Bankless - ROLLUP: 4th Week of January ($GME, Robinhood RANT, WHY WE DEFI)

Starting point is 00:00:00 Hello, everyone. Happy Friday morning. Welcome to the fourth week of January. David, how are you doing today? I am fired up today. We have a lot of things to talk about so much news. We are going to do something a little bit different in this episode. I know a lot of people, including myself, want to talk and hear about GameStop and all of that, just that massive amounts of news. There's so much to talk about. There's so much to peel back. what we are doing in this particular weekly roll-ups, we are putting the very last section, the section about what David and Ryan are excited about, that is going to be, we're only going to talk about GameStop. We're going to talk about GameStop for like 20 minutes,

Starting point is 00:00:50 and the reason why we're doing that is so that we can go through the weekly roll-ups as we usually do it. We don't have to bother about touching GameStop because we're going to touch on all of the GameStop topics at the very end. It's going to be a normal weekly roll-up up until that point, and it's going to be our normal PG weekly roll-up

Starting point is 00:01:07 up into that point. But like I said, I am fired up. So if you got kids in the car, if you listen with your kids around, maybe listen to the GameStop section of this episode at a different time because there might be some swear words. There you go. Things are going to get kind of spicy, kind of weird near the end of this weekly roll up. But David, let's get started with the typical. We always start with market. What is going on in the market? Should we talk about Bitcoin? Yeah. Bitcoin is hanging around in the low 30,000's range, ranging, between, it actually got below 30,000 a couple times in the last week, but didn't stay there for very long, kind of staying within 30 to $34,000, consolidating as what is still a relatively

Starting point is 00:01:49 high price, pretty still for pretty far off of its all time high of $42,000, but doing a good job maintaining that $30,000 floor. When there's a dip, people always question. They always ask, well, are we going back to all time high below all time high? Do you have any takes on that? Are you just kind of a wait and see? Yeah, I think Bitcoin at this point is growing a pretty strong allergy to anything in a $20,000 range. I think we could flirt with it a few more times. I don't think, I think Bitcoin is

Starting point is 00:02:17 actually going to be relatively quiet for perhaps even all of Q1. I think we're going to find $30,000 Bitcoin to be an extremely comfortable number. Okay, well, let's talk about some other numbers. Heath Price. We had a new all-time high. Can we just say that? Yeah, last week too. I think we just said that. I think we're three weeks in a row of Eath all-time high. First, it was 1440, then it was like 1460, and then it was 14-90, still having resistance around the 1400 level. Yeah, well, let's see if we can continue that trend, David. I'm kind of liking it. Let's all-time high next week, too. What about D-Fi? What's going on there? Is it D-Fi season yet? Oh, I think it could be. Things are really heating up with D-Fi tokens. The DPI index, the token that track, the token that track, all of Defi, well, most of Defi, the top 10 defy assets, is at an all-time high of $291, as well as the value locked in Defi is at an all-time high of $26.5 billion. DeFi doing really, really well.

Starting point is 00:03:21 Well, let's talk about Defi versus Ether because we always approach sort of Bitcoin, but also Ether as kind of a reserve asset. Ether is the reserve asset for the Ethereum economy, which means if you're buying defy tokens, you better be making more value in ether with your investments or else you're better off just holding ether, right? So that's why you're bringing this metric into the, into the fray here. I've got to join for free button on trading view. I'm not going to join today, David. Is that okay? Not today. Okay. Just refresh that page and that'll go away. All right. Refresh the page. But what is this ratio that we're looking at? Yeah, so we are looking at the U.S. or the ETH dollar, the ETH price of DPI.

Starting point is 00:04:06 So DPI denominated in ETH terms. And that tells us a very different story than the DPI price in dollar terms. So it is, you know, the dollar is the dollar, but ether is really the reserve asset of Ethereum. And what we are seeing is back in, we had, we had DFI summer where very, basically all of the DFI tokens were, you know, pretty inflated in price. And then we had the DFI, like quote unquote, three month bear market at the bottom. it bottomed out in November and then it bottomed again really in January versus Eth. But since like early November, early November 2020 to where we are now, defy tokens have been in a channel versus Eth that it is starting to poke up against the upper bounds of that channel.

Starting point is 00:04:48 And I think the reason why it's important to pay attention to DeFi tokens versus Eth and DPI versus Eth is that it's DFI season, quote, quote, alt season, which I totally think is coming, which we've been talking about on the weekly roll-ups for a while. I think that that happens when these defy tokens break out of this channel versus Ether, which they have been outperforming Ether for basically all of 2021. And all we need to have happen is for that trend to continue for us to get into Defy season. I think Defy season is right around the corner. And the DPI ETH chart has that story being told.

Starting point is 00:05:23 Oh, David, I don't know though. Heath is pretty strong these days too. So what happens if ETH goes on a tear, bust through the, the 2K mark and leaves defy in the dust. Is that a possibility as well? Yeah, I think that's totally a possibility. And like I said, I think in defy tokens in that, in that possibility will outperform the dollar very, very strongly because they track ether. But you're totally right. Versus ether, they could fall. There is room for ether to just do something stupid after it breaks its all time high like we saw Bitcoin did. You know, Bitcoin broke its all time high and then doubled it.

Starting point is 00:05:58 you know, ether has broke its all time high twice now, but, you know, has really been kind of scared to get into price discovery mode. I think the time where ether breaks all time high and goes into price discovery mode, I think that's a possibility. I'm hoping that that happens. That would be awesome. And that would definitely kick the can down the road for defy tokens versus ether and defy season. If ether comes to dominate the landscape, defy tokens will have to take a backseat. But I think defy season is coming inevitably one way or another. This is why we talk about the crypto money portfolio, the bankless portfolio being a healthy dose of crypto monies at the bottom. So these are ether. These are these are Bitcoin. This is sort of what you denominate

Starting point is 00:06:43 your wealth in in the crypto economy. And you purchase some things like defy tokens and those assets. If you think they're going to outperform ETH and Bitcoin, right, in order for them to be good investments, they must. But if you have that kind of a portfolio, you can't lose in this kind of a bold market. Of course, never know what could happen in the future, but things are going up at the moment. David, I just said things are going up at the moment. At the same time, Bitcoin has had like, you know, two weeks, maybe three weeks or so of somewhat of a correction, right? But these corrections are normal, aren't they? Like this is, so this is a chart of 2017. What's happening in 2017 here that is relevant for?

Starting point is 00:07:25 us in 2021. Yeah, this chart shows the four quarters of 2017, and it shows multiple 20 to 40% retracements of the Bitcoin price as it climbed up that 2017 parabola. We've talked about this before on weekly roll-ups. We're talking about it again. 20 to 40% drawbacks are the norm in bull markets. You know, bull markets are fun times because everyone's making money, but that does not mean that pain is not felt in bull markets. There is always pain. ahead of us. Even if you've just felt pain, there's pain ahead still. That's how bull markets work. It is not smooth sailing. So there's always a looming 20 to 40% correction on the horizon. So that's the message here. The other message thing, the other message is, of course,

Starting point is 00:08:10 that these corrections, these pullbacks, if you will, are normal in bull markets. We've seen this play out already. There's about one every quarter that happens with Bitcoin. This is what happened in 2017. And the average pullback is about 30%. David's right on between. 20 and 40% would be somewhat normal. So keep that in mind during the Bull Run. If there's a correction, doesn't mean necessarily that it's over. Guys, we've entered a bull market. Now is the time to start building your crypto empire.

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Starting point is 00:10:03 have deposited collateral. Here you can see me getting a 200 USDC loan against my portfolio of a number of different defy tokens and ETH. I'll choose a variable interest rate because it's a lower rate than the stable interest rate option, but I could choose the stable interest rate option if I wanted to lock that interest rate in permanently. One of AVE's V2 features is the ability to swap collateral without having to withdraw your assets, trade them on Uniswap, and then deposit them back into AVE. AVE does all of this for you, all in one seamless transaction, so you don't have to repay loans in order to change the collateral you have backing them. Check out the power of AVE at AVE.com. That's AAVE.com.

Starting point is 00:10:43 David, that's Market. Let's get to releases. So EF2 is available on Bitfinery. And we're talking about the ETH-2 assets. Staked ETH really is what we're talking about here. What is what does that mean? So BitFinex is offering an ETH derivative asset is what they're doing. They are accepting ETH deposits from their users. And then they are putting those deposits into the beacon chain and staking that ETH on behalf of their users, getting a yield on their ETH on behalf of their users. But then they're also letting people trade that ETH derivative token. So for right now, before Ethereum 1.0 merges into Ethereum 2.0, we have two separate ETH, ETH on the

Starting point is 00:11:25 beacon chain, ETH on the main Ethereum chain. And BitFenex is allowing people to trade claims on Beacon Chain ETH for their real ETH. All the crypto banks are doing this, guys. So Cracken has amassed a pretty large amount of Eith, staked Eith. Coinbase is going to be doing it at some point soon. I'm looking to that release. David, this is not necessarily a bad thing, but it's also not necessarily a great thing. What we prefer is for people to stake at home on their own validators.

Starting point is 00:11:57 And barring that, we prefer that they use a decentralized staking as a service provider. Can you talk about that second option? Yeah. So for any centralized product that this world experiences, the theory behind Ethereum is that if there is a centralized product, we can make a decentralized correlate to that product using Ethereum's app layer. One of the centralized products that I think will come first to Ethereum's app layer and create a decentralized version of this is staking.

Starting point is 00:12:25 It would be pretty terrible if things like BitFinex and Coinbase and all these other centralized exchanges were the main staking entities behind the Ethereum network. And so let's create an application that decentralizes the service where people can contribute the resources that they have. Maybe it's ether. Maybe it's a validating node. depending on what you have, you can come to this theoretical decentralized staking as a service application and then deposit the resources that you have in order to create a self-sovereign staking

Starting point is 00:12:55 system. We just wrote about this in the bankless newsletter. I put an article in there talking about the thesis and theory behind decentralized staking platforms. And I use Rocket Pool as the example, the example are example of what a decentralized staking as a service application can do. In the same way that, you know, it's really great that we have U.S. DC on Ethereum, even though it's a centralized stable coin, it's a banked stable coin. That's totally fine. There's more options for us. It's really important that we also have die. And in that same vein, it's in, we are going to see centralized versions of staked ether derivative tokens come into Ethereum. And it's going to be really important that we have

Starting point is 00:13:33 a decentralized derivative staked ether token. And that coming out of rocket pool is our ETH. I think there's going to be a very fun battle ahead of us as you know, centralized protocols and decentralized protocols all compete for ether deposits to issue a staked eth derivative token on Ethereum. And the one, the staked ether derivative token that's issued on Ethereum that is issued by a decentralized staking as a service provider will be the trustless, you know, assure, high assurances, high, low risk token that I think will come to be the status quo for a derivative token on Ethereum. Well, at least that's what the protocol sync thesis would predict, which we are big advocates of and has a pretty good track record in this space that the most credibly neutral

Starting point is 00:14:17 protocols win. David, speaking of developments on Ethereum, L2 is coming. Let's talk a little bit about this. Big news. Ave A tokens, so this is their interest-bearing tokens we talk about so much. Thanks, Avey, for sponsoring bankless and making this possible. They have just ported some of their interest-bearing tokens to the Maddoch network. What is the Maddoch network? Yeah, Malik, network is an L2 on Ethereum. Its competitive advantage is a decently expressive L2. One of the big problems behind L2 designs is that we had trouble in Ethereum development, making them as Turin complete or as expressive or as smart as the actual Ethereum base layer.

Starting point is 00:15:02 Maddick has solved that problem. So they have this L2 that has composed ability and they have smart contracts. And that's pretty unique. and AVE has put their interest-bearing deposits onto Matic Network. And so for people that are managing these interest-bearing deposits, they can use them on the Matic network with much lower gas fees. And I think this is part of just the story of Ethereum scaling. We saw synthetics roll out there, L2, with optimistic roll-ups.

Starting point is 00:15:30 It looks like Avey is going on Matic. And this is going to be just another one of Ethereum's big applications, finding ways to save its users on gas with L2s. Yeah, I'm super excited about this. I remember the 2017 Bull Run. It was always, well, here are some possible theoretical ways for Ethereum to scale in the future. And there was the state channels, radio networks going to scale everything. And then there was plasma as sort of the Holy Grail.

Starting point is 00:15:59 Different era. Now we actually have solutions that are here and being used. So it's exciting to see them being. adopted, I think we'll cover that in future roll-ups as well. Coinbase, that's something else we're going to be covering in the future. What are they just, they're teasing us? They're offering a secondary market for their private shares ahead of their public stock listing. As if this wasn't one of the biggest IPOs, anticipated IPOs in crypto. They're offering it to the secondary market ahead of time. What does this mean, David? Yeah. So everyone wants to get in on the Coinbase

Starting point is 00:16:33 IPO. Like I have zero legacy assets. I have zero equity assets. But I would know I've got no stonks, but I would still buy the Coinbase IPO just because I think it would be it was probably a good bet. Wait, wait, wait. Would you buy it over Unitokin so? Well, I already got my Unitokin. Okay. What are they going to give us retrospective air drops, huh? I've been to Coinbase user for a while. Yeah, right. Like I've played Coinbase plenty of fees. Where's my air drop? Where's my, you know, they should follow in their competition footsteps. What my question is, is this secondary listing of this private shares ahead of the public stock trading.

Starting point is 00:17:11 Who gets to access that? Do I get to access that? I'm not accredited investor. Who gets to access that? That I don't think, I don't think it's available for typical retail investors to be able to access. Yeah, this would probably be an accredited investor thing for sure on the secondary market and mostly for like employee liquidity purposes. David, some other things,

Starting point is 00:17:31 DFI protocols are continuing to ship. So Kiber, it's been around for a long time, fantastic liquidity provider in the DFI space. They just launched a bunch of things, including their V3 release. And this V3 release focuses on liquidity, particularly providing incentives for their liquidity providers, which is something they've been quite good at.

Starting point is 00:17:55 Any comments here? Yeah, Khyber is kind of an unsung hero. I think when it comes to liquidity in Ethereum, before Uniswap was the, the shelling point of liquidity, Khyber was. And it actually still is. On a decent number of trading pairs, Khyber is actually one of the most liquid networks, liquidity networks in Ethereum. They are not an AMM like Uniswap is.

Starting point is 00:18:16 They have a different way of providing liquidity to Ethereum. And that offers more options, more modularity with how liquidity providers want to be able to use their liquidity. With Uniswap, you kind of only have one. option. You have to deposit equal amounts of two assets into a pool. Khyber gives you more optionality with how liquidity providers can offer liquidity. It's a little bit more capital efficient. And some of the main updates in this Khyber 3.0 update are just furthering and bolstering the tools that liquidity providers have and how they provide liquidity to Khyber.

Starting point is 00:18:51 Speaking of which, Alpha Hymorra is an interesting DFI protocol too. They just put out their second version, an interesting protocol for yield farmers. So folks that were already generating yield on governance tokens and the farms can now take leverage on ETH and other assets and actually generate more yield. So X or yield, two and a half X your yield. This is really a DGEN type of tool. So I'm not sure how comfortable I would be with it. But there is a way to actually lend ETH to this protocol. It's generating some pretty substantial return. So like the 7, 8% rate. And it's locked up up a massive amount of EF, David. So like 500,000 EF, it's locked up right now in Alpha, Hamara. What do you make of that? Absolutely crazy. What I make of that is that it's product market

Starting point is 00:19:45 fit, man, like leveraged yield farming with ether deposits. Like I'm not personally going to put my eth in there because, you know, that's a little risky for my takes. But like, defy DGens who want to yield farm with leverage in an automated fashion that saves them on gas. Like, no shit Alpha has, oh, I promise I wouldn't swear. No wonder like Alpha has gotten like almost 0.5% of all outstanding Eth supply in its contracts. Like that's just product market fit. Like that's just defy degeneracy at its best. And I mean that in the best way possible. Yeah, I beth is the product for that. That's where you deposit your. ETH inside and you're right that's getting closer to 5% of all ETH in circulation.

Starting point is 00:20:28 It goes to show you how these money protocols can just be ETH monsters, ETH goblers, sucking up all of that economic bandwidth that we talk about so much. David, back to layer twos for a minute. Starkware released their roadmap and they were talking about a permissionless, stark powered layer two built around ZK rollups with, and this is important, turn complete functionality, so the ability to program on top of this layer too. If that felt a little bit jargony for you, then you have to check out the Vitalik podcast and video that we just put out where he walks through roll-ups. But this technology, it's a little bit away. So it's a

Starting point is 00:21:11 year or two, maybe three years away. But this is really the holy grail for Ethereum scalability. Any thoughts on this? Yeah, that's exactly right. So this is the version of roll-ups that Vitalik is particularly hot about. He made the estimation that it's going to be optimistic roll-ups in the near-term that really kind of get going with Ethereum and find a lot of product market fit. But Vitalik in the long-term believes that ZK roll-ups are going to be the dominant form over the long-term.

Starting point is 00:21:42 And this is one of the first steps to rolling that out into the Ethereum ecosystem. Definitely check out that video. That video is coming out roughly around. the same time that this one is. It's already out. And so, you know, just another video with Vitalik coming out on the bankless YouTube and bankless podcast. All right. And we're talking about all of the layer two. Somebody put together a fantastic. Actually, I think Kevin Awaki did put together this fantastic index of all the layer twos. We'll include this in the show notes, but you can check out all of the different layer twos that

Starting point is 00:22:09 are in development. Their various stats, transaction cost, how consensus works, and their transactions per second. Just a lot of work going on in that space. very exciting. So this was really interesting to David, some liquidity pools from Uniswap. These are assets, of course, that are composed of Uniswap liquidity, like pairs of liquidity. One specifically for wrapped Bitcoin and ETH and another for USDC, ETH, liquidity pools, were just approved to be collateral in the Maker Dow system. So that means they are backing the value of die. What's the significance of this? Yeah, the significance is that uniswop collateral, uniswap liquidity tokens are being added as collateral into MakerDAO, which allows people to draw die against their liquidity positions in Uniswap.

Starting point is 00:23:00 And not only USDC-Eth pairs are being added to MakerDAO, but die and ETH pair out of Uniswap. If you submit ETH and die to uniswap, you get a token back. That's how Uniswap works. And then you can now take that token to MakerDAO, put that into a vault and Maker Dow, and draw die. against the dye-eith pair that you've deposited into Uniswap. So if you can add, you can add liquidity to die. You can make dye more liquid by adding liquidity to Uniswap. And then you can take that position and then draw more dye against it.

Starting point is 00:23:33 Making dye, it's a fantastic positive feedback loop of dye supply. I really expect this to be one of the main things that adds supply to die. Both supply and liquidity. It's a two-for-one punch. It's really awesome. And that's just a nice benefit to people that really want to contribute to the MakerDAO protocol. I think if MakerDAO came around in maybe 2019, 2020, this would be a yield farm. I bet you because MakerDAO, they already have their MKR token kind of locked into how they like it.

Starting point is 00:24:03 But I foresee a alternative universe where the MakerDAO protocol or something similar to it came and started issuing MKR rewards to people that do this. If I had my fingers in the MKR token economics, I would issue MKR rewards to people that do this just to incentivize liquidity. This is actually a normal playbook from Defi protocols nowadays. But pretty cool innovation by MakerDAO, pretty cool, new collateral, just more options for dye to become liquid. And of course, it's really important that die is liquid in Ethereum. Yeah, it's also an example of super fluid collateral, the ability for these collateral, the collateral, the collateral, tokenized collateral on Ethereum, be used across all of these various money protocols.

Starting point is 00:24:47 I always think a liquidity pool is kind of interesting because it's not only a bet on the assets and the ratios of those assets inside of a uniswap liquidity pool, but it's also a bet on uniswap trading volume, which makes it a unique asset that is not available anywhere outside of defy and a very decentralized asset at that. So very cool to see Dye starting to adopt that. Ryan, if you go to that Dye stats page, you'll see that there is a $3 million die limit on both U.S. Bitcoin and Ether uniswap tokens and a 3 million die limit on USDC and ether and also a 3 million limit on die ether liquidity pairs.

Starting point is 00:25:29 That's a relatively low ceiling for die. There's only 3 million per uniswap token. The reason why this is so low is that this is actually a new, there's a new Oracle system providing the value of these uniswap tokens going into MakerDAO. So MakerDow previously uses other oracles to understand what the prices are of the assets inside the program, inside the protocol. This is because these are uniswap tokens, there's a different or there's a, the MakerDAO needed a different way to test and understand the value of these assets because now there's a waiting between it's one, one part, ETH, one part die or one part Bitcoin, one part ETH. And so there's a new Oracle providing new information to the MakerDAP protocol. And that is why the debt ceiling is so low as people get more comfortable,

Starting point is 00:26:14 as the MakerDAO, MKR voters get more comfortable with this new type of asset, I expect the debt ceiling on these LP tokens to increase significantly. And so that just means we can put more and more inside of MakerDAO and withdraw collateral based on it. Okay, cool. That is the, those are the releases for this week. Let's talk news. Of course, our main event, we're going to get to you in a little bit, which is everything

Starting point is 00:26:41 that's going on in the GameStop. world, but we'll get to that soon. Let's talk about some of these other things. I thought it's really cool. It's an artifact of open finance that we can actually track the assets that individual funds, popular funds, hold and trade. This is from a sorry, this is a watch list of all of the assets that placeholder ventures, our friend Chris Berninski, holds inside of his fund. Very cool that you can do that, I think, in open finance. And this is very much a, unlock, I think, for all of us to be able to see what thought leaders, what individual funds are holding inside of their wallets. Yeah, I think this actually does contrast very well with the

Starting point is 00:27:26 GameStop conversation. Not to, I know I said we were going to tease that, but this is an inside out industry. People's bags are transparent. Like there's no hidden information, right? And because there's no hidden information, people like Misari, the data website, are publishing people's bags because that's already that's information that's available. And so it's one part of privacy concern. Like, you know, everyone should understand that your bags and your addresses are public. But that also means that everyone is on an equal informational playing field, which is not something that we can find in the legacy markets. Yep. Okay. Next two things are about more firms buying Bitcoin. So this is a NASDAQ listed company, Marathon Patent Group,

Starting point is 00:28:09 buying $150 million worth of Bitcoin. That seems to be a really good. occurring trend in 2021, firms buying publicly traded companies, buying more Bitcoin, adding it to the balance sheet, speaking of which, Microstrategie bought even more Bitcoin. How much did they buy this time, David? They did it again. This is their smallest purchase ever, which is going to be really curious about this. 10 million dollars, a modest 10 million dollars on, I think, what is already like seven or 800 million dollars. I could be wrong about that. But I think this is, It's interesting just every time micro strategy buys Bitcoin, that's always interesting. But it's interesting as how small this is.

Starting point is 00:28:48 Just like, it's a drop in the bucket of all the bitcoins that they already own. Just a casual 10 million, just dollar cost averaging in as one does into crypto. Yeah. And so like this people talk about like is Michael Saylor trying to do like a Bitcoin pump and dump? Like is he trying to really pump the price of Bitcoin. And maybe he is, but I don't really think so. I think he is actually a Bitcoin believer.

Starting point is 00:29:11 And so I think any spare change that Micro Strategy has is going into Bitcoin. So I just pulled this up, Bitcoin Treasuries.org. They have 70,700 Bitcoins, which is at today's value, $2.3 billion. So Micro Strategy adds on $10 million onto their $2.3 billion supply of Bitcoins. It's crazy how well that has worked out for them. Let's talk about Janet Yellen again. We talked about her last week. She is, of course, the new Treasury Secretary.

Starting point is 00:29:42 She's going to be overseeing important things like FinCEN. She came out with a more bullish quote on crypto this week. Last week she said something bad that made headlines. This week she's saying U.S. government should consider the benefits of cryptocurrencies and digital assets, perhaps walking back some of first statements from last week. You know, this really reminds me of the, conversation that we will be publishing on Monday, but the conversation we had with Jeremy Allaire from Circle, and we went through 2021 and whether there were going to be more headwinds

Starting point is 00:30:19 or more tailwinds from regulators, it always seems to be those just conflicting message. Sometimes it's good, sometimes it's bad, but it's never fully one or the other, almost like they're lukewarm on crypto at the moment. What's your take here? Yeah, the Yellen statements from last week was linked to the drop in Bitcoin price that happened last week. People saying that there's a bunch of regulatory food. I didn't really put much weight into that analysis. And now this week, Janet Yellen is saying, you know, hey, there's actually some value that could be leveraged by public blockchains. You know, I just don't think Janet Yellen is really all that informed.

Starting point is 00:30:54 And I think both of these statements are relatively boilerplate and don't really mean all that much. We're going to have to wait for real action, real tangible action coming out of, Janet Yellen and the rest of regulation. Like all these boilerplate comments are just not helpful to try and interpret as news. We are wait and see mode. Meanwhile, some mayors are pretty hot on crypto. This is the mayor of Miami who is talking about turning Miami into an economic hub for crypto innovation.

Starting point is 00:31:26 I think that this is going to be a popular narrative. And this is why regulators and those in government cannot ignore crypto. there's just tremendous opportunity, economic opportunity, job opportunity that their constituents will want. And I think this will drive the adoption of crypto. What's your take there? Yeah, Bitcoiners often call Bitcoin a mind virus. And instead of thinking of, you know, it's Bitcoin versus state or like public blockchains

Starting point is 00:31:52 versus the nation state, I think it's actually much more suitable to think of like public blockchains as viruses that creep into people's brains and convince them that they are the best thing about the best thing about the world right now. And that's, I've caught that bug. I know you've caught that bug, Ryan. It seems like the mayor of Miami has caught that bug. And the important takeaway is that there's totally a path where Bitcoin and Ethereum as mind viruses infect people in positions of power around the globe, including our own regulators, including our own governors, including our own mayors. And we just have these protocols adopted because the people that use them are also in positions of power. Absolutely. All right. Let's talk about China for a minute. We do from time to time. So

Starting point is 00:32:37 Ethereum-based consensus that is a big development studio that is developing tooling for Ethereum. They just partnered with the blockchain network of China. Is this good or bad? What does this mean? Yeah. This is something to keep one's eye on. KORUM used to be a private consortium blockchain. and I think it still is based off of consensus owned by consensus. And so, you know, very much aligned with the ESOS of China to run a blockchain that is, you know, much more centralized, much more private, much more controlled. But still, blockchain is creeping into every single corner of the world. And it's interesting to watch consensus help other entities lead that charge.

Starting point is 00:33:20 Public permissionless blockchains are different than what's going on here. But, you know, blockchain technology, you know, I'm not a blockchain, not Bitcoin, corner, but I do think there is value in blockchain as a technology, and I like to see that proliferated, and that's what's going on. Yeah, and particularly as it's linked into public blockchain, I think this lads lend some more credibility to the idea that their governments might have their own private ledgers and private chains even, but ultimately, they're going to have to settle on some credibly neutral infrastructure, a public network like Ethereum. And this just provides the China's blockchain network

Starting point is 00:33:57 with a conduit and a bridge to do that. So I think we'll have to see how that plays out. Speaking of China, David, I've been wondering a lot about Pocod these days. The token price of dots has been just like off the charts, just crazy, right? Yet adoption hasn't missed. There are some projects building on Pocod, but we don't see the transaction fee revenue on Pocod that we see on Bitcoin.

Starting point is 00:34:25 It's largely empty blocks. largely a ghost chain now. That could change in the future, absolutely, something to watch out for. But right now, that is what it is. But dots are super hot in China. I think this may be the reason price is pumping in the way it is, or at least one of the core reasons. Any takes on that? Yeah. Dot has a different consensus system than Ethereum does. And it's a little bit, the topological design, I should not be considered an expert in Pocodot at all. So take this with the grain of salt. The topological. design of Pocodot allows for a little bit more governance and control over what goes on

Starting point is 00:35:03 on the base chain than what Ethereum does. And so I find that interesting that China of all places, which it has a society, like in Asian countries tend to be a little bit in this disposition or demeanor. They're a little bit more control with top down, stop top down control. The Chinese population is used to top down control. And Pocod has sort of a top down control mechanism in his consensus. So I find that that resonance between Pocod and China a little bit interesting. Yeah, it's going to be interesting to see whether Pocod can build something of lasting value or whether it's taking the EOS approach, which of course did very well in China for a period of time. And now it's nowhere to be seen. I mean, no one's doing anything with EOS. Big blocks,

Starting point is 00:35:45 you know, delegated proof of stake did not work out over the long run. So we'll have to see what happens. Don't cut corners on your blockchain, folks. That's right. You can't do that. Have to preserve credible neutrality. DYDX. They just raised 10 million and they put out this report, David. I don't know if you got a chance to see it, but I was blown away by the numbers. So first of all, two and a half billion in trade volume. DYDX, of course, is a decentralized exchange and it provides margin in the same way a bitmax did. But it does so in a decentralized way and the trades are transparent, so you always know the house isn't betting against you.

Starting point is 00:36:24 But this stat was astounding to me. 17.4 billion in loans originated in 2021. 17.4 billion. That's billion with a B. Pretty incredible, David. This is just a great platform. And next month, they are actually moving to layer two. So they're rolling out their own.

Starting point is 00:36:46 layer two solution built on some starkware tech. I'm pretty excited about it. What's your take here? Yeah, DYDX is one of the great big Dye sinks, which is one of, and also USDC and also ETH. And so like DYDX as an application is one of the great reasons why there's yield behind die at USC and Eth. That's important to know. There's also speculation on a DYDX token, question mark. I don't know anything and I don't think that there's been statements from the team at all. but I think there are rumors going around that there could be a retroactiveirdrop, as we all know and love, coming out of DYDX. Unconfirmed, yeah, I'm cautiously optimistic.

Starting point is 00:37:24 If there was a DYDX token, I would be a recipient of one. Absolutely. That's because you use the protocol so much. And guys, if, you know, we put out a post recently about some future air docs, just kind of speculating and predicting. There is value in using these protocols now. not only value in leveling up, but also due to these retrospective airdrops. I mean, last year, if you collected all of the airdrops that were available,

Starting point is 00:37:54 it was like $20,000 or something crazy. And guys, all this entails is actually using Metamask, using a D5 wallet, connecting to these applications and using them. Of course, that might not remain the case for DYDX, no promises, but it's worth a shot, is it not? Spend 10 minutes of your time to go figure this stuff out. David, let's end with Mark Cuban. So Mark Cuban is getting in the NFT world, it seems.

Starting point is 00:38:21 This is deep into DFI. This is just I have ether that I own on Coinbase or even I've used Avey. This is he's actually minting an NFT using Rarable from his own public Ethereum address. This is pretty deep. I'm pretty impressed by this. What's your take? Yeah, what was interesting is that when Mark Cuban made this NFT, which double check me on the numbers, but I think it listed for 0.2Eath and then it sold for $17,000 a few blocks later.

Starting point is 00:38:53 So somebody really wanted that Mark Cuban NFT really badly. But in process, like we were saying earlier, this is a public ecosystem. And when Mark Cuban mince an NFT and sells it, people know where that NFT came from. And so people took a look at Mark Cuban's bags. Mark Cuban is a sushi token owner, by the way, for the, those that didn't want to know, he's got sushi in his bag. He's got a few other things. You can find that tweet and investigate yourself if you really want to find out. But what really is interesting to me is like, you know, he's a sushi swap owner. Sushi swap isn't even the leading

Starting point is 00:39:26 AMM in DFI. Uniswap is. So like Mark Cuban's deep in DFI right now. He has got his fingers in the weeds. I think I got my fingers crossed. He's coming on bank list for a podcast in the future. Yeah, well, you can see my tweet right underneath like prompting him as such. So fingers crossed, David, that could be the case. We will see what happens. David, let's get into some takes. So that was news. This is the first take.

Starting point is 00:39:52 Why'd you like this one? This is someone saying Ethereum, not blockchain. That's it, three words. Ethereum, not blockchain. Yeah, this is a Jay, who's another podcast co-host. And she says, Ethereum, not blockchain. And, you know, I find myself keeping on, when I do my writing, I talk about, like, the cryptocurrency industry, or I talk about public permissionless blockchains.

Starting point is 00:40:13 But what the hell am I even talking about? I'm really just talking about, if I'm talking about public permissionless blockchains, I'm just talking about Bitcoin and Ethereum. So I'll just say those things. Or if I'm talking about the cryptocurrency industry, most of the time I'm basically just talking about the Ethereum industry. And so like when people talk about like, yo, I'm I work in crypto or I talk about cryptocurrencies, like, no, it's actually just Ethereum.

Starting point is 00:40:34 Like maybe this is me, my ETH maxi hat getting put on, which I'm happy to wear. But like the cryptocurrency industry is mostly noise except for what is the Ethereum side of that cryptocurrency industry. So let's just start calling it Ethereum. It's the Ethereum industry. Ethereum not blockchain. There you go. All right. That's David with his Ethereum Maximilist hat on. Let's do another Ethereum take here. Proof of stake versus proof of work on energy. This has not been a narrative that has entered into the mainstream consciousness yet. It's something that has been talked about at various times. But of course, proof of work is a massive energy consumer, right?

Starting point is 00:41:15 So all of the miners that like operate economically secure, the Bitcoin network and the Ethereum network on proof of work today consume a tremendous amount of electricity and power. And that has an impact, of course, on the environment. But proof of stake does not have that same impact, right? it has almost like no impact on the environment. Van Spencer here is making the comment that more ESG funds, so these are environmentally savvy funds, will not allocate to proof of work systems like Bitcoin. So what he's saying is proof of work or cryptocurrency networks that employ proof of work will not be viewed favorably for a number of investors and perhaps government

Starting point is 00:42:04 bodies and the world in the future, and proof of stake has an advantage there. What's your take on this? Yeah, I'm on the fence about the proof of work sustainability arguments. I'm actually a believer that over the long term, the extra consumption by Bitcoin energy consumption is actually a net positive. I think there's a very strong argument that it actually in the long term can promote green energy consumption, incentivize green energy consumption. I'm compelled by that argument. In the near term, I think that it could be a massive part of the 2021 news cycle. As people focus in and on climate change, as climate change moves to the forefront,

Starting point is 00:42:42 especially under a Biden presidency, I think Bitcoin could actually be plagued by its branding as a very energy consumptive network, which is, it is. It's like taking up 1 to 2% of the world's electricity. It's insane. And this is a frequent topic of conversation on my podcast with Christian Carolla,

Starting point is 00:43:00 so of Bitcoin Magazine. We talk about this, and we both generally agree that, like, over the long term, the merits of Bitcoin energy consumption could be positive. But like this article states, like, I think the short-term fud about Bitcoin's energy consumption will be a significant toxic plague that plagues its brand for many, many years to come. Yeah, so you've got definitely a narrative issue, despite what the truth ends up being about Bitcoin's impact in, like, the environment. I'm not actually sure what I think yet. I think I need to take a look at some more data. There's certainly environmental externalities that need to be considered when you're consuming this massive amount of energy.

Starting point is 00:43:41 But I guess the Bitcoin or argument is that essentially it's using energy that otherwise would not be used and go away. So these energy sources are greener than other energy sources. I think that's really like something that you don't over the long run need to form an opinion on. like the data will just bear it out and show us. So it's kind of a thesis. I know that Bitcoiners want that to be true, though. Like, and I understand they wanted to be true. But I'm not sure that it is.

Starting point is 00:44:10 At least I need to see some more data on that. So let's go to the next take. So institutions adopting ETH is money. David, it's happening. I read an article in Coinbase that basically said, institutions are saying ether is a store of value. Look at this. The case for owning.

Starting point is 00:44:29 Ethereum, Ether, we hear most frequently from our clients is a combination of first. It's evolving potential as a store of value. It's evolving potential, not oil, ether as a store of value, as a money. Second, as its status as a digital commodity. Oh my God, they almost got all three. Just add staking and they have the triple point asset thesis here. Pretty incredible because back in 2017 and before, no one was saying this, least of all institutions. but basically no one was saying it at the time.

Starting point is 00:45:00 Do you think this is a narrative change that's going to take hold in 2021? Absolutely. And I think this is actually indications that this has already taken hold and there's only going to be more talk of this. Like I was saying in the last roll-ups, people are coming into this industry with a blank slate. Like they are not coming in with bias. They don't have a bias to bias them. Their opinions are largely informed.

Starting point is 00:45:20 And so the value proposition of ether doesn't have this plaguing branding, branding of just being gas for Ethereum, which is just, it was, that belief was antiquated back in 2017, but it takes time for data and facts and knowledge to proliferate. In the same way that Ryan, you were just talking about, like, people are just going to have to wait for the Bitcoin energy consumption narrative to show up with facts and figures. You know, Ethereum, before we had, like, the evidence that we have today, back in 2017, ether could have been argued as if it was gas, and it totally was argued to be that. Now we have the facts and figures, and we have the facts and figures, you know, they started to

Starting point is 00:46:00 brew in 2018. They grew a lot in 2019. And now they are growing out of the surface into the mainstream media, into the mainstream knowledge that ether is a store of value non-sovereign asset just like Bitcoin and it has its own unique, compelling value propositions. The world is waking up to this. And that makes me really bullish. Well said. Yes. How do we know it is money? It's because it's being used as money. That's exactly how we know. There's increasing evidence of that. It's very plain see hard to argue otherwise. Eric Voorhees, one of our favorite folks in crypto is talking about the value of air drops last year. We talked about this a little bit earlier. This is where I got this stat. But the quote he tweets is, assuming you were an average defy investor and a bankless listener

Starting point is 00:46:44 and a bankless reader, of course, this past year and only used one address. So one Ethereum address only, you made nearly 20,000 in AirDrops alone. This is because projects, DFI projects, retrospectively rewarded their users with token drops. And Eric says, this seems nuts, but consider what DFI projects are doing. All they're doing is paying users to use them rather than paying advertising advertisers to use them. So essentially what he's saying is, guys, this is just marketing budget. And this is what marketing costs. And it's a genius move.

Starting point is 00:47:20 except that marketing isn't going to like Facebook ads or Google ads. It's actually going to users who then propagate their love for the community through free advertising and marketing. It's pretty ingenious. Yeah, I'd love to know the tweet that Eric Voorhees is retweeting. I'd love to know the tallies that Nick, the tweeter, tallied together when he talked about the airdrops. Obviously, Uni is one, which was air dropped at roughly a value of $1,200 when Uniswap

Starting point is 00:47:50 was $3 a token, which is now just under $18, $15 a token. There's also one inch. There's also tornado cash. There's also Dig, Badger. There's a bunch of airdrops, yeah. And so it is valuable to just use these things. Like, sorry, gas fees are really high, but like, fingers crossed, you'll just be compensated by air drops.

Starting point is 00:48:11 It has certainly paid to be a defy user in 2020. And I think it will in 2021 as well. We are so early. It's still so early. Last take here. This is a take by Afri. Actually, I don't have it pulled up, David, but I will pull that up in a minute. And what he says is basically he's pretty flummox that banks are charging negative interest rates. Yeah, I'll read it out here. Afri says, Afri is a core, used to be a core Ethereum developer. I think he stepped back, but definitely very much involved with the Ethereum community. Affrey says, my bank just informed me that they will now charge half a percent negative interest on my Fiat holdings. It's really hard to understand the purpose of a bank in 2021 fiat whatsoever. Just imagine the potential of anything and not requiring a bank. Hmm, I agree, Offrey.

Starting point is 00:49:03 I agree with this idea. Why just use banks? The thing about Offrey is like he's very bullish Ethereum, but like he's been pretty bearish, I think, on defy in general and anything involving money. So to hear him say this, as he's looking at his traditional bank account and look at a half a percent negative interest rate is pretty astounding. So we're convincing even the skeptics here. Yeah, absolutely. And if that just doesn't scream bankless, then I don't know what does.

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Starting point is 00:51:31 one transaction away from any token that Uniswap has to offer. Go to www.dharma.io. That's dh-a-r-m-a-o. DARBA app and get yourself unbanked today. All right, David, we are getting into the roll-up section for takes. This is the long-awaited moment where we talk about what is going on with GameStop. Why don't we start there, dude? What is going on with GameStop? All right, I'm going to tell the story from like the very beginning because it's important to tell this whole entire story.

Starting point is 00:52:04 It's really a fantastic one. For those that have seen the movie, The Big Short, the Big Short is about a bunch of people that see the coming collapse of the American housing market and the American financial economy in 2008. This guy was one of the first guys to really put the pieces together specifically in the subprime mortgage area. And so he famously shorted a lot of his funds money against the stock market. That trade ended up working out. And so he kind of got famous off that. So now that he's a legend for calling the 08 crisis, people follow him, people pay attention to him. And what he did with this GameStop call is that he looked at the GameStop share price. He noticed that it was at trading at a particular value. And then he

Starting point is 00:52:49 went and he tallied up all of the assets that GameStop owns, like the real estate, the property, all the real assets. Like no, never mind the business model. This is like their book value, right? The book value. Yeah. Uh-huh. The assets on the balance sheet. And he said that he thought that the share price was not inclusive of all the value that the company actually owned, like the straight physical assets. And so he said that he is going to make a long position on GameStop because the value of the asset, the value of the company is trading well below it, the actual value of the underlying assets that they own. Okay. So, and where did he say this? Because I remember the big short in 2008, like, no one would listen to him.

Starting point is 00:53:29 He kept going to all these people. And everyone was like, yeah, whatever. Shut up. Like, we're not listening. Where did he start saying this? I don't know. I don't know the answer to that question. I just do know that it was public.

Starting point is 00:53:39 And it started it started brewing in the Wall Street. bets, subreddit server. So for those that aren't familiar with the subreddit server Wall Street bets, it's kind of, Defy G-Gens will find themselves very, fit very well in there. It's people that try to make like YOLO bets where they put a ton of money on the line and they do it, they mainly do it for engagement. And they either make a ton of money or they lose a ton of money. There are, there's memes. It's a little bit like 4chan culture. There's memes, the degeneracy, just like, you know, all the memes that you see coming out of corners that the internet like this was present in Wall Street Betts.

Starting point is 00:54:15 Okay, so I want to understand the Wall Street Betts culture because I think this is important before we go on to the rest of the story, right? So like my impression of Wall Street Betts culture is like, they're DGEMs, they're trying to make money, but they know this is all a game, right? Like they very much know that the system is rigged and is set against them

Starting point is 00:54:35 and that money printer is going burr and it's distorting the fundamental value of all of these assets, including stocks, and they're just like, what the hell? We might as well benefit from this too. Is that the culture? Is that the philosophy of Wall Street pets? You know, I don't think it was.

Starting point is 00:54:51 It certainly is now. I think it wasn't necessarily that. I think maybe the MoneyPrinter Gober was in there just as a casual meme. It was mainly just a meme of just like degenerate yoloers who like people, and I think mainly very wealthy people would just like, you know, Yolo $100 into options. And options for those that don't know are a way to make or lose a bunch of money all at once. But I would say in order to understand Wall Street Betts culture, you would need to understand

Starting point is 00:55:21 it's very similar to some of the green frog culture that we see in the crypto space. There's very much this headless movement. It's a cohort. It's a community, right? There are no leaders. It's just what the community thinks. And so if you've ever participated in like a chain link community or 4chan community, these are very similar communities.

Starting point is 00:55:39 No one is the leader, but these all, the, you're kind of a rise as a similar energy, a similar, just community out of these people, right? And so back to the story. And so this guy that's famous for calling the 08 crisis says that GameStop is worth more than what the share price is. And so he buys a position. And that information leaks out into the internet public knowledge. And the Wall Street bets, subreddit grabs a hold of this. And they start kind of piling on. There are some of, there are some extremely savvy and form. investors who do their own analysis in Wall Street Betts and some of the Wall Street Betts community like listens to these people. And so this trade became more or less public knowledge inside the Wall Street Betts subreddit. And so that means that a bunch of these Wall Street bets, they all put their capital into the same spot. And that's a very interesting phenomenon that we're seeing inside of Wall Street bets. We're seeing inside of projects like ChainLink. We're seeing that in the projects that are like run up by green frogs on 4chan, people are coordinating and injecting capital in specific places to pump collectively

Starting point is 00:56:42 pump backs. That's what it's going on here. But at the same time, there's also this fundamentally true and sound trade beneath all these things. So GameStop, or excuse me, for Wall Street Betts, they identify this trade in GameStop and they all start buying spot. They all start taking and putting GME stock into their portfolios. And what that does is that increases the price of the game stop stock. And so now we have to talk about hedge funds. Yeah. So yeah. So where do the, so where do the hedge funds fit into this picture? And like shorts, we've heard that term as well. Right. So we need to understand the concept of a short squeeze. And so when you are going short an asset, that means you are hoping that the price goes down. And what that means is that when you short an

Starting point is 00:57:27 asset, you borrow it from someone. And so say I have a stock that's worth $100 and you want to short the asset, you want to short that stock, Ryan. And so you borrow that stock from me and it's at $100. And then the stock goes down to $50. And then when you borrowed that stock from me, you actually sold it on the market for $100. So you put that $100 into your pocket, kept that there. And then the stock went down $50. And then you bought that stock back off the market and gave that stock back to me. And then you pocketed that $50 difference, right? That's a short. That's ideal. If you want to short an asset, it goes down in price and you get the pocket the difference based off at the moment you shorted it.

Starting point is 00:58:09 It can go really, really wrong in the opposite direction because say you borrow a stock from me at $100 and then you sell it and you're going to return that stock to me at a later date. But instead of that stock going down from $100 to $50, it goes up from $100 to $200 or maybe $300 or maybe $500. I have to pay that entire diff. You have to pay any number. It could be, it's an infinite level of risk. It could go to a million dollars and you have to pay back a million dollars, even if you just shorted that stock at $100.

Starting point is 00:58:42 So there's a large amount of risk. And the thing that funds were doing is many large hedge funds, very wealthy, which are just made up by wealthy investors, were shorting game stock basically into the ground. And what the important point about this story is that there were, there are alleged accusations of naked short selling, which is short selling the stock without actually borrowing the underlying stock in the first place, right?

Starting point is 00:59:07 Which means that more than the total supply of GameStop shop, game stop shares, were being shorted, which means it's like a fractional reserve system. It's kind of a way. How do people get away with naked short selling? Because it's illegal and done behind the scenes. I'm pretty sure it's illegal. Is it illegal? YouTube comments, let us know if it's illegal or not.

Starting point is 00:59:29 Yeah, I would think that would be. be definitely illegal. Okay, so these funds are doing possibly naked shorts, which is like, doesn't get any risky, right? Like, it's not only illegal, quite possibly. It's also, they're betting, essentially, that this stock does not go up in value at all. And they don't even have the stock backing that bet, essentially. So they're completely exposed here. completely exposed and they think that they can just short the stock into the ground and make a bunch of money on these shorts, right? And like honestly, maybe it's bad. Maybe it's not right to like put sentiments into this, but like GameStop is a brick and mortar business during times

Starting point is 01:00:14 of COVID. Like, you know, I think if somebody said, fuck you for shorting a stock, a brick and mortar company during COVID times, I would agree with that. You know, markets are supposed to be efficient, but, you know, kind of, kind of fuck you. And anyways, so, Okay, so like there, we have a large, and the thing about shorts is that a short squeeze can happen. And so if you are exposed to a short, as in like you owe shares back to someone and those shares double in price, all of a sudden you have to buy back the shares that you borrowed at a higher price. But if you buy back those shares, say you're saying like, all right, I don't want this trade anymore, like I've lost money.

Starting point is 01:00:54 I'm just going to buy back the shares. I'll cut my losses and I'll pay it and I'll pay back. and I'll return the shares to their owner. If you do that, you buy back the shares. And that increases the price because you bought them back, which means further shorts are then pressured even more because as shorts pay back, buy back their shares off the secondary market to cover, they push the price up and up and up,

Starting point is 01:01:15 which causes more and more shorts to be influenced to buy back shares. And so it's called a short squeeze. This thing is explosive. It can turn into a positive feedback loop of people buying back shares, off the market. And remember, there was more outstanding short interest than the floating supply of stock, of game stock the shares. And so this thing just rocketed from $20 a share up to like $350 a share in like three days, right? And so all the companies that were cut short are down like 99.9% on their position, right? And these are all hedge funds. And so this is where the drama

Starting point is 01:01:51 starts. Okay. So let me ask you here. So Wall Street Betts culture, obviously they want to benefit from this trade, right? Right. We understand that rationale. Do they also want to screw the hedge funds? Do they want to screw the bankers? Was that part of the motivation behind this? No, this is a secondary after effect.

Starting point is 01:02:09 They just saw a position. They just saw a heavily shorted stock. And they all decided as a community saying, like, hey, if we all buy GameStop, so many of these hedge funds will have to cover their shorts that it could trigger a short squeeze. That's exactly what happened. Okay. So what happened to these hedge funds, David?

Starting point is 01:02:26 I'm looking at our first headline here. They got wrecked. All right. GameStop short sellers lost 1.6 billion in a single day as Reddit traders rebelled against them. That's a, that's a, that's a 2021 headline. I feel like this is, this is a pretty, this is a pretty massive event. This is like main, main street investors, retail investors, kind of sticking it to the funds in a way. That's been the kind of the net effect.

Starting point is 01:02:53 But the funds got to be pissed about this. I mean, oh, I'm sure. Did not see this time. I'd be pissed if I lost money too. But like this sort of thing is, let me say, outside of the rules of play, it's a complete off-script move. No hedge fund trader. Like they're all aware of the other traders and other hedge funds who might be coming after

Starting point is 01:03:15 them. But none of them anticipated an online community to take this kind of an action. So they were completely caught off guard. Completely caught off guard. Yeah. Yeah. Yeah, but they shouldn't be caught off guard if they were paying attention to the fundamentals of GameStop because they should know that there was in the massive amount of short interest out on GameStop. And everyone knows what a short squeeze is.

Starting point is 01:03:36 This is not like esoteric information. A short squeeze is public knowledge, right? And the other interesting thing is Wall Street Best is a public discord or, well, it's also a discord. It's also a subreddit. So all the coordination in the subreddit was done in a public forum where the hedge funds and all their naked short selling is done behind. behind the curtain, you know, private, private knowledge. You don't get to know that information. And so, like, this is absolutely a story of just like the little guy versus the big elites who have who have access to financial instruments and have access to financial resources and and capital

Starting point is 01:04:12 that no one else has access to. Yet the Wall Street Betts subreddit, they saw the weakness in the armor and they all realize if they all just go buy the stock, they're going to be able to to short squeeze these funds who are trying to wreck this country, this company into the ground, they're going to short squeeze them into oblivion. And that's exactly what happened. Okay. So fair story so far, it sounds like, right? Fair story. This is all within the rules of play here. You know, hedge funds are taking massive amounts of risk in taking out these kinds of positions. You know, naked short selling aside, it's still a massive amount of risk when you're shorting something. And this online community, Wall Street Betts, is just doing what it normally does.

Starting point is 01:04:56 It's seeing an opportunity and it's pouncing on that opportunity as a community. And the market response and the stock goes up. And it's story, right? But like, it's not the end of story. No, it's not the end of the story. Because the hedge funds and the banking class has something that this Wall Street bets rabble, right? This crowd, this online community does not have. they have connections.

Starting point is 01:05:21 Political connections. They have institutional prowess. They have people that they can call on the phone to get to take certain actions against the unwashed masses in the subreddit. So what happened? And so a large amount of these Wall Street bets traders trade on Robin Hood, right?

Starting point is 01:05:43 This is the retail trader, the little guy, right? So they use the Robin Hood application to make their trades. Robin Hood shut down trading on the GameStop stock and also the AMC stock, AMC theaters, right? Another asset that has heavy, heavy short interest that started to become a target of further, you know, further Wall Street bets short squeezes saying like, hey, like we just short squeeze the shit out of GameStop. We could probably do it for AMC. And that began to happen.

Starting point is 01:06:12 And yet Robin Hood canceled all trading activity on GameStop and AMC as of this. morning. And not only that, but also TD Ameritrade. And it gets even worse. We're going to show some tweets and some links in a second. They even took their clients' positions and sold them for them. While the trading activity was halted, Robin Hood and TD Ameritrade and other brokerages made orders on behalf of their customers to sell the stock because of market volatility and market risks. So they did other things with other people's money because allegedly from what we understand, what we think is true is that people who had connections at these funds that got wrecked. I can't remember the name of the fund called up Robin Hood and said, yo, shut this down.

Starting point is 01:07:03 And we think that's what happened. And we think that's what exactly what Robin Hood did. They shut down trading. First, they tried to pause the market when, when two days ago, I think, when the GameStop share price went up too fast, they halted trading. This was like NASDAQ was threatening to you. NASDAQ halted trading because because and they were, that was after funds started screaming that they needed to recalibrate their positions. And so they wanted to halt trading. What is that other than these funds, these funds were going bankrupt.

Starting point is 01:07:33 Going bankrupt. Going bankrupt. Absolutely destroyed. So not only losing billions, but like it's costing them their entire business. The entire fund, the entire fund, because there is no. no risk on short selling. Right. And so they're making phone calls.

Starting point is 01:07:49 And then like so they, they stopped trading for a while and they threatened to stop trading. So that happened. But this morning was the action that that you're talking about, which is kind of like the, you know, unprecedented. Unprecedented, yeah. Where Robin Hood, like Robin Hood, this is what all the Wall Street bets traders use. This is this is kind of their life stream into finance, basically.

Starting point is 01:08:13 that was being shut down completely from these assets. And their assets were being sold without their permission. That's exactly right. And so this is why when we talk about uniswap and we talk about being able to control trading and you can't turn it off and you can't permission the assets and you can't permission the network. This is why this is important because a bunch of head funds made a bunch of calls to a bunch of their market running friends saying like, hey, I want this to stop because I'm losing money.

Starting point is 01:08:41 And they did it. And they listened. And not only that, but Discord, which is one of my favorite applications, canceled the Wall Street Betts Discord server. I mean, private company, sure, they get to cancel whoever they want because it's a private company. But like, fuck, where are all these people supposed to meet? Like the Wall Street Betts subreddit had to get locked because it was getting briganded

Starting point is 01:09:04 by just a bunch of randos. Discord is canceling their server, preventing them from being able to coordinate as people. Like there's nothing more than oppression and silencing than just being able to cancel the place that these people meet and congregate. It's a violation of what makes America so great. And like maybe it's not a constitutional violation because private companies get to silence speech as much as they want. But it's still fucking stupid. Well, so everyone's saying like people are angry about this and justifiably so. It's because basically the the banker class and, and the,

Starting point is 01:09:41 the elites and the people with connections and billions of dollars and in funds were able to do things that like you and I are normal people, average just people that are on R slash Wall Street bets cannot do. They don't have these connections. It's like a different set of rules applies for one group of people versus versus another. Imagine the power just because you are getting wrecked on a trade to go delist an asset. Like that's an insane amount. of power. And what's so crazy about this, David, is like, they just did it in broad daylight. They did in broad daylight? So brazen. Like, did they think that people weren't going to be pissed, that like we weren't going to talk about this, that there wasn't going to be massive anger?

Starting point is 01:10:27 They just delisted the assets. I mean, these are Robin Hood's own customers. Right. I can't imagine the amount of pressure that was on Robin Hood to get them to turn against their own customers. That affects their business model economically. There must be a massive amount of power here to or leverage here to do something like that. Yeah, people are making calls to say delete Robin Hood, delete, delist Robin Hood from your, or delete it from your phone. That's a hashtag that's getting trending on Twitter. Ryan, let's go through some of the tweets and links that we have pulled up, ready to go. Representative Tel-Lebe, actually the same person behind the Stable Act, calls for congressional hearing on Robin Hood's GameStop actions.

Starting point is 01:11:09 Nice drop. Like, yes. Like this is a, this is a securities market violation. If we believe in free markets in this country in the United States, then this people actually need to get summoned to Congress. They need to go to court. Somebody needs to go to jail or get fined. So it's good to see representation talking about this issue. Okay, what's the next tweet here? Oh, yeah. This is from Russell. He's a football player. I'm not into sports. So I'm not going to try and mispronounce his last name. But like this is this is this is, this is, this is, this is, is what's going on. This is a starting pistol for this entire industry, especially for D5. Russ is a big Bitcoiner. He is one of the few players in the NFL to get paid by Bitcoin. I don't think he knows about Ethereum or Defi yet, but if he did, he'd be bullish on it. GameStop. Get the dirty fiat and turn it into Bitcoin immediately. There's values, virtues, and ethos that are exuding out of this industry that the rest of the world needs that we need to export to the rest of the world. All right, let's go to the next one. Oh, yeah. Ram Capital. he's a fun meme account.

Starting point is 01:12:09 Looks like Robin Hood woke up today and chose violence. Yeah, fuck you, Robin Hood. All right. Tyler Winklevoss, you want this one? Okay, so what does he say? What kind of a soulless human being do you have to be to short a brick and mortar business during a pandemic? These companies are not even allowed to legally operate. These suits have no solidarity.

Starting point is 01:12:29 They care nothing about America. I'm glad Wall Street Betts is punching back, right? Like he's basically saying, look, they're not good guys. here, right? They're just trying to make money. And so when they lose money, they, they, they take on this risk and they lose money. So what? Who cares? Be like put on your big boy pants. Like, I mean, this is what the markets do. You got wrecked. You've wrecked a whole bunch of other people in the past too. This time you got wrecked. You lost. That's how the game's played. Bye. Bye. See you later. Yeah. No doovers in public markets, bro. No doovers. You can't pull this kind of thing.

Starting point is 01:13:06 I agree with Tyler there. Okay. How about this one? AOC is talking about it. This is Dave Portnoy. This is Dave Portnoy. This is Dave Portnoy of Barstool Sports. He goes, when AOC and Donald Trump Jr. are on the same side, you know you fucked up at Robin Hood app.

Starting point is 01:13:20 Yeah. AOC and Donald Trump Jr. Both are populist individuals. One's a populist for the right. One is a populist for the left. This is a populist issue. This is a few against the many. Yeah, a few against the many issue.

Starting point is 01:13:32 And both AOC and Donald Trump Jr. are populist leaders for their respective camps. And they're funnily enough aligned. This is the Wall Street Betts chairman here. Is this a meme account or is this an actual representative from Wall Street Betts? Definitely. Well, no one can truly represent Wall Street Betts yet this guy is one of the leaders of the community. Yeah. Okay. So what's he saying here? They can only control us because we use their currency. So Wall Street Betts historically has not been a crypto-friendly community or subreddit, right? So like if you post something about crypto on Wall Street Betts, it gets auto-band.

Starting point is 01:14:11 I'm not sure if this was an outcropping of like 2017 or something where there were so many Cryptos vein, like BitConnect. It's just simpler for Reddit moderators to just ignore the noise. But they still maintain that posture. And yet this is kind of making the Wall Street Betts community open up to crypto, open up to as a solution. That seems to be. what this tweet is saying.

Starting point is 01:14:33 I mean, we are certainly open to Wall Street Betts. I hope members of the Wall Street Bet community understands that this industry is young and nascent and it's not the industry that it was back in 2017. We have grown a lot. And all of a sudden, a lot of the things that we find valuable, I think the Wall Street best community would also find extremely valuable. Absolutely. All right.

Starting point is 01:14:54 Let's go to this next one. Yeah. One hedge fund blows up a million retail investors, efficient market. Instead, a million retail investors blows up one hedge fund, market manipulation. This is a diss towards people that are, for the same reasons that the Wall Street Betts Discord server got canceled because they are, they, the powers that be are claiming that Wall Street Betts is manipulating the market. If buying spot is manipulating the market, I guess we're all market manipulators.

Starting point is 01:15:25 I guess when you buy something, the price goes up. Like, is that market manipulation? No. It's market manipulation to call up Robin Hood and say cancel trading. That's market manipulation. Buying spot is not market manipulation. Yeah, totally agree. It's crazy that they would even propose that.

Starting point is 01:15:42 What's this one? Yeah, this is a screenshot of somebody who tried to place an order inside of Robin Hood. And Robin Hood gives them an error message. They wanted to cancel the order that Robin Hood placed on their behalf. Robin Hood shows them an error message saying, we're sorry, this order can't be canceled. placed it to mitigate the risk to your account. Who the fuck are you to control other people's money? You don't know what risk is. The only reason why markets know what risk is is because a diverse

Starting point is 01:16:11 set of market participants all bear their own individual risks and they all place their own individual bets. You don't get to determine what other people's risk is. We're screwing you over for your safety. You know, this kind of reminds me, we've talked about it so often, but like the SEC credited investor laws where you have to have a certain net worth in order to invest in a million dollars or over in order to invest at a startup. It's reminiscent of this sort of thing. It's like, sorry retail investor. You're not smart enough. You're not sophisticated enough to do this. So you're not elite enough to do this. So we're going to wall you off from this little corner of finance. We're going to handle this for you. We're going to sell your

Starting point is 01:16:53 shares in the brokerage account because it's too dangerous. Absolutely insane. that this is the error message that they would put up to justify. Dude, this one's even worse. Read this one out. We don't let you buy, only sell, and even if you don't sell, we will sell it against your will. This is, is this Robin Hood Terms of Service? Is this an email that someone got? So that was a Twitter comment about an email.

Starting point is 01:17:16 What's the email say? Yeah, the email is from Robin Hood to this user's inbox, I'm assuming, and says, important information about your Robin Hood account. In light of recent volatility, we are really. restricting transactions for certain securities to position closing only, aka you can only sell. However, due to the unreasonable risk involving brokering your position, we have closed your 14,500 shares of GME, that's GameStop, for an average price of $118 on January 18, 2021. They just executed orders with their customers' money on their behalf.

Starting point is 01:17:55 That's crazy. That's absolutely insane. That's absolutely insane. All right. So what does this all mean, right? So like populism, people are pissed. Banks are doing things with political connections, bankers and hedge fund managers and the wealthy elite are doing things that retail can't do. David, D5 fixes this.

Starting point is 01:18:17 D5 fixes this. This is what we have been chanting for so long. So you can't. You can't delist. an asset from Uniswap. In fact, anyone in the world can list an asset on Uniswap. This is not just, it, it's not just, it hasn't happened on Uniswap. It can't happen.

Starting point is 01:18:39 Can't happen. This is the idea behind protocols rather than banks. This is the idea behind outsourcing this sort of, like creating institutions that are not based on corruptible human beings, right? This is what Defi is all about, this openness, this transparency, this access to the world. This everybody has a fair playing field. It doesn't matter what country you're from. It doesn't matter what bankers you know, what politicians you can call, how much money you have.

Starting point is 01:19:14 Everybody is treated equally. Everybody is treated the same. This is an institution that makes way more sense to build on top of than the corrupted. banking institution right now. It's like, so is this a defy moment? Like maybe mainstream doesn't realize it yet, but is this a defy moment for us? This is an absolute defy moment. And I think if people were more savvy to what's going on, I think we would see, because, you know, markets are supposed to be efficient. If some news breaks, then assets tend to move. The reason why I think that, you know, people are, it's going to take a while for people to digest this information and then

Starting point is 01:19:56 connect it to defy on Ethereum. Because if people did make those connections, we would see assets like you and I, it's absolutely mooting right now. Like if that's, I think that's the case. And the important thing, I think, to take away from this whole ordeal is that, you know, things that are deep in the protocol sync, the protocol synch, the, the protocol synthesis that we chant about all, all the time on the bankless program, the things that are deep in the protocol sink, the things that are neutral, are inherently flat. They are flat landscapes for economic activity, right? And that flat landscape means a neutral playing field, a flat playing field where no one has advantages over any others. And that's what scares all the legacy institutions

Starting point is 01:20:39 is because they have built systems that are not flat. They have built systems that privilege themselves over their users, over other people, and the elites are on the peaks when everyone else is in the troughs, right? And this is what Ethereum can bring to the world, a leaven playing field. One of, you know, Bitcoin is famously known as, you know, the separation of money and state. And Ethereum is the separation of economy and state. There's no reason why the economy, the quote unquote, the market should be under control of Robin Hood or TD Ameritrade or anyone that can pick up a phone call, make a phone call and stop canceling. If somebody has the ability to stop trading of something, then the market.

Starting point is 01:21:20 is controlled and the market inherently does better when it's not controlled. And unless, and the market, the free market is not free unless it actually manifests itself on Ethereum. There's no other place in the world to have a free market other than Ethereum. Yeah, absolutely. Okay, so here's the thing. Listeners of Bankless will know that we are bullish Bitcoin. Like we like Bitcoin. It's a good asset. But Bitcoin doesn't fix this. It doesn't have the answer to this problem, right? Coinbase, Binance, anywhere that you can purchase Bitcoin today, can still delist those assets with a phone call. With a phone call. With government regulation, right?

Starting point is 01:22:00 So like Bitcoin is one part of the defy story. But if you just stop with Bitcoin maximalists and maximalism, you don't get what we're talking about, a censorship resistant, permissionless, open financial system that solves the problem of GameStop and Robin Hood. You need something like Uniswap. you need money protocols in order to do this. I've seen many kind of maximalist like thought leaders say, yeah, Bitcoin's the solution. And it's like, no, it's not, dude. It's not.

Starting point is 01:22:28 Like, defy is the solution. I was glad one of the Winklevoss twins said that. It's Bitcoin, Ethereum, and Defi. Without all of these things, you can't actually solve what we're talking about today. We've been saying this since the beginning. You need a bankless money system if you're going to have a free money system. or else you get the same system that we've already built. It's just built on a different store of value.

Starting point is 01:22:53 New set of bosses, new set of bankers. That's not what we want. Ethereum really does solve this. David, maybe you've got a comment on that, but I also want to ask you about, like, what is it really going to take for the world to start seeing this? Is the user experience just too hard on defy now? Is it just like for somebody who's used to Robin Hood and they switch over to crypto and defy and they have to do metamask and they have to do like private key management and there's

Starting point is 01:23:21 gas fees on uniswap. Is that just all too much? What do you think the, why don't, why haven't we seen this influx of retail coming from the disenfranchised Wall Street bets crowd? Well, I think a very simple answer is to say that like GameStop is not available on Ethereum. Like that's not where the game stop the asset trades. And so first we just need assets on Ethereum that people are interested. in. And, you know, while many of these defy tokens that we are so hyped about, I think are truly revolutionary, they are unfamiliar to the legacy market participants who are looking to, because when Wall Street bets chats, they're not chatting about defy tokens. They're talking about things on Robin Hood. Robin Hood has actually done a terrible job adding new assets, crypto assets,

Starting point is 01:24:05 into their platform. They have a, they actually have a category in crypto assets called the Ethereum family. You want to know what's in there, Ryan? Yeah, what's the Ethereum family? Ethereum and Ethereum classic. Oh, my God. Terrible. Correct me if I'm wrong. But with Robin Hood, David, you can't actually withdraw to an eth address, basically. You don't get accessing underlying.

Starting point is 01:24:30 What they're selling you is IOUs of something. They can pull the same shit they just pulled on GameStop, which is like sell your eth out from under you. Like take it away. Can't like cancel it. Delete it. They can pull all of that because they are purely a bank selling IOUs. They're not selling.

Starting point is 01:24:45 actual ether that you can withdraw from their exchange. Robin Hood is not the place. If you're, look, if you're a millennial, if you're a zoomer, go level up on defy. We're going to need this tech for the 2020s. I hope this week made it obvious. We need to be leveling up on these things. And I feel like sometimes, David, people just like, it's too hard, right? That's not that hard. Yeah. And you got paid $20,000 if you used defy in 2020. What do you mean? It's not hard. So you're friends outside of crypto, right? What do you think their reaction is going to be as a result of this?

Starting point is 01:25:23 So, right? Like they say something about this. I know they're going to talk about this. And you say, yeah, this is why Defi exists. So what's their objection to coming on board of Defi? What are they going to say? Yeah, that's a good question. There is a group chat that I'm in of roughly 12 people who are Defi that are people that are defy curious.

Starting point is 01:25:41 But many of them come from the legacy markets. And there was just general consensus that like this pissed them off. Like this just riled them up. And, you know, I think that's the energy that we need for people to feel. That is that energy, that is motivation. That's pure motivation. They're angry at something. And Defi allows that anger to be expressed in productive ways, right?

Starting point is 01:26:04 We can take that riled up energy and we can put it into the Defi ecosystem. I think that the barrier to adoption and the barrier to understanding just got a lot lower, you know, it's a frequent phrase that we say on the bankless program that the most bullish thing about this industry is to become understood. And this is one of the most exposing pieces of news that has ever come across the new cycle at all, right? The canceling of an asset on an exchange. That's insane. I don't think there's ever going to be this one magic moment where like all of a sudden, like all of Wall Street best is like, yo, let's go trade on uniswap. It's just going to be a slow trickle.

Starting point is 01:26:42 But like I said, the barrier is getting lower and lower and lower and lower. And it's allowing more and more water to fall over it faster and faster. Yeah. And at the same time, defy is getting more and more. So the truth is if we had that influx now from Wall Street bets, we probably, like we couldn't take it. I mean, too many transactions, gas fees would spike. But at the same time, Ethereum, DFI is developing layer two, right, to start to, you know, other containers for this liquidity and for these users.

Starting point is 01:27:12 So it's almost, we also don't want it to happen all at once. It's like better for it to kind of trickle in. And, but, but look, man, this is like, this is, this is populism. This is the 2020s. I feel like this is not going to go away. It's only, if anything else, it's coming from the right. It's coming from the left in politics. It's only going to get worse.

Starting point is 01:27:34 And one of the reasons, David, I'm in this industry and I think this is true for you is because this allows us to channel populism and this anger into something productive. We're not just focused on tearing it down, right? Because you could look at this and get pissed. Like, I want to revolt. I want to go, I want to occupy Wall Street. I'm going to like storm the banks. I want to get the hedge funds who did this.

Starting point is 01:27:59 Like that's one approach. The defy, the crypto approach is we're going to build a new system, right? That's credibly neutral and doesn't have the. dependencies of the old system and all that anger that we feel, we're going to, we're going to channel that into something productive. We're going to build an entirely new financial system from the ground up, right? Because populism can get really ugly for human beings. Like famously, the 1930s populism led to a world war, right? That could happen here. But the reason I'm in Ethereum, the reason I'm in defy and crypto is because it's a way to channel that populism

Starting point is 01:28:33 into a movement that is all about building new structures and institutions. for the world. So it's exciting from that perspective, too. Yeah, that's exactly right. Another concept that we talk about on the bankless program frequently is that before 2008, there was no place to exit to, right? And then Bitcoin came, right? And in 2021, in the financial crisis of 2020 and 2021 because of COVID, there is actually a place to exit to, right? There is actually a way for that populist angst and that populist energy to be expressed invented, right? We actually have solutions for this. To me, this really echoes sentiments of the

Starting point is 01:29:14 fourth turning concept where there is distrust in legacy institutions, no better of this more salient example of institutions canceling their customers' orders against their will to profit to make sure that the elites can keep their money. Distrust in institutions. Meanwhile, we are erecting new institutions for people to adopt instead. So we are changing. the guard. It's not going to happen overnight. It's going to take a decade. But people are looking for new institutions these days because their old institutions are failing them. And there's no better, more salient of example than what happened recently. Absolutely. Well, this is turning into an interesting year for sure with 2020. I think this is going to be a big year for crypto,

Starting point is 01:29:57 a big year for the social movement that is crypto, the technology that is crypto, and probably the price and the bull market that is crypto right now. So very exciting. We're glad to have you on bankless. David, you feel like you got that out of your system, man. This is, this is, this is catharsis for you. I know you were angry this morning. I was pretty angry this morning. And the thing is, like, my one final comment on this is like, there's no reason to think that this was a one and done. The GameStop community or the Wall Street Best community just figured out that they are a force. They are a fund just like actual funds. They are a collective community of people that have the ability to allocate capital. They are a Dow. They are a Dow. They are a Dow. They are literally a Dow. And they are only going to grow massively.

Starting point is 01:30:45 First off, all of them just got really rich, even though some of them kind of got wrecked by Robin Hood. People that were making the trade before the short squeeze just made massive upsides. Like, if you were in options, you could have turned $1,000 into $20,000 to $50,000 depending on your position. So now they're well funded. Now they realize that they are a force. They are more organized. They are more coordinated with each other. And I think that this is just going to be the first of many coordination attacks on legacy institutions like this, legacy markets.

Starting point is 01:31:17 I think this is going to be only the first of many episodes like this to come. Well, I can't wait for that group to start to get their minds wrapped around defy. And I'm excited to help in any way. So, David, this has been our roll up, as always guys, risks and disclaimers. Defy is risky. ETH is risky. Apparently so are the traditional financial markets. Weird.

Starting point is 01:31:45 But you could lose what you put in, of course. But this is the frontier. We are headed west. Thanks for joining us. This has been the weekly roll-up from Bankless.

Bankless - ROLLUP: 4th Week of January ($GME, Robinhood RANT, WHY WE DEFI)

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