The Chopping Block: Will Warren of 0x on Its Settlement With the CFTC - Ep. 546
Sep 21, 2023
auto_awesome
Will Warren, cofounder of 0x Labs, delves into the CFTC's Wells Notice to 0x and how they worked with the CFTC to avoid violations. The podcast discusses the challenges of geolocalization, lack of regulatory clarity, and potential conflicts of interest. It also examines the incentives for building new infrastructure in crypto, distribution models, and tokenization's impact on regulation.
First-world countries have clear regulatory regimes for crypto, indicating that it is possible to provide clarity.
The tension between building public goods infrastructure and creating separate entities to compete in the market is a challenge in the crypto industry.
The alignment of incentives between equity holders and token holders in crypto ecosystems is a complex issue that requires ongoing attention and solutions.
Deep dives
Regulatory Clarity and Crypto
The podcast episode discusses the lack of complete regulatory clarity surrounding cryptocurrency and the challenges faced by agencies in regulating this new industry. It highlights that many first-world countries have clear regulatory regimes for crypto, indicating that it is possible to provide clarity. The tension between building public goods infrastructure and creating separate entities to compete in the market is explored, with examples from the 0x ecosystem and Uniswap. The divergence of incentives between equity holders and token holders in these structures is considered, with the regulatory environment influencing the choice of structure. The discussion acknowledges the complexities of building in this space and the ongoing need for regulatory clarity.
Separation between Tokens and Companies
The podcast delves into the phenomenon of protocols and companies that are associated with each other but have different assets and incentives. It uses examples such as 0x and Matcha, as well as Uniswap and Uniswap X, to illustrate the divergence between tokens and equity. The tension arising from the split in incentives is examined, as well as the challenges faced by these structures. The discussion acknowledges the double-dipping concept where companies raise funds both through tokens and equity, leading to potential conflicts and competition for the same revenue streams between the two entities. The regulatory environment and desire to avoid potential securities violations is mentioned as a driving factor behind these structures.
Aligning Incentives in Crypto
The podcast raises questions about aligning incentives between equity holders and token holders in crypto ecosystems. It explores the challenges of capturing value and shares insights on how different structures attempt to address this issue. The divergent stakeholders and the potential tensions arising from competition for fees and revenue are discussed. The tension between building public goods and generating profit is examined, with examples of open ecosystems and regulated markets. The uncertainty and lack of clarity surrounding value capture and token versus equity interests are acknowledged as ongoing challenges in the industry.
The Experience of 0x and Matcha
The podcast shares insights from the experience of 0x and Matcha in navigating the tension between tokens and companies. It mentions the early dominance of 0x in the decentralized exchange space that eventually led to a shift in focus towards building consumer-facing products. The challenges faced in attracting relayers and the decision to prioritize building their own ecosystem are highlighted. The discussion includes the importance of being in control of one's own destiny and touches on the opportunities and complexities in deploying capital within the crypto ecosystem.
Thoughts on the Future of Token and Equity Structures
The podcast concludes with thoughts on the future of token and equity structures. It raises questions about resolving the tension between equity and token holders, as well as capturing value in sustainable ways. Examples of successful ecosystems and layer two networks are mentioned in relation to value creation and value capture. The ongoing need for sustainable models and regulatory clarity is acknowledged, as well as the challenges faced by the industry in reaching a steady state of ecosystem development and value capture.
Welcome to The Chopping Block – where crypto insiders chop it up about the latest news. This week, Haseeb Qureshi and Tom Schmidt speak to Will Warren, cofounder of 0x Labs, to discuss why the CFTC issued them a Wells Notice, how they responded to regulatory scrutiny, and how other countries may offer a blueprint for crypto regulation.