Matt Leising is a former Bloomberg News reporter turned crypto journalist. After 17 years at Bloomberg, Matt left to co-found DeCential Media. Merging his passion for writing and his 7 years of reporting experience in the blockchain space, Decential covers the people who are bringing cryptocurrencies, blockchain technology, and decentralized money to life. In today’s episode, we discuss the astounding story of the loss of ETH valued at $55 million detailed in Matt's book, Ethereum Classic's ancestry, why Matt decided to become a journalist, the influence of Vitalik's upbringing on his decision to save Ethereum, fundamental regulations needed in blockchain, Lessons from the failure of FTX and humanity's interplanetary expansion.
Matt Leising is the co-founder of Decential Media and a former Bloomberg News reporter. His book, Out of Ether, outlines the astonishing disappearance of $55 million worth of ETH. Decential, his media company, chronicles the behind-the-scenes activities of the men and women working to make blockchain technology and decentralized currency a reality.
CHAPTERS
[00:00:00] Intro.
[00:02:46] The most outstanding person in Ethereum. [00:07:26] Biggest moment in Vitalik's career, Founding Ethereum.
[00:12:26] Getting into Ethereum, Dow Heist, Blockchain’s appeal to financial institutions. [00:16:45] Timing of Matt's book-writing process
[00:23:37] Vitalik’s decision to fork the Ethereum blockchain.
[00:28:15] Origin of Ethereum Classic.
[00:32:28] Reasons Matt became a journalist.
[00:34:27] Reaction to the insane 2021 crypto market, Applications of crypto.
[00:43:10] Cornerstone regulations needed in blockchain, Upside of speculation in the market, FTX Downfall.
[00:48:36] Blockchain subject that's got Matt’s attention.
[00:52:59] Humanity achieving interstellar travel.
[00:56:18] Final remarks.
Connect with Matt.
· Twitter: https://twitter.com/mattleising
· LinkedIn: https://www.linkedin.com/in/matthew-leising-5278b85/
Check out, Out of the Ether & DeCential.
· Out of the Ether: https://outoftheether.net/
· DeCential's Website: https://www.decential.io/ https://twitter.com/DecentialMedia
Resources Mentioned in The Episode:
· Matt’s article for Bloomberg(Vatalik interview): https://www.bloomberg.com/news/articles/2021-08-05/ethereum-founder-says-upgrade-sets-stage-for-energy-usage-cut?
· Bitcoin magazine articles by Vatalik: https://bitcoinmagazine.com/authors/vitalik-buterin
· Pod of Jake # 4- VITALIK BUTERIN: https://open.spotify.com/episode/2ZDuSxxj5Awtqn9Wy1sR0J?si=6-ptTDA9SmSaVsF2AncTmw =&nd=1
· Bloomberg heist article: https://www.bloomberg.com/features/2017-the-ether-thief/
· Blocksize War (Book): https://www.amazon.com/Blocksize-War-controls-Bitcoins-protocol/dp/B08YQMC2WM
· Digital Gold (Book) : https://www.amazon.com/Digital-Gold-Bitcoin-Millionaires-Reinvent/dp/006236250X
· FTX Disaster article: https://www.investopedia.com/what-went-wrong-with-ftx-6828447
· SEC regulating blockchain article: https://www.sec.gov/news/press-release/2022-208
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[00:00:00] Louis: Hello, and welcome to another exciting episode of the Louis and Kyle Show. An interview podcast with fascinating conversations with entrepreneurs, investors, authors in a whole variety of incredible subject matter experts today, of course, being no different. In this conversation, we speak with Matthew Leising. He's the author of the popular book on Amazon out of the Ether, the amazing story of Ethereum and the 55 million heist that's almost destroyed it all. In addition, Matt is the co-founder of Decile, a media company committed to telling the stories of founders, billers, and visionaries, they're creating a new, decentralized economy and intranet's experience.
Matt's been a reported since 2001 and for the past 17 years worked for Bloomberg News. He's been covering crypto since 2015 as one of the very first mainstream journalists to understand what the breakthrough of blockchain technology can mean for finance, culture, and industry in general. This conversation dives into the big stories from his book out of the Ether, which I just mentioned.
What he learned from actually getting fairly close with a vitalik Buterin, the creator of Ethereum or co-creator, depending on how nuanced we get there. We discuss, how we actually almost gave up when he was writing the book by why and how kind of timing and luck and circumstances helped him persevere.
We discussed reflections on all of 2021 and all the craziness from that specific year in the world of crypto. We discuss what his perspectives are on regulations he'd like to see in the industry. And if you've heard Louis and Kyle show, you can guess we cover a whole lot more. That's all I'm gonna say, before we get started, quick word from our sponsor and then I'll switch right over to the episode, enjoy.
This episode is brought to you by our friends at Vasa, the virtual assistant staffing agency. We hired our first virtual assistants from Vasa to assist with our operations running the show back in June.
But Vasa is not just for podcast editors. If you need some extra hands to free up your time, let Vasa help you with hiring for administrative, technical, and creative work. That's graphic design, cold callers, social media managers, sales reps, video editors, admin assistants, and more. Free up your time to focus on your highest impact work and learn more about vasa@vastaffing.agency, or by clicking the link in the show notes to schedule a free strategy session with their team. Back to the show.
Matt, welcome to the Louis and Kyle Show. I think this is gonna be a really fun conversation today.
[00:02:20] Matt: Thank you so much for having me. Yeah, it's gonna hopefully be a pleasure.
[00:02:23] Louis: We've done a lot of interviews with people who assume the title of expertise for crypto, cause they're on Twitter, they think they know a lot about it, but to actually dedicate yourself to publish a substantial book with a publisher and the whole actual process, I think really qualifies you as someone with, especially this, one story within it, but the field as a whole think we're gonna learn a lot from kind of the depth of your expertise.
I want to ask you a fun question at the start, in either the story of kind of the creation of Ethereum more broadly or specifically in the Dao, in your process of finding your research for this story and traveling to different parts of the world and chasing people down, who do you say is just the most outlier,
interesting, just extremely intelligent, just bizarrely, otherworldly level of just, wow, that is genius? You can say Vitalik if you'd like, but if there's another one that's more under the radar, that's fine too. But in that process, who comes to mind is wow, that person was just outrageous?
[00:03:19] Matt: I, hope it, not to bore you, but I am gonna say Vitalik, but for a different reason, and because when I started the book, I had known Vitalik a little bit. I'd interviewed him a few times when I was a Bloomberg reporter, so I knew he was like obviously a genius and, brilliant coder. And he was very, versed in how Bitcoin worked and co-founded Bitcoin magazine, and like his reputation was very much in the blockchain space.
But what I really liked finding out, about him from interviewing his mom, his dad, his stepmom, I went to his high school, I interviewed his high school English teacher, his Math teacher, like the principal at the school. They all still, speak glowingly of Vitalik. So he went to this, very high, intelligence high school in Toronto called Avalar.
And he just crushed it. And every subject he ever took part in, like whether it was Chemistry or Math or Physics, he was reading Greek, in, he was doing Greek, mythology in Greek. He was reading it in Greek and he was getting A's and just like blowing people outta the water left and right.
And this is among a group of his peers that are like, of similar intelligence, it's not like just a normal high school in Toronto. And so I really got an appreciation for what a kind of renaissance man he is. And I don't think he and many people know that about him. And I don't think he comes across that way necessarily because usually he's talking about some technical aspect of Ethereum or blockchain or consensus protocols or what have you.
So you don't really, I never get a sense to like, figure out that this guy like writes really well, like he wrote for Bitcoin magazine in a way that really, I think brought a whole generation of people on board by doing a really good job of explaining complicated things in a way that people can understand.
He's also, like I'm saying he's got a, real world kind of view of, just a lot of different subjects and he, speaks several different languages. And so what I came away with and was accidental, with the book, but when all it was said and done, I feel like I was able to create a really nice sort of portrait of Vitalik as a person, as a human being and somebody who had fears and doubts and, personal conflicts, but also triumphs and like breakthroughs.
And so I felt like at the end of the day, I, came away with this really nice, profile of him, which I did not set out to do. I definitely wanted to tell the book through the characters, and obviously he's a main character, but I think that, just, figuring out and, just realizing how, he was the perfect person to bring Ethereum to life.
Because what Ethereum is a system where the substrate is there and you can bring whatever idea you have to it, and you can create on top of this thing that he helped create. And I feel like that's very, indicative of his own sort of mindset, and just like the way that his own school went and schooling and his academic career was like, he was a jack of all trades.
And so he brought that into the blockchain space where, you had Bitcoin to begin with and that's great for one thing, but then Ethereum is like the Swiss Army knife of blockchain, you can do almost anything with it. So I, just came away with that so I hope that's not boring, but I don't think that many people get to see him in these other, in this other light.
[00:07:05] Kyle: Yeah, I would recommend the podcast that he did with Blog of Jake, another person that we've interviewed on this podcast as a place to really find out how wide ranging Vitalik is, because I think that podcast had nothing to do with crypto purposefully to showcase the range that he has.
But I think, like you're alluding to this kid is a genius, right? He has, is doing Greek mythology and Greek and, is smart in the math professors, but there comes this time in the early days of Ethereum where he has to make a, layer zero, if you will, decision around the leadership of the company when they're in Zug, Switzerland.
And it's this very dramatic, very big moment in his life. How do you think that affected him, moving forward where he had to be this kind of like new leader, whereas before that he was a loner writing the white paper by himself in Spain and et cetera, et cetera. Like how do you, think about that?
[00:08:16] Matt: Yeah, I think, that was a huge learning point for him, I think, and a turning point as well because, as he told me, he'd never had a job, this was the first thing he did, he was a writer for, Bitcoin magazine, but he was doing that while he was still in high school and then early into his college career before he left college.
And so when he came up with the Ethereum idea and sent out his white paper, he collected a bunch of people around him, some of them whom had money to help fund the project, some of whom, were, developers who could help him write code in different clients. And some of people who were just like hangers on, or, somebody who they wanted to get in on the ground floor of this thing that they, thought would be a billion dollar, enterprise, which it turned out to be.
And so, Vitalik was not a CEO. He was a kid, he was 19. And so I think he found himself in this situation where all of a sudden there were people around him who had agendas. And he said to me, it was the first time that I realized that somebody could be nice to you for, another reason than just wanting to be nice.
like they were sucking up to him or they were trying to triangulate with him, or trying to figure out an angle and, after a short amount of time, it, it was only six months before the co-founders came together in Miami to where he had to fire people in zoo in June or July of that year.
And, so it, I think it's showed him a bit of the real world, that he had never really been experienced or had no experience with. There was also, of course, like I alluded to a lot of money here at stake, and, people knew they were coming from Bitcoin and they had seen how much money people had made in Bitcoin.
by this time, around, we're in 2014, 2015 time period and if you understood the blockchain and peer-to-peer idea and then you saw what Ethereum was proposing, you, would probably figure out that this thing could be huge, it was the next big thing. And so everyone wanted to get in on the ground floor and so, there was a huge money element to it, and there was a lot of politics and a lot of backstabbing and a lot of, craziness that I chronicle in my book.
And I think for Vitalik, who really just wants to be, I don't think he ever set out to be a leader, but he wants to be someone who's thinking about, deeply about these things and about like crypto economics and how to use a token to change, how a company or, a group of people work and how do you incentivize them with that,
where a big thing with Ethereum is, with the Ethereum Foundation, how do you keep funding the Ethereum Foundation without just issuing more ether to fund this thing? It's an interesting question because it's not really a nonprofit where they're going out for grants.
they, can do some of that, but, that's not really like a crypto native kind of way of being self-sustainable. So he's always, I think, really wanted to be a deep thinker and a writer and a communicator and someone who's writing code, but at a high level, and, if you notice, what he usually does is he's got the great ideas and the architecture, and then he usually leaves it to other people to be like, okay, now here I've drawn this house in a sketch, but I need an architect to come and like actually put in, what this joist is gonna be like, and here's the load bearing stuff, and put in the nuts and bolts of it.
Especially earlier in his life, like what you asked about, I think that was a kind of a rude awakening and it was not comfortable for him. And I think, it was something that, he still talks to this day about having regrets about, but it, did become something that he couldn't avoid.
[00:12:26] Louis: Were you personally get into the story, so where were you in your career leading up to the moment where actually this is covering this and telling the story about what's going on right here, right now is gonna take precedence over the majority of everything else that I do?
[00:12:43] Matt: So I started covering blockchain for, Bloomberg News in 2015, and at that point it was like Wall Street was starting to dip its toe into, whether this kind of network idea of computers and, like putting people on a network that was maybe promising almost near instantaneous settlement of trades and things that, the Bitcoin blockchain had proven could be done.
So Wall Street saw that and said, hey, Wall Street works in a way where it's all siloed and it takes days to settle trades and everything, and there's one set of books here at JP Morgan and another set of books over at Bank of America. And when transactions go between them, each side has to reconcile that trade and change their books and sometimes their errors.
And it takes days and it costs a lot of money because both of the banks have to set aside money to ensure that if those trades don't, go through, they've got some capital set aside to make anybody whole as needed. So it ties up a lot of capital, and it's slow. So a blockchain kind of idea among a bunch of banks and financial institutions that was more instantaneous had a huge appeal.
And so, that's where I got into it, and it made a lot of sense, for me at my job at Bloomberg where I was deep into Wall Street. And then, so that was 2015, Ethereum had just come around, I was not really quite aware of it. I started hearing more and more about it in early 2016.
And then the Dow came around, which was this first really big project where in a nutshell it was a kind of digital asset version of a venture capital fund where everybody decided let's pool all our money into this big smart contract. And then startups can come and pitch us ideas on what they want to do and to create an, app on Ethereum, and if we like the project, we'll fund them a little bit with what we have in the pool of money.
That's what got my attention. I remember sitting down with Joe Lubin, the, he's a co-founder of Ethereum and the founder of Consensus and their, offices were in Bushwick, Brooklyn, where I lived for a couple of years.
And, I just sat down with him and he really made the light bulb go off over my head about Ethereum as this global computer. It's like way, more powerful than Bitcoin. With Bitcoin is a global payment network, which is great and it's hugely powerful. Ethereum is like a, global computing network, which is, even more powerful.
So that's where I was coming into it from, then the Dow got hacked and there was, that crazy story about what happened and it turned out that one of the editors at, the Bloomberg Markets Magazine asked, they do a story, or excuse me, an issue every year on heists.
And he said to me, he knew I'd been covering crypto for a bit and he said, hey, do you know of any good heist stories? And I said, yeah, I got a good one. So then I got the assignment and set off on figuring out, okay, how can I tell this story about the Dow in a way that makes it compelling?
and, you want like a strong narrative. And so that's when I started getting to know the folks behind that. And that magazine story eventually led to my book and I used the Dow hack as a way to, I threaded it through the book as a kind of narrative tension, and then I also, surrounded those chapters with chapters about Vitalik and about, how he created Ethereum and brought people around him and all the conflicts and successes they had.
And so that, that was like the format of the book gelled in my mind and that's what I was able to do going forward to get the book written.
[00:16:45] Louis: Yeah, I think when people listen to the podcast, they don't appreciate, the podcast here you are today sitting with us as just the author of this book, but what was the extent of time, I guess let's skip to the part where you'd already published the successful magazine piece to take that and turn that into, cause I know you traveled forward, why to actually conduct these interviews in person.
I dunno if that's, one of those kind of just maybe standard practice in the pre covid era and then also, you're more likely to get people to share maybe sensitive details or just become more personal and trusting with that, but what was that entire duration of that process?
[00:17:19] Matt: Yeah, I think I got the assignment for this magazine story in like late 2016 December-ish or something, cause I think something around there early 2017 took several months to write that, report and write that story where I got to know some of the developers and the hackers that were, there was a group of white hat hackers that were involved that kind of rescued a lot of the ether that was at stake of being stolen.
So that came out in the summer of 2017. Once it came out and the people that I had spoken to for the story saw it and read it and, they liked it and realized, okay, we can trust this guy. I think, like they, they felt like I did a good job with their story and that was a huge, help to me when the book came around.
So what I did after that was like, I realized, okay, this is the stepping stone to the book, you have to write a book proposal. You have to lay out like an outline and here are some sample chapters and you really have to spell it out for a publisher and then you send that out, to agents.
And so I started doing that. it didn't really get anywhere, it wasn't really hitting because it was still pretty early in the crypto world, and blockchain and it hit, but by the end of 2017, that's when, Bitcoin hit 20,000 and everyone was going crazy and Ether was at like 1400. And these were all time highs.
Everyone was talking about it and was talking about it, in bars. I remember being in LA and hearing about, just crypto and random conversations when I was in bars around like Thanksgiving of 2017. That's when it really burst through into the consciousness of the world.
So it was just a lot of sending letters out and trying to like, get an agent and not hearing anything back or getting a no, or oh, I think this is a good idea, but I just don't think it's right for us. And then in early 2018, One agent that I had sent something to, I'd given up at that point I thought wow, crap, I thought that was a good idea, but it doesn't seem like anyone's biting.
So, and then outta the blue or an agent I had sent, pitched to, got back in touch with me and asked me if it was still available and I said, yeah, and that was like early 2018. And so we went over it and what you an agent does is they help you with your pitch and, your book proposal cause they know way better than I do, like what a publisher actually wants to see.
So we worked on it and then he took it out and pitched it to publishers and, we got a few bites but, and then we got one, from Wiley and I ended up being the book contract. So think it was like, maybe early spring of 2018 when I actually got the book contract. And that, what that means is you get an advance.
so I got a small amount of money, to use to report out the book. And so then, you're off to the races and so I started reporting it and I did some traveling all through 2018. So by about November, 2018, I'd done about, I don't know, I wanna say eight to 10 months of reporting.
Had lots of interviews with whole bunch of people. I'd gone, all over the place. and then, I'd gone to Europe, I'd gone to Canada, I'd gone to New York. I went to Burning Man for a week, and then, I just had a ton of great information and a ton of great interviews, in my notebook.
And so, starting in about November of that year, I took book leave at Bloomberg, for about three months. They gave me three months, and that sort of is when I wrote the book. and, then it came out like I was trying to find out who hacked the Dow and that was like one of the things that I was really trying to figure out at the time.
And I had hit a dead end on that and then I got a good lead on it. And then, so right at the end of my book leave, I was able to fly to Tokyo and meet with somebody who I thought was involved with the Dow hack. And this was, I think like January or February of 2019, or 2020.
I hope I'm not getting my dates wrong here, but it was, right before everything shut down in the pandemic, and, did that final interview with him and was able to get it into the book. and then it goes to the publisher and, they take a lot of time to get it formatted and proofed and all that stuff, and it was released in September of 2020.
[00:22:06] Kyle: It's good timing, it had a whole bear market that you went through between, the event with Vidal and, starting that all the way to publishing, that's pretty funny.
[00:22:18] Matt: Yeah, it sounds like a lot but it was the finest thing I've ever done in my career. It was like a really, good project and it was something that I really wanted to challenge myself with, and it definitely was that, because I'd never done anything like that in such a big, I'd written magazine articles and stuff, but the book is a whole new world. But the people who I spoke to and interviewed, they were just so generous with their time and, they just gave me everything that I needed.
So I knew by the time it all, was over and I had stacks of, files and like 30 notebooks full of interviews, I'm like, there's a great story here. All I have to do is figure it out and find it and all of this stuff, and I knew where it was at that point because I had spoken to so many people and it, so it just became a task of okay, now it's time to write the thing.
[00:23:18] Kyle: I love that, and I think it's a very important story too, and that makes it heavy on you because I think in the future, as Ethereum becomes more and more important to the world and to society, people will look to that book as a source of like truth, which is a super cool spot to be in.
But going back to the Dow, and in line with the threat of questioning about Vitalik, there was another moment there where he had to decide whether or not to fork the Ethereum blockchain, and ultimately he decided to, and that created Ethereum Classic and Ethereum. As somebody who has studied that event so deeply, how do you think about, Vitalik decision to do that and what do you think are the factors that he was weighing, and and ultimately, do you think he made the right decision?
[00:24:13] Matt: Yeah. So first of all, it wasn't a decision Vitalik made, like he couldn't do that, like he's just one person, but after he considered the options, he came down, with his decision that forking would be the best option. And then what he had to do at that point was convince the rest of the Ethereum community and that was the best option.
Because for that to happen, you, have to basically, everyone who's running in the Ethereum client needs to, agree to update, so there's gonna be an update to the code that is the Ethereum blockchain. And an update, like in this case, it would take the Dow contract that was there, that had the bug in it, and it would basically replace that contract with a contract where it would say, okay, if you.
If you sent Ether to the Dow and got Dow tokens in return, now you can send those Dow tokens to this contract and get your Ether back. So it completely changed the Dow contract and it basically changed the history of the blockchain. But it's important to note it only changed this one small specific thing.
Everything else around that, all the transactions that had happened before and after that didn't get changed at all. It was just this one contract. So they basically decided, okay, what we're proposing is we're gonna swap out the bad Dow with this good Dow where everyone can get their money back and it'll be like the, none of the money was ever stolen.
So Vitalik and other people in the community had to go out and convince everyone that this was the best path forward, it was contentious. And it's still contentious to this day because blockchains are supposed to be immutable, right? That's one of the things, if you're operating in a trustless environment where you don't know your counterparty and don't trust 'em, you can't have it be that after the fact that those transactions can be reversed.
So there has to be that, the trust comes in with that idea that my transaction will be final once it's final, because I don't know who I'm interacting with and I don't have control over that, but I need to know that once I go forward with this, it's not gonna get reversed at some point in the future.
So that was the contentious part of it. The other options they had were not good, and it was really, the other option here was that the guy, the hackers or whoever they are, were gonna get away with the money. the clock was ticking on the Dow, they had something like 31 days to do something, otherwise the attacker would actually get away with the money and then the Dow would be sitting there still with this bug in it and other people could exploit it.
And so it was a question of whether these good guy hackers that were trying to protect the Dow, wanted to keep fighting and they were tired and they didn't want to keep fighting and they were doing this for free in their spare time. So I think for those reasons, everyone kind of came around to this idea that forking and changing the history, of the Dow contract was the best thing for them to do.
So, In the end, 99.9% of everyone using Ethereum agreed to that, and they updated. But the reason we had a fork, or a reason that the old chain continued to con like to be live, was that there was one Ethereum pool operator called F2 Pool in China that didn't upgrade, and they kept mining on the old chain.
And that was a conscious decision on their part. It cost them a lot of money at, the beginning, but it gets into other things. If you guys want to get into that, about where Ethereum Classic came from, and that's one of the weirder more science fiction aspects of this story where, it's already pretty weird and then you get, get into this level and it's whoa, what the hell?
[00:28:15] Louis: I don't think we can leave a hundred percent of a cliffs finger there if there's the...
[00:28:17] Kyle: Yeah, that's too intriguing.
[00:28:21] Matt: Okay, so what they did, like what everyone is hoping would happen is when the fork went into the fact that a hundred percent of everyone would upgrade to the new version of Ethereum, and the chain would fork, and now it would be as though the Dow never existed.
And it was just this contract where you could go get your money back if you had given money to the Dow in the first place. But this, F2 pool in China kept mining on the old chain, which at first is very expensive and energy intensive because there's, no reward for it and there's no really reason to do it.
But they kept doing it. And until, they they kept mining enough blocks to keep, that old chain going. And this is the chain where the Dow Act still was like part of the history. And so, what happens here is now you've got two chains in parallel. You've got the new Ethereum chain, which is forked, and then you've got the old Ethereum chain.
And when that happens, you have to have a cryptocurrency associated with these chains. So on the fork chain, it's still the old Ether. On the new chain, there is now a kind of a doppelganger crypto, and people started calling it Ether Classic. And so if you had, a wallet with any ether in it before the hack or, before the fork, and now this new chain or the old chain still keeps going.
So you had a hundred Ether in your wallet, now you've got a hundred Ether Classic in your wallet. So it's a, real weird kind of quirk of blockchains. And so, once that happened a couple days after the, miners kept creating blocks on that old chain, a couple exchanges listed Ether Classic, and, you could now go and buy and sell Ether Classic.
And so all of a sudden it had a value, and so it got really weird with the Dow attacker, who had, 12 million or something, Eth now has 12 million Ether Classic and now, so at its highest point, classic was around 20 bucks or something, I think. And so while the Dow hacker had his 55 million taken back by the community, he had now like something like I don't.
It was a couple million dollars in Ether Classic. And so, that's the genesis of Eth Classic and it's still out there today, it's not really a very viable blockchain in my opinion. It's been 51% attacked, several times and there's really nobody building on it, but yeah, it's, weird and I'm, sure I've gone too fast, but, in the book, I, that's one thing that's nice about a book.
You can slow down and spell this stuff out a little more, concretely and a little more slowly. But, yeah that's the, high level view of it.
[00:31:33] Louis: There's some fun parallels there too, kinda like I read or listened to the Block says War, which has a lot of similar dynamics.
It's not quite the same story and I'm forgetting the name of the Oscar there, maybe Johnson Beers or something. I just know that Guy Swan narrated it. We had guy on the show like two years ago as well, but these stories are for, who's just getting the, a little bit hooked. I would definitely recommend diving into the books in getting the full.
There's so much nuance and so much context in colorful characters. I would go take that next step to, shoot overhear the whole sauce.
[00:32:06] Matt: Absolutely, and, a great book to start with if anybody's just starting is, digital Gold by Nathaniel Popper. It's just like he's got the whole history of Bitcoin there and it's really well done.
And was a bit of a template that I wanted to use for, Out of the Ether, but my book was not nearly as exhaustive as his.
[00:32:28] Louis: Yeah, that's a very good one. There's a lot of good Althinia like history in there as well. Why did you become a journalist in the first place?
[00:32:39] Matt: I've I've always loved to write. it's just always come easily to me and it's something I really enjoy. so when I'm looking around for jobs, like journalism was a job where I could write and get paid and not have to worry about, trying to publish a novel or, short stories or whatever, which is, really difficult, in this day and age.
So it was like my love of writing with a little bit of practical kind of, application to where, I'll, have a paycheck every two weeks, so that's where it started. And then what I quickly realized was that it's really fun to be a journalist because what you're basically doing, first of all, you're trying to tell people something they don't know, which is fun and there's a kind of like a hunting aspect to it in a little bit, in a certain way.
and And then, you're also calling up people and, sometimes powerful people and very interesting, smart people, and just asking them to talk about themselves. And everyone loves to talk about themselves, so if you have a reason to call someone and say, tell me about what you're doing, tell me about your job, or tell me about what's going on, that goes a long way with a lot of people, especially, if you can be lucky enough to get somewhere like Bloomberg, where you've got that sort of reputation behind you and, they know that this is gonna go out into, a major media site.
So those things combined to make it, a, really fun career for me but it always comes back to the love of writing.
[00:34:27] Louis: Good love of the process itself. I want to ask a couple other questions about, some more recent components of this story. in terms of like specifically 2021, do you have an inclination or a crazy story from that period?
Because I had asked Kyle this question before we'd started his thoughts on, me asking this question, did you think based on everything crazy you saw and studied from 2016 to 2020, that things would get as crazy and outrageous as they did in 2021? were you surprised? And what Kyle had said to me was, he is no, no one expects bull markets to get as crazy as they get, that's why it's bull market.
But what was your kind of reaction to all of the insanity? Cause I think as crazy as the heist is of the Dow pack, some of the numbers just, if 2021, it seemed like $50 million mistakes and craziness was happening like on a daily basis in, some parts of 2021.
So what's your, now that we're in this late 2022, things are clear, not calmed down, I guess at all, especially the week we're recording this along the, Spf Chronicles, but your reaction to 2021 as a whole, given all the kind of pre framework you had to process it going into it?
[00:35:42] Matt: So are you asking about like the hacks and stuff or also about Defi summer and the NFT stuff that all came out?
[00:35:51] Louis: I'd say more so just, the Defi summer, the NFT stuff cause 2021 was insane year in crypto.
[00:36:00] Matt: So I likened that back to the previous bull market when it was the, initial coin offerings, right? That got everybody really crazy and that's what drove, Ether up to 1400 so that was obviously, where there's a lot of scams there of course, and a lot of people lost a lot of money and there's a lot of fraud.
But what was really interesting about that was for the first time you had a peer-to-peer system, enabling capital formation, for a startup to, you could go now to your peers or to investors directly and say, this is my idea.
I want to build this decentralized app to, I wanna build this a decentralized exchange, so like Uni swap where, you can just trade pairs of coins and there's no intermediary, there's no New York Stock Exchange in the middle or, I want to build this NFT platform. And I know it was early for that, but these are examples of the things that people were, wanting to build.
And what they were able to do was, they would go directly to the potential users of these applications and say, okay, here's my idea. Now we're selling a coin and you buying the coin will allow us to get the money to fund the development of this idea. So again, the caveat, huge amount of scams, huge amount of grifters and people just ripping people off.
But the thing underlying that's so foundational is that for the first time you were, enabling capital formation that didn't involve a bank or a venture capital fund or a loan or anything like that, it was like a peer-to-peer system. So that's what's so powerful about these decentralized systems and crypto in general, in my opinion, is you're taking traditional financial applications and like one of the main functions of a bank is to help companies raise capital.
And maybe that's who the initial, public offering, right system in the stock market. So now you've obviously, got the initial coin offering in the crypto world. At the end of the day, they're, both raising money. Obviously the ICO process is a wild west.
There's no regulation, you don't have to go through the SCC, so that was the powerful thing there, that you could like, raise money for your project directly. And it was insane that, as you guys probably remember, people were raising 50, a hundred, $200 million in minutes. like the coins would sell out and it was just like incredibly, lot of money, a lot of like money moving really fast.
So that was the big breakthrough there. Fast forward a couple years and now Defi summer, you've got, people who have been working and building things on like now, okay, you can lend, or you can use your crypto as collateral to get a loan, or you can, you can use, your crypto to earn interest.
And so, now it's like collateralized loans, in the crypto world. Again, basically peer-to-peer or you're working with, a centralized sort of, actor in that space, but there's no bank involved there, there's no financial institution, so this is now another huge part of, traditional finances, loans, and now it's been remade and there's an alternative system so you can get loans in the crypto world.
So then that's another kind of big thing that has now been developed. Then you go a little bit further forward in NFTs, and for the first time, you now can have scarcity for a digital good, which had never existed before.
So previous to that, a digital file could be replicated a million times and sent, uploaded, to anyone anywhere. And, that's why they were fungible, right? They were just like, whatever. It's Napster, right? You upload your file, anyone around the world can download that file. Now when you introduce a blockchain to a digital file, you can make it scarce and you can trace its history of, who owns it and where it's been.
And you can prove that no, this is mine and there's only 10 of these in existence. So that scarcity lends itself to collecting and to, people wanting to, maybe think that it's an investment, for the first time. And that's where the art world came into it and, realized that NFTs could change the economics of the art world and you no longer need a gallery, to vet art.
And now you could do it on the blockchain. Musicians are now figuring this out with the music NFTs in different ways of selling. parts of their recording process to maybe fund the way that they fund their record. And so now a music company's not necessarily needed to loan that artist money and give them these onerous contracts and where they never make any money and streaming services have, like crippled musicians, in terms of making money from the actual music they make now they have to make their money by touring.
So that's the way I see the craziness of 2021 and 22, where we click or we checked off these other big boxes in traditional, industries or financial applications like loans and collateralized, applications for things. And then, like making digital items scarce was, a huge breakthrough.
And people like to laugh that oh, it's just a jpeg but it's, so much more than that, and so I think we're just at the very beginning of what that sort of technology is gonna allow in, art and music in a lot of other industries.
[00:42:11] Kyle: I'm so much with you on the, applications of these technologies being something that, are world changing. I think that the speculative fervor that surrounds these applications during the bull market can really damage the image of crypto and blockchain and, hinder these things from actually coming to fruition and happening and helping the world and, allowing people to get loans without, people that previously could not get a loan can now get a loan.
People who are getting screwed by their, 360 contract or are and, unheard of artists are making a lot of money. But, I think that those things are set back by the speculative fervor, which I think a lot of people would attribute to, the lack of clarity and the lack of regulation around these markets.
And I think that you probably have a really interesting perspective on it coming from, Wall Street, which is very, it's been regulated for hundreds of years or not hundreds, but like a hundred years. so what do what do you think are like the, really important cornerstone regulations that we need to get, and and get right in the industry in order to let these things blossom and, and affect the world without being, negatively impacted by the scams and speculative fervor?
[00:43:48] Matt: Yeah, the speculation is obviously rampant crypto, I don't think it's very different though, than other markets where, whether it's the stock market, parts of the bond market. Every financial market has this aspect to it. you have to have speculators in a market.
otherwise it doesn't work because typically you got somebody who's producing something and they need to, sell that thing or, they wanna sell stock to raise money for the thing that they're making. And then you've got speculators on the other hand, on the other side of that trade who are wanting to buy that, hoping that it goes up in value.
So, If it was only producers, you don't have a market, so that's, one thing that you need to keep in mind. No, there's no market in the world that works without speculators. That That being said, the bubbles happen all the time. we've gone through it in lots of other ways with, the.com the dotcom bubble, the housing bubble, in 2008 leading up to that, was, driven by financial products on the back end that were, basically incentivizing banks to give mortgages to people that they knew couldn't repay them, but they just would sell those mortgages off and they do another mortgage tomorrow.
And, the, incentive there was, incredibly bad, and it came crashing down and almost crashed the entire global economy. So, we see this in, every market that's ever existed. I think the speculation is a, bit of a problem in crypto,
but we're talking this week when FTX just went bankrupt and FTX was centralized exchange that everyone trusted and thought was, like the model for what was going, to be this sort of crypto future within a week, 46 billion or something, is vanished, and it turned out that it was a house of cards and that, they were using customer money to, invest into venture capital funds.
And they were completely overlevered. And so that's a centralized actor in this space and they were no transparency into that and that's a bigger black eye in my opinion. And we've seen that, this is not the first time this year that, that something like that has happened. We've seen three Euros capital go down and bring other people down with it.
We saw Tara Luna, go down, that was another centralized sort of, black box, crypto stablecoin. And so like crypto is, it's amazing, how much punishment it can take and it just keeps going. Like it, nothing has brought it down completely.
we have these setbacks and they're, crazy and a lot of money is, evaporated at certain times but it's, we also need to remember that a lot of the value that like FTX had was in this coin, it created FTT. And it's what is that? that's a crypto that they made and, people gave it value until they realized it was worthless and then it crashed.
So there's another dynamic here that's not like the other markets where, the dollar doesn't go to zero, like the stock market doesn't go to zero. There are bad losses, but in this space it can be so volatile because a lot of times you have these new cryptocurrencies or whatever protocols, have been created that people think are valuable until something comes to light.
And now people realize they're not valuable and it can literally go to zero overnight. So I think that's a bigger concern that I have right now, is that the centralized sort of, they're, supposed to be, quote unquote, the adults in the room are not behaving like that.
And, it's, I think that is more damaging because an exchange like FTX that, is sponsoring what Formula One racing it's on, baseball umpires, you can't watch a major League baseball game without seeing FTX this last year, and now it's gone. I think that doesn't send a good signal to people.
[00:48:20] Louis: Yeah. I just chuckled a couple times and I don't know if chuckling is like the, most mature reaction, but you just listen off just tragedy after tragedy, just like the Kyle Davies and Zsu, just the collapse of three hours cap, these are monumental collapses that have all, and the Tarana, I'm like, oh yeah, that one.
These are just humongous numbers. It's just a crazy and exciting time to, be sun paying attention and just have an intellectual curiosity about the future of so many industries at once. These are gonna be our last couple of questions and, rapid fire I guess, but what in the industry on the horizon are you most obsessed with, curious about, that we haven't covered?
Whether it's just some completely other corner of the system or sticking tr true to just letting ETH reach its full potential or something?
[00:49:06] Matt: You, asked me about it, but I wish I could answer this better, but I wonder at the regulation, now what's gonna happen in the wake of FTX, in the wake of Sam Bankman Fried had pretty deep connections in Washington DC. He was lobbying for certain things.
He was strangely lobbying to, regulate Defi more than it's regulated which, Defi has been fine throughout all of this, it's the CFI stuff that's gone to shit. So, that's gonna be really interesting and, lot's been written in the last few days about how this whole implosion has thrown a wrench into like how regulators and, politicians are gonna try to like, figure this out because the thing is, a lot of those folks don't know much about this.
They're still learning about it if they know anything about it at all, and there's 435 members of Congress, for example, and, you can probably count on one hand the number that actually understand blockchain and Web3, that, now you gotta think about Europe and Asia and then the regulatory bodies, where, okay, how does the Fed come into this?
How does the CFTC, where's the SEC's role? where is the European Commission coming in? So that to me is the biggest headwind right now because I think, it cannot be ignored. I'm not saying that they were ignoring it before, but I think, the SEC was trying to take a path of least resistance where they would go after small projects, whatever they said, you violated securities laws, we're gonna sue you.
And that's gonna send a message to everyone else that like, you can't do this, so we're not gonna actually write any laws, but we're gonna enforce through regulation. And I, don't think that's really viable anymore.
I think Congress has to get involved here in the United States. I think they have to write some laws that take into account that in a lot of these cases, you might be interacting with a smart contract, that's your counterparty, that's a piece of code. This is not a broker dealer that's registered and has, licenses and insurance and has a fiduciary duty.
It's a different world. And I think they finally have to hopefully get this through their heads that they need to, like right laws that, take that into account and make, modernize this and bring it into the 21st century. We can't be relying on laws that were established around, whether you could sell shares in orange, in Florida, to apply that to digital assets.
So there's a lot of work to be done and getting that stuff through Congress takes years and, it's not always successful and it might be the second or third try when something finally happens, but in those ensuing years, blockchain's not gonna stop, this doesn't stop, nobody stops here, we just keep going forward.
And that's one of the great things about it. But I hope that something drastic isn't done where it's people in the government say, okay no, we gotta shut this down some way because we can't let this keep happening. So I hope there's some sort of, agreement where, the innovations can keep happening, but the new rules and regulations can be drafted and agreed upon so that people know, like a lot of the people I talk to, and a lot of people in the space want to play by the rules.
they want to be headquartered in the us, they like it here. But for them to do that, they need to know what's okay and what's not okay. And that's not the case right now. So that's a huge thing that I think needs to be resolved as soon as possible, the regulatory clarity.
[00:52:59] Kyle: All right. I have one more question for you. So you shared with us that your dad worked on the propulsion system for the Voyager and the Voyager 2. That's incredible and super interesting, but there's this fact that I know that it's if you set the Voyager 2, which is I think currently the fastest moving manmade object, it's going like 30,000.
The point is that if you set that object on a direct line for the nearest star, it would take 33,000 years for it to get there. What do you think we do to get to interstellar humanity?
[00:53:51] Matt: Yeah, we need to find Efram Zilo, like another guy from Star Trek that, broke warp. Good question, I don't see it happening with the technology we have today. What I've always hoped is that we, get serious about space and not treat it like some afterthought or some like money sink. I think establishing a base on the moon, making the International Space Station more robust and more international, and then using that, based on the moon to get to Mars, is a no-brainer.
if, I dunno if you've watched this show for, all mankind, but that's like the gist is that the Russians beat us to the moon in the sixties and it just starts this real space race and the Cold War kind of plays out in space, and so we get the internet in the eighties and we get cell phones in the eighties and everything's accelerated.
And you watch that show and you're damn, we could have gone that route, but we didn't, but I don't think it's too late. And I hope that what we do is, make that a priority, not just for the US but for everyone on the earth and, try to really figure out how to, cause that's gonna help, I think, solve a lot of problems here we have on earth, and we don't know that yet.
And that's what the amazing thing about science is, and just basic science research will often. lead to these breakthroughs that have applications and things that are completely farfield from what the people were actually investigating in the first place.
I think space is a great example of that. So I, unfortunately Kyle, I don't think we're gonna be like going into light speed anytime soon, but, if we could make it to Mars, and like figuring out how to grow food there and figure out if we can, get water out of the environment there, I think that would be amazing.
[00:56:02] Kyle: We've gotta put a center, of hash in between us and, Mars in order to keep the Bitcoin or Ethereum, blockchain the same, so that's the in between step, yeah.
[00:56:18] Matt: I was gonna say crypto should definitely be the National Monetary system of Mars, so need to make that happen.
[00:56:32] Louis: Awesome, that is a fun place to wrap this up, that I know you're active online in a couple places. Your book is also available in a lot of places as floor is yours for the most relevant things related to that comment.
[00:56:45] Matt: Oh, yeah. It's, called Out of the Ether. You can find it, online. It's all formats like ebook or audio Audible or whatever you like. if you're into special editions, like it's an NFT,, there are only a thousand of these printed. You can order that, out of the ether.net. I co-founded, a crypto media company called the last year.
we have been writing about the folks who, are making all of this stuff a reality. We've got a bunch of podcasts, that's at decntilo.io, you can find us on Twitter @thecentralmedia. I'm, on Twitter @MattLeising, and that's about it. If you can't find me there, then I don't know what's happened.
[00:57:35] Louis: Awesome. this has been a blast. Thank you so much.
[00:57:37] Matt: Yeah, thank you Kyle, thank you, Louis. This has been a pleasure. I really appreciate the time and an interesting conversation.
[00:57:42] Louis: That closes out this conversation with Matt. Three takeaways from me and that will close out this episode. The first one being all markets require speculators, otherwise, there would not be a market, something I had to sit with when this conversation ended and really think about for a minute to fully understand.
But if it's just people producing, not people speculating on what will become more valuable over time, then there's really not like an interesting market to be had. So I feel like if I say that randomly in a conversation in the feature, people will be like, oh, interesting. Not that's like the most important reason to listen to something or to find it interesting, but again, I'm clearly still processing what that means, but that really stuck out to me and I wrote it down on this piece of paper here.
Second takeaway for me, I like the authenticity of, Matt just, I asked him why he is a journalist. He's such a good, simple, true answer. I just love writing or he just loves writing and continues in 20 years strong, continues to love to write, and he found something where he can make money and, do his thing, doing something that he really enjoys.
So hats off to him for that, and the takeaway there being pretty obvious. If you just love the process of what is involved in what you have to do every single day for your professional outcome, then you're probably in the right spot. And that's actually my third takeaway about being in the right place in the right time.
I think when I started this podcast, I had a very hyper conscious or trying to be really proactive about what is the best thing I can possibly doing to set myself up for the best position for jobs, business opportunities, making money, opportunities, I said opportunities twice.
That's how hyper over I was thinking about it. And the philosophy I've really come to now is just do interesting things, do challenging things, and be out in the world and put yourself out there for things to happen. that's not enough agency to be like a perfect belief system, but if you are doing things, you're making money, you're interacting with other ambitious people, you're just gonna stumble around and, cool things are gonna happen to you.
And I think that's somewhat the moral of the story here, with Matt's career is, he was a journalist because he loved that and it was a good way to make money and he followed his passions and then crypto became really interesting. So he started writing about that and then that led to these conversations and that led to taking on the book.
But it's not this deterministic starting at point A, wanting to navigate to this outcome point B. It's just again, follow something that he likes doing that's profitable and working really hard at it and just trusting that good things will come from that. Those are my three takeaways, thank you so much for listening to this episode of the Louis and Kyle Show.
And if you've listened to another episode, thank you, for listening to that one too. If you would like to be in touch with myself or Kyle for any reason, I'd encourage you to say, hey, let us know any feedback you have. Let us know who you wanna see on the show. we're pretty easy to find, there's instructions in the show notes wherever you're watching.
If you want to support us, couple ways to do that are to leave a review on Apple Podcasts, on Spotify or on YouTube. Just subscribe, like the episode, make a comment, anything like that. Share this podcast with a friend if you think they would like it. That is all for me, until the next one, I will see you there. Have a good one. Bye.