Mike Townsend: Today's interview iswith Stefan Rust. The CEO and founder at Truflation helps to aggregatedifferent data sources to show live realtime, up to date information aroundinflation. So Stefan and I talked about his decision to launch multiplebusinesses, not just Truflation as a DAO. How they did it, exactly whatjurisdiction, how long it took, how much it costs, what the challenges were.

Mike Townsend: We went into thosedetails. We talked about inflation from a macroeconomic perspective, where weare today in the world, what he sees from looking at the data as to where wemight be going in the future. And then how Truflation actually works, how they pullin their data, and what some of the emerging trends are in crypto aroundmonetary policy.

Mike Townsend: So hope you enjoy thisconversation. Here is Stefan Rust.

Mike Townsend: Yeah. Stefan, I'mexcited to chat with you. Why don't we, just before we kick off theconversation, I'm excited to go into so many different areas with you, butlet's frame it out for what you're currently working on. You have a a, a labsLaguna, and then Truflation and a couple other things.

Mike Townsend: What's sort of mostimportant and consumes most of your attention these days?  

Stefan Rust: So, Truflationdefinitely, you know, consumes a lot of my time. I run Laguna Labs, which isthe development arm for a lot of the projects that we build out. Why did we,And, and we originally started off with Truflation and Trusted Node to reallyprovide income are to people that were holding coins that they loved and theydeserved their rewards for helping secure the specific blockchains. That wastrusted node. And then we were looking to build out and everything we run, bythe way is, is a DAO. And so in essence, we want all of these DAOs to be stealself standalone businesses.

Stefan Rust: And then we just hiredevelopers and are a development arm to help those build out as they needresources. And that's sort of what we do at Laguna Lab. Truflation is reallythe core of what we're doing at the. And, and it will be, it is such a, we'rein structural inflation right now. There's such a structural change takingplace in terms of supply side changes that is going to require and will push,put a lot of pressure on inflation at the moment.

Stefan Rust: And so we're scalingup Truflation in terms of getting more data sources and going into additionalmarkets. But more importantly, we want to also get more and more real time. Atthe moment we're only daily, how do we get closer to a real time calculatorthat really predicts what inflation is right now in the market to an accuracythat is what people experience when they go to the gas station or the grocerystore.

Mike Townsend: Hmm. Interesting. So,I wanna ask you more about inflation, but I, I first want to pick your brain alittle bit on the, the structure of the DAOs. So the inflation sorry.Truflation itself will be a DAO and then each different product you launch willbe a DAO. When you launch a new product under the DAO structure, what's yourchecklist that you go through? Like how do you practically get it out thedoor?  

Stefan Rust: So we generally havewe, we set up a foundation. We choose jurisdiction that's friendly. Mm-hmm. .And depending on the product, we choose a, maybe a more trustworthyjurisdiction, a more costly jurisdiction or a more legally friendlyjurisdiction where a lot of corporations understand that jurisdiction.

Stefan Rust: So the bigjurisdictions at the moment, or have been in the past, has been stay shells hasbeen a really big one. But that has been tightened up a lot. And so that is abit more difficult to launch a foundation in the sa shells Panama, Switzerland,Liechtenstein. And ultimately the cost rises wherever you go associated withthese, most of them.

Stefan Rust: Unfor BVI is anotherone. Most of these are offshore entities. And we've looked at mainly offshore.As the source in Panama just seems to be the one most friendly to crypto.They've been consistently supportive of crypto. And they've also, you know, alllawyers around the world and accountants are very familiar with the Panamanianjurisdictions, which really helps from a management perspective.

Stefan Rust: Once you have thefoundation, you then build an entity that is licensed to then act on behalf ofthat foundation. As the DAO is still super early ultimately that entity canthen drop off and, and disappear. And that is the one that then sells on behalfof the foundation, issues the tokens and acts on behalf of the foundation to beable to do that.

Stefan Rust: And over time it thenbecomes a self-sustaining foundation that then sort of becomes at all, andmaybe we did get rid of those at the end, and we don't need those. Once thetokens are fully in circulation and everything's up and running.  

Mike Townsend: Okay. And, and do youhave to, are you physically going to Panama? How long does it take and what,what's the actual, if there's like a set legal name for this? I mean, wouldPanama have like a DAO on their government website or are you kind ofretrofitting some existing corporate structure?

Stefan Rust: We're retrofittingsome existing corporate structure, right? So the advantage with Panama, it'svery cost effective and you can get it set up in, in six days, which is verysimilar to a Delaware LLC. Takes you six days to launch a Delaware LLC. And youcan do that for five, 600 bucks. It's a bit more expensive to set up in Panama.You don't need to go there in person. You have to have a representative thatactually lives in the country to sit on the board as you do in Switzerland aswell. You know, so they make sure that they have somebody accountable in thespecific jurisdiction, and ultimately you then have to find that trustworthypartner that you will be working with.

Stefan Rust: I don't know if yousaw what happened in the Tazos example. They set up a foundation inSwitzerland. They had a representative running the foundation, and I don'tthink that worked out very well with the use of proceeds from the token sales.And that went in a bit of a sour direction. And so a lot of learnings came fromthat.

Stefan Rust: It's super early,these DAO structures. We're still experimenting. I mean, we don't have yearsand years of history of corporate, you know, decades and centuries of figuringout how to set up corporate structures. But we're learning really fast and, andwe're trying to improve each time we have another success case or a bit of a, ahiccup, a challenge. How do we improve from that.  

Mike Townsend: Yeah. Yeah. If so manypeople are interested in launching them too, that's why I kind of pry in to, topeel back the details a little bit. And so if you were to go, Panama takesrelatively short time, little bit more expensive than 600, you need to findsomeone locally, it sounds like that's the bottleneck.

Mike Townsend: Yeah. Is there a, awebsite you go to, or is it all word of mouth or how would you find, and can itbe the same person that runs like in one person, you know, some lawyer downthere that has a trustworthy reputation be on the board of endless countlessDAOs? Or how do you, how do you do it?  

Stefan Rust: The latter, Right? Sogenerally you have specific people that act. I don't know the, I don't know theEnglish word, but the German word be toy hand, right? So they're basicallytrusted parties a trusted handler on your part. And they have this as aprofession, and this is what they do. I mean, they're corporate secretaries, ifyou will that dedicate their life.

Stefan Rust: And they're onmultiple such boards, right? They may be I'm 30, 40. How do they check thatand, and monitor each one? It's as soon as the decision comes through, that requiresa board approval. You know, they then come in and ask a lot of questions, so itdoesn't require that much time from their side. And, and that's, how did wefind out about it?

Stefan Rust: I mean, in essence,word of mouth and finding a right lawyer, accountant yeah. The, a lawyerbasically that could help us navigate this landscape.  

Mike Townsend: And then they set upa, Is it a bank account that would initiate the start of a DAO say in the caseof Pan Panama? Like where the foundation is ultimately a bank account thatmanages the control of the funds. Is that right?  

Stefan Rust: I mean, if you want toset up a bank account the entity can set up a bank account. Right. We've doneeverything in crypto, so everything is paid for, The token purchases are alldone in crypto. The settlements are all done in crypto. And the token transfersare done Yeah. Through smart contracts. So we don't actually have, in somecases, you don't actually need a physical bank account.  

Mike Townsend: Got it. So say in thecase of Truflation, you establish, first you establish the Panama entity, havethe representative get that set up for the, For the foundation, For the DAO.Yeah. And then you, Is it. The person, Like who would, how does key managementwork for the actual control of the crypto? Once the crypto is generated for thefoundation?  

Stefan Rust: So at the moment, youknow, early, I mean, we're, we're four months in, right? So it's like superearly. Mm-hmm. So we're still in a multisig wallet. We've got, you know andwe're super early. We haven't raised that much. And we manage it out of aMultisig wallet.

Stefan Rust: We, and anyway, that,that's sort of how we do it. We've issued the tokens are now in a smartcontract, so we will be handing over more and more to the DAO where thenproposals, the funds get locked up into the specific smart contracts andultimately the issuances of the tokens then get distributed according to theterms that investors or the first purchases agreed upon.

Mike Townsend: And in your view, howdo you view the, either the short term or medium long term benefits of havingthe legal structure as a DAO versus a traditional company? Because I could seeTruflation, you know, hiring developers and like selling a product and being successful,taking a traditional path. What, what was the pros and cons and how you waitedout?

Stefan Rust: So we've evolved, Themarket's changed terms have changed and customer basis has changed as well forus. Totally. Unexpectedly or, or not unexpectedly, but just sort ofsurprisingly, Let's put it like that. And by the way, we are a Delaware LLCcorp as well, right? So we've just set up an LLC corp. We need a bank account.

Stefan Rust: We are gettingcustomers from the Tradify world in terms of hedge funds, family offices.Private equity funds that are really interested in the inflation data that weprovide. And so as they're interested in that, they don't have crypto, theydon't want to pay in crypto, they want to have that in an API key.

Stefan Rust: They don't care aboutsmart contracts. They care that it's immutable. So they're interested and theylike the fact that we store all the data on chain in terms of all ourcalculations. All of that is available for them to view. So it's verifiable andimmutable. And so that's what they like. But other than that, they want to dealin normal day to day business.

Stefan Rust: And so for us tosecure that revenue, that's the model and the path that we're going down withthat. Ultimately, at the time when we first launched, you know, I was a bigbeliever in DAO and that the DAO model and tokens would replace, and I thinkstill over time they will, because of the efficiencies of tokens, replace thedemocratization that it enables.

Stefan Rust: And, you know yeah,just the ef yeah, just purely the efficiencies that tokens allow you tointeract with your user base much better or the stakeholders as they're nowcalled a lot better. And as that model, I still think that that will evolve andI think it'll come to fruition in the next five years, six years as thematurity around blockchains and the SecurIT, the security, you know, thesecurity it provides, the, the banking and the financial services it can offer.All of that becomes more mainstream and, and gets adopted at a granderscale.  

Mike Townsend: So in in, in yourcase, would it be true to say there's a LLC that, that controls the, likethere's an o some operating agreement that controls Truflation, but thenseparately there's a foundation for the tokens that were raised that are, thepurpose of those is to, to grow the ecosystem. So they operate fairly autonomouslyfrom each other.  

Stefan Rust: Exactly. And we'vecreated I mean, I, I'd call the LLC a consulting. And they are licensing theproduct. They can take that to the customers. They can build their ownregressional analysis associated with the data that we provide. They can do allthe interpretations and they can handhold and meet the requirements that theTradify customer base is looking for.

Stefan Rust: All the meanwhile, theDAO has an interest in scaling up, providing more decentralization associatedwith the data that we have ensuring greater uptime accessing more data andbuilding out the tokens associated with that.

Mike Townsend: Got it. So an example,say, say you somebody. Say you wanted to say you wanted to change the name, sayyou wanted change it to false ation.

Mike Townsend: Right. And would you,So in a typical structure, the, you know, the company is controlled by the ceo,which is really held accountable to the decisions of the board of director. Soif, if the board voted to do something and the CEO blatantly went a differentdirection, there's fiduciary duty that CEO can be fired or personally heldaccountable.

Mike Townsend: What is, how does thepower play out in DAOs? Like if, if somebody in the company that's licensing,as you say, through the LLC, they're licensing the product and the brand andeverything, they could technically make these changes if that were to happenand maybe taking Truflation as example. But I'm really interested in thebroader architecture of control here.

Mike Townsend: Like, would there be acollect, could there be a collective action amongst the stakeholders to likefile a. Law lawsuit or like, how does heart power work? , figuring out  

Stefan Rust: No, I mean, you file alawsuit, you, you rally other token holders to vote behind a proposal. Right?That the ability to, and, and I, you know, each DAO has its own terms andconditions, right?

Stefan Rust: How do I, how do Isubmit a proposal to the, the, the DAO itself, right? What's required? Do Ineed to stake 50% of the total token supply in order to provide one? Is it 10%?Do I need to have, you know, a 50 wallets that in agri to 50 different walletshave to submit a proposal and, and then that proposal goes to the wholecommunity?

Stefan Rust: Then the wholecommunity can participate and, and approve or disapprove that vote. So youknow, and you can see that really come to fruition in, in, in projects likeMaker DAO, right? Which is now dissolved, its foundation. There's nobodyinvolved other than the token holders in that it took 'em five years to getthere.

Stefan Rust: So this is a journeyof, of slowly, slowly handing things over, over five years. But who are theirtoken holders? Right? It's now the Harvard Endowment, which is a proxy onbehalf of a 16 z was, was, which was one of the first early investors. You havea bank in Spain or, or in France, I can't remember which one.

Stefan Rust: That has a largeportion of the tokens, and they're putting forward proposals. And Coinbase, bythe way, is also a big token holder. They're putting forward proposals wherethey, you know, they would like to. You know spend 20 million dollars of thetreasury funds towards educating people how to use crypto. They want to use,put forward a proposal that the liquidity should go to Coin Base Pro so thatCoin Base Pro can add more liquidity for die in their vaults.

Stefan Rust: Right? But only accesspro account holders, things like that. Right? And so, or that, I can't rememberif it's a Spanish or a European bank, let's call it, that's, that's, that'smore central. But the European Bank wanted and put forward a proposal to have,you know, fiat assets, real world assets as the collateral and no longer justeat and die and, and, and other stablecoin or other sort of cryptocurrencies asthe collateral.

Stefan Rust: So you can see thatall of a sudden that. It as it goes. A DAO the token holders could be somebodytotally unexpected who we didn't anticipate influencing the direction ofsomething that has become, you know, yeah, you know, you know, a poster childfor DAOs in crypto land.  

Mike Townsend: Yeah. Yeah.Ironically, it's not all that different from the current structure of thepublic markets. You know, you can, like, I mean, Elon's a good example withElon Musk, with Twitter. It's like the guy that comes in, he is like, Well, I'mjust gonna make this offer to buy all these shares, and now you havecontrolling control the entity. So Harvard or some wealthy institution thatjust wanted to buy Maker DAO token voting rights.

Mike Townsend: Then all of a sudden,well, I mean, there's probably some scenarios that will play out in the futurewhere we look at that and say, Ooh, that probably that's, that's not the way wewanted it to go, That there's a negative externality that's happening becauseof some consolidation of power. Yeah, but that's the, that's the name of thegame.

Stefan Rust: But that's, that's,you know, Yeah. I mean, you know, a water, water goes down the mountain, right?And, and sort of, it finds it's the best, the past of leaf pass path of leastresistance and as it goes down the mountain. And so I think, you know, Yeah. Yeah.I think that's a nature for DAOs, right? We're, we're going down a mountain, wedon't know where it is.

Stefan Rust: I mean, there's,there's no sort of trenches that are laid out for the river to flow. We have tocurve those out, and over time we'll see where they go, and I don't think theywill be too dissimilar to what we see in the shareholder market. That appupside though, I found, at least in the history, you know, of crypto land, isthat people have been able to participate in this and have generated andallowed to be, have been allowed to create a lot of wealth associated on thatjourney.

Stefan Rust: And, and now there area lot more restrictions coming in on who can invest, who can participatelargely because it's just grown so big and, you know, a lot of people aren'teducating themselves and they're just going in because of fomo versus actuallyhaving the right tools in place and watching the right videos to get informedand find out whether this is true or a scam.

Stefan Rust: It's just, Oh, 20% up.Okay, buy now, right? Like, what is that? I don't know. You know? But, butit's, it's up 20%, right? So how do we provide them the right tools to find outwhere to and how to invest and participate?

Mike Townsend: Is there a particularlike mental model or way, way you consider what types of businesses should takethis path? Say, say we're, say somebody is you know, starting a startup now, ormaybe they're running a small startup and they're debating whether or notbusiness structure is appropriate to, to grow into DAOs and they're weighingmarket timing, maybe legal complexity or un unknown legal risk. Do you kind ofview this as like, what, what are the most important things to wait here?

Mike Townsend: Is it like thebusiness model itself? Like what are your like top three or so considerationsfor determining whether or not a business would be good to move in a DAOdirection or like typical C Corp direction?

Stefan Rust: The first question Iwould ask myself is, what jurisdiction are you in, Right? I mean, if you're inthe us At the moment, the hot thing is setting up a, you know an LLC somewhere,and then selling equity into that with the rights to purchase tokens for thedown the road.

Stefan Rust: The reason behind thatis the uncertainty associated with the regulatory environment, right? And so Ineed to develop a token model that gets legal approval has, you know, has buyinis confirmed as utility is less likely to be viewed as a security, et cetera.And so that's it. I think on a global scale outside or internationally, maybeoutside of China and China, I wouldn't do anything in crypto.

Stefan Rust: Otherwise you'll bekilled. But other than that, I think, I think you You would, The DAO is a morefavorable model to set up and you set those off generally offshore, and youchoose investors cautiously as the, again, the more US investors you have, themore governance the US can apply even if you are to you, even if you areoffshore.

Stefan Rust: And then you just needto make sure you are legally sort of, you have support to back your model andyour token offering. Now, I mean, I don't know if there's governance token,what the regulation regulatory situation is for governance token, but governancetoken as a standalone, Are not seen very much today as a very attractiveproposition right.

Stefan Rust: Today. But that canchange in six months time. Right. We see how quick crypto can evolve andchange. But the, the the, you know, the theme DU Azure is, is definitelygovernance tokens are, unless there's rewards and dividends that get redeem,you know, passed on to the governance token holders it's, which again, the DAOneeds to propose or somebody needs to propose and the do needs to approve and thenthat happens. Seems there's very democratic solution.

Mike Townsend: Yeah. Which is, whichis the inherent beauty in it. Yeah. It certainly seems like there isn't someopportunity to streamline this process. You know, the , kind of the implicitsense I'm getting from you is that it's like painfully early and people aresort of waiting on the sidelines either to, to make moves in this direction.

Mike Townsend: Maybe it's regulationor just, it's just unclear what jurisdiction or who controls this. But I, Imean, I could see a, some platform coming out there that like make streamlinesthis for people trying to start DAOs, which would be awesome.  

Stefan Rust: I mean, you have someplatforms out there, right? That, that really streamline it. There's likeArgon, which was one of the first that tried to really set it up and set upgovernance and, and, and solve disputes between token holders. And so you hadan arbitration, sort of a court of arbitration to solve disputes. Then therecame some more centralized solutions to help out these decentralizedenvironments.

Stefan Rust: You have likesnapshots, your boardroom. There's some tools out there that allow you, in theinterim before you get everything into a smart contract so that it'sstandalone. You have these interim solutions where you can test out the way itworks. You can get people to vote, you can get people to submit, and thosetools are, are, are really handy and actually have a very nice userexperience.  

Mike Townsend: That's awesome. Yeah.You mentioned Argon boardroom, Snapchat Snapshot, not Snapchat snapshot. Yes,exactly. I wanna shift gears a little bit and get your thoughts on the market.So yeah, I'm, I'm less interested in our current state and more interested inlike how you understand the markets change. So maybe we'll start with focusingon inflation.

Mike Townsend: How, what are thefactors that you would need to take consideration about a country or an economyto determine the, the ideal inflation? And I'll, I'll preface that by sayingthat most economists, I would say, feel that some inflation is a positiveinfluence on the economy, like one to 3%, and that most people recognizeextreme deflation or inflation is, is terrible and, and can be reallydetrimental. But what are the factors that play into like why inflation is goodand how to think about it?  

Stefan Rust: So, I mean, ultimatelyinflation is the amount, well, the increase in price in a society and a largeportion of that is driven by the increased amount of capital available in aspecific society. Right?  

Stefan Rust: And it also plays outnot only that, against supply and demand, right? So the more supply in themarket, then the, then the, the, and the demand stays the same, thenultimately, you know, the price drops. And vice versa, right? The more demand,the less supply, the, the prices rise significantly, and that then is accountedas inflation.

Stefan Rust: Yeah. And, and from aneconomic standpoint, that's simple terms of where we're at. Why is a standardamount of inflation good? I think it just shows that there's a bit, you know,there's, the demand is growing and exceeds the actual supply, which means thatthe wealth in a society is actually growing.

Stefan Rust: People feel thatthere's more money out there, people wanna buy. So the demand is slightly,always slightly stronger than the supply. That's what you ideally want. Becausethat means that we can produce more the economy's healthy. There is alwaysdemand there for what we produce. We can still innovate and there is, again,more demand to be able to meet that new market fit with a new product, with newpricing, with or it puts pressure to optimize from a manufacturing standpoint,how do I deliver more product to market so I can hire more people to help, youknow, with the factories and, and, and et cetera, to produce more goods to thenhave those delivered and put into the shelves or into warehouses where peoplecan then go and purchase that.

Stefan Rust: That is sort of theinherent fact. I think what we are seeing right now is there's been a we've,we've lived in the last 30, 40 years in a very expansive mode where we've goneglobal, we've built this global supply chain. And what that has done, it hasallowed us to capitalize on you know, sort of benefits of lower cost ofmanufacturing in one markets, whereas also exporting into other markets.

Stefan Rust: So I have grandereconomies of scale, bringing down the unit costs of items that get produced.And we've been living in that market for the last sort of 30, 40 years, if youwill. I mean, , you know? Yeah. World Trade Organization and, and all of thesebilateral agreements and the, you know, nafta, we had the European Union all ofa sudden one single market.

Stefan Rust: And, and so you'vebeen able, as a, as a, as a builder, as an enterprise, scale up and provide,you know, benefit of economies, of scale. So whatever you r and d I can scalethat around the world. I've got a big customer base. I can bring down the unitcost significantly. This is changing. Right. We're, we're de globalizing,right?

Stefan Rust: And what does thatmean? That means our structure and supply chains are changing significantly. Ican no longer, very quickly and easily produce something in China, have itshipped to the US and put on the shelves just in time for Christmas holidayswhere people can then purchase the products off the shelves.

Stefan Rust: Those days are over.We're having structural issues. I cannot get enough energy in Europe in orderto prepare for the winter. So the price of utility costs are skyrocketing 80%,you know, in the last year. And that does not include the previous year becausethe lack of demand as well. So all of inflation always gets compounded as well,by the way.

Stefan Rust: And, and so I thinkthat we're in this structural inflation that it's going to be permanent, butnot because of the demand side, but because the struggles that we have in thesupply side.  

Mike Townsend: And I, you didn'tmention it, but I would assume that the pandemic in 20 20, 20 21 was the, wasthe, was the thing that introduced a tremendous amount of chaos and exploitedthe lack of resiliency.

Mike Townsend: I, and my thought onthis is like if you, if you boil an economy down to an individual person in ahome Yeah. If you, if you kind of weigh the scales on resiliency versusefficiency, Efficiency is that person, everything in their house is completelydone by other people throughout the world. And so it's, everyone's superspecialized.

Mike Townsend: And if you are on theother side of the spectrum, that person does everything. They grow their ownfood. Yeah. They build their own house, you know, everything. But they'reincredibly resilient, but incredibly inefficient.  

Stefan Rust: Yeah, exactly. And I,yeah, it's, I think that's a good, good analogy. I mean, that's definitely thecase.

Stefan Rust: And, and the otherthing I'd say is in that shift to that resilience it was really a shutdown fromthe previous model where, and, and you can't just switch that back on you. Onceyou've built your own garden, you've got your own vegetables. Why should I goto the supermarket and buy, you know, you know, genetically modified, you knowvertically farmed tomatoes versus my tomatoes that come from my soil that I'vecultivated and, and grown, you know, so it, it

Stefan Rust: You can't just turnthat over right away, right? It, it, it takes a year or two. Oh, I get bored. Idon't have the time for that anymore. I didn't look, oh, I missed the rain. It rainedtoo much last night. So I have to actually go and buy that and then you getused to, it's much easier to just buy it. I don't need to work.

Stefan Rust: And then I'll, I'lluse that because then I can spend another 15 minutes coding, you know, the nextsmart contract.  

Mike Townsend: What do you feel aboutgovernment intervention with things like bailouts? Certainly the, i, in mylifetime, one of the most famous ones was in 28, 2008 with the bank bailouts.But then it just seems to have been kind of this growing economic philosophy,at least the US that the government's intervention into private markets isoften or is necessary and is very helpful.

Mike Townsend: Although that'sheavily disputed, and I would, I would really critique whether it's, it'suseful. Like, you know, I, I think people in 2008, what the banking crisiswould say, These banks are so big we can't let 'em fail. Yeah. But I tend tothink it's the other way around where they're so big they had to fail. Do you,how, where do you kind of line up on government's role in private markets?What's, what's necessary? What's useful?

Stefan Rust: I mean, I think themarkets should decide. I, I don't believe in bailouts. I believe in line ofcredits. I mean, if, if, if, if somebody has extended themselves or themarket's crashed a bit more, they've got a, they've had a healthy business,they haven't been misappropriating funds you know, I feel that a government cancome in and help give them a line of credit and, and, and sort of help themout.

Stefan Rust: I don't, I don'tbelieve that, but but if it's a case of really bailing out, you're gonna gobankrupt. You've acted maliciously, you work careless in your risk assessments,I think you should go bust and you should, that the economy should fix itself.It's painful. I look at what happened in crypto land, I mean, We've gonethrough this a couple of times, right?

Stefan Rust: Every time it hurts.Every time when something goes bust. And I mean, we had Tara Luna go bust,right? It's based in Korea. It's a great, it was a, a poster child for many,many con, you know, investors around the world. Individuals had tokens in it,they stake their funds in there and you know, somebody attacks it, it goesdown.

Stefan Rust: And, but the amazingthing about me about that there was no bailout or people tried to give it aline of credit, help it out, see what they could do, but ultimately didn't workout and they went belly up. Okay? As a result, a lot of us lost a lot of moneyin crypto land, but. You know, they just had the career blockchain week, Ithink it was, you know, two months ago or something, and maybe three monthsago, two months ago, time flies.

Stefan Rust: But anyway, you lookat that and everybody there was still positive. They were looking for newopportunities. How can we make it back again? What do we need to do to, what'sthe next opportunity? How do I get back into building? And it was a buzz aroundthere, right? Even and in Korea where Tara Luna went bust, which was a 50billion company in about two days, right?

Stefan Rust: And, and I thinkthat's healthy because ultimately we've all learned, we saw the mistakes, We'veoptimized for that, and we've picked ourselves up to go forward again and. Andwe've learned to do better due diligence, read the documents, see andunderstand how these companies and businesses make their money.

Stefan Rust: And we've shared thatin hundreds of blog posts in open source coding that has been put up in GitHubto fix that and rectify that to with better explorers that show what theexposure is with proof of reserve technologies that are being developed at themoment, right. From independent Oracles, et cetera.

Stefan Rust: And so I think all ofthose are a result that the industry wants to improve and will take necessarysteps to help move forward without a bailout. And without, you know, withoutany real regulation needed to, I mean, before any regulation has even come in.  

Mike Townsend: Yeah. Yeah. One thingwe learned is that one thing we didn't learn is that the government is gonnacome to the aid to help people when they lose on crypto trades or cryptoprojects go belly up.

Mike Townsend: So I mean that if Iwalk, if you walk away with 2008 banking crisis, you learn, Hey, if it getsreally bad and we fuck up, well we can always go to the government and they'regonna give us bunch money. And it's like, Yeah,

Stefan Rust: Well, they never helpout the individuals. I mean, they haven't helped other than during Covid wherewe got a paycheck.

Stefan Rust: I mean, theindividuals don't get helped out in a bailout. It's basically the executives,the entity or the enterprise that gets bailed out. And guess who over the wholecourse of misappropriation of funds or the belly up, why did that company gobail, you know, belly up. I mean, there's a reason for that.

Stefan Rust: And nine times outta10, all the executives that earned big fat paychecks throughout that wholeperiod were never held accountable.

Stefan Rust: And it was, You hadmoney. Yeah. Yeah. Anyway, your pension fund was tied up with aig. I mean, whathappens there? You know, Do I get any money? Okay. My pension is protected.

Stefan Rust: Okay. I do get it inthe long run. But yeah,  

Mike Townsend: Well, that's thereality of hard power and that, that, that's what I was kind of interested inthe DAO, but it's like, okay, it's all nice. When people start companies andthey have some structure like I was interested in, in key management, it'slike, okay, it's one thing to have like a public ledger vote on what we shoulddo, but then what happens if somebody just takes the keys and decides to justmove it to their own personal account?

Mike Townsend: So, yeah, exactly.It's like there's, there's almost two parallel systems. One is the actualmechanism for voting on the shares or tokens or whatever it is, and thenthere's the actual. Hard power of who has like, rude access to the cryptoitself. And yeah, it feels like in the fiat world, that's just going to be thegovernment.

Stefan Rust: I think in a startupworld, no matter where and what type of startup you're investing in the people,these, that team needs to be able to execute and deliver on a vision. And youwant to invest incredible people that you can trust that aren't going tonecessarily run with your money. If you've invested that, and I think you havethat same issue in a fiat world as well as in a, in a crypto world, I don'tthink that's different either.

Stefan Rust: Or the mission for usin the crypto world, especially if we're setting up as a DAO, is to get astandalone entity so that we are not needed in that entity anymore and it'sgonna run in its own. And the timeline that we put ourselves forward for is todo this in five years. , is that realistic? Is that achievable?

Stefan Rust: In some case it may besix years, but that is based on a business plan that you put together fiveyears ago. And if you did it in six years, hands down, kudos that you did it.If you did it in four, even better. Right? But I mean, in essence, you areinvesting in a team that can execute on a vision and you're buying into thevision that that team has, and that's your initial early day investment.

Stefan Rust: And that the beauty ofcrypto and decentralized exchanges, or maybe even standardized centralizedexchanges is that I can, could do a token sale right at the. And people wouldinvest as a venture capitalist into new projects. Ethereum was such, EOS wasanother one. I mean, Cardo, all of these projects that were now in the toptier, they didn't run away with the money.

Stefan Rust: They started offcentralized. They took Bitcoin as payments and they launched specific projects.And those projects are largely still alive today. But it meant that thoseindividuals that invested were all acting like a venture capitalist. Theybelieved in the model. Maybe they just foamed in, but then they were lucky.

Stefan Rust: But though you havethose as well, but I think you have that everywhere. But in essence, whathappened as soon as that project listed, the price is marked up and down basedon the sentiment of the investor base on an instantaneously 24 7 basis. And ifyou don't like what the team did or they didn't close a deal that you thoughtthey should have closed, you can immediately exit if there's liquidity there.

Stefan Rust: Or you can buy inbecause you love that deal and you see the upside. You and I missed out on theearly private sale, but I got in at the sta at the, at the stale earlier. Andso the mark of the marking up and down of a price happens instantaneously andanybody can become a venture capitalist in this market.

Stefan Rust: And that I think is aninteresting element. Are they experienced capitalists venture capitalists? Thatis another question. But the definition of what is an experienced venturecapitalist is I think flawed where you have to have a million dollars in yourbank account. I mean, yeah, I don't feel that is the right assessment, but thatcould be changed going forward to get more responsible investment.

Mike Townsend: Yeah, and it is too.There's a, Reg CF is a S E C ruling that came out a few years ago that allowspeople to participate. And crowdfunding campaign. So I do think the pendulum isswinging in a direction that allows more independent liberal freedom for makingdecisions. I think we get clouded with these, with these words of like venturecapitalists. It's really just decisions on what you do with your money, right?Like, call it whatever you want. That's all it is.  

Stefan Rust: Asset allocation,right? I mean, that's what it comes down to. How are you as allocating yourasset? Do you put a hundred percent in a new startup or do you put 2% of yourwealth in a new startup? Right? I mean,  

Mike Townsend: And everyone does it.I mean, or you put a hundred percent in your checking account and that's adecision too. Yeah. That's, yeah.

Mike Townsend: What do you view,what's your, what's your thought on the I'm guessing that you feel and tell,correct me if I'm wrong, cause I wanna ask you a follow up, is that there'sgoing to be a transition over the course of our lifetimes. Maybe longer, maybeshorter, where we move from a government issued money supply to a decentralizedmoney supply.

Mike Townsend: Like it right now, theFed Federal Reserve prints money, we all use it, US dollars, global reservecurrency. There seems to be a tremendous amount of growing pressure in cryptoto supersede that, where it's not managed by one individual and thus keeping inline with like, what's the ability of the government to influence monetarysupply?

Mike Townsend: Well, if, if, sayBitcoin, for instance, supersedes the US dollar and becoming the, the, theglobal reserve, then there's no ability. Then the government can't do anything.And I think people as, as governments abuse that power by printing more andmore money, then people internationally drop that as a global reserve.

Mike Townsend: Thus givingdecentralized money more leverage, assuming that's the trend we're on, is gonnahappen. I would imagine that the US presents. Particularly the Federal Reserveand, and the federal government want to stop that or at least slow that fromhappening. What's your take on the, the, the ways that that tension mightmanifest?

Mike Townsend: I mean, one obviousovert example would be the government bans crypto like they did in China, butit seems like we're kind of, that ship is sailed. How do you, I can't imaginethat the Federal Reserve just says, Oh, everyone's leaving US dollars. We printmore money. Inflation goes skyrocket, and everyone's going to Bitcoin have funin Bitcoin.

Mike Townsend: Like, they're gonnaprobably try to stop that somehow. How do you see that manifesting?  

Stefan Rust: I don't think it'sgonna be an easy transition. I think it's, you know there's a lot of power in,in printing money and there is a, an amazingly huge installed base intraditional finance. All the assets around the world are in traditional.

Stefan Rust: We're 1 trillion. Imean, if I look at the derivatives market alone, you're talking in, in quadribig, right? I mean, I can't even imagine how big that number is. But comparedto this minuscule one, $1 trillion crypto base, or maybe $2 trillion now,depending on the day, but we're tiny and the incumbent see the efficienciesthat we're creating.

Stefan Rust: The difficulty interms of jurisdictions, if I have node operators around the world, Bitcoin, Ibelieve actually had Bitcoin been a bit more open to innovation and reallykeeping down the costs of remittances. Could have potentially as one singleCoin really grabbed big market share really early on in its days.

Stefan Rust: And still today it's,it's a super strong inflation hedge. And the proof of work model is provingvery difficult to, to, to navigate. There's too big an installed base, too manynode operators out there, too many minors out there. How do I get, you know,control those or man, And it's all about control.

Stefan Rust: And if you look, therewas just a report that I think the White House had printed, which was aroundhow can we regulate minors, especially as minors come to the US more and more,How do we give each of the states more jurisdiction into controlling whatminors do because of. Carbon footprints, right?

Stefan Rust: And so there's alwaysanother excuse in terms of how I can go after a specific entity and open thedoor from a legal perspective to then be able to shut them down or have a viewat its books, or make it difficult for their life. You know, put more taxes onit or charge more carbon credits on it, or whatever the angle might be to makeit difficult at a point in time when it's needed.

Stefan Rust: But it's, I'm layingand, and I'm seeing the government laying the foundations today in terms ofopening the doors for levels of attack. They don't want to kill this business.There's too much innovation happening. All the future jobs are gonna be createdin crypto land and in this new DeFi industry, in this new NFT industry, thewhole entertainment industry is going to have royalty payments because of NFTs,right?

Stefan Rust: On an ongoing basis.The, the education markets, the books, you know, all the books that are sold inschools. How do you, I leverage NFTs as a means to share and get a royalty inthe secondhand trading of those books. Right. Et cetera. Right. And so I thinkthere's a whole new set of model. They don't wanna shut that down, but theywant the ability to say, who's a bad actor?

Stefan Rust: And I wanna be able toclose down on that bad actor and go after them based on Yeah, yeah. On, onwhatever the rule might be. And it can be extremely arbitrary. I don't likeyou. Right. It's like,  

Mike Townsend: Yeah, that's thedanger, right, Is like exactly what is it based on? It's based on whatever theywant it to be based on.

Mike Townsend: And I think you made,you brought up a really good point about the, the, the leverage point, thewedge being climate change, like anything related to climate change is gonna bea free ticket for the government to say, we're gonna take this extreme action,you know, tax Bitcoin minors and additional 30, 40, 50% because of the energyconsumption.

Mike Townsend: I, I could certainlysee them doing that if, if that was the initiative, if they viewed it as athreat to the US dollar in a real significant way.  

Stefan Rust: Three things, theycare about tax income, they care about printing money because ultimatelythere's a lot of power in, in, in printing money. And then what you justmention.

Mike Townsend: And from, fromTruflation's perspective, are you, what motivates you? Do you, do you view, doyou view putting this inflation and monetary statistics and data on chain? Whatdo you hope to accomplish and what what sort of drives you to do this?  

Stefan Rust: So, I mean, a coupleof things. When, when we looked at this a while back, we saw how archaic it is,right?

Stefan Rust: It was built, theframework to calculate inflation was developed in, in, you know, nearly acentury ago, a hundred years ago. So before we even had electricity in everyhousehold, right? Then. , the way in which it is captured today is also stillvery old. We have panels, you have people going to 477 people going to thestore and actually calculating what the price of a, of an item is on the groceryshelves you know, on the shelves in the grocery stores.

Stefan Rust: You have all of thatout there. And then you have the same entity curating the numbers so that theycan be published to give the regulators and the executive running the country ascorecard. So it ultimately has become their scorecard. And so it has been 2%inflation is a good scorecard, 8%, 10%. That's a really bad scorecard, right?

Stefan Rust: And it's come to apoint where I can't curate this anymore to keep this lower because people atthe gas pump are realizing that actually it's a lot more expensive than 5%, 6%.I mean, our gas has gone up xyz. And so when I looked at that, I felt we needto, number one, take a modern developer approach to aggregating data and doingit faster.

Stefan Rust: So not 60 days later,but actually in, on a daily basis, how can we do that? And, and, and how do wedo, how do we pull that together? And ultimately, you know, it's providing analternative source of what really is inflation. So Truflation. And then how dowe also provide an independent body that's doing a scorecard on the performanceof an economy? And, and yeah, I think that's, that's really the idea.  

Mike Townsend: And are you, do youview the potential revenue model is coming from government budgeting,government funding towards researching and, and I mean, I'm sure they spend, Idon't know how much money, I imagine it's way too much on getting thesefigures. Is that what you sort of view, like there'll be some licensing fee thatstate or, or federal governments will pay that?

Stefan Rust: That could be, thatcould be an angle. I mean, we've talked about that obviously. I originallythought we would have a whole set of, you know, web three companies building ontop of this data that we make available on six different blockchains today.

Stefan Rust: So we have some 50companies building in various forms and, and, and various stages ofdevelopment. On using Truflation data. So we're excited about that. But wherewe are seeing the real revenue come from is, is definitely the Wall Street,the, the, the fiat world that is looking to be able to predict the outcome ofthe inflation numbers that will be published by the Bureau of Labor Statisticsin the US and in the UK as well.

Stefan Rust: And so, yeah. And dowe see the government at some point, the federal government or the departmentcoming to us and saying, How can we work together? We'd love to spend, youknow, a fraction of the cost of what we would do otherwise and have certainelements. Maybe they need two or three different parties.

Stefan Rust: We aggregate every 18million data items that we. For price changes. We have multiple sources foreach of those items as well. And we do that on a daily basis. Right. That is anefficiency that I believe would give the necessary departments in the federalgovernment the right tooling that would give them a better perspective of howthe economy is performing.

Stefan Rust: We've just broughtonline sentiment data. We've brought online precious metals at commoditypricing. So all of that is coming live right now in real time so that they canmake better decisions.  

Mike Townsend: And are you, is thedata sources for the, ultimately the inflation, is that coming through APIsfrom existing, like online trading marketplaces or in saying the case of youknow, taking groceries for example, How would you, or how, how is itcalculated? I'm kind of assuming maybe too much there.  

Stefan Rust: Yeah, I mean, so wehave, we have multiple sources again, so there's not only one given way, butwhat we used to go to start to kick off, we needed big numbers quickly. How dowe get that? Yeah, I mean we, we chose to partner with big institutions thathave an aggregate pricing information associated with items at a grocery storefrom the teller.

Stefan Rust: So they capture allthe, based on every single SKU in a supermarket or grocery store. They thencapture the price information for that sku and they capture that on a weeklybasis. And we pulled that on a weekly basis from them. We purchased that to behonest. Okay. Additionally over time, we then realize that there are APIs,there are websites out there where you can get the price information through anapi.

Stefan Rust: And so we'vecomplimented that data with APIs from online eCommerce sources, right? That canbe through an Amazon, through a McDonald's website and, and, and, and Shopify,et cetera, where you actually have prices up there and you can capture them inreal time. What those prices are for those products and how they then moveover, I mean, yeah, grocery, I mean, food items don't change in price on adaily basis. So, so that's a bit easier. They change generally on a six monthlybasis.  

Mike Townsend: And how correlatedare, if, if the Federal Reserve prints, you know, 10 trillion, everything's notgonna rise in price at the same speed. How correlated are different like commonconsumer asset categories. Are, are they strongly correlated or likesurprisingly uncorrelated?

Stefan Rust: I mean, prettyuncorrelated. I mean, if you go to, you can go to app.Truflation.com and wehave an open source dashboard where anybody can see the waiting in terms ofwhat a average household expenditure looks like across multiple differentcategories. You can see the inflation per category and then how that, whatitems are included in that category.

Stefan Rust: Over time. We godeeper and deeper and deeper, and we'll provide visualization into more andmore data sets associated with that. But you can then see certain items, likein, in the UK for example, you look at the utility costs, it's jumped 88% inone year. Right. That's crazy. And, and you, yeah. You contrast that to other,other sites and, and you know, other items, food items.

Stefan Rust: Okay. Food items hasgone around. The world has increased because of the global supply chain issuesand. You know, due to covid and the shutdown, et cetera, how do we make surethere's enough food supply around the world? But yeah, you definitely see verydeviations. But as a percentage of your overall household expenditure, youmight be spending more in transportation.

Stefan Rust: I got four kids, Igotta take them to school, soccer practice. So I'm driving every day. And then,you know, and then the other partner in the household is flying everywhere,right? He's gotta go, I gotta go to this city, that city for that meeting. Andso ultimately transportation plays a much heavier waiting on an average basisin a household.

Stefan Rust: And so what does that,If the transportation price changes, that has a huge impact on a household oron the average household, and then in inflation as a whole. And then you lookdeeper into items. Transportation. You have multiple different vehicles andmotors of transportation. You have multiple different influences that drive upthe cost associated the fuel cost, the raw material costs the pricing, theshipping of that raw material the manufacturing of that, the labor costassociated with the manufacturing of that, converting that raw material into a,a actual component that then gets bolted on into the final transportationvehicle, et cetera.

Stefan Rust: And so we're trying toget deeper and deeper into that stack where we can then see how all of thoseelements lead up into influencing the price of transportation overall. And thenbeing able to get more and more real time, because a lot of these raw materialsare traded on commodities exchanges and are priced on a per minute basis everytime the commodity exchanges are open for trading.

Stefan Rust: And so, or even whenthey're not open for trading, because pre and post-market prices are alsopublished somewhere. Right.  

Mike Townsend: Interesting. And how,how much worse do you see it getting? Do you see us do you see us getting closeto higher levels of inflation and coming out of it? Do you see this likepossibly getting severely worse?

Stefan Rust: My view is it's, Idon't think it's worse. I think worse is when I cannot predict it and I cannotmake plans according to how it's go. If we live in an 8% inflation for the nexttwo, two years, I don't think that's too bad, as long as it stays within an 8%range. And I can deal with that, right? If it goes down to 2%, then it goes upto 8%, then, then I don't know, I, I dunno how to deal with it.

Stefan Rust: Why is that happening?And we had all of this happen so quickly because of the covid shutdown and thenthe reopen and everything come online. We had the Ukraine war, we had Russiasanctions, we had the China issues. You know, all of this compounded has justcreated huge uncertainty that has driven that, that whole whackamole that Icannot predict anymore.

Stefan Rust: I don't know whatmetrics to use, and then the cost of capital changing all of a sudden. So allof a sudden, my predictions, I don't know how to predict. I don't know whattools to use anymore. So the world has to come and identify what are the newtools that I need today in order to calculate what inflation could look likeand what impact that will have on an economy and to the cost of capital.

Stefan Rust: And based on thosetools that are provided that are modern tools, hopefully we will get to a morebetter predictability, which allows people to make better decisions, doinvestments accordingly, and asset allocation, and improve the asset allocationthat they need to in order to hit returns. And yeah, I think we're on a, on ajourney down that path. So 8%, if we can hold it at 8% for a period of time, Idon't think that is too bad.  

Mike Townsend: Yeah. So volatility isworse than necessarily the single digit number or the number that it is.Fascinating, Steph, and I could tell you think a lot about this stuff. It wasreally fun to have you on and, and talk to you in depth about your thoughts oninflation and the market and Dallas and everything else. Are you activelytweeting or writing personally anywhere you wanna throw out? .  

Stefan Rust: Yeah. No, I mean, Itweet a lot on Twitter @sruss99. I, yeah, we write newsletters, so sign up toour newsletter, go check out our site, truflation.com. And there's a lot ofactivity and, and, and the community's super engaged.

Stefan Rust: It's amazing how muchfeedback we've received from the community around our product, what data setswe should be including. We've incorporated all of that from the feedback of thecommunity. So we really treasure people's opinions and we try to loop it in,and that's the beauty. of digital communication.

Stefan Rust: I can capture whatpeople want. I can see what the community sentiment is, and I can incorporatethat in our product evolution and development in order to meet the requirementsthat the community's asking for. And I don't need to wait for some smokey roommeeting in person mm-hmm. You know, three months later to get the feedback.

Stefan Rust: In fact, I can get itreal time from everybody, and I can see from a large constituent what they'relooking for and how we can improve a product.

Mike Townsend: Through things likediscord? Like a public  

Stefan Rust: Discord telegram.Yeah. The Twitter sentiment, the Twitter feedback. So you have all thesedifferent, you know, digital channels. Newsletters difficult becausenewsletters are sort of more, a bit more broadcasty blogs. Sure. But I thinkpeople have lost the desire to read too much. Mm-hmm. other than paid foranalysts that are, are actually doing this for a, a living. And so how do youbring it out and how do you capture the sentiment and, and, andrecommendations.

Stefan Rust: Yeah. But it's with ahyperlink I can link should link you to Yeah, no, it's fun.  

Mike Townsend: It's super important.So I, yeah, I congrats on all the progress you guys have made and hope you keepcrushing it.  

Stefan Rust: Yeah, we're, we're, wewill, there'll be some really interesting products coming out. We have a, aPersonal Inflation Calculator coming out at the, I think next month inNovember.

Stefan Rust: So you can then importyour expenses you can integrate your credit card data, You can take yourexpensify account and then work out what is inflation for you.  

Mike Townsend: Oh, interesting. Yeah,send that over to me.

Stefan Rust: Your spending. Yeah, Iwill definitely do that.  

Mike Townsend: All right,brother.  

Stefan Rust: Talk soon. Thank you.Thank you.

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