On The Other Side ep 62 - Reviving trust in crypto w/ Ria Bhutoria
Primer: In this episode of On The Other Side, Ria Bhutoria of Castle Island Ventures shares with us the three main values that individuals should espouse in the crypto space and why they are important — and what happens if you fail to do so.
Background
Started her career in equity research at an investment bank, covering the FinTech and payments space
In 2017, when she started looking into the crypto space, she realized that no one was doing formal institutional grade research on crypto
In 2018, she left Credit Suisse to join Circle, helping to build the Circle research platform
After 1.5 years, she left and joined Fidelity Digital Assets after they launched their crypto custody and trading business unit
Eventually, she became a general partner at Castle Island Ventures
Values-Driven Approach
Why?
When people start conversations with technology and not the rationale, they compromise on their values
Such compromises have led to catastrophes like FTX and other large institutions
The Values
Sovereignty: The ability to empower individuals to take control of their assets and identity
Accountability: The ability to leverage the transparency of the systems to place checks and balances on intermediaries
Credible Neutrality: The lowermost layer to be as unbiased and neutral as possible
Sovereignty
She conflates sovereignty with self-sovereignty
Self-custody is still very complex and places a lot of responsibility on the end user
Users are going to gravitate towards centralized systems that manage their assets on their behalf
“Most people aren't going to care about this notion of, oh, it's so cool that I can take ownership of my own assets. Most people haven't experienced situations where they have actively had their trust compromised by centralized intermediaries.”
- Ria Bhutoria
The tech is a trojan horse to get people into the system
Once they enter the system, they have skin in the game and start thinking about the values that are enabled by the system
Accountability
After the failures in the industry last year, we need to make it easy to take custody of our own assets or have safeguards in place
Still unclear whether non-custodial systems will be as seamless and easy to use as custodial systems
Some institutions may never be able to self-custody because of regulations requiring them to use third party custodians
Important to build systems that are more accountable
Education And Accountability
The demise of FTX was a painful education for many people
“Unfortunately, the most painful education is the best education.”
- Ria Bhutoria
Centralized institutions are feeling the pressure to provide better transparency
Proof of reserves is used to prove that the liabilities that institutions owe to users/clients match the assets that they have available to them
Initially, there was a lot of momentum behind proof of reserves, but it tapered off
Only one exchange started publishing proof of reserves on a consistent basis
Credible Neutrality
Credible neutrality and censorship resistance are the reasons why we are building these systems
Concerns about credible neutrality emerged when OFAC decided to sanction smart contracts associated with Tornado Cash
It raised questions about whether Ethereum is robust against censorship
The fears around censorship worsened because Ethereum was also moving from Proof-of-Work to Proof-of-Stake
Comparing Censorship To The Ethereum Fork From The DAO Hack
The root of the answer goes back to who is deciding the outcome — A single small group of entities or the broader community
Possible Solutions
Transaction inclusion lists where validators come up with a set of transactions that they believe are valid and require block builders to include those transactions
EigenLayer, a restaking protocol to allow for the creation of partial blocks:
Block builders construct a piece of a block that may be censored
Validators construct the second piece of the block, which includes transactions that the block builder may have censored
Decentralizing the process of block building
What Is She Most Excited About?
Progress against each of these values
To be optimistic that they can create systems that rival centralized alternatives
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