theCUBE + NYSE Wired: Crypto Trailblazers | Gene Hoffman, Chia Network Inc.

Clips
More from theCUBE + NYSE Wired: Crypto Trailblazers

Gene Hoffman

CEO & President

Chia Networks

play_circle_outline OneMarket concept and global markets

play_circle_outline Enhancing Security in Chia Network Through Smart Contracting, Proof of Space & Time, and Multi-Factor Authentication

play_circle_outline Exploring Chia's Design Principles, Security, and Decentralization in the World of DeFi and Blockchains

play_circle_outline Importance of self-custody in blockchain audience

Info

Gene Hoffman, Chia Network Inc.

Gene Hoffman

CEO & President Chia Networks

search

>> Hello, and welcome back to the Crypto Trailblazer series. I'm John Furrier, host of theCUBE. We are here in our Palo Alto Studios, of course, theCUBE's home here is in Silicon Valley. And now we have our new home on the show floor of the New York Stock Exchange. And of course our partnership with the NYSE Wired open community that nobody owns. It's one of trust network that's building in real time and as we do these events, we want to bring more and more content to the community. We have Gene Hoffman here, the CEO and president of Chia Network. Gene, great to have you on theCUBE. I wish we could have recorded the preamble before we came on camera, but thanks for coming on.

Gene Hoffman

>> Thank you for having me.

>> Welcome to our studios. We were just riffing before we came on. I want to get into Chia Network and some of the amazing things that this enables. But we're talking about kind of the history of the motivation and where we are now. There are some I would call the OGs and some founding fathers and folks that were actually building a lot of peer-to-peer. You were involved in that, Bram Cohen, who's your partner in this venture, among all the hundreds of thousands of people in the community. Where we are started at the beginning of the roots of the, I won't say rebels, but they were rebels. And the internet started, folks who built in open systems, very open, no control, to now we're at the beginning of serious blockchain.

Gene Hoffman

>> Yes.

>> Take us through your view there, where we came from and why it's relevant today.

Gene Hoffman

>> So look, there were two things that kind of came together. There was the internet and there was public key cryptography. Bram and I often joked that were out building this Rube Goldbergian database to try to get banks to finally use public key cryptography. But backing up into the '90s and the early aughts, the cypherpunks were where this really kind of came together. And the cypherpunk view was that technology really could empower the individual to do things that you never had been able to do before. And so there was a lot of effort put in. And in fact, I almost started a cryptocurrency in 1997 to give you a sense of how much this has been something that made sense. But back then, my now wife, then girlfriend said, "Strange Caribbean island surrounded by armed guards." Go back to the United States? Probably not. It's just music thing.

>> And at that time too, in that '90s frame, it was very regulated in the US. You had to go to Canada or outside the jurisdiction to even do anything.

Gene Hoffman

>> Well, so I was the second person to ever technically export PGP in book form. And that ended export controls in cryptography. But what's happened with Satoshi and Bitcoin was solving that problem of being a single point of failure. And so this is kind of a natural outgrowth of Bram Cohen goes and solves peer to peer in a way that even Disney can't stop. And once you do that, Bitcoin is named an homage to BitTorrent. It uses large pieces of that, but then had that innovation of proof of work being the way that you can prove that you're not just like seven different people, you're just one person.

>> Yeah. BitTorrent, Bitcoin, a lot of resemblance there. And again, not obvious, came out of the community for free, I call it social freedom fighters in technology, which you're part of. We've all been looking at social change. Now we're on the new era, the dawn of this next, I call, global social change. Group formation, trust networks, transparency, security. Take us through where we are right now in terms of what that actually means today when people look at how banks are changing. Yeah, you see commerce coming into Bitcoin and blockchain and crypto. We kind of went through the typical froth phase and then underbelly, now reality. I mean, that's my words, but stuff happens. Innovation happens in the dark sometimes, but we're now here. Everyone's rushing to look at the benefits of it. What's your take on this?

Gene Hoffman

>> Well, it's now time for blockchain to live up to its promises. So the thing blockchains are going to do is create one global market. We literally call it OneMarket. And it allows you to do a whole bunch of things. So for example, the World Bank chose the blockchain to basically create as Edgar is to the stock markets in the United States, this is to the global voluntary carbon market. Now throw the politics aside, it's really powerful that you can have nations and private actors all be able to both trust and distrust each other at exactly the right amount to create an immutable record that is like, "Wait, that carbon got double printed in Mexico. I see that that happened. That's a problem." Now where we go is we go to 24/7 global markets. The idea that we open at 9:30 and close at 4:30 is quaint, to put it mildly. Is it 4:00? 4:00.

>> The aftermarket stuff. Okay, that's aftermarket, apparently. It's still the market.

Gene Hoffman

>> Yeah. Right. And that's the interesting thing. So one of the things we're doing with some partners from the investment banking world is a thing called Permuto Capital. And so what we're going to do is we're going to take blue chip stocks and we're going to split them into the dividend component and everything else and trade them separately. Now because we're still in a transition, we're going to let those trade on a national market as well, but ultimately the most efficient and highest return for the investor's on chain, because the chain takes all of the pain out of the traditional stock management system, if you will. And so this is one of the first real applications where without a blockchain, you really couldn't do it and scale it up and make it as investor friendly as you can with a blockchain.

>> You know that's interesting. I want to just click on that for a second because a lot of people look at the blockchain and say the obvious, which is, "The middleman's gone." That's actually a person or a firm, but there's mechanisms too. There's not just the organizations that are being dismantled and going direct peer to peer, immutable energy powered on Bitcoin, but now we'll get into what you do. But there's also software in these other mechanisms that are also middle, these transitional pieces.

Gene Hoffman

>> So one of the things we have to talk about is back to the future. So in fact, like on Chia, the way you trade equities is open outcry globally. So literally you announce to everybody in the world that, "I want to buy Microsoft dividend certificate at 55," right? And you just push it out. And it's signed, so no one can take it the wrong way, but anybody on the planet can look at that offer and go, "I'll take the other side of that," and transact and settle using the blockchain as a settlement mechanism in five minutes. And now all of a sudden you've got global open outcry. And it hearkens back to something most people don't know you can still do, which is you can pull your certificate out of DTC, you can have your name on it. You can walk into an office and trade it for a briefcase full of cash and walk away after signing the back. Like that system still works back from the '20s. And so in fact, what we're often doing here is taking these old systems that are still completely valid and then bringing all the power of a blockchain. Again, I don't have to trust whether or not you're going to steal the cash from me. You can't. I don't have to worry whether it's going to settle or not. It does.

>> That's ultimate self-custody right there.

Gene Hoffman

>> Correct.

>> I used my certificate.

Gene Hoffman

>> But the thing is, this is even better. You can't take my certificate from me without absolutely giving me safely your money. Like that's the thing that didn't exist in the real world.

>> So let's get into Chia Network, because I think this is very innovative what you've done. We were talking before we came on again. Explain what you've built, when you started it and how long you incubated it and built it out and what is it doing today?

Gene Hoffman

>> So we founded the company in 2017 but had real R&D until about 2021 when we launched a blockchain. But that R&D was basically fixing proof of work. Proof of stake is a step backwards in technology. The proof of work was very much meant to fix proof of stake. And I understand why people have made that compromise, but it's also a big security compromise. So what Bram wanted to do was figure out a better way to do proof of work. And so we do what is called proof of space and time. Now the best way to think about it is, it's proof of proof of work. So you've got some empty hard drive space, Friday night, you do your proof of work to Saturday, maybe even Sunday if you've got a lot of empty space. But then you're done. And now you just listen to the network and proof of time calls a number and you look on your hard drive and go, "Do I have a number close enough to be the winner of the block?" So now it's just, you're listening to the network, you're not spending anything but your hard drive. You're not sitting there like in proof of work, grinding all day, cooling fans as fast as possible. And it turns out people have a lot of extra storage laying around. But that was to get to a place where proof of space and time with 100,000 farmers, we've been as high as 400,000, uses the same amount of power as proof of stake in .

>> When you say farmers, describe what that means.

Gene Hoffman

>> In Bitcoin, you've got miners, they're sitting there toiling away at . In Chia, you plant your seeds in your hard drive, you harvest them. And if you're the winning farmer, you win the block.

>> Yeah, I mean love the name, I don't want to go there, but everyone can relate to it. So farming means I'm just going to get value out of it, be a resource.

Gene Hoffman

>> You're going to be the validator who uses your hard drive space. And as long as you have enough hard drive space, it's kind of one terabyte, one vote.

>> Got it. All right. So this is a collective intelligence infrastructure, if you will, for lack of a better description. Is that an accurate assessment or is that a little bit off?

Gene Hoffman

>> It's very much like Bitcoin, but the difference is that it also has smart contracting. And that's the other major thing that Chia really did. We looked at what Ethereum was doing, what others were doing, and I think a lot of people don't think about it, but smart contracting is the most adversarial compute environment known to mankind. Like as much money as you put on that chain is how much money a foreign actor wants to steal from you. And so from first principles, we built a different type of programming language, which is not as easy to develop in, but is much easier to secure. And so when you start talking about having something like 5% of all Microsoft stock on a blockchain, you really need to know that what you've written and what you're doing isn't going to be hacked by the North Koreans next week.

>> I say, "Hey, but I thought it was immutable."

Gene Hoffman

>> Well, it's immutable when-

>> not secured.

Gene Hoffman

>> So the issue is immutability isn't security.

>> Exactly.

Gene Hoffman

>> Right? The current blockchains, their self custody tools are painful. They're not human friendly. They are not average person can handle them and deal with them, even when it's a average person who knows there's 20 million on the line. And so we've also kind of addressed that. So with self custody, peer to peer actual transactions and this ability to have confidence that if you do create an offer for USDC for your Microsoft stock, no one can beat it. You've got to be crypto. And what I mean by that is the signature scheme.

>> Yeah. So you wrote a couple of I want to just, the self custody I want to bring, it comes up a lot. I get a lot of questions on this. And I also have a lot of questions myself, which is, it sounds easy, but it's hard and human error is a big part of that. So again, most of the security breaches are from human error.

Gene Hoffman

>> That's right. Or the defense in depth gets to a human failure.

>> Explain self custody, ideal scenario and what the current problems are.

Gene Hoffman

>> Well, so today, your self custody is you have like 24 words, but of course if somebody steals those 24 words from you, they get complete control and there's nothing you can do about it. What we're shipping right now is what we call vaults and Bitcoin's played with this but hasn't really gotten there. But instead of this entire paradigm, instead we're going to use your mobile device because it has a secure element inside of it and it's going to be your primary signing key. But then you're going to have a backup key and a second backup key. The first backup key, if you lose your phone or you forget and you get a new phone, you can use that backup key and when you submit it, there'll be like a four hour window where somebody stole it from you and you still have your phone, you can go, "No, stop. Somebody stole my backup key." So now all of a sudden, giving your ex-wife or your attorney your backup key is totally acceptable because if they did something completely illegal, you would see it and stop them. And that third one can be an institution like a bank or a security service or somebody you trust who it might take a week to get it back from. But that's your final ultimate oops scenario.

>> Multi-factor elements in terms of that fundication.

Gene Hoffman

>> Yeah. And multi-grades of, okay, this activity, this wallet has a billion dollars in it. It should probably have a 24-hour clawback window for anything you spend. Because like the Bybit hack, if there was a clawback window, you would have had a chance to realize something was horribly wrong and let's bring it back. That's not something most blockchains can do and only Chia can do it and Bitcoin, if they finally get around to it.

>> All right, so let's get back into Chia because I want to get into the motivation. Obviously you got the nice history. What were some of the design principles, the purpose? You mentioned compute, cycle times. Layout the requirements, scope the network, how it works, what's involved.

Gene Hoffman

>> So the whole goal there was we wanted to have the security level of Bitcoin, which is much better than proof of stake with, in this case 3% of the total global power spend and much more decentralized. So right now when you do a Bitcoin transaction, one or two people are likely to sign it. And that's not the decentralization Satoshi was really looking for. Chia has been as high as 140. We've currently fallen down to about a six or seven. We're about to fix that and bring it back to 100.

>> That means what from a security and speed standpoint?

Gene Hoffman

>> So if you only got two people signing transactions, a federal court could tell them what to sign. But if you've got 140 people around the globe, I wish everyone luck trying to get a group together that could actually censor or change outcomes or do any of those kinds of things. Because if you're a bank or you're a financial institution, you don't want your crypto founder to be able to veto your transactions. You want it to be that there's no possible way. It's credibly decentralized. And Chia really is, it's one of the most decentralized blockchains on the planet.

>> Give us some examples of some things you guys are doing now in terms of use cases people are using them for. You mentioned Raspberry Pi works there, so I don't need specific hard disk farms, server farms.

Gene Hoffman

>> Yep. Some people go crazy and buy themselves a bunch of hard drives and throw them in racks. But the thing is a lot of people will grab a couple of portable hard drives or they've got their entertainment NAS system and they just fill that up. Actually farming, the plotting takes a little work, so you might use your gaming PC to plot. When you're done, you go play games on your gaming PC and you plug a Raspberry Pi in your hard drive and it does all of the work to validate the network. But the real applications aren't farming and validating. The real applications are using this for decentralized finance. So as I said, the World Bank uses Chia to basically create a full record of literally every single voluntary carbon offset since inception and moving forward. And then some of the registries are actually trading them on Chia. So they're saying, "Here, here's my entire audit history and now I've got a public market for carbon."

>> And who does that as an example?

Gene Hoffman

>> Eco Registry is one great example of that, but Gold Standard, Verra are both in what's called the CAD trust. This is the kind of Edgar system that is in there. And this is running in production and has been for a couple of years now on the Chia blockchain.

>> And you guys have been in production for how long?

Gene Hoffman

>> Our fourth birthday is like next week.

>> Toddler stance, but still doing great. Okay. What's the biggest surprise? If you had to look back and say something that surprised you, good or bad or ugly, pick your choice. Or name all three, because you're in an area that's pioneering and solving a lot of problems and getting a lot of benefit.

Gene Hoffman

>> So look, our two surprises both positive and negative are Sam Bankman-Fried and the SEC. And so let me explain what I mean by that. Sam Bankman-Fried froze all of the, what I would call, good blockchain adoption that was about to happen. You had a lot of people who were finally getting serious and realizing the tools were now mature enough. And so that set us back maybe 18 months. So when you talk about four years, that's not a small impact.

>> Just in terms of sentiment or just more culture?

Gene Hoffman

>> If you had a top five commercial bank who'd done a successful proof of concept and you were thinking about launching that in the weeks after that trial, the boss wasn't saying yes.

>> Never fight fashion, as they say, in this case negative fashion.

Gene Hoffman

>> Right. But on the other side of that, people thought I was crazy when I said we're going to file an S1 for Chia Network's stock, not our coins in about April of 2023. And people were like, "Are you going to get a ha-ha directly from Gary Gensler?" Instead, we got a completely rational set of comments and we filed two more turns and are down at a place where, but for market conditions, the SEC has looked at it under the previous regime and is comfortable that it's kosher, if you will.

>> Have you guys announced the offering yet?

Gene Hoffman

>> We have definitely said that we are in the confidential process. Well, we had chosen a bank and they were called Credit Suisse First Boston, so that slowed the process down a touch, but it also kind of indirectly led to the Permuto trusts, which we're also talking about.

>> Yeah.

Gene Hoffman

>> Right now, we're actually from an offering perspective, going to do the Permuto trusts first. That's so far announced, Microsoft, Apple and Broadcom, but we'll have a few more and then expect that once those trade well, makes tons of sense about revenue and application and then we go on the heels of that.

>> So digital currency, assets on-chain, commercialization's happening. What's the revenue model? How are you guys making money on this? Obviously going public means you're going to be public. So one, business model, what are you guys doing there? And two, why public? Why go public?

Gene Hoffman

>> So the core business model is Red Hat style. We're talking to one of the banks that we talk to often and they were like, "In 1998, if you'd told me we'd run Linux, I would have laughed you out of the room. And by 2002, that was the only thing we ran." And I think blockchains are very close to that here. And so in the Permuto example, we're actually a JV there, so we're going to get kind of outsized revenue in that situation and it kind of drives forward the opportunity. They needed us a little bit more than usual to kind of create in some ways our perfect customer, but ultimately we think that's going to shake the tree loose of a lot of other people in traditional finance who've got great ideas but have been like, "There's no way I could do this in DTC." And so I think that's really kind of the next major step.

>> You know, open source is a great thing because if you do the right thing, there's monetizations around the edges. Sounds like that's what you guys look at.

Gene Hoffman

>> That's right.

>> And there's probably a multitude of vectors.

Gene Hoffman

>> Well, and also we have this kind of interesting thing that Satoshi hinted at doing and that is we own a bunch of our own coin. And so as an investor, you're indirectly invested in the coin and so the balance sheet value there, if we drive adoption, we very much believe you can value blockchains. It's what's the annual ongoing demand for access to blocks.

>> Okay, so since I have you here and you're in our studio and I'm the host, I get to ask the question, who is Satoshi?

Gene Hoffman

>> So Graham and I believe that it is a group of people, they are friends of ours and they're ex-cypherpunks or well I guess are cypherpunks, but two of them are dead. A lot of people point out like Hal Finney and say, "Well gee, Hal was running a marathon when Satoshi was talking." Well, Satoshi was a group and the old story about PGP was that Phil Zimmerman exported PGP the first time and I did it the second time. It's actually Hal who did that and Phil stepped in to take the fall. So very much a Hal kind of thing to do to not be Satoshi, even though he probably was.

>> Talk about that time in history. And a lot of people have mentioned, it's been in a group, not one person. The paper came out, but it was also stuff going on before the paper.

Gene Hoffman

>> That's right.

>> There were forums, people were on, squashing bugs.

Gene Hoffman

>> Yeah, well the cypherpunks mailing list was a thing. It was a wild west kind of email list. So it's not your average email list, but there were a bunch of really smart people there. So you had real cryptographers, some of the best developers on the planet debating about how to solve spam. And in fact, oddly enough, Bitcoin kind of comes out of solving spam. Proof of work, the idea was that you wouldn't deliver email unless you proved, you did a little work and then all of a sudden spammers couldn't get the leverage they get. So it was really taking anti-spam ideas and some of the stuff that like Len Sassaman did on NIMs and obviously what PGP was driving forward and pulling all those pieces together to build what became the Bitcoin platform.

>> Yeah, and what's also interesting, and I think I'm the only one who's publicly said this in media, Dave and I talked about it all the time on our podcast. If you look back at where we are now, many years into Bitcoin, it's less than 20 years old. And so there are a lot of people, whether it was a 17-year-old kid at that time in the mailing list, watching the big boys do their thing, they were in, an OG, they were putting coin at 12 cents in their pocket.

Gene Hoffman

>> Absolutely.

>> And so there's Bitcoin whales out there that range in diversity, they're sitting there and now we're in a liquidity market. So my theory is you're going to see an in-migration of liquidity from the gains. That's going to have a huge impact on the culture of today's so-called gatekeepers.

Gene Hoffman

>> Absolutely.

>> What is your view on that? Because I think it's going to be pretty interesting. Yeah, there might be some diversification. I get a house, I buy some assets. It won't be a hundred percent because fiat is fiat and now you've got digital tokens, stable coins. So how's that going to play out in your mind?

Gene Hoffman

>> Well, I think that once we get self-custody right, the audience that was already a blockchain audience will love being able to self-custody mostly everything. And so you get in the situation where it's like, what's not going to change is Microsoft, Google and Meta generating fanboy revenue and paying dividends with it. And so all of a sudden we go from this world where the yield might be you in the casino into the yield being an Apple fanboy, and we all know where that comes from, right? So I think we're going to see Wall Street and then the commercial banks quickly move to enabling self-custody, being third-party custodians because your phone is all you really need with an internet connection to trade anything for anything else. I mean, I joke, but I believe in the near future you're going to buy coffee with Apple stock.

>> Yeah, Clay Shirky wrote a book once called, Here Comes Everyone, I think it was like 20 years ago. And it was early crowdsourcing kind of wisdom of the crowds. Remember the days? That's where we're at right now. I mean, so that's a system change.

Gene Hoffman

>> That's right.

>> That shifts to the person.

Gene Hoffman

>> Well look, one of the big changes, I talk about securities laws a lot is just because we kind of get in this world and like the 33 and the 34 Act are kind of universal. They're going to be there for a very long time. But the 40 Act was this idea that you needed a company to coordinate everybody to kind of invest together. That's called a DAO. And it's not clear to me that you need the same kind of rules ultimately and therefore the same cost structure because ultimately what you really want is you want it to be much cheaper, so more of the returns on the investment flow down to the investor.

>> Yeah, I mean I think you have so many points to drill down, we could probably do a two-hour podcast or six hours and beat Joe Rogan's records on this one topic, but DAO points to a model. So DAOs is not just about the DAO, it's about what a DAO is. And you mentioned open source, monetizing around the fringe Red Hat style, for those Linux days. This making trend changes. What's your vision on that as those dots start to connect?

Gene Hoffman

>> Well, so there's this term I like a lot called Borgs, which are basically like the Borg where you take an offline entity, so think an LLC, you use the same rules because we've got 400 years of history about joint stock corporations, we kind of know how they work, but you now enable a bunch of stuff with simple blockchain governance you couldn't do before. And so all of a sudden you get all of the things that are great about being a or a LLC, but with all the things that are great about being on chain. And so you don't need the same heavy-handed regulation if you wanted to put together a DAO that invests in a certain category and you bring together the people who want to do that and they're there with easy exit because they go, "Okay, I don't like the decisions, I'm going to exit." That's a whole new world where all of a sudden a lot of middlemen frankly fall out of the need to do group investing and kind of spread the risk.

>> I was just at a conference from innovative impact philanthropy people, I don't know what the word is, but there's a name for that, but there's all different categories of social good. And it used to be you get rich, you make a bunch of money, you put a foundation together or you give it to a foundation and then they put 95% in the bank and they put 5% in the market. And now you're starting to see people, and that's just like a waterfall mentality and nothing happens. And everyone's like, "Where's the impact?" No real change. Now the innovation is impact is in real time and that you can direct the impact efforts and think like a hedge fund, not a philanthropist, but actually do good.

Gene Hoffman

>> Look, this is the CAD Trust in some ways, right? If you're an investor in carbon offsets, you now actually have this known trustworthy final outcome where you can be like, "Yeah, that is the Deloitte audit. Yes, I did get my money spent correctly," or, "No, I didn't," which in some ways is even better, but that is now enabled by cryptography and not by local law, right? And that's a big change. When you can start to do certain things where you don't have to trust anyone else to ultimately come to the right decision, you can coordinate in new ways

>> I was talking to a friend the other day, I was making an observation about something we're seeing around trust networks. And he went, "What do you mean?" Well, you know, they had IP addresses and then you had domain names, which logically kind of... And it was all open and protected, by the way, by the community. And we all kind of know the history there. If you don't, there's legendary stories there around people who were warriors who guarded the sanctity of open and no commercial interests. But social infrastructure is there and now this trust networks on top. You're building infrastructure, blockchain, decentralized, and now these trust networks are ad hoc on top and they're open.

Gene Hoffman

>> Right.

>> What is your reaction to that? Do you see that as a real phenomenon? DAOs kind of point to it. We're seeing kind of in our community where, hey, NYSE Wired came out of Brian Bauman's innovation around just putting people together and then having a reputation and then they're sitting on top of something else called the social internet. But you're kind of doing the same thing here.

Gene Hoffman

>> Well look, we see this in one community on our blockchain, which is called the Tang Gang. Long story about how the heck they got that name, but what it is kind an NFT collective. And so what they're doing is they're bringing in certain artists and certain collectors and they've got a kind of even frequent flyer mile that they hand out if you own the right NFTs and you get into this drop, and it's very much that. Like there's a reputation from your NFTs and your collection that you now understand about, okay, who is this person? How involved are they? And so it gives you different access levels and that all just kind of comes together on a blockchain in Discord and that is it.

>> Yeah. And as a first party relationship, as if it's face-to-face, because when you meet someone face-to-face, you have a relationship, "Oh, he's shifty," or, "Well, he's smart," but then when you go digital, you met them in person. But if you never met in person, you have a global network. There has to be a trust protocol.

Gene Hoffman

>> Yeah. Well, and it's being bolted on to X, Discord and blockchains. I mean, that's exactly where it's going because those are the kind of primary ways you have those conversations.

>> Well, Gene, it's been fascinating. Thank you for coming. You're certainly a trailblazer. You've been a trailblazer. Final question. A lot of trailblazers who plow in the field sometimes get blow back, right? Get shrapnel. What's some scar tissue lessons you've learned as you plow forward into this new world where you're loving life right now. It's a great time. What are some of the things that have blown back at you? You've gotten through, you've been eating glass, spitting nails. What are some of the things you've learned?

Gene Hoffman

>> Yeah, look, so eating glass is the right answer. One thing I regret slightly is that I had just bought rollingstone.com and eMusic. We had potentially the same path as Audible did, where you kind of went into the doldrums of literally 25 years ago if we're all remembering this. And they made it back through and ultimately got bought by Amazon. I ended up having to sell to Universal. Now that kicked off the iTunes Music Store as you know it, so I'm not real unhappy about that, but ultimately it would have been fun to be able to run that. But what I really took from it, to answer your question is you really have to be like, even when it's so dark that you think you're dead, you got to push on through, like keep eating the glass.

>> Grit is everything.

Gene Hoffman

>> It is. And what happens is when you're an overnight success, no one remembers all of the glass.

>> Yeah. And talking about the Rolling Stone is interesting because the music industry had a dark time. And then the Renaissance was the rebel forces coming around, the P2P music sharing, iTunes wouldn't have existed.

Gene Hoffman

>> Look, it was Bram Cohen and I pincering the music business. Bram on the one side going, "Look, if you do something that's customer unfriendly, they're just going to torrent it." And I, on the other side going, "It turns out that if you are again customer friendly, subscription, 99 cents, this works." And that launches the iPod with Apple. Tony Fidel had worked for me for a while and then when Universal bought us, I brought them over to meet the Apple folks, and that is the iTunes Music Store.

>> And what's interesting about full circle here is that Chia is that equilibrium because there is... It doesn't have to be polarized.

Gene Hoffman

>> Correct.

>> I mean, it could be asymmetrically inefficient or disadvantaged. Media is the same way. Cybersecurity is always asymmetry at some point and then equilibrium kicks in.

Gene Hoffman

>> Well, there's a key insight from the music change and that was that Tower Records was not going to go well, nor was Blockbuster. But it turns out in finance, it's not nearly that bad. I mean, investment banks are still going be investment banks when they're primarily using the blockchain. Commercial banks are still going be commercial banks, insurance companies. So there are some losers, but they're not the same. And so in much the way that things like in the music business transition their model a bit, like Harry Fox Agency is still there. No one would have expected that. And it turns out they serve a really important purpose. And so I think exactly the same thing's going to happen with that.

>> I think service businesses are underrated now that you have operating leverage with technology. And if the efficiency kicks in, services are never going away.

Gene Hoffman

>> That's right.

>> Ever.

Gene Hoffman

>> Right.

>> Okay. Well, great interview. Love the conversation. While we have the last minute here, put a plug in for what you guys are doing. You're going to go public. How do people get involved with Chia Network?

Gene Hoffman

>> So I would check out chia.net and Permuto.Capital. The big story of this summer is launching all these blue chip stocks on chain and on the stock exchange. If you're an investor, you should invest in them no matter what. Because if you're currently a Microsoft investor, you have to ask, is this exactly the amount of cash I want, or do I want to have less cash and more of the asset?

>> And shout out to Bram too as well. Great job. Just lifelong mission. And again, just swimming through the market, every wave has their surfers and everyone takes a dive. And sometimes you fall a lot.

Gene Hoffman

>> Yeah. Look, we got to be in the right place at the right time with an odd set of skills to be able to drive the future of finance.

>> Thanks for coming on our Crypto Trailblazers program. Thanks so much.

Gene Hoffman

>> Thank you.

>> All right, Gene Hoffman, CEO and president of Chia Network. Again, another example of as the innovation waves change, the game is still the same. At the end of the day, the outcomes are going to get equalized, you're going to start to see different efficiencies. And I think what's interesting now is with even AI coming around the corner, but blockchain very efficient, the middleman, the middle mechanisms get go away, and then magic happens from there. Of course, the Crypto Trailblazers are here in theCUBE. We're bringing the data to you. I'm John Furrier. Thanks for watching.

Gene Hoffman, Chia Network Inc.

search

>> Hello, and welcome back to the Crypto Trailblazer series. I'm John Furrier, host of theCUBE. We are here in our Palo Alto Studios, of course, theCUBE's home here is in Silicon Valley. And now we have our new home on the show floor of the New York Stock Exchange. And of course our partnership with the NYSE Wired open community that nobody owns. It's one of trust network that's building in real time and as we do these events, we want to bring more and more content to the community. We have Gene Hoffman here, the CEO and president of Chia Network. Gene, great to have you on theCUBE. I wish we could have recorded the preamble before we came on camera, but thanks for coming on.

Gene Hoffman

>> Thank you for having me.

>> Welcome to our studios. We were just riffing before we came on. I want to get into Chia Network and some of the amazing things that this enables. But we're talking about kind of the history of the motivation and where we are now. There are some I would call the OGs and some founding fathers and folks that were actually building a lot of peer-to-peer. You were involved in that, Bram Cohen, who's your partner in this venture, among all the hundreds of thousands of people in the community. Where we are started at the beginning of the roots of the, I won't say rebels, but they were rebels. And the internet started, folks who built in open systems, very open, no control, to now we're at the beginning of serious blockchain.

Gene Hoffman

>> Yes.

>> Take us through your view there, where we came from and why it's relevant today.

Gene Hoffman

>> So look, there were two things that kind of came together. There was the internet and there was public key cryptography. Bram and I often joked that were out building this Rube Goldbergian database to try to get banks to finally use public key cryptography. But backing up into the '90s and the early aughts, the cypherpunks were where this really kind of came together. And the cypherpunk view was that technology really could empower the individual to do things that you never had been able to do before. And so there was a lot of effort put in. And in fact, I almost started a cryptocurrency in 1997 to give you a sense of how much this has been something that made sense. But back then, my now wife, then girlfriend said, "Strange Caribbean island surrounded by armed guards." Go back to the United States? Probably not. It's just music thing.

>> And at that time too, in that '90s frame, it was very regulated in the US. You had to go to Canada or outside the jurisdiction to even do anything.

Gene Hoffman

>> Well, so I was the second person to ever technically export PGP in book form. And that ended export controls in cryptography. But what's happened with Satoshi and Bitcoin was solving that problem of being a single point of failure. And so this is kind of a natural outgrowth of Bram Cohen goes and solves peer to peer in a way that even Disney can't stop. And once you do that, Bitcoin is named an homage to BitTorrent. It uses large pieces of that, but then had that innovation of proof of work being the way that you can prove that you're not just like seven different people, you're just one person.

>> Yeah. BitTorrent, Bitcoin, a lot of resemblance there. And again, not obvious, came out of the community for free, I call it social freedom fighters in technology, which you're part of. We've all been looking at social change. Now we're on the new era, the dawn of this next, I call, global social change. Group formation, trust networks, transparency, security. Take us through where we are right now in terms of what that actually means today when people look at how banks are changing. Yeah, you see commerce coming into Bitcoin and blockchain and crypto. We kind of went through the typical froth phase and then underbelly, now reality. I mean, that's my words, but stuff happens. Innovation happens in the dark sometimes, but we're now here. Everyone's rushing to look at the benefits of it. What's your take on this?

Gene Hoffman

>> Well, it's now time for blockchain to live up to its promises. So the thing blockchains are going to do is create one global market. We literally call it OneMarket. And it allows you to do a whole bunch of things. So for example, the World Bank chose the blockchain to basically create as Edgar is to the stock markets in the United States, this is to the global voluntary carbon market. Now throw the politics aside, it's really powerful that you can have nations and private actors all be able to both trust and distrust each other at exactly the right amount to create an immutable record that is like, "Wait, that carbon got double printed in Mexico. I see that that happened. That's a problem." Now where we go is we go to 24/7 global markets. The idea that we open at 9:30 and close at 4:30 is quaint, to put it mildly. Is it 4:00? 4:00.

>> The aftermarket stuff. Okay, that's aftermarket, apparently. It's still the market.

Gene Hoffman

>> Yeah. Right. And that's the interesting thing. So one of the things we're doing with some partners from the investment banking world is a thing called Permuto Capital. And so what we're going to do is we're going to take blue chip stocks and we're going to split them into the dividend component and everything else and trade them separately. Now because we're still in a transition, we're going to let those trade on a national market as well, but ultimately the most efficient and highest return for the investor's on chain, because the chain takes all of the pain out of the traditional stock management system, if you will. And so this is one of the first real applications where without a blockchain, you really couldn't do it and scale it up and make it as investor friendly as you can with a blockchain.

>> You know that's interesting. I want to just click on that for a second because a lot of people look at the blockchain and say the obvious, which is, "The middleman's gone." That's actually a person or a firm, but there's mechanisms too. There's not just the organizations that are being dismantled and going direct peer to peer, immutable energy powered on Bitcoin, but now we'll get into what you do. But there's also software in these other mechanisms that are also middle, these transitional pieces.

Gene Hoffman

>> So one of the things we have to talk about is back to the future. So in fact, like on Chia, the way you trade equities is open outcry globally. So literally you announce to everybody in the world that, "I want to buy Microsoft dividend certificate at 55," right? And you just push it out. And it's signed, so no one can take it the wrong way, but anybody on the planet can look at that offer and go, "I'll take the other side of that," and transact and settle using the blockchain as a settlement mechanism in five minutes. And now all of a sudden you've got global open outcry. And it hearkens back to something most people don't know you can still do, which is you can pull your certificate out of DTC, you can have your name on it. You can walk into an office and trade it for a briefcase full of cash and walk away after signing the back. Like that system still works back from the '20s. And so in fact, what we're often doing here is taking these old systems that are still completely valid and then bringing all the power of a blockchain. Again, I don't have to trust whether or not you're going to steal the cash from me. You can't. I don't have to worry whether it's going to settle or not. It does.

>> That's ultimate self-custody right there.

Gene Hoffman

>> Correct.

>> I used my certificate.

Gene Hoffman

>> But the thing is, this is even better. You can't take my certificate from me without absolutely giving me safely your money. Like that's the thing that didn't exist in the real world.

>> So let's get into Chia Network, because I think this is very innovative what you've done. We were talking before we came on again. Explain what you've built, when you started it and how long you incubated it and built it out and what is it doing today?

Gene Hoffman

>> So we founded the company in 2017 but had real R&D until about 2021 when we launched a blockchain. But that R&D was basically fixing proof of work. Proof of stake is a step backwards in technology. The proof of work was very much meant to fix proof of stake. And I understand why people have made that compromise, but it's also a big security compromise. So what Bram wanted to do was figure out a better way to do proof of work. And so we do what is called proof of space and time. Now the best way to think about it is, it's proof of proof of work. So you've got some empty hard drive space, Friday night, you do your proof of work to Saturday, maybe even Sunday if you've got a lot of empty space. But then you're done. And now you just listen to the network and proof of time calls a number and you look on your hard drive and go, "Do I have a number close enough to be the winner of the block?" So now it's just, you're listening to the network, you're not spending anything but your hard drive. You're not sitting there like in proof of work, grinding all day, cooling fans as fast as possible. And it turns out people have a lot of extra storage laying around. But that was to get to a place where proof of space and time with 100,000 farmers, we've been as high as 400,000, uses the same amount of power as proof of stake in .

>> When you say farmers, describe what that means.

Gene Hoffman

>> In Bitcoin, you've got miners, they're sitting there toiling away at . In Chia, you plant your seeds in your hard drive, you harvest them. And if you're the winning farmer, you win the block.

>> Yeah, I mean love the name, I don't want to go there, but everyone can relate to it. So farming means I'm just going to get value out of it, be a resource.

Gene Hoffman

>> You're going to be the validator who uses your hard drive space. And as long as you have enough hard drive space, it's kind of one terabyte, one vote.

>> Got it. All right. So this is a collective intelligence infrastructure, if you will, for lack of a better description. Is that an accurate assessment or is that a little bit off?

Gene Hoffman

>> It's very much like Bitcoin, but the difference is that it also has smart contracting. And that's the other major thing that Chia really did. We looked at what Ethereum was doing, what others were doing, and I think a lot of people don't think about it, but smart contracting is the most adversarial compute environment known to mankind. Like as much money as you put on that chain is how much money a foreign actor wants to steal from you. And so from first principles, we built a different type of programming language, which is not as easy to develop in, but is much easier to secure. And so when you start talking about having something like 5% of all Microsoft stock on a blockchain, you really need to know that what you've written and what you're doing isn't going to be hacked by the North Koreans next week.

>> I say, "Hey, but I thought it was immutable."

Gene Hoffman

>> Well, it's immutable when-

>> not secured.

Gene Hoffman

>> So the issue is immutability isn't security.

>> Exactly.

Gene Hoffman

>> Right? The current blockchains, their self custody tools are painful. They're not human friendly. They are not average person can handle them and deal with them, even when it's a average person who knows there's 20 million on the line. And so we've also kind of addressed that. So with self custody, peer to peer actual transactions and this ability to have confidence that if you do create an offer for USDC for your Microsoft stock, no one can beat it. You've got to be crypto. And what I mean by that is the signature scheme.

>> Yeah. So you wrote a couple of I want to just, the self custody I want to bring, it comes up a lot. I get a lot of questions on this. And I also have a lot of questions myself, which is, it sounds easy, but it's hard and human error is a big part of that. So again, most of the security breaches are from human error.

Gene Hoffman

>> That's right. Or the defense in depth gets to a human failure.

>> Explain self custody, ideal scenario and what the current problems are.

Gene Hoffman

>> Well, so today, your self custody is you have like 24 words, but of course if somebody steals those 24 words from you, they get complete control and there's nothing you can do about it. What we're shipping right now is what we call vaults and Bitcoin's played with this but hasn't really gotten there. But instead of this entire paradigm, instead we're going to use your mobile device because it has a secure element inside of it and it's going to be your primary signing key. But then you're going to have a backup key and a second backup key. The first backup key, if you lose your phone or you forget and you get a new phone, you can use that backup key and when you submit it, there'll be like a four hour window where somebody stole it from you and you still have your phone, you can go, "No, stop. Somebody stole my backup key." So now all of a sudden, giving your ex-wife or your attorney your backup key is totally acceptable because if they did something completely illegal, you would see it and stop them. And that third one can be an institution like a bank or a security service or somebody you trust who it might take a week to get it back from. But that's your final ultimate oops scenario.

>> Multi-factor elements in terms of that fundication.

Gene Hoffman

>> Yeah. And multi-grades of, okay, this activity, this wallet has a billion dollars in it. It should probably have a 24-hour clawback window for anything you spend. Because like the Bybit hack, if there was a clawback window, you would have had a chance to realize something was horribly wrong and let's bring it back. That's not something most blockchains can do and only Chia can do it and Bitcoin, if they finally get around to it.

>> All right, so let's get back into Chia because I want to get into the motivation. Obviously you got the nice history. What were some of the design principles, the purpose? You mentioned compute, cycle times. Layout the requirements, scope the network, how it works, what's involved.

Gene Hoffman

>> So the whole goal there was we wanted to have the security level of Bitcoin, which is much better than proof of stake with, in this case 3% of the total global power spend and much more decentralized. So right now when you do a Bitcoin transaction, one or two people are likely to sign it. And that's not the decentralization Satoshi was really looking for. Chia has been as high as 140. We've currently fallen down to about a six or seven. We're about to fix that and bring it back to 100.

>> That means what from a security and speed standpoint?

Gene Hoffman

>> So if you only got two people signing transactions, a federal court could tell them what to sign. But if you've got 140 people around the globe, I wish everyone luck trying to get a group together that could actually censor or change outcomes or do any of those kinds of things. Because if you're a bank or you're a financial institution, you don't want your crypto founder to be able to veto your transactions. You want it to be that there's no possible way. It's credibly decentralized. And Chia really is, it's one of the most decentralized blockchains on the planet.

>> Give us some examples of some things you guys are doing now in terms of use cases people are using them for. You mentioned Raspberry Pi works there, so I don't need specific hard disk farms, server farms.

Gene Hoffman

>> Yep. Some people go crazy and buy themselves a bunch of hard drives and throw them in racks. But the thing is a lot of people will grab a couple of portable hard drives or they've got their entertainment NAS system and they just fill that up. Actually farming, the plotting takes a little work, so you might use your gaming PC to plot. When you're done, you go play games on your gaming PC and you plug a Raspberry Pi in your hard drive and it does all of the work to validate the network. But the real applications aren't farming and validating. The real applications are using this for decentralized finance. So as I said, the World Bank uses Chia to basically create a full record of literally every single voluntary carbon offset since inception and moving forward. And then some of the registries are actually trading them on Chia. So they're saying, "Here, here's my entire audit history and now I've got a public market for carbon."

>> And who does that as an example?

Gene Hoffman

>> Eco Registry is one great example of that, but Gold Standard, Verra are both in what's called the CAD trust. This is the kind of Edgar system that is in there. And this is running in production and has been for a couple of years now on the Chia blockchain.

>> And you guys have been in production for how long?

Gene Hoffman

>> Our fourth birthday is like next week.

>> Toddler stance, but still doing great. Okay. What's the biggest surprise? If you had to look back and say something that surprised you, good or bad or ugly, pick your choice. Or name all three, because you're in an area that's pioneering and solving a lot of problems and getting a lot of benefit.

Gene Hoffman

>> So look, our two surprises both positive and negative are Sam Bankman-Fried and the SEC. And so let me explain what I mean by that. Sam Bankman-Fried froze all of the, what I would call, good blockchain adoption that was about to happen. You had a lot of people who were finally getting serious and realizing the tools were now mature enough. And so that set us back maybe 18 months. So when you talk about four years, that's not a small impact.

>> Just in terms of sentiment or just more culture?

Gene Hoffman

>> If you had a top five commercial bank who'd done a successful proof of concept and you were thinking about launching that in the weeks after that trial, the boss wasn't saying yes.

>> Never fight fashion, as they say, in this case negative fashion.

Gene Hoffman

>> Right. But on the other side of that, people thought I was crazy when I said we're going to file an S1 for Chia Network's stock, not our coins in about April of 2023. And people were like, "Are you going to get a ha-ha directly from Gary Gensler?" Instead, we got a completely rational set of comments and we filed two more turns and are down at a place where, but for market conditions, the SEC has looked at it under the previous regime and is comfortable that it's kosher, if you will.

>> Have you guys announced the offering yet?

Gene Hoffman

>> We have definitely said that we are in the confidential process. Well, we had chosen a bank and they were called Credit Suisse First Boston, so that slowed the process down a touch, but it also kind of indirectly led to the Permuto trusts, which we're also talking about.

>> Yeah.

Gene Hoffman

>> Right now, we're actually from an offering perspective, going to do the Permuto trusts first. That's so far announced, Microsoft, Apple and Broadcom, but we'll have a few more and then expect that once those trade well, makes tons of sense about revenue and application and then we go on the heels of that.

>> So digital currency, assets on-chain, commercialization's happening. What's the revenue model? How are you guys making money on this? Obviously going public means you're going to be public. So one, business model, what are you guys doing there? And two, why public? Why go public?

Gene Hoffman

>> So the core business model is Red Hat style. We're talking to one of the banks that we talk to often and they were like, "In 1998, if you'd told me we'd run Linux, I would have laughed you out of the room. And by 2002, that was the only thing we ran." And I think blockchains are very close to that here. And so in the Permuto example, we're actually a JV there, so we're going to get kind of outsized revenue in that situation and it kind of drives forward the opportunity. They needed us a little bit more than usual to kind of create in some ways our perfect customer, but ultimately we think that's going to shake the tree loose of a lot of other people in traditional finance who've got great ideas but have been like, "There's no way I could do this in DTC." And so I think that's really kind of the next major step.

>> You know, open source is a great thing because if you do the right thing, there's monetizations around the edges. Sounds like that's what you guys look at.

Gene Hoffman

>> That's right.

>> And there's probably a multitude of vectors.

Gene Hoffman

>> Well, and also we have this kind of interesting thing that Satoshi hinted at doing and that is we own a bunch of our own coin. And so as an investor, you're indirectly invested in the coin and so the balance sheet value there, if we drive adoption, we very much believe you can value blockchains. It's what's the annual ongoing demand for access to blocks.

>> Okay, so since I have you here and you're in our studio and I'm the host, I get to ask the question, who is Satoshi?

Gene Hoffman

>> So Graham and I believe that it is a group of people, they are friends of ours and they're ex-cypherpunks or well I guess are cypherpunks, but two of them are dead. A lot of people point out like Hal Finney and say, "Well gee, Hal was running a marathon when Satoshi was talking." Well, Satoshi was a group and the old story about PGP was that Phil Zimmerman exported PGP the first time and I did it the second time. It's actually Hal who did that and Phil stepped in to take the fall. So very much a Hal kind of thing to do to not be Satoshi, even though he probably was.

>> Talk about that time in history. And a lot of people have mentioned, it's been in a group, not one person. The paper came out, but it was also stuff going on before the paper.

Gene Hoffman

>> That's right.

>> There were forums, people were on, squashing bugs.

Gene Hoffman

>> Yeah, well the cypherpunks mailing list was a thing. It was a wild west kind of email list. So it's not your average email list, but there were a bunch of really smart people there. So you had real cryptographers, some of the best developers on the planet debating about how to solve spam. And in fact, oddly enough, Bitcoin kind of comes out of solving spam. Proof of work, the idea was that you wouldn't deliver email unless you proved, you did a little work and then all of a sudden spammers couldn't get the leverage they get. So it was really taking anti-spam ideas and some of the stuff that like Len Sassaman did on NIMs and obviously what PGP was driving forward and pulling all those pieces together to build what became the Bitcoin platform.

>> Yeah, and what's also interesting, and I think I'm the only one who's publicly said this in media, Dave and I talked about it all the time on our podcast. If you look back at where we are now, many years into Bitcoin, it's less than 20 years old. And so there are a lot of people, whether it was a 17-year-old kid at that time in the mailing list, watching the big boys do their thing, they were in, an OG, they were putting coin at 12 cents in their pocket.

Gene Hoffman

>> Absolutely.

>> And so there's Bitcoin whales out there that range in diversity, they're sitting there and now we're in a liquidity market. So my theory is you're going to see an in-migration of liquidity from the gains. That's going to have a huge impact on the culture of today's so-called gatekeepers.

Gene Hoffman

>> Absolutely.

>> What is your view on that? Because I think it's going to be pretty interesting. Yeah, there might be some diversification. I get a house, I buy some assets. It won't be a hundred percent because fiat is fiat and now you've got digital tokens, stable coins. So how's that going to play out in your mind?

Gene Hoffman

>> Well, I think that once we get self-custody right, the audience that was already a blockchain audience will love being able to self-custody mostly everything. And so you get in the situation where it's like, what's not going to change is Microsoft, Google and Meta generating fanboy revenue and paying dividends with it. And so all of a sudden we go from this world where the yield might be you in the casino into the yield being an Apple fanboy, and we all know where that comes from, right? So I think we're going to see Wall Street and then the commercial banks quickly move to enabling self-custody, being third-party custodians because your phone is all you really need with an internet connection to trade anything for anything else. I mean, I joke, but I believe in the near future you're going to buy coffee with Apple stock.

>> Yeah, Clay Shirky wrote a book once called, Here Comes Everyone, I think it was like 20 years ago. And it was early crowdsourcing kind of wisdom of the crowds. Remember the days? That's where we're at right now. I mean, so that's a system change.

Gene Hoffman

>> That's right.

>> That shifts to the person.

Gene Hoffman

>> Well look, one of the big changes, I talk about securities laws a lot is just because we kind of get in this world and like the 33 and the 34 Act are kind of universal. They're going to be there for a very long time. But the 40 Act was this idea that you needed a company to coordinate everybody to kind of invest together. That's called a DAO. And it's not clear to me that you need the same kind of rules ultimately and therefore the same cost structure because ultimately what you really want is you want it to be much cheaper, so more of the returns on the investment flow down to the investor.

>> Yeah, I mean I think you have so many points to drill down, we could probably do a two-hour podcast or six hours and beat Joe Rogan's records on this one topic, but DAO points to a model. So DAOs is not just about the DAO, it's about what a DAO is. And you mentioned open source, monetizing around the fringe Red Hat style, for those Linux days. This making trend changes. What's your vision on that as those dots start to connect?

Gene Hoffman

>> Well, so there's this term I like a lot called Borgs, which are basically like the Borg where you take an offline entity, so think an LLC, you use the same rules because we've got 400 years of history about joint stock corporations, we kind of know how they work, but you now enable a bunch of stuff with simple blockchain governance you couldn't do before. And so all of a sudden you get all of the things that are great about being a or a LLC, but with all the things that are great about being on chain. And so you don't need the same heavy-handed regulation if you wanted to put together a DAO that invests in a certain category and you bring together the people who want to do that and they're there with easy exit because they go, "Okay, I don't like the decisions, I'm going to exit." That's a whole new world where all of a sudden a lot of middlemen frankly fall out of the need to do group investing and kind of spread the risk.

>> I was just at a conference from innovative impact philanthropy people, I don't know what the word is, but there's a name for that, but there's all different categories of social good. And it used to be you get rich, you make a bunch of money, you put a foundation together or you give it to a foundation and then they put 95% in the bank and they put 5% in the market. And now you're starting to see people, and that's just like a waterfall mentality and nothing happens. And everyone's like, "Where's the impact?" No real change. Now the innovation is impact is in real time and that you can direct the impact efforts and think like a hedge fund, not a philanthropist, but actually do good.

Gene Hoffman

>> Look, this is the CAD Trust in some ways, right? If you're an investor in carbon offsets, you now actually have this known trustworthy final outcome where you can be like, "Yeah, that is the Deloitte audit. Yes, I did get my money spent correctly," or, "No, I didn't," which in some ways is even better, but that is now enabled by cryptography and not by local law, right? And that's a big change. When you can start to do certain things where you don't have to trust anyone else to ultimately come to the right decision, you can coordinate in new ways

>> I was talking to a friend the other day, I was making an observation about something we're seeing around trust networks. And he went, "What do you mean?" Well, you know, they had IP addresses and then you had domain names, which logically kind of... And it was all open and protected, by the way, by the community. And we all kind of know the history there. If you don't, there's legendary stories there around people who were warriors who guarded the sanctity of open and no commercial interests. But social infrastructure is there and now this trust networks on top. You're building infrastructure, blockchain, decentralized, and now these trust networks are ad hoc on top and they're open.

Gene Hoffman

>> Right.

>> What is your reaction to that? Do you see that as a real phenomenon? DAOs kind of point to it. We're seeing kind of in our community where, hey, NYSE Wired came out of Brian Bauman's innovation around just putting people together and then having a reputation and then they're sitting on top of something else called the social internet. But you're kind of doing the same thing here.

Gene Hoffman

>> Well look, we see this in one community on our blockchain, which is called the Tang Gang. Long story about how the heck they got that name, but what it is kind an NFT collective. And so what they're doing is they're bringing in certain artists and certain collectors and they've got a kind of even frequent flyer mile that they hand out if you own the right NFTs and you get into this drop, and it's very much that. Like there's a reputation from your NFTs and your collection that you now understand about, okay, who is this person? How involved are they? And so it gives you different access levels and that all just kind of comes together on a blockchain in Discord and that is it.

>> Yeah. And as a first party relationship, as if it's face-to-face, because when you meet someone face-to-face, you have a relationship, "Oh, he's shifty," or, "Well, he's smart," but then when you go digital, you met them in person. But if you never met in person, you have a global network. There has to be a trust protocol.

Gene Hoffman

>> Yeah. Well, and it's being bolted on to X, Discord and blockchains. I mean, that's exactly where it's going because those are the kind of primary ways you have those conversations.

>> Well, Gene, it's been fascinating. Thank you for coming. You're certainly a trailblazer. You've been a trailblazer. Final question. A lot of trailblazers who plow in the field sometimes get blow back, right? Get shrapnel. What's some scar tissue lessons you've learned as you plow forward into this new world where you're loving life right now. It's a great time. What are some of the things that have blown back at you? You've gotten through, you've been eating glass, spitting nails. What are some of the things you've learned?

Gene Hoffman

>> Yeah, look, so eating glass is the right answer. One thing I regret slightly is that I had just bought rollingstone.com and eMusic. We had potentially the same path as Audible did, where you kind of went into the doldrums of literally 25 years ago if we're all remembering this. And they made it back through and ultimately got bought by Amazon. I ended up having to sell to Universal. Now that kicked off the iTunes Music Store as you know it, so I'm not real unhappy about that, but ultimately it would have been fun to be able to run that. But what I really took from it, to answer your question is you really have to be like, even when it's so dark that you think you're dead, you got to push on through, like keep eating the glass.

>> Grit is everything.

Gene Hoffman

>> It is. And what happens is when you're an overnight success, no one remembers all of the glass.

>> Yeah. And talking about the Rolling Stone is interesting because the music industry had a dark time. And then the Renaissance was the rebel forces coming around, the P2P music sharing, iTunes wouldn't have existed.

Gene Hoffman

>> Look, it was Bram Cohen and I pincering the music business. Bram on the one side going, "Look, if you do something that's customer unfriendly, they're just going to torrent it." And I, on the other side going, "It turns out that if you are again customer friendly, subscription, 99 cents, this works." And that launches the iPod with Apple. Tony Fidel had worked for me for a while and then when Universal bought us, I brought them over to meet the Apple folks, and that is the iTunes Music Store.

>> And what's interesting about full circle here is that Chia is that equilibrium because there is... It doesn't have to be polarized.

Gene Hoffman

>> Correct.

>> I mean, it could be asymmetrically inefficient or disadvantaged. Media is the same way. Cybersecurity is always asymmetry at some point and then equilibrium kicks in.

Gene Hoffman

>> Well, there's a key insight from the music change and that was that Tower Records was not going to go well, nor was Blockbuster. But it turns out in finance, it's not nearly that bad. I mean, investment banks are still going be investment banks when they're primarily using the blockchain. Commercial banks are still going be commercial banks, insurance companies. So there are some losers, but they're not the same. And so in much the way that things like in the music business transition their model a bit, like Harry Fox Agency is still there. No one would have expected that. And it turns out they serve a really important purpose. And so I think exactly the same thing's going to happen with that.

>> I think service businesses are underrated now that you have operating leverage with technology. And if the efficiency kicks in, services are never going away.

Gene Hoffman

>> That's right.

>> Ever.

Gene Hoffman

>> Right.

>> Okay. Well, great interview. Love the conversation. While we have the last minute here, put a plug in for what you guys are doing. You're going to go public. How do people get involved with Chia Network?

Gene Hoffman

>> So I would check out chia.net and Permuto.Capital. The big story of this summer is launching all these blue chip stocks on chain and on the stock exchange. If you're an investor, you should invest in them no matter what. Because if you're currently a Microsoft investor, you have to ask, is this exactly the amount of cash I want, or do I want to have less cash and more of the asset?

>> And shout out to Bram too as well. Great job. Just lifelong mission. And again, just swimming through the market, every wave has their surfers and everyone takes a dive. And sometimes you fall a lot.

Gene Hoffman

>> Yeah. Look, we got to be in the right place at the right time with an odd set of skills to be able to drive the future of finance.

>> Thanks for coming on our Crypto Trailblazers program. Thanks so much.

Gene Hoffman

>> Thank you.

>> All right, Gene Hoffman, CEO and president of Chia Network. Again, another example of as the innovation waves change, the game is still the same. At the end of the day, the outcomes are going to get equalized, you're going to start to see different efficiencies. And I think what's interesting now is with even AI coming around the corner, but blockchain very efficient, the middleman, the middle mechanisms get go away, and then magic happens from there. Of course, the Crypto Trailblazers are here in theCUBE. We're bringing the data to you. I'm John Furrier. Thanks for watching.