Bankless - Restaking Summer & What it Means For Ethereum

Episode Date: February 8, 2024

In this episode of Bankless Takes, Ryan and David discuss the incredibly valuable investing wisdom from Chris Burniske, restaking summer…what’s the impact to ETH, and Vitalik’s end of my childhood post. ------ 🏹 dYdX | STAKING https://bankless.cc/dYdX-staking-podcast   ------ 🎧Listen On Your Favorite Podcast Player  https://bankless.cc/Podcast    ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2    ⁠  🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo    🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku    🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle    💸 CRYPTO TAX CALCULATOR | USE CODE BANK30 https://bankless.cc/CTC  🦄UNISWAP | ON-CHAIN MARKETPLACE https://bankless.cc/uniswap   ------ TIMESTAMPS & RESOURCES 0:00 Intro 1:19 Wisdom 5:20 Burniske Investing Wisdom https://x.com/cburniske/status/1754315356770902293  18:20 Restaking  22:50 Restaking Impact on ETH?  https://cryptoquant.com/asset/eth/chart/eth2/total-value-staked  https://ultrasound.money  https://app.eigenlayer.xyz/  https://dune.com/hashed_official/lrt  41:30 End of My Childhood (Vitalik) https://vitalik.eth.limo/general/2024/01/31/end.html   51:17 Closing & Disclaimers ------ See our investment disclosures here: https://www.bankless.com/disclosures 

Hey, Bankless Nation, welcome to Bankless Takes. This is where David and I just talk about maybe links we saw, articles we read, stuff, just whatever's top of mind. Yeah, we read you tweets. Yeah, it's a freeform episode. Today, David, I think maybe the theme is wisdom in general, maybe some investing wisdom, but also just like life wisdom. That sounds a little deep for a bankless podcast, but you know, we get deep on here. We've done deep before. Yeah. Yeah. So there was a great Twitter thread that we'll get into, investing wisdom from Chris Berninski. So we've got to talk about that. What else we got? Vitalik wrote an article on his blog titled The End of My Childhood, which the title's already deep. Vitalik turned 30 years old. Happy birthday, belated birthday, Vitalik. And he wrote a reflective article that touched on many different things, not even one thing in particular. So we'll unpack that a little bit in our favorite part. I want to hear your take on it because you recently turned 30, didn't you? It's like,

31. No, I've got a year on. You got a year on Vitalik still. But like, yeah. They have a $250 billion network on me, though. He's done some things. Also, I want to talk about restaking summer in particular. What's the price impact to ether, ether the asset? So that's what's on slate for today. David, I think wisdom is a good place to start.

I'm feeling reflective. So crazy story. I know we're a little late to record this, but this morning, there was a really bad car accident on my street. And you sent me a picture. I got a message from Ryan. I've gotten messages like this from Ryan before where like I actually don't know how to gauge the severity of it. You sent me a message one time.

It was like something bad just happened. It's like serious. And I'm like, and then you go off and deal with unsaid things. Sorry. And I'm just like, what does that mean? Then you come back. Was it serious? Remember what it was?

Yeah. Well, you didn't tell me what the nature of it was. And I thought when you finally come back online like three hours later, I was like, wife, kids, how are they doing? And you're like, oh, nothing like that. Like, I got a letter from the SEC about like an old baking project that had.

That felt very impactful. I'm like, that's also bad, but holy hell, please specify. Yeah. So Ryan says, like, my friend was in a car accident. Like, I got to go help. I'm like, uh-oh. And then I get a picture of an upside down car. It was crazy, dude.

Calm looking street. It was crazy. And the reason I can laugh about this is he's totally fine. but this was like a carpool that stops by my house every morning. I actually David, though, there was like ambulance and fire truck and all of this. It was just outside of my house at the end of my street. I honestly, I thought it was one of my kids for a minute. It was like a carpool full of kids.

And so I didn't get in that detail. So I rushed out of the house and didn't know for a few minutes. Anyway, I'm in a reflective mood because like, man, life happens so fast. This is just like going to this episode, we're talking about. wisdom just like go give somebody a hug that you love go call your mom like get her on the phone because you never know like just shit happens in life and you can't predict it and it's like outside of all of your framework for analyzing the future things that you didn't anticipate happen can happen in an instant so that's the that's the mood i'm in this morning yeah you

remember um i know you know this um uh wait but why from Tim Urban. Yeah. He just like, he says, like, hey, you have a limited amount of time left. How many books are you reading a year? Like two books a year, three books a year? How many years you got left? All right, you got like 40 years left.

All right, you got 120 books you're going to read in the rest of your life. And then you're reading a shitty book. Maybe you should put that one down, right? And then it goes into like, all right, how many times you see your parents a year? Like three times a year? Four times a year? All right, how many years you got left? It's something like.

People don't like it when I bring this up. But no, it's deep. I guess we're breaking, we're talking about it all this morning, huh? This is not in the agenda. He does something, he also says something to the effect of,

like, if you have kids, the time from, you know, zero to 18, you will have spent like something like 97% of all of your time with your kids during those years.

And so after they're 18, after they're out of the house, you only have like 3% left. Yeah. But that 3% is extra quality, though, because like a decent amount of the time in the 90s,

7%, you were like clean and poop out of their diapers, right? You can trade that for like deep conversations that happened in the last like 3%. Absolutely. And I know you've spent some good quality time with your mom recently, too. Yeah, I took Argentina, right? None of this isn't the agenda. She had never seen that corner of the world. And like none of her friends or whoever she's talking about, hey, let's go traveling

with my friends. They're like, you're up. Never did she would ever imagine herself like walking on a glacier in like the very far out. That's cool, man. Like you just having like a trip with your mom into adulthood, right? So there is quality time that that can be spent. And yeah, that's really cool. You get to do that. Anyway, the theme is investing. Now your job, Ryan, is to transition this conversation into the Chris Berniske thread that we're about to pull up. Okay. Chris has some wisdom for us as well. I don't know if it's life advice or investing advice, but I think it applies to both. This is the first

tweet. And Chris is probably, Chris Brininski is probably one of the people I go to most often when it comes to like fundamentals wisdom type of, like a Charlie Munger type thing, but for crypto. Or imagine if Charlie didn't hate crypto, rest in peace, Charlie. And Warren Buffett, it's these types of takes. He also got me crypto assets. It was one of the first books I read in going down the crypto rabbit hole. Chris Brininski wrote it. Anyway, he starts off this tweet thread like this. you are responsible for every investing decision you make. I'm going to repeat that. You are responsible for every investing decision you make.

If you blindly follow what other people say with no opinion or critical thinking of your own, you're playing a fool's game. Not only will you not hone your practice, but you'll likely lose money in the coming years. So that's how he starts this off. And then he goes on to make a general comment, I think, about crypto Twitter. maybe and some of the scenes in the culture that's entered here recently. He says, I see an increasing amount of misinterpretation in my replies. It's his Twitter replies. And many long time crypto-tweater personality showing signs of exhaustion, which tells me there's a new crop of culture. Zeders, he says,

X-Eaters. I don't know what that is amongst us. And he says this. A lot of the misinterpretation comes from not accepting what you are responsible for or misunderstanding the high-level lay of the land start with the less entitled you are, the more you'll learn. What are your thoughts on this? I remember there's a line that has been burned into my brain. I can't remember where it came from, but it's about copy trading basically where like there is somebody person publishing their trades and like, hey, here's what I'm doing. And this is a common practice for traders to do. It's like, you know, it's like social media for traders. Like here's my trade. Here's what I'm doing. You can copy someone's trade, but you can never copy their conviction. So like two people can try to

attempt the same strategy in investing. But if one person was, it was their original idea that they decided to come to a conclusion to based on evidence and analysis and that was theirs versus somebody else who's like, oh, I think that's a good idea and they just copy them, you're kind of becoming a weather vein. You're a leaf in the wind. You're going to see somebody else's trade and be like, oh, that's also a good idea. Let me just copy that trade too, but those two things conflict.

And it will be generally after they've been successful. So it's like after it's worked and you're kind of like looking at that and you're sort of buying the top of the after it's worked. You weren't looking at them when they were contrarian, right? And it looked like they didn't know what they were talking about. Right. And so generally, Chris is just asking people to reflect and consider like just critical thinking and independent thought, which is something that I think very just massively is lacking, especially in crypto, probably all financial markets. I bet you this is a thing across all markets,

but especially with crypto, where people who make a lot of money get turned into like deities by the average person on crypto Twitter, and people just want to like cop and like, just like, you know, live in their draft, for example. So like this is a rampant behavior where people are just like using other people

and like trying to copy their lifestyle, copy their investment strategy, just copy them. And Chris is asking, like, hey, you can copy them, but that's on you. Like, that's your, if that's your strategy to copy others, that's on you. Well, I think he's also saying here is just like, back to that our word of like responsibility, right? And so, I mean, you are accountable for your own investments.

That, like, you have to kind of own that, right? It's like, you press the buy button. You know, you failed to press the sell button. And I think that's just a good life principle for investing, but just like anything, right? Specifically, markets are great at figuring out what's true, and they will tell you over time, whether you are right or wrong. And it's important when you get the signals of you being wrong, that you are self-reflective about that.

You own up to it because that's how you become a better investor in this space. You go back through, you do a retrospective, and you're like, where did I mess up? Was this a psychological fault? Was it a fault in my understanding of the project? Was I maybe copy trading, to your point, David? was I copy trading someone else or following some YouTuber trying to mirror their success rather than doing my own thing. And so the very first step, I think, in a investor journey and crypto investor journey is like, own your actions. Right?

And by the way, you're not entitled to the upside. You got to work for it. And it's not necessarily going to come overnight, right? Like it could take a lot of time in the market to meet your goals. He also says this, know which assets. in time frames you're choosing. You know that thing we say so often, David, is when you come into crypto,

you've got to pick your character class. 100%. What do we mean by that? Yeah, so I came into crypto in 2017, which was my meme coin era. Like, people ping me with meme coins all the time. I'm like, that's just not about that life. This is when I was like buying trade.

This is when I was like pressing the buy and sell button on the same assets inside of the same week on Binance in 2017. And this is just because I think everyone kind of enters this crypto world and they think that the charts and trading and speculation. And that's definitely what I did in 2017. I got that out of like this. You just think that's the game. You think that's what everyone's doing.

Yeah. And so everyone, everyone dabbles with like the charter trader like character class because that's just like that's the beginning or that's a beginner character class. And then it wasn't until the bear market when I was still had so many more questions that I was like, well, there are other ways to. like navigate crypto and also I'm here for the long term. And so I need to like find a different strategy because that's in work. That one did not work. And so different character classes

emerge, especially if you're just going to be in crypto. You can't just trade all the time, unless you're a trader. But like there's other ways to fill your time. There are the tweet influencer character classes. There are the research character class. There is the content producer character class. And I think part of what Chris is saying here is like, yo, I wrote this book called crypto assets in 2016. And it was about me and my journey in developing my investing strategy as it relates to crypto assets. Hence why I'm writing this book called crypto assets. And so he identifies his character class in this tweet, I'm a crypto assets focused, long only,

long term investor, three to seven year time horizons. I handle both public market positions and venture investments that turn liquid. He knows exactly who he is. Exactly. Yeah. And so I think you and me, Ryan, we came together because our investing strategies like line up pretty damn well. We want to deeply identify why crypto assets are priced and valued the way that they are from a variety of different angles and think about them in I think like the longest of terms. Like bankless has always been, bankless the podcast has always been like a truth seeking endeavor because we want to look see.

we want to make hypotheses, theses, about the way that the crypto world will look in 100 years. How will it end up? Like, what are

the converging basins of attraction that will imply our investments now? And this is our strategy. And I think there's been, like, everyone gives everyone else

flack in this industry for, like, having a particular strategy. And I think there's a certain subset of people who have different timeframes, mainly,

and perhaps also different ways of valuing things that these conflict. And so, like, people, a lot of arguments that happen in crypto are very frequently about timeframes. And I think you and I have developed a strategy that's about trying to discover the deepest fundamentals in the longest term timeframes.

And then we've made a media company around this. And that's what we would call bankless. And that is our strategy. I think that's also important when people are choosing their character classes to just, like, follow those sources that will benefit their character class, right? So Chris says this, know your sources, their role in the industry, their credibility, ideally across multiple cycles, the asset styles and timeframes of any investor you follow. If you are an investor, like character class and you're kind of long-term buy and hold,

and your goal is to increase your crypto-denominated wealth, right? And by that, I mean, like, whatever you're a unit of denomination is, for your portfolio. For me personally, it's ether. That's my money. Yeah, that's my money. And so I'm trying to like, how much wealth do I have as denominated in units of ether? That's literally what I'm doing. But if I was consuming content from like a crypto trader that is just kind of like trading the Bitcoin eth ratio and that's in my brain. And I think I like I'm, I'm probably going to the wrong source of content for my character class. Do you remember what Arthur, hey, we asked this question, Arthur Hayes, what do you denominate in? Do you remember what he

said. Didn't he say like he would do tins, like cans of oil if he could strap it to a belt. He said hydrocarbons. I denominate energy. Yeah. Which is a very interesting perspective. And 99.9% of the people that follow Arthur are not thinking like that. Most people just like, I denominate in dollars, Bitcoin, Eith, Salon. See, Arthur knows his character class. So he knows what he denominates in. And by the way, he knows his strategy for increasing his denominations, increasing his hydrocarbons. which is he's trading. And he's trading not on like the week by week cycle,

but if you like ask him or talk to him, it's like months. It's like three to nine months types of trends. He's got his character class absolutely nailed down. Chris has some other takes here. Chance favors the prepared mind, but there's still amount of chance involved. Chance never favors you forever.

Right? You can get lucky some of the time, but you're not going to get lucky all of the time in crypto. He goes on, all idols are false. something we were saying earlier. Form your own opinions. Don't try to mimic your idols.

Following a hero in crypto is dangerous. And this is the same thing with like copy traders. Like there's a bunch of traders out there who play the influencer game. And they very much enjoy when people follow their trades because that also makes their trades more lucrative. And if some people can make money, that's why they like, some people just glorify these people. You know, it's just like, we had a lot of bad idols.

last cycle, didn't we? 2021 idols. I think we always have bad idols. And I think this is what Chris was saying, I think, higher up in the thread where he just says, just like know your sources. Also with character classes, and especially for people who go through one cycle that he highlights, people morph character classes, sadly, in crypto. And you can be one strategy, one character class on the way up and a different character

class on the way down. And you can be like shifting around depending on the nature of the nature. the game and fine that's fine but if you are somebody who's like looking towards these people as leadership you need to be aware that like their strategy their strategy changes how they get value and how they make their trades can also change and so sometimes it's more beneficial to identify the people who are not changing their strategies across cycles agree and and like people change right and they like to your point their styles change over time have you ever heard um nebal's framing of this where you know he's like early in your life you want to be a mercenary and kind of

later, once you've made it, you become a missionary. And then like later in your life, once you've done that, you become an artist. He's like mercenary, missionary, and then artist, right? And I think I've seen many people in crypto sort of follow that trajectory where at first they're like, mercenary. They're just like, okay, but I want to get like more faster than you, right? Like, I'm just going to. And then they move into kind of a missionary where they're part mercenary still. They're still trying to make a profit, but they have a wider. Yeah. And I would say I've kind of like, Like, I'm part missionary, you know, part missionary now. And like the missionary has grown like over time for me in my crypto journey.

And the mercenary has shrunk a little bit. And then I can see the artist thing on the horizon. Like, by the way, this gets to Vitalik's post where I think for Vitalik, it's actually like, he skipped all that. It's mercenary, missionary, missionary, and monk. And he just went all the way to Monk face. Well, he, Vitalik has lived a very sped up life. Yes, he has.

man. Anyway, we'll get to that in just a second, David. But first, I want to talk to you about something less deep, but something that is on the near-term horizon, and that is restaking. And I know you're doing- As we turn to restaking, can we also place this in like about our strategy as content producer investors? Let's try and do that. I think like restaking and eigenlayer has resonated with you and me for a particular reason. And I think it's because it fits in our understanding of crypto networks, where crypto networks are going, and it is like resonant with our strategy. 100%. Is why we are excited about it. Yeah, there's two parts to this. Like for me anyway, I'd love to hear what you say about it. It's like one, a longstanding thesis that out of

crypto will emerge monetary instruments, like stores of value through which you can and probably should denominate your wealth in a bankless way, right? Outside of the existing Fiat central bank system, we've created this new store of value, this new money, right? And there have been some longstanding contenders to where that money can emerge. Bitcoin has been in the fray. Bankless has long argued that Ethereum is in the fray and should be in the fray. And I think we've been on... Well, accepted by now.

Yeah, we've been on kind of like the righter side of that argument. It's not fully fledged, but Ether has become more money over the past three years since we started the bankless podcast and kind of like dove into the space. And so the interest for me in restaking is, one, this establishes ether as a monetary instrument even more. And so it makes me even more excited to denominate my wealth. But then there's also like, again, the mercenary side, the trader side, there's a lot of value being created in the restaking economy through like eigenlayer and all of these restaking protocols.

And that is more short, that is shorter term. That is like defy summer. Like you see this kind of emerge. It's going to emerge in expect of frenzy. But there's opportunity in that speculative frenzy. And we're also going to create something that I think is going to be much more lasting than just kind of like the bull bust cycle of the speculative frenzy. So there's both a long-term play and there's a short-term play here that I see. Yeah, how does that reflect how you think about this?

I think it aligns with the concept of smart contracts on Ethereum, which, I mean, let's go back to 2015, was a revolutionary concept. like smart contracts are no longer a revolutionary concept but that's because ether like popularize them. Do you mean like programmable money? Programmable money. Yeah. And so like we have crypto networks with native assets and then we have smart contracts

and Turing complete like languages like solidity. Those two particles come together and boom, we have programmable money. And eigenlayer and restaking is a continuation of those two particles being smashed together back in 2015. Yep. And so it's a return to, is like a very core principle of like why people, why there was this original brain drain

from Bitcoin into Ethereum in the first place, where it's like people just thought, oh, it's, it's Bitcoin, but it's programmable. It's Bitcoin with programmable money. Bitcoin is digital gold. ETH is programmable money. And now like Eigenlayer is taking programmable money and using that to create new crypto economic networks that do new things that are like completely adjacent from a blockchain, but are still crypto. And that's kind of the exciting new thing that I think is getting a lot of people's imaginations going. Yeah, exactly. And I know you're doing an episode about kind of the more, the shorter term or this kind of like new ecosystem that's springing up with restaking protocols, right? You're doing like a speed dating episode where are you

like interviewing, I don't know, five or so of the teams and giving them like 15 minutes, give me your pitch type. Is that the episode format? Might be six. So maybe just to really just place this into context. We have ETHI asset and the very center of a set of concentric circles. It is programmable money. Then we have liquid staked eth, right? The LST tokens, the Staked ETH from Lido, R ETH from Rocket Pool. That is the next concentric circle out. With EganLayer, we are going one more concentric circle out with it, which is liquid restaked ETH, liquid restaked tokens, LRTs. And there are, this is brand new. And so there are so many teams going after this. I think really there's six that represent over 95% of the all of the TVL and liquid restaking tokens. So I'm just,

doing a speed dating episode so we can get to know all of these projects. And so like 15 minutes or less for every single project, one by one by one. And so that episode, I'm recording most of those this week and then we'll be finished recording next week and then hopefully it'll sell around Heath Denver. Okay. So what I want to talk about is maybe the bigger picture vision here of why is restaking good for Ether? And so in what you just said, right, you said there's there's Heath and there's staked Ethan, there's restaked eth. I think one analog, if you're looking at this through a monetary lens, is like, let's say you take fiat. Let's say you take the dollar, okay? That is similar to ether. Now, let's say you put that dollar in a bond, right? So you lend it back to the protocol.

You lend it back to the U.S. government. Well, it becomes a treasury, a T bill, and you earn some yield. That is equivalent to staked ether. All right? So you've got the dollar and then you wrap it inside of a T-bill, a treasury, and it becomes the staked dollar. Okay? And then if you use that staked dollar in some sort of form, you can kind of create, and use the economic security of the nation state, you can kind of create a different bond market that is the corporate bond market. And that's kind of what I see with restaking is it's like a form of corporate bond

market for all of these apps that are being built on top of Ethereum, these AVSs that are using the economic security of the theorem. So I think we're starting to frame out like the next frontier. We talked about ether so much on bankless as sort of a different form of monetary unit versus Fiat. And then we got really excited. We started talking about staked ether, right? That's the next phase. Now we're in the kind of the corporate bond market. That's kind of how I see things. I don't know if that resonates with you. 100%. The main difference is that when you have a dollar and then you turn it into a treasury, you can't also turn it into a corporate bond. Yeah.

In the world of Ethereum, you have to turn it into a treasury in order to turn it into a corporate bond. So we have the yield of corporate bonds being staked, stacked on top of the treasuries. One of the big bullish things about crypto is just the instances in singularity, if you will, that I see. It's just like what was separate and disparate in trad markets is now they same and synergistic in crypto worlds. Things just like are more harmonious, more stacked on top,

more synergistic in the crypto world. And this is an example of those. We can do more of the same things at the same time very frequently. Capital is just so much more efficient in crypto. And this is exactly illustrating that exact point. So we have corporate bond markets, which is just like, in the trad world, corporate bond markets is just like Tesla or Amazon saying, hey, I need a loan and I'll pay 6%.

And then the market will come and fulfill that. order. And that is me probably is usually higher than like a treasury market where the treasury market's giving like four percent, which is the incentive. It has to. It has to be higher because the the cost of capital or like the zero risk form of capital is actually treasuries. So corporate bonds always sort of have to because they imply greater risk of right. Because Tesla could default, but it's assumed that the United States will never default because we have the money printer. They have the money printer. And so they'll just, oh, we don't have enough money, oh, boom, we just made more money, right? Tesla can't do that. The U.S. will never default

nominally, right? It could default in terms of real returns. It's not a default. That's not a default. Gotcha. On a technicality. All right. So, okay, so there's always higher yields for the corporate bond market. This is actually different in the Ethereum context, where the yields being added on to Ethereum ether are resaking are actually quite marginal. They're quite nominal, which is actually the point, which is why, like, Cosmos validators who have to, like, find their own security, share their own security, have to actually pay a lot. But when you can aggregate these things together, you can get a very comparable level of security for much fewer.

We do that. We do that. And like, we TradFie does that, David, in that they'll group a whole bunch of bonds together and they'll give them a rating. And that you could buy a mutual fund of kind of like a class of bonds, basically. Well, they'll just smush a whole bunch of the corporate bonds into kind of like one unit that you can purchase. Yeah, but that's actually not what I was referring to. So, like, with restaking, one dollar of capital can be applied to, like, turn into $7 of security for seven different networks.

But with like what you were saying, like, $1 of capital is $1 of capital. It's just like being aggregated across all of these bonds. And so all of these different corporate bonds that are using like corporate networks, AVS networks, we need to stop calling them corporate networks. They can all actually become more efficient with their security spend. So they get to secure their protocol for like marginal, marginal amounts of spend, security spend. But then it all aggregates together into a shared like commons of security, which is the restaking markets. So the question I think that maybe people are listening to who owns some ether is, is restaking going to be good. for the price of ether, the fiat denominated price of ether. And I want to maybe give a take on that.

And I'd love your thoughts on this, David. So one is we're looking at a chart of the amount of that staked over time since basically this functionality was launched. So back in 2021, it has been basically up only in terms of the amount of eth actually staked because there's raw eth, of course, and there's ETH that you can stake. And here's a chart that just shows kind of the trajectory. And as I said, it's just kind of up only. So the total amount of ether staked is almost 30 million right now, which is, what is that, like 25% of the network?

It's mid-20, something like that in terms of percent of the network. And so one, I think, obvious thing that we'll see is there will be increased demand for staking ETH. Why? because you get some additional yield on top of it, because there's more reward for staking eth. And I guess the question is, how does that reflect in terms of price?

Or like, what does that do to the unit of ether? And I guess I have a few things. I think it does. So number one, unit of value. This is even more of a reason to denominate in ether, because now you're either. of account, not unit of account. Unit of account.

Now your ether becomes like a asset that you can use, not just to purchase gas, not just to watch it go up in fiat terms, but it becomes an asset that you can use to generate yield in other places of the market. So for me, as a holder of eth, it makes it even more attractive to hold it. And you compare that to, say, dollars. There's a lot of utility for dollars out there.

But the nice thing about ether, of course, It generates yield, and we know what the supply schedule looks like, right? So it's attractive from that perspective. I also think it creates additional monetary value, monetary premium for ether the asset, because this use case really establishes Ether as a collateral as like a bond, not just a bond for its own internal network, but a bond for an entire economy of applications that are built on top of it. And I think what that does is it creates some narrative value.

So this meme that we've talked about the very, like I think the very beginning of a bankless of ether as an internet bond sort of starts to really reinforce that narrative value proposition. And that creates like a liquidity flywheel. So recall one definition, a great definition of money from the Austrians is that's the most saleable good. And what that means is it's the most liquid good, right? So no matter the time, no matter the place, the depth of the market is extremely deep. Yeah. So you could sell like hundreds of millions of dollars and a very liquid market would not move the price.

And so that is one definition of money. And I think it's probably the truest definition of money in an acid test. So this liquidity flywheel means there will be more places to buy and sell either. It expands in terms of market. market cap and it becomes a more saleable good. And then we also have all of these yield products that are built on top of this. And I think that narrative, probably in a year or two's time, we'll start to take over Tradfai, where they start to see Ether, not just as a productive asset being staked, but it's a productive asset for this whole, like, we'll call it the

corporate bond economy, essentially, inside of Ethereum. And so that will have a flywheel down on that point, not just is ether a productive asset natively inside of Ethereum. Cool crypto bros, you guys figured out that's a cool insular economy, but they will also see ETH being a productive asset that's expanding beyond its own internal Ethereum network. So the asset itself is being productive for non-native use cases, which we are calling ABSs. Yeah, exactly. And that's sort of what I like about this is because, right, part of these, where are these yields ultimately come from in restaking. Well, there has to be some valuable ABSs, applications that are

built on top of restaking an eigenlayer. But to the extent that's true, it becomes a crypto-specific economy source of yield for ether, right, that is sort of outside of Tradfey's existing apparatus. It's not like a mortgage. It's not like a corporate bond or some other source of yield. It's like internal to the crypto economy. And so that's cool. And lastly, what I would say is it's a pretty strong moat for Ether as a monetary unit, right? So Bitcoin is not being used in this way. I think there are attempts to try to make Bitcoin. Yeah, the restaking network, the eigenlayer equivalent for Bitcoin is called Babylon. But whether or not there is actually product market fit is yet to be discovered.

Right. And because Bitcoin is not as expressive as Ethereum, it's just much harder to kind of draw that out in a trustless way. And so, yeah, and then you look at alternative layer ones, right? And they're not being used in this way as a money. So it kind of establishes Ether even more. It's got a pretty high market cap, but it went down today. And I'm sorry, you can't restake on a network that goes down. Right.

So, ETH as programmable money is kind of a moat. So all that said, I think it's, look, restaking. This is why we're excited about it from a time horizon. long time horizon perspective is because it really establishes maybe cements the monetary value proposition of ether as an asset as a bond for applications on the internet. So at the time of recording, there's 1.72 million ether deposited into eigenlayer. Almost 600,000 of that is natively restaked, which is just like raw vanilla ether going straight into eigenlayer. But inside of that natively restaked is also some LRT competitors. So we have liquid restaking, which is taking your

rocket pool ether, your Swell staked ether, your Lido-staked ether, and you're just deposing it into eigenlayer. And then there's native restaking, which is where many of the LRTs are competing, which is they're taking your ether. They're creating an eigenlayer, a node on the Ethereum layer one, a validating node on the Ethereum layer one, and then hooking that into the eigenlayer contracts for native restaking. So 1.7 million ether. And then the liquid restaking wars, are probably one of the hottest things in a theory. Do you have a prediction? How big do you think this is going to grow?

If we're at 1.7 right now, you think we get to 5 million, think we get to 10. One of my predictions for 2024, right, which one of them came right today. I think you can know which one it was. The second one I have is that $10 billion gets put inside of Eigenlayer in 2024. $10 billion. Now Eif to nominate that. That's hard to know. Well, it depends on the east price, but we are at $2 billion, I think $1.7 billion.

Let me actually do the actual real math on that with my calculator because the bank of nation knows I'm terrible at math. 1.7 million times 2,300. Is that where we're at? Which comes to $3.9 billion. Yeah. I made this prediction below $1 billion. Yes.

So we're well on our way there. Well, actually, the problem with your prediction might be like you weigh underpredicted here. I think we could get well past 10 billion. I want to go five for five this year. I've got one. The other one is $5 billion gets air drop to users in 2024. That one's going to happen. That's where already, we're probably already like two or three billion in right now.

Yeah, I can't remember what the other two were. We'll pull that up later when I get five for five this year. Anyways, okay, so $4 billion in Eigenlayer, 1.7 million ether. The early Ethereum predictions from the protocol devs, the Justin Drake, Satelix, Timbacos, Danny Ryans of the world, were like, yeah, the equilibrium will be 20 to 30 million ether native, like just staked and validating the chain. That would give us a minimum threshold of security that would make us feel comfortable.

And right now we are at 29 million. So we're at the upper end of that prediction. But that prediction was before LSTs were a big deal and way before Eigenlayer was even a thing. If you look at other Ethereum, other proof of stake networks, all of the Cosmos chains, Solana included, their stake rate of like how much their native asset is staked to the network is around like 60 to 70%. Why are these variables so different? Like all other proof of state networks are starting at a very high stake rate and actually trying to get theirs lower. Whereas Ethereum started at zero and has trying to begin to get its higher.

Now Ethereum is currently like fine. It doesn't matter if it goes up or down, but it's going to go up and I'll get there in a second. whereas other networks started off with like delegated proof of stake, started off with not very robust defy ecosystems. There's not really a reason to not stake, therefore everyone wants the inflation. And so with Eugenlier and in the increasing yields that all AvesS networks will place into restaked ETH, the incentive to Steak Heath will go up and up and up. And so all of a sudden the new predictions around the percentage of ETH staked have seen from,

go like, I haven't even heard of predictions specifically from the EF folk, but just from other people in space like Mike Abolito, he thinks it's going to approach like 60%. That's interesting. I actually, this is a whole other episode. I don't know that it'll get that high because I think like if we get into ETH monetary economics, like there's an asymptote where you get to a certain point in time and like the yield, at least from raw staking ETH, ignore the LSTs and the additional yield juice on that, starts to like go down. And so this is kind of like an

ETH monetary policy type of decision. It's like a mechanism design of what what's in the best interest of the network. Do we actually want like 50, 60, 70% of ETH staked or not? And I think the answer is I think we don't want that, you know, for network latency reasons, other reasons. But this is a good question. We should ask some ETHs, like core devs, ETH researchers. It's a Justin Drake type. question. Well, we are doing an update to the Ethereum Roadmap episode with Mike Norder and Dom on Friday. So I think we will just have that included in the episode. Yeah, it'll definitely

do that. The networking issue gets fixed with the EIP Max Effective Balance, who Mike Noiter is one of the guests on the podcast is actually championing. Apparently it's not getting pushed through for Electra, which is a big bummer. But we can talk about that in the episode. There we go. David, you want to get to Vitalik's post, end of my childhood? But first, a moment to talk about some of these fantastic sponsors that make this show possible. Cracken knows crypto. Cracken's been in the crypto game for over a decade, and as one is the largest and most trusted exchanges in the industry,

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to promising projects that help expand, secure, and decentralize Mantle. If you want to get started working with the first Dow-ledd layer-2 ecosystem, check out Mantle at mantle. And follow them on Twitter at ZeroX Mantle. The end of my childhood. This was a blog post. From Vitalik, I don't miss anything this guy writes.

I mean, if you know Fatalic, David. Why would you? Really smart dude. I know him more than you. I've actually met him. He's just turned 30. And he's someone that I've long looked up to in this industry. He's not one of the main characters who has been kind of like eliminated from the script.

He's got some durability. And we've had enough conversations with Vitalik. Yeah. I feel like I know the human being and from reading his writing, good person. And this is, I think the overall. vibe of this article that he wrote is like Vitalik's going like kind of pure monk era here. And so he was talking about how he doesn't want to be the only leader of Ethereum and how more people are stepping up and how that is so great to see because he's basically not always

going to be as plugged in as he is now. Right. But this was all about dropping wisdom. And one reflection I had is I just, I can't wait to have an interview, a conversation. or hear an interview with Fatalic in his 40s. Because he's aging very well, I would say, in terms of like wisdom per unit of year. And that was really reflected in this article.

How did this hit you? The first thing I noticed about this article is it was just structured differently than previous normal Vitalik articles. It's a little more prosy. It's a little bit more, oh, I'm a story time. This is story time. He titles the sections,

one, two, three, four, rather than just like, here's, this one is about, like, stealth addresses or whatever. And it's a little bit, it's a little bit like writing for writing's sake, which I, I think that was the first thing that, like, stood out to me. I sent this article actually to my mom after she sent me forwarded me a message, or not even forwarded me, just sent me the message. Like, I just read about BitBoy in the New York Times and like, oh, I'm just so disgusted, like, terrible.

It was, I think it was, I saw this. I saw this art. It was like in the New York Post. New York Post, yeah. And it basically was like, look at this crypto, scammer, grifter. Right. He's, yeah. With the error of like, this is what crypto is, it's Bit Boy.

100%. Right. And like perfect product market fit for its readers who definitely want their like dose of crypto Schrodenfroid, which is like what I sent my mom. And she was like, I totally understand that. And then I sent my mom, my mom, this article from Vitalik. And she was like, oh my God, that was so. beautiful, like, such a fantastic cleanse.

Like, what an incredible mind. Yeah. Like, yes, this is my side of crypto. This is the preferred side of crypto. This is what I see when I see crypto. Completely. One of the images he captured in the article was this. It was a chat GPT prompt.

And he asked for some prompt for, show me Bitcoin. And then you said, show me Ethereum. And he kind of juxtaposes the two. Well, no, no, not just that. Show me Bitcoin. Now make it 1,000 times more than coin. And then dial up the culture. Yeah.

Turn Ethereum up to a lot. and show me what that looks like. And for people who can't see this in the podcast, Bitcoin is kind of like very much gold types of tones, sort of like these browns and yellows that you find gold. It's very gilded with a big guy wearing a crown and some songs on a throne. Big old Bitcoin necklace. Scepter, right?

And there's all the kind of the unit of Bitcoin around. And then you move to the Ethereum. Yes, the same question. Now make it 100x more Ethereum-E and chat GPT really captured the vibe of these two cultures. So Ethereum is much more like, I'd say like Tron style, like futuristic, not the Tron blockchain. Oh God. John the movie. The video game movie. When I first saw this image of the Ethereum image, I was like, oh, that's Carl Floresh. Oh, really? It's a little bit like Carl mixed with Vitalik to me. It's kind of like futuristic, these purple hues, these neon type

colors. Purple blue hues, actually ironically so long of colors. Yeah. It's a little bit. So one thing that we can kind of capture from this is a difference between Bitcoiner and Ethereum culture. Another thing that struck me in this post was actually somehow he manners to this conversation about like how we get there in crypto. And he put together a diagram that I've not seen somewhere else about like these four different kind of sub-tripes within crypto. And so we've got the token holders and the defy users as one group. We've got the application builders as another group. We've got the pragmatic users. These are different than the defy users who are doing the speculation and the token hold,

not the investors. Pragmatic users are just like... We call that adoption. People, yeah, adoption, like real world use cases. This is people in Argentina using it as a stable coin to kind of like get by and denominate their wealth and that sort of thing. And you've got the intellectuals or like the researchers, kind of the protocol devs. And he paints this picture of how they all.

interact and all of these tribes kind of have different goals and different identities. And he says the token holders and defy users contribute greatly to financing the whole thing. That's their value proposition to the network, which has been key to getting technologies like consensus algos and zero knowledge proofs to production. Intellectuals provide the ideas to make sure that the space is actually doing something meaningful. The builders bridge the gap and try to build applications that serve users and put their ideas into practice, and the pragmatic users are the people we are all ultimately serving. So some wisdom here,

and I definitely see that in kind of like the tribes. And this is sometimes the intellectuals don't understand what in the world the token holders and defy users are doing, right? Sometimes the builders don't fully understand, like what the builders are most connected, I would say, to these three groups. And sometimes the token holders and defy users are just like, DGens, all about the next thing where they can get some return and they don't see the bigger picture. Anyway, it's been interesting very much to observe the interplay between all of these sub-communities

within crypto. And they all help one another. They all have different goals as well. I think the part of the article that stands out to me the most, and there are, there's so much depth for this article, and we are just skimming our favorite parts off the surface. And so this is what we are doing is not at all in supposed to reprise. place actually reading the article. We're just talking about, I think, parts that stood out to us. This one passage that I'll read is the one that stood out to me the most. And Vatelic writes, but how, beyond stories, do we make this happen? This being like adding decentralization and crypto values for the world. Here, we get back to some of the issues that I raised in my post

from three years ago, the changing nature of motivation. Often people with an overly financed focused theory of motivation or at least a theory of motivation within which financial motives can be understood and analyzed and everything else is treated as a mysterious black box we call culture, are confused by the space because there are a lot of behaviors that seem to go against financial motives. Quote, users don't care about decentralization, and yet projects still often try hard to decentralize. Quote, consensus roans on game theory.

And yet successful social campaigns who chase people off the dominant mining or staking pool have worked in Bitcoin and in Ethereum. I think the punchline of this short little passage is that there are other forces at work, hidden forces at work that are steering the ship of crypto that are not just financial motivations. Like there is a very strong culture of decentralization that has permeated in crypto from day one. You can see that in like the rocket pool community. You can see that in anyone who's like chanting get off get guess. You can see that in like the Bitcoiners who like for, better for worse, have turned into this weird bit of just like religious zealots about like

BTC the asset. Like we have motivations that are beyond just in like natural financial motivations. But the thing that's nerds like to me about crypto is like this relationship between code and culture. There is a back and forth conversation between these two things. And this is why in crypto we find people to be so tribal is like somebody writes code that represents value, the literal value as in like BTC the asset but also human values and then humans look at those things and then they see oh Bitcoin has some set of like values

they're like the Austrians like Ethereum has some set of values they're like the sci-fi tinkerers like oh Solana has some set of values those are the low level devs the pragmatists which do I resonate with the most oh okay that's my tribe that's my culture and these are the cultures that I want preserved as this thing scales out into the world. And I think there's just a very powerful way of showing just like, hey, like, it's not just money.

Even if you think it's just about money, you've actually chosen a particular set of values, which represents your tribe. And the choices that you make are implicitly an attempt to scale those values out to the world. Like Solana wants to scale Solana values to the world. Ethereum wants to scale Ethereum values of the world, et cetera, et cetera. And the fact that we can articulate these things and just prove that, hey, It's not just financial motivations. I think it's powerful, at least powerful enough to, like,

build a brand around crypto that's not merely like degeneracy. I 100% agree. And I think we'll get there. And I love the optimistic note through which Vatelic leaves the post, which is just generally optimistic and bullish on humanity and bullish on this thing that we're creating here. So we'll include a link in the show notes to this article. Let's end with this. Risk and Disclaimers, Crypto is risky. You could lose what you put in. but we're headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey.

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