Exclusive Interview: Lex Solokin, Chief Cryptoeconomist at ConsenSys Fintech & DeFi Builder

Why this Fintech guru sees a bright future for Ethereum and Smart Contracts

Ric Edelman: I'm really excited to be bringing back onto the program a really good friend, Lex Sokolin, and Lex has been in the crypto space for a really long time. He's the chief crypto economist and the global fintech co-head at ConsenSys. Everybody in the world of crypto knows Lex. If you're not in the world of crypto, you might not. But Lex is a futurist. He's an entrepreneur, works with the next generation of financial services, and he focuses on emerging digital assets, public and private enterprise, blockchain solutions, decentralized finance, autonomous organizations. Before joining ConsenSys, Lex was the global director of FinTech Strategy at Autonomous Research that was later acquired by AllianceBernstein, and he covered their AI Neobanks Robo advisors, mixed reality - you name it. He's also the former CEO of Advisory Engine, CEO of Nest Egg Wealth, and he had prior stints at Barclays, Lehman Brothers, Deutsche Bank. Lex has a JD MBA from Columbia, BA in economics and law from Amherst. And you see his columns in the Wall Street Journal, The Economist, Bloomberg FT, Reuters, American Banker, ThinkAdvisor, InvestmentNews, everywhere. And he's on the lecture circuit along with me at industry conferences all over the country. I think, Lex, the first time we spoke together was at Schwab. I don't know, was it 10 years ago? More than that, I think.

Lex Sokolin: Yeah. Yeah. I need to trim that bio is my takeaway. But yeah it was. I think from the robo advisor world I had gotten bit by the entrepreneurship bug around 2010 and was focused on digital wealth and trying to figure out kind of the consumer experience. And I think that's probably where we started to intersect.

Ric Edelman: When you were getting your law degree and you're at your joint law degree and MBA, were you expecting to enter the crypto field? How did you go from there to here?

Lex Sokolin: That's very, very kind of you to bring up that degree as being useful.

Ric Edelman: In other words, it's not?

Lex Sokolin: I'll give you the honest answer, and it's a three-part answer. So the reason I went after the JD MBA, which is a law and a business degree, was I was telling myself a story that senior people in finance seem to have some combination of legal and business experience. And if you looked around Wall Street at the time I was at Lehman Brothers, which, you know, God bless.

Ric Edelman: Look what good it did them.

Lex Sokolin: Well, Dick Fuld did not have a law degree, but the CEO of Goldman was a lawyer. Blankfein. And then the CEO of I think Morgan Stanley was also a JD MBA. And then one of my direct managers who used to be Lehman's CFO was a JD MBA. And I thought, okay, well, high finance is so complicated. You need the numbers, but you also need the systems. You need to understand regulation and the law and so on. And that was the story that I applied to Columbia with. Later on what I figured out is that it's total correlation causation was totally mixed up in my sample set, right? So it's not that these people were so good at their job because they went to these schools and got this background. It's the opposite, right? So if you've got the capacity to get these degrees, then you've got the capacity to run these firms. But I don't regret it because I got four years of freedom and you could say federally subsidized venture funding of $400,000 of loans to try and start a business and to have the freedom and kind of remove the pressure of day-to-day life. And so I felt like I had a community and I had the freedom to try out something that otherwise I'd probably be too risk averse to do.

And, you know, starting a company as an entrepreneur, the legal skill set is really important because you're doing all the corporate law stuff by yourself, even though it's not very large or impactful. But you might be drafting contracts, you're dealing with a Board, you might have some small transactions. And certainly in the RIA space, you know, having a sense for regulation, figuring out what's a broker dealer, what's an advisor, what are the legal limitations, is interesting. But then once crypto opened up and for me that was closer to 2017, once crypto opened up, it was kind of a dream actually. And that legal background does translate quite well to crypto because all of a sudden you're thinking about economics, but you're also thinking about economics in the context of a very different legal system and a very different property rights enforcement mechanism. And you almost have the opportunity to, instead of building companies, building constitutions and little economies and tribes that have their own legal rules. And so I think there is some usefulness that's come out of that federal investment in my education.

Ric Edelman: College is a “whole nother” conversation that I talk about often on this program, as everybody knows, because I'm so critical of America's higher education system. $400,000 to get a law degree and an MBA, neither of which you particularly use. And the years that it took you to get those degrees, that's another conversation. Fortunately, some who obtain them are able to turn that into economic ROI to justify the time and money spent to obtain them. But as we all know, tens of millions of Americans are in student loan debt without having a degree. 39 million Americans have student loan debt but don't have a college degree. And they're in occupations that they're never going to bail themselves out of this. And we know the mess that we have with $1.8 trillion in student loan debt and blah, blah, blah, I'm not going to go there. I'm glad that your experience proved to have been worthwhile, but I want to see the connection now. Lex of the rabbit hole. You know, everybody always asks, you entered crypto in 2017 - what was your introduction to it? What was your reaction when you were first introduced?

First Entry: Buying Bitcoin for $125 in 2012

Lex Sokolin: My first interaction with crypto was with Bitcoin and with crypto assets and that first kind of macroeconomic story. And I had my robo advisor and so that meant I went to every conference and to try to sell things I didn't understand to other people that didn't understand but would pay for them - which always turns out fantastic. And I ended up in this San Francisco fintech conference as a founder, feeling like I'm on the edge and I should know what's going on. And it was 2012 and the host said, “Raise your hand if you own Bitcoin.” And something like a third of the people in the audience raised their hand. 2012, early on. And it was a fintech conference. It was San Francisco. What are you going to do? You know, I've stolen this technique now, right? If like I'm ever giving a speech, I immediately start with a quiz of who owns what and so on. Anyway, I didn't raise my hand because at the time I didn't own anything. And it was a little bit of like an identity crisis. Like there's a little bit of FOMO, like how am I not getting this right? And so I came back and Bitcoin was at $250 at the time. I opened up a Coinbase account. It was my birthday and my wife was like, I'm going to get this for you, but I'm only going to spend $125 because obviously this is ridiculous.

Ric Edelman: At $125 in 2012, you got half a bitcoin.

Lex Sokolin: It's fuzzy in the past, but it was half a bitcoin for $125 and she wouldn't buy me more. So I spent $125 more of my own hard earned money while being in Columbia grad school.

Ric Edelman: That math sounds about right. When I first started in 2012 as well. My first bitcoin I think was either $400 or $700 in that range. And my wife had the same reaction of, we're going to put a severe limit on the amount of this nonsense you're buying, which I continue to tease her to this day about.

Lex Sokolin: Yeah, I mean, I got a lot of pushback from her and then lots of other people as well. But, you know, I didn't fall in love with the macro narrative. I think there's a subset of people who gold bugs and anarchists and kind of countercultural people who were very enamored with the commodity nature of Bitcoin and the idea that it's decentralized. And, you know, finally as the apocalypse hedge story and that's an asset class story and I was really busy building like a software product for people. And so my lens at the time was like, all right, well, maybe this is something people hold a little bit, but it's not Google, right? It's not going to be the delivery mechanism of financial products to everybody. So I forgot about the crypto space until 2017. And what happened in 2017 was I was at Autonomous and I was looking into platform shifts, technology platform shifts, and I saw Ethereum launch. And the idea that you could put a computer into an ecosystem that has a digital asset was very alien. And for me, like bells ring when something is super weird. When something is very strange, it tells me to pay attention. So, you know, last year an example of this would be fashion companies designing 3D objects into NFTs that people on Instagram would wear and then they would be rendered and sold on NFT marketplaces.

Ric Edelman: Yeah, you're talking Dolce and Gabbana and Gucci and Burberry and Tiffany.

Lex Sokolin: Yeah. And most people will say that's weird nonsense. It's just toys, right? And I had that sense about Ethereum and the offering, the coin offerings that were starting to pop up. And by that time I had also been watching the equity crowdfunding field, you know, and my thesis, having done robo advice was people hate finance. It makes them feel bad. And most people will not choose to interact with financial products. There are some people for whom it's an addictive drug and they like it and their personality is wired in a dopamine way. But for most people they'd like to delegate and it makes them feel bad. And so that was consistent with equity crowdfunding. Equity crowdfunding largely is a failure. You know, there's not a giant wave of retail interest to pick horrible private companies that then, you know, lose all their money and replace venture capitalists. It didn't happen like that. But there was something different about Ethereum and the token offerings there where actually people loved being part of it and they started crowdfunding, actually started to work. And it was very counter to my intuition.

And then as I track the space, I had clients that were interested in it and I started to see dozens, hundreds and thousands of startups all trying to build companies and various protocols of very different types. So financial ones, data ones, pure technology protocols, health protocols. And in 2018, all these projects ended up most of them ended up failing and being a bad deal. But it was profoundly interesting because it was an operating system for decentralized applications that could do financial functions in the same language as legal functions, in the same language as privacy and data and all of it. And having grown up in finance, the idea that your venture capital and private equity and fixed income and equities are all in the same place is also profoundly liberating. And so I was just very compelled by this idea of a computational blockchain. And so I ended up joining ConsenSys, which is essentially the labs company for Ethereum that runs the wallet. The developer infrastructure launches protocols, works on the main Ethereum protocol. And I've done a bunch of things there.

Ric Edelman: And what I find really interesting is that what fascinated you about Ethereum when it came about and I remember that really clearly my excitement about Ethereum was who was behind it. The Ethereum Consortium filled with Fortune 500 companies, companies that were paying no engagement at all to Bitcoin. But along comes Ethereum and the notion of programmable money, smart contracts, the ability to, as you said, put a computer into a digital asset, a coin or token. We had such huge companies engaged in this that my attitude was, I don't know if Bitcoin is going to survive, but Ethereum is real because these companies are not going to waste their time and energy or their reputations and something that isn't going to prove to be successful. And so, like you, I got very excited about Ethereum extremely early, bought Ethereum as soon as it became available and have continued to own it since. At this point I own more Ethereum than I do bitcoin. What's your view today about Bitcoin versus Ethereum? Where is your excitement these days?

Lex Sokolin: It would be too much to call myself a psychologist. You know, I can do some things with code, but I wouldn't call myself a technologist. But maybe as somebody who's predisposed to entrepreneurship and building and somebody who understands, like software businesses and their ecosystems, the idea of an orthogonal Internet, like a Web3 relative to a web, to an Internet that has different starting principles where the economy of it has digital scarcity rather than infinite supply, where there is tokenized money and ownership rather than, you know, endless attention and advertising. It's a dialectic to the Internet. It's a different version of it and a stretching of it. And I think the scale of that is far beyond finance or an asset class. I think the scale of it has impact on the fabric of our society, of like what businesses are, what corporate structure is, what money is, how software works, you know, and like it's the cloud and a money reinvention all at once. It's janky. It doesn't process a lot. It's very pixilated and it lags. But I think the core idea in it is quite, quite magical. And so for me, the Web3 themes are just a lot, much more aligned with what I find compelling, which is entrepreneurship, building stuff like making things for clients, creating value in that way. I think the Bitcoin thesis is in many ways - because it's simpler, it's more powerful, you know? And I find that people who are very loud about Bitcoin, they can get really loud because they have like the one message and it's a sharp message and because it's very divisive, it's even more effective. So the people who you exclude will be excluded, but the people who you attract will be attracted to you a lot more than sort of somebody you persuade halfway. And so I think it's great to have a decentralized store of value that's independent of central bank supply and demand control. I think it's a really useful thing to have.

Ric Edelman: Meaning Bitcoin?

Lex Sokolin: Meaning Bitcoin. But in terms of intellectual curiosity, I mean, I haven't thought about Bitcoin for years, to be honest with you.

Ric Edelman: Does that mean you don't own any Bitcoin at this point?

Lex Sokolin: I own some bitcoin. My Ethereum position is certainly quite a bit bigger.

Ric Edelman: So we both are friendly with Michael Saylor, who is one of the most vocal Bitcoin advocates as we know. And we both know what Michael has to say about the reasons why he is so much in favor and supportive of Bitcoin. And as you noted, his arguments are pretty good to the extent that they go.

Lex Sokolin: That's the thing. It's like really exciting.

Ric Edelman: You're absolutely right. It is exciting. It is persuasive. It is a powerful, intellectual debate. But your attitude and I think mine as well, is that only goes so far that really doesn't spill over into the world of commerce. The practical application of the technology into helping businesses operate faster, safer, cheaper than they can with existing technologies. And that's, I think, why I'm excited about Ethereum as a tool for commerce. And am I putting words in your mouth to say that?

Lex Sokolin: Yeah. There are things to say about payment rails and kind of Bitcoin as a currency that subsumes payment rails and potentially at some point if the tech were to be more performance. But it's like, let's say, the European Union digitized to such an extent that the entire currency of the European Union is now a bitcoin. Okay, fine. I can buy my sandwich in bitcoin instead of buying my sandwich in USD or I just don't care. That's the difference between wearing maybe the chief investment officer hat and the chief product officer hat. Sure, it's better money and it might have a great investment return if the thing you primarily care about is investment return versus the world burning and that's exciting to you and you want to track that. I think the Bitcoin macro narrative is where you want to live. But I'm much more interested in the types of things that can be built in and around blockchain networks, like what kinds of software companies, protocols and projects that are different and distinct from the businesses that have been built over the last decade and a half. What are those? Thousands of applications? What can they do? Being programmable, incorporating digital assets and so on.

I want much more. Ethereum was actually denominated in bitcoin. Like I wish many more NFTs were bought and sold using bitcoin. And the thing about Ethereum that happened is that Ethereum actually became useful. And the reason Ethereum became useful is because you could use it to buy experiences and stuff that you like. So you can actually live in a Web3 environment. There are things you can do with your capital gains. And that's in part why there is this constant innovation because people generate capital gains holding Ethereum, or then they go and they create a protocol, they create compound or AAVE or they create some defi protocol, and then people use ETH inside of that protocol to achieve some goal. And then that creates value in the token of the protocols of this capital gains. And then people go and invest that and then all of a sudden, you have the arts. You have digital artists coming to the space and building tokens that again, other people can appreciate and buy. And so there's a creative loop and there's like an economic differentiation that happens because it's composable, there are different kinds of things you can do. And I think that's really interesting.

Ric Edelman: So is there any reason then, to buy AAVE or Algorand or Polygon or you name it, as opposed to just simply owning Ethereum? Or do you need to go to those other coins in order to gain the economic potential that Ethereum initiated, but won't in and of itself fulfill?

Lex Sokolin: Yeah, I think the analogy I would go to because evaluating tokens is very difficult, including talking about fundamentals. Much of the value of tokens is caught up in the macro cycle and how much the value of tokens is caught up in the macro cycle is determined by how much integration of the crypto economy we have into the traditional economy. So the more institutional investors, i.e. hedge funds, the more Apollo and Tiger hold crypto, the more crypto is going to behave the same way as Google stock because the entity holding them will trade them in the same way, therefore creating correlation.

Ric Edelman: As we have discovered in 2022.

Lex Sokolin: Exactly. So you thought that you had an early-stage venture class that was uncorrelated and instead, what you're holding is a hedge fund shorting tech and high beta stocks into zero. Anyway, putting all of that aside, somebody might want to buy Apple stock because they think the iPhone is a great platform for mobile applications. So the iPhone is infrastructure for iOS. With an iOS, you have lots and lots of mobile applications. You have millions. And so you might say people are going to use this thing as the remote control to their life. And it's such a great device. And Apple's going to do great because it'll be adopted. And there's an adoption curve according to which this is going on. Just because you buy Apple stock doesn't mean you should ignore every single application that runs on the phone. So what runs on the phone? Well, Facebook. Also JPMorgan, right? So every single company that has a substantive business is going to use the operating system to deliver its services as a distribution channel. And so, you know, they're very different bets. So you might be in a place where all you want to do is hold Apple stock, but you might also be in a place where you want to have exposure to the substantive businesses that people are trying to build. But obviously, it's very high-risk endeavor.

The Saga of the Crypto ETF

Ric Edelman: Now, we've been talking in a pretty deep conversation among crypto devotees. I'll call ourselves people who are at least familiar and if not fully immersed in the crypto space. But let's admit it lacks the vast majority of Americans still don't know much at all about any of this. And that includes, unfortunately, financial advisors themselves who have very little training and experience in this field as well. And I've just described pretty much everybody listening to the show. This is not a crypto show. I'm not Pomp and my audience is not as sophisticated and knowledgeable as his in the crypto space. You tend to spend a lot of your time talking to people in the crypto world. I do a bit of that myself as well, but this show is being listened and watched by people who may be crypto curious, or maybe they're kicking and screaming, highly annoyed that you and I are talking about this subject for as long as we're talking about it. So let's go backwards. I want to go backwards before I go forwards. And in the world of backwards, the one thing that everybody is familiar with is EFT. So we have to talk about the elephant in the room. What? Has the saga of EFT meant for crypto? What is the takeaway if there is one? What is the message we should be conveying to those who are listening and watching as they combine the crypto conversation with the EFT conversation?

Lex Sokolin: It's a really difficult question because there are so many layers of the onion here to peel off. And the first layer is the obvious skepticism and the righteous indignation that many people enjoy in the moment. So my counter to that is you have a choice as a human being when encountering this information. You can use a broad brush to paint different things in the same way. Or you can spend the calories to try to understand the granular differences. And it's easier to paint with a broad brush. And it feels good. And it feels good because likely people are coming from a place of like, 'Oh, this thing is hard to understand. It seems kind of gritty, serves them right'. My perspective is, again, that there is actual underlying information, and if you want to be intellectually honest, you've got to engage in that instead of doing the easy but the wrong thing. So if I'm making the claim of there's something here to understand, what is that? So in any economy, there's a separation between the economic activity of the operating businesses. So the goods and services that businesses provide. I make sandwiches, you buy them. You know, we farm, we produce goods like shoes and clothing and so on. And then we have commerce and exchange around that. And then separate and apart from that economic activity, there is financial activity and finance is about 20% of GDP, give or take.

Lex Sokolin: When you have too little finance, you say we don't have financial inclusion. All these emerging economies are underbanked. People don't have access to credit. If only they had access to credit, they could build businesses and thrive and it would be a better economy. When you've got over financialization, i.e. 2008 and you say things like, Oh, all these derivatives are weapons of mass destruction; there's too much finance. All the banks are stealing the money, they're paid too much; conflicts of interest, blah, blah, blah. Regulate the banks. So we know that there is some Goldilocks sweet spot. You need finance, but there's a Goldilocks amount of it relative to economic activity that you want. And finance has a role which is to intermediate people's financial health or to save for the future, to borrow, to invest, to pay for things that are that are going to grow everyone's pie in the future. But that involves risk. And sometimes you can get caught in that loop.

So for crypto, I believe the architecture of crypto provides both a technology and an economic architecture. It creates an operating economic environment for digital exchange, digital assets and digital objects. I think our Internet of attention and advertising and all that stuff is over time going to be in part replaced by commerce and labor and production around digital objects, digital goods and all of that is going to sit on the economic architecture of Web3.

However, we're in this bootstrapping phase where the financial services aspect of it is very asymmetrically large relative to the GDP of Web3. And so there is a lot of over financialization against a fairly small economy so people get excited about trading tokens or holding them in their portfolio. People get excited about using leverage protocols to lever up their tokens, to buy more tokens and so on and so forth.

And so there is a lot of financial engineering that has gone on. Over the last five years because that's something the economic architecture is very good for. And so the balance between having a productive economy and then having lots of financial players is out of whack. And that has to be changed. On top of that kind of getting to the specifics of FDX, when you look at finance in the crypto world, it's no different than finance in 2006 in the traditional world and no different than the finance in 1929 and no difference than a millennia ago. So the patterns, the behavioral patterns that people have around savings and paying and banking and investing and borrowing, they're all the same patterns. And so the mistakes that people make are also of the same type. And so what we've seen where FTX is the final kind of symbol of it, and what we've seen in the financial liquidation in the crypto market since the beginning of 2022, is a very traditional financial crisis.

There was an asset that blew up and that was Terra Luna, and that was a pretty large asset. So as a $40 billion market cap protocol with a stablecoin that was financially engineered in a way, you can think of it as a risk gone wrong. So that was an investment that legitimately was part of the crypto ecosystem, was poorly designed, ended up blowing up, and so that created a loss. You can compare that to the loss that the underwriting mistakes during 2006 to 2008 led to, right? So the issues in the mortgage crisis wasn't that people don't need homes, it’s that the underwriting was incorrect and the defaults were much higher and therefore the whole all of the financial instruments and the derivatives that sat on top of the exposure blew up. People still need homes.

Similarly, in the crypto world, we still need the architecture, but the financial engineering was such that it created a blowup and a bad exposure. And then there was a series of companies that had exposure to Terra and Luna, and these companies were not like crypto native protocols. They weren't digital asset companies, they were companies that were centralized exchanges, which, you know, in the traditional world is a combination of a custodian, exchange broker, dealer and advisor packed into one with very little controls and regulation and disclosure.

And so companies that were in the business of selling and holding tokens as investments ended up absorbing that giant $40 billion hole. And so you saw things like Voyager and Three Arrows Capital and Celsius start to blow up. So three Arrows Capital was an asset manager. It lost a lot of money through Terra. It had borrowed from other companies from their lending desks, which blew up the lending desks of those companies, which created a run on the bank cycle where people sold the assets, which then led to larger players like FCX starting to sell off their good collateral, i.e. Bitcoin and ether, and then ending up sitting on their bad collateral, which was the FTX token. And then retail runs on the bank to pull money out and all sorts of other shenanigans. And in the case of EFT, very likely pretty straightforward fraud, you know, which again has very little to do with software architecture or crypto assets. And so you have this financial liquidation cascade that has blown up the economics of the industry and has created a lot of fear. You know, and in my mind, it's very regrettable that people don't separate out the financial crisis of pretty traditionally structured broker dealer type firms from the people building blockchain technology and building this new operating system with novel businesses and protocols and kind of conflating the two things.

The FTX Debacle

Ric Edelman: So you've taken us from the past and you're walking a little bit toward the future, which is where I wanted to go next. If FTX was in the end, as you've noted, nothing but a fraud—just as Bernie Madoff was a fraud—he wasn't representative of the stock market. And Charles Ponzi was a fraud, not representative of banks and businesses in the twenties. What does that mean for crypto going forward in terms of what people think and feel about it? Do we shrug our shoulders and be dismissive of FTX? Or is crypto filled with nothing but Sam Bankman-Fried, the whole thing nothing but filled with con artists and crooks and fraudsters? Or is that, as you noted, just the sideshow that is inherent with any investment category? And we need to invest in spite of or despite the existence of those folks. Can crypto survive this? And if so, how long will it take for people to put this into their rearview mirrors?

Lex Sokolin: I think what we're talking about is the financial sector trying to sell crypto assets to retail, right? Like that's what FTX is. And I'm going to keep trying to draw this line because it is fundamentally different from, you know, the technologists that are building applications on Ethereum trying to build a company versus trying to be an investment banker for companies, different things. It's not obvious to me yet because I don't have the information or know it's going to take a while. Whether SBF was like Bernie in that, like the whole thing is a Ponzi versus there was productive stuff that FTX was doing, but there were decisions that were clearly wrong, such as using customer funds, you know, taking customer funds to pay down debts, even if it's done through mechanisms like, oh, we're just borrowing against them or whatever it is, we're collateralized our taking of customer funds with a token that we minted. I think it's more complex than, oh, it's just literally a scheme. I do think the takeaway for the financial industry around crypto assets is that there's not a great reason for custodial businesses, businesses that want to take client money, to be treated any different than any other financial services business that takes custody of people's money. So when banks take your money and put them into their depository institutions, there's FDIC insurance on top of it. And that's the answer to bank runs. When investment companies take your money and put them into a brokerage account that goes to some underlying, like the industry structure of having very large custodians that don't fail because of their enormous trillion-dollar scale, is the answer to making sure that somebody doesn't run away with your money through these conflicts of interest, crypto has to do the same.

You need to be able to trust these custodial institutions. And right now, no custodial exchange feels safe other than maybe Coinbase. And that's because Coinbase is very well regulated. I mean, it's in the crosshairs of every American regulator. And I think that that applies across the crypto brokers. That's very different and distinct from, I'm writing an app to create digital identity or I'm building a community using digital art. And we create social events or other application that people are building on Ethereum, which has something like 300 million registered users. So I think the reputational issues of the brokers are definitely destroying value. They're hurting the venture market, the fundraising market. They are hurting perception. Today it's much more difficult to issue tokens and have people believe that they're worth something, maybe for good reason. So it's harder for builders to build because of the reputational effects of FTX. But the lessons that we learned from FTX are about how financial industry should be structured. They're not about how the Internet or Web three should be structured.

Ric Edelman: The common criticism that I often hear from those who are skeptics is that crypto doesn't work, that it doesn't solve a problem, that it's the so-called solution in search of a problem. I remember when Microsoft launched the mouse back in the 1990s, and the very first review I read of the mouse was it's really cool, but what is it useful for? And today, of course, we wouldn't be able to operate our computers, laptops and desktops without a mouse in so many computer applications. It's so ingrained in the functionality. I wonder to what degree are the skeptics simply not realizing that they're unrealistically impatient, that they are expecting too much too soon from crypto and the technological innovations that it's bringing us and that we need to be a little more patient to see this technology develop a little more fully, be adopted a little more extensively, to be able to demonstrate the utility, the promise that it's offering. Do you do you share that viewpoint?

Lex Sokolin: Yeah, I think you probably tend to be more kind to skeptics than I would be. I think this is going to sound very pretentious and I'm not trying to frame it in that way.

Ric Edelman: From you, Lex? Really.

Lex Sokolin: Like, take the perspective of an artist, right? That's the pretentious bit, right? Take the perspective of you being an artist. Things can bring you inspiration or they can bring you information about the public mood, right? Because you're trying. You might try to hit something about the zeitgeist or whatever it is. And so you, you care about information, but you care about information that lets you create. The pushback that you described; it has no information in it. There is no content in those statements with which anyone can do anything. The first thing is they're on they're like on their face. They're wrong statements. And so when people use them today, if people are still using these statements today, like, oh, there's no use case, it's not a better payments mechanism, blah, blah, blah. It just shows that they haven't put in any engagement or work to understand what they're talking about. And that's okay. Not everybody has to care about all the things. There's lots of things I don't understand or care about. But it's just very hard to respond or do anything with that criticism. I think the way to answer that criticism isn't with an argument about, look, it does X, Y, Z. The way to answer it is just to say, look at the usage stats. Like, you think that it's useless and nobody does anything with it. But. Hundreds of millions of people use it and do something with it. Right. So the evidence for that statement being true is just the quantitative evidence of people adopting it and using it, you know, and so consensus works on Metamask, which is a crypto wallet.

Is an obvious thread between my interest in robo advice and crypto wallets. Crypto wallets hold your assets. You invest through them. They in many ways resemble neobanks and payment apps, but they do a lot more than that. They're like, If you were to take a Neobank Robo Advisor payments app and all of that and then attach a browser to it and make that run sort of like an economic architecture and have all your stuff in there, you would have a crypto wallet, you know. So in the middle of last year, Metamask had 30 million users. Compare that to Betterment. Compare that to Stacks, Chime, and any of RobinHood’s, I think, 10 million users. There was such wild organic demand, not demand by buying AdWords in the same way that I said equity crowdfunding failed. But these token offerings, there was a cultural caring about participation, and that's what attracted me to the space, right? Like for just one wallet and not the Coinbase wallet, not the Binance Trust Wallet, but just for Metamask alone to have 30 million people per month use it. Tells me that there is something valuable that they're getting out of their interactions and. I think that's the largest proof you're going to get there is the if you were to go down the argument route, the argument is the following. Do you remember real player from 2002? Sure. How? How? On a scale of 1 to 10, how much did you love Real player.

Ric Edelman: Oh, not very.

Lex Sokolin: Yeah, like zero. Right. So the videos wouldn't play. They would always buffer. It was full of ads. It would slow down your computer. There was no content on it. It was horrible. Even though real players sucked, anyone who at the time said real player sucks because and streaming doesn't work and video isn't for the computer. Anyone who would have said that in 2002 is honest on their face completely and utterly wrong. Right. And that comment at that time had no content in it. There's no information in somebody saying streaming doesn't work because real players not loading.

Ric Edelman: But that's kind of my point. Lex is that could not people say that today about blockchain? I mean, every business at one point had a fax machine. You couldn't do business if you didn't have a fax machine. Well, today faxes are obsolete, but everybody today has a website. Everybody has a URL in their business. Can't operate a business without a website. But I'm not sure that every business today is using blockchain technology. So at what point are we going to have it as ubiquitous where streaming video is ubiquitous, Everybody everywhere does it. At what point are we going to be able to say that about Bitcoin, Ethereum, Metamask, Web3, blockchain, etc. We're not there yet. As you said, it's hundreds of millions out of 8 billion on the planet.

Lex Sokolin: Yeah, I mean, if you were to put my feet to the fire, I'd probably give you a 20-year target. And there are two analogies. You know, the point about real player is that obviously we have YouTube and TikTok and everything's video and it's streaming. So the two analogies are video games. So imagine Pong or Super Mario Brothers and it's pixelated and it's got 16 bits, right? And it's got four colors or eight colors. And now fast forward from that, draw the line to the entire Mandalorian series. Everything you see on screen is people in front of a green screen and the background is the Unreal Engine, which is from Epic, which is used to render video games. Right? So the entire Mandalorian is that fidelity of imagery, right? Draw the line from that to Pong. And then the person who's complaining about Pong not being engaging or beautiful, that's what you sound like about blockchain if you're a skeptic. The other analogy is artificial intelligence, you know, and it's been fascinating since 2012 to kind of pick up this argument because the AI we're enjoying today is actually 60-year-old math. And there were three different waves of venture investment in AI over the last 60 years. And all those three waves died. They all failed because there wasn't enough compute power and there wasn't enough information. And you know, what are you going to do in the seventies with your complicated neural network? Nothing. So again, like, it may be that the blockchain journey is a 60-year A.I. journey until one day you know it can GPT three and pass the Turing test. I hope it's not that long. But again, like that, skepticism doesn't mean you shouldn't try to make it real.

Ric Edelman: This has been a very fascinating conversation. And I think you're demonstrating once again to those who may not be as familiar with you as I am, just how deep you are in this space and how knowledgeable and hopefully you are for folks. Learn about this. By the way, Lex is on our faculty and teaches one of the modules in our course for advisors who are obtaining their certificate in blockchain and digital assets. Your module is one of the most popular of all the modules in our course, as you know. Lex, tell us about ConsenSys. If people want to learn more about the work that you're doing and the work that Consensus does, how do people learn more about ConsenSys?

Lex Sokolin: Absolutely. So the one thing I would advise your listeners is just to have curiosity. That's the only thing you need to do is just to have a little bit of curiosity. So check out Metamask. Metamask.io and play around with your crypto wallet. And then if you're interested in some of the things that I cover, I also publish a newsletter at FinTechBlueprint.com, which opens up all these themes and you can always find me on Twitter at LexSokolin.

Ric Edelman: That's Lex Sokolin here on the Truth About Your Future. Lex, thanks for joining us on the show today.

Lex Sokolin: Always a pleasure.

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