 And look, it's Goldman and Citi and JP Morgan all come to us tomorrow and they say, look, here's what we need, right? This, we've decided how we're going to do it. We've defined everything, then we'll be like, great, we're ready to make that happen. But they don't know either yet. Sounds like you're a college girlfriend waiting for the boyfriend. One of the most powerful men in crypto, Sam Bankman-Fried spent his time at the Bitcoin 2021 conference taking a well-deserved victory lap. The founder of FTX and Alameda Research just closed a deal for the naming rights of the Miami Heat NBA Arena, as well as a $200 million deal to rename the Esports team TSN. And, don't forget, he also landed at number three on Coin Telegraph's list of the 100 most influential people in crypto. We don't know what yet. We don't understand what's going on. But every single client of ours is asking us, why don't you offer crypto? I'm going to go to your competitor if you don't let me do the crypto thing. In an interview, the 29-year-old deca-billionaire talked over what's in store for the rest of 2021, including whether or not his donation to President Joe Biden's campaign is a sign of lobbying efforts to come, a wave of institutional adoption he says is desperate to get into crypto, and why Layer 1's Solana might win out over Ethereum in the long run. Stick around to hear the thoughts of one of the savvy minds in all of cryptocurrency. But first, don't forget to like and subscribe. I'm Andrew Thurman. I'm the weekend editor at Coin Telegraph, talking here with Sam Bankman Frey, illustrious shit poster. Also happens to own a couple companies. First off, congrats on the TSM FTX. Thanks. It's been super exciting working with them. Yeah. I love the jersey. The new swag is cool. Oh, yeah. No, they even asked the logo on my name on the back. Yeah. I guess they're probably not going to be calling you up to participate in any matches anytime soon. I hope not. Yeah. If so, I think we got to choose a new team because they will fall on pretty dire straits. Right. The bench is deep enough. They don't need you. I think that's right. It is an interesting move. I think FTX is starting to get pretty creative with the marketing between this and the heat arena. It's some exciting moves. Can you tease or you guys really starting to branch out a little bit more or are we trying to become the brand name of crypto? That's so. And I think when we think about this, a lot of it is like we're fortunate to have a pretty captivating industry and a pretty cool story. And I think that means that we have material to work with, which has the opportunity to really turn heads. And I think that's what we want to do and what we want to avoid. It's just something that looks generic. Right? I mean, maybe it's worth doing that in addition, but that's not going to convince people to bother checking out FTX. Right? Like this sort of like, you know, have you thought about using our exchange? It's good. You know, picture the logo. I don't know. It's not something, something cooler than that, something that'll get, you know, that people will really be excited to think about. I think, you know, one of the inevitable byproducts of FTX coming onto the market and becoming a force a little bit more is that you yourself are then under the public eye. Yeah. You know, there's been a lot of calls. I think a lot of people were hoping, you know, because you donated to a campaign, you're going to become like a professional lobbyer. Right. How do you think about that? Is that, is that a role that you could one day do? Is that something you're interested in doing? You know, you know, I'm super happy to serve as a resource for anyone needing government or anything else who wants it and I think how do we talk about what the industry is like, where the pain points are, where it might be going, ways we might be able to work together, and you know, ways that we can come to hopefully, you know, good deals with, with regulators where, you know, we're able to keep track of the things that are really important to them and they're able to create a regulatory environment that lets crypto thrive. And I think that that's sort of the main goal, you know, I don't see myself as, you know, going in with a singular goal of, you know, increasing FTX or crypto at all costs. I see myself as going in with the goal of just telling things as I see them and hoping to educate and be a resource there. And I think partially it's just like, look, they have so many people who come to them with agendas, right? Sure. You know, to the extent I have an agenda, I just wanted to flow from my actual thoughts and beliefs. So that's all I have to talk about. It is my thoughts and beliefs rather than trying to create a fact pattern that happens to fit where I want it to go or something like that. Fascinating. So we're not going to see you, you know, in front of any presidential commissions or testifying before Congress. That's not, you know, not unless, I mean, look, again, if they want to know more, I'm happy to go talk. But, you know, I think that's the circle on mine. Interesting. Another sort of byproduct of this conversation is obviously, you know, the regulatory environment. You can share your thoughts on it and if people want to listen, that's good. How do you feel about it? I can imagine from your view, things might seem faintly absurd at this point. Yeah. It's, I mean, it's tough, right? Because you have this industry that's new and importantly is not using the same rails as the existing financial industry, right? It's not using the same clearing firms, the same custodians, not even the same philosophy in terms of how things are settled. So it doesn't fit super neatly into the existing regulatory structures. And it's also just rapidly, rapidly iterating. And so any framework you come out with isn't going to be comprehensive in a year anyway. And with that backdrop, it puts regulators in a tough place, right? Of like, how do they, how do they create a structure which makes sense given the pace of evolution of the industry? And you know, I think that like in the end, the best compromise you can come up with there often look like, look, here are the things that you can't do that we're really concerned with and we're going to give the color we can, but like, you know, you're going to have to be responsive and have to be doing good faith attempt of not trying to find loopholes in it. Here are the things that we know are okay and we're creating license for and you know, we're totally fine with. You know, other things look, if they, if they aren't fraudulent, you know, if they're not taking advantage of users and they're not touching the bad things, you know, you can start out doing them and we'll give color if we start to become easy about, uneasy about them, right? I'll say, Hey, here's an area which we think that we're nervous about. Here's what our goals are here and communicate with the industry, right? I think that like derivatives are like one of the key flash points here where almost no one has banned crypto derivatives. There isn't, you know, a global movement to get rid of them, but they're also just complex products from a regulatory point of view and they cross boundaries, right? It's like, is this a commodity? Is this a future? Yeah. Is this like a currency? Yeah. Is it, is it a derivative? Is it an EFP? Is it a contract like, and in different countries, different agencies regulate these and they regulate them differently and even the United States, there's a few different agencies involved there. And so I think that's one of these cases where like, you're not going to tomorrow come out with a comprehensive regulatory framework. Everyone knows that. Eventually, there's going to be one. And the question is in the meantime, you know, I think the goal should be create an environment where good actors can have thriving businesses that can grow and build out the industry while making it clear what things you're uncomfortable with as regulators. What we really want is a dialogue and a clear short and medium term path forward while the long term regulatory framework is still being built out. Yeah. I've been talking to a lot of the guys, DeFi guys doing permission pools or trying to help institutions get involved. And what they're increasingly telling me is that it depends on the risk tolerance of the lawyer at the institution. Like people don't actually know what's okay and what's not. And so it is this sort of good actor should be allowed to do things or should try to do things and just be honest or be forthcoming. Like how does FTX handle that and how do you talk with institutional partners about these things and help them navigate, you know, these very gray areas? Yeah. I mean, the first thing that we do is we just listen, right? We're like, look, what's your goal here? What do you actually want to do? Right? Are you trying to get away to get Bitcoin exposure to, you know, to high net worth individuals? Are you trying to get away to get higher yield on your dollar reserves? Is your goal here to offer like trading to HFT firms for clearing through here? Like, you know, what's the product that you need? What's the service you need? And then we can say, all right, cool. Here's how the industry works right now. Ignoring what you said. Yeah. Here's the lay of the land. So you have that. Right? Here's what you want. And here's what you might be able to get. Yeah. And then what sets in between, right? Like, what's the thing that might meet what you need and still fit within the framework that exists right now? And I think one of the things that comes up again and again and again has not been resolved is custody. Yes. And a lot of people don't understand what's going on here. A lot of people think like, whatever, just use custodian, but that's not the problem. Right? The problem is that it's a totally different framework than crypto, whereby each exchange is its own full tech stack. It builds up every piece of the product, right? Including settlement deposits, withdrawals, matching, risk engines, everything, right? AML KYC. And so then you say, all right, fine. Use a custodian, right? It's like, we need a custodian with these properties. You find your custodian, right? You send some dollars to them and then you want to go like buy a Bitcoin on this exchange, right? But you haven't resolved a lot of open questions here, right? Even if there's a trilateral partnership. Here's one thing. Let's say there's a disagreement on settlement terms. How do you adjudicate that? Right? You have the clearing firm or the settlement agent or whatever. You know, custodian, whatever you want to call it. You have the buyer. You have the seller. You have the exchange. They're all disagreeing. Who's the arbiter? Yeah. They govern this. What if the terms are unclear? Second of all, how does settlement work, right? Let's say that there's a trade and one party is going direct to exchange. The other is going to a custodian and one party wants delivery immediately. And the other operates on a 24-hour settlement cycle. How'd you do that? How'd you get the Bitcoin from there to there? If this side wants to take a day and this side needs immediately. And these aren't unresolvable questions, but there are open questions. And it adds a lot of complexity to this story because it's not just like that there's this weird wonky thing crypto does and it just has to stop doing that. It's actually a differently built system. I think there are a lot of advantages to it. But when you try and plug it into the existing system, you have the square peg in this round hole and finding the connector is quite tough there. Even if you have the circle in the square, like, you know, so I think that's sort of the core thing here is like when you try and figure out how institutions are going to interface with crypto, if you want to do it tomorrow, I can tell you what the answer is. The answer is you go to an exchange, you trade there. Like, that's how it works, right? And if you don't want to do that, there's a new thing being pulled out, right? But there's a lot of open questions in that process. That just in a lot of systems, right, in the crypto ecosystem. I do think that there's a sort of race underway between a couple of those trifectas though, right? Yeah. You have Anchorage, Visa, you have Paxos, PayPal. You have Silvergate, Gemini. You know, is FTX looking at this and where do you play a role in getting these institutions on board? Absolutely. We have to be, right? Right now we're having conversations and we want to be a day away from pulling the trigger on a big deal, but we don't want to pull the trigger yet because we don't know what the answer is, right? That's the fundamental thing here is we don't know yet what the future is going to look like and we don't know what the right answer is. If we knew what the best answer is, we'd just go build that right now. Yeah. I'm going to be honest. Our sense is the current crypto system is kind of cool. We think there's a lot of advantages to it. To some extent we think the right answer is like, this is how the system works, but that's not the answer that works for institutions right now, right? And so then we're sort of like, all right, we're going to try and meet them halfway, but we want to be able to get that done immediately once we know what to do. And look, if Goldman and Citi and JP Morgan all come to us tomorrow and they say, look, here's what we need, right? This, we've decided how we're going to do it. We've defined everything. Then we want to be like, right, we're ready to make that happen, but they don't know either yet. Yeah. Yeah. So, I mean, I love the terms here. It sounds like you're a college girlfriend waiting for the boyfriend, right? You're just going to be ready. Exactly. We're going to be ready. We're going to be feeling it out. We're going to... Lots of conversations, you know, lots of open talking about our feelings and desires, but, you know, we can't say we're ready, and we can say we're ready for you to turn on. Yeah. We can't say it's training starting tomorrow. They're going to be like, no, how are we training? Yeah. Right? Like you're not... Our clearing firm doesn't support you yet. I mean, are they hungry for it? Do they want it? Absolutely. I mean, desperately, right? And this is what's changed in the last year. Yeah. A year ago, all of them, they're individual employees who wanted it. Fine and large. They decided to mandate not to touch crypto unless they really needed to. Now, they're all told, look, you're going to get fired if you don't at least touch crypto this year. Right? Like, you got to do something. We don't know what yet. We don't understand what's going on. But every single f***ing client of ours is asking us, why don't you offer crypto? I'm going to go to your competitor if you don't let me do the crypto thing. And they're like, what do you mean, do the crypto thing? They're like, well, Bitcoin thing and the other coins. They're like, okay, yeah. But we don't know what that means either. Like, well, I don't really know, right? I'd say come to us, right? And they're like, we're going to do the crypto thing. And we're like, cool, let's sit down. Let's talk about what you actually want and what your constraints are. Let's talk about what your customers actually want, what their constraints are. And then let's figure out what the crypto thing means here. Right? Yeah. Very cool. I think like the route to getting institutions involved obviously fundamentally different than getting users involved, right? One of the most fascinating experience in all of DeFi right now, Oxygen and maps.me. Users are there and you think if you put a DeFi interface in front of them, they're going to want to use it. So I think that the key to this is that long tailed users who've never touched crypto before, they don't want to see, sorry, your transaction failed because you didn't spend enough gas or like the mempool or something like, okay, they don't want to see that, right? On the other hand, there are a lot of advantages to DeFi. And all you have to do is try and do something without DeFi and see all the barriers you run into before you realize why building a well-defined system could have advantages. And so then what you do the bridge at, and I think the answer is you build the right system. Forget about the user experience for a second, right? Build the right technology, the powerful technology, the scalable technology that offers the right financial opportunity. Then you take a step back and you're like, all right, we've got this code. It's deployed, but no one's going to fucking understand how to use it. And now you say, let's ignore the underlying product. Let's find the right UI, the right user experience, right? Let's build this as it's a pleasure to use. And the goal of the product, of the app then in some senses, is to be that layer in between. You know, if you want to say like, could this have a trillion dollars in it and have, you know, be as active as all of us stock loan is right now. The answer is theoretically yes, right? There's a lot you need to build on it to get there. But there's no reason that it couldn't eventually theoretically happen. And so then if you execute beautifully, you might be able to get there. And I think the problem with a lot of DeFi protocols is you look at them and you're like, here's the reason, theoretically it will never, ever, ever be able to get there. It doesn't matter what UX you build on top of this. It just doesn't have a throughput, right? And it never will. And so at some point I think that's one of the big things I think about is like, there are a lot of blockers you can fix over time. Yeah. You have to make sure that you've gotten rid of the blockers you can't fix. Yeah. I think that's one of, you know, Solana's competitive advantages. Obviously very deeply invested in the ecosystem. Yep. And so I'm wondering though, the things that people say, oh, but Ethereum will win because of the developer moat. Right. But I saw the Solana hackathon, what, 2,000 teams? Yep. I mean, insane teams. Yeah. What is it like, you know, sort of overcoming those kinds of maximalist arguments or what have you done trying to replicate all the good things that Ethereum has that some of these sidechains don't? Right, totally. And look, Solana hasn't yet. It's done a lot of them. It hasn't done all of them, right? Yeah. And I think the big question, I think there's two questions, right? The first is how big is this moat, right? And the moat is massive on the scale of current DeFi. Yeah. It's tiny on the scale of the world, right? It's like 50,000 users, which is most of DeFi, but it's tiny compared to the user base of any centralized exchange in crypto, right? And so I think that's one of the fundamental tensions here, is that like this moat is insurmountable if crypto never grows. But if crypto gets 50 times as big that the moat was 2% of the eventual pie, the other piece of this, right, is why is a moat valuable as a business? A moat is valuable to keep other people out. A moat doesn't let you grow itself, right? It gets rid of a particular impediment to growth, which is competitors. But a moat isn't growth itself. And then you can ask the question- You can have a very strong but very crummy castle. Exactly, right? And so I think the problem that you're going to run into with a lot of ecosystems is whatever your moat is, if your castle literally can't get any bigger, right? Maybe no one will ever get into it, but it's only got 2% of the land right now, and it just physically can't get any more. And so I think that's one of the big things I think about, I think this gets back to like user acquisition is a hard problem. It's not an unsolvable one, right? That's a really valuable thing to have, but it's not something which you can't break through, right? At some point, if and only if crypto gets big, right? If we get to the world, which is where I think all the expected value, where all the value is, right? Is in the world where there's a billion people using crypto. When you get there, try however you want. There's going to be a million transactions a second happening, right? It's just going to happen. That is a consequence of that user. It's true of every billion dollar, every billion person company in the world. But there are billion user-based companies in the world. I mean more than that too, because you think about, you know, suddenly social media gets commodified by OVA or something. It's going to be multiple times bigger than the current financial infrastructure. That's right, and there's a million tweets a second, right? So like, you just have to, that's not negotiable if the ecosystem grows. And so then what you're thinking about, it has to be, if you're conditioning on crypto getting big, you have to condition on a million TPS or more, right? Maybe tens of millions. Yeah. And then you're like, okay, what, what, like no current T5 system can do that, right? So you could, it's got to be something. Something has to change. You have to break out of that mode somehow in order to grow. And then the question is just, what's the right way to do it? And is it an L1 that tries to get to that throughput? Is it a sharded L1? Is it L2s? None of those quite fit within the current mode. But the current mode can't, can only maintain its current size. It can't grow. And, and then the question is, what can build the beautiful user experience for a billion people? I think it's just really hard if you lose composability. I think if you can't have more than 50,000 transactions per internally composable system, you can't have any single application bigger than 50 kTPS. Yeah. If you have a single application bigger than that, you can't have a single big business. And so I think you can argue about whether the number is 100,000, a million, or 10 million. It's not 1,000. So be it. I really appreciate you taking the time, man. Thank you. And congrats again, FTX. I'm super excited. Good stuff, man. Cheers.