AC Dialogue Delphi: Step Out of the Crypto Wilderness and Into a Compliant Future

Author: Delphi Media, Andre Conje

Compiled by: DODO Research Institute

Original podcast link: https://www.youtube.com/watch?v=o7TRvQNe94k\&t=2359s

The transfer of minting rights symbolizes AC's gradual loss of control over Yearn, but in his eyes, it also symbolizes the success of Yearn's decentralization.

(00:02:05)

Delphi: Looking back at your experience with Yearn, have you ever had regrets?

AC: I'm generally not a person who regrets… The only point I might regret is when I feel like I've lost control over Yearn. But from another perspective, this is also a characteristic of Yearn's success - because it has been "forced" to decentralize. The little regret is not aimed at Yearn, but rather about what the process of testing products actually symbolizes. Many people say you just need to do what you want and not worry too much about the testing part, but I personally feel a strong sense of responsibility for the users' assets, not to mention that I usually put my assets into the systems I build first, so I must ensure the entire auditing and testing process.

Delphi: Do you think you suddenly lost control over Yearn or was it gradual?

AC: I feel that generally, when I'm not online, bad things tend to happen. Once things are not resolved in a timely manner, they immediately head in a bad direction. I remember when we first launched two liquidity pools, I still held direct minting rights, but one morning I woke up to be notified that those minting rights were being transferred via multi-signature, and I thought, is this a "coup"? But to calm users' concerns about centralization, I still handed over that right. I feel this event symbolizes my gradual distancing from Yearn.

The definition of decentralization is a complex issue; AC's vision for decentralized compliance is that cryptocurrency should not harm others or oneself.

(00:08:30)

Delphi: Is there a better path to decentralization?

AC: For this question, I don't think there is a best answer. Most people think of decentralization as two extremes: either centralized or decentralized. But think about it, although Uniswap claims to be decentralized, who besides their team can launch Uniswap v4?

I remember reading about the three laws of robotics, and now I've digested them into my understanding of the principles of the so-called "regulated" cryptocurrency world: 1) What you do should not directly or indirectly harm anyone 2) What you do should not harm yourself.

I think Vitalik has done a great job adhering to this principle. Just think about how many DeFi projects have perished without team support; to be honest, very few projects can sustain or update themselves without external support. For example, if Chainlink's oracle stops working tomorrow, how many DeFi projects would collapse?

So while everyone wants a simple answer, the discussion about decentralization is very complex.

Delphi: Did you think when you were building Yearn that one day you would let go?

AC: Yes, that was my goal at the time. My decision to leave Yearn has indeed achieved my original goal, although the vision of Yearn now is somewhat different from what it was back then, as Yearn is now maintained by a new group of people. The current code is somewhat more centralized compared to the version I released, but that's fine; it does suit the current product.

I also don't like proxies and upgradeable things (referring to smart contract proxies). Not all products need a ten-year development roadmap; the existence of such a roadmap is just a game for token speculators. Without speculation, people wouldn't be excited about it. For example, Tesla is very exciting; they periodically release batteries, AI, and even robots, which easily excite people and compel them to participate in this speculative game.

In this sense, true decentralization and speculation cannot coexist - once you are clear about your purpose, you won't change your product to satisfy users' speculative tendencies.

The "normalization" of cryptocurrency and the "regulation" of cryptocurrency are different; AC hopes regulators find a balance in controlling cryptocurrency while leaving 5% of self-use development space for decentralized finance, as some decentralization cannot be regulated.

(00:16:40)

Delphi: Your project has always advocated for decentralization and community culture; why do you advocate for cryptocurrency regulation today?

AC: First, I want to emphasize that regulated crypto and crypto regulation are different.

Currently, the government's regulatory pressure on cryptocurrency comes from their concerns about capital outflow. But they really can't stop capital outflow unless they shut down every DEX or P2P transaction. But to be honest, they can't stop everything happening on Ethereum, so a better approach is to establish an orderly, normalized flow of funds, as I mentioned.

When the government realizes they can't comprehensively regulate cryptocurrency, they shift that pressure onto founders or cryptocurrency projects, and these founders are powerless; to some extent, they can't provide the information the government requires.

My idea is to provide a mechanism for regulatory bodies that want to regulate, allowing them to feel they can exert enough control within their guidelines, while leaving 5% of space for decentralized cryptocurrency activities.

For traditional financial institutions wanting to enter cryptocurrency, the threshold is very high; they have a lot of fiat currency but don't know how to operate, they are unclear about which exchanges won't face regulatory risks, how to comply, etc. Even if they enter the cryptocurrency world, they face various tax issues. It's like giving drugs to someone who just turned 18 and then letting them bear the consequences.

When cryptocurrency becomes compliant, creators with ideas have more open choices to build their products.

(00:28:06)

Delphi: I understand what you mean; you are not advocating for regulation for the sake of regulation, but rather to find a semi-gradual state to protect these founders. So, assuming the project parties and regulators reach some consensus, on one hand, they can build projects with peace of mind, but on the other hand, what do they sacrifice for this "compliance"?

AC: These founders have two choices: first, they can continue to work anonymously, but for those who want to be public, they can apply for a compliant ICO. But the problem is they currently have no choice; more companies want to create cryptocurrency-related financial products without worrying about regulatory risks. There are many experimental innovations in the current cryptocurrency space that may want to avoid the pressure of "regulation," but some need a compliant framework to solve problems more efficiently, making them feel legitimate and safe. So many people are afraid to enter this field publicly because they don't want to touch the boundaries of regulation.

ICO is an invention that allows companies to merge equity utilization and rewards for loyal users.

Delphi: Do you think we are recreating IPOs now?

AC: Let's look at what an IPO is; simply put, the rules for going public are straightforward: you must be a certified investor to do anything on this platform. But stepping back, how do you define what a qualified investor is? In cryptocurrency, a person gains wealth by learning the rules of the game here. It's like how people in traditional finance obtain qualifications through exams; no one stops you from taking the exam. This is what I want to see - anyone can participate in cryptocurrency. But some people hesitate; they don't know how to use wallets and are afraid of making mistakes during transfers. They would rather choose investments like pension funds and don't trust a "qualified" ICO investor.

AC: Cryptocurrency ICOs are no different from traditional companies' loyalty reward programs. For example, Coca-Cola launches a rewards program: when users spend a hundred dollars, they get a Coca-Cola point. If you accumulate a hundred points, you can get a share of Coca-Cola, right? Because the core of the token mechanism is like this; we reward loyal users with shares. I feel traditional finance hasn't made good use of their equity; this is indeed a brand new paradigm that doesn't exist in traditional finance.

AC: As for why traditional finance doesn't do this, it might be because such innovations didn't exist five years ago, and you couldn't track people's participation levels and dynamics. The emergence of cryptocurrency allows companies to merge equity utilization and rewards for loyal users. I admit I may not fully understand what prevents traditional finance from making such a merger, but at least it's a concept worth exploring.

Compliance cannot stop at outright rejection. Communication is the bridge to establish the correct compliance path.

(00:38:00)

Delphi: Do blockchain compliance and tax concerns raise the barriers to entry for blockchain developers, requiring them to consider many compliance risks?

AC: Only people are subject to government jurisdiction; blockchain and decentralized applications (DApps) are not under government jurisdiction. I see that people in the crypto space now think compliance will be a disaster, so they don't want the government to attempt anything in this regard. But I think we should at least try to comply; that's the only way to have a chance of success. We can't just reject some solutions outright; we should at least propose an alternative when rejecting a solution.

(00:45:00)

Delphi: How can the public participate and contribute to blockchain compliance?

AC: First, we need to clarify what compliance aims to achieve. Then, based on that goal, understand where they can implement it. The public just needs to express their acceptance levels and reasons regarding areas that may be affected by compliance. At the same time, everyone should show enough willingness to engage in compliance-related communication; otherwise, it will be impossible to reach effective communication with government agencies, making things more unfavorable for both sides.

AC: For me, I mainly consider accessibility, like pensions. Currently, pensions are not operating on the blockchain because they can't secure funds on the blockchain, conduct OTC transactions, and they don't know if the government will allow them to do so, and the tax items they need to pay are also unclear. All regulation is not meant to stop people currently in the blockchain from doing things but to allow those who haven't joined yet, who are afraid to join but want to join the blockchain from traditional industries to enter. Because a lack of regulation means uncertainty, and large funds dislike uncertainty and sudden government shutdowns.

(00:53:30)

Delphi: What do you think the success rate of compliance will be in the coming years? How do you measure success?

AC: I have been working on blockchain compliance for four years. Four years ago, no government officials were willing to discuss this. Three years ago, they were only willing to have simple discussions but wouldn't do anything. Two years ago, they started to take some simple exploratory actions. This year, management has begun to pay attention to this area and try to understand it. The current situation is that 40% of people think it's good, but 60% are very resistant. Everything starts from 0 support. Next year, maybe 60% will support it. The year after that, maybe 80%. A few years later, we will finally see real effects. You have to keep explaining the same things to them. If you don't communicate with them, they will make their own assumptions and rules.

AC: Everything is gradual. Currently, we are getting large funds to lobby the government and influence government actions. Banks will soon realize that blockchain can significantly reduce their operating costs and make their funding operations more transparent. In a few years, everyone will be more inclined towards transparent banks because there will be more trust among people. But the current problem is that completely decentralized businesses don't care about compliance because they don't feel the pressure of compliance, while large institutions like Coinbase and FTX have a more urgent need for compliance.

Regarding Fantom, Solidly, and the exit event: For now, I don't want to return to DeFi.

(01:00:00)

Delphi: Why did you decide to develop on the Fantom chain?

AC: Everyone thinks I made the decision to develop blockchain applications on Fantom, but in fact, I was one of the earliest contributors to the Fantom chain; my experience developing Fantom was before I worked on Yearn. Throughout the timeline, I worked on Fantom before Yearn, and before Fantom, I was doing technical code analysis at Crypto Briefing. My entire DeFi experience has actually been driven by interest rather than my main profession. The reason people don't know about my relationship with Fantom is that by the time Fantom launched, I was no longer a core developer and was not involved in management. My core strengths are in research and development, not in the operation of large projects, so although I was an early contributor to many blockchain ecosystems, I am no longer deeply involved now.

(01:12:00)

Delphi: Your recent project Solidly launched just days before you announced your exit; what happened?

AC: Solidly was already the final version upon launch; I didn't need to and couldn't do any further maintenance or updates. I thought I had made it very clear in the documentation, but the reality seems otherwise. A month before everyone thought I was exiting, I had actually completed the development of Solidly, and after that, I just launched Twitter because my exit led many people to criticize me on Twitter. I admit this series of events caused some negative outcomes; if I could do it all over again, I would definitely rearrange the timeline of these events. Because everyone thinks that launching a token is a sign that a project has gone live, not the formal deployment of the project two weeks prior. But I don't think there's anything wrong with the order of events; it was just too tight on time.

(01:18:40)

Delphi: Have you thought about making a comeback?

AC: I don't want to say anything too absolute. But a comeback would definitely be harmful to what I'm currently doing. However, I can't say I will always think this way. So for now, I don't want to return to DeFi. After dealing with regulation and compliance, I think I will work on compliant DeFi projects.