Exploring Blockchain Infrastructure with Shawn Douglass of Amberdata
Shawn Douglass, Chief Executive Officer and founder of Amberdata, joins theCUBE at the New York Stock Exchange for an insightful discussion on advancements in blockchain infrastructure and digital asset analytics. As part of the NYSE Wired Crypto Trailblazer series, this video examines the pivotal role Amberdata plays in tracking and analyzing cryptocurrency transactions through innovative data solutions.
In this session, Douglass shares their expertise on blockchain infrastructure and its impact on financial services. Over the past eight years, Amberdata has pioneered data analytics for digital assets, building institutional-grade technologies that process billions of application programming interface calls. Hosts from theCUBE Research explore these topics, highlighting Amberdata's journey and the evolving landscape of decentralized finance.
Key takeaways from the discussion include Douglass's perspectives on the convergence of traditional finance and cryptocurrency, the importance of comprehensive analytics in this sector, and the significance of the US regulatory shift in favoring cryptocurrency advancements. According to Douglass, Amberdata is positioned at the forefront, providing critical insights that facilitate institutional engagement with digital assets.
Find more SiliconANGLE news and analysis https://siliconangle.com/
Follow theCUBE's wall-to-wall event coverage https://siliconangle.com/events/
Learn about the latest theCUBE events https://www.thecube.net/
00:00 - theCUBE and Amberdata: A Journey through Institutional Innovation and Partnerships
02:43 - Navigating the Evolving Landscape of Digital Asset Markets
05:56 - Advancements and Opportunities in the Digital Asset Landscape
08:09 - Navigating the Evolving World of Digital Assets: Regulation, Adoption, and Use Cases
11:38 - Synergy of Finance: Integrating Traditional Systems with Digital Assets
15:36 - Amberdata's Role in the Market
17:38 - Lessons Learned from Past Challenges
19:50 - Title: Strategic Insights and Future Prospects
#Amberdata #CryptoTrailblazer #BlockchainInfrastructure #DigitalAssets #NYSEWired #theCUBE #DecentralizedFinance #InstitutionalData #FinancialAnalytics
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Haonan Li, Codex
Exploring Blockchain Infrastructure with Shawn Douglass of Amberdata
Shawn Douglass, Chief Executive Officer and founder of Amberdata, joins theCUBE at the New York Stock Exchange for an insightful discussion on advancements in blockchain infrastructure and digital asset analytics. As part of the NYSE Wired Crypto Trailblazer series, this video examines the pivotal role Amberdata plays in tracking and analyzing cryptocurrency transactions through innovative data solutions.
In this session, Douglass shares their expertise on blockchain infrastructure and its impact on financial services. Over the past eight years, Amberdata has pioneered data analytics for digital assets, building institutional-grade technologies that process billions of application programming interface calls. Hosts from theCUBE Research explore these topics, highlighting Amberdata's journey and the evolving landscape of decentralized finance.
Key takeaways from the discussion include Douglass's perspectives on the convergence of traditional finance and cryptocurrency, the importance of comprehensive analytics in this sector, and the significance of the US regulatory shift in favoring cryptocurrency advancements. According to Douglass, Amberdata is positioned at the forefront, providing critical insights that facilitate institutional engagement with digital assets.
Find more SiliconANGLE news and analysis https://siliconangle.com/
Follow theCUBE's wall-to-wall event coverage https://siliconangle.com/events/
Learn about the latest theCUBE events https://www.thecube.net/
00:00 - theCUBE and Amberdata: A Journey through Institutional Innovation and Partnerships
02:43 - Navigating the Evolving Landscape of Digital Asset Markets
05:56 - Advancements and Opportunities in the Digital Asset Landscape
08:09 - Navigating the Evolving World of Digital Assets: Regulation, Adoption, and Use Cases
11:38 - Synergy of Finance: Integrating Traditional Systems with Digital Assets
15:36 - Amberdata's Role in the Market
17:38 - Lessons Learned from Past Challenges
19:50 - Title: Strategic Insights and Future Prospects
#Amberdata #CryptoTrailblazer #BlockchainInfrastructure #DigitalAssets #NYSEWired #theCUBE #DecentralizedFinance #InstitutionalData #FinancialAnalytics
>> Hello, I'm John Furrier with theCUBE, host here in the New York Stock Exchange CUBE Studios. Of course, we have our Palo Alto studios connecting Silicon Valley and Wall Street. It's part of our crypto trailblazers series where we feature the leaders who are making it happen, bringing this next generation infrastructure, kind of rewiring the financial infrastructure with crypto, with the advent of Stablecoins and the advancements in the performance and the security and scalability of blockchain. You're starting to see clear lines of sight into where the innovation is and where the value is created. Of course, when you have value creation, you have value extraction. Haonan Li is here, the co-founder and CEO of Codex. Great to have you on. Thanks for joining the Leaders series. Appreciate it.
Haonan Li
>> Thanks so much for having me.
John Furrier
>> Podcast is growing. This is our most popular ongoing podcast series, so thanks for coming on.
Haonan Li
>> Thanks for having me.
John Furrier
>> So we were riffing before we came on camera about the entrepreneurial, the financial institutions. I said it kind of was a mercenary environment in the crypto world. Yeah, let's take down the old guard, and now more of a missionary, hey, people are leaning in and working together. Do you agree with that statement?
Haonan Li
>> Yeah. I think crypto started as a sort of, the roots of crypto are anachronistic and focused on sort of taking down existing systems and creating a parallel system. I think what we're seeing this cycle is that the most promising areas for crypto to go to next are about mish-mashing the traditional world along crypto rails. I think we see a future where Stablecoins are just basic infrastructure that underlies the modern economy in the way that a bank account might do so today.
John Furrier
>> We're here. Today's going to be a great day. We got a lot of interviews, Ethereum's 10-year anniversary. Our team in 2017 started to build on Ethereum. We had a CUBE coin, smart contracts, all this cool ideas. And then it kind of stalled because of the whole ICO craze. But now it's back. Smart contracts are a big part of it. And Stablecoins, the recent regulatory regime is very pro-crypto. And as a result, there's been some really cool things happening. Talk about what you guys do and why now is an important part of the market and the growth.
Haonan Li
>> Yeah. So Codex is Ethereum's Stablecoin chain. So $160 billion of Stablecoins sit on Ethereum today, and this is the predominant amount of Stablecoins globally actually on Ethereum. And now the issue is that they don't move quite as much on Ethereum as they do on other chains. And part of that is because the sort of next generation of features and functionality and ease of use needs to happen. And so that's where we come in. We see a future where Stablecoins sit on Ethereum, but they move on Codex. As for why now in particular Stablecoins are blowing up, and in a good way, are accelerating maybe is the better way to say it, I think-
John Furrier
>> I use that word all the time, by the way. Blowing up is like, yeah, slang for doing well, not blowing up as in crashing.
Haonan Li
>> That's right. That's right. And I think why things are accelerating now is that in that 2017, 2018 era that you were talking about, because of the regulatory posture of the government, it became very difficult to link crypto systems with the real world, to link crypto systems with atoms. And so what ended up happening is you have these financial primitives that work fine, but they don't really move any real substantive physical value around. And so you have these fumes basically. They're just going up and down on these roller coaster rides. What you're seeing now is that these crypto systems are plugging into the real world. They're intermediating cross-border transactions. They are providing credit in places where otherwise there would be no credit. Their FX is now moving on chain as well. And so I think as you see these worlds collide and merge, things will just get faster and faster and faster.
John Furrier
>> Talk about the origination story. How did this all come together? How long? How big is your team? Give some stats.
Haonan Li
>> Yeah. Five years ago, I moved to a little hacker house in LA to live with Vitalik Buterin for six months to work on scaling with him. So that was my introduction to the space. I very much grew up in Ethereum, so to speak.
John Furrier
>> Yeah, it's hardcore. He's a founder. Yeah, of course.
Haonan Li
>> And so you'd come downstairs and Ashton Kutcher's in the kitchen or he's on the phone of Elon or something. So it was a fresh sort of blow to the ego every morning, which I think is very, very helpful.
John Furrier
>> Yeah, it's hot. Hot area.
Haonan Li
>> And so I think it very much upped my ambitions on what is achievable at such a young age. And that was probably one sort of seminal moment. I think over a period of time working on scaling, it seemed to me that scaling as sort of a technical construct was getting simpler and simpler and easier and easier. It really seemed to me the problem was how do you apply this technology in a way that is product-specific and industry vertical-specific, and seemed to me Stablecoins were underserved. Now, this was contrarian two years ago.
John Furrier
>> Yeah, this is radical.
Haonan Li
>> It's becoming a bit more consensus now.
John Furrier
>> Yeah. So in the early days, you're pioneering trailblazing there. If you look at where we are now, take us through the thought process, because again, a lot of work has gone on and you mentioned primitives. When I hear primitives, I think programming. We're talking about programmable money. The infrastructure is what you're involved in.
Haonan Li
>> Totally.
John Furrier
>> Take us through some of the key moments and when you kind of knew, pre-regime now, but like when you kind of had a feeling it was going to happen.
Haonan Li
>> Yeah. I think there are a couple moments. I think famously, many crypto companies don't use crypto, and because so much of crypto at that time was difficult to use or like you really wouldn't use it unless you were speculating on something or buying a picture of a cat and you hope the picture of the cat goes up. There's one notable exception. When you need to pay a contractor in a foreign country, let's say in Malaysia, we would use Stablecoins. And not because of ideological reasons or I need to look like I'm really into, I'm an anarchist or that I need to check some box, just because it's easier. It settles immediately, not quite immediately, but near immediately. And that was one early moment in my mind that made me think-
John Furrier
>> Yeah, this works. It works.
Haonan Li
>> It really works.
John Furrier
>> Yeah, this works. Take me through where we are today in the performance, because a lot of people that are coming in, again, part of the series is to kind of cover the mainstreaming of it while kind of telling the OG stories. One of the things that we're observing in these interviews is, okay, there's definitely enthusiasm.
Haonan Li
>> Yeah.
John Furrier
>> On the mainstream side, there's still that confidence level. So enthusiasm and confidence right next to each other. So we're close to like that tipping point of pure confidence and obviously reliability. What's your take on the narrative of, not that it's a mainstream narrative, but it's definitely on people's minds. Will it work? Will I lose my coins? What's the custody issues? Because a lot of the things that were problems just a few years ago now are going away.
Haonan Li
>> Absolutely.
John Furrier
>> What are some of those things?
Haonan Li
>> Absolutely. I think previously, many of these custody solutions are difficult to use. Previously, gas fees are enormously volatile and difficult to wrangle. These problems are all largely going away. I think most crucially, there's a perception, legitimization that is happening. And when you have the treasury sector, you're talking about Stablecoins constantly as a form of extending American dominance globally, I think that very much legitimizes Stablecoins and makes foreign governments also start to think perhaps we should do something as well.
John Furrier
>> When I talk to people under the age of 30, even 35, let's say 30, they just can't comprehend why people don't get it.
Haonan Li
>> Yeah.
John Furrier
>> Because if you think about the digital convergence of life, you mentioned real world. Real world assets is one of the hottest areas too. Physical AI is a topic that Jensen Wong talks about with Nvidia all the time. I mean, AI has tokens and there's tokens over here, both bounded by power. So similarities, but that world's coming together. The digital world we live in is just we're already digital.
Haonan Li
>> Totally.
John Furrier
>> So talk about the importance of Stablecoins, why that piece is so important. And you saw it early on before, it was kind of endorsed, if you will, as a mechanism, so it works. Now it's scaling, because now you have a lot of consensus around, okay, the government's backing it with the USD, mainstream institutions are leaning in, the payment rails are looking good, settlement rails are looking good, so it's moving in the right direction. Talk about why the Stablecoin piece is super valuable.
Haonan Li
>> Yeah. I think Stablecoins can sound quite abstract sometimes. To make it concrete, Stablecoins enable people to transfer the fruits of their labor across space and time in the most efficient way. And here in the US, we don't feel this as much. You swipe your card, it mostly works, it's fine. But there are parts of the world where the fruits of people's labor is robbed away from them by inflation, is robbed away from them by currency controls, is robbed away from them by inefficient and ineffective banking services. So Stablecoins offer sort of a leveling of the playing field in a way that previously was not possible.
John Furrier
>> You mentioned cross-border transactions earlier. I mean, again, this is what we're talking about. You could be an e-commerce player in the US serving goods in other countries, and the currency fluctuations could literally be the difference between being affordable or not.
Haonan Li
>> Absolutely.
John Furrier
>> I mean, that's real. I mean, that's not made up.
Haonan Li
>> 100%. And for transactions to cross-border today, often they are too slow or too expensive. And certainly for a set of businesses that have to transact frequently across these corridors, Stablecoins already make sense. I think broadly, if you think about our mission here at Codex, Stablecoins make sense in these crazy situations already, crazy governments, crazy sort of business situations. It already makes sense. What we want to do is we want to broaden the appeal of these systems such that they make sense for an increasingly large amount of businesses and people to make them mainstream. That's the vision.
John Furrier
>> It's no-brainer that you see on your phone, everyone sees Apple Pay. It's going to be a digital wallet. That's going to be from a user standpoint, very easy. That's a no-brainer use case. That's coming fast. So talk about how you guys fit into that. And what do you guys do? Explain where you sit in the stack, what is the offering? What's the platform look like? How do you fit? And how do you accelerate that scale adoption?
Haonan Li
>> 100%. So we're an Ethereum L2 that's focused on Stablecoins. And we think the most important property of a Stablecoin chain is liquidity. And so our first product is Codex FX, which enables people to move between Fiat and Stables seamlessly, as well as between different types of Stables seamlessly. And so if you're trying to convert $20 million of Fiat into Stablecoins, we're probably the best people to call. We can do it for you cheapest, fastest, and easiest.
John Furrier
>> Or if I have my own crypto and I want to convert to Fiat, same thing?
Haonan Li
>> We're less focused on sort of that kind of crypto token business. There are others that are focused on that. We want to be ruthlessly focused on Stablecoins and Stablecoin-
John Furrier
>> Fiat to Stablecoin?
Haonan Li
>> Fiat, Stablecoin, Stablecoin, Fiat.
John Furrier
>> Got it. Okay.
Haonan Li
>> Stablecoin, Stablecoin.
John Furrier
>> Got it, yeah, yeah. So you're on the Stablecoins. So you're not going to let other people deal with the crypto a little bit more. What's the reason behind that? Focus, or?
Haonan Li
>> So traditionally, chain companies don't focus on this border. There's this border between Fiat and Stables. And most chain companies don't bother because why would you? You're a crypto-native chain company, Fiat, annoying, difficult, dirty, don't touch it. We think that this is a big mistake. We think that for these systems to really be useful for a mainstream audience, that this border between Fiat and Stablecoins needs to collapse entirely. And so we are ruthlessly focused on this. We're staffed against it. We wake up every morning thinking about this. How do we eliminate this border to the point where it's zero?
John Furrier
>> What's the view of the private chains emerging? You're starting to see a lot more public, private, kind of hyper-converge, if you will, environments. Stablecoin fits in that too?
Haonan Li
>> Absolutely. I think you're seeing, this is sort of the best, The holy grail, right? The chain that becomes where all the Stablecoin transactions happen and all the sort of other financial primitives will be built on top of Stablecoins will be worth trillions. This is the holy grail. And so there are multiple aspirants to this holy grail.
John Furrier
>> A lot of people love seeking the holy grail.
Haonan Li
>> A lot of people seeking holy grail. And so there's one category approach, which is don't bother Ethereum, right? Don't build an Ethereum community, build your own thing. And we're somewhat skeptical of that approach. I think it creates a couple problems. One is neutrality. So many of the folks that are building these alt L1s are themselves running a FinTech business or Stablecoin issuer business. And the question to ask is, well, if you're another business that's considering deploying on this chain, do you want to entrust your future to your adversary? And I think the lessons of the history of technology is that open systems win.
John Furrier
>> Yeah. We were talking about that before we came on camera, you asked about the '90s. Remember the '90s, network operating systems were controlled by the mainframe companies, IBM, Digital Equipment Corporation, a bunch of mini computers. And then the OSI model came out, TCP/IP came out, you had low layer of standardization on transmission and the physical wire, and that created the interoperability. And then ultimately, the death of NOSs, or operating systems. So I ask that because I wonder, because I think about this a lot, maybe I'm kind of off base, but if you have too many siloed proprietary solutions, I mean, the mainframe was a full stack. I mean, IBM had their full stack of applications all the way down to the token level, token ring. Ethernet ended up winning. Is that a bad analogy to think about in terms of crypto or is it similar? I mean, it's kind of a weird analogy, but what's your take on that? Because I think open always wins. I'm an open person. I think open source won because the collective intelligence of the community, open protocols win, internet won, that was open.
Haonan Li
>> I'm biased here, of course, but I think what you're saying resonates a lot with me. And I think a lot of these alt L1 approaches that are basically private companies seeking to own this entire stack will fail just as mainframes did.
John Furrier
>> And so yeah, they might get a couple wins. That's your point about being a FinTech company.
Haonan Li
>> Yeah.
John Furrier
>> They're essentially going to target use cases, lock in, and then they ultimately become a siloed chain unless they're interoperable.
Haonan Li
>> Yeah. I think the issue is greed.
John Furrier
>> Okay. So I want to ask you a question. What's the biggest misconception of Ethereum right now?
Haonan Li
>> Yeah. I think one underappreciated fact is just how much of the existing Stablecoin product market fit sits on Ethereum today. The bulk of Stablecoins sit on Ethereum today. It's sort of Wall Street's default choice. When you think about a default neutral layer to transact on, Ethereum is the first one that comes to mind. And this has all been achieved despite the complete lack of a BD motion. Historically, there's nobody you can call. You don't pick up the phone and somebody at EF picks up, it doesn't happen.
John Furrier
>> No one person in charge.
Haonan Li
>> That's right. That's right.
John Furrier
>> So talk about the culture of your company, because every company has a unique culture. Intel had Moore's Law, cadence of Moore's Law, well documented. Is there a culture that you guys have? What's it like working at your company? Are you looking to hire? What's the focus? Take us through some of the day in the life of what you guys are working on.
Haonan Li
>> I think we're a company that's ruthlessly focused on what is intellectually honest, intellectually true. And it's definitely a place that's an idea meritocracy, which means that it doesn't matter whether you just joined the company or you've been there forever. The right idea will win, not the right person. I think it's also a very flat organization and people feel very comfortable telling me what I'm doing wrong. As for on the recruiting side, I think one of the big hires we're looking for right now is a excellent marketing person. And so to the extent that you have any recommendations or your audience does, please hit me up.
John Furrier
>> Great. What's the coolest thing you're working on right now?
Haonan Li
>> We're working on shifting the FX that we are doing. We're already doing it, but it's off chain. We want to shift it to being on chain. And we want to provide a way for retail audience to really capture a lot of the economics of that machine. And so we think we can generate pretty low risk, 20% plus yields for retail if they stake local currencies in our pools. And so that's something that we're very excited about.
John Furrier
>> In terms of your target customer to engage with you guys, who are they? What's their category, and what's the engagement like?
Haonan Li
>> Yeah. So most of our customers are fintechs and PSPs and exchanges, these sort of institutional customers that are accessing Stablecoins on a wholesale basis is the way to think about it. We haven't extended into retail quite yet. It's maybe not worth the trouble sometimes for now. But if you're looking to turn $20 million of Fiat to Stablecoins, give us a ring. We're probably the best people to do it.
John Furrier
>> And why are people doing that? Just explain that concept because this is where the economics start to kick in. A lot of people see the activity, they get the structural positioning of how things are going down. Certainly the US Treasury and the Treasury secretary is endorsing it. What's the motivation?
Haonan Li
>> Yeah. So these folks that we're engaging with are basically the new nodes of this parallel payment infrastructure that are built on top of Stablecoin rails. And so typically they are acquiring those Stablecoins to then distribute down below. So perhaps it is a retail customer that wants to purchase Stablecoins to prevent his earnings from being hyper-inflated away. Perhaps it's somebody who wants to purchase Stablecoins to do remittance from the US to the Philippines. The use cases are sort of myriad. But by engaging at sort of this wholesale level, we're able to really have a ton of impact very quickly.
John Furrier
>> It sets the system up, and I like that system thinking. I want to get your thoughts on... So that's awesome, by the way. So thanks for doing that. I want to get your thoughts on what you said earlier about people's work.
Haonan Li
>> Yeah.
John Furrier
>> Tools are different than work. Agents are bringing this idea that tools aren't the issue, it's the work product. And in smart contracts, one of the main benefits of the chain is that you can actually remove the middleman between two workers.
Haonan Li
>> That's right.
John Furrier
>> And do a smart contract and have value created and then measured and captured.
Haonan Li
>> That's right.
John Furrier
>> Talk about that use case, because the ultimate benefit on the Ethereum is the users, people doing the work. What's your reaction to that? What's your commentary?
Haonan Li
>> I think there's a variety of benefits. The first benefit is just the economics are incredibly efficient. If you think about a Tether, which in a way is the world's largest narrow bank. You could staff Tether with probably 15 people. You could fire pretty much everybody else and you'd probably be fine, and the thing generates $5 billion of free cash flow. It's possibly one of the best businesses of all time, stretching all the way back to the Medicis.
John Furrier
>> Yeah, it's better than Google.
Haonan Li
>> It's almost like what every tech company wishes they were. And I think it's a very interesting moment in technology where the traditional tech names are actually becoming not what classically are tech properties, right? They're becoming capital-intensive. There's becoming a variable cost to their operations. You got to buy the power plants. You got to buy the chips. Inference costs money. And so in a way, traditional tech is actually becoming less tech-like. And sort of the economics-
John Furrier
>> Yeah, because the CapEx expenditures are huge.
Haonan Li
>> That's right. That's right. And I think that's underappreciated, especially when everybody's default investment path is the S&P and 40% of the allocation is in these six tech names. So it's a very interesting moment where the traditional tech names are becoming less techy. And you have these emerging Stablecoin companies that have the properties of kind of the classic tech company, right? Just incredible zero marginal cost, just like they can grow to the moon. I think it's a very interesting moment in-
John Furrier
>> It's interesting because tech is where all the entrepreneurship is been. I want to ask you to wrap up is, in finance, we're seeing, at least my observation, is there's a financial entrepreneurial market in kind of a tech way. There's been always entrepreneurship in finance. Oh, yeah.I'll just ride someone's prepaid rails or something, maybe make 30 million, buy a boat in a house in Hamptons. Here, it's different. You could actually take down a market.
Haonan Li
>> That's right.
John Furrier
>> That's real entrepreneurship. Billion-dollar valuation or more, like mentioned Tether. So in the finance side, they don't have the concepts of product managers. So there's financial products that come out of what you're doing. So I'm speculating or guessing or predicting that there's going to be new products that emerge. Like in cloud, we saw Airbnb. Airbnb doesn't exist without AWS. In fact, they probably never would have even done anything if they'd buy a server. Okay. So is there an Airbnb-like moment inside the financial products?
Haonan Li
>> I think so. I think you're certainly right. I think the prize here is very much more than a Hamptons house and a boat. I think the prize here is much greater than that.
John Furrier
>> I had to goof on the New Yorkers. I'm from California, so it's kind of a dig. No, but it's nice to have a house in the Hamptons.
Haonan Li
>> It's nice.
John Furrier
>> Yeah, but you get rich, you don't actually take... Entrepreneurship's about taking territory.
Haonan Li
>> I think so. I think if you're primarily motivated by the Hamptons house and the boat, this is probably not the most direct path to it. I think there are easier ways to get to that goal. I think if you want to build a lasting institution the way that the New York Stock Exchange was built way back in the day, then I think Stablecoins today are fantastic.
John Furrier
>> It's interesting. What I like about the conversation in Ethereum too is that the conversations are about building something meaningful and durable.
Haonan Li
>> Absolutely.
John Furrier
>> Versus get rich quick schemes, which is not just a New York thing, just some people have that orientation. I mean, even in California, I've seen people trying to flip a company too fast. They're just in it for the money. The best companies are formed on missions.
Haonan Li
>> That's right. Sort of irrationally committed to the mission.
John Furrier
>> Yeah. They're crazy. What's that idea?
Haonan Li
>> That's right.
John Furrier
>> Renting my room out? What is that? Stupid idea. I mean, how many stories have we heard there? Well, thanks for coming on. I really appreciate you coming on and explaining all the action and certainly trailblazing crypto and bring it mainstream. Thanks for what you do.
Haonan Li
>> Yeah, thanks so much for having us.
John Furrier
>> All right, I'm John Furrier, host of theCUBE. Blazing the trail here, featuring the leaders who are making it happen. The durability, the long game of financial infrastructure is changing, it's rewiring, it's being recast. And again, AI, crypto, too hot areas, all being implemented at the infrastructure level, and that's where the change is. It's an enabler. It's accelerating value and value extraction. Thanks for watching.
>> Hello, I'm John Furrier with theCUBE, host here in the New York Stock Exchange CUBE Studios. Of course, we have our Palo Alto studios connecting Silicon Valley and Wall Street. It's part of our crypto trailblazers series where we feature the leaders who are making it happen, bringing this next generation infrastructure, kind of rewiring the financial infrastructure with crypto, with the advent of Stablecoins and the advancements in the performance and the security and scalability of blockchain. You're starting to see clear lines of sight into where the innovation is and where the value is created. Of course, when you have value creation, you have value extraction. Haonan Li is here, the co-founder and CEO of Codex. Great to have you on. Thanks for joining the Leaders series. Appreciate it.
Haonan Li
>> Thanks so much for having me.
John Furrier
>> Podcast is growing. This is our most popular ongoing podcast series, so thanks for coming on.
Haonan Li
>> Thanks for having me.
John Furrier
>> So we were riffing before we came on camera about the entrepreneurial, the financial institutions. I said it kind of was a mercenary environment in the crypto world. Yeah, let's take down the old guard, and now more of a missionary, hey, people are leaning in and working together. Do you agree with that statement?
Haonan Li
>> Yeah. I think crypto started as a sort of, the roots of crypto are anachronistic and focused on sort of taking down existing systems and creating a parallel system. I think what we're seeing this cycle is that the most promising areas for crypto to go to next are about mish-mashing the traditional world along crypto rails. I think we see a future where Stablecoins are just basic infrastructure that underlies the modern economy in the way that a bank account might do so today.
John Furrier
>> We're here. Today's going to be a great day. We got a lot of interviews, Ethereum's 10-year anniversary. Our team in 2017 started to build on Ethereum. We had a CUBE coin, smart contracts, all this cool ideas. And then it kind of stalled because of the whole ICO craze. But now it's back. Smart contracts are a big part of it. And Stablecoins, the recent regulatory regime is very pro-crypto. And as a result, there's been some really cool things happening. Talk about what you guys do and why now is an important part of the market and the growth.
Haonan Li
>> Yeah. So Codex is Ethereum's Stablecoin chain. So $160 billion of Stablecoins sit on Ethereum today, and this is the predominant amount of Stablecoins globally actually on Ethereum. And now the issue is that they don't move quite as much on Ethereum as they do on other chains. And part of that is because the sort of next generation of features and functionality and ease of use needs to happen. And so that's where we come in. We see a future where Stablecoins sit on Ethereum, but they move on Codex. As for why now in particular Stablecoins are blowing up, and in a good way, are accelerating maybe is the better way to say it, I think-
John Furrier
>> I use that word all the time, by the way. Blowing up is like, yeah, slang for doing well, not blowing up as in crashing.
Haonan Li
>> That's right. That's right. And I think why things are accelerating now is that in that 2017, 2018 era that you were talking about, because of the regulatory posture of the government, it became very difficult to link crypto systems with the real world, to link crypto systems with atoms. And so what ended up happening is you have these financial primitives that work fine, but they don't really move any real substantive physical value around. And so you have these fumes basically. They're just going up and down on these roller coaster rides. What you're seeing now is that these crypto systems are plugging into the real world. They're intermediating cross-border transactions. They are providing credit in places where otherwise there would be no credit. Their FX is now moving on chain as well. And so I think as you see these worlds collide and merge, things will just get faster and faster and faster.
John Furrier
>> Talk about the origination story. How did this all come together? How long? How big is your team? Give some stats.
Haonan Li
>> Yeah. Five years ago, I moved to a little hacker house in LA to live with Vitalik Buterin for six months to work on scaling with him. So that was my introduction to the space. I very much grew up in Ethereum, so to speak.
John Furrier
>> Yeah, it's hardcore. He's a founder. Yeah, of course.
Haonan Li
>> And so you'd come downstairs and Ashton Kutcher's in the kitchen or he's on the phone of Elon or something. So it was a fresh sort of blow to the ego every morning, which I think is very, very helpful.
John Furrier
>> Yeah, it's hot. Hot area.
Haonan Li
>> And so I think it very much upped my ambitions on what is achievable at such a young age. And that was probably one sort of seminal moment. I think over a period of time working on scaling, it seemed to me that scaling as sort of a technical construct was getting simpler and simpler and easier and easier. It really seemed to me the problem was how do you apply this technology in a way that is product-specific and industry vertical-specific, and seemed to me Stablecoins were underserved. Now, this was contrarian two years ago.
John Furrier
>> Yeah, this is radical.
Haonan Li
>> It's becoming a bit more consensus now.
John Furrier
>> Yeah. So in the early days, you're pioneering trailblazing there. If you look at where we are now, take us through the thought process, because again, a lot of work has gone on and you mentioned primitives. When I hear primitives, I think programming. We're talking about programmable money. The infrastructure is what you're involved in.
Haonan Li
>> Totally.
John Furrier
>> Take us through some of the key moments and when you kind of knew, pre-regime now, but like when you kind of had a feeling it was going to happen.
Haonan Li
>> Yeah. I think there are a couple moments. I think famously, many crypto companies don't use crypto, and because so much of crypto at that time was difficult to use or like you really wouldn't use it unless you were speculating on something or buying a picture of a cat and you hope the picture of the cat goes up. There's one notable exception. When you need to pay a contractor in a foreign country, let's say in Malaysia, we would use Stablecoins. And not because of ideological reasons or I need to look like I'm really into, I'm an anarchist or that I need to check some box, just because it's easier. It settles immediately, not quite immediately, but near immediately. And that was one early moment in my mind that made me think-
John Furrier
>> Yeah, this works. It works.
Haonan Li
>> It really works.
John Furrier
>> Yeah, this works. Take me through where we are today in the performance, because a lot of people that are coming in, again, part of the series is to kind of cover the mainstreaming of it while kind of telling the OG stories. One of the things that we're observing in these interviews is, okay, there's definitely enthusiasm.
Haonan Li
>> Yeah.
John Furrier
>> On the mainstream side, there's still that confidence level. So enthusiasm and confidence right next to each other. So we're close to like that tipping point of pure confidence and obviously reliability. What's your take on the narrative of, not that it's a mainstream narrative, but it's definitely on people's minds. Will it work? Will I lose my coins? What's the custody issues? Because a lot of the things that were problems just a few years ago now are going away.
Haonan Li
>> Absolutely.
John Furrier
>> What are some of those things?
Haonan Li
>> Absolutely. I think previously, many of these custody solutions are difficult to use. Previously, gas fees are enormously volatile and difficult to wrangle. These problems are all largely going away. I think most crucially, there's a perception, legitimization that is happening. And when you have the treasury sector, you're talking about Stablecoins constantly as a form of extending American dominance globally, I think that very much legitimizes Stablecoins and makes foreign governments also start to think perhaps we should do something as well.
John Furrier
>> When I talk to people under the age of 30, even 35, let's say 30, they just can't comprehend why people don't get it.
Haonan Li
>> Yeah.
John Furrier
>> Because if you think about the digital convergence of life, you mentioned real world. Real world assets is one of the hottest areas too. Physical AI is a topic that Jensen Wong talks about with Nvidia all the time. I mean, AI has tokens and there's tokens over here, both bounded by power. So similarities, but that world's coming together. The digital world we live in is just we're already digital.
Haonan Li
>> Totally.
John Furrier
>> So talk about the importance of Stablecoins, why that piece is so important. And you saw it early on before, it was kind of endorsed, if you will, as a mechanism, so it works. Now it's scaling, because now you have a lot of consensus around, okay, the government's backing it with the USD, mainstream institutions are leaning in, the payment rails are looking good, settlement rails are looking good, so it's moving in the right direction. Talk about why the Stablecoin piece is super valuable.
Haonan Li
>> Yeah. I think Stablecoins can sound quite abstract sometimes. To make it concrete, Stablecoins enable people to transfer the fruits of their labor across space and time in the most efficient way. And here in the US, we don't feel this as much. You swipe your card, it mostly works, it's fine. But there are parts of the world where the fruits of people's labor is robbed away from them by inflation, is robbed away from them by currency controls, is robbed away from them by inefficient and ineffective banking services. So Stablecoins offer sort of a leveling of the playing field in a way that previously was not possible.
John Furrier
>> You mentioned cross-border transactions earlier. I mean, again, this is what we're talking about. You could be an e-commerce player in the US serving goods in other countries, and the currency fluctuations could literally be the difference between being affordable or not.
Haonan Li
>> Absolutely.
John Furrier
>> I mean, that's real. I mean, that's not made up.
Haonan Li
>> 100%. And for transactions to cross-border today, often they are too slow or too expensive. And certainly for a set of businesses that have to transact frequently across these corridors, Stablecoins already make sense. I think broadly, if you think about our mission here at Codex, Stablecoins make sense in these crazy situations already, crazy governments, crazy sort of business situations. It already makes sense. What we want to do is we want to broaden the appeal of these systems such that they make sense for an increasingly large amount of businesses and people to make them mainstream. That's the vision.
John Furrier
>> It's no-brainer that you see on your phone, everyone sees Apple Pay. It's going to be a digital wallet. That's going to be from a user standpoint, very easy. That's a no-brainer use case. That's coming fast. So talk about how you guys fit into that. And what do you guys do? Explain where you sit in the stack, what is the offering? What's the platform look like? How do you fit? And how do you accelerate that scale adoption?
Haonan Li
>> 100%. So we're an Ethereum L2 that's focused on Stablecoins. And we think the most important property of a Stablecoin chain is liquidity. And so our first product is Codex FX, which enables people to move between Fiat and Stables seamlessly, as well as between different types of Stables seamlessly. And so if you're trying to convert $20 million of Fiat into Stablecoins, we're probably the best people to call. We can do it for you cheapest, fastest, and easiest.
John Furrier
>> Or if I have my own crypto and I want to convert to Fiat, same thing?
Haonan Li
>> We're less focused on sort of that kind of crypto token business. There are others that are focused on that. We want to be ruthlessly focused on Stablecoins and Stablecoin-
John Furrier
>> Fiat to Stablecoin?
Haonan Li
>> Fiat, Stablecoin, Stablecoin, Fiat.
John Furrier
>> Got it. Okay.
Haonan Li
>> Stablecoin, Stablecoin.
John Furrier
>> Got it, yeah, yeah. So you're on the Stablecoins. So you're not going to let other people deal with the crypto a little bit more. What's the reason behind that? Focus, or?
Haonan Li
>> So traditionally, chain companies don't focus on this border. There's this border between Fiat and Stables. And most chain companies don't bother because why would you? You're a crypto-native chain company, Fiat, annoying, difficult, dirty, don't touch it. We think that this is a big mistake. We think that for these systems to really be useful for a mainstream audience, that this border between Fiat and Stablecoins needs to collapse entirely. And so we are ruthlessly focused on this. We're staffed against it. We wake up every morning thinking about this. How do we eliminate this border to the point where it's zero?
John Furrier
>> What's the view of the private chains emerging? You're starting to see a lot more public, private, kind of hyper-converge, if you will, environments. Stablecoin fits in that too?
Haonan Li
>> Absolutely. I think you're seeing, this is sort of the best, The holy grail, right? The chain that becomes where all the Stablecoin transactions happen and all the sort of other financial primitives will be built on top of Stablecoins will be worth trillions. This is the holy grail. And so there are multiple aspirants to this holy grail.
John Furrier
>> A lot of people love seeking the holy grail.
Haonan Li
>> A lot of people seeking holy grail. And so there's one category approach, which is don't bother Ethereum, right? Don't build an Ethereum community, build your own thing. And we're somewhat skeptical of that approach. I think it creates a couple problems. One is neutrality. So many of the folks that are building these alt L1s are themselves running a FinTech business or Stablecoin issuer business. And the question to ask is, well, if you're another business that's considering deploying on this chain, do you want to entrust your future to your adversary? And I think the lessons of the history of technology is that open systems win.
John Furrier
>> Yeah. We were talking about that before we came on camera, you asked about the '90s. Remember the '90s, network operating systems were controlled by the mainframe companies, IBM, Digital Equipment Corporation, a bunch of mini computers. And then the OSI model came out, TCP/IP came out, you had low layer of standardization on transmission and the physical wire, and that created the interoperability. And then ultimately, the death of NOSs, or operating systems. So I ask that because I wonder, because I think about this a lot, maybe I'm kind of off base, but if you have too many siloed proprietary solutions, I mean, the mainframe was a full stack. I mean, IBM had their full stack of applications all the way down to the token level, token ring. Ethernet ended up winning. Is that a bad analogy to think about in terms of crypto or is it similar? I mean, it's kind of a weird analogy, but what's your take on that? Because I think open always wins. I'm an open person. I think open source won because the collective intelligence of the community, open protocols win, internet won, that was open.
Haonan Li
>> I'm biased here, of course, but I think what you're saying resonates a lot with me. And I think a lot of these alt L1 approaches that are basically private companies seeking to own this entire stack will fail just as mainframes did.
John Furrier
>> And so yeah, they might get a couple wins. That's your point about being a FinTech company.
Haonan Li
>> Yeah.
John Furrier
>> They're essentially going to target use cases, lock in, and then they ultimately become a siloed chain unless they're interoperable.
Haonan Li
>> Yeah. I think the issue is greed.
John Furrier
>> Okay. So I want to ask you a question. What's the biggest misconception of Ethereum right now?
Haonan Li
>> Yeah. I think one underappreciated fact is just how much of the existing Stablecoin product market fit sits on Ethereum today. The bulk of Stablecoins sit on Ethereum today. It's sort of Wall Street's default choice. When you think about a default neutral layer to transact on, Ethereum is the first one that comes to mind. And this has all been achieved despite the complete lack of a BD motion. Historically, there's nobody you can call. You don't pick up the phone and somebody at EF picks up, it doesn't happen.
John Furrier
>> No one person in charge.
Haonan Li
>> That's right. That's right.
John Furrier
>> So talk about the culture of your company, because every company has a unique culture. Intel had Moore's Law, cadence of Moore's Law, well documented. Is there a culture that you guys have? What's it like working at your company? Are you looking to hire? What's the focus? Take us through some of the day in the life of what you guys are working on.
Haonan Li
>> I think we're a company that's ruthlessly focused on what is intellectually honest, intellectually true. And it's definitely a place that's an idea meritocracy, which means that it doesn't matter whether you just joined the company or you've been there forever. The right idea will win, not the right person. I think it's also a very flat organization and people feel very comfortable telling me what I'm doing wrong. As for on the recruiting side, I think one of the big hires we're looking for right now is a excellent marketing person. And so to the extent that you have any recommendations or your audience does, please hit me up.
John Furrier
>> Great. What's the coolest thing you're working on right now?
Haonan Li
>> We're working on shifting the FX that we are doing. We're already doing it, but it's off chain. We want to shift it to being on chain. And we want to provide a way for retail audience to really capture a lot of the economics of that machine. And so we think we can generate pretty low risk, 20% plus yields for retail if they stake local currencies in our pools. And so that's something that we're very excited about.
John Furrier
>> In terms of your target customer to engage with you guys, who are they? What's their category, and what's the engagement like?
Haonan Li
>> Yeah. So most of our customers are fintechs and PSPs and exchanges, these sort of institutional customers that are accessing Stablecoins on a wholesale basis is the way to think about it. We haven't extended into retail quite yet. It's maybe not worth the trouble sometimes for now. But if you're looking to turn $20 million of Fiat to Stablecoins, give us a ring. We're probably the best people to do it.
John Furrier
>> And why are people doing that? Just explain that concept because this is where the economics start to kick in. A lot of people see the activity, they get the structural positioning of how things are going down. Certainly the US Treasury and the Treasury secretary is endorsing it. What's the motivation?
Haonan Li
>> Yeah. So these folks that we're engaging with are basically the new nodes of this parallel payment infrastructure that are built on top of Stablecoin rails. And so typically they are acquiring those Stablecoins to then distribute down below. So perhaps it is a retail customer that wants to purchase Stablecoins to prevent his earnings from being hyper-inflated away. Perhaps it's somebody who wants to purchase Stablecoins to do remittance from the US to the Philippines. The use cases are sort of myriad. But by engaging at sort of this wholesale level, we're able to really have a ton of impact very quickly.
John Furrier
>> It sets the system up, and I like that system thinking. I want to get your thoughts on... So that's awesome, by the way. So thanks for doing that. I want to get your thoughts on what you said earlier about people's work.
Haonan Li
>> Yeah.
John Furrier
>> Tools are different than work. Agents are bringing this idea that tools aren't the issue, it's the work product. And in smart contracts, one of the main benefits of the chain is that you can actually remove the middleman between two workers.
Haonan Li
>> That's right.
John Furrier
>> And do a smart contract and have value created and then measured and captured.
Haonan Li
>> That's right.
John Furrier
>> Talk about that use case, because the ultimate benefit on the Ethereum is the users, people doing the work. What's your reaction to that? What's your commentary?
Haonan Li
>> I think there's a variety of benefits. The first benefit is just the economics are incredibly efficient. If you think about a Tether, which in a way is the world's largest narrow bank. You could staff Tether with probably 15 people. You could fire pretty much everybody else and you'd probably be fine, and the thing generates $5 billion of free cash flow. It's possibly one of the best businesses of all time, stretching all the way back to the Medicis.
John Furrier
>> Yeah, it's better than Google.
Haonan Li
>> It's almost like what every tech company wishes they were. And I think it's a very interesting moment in technology where the traditional tech names are actually becoming not what classically are tech properties, right? They're becoming capital-intensive. There's becoming a variable cost to their operations. You got to buy the power plants. You got to buy the chips. Inference costs money. And so in a way, traditional tech is actually becoming less tech-like. And sort of the economics-
John Furrier
>> Yeah, because the CapEx expenditures are huge.
Haonan Li
>> That's right. That's right. And I think that's underappreciated, especially when everybody's default investment path is the S&P and 40% of the allocation is in these six tech names. So it's a very interesting moment where the traditional tech names are becoming less techy. And you have these emerging Stablecoin companies that have the properties of kind of the classic tech company, right? Just incredible zero marginal cost, just like they can grow to the moon. I think it's a very interesting moment in-
John Furrier
>> It's interesting because tech is where all the entrepreneurship is been. I want to ask you to wrap up is, in finance, we're seeing, at least my observation, is there's a financial entrepreneurial market in kind of a tech way. There's been always entrepreneurship in finance. Oh, yeah.I'll just ride someone's prepaid rails or something, maybe make 30 million, buy a boat in a house in Hamptons. Here, it's different. You could actually take down a market.
Haonan Li
>> That's right.
John Furrier
>> That's real entrepreneurship. Billion-dollar valuation or more, like mentioned Tether. So in the finance side, they don't have the concepts of product managers. So there's financial products that come out of what you're doing. So I'm speculating or guessing or predicting that there's going to be new products that emerge. Like in cloud, we saw Airbnb. Airbnb doesn't exist without AWS. In fact, they probably never would have even done anything if they'd buy a server. Okay. So is there an Airbnb-like moment inside the financial products?
Haonan Li
>> I think so. I think you're certainly right. I think the prize here is very much more than a Hamptons house and a boat. I think the prize here is much greater than that.
John Furrier
>> I had to goof on the New Yorkers. I'm from California, so it's kind of a dig. No, but it's nice to have a house in the Hamptons.
Haonan Li
>> It's nice.
John Furrier
>> Yeah, but you get rich, you don't actually take... Entrepreneurship's about taking territory.
Haonan Li
>> I think so. I think if you're primarily motivated by the Hamptons house and the boat, this is probably not the most direct path to it. I think there are easier ways to get to that goal. I think if you want to build a lasting institution the way that the New York Stock Exchange was built way back in the day, then I think Stablecoins today are fantastic.
John Furrier
>> It's interesting. What I like about the conversation in Ethereum too is that the conversations are about building something meaningful and durable.
Haonan Li
>> Absolutely.
John Furrier
>> Versus get rich quick schemes, which is not just a New York thing, just some people have that orientation. I mean, even in California, I've seen people trying to flip a company too fast. They're just in it for the money. The best companies are formed on missions.
Haonan Li
>> That's right. Sort of irrationally committed to the mission.
John Furrier
>> Yeah. They're crazy. What's that idea?
Haonan Li
>> That's right.
John Furrier
>> Renting my room out? What is that? Stupid idea. I mean, how many stories have we heard there? Well, thanks for coming on. I really appreciate you coming on and explaining all the action and certainly trailblazing crypto and bring it mainstream. Thanks for what you do.
Haonan Li
>> Yeah, thanks so much for having us.
John Furrier
>> All right, I'm John Furrier, host of theCUBE. Blazing the trail here, featuring the leaders who are making it happen. The durability, the long game of financial infrastructure is changing, it's rewiring, it's being recast. And again, AI, crypto, too hot areas, all being implemented at the infrastructure level, and that's where the change is. It's an enabler. It's accelerating value and value extraction. Thanks for watching.
John Furrier