Bankless - 7 - Ether’s Value Mechanisms

Episode Date: April 13, 2020

Episode: #7 April 13, 2020 Ether has some native mechanisms that contribute to its scarcity and value. David and Ryan explore these value mechanisms and compare/contrast them with money printer go brrrr. This episode covers: 1. Scarcity mechanisms and fair games 2. Ether’s value mechanisms 3. How USD will fare vs. ETH ----- Tools from our sponsors to go bankless: Rocket Dollar - tax shelter your crypto ($50 w/ "BANKLESS") Monolith - holy grail of bankless Visa cards Aave - money lego for lending & borrowing Zerion - portal to your DeFi portfolio ----- Resources Mentioned: (Watch) Conway's game of life (Article) Ether is equity (Article) The Final Puzzle Piece to ETH's Monetary Policy ----- Episode Actions: Listen to previous episodes to get a firm foundation! Read these The Final Puzzle Piece to ETH's Monetary Policy Ether is equity Watch Conway's game of Life Give Bankless 5 stars on iTunes ----- Subscribe to podcast on iTunes | Spotify | YouTube | RSS Feed Leave a review on iTunes Share the episode with someone you know! ----- Don't stop at the podcast! Subscribe to the Bankless newsletter program Visit official Bankless website for resources Follow Bankless on Twitter | YouTube Follow Ryan on Twitter Follow David on Twitter

Welcome to bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front-run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. David, we've got a super interesting topic today. I think it's pretty ambitious as well. What are we going to talk about? We are talking all about scarcity mechanisms, scarcity games, and value accrual for ether. But I think we're going to put this into a larger context, which in the context of the outside world where, you know, the Fed is printing $2 trillion, it seems, every other day, this is really going to fit well in contrast to what is going on with coronavirus, with the world, with our current financial system.

We're going to compare the different scarcity mechanisms that Ether has. And I think that's going to contrast well with the scarcity mechanisms that the dollar perhaps. does not have. Yeah, and it certainly seems to have the quality of scarcity less and less these days. So this is going to be a really fun topic. You know, a lot of people talk about Ether as a utility coin with an inability to accrue value over time. I think in today's episode, we're really going to take a wrecking ball to that notion

because Ether has some really interesting scarcity games and properties built in to the Ethereum network, and three in particular we're going to focus on. So this is going to be an ambitious episode, lots to cover, but I think super useful for bankless listeners to understand the scarcity games in crypto relative to the traditional financial system, and then specifically to the Ethereum economy and ether relative to other assets and other networks like Bitcoin. But before we do that, let's talk about some big picture stuff. that's going on. You know, one place I want to start, David, is let's talk about what the Fed is doing these days. I mean, I hear the sound of the money printer more and more. How about you?

Yeah, they just refuse to turn it off. And it's just become more and more salient what exactly is going on. The big thing that everyone needs to understand, at least the takeaway message that I have, is that we are printing so much money that we have now begun to nationalize money. And maybe in the crypto space, the Bitcoin community has always been talking about how, like, basically the Fed has its hands around the money spigot, the money printer. But now this is really, really obvious. And it's really down to a political decision as to who lives and who dies. Who gets the bailout money and who doesn't?

because when you can print, you know, $10 trillion over the course of two weeks to bail out certain companies, like you start to really back yourself into a corner with regards to who and what you bail out and who and what you don't. Like there's $1.5 trillion of U.S. student debt in the United States, and we just printed $10 trillion to give to corporations and companies. And so, like, it's becoming harder and harder to justify not bailing people out, which means it's, harder and harder to justify just not printing more money. And every time we print more money, the world becomes a little bit less fair because money is supposed to be fair and printing money is not that. Yeah, we've talked on previous episodes, I think episode two, where we talked about monetary policy about this idea of the cantillion effect. And you had a great definition of what the

cantillion effect is. But it basically means that those that are able to position themselves in front of and right underneath the money spigot are the ones that, that, that, benefit. And the money spick is really coming from a very small group of individuals in the U.S. government right now. They're the ones deciding, you know, folks like Jerome Powell, for instance, they're the ones deciding where the money goes in this economy. And so if you can position yourself close to the money spigot, you win. And that's a much less fair notion of what money is. It starts to erode even the game of capitalism and turns it more into a game of money and connections. You know, one example, I think we saw just last week.

So on Thursday, the Fed actually started buying more junk bonds. So they had been purchasing bond ETFs previously. And now they're actually buying really low-quality corporate bonds, actually EFTs, JNK, like junk-bond EFTs, directly. And they're doing that to, in their words, try to stabilize the economy in the coronavirus epidemic. But of course, what this inevitably occurs to happen, and what this inevitably causes is the bailout of companies and balance sheets that don't necessarily deserve to be bailed out. So we can contrast that with basically what big companies get. If you're a big enough company to have bonds and even junk bonds, for example, listed on public exchanges, then the government's

going to buy your debt directly, right? If you have, if you're big enough to have a good banking relationship, then you are first in line for some of the loans that are coming down the pike. If you're a small business, now the government is also in the U.S. rolled out some programs for small business under SBA loans. You have to wait in line effectively. So first, you know, you have to have a bank account with an SBA lending bank, and they're going to prioritize the businesses that already have loans with them. But if you don't have a bank account with an SBA loan designated bank, then you're the low man on the totem pole. You're effectively unable to get a loan in this SBA program. You're too far from the money spigot to really benefit. You're kind of

last in line in the whole process. And that is unfair. It rewards connections and money and the size of the company over traditional, credibly neutral, capitalist market forces. And that's a massive unintended consequence of all of this money printing as well. Massive unintended consequence. And I think that those three words are the things that really sum up what is, we're all really worried about here because it's it's really enticing to press print on the money printer right it saves us from going into a very deep recession it keeps us for it keeps us at bay it feels good now people get to keep to keep on shipping people around even though they're not making any money a lot of things we get to continue our old way of life that's what the money printer does is it prevents change

but economics and finance and money and business is constantly evolving. It's a Darwinian process, and the MoneyPrincher-Go-Bur instantiation is getting in the way of that. It's really playing God with the economy, and it's really something closer to central planning. The reason why the United States won the Cold War versus the Soviet Union was because our economy was not centrally planned, but since there is no more Cold War, we've been able to move into a centrally planned system. And that's what we see here. That's what the money printer go burr is. It's a centrally planned economy, which in other contexts, we as Americans, we absolutely loathe. Yeah. Have you ever read that book, Red Notice? Yeah. Yeah. Oh, I've talked about that. Actually, literally last night with my parents talking about how Red Notice, the story of Bill Browder and his capitalist endeavors in post-Soviet Russia.

It was it was not about good business. It was about how do you play the game? of politics. Yes. Yes. Which kleptocrats do you know and whom can you bribe and whom can you be in favor with? That was how to win the 1990s stock market in Russia. It had very little to do with the fundamentals of companies or free market competition. It had a lot to do with who those in power and government power specifically chose to reward or to penalize. And, you know, I don't think we're saying, David, that the U.S. is immediately going to, like, 1990s Russia. I mean, that's not happening overnight. But is this a step in that direction?

Is this an erosion of the credible neutrality of the U.S. capitalist system? Is this a reward for those who are closer to the money spigot versus those who are farther away? Absolutely. I think that's pretty undeniable. And just as you said, I mean, that is an unintended consequence of these bailouts and the way that they're structured. And it's why I think it's important for us to have an alternative universe, an alternative game of scarcity and monetary system that we can fall back on, one that is transparent, incredibly neutral, which I think is going to be the focus for today's episode. But before we get there, David, you had something. interesting happened to you last week. You were called a Bitcoinser. What was that about?

I had Nick Carter on my other podcast, P-O-V-Crypto, where if you want to listen to a place where only the host disagree, I would go recommend P-O-V-Crypto. We brought Nick Carter on to talk about kind of what his position is in the space. And we talked a lot about what we were just talking about right now with Bitcoin being an instantiation of values. And a lot of what the values that we were talking about we were just talking about very recently with unfairness with regards to money and so we were talking about that and you know i wholly agree with the concept of crypto instantiating these these fair values inside of all of us and in the twitter comments as i was tweeting this video out this i hadn't seen this twitter account before so i don't know who this person is but he goes

oh three bitcorners talking about why bitcoin is so great get ryan sean adams on there and we'll a real conversation. And I'm like, wow, I've never been called a Bitcoiner so directly before. Yeah. I mean, so, okay. So that brings up an interesting question because, look, there's some vitriol between the communities, Bitcoin and Ethereum. You know, so my question is, can you be both an Ethereum and a Bitcoiner at the same time? Is this a bit like, you know, liking Korean food and also sushi? You know, they're both great, great foods. And there's no kind of tribalism between them? Or is it a bit more like being a Democrat and a Republican at the same time?

Like that's fairly difficult to do. Or being like a Christian and a Muslim at the same time. Those are tribes that have had a history of not getting along. What about being an Ethereum and a Bitcoin or can you be both? Yeah, it's actually, I think, a really interesting question. The obvious answer is obviously you can be both. But at the same time, even though that is the answer, you can be both. both. No one really seems to choose that answer. Like I think you and I definitely identify as

Ethereum's. However, I definitely also have the same values as Bitcoiners. However, calling me a bitcorner is odd because of how much time I spend in the Ethereum world. Also, in this episode that we were recording with Nick, he was talking about how these crypto economic systems are political systems. They are, the code is an instantiation of values. And values is kind of what you rally behind when you rally behind a political party. So to some degree, these are political parties that we kind of adopt. And you can't really be one or the other. Even though they aren't all that opposed to each other, like the difference between Bitcoin and Ethereum, in my opinion, is not all that great. They're actually

pretty aligned politically speaking. But since there's only these two political parties in the crypto universe, like, what else do you have to fight and debate against? And so, like, you are pushed to one end of the spectrum either way. It's a really interesting concept that I keep on coming back to you over and over and over again. Yeah, I totally agree that there's a ton of overlap and that you can be both an Ethereum and a Bitcoin, or though it's true. I think most people end up identifying themselves more as one over the other. Some folks, of course, will say they're exclusively one or the other. You know, I think Vitalik said, you recently that Ethereum effectively has moderate Bitcoin values, right? So there is a ton of overlap in the

underlying value system of both communities. It seems like in some ways, Bitcoiners are a bit more extreme on one end of the spectrum, whereas maybe Ethereum take a more pragmatic approach. And there's lots of different lenses. You could compare these to you social movements under. But one is certainly that. We talked about monetary policy in the past. That's certainly another one. I think emphasis on security versus fixed scarcity of the asset itself is another. And I think in a lot of ways, the bankless podcast is about exploring some of these underlying differences, how both of these social movements contribute to the wider movement of going bankless and this alternative money system that we're that we're standing up. So you can be both bankless listeners. Don't get stuck

in the idea that you have to be in one camp or another. I think both David and I would say, look, we're we're Ethereum's, we're Bitcoiners. We're both. We're here for the bankless social movement. That's what this entire crypto movement is about in our minds. And so it's okay to be part of both communities, certainly. It's encouraged. Because at the end of the day, we are all here for computer-driven code, a code that is run on the internet, that is credibly neutral, that is completely fair, and without human beings involved. That's the values that we really overlap. And that's really also the topic of today's episode, which we're totally going to get into right after these sponsors.

First, we're going to talk about AVE, which is a defy protocol that you have to check out if you already haven't. It's growing phenomenally these days. It is a lending and borrowing protocol on Ethereum. That means you can lend things to it. So if you have an asset like die or you have an asset like ether, you can put it in AVE. It will magically transform that asset into an interest-bearing asset that actually yields you interest. It yields you returns. You can also borrow from the AVE protocol. So you can borrow against your ETH. You can borrow against your die rather than sell it in the U.S. has great tax benefits. Most DeFi protocols that lend to you have a variable rate.

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three headline topics we're going to talk about. The first is scarcity mechanisms and fair games. The second is ether and the value mechanisms, scarcity mechanisms, it employs. And then thirdly, how USDA will fare against these crypto money scarcity mechanisms. But let's start by talking about scarcity mechanisms and fair games in general. I mean, we talked in the intro and the big picture portion about the Fed and its money printing and its ability to arbitrarily give to anyone it wants to. That's not the case with crypto money systems. And I think that comes from the value system. We're talking about value systems, with the value system of Austrianism, Austrian money,

that really enables these scarcity games. Can you talk about that a little bit? David, why is this Austrian philosophy? so important. The Austrian attitude towards money is an attitude of fairness about money. A good Austrian money is not something that is engineered by human hands, but rather discovered or emergently used organically. Gold as Austrian money, gold is really nice because it was evenly distributed across the world. And so as different civilizations came into maturity, no one civilization had all the gold, right? It was fair.

And because it was this natural element in the earth's crusts, like no one was able to play God with gold. No one could mint gold. And so when we talk about fairness and money, like I said in a previous episode, humans have a very strong fairness meter, fairness radar. If they see something that's not fair, everyone picks up on it. And it's really important with our money because what money is is a measurement tool. of value. Money is like this meter stick that measures value of different things. Ryan, if you want to sell me

your house and I am an apple farmer, how many apples will you take for your house? Like, how do you even make that comparison? That makes no sense. Like, you can't compare like, okay, well, this house is worth 20,000 apples. Money is this tool that we use to measure the value of different things. And when you are able to distort that measurement. You are able to print new money. What you are doing is you are changing that measurement, that measurement stick. What if we all had meter sticks? And then this, this entity just kept on changing what a meter meant, like how long a meter is. It would mess up everything. And that's what Austrian money is all about. It's saying that everyone has the same measurement tool equally across the world. And we're all using the same measurement tool to

to make value judgments. And so fairness is really important in that context. Yeah, and I think one thing that you get when you have money systems and economies that aren't fair in the crypto world, when that sort of thing happens, when the community doesn't accept it socially, there's a network fork. That means basically people take the underlying network

and they create their own version of it. So they might create an entirely new kind of side asset and they fork out unfairness. To me, that's kind of akin to what happens when monetary systems of nation states or of kingdoms go awry is that people have a tendency to fork. We don't call those forks necessarily. We call them revolutions, though. And that's what can happen to a society that pollutes and allows corruption and unfair decision-making to its underlying monetary and economic system. And if you look at, you know, just the world that's going on, and I know, you know, investors like

Ray Dalio have compared this sort of era that we're into the 1930s, there is a level of unrest going on. There is this feeling that things aren't fair, and certain parties in power are bending the rules in favor of the establishment and in favor of those people. who will continue to keep them in power. And to me, those are early seeds for social unrest, for potential revolution, whether that's an actual, like, physical revolution or if it's a social revolution. And I think bankless and crypto money systems are all part of that revolution.

It is a way to opt out of the existing financial system where a few people can bend the scarcity rules of the underlying money system. And certainly that's the perspective that Austrians were coming from. Their perspective is, hey, you know, a few folks shouldn't have the ability to bend the rules of the money system because if they do, they will bend it in their favor and the system will become unfair and not only unfair, but also inefficient, because the top-down system cannot compete with a bottom-up system from an innovation perspective, from an efficiency perspective, from a price reliability perspective. So decentralized systems in markets have worked really well

throughout history, and I think that's very much where the Austrians are coming from. So, you know, I think we would both say that Bitcoin is a type of scarcity game, too. It's almost a type of Austrian scarcity game, wouldn't you say? Absolutely. Bitcoin is one massive game. And in the context of what's going on today, I remember you bringing this up a couple times in the very first episodes where you talked about Gresham's Law, where people will keep the good money and spend away the bad money. And we've seen this with regards to previous community forks, or AKA Revolutions in Argentina, in Venezuela, where people spend the bad money and keep the good money, which is dollars. And that puts us in this very unique position where the Federal Reserve is there's no other Fiat money to run to, right? So the Federal Reserve is like, well, we're just going to print more because there's no other money out there. Like, what are you going to do? Run to gold? Well, Bitcoin and its game is the alternative that they do not see coming. And this game that Bitcoin has is a pretty fun and fair game. And it's much more fun,

in my opinion, than the game of the Federal Reserve Money Printer Goober. And why I'm referring to this as a game is because that's kind of how these Austrian money systems work. Bitcoin is this large game of chicken where no one wants to be caught with their pants down. There's this very large prisoner's dilemma going on between everyone in the world where if you are the last person to buy Bitcoin, you lose. Like no one wants to be the last person to buy Bitcoin. And anytime MoneyPrinter goes Burr, you increase that incentive to buy Bitcoin early. Are you saying, so are you saying Bitcoin is,

a Ponzi? Bitcoin is a Ponzi game, yes. And that is very, very different than a Ponzi scheme. A Ponzi scheme has a one central operator who is ready to run away and disappear and fake a death with all of his new money. There's a backdoor in Ponzi schemes. A Ponzi game is entirely different where everyone benefits at the bottom if everyone else at the top buys after them. You want to be first in this Ponzi game. It's this. It's very much a pyramid structure, but that's how these money's bootstrap. The incentive to play the Bitcoin scarcity game, how many Bitcoins can you own, which is really just the, if you look into the memes shared by Bitcoiners, it's really just a signal

of playing different games. Stacking Sat is a very famous Bitcoins or meme, and it's really just about, hey, like, increase your points, get up the point scale, like get up the value meter stick of Bitcoin. because if everyone else starts using Bitcoin as a value system, like, well, then you got ahead when the points were cheap. And so that's the big Bitcoin game. It's really how many of the 21 million bitcoins can you get? And are you going to get them before everyone else?

Yeah, it strikes me that what you're saying is, okay, yeah, Bitcoin and crypto money systems in general are a Ponzi game, right? But so is gold. That's very much a Ponzi game. And that's different from a Ponzi scheme, which might be more like the Fiat system, where a few folks can essentially reward their friends and run away from the money. But, you know, I'm reminded of this quote by Peter Thiel, and he says, you know, money is the bubble that never pops. It's essentially its value is based on a bubble, a social belief. We've talked about this in our memes episode and previously.

So check those out. But Ethereum is a little bit different. So it has some of those scarcity Ponzi game type characteristics that you're talking about with respect to Bitcoin. But it also has some in-game mechanics. Ether is almost like a point system for these in-game money games that are played on top of Ethereum. And I think you've done a really good job talking about the three pillars

of scarcity in Ethereum. And these are effectively, because scarcity and value go hand in hand. These are effectively value accrual mechanisms that are built into the Ethereum protocol for ether, the asset. So maybe we should talk about the three pillars of scarcity. Why don't you just, like, you tell us what they are first, David,

and then maybe we can hit them one by one. Absolutely. And these three pillars, I believe is where Ethereum gets its political differences from Bitcoin, where Bitcoin has one large single pillar, which is 21 million now and 21 million forever. Ethereum has three smaller pillars that each represent their own scarcity mechanism, their own little game of chicken of sorts. Each pillar represents its own additional scarcity force for ether.

And so the first one is the one that we all know and love, ETH in DFI. The famous term, ETH locked in DFI or, you know, $1 billion locked in DFI. That is ether being used in this DFI ecosystem as collateral, as a store value asset. And the more ETH in DFI, the less ETH there is everywhere else. And so Maker has 2.3% of all ETH out there. Compound has like 0.5% of all ETH. the more defy applications there are that are good defy applications good being defined as how much ether

is inside of them the less ether is there there is in the rest of the universe so this every time every defy team every defy company defy protocol that comes into existence represents some amount of incentive to deposit ether into that application to use that application for whatever that application is. So the more the bigger defy is, the more defy protocols there are, the more incentive there is to take ether from wherever it is in the world and deposit it into defy. And so that's the first pillar. We'll talk about the other two pillars in just a minute, but maybe we should we should camp on eth locked in defy for just a second, because what these protocols are on top of Ethereum are almost forms of Ethereum banks where

eth the asset is the reserve asset as the most trustless asset for economic bandwidth. So these DeFi protocols, these crypto, these internal banks, Ethereum banks effectively are using ether to back loans as trading pairs in protocols like uniswap. And it really reminds me of the fourth attribute of money that is much less talked about. So when we talk about money,

and we've defined money before in the bankless podcast, David, as three things, a store of value, a unit of account, and a medium of exchange. So those three things. But it's also a fourth thing.

A guy by the name of William Stanley Jevons talked about the fourth attribute of money, which is money as a standard of deferred payment. So money as a standard of deferred payment. What that effectively means is the monetary denomination of a loan. So if you have a mortgage, for instance, and if you're in the U.S., it's generally going to back the denominated your loan, your mortgage that is, is going to be in U.S. dollars. Well, that aspect of debt denomination, the standard of deferred payment,

is a fourth very important attribute of monetary systems. And just to kind of look at the big picture of what's going on in the market today, there is an absolute rush to liquidity, a rush to dollars around the world. You can see this in various currencies, fiat currencies, losing their value relative to dollars. The value of dollars is going up and everything else relative to dollars is going down. And a primary reason for this is because so much debt around the world is denominated in dollars. So there's 60 trillion of debt around the world that is denominated in dollars. And when there's economic uncertainty, the folks that have borrowed with and have a debt obligation denominated dollars, they want dollars. They're demanding

dollars. They're buying dollars in order so that they have the ability to pay back these debts. And so they don't go bankrupt and they don't go broke. So there's kind of this this sucking type of dollars when there's economic uncertainty because dollars are the standard of deferred payment. Now, what's happening in the Ethereum ecosystem is super interesting because all of these defy protocols are effectively making ether a standard of deferred payment. So if you take an example of Dye, which is a stable coin, what die actually is, is in global settlement, it is a coupon for redemption in ether. So it's effectively a debt note against ether.

So, you know, maker loans, vaults, they used to be called collateral debt position CDPs. These are ether denominated debt devices. So what's happening in defy, the reason ethlocked in defy is important from a, you know, monetary accrual aspect is because it's producing all of this financial instrumentation that is backed by ether as debt. It's making ether a standard of deferred payment. Let's talk about the second pillar now, David. So that is staking.

So tell us a bit about that. Staking is where Ethereum gets its security. In previous episodes, we illustrated the security of each blockchain as, well, with Bitcoin an energy wall. Bitcoin's security comes from this energy wall of electricity that every individual miner helps contribute to. If you want to attack the Bitcoin network, you need to get over this energy wall. And that energy wall is really, really high. It's the collective energy of all Bitcoin miners everywhere in the world, all inherently contributing to this energy wall that really exists

on the internet. Ethereum and proof of stake, and specifically staking, is the capital version of this wall. And money at the end of the day is just energy, right? So if I have $20, Ryan, I could ask you to do some number of pushups and I bet you you would do it because you want this $20. There's really, it's really a battery. There's energy stored in this in money, right? So you go out and you work in your field and you create and you toil and you create your wheat and then you put your wheat in the bank and then you get a deposit slip and that's deposit slip is money that represents your labor. So inside of money is a battery. And that's why Ethereum is transitioning to staking and and proof of stake is because we like efficient systems, and staking is really, really efficient,

because instead of just using energy directly, you use a representation of energy. And that's what staking does. And so you take your ether and you stake it on the promise to not lie to the blockchain, on the promise to do everything correctly. And the more people that are doing this, the higher the wall of value that you have to get over in order to attack the Ethereum network. And so it's actually extremely inexpensive to take ether and stake it. The only thing that is expensive is the value of ether itself, and you are paid commensurately for your capital when you stake. And so you take your 32 ether or your multiple of 32 ether,

you take it off of the secondary market, you take it away from the floating supply of ether in the world, and then you put it in the staking contract, and then you lock it, and then you get paid some amount of fees over time. And that fee is the incentive, the fees that you get that you earn from staking is the incentive to keep that ether off of the secondary market. Because what staking is doing is it's doing two things at once. That's really, really just a nice feature is that it creates this new wall that you have to get over, this value wall. You can measure the amounts of security that Ethereum has with the amount of value that is in the wall.

right and so with we're targeting between 10 and 30 million ether which is roughly 10 to 30 percent of the total supply of all ether as the amount of stake that we want which means you have to have an equal amount plus one to get over that wall and so if you are and so that represents you know 10 to 30 percent of the total market cap of ether which is a really high wall and if we're staking 10 to 30 percent of ether because we want access to the block rewards, we want access to the fees, we have to pull 10 to 30% of ether off of the secondary market away from the hands of potential attackers. So not only is this value wall, 10 to 30% of the market cap of ether, but there's also 10 to 30% of the market cap of ether not available for attackers to use. And so this scarcity game,

The scarcity mechanism is the game that protects Ethereum, and it also creates scarcity in ether at the same time. It pulls ether away from the secondary market to protect Ethereum and to pay fees to stakers to get that value wall as high as possible. So a scarcity mechanism that effectively secures the entire network. I mean, that's pretty powerful, and it's not something that is necessarily that new. as you said, right, staking is effectively, it costs and opportunity costs of doing something else with your ETH. This is sort of the same way that nation states bootstrap their security, if you think about it like this. So in a nation state like the U.S., you can take your U.S. dollars, and you can park those dollars in treasuries. So these are debt instruments effectively where you're lending to the state.

What does the state do with that money? Well, you know, lots of things, but part of what they do is actually defend the legal system. You know, defend the nation against foes that would seek to attack it. Establish the protocol and protect the protocol. The U.S. protocol, of course, is embodied in the Constitution. So staking in Ethereum is very much like taking your dollars and parking them in T-bills. That's why I think on bankless, we've called these effectively. This is like ETH bonds is what you're doing.

You're lending to the protocol. And this has a really nice attribute because just as T-bills are effectively the risk-free rate of doing anything with your capital. That's what staking on Ethereum is going to become too. So if you lend ETH, if you stake your ETH to the protocol, it becomes the risk-free rate of lending eath. And folks are incented to do that when they get some level of return on their eth. So the return might be 5%, it might be 10%, it flexes up or down based on the total amount of eath that is locked. So if a low amount of eath is locked, then the rates are going to be higher to incentivize more folks to stake. But this rate is going to be the risk-free rate, the kind of

bottom floor rate for all of defy. So all rates should be higher because they are a bit more risky. So, you know, if the ETH staking rate is 4%, for example, it should cost greater than 4% to lend ETH in a protocol like compound, because compound adds another level of risk onto lending your ETH. So it has this really nice property of being the risk-free rate for the Ethereum. economy, and as you said, it's all part of the scarcity game. And this game, in particular, the staking game in particular, effectively is used to defend the network against foes and attackers. All right, so let's talk about the third pillar of scarcity and Ethereum.

Now, this has kind of a clunky name to it. It's called EIP 1559. And just to talk about EIP for a minute, EIP stands for Ethereum Improvement Proposals. So this is like, David, have you ever seen the, you know, how a bill becomes a law video. Do they teach you that in school? I'm just a bill. Yeah, that's the one, man.

It's like burned into, if you went to school in the U.S., it's like burned somewhere in your subconscious. You cannot get away. This is the story of how a bill becomes a law. Well, EIPs are effectively bills on their way to becoming laws that is embedded in the protocol in Ethereum. So EIP 1559 is a really interesting manifestation of an ETH scarcity game in the Ethereum economy.

Do you want to tell us about it, David? Yeah, the story of EIP-1559 is really interesting. It's beginnings come from just a UX and UI improvement to making a transaction on Ethereum. For those that first got into crypto, I think we all probably remember our first Ethereum transaction because we all looked at the gas field and we were like, what is gas and what do I do with this?

You know, gas is not a friendly mechanism that people have to play with in order to make a transaction on Ethereum. There's no real world correlate to what paying gas is to make a transaction on a blockchain. It's just something totally brand new. And EIP 1559 is a way to remove this from having to make a transaction on Ethereum. What the improvement proposal does is that it creates a kind of like a difficulty adjustment, like Bitcoin's difficulty adjustment that changes every two weeks. depending on how much hash power there is.

This kind of works similarly. Depending on congestion over time, this number will go up or down based on how congested the congestion is. Based on how congested the blockchain is. And this number is the minimum fee number to make a transaction on Ethereum. So there's no guesswork involved. So you can just make a transaction. And the EIP 1559, the number is called base fee.

The base fee amount will automatically be in question. included. And the difference why we're talking about this in the context of scarcity games and scarcity mechanisms is that base fee instead of being paid to the validator is burnt. And instead, you can, if you want to get included and jump the line, which you can always do in blockchain systems, you just pay a small tip on top of base fee. But if you don't really care about timing, you can just pay base fee and base fee is burnt. What do you mean by burnt for those that aren't familiar with like burnt what does that mean where does it go yeah so in the current system when you pay for your transaction fee you pay it to the validator uh in this new system this eip 1559

system you burn it and basically what that means is you send it to no one you send it off into the ether if you will no one receives it it gets deleted gonzo goodbye uh there's no no one receives this this base fee amount all right so this is like if i had a briefcase full of money and I'm giving that to you, you know, in order to get my transaction through and you take that briefcase, you throw it in the fire. It's like, it's like gone. It's, you know, distributed into carbon can never be reassembled, like never coming back. Issuance of US dollars has been reduced because money was actually physically burnt. Is it like that? Yeah, yeah. It's like that. And maybe people are asking, well, why would we but burn money? And that's because,

First off, base fee doesn't increase or decrease the amount of fee that is paid. So we aren't paying more or paying less in order to get our transactions through. And why we are burning base fee is because, well, the alternative is to pay it to the validators, but the validators are already being paid because we have ether issuance encoded into the Ethereum protocol. We do not have a set monetary schedule of when we are going to reduce issuance because our Ethereum's security goes ahead of its monetary policy. That's part of the Ethereum political party, if you will. We believe in security ahead of monetary policy.

And so we pay our validators block rewards ahead of time. We pay them for, we get security regardless of the fee market. And so the fee doesn't necessarily need to be sent to validates. for more security because we already paid for security. And so what we do is we burn it. And this has a number of different economic implications for ether. First off, it increases scarcity, right? Because you know, that first the ether exists and then a transaction is made and then the ether stops existing. And so every individual transaction on Ethereum removes some amount of ether from the supply of ether in the world. And so it increases the scarcity of ether over time. And so as the Ethereum

economy starts to, you know, heat up and get larger and larger and larger, every transaction, there's more transactions per day per minute, larger transactions, more and more ether is getting burnt. And remember when we were talking about staking, if you want to attack the Ethereum network, you need to take the available supply of ether and you need to make a higher value wall than the current value wall of ether so you can get over that the staking wall. If EIP 1559 is constantly burning ether, it's making less ether available for security in the future. And so where staking is economic security for today, burning ether in EIP 1559 is economic security tomorrow. And so the more ether that we burn today, the less available there is on the secondary market

tomorrow. And so it's, to me, it's paying for future security. It's future security payments. And not to mention how it simply acts like a kind of like a stock buyback of sorts, where instead of paying the validators, burning ether simply pays everyone equally. It's an extremely fair way of issuing a stock buyback because any holder of ether, wherever they have their ether in the Ethereum ecosystem, they benefit from burning ether because their ether is a little bit more scarce, that this scarcity mechanism creates scarcity for all other ether other than the ether being burned. Yeah, it's super cool.

And I want to make the point, too, that this is pretty unique, a unique design that's only possible in the world of crypto. So if we were to think about an analogy to nation state, it'd be as if there was some sort of consumption tax. And, you know, there's consumption tax at the state level in the U.S. You know, some countries, Canada has a consumption tax, you know, generally in the form of that sort of tax. But it's as if that consumption tax, so anytime you did something in the network, was actually burnt. You know, Fiat government systems don't have this.

They never burn Fiat. They're always issuing it and increasing it. But in the Ethereum system, yeah, quite the opposite. In the Ethereum system, every time you make a transaction, every time you do something economically, on the network, a portion of issuance is getting burnt. And this is not only unique relative to governments and how governments work and nation states work, but it's also unique relative to how other commodity monies work. So gold, for instance, you know, no one burns gold. As you use gold, if I were to give you a gold bar, David, that's not getting burnt. You're just using that and recycling that

and doing something else with it. Unless you're a non-rational actor and you like, you know, just to burn your money, which is generally not the case. Bitcoin, too, when Bitcoin transactions are used, those transaction fees go to miners, proof of work miners in the Bitcoin network. They're recycled as well. Those fees are used to pay for. Security budget for proof of work. They're not burnt. So this is really a new possibility in crypto economic systems that Ethereum is tapping into. And, you know, in a lot of ways, from a scarcity game perspective, it's an improvement. It's an improvement over government fiat. It's improvement over gold. It's an improvement over Bitcoin. It actually could make ether a more scarce store of value where you actually have

negative issuance on the platform. So rather than fixed issuance, you know, more ether is potentially getting burnt every year than is being produced. And it links, it has a very nice link, as you said, to the consumption and the use of Ethereum, the network. So pretty unique from that perspective and pretty exciting. So over time, EIP 1559 burns ether. And like you said, it creates the possibility of actual reduced issuance. Ethereum has constant issuance with block rewards to pay for security. But if we have a lot of congestion, if there's a lot of demand on the Ethereum blockchain,

then we could actually have a EIP-1559 burn rate that's higher than the issuance rate. And that would be a very interesting day if that does ever happen, where we are burning more ether than we are issuing. And that is in stark contrast to what we are seeing today with MoneyPrinter GoBurr, where we only see issuance. There's no possibility for the dollar to have this value accrual, this scarcity mechanism, this price appreciation. because anytime the dollar appreciates, the Fed just prints more.

And sometimes it prints more when the dollar doesn't appreciate. And so this kind of goes back to what we were talking about with Ponzi games. This is a really fun game to play for ether holders, right? Because you are incentivized to buy an asset that is becoming more scarce over time as it gets used. And so like we are saying with people wanting to spend, their bad money and keep their good money. Well, personally, I'm seeing the Federal Reserve print a bunch of dollars, and then I'm seeing EIP-1559 getting worked on and built and audited it and put into the code of Ethereum 2.0. And so I see my dollars being minted freely by this federal

government who is bailing out these people that are politically close. And then I see EIP-1559 being set up and ready to burn transaction fees and increase my percentage of the Ethereum network. And so I'm really incentivized to spend my dollars and keep my ether because that's how these Ponzi games work. This is a very core component of Ethereum's Ponzi game. Absolutely. And all those rules are transparent, too, and embedded in the protocol, which makes it really nice and really fair. Credibly neutral is the phrase that we would use for that sort of thing. Now, we should point out to listeners that the last two pillars of Ethereum scarcity, I think you, you mentioned this, but those are coming with eth 2.0. So the next version of the Ethereum

network upgrade. So staking, the first edition, Ethereum's initial bond offering, will probably go to effect sometime this year. EIP 1559 may get incorporated in Ethereum 1, but is certainly going to get incorporated in Ethereum 2. So these are sort of future games that the network is going to be adding. And I think it's important to sort of zoom out and talk about, you know, Bitcoin and Ethereum as networks relative to how complete they are. So the networks themselves, I would, you know, I would consider Bitcoin maybe 90% done. They're working on tweaks, some minor changes in additions, but they're not planning. The Bitcoin network is not planning a wholesale improvement in a 2.0 version. Ethereum, on the other hand, that project is maybe 20%

complete, maybe 30% complete. And so these additional elements are being added on top of it as we go. And I think it's important to understand the state of completion of these projects, even when you're comparing them. Because at the end of the day, if you've got a 10-year time horizon, you're sort of comparing the end state of both of these networks. But if you've got a one-year time horizon, you know, you're comparing two projects that are in different phases of completion.

All right. So just to recap the three pillars of scarcity, these are all in-game drivers of ether's scarcity in the Ethereum network. So the three of them, when DFI goes up, that's ETH locked in DFI, ETH gets more scarce. When people want to hold and stake their ETH, then ETH gets more scarce.

When there are transactions on the Ethereum network, ETH gets more scarce. those are all of the in-game drivers of the Ethereum protocol. And we're not even counting the outgame drivers. So Ether has some of the same outgame drivers that Bitcoin does when ETH is used in a crypto bank or as a store of value to hedge against inflation. You know, it's being held. And that's an outgame scarcity driver when it's being used as a, you know, a meme of commodity store of value. It's also being held.

So it has some of the same outgame drivers that Bitcoin does as well. I think of Ether as having both those in-game and those out-game drivers that effectively drive up its scarcity inside of the network and external to the network. Okay, we're going to talk about games more in just a second. But before we do, let's talk about our sponsors. Rocket Dollar is for our U.S. listeners primarily. this is the game of retirement, which is also an important game to be playing, saving for your retirement. If you have an IRA or a 401k, the chances are it's jailed in a brokerage. So it's in something like Fidelity and Schwab.

You can't get access to crypto. You can only access stocks and ETFs. What if you don't want to buy those things? What if you want to buy crypto within a brokerage? Well, then it costs 5x the price if you were to buy something like $1. ether in a brokerage. Don't do it. That's a rip-off. You should break your retirement account out of jail. I've done this with multiple of my retirement accounts. It's fantastic. Rocket Dollar can take care of the pain for you. They can help you with the paperwork. Once you break something like

Heath out of jail, then you can stake it in essentially a tax-free retirement account. Use the code bankless when you go to Rocket Dollar and you'll get $50 off. way to do it, go to rockadaller.com, use the code bankless, and start your self-directed retirement account today. If you want to look cool while you show all of your friends crypto, you need to send them to zirion.io. Zirion is the front page portal to the defy universe with a complete set of financial services and activities available for you. It is the place to view your portfolio. You can add all of your wallets and you'll get a report of all of your assets in side of them. Not only that, but Xerion also allows you to buy, sell, trade throughout the various

defy systems that are available on Ethereum. If you want to make an exchange, Xerion now sources liquidity not just through Uniswap, but also through X, Khyber, Curve, and all the other protocols that are relevant to whichever specific trade that you are making. You can also invest through Xerion as well. You can lend out your assets to receive a return, but you can also invest into uniswap or bank or pools if that so suits you. So if you want to look like somebody that is on the bleeding edge of finance while you show your friends what crypto is and why crypto is so cool, send them to zirion.io. So, Ryan, I want to circle back around to DFI. We talked about DFI as one of the, perhaps the most important game, although I won't pick favorites, for ether and

its scarcity mechanisms. But Defi isn't really one thing. Now, is it? It's actually just a collection of different applications. And so, Defi to me, represents this side quests of Ethereum, the mini-games of Ethereum to offer you different activities to leverage your ether in different ways. Oh, for sure. It's definitely a universe. of financial applications of these DFI protocols, which are all ETH money eaters, inside of the Ethereum network. I think that's going to be a massive driving force of ether's scarcity as these almost organisms, if you will, kind of grow, these DFI protocols grow inside of Ethereum and

consume and eat more and more ETH. But, you know, one of my favorite illustrations of this actually came from an article that you put together. and it's called Ether's Equity and you you set up that article with this other kind of scarcity game but it's almost like

more than a scarcity game it's almost like a biological type of game that's embedded in programming it's called Conway's Game of Life I'm actually looking at it on my screen right now and it's like it's hard to explain without seeing it

so we should definitely put some of these visualizations in the show notes. But can you give it an attempt to explain what Conway's Game of Life is and what's going on here? I highly recommend if you have 30 seconds a minute to just Google Conway's Game of Life and check out some of the images because that will make this very easy. But I'll do my best. So Conway's Game of Life is an open landscape. It's a grid.

Think of a grid. And these cells, these squares, are either white or black. So it's a binary grid. And the grid goes, is endless. It's an endless field. And there are certain rules in Conway's Game of Life about the state of the color of a cell versus its neighbors. And so there are rules like if you are a white square and three of your neighboring cells are black squares, then in the next state you will turn black. And there are a couple more rules.

But basically there are rules for if you are X and then your neighbors are Y, then in the next state you change. David, these rules are embedded in code, right? These rules are embedded in code. And so what Conway's game is is a state machine. A state machine is this computer application that moves forward one state at a time. It goes like a metronome, just moves forward, next move, next move, next turn. And Ethereum is very much a state machine as well.

Ethereum is a state machine where every block is every state, right? and the account balances of every single Ethereum address are like individual cells inside of Conway's Game of Life. What you can do if you are really bored with Conway's Game of Life is you can start creating things. You can create structures that exist and live and move into perpetuity on Conway's Game of Life. And if you want to keep on going down the YouTube rabbit hole for Conway's Game of Life, You can see people that built, you know, started off with very small structures that some of them are called gliders. They just move around. Some of them are replicators.

They generate new little structures that also glide around. There's this ecosystem of things that you can build. And you can go look at these YouTube videos of people that have spent way too much time on this. And created this massive, this like interconnected network of different structures, sending, you know, different packets of cells around each. other and it turns into this vibrant ecosystem of activity inside of Conway's Game of Life. Now, why are we talking about this? Well, because both Conway's Game of Life and Ethereum are state machines with account balances of sorts. And each application on Ethereum I see as a structure inside of Conway's Game of Life. So for example, Uniswap is a great example. It is this

thing that is built into code that progresses forward in a state-by-state basis, and it self-perpetuates and moves into infinity. And that's what it is on Ethereum. And all these applications are like Conway Game of Life structures. And they are all these independent organisms that when you put them into the same spot, they start growing off of each other. They start building off of each other and creating this ecosystem, this economy, this world of living protocols, living applications.

And that's really what Bitcoin and Ethereum are. from an internet perspective, Bitcoin is this organism that is built into the internet, and so is Ethereum. The cool thing about Ethereum and Turing Complete Code is that you can build organisms inside of Ethereum. And I absolutely view Uniswap as an organism. It is fed resources. It's fed nutrients, ether mainly, and then it progresses forward in the state machine of Ethereum. And so the overlap between Conway's Game of Life and Ethereum applications, I think, are really strong. It's crazy how biological, these simple rules create things that look biological. I guess that's why they call it Conway's Game of Life.

But as you were talking, you talked about Conway and Ethereum as a state machine. Well, is like DNA the state machine for life? Yeah, I would say so. I mean, it's crazy to think about, but like the resemblance is absolutely insane. I mean, DNA at the end of the day is, you know, strings of code. I was looking, for example, at the RNA virus, coronavirus, COVID-19 that they sequenced. And it's crazy. I mean, it's just a very long string of code that attaches itself to other strings of code, humans, you know, and kind of their DNA and extracts life out of them and uses that to self-perpetuate.

Dude, maybe we're just like inside a big blockchain. Maybe that's what reality is. The blockchain simulation theory. Yes. Yeah. Look, maybe I've just been in the house too long, think about coronavirus stuff. But, okay, so, okay, we've got Conway's Game of Life, and we've got all of these essentially money applications that are consuming ether as economic bandwidth.

And that creates a very emergent ecosystem of... money applications that are all kind of competing against one another. In Conway, they compete for pixels in Ethereum. They're competing for ether and assets and money and capital pools, right? And so, what do we get at the end of all of this if we have kind of this vibrant ecosystem of almost quasi-biological robots, chewing on this capital? Like, what does this look like in two years, in five years and 10 years. While writing that article, I learned of this term called Chaotic Organization, which means

which means organization through chaos. And that's kind of what I see with Ethereum and DFI. These applications are starting to organize around each other. And these different applications or organisms are positioning themselves next to other ones that share a lot of economic activity. So Maker and Uniswap are very close because, you know, people go deposit ether, mint dye, and then take that dye to uniswap to buy the asset that they want. And so these organisms just live around each other and they're starting to mesh. And they create

this one single structure. Because of the weight of ether, everyone is consuming the same resource. All these apps are converging into one single superstructure of sorts. Superstructures, the term I've landed on that makes sense to me. And so this superstructure grows and grows and grows. as every application is also getting larger and also new applications come to the structure. And this superstructure is what we are calling defy. This one single structure is the eth locked in defy structure. The weight of the structure, the size of the structure is measured by how much eth there is in it, how much value there is in it. And so as these applications grow, this structure grows and it needs more ether. And so going back to the,

organism metaphor. I view ether as like blood flow, right? It delivers nutrients to these applications, to these organisms. And the larger the defy structure is, the more blood it needs. You need to pump more blood through defy in order to keep that whole system nourished. And so if we get another application like maker that sucks up, you know, 2.3% more ether, we're just going to need to pump more blood flow into that. And maybe that's the wrong way to, to approach it. It's going to suck up more blood. It's going to happen on its own. It's going to create its own native demand for ether. And it's going to take away ether away from, you know, the rest of the world. And because it's going to create the incentive to deposit ether into this new application on defy. And so the growing weight

of the structure is a measure of how much ether is in demand from this defy structure just to operate on a daily basis. How much nutrients does it need to keep on going and growing and growing? Yeah, it's crazy. Like when people ask, what do you think the next killer app on Ethereum is going to be? What do you think Ethereum is going to look like in 10 years? I mean, it's a little bit like trying to predict New York City in the Pre-Cambrian era of the Earth, right? There's this explosion of biological activity. And it's almost impossible to predict where that biological activity is eventually going to lead. I see Ethereum a lot like that.

It's very hard to predict what it looks like 10 years out. But we know as these systems build on each other, they will consume the scarcity and the money energy of ether as their primary fuel. So let's talk about maybe the thing that is probably a bit easier to predict in all of this. And that's scarcity, these systems like Ethereum and Bitcoin, their economic scarcity versus the U.S. dollar price. So you've described this as a little bit of a tug of war against the U.S. dollars, you know, ether scarcity versus U.S. dollars. Can you talk about that a little bit? Yeah, so this defy structure, this superstructure that requires ETH, that sucks up ETH, needs ether, right?

It needs to have access to ether. But so does staking, right? So staking also needs ether. And while these two things, they compete, they are both fighting for the same amount of ether, for the same ether on the secondary markets. Meanwhile, EIP-1559 just keeps chugging and keeps on burning more of the ether that everyone is looking for in order to get into their application or into the staking contract. And so we have these three different demands for ether that are competing for ether,

that all want ether. And that's aside for all the humans that are just looking to buy ether and put it in their wallet and hold it. That's that we haven't even touched on that. And maybe we will now. So ether and defy staked eth plus the ether burn rate creates ether scarcity. And the amount of scarcity is always reflected by the U.S. dollar price. And so I view this as a three-way tug-of-war between ETH locked in D.Fi, ETH that is staked, and then the U.S. dollar price on a secondary market.

To whatever degree, the incentive is to deposit ether in defy or ether into a staking contract, the measure of that incentive is the U.S. dollar price on the secondary market. These three things are all fighting against each other. There's this three-way tug of war. And then there's also EIP-1559 that is always pulling on the U.S. dollar price as well. So the U.S. dollar price is almost like a bribe to sell your ether early before all of these scarcity mechanisms come in. You know, like I asked you the question last episode, at what price, David Hoffman, would you sell your ether? and your answer to me was like, you know, when the system emerges and evolves, I won't have to sell it, man. I'm not going to sell it at any price.

That to me is the long-term horizon. It's because you're looking for these in-game and out-game scarcity mechanisms to kick into ETH. And to sell now would be to sell before all of that stuff kicks in. And it would be to sell way too early. I think that's the reason, right? Absolutely. That's totally true. Like the ether, the staked ether incentive is not pulling on the US dollar price.

The ethel locked in defy is. We haven't started to see ether burn from 1-559. There's so much left in store that is going to, in my opinion, absolutely eviscerate the US dollar side of this tug-of-war fight. Bullish crypto money systems then. I mean, it's effectively the crypto money system with an inelastic issuance schedule versus an elastic, you know, basically. we can print as much money to, you know, insiders or whoever we choose system. And I think the population will realize which of those money systems is more credibly neutral and fair and choose the one that is over time. You know, the last thing maybe to touch on is I feel like a lot of people

aren't appreciating Ethereum's in-game scarcity mechanisms to the extent they could. Because I still see on crypto Twitter people saying things like, well, I like a thing. the network, but eth-the-asset will not accrue value. And when you look at these in-game scarcity mechanisms, it shows how null-in-void that argument actually is, because there's no way the Ethereum network can be successful in an open money financial system for the world. There's no way defy can be successful. There's no way that staking can amount to economic security for a global permissionless network without ether accruing value.

So it drives me mad that people aren't seeing this because it's basically, it's written into the protocol and it's going to be deployed in the protocol soon. And to me, that kind of nulls the argument that ether will not accrue value, but Ethereum will be successful. It's not an argument that makes any sense to me. Even the most bearish case

where ether is just used, use for transaction fees. Like say defy doesn't happen and there's just transaction fees and staking. Well, like all the activity on Ethereum is still paying for ether scarcity, right? And so like realty, my company, tokenized real estate, we don't lock up ether. We're not part of the defy ecosystem. We only use ether to send our assets around the network. We don't really benefit ether in an M0.

but we're all of our economic activities still being paid to ether stakers who and then with the IP 1559 is still going to be burnt so there's literally no way that you can use ethereum without positively impacting the price of ether that is baked into the code any amount of use of ethereum positively impacts ether directly yeah absolutely and you know we talk every episode about front running the opportunity it seems like if you believe in in defy believe in what the Ethereum economy is building. It's really front-running the opportunity to buy some ETH. You know, like it's undervalued potentially relative to the narratives out there, because most of the narratives don't, I think, recognize the power of these in-game

protocol mechanisms embedded in Ethereum. And ultimately, when you get to issuance in the Ethereum network of, you know, say, 1%, under 1%, potentially, like negative issuance, that's a pretty compelling value proposition for a store of value asset, at least comparable to Bitcoin, maybe in some ways better than Bitcoin, which is why I think the bankless communities is pretty bullish on ether. All right, let's just sum this up, David, and talk about the action. So we talked about scarcity mechanisms and fair games, how crypto money systems enforce those scarcity mechanisms, both in-game, and outgame, particularly

Ether's scarcity in-game scarcity mechanisms are ETH and DFI, staking, EIP 15-59, we talked about all three of those. We talked about Conway's Game of Life and how D-Fi, ETH-Locked-In-D-Fi,

almost represents a mini-scarcity game inside the Ethereum network. And we talked about how difficult it will be for USD dollars to compete with these new digital economy. with inelastic money supply, net net USD must fall to die relative in price. Excuse me. Net net USD must fall to ETH relative to price.

All right. So actions. Here's what we want you to do. So you might be new to this podcast. We're on episode seven now. So that means we have six previous episodes that have really set the stage for episode seven. The first episode we defined bankless. second monetary policy. We talk about concepts like economic bandwidth, the power of crypto means,

the defy trust spectrum. If you haven't listened to previous episodes, you've got to do so. That sets the foundation for everything we talk about in bankless going forward. So make sure you catch up on previous episodes so you are up to speed. You've also got to read an article that David published called Ether's Missing Puzzle Piece. This is all about EIP 1559 that we talked to which we talked about in today's episode. It goes into the details of that, the implementation of it. It's a fantastic article. Also read Ether's Equity, which shows some of a Conway's game of life and how that relates to DeFi protocols and the biology and the biological systems that are being created here. So a couple of reading assignments and some listening

assignments. And for you visual people, you can go to YouTube and you can watch a video of me reading Ether is Equity right to you. And so on the screen is the actual article itself. So you can get those visual images. For those that don't like to read, YouTube is an alternative for all the articles on bankless. Awesome. Get David Hoffman directly into your earholes, people. Okay, so how are we doing on five-star reviews, David? We are doing acceptable on five-star reviews, Ryan, but it be better. We are still not yet above ICO 101 podcast, which hasn't released an episode in nine months. So if you think that when you search generic crypto terms such as Bitcoin and Ethereum into the iTunes podcast store, we want bankless to show up. And I hope you do too. And so if you

think that bankless should show up higher than ICO 101, please give us those five-star reviews. They are really, really important for spreading the bankless revolution, making sure everyone knows that money printer goper is unfair and that there are these credibly neutral scarcity games on Ethereum that we want everyone to play. That's it, man. All right. Let's talk risks and disclaimers. Guys, ETH is risky. That's an asset that we've talked about. Bitcoin is risky.

Crypto is risky. Using D5 protocols are also risky. You could lose what you put in. We're headed out west. This is the frontier. It is not for everybody. but thanks for being with us on The Journey. This has been episode seven.