 Thank you all for coming. Basically, the premise of the talk is a little bit about what are RCOs, or a broader superset, token-generating events? I think that's the latest parlance that we're pushing out of Switzerland. The different kinds of them, and what are kind of some of the regulatory problems and moral hazards and other things, and maybe my opinion on where the hell it's all going. So what is a token-generating event? We've got three different types. Got the ICO. That's what everybody's doing right now. $1.3 billion raised so far. Got people copy and pasting code, changing a name, putting a new name in, raising $200 million, not to name any ventures or anything like that. Other people making great claims, and that's fun, and we'll get to that in a bit. Then you have two other forms. One is called proof of burn. Anybody know what proof of burn is? Show of hands? A few of the oldies in the space. And what was the first proof of burn? You got it, right? And what is proof of burn? It's an upgrade. You take a token, you destroy the token, and you get a new token. It's a really interesting device, and actually it doesn't seem to pass to how we test it, in my view. Then you had a share drop. Anybody know what a share drop or an air drop is? You ever hear this term before, a show of hands? Ah, a couple of people. So, anybody know about Ethereum and Ethereum Classic? What happened there? We took Ethereum, and then took the UTXO, copied it over, and now we have two Ethereums, Ethereum Classic and Ethereum. It's a share drop, so if you had one Ether, you have an Ether Classic as well. Now, the rational actor would say, well, that's impossible, because the minute you do it, the new coin will die, because everybody just makes infinite profit, right? As soon as you get it, it's free money. You should sell it till it goes to zero. But these TC is actually over a billion, and it's doing quite well. So, share drops actually can result in a stable ecosystem with lots of money. So, these are kind of the three vehicles. And I've been in the space long enough to actually witness all of them be used to various degrees of success. The first I see I'm aware of was Mastercoin. There may have been some decentralized crowdfunding on Bitcoin talk prior to that, but Mastercoin was like the first one to do an Exodus address and all this stuff. Jarrah Willett had the Bitcoins on his laptop or desktop, and they rushed and created some Delaware company to actually do illegal structure, and they raised like $500,000. And at the time, they were proud, man. They were like, wow. One month, we raised $500,000 off of Bitcoin talk. Oh my God, this is so cool. Now, later on, Dan Larimer, working with some guys, did angel shares, and they raised like $4 million. And everybody's like, whoa, this is so cool. Then the big daddy was Ethereum. Everybody remember that one? It was $18 million. My God, how are they ever gonna spend all that money? Now you do an ICO today, it's like $18 million. Oh God, how did it fail? You know, what did you guys do wrong in your marketing or something? So, the point is that we're growing up like an order of magnitude, basically every time, every event. And that's a good indication that there's probably gonna be a bubble and there's probably gonna be a collapse. The other thing is that we're no longer talking about what is the technology, what is the purpose? Do you have a right to exist, a reason to exist? Do you wanna change the world? What are you gonna do with the money? It's all about ROI. That's another indication that there's a bubble. You see people who got really lucky with Ethereum or really lucky with Bitcoin and it got 100X, they say, hmm, well this new token, yeah, people are gonna like bats. Yeah, everybody's gonna be after that shit. Let's put in some money and we'll get a 10X, right? And so you're actually taking lucky people and they're doubling down to be lucky again. So, I believe what we're in for is going to be some form of a bubble and the bubble's gonna collapse. And then that'll draw on the regulators. So that's kinda the premise of the talk today is to have a little bit of a discussion about what are some of the moral hazards that I've seen or I think in the space and also what would a regulatory event look like in my opinion and what would the aftermath be if such a thing occurred? So it's probably a glum morbid speech but I get to tell it cause y'all came. So anyway, what are some of the moral hazards? Well, first off we're not doing KYC and AML and a lot of these offerings. What is KYC and AML? Anybody run an exchange? I know you do. Okay, so basically, let's say John. You say you're John O'Connor, right? Okay, you say that but I don't know that unless you provide some evidence to that. Now why would I want that? Well, I know you're a unique human being. That's the first thing. So let's say we have a crowd sale and 5,000 people participate and all send funds to this Exodus address. How many are real people and how many are just transactions? The only way you can know that for certain is with KYC and AML. You have to do compliance or else it could be one guy who created 5,000 transactions and sent it to the Exodus address. Now why would you do that? Any ideas? Well, what if you are an insider? Where's the money going to yourself and you're creating coins out of thin air doing this? And then there's a hype cycle. So when it goes way up, you sell the new coins you've created and you make a 5x or 10x in the money that you just put in. And it's anonymous, right? Nobody knows, nobody sees it. You say, I don't know who these people are. They're people over the internet. For the more, you know, there are foundations that are doing these events. And what do legal entities have? They have bank accounts. And so what does a banker have to do? Anybody in banking here? Anybody ever been in banking here? Show of hands? Have the courage? Okay. So this one guy over there who's very courageous and the ones who aren't courageous, what do they have to do when you open account? They do KYC and AML. And they also have to think of origin of funds, right? So when you have an account like a business that's brand new and they have $10 million that came out of damn nowhere and you call them in the office and you say, hey guys, where'd you get this $10 million from? What do they say? Oh yeah, it's so cool. You know, we did this crowd sale. We got it from all these people over the internet. We don't know where they're at. Could be in Iran. You know, who cares? It's so awesome, man. It's great. Is that like a high-risk bank account or a low-risk bank account, right? So that's a problem. Then you have a litany of other moral hazards like how do you spend $200 million? I run a company. We operate 10 countries. We have 100 people. We have three research partnerships. One at Edinburgh, one at Tokyo Tech, one at Athens. And I would not be able to spend this much money. It would be so devastating to us as a company. First, think about wages. You have a guy come on board and say, I ask him, how much do you want to be paid per month? He says $25,000 a month because he knows you have $200 million, right? There's no, oh, I don't have the money to pay you. There's none of this discussion because everybody publicly knows you have this much value in your back pocket. Furthermore, you start thinking, well, I can take business class. Well, I can do five-star hotel. I earned it. I got all this capital. And lo and behold, your expenses go way up. You don't work any harder. Your people don't work any harder. In fact, they're actually thinking more about the money than the project or the product. And so you actually execute slower. Job on is a great example of that. If you get overfunded, it's just as bad as being underfunded. And this is a phenomenon that I think a lot of these ICOs are going to be facing soon enough. And the other thing is that your investors, the people buy these tokens, they have an expectation of a return. How many people gave money to an ICO and said, you know, I don't care what they do with the money. I don't care if the token goes up. But yeah, it's fine. I love the mission and the vision and the principle. You know, if it's your favorite charity, maybe. But for a lot of these guys, you're like, oh, that's a good investment. That's going to be 5x. They've got some good people. If you raise $200 million, now your guys want a billion-dollar capitalization. And they want you to do it in two years or less. How do you do that, especially if the market's in a bubble and the bubble collapses? I think bank were raised $150 or they're at $60 now. What if it goes to $10? Are you going to have happy people who are all copacetic and they're feeling great about life? No. So the problem is that the Securities Exchange Commission, which is kind of the big watchdog for a lot of the stuff, is in between a rock and a hard place. On one hand, they say, you know, we don't want to stifle innovation. We want to allow this model to grow and persist. But on the other hand, we're starting to see a moral hazard. It's growing up by an order of magnitude every generation. You have obvious structuring schemes where people go and hide in Switzerland or somewhere else. They operate in America, so their substance is in America, but their form is in Switzerland, so there's kind of a tax evasion component to that. And they have no moral or ethical obligation in their view to the buyers. If you read the terms of sale of a lot of these ICOs, they say things like, you have no rights. It's a donation. If we go spend the money on our favorite extracurricular activities, it's just as good as writing code. And there's not a damn thing you can do about it. And there's no consumer protection. Why? Because they didn't do KYC and AML. So how do you know how to help the people? How do you know how to assist them? If Bob says, I bought your ICO, and he comes to you six months a year later, and he says, well, I lost my credentials. You can't go check his passport and say, yeah, you match our records. You don't know who Bob is. So you can't issue a new certificate. You can't use a backup recovery archive. You can't do any of this stuff. You just say, Bob, you've lost everything. So sorry. So you get a situation where people are irrational. You have massive amounts of money. You have a lot of corporate malfeasance. You have a lot of potential insider trading, a lot of board transitivity, and no regard whatsoever to consumer protection. This is the environment our space is currently in, whether we want to admit it or not. So what will happen? Well, bubbles break. They always do. And when they break, all these ventures get defunded. Then that's a great time for the SEC to come in, a great time for class action lawsuits. And they have seven years to do it called statutes of limitation. They can still go after the master coin guys if they want to. And then every one of these ICO guys has to argue why they don't pass the Howie test. How many of them got a legal opinion on that? Not, I talked to a lawyer and the lawyer said, yeah, it's probably not. Now there's something like serious, like a more likely than not opinion, where they had to do research and provide an argument and the law firm stands behind it. Probably not many. How many got a no action letter from the SEC? None. So no one's protected if they've sold into the United States. And then you have some people get clever who are like, well, I didn't send and sell into the United States, wink, wink. But if you don't do KYCAML, how do you know? Yeah, there's already decisions that the SEC has made that you have to do that to blacklist them. And if you don't, well, you probably did. There was a certain venture that shall remain nameless that bragged about how they didn't sell into the United States. And then on right on Times Square's billboard, their logo's there. And there's trucks driving through Manhattan with their logo on the side. And let me get this straight. That's not a road show. That's not advertising to US purchasers who will use VPNs or other things to evade and buy in. Why would you market if you're not selling into this jurisdiction? So there's a lot of precedent. Now if they do get involved, what happens? Well, you get double whammied. First off, if a token is a security, you can't sell it on an exchange. Why is that exchange? Because you need broker dealer, right? You need special licenses to sell securities. You can't list normal instruments like that. Okay, so we'll see tokens get delisted from American exchanges and probably international exchanges as well as part of risk mitigation. Furthermore, the banks, they're gonna say, these are too risky, these clients. They'll drop the accounts. Okay, so they lose their bank accounts and they get delisted from exchanges and the token value goes to the toilet. And then the token buyers feel defrauded and want their money back. What do they do? Class action lawsuit. That's probably, in my view, the most worst case scenario that we're looking at in this space. Maybe it'll be less draconian but it's probably gonna happen. And what's the aftermath of that going to be? Well, in my view, the SEC will have to create a standard. They'll issue an administrative ruling and say something like, well, this is how you have to register. You have to do KYC and AML. You have to have some consumer protections and they'll create some framework. They'll pick somebody really egregious. They'll throw the book at them to make an example. And then for the rest of the people, they'll give them a fine or say you have to register or do something like that. And the industry will move on. That's how this usually works and that's how it's always worked. Now, will this stop ICOs? No, because we have other mechanisms like proof of burn, share drops. People are outside the United States legitimately. Like if you have an organization in South Korea or China, you just sell the people in China, there's no US participation, there's no jurisdiction there. It's very difficult to have that. So those will continue. And that's over six billion people. So I think ICOs are here to stay. I think ICOs are going to continue growing. I think we're going to have more and more and more rational exuberance. And then eventually I think it will burst. It'll contract the market a little bit. The strong will survive. A lot of the weak will get flooded out. And if you're in a developed jurisdiction like countries in Western Europe or the United States, my belief is that there'll be regulation for these things. The regulation will probably be kind of hybrid. Something like the Jobs Act, something where it's somewhat easy to comply, but you'll have to have a prospectus and some notion of registration and some notion of compliance. And as for the rest of the world, they'll continue like online gaming and gambling and running in a kind of a gray area market and doing gray area things. So that's my view on ICOs. It's a very pessimistic one, but I think it's a pragmatic one and I think it's a realistic one in a sense. This said, I do believe there's a lot of room for innovation in the space. And I do believe if you're an entrepreneur and you want to capitalize your company, there are a lot of really clever ways you can still do it. Like proof of burn is legitimately a great option for a lot of people. Let's say you have a great new privacy coin, for example, and you think yours is legitimately better than Minero or Zcash or any of these other guys. Okay, create an endowment and do a proof of burn. Have people destroy their token. It creates a distribution, it creates a value. They've upgraded their token, but you don't take anybody's money and you only get paid if the tokens actually were something. So you're actually directly aligned with the people that you're working for and you're betting on the technology, its adoption and its growth over a period of time. That seems to be a far more sensible model. Share drops are also interesting. That's where you have philosophical differences, Bitcoin may experience this. If the segregated witness debate doesn't pan out the way that we want it to, you're gonna have one philosophy here and you're gonna have another philosophy here. And what does that mean? We're cloning the token. We now have two of these tokens or more, just like Ethereum and Ethereum Classic and the communities diverge. And because there's real people there and there's real trading and real mining and we split the community, we've actually now created completely different ecosystems and those will have real value. So I think that those are healthy because they actually allow you to take an unstable community that can't advance and split up, mom and dad split up, they got a divorce. They can now go get remarried and have a better life. And there's maybe a lot of business models. Like maybe you wanna grab someone's community. Like maybe you wanna compete with EOS and you think the Steam guys and the BitShare guys got screwed because they didn't get any distribution. You can just take the ownership, create a share drop and fork EOS. Maybe you'll do something there. This has actually been tried with some projects to some degree of success. So I think there's a lot of innovation here that doesn't necessarily involve an ICO. The last point I'll make is that there's a moral obligation when you take other people's money. I don't like it when people say give me money and I don't have to do anything. It's just insane to me. You take someone's money, you gotta deliver something. You have to create value, real value or do your best. You have to wake up every day and say, well, my job is to make sure these guys have a good outcome. That's the key. And I think that that's the mindset we need to return to in this space because the reality is that that's how Bitcoin got created. Nobody was thinking about money in the beginning days of Bitcoin because it wasn't worth anything. If you were a core developer, it's because you were philosophically aligned with it, you believed in it. And it turned out that all the people got in early if they stayed in, got fabulously wealthy. But that's an after effect of a philosophy and a passion. And that's why I entered this space. It's why I'm here. It's why IWGK exists. We do a lot of first principles research. We do a lot of Haskell development. It's not easy, but we do it because we love it and we're really excited about it. And we think we can do great things as a company. And if we are successful, we're a company, we're for profit, we'll do well. But my success is not measured in how much money we make. It's measured in the things that we do and the products we build and the protocols that we enable and their impact that they have. If you change the world, you're gonna get rich. Either an experience or in money. So that's my brief, cynical, sleep-deprived, wreak elevator falling presentation on ICOs. And I'd love to have your questions because I assume that we're gonna get at least one or two good ones. Thank you. Let me provide a little bit of comment on the other side of this picture. So I ran a publicly traded company for almost 20 years, raised $550 million for other people's mindsets. Over 39 different transactions. I went through a five-section lawsuit. Went through an S&T investigation of closing their fault, it was fantastically good fun. Learned, like, no, no, we'll look later on. We're great, I'll tell you the story about the settlement with the judge of New Jersey. You could have been on ICOs, fantastic. But the point is that it's been, it was an interesting process to go through the setting up of an ICO and the legal work for it and the process of getting an opinion from the legal side and trying to figure out the right mechanisms. Oh, sorry, and trying to figure out the right mechanisms to put in place. There are things that are definitely on the edges of this. The question is, do we or do we not want a token-based economic model versus an equity-based economic model? And so the real change opportunity here, and I'll tell you where the real risk is and the huge opportunity, the risk is we as companies should not use tokens as compensation, period. Not to vendors, not to developers, not to third parties, not to founders, employees, and others. But the moment we concede to that point, we lose the fundamental benefit of the token economy, which is that there's this participation as a group in the formation of something that's a broader ecosystem. And so it moves it out of this sort of corporate culture and into this much more potentially distributed architecture. I think that's where the real battle should be balanced. Both for the SEC, the other regulators and others is that's where the innovation is that we can't really use stocks for that because the rules are tough on that side. People aren't gonna give away bits and pieces of their stock to other vendors and get it all distributed around because it makes a mess out of governance of the thing. Where in tokens, I think actually what you want is mass distribution of your tokens as broadly as possible. So just from a slightly more optimistic side of this, by the way, I think the real thing here is I think of this as like corporate venture done crypto style. So if you had like $100 billion, would you take 5 billion, like 5% and just toss it to a bunch of complete total lunatics? By the way, I'm a member of the lunatics crowd. So like you give me some money, I'm like you can't hire me from a marketing department perspective. I'm a religious fanatic, right? I'm gonna go out there and tell you why I need at least $20 billion of value stored on devices just to like get up in the morning. Well, that's like the current valuation of Ether, right? So that's just like, that's just roundoff error. Let's get this thing cooking. And so what you want is 200 lunatic executives out there running around, well-funded, as the marketing department. Because if we do our job, let's say every IACO, we average all of them and we look at it three years from now, probably pretty good guess, zero. No gain, no loss. Some will win, some will lose. No gain, no loss. But the underlying crypto went up 500%. How many people are gonna do the trade again? Like take 5% of your position, put it in a marketing budget and see if we can make the core underlying crypto go up. Because the problem today is we don't really use crypto very well. We use it as a store of value. We don't really use it. Like what's the total actual throughput in use of it for practical purpose? Not a lot. Maybe the IACO might unlock the utility of crypto on a global basis. We just don't know which ones are the winners and the losers, but we need like a hundred of them. And so Intel did this a long time ago. They put a wifi chip on the PC and then they started a $100 million venture fund and they funded every idiot business plan that had the word wifi in it in like 2000, 2001 timeframe. Guess what? We all have wifi today as a result. And so I think there's an interesting aspect of this and kind of how it helps the whole ecosystem grow. We have to be careful. The points you're making about like pay attention to the details. Really critical. Both as buyers and then the seller side of this equation and understand we're building product and we have to be careful when we build product otherwise it will absolutely become a security. We don't want that to happen too soon. Sorry, just my two cents. Okay. Testing? Okay, works. So, you know, my pessimism is that I see where the industry is going and how people act. Private conversations with other CEOs and the attitude people have towards token holders. Also where the money came from. You know, if the money comes from smart money it's like dot com bubble and a certain respect built an entire industry. And you know, there are a lot of losers but let's be honest about where most money came from there. It came from VCs that were already quite wealthy. Right? So they make some bets, they lose some bets. Shame on them. Right now we have a situation where a lot of people got really rich really quickly. That's one of my primary concerns. And when you get really rich really quickly you're not smart. You're lucky. And if you don't know the difference between the two you're soon going to be poor again. And so what's happening in a lot of these things is I think we're building kind of a house of guards where some people got really rich really quickly and now they're realizing that value to get to another token and it just repeats and it just repeats and repeats and eventually it comes collapsing down and there's no liquidity and these things would happen. Now as your point about the utility of the token the devil is in that detail. If you got a legal opinion that says there's real utility here, the way you're using it, the way things are done and it doesn't pass the Howie test, that's fair. You know, we did that with Ethereum. We talked to a law firm. It was an incredibly aggressive and extremely painful time consuming effort and the conclusion of that was that it didn't pass the Howie test for a variety of reasons. The fact that all these ICOs are occurring on Ethereum is a good example of that. It's an enabler of these types of things. It's not in itself just valued as a speculative instrument. It's an enabler of distributed computation but you have to draw a line somewhere and frankly no matter how you want the token to be used people are going to use it the way they want to use it. Some people are going to use it as a dead instrument. Some people are going to use it as a currency and some people are going to use it as stock. And so the question is does the use, the guilt of these open systems transitively come back to you? And where do those boundaries end? Being an unregulated product and given that there's a lot of moral hazards in the space, my opinion is that it will be shut down as a funding vehicle without some form of a channel, a regulated channel. Well it can't be shut down. It's a distributed system. I should say shut down and that it's no longer a lawful way of doing things the way we're doing it today. Yeah, they've done a season equity offering. The difference is that, hang on. But hang on, no one has an expectation of return there. That fails the how we test son. Come on, I'm buying a car to resell it at a 2x or a 3x. Okay. Okay, but the vast majority of people buying slots is their opinion of an expectation of return and also is their, okay. All right, so it goes on average, right? And is the vast majority of people buying a cryptocurrency, do they feel there's an expectation of return or do they want a real life utility out of it? And that's the unanswered question and what the SEC has to look into at some point. Yeah, it's a fair point and I understand what you're saying. Ferrari has the same problem. If you like 488s, you're gonna have to buy a slot because there's no way you're gonna get it in two years, right? Let's open questions up to the floor. I've got lots of hands here. So question to Charles Hoskinson. Yes, hi, my name's Robert Willis, executive MBA, entrepreneur in the technical space. We've experienced a lot of noise in the space of crypto currencies and blockchain. And I suppose I've got a controversial statement of stroke question. Do you think most of the ICOs are found venture capitalist adventures? And so the next step for those companies were to pitch to the populist, people who are not really educated or know much about how business works. And as a result, they were able to develop a white paper pitch and we're here to, we are where we are today. Controversial, but what's your take on that? I'd give Steve money and I'd give Eric money over bets. There's some very good people who have had fiduciary responsibilities before and they certainly earned the right to try again because they have real products and there is real infrastructure there. There's a business plan. They can execute. There's still a risk because it can fail but you know that they're not gonna fail because they decided to go to Barcelona for six months and disappear and by being substances that aren't fully legal. But that said, there's certainly a lot of people who are raising money with absolutely no business experience whatsoever. The challenge is that that's not a criteria itself to blacklist people or else we wouldn't have Elon Musk. You have basically a college dropout, left Stanford's physics program to go play with his brother and start zip to. At that time there was no legitimate reason to believe that Elon and Kimball were gonna go build some empire. It was a roll of the dice and it was the same for the most of the modern tech industry. So on one hand, I'm sympathetic to the idea of giving people a shot but on the other hand it has to be reasonable and scoped. You don't hand a 16 year old a Ferrari. You hand a Toyota or something like that. You let him build some reputation and credibility and grow up because the vast majority of the time you'll have a bad outcome. Now, you're probably right that a lot of these ventures are junk but to be fair, if you're in venture capital 90% of what crosses your deck and gets funded is junk. Think about how many of these damn social media apps we have that get a big buyout and they're just customer acquisition plays. They've never seen a dollar of revenue. They just burn cash like crazy. Their tech stacks are absolutely dreadful. They're like always two days away from the whole service falling apart and they get acquired just basically to get the customers and roll them into an enterprise product line from a larger company. So given that this environment already exists in the traditional world, I think it is unfair to go ahead and say that somehow the cryptocurrency world is uniquely different in that respect. It's a human enterprise and the things that people try to do in the old system they're gonna certainly try to do in the new system. And Steve, do you wanna add anything to this? I don't know, I think you're right on. Okay, next question. Thank you, that was a good question. Okay, so my question is supposing that the bubble is bursting as you predict and I'm the guy from the SEC who comes along and says, I've studied your monetary policy document. Can you explain to me why is your scheme not just a Ponzi scheme or why is yours not and the other guys is? What is your argument to me as to why your scheme is not a Ponzi scheme? Right, that's a fair question as well. And it's one that's been levied against Bitcoin by traditional economists. So just because you have fixed supply or deflationary supply mechanic doesn't necessarily mean and it's problematic, it just depends on the use cases. It's store value, we're doing something with it and so forth and also why are people acquiring the token? So if you have natural demand in your system, for example gambling, no one ever goes to the Bellagio and says, boy, I can't wait to buy some Bellagio chips. They're gonna go up like four X this weekend, it's gonna be great. They don't do that. Instead they say, I'm doing something with the chip and the game is to get more of the chips by taking them from somebody else. Do you particularly care that the Bellagio has 100,000 chips or 200,000 chips? No, because that's the game. If the game is I buy my chips and I'm trying to sell them to John for a 10X so he can sell it to Jane for a 10X, who can sell it to Duncan for a 10X, that's a Ponzi scheme, right? So it does depend upon what the system is being used for, how the system is represented and the expectations that the people have. And you can look at the infrastructure, you can look at the roadmap and you can look at the commercial attempts that derive here. Like Ethereum is an interesting example of this. So if they are actually able to realize their vision, we're talking about a computational layer for the entire internet. It's bloody mad. Bloody, bloody mad. But it's a multi-trillion dollar business we're talking about here. So as a natural consequence of the ledger doing its service, the currency will get more appreciation. But that's not the primary purpose. It's more of this is fuel for computation. And when I buy Ether in distant future, five years, 10 years, 15 years down the road, I might very well be just trying to fund a decentralized application. And it's just like an Amazon EC2 type of a deal for me. It's just maybe a competitor and I need this to be decentralized because I don't trust Rackspace or Azure or whatever it might be. That could be a reality. But the thing is, is this analysis has to be done on a case by case basis? Absolutely. And if you try to make a blanket statement, I think that you run into some problems because you'll inadvertently actually take some honest actors who do good things and throw the baby out with the bathwater. That's my best non-answer to your question that I could get. Hey, sorry, he's putting his hand up. So I see one of the big values of cryptocurrency and token sales as being the accessibility of them as opposed to buying some shares or something. So if there's, as you say, a fallout of ICOs, eventually, what do you think, what do you predict might happen to the market for the people who don't want to take on, who still don't want to take on the legal obligation that they might have to in that kind of fallout because they don't have to because it's a decentralized, unstoppable system. So if I understand the question, can you repeat it, rephrase it a little bit? I just wanna make sure I'm answering the right question. So if there's a fallout of the ICOs, as you say, and then the NSC comes in and imposes legal obligations on these kind of sales, there's still a whole market of people who don't have to take on that legal obligation. What do you predict for that part of the market? Okay, well, first off, remember, the SEC is powerful, but it's not God. So if their regulations come down, there's still going to be ICOs trading and all kinds of things happening. And then actually, I liken it to file sharing. There's a certain degree of resilience to this technology. So what happened when we got music online, got Napster, and then the government's like, ah, this is crap, they shut it down, right? Then the response to that was BitTorrent and Tor and all these other things, and people started using it to anonymously share things and now Game of Thrones is the most pirated show in history. The more people watch Pirated, then people actually watch the show on HBO. So if they push too hard, what will happen is that it will continue, we'll just see decentralized exchanges running in dark nets with all these things that have been put in to make it impossible to identify people. And actually, the regulators created an even bigger problem then, because there's absolutely no way for consumer protection. At any point, somebody can just run an exit scam and do all these problems. So I think that first off, the regulation or not, it's not gonna kill the market. Just it'll change the structure and the form of the market, and frankly it'll make it easier for guys like Steve, because then the lawyer can say this is absolute certainty and it can even get a no action letter and other such things, which is not currently possible in this type of an environment. And now this legitimate fundraising mechanism is available. The downside though is if it's treated too draconianly and harshly, it could actually end up hurting the market. First innovation and then second by dramatically reducing consumer protection by offshoring it to increasingly hostile technology. But we're here to stay, tokens are great, I love them and the world is being tokenized it's not going anywhere. Steve, you wanna add anything to that or? Guy, I'm being tokenized. That's the whole point, right? The fundamental economic model of how we're going to compute we've experienced is called cloud. So today you go out and buy a server and you give your server some rules like, hey, when you get too busy, can you just go buy some more servers? And so we've given our servers some money to buy more servers because the humans decided to all watch the same stupid funny video at three o'clock in the morning while everybody was sleeping and we don't wanna wake up and have a question, new server, new server, we just make it automatically happen. And so we just wanna extend that concept from a completely centrally controlled model which is the cloud architecture today to the utility compute model that's out there. This is the first touch of that. So you might actually be witnessing not just the beginnings of an understanding of an economic model of the end of enterprise compute. So enterprise networking has been based on ports and passwords and spectrum and right-of-way delivery of service. And we're moving to a model where service is delivered based on the identity of the device. Oh, so we need a whole new back office to run all these device identities. That's what blockchain is. You can almost think of the monetary system as just an alpha because we wanna run the network on a global basis. And I can send movies around the world completely outside of the control of the people who've been licensing right-of-way and spectrum. I mean, you can't take up the streets with the free feet you're putting a new network in, but Apple shifts everybody in the country in iPad and they're completely in control of the continent delivered. And that's the model. And we should open that box so that everybody can have their own iPad that way. This one's for you, Steven. I think you correctly identified that the current ratio of economic value and economic applications to speculative cash in blockchain is currently very, very low. I think from there, you go and say that's what you expect these wave of ICAs to do is to boost massively on the economic application size. But actually in the short term, when we've got no constraints on the amount which is being raised, when often these raises aren't being raised for specific business applications, aren't we really just pushing up on the speculative size? We're just getting warmed up. So in my previous company in 1999 and like, God, I don't know, April, May timeframe, 1999, we raised $20 million. And thank God because we got relisted back to NASDAQ and so it was fantastic and we were all really excited. And we knew we were gonna have to raise some money further in the future and we're sitting around Christmas of 1999 and NASDAQ's on its way to 5,000. We're going like, dude, we really need to get in on this action. This is a really good idea. So first week of January, we pick up a phone, we call our investment bankers who'd done the deal a year before and we're like, we need to go raise some money. They're like, you just raised money. Yep, we're like NASDAQ 5,000. We should be raising money. So four weeks, we put together an entire offering into the public market. It was a NASDAQ national market cap trading company. We went out and we're like, let's go raise another $20 million. That'd be great. So we start our road show, stock at 11, start our road show going out to raise $20 million. We came home six weeks later with $122 million priced at 34 with the stock trading at 43 and Bain Capital took $34 million of the transaction. We sold 3.2% of the company and that year we did $56,000 in revenue. So when you guys got to get ready to do this, like this was fully NASDAQ compliant, da, da, da, da, da. So I would just say we lived through this. We're not even close to the scale where like in like round off area, you can't even get to 1% of what went on in the dot com. Now the question is how are you enjoying the dot com? Like you like all this video stuff you got on your phones and this multimedia stuff is actually pretty good too. And we got wireless networking. That's working out all right. And we've pretty much got better than DSL bandwidth almost everywhere on the planet, except my house. And so, you know, there's the good news side of it now. So this thing crashed. We lived through the crash too, it was fine. I don't know, 12 months later, we had 20% of the market cap we had. We bounced the sucker off a $2.5 billion market cap. We could have bought a General Motors division, right? I mean, it was crazy. And yet you can survive through that process and yet build incredible things. And so, you know, companies suffered out of it and people had a hard time, but we didn't end up with every company in a shareholder lawsuit. So I don't know, just a little sort of a reality check on this. It's okay to raise capital and to put it together and put it to good economic use. And some people do like pets.com. Remember that? Yeah, like $200 million, so we get it. It was fantastic. It was fantastic. So like, go back and just remember that we're humans. We do this stuff over and over and over again. We can't fix ourselves. Okay, time for I think two, three more questions. Tony, if you obviously want to ask Steven a question, please do so. Hi, I'm Luke. I'm a corporate lobbyist. Don't boo. We've heard a lot about how the industry itself can be its own biggest risk. With the gambling industry, we've heard about how, you know, there are different models, but really the reason that it's not legalized in the US is because of the casinos, because of Sheldon Addison, because of a protectionist model. The reason that we haven't had decent streaming services is because of the Hollywood and, you know, all those industries. How, who are your external enemies and how are you gonna win them over? Well, for raising money, your external entities are the people who raise money from, right? Investment banks, VC's, these types of people will say, oh, the moral hazards are so terrible. We have to shut this whole industry down unless we're the ones running it. In which case it's actually a wonderful industry and it's an innovative new way to create liquidity. Right? So, and it's just like how digital music worked, right? They tried to say that there's only one way to do that and then people kind of forced their hand in the matter. On the other hand, certain other industries have been shut down successfully. For example, the online gambling business where they did this, was it 2007 when the crackdown came from DOJ? Yeah, anyway, they did that and then it's like with $4 billion industry. Now it's like a $40 billion industry. So yeah, how's that working out for you, DOJ, right? It's really against Costa Rica every year. Right. Right, and so you have to ask yourself, are you creating a good outcome or are you just protecting an existing business model? Unfortunately, in my experience, most regulation is about protecting incumbents. It's less about outcome. That's why we keep having collapses over and over again. It's kind of funny, remember 2008 where we say we're going to end too big to fail by making the banks larger? Okay, so I think some of that's there, but I do think we're going to have a bit torn like effect where capital is now too liquid. Also monetary policy as a whole is not being run well by central banks. They're just printing and printing and the interest rates are not where they need to be. So there is a flight to alternative value. And what I think is what I'm happening is we're going to have just a tokenization of value for everything. So I've been traveling all around Europe. I was started in Odessa and then I went to Athens and I went to Zurich and then I went to Germany and then I went to England. What's unique about every one of these countries has different money. I guess Germany and Greece have the same money now, but I paid in dollars for everything. I never exchanged because I have a card, right? So when I bought something, I was paying in dollars, they got paid in local standard. So why conceptually is that any different than me being able to have tokens representing pretty much anything I want? Land, gold, silver, these types of things and holding them in a universal wallet on my phone. And there's a decentralized market maker that lives in between and there's a payment service that happens to accept this stuff. The merchant always gets paid what they want. I'm paying in airline miles or gold or any of these things. Well, the point of this is that the very same technology that makes data reality also enables online gaming and gambling, also enables content sharing that enables a lot of really good things. So I think it's gonna be rather apiric if a regulatory crackdown comes. My belief is it will because of incumbency protection, but I believe like BitTorrent, it's gonna actually, these markets and this tokenization is gonna be so pervasive. It is going to force the entire regulatory system to change and how the space is perceived, how people are going to treat cryptocurrencies is completely up to us as a community. And we need to treat ourselves a little bit better and take better care of ourselves. If you eat nothing but junk, shouldn't be surprised if you're fat. See, I got my belly right here, right? There's a lot of ribs in here and a lot of steak in here, okay? It's, that's my point. Well, we got, I think about time for one more question. So he's a lucky person to ask the final question before Steven speaks. Shahan's, one more question? No takers? Oh, no one, kids. Ah, we got one back there. One back there, wait, there we go. I mean, so just a kind of counterpoint. I mean, there are a lot of problems with the ICOs, but it's not like the current system we have on whole is that great. And I think Steven was alluding to this. I mean, it's not as though everything that gets issued in the equity markets is a great business. It's not as though those businesses don't fail. And then on the whole, I mean, you know, anything could happen with ICOs too. It's a very new, but the way equities are sold, the way IPOs are sold, someone like me, you know, or the average person here has barely any chance. I mean, most of these things in the US, you have to be an accredited investor. And even then you have to go through a broker dealer. You've got the exchanges in the middle of things. I mean, you've got a very centralized structure. You have a lot of rent seeking at different layers. And while I agree that, you know, the ICO market right now is a wild west in a sense. On the other hand, I mean, it does, at least for the moment, cut out a lot of this centralization, cut out a lot of this rent seeking. I can on the whole be certain that what I'm getting for the money I put in is the token that is being sold. I don't have questions, like am I actually getting the share that's being sold that you might going through an IPO process without a broker dealer. And then I guess more people maybe get to participate for now. I don't think it's so bad necessarily if even these high risk asset classes are funded by, you know, a lot of people giving a little bit of money rather than just a small pool of accredited investors giving a lot of money and them being the only ones who can like rise or fall with the tide. I think more of us at least now might have an opportunity. Right, and actually bring up a very valid point and another counterpoint to strengthen your argument is the fact that you now actually can have money anywhere. You know, if you're born in Nigeria or Ghana, good luck getting Silicon Valley investment is not gonna happen. Now everybody's on the same stage with ICO. So there's a lot of power there. It opens up liquidity to everyone in the world. My only grievance is not with the mechanism of how we move value from Alice the Bob. It's about this desire to abandon basic business principles like due diligence and verification of claims and knowing who your customers are so you can protect them or at the very least have a relationship with them because after all they made what you're doing happen. You have some sort of moral obligation to them. This is my primary criticism for it and the issue is as we as a field don't do something voluntarily. Either through our actions or self-regulation or through some sort of smart contract driven standard then it's going to be done on our behalf by the people who want to end this field and as a consequence it'll set us behind a bit. Won't end it, but it'll set us behind and it'll actually reduce good outcomes. That's my primary grievance with this whole thing. The other side of it is that I am deeply disturbed by insider trading. This is one thing that the Nickerbocker crisis in 1907 taught us leading up to that you had a situation where everybody knew everything in the inside like you're alluding to these accredited investors these insider guys and they legitimately actually got information before anyone else. So they knew when a collapse was coming, they knew when a balance sheet was bad and they could buy and sell based on that information at the expense of every single other person. And it's taken quite a bit of time for us to get to a point in the markets where they're a little bit fairer. They're not quite, there's still tons of problems. Facebook, IPO is a great example of that. And there's others. Yet in cryptocurrencies we've now regressed because if you don't actually do any compliance the problem is you have no idea of knowing who actually participated as I alluded to earlier. So you mentioned the monetary policy. You know you got a token. Well if we said there's a million tokens but the reality is actually 99% are owned by Bob who's just gonna play around for a little bit at your expense. There's been more than one dubious offering in the space that's done that. And I think that's one area that we really do as a community need to clean up a bit. Anyway, I've taken way too much time. Steve, I know you have a great presentation. All right, everyone, big hand for Charles Hoskinson. Thank you very much.