Joshua Scigala on Solving Inflation with Standard.io (Episode 210)
Joshua Scigala joins us to discuss solving inflation with Standard.io.
Joshua Scigala has been working in the alternative economy space for over 20 years building the first swap website where people could swap items rather than buying and selling, Joshua soon realised that a non-government currency would make the market better but the cypherpunks had not yet figured how to fix the double-spend problem. Joshua followed the work of the cypherpunks mailing list and in 2010 read Satoshi Nakamoto’s solution.
A decentralised peer to peer currency without the double-spend problem had been invented. Joshua has been working with Bitcoin ever since and has been instrumental in everything from the scaling debate and solution to launching the first lighting network exchange as well as the first exchange to trade between bitcoin and physical gold. Joshua is now working on a new stablecoin protocol called The Standard DAO (TheStandard.io) that will enable people to generate stablecoins pegged not to fiat but collateralized by gold bullion, bitcoin and ethereum.
The following transcript was created using artificial intelligence. There will be some grammatical errors below.
00:01:13:00 – 00:01:36:17
Richard Carthon: Hello, everyone. Welcome to another episode of Crypto Current, your host here, Richard Carthon. Today, I got a special guest rejoining us after a ton of amazing new developments. You know him back from Episode 77 when he was working with Vaultoro, but he’s joining us today to talk about something else, which is really, really cool that’s going on called The Standard.Io. We have Joshua Scigala. How are you doing today?
00:01:37:08 – 00:01:48:12
Joshua Scigala: Hey Richard man, it’s such a pleasure to be back. It feels like a lifetime ago that I’ve been on. You know, everything Crypto happens so quickly. A minute is a week and it’s like, yeah.
00:01:48:14 – 00:02:16:21
Richard Carthon: So much has happened, man. I mean, back when we last spoke was before COVID, and everything else and the world has greatly changed. I know you’re out in Berlin and even how everything is going out there, I’m sure is different than what’s going on here in the states. But first, I want to just get a brief recap, updates on what’s going on with Vaultoro. So, when we left off last time, everything was kind of going in a positive direction. What’s the latest?
00:02:17:02 – 00:02:46:21
Joshua Scigala: Yeah, man. I mean, it just keeps being positive. So, Vaultoro for those that don’t know is it was the first Bitcoin exchange that traded to allocated gold. And the reason for that is because all these exchanges that deal with Fiat have to have bank accounts. The bank accounts get shut down or if we have a banking crisis, all that money will disappear and it’s not insured. Well, it’s insured to like 100K or something. So, the whole, you know, if an exchange has a billion dollars on it, it loses everything, 100K.
00:02:46:23 – 00:03:15:09
Joshua Scigala: So, our focus was really on transparency, but also for people to buy allocated gold sitting in your name, as your asset insured to however much you want and fully audited by like a large auditing firm in a high security vaulting facility in Switzerland and then trade it back to Bitcoin whenever you want it. That was for me, like a really big step to trade between rare numbers and rare metals, rather than this filthy Fiat stuff that we all got into Bitcoin to get away from, you know?
00:03:15:29 – 00:03:16:14
Richard Carthon: Right.
00:03:16:16 – 00:03:18:06
Joshua Scigala: And, sorry.
00:03:18:08 – 00:03:49:17
Richard Carthon: No, I was going to say, and it’s even more relevant as everything that’s going on during COVID times with, you know, financial markets doing what they’ve been doing and just trying to understand how we can continue to like, make sure that people are being empowered and can leave. I mean, a prime example, unfortunately, is what’s going on in the world with Afghanistan. You know, having to leave, having something liquid that you could go with and Bitcoin is a huge reason why you would potentially want something like that as opposed to a local currency.
00:03:50:09 – 00:04:20:05
Joshua Scigala: Yeah, absolutely. If you look at the stories during World War II, the people that managed to flee before it hit the fan, excuse my French. But was they had, you know, some diamonds and gold and silver. They had stuff that they could just grab and run that would hold a dense amount of value. And yeah, it’s really a strange time.
00:04:20:07 – 00:04:55:14
Joshua Scigala: And in terms of banking, you know, I’m surprised that we haven’t seen a hard bank crisis yet. I think it’s definitely coming, like it’s a ticking clock. It’s kind of you don’t know because so many businesses have gone out of business. So many businesses that have credit lines just have defaulted on those and those defaults being packaged up and sold elsewhere and hidden and just sort of stuffed. And these banks are getting like so much hidden stuff that their jacket’s going to blow and everything’s going to pour out.
00:04:56:05 – 00:05:31:13
Joshua Scigala: And yeah, we’re going to probably have another credit crunch. So, it’s hard, it’s really hard to know when, but you know, this isn’t financial advice, but we’re in the Crypto space for a reason, and that is get as many people out of Fiat as possible. If they’re holding savings in a unit of account, meaning Fiat, why would you do that? Why wouldn’t you hold savings in a rare asset like gold, silver, Bitcoin, Ethereum, something that’s rare, that’s ultimately rare. You just don’t want to be holding this stuff.
00:05:31:15 – 00:06:28:15
Joshua Scigala: So our saying, especially with The Standard, and we can talk about that later but it’s really save in assets, spend in Fiat. Don’t save in Fiat, that’s going to be the dumbest thing ever. But another thing which is really interesting is during these inflationary times, like with the US printing three trillion and Europe printing nearly just as much and everyone, like the whole world. This is the first time that we’re seeing a global inflationary event. And I went through and had a look at the history of hyperinflations and they every time, every time, Richard, they happen the same way. It’s like a huge, catastrophic event, like a natural disaster or some sort of A-hole, you know, a politician gets in power and just screws everything up or there’s, you know, just something like that. Something that needs stimulus.
00:06:28:22 – 00:07:00:17
Joshua Scigala: So, they’re like, Oh, everything’s going to hell or war you know. Everything’s going to hell, let’s inject some cash. So, they start printing just to stimulate the economy and they can’t help themselves but go further and further. And it’s this train, it’s way bigger than the Titanic. The reason the Titanic couldn’t move away from the iceberg is just it’s too big. It’s on its course, it can’t just nimbly move. So, this is the exact same thing that’s happening with the financial markets.
00:07:00:27 – 00:07:39:26
Joshua Scigala: And you know, what’s fascinating is that all around us that things are crumbling and they’re offering us crumbs, little crumbs to stay with them. Oh, here, here, have .01 percent interest over the year. Meanwhile, in the DeFi space, people are getting APY of like 70 percent, you know, or even more sometimes like near the thousands, you know, that I would probably stay away from. But nevertheless, not because it’s some sort of scam and there’s a lot of scams out there. Don’t get me wrong, but because the mechanisms have cut out all those middlemen, all those banks in between and all those people skimming off everything.
00:07:40:03 – 00:08:01:28
Joshua Scigala: Purely if you go all the way into banking, the reason why they can offer you those interest rates is because they market make. That’s why. They market make and they invest those funds or they market make and they earn interest on the trades, on the Forex’s and a bunch of other stuff. And all the way up the chain, people take a cut and you get the tiny little crumbs at the end. Hey, in DeFi, you know what?
00:08:02:03 – 00:08:43:09
Joshua Scigala: You take your Ethereum, or whatever your cake, the crap you got and you dump that straight into an automated market maker who’s giving you API for it like a return. So, it’s absolutely stunning. So, it’s a black hole that’s sucking everything in. There’s no reason to stay in this legacy system for much longer and people better take the time to educate themselves. And this is why I love podcasts like yours, because it really helps educate people before it happens, before everything goes south. And so, yeah, that’s just get out of Fiat, whatever you do.
00:08:44:03 – 00:09:21:06
Richard Carthon: Aw man, a lot to unpack there. First, thank you for the compliment on the podcast. We definitely want to keep educating people who know nothing or even our Crypto OGs in the space with thought leaders in the space, and to just be aware of all the different things that are going on because, like you said, the world of Crypto changes very quickly and everything in the world is changing as well. But we want to give you access to be empowered and to be able to create your own generational wealth and your own security, no matter what’s going on by worldly events. I do want to spend just a moment to echo I think we have a ticking time bomb in the regular equity markets across the globe, just like you said.
00:09:22:19 – 00:09:56:23
Richard Carthon: We solved COVID by printing more money. As anything that can be inflated, we saw inflation happening all across, if you don’t believe me, just look at how much you’re spending on your groceries right now compared to a couple of years ago or just other things that are going on. Also, if you look at like you were saying there are less people working, there are less companies alive because a lot of them had to shut down, yet the markets are reflecting that everything’s been going up. How does that make sense? It doesn’t.
00:09:56:28 – 00:10:39:26
Richard Carthon: So, I think there is also going to be a great awakening and reckoning of some sort at some point. It’s just a matter of when, not a matter of if in my opinion. Again, not financial advice, it’s just the way I’m looking at it as well. But to your point and why I think what you’re going to explain, with The Standard is, how do you get to a more stable currency or asset that you can have that no matter what happens, you know that you have something that is not being outrageously just impacted by outside conditions? So, can we kind of just unpack, you know, what is The Standard and how is it able to help deflect what is potentially incoming?
00:10:41:18 – 00:11:24:12
Joshua Scigala: Yeah. Well, you know, there’s two things that are really important in this space at the moment, and that is one-to-one stablecoins, which are like Fiat backed, a company, sits there and they have $1 sitting in a bank account for an ERC 20 or equivalent on other chains that they will always promise to pay one of these for one of these. And that pegs that price. Tether was the first to launch this and it was basically a way for exchanges to get around regulations of onboarding banks because banks would just shut down. Like, when we first launched Vaultoro back in 2015, it was almost impossible to get a bank account.
00:11:24:14 – 00:12:09:17
Joshua Scigala: So, there was a real reason to Tether for people, you know, being able to trade between the USD, which was not really the USD, but the exchange would say we don’t have USD, we’ve got this software that just is like, you know, tethered. The problem is this company, like Tether for example, I don’t want to pick on Tether because there’s a whole bunch of them, but let’s just pick on Tether. But yeah, you know, they’re absolutely massive now. JP Morgan just recently released a report saying that they are up there with the top three largest funds in the world now, along with BlackRock. You know, they’re up there.
00:12:10:01 – 00:12:44:09
Joshua Scigala: So, what happens when something happens with these massive ones, so, there’s USDC, which is circle, there’s Binance Coin, like USD as well, and there’s a whole gamut of them. And the problem is that the US is heading very, very quickly towards negative interest rates. And you’ve got to ask yourself, why isn’t there a Euro stablecoin? Wasn’t there a one-to-one Euro stablecoin, really? I mean, you know, people have tried, but they failed. The reason is because they have negative interest rates here.
00:12:44:11 – 00:13:03:05
Joshua Scigala: If you’ve got above 100K, you’re paying the bank to have your money in there, which is just bonkers. Like, talk about an experiment. You know, people say Bitcoin’s an experiment. I mean, that’s just gaga. Nevertheless, it’s a reality. And the US is heading very quickly towards that.
00:13:03:07 – 00:13:50:27
Joshua Scigala: If you keep an eye on the reverse repo markets, for instance, in the US, like, these markets are out of control. The state is pretty much buying up all these equities. Like you said, you know, if all jets, like all massive airlines are grounded for the first half of 2020, yet their stocks going up and up and up, you’ve got to scratch your head and go, Hmm, either on Laurel and Hardy scratching my head or there’s something wrong. You know, like, there’s something really wacky going on. So, these one-to-one stablecoins, if there’s a big banking crunch, as we mentioned in the first part of this conversation, these people are going to have a big, hard time.
00:13:50:29 – 00:14:51:13
Joshua Scigala: Not only that, if negative interest rates come in, these people, it pretty much destroys the business model that they have. So, what will happen is that they’ll have to lobby the state to say, “Allow us to do fractional in our reserves, please,” because you know, they’ll buy a bank license or, you know, or they already have one. And basically, we’ve got like, to pardon the pun, but full circle, you know, USD circle will basically go, Hey, let’s get away from Fiat to go into Crypto and by the way, let’s go back to being fractional reserve. And why I’m so passionate about this is because we have basically billions and billions of dollars now that’s sitting there and sort of controlling the price of Cryptocurrency. And not only that, these companies, they can print this stuff out of nowhere, like they’re literally doing what Leonardo DiCaprio did was doing at the end of Catch Me If You Can, like just printing checks. Like, it’s totally illegal, but somehow they can do it. I don’t know.
00:14:51:15 – 00:14:52:00
Richard Carthon: Somehow they can do it, right.
00:14:52:02 – 00:15:37:09
Joshua Scigala: They can say, Yeah, like they say, no, this is actually $1. Anyway, so, I see a moment where you’ve got multiple things with multiple existential threats towards this huge part of the Crypto space and that is negative interest rates, maybe a banks banking crisis and then the third one is CBDCs, which is central bank issued Cryptocurrency, which would probably start in China, but will very, very quickly once they do it, be released in other countries. These guys don’t want to compete with some private stablecoin. They’re just going to be illegal, you have to use ours. It will just happen. And when that happens, that will cause a massive ripple effect. So, what’s the answer, you know?
00:15:37:11 – 00:16:31:27
Joshua Scigala: That’s really where The Standard came in and really, who really pioneered it is MakerDAO, because Maker created a stablecoin pegged to the USD, but there’s no USD, there’s no bank in the middle. It uses an algorithm to stimulate interest rates, and we can talk about it further if your audience really break it down to basically stabilize and soft peg that currency. And this is I didn’t think it would work as well as it did when Maker launched like four or five years ago, I was like, Hmm, you can’t react quick enough with inflation deflation lever to, you know, the prices of Crypto, but it’s worked remarkably well. So yeah, basically what The Standard is is taking that and making a next gen version.
00:16:32:22 – 00:17:07:14
Richard Carthon: So, I want to unpack it for sure and something that I also want to reemphasize to a lot of people who enter the Crypto space and sometimes forget, right? Because a lot of people get so wrapped up in like, Oh, here’s this new Crypto, here’s this new company to the Moon. I’m trying to get as much money as I can and be in and out, whatever. MakerDAO took four to five years to get where it is today, yet, you think about Bitcoin to get to the price point it is today, this took over a decade. You think about where Ethereum is with its ecosystem and everything that’s going on with it right now, this took about eight years to build.
00:17:07:16 – 00:17:34:16
Richard Carthon: Like, these things take time to build out and to work properly. So, you have to broaden your mind on if something sounds like its premise is good, you have to then allow it to have the time to build it out and prove that it works. So, I just wanted to unpack that for a second, and then I definitely want to dive into this new and improved kind of what MakerDAO has done and how The Standard is standardizing it and making it even better.
00:18:17:17 – 00:18:35:29
Joshua Scigala: Yes, sure. So, one thing that a lot of people talk to me about over the years is, Hey, Josh, you’re the Crypto and the gold guy. You know, love gold. You’re not like Peter Schiff who’s like, Screw this Crypto and you’re not like, you know, all the Crypto people, they’re Like screw gold. It’s just, you know, useless, it’s old.
00:18:36:15 – 00:19:09:03
Joshua Scigala: I really see the value of both because A, it’s insurable and auditable, and it’s a great diversification in a rare asset. So, it’s nice. But a lot of people came to me from other companies, other large vaulting facilities and said, and by the way, folks, there’s 10 trillion with a T worth of gold sitting in vaulting facilities around the world. So, this is not a small market. If you think that DeFi is running in the billions of volume, gold is the trillions, you know.
00:19:09:05 – 00:19:32:03
Joshua Scigala: And just to unpack that even further, because we throw trillions and billions around a lot, let’s just quickly look at that number. A million, if you counted a million seconds, is 11 days. If you go one, two, three, you’d be there for 11 days. That’s a million. If you counted for a billion seconds long do you reckon you’d be there, Richard?
00:19:36:25 – 00:19:37:14
Richard Carthon: A half year.
00:19:38:23 – 00:19:40:00
Joshua Scigala: Thirty two years.
00:19:42:27 – 00:19:43:12
Richard Carthon: That’s nuts.
00:19:43:14 – 00:19:50:09
Joshua Scigala: You’d be there for thirty two years, right? From 11 days. Hey, what about a trillion? What do you reckon you’d be in a trillion seconds?
00:19:51:06 – 00:19:56:02
Richard Carthon: That’s 32 years, so let’s call it 400.
00:19:57:15 – 00:20:24:08
Joshua Scigala: Thirty two thousand years, right? So, because people throw these numbers around all the time and they can’t comprehend it. They can’t comprehend the magnitude what these numbers are. From 11 days to 32 years to 32,000 years. You’d be sitting there one, two, three, a trillion. Yeah, it’s a massive number. So, nevertheless.
00:20:24:13 – 00:21:21:28
Joshua Scigala: So, what I’m saying is that these people would come to me and say, Josh, how do we tokenize this gold? How do we make it actually do something? And every time I said, “Guys, you can’t.” And I’ll tell you why. Because if you tokenize the gold, if you say one gram of this gold in the vault is tethered, pardon the pun, to this ERC 20, and that person dies or loses their private keys or whatever, you’re there stuck paying the vaulting facility fees, the insurance, the auditing, the men with guns, the large doors. You’re paying that forever without ever knowing what’s going to happen to this gold. And there are vaults in Switzerland holding gold for that exact reason where they’ve lost who owns it, and they’re not allowed to contractually sell it or do anything and they have to pay. It’s this weird thing.
00:21:22:00 – 00:21:23:14
Richard Carthon: That’s nuts, yeah.
00:21:23:16 – 00:21:30:12
Joshua Scigala: Yeah, it’s nuts, right? And that would happen a lot. I mean, there is a lot of lost Crypto out there, you know.
00:21:30:14 – 00:21:30:29
Richard Carthon: A ton.
00:21:31:01 – 00:22:08:07
Joshua Scigala: It’s not something that you can just fix. And sure, some have fixed it with weird things, but you can say, Oh, well, you’d have like, a private investigator investigating if that person actually did lose their private keys or are they just saying that? Or you could untether it, but to untether, then you’d also need proof because it’s an allocated asset. It’s not your property, it’s the company. It’s like it’s a can of worms. And so, I said you just don’t want to do that. Just let people buy gold and sell it back for Crypto. That’s the way. And that’s what Vaultoro has done for this whole time.
00:22:09:06 – 00:23:01:13
Joshua Scigala: But why a lot of people don’t like gold is because that has no yield, it just sits there. It’s a big block of metal that just gathers dust and holds value extraordinarily well. But it’s just that’s its only function. And so, what we wanted to do at The Standard was like, okay how do we tokenize this? So, the solution that we came up with over a long time contemplating and thinking of how to structure this is to allow it to be tokenized only into a smart contract. And that smart contract is only accessible by the user, but that user can never withdraw that tokenized gold into their wallet, so they can never lose the keys. They can lose access to locking it and to generate stablecoins, but it doesn’t matter.
00:23:01:15 – 00:23:56:15
Joshua Scigala: If they lose their keys, that smart contract is paying the bills every month, the most on time it’s ever been paid because it’s just computationally done. And until it reaches a collateralization ratio, anyway, we’ll go into that, but basically, that’s what we’re solving on that side. So, what The Standard is is imagine if you’ve got some gold and you’ve got some Bitcoin, you’ve got some Ethereum and your car breaks down and you’re like, Man, now I need to buy a car, but Ethereum’s going up every day and I’m like, I don’t want to sell my Ethereum. What you can do is you can take your Ethereum, you can take some gold, you can put it into a smart contract. And let’s say there’s 10,000 bucks in there and you can borrow up to 85 percent of that by generating a stable Cryptocurrency, so, you lock that value in and you say, Okay, let’s generate a standard Euro.
00:23:57:19 – 00:24:47:15
Joshua Scigala: We’re going to start with Euro because there isn’t a Euro stablecoin, like I mentioned before, but later on we’ll be releasing every single currency around the world and going through and building a stable alternative. So, the key here is to have something fairly stable compared to Crypto, which is bullion and be able to collateralize smart contracts and issue your self-alliance. This is also a weird concept, and I just love it. I love the fact that people can borrow money from themselves, you know, kind of like a pawn shop without a pawn shop. You know, you sort of say, “Hey, I really need some money. I’ve got this dope bag. I’m just going to like, lock it in a smart contract, issue myself currency and then pay that currency back to unlock my bike again.”
00:24:48:04 – 00:25:49:15
Joshua Scigala: And so, you don’t have some sort of strange parasitic pawn shop that, you know, basically robs you of your stuff and pays you hardly anything back for it once you’ve got a smart contract. And this is amazing. So, this is what The Standard is. It’s a way to collateralize the 10 trillion sitting in gold around the world and allow people to A, borrow against it and then use that in the DeFi space to earn an APY, which is impossible with gold. It’s one of the reasons why Warren Buffett doesn’t like bullion is because it’s like, Oh, well, I’d rather buy a house because it has some return. Well now, you can buy something really great store value that’s bank independent and tokenize it, play around in the DeFi space by market making and allow you to earn a reward. But also it’s not fathomable to the same problems that these one-to-one stablecoins are.
00:25:51:10 – 00:26:46:08
Richard Carthon: So there’s a lot that you just said there, and I want to take away some of the key points that you brought up. I think some of the main ones that for the listeners here is essentially you have a way to take something, collatorize like, actual physical gold and then being able to turn it into Cryptocurrency like a Bitcoin. And then now, while that’s locked up and you’re letting that sit there, now you can earn APY, annual percentage yield and instead of having to liquidate your Bitcoin for money, you can let it sit there. You can now get a loan against your own money so that you can still let your Bitcoin potentially be appreciating, have it pegged to the Euro, so, now you have this money that you can now use to go buy the new bike or whatever it is. And then, once you get the money back, pay it back and now you still have all your Bitcoin still there and it’s still been appreciating without you ever truly having to touch it.
00:26:47:02 – 00:27:18:06
Joshua Scigala: Yeah, I couldn’t have said it better myself. And there’s some really interesting things there. For instance, the US has just passed like some nuts capital gains taxes, right? So, you’re not selling your Crypto, so, you don’t pay capital gains taxes. This is quite important. This is about optimizing taxes, and you definitely shouldn’t dodge taxes. It’s not tax dodging, it’s literally just optimizing your tax structure.
00:27:18:14 – 00:27:59:08
Joshua Scigala: So, rather than selling the Crypto, you’re borrowing, you’re taking a loan. There’s no capital gains tax on that and then you’re paying it back. And the second part of it is a lot of people don’t know because it’s not taught in schools, but how do the rich survive traditionally during a hyperinflation or inflationary periods of economic times? And that is by shorting the things that’s being, you know, being inflated away. So for instance, what that means is that when you short something, you know, obviously, you know, Richard, but maybe I’ll break it down for your audience.
00:27:59:10 – 00:27:59:25
Richard Carthon: Please do.
00:27:59:27 – 00:28:16:27
Joshua Scigala: You know, everyone knows that if you buy a Tesla stock and it goes up in price and then you sell it, you’ve made a profit, right? It’s pretty easy to grasp. You’re like, Oh, that’s how you make money. But how do people make money when it goes down? Well, what you do is you borrow the stock.
00:28:16:29 – 00:28:58:19
Joshua Scigala: Say Richard’s got some Tesla stock, I borrow it from him, I sell it right away and then, the price drops because I’m hoping it’s dropped and it drops and drops and drops and then I buy it back, I give Richard back what he lent me and I keep the difference. And this difference is how I profit from the price going down. So, this shorting mechanism is what you want to do when the, let’s say, the dollar is inflating away. Like you said, Richard earlier, that shopping’s costing more and more and more. It’s not because the shopkeepers are greedy, it’s literally the money is becoming worth less and less and less. And that’s basically the price going down of the dollar compared to groceries, compatible to pork bellies and corn and all the commodities.
00:28:59:08 – 00:29:32:15
Joshua Scigala: So, as this is going down, how do you profit? How do you keep your savings safe? Well, you take a loan out. Traditionally rich people would take big fixed interest rate loans, and they would buy property like crazy, you know, just by property. Borrow like crazy, sell that for real stuff and then, let’s say you’ve bought a house with a loan, in 10 years time, maybe that same cost for that house now is the cost of a carton of milk. Well, then you’ve just paid off your house with a carton of milk effectively.
00:29:34:05 – 00:30:36:21
Joshua Scigala: So, this is the thing, during large inflation cycles, you want to be in debt. It’s a really counterintuitive thing, but you want to be in well-structured debt. And to be able to just get rid of all banks and be able to borrow from yourself is really cool because, Hey, maybe you take a loan for that bag, wait 10 years and that loan now is worth, I don’t know, the same price as the pump that you bought with the bike like. So, that’s kind of what you want to do is optimize the way you deal with taxation, but also deal with the inflationary problem. And the third thing that’s really interesting is that I’ve noticed that as a Crypto business, we pay a lot of people in Crypto. A lot of people, like, 99 percent of people want to be paid now in stablecoins because A, it’s really easy to account for, they’re like, Okay, I put an invoice for 99 bucks and I got it, 99 bucks, you know? That’s it.
00:30:36:27 – 00:31:13:07
Joshua Scigala: With Bitcoin, it’s like I can’t Bitcoin 3.855, the conversion rate was this at that time, but actually only on that exchange, because the other exchange, some fat finger, really bought a lot. So, like, it’s a nightmare. So, what they do is they ask for stablecoins and then with those, they buy some Bitcoin to invest in, or they buy some Ethereum, so it’s much easier to do it. And so, I really see stablecoins as a massive future. Definitely not the one-to-ones. Where I see the future is these algorithmic stablecoins, they really are. And maybe we can talk about how they stay stable because I think that’s.
00:31:13:09 – 00:31:47:06
Richard Carthon: Yeah. And actually had on another guest recently who was talking about, as you look at the future, one of them is going to be stablecoins. I don’t know that they all survive, but the ones that do, they’re going to dominate. And I think when you look at APYs, a lot more structures are going to be more lenient to wanting to help you give higher APYs with a stablecoin as opposed to a newer Crypto. So yeah, let’s unpack that for a second of like, how do you think that’s going to play out?
00:31:49:06 – 00:33:05:13
Joshua Scigala: Yeah. Like, algorithmic stablecoins have an interesting mechanism, and that is that when you take these loans out, it’s just a token, it’s just like an NFT or anything else, right? Just, if you left it to the free market, it would have all the volatility like a normal token. But what you say to the market is you say No, this one is pegged to the Euro and when it goes because it’s come from a line someone’s borrowed against themselves to generate this thing, so, there’s more capital sitting locked up that is effectively backing this thing that’s out here. And then, you say this thing here is worth a Euro, and if it drops below the price of a Euro, of an actual, you know, ECB European Central Bank issued Euro, if it drop below that what the the algorithm would do or the community would say, Hey, let’s lift interest rates, so lift interest rates across the board and people that have taken debt out for themselves go, That’s too expensive for me, I’m going to pay off my debt.
00:33:06:12 – 00:34:03:02
Joshua Scigala: And so, they go into the open market and and they start buying standard Euro back and that demand causes the price to lift back up. And it maybe overshoots, you know, let’s put more and more people by. So then, they drop interest rates and people go, Oh wow, this interest rates cheaper, I’m going to borrow it for myself again, and I might take another loan out and dump that on the market, creating supply, which brings it back down. So, that’s why it’s called a soft peg, these algorithmic stablecoins, because they’re not really hard, but the softness is really quite hard. It’s remarkably effective. If you look at the history of Dai, like if you go to CoinMarketCap and click on D-A-I, which is the first algorithmic stablecoin that was generated, it, over time, it’s like in the beginning, it was a bit of volatility, and it’s been nice through some big dumps like some big market headaches.
00:34:03:04 – 00:34:29:14
Joshua Scigala: So, I’m super fascinated by that. And the only issue I have with Maker in terms of how they decide interest rates is that they use a voting mechanism. And, you know, I’m a bit of a, you know, I guess, volunteirist of I’m not a capitalist type. You know, I find voting like it’s a silly mechanism, but it’s better than a dictatorship. It’s better than a monarchy.
00:34:30:00 – 00:35:09:00
Joshua Scigala: But I think there’s room to, you know, either like, nah, you’re either for that or it’s for democracy and I’m like, it’s other ways. Like, and one of the really cool ways that I love the idea of exploring anyway, I mean, who knows if it’ll work, but is the idea of prediction markets being used. And there’s a lot of academic research behind prediction markets stating that they are the best way humans have to determine the future, apart from seeing, you know, the old lady at the fair that you know, who looks in a bowl there. But, they’re remarkably accurate.
00:35:09:06 – 00:36:06:20
Joshua Scigala: Of course, they’re not 100 percent, but what happens in a prediction market to tell the future and what a prediction market is basically a bet is you would say you have a sports team and the odds of a whole bunch of people betting will usually determine the team that will win. And why is this? Because I might be absolutely in love with Team Red, I’m like, Team Red is the one. I love it, it’s my whole life. My family, my father, my grandfather, we’re all Team Red’s. But the goalie just broke his leg like three days ago, the other guys totally sick, they’ve got this dodgy guy stepping in, they’re playing Team Blue and, you know, I’m putting money down. I think they’re going to win, so, I’m going to put my money on Team Blue, so like, putting skin in the game sort of removes this dogma that people have about their own, you know, ideas.
00:36:07:24 – 00:37:10:20
Joshua Scigala: And so, imagine if we could use that for governance instead. So, you’d say something like the question would be would moving the interest rate up .1 percent in the next 10 minutes peg, you closer to zero to one-to-one in the next 10 minutes than a .2. You know, questions like these and people would place bets and one of the odds is that’s what the system then would choose to adjust. And I think this is a really fascinating idea. I want to explore it further. One of the really great people that, you know, even Satoshi used the Merkle trees, and this is from Ralph Merkle, the inventor of the Merkle Tree. He’s obsessed with Tukaki, which is this whole idea of governance through prediction markets. You know, rather than saying, I vote for Trump or I vote for this other person or I vote for well, I shouldn’t have brought up Trump, because that causes all sorts of problems. But, you know. But yeah.
00:37:10:22 – 00:37:11:07
Richard Carthon: Even today.
00:37:11:09 – 00:37:55:18
Joshua Scigala: Instead of saying I voted for, you know, President A, you say, will you be happier or maybe a better metric than happier, will there be more jobs like 20, you know, above 20 percent job growth in five years time if President A or President B gets in? Place your bets. And people are like pretty sure President B. You know, I like president A, more, he’s pretty cool, but President B does have more, you know, a better plan in terms. So, putting away dogma is to wait because if then in five years time, that’s when you get rewarded for finding the truth in the future. So, by that reward, it’s really interesting.
00:37:55:20 – 00:38:27:26
Joshua Scigala: Anyway, there’s a great conversation on Epicenter Bitcoin with Ralph Merkle. He’s a top guy and a really well thought out structured conversation with him. But this is what we’re looking to do with The Standard as well. We’re going to start with voting because we need critical mass of prediction markets, you need a lot of people participating. But this is like Daos in general, decentralized autonomous organizations, they’re the ones that hold the governance token of The Standard. They vote. They’re the ones that vote on the interest rates.
00:38:27:28 – 00:39:08:03
Joshua Scigala: And the thing that we’re seeing in Daos generally across the board is voter apathy. You know, people just don’t care about voting they’re like, I don’t know, I don’t want to partake. And then, if you like, try to stimulate people to or promote people to vote, like by giving them a reward, say, “Hey, you get a reward for voting.” They just come on the website and they click anything, they don’t care, they just click anything because then they get the reward and they go. So, it’s kind of this balancing act to say, “Hey, how do we get more participation and how do you get better answers?” And I think prediction markets are a great way to do that. Sorry. Total like, brain dump there.
00:39:08:12 – 00:39:30:02
Richard Carthon: No, I mean, definitely a lot to unpack. Everyone, listening, make sure you go just take that in. I’m probably going to go back and listen to it a couple of times because it is interesting in a lot of different ways that can be unwound and used in a lot of practical ways. But man, you’ve dropped a tremendous amount of knowledge on us today, we definitely appreciate it. But what is a final thought that you want to leave with all the listeners here today?
00:39:32:14 – 00:40:01:24
Joshua Scigala: Final thought. You know, this world we’re living in, probably the most interesting time in history. And there’s some really, really strong good Crypto projects out there. You know, try to like, and I’m seeing just so much rubbish just coming out of the Crypto space as well. And don’t miss your opportunity to find strong projects in space.
00:40:01:26 – 00:41:06:28
Joshua Scigala: Don’t miss the opportunity to find infrastructure because the infrastructure’s being built right now. And a lot of people are like, Oh, look at that funny like dog coin over there, you know, or whatever, like Doge or Nuit like Rainbow, or Poo Coin, I don’t know. There’s a whole circus of craziness, right? Totally fun and you know, it’s a free market, but hey, there’s a lot of opportunity out there right now of infrastructure that’s being built that is building the Web3 up right now, especially with a whole Layer Two technologies that are coming out and there’s a whole gamut of them. And, you know, maybe we can talk about them in another show. But they are also fascinating because the scaling debate really is just starting as well. And it’s not a war like Bitcoin was, you know, fortunately, but it’s definitely a battle because there’s so many different scaling technologies, especially for Ethereum, but just general Blockchain scaling. They all have the same sort of needs.
00:41:07:07 – 00:41:47:19
Joshua Scigala: So, this is interesting as well because you can’t just have so many because the liquidity, if you spread the liquidity across every single one of these scaling solutions, there wouldn’t be enough liquidity that’s needed. So, if you did a swap, it’d be way too much slippage because the market makers would have to have a pot in every single second layer chain or sidechain or whatever. So eventually, I think what will happen is people will migrate towards one that’s getting less and less slippage, and the volume will attract more and more. And that will then it’s really hardened that network effect, so, all these things, there’s really, really good opportunity.
00:41:48:21 – 00:42:42:03
Joshua Scigala: And, you know, we’re hoping that The Standard is also a, you know, will become standard across the world. We’re really looking to not only be that in the DeFi space, but you know, when banks and all this banking structure collapses, I think the thing that’ll left, funnily enough, weirdly enough, these massive vaulting facilities of the past that the wealthy have kept their assets in and the middle class is just totally forgotten about, they just use that banks. These facilities, the private facilities, and they need a network just like CiphAR, just like Swift, just like these banking networks have. And we’re hoping that the standard and you know, it comes from the gold standard, of course, but I’m hoping that The Standard will be able to connect all of these not only to each other, but into the DeFi space. Turning DeFi from billions to trillions and yeah, let’s see if we can do it.
00:42:43:03 – 00:43:29:12
Richard Carthon: No doubt. Well we’ll definitely stay posted on the journey as that comes together. I mean, you laid out a lot of stuff that we can go and unpack even more. I’m sure, I mean, we could easily spend an hour plus on just unpacking it all, but it’s a lot of good information that people really need to go, absorb, understand what’s going on and start to participate in the opportunities that are there. And it’s all about educating, like you said at the beginning of the show, and you have to continue to further educate yourself on the various ways that you can keep diversifying your portfolio, having ways to stabilize and keep having access to information of various ways that you can keep getting involved. So again, Joshua, I really appreciate you spending time with us. What are ways that people can connect with you and learn more about The Standard?
00:43:30:25 – 00:43:57:27
Joshua Scigala: Hey, you can check out the Telegram, which is T.Me/TheStandard_Io or you just go to The Standard.Io and all the links are there. You can follow me on Twitter, which is @ J Scigala, which is Josh, J, and then Scigala, S-C-I-G-A-L-A. I’m constantly posting stuff there, If you’re interested. But you can definitely keep up with that. But TheStandard.Io Is probably the place to go.
00:43:58:15 – 00:44:03:02
Richard Carthon: Excellent. Well, again, we really appreciate your time today and for everyone listening. Stay, Crypto Current.
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