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[upbeat music] What's going on, y'all? Welcome back to Block Space Live, coming at y'all fresh and early this Monday morning.

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The crypto oligarchs are at each other's throats as World Liberty Financial threatens to sue Justin Sun after the Tron founder and erstwhile World Liberty Financial supporter excoriated the DeFi project linked to President Trump after some shady borrowing tactics that left a bunch of retail crypto investors marooned in a Dolomite lending protocol.

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For our second story, we cover a new income ETF from BlackRock tied to its IBIT Bitcoin ETF and include a buyer beware, uh, statement for if you're looking at this for Bitcoin yield, you might wanna look elsewhere.

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And then for today's guest, we have Zach Pokorney from Galaxy Digital on to talk about agentic payments and blockchains, and then we will wrap up the show with a note on Circle refusing to freeze funds tied to a recent Drift hack from the Lazarus Group in North Korea, and a little bit of Opium to close out the show with ETF flows last week hitting their largest volume for crypto since January.

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Block Space goes live Monday, Wednesday, Friday at noon Eastern. We feature quick hits on the latest in Bitcoin, mining, AI, emerging tech. Make sure to like and subscribe.

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If you're on YouTube, hit the notification bell so you get the push notifications to your mobile. And after this wraps, after about an hour, it becomes a podcast. Anywhere podcasts are found, Spotify, Apple, RSS.

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And if you like this stream, you will love our newsletter. Drops on Fridays, we go deeper, and we do, uh, a lot of interesting investigatory stuff, stuff you won't read long form anywhere, and it's, uh, mostly

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handwritten. Very little AI outside of research. So we also have, this week, our conference. It may actually be too late to book that flight and buy a ticket because this conference is almost sold out.

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So I will, I will point you here. We're gonna be live streaming it on our platforms.

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So on Wednesday and Friday, no Block Space live stream because on Thursday in between, we are broadcasting eight-plus hours of our technical conference, Opnext, O-P-N-E-X-T.D-E-V.

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This show is brought to you by CleanSpark, NASDAQ-listed ticker C-L-S-K. More on them later in the show. Let's kick it off. Let's kick it off- All right...

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with a story that I think really beautifully contrasts with the programming we'll have at Opnext.

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We are gonna have a lot of seasoned and respected Bitcoin developers talking about some of the most important technical topics in Bitcoin, including quantum resistance.

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But for our lead story today, we're flipping straight to page six for the gossip columns and talking about, you know, just egos bu- brushing up- Oh, oh my gosh. I-... against each other, man.

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I- Scammers getting mad at being scammed- Oh, man... by other scammers. I'm so happy that Justin Sun is fighting versus the Trump family.

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Like, these are the two biggest scamming families, the two biggest scamming dynasties of all time in crypto going head-to-head, and they're finally taking the gloves off, and it's... Oh, man. It's so good. Yeah.

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And you gotta, you almost gotta respect in some ways how quickly the Trumps caught up with [chuckles] someone- Yeah... who's been around as long as Justin Sun.

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I mean, I believe he really got started in like twenty sixteen, twenty seventeen with Tron during that ICO boom. Anyway, we- we'll start with the source here.

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Uh, th- this is a story that really starts back in February, but a lot of the information was not leaked out, or rather wasn't snuff- sniffed out until last week.

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And I'm reading the headline here from CoinDesk, "Trump's World Liberty Financial Uses Five Billion WLFI to Borrow Seventy-Five Million From a Platform Its Advisors Co-Founded."

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So I'll try to be quick with this, and then we'll get over to Justin Sun's tweet.

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What essentially happens here is the World Liberty, uh, Finance Treasury deposited fourteen million USD One, which is a stablecoin, um, its own dollar-pegged stablecoin for the World Liberty Financial ecosystem, into Dolomite, which is a DeFi platform as, uh, CoinDesk just reminded us in the headline, which was actually founded by-- co-founded by one of World Liberty Financial's advisors, and it borrowed eleven point four million USDC against this, deposited into Coinbase Prime.

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Now, it would do this a few more times, eventually borrowing up to seventy-five million dollars from this stablecoin lending pool using billions of its World Liberty Financial token to collateralize that, uh, that loan.

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Now, why does this matter at all outside of the connection between the World Liberty Financial advisor and the, the Dolomite, uh, platform?

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Well, part of the reason is because after the Treasury, after World Liberty Financial dipped its hands into this lending pool, they ended up actually maxing out the utilization rate of this pool, meaning they withdrew so much liquidity from it, so much stablecoin liquidity, that other depositors couldn't actually redeem their deposits.

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They could not get back the money that they had been yield farming through this pool. So it locked out all of these other users from being able to deposit from this stablecoin pool.

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Now, there was a headline that dropped, I believe this morning, where, uh, I think it said something like, uh, the World Liberty Financial has paid back, like, twenty-two million, roughly some twenty million of this outstanding position.

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But basically, the idea here being that World Liberty FinancialTook a loan from a stablecoin lending pool that is tied to one of its advisors from another DeFi protocol called Dolomite, and then that locked users out of being able to actually use that pool.

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We don't know what World Liberty Financial is using the money for. Again, it sent, I, I believe, the majority, 40 million of the 75 million that it borrowed to Coinbase Prime, so who knows what it's doing there.

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But Justin Sun wasted no time throwing invective at the World Liberty Financial team for this decision. And a little context here, because Justin Sun was one of World Liberty Financial's first and most ardent supporters.

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I mean, what can you say, Charlie? He just really believed in the project. He saw the potential to attach his wagon to the Trump horse and make himself even richer than he already is.

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Look, as, as Justin Sun, as a guy who you just know at some point in his future, he's gonna need a presidential pardon, um- [laughs] Please, that, that is a, that is a joke. Please, Justin, don't eviscerate me.

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As a guy who, like, probably is gonna need a presidential pardon in the future, he's gotta play his cards.

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Now's the time to play them, throw down that money, get in the good, you know, on the good side, but, uh, it doesn't look like it anymore. It sounds like he's miffed. He is a little bit miffed.

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And, you know, some of that support when Worl- World Liberty Financial launched, I believe, what, it was the summer of 2024, it was in the lead-up to the election.

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It, it was in this, this kind of strange- It was before the election. It was really like, we l- we literally thought it was, like, fake. We thought it was a- Yeah... like a, like, "Oh, why would they do this?"

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It's, like, a terrible decision going into a very contested election. But nope, it was real. Yeah, and

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just to rewind to that moment for a second, you had World Liberty Financial, and then you had the Trump and Melania coins launch the days- [laughs]... the day before the day of the inauguration. [laughs] Yeah.

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And so you, you just, you know, he was really speed running the crypto grifting up until the point of the election in a way that was really kind of brazen.

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But anyway, Justin ended up buying $30 million worth of World Liberty Fi because the launch was pretty lackluster.

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I mean, you're looking at a platform, honestly, that seemed, at least to me, like six years too late, seven years too late, like something that you would've expected to see in 2017 or maybe the DeFi summer of 2020.

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So it, it just seemed like an idea whose time had completely passed, but they launched it anyway.

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And anyway, Justin Sun put $30 million into it, and he says here in this tweet, quote, "I have always been an ardent supporter of President Trump and his crypto-friendly policy.

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As an earlier supporter who invested heavily in World Liberty Financial, I did so because I believed [laughs] in the vision that was presented to the public, a decentralized [laughs] finance platform that would promote financial freedom, remove inter-intermediaries, and bring the benefits of DeFi to mainstream Americans."

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I'm sure that's exactly why he invested in it. Yeah.

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[laughs] Um, what was never disclosed to me or any investor, and this is interesting 'cause this was not in the reporting, this is Justin alleging this, is that World Liberty embedded a backdoor blacklisting function in the smart contract used to deploy World Liberty Finance tokens.

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This function gives the company unilateral power to freeze, restrict, and effectively confiscate the property right of any token holder without notice or without cause. Uh, opposite to the situation, blah, blah, blah.

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He, he goes on, basically says that he's, um, distancing himself from the project, said that they're farming World Liberty Financial, uh, you know, holders like an ATM. And

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the Trump adminis- or no, I shouldn't say the Trump administration. Uh, weird Freudian slip that I'll unpack here in a second.

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But, uh, World Liberty Financial is threatening legal action against Justin Sun [clears throat] after he accused this project of having these kind of secret deals, you know, engaging in all kinds of nefarious crypto chicanery.

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And so they're threatening to sue him, and I just wanted to pull up the tweet, 'cause I, I think this tweet is, is... And this is where this, that slip came from.

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Uh, the tweet says, quote, "Does anyone still believe Justin Sun?" Justin's fa- This is from the official World Liberty Fi account, by the way. This is, this is... Yeah. Thank you.

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This is from the World Liberty Financial account. This is a platform from the official WLFFi account. It, we don't know who's typing the words, but it's someone on the... Yeah.

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Um, yeah, and they say, "Justin's favorite move is playing the victim while making baseless allegations to cover up his own misconduct. Same playbook, different targa- target. World Liberty Finance isn't the first.

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We have the contracts. We have evidence. We have the truth. See you in court, pal." That reads like a staffer wrote it. Do you know what I... Like, th- this reads like someone who is used to the swamp

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and used to the kind of language they use to frame things and is, is comfortable with media framing and agenda-setting. That's what this reads like to me.

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Like, when I read it, I was like, "I, I think I've seen s- similarly toned and similarly structured tweets from different congressional members on Twitter before."

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And so, you know, obviously I have noth- I can't prove that. There's no hard evidence. But when you look at this DeFi, you know, I, I, I struggle to even call it DeFi.

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When you look at this crypto project, and you see the links with the Trump family, and then you see something like this, it's like they know how to play ball in a certain way. You know what I mean?

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And you do, I do really wonder, it's like [clears throat] what agency or, or what intern is, is running this Twitter account for this?

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And the last thing I'll say on this before I toss it to you, Charlie, for some color and some second takes, [clears throat]

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you know, I couldn't find any evidence online of, uh, any, any sort of backdoors with Tron or any in- instances in which, you know, they, they played around with user funds using things that they might not disclose.

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But hearing Justin Sun be absolutely shocked that World Liberty Financial isn't sufficiently decentralized, and having this kind of, you know, moral outrage at that is really rich- [laughs]...

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considering, you know, Tron is one of the most centralized blockchains you can find, right? Uh, uh, uh, Colin, what are you talking about? There's multiple Tron validators who are all not Justin Sun in different hats.

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[laughs] Okay. Um, there's, there's a, a, the bunch of takes. I guess, like, first of all, you know, just that, that World Liberty Fi tweet clap back to Justin Sun Tron, uh, at the end says, "See you in court, pal."

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Can we, like, take a moment?Take a breath and like think about the irony of, of branding something as DeFi or decentralized and, and, and you know lauding the blockchain and thing, and then the real, the real enforcement of, of like authority and truth is gonna be an American court system.

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I mean, yes, it's obviously like a USA-centric, uh, DeFi project.

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But like while DeFi is ultimately enforced in local and local juris- you know, jurisdictions and like regional courts, uh, to me that just means that DeFi fails to actually execute what its goal is.

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Now, maybe someday that won't be the case, maybe there... And there have been, you know, examples to the contrary. So the next, uh, take is, um,

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it's just in the wor- in the wor- in a time when like anything you post on the internet like is there forever, especially if you're a major public figure like anyone in the Trump family, it seems

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crazy to me that you can just think you're going to delete history that's, that's been well recorded, documented. For example,

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this post, while is a bit conspiratorial, does describe and summarize what has happened with public association with the World Liberty Financial project.

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First of all, this is a little under the radar, a few weeks ago Eric Trump started deleting crypto tweets, especially ones containing comments about World Liberty Fi. This didn't make much news.

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We thought about reporting on it, but I was like, "Oh, we don't really know anything. What are we gonna do?" You know?

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Obviously things like crypto is a wash, so like, you know, maybe it doesn't wanna be associated with it. But now we've got the World Liberty Fi controversy.

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So the World Liberty Financial website has had three different versions of who's officially associated with the project, and this, uh, tweet documents it.

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So when the World Liberty Financial pre-sale happened, uh, I believe right before the, the presidential election, all of the Trump family members were co-founders.

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We have literally a meet our team page screenshot, this is true, I verified it, with Donald, Eric, uh, Donald Jr., Barron, the, the four Trump alpha males [laughs]

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all listed as, uh, co-founders at the time. Then after the pre-sale, they were demoted to just Web3 ambassadors [laughs] and Donald J. Trump remained chief crypto advocate.

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[laughs] So you could s- uh, and then the co-founders were moved to other people on the team. [laughs] So then after their, quote, their latest borrowing scam, quote, the entire team member page has been removed.

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So there's no team members, and there is now a little asterisk at the bottom in plain text saying, "Donald Trump and his family are not directly involved in management of World Liberty Financial."

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[laughs] So like they were originally co-founders, then just Web3 ambassador, which is just a code name for a person who DMs me on Discord with useless collaboration opportunities, and now they're not active managing, in fact trying to disassociate.

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So, uh, you got to love the grif- uh, mind you, it has been not even a year and a ha- it's been not even two years. Not even a year and a half since Trump ascended to the throne of the world.

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Um, so he, so like, you know, [laughs] these, these boys have max extracted. Um, they're disaffiliating at the, at the, at the bottom. Uh, things are collapsing around them.

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I would say overall, a successful DeFi project [laughs] because that's the whole kind of- It's just missing the rug. Yeah, I know.

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Which maybe, maybe this is the, the, the quasi or the proto rug that we're, we're reporting on right now. The last was they're just gonna delete the Twitter account and never talk about it.

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I mean- I just went on their website. You can't even find a team member page now. Yeah. [laughs] Uh, and so when you go to the about us, there's no team members listed.

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Also imagine, you know, could you imagine the, the conversations, you know, maybe Trump or, or one of the Trumps had with the family lawyers, where it's like, "You're doing what now? Okay.

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No, no, you gotta get off the site. You gotta get off the site." And then Trump's like, "Okay. No DeFi, but meme coin." Yeah. [laughs] You know? And then- Well, well, uh, can Melania like take over?

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[laughs] And, and it's that meme from, uh, Arrested Development of like a husband and wife can't be convicted of the same crime. [laughs] I mean, that's, that's what this whole thing has felt like. It...

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That's what the, the, the, the his and hers meme coin, presidential meme coins felt like. Uh, uh, it's crazy because everybody knew the playbook in crypto, man. Like we've seen this a, you know, 200 times.

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This is a, this is a, this is a page out of like 2017 to 2021. And, uh, yeah.

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You know what it also reminds me of, and you can see this in multiple different corners of American society from welfare and Medicaid fraud, you know, right?

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With the, you know, budding hospice scandal in California, and the one that preceded it with the daycare scandal in Minnesota.

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But what this reminds me of with the Trump family is this kind of strip mining, you know, just kind of tearing at... You get, you extracting any value you can as, as the American empire is in decline.

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I, I, I, I, uh, think back to when Matt Taibbi, you know, a journalist who is, uh, a polarizing figure to some extent, but back in 2008 and '09, uh, and 2010 when he was at Rolling Stone, he, he reported on a lot of the bullshit that was going on with the subprime mortgages and with the, uh, housing bubble and the financial crisis that was precipitated from all of these-You know, ho- horrible, uh, mortgage-backed securities that were poorly rated and some of the lending practices from the banks, but he was, uh, reporting on the Soviet Union during its collapse, and he talked about how when the Soviet Union was collapsing, you had all of these interest groups and vested interests who had access to certain industry within the Soviet Union just basically selling it piecemeal to whoever was the highest bidder, and that's how the oligarch class got started in Russia as we know it today.

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And there's almost like this element in American society right now where people are just...

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It's like you gotta swindle what you can swindle while it's still there, and that's, you know, I gotta say a lot of the, the crypto,

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a, a lot of the crypto dealings that we've seen from the current administration remind me of that. But we won't go too far into politics, uh, in today's show. Oh, we've, we've gotten very far into politics.

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We, we need a, we need a ripcord. Get us out here. Here, let's go to the next best thing, which is- W- w- corporate- Yeah, we're making business news now. Well, a little- Yeah...

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a little palate cleanser, and, uh, this, this just dropped, I believe this morning. BlackRock is launching its Bitcoin income ETF under the ticker BITA.

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What this is, is it sells call options on BlackRock's treasure trove of fifty billion-plus, uh, Bitcoin for its IBIT fund to generate yield from Bitcoin's volatility.

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So these income and yield-generating ETFs that are based on an underlying asset are somewhat common. They're usually-- They're, they're pretty common with volatile assets because it's a way to harvest the volatility.

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So you'll see them with oil, is quite common. There's also one for the S&P 500, which is very popular.

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It yields about five to seven percent, you know, but that being said, you know, uh, stocks and oil are volatile, how should we say, in the analog sense, in the, in the pre-crypto sense to where they're volatile for traditional market instruments, but Bitcoin is like taking that and, and pumping it full of peptides, right?

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And then giving it, you know- Which is in these days, by the way. [laughs] Yeah. We can say that now. But so Bitcoin's volatility will be obviously by far and away much more extreme than these other,

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than these other products. And in a quote tweet to this, Alex Bloom of Two Prime, the CEO of Two Prime, whom we had on the show, I believe, uh, about actually a month ago today,

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was talking about how if you wanted to increase your Bitcoin-denominated position, if you wanted to increase how much Bitcoin you actually own, something like this would be a terrible way to do that.

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And the reason that Alex is saying that, he wrote an article for Forbes that I used to prep for this show, and essentially what he says in that is this is kind of like picking up pennies in front of a steamroller, that, you know, that classic analogy.

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The reason being is, you know, you will get... You'll, you'll, uh, receive income from this if you, if you buy the fund. You will get dollar-denominated yield from it, depending on how well the call options pan out.

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So, uh, for those of you w- who might be a little bit, uh, shaky on the options landscape,

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um, a, a call option is an option to purchase a asset at a pre-d- at a, a predefined price within the contract, within a certain timeframe, and a put is the option to sell that, um, option at a specified- Call, you go long, you think it's gonna go up.

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Put, you go short, you think it's gonna go down. Thank you, Charlie.

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And so for this strategy, for something really volatile like Bitcoin, Alex basically makes the point, yeah, like let's say you are going to, uh, buy into this.

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W- what you're essentially going to get then is you are going to get a little bit of yield, but any sort of extreme move in Bitcoin's price to the up or the downside could potentially completely wipe out all of your gains.

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So here's one example. Let's say that you're selling a covered call for one Bitcoin at 50K. You sell a call at fifty-- at Bitcoin's at 50K, you sell a call for fifty at fifty-five thousand.

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That's ten percent out of the money 'cause it's a ten percent increase from the price of Bitcoin when you're selling the call to the call strike price.

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You collect a thousand-dollar premium because if someone's buying a call from you, they pay you for the option. They pay you for the optionality to then buy that Bitcoin at that price.

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So maybe you're making like a thousand-dollar premium for this. You're feeling pretty good. Well, then Bitcoin moves up to 80K, let's say, over the course of a few days or a week, which has happened. I mean, there...

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A Bit- a move from fifty to 80K is not out of the realm of possibilities with Bitcoin within a very short timeframe. So you have to sell the Bitcoin at fifty-five thousand because of the call option that you wrote.

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So you just made a thousand dollars under this scenario, but then you lost out on thirty thousand dollars of gain of Bitcoin 'cause you had to sell it at fifty-five when it's actually trading at eighty.

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And the same holds true on the downside. Let's say you sell a put for like 40K Bitcoin. Bitcoin is at forty-four thousand. That's ten percent out of the money as well. You collect a premium.

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Bitcoin crashes to sixteen thousand. This is, you know, an example drawing from the last bear market, um, or I guess the second to last bear market, depending on if you count our current market as a bear.

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Then you're obligated to buy that at, at forty thousand, and you basically just made a massive-- you had a massive unrealized loss on that Bitcoin, because Bitcoin's trading at sixteen thousand, you had to buy it at forty.

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So on the extreme ends of market volatility for an opt- or for a strategy like this, you might make a little bit of money, but you'll be absolutely wiped out in, in BTC terms if you see some extreme volatility.

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And so Alex says something like this is probably...

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He po- he postulates that the reason we're seeing this now is that this was a s- a structure for something like this was probably in the works shortly after the Bitcoin ETF launched, and they were drawing on historical data from 2020 through 2024, where Bitcoin's volatility was pretty muted, right?

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I mean, Bitcoin had a slow grind up from its bottom in 2022 in November of 16K up to like 40K, and then the ETF got announced in January 2024, and then it popped up to sixty.

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And but between, you know-For most of 2023, it was pretty, uh, it was pretty tame, Bitcoin's volatility, and there weren't extreme moves in one direction or the other.

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So then that obviously raises the question, who is this for then? And the obvious answer is it's for your boomers. It's for-- it's, it's Boomer-Fi.

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It's for people who might want a little more of, a little more risky exposure to Bitcoin and get some yield on that exposure, but who are not going to stack Bitcoin like some, you know, a laser-eyed zealot, like we, we-- which we love.

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We love all of our laser-eyed zealots. Um, we, we, we used to be one, in fact. But- [chuckles]... those kind of people, this is not built for that. This is not built for your, you know, stacking maxi.

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This is not built for someone who's going to take self-custody of their coins.

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Maybe if they wanna augment their exposure to Bitcoin and augment their upside, kinda like we've seen with guys who wanna play stretch with, with strategy, right?

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You, you, you would-- You do-- When this, when this strategy works, you will be gaining yield, right? You will end up dri-- uh, generating income from it.

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But the question then becomes when volatility really returns, how are you going to fare? And in Bitcoin terms, you will almost certainly lose out if you see big moves to the upside or downside.

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You know, maybe you think Bitcoin's not gonna be as volatile in the future, uh, in which case

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the boomers are right, and they get one over on us yet another time, 'cause those dang boomers, they, they keep having their last laugh.

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We're like ten last laughs into their economic superiority over, uh, uh, over our s-subservient generations. Okay, enough about that. We have our guest on next.

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We got Zach Pecorny of Galaxy Digital, but right before that, we're gonna get a word from our sponsor, CleanSpark.

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[gentle music] We are CleanSpark, America's Bitcoin miner, a publicly traded company with the largest operating hash rate, powered entirely by self-operated infrastructure across four states.

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This is our proof of work. We are setting the standard for what's next. Learn more about the intersection of energy and Bitcoin at cleanspark.com. All right. We have our guest of the day, Zach Pecorny.

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I'm gonna bring him on up here. Welcome, Zach, to Block Space. [soft rock music] Hey, guys. What's going on? Nothing much. We're on live. It's a Monday.

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We got-- We're coming up to your neck of the woods this week up there in New York City. But you put out a very, very interesting writeup for Galaxy Digital, as you often do. This one caught my eye.

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I read through the whole thing, on AI agents and how they-- Well, everybody's talking about how they're b-big on blockchains. The reality is that there's a lot more friction. Um, explain to me

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some of the ways blockchains, that you describe blockchains are built for humans and not AI agents today. Yeah. Well, I mean, the agents narrative is obviously huge.

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Um, and when I started to look into it, I realized that the majority of it was people essentially giving their agent access to a wallet to go buy things on like Amazon. It was like agentic commerce,

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which I think is like fascinating and, and will grow into a big market. Um, but it's not something that I was like overly interested in.

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So I was like, how do I give my agent a bunch of money to go trade DeFi, find the best deals, and so on? And what I quickly realized is that they just totally lack the context of what's happening on-chain.

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And then the next step is like, well, how do you give them that context?

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And that was when I kind of realized that we are pretty far away from having like purely autonomous, fully discretionary agents running around on-chain, finding the best yield, trading, and, and doing all that stuff.

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Um, and I kind of broke the, the friction down into three sections, like discovery. So how does it actually find the opportunity or find the contract to go act on?

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Uh, control plane friction, which is mostly, uh, an issue of, uh, like authenticity of the contract, making sure you're not depositing into a honeypot, um, and then actually going and getting the data.

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Um, so it really comes down to those three things. Like one, how does it find a contract? Two, how does it make sure that it's authentic and real and not like a honeypot or a malicious contract?

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And then how do you actually get the data to tell the contract what you wanna do? Um, and yeah, I think that's like high level, like the three issues.

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And when you think about how much humans play a role in doing all that, like curating allow lists and whitelist for like what token is real, what contract is real, um, building all the adapters to the contract interfaces to make sure that the, the algorithm or the agent is aware of it all.

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Um, but yeah, the high level take is just humans have a massive role in blockchain action, even when it's algorithmic and, and machine driven, um, whether we like it or not.

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And how we bridge that divide, I think is still a, an open question. Um, but will be super valuable when we eventually figure it out. So- Let's- Yeah, you go for it, Josh.

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I just-- I want to, I want you to unpack that, what you mean by context there, and I think you kind of explained it. They might lack context for what's a scam and what isn't.

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But is, is that basically you're saying they can't discern what might actually be worth putting money into and which, and which DeFi trades are worth making? Well, that's like an element of it, right?

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Like how does it find like high EV opportunities? Um, but it's mostly understanding like what contract is real.

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Like, somebody can fork an Aave contract, it looks identical to the real Aave contract, but how does it know that it's the actual one, um, i-is really the primary issue there.

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So, you know, I think a lot of folks imagine that agents are basically just like really high functioning, super fast humans with access to infinite more information, but yet

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it's not really what we see currentlyOn-chain, really just the available frontier models, and, you know, 'cause I was, like, looking into this, 'cause you, you described, say, like, the discovery and trust friction, um, like which is the real Aave contract.

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And I think about it 'cause, like, a lot of the, uh, like a lot of the ability to discern what is the true and real contract comes from almost, like, social and web of trust dimensions, which I don't think are loaded into agent context.

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Um,

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is maybe w- it- is, like, one of the, the barriers that we just don't have great l- uh, registries and context to give these agents, or is there something, uh, you know, additional, different that's going on that's making these things-- that's making agents harder to use blockchains?

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Yeah, I mean, registries I think is, like, a place where people are starting.

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But again, like, it requires a human in the loop, and that's not totally scalable in a fully permissionless world where anybody can go press a couple buttons and launch a contract.

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I think, uh, on Ethereum, it's like EIP 8004, they're doing like an agents registry to say, like, this agent has, like, this reputation and it's good, or, like, this one has a reputation, but it's bad, don't use it.

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I haven't come across anything that's doing the same for, like, contracts and tokens, and when we look at what exists today with, like, white lists and registries for, like, official token lists on, like, Uniswap or Jupiter, there's a human on the back end, like, submitting a PR to, like, Jupiter that says, like, "This is my token.

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Here is, like, the Twitter page and all the followers, and we're the team and we disclose, like, who we are."

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Um, like, that just doesn't work or scale in a world where you have a million agents running around, uh, doing things on a permissionless ledger. But, like, that's ultimately probably where this has to end up.

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It's a very difficult problem to solve, at least in a scalable way. Like, for now, you can have, like, curated lists that you build up over time, and maybe eventually they get big.

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But, like, in a world where you can launch an infinite number of contracts or tokens in a day, how do you make it so that you can get them all into a registry and, and score them and whatnot? Um, so yeah.

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It's really, like, a human in the loop scalability issue on that front. So we'll get into what you think is the direction that the ecosystem should go. But I wanna look at where it currently is,

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and there's-- everybody and their dog has pivoted from crypto to AI, and if you're in crypto, you're pivoting to, like, AI, AI as it relates to crypto.

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You know, people are trying to build AI agents to do things on blockchains. What are most teams building right now, and are they building the right things?

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Yeah, I mean, I feel like as of right now, the primary focus is on, like, agentic commerce and, like, using stablecoins to buy, like, consumer products. Like, Circle actually released a cool product where you can...

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It's like a ChatGPT style interface where you give it access to your wallet, and you can go shop on, like, Amazon or whatever store, and it just streams the stablecoins to the vendor over, like, X402.

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Um, that's kind of the low-hanging fruit, in my opinion. It's not the wrong thing to be working on. Um, but it's just a low-hanging fruit, sort of easier issue to solve.

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Um, and then in terms of, like, the DeFi stuff, it, it's still just so young and so new.

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Like, Open Claw was really the thing that kind of sparked the whole, like, I'm gonna give my agent a wallet and some money, and then the traders got their hands on it.

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Um, and people are using it, but what it mostly looks like today is just, like, human-curated sets of contracts, mostly over, like, one or two applications, um, and then they just have, like, fixed parameters for it to go trade on.

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So, like, from my view, it still kind of looks like the old school, like, algo trading style stuff versus, like, purely agentic workflows where it's like, okay, the agent is reasoning, it's finding the best opportunity, and then it's going and doing it.

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It's still just kind of acting over fixed curated sets of tokens and contracts and, and applications. So barring... And then, you know, I'll, I'll ask you about, you know, fundamental architectural overhaul.

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But given the current landscape of blockchains, and you're-- you mainly focused on, like, Ethereum or DeFi style blockchains.

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Given the current landscape of them, is this an infrastructure problem that needs to be solved? Are we back to the infrastructure [chuckles] uh, play?

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It like, you know, is this, is this solved or improved significantly by a bunch of really good savvy MCP servers, um, or does-- do we have to re-architect everything?

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No, I mean, we've been talking about, like, possible solutions here on the desk, and it seems like the, the middleware layer is probably the most rational place to start.

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Like, it doesn't require, like, overhauling what Ethereum or Solana or any of these chains actually look like.

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But I could totally see a world where people start building chains that are built with autonomous agent consumption in mind first versus, like, kind of the, the human-based stuff that we've seen, um, up to this point, like, because we had no other choice.

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Um, but yeah, I, I could totally see a world where we have chains that are standardized just for agents. What might that look like? I don't know. I have no idea what that would even look like.

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Yeah, I mean, I think, like, one interesting place for it to all start would be, like, standardized contract interfaces.

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Like, if you build a lending app, the, the lending contract interface looks the same across the board, and, like, that obviously comes with limitations, uh, 'cause you can have, like, special features that are different from another app.

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Like, so by default, the interface has to look different. Um, but, like, standardizing data retrieval and, like, uh, data structure across the board just makes it easier for agents to interpret a lot of this stuff.

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Like, the example I used was comparing, like, Aave and Compound and, like, the difference in the data retrieval paths to get the same information from both. Aave is pretty clean.

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You could go do two, three RPC calls to get all the information you need, whereas with Compound, you need to do, like, triple the number of RPC calls.

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The names for everything, it's like supply rate versus, like, variable supply API.

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Like, the agent needs to be able to reason over that and kind of connect the dots between it all.So like some kind of like standardized data output, data structure, I think can go a long way.

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Um, but getting there can be tough and introduce like a number of limitations. Um, yeah.

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Which is interesting because a standardized output is kind of what an MCP server is, but you just enshrine that into the architecture of the blockchain itself. Um,

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so about just fundamental blockchain architecture, you know, your writeup was mainly focusing on DeFi. Most DeFi happens on Ethereum or EVM chains or Solana, and not as much on UTXO-based chains.

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But I'll-- I, I don't even know if you're ready for this question, but like what are... You know, Bitcoin's UTXO-based. It's not account-based, at least functionally.

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Um, do you think that like these different blockchain designs, statefulness or not, do you think that there is a structural difference between how agents will use and view these chains?

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I invite you to pontificate on this. Yeah, it's actually an interesting question. I haven't given it much thought. Um,

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I mean, DeFi chains are interesting because there's like financial primitives built on top of them where you can have like asset management trading and all that stuff.

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For UTXO-based, it's mostly payment stuff, but where my brain kind of defaults to, just kind of given my line of work, is like, it would be great to have an agent who can track like all the UTXO flows.

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I've spent a good amount of time doing like investigative work into people trying to like obfuscate, uh, like their Bitcoin and hide their, their trail, and it actually would be great to have an agent that can figure all that stuff out.

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But yeah, I just find DeFi to be a more interesting place for this stuff to happen just 'cause you can actually do things. There's financial primitives, and, and yeah, it's just like utility-based, um, at its core.

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So my last question for you is a curveball. Uh, what's one of the most interesting AI things happening on blockchains in your view right now?

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There's a million people who are always shilling like their own thing, but like, what i- what's the thing that's interested you the most in this category?

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Yeah, I mean, I'm a data engineer and data scientist, so I, I just find the, the data curation layer of all this stuff to be super interesting. Like, one, it,

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it requires a lot of different ways of going about like, oh, I need to go get like the state to Thessalon rate and then compare it to like the USDC borrow rate, and then when-- like we never really had a reason to bring all this stuff together in the first place.

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So like the most interesting thing in that I've seen is like the real unification of all the DeFi data into one like standardized output. Um, that's just kinda coming from like a nerd snipe data background.

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Um, but for-- it feels like for the first time I've been building like a lot of like unified databases across applications and concepts, and you can actually draw like very interesting lines in the sand through all of this stuff.

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And I think it's gonna just create a more, um, sorry, I'm looking for like economically efficient, um, and we're gonna have like a bunch of new primitives and trade ideas come out of all of this stuff.

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Um, but yeah, I think the data side of it is, is the most fun and, and exciting at the moment. Well, I really appreciate you diving into this because everyone is saying, "Oh, AI a- AI agents are gonna change everything.

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Oh, my, it totally changes blockchains." And y- I think you brought a healthy dose of realism about the friction that currently exists. Zach, thank you so much.

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I'll link the report in the show notes afterwards, and, um, I hope to see you in New York very soon. So thanks again for coming on the show. Yeah, appreciate you guys having me on. Thank you, Zach. Yeah.

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It really kind of does throw cold water on the idea that you can just get rich by sicking an AI agent on the world of DeFi and crypto.

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Your best bet is probably finding an account that appears to be a political insider on Polymarket and just copy-pasting all of their trades.

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That actually might be one of the only decent strategies right now with AI agents with regards to training. Yeah. Uh, I'm a believer that there's still a lot of alpha on Polymarket.

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Those are the only like real money that I've had, that I've confirmed that people have made. But again, this is a new and emerging topic. I'm one person with one information feed that I can condense.

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So enough about that. I'm gonna tap you in, Colin, to do the ad read from our friends at Luxor. Yes. Quick ad read before our next story.

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And with that, Charlie, let's go ahead and see what the folks at Circle are doing. A little update on the stablecoin wars.

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We have a press release from the Circle team here that reads, "When open systems are tested, accountability, rule of law, and the work ahead." So this is a probably,

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you know, I would say longer than maybe it needs to be screed.

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It's not that long, but it is an update from the Chief Strategy Officer and Head of Global Policy & Operations at Circle, Dante Disparte.Um, Desparte, Desparte, I'm sorry, Dante, I-I'm butchering your name.

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But it's in response to pressure for Circle to freeze two hundred and seventy million dollars worth of funds tied to the Drift Protocol hack. Now, we covered this Drift Protocol hack on the show a while back.

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One of the more interesting and also very troubling instances of a DeFi hack because it wasn't a hack in the way that you're thinking of, I think, or w-when most people think of DeFi hacks.

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Usually, someone's exploiting a vulnerability in a smart contract, a really clever technical workaround just from reviewing the code.

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But the Drift hack was socially engineered to where these hackers that have ties to North Korea's Lazarus Group more or less befriended the Drift team, or befriended maybe is not the right word.

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They established a business relationship with them, said they were very interested in using the protocol, uh, you know, was working close with them to write up all of these proprietary, you know, code bases for how they would trade on Drift, and they ended up sneaking a Trojan horse into the Drift protocol and stealing two hundred and seventy million dollars worth of funds.

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Now, Circle is being asked to freeze those funds because some of them are, were USDC, and they are saying here that the power to freeze is not the power to police.

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Quote, "Let me be clear about something that is frequently misunderstood. When Circle freezes USDC, it does not...

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It, it is not because we have decided unilaterally or arbitrarily that someone's assets should be taken from them. It is because the law requires us to act."

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So Circle is basically saying here that they refuse to freeze these funds because they have not had a court order or a law enforcement, a request from law enforcement to freeze these funds.

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Now, when I read this, I was, was really curious because this is, I would say, a-- one of the more notable double-edged swords for stablecoin platforms. They are extremely centralized.

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There's a central issuer who is in charge of redeeming and issuing new stablecoins. And as a result, we've seen a lot in the past, specifically from Tether, of funds being frozen in the wake of a hack or some sort of...

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even not even hacks. In, in, in the case of, of, a, a, you know, a, an unknown vulnerability causing an accidental loss of funds.

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We've seen Tether specifically time and time again respond to these misfortunes by freezing funds or rolling back the chain to make sure that they can make users whole. Circle does not have the same approach.

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So I got curious, and I, I needed-- I wanted to dig up instances of when Circle has frozen funds and if there is this clear distinction between we won't do it with law enfor-- we will only do it when law enforcement asks us to, or a court order, or a government versus just if someone was hacked, oopsie, see you later, there's nothing we can do with that.

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And the relationship holds up. Circle almost always only freezes funds when asked by officials, and even then, sometimes they don't. The first time they...

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'20 when they froze approximately a hundred thousand USDC belonging to one wallet address based on a law enforcement request.

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In twenty-twenty two, following the US Treasury OFAC sanctions against Tornado Cash, Circle blacklisted associated wallet addresses freezing at least seventy-five thousand USDC.

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In October of twenty-twenty two, in the Mango Markets exploit, y-you know, you can kinda just pick from the cornucopia of DeFi exploits at this point.

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[laughs] You could probably just pick a random name of a fruit or some- Yeah. Pick a, pick a fruit, pick a food and a, and a, and yeah, pick a food and see how much, uh, money's been stolen from DeFi [laughs].

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[laughs] Uh, the Mango Market exploit for fifty-fo- seven point five million was routed through a Circle address on Solana and never frozen on-chain. There was no l- court order or no request from law enforcement.

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During the Nomad Bridge hack, approximately forty-five million USDC sat in exploiter wallets for thirty to forty-five minutes without Circle blacklisting.

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The list goes on and on and on, and there's even a scenario in which in, uh, this year, in twenty twenty-six-- or sorry, this was, uh, last year. Um, oh, no, this was this year.

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They're, uh, they have, uh, received a court order from a victim of a three-million-dollar hack to freeze funds.

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Uh, the funds were moved just hours before the court order was granted, and despite requests to freeze from law enforcement, Circle didn't do it. So maybe that was just small potatoes.

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They're kinda picking and choosing what they wanna do. But this one kinda takes the cake, and ZachXBT, crypto Twitter's favorite sleuth, really took them to task on this one. Uh, this happened last month in, this year.

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Circle froze the USDC balances of sixteen unrelated business wallets simultaneously tied to the sealed US civil case in the s- tied to a s- a sealed US civil case in the Southern District of New York.

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Uh, the frozen wallets included crypto exchanges, online casinos, Forex brokers, payment processors, and even the Dfinity Foundation Bridge contract. Those were erroneously frozen.

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Those weren't even the ones that they were supposed to. [laughs] So they ended up freezing the wrong wallets in, in, in an effort to s- uh, you know, stamp out some, some illicit activity and illicit fund moving.

263
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So all that said, Circle does not have a good track record with freezing funds that are tied to exploits, in some cases, even when law enforcement officials ask them to.

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And I won't go over all the examples, but go ahead and just go to your, your, you know, your AI du jour, your favorite AI, Claude or ChatGPT, and ask for known freezing events from Tether.

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It's, it's a pretty extensive list, longer than Circle, and most of the time it's in response to a hack, and Tether just freezes it. Which again, double-edged sword, some people don't like that.

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They think that you shouldn't do that.

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You know, this is a huge debate, I think, within the realm of blockchain architecture and decentralization, whether or not you should punish hackers for exploiting something that the developers missed, even if it's stealing people's funds.

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But the fact of the matter is, Tether does it much more than Circle. Very interesting dynamicYeah.

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You said it, but I'll re- s- I'll just, I'll reiterate, is that it is ironic that Tether, the comparatively gray market or historically gray market,

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uh, stablecoin is the one to take the most black-and-white approach, a proactive black-and-white approach to users, uh, and their token issue.

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Whereas Circle, the one which a lot of people are like, "Oh, it's the fed coin. Oh, it's the new, uh," you know, uh, what do you call it? Um, you know, the- CBDC. CBDC, yeah. It...

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That's the one which is the one dragging their feet the most. It's kind of wild.

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And it does make sense, I guess, that Circle, because they're trying to be extremely, uh, buttoned up, that they're only gonna listen to, I guess, you know, judicial orders and regulatory sanctions.

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But it's weird that in practice, Circle has been the freedom stablecoin compared to Tether. There's another, um, dimension to this, 'cause I learned a little bit more about the process for, like, freezing these tokens.

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Um, again, this is what I've learned by querying my AI agents, 'cause I'm curious how they do it beyond just, oh, they just press a button.

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Um, so Tether actually in most of their contracts, depending on the blockchain, has, um, specific tools allowing them to freeze wallet addresses. I think Circle can do that as well.

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But then Tether in- uh, goes further than that, and they have, um, the ability to actually destroy those tokens, burn seized tokens, reissue clean versions of those tokens, whereas that's not necessarily the case for Circle USDC on most of their chains.

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So, like, Tether has more of these, like, tools built into the contract that Tether launches to issue the stablecoins. And

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I know you gave the numbers for, like, you know, Tether does more, uh, freezing and seizure, but the b- you know, for that, the one-liner multiple is that Tether's cumulative freezing and seizure has been about 30 times that of Circle's total seized assets.

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Now, if we normalize for, like, size of the, the token, um, you know, maybe it's only three or four X 'cause Tether's a few multiples bigger than Circle.

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But there's some interesting, like, um, you know, there's some interesting color to this story. Um,

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it just cracks me up though that you had a couple days and a quarter billion dollars flowing through the regulated US stablecoin that went to North Korea, [laughs]

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which is kind of wild because, uh, just weird to say that out loud, you know? And it's... I think that's a really good...

284
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It's a, and it's a good dichotomy to really highlight because you'd think that, like you said, Circle would be the one who would immediately freeze as the more- Yeah, like that, like that should be an issue.

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Like, maybe it was, maybe it was a different hack, and it's not clearly associated with Lazarus Group or a North Korean hacking group.

286
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But, like, this was- Even so, you know- Yeah...270 million's a big payday, and you would think that the more regulated and the stablecoin that has always advertised itself as being the American stablecoin, being the US, the US stablecoin, the one that actually has the blessing of the overlords on Capitol Hill, that they don't do this.

287
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And I have to wonder, and I'll leave it at this unless you have closing thoughts, I have to wonder what kind of signal this sends to projects and to companies in Bitcoin and in crypto.

288
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'Cause if you're looking at the way Tether responds to threats versus Circle, you might think twice about prioritizing Circle's stablecoin and their infrastructure over Tether's because you won't have any recourse, right?

289
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I mean, that's part of the benefit of the stablecoins, or ostensibly should be, is they're more akin to banks in the sense that they do have the ability- They're narrow banks, yeah...to freeze or roll back transactions, which is, you know, not on...

290
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I mean, I, I'm not gonna say it's common for the $200 million wire to be rolled back, but credit card fraud, all of these things at a much smaller scale, these kind of backstops exist in the traditional financial system.

291
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So you'd expect a stablecoin issuer to maybe offer a little more protection. And so if I were a founder, I wonder if that would factor into whether or not I choose to...

292
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You're probably gonna support both, but w- d- w-which one are you going to prioritize a relationship with? But- Yeah, I mean, I, my last word is, um, as much as

293
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I do not want money to go to North Korea, I do generally err on the side of I want blockchains to operate as freedom and permissionlessly as possible. So, like, you know, I'm not getting too ruffled.

294
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Do personally ruffled that you had some, you know, one of these stablecoins was a little slow to act because if they're slow to act on that big state actor, they may be slow to act on other people who I think it's less clear, uh, their, like, active risk and hostility to the United States.

295
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So enough about that before we get canceled. [laughs] Got to- Before we get canceled. Before... [laughs] Yeah, not, not by people, but... [laughs] Not by people, but by strange entities. Yeah.

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Anyway- Before we get black-bagged. W- we have one more story, a little dose of hopium very quick before we go, but before we get to that, a quick ler- word from Ligos. Hedge funds are getting liquidated.

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Is your Bitcoin safe? It's not just Bitcoin's price drying up. Hedge funds, big whales, lending desks are reeling after the October 10th and February 5th liquidation events.

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Counterparty risk is rampant, so it's more important than ever to understand who controls your Bitcoin, and with Ligos, that is always you. Don't be the next FTX, Celsius, or BlockFi victim.

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If you are working with another loan provider, do yourself a favor before it's too late and move over to Ligos. They are our preferred Bitcoin lending provider here at Blockspace.

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And with that, Charlie, we will leave our listeners with a dash of hopium

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with a report from CoinShares that came out today that said one point one billion in digital asset flows came into the market last week for the highest level since January.

304
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So CoinShares does these weekly updates on flows to Bitcoin and crypto ETFs. They look at the European as well as the US market for this, so it gives a pretty holistic picture.

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And there were one point one billion in inflows last week. Bitcoin led with eight hundred and seventy-one million in inflows.

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The US market accounted for ninety-five percent of all of this movement, contributing one point zero six billion to the total overall figure.

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Ethereum, always in second place, came in with a hundred and ninety-six point five million in inflows.

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So if you were looking for a reason to be a little bit bullish as we go into the week, if you are hoping that that Iran ceasefire sticks and that we've seen the peak of that conflict, who knows?

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Maybe some folks out there in the markets are betting on it. It's nice to see some flows again.

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Lot of people curious as to whether or not we've really seen the bottom in sixty K, whether or not that was true capitulation, and whether or not the weak hands have been flushed out.

311
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I am personally not convinced, but we will see what happens over the next few months as we continue trudging our way through what is panning out to be a pretty, uh, pretty interesting twenty twenty-six.

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And with that, we are taking a Blockspace live stream break until next Monday because the whole team's flying out to New York City for our conference this Thursday. There's, like, maybe a few GA tickets left.

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If you really want one, you can DM me, and I'll send you a Bitcoin invoice, or you can go through our website, opnext.dev, opnext.dev.

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We are live streaming the talks on the main stage on Thursday from nine AM Eastern to about four PM Eastern, so make sure to tune in. That's gonna be a banger.

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We have, like, all the who's who of everybody, and if you want the definitive talks on Quantum, they'll be happening in New York at the Times Center this Thursday, April sixteenth.

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So make sure to put that on your watchlist. Otherwise, this is a podcast. Make sure to like and subscribe wherever you listen to podcasts and check out our newsletter, newsletter.blockspacemedia.com.

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I'm Charlie, this is Colin, and we will see you next week. [outro music]