question about the bear market. I’m going to move away from the product and then good. And then start asking questions about the market.
Ken: We’ll go into early beta access in August. We’re expecting to get our license approved in September, and the lending and borrowing protocol goes into testnet in September. So, everything should be put together and be live out of testnet or early access in October.
Mario: And how many people do you have on your waiting list? How much have you raised? Give us some numbers. Impress the audience.
Ken: So, we have around 25,000 people signed up already when it comes to the raise…
Mario: Hold on, you got 25,000 people signed up already?
Ken: Yeah. Everyone wants to use this? I mean, all of our competitors have died on the vine. All of our CeFi competitors — BlockFi, Celsius, Voyager… Everybody’s gone, right? Signature is gone…
Mario: Hold on, did you do a whole campaign on trust is dead in CeFi? And time now for DeFi solutions to what happened last year. Have you done an aggressive campaign to kind of put this in people’s face?
Ken: Not yet. So I’m actually in the middle of writing an article about this right now. As a result of Prime Trust, where we can actually say the thesis has been proven over the past year and a half, all of this idea of centralization and CeFi is just a horrible idea. So we will be talking about this and we will be going into this.
Mario: You got to be so aggressive. You got to be quick and be aggressive about it, man. Be very aggressive. The time is now. The next question I have is sorry, not question first. Keep giving us some things to impress the audience. All about 20,000 people signed. How much did you raise? You raised money in the bull market, didn’t you?
Ken: We raised money in the bull market through two ways. We had a private token sale where we raised from just private individuals. We raised $35m. And then we also invented a new method of. Funding for crypto projects. So it’s called an, ISPO where you do an initial state pool offering. So we were the first to do this, and you basically set up a bunch of state pools on a proof of stake blockchain. And then you keep the block rewards and in exchange for a fixed amount, you then give your token in exchange for those block rewards. So we did that, and when we did it, we got 100 million staked on the on the validators in the first 24 hours. And after three months, we peaked at 1.3 billion staked and we raised 14 million out of that.
Mario: How much did you raise total?
Ken: 45.
Mario: Jesus fucking Christ. You guys raised $45 million?
Ken: Yes. Well, we demonstrated, right? We demonstrated that we could do financial innovation, so we created a new method of being able to raise.
Mario: Ran, did you know this? Did you know they raised $45 million?
Ran: I know this because I spoke to the team this afternoon but not before that. No,
Mario: That’s fucking mental.
Ken: We don’t advertise it.
Mario: You should advertise a lot more. Like, this is such a big it’s a beautiful flex. Who’s using your account now? Who did I bring up? So, head of marketing is in the Meld account now? What’s head of marketing’s name? His name is Youssuf. You can speak, man. Don’t be shy, bro.
Josh: It’s not Youssuf. It’s Josh. But yes.
Mario: Josh. Are you in marketing as well?
Josh: I am the head of Community.
Mario: Sick, man. All right, well, congratulations on having community. Tell Youssuf, man, to flex the hat out of what you guys are doing and how much you raise, but also how you’ve innovated with your raise and how your solution to all the centralized solutions that died over the last twelve months. Yeah, go ahead. No, I’ll finish my sentence, man. I’m just telling Josh to tell Yusuf. To not listen to Ken and just go aggressive with marketing, because that’s pretty cool.
Scott: We want to ask Ken a question, actually, because, Ken, something you said was so interesting to me. I think everybody saw, obviously, the collapses of Voyager, BlockFi, Celsius, FTX, those centralized, obviously, authorities and platforms. But you hinted at the fact that you’re writing something about Prime Trust, which I think has gone wildly sort of underreported and discussed, but the fact that that was a custodian so much bigger than all of those. Right, because the custodian has one job that they and there was no yield explosion, there was no greed, there was just literal stupidity and then fraud to cover it up, obviously. And it’s something that we discussed very closely here, but I want you to can you give us a bit of what you’re writing about there? Because I’m so interested in that story.
Ken: Yeah, I mean, there’s two parts to it. One is custodians. Like you said, they have one job. They should not screw this up. But the point is, when something like a custodian goes down, they take down so many other organizations with them. So the remnants and the small players and the organizations that are kind of trying to do some of what we’re trying to do when it comes to lending and borrowing, they’re using these types of custodians. They’re running into these types of problems. So the custodian is actually worse. It’s more like an FTX in the sense that it’s got so many tentacles into so many other projects that when it goes down, it takes so much else with it.
Scott: So many of these platforms dodge that bullet, and people don’t realize how close it came to affecting so many more consumer facing platforms. I mean, everybody’s praising, obviously, a number of them for switching from prime to I mean, Fortress may have problems too, I don’t even know, but switching from prime to others. But the real story there is they were a month away from potentially being insolvent.
Ken: Yeah, it just ties back into this basic idea. It. Take control of your assets. Stop expecting a license to sort of mean something that people are actually going to trust. People should be trusting in what they have.
Mario: But Ken, do you have solutions for the flaws in self custody? Is there decentralized ways to be able to quote, unquote, reset your password?
Ken: Yeah. So this is something that we started we were working on something like this, right when the Ledger debacle came out. And then when we saw the community reaction to Ledger, we decided to kind of take a step back from the cliff and say, hang on, let’s do a bit more work on this before.
Mario: I’m not very technical, but is there centralized ways of doing what Ledger is doing? Ledger is finding a partially centralized solution.
Ken: Well, I mean, if you’re dividing your asset up into three centralized entities, then it’s a centralized solution. The challenge here is that it’s a high risk thing because if you’re giving your keys to even if you’re dividing up, you’re giving them to a regulated entity. There’s a jurisdiction, there’s a governance body that sits on top of them that can demand those assets. You saw it today with Kraken. They demanded the user data. The IRS demanded user data from Kraken. So what it needs to be is it needs to be the same kind of mechanics that you saw with Ledger, but it has to be in a fully decentralized manner. It has to be in a way where nobody can get access to it. That’s what we’re working on.
Mario: Man, I forgot you’re a sponsor because we started just chatting and kind of got carried away. But yeah, man, I appreciate you sponsoring. Sure. What do you think of the chat? Do you like the structure that we do this? How we do an AMA at the end?
Ken: I think it’s great. Think that I would actually like to see even more sort of challenging questions and sort of hot topics. I think there’s a lot of problems that are happening and there’s a lot of things that are the root cause of what you guys talk about. Things like the war in Ukraine, the fact that the Central Bank of Russia had their assets stolen from them or taken from them. These types of topics have kind of rocked the financial world and they’re also causing the SEC and treasury to behave in a unique way. So it’s all connected. And I think it’s cool that you guys are actually asking these really hard questions.
Mario: Yeah, if I was a bigger DeFi expert like Scott, if I was as boring as Scott, I would be able to ask some tougher questions. I had a few there, but you seem to have a good answer for all of them, including the well, I kind of put you on the spot with you talk about the advantages of self custody, but there’s obviously one big disadvantage, but at least you guys are working towards solving it. So that’s probably the best answer you could give.
Ken: Well, I mean, think about it this way, right when Celsius went down, when FTX went down, what do you think people were thinking? There’s no recourse. There’s no way you can get your assets back. There’s no way for you to do anything about it. At least when you have self custody, you have the opportunity to make decisions. You decide, okay, I’m going to take this, I’m going to put this in a safe or in a safe deposit box, or I’m going to make copies of it and give it to my family, or however you’re going to handle your self custody, you have a choice when it comes to centralized, you have no choice. You don’t know what your assets are going to be used for, you don’t know how they’re going to be held. You have no choice at all. So, I think that the ability to have choice is much, much more valuable than zero choice.
Mario: All right, well, Ken, I’m going to ask your audience, give us their thoughts in the comments, bottom right corner. I don’t think you’ll have enough time because when I enter space, you can’t comment anymore. But give us your thoughts on the discussion with Ken and what you think of Meld. Um, any tougher questions I could have asked, put them in the comments, bottom right corner. Otherwise, if you want to come on stage similar to how Ken was here, just hit us up, check the pin, tweet and email us or DM me or Ran if you want to check out Meld. We brought up Josh who’s running Meld’s account. It’s that red circle. And the other red circle with the. Ugly logo is a Crypto Town Hall account. So you could check that, follow it, because that’s where we’re going to start hosting the shows on the red circle called Crypto Town Hall. The ugly logo of a mic. Otherwise yeah, we’ll see you all tomorrow morning. And, Scott, don’t you dare protect the logo, man. Don’t you dare say, okay, cool. Well, Scott, mute cobra. Don’t do it. Don’t do it. It’s ugly.
Scott: I’m literally just messing with you to see when you’ll end it.
Mario: Okay. All right, guys, I’m going to end it now.
