Mike: Hey guys. Thanks for tuning into an episode of Around The Coin. Today's guest is Sergej Kunz, the co-founder of 1inch Network. 1inch is a decentralized protocol that enables fast and lucrative. Protected transactions. They effectively aggregate liquidity pools and provide people with increased transparency and very low transaction fees.

The company or the protocol has raised 175 million. In series B funding at a 2.25 billion valuation. We talked to Sergei. We talked about how he started the project, what they're trying to accomplish in the world. We touched on DeFi and cfi, centralized and decentralized finance and crypto. And the implications of FTX fallout recently.

It was a dynamic conversation and I really enjoyed hearing Sergei talk about the intricacies of how he started the business, how he's funded the business, and how he sees growth in the future. I think it's one of the more exciting projects that I've interviewed, and I'm very much rooting for that. The show today is sponsored by Kickfurther and Kickfurther uses, profits at an annualized 18.2%.

So on Kickfurther, you fund inventory for vetted products and brands whose credibility metrics you review before participating. So Kickfurther is backed by investors, same investors that are behind Tesla, Robinhood, Canva, zoom, and they've paid out nearly 100 million. You can participate with as little as $20 and Kickfurther will give new users $10 in credits to get started.

So check it out at kickfurther.com slash get 10 to claim your credit, and I hope you enjoy this conversation with Sergej Kunz.

Mike: All right, Sergej, I'm excited to be chatting with you. I wanna ask, start off by this question.  

So I heard you once asked if you were in an elevator and you got to be in the elevator with anyone and you could give them a pitch of the business, who would it be and what would the pitch be? And it was something along the lines of Elon Musk and the pitch was, Hey, trading on decentralized protocols is expensive and confus.

check out, invest and check out 1inch, invest in 1inch. Can you update that question? If you were to be in an elevator with anyone and you could give them the elevator pitch, who would it be and what would the pitch be?  

Sergej: Sure. Yeah. First of all, thank you for inviting. It's a pleasure to, to be here.

Mm-hmm. . if I would stay in an elevator with own Musk, I would, pitch them, to anyone. Yeah, I would to pitch them to first, to fly to to, to the moon. Not to to, to the Mars. Yeah. , because makes sense to first to, to, to build a kind of station on the moon, to learn and, and then iterate and go, go farther.

the same, we, we have here in the define space, we are, we are building, on 1inch. that in the small steps for what we can achieve, huge changes in its traditional finances. and, yeah, I would love to ask him to not, push Dutch Bitcoin because like, just a, just a fork of Bitcoin, which actually makes no sense.

Sergej: It's just like fun. mi. , and, maybe it makes sense to concentrate on a great technology like Ethereum, which just changed, changed right now the traditional finances from a, I guess that's, that's what I would like to say to him. Mm-hmm. , he's a really great guy. I have seen the last documentary about SpaceX.

It's, it's really crazy what they achieved in the last years, with a couple of startups. but somehow, Doesn't show up there. Their kind of to, to being smart in cryptocurrencies and, and blockchain technologies and pushing some sheet coins on Twitter. Yeah.  

Mike: Well, my thought would be that he just doesn't care.

It's not a focus of his and it's entertainment and frankly it is entertainment for most people. I mean, who are all the people that participated in board ape all the people who bought NFTs? Of, of, of, you know? It's like, what is that really? Entertainment?  

Sergej: One of them . Well, also,  

yeah.  

Mike: How did you come out on the nf?

So now we're recording November 17th. Market's been down for a minute. How was your NFT reflecting back at your nft? what do you, what do you make of the both personally and then what do you make of the, the whole market?  

Sergej: So, I actually didn't invest in NFTs at all. I, I wanted to, to come to a party and I heard that, board a NFT would help that I can come to this party.

And, but it was wrong. The information was wrong, but I bought it already, so, and yeah. How much was it? Yeah, a lot. A lot. It's like Porsche and in one. Okay. Yeah. And now like I lost like the half, maybe more so, but it's, anyway good for me, kind of from tax per perspective, so I can declare it as loss.

Mm-hmm. . And so I have to pay less, less taxes here in Germany. Yeah, but in general, I didn't listen in NFTs or something. it was kind of interesting from one side, but from other side I didn't see any value in that. in the future, potentially we will see, NFTs where you have also real world assets behind that.

This makes sense. Like for example, you can buy apartment or maybe a piece of the apartment, or you can invest also in a luxury car. Partially and benefits from the price grow. discounts of NFTs makes sense. but like, just picture jpx, I don't see kind of huge values when, you don't have any benefits from it.

For example, if I would have born, bought APE and would get access, To cool party. If I'm celebrities, I can meet maybe Mywe Corner McGregor or maybe, I don't know, snow dog or something. Mm-hmm. that would make maybe make sense to have such a, such a nft or I can go to F1 and kind of mm-hmm. , go to a V V I P area and speak with,  

Mike: yeah, there's some, some practical use case.

Yeah.  

I wanna ask you about 1inch. So you started this project that you are not CEO of, but you are the co-founder of the protocol. 1inch is, as my understanding, you are aggregating smaller liquidity pools and allowing people to get better price transparency and pay less than transaction fees.

Through doing that, can you explain and then also tell me where you guys are in. Like I have down in the notes here, raised 175 million to series B with 2.25 billion valuation that may have been dated. What is it? What is it that 1inch is doing? And then how, where, how's the size of the protocol today?

Hmm.  

Sergej: So first of all, maybe it's important. How did you start with that? I, back in 2018, 2019, we were touring around the globe participating on different blockchain hackathons. If you're in global hackathons, I guess like we participated in 17 hackathons around the globe. I was New York, Denver, Boston, South Africa, India.

Berlin from maybe one price from, Daimler, for smart Mobility car, which you could rent with, any crypto. and we, we collected a lot of, a lot of experience and, one of the second ones in New York. We were like thinking, what, what should we build on this hackathon? Normally we just came to the idea on the hack, just on the hackathon.

we were like speaking with a couple of people, in New York. I was speaking with, vital with Hayden, from Uniswap. and yeah, we came to the, to build something where you can find the best execution for trades. Actually an had the pain that she was all the time jumping between Dexus and tried to find the best rate because liquidity, like was not the same on all the protocols.

Sergej: And nowadays we have kind of. A lot, a lot of protocols and a lot of, we distribute among them. So, and he want actually a kind of a page where you see all the liquid source, you select one, and I suggested to him, maybe it makes sense to, to, to write an algorithm which finds the best distribution among them by taking the account or the gas.

cause codes and whatever else, like liquidity and so on. And, he left like for a couple of hours and come back with the algorithm. He didn't sleep like two nights, from Friday evening to Sunday,morning, a Saturday morning, and. Yeah, we, we have built something that changed the DeFi digitalized finance actually.

when we have built it. No one was talking about DeFi. People were like talking about Dexus, like Uniswap. But, yeah, in the end we, we built something with, soft problem. Yeah. And, Offer the best execution among digitalized exchanges. Nowadays, we aggregate not just digitalized exchanges, we aggregate also other protocols.

Like a for example, you can easily jump into a by just doing swap. For example, you have Ethereum, you would like to jump in a use landing pool. You can just do refund one trade. And at the beginning we just split it among protocols for the same trading pair. Nowadays we have like,Ironman, we found, kind of pathfinder we call it.

It finds a way from one talking to another, talking by using multiple markets. So it can be used in between Bitcoin market, UTC die market, what is liquid Yeah. On the market. By this approach? yeah. We kind of achieve right now the best execution. also in terms of gas execution, gas costs. We are better than Uniswap itself.

cause we have very, very optimized, route Actually, they can just copy our implementation used for the own, but they don't do that. we use MIT licenses for fully open source, but they need to take care of what copyright as well. I guess that's why they don't, don't use it. But anyway, we have special implementation also for multiple hops, multiple trades split between the protocols on each of these hops and this kind of best execution right now on the market.

And couple of days ago we released the V five, which is. 10, at least 10 percentage is, more efficient than everything else on the market. yeah, this is how we started and what we have built, we solve huge problem with that. This was kind of our first protocol and we introduced more protocols. We have liquidity protocol, similar like automated market makers, similar to units who have been v2, but with, additional features like sandwich protect, protection, front front writing, protection.

By using virtual balances. we have our limit order protocol, which overtook zero x recently on the market market share. and, we have our governance, we have our, token for, for, for governing the multisig. now what, what we have right? . So there's also kind of revenue stream for of the protocols.

we call it spreader plus. it's, it's like a dust, what's happening when people exchange. And, in the, in the processing time, the transaction time, the price can little bit jump. Yeah, if it jumps and the protocol gets more than expected, just little bit dust goes to the DAO and on billions of dollars, sometimes a day volume, we collect good amount of dust, which goes directly to the DAO.

Sergej: The do and decide on a lot of things, like, for example, provide a brand for, for software development, company or team or or single person who would build something for, for, for 1inch network. We have a lot of teams, working for on a lot of things, kind of. we have, our wallet, non custodian solution where you have kind of really good ux, UI and, very secured implementation, to keep everything safe.

also, There are teams who are like working with the community also, support team is very important. Someone don't know what to, how to exchange or understand something. They can just chat with their community support team. It's, it's really cool to see people joining around the globe to, to the 1inch network.

Sergej: We have already around one 30 people, also from us, from Europe. from Dubai, from Cyprus. Mm-hmm. from Ukraine. We have two guys working right now. unfortunately they cannot, they cannot leave cause of the war, the country. yeah, we try to support them as much as we can. yeah, this is kind of 1inch network that we have built and yes, we, we have, we raise multiple times.

we have great bakers. there's no one who has, huge part of the 1inch network. This is very important cause of ization to keep it. They're decentralized. There's no one who can decide everything. It's very good. Distributed among Baker community, there are like 100,000 wallets who. Who, have right now oneish tokens on the wallet.

Sergej: Actually, there are more, because a lot of people are in centralized exchanges. unfortunately we have seen like these problems last days with ftx. yeah, this is kind of very, very, yeah, kind of homicide bad things, but also from other side kind of good things, but that people. Got it. That makes no sense.

Just trust someone. Don't trust. Yeah. Yeah. Use something.  

Mike: Yeah. Before we jump into that, cuz we could certainly talk about that.  

So 1inch, if I were to distill it down, it's price, transparency and reduced transaction fees and then making it easier to use. Yeah.  

Sergej: This and very important thing is, you, you don't have to trust us, you don't do any deposits to, to the, to the protocol or to kind of a centralized entity.

The rate is executed by the user itself. They get just information, how to exchange one asset against another for which rate, and the protocol ensures that the user get what they expect. If they get less, the transaction reverts, so everything is safe. You don't have to trust anyone, just you can read the code.

it's, very good, audited by consensus, by open, and by a lot of companies. We have like, I guess the last version, more than 10 audits, security audits. So it's,  

Mike: it's decentralized. Decent centralized price transparency.  

Sergej: Inexpensive. It's permissionless, trustless, decentralized, protocol for best execution.

Execution of swaps among a lot of, liquid sources, not just decentralized exchanges. Also market makers who I integrate. Got it. They're using RFQ protocol. What also invented by my co-founder. yeah, just, just the future of finances. Don't trust anyone. You don't have to, to deposit to the bank or to, to broker, right.

Something. And, yeah.

Mike:  So alternatives to this would be, if you look at like your direct competitors, would that be who, who, who comes to mind as like other large, would it be, I don't know. like who, who comes to mind when you think of competing protocols?  

Sergej: So, I don't, I wouldn't say competitors. we are, we are coming from hackathon, so every hackathon means you, you kind of compete against other hackers, programmers to, to build something.

And maybe you will, you will win, maybe not. And, this is, in our space, this is like, building on, future finance. Together. How is it of. I invented the aggregation among these exchanges and sources of each sources. People started to try to build that what, what we have invented, tried multiple approaches, similar approaches.

We did. but it's good. It's good to see people working in the same space, also onboarding new people. Mm-hmm. , everyone who's in this space, they try to onboard new people to, to, to, try to,move people from centralized exchanges like  

Mike: Coinbase. But assume, assume, assume people are in DeFi. So, similar type protocols.

I embrace the word competitor. I look at it as a great thing. If you don't have competitors, you're not doing anything valuable. Ultimately wherever there's value. Yeah, there should be multiple people creating services. So is it like, like Ave would be like if I'm, if I'm a user that wants to trade coins, I'm probably comparing multiple protocols.

Mike: If I'm comparing 1inch, I'm probably comparing it's ave and. Compound, like I would imagine it consolidates around 2, 3, 4, maybe five options. Is that about right? Yes.  

Sergej: Yeah. We have players like ZeroX. first Zero X started with this order books kind of limited protocol, and then they came to the idea, wow, se invented something and they started to, to, to.

The same. Mm-hmm. TPI was the same, like from the interface. yeah. The thing is, we are kind of hackathon guys who are very fast and, very, very motivated. I guess first one half years I didn't sleep at all, like three, four hours a day. Lot more. And, there are also other, some, like, for example, guys, they started also to copy also the interface as well.

Cable network. actually, cable network was kind of also aggregator, I would say in the early days. They helped us a lot. On the hackathons, we integrated them and, they, give us sometimes bonuses. Got it. Now this actually, they, they, they, to copy our ui. That's funny to see you. Good. We are friends with, we are friends with them.

I see it like it's a pleasure. When I came to, to the idea and come go to my team and say like, guys, why were not building. Such an interface. Yeah. With chart and the swap interface next year and, and the list of the sources, I guess, decided came from Anton as well. And, and someone integrate and built the same, looks like the same.

And that means, works. First of all, it is useful and other people try to do the same and it's like pleasure for us.  

Mike: And so how is it structured? So you have the protocol, which is decentralized, there's a token in which people can cast votes for different features and changes to the protocol. I would imagine you have a private C Corp or LLC established in some country, and that was the vehicle that you used to raise 175 million or can you explain a little bit more about how the funding flows in the general corporate structure?

Sergej: Yes. so how you set, you need vehicle, to work in the real world? nowadays you can race with Dow. But back into the days, no one knew how to do properly. yeah, we have a limited, on Bridge Virgin Islands. there's kind of huge structure on that. They directors, they employees, some employees, but most of the people are, kind of freelancers, core contributors.

they're around the globe and, some of them are working directly with the foundation, which is completely independent. We found some guys who, who, who wanted to, to help and to, to push this idea forward. they created foundation. It's completely independent from Y and Anton. We are not controlling it.

and the goal of the foundation is just to, to, to. To grow the network. Yeah. Mm-hmm. , they have some Oneish tokens via limited. Good. Also from the foundation, some one tokens. I as a core contributor and Anton and some the other people who,before the token launch contributed to the network. Good.

Sergej: Also, a lot of kind of, Tokens to, to work, to be able to work on that. and also huge amount went to, to the community as well for those people who supported the protocol, who used this. so we had kind of this, initial talking distribution by the foundation. similar to Uniswap actually, kind of this approach was very successful, very kind of permissionless and distance realized.

so it was also taken for this, yeah, and the, the raising of the money was actually difficult for us cause I and Anton, we were just normal programmers. Software engineers, software architects. I had more business experience because I have built my first aggregator for communication back in 2011.

Sergej: Already had some customers in the portal. I was working on startups, consulting companies. Mm-hmm. , Porsche, for example, three years, one half years as external consulter and one half years internal. We learned a lot of things. I'm jumping from one setup to another. Yeah. This, yeah. And, and the, and the raising itself, like it was difficult for us.

We, we didn't know how to do that. Mm-hmm. , I had no idea. I, I didn't deal read any books cause I had no time for that. we were like working on a normal jobs, the nights we were just working for this, project for 1inch, like for free. Right. We didn't earn anything, any pain in the first one and a half years.

And, yeah. And then we raised, after one other pitches, I would say I did like one other pitches.  

Mike: And, and how were you pitching was the basic pitch, like, Hey, invest money, buy our tokens at a discount before we ico. Like, how did the capital formation work?  

Sergej: No, no, we never did an ICO or we never sold to, to, to, to any retail customer.

we were looking for really ADD investors, so there were a lot of people who, who offered a lot of money, but it was never about the money. Mm-hmm. So, and, In the first round we collected like 2 million something and it was about to have, really good distribution among, among bakers. And also to get those, those, investors who help us.

Sergej: So who expand our network, who helps with hiring. . at the beginning we had the luck that we had really great network through traveling through multiple countries and hackathons. We have already built good developer network and we could hire good people.

Mike: So just so I, just so I'm on the same page, so investors put in dollars and they get back tokens from the protocol or they put in dollars and they get back equity in the company?  

Sergej: So we never, we never sold equity because we have never seen value in equity. Nowadays, I see it little bit different. I can explain little bit later about that. but yeah, we, we sold part of the tokens which we got from the foundation.

Got it.  

Sergej: Yeah. In, in all three rounds. So C round after I guess two months, we raised the second round series A, we call it series A, but at the ends like just selling tokens for specific price. and then the third round, the last round was really big. We got really, really good bakers additionally. so for example, I, I asked for the wealth of the Wall Street.

I wanted to speak with them, because he, he's a really good teacher, kind of. He is, do motivation talks and explain how to sell and everything. And, I was wondering to, to speak with them. I wrote shortly to my, to our bakers. , they came like a week later with this guy. We had a call with the Wall Street.

Was really a pleasure to, to meet them. It was. Kind of cool. This, this, what means that, that you have value add investors. If you need something, you get it. If you need introduction to, I don't know, to, to break, you can get it by, by having the, the right, right. investors.  

And so the pitch was, hey raise. It was a total $175.

Obviously that was traded in the. Token, so I imagine that has fluctuated as related to the s d, but the money went from investor into the foundation exchange for tokens immediately, and held in tokens in the foundation subject to the Price  

Volatility Center, foundation, foundation's, completely independent, foundation's nonprofit, okay in the limit we go.  

Mike: Got it. Okay. So directly into the, so you, you said basically we'll sell you tokens at a discount. If you buy them And were in the purpose of the round.  

Sergej: In the last round. Yes. In the last round. Yes. So we had a good amount of tokens in the limited and, yeah. got it. We had to something to sell, you know, like, yeah.

I just wanted the investors and you, you need, you need just to sell something. Yeah. And equity was not far enough. It's still not far enough, but, I'm looking forward to also maybe to raise token and equity. We have still good amount of one tokens, which could be distributed among new makers. Mm-hmm.

and it makes sense from my point of view to sell maybe a po. Because we are far enough, we, we have kind of enterprise services already. We have APIs, which we can sell. Mm-hmm. , and we are doing right now institutional products as well. So based on the DeFi community technology of one, each network, we are gonna.

start the institutional product. of course right now it's not the best situation. I would say after just terrible, terrible weeks, I would say, a lot of people lost trust in, in blockchain currencies. Also from institutional, point of view. , but I'm pretty sure in the next years we, with this great technology, we can achieve really gotcha good goals.

Mike: And so investors would put in dollars into the protocol and they would get discounted tokens. You raised roughly 175 million total over that multiple process called Series A, series B, and you're maybe thinking about a future one, but did not sell equity in. BVI business as that business is not really aimed to increase value.

It's all about what you think about is growing the value of the protocol. And I would imagine that's the incentive of the foundation. That's your incentive. And so allocating tokens is gonna be something that would need to have been approved by the foundation. And then you allocate token, say we're gonna, we're gonna mint a million tokens and we're gonna sell those for a total of 1 75 and there's a 20%.

And we're gonna go around and pitch investors. That's, I just wanna make sure I understand basic, like the basic capital formation structure, and then we can,  

Sergej: yeah. This is, this was kind of not the same, but kind of mm-hmm. this direction for the, the last round. First, first, first and second round was just simple because we are, we are building the future finances.

We, with two and a half men, we. protocol, which had millions volume a day with no capital. Mm-hmm. , we didn't invest any penny. Not, not in marketing, not in anything else. Anton was very successful with his memes on Twitter. It was, if you go back in the history, yeah. If you go back Twitter, you will see a lot of memes about our achievements, about our features, which, which we released.

And it's, it's a community who helped us to, to build this product. And yeah, and based on what we achieved, we didn't, you know, anything kind of, that we. Gonna, what, what we not, we were able to build, we, we proved that we were able to build something like this with daily volume of millions of dollars and with just two and a half men with no capital.

Yeah. And now this, we are 130. and I have a lot of, kind of protocols, products, and expanding and building for, yeah, more.  

Mike: Okay. Got it. And then do you,  

do you think the capital formation process sounds like it was a little frustrating, maybe a little confusing for you? Do you think it's in the end stage?

Like if you were to start a new protocol today, brand new, do you go. Set up a BVI LLC or an unlimited, and then hire people through that entity to then build a decentralized protocol with a foundation, go out and raise money, allocating new tokens at a discount in the protocol. Or do you think, does that model shift away and do we move towards something that's more, I don't know, efficient, effective, legal?

Sergej: Yeah. This is difficult. in the traditional world, it's difficult to work with organization and I guess in us it's already possible in some states, right?  

Mike: Something, yeah. Wyoming. Yeah, they, they recognize that, and it does seem, it's so important and I think it doesn't get talked about enough. It's like how you capitalize the project matters so much.

Sergej: I think it's possible nowadays to work,through a DAO to collect some investments through a DAO, and, but it makes everything slow. Mm-hmm. . So if you have a DAO you need kind of process to protect you from abuse, manipulations, or draining the, the multi it's happened with one. Do I guess that es multisig like we have.

And, someone created transaction and drained the whole multisig cause no one was caring about the transactions in the DAO so. yeah.  

Mike: Wait, where did that happen?  

Sergej: I guess it was like half year ago somewhere. I have, some other protocol. Yeah. Yeah. Some, some other DAO.  

Mike: See this, the thing, this is like, just to the one, not to interrupt you, but it's like, yeah, if you rely on other people to store your funds, like in CFI with ftx, very easy to understand how people can steal your crypto.

However, when people say, oh, it's trustless, it's it's decentralized, it's permissionless, and then there's hacks on bridges. It's like, oh, well now what can I trust? Because. . It's like, you know what I'm saying? It's like, well, if it's decentralized and we, and it's still getting hacked, then I don't know.

It's hard to evaluate.  

Sergej: Yeah. Smart contracts are written by, by humans, you know? Mm-hmm. . And we may make mistakes, that's why we have a lot of security in our smart contracts, and we try to keep all the implementations really highly efficient with small code. that helps. Yeah. But, It can happen. Yeah. That someone just do a mistake or maybe the, the, the blockchain itself can change the, the approach and maybe it's possible to use maybe kind of a back in, in, in solidity or.

In, in, in the, in the flow how it works. Right. so renderance C attacks, for example, no one was thinking about them, before it started to be to, to become popular. Also, flash launch, attacks. So actually I, Anton became with their flash loan idea and Paris back 2019 to. Stan and we gave them a piece of quote of the flash loans and suggested them to implement in the, in the, in the, I guess they had if land or something.

Mike: who is this? You're saying flash loans? Flash loans, yeah. Okay. And this is the first, so actually  

Sergej: what does that mean? We give our flash loans or flash loans are kind of, you can, you can borrow. money from, from a, for example, if they have like 500 million of usdc, you can just borrow it, do something with it, and in the same transaction you through your Smart , you come back and give it back.

For free. So actually in a small, small fee, really small, small fee, that means you can use this huge amount of money to drain another protocol. It happens multiple times. Oh wow. Actually, and I feel IAnd we in charge of, of all these hacks, because we suggested A, to integrate flash launch. unfortunately, yeah, kind of.

people start using it to drain other protocols, but it's cool, cool thing with the flush ones. You can create leverage positions very nicely in, in landing protocols, or short positions. yeah, but it was kind of misused at the end.  

Mike: That's interesting. so let's, let's buzz up to spf. So how does, how has.

collapse of FTX affected you and maybe affected 1inch more broadly. And, yeah. I'm curious to hear your, your story on it.  

Sergej: Yeah. yeah, we lost like ATK on ftx, from limited. We had some small amount of money there. And, yeah, and actually we got future amount of volume these days. we had, two and a half billions of dollar volume a day, when it happened.

cause people started to, to move to DeFi, to wallets and started to. To hedge positions,this implementations like, index, like aggregators. So, yeah, actually we, we got kind of huge volume, cause of these, crazy things. What happened with, ftx. and yeah. and that's it actually.

Sergej: Mm-hmm. , we have, we are trustless commissioners and decentralized and, we don't care about such situations in terms of, we don't have any positions, of, of people. They don't give us money to, to, to. To, to, to trade with it or something like that. it's fully permission. You, you have your tokens on your wallet and when you trade, you execute by yourself.

And, the protocol just ensures that you, that you get this specific amount, you, you accept.

Mike:  

I mean, so many ways. I would imagine that DeFi founders are sitting around thinking I told you so, thinking. You know, come check us out. Do you think the, the market accelerates towards DeFi protocol trading faster?

I mean, maybe this is obvious, but are people moving away from all the centralized exchanges for good? Or like how do you make sense of the. The transition, or are people just so scared of crypto as a whole, and maybe it's a demographic split. It's people who are comfortable enough with it versus people who just are in there to get gains and hold versus.

Sergej: I, I think, people will forget this case, like they forgot it with empty GOs cases and other, this, this one case, which I have seen on Netflix in Canada, this guy, which tie and, and,the, the company didn't, the company lost access to the, to the, wallet. Mm-hmm. Because one CEO just died in India somewhere.

Mike: wait, are you saying died? The guy died. He died?  

Sergej: Yeah, they died. And, and, and the keys were lost after that? Yeah, but at the end they found out that actually this guy just, used the user funds to, to, to have a nice life, similar to ftx. We are, Sam, borrowed from FTX and, and lost somewhere by, by, by trading nine billions of dollars.

It's insane. Yeah. But such cases, people forget very fast. Mm-hmm. also with empty GOs, they forget it. And, again, the, the start to trust centralized entities and I don't think so. That's it's kind of huge program. I guess regulator will come and regulate more mm-hmm. violence and who's left. Yeah. and, they will try, the centralized exchange will try to get, again, trust of, of the people.

But, we have the opportunity to onboard more people right now and try to, to explain and educate people to. Own, own keys on private kind wallets and not trust anyone.  

Mike: Yeah, yeah. Yeah. It seems like that's gonna be, the message is either get on board with DeFi or get out crypto entirely. And I, I, like you said, I can't see it swelling up to zero for long.

People will eventually come back. It is certainly, a progressive technology.  

Sergej: Yeah, it's it's of course what's happened. It's, it's damaging. Mm-hmm , the blockchain environment, DeFi environment as well. cause a lot of people lost a lot of money. a lot of companies have to close and will close of, kind of, die they after, after this was happened.

Cause, FTX had a lot of relations to a lot of companies. How early made a. in that again.

Mike: How early are we in that, do you think we're in like, you know, the first inning, like, is there gonna be a hundred more companies closed down or like two or three?

Sergej: It's, it's just started. It's just started. And a lot of companies, they will run off out of money.

So Ed Research actually invested also in 1inch. And, they had on this small, small amount. And actually what happened, The hacker who got got access to, to the wallet of fx, the, the salt all left eggs on the wallet and, how I have seen it's part of, of the tokens with ala mego, we were already sold.

On the market. So they're actually don't already. yeah, this is how is, actually didn't affect the price itself. And we, we, we, from our side, we, we don't really care about the price itself cause we, take care about this technology and what we, what we are building. And,  

Mike: can you say that again? see, was there a hack involved in FTX or was it just purely a collapse of the price?

Sergej: Yeah. The, the thing is, hacker got access to FTX wallets, the hacker started to sell. . I guess they, they tried to sell through 1inch and they got blocked because, 1inch Foundation, who, who provide the, the app, the access to the 1inch network? It's like a client, right? The app?

It's just a web, kind of web of website. Yeah. it's served by the foundation. And the foundation also works very closely with kind of, compliance team. This additional team who take. If a had hack happening, they tried to block the hackers and this guy was blocked and they started to use other protocols.

I guess they use cow swap. It's also kind of aggregator of aggregators. They actually would use also 1inch protocols as well. So yeah, and this hackers started to sell a lot of tokens, different tokens when they had, and also oneish tokens. And, they sold like 17 minutes of oneish tokens at one in one single transaction.

Yeah. yeah, we had liked that it was covered kind of by the, by the good amount of liquidity and this exchanges, yeah. But this is how it is. Yeah. So,  

Mike: wait, wait. So let make sure I understand that. So you're saying that the FTX collapse was in part, created by a hack?  

Sergej: It was additionally, so the collapse happened, Uhhuh, and they stopped TV travels and the hacker got, somehow got access.

It's not very complicated, normally. Interesting. If you, if you are kind of a good kind of hacker, you, you do some investigations. You, you check the trash of the, of the victim. you do some social engineering and you maybe sitting like months in the computers of the victims. and one day you, you have to wreck and, and do something.

And I guess this happened here. I done security experts. I was working also Porsche security expert. so, and this, this guy just reacted, I guess they, they, he was already sitting long time with ftx and what I understood from them last kind of reports that FTX was really bad in terms of building software.

Which didn't do proper accounting, research, got benefits,to not being liquidated and something Right. Something like that. So yeah, security was not the highest level. They, they had. Passwords in emails or something. Oh boy. And it makes, it makes hackers life easier and they just wrecked it and I guess, and started to sell, transfer and everything.

Mike: Okay. So it sounds like the hackers were, they downloaded some piece of software in the computer that was on the computer for a long time. And then the market crashed and then they utilized?

Sergej: I think so. Yeah. I think so. Wow. Yeah. Yeah. If I would do that, I would do it like that.  

Mike: Yeah. Making it bad to worse.

So there's a lot of varying opinions on SBF right now. How do you view this person individually and what, what sort of, Reaction. Do you think the community society, should, should levy to him? Is this on the order of like life in prison, you know, or is this, hey, you're an idiot and made a ton of really bad decisions.

I guess what I'm asking is from what you know now, how much malice do you think was attributed? Or was it just purely a combination of important incompetence mistakes?  

Sergej: I think, Sam is,I, I was speaking with Sam, I guess two times. Mm-hmm. so I didn't meet them. but what I got, is he's very educated.

Yeah. so, and based on the reports I have seen last time, what he did was a crime. He. He just, he, he knew what he did and he, they wrote specific software to not being liquidated, you know, and other customers were liquidated and, and, such things. This is crime. Yeah. And I, I, I have still this, this picture where Sam is sitting in front of US government and, and explaining we are regulated by this and this and this and this entity, but at the end, they were not regulated from my point of view.

They, they brought piece of shit of software, which was super manipulated and super in benefit of, of, of his, kind of daughter company or kind of mm-hmm. , his own company. And, accounting books were really done very badly. based on the last report, and, and this is Regulat. I don't think so. Just as a good regulation.

We had similar case with wire cart. I don't know if you have heard. No wire. No wire, yeah. Wirecard also,yeah, kind. light, on what they do. They, there was like, it was like payment provider. They bought a lot of companies around the globe and they used these companies. They said like they, they buy it because of licenses to get the right license to operate in these countries.

But at the end, they wash the money. Through these companies and extracted, the whole money similar to ftx actually they, and, and use this money for, for all needs. this, the CEO left,Germany, and this, if you go to the airport in Germany, you see his face everywhere. They're still searching.

Mike: Yeah, it's an interesting point, right. How, what goes through your head? What's the calculus on? Do I run or do I, do I fight? And I mean, it seems like SBF is not running. And maybe, maybe that's impossible for him, but God, it's gotta be right. How many people, how many crypto people are on the run? It's impossible.

Sergej: Yeah. I guess it's impossible. with enough money, you can do a lot of things. I have seen. the crypto Queen, the one Coin, I don't know if you've heard about them. the brother of the, of the, of the, founder, is sitting us in prison right now. I know, but she. the founder of this one, Coin, the crypto queen, so called, is, somewhere no one can find her.

if you're enough of money, you can, I don't know, do a lot of things.  

Mike: some people it's a form of prison. It is a form of prison. Like being on the run is like,  

Sergej: Yeah, I don't know. You, you can change, you could change your face with enough money. You can change, change your passport. Everything's possible.

But still, that's not the problem. You know, that someone is living and, and living somewhere and with a lot of money. The problem is that, the regulators claim to regulate, for example, in this, in our case, centralized exchanges, but they fail, fail. I have no words to explain how, how fail. they, they, they are.

But also wire is wire case. The B the German regulator, then, normally very strict and they actually fucked up with their, to, to, to verify that they are processing everything in a compliance manner. yeah. This is, this is, how, this is again about trusting people. Yeah. You know, someone pays someone and they don't check every, every, everything.

Corruption is possible when, when you, when you trust people, when you trust code, there's no corruption possible. You know, there's just code which is written in stone on blockchain. You cannot change it.  

Mike: Yeah.  

And what do you know how, off the top of your head, how much was lost in the wire card scandal? I guess two billions of dollars.

Yeah. Billions. Oh god, that's brutal. And I imagine it always falls back on retail. I. Like that's who ends up losing. Yeah, yeah,  

Sergej: yeah. This stock just dropped to nothing.  

Mike: Yeah. In couple hours. That's brutal band. That's yeah. That makes it hard to get excited about the technologies. When you see people, I mean, ultimately it's people and I have to believe, yeah.

Regulation plays a role. I do tend to be, aggressive on the role of regulation, and I do think that there's an under spoken for an underappreciated reactionary defense from the public. People are just going to be more critical of the CFI protocols. They're gonna be more, or cfi, businesses. They're gonna, and like, that's, that's how it works, right?

It's like, okay, if you get hit in the face, you're just gonna be more aware. You're gonna be better defensively. Our bodies work like that. Like if you get sick, your body is stronger. It has that immune system. So I think. Relying and saying, oh, it's, or you die. Oh, yeah. Or you die and like if you die, like listen, like survival of the fittest.

Right. Evolution has a theory, and that's if you die, that means someone else learns from it and is better for it. So the lesson is always encoded. There's always a flip side to it. And that's why I, I, I tend to think it's like, yeah, regulation maybe could have done better, but on some level you have to, you can't regulate the unknown.

You have to let people try fail and then.  

Sergej: I'm not speaking about to, to regulate properly. I'm, I'm, I'm speaking about maybe we should change the view. Maybe this, maybe we, we need to just allow Defy. To grow and, use DeFi technology to have, regulation by default. Yeah. Mm-hmm. . So for example, if you have smart contract and it's, use the full information manner, then you don't have to regret anyone, in terms of, this, there's no one depositing money on it, you know?

Mm-hmm. . You can, you have to maybe to regulate that. it's kind of audited, verify there's no box back doors, no box, and the, the creator, or someone else can, can just take the money from, from, from the people who are using it. Yeah. Because they give permission to the smart contract to transfer the tokens for the swaps.

if it's kind of safe and clear, maybe this is deregulation and maybe it's. Yeah. Because no, we eliminate distrust and deposits and, managing money, and it's also less effort for the regulators if they keep the regulation more efficient, more simple. Yeah. Mm-hmm. .  

Mike: Yeah. Yeah, I agree. We'll see what plays out.

Boy, fascinating story and kudos to you guys are being in a great position to effectively benefit from it and offer the, the saving grace or the, the life raft for people who are trying to get outta CFI and don't, you know, don't want to or don't have trust in those institutions. Sergej, are you actively writing tweeting anything you wanna throw out personally that you have on the internet?

Sergej: Yeah, I have my Twitter account, @deacix. It's also, I have the luck to being verified a long time ago before it's, it was possible to verify for eight bucks. Mm-hmm. it was kind of difficult to get the verification, but, sometimes I post something I have not a lot of time to, to write something. I guess last time I, I was, shooting on centralized exchange a little bit.

and yeah. Wrote that, don't trust anyone, just use permissionless, trustless system. DeFi. Yeah. yeah. But yeah, right now it's difficult. I have little less time. I have, to communicate with a lot of people. Mm-hmm. , we do workshops, was kind of working on new ideas. I've read also code. Mm-hmm.

Mike: even at this scale, even with 150 people you're writing code?.  

Sergej: Yeah. Yeah. So I had to fly from Dub Dubai to Germany and had the idea, just put a couple of microservices to, to, to improve. also kind of, a problem, what you have right now, sandwich attacks. You have heard, I guess, about that when you swap something on, for example, someone can take you transaction and swap before you, and swap after you and, and, and get some, some benefit from.

I see. Because, and, there are some solutions to prevent it. So just came to an idea, wrote a prototype, now sharing it with my, with my guys. also, yeah, it's not like first time the algorithm, the pathfinder, I came to, to the solution. Initial solution on the couch of my sister.  

Mike: That's how it happens.

The best ideas that in the shower.  

Sergej: Yeah. Yeah. That's, yeah. This is how it is. Yeah. And I like to also to to write some quote, not just to speak with lot of people sometimes. I have like the whole day, calls, meetings. Mm-hmm. . Yeah. people wanted to, to to speak with us as well. A lot maybe have kind of collaboration.

Yeah. ask for investments as well. .  

Mike: Yeah. A lot of stuff. Yeah. All of things happening right now. Well, I appreciate you coming and talking to me.  

any particular person? Is there one person, one book, one article, blog, article or blog that you want to throw out as being a point that maybe has been, interesting to you or inspiring to you? Educational or last few years?  

yeah, inspiring. I was, I told I was working for Porsche. Mm-hmm. , and I like this. mentality of Porsche people. I'm, I'm feeling still. I'm PORs us. What's it like? this is, I like this kind of, the division, what they have. They say, if you see something, if you don't see something, what, what you're looking for, then just build by yourself.

Sergej: Mm-hmm. , the, it actually was the kind of, statement of fairy Porsche is the son of Ed Porsche, who, who created the company, the fairy Porsche, was looking for, for a. , the first Porsche car. What? He built the first Porsche car. it's like, it was like a spider. so, like a cab, you know, like, before the top.

and he was looking for really nice one round one, you know, and, silver one. And he just built by him. And, every, everyone was wondering, what is this? And, she said like, I didn't find the, the, the, the car I wanted. I just build it by myself. It's actually the same with 1inch. We didn't find the aggregator.

Sergej: We just build bar. Yeah. So, and I would also suggest to everyone, if you don't find something, just build it. Yeah. Try, try to build. Yeah, it's possible. and one more guy, is Bruce Lee.  

Mike: one, the 1inch punch, right?  

Sergej: Yeah. We called 1inch because of 1inch punch. everything, what Bruce Lee did was highly efficient.

He, he, he trained that hard to, to be more and more efficient. And, I do also my, mixed martial arts more almost my whole life. oh, what do you, what do you train in sometimes? I started with karate Uhhuh, so karate until second brown belt, like five years. I spent for it and Muay Thai. Then I switched to a mixed martial arts and Brazil jujitsu.

Yeah. And now, I do more Brazilian jujitsu than everything else. Yeah, because sometimes, you know, when you do sparring like mu thai, you get some, some punches on the head. Mm-hmm. and I had the prob, I have the problem sometimes I don't see on the left side anything when I get some punches. Yeah. That's why I remember me every time when I have this case, that maybe BJ Brazilian juju is, is better.

it's like judo. I know. I train five days a week. Yeah.  

Mike: Oh, very nice. Yeah. Which belt? I'm a blue belt. So you doing blue belt three years?  

Sergej: I have, I have, I didn't train like five years. I did like one half, two years until Blue Belt with, two stripes. Mm-hmm. . Yeah. And, then, I didn't train five years and I came back this February.

Yeah, I didn't train again. Three, two months, I guess. Mm-hmm. didn't train. Need to come again. A little bit problematic about the time, you know? Yeah. Yeah. All the things happening and I need to be everywhere, but yeah, I will go again. Nice.

Mike: I'll hold you to it. Be your,  

Sergej: I would love to, to have a role if you, maybe you can come to Dubai.

Mike: Dude, I, I'm down. I would love to. I suck it up. All right, man. Well let's stay in touch. Thanks so much, Serge. It was awesome chatting with you. Chatting with you, and congrats on all the progress.  

Sergej: It's a pleasure. Yeah. Thank you very much for inviting.