🎙 Tarun Chitra on whether Code is Law | Layer Zero

i think cryptos is you know one of the more interesting things because it's like if we zoom out enough uh you could argue that the entire goal of cryptos is to make organizations that can do commerce with each other on the internet welcome to layer zero layer zero is a podcast of unscripted conversations with the people that make up the ethereum community crypto is built by code but is composed by people and each individual member of the crypto community has their own story to tell cypherpunks understood that the code

they write impacts the people that use it and layer zero focuses on the people behind the code because ethereum is people all the way down and it always has been today on layer zero i'm talking with tarun chitra who's generally known as one of those giga brain math wizards on crypto twitter and around and uh tarun is is so good at like math so fluent in math that he actually comes out the other side and he's actually really creative about it um so he's like a creative math geek i'd say uh and you can

definitely see that in like his style that of his clothes and apparel uh but uh this is this episode turned out to be less about uh the creative side of math and the beauty of math we do touch on that at the end but more about the relationship between regulation and finance and we talk about how smart contracts are more of a innovation in the legal space more than they are in the financial space and we unpack the fact that finance is really just the combination of money and law money and contracts is how you create

finance and we talk about how uh united states regulation is perhaps holding back the truer manifestation of this world of finance not just inside of crypto but but outside of crypto and how this incumbent regulation actually slows us down in the way that states can engage with each other and what if we had interstate law law agreements that were based on smart contract rather than a federal system which was very slow so some very hypothetical zoomed out applications of what it means to have

smart contract law is code law so let's go ahead and get right into this conversation with tyrone right after we talk about some of these fantastic sponsors that make this show possible slingshot is a decentralized trading platform that combines the performance and ease of a centralized exchange with the openness and transparency of defy slingshot aggregates liquidity from all of d5 in order to find the best price on thousands of crypto assets every token on slingshot comes with a price chart and trade logs to give you insights into the market's activity in real time slingshot is available on polygon arbitrary and optimism saving you from

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great how about you oh absolutely fantastic troon i think you have a very interesting position in the crypto industry and i think it's one that what i want to parse apart is are you more analytical and math focused or are you more creative and art focused and i actually don't know the answer to this question and so do you i don't think i know the answer to this question but i will say it's like a coin flip every day

i prefer it having some like randomness and and uh kind of things changing um i also think there's kind of like a a sense in which it there's like phases and seasons of for things for me um you know sometimes it's like i you know there's a time where it's like you people are more in the like production mode and creating things mode and other times you're like consuming things you want to read read things go see movies go places and

stuff like that and i i tend to think of things and more in that dichotomy of like am i in a production mode or consumption mode and like how how are things changing and that that usually guides that but i don't think i think kind of i try to stay in the middle as much as possible i think if somebody who is watching on the youtube they would look at you and be like oh that's definitely an artist like got this colorful stripy shirt got called for glasses got a colored hair but i think if somebody looked at your twitter they would think like oh this is the biggest math gigabrain like

like theoretical physics type like brain person and so like it's interesting to see that you i think are very much on a barbell as in like you know math and cryptography to the nth degree but you know it so well that you've actually been able to make creative stuff out of it like you're like you're fluent in math to the point that it becomes creative for you i think there's always like some element of that um but i think one of the things that um you know i

in retrospect got lucky with was i didn't go do a phd um i think you know after undergrad i was like oh i got into a bunch of phd programs i was going to go do my phd but then effectively it sort of became i don't know i i just like got a little weirded out by like hey you have to like pick a field now and then you have to stick in it for seven years and i kind of have this like wanderlust of like uh i like some fields i like you

know i like some math there are many math-related fields why do i have to pick one and get stuck in it for seven years and then even after being stuck in it for seven years there's like no jobs at the end and dot dot dot dot right like there are there are a lot of problems with academia um so i i feel like that just led me to be like all right well i'm gonna try to optimize for what city you can have the most fun in and then that just like led me to not not really like to kind of like move back and forth between all these

different different worlds and i think living in new york especially like post-financial crisis i feel like there was actually quite a bit of like unbridled creativity here um and uh you know i think that was like a fluke a luck and time type of thing i mean you know i i think in general it's easy to get like stuck in one thing and i think uh you know i just personally always had a little

bit of an aversion to that when did you move to new york 2011. okay uh so like just long enough after the financial crisis that like things started getting back to normal i feel like but also excuse me around the time that um like san francisco was starting to have this like uh you know kind of grow and have this like economic boom and from my perspective

uh attract all the [ __ ] uh from new york uh to go ruin the bay area so i i i found that also like to be like a great time to be here because a lot of people who are kind of shitty left you know that's like a weird weird reason to be like i love this city because all these people left but i feel like there was a while you know probably 2000s where people were like oh new york it's like the like finance bro like stereotype

real estate trump wall street bro whatever type of thing um and like with the younger versions of those people a whole generation of them just didn't go to new york and went san francisco which was great and that that actually i feel like was good for like music and arts here in a lot of ways yeah how would you characterize the city now have you been in new york ever since 2011 yes i've been here for uh 11 years um yeah i think it was like everything was

i mean the pandemic i i don't think the pandemic is over here so like i i've like definitely traveled a bunch in the last year and have kind of come to the conclusion that you know people in new york were very scarred um by the original part of pandemic and haven't quite got like okay here's a great example this week i believe on monday all indoor mask restrictions were removed everywhere in new york and yet you cannot go on the subway and

find very many people not wearing math in spite of the fact that like there's no you know like things have have gone people are just so wired to that right now so i would say things have changed a little bit because of that um and people are more mobile so there are a lot more people who are i meet myself included who are like kind of like hey i'll move around in winter and like go somewhere warmer and then come back so i feel like the there's kind of this interesting thing going on where like a lot of people are

like part-time who are full-time new york residents or like part-time new york residents but there's also way more people here right now than i've ever seen so like it feels like post-pandemic um there were just like more a lot of people who were stuck in the suburbs at home for like months my theory is that they just hit some turning point where like we need to be around [ __ ] people and like lo and behold you got this like huge huge uh increase in the population especially in

brooklyn like manhattan i think is actually lower than its population pre-pandemic but brooklyn and queens are like way higher um and so that that's been like kind of an interesting yeah brooklyn has turned into would you say the brooklyn's kind of turned into a new shelling point for definitely for crypto people i don't know i don't actually honestly i don't know anything about any industry that's not crypto at this point because i'm so into crypto but like everyone seems to be moving to brooklyn i think that's definitely true

for people in tech related fields so like okay there's a ton of people who have come from sf uh i call them the the the the fang refugees uh and they've they've sort of like all moved and mass um and uh you can see this in new york in a funny way in that like kind of the shitty the like not very artistic but like very modern buildings are all all the rents for those skyrocketed but like the rents

for like the brownstones like are the same um so i i think it's true for tech people especially tech people who want to get out of california um and then i also think like this whole like miami austin denver thing was oversold and having been having been to all three of those cities this year or in the last 12 months let's say sorry uh i'm not convinced they've like built up this like whatever tech hub [ __ ] that you see in like the new york times you

know what i'm talking about you were just there like i i it doesn't feel like it's really there it feels like it's like kind of flimsy at best yeah um denver always has had some sort of presence in web web 3 but i don't see it like growing miami i do see growing in austin i see a lot of people moving towards just generally but again brooklyn is definitely up there in places that people are going towards and it definitely seems to have like a frontier of of technology frontier of just like human exploration and

innovation uh kind of vibe to it yeah kind of in a weird way uh because like you know i think people you know if you went to like another country and you're like okay what what is like the most innovative part of the us and like 99 of them would just say like silicon valley sf something like that right does not seem to be true at all right now um or at least like i feel like a lot of the really a lot of really smart people took advantage of being remote and are just like i'm never

going back to that [ __ ] hole and uh that that seems to be what has happened i i actually feel like europe also london also felt like this super super alive i mean london is post pandemic new york is like on the precipice of crossing the the rubicon but it's not quite there but like yeah london also felt like really back alive in a way like way more than i remember it so i think i think it's cool that the world is like kind of having these new centers um but personally i'm actually more

excited for like latin america i kind of feel like in the same way that um asia like leapfrogged the us um by like skipping building landlines and like fiber and stuff like that and like went straight to mobile like i kind of feel like latin america is going to like skip uh like the venmo era and go straight to crypto like it feels like they're just

like way more primed for it right now than i i was living i was living and moving between cities and latin america and pre-pandemic um like no one took credit card like absolutely no one for cracker if you had a credit card you're already looked at a little bit weirdly and someone would you know it was it was already kind of like a weird thing this time i i went to like mexico city bogota um other places south uh like chile

everyone takes credit card everyone is taking like tap to pay stuff and i kind of just feel like they there's this weird chance that like the us gets leapfrogged by by like latin america maybe africa although i i haven't been there so i don't know what to say but that's definitely aligned with what i'm hearing from i did a podcast with um santiago uh santiago siri santi yeah uh talking about the rate of crypto adoption in argentina uh and he says

that everyone's got um everyone's got crypto on their phones and they use actually binance the binance exchange they all have binance accounts and so when they're sending stable coins they go from binance account to binance account because they can't pay for the ethereum fees so they're all using like the binance exchange not not bnb not binance chain but like binance decentralized exchange yeah and that's how they pay they pay with stables in in just using the binance exchange and he said that um vitalik's recognition like vitalik as a celebrity status is like bled out from

the crypto community and now like it's just the regular argentine society that is where vitalik is a superstar and regular like argentine societies using crypto i i think argentina has always been at the cu ahead of everyone because of all of their kind of uh debt failures historically um but like mexico you know if you asked me in 2019 if like mexico was going to be a big crypto place i would have said not really because like i'd gone there a bunch of times

um and i i don't mean like tulum and like that type of stuff i mean like actual like mexico city like mexican people who are right who are who are using uh digital assets because i was like everyone wants to use cash there like no everyone's like we just want cash we hate credit cards and uh you know the pandemic you know for for them seems to have really made them suddenly embrace digital finance like way more um and i think the interesting thing there is that uh they're

like the apps that people use are way more like one stop fits all type things like that like you know their app for like a robin hood like thing does like rob it's like revolut it's like a even more crazy version of revolut it's like you can trade stocks you can send stables to each other you can buy crypto you can buy insurance like in in app like it's actually kind of crazy because it's it's easier than anything you get in the u.s i'm i'm seeing this trend

i think we're seeing this trend across the globe um i mean this is the like in china they have the super apps right uh and ftx is kind of turning into like a financial superstructure it's a bank it's a crypto exchange it's got derivatives uh it just got an integration with stripe for payments um they're doing nfts they're doing it all right and so i'm seeing kind of like a converge on to like if you don't build an app that does everything then like you're gonna be bought or can or your or your services are just gonna be integrated

are you seeing this the same trend uh for sure i think in the us you don't see it because there's tons of like regulation reasons and like for instance insurance right like the fact that i can go into an app in mexico and buy car insurance and it's like five steps and like i i'm done i literally just take pictures of the car uh and then you have car insurance and then here it's like every state has a different law and like to be an insurer in each state you have to like have deposit capital with each state's registry it just it's just natural that the us is

going to be last in the aggregator game because it's just like there's just too much like state-by-state financial regulation whereas i think in like places like latin american africa this aggregator thing works like insanely well like the binance and ftx examples are like i their american branches of all these exchanges are kind of not that great right like volume-wise like right user-wise but like their international stuff is like insane and and i think you know they're all private

companies so we don't know but i would love to see like the breakdown of like latin american and african users um in terms of like not in terms of dollar amounts because like if you if you try to like say like hey like who what who transfers the most obviously it's gonna be like the whales in china and like american like institutions or whatever but you know like if we actually do some more like transaction count based type of thing how many users do you have who are regularly using certain things

i wouldn't i wouldn't be surprised to see like somewhere like mexico had got went from like 50th to like second uh since pandemic which is like that's like an interesting trend and so definitely recommend going going and taking a little tour uh just to like see how like behavior has changed do you do you think that the leap frogging of the united states just in general is because many other countries in the world just don't have the same the sheer volume and magnitude of regulations that

we have i mean i think i think part of it is the regulation but part of it is also like um you know matt levine this bloomberg calmness he he always says like everything is security's law uh like because like you know someone can commit a crime or like kill someone but then like if you look at the statistics half the time it will be like hey they didn't pay their taxes right like that was like how all the mafia rico stuff happened in the 80s

right like none of them were really arrested for like the murder crimes because it was you know but a lot of them were not arrested for like tax division um and so in the u.s financial maybe a less pithy version of this is like in the us financial law is the strongest seeming law here right it seems like if you can convert some type of social more into a like hey like there's some some financial mismanagement here you can get your case through quit more quickly and

like it work the system seems to work only for those cases and i just don't think that's necessarily true in most places and then like i i think that and and so because of that we have this somewhat onerous system um and and the leapfrogging i think will be interesting in that you know i remember like in the early 2000s japan was still kind of like the viewed as like the most technologically

sophisticated country right whereas like right now it's probably like i don't know taiwan singapore right um and japan seems a little old like it's like still stuck in like sort of like the sony era um and uh you know i think an interesting thing was like everyone was like oh asia like completely leapfrogged the us they went straight to mobile never did you know everyone had 100 embed internet in their house um but yet if we look at what products ended up being distributed the most

right it ended up coming from south korea and the us right apple and samsung so the leapfrog might just like be a good way of like you know if we if we play the game out two steps you know latin america and africa leapfrog the u.s you see some huge companies get built out of there and then people in the u.s start copying that and then like they are able to effectively lobby congress to basically give some exemptions to things that look like the things they see outside that are working and successful

and then the u.s can kind of innovate that way like i could totally see that ending up being a a thing i think the the mobile thing was actually it's a similar regulatory thing but sort of different in that in the u.s um you know there's there's sort of spectra so like you know the frequency radio frequencies the the frequencies on the electromagnetic spectrum um there's certain frequencies the government has dictated that they they own and you have to buy licenses to broadcast on

those frequencies um from them and so there's a thing called the spectrum auction uh and you have basically you it's almost like a patent like the government gives you like the rights to that like 102.5 megahertz to 102.7 megahertz and like radio stations usually lease their um their frequency from from someone else so the spectrum auction actually kind of kept the us back in a lot of mobile stuff like that's the reason 5g is taking forever is like people can't

actually get that can't like there are a few players who own the spectrum and they're not the technology providers they're like um you know like the comcast type of companies that bought bought up all the spectrum a long time ago and you know i think basically what happened is south korea leapfrog u.s and now there's like all this pressure and this is why 5g was in the news right before the pandemic uh where like the us government's like we can't get left behind we're willing to get do anything and it like plays catch-up and i kind of feel like that's how it always is it's

like someone figures out how to do something somewhere easier and it like blows up in a good way like grows really fast and then the us suddenly is like ah capitalism must run faster and like so i don't think it's necessarily a bad thing i think it's actually a good forcing function because it kind of is like a way to be like to give a narrative to regulators to be like yo this is [ __ ] stupid like you should allow certain types of things to happen so is the pattern that's unfolding here is like where america

we have american exceptional exceptionalism we're in the lead we have all the money we have all like the talent but then we rest on our laurels uh and like regulation perhaps kind of like disincentivizes innovation and so because of this like disincentive to get up and do something because of regulation we let somebody else do it but then we see that being innovated somewhere else and then we're like all right well we were resting on our laurels too much now we've got to get up and go and so we make an exception in the regulation to

uh capture that new innovation that was made offshore to bring it home to america uh and then we innovate on that build that out and then we can rest on our laurels again so it feel it feels like we're the hair in a tortoise and a hair race where like we go really fast we sit down we take a breather we rest on our laurels because we're americans and we're awesome and then innovation continues the march of innovation continues elsewhere because they don't have the same regulations that we have and then at some point something inevitably crops up out of uh out of just pure unbridled uh innovation that's unbridled by

regulation elsewhere outside of america and then and then we just repeat this process is that a fair way to describe this yeah yeah it's like an iterated tortoise in the hair like the hair is like only realizes it's losing the race when the tortoise is like five feet from the end and then suddenly runs and like just tries to like play catch up right um but i think that's generally the like the whale versus minnow dynamic that often happens even in other types of games abstractly where like the whale with a lot of resources gets lazy or like they have too much

concentration of power wealth resources and then that just like has a sclerosis thing effect uh and then you know someone more nimble kind of takes advantage of that and then like eventually the whale's like ah [ __ ] i gotta like save myself and uh i the question is how many rounds of this can we survive right like the pandemic was like a weird you know that was like someone like that's like playing chess and someone just in the middle of your chess game

randomly removes like 50 of the board spaces and you're like all right go you have to play now and anything that doesn't have a piece you die you know it's like so i think there's like kind of a question of like is it sustainable kind of always have this repeated tortoise and the hair type of thing or is it is it like is it inevitable is there like no other alternative um yeah i think the crypto industry is generally a fan of just like we have way too much

regulation let's reduce regulation by like 90 percent and go from there uh would you be in that camp as well i don't know about like 90 i think it like needs to be metered i think the the beauty of the us right it's like we built this union founded on this notion of like a very clear separation of like local versus national rights and you could have the separation of local versus national in the same way you're supposed to have separation of

church and state um i just think like in a world where internet commerce is larger than real life commerce perhaps um then the state versus national thing doesn't really matter anymore and so then you kind of end up needing a different legal structure uh otherwise like you're gonna have you're gonna kind of always run to the tension um and like a very stupid example of this uh but like one that that's interesting is that um

so uh you know if you go to say mexico argentina the delivery apps there can deliver you any type of alcohol basically any time of day in the u.s however because certain states want to charge a liquor tax on stuff produced in that state they don't allow delivery outside that state and like there's this very complicated set of rules of like when you're allowed to deliver alcohol and if you cross the state border you have to pay taxes on

both sides and like it just becomes it's like kind of a huge mess right and all that you wanted was just like hey guy in florida making some small batch whiskey i'm in new york why the [ __ ] can i just order that online and i'll just like new york and florida just agree to split the tax evenly well that doesn't happen right and so then you have these like turf wars between states and then eventually that fragments the apps right like the now the liquor app has to be

kind of separate from like the ubereats doordash thing um so i think this like the the the maybe 10 000 foot view of this is actually there's this challenge when you have so much commerce done on the internet uh there's this challenge of like reconciling that with like these like state and national laws and let alone international like internationals be more complicated let's just start with state and national like

those things are even hard to reconcile so i think the question is do we end up with a different governance structure which then would yes it would change 90 of regulation but it's unclear if it would remove all of it or if it would just like re-shape it or if like there would be some sort of like treaty you know because like in the the the articles in the constitution we have this interstate commerce clause right in the interstate commerce clause is very interesting because that's the thing that ensures that one state can't