Tokenizing GLXY with Robert Leshner

15:44Do you know it all?

15:45Alex Thorn:I'm not even sure I know the whole thing. Yeah, at a high level, here's exactly how that works. Okay, so you have a company, a public company. Let's just say Tesla. I'm picking that one at random. It's not that I love Elon Musk or Tesla shares. Totally unbiased. Okay, you have a company, and they issue stock. They could have multiple classes of stock. They could have debt. They could have all of these instruments that they've issued that are basically legal concepts. And when they issue stock, they hire a company called the transfer agent to record their stock. So at the lowest level here, we have an issuer.

16:19Above that, we have a transfer agent. A transfer agent records who owns the stock. And it starts off, they say, oh, well, it starts off in our treasury and we're going to sell it to 10 different holders. And a transfer agent records who those 10 different holders are. And back in the day, those 10 different investors would trade those shares, maybe meeting underneath a tree and handing this paper certificate to someone else and signing the back to say, it's no longer Roberts, now it's Alex. But you would have them recorded in one place. Well, that was really inefficient. And so in the 80s, we said, well, you shouldn't be trading things that you have to update the records of who owns it constantly, why don't we simplify the system?

17:02So above the transfer agents, we built as a society a system called the DTCC. And what this does is instead of the shares all being recorded by a transfer agent and you have to update the list of shareholders every time something trades, all of the shares live in a new business built on top. And that business does security, settlement, and clearing. And instead of having a list of all the shareholders, they have a list of all the different brokers who have clients who own shares. And at the end of each day, you don't have 10 million records being updated. You have big netting that occurs between all the brokers and each other.

17:47And so one broker, You know, E-Trade might have bought 10 ,000 shares and interactive brokers might have sold 304 ,000 shares. And they net all of this. And so the DTCC has a list of, you know, the brokerage balances. And then each broker has its 10 million customers. And they have a database and they record, you know, for each of their 10 million users, how many shares they have. And you have this like incredibly long chain. And at the top, it's no longer stock. What you own in your brokerage account, it's the right to stock. It's called a security entitlement. But you're not actually trading stock.

18:23You're trading something that's very similar. It's very close. There's insurance to make sure your broker's credit risk on this is basically zero. But at the end of the day, you're not even trading stock. You're trading the legal right to stock called a security entitlement. And this is the chain. And whenever there's a proxy vote or a dividend or any of these things that companies do, it has to flow all the way up these stacks with all these different middlemen coordinating along the way to do something as simple as processing a payment or collecting a vote. And when you compare this to how tokens work, they're really limiting all of these different layers.

19:06You have an issuer, like Galaxy. You have a transfer agent that records its shares. And those shares are tokens on a blockchain. And every time one of those tokens trades, you update the list of the shareholders, and that's the entire system. And it cuts away all of these different layers and removes all of these different steps that are required for something as basic as collecting a vote or processing a payment. And it collapses this incredibly long chain down to something very simple, where shareholders essentially wind up having a much closer relationship with the issuer directly. There's so many fewer steps.

19:45And the benefits of this are not really seen yet, right? Because we just announced Galaxy a few hours ago. We haven't seen an on-chain ecosystem built up. But you can imagine that this will enable shareholders to interact with a company much more efficiently and much closer. So processing a dividend payment, well, Galaxy knows everyone's on-chain wallet address. Smart contracts are really good. It could be like how you collect an airdrop today. You just hit a claim button and it goes straight into your wallet. You could reinvent voting. I had the opportunity to experiment with token-based governance with Compound, and it became a framework for a lot of others.

20:25You could vote Galaxy corporate events, like firing a board member or replacing them the same way you vote in a protocol or a DAO. And by moving the record-keeping from stacks of middlemen to just a token, it's just going to facilitate all of these subtle upgrades to the system.

20:44Alex Thorn:I agree with that. And incredible. Robert Leshner, traditional market structure archaeologist. I appreciate it. I didn't want to be an archaeologist. I always felt like you ever hear in New York City that like if you dig down, you could uncover like prior layers of the city. They just get built on top of each other and on top of each other. That's how I feel. Rome is the best example. Like Rome, it's like it goes like so many like millennia down. Right. Where like there's constantly discovering like new parts of the city they didn't even know existed. They're like, oh, actually, 400 feet down, like we found a temple, you know.

21:17Alex Thorn:And then you take something like fractionized shares, right? Every new sort of feature that the traditional markets come up with, they just sort of bolt it on like a new like – so you have this like giant Frankenstein's monster walking around with like – right? Because fractionized shares are just like obviated at the broker level, right? They don't exist, I don't think, in DTCEC. So it's sort of like, yeah, they're like, well, you know, they could end up with some dust when they let you buy like a third of a share, right? It's just sort of like they're assuming that, you know, they know they have this many share liabilities of security entitlements and they will meet them, right?

21:49And yeah, I mean, the craziest thing though is like they know how many like liabilities there are. They know how many shares are like owned. I'm putting owned in air quotes by all the people.

21:58Alex Thorn:Right. But there's trade breaks and there's errors and there's reconciliation every single day. Like every single day that the NASDAQ and NICI are open or any stock exchange anywhere in the world are open, there are errors. There is a miscounting of this. And, you know, I'm not like a GameStop truther, you know, on Reddit. like Wall Street bets type. But there's a lot of credibility to the critiques of this system in that shares are shorted that don't exist or the total number of shares of a company is constantly miscaltered. It doesn't always add up. There's constantly errors throughout the entire system and they're subtle, right?

22:40And we have this incredible legal framework around the securities markets to say like, well, if there's a problem, obviously it'll get fixed and loses their money. Right. It doesn't matter if the numbers don't fully add up. As long as no one gets wrecked by that, it's fine. We'll net it out. We'll reconcile it. Even if we miscount the shares, that broker will have to pay more money later to undo it. It's all good. Yeah. And it works because there's so much duct tape and elasticity allowed in the system. Because it doesn't add up. Like there's not a single day that goes by where all the numbers check out and the whole thing adds up correctly.

23:21Alex Thorn:Yeah, and that's what the distributed ledger is perfect at, right? I mean, that's like the one – in fact, that would be interesting. I don't think – I guess maybe like an unintended inflation bug of supply would be like that. But it's not – of all the things that have gone wrong with blockchains and their history, miscounting the people's balances I don't think is one of them. I don't think I've ever heard of that occurring. you know and if there was you can see it right so like if you have some like shady project that decides to like dev mint you know the the ledger has the history right you can see the ledger itself though transaction where it went awry and why and how so it's like oh the dev minted more tokens to their wallet right yeah but bad behavior is still possible but like again the ledger doesn't lie so like you can see the let the books and records aren't what have an issue typically exactly and And this is full circle, but what got me excited about crypto a really, really, really long time ago, you know how everyone has this story where they're like, my first day on Wall Street was Black Monday or whatever.

24:25It's like I graduated from college and went to work on Wall Street in the summer of 2007 in interest rates, right as the whole system was starting to collapse really, really quickly. And a lot of people today in crypto don't remember the great financial crisis. They don't remember what happened. They weren't around for it. But earlier in my career, I worked at a bank as the banking system was collapsing. And one of the reasons why it was collapsing, one of the things that was so scary to me inside a bank, having that as my vantage point, was no one knew what anyone owned. Every single entity in the space, whether it was a bank, a hedge fund, a clearing firm, everyone had their own books and records and their own view of what they owned and what their counterparties owned.

25:12and none of it really added up and everybody was panicked. And when you look at what crypto is in terms of like, okay, it's one ledger that anyone can write to and everyone can see how it works and everyone can see how we got here. It completely eliminates this fear that's created out of imperfect records and opacity. and blockchains are unequivocally such an incredible technology. So we're all on the same page at the same time in real time about who owns what and there's no disagreement. When I was at a bank, it was like, well, we think we owe them$300 million and they think that we owe them$408 million.

26:03I don't know, one of us is right. Yeah, we got to argue about it. Yeah, we've got to argue about it, you know, in the middle of like, you know, no one has enough capital and everything's collapsing.

26:12Alex Thorn:Yeah, not ideal. It does feel like if you could rebuild the stock markets and other capital markets from scratch today with today's technology, you would absolutely put public blockchains at the base of them. um you know it's like there was this um chairman atkins talked about this paperwork crisis on wall street in the 60s and how it eventually led to the creation of the dtcc which is what you talked about you know with share certificates being dropped in puddles and lost and falling behind desks and stuff and it was so bad that the something like a quarter of all the brokers on wall street went out of business due to excessive back office record keeping cost and they had to close NYSE for a half day every Wednesday.

26:53Alex Thorn:So trading would stop at noon just to give all the brokers time to catch up with all their settlement and their stuff. And you just think about like, you know, the natural state of humans, I believe, is to work directly with each other, peer to peer. But at scale, that can be impossible. And, you know, if only there was a technology that would let us trade peer to peer at scale. Right. And not just that, though, like trade peer to peer at scale, but also invent new systems and tools to make it where we can trade infinitely without anything breaking. Yeah, and perpetually, you know, 24-7. Let's talk about, let's get a little more specific into what we've done and what we haven't done, I think, for the viewers.

27:36Alex Thorn:We've written extensively about this, by the way, because I mentioned there's a white paper. There's plenty of explanation about it. But for us to hear it directly from Robert, what is Galaxy actually doing? Because you are one of Galaxy's transfer agents. We've hired SuperState as our transfer agent. So you are an official record keeper for our stock. So then how do the stocks go from traditional format to tokenized format in this way? Yeah, so in this way, if you remember the stack of intermediaries that exists, What we do is we're a transfer agent that works alongside Galaxy's traditional transfer agent.

28:16So, you know, Galaxy went public many years ago. They have, you know, a transfer agent that's been recording their stock that records the stock that trades in the NASDAQ. You know, there's already books and records of who owns Galaxy's stock. So the way that SuperState slots in is we're a transfer agent alongside the traditional transfer agent. You know, there's some great guidance put out by the SEC, you know, in this administration, you know, talking about the role of multiple transfer agents, including crypto native transfer agents, working together to record the ownership of a company. Saying very clearly, you know, you can use these like traditional record keeping like, okay, we can use the records that are in the DTCC alongside on chain blockchain based records to create the full picture.

29:02And so this full picture is created by combining the shares that exist in your brokerage account that are in the traditional system alongside shares that are crypto-enabled and crypto-ready. And so what that means is you have shares at one transfer agent, the ones in your brokerage account, and you have shares when they're in token form that are recorded by SuperState, a second transfer agent, and they can relatively seamlessly migrate or bridge between these two worlds. And so you can take stock in a brokerage account and through a couple, for now, relatively cumbersome steps, you can move it from your brokerage account into token on Solana.

29:46And this process works. It's bidirectional. You can go from brokerage account to Solana. You can go from Solana to brokerage account. I could right now spin up a completely fresh wallet, buy a token of Galaxy Class A common stock on Solana, and move it into my brokerage account of choice. It's a bridge. And by combining TradFi transfer agent plus crypto-native transfer agent, what we've really done is build a composability between these two systems to move the official canonical stock between them. So when we're doing this, the actual stock is moving on chain. It's not a new product. It's not a new instrument.

30:29It's not a wrapper around something. It's not buying a bunch of stock and putting it into an SPV. It's not a derivative. It's not a swap. It's not a third party with a different credit risk about whether or not the stock's actually there. It's not a new product that's cash redeemable but not securities redeemable. What we build is a bridge for stock to efficiently move between these two systems. And that's what SuperState does.

30:54Alex Thorn:Yeah, I do think of it like a bridge in sort of crypto-native terminology. technology and also it's – and again, it's different than this, but for people who spend a lot of time following the ETF launches, it's a little bit like a create-redeem process except I don't want to say that because we're not creating shares. We really are moving them to your point. But for some of our more TradFi-focused people, it's not that dissimilar pragmatically speaking except that you're going through a transfer agent. You're using the direct registration system, DRS, to tell – in fact, the only other time to tell your brokerage to move your shares directly to the issuer's transfer agent, in which case is SuperState.

31:38Alex Thorn:And then SuperState says, OK, great. We were holding them for you, Alex Thorne. Would you like them in token format? There's literally a button in your SuperState account that just says tokenize, right? And to your point, if I'm done with the on-chain or for whatever reason, I want to move the shares back, I just deliver them back to SuperState and say untokenize. Yeah, you burn and then you send them to your brokerage account. But I love this notion and it's so important. You said they're not derivatives, they're not swaps, they're not wrappers, they're not SPV shares because we're seeing an explosion in equity tokenization, generally speaking, right?

32:15Alex Thorn:We've got Kraken and Robinhood and X stocks from Bakkt. And I just saw today that Ando announced their big tokenization thing. I'm pretty sure all of those ones that I mentioned by name, those are all wrappers. Not one of those tokens is an actual share in the actual stocks, right? They're all some form of a claim, mostly a claim on a fund that owns the stock. That's mostly the format they're using. None of them are from the issuer. That's right. But I think they also appeal to different audiences. And I think there's a lot of different use cases. So a lot of these are also offered, whether accurately or wink-wink-ish, they're offered to ex-US investors.

32:59They're not offered necessarily to US investors because they're not registered. They're not fitting in neatly to the securities laws. But they appeal to different things. So if you're someone who just says, I want something that's easy to trade and I want exposure to an asset. And yeah, I know that there's some tail risk here that maybe it's not exactly the same thing. And in a blue moon, every time there's a financial crisis, something breaks. But that doesn't really matter to me. I just want something that basically works. I think there's a lot of market for that. But I think it's a very retail focus.

33:38I think, you know, as you start to scale more institutional, you know, and you go into the world of like hedge funds and regulated players and, you know, folks that do a lot of due diligence on how things work, you know, there's a lot more of a market for, no, it's the same shares that you're buying, you know, through a prime broker or a broker. It's the same shares. You know, I think it speaks to a different audience. And I think both of these are going to coexist. I think you're going to have wrappers, and I think you're going to have native tokenization. I think there are different markets.

34:12I think right now people don't really understand that, and they think about it as like, oh, it's all just tokenized stocks. Like, you know, it's all the same, or it's all competing with itself, or whatever.

34:21Alex Thorn:I've been asked, like, can you confirm that every Galaxy on-chain token is collateralized one-to-one with a real share? And I was like, in simple terms, yes, but it's not a stable coin. and I was like, the token is the share. So I don't know. Right, exactly. And that's the correct question for a wrapper. If I just start a startup that goes out and buys Galaxy shares without ever working for a long time, without talking to you guys, I can go out and buy 100 Galaxy shares, put it in a box and issue 100 Galaxy tokens backed by whatever's in that box. When I do that, that's the correct question. It's like, well, how can you prove it?

35:01That it's in the box.

35:02Alex Thorn:What's in the box? What's in the box? The super state model that we're using with Galaxy is actually the exact opposite of that. It's like the same assurances that whatever is in your brokerage account are the actual shares, that's what the token is as well. And it's a different set of questions. It's like, what's the resilience policy of the transfer agent? Or disaster recovery policy of the transfer agent? But those risks are so minute that no one even asks those questions about the stocks that they own. Yeah, I agree. But the other thing you were saying, I think you're right. There is a market for those other types of structures, particularly offshore if it's difficult for foreigners to open U.S.

35:46Alex Thorn:brokerage accounts and gain access to U.S. stocks, which I don't think it is as difficult as some of the proponents make it seem, but it is somewhat difficult, and I understand it could be. Or maybe you only have on-chain wealth and you have no general ability to open a bank account and a brokerage account, But you aren't a terrorist. You should be able to own them. You just simply can't. There's definitely a market for that. To me, the way I think about it is if we're right about – and I'm quite confident we are – about how effective blockchains are for recording and moving ownership of assets.

36:19Alex Thorn:and we know they're extremely effective at this. It's one of their main use cases. Maybe deep in and gaming and social will eventually also come. But for now, we know for certain that like Bitcoin, Ethereum, Solana, other major blockchains are great at tracking the movement of assets. It's like what they do 24-7. And that that will be integrated with traditional finance. Surely the way that stocks are tokenized in the U.S. will not be the wrapped versions and it will not be synthetic versions. It surely must be the similar way to the way companies issue stock today, that they issue them. Some third party doesn't come and take Galaxy stock and trade it on a different stock exchange.

36:58Alex Thorn:That's not allowed, right? We, the issuer, we get to choose which exchange we trade on, right? And real Apple stock is issued by Apple. It's not – so I feel like we're – SuperState and Galaxy, like some people have criticized since we announced this. well, you know, I can trade, you know, X stocks wherever, blah, blah, blah. And I'm like, well, yeah, but that's not, A, it's not a real stock of Tesla to use your example. But B, it's not, it's not the, they're playing the short game. Like we're playing a long game. We want to remake the financial system in a way that still works for issuers. We don't want to take advantage of them and put their, turn their cap table into these black boxes of SPVs.

37:38Alex Thorn:We want them to be able to know their shareholders, right? Like we want to play by the rules and do it the right way. It's a a little slower, but much more exciting long-term. Yeah, it is. And I think both models are appealing from a market perspective. The advantage of permissionless third-party tokenization is that anyone here can start a company today, after you listen to this podcast, go out and tokenize all 500 stocks in the S &P 500. You can do that. You could go out, buy 500 different stocks, and then issue 500 tokens against them based on the full faith and credit of your new startup. That's totally valid.

38:21And I think there'll be lots of them. Just like how many different stablecoins are there? There's a couple of major ones, but the list of things that have the ticker USD in them if you go to CoinGecko, it's crazy. And so wrappers will always exist, but there can only be one official version. And the official version has a lot of advantages that people haven't seen yet. And I don't think people appreciate what the advantages are because Galaxy and SuperState haven't used any of these new advantages yet. They haven't come into the world yet. But here's at a high level, I think, some of the really exciting things that are possible with issuer natively tokenized shares that just are not possible with the Rapp.

39:08The most basic and obvious one that I think people forget because it's so obvious that it doesn't get considered very often is that an issuer, a public company, can sell stock. That's the entire reason for our capital markets to exist. Companies raise money using shares all the time. A company can't raise additional capital with a third-party rapporteur. Right. You can raise capital with your shares on the NASDAQ, in secondary markets, pipes, whatever. You can do that with a token. And we haven't seen capital formation with a token by a public company yet. We just announced Galaxy had tokenized its stock.

39:57But Galaxy could work it with a broker-dealer or whatever it is, an investment bank. Like, you know, ironically, Galaxy probably can't do it for itself, but it could do it for other companies with tokens. But, you know, Galaxy could raise capital using a token. They could sell their token on Uniswap to raise capital. If you're a crypto native person, you can think of this as they can mint tokens and sell, right? To add money to the balance sheet, to build more stuff. That is doable with a native token in a way that's just not doable with a wrapper. You can actually use it. To take this one step crazier, a company legally could airdrop their stock to users.

40:41This has not been technologically possible in the traditional markets. It's like just functionally impossible. But with a couple basic filings to the SEC, Galaxy could say, and all clients of Galaxy Investment Bank also get our shares as a thank you on chain whenever they trade with us or whatever. I don't know if you'd want to, but it's possible.

41:04Alex Thorn:It is very interesting, the idea of knowing, well, or you could say, let's say there was a, I don't know, there's some DeFi app and we either liked it or wanted people to use it or. You can incentivize it, yeah. We can just say, you know what, congratulations everyone who used Uniswap during this time. You're all getting a Galaxy share. I mean, there is no database of everybody's brokerage account that you could even consider doing that for. So it's not like a, it's not even technologically possible in the traditional world. Yeah, I mean, the closest thing I'll say is there are spin outs all the time.

41:38Like, have you ever had like a stock in your brokerage account and like you wake up and it's like, wait, I have another stock. Like there's sort of this equivalent airdrop concept in traditional markets where like I have a new ticker like that. It was spun out of a company and then it's like airdropped into my brokerage account. Like, what is this?

41:53Alex Thorn:That's true. It does happen. You know, and the brokerage system does enable that. It's a little clunky, but it works. Well, you got to traverse through the whole stack to get that done. But you're right. Even Galaxy, when it uplisted to the NASDAQ, there were people who owned an OTC ticker version of ours that just eventually, like within a few weeks, just auto-converted to the correct new ticker. So you're right. There is some capability there. But the only input into that process is do you own some ticker? Then you get another ticker. Right. It can't be you did this activity or you have this many of the ticker or – Right.

42:30You can't use that as an incentive. Otherwise, there's no purpose.

42:33Alex Thorn:And you can't use a third part, like an unrelated ticker. For example, you could say – remember like right at the end of their T5 summer with SushiSwap sort of vampire-tacking Uniswap. Like a company could say, you know what? We're going to give a share of our stock to every holder of our competitor's stock, right? Right. You can see what a public wallet may hold. So, yeah, you're right. There's many more criteria you could use for the airdrop. Right. You could do it based on on-chain activity. Like, oh, every shareholder that keeps their shares in curve, I'm making this up, gets additional shares.

43:08Right. Because we believe that this is in the best interest of the company.

43:11Alex Thorn:Right. It's very interesting. It does feel like a watershed moment. Can Superstate – what are we? Are we a client of you? I think we're a client of you. We're an agent of you. Agent of ours. Can Galaxy, with our tokenized GLXY or other firms for whom you are an agent, can those tokens trade yet today in DeFi? So, you know, we just announced Galaxy's shares being tokenized today. You know, right now they're not integrated into any DeFi protocols. You know, there's nothing that exciting happening with them yet. they can trade on a peer-to-peer or OTC basis in the same way that shares today can trade off exchange.

43:55It doesn't happen extremely commonly when you have an exchange listing. There's not that many use cases for two shareholders to find each other and exchange shares. It can happen today.

44:09Alex Thorn:It's mostly just not pragmatic today in TradFi because you can't meet, there's not a mechanism. The mechanism is the exchange. I mean, exactly. The exchange is such a superior mechanism that, yeah, there could still be bulletin boards even for an exchange-listed company. It's just that there's not really a... Or we could do a private transaction. I could say, I'm going to buy your house, but I'm going to pay you half in this stock. 100%. You could do that. You could totally do that. Stocks can trade peer-to-peer or OTC today. It's just not that common. Well, because we didn't have the good tech, too.

44:42Alex Thorn:So that's part of the thing. Right. So Galaxy shares could trade as tokens, OTC and peer-to-peer today. I think we'll start off seeing basically zero of this, and I think it'll increase over time as there's more and more reasons to bring the tokens on-chain. Right now, very few tokens have been brought from brokerage accounts onto Slack. I think as of our latest dashboard, it's 21 holders of our on-chain shares at the moment. And I should disclose, I think I'm one of those. I'll disclose, I'm one too. Yeah, so it's not that big yet. And you're right. But I guess the big question then is, I've thought about DeFi obviously for a long time.

45:25Alex Thorn:And to me, today's killer apps, and there are several others, but the top two very clearly are trading and lending. And so if we talk about DEXs, in particular, and there are obviously many forms of decentralized exchanges, many of them great, But sort of the iconic crypto native on-chain decentralized exchange isn't an exchange at all. It's the automated market maker, right? Like Uniswap or Orca and Radium on Solana. Like, so, and I know, you know, we've met with the SEC and discussed this. They're thinking about this, how to contemplate the existence of these things. That's the big question I think that people may have is when can we see on-chain GLXY in an AMM?

46:06Hopefully soon, right? I think that is also a watershed moment. So massive milestone one, public company on blockchain. We've done it. In a lot of ways, we've checked the first box. The second box is it trades in a DeFi protocol as effortlessly as people can buy or sell any token in Uniswap, Orca, Radium, whatever. And that's coming soon. I mean, I'm really hopeful for, in the very near term, additional guidance from the SEC for how securities interact with DeFi protocols, what requirements exist on different participants from the ecosystem. Requirements for broker-dealers, requirements for issuers, requirements for transfer agents.

46:53We've put forward some proposals to the SEC on what this looks like. A lot of others have as well. Coinbase has floated its own proposals. There's a lot of people that have gone in and said, here's what we think it should look like and what the requirements should be. And there's a lot of indication from commissioners and public speeches that there's going to be more guidance. There's going to be more rules. There's going to be some sort of framework for all of this to function at some point soon. And so I think before you know it, there's going to be AMMs trading securities in not like a scary way of like, oh, it's a security and it's US persons and like, oh my God, it's like, you know, Gary Gensler is going to sue everybody.

47:36In the opposite, where it's you have securities that anyone can own and they're trading in the open on AMMs and it's done in a way where everyone high fives and says like, this was the right way and it works.

47:51Alex Thorn:Yeah, and that's okay. And it's okay. And like, this is like the best of all worlds. You combine the known safety nets of regulated stuff with the awesome composability and innovation and degen-ish stuff of crypto, and you get a best of both worlds. Yeah, I agree. There's another way I've been thinking about this is that we kind of gave, crypto kind of gave like Bitcoin and ETH and maybe others soon to the Fidelities and BlackRock's and Invesco's in the form of ETFs in exchange basically for higher prices, right, for wider adoption and ownership. We kind of gave it to them. Number goes up, and that's kind of a very important metric.

48:36Alex Thorn:It would be nice if they would give us stocks in return. They're not doing it, though, right? So we're kind of taking them. And this SEC appears very publicly on board with figuring out how to allow that. And so one thing that people ask me a lot, like Superstate has a great company and great business, and that's why we love working with them and pick them to work with on this. People are always like, well, what's the revenue opportunity for Galaxy, right? And, you know, I think when it comes to our stock, the revenue opportunity might be somewhat limited. We, just like if it was on NASDAQ, we can't just like trade and do stuff with our own stock, right?

49:12Alex Thorn:We could do it for others, though. And you could imagine a company that's, you know, one of the biggest spot crypto trading firms, futures crypto trading firms, lending firms, right, on-chain asset manager, investment bank. Like, we're doing all that stuff today for crypto. But if stocks were also crypto, all of a sudden it's like, well, wait a second. Because I just saw that SEC CFTC notice about how they're going to let national securities exchanges trade crypto. And FBOTs and DCMs and then – and I'm sort of like, well, then they got to let crypto trade stocks. It seems like that's – we're heading towards a conversion, are we not?

49:50Yeah, I think at the end of the day, as long as you can, from a security and operational perspective, handle the asset without losing it, right? And exchange is an exchange. It shouldn't matter, you know, the ticker that's being traded on it, whether it's BTC or TSLA or GLXY or, you know, Yen. You know, it's like, if you're an exchange, it's just different tickers, right? And so, yes, there's very different custody and settlement for the actual assets, right? Crypto is custodied and settles very differently than stocks, right? But aside from that aspect of it, why should it be so different?

50:37Alex Thorn:And it should be easy to settle. It is easy to custody and settle at this point. It's way different, though. But actually, frankly, I think it's been a lot harder for us to bring stocks into crypto than from a technological standpoint, frankly, even, than it has been for TradFi to bring in crypto onto their platforms because custody and crypto, I mean, send in, receive, you don't even need a system. It's built in natively. Like, you know what I mean? Like the tech is pretty good and widely available, especially for major blockchains. There's tooling and dev kits and all that stuff. So it's just a very exciting time, Robert.

51:16Alex Thorn:And, you know, I don't know. I guess a couple other questions I've been asking to put to you. One was, why Solana? Why not ETH? In particular, your background building on Ethereum and pioneering there. Why Solana first? Yeah, a couple reasons. I know Solidity quite well. My entire time in crypto going back to 2017, I've been building an Ethereum. I understand it. I understand the challenges of it. I understand the warts of it and what's great about it. Part of it is a challenge. to be able to be Omnichain, starting with something that I'm not as familiar with. Because in my view, I know Ethereum.

51:56If I can do Solana and Ethereum, well, then the third chain, the fourth chain, the fifth chain is a lot easier if you're building a system that's generalized. And at the end of the day, we support both. Galaxy could launch on Ethereum probably tomorrow if we wanted. Actually, it can launch on Ethereum tonight if Galaxy wanted.

52:17Alex Thorn:You mean, yeah, in terms of super states technologies. Yeah. Like, you know, it's literally like, you know, it's a field in a dashboard that Galaxy can check. So you're saying almost learn and build for Sol with an eye towards also Ethereum so that you could eventually do both. Yeah, exactly. I mean, we can do both right now, right? Yeah. I mean, I'm serious. Like, if Galaxy wants to launch on Ethereum, we can do it on this podcast. Just, you know, text the rest of the crew. But, you know, we're set up for both. The first launch is, in my mind, preferable in something that I haven't launched something on before.

52:54I think when you're building a multi-chain platform, you need to make sure that you are multi-chain ready. And everything is built to an incredibly high quality standard. And you're ready for out-of-the-box building a system that spans beyond chains. Because at the end of the day, what we're building is the ability for a share to live simultaneously in the NASDAQ, on Solana, on Ethereum, on a chain that hasn't been invented yet. Shares don't have to be locked down and chained up and put into a cave. They can be more places at once. And that's the theory behind SuperState. I mean, this is the deep, deep lore, but that's also where we got the name SuperState from, barred a little bit from quantum mechanics.

53:41And the idea that shares of an asset will live in many places simultaneously. And so we're going to be multi-chain. We're going to launch things on Ethereum. We have other issuers that prefer to launch Ethereum first, right? But it was really a readiness and operational preparedness thing to start with something that I was a little bit less experienced in. Yeah. You know, second, you know, it's got a large retail audience, you know, this is an institutional product. I thought it'd be interesting to try something that's like, you know, the ecosystem is more degen. And like, I'm seeing it like already, like day one, it's like the amount of scams and like, oh my God, dude, there's so many like fake GLXYs.

54:27Alex Thorn:By the way, I should tell the audience, make sure you go to our website or go to SuperState's website, which also has it and make sure you if you are looking at a GLXY token, and ensure that is the correct token we published. I'm not going to read out the contract address here because it's long, but check, check, because there are many scammers out there being pretty creative. And as Robert said, too, at this moment, there are no GLXY share tokens trading in DeFi apps, period. So if you see on Radium or Orca or anything like that, that's not ours. You can easily check the contract address, though, but people are – just be careful.

55:05Alex Thorn:That stuff will come, though. I agree, hopefully soon. I will add, you know, we loved Solana. Galaxy's big in Solana. We're one of the largest validators in Solana. It's fast. It's, we think, proven. It's designed initially to be, what did Anatoly say? The NASDAQ of blockchains. Wasn't that one of his original taglines for it? So we thought it was just very appropriate. But we're interested. I will say one thing. I don't know if you've thought about this. We are very focused, though, that we believe that in particular equities but other centrally issued liabilities that are tokens, whether it's a security or some other thing issued by a real-world issuer, should primarily be issued on layer one blockchains and maybe can be abstracted into layer twos like an Ethereum rollup but shouldn't be natively issued on rollups today.

55:55Alex Thorn:Have you thought about that, Robert? Yeah, I mean it's a really interesting question. I agree. We're starting with layer ones generally. You can think of what we're doing with the issuance of a token as being a little bit akin to how USDC or USDT are natively issued by Circle and Tether in that you have issuance that's native. And it can happen on an L1. It can happen on an L2. But the bridge is sort of this authoritative company that's responsible for making sure it's like the official token and it's accounted for correctly. Now, our whole business is accounting for things correctly, right? And so, you know, while we're starting with L1s for how we're launching these tokens, like there's nothing that prevents us from launching it on an L2 or an L3 or some other system as native issuance.

56:50What we're not going to do is have bridged tokens going from an L1 to an L2. If it's on the L2, it's going to be a native issue.

57:00Alex Thorn:Circle did a really good job with this with their, what, CCEIP? Is that what it's called? Yeah, CCEIP. Yeah. Or CCTP. CCTP. CCTP. Yes. Yeah, they've done a great job with this. It feels pretty intuitive and native. Right, rather than bridging the USDC coin, you effectively just like send a message to Circle and they burn yours and reissue it to the wallet you choose on a different network. So it's always just from the issuer. Exactly. And that's a really sound model. And, you know, I prefer to have native Galaxy on many chains, including L2s, than like bridged Galaxy where, you know, things sit inside a bridge contract and you get into weird questions of like, who owns them?

57:44How do you account for them?

57:46Alex Thorn:It actually sounds kind of like a security entitlement at that point and not a direct security. Right. Does the L2 become a security entitlement if it goes through a bridge contract first? Right. Like, kind of? Maybe? Yeah, maybe. Technically, it might be a different asset, right? Right. Yeah, and the other thing about the L2s to me is like I'm specifically thinking about optimistic roll-ups on Ethereum, which I think are a great achievement. they are centrally sequenced today and they don't have they're not decentralized and effectively one sequencer controls things like transaction ordering or fees or settlement finality right and the way the ethereum community in particular sort of become okay with this is that they have unilateral exit right if you get censored or whatever you can replay your transaction on the l1 but that wouldn't be true for uh an issued asset uh unless it exists on both and and and whatnot so to me it's always like i feel like assets should be issued on l1s and then perhaps go to l2s in some way and not not the other way around but again this is very early it's sort of you know i'm sort of just thinking about this stuff and why we liked solana or eth and in our case solana is the first place to do this i mean frankly i think they're both phenomenal chains like when i look from a business perspective on like where do you issue tokenized equities there's only two chains that matter for now.

59:05Solana and Ethereum. It's like saying they're apples and oranges in a lot of ways. It's not like we picked Solana, we picked Ethereum. It's like no. They are in some order. Absolutely number one and number two and there's a big drop off before you get to something else. And they're actually quite different. We're going to be working with both.

59:29Alex Thorn:It's exciting the fact that they are different. I always like this when cryptos truly are different. You know, the days of, you know, super high beta, everything trades the same because it's like, oh, you know, Bitcoin, ETH, whatever, they're all the same. I long for them to be different. And I used to tell this to my Ethereum friends who talk about, you know, ultrasound money. And I'm like, guys, stop trying to be Bitcoin. Let Bitcoin be Bitcoin. It doesn't do a lot of the stuff you do because it doesn't want to. And you shouldn't do the stuff that it's good at because you won't be that, you know, that in particular, you know, scarcity, digital scarcity.

59:58Alex Thorn:you're not going to be as good at you're not as immaculate as bitcoin's digital scarcity well they thought they were better i know it's even worse they thought they were at it's like it's not even inflation it's deflation i know and but i'm just saying like guys ultra sound i know this is like justin drake too and danny ryan and it's sort of like guys you did that okay like bitcoin's like the it's it's like gold because it hasn't changed is one of the big parts it wouldn't matter if it was 21 or 42 or 84 million it's the fact that it never changes right but anyway i just like separate from the bitcoin eat thing i just i i want them to be different that's exciting that's diversity in the market there could be different reasons that you need you know a 400 millisecond block time slot time on solana instead of a 12 second layer one you know block time on eth like which by the way is still pretty fast like i'm not saying it's not right so i i agree it's sort of like you know there could be a lot of different reasons to do it on different places and that's That's one thing we loved about you guys too as technologists is you're not maximalists.

1:00:58Alex Thorn:You're stock maximalists. You're tokenization maximalists. I'm a tokenization into DeFi max plus. Yes. Right? Yeah, I agree. So look, this has been a great conversation, Robert. I really appreciate it. I encourage people to check out SuperState. By the way, and as we said, you can't really trade it on chain quite yet, but we think that will come. But in general, you are free to go and register at superstate.com slash register. It's like opening a crypto exchange account, right? You enter your information. I think you take a picture of your ID, right, to KYC. And then anyone who is KYC'd with Superstate can hold, in this case, hold and transfer for now, but eventually trade securities that have been tokenized by Superstate, including GLXY.

1:01:44Alex Thorn:But not just GLXY. When SuperState inevitably tokenizes many stocks, that one central KYC will let everybody do it. And if you are an existing Galaxy shareholder who wants to transform your traditional shares into tokens, we explain all how to do that in our white paper. You can read at galaxy.com slash research. It's pinned to the top there. And we even show my screenshots of chatting with my Fidelity rep literally in the chat. I didn't even have to call it. It's not as hard as people think. It's still a little clunky to sort of traverse the bridge, not on your side, really on the TradFi side.

1:02:23Alex Thorn:But it is possible. So I'm not encouraging that necessarily. We've got a whole range of disclaimers and disclosures at the beginning and end of this podcast and also in the paper and on our investor website and on SuperState.com. But we do explain a lot more about this and how to do it if you're interested. I think it's very exciting. I do think we're going to look back in 5, 10 years and think that this is sort of the Uniswap moment where it's like, wait a second, DeFi is not just MakerDAO. It is like you can trade anything. And Uniswap today is 20 % in the DEX to SEX ratio. So it matters. It's a huge part of crypto trading.

1:03:06Alex Thorn:And I think tokenized stocks will be a huge part of stock trading. I think so too. I mean, the thing, just to leave on one note, that excites me about all of this is if you wanted to start a fintech product in the US that did something differently with stocks or traditional banking or any of the assets on Wall Street, it was always really, really, really hard. And the innovations you would make were really, really, really tiny. You'd be like, oh, I started a fintech company that does this one thing just a little bit differently. And it took us like three years of negotiating with like nine different service providers and vendors and all of this stuff.

1:03:43And when crypto came around, it was like, okay, it's a totally separate system, but like you can innovate to your heart's content. Go wild. Build stuff that's never been built before, you know. Build stuff that looks like old stuff, but it's different and better, right? Like there was like no obstacles in front of developers and builders. With tokenized equities, I hope we get to the point where you truly get the programmability for traditional assets that's never really existed. Where someone can wake up with an idea and it's like, you know what, I'm going to build an app that mashes up these stocks in some interesting way.

1:04:22And who knows what they built? but you'll get the sort of pace of crypto, you know, unbridled innovation with traditional assets. And we're going to get really cool results. We just have to wait.

1:04:36Alex Thorn:Robert Leshner, CEO and founder of Superstate. Thank you so much for coming on Galaxy Brains, Robert. Thanks for having me, Alex. That's it for this week's episode of Galaxy Brains. Thank you to our guest, Robert Leshner, CEO and founder of Superstate and our good friend, Bim Netabibi from Galaxy Trading. Everyone have a safe and happy weekend and we will see you next week.

1:05:00Alex Thorn:Thanks for listening to Galaxy Brains, the weekly podcast from Galaxy Research. If you enjoy the show, please like, rate, review, and subscribe wherever you get your podcasts. To follow Galaxy Research, sign up for our weekly newsletter at gdr.email, read our content at galaxy.com slash research, and follow us on Twitter at glxyresearch. See you next week. Thank you.