EP 241 – Joel Lin – Contributor at CitaDAO – KYC Means Know Your Code

by | Nov 18, 2022

Asia Tech Podcast had Joel Lin, Contributor at CitaDAO, back on the show.  We needed his expertise to further our discussion on the volatility in the crypto markets.
Some of the topics Joel covered:
  • Recent financial crises juxtaposed with FTX, Alameda Research, and Binance
  • Sam Bankman-Fried and Changpeng Zhao rivalry
  • How much regulators knew about FTX
  • The importance of code auditing
  • Do smart contracts solve this?
  • Web2 projects disguised as Web3 projects
Other titles we considered for this episode:
  1. He Tried to Run an Exchange Like a Bank
  2. People Trust the Community
  3. Not a Failure of Regulations, But of Regulators
  4. The Web3 World Can Not Be an Imaginary World
  5. You Gotta Wonder Where All That Money Came From

Read the best-effort transcript below (This technology is still not as good as they say it is…):

Michael Waitze 0:01
Okay, we’re on. Hi, this is Michael Waitze. And welcome back to the Asia Tech Podcast. This should be another super interesting episode a few weeks ago, we had Joel Lin on..a contributor to CitaDAO, and we kind of felt like we left a whole bunch of stuff on the table. And in the interim, a lot has happened. A lot has transpired. And we want to have Joel come back and talk to some of the things that are really important to him. Joel, thank you for doing this again. How are you?

Joel Lin 0:28
I’m good. Thank you, Michael, thank you so much for having us back on the show.

Michael Waitze 0:31
It’s my pleasure.

Joel Lin 0:34
Indeed, much have happened between the last time we spoke and today. And I guess it’s drawing more awareness. Good or bad into the crypto scene? Yeah. Everybody is wanting to know what happened here. In fact, I saw some comparison, whereby they said a 10 billion use of SPF transferred to FTS and at that transferred elemental research is equal event to like some big well known companies market cap itself.

Michael Waitze 1:04
I mean, $10 billion is a lot of money. But can I ask you this, though? Again, I don’t know how long your history is in the financial services markets. But like to me the equivalency here is not something else that’s happened in the crypto markets, but something that happened in the late 90s. Do I have this right, late 80s. Actually, this is the LTCM. fiasco, right. And I think that those two things are just the numbers are different. But back then it was $2 billion. This time, it’s 10 billion. But it’s just so similar. Sorry, go ahead.

Joel Lin 1:32
I guess if inflation Yeah, can be anyways. Yeah. And if if, and I agree, I’m not doing the LTCM, even though I studied those in, in school, for my finance degree. But ironically, this LTCM thing, just keep happening over and over again, the most recent memory is the Oh, eight financial crisis. Lehman Brothers went down. And then all the banks, were just trying to guess, who has the counterparty exposure to Lehman Brothers. And then more banks went down, and then everybody’s guessing who has counterparty exposure to this group. And become, it becomes a reach a point where the authorities have to step in and pay this poor good bank, ironically, and a bad bank portfolio and start aligning the debt according to whether it’s a good bank them bank debt, so much so that you could use the financial system. My guess is today, as we stand today, this is ironically a repeat of the financial crisis. Be honest, much smaller scale and financial crisis, but something of equal magnitude in the crypto space that’s happening.

Michael Waitze 2:58
What makes a guy besides the fact that he’s like an idol in the crypto space, right that everybody holds him up as like the next Warren Buffett, if I remember what Forbes or Fortune Magazine said, but this guy literally took customer funds, put them into his research his own trading arm and tried to kind of like make the money back. Do I have this right?

Joel Lin 3:18
The last we heard of was really the similar case of SLR liability mismatch, whereby this guy with no experience in the financial sector, the most recent short stint doing market making Jane

Michael Waitze 3:32
Street, but that’s like a tiny change. It’s like a tiny firm, like, Do you know what Jane Street is? And sorry to interrupt you. But Jane streets like this really small street in in like, I don’t know, in Chelsea, or somewhere downtown in New York? Like, that’s zero experience in my mind. Sorry. Go ahead.

Joel Lin 3:50
Yeah, yeah, that’s that’s what I was about to say. And then, and then after that, what he did was that he tried to, he didn’t get the context of the difference between an exchange and a bank. So effectively what it was tried to run it like a bank. And that’s when all things fell out. If you look at it, what really went well, first of all, he has no license in any way despite why he said to run FTS as a bank. At best, he he has the license to probably bleep operate as an exchange. And here is the very huge difference within an institution a bank. There’s a reason why the New York Stock Exchange there’s a reason why Chicago Mercantile Magento exchange CME and stuff, they don’t behave like a bank. That’s because when funds from customer goes into those exchanges, they were meant to be held in custody in trust for the customer to trade and effectively there should be a proper segmentation of customers. font and poetry capital. And I think what went wrong here is that he decided that look, since the banks, some banks are doing like a brokerage activity, he could try to run a brokerage, like bank now that there’s a fine different set of fine differences that banks are actually allowed to call it deposit, they are allowed to lend. Yeah, make loads of stuff. And the reason why they weren’t allowed to do all this in the first place is because the regulator’s the authorities have looked at the entire flow and forgot that okay, there are certain backstops the banks, for example, the banks have repo facilities with the Central Bank, which prints money. So literally, the central bank could bet stop the bank. And that shape, however, do not have both facilities with the with something similar to federal offered.

Michael Waitze 6:05
Also, the FDIC insurance everybody’s banking on up to $250,000. And when you put your money in a bank, you know that it’s an institution that provides leverage to the rest of the economy, like it’s part of the money supply. When you put your money into a an exchange, you’re not even putting it into an exchange, you’re buying and selling assets on the exchange. And the exchange is the person that gives you the safety so that if the counterparty who you don’t know, doesn’t settle the exchange guarantee settlement, it has nothing to do with deposits and loan making. That’s not the business of an exchange at all. Yeah.

Joel Lin 6:36
I like the way you put it. That sums it up nicely. And so bad things went well, literally. Because first of all, I mean, fine, if you want to take the customer deposits, and you want to do all this, at least have the proper team to do the necessary feasibility study, the due diligence before lending out the money, you need to have a proper team set up to facilitate all this business. You don’t you don’t you don’t just put a Wall Street trader to go and start lending your money, you probably lend money to any public heavy, he knows. And that’s when things go down. Right. But that’s basically what happened over here. Back to the point of backstopping the exchange doesn’t have the same backstop as the banks do. And when all hell break loose, and as a bank run, there is no report facility that the exchange the FTAs could tap into to find it short term liquidity crunch, leading to a massive breakdown in its asset liability equation, which ultimately led to where we are today, the spectacular collapse of second biggest exchange in crypto in one day. So I

Michael Waitze 7:51
want to say something really controversial. Tell me what you think. This is either completely solved by smart contracts completely right. So this is either like the defining moment that says Yeah, well, if this were decentralized, if this were real defy, and no individual person could make a decision about what to do with customer assets without there being a smart contract that governs what happens there. So the technology doesn’t allow it to happen, just can’t happen. Because if you tried to take that money out and do something with it, the smart contract would just prevent it. Or it’s saying decentralization just doesn’t work. I think it’s I feel like it’s super binary here. Right? And that if you have individuals, given the ability to make these decisions, or decentralization, where it just happens in the market somehow, like, what is the real implication of this at scale? Because Because crypto is not going away? Right? It’s not gonna go away. Right? But what’s the implication of what’s happened today, where somebody super prominent, and very well respected apparently just did something so bad, that people are gonna have to reevaluate.

Joel Lin 8:58
I will say that there is a failure, not in regulations, but emulators. Because if you look at even the US law, as it is, right, the existing regulations actually defining how an exchange is supposed to behave and how a bank is supposed to behave. Right. And if you don’t have a banking license in you’re applying for exchange license, obviously, you are an exchange, right? So you’re supposed to pay for that exchange. Now, what struck me as interesting is how this exchange that causes exchange, was able to keep functioning as a bank, without it getting picked up by the regulators, despite such close relationship between regulators and exchange itself. It’s not to say that this is a tug of war exchange, where the regulators have not heard of, in fact, they were causing very close to each other. So is it Chances are regulators probably see some activities. And these are not these are not hidden activities like lending, like yielding, like providing deposit account. These are things that instantly should strike in court with the regulator’s who knows what they’re doing that, hey, you know what this session is not supposed to be providing deposits for customers, right? It’s supposed to be costing the customer funds. Right, right. And then suddenly, this exchange that goes out making billion dollar investment start dishing out tons of money, lobbying, politicians stopped buying up stadium naming rights and stuff, you got to wonder where all that money came from? Because it has changed. It’s not that profitable. I mean, look at NYC, they have been around for a long time they were most respiratory change out there. They are functioning everything and they don’t go around spending the way FTS did.

Michael Waitze 10:55
There’s no NASDAQ football stadium, at least one that I know of. But But So tell me, does software solve all this? In other words, if we really believe in defy the smart contracts are some thing like a smart contract solve this where like, I have a wallet. I don’t deposit money at the exchange, but I’m trading at the exchange, but the governing aspect of that money that I have to exchange is all governed by a smart contract. So the exchange itself can’t do anything with that money unless I give it the right to.

Joel Lin 11:26
Yes, I believe that there will be there will be a time whereby this is going to be sort of the more trusted feature to to facilitate liquidity on marketplaces, rather than putting into the hands of third party individuals that could make unilateral decisions without actually getting caught until things blow up. Right. So I think that there’s there’s, there’s one, there’s one direction, I think things were hit. But I also like to highlight that code is code, right? While code cannot operate beyond what is programmed to do a poorly coded smart contract or could end up providing a similar vulnerability, like similar to some something like fts. So I will say that there still needs to be some form of independence conduct. Whereby, I mean, the programmers of the code, the founders, could be anonymous. For all we care. But we believe that recognize competent institution, maybe the regulators and stuff should have an arm that can audit the code independently. Yes, and put a stamp saying that, hey, you know, what, we have looked through the code, and we believe that the code is supposed to work the way it does, and there’s no funny things going well. So yeah, this is a stamp of approval. Without even having to know who the the the coders are. I think that that could be one way to get involved in the sense that the regulator’s will have to, if they have the capability to do so to audit the code. And make sure that it’s the same way as when you apply for regulations, by a shape by banks, they check your process, they check your systems, they check the ID that individuals and stuff, they make sure that your your flows, secure, that no funny businesses, they flag up vulnerabilities. And when you address all their concerns, they give you the stamp of approval. It’s just that in the war of court, probably they can do away with trying to ID the person behind the people community behind the code. But he could focus more on just the code a process itself, which makes things a lot more efficient for the regulator’s to

Michael Waitze 13:58
do you think that KYC is not going to mean like know your code as opposed to know your customer?

Joel Lin 14:03
I think so. I think I think I think knowing your code will be more relevant and know your customer, because in this case, it doesn’t matter who your customer is. We know who Sam is. We know who FTS is and it didn’t help.

Michael Waitze 14:15
Well, I mean, in a way it hurt, right? Because you made a really good point. And I don’t want to gloss over this right, like Sam bank been fried and what was happening in FTX. And Alameda was not happening in the dark. Right? And the regulators knew who they were, and they were actually quite close. So the implication to me is that somebody must have known what was going on in the same way, by the way, that the regulators knew what was going on with LTCM. They knew what was going on in the 1997 global financial Asian financial crisis. They knew what was going on in 2007 2008. But they just kept hoping it was going to get better. Through more either financial engineering or through just like trading out of the problem. This never ever works. Believe me. I sat on Wall Street for 25 years. Every time that happens, it’s a fail. Every time go ahead

Joel Lin 15:02
completely. I mean, one to one doesn’t make one, right? No. And she wants only makes things worse.

Michael Waitze 15:09
300 wrongs makes a complete nightmare.

Joel Lin 15:12
Yeah. So you’re right on point on that. We believe that the future of defy will probably involve more of knowing your codes rather than know your customer. Yeah. However, we also have to be aware that regulators and going to the life regulators, always money laundering, terrorism financing, F ATF and stuff, right. So I believe that no funds is going to be equally important. The AML checks still have to be done. However, having said this, the legit operators in defy space lead ology leaders in the device space, have also recognized the need for this, this is not something this is this is at least something that the alignment with the very latest with the track five community on this. And I believe the first path towards building integration between defy space and cyberspace is attributing alignment, working on where interests are aligned. I don’t believe that the FIE community wants to fund terrorist financing. I don’t think that the majority of the defi community wants to start supporting war efforts, or human trafficking efforts and stuff. In fact, I believe the majority of defy community in good faith against of this, they want to make the world a better place. That’s why the FBI was created in the first place. In fact, if we draw back to the opioid crisis, something similar to what happened recently, in the crypto space, you could imagine why defy was even created in the first place, the barrier of defy is decentralized transactions. So if you look at the OIC financial crisis, when Lehman brother came down, and let’s say I’m a guy in the UK, and I have a son study in the US, or a daughter in the US, and I want to, I want to transfer some, some money for for them to pay tuition fee. And I’m looking at the banks collapsing one after another in the States. And I’m like, what if my money never which, my, my kids? How are they going to pay the tuition, I don’t want my money to disappear into a black hole. If I initiate a transfer now of this tuition fee to my kids, and the banks in the middle of the transaction collapse, my money is going to be lost forever, and my kids are not going to it’s going to disrupt our lives. So how do I do that? How do I give the tuition money to my kids? Now? The obvious answer will be to pack a bunch of this money into a bag, fly over to the US obviously, this declaring the money to customers throughout the way, and then taking the bit of money and handing over to my kids. That is possible if I have one or two kids by imagining if I have, like, not seeing me, but like 50 All kids all over the world.

Michael Waitze 18:20
But to be fair, that’s not even possible, right? Because no one’s gonna let you want to play in our pack a suitcase filled with a million dollars in it like this only happens in crime movies. But isn’t isn’t it also important to note that, like, you had the big banks in 2007, and 2008. And frankly, this happened all through the early 2000s as well, it just came to a head in 2007 and 2008. Just like building all these financial products that didn’t really add any value to the economy, but just made money for people. So it was taking money to make money and just making really using financial engineering to make money in a way that like wasn’t sustainable that all people know this, right? And I get this idea of defy, but at the end of the day, like whether it’s sandbag and fried, or Jamie Dimon or whoever it is, billions of dollars of value have just like disappeared, they’ve just vaporized and we know like why it happened. So the big concern I think for some people and I’m curious about your opinion on this is in the defy world, do you just get to walk away because no one’s accountable. Everyone is just like part of this big community of people that are trying to get good things done. Or and even like Jamie Dimon just walks away it’s like Yeah, well I mean, I guess we lost billions of dollars in the head the CEO of of Merrill Lynch the same thing. But like what happens who’s accountable in a we’re in a D in a decentralized world where like, no one has taken responsibility. The dude literally just posts on Twitter. Sorry, I’ll do better next time. But where’s my 10 million bucks? Do you know what I mean? Like who’s accountable?

Joel Lin 19:54
Ironically, in the event in fact fi system today it’s almost It’s impossible to recover your funds to a loss. In fact, the better approach to answering this question is education, right? In D phi. And phi, I would say, in both cases, even even even when lights are taken in the Boeing crashes, people just walk away, right? Buildings are lost, people just walk away the

Michael Waitze 20:22
737. Max is was in were a nightmare. But yeah, go ahead.

Joel Lin 20:26
Yeah, to say that d phi and phi d phi will solve this problem. It’s going to be far fetched. I will say that in terms of accountability, everybody’s accountable to themselves to communities accountable to yourself, doing the proper due diligence, doing the proper checks and balances, asking simple questions, looking into a flex, there is the most important you are ultimately accountable for your own assets. Right? The difference between the fine fine, however, lies in the fact that in defy the code is transparent. And if we could have better code auditors out there, if we could have better trained community members out there, who can look into the code and start analyzing the code and providing positive feedback. educating the community about which clay say which court isn’t that good, right? That works. In the case of track five, unfortunately, the system is so okay. You don’t even know you have to trust the person about percent. In the case of SPF and Sam right, and how do people build trust? That’s that’s, that’s interesting. USM is very good at people you trust, by building credit, by by by being credible people into the ecosystem. And ironically, in today’s world, credible people can still be bought by money. Look at the campaign’s lead a lobbying letter campaign donations, and he spent lots of money in there to bring those people into the system for

Michael Waitze 22:06
what’s already donated or whatever given to political candidates. Yeah, yeah, million bucks. That’s a lot of money. Go ahead.

Joel Lin 22:13
And then and then boy, well, tell him people who is that who is Mom is intelligent people who Caroline is girlfriend, ex girlfriend, CEO of animal research. That is, which by the way, is the boss of Gary Gensler, the current sec, Chairman.

Michael Waitze 22:36
Problem to I’m glad you brought this up, right. So like, people talk about the SEC being a regulatory body, right. So the SEC was created by the US government, but it’s not necessarily part of the US government. And if you look at the SEC chairman, and it’s been mostly men, they’ve all come out of Wall Street, all of them. Right, whether it was Hank Paulson from, from Goldman Sachs, the guy from Citigroup, Robert, I can’t remember his last name. But all these guys and gals came out of Wall Street, so they have no incentive to be excessively regulatory. They’re just like, yeah, it’ll be fine. It’ll be fine. And don’t worry, no one’s gonna take your bonus away. Right. So what Sam Backman free was doing was no different than what’s already been happening SEC or no sec. Do you know anybody by the way? That knows him? Like do you have any inside view on what’s been happening here?

Joel Lin 23:25
Yeah, that’s a very interesting question. And now that now that I mean, everything’s out there. We start seeing all kinds of interesting skeletons coming out of the closet. Interestingly, there’s a Twitter chat going on on CT, so actually knows that the follow Tracy actually knows. Smells of it when he met Sam, for the first time who is on to the founder of three AC who is currently on the run to so interestingly, he pointed out that he, you know, he, he felt that Sam was a little off the first time we met Sam.

Michael Waitze 24:11
Okay. I mean, I hate to say it, but like, anybody who’s trying to be that alternative? on purpose, right? Not for art’s sake, not for any particular site. The dude is just trying to be weird. He’s weird. Like, that’s just my opinion. But go ahead.

Joel Lin 24:30
Yeah, so I mean, I mean, they he did he did brought it up. And there were other guys that actually on CT mentioning that Sam might actually have been the one that brought down Luna in the first place. He was a he was an actor there that ultimately led to the crash of nine Celsius and stuff. I mean, those are just conspiracy theory. But what we do know, is tourists And after by Nance talks failed and this was on a blockchain available for our to inspect and see what happened was that element of research, they kind of tried to do the unthinkable. What’s that? They did a bet they basically went and shot the USD T and executed the same trade, the important doll USD will not have they executed exactly the same trade on USD T. And the scary part is if they had succeeded, they would have gotten away with everything. Because what they would have done is they have trained the TITO treasury to have gotten the billions back at the expense of USD T. They would have crashed by Nance by Nance would have gone down, they will have crashed the entire ecosystem, your Bitcoin ATM, everything would have gone for pennies on the dollar. And they will use the billions that they extract out of the theater reserve to then buy back all this Bitcoin here. And then they will fulfill all the withdrawal requests on FTS and say that hey, you know what, we’re fine. We’re fine.

Michael Waitze 26:12
Yeah, but here’s the thing, though, isn’t Cheng’s out right. So CZ nickname CZ because it’s easier for most people to pronounce? Isn’t he like the most Machiavellian guy in the world? He knew what was going on. Right. And he pretended because there’s been this kind of rivalry between like, Wait, why is the SAM Beckman fried? So famous and so popular? Everybody loves this dude. And like I got a regular haircut. And how come I’m just a regular guy running the biggest exchange in the world? Do you feel like this is part of a little bit of an internal game between the two of them as well like a competition and CZ is just like, Hey, dude, I guess you’d lost.

Joel Lin 26:48
Well, Sam did mention that CG when in his tweeted his tweet. He said we outplayed you want right? In following CJ Mosley. mitre, ACC is probably in a very difficult position. He knows that this revelation will bring about a Lehman Brothers crisis in crypto in our good faith, she didn’t take a short position on a trade, he could have easily made billions of dollars just by shutting FTAs FTT before he made the announcement, right? He didn’t do any of these things, which is much better than Wall Street whereby everybody was just shutting before they went out and tell everybody there’s something wrong and making tons of money from them. So at least the motivation in terms of making a huge, but often FTS, at the expense of everybody else

Michael Waitze 27:47
is doing this. But I sat on a trading desk for I want to get this right to 1998, almost 15 years, and I’ve been around trading desks for more than two decades. And I have like an unending number of stories of stuff that probably shouldn’t have happened. But did.

Joel Lin 28:06
Yeah, likewise. So he had an opportunity to go back there. Yeah, a couple of buildings. But maybe he didn’t take that. So for that kudos to him. In terms of making the decision to make this public. The motivation behind I guess only CZ will know, is probably a very difficult call to make. Because he knows that the moment he said is going to bring about Lehman Brothers moment in crypto, right. He’s going to put a lot of people runs

Michael Waitze 28:37
into some of his own problems as well. I mean, if FTX fails, failed, people are now naturally gonna look at binance and just say, slow down, dude, are you commingling funds? Are you like using customer funds to do this kind of stuff that you make some of the same decisions even at a small scale? And if they did, you’re right, that’s gonna go down as well.

Joel Lin 28:57
Yeah. So Honestly speaking, I think that would have been a very bad way to take our competition. Because, because, because it basically is going to boomerang back to you. Right? So I feel that the motivation is not to take our competition. In fact, we were just saying that there’s so many other ways you could take out a competition without doing this. Yeah. Fair enough. Yeah. So if we address if we strike off the speculator motivation behind this decision, which is taking down a competition and probably making a quick buck of it, which both isn’t his motivation. We are left to us, then what is your motivation behind this? Is it because he wants to make crypto space? To be honest, after this, I believe that crypto will be a much stronger and better space. Whether it’s motivation or not, because the regulators are going to come in they’re going to say that hey, you know what? changes are supposed to be changes, you’re not supposed to commingled funds moving forward, all funds must be segregated and not segregated. So I believe that that will be something that will likely happen. So he’s, ironically bring more regulations onto himself. Recently, he has also been advocating defy, it’s been telling people that you know, what, don’t trust centralized exchanges like us, in fact, move your money into decentralized wallet. Right. And he mentioned a trust wallet, which ironically, is owned by coincidentally is owned by binance. So by Nance actually have a space in the in the defy space, in the device space already, probably will transition into a four we know. But if you look at the consequences of his decision, he actually made the global crypto scene a much more mature, a much more trusted space after the dust has settled, whether that is motivation or not, I do not know. But what I do know is that or he has made the crypto space, he has brought crypto one step closer towards integration with the trek five space. Yeah, as it was.

Michael Waitze 31:18
I want to say this too, right, just so people understand. We’re watching the debate, the beginnings and the development of a new part of the financial system. And we’re documenting it in real time. And this is kind of unprecedented, because nobody was standing right on Wall Street in the late 1800s and early 1900s. And just you know, talking in real time about all the shenanigans that was happening in what back then and I’m putting in quotes was the stock market because it was all happening on the street right before the exchange was built. And it has to It either makes it stronger, or it makes it go away. I believe this is pretty binary. And I’m a believer that whatever, decentralized finances and whatever cryptocurrency is, is not going away. The technology is too good. It’s way too interesting. And there’s just no way it’s gonna go away. So how do we handle this real time documentation so that we can still build trust? Like, the thing I want to ask you is what’s the implication of all this stuff? Unlike Citadel, where you’re trying to convince people and the team at Citadel, right, all the contributors are trying to convince people look, your assets in the real world are actually worth more than more on chain than they are off chain. And then people go, Yeah, but I saw that same Megaman fried thing. And I’m out, do you know what I mean? Like, what’s the implication for you?

Joel Lin 32:35
Ironically, in terms of education, the man on the street is still classifying all things crypto, under the mega crypto umbrella, same, so be your web to web three, or web to this crisis with three platforms. They will just be like, You know what, I’m going to be a lot more careful now. And many, many of them, in fact, will probably say, I’m out, right? That’s fine. But some of them will go like, you know what, you’ve seen this happen? Okay, how is the project doing? In the end to be like, you know, what, we actually, we actually, were actually totally unscathed. We weren’t doing very well. In fact, our token price was not affected our assets on chain, were all very safe. We always get used to this to generating rental income. We are operating business as usual. Right?

Michael Waitze 33:33
Don’t just I was gonna say, don’t you also benefit from the fact like we were joking, during the first episode that you don’t call yourself the CEO of Citadel, you don’t say like you’re the founder, you just say I’m a contributor, in a way. Right? And I’ve just kind of come around to this, but in a way, isn’t it better, that there isn’t sort of this cult of personality around one person that’s either running your business or the FTX business, or frankly, the Biden’s business or any business because at some level, you can’t do everything by yourself, first of all. But second of all, if you create so much self importance, it mucked around with the way you think about yourself and what you can get away with. Do you know what I mean?

Joel Lin 34:13
I think that’s one thing. But the greater danger is that it diverts everybody’s attention from the project. If you look, in fact, if you look at all the successful the five projects that did very well for himself, some of them you may not even have the the founders, or you may not even know who the founders are. Yeah, case in point, the curve. Or let’s say uniswap was the following initial, no, it was the founder of compound finance, who is the founder of Avi, who is the founder of maker Dow, who is the founder of die, right. So there are so many well known projects out there that are doing so well, and really benefiting the community at large. And you realize, oh, A time that people trust the project, not because they trust an individual, but because they trust the community that has built around the project. Because this community is constantly not just looking out for others are looking out for themselves. And it doesn’t take one person to believe everything, you really need a lot of people to collaborate together to work on a project in heavenly Mr. Project safer. And that’s something that we strongly believe that any decision should never be made by one individual, it should be made by the collective community. That’s how it’s supposed to be operated. Now, others may or may disagree. They may say that because you know, many people have to make a decision. Sometimes you get to know decision sometimes decisions making sense, lowest. But I would like to counter that by saying that sometimes slow decision making process is not a bad thing. Yeah. In fact,

Michael Waitze 36:07
like, why are you kind of thing, right? Yeah. Why do we need to say this immediately, let’s be thoughtful about it. That’s in a way, it’s better.

Joel Lin 36:14
Yeah, in fact, security is more important than speed I view, keeping user funds safe, is more important to speed. Because at the end of the day, it doesn’t take a lot to bring down an entire ecosystem, we see a $16 billion Empire, the $2 billion Empire collapse video in a day. Because Because one this one person was making a decision. He was making some not very correct decisions. And because it’s a web two, disguising as a tree platform, nobody’s smarter. He managed to get away until somebody caught up, caught him out. Right. And the question is, why was he allowed to build to this scale before he was caught out? Because very few people know what he was doing. Yeah, legitimately.

Michael Waitze 37:03
And very few people understand that as well. Can I ask you this? What do you mean by a web two platform disguised as a web three platform.

Joel Lin 37:13
So and there are many of these platforms out there. In fact, we see a lot in, in our spaces. So by platforms coming around telling you say that, you know what, we are a free platform. But hey, you have to hand us your cash for us to manage on your behalf. Right. But they say that you know what we do blockchain technology, we do this. We we create our own tokens. And because we use blockchain technology, and we create our own tokens, we have a few platforms. Which is the case for FTS why they have their own tokens, right? The moment you have to hand over your cash to somebody to manage on your behalf. There is no web token. That’s not not all that free platform, work free means that your cash, your money, your wallet, your keys, you should never have to hand it over to somebody else to manage it for you. But the general public still, in all manner, still require quite a bit of education in differentiating a web two from our web platform, because there were so many scammers going well, I mean, that’s the best way to scam people. Like when web, she was all the hype, the scammers were on, were jumping onto the train telling everybody that you know what, we have actually platform. You put your money with us, our token goes up 100 times 1000 times you’ll be a millionaire instantly overnight. It’s even better than winning the lottery. Right? And, and everybody just said what went through and put the money. They say, hey, you know what, this is my money. I’m giving it to you go make that money for me. Right? Yeah. And then all things blow up. And then we have a very, very nice today.

Michael Waitze 38:58
I mean, it’s such a philosophical question, right. But why? I just don’t understand why people believe. So. And again, I want to go back to this. When I graduated from college, they there was this movie called Wall Street. I’m sure you’ve seen it. Michael Douglas was the star of this movie, right? It’s Gordon Gekko. And you know, one of the things that one of the managers on the floor where bud Fox worked said was there are no shortcuts. And these like overnight success schemes and get rich quick schemes. They just never work. And they’re always some kind of scam or some kind of Ponzi scheme. Like what’s going to have to happen for people to stop believing this. I mean, I believe it’s never gonna happen. But do you know what I mean? Like, it’s so silly.

Joel Lin 39:43
I think greed is producing everybody’s bloody Greek, at some level, I guess. And unfortunately, without proper education, without the right experience. Greed sometimes leads us to make it A lot of decision, which ultimately, results in self inflicted pain.

Michael Waitze 40:06
Yeah, exactly. It’s self inflicted pain for sure

Joel Lin 40:09
that the way we see things progressing, believed that the onscreen web framework cannot be imagined or it will, I think we have reached a stage where we have built the right infrastructure, we have built the right and tested it out, in fact, to show that it’s working, fine, even the common collapse today, I’m referring to but for the community, I believe that at some point in time, it has to be used for something good, you should be used for something for the greater good shall be used for speculation and stuff, right. And the best way to do it, we believe will be to integrate the track five space, traditional finance space, with the word free space, and we believe that will assets could be the key to sustainable growth, for the web for universe in the future. In fact, if you look at the web space today, do we have the websites on chain today? My answer to that is yes. What will assets do we have on chain at such large scale today, they actually perform well, despite the carbon crash. The answer to that is the US dollar. If you look at how suckers have done it, that how Paxos is how the stable coin issuers have done it, they have effectively tokenize the most simple form of real asset, which is the currency US dollar, not your stocks, not your bonds, no university, knowing when you go diamond, but your US dollar, the body on chain.

Michael Waitze 41:49
Isn’t that super ironic? Because the dollar itself is also backed by nothing. It’s backed by the full faith and what is it of the US government? Right? So it’s actually backed by nothing, there’s no gold behind it. There’s no asset behind it. It’s just people believing that it’s actually that it actually has value. Like that’s fascinating to me.

Joel Lin 42:08
To me, it’s backed by oil.

Michael Waitze 42:11
Well, at some level, you have I mean, there’s a symbiotic relationship, right? Because all oil is priced in dollars, right? And then the biggest consumers of oil have dollars to buy oil. So maybe but yeah, fair enough. I mean, in a way, it’s kind of a funny con. But I will say this, I love this statement you made the web three world cannot be an imaginary world. And I’m going back and forth between should that be the title of this episode? Or should? Should it just be like KYC? And then in parentheses, know your code? What do you

Joel Lin 42:42
think? I’m fine. If you don’t want I think you already know your code is a very, very invest first time I heard it, but I love it. That’s why you should go pay today, right? But honestly, I believe that when when when Facebook changed and into matter, it’s a huge distraction from the real problems they’re facing. And the honest, honestly, I feel that elite everyone on a wild goose chase. At the end of the day, we realized that the metaverse is very nothing is I mean, it’s not for it’s not productive as of yet. Now, will you be productive in the future? My answer to that is yes, yes. But only at which point, the metaverse is able to generate real property income for us humans in the real world to spend to live, proper lifestyle to feed our families.

Michael Waitze 43:47
Right. So this gets back to something that I talk about a lot. And that is that the solution to all of these problems is not technology. It’s a hybrid solution between technology and humans and how humans are super powered by the tech. And how the tech that gets written is continually iterated and perfected by humans to make the life that humans lead in the real world easier. So the metaverse may be a place where it’s easier for people to interact. So like if you’re sitting in Paris, you can make it feel like you’re in New York, so you can talk to somebody who’s in New York and make it feels and make it feel like you’re there. That is an amazing use of technology. You have this type of technology, this type of immersive technology, right? Yeah, but it’s not imaginary. And the only real output is going to be like, Where can I buy my vegetables for this? And how can I get my hair cut and all this other stuff has to happen in the real world. That’s how, and that’s my solution to not everything, but that’s how I believe everything is going to happen. It’s just my feeling on this

Joel Lin 44:46
as well. So I mean, one other way the metaverse could be useful is if it brings the collective minds of everybody together to solve complicated problems that a single individual locating one contribute, I’d be a bit soft, and ultimately making it more productive. So that’s where I see the metaverse as it is today. And because of that we believe that ultimately will assist will have to matter in the metaverse for it to be sustainable. And to be honest, having seen the success of the US dollar, how the US dollar has been tokenized kind of give us faith and confidence that you know what other assets that we can tokenize since it’s so successful, because the technology is that the Fed a US dollar can be tokenized could transact so seamlessly through the entire ecosystem, even though obviously, with the proper KYC AML in place, ultimately led to a more efficient US dollar system. Now, for the longest time, everybody’s happy to wait one or two days for the US dollar to reach their bank account after they have been transferred. And happy to wait out the weekend while the bankers are out there partying until the Mondays are well before they receive their US dollar transfer. But and those expectations are increasingly being updated with the tokenization, the US dollar because the US CCI could effectively transfer your US dollar anytime of the day, any day of the week.

Michael Waitze 46:19
Again, to be fair, right? Like I worked, like I said, I worked on a trading desk, I did everything from the operational side of the business to the trading side and everything in between. We could have made bank transfers automatic 20 years ago, because the tech was already there. And to be fair, I get mad now like I have somebody in Japan sent me money yesterday. I don’t get it until today after like 3pm. It’s ridiculous. But the reason why that that’s done one of the reasons why is because for every moment that the bank does not give you the money, they’re earning interest on it. And they can lend it out to like there’s a whole bunch of reasons why that doesn’t happen. And yeah, if you remove the intermediary, because right now if I want to just transfer money to my buddy here in Bangkok, I just like go directly to my from my account to his account, give him money done. He has it he can spend it right away. Yeah, banks can definitely do this. Sorry. Go ahead.

Joel Lin 47:11
Yeah. And so because of limitation about Office, right. I mean, have you ever had money gone missing? Because along the way, one of the correspondent bank forgot to execute on an empty 103?

Michael Waitze 47:22
No. I’m sorry, I don’t want to talk about it. Because I know what’s gonna happen, but I’ve never had it happen. I feel super lucky. But I know what you mean. It’s not impossible. But

Joel Lin 47:30
I had it happen a few times. And then the response on the bank was that, sorry, we forgot your money.

Michael Waitze 47:38
Because there’s some there’s some person there who has to like like their, you know, they’re their boyfriend is going, Hey, we’re late for dinner and like, just to be on nevermind, I’ll do it tomorrow kind of thing. And then your money does Tuesday, as opposed to on Monday. Yeah, I know.

Joel Lin 47:51
Ya know, in some cases, you will, you’ve got forgotten like, I was making a transaction to purchase something. And the guy now receive the money for like, Close to close to a month. And every time we checked the bank, the bank said no interest was done. Until I was saying, Look, guys, there’s a whole bunch of ways a lot of money in this list is TJ. And, you know, saying that it’s all missing. It’s like you debit for my account, but it’s not a criminal other side what’s happening, right? And then they manage it. And then they found that, sorry, our correspondent bank forgot to execute the transfer. You gotta be kidding me. Yeah, it’s

Michael Waitze 48:28
begging for a solution. Yeah,

Joel Lin 48:30
so I believe that the efficiency of the web three space will make all assets more efficient, simply because it has made it so FOLLOW US dollar. And if we look into the traditional space, what kind of assets are the most inefficient you have your bonds, which is the debt, but other side, you also have your real estate, which is your properties. Now, bonds and deaths, I believe, will ultimately be tokenized the right way, I hope. But for me, personally, I feel that I prefer to look into doing that technology, I discovered a bit free space to real estate. Honestly, I feel that VCs asset class is a lot more safer than any financial instruments out there. And when I say safer, are referring to the ownership of the real estate. Not real estate is a fixed immovable property, it doesn’t have legs and you can’t want anybody who wants to steal their real estate, patent adversity into a bear and fly somewhere and

Michael Waitze 49:36
see if it gets there as an address. Move it

Joel Lin 49:41
so. So obviously, when it comes to applying new technology to asset classes, you want to pick the safest path possible to build credibility and real estate came up tops from all asset classes. I mean, you have All you have is so many things. But every day all these asset classes are movable. And because it’s movable, it can be collateralized many times over. Yeah. And yeah, I remember someone actually mentioning about one of the tokenization so called self declared, but mentioning that it could tokenize cruise ships. I was like, Do you know what goes into tokenizing? A cruise ship? Do you know how many places the cruise ship could be registered under? What is this? This this, this owner decides to tokenize the cruise ship here and then go to the UK and tokenize a cruise ship go to China and tokenize the cruise ship both the US into classic cruise ship

Michael Waitze 50:45
or the Caymans

Joel Lin 50:47
us. Yeah. And then he also moved all the money. And then now you have this cruise ship as collateral. And everybody is coming back and say that that cruise ship is mine. And you realize that no country actually has jurisdiction? Right? All the countries are fighting over each other for jurisdiction over the cruise ship. In which case, how do you unwind this? Yeah, you may not even get sense the dollar in this case is probably worse than FDA. So I guess tokenization done. The right way has lots of potential but done incorrectly, by by those who are not aware of the risks of doing so could result in a worst collapse and the FTS crisis. In all honesty, I feel that the safest place to tokenize is real estate because if anybody crashes or want to claim that, you know, this verse state belongs to me and so forth. Usually the government of the country where the property is located have the final say with this property Bill two, three, you’re gonna have a case where all the garments come together, especially here with us this acid belongs to that one.

Michael Waitze 51:54
Let’s end with this to like, you can’t put the Mandarin Oriental Marina Bay Sands onto like a truck and just like move it. You know, they just can’t do it. Anyway, you kind of up. Okay, you got to come back to these conversations are really, really great. Does that cool? Let’s end here. Yeah. Joel Lin, thank you so much again. That was awesome. Thank you


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