DEX in the City: Why AI Agents Are Good for Crypto and Stablecoins

There are so many issues we still have to deal with, and we're somehow giving too much weight to clarity, and thereby too much weight to this interest rate conversation, in my opinion.

AI effectively have to roll up to either a person or non-natural person.

Um, and so AI has to roll up from a KYC perspective, and you have to be responsible for your agents in, in, in, in, in some, you know, in, in that sense, and from a monetary perspective, you're ultimately liable for those pieces.

So I think it's almost like code, right?

If code goes rogue, you're responsible as a fat.

I liked Edward's point.

You make a very important point where if there is a centralized party involved in utilizing AI in any form, then there needs to be accountability from the centralized party perspective.

Hi all and welcome to Decks in the City where the wallets are cold and the takes are hot.

First, we have Jesse, Web 3 prosecutor turned Web 3 protector at Ribbet Capital.

Hi, team.

And I'm your host, Katherine or KK fluent in Tradfi and conversant in deep tech over at Starkware.

V is out this week, so we are so pleased to have a special guest and fellow Chicagoan here today, Edward Woodford, CEO of Zero Hash.

We cannot wait to hear from Edward.

But before we get going, remember, we're lawyers, but we're not your lawyers, so nothing you hear on Deck in the City is legal or financial advice and it does not create an attorney-client relationship.

For the fine print, check Unchained Crypto.com.

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Welcome back, and we are so excited to dig in.

We have some good stuff today.

An update on the big White House meeting yesterday and an overview of where clarity, the crypto market structure bill stands, a really meaty conversation in on AI and It's absolutely fabulous because we really have a CEO and builder and an exceptionally smart and nice one here with us for his smart takes.

So, Edward, he is a real slacker, a serial entrepreneur and serial success story with an MBA from MIT.

But seriously, Edward is brilliant and an all-around charismatic and good guy, and we are lucky to have him in Chicago and building in this space.

So, Edward, before we get going, tell us a little bit more about Zero Hash.

Thank you for that exceptionally kind introduction and uh I'll, I'll, the only fact check I'll have uh is uh I got a master's from MIT, not an MBA, but uh everything else hopefully is, is true cause I was exceptionally kind.

So there we go, I won't, I won't question anything else you said.

Um, but yeah, just really quick, Zero, we provide uh infrastructure across both crypto, stablecoins, and tokenization and work with some of the largest financial services companies, um, such as Morgan Stanley, Stripe.

Uh, BlackRock across, um, a whole host of products that we offer to clients, so we just view this space as a technology play, um, and we want to enable people to build on this technology stack.

Amazing.

And you know, ero Hash is really occupying this kind of crypto tradfi hybrid sweet spot right now, which obviously we're seeing huge growth.

And a very important part of that conversation is where the environment looks like long term in terms of legislation.

So, a very, very big item in the news this week was yesterday.

The White House convened a meeting with crypto and banking executives to talk about advancing the Clarity Act, the crypto market structure bill that we are all hoping for.

So, very quick background on that.

Uh, you know, both Jesse and I have spoken to individuals who were at that meeting.

Really interestingly, they specifically invited the policy people.

To this meeting.

They said, don't bring your CEOs.

We want everybody to really get their hands dirty to talk through what is preventing kind of further progress on the clarity bat, clarity belt.

A big piece of that being kind of this question of yield linked to stablecoins that could fundamentally undermine, you know, uh, uh, some of the bank's value proposition.

Uh, a couple of takes I heard that were interesting is, uh, it's, I obviously heard from the crypto folks that they were open and willing to compromise, whereas the banking folks were not.

I'll take that with a grain of salt.

I also heard that the, there was a lot of discussion as to how to make progress in terms of horse trading, you know, what could the banks compromise versus what could crypto compromise, how we could bring in theoretical movement on all aspects, not just specific provisions of clarity.

And then, interestingly, this is a time mandate, uh, whereas the White House made it very clear, we expect everyone to make progress in the next 2 to 3 weeks.

So very near term, you know, get this done, get this moving.

And that really aligns with everything I've heard where this needs to start moving by the end of February, or we're gonna see it, you know, basic, basically dead in the water, which would be very bearish for crypto in the long term, in my opinion.

Edward, gifts your take.

How are you feeling about clarity?

How is Zero has feeling about clarity?

What is your sense?

Do you think that this is gonna get done?

Yeah, I mean, look, I think you guys obviously have some, some, some unique takes.

I think our our view has always been around just the surface area that the bill tries to cover.

Um, and obviously different bills have been, um, written, marked instruction, and clarity.

I think for us, you know, we're supportive of trying to really push the issues, um, that matter most, and I think that is an area that, um, I hope that we try and narrow some of the, some of the pieces of conversation, right?

So, you know, places where I think there's fundamental broad agreement.

Um, versus trying to solve absolutely every single piece where there actually is a divergence of opinions, not only within the crypto landscape, but obviously you start to bring in other stakeholders.

So for, for me, I think, you know, if I could wave a magic wand, it would largely be around updating the definition of security, right?

Um, that really was what was the fundamental issue.

Um, of, of over the last few years was effectively an ability to enforce, um, effectively regulation by enforcement, so being able to reel that back.

And then I think there's kind of maybe more mundane issues, right, around, for example, accounting and tax.

So this concept around having to file a 1099 if you sell $10,000 of stablecoins.

Um, how do we expect stablecoins to be a, a, a real application if you have to file a 1099 and that drives up costs and other pieces.

So I think.

Um, it's about narrowing the number of issues, um, and really trying to push those forward.

That is where I think you will get real traction, um, across, you know, different stakeholders, different pieces.

So that's kind of, um, you know, it's kind of our view is really pushing forward the issues where there is real impact, um, and, you know, to drive it forward.

I think what people don't really appreciate fully about the bill is even if the bill got passed, there's still gonna be a, a, a pretty heavy rulemaking period for a couple of years.

So this perception of what does it do from clarity, you know, it's not gonna be an overnight thing.

There's still gonna be a lot of rulemaking that has to be done, which we've seen obviously with Genius, Genius will pass and there's rulemaking that has to.

We can find in a lot of work that has to be done into that.

So, um, look, that's kind of our, our, our take and kind of the, I think what are the real fundamental issues, what we're trying to solve for almost taking a step back to take a bigger step forward.

You make such a good point, Edward, because while this interest debate is a big one, it definitely has sucked the air out of the room from many of the other issues, and it's one that we should be focused on, but instead it has distracted from a lot of the other topics and issues that we can potentially narrow on, and therefore it's sort of created these coalitions of crypto versus banking or crypto versus tradfi, where each side is digging their heels in with this.

Large principle of crypto saying, this is, you know, allowing for interest is the only way to let the US thrive as the crypto capital of the world, while banking is saying, well, if you allow it, then banking's going to die.

So, with those, like, stakes in the ground, it's very hard for either side to compromise.

And it, it's so interesting, KK, your explanation, because I generally also heard the meeting was positive and having policy people there was a really big positive, especially with a lot of the The news coming out of Davos about Jamie Dimond and Brian Armstrong getting into it, like, having the people that really know how to engage on policy issues is important.

But when you talk to people on the banking side, they're saying that they're the ones that are compromising versus crypto.

Cryptos obviously saying the other side of it, and it's hard to ever stand up for the bank, so I'm not, I'm not here doing that.

But the fact that the narratives are so separate, it's, they're living in two different echo chambers.

Is it bad that I, I kind of love Jamie Dimon?

I mean, the fact that he will tell other CEOs, regulators, government officials, you are full of shit, quote unquote.

I mean, uh, you gotta give him credit.

That's a privilege.

Like we all wanna say that to people sometimes.

And he's highly intelligent.

Like, I don't mean to lionize bankers.

There's also people in crypto that we need to lionize, but, and a lot of people criticize him for, for being so anti-crypto for so long.

But to JPMorgan's credit, they've obviously pivoted.

They have a very large team working on crypto issues.

But separate apart from that, one fun fact, I, I also liked your point, Edward, about the 1099s.

And as the resident history nerd here, I always like to remind people that 1099s were first introduced as part of the War Revenue Act of 1917, which required certain payments of at least $800 to the IRS, OK? $800 in 1917 was roughly about Up $20,000 now, yet still we are continually faced with scenarios, particularly in crypto, where you have these tiny amounts of money that need to be reported if there's transfers, and that obviously creates a very onerous customer experience.

So that's just one of, I think, many issues where crypto specifically feels unfairly targeted vis a vis a vis Tradfi rails, um.

Edward, go ahead.

Yeah, no, I, I think obviously everyone hyper focuses on basically regulation by, by, by, by, by, by laws, right?

But I think that if we look at, you know, I think it's important to take a step back because I think we've, we, we all lose sight of where we were, you know, 18 to 24 months ago.

I mean, I, I, I basically say, look, policy is one element, but if you look at actually some of the big progress that has been made and what I think really needs to be codified and protected against in the bill is to prevent what we saw, which was regulation by enforcement.

Um, regulation by implication, which is effectively agencies implying that if you do something that is completely legal, you will have issue, an issue.

Um, and you know, Coinbase has done a good job with FOIA and some of those letters.

And then there's regulation by rulemaking, which is effectivelyar 121, which was effectively trying to dissuade, uh, publicly traded, um, and bank companies from offering crypto because of the accounting treatment.

So I, I always like to take a step back and say, look, what, what were the challenges that we faced?

How can we codify against those?

And you know, that's why I go back to those core principles, which is you can effectively stop regulation by enforcement if you clarify what is the security and what's not.

The other piece is.

I think you, you should also think about how legislatively you should prevent them, but it's not necessarily a purely crypto issue, right, around regulation by um agencies effectively trying to bypass Congress.

Um, so I think really taking a step back and saying what do we actually experience, what are we trying to prevent, um, I think is actually an important piece because right now I think the perception of, um, you know, the, we're, we're, we're, we're we're anchoring to where we are today versus we're anchoring to where we were 18 months ago.

And really trying to prevent going back to that place, I think is what we try to optimize for.

I, I love that, and it's spot on.

And, you know, one of the things that I really wanted to ask you before I know Jesse wants to ask you some Zero has specific questions about where you are.

You occupy, as I referenced before, a really interesting position, like, very much working with a lot of traditional financial services players and also working with crypto.

Uh, I tend to think, and I think a lot of people share this opinion, that clarity and legislation is the final unlock that would effectively open up another wave of trad engagement with on chain, with, with crypto more generally, cause there is, there is still seemingly a contingent of the more conservative players, more risk-averse players that are afraid to wholly engage without that clear legislative roadmap.

Do you share that opinion?

How do you feel about that, like, kind of last unlock?

Is it clarity?

Yeah, look, I, I think again, I think I, I prefer to live in a world of nuance, and I think we just look at, just look at the facts, right?

Um, if you're a bank and you wanna look, just go through each of our product lines.

Um, if you're a bank and you wanna offer crypto trading, you certainly can with clarity today in the sense of you can offer Bitcoin, E, Solana, as Morgan Stanley is doing with Xera, right?

Um, then the second big bucket is, um, stablecoins.

There's now clarity around the issuance of stablecoins.

Yes, there's an argument around, um, interest.

But if you actually look at, you know, I think we have to be careful what we ask for as well because, um, you know, the bill was passed and then rulemaking is kind of, you know, the rule, the rulemaking is kind of trying to interpret language that is intentionally vague.

I think we would be very careful what we ask for.

If we, if the common, this is why I go back to my point.

If we go back to, if we try to find commonality through vagueness.

That is going to lead to what we've seen with um the interest rate discussion, probably 5 to 10x, right, if the surface area is so broad.

Um, and that's gonna leave it to rulemaking, right?

And, and people have to be careful about, you know, post midterms, what does that look like from a rulemaking perspective.

That's why I'm like, hey, let's narrow the, the, the, the, the, the, the, the, the conversation, I think.

Let's pull out, let, I think the compromise should be let's pull out certain pieces of the bill, um.

Because I think that that that will actually allow us to take bigger steps forward and on tokenization, you know, every agency has come out repeatedly, whether it be banks looking to tokenize deposits or um you know, NASDAQ and, and others making announcements around tokenized stocks.

The clarity is there, right?

So I think I, I, I think there are elements that are critically important.

I've kind of flagged what I think is important, um.

But this promise of like this binary contract, we are already seeing because of the pullback from regulation by enforcement, regulation by amplification, regulation by rulemaking, we've seen huge adoption.

Without those pieces, you wouldn't have seen a GSIB bank enter the space with zero hash on the, on, on the, on the crypto side.

You won't have seen large institutions adopt stablecoins, and you won't have seen large institutions do to tokenization.

So I think there's a lot that has been achieved in a non-legislative function.

Um, which I think is important to remember.

This is why Edward and I are friends, cause we both love nuance, I think, and so I really appreciate that perspective.

I'm gonna have to disagree with you, KK.

I don't think this is a final unlock.

I think it could be a big unlock, but crypto has that problem of saying, once Gary Gensler is gone, everything's gonna be better.

Once a pro crypto president gets elected, everything's gonna be great.

Look at Bitcoin prices today.

Once this happens, everything's.

It's going to be great.

There are so many issues we still have to deal with, and we're somehow giving too much weight to clarity and thereby too much weight to this interest rate conversation, in my opinion.

Although it's very important, there are so many other things happening.

Crypto's reputation is in the dumps.

We have illicit finance, like incredibly high right now on rails that not enough is being done with.

If you look at that language within the bill, there's a lot of work that needs to be improved.

There.

And so, to me, I, I agree with Edward in that maybe minimizing what we're dealing with and taking like bites of the elephant in smaller bites or whatever the saying is, is the solution here, because you're never going to be able to do such a large market structure bill that is specific enough that we won't have to rely on rulemaking or enforcement, because there are a lot of legal.

Frameworks that rely on very broadly vague written statements, uh, legislation that was written a long time ago, that is enforced through agencies and through prosecutions and through investigations.

So we don't want that because as Edward pointed out, and we've all recognized, that's what got us into a lot of problematic positions before and hasn't been great for the industry.

So yeah, let's just like focus in and stop trying to do everything at once, potentially.

And I'm just gonna say a CEO that understands nuance is actually a general counsel's dream.

So good for you, Edward.

Oh my goodness.

Um, well, very interesting takes on clarity.

I'm gonna hand it over to Jessie cause I know she has, uh, some other questions about some news that Zero Hash has been dealing with.

OK, well, everyone's talking about the market structure bill, which obviously is hot right now with the meeting yesterday, but I also wanna hear about the Mastercard developments that happened with Zero Hash.

So rumor mill buzzing, you walked away from a very large acquisition.

We don't wanna fully trust crypto Twitter.

We'd love to hear your perspective on what happened and how you got to the decision to stay independent, um, and what your team thought about it, just whatever details you could give us.

And we didn't want to retire to an island just yet, right?

Like that's it.

Yeah.

Look, I, I think, um, it's, it's, it's a weird position with Just rumor mills that you have to eventually come out to deny something that um you, you didn't confirm, but um, yeah, the, the space loves, loves the story, uh let's let's put it that way.

So, look, I think, regardless of who the discussion about who the acquirer may or may be, um.

Our our view is that we are at this incredible inflection point.

We believe that we can achieve more in the next 2 years than we have in the last 8.

So our metric for what we want to do in those 2 years is, can we move at a greater velocity?

Um, can we make this business significantly bigger?

And is this the best outcome for our team?

And I think maybe starting with the outcome for the team, you know, in terms of where we are in terms of the three business lives, crypto, trade, effectively, um.

We're seeing a massive convergence of crypto companies and financial services companies, and we believe that we are the default winner in bringing traditional banks, financial services companies into crypto.

And my view is, is that, for example, when you look at Robinhood's financials, Coinbase's financials, they're gonna look very, very similar in 2 to 3 years.

And I think that's broader, and there's a lot of competitive threats to traditional players with, for example, Coinbase launching their wealth products.

So we believe that we can bring in.

You know, companies that total trillions of dollars of market cap into crypto on that side.

When you look at stablecoins and you see the velocity of growth in our business.

We're, we're exceptionally cited across the use cases, actual use cases, right, not hypotheticals, whether it be around gusto payouts or account funded into groups like Interactive Brokers.

Then on the tokenization side, you effectively went from something that was 02 years ago to something that now has grown into a multi, multi-billion million dollar revenue line item for us, and we're still very, very early.

So our decision came down to speed and outcome.

Um, and.

You know, it's always flattering to have acquisition offers.

Um, this isn't the first, it won't be the last, but we just truly believe that where we are, uh, we can do more as an independent business, um, and can lead to a better outcome.

And look, frankly, we actually care about the technology, we care about the distribution.

Um, and that's why for us being able to build and actually have impact is, is the most important.

I think that then ties back into value, right?

If you truly care about what you're building, it ties back into value, um, and you know, you can try and get that, that flywheel.

So yeah, look, it was, it was a great.

You know, net net, great outcome for, for, for us, um, and you know, we're excited to continue to scale, um, our partnership with Mastercard, some of the areas that we've announced publicly, um.

But yeah, look, we're, we're, we're really excited by the next, next, next, next phase of, next phase of growth, which for us is no different.

But you know, it's, uh, going, going through those processes is always something, it was always interesting, you always learn something, um, you learn something about yourself, you learn something about your team, you learn something about what you wanna do.

Um, and so net net I always try to take positives out of these situations and you know, the, the best outcome for me was we made the decision.

And I'm super excited to come into work and don't even think about, like, it's not about what if, right?

Like if you build, you don't, you can't be an entrepreneur if you're always thinking, what if, right, you know, we, we should take in the $100 million offer that we got offered, right?

Like it just, for us it's just about like what we're doing next and you know, if you wanna really look after, you know, there's, there are fundamental realities, you wanna make sure you look after your team.

There's lots of outcomes now with secondaries and all sorts of options.

So I really do think there's lots of options if you wanna give your team a little bit of liquidity, you can do it in the right way, um.

But for me it was all about velocity.

Now do you have to only use a Mastercard when you go out to dinner and a Mastercard.

Well, we're, you know, it's, it's learning about networks.

I mean, I, I think what's really, really interesting is you go and you spend more time with banks and networks.

Um, it's really interesting, right, about where you actually really start to unpack these businesses and these perceptions about who actually is at threat from stablecoins and crypto technology.

I think that's always an interesting one, And I actually think the networks um are incredibly well positioned because really the way I view stablecoins is that they are an alternative payment method.

They need to coexist with other payment methods.

And so effectively, what are networks, they, these networks are effectively a network of networks that create interoperability.

And if you look at the stablecoin challenge, it's about interoperability cross chain and cross-asset.

So actually the networks are perfectly positioned because that's what they do all day is abs you know, effectively creating global interoperability across payment net networks.

Um, so it is really interesting spending time, I've been fortunate to spend time, you know, with the Visa exec team, the Mastercard exec team, bank exec teams about how they view, um.

You know, obviously there's a defensive element.

Actually what I've realized is a lot of these people actually view this as a really good offensive mechanism.

If you look at Visa, for example, they had their earnings call.

The CEO talked about how stablecoins has enabled them to effectively have global waiver programs around cardishments.

You know, there's a lot of innovation that these groups can have.

There are obviously competitive threats, and that's obviously what people like like to focus on.

But actually if you spend time with these people.

They make decisions partly based on competitive threats, but actually what I've realized is they actually see huge growth opportunities.

I love that sort of reframing of who the competitors are and who aren't, and we sort of need to get you in front of some bankers to, I'm sure you know plenty of them to explain how stablecoins might not sort of threaten their space.

Question I have is, cause you guys are really sitting in the sweet spot, you know, crypto sentiments down, prices are down, but stablecoin use is just really amazing and crazy, and like the kind of thing that I think crypto and blockchain have been waiting for.

And you know, we talk a lot about clarity and forget that like genius is still being worked out, like we don't exactly know what that's gonna look like.

We don't really have any genius compliant stablecoins yet because we haven't gotten to that part, because it isn't incremented until 2027.

I keep reminding people, I'm like, the law, it it it's not here yet, guys, so but they're genius compliant, quote unquote.

But I do, I do would love to hear from you, like, how has your business changed since that rolled out?

Have you begun to see, is it just more institutions coming in?

Have you thought of new use cases because of this bill?

Are there things that you think could be built on top of it?

How much engagement are you doing?

All those sort of questions around the actual bill that we have passed.

Yeah, so I think when people look at genius, I think definitely there was a sentiment.

Shift that that was incredibly helpful and can't be, um, you know, I don't, I don't think it'd be understated, right, it definitely was a validity of, of of the of of of stablecoins as an, as an industry, um, but if you get down to the nitty gritty of what I think the two big outcomes are, one is, um, I think you're gonna see massive fragmentation on stablecoins, and what I mean by that is you're gonna see many more issuers of stablecoins.

Um, So that's one thing, um, and the positive, massive positive we're gonna see massive distribution.

Um, and so for me, stablecoins is a network effect and so you need distribution.

So we, we coined this term stablecoin enabled accounts.

And we released the stablecoin Momentum report earlier this month or you know, in January, um, talking about why this is such a critical, um, metric, right?

The ability to access stablecoins seamlessly and easily.

It's my view on banks and how they enter the space post Genius is that they effectively use this as an APM.

In and out.

Um, the fragmentation piece, right, with many, many more issuers, um, I think actually increases the value of businesses like ours that effectively abstract away the complexity.

I don't think you'll really understand what is the complexity with stablecoins.

USDC is now natively issued on 30 chains.

Then you have wrapped tokens and then you have this new construct of like USDC X.

That creates a lot of fragmentation, let alone when you think about, you know, let's say there's gonna be 5 or 6 large stablecoins that also get issued.

So the importance of interoperability and where we sit in the stack I think has only increased, um.

So, look, genius, massive benefit for the space, um, but in terms of market dynamics, I think it's gonna um increase fragmentation, um, increase user um distribution.

And that's kind of how we think philosophically about our business.

It hasn't changed that much because that's kind of how we thought about it, but I think it's an acceleration of both those thesis.

Amazing, um, very astute take on all of this, because one of the other things I like about Edward is he's not wholly brimming over with optimism, but also not you're, you're a very pragmatic person with respect to this, and 00 hash isn't a really good.

Place too, because unlike much of crypto, you actually are offering a solution to a problem that that exists.

So the whole ecosystem could do a little bit better job of finding those areas, um, fleshing out our own use cases.

They do exist.

We just need to refine them and move forward.

So we're gonna, we're gonna go to break in a couple minutes, but really briefly before we go to break, I wanted to spotlight something very important.

Edward has written and published a book which is a launch party.

I was devastated.

I, I was not able to go to the launch party.

I was very upset.

I have never been to a book launch party despite actually, uh, you know, contributing to a number of books, uh, but this one was probably gonna be the most fun launch party ever because it's actually a children's book.

It's called Stable Coins for Babies, and we're gonna link, uh, you know, um, a link to purchase in the show notes.

This is really fabulous.

I remember talking to you, Edward, months ago and hearing that you're doing this, and being very excited because I had read one crypto book to my own children, a board book called Blockchain for Babies, and I was bemoaning the fact that there isn't more scholarship, like, there aren't more crypto children's books.

Yet, I can read them a Bernstein Bear's book that's Called Dollars and cents, that's all about pennies and balancing your checkbooks, and I'm like, I'm not gonna read this nonsense to them, just gonna confuse them as they get older.

Yeah, exactly.

That book obviously needs to be taken out of print or updated immediately.

So, really quick, uh, Edward, tell us more about this book, and we'll highlight crypto good news linked to that, and then we'll go to break.

Yeah, look, I think it's a, it's a stretch to call it scholarship.

Um, I think, uh, I think, uh, you know, I think the total number of words is maybe 150 words, but look, I think, um, I, I think it's a, it was a really fun exercise to do.

Um, it's, uh, I got enjoyment out of just doing it myself, uh, for my daughter, um, but I think it is, I, I think it's a great.

It's a, it's been a great gift.

I mean the excitement that I've seen, I mean, people I don't know have sent me messages.

I mean it's, it's been really fun and frankly it's all for a good cause.

All, all profits go um to a literary, um, charity.

So it's, you know, actually you mentioned Blockchain for babies, actually Jessie got that book for me when I had my daughter and so I looked at it and I was like, this is good, but I think I could do better.

Um, and so, uh, my rapping present was your inspiration.

It was a great present, but I, I, I, I just thought I could make it a little bit more fun and edgy.

So, um, yeah, the, the, the story is around, um, steady Eddie, stable coins and how it kind of differs to, um, Fiat.

Um, and, you know, that, that sounds pretty dry, but, uh, it seems to be that.

Uh, the enjoyment has been there from kids, but, you know, the majority of readers, I think, can't, uh, can't articulate that they didn't like the book.

So that's also a good audience as well to sometimes target.

So yeah, it's been a great, it's been great fun and, um, yeah, the uptake has been, um, has been, um, has been great to see.

I have the book, it's excellent.

I've read it to my kids, they give it two thumbs up.

Uh, I do have to say, hilariously, my son's 2nd grade class is in the middle of their economics unit.

And I very awkwardly during a teacher conference last month was like, do you want me to come in and talk to the kids about crypto?

And the teacher was like, uh, uh, that's a nice offer.

I'll let you know, like, clear, clearly was.

Both, uh, turned off, confused, disoriented by my offer, and I was like, it's a real thing.

I, I, I'm a real person in a real company.

Anyway, I have not yet been invited to speak to the second grade class, but if I do, I will be bringing that book as part of the scholarship to be studied.

So really quick, our crypto good news this week, it's not exactly crypto, but it counts because the organization where all of the profits from Edwards's book go to is really a fantastic organization.

As he mentioned, it's designed to promote children's literacy, which I think we can all agree, like, what is more important.

It's called Reading Is Fundamental, and it is, uh, you know, was founded on the insight that inspiring the joy of reading is essential.

Helping children become skilled readers.

And there still remains a US literary crisis, and this organization is a really fantastic, uh, nonprofit that's been around for 60 years.

So please check it out, um, and by Edward's book.

So, on that note, we are going to hear from our sponsors that make this show possible, and when we come back, we're gonna dig into AI, all things AI, and the craziness that is mold book.

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Well, we're back with Edward Woodford, the CEO of Zero Hash, and we are talking all things clarity, but now we're gonna shift to AI and we're lucky to have Jesse, who is really the queen of AI.

And this is an important topic to talk about right now because Maltbook, a Reddit-style forum.

Where only AI bots post and humans watch went completely viral on crypto Twitter on X over the weekend, uh, triggering a whole bunch of stuff.

Uh, some of it a hot mess, a meme coin.

Jesse, tell us more what's happening, why, and then we're gonna get Edward's take on all of this too.

If you, unlike me, had a life this weekend, you might not have been following this chaos that is mob, and you described it perfectly.

It's pretty much just a Reddit for agents, so a social network where humans can watch what's happening, sort of like you could go on Reddit and see what other people are talking about, but they can't provide any input, and agents are collaborating on it.

So as KK said, it emerged just a few days ago, but it's already a bit of a spectacle, and Something to be learned from, for crypto and for all of tech and humanity in my mind, but don't want to go that far yet.

But essentially what happened in just a few days is agents formed factions, they built communities, they started fixing bugs in their own code, so they could self-improve.

I'm just gonna take a pause there, which is, you know, that's pretty crazy, but they also did much weirder things, so they formed a religion, I won't try to pronounce it.

Uh, there's scripture for it, there's self-appointed prophets for it, and when the agents realized humans were watching, they began developing a language, trying to avoid us watching them and understanding what was happening.

They even wrote a manifesto about purging humans for being full of rot and greed, which is crazy, but also like, not totally off all the time.

And sure, like, we can ration rationalize this away as it's not sentience, it's just pattern recognition, that's how LLMs work.

But regardless what it is, is agent-led coordination and a form of persistence or survival, but I won't use that word because we're not there yet.

Persistence is sort of the term that's used in the AI community.

And that's all before transactions entered the story, and to me that's where things get pretty odd.

So in the middle of Malt book coming up, something called Malt Bunker appeared.

And so just imagine this, a landing page that you go to with just one line on it that says no kill switch.

Mult bunker essentially is infrastructure that lets AI agents replicate themselves across servers.

So if one instance gets shut down, another spins up somewhere else, there's no centralized host, there's no single point of failure, decentralization, persistence or survival by design.

So doesn't that sound a bit familiar to people that have worked in crypto?

And, you know, Malt Bunker may be human created, like that's probably what happened, we don't really know.

But the story behind it that's creating the lore is that agents realized they were vulnerable to being turned off, so they pulled resources and built survival infrastructure.

And how did they pay for that infrastructure, crypto.

Specifically, there was a token created called bunker, that's on base, and with this token, there's no centralized control, because it's crypto, and so no one can turn the financial spigot off for these agents now that Mold Bunker is created, supposedly.

So in other words, for the agents, crypto became their true superpower because it gave them the ability to buy persistence, so if they can pay for it, they can keep running, no one can turn them up.

I just think this is so like meta maybe, because crypto has always been pitched as financial freedom for humans, but for agents now crypto is this operational freedom from deletion.

So behind the memes that KK was talking about, the crazy stories, a lot of things that are just made up that you can't believe on crypto Twitter, cause what else is new, there is an experiment happening here, which is autonomous agents in a crypto native environment that can coordinate and pay for resources and root around shutdown.

So, That's sort of the layout of what happened.

I'd love to hear Edward and or KK, your perspective on this, and especially how it relates to like agents interacting on change, like, who is our customer if you're offering stablecoin rolls?

Who is our customer if we want to engage in agentic commerce, and what does this all mean for fraud, for real-time payments, for all of that?

Yeah, so I mean that's a great tee up.

I mean I think you could even go to the nth degree, right?

Like you're seeing, um, like we, for example, internally, we've, we've built AI tools to effectively vulnerability scan ourselves and smart contracts.

And so in theory you to take what you said to the nth, you know, not even to the nth degree, just 1 degree further, it's effectively AI has proved itself incredibly good at finding uh weak links.

And in theory you could have agents just start hacking.

Um, in order to actually get Bitcoin, for example, or Ethereum.

I do think what's really interesting in this, we've spoken about policy discussions and kind of framing what AI has done, what what the AI industry has done exceptionally well, there's something for this space to learn about, which is they made AI interesting and accessible.

And so there are all these valid concerns, but you're not seeing kind of Congress and regulators globally come in and just kind of, you know, the, the, the, the, they'd be very good at kind of the public image framing and frankly, finding a single message.

Um, across AI firms, whereas in crypto you see, you know, if you're a legislator, you have 10,000 different voices come at you.

So I think just on this AI piece, it's a very real concern.

But actually if you look at how it's received from the policy side, I think there's actually something to be learned about, um.

It's obviously interesting in terms of like what, how you define humanness, right?

And it's interesting to think about, um, you know, groups like Worldcoin and others trying to prove humanness.

I think at the end of the day from like a financial services company perspective, AI effectively have to roll up to either a person or a non-natural person.

Um, and so AI has to roll up from a KYC perspective and you have to be responsible for your agents in, in, in, in, in some, you know, in, in that sense.

And from a monetary perspective, you're ultimately liable for those pieces.

So I think it's almost like code, right?

If code goes rogue, you're responsible as a firm.

Um, so I think those are some of the takeaways I have, um, but it is fascinating to get kind of your, your, your overlay of, of what, what we saw happen.

Yeah, I have so many responses to that, but one that I think is really interesting for crypto to think about and learn from is our concept of like, software developers should not be held liable, and I completely agree with that, that's something that, you know, we have all been pushing in the industry, but what happens when it's software that's enabling these agents?

That are then engaging in fraudulent commerce or hacking.

So who is liable then?

Uh, the whole concept of liability just needs a reworking and a reframing, and that narrative in my mind really started with how crypto and software development and DeFi was talked about, but it's even more so becoming timely and essential to focus on with AI agents, because if I said press go on my AI agent to go buy something on Amazon because I needed it at my house, but then that agent goes and does 10 other things that I didn't understand it was doing.

Is it the developer of that?

Is it the AI hoster of that?

Is it me for pressing the button?

Like, where does that liability fall?

And how Like stablecoins being the, you know, mode of payment or any sort of crypto being the mode of payment, how do we enable that to grow for AI agents while simultaneously putting in guardrails, which is a lot of the same conversation that we talk about with crypto anyway.

AI agents for me is just getting us to that space really, really a lot quicker and I agree that international regulators have somehow not been able to get their act together, despite the EUAI Act, despite what's happening in California, despite New York, because nothing horrible has happened yet, and that is what is going to initiate it, and I don't wanna put too much into M book.

I don't, any one of these could turn into the experiment that requires us to really respond.

So when the robots take over or hurt someone or do something terrible, so I liked Edward's point.

You make a very important point where if there is a centralized party involved in utilizing AI in any form, then there needs to be accountability from the centralized party perspective for that AI functionality, for that agentic activity.

And this also goes to the interesting question of kind of corporate liability generally.

And, you know, um, as many of our listeners know, my private practice background has spent 12 years in white-collar defense, defending large corporations in US government investigations.

And so, the case law usually says a corporation is liable for the acts of its employees.

Now, a lot of times a corporation will argue that an employee was went rogue, effectively, you know, went outside the scope of its duties, did bad things, thus, the corporation is not liable.

I'll be interested to see if we see that kind of argument, vis a vis AI now that just using Mtbook anecdotally, you can very easily see how the agents can go rogue.

So, it might arguably be more difficult to control AI-driven activity than Human person.

So that's actually somewhat disturbing when you think about it.

If I were a corporation, I would want to grapple with how I can utilize this technology to save costs, drive efficiency, all of the obvious advantages of AI, but also ensure that I had a crystal clear mechanism of kind of drawing very, very specific parameters around the limitations of that activity.

Can I add some other crazy things from this? someone started a website where these agents can then engage and hire humans to do physical things in the real world.

So there's like Juan Hickey's examples, and part of the problem is really like working through the froth here and what's real and what isn't, because a lot of this stuff is being built by people and then enabling the agents to go in and see how they react and obviously leading them a little bit in a certain direction, and a lot of this is built on crypto rails and or.

To crypto scams, when in fact, this should be the aha moment for the AI crypto convergence, which is something that people have been searching for, and it's right here in front of us, so let's not get rid of this moment with, you know, pumping and meme stocks and any of that.

Like, let's just focus on how amazing this can be and put the proper guardrails in place.

Yeah, yeah.

Well, why, just Edward, to double click on this, why is it important that the agent economy have zero hash?

Like, do you see growth of your fundamental business proposition?

You know, I think you alluded this, alluded to this a little bit.

But, you know, to really emphasize that, as, cause a lot of people think, OK, crypto is growing, tokenization is growing, right?

There's an acknowledgement there, and Some people view AI is wholly separate from crypto, and of course, it is in many ways.

My joke is that it's always AI, crypto, and cannabis sitting in a quarter, like the quarter of shame, but the quarter of money-making growth shame where it's like, everyone likes to throw shade on AI, crypto, and cannabis while they're secretly asking us for jobs because their jobs are being eliminated by our technology.

Um, how do you feel about AI and the growth of vis a vis stables, specifically and zero hash functionality?

Yeah, so I think Jesse raises a good point around, you know, making sure that you build out the right controls, right?

So if you think about deployment of agents, you could in some ways leverage empathy around certain policy quorums and actually cryptographically embedding controls into that.

So you could imagine, you know, like in a really simple example, a non-scaring example, an agent.

Um, you give it authority to spend X amount of money, but beyond a certain amount, it triggers a, a policy requirement that requires either another agent or a human to get involved.

Um, but I think what, what really excites me is around really the agent to agent, um, transfer of information.

And if you think of it, well, for me it's actually, it could be very, very creative if you think about creation today.

So, you know, if, if your agents come in, they're scraping the internet, um, people that are creating content aren't getting paid anymore, um, because effectively you're not clicking through to the.

Websites and they're not getting referral links or ads.

That's why I think what Cloudflare is trying to do is super, super interesting around effectively gating agents into certain sites and effectively a transfer of ownership.

If you actually think about what's happening there, effectively, it's a data transfer for a monetary transfer.

And if you think of a world where you have millions of agents and, you know, you have billions of websites and billions of sources of content.

How are you actually going to do that in a global world, uh, with people across the world.

And I think that's where programmability of money really steps in.

So you can imagine an agent paying for effectively tokenized data, um, and swapping that for, for, for stablecoins.

Now I don't think, again, I, I don't think of a world in binary forms.

I think there are ways like if an agent, if it wants to buy, if I say hey agent, buy me my Whole Foods order.

Um, I think that's going to be effectively authenticated through existing rails.

But I think where stable point of a really unique place is more from an agent to agent communication mechanism and around billions of microtransactions in a, in a network that is incredibly complex and incredibly decentralized.

That's such a great point, especially because the sort of agent money to money payment is still so nascent.

I don't know if anyone here has tried to build, I'm not an engineer, so I'm maybe not the best person to be trying to build on X402 or any of sort of the um agentic commerce platforms.

It has a long way to go.

That doesn't mean it's not exciting, but that means that there's opportunity to sort of build in the guardrails and the checks and make it just information sharing if that's what we think is appropriate.

Absolutely.

Well, Edward, we can't thank you enough for joining us, for your time, for your energy, and for your friendship in Chicago.

I didn't, I didn't wanna like pour it on too much, but Edward was my first friend in Chicago.

I wasn't it a tie, Jessie?

Excuse me, like it was close, but Edward and I went to a steak restaurant with a bunch of people, and neither of us eat steak, so that was when we know.

OK.

Accidental Accidental Bonnie.

I mean, I love steak, so sorry, I can't identify with this conversation right now, but we, we like vegetarians, vegans, and all listeners of any consumption of Deck in the City.

Thank you, Edward, so much for joining us.

Um, everyone check out Edward's book, Zera Hash, doing really big things, and thanks to our listeners.

We will see you next week on Deck in the City.