August 24, 2023 

Daily news update for the terminally online

Are you happy with the markets at the moment?

I haven't even looked at the markets yet today, dude.

I was going to say that was probably the news that stuck with me kind of the most.

I was sifting through everything after we got up yesterday.

Looking like the developer's getting charged.

Yeah, I don't know if They like arrested him or they just charged him.

But I know that they're the Russian nationals.

2 of the people were charged at least for laundering over a billion through their crypto mixing service.

I know that there were like some assertions about money transmitting, some assertions about that even after the fact they still weren't compliant because they weren't limiting OFAC controls.

I know that a few weeks ago when Coinbase sponsored the legal counsel of the privacy aspects of Tornado Cash, so I know that the the basis was if I wanted to raise money for Ukraine, and I didn't want that to be associated with Me personally, that is a legitimate reason for Tornado Cash.

If I wanted to be an anonymous donator to Ukraine.

And essentially they said, that's bull, that's BS.

It's looking like they're calling LARP also on the chain analysis sanctions contract, which we kind of knew would happen, but it's, I guess, funny to kind of finally see in a court document.

People that don't know what That is, it essentially was a contract that listed all of the sanctioned addresses by OFAC and, you know, would run a check to make sure that none of the money was coming from those addresses.

And that is what they had implemented to say that Tornado Cash was now OFAC compliant.

The issue with that is that it doesn't track or chain trace, you could say, to see if the funds had moved from a Tornado Cash sanctioned address, I mean, an OFAC sanctioned address to a new address before going to Tornado Cash.

So TLDR, you could easily get around it by just sending to a fresh address.

The crazy thing is that there are a lot of protocols, companies, whatever, that offer services like this that people are using, and they all have some kind of, you know, like lag on them to where they're skirtable.

So it makes you wonder, you know, if they knowingly are selling these services to protocols, understanding that they're not providing any form of real safety net to them.

And I think everyone's kind of aware of that, except for the government.

Because you can go to the government and be like, look, I'm compliant.

So they can get their rubber stamp and say that they're doing the checks when they know that the checks are easily, you know, you can easily go around them.

I mean, if they really wanted to implement this, they would use callbacks.

So they would do you similar to like how ENS works where like you have to submit a transaction and then you have to wait a minute, and then you, before you can buy the ENS, you do something like that, where you submit a transaction, where it'd be like, can I do this transaction with this wallet address?

It would then do a chain link function, gelato function, call off-chain to say, is this, you know, what's the change race on this address?

You'd be like, oh, it just came from an OFAC, so fail it.

And then after your minute is up, you'd go to do the transaction and it would say, sorry, you're ineligible.

I mean, if I was the developer doing this, that's how I would do it.

But I don't think that they were actually trying to make it compliant.

Too dumb to check to see if the money moved to a new fresh address.

Smart enough to come after you for all the taxes you haven't paid funny how that works what else we got Pendle integrating real-world assets into the platform.

Utilizing MakerDAO's boosted savings, is it SDI and FluxFund, F-U-S-D-C?

This move allows Pendle users to profit from real world assets.

What's funny to me is that we're tying fiat based stable coins into real world assets.

I know they offer stuff based on treasuries, so I'm not, this isn't a jab at Pendle.

It's more of an industry thing where We were talking earlier and we've heard people in the past talk about how they're building you know in RWAs or they're incorporating RWAs and what they were referring to is like essentially cash or cash settled assets and That seems really like silly to me like

Yeah, like projects just trying to hop on

But I do like the basing it off of real-world assets, like US Treasuries, bonds, stuff like that usually comes to mind.

And we were talking before about back in the era of dreams, the ICO phase, I had like a handful of real-world asset ICO projects reach out and the 1 that always stuck with me was this this project that was going to tokenize condo buildings, like buy a unit.

So they aimed to make the process of purchasing and transferring your condo unit much easier.

For anyone who's ever purchased a home, it's not exactly the shortest or easiest process to go through.

But it was quite laughable because you know they wanted to do this with an ERC20 token.

We all know what happens once ERC20 tokens for shit coins hit the market.

So it would have been very very interesting to see on top of that there in the US.

So I don't know how long they would have survived.

Back then I thought it was a really, really dumb idea.

Still now, I still think that the way that they were going to implement it was a very dumb idea.

But the idea in itself I love because I do think that as we continue moving further into the future and away from the traditional systems that we've used in the past into digital systems that when you look at things like deeds and like, you know your Registrations and things like that like Those type of documents totally could be and I think belong on an immutable ledger.

I remember Dash years ago was doing this with actually weed strains, or someone was doing this on Dash, because it might have been Monsanto.

There was a huge company that was coming in and they were trying to patent like tons of strains of marijuana.

So there were some guys that were beating them to it essentially by putting

And I always thought that stuff like that was really cool Because when you look at what a blockchain is, it's an immutable database and there's certain types of information and documents that belong on an immutable database.

Things like patents and documents that are of importance that if they were lost or destroyed would cause, you know, some type of financial harm or restrictions to you that blockchain is a perfect place for them.

What crazy IWA shit have you heard about?

The 1 that makes sense, obviously, is treasuries, right?

So like you go into the no yield environment in which a lot of crypto was kind of brought up in, especially the last kind of bull run, if you will, was before we started to raise rates, money was super cheap, money was given away for free for individuals that are impacted by COVID.

And then you had all these different yielding products on crypto.

And you get to, you know, there's obviously a risk premia for the crypto space.

But then you come into an environment 3, 4 years later where rates are a little bit higher, like the risk-free rate is a little bit higher, I mean significantly higher.

And then the risk premia of crypto is also significantly high.

So like the cost of capital on chain is what, like 15 to 20%, probably.

And so if you're not getting anywhere near that, then you just make sense to take your money off chain and park it somewhere for cheap.

I mean, park it somewhere for like 5% return with little to no risk.

The fact that people are bringing the treasuries on-chain makes sense.

I mean, it's good for keeping capital in the crypto sphere.

But, yeah, I mean, I'm super bullish on property in the future and like REITs on chain and the fluidity of being able to move over title, fractionized titles, even though it's kind of illegal in some jurisdictions.

But I think we've still got a ways to get there.

Do you think it provides a level of security for, I don't know, maybe more serious, more on the pro-tail side of things when it comes to investors when they're looking at something that their reserves are in real world assets like treasuries or bonds versus their treasury being in shit coins and bespoke stable coins?

Well, In traditional finance, like US Treasuries are used for collateral for everything, right?

Like it is like cash, it pays a yield, and it's used to collateralize the entire trade-fi industry, Right?

And so bringing those on chain at scale is definitely necessary to move a lot of the trade volume and the collateralization and margin and all of that.

Bringing it on chain, you have to, you have to bring US Treasuries on chain.

And that's gonna be like a massive industry 1 day.

you think that'll cause conflict with the US government though, when you have entities from other countries that are not nation states that control large portions of the US Treasuries.

Like, you know, right now they've talked a bit about how, or I shouldn't say they, people have talked a bit about how tether owning so much in US Treasuries gives Tether kind of this like shadow advantage because it's like how do you, how do you really come at someone when they, they like in a way, Not have you by the balls, but you know, they've got a grasp a bit.

I mean, they're holding bonds that they get paid a fixed rate on and fucking they made a fuck ton of money last quarter.

I mean, the worst thing that can happen is that they, if you hold, you have significant, what's the word I'm looking for?

Consolidation within a certain entity is that if they would choose to unload and they kind of bring down the price.

That affects like future issuances and stuff like that.

So sure, they have an indirect impact, but what else are you gonna put your money in if you're sitting on that much extra capital?

Until we get an asset-backed bubble again and the price of those plummet

If the US Treasuries default, we have a million more problems in the world than like the backing on like USDT for example.

Like the whole entire financial sector is based on US treasuries.

So yeah, anyways, I think that that would be like, I've always said that like if these default, We will have so many more problems than not collecting your redemption price on US Treasuries.

Brings up an interesting point with these assets using different forms of real world assets.

What happens when there's negative yield?

Does their compounded yield that they're getting off of the DeFi stack have to level out?

Are they going to change the way that they're issuing inflation?

I haven't dug into the architecture of some of these RWA wrappers or synthetics to know how they handle that, but that

So if you have someone like, I wanna say Germany, right, like Germany, they encouraged, like they had like a negative yield on their, you know, savings account.

And I, all right, it might have been their treasuries, but they encourage you to go out and spend money, right?

That you shouldn't be holding any cash in your bank account because if you do, then we're going to slowly draw it down, right?

So that encourages you to spend your money, pushes like, especially service-based economies, but pushes you to consume.

That's 1 product that is distinct and different from something like a ETF that has gone down, right?

So like If you have an ETF that is worth $100 and it's constantly paying like a 5% dividend yield, do you extract out the 5% yield?

And so it's going to be positive, but then you have capital loss.

But then what if, I guess it depends on, I need to learn more about these yield tokens and the principal tokens, because if you have a capital loss, so for example, if you had a DOV, an options fault, and it's not guaranteed that it's always going to go up only.

Is that negative, I'm assuming that you put in a thousand dollars into a DOB And then it could go up, it could go down.

With these types of products like Pendle, do they harm the yield token bearer if the price goes down or do they do, or is it the principal bearer?

Because I know that the payment token, excuse me, the principal token plus the yield token needs to equal the value of the asset.

But I just don't know which 1 do they depreciate?

On the regulatory side of things, come September 1st, the UK is implementing their travel rule set forth by the FATF.

I was always, when I was thinking of travel rules being implemented, I was more thinking on the side of them making us declare digital currency when traveling.

But you were telling me a bit earlier that this is more akin to what we currently do just from 1 institution to our bank institution.

So Travel rule initially was designed for AML, anti-money laundering.

It coincides in lockstep with KYC, know your client.

And so in the way that it works in traditional banking is that every time money kind of moves between accounts or between banks is that you need to know the sender and you need to know the receiver.

And so some things, So like when you open up a crypto account with let's say Kraken and you need to deposit your money from Kraken into your bank account, you can only deposit it into an account in which bears the same name as the Kraken account, right?

Whether they both be a corporate account and they have the same legal entity name or if it's ultimate beneficial owner and it's like a personal account, the receiver and the sender have to be known and they have to be the same.

That's how they can kind of get around like not having to do too much of a stringent check on where the money's coming and going from, right?

In traditional banking, it gets, when you start doing large cash moves and you start doing cross-border payments, when you start having agent banks and third parties and your onward delivering.

And there's a lot of complexities in the banking, especially on the business side of things.

And so you need to make sure that you understand that this is where the money's coming from, this is where the money's going.

Different banks have different levels of controls.

Sometimes a bank might not be implementing all of the sanctions checks that they need to be doing because maybe they're a bank based in, I don't know, Israel and they're not adhering to the same rules that a bank in the US might be adhering to, right?

So if you're a US bank, you need to check that the And this is where like Swift comes into play if you don't really know Swift too much But this this is where you'll check like the actual message within a Swift and say, like, okay, is there any known names in this Swift in which that I need to run versus an OFAC list and check to see if is this person sanctioned or not.

If this person's sanctioned, I need to essentially DK, no pun on my name, but I need to don't know this cash back to the submitter.

If I don't, then my Omnibus bank account might get fully locked up, right?

And so like you saw this with like some of the Argentinian times of larger banks receiving Argentinian government bond payments landing into an Omnibus account and those accounts getting locked up.

And then from your business use case, I mean, if you're a bank and your omnibus account gets locked up, that means that anyone that's sending and receiving money, just like you would see like a crack and hot wallet, like any money that goes into that crack and hot wallet is locked up.

And so like, from a regulatory perspective and running a business perspective, you need to make sure that you're adhering to this travel rule because otherwise the regulators have the ability to lock your business up.

And that's a significant drawdown for any of your clients because how are you going to explain, Hey, sorry, I couldn't get you your money.

Like we accidentally took some money from a terrorist you know somewhere

so if people don't realize how like kind of serious it is you know there's been a lot of kind of pushback on d5 protocols when they're enabling these kind of blocks on the front end and stuff.

And like, I think it comes a lot from people who aren't experienced with having to deal with different 3 and 4 letter agencies, because it's not fun whatsoever.

I know a company I worked for in the past in the space had issues because of just support, you know, not even with like the transactions that were taking place.

Their download page and front end was blocked from all sanctioned countries, but, and like their Slack was for support, but that didn't stop someone from using a VPN to download, get access.

So there were, in the beginning, there weren't really any checks in place because they felt that that was enough.

But eventually through a support issue, it was found that they had provided service to someone from a sanctioned country.

And then it was a huge process, but they then implemented APIs to ping for every support user that came in that would check the email with associated names, with their registered...

This is all in a OFAC database, and it would just run it against that if there were...

It took less than a minute, but they'd run it against that.

If there were no hits, then you were free to proceed chatting with them.

If there was a medium, like a middle status, which meant you had to do a more thorough check, you had to submit a little bit more information.

And then obviously the last 1 was just like that it was a hit and that you couldn't you know provide them Service and in those cases there was a scripted email that you had to send They were in slack.

There was a scripted message and then you weren't allowed to say anything after that.

It was cut off all lines of communication.

You know, like if if after after that had happened, if you know, you fucked up like you were gone, You know, that no 1 was risking additional fines or anything being added or potential, you know, jail time for them operating a business that was doing this stuff knowingly after, you know, like being in the process of setting up guardrails.

But yeah, I mean, it's definitely not fun.

You could lose your whole business, lose all your money, all your banking relationships.

Yeah, I mean, it's a nail in the coffin for businesses, so you have to kind of comply with it.

Otherwise, you'll, they'll, they're hanging out to dry.

It's unfortunate, but that's how the that's how it works.

And there are certain jurisdictions that are allowed to do business with other jurisdictions, right?

So like obviously the US has their OFAC list and Europe has their OFAC list and you know certain, you know, European member countries have their own OFAC list and maybe Iran is not on 1 of those lists, but it is on the US list.

And so you have to continuously make sure that you're submitting all of the necessary information as it moves from 1 intermediary to the next.

And that's what the travel rule is, right?

It's making sure you continuously send that information as the funds travel through the banking sector.

And so, I don't know, it's insanely difficult to do in crypto because it's not like we're sending metadata along with transactions, right?

And so they've had to like go around that by like pre-approving accounts and like, you may or may not know this but like most of the centralized exchanges actually share

and like they know that you know this is DK's account on Kraken and this is DK's account on Coinbase and so if I'm sending money from 1 to the other then it's okay because it's DK on both sides.

But if it's not, and I'm sending something from a Russian exchange to DK's account at Coinbase, then it's going to flag up, especially if it's not in DK's name in Russia.

So you might not have that problem, but they definitely need to enforce that at the Coinbase or Kraken level.

We talked about base a lot yesterday, but more shit going on over there.

They just surpassed Arbitrum in, what was it, daily

Which, I don't know, This is not because of my arbitrum forward mindset, but I don't think that that will sustain, personally.

I still think that Bay Summer is just kind of Bay Summer.

But we'll see, we'll see if they prove me wrong.

Any thoughts on that for you before I move on to my next thing I'm kind of happy about?

Comment on the video, so we actually don't know this.

Can you withdraw capital from your Coinbase account, not wallet, because I know the wallet, you can, but just your Coinbase account directly onto Base yet?

Or do you still have to go from like Ethereum mainnet to Ethereum mainnet Coinbase wallet.

And then you have to go through the bridge to go from Ethereum mainnet Coinbase wallet onto base.

Because I think that once you can go directly to base, then maybe that will change a little bit.

Yeah, so we don't know this because I'm locked out of my Coinbase account.

And what I'm thinking is, alright, 2 things.

Either A, it's just time for me to update my info with them.

Or B, they do have this now, so with their latest app update maybe everyone has to resubmit stuff not sure but I think that'll be huge once you can go directly from Coinbase exchange app to base.

You're now seeing more grandfathered in protocols like Aave launching on base.

That still doesn't really move the needle for me because Ave is everywhere.

So it's like in my mind right now we have Ave, you have Aerodrome that the Velodrome guys are launching over on bass, and you have Frentech which are like the things that people are and people will actually use.

It's the flagship app right now for sure.

And then everything built on top of FriendTech.

But something cool about FriendTech is they surpassed Tron and Uniswap and earned fees in only were they on day 11 now I think since like their more public launch I guess you could say.

I still haven't set up an account yet, but we got plenty to do.

The meta right now, at least yesterday, was e-girls.

It's like, everyone's getting insanely rich, but you.

You know, the funny thing is like, you, I forgot who posted it, but, you know, people were kind of hating on this, like, e-girl, OF, like, transition, or, I don't want to say transition but coming to Friend Tech like you know people are paying so much for people pay so much for the videos why would they move over there permanent it's like the majority of their money is actually made off messaging.

So people paying them to build a message with them.

So FriendTech is very parallel to where they're seeing the most value being able to be extracted from OnlyFans.

On FriendTech, is it group chat though now or is it DMs, one-on-one DMs?

It's essentially a group chat, but you as the shareholder can only see the messages from the person whose shares you own.

And on the other end, as the person who owns the shares, you can see all of the messages that people are sending to you.

I'm sorry, as the 1 whose share that people own, if it's your chat, you can see everything that's put in there But

Yeah, good if you on my share you can't see anything that people are sending me in the chat You can see all my replies though oh

so if I send you a dick pic, only you can see it?

If you sent me a dick pic, only I would be able to see it.

Okay, because isn't that like what A lot of the messaging is, right?

Is a lot of like, is a, you know, body rating.

Stuff like that or personalized videos or, but if I send a personalized video back in the group chat, like let's say you send me a personalized video and you're like, hey DK, does everyone else see that personalized video?

If they, I mean I assume that what, all right if I were to hypothesize right, you look at SteelCam and SteelCam was digitized or pixelated to anyone that didn't own that item.

So if I were to make an educated guess, if they were to implement video and picture, or video picture type content into the platform, it would not be visible to everyone by default.

That's just a hypothesis because I think that, you know, the issue that you're bringing up is like the biggest issue with, it is the problem kind of with like OF at the moment that you know you share something and then like people can take it and just like repost it around and nothing stops someone from like unpixelating the image and and then sharing that around right But what it does do is it lets you know exactly who did that.

Like which shareholder had that video or image or whatever, which shareholder did it.

And also like it's such a smaller pot that let's say like you did put something out and then it leaked, you already know the group.

Something we should bring up to raise, because the 1 thing people have brought up was, you know what happens if a stalker buys your share and they just harass you, you know, like every day in the chat.

Okay, you can ignore them, but like nothing stops like them from just sending you tons of messages.

So I think all these like small things will probably be addressed if they continue pushing forward.

But I think content is probably the first thing they're going to go at, because it's the most requested thing.

And given that they already have an application that was or had a previous app that was really like rooted and based off of that.

See all Eden Aesthetix transcripts on Youtube

Eden Aesthetix : Episode #02