Ryan Selkis

Messari – Bringing Transparency and Self-Regulation to the Blockchain Industry

Since he started blogging as Two Bit Idiot in 2013, Ryan Selkis has been both industry insider and industry critic. Consistently calling out excesses and abuses, but also maintaining his sights on the long-term potential.

He recently founded Messari, a project that aims to bring more transparency and fairness to the industry. Messari has narrowed in on siloed, inaccurate and incomplete data as a key factor that allows insiders to profit at the expense of the public. We talked about the various ways in which Messari tackles that problem, ranging from a community-led effort to gather project data to the ambitious goal of a token-curated registry of stand-up projects.

Topics we discussed in this episode
  • Ryan’s start into the crypto industry as pseudonymous blogger Two Bit Idiot
  • His insights from being the Digital Currency Group’s first employee
  • CoinDesk and the challenges of journalism in crypto
  • Why poor and inaccurate information benefits industry insiders at the expense of retail investors
  • Messari’s mission to lead a self-regulatory effort for the crypto industry
  • How an open, distributed crypto data library could help create a fairer playing field
  • The plans for Messari’s token-curated registry of projects following reporting standards
  • The economics and game theory around the Messari token and TCR
Transcript

Brian Fabian Crain:  This is the Epicenter, episode 247 with guest Ryan Selkis. Now, probably quite a few of you have heard of Ryan Selkis. So he was writing this blog called the Two Bit Idiot back a long time ago around 2014, which was widely read including by myself. And he’s had since quite a few interesting roles in the industry. He was at the Digital Currency Group. He was the first employee there and Digital Currency Group invested in lots and lots of Blockchain startups. And since then, he started a new company called Messari and we’re going to speak quite a bit about Messari today. So thanks so much for joining us today, Ryan.

 

Ryan Selkis:  Yeah, thanks, and I’ve been a fan of the podcast for a while. I know we’ve . . . I think there’s been like two or three points in the past where we’ve tried to get this on a calendar and it’s just falling through for whatever reason. So it took about three years, but here we are, so long overdue.

 

Brian Fabian Crain:  Absolutely, yeah.

 

Ryan Selkis:  That’s how, you know, you’re like the OG like crypto podcaster, too because we’ve had that many misses over that long period of time.

 

Brian Fabian Crain:  Yeah.

 

Ryan Selkis:  Everybody’s got a podcast now, but no one has depocenter.

 

Brian Fabian Crain:  Yeah, that’s true. Yeah, there has been influx of competition, that’s for sure. Well, let’s go back in time, right, because I think there’s probably an interesting story there. So you started writing about Bitcoin back in, I think, was it 2014 or ’13?

 

Ryan Selkis:  ’13, I think.

 

Brian Fabian Crain:  ’13, yeah. So tell me . . . tell us how did you first learn about Bitcoin and what was the step that, you know, caused you to start writing about it?

 

Ryan Selkis:  Sure. So, you know, I got it . . . original back in 2011. I was convinced that the dollar was going to collapse and this was around in the U.S. There was this . . . you know, over the summer there was this debt sequester and they basically shut the government down they were, you know, haggling over the debt ceiling. And while that was happening, you know, I just remember thinking, you know, the U.S. was screwed. The history of, you know, reserves is such that, you know, reserve currencies tend to change hands every so often and it seemed like, you know, with China kind of rising up and the U.S. just not able to get and it was collective [indiscernible] [00:02:45] together that there was going to be some, you know, kind of massive disruption to, you know, our reserve currency status. And so naturally, I learned about Bitcoin but instead I ended up shorting the U.S. Treasury ETF and buying gold.

 

And I didn’t buy any Bitcoin because at that point you would have had to go into a cafe and get someone, you know, cash in return for a USB stick. And I’m not an engineer, right, so that just didn’t seem right. And I had the thesis right, but the way that I played it was so colossally bad because the long gold, short, you know, treasuries was just a horrific trade. But if I had purchased Bitcoin it, you know, would have been a legendarily good trade. So that’s when I first learned about it, kind of, you know, kept loose tabs on it like, you know, met so many other people just, you know, being interested on [indiscernible] [00:03:37] wire articles or, you know, any kind of high profile news. But I really started to pay attention when Fred Wilson invested in Coinbase. And then that . . . so that was in kind of mid-2013. That was right around the same time with the Winklevoss twins where, you know, it announced ETF Plans.

 

It was . . . run up to 250 from, you know, kind of low . . . high single digits, low double digits kind of early in 2013. And so over the summer I kind of tracked it, but I didn’t make the leap until late August, early September in terms of buying my first Bitcoin. And that was, you know, kind of a speculative investment just like some of the others because I thought, you know, this is cool and, you know, I want to just in case I have a little bit. And then when the . . . when the Fed shut down Silk Road it was, you know, kind of an aha moment because I thought, okay, this isn’t just going to be for, you know, terrorists and kiddie pornographers and drugs, you could actually see this being for Global Payments not just black markets. And even though, you know, I’d still argue that black markets were the killer app for a Bitcoin in building up the monetary base.

 

And I got very lucky because that happened to coincide with me deferring my offer to business school and shutting down the startup that I was working on. So all of a sudden I was supposed to go to either MIT or work on the startup, I ended up one in those . . . down the startup and I had, like, 10 months on my hand before I would be able to go to the next cycle in the following year. So I basically had to, you know, look a little bit more carefully at Bitcoin because six weeks later, it rallied about six or seven times from when I purchased it. And as someone who was newly unemployed and trying to figure out what to do for 10 months. I had to make a, you know, kind of buy, sell, hold decision first, you know, how do I pay for my rents, should I sell this thing and count my, you know, count my blessings that it worked out and I ended up liquidating my 401(k) buying more Bitcoin and then using the rest for kind of rent the next 10 months or so.

 

So it was from a small days but I went I went about as all-in as you could probably go and then included, you know, kind of writing on a daily basis, which, you know, at that point was the easiest way to learn and really no one was doing it outside of the Reddit threads.

 

Brian Fabian Crain:  Yeah, that’s pretty aggressive of liquidating your 401(k). I actually didn’t know that because even back then, I felt like you were sort of always on the edge and always, like, kind of unsure, a bit critical and a bit like maybe this is all going to collapse pretty soon.

 

Ryan Selkis:  Well I think part of that might have been because . . . well two things. One because I think I’m trying . . . I try to be hyper rational and kind of poke holes in all the arguments. And if . . . you know, when I started writing, it was in that kind of parabolic run-up. So I think I actually got a pretty decent executive audience because I wasn’t just one of the guys posting the rollercoaster gifts and all the to the moon threads, you know, on Reddit, which is . . . you know, it was a little bit hot and heavy. I think everybody was high-fiving a little bit too much leading up to, you know, the end of 2013 and then of course it kind of crashed. And then, you know, the other major component is within, you know, two and a half, three months of writing and getting into the industry. I had met most the executives because it was so small and I went to a couple conferences and they kind of enjoyed the blog.

 

And then, you know, the [Mal Cox] [00:07:32] documents fell into my lap and I ended up publishing them. So I had plenty of reasons to be skeptical and then, you know, I also was . . . on kind of one hand is this whistleblower that people respected on the other, like, kind of, in some circles public enemy number one because, you know, the . . . because the market obviously really cratered after that and it was a big black eye. But, you know, it was a hell of an opening six months to get into a new industry and then, you know, have that kind of combination of things happen. Epic rally, you meet everybody in short order because, you know, this silly little pseudonym takes off and then ultimately or you’re kind of unmasked around, I think, you know, probably still the biggest story to date which is the Mal Cox document.

 

Brian Fabian Crain:  Yeah, I have vague memories of that actually now that you mention it. But it says, so why did he choose to write under a pseudonym?

 

Ryan Selkis:  So the pseudonym was actually one of the best ideas that so my, you know, finance friends had because I started writing the blog, really, it was just kind of like a daily email I, you know, sent to . . . I’d sent some email around to some of my friends at this firm called Summit Partners where I started my career and I said you guys should check out Coinbase. I think it’s going to be, you know, just a really hot company. And they were like in the middle of this industry, they’re kind of the only trusted brand and, you know, they solve a lot of the, you know, kind of onboarding pain points and I basically done a back of the napkin on, you know, what Coinbase could be worth and how much money they were making.

 

And at the time during the run-up, they were probably making, you know, a couple of million dollars a month, right, so, you know, at least $20, $25 million run rate and I know that was close because I posted this under the pseudonym and Brian Armstrong actually messaged me and he’s like, “How do you know so much? Who are you?” So but it was basically just like backing into their fees and at that point they were posting like volumes and all that, so it was, you know, it was actually pretty straightforward. You just had to do kind of like all the digging and that their, you know, kind of company blog at that point. But one of my, you know, that email kind of quickly got forwarded and all of a sudden I had like 20 people on this email thread and I said, hey, you know, I, at that point, was kind of replying to the email daily with updates and then one of them said, you know, you like writing about this, you should start a blog.

 

But by the way, this is probably going to end in tears and you don’t want like a black mark next to your reputation for whatever job you get next. You don’t want to be like the Bitcoin guy that was in bed with all the, you know, the kiddie pornographers, and terrorists, and drug dealers, so you should create a pseudonym if you’re going to post any of that stuff online. So I did and, you know, and it’s stuck. And then, you know, naturally, the pseudonym lasted for about five weeks I think and then it was all over. But it’s funny how things work out.

 

Brian Fabian Crain:  Yeah, absolutely.

 

Ryan Selkis:  And you know what’s funny, Brian, like I thought about this in terms of fortunate accidents, I think the only reason that I was able to get any traction with the writing was because I had the pseudonym. Because I feel like, you know, you always try to like put on airs for people and it’s very, very hard to kind of write right in an authentic voice if you’re trying to impress people and you’re trying to basically show how smart you are and you’re, you know, and you’re kind of calculating. I was just shooting from the hip and having fun with it. And, you know, I think . . . forget who says. It’s like I think maybe like an Oscar Wilde quote, you know, “Give a man a mask and he’ll tell you the truth.” And that’s kind of what happened, right. And then it just stuck and, you know, people liked it so, you know, it doubled down, you know.

 

Brian Fabian Crain:  Yeah, yeah, no, absolutely. I think that is one of the qualities of your writing, there’s sort of, you know, frankness and directness and, yeah, I totally see the association with the pseudonym. So now back then the first thing you did in an industry . . . I mean besides this writing I think your first proper chart was to join the Digital Currency Group, like, what was the Digital Currency Group back then and what was your . . . what was the kind of evolution it went through while you were there?

 

Ryan Selkis:  So I was kind of a skunkworks employee. Barry Silbert’s old company was called Second Market. And DCG was envisioned as a combination between Second Market’s digital currency related businesses which were its trading desk as broker-dealer and then the sponsor of the Bitcoin Investment Trust which later became Grayscale and then the broker-dealer became Genesis. But the legacy Second Market business ended up getting spun out and sold in Nasdaq in 2015. So you have these digital currency focused businesses that were kind of pivoting from the existing SecondMarket business and then Barry’s kind of personal investment portfolio which got merged into one and that became Digital Currency Group. I say skunkworks employee because I was working only on digital currency things but technically DCG didn’t exist until nine months after I joined.

 

So, you know, I come in with the, you know, general related the pitch that, you know, I can help during this transition, you know, I’ve got the investing background, so we can take a lot of the blocking, tackling off your plate for seed investing, help with the fund raise, help build the core team. And, you know, ultimately we could go . . . one of the few different ways, you know, after we do these kind of first few things, but one of the things that I’d like to do is kind of start a company under the DCG umbrella. And so that kind of played out, you know, to a tee. We, you know, we recruited Meltem Demirors, and I think many people know the industry as well who’s now at Coin Shares. She joined in May.

 

She actually ironically would have been one of my classmates at MIT and was connected through a mutual friends that I had known kind of dating back to 2013 and then we, you know, we recruited a couple of other people to the core team, closed the rounds. And then that fall we met with Jeremy Bonney who’s the old CoinDesk CEO and, you know, started discussing the acquisition. But, yeah, I mean the first year, so DCG was . . . it was essentially forming the company, keeping the lights on and kind of positioning it for, you know, the next step.

 

Brian Fabian Crain:  And then, of course, you took over and you ran CoinDesk for quite some time. Now, the issue of coin . . . of journalism and in the cryptocurrency space seems to be an interesting realm. There’s so much money in this industry and people have often been very critical of publications like CoinDesk at the same time also very critical of public . . . of any kind of mainstream coverage because often, you know, it would be flawed or misinformed, like, what wise journalisms and cryptocurrency, why is this such a difficult thing to have those two work together?

 

Ryan Selkis:  Well, I mean first of all, everybody’s kind of making it up as they go along. Information moves incredibly fast, ideas change, projects pivot personnel changes, you get 10 experts in the room debating, you know, BFT consensus systems. And nine are going to shoot on one and then they’re going to go round robin and, like, they’re basically all going to, you know, poke holes in the others’ arguments. And, you know, we see this playing out in real time, you know, online, right, like folks from Ethereum criticizing EOS, you were criticizing Definity and it’s just, you know, this big, loud and incredibly difficult to decipher ecosystem where if you look at this probabilistically, most of the critics are going to be right.

 

But, you know, if you look at this more like an angel or a seed investor there are some projects that are truly going to figure out the equation and ultimately scale onto just massively important protocols and businesses and you really don’t know until, you know, many, many years down the line. So reporting on anything related to crypto is always tough because, you know, not only do you have this, you know, extremely fast-moving environment where, you know, a lot of people disagree, but it’s very, very deeply technical subject matter and, you know, quite frankly there aren’t many computer scientists that are journalists, right? Because, you know, for one thing the economics just don’t work, right?

 

I mean, you know, Solidity developers are getting paid, what, half a million dollars a year or, you know, more than that right now just given the immense shortage and, you know, kind of the ICO [indiscernible] [00:16:24] and, you know, journalists like that is just . . . I don’t know if like the editor-in-chief of like the New York Times makes that much money, right. You know, maybe like there’s a few people in journalism that make that kind of money. So there’s just I think a gap in terms of like what the market value is for that expertise and kind of where it’s deployed and, you know, the other side is like you basically can do no right. Because if you try to basically say here’s what this group is saying is true and, you know, if these three things end up being true then, yes, this project could get legs and you basically just report on what the project’s lead want you to know then you’re accused of being a shill.

 

And if you take the other side and you basically just get a bunch of like criticisms for that same project, well then you’re just accused of spreading like FUD and, you know, being malicious, and trying to like denigrate the entrepreneurs in the industry. And the funniest part is, you know, CoinDesk is a great example because I think they do a great job, you know, kind of balancing or, you know, at least they, you know, they work their asses off to get it done. [indiscernible] [00:17:41] is on the rest the team. But many times those same arguments will come on the same article, right. So you’ll get people that are like “I can’t believe you’re shilling Ether, I can’t believe you’re crapping on, you know, sharding and Casper and, like, all of a sudden, like, in the same exact article, right. So and I generally found that the articles that I post like that are some of the best ones, right, because it means that you’ve kind of accurately, like, given both sides of the argument.

 

So that’s I think one of the major things that is problematic and, frankly, it’s one of the reasons that I think some curation markets are so interesting and just other curation tools are so interesting. I really like I think what Token Daily is doing obviously . . . you know, what we’re doing at Messari with our homepage and that kind of new summaries and kind of condensed research summaries I think is very valuable. And I think we’re going to see a lot more like that to help people, you know, kind of filter through the noise.

 

Brian Fabian Crain:  So when it comes to Messari, I think, you know, just sort of a backdrop to Messari, which is that, you know, these big problems that you see in the industry and kind of failings that you see in the industry, like, what is . . . what are the things that bother you the most or disturb you the most about, like, what’s going on in the crypto space today?

 

Ryan Selkis:  Well, we claim that it’s decentralized and equitable and it’s all about the technology and that’s all bullshit. Just cover, cover, it’s just not true. Most of these tokens that are being sold are being, you know, held by the same syndicate of investors who gets an, you know, early access to all the deals because it’s, you know, probably not decentralized. They’re getting massive discounts so, you know, by the time the retail investors actually have an opportunity to purchase these very often, they’re buying it, you know, 10 or 20 or 50 X multiple of, you know, what the insider are paying. And these things are trading publicly with massive information asymmetries where, you know, the investors, even when they are liquid, right.

 

Even when they’re trading on exchanges, like the insiders of the projects, the investors that, you know, have gotten early, they just have a different level of access to information than anyone else that’s, you know, buying through Binance or Bitfinex or, you know, even, you know, Coinbase or Gemini. So maybe not the latter just yet because they’re not really touching tokens but, you know, I think you get the point. So what we’re really trying to do at Messari is level the playing fields and just usher in some sanity around disclosures and kind of common sense aggregation of kind of key information. And where we’re starting is super rudimentary, right, like, supply curves out of your tokens vest over time and do you disclose when you make a sale outside of the initial ICO. Who are the verified personnel on the team? Who generally speak on behalf of the project? What communication channels do you use?

 

And I think it’s things like that where you want to know if, you know, Project Lead Bob Smith, right, just ends up making a material change to the token issue in schedule as, you know, as part of their proposed upgrade to the network protocol. And you want to be able to, like, see how that trickles down to other investors, right, this new inflation or this, you know, this kind of arbitrary change to the schedule. And you want to know, like, on par with all of the insiders at the project that issued the token, you want to know, you know, at the same time as the investors are back early and there is no expectation that happens right now within crypto. So you’ve got this really weird like, you know, these things your quasi-private, quasi-public and what’s going to happen is it’s going to create a real mess once people start losing a serious amount of money.

 

And that’s happened a little bit this year but I don’t think we’ve seen the worst of it yet and it hasn’t been quite big enough, so I think I actually worry about the next leg up, right, if, you know, a Bitcoin ETF gets approved and, you know, institutional custody gets solved, we’re going to see another mega rally in Bitcoin. And whatever, you know, Bitcoin rallies it brings up all of the rest of the tokens with it regardless of kind of quality. It just, you know, you’ve got, you know, the “shift coin rally.” And when that one bursts, it’s going to be an order of magnitude larger than kind of the last six months setback and that’s when it actually creates some real pain for really large community of back holders large enough where governments get involved, regulators get involved and then it could be a serious crackdown.

 

So we come at this from, like, let’s protect, you know, retail investors, let’s aggregate information on these projects and just solve like the practical issue of, you know, where’s a single source of truth for information on, you know, the universe tokens. And then ultimately, you know, I’m pretty negative on a lot of what’s been going on, but I’m very long-term bullish on attack in the industry and, you know, kind of the good guys that are actually working on building the infrastructure here. So it really does matter to us that we, you know, help fix some of the macro problems because I care about where this industry is going to be in 10 years and, you know, if we fuck it up now, it’s going to set us back for quite a long time. So there’s like a self-regulatory like let’s clean up our own house type of angle to what we’re building at Messari.

 

Brian Fabian Crain:  Yeah, I think you point out some definitely some massive issues. Now I’m curious if we can get into like a little bit more detail here when you kind of talk about like let’s say this bubble bursting, people getting hurt, like how . . . what do you think are some examples of ways that the current information asymmetry could be like abused and misused that then leads to these like massive pain among, let’s say, retail investors?

 

Ryan Selkis:  Well, it doesn’t even have to be nefarious, right. So a perfect example is civic and I think the way that [Vinnie] [00:23:35] and his team structured their token sale, I think it was aboveboard. I think they, you know, tried to do things the right way. I think, you know, everybody got access to the same price. They had this auction structure, so they did a lot of things really right and this was last July. But, you know, a couple weeks ago, he emails me and says, “Hey, we just had the first anniversary of our token distribution and that means a 110 million CVC tokens have vested and are now liquid. But we’re not planning to sell them, like, we’re going to keep them on our balance sheet and we’ve just posted this blog post about, you know, when we’ll sell and how we’re going to commit to, you know, disclosing any secondary sales of this kind of liquid supply that’s on our balance sheet now.

 

And this happened . . . it vested on a Friday and we had this conversation on Tuesday the following week. And this is a guy that, you know, is like, “We’re not selling, right. We’re not going to dump this on the market even though it’s liquid.”  But that information was public just no one knew about it. And if you kind of back into the amount of money that actually equated to, you’re talking about, like, $25, $30 million worth of tokens that were just unlocked overnight according to the smart contract and that’s, you know, multiples of the daily volume traded in CVC tokens. So you can imagine, you know, other teams that might say something like “Oh well, this was in the smart contract, so we said it was going to vest over this time period and then you wonder why, you know, the token X has crashed 50%. It’s because the team just vested and liquidated their holdings of like a vested, you know, percentage of tokens.

 

So that’s kind of like an [indiscernible] [00:25:39] And some of this is public information, right, so, you know, that’s why I think we’re starting very, like, remedial with the disclosures and then we can kind of get more assertive over time. According to, you know, kind of community governance standards, I don’t think we want to reinvent the SEC because, you know, that . . . I don’t think that system necessarily works for crypto anyway. But there are, you know, kind of low-friction ways to at least clean up some of the, like, very egregious type of activity and major information symmetries. So I think that’s number one. And then, you know, number two which is a lot trickier is how do you understand the investor incentives, right. So I want to know if a project that is raising money at a $6 billion evaluation, I want to know what the existing stakeholders have at risk and over what time period that vests.

 

Because if someone invests at a, you know, a $5 million evaluation and then the project turns around, uses their name to advertise that they’re raising money at a thousand times that, that’s a pretty big problem because the implication is Andreessen and Union Square have invested in this therefore it’s a good high-quality project that you have access to, lucky you. And in reality, yes, they had access to this deal at a penny on the dollar and you have access to a very, very different deal, but by the way, the team has made no material progress in the five months between those two events. So I think it’s important there where, you know, you at least understand, you know, what’s at risk for the, you know, kind of earliest stage investors. And I’m not suggesting that information is just going to clean this up, it’s not. But it’ll certainly mitigate some of the damage if you have this all this information in one place.

 

And very importantly, you know, you can build a network around it. So, you know, our whole angle is we’re not going to gather all this data and then resell it. Someone has to create the kind of common library that the Bloomberg’s, the Moody’s, the S&Ps, you know, all the other data services and financial services kind of build on top of and referenced as a single source of information.

 

Brian Fabian Crain:  So this is situation which is, you know, I totally agree with the examples, right, it’s a really tricky situation and has potentially really bad outcomes, is this . . . like what’s the cause of this? Is it primarily driven by, you know, lack of regulation and liquidity of all of these assets? Or do you think there are some other key drivers to this problem?

 

Ryan Selkis:  Well, there are jurisdictional challenges, too, right. So one, you know, you get a lot of projects that if there’s a huge crackdown in the in the U.S. or a certain state or whatever, you know, they’re going to move overseas. And, you know, the other issue is there are . . . there haven’t really been any precedents so there’s a practical issue where, you know, the SEC, which might be the most aggressive enforcer of, you know, are coming after unregistered securities offerings and with respect to tokens taking a close look at enforcement actions, they’re being very, very careful and just practically speaking, they can’t play this game of whack-a-mole and try to go after every project because they just . . . they don’t have the resources and when they do finally make a case against someone.  they want it to be a slam-dunk. So I think it’s very unlikely that they go after something like XRP and Ripple.

 

Because, you know, Ripple can afford, you know, a $100 million of legal fees no problem. And, you know, they’ve got the former SEC Commissioner on their legal staff, right. So you kind of think about like all these deep pocketed projects that are playing this, you know, regulatory shell game of sorts and it becomes difficult to enforce. On the flip side, I think it becomes very easy for the projects that are at least trying to do things the right way to signal, you know, our intentions are good, right. The market is frothy, our intentions are good, here’s how we’re trying to structure things for the long-term. And what that will ultimately help on the other side is, you know, if we’re just basically . . . if we’re going after super remedial basic information disclosures and a project says no, well then that’s kind of a pretty significant red flag that if I were a regulator I would want to look at.

 

Because they’re going to go after like the truly fraudulent, you know, worst actors right now get the easy wins and it kind of build up over time. So, you know, I view some self-regulatory mechanism as ultimately much more effective than anything that we’re going to see from on high.

 

Brian Fabian Crain:  Yeah, absolutely. I mean we did do a podcast a while ago with someone who used to be an SEC . . . at the SEC, a prosecutor and I was very illuminating too in this regard and kind of made it very obvious that the SEC would be completely incapable of going . . . of really making a big dent in this at least for a long time. Now let’s speak a bit about this TCR idea. So TCR of course stands for Token Created Registry, which has come up, you know, quite frequently in the last year. I don’t . . . and the idea of or one of the idea of Messari is that basically you create this registry, right, of good projects or projects that comply with certain reporting standards and that then, you know, I as a consumer investor, I can say okay, I can look at that list and I can know that there are certain quality standards are met by that project and I have certain information that I can rely on, talk a little bit about TCR. Why is that the right design for this?

 

Ryan Selkis:  Yup. So it goes back to the coordination challenge amongst regulators and kind of industry. If you look at your self-regulatory efforts and the existing financial system, like, FINRA is the great example that regulates financial services and like all the broker-dealers and, you know, does licensing for, you know, both broker-dealers and then, you know, securities professionals. So, you know, FINRA basically exists at the mandate of the SEC. And, you know, it’s an eighty-year-old organization basically. It’s self-regulatory body regulates broker-dealers and kind of licensed securities professionals, but it doesn’t exist without kind of the SEC’s mandate. Within crypto, there is no SEC because you would need some global regulatory body that would set standards and, you know, have some type of enforcement teeth that could penalize, you know, fraudulent actors or folks that are out of compliance with standards.

 

So the question becomes how do you bootstrap any sort of self-regulatory mechanism without a central regulator. And what we’ve proposed is that you might be able to do this with a token-curated registry. Now the TCR is, you know, pretty interesting because you could economically incent exchanges, funds, underwriters other kind of financially motivated, you know, strategic actors to actually buy stake in a system that votes on the eligible participants in that system and ultimately curates a list of projects that abide by certain standards. And then ultimately helps to evolve those standards over time and make any adjustments that are necessary. So at the end of the day, if you, you know, even if you have a 1% stake in the registry, you know, you could either vote directly on projects or delegate to a proxy who should ultimately be on that list. And the way I like to think about it is I used a university example all the time.

 

If you have a Board of Trustees, their primary motivation for the university is to preserve the integrity of the university or, you know, even increases profile, boosts profile. At the end of the day, what they’re really trying to do is continue to boost the credibility and the value of the diploma that you get, the credential that you get from graduating. So you got the Board of Trustees that are managing the university at the high level and then you’ve got applicants that really, really want to get into the university just so that they have that credential long term. And, you know, that’s really what they’re paying for is the piece of paper at the end of the four years. And the social signal that they’ve met certain standards and now they’re an employable professional. The issue is the . . . with current TCR is everybody is assuming that the token holders are going to vote directly on the applicants.

 

And that’s like saying that the Board of Trustees at the university are going to review every single applicants, college assay. And we know that doesn’t happen in reality. What happens instead is they actually delegate to an admissions counselor, right, a group of specialists that are going to validate the integrity of all of the applicants and ultimately curate the lists of students who get admitted. So I think a good TCR and the way that we’ve envisioned ours is one where you get a bunch of strategically aligned token holders at the kind of governance level. You have all the projects at the base layer that are, you know, interested in applying so that they can, you know, have this credential, the social signal that they’re at least trying to do things the right way.

 

And then ultimately, a fee market emerges where there are, you know, healthily incentivized auditors or validators that will review all these applications and kind of sign off on different projects and ensure that they are actually in compliance with the standards. They say they are because they’ll learn all the network fees and they’ll learn all the application fees that are coming from this pool of applicants. So, you know, that, I think is a really interesting mechanism that is much, much harder to game than kind of the current TCRs that have been out in the wild which, you know, where you have kind of quorum issues, you have free-rider issues, you know, folks that, you know, basically, you know, continue to just own the tokens but do nothing with them except for speculate the future value the network’s going to go up.

 

So I think the way that we’re thinking about this is, you know, how do you truly incentivize work and validation of good projects and ensure that you don’t just distribute a token that might govern a list like this to, you know, non-strategic investors and that would include retail folks. The reason that we like this so much is, you know, we could build a lot of what we want to build at Messari without the TCR, but the issue that we would get with our, you know, database of projects in particular is you’d have a staleness and data completeness problem, right. So think about Crunchbase or, you know, AngelList, basically like any private company markets, you know, information repository. The information there is often inaccurate or incomplete just because private companies don’t necessarily have much reason to disclose all of this information.

 

And there is no real penalty for, you know, a three-month lag in updating your Crunchbase profile. And the reason for that is pretty simple, like these shares don’t change hands, right, they don’t trade. And if they do, if there is some type of secondary sales, it’s usually amongst other, you know, credited investors and other venture funds, you know, folks that are going to do their own diligence and actually invest in one slug not on a day-to-day kind of trading basis. So your Crunchbase works for private markets even though it’s not perfect because, you know, people do their diligence and these are kind of like blocked sales of shares. In crypto, with these assets trading 24/7, you’ve got kind of the worst elements of Crunchbase right now which is data, and completeness, and, you know, really no expectation that it’s going to get updated and then, you know, kind of public market liquidity.

 

So the TCR is really designed to help bring some type of teeth to disclosures around, you know, whenever there’s a material change to your project, right. So like how do we ultimately get, you know, teams to, you know, update these profiles in a timely manner so that the information doesn’t just trickle first to like the venture capitalists or the, you know, the insiders of the companies themselves.

 

Brian Fabian Crain:  Great. I would love to challenge you a little bit on the analogy you used. So you use the example of a university, right, and you have these trustees and then they want to kind of protect the value of being on that list of like university graduate, right. But then when you look . . . when you talked about Messari and this token-curated registry. There you talk about okay having strategic people and I think you mentioned the changes and then the Whitepaper meant just crypto funds and stuff like that that holds some of those tokens. Of course if you sort of translate that to the university example, right, that would be like a trustee who also has some sort of stake potentially, right, in the, you know, future revenue potential off a particular actual, you know, university applicant or university member who wants to get a degree, right.

 

So they obviously have to, you know, or if you then translate that to the crypto world where let’s say token fund they have invested in a particular project, it may not be completely legit or it may be a conflicted project but they do want that on that whitelist. So how do you think that it’s going to play out if there are all of those other economic interests that are . . . may not be apparent and maybe hard to monitor?

 

Ryan Selkis:  Yeah. Well I actually think that’s a good thing, right. So with the caveat that’s . . . you want to make sure that the initial token supply is well distributed. Because if you just raised money from a couple of investors then, you know, of course they’re basically going to talk to their own book and say . . . and vote in their own projects, right. But if it’s a widely distributed group of initial backers and voters and, you know, interested parties in the TCR, you’re going to have a lot of disagreements. And I would imagine that, you know, there is some equilibrium where the group kind of agrees, okay, even if I did invest in this project they are doing things the right way, we have respect for the team and, yes, they certainly meet these standards.

 

And on the other hand if there was a really shady portfolio company at one of the token holders, they would just be overruled by the other, you know, 15, 20 different funds or exchanges that we’re voting. So I think that kind of works itself out naturally. The caveat to that is how do you mitigate the risk of those tokens ever being sent, like, held centrally, right. And how do you, you know, prevent people from accumulating outsize positions in the registry and ultimately, you know, a large degree of influence over who actually gets onto the list. And there’s I think a couple of ways to do this. One, you kind of control the initial distribution and you ensure that there’s kind of vesting schedules and these are relatively illiquid to start. Two, I think it’s important for whoever the initial incubator of the registry is to be able to add partners and continue to unwind the treasury over time.

 

And we’ve kind of proposed selling, you know, X percent at time zero and then unwinding the other, you know, like remaining tokens supply that we hold on our balance sheet over, like, some defined period of time like three years, four years, whatever. But actually selling it in a structured way not just having it vest and having it be uncertain but actually saying every six months we’re going to do this auction. So there is this predictable liquidity in the system and these are the only eligible buyers. So I think that’s another way to do it. And then the last way is to incorporate identity and reputation into the system in some way. And I don’t know exactly what that looks like yet but I think for certain TCRs, it’s definitely easier than others to basically know not necessarily the votes of everybody that’s casting them, but to know what the voting power is of all of the participants, right.

 

So imagine knowing who has 100% . . . if you’re going to split the pie chart of Bitcoin mining capacity, it’d be really helpful to know like what percentage Bitmain versus Bitfury versus, you know, any of the other major miners have at any given point in time. And with a reputation system and the TCR and kind of the state based voting, you might be able to track that over time so you can basically guarantee it at least on chain there is this distribution of voting. Now that wouldn’t present . . . prevent, you know, bribery attacks or kind of, you know, off chain collusion or anything like that. But if there were collusion, you would know who the parties were that were, you know, colluding, right. And at least, you know, now there’s some reputational stake if the quality of the registry declines over time.

 

So I think in our system in particular, this isn’t true for all TCRs but we’ve thought, you know, very carefully about the specific risks in our system and kind of the tradeoffs and so while I think TCRs are exciting, I tend to agree that they are, you know, in general, they’re not one-size-fits-all, right, and they are a useful mechanism but the kind of mechanism design is going to depend on the use case.  

 

Brian Fabian Crain:  Let’s say there’s a particular project and the expectation is that project would, you know, let’s say they do their token sale and then they say, okay, we’re going to have this much for a software development, this much from marketing, and then we also are going to have, you know, this amount which is going to be used in the budget to pay for this application fee because presumably for these tokens to be actually worth something, those application fees have to be very high. Or how do you . . . how is the value of those registry tokens is going to be driven?

 

Ryan Selkis:  Yeah, I think, you know, we’ve started out with the $25,000 application fee and I think it’s high enough where people are, you know, demonstrating that they actually are taking this seriously and that it’s not a negligible amount that they can just kind of throw away. It’s low enough where people are probably willing to pay it and it doesn’t take a massively long sales cycle to kind of convince people to merit to this. But it’s also high enough to ward off frivolous challenges to a given candidates registry status. So, you know, if you only had $500 at stake, you might get, you know, dozens of trolls that are just trying to, you know, poke holes and, you know, oh, you know, the, you know, Vinnie tweeted this thing and . . . or, you know, the Golem guy has treated . . . tweeted this thing and so that means that they’re out of compliance with, you know, the disclosures, framework that they committed to you.

 

And they should be booted, you know, so it kind of prevents . . . it’s like a spam prevention feature, right. So instead of like a fee market or, you know, gas market, ours is, you know, a little bit chunkier in the sense that it takes, you know, five figures of value maybe more over time to actually challenge these applicants. So it’d have to be something pretty material that they, you know, welched on.

 

Brian Fabian Crain:  Yeah. I mean I’m still struggling a little bit because, you know, let’s say there is a thousand projects per year that actually kind of applying goes through this process pay this fee, which is a lot, right, like a thousand projects is probably not a thousand, you know, legitimate token projects today. You know, I think that probably significantly less or fewer.

 

Ryan Selkis:  No, yeah, right, but if you think about tokenized securities, right, and, you know, what that market might look like over time, you know, the end game for us, you know, EDGAR is an inferior system, right. So if you were able to automate accounting and disclosures via smart contracts long term for all types of securities and all types of, you know, new types of programmatic asset, smart assets, then that becomes a very, very large market. And the whole concept of doing like a 10-K or 10-Q becomes laughably obsolete because information is available and, you know, basically real-time.

 

Brian Fabian Crain:  Yeah. I mean I guess where I was, sort of, leading to was that, sure, right. Like the market can grow enormously security tokens and then also this kind of volume can grow enormously. But if you think of the security of this registry as this central self-regulatory body and if you see that as being, kind of, protected through game theory and through the value of this token, then it seems like it’s a sort of disproportionate knowing that the value of this token or the volume that’s coming in in transaction fees is going to be very low compared to, you know, the massive, massive potential benefit that could be had in gaming this system, you know, if it actually gets that standing.

 

Ryan Selkis:  Well, you know, I don’t think that the $25,000 is static either, right. So it’s your point if this becomes a critical piece of market infrastructure the token holders could ultimately vote on raising the fees or they could vote on, you know, adding an annual assessment to projects that, you know, want to continue to be on the registry so it becomes recurring. They could, you know, ultimately add other types of credentials that they’d like to see, right. So, you know, FINRA has . . . you know, they, you know, charge fees to the broker-dealers themselves annually, but then they also do all the credentialing for the brokers, right. So do you verify personnel that are in, you know, certain roles or certain, you know, positions within the industry? So I think, you know, there are many ways to kind of get there.

 

But, you know, the back-of-the-envelope math is, you know, if long-term, you gets . . . you know, there’s 2000 projects paying $25,000 a year that’s 50 million in network revenue. That’s a lot, right. And that’s a hell of a lot more than just about any other, you know, crypto economic system right now. And if you kind of use traditional evaluation metrics, I don’t think that this is a security because the token holders would be the ones doing the actual work in exchange for earning those network fees, but you can still look at it like an income-producing asset and that kind of right-to-work token, you know, I don’t know what the multiple is, but you assume that’s pretty high margin revenue that could be, you know, multiple 20 on that, that gets you to like a billion dollar network value for a token that isn’t just backed by error, right. It’s like actually backed by real, you know, economics [indiscernible] [00:48:42] through the system.

 

So that’s what I think gets us, like, super, super excited is, you know, in a world where, you know, this replaces traditional reporting frameworks and you can actually bootstrap the network and develop critical mass and get to, kind of, the critical part of the S-curve, you need to get before it really takes off. Then, yeah, it would be very valuable as a public good, number one, but also very valuable financially because, you know, the system was well designed and incentives were aligned. Does it start as a billion dollar network token? Of course not, right. And so that’s why, you know, when, you know, as we build this out and we think about like who the next partners are going to be, it’s going to be, you know, significantly lower than that. But, you know, the flip side and I always add this as a caveat because I’ve been, I think, very outspoken on ICS in general, none of our natural users are individuals, right.

 

They’re all institutions whether you’re talking about the projects that are applying or the entities that are facilitating resale or, you know, kind of this whole economic boom, they’re all almost by definition or credited investors based on their size. So we actually don’t need to worry about a lot of the, like, pump-and-dump type of schemes, I think, because I have no interest in, you know, letting this trade publicly anytime soon and we would only roll that out, like, very carefully over a multi-year period.

 

Brian Fabian Crain:  It would be an extremely exciting public good and that I hope, I hope this will exist. So I’m keeping my fingers crossed for you. So I would also love to understand a little bit how this token created registry which my understanding is this kind of the central idea of Messari fits in with some of the other things that you’ve worked on. So I mean there are these, you know, reports on projects created by the community and of course that very much fits into, I think, with this reporting but then there’s also messari.io which you’ve recently sort of touted as the, you know, front page for crypto and you said that it was going to be a CoinDesk competitor and then you also acquired OnChainFX, which is something a bit similar to a coin market cap though I’m sure you think superior, so how does that fit together?

 

Ryan Selkis:  Well, I don’t think we want to build an editorial desk, number one, so not quite a CoinDesk competitor but former CoinDesk managing director competes with CoinDesk is always a sexier title than another, you know, another blog pops up. But, you know, I do think that what we’re doing on the curation side is super important and interesting just to help people, you know, kind of filter through the noise. And the way that I always look at content is and it’s an engagement mechanism, right. It’s marketing. So I don’t think that there is much that’s interesting for us to do on the kind of content curation side other than continue to drive eyeballs and engagement with Messari as a brand to drive people into our community to help, you know, solve some of these communal research problems.

 

And then ultimately to get projects on board with the idea that we should be kind of the initial maintainer and curator of this information with respect to their disclosures. Because a very natural question for projects, you know . . . now fortunately I’ve been around for a while so a lot of these guys know me, which I think gives us a good head start, but a natural question is, you know, why are we going to make all of our disclosures with you when no one visits your site, right? Like I want to make sure that if we update this information, it kind of percolates out to, you know, a hundred different data services. And so, you know, it’s about kind of brand community engagement and also just, you know, audience development and making sure that we have . . . that essentially every single data partner within the industry that might want to build on top of that disclosures library and actually pull that information as a single source of truth as a base layer that we’re very visible.

 

Because what we’re trying to do is kind of build the low, like, the base data layer for crypto. And so your point about OnChainFX, you know, you’ve got, kind of, curated analysis and news that you can categorize by sector, by asset, and then you have all of the quantitative information about these projects and all of the kind of, like, on Blockchain information. And that gives us two really important touch points. One is with all the exchanges and all the real layers as decentralized exchange gets, you know, more important. And two, you know, in order for us to make the TCR reporting seamless, we actually have to build quite a bit of on Blockchain infrastructure where, you know, we’re actually spinning up network nodes and like Ethereum is a great example, right. We need like a really strong Ethereum infrastructure so that we can seamlessly pull all this information from ERC-20 assets.

 

And ultimately we, you know, as we build our library or others build on top of our library, it’s trivial to add kind of snippets of code to a token’s, you know, wallet address and, you know, automatically disclose that information into our database, you know, via some type of hash. So all of the like quantitative, you know, more rigorous stuff that we’re doing related to Blockchains is kind of . . . and all of the work that we’re doing on curation is, you know, kind of a method to the madness to ultimately get us to the end goal of this disclosures library and I’ve written about it as well, right. It’s part of a flywheel. So do I want to build a media site? No, I already did that once. I loved the CoinDesk people, I hope they do very well. I’m not building another media business. Do we want to build a community? Of course.

 

The community is not going to be a social network. It’s, you know, a place to learn, it’s a place for us to bootstrap and kind of coalesce people around a common mission and will certainly add tool in there. But, you know, really the more important thing is this last piece of the puzzle which is how do we build a data layer for crypto and then data services on top of that that make this asset class easier to understand. But it’s a great question. It does look . . . you know, and I’ve gotten this, you know, from . . . you know, even some of our investors, they’ve basically said oh like I think there’s a little bit of brand confusion right now in terms of what you guys are doing. And part of me is, you know, you always don’t want there to be, you know, confusion about your brand or, you know, particularly about any misalignment issues.

 

But there’s another part of me which is like, “Okay, that’s fine, like, you know, let’s get all the pieces in place and then when we’re, like, really ready to hit the go switch, you know, we’ll kind of, like, unveil everything and it will all be beautiful and it will make sense. So yeah that’s always a delicate balance. But you’re asking the right questions and, you know, hopefully that helped as an answer.

 

Brian Fabian Crain:  Yeah, no, absolutely. Now, I would be curious to hear a bit about, you know, what’s the timeline here? So what would what do you think is going to happen in the next, you know, 12 months, next, you know, 24 months?

 

Ryan Selkis:  Yeah, so, you know, we’re actively working with a number of, you know, high-profile projects now on getting them on board as the kind of initial registry participants. And, you know, nature of the beast in doing any decentralized network launches, it’s got to start centralized so we are, you know, certainly starting as the central maintainer and an arbiter of who’s going to get onto the list. But we’re trying to make it as open access as possible. So, you know, obviously, you know, know some of the older projects just, you know, by virtue of how much smaller the industry was five years ago than it is today, we won relationships with, you know, every single project that’s launched, private and public. And we want to be able to start, you know, assessing, you know, whether they’re interested in joining and, you know, kind of who’s going to be part of the initial list.

 

So a lot of it is kind of political and [indiscernible] [00:56:35] right now and then our engineering team on the backend is building the user flows, the application infrastructure, and then ultimately the Blockchain mechanics themselves that can, you know, make all this, you know, kind of work together.

 

Brian Fabian Crain:  Great. And now community, you mentioned community and I think right now even these reports, right, our community curated, community created so people who want to . . . like who are you looking for and how can they get involved?

 

Ryan Selkis:  So another thing that I found is pretty difficult. You know, I’ve seen other research communities where you go to their telegram group and their telegram group has 40,000 people and it’s just like one moon, one ICO, one airdrop, you know, like it’s just a bunch of, like, bullshit and completely counterproductive. So our community is actually pretty exclusive and restricted. And it’s still just kind of volunteer contributors. It’s basically hobbyists and, you know, folks that are doing this research in their spare time anyway and they, you know, want to join to actually learn about, you know, the fundamentals and kind of inner workings of these networks not to, like, pump-and-dump and kind of talk to their own book.

 

So it’s a lot of analysts, a lot of kind of young computer science grads, a lot of investors, you know, academics, but there’s about 150 folks in the community right now and we’re probably going to get that up to 500 by the end of this year without kind of sacrificing the quality of the conversation. So it’s . . . you know, we do actually have a high bar. You know, we . . . you know, certain folks that we already know or that have a certain standing in the industry that have kind of proven their bona fides as a . . . as an investor or an analyst or what have you, you know, we kind of invite just based on knowing their credentials but then, you know, we also try to keep it open access where if someone is an up-and-comer, they can actually submit an application, you know, token pitch, give us a writing sample and, you know, we can kind of go from there.

 

You know, the goal is to make this open and accessible to anybody on the contributor side of things, but until we’ve actually built all that, like, Wikipedia like permissioning and infrastructure, we have to centrally manage it and it’s just the bandwidth issue, so. We have an open application that anybody can check out if they’d like to join the community.

 

Brian Fabian Crain:  Okay, we’ll definitely put that in the show notes. And in this, the idea down the line also that maybe people who do that work and get some token distribution from this creation token or is there some incentive model around that downline as well?

 

Ryan Selkis:  Nothing for the foreseeable future. I would love to find a really smart way to do that. I don’t think anyone’s figured it out yet, it’s not our core focus, so, you know, we kind of take the approach that we’re all on this together. Anything that’s contributed by the analysts will never be resold by us. It will always be open and free to the extent that changes in the future, we would only change it if we could actually, you know, finance . . . you know, share the financial spoils with the folks that were kind of early in the community. So I’d say like hard no for the indefinite future and I don’t want to, like, mix the message or, you know, have . . . because this is always the thing, right. Like, oh, there’s like a little bit of like, you know, wink and nod. It’s like, oh, we’re not going to help you and we’re not going to pay you, but wink, wink, nod, nod, there may be this light at the end of the tunnel that’s like magical airdrop.

 

Or this, you know, this token is, like, you know, a monetary incentive and I am very, very reluctant to get anywhere near that. It’s, you know, let’s just start with the assumption that no one is ever getting paid anything and this is, like, if you . . . if you’re interested in joining a community of, you know, kind of like-minded people and then, you know, welcome. Let’s, like, build some cool shift together and help solve some of these information problems. But if not and, you know, you need to be paid for your work, totally understand, you know, come check in with us when we’re in a position to do that.

 

Brian Fabian Crain:  Okay. I guess there’s one last question that we must cover, I realized, especially since we’re talking about, you know, disclosures and, you know, and financial interests and all, so what is the business model of Messari? I mean, presumably you guys will keep some of those tokens, but is there . . . is that the case and is there something else as well?

 

Ryan Selkis:  Yeah, so, you know, we should be one of the initial validators of who gets onto the registry. But we have ideas for how to basically force competition and ensure that there are other validation services that emerge and basically compete away that side of the business from us. I hope that we’ll always have some share of it, but I don’t think we want to be a 100% because that defeats the whole purpose. And if we assume that that market materializes over time and becomes, you know, tens of millions of dollars per year then, you know, that’s a pretty, you know, healthy revenue line for us. We are going online, the tokens over a multi-year defined period, but how exactly that splits is something that we’re kind of, you know, stress testing and, you know, peer reviewing right now.

 

But of course there will be, you know, some reward element that accrues to us for launching and incubating the network, but there is kind of a defined exit strategy, so, you know, we would have to liquidate over a certain course of time. And then finally, you know, I think we’ve always wanted to build a data business and this is just, I think, the first kind of critical missing piece of infrastructure. If we can bootstrap this public commons, there are 50 different value-added service we could build on top of that that are, you know, completely different business lines. We’re all kind of in the data service business, right. So whether you’re talking about on Blockchain analytics, whether you’re talking about better trading tools, or, you know, kind of business intelligence tools for, you know, professional investors, whether you’re talking about reporting tools or kind of treasury management for the projects themselves.

 

Or if you start to kind of verticalize and look at some of the most exciting networks and say, “Oh we can make a really interesting solution here or even get into, you know, investment services, you know, in a sub market,” right. So, you know, one could be . . . you know, if Augur takes off and we have, you know, a massive advantage on a data processing side in terms of, like, which Augur prediction markets we should make, you know, maybe we decide to become a market maker and one of those sub markets. Or, you know, decide to, you know, start, you know, staking pools for, you know, a variety of other, you know, token, you know, based markets. So there’s a lot of different directions a week ago. Many . . . you know, almost all of them make money, so let’s solve like the here-and-now problems and, you know, over time, you know, we want to do this the right way, so.

 

Brian Fabian Crain:  Right. Although I guess that that is . . . it is going to be an interesting, you know, also potential conflict of interest error, right, because people often criticize this foundation structure that the Ethereum used to do the fundraise, but personally, I actually think it’s a good structure because it does have this, you know, funds raised through a token sale or have like it’s designated purpose, like, there’s like actual checks and balances that they’re used with that, you can’t, like, build a poor profit business, like, with the same team and the same . . . like here, you do have much more of a blurry boundary, I guess. How do you . . . how are you planning to like manage, that was the tricky situations that can arise. So let’s say somebody wants to build a business on . . . like a validation business but you guys who were running the protocol are also building one as . . .

 

Ryan Selkis:  Yeah. So here’s maybe the easiest way to think about it, right, and we’ve thought about what the default should be. But I think here can be a pretty easy and fair way to do it, right. On the one hand, we have all these tokens that we’re going to unwind over time. And I would say any tokens that we have that we don’t distribute are non-voting. So we should never be able to vote our own tokens and provide validation work, right. So, yes, we could sell them, we can distribute them strategically over a period of time, but we’re not actually going to be able to vote them. So then the only voters in the system are the ones that have actually, you know, acquired tokens from us. And the tricky part is not all of them are going to necessarily want to do the validation work. So we should also be the default validator at first. So we have a 100% market share on validation on day one, right, and that’s a problem.

 

But one way you might be able to solve it and kind of compete away our business immediately is to tell the token holders, “Hey, you must vote. If you don’t vote, you’ll lose your stake. By the way, you can also delegate your vote to someone and then you can delegate to a some kind of third-party validation service of which were the first.” But if you don’t vote and you delegate to us, we’re going to take a 100% of the network fees. Like a 100% of the rate you basically get no dividends and you essentially just own the token and if it appreciates in value then, you know, that’s where your economic come in. What that, I hope, would do is the fee market materializes is give other validation services and opening to say, “Hey, we’re going to come in, in exchange for your voting power, we’re going to provide the same quality of service, but we’re going to rebate back to you 50% of the fees that we make.”

 

So any rational token holder would say, “Well, Messari is great but to prevent them double-dipping and to ensure that we have kind of a nice distributed validation framework and so that we can actually earn better fees, we’re going to delegate to these other guys. So Messari, you’ve just lost our vote, sorry. And I think, you know, what would happen in a scenario like that is you’d ultimately have, you know, three or four, you know, kind of a handful of entities that would compete for that business and you’d have some market equilibrium for what the feast sharing structure should be and then ultimately, you know, kind of go from there. And there are things you can do around like liquid democracy where, you know, maybe even the validators kind of share applications. It’s not quite so concentrated but, you know, it’s one of the first things that we’re thinking about decentralizing and mitigating those conflicts.

 

And I think we’ve got some good ideas, how they work in the wild, we got to stress test first.

 

Brian Fabian Crain:  Yeah, that will certainly be interesting to see. Well Ryan, thanks so much for coming on. It was a pleasure talking to you.

 

Ryan Selkis:  Thank you very much. Have a good one.