Exploring the Future of Cryptocurrency with Offchain Labs
Join us as we delve into an insightful discussion with Steven Goldfeder of Offchain Labs, analyzed by theCUBE Research. This segment, part of the Crypto Trailblazers series in collaboration with NYSE Wired, explores the innovative efforts redefining the Ethereum ecosystem and the broader blockchain landscape.
Steven Goldfeder, co-founder and CEO of Offchain Labs, discusses significant advancements and strategic insights in blockchain technology. In this engaging episode, hosted at theCUBE Studios, Goldfeder shares their expertise on how Offchain Labs contributes to the evolution of Ethereum through groundbreaking projects such as Prysm and Arbitrum, while discussing impacts on scalability and decentralization.
In this discussion, Goldfeder elaborates on key technological initiatives driven by Offchain Labs, focusing particularly on Arbitrum, the pioneering layer two scaling solution for Ethereum. They illustrate how innovative platforms such as Arbitrum significantly enhance Ethereum's capacity, efficiency, and scalability without compromising security or decentralization, closely analyzed by theCUBE Research.
Highlights include Goldfeder's insights on the future trajectory of Ethereum and its ecosystem, emphasizing the sustainable development model and potential for global business transformations. Goldfeder states that engaging with regulators now can ensure crypto's lasting impact, aligning with a US administration open to embracing this technological shift. This discussion offers valuable perspectives for developers, businesses, and policymakers navigating the crypto landscape.
#OffchainLabs #Arbitrum #Ethereum #theCUBE #NYSEWired #Blockchain #CryptoTrailblazers #Scalability #Decentralization #Innovation #Crypto #SmartContracts #PaloAlto #CryptoRegulation
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 - Intro
00:06 - Exploring Innovations in Blockchain: A Deep Dive into Offchain Labs and Arbitrum
05:23 - Ethereum's Scalability and the Layered Architecture
08:01 - Smart Contracts and Developer Innovations on Arbitrum
11:46 - The Impact of Arbitrum on Blockchain App Development
16:08 - Navigating the Future: Offchain Labs and Ethereum in a Regulatory Landscape
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Bill Barhydt, Abra
Exploring the Future of Cryptocurrency with Offchain Labs
Join us as we delve into an insightful discussion with Steven Goldfeder of Offchain Labs, analyzed by theCUBE Research. This segment, part of the Crypto Trailblazers series in collaboration with NYSE Wired, explores the innovative efforts redefining the Ethereum ecosystem and the broader blockchain landscape.
Steven Goldfeder, co-founder and CEO of Offchain Labs, discusses significant advancements and strategic insights in blockchain technology. In this engaging episode, hosted at theCUBE Studios, Goldfeder shares their expertise on how Offchain Labs contributes to the evolution of Ethereum through groundbreaking projects such as Prysm and Arbitrum, while discussing impacts on scalability and decentralization.
In this discussion, Goldfeder elaborates on key technological initiatives driven by Offchain Labs, focusing particularly on Arbitrum, the pioneering layer two scaling solution for Ethereum. They illustrate how innovative platforms such as Arbitrum significantly enhance Ethereum's capacity, efficiency, and scalability without compromising security or decentralization, closely analyzed by theCUBE Research.
Highlights include Goldfeder's insights on the future trajectory of Ethereum and its ecosystem, emphasizing the sustainable development model and potential for global business transformations. Goldfeder states that engaging with regulators now can ensure crypto's lasting impact, aligning with a US administration open to embracing this technological shift. This discussion offers valuable perspectives for developers, businesses, and policymakers navigating the crypto landscape.
#OffchainLabs #Arbitrum #Ethereum #theCUBE #NYSEWired #Blockchain #CryptoTrailblazers #Scalability #Decentralization #Innovation #Crypto #SmartContracts #PaloAlto #CryptoRegulation
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 - Intro
00:06 - Exploring Innovations in Blockchain: A Deep Dive into Offchain Labs and Arbitrum
05:23 - Ethereum's Scalability and the Layered Architecture
08:01 - Smart Contracts and Developer Innovations on Arbitrum
11:46 - The Impact of Arbitrum on Blockchain App Development
16:08 - Navigating the Future: Offchain Labs and Ethereum in a Regulatory Landscape
>> Hey everyone. I'm John Furrier, host of theCUBE here at our NYSC CUBE Studios on the East Coast. Of course, we've got our Palo Alto studio connecting tech and money, Wall Street and Silicon Valley. Of course, this is our Crypto Trailblazers series where we feature the leaders. And back on theCUBE is Bill, CEO of Abra, back on theCUBE. Last time we talked about stablecoins, a lot going on. I remember that interview, it was very memorable. We hit a lot of points. We were like a helicopter. High level, went in the weeds, covered a wide range. Welcome back.
Bill Barhydt
>> Thanks. Great to be here.>> I really enjoyed talking with you because you got a great view of multiple perspectives on DeFi, tech, LLMs, we were just riffing before we came on camera, but one thing that you guys are doing that you had said before we came on camera is that you see the bank account of the future.
Bill Barhydt
>> Yeah.>> You guys are working on that.
Bill Barhydt
>> Yeah.>> Also, retail leverage. The world is moving so fast to I call the edge where the consumer is in charge. The back end is being worked on feverishly by everybody. What does that mean, bank account of the future? How do you see what you guys are doing to do that?
Bill Barhydt
>> I think we're rapidly approaching kind of nexus in the securities, banking system, traditional wealth system. They're all kind of merging, even lending, right? So you have bank accounts that are way over leveraged, right? Banking system is way over leveraged, right? Fractional reserve banking has been its own unique thing/problem for decades, and it's actually becoming quite a big problem relative to the debt burden and they're being forced to buy treasuries, and we saw what happened with a bunch of banks that were way over leveraged with treasuries last year when they had a run in the banks. And so I believe to make it simple that the bank account of the future is a hundred percent reserved off balance sheets. What does that mean? It means that your assets stay your assets, right? And now in the equities world, we already have that concept. Wealth management has this concept of an SMA, a separately managed account, and that falls under the auspices of the SEC, not the banking system because by definition you can't have that in the existing banking system because they maintain a fraction of the assets, hence fractional reserve banking. So the bank account of the future, in our opinion, is effectively a vault where your assets stay in place, but you can earn yield on the assets if you want to participate. And most importantly, you can also borrow against the assets if you choose to participate. Now, it also doesn't matter in our model whether those assets are native crypto tokens or tokenized versions of real world assets. So for example, today our fastest growing business is clients borrowing against Bitcoin, Ethereum mostly and at phenomenal rates. But their assets don't have to be commingled with other Abra client assets to do that. They're not on Abra's balance sheet. We basically have a marketplace model that leverages DeFi to facilitate lending. Well, once we have tokenized real estate, meaning the title to your home is tokenized, once we have tokenized stocks, it all becomes fungible so that you can borrow against your home, which sounds a lot like a HELOC, and you can borrow against your Apple shares, which sounds like securities lending, but it will all be fungible, meaning the same marketplace will facilitate lending against all of it. And now you have a very simple model where, okay, all my assets can be managed in one place, or I split them up in multiple vaults, who cares? And then against those vaults, I can earn yield, I can borrow, I can make stablecoin payments using a debit or a credit card. The credit card that I have actually facilitates a loan against the value of the assets in my vault. So my credit score is now dependent upon what I have, not against future earnings, which represents significant credit risk, especially around the world where they don't have our credit scoring system. So I'm not just talking about the US, I'm talking about 8 billion people now that have a normalized system for storing assets, facilitating loans against those assets, et cetera, et cetera.>> And the impact of the individual is they can think differently about what they do. It's like if I have a home or if I have Bitcoin or any asset, that's mine. No one else is making money on that asset.
Bill Barhydt
>> That's right. So the wealthy already think that way. So in other words, when you think about high net worth investors, family office style investors, the accounts they manage use this model today. They put certain assets in these separately managed accounts and they can borrow against securities, they can borrow against now crypto, real estate, whatever. What we're saying is okay, that's very bespoke where a team can manage doing that for high net worth investors because cost-effective to do that. They can't do that easily for retail because the cost of doing that is prohibitive. Hence, the model that we have. I think now services like Abra, tokenization of real world assets that's coming, merge those into one kind of model that works just as well for the middle class investor as it does for the ultra-high net worth investor.>> You're starting to see the power law shrink with the old model because the old model is limited to the rich. So you have this no neck, straight down power law, long tail that's very thin and flat. You're basically increasing the power law to have a neck, a torso, a belly where you're giving the democratization layer for people who have say middle class or rising middle class leverage.
Bill Barhydt
>> That's right.>> And giving people in the long tail could be someone right out of college, which the biggest complaint you're hearing these days, I can't get a job, can't buy a home. They need financial headroom so they can just start buying Bitcoin or doing things-
Bill Barhydt
>> Well, Bitcoin showed us the way for that, right? Historically, to put a fine point on it, the exit strategy for a lot of institutional brokerages is retail. With Bitcoin, the exit strategy for retail was often institutional investors because a lot of retail investors got into Bitcoin at $500 and they're selling right now at a hundred thousand dollars, which is why the market's been going sideways while everybody's buying ETFs because we have these retail investors from 15 years ago, well 10 years ago, who are now selling to institutions. And so yes, this power->> Explain that phenomenon because I was talking to someone, they didn't really get it. I want to go a little slower because I think this is an important concept. If you bought Bitcoin in whatever early marker you want to call, 2012 or whatever, you're rich now. So you had a lot of Bitcoin, so there's new wealth coming in from just say Bitcoin as an example. They're sitting on value. Now enter ETFs. What's the dynamic? Explain that concept that's the sideways. I think this is a tell sign that the new fresh leverage is coming in.
Bill Barhydt
>> It's simply an explanation of what you would normally in stock trading call an accumulation phase, which on a stock chart, the ideal accumulation phase looks like a pennant, like your Yankees fan used to have those old style pennants that look like a triangle. If you see that pattern in a stock trading, usually that means you've got an essential tension between buyers and sellers. And so you have sideways, and usually it's often a changing of the guard in some ways, profit taking by some, accumulation for some usually getting ready for the next run up when there's no more sellers, hence we call it an accumulation phase because there's a new group accumulating. I think what's been happening in the case of a lot of these ETFs, and this was earlier this year, I don't think that's what's been happening right now, but earlier this year as the ETFs were getting a lot of traction, you had a lot of sellers from people 10, 12 years ago who bought Bitcoin in the hundreds, five hundreds, low digit thousands who are up 50, 100X, massive, 1000X in some cases. So these people have been taking profits and selling to the likes of BlackRock and others.>> Who are accumulating.
Bill Barhydt
>> Who are accumulating because people are putting money into the ETFs. And I also think that there's still a lot of that going on. I think the changing of the guard is basically complete meaning people who wanted to take the profit can. And that's why our lending business is growing so nicely because a lot of people in my world don't want to take profit. They want to ride the future gains, but they also want to access the gains. And that's where lending against the value of the Bitcoin becomes also very, very interesting.>> And I think this is where the key phenomenon that I like right now in this market with stablecoins, we talked about it last time, the staking is an example, that's happening. How does an average person get involved? Because I think it's come up a lot. Since our last talk, I noticed a couple trends, and I want to get your reaction to this. I've never seen, and I'm not truly in the finance sector, you know this world, I've never seen financial entrepreneurship that wasn't arbitrage. Yeah, people did high-frequency trading. I guess that's innovation, but it's also kind of a little bit of arbitrage. There's real people building financial entrepreneurship things going on. That's going to spur more interest, younger generation, cultural generation connections. What does that look like to you? Am I misreading that? Is there really entrepreneurship going on in finance? Because the gatekeepers are all being disrupted.
Bill Barhydt
>> Sure. So I think what's happening in the DeFi world is the purest form of financial services entrepreneurship I've ever seen because you're rebuilding the entire banking stack from the ground up. If you launch a prepaid debit card in the United States, to your point, that's an arbitrage play on some bank card issuer where you're basically leveraging their bank rails to sell something. And to your point->> You're kind of parasitic in a way.
Bill Barhydt
>> If you're building DeFi rails from the ground up, you're not leveraging the existing banking system at all for the most part, if it's really DeFi, right? Whether it's for lending, whether it's for insurance, whether it's for these new futures, perp markets, they're all basically native decentralized protocols built from the ground up to replace the existing system. And my belief is that whether it's here at NYSE or regardless, any kind of bank in the future is going to be using these rails. So to me, to answer your question, it is the ultimate form of financial services entrepreneurship because you are effectively taking... Look, the mantra has always been software is eating the world, except it never happened to money. It happened a little bit to banking. You had the apps, you had competing services, some neo-banks. But really now because of decentralized software, crypto, software is finally eating and internet is finally eating banking and money and DeFi is the ultimate achievement in that regard.>> I think I agree with you. I think financial entrepreneurship never was possible before because there was too many blockers and it was a parasitic kind of arbitrage going on.
Bill Barhydt
>> We could argue all day long why the moats exist around the existing system. It doesn't really matter. They're there. Okay? What decentralization says is, okay, here's your moat and here's our moat. And our moat is open to the whole world and people can build their own moats with new decentralized systems.>> And your business is beautiful because as more people come on board, you get network effects.
Bill Barhydt
>> A hundred percent.>> And the leverage and your ability to manage. Talk about that because I think this is a phenomenon that's a wisdom of the crowd kind of philosophy. Maybe that's a bad example, but I remember back 20 years ago when blogging started, there was a book called, Here Comes Everybody, and it was about everyone's getting on the web and connecting. I think Corey wrote that book, but that was kind of about how social media would work. But what he was basically saying is that when you have collective intelligence and connections, the opportunities to reform is interesting and that's what you guys are leveraging.
Bill Barhydt
>> Absolutely. I mean, I've made my career on understanding I think really two things at the end of the day, right? The first is Moore's Law, which has to do more with technology and transistors, but its network effects based upon the fact that you're building out the capabilities of computing based on the ability to squeeze more and more transistors into->> Smaller, faster, cheaper.
Bill Barhydt
>> The second one that's always fascinated me is Metcalfe's Law, which is the value of networks. If you remember a few years ago before Facebook went public, their stock was going crazy on secondary markets and people were saying, well, this makes no sense because in my opinion, they didn't understand Metcalfe's Law. Adding a small number of users to a network has a geometrical effect on the value of the network because of the number of connections you can make inside the network. And so when you combine those two phenomenon, you end up with social media, you end up with crypto and smart contract based stablecoin oriented payment systems, you end up with things like OpenAI and ChatGPT, et cetera, et cetera.>> You're going to like the new law we coined. Jensen's law. Jensen's Law is spend more, make more.
Bill Barhydt
>> There you go.>> And he said spend more, save more. But he changed it recently to spend more on GPUs and to make more money. And his thesis was, the faster you go with GPUs, the advantage you get. But it's interesting, with your model that applies because if I spend more on say Bitcoin, I make more.
Bill Barhydt
>> Sure. But that's investing. I mean, that's investing in general, but in the case->> By the way, we made that up, it's not really a law yet, but it's clever. It's a clever kind of cliche, but it's a point of now we're in a new generation of, okay, Moore's Law, which is kind of infrastructure playing, obviously semis are doing all that great stuff, but Metcalfe's Law, network effect, totally awesome. There's new dynamics going on on top now. What would you say that's enabling? Is there any other flywheels that you see that comes out of the network effect? Obviously you're hitting the leverage piece beautifully. I love the idea that if I have an asset, I'm making the money. Love that all day long.
Bill Barhydt
>> Yeah. Look, I think there's two things that excite me right now. One is the confluence of DeFi and traditional banking, and I think the bank account of the future is going to look very, very different. I think the bank account of the future, like I said, it's a vault. It's my assets. Nobody's touching my assets. They're not on a bank's balance sheets, but I can still earn yield, I can still borrow against my assets, I can still get a mortgage because the title to my mortgage is a token in my vault that I can borrow against and things like that. The second is the integration or the convergence of AI and crypto and smart contracts. I think that as we basically come out of the LLM generation and move towards self-learning self-replicating AI, it's all going to be smart contract based because it can't be based on centralized systems. An AI can't spin up a new bot or a new AI that needs a bank account because it's going to have to wait a week to get a bank account and fill out all these forms and well, who's->> Latency kills.
Bill Barhydt
>> Well, plus it's not a person, it's not an entity, it's not a business. Maybe it's a DAO, I don't know. But it needs a real time stored value system with the ability to process the transaction from a smart contract and move value around in real time. And now we have these next gen layer one blockchains that are super high performance. If you look at what Sui and Solana have achieved, it's massive high performance throughput that will work in this next generation of AI that I'm talking about. You probably saw Stripe announce their own blockchain platform and everybody's trying to figure out what their claim is going to be to stake in this new AI convergence, and I think it's going to just shock people how fast it's->> And that's scaling smart contracts. We're talking about a preferred future where billions of people are connected.
Bill Barhydt
>> Billions of devices are connected.>> Devices, agents.
Bill Barhydt
>> Billions of software bots are connected, and you can't tell the difference between what's a bot, what's a person, what's an IoT device? And it's all just->> It's interesting, you mentioned the AI. One of the things we've been watching is the hype of agents, which we love the hype, but there's a lot of data that needs to get settled first. The agents under the covers will be acting on behalf of the smart contracts. It could be a lot of agents working on things.
Bill Barhydt
>> I think we're moving into this world where the next 10 to 15 years, the idea of a company is most likely to be replaced with the idea of a DAO, decentralized autonomous organization, where it's kind of superfluous who's the owner. It's all software based. If you read Balaji's network state, it starts to kind of merge some of the concepts of that with this little esoteric, but post turning society where again, merge with AI, it's just agents talking to agents.>> Well, you and I are on the same page. We meet at theCUBE and SiliconANGLE and now with NYSE Wired as evidence, abstractions in relationships can exist and on the social infrastructure and now financial infrastructure, those connections can be instrumented. And whether it's content or some transactions, they're there. That's digital. It's digital exhaust. So as software figures it out, they'll start to stitch together network effect patterns and there'll be assets that'll come out. That's why I love the DAO concept. Also, I love the tokenization of communities. Patreon I think tried it, right? I'm not sure that's the right answer, but things like that where people will self-volunteer their assets for something. They own their data, they own their thing. That's what you guys are doing.
Bill Barhydt
>> Absolutely. And I think you're going to see just so many tests in the next five years, in my opinion. You're going to start to see now with the RoboTaxi model cars that own themselves, you're going to see basically a proliferation of bot-owned, like I said, bank accounts that look like stablecoin wallets, and it's all just going to basically be moving around using smart contracts.>> The physical and digital world merges together, kind of a hybrid. Level four will come on soon on cars. All right, so what are you working on now? What's your focus? You've got a paper you're writing, I don't want to reveal too much. You've got your business. What's your goal?
Bill Barhydt
>> So Abra is in hyper-growth mode. The goal there is to just get into the billions of AUM. We're signing up lots of clients now. We've been able to push the envelope and going from initially supporting ultra-high net worth clients to now supporting retail. So now we have a model where retail clients can sign up for effectively a vault that is traditionally reserved for the ultra-high net worth, protect their crypto, earn yield on dollars. I think we're paying like eight or 9% on dollars right now, stake Bitcoin, earn yield on Bitcoin, stake Ethereum, Solana, SUI, all of that, and borrow against the Bitcoin long-term. That's the big play because people don't want to sell their Bitcoin, they want to borrow against it. And the ultimate value of stablecoins and DeFi today, or its biggest value, is the ability to leverage Bitcoin to access the gains using stablecoins. And that's become our best business. We're doing a lot of work on next generation yield products, synthetic dollars, the ability to generate high yields using... So as we get tokenized stocks, okay, let's say tokenized stocks are running on Solana, SUI, Apto, some of these next-Gen L-one platforms, what's happening in between transactions? How am I earning yield on my dollars? Where are my dollars stored? And so we're thinking about this in the context of, okay, is it traditional treasuries? Is it synthetic dollars? Because in a lot of cases, what hedge funds do is they don't store the dollars. They'll basically leverage perp markets to create synthetic dollars and squeeze the yield out of those, which is much better than a treasury rate. Well, we want to do that for retail. And so the Genius Act for example didn't directly address this, but I think it's coming and I think the regulation allows for it now in a very clever way, and so we're working on things like that.>> The retail market's booming. I mean, the leverage you're seeing, you're doing, you're enabling. And as more people come on board, I mean, people will be motivated by what the consumers do.
Bill Barhydt
>> It has to be easy. A lot of what I'm describing, I can't market the way I'm describing to a consumer. What I need to be able to market to a consumer is the bank account of the future is going to be safe. Really safe. Not government-marketed safe, not FDIC safe, but by definition safe meaning your assets are your assets. So the bank account of the future has to be safe. My loans, my assets that I'm putting up as cloud have to be safe.>> Unhackable. Unhackable.
Bill Barhydt
>> Unhackable, very simple loans, very simple rates, all fungible. I can store my stocks, my house title, my cash, my crypto all in one place. I can borrow against it when I want. I can earn yield on what's there. It's that's simple. We are not there yet as a society.>> Yeah, we're close. It's accelerating to that point.
Bill Barhydt
>> It's accelerating. We're building the rails. And so we're spending a lot of time now at Abra thinking about the user experience of the future.>> So the best practice today is get some crypto, Bitcoin, Ethereum, get on board, leverage the asset. Is there a threshold? I mean, for the folks who are like, do I have to spend a hundred grand to get Bitcoin? What's the threshold of value do people start seeing leverage?
Bill Barhydt
>> So we have clients who borrow a couple of thousand dollars against $25,000 worth of Bitcoin. That's fine.>> But if someone puts say, 2 million to Bitcoin, what's the leverage on that?
Bill Barhydt
>> Well, it's not leverage. It's a loan to value ratio. So usually the loan to value ratio, you want to start about 30%. So on a $2 million collateralized loan, let's say it's $2 million worth of Bitcoin, you can borrow easily about 600 to $750,000 in real time, very low rates. And if the price of Bitcoin is going up, you're actually borrowing more while keeping the LTV the same. So it actually becomes for many people the bank account of the future with a line of credit against the value of the assets in the account. And so we call these lifestyle loans. We have a lot of wealthy clients now who've been holding Bitcoin forever. They put it in the vault and they just borrow against it when they want to draw down. And a lot of them don't even pay back the loan because the Bitcoin goes up faster than their accruing interest anyway.>> They're already in the money.
Bill Barhydt
>> Yeah, they're already in the money.>> Bill, great to have you on again. We'll certainly do more, you're awesome. Love the vision. Again, the future's here. It's just inch by inch, move the needle, connect the dots. Congratulations. Thanks for coming on. Appreciate it.
Bill Barhydt
>> My pleasure. Great to see you.>> At Crypto Trailblazers, the world's changing, it's upgrading, it's being retrofitted and entrepreneurship and finance is software, it's tech, it's money. Tech and money coming together, this is our mission at theCUBE. I'm John Furrier, your host. Thanks for watching.
>> Hey everyone. I'm John Furrier, host of theCUBE here at our NYSC CUBE Studios on the East Coast. Of course, we've got our Palo Alto studio connecting tech and money, Wall Street and Silicon Valley. Of course, this is our Crypto Trailblazers series where we feature the leaders. And back on theCUBE is Bill, CEO of Abra, back on theCUBE. Last time we talked about stablecoins, a lot going on. I remember that interview, it was very memorable. We hit a lot of points. We were like a helicopter. High level, went in the weeds, covered a wide range. Welcome back.
Bill Barhydt
>> Thanks. Great to be here.>> I really enjoyed talking with you because you got a great view of multiple perspectives on DeFi, tech, LLMs, we were just riffing before we came on camera, but one thing that you guys are doing that you had said before we came on camera is that you see the bank account of the future.
Bill Barhydt
>> Yeah.>> You guys are working on that.
Bill Barhydt
>> Yeah.>> Also, retail leverage. The world is moving so fast to I call the edge where the consumer is in charge. The back end is being worked on feverishly by everybody. What does that mean, bank account of the future? How do you see what you guys are doing to do that?
Bill Barhydt
>> I think we're rapidly approaching kind of nexus in the securities, banking system, traditional wealth system. They're all kind of merging, even lending, right? So you have bank accounts that are way over leveraged, right? Banking system is way over leveraged, right? Fractional reserve banking has been its own unique thing/problem for decades, and it's actually becoming quite a big problem relative to the debt burden and they're being forced to buy treasuries, and we saw what happened with a bunch of banks that were way over leveraged with treasuries last year when they had a run in the banks. And so I believe to make it simple that the bank account of the future is a hundred percent reserved off balance sheets. What does that mean? It means that your assets stay your assets, right? And now in the equities world, we already have that concept. Wealth management has this concept of an SMA, a separately managed account, and that falls under the auspices of the SEC, not the banking system because by definition you can't have that in the existing banking system because they maintain a fraction of the assets, hence fractional reserve banking. So the bank account of the future, in our opinion, is effectively a vault where your assets stay in place, but you can earn yield on the assets if you want to participate. And most importantly, you can also borrow against the assets if you choose to participate. Now, it also doesn't matter in our model whether those assets are native crypto tokens or tokenized versions of real world assets. So for example, today our fastest growing business is clients borrowing against Bitcoin, Ethereum mostly and at phenomenal rates. But their assets don't have to be commingled with other Abra client assets to do that. They're not on Abra's balance sheet. We basically have a marketplace model that leverages DeFi to facilitate lending. Well, once we have tokenized real estate, meaning the title to your home is tokenized, once we have tokenized stocks, it all becomes fungible so that you can borrow against your home, which sounds a lot like a HELOC, and you can borrow against your Apple shares, which sounds like securities lending, but it will all be fungible, meaning the same marketplace will facilitate lending against all of it. And now you have a very simple model where, okay, all my assets can be managed in one place, or I split them up in multiple vaults, who cares? And then against those vaults, I can earn yield, I can borrow, I can make stablecoin payments using a debit or a credit card. The credit card that I have actually facilitates a loan against the value of the assets in my vault. So my credit score is now dependent upon what I have, not against future earnings, which represents significant credit risk, especially around the world where they don't have our credit scoring system. So I'm not just talking about the US, I'm talking about 8 billion people now that have a normalized system for storing assets, facilitating loans against those assets, et cetera, et cetera.>> And the impact of the individual is they can think differently about what they do. It's like if I have a home or if I have Bitcoin or any asset, that's mine. No one else is making money on that asset.
Bill Barhydt
>> That's right. So the wealthy already think that way. So in other words, when you think about high net worth investors, family office style investors, the accounts they manage use this model today. They put certain assets in these separately managed accounts and they can borrow against securities, they can borrow against now crypto, real estate, whatever. What we're saying is okay, that's very bespoke where a team can manage doing that for high net worth investors because cost-effective to do that. They can't do that easily for retail because the cost of doing that is prohibitive. Hence, the model that we have. I think now services like Abra, tokenization of real world assets that's coming, merge those into one kind of model that works just as well for the middle class investor as it does for the ultra-high net worth investor.>> You're starting to see the power law shrink with the old model because the old model is limited to the rich. So you have this no neck, straight down power law, long tail that's very thin and flat. You're basically increasing the power law to have a neck, a torso, a belly where you're giving the democratization layer for people who have say middle class or rising middle class leverage.
Bill Barhydt
>> That's right.>> And giving people in the long tail could be someone right out of college, which the biggest complaint you're hearing these days, I can't get a job, can't buy a home. They need financial headroom so they can just start buying Bitcoin or doing things-
Bill Barhydt
>> Well, Bitcoin showed us the way for that, right? Historically, to put a fine point on it, the exit strategy for a lot of institutional brokerages is retail. With Bitcoin, the exit strategy for retail was often institutional investors because a lot of retail investors got into Bitcoin at $500 and they're selling right now at a hundred thousand dollars, which is why the market's been going sideways while everybody's buying ETFs because we have these retail investors from 15 years ago, well 10 years ago, who are now selling to institutions. And so yes, this power->> Explain that phenomenon because I was talking to someone, they didn't really get it. I want to go a little slower because I think this is an important concept. If you bought Bitcoin in whatever early marker you want to call, 2012 or whatever, you're rich now. So you had a lot of Bitcoin, so there's new wealth coming in from just say Bitcoin as an example. They're sitting on value. Now enter ETFs. What's the dynamic? Explain that concept that's the sideways. I think this is a tell sign that the new fresh leverage is coming in.
Bill Barhydt
>> It's simply an explanation of what you would normally in stock trading call an accumulation phase, which on a stock chart, the ideal accumulation phase looks like a pennant, like your Yankees fan used to have those old style pennants that look like a triangle. If you see that pattern in a stock trading, usually that means you've got an essential tension between buyers and sellers. And so you have sideways, and usually it's often a changing of the guard in some ways, profit taking by some, accumulation for some usually getting ready for the next run up when there's no more sellers, hence we call it an accumulation phase because there's a new group accumulating. I think what's been happening in the case of a lot of these ETFs, and this was earlier this year, I don't think that's what's been happening right now, but earlier this year as the ETFs were getting a lot of traction, you had a lot of sellers from people 10, 12 years ago who bought Bitcoin in the hundreds, five hundreds, low digit thousands who are up 50, 100X, massive, 1000X in some cases. So these people have been taking profits and selling to the likes of BlackRock and others.>> Who are accumulating.
Bill Barhydt
>> Who are accumulating because people are putting money into the ETFs. And I also think that there's still a lot of that going on. I think the changing of the guard is basically complete meaning people who wanted to take the profit can. And that's why our lending business is growing so nicely because a lot of people in my world don't want to take profit. They want to ride the future gains, but they also want to access the gains. And that's where lending against the value of the Bitcoin becomes also very, very interesting.>> And I think this is where the key phenomenon that I like right now in this market with stablecoins, we talked about it last time, the staking is an example, that's happening. How does an average person get involved? Because I think it's come up a lot. Since our last talk, I noticed a couple trends, and I want to get your reaction to this. I've never seen, and I'm not truly in the finance sector, you know this world, I've never seen financial entrepreneurship that wasn't arbitrage. Yeah, people did high-frequency trading. I guess that's innovation, but it's also kind of a little bit of arbitrage. There's real people building financial entrepreneurship things going on. That's going to spur more interest, younger generation, cultural generation connections. What does that look like to you? Am I misreading that? Is there really entrepreneurship going on in finance? Because the gatekeepers are all being disrupted.
Bill Barhydt
>> Sure. So I think what's happening in the DeFi world is the purest form of financial services entrepreneurship I've ever seen because you're rebuilding the entire banking stack from the ground up. If you launch a prepaid debit card in the United States, to your point, that's an arbitrage play on some bank card issuer where you're basically leveraging their bank rails to sell something. And to your point->> You're kind of parasitic in a way.
Bill Barhydt
>> If you're building DeFi rails from the ground up, you're not leveraging the existing banking system at all for the most part, if it's really DeFi, right? Whether it's for lending, whether it's for insurance, whether it's for these new futures, perp markets, they're all basically native decentralized protocols built from the ground up to replace the existing system. And my belief is that whether it's here at NYSE or regardless, any kind of bank in the future is going to be using these rails. So to me, to answer your question, it is the ultimate form of financial services entrepreneurship because you are effectively taking... Look, the mantra has always been software is eating the world, except it never happened to money. It happened a little bit to banking. You had the apps, you had competing services, some neo-banks. But really now because of decentralized software, crypto, software is finally eating and internet is finally eating banking and money and DeFi is the ultimate achievement in that regard.>> I think I agree with you. I think financial entrepreneurship never was possible before because there was too many blockers and it was a parasitic kind of arbitrage going on.
Bill Barhydt
>> We could argue all day long why the moats exist around the existing system. It doesn't really matter. They're there. Okay? What decentralization says is, okay, here's your moat and here's our moat. And our moat is open to the whole world and people can build their own moats with new decentralized systems.>> And your business is beautiful because as more people come on board, you get network effects.
Bill Barhydt
>> A hundred percent.>> And the leverage and your ability to manage. Talk about that because I think this is a phenomenon that's a wisdom of the crowd kind of philosophy. Maybe that's a bad example, but I remember back 20 years ago when blogging started, there was a book called, Here Comes Everybody, and it was about everyone's getting on the web and connecting. I think Corey wrote that book, but that was kind of about how social media would work. But what he was basically saying is that when you have collective intelligence and connections, the opportunities to reform is interesting and that's what you guys are leveraging.
Bill Barhydt
>> Absolutely. I mean, I've made my career on understanding I think really two things at the end of the day, right? The first is Moore's Law, which has to do more with technology and transistors, but its network effects based upon the fact that you're building out the capabilities of computing based on the ability to squeeze more and more transistors into->> Smaller, faster, cheaper.
Bill Barhydt
>> The second one that's always fascinated me is Metcalfe's Law, which is the value of networks. If you remember a few years ago before Facebook went public, their stock was going crazy on secondary markets and people were saying, well, this makes no sense because in my opinion, they didn't understand Metcalfe's Law. Adding a small number of users to a network has a geometrical effect on the value of the network because of the number of connections you can make inside the network. And so when you combine those two phenomenon, you end up with social media, you end up with crypto and smart contract based stablecoin oriented payment systems, you end up with things like OpenAI and ChatGPT, et cetera, et cetera.>> You're going to like the new law we coined. Jensen's law. Jensen's Law is spend more, make more.
Bill Barhydt
>> There you go.>> And he said spend more, save more. But he changed it recently to spend more on GPUs and to make more money. And his thesis was, the faster you go with GPUs, the advantage you get. But it's interesting, with your model that applies because if I spend more on say Bitcoin, I make more.
Bill Barhydt
>> Sure. But that's investing. I mean, that's investing in general, but in the case->> By the way, we made that up, it's not really a law yet, but it's clever. It's a clever kind of cliche, but it's a point of now we're in a new generation of, okay, Moore's Law, which is kind of infrastructure playing, obviously semis are doing all that great stuff, but Metcalfe's Law, network effect, totally awesome. There's new dynamics going on on top now. What would you say that's enabling? Is there any other flywheels that you see that comes out of the network effect? Obviously you're hitting the leverage piece beautifully. I love the idea that if I have an asset, I'm making the money. Love that all day long.
Bill Barhydt
>> Yeah. Look, I think there's two things that excite me right now. One is the confluence of DeFi and traditional banking, and I think the bank account of the future is going to look very, very different. I think the bank account of the future, like I said, it's a vault. It's my assets. Nobody's touching my assets. They're not on a bank's balance sheets, but I can still earn yield, I can still borrow against my assets, I can still get a mortgage because the title to my mortgage is a token in my vault that I can borrow against and things like that. The second is the integration or the convergence of AI and crypto and smart contracts. I think that as we basically come out of the LLM generation and move towards self-learning self-replicating AI, it's all going to be smart contract based because it can't be based on centralized systems. An AI can't spin up a new bot or a new AI that needs a bank account because it's going to have to wait a week to get a bank account and fill out all these forms and well, who's->> Latency kills.
Bill Barhydt
>> Well, plus it's not a person, it's not an entity, it's not a business. Maybe it's a DAO, I don't know. But it needs a real time stored value system with the ability to process the transaction from a smart contract and move value around in real time. And now we have these next gen layer one blockchains that are super high performance. If you look at what Sui and Solana have achieved, it's massive high performance throughput that will work in this next generation of AI that I'm talking about. You probably saw Stripe announce their own blockchain platform and everybody's trying to figure out what their claim is going to be to stake in this new AI convergence, and I think it's going to just shock people how fast it's->> And that's scaling smart contracts. We're talking about a preferred future where billions of people are connected.
Bill Barhydt
>> Billions of devices are connected.>> Devices, agents.
Bill Barhydt
>> Billions of software bots are connected, and you can't tell the difference between what's a bot, what's a person, what's an IoT device? And it's all just->> It's interesting, you mentioned the AI. One of the things we've been watching is the hype of agents, which we love the hype, but there's a lot of data that needs to get settled first. The agents under the covers will be acting on behalf of the smart contracts. It could be a lot of agents working on things.
Bill Barhydt
>> I think we're moving into this world where the next 10 to 15 years, the idea of a company is most likely to be replaced with the idea of a DAO, decentralized autonomous organization, where it's kind of superfluous who's the owner. It's all software based. If you read Balaji's network state, it starts to kind of merge some of the concepts of that with this little esoteric, but post turning society where again, merge with AI, it's just agents talking to agents.>> Well, you and I are on the same page. We meet at theCUBE and SiliconANGLE and now with NYSE Wired as evidence, abstractions in relationships can exist and on the social infrastructure and now financial infrastructure, those connections can be instrumented. And whether it's content or some transactions, they're there. That's digital. It's digital exhaust. So as software figures it out, they'll start to stitch together network effect patterns and there'll be assets that'll come out. That's why I love the DAO concept. Also, I love the tokenization of communities. Patreon I think tried it, right? I'm not sure that's the right answer, but things like that where people will self-volunteer their assets for something. They own their data, they own their thing. That's what you guys are doing.
Bill Barhydt
>> Absolutely. And I think you're going to see just so many tests in the next five years, in my opinion. You're going to start to see now with the RoboTaxi model cars that own themselves, you're going to see basically a proliferation of bot-owned, like I said, bank accounts that look like stablecoin wallets, and it's all just going to basically be moving around using smart contracts.>> The physical and digital world merges together, kind of a hybrid. Level four will come on soon on cars. All right, so what are you working on now? What's your focus? You've got a paper you're writing, I don't want to reveal too much. You've got your business. What's your goal?
Bill Barhydt
>> So Abra is in hyper-growth mode. The goal there is to just get into the billions of AUM. We're signing up lots of clients now. We've been able to push the envelope and going from initially supporting ultra-high net worth clients to now supporting retail. So now we have a model where retail clients can sign up for effectively a vault that is traditionally reserved for the ultra-high net worth, protect their crypto, earn yield on dollars. I think we're paying like eight or 9% on dollars right now, stake Bitcoin, earn yield on Bitcoin, stake Ethereum, Solana, SUI, all of that, and borrow against the Bitcoin long-term. That's the big play because people don't want to sell their Bitcoin, they want to borrow against it. And the ultimate value of stablecoins and DeFi today, or its biggest value, is the ability to leverage Bitcoin to access the gains using stablecoins. And that's become our best business. We're doing a lot of work on next generation yield products, synthetic dollars, the ability to generate high yields using... So as we get tokenized stocks, okay, let's say tokenized stocks are running on Solana, SUI, Apto, some of these next-Gen L-one platforms, what's happening in between transactions? How am I earning yield on my dollars? Where are my dollars stored? And so we're thinking about this in the context of, okay, is it traditional treasuries? Is it synthetic dollars? Because in a lot of cases, what hedge funds do is they don't store the dollars. They'll basically leverage perp markets to create synthetic dollars and squeeze the yield out of those, which is much better than a treasury rate. Well, we want to do that for retail. And so the Genius Act for example didn't directly address this, but I think it's coming and I think the regulation allows for it now in a very clever way, and so we're working on things like that.>> The retail market's booming. I mean, the leverage you're seeing, you're doing, you're enabling. And as more people come on board, I mean, people will be motivated by what the consumers do.
Bill Barhydt
>> It has to be easy. A lot of what I'm describing, I can't market the way I'm describing to a consumer. What I need to be able to market to a consumer is the bank account of the future is going to be safe. Really safe. Not government-marketed safe, not FDIC safe, but by definition safe meaning your assets are your assets. So the bank account of the future has to be safe. My loans, my assets that I'm putting up as cloud have to be safe.>> Unhackable. Unhackable.
Bill Barhydt
>> Unhackable, very simple loans, very simple rates, all fungible. I can store my stocks, my house title, my cash, my crypto all in one place. I can borrow against it when I want. I can earn yield on what's there. It's that's simple. We are not there yet as a society.>> Yeah, we're close. It's accelerating to that point.
Bill Barhydt
>> It's accelerating. We're building the rails. And so we're spending a lot of time now at Abra thinking about the user experience of the future.>> So the best practice today is get some crypto, Bitcoin, Ethereum, get on board, leverage the asset. Is there a threshold? I mean, for the folks who are like, do I have to spend a hundred grand to get Bitcoin? What's the threshold of value do people start seeing leverage?
Bill Barhydt
>> So we have clients who borrow a couple of thousand dollars against $25,000 worth of Bitcoin. That's fine.>> But if someone puts say, 2 million to Bitcoin, what's the leverage on that?
Bill Barhydt
>> Well, it's not leverage. It's a loan to value ratio. So usually the loan to value ratio, you want to start about 30%. So on a $2 million collateralized loan, let's say it's $2 million worth of Bitcoin, you can borrow easily about 600 to $750,000 in real time, very low rates. And if the price of Bitcoin is going up, you're actually borrowing more while keeping the LTV the same. So it actually becomes for many people the bank account of the future with a line of credit against the value of the assets in the account. And so we call these lifestyle loans. We have a lot of wealthy clients now who've been holding Bitcoin forever. They put it in the vault and they just borrow against it when they want to draw down. And a lot of them don't even pay back the loan because the Bitcoin goes up faster than their accruing interest anyway.>> They're already in the money.
Bill Barhydt
>> Yeah, they're already in the money.>> Bill, great to have you on again. We'll certainly do more, you're awesome. Love the vision. Again, the future's here. It's just inch by inch, move the needle, connect the dots. Congratulations. Thanks for coming on. Appreciate it.
Bill Barhydt
>> My pleasure. Great to see you.>> At Crypto Trailblazers, the world's changing, it's upgrading, it's being retrofitted and entrepreneurship and finance is software, it's tech, it's money. Tech and money coming together, this is our mission at theCUBE. I'm John Furrier, your host. Thanks for watching.
