Bankless - ROLLUP: Bitcoin ETF Approved | ETH Moves | EigenLayer Cosmos

Starting point is 00:00:00 We have today a Bitcoin spot ETF that has just been approved. I am absolutely excited about this. Bankless Nation, happy second week of January. It's time for the weekly roll-up. I've got Anthony Sasano here with me. He is here in lieu of David, who is off in the mountains. What are your thoughts on the Bitcoin ETF just going into this episode? Yeah, I mean, I think I'm just relieved that we can stop speculating on this now.

Starting point is 00:00:28 I know that people have already begun speculating on the ETH spotting. ETFs, but it's a different thing where, you know, for months and months now, since BlackRock really filed for the ETF in June of 2023, it's been nonstop speculation or will they approve it, will they not approve it, you know, Gensler hates crypto, the SEC is unfriendly towards crypto. And then as we got closer to the date, the picture became clearer and clearer, but people were still doubting it up until the day of approval. They were saying, you know, Gensler's going to rug us. That's what he loves to do. And then in the end, what ended up happening was that those court cases that the SEC lost, especially the one against Grayscale, ended up forcing the

Starting point is 00:01:01 SEC's hand in order to approve these. And Gensler was one of the ones that voted for the approval. There was three, four, and two against, I believe. Which is quite funny to see. It's beautiful and definitely worth celebrating. So guys, a few things we're going to talk about. Number one, the spot Bitcoin ETF. How did it happen? It seems like the SEC approved this begrudgingly. They came in kicking and screaming, but we still have it approved. And as Anthony said, Gary Gensler was the deciding vote. So we'll talk about some of that. Also, why is ETH price rocketing up. Anthony, I want to get your take on that because I thought this was Bitcoin's week, yet we have an amazing ETH price on the charts. And also, we're going to talk about what if

Starting point is 00:01:42 ETH Ethereum was used to secure all the cosmos chains. There's some interesting developments in eigenlayer that might make that possible. I'm going to pick your brain on that circle IPO. That was just breaking at the time of recording. So all of this and more on the weekly roll up today. But Anthony, we've got to start with the markets, I think, today. These market charts brought to you by our friends and sponsors over at Cracken. Let's start with Bitcoin on the week. So we are up, I believe, almost 9% on the week, which you would kind of expect this, given the Bitcoin ETF approval.

Starting point is 00:02:16 So at the time of recording, Bitcoin currently sits at about 47K. So 47359 to be exact. We've got some interesting candles in the charts there. week. I think this one on January 3rd, and then some of this over here. Overall, do you have any thoughts on Bitcoin price? Is this kind of expected up 9% on the week? Yeah, I mean, I think it's just a logical conclusion of kind of the speculation leading into it, right? Where essentially the bulk of the move on the ETF stuff happened from 25K to 45K. That was the ETF related move because when BlackRock filed for the spot ETF, it was June, as I said, 2023.

Starting point is 00:02:59 and the BTC price, I believe, was around 25K. It went to 30K on that news, but then came back down. But if you look at, like, since then, it was between 25 and 45K is the bulk of the move. And that was the market pricing it in. And I know that's a bit of a meme where people say, the market doesn't price anything in. It's like, well, it does when it's that obvious. Like, everyone kind of knew that the ETFs were filed. They knew when the deadlines were for them to get approved.

Starting point is 00:03:22 And they also were just speculating on that chance of approval. And then you had people like Eric Balkanis and Jane. James SciFard, who I follow on Twitter, two ETF analysts from Bloomberg, saying, oh, there's 90% odds of it getting approved. And then you basically had the price keep going up, the more and more confident the market got that these things were getting approved. We had Grayscale in September, which seemed to inject some confidence to. The court case wins. Yeah, yeah, exactly. And that's why I, why I said, like, oh, that whole move between 25 and 45K was basically the market being convinced that these things were getting approved. And that's

Starting point is 00:03:55 why you saw BTC basically not run totally on its own. There were other things outperforming here and there, but it had a monstrous run. Like that's a very big run for BTC, given that BTC's market cap is so high compared to everything else. And then obviously when the date came, no one knew what to do. Like, is it a sell the news event?

Starting point is 00:04:11 Is it a buy the news event? And that's why we've kind of been flat on BTC. But I think the more interesting story, as you alluded to, was what happened with ETH on the day. Let's flip there. What the heck? So, ETH price up about 20% on the week.

Starting point is 00:04:25 I believe on the seven day. So right now at the time of recording, 2650 is the price of ETH, kind of stealing maybe the thunder from Bitcoin, but I guess your story is the Bitcoin ETF, a spot ETF was kind of priced in long before this, starting all the way in June. But like, explain what's happening with ETH.

Starting point is 00:04:44 Is this now ETH starting to price in a spot Ethereum ETF? Or do you think this is completely unrelated to ETFs? No, I mean, it's definitely related to the ATF. I like to call this move, rotate the news, where essentially even before the ETFs were officially approved the day before, we saw that the SEC's Twitter account was compromised and someone sent out a fake approval tweet. And BTC dumped and ETH pumped on that. So the market basically showed its hand and said, hey, you know, when the EATFs are approved, we're all just going to rotate to ETH because we're now speculating on the ETH ETFs, which is obviously the next major narrative.

Starting point is 00:05:21 And that's why you've seen ETH go up so violently. After lagging, mind you, like ETHs, BTC has been on a downtrend since June 2023, like a complete downtrend. And now you're seeing like the rotate the news, as I called it, playing out here, which I think is quite funny, but not unexpected for me. I have actually been calling for this for months on my own show where I basically said that you're going to see the narrative shift immediately because when the ETFs get approved, there's no longer a narrative to pedal. There's no, you know, we're waiting for the ETFs to be approved.

Starting point is 00:05:50 Well, there isn't for BTC, but there is for ETH now. So the narrative shifts there. So it's almost as if the Bitcoin trade is over and the ETH trade is kind of just begun here. This is the ratio that you were talking about. I don't think I've seen such a green candle on the ratio in a very long time. And it does seem counterintuitive that that would happen like the week the spot Bitcoin ETF is approved. But look at the spike back up and we're back up to 0.056 at this point in time.

Starting point is 00:06:20 So do you predict kind of a recovery on the ratio for ETH for 2024? Yeah, I mean, I think ETH is going to perform quite well. I think when you look at the ETH-BTC ratio, it's definitely too early to tell. You know, these violent moves tend to happen, as I said, because there's those narratives going on. There's like this hot ball of money that rotates between assets, things like that. But, you know, if we look at history, ETH has always outperformed with BTC in a proper bull market, proper new money bull market. Like I think over the last six months, it's really been existing money just rotating around,

Starting point is 00:06:51 especially flowing from BTC as it goes up. you have that wealth effect and people speculating in BTC are like, well, what else can I buy? And we've seen some other assets outperform. And I think that now going into the proper bull market, which I think has basically started at the beginning of this year, we're going to see all that fresh money coming in now. Now, of course, a lot of it's going to go into BTC via the ETF, but that doesn't really stop fresh money going into centralized exchanges like it usually has in other ball markets. So I think when it comes to ETH, ETH is going to be a beneficiary of that for sure. It's going to be a beneficiary of the ETF narrative. but also what ETH has that BTC didn't is now people get to see how much money these

Starting point is 00:07:28 ETFs actually take in. So if the BTC ETF takes in billions and billions of dollars, what do you think people are going to speculate on? They're going to say, well, if BTC can do that with the EATF, why can't ETH do that? And they're going to try and front run that. And basically, I'm not going to wait for billions of dollars to come into ETH. I'm going to buy now. And then you've got obviously the normal bull market happening right now within crypto, which will bring in more fresh money. So, yeah, I think ETH is going to have a fantastic 2024. We are back to prices from, let's see if I can zoom out some more here. I think it's May, 2020, just before the terror collapse.

Starting point is 00:08:02 Yeah, May 22. So almost two years ago now. Big recovery. And it wasn't just ETH, but it's the entire ETH ecosystem. This is Igness saying, seems like the SEC approved ETH ecosystem, ETF by mistake, laugh out loud. And then he shows Arbitrum up 28% on the week. Optimism, up 24% rocket pool up, synthetics up, Lido,

Starting point is 00:08:22 mantle, Maker, all of these ETH ecosystem tokens. Is this kind of what happens, you think, in an Ethereum bull market? So when ETH price soars, then all of the other, I guess, you know, like higher beta assets in the Ethereum ecosystem rocket up as well. Are they kind of correlated in this way? Definitely. I think when you kind of look at the ecosystems, not just Ethereum, but other ecosystems, they all tend to move together.

Starting point is 00:08:47 Like people call them beta, like when you speculate on tokens other than like the main ecosystem token, which in this case obviously is Eith. And I think when it comes to some assets as well, like arbitram and optimism, they're actually in all-time high price discovery right now because they came out during the bear market essentially. Like the tokens got minted and created during the bear market. So they've actually not had a bull market yet where they've gone into price discovery. So that's what's happening there. And then you've also got a bunch of other complementary narratives like EIP 4844 coming in the Dengoon upgrade in, I think March is my estimate for when it goes live on main net. That also helps things like LLL.

Starting point is 00:09:21 two tokens because people are speculating on that. So if you really take that all together, yeah, an ecosystem pump makes sense. And then it happens across other ecosystems as well. Looking at kind of seven-day big token moves. Look at ENS, Anthony, up 70% on the week. This is interesting too. Ethereum Classic. So what is going on here? Ethereum Classic up 54% on the week. Is this just, you know, some traders having fun? Or do you think this is an example of, is this retail flooding in and just mistake doing the classic. I thought Ethereum classic was Ethereum. Is this maybe a sign that retail has entered the fray? No, no. It's definitely just traders having some fun here, just speculating on these things. And they're really just very short term moves.

Starting point is 00:10:04 They may look violent like 50% up and you may think, oh, wow, that's a huge move. But I went back and looked at like the ETH ETC chart. And ETC is down like 99.7% against ETH. And so when you look at these violent moves, you have to kind of go further than seven days out because you have to contextualize it because a lot of these assets are beaten down a lot and then they might spike up a lot, but then they're really not really going up a lot because they've just gone down a lot, right? So they need to go up a lot more to recover how much they've gone down. And I think a lot of people miss that. They're like, oh my God, I miss this 100% move on this random coin. It's like, yeah, but if you held this coin at any period in the last 12 months, you probably didn't do very well at all

Starting point is 00:10:45 and you probably lost money. So you can't just look at, I think, the seven days. You have to definitely zoom out on these things. Well, Ethereum ecosystem having just a banger start to the year, Arbichum up over all-time highs, optimism as well. L2B, total value locked at $23 billion. This is another all-time high. I'm just curious.

Starting point is 00:11:06 I'm looking at L2B.com. What, in your opinion, Anthony, are kind of like the key metrics? Do you still look at total value locked? Do you like the transactions per second and scaling factor types of metrics? What are the most valuable metrics for you when you're looking at layer two's? Yeah, it's kind of hard because I'm of a pretty strong opinion that a lot of the metrics that we have across the board, whether it's a layer one or layer two, it doesn't really matter. They're kind of inferior for a number of different reasons, right?

Starting point is 00:11:35 They all have their own kind of asterisxes next to them, which basically have a list of caveats. Like when you look at total value locked, you can say, okay, well, it's up, but it's up because the token prices are up, right? It doesn't necessarily mean that there's new value being deposited here. Like, for example, if there is a million eth deposited and eth goes up 10%, well, now that existing million eth is worth 10% more. It doesn't mean that there's 10% more eth that went in. So TVL is definitely an inferior metric from kind of that perspective. But I like to take like a holistic approach where I look at TVL, I look at, you know, transactions per second, like the scaling factor that you showed before, transaction counts, active addresses, fees paid.

Starting point is 00:12:13 is a fan favorite for me, honestly, because if you see fees being paid, it means that there's actually real human users, well, not just humans, but obviously bots as well, that are willing to pay to use that service. Because a lot of these stuff can be games as well, whether the people are trying to farm air drops, things like that. So I try to take a holistic kind of look at things. And also, I don't look at like the last seven days or 14 days. I look at like six to 12 months minimum for activity across the different L2s, because then you get a clearer picture of sustainable activity rather than hot activity like we saw with inscriptions the other week. The inscriptions craze on the EVM chains, that was very like one week and it was done.

Starting point is 00:12:50 And then you see all the metric spike up a lot. But if you didn't know that that was inscriptions, you would be like, oh my God, this is so bullish. Like everyone's flooding into this right now. When in reality, it was just like the inscriptions kind of trend going on for about a week and then dying off, of course. Actually, later in this episode, there's a Delphi report that came out about kind of layer two. I want to pick your brain about some of their conclusions in the summary and see how it compares

Starting point is 00:13:12 with your own. But all of those metrics that you mentioned over the last six to 12 months, what would you say about layer twos? I mean, are we in a healthy place? Is it really indeed, as it looks like on many of the metrics? Are we at kind of all-time highs in terms of layer two traction? What do you see? I mean, definitely, yeah. I mean, the layer twos have never been stronger than they are today. And there are some breakout winners. Obviously, Arbitrum 1 is the leader right now, I think across every metric, you know, TVL, defy, trading volume. They're, they're killing it, honestly. The other day, they did more than Ethereum main nets, which is the whole point of these layer twos, by the way. They should be doing more volume, more kind of like

Starting point is 00:13:52 active users, more transactions than Ethereum Mainnet, Ethereum L1. But yeah, no matter what metric you look at on L2B or GrowThePy.x, is another website I like to use. It's all up only. It's all pretty much at all-time highs in terms of activity. And we're really just getting started to. because these L2s have not existed in a bull market with new retail flows coming in, where they can basically onboard from Coinbase or wherever else. And now they do. And they're very easy to use because you can use the same wallets that you use for a theorem mainnet, and then you can just onboard directly and you get cheaper fees, faster transactions.

Starting point is 00:14:24 And there's a lot of liquidity there too. Like Arbitrum 1, there is so much liquidity on there now. Like there's probably going to be more than main net for a lot of tokens on there very soon. It's very interesting as well how some of the exchanges can prioritize their own layer twos. So I was on Coinbase the other day and just looking to kind of withdraw from some USC from a Coinbase account that I have. And the leading option, it sort of says you can withdraw to Ethereum or you can withdraw to all of these layer twos. But the leading option was withdraw to base. And it's like free, fastest.

Starting point is 00:14:59 It's like advertised within the Coinbase app. and they're clearly promoting their base layer two, as you'd expect them to do it because they have ownership of the product. But it just shows you a glimpse of kind of the exchange layer two approach and how they're going to serve as what Coinbase has 130 million users, something like that, 100 million to 130 million users. And you can only expect that to grow. I was looking at some of their leaderboard app type,

Starting point is 00:15:28 how many days they've been the top app in the app store. And during the bull market, they hit number one, like often. It was like six days last time. And so you can expect that to be a massive, probably market underrated onboarding mechanism for Normies, quote unquote, into layer twos. Yeah, definitely. And Coinbase is actually doing a lot of interesting things with base. One of the most interesting is their Coinbase verification program, where essentially,

Starting point is 00:15:55 if you're comfortable doing this, you can verify and tie your Ethereum address to your Coinbase account using what's called the Ethereum Attestation Service, and then you get free transactions. I don't think that's enabled yet, but it will be enabled soon. You'll get free transactions and other perks on base. So this is a really neat way for Coinbase to verify that you're not some bot trying to farm something, your actual real verified human. And then only Coinbase knows that. This attestation does not reveal anything about you to the public. It's just Coinbase knows that the Ethereum address that you have tied to your Coinbase account is you. And then, yeah, they give you perks on base. So base is going to be huge. People are still underestimating how big base is going

Starting point is 00:16:33 to be simply because Coinbase has such a massive user base and they're going to do everything they can to get fees as low as possible, not just for like the verified users, but for anyone really, bring as much liquidity as possible. And not just with defy, they're doing a lot of stuff around NFTs, social. Yeah, it's going to be big, I think. And not just because they have the user base, but because they're committed to actually building it out and actually building out over the long term, alongside the entire optimism stack, which is what's powering the base network. Well, we got a lot of green in the markets this week, total crypto market cap, just floating below 2 trillion. So we're at 1.9 trillion. The $2 trillion mark will be another celebration.

Starting point is 00:17:12 And Bitcoin also flirting with a trillion as well. So 928 billion right now. So good things ahead. I want to talk to you a bit more about the Bitcoin spot ETF and break that story down. how it happened. There was some drama at the last minute. And Gary Gensler with the deciding vote, so who dissented and who thought this was a good idea? Also, I want to talk to you about what we can expect from Layer 2s in 2024, specifically data availability layers. Igen layer as well, we've got some more stuff to cover. We'll be right back. But first, we want to tell you about some of the sponsors that made this episode possible, including our number one recommended exchange for 2024. That's Cracken. Go create an account.

Starting point is 00:17:56 Cracken knows crypto. Cracken's been in the crypto game for over a decade, and as one is the largest and most trusted exchanges in the industry, Cracken is on the journey with all of us to see what crypto can be. Human history is a story of progress. It's part of us, hardwired. We're designed to seek change everywhere, to improve, to strive. And if anything can be improved, why not finance?

Starting point is 00:18:18 Crypto is a financial system designed with the modern world in mind. Instant, permissionless, and 24-7. It's not perfect, and nothing ever will be perfect. But crypto is a world-changing technology at a time when the world needs it the most. That's the Cracken mission to accelerate the global adoption of cryptocurrency, so that you and the rest of the world can achieve financial freedom and inclusion. Head on over to crackin.com slash bankless to see what crypto can be. Not investment advice, crypto trading involves risk of loss.

Starting point is 00:18:43 Cryptocurrency services are provided to U.S. and U.S. territory customers by Payward Ventures EECBBBD doing business as Cracken. SELO is the mobile-first, EVM-compatible, carbon-negative blockchain built for the real world. And now something big is happening. Introducing the cello layer two. It's a game-changing proposal that's going to bring Sello's rapidly growing ecosystem home to Ethereum. Vitalik has shared its excitement for the Sello Layer 2 on the Selo Forum, so has Ben Jones from optimism. But why?

Starting point is 00:19:07 The Sello Layer 2 will bring huge advantages, like a decentralized sequencer, off-chain data availability, and one block finality. What does all that mean? Rock solid security, a trustless bridge to Ethereum, and more real-world use cases for Ethereum without compromise. And real-world adoption is happening. active addresses on cello have grown over 500% in the last six months. With the cello layer two, gas fees will stay low and you can even pay for gas using ERC20 tokens. But cello is a community governed protocol. This means that cello needs you to weigh in and make your voice heard. Join the conversation in the cello forum. Follow at cello org on Twitter and visit cello.org to shape the future

Starting point is 00:19:43 of Ethereum. Are you launching a token? Is it already live? How are you managing the legal and tax for providing token awards for your team. Toku simplifies everything about managing token grant compensation and you can get started with them for free. You'll have access to top-notch legal and tax support to handle the distribution and management of tokens for your team. Toku caters to every step in the process from user-friendly legal templates for granting tokens to tracking investing periods and calculating withholding taxes. Toku understands every grant structure, token purchase agreements, restricted token awards, restricted token units, token options, and all the other ones. Toku is already simplifying this today for leading companies like

Starting point is 00:20:22 Protocol Labs, DYDX Foundation, Mina Foundation, and many more. You can learn more about how Toku can help you streamline your token management and get started for free. Visit Toku at Toku.com slash bankless or click the link in the description below. As we said, the spot Bitcoin ETF has been approved, giving you a little bit more detail on how this happened, some of the drama that unfolded and what this means next. But here's a tweet breaking. The SEC officially approves all spot Bitcoin ETFs. Remember, there were a number of institutions companies vying to apply for a spot Bitcoin ETF. They were all blanket approved. So we got Vanek, we've got Bitwise, we've got Fidelity, we've got Franklin, we've got Valky, we've got, of course, BlackRock and

Starting point is 00:21:04 Grayscale and Wisdom Tree, all of these established institutions. I think the high level of why this matters, we've covered before on bank lists, as Anthony pointed out, there have been kind of months leading up to this outcome. Ever since June. we've been talking about the spot Bitcoin ETF. And the big win for crypto, I think, is this new pipeline to capital. So analysts have estimated between $10 and $100 billion in new buying pressure that this could unlock over the first 12 to 24 months. That, of course, is big. It also, maybe it means a bull market confirmation, at least in the sphere of normies, right? This is going to make absolutely massive news. It's much heralded, never happened before. And I think maybe one

Starting point is 00:21:46 underlooked thing is they actually didn't want this. The regulators, let me say, in the SEC actually didn't want this to happen. In particular, Gary Gensler and Elizabeth Warren in her anti-crypto army. They didn't want this to happen. So that's the chair of the SEC very clearly was resisting this and dragged into this kicking and stream in screaming. And yet, he was put in a position where I think he felt like he had to approve probably like as part of the court order as part of the mounting pressure to like just do his job and stop standing in the way of this type of thing. And I think that is overall bullish on the story of crypto in the United States and across all other jurisdictions, even though the governors and the regulators may not want this technology,

Starting point is 00:22:32 may not want to support this asset class. They're kind of being pushed into it by their population in this most recent case, by their elite bankers, by the Larry Finks of the world, by the black rocks of the world. That's how this hits me. and the significance of it, Anthony. How does it hit you? Yeah, same here. Exactly same view here, especially on the fact that they were forced into this. And as I mentioned earlier, I believe it was because of the lawsuit that the SEC lost to gray scale over converting GBT, the trust, into a proper spot ETF.

Starting point is 00:23:04 And what I find kind of funny about them being against these things is that they, they being the SEC, they have allowed other products to exist that are much worse for investors. I'm not saying the ETAP is bad for investors, but they've allowed products to exist for a long time that are really bad for investors. And to keep on topic here, two of those products are GBT and ETHI, those great scale products. And the two reasons why those products are horrible is one, they have a really high management fee for starters. I think it was as high as 2%. And two, they're a close-ended fund. So you couldn't actually redeem your GBT for actual BTC, which means that the thing never traded at really at fair value. It always traded around fair value.

Starting point is 00:23:43 And then at one point, it got to a discount of about 50%. So if you had bought at around fair value, even at a premium, you were down 50%. And if you had sold that, you were just wrecked on it. So the SEC allowed this product to exist for a long time, mind you. It's not a new product. It's been around for a long time. Accrue, what, $20 billion worth of AUM, and then deny all the spot ETS because they considered it too risky.

Starting point is 00:24:07 The hypocrisy is insane to me around this. And really, this boils down to politics, I think. think at the end of the day, especially from Gary Gensler, who obviously wants to get promoted within his, he's kind of like a political sphere to probably treasury. And Elizabeth Warren is basically his boss, so he's just following what she's telling him to do. But because of the fact that the SEC has, I mean, they didn't just lose against Grayscale. They've lost two other cases as well. They lost against Ripple as we, as we know. But because they're lost so many times, they just became such an illegitimate institution in so many people's eyes. And they had all the pressure from BlackRock et al to

Starting point is 00:24:41 get this thing approved. So that's what you've seen happen. Basically, they're being kicked and dragging and screaming to approve these things. Their hands are tied and they had to approve it. Yeah, incredible point about these terrible products already existing. And the Bitcoin's bought ETF only being an improvement for retail investors. There's some drama leading into this, Anthony. So on Tuesday, I believe it's around like 4 p.m. Eastern time, something like this. this tweet came out of the SEC official Twitter account. So this is at sec.gov. And this happened on Tuesday, saying today the SEC grants approval for Bitcoin ETFs for listing on all registered national securities exchanges, basically announcing that the Bitcoin spot ETF had been approved. Again,

Starting point is 00:25:27 this was on Tuesday afternoon, East Coast time. They even include a quote from Gary Gensler himself. turned out, at least the SEC said, that this tweet was a compromised tweet sent by a hacker, Anthony. And so what happened was the market price on Bitcoin just like absolutely torpedoed up and then fell back down. Some were calling this kind of like market manipulation. I believe within a half an hour or so, Gary Gensler tweeted something and said, basically, the SEC Twitter account has been compromised. You know, there has been no Bitcoin spot approval. Again, this was on Tuesday, so before we had the official word, it seems like people were speculating all sorts of things, whether this was an intern who posted the tweet 24 hours earlier or whether a hacker had indeed

Starting point is 00:26:17 gotten into the SEC Twitter account and tweeted this out. It looks to me, you know, in the weight of the evidence, like it was probably just a sim swap type of attack. They didn't have two FAA on the account and some sort of third party compromised the account and tweeted this out. But like, what chaos. I mean, like, I can't believe the incompetence of the SEC causing like billions of dollars of accidental market manipulation by not doing the basics of having their Twitter account secured. What's your take on all of these, like this craziness? Yeah, I mean, I think it's just perfect when you contextualize it. You contextualize the fact that the SEC keeps saying that they want to protect investors, right? That's their mandate as given to

Starting point is 00:27:01 them by the US government, but they can't even protect their own Twitter account, which is like the bare minimum, I think, of protecting yourself, right? Protecting a Twitter account is not hard to do. Like, all you have to do is set up proper 2FA. Like, I know that there's been a lot of drama around doing mobile 2FA, but if you are the SEC, you should have at least one person in your organization that can say, hey, we need to secure our accounts, right? We need to secure our Twitter account others. But they didn't, apparently. Apparently it was very easy to compromise the SEC account. Yeah, this is some senators weighing in.

Starting point is 00:27:35 Fraudulent announcements, like the one that was made on the SEC social media can manipulate markets. We need transparency on what happened. That's Senator Cynthia Lemmiss. This is Philip Martin. Hey, Gary Gensler in the SEC. Serious offer as a crypto exchange. We've had lots of experience.

Starting point is 00:27:51 Philip Martin is, by the way, from Coinbase with security protocols around social media. And as a veteran patriot, I loved out my country. If you want some help, feel free to reach out. So this is Coinbase offer. their help to the SEC in an ultimate irony here. So kind of crazy, I think that all of this happened like just 24 hours before it was officially approved. Certainly, maybe a punch to the gut for the legitimacy of the SEC. But you know what's interesting to me, Anthony, is this actually barely

Starting point is 00:28:20 passed. So for people who don't know, it has to be passed by the majority vote of a commission, right? So Gary Gensler, he is the chair of the commission, but there are five commissioners, five folks that vote, including Gary Gensler himself. And the Bitcoin spot ETF barely passed with a three to two vote. So the three who approved were Hester Perce, you know, a gentleman by the name of Mark Yuyeda, I believe that's how it's pronounced. And then Gary Gensler. And then there were two against, including Caroline Crenshaw and another commissioner as well. Did you get a chance to read some of the statements coming out of both Gary and Caroline and Hester Pierce, Anthony?

Starting point is 00:29:04 Yeah, I mean, I saw the highlights of both Gary's and Hester's statements. I think in Gary's statement, he mentioned that, you know, the SEC is supposed to judge things based on on merit, but and then he goes on a bit of a tangent and says that like, just because we approve these ETFs doesn't mean that we endorse them or think that they're good investments, which, you know, is a really stupid thing for a regulator to say if they're trying to be neutral, because that's not neutral. Like, is he going to say this about everything that they approve now, every ATF that they approve? It really does seem like, as I said, they were kicked and dragged kicking and screaming into this

Starting point is 00:29:38 and they needed to have their last kind of say on the fact that they think this is a really bad idea, which in my opinion, the SAC can go screw themselves on that because it shouldn't be up to them to tell me what is a good or bad idea to invest in. Like, I know, you know, I know what I'm doing. I think people are smart enough to figure it out for themselves and it should be on the person to make their own decisions. So Gary voted, yes, we should say. But yes, the statement, I read it the same way you did, Anthony. It's kind of a whiny statement. He basically says, he says that I have often said that the commission acts within the law and how the courts interpret the law. And then he goes on to say that basically their loss in the gray scale case in September kind of forced their hand. And so now this is the court system interpreting the law for the SEC. And Gary just acquiescing to. to their will here. But you're right. He says this at the end. Just a, you know, a parting stab.

Starting point is 00:30:32 Though we're merit neutral, I'll note that the underlying assets in the metals ETPs have consumer and industrial uses, right? So like silver, gold, platinum, palladium, all of these have industrial uses. Well, in contrast, Bitcoin is primarily a speculative, volatile asset that's also used for illicit activity, including ransomware, money laundering, sanction invading, and terrorist financing. So he absolutely had to say that. That just reads like an email Elizabeth Warren sent me. Hey, you need to include this statement, this kind of part in your statement, you know, because this is what I need to kind of push as my messaging out there, which she's been doing, right? She's been like the leader of pushing this messaging of crypto being just used for terrorism financing, even if it's made,

Starting point is 00:31:16 it's based on completely made up facts, right, that she's kind of pushed in Congress. It's definitely anti-crypto army talking points. What was more concerning to me was Caroline Crenshaw's statement, who's another SEC commissioner. And in a worrisome fashion, like one of these commissioners might be in line for the throne of chair at some point in time. Gary Gensler's not going to be doing this forever. In fact, his days might be numbered. And so, right, there's like Crypto's choice, which would be Hester Purse as SEC chair. But then there's others who could be contenders, including some of these other commissioners, maybe like Caroline Crenshaw. And she says this. she dissents and she voted no and she said the commission also has not taken into account adequately

Starting point is 00:31:58 broader public interest considerations for example it is well documented that many criminals use bitcoin to evade u.s financial sanctions ransomware tax demand bitcoin payment analysis shows that these payments may end up funding our geopolitical rivals and adversaries in approving these products for listing and trading on american exchanges could we inadvertently be working at cross purposes with the goals of other arms of our government? Wow, I didn't realize all of that was in your mandate at the SEC. But apparently, according to Caroline Crenshaw, it is. She says, I am deeply concerned about today's action. She also goes on to take a jab at Bitcoin. She says, basically, I have a simple question. Wasn't Bitcoin supposed to solve this? If this technology is so revolutionary,

Starting point is 00:32:44 why do they need an ETF in the first place? So definitely a lot of anti-crypto vitriol and a lot of opinions being baked into what's supposed to be a merit-based, credibly neutral regulator. Of course, the opposite end of this spectrum was just an absolutely banger piece from a statement from Commissioner Hester Purse, who says, today marks the end of an unnecessarily, unnecessary but consequential saga. What happened in the past is the goalpost kept moving as the commission slap denied on application after application. And then the commission, rather than admitting air, offered a weak,

Starting point is 00:33:21 explanation most recently for its change of heart. She's basically saying, we're just doing what we should have done all along. And the commission in the SEC has just put up roadblocks for the last 10 years. We squandered a decade of opportunities to do our job, she says. If we had applied the standard we used for other commodity based ETPs, we could have approved these products years ago. But we refused to do so until a court called our bluff. Yes, well said. That's exactly what happened. And she concludes with this. I'm not celebrating Bitcoin or Bitcoin related products. What one regulator thinks about Bitcoin is irrelevant. I'm celebrating the right of American investors to express their thoughts on Bitcoin by buying and selling spot Bitcoin ETPs. So you got the good regulators on one side who are

Starting point is 00:34:08 kind of doing their job as a merit based in your credibly neutral arbiter. And then you have others like Caroline Crenshaw who are just putting in roadblocks and I don't, forcing kind of their views of the asset class into their regulator position. I don't know how we get out of this state, Anthony, but I guess this is progress, kind of winning the Bitcoin spot ETF, even though the SEC was brought into this kicking and screaming. Yeah, I mean, it's just like weaponization of regulatory bodies, right? This is exactly what's happening with the SEC and maybe it'll happen with other regulatory bodies in the US. Obviously, I'm not across all of them, but I'm pretty across the SEC given that it's relevant to crypto. But it just feels like, yeah, as I said,

Starting point is 00:34:50 Warren is weaponizing the SEC, maybe not just term, but there's others as well, but weaponizing it to achieve her own political goals, right? Because a regulator should not have an opinion on these things in my, in my opinion, right? I don't think that they should have an opinion on the actual underlying assets. They should just look at it as a kind of merit-neutral thing, as as Gary Gensler said, not make these statements and put out these statements and just kind of approve it or deny it

Starting point is 00:35:14 based on the merits, which I don't see any issue with there being a Bitcoin spot ETF. I don't see there being any issue with an e-spot ETF. And honestly, a lot of the other assets out there in crypto, I wouldn't see an issue with that either because, I mean, a lot of people can already access these assets as well, mind you, right? Like, they can already buy them on centralized exchanges and other kind of such places. But I think the main worry for people becomes that, oh, well, you know, these ETFs are in retirement accounts.

Starting point is 00:35:41 What if people put their money into these things? Well, people can put their money into anything in their retirement accounts. Like, there are a lot of traditional investments. Game stocks, AMC. Exactly. There's a lot of traditional investments that are bad investments. So it doesn't matter if it's crypto, if it's a stock. If it's a bad investment, it's a bad investment.

Starting point is 00:35:58 It's simple as that, right? And as we've seen in crypto, people are very quick to put their money into bad investments, regardless of how many warnings you put in place, regardless of how many times you tell them this is a bad investment. I mean, I have people telling me all the time that these things that I believe are legitimate scams. They tell me, no, it's not a scam. I'm like, okay, well, you go do you. And no amount of like regulatory protection that these regulators think that they're going to be able to put in place would prevent people from doing this.

Starting point is 00:36:24 People have to learn on their own. They have to make their own decisions. And I'm just sick of this kind of babying that these regulators. I mean, they say that they're doing this. I think in reality, they're just doing it as a political play. It's not your job. And also they've been so freaking wrong. What have they protected, like investors from over the last 10 years?

Starting point is 00:36:42 They didn't protect anyone from crypto? Yeah, exactly. They didn't protect anyone from FTX. They didn't expect anyone from Celsius and others. There was no protection going on here. And the fallout from those things have been massive. Whereas the fallout from Bitcoin's price going down has been, hey, wait a few years and you'll be in the cream again.

Starting point is 00:36:59 It's just absolutely frustrating. But here's where we are. One of the other things we've just kicked off is a coin derby. I think that's what James Safert calls it. And look at all of these companies now trying to lower their fees. So Bitwise, Arc, Fidelity, Wisdom, All of these, Vanek, they're all in a race to discount their fees for the first six months. This just started happening earlier this week.

Starting point is 00:37:26 And I think is bullish again for the ETF. We've got some competitors. It's not just BlackRock in here. Although I do still think, Anthony, there will be some power law winners. In addition to kind of power law winners and whoever wins the ETF derby, there's also, I think, the existing exchanges who could be winners here. So Cracken owns a company called CF Benchmarks. That company is going to be used as a reference rate for many of the Bitcoin ETFs, as well as Coinbase. Eight of the 11 firms that follow the spot Bitcoin ETF are custodying those assets with Coinbase.

Starting point is 00:38:00 So I think existing U.S.-based exchanges are the big winners here as well. But one question I think in my mind, Anthony, and I think in the minds of many listeners, is when ETH spot ETF? there is a May 23rd final decision deadline for the Vanek Spot ETH ETF. I'm actually not sure. I'd have to talk to Eric Boutchunis or James Safert about kind of the delay details there. But there's the possibility, however maybe it might be remote. There's the possibility that we could have an ETH spot ETH approval in May. Do you see that happening with the current SEC?

Starting point is 00:38:41 It would all depend, it seems like, on Gary's vote, right? because there'd definitely be two commissioners yes, two no, which makes Gary the decider here. What do you think the possibilities are of that in May? Yeah, I mean, I may be a bit biased here, given that like I'm an eighth mega bull, right, as everyone probably knows, but I think that the chances are quite high of the, the ETH spot ETS getting approved by that final deadline. And the reason I think this is, you know, there's various different reasons. But a major reason is that they already approved the futures ETF, the futures ETHs a little

Starting point is 00:39:14 while ago. Now, the reason why this is a big deal is because they, the SEC lost the case to gray scale based on the fact that they had approved the BTC futures ETFs, but then denied the spot ETFs. And the courts basically said to them, hey, why are you doing this? Like, they're basically the same product. You can't deny the spot ETFs and prove the futures ones. You have, you basically have to approve them both. So because of that, if they go ahead and deny the spot EFTEFs now, it opens them up to another lawsuit in which there's already precedence set because of the grayscale win and they just would probably lose again. So again, it's a really bad look for the SEC. It's a bad look for Gensler if he's still, I guess, the chair by then. I mean,

Starting point is 00:39:51 it probably will be. It's not likely he kind of leaves this year, but we'll have to see how that plays out. But that is, that is kind of the major reason. And I think a second thing that a lot of people probably haven't paid attention to that is very, very important. A few months ago, I would say, maybe coming up on six months ago, the SEC changed their tune towards ETH. They stopped calling Ether security. Gary Gansel stopped making comments about ETH being a security. The SACs stopped making comments about this. And they stopped saying that all crypto assets except BTC are a security. They basically said that most crypto assets are securities. So now they leave themselves open to,

Starting point is 00:40:25 oh, okay, we can say most of the securities, but like there's these ones here that aren't. I noticed that change. I noticed that change in language. It was a pretty substantial change in language there, which basically to me means that they're not even going to try and kind of go after ETH for being a security or whatever they want to do there, especially in the light of the fact they lost against Ripple in court. So given those kind of reasons, as well as the fact that we just got the BTC spot ETSB approved, given the fact that BlackRock has also filed for an ETH spot ETF, I think the chances

Starting point is 00:40:56 of them being approved by that deadline in May are quite high because the products themselves are just the same as a BTC ATF. It's not a staked ETH. The product itself is the exact same as a BTCETF. It will probably use the same custodians. It will have probably similar fees. So all these issues have to do is copy paste. And all those amendments that they had to do with the SEC, they've already done them for BTC.

Starting point is 00:41:16 So now it becomes a very easy kind of, okay, we can approve the ETH ones. It's basically the same thing as BTC. And yeah, so that's why I give it like a relatively high chance of happening. I think that Eric Boltunis, who you mentioned, I think that him and James give like a 70% chance or something like that by May. I would say that that's where I'm at right now. But I don't know. The ETH bull inside me thinks it's higher, I think. But I think based on my comments that I just made and the reasoning I just gave, it seems like a pretty good chance to me.

Starting point is 00:41:46 Well, you know, all these banks are still going to want it just as much. Now they've got a Bitcoin ETF. And then Grayscale, as you said, could just run the same play back, right? Take them to court for the gray scale ETF. And so I'm sure that SEC has to think that that's coming. One interesting thing about all of this is financial advisors. I think you can expect to now begin shilling Bitcoin and crypto. in general. This is a survey done last year by Bitwise. Eighty-eight percent were interested in

Starting point is 00:42:18 purchase. And these are financial advisors. This is basically where US, you know, boomers and Gen X keeps kind of their wealth, right? 88% would purchase the Bitcoin ETF, but they're waiting for the spot Bitcoin ETF. They've just been waiting for a product to sell. 88% received client questions about crypto of last year. But here's one of the things that I find interesting is only 40% believe that the spot ETF would be approved in 2024. The survey was done last quarter. It shows you just financial advisors are just not tuned into crypto. But once they have a product to sell, they'll be like, yep, go buy Bitcoin.

Starting point is 00:42:52 And hopefully later, go buy Ether. The last thing I'll say, of course, and we've got to say this because, of course, you know, we are bankless. The best Bitcoin ETF is the one you never have to buy bankless listener. Because whenever possible, you should own actual Bitcoin, own actual crypto, own your private keys, not IOUs. This is for the normies who can't do that. This is for the retirement accounts. And so, I'll end with that. Anthony, we got a lot more to cover, including layer two's. Also, I want to get your take on Justin Drake's answer to the question, how do we fix layer two

Starting point is 00:43:24 fragmentation? I think he had a fantastic response. I'm going to talk a bit about using Ethereum to secure Cosmos chains. And also, did Elon Musk just rug NFTs on Twitter? We'll talk about all of this and more. But before we do, we want to thank the sponsors that made this episode possible. Mantle, formerly known as BitDAO is the first Dow-led Web3 ecosystem, all built on top of Mantle's first core product, the Mantle network, a brand new high-performance Ethereum Layer 2 built using the OP stack, but uses Eigenlayer's data availability solution instead of the expensive Ethereum Layer 1. Not only does this reduce Mantle network's gas fees by 80%, but it also reduces gas fee volatility, providing a more stable foundation for Mantle's applications.

Starting point is 00:44:05 The Mantle treasury is one of the biggest Dow-owned treasuries, which is seeding an ecosystem of projects from all around the Web3 space for Mantle. Mantle already has sub-communities from around Web3 onboarded, like Game 7 for Web3 Gaming, and Buy Bit for TVL and liquidity and on-ramps. So if you want to build on the Mantle network, Mantle is offering a grants program that provides milestone-based funding to promising projects

Starting point is 00:44:27 that help expand, secure, and decentralize Mantle. If you want to get started working with the first Dow-led layer-2 ecosystem, check out Mantle at Mantle dot XYZ and follow them on Twitter at ZeroX Mantle. Arbitrum is the leading Ethereum scaling solution that is home to hundreds of decentralized applications. Arbitrum's technology allows you to interact with Ethereum at scale with low fees and faster transactions. Arbitrum has the leading defy ecosystem, strong infrastructure options, flourishing NFTs, and is quickly becoming the web-free gaming hub. Explore the ecosystem at portal.arbitrum.io. Are you looking to permissionlessly launch your own

Starting point is 00:45:01 Arbitrum orbit chain? Arbitrum orbit allows anyone to utilize Arbitrish-Ribus. Trump's secure scaling technology to build your own orbit chain, giving you access to interoperable, customizable permissions with dedicated throughput. Whether you are a developer, an enterprise, or a user, Arbitrum orbit lets you take your project to new heights. All of these technologies leverage the security and decentralization of Ethereum. Experience Web3 development the way it was always meant to be. Secure, fast, cheap, and friction-free. Visit Arbitrum.io and get your journey started in one of the largest Ethereum communities. A little bit of news that was released just before we hit record.

Starting point is 00:45:35 chord. Stablecoin firm Circle confidentially files for a US IPO. I guess it's not confidential anymore. This is being reported on X. Anthony, was this expected Circle doing an IPO sometime this year? Yeah, I mean, they've been talking about this for quite a while. This is not a shock or a surprise really to anyone. I mean, it shouldn't be because as I said, it's been talked about for quite a while. I think maybe they're waiting for market conditions to improve across the board for crypto to obviously get more interest in their IPO, just like how Coinbase basically went live at the top of the last market. They did their IPO at the top of the last market.

Starting point is 00:46:11 Yeah, I'm not sure when Circle would do this, but it makes sense for them to do it. I mean, obviously, USDC is the second largest centralized stable coin out right now, and they're trying to continue growing that. It did have a bit of turbulence last year, obviously, with the DPEG, and it has, obviously, lost the market share because of that. But they are really well positioned, I think, and, you know, IPOing, obviously is something that's been on the cards for a while, and I guess, like doing it when the market's good is better than doing it when the market's back.

Starting point is 00:46:35 Probably good to have the legitimacy going through the SEC in case the SEC tries to pull USC's security or something like that in the future as well. Anthony, this popped by my desk this week as well, the idea of eigenlayer coming to Cosmos. And the question I think that this potentially answers is, what if we use Ethereum's economic security to actually secure the cosmos chains? So I've been interested in the Cosmos community since probably in 2017. 2018 as this idea of interoperability network. But the one thing that never made sense to me was how they were going to secure all of these various app chains because every single cosmos chain, you have to kind of boot up your own

Starting point is 00:47:18 validators and boot up your own economic security. And therefore you have to boot up a token and the value of that token. And that's very difficult to do, particularly if you don't have a monetary premium, if your token is not money, right? And like most of these app chains, it's obviously not going to become a money. The idea with eigenlayer is that you can actually export the Ethereum validator set and Ether as a security layer to Cosmos. I know the Atom Cosmos Hub was trying to do this in the past with the kind of shared security

Starting point is 00:47:49 for multiple chains. It hasn't quite taken off yet. What are your thoughts on this move by eigenlayer and the idea of Ether, kind of this internet bond being used to secure non-Ethereum chains? Maybe it could just be Ethereum as the security layer for all. of Cosmos or a big part of it. Yeah, I mean, I've always looked at the Cosmos ecosystem as an ecosystem that has a lot of really great ideas, but also that has an asset that's not occurring monetary properties, which means a lot of those ideas cannot be materialized.

Starting point is 00:48:19 I think that what a lot of people miss in this ecosystem is that once you have the money, you can have everything else that you want. Like, everything just sprouts off of that. And there's only two networks right now that have the money. It's Bitcoin and Ethereum. Obviously, you can't do much with BTC. It's not programmable money. It doesn't have that functionality. So you're really only left with ETH. And because of that, we now have these services, obviously, like EigenLayer going live, that are going to tap into EIT's economic security and export that out, as you mentioned, to other services, whether they be Cosmos chains, whether they be kind of shared sequences,

Starting point is 00:48:50 whether they be data availability layers. And they can only do this because of ETH, the asset, allowing them to do this, as well as, obviously, Ethereum's validator set, which is in place because of ETHIEEEEASET being so valuable and the Ethereum ecosystem being so large here. So I think that what could potentially happen here is that the Cosmo's vision can get realized in a much quicker and faster way than having to rely on the atom assets

Starting point is 00:49:14 because obviously that asset has not recruited much of monetary premium. It really is an asset that's underperformed greatly through the market. And also, as you mentioned, these chains no longer have to issue their own token and try to drive value to it or try to drive long-term value to it to secure themselves. They can just tap into Ethereum's existing kind of node operator set as well as eats economic security, which is a huge, huge deal, I believe. So it's going to be

Starting point is 00:49:38 interesting to see how many kind of, I guess, like Cosmos projects do this. But at the same time, you know, we're going to see an explosion of them. A lot of them are not going to work out. Some of them may succeed. But generally, I've been kind of bearish on sovereign chains, honestly, if I'm being honest, just because I think that layer two is superior to them. But there may be some kind of niches where sovereign chains make sense. And then you've got eigenlayer that kind of fits in there instead of these chains having to spin up their own validator set, which people don't realize is extremely difficult to spin up your own decentralized, long-term sustainable validator sets. The only network that has done that is Ethereum. Bitcoin is not sustainable right now.

Starting point is 00:50:14 Bitcoin's validator set, its miners, are being paid out via network issuance and the fees that Bitcoin takes in is nowhere near enough to cover that issuance. So if we're talking about sustainability, not even Bitcoin does it. Only Ethereum does it. And we're exporting that to these other chains. So yeah, I think overall very bullish for the projects that succeed in this arena, but it remains to be seeing like how many of those there actually are. A new kind of chain design is one exemplified by Lira, which tweeted this out this week. Lira is going modular. We're upgrading Lera chain powered by the optimism stacks as a roll-up based stack and then using Celestia for data availability, right? So that's kind of Ethereum for consensus, optimism stack for

Starting point is 00:50:56 kind of the roll-up itself and then Celestia for data availability. This is a tweet. This is last month. DA costs 42Eth for Lyra. Next month, DA will cost less than 0.5Eth, 100x in savings. It's not just Celestia, of course, eigen layer is going to have eigenDA, and there'll be many different DA layers as well. What are your thoughts on this kind of design and how does this impact Ethereum? Do you think that this drives like a decrease in block space consumption of Ethereum and kind of like a decrease of the fee market. Do you think this design will propagate and take off in many other places as well? So I'm generally a fan of these designs.

Starting point is 00:51:37 They're basically called Validiums. That's a term that people throw around where essentially you store the data off chain instead of on Ethereum because to be considered a full roll-up, you would have to store both your kind of like proofs and data on the same layer, which is layer one Ethereum. But I will kind of caveat that by saying like I think the idea is sound, but it should not be used to kind of equate, you shouldn't equate like a roll-up and a volidium as if they're the same thing.

Starting point is 00:52:00 Like there was that tweet you showed just before that MJS tweeted out. They kind of were describing the savings here. This is a false equivalence. There is not, there is savings, but it's not the same product anymore. If you're storing your data off-chain, not an Ethereum L-1, you are no longer a roll-up, which means you are no longer the same product as if you had stored it on Ethereum L-1. So the way I frame this is that what MJS is doing here is saying,

Starting point is 00:52:22 hey, today I have an iPhone 15 Pro Max, tomorrow I have a $50 budget Android phone. They're completely different products, right? So I don't like that framing of equating the two and saying, oh, we have so much in savings. What you're giving up for those savings is Ethereum security, essentially, because you no longer have Ethereum securing and serving your data. You are now relying on a third-party data availability network. In this case, it is Celestia. So as long as people don't equate the two and don't confuse users like that, I'm okay

Starting point is 00:52:50 with it because it means that obviously you're really. you're kind of making it transparent that they're not, they're not equal. But that's not what, that's not what's happening here. So I was a bit disappointed to see that. But in saying all of that, as I said, I still think that the validity and design is very, very powerful. I don't really like it for defy products, to be honest. I think defy products should definitely be roll-ups. But if you're talking about things like NFTs, especially immutable is doing a lot of work here with NFTs and doing belliums and stuff like that, social apps, those sorts of things, even payments apps, like low-value payments apps, those things are fine to be validityms. But if we're talking like a proper

Starting point is 00:53:21 defy chain securing potentially billions and 10 to billions of dollars of value. Like, I wouldn't be trusting storing the data somewhere else. I would want to put it on Ethereum. And you could afford to do that if you are obviously securing that. Does your answer change if it's like eigen-DA, which is, you know, has different assurances than Celestea DA. It's kind of, it's still backed by ETH, but it's kind of like some smart contract, eigenlayer protocol sort of risk that you're injecting.

Starting point is 00:53:48 Do you think that's... Technically, it's still... It's not Ethereum. Like, it's not backed by... So it's backed by, like, ETH economic security and restaked validators, but it's still a separate network. It's not Ethereum L1. It's its own thing, Eigen DA.

Starting point is 00:54:01 So my opinion would be the same, whether it's Celestia eigenDA, I know NIA is doing DA, avail, like, the project that's spun out of Polygon. Like, it doesn't matter. Like, if it's not settling on the same network, you are now giving up security guarantees and giving up data availability guarantees in order to, obviously, have... have cheaper costs here. And as I mentioned in my analogy, you're not getting the same product. So I think that we shouldn't be equating the two as if they're the same thing.

Starting point is 00:54:26 But in terms of how I would rank them, look, it depends as well because you know, you have different data availability network. Some of them have data availability sampling in place, which is, which is, you know, allows for more scalability and allows for kind of more nodes on the network, which would allow for more decentralization, things like that. But then you also have some of them that have cheaper fees than others as well. But okay, how do they achieve that cheaper fees? Is it harder to run a node?

Starting point is 00:54:51 So there are all these considerations that go into this. That's why the gold standard is always going to be just storing it both on Ethereum L1, even though it costs more, of course, but we'll get cheaper over time, hopefully. Storing it off chain, you always have to consider, okay, what am I giving up for that? How is this secured? And, you know, what's not only the economic security like, but like how old is this product? Is it a brand new network? Is it going to have bugs because it's brand new, right?

Starting point is 00:55:16 Is my data not going to be available because the node? aren't storing it and there's not enough nodes to kind of serve that data because people also misses that it's not just the data being there. It's also being available 24-7 for you to access it because it could be a thing where basically the data isn't available for a day or two for some reason and you've got no recourse. You have to wait for it to become available again. Whereas in Ethereum L1, the data is going to be available all the time. For it not to be available for a day or two, which would mean the Ethereum network itself is down, basically. It's always going to be there. Yeah, I think the good news is I think the market will behave a little irrationally in the short run as it tries to figure out what level of security various apps need. If you're like a gaming app, you probably are fine with a volidium and really cheap, you know, like transaction fees. If you're defy and crypto native assets, well, maybe not so much. But I do think the market will figure this out over time. It'll probably take a few catastrophes to kind of get there and a few like whoopsies and mistakes. Another interesting post this week I wanted to get your take on is every once in a while the Ethereum researchers do an AMA with Reddit.

Starting point is 00:56:20 And someone on Reddit asked Justin Drake and other ETH researchers the question of what do we do about L2 fragmentation? And I read this post here and I'll include it in a link in the show notes. I encourage listeners to go check it out for a post that answered to that by Justin Drake. First, he acknowledges that fragmentation of liquidity and composability across roll-ups is a problem. even across validiums. And he says, we have lost universal synchronous composability across Ethereum contract, which has been a fundamental driver of network effects. And then he injects like this little tidbit that I actually wasn't aware of, Anthony,

Starting point is 00:56:56 and I'm pretty fascinated. The idea, I know you can have shared sequencers, which can help solve the composability problem. But I didn't realize this. I didn't realize that the Ethereum layer one could actually be a shared sequencer in and of itself. In fact, it might be best positioned to be kind of the universal, credibly neutral shared sequencer for the entire roll-up ecosystem. And if this happens, we kind of basically solve the composability problem. Like, it's just like the ultimate fix.

Starting point is 00:57:29 Now, this is not necessarily coming anytime soon. There's some research that needs to happen, obviously a hard fork and that kind of thing. But I didn't actually know it was possible. Here's what Justin Drake says about it. Well, it's common knowledge that, Ethereum can be used as a DA layer for roll-ups. Few realize that Ethereum can also be used as a shared sequencer. My personal thesis is that in a few years, the native Ethereum sequencer will win as the de facto shared sequencer for roll-ups. Roll-ups that use the native sequencer will have merged with the layer one. Ethereum will regain fundamental and memetic unity, and it will all be rainbows and unicorns. I want to have an entire episode with Drake about this,

Starting point is 00:58:05 and we're in the process of scheduling this. But what's your take on this answer? And overall, 2 fragmentation, because that is one of the existing, I would say, technical and narrative problems as we enter 2024 for Ethereum. Yeah, so I will start off by saying that Justin Drake definitely knows a lot more about this than I do. And I'm very much looking forward to the episode that you do with him on this because I'd love to get his takes on these things. But I would say that generally, I think people overplay how bad the L2 fragmentation is, because if you actually look at the L2s as they exist today, they're already exhibiting a power law effect where the top L2s, have most of the liquidity already, right? And there's only like two or three of them or something. And the Polygon POS chain isn't a layer two today,

Starting point is 00:58:48 but it will be in the future, I think sometime this year. And that would instantly be one of the top L2s. So if you kind of look at it from that perspective and look at where the liquidity is actually sitting today, it's already pretty concentrated in the top L2s in kind of like a power law effect, which is expected because we saw this play out with the L1s as well. It was the same kind of thing that played out with the L1s.

Starting point is 00:59:07 Now, of course, that doesn't mean it's still not an issue. Like we want these things to communicate. Some of them communicate already through bridges, but bridges don't allow for automaticity, which is basically what Justin Drake says here, we're essentially being able to tap into liquidity across all the different layer twos and do atomic transactions and stuff like that. Like that's not really possible today, but there are many teams building this. Like one of the top teams building what Justin Drake was describing with these kind of L1 validators being the shared sequencer, Tyco is building this.

Starting point is 00:59:37 And they're building on the concept of based boosted roll-ups or boosted roll-ups. and these basically use the L1 validators as sequences, which is obviously a solution for the issue, but it does have its own caveats as well. When you kind of think about MEV, you kind of think about, okay, well, do these L2s want to give up the transaction ordering of their own sequences

Starting point is 00:59:57 where they can extract MEV from and then just give it back to L1 Ethereum validators? Do they actually want to do that? It may be better for, I guess, users and maybe better for doing atomic transactions and stuff like that, but it may be worse off for the, L2 itself because now their token may not be accruing as much value because it's not capturing MEV and

Starting point is 01:00:15 things like that, right? So there are other considerations to be had here. But from a pure technical perspective, this is already possible. This is not like theory. This is not something that's in pie in the sky. This is technically already possible. It just needs to be built out. Obviously, as you mentioned, it probably requires a hard fork or added functionality on the Ethereum L1 itself. But that's only one of the solutions too, right? You mentioned shared sequencing. I just talked about the bridges as well. And as I said, generally, I believe that the L2 is just going to follow a power law effect anyway. So I don't think the fragmentation stuff is going to be as big of an issue as people think it is, honestly. Even in the long term, I think that it'll get abstracted away.

Starting point is 01:00:52 It'll get solved in various ways. But I actually think that the L1 fragmentation is a big issue. Like if we had liquidity split among a bunch of different L1s, that is a much bigger issue than the L2s from a number of different reasons. And the top reason being security. Like you're not getting security from these L1, from Ethereum on these L1s, whereas a properly constructed stage two roll up gets the security guarantees for its bridge essentially from Ethereum L1, which is basically the whole point of doing a roll-up to begin with, right? Yeah, absolutely.

Starting point is 01:01:24 There are so many solutions to fragmentation. It's just kind of inevitable at this point, though it might take some time. And one of those is market forces. Justin Drake says this. thanks to the strong network effects that come with synchronous composability, I expect Ethereum to organically coalesk and heal itself through natural market forces. So that is another force at play here. Anyway, fantastic posts.

Starting point is 01:01:46 Cannot recommend it highly enough if you are interested in how is Ethereum going to solve L2 fragmentation. Stay tuned for that episode too. Last thing, Anthony, of the week that we got to talk about is Twitter, Elon Musk, X, removes, support for the NFT, profile picture. Did you ever use this feature in X? So this was like basically you would get kind of a hexagon shaped profile, I believe, and you had the ability to sort of set your PFP on Twitter on X to an NFT if you want for, I guess, bragging rights. I got the NFT and I can prove it on Twitter. They've now removed that feature. Did you ever use this? No, I didn't personally use it, but I know a lot of people did. And it was always pretty cool to see that like they actually

Starting point is 01:02:33 own the NFT, right, that they were kind of repping on their Twitter profile. But it doesn't surprise me that it was removed, considering that obviously it was put in place under Jack Dorsey, or maybe not Jack Dorsey, but put in place under the old Twitter leadership. And then obviously, once it got sold to Elon, he's done his own things with it. I mean, I think they announced the new payments thing that they're doing the other day that doesn't seem to include crypto. So yeah, and I think Elon Musk was actually on a Twitter space recently, maybe yesterday, saying that he doesn't really care about crypto. So, I mean, He went on SNL and pumped a doge coin, but he doesn't, like, now he's thinking he doesn't care

Starting point is 01:03:07 about crypto. He was there for the money, not for the tech, Anthony. Yeah, exactly. Discontinued support for NFT profile picks on X is a step back for the industry. Reduce utility is always a loss. NFTPs weren't widely used, but it was an MVP. It's kind of a shame that I would say social media, web two companies have started to really abandon.

Starting point is 01:03:27 Like Facebook dropped its NFT features last year as well for Instagram. you know, and they're kind of abandoning NFTs. They're abandoning verifying assets on blockchain. Do you think they'll come back the next bull cycle? Or do you think this opens up an opportunity for kind of socialify Web3 native companies to do this in a better way? What's your take on this? Yeah, I think it's basically all of that. There will be some that they come back and that realize that the opportunities there,

Starting point is 01:03:58 or maybe they were too early and realized that in a few years that it makes more sense for them to build on this stuff. But I do think that the Web3 native social protocols like Lens and Farkaster that stand to gain a lot from this. I mean, it's just really awesome using something like Farkaster and seeing all of the stuff just natively integrated into the actual app itself. Do you use Fartcaster much? I mean, I try to use it more. It's kind of something that I've been trying to use more and more over the past, especially like a few months. But like whenever I use it, it's just it feels so Web3 kind of crypto-native, right, where I can just like mint an NFT directly in the actual app itself and directly on the on the kind of site itself.

Starting point is 01:04:36 And I think that Firecaster's goal obviously is to be decentralized. So that makes it even better because it means that you have a kind of, I guess maybe not a, not a 100% guarantee, but you have like a pretty high degree of certainty that you're not going to get rugged on this. That it's not just going to be like how X removed the NFT, PFPs. You're going to have like a pretty high degree of certainty that this is always going to be there and you can and you'll be able to do whatever you want with your NFTs on that platform. Same for something like Lens as well.

Starting point is 01:05:03 Yeah, I think a big opportunity for Web3 social for sure. And I got a plus one on Farcaster. I've been using it a bit more this year. And it's actually been a goal to get off Twitter. Twitter was pretty toxic for me last year. I don't know about you, Anthony, but 2023 was not a great year. And so I just find communities like Farcaster and Lens to be much more healthy, even just the crypto community.

Starting point is 01:05:24 So I encourage you guys to check it out. That is it. This has been the roll-up. This is the celebration of the Bitcoin. ETF. Hopefully we have another ETF to celebrate later in the year, Anthony. And it's got to be a time when David's away because bad stuff happens to Gary Gensler

Starting point is 01:05:39 and good stuff happens to crypto. Apparently when David is off in the mountains, maybe destroying Horrockses. Who knows what he's doing up there? And as we end this, I want to give another shout out to the Daily Gwe, which you could tell during this rollup, we went in a bit more detail on Ethereum.

Starting point is 01:05:55 And that's because Anthony Sassano is the best Ethereum educator that I know. He can go in deep in detail on all of the EIPs, everything that's going on with Ethereum roadmap. Indeed, he does so on a daily basis on his YouTube channel. And now it has an RSS feed, the daily gway. He calls this the refuel as definitely a way to get refueled on crypto. Anthony, I just want to say, like the bankless community, myself, David, we appreciate the work that you're doing over there and definitely see you as a kindred spirit. And I'm glad you're doing it, man. I know sometimes

Starting point is 01:06:29 content creation world in crypto is not always a rewarding experience, but you've been just doing this relentlessly for years. And you're an absolute asset to the community. And I just want to thank you. And shout out, if you are not subscribed to the Daily Way and you're listening to Bankless, you will absolutely enjoy the show that Anthony puts out there. What do you have in store for 2024? You're just going to kind of keep at it? Is anything new or just kind of like consistent Anthony Sassano, bullish Eith channel that we can, you know, know to love and expect. Yeah, yeah. I mean, first of all, thank you for all the very kind words and right back at you and the whole

Starting point is 01:07:06 bankless team. I've always loved what you guys are doing from day one, basically. I still remember when you first started this thing, Ryan, it's a been a journey, that's for sure. But yeah, really, it's more of the same. I like to keep it consistent with the deadly way because the community really appreciates that, just more of the same, keeping people updated on things. And it doesn't matter if it's a bull or bear market.

Starting point is 01:07:24 I'm always covering the same kind of stuff and keeping people updated, especially in bull markets, I think, as well. I mean, I've been doing it since late 2020. So I've been through bull and bear markets on the show. And it has remained pretty much the same and just covering all Ethereum-related updates and news and making sure people can kind of stay informed because it is a crazy ecosystem to keep up with. And even though I do a daily show, I reckon I could do two a day and still not cover everything. It's pretty crazy.

Starting point is 01:07:49 Yeah, man, Anthony, two shows a day. I bet you could do it. Oh, no, that's not me saying. I'm going to do two shows a day just to be careful people. Definitely, one of the day is already a lot. So yeah, but if I wanted to, I could do it. Well, thank you for your contribution, Anthony. Risk and disclaimer is going to end, as we always do, by telling you,

Starting point is 01:08:06 crypto is risky. You could lose what you put in. But we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.

Bankless - ROLLUP: Bitcoin ETF Approved | ETH Moves | EigenLayer Cosmos

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.